SUMMARY

Foreword
Milestones, 1995/96

Chapter I : Preparing for full competition
1. New ground rules for telecommunications
1.1. Timetable leading up to 1998
12. Details of the new ground rules
a) Competition open and accessible to all
b) Combining public service and competition
c) Regulation of the telecommunications market
2. Study and audit of France Télécom's costs
21. Study and audit of France Télécom's costs
22. The Champsaur group
3. Adapting France Télécom's status
3.1‑ Provisions for providing and guaranteeing the operator's public service mission and employee status
3. 2 ‑ Provisions simplifying the operation of the company in a competitive framework
3. 3 ‑ Provisions for internal company reform

Chapter 2:French Presidency of the European Union and Community Decisions
1. European Union telecommunications projects
1.1. Work of the French presidency
1.1.1. The debate on the post-1998 regulatory framework
1.1.2. The proposal for a directive on ONP-voice telephony
1.1.3. The resolution on mobile communications
1.1.4. Commission's draft directive on the liberalization of cable television networks
1.2. Furthering the debate on the regulatory framework under the Spanish presidency
1.3. Work of the Italian presidency
2.	Postal Services
2.1. French presidency gives fresh impetus to EU efforts
2.2. Postal directive gets off the ground under the Spanish presidency regarding the draft communication 

Chapter 3 : Extending France’s International Reach
1. The international expansion of French operators: new alliances, new partnerships
1.1. International expansion accelerated by the liberalization of the EU telecommunications market
1.2. Promoting the international growth of French operators
2. Bilateral international cooperation
2.1. Bilateral relations with OECD countries
2.2. Bilateral relations with emerging countries
3. Multilateral activities with developing countries

Chapter 4:Building the Information Society
1. Preparing France for the information society
1.1. The major factors likely to pose a challenge to the current legal framework
1.2. The regulatory framework will have to be amended but the changes must be based on a few simple principles
121. Maintaining separate regulation for services and media
122. Promoting the development of networks and services
123. Guaranteeing a suitable level of security on these new networks
2. Major international events
2.1. The G7 and the information society
22. The information society and the French-speaking world
3. Drawing up a world-wide framework
31. World Trade Organization (WTO) negotiations on basic telecommunications
32. Reforming international telecommunications satellite organizations 
33. The ITU policy forum

Chapter 5 : Regulating markets open to competition
1. The mobile networks and services markets
11. The development of mokile markets
111. The number of French mobile telephone subscribers passed the one and a half million mark in 1995
112 Radiopaging
113.Local cordless telephony
114.Corporate radiocommunications services: trunked radio networks
1.2 Regulating the mobile market
121. The mobile communications observatory: a regulatory mechanism for all operators
122. Several indicators will be published in 1996 to assess the quality of service of French 		GSM networks
123. Mobile phones
124. Regulation for radio paging (POCSAG / Eurosignal licence)
125. A new local mobile telephone operator - Prologos Aquitaine
126. Optimizing the use of the available radio spectrum
2. The markets for fixed networks and services
2.1 Certain markets have already opened up
211 Services
212 Independent wired and radio networks
213 Satellite networks open to the public
2.2 On-going regulatory amendments
221 Certain markets have already opened up
222  Interconnection: further requests for DGPT arbitration
223- Access to the public domain
224. Launch of public consultation on wireless local loops

Chapter 6 : Ensuring fair competition, protecting consumers and keeping users informed
I. Competition
I. 1. The key features of market players in the telecommunications industry
I. 1.1. France Télécom and the competitive sector
I. 1.2. The structure of competition
I. 2. France Télécom and its subsidiaries
I21. The financing of France Télécom's subsidiaries
I22. Commercial relations between the parent company and its subsidiaries, and between subsidiaries
I. 3. Genuine competition on the international services market and more generally on the corporate 	services market
I31.Genuine competition on the international voice services market
I32.Effective competition on the global business market
I. 4. Progress towards access to the France Télécom network
I41. Access to the international routing centre (CIA)
I42. Access to the D-channel
I43. Access to space capacity
I. 5. Improving market transparency
I. 5.1. Upcoming publication of sectoral surveys
I. 5.2.Additions to France Télécom's price list
I. 5.3.Publication of the conditions for reduced Transpac tariffs
I. 5.4 Improving the Colisée/DOM offer
I. 5.5.Modification of the information pages in the France Télécom directories
2. User protection
21. Harmonization of national legislation on the protection of individuals with regard to personal 	data
22. Towards the harmonization of European consumer protection for contracts negotiated at a 	distance over telecommunications networks
23. Directories
3. Taking user expectations into account
3.1. Dialogue with users: June 1995 meetings with consumer associations
3.2. Awareness of user expectations: the IFOP survey on service quality.
4. Regulation based on the generalized consultation of operators and information provided to the users
41. The DGPT's demand-oriented information and communication activities
42. Ties with the profession

Chapter 7:Economic supervision of France Télécom: Regulating tariffs and service quality
1 - Tariff regulation in 1995
1.2 - Significant price cuts in 1995
1.2.1 - Overall trend towards a significant decrease
1.2.2 - The national telephone service
1.2.3 - International telephony
1.2.4 - Leased lines
1.3 - Main changes in 1995
1.3.1 - Tariff diversification
1.3.2 - Other tariff-related measures approved in 1995
2. Measuring customer satisfaction and the quality of the public operator’s service
2.1. France Télécom’s commitment to its customers
2.2. New rights of customers
2.3. Fair processing of complaints: the current situation.
2.4. Assessment and supervision of France Télécom’s general performance on service quality

Chapter  8 : Clarifying relations between La Poste and the French government
1.  Monitoring the Contrat de Plan 
1.1 - Mail activity
111. Changes in the mail activity of La Poste: a new role for written material in the information society?
112. Quality of the mail service at national level
113. Measuring the quality of the domestic mail service
1.2 - Financial services
2.  The official-paid mail service: dismantling the exemption procedure
3. Round-table discussions involving the government, the press and La Poste
4 - Price regulation of mail services offered by the public operator La Poste
4.1 - The regulatory framework
4.2 - the pricing policy of La Poste
4.3 - 1995: moderate price increases

Chapter 9 : The postal and telecommunications sectors contribute to regional development
1. Town and Country Planning and Regional Development Act
2. La Poste's contribution to regional development
2.1- A postal network to serve rural areas
2-2  The “zero closures” policy introduced by the chairman of La Poste
2-3- Changing organizations and infrastructure
3. The role of telecommunications in regional development
31. France Télécom’s Contrat de Plan and its contribution to regional development
32. Respecting the moratorium
33. Active preparation of the sectoral telecommunications programme
34 . Increased efforts for the environment
35. Regional development and terms of reference for network operators and service providers

Chapter 10: Preparing for the new ten-digit numbering plan
Preparing and coordinating the new ten-digit numbering plan
The consultative committee for the new numbering system
Technical consultation concerning management of the numbering system
Provision of the telecommunications Act dealing with numbering
The new numbering system

Chapter 11 : Technical regulations: providing operators and users with a sound basis for expansion
The frequency management agency
Frequency regulation
Billing for authorized radio networks
Approval for telecommunication terminal equipment
Enforcement
Standardization
Security and defence

Chapter 12 : The DGPT and labour relations
1 - Relaying and advancing governement policies
A - Election of the boards of directors
B - Annualised worktime
C - Supervision of social security regulations
D - Work contracts specific to La Poste and France Télécom
E - Work conditions
F - Urban regeneration policy 
G - Relocation
2 - Supporting and adpating human resources policies
A - France Télécom: agreement on youth employment and retirement planning
B - Employee evaluation
C - Action related to joint organisations
D - Active service and regrading
3 - Specific action
A - Regrading in Polynesia
B - The end of automatic secondment
C - Monitoring social issues
D - Management of higher professional bodies

FOREWORD

This year’s annual report reflects the accelerated pace of change in the telecommunications sector both at European level and in France.  The sheer momentum gained in overhauling the domestic regulatory framework is perhaps not best conveyed by focusing on the 1995 calendar year, a forerunner to the adoption of the sweeping legislation in 1996 and the setting up of a new telecommunications regulatory body in January 1997. 

France pressed its European partners for the timely adoption by the Council of Ministers of an open framework for facilities-based competition, encompassing voice telephony, which would ensure the provision and financing of universal service, building upon the high level of public service currently enjoyed by customers in France.

Whilst the postal sector was not caught up in quite the same whirlwind of change, the implementation of the Contrat de Plan led to much fruitful discussion, with the removal of postal charge exemptions and the realigning of tariff conditions for newspaper and magazine delivery.

Looking ahead to the advent of the information society, an interim bill was drafted and enacted to lift regulatory impediments on the provision of innovative services and the combined use of infrastructure, enabling real-size market-oriented trials of the prospective information society services to be carried out. 

Ground-breaking regulatory initiatives in the telecommunications sector were set in motion during 1995 with the launch of a broad consultation process involving market players.  This enabled the drafting of a blueprint for new telecommunications legislation, in preparation for fully-fledged competition in European telecommunications in January 1998.

The public consultation on the blueprint for a new Telecommunications Act was an extensive and successful exercise, giving market players and particularly would-be entrants the opportunity to comment on the regulatory options which would shape their future business environment.  Although the enactment of the telecommunications bill represents the most significant milestone, drafting extensive secondary legislation and administrative orders is key to bringing about the level playing field and reaping the full benefits of competition which are considered the prime objectives of the reform.

Considerable expertise was gained and wisely invested in the economics of interconnection, both in the context of a partially liberalized market where mobile operators are making inroads in fast-evolving segments and with a view to driving effective competition for all services and infrastructures in the run-up to 1st January 1998.  The DGPT was called upon to arbitrate on interconnection disputes involving mobile operators.  It acted swiftly, and at the same time started developing methodology and tools to cope with future similar situations.

Further, a Select Committee of independent experts was established to advise on appropriate costing and pricing methodologies.  Ensuing recommendations are currently subject to yet another round of consultation with the industry.

Illustrating the importance of a pro-active stance and true anticipation of market evolutions in the management of essential resources, the DGPT engaged in the preparatory steps towards the enforcement in October 1996 of a ten-digit numbering plan designed to accommodate unprecedented increases in demand and provide a firm base for the timely implementation of number portability and equal access.

In this global context, corporatizing France Télécom is a further logical step, to be prepared in 1996, enabling one of the leading international operators to forge strategic alliances, provide diversified, high quality services and expand on a worldwide market while facing effective competition in its core activities and market. 

The establishment of a fair competitive environment in France will be further supported by the setting up of an independent regulatory authority as of 1st January 1997, a key provision of the newly enacted Telecommunications Act.  Functions carried out by the DGPT for the enforcement of legislation and regulations, the processing of licence applications and the arbitration of disputes among market players will be shifted to a new regulatory authority, fully empowered and granted structural independence from Government policy-making. 

Beyond the above-mentioned domestic developments, regulatory transparency and effective market access abroad are the key policy objectives strongly supported by the DGPT.  A well crafted and balanced multilateral agreement on basic telecommunications services is indeed the most appropriate prerequisite to a truly global information society.  Hence our determination, throughout 1995 and beyond, to press for the successful conclusion of the negotiations taking place under the auspices of the WTO.

In all our activities we endeavoured to root our involvement on broad-based concerted action.  I take this opportunity to thank our two advisory committees, chaired by Pierre Faure and Marc Houery, for accompanying us in our constant quest to strike a balance so as to reflect fairly the interests of all concerned.

Milestones, 1995/96

JANUARY 1995
1. DGPT
2. France
23 January: deadline for proposals on information superhighways and services
26 January: Caisse des Dépôts et Consignations (CDC) sells France Télécom the operating companies for the cable plan, making it the 3rd leading cable operator in France. CDC sells Lyonnaise des Eaux-Dumez the 16 concessionary networks, making it the leading French cable operator.
3. European and International
1 January: France takes over the presidency of the European Union
10 January: German conglomerate Viag and BT announce the creation of the joint company "Viag InterKom" operating on the German market
25 January: the European Commission adopts the second part of the Green Paper on telecommunications infrastructures
25 January: Thyssen and BellSouth announce the creation of a joint company in Germany
27 January: Cable & Wireless and the German company Veba, an electricity distributor in Dusseldorf, sign a cooperation agreement whereby Veba takes a 10% stake in the capital of the British operator
27 January: Unisource and AT&T announce their new European joint venture, Uniworld
31 January: the Japanese competition commission examines the possible break-up of NTT

February 1995
1. DGPT
1 February: the DGPT launches the monthly publication Observatoire des Communications Mobiles (Mobile Communications Observatory)
7 February: Air France is granted a "bearer services" licence (for data transmission)
February:
. conclusion of the study into "requests for special access in open telecommunications networks"
. conclusion of the study into "the consequences of making La Poste's postal activities subject to VAT"
2. France
4 February: adoption of the blueprint law for regional development, providing in particular for the establishment of regional telecommunications plans
23 February: commercial launch of Tam Tam, the 2nd paging network operated in accordance with the Ermes standard by TDR (part of the Générale des Eaux group)
28 February: the interministerial committee for information superhighways and services adopts 49 of the 635 projects submitted in response to a call for proposals
3. European and International
1 February: the German government announces the timetable for opening the German telecommunications sector up to competition.
2 February: the US authorities publish a bill for the liberalization of the telecommunications industry
21 February: the European Commission lays down the rules for La Poste's insurance business
24-26 February: the G7 conference on the information society is held in Brussels

MARCH 1995
1. DGPT
March: the DGPT launches a study into "consumer expectations of telecommunications service quality"

APRIL 1995
1. DGPT
25 April: Bruno Lasserre calls a meeting in Paris of the directors of the national regulatory authorities to prepare for the Council of European Telecommunications Ministers of 13 June.
26 April: France Télécom's Alphapage licence is altered, establishing the process for gradually converting the channels used by this network to the Pocsag and Eurosignal standards.
27 April: Prologos is awarded a licence to set up a telepoint service in Aquitaine
2. France
13 April: The 2nd Contrat de Plan is signed between the State and France Télécom.
13 April: Creation of SIRIS, the 50/50 subsidiary of Compagnie Générale des Eaux (through Cogeri) and Unisource

MAY 1995
1. DGPT
May: a licence for an independent CUG network is granted to the MFS company
4 May: the threshold for value-added services requiring official declaration is raised from 5 to 34 Mbits
11 May: alternative infrastructures: the SNCF licence is altered enabling it to offer capacity to mobile operators
2. France
10 May: Compagnie Générale des Eaux makes an official agreement with AT&T and Unisource in the field of  corporate communication services
31 May: Mr Serge Tchuruk is appointed chairman of the Alcatel Alsthom group

JUNE 1995
1. DGPT
June: conclusion of the first survey by SOFRES assessing the quality of GSM services
2. France
21 June: regional development: La Poste's chairman decides not to close any rural post offices before 1997
3. European and International
June: a G7 conference on the information society is held in Halifax (Canada)
13 June: the European Council of Telecommunications Ministers unanimously adopts a resolution on full competition in the sector as of 1 January 1998
15 June: Compagnie Générale des Eaux and the German company RWE Telliance (telecommunications subsidiary of the RWE group) sign an agreement setting out the framework for the ongoing process of cooperation between the two groups in telecommunications
22 June: France Télécom, Deutsche Telekom and Sprint sign an agreement for the creation of, and participation in, a joint subsidiary (the Phoenix strategic alliance project)

JULY 1995
1. DGPT
July:
- launch of a study into "the international problems related to the development of information superhighways, especially in the United States, Canada and Japan"
- approval of the interconnection agreement between Prologos Aquitaine and France Télécom
9 July: first authorizing decrees concerning independent radio relay systems operating in the new 23 and 38 GHz frequency bands
21 July: publication of the opinion on the launch date for the 10-digit numbering plan
24 July: definition of the conditions for the establishment of wireless local area networks in France and initial authorizations

3. European and International
13 July: the US Justice Department approves the Phoenix agreement
26 July: the European Commission adopts a draft postal directive on universal service and "reserved services", and a draft communication on the application of the rules of competition to postal services.
27 July: AT&T and Philips sign a protocol for the acquisition of Philips' public telecommunications activities.

AUGUST 1995
3. European and International
3 August: STET, the Italian holding company that owns Télécom Italia, announces the signing of a joint global partnership agreement with IBM.

SEPTEMBER 1995
1. DGPT
September:
- approval is given to the interconnection agreement between Compagnie Générale des Eaux and France Télécom for the DECT service in St Maur, after DGPT arbitration
- Bouygues Telecom requests arbitration on the interconnection agreement between its DCS 1800 network and the France Télécom network
- the DGPT launches a series of studies into the "degree of intervention of France Télécom in the competitive sector: audiovisual, written and voice telematics, installation, software and computing services"
- conclusion of the "economic analysis of supply over cable networks"
12 September: the mobile operators Bouygues Telecom and SFR are assigned new radio frequency bands
23 September: full competition (excluding voice telephony for public use) in all services in France using VSAT satellite links.

2. France
18 September: The minister responsible for telecommunications appoints Paul Champsaur as chairman of a group of experts looking into the economic advantages and disadvantages of possible solutions for defining, evaluating and calculating charges for interconnection, financing the universal service, regulating local networks and separating certain activities from the operators. The DGPT drew up this working group's general report.

3. European and International
September: France Télécom wins the call for tender to operate the second GSM network in Belgium.
21 September: Robert Allen, chairman of AT&T, announces the strategic reorganization of the group into three separate and independent companies, thereby abandoning vertical integration: AT&T (the telecommunications operator), Lucent Technologies (telecommunications equipment) and NCR Corporation (computing).

OCTOBER 1995
1. DGPT
October: a request is received for arbitration on the use of the ISDN D-channel by data transmission operators other than France Télécom
15 October: launch of the public consultation "New ground rules for telecommunications in France" seeking the opinions of all operators concerned by the development of French legislation.
17 October: the 3614 10CHIFFRES teletex service opens to inform companies of the new French numbering plan.

2. France
October: Compagnie Générale des Eaux opens a GSM network on the Indian Ocean island of Réunion
16 October: the interministerial committee on information superhighways chaired by the prime minister selects 170 "public interest" projects (out of the 635 submitted at the call for proposals), and earmarks specific funds.
17 October: The government Revenue Office (Cour des Comptes), States in its annual report: the fact that France Télécom has not spun off its mobile business into a subsidiary is detrimental to the transparency and reliability of the internal accounts drawn up for mobile telephony.

3. European and International
3 October: at Telecom 95 SITA announces the creation with the Morgan Stanley bank of a subsidiary devoted entirely to telecommunications
6 October: Vebacom and Cable & Wireless announce the finalized terms of their partnership agreement concluded in June.
11 October: the European Commission adopts the directive on the liberalization of cable TV networks
11 October: the United Kingdom's DTI invites candidates for radio local loop licences
16 October: Global One obtains the go-ahead of the European Commission's DG IV

NOVEMBER 1995
1. DGPT
2 November: establishment of an expert group chaired by Paul Champsaur on interconnection and the financing of the universal service.

2. France
15 November: establishment of a round-table comprising representatives of the press, La Poste, parliament and the State, chaired by Yves Galmot
15 November: presentation in the council of ministers of a bill on information technology and services
22 November: the board of directors of French Railways (SNCF) decides on the principle of creating a telecommunications subsidiary: SNCF Télécom Développement

3. European and International
15 November: France Télécom and Olivetti sign an agreement for the creation of a joint company whose aim is to become the leading alternative operator in the Italian telecommunications sector.
27 November: the European council of telecommunications ministers adopts the "ONP-voice telephony directive"

DECEMBER 1995
1. DGPT
December: Interconnection: launch of a study on interconnection and the cost of the universal service (study assigned to Devotech and Touche Ross) as well as an audit (KPMG) on France Télécom's cost accounting procedures
15 December: more than 100 bodies reply to the public consultation "New ground rules for telecommunications in France", organized by the DGPT to pave the way for the telecommunications regulatory bill
19 December: alternative infrastructures: Cofiroute is authorized to offer capacity to mobile operators
22 December: arbitration on the conditions for the interconnection of the ERMES network (Tam Tam) operated by TDR (Générale des Eaux group) and France Télécom.
December: launch by the DGPT of the study comparing "the main methods used for the granting of licences in the EU and in those countries where this sector is open to competition".

2. France
December: GSM subscribers in France top 1 million at the end of the month
13 December: Serge Tchuruk officially takes over from Pierre Suard as chairman of Alcatel Alsthom, the French leader in telecommunications
19 December: Siris (50/50 subsidiary of Compagnie Générale des Eaux and Unisource) announces it is making its data services available to private companies.
20 December: France Télécom chairman Michel Bon announces an organizational overhaul of the State-owned company

3. European and International
15 December: The FCC officially authorizes the Global One alliance
21 December: AT&T acquires Philips' telecommunications network activities (operated in France by TRT), pursuant to the protocol signed by the two companies on 27 July 1995.

JANUARY 1996
1. DGPT
8 January: Interconnection: the DGPT renders two arbitration decisions on the conditions for the interconnection of France Télécom's public network with Compagnie Générale des Eaux's Tam Tam paging network and Bouygues Telecom's DCS 1800 service.
9 January: final round-table meeting of the public consultation "New ground rules for telecommunications in France"
12 January: creation of a new testing laboratory, CETECOM France, for the approval of telecommunications terminals
13 January: the motorway company Cofiroute is given permission to let mobile operators use its telecommunications infrastructures
January: launch of catch-up billing for independent radio networks (some FF280m collected by 30 June)

2. France
1 January: official postal exemptions are scrapped
11 January: Technical implementation of Bouygues Telecom's DCS 1800 network
19 January: France Télécom rebalances its tariffs: subscription charge increases to FF52.80 (excl. VAT) while the cost of national calls is cut by 10%.
25 January: creation of the AFOPT (French Association of Private Telecommunications Operators) comprising SFR, Bouygues Telecom, Infomobile, CGRP and SRR.
30 January: parliament passes the law on the "information highways" at its first reading

3. European and International
2 January 1996: GSM licence: France Télécom submits notification of arbitration with the Republic of Poland
15 January 1996: Motorola announces a 22% increase in turnover for 1995 (to $27bn) and thereby retains its place as world leader in the field of radiocommunications
16 January 96: Germany: protocol signed between Veba and Mannesmann for the creation of a joint company charged with setting up a data transmission network for Germany
16 January: the European Commission adopts the "mobiles" directive
31 January 96: final signature in Bonn of the FT/DT/Sprint agreements and the creation of the joint subsidiary Global One

FEBRUARY 1996
1. DGPT
February: 
. progress report of the economic expert group chaired by Mr. Champsaur on interconnection and the financing of the universal service
. launch of two studies "segmentation and interconnection" and "the feasibility of measuring the quality of La Poste's press transport service"
. conclusion of the study into the "composition of the basic subscription in the field of telephony and interaction with foreign pricing options"
12 February: alternative infrastructures: SANEF is authorized to offer capacity to mobile operators

2. France
1 February 96: at a colloquium on information superhighways and services, telecommunications minister François Fillon announces the launch of a new call for proposals reserved for small and medium-sized companies
2 February: the Philips group announces its intention to create a division devoted solely to local mobile telephony, in Le Mans, which thus becomes the international centre for the group's business in this domain
6 February: creation of the FEDIA (forum for research and development in alternative infrastructures) comprising ADP, RATP, Eurotéléport de Roubaix, SNCF and SANEF.
20 February: adoption by the French Senate of the "information superhighways" bill at the first reading.

3. European and International
February: adoption of the "full competition" directive
2 February: the US House of Representatives and Senate approve new American telecommunications legislation
7 February 96: BT and VIAG sign a protocol with the German industrial group RWE to provide telecommunications services in Germany
8 February: the Hermés Europe Railtel consortium obtains European Commission approval on this project of intent between 11 European rail companies and George Soros's American Global telesystems company for the development of a pan-European telecommunications network
16 February: the US Justice Department gives its formal go-ahead for the Global One alliance

MARCH 1996
1. DGPT
March: preparation and interministerial discussion of the bill setting out a regulatory framework for telecommunications
28 March: 10-digit numbering: the DGPT reminds companies that they must upgrade their switchboards as soon as possible
March: Telecommunications directory: launch of a study on "drawing up the universal directory"

2. France
12 March 1996: Senator Larcher presents his report on "the future of France Télécom" establishing conditions for opening the company's capital and appropriating the proceeds from the stockmarket flotation
18 March 1996: the prime minister announces that the government is to change France Télécom's status
20 March 1996: Renaud Denoix de Saint Marc, vice-chairman of the Council of State, publishes his report on the French doctrine of "public service". It concludes: "In the field of telecommunications it is possible to create an independent authority on condition that this is not empowered to lay down the general rules. On the other hand, it could have the power of proposal in addition to its individual powers of decision-making and sanction "
26 March 1996: parliament adopts the Information Technology and Services Act 
27 March: the minister responsible for telecommunications presents the Council of Ministers with a paper on information superhighways and announces that 74 further projects will be approved

3. European and International
13 March: the European Commission adopts the "full competition" directive and issues a communication on the universal service
21 March: the European Council of telecommunications ministers approves the "ONP-interconnection" directive
29 March: announcement of talks between UK operators BT and Cable & Wireless for merger plans

APRIL 1996
. DGPT
April:
. preparation and interministerial discussion of the bill on the national France Télécom company
. publication of the study on "consumer expectations of telecommunications service quality"
. publication of the Champsaur report on interconnection and the financing of the universal service in the telecommunications sector; the DGPT showed its support by acting as rapporteur general
3 April: publication of a decree setting out the conditions for the authorization of independent radio networks (IRN)
4 April: the consultative committee on radiocommunications is presented with two public consultation projects, one on the radio local loop and the other on low-earth orbit (LEO) satellites.
9 April: the DGPT creates a working group on interconnection (WGI) comprising the most directly concerned operators. Two committees are set up: "regulatory and technical studies" and "economic and accounting studies"

. France
April: the number of mobile phone subscribers in France tops 1.5 million; the paging market now has more than 500,000 subscribers
3 April: the Council of Ministers adopts the telecommunications bill
4 April: Pierre Faurre, chairman of Sagem, the second largest French telecommunications group, announces turnover in 1995 of FF15.07bn, up by 10.1% (of which FF8.134bn and 10.9% growth for the telecommunications segment)
10 April: promulgation of the Information Technology and Services Act 
16 April: Bouygues Telecom announces that its DCS 1800 network will begin commercial operation on 29 May 1996
16 April: the Syndicat des Industries de Télécommunications (SIT) group announces turnover for its French telecommunications division of FF38.4bn in 1995, up by 7%
18 April: Bouygues acquires an 18.5% stake in Infomobile
30 April: creation of AOST, the association of telecommunications service operators comprising AT&T France, BT France, Cable & Wireless France, Siris and Worldcom.

. European and International
April: merger talks between the UK operators BT and Cable & Wireless break down
1 April: merger plans are announced between American operators SBC Communications (formerly Southwestern Bell) and PacTel (formerly Pacific Telesys) for the creation of a group with turnover of $21bn.
3 April 1996: AT&T floats Lucent Technologies, a company representing its telecommunications equipment activities (turnover $21.4bn)
15 April: WTO: no agreement is reached at the basic telecommunications talks in Geneva; the countries concerned agree to push back the deadline to 15 February 1997.
22 April: the two Baby Bells on the US east coast, Bell Atlantic and Nynex, announce plans to merge and form a group with turnover of some $27.8bn, thus creating the second largest US telecommunications operator

MAY 1996
. DGPT
17 May: a "bearer services" licence (data transmission) is awarded to SITA
31 May: first full meeting of the WG on interconnection directed by the DGPT

. France
May: the CGE/Unisource consortium is selected by the La Défense development council (EPAD) to lay the fibre optic cables and provide an optical connection service for the La Défense business district of Paris
6 May: the government presents a paper for privatizing France Télécom 
9 May: the launch in Bordeaux of France's second telepoint network complying with the CT2-CAI standard: the Kapt service is operated by Prologos-Aquitaine 
10 May: parliament adopts the bill on the regulation of telecommunications at the first reading
15 May: France Télécom announces its results for 1995: consolidated turnover totals FF147.8bn, up by 3.7% while profits fall to FF9.2bn, down 7.3%.
21 May: inauguration in Paris of the MFS service
29 May: the commercial launch of Bouygues Telecom's DCS 1800 network
29 May: the Council of Ministers adopts the bill on the privatization of France Télécom

. European and International
13 May: G7 summit on the information society held in Midrand (South Africa)
14 May: Unisource and AT&T merge their European activities
16 May: BT announces turnover of £14.4bn, up 4%, and pre-tax profits of £3.01bn.

JUNE 1996
. DGPT:
June: Sofres launches a survey of GSM network service quality
7 June: two licences awarded to Axone, one for "bearer services" (data transmission) and one for a value-added service using a network of leased lines

. France:
18 June: parliament adopts telecommunications bill at its final reading following the agreement of the all-party joint committee
27 June: Jean Marie Messier, chairman of Compagnie Générale des Eaux, announces the creation in the autumn of a subsidiary handling the group's telecommunications business
29 June: final adoption of the bill on the privatized status of France Télécom.

. European and International
26 June: Germany: the commission mediating between the two houses agrees on a compromise for the bill setting out the regulatory framework for the sector as of 1 January 1998
27 June: the European posts and telecommunications ministers, at a council meeting in Luxembourg, fail to agree on a proposal for a directive for the postal sector

CHAPTER I

PREPARING FOR FULL COMPETITION

	Competitive forces are already at work in many segments of the telecommunications industry, including mobile phones, satellites, closed user-group networks and services and value-added data services. As of 1 January 1998, the entire sector will be opened up to competition.
	France realised the need to prepare immediately for this deadline, set in June 1993 by a unanimous vote of the Council of European Telecommunications Ministers for the telephone service and extended in November 1994 to cover infrastructures. That preparation was needed to give all economic agents operating on the French market, or liable to enter it, a complete and unobstructed view of the rules that will be introduced in 1998 and all the factors, economic and regulatory, that will affect their activities. Changing the status of France Télécom is also part of this preparatory effort.

1. New ground rules for telecommunications

	The definition of these new ground rules, which will mean amending the Telecommunications Act of 29 December 1990, led the government to publish a guideline document in October 1995 announcing the French authorities' intentions with regard to the future regulation of this sector.

	1.1. Timetable leading up to 1998

	The guideline document published in October 1995 set out the various stages along the road to full competition in 1998. This document was drafted by the DGPT on the basis of the work and joint studies already carried out on the key aspects governing future regulations. These include the public consultation procedure on the regulatory framework for this sector in France, conducted by Bruno Lasserre at the minister's request in late 1993.

	This document initiated a public consultation phase , which ran until 15 December 1995 and sought the views of around 100 organisations and enterprises: operators and service providers already present in France or interested in the French market; industrial groups; business and residential users; professional associations; computing services companies; employee associations and unions; foreign governments and regulatory authorities; and consultancies and other unsolicited contributors. The DGPT examined these contributions and organized special hearings in the consultation phase which enabled most operators to defend their points of view.

	The results of the public consultation were presented at a round-table meeting held on 9 January 1996 and chaired by François Fillon, minister for posts, telecommunications and space. At this meeting the minister set out the guidelines adopted subsequent to this consultation process. A document containing over one thousand pages of contributions was made public at this time.

	This public consultation process, which gave rise to a wealth of innovative and original comment and recommendations, enabled the DGPT to draft a telecommunications bill. The minister presented the bill to an interministerial meeting, and it was then forwarded to the State Council in early March 1996.

