9 October 2002
On 1st August 2002, the Minister to Industry and the Minister of Culture and Communication launched a public consultation regarding changes to French law on electronic communications. The purpose of the consultation was to collect the opinions of sector players in order to prepare the transposition into French law of the new, recently adopted EU directives.
During the first half of 2002, ART held initial discussions in preparation for adapting regulation to sector changes, in particular to take account of the upcoming application of the new European regulatory framework. The conclusions of this work were made public in July in the form of a summary, then a more detailed report.
Continuing on these considerations, ART wished to provide additional information to the Government and the sector by submitting a detailed response to the public consultation.
Regulation is at the heart of legislation on electronic communications, and because of its mission, ART will have to apply it when concretely analysing markets and promoting their development through competition. This is why, in addition to its contribution to this consultation, it hopes to share its experience in regulation with the Government in preparing this new stage.
To this end, it has created a mission under its Director General for applying the new EU framework. The mission will have three tasks: to monitor the transposition process, to coordinate, in preparation for their examination by the Board, the preparation of the contributions the regulator may offer, and to initiate internal discussions on adapting its organisation and working methods. To this end, it will receive the analyses and proposals of any market players wishing to submit them.
ART’s main proposals
ART’s answers to the questions posed in the electronic communications public consultation expand on and supplement the proposals it made in its recent report and report summary on adapting regulation. Its contributions focus on several general topics:
Easing and simplifying regulation
The spirit and the letter of the new directives must lead to a easing and simplification of the regulations applied to operators, primarily by establishing a general authorisation system. In order to implement this major evolution, the categories of players present on the market must be identified according to their rights and responsibilities, and those who are to be subject to a mandatory notification system must be clearly distinguished from those who are exempt. This is the reason why ART proposed various regulatory categories in its submission. ART also favours an easing of the general level of taxes and the establishment of a low proportion to sales, as well as an across-the-board ceiling for the fees paid by operators for rights of way.
Simplification is also achieved by modifying current categories. Thus, ART supports the maintenance of the "independent network" category as long as its definition is modified to more clearly distinguish between independent networks intended to meet the needs of a community and public networks. ART also considers that including passive infrastructure managers—and in particular regional governments—in the scope of the general authorisation might help establish a clear basis for the interventions these governments may sometimes wish.
In the area of numbering, ART does not support the direct assignment of numbers to users and feels it preferable that discussions be initiated on the rules for establishing fees. It also favours clarifying and simplifying the frequency fee system, whose calculation method is currently based on several texts and on different criteria, which leads to inconsistencies. As for the means of allocating frequencies, ART considers that frequencies can be transferred between operators only under strict conditions, and should be limited to "activity transfers", in particular to facilitate the continuation of the activity in the event modifications affect the legal form of the operators.
Planning suitable competition regulation
As concerns the regulation of competition, while the new regulatory framework for electronic communications tends to bring together the principles of sector law and general competition law, it also maintains sector law, and in certain respects makes it even tougher. Therefore, ART feels it essential that the transposition articles faithfully respect the spirit of the "framework" directive, which in essence allows national regulators to adapt sector regulation to the competitive situation of each market. Legislation and regulation must guarantee this necessary flexibility in competition regulation (market definition and analysis, designation of powerful operators, removal or imposition of tougher responsibilities) while avoiding the risk of soldifying situations, which, in the spirit of the directive, must be progressive. ART’s proposals for price controls follow the same logic: the regulator must have the latitude it needs to adjust the performance of this control according to the competitive situation of the markets, which it must have previously analysed in relation with the independent competition authorities.
With this in mind, ART wishes to reiterate that the cooperation established under the current framework between the telecommunications regulator and the authority responsible for competition has worked perfectly. This measure, which is coherent with the provisions of the new directives, must be preserved because it constitutes an effective tool in continuing the move towards full competition on the electronic communications sector.
A review of the use of regulation tools brings us to the goal of improving the effectiveness of decisions. Indeed, the operators at fault sometimes slow or block the application of decisions, resulting in major difficulties in implementing the objectives set by the decisions and sometimes putting at risk the very existence or sustainability of a competitive market. One answer would be to allow ART to implement more restrictive execution procedures, based on the model of injunctions or penalties, which may be ordered by common law jurisdictions.
