On 16 April 2004, the French regulatory authority ART published its first formal public consultation document in the context of the market analysis procedures in application of the new EU regulatory framework for electronic communications.
It concerns Market 16: “voice call termination on individual mobile networks“.
In actual fact, the ART has been actively preparing the process of market definition, market analysis, SMP designation and definition of regulatory remedies on all markets for quite some time: detailed qualitative and quantitative questionnaires were sent to operators for completion in mid-2003.
The ART public consultation document on Market 16 is 120 pages long, covers the period 2004-2007, and follows the logic of single market dominance.
As regards the three main mobile operators on the French mainland (different principles are defined for smaller operators and for operators active in the overseas territories), the ART puts forward obligations of non-discrimination, the publication of a reference interconnection offer, and a glide-path for the per-minute call termination charges, with defined maximum charges for the years 2005, 2006 and 2007, leading to a form of cost-orientation in 2007, according to a specifically defined cost-accounting methodology set out in Annex F of the ART consultation document, which excludes commercialisation costs and excludes compensation for network externalities.
One specific implication of imposing non-discrimination in interconnection on mobile operators active on the French mainland is that an end has to be put to the principle of “bill and keep” interconnection which has historically been operational between Orange France, SFR, and Bouygues Telecom.
The ART (page 70) describes “bill and keep” as follows:
“Ce dispositif qui est appliqué pour des raisons historiques entre les opérateurs mobiles de métropole, est discriminatoire vis-à-vis des opérateurs fixes et non transparent.”
Putting and end to “bill and keep” interconnection has wide-ranging implications, for the mobile operators, but also for the fixed operators.
For instance, French fixed alternative operators are making use of SIM gateways on a large scale, and calls are passed across SIM gateways (at retail rates as low as 9c/min, whereas average wholesale call termination rates are 17c/min), and then are passed from one mobile operator to another under the free of charge “bill and keep” arrangement, leading to unique competitive dynamics.
The ART consultation document, pages 29 to 31, explicitly recognises these unique dynamics, by discussing “on-net” and “off-net” SIM gateways, and stating the following:
“Chaque opérateur mobile a donc eu individuellement intérêt à maximiser son volume d’appels off-net passant par des hérissons, tout en minimisant son volume d’appels entrants en provenance d’autres réseaux mobiles. La recherche de cette maximisation s’est faite par une concurrence sur les prix de détail de flotte, conduisant ainsi à des tarifs inférieurs à neuf centimes, soit moins de la moitié du prix de détail moyen.”
and
“Les hérissons sont inclus dans les marchés pertinents de la terminaison d’appel vocal sur les réseaux individuels des opérateurs. Les hérissons se sont donc partiellement substitués à la terminaison d’appel. Néanmoins, l’Autorité considère que l’incitation à utiliser les hérissons off-net est amenée à disparaître dès la sortie du bill and keep et que les hérissons on-net devraient fortement diminuer dès lors que la charge de terminaison d’appel vocal se rapprochera des coûts. Par conséquent, les obligations imposées dans le Chapitre 5 pour remédier aux problèmes concurrentiels seront imposées à l’offre de terminaison d’appel et non aux offres permettant de constituer des hérissons.”
The deadline for responding to the ART consultation is 28 May 2004.
The full text of the ART consultation document (in French) can be accessed by clicking here.
The set of questions defined by the ART (in French) can be accessed by clicking here.
For a discussion of call termination issues in France, please contact Yves Blondeel.