REGISTRATION DOCUMENT AND FINANCIAL REPORT - Iliad

6. OVERVIEW OF THE GROUP’S BUSINESS
6.1 PRINCIPAL ACTIVITIES
Free’s innovative interconnection concept was to establish a direct connection between France Télécom’s
switches and the Group’s Cisco modem servers. Therefore, instead of installing conventional switches between
the France Télécom switches and its modem servers, Free helped to develop an application on the Cisco modem
servers which supported the France Télécom network protocol.
This type of architecture, designed for data traffic, resulted in (i) a significant decrease in the level of capital
expenditure required by reducing the quantity of equipment necessary for operation of the network, and
particularly by avoiding the need for a central switch, (ii) greater control over the quality of service, and
(iii) bandwidth savings over the national network as data is converted to IP mode at the level of the regional
Point of Presence (POP).
By April 2001, the Group was interconnected to the 18 regional MSUs and the 119 LXs in the Paris urban area,
thereby covering all of mainland France, mainly through the leasing of optical fibers at the MSU level and of
bandwidth capacity for the national transport of data.
6.1.3.2.2 Interconnection at a number of LXs outside Paris and upgrading for voice traffic routing
The second development phase, implemented between April 2001 and August 2002, was the interconnection at a
number of LXs outside Paris and upgrading for voice traffic routing.
This second phase focused on increasing the density of the Group’s network by interconnecting it to a greater
number of LXs in order to reduce the interconnection charges payable to France Télécom.
Through the conclusion of IRU agreements with several operators, including in particular Louis Dreyfus
Communications (since renamed Neuf Cégétel), beginning in April 2001 Free was able to start taking delivery of
dark optical fiber pairs contained in cables laid by Neuf Cégétel in 15 regional towns and cities and of several
dark optical fiber pairs in cables laid in the sewers of Paris.
This second roll-out phase was a fundamental stage in the development of the Group’s network as it exists today.
The principal benefit of these optical fibers is that they provide Free with a high level of density at the urban
level and enable it to interconnect at a lower hierarchical level in the France Télécom network, i.e. at the LX
level rather than the regional MSU level. This closer proximity to its subscribers has considerably reduced the
recurring interconnection charges paid by Free to France Télécom. During this phase, Free’s teams worked on
the highly complex task of taking delivery of each pair of dark optical fibers in France Télécom’s LXs and
installing optical equipment (Add/Drop Multiplexers, or ADM) to enable these fibers to carry data (lit fibers).
The Group also decided during this period to enable its network to transport voice as well as data. In addition
therefore to the central switch located in the main POP in Courbevoie, Free’s teams installed switches in each
regional POP. This provided Free with a network capable of transporting both voice and data, a development
which coincided with the acquisition of One.Tel. The use of the Cirpack softswitch technical solution helped
keep any additional necessary capital expenditure to a minimum compared with the potential profits the Group
could obtain from providing a conventional telephone service.
By August 2002, after completing these operations, Free had regional-level interconnection at the 18 MSUs and
local-level interconnection at 208 LXs, covering all of mainland France. This optical fiber network, largely
operated under IRU agreements with a 10-year term in the case of metropolitan loops (expiring between 2011
and 2013) and a 25-year term in the case of the northern Paris loop (expiring in 2025), can be used to transport
both data and voice, permitting the migration of One.Tel’s traffic (during 2002) to the Group’s network and the
launch of an ADSL voice service (since August 2003). In order to guarantee the security and independence of the
traffic flows, voice and data traffic are processed by different equipment.
6.1.3.2.3 Unbundling of the local loop and expansion of the national network
The third development phase for the Group’s network has been implemented since September 2002. The
unbundling of the local loop is the latest major development, allowing the Group to have direct access to its
customers. Early in the second half of 2002, Free designed and launched a broadband Internet access offer using an
optical fiber network which was already connected to 162 France Télécom sites. End-to-end management of the
network allows for a broadband offering along the entire chain linking the subscriber to the World Wide Web.
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