The scope of the dispute settlement powers, which has been extremely useful in exercising regulation, should be extended by the application of the new directives, without necessarily restricting its reach in the texts of domestic law. A number of improvements could make the exercise of this power more efficient. First, the possibility, for ART, of leading a public consultation in progress, the express ability to make decisions retroactive in order to take into account the economic and competitive impacts of the conditions which remained in force during the examination period, and the strengthening of the means of requiring parties to immediately and fully execute these decisions would likely give this jurisdiction all its reach and full efficacy.
As regards sanction powers, the times required to declare a sanction must be made more flexible and the range of sanctions which may be imposed extended. This could be done, for example by allowing ART to confiscate usage rights to frequencies and numbers. These two measures are explicitly mentioned in the new directives. Other improvements, which would reinforce the efficacy of decisions, are also desirable.
Regulation should also be granted greater powers to allow it to conduct real investigations, including outside the scope of simply seeking possible infractions. Such investigations are indispensable given the imbalance of information, which is characteristic of the respective positions of the regulator and operators. Finally, respecting the directions set by the directives in the area, it should operate within a framework which is better suited to collecting information from operators, for regulation (in particular in conducting market analyses) or statistical purposes.
Taking into account technological convergence
If technological convergence is to be included in electronic communications regulations, a distinction will have to be made between the regulation of networks and the regulation of content. This applies to several areas:
If cable networks are to be integrated in the electronic communications legal system (which springs from the spirit and provisions of the directives), there will have to be an easing of the constraints currently weighing on these networks: a separate authorisation for each city for establishment and operation, a concession system where infrastructures must be returned to the municipalities, less favourable conditions of access to public property than those applied to telecoms operators. Moreover, ART would not oppose a transition period in moving to the new system of law, as long as it did not delay the relaxing of the specific constraints to which these networks are subject. Finally, ART underlines the risk to the cable economy of "must carry" responsibilities for TNT and cable operator individual coverage limitations at 8 million inhabitants. Its proposals are based on the sole concern of preserving the existence of a cable industry in France, the development of which represents an advantage for the development of the information society and for the respect of pluralism in content production.
As concerns frequency management, ART wants all the consequences of the distinction between network and content regulation to be identified. Based on means to be defined, it would be legitimate to assign all frequencies to carriers and no longer to content publishers. Still, radio and television networks straddle the borderline between container and content regulation. It is therefore important to adopt a pragmatic and progressive approach in this case. Moreover, because of convergence, greater coherence will be necessary as regards frequency fees in the telecommunications and audiovisual sectors.
Regarding ground radio broadcasting, ART feels it desirable that the activity of passive infrastructure manager, and in particular that of TDF, be covered by electronic communications regulations. This would ensure that the regulation of powerful operators and dispute settlement powers cover the relations between site managers and operators. Moreover, the directives clearly state that audiovisual carriage activities have the status of electronic communications network operator. They are therefore covered by that system for access and frequency allocation.
Adapting the means of providing public service
ART reiterates that the definition of universal service responsibilities cannot be separated from considerations of how this service is financed. Indeed, the benefits derived by cities from universal service must be compared to the financial burden it imposes on those called to participate.
We must also emphasise that the stated goal in establishing universal service may also be met, in certain cases, by mechanisms which are not covered by the law, as shown by the measures used to complete geographic coverage for mobile operators.
Moreover, given the rapid technological developments in the electronic communications sector, the definition of universal service will likely change on a regular basis. Indeed, article 15 of the "universal service" directive calls on the European Commission to re-examine the scope of universal service and propose its modification to the European Council and Parliament by 25 July 2005 at the latest, and every three years thereafter.
In terms of means, ART considers it legitimate to introduce competition mechanisms in the provision of universal service. However, it emphasises the difficulties inherent to such measures, especially if the principle of geographic division is chosen. The regulator must control the fees for universal service by establishing a price cap, as stipulated by the directives, supplemented by the individual examination of certain prices.
As concerns financing, the "universal service" directive allows Member Countries to choose one of two mechanisms: the use of public funds or the establishment of a fund financed by the sector. For the second, the number of operators called to contribute should not be automatically restricted. On the other hand, a distribution key for contributions needs to be defined based on operators’ sales (excluding interconnection) and not on traffic volume, a base that weighs heavily on the cost of Internet access.
Last, ART explains that while the "universal service" directive explicitly gives Member Countries the possibility of making certain services mandatory, the provision of a "minimum set of leased lines" also stipulated by the directive would not be covered by this framework, as it may be imposed by competition regulations.
ART emphasises that issues of consumer protection should be dealt with primarily under general consumer law, which offers effective and transparent protection.