Communiqué de presse

Zoning changes in enterprise market regulation

Paris, 6th November 2015

In a bid to make the enterprise market more competitive, ARCEP has temporarily prohibited Orange from setting its wholesale prices for certain products below the so-called "price-squeeze" threshold, to help stimulate and protect alternative operators' investments. This is an additional and temporary protective measure that supplements common competition law which, if need be, prohibits a dominant operator from engaging in exclusionary practices.

An alternative regime of this kind cannot be maintained over too long a period of time, and could lead to the creation of artificial rents and inefficient investments. ARCEP Decision No. 2014-0735 of June 2014, on analysis of the wholesale capacity services market, therefore introduced partial and progressive price deregulation for Orange wholesale products starting on 1 January 2015, taking the evolution in intensity of local market competition into account.

For products based on the copper local loop (C2E cuivre, CELAN cuivre and DSLE), the intensity of competition is measured on an annual basis by observing the expansion and lifetime of local loop unbundling (LLU) with a guaranteed repair time of less than four hours (4h GRT) from wholesale market operators. Three complementary zones, which correspond to decreasing degrees of competition, have thus been defined:

- Copper zone 1 ("CZ1") (1) - where Orange is free from any price supervision. This includes all backhaul sections upstream from unbundled exchanges, with a 4h GRT in place for more than seven years from at least one alternative operator offering copper-based bitstream products for businesses;

- Copper zone 2 ("CZ2") - where Orange is prohibited from price squeezes. This includes all backhaul sections upstream from unbundled exchanges, with a 4h GRT in place for less than seven years from at least one alternative operator offering copper-based bitstream products for businesses;

- Copper zone 3 ("CZ3") - where Orange must charge cost-based prices. This includes all of the remaining backhaul sections upstream from unbundled exchanges, and where Orange is the only operator offering copper-based bitstream products for businesses.

Starting on 1 January 2016, these zones will change: 324 exchanges will be added to CZ1, while CZ2 will include an additional 334 exchanges. As a result, there will be 1,362 exchanges in CZ1 and 3,309 exchanges in CZ2 as of 1 January of next year. CZ1 is expected to continue to grow in the coming years as the existence period of LLU exchanges with a four-hour GRT increases: some 360 additional exchanges will be added to CZ1 in 2017, and a further 800 by 2018.

By the same token, in the same aforementioned decision, ARCEP defined a zone where Orange is not subject to any price supervision of its wholesale fibre products (C2E optique, CELAN optique and CE2O), to take variations in the degree of local competition into account.

This fibre zone 1 (FZ1) - which will be revised every year on 1 January, based on the size of dedicated optical local loops' user base as of 30 June of the previous year - is composed of municipalities where competition is proven to be significant. They must satisfy the following three criteria:

- have economic potential, with a density of more than 50 businesses (with 10+ employees) per km²;

- significant rollouts, with at least 50 access lines sold in the municipality's retail market;

- an alternative network density that is at least comparable to that of the Orange network (at least one in two access lines built by an alternative operator).

Starting on 1 January 2016, this zone will be expanded to include three new municipalities: Saint-Denis, Puteaux and Charenton-Le-Pont, in addition to the existing 17 (2). Pricing changes could occur in those locations.

In the remaining municipalities, which are grouped together inside of fibre zone 2 or "FZ2", Orange must continue to charge wholesale prices that do not constitute a price squeeze (to help stimulate and protect alternative operators' investments), and which are not excessive (to prevent abusively high prices).

N.B.: A detailed definition (in French) of the different acronyms employed here can be found in the glossary for ARCEP Decision No. 2014-0735 (pdf - 1.53MB)

 

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(1) Referred to in French as "zones cuivre": ZC1, ZC2 and ZC3.
(2) Grenoble, Nancy, Lille, Lyon, Villeurbanne, Paris, Boulogne-Billancourt, Courbevoie, La Garenne-Colombes, Issy-les-Moulineaux, Levallois-Perret, Malakoff, Montrouge, Nanterre, Neuilly-sur-Seine, Aubervilliers and Vincennes.


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