ART consults players on its planned evaluation of the cost of financing universal service for 2003

Paris, 29 April 2005

Autorité de Régulation des Télécommunications (ART) will soon be evaluating the final cost of universal service for the year 2003, as well as the contributions to be paid by electronic communications operators financing it.

To do so, it has launched a public consultation on the methods it plans to implement for this evaluation, in application of articles R. 20-33 to R. 20-38 and R. 20-39 of the Post and Electronic Communications Code.

ART kindly requests operators and other interested parties to submit their comments and any proposed changes to this document by May 20^th 2005 at the latest.

After the closing of this consultation, ART will adopt and publish the rules it will use for this evaluation.

The main changes proposed by ART from the rules used for the 2002 evaluation are summed up below.

This article regards the evaluation of the net cost resulting from the obligation of delivery of fixed telephony lines with national coverage and geographic averaging for tariffs.

As in previous years, the net cost of non-profitable areas is evaluated by using a model representing the development of a telephone network covering first the areas with the highest density of population, which are supposed to be the most profitable areas, and progressively extending to areas of lower density. The areas are divided into 35 density classes, and the model allocates the following to each class, starting with the one of highest density :

• the additional costs resulting from coverage of all areas of that class, the areas belonging of classes of higher density being already covered

 

• the additional income corresponding to the direct or indirect revenues expected from coverage of that class

 

A net cost exists if additional incomes are lower than additional costs.

As for 2002, ART may consider France Telecom’s indirect revenues coming from all services provided on the network, including leased lines, ISDN telephone services and broadband services.

I.1. ISDN services

For 2003, in its audited accounts sent to ART, France Telecom submitted a breakdown of digital lines based on the 35 density classes, the network costs and the costs and revenues related to ISDN telephone calls. It used the same format as for analogue telephony. It also submitted the matrixes of telephone traffic between areas, which allows the model to allocate to each class the revenues and costs related to additional calls resulting from the extension of the network to a given lower density class; i.e. those within that class or between it and the already covered classes of higher density.

I.2. Leased lines

Leased lines are an important product provided along with telephone service; it generates significant margins for France Telecom.

Although ART could use an incremental reasoning similar to telephony, it plans to allocate average costs and income for 2003 according to the number of leased line ends per density class.

Since it lacks information on the breakdown of the number of ends of leased lines per density class, ART is planning to use the breakdown of the number of analogue business telephone lines per class.

Unlike the previous calculation made for the 2002 evaluation, ART is looking at handling id a specific way the local loop part of the costs.

I.3. Broadband services

Given France Telecom’s deployment of xDSL services in 2003, which was then limited to high density areas (i.e. profitable ones), ART does not plan to take into account income from broadband services for the evaluation of the 2003 net cost of the obligation of geographic averaging of tariffs.

ART has adopted a decision establishing the return on capital for 2003 at 10.8%, the same as the one used in France Telecom’s audited accounts for 2003. This is the rate that will be used to evaluate the final cost of universal service for the year 2003