- the spoken speech shall be deemed authentic -
Ladies and Gentlemen,
In the name of the entire Board of Directors of ARCEP here beside me, let me welcome you to the presentation of the tenth activity report of Autorité de Regulation des Télécommunications, which two years ago became Autorité de régulation des communications électroniques et des postes. ARCEP is celebrating its tenth anniversary this year.
I will begin with a review of the Postal sector.
Almost all of the application texts of the Law of 20 May 2005 on the regulation of postal activities have been published.
As in the electronic communications sector, ARCEP conducts its mission with pragmatism and, I hope, professionalism, seeking transparency and encouraging discussion:
- It has developed public information on postal markets by creating a statistical observatory of postal activities which has already seen two annual publications: there was a real lack of economic information on the sector. I think it’s true to say that all players of the sector appreciate this initiative and I thank them for their contributions. ARCEP will continue to work to improve this tool;
- It provided La Poste with a pricing framework, establishing, the price cap characteristics for postal universal service services for the period 2006-2008. This framework allows La Poste to conduct its ambitious modernisation Cap Qualité Courrier programme;
- It ensures that competition develops, not only by issuing the first authorisations but also by conducting open discussions with players on operational subjects such as access to mail boxes and marking postal items.
I would like to return to these last points.
In terms of authorisations, 17 authorisations have been issued; all the major post offices of neighbouring countries have obtained authorisations for international mail. An authorisation was granted to Adrexo to deploy an extensive national distribution network and local operators have made a large variety of requests to operate on market niches at the level of a city or a département. That said, the mail segment open to competition is still limited and the intensity of this competition is bridled.
The law establishes a principle of equal access to buildings for all postal services operators. However, its implementation is difficult in the field for new entrants, in a context where more and more apartment buildings are locked. ARCEP is concerned about making this principle applicable and has initiated discussions with building professionals and operators to raise their awareness and to define appropriate access means.
In our country, as in other European countries, the coexistence of several operators makes it necessary to define rules for marking postal items, in particular when items pass from one operator to another.
The discussions we have held with operators on this subject lead us to conclude that a residual situation of double marking was inherent to a market transition phase.
ARCEP has also initiated an active dialogue with La Poste on the quality of postal universal service, the surveillance of which is one of its major regulation missions. It has just launched a public consultation on the needs and expectations of postal service users in terms of the quality of universal service and information on it.
Moreover, in order to have objective economic references available, it has taken an initial decision establishing the accounting reports La Poste is required to produce, taking into account both what the efficient implementation of ARCEP’s missions requires and the capacities of La Poste’s accounting system.
Finally, as you probably know, European bodies should soon agree on the date of the full opening of postal markets to competition. This is extremely important for the postal sector: you can be sure that all our efforts will focus on a single objective: ensuring that this opening will be a success.
A satisfactory review of electronic communications sector regulation, in a sector in full change
I now turn to the electronic communications sector.
The market has changed profoundly since ARCEP’s creation in 1997.
Operators’ innovation and the dynamic of competition have reinforced consumers’ appetite for electronic communications services, and have fed the diffusion of mobile and broadband services.
The penetration rate of Internet in French homes is now close to 45% and has been growing by about 5 points every year since 1999. Since 2006, France has almost 13 million broadband Internet subscribers. This remarkable development, essentially realised through ADSL technologies on telephone copper pairs, is the result of determined but pragmatic regulation which encourages innovation and investment in infrastructures, the dynamism of operators like Free (Iliad group) and NeufCegetel, and the professionalism of France Telecom which has played the game and has joined this new market dynamic.
On the mobile telephony front, the number of subscribers has been increasing regularly, at an annual rate of 7 to 8% over the past three years. At end 2006, it was almost 52 million, for a penetration rate of close to 82%. The volume of telephony minutes consumed increased last year, rising 15% in one year, compared to 10% in 2005. ARCEP significantly reduced the wholesale voice and SMS call termination rates. Between 2002 and 2007, voice call termination levels were divided by three, resulting in a 50% cut in fixed-to-mobile call prices for consumers.
With sales of €41 billion, of which 32 billion for fixed telephony, mobile telephony and Internet, the electronic communications end market today represents 2.3% of French GDP. The mobile telephony market is largely preponderant with sales of 16.9 billion, fixed telephony representing 11.4 billion and Internet 3.7.
