ART imposes a price decrease on France Telecom leased lines for other operators

Paris, 15 February 2002 

Autorité de régulation des télécommunications (ART) has just adopted two decisions regarding France Telecom's leased lines interconnection offer:

. the first one approves the integration of these types of services in the incumbent operator's 2002 interconnection catalogue

. the second one rules on a dispute between MFS Communication (whose commercial name is WorldCom) and France Telecom

• The goal: to allow the development of a leased lines offer by France Télécom to other operators

ART's goal is to stimulate the development of competition on the data transmission market across France, by allowing France Telecom's competitors to complete their own medium- and high-speed leased lines networks. This will allow them to connect their own clients' premises, when located beyond their own networks, via an interconnection service offered by France Telecom for all of France.

ART's decisions generates a 10 to 20% decrease in the price of France Telecom's leased lines to other operators. The price drop will allow operators to lower their prices to their own business clients with an offer competing with the incumbent operator's, while improving their financial situation.

Thus, this offer should help develop competition: first on the market for leased lines offered to companies, worth approximately 700 million in 2000 (excluding lines between operators), and also on the broader market for corporate services which require leased line connections. The total market is estimated at 5.5 billion in 2000 and includes a large scale of high value added services: corporate networks, Internet access for large companies, data transmission, etc.

• The interconnection offer added to the 2002 catalogue

The interconnection offer approved by ART concerns medium-speed leased lines (64 kbit/s to 2 Mbit/s) and allows operators to cover all of France with 123 interconnection points. Pricing and technical conditions will be reviewed annually by ART.

The introduction of such an offer in the interconnection catalogue is a major advance. Until now, new operators had to purchase leased lines at discounted retail prices, that is at almost the same price as businesses themselves, preventing them from making a competitive offer.

It was important for France Télécom’s new offer to provide technical conditions which would make it attractive and long lasting right from the start, primarily by including it as best possible in the interconnection architecture already settled for "voice" traffic, and by setting a satisfactory service level. The offer approved by ART should meet sector expectations, by providing guaranteed delivery times and service recovery conditions comparable to France Télécom’s commercial offer (Transfix); it makes it possible to reuse investments already made to route voice interconnection traffic.

As regard pricing conditions, the operators currently using France Telecom's commercial offer may decide, on a line-by-line basis, whether to migrate to the interconnection offer. The usefulness of the interconnection solution will depend on a number of factors, including size, distribution in distance or speed and geography of the current infrastructure. However, it appears that notwithstanding the specifics of operators, the interconnection offer will represent a major advance, especially with respect to France Télécom’s current commercial offer.

• Settlement of the dispute between MFS Communication and France Télécom

MFS Communication presented its complaint in August 2001. During the procedure, France Telecom offered to integrate some categories of line in its interconnection catalogue for 2002, so the decision deals primarily with questions which were not resolved in ART’s previous decision, and in particular:

- high-speed interconnection lines (34 and 155 Mbit/s) for which France Télécom will have to make a proposal to MFS Communication in order to contract by end 2002, unless it allows MFS Communication to install optical fibre cables in its available sheaths

• 64 kbit/s to 2 Mbit/s lines for which an agreement will also have to be signed by MFS Communication and France Telecom before 30 September 2002 according to the new items of the interconnection catalogue
• creation of a temporary price, until migration towards the new interconnection offer can be done for all lines currently leased by MFS Communication (64 kbit/s to 34 Mbit/s)
• no charge to migrate from of the current architecture of the lines leased by MFS Communication towards the new interconnection offer, unless a new line is constructed
• optional service level which are improved with respect to those appearing in the catalogue; the quality cannot be less than that France Telecom offers its own clients, in the respect of the principle of non discrimination
• A new market segment opened to competition

These decisions taken by ART should make it possible to truly open a new wholesale market segment (leased lines) to competition, and to thereby lower the prices of telecommunications services offered to businesses. This satisfies the wish of major companies, as reflected in the survey conducted by ART in March 2001.

The decisions are part of a broader continuous process to open the telecommunications market to competition to the benefit of consumers: long distance telephony in 1998, fixed to mobile calls in November 2000 and local calls on 1^st January 2002. Each of these steps has led to a significant decrease in prices.

N.B.: The text of ART decisions no. 02-146 and 02-147 dated 12 February is available for consultation on ART's Web site:

ANNEX
The leased line market in France

• Total market value in 2001:

€2.3 billion (FRF 15 billion), of which €2 billion controlled by France Télécom

• Major operators present on the market

France Télécom (approx. 85% of the market), Télécom Développement, Colt, Equant, Siris, Nets SA, Telia, Gensat, Kaptech, Aéroports de Paris, Téléglobe, Completel, Cegetel, Level 3, MFS WorldCom, LDCom.

• The market accessible via the purchase of leased lines