Arcep speaks

New Year wishes from Autorité de Régulation des Communications Electroniques et des Postes, presented by Paul Champsaur, ARCEP Chairman, 9th January 2006

- the spoken speech shall be deemed authentic -

Ladies and Gentlemen,

The year 2005 ended with very sad news, the passing of Yvon Le Bars who had been a member of ART’s first Executive Board upon its creation in 1997. Along with the President Jean-Michel Hubert and his three colleagues, Roger Chinaud, Dominique Roux and Bernard Zuber, he actively participated in the creation of ART and in the liberalisation of the telecommunications sector. ARCEP and the entire sector owe him a huge debt of gratitude for the remarkable pioneering work he accomplished. All of his former colleagues considered him a friend, appreciating his energy, clarity of thinking, his true Breton tenacity and his many human qualities, which he used to advantage in his activities as a member of the CSA.

Please allow me to present my warmest wishes for this New Year, to you and to your loved ones, and to the institutions and firms you represent.

The year 2006 is opening with encouraging prospects for the entire electronic communications and postal sector. I will therefore attempt to shed light on the various subjects for which ARCEP is responsible.

The postal sector

I will begin by mentioning ARCEP’s new activities: those concerning the postal sector.

In May 2005, the newly voted postal law made ART, which then became ARCEP, responsible for postal sector regulation. This responsibility took effect in the month of November.

The postal sector and the electronic communications sector are two very different industries, which operate according to different economic logics and require specific regulatory schemes. Under no circumstances would we attempt to impose on the postal sector the regulatory methods used for electronic communications. I must insist on the fact that, while they are two distinct sectors, a single Authority regulates them both: it is composed of a single Executive Board, whose members are all highly competent with regard to all the dossiers under their responsibility.

We will ensure we apply to the postal sector the transparency and openness to discussion which have always been key to our actions and decisions in the electronic communications sector. In this regard, I am pleased with the success of ARCEP’s 10th meetings held on 6th October on the regulation of the postal sector and its issues. Be assured that we will continue to actively use discussion as a tool. Following discussion with the sector, we have already begun the creation of a postal market observatory, an instrument which we hope will improve the transparency of these markets. The postal law made ARCEP responsible for regulating the postal universal service, accounting control of this universal service, and the allocation of authorisations for the delivery of correspondence. We are therefore not responsible for any of the activities of the La Poste group. In particular, we are not concerned with financial services, regional development aspects, and any of La Poste’s departments not related to universal service.

The authorisation regime covers a vast area, since the unreserved sector, which is open to competition, now includes all delivery of correspondence: correspondence weighing up to 50 grams priced at less than two-and-a-half times the base price (€1.325). ARCEP will be able to issue these authorisations once the postal law’s application decrees have been published; the Government initiated the consultation regarding these decrees in November. Until these decrees are published, postal operators may continue to develop their activities in the respect of texts regulating them. ARCEP’s other major area of intervention will be to monitor universal service. The corresponding decree will allow ARCEP to exercise its monitoring responsibilities for La Poste’s activities regarding universal service. ARCEP will ensure that prices and services are accessible and that universal service is of good quality, thanks to the tools which will be defined by this decree.

We are determined to implement the regulatory framework established by the law to encourage the economic development of the sector as much as possible, and therefore innovation and investment, not only for postal services, but also for the entire chain of activities from design to the distribution of postal items. To do so, one condition must be met: that all users have full trust in the quality of services offered by all firms in the postal sector.

Last, I wish to emphasise that 2006 will be an important year for the sector, because the European Commission will issue its proposal, either confirming the year 2009 for the full liberalisation of the postal services market, or establishing another deadline. Through discussion and the studies which we will commission, we will contribute to France’s constructive participation in the preparatory work of this directive.

Let us now focus on electronic communications.

I will not present a detailed review of 2005. However, I do feel it useful to highlight a few elements, and I cannot resist expressing cause for satisfaction.

First: high speed.