We can only be pleased with these results, obtained thanks to a flexible, clear and well-designed regulatory framework.
Still, the market is organised around major operators: France Telecom remains the largely dominant operator, representing about 60% in value on the retail market (fixed and mobile) in all. This figure is even higher if we include the wholesale markets.
In the mobile sector, the three mobile network operators, and the top two in particular, have a very strong position. At end 2006, the mobile virtual operators totalled 1 400 000 customers, or just under 3% of all mobile subscribers.
On the retail broadband segment, which will take the lead over fixed networks in the future, the market is concentrated with about 50% for France Telecom and about 20% each for Free and NeufCegetel, although the size of each of these two operators is small compared with those controlling a mobile activity.
The development of a very dynamic and competitive broadband market must not hide an overall imbalanced situation between mobile and fixed operators, which leads to uncertainties for the future.
After this brief review of the situation of the markets, how is their regulation developing?
Asymmetrical regulation continues, though with more focus
ARCEP is evolving asymmetrical regulation and is focussing it on bottlenecks constituted by infrastructures, access networks and call termination.
In terms of access, ARCEP is actively monitoring France Telecom’s various wholesale offers. It has just checked France Telecom’s implementation conditions of its fibre optic leasing offer (LFO), which lets alternative operators more rapidly extend their unbundled areas. Observed operational changes led us to conclude that it was not necessary to regulate this offer within the framework of the local loop access reference offer.
For call termination, we have just begun a second cycle of market analyses, publishing a first public consultation in April on the regulation of mobile call termination for 2008-2010.
Correlatively, unnecessary retail and wholesale market regulation is being eased.
During its first cycle of analyses, ARCEP had imposed obligations on wholesale markets, but also on certain retail markets.
This regulation of retail markets is not intended to last. As the regulation on the wholesale markets is implemented and becomes effective, the competitive regulation of retail markets must ease to progressively give way to the application of competition common law, under the surveillance of the Conseil de la Concurrence. So:
- This year, ARCEP initiated the deregulation process of residential fixed telephony retail markets, which was made possible by the implementation and taking off of the wholesaleLine Rental , called VGAST, which lets alternative operators propose to their customers a subscription in their own name. Plus, this market is now competitive thanks to the rapid diffusion of broadband voice offers.
- This approach will be extended to business fixed telephony retail markets in 2008, once the quality of service of all of France Telecom’s wholesale access offers have been re-examined.
In the framework of this deregulation of certain markets, ARCEP is committed to providing the Conseil de la Concurrence with tools which will allow it to effectively apply competition common law. So, it put in place more precise accounting separation obligations than in the past in order to ensure that there is no discrimination or crossed subsidies by the integrated operator subject to this obligation. It also develops various cost models and publishes them on its web site. Beyond the use that the Conseil might make of them, these models also allow players to discipline themselves.
All of this is done within the European framework which should itself evolve
Indeed, the Commission launched the European framework revision process in January 2006. Experience of recent years has shown the solidity and effectiveness of the principles on which it is founded. Therefore, in ARCEP’s view, there is no need to modify these principles or to change the institutional organisation.
In this regard, I regret that the current debate, which is based on the observation, which ARCEP shares, of a lack of harmonisation in regulation in Member States, develops around a false good idea: the establishment of a European regulator, and the resurgence of a problematic remedy, functional separation.
Launching a vertical disintegration process of incumbent operators, of which functional separation is the first stage, seems to me to be a last recourse if the regulator is unable to effectively implement the remedies it already has. I can’t resist doing a bit of advertising for ARCEP’s newsletter. Its March-April issue dealt in depth with the functional separation topic; so I will say no more on this point.
As for creating a European regulator, to which the Commission would transfer its powers in terms of market analysis decision making, its goal would be to improve the harmonisation of national regulations. However, it seems to me that the lack of harmonisation that we are seeing comes primarily from two deficiencies:
- The Commission does not play fully and effectively its role as "European regulator": the many individual opinions produced by the Commission on the market analysis decisions of the NRAs are not sufficient to create a regulation policy and above all do not give the strong signals which major subjects require.
- The regulation differences have to do essentially with "on-the-ground" implementation, or enforcement by the NRAs of the general obligations set by the market analyses, which are more or less fairly homogenous from State to State: while the ERG can help to harmonise practices, it cannot replace the political impulse that only the Commission can give.
