France - European Commission inquiry into legality of French Telecoms Tax

[ihs] The European Union (EU) has announced it has opened an infringement procedure against France, deeming the country's "telecoms tax" on operators illegal. France has recently introduced the specific tax, on the turnover of telecoms operators, as part of their licence agreements, in a move to offset the ending of advertising revenue from public TV channels. However, the European Commission has now suggested that this tax constitutes an administrative charge that is incompatible with European law, adding that there is a serious risk that the cost will be passed on to customers at a time when prices should be coming down. According to European rules, an administrative charge levied in connection to licencing can only cover certain specified costs—and not a rolling, ongoing tax. The French Government now has two months to reply to the letter of formal notice, which the Commission sent today.

Significance: Telecoms commissioner Viviane Reding has already expressed serous doubts about the tax, saying not only does it seem incompatible with the European rules, it also concerns a sector that is now one of the major drivers of economic growth. She added that as the EU is trying to reduce consumer bills by cutting termination rates and call, data and roaming charges, such a fresh demand on operator profits was most unwelcome. France Telecom has recently stated that it sees high-speed broadband rollout as its key strategy in the country's saturated markets, and although the three leading fixed-line operators France Telecom, Vivendi's SFR, and Iliad are carrying out experiments in shared fibre roll-out in three regions near Paris, these are somewhat limited, and former incumbent France Telecom in particular has been shy to invest without some regulatory pledges that it will be able to get a fair return on its investment if it is forced to open these networks to rivals. Despite the funding pledge, France's regulator must also act to allay operators' fears, if it hopes to bring broadband connectivity and competition in French telecoms up to the level of its European neighbours.

EU Opens Inquiry Into Legality of French Telecoms Tax