Chapter 1:

Significant progress in opening up the French telecommunications market to competition

From the regulatory point of view, the telecommunications market in France is one of the most open in the European Union, after the United Kingdom, Finland and Sweden. Competition grew even sharper in 1994, particularly with the designation of a third mobile telephone operator, the emergence of four competitors to Transpac for data transmission, and the increasing use of the possibilities offered to closed user groups. All the European Union Directives in this field have been transposed into national law, and France has even adopted a number of European decisions in advance.

The public consultation on the development of French telecommunications organised by Bruno Lasserre made it possible to highlight the demands of the social and economic players in this field: the extension of competition to infrastructures in 1998, fairer competition, and support for the role of the regulatory authorities, particularly at the economic level.

Finally, France, whose position was strengthened by this consultation process, played an important part in initiating and supporting the decisions taken by the European Council of Telecommunications Ministers in June 1993 and November 1994 to wholly open services and infrastructure to competition by 1 January 1998. This kind of opening up requires that a regulatory framework be set out and harmonised at the European Union level, including: the definition and financing of universal service, interconnection, the granting of licences, and reciprocal access to the markets of non-EU countries.

These principles were at the heart of the efforts undertaken by the DGPT to prepare for the meeting of the European Council of Ministers on 13 June 1995.

I - Strengthening competition in France

1994 saw a continuation of the process of actually opening up the French telecommunications market to competition. In certain areas, efforts that had been initiated earlier were continued, and the field of competition was gradually expanded. Other market sectors (data transmission, mobile communications, and international telephone communications) saw an intensification of competition. The plans of the regulatory authority were adapted to deal with these developments in the market.

1.1. Mobile communications: competition is now completely open

1994 was the year when the final steps were taken to completely open up this market sector to competition: the third mobile phone operator was designated — Bouygues Télécom, which now holds a national licence to set up a DCS 1800 personal communication service — while the two GSM operators were authorised to carry out trials with this service in a large French city; the GSM service took off (rising from less than 100,000 subscriptions at the end of 1993 to 458,000 by the end of 1994) in an increasingly competitive market; an experimental DECT licence was granted to Compagnie Générale de Vidéocommunications; three licences for ERMES standard European digital radio paging were granted to Bouygues, Compagnie Générale des Eaux and France Télécom; and new licences were granted for radio relay systems open to third parties. (Note: All these developments are examined in Chapter 4.)

1.2. Satellite communications: New players in a still underdeveloped market

In 1994, there were continued regulatory efforts backing the plans drawn up in 1991 to open the market to competition. Seven additional authorisations were granted to VSAT networks, bringing the total number of licences to 33. But apart from the three operators that won invitations to tenders on behalf of large accounts, few of these companies actually carried on any business in this field.

There were five new authorisations granted to news gathering stations (non-permanent video links), bringing the total up to 25, and regular business developed in this field.

There are relatively significant prospects for increasing competition in the coming year. The regulatory authority must respond to several new applications, for example, for the use of shared bandwidths and for satellite stations linked to teleports.

In addition, in order to implement the Directive on satellite communications, adopted in October 1994 by the European Commission, the regulatory authority must consider the measures needed to improve access to the space segment, which continues to be the main source of difficulty for operators as well as the main cause of disputes brought before the regulator.

1.3. Local Area Networks: an increasingly exercised right

Local area networks include both the infrastructures set up to meet the internal needs of companies or closed user groups (private networks) and telecommunications services that are not available to the public.

More than 400 independent wired networks have been authorised by the DGPT to date. The majority of these are small, strictly private networks that are generally used to connect two sites that are close but separated by public access areas. Some of these networks are larger and belong to organisations that have the advantage of geographical continuity. This is the case, for example, of the SNCF networks, urban rapid transit systems (the RATP, Lyon's rapid transit system), and motorway companies. In addition to these 400 private wired networks, there are 67,000 private radio-based networks authorised in France.

There were three main trends in this field in 1994.

The first one reflected the growth in the sector: the significant increase in requests for interpretation submitted to the DGPT concerning the concepts "closed user group" and "services not available to the public". As concerns the notion "closed user group", which is not defined by law, the regulatory authority developed a definition based on legal proceedings in actual cases: a closed user group must be based on mutual and shared interests that are sufficiently stable to be identifiable and which exist prior to the request to set up a private network. This relatively flexible definition has given rise to several concrete interpretations (see figure).

The DGPT has developed certain rules which make it possible to better determine what is and what is not a CUG
Factors that are neither necessary nor sufficient to constitute a CUG	Examples of what can constitute a CUG
Location in the same geographical area. Taking the form of a legal entity.	A CUG can include company personnel who are travelling or at home, when their communications relate to business matters.
The identification of a customer by a number, a contract, or an agreement.	A company and its agents.
The existence of an abbreviated dialling system. Contractual relations or an agreement.	A company and its subsidiaries, when they are involved in the same field of business.
	A company and its suppliers. Companies in the same sector that have partnership relations or cooperation based on agreements.

