Paris, 20 June 2003
Autorité de régulation des télécommunications (ART) has ruled on three disputes submitted by France Telecom regarding the fees charged for call termination services by Completel, its subsidiary Estel and the company UPC France.
Call termination refers to so-called wholesale "interconnection" services, by which a local loop operator providing telephone service allows other operators to establish telephone calls between their customers and its own.
In a telecommunications market open to competition, the reciprocal provision of these wholesale services by all local loop operators is essential to ensure that every subscriber to telephone services in France is able to reach all other subscribers, regardless of the local loop operator to which they are connected.
The fees for these interconnection services are key competitive elements for local loop operators. Indeed, for a local loop operator, the purchase cost of call termination to competing operators determines to a certain extent the fees it can charge its own subscribers for calls to subscribers on other networks. Inversely, the sale of this service on its own network to competing operators also determines to a degree the fees they can offer their subscribers for calls to its network.
Naturally, this situation makes negotiations difficult in defining the levels of these charges, since each operator might be tempted to increase its own call termination charges in order to maximise the revenues it earns from billing this service to its competitors and to increase its competitiveness on the market, and at the same time, disadvantage its competitors in the competition it creates on the market.
Twice in the past, following failed negotiations, operators have called on ART to establish "fair" fees: the first time in 1999 in a dispute between Cegetel Entreprises and France Telecom, and the second time, in late 2001, between UPC France and France Telecom.
The fees set on these two occasions were based on the same approach: in order to take into consideration the effects of these fees on competition on the local loop market and the need to incite players to exercise economic efficiency, ART considered it necessary to define a method which would establish a reciprocal fee for reciprocal services; i.e. equivalent to those charged by France Telecom to these operators for its equivalent call termination services.
The disputes brought before ART by France Telecom concern the call termination fees charged by local loop operators Completel, Estel and UPC France.
In its decisions, ART confirmed the need to define a pricing method coherent with the analysis it developed in the past, which aimed to ensure competitive neutrality and incite operators to economic efficiency.
Therefore, for the medium term, ART reaffirmed the pertinence of the reciprocal fees approach, under which the price set by a local loop operator to route an incoming call on its network must be equal to the outgoing interconnection fee-i.e. an equivalent service-purchased from France Telecom.
However, ART did feel it necessary to take into account the specific, temporary situation in which these three players find themselves. Given their recent arrival on the local loop market, they do not currently have the experience of France Telecom, which allows them to attain comparable network costs.
Therefore, the method established by ART allows these operators to apply to France Telecom fees which are at most equal to those practiced by France Telecom five years earlier. They will be permitted to do so until the end of 2007.
These decisions encourage the development of investment and competition on the local loop market: they provide the conditions for fair remuneration of the interconnection services that are indispensable to the activities of local loop operators.