EUROPEAN COMMISSION Brussels, 18.9.2014 C(2014) 6809 final Autorité de Régulation des Communications électroniques et des Postes (ARCEP) 7, square Max Hymans F-75730 Paris-Cedex 15 France For the attention of: Mr Jean-Ludovic Silicani President Fax: + 33 1 40 47 72 02 Dear Mr Silicani, Subject: Commission Decision concerning Case FR/2014/1643: Access to the public telephone network at a fixed location for residential and nonresidential customers in France I. PROCEDURE Commission Decision concerning Case FR/2014/1644: Call origination on the public telephone network provided at a fixed location Comments pursuant to Article 7(3) of Directive 2002/21/EC On 19 August 2014 the Commission registered a notification from the French national regulatory authority, Autorité de régulation des communication électroniques et des postes (ARCEP), concerning the fourth review of the markets (i) for access to the public telephone network at a fixed location for residential and non-residential customers in France, (ii) and for call origination on the public telephone network provided at a fixed location in France. 1 Two national consultations 2 have been carried out: from 20 February to 21 March 2014, and from 15 May to 18 June 2014. A request for information (RFI) 3 was sent to ARCEP on 28 August 2014 and the reply was received on 3 September 2014. 1 2 3 Corresponding respectively to market 1 and 2 of the Commission Recommendation of 17 December 2007 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services OJ L 344, 28.12.2007, p. 65-69 (the Recommendation 2007). In accordance with Article 6 of the Framework Directive. Pursuant to Article 5(2) of the Framework Directive. Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111
Pursuant to Article 7(3) of the Framework Directive, national regulatory authorities (NRAs), the Body of European Regulators for Electronic Communications (BEREC) and the Commission may make comments on notified draft measures to the NRA concerned. II. DESCRIPTION OF THE DRAFT MEASURE II.1. Background In June 2011, ARCEP notified to the Commission its third review of the markets for access to the public telephone network at a fixed location for residential and nonresidential customers (case FR/2011/1234) and for call origination on the public telephone network provided at a fixed location in France (case FR/2011/1235). ARCEP found that France Télécom (FT) had significant market power (SMP) in the two markets and imposed a set of remedies including the obligations to provide wholesale line rental (WLR) and Carrier Selection and Carrier Preselection (CS/CPS). The Commission invited ARCEP to encourage a timely migration towards IP interconnection. II.2. Market definition II.2.1. Access to the public telephone network Similarly to its previous market analyses, ARCEP includes any form of access to the public telephone network at a fixed location independently of the underlying technology (inter alia copper, optical fibre and coaxial networks), which are used, exclusively or principally, for the provision of voice telephony services. ARCEP excludes from the relevant market access services used for providing not only telephony but also broadband, as well as telephony services provided independently from access, and access services for mobile telephony. ARCEP continues defining two separate fixed access markets, one for residential and one for non-residential customers. ARCEP explains that, even if certain types of access are purchased by both residential and non-residential customers, the characteristics of these products differ widely between the two markets. 4 The geographic market includes the territory of metropolitan France, the French overseas departments and the overseas communities of Saint-Martin, Saint-Barthélemy and Saint- Pierre-et-Miquelon. II.2.2. Origination market Call origination is defined as the wholesale service for routing calls originating from fixed numbers open to interconnection on a public electronic communications network, from a termination point on the network to the relevant points of interconnection. The relevant product market comprises services enabling interpersonal voice traffic (through carrier selection) and narrowband internet traffic but, unlike previous market analyses, excludes value-added services (VAS) traffic. ARCEP explains that call origination to VAS numbers has some structural specificities, namely the value chain around which those services are structured and supplied, which explain that such services should be excluded from the relevant product market. 5 4 5 ARCEP explains in this regard that purchase orders for non-residential access are often centralized with a harmonized delivery date and that the services requested are usually advanced services subject to a tendering process. A key distinguishing factor is the much higher quality of service required by enterprises. The tariffs structures (and the rebates schemes) are therefore different for residential and non-residential services. The customers of operators buying VAS numbers are value added services publishers whose principal goal is the commercialisation of their services by means of telephony. Conversely, operators buying 2