	The guideline document also set out the three preparatory stages for opening the sector up to competition:

	- the reading in parliament and vote on the new telecommunications bill in the first half of 1996;

	- adoption of the implementing decrees for this new law and the publication, after public consultation, of licensing conditions and the economic factors related to interconnection and the financing of the universal service;
	- granting of licences beginning in Spring 1997;

	- and the publication of a catalogue for interconnection to the public network at the beginning of 1997.

	There are a further three stages on the road towards opening the French market up to competition:

	- the possibility, once the Information Technology and Services Act has been passed, to make exceptions to the rule on the monopoly of wire-line telecommunications infrastructures and providing a cable-delivered telephone service in the context of experimental projects recognized as being innovative (see chapter 4);

	- opening up to competition of alternative infrastructures for the supply of all already-liberalized telecommunications services as of 1 July 1996;

	- full competition in telecommunications networks and services as of 1 January 1998.

	12. Details of the new ground rules

	The ground rules set out in the bill, which the government approved, sought to establish open competition accessible to all users. This competition would respect the principle of public service and would be regulated by an independent authority.

		a) Competition open and accessible to all

	The model adopted by France and the rest of the EU for liberalizing the telecommunications industry will differ significantly from the experiments already carried out in various OECD countries. The aim is not merely to introduce a single player to challenge the historical operator, which is what the United Kingdom chose to do in the 1980s; neither is it to follow the example of the United States and separate long-distance and international telephony -- wide-open to competition -- from local telephone services, which remain either a legal or de facto monopoly.

	In 1998 there will be total competition. This will concern all segments of the market without exception, regardless of the customer base, the technology employed or the services offered. Such competition will also be thrown wide-open. In the first instance, no limits will be set on the number of licences awarded, unless there is a lack of available frequencies; the conditions for refusing a licence will be strictly defined and, as a rule, applications will be granted.

	What is more, competition in the sector of telecommunications will have to be easily accessible to all users. The user should have no difficulty in using the services of the different competitors. Consequently, number portability will be guaranteed as of 1998 (cf. chapter 10) and telephone terminals may also be used anywhere without restriction.

	Competition will also have to preserve the universal nature of telecommunications. Interoperability of services and interconnection of networks will be preserved, and a universal subscriber directory will be collated to ensure that competition to provide telephone services does not result in "libraries" of unwieldy and complicated directories.

		b) Combining public service and competition

	The fact that competition will become the rule on 1 January 1998 does not imply the end of public service in telecommunications. Quite the contrary: the new guidelines will help define the public service, ensure its effectiveness and enable its financing.

	Public service in the telecommunications sector will consist of three basic elements:

	- universal service, i.e. a basic, high quality telephone service at affordable prices along with a number of other services (public payphones, free emergency calls, a directory and an information service). The definition of the universal service, which lies at the heart of our public service, may evolve as society's needs change and technology improves;

	- mandatory services, such as access to ISDN, data transmission, telex and advanced services over the telephone network, which will be supplied throughout the country;

	- other public-interest services in the field of defence and security, public research and training, which are supplied for, and supervised by, the state.

	Once public service has been defined, its effectiveness will also have to be ensured. The law therefore insists that the universal service and mandatory services be supplied throughout the country: France Télécom will be explicitly charged with ensuring that this condition is respected. However, other operators may also supply a universal service if they are capable of doing so on a country-wide basis.

	Financing will be organized according to the "pay or play" principle:  only those operators that do not provide the universal service will be required to contribute to its financing . The practical arrangements have been worked out by the DGPT and the economic experts group chaired by Mr Champsaur (see above).

		c) Regulation of the telecommunications market

	The telecommunications market, which will be fully open to competition as of 1998, will not, however, be subject to market forces alone, nor to the laws of competition. Specific regulations are needed to ensure fair competition. (Moreover, virtually every other country that has opened its telecommunications sector up to competition applies such regulations.) There are three main reasons why such regulation is required:

	-Initially, competition will be introduced into a sector with a public service role. The existence of that role and its method of financing -- both of which are key parameters that determine the activity of competitors -- cannot rely solely on the right to compete or depend entirely on the authorities charged with ensuring this right; it must be underpinned by specific regulation.

	- Judging by the experience of other countries, the switch from a monopoly to effective competition in France will be much more gradual in the field of telecommunications than in sectors where the substitution effect is stronger. The fact that the historical operator will continue to occupy a dominant position for years - and even enjoy a de facto monopoly in some sectors - warrants the introduction of certain precautionary measures, especially with regard to price structures. As far as possible, these measures would prevent any distortions in the market that could arise from such a dominant position or monopoly.

	- The ability to interconnect with existing networks is vital to any new entrant, for whom it is just as important as receiving a licence. And yet, a newcomer cannot obtain an interconnection agreement unless its competitors are prepared to negotiate. For this reason, it was deemed appropriate to impose specific rights and obligations on operators in this area. Thus, a market entrant will negotiate on a commercial basis with existing operators with a view to concluding an interconnection agreement, but it can also request the arbitration of the regulatory body in the event of conflict. Such a system, comparable to the one that exists or is being set up in other countries, already exists in France for mobile telephony.

	The opening up of the telecommunications sector to competition must therefore be accompanied by firm regulation, encompassing new powers (e.g. in the field of sanctions and numbering) in addition to those exercised by the DGPT.

	The government proposed that parliament should create a regulatory authority for the telecommunications sector. This would make it possible to separate these new powers from those stemming from the role of shareholder in France Télécom, which falls to the government. This authority, to be created on 1 January 1997, will be made up of existing DGPT departments. It will be directed, according to the terms of the bill, by five members appointed by the government who will have irrevocable six-year mandates and will intervene at various levels to ensure that the ground rules are respected:

	- it will have full autonomy to impose sanctions, including fines, thus giving it effective control over operators' terms of reference;

	- it will be empowered to arbitrate in disputes related to interconnection and network access, as well as those related to facilities sharing and the use of cable networks;

	- it may directly refer a matter to the competition authority if the rules governing the right to competition are not respected;

	- it will allot the operators, according to transparent and non-discriminatory procedures, the frequencies and numbers they need to carry out their activity, and will manage the numbering plan;

	- it will also have shared powers with the telecommunications minister:
		. in the field of licences, it will examine requests and grant						independent network licences directly;
		. in the field of technical rules of application (especially for interconnection or terminals)		which it will decree with the minister's approval;
		. for the financing of the universal service, the Authority will submit for ministerial decision
		the individual contributions the operators will have to pay and will monitor the				financing mechanisms;

	- the government will invite the authority to participate in drafting decrees and bills, conducting international negotiations, and monitoring tariffs.

	The newly formed Telecommunications Regulation Authority will therefore be able, as of 1 January 1998, to authorize and encourage the development of effective, innovative and fair competition for the greater benefit of telecommunications users. Such is the remit that it will be assigned by law. To obtain the desired results, the Telecommunications Regulation Authority will be able to rely on the skill and experience built up by the DGPT since it was founded.

List of the bodies that participated in the public consultation and whose
contributions were published

o Public Service Commission for Post and Telecommunications
o Telecommunications operators and service suppliers
. Paris Airports
  Air France
. Association des Sociétés Françaises d'Autoroutes (motorway operators' association)
. AT&T France
. Bouygues
. BT France
. Cable and Wireless
. Cristal Telephonie
. COFIROUTE
. Compagnie Générale des Eaux
. Comptoir des Signaux
. Deutsche Telekom
. Eurotéléport de Roubaix
. FEDIA (forum for research and development in alternative infrastructures)
. France Télécom
. Hermes Europe Railtel BV
. Kinnevik
. Lyonnaise des Eaux
. MFS Communication SA
. RATP
. SANEF
. SNCF
. SITA
. STET
. Téléport Marseille / Provence
. Télétam
. Telia
. TENOR (voice telephony suppliers)
. Vodafone
. World Com
. World Teleport Association
o Industrial concerns
. Alcatel Alsthom
. Dassault AT
. Doortel
. FIEE (Federation of electrical and electronic industries)
. Matra Communication
. MET
. Nokia 
. Nortel
. SAGEM
. SFIB (Union of Computing and Office Equipment Manufacturers)
. Siemens 
. SIMAVELEC (Union of Audiovisual and electronic equipment industries)
. SIT (Union of Telecommunication Industries)
. SPER (Union of Electronic and Radioelectric Professional Equipment)
. TRT Philips
o User representatives
. AFUTT (French Association of Telephone and Telecommunications Users)
. CIGREF (Computing Club of Leading French Companies)
. UNAF (National Union of Family Associations)
. Union of Interconsular Offices for Transport and Communication
o Other company representative bodies
. American Chamber of Commerce
. French national committee of the international chamber of commerce
. CNPF (National Council of French Employers)
. FICOME (Interprofessional Federation of Company Communications)
o Major users and computer services companies
. AFTEL (French Telematics Association)
. EDF
. Eurotunnel
. FFCT (French Federation of Telecommunications Consultants)
. Gaz de France
 . IBM France
. Indosuez Capital
. INRIA
. La Poste
. PSA
. Renault
. Saint Gobain
. SEMA Group
. Syntec Informatique (Union Chamber of Service and Computer Engineering Companies)
o Staff unions and associations
. Association of Telecommunications Engineers
. Association of Brittany Telecommunications Engineers
. ENSPTT former students association
. France Télécom executives association
. CFDT-PTT
. CGC-PTT
. CFTC-PTT
. CGT-FO
. CGT-PTT
. INT graduates
. National Union of France Télécom Contractors
. SUD
. UCSD (Union of Senior France Télécom Management)
o Regional authorities
. National Association of Regional Councillors
. Assembly of French Regional Council Chairmen
o Foreign Governments or regulatory bodies
. U.S. government
. OFTEL (United Kingdom regulator)
. Sweden: Ministry of transport and communications
o Higher telematics council
o French Braodcasting Authority
o Thinktanks, consultancies and others
. AMR Légatique
. CLC Consulting Inc.
. France Technopoles
. a group of telecommunications research officers in higher education
. Laurent Bister Consultant
. Média 1992
. Part'Com
. Réseaux Services Publics
. SAMARIS
. TELAL

2. Study and audit of France Télécom's costs

	The DGPT spent 1995 preparing for the post-1998 competitive framework. It will disclose the results of those efforts in late 1996.

	This preparatory work resulted in:

	– detailed specifications of a study and audit of interconnection costs;

	– the DGPT assuming the role of rapporteur general for the Champsaur group.

	The DGPT worked intensively in this framework, and focused particular attention on examining tariffs from the international point of view, evaluating interconnection tariffs, and looking at methods for evaluating the cost of universal service obligations.

	Fruitful contact was also made with sector operators via the contributions they made to the minister's consultation process, to the Champsaur group and to the DGPT's project steering committee as well as more informal contributions.

21. Study and audit of France Télécom's costs

	Subsequent to the request made by the mobile operator SFR on 16 March 1994, the DGPT issued its arbitration on 3 June 1994. It set out the conditions for interconnection between the mobile network and the fixed network until 31 December 1996.

	This was the first time that such arbitration had been needed. It was made possible by article 11 in the France Télécom regulations and by the terms of SFR's licence. The DGPT thus drew up the principles and established a practical calculation method.

	In the short term (until 31 December 1996) this decision will be used as a benchmark for all operators.

	Several factors prompted the DGPT at the beginning of 1995 to set up a working programme on interconnection prices. First, the abovementioned arbitration was conducted according to pre-January 1998 regulations. Second, it was based on France Télécom's cost accounting procedures, which at that time were incomplete. Third, interconnection requirements are developing and becoming more precise, with the ensuing risk that industry participants will rely increasingly on arbitration by the regulator.

	For all these reasons the DGPT sought to establish a reference framework for a period of two to four years as of 1 January 1997.

	Thus in 1995 the DGPT launched an operation helping to define the regulation of France Télécom in a wholly competitive environment. That operation has two aspects: an audit and a study:

	– The first aspect, the audit, consists in appraising France Télécom's information system to obtain a clearly defined reference for costs and/or, by correlation, to highlight the limits or inadequacies of this system.

	– The second aspect, the study, consists in proposing principles for setting interconnection prices, with due regard for three factors: the general objectives of regulation (in particular the economic aims), trends within the EU, and reference frameworks or international practice. In consequence, this involves an overall review, from a regulatory standpoint, of the public operator's pricing system (both retail prices and interconnection prices) and the rules for segregating activities.

	Both these actions are coordinated in such a way that the audit is not confined to a mechanical review of procedures, but includes a critical assessment of existing systems. Conversely, the study will require excellent knowledge of the capacities of the existing systems and their potential for development in order to define the principles and means of regulation in the medium term which could actually take effect within a reasonable period.

	The specifications for the audit and study operation were decided on in August 1995 after talks with France Télécom, and in light of the views of experts and interested operators. This resulted in a call for tender in Autumn 1995, at the end of which:

	– a partnership between Devotech (France) and Touche Ross (UK) was selected to carry out the study;

	– KPMG was selected to conduct the audit.

	These consultancies set to work at the same time in early 1996, and the highlights of their findings will be disclosed in June 1996.

	The study is being monitored by a steering committee, accessible to all the key players, which has met frequently and regularly since the start of 1996.

Composition of the steering group for the study of interconnection pricing

This working group, controlled by the DGPT, is made up of representatives from the following bodies:
. Devotech Conseil
. Touche Ross
. KPMG
. Forecasts Department (Economy Ministry)
. CNPF (employers' federation)
. France Télécom
. Générale des Eaux
. Bouygues Telecom
. BT France
. Lyonnaise des Eaux
. FEDIA	

22. The Champsaur group

	The Champsaur group was instructed by the minister to help plan, under optimum conditions, for the revision of the regulatory framework.

	Directed by Paul Champsaur, Director General of INSEE, the French statistical bureau, this group was charged with "studying from an economic viewpoint the advantages and disadvantages of possible solutions for defining, evaluating and calculating interconnection charges, for financing the universal service and for regulating the local network. It will also investigate the separation of certain of the operators' activities".

	The group consists of leading figures from the economic and academic worlds.

Chairman

Paul Champsaur

Director General, INSEE	
Rapporteur General

Jean-Pierre Dardayrol

Deputy Director, DGPT	
Qualified Figures

Jacques Arlandis

Dominique Bureau

Martin Cave

Nicolas Curien

Jean-Jacques Duby

Frédéric Jenny

Robert Labouze

Jean-Jacques Laffont

Werner Neu

Anne Perrot

Lucien Rapp

Scientific Director, IDATE audiovisual and telecommunications development institute; Director, ENCIP

Deputy Director, Forecasts Department

Professor of Economics
Brunel University

Professor, CNAM

Director, SUPELEC

Vice-President, Competition Council

Auditor

Professor of Economics - Toulouse 1 University

Director, WIK (Germany)

Professor of Economics - Paris 1 University

Professor of Public Law - Toulouse 1	

	The Champsaur group did most of its work in a very short space of time (between November 1995 and January 1996), and published a provisional report in February 1996 followed by the final report in April 1996. The main conclusions were as follows:

	1)  The group first stressed the importance of immediately assuming the conditions of a fully competitive market. However, in the first few years following the 1 January 1998 deadline, market conditions will still be imperfect. Some initial form of interconnection regulation will be required. This must remain compatible with development driven by demand and technological change and must not therefore lead to an administered economy. It must be liable to change and, to this end, will be reviewed at regular intervals. Such regulation will accompany the market's transition to open competition and should promote consistency between the regulatory authorities and those in charge of overseeing competition. The initial aim of regulation will be to foster the emergence of competition: it will be largely based on the principle of fair prices for interconnection.

	2) The group then sought to define the notion of balanced tariffs; it reviewed international tariffs on liberalized markets to illustrate that this balance is not an accounting equation balance between fixed costs and revenue, but is instead determined by the extent to which the playing field is really level. By comparing the tariffs charged by France Télécom and those of similar operators in liberalized markets, it became clear that France Télécom's tariffs needed to be rebalanced.
	On the basis of these international comparisons, the group considered a subscription fee of around FF65 (excluding VAT) would permit a balanced pricing system in a competitive market. This price could cover additional subscriber services such as service-quality guarantees and itemized billing.

	3) The method chosen by the Select Committee for calculating interconnection charges is the average long-run incremental cost method, with no adjustment for usage, service or volume. This method ensures that the historical operator recovers the costs incurred by actual use of the transmission and distribution network, according to the principle of greater economic substance. It also satisfies two other conditions: it is acceptable to all the operators on the market and allows fair competition.

	If it proves impossible to implement this method when the initial interconnection charges are being set, then a historical-cost method will be used as a temporary measure. This will be applied in conditions (including mandatory and gradual price cuts) aimed at introducing the average long-term incremental cost method as soon as possible.

	4) The Select Committee recommended the net avoidable long-run cost method for evaluating the cost of the universal service obligation. According to this method, the cost of universal service is calculated as the difference between the costs (net of revenue) incurred if an operator is obliged to provide such a service and those incurred if not. The method was used for the first time in Australia, and then in the UK; it is consistent with the results of economic theory.

3. Adapting France Télécom's status

	In August 1995, François Fillon announced that the government would be giving France Télécom the structures and resources it required to cope with full competition. Three initiatives would be taken to this end:

	- support for the partnership with Deutsche Telekom;

	- clarification of the regulatory framework for open competition, with the Telecommunications Act;

	- changing the status of France Télécom, enabling the company to face competition on an equal footing with its rivals.

	The method suggested by the minister was based on consultation and dialogue with the workforce and the reorganisation of the company's internal structures. On 18 March and again on 29 April 1996, the prime minister confirmed the guarantees made to the group's workforce. The DGPT contributed to the work done at interministerial level to draft the law which was adopted at the Council of Ministers meeting of 29 May 1996.

	The law of 26 July 1996 on the privatization of France Télécom consists of three parts.

	3.1‑ Provisions for providing and guaranteeing the operator's public service mission and employee status

	The Telecommunications Act confirms France Télécom's role as the public service operator and the provider of the universal service. Article L. 35-2 states:  "France Télécom shall be the public operator responsible for the universal service" while article L. 35-5 states: "France Télécom shall provide all the mandatory services [for telecommunications]".

	The law for the privatization of France Télécom establishes two essential guarantees:

	 ‑ the state shall directly hold a majority ownership interest;

	 ‑ the staff will retain their public-employee (fonctionnaire) status and their rights to the associated pension fund.

	Moreover, the continuity of public service is guaranteed by the state's right to oppose the sale or contribution of those assets required to maintain the public service.

	3. 2 ‑ Provisions simplifying the operation of the company in a competitive framework

	The legal framework applicable to France Télécom is similar to that applying to its competitors: France Télécom is subject to all the legal provisions applicable to public limited companies on condition that these do not conflict with the legal provisions establishing France Télécom as a public corporation. The rules governing the composition and powers of the board are set out in articles 5 to 13 of law no. 83‑675 on the democratization of the public sector.

	The conditions governing recruitment and pension fund financing at France Télécom are similar to those applicable to companies incorporated under ordinary law:

	 ‑ the company shall be free to recruit employees under private contract law; public employees may, however, be recruited until 1 January 2002.

	 ‑ for the financing of mandatory social charges and taxes on wages, the company shall be subject to a withholding (or PAYE) system, which will ensure that said charges are similar to those paid by other companies in the telecommunications sector.

	3. 3 ‑ Provisions for internal company reform

	The law establishes two kinds of social provisions to facilitate this process of reform:

	- To promote social dialogue between management and staff in the public corporation, a joint committee will be created to ensure that the collective views of the workforce are represented. The law explicitly allows for the conclusion of collective agreements in different fields. Parliament also established legal provisions relating to early retirement in order to accelerate the process of rebalancing the age pyramid.

	‑ The law also allows for the establishment of an employee incentive scheme and stock ownership plan designed to motivate staff over the longer term.

CHAPTER 2:
French Presidency of the European Union and Community Decisions

	When France took over the presidency of the European Union (EU) in the first half of 1995, it assumed responsibility for establishing guidelines for the future regulatory framework for telecommunications. The previous presidency, held by Germany, had concluded with a key political decision: telecommunications infrastructures would be liberalized at the same time as the voice telephony service on 1 January 1998.

	France also wanted the Council to immediately adopt a common position on the ONP-Voice telephony directive based on the recent Commission proposal. The second important theme of this half-year concerned the texts on trans-European networks, applying Title XII of the treaty against the backdrop of the debate on the Information Society launched by Commissioner Martin Bangemann.

	The French presidency also sought to foster a political agreement with the Commission before rapidly presenting a draft directive on the single market for postal services.

	The Spanish presidency began the second half of the year by examining draft directives for the completion of the 1998 regulatory package.

1. European Union telecommunications projects

	1.1. Work of the French presidency

		1.1.1. The debate on the post-1998 regulatory framework

	In January 1995, the European Commission published the second part of its Green Paper on the liberalization of telecommunications infrastructure and cable television networks. It was on the basis of the first part of this Green Paper that the Council had adopted the November 1994 resolution to liberalize telecommunications infrastructures as of 1 January 1998. In the second part the Commission made proposals for the regulatory measures that would accompany the joint liberalization of infrastructure and voice telephony.

	The second part of the Green Paper was the subject of a vast public consultation exercise organized by the European Commission. The DGPT played a threefold role in this consultation process: 

		- it invited French operators to submit contributions either directly to the Commission or via the DGPT;

		- it drafted the French government's contribution to the Commission's public consultation. This resulted in the creation of specialist working groups in the areas of interconnection, licensing and the universal service;

		- it sketched out a political resolution for the Council, concluding the consultation process and acting as a platform prior to the presentation by the Commission of the draft directives aimed at setting out the regulatory framework for 1998.

	Despite the delay in launching the public consultation, the efforts of the French presidency made it possible to reach these objectives, thanks notably to a meeting that the DGPT organized between the Directors-General of the national telecommunications regulatory authorities in Paris on 25 April 1995. The Council was thus able to unanimously adopt an important resolution on 13 June 1995.

	The Council resolution reflected a political agreement on the key features of the future regulatory framework:

		- a timetable and the aim of the main directives that are expected,

		- guidelines for the content and financing of the universal service, interconnection rights and obligations, and the licensing regime applicable to telecommunications activities,

		 - a multilateral dimension: the search for comparable and effective access to the markets of third countries in the context of WTO talks, on the basis of an EU offer with the same guidelines as those applicable to the single market.

	This result was all the more important since the 1 January 1998 deadline leaves little room for manoeuvre with regard to the schedule for adopting and transposing the proposals for a directive.

	The proposal for a decision of the European Parliament and the Council on the policy stance on trans-European telecommunications networks was not adopted by the Commission until 7 June 1995, and as a result could only be presented orally by Commissioner Bangemann on 13 June.

		1.1.2. The proposal for a directive on ONP-voice telephony

	The European Council of Ministers examined this new proposal for a directive which followed the breakdown of the conciliation procedure between the European Parliament and the Council in 1994 on the subject of the previous proposal. Without any major changes, this text presented the political interest of tying the legal framework for open network provision (ONP) more closely to the guarantee of a universal service, and of empowering the consumer.

	The common position of the Council was adopted on 13 June 1995, and the directive was finally adopted in November 1995.

		1.1.3. The resolution on mobile communications

	Virtually all EU countries have introduced competition into their mobile telephony markets. However, in 1994 the single market of mobile services was far from complete. In many cases new mobile operators were forced to use the infrastructures monopolized by the traditional operators of fixed networks. France introduced competition into mobile communications in 1987 and authorized operators to set up their own infrastructures and use those supplied by third parties (independent networks). For this reason, it naturally supported the general position of the Green Paper on mobile and personal communications published in 1994.

	Given this sector's high development potential it was only natural that the mobile communications markets in the EU should be opened up as quickly as possible – without waiting for the planned general EU process of liberalization – and for any remaining barriers and disparities to be removed.

 	At France's behest, the Council of Ministers adopted a resolution dealing with the following points:

		- the prohibition of anti-competitive cross subsidies,

		- the free interconnection between fixed and mobile networks (related to the previous objective),

		- the coordinated release of frequencies for pan-European systems such as ERMES,

		- recognition of mobile services providers.

	However, the member states could still not agree on the question of the early liberalization of mobile system infrastructures and the direct interconnection of mobile networks. Both these questions were, however, dealt with subsequently in a manner satisfactory to France in the Commission directive adopted on 16 January 1996.

		1.1.4. Commission's draft directive on the liberalization of cable television networks

	The European Commission tabled this draft directive in January 1995, returning to article 90-3 on the basis of which it had adopted the "services" directive in 1990 for the liberalization of telecommunications services other than voice telephony. This text in particular sought to authorize the use of cable television networks for the provision of those telecommunications services already liberalized.

	In an attempt to strike a political and institutional balance, it was essential that the European Council of Ministers make a decision on this project. France backed the Commission's text which was wholly in line with the state of development of French cable networks. On 13 June the Council adopted certain conclusions, but no consensus could be reached on the appropriateness of this draft directive because of the major disparities between the situations in the various member states in this field. The directive was adopted by the Commission on 18 October 1995.

	1.2. Furthering the debate on the regulatory framework under the Spanish presidency

	In the second half of 1995 the European Commission, in accordance with the Council of Ministers resolution of 13 June, presented three proposals for a directive from the Council and the European Parliament, on ONP-Interconnection, licensing, and updating the ONP-framework and ONP-leased lines directives. An additional draft directive was adopted at the first reading, amending the "services" directive of 1990 and resulting in full competition in this sector.

	In addition to the mechanism completing the regulatory package of 1998, the Commission also presented two proposals for a decision dealing with personal satellite communications and the promotion of multilingualism in the Information Society.

	Despite the presidency's efforts, the Council was unable to launch a real policy debate on 27 November 1995 on the proposal for a directive on interconnection.

	The two liberalization directives - one on mobile telecommunications infrastructure and services and the other on the full competition in the sector - were submitted for a two-month public consultation and were the subject of Council conclusions on 27 November 1995. France had the opportunity of putting forward its position on these projects in the framework of its public consultations, both in the Council and in bilateral meetings with the Commission. The "mobiles" directive was adopted by the Commission in January 1996, while the "full competition" directive was adopted in February 1996.

	The Council of Ministers of 27 November 1995 moreover:

		- adopted the definitive ONP-voice telephony directive, concluding a process that had run for almost three years,

		 - arrived at an agreement in principle with a view to adopting a common position on a policy decision for trans-European networks,

		 - arrived at a unanimous agreement in principle on a proposal for a decision aimed at stimulating multimedia development in the new information society (Info 2000). Discussions could not continue because of a disagreement over programme financing. Subsequent failure to resolve the problem could jeopardize the adoption and implementation of this decision.

	1.3. Work of the Italian presidency

	The work carried out under the Italian presidency in the first half of 1996 is notable for the following results:

	- adoption by the Commission of directive 90-3 "Mobiles" on 16 January 1996 (cf. insert). This directive amends directive 90/388/EEC of 28 June 1990, the so-called "Services" directive, which had already been amended by the "Satellites" directive of 19 October 1994 and the "Cable Networks" directive of 11 October 1995. Its primary aim is to liberalize mobile and personal communications with the possibility of transition periods for certain countries. In particular it provides for eliminating all restrictions on mobile operators in terms of infrastructure (the establishment of own infrastructures, the use of third-party infrastructures, the sharing of infrastructure, other installations and sites), as well as those on the direct interconnection of mobile networks and their interconnection with fixed telecommunications networks. It also guarantees the right of interconnection between the mobile communications systems open to the public and the public telecommunications network.

	- adoption by the Commission of directive 90-3 "Full competition" on 13 March 1996 (cf. insert). This directive, published in the OJEC of 22 March is intended to amend the "Services" directive with the primary aim of liberalizing voice telephony and the provision of public networks as of 1 January 1998, with the possibility of transition periods for certain countries. It also examined the principle of liberalizing alternative infrastructures as of 1 July 1996 for the provision of those services that have already been liberalized.

	- presentation by the Commission of a communication on universal service on 13 March 1996.

	- drafting of a political agreement by the Council of Ministers on draft directive 100 A “ONP-Interconnection" of 21 March 1996 (cf. insert).

THE MAIN DIRECTIVES ADOPTED RECENTLY OR IN THE PROCESS OF BEING ADOPTED

A. MOBILE NETWORKS:
Commission Directive 96/2/EC of 16 January 1996 amending directive 90/388/EEC on mobile and personal communications

	1. Timetable for adoption

	On 21 June 1995, on the basis of article 90-3 of the Treaty, the Commission published a draft directive for the amendment of the so-called "Services" directive 90/388 of 28 June 1990, already amended by the "Satellites" directive of 19 October 1994 and the "Cable Networks" directive of 11 October 1995.

	This draft, in addition to being officially transmitted to the member states, the Council and the European Parliament, was also published in the OJEC of 1 August 1995, at the Commission's initiative, whereupon a two-month period of public consultation was launched. The directive was adopted in final form by the College of Commissioners on 16 January and was published in the OJEC on 26 January 1996.

	2. Key provisions of this directive

	The primary aim of this text is to liberalize mobile and personal communications, with possible transition periods for certain countries.

	In particular it provides for the lifting of all restrictions on mobile operators in terms of infrastructures (establishing own infrastructures, using third party infrastructure, sharing infrastructure, installations or sites), as well as restrictions on the direct interconnection of mobile networks and interconnection with fixed telecommunications networks.

	It also guarantees the right of interconnection between mobile communication systems open to the public and the public telecommunications network. To this end, licences for mobile services must include a guarantee covering the necessary number of points for interconnection to the public network.

	The directive also sets out the general principles for the granting and use of licences for mobile and personal communication systems. The number of licences can only be limited by fundamental restrictions related to availability in the frequency spectrum.

	Specific provisions deal with the GSM, DCS 1800 and DECT networks. When this directive comes into force, member states must grant licences for systems operating under the DECT and DCS 1800 standards (in the latter case, before 1 January 1998 at the latest). They shall impose no restrictions on technology or mobile system combinations, especially when multistandard equipment is available. In any event, as in the case of extending the scope of existing licences for such combinations, account should be taken of the need to ensure the effective competition between operators of competing systems.

B. FULL COMPETITION:
Commission Directive 96/19/EC of 13 March 1996 amending directive 90/388/EEC on full competition in markets for telecommunications services

	1. Timetable for adoption

	On 19 July 1995, on the basis of article 90-3 of the Treaty, the Commission published a draft directive for the amendment of the so-called "Services" directive 90/388 of 28 June 1990, already amended by the "Satellites" directive of 19 October 1994, the "Cable Networks" directive of 11 October 1995 and the "Mobiles" directive of 16 January 1996.

	This draft, in addition to being officially transmitted to the member states, the Council and the European Parliament, was also published in the OJEC of 10 October 1995, at the Commission's initiative, whereupon a two-month period of public consultation was launched. The directive was definitively adopted by the College of Commissioners on 13 March and was published in the OJEC on 22 January 1996.

	2. Key provisions of this directive

	The primary objective of this text is to liberalize voice telephony and the supply of public networks as of 1 January 1998, with possible transition periods for certain countries. The principle of the liberalization of alternative infrastructures as of 1 July 1996 for the supply of already-liberalized services was also examined.
	In line with the directives for  harmonization, the text set out the general principles for licensing and the framework of future systems for interconnection and the universal service.

	Of particular note is the Commission's decision to limit individual licences to voice telephony services and the establishment and use of public telecommunications networks and networks using radio frequencies. Moreover, it is stressed that the number of licences granted may only be restricted if the frequency spectrum becomes saturated.

