ARCEP is analysing the operation of the inter-territory transit markets and submitting for consultation a modification to the regulation currently applied to these markets in order to encourage all operators to develop new communication offers between Metropolitan France and Overseas départements and territories to benefit consumers

Paris, 10 May 2007

The development of transit markets benefits the end consumer

The development of transit markets, i.e. the routing of calls between two networks and/or two territories, to or from Overseas départements, municipalities and territories benefits the end consumer by energising the retail call markets to and from Overseas départements and territories. The development of these markets has allowed certain operators to include calls made from Metropolitan France to fixed phones in Guadeloupe, Martinique and Réunion in their unlimited call packages.

In order to maintain this competitive dynamic which benefits the end consumer but also in order to adapt its regulation to changes in the wholesale transit market, ARCEP plans to modify the remedies it applies to this market.

ARCEP plans to modify the obligations on the relevant switched inter-territory transit markets

On 27 September 2005, ARCEP adopted decision no. 05-0571 bearing on the definition of relevant fixed telephony markets, the designation of operators having significant power on these markets and the obligations imposed because of this. This market analysis decision remains valid until 1^st September 2008.

In its analysis, ARCEP identified ten relevant inter-territory transit markets for ex ante sector-based regulation. On each of these markets, France Telecom’s significant power was highlighted and because of this, ARCEP imposed several specific obligations on it; in particularm the obligations of transparency and cost oriented pricing.

The regulatory framework includes the possibility for ARCEP to modify the obligations imposed on the operators with significant influence prior to the term of its market analysis decision, without having to revise the definition of the relevant markets.

Given the evolution of the operation of the wholesale inter-territory transit markets, ARCEP now proposes modifying the remedies imposed on France Telecom. Indeed, many alternative offers have appeared, making these markets more fluid and bringing into question the appropriateness of the current obligations with the operation of this market.

So, ARCEP plans to raise the obligations of transparency and cost orientation for the inter-territory transit markets and to replace them with a ban on predatory pricing. However, it suggests that the current regulatory measure be maintained for the switched transit services in place between Metropolitan France and Saint-Pierre-and-Miquelon, and between Metropolitan France and Mayotte.

This adjustment proposed by ARCEP should allow France Telecom to continue to participate in the competitive play on these transit markets and, as a consequence, stimulate competition on the call retail market, to the benefit of the end consumer.

The proposed modifications are based on the current regulation of capacity services

In this public consultation, ARCEP analysed the operation of the switched inter-territory transit market in light of the operation of the underlying wholesale capacity services market, which allows the replication of switched transit services.

Capacity services were covered by market analysis decision no. 06-0592 dated 26 September 2006. In this decision, ARCEP defined the wholesale inter-territorial trunk services markets as relevant for ex ante sector-based regulation. These markets are used to offer switched transit services between these territories.

On each of these markets, France Telecom is subject to an obligation to grant reasonable requests for access, to an obligation of transparency, to an obligation of non-discrimination and is forbidden to practice predatory pricing. In addition, a specific obligation to reflect costs is imposed on France Telecom on the wholesale trunk market for Metropolitan France, Réunion as well as on all other markets mentioned above, for all collocation services, remote connection and the terrestrial segment.

ARCEP invites contributors to share their opinions on its analysis of the current functioning of the market as well as on the easing of the remedies that it plans to implement upon completion of the public consultation which it is launching today and until 11 June 2007.