ARCEP has launched a public consultation and notified the European Commission of its proposed regulation of wholesale mobile voice call termination services in mainland France and the overseas dependencies for the period 2008-2010. In mainland France, ARCEP is pursuing its policy of reducing prices with a view to maintaining the relative position of French tariffs compared with other European countries. Furthermore, ARCEP has reduced the timeframe covered by this plan to 18 months, in anticipation of the necessary harmonisation of the practices of European regulators. With regard to the overseas dependencies, where mobile call termination prices remain high by European standards, ARCEP is proposing to reduce tariffs by 50% over a three-year period.

Paris, 24 july 2007

Mobile call termination – an issue which affects the entire sector

All operators offering telephone services must allow their customers to make calls to the 52 million French mobiles. In order to do so, these operators need to purchase call termination services from each mobile operator under terms which, in the absence of regulation, are established unilaterally by the mobile operator in question. The termination of mobile voice calls therefore constitutes a bottleneck in the market. Mobile call termination charges are the main source of financial transactions between French operators and generated revenues of more than 3.3 billion euros for the mobile operators in 2006.

The ARCEP’s objective is to prevent any distortion of competition arising from excessive call termination charges. This type of problem could affect the operation of either the fixed or mobile telephony markets and would have a direct impact on consumers. ARCEP has, ever since it was established, sought to reduce mobile call termination charges and has in fact managed to cut the cost of these services from over 30 eurocents per minute at the end of the 1990s to the current level of between 7.5 and 9.24 eurocents per minute in mainland France.

Issues for the mobile markets

Inappropriate pricing of call termination is likely to artificially restrict the ability of operators with the smallest market shares to compete effectively. Indeed, operators with large market shares could avoid having to pay mobile call termination charges by offering inclusive call packages restricted to calls to their own subscribers, i.e. solely on-net packages. Operators with smaller market shares would find themselves hard put to respond to this, as the price of call termination does not reflect the actual structure and level of mobile network costs. In the end, it would be mobile users who would pay the price of reduced competition.

Issues for the fixed markets

The cost of mobile call termination remains the principal factor affecting the retail price of fixed-to-mobile calls, which are among the most expensive types of calls. Consumers have therefore restricted their usage of such communications and the rapid growth of mobile networks has not been matched by a comparable increase in the volume of fixed-to-mobile calls.

Consequently the high cost of mobile call termination, compared with fixed call termination, makes it difficult for fixed operators to offer their customers inclusive packages – as they do for fixed-to-fixed calls – for fixed-to-mobile calls as part of their broadband unlimited calls packages.

Convergence issues

The development of the first fixed/mobile convergence services or the appearance of inclusive packages for mobile calls from the home illustrates the increasing level of competition between fixed and mobile operators. Moreover, while the high cost of mobile voice call termination could in the past be justified as a means of promoting the initial rollout of mobile networks, the current maturity of mobile network telephony services no longer offers any such justification.

In such circumstances, the regulation of call termination services needs to focus on a more neutral approach to the fixed and mobile markets, making it easier, on the one hand, for fixed operators to replicate the services offered by mobile operators, and, on the other, for consumers to opt for their preferred technology, without the cost of call termination having an adverse effect on this choice.

European issues

The importance of mobile call termination for the operation of the sector calls for the implementation of a consistent regulatory policy throughout Europe. The current situation, in which the price for one minute of call termination can range from 2 to 18 eurocents, cannot be explained simply by differences in geography or usage.

Mobile voice call termination charges in mainland France (between 7.5 and 9.24 eurocents per minute, depending on the operator) are among the cheapest in Europe. On the other hand, in the overseas departments and regions, where prices range from 12.6 eurocents to over 30 eurocents per minute, prices are still very high.

ARCEP considers it to be both necessary and urgent to augment the harmonisation of call termination regulatory policies in Europe. ARCEP feels that this harmonisation process should be conducted under the aegis of the European Regulators Group (ERG), which acts as an interface between the European Commission and the national regulatory authorities.

Call termination tariffs proposed for mainland France

With this in mind, the Authority plans to pursue its policy of reducing mobile call termination rates, by imposing a new reduction to take effect on 1 January 2008, cutting the mobile call termination prices charged by Orange France and SFR from 7.5 to 6.5 eurocents per minute and those charged by Bouygues Telecom from 9.24 to 8.5 eurocents per minute.

These rates will remain in effect for 18 months. During this period, the Authority will be working with the European Commission and the other regulators to achieve effective harmonisation of the regulatory policies concerning mobile call termination.

Call termination tariffs proposed for the overseas dependencies

In view of the high prices charged for call termination overseas – a situation which cannot be justified by the operators’ cost structures - the Authority proposes continuing the process of cost orientation and reducing tariffs by 50% over a three-year timeframe, by:

• imposing the following tariffs on Orange Caraïbe and SRR, which are both obliged to operate a cost-oriented pricing policy

 

• and clearly setting out, with specific reference to the situation of each active overseas operator, the scope of their obligation not to practice excessive pricing.

 

The public consultation

The two draft decisions concerning mainland France and its overseas dependencies respectively have been made the subject of a public consultation process which will run until 5 p.m. on 14 September 2007. Responses should be sent to the following email address: m16(@)arcep.fr

With the aim of ensuring the transparency of this process, ARCEP will publish all the comments it receives in full, with the exception of those parts which are subject to commercial confidentiality.

At the same time, ARCEP has notified the European Commission and the other European regulators of these proposals.

After considering the responses and comments received, ARCEP will be in a position to adopt the final decisions in the autumn, for implementation on 1 January 2008.