	With regard to interconnection, the Commission imposes the following obligations on telecommunications bodies for a period of five years as of the date voice telephony is liberalized:
- to provide interconnection to their voice telephony service and their switched public network for operators authorized to supply services or networks,
- to publish an offer for interconnection "to the basic functional components" of this network/service before 1 July 1997,
- to use a cost accounting method that makes it possible to identify the various costs built into the interconnection fee.
	Moreover, the member states must ensure that all operators of networks or services can negotiate, on request, with the telecommunications bodies to arrive at interconnection agreements for special access to the public switched network and/or conditions replying to their specific needs. If no agreement can be reached between operators within a reasonable time then the regulator may be called in by one of the parties to arbitrate, also within a reasonable time.

	Where the universal service is concerned, the Commission defines the possibilities for sharing the cost of the universal service borne by the traditional operator, requiring contributions from just the operators of public telecommunications networks; the choice of mechanism, fund or access fee will be left to the individual member states.

	Moreover, "the member states will authorize their telecommunications bodies to reassess tariffs taking account of specific market conditions and the need for an affordable universal service. When this assessment cannot be done by 1 January 1998, a report including a detailed timetable for the gradual elimination of price inequalities must be sent to the Commission by the member state concerned".

	Regarding connection rights, the Commission obliges all member states not to discriminate between the suppliers of public telecommunications networks, and, "when it is impossible to grant additional licences for fundamental reasons", then the member states must provide public network operators with access to existing installations "on reasonable terms".

	Lastly, those companies that benefit from exclusive or special rights in other activities must draw up separate accounts for their telecommunications activities if their turnover in these areas exceeds Ecu50 million.

C. ONP
Draft directive on interconnection

	1. Timetable for examination

	On 19 July 1995 on the basis of article 100A of the Treaty, the Commission published a draft directive for interconnection. This text received the political agreement of the Council of Ministers on 21 March 1996, whereupon it was possible to adopt a common position.

	2. Key provisions of this directive
	The primary objective of this draft directive is to provide a harmonized regulatory framework for the interconnection of telecommunications networks and services. It contributes to the goal of a universal service from the point of view of guaranteeing communications between all users. The proposal does not deal specifically with the content of the universal service but instead goes into detail over its method of financing: it identifies those services that are liable for shared financing by all market operators and defines the operators liable to contribute to the fund and the mechanisms involved. It also presents the principles that should be applied when calculating the cost of the universal service.

	Moreover, the text sets out the interconnection rights and obligations according to the categories of operator, establishing additional obligations for operators with significant market power including, in particular, the obligation to publish a reference interconnection offer.

	The draft directive states that certain operators should publish their accounts and lists the principles to be used in setting interconnection tariffs. In all these areas the text states that the National Regulatory Authority must occupy a supervisory role, setting out the framework and even establishing agreements or fixing conditions on its own initiative. The text also sets out a procedure for the settling of disputes by the National Regulatory Authority; an additional community-scale conciliation procedure could also be devised.

2.	Postal Services

	2.1. French presidency gives fresh impetus to EU efforts

	In 1989 the French presidency drew up a timetable for work in the postal services field. However, this has since been seriously delayed by the lack of proposals from the Commission.

	Nevertheless, following the publication of the Postal Green Paper in 1992, the European Council of Post and Telecommunications Ministers adopted a resolution on 7 February 1994 identifying the aims of a EU policy in the field of postal services and stressing the need for decisive action by European institutions. The Commission was accordingly invited to prepare, by the end of the first half of 1994, those measures required to achieve these aims in the field of a universal postal service, reserved services, harmonization and quality of service.

	France has always supported the aims of the community postal policy as defined by the Council and has pushed for urgent EU regulation in this sector to give the postal market a set of clear and coherent rules which would, in particular, guarantee the essential missions of public service and overcome the disadvantage of having regulations passed on a case-by-case basis whenever disputes arise.

	The French presidency therefore made postal issues one of its three priorities for the Council meeting of 13 June 1995 in order to launch Council work immediately on draft regulations applicable to the single postal services market and to encourage the adoption of a community system of terminal dues.

	The presidency made a number of approaches to the Commission to convince it of the urgent need to deal jointly with the universal service and "reservable" services in a single Council and European Parliament directive. The draft of this directive could be presented in parallel with a Commission communication on the application of the rules of competition to postal services.

	While plans were being made for a general regulatory framework, a specific initiative on terminal dues was also promoted through a Council resolution. Although it is directly related to the universal service, this issue is somewhat removed from the general process insofar as it is tariff-related and therefore should not be fully governed by the rules of community law but for the most part should be regulated by a negotiated agreement between the different European postal services. The purpose of the Council initiative is simply to establish a political consensus between the member states to give operators some kind of direction and guiding principles to apply to the future system, whatever its final configuration. It results from the Council's responsibility to ensure that reciprocal payments between operators for the universal service have a regulatory basis that confers a sufficient degree of legitimacy and stability.

	The Commission having failed to come up with any proposals, in-depth but informal discussions in the Council meeting on 13 June 1995 again highlighted the urgent need for work to begin on developing a European regulatory framework. The discussions ensuing from the draft resolution on terminal dues prepared by the presidency led to the conclusion that there was broad agreement in the Council on the principles set out in this text.

	2.2. Postal directive gets off the ground under the Spanish presidency

	Owing to efforts made by the French presidency, the Commission finally adopted draft directive 100A on 26 July 1995, which deals with the whole issue of the universal service and reserved services, as well as a draft communication on applying the rules of competition to the postal services. The short-term scope of the directive (definition of the universal service and precise identification of reserved services) is satisfactory, but France believes that further assurances are required on the following points:

	* the mechanisms for reviewing the directive, especially with regard to reserved services,

	* the options that will be adopted during this review, especially concerning the regime applied to direct marketing and incoming cross-border mail,

	* the conditions justifying authorizations and declarations applicable to non-reserved services,

	* the introduction of a cost-based system of terminal dues.

	Regarding the draft communication on the rules of competition, which should focus on the interpretation of existing legal provisions, we must ensure that the approach taken corresponds perfectly to the direction taken by the regulatory framework defined by the directive.

	The work begun by the Spanish presidency in the second half of 1995 enabled the Council of 27 November to launch a policy debate on the proposal for a directive as well as a debate on the draft communication. The convergence of views on the definition of the universal service and the opinions expressed on the scope of reserved services laid the foundations for a compromise text produced under the following presidency (Italy). Moreover, the Commission's undertaking to delay publication of the communication until late 1996, to give the Council time to adopt a common position sketching the final "shape" of the directive, was welcomed by the Council.

BRIEF GUIDE TO THE WORK OF THE EUROPEAN COUNCIL OF MINISTERS

The work of the European Council of Ministers is organized and timetabled at the beginning of each half-year by the new presidency. The Council will discuss a subject on its agenda when the following procedure has been completed:

- examination in one of the Council's working groups (for post and telecommunications issues the working group in question is the Economic Affairs Group): these groups are generally chaired by a member of France's permanent representation to the EU or by a national expert from the country currently holding the presidency, with the assistance of the general secretariat of the Council. The representatives of the various delegations (national experts and/or advisers to the permanent representations) discuss the issue, suggest amendments to the texts being examined and attempt to resolve sticking points. This work, which cannot be fully conclusive or result in a formal vote, ends simply with a memo being drafted from the group chairman to the Permanent Representatives Committee (PRC) presenting the results of the work and requesting, if this issue is sufficiently relevant, for it to be included on the PRC's agenda.

- examination in the PRC: the PRC consists of two bodies ("PRC I" for institutional issues, general affairs, justice, financial and budgetary questions, and development; "PRC II" for other sectoral issues including post and telecommunications). It is composed of all the ambassadors to the EU from the various member states and has the task of preparing the Council's business. Issues are examined by the PRC. Problems that could not be resolved at working group level are discussed again in detail. This committee decides on whether the subjects submitted to it are ready for discussion in the Council. If so, they are put on the Council's agenda, either under "Points A" when they can be adopted without discussion, or under "Points B" when a debate, possibly followed by a vote, is required.

INSERT:
TIMETABLE FOR THE ADOPTION OF THE COMMUNITY DIRECTIVES PREPARING FOR THE 1998
REGULATORY FRAMEWORK (POSSIBLE TIMETABLE)

	Commission adopts a proposal and submits it to the member states (100A).
Prior adoption of a draft by the Commission and public consultation (90-3)	Joint
Position
(art. 100A)	Adoption by the Council and Parliament (art. 100A)
or by the Commission 
(90-3)	End of transposition period	
Cable networks
(90-3)	21 December 1994
		18 October 1995	May 1996	
Mobile networks
(90-3)	21 June 1995
		16 January 1996	September 1996	
Full competition (90-3)	19 July 1995		13 March 1996	1 January 1998
(01/07/96 for alternative
infrastructures)	
ONP-Voice telephony (100A)	21 December 94
(2nd version)	13 June 1995	21 March 1996 	December 96	
ONP-Interconnection
(100A)	19 July 1995	May 1996	end-1996	1 January 1998	
Licensing
 (100A)	14 November 1995	end 1996	mid-97	1 January 1998	
Adaptation 
ONP (100A)	14 November 1995	end 1996	mid-97	1 January 1998	

CHAPTER 3
EXTENDING FRANCE'S INTERNATIONAL REACH

	Since the early 1990s, telecommunications operators have been extending their international presence. This has been achieved by taking ownership interests in foreign companies, setting up offices abroad and forming strategic alliances.
	French operators have been no exception, and numerous initiatives were taken in this area in 1995. However, because of the very scope of the project, this year will be remembered for the two procedures that should eventually lead to an informal authorization for the partnership between France Télécom, Deutsche Telekom and Sprint, and the launch, in late January 1996, of the Global One service. The procedures were worked out with the European Commission and the Federal Communications Commission (FCC) and the US Department of Justice.
	The DGPT helped to clarify the existing regulatory framework and the timetable for the liberalization of alternative infrastructures.

1. The international expansion of French operators: new alliances, new partnerships

1.1. International expansion accelerated by the liberalization of the EU telecommunications market

	There can be no doubt that the gradual opening up to competition of the EU telecommunications market has accelerated the globalization process among operators. Numerous alliances have been formed with a view to providing a global, seamless offer of liberalized services to companies.

	Two French operators were involved in such an alliance in 1995. First, the link-up between France Télécom, Deutsche Telekom and Sprint led to the formation of the Global One joint venture to supply global services to multinational companies (cf. above). Second, on 13 April, Compagnie Générale des Eaux (CGE) and Unisource formed a jointly owned company. (Unisource is a consortium controlled equally by PTT Telecom Nederlands, the Swedish operator Telia, Swiss Telecom PTT, and the Spanish operator Telefonica). CGE holds a 50.01% stake in the new company through its COGERI entity. Christened SIRIS, this new entity is the French interface for the services of Uniworld (a Unisource/AT&T alliance) and Worldpartners. It is looking to become the second largest French operator in corporate telecommunications.

INSERT

- cf. IDATE table on following page -
Newcomers and partnerships in French telecommunications

	The opening up to competition of mobile and personal communications, which was generalized at EU level on 1 January 1996, has also encouraged the trend towards increased internationalization insofar as it has provided countless opportunities for expanding business into other EU member states.

	In September 1995, France Télécom beat four other competitors to win the operating licence for Belgium's second GSM network. Dubbed France Télécom Mobile International, (FTMI) the network should be operational in Belgium in 1996.

	The main international operators are already gearing up for the total liberalization of the telecommunications sector in all EU member states on 1 January 1998.

	This is the case of France Télécom which, as an extension of its alliance with Deutsche Telekom and Sprint, signed a preliminary agreement on 15 November 1995 with Olivetti for the creation of a joint company in Italy, owned initially by Infostrada (51%) and France Télécom (49%). Infostrada is an Olivetti-Bell Atlantic partnership (67%/33%). According to the terms of this agreement, which is part of the Global One strategy, the new company will be the sole distributor of Global One products on the Italian market which is currently the fourth largest in Europe. The long-term objective of the new company is nevertheless ambitious: to become the second Italian operator, in direct competition with Telecom Italia.

	Finally, across-the-board competition in Europe should prompt European operators to look for new outlets outside the EU.

	France Télécom is already looking further afield. With its Lebanese partner, Mikati, it has obtained one of two licences for a GSM-type cellular network in Lebanon as part of a 10-year BOT (Build, Operate & Transfer) contract. It is also negotiating a cooperation agreement with the Indian national operator DOT, and has won the right to operate 500,000 lines on the Indonesian island of Sumatra (the KSO project). With KSO, a 15-year BOT contract for which it has gone into partnership with the Indonesian Astra group, France Télécom aims to double the size of the existing network and then run it, splitting the profits with PT Telkom. CGE has a minority shareholding in a similar project with Southwestern Bell to operate a mobile telephony licence in the Baltimore metropolitan area in the United States.

1.2. Promoting the international growth of French operators

	The DGPT is closely monitoring the changing face of the telecommunications sector. It wants to ensure that French operators make a smooth transition to the international telecommunications market. An essential feature of this is the quality of the dialogue that the DGPT pursues with its counterparts in the various partner countries and with the European Commission. This relationship of mutual trust can prove beneficial, especially if the French authorities ever have to intervene directly to defend or promote an international project involving French operators.

	In this respect, the fact that the US and EU authorities gave the green light to the Global One (formerly Phoenix) and Atlas alliances is particularly revealing. The French authorities provided the Federal Communications Commission (FCC) and the Department of Justice (DoJ) with clear guarantees as to the speed and progress of the liberalization process, especially for alternative infrastructures. This not only clarified the changes that will be made to the regulatory framework of the French telecommunications sector; it also convinced the FCC and the DoJ that France was sincerely determined to open the telecommunications market up to competition.

	The efforts made to convince our partners, which culminated in the visit to the United States of France's telecommunications minister, François Fillon, were instrumental in securing approval for the Global One agreement. Pursuant to the antitrust action brought by the executive arm of the US government, the DoJ and the parties to the agreement reached a compromise on 13 July 1995, which was then ratified by the courts on 16 February 1996. The FCC gave its formal approval on 15 December 1995, but attached certain conditions. The European Commission issued an informal decision granting exemption under the terms of article 85-3 of the Treaty of Rome on 18 October 1995. Further developments in the course of the year testified further to the quality of coordination with the German regulator, the intensity of the dialogue with the European Commission and the FCC and the firm commitment of French and German ministers to open up alternative telecommunications infrastructures to competition as of 1 July 1996.

The France Télécom-Deutsche Telekom-Sprint Alliance

	France Télécom and Deutsche Telekom, the world's fourth and third largest operators respectively, notified the European Commission in December 1994 that they intended to set up at 50:50 joint venture named Atlas. They were seeking the go-ahead for this alliance either through negative clearance or an exemption in accordance with article 85.3 of the Treaty of Rome. In late June 1995, the Commission also received notification that Atlas would be extended to the United States under the so-called Phoenix agreement concluded with Sprint, America's third largest long-distance operator.

	The essential aim of Atlas and its Phoenix extension is to supply global services, including international voice, data and video services for multinationals and other business customers (data transmission networks, VSAT networks, outsourcing, national and international virtual private networks).

	After making many substantial alterations to the initial project, the parties finally reached an agreement with the DGIV on 16 October 1995 on the conditions for the approval of the two operations in question. This agreement in principle was confirmed by the College of Commissioners on 18 October 1995 on condition that alternative infrastructures in France and Germany be liberalized ahead of schedule, on 1 July 1996.

	A public consultation process, beginning with the publication in the OJEC of the Commission's intentions regarding the two alliances, was concluded at the end of January 1996.

	On 31 January 1996, France Télécom, Deutsche Telekom and Sprint announced that FT and DT had each acquired 7.5% of the capital of Sprint. This date also saw the launch of the former Phoenix project, renamed Global One, a new operator on the international telecommunications services market. Global One was created from the merger and extension of several of the activities of its parent companies, Sprint International and Atlas. The final instalment of FT's and DT's investment in Sprint, giving both companies 10% of the voting rights, will be made following the split-off of Sprint Cellular which is scheduled for the first half of the year.

	On 15 December 1995, the alliance received the formal approval of the FCC. The US antitrust authorities referred the matter to the courts, which gave their approval on 16 February 1996. However, the negotiated conditions for approval of this alliance by the European Commission have not yet received official confirmation. This should, however, come at the end of a long procedure which should be completed by the end of the first half of 1996.	

The internationalization of telecommunications operators:

Comparison of the four main partnerships
between operators of fixed telecommunications networks
	BT	Cable & Wireless	France Télécom	Unisource (1)	
Partnerships meeting the requirements of multinational corporations	BT/MCI partnership:
Concert project	Company present in 50 countries	France Télécom - Deutsche Telekom - Sprint partnership
Global One project	Partnership with AT&T: Uniworld project	
Position on the main European markets					
Germany	The BT - VIAG - RWE partnership	Partnership with VEBA	Partnership with Deutsche Telekom: Atlas project		
Spain	Joint-venture with Banco de Santander: BTT
Stake in Airtel (7%)  a GSM consortium			Telefonica, the historical operator, has a stake in Unisource (see below)
	
France	BT France subsidiary		Historical operator	Joint venture with Générale des Eaux: SIRIS project	
Italy	Joint-venture with Banco Nazionale del Lavoro (50/50): Albacom		Joint-venture with Olivetti and Bell Atlantic		
United Kingdom	Historical operator	Mercury (80%)	3 subsidiaries: FCR Ltd., France Télécom Network Services Ltd. and MAXAT		
Sweden	Stake in TeleNordia (33%)	Tele 2	Subsidiary France Télécom Network Services Nordic	Telia, the historical operator, has a stake in Unisource (see below)	

(1) Unisource: Telefonica (Spain) 25%; Telia (Sweden) 25%; Swiss PTT 25%; KPN (Netherlands) 25%

2. Bilateral international cooperation

2.1. Bilateral relations with OECD countries

	For a number of years the DGPT has been fostering sustained bilateral relations with France's leading economic partners. As a result of this policy, regular meetings are held with our counterparts in the main European Union countries as well as with the United States, Canada and Japan.

	At EU level, in addition to the usual exchange of information on national regulatory changes, France's presidency of the Council in the first half of 1995 naturally directed discussions towards the work of the Council on 13 June. This was the subject of the DGPT's talks with the Dutch regulator in January, the Spaniards and the Swedes in April, and the Portuguese in May.

	The DGPT also received an American delegation in September 1995 composed of State Department officials and members of the Federal Communications Commission (FCC), the National Telecommunications and Information Administration (NTIA, Department of Commerce), the Department of Justice and the United States Trade Representative (USTR). In November it was the turn of a Canadian delegation to visit Paris, a party which included the presidents of the CRTC (Canadian Radio and Telecommunications Council), the CRC (Communications Research Center) and the Ministry of Industry.

	The French authorities called these meetings to inform their counterparts of recent national regulatory decisions. They again stressed the commitment that France had made in the European Council of telecommunications ministers to the timetable and methods leading to the total liberalization of telecommunications services and infrastructures on 1 January 1998, and it was announced that there would be a public consultation on the future regulatory framework. These talks also gave the DGPT an opportunity to recall France's desire for a positive outcome of WTO negotiations on basic telecommunications on 30 April 1996 (cf. chapter 4). Finally, the discussions gave us a better idea of the regulatory structures employed by our partners.

	One of the main topics of discussion in these bilateral meetings was a description of the experiments and initiatives of the public authorities with regard to the information society, and an overview of the results of jointly-managed projects, notably pilot schemes within the G7.

	Prior to the meeting with the US delegation a team of DGPT experts had been on a fact-finding tour of the USA to study America's experience of regulating interconnection. At the meeting, the DGPT managed to obtain more detailed information regarding the legislative procedure under way at the time, which resulted in the adoption of a new Telecommunications Act in February 1996. Talks also helped clarify certain issues with the DoJ representative who was at that time looking into the Phoenix affair, the planned partnership between Sprint, France Télécom and Deutsche Telekom. The partnership was subsequently approved, albeit with strict conditions imposed by the DoJ and the FCC.

	These same issues featured on the agenda of Telecommunications Minister François Fillon when he visited Washington in late November 1995. The minister was accompanied by the DGPT's director general, Bruno Lasserre, and the international affairs director, Jean-Michel Linois.

	Our talks with the Canadians underlined both parties' desire to further develop bilateral cooperation on the information society, both to promote the use of the French language on the information highways and to encourage the creation of partnerships between operators from both countries.

	2.2. Bilateral relations with emerging countries

	Closer dialogue between the DGPT and its institutional partners in other countries is a key factor in developing a French presence abroad. This is especially the case in high-potential emerging nations in which our companies, operators, service providers and equipment suppliers in the posts and telecommunications sector are finding it hard to gain a foothold. They are faced with increasingly stiff competition from foreign groups which are, moreover, aided by sustained political and diplomatic action (notably in the case of German, North American and Japanese firms). French firms are frequently hindered by a lack of judicial and organizational clarity in the countries concerned.

	The work of various ministry departments looking into a new configuration for our foreign trade support network has highlighted a keen demand from the business sector for greater political and institutional involvement in this regard, and not just where resource management is concerned.

	Through a policy of regular, high-level bilateral meetings between the DGPT and the posts and telecommunications officials in these countries – meetings to which company representatives are now invited as a matter of course – our firms are able both to present and promote their offer and to obtain a clearer grasp of the framework and decision-making mechanisms. Of the geographical areas on which the DGPT has concentrated this year, the Asian zone has remained a priority (China, India, Vietnam) and has even been widened to include Thailand. At the same time, feelers have been put out in Latin America (Brazil, Argentina) and South Africa, and cooperation in this sector has been fine tuned for the Maghreb region. Indeed, a great deal of attention was focused on the Maghreb and China this year.

	China

	Created by the cooperation agreement signed by the French and Chinese telecommunications ministers in July 1994, the joint sectoral committee met for the first time in Beijing in March 1995. The committee includes a dozen or so French operators and industrial groups and is chaired by Bruno Lasserre and Deputy Minister Zhou Deqiang. The two countries drew up a cooperation programme including seminars, visits by Chinese officials to France and pilot schemes. The programme involved representatives of the busineks community as well as government bodies. A return visit to Paris by Zhou Deqiang in September 1995 made it possible to take the discussions of the joint committee one step further. The Chinese posts and telecommunications ministry thus expressed its requirements and gave its backing for a seminar, which the DGPT plans to organize in Beijing in 1996, on the ways in which French companies can invest in telecommunications network construction projects. The DGPT, presenting the tools used by the regulator, will be joined at this seminar by French operators and suppliers, and the banks and law firms operating on the Chinese market. Chinese delegates, in addition to the ministry, will include the financial and operations directors of Chinese provinces, who will submit concrete proposals.

	Maghreb

	This is a political and financial priority region for French cooperation. Our companies are running into serious competition on these markets and the Maghreb countries are demanding aid for the implementation of new technology and services and for general restructuring in this sector. Increased dialogue was therefore required. The mixed French-Moroccan committee, dormant since February 1992, was reactivated and enlarged to include operators and industrial groups. It met in Rabat in early February 1996, with Bruno Lasserre in the chair for the French side. The closing address was given by François Fillon. The committee redefined the major lines of joint cooperation and laid the emphasis on upstream action aimed at establishing clear legal and regulatory conditions for developing posts and telecommunications. It also sought to redirect training activities, taking account of previous technology transfers by France, and focused on the possibilities for commercial partnerships between French and Moroccan companies.
	A similar approach is required with Tunisia and will be implemented some time in 1996.

	Emerging ties with the countries of Central and Eastern Europe

	As the European Union prepares to expand to take in the countries of Central and Eastern Europe which already have associate member status, the DGPT has launched a bilateral regulatory cooperation policy in a number of these states. Experts were sent to Bulgaria, Poland and Romania to provide assistance with licensing, mobile services regulation, frequency management and tariff regulation.

	This policy of seeking closer ties with the Central and Eastern European nations was bolstered by the signing of a cooperation agreement with the Bulgarian Posts and Telecommunications Committee. Similar agreements are expected to follow in 1996 with other countries in the region.

	The policy is also strengthened at the multilateral level by the activities of the CEPT ACECO working group (Assistance and Advice to the Countries of Central and Eastern Europe), which France has chaired since 1992. The central aim of this group is to organize seminars and workshops ensuring that these countries benefit from the regular transfer of know-how in the posts and telecommunications sector.

3. Multilateral activities with developing countries

	In 1995, through the multilateral bodies charged with development, such as the International Telecommunication Union (ITU) and the World Bank, the DGPT sought to inform developing nations of its sectoral policy, which is being implemented alongside structural reforms, and to promote French economic interests.

	The ITU's world development conference held in Buenos Aires in 1994 created two study commissions to examine regulatory and financial issues as well as technical and industrial factors. The DGPT and the representatives of French operators and industrial groups made an active contribution to new projects for structural reform and the regulation of telecommunications in developing countries, devising policies for funding the modernization of telecommunications infrastructures, communications in rural and isolated areas, and applications of information technology, especially in the field of health care and the environment.

	A number of groundbreaking initiatives have been promoted in other areas. As a result of the Barcelona Mediterranean conference of November 1995 which sought to strengthen political and economic ties between Europe and the southern Mediterranean countries, plans are now afoot for a modern communications network to connect these countries. As part of its activities with the World Bank, the DGPT helped mobilize French institutions for the launch of the INFODEV (information for development) programme which will promote more effective sectoral policies in low-income countries. Finally, plans have been made to commission the DGPT to conduct a comparative study of the cooperation and development aid mechanisms in Germany, Canada, France and Japan. The aim is to shed light on the political choices liable to strengthen preliminary cooperation work between public and private sector operators, and to ensure greater consistency between sectoral cooperation programmes.

CHAPTER 4:
BUILDING THE INFORMATION SOCIETY

In 1995 the government's experimental measures aimed at generating momentum for the creation of the information society in France resulted in the approval of 260 projects of public interest out of the 635 submitted. Analysis of these projects helped pinpoint the major factors likely to pose a challenge to the current legal framework and the regulatory changes that will be required, not least in terms of right of access to telecommunications facilities. It was on this basis that the DGPT helped draft the law on information technology and services.
In 1995 the DGPT also made a significant international contribution in this field, participating in the French delegation at the G7 summits held in Brussels (February 1995), Halifax (June 1995) and Midrand (May 1996). The DGPT also took part in the WTO negotiations on basic telecommunications, which were held in Geneva over a period of several months with the aim of reaching a signed agreement. Also, the DGPT played an active role in the debate on the reform of international satellite telecommunications organizations (Inmarsat, Eutelsat and Intelsat), defending the position that governments should focus their attention on regulatory work.

1. Preparing France for the information society

	The government strategy for preparing France for the information society is based on the following principles:

* the private sector must be involved since any interventionist state initiatives will be doomed to failure
* new technologies or services must not be prejudged because current trends are not definitive, and it is impossible to accurately predict or fully control how the market will develop.

	Given the uncertainty involved, the only acceptable and effective approach is likely to be one based on experimentation. The government therefore opted for a strategy of providing impetus for the nascent information society without stifling its development.

	For this reason, a call for proposals was issued in late 1994 with the aim of testing projects submitted by companies, local authorities and public bodies. A total 635 trial projects were submitted and 250 of them – considered to be "in the public interest" – were selected. Some of these projects were granted financial aid. The DGPT was involved in drawing up a draft law on information technology and services aimed at removing certain regulatory obstacles. This was then discussed in Parliament in the first quarter of 1996.

The law on experiments in the field of information technologies and services 
(Law 96-299 of 10 April 1996)

Why was a law of this kind necessary?

While some of the experimental projects submitted following the call for proposals did indeed fulfil the criteria of technical and industrial innovation, content and use, user association, viability and technical, financial, industrial and economic realism, and interest to society as a whole, their actual implementation was hampered by regulatory obstacles.

A draft law was therefore drawn up in order to remove the obstacles identified when projects in the field of telecommunications and audiovisual communications were examined. This law was given its first reading in the lower house of parliament on 30 January 1996 and then in the Senate on 20 February 1996. It was passed by Parliament on 26 March 1996 and published in the Official Journal of 11 April 1996. (this law is included in the annexes to this annual report).

The legal constraints have been eased from the point of view of:
* time: the maximum time for which experimental licences may be granted has been set at five years, while the law will only apply for three years;
* space: experimental licences are granted for restricted geographical areas. Limits may also be set on the number of users;
* experimental licences will have to be adapted to comply with any future legal amendments, especially in the field of telecommunications.

In the telecommunications sector, the law should make it possible to set up and manage platforms offering a wide range of advanced telecommunications services and functions in a specific area (teleports, for instance), and also allow the use of cable television networks for telephone services.

In the audiovisual sector, experiments using new technologies (techniques for digital broadcasting or multiplex broadcasting on microwave channels) require a precise legal framework applicable to global services. Moreover, it should also be possible to adapt certain obligations in terms of content to the needs of specific services (e.g. multiplexed services or video-on-demand).

	An analysis of the projects also made it possible to identify the major factors likely to challenge the current legal framework and the regulatory changes that would therefore be required. France's preparations for the information society will be given fresh impetus by the Telecommunications Act.

1.1. The major factors likely to pose a challenge to the current legal framework

	Three issues are likely to pose a major challenge to the current legal framework.

Firstly, the networks' capacity for transporting increasing volumes of all types of data (sound, text and still or moving images) at higher speeds.

	The increase in network functionality results from the introduction of techniques such as fibre optics, ATM and digital compression. Fibre optics allows for higher transmission speeds and consequently more information can be sent down the line in a given period. ATM makes it possible to process all kinds data without distinction - voice, still or moving images - and effectively to switch very high-speed signals. Digital compression will make it possible to increase carrier capacities while reducing costs.

	The relevance of basing resource access on the notion of relative scarcity will also have to be addressed. The question of operating regimes for services (authorization or declaration) is also relevant for services distributed over wired networks.

	Moreover, in the long run it will probably be impossible to maintain different types of regulation for all the various kinds of information support. It is already possible to use different infrastructures for the same service or to offer new services for which the network was not originally intended. Today, for example, telecommunications services can be delivered through cable networks and paging services through audiovisual radio networks. Telecommunications and audiovisual services can also be broadcast by telecommunications satellites. This trend is set to continue, especially since the IT & services law will make it possible to offer fixed telephone services on cable or on the alternative infrastructures run by transport operators.

Second factor: the increasingly interactive nature of services

	The distinction between telecommunications services (messages relating to private correspondence) and audiovisual services (available to the public) is bound to become blurred.

	Nowadays the distinction between broadcasting (television services) and telecommunications services (point-to-point) no longer applies. Services are becoming increasingly interactive in nature and public information and private correspondence services are becoming irreversibly mixed. The television viewer is being turned into a writer, a consumer and a producer.

Third factor: the elimination of national boundaries

	Radio networks are becoming increasingly global thanks to satellite technology - which by definition ignores national borders - and wired networks, including the ultimate network of all, the Internet. One of the characteristics of this globalization is deregulation and the arrival of new competitors on the telecommunications market.

	The services too are becoming more international in nature. These new developments create complex problems regarding codes of practice, including protection of minors and copyright. At national level, telecommunications minister François Fillon and culture minister Philippe Douste Blazy have set up a special think-tank. Chaired by Isabelle Falque-Pierrotin, this body is composed of representatives of various government departments and national economic authorities; it was created to examine problems relating to codes of practice and then to unearth ways in which these could be resolved. The DGPT contributes to the work of this group. At the international level, amending the right to have world-wide networks and services has to be considered. This subject was broached at the unofficial European Council meeting of telecommunications and culture ministers in Bologna in April 1996.

1.2. The regulatory framework will have to be amended but the changes must be based on a few simple principles

There are three major principles that should be considered.

