Court Decision pertaining to the French MTR Regulation

Paris, 24th July 2009

The French Supreme Administrative Court supports ARCEP’S methods for regulating the mobile termination rate, which is the service by which a mobile network operator enables his customers to be called by end-users of other mobile or fixed operators

  • Regulation of Mobile Call Termination

Any fixed-line or mobile operator providing a telephone service must allow its customers to reach any mobile phone number in France. To be able to do so, operators must purchase a call termination service from each mobile operator which exerts monopoly power over access to his customers.

In a decision of 4 October 2007, ARCEP imposed on all three mobile operators in Metropolitan France a price-cap applying to their mobile termination rates, respecting a cost-orientation principle. In this Decision, ARCEP set the price-caps till 30 June 2009.

In a decision of 2 December 2008, ARCEP had set the price-caps applicable to Orange France, SFR and Bouygues Telecom MTRs, from 1 July 2009 to 31 December 2010. This decision was legally challenged by Orange France and SFR before the Conseil d’Etat, which is France’s Supreme Administrative jurisdiction.

  • The Conseil d’Etat supports the Principles set by ARCEP for this Regulation

In the decision that was legally challenged, ARCEP had considered that the optimal level for call termination rates must reflect the long run incremental costs of a generic efficient operator, in order to develop, to the benefit of end-users, sound and fair competition between mobile and between mobile and fixed players. The adoption by ARCEP of this cost standard meets the requirements of the European Commission’s Recommendation of May 7th 2009, and fosters the development of flat-rate offers providing calls to all networks (all-net calls), and not only to the customers of the same network (on-net calls), or fixed/mobile convergence offers.

ARCEP considered that in order to give to the market time to adapt, it is necessary to set a transitional period during which the price-caps converge towards incremental costs but exceed them. ARCEP considered that the competitive disadvantage inflicted by such a margin upon Bouygues Telecom, who buys more termination minutes than he sells, must be partially compensated by a transitory rate asymmetry.

The plaintiffs challenged the use of the incremental cost standard, and the need for the rate asymmetry. The Court rejected these two criticisms.

  • The Conseil d’Etat upholds the Price-caps set on Orange France and SFR for the Entire Period and for Bouygues Telecom till 30 June 2010.

ARCEP had set, from 1 July 2009 till 30 June 2010, a price-cap of 4.5 €c/min for Orange France and SFR and 6€c/min for Bouygues Telecom. This rates were to be lowered to respectively 3€c/min and 4 €c/min for the period going from 1 July 2010 to 30 December 2010.

The Conseil d’Etat agreed to all these rates, except for the second cap of 4 €c/min applicable to Bouygues Telecom. The Conseil d’Etat considered that the rate asymmetry granted to Bouygues Telecom is justified in principle, but that the level of this compensation set by ARCEP for the second semester of 2010 is excessive with respect to the objective pursued.

ARCEP acknowledges the Court’s decision and will very shortly set a new cap applicable to Bouygues Telecom for the second semester of 2010.