Furthermore, ARCEP explains that each origination operator holds structurally a monopoly on the supply of call origination to VAS numbers for their end users. Therefore while Orange is subject to SMP-type regulation on the basis of the previous market analysis, ARCEP has implemented since 2007 a symmetrical regime for regulating call origination to VAS numbers provided by all operators. 6 ARCEP explains that following the current market analysis, in view of the market dynamics of call origination services to VAS, symmetrical obligations will apply to Orange while SMPtype regulation for VAS numbers will be withdrawn. The relevant geographic market corresponds to the territory of metropolitan France, the French overseas departments and the overseas communities of Saint-Martin, Saint- Barthélemy and Saint-Pierre-et-Miquelon. II.4. Finding of significant market power II.4.1. Access to the public telephone network ARCEP proposes to designate Orange as having SMP in the markets for access to the public telephone network at a fixed location for both residential and non-residential customers. The main criterion considered by ARCEP is Orange s high market share, which has slightly declined with the development of WLR but is still significantly high both in the residential 7 and non-residential access markets 8. ARCEP considers as additional criteria i) the difficulties to replicate Orange s infrastructure, and ii) the existence of significant economies of scale and scope. ARCEP concludes that there is no tendency towards competition expected and that without a wholesale access obligation, Orange would be re-monopolising the market. ARCEP analysed the market dynamics and observed that a transition from PSTN to IPbased telephony services is taking place at a fast pace. 9 Nevertheless, ARCEP explains that Orange stills holds a strong position on the market for access to the public telephone network at a fixed location since alternative operators are providing telephony services as part of bundles (double-play or triple-play), which are not substitutable to the standalone 6 7 8 9 call origination services through carrier selection or low-speed internet access have residential or nonresidential end-users as their customers, whose principal goal is to communicate with each other to access information. Moreover call origination by carrier selection and low-speed internet access are supplied exclusively by Orange while call origination to VAS numbers is provided by all origination operators (including mobile access origination). In the reply to the RFI, ARCEP explains that the call origination market structure has evolved significantly in the last years, with a growing part of the market for the provision of call origination to VAS held by the alternative operators. The exclusion of the market of call origination to VAS numbers from the relevant market is therefore, in ARCEP's view, justified. See FR/2007/0608. In its response to the RFI, ARCEP has indicated that under symmetrical regulation, all alternative originating operators have the obligation to meet reasonable request (i) for access from VAS providers, (ii) for billing and cost recovery, and (iii) for access to VAS numbers. In case of disagreements between the actors, ARCEP intervenes by way of dispute settlements. Under symmetric regulation ARCEP explains that Orange is subject to the equivalent but stricter access and pricing obligations (price caps). Around 92.5% in volume and in value. Alternative operators share of the market is around 6.5% (almost zero if excluding WLR-based services). Around 83% in volume and in value. Alternative operator s share of the market is only of 5% if WLRbased services are excluded. In 2012 56% of telephony subscriptions were based on IP (VoB) compared to 5% in 2005. 3
telephony subscription provided via access to the public telephone network 10. As to the non-residential segment, ARCEP explains that the development of competition remains limited, essentially because non-residential customers are reluctant to switch to voice over broadband services (fear of degradation of quality of service, interruption of service), and that it is difficult for alternative operators to enter successfully in the market because of the commercial costs involved. ARCEP indicates in its response to the RFI that it will, however, closely monitor future market developments, especially regarding the emergence of a national telephony offer based on an architecture alternative to Orange s legacy PSTN. II.4.2. Origination markets ARCEP proposes to designate Orange as having SMP in the market for call origination at a fixed location. ARCEP bases its conclusion on the following criteria: market share 11, control of infrastructure, which is difficult to duplicate, economies of scale and scope, lack of countervailing buyer power of alternative operators, and limited prospects for the evolution of the market. 12 II.5. Regulatory remedies ARCEP proposes to maintain the following obligations on the markets for access to telephone networks and call origination: (i) access and interconnection, (ii) nondiscrimination, (iii) transparency (including reference offers), (iv) indicators of quality of service, (v) price control, and (vii) accounting obligations. With regard to access regulation on the origination market, Orange should continue to provide call origination services based on protocol SS7, which still prevails as the main interconnection interface. In addition, Orange must also grant to third parties access to new interconnection architecture upon reasonable demand. 13 On the market for access to the public telephone network, ARCEP proposes to maintain the obligation on Orange of providing Carrier Preselection (CPS) as well as call by call carrier selection (CS) and Wholesale line rental (WLR). 14 In respect of the price control obligation, ARCEP proposes to maintain on Orange the obligation to apply cost-oriented tariffs for CS/CPS and narrowband Internet. However, 10 11 12 13 14 While triple play tariffs (including telephony, Internet and TV) start typically at 30 /month, the monthly standalone telephony subscription is sold between 15.9 and 16.96 /month. Some double play offers are in the same price range as the standalone telephony subscription but remain offered in a limited part of the territory. Orange holds 100% of the market. Orange is the only provider of such a service. However, ARCEP notes that the provision of origination services is decreasing in particular with respect to the provision of narrowband (given the development of broadband services) and the provision of call per call pre-selection. ARCEP will particularly monitor the transition of those services towards WLR, which is increasingly used. ARCEP explains that so far, although Orange provides already IP call termination services at a reduced number of points of interconnection, it still requires interconnection at a large number of central offices. Given the reduction of points needed for IP interconnection, ARECP aims at harmonizing the interconnection points for termination and for origination services. ARCEP will monitor the work already carried out by the relevant industry association in this field in order to put in place, once the final measure at stake is adopted, a calendar for the transition towards IP interconnection. Orange must ensure that the WLR allows access seekers to provide bundles. WLR must be provided together with the necessary ancillary colocation and connecting services. Furthermore, Orange may decline offering WLR services if Orange decides to stop providing telephony services on its traditional copper-based architecture, provided a minimum 5 year prior notice is given to the access seekers. 4