France is now one of the leading countries for high speed, with over 9 million subscribers, of which close to 3 million through unbundling. It took just six years to attain this impressive level. Growth continues to be very strong, although naturally, it will slow due to current equipment rates. In addition to these impressive figures, we are also currently witnessing major improvements in quality. High speed is no longer limited to Internet access: it is becoming more and more multi-service access which also supports telephony and audiovisual broadcasting services. This trend was very clear 2005: today, over two million subscribers regularly use high-speed voice on IP services, four times more than a year ago, and half a million watch television broadcast on ADSL. Finally, with over 500 000 lines fully unbundled at end 2005, full unbundling has truly taken off.

All players, and alternative operators in particular, have shown a remarkable capacity for technological and marketing innovation which puts the French market on the leading edge, for the great benefit of consumers. I must congratulate France Telecom on its virtuous policy of innovative investment in high speed and services, a policy which benefits it not only in France but also in its international developments. I am pleased to say that according to a recent study by Dataxis, France Telecom became the second global leader in ADSL in mid-2005, behind China Telecom and ahead of SBC. I also salute the major efforts made by cable operators. Thanks to the new regulatory framework, under which, by July 2006, former agreements will be brought into conformity and networks restructured, cable operators could become active players on the competitive playing field.

Second subject for 2005: mobile telephony

This market continued to grow regularly, with an almost doubling of uses in five years. High speed mobile really took off in 2005, with over two million subscribers to operators’ high speed services. The one million 3G subscriber mark was topped in 2005. This explosion, in France as well as in other countries is very encouraging: it demonstrates the existence of solvent demand for new multimedia mobile services.

In 2005, ARCEP was committed to covering the entire mobile market with professionalism through three major files. First, call termination, which we examined in terms of costs and recently adopted a decision which will provide us with a strong reference.

The second file is MVNOs. Following questions by the Commission regarding the regulation of the wholesale mobile access and call origination market, by mutual agreement, we put this market under supervision. We will maintain this surveillance in 2006. MVNOs are working to gain a foothold on this market and we are pleased. However, ARCEP will remain vigilant on the development of their agreements with host mobile network operators, who currently do not allow MVNOs sufficient freedom.

The third file is that of portability. Although we have provided little information on this subject in recent months, we are involved in in-depth work with operators and the Government. This work will be intensified in 2006, to offer considerable progress for consumers in early 2007, to simplify number porting procedures and shorten porting times. We now need to conclude our technical works conducted among operators through a constructive and pragmatic approach during the first quarter 2006.

Today we can produce a positive review of many subjects, thanks to this new regulatory framework. Following the major work required to put it in place, which provided us with a clear and well-documented understanding of all the relevant markets, the current regulatory framework is proving to be an effective and flexible tool which promotes investment and innovation. It also offers a multi-year approach and allows the Commission to fully play its role in moving towards greater harmonisation, which we fully support, such as for the regulation of international roaming markets.

Further, this framework considerably improves the link between sector law and shared competition law, and strengthens the complementary nature of the work of ARCEP and the Conseil de la concurrence. I wish to recognise at this point the exemplary nature of this cooperation between these two institutions.

Competition, innovation and investment

I have referred several times to competition, innovation and investment. I wish to return to them now. The success of the market economy depends on a combination of investment in innovation and competition which, in the end, benefits everyone as long as it is monitored through regulation. This is particularly true for an economy such as ours which aims not only to imitate the experiences of others, but also to move to the head of the pack.

The recent development of the French fixed high speed market is a good example; it could even be considered a case study. It is unlikely that the market would be as well developed as it is today, in terms both of quantity and quality, without the competitive pressure which stimulated and directed it.

The type of competition promoted by ARCEP’s regulation, that is competition between national electronic communications operators through investment and innovation, leads to competition which benefits the majority, takes root, and eventually, requires only light regulation. However, at the same time, we must not butt our heads against the limits. The success of high speed in our country makes these limits even more pressing. I’m thinking of the length of telephone lines for the residential fixed high speed market, of their capacity for the professional fixed high speed market and of the availability of suitable frequencies for the mobile high speed market.

