UPDATE 1-Regulator probes France Tel quad-play offers

* French competition authority opens formal investigation

* At issue: length of contract, limits on consumer choice

* Rivals Iliad and SFR wrote letters to regulator

(Adds detail, background)

By Leila Abboud and Marie Mawad

PARIS, Oct 4 (Reuters) - Regulators are examining France Telecom's FTE.PA new all-inclusive bundles of mobile, fixed, broadband and TV over concerns that they distort competition and limit consumer choice by requiring two-year-long contracts.

France’s competition authority said on Monday it expected to question executives from the operator shortly as part of the formal investigation into France Telecom’s “Open” quadruple-play offers.

Although in its early stages, the inquiry could lead the regulator to ask France Telecom to alter the terms of its offers voluntarily or impose changes via an official administrative procedure.

The move comes as quadruple-play offers are gaining in popularity on the French market, with all major operators now offering such discounted bundles as a way to attract and retain clients. [ID:nLDE6901NV]

Consumer advocates have criticised the long contract terms. Two of France Telecom's rivals, Iliad ILD.PA and Vivendi's SFR VIV.PA, also raised concerns in letters to the regulator about how the "Open" offers would distort competition.

France Telecom was the last major player to launch quad-play with its “Open” offers, which go from 54.90-109.90 euros per month, because it had to obtain regulatory clearance to do so as the former monopoly and dominant actor in France’s telecom market.

In June, when the Competition Authority lifted a ban on cross-selling and paved the way for France Telecom to market quadruple-play offers, the regulator warned that it would monitor any new offers closely to make sure they didn’t pose competitive problems. [ID:nLDE65D1QA]

Bouygues Telecom BOUY.PA and SFR also sell quad-play packages, but neither have stringent 24-month contract terms.

“If France Telecom calls all their existing clients, signs them up for quadruple play and locks them into place for 24 months, we are dead,” said one industry source, who declined to be named.

“The regulator would like France Telecom to make some changes to the offer without being forced to undertake an official action against them,” said a second industry source who declined to be named.

France Telecom had no immediate comment.