To illustrate this, I would use an already old, and emblematic, example of this lack of harmony, that of the setting of call termination charges for mobile networks. Today, there is no longer any objective reason for mobile call termination charges to be determined in a manner significantly different from fixed call termination rates. It even seems to me, in a context of convergence and growing direct competition between fixed and mobile operators that this competitive imbalance should quickly disappear.
However, I’m seeing the reduction in call termination charges stop in a number of major European countries, with what I would qualify as "surprising" justifications for high levels.
It seems to me that the role of the Commission, in its capacity as European regulator, is to put an end to this disorder, to give the signal for the eventual convergence of mobile and fixed call termination and to control their technical implementation (cost relevance rules, cost accounting methods, timetable, etc.), with the support of the European Regulators Group (ERG) in the Commission’s language.
I believe that only the Commission has the political legitimacy and the technical competency, with the support of the national regulatory authorities, to complete this harmonisation and ARCEP, as it has done in the past, will give it all its support and all its expertise.
However, we have new challenges to face. The first concerns more economical management of the spectrum.
In its various communications, the European Commission has insisted on the need to adopt a more liberalised and more flexible approach in managing frequency resources, in phase with the economic functioning of the market, and more coordinated at the European level.
I have spoken on several occasions on this subject in recent months. I am obviously in favour of more flexible and more economic use of the spectrum and the need for better spectrum harmonisation in Europe also seems clear; frequencies, as the history of GSM shows us, constitute the leading tool of industrial policy in the wireless communications sector.
However, this evolution can occur only gradually and without ideology. Indeed, the question of more economic and competitive regulation of the radio spectrum is raised within a complex institutional context because, in a variable manner depending on the European countries, political authorities (Government and Parliament), civil and military frequency assigning authorities, and audiovisual content regulators (the CSA in France) and the electronic communications regulators are all involved.
But right now, France and Europe must use the exceptional opportunity provided by the switchover from analogue to digital television, which will free up resources in the UHF bands, historically reserved for broadcasting services. The Government and Parliament have seized upon the subject of the digital dividend, through the provisions in the law on the television of the future and with the creation of the Digital Strategies Committee (Comité Stratégique pour le Numérique). The technical work conducted by the ANFR, at the French and European levels, seem to confirm the possibility of an agreement on a harmonised sub-band for mobile services of at least some 60 MHz in the upper end of the UHF band (channels 60 to 69).
Moreover, the Commission Consultative des Radiocommunications has just created a working group responsible for analysing the frequency needs and the candidate technologies for the use of the digital dividend, and ARCEP will soon be launching a public consultation on the subject.
The question of the feasibility of a digital dividend containing a harmonised sub-band at the European level for mobile services seems to me to be on the way to being decided. It is important that quick decisions make it possible to initiate technical work, in particular negotiations with bordering countries, to guarantee the availability of this digital dividend at the extinction of analogue broadcasting, since its freeing process must be part of the frequency general reorganisation process necessary for the switchover of analogue broadcasting.
The second subject I would like to mention is that of the deployment of very high speed broadband on the residential market. The construction of a new fixed-line local loop represents a structuring issue for both operators and our country. The risks of this project are in proportion to the financial and operational uncertainties.
ARCEP has spoken out recently on the subject so I won’t go over it again in detail. The establishment of a framework encouraging the sharing of civil works and of the terminal part of networks is an objective supported by all players. We now need to make words reality. As for broadband, where their role was key in the geographic extension of unbundling, local governments will have an important role to play to create the synergies necessary for the deployment of very high speed broadband in a context of reasonable competition.
Concerning the sharing of civil works, ARCEP will be submitting a market analysis to public consultation this summer on the competitive situation of ducts and their possible regulation. By the end of the year, we will publish guidelines, based on the work of the Comité des réseaux d'initiative publique, on the means which local governments can use to encourage the deployment of very high spped broadband in their areas.
ARCEP is also committed to encouraging the effective sharing of the terminal part of networks, in order to prevent the creation of micro-monopolies in apartment buildings. It is currently receiving operators’ technical and pricing offers on access to the terminal part of their network and will quickly submit a document for public consultation aiming to define the main conditions necessary to allow sharing of the end part under satisfactory technical and economic conditions.
While, as I hope, these initiatives should help to reduce the economic risks incurred by operators, it is still essential that new services, in particular linked to audiovisual content, help to increase their income. While, in this regard, positive evolutions seem perceptible, in particular through new forms of audiovisual consumption on Internet, relations between operators and content providers do not yet seem up to the stakes.