121. Maintaining separate regulation for services and media

	Unifying regulations for telecommunications and audiovisual services is not the answer. The only realistic solution is to keep the regulation of media of any nature (i.e. economic regulation) strictly separate from the regulation of content whatever the medium involved (i.e. moral regulation). This type of distinction is required for three reasons.

* Firstly, these markets will retain their different structures for a long time to come: the telecommunications sector will continue to be characterized by the dominant position of France Télécom and the imbalance between a traditionally powerful operator and newcomers onto the market will remain. It may take several years for newcomers to be in a position where they can make their mark and win significant market share.
The audiovisual market, on the other hand, is not structured in at all the same way. There is more of a balance between the various operators, especially in the field of radio.

* Secondly, the concept of public service does not have the same meaning in these two sectors: in the telecommunications sector, public service includes the concept of a universal telephone service (equal access to a quality telephone service for the same price throughout the country) as well as obligatory services such as the offer of leased lines, an Integrated Services Digital Network (ISDN), etc. For audiovisual communications, public service is equated with the public audiovisual sector.

* Thirdly, the objectives are, and will remain, separate to a large extent: the aim is to guarantee the freedom of communication and at the same time ensure that content is regulated and in the audiovisual sector this . is a matter of ethics. There must be effective, innovating and fair competition for all media, but this competition must coexist with a public telecommunications service. Fostering such competition will require organization. Regulating access to the network – in other words, regulating interconnection – will therefore be a crucial element in the regulatory framework that takes effect in 1998.

122. Promoting the development of networks and services

	If it is to succeed, this development will require the following action to be taken:

* Preparing the markets for open competition: This is the purpose of the experimentation law which aims to prepare new players - cable operators and transport companies such as French Railways and motorway management companies - to supply services which have until now been subject to a monopoly. Assessing the experiments, restricted in time and space, should highlight those factors that will have to be considered when bringing the existing legislation into line with new technologies (legislation on copyright, computing and liberties, etc.).

* Maintaining the relatively flexible system of new audiovisual communication services (telematics) through suitable adaptation: the relatively non-restrictive legal environment (simple declaration system) for telematics services is often cited as one of the reasons for the success of telematics in France. There were 24,600 teletel codes generating some FF6.6bn in 1995 and 5,775 audiotel codes representing FF2.6bn.
It will be necessary to maintain, and if necessary adapt, regulation of this kind for services offered on the telecommunications networks. The Telecommunications Act therefore includes provisions for easing the licensing procedures and permitting unrestricted supply of data transmission and value-added services.

* Developing encryption and ciphering techniques. This is a sensitive area since the government has to find a suitable balance between national security interests and the interests of individuals and companies. Indeed, as recently as 1990, cryptology was still considered a military resource. However, one thing is certain: it is essential to make the network or networks secure against hackers, especially if the aim is to develop an economy based on electronic transactions. The government is in favour of setting up a free identification system and of appointing "trustworthy third parties" responsible for managing cryptology on behalf of others. In this case, users and suppliers of services which require encryption would no longer have to request individual authorization (cf. also chapter 11).

123. Guaranteeing a suitable level of security on these new networks

* Public order and codes of practice must be guaranteed. In order to do this, blocking devices must be made available to users.
This practice has already been implemented in the United States where there is an obligation to make the V-chip locking device generally available to parents so that they can block certain programmes and prevent their children from viewing them. The European Parliament also appears to be in favour of this kind of approach. It is essential that the responsibilities of carriers/access suppliers/service suppliers should be clarified in advance. The French Senate debated the issue of the responsibility of commercial and technical suppliers of access to services during the debate on the information technology and services bill. The final decision was that service suppliers alone should bear the responsibility. However, no definitive decisions have been taken on this issue and it could be re-examined by the think-tank directed by Isabelle Falque-Pierrotin and set up by the ministers of telecommunications and culture. The DGPT is also involved with this working party.

* The essential aim must be to maintain a high level of personal security as top priority and data protection as a second priority. The telecommunications sector has developed around the principle of privacy of correspondence (law of 10 July 1991) and message confidentiality. In the audiovisual sector, the anonymity of television viewing choice is guaranteed.

	However, there is a significant risk of these principles not being adhered to, due to the fluidity of information and information processing, the possibilities of image and voice processing, and the fact that services are paid for which naturally requires the clear identification of the user, a fact that encourages the processing of personal data (e.g. the creation of subscriber files).

	The law of 6 January 1978 on information technology, data files and personal liberties will have to be amended to ensure that the provisions of the directive of 24 October 1995 are adequately transposed into national law. This directive deals with the protection of individuals with regard to the processing of personal data and the free circulation of such data (cf. chapter 6). This amendment should make it possible to cover new categories of data such as sound and moving images to take account of interactive situations where users are involved in the collection or transfer of data concerning themselves, and to deal with the global nature of networks and the increasing number of operators.

* There must be increased consumer protection: there are two possible ways of achieving this. Firstly, the system could be simplified through the creation of a universal telephone directory and the possibility of keeping numbers ("portability"). Secondly, there could be increased standardization making it possible to use one access device for several different services. Developing the networks and services required by the information society will fail unless the level of security offered to users is adequate and is suited to new communication technology.

2. Major international events

	Creating an information society is one of the most important challenges facing us as we near the turn of the century. Like its partners all over the world, France has to face up to this challenge. The DGPT was actively involved in drawing up and implementing the call for proposals which closed in January 1995 and which helped generate the dynamism required to launch new services and initiatives. In 1995 it also played a leading role at international level, putting across France's position at the preparatory stages of conferences and summits on the information society. This included the G7 summit, the conference of French-speaking countries and meetings of international organizations with an interest in this subject.

2.1. The G7 and the information society

	Pursuant to a decision taken at the Naples summit in July 1994, a G7 ministerial conference on the information society was held in Brussels on 25 and 26 February 1995.

	The French delegation was led by Mr Rossi, the telecommunications minister at that time. The conference was held at the same time as an exhibition of concrete achievements made possible by new information technologies. It was the opportunity to look at various approaches and - even more importantly - to define a vision and the joint objectives for bringing about a global information society. These objectives reflected the desire to give priority to the way the market is organized (promoting dynamic competition, encouraging private investment, setting out a flexible regulatory framework and guaranteeing free access to the networks). The social dimension is also considered (guaranteeing the universal offer of, and access to, services, promoting equality of opportunity between all people and guaranteeing a varied content.

	Finally, this conference gave the go-ahead to eleven pilot projects designed to illustrate, with practical examples, the real-world benefits of the information society. The pilot projects cover very different fields ranging from distance learning, electronic museums and libraries, environmental and crisis management, health, services for small and medium-sized companies, maritime information systems and electronic services provided by government departments.

	The DGPT is responsible for coordinating these projects in France which has a number of pilot projects for electronic museums and libraries and distance learning.

	The decisions of the ministerial conference in Brussels were endorsed by the G7 Heads of State and Government at the Halifax summit in June 1995. This summit also agreed that another conference should be held in South Africa (Midrand in May 1996) dealing with the information society and development policy. This meeting included Australia, Russia, Israel, a dozen or so "emerging" countries and the same number of "less developed" countries. Based on the experience gained at the Brussels conference, the DGPT played an active part in the preparations for the Midrand meeting. The French delegation was led by the secretary of state for French speaking communities, Margie Sudre, Mr Fillon - the minister for telecommunications being unable to attend.

	France's position was set out on four points:
	- France wishes the topic of the information society to be part of the overall vision of development aid, and this will be one of the issues discussed at the Lyons G7 summit;
	- France intends adapting the decisions of the Brussels conference to take account of the specific features of developing countries at both regulatory and operational level, giving priority to development in stages;
	- France believes it is essential to promote the concept of cultural diversity. This will make it possible for developing countries to act as local content suppliers and not merely play a passive and "receptive" role;
	- any joint actions should include the competent international organizations, more especially for financing considerations. A meeting of experts could be held to discuss this further before the end of 1996.

22. The information society and the French-speaking world

	One of the major issues defended by France in the various international bodies is cultural diversity. This topic was considered at the interministerial meeting in Brussels, where its importance was confirmed. It was also considered by the sixth conference of heads of state and government of French-speaking countries in Cotonou from 2 to 4 December 1995.

	The heads of state and government adopted a specific resolution on the information society, since they are well aware of the challenges posed by the rapid development of the information society and the ensuing economic, technological and cultural consequences. The resolution gives priority to developing French-language sections on information highways and to encouraging the creation of French language servers. Network browsing software in French should also be high on the list of priorities. This would make it possible for countries in the southern hemisphere to play an active part in creating information so as to promote their cultures.

3. Drawing up a world-wide framework

	To achieve a global information society the various countries will have to work together to establish joint objectives and then define the means of reaching them. While joint objectives were established at the G7 meeting in Brussels, attaining them will require a world-wide framework involving as many countries as possible. With this in mind, France and its European Union partners raised the issue of telecommunications in World Trade Organization (WTO) talks; if this initiative succeeds, it should boost partnerships and international investment. This was also the guiding principle for France wishing to set up more extensive exchanges between the international organizations. This is already bearing fruit in the form of increased cooperation between the WTO and the ITU, which could result in a joint consideration of the procedure for the reciprocal remuneration of international traffic operators (accounting rates).

	Finally, France wants to extend this vision to the international telecommunications satellite organizations, the idea being that governments should once again focus on regulatory activities. This could involve all operators in the space segment, both for geostationary systems and for systems in Low-Earth Orbit (LEOs) and Middle Earth Orbit (MEOs). This objective, requiring a new organization of the market to ensure an international dimension, will form the basis of France's position at the ITU forum on telecommunications policy in October 1996, organized to consider satellite systems for personal communications.

31. World Trade Organization (WTO) negotiations on basic telecommunications

	When the Uruguay round of the GATT was finally concluded in Marrakech, the ministers of the countries involved decided to start new talks in various sectors but especially the telecommunications sector. They set a deadline of two years (i.e. by the end of April 1996) for the group for negotiations on basic telecommunications (GNBT), set up by the WTO, to see these talks through to a successful conclusion.

	The European Union and the member states have joint responsibility for these negotiations on telecommunications. The European delegation sitting in Geneva, which is part of the GNBT, therefore includes representatives from the Commission and from the individual member states. The DGPT is also playing an active role in these negotiations, working closely with the France's directorate of foreign economic relations (DREE).

	While in 1994 the focus was on detailed examination of the legislation in force in the various states taking part in the talks, a broader view was taken in 1995 with the study of the application of international trading standards to telecommunications services, especially with regard to the presentation of initial, conditional offers from the major developed countries and some developing countries. This saw the group enter the real negotiating phase, with delegations representing both sides outlining the concessions they wished to obtain, not least in terms of market access. The discussions also covered the definition of a number of additional regulatory commitments, the only way of guaranteeing real market access.

	The European Union and the member states decided to proceed at once with a high quality initial offer in order to play a pilot role in negotiations, and thus be in a position to ask the other participants to match this offer. On 1 March 1996 the offer from the EU and the member states appears to be the best offer on the table. It is based on the future community regulatory situation in 1998, the broad outlines of which had already been set out in the European Council of telecommunications ministers' resolution of June 1995. This resolution states that the EU and member states delegation should negotiate in Geneva (WTO headquarters) on the basis of the reference framework drawn up be the ministers at this Council meeting.

	The initial offer from the United States contained certain restrictions, especially in respect of local communications. However, it does contain significant potential for improvement with the adoption of the USA's Telecommunications Act of 1996, which will open the local markets up in the same way as the federal market.

	Most of the offers by our other partners are still very inadequate, mainly in respect of market access and national solutions. The representatives of the Community and the Members States - especially France - are putting pressure on the other countries to improve their initial offers.

	While urging its major partners to improve their initial offers, France and its European Union partners are aiming to have the agreement signed by a sufficient number of countries in order to achieve the critical mass essential for generating international momentum to open up the markets. For this reason France upholds the principle of additional commitments through sufficiently flexible regulations. While guaranteeing certain basic principles, these regulations should include provisions relating to the specific situation of developing countries.

	Following a U-turn by the USA on the question of satellite telecommunications during the last ten days of talks, it was impossible to have an agreement signed by 30 April 1996. The decision was therefore taken to extend the talks until 15 February 1997 on the basis of the results already achieved.

32. Reforming international telecommunications satellite organizations 

	Intelsat, Inmarsat and Eutelsat - the three international telecommunications - were created on a model dating back to the 1960s, when the environment was very different to today's.

	All the Member States now agree on the need to make changes to these organizations and for more than two years now an in-depth study has been conducted into the precise measures to be taken in this respect. Working closely with the foreign ministry, the DGPT is responsible for representing France in the international telecommunications satellite organizations. In this capacity, it is playing an active role in the current talks on the reform of these organizations.

	In the various working parties which provide the framework for these talks, the DGPT's position revolves around recentering the role of governments on regulatory matters. There are three priorities:
	. these organizations should be developed to give them the means to face up to competition from new systems;
	. the public service missions performed by these organizations at present must be maintained in the future;
	. any changes must comply with the principles of fair and free competition, both for telecommunications operators likely to have access to the space capacity of these organizations, and for competitor organizations on the space capacity market.

	These were the guiding principles adopted by the DGPT which thus played a leading role in the decisions taken during the course of the year:

	At both Intelsat and Eutelsat, the trend towards free and fair access was confirmed with the official adoption of amendments giving all operators access to the space capacity of the organizations on identical terms and conditions. France will not wait for these amendments to be ratified: it will implement provisions aimed at giving direct access to the space segment of these organizations as of 1996;

	France is in favour of considerable changes to Immarsat, and 1996 should see it developing a structure more in line with market realities.

33. The ITU policy forum

	The ITU must also contribute to the establishment of the global framework for the information society via the forum on telecommunications policy. The plenipotentiary conference in Kyoto in 1994 decided to set up this organization (see the DGPT's 1994 report). Its purpose is to debate strategy and policy trends in the changing telecommunications sector. At its last session in June 1995, the ITU Council - where France is represented by the DGPT - raised this issue and set a date for the first world-wide forum. This forum will be held from 21 to 23 October 1996 and will consider questions arising from global mobile systems and services for satellite personal communication, including:

	· the globalization of telecommunications services and the opportunities for international co-operation in this field;
	· the role of these systems in offering basic telecommunications in developing countries, underdeveloped countries and remote or rural areas;
	· the measures making it possible to use these mobile terminals across borders;
	· the problems of general policy, regulations and especially interconnection posed by the use of these systems and services, in order to ensure fair and standardized conditions.

	Despite the delay in setting up this forum, which comes after the FCC in the USA has already granted the first licences for operators of world-wide systems for mobile telecommunications by satellite, France intends to defend a number of principles which would be adopted on a voluntary basis and would favour the global development of these services:
	· guaranteeing close cooperation between the various national regulatory bodies;
	· guaranteeing the international nature of the capital of system operators (which implies non-discrimination of capital in granting licences);
	· guaranteeing access to frequency bands on the basis of objective, transparent criteria;
	· guaranteeing the provision of emergency services by such systems;
	· guaranteeing competition in the production and supply of terminal equipment.

Chapter 5
REGULATING MARKETS OPEN TO COMPETITION

The mobile communications market in France got off the ground in 1995. The impetus came from the opening up of "alternative" infrastructures (such as those used by French Railways and motorway operating companies) and the arbitration decisions taken by the DGPT in favour of mobile operators. As a result this market acquired 500,000 new subscribers in just one year. Prices for mobile services came down and a more even balance was struck between the market shares of the two operators already present on the market.
Where fixed independent networks are concerned, 1995 saw a new type of licence for networks operated for several closed user groups - MFS obtained one such licence. There was also an increase in the number of applications for independent radio links following the allocation of new frequency bands for this purpose. Two of the year's other highlights were the total liberalization of the market for satellite telecommunications and the payment of spectrum usage fees by France Télécom.
The DGPT was also involved in several requests for arbitration from mobile operators and data transmission operators following disagreements on the conditions for interconnection to France Télécom's network. The growing role of the regulator in this area highlights the strategic aspect of interconnection, especially for newcomers to the market.
The DGPT worked much more closely with public-domain network managers on the installation of wired networks by licensed operators. Finally, in the first half of 1996 it launched a consultation process on wireless local loops. The aim was to address, in the second half of the year, the important issues raised by the introduction of these systems in France, including the conditions for granting licences, organizing the market and choosing frequencies and standards.

1. The mobile networks and services markets

11. The development of mobile markets

111. The number of French mobile telephone subscribers passed the one and a half million mark in 1995

	As at 31 December 1995, more than 1.3 million people had subscribed to one of the four mobile services available in France, an increase of more than 500,000 subscribers in one year.
	There was a marked increase in the number of subscribers to digital systems (GSM). The digital market overtook the analogue market during the final quarter of 1994. The increase was most significant in the last quarter of 1995, and the number of GSM subscribers topped one million by the end of the year.
	Although the market has expanded rapidly, the penetration rate in France is still well below that in other European countries. This would suggest there is still potential for significant growth.
	The number of Radiocom 2000 subscribers continued to fall steadily in 1995, at the rate of 4,000 subscribers a month, while FR Analogique recorded its first year-on-year fall.
	Subscribers to analogue systems now account for less than a quarter of the market, compared with 43% at the beginning of 1995. There are now around 300,000 analogue subscribers.
	The fall in the number of SFR Analogique subscribers worsened at the beginning of 1996, accelerating the contraction of the analogue market. The average monthly decline for the first four months of 1996 was more than 75% greater than in 1995.

Digital mobile phone market at the end of  1995
(and at  30 April 1996)						
	No. of subscribers	Net annual increase	Breakdown of gross increase		Market share	
			Direct sales	Service providers		
Itineris	700,700 
(835,000)	331,600
(385,000)	45%
(46.8%)	53%
(53.2%)	70%
(66%)	
SFR Numérique(1)	305,500
 (423,000)	216,200
(302,000)	60%
(54.4%)	40%
(45.6%)	30%
(34%)	
Total	1,006,200 
(1,258,000)	547,800
(687,000)	51%
(50.2%)	49,6%
(49.8%)		
	(1) including Société Réunionnaise du Radiotéléphone (SRR)

	The milestone of one million GSM subscribers was passed at the end of 1995, i.e. a two-fold increase in the space of just ten months. With 550,000 new subscribers in 1995, the digital mobile phone market is now growing at a rate 50% higher than that seen in 1994. This sector now represents almost 80% of the total market.

More balanced distribution of growth between France Télécom and SFR
	Although Itineris was the main beneficiary, accounting for more than 60% of the annual growth in the market (330,000 subscribers), SFR Numérique also achieved a significant improvement in the performance in 1995, with growth of more than 170% relative to 1994 (compared with 14% for Itineris).
	This rise went hand-in-hand with a more balanced breakdown of market share among the two operators. Despite Itineris's dominant position, SFR's market share in mobile telephony jumped from 20% to 30% in the space of a year. The extension of SFR Numérique's coverage – the service being opened up to the whole of the country at the beginning of 1995 – has no doubt played a significant role in this much-improved performance.
	The increase in the number of GSM subscribers surged at the beginning of 1996. In the first four months of this year, the average monthly increase was more than 40% higher than for 1995, bringing the total number of subscribers to 1,260,000.

Distribution: a fall in the market share of mobile radio service providers
	Mobile radio service providers lost a substantial share of the GSM subscriber market in 1995. The percentage of subscribers managed by service providers dropped from around 64% of at the end of 1994 to 56% at the end of 1995 (estimated figures).

	This decline was especially marked on SFR's GSM network, where their share in marketing SFR Numérique fell to its lowest level (33.4%) at the end of 1995. For the year as a whole, service providers accounted for 40% of SFR Numérique sales and 55% of Itineris sales.

Significant growth potential
	Boosted by the impact of the growth in GSM, the penetration rate for mobile telephone services is continuing to rise in France. By the end of December 1995, 2.27% of the French population subscribed to a mobile telephone service, compared with 1.4% at the end of 1994 and 0.8% at the end of 1993.
	Although this is a spectacular increase, it must be maintained if France is to reach the penetration rates for mobile services enjoyed by its main European partners.
	The European Union as a whole is witnessing a marked acceleration in the development of mobile services, including the smaller countries and countries where GSM has only been available for a relatively short period of time.
	France currently ranks fourth in Europe in terms of digital mobile telephone subscribers. It lags Germany, the UK and Sweden, where large numbers of subscribers are switching from analogue to digital services (GSM and DCS 1800).

	The market should develop more rapidly in 1996, with the target group broadening to include individual customers. This will result from fiercer competition (including the prospect of Bouygues Telecom's DCS 1800 network) coupled with an increasing number of advertising campaigns and the availability of more attractive and efficient terminals.

112	Radiopaging

The first effects of competition on the pager market were seen in 1995 with a sharp increase in the number of customers

	The French market for pagers has altered radically since the end of 1994. Once a market based on a handful of services offered by the France Télécom group, it has become a highly competitive environment. Two new operators, Infomobile and TDR, were granted licences alongside FTMR to offer a service based on the European ERMES standard. The changes in the market structure have spurred fresh growth after a period of stagnation since the beginning of 1994.

Radiopaging market as at the end of 1995
(and at 30 April 1996)				
	No. of subscribers	Annual growth in  1995
(% for 4th quarter)
		
• Kobby (Infomobile)	12,40 (19,120)	10,960 (56%)		
• Tam Tam (TDR)	28,040 (51,550)	28,040 (73%)		
• Textnet (FTMR)	530 (650)	530 (50%)		
Total  ERMES standard	40,910 (71,320)	39,540 (68%)		
• Tatoo, Alphapage Bip, Num, text (POCSAG)	237,070 (315,200)	61,010 (98%)		
• Eurosignal, Bip+	69,860 (67,060)	- 2,102 (55%)		
•  Alphapage Num+, Text+ (RDS)	58,690 (55,750)	-1,254 (n.a.)		
Total - other standards	365,620 (43, 010)	61,862 (100%)		
Total  pagers	406,530 (509,330)	10, 400  (88%)		

	With more than 500,000 subscribers as at 31 April 1996, the French radiopager market saw remarkable growth in 1995.

	Having lost 3,400 subscribers in 1994, the market turned around quickly, picking up more than 100,000 new users following the launch of the first ERMES network at the end of that year. However, the peak came in the last quarter of 1995, which accounted for more than 88% of the total annual growth. This fourth-quarter surge was mainly centred on general public services - TDR's Tam Tam, Infomobile's Kobby Découverte and France Télécom's Tatoo.

	The radiopaging market expanded owing to the launch of a wider and more extensive range of services for the general public, including mass-market services such as Tam Tam, Tatoo and Kobby (the latter was launched on 2 May 1996).

	The introduction of the ERMES standard increased the scope of use for radiopaging services. New applications, mainly for business users, also played a part in market development. These include the capacity for receiving long messages (up to 9,000 characters compared with the maximum of 80 characters for the other standards in France), which enables extended e-mail-type services, and the possibility of transmitting messages and files from PCs. The ERMES standard also facilitates the development of applications currently outside the normal realms of radiopagers (such as remote control of systems spread over a wide area - lighthouses, street lighting and road traffic indicators).

	The arrival of competition and the efforts by newcomers to extend their coverage and promote their services have resulted in a broader offer and spurred radiopaging operators into action.

	At the beginning of 1996, the development of the radiopaging market still essentially involved the three operators' services to the general public. As at 30 April, France had 510,000 subscribers to radiopaging services.

Extending the ERMES standard throughout the world

	The ERMES standard was the subject of a European directive and a recommendation by the European Council for opening up the 169.4 to 169.8 MHz frequency bands. The Council also recommended that it should be introduced in all 15 European Union countries. The 43 countries of the European Conference of Postal and Telecommunications Administrations (CEPT), which represents virtually all of Europe, adopted the same measures. The ITU has also recognized ERMES as an international paging standard. 

	To date 36 operators and 3 regulators, representing 23 countries, have signed the ERMES memorandum of understanding (MoU) thus undertaking to use ERMES networks: six networks are in service and a dozen operators should begin to offer a service by the end of 1996. The ERMES standard therefore has an extensive potential market, extending beyond the European Union since Malaysia, the United Arab Emirates and Saudi Arabia have also signed the ERMES MoU.

1.1.4.	Local cordless telephony

	To date three companies have been licensed to set up and operate local cordless telephone services:

 	- France Télécom has a licence to operate a service that complies with the European CT2-CAI standard. It markets a service under the name of Bi-Bop, which is available in the Greater Paris area, in the conurbations of Lille and Strasbourg, and in the major airports and a number of French high-speed train stations.
		- Compagnie Générale des Eaux is testing a service in accordance with the European DECT standard in the Paris suburb of Saint-Maur-des-Fossés. The infrastructure of the DECT network is based on the use of the cable television network in Saint-Maur-des-Fossés, operated by Compagnie Générale de Vidéocommunication (CGV). This network is operational and is being used by pilot subscribers.
		- Prologos Aquitaine was granted a licence on 27 April 1995 to provide the public with a CT2-CAI-compliant telepoint service in four regions in Southeastern France (Gironde, Pyrénées-Atlantiques, Landes and Charente-Maritime). This service became commercially available in the first half of May 1996.

	Bi Bop had 93,420 subscribers at the end of 1995, which represents an increase of 20,650 over the year. The number of subscribers has dropped off since, proving the impact of promotional campaigns on the telepoint market. Growth in 1995 was significantly lower than in the previous years: 56% of the growth occurred in the two months when promotional offers were made on services (January) and handsets (December). Despite strong growth in May and June, the launch of Bi-Bop Malin (non-subscription service) failed to trigger a sustainable recovery in the telepoint market.

	There are several possible reasons for this. First, CT2 phones are too expensive compared with GSM handsets. Second, GSM call charges have fallen to highly competitive levels. Third, non-subscription radiopaging services have now been launched.

1.1.5.	Corporate radiocommunications services: trunked radio networks

Unlike public networks, provate radio addresses a narrower market. However, it does represent a significant portion of companies' activity, both in respect of users and manufacturers of radio equipment and systems.

This market experienced a marked upturn in mid-1995 (compared with 1994), with a sharp increase in the number of terminals both for standard networks and for trunked networks. The trunked network market is the most dynamic: as at 31 December 1995, the trunked network market represented 36,100 stations connected for a total of 3,300 fleets. The market expanded steadily, gaining almost 50% in 1994. The trend was especially marked in the Paris area, which still accounts for the bulk of this activity and where the growth rate is higher than for the market as a whole.
Trunked network are now available over virtually the entire metropolitan area, thus confirming the key role they play in the professional radio market.

The trunked network market comprises five major operators:
	- Bouygues,
	- Télésystème/Banexi/GTMH,
	- France Télécom/TDF,
	- EDF,
	- ADP (for Paris-region airports).
In addition to the 36,000 stations connected to the trunked radio open to third parties, a further 10,000 terminals are linked to private trunked radio networks for specific applications (public transport, electrical installation, industrial sites and motorways).

The number of trunked radio terminals, which already represents 12.5% of the number of private network terminals (excluding pagers) should continue to grow, reaching 20% in the coming years. France Télécom's R2000 RE business network has been losing customers and only had 76,500 subscribers at the end of the year.

The local radio networks - "RLAN" and "Hiperlan"

Local wireless networks have been authorized in France since publication of the decree of 24 July 1995 in the Official Journal on 24 August 1995. Defence requirements were taken into account when the regulatory provisions were being drawn up. This restrictive provision, whereby the general licence system introduced in the rest of Europe could not be implemented in France, was due to the fact that the harmonized band of CEPT frequencies is reserved in France for the armed forces. However, an official agreement was reached with the ministry of defence in July 1995 concerning the use of the 2446.5 MHz - 2483.5 MHz frequency band. There has been significant interest in this type of application, with projects concerning logistics and office automation systems for small entities where the limited "RLAN" transmission rate of 1 Mbit/s meets the requirements.
Moreover, the recent opening up of the 5.15-5.25 GHz band for local high-performance networks ("Hiperlan" = High performance radio local area network) with transmission rates of between 10 and 20 Mbits/s will offer attractive prospects for users and suppliers by 1998.
In September 1995 the DGPT drew up and published an information document on local radio networks (fax:+ 33 1 43 19 65 34)

Regulatory changes for mobile telephony  in the European Union
mobile and personal communications included in the "services" directive

On 21 June 1995 the European Commission adopted a draft directive based on article 90 §3 of the Treaty, amending directive 90/388 of 28 June 1990 - the so-called "services" directive, to include mobile and personal communications. This draft was submitted for public consultation for two months before being adopted in final form.

	The aim of this directive was to open up mobilr and personal communications within the European Union as of January 1996. In particular, it provides for the lifting of regulatory restrictions affecting mobile operators in terms of infrastructure, and the restrictions concerning the interconnection of mobile networks. It also guarantees the right of interconnection between mobile communications systems open to the public and the public network - the minimum number of interconnection points is to be specified in the licences. Finally, the directive sets out the general principles for granting licences for mobile networks and services - the number of these may only be restricted by essential requirements such as efficient use of the frequency spectrum.

	France welcomed this directive, which is in line with the measures it has taken since 1987 to introduce competition in the mobile communications sector. France also obtained the reciprocal concession that issues such as the desirability of GSM accessing the DCS 1800 bands, remain at the discretion of the national regulatory bodies.
	The directive was passed in January 1996.
	In November 1995 the Commission also put forward a proposal for a decision by the European Parliament and the Council concerning joint action in the field of personal communication services by satellite. For scheduling reasons, the discussions were due to start in the first half of 1996, under the Italian presidency.

1.2 Regulating the mobileemarket

1.2.1. The mobile communications observatory: a regulatory mechanism for all operators

	The DGPT is the regulator in the field of mobile telecommunications and an independent observer of the market. At the beginning of 1995 it created a mechanism - the mobile communications market observer - which will provide economic agents with accurate information every month on the state of the market, its development and the position of the various operators.
	This DGPT initiative fills a need in the profession and has been a considerable success. The information contained in the observatory has been available on the public teletex service (Minitel: 3614 code PTT, section OBS) since November 1995, and on the Internet (http://www.telecom.gouv.fr) since March 1996.
	The observer is established on the basis of technical and commercial statistics that operators send regularly to the DGPT, in accordance with the provisions of their operating specifications.
	Before the initiative was implemented, extensive consultations were held with companies active on the French mobile market to determine the information that could be made public without compromising trade secrecy.

1.2.2. Several indicators will be published in 1996 to assess the quality of service of French GSM networks

	France Télécom and SFR, the two French GSM operators, launched their Itineris and Ligne SFR Numérique services in early 1993.
	According to their licensing terms the operators have to cover the whole country. To ensure that the coverage requirements are met and to assess the quality of the services offered by each of the operators, the DGPT commissioned a preliminary study on the quality of GSM network service from the independent polling institute, SOFRES. Initial results were received in 1995.
	The two GSM operators cooperated fully with the operation, and another survey will be carried out in 1996. A number of quality indicators will be published during the year.
	At a later stage the study will be extended to include Bouygues Telecom, the third operator. This will make it possible to monitor whether that company is fulfilling the terms and conditions of its licence, which included ambitious commitments in terms of the quality of both indoor and outdoor services.

1.2.3. Mobile phones

	The various regulatory measures implemented in 1994 to boost competition on the mobile phone market resulted in an increase in the number of offers of service in 1995 and accelerated growth in most of the market segments.

