Mobile telephony in Reunion: chronicle of an announced distortion of competition

In Réunion, the internet service provider Zeop is considering with apprehension the allocation of new mobile telephony frequencies, supervised by Arcep. Guarantor of respect for the rules of the competitive game, the telecoms policeman could well, paradoxically, be responsible for a strong distortion of competition to the detriment of the Reunion operator. Explanations.

Zeop, fiber pioneer and newcomer in mobile telephony

Alternative operator, unknown or almost unknown in mainland France, Zeop, on the other hand, enjoys a solid reputation in Réunion, which owes it a lot. Created in 2008 by Canadians, bought in 2011 by a consortium made up of the Reunionese group Océinde (80%) and the Mauritian bank MCB (20%), the operator originally shines in optical fiber, having contributed to more than 90% of Reunion’s housing being connected. A pioneer in Fiber to the home (FTTH) technology, the Goulamaly family, at the head of Océinde, can be proud of having made Reunion Island “The first fiber department in France after the Ile de France”.

In 2016, Zeop took advantage of Arcep’s desire to boost competition in overseas territories to invest in the Reunionese mobile telephony market. The Regulatory Authority wishes to increase the number of mobile telephone operators in each DOM to four, in order to honor the mission entrusted to it by Parliament when it was created in 1997: “Support the opening up to competition of the electronic communications sector (…) for the benefit of the end user. “ In Réunion, in addition to the latest arrival Zeop, Orange, SFR and Free share the mobile telephony market.

Fourth in the comparative submission initiated by ARCEP in 2016, Zeop “Obtains 15 MHz duplex in the 1800 MHz band, 14.8 MHz duplex in the 2.1 GHz band and 20 MHz duplex in the 2.6 GHz band”. A nice introduction, undisputed, which should not, however, mask a complicated and disabling technical reality. Insiders will have noticed that this portfolio does not contain low frequencies even though the three competitors of Zeop, which already had some in the 900 MHz band, are given new frequencies in the low 800 MHz band.

Low frequencies and high speed

Why is this problematic? The explanation is in a few words. According to Félix Marciano, specialist journalist, “The lower the frequency used, the farther the signal carries and the better it passes through the walls of houses”. In a letter sent to Arcep in February, Zeop did not say anything else: “For a mobile operator, low frequencies are essential since, given their propagation properties, they allow it to provide a service (…) which penetrates efficiently into buildings. Without low frequencies, to increase its in-door coverage to the same level as an operator with one, it would have to multiply by a minimum of three the number of its antennas to achieve the same result. It does not seem possible or even feasible. “ In other words, this better power of propagation of low frequencies, which implies less relay antenna to cover the same territory, translates financially into a lower deployment cost than that of high frequencies. The Competition Authority also recognized this competitive disadvantage in a 2013 opinion.

That being said, Arcep’s announcement to allocate new frequency bands to Réunion, including bass in the 700 MHz band, should have delighted Zeop. It has not happened. In question, the methods of allocation of these frequencies, which, instead of correcting the flagrant imbalance from which the operator in Reunion Island suffers compared to its competitors, could further aggravate it.

Thus, 6 new 5 MHz blocks will be allocated to Réunion, in the 700 MHz frequency band, for a total of 30 MHz. Everything suggests that each of the operators present will acquire one of these blocks, while the two remaining blocks will be auctioned. If, in the best-case scenario for him, Zeop gets one block at auction, while Free gets the last, that will bring the 700 MHz band in the hands of Zeop and Free to 10 MHz. Zeop will only have these 10 MHz in its low frequency portfolio, while adding these new allocations to the other low frequency blocks already allocated to Free, Orange and SFR will respectively have 29.8 MHz, 27 , 4 MHz and 27.4 MHz, or together nearly 90% of low frequencies in Réunion.

How could Zeop fight on an equal footing with competitors benefiting from three times more low frequencies than it and who will thus be able to offer their customers much better data speeds? This is the question to which Laure de la Raudière, newly appointed at the head of Arcep, and Cecile Dubarry, its CEO, could be invited to answer in the coming weeks … With some embarrassment, we imagine, the Arcep’s role is precisely to avoid this type of distortion of competition in the allocation of portions of the wireless public domain.

If the equation seems insoluble, maybe the terms are wrong. One solution could be to limit to 25 MHz, instead of the current 30, the ceiling that each operator can have in low frequencies, and to increase to 25 MHz, instead of 15, the maximum threshold for holding 700 MHz frequencies. Mechanically, this would prevent Orange and SFR from claiming more low frequencies than they already have (22.4 MHz each), since they are allocated in blocks of 5 MHz. Free meanwhile could get 5 more, bringing its total to 24.8 MHz, while Zeop would be given the remaining 25 MHz. Enough to divide the cake into four almost equal parts. The opportunity to situate this issue on a ground that it should never have left: that of effective competition between mobile operators through the quality of their network and the richness of their commercial offers, which will be arbitrated by consumers in Reunion Island. .

Innovation and customer benefit

Since its arrival on the fiber optic market and then mobile telephony, Zeop has distinguished itself by its sense of innovation. After having covered the whole of Reunion in very high fixed speed and launched the first fiber optic offer at a speed of 1 Giga, we owe him, in 2019, the creation of the first completely unlimited mobile internet offer (voice, sms and data) and inexpensive, having made it possible to democratize the consumption of data. By widening the competitive gap between Zeop and its competitors, and leaving only the smallest portion to the Reunion operator in terms of low frequencies, Arcep risks increasing the latter’s deployment costs and limiting quality. of its offers in terms of throughput and therefore undermine its economic model. Until suffocation? We can fear it, especially since, quite inexplicably and in defiance of European law, Zeop still does not benefit from roaming rights in Réunion, whereas any mobile operator who enters a lagging market must be able to benefit from it. .

One thing, in any case, is certain: in view of the conditions for the allocation of frequencies offered by Arcep, the latest arrival on the Reunionese mobile telephony scene may eventually no longer be able to offer the innovations that have makes its success and the happiness of the Reunionese until now. A shame, when we remember that it is precisely to serve the benefit of end users that the telecoms policeman supported the integration of a fourth operator in 2016.