ARCEP submits to the European Commission its analysis of the wholesale market for broadband access offers delivered at the national level

Paris, 27 June 2005

As part of the broadband market analysis process, and having adopted its final decisions in May regarding unbundling and broadband access delivered at the regional level, Autorité de régulation des communications électroniques et des postes (ARCEP) is now submitting to the European Commission its draft decision regarding the wholesale market for broadband access delivered at the national level.

• Encouraging unbundling to increase the penetration of broadband in France

 

As a general rule, high-speed access is regulated in order to develop the information society, by increasing the penetration rate of broadband. Broadband access is important because it provides access to knowledge and content on line and improves the communication capacities of individuals and companies.

The preferred means of meeting this objective is through developing fair and effective competition. When based on networks and technological innovation, competition makes it possible to diversify the services proposed to end users and progressively decrease retail prices. Unbundling is the primary vector of competition, and must be favoured in the short and medium term. It allows alternative operators to deploy their fibre networks and provides access to the incumbent operator local loop.

As of mid 2005, unbundling is available for 50% of the population. Extending this coverage is a key and urgent priority. The broadband market growth might slow down progressively which means that it is now structurally easier to make short-term deployments cost effective than it will be in coming years.

French and European experience in the functioning of high-speed markets on ADSL have shown that the development of competition and the deployment of alternative networks have two distinct bases:

- regulation of access, i.e. access for alternative operators to the unbundled copper pair in dense areas and to wholesale regional and infra-regional broadband offers in less densely populated areas, under efficient, transparent and non-discriminatory conditions,

- the absence of anticompetitive practices by the incumbent operator which has the technical and financial resources to lock out its competitors, or at least to limit the profitability of their investments in networks and therefore limit their deployments.

 

Over the past five years, unfair practices of the incumbent have been discouraged or detected and corrected: Wanadoo was made a subsidiary and a pricing approval mechanism was in place for France Telecom’s IP/ADSL offer (option 5), which France Telecom sells to its subsidiary and other Internet access providers.

The reintegration of Wanadoo has led to a loss of visibility for ARCEP and for competition authorities on France Telecom’s pricing conditions and transfers within the group.

Easing the previous regulatory framework

In this context, ARCEP analysed the wholesale market for broadband offers delivered at the national level and concluded that:

- the market is relevant in terms of sector regulation. This analysis was validated by the competition authority, Conseil de la concurrence, in its opinion 05-A-03, as of31 January 2005<>

- France Telecom has SMP on this market, due to the economies of scale it enjoys and vertical integration which allows it to leverage the retail and wholesale markets

- the pricing approval obligation in place under the previous framework can be removed and replaced by ex post checks of the incumbent’s prices

- finally, France Telecom must formalise its internal transfer conditions between the network and services branches in a protocol; it must submit this protocol to ARCEP and make it available to competition authorities

The aim of this measure is to significantly alleviate the regulatory framework currently in force, giving France Telecom control over pricing with no prior checks or approvals. It provides a transparent transitional mechanism, which aims to discourage and/or detect any unfair competition practices of the incumbent.

This market analysis remains valid for three years, but may be reviewed earlier if the market conditions change significantly during this period.

Along with the notification procedure, the draft decision will be submitted to a public consultation between 27 June and 27 July 2005, final deadline. ARCEP will consider seriously all comments made by the Commission, national regulatory authorities and market players before taking its final decision.

The following documents are available :