1.2.3.1. SIM-locking

	The DGPT had to define clear rules for the implementation of a new technical procedure which has significant regulatory implications - the so-called "SIM-locking" technique.
	A SIM card holds information relating to a customer's subscription to a GSM network. Inserted into a GSM terminal, this card provides access to the GSM network service chosen when the subscription was taken out.
	It is now technically possible to activate devices capable of preventing unmodified GSM terminals from functioning with a SIM card for a network or service provider other than those initially subscribed to.
	SIM-locking reduces the risk of fraudulent use and "bonus hunting" by some of the more unscrupulous subscribers.
	One of the provisions of the licences granted for Bouygues Telecom's DCS 1800 network and the experimental networks run by SFR in Strasbourg and France Télécom Mobiles 1800 in Toulouse, was that no locking procedures (neither "network" locking nor service-provider locking) should be used when terminals are sold or offered on hire purchase agreements. However, this ban does not apply when terminals are leased or if a subscriber requests that his terminal be locked to his own SIM card. This provision was not included in GSM licences, since the SIM-locking technique did not exist when the licences were granted.

	Several GSM operators have drawn the DGPT's attention to the fact that the regulatory framework for SIM-locking must be clarified.

	The DGPT therefore consulted all the parties concerned (users, operators, service providers and industry) on the advisability of allowing cards to be locked to a network or a service provider. Thirteen replies were received. Whatever the final decision, it was clear that the regulatory framework would have to be the same for both the GSM and the DCS 1800 networks.
	Following this consultation, the decision was taken to authorize SIM-locking, subject to certain conditions aimed at guaranteeing the subscriber's freedom of choice:

	‑ the customer must be informed in advance that such a mechanism is being activated,
‑ the subscriber may request unlocking at any time,
‑ locking must only apply for a short period,
‑ the subscriber must be given the unlocking key - automatically and free of charge - when the abovementioned period expires.

	The necessary amendments were made to the GSM and DCS 1800 operating licences at the end of May 1996.

1.2.3.2. Fair competition and transparency in the accounts of France Télécom Mobiles

	To ensure fair competition, cross-subsidies between activities carried out under a monopoly and those subject to competition are strictly prohibited. France Télécom's licence for its Itineris GSM service therefore contains specific accounting provisions stating that all income and charges relating to this activity must be booked to its profit and loss account. The same applies for the France Télécom unit operating the Bi-bop network.
	Specific attention must be given to various additional points, such as the method of accounting for financial charges, R&D costs and marketing expenses. The accounting practices currently in force do not provide total transparency. In its report of 17 October 1995, the government Revenue Office stated that "the documents in this sector do not give a true and fair view of the results of the mobile networks". Furthermore, "the fact that this business has not been spun off into a subsidiary has a negative impact on the transparency and reliability of [France Télécom's] internal accounts in respect of mobile telephony."

	At the request of the DGPT, France Télécom organized an audit by an independent firm.

	The audit confirmed the findings of the Revenue Office. Although the accounting system developed by the mobile phone division of France Télécom to separate the income and charges for this activity has been considerably improved, there are still shortcomings. The independent auditor confirmed that the mobile division of France Télécom that directly operates the Itinéris, R2000 and Bi-Bop networks is not in a position to produce audited accounts, unlike France Télécom Mobiles Radiomessagerie and FTM 1800.

	Legal separation of mobile activities was the method chosen. This same method has already been adopted by virtually all European operators, including in Germany, Belgium, Spain, Ireland, Italy, Portugal, the UK and Sweden. The new licences granted to France Télécom in the mobile sector will in future be granted to its subsidiaries, as was the case for DCS 1800 activities in the Toulouse urban area and the TFTS aeronautical telephony service.

1.2.4. Regulation for radio paging (POCSAG / Eurosignal licence)

	Events in 1995 confirmed the major role played by the ERMES standard in France. For historical reasons, the three operators, France Télécom Mobiles Radiomessagerie (FTMR), TDR (a subsidiary of Générale des Eaux group) and Infomobile (part of the Bouygues) do not have the same resources and competition between the three is not as fair as could be desired. In addition to an ERMES licence, which has also been granted to TDR and Infomobile, FTMR was granted an additional licence in 1987 to operate networks conforming to the Eurosignal and POCSAG standards. That licence expires in 2001. FTMR is also authorized to supply a service in accordance with the RDS standard (the Operator service previously provided by TDF-RS) since the DGPT gave France Télécom the green light on 3 May 1995 to group all its paging services in one company (60% of FTMR's capital is held by Cogecom and 34% by TDF).

	In view of the prospect of the French paging marking being centred round the ERMES standard, in 1995 the DGPT took a number of measures aimed at ensuring a smooth transition and restoring a balance in the conditions for competition between the three operators.

	The amendments to the terms of the POCSAG / Eurosignal licence in May 1995 take account of the characteristics of the French paging sector as a whole and are based on two fundamental objectives:
	- optimum management of the frequency spectrum;
	- fair competition on the paging market.

	ERMES does not require much frequency space and its technical specifications give more effective control of the radio spectrum than the POCSAG standard. Moreover, the whole of the frequency band reserved for the ERMES channels is available in France and harmonized at European level, whereas the POCSAG channels used by FTMR are located in a band that will eventually be used by the radio networks of large users.

	As far as competition is concerned, it is only fair that the three operators should eventually have access to the same resources, both in terms of the standards used and the frequencies made available to them.

	The process of freeing channels, which began in 1994, continued apace in 1995. The provisions of the decree of 26 April 1995, to which FTMR agreed, specifies the conditions for gradually freeing several POCSAG and Eurosignal channels, without prejudicing the measures that will be taken with regard to the expiry of the licence in 2001.

1.2.5. A new local mobile telephone operator - Prologos Aquitaine

	With effect from 27 April 1995, the DGPT authorized a second operator to set up a radio network to supply the public with a telepoint service in accordance with the CT2-CAI standard. Since 1991, France Télécom has been the only operator authorized to operate a CT2-CAI network, even though this type of service was not subject to any rights to exclusive use.
	Prologos Aquitaine is licensed to offer pedestrians located close to a radio terminal the possibility of receiving and making telephone calls in four regions: Gironde, Charente-Maritime, Landes et Pyrénées-Atlantiques. A paging service will also be available.
	The originality of the technical and industrial solutions adopted should enable Prologos Aquitaine to offer a high quality service at prices which compare favourably with those for fixed-wire telephones.
	In July 1995, Prologos Aquitaine and France Télécom signed an interconnection agreement, which was approved by the Director General of Posts and Telecommunications.

CT2/CAI and DECT wireless technologies at home and at work

In early 1995 the DGPT issued general licences for wireless applications using the CT2/CAI and DECT technologies in companies (wireless PABX) and at home (private terminals).  The decisions are contained in the decrees of 13 January 1995, published in the Official Journal of the French Republic on 26 January 1995.

	The installation of CT2/CAI or DECT wireless applications, either in the form of "add-on" equipment or built into the PABX with provision for wireless equipment among the sets connected, enables a radio extension to the service of a telephone switchboard or a company PABX.
	The use of private terminals for "cordless telephone" use at home offers an alternative to the approved analogue equipment already on the market.

	The general licences do not require any administrative formalities on the part of users, who must simply ensure that the equipment concerned is approved. ((In the case of a wireless PABX, they must also called on a qualified radio installer.) 

	The  CT2/CAI systems work on the  864.1 - 868.1 MHz frequency band and the DECT systems use the 20 MHz at the upper end of the 1800 MHz band (1880-1900 MHz).

1.2.6. Optimizing the use of the available radio spectrum

	The development of civil radio applications in France has always run into the problem of locked frequencies: only 15% of the spectrum is reserved for civil radio services (see chapter 11). It was for this reason that the DGPT implemented a policy to optimize the use of the available radio spectrum.

	The scale of charges for using the radio resources, for the same service, is set according to various criteria:
‑ the amount of the spectrum allocated in the frequency band in question,
‑ the extent of the geographical area in which the frequencies are available.
In certain cases account is also taken of the congestion of the frequency band and the constraints for use imposed on the operator and, for different services, the turnover generated by use of the spectrum.

	Initially introduced for independent radio networks, the spectrum usage fee was subsequently extended to all mobile operators licensed by the DGPT. The position of the analogue network R 2000, the last major mobile network not to pay usage fees, was therefore brought into line by the decree of 12 February 1996.

The major stages in implementing a spectrum usage fee in France 

 Independent radio networks

	The operators of independent radio networks (IRN) were the first to have to pay a fee for access to the spectrum. At present the IRNs contribute a total annual amount of nearly FF300m to the state budget for limited use of spectrum resources.

	The most recent development in this field is the opening up of frequency bands for fixed radio links, for which a fee is also charged.

 Public radio telephony networks

	From NMT to GSM

	NMT, the analogue mobile telephone network operated by SFR under the name Ligne SFR  was the first mobile network open to the public (in 1987) to be subject to a fee for  using frequencies.
	In 1991, similar conditions were introduced in the GSM licences granted to France Télécom and Société Française du Radiotéléphone. Every year the two operators pay FF600,000 per duplex channel available in mainland France.
	In 1994 each operator paid fees totalling almost FF35m to the State for a spectrum volume of twice 10.9 MHz. By way of comparison, the German GSM operators - D1 and D2 - paid the equivalent value of FF20m in their first year of operation for a volume of twice 7.4MHz, based on a pricing principle similar to that used in France.

	DCS 1800

	At the end of  1994, the licensing of a DCS 1800 network in France provided the opportunity to define a fee system adapted to the practice of making frequencies available on a region-by-region basis in metropolitan France.
	Consequently the licence granted to Bouygues Telecom provides for a sliding scale of fees according to the geographical area in which the DC 1800 frequencies are available, while maintaining a fee of FF600,000 per duplex channel available in mainland France.

   Other mobile networks

	Now, the mobile paging service operators Alphapage, Eurosignal, ERMES, the operator of the aeronautic TFTS standard, and the operators of  CT2‑CAI and DECT telepoint services, must also pay a frequency access fee.

	The DGPT wishes to extend the payment of fees as quickly as possible to all telecommunications operators using the radio spectrum in France, whether this involves mobile or fixed applications.

2. The markets for fixed networks and services

2.1 Certain markets have already opened up

2.1.1 Services

a) voice services

With the exception of radio networks open to the public (such as the mobile phone networks), the establishment and operation of the network open to the public will remain part of the domain reserved for France Télécom until 1 January 1998.
Similarly, where services are concerned, the public voice telephone service is reserved by law for the public operator France Télécom. However, all services for closed user groups (CUGs) are free since they are not offered to the public at large.
It is thus the concept of CUGs which makes it possible to determine the domain reserved for France Télécom, in terms of both networks and services.
This concept has been the key factor in determining which of the activities within these two categories come under the monopoly of France Télécom and which are open to competition. A flexible, changing definition of CUGs made it possible for the DGPT to monitor demand trends in the sector within the legal framework established in 1990.

A flexible definition of CUGs

	The examination of real cases by the DGPT highlighted the importance of the concept of common interest in defining closed used groups. This is considered more important than other criteria such as the existence of legal or financial links between the various members of the group.
	The concept of CUGs has made it possible to licence network operators to supply services to third parties organized in CUGs, for corporate mobile networks and more recently also for fixed networks. 
	Network operators and service providers, both French and foreign, regularly call on the DGPT to ensure that their projects comply with the definition of CUGs. For services, the aim is to check whether they can be offered without restriction. French regulations make no distinction between services that are offered within the country and those that originate from, or are destined for, other countries. The rules applicable to free operation, licensing and restrictions are identical.

b) data transmission services
	"Bearer services" are those involving the simple transmission of data. They consist solely of routing and transmitting data in real time. This includes the basic X.25 services, SNA services and frame relays. These services have been open to competition since 1 January 1993.
	The regulatory framework defines the general conditions applicable to service operators. There are three major factors in this: transparency of offer, the conditions of fair competition, and compliance with the essential requirements set out at European level.
	For interconnection with a bearer service provided by the public operator, France Télécom, the principle is the right to interconnection in accordance with a system identical to the one used for interconnection with the public network. Within this framework there is provision for a mechanism of commercial negotiation aimed at reaching an agreement, which is then submitted to the DGPT for approval. If no agreement is reached, the DGPT may be asked to arbitrate.
	By 1 January 1996 seven companies had applied for, and obtained, licences to offer public bearer services: Transpac, Sprint, BT France, Air France, Siris, Sita and CGV (for the DECT experimental network at Saint-Maur-des-Fossés).

c) international  telecommunications
	In theory, French regulations do not distinguish between services provided within the country and those offered within the country but originating from, or destined for, other countries. The regulations for free operation and the granting and refusal of licences are identical.
	However, regarding services between France and a country outside the European Union, the DGPT is required to ensure that reciprocal conditions exist in the country concerned. This means that the French service suppliers, including operators of networks open to the public, can supply similar services under equivalent conditions. Contracts are drawn up with the appropriate authorities of the countries concerned on this basis.
	In this way France is applying recommendation D1 of the International Telegraph and Telephone Consultative Committee (CCITT).
	Also, 1995 saw the arrival of competition in international telephone services, essentially in the form of call-back and rerouting services.

	* call back
	The offer of call-back services to the public is unrestricted and does not require authorisation provided that the service does not use leased lines, is based on the public switched network and conforms with certain essential requirements, namely the security of users and staff of the network operators, the security of the networks and the interoperability of services. In this respect, the units used to make call-back services transparent have to be approved by the DGPT.
	At present the call-back operators, backed by the large international operators for whom they generate traffic, benefit from volume discounts. Call back consists of buying one minute of transatlantic communication wholesale and then reselling it on a retail basis, a highly lucrative business. Moreover, since the service is invoiced abroad no VAT is charged. This primarily benefits private individuals.
	Call-back activity is at present focused on transcontinental services but it could also be extended to links between European countries.
	This is still a niche market but it is helping to put pressure on France Télécom tariffs for international calls.

	* rerouting
	Rerouting consists in using national or international circuits other than those which the public operator in the country of origin would have allocated automatically. The aim is to take advantage of the tariff differences which may exist either between two operators or between leased links and public switched networks. The service is provided by specialist operators. The most competitive of these are routers (ad hoc programmed servers) which can find the best routing according to the call characteristics (destination, time and service carried).
	The marketing of rerouting services is legal provided that, in the voice telephony sector, the public is not being offered a circuit or leased link whose two ends join the public switched network. (However, this is allowed if the service is being offered to CUGs.)
	Most companies involved in the international telecommunications market offer both call-back and rerouting services.

2.1.2 Independent wired and radio networks

Shared independent networks: licence granted to MFS

	In the field of independent wired networks, a new type of licence, based on the model of trunked radio networks, was created in 1995 to govern the operation of such networks on behalf of several CUGs. Each group must meet the legally-established criteria for CUGs.
	The closed nature of these user groups must be guaranteed since they are not intended to communicate with each other. Connection to the public network should remain the exception, as provided for by law. MFS, which already has a licence in the United Kingdom and Germany, was the first company to be granted a licence of this kind in France. Further applications were still being examined on 1 April 1996.

The other large independent networks: EDF, SANEF, Cofiroute

	One of the consequences of the regulations allowing (as of the end of 1994) business users to set up independent radio links has been an increase in the number of applications for licences for independent networks using both wired media and radio links.

	Wired media make it possible to effect short-distance, "across the street"-type links without any difficulty, but they are often unsuited to long-distance links due, amongst other things, to difficulties in laying lines and the high cost of engineering works. However, these difficulties can be overcome by setting up radio links that can make single hops over several kilometres. For example, a hop of some 12 kilometres is typical in the 23 GHz band. Independent network projects using short and long links are therefore more easily achieved by mixing the two types of medium.

	Mixed media are especially suitable for new networks set up by users such as universities and hospitals, where numerous buildings spread over an extensive area have to be served.

	In more general terms, the possibility of using mixed supports features in the recent licences granted to large independent networks covering the whole country or entire regions; these include France's electricity utility, EDF, and the motorway management companies SANEF and Cofiroute. Licensed motorway management companies have the further advantage of being able to resell capacity to mobile network operators according to the same conditions covering the licence granted to French Railways in May 1995.

Independent wired networks

With a volume of about 100 networks, the rate of applications for licences in 1995 was comparable to that of previous years. Apart from regional and national networks, the majority of the networks involved are of the "across the street" type, as can be seen from the following statistics on cable lengths:

70% of networks for links of up to 300 metres
13% of networks for links of between 300 and 500 metres 
15% of networks for links of between 500 and 1,000 metres
2% of networks for links exceeding 1,000 metres

Opening frequency bands for independent radio links

	The 23 GHz and 38 GHz frequency bands were made available by the decree of 7 October 1994. In addition, the DGPT has continued to push for the opening up of new frequency bands, which should make it possible to meet all current requirements. In particular, it managed to obtain the freeing up of capacity in the 1.5 GHz band for the establishment of very low capacity radio links. These will mainly be used to accommodate the fixed links presently occupying the 400 MHz band and to meet the long-distance security link requirements of companies such as EDF.

	All the technical and regulatory conditions are in place for opening up two new frequency bands (1.5 GHz and 13 GHz) and for amending regulations for the 23.6 GHz band. Radio links with capacities of between 2 and 8 Mbits/s at 13 GHz should make it possible to meet similar business requirements to those at 23 GHz but over greater distances - typically between 20 and 30 kilometres instead of 10 and 15 kilometres. At 223.6 GHz, the 1984 regulations were updated, mostly for video surveillance applications.

Independent satellite networks

As part of the plans to open up the sector to competition, drawn up in 1991, new VSAT licences were granted in 1995 and 1996.

There was a sharp increase in the number of licences for news-gathering stations, which reflects the dynamic nature of this activity.

2.1.3 Satellite networks open to the public

Directive 94/46/EC adopted by the European Commission on 13 October 1994 in accordance with article 90-3 of the treaty fully liberalized satellite telecommunications within the Union. France published an opinion in the Official Journal of 23 September 1995 specifying the procedure for transposing the provisions of this directive into French law.

Meanwhile, the DGPT defined the regulatory framework applicable in this field and set up a new licensing procedure for satellite telecommunications networks (such as VSAT networks or teleports) carrying services accessible to the general public. This does not include voice telephone services open to the public, which will not be liberalized until 1 January 1998.

In concrete terms, autonomous stations serving as teleports or VSAT networks may, depending on the services they carry and the end users of these services, be licensed as networks open to the public.

These services may include leased lines for the general public, access to foreign public networks (ISDN for example), Internet access, bearer services and value-added services in the field of computer data and video.

TYPE OF SERVICE	

INDEPENDENT RADIO NETWORK

NETWORK OPEN TO THE PUBLIC	

VOICE AND DATA IN CUGs

YES	

YES	

DATA SERVICE OPEN TO THE PUBLIC

	

NO	

YES	

VOICE TELEPHONY OPEN
TO THE PUBLIC

	

from 1 January 1998	

2.2 On-going regulatory amendments

2.2.1 Certain markets have already opened up

2.2.1.1. For mobile operators
	French regulations now give public mobile telephone operators extensive freedom in setting up their infrastructure network. In the autumn of 1993 the telecommunications minister decreed that, for their fixed services, these operators could use fixed links other than those leased from France Télécom.
	Since the beginning of 1994 mobile operators have been authorized to set up their own infrastructures and then lease capacity to licensed bearer service providers. Since early 1995 they have also been able to share the independent network infrastructures of authorized operators such as French Railways and motorway management companies.

	New frequency bands allocated for radio links
	Several frequency bands have since been allocated for use by the fixed infrastructure networks of mobile operators. These bands take account of the diversity of requirements in terms of transmission speeds and the length of hops.
	However, in view of the present usage level of the radio spectrum by France Télécom, it is not possible to allocate channels within certain bands in which mobile operators may use their radio links freely.
	A working party comprising France Télécom and the new operators has been set up by the DGPT to ensure that these frequencies are made available under the best possible conditions. A scheme has been worked out to manage the transition period by the end of which France Télécom will have freed up the specified frequency bands. This was then set out in two decrees: one published on 12 September 1995, which amended the operating terms for Bouygues Telecom and SFR, and the other on 27 December 1995 amending the terms of France Télécom's GSM service. The scheme guarantees mobile operators access to the radio resources while minimizing the impact on the existing resources of France Télécom. The DGPT's long-term objective is to make sub-bands available to mobile operators, which they use and manage at their own discretion.

	The possibility of leasing alternative infrastructures to licensed third parties
	These provisions introducing greater flexibility in setting up mobile telephone network infrastructure were supplemented by two decrees of 8 December 1994, whereby mobile operators may lease transmission capacity from any independent wired network authorized to offer it.
	In 1995 French Railways, Cofiroute and SANEF were all authorized to provide mobile operators with transmission capacity. Other organizations operating "independent network" licences and with extensive telecommunications infrastructures may be authorized to do likewise under the same terms and conditions if they so request.
	At the request of France Télécom, this provision was included in the operating terms and conditions of Itineris on 27 December 1995.

2.2.1.2 The liberalization of alternative infrastructures for fixed services on 1 July 1996

	This possibility was initially restricted to operators of mobile telephone networks open to the public. As of 1 July 1996, however, it will be extended to all services already liberalized, such as data transmission and corporate services. This will mean that licensed operators of telecommunications networks will be able to open their infrastructures up to operators of telecommunications services which have already been liberalized.

Examples	Railway and subway networks (SNCF, RATP)	Motorway management companies	Cellular operators (SFR, Bouygues Telecom)	Other large networks (EDF, etc.)	
Current regulatory situation	Independent network of the L 33-2 type, with the possibility of leasing capacity to mobile operators	Independent network of the L 33-2 type, with the possibility of leasing capacity to mobile operators	Radio network open to the public to offer a mobile service and resale of capacity to other mobile operators	Independent L 33-2-type network	
Regulatory possibility as of 1 July  1996	Operating licence for L33-1-type alternative infrastructure to offer all telecommunication services, except for a public telephone service between fixedrpoints.	
On 1 January 1998	Liberalization of all telecommunications networks and services within the framework to be defined in the new Telecommunications Act and its implementing decrees.	

2.2.1.3 Radio infrastructures for fixed-frequency management policy 

	Liberalizing alternative infrastructures requires the fixed service networks to be managed on a voluntary basis. Setting up transmission links via radio links is a quick and flexible way of creating a network, especially for those operators which do not already have a wired network. This does of course mean that frequencies must be available in the bands allocated for this kind of application.

	In the past the fixed service frequency bands in France were mainly used for setting up the regional and national infrastructure of the public telephone network and for the network carrying programmes from TV stations to cable distribution networks. More recently the architecture of the public network was reviewed by France Télécom on the principle of a fully optical, automatically backed-up network, where radio links are only used in difficult cases. This review was motivated by the need to cope with the enormous transmission capacities required by increased traffic, the development of new services and technological progress in fibre optical transmission.

	As a result France Télécom is gradually reducing its reliance on radio transmission. With the backing of the regulator, this should make it easier for new operators to set up networks. This has already been the case for the proprietary infrastructures of public radiotelephone operators. Allocating them priority channels in certain frequency bands to new operators, and writing these into their schedule of conditions, gives an additional guarantee of access in the event of incompatibility with the existing links.

	Along with France Télécom, potential operators of alternative infrastructures and industrial companies, the DGPT is working towards defining and implementing a development plan for the use of fixed service frequencies which will make it possible to meet requirements in terms of quantity, quality and timetables.

2.2.1.4 Charging France Télécom spectrum usage fees for fixed radio links

	Apart from determining the procedure for the use of frequencies for radio links, the fact that payment of fees for provision of fixed radio frequencies will applied across the board in 1996 will encourage the use of the DGPT-controlled portion of the spectrum. So far radiotelephone operators are the only operators of networks open to the public that have to pay fees for using frequencies for radio links. The financial procedure for the use of fixed frequencies by the France Télécom public network were being drawn up in the first quarter of 1996 and will be published by the DGPT in the near future.
	The objective is to achieve the best possible use of the radio spectrum and to encourage France Télécom to make technical and economic choices on the most efficient transmission technologies in terms of spectrum usage.
	Basically, this will speed up the process of freeing little-used frequency bands to meet the increasing needs of mobile networks and the operators of alternative infrastructures. Encouraging payment of fees for provision of frequencies for fixed applications would appear to be a key factor in the regulation of telecommunications with a view to the total liberalization of the telecommunication sector by 1998.
	The scale of charges for fixed frequencies made available to France Télécom should be determined on the basis of criteria similar to those used for mobile operators:
	- the frequency range used, directly related to the length of the hop between two radio link stations, 
	-  the constraints imposed on the operator,
	-  the level of use of the band.

2.2.2  Interconnection: further requests for DGPT arbitration

	The operating specifications for operators of radio networks open to the public and for France Télécom allow either of the parties to apply to the DGPT for arbitration in the event of a dispute concerning the interconnection agreement. Under the terms of their licences, the operators of data transmission services can call on the DGPT to arbitrate on their conditions of access to France Télécom's bearer services.

	The DGPT first arbitrated in 1994 following a complaint by SFR concerning its GSM and analogue mobile telephone networks. In a decision of 3 June 1994, the Director General of Posts and Telecommunications, Bruno Lasserre, set out new financial terms for interconnection between these networks. These conditions, which also apply to France Télécom and Bouygues Telecom, call for significant reductions compared with the public price for the cost of most leased lines and a fifty per cent reduction in the cost of subscriber access to France Télécom's telephone network. The method used took account of the need for cost-oriented pricing and for mobile telephone operators to contribute to the cost of the universal service. The fees thus set will be reviewed before the end of 1996 after the decision by the group of economic experts on interconnection costs and the study and audit of France Télécom's costs instigated by the DGPT (cf. chapter 1).
	All operators of radio networks open to the public now benefit from tariffs for leased lines determined in accordance with this arbitration decision.

	The DGPT took part in several new arbitration procedures in 1995: these included Compagnie Générale des Eaux for its DECT local mobile telephone network at Saint-Maur-des-Fossés, TDR for its mobile data network (“TDR -Mobitex”) and subsequently for its ERMES network, and Bouygues Telecom for its DCS 1800 network. The newcomers in the data transmission sector called for arbitration concerning access to the D-channel and concerning the agreement for hooking their networks up to the France Télécom network.

	2.2.2.1. DECT arbitration, requested by Compagnie Générale des Eaux 

	Compagnie Générale des Eaux (CGE) turned to the DGPT for arbitration. During initial negotiations with France Télécom on the conditions for interconnecting its Saint-Maur-des-Fossés DECT network to the public network, CGE had been unable to obtain a supplementary charge band for traffic using the public network inside the Zone Locale Elargie (ZLE, Extended Local Area).

	The arbitrator ruled in favour of this principle and invited the two parties to negotiate the most suitable band and the associated tariffs. Firstly, this ruling was justified by the physical level of interconnection of the CGE's DECT network to the public switched network, since its contractual specifications provide for the connection of its network to the closest autonomous switched network. A ZLE-level tariff band was not considered suitable in view of the principle of cost-oriented pricing and the fact that the purpose of the Saint-Maur-des-Fossés network was to route local calls.

	An agreement was finally reached and the interconnection agreement, signed by the two parties, was approved by Bruno Lasserre in September 1995.

	2.2.2.2. ERMES arbitration, requested by TDR

	On 22 December 1995 the DGPT issued an arbitration decision at the request of TDR. This concerned the financial terms for the interconnection of the ERMES paging network, for TDR's Tam Tam service, and France Télécom's public switched network.

	The major issue at stake in TDR's request for arbitration was the size of the rebates that France Télécom makes to TDR, which are then passed on to Tam Tam customers on TDC's radio ERMES service. These rebates are deducted from the amount invoiced to fixed-network subscribers for leaving messages. This is a crucial issue for paging operators such as TDR, which do not charge a subscription fee for their service but derive their revenue solely from rebates of this kind.

	The arbitrator upheld the principle of a contribution by the paging operator to the universal service. However, since this did not involve a telephone service, it was decided that TDR should not have to contribute to the financial compensation paid in respect of imbalances in telephone tariffs (the so-called "access deficit").

	This decision, which promotes cost-oriented pricing, refers back to the previous ruling by the DGPT on 3 June 1994 concerning the interconnection between SFR's GSM network and France Télécom's public network.

	The principles and scale of charges resulting from this decision could be applied to other paging operators if they so request.

	2.2.2.3. DCS 1800 arbitration, requested by Bouygues Telecom

	 At the end of September 1995 Bouygues Telecom asked the DGPT to arbitrate on the interconnection of its DCS 1800 network with the France Télécom network. More specifically, Bouygues Telecom wanted to decide freely on the location of interconnection points between its network and the public switched network.
	Bruno Lasserre handed down his decision on 8 January 1996. Regarding the key issue, his decision recognized Bouygues Telecom's right to choose the location of interconnection points freely, for both incoming and outgoing calls. Regarding one of the other major points, France Télécom was given three months in which to present an interconnection tariff based on units of one second rather than 24 seconds, as is the case for mobile operators. This method of charging is probably better adapted to inter-operator services, and is more in line with the principle of cost-oriented pricing for interconnection.
	This decision could be applied to other operators of public radio networks, if they so request.

	2.2.2.4. Data transmission arbitration, requested by TDR

	In its commercial negotiations with France Télécom, TDR was unable to obtain the same tariffs for leased lines as those available to SFR following the arbitration decision on 3 June 1994. TDR therefore called on the Director General of Posts and Telecommunications to arbitrate.
	Based on the principle that all operators of networks open to the public should be entitled to cost-oriented interconnection charges, the arbitrator ruled that the charges offered to SFR should also be offered to TDR.
	These tariffs also apply to the leased lines that TDR may use to link its customers to its radio network via Transpac.

	2.2.2.5. Arbitration concerning use of the ISDN D-channel by data transmission operators other than France Télécom

	A possible alternative to leased lines for transmitting data to licensed bearer services is the Integrated Services Digital Network (ISDN) D-channel. Although this alternative has certain restrictions in terms of transmission speeds, it is extremely cost-effective when used in remote areas with low traffic levels (cf. chapter 6).
	Transpac, a subsidiary of France Télécom, has been able to use this alternative since 1992. At the beginning of 1996 it was the only data transmission service operator with access to the D-channel. Two competitors, both newcomers to the market, called on the DGPT to intervene since they wished to obtain access under the same technical and financial conditions.

	The DGPT consulted the parties concerned on an arbitration proposal aimed at fostering fair competition on the data packet transmission market. The arbitration procedure is still under way.

	The Telecommunications Act contains important provisions in this respect (see insert).

Interconnection: the importance of the regulator's role

	The DGPT's increasingly important role in matters involving interconnection highlights the strategic importance of this issue, and more especially of the agreements for market entrants. Until now newcomers often had to seek arbitration from the DGPT. Interconnection will become an essential factor in the regulation of the telecommunications market.
	However, arbitration must not take the place of commercial negotiations between the parties concerned, which must remain the general rule.
	Under these circumstances, it is vital to assess immediately what type of interconnection regime would be suitable in a totally liberalized sector. Some of the factors which must be considered are the hierarchical level of interconnection, interconnection points, signalling and the different tariff scales. These matters are already under consideration and this process will continue to gain in prominence in 1996.

	The Telecommunications Act contains important provisions in this respect

	. All operators of networks open to the public or suppliers of public telephone services will be entitled to interconnection with other public networks.
	. All operators of networks open to the public must therefore accept all reasonable applications for interconnection.
	. Operators with a significant market share will be liable to stricter obligations. They will be required to publish an interconnection offer and supply other network operators and providers of public telephone services with a system of cost-oriented prices; to implement the principles of open network provision guaranteeing transparent, objective, non-discriminatory access to providers of other services and, if necessary, offer special access to their network.
	. In the event of dispute or default, the technical and financial conditions covering interconnection and access to the network could be fixed within a deadline set by the telecommunications regulatory authority (article L. 34-8).