For the residential fixed high speed market, thanks to the combination of the rapid progress made in DSL technologies, and France Telecom’s remarkable programme to equip all its distribution switches by the end of 2006, the problem created by these overly long lines will be limited geographically and limited to just a small percentage of our fellow citizens. This problem is now well known to the local governments in question. A solution can be found thanks to the palette of alternative technologies such as satellite, WIFI and WIMAX. Following an agreement with the Ministry of Defence, which I thank for its cooperation, ARCEP recently requested approval from the Minister of Industry for the opening of 5 GHz bands for more powerful WIFI applications which would be particularly well suited to projects with local coverage. Thanks to wireless local loops in the 3.5 GHz band, new and existing players will be able to extend ADSL high speed coverage over very large areas.

The situation is more mitigated, however, for the professional fixed high speed market. The conditions of development of operators specialising in the professional market have been improved by enhancements to the unbundling offer (particularly for modularity), France Telecom’s recent business high-speed regional collection offer (in accordance with the obligations established following the "bit stream" market analysis) and the creation of a wholesale Ethernet optical collection offer at our request.

With its business centre equipment plan, France Telecom has introduced major initiatives to address the problem of equipping business parks with digital connections, which is a crucial element to improving the competitiveness of the regions. Regional governments have also addressed the issue, developing collection fibre networks, which they have made available to all operators. On these issues, in particular for wholesale offers proposed by assignees and the digital equipment of business parks, major work was initiated with operators and regional governments under the Comité des Réseaux d’Initiative Publique. On 15th March 2006, ARCEP’s Executive Board will meet in a plenary session with all interested elected officials, in order to address these two issues and to discuss strategic and political aspects regarding the completion of the works in progress. The goal is for every firm in a business park to a high-speed connection offer have available to it, via optical fibre, and for a majority of them to be able to choose between competing offers.

Obviously, the number of high-speed connections cannot double every year, although it is difficult to say when this growth will slow. The equipment rate of households in personal computers (currently about half of all households) is one limit. Beyond that, the generalisation of high-speed access will depend on the development of innovative services and terminals that the entire population can purchase, as was the case for mobile telephones. The development of next-generation network (NGN) core technologies seems to me to be a priority so that as many people as possible can be offered innovative services which are easily customisable and accessible via fixed or mobile accesses. The French market seems particularly propitious for such developments, where the dynamics of high-speed access whetted the appetite of consumers for convergent triple play offers, leading to the generalisation of unlimited access flat rate offers on the fixed telephony market. We will, however, remain vigilant, to ensure that all players have the opportunity to apply this fixed-mobile convergence strategy, if they so desire.

As for the mobile high speed market, new mobile uses cannot grow or mobile services and convergent fixed-mobile services develop unless new suitable frequencies are made available. This is the issue of the digital dividend. I will not tarry on this subject, since the President of the Republic presented the major outline of this project during his New Year’s speech on 5th January.

Revision of the Community framework

I wish to conclude my remarks with the review process for the regulatory framework just launched by the Commission.

These considerations, which were established by the 2002 Directives, come at a good time. The new framework is now in place and we can already appreciate its positive effects. Naturally, the aim is not to disrupt the current framework, but to seriously consider current technological advances and to use the experience we have acquired in order to make the necessary modifications. This review process should increase harmonisation at the European level both for the regulation of dominant positions (notably joint dominant positions) and joint rules. It should examine in depth the complex issues raised by the regulation of convergent markets, like fixed to mobile. It should also evaluate the efficiency of current tools for non discrimination and equal access, especially account separation: the complete specifications for the French market will be finished in 2006 and will close our market analyses.

The Commission’s timetable calls for initial proposals to be made in mid 2006. ARCEP will actively participate in these works, through its membership in the European Regulators Group (ERG), which will meet in Paris on 8, 9 and 10 February.

So, our calendar for this New Year is already quite full, and it is in the prospect of beneficial developments that I renew to you my best wishes for this year 2006.

Thank you for your attention.


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