ARCEP explains that call by call carrier selection services have sharply decreased since the last market review while alternative operators are increasingly providing telephony services based on WLR. Against this background, in order to encourage CS/CPS operators to migrate toward WLR products, ARCEP proposes to implement a gradual deregulation for standalone CS/CPS products, transitioning from cost orientation to an obligation not to charge excessive prices as of 1 January 2017. 15 III. COMMENTS On the basis of the present notification and the additional information provided by ARCEP, the Commission has the following comment. 16 Regulation of Value Added Services ARCEP proposes to exclude the origination of calls to value added services (VAS) from the wholesale market for call origination, to withdraw SMP regulation imposed on Orange in this respect and to rely instead exclusively on symmetrical regulation which has been in force since 2007 on the basis of Article 5 of the Access Directive, as regards call origination to VAS numbers provided in France. The Commission agrees that the provision of VAS is characterised by the presence of very specific actors (e.g. VAS providers and publishers) and market dynamics (i.e. number of players in the value chain and complexity of their contractual relationships, need to ensure end-to-end connectivity), which may lead to the conclusion that those services should be treated differently from other call origination services. However, the Commission recalls that it is of the view that Article 5 of the Access Directive must be used with caution, taking into account the general principle under the EU electronic communications regulatory framework that regulation should only be imposed when necessary and must be proportionate to the market failure identified. 17 The Commission would like to stress that some data provided by ARCEP in its reply to the request for information shows that the market shares of alternative operators with regard to the provision of VAS have increased sharply with the deployment of their local loops, especially for the VAS provided over voice over broadband platforms. 18 Against this background, the Commission can follow the argumentation of ARCEP to lift SMP regulation previously imposed on Orange with regard to the provision of call origination to VAS numbers. However, in the absence of a detailed analysis since 2007, the Commission wonders whether the symmetrical regulation applied to Orange and other operators is still appropriate. The Commission takes the view that the market for call origination to VAS numbers, which is no longer part of the notified measure, requires an in-depth investigation 15 16 17 18 The tariff increases from 1st January 2017 should be progressive, reasonable and ARCEP takes the view that the first increase should not generate a margin exceeding 5 to 10% for the first year (2017). Ancillary services are either subject to cost-orientation (e.g. collocation) or to a non-excessive pricing obligation (i.e. connections services which are replicable by alternative operators). In accordance with Article 7(3) of the Framework Directive. UK/2013/1515. According to ARCEP in 2012 alternative operators were providing more than [ ] of the VAS traffic (compared to [ ] in 2010), while they hold [ ] of the access provided over broadband. 5
by ARCEP. The Commission calls therefore on ARCEP to conduct an assessment on the basis of updated market data regarding the provision of VAS, as well as call origination services to VAS numbers in France, to justifying the imposition of remedies, if appropriate, in line with the requirements of Article 5 of the Access Directive. Such an analysis should be consulted pursuant to Article 7 of the Framework Directive. Pursuant to Article 7(7) of the Framework Directive, ARCEP shall take the utmost account of the comments of other NRAs, BEREC and the Commission and may adopt the resulting draft measure; where it does so, shall communicate it to the Commission. The Commission s position on this particular notification is without prejudice to any position it may take vis-à-vis other notified draft measures. Pursuant to Point 15 of Recommendation 2008/850/EC 19 the Commission will publish this document on its website. The Commission does not consider the information contained herein to be confidential. You are invited to inform the Commission 20 within three working days following receipt whether you consider that, in accordance with EU and national rules on business confidentiality, this document contains confidential information which you wish to have deleted prior to such publication. 21 You should give reasons for any such request. Yours sincerely, For the Commission, Robert Madelin Director-General 19 20 21 Commission Recommendation 2008/850/EC of 15 October 2008 on notifications, time limits and consultations provided for in Article 7 of Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services, OJ L 301, 12.11.2008, p. 23. Your request should be sent either by email: CNECT-ARTICLE7@ec.europa.eu or by fax: +32 2 298 87 82. The Commission may inform the public of the result of its assessment before the end of this three-day period. 6