ARCEP launches a public consultation on France Télécom’s accounting obligations

Paris, 29 June 2006

In its relevant market analyses for fixed telephony and broadband services, ARCEP identified France Telecom as having significant market power on a number of wholesale and retail markets. To remedy to competitive problems on these markets, ARCEP imposed obligations to the incumbent, France Télécom, including cost accounting and accounting separation obligations. These obligations had to be specified subsequently by ARCEP for all the concerned markets, so that they could be established and implemented in a single and coherent framework.

The draft decision specifying France Télécom’s accounting obligations is now being submitted for public consultation for implementation in the Fall.

The cost accounting obligation

Cost accounting is necessary to satisfy the efficient implementation of price control obligations. It requires the creation of a cost accounting system which allows the attribution of costs, revenues and capital employed for each service and product the company produces. In this way, the regulator has in particular the possibility to verify that the tariffs practiced by the operator are consistent with supported costs when cost orientation is imposed. The draft decision submitted for consultation contributes to an updating to the new regulatory framework of the cost accounting obligation imposed on France Telecom under the former framework. The significant improvement of the obligation concerns :

• transparency to third parties, notably through the publication of the description of the cost accounting system and of costs, revenues and capital employed attribution methods ;

 

• a more global and synthetic approach of costs, while maintaining a fine analysis for each individual product ;

 

• verification of the relevance of the attribution choices in a competitive context in evolution.

 

The accounting separation obligation

Accounting separation is based on markets and products costs and revenues elements made available by the cost accounting system. It requires the simulation by the operator of a functional independence of its activities in order to verify that the non-discrimination obligation has been met on wholesale markets and that there are no abusive cross-subsidies between activities. In this purpose ARCEP requires France Télécom to describe in protocols the conditions of transactions between its wholesale and retail activities.