The European Commission confirms that new entrants may benefit from asymmetric voice mobile termination rates, while raising concerns as regards the justification of this asymmetry

Paris, 13th April 2012

ARCEP has been fully involved in the initiative carried out by the European Commission in order to decrease termination rates on fixed and mobile networks, as provided in its recommendation published on 7th may 2009. In pursuance of this recommendation, the Authority, in its decision of 5th may 2011, decided to set the voice termination rates that are applied by French mobile operators to the level of long-term incremental cost, i.e. 0,8 €cts/min, on 1st January 2013. ARCEP therefore places France as one of the first Member States that have fully implemented the Commission’s recommendation.

The decision to set a glide path based on the BULRIC model (bottom-up Long-run incremental cost) for termination rates , which ARCEP had taken and started implementing even before the recommendation was adopted, has already had a positive impact. It has fostered competition on the retail market by limiting the so-called “club” effects. It has also encouraged the development of commercial innovation: unlimited offers (between fix and/or mobile operators) have now become widespread on the French market. This is also shown by the changing consumption modes and higher consumption volumes.

In this context where mobile termination rates are fixed according to the BULRIC model, ARCEP considers that symmetry is the rule, and that fixing asymmetric rates between mobile operators can only be justified if it applies to new entrants (new MNOs  or “full MVNOs”) under conditions and is limited to a transitory period. These were also the conditions set in the recommendation of 7th may 2009.On 13th March 2012, ARCEP notified to the European Commission its draft market analysis regarding the mobile voice call termination applying to the first active full MVNOs, Lycamobile  and Oméa Telecom , and to the new MNO, Free Mobile. In this draft document, ARCEP proposes to set up for the new entrants termination rates that are slightly higher than those applying to existing operators, due to the higher costs incurred by new entrants, and that these slightly higher rates only partially compensate. In 2012, these remain, 35% below the average regulated rates imposed on existing operators in other Member States of the Euro-zone.

In its opinion adopted today, the European Commission confirms that asymmetrical rates are acceptable in principle, but raises concerns as regards the justifications brought by ARCEP. The Vice-president of the European Commission, Neelie Kroes, summarized the Commission’s position saying: “French consumers are already on track to benefit from ARCEP's decision to impose cost-based mobile termination rates on existing mobile operators. The entrance of new operators ensures that the French mobile market is competitive and vibrant, giving greater choice to consumers. However, imposing higher mobile termination rates for new entrants only make sense if this reflects real higher costs. "

The debate is about how to take into account the specific situation of new entrants, as, among other, when they become active, they incur structurally higher costs than their competitors when terminating calls to their clients. In order to take utmost account of the Commission’s opinion, ARCEP will in the coming weeks examine the practical ways to make effective the provisions of the recommendation, in view of the Commission’s comments and the situation of these new entrants on the French mobile market.

This document is a courtesy translation of the French press release.