he Autorité de la concurrence recommends that sector-specific regulatory obligations of the incumbent operator regarding broadband access in urban areas be reduced.
The Autorité also invites the French Telecommunications and Posts Regulator (Arcep) to begin preparatory work related to the implementation of a new tool: a possible functional unbundling of monopolistic activities from competitive activities
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The Autorité issues today an opinion on a project of regulatory mechanism issued by the French Telecommunications and Posts Regulator (Arcep) regarding the wholesale broadband market and the regulation of next generation access networks (NGA) for 2011-2014, in the frame of its third round market analysis1.
The success of broadband access regulation, welcomed by the Autorité, justifies reducing some obligations imposed to France Télécom
Unbundled access to the local loop in the fixed public telephone network2, imposed by a sector-specific regulation, constitutes the main means for new entrants to enter the market of broadband internet access. It fostered the development of innovative offers (triple play) at a competitive price for consumers. With regard to the dynamic of its broadband market, France is often cited as a model. In the densest areas, alternative operators' (Free, SFR) market shares are closed to the incumbent operator's (Orange) on the residential retail market and alternative operators also dominate the wholesale market, which allows new operators to commercialize offers on the retail market.
In these dense areas, where competition is now effective, the Autorité considers that the ex-ante regulation, which closely monitor France Télécom on the wholesale broadband market, should be lighter and give place to common competition law enforcement. Nevertheless, sustained regulation remains necessary in less densely populated areas and on the business segment, where the incumbent operator still holds strong positions.
The Autorité suggests introducing a mid-term clause (in 18 months) to review the efficiency of the regulatory framework regarding the deployment of fibre network
Looking forward, the metallic pair circuit of France Télécom's public telephone network will be replaced by new fibre networks connected to the consumer's premises that will provide very high speed broadband services. The conditions, in which these new networks will be rolled out, as well as their competitive environment, will be crucial regarding the future of the sector.
The Telecommunications and Posts Regulator (Arcep) is fulfilling its role when seeking a balance between economic incentives to invest in fibre infrastructures and the obligations imposed to investors3. This balance, at this stage focused on facility-based competition, must be monitored on a regular basis. A mid-term clause in 18 months (at the mid-term of the market analysis) would be necessary to monitor the efficiency of this regulatory framework. When a lack of investment by the operators in networks would be established, or when the choice offered to the final consumer would appear to be too limited, regulation could be adapted to foster service-based competition: the obligation to provide wholesale broadband access on fibre networks could cover a broader scope as today.
Moreover, the Autorité welcomes Arcep's proposals to increase bandwidth in rural areas
The longest public telephone lines, most of the time located in rural and peri-urban areas, offer a limited bandwidth. Therefore, some local authorities are considering financing the upgrade of France Télécom's network. In an opinion issued at the request of Arcep (Opinion 09 A 574), the Autorité underlined in December 2009 a range of risks that could derive from such operations : less active competition due to a decrease of local loop unbundling in these areas ; distortion of competition during the tendering processes for such public projects, due to the specific position of France Télécom on the telephone network; possible exclusion of these geographic areas from any future high speed broadband access, through discouraging new investments in fibre network.
The Autorité welcomes that Arcep has taken into account these worries. Indeed, in its proposals, Arcep intends to give local authorities the possibility to rapidly increase bandwidth in their geographical areas without hindering a competition that consumers strongly support. The scheme proposed by Arcep should in principle address the competitive worries identified by the Autorité.
The Autorité considers that, in any case, the upgrade of the fixed public telecom network is only one available tool among others to increase bandwidth. When it is viable, the roll out of a new fibre local loop remains the best solution regarding technological aspects and competition.
Functional separation of France Télécom is henceforth part of the telecommunications regulator's “toolbox”
Arcep will soon be empowered to impose to the incumbent operator a functional unbundling of monopolistic activities and competitive ones. Such measure, already existing in most of the other regulated network industries, can strongly secure the well functioning of markets and limit the regulatory burden over the regulated operator. It would be premature to tell whether such a tool has to be used or not in the electronic communications sector and the Autorité invites Arcep to begin the preparatory work related to its possible use.
Broadband and next generation access networks