ARCEP is led to play an increased role to the benefit of the consumer and of regional development
In both cases, this requires more symmetrical regulation.
After more than 10 years of regulation, competition conditions and market structures change. Although the incumbent still occupies a preponderant position, the sector no longer operates only in response to its behaviour and manifests a new need for regulation: it is now necessary to clarify certain rules applicable to all players, independently of market power; we need to increase market fluidity, improve technical processes, ensure service interoperability and guarantee relevant information, so that consumers can put competition into play under the best conditions, and so that local governments have the information they need in order to act.
Thus, ARCEP proposed to the Minister of Electronic Communications a number of regulatory decisions, adopted on the basis of article L. 36-6 of the CPCE which grants it a derived regulatory power. It is via this measure that it was able to advance subjects this year such as number portability, directory services and value added services for example.
As the topics I have mentioned about very high speed broadband show, this type of symmetrical regulation could be usefully used on oligopolistic markets, where asymmetrical regulation defined through markets analysis is not effective, and where competitive problems must still be prevented or corrected.
ARCEP has continued its efforts for regional coverage and reduction of mobile and broadband white zones, with all players, especially with local governments through the CRIP, in the framework of government action.
As of June 2007, all of France Telecom’s distribution frames are equipped for DSL. This means that all telephone lines can theoretically receive broadband. However, because of the French geography, there are still 2 to 3% of lines which are too long and which are not eligible for ADSL.
France Telecom has taken two important decisions.
It has indicated that it would quickly be able to provide infra-district maps which identify ADSL white zones.
It also announced a program, in little populated areas, transforming secondary distribution frames into distribution frames, called NRA Shadow Zones. A wholesale offer allowing alternative operators and France Telecom itself to make these transformations is part of the unbundling reference offer since 11 June. This type of deployment will help cover isolated towns and villages and offer an ADSL alternative to wireless coverage to white zones.
Moreover, the deployment of Wimax is one of the ways which could help reduce ADSL white zones. Since the allocation of licences a year ago, ARCEP has been closely following the work initiated by operators and local governments having received frequencies. Initial deployments, although of limited amplitude, have already been made. Moreover, the option offered to license holders to transfer frequencies in the framework of secondary markets—which for the first time was an integral part of an application procedure for the allocation of Wimax licences—has already been used on several occasions, in particular in the framework of the provision of frequencies by regions to départements. I’m very pleased with this. In coming months, ARCEP will continue to monitor deployments in progress, with an initial deadline on 30 June 2008.
ARCEP also wishes that operators deploying WiMax networks inform local governments of their projects in broadband white zones.
In this way, local governments will have all the information they need to establish a coverage diagnosis, to choose the appropriate solutions and better schedule public interventions aiming to reduce broadband white zones.
As concerns mobile telephony, ARCEP has adopted new measures aiming to reinforce the transparency of coverage information. In February, it took a decision which requires that mobile operators publish maps describing their coverage in detail. These new maps, which will be made available beginning 1st October, must be consistent with the results of measurement campaigns in the field which will be conducted each year on a sampling of districts: so, in 2007, coverage will be audited in an initial list of 250 districts located in 11 Metropolitan regions. The measurement protocol has been made public by ARCEP, in order to allow any person or local government wishing to do so, to conduct additional on-site studies.
I repeat that the end of 2007 will mark an important moment for the coverage of mobile telephony, with the completion of the "white zone" coverage program, which will have brought mobile telephony to the centres of all towns where the three mobile operators were not present.
I wish to conclude with a necessary dialogue, in particular with consumer associations.
Discussions with players have been an essential element in ARCEP’s action over the past 10 years. In addition to direct contacts, ad-hoc working groups and public consultations, permanent working structures such as consultative commissions (CCR and CCRSCE), the Comité de l’interconnexion et de l’Accès, and the latest, created in 2004, the Comité des Réseaux d’Initiative Publique (CRIP), have played an essential role in ARCEP’s action. I believe that the evolution of the regulation which we are called on to perform requires that relations with consumer associations, while clearly present but relatively more informal and episodic, find a more permanent framework, like the Comité de l’interconnexion et de l’Accès for operators and the CRIP for local governments. So, ARCEP will propose creating a Comité des Consommateurs which could hold its inaugural meeting in the autumn.
I thank you for your attention.