2.2.3- Access to the public domain

	 Access to the public domain, and more especially scarce physical resources such as cables, conduits and land rights is one of the major challenges to setting up telecommunications networks. The opening up of the telecommunications sector should go hand-in-hand with equitable conditions for access to the public network. In particular, the future financial and technical conditions for France Télécom's access to the public network should be brought into line with the standard right of operators, as provided for in the new Telecommunications Act (cf. chapter 1).

	The use of wired networks by licensed operators (MFS, SFR, Bouygues Telecom, etc.) prompted the DGPT to work increasingly with the various public-domain managers (local councils, planning authorities, motorway management companies and railway companies).

	The DGPT was thus involved in the development of the La Défense business district, where the public domain is managed by EPAD, to ensure that telecommunications operators could rapidly deploy their networks under non-discriminatory conditions.

	Moreover, the introduction of new national radio infrastructures has prompted amendments to the working practices of the interministerial bodies responsible for allocating frequencies (CAF commission) and to the system for granting operating licences for radio sites (CORESTA). These amendments have two objectives, especially as regards CORESTA:
	- processing applications more quickly in order to avoid delays in introducing networks, which can hamper widespread access to mobile services; 
	- treating all operators of telecommunications networks, including France Télécom, in the same way in respect of procedures and representation.

	2.2.4. Launch of public consultation on wireless local loops

	The possibility of using radio links for the last segment of subscriber access (radio-in-the-loop) is now considered a key factor in the development of telecommunications. The use of wireless local loops can help reduce the cost of providing the universal service in certain geographical areas. It is also a way of boosting competition in local loops since, compared with wired networks, radio infrastructures make it possible to set up a network cheaper and faster.

	Granting licences for wireless local loops raises a number of questions ranging from the choice of standards and frequencies to the way in which the market is organized and the conditions for granting licences. 
	To provide answers to all these questions, in 1996 the DGPT will be organizing consultations on the conditions for introducing wireless local loops.

Wireless local loops in the United Kingdom

In the UK, the Department of Trade and Industry (DTI) issued a call for candidates to operate licences for wireless local loops in the 2 to 10 GHz frequency bands, on 11 October 1995.
The aim was to reduce the cost of universal service, to boost the development of digital services and enable manufacturers and operators to prepare themselves for competition on the European markets.
Prior to this call for tender, the DTI had undertaken consultation on procedures and conditions.

A total of 24 tenders were submitted by, inter alia, BT, Mercury, four cable operators and Ionica and Atlantic, operators present on the wireless local loop in other frequency ranges. The DTI chose BT and RadioTel Systems, which were each granted a licence covering half of the country for the 2 GHz band. NTL and Ionica, in association with Scottish Telecom, were granted national licences in the 10 GHz band.
The DTI decided not to grant a national 10 GHz licence split up into several regional licences.

The two frequency bands allocated in these licences are part of the bands specified by the CEPT for local loop systems. The operators' equipment must conform to the CEPT's frequency scheme and the norms and standards at present being drawn up by the ETSI.
The DTI reserved the 10 GHz band for advanced high-speed digital services. The target market is small and medium-sized business users.
The 2 GHz band is to be used for rural areas with low population densities (less than 50 people per km2), which accounts for 40% of the country.
The frequencies allocated are not available throughout the country and the newly-licensed operators will have to coordinate with present and future users.

The local loop licences which have just been granted supplement the licences already granted for applications of this type in other frequency bands. At the beginning of 1996, Ionica, Atlantic and Liberty were about to open commercial local loop services in the 3.4-4.2 GHz bands.

Wireless local loop: the DECT licence system defined by the BMPT in Germany

	The Bundesministerium für Post und Telekommunikation (BMPT) considers the DECT to be a key channel for introducing competition in the local loop  market. It hopes to initiate a procedure for granting DECT licences in the summer of 1996 once the law has been voted on. Operators will only be able to market their services as of 1 January 1998. Deutsche Telekom and the mobile operators will not be excluded from the licence-granting procedure.
	There will be no restrictions on the geographical scope of licences, unless there is a shortage of frequencies. The general system of licences for voice telephony will apply.
	The BMPT already seems to anticipate a shortage of DECT frequencies and is looking for ways of allocating additional frequencies. Trials will be carried out to test the capacity limits of the DECT system. Another solution for local loops could be implemented.

Chapter 6
Ensuring fair competition, protecting consumers and keeping users informed

Competitive trends in the telecommunications sector in 1995 pointed to greater maturity in the market.
	The profile of sector participants became more clearly visible, and France Télécom's approach developed accordingly, particularly in terms of relations with its subsidiaries,.
	Competition continued to develop, especially in the field of international telephony and also in the corporate services market, encouraging France Télécom to take a more market-driven stance to its customers' requirements. That policy prompted its rivals to lodge a series of complaints with the DGPT, which then had to decide whether the practices in question in each case represented fair or unfair competition. Also, important developments emerged in two areas which will have major repercussions in the run-up to generalized competition in this sector: access to new parts of the France Télécom network, and increased market transparency.
	In 1995 the DGPT also actively continued its policy of regular discussions with market operators and paid particular attention to the real needs of users by meeting with consumer groups and commissioning a survey from the IFOP market research institute into consumer expectations in terms of service quality.

I. COMPETITION

I. 1. The key features of market players in the telecommunications industry
	France Télécom, the public operator, is the key player in the French telecommunications industry, largely because it has exclusive rights over certain areas of activity. This sector has been partially opened up to competition, and a host of companies of all sizes and from a variety of industry segments are currently operating in the market.

	I. 1.1. France Télécom and the competitive sector
	In terms of competition between the public and private sectors, the situation of the telecommunications sector is unusual. In France, such competition generally results from the fact that the public operator has exclusive rights, either legal or de facto, in certain areas of activity. Its operations in the competitive sector generally take the form of diversification from the core business.
	Unlike France's gas and electricity utilities (GDF and EDF), for example, which generate a very small proportion of their turnover in the competitive sector (3.5% and 1% respectively, including subsidiaries), the France Télécom group generated around 30% of its 1995 turnover in a competitive environment (for France Télécom alone this figure was some 20%).

	This situation came about for a number of reasons.
 	Firstly, it is not the result of France Télécom's diversification so much as the liberalization of activities previously reserved solely for the historical telecommunications operator. Now, France Télécom only has exclusive rights over the fixed public telephone network and wired public infrastructures, which represent 80% of turnover (FF103bn in 1994 out of a total of FF129.3bn).
 	The France Télécom group also has a policy of growth through acquisitions, both in France and abroad. In 1996, this should gather greater momentum with the Global One strategic partnership with Deutsche Telekom and the US company Sprint, and the launch in Belgium of the Mobistar mobile telephone network (cf. chapter3).
	Moreover, the liberalization of the entire telecommunications sector on 1 January 1998 will expose all group activities to competition. Since France Télécom is likely to retain its de facto monopoly in many segments for some time to come, the principles of fair competition be monitored with even greater vigilance.
	In addition, France Télécom's competitive position varies from one segment of the global telecommunications market to the next.
 	In some cases France Télécom is in a dominant position compared with new arrivals. This is currently the case in segments where it traditionally held exclusive operating rights but which have already been liberalized: data transmission services and radiocommunications, for example. This will also be the case when the telephone service and wired infrastructures are liberalized.
 	In other cases, France Télécom is itself a newcomer to markets traditionally occupied by other players. This is the case for private telephone installation. France Télécom's influence and knowledge arising from its exclusive position could lead to unfair competition if it does not scrupulously respect the conditions for a level playing field.
 	On the innovative segments of the telecommunications market, including computer-related activities such as facilities management, France Télécom is, in theory, on an equal footing with its competitors insofar as they are all arriving on the market at the same time. In practice, however, France Télécom could use its market influence to take the high ground in these sectors.
 	Lastly, certain sectors are true diversification markets for France Télécom, such as audiovisual production, where the group can make its influence felt over more established but smaller operators.

	I. 1.2. The structure of competition
	The leading companies already present on the French telecommunications market can be divided into six categories of varying nature and influence. As liberalization gathers pace, they should be able to strengthen their positions:
	- the leading foreign telecommunications operators which have been active on their domestic markets for many years; some have developed international partnerships to meet the requirements of an international corporate customer base;
	- telecommunications equipment manufacturers (French and foreign) which are diversifying their activities through vertical integration in equipment installation and service provision;
	- leading computer companies: manufacturers and service suppliers;
	- major French groups involved in water distribution and construction but which are now starting to diversify; some are also present in the audiovisual sector (cable and terrestrial television);
	- major public sector or parastatal groups owning large telecommunications networks which they currently operate for their own purposes;
 	- medium-sized and, more often, small companies active in the so-called value-added telecommunications services (voice mail, teleconferencing, etc.), equipment installation and maintenance, and audiovisual production.
	Thus, competition in the telecommunications sector comes from companies whose status and activities vary greatly and which have varying degrees of influence over the market. The issue of competition thus transcends the traditional divides of big-versus-small and public-versus-private, since France Télécom is active on a market where a host of different companies coexist and compete to obtain a firmer foothold.

I. 2. France Télécom and its subsidiaries

	I. 2.1. The financing of France Télécom's subsidiaries
	The conditions for financing the competitive activities of a public-sector company with exclusive rights in certain areas are bound to have a decisive influence on the balance of that sector because its rivals do not have the same financing capacity. This applies equally to raising capital and obtaining access to markets.
	This situation needs to be examined from the twin perspective of State aid and cross-subsidies.

	I. 2.1.1. Principles governing state aid and cross-subsidies
	European Commission precedent has established that, when a public holding company injects fresh capital into one of its subsidiaries, the state must apply the same guidelines as those governing the activities of a private investor. Hence, the recapitalization must be guided by the principles of group solidarity and, in particular, must be motivated by the search for overall profitability, even if only in the long term. If this is not the case, then the allocation of state aid could be considered to be in breach of the Treaty of Rome.
	In France the criteria used to judge the actions of a private investor were set out by the competition authority in its opinion published on 10 May 1994, and by the ministers of industry and economy when they examined the conditions for the diversification of EDF. These conditions are:
 	-the subsidiary's balance sheet structure must be appropriate for the sector concerned;
 	-the rates of interest paid on funds must be consistent with the norms for the sector;
 	-the long-term return on investment should at least be equal to the return that the State would have received if the company had not made these commitments ;

	In its guidelines for competition in the telecommunications sector published in 1992, the European Commission considers that subsidies for competitive activities paid by a dominant company and charged against those activities performed under a monopoly would upset the level playing field of competition and could be considered as the abuse of a dominant position according to the terms of article 86 of the Treaty of Rome.
	The Commission would then consider that there were grounds to presume the existence of such subsidies and would ask the company to provide a rebuttal, in particular by highlighting the perspectives for long-term profits.
	France Télécom is indeed subject to such a presumption in that its capital injections to its subsidiaries are paid out of funds generated by monopoly activities and would, at least partially and indirectly, benefit subsidiaries involved in competitive businesses.

	I. 2.1.2. The effect of these principles on the situation of the France Télécom group
	France Télécom's financing of Cogécom and its subsidiaries, which have become steadily less profitable since 1988, is of interest to the DGPT for two reasons:
	- firstly, the respect of the conditions of fair competition: France Télécom must not artificially keep companies on the marketplace if they are in structural difficulty since this would destabilize the sectors concerned. Meanwhile, three Cogécom subsidiaries generate three-quarters of total turnover and contribute to its operating profit.
	- secondly, the consolidation of State assets: the financing of the Cogécom subsidiaries must provide the shareholder (i.e. France Télécom and therefore the French State) with a customary rate of return on capital invested over the long term.
	These concerns prompted the inclusion of a specific objective in the Contrat de Plan signed by the State and France Télécom for the period 1995-1998. This objective concerns the rate of return on France Télécom's long-term financial investment. It focuses on financial viability of the company when the Contrat de Plan expires, taking into account the structure and maturity of the market.
	On the basis of the abovementioned principles, the DGPT monitored France Télécom's policy on the financing of its subsidiaries. France Télécom outlined a number of prospective changes, which the DGPT deemed to be positive. Thus, France Télécom would limit the recapitalization of Cogécom and also restrict Cogécom's capacity to recapitalize its subsidiaries in order to finance their activities. Instead the emphasis is placed on cash flow, asset disposals and a balanced use of debt and equity financing. 
	The DGPT acknowledged that France Télécom had made significant progress but asked to be informed, at some point in 1996, of Cogécom's dividend policy with regard to its parent. The DGPT will also be kept informed of France Télécom's intentions as regards Cogécom's financial strategy, shareholding policy and profitability.
	At the DGPT's request a study will be carried out by an independent consultancy in 1996 to assess France Télécom's position in this respect, comparing it with the situation of the other participants in the sector.

I. 2.2. Commercial relations between the parent company and its subsidiaries, and between subsidiaries
	Another feature of France Télécom's internal policy that could have an influence on the competitive balance of the market is the services that France Télécom performs on its own behalf so that it can engage in direct competition (value-added services, the sale of products and services through its outlets, public mobile telephony, etc.). This also includes the reciprocal services that France Télécom and its subsidiaries perform for each other, also for competitive purposes.
	Thus a commercial relationship exists between several France Télécom departments, between the parent company and its subsidiaries, and between the subsidiaries. To maintain a level playing field, the pricing systems for internal services must be on a par with those applied to external services.
	If this principle is not respected then such practices could conceal possible cross-subsidies between activities benefiting from exclusive rights (use of the public switched network, leased lines, etc.) or performed in a dominant position, and the company's competitive activities. This situation would be especially prejudicial in the case of global offers where services provided under exclusive rights are closely linked to those performed in a purely competitive context.

	For this reason,  certain specific guidelines were recently set out for France Télécom.

	Firstly, the Contrat de Plan between France Télécom and the State forces the company to make substantial improvements to the way it accounts for each category of activities in order to establish a system of auditable costs. Respect of this obligation will be monitored by an extensive audit operation performed by an independent consultancy at the request of the DGPT and with the close cooperation of France Télécom (cf. chapter 7).
	Secondly, a subsidiary should be set up to handle mobile communications activities within France Télécom itself. For the time being the DGPT has asked France Télécom to establish a system of separate accounting and to commission an audit of its accounts (cf. chapter 5).
	Lastly, the DGPT and France Télécom must jointly devise a system for the evaluation and systematic invoicing all services provided by the parent company to its subsidiaries and vice versa.

I. 3. Genuine competition on the international services market and more generally on the corporate services market
	At a time when competition is reaching a large segment of the market and total competition lies just around the corner, a degree of competitive pressure is being felt. This is particularly true in the corporate segment for voice services (especially at the international level) and tailor-made offers incorporating services still provided under the system of exclusive rights.
	This genuine competition stems from the combined influence on the market of the various participants. Customers are naturally keen to pay less; new operators are offering innovative solutions, especially as regards pricing structures; and France Télécom has been spurred by these new offers. As a result, France Télécom has adopted a more market-driven approach. The DGPT nevertheless makes sure that the principles of fair competition are respected to the letter.

I. 3.1.	Genuine competition on the international voice services market
	The international voice services market represents only a small share of France Télécom's voice telephony turnover (around 10% in 1995). However, this is one of the market segments coming under the most pressure from competition.
	Rival offers to France Télécom's public switched network have emerged, especially aimed at companies. Based on leased line architecture, these are the so-called rerouting services (cf. chapter 5). France Télécom itself proposes this kind of service through Colisée International.
	France Télécom has developed new services for the public switched telephone network (PSTN), comprising mostly of specially targeted tariff reductions for companies (the former Transgroupe project developed using the intelligent network). This new offer has changed the nature of the competition, which so previously revolved around technically-identical rerouting services.
	Now the market configuration comprises France Télécom's offers, arising from its exclusive rights (i.e. tariff reduction on the PSTN), and competing offers dependent on France Télécom's leased lines.
	Two major obstacles stand in the way of totally free competition, one technical and one tariff-related:
	- France Télécom's intelligent network makes use of the network's internal functions, namely signal channel no. 7. The existing architecture of the intelligent network is such that to all extents and purposes the functions of this channel cannot technically be shared with other service suppliers. Since this situation is the same in all countries, ETSI is currently examining a standardization package giving service providers technical access to the intelligent networks of the traditional operators. However, this project is still at an early stage and no such access currently exists. Accordingly, all telecommunications companies that do not have their own network must be given access to leased lines so that they can supply this kind of service.
	- The tariff-related obstacle to fair competition results from the existence of two types of tariff:
	. on the one hand the tariff reductions that France Télécom offers companies over the PSTN do accurately reflect network costs as they are calculated today. There is no economic reason for them not to receive DGPT approval, particularly since they benefit the users;
	. on the other hand, the cost of leased lines prohibits competitors from developing a profitable offer for customers with premises dotted around the country.
The Contrat de Plan between the State and France Télécom stipulated that the cost of leased lines would be reduced by 10% a year for the period 1995-1998. While this reduction is in line with the price of the basic telephone service, it is still insufficient when tariff reductions of 15-20% are being applied
There is therefore a cut-out effect between the cost of leased lines and the cost of reduced-price voice services.
	This cross-over effect results mainly from France Télécom's vertical integration whereby the same entity markets the services and the infrastructures needed for these services.
	This issue has been raised by a number of rerouting companies and the DGPT is currently looking into the matter.

I. 3.2.	Effective competition on the global business market
	France Télécom's competitors have lodged a number of complaints with the DGPT regarding calls for tender for global business services. The main sticking point has been the favourable conditions that France Télécom has granted itself for the supply of services arising from its exclusive rights. These contrast with the less advantageous conditions it imposes on its competitors for the provision of similar services, thereby making their offers more expensive.
	The DGPT detected unfair pricing practices at France Télécom in breach of the principles of fair competition and the obligations of open network provision (ONP) whereby access must be transparent, objective and non-discriminatory.
	These unfair practices included:
	- discounts on the list prices of products and services, some of which were the result of exclusive rights, without such discounts being mentioned in the catalogue. In one instance the DGPT passed on the details of the case to the economy ministry's fair-trading unit (DGCCRF) which launched an inquiry;
	- in certain cases, these discounts were backdated. The DGPT told France Télécom that this kind of adjustment still made France Télécom guilty of unfair practices since, when such contracts were being negotiated, the public operator had created an unjustifiable comparative advantage for itself;
	- finally, in other instances it appeared that France Télécom's offers were based on out-of-date tariffs which, when announced in a discretionary manner to customers, had not been approved for those services provided under exclusive rights and had not been published in the case of other services. Such practices are all the more reprehensible because they concern services that competitors have to buy from France Télécom at catalogue prices.
	The DGPT therefore reminded France Télécom that such practices were, naturally, prohibited. Since these practices often came to light after the contracts in question had been signed, the DGPT could only advise the competitors to bring their case to the competent courts if they felt such a step to be justified.

THE SANCTIONING POWERS OF THE FUTURE TELECOMMUNICATIONS REGULATORY AUTHORITY

In accordance with the new regulatory framework set out in the new Telecommunications Act, the telecommunications regulatory authority will be granted wider-ranging powers of sanction than those enjoyed by the current DGPT.

Firstly, the chairman of the telecommunications regulatory authority will be able to inform the competition authority of any abuse of dominant position or distortion of competition in the telecommunications sector of which he may be aware.

The telecommunications regulatory authority will also have its own sanctioning powers which it will be able to exercise in clearly defined conditions:

	"1) When a network operator or a service provider violates a legislative or regulatory provision pertaining to its activity, or in respect of which it exercises its activity, the telecommunications regulatory authority shall summon it to remedy the matter within a stipulated period of time. It may make such a summons public.

	2) When a network operator or a service provider does not comply with a decision taken in application of article L. 36-8 or the summons provided for in point 1) within the period of time stipulated, the telecommunications regulatory authority may impose one of the following penalties:

	a) depending on the gravity of the default, either total or partial suspension of the licence for one month maximum, reduction in the duration of the licence up to one year, or withdrawal of the licence.

	For licences subject to the provisions of III of article L. 33-1 the licence may be withdrawn without prior summons, in the event of a substantial change in the composition of the share capital.

	b) or, if the default does not constitute a criminal offence, a fine may be levied in proportion to the gravity of the default and to the advantages which it affords. The fine shall not exceed 3% of turnover, increased to 5% in the case of a repeated default of the same obligation. In the absence of sufficient activity to determine this threshold, the penalty may not exceed one million French francs, increased to two million French francs in the case of a repeated breach of the same obligation.

	The penalties shall be imposed after the operator has received notification of the grounds for complaint, has been given the possibility of consulting the case file, and has presented written and verbal comments.

	Fines shall be recovered as State debts, independently from taxes and public property.

	3) Matters dating back more than three years may not be referred to the telecommunications regulatory authority if no action has been taken in view of an inquiry, verification or penalty.

	4) Decisions shall be fully reasoned, notified to the interested party and published in the French Official Journal. They may be the subject of an appeal to the State Council or of an application for stay of execution. Where fines are concerned, applications for stay of execution shall be suspensive."

I. 4. Progress towards access to the France Télécom network
	Conformance with the ONP principle, whereby France Télécom must offer use of its network resources in objective, transparent and non-discriminatory conditions, was a recurring bone of contention in 1995. As we have seen, France Télécom is often criticized for applying preferential conditions, whether technical or tariff-related, to itself or its subsidiaries for the supply of intermediate services making up a global offer. The best solution for overcoming such distortions is to force France Télécom to grant its competitors the same conditions of access that it has for its own services.
	Most of the complaints have concerned access to the resources of the PSTN and space infrastructures.

I. 4.1. Access to the international routing centre (CIA)
	In 1994, competitors to France Télécom's Colisée service asked the DGPT to examine what they considered to be unfair competition on the international telephone services rerouting market.
	In particular, since Colisée International's router was directly connected to France Télécom's international routing centre (CIA), the DGPT stated that any company performing the same activity as Colisée International should be able to access the CIA under the same technical and financial conditions as those that France Télécom provided for its own service.
	The DGPT's efforts to open up new access links to the switched network subsequently began to pay off. In 1995 a number of rerouting companies started negotiations with France Télécom to this end, some of which have already been concluded. However, France Télécom is still holding talks with a company offering services between mainland France and its overseas departments.

I. 4.2. Access to the D-channel
	Following complaints from competitors relating to data transmission contracts, it emerged that France Télécom's Transpac company had a key competitive advantage over its rivals: it could connect customers to its network over the Numéris (ISDN) D-channel rather than leased lines. France Télécom had reserved this option exclusively for Transpac.
	Asked by two competitors to investigate this matter, the DGPT launched an investigation and subsequently issued proposals aimed at fostering fair competition (cf. chapter 5).

I. 4.3. Access to space capacity
	Other complaints highlighted the problems encountered by VSAT satellite service providers in obtaining sufficient space capacity at prices competitive with those enjoyed by France Télécom.
	It emerged that, despite the agreement concluded several years ago by a number of European countries (France, Germany, the United Kingdom, the Netherlands and Switzerland) providing increased access to the Eutelsat system operated by the traditional operators in the international cooperative, France Télécom still had a competitive advantage in France.
	In addition to France Télécom's direct access to the space capacities of the international organizations of which it is a member (Eutelsat, Intelsat and Inmarsat), the operator also has its own satellite system (Telecom 1 and Telecom 2) to which it has sole access.
	In view of this situation, the DGPT has taken two steps:
	- firstly, it lent active support to the policy granting direct access to the space capacity of Eutelsat and Intelsat;
	- secondly, it examined the way in which France Télécom organized VSAT service provision and found a lack of transparency and separate accounting procedures, especially with regard to the supply of space capacity.
The DGPT therefore told France Télécom that, if it received any complaints concerning the conditions for obtaining a VSAT services contract, there would be legal grounds for presuming a cross-subsidy between the VSAT services and the services benefiting from exclusive rights, unless steps were taken to meet the requirements of market transparency. The DGPT would then encourage the plaintiff to take its case to the competent courts so that the conditions for fair competition could be restored.

I. 5. Improving market transparency
	Market transparency is one of the conditions required to ensure conditions of fair competition in the telecommunications sector. This transparency is especially important in a sector where the France Télécom group generally has a dominant position, even in those segments for which it does not have exclusive rights. The DGPT's persistent efforts in 1995 finally achieved substantive results.

I. 5.1. Upcoming publication of sectoral surveys
	The consultation on the regulation of telecommunications in France, conducted by Bruno Lasserre in 1994, highlighted the need to assess the extent to which France Télécom is active in the competitive arena and to publish the results of this investigation.
	Such a move is aimed at ensuring a more balanced exchange of information between France Télécom and its competitors. Activity in the various segments of the telecommunications market has to be identified before France Télécom's activity on these markets can be evaluated.
	The DGPT therefore commissioned four sectoral studies from independent consultancies. These focused on the sectors of private telephone installers, computing software and services, written and oral telematics, and the audiovisual domain.
	The results of these studies, compiled for 1994, will be published in the first half of 1996. These sectors will also be monitored using the results for 1995. The scope of the study was enlarged in 1996 to include the corporate services sector (voice and data).

I. 5.2.	Additions to France Télécom's price list
	Until recently some of France Télécom's tariffs were not published in its price list even through they concerned services provided under France Télécom's exclusive rights and were subject to approval from the economy and telecommunications ministries. In 1995 the cost of these services was entered in the France Télécom catalogue to ensure wider publicity. The price list is available from all the operator's outlets.
	Broadly, the publication concerned:
	- the price of international leased lines: these features of the fixed network, thereby benefiting from exclusive rights, are marketed by France Câble et Radio (FCR), a subsidiary of France Télécom which acts on behalf of its parent company. At the DGPT's request these tariffs are now published in the price catalogue of the public operator since it is responsible for leased lines.
 	- the price charged for the use of the PSTN by Teletel services (excluding kiosk services), which had been published just in the Transpac catalogue even though they resulted from the exclusive rights pertaining to France Télécom's public switched network. The tariffs for this service, included in the Transpac offer to telematics service providers, are now listed in both the general and Transpac catalogues.

I. 5.3.	Publication of the conditions for reduced Transpac tariffs
	A complaint was lodged with the DGPT concerning the lack of transparency in Transpac tariffs. More especially, the conditions whereby Transpac granted its customers reductions violated certain obligations for price setting and publication featured in its operating specifications. These obligations do respect Transpac's freedom to set its own prices like any other supplier of "support services".
	At the DGPT's request, Transpac wrote the conditions for price reductions into its tariff system, in particular regarding eligible volumes and contract duration.
	Nevertheless, the DGPT found that the published tariffs still did not fully satisfy the need for proper transparency. As part of the public consultation on the price of leased lines begun in September 1994, the DGPT added a number of questions to a user survey. These sought to establish the degree of precision needed to combine flexibility with transparent pricing. When this aspect of the consultation process failed to trigger any reaction on the part of the users, the DGPT concluded that the publication of Transpac tariffs satisfied user requirements.

I. 5.4	Improving the Colisée/DOM offer
	When the DGPT examined the Colisée dossier at the request of a number of its competitors, the study revealed that the pricing conditions for France Télécom's Colisée service between mainland France and the overseas territories lacked sufficient transparency. Firstly they were not consistent with the existing tariffs for other Colisée destinations. Secondly, they did not comply, either, with the terms of the contract. Finally, they proposed a customized service that France Télécom did not provide.
	Following the DGPT's intervention, these imperfections prejudicial to consumer interests were ironed out by a pricing decision taken in the summer of 1995.

I. 5.5.	Modification of the information pages in the France Télécom directories
	The introductory pages of the Yellow Pages directory detailed all France Télécom services, but made no distinction between those covered by the monopoly and those provided in a competitive environment.
	This situation could confuse directory users since these pages could suggest that France Télécom was the sole supplier of all the services described, a situation that could hinder fair competition.
	Following repeated attempts by the DGPT to put a stop to this practice, the marketing department of France Télécom finally informed us at the end of 1995 that the 1996 edition of the Yellow Pages would avoid all risk of confusion by presenting the products and services supplied in a competitive environment on different colour pages from those covered by the monopoly. In addition, these pages would be marked as listing competitive products and services and monopoly products and services.

COMPETITION: FOLLOW-UP ON PAST ACTION

Teleconferencing: improved economic situation for this market segment

	Following the DGPT's intervention on the teleconferencing market, the companies concerned were asked to keep the DGPT informed of sector developments so that it could assess the effects of the measures taken.
	From the information received it would appear that the DGPT's action has had a positive effect. The increase in France Télécom's tariffs did not hinder its growth. On the contrary this business has grown steadily and generated a profit.
	The competing company has also seen increased growth in this area and was expecting to report a profit for 1995 and 1996. It was therefore able to retain is position on the French market and continue to expand abroad.
	Thus, forcing France Télécom to abandon a predatory pricing policy proved to be beneficial for the market as a whole.	

COMPETITION: FOLLOW-UP ON PAST ACTION

Corporate data transmission contract brought before the competition authority

	In 1994 a company complained to the DGPT about a contract concluded by a France Télécom subsidiary for the provision of a data transmission service.
	After investigating this matter, the DGPT concluded that certain aspects of this contract did not respect the principles of fair competition and informed the competing company of this, encouraging it to take its case to the competent judicial authorities since the DGPT has no powers to intervene in a contract that has already been concluded.
	The company thus took its case, based partly on the conclusions of the DGPT, to the competition authority.	

CASE STUDIES

Competition for audiovisual broadcasting services

	A company broadcasting audiovisual programmes to Africa issued a call for tender for a service to carry these programmes. Providers would have to make two kinds of offer:
 	- a competitive offer for satellite broadcasting of programmes;
 	- an offer provided under exclusive rights for secure leased audio-video lines between the broadcaster's head office and the satellite transmission centre.

	France Télécom replied to this call for tender, along with one other company, and won the contract. The other company lodged a complaint with the DGPT concerning:
 	- France Télécom's global offer combining competitive services with those provided on the basis of exclusive rights;
 	- the pricing conditions for securing the audio-video links which it was obliged to acquire from France Télécom.

	The DGPT's investigation revealed that the price of France Télécom's commercial offer did not distinguish which services were provided in competition and which arose from its exclusive rights. The DGPT reminded France Télécom that this practice was counter to the principles set out in the consultation on the regulation of telecommunications and which are listed in the DGPT's guidelines for a code of good practice published in March 1994.

	Moreover, to ensure that France Télécom had not infringed the terms of article 23 of its contractual obligations (when France Télécom supplies a service consisting of services arising from its exclusive rights and services subject to competition, the contract shall distinguish between the two categories of services, both for supply and invoicing), the DGPT asked France Télécom for a copy of the contract.

	With regard to the conditions offered by France Télécom for the supply of secure audio-video links (the complaint cited the problem of the cost of securing the links), the investigation revealed that the broadcaster had been offered volume discount that were not listed in the catalogue of prices. The DGPT told France Télécom that it cannot depart from the price catalogue and that all new tariffs must be announced and approved through the necessary procedures.

	As for the securing of the links, the DGPT's initial investigation revealed that conditions identical to those offered directly to the company could not be reserved for the complainant since specific investments were required to secure the audio-video lines connected to the client's transmission centre.