Services supplied on leased lines are considered as not available to the public when they are not connected to the public switched telephone network or they are only connected at one termination point. The reverse assumption applies when they are connected to the public switched telephone network at both termination points. This approach is compatible with the rules set out at the European level ("services" Directive) and internationally (ITU Recommendation D1) and it has made it possible for a number of service providers to meet the increasing need for in-house communications from companies and groups of companies.

The second trend involves proposals to operate wired networks with shared resources, that is, networks used by several closed user groups which have no intention of communicating with one other. This practice, which is common for radio networks, was unusual up to now for wired networks. The first application files have reached the DGPT and are in the process of being studied: this could lead to new authorisations in 1995.

The final trend in 1994 concerning the opening of this field to competition was the adoption of general licensing conditions for private radio relay systems (decree of 7 October 1994, included as an appendix). These conditions, which are linked to the gradual freeing of frequencies in several bandwidths suitable for this purpose, will make it possible to meet business needs for voice radio transmission efficiently and rapidly.

1.4. Data transmission: open to competition

As provided for in the "services" Directive, 1 January 1993 saw the data transmission market completely opened to competition by the Order of 30 December 1992, which defines the conditions for authorizing bearer services (that is, simple resale of capacity). Authorisation is granted to any service provider that requests it, but it is subject to compliance with a schedule of terms and conditions.

It was not until 1994 that four competitors to Transpac — already authorised in 1993 — requested and obtained their authorisation to supply the public with bearer services and installed themselves on this market: BT France, Sprint, Unisource, and Air France. In addition, an authorisation to supply bearer services on cable networks was granted to the Compagnie Général de Vidéocommunication, for the trial of the DECT network in Saint Maur des Fossés.

Meeting needs for interconnection

As the process of opening up data transmission services to competition has gone forward, the growing needs for interconnection have come to the surface; these were able to be met due to the regulatory system developed since 1990. Authorisations provide for a certain number of rights and obligations that make it possible for service providers to develop their services in a satisfactory competitive environment. In particular, France Télécom is required by a section of its schedule of terms and conditions to meet requests for interconnection for authorised bearer services. The regulatory framework provides for a mechanism of commercial negotiations, which could lead to an agreement to be submitted for the approval of the DGPT, or, in the absence of an agreement, to the possibility of arbitration by the DGPT.

Considering how to simplify the regulatory process

During the public consultation organised by Bruno Lasserre on developments in French telecommunications, all the players expressed their desire for simpler procedures, particularly as concerns the relevance of the distinction made between "value-added-services" and "bearer services".

Services that are limited exclusively to data transmission are in fact rare: most often other functions (particularly network administration) are included. The existence of a schedule of terms and conditions, even if only aimed at providing transparency and information for users, is occasionally considered to be overly burdensome.

Reflection on how to simplify the regulatory system is thus on the agenda. The DGPT is in favour of such flexibility, which could be incorporated into a reporting system for all data and/or value added services.

1.5. The development of international telephone services: call back and rerouting

1994 saw the real emergence of competitive international telephone services, which are based mainly on what is said to be an improved charging system. These services have mainly taken two forms: callback and rerouting.

As far as the law is concerned, callback, which makes exclusive use of the public switched telephone network, is unrestricted. Rerouting, which uses leased lines, is unrestricted as long as there is no service to the public: to the extent that customers are connected to the service by leased lines, the DGPT considers that there is an assumption of no public service (see above).

Call back The user's interest: making the most of rate fluctuations, particularly with the United States In France, call back has mainly been developed for communications to the United States. Time zone differences between the two countries thus come into play (calls at night rates) and, to a lesser extent, call back makes use of rate differences. In addition, it is apparent today that small call back operators, who have the backing of the large international operators for which they generate traffic, benefit from "wholesale" or "semi-wholesale" rates. It is actually quite lucrative to purchase a minute of transatlantic communication at wholesale rates and then resell it at retail rates. Moreover, as the service is billed in the United States, there is no Value Added Tax. It should be noted that this type of service only benefits consumers who have a large amount of international traffic. This is due in particular to the minimum charges that are billed by call back operators, and there is always the potential risk of rapid changes in currency exchange rates. Lastly, the consumer has every interest in finding out just where any potential disputes over billing would be heard, which is specified in the contract. A niche market According to a study carried out by IDATE for the DGPT, the share of call back services in sales of voice services is still low: In 1994, call back sales should reach FF 100 million, a figure which should be compared with international traffic to the USA (about FF 1 billion) or with total international traffic (about FF 10 billion).

II - Developments in French telecommunications regulation

III - A new field for experimentation: alternative infrastructures

IV - European Union decisions on opening the market for services and infrastructures

Chapter II