The French telecom market is led by France Telecom/Orange, SFR, Bouygues Telecoms, and the newcomer Free/Iliad. Free is growing fast with a blend of low-cost pricing and innovation. Its arrival in the mobile market has shaken the rest of the players. The other operators have underestimated Free’s potential to have an impact and were surprised by how much market share they could gain from the incumbents. The arrival of Free has resulted in considerable downward pricing pressure and as a result has led to severe cuts at all the other French telecom operators and MVNOs. The telecom price war is particularly tough in the consumer market but the B2B market still represents an interesting growth opportunity. For the moment, Free is not positioned there.

Cloud computing is the operator’s launch pad to upsell from telecom networks to IT services. This is especially true for existing telecom clients, after all Cloud Computing is heavily dependent on a fast network. Furthermore, Cloud Computing models which are based on volume and slim margin are well adapted to the telecom player’s business model, building core infrastructure and selling access to it based on pay for usage pricing models.

All telecom operators around the world have been building cloud capacities with the help of major technology providers, such as Orange with EMC/VMware, SFR with HP and Bouygues Télécoms with Microsoft. Offerings around cloud compete directly with the low-end offers of the traditional IT providers such as IBM or Microsoft and Cloud newcomers like Amazon or Google. But it is difficult to make margins against newcomers so SFR and Orange are now exiting the low-end of the market in favour of their French State backed joint ventures, CloudWatt (Orange & Thales) and Numergy (SFR & Bull). To be financially viable on large scale, to master every aspect of the value chain, and to be technology independent, these two government backed consortiums have based their IT platforms on full open source stacks. Is this a sign of a renewal in the interest of Telecom providers for Open Source Software (OSS), under the catalyst of the Cloud Computing?

Telecoms have often and widely used open source tooling, and make their server consolidations on Linux systems, but it used to be rare for critical platforms. This is changing. There have been several converging factors driving this: the best cloud providers run largely on OSS, Android is based on OSS and the OSS ecosystem has gained in maturity now backed by some of the biggest names in IT.

Even if this momentum is growing, operators do not plan big moves towards OSS in the short term, except at low infrastructure levels. In midterm, they will benefit from the experience gained with their Cloud joint ventures.

For the telecom industry, cloud computing represents the biggest shift in business models since the arrival of Internet. The Open Source community should thank Cloud Computing and also the French taxpayer!