December 18, 2008
The French Competition Council – the Conseil de la concurrence – ordered yesterday that Orange’s iPhone exclusivity be immediately suspended, with the result that any French carrier (SFR and Orange) is now able to offer Apple’s iPhone.
Orange will appeal the decision before the Court of Appeal in Paris, but in the meantime (it may take as long as 12/18 months to have a final decision) Orange’s competitors will be able to sign distribution deals with Apple. SFR annnounced it had anyway already 45,000 unlocked iPhones active on its network. However, the time those agreements are in place, Bouygues and SFR cannot benefit from the Xmas sales period. After one year of its exclusive partnership, Orange announced that they will have sold over 150,000 first generation iPhones and over 450,000 3G iPhones. But beyond the idea of attracting high-end users, such an exclusive agreement was a key way for Orange to differentiate from competition, drive traffic to shops to cross-sell other Orange/France Telecom products and to nurture the brand (iPhone being all about "convergence").
Orange complained that this decision places France in a radically different situation compared to countries such as the United States, Germany, the United Kingdom and Spain. It is difficult to say the impact such a decision could have on other courts but Vodafone already tried in vain to stop T-Mobile distributing the iPhone in Germany.
The interesting piece here is that the French decision is motivated as follows: "by nature introduces a new factor of rigidity in a sector that already lacks competition." Bear in mind, the Competition Council already fined the 3 operators for the lack of competition. See an old post from December 2005 on this topic.
From an Apple perspective, it could however boost sales, now that they have radically altered the business model when launching the 3G iPhone. There are already several countries where non-exclusive agreements are in place: TIM and Vodafone distribute the iPhone in Italy; T-Mobile and Orange in Austria, Singtel and Vodafone in India.
That being said and beyond the iPhone decision, the ruling (still a temporary one) states that ‘all exclusive agreements will have to be limited to three months". No doubt such a decision will raise lots of discussion among operators and handset manufacturers.