Pyramid Analysis

France Regulatory Outlook

Pyramid Research has released a report covering the regulatory environments of nine European markets.  This release provides an update on the main regulatory initiatives being introduced in the region. The aim is to highlight regulatory advances on such key issues as local loop unbundling, VoIP, tariff regulation, number portability and others.

Incumbent operator France Telecom’s dominance of the country’s telecoms sector remains strong.  The fact that the government still controls a significant stake in the operator has made it hard for the regulator to curb some of the telco’s power.  Faced with increasing pressure from market challengers and the European Commission, the French government has been forced to find ways of making France Telecom loosen its grip on the market and allow for greater competition.  As a result, the government has provided the regulator, Autorité de Régulation des Télécommunications (ART), with greater authority. In 2005, we expect that ART will increasingly exercise its powers and enforce its rules not only over France Telecom, but also over any operator whose behavior is deemed anti-competitive.

ART’s new powers include ordering telecoms operators to offer wholesale services to third parties and restraining them from lowering retail tariffs. The regulator’s other functions include fostering fair competition by determining the ways in which telecoms services are provided, regulating tariffs, settling disputes among players in the telecoms sector, and imposing penalties whenever it deems necessary. The government hopes that this new law will contribute to the “de-politization” of tariff setting. Given that the French government still has a significant stake in France Telecom, the process of regulating prices and rates had in the past been an awkward and thorny one.

MVNO Legislation

According to France’s Council of Competition, the mobile market in France is not very competitive despite having three operators.  An indication of its lack of dynamism is the fact that third operator Bouygues Telecom has only managed to increase its market share by 2% in the last two years despite the fact that its tariffs are significantly lower than those of its rivals - Orange and SFR.  In addition, the competitive watchdog argues that competition in the mobile wholesale market is not fair and that the country’s three mobile operators are in tacit collusion against MVNOs, whose contracts tend to limit their commercial freedom. For this reason, in April 2005 the Council, called for ART’s intervention to resolve the matter.  So far, the regulator has not announced what measures it will take to make the mobile market more open and dynamic, although it will likely address issues such as the difficulty end-users face when attempting to port numbers and end their contracts.  

VoIP Legislation

In December 2004, ART decided not to regulate ISPs or VoIP services, considering these to be outside the realm of traditional fixed-telephony services.  This decision took many by surprise since the regulator had previously stated that it would in fact regulate these areas.  Nonetheless, ART is prepared to intervene in the IP and VoIP sectors if it sees an ISP controlling a large market share.