	The DGPT is currently re-examining this specific point on the basis of new information provided by the plaintiff.	
CASE STUDIES
Competition for France Télécom's Dealing Room Network offer

	A competitor of France Télécom complained to the DGPT about France Télécom's standard Dealing Room Network  (RSM) offer. Without actually refusing to provide the competitor with this service, France Télécom had nevertheless delayed the process, and talks between the company and France Télécom had been running for more than 7 months.
	The DGPT looked into this case and found that, while particularly suited to the needs of securities traders, this offer was not exclusively reserved for them even if the customers' requirements do correspond well to the specifications of the offer, namely a minimum number of 30 analogue leased lines to be digitized, each one no longer than 10 kilometres.
	Moreover, the DGPT found the clause in the standard contract prohibiting resale to be invalid since the simple resale of capacity has been legal in France since 1 January 1993.
	The DGPT therefore concluded that France Télécom should supply the RSM offer to its rival and that the clause prohibiting resale should be considered null and void both for future contracts and those already concluded.
	Lastly, if France Télécom did consider the RSM offer to be a made-to-measure offer then the DGPT ought to have been informed of each contract in accordance with article D 371 of the posts and telecommunications code, and this was not the case. Insofar as this standard offer is intended for a clearly-identified target customer base, estimated at around 150 to 300 customers, it should therefore feature in the catalogue of prices, also in accordance with article D 371.

Article D 371, para. 3: When it supplies, at the request of a specific user, a leased line replying to precise specifications, the public operator shall inform the regulatory body of the financial and technical conditions governing this offer. The regulatory authority may then, depending on market demand, ask the public operator to publish the conditions for the supply of these specific lines.

	France Télécom then decided to temporarily suspend this offer in order to review all the clauses of the contract. The DGPT informed France Télécom that the RSM offer was similar to that for a leased line offer and that it was therefore subject to ONP and, in particular, article D 373 of the aforementioned code which sets out the rules that France Télécom must apply for the withdrawal of the offer of leased lines. Since France Télécom had not publicly announced that it would be withdrawing its offer at least 12 months in advance, the DGPT refused to let it do so and asked for the contract to be amended straight away. In particular, negotiations should begin again immediately with the company concerned and should be concluded within a reasonable timeframe.
	The company in question has informed the DGPT that talks with France Télécom are on the verge of reaching a successful conclusion. France Télécom is currently finalizing its new offer conditions.	
CASE STUDIES
Competition for France Télécom's Tatoo service

A company supplying public paging services lodged a complaint with the DGPT relating to France Télécom's Tatoo service operated by its subsidiary France Télécom Mobiles Radiomessagerie (FTMR).
The company questioned various aspects of the Tatoo offer, and especially:
    - potentially misleading advertising,
    - the risk of standards being confused,
    - insufficient customer information on tariffs and contractual obligations,
    - the ambiguous relationship between FTMR, the service provider, and France Télécom, one of the distributors of the pager,
- unfair competition, especially with regard to the name of the service, the socio-cultural references featured in the advertisements and the choice of sponsors.
	The information at the DGPT's disposal did not appear to warrant its intervention except on the question of advertising. It was true that certain advertisements mentioned that this was a France Télécom service rather than one provided by FTMR. It also stated that a user could be contacted anywhere, whereas Tatoo is not available throughout France. As most of the advertisements were placed by distributors outside the France Télécom group, FTMR undertook to correct the misleading advertisements. This has since been done.
	Where unfair competition is concerned, the DGPT told the complainant company that it was not empowered to rule on a question for which there is abundant case law. The company was therefore advised to take its case to the competent courts if it felt such action to be justified.	

2. User protection

21. Harmonization of national legislation on the protection of individuals with regard to personal data, particularly in the telecommunications sector

After five years of intense discussions, the directive on the protection of confidential data was finally published on 24 October 1995. The member states now have three years in which to transpose the terms of this directive into their national legislations.

Most of the rights granted to private individuals (information, access and blocking), the grounds for lawful processing as well as the obligation to notify an independent monitoring authority have existed in French legislation since the law of 6 January 1978 ("Computing and Liberties"). However, the transposition of the directive does require a fresh appraisal of the structure, terminology and basic provisions French legislation. Moreover, that legislation depends on different legal systems depending on whether the processing of data takes place in the public or the private sector. This review will also make it possible to modernize the law of 1978, bringing it into line with subsequent technological developments which have had significant effects on the life of the government organizations and the economy, and more particularly on the telecommunications sector.

The DGPT is participating actively in discussions on how best to transpose this directive in France. It is also contributing to the work of the EU for the adoption of a similar directive specific to the telecommunications sector.

A modified proposal for a directive "concerning the protection of personal and private data on digital telecommunications networks, and especially Integrated Services Digital Networks (ISDN) and digital mobile networks" has, since the general directive was adopted, attracted a great deal of interest as the information society continues to develop. Work on this directive, suspended pending the adoption of the general text, has therefore begun again.

This proposal for a directive calls for the adoption of principles for protecting telecommunications subscribers and users whenever traffic and billing data is being processed, itemized bills are sent out, when services such as caller identification and call forwarding are introduced, and for the creation of directories. It also sets out measures for communication security and third-party access.

22. Towards the harmonization of European consumer protection for contracts negotiated at a distance over telecommunications networks

On 29 June 1995, the Council of Ministers adopted a " common position " on the proposal for a directive issued by the Commission on 21 May 1992 and amended on 7 October 1993.

This position stated that consumers should be kept fully informed about contracts negotiated at a distance over communications systems such as telephone, fax and by printed forms, and that they should have the right to withdraw from such contracts and protect their personal interests for their own peace of mind.

Aware of the threat to the peace of mind that potential consumers seek, the Council, in its common position, called for rules to be established enabling consumers to say explicitly whether they want their personal data to be made available to professionals seeking to interest them in commercial ventures.

Thus, according to this common position, any business wishing to use fax or automatic calling systems must have received the prior consent of the consumer. The use of other techniques, such as telephone or direct mailing is possible unless the consumer expressly asks not to be contacted in this way.

In December 1995 the European Parliament adopted a series of amendments, one of which stipulates that any business using the telephone to canvas for new clients must announce the purpose of the call from the very outset, thereby enabling the consumer to break off any unsolicited communications. The solutions recommended by the Parliament, and this one in particular, often run counter to the aims of the Council. Consequently, there is every reason to fear that discussions will prove difficult over the coming months.

23. Directories

The market for directories in France is open to competition in accordance with the principles set out by the European Commission in its recent "communication on directories and other information services in a competitive environment" presented by the Council in November 1995.

The DGPT is therefore more especially interested in another of the missions set out by the European Commission in this communication, namely preparing for the creation of a universal directory in the context of the complete opening up of telecommunication services to competition. This universal directory is an integral part of the universal service.

It emerged from the Directorate of Regulatory Affairs's (DRG) public consultation in 1993 that an exhaustive directory was needed combining all subscriber lists (except for ex-directory numbers) for the various networks. In this way telephone competition would not result in the production of multiple directories which would be awkward to use and cumbersome to manipulate.

The creation of the universal directory must respect the right of all voice-telephony subscribers to choose whether to be listed in the universal directory. This will necessarily impose obligations on all public telephone service providers, which will be written into their licences. Among other things, subscribers will be able to exercise their rights and providers will be forced to update subscriber lists and send them to the body selected to manage the single list.

Work is currently under way on a mechanism to identify the entity whose legal status and operating methods will respect not just the requirement for protecting personal data but also the crucial aspect of trading confidentiality and equal conditions for competition.

The telecommunications directory market in France

Almost 200 user directories for public networks were declared in 1995 by 60 different publishers. In accordance with the law of 21 July 1995, for the first time each publisher received a list of the declarations recorded by the DGPT for that year.
--------------------------------------------------------------------------------------------------------------------------------
year of declaration			number of publications		number of publishers
					declared			making a declaration
--------------------------------------------------------------------------------------------------------------------------------
1992					98					22
1993					150					42
1994					130					55
1995					196					60

3. Taking user expectations into account

In 1995 the DGPT launched initiatives aimed at increasing its knowledge of user expectations and monitoring the quality of telecommunications operators' offers.

3.1. Dialogue with users: June 1995 meetings with consumer associations

	The DGPT continued its policy of cooperation with sector participants in 1995. In 1994 it had met with the major network users, so in 1995 it decided to hear the views of a number of consumer groups.
	These meetings helped the DGPT gain a better idea of the concerns of these associations, to ascertain the expectations of consumers, and to gather viewpoints on the current and future evolution of the sector, in particular with regard to service offer, prices and service quality.

The results of consultation with consumer associations

* Consumer associations generally have a positive view of the current and future evolution of our sector

	They consider France Télécom's results to be "positive overall", especially with regard to the quality of the telephone service, customer services and generally meeting the needs of the user. The opening up of the sector to competition is generally considered to be beneficial to the consumer: this will make it possible to select one's operator, benefit from new services and will encourage France Télécom to develop further. However, they expect continued access for all to the telephone service.

	Increasing customer segmentation and price diversification are also viewed as a positive step. In the associations' eyes the segmentation of the customer base means taking account of the customer's telephone usage. All the associations approached believed that an à la carte service was the best possible approach that could be taken from the consumer's point of view. However, the options offered must be tailored, sufficiently flexible and developed in such a way that the offer remains clear. The associations are also on the alert for any unequal treatment of different consumer categories that could result from tariff diversification.

* All the associations approached said that the overriding priority must be to make consumers more responsible by giving them the means to make their own choices: a transparent and clearly understandable offer, controlled consumption and transparency in billing are all considered essential requirements.

	The associations believe that information on services and tariffs must be improved; they stressed that good information will be a decisive factor in consumer choice in a competitive environment.

	In addition, they feel that assistance must be given to users to help them manage their telephone consumption. The associations came up with a number of solutions to help achieve this aim, including the possibility for the user to choose which type of calls and telematic services he would like to have blocked.

	However, expectations are strongest in the area of billing. The associations all agreed on the need for greater transparency and improved justification of the invoiced amount. Moreover, the associations believe itemized consumption can generate new requirements and foster a trend that will be beneficial to the operator (for example, highlighting the most-frequently called numbers could encourage the user to select a more suitable pricing option).

The associations wanted bills to be presented in a more legible way, at the very least distinguishing between the different amounts per call type; suggestions were also made concerning the regularity of billing.	

Finally, options were proposed to improve the presentation of itemized billing. For most of the associations, itemized billing is not a general requirement and should remain an option. On the other hand, they all agreed that itemized billing should be provided free of charge.

* Room for improvement in the handling of individuals' complaints:

	The associations all agreed on the serious problems encountered by individuals who question their France Télécom bill, and they expect the operator to improve its complaints system.

	The associations want to see customer demands really taken into account, which for them means:

- having responsive customer-relations staff who are prepared to listen; this is the main request of people unable to pay their bills;
- avoiding cutting off the subscriber's line;
- developing procedures for the amicable settlement of disputes;
- establishing a free, easy and fast procedure leading, where appropriate, to fair compensation.

	The associations believe that users would be reassured if they could call on a mediator to settle disputes. They would prefer to see the creation of an internal mediator working with the operator, trained by the operator, possibly a former staff member, but with an independent status and real power vis-à-vis the operating services. They feel that careful attention should be paid to the legal mechanisms employed, especially with regard to the right of referral.

* The associations believe that quality is an essential feature in the consumer's choice:

	In a competitive environment, the associations believe that prices are bound to be the first criterion in a consumer's choice, but that the quality of the service provided will promote customer loyalty, a decisive factor in the long term; they consider value for money should therefore be a prime consideration.

	The quality of the after-sales service and the guarantees provided, especially in call-out times, are important features in a consumer's expectations. Continuity, in particular for leased lines, is the main priority for companies.

	Generally, the consumer associations feel that where quality of service is concerned France Télécom has done well but that it should work at preserving its standards. They believe that the quality of service should be measured by indicators, but selecting those indicators likely to be of interest to the consumer, independent of those that the operator sets up for its own purposes.

	

3.2. Awareness of user expectations: the IFOP survey on service quality.

	The DGPT wanted a basic report assessing the nature and ranking of consumer expectations in the field of service quality. The survey also examined the methods the consumers felt to be the most appropriate for meeting those expectations and encouraging operators to improve service quality.
	The main aim of this qualitative and quantitative study, conducted by the IFOP market research institute, was to examine the future competitive environment. It included a survey on representative samples of residential and business consumers, and the views of consumer associations were also sought.

	The main conclusions reached were as follows:

- individuals and businesses alike are prepared for the technological changes and future developments in the telephone sector. The consumer considers these changes to be positive, although a segment of the population believes it will not be affected;

- consumers view liberalization positively, especially business consumers (the arrival on the marketplace of competing companies is considered "a good thing" by almost two out of three residential consumers - 64% - and more than three in four business consumers - 77%). While the expected benefits are primarily commercial (lower prices, greater choice), they also concern service quality (61% of residential and 71% of business consumers predicted a better quality of service) and ease of access (69% of residential and 78% of business consumers). However, competition is not really viewed as a necessity by "small consumers (2)" (60% of residential and 53% of business consumers thought that more operators would "complicate things");

INSERT
(with pie charts)

- consumers believe that when the sector is opened to competition, the operators will be bound by rules. They believe three rules to be of the utmost importance: respect for individual freedom and privacy; transparency; and the commitment of the telephone companies to their customers. Residential consumers and the associations both add the extra requirement of a telephone service that is accessible to all, related to the notion of public service;

- residential and business users alike believe that a competitive environment is bound to encourage operators to pay greater attention to customer requirements;

- residential consumers expect the operator to provide a quality service (in terms of availability, speed of response and the elimination of the distance-charging principle), to make a commitment to this quality, and to provide them with the opportunity of making savings (by offering ways of monitoring consumption and by reducing tariffs). The last two points are currently, in the eyes of the consumer, weak points for France Télécom, and thus potential niches for possible competitors;

- business consumers expect much the same things as residential ones. However, they place greater emphasis on the need to ensure a continuous service (for example, through measures reducing the effect of moving premises and changing telephone numbers) and on the expectations for lower tariffs. On a competitive market, business consumers will respond to any operator that shows understanding for the constraints imposed by their working environment.

The process of consulting with associations highlighted the expectations of different customer groups and the need to bolster information services and guaranteed service for the users, especially in what will be a competitive environment. The users have two main requirements: they want to be kept abreast of the conditions for the supply, use and pricing for the products and services offered, and they want ways of fully exercising their rights and expressing their needs.

The regulator can respond to these demands by ensuring transparency and promoting service guarantees and recourse for the consumer, stressing requirements so that they are better satisfied and favouring increased dialogue with users.

The DGPT has also examined the methods used by regulators abroad to control quality and take customer requirements into account, especially in a competitive environment. SAGATEL was commissioned to produce a comparative study of the solutions chosen and implemented in various European countries and in the United States. On the basis of this study two types of country can be identified: those in which the regulatory mechanisms are reasonably developed (Germany, Spain and America), with a set of laws setting precise obligations on operators; and those in which a less formal approach has been taken (Sweden, Finland, the UK) where the users and operators themselves are often highly aware of these issues. In all the countries examined, service quality indicators have been defined. The United States has developed a sophisticated arsenal of penalties to sanction inadequate service quality, while the UK places the greatest emphasis on dealing with customer complaints.

4. Regulation based on the generalized consultation of operators and information provided to the users
	The DGPT is active at the very heart of the posts and telecommunications sectors. Consequently, it has to prove itself a dynamic motivating force through its combined activities of regulating the market and communicating with players and users in these sectors.

41. The DGPT's demand-oriented information and communication activities
	From its privileged observer's position, from which it can identify the needs of all market players, the DGPT can conduct a targeted communications policy to meet specific objectives and to reach particular audiences:

	- a specific information campaign was thus run for operators and users for a key event in 1996: the new ten-digit numbering scheme. The DGPT set up a teletex service (Minitel: "3614 10CHIFFRES") presenting companies with all the technical and cost data they need to plan for the switch and adapt their equipment accordingly.

	- a vast public consultation process was, however, felt to be necessary to alter the regulatory framework which will pave the way for the liberalization of the telecommunications sector. The contributions made to this process by the sector operators - more than 1,000 pages - were published along with a report on the round-table meeting that closed this mammoth public debate. At the same time, the results of a survey carried out by the IFOP institute were distributed, illustrating consumer expectations in terms of service quality in a newly-competitive environment(3).

	- information and general documentation remains available to all operators - government organizations, public services, companies, researchers and consumers - through various channels:

* Publication of some 20 documents (most available free of charge)

List of publications in 1995

- consultation documents:
. the new ground rules for telecommunications in France
. leased lines: offer and pricing
- consumers:
. the end of postal exemptions
. the consumer and the Contrat de Plan between the State and the France Télécom group
. results of the reform of the telephone service of 15 January 1994
. leased lines: rights and obligations of users
. radio scrambling and CB: what approach?
- regulation:
. radiocommunications installers: information document and registration file
. telecommunications installers: information document and registration file
. list of subscribers to telecommunications networks: procedure for the prior declaration by directory publishers
- technical:
. monitoring the radio frequency spectrum
. the installation of radiotelephones in vehicles: the AFNOR standard
. radio local area networks (RLANs)
. the electromagnetic compatibility of telecommunications equipment
. civil radiocommunications in France
- reports: 
. the leisure radiocommunications market
. consumer expectations for service quality
- guides:
. CB guide, 
. Ham radio guide, 
. Installers' guide
. Guide to the procedures for the approval of telecommunications terminal equipment
- regular publications (monthly): 
. The mobile telecommunications markets observer

		*Participation in the launch of the ministry Internet service (http://www.telecom.gouv.fr) launched in February 1996 and offering 150 pages of news and general information and 500 pages of reference documents. This service is fully bilingual.

		* Public launch of a documentation centre containing public regulatory and economic information in the area of posts and telecommunications in France and abroad (more than 4,000 references in the documentation base). In 1995, the documentation centre subscribed to 250 specialist reviews and acquired 300 papers and reports. It responded to 1,350 requests for documentation, 108 of which from university staff, 129 from consultants and 83 from private individuals, the balance being made up of companies and administrative departments.

		- Institutional communication as part of our participation in Telecom 1995 in Geneva, in Sircom and in the forum on information highways:

		- Alongside other regulators such as OFTEL, the DGPT attended the Telecom 95 fair (in the French section), meeting delegates from various countries and sharing our experiences with the many professional visitors to this show which is organized every four years by the ITU.

		- in the radiocommunications field, the DGPT continues actively to support the SIRCOM fair, held not only in Paris but also in the provinces (Lyons in 1995, Toulouse in 1996), which enables professionals to learn about the latest technological and regulatory advances. The DGPT also published a report drawn up by the IDATE on the leisure radio market which was previously something of a grey area. The focus of all information disseminated in the field of radiocommunications is the monthly publication of the Mobile Communications Observer, whose figures are eagerly awaited by all sector participants.

Study on the leisure radiocommunications market
The DGPT asked an external consultancy to write a report on the leisure radiocommunications market, and more especially CB radio, in France and its European neighbours. While the French market is one of the largest in Europe alongside that of Germany and Spain, its growth is primarily linked to the institution of a penalty points-based driving licence. This explains the small number of users in the community at large, which accounts for less than 1% of all CB enthusiasts in France, and the degree of information concerning regulation.

42. Ties with the profession

In addition to such regular information campaigns, the DGPT has established regular contacts with economic agents, either through the public consultations it initiates on a regular basis or, in a more institutionalized form, through the consultative committees for telecommunications services (CCST) and radiocommunications (CCR).

- in the radiocommunications sector
The new-look consultative committee for radiocommunications (CCR) met for the first time in 1995. It has been enlarged from 15 to 21 members to account for the changing market and the arrival of new operators, such as the third mobile telephone operator and service providers.
The commission is a forum for the regulator to present its planned action. In association with the sector participants, the body makes it possible to assess the impact of planned regulatory changes, both when they are being devised and later at the study phase represented by public or specific consultations (depending on the issues being examined).
The DGPT's proposal for a public consultation on the wireless local loop was approved after being examined by the CCR in late 1995. Similarly, the questions of locking SIM cards and the scope of the information disseminated in the Mobile Communications Observatory were also discussed by the CCR.

The new composition of the Consultative Committee on Radiocommunications

- College of representatives of suppliers of radiocommunications services:
Mr Bartoletti, representing the Association of 3RP operators
Mr Bertinetto, representing France Télécom Mobiles 
Mr Combes, representing Telediffusion de France
Mr Glotin, representing Société Française de Radiotelephone (SFR)
Mr Grosdemouge, representing the interprofessional federation of company communications (FICOME)
Mr Russo, representing Bouygues Telecom
Mr Vienney, representing the national union of radiocommunications installers (SNIR)

- College of representatives of users of radiocommunications services:
Mr Berry, representing the French association of telephone and telecommunications users (AFUTT)
Mr Bontemps, representing the club of service providers
Mr Costa Helias, representing the northern and eastern France motorways company (SANEF)
Mr Henninot, representing the rail telecommunications agency
Mr Leridant, representing Electricité de France (EDF)
Mr Puglisi, representing the national council of French employers (CNPF)
Mr Renaudin, representing the computing club of leading French companies (CIGREF)

- College of qualified figures:
Messrs Benzoni, Dupuis, Gérin, Houéry, Lasserre, Popot and Vigneron.
The CCR is chaired by Mr Marc Houery

- in the telecommunications sector
The CCST met twice in 1995 and on 6 February 1996. The following issues were discussed:
- information superhighways and the call for proposals issued in this area;
- changes to the telephone numbering system;
- practical problems raised by the obligation of service interconnection (possibilities and tariffs);
- implementation of the main European services directives;
- phenomenal expansion of the Internet: the regulatory, technical and social issues that this raises;
- liberalization of infrastructures.

The composition of the Consultative Committee on Telecommunication Services in 1995

- College of representatives of suppliers of telecommunications services:
Mr Bonelli, representing the Sema Group
Mr Bourrus, representing BT France 
Mr Caizergues, representing Syntec Informatique
Mr Le Mouel, representing France Télécom
Mr Leprince-Ringuet, representing Unisource Business Systems France
Mr Seletzki, representing the French telematics association (Aftel)
Mr Simonet, representing Transpac

- College of representatives of users of telecommunications services:
Mr Berry, representing the French Association of Telephone and Telecommunications Users (AFUTT)
Mr Bravo, representing the national council of French employers (CNPF)
Mr Doucet, representing the union of transport offices and the postal service
Mr Dreyfous, representing Edifrance
Mr Favier, representing CIIBA
Mr Lalanne, representing SITA
Mr Nora, representing the Computing Club of Leading French Companies (CIGREF)

- College of qualified figures:
Messrs Bensoussan, Bertrand, Dreyfus, Faurre, Lasserre, Lavenir and Serres.
The CCST is chaired by Mr Pierre Faurre.

Chapter 7:
Economic supervision of France Télécom: 
Regulating tariffs and service quality

The regulator’s powers of economic supervision of the incumbent operator, France Télécom, are set out in the Contrat de Plan signed between the French government and the operator in 1995. In addition to the regulation of tariffs, the regulator is also responsible for monitoring service quality, customer satisfaction and R&D policy. The DGPT is continuing its work on the issue of tariff regulation and its impact on the structure of the market.

1 - Tariff regulation in 1995

	In 1995, tariff regulation took account of the liberalisation of all telecommunications services and infrastructures, scheduled for 1 January 1988. Rules were designed to create favourable conditions for fostering effective and fair competition and to ensure that the needs of users are met, particularly through tariff reductions.

	The Contrat de Plan for the period 1995-1998 is the first stage of preparations for 1 January 1998. Concerning rates, the Plan aims to stimulate significant reductions in the price of telecommunications, while rebalancing the tariff structure, and to ensure that rates proposed by France Télécom do not hamper the development of competition. For this reason, special attention has been paid to charges for leased lines, a crucial product for the development of services competing with those of France Télécom.

	The regulator has also begun to reflect on future trends in tariff regulation, particularly as regards interconnection and financing of the universal service. These matters are being examined by a working group and are part of a study, commissioned by the DGPT, on interconnection and segmentation.

The current legal framework governing tariff regulation

The conditions for tariff regulation and interconnection are defined in France Télécom’s contractual obligations. The regulation of tariffs is organized into three systems:

A system of individual approval, applying to services under monopoly.

- For national services, the ministry of telecommunications (DGPT) and the ministry of economy and finance (DGCCRF) have one month, from the date of reception of France Télécom’s proposed tariffs, in which to make known any objection. If no notice of objection is given within one month, those tariffs are considered approved.

- For international services, the ministry of telecommunications (DGPT) has fifteen days in which to make known any objection.

A price cap system, laid down in the Contrat de Plan between the French government and France Télécom.

	This system, particularly suited to the current context of deregulation, consists of a multi-year price cap on France Télécom’s tariffs. This would take the form of a ceiling on real prices for telecommunications.

A special arbitration procedure for matters concerning interconnection of networks.

In the event of disagreement between France Télécom and an applicant for interconnection, either party may seek the DGPT’s arbitration.

1.2 - Significant price cuts in 1995

	The general downward movement of prices in 1995 reflected greater emphasis on reaching tariff targets compared with the first Contrat de Plan. However, France Télécom must still make considerable progress towards achieving more competitive rates between now and 1998.

	The downtrend did not apply to all telecommunications services. Rates for the telephone service were further rebalanced against an overall background of lower prices. Rates for international telephony and leased lines continued to fall.

1.2.1 - Overall trend towards a significant decrease

The overall price trend in 1995 revealed a substantial decrease for all France Télécom’s services. Rates decreased more than during the previous Contrat de Plan.

Change	Overall	Telephone service	Leased lines	
1995	CPI-4.7%	CPI-4.1%	CPI-10.1%	
annual average 
1991-1994	CPI-3.1%	CPI-3.1%	CPI-2.4%	

Although the downtrend is more favourable to businesses, given the nature of their telecommunications usage, all categories of economic agent are benefiting from the reductions.

Change	Households	Businesses	
1995	CPI-3.7%	CPI-5.4%	
annual average 
1991-1994	CPI-2.1%	CPI-3.7%	

1.2.2 - The national telephone service

As the following table shows, the process of rebalancing France Télécom’s tariffs made little headway in 1995. A business subscription rate was introduced (see below), helping to raise the operator’s fixed income. However, the principal aim was to diversify the service offer. Meanwhile, the price of long-distance calls has been cut only slightly.

Change	Subscription and connection charges	Local calls	Regional calls *	Long distance calls	
1995	CPI+0.9%	CPI-1.7%	CPI-1.7%	CPI-4.9%	
annual average 
1991-1994	CPI+4.0%	CPI+3.8%	CPI-10.5%	CPI-5.0%	

	France Télécom’s tariff structure is still unbalanced. This is both a handicap for the operator, given the forthcoming liberalisation of the market, and a hindrance to competition, particularly on the local network. Several salient points can be observed in the table below, which compares France Télécom's tariffs with those of other operators:

	- 	France Télécom still offers one of the lowest monthly subscription rates in Europe, even if the rebalancing of subscription charges on 2 March 1996 did reduce the gap. However, France Télécom’s subscription must be considered in context. The quality and content of the subscription in France is inferior to that in Sweden and the UK (where itemized billing is included in the standard subscription, for example).
	- 	The price of long-distance calls is significantly higher than in countries that have liberalized their telecommunications market.
	- 	The ratio of the price of long-distance calls to local calls in countries that have achieved price rebalancing (Sweden and the UK) is between 2.5 and 4.5

Standard peak rates (excluding special options) at 2 March 1996
Exchange rates at 2 February 1996

	Monthly subscription charge in French francs 
(incl. VAT)	Price in French francs (excl. VAT) of a 3-minute call (3) 	Ratio of long distance to local call prices (3)	
	residential	business	local	long 
distance		
DT	86	86	0.73	5.47	7.5	
Telecom Italia	41	64	0.77	5.27	6.8	
Telia
	74	124	0.43	1.90	4.4	
BT
	65	107
	0.79	1.96	2.5	
France Télécom
	52.80	78.39(1)
45.76(1)
at 1/7/96
90.45
56.68
	0.615	4.92	8.0	
(1) Business subscription. For France, there are two levels of business subscription available. The first is designed for companies with three or more lines and the second for those with no more than two lines
(2)	Residential subscription
(3)	Peak
(4) At 1 July 1996

	Clearly, France Télécom needs to rebalance its rate structure, as far as possible. This would mainly involve cutting the price of long-distance calls and, most probably, increasing subscription charges. Looking at rebalanced rate structures in other countries, the DGPT assessed the effects of rebalancing rates on different categories of user in France, namely average users, average households and low-usage households.

	The assessment was conducted by applying BT and Telia rates to a basket of average consumption (business and household), a basket of average households and a basket of low-usage households (i.e. in the second billing decile).

	It was found that:

	- 	Rebalancing rates would result in an overall reduction of around 25% in the price of telecommunications.

	- 	On average, households will see their telephone bills decrease by around 35%.

	Households and businesses
(excl. VAT)	Households
(excl. VAT)	
France Télécom	100	100	
BT	76.9	68	
Telia	73.0	62.5	

	For households, a detailed analysis of billing deciles for French households at France Télécom, BT and Télia prices showed that:

	- the first decile would increase by 20% at BT prices and by 40% at Télia prices, or an absolute value increase of FF10.00 and FF21.00 respectively per month (including French VAT);

	- the second decile would decrease by 25% at BT prices and 3% at Télia prices;

	- the third decile would decrease by 11% at BT or Télia prices.

	Only the first decile is affected by an increase in prices. This is because France Télécom’s tariff structure includes a special rate for users with the lowest level of consumption, i.e. lines which use less than 15 telecommunications units per month.

	This rate currently affects around 2 million lines of which:
	- 900,000 lines servicing households in their principal place of residence,
	- 1,100,000 lines servicing second homes, technical facilities and businesses.

The national telephone service: Price movements on 2 March 1996

	1996 saw a major rebalancing of tariffs comparable to that of the reform of 15 January 1994. The main changes to tariffs from 2 March 1996 are as follows:

	- Stability of prices for local calls and regional calls (i.e. midway between local and long-distance);
	- A decrease of around 10% in the price of long-distance calls;
	- A rise of FF7.04, including VAT, in the monthly subscription charge from FF45.76, including VAT, to FF52.80, including VAT. The special rate for low-consumption users will remain.
	These changes resulted in an overall decrease of 4.2%  in real prices for the national telephone service.

1.2.3 - International telephony

	International telephone service tariffs have fallen steadily over the last few years owing to an adjustment in percentage allocations of accounting rates and to growing competitive pressures on some relations (call-back and international phone cards).

	France Télécom’s policy has a two-fold aim: to simplify the tariff structure by merging geographical zones and making uniform reductions (of around 20%) and to concentrate reductions on a limited number of destinations.

	In 1995, international tariffs, particularly those for North America, were reduced by a modest 5.7% on average. On 20 January 1996 another and more substantial reduction (8.9%) was made to tariffs, particularly for zones outside Europe.

	Across-the-board comparisons of international telephone prices are never completely reliable. The DGPT decided to concentrate on comparisons between European operators for calls to countries adjacent to France, which account for 40% of total international calls.

	The following comparisons are based on the price of a six-minute call to Europe zone A, at standard time, excluding special options, calculated in French francs excluding VAT.  Exchange rates at 15 January 1996.

	1994	1995	
France Télécom
(France)	100	100	
Deutsche Telekom
(Germany)	109	109	
BT
Mercury
(UK)	83
70	75
65	
Telecom Italia
(Italy)	90	88	

	These comparisons show that France Télécom’s international rates are still very high despite the steep cuts made in March 1995. The operator made further progress with an 8.9% reduction on 20 January 1996, the biggest decrease since 1991.

1.2.4 - Leased lines

	The price of leased lines fell 2.4% on average between 1991 and 1994. This has failed to improve France Télécom’s position for leased line tariffs, to the detriment of users.

