Long-term co-investing in the digital future: How FTTH project Asterix leads the way

The foundation for project Asterix is a 30-year contract between the joint venture (code-named “Asterix”) and Bouygues Telecom. The initiators behind the project plan to invest a total of EUR 1.4 billion into the FTTH rollout over the next five years by acquiring long-term FTTH access rights (irrevocable rights of use or IRU). As a member of the lending group, KfW IPEX-Bank committed 104.5 million to finance the project through a bespoke long-term loan.

Around two million FTTH connections are expected to be built within the next four years. Once access is available, Bouygues Telecom will rent long-term FTTH access rights in the Orange AMII area as a cornerstone tenant in the network, with a lease option for independent third-party operators interested in accessing the network as well..

With its long-term financing of Asterix, KfW IPEX-Bank supports the build-out of FTTH in France and thus continues to boost the expansion of digital infrastructure in Europe.

To foster deployment and meet ambitious digital targets, the French regulator has created a complete set of rules for fibre infrastructure investments. France’s PFTHD divides the country into three zones: high-density areas (VDA), medium-density areas (AMII) and low-density, rural areas (AMEL and PIN). Asterix focuses on delivering high-speed internet access to medium-density areas (AMII).

Across the country, France’s zone-specific regulatory strategies encourage equitable conditions for market participants and fair pricing for consumers. In high-density VDA zones, a lucrative market with ample competition allows for purely market-driven rollouts without the need for government intervention.

In the more rural AMEL and PIN areas, the French government tends to support broadband funding and build-outs through concession-based structures and subsidy instruments. In medium-density AMII areas, the regulator encourages the co-financing of fibre deployment, an arrangement that diffuses pressure on incumbents and creates opportunity for other market players.

For AMII areas in France, major telecommunications incumbents take the lead in building new fibre networks in their designated areas (e.g. Orange AMII). All the while, however, they are required to ensure fair and equal access to third-party players. This means other operators must be able to access the networks by acquiring IRUs or renting network sections once construction is completed.

The principle of equitable access serves the needs and interests of both sides: When incumbents build large-scale networks, they face immense capital expenditures that consume scarce capital – potentially needed for other investments such as servicing and upgrading mobile telecommunications infrastructure and, increasingly, implementing 5G, which are necessary to maintain a competitive edge. By co-investing in the construction of new fibre networks, smaller alternative network providers (the “altnets”), on the other hand, can gain network access on an attractive, equitable footing. This allows them to serve local clients on competitive terms and benefit from early mover status in new areas of their choice.

In line with the French tariff regulation for high-speed broadband and the IRU access framework, network access providers in France must adhere to strict, long-term pricing guidance for IRUs, laid out in a concave curve. This pricing structure encourages co-investment early on. Fibre co-investors enjoy more attractive terms of use than other players purchasing IRUs later down the line – a regulatory reward for sharing the designated incumbents’ risk during the network construction period.

In this way, the French framework fosters long-term partnerships and creates a breeding ground for profitable long-term investments. Co-investing also accelerates the rollout of high-speed internet for faster access to a new customer base. For the millions of consumers and businesses waiting for enhanced connectivity, the result is a welcome upgrade.