	The new tariff contract sets a larger reduction target: an annual average of CPI-10% over 1995-1998. France Télécom’s actions in 1995 indicate that the operator is keen to reach the target. The rates announced for 1996 confirm this trend.

Changes in the value of the leased line basket	average
1991-1994	1995	1996*
(forecast)	average 
1995-1996
(forecast)	
CPI-	2.4%	10.1%	10.4%	10.2%	

	France Télécom did not apply uniform tariff reductions. Rather, the reductions were modulated depending on the type of line and the distance involved. France Télécom focused its tariff policy on reducing rates for digital leased lines. Rates for international lines remained stable in 1995 but reductions would be introduced in 1996.

Type of circuit	1995	1996*
(forecasts)	
Analogue 	CPI-8.1%	CPI-6.8%	
Digital	CPI-12.8%	CPI-11.0%	
International	CPI-1.7%	CPI-18.0%	
Total	CPI-10.1%	CPI-10.4%	

	Special attention was paid to high-speed lines (64 Kbit/s and 2 Mbit/s), since these are likely to become the key service in the leased line segment.

Type of circuit	1995	1996*
(estimates)	
64 Kbit/s 	CPI-20.1%	CPI-20.0%	
2 Mbit/s	CPI-16.2%	CPI-16.1%	

	Despite these reductions, France Télécom’s prices are still high compared with BT’s.

	BT 1994
(1994 = 100)	BT 1995
without reduction	BT 1995 with reduction
(1)	FT 1995
without reduction
	FT 1995
with reduction
(2)	Ratio
(2)/(1)	
2-wire circuits	100	91	88	138
1996: 135	128
1996: 123	1.45
1996:1.40	
4-wire circuits	100	94	91	213
1996: 196	198
1996: 179	2.18
1996: 1.96	
64 Kbit/s circuits	100	102	97	171
1996: 152	143
1996: 124	1.47
1996: 1.47	
2 Mbit/s circuits	100	94	91	156
1996: 146	146
1996: 125	1.63
1996: 1.60	
Weighted average	100	92	89	152
1996: 146	140
1996: 132
	1.57
1996: 1.48	

	France Télécom has committed itself to offering 34 Mbit/s leased lines in all parts of France from the end of 1997 onwards. Current tariffs are still very high compared with those charged by foreign operators.

1.3 - Main changes in 1995

	A major change in 1995 was the introduction of a tariff diversification policy, as set out in the guidelines in the Contrat de Plan.

	In addition to changes to tariffs for the telephone service and leased lines, a number of other noteworthy measures were introduced in 1995 and at the beginning of 1996.

1.3.1 - Tariff diversification

	Tariff diversification is beneficial both to users and the operator. Rates that can be adapted to suit consumption patterns will stimulate growth of telecommunications usage.

	This diversification policy heralds the price structures that will be offered by operators in a competitive market. One of the most striking examples is the US market for long-distance calls. AT&T estimates that over half the call-minutes it sells are charged at reduced rates.

	The Contrat de Plan takes this development into account and stipulates that France Télécom must offer special rates suited to the consumption patterns of both residential and business users. The contract suggests special volume discounts for businesses and special rates for low-usage for residential users who regularly call the same handful of numbers.

	The Contrat de Plan also lays down a number of principles guiding the policy of tariff diversification: cost-oriented pricing, fair competition and non-discrimination.

	In 1995, the tariff diversification policy had no significant effect on telecommunications prices. It accounted for less than 1% of the total reductions made in 1995. However, these special tariffs have only just been introduced and are expected to become more widespread in 1996 as a result of intensive marketing and an improved structure for calculating discounts.

	The DGPT has a favourable attitude towards tariff diversification, which is in line with the abovementioned principles and also benefits users.

	Two examples of this position are significant:

	Modulance Global 

	Modulance Global is a tariff option that enables subscribers who pay a special monthly subscription to benefit from phased reductions in the price of national calls (i.e. except for local calls) and international calls depending on their level of consumption.

	The DGPT decided to check that this offer was compatible with current conditions for interconnection, to ensure compliance with the principle of fair competition. It therefore tested the savings that could be generated by using this service.

	The regulator checked whether France Télécom’s margins on regional and long-distance calls enabled the operator to offer selective reductions as part of Modulance Global, while maintaining its contributions to the local network and the long-distance call segment.

	The DGPT found that Modulance Global did not involve undercutting market rates, but moving prices closer to costs, which was beneficial to users.

	However, the combination of selective reductions under Modulance Global and the rising price of leased lines, which competitors need to provide similar services to Modulance Global, could create a scissor movement that would affect competitors (see Chapter 6).

Cross subsidy or no cross subsidy?
Non cohesion and fair competition

The US economist Gerald Faulhaber (1975) gave the following definition of cross subsidies: a price system is free of cross subsidies if the revenue derived from any one market segment exceeds the incremental cost of supplying it along with the rest of the market, but does not exceed the cost of supplying it in isolation, i.e. excluding the rest of the market.

Applying this principle to Modulance Global would involve checking that, for France Télécom, the subscriber group benefiting from tariff reductions generates an amount that exceeds the incremental cost of servicing that group, which in consequence is not cross-subsidized by other users.

The cohesion test used by the DGPT involves comparing direct revenue from Modulance Global subscribers, which is lower than the revenue that subscribers to Modulance Global generate, since direct revenue does not take into account calls to these customers at traditional telephone service tariffs, which, for the telephone service, are higher than the incremental costs.

Therefore, if Modulance Global responds satisfactorily way to the test of non-predatory pricing and fair competition, it passes Faulhaber’s test. Therefore there are no cross-subsidies between telephone users and subscribers to Modulance Global.

	Leased lines

	France Télécom offers various tariff reductions on leased lines, notably for volume discounts and for long-term contracts.

	The DGPT is in favour of reductions for high usage since this is in line with the emphasis on cost-oriented pricing and is also common commercial practice among operators.

	The regulator nevertheless asked France Télécom to increase the number of levels of consumption entitling users to discounts and to make leased lines between mainland France and the French overseas departments eligible for this type of reduction.

	Accordingly, France Télécom introduced more levels into its system of high-usage tariff reductions and made such discounts available on lines between mainland France and the French overseas territories.

	The DGPT took a particular interest in reductions for long-term contracts. As these contracts are likely to pre-empt the liberalisation of the leased line market, the DGPT requested that France Télécom allow subscribers to withdraw from such contracts without penalty.

1.3.2 - Other tariff-related measures approved in 1995

	A number of tariff-related measures taken in 1995 can be considered of major importance for various reasons. Numéris and Internet access represent significant technological advances in telecommunications. The increase in value-added tax in France had a considerable impact on telecommunications prices. Changes to geographically averaged rates and the introduction of a subscription rate for business users are improvements to the tariff structure.

	Numéris
	On 3 October 1995, France Télécom brought the price of digital communication via Numéris in line with the price of telephone calls, which is consistent with the majority of other European operators.
The complete digitisation of the network, bringing the cost of voice and data transmission into line, eliminated a price distinction between the two types of communication.
This is an important change, at least symbolically, since Numéris has thus become a commodity product.

	Internet
	In early February 1996, France Télécom opened an access service to Internet Access Providers (IAP), via 36 01 13 13, for the price of a local call, i.e. one telecommunications unit every three minutes with different rates applying to different time slots.

	This service was introduced in response to an explicit request from François Fillon, minister of telecommunications. Access to IAP at the local rate was extended to the whole of France. Previously, this had not been possible for users whose IAP had no representative office in their local area.

	Increase in VAT beneficial to consumers 
	The increase in VAT, which came into force on 1 August 1995, could potentially affect the Consumer Price Index. The impact of the rise has been estimated at 0.9 percentage points over 1995 and 1996.
	The DGPT, jointly with the DGCCRF, moved to forestall the impact of the new VAT rate on the price of telecommunications by lowering the price cap for 1995 and 1996. The reduction in the price of telecommunications should offset the increase in VAT.

	Changes to geographically averaged tariffs: fairness and regional development
	The tariff reform of 15 January 1994 introduced the concept of Extended Local Zones. This brought a considerable improvement for users since it substantially increased the geographical range and potential number of subscribers accessible at local rates.

	However, a few problems remained, particularly some small locations that could not reach the administrative centre of their department at the local rate. With the assistance of a consultation group including local politicians and consumer representatives, France Télécom acted to overcome these problems by changing the geographical basis for averaging tariffs.

	Five changes took place in 1995 and four more took effect on 27 March 1996 to promote fairness and regional development.

	Introduction of business subscriptions
	On 1 September 1995, France Télécom introduced two new subscription contracts for the telephone service specifically designed for business users:

	- 	The Contrat Professionnel designed for businesses with a maximum of three lines. The monthly subscription is FF37.94, excluding VAT, until 1 July 1996, when it will rise to FF47.00, excluding VAT.

	The Contrat Professionnel Présence designed for more complex installations (more than three lines). The monthly subscription is currently FF65.00, excluding VAT.

	These contracts meet France Télécom’s need to introduce cost-oriented pricing in an increasingly competitive environment, thus limiting the problem of loss-making provision of access to the telephone service (i.e. the access deficit). It is also a response to user demand for better service.

	The business contracts include specific after-sales service, guaranteed response times for repairs and maintenance and free listing in the Yellow Pages. They also give access to diversified tariffs specially designed for this category of customers.

2. Measuring customer satisfaction and the quality of the public operator’s service

In 1995, the DGPT took initiatives to become better acquainted with the needs of users and followed up the quality of products and services offered by telecommunications operators.
The Contrat de Plan contains measures designed to better satisfy customer needs and maintain high quality service. The measures reflect a requirement by customers for personalized consideration of their needs and customized, guaranteed quality of service.

2.1. France Télécom’s commitment to its customers: customized, guaranteed quality of service

	Customer needs vary according to the market. The distinction between households and business users is particularly significant. The service provided to customers can be improved principally through a more personalized approach to quality. Contractual relationships between customers and France Télécom form a suitable framework for meeting the requirements of different markets; they are also a key factor in service quality.

	In accordance with the timeframe laid down in the Contrat de Plan, France Télécom published specific undertakings on guaranteed service quality, adapted to the needs of the three main markets (residential, small enterprises and business). These undertakings were put into effect on 15 October 1995.

	France Télécom’s undertakings set general targets for efficiency, customer service and ease of use. They also include concrete measures, particularly on response time (repairs in case of breakdown, punctuality of appointments, handling of complaints) and financial compensation (refund of two months’ subscription) if the operator does not honour certain undertakings.

	The DGPT considers that France Télécom must be liable if it does not honour its commitments. The system of financial compensation therefore represents a guarantee for users.

2.2. New rights of customers: the possibility of controlling telephone consumption

	Under the Contrat de Plan, France Télécom was asked to implement concrete measures to make it easier for customers to be aware of and control their telephone consumption (see box below).

Customer satisfaction:
Measures in France Télécom’s Contrat de Plan

* Publication of France Télécom’s undertakings to residential, professional **and business customers, specifying the applicable penalties if the operator does not honour these undertakings.

* Improved, more needs-responsive contractual clauses on service quality and guarantees.

* Measures making it easier for customers to be aware of and control their telephone usage:

- the possibility of assessing telephone consumption at any time and setting personal limits,

- the possibility of choosing the conditions of access to services, particularly written and voice telematics services,

- wider choice in the lay-out of bills, in particular itemized bills, and methods of payment,

- more effective solutions to nuisance calls, within the framework of existing regulations,

- greater cohesion across France Télécom’s distribution network

* better complaint handling procedures.	

	In this respect, 1995 saw the launch of a new restricted service that can be customized by subscribers. For the monthly subscription of FF15.00 including VAT, this new service allows customers to choose the level of restriction they wish to place on their calls, with the aid of a command on the telephone number pad. The system is protected by a personal code. Several options are offered, which can be modified at any time. These range from unrestricted access, which allows all kinds of calls to be made, to locked access, allowing only freephone and emergency calls. 

	France Télécom is currently experimenting a service that allows users to choose the written and voice telematics services to which they wish to have access.

	As these measures are implemented, the DGPT will ensure that the solutions implemented result in a service offer that is consistent, flexible, clearly presented and needs-responsive.

2.3. Fair processing of complaints: the current situation.

	Users must be able to fully exercise their rights in the event of a dispute with the operator. The DGPT places particular importance on the quick and efficient handling of complaints by France Télécom.

	In accordance with the provisions in the Contrat de Plan, France Télécom reported on its progress on this matter. The operator has recently worked towards improving the quality of written replies to complaints, both in terms of content (the solutions proposed, presentation, a more personalized style and response times (less than ten days for a standard complaint, less than one month for complaints requiring a technical inquiry). France Télécom has also introduced a system to monitor accurately the number and purpose of written complaints, and the degree of customer satisfaction. Particular strategies, based on information and prevention, have also been developed for residential users, small enterprises and business customers.

2.4. Assessment and supervision of France Télécom’s general performance on service quality: indicators in the Contrat de Plan.

	Statistical indicators are used to measure the overall quality of services offered by operators. This is vitally important for consumers when the telecommunications industry is open to competition. The Contrat de Plan provides a framework for France Télécom's service quality.

	The Contrat de Plan between the French government and France Télécom contains undertakings by the public operator to improve the quality of its services. Eight quality of service indicators were selected. They set quantified targets, reflecting consumer requirements for service quality, that must be achieved before the Contrat de Plan expires. Four indicators refer to the national service and four to regional services.

France Télécom’s billing system:
current situation and changes underway
Conclusions of the Inspectorate General of Posts and Telecommunications in its report of January 1996

At the request of the DGPT, the Inspectorate General of Posts and Telecommunications investigated France Télécom’s billing system to assess the current situation and the changes underway. A report on the findings was published in January 1996. The conclusions in the report, outlined below, can be compared with France Télécom’s commitments under the Contrat de Plan:

* France Télécom has introduced several options designed to meet various needs (itemized billing, tariff diversification, billing for mobiles, special billing for businesses, etc.). However, these could still be more flexible on some points.

* Developments underway will improve the quality of billing

- By the end of 1996, the whole network will be equipped with traffic data recording centres, which will facilitate transmission of information,

- The debt collection module of the FREGATE application will be implemented, allowing outstanding accounts to be settled without recourse to legal action,

- France Télécom has moved to obtain ISO 9002 certification for calculating and billing, in line with an objective in the Contrat de Plan. Certification is expected in four pilot regions by the end of 1996 and will subsequently be extended to the other regions.

* New billing services will also be develop:

A number of options will be possible in the future, including billing on request, grouped bills, new layouts for itemized bills, itemization for telematics services and the possibility for subscribers to check their telephone usage. Some of these options are provided for in the Contrat de Plan. The report expressed disappointment with the lack of proposals for improving or changing the layout of bills.

In conclusion, the report highlights France Télécom’s pragmatic and positive initiatives for billing, but expresses concerns over possible delays in the implementation of the new applications and consequent reorganisation.	

CHAPTER 8 

Clarifying relations between La Poste and the French government

The Contrat de Plan signed by the French government and La Poste was applied for the first time in 1995, a year that saw a significant decrease in the revenue generated by the public operator's mail business. It is therefore useful to consider the changing role of written material in the information society. Also in 1995, relations between the government and La Poste were normalized in terms of official-paid mail for government offices. This system has now been abolished in accordance with the law of 1990. The year also saw the inauguration of tripartite talks involving the government, the press and La Poste. The aim of this round-table discussion was to define a new relationship between the press and La Poste over the next ten years.

1.  Monitoring the Contrat de Plan 

	Signed on 14 October 1994, the Contrat de Plan between the government and La Poste came into effect on 1 January 1995. It specifies the framework of management within which La Poste will implement the broad outlines of group strategy for the period 1995-1997.

	1.1 - Mail activity

     In 1995, mail-related revenues were impacted by an economic slowdown during the second half of the year and by two industrial disputes that affected the public operator in June and December. If the trends observed in 1995 are confirmed in 1996, both in volume and value terms, then it could be necessary to take a fresh look at the macro-economic hypotheses that underpinned the preparation of the Contrat de Plan in 1994. 	
	111. Changes in the mail activity of La Poste: a new role for written material in the information society?

Mail activity used to be closely correlated with a country's gross domestic product. The relationship between the two variables can clearly be seen over a five-year period (1990-1994). In 1995, however, a sudden break occurred. This suggests that it would be useful to look at the future of mail activity and, more generally, the role of written material in the information society. Figures show that although the volume of La Poste's mail activity outstripped overall economic activity during the period 1990-1993, it slowed in 1994 and again - to a greater extent - in 1995. 

Although the decline in traditional correspondence - the 20 g letter - in relation to overall traffic is a recognized fact (-3% between 1993 and 1994), e-mail services and the direct marketing segment were also on a downtrend in 1995. Only non-addressed direct mailing - an activity open to competition - saw a slight upturn in 1996, although the increase was three times smaller than growth figures observed previously. 
It would be useful to study the commercial reasons for this situation. The public operator has undertaken to modify its commercial policy on the most exposed segments of its activity, but this explanation is in no way sufficient. This is because the traditional markets of the public operator are undergoing a profound change- the mail market is maturing, while the structure of the e-mail market is undergoing significant modifications.  

Comparative postal traffic

	FRANCE	CANADA	GERMANY	NETHERLANDS	UK	
Number of postal objects per capita

	417	399	242	456	301	

Another significant factor is that mail is becoming increasingly "virtual" or electronic. This phenomenon has been accentuated by the development of new information technologies and - for La Poste's biggest customers - it is often accompanied by a rationalization of mail procedures. As more and more French households acquire Minitel videotex terminals, so remote payment has developed, replacing the voluminous quantities of mail regularly sent out by private individuals. The development of Electronic Data Interchange, a movement in which the public operator is participating in cooperation with other European postal bodies, should replace traditional postal flows in the long term.

112. Quality of the mail service at national level

Service quality fell in 1995, forcing La Poste to make efforts to improve the situation. In order for La Poste to meet the objectives set by the 1997 Contrat de Plan, a specific "mail quality" plan was set up. The plan concerns three products: the letter, the Colissimo service and the Postimpact service. Its main aim is to cut long delivery times. The objective for 1997 is to achieve a rate of just 3% on any type of letter delivered two days after posting. More broadly, the public operator is adopting a more dynamic commercial stance in an effort to:

-  negotiate a global sales agreement with mail order companies
- revamp the product range to place the focus on the so-called "ready-to-post" items
- overhaul postal charges as part of the future general revision of pricing
- set up a new sales organization for the corporate sector, offering such features as a special toll-free number for business.

113. Measuring the quality of the domestic mail service

	- The legal framework: the obligation to achieve results

The law of 2 July 1990 concerns the organization of the public postal and telecommunication service. Article 8 of the law refers readers to the specifications of La Poste, with particular reference to the "conditions in which the quality and availability of the service are guaranteed".

The preamble to the specifications applicable to La Poste states that "the activities of La Poste satisfy the needs of users in the best economic and social conditions for the community" and that "La Poste offers cost-effective services corresponding to the needs of the community ". Article 23 gives the public operator the obligation to achieve results in service quality, noting that "La Poste takes steps to provide the best quality of service possible. To ensure that standards of quality are maintained, La Poste may organize periodic inspections in consultation with users".

Service quality obligations are set out in the 1995-1997 Contrat de Plan. Article 5 indicates that service quality must include the criteria of rapidity, regularity and service. The Contrat de Plan provides for La Poste to continue measuring the quality of postal services through an external organization and to "progressively generalize the external measurement of customer satisfaction ".

	- The system in place

In 1991, La Poste commissioned the opinion research institute SOFRES to develop an external system for measuring service quality. Since 1995, the survey system introduced by the institute has regularly measured the time taken to deliver several postal products and one e-mail product, on the basis of universal service criteria. The survey conducted by the SOFRES provides national results by postal area, for the main flows and distribution modes. Delivery times are measured from the time the stamp is placed on the product to the date on which it is received by the addressee. The process uses real mail sent to a panel of users -- businesses and households -- all over France. In 1994, SOFRES changed its methodology by extending the survey over ten months - July and August were not counted - and by extensively broadening the panel of households and businesses.

The external system of measurement was modified in 1995 in order to reflect certain factors more accurately:
- different types of customer, notably businesses and mail order firms,
- main economic flows such as intercity mail,
- expectations of regulatory authorities, particularly with reference to mail traffic inside cities and regularity of delivery.  

In addition to the SOFRES quality survey, La Poste periodically commissions other external surveys on a variety of topics in order to assess its image. These surveys concern a representative sample of the population, put together using the quota method.

	1.2 - Financial services

	The highlight of 1995 was a change in the method of calculating interest payments on postal-account deposits held with the French Treasury. The switch from administered rates to a market-based benchmark (i.e. 13-week Treasury bills) proved to be beneficial to La Poste. Buoyed by high short-term rates, the annual rate of interest on deposits rose to 5.8% compared with 5.2% in 1994.

	La Poste retained its overall share of the financial services market in 1995, offering customers a broader range of products (term accounts, etc.). La Poste conducted an active policy in terms of home savings plans and signed an agreement with Crédit Foncier de France to distribute government-sponsored "0% APR" loans to housebuyers.
	
	La Poste undertook a sweeping reorganization programme, the Atlantis project, to boost productivity gains in financial services. Net banking income per employee should reflect the impact of these measures. 

	In compliance with the provisions of article 6 of the Contrat de Plan, La Poste pursued its policy of debt reduction in 1996. It also introduced more active debt management measures, with a view to reducing the financial burden. As in 1994, La Poste did not rely on long-term loans to raise financing. Total medium and long-term debt (excluding interest accrued but not outstanding) should total FF31.2bn at the end of 1995 compared with FF33.3bn at the end of 1994. 

	The tax burden will increase significantly because 1995 was the first full year for which La Poste was liable to ordinary-law taxation (with the exception of local taxes). Before the end of 1996, the government will present parliament with a report itemizing the expenses incurred as a result of La Poste's nationwide service requirement and the contribution the operator is required to make to regional development expenditures. 

	Total investments exceeded FF2.5bn. Mail is La Poste's main area of investment, with the chief strategy being programmes focusing on e-mail platforms and the sorting of flat items.

The first appraisal of the outturn of the Contrat de Plan will be presented in 1996. It should show the progress made towards reaching set objectives, as well as the main measures envisaged by La Poste to correct any drift from initial objectives. 

	2.  The official-paid mail service: dismantling the exemption procedure
	
Official mail sent between administrative departments is covered by an exemption system (franchise postale), whereby it is considered as prepaid. The system also applies to the information and assessments that the Internal Revenue Services send to taxpayers. Lastly, it is open to mayors, acting as representatives of the state primarily through their functions as official registrars.

The 1990 reform positioned La Poste as an independent public operator and set up new relations between the government and La Poste. Consequently, it was clear that the system of official-paid mail would disappear. The specifications drafted for La Poste in 1990 indicated that the system would disappear once and for all on 31 December 1995, following a five-year transition period during which administrative departments and the postal operator could plan appropriate measures.

The exemption system did not mean that La Poste was providing its services free of charge; simply that senders did not have to stamp their mail. Every year, the government paid La Poste a lump sum corresponding to services provided, on the basis of the number of letters counted by La Poste, i.e. FF36bn in the finance bill. This figure has remained constant since 1991 but is nevertheless subject to budgetary regulations which vary from year to year. In this way, FF3.481 billion was paid in 1991, FF3.418 billion in 1993 and FF3.422 in 1994.
 
With the elimination of the system, and effective 1 January 1996, the former beneficiaries were forced to adopt the same stamping and billing procedures used by all La Poste's customers. In this way, each sender now pays for the services requested from La Poste. 

The Inspection Générale des Postes et Telecommunications and the Inspection Générale des Finances conducted a study in July and August 1995. Their aim was to evaluate the expenditure of each administrative department and clarify the procedures to compensate ministerial departments for the charges that they now have to pay. Recall that ministerial departments are among La Poste's biggest customers, primarily eight major accounts that were sending mail to a value of over FF50m under the old official-paid system: close to FF900m each for Public Accountancy and the Tax Office, close to FF300m for the ministries of defence, the interior and education, and almost FF150m for the ministry of justice, Customs & Excise, and the ministries of public works, housing and transport. Seven other ministerial departments, including the Ministry of Finance and Economy and the Ministry of Industry consumed between FF4 and 50m. These estimates provided a basis for apportioning the total amount among ministerial departments. Each individual total can be adjusted as necessary during the first year of operation. 

Under the terms of the budgetary procedure adopted, the total amount corresponding to the old official-paid system will be divided among the ministries, according to a decree issued by the Minister of the Budget. In this way, additional management resources will be provided for each ministerial office concerned.

The overall operational appropriation to local administrative areas was increased by FF97.5m in order to enable mayors to cover the additional charges caused by the elimination of the official-paid system. Also, a further FF87.41m was allocated to the budgets of the regional and departmental councils; earmarked for decentralization, the funds were intended to offset the expenses arising from the transfer of jurisdiction from national to regional level within the scope of the decentralization laws. 

A circular prepared by the DGPT and the Ministry of the Budget outlines the technical and commercial arrangements for the elimination of the system. These are the responsibility of the central administrative directors responsible for resource management.

To help administrative managers introduce a new postage system in 1996, a temporary unit has been set up to assist government offices.

3. Round-table discussions involving the government, the press and La Poste

	Since 1980, relations between the press and La Poste have been governed by the Laurent agreements. In 1992, the Ministry of Posts, the chairman of La Poste and representatives of the press signed a memorandum of understanding.
	This institutional framework promoted dialogue between the press and La Poste by maintaining on-going discussion and specifying the rights and obligations of each party in terms of service quality. It also allowed a less disproportionate breakdown of the costs arising from the obligatory transport and distribution of newspapers and magazines.

	However, economic and social trends have made it necessary to adapt the existing arrangements. For this reason, the Contrat de Plan signed in October 1994 by the government and La Poste put relations between the public operator and the press on a new footing. The new arrangements incorporate the general principles of company management and financial equilibrium required of La Poste, while taking into account the service quality requirements involved in press distribution. 

	The press/post round-table should lay down guidelines defining the new relationship between the press and La Poste over the next ten years. The discussions were chaired by Mr Yves Galmot, sectional manager at the Council of State, who took over the function in January 1996 from Mr Michel Boyon, Maître des Requêtes at the Council of State.

Participants in the round-table discussion involving the government, the press and La Poste

The table is chaired by Mr Yves Galmot, sectional manager of the Council of State

Members of parliament
‑ Mr Jean Besson, MP for the Rhône department, Chairman of the Higher Public Service Commission for Posts and Telecommunications,
‑ Mr Gilles Carrez, MP for the Val de Marne department,
‑ Mr Jean Cluzel, Senator of the Allier department, rapporteur for the Budget and Communications to the Finance Commission and the Senate.
Representatives of the French Press Association: the FNPF
- Mr Jean Miot, Chairman of the FNPF,
‑ Mr Bernard Porte, Vice‑Chairman of the FNPF, Chairman of the SPPMO, Chairman of the Board of Directors of Bayard Presse,
- Mr Jean‑Marc Detailleur, Vice‑Chairman of the FNPF, Chairman of the FNPS,  Chairman and Managing Director of the publishing house Lamy SA,
‑ Mr Jacques Saint-Cricq, Vice‑Chairman of the FNPF, Chairman of the Syndicate of Regional and Daily Press (SPQR), Chairman of the Board of Directors, "Nouvelle République du Centre‑Ouest".
Representatives of the Information and Magazine Press Syndicate (SPMI)
‑ Mr Wouts, Chairman of the SPMI and Chairman & Managing Director of the operating company of "Le Point",
‑ Mr Paul Dupuy, Chairman and Managing Director, Excelsior Publications. 
Representatives of La Poste
‑ Mr Claude Bourmaud, Managing Director of La Poste,
‑ Mr Claude Viet, Assistant Managing Director in charge of Posts, La Poste,
‑ Mr Jean‑Paul Marchetti, Assistant Managing Director in charge of Finance, La Poste,
Representatives of the government
‑ Mr Yann Petel , DGPT,
‑ Mr Brun-Buisson, Legal and technical department of information and communication,
‑ Mr François Jonchere, Budget Division.

	The inaugural meeting of the round-table took place on 15 November 1995 in the presence of the minister for posts, Mr. François Fillon, and the conclusions should be made known before Summer 1996.
	The round-table will examine a number of topics such as the definition of an obligatory service, service quality, targeting of assistance of the press and new pricing guidelines.
	To supply the round-table with information for its studies, a tripartite technical commission has been set up, chaired by the DGPT and bringing together the government, the press and La Poste.

4 - Price regulation of mail services offered by the public operator La Poste

The legal framework relating to the pricing of mail services offered by the public operator is defined in La Poste's terms of reference as well as in the Contrat de Plan.

4.1 - The regulatory framework

Price modification procedures differ according to whether the product is in a sector of activity reserved for La Poste or one that is open to competition.
With respect to prices of reserved products, article 33 of the terms of reference states that La Poste must submit its proposals to the DGPT and the ministry of the economy for approval. For products in sectors open to competition, La Poste has a free hand in setting prices. It sends the relevant information to the DGPT and the ministry of the economy, who make sure that the pricing policy adopted by La Poste for this type of product respects the rules of competition.

Special procedures apply to the pricing of objects aimed specifically at companies (Postimpact, Coliéco TS, catalogues). These procedures state that La Poste is entitled to set up partnerships with its biggest customers (mail order firms, advertisers, etc.). This type of relationship is governed through standard contracts that are submitted to the regulatory bodies for approval. 

4.2 - A contractual system set up in the 1995-97 Contrat de Plan with a view to revitalizing the pricing policy of La Poste

The Contrat de Plan defining the obligations of La Poste states that the mail activity must sustain its own development and generate a sufficient margin to cover investments, perform its public service role and face increased competition. In the field of reserved services, the objective of pricing policy is to improve the rate of cover of loss-making products and to develop products that generate profits. 

In view of these objectives, it will be necessary to modify the pricing structure of postal products and limit price increases on products for which La Poste has a monopoly.

Article 2, paragraphs 4 and 5 of the Contrat de Plan encourage La Poste to define a more cost-effective pricing structure for its products “while continuing to charge the same basic prices for all reserved services, regardless of geographical location, and to guarantee equal access to the network". The Contrat de Plan specifies that the pricing structure should be designed to limit any creaming-off that would jeopardize the viability of the operator responsible for providing a universal service. To this end, La Poste must develop pricing formulas that are better suited to the economic structure of its markets. The Contrat de Plan makes provision for a system that encourages La Poste to optimize its pricing policy for monopoly services. Article 2, paragraph 3 states that from 1995, the average overall increase in the prices of reserved products will be pegged to the consumer price index over the period 1995-1997.

A comparison of postal prices and consumer prices shows that the former have increased faster over the past nine years, with the index rising by 30 points between 1986 and 1993.

	1986	1987	1988	1989	1990	1991	1992	1993	
Consumer price index
 (1)	102.7	105.9	108.8	112.7	116.5	120.2	121.6	125.8	
Postal price index
 (2)
	104.2	107.8	110.1	111.5	115.5	118.7	124.3	130.8	
(1) source: INSEE
(2) source: La Poste
Postal prices and consumer prices: 1985 = 100

4.3 - 1995: moderate price increases

No across-the-board revision of postal prices was undertaken in 1995. However, La Poste readjusted the pricing of its financial services. Postal order tariffs were rebalanced in order to ensure that this service will eventually cover its costs. Price increases for other financial services were moderate (2.1%). 

In September 1995, La Poste presented a draft for a general review of postal charges. In view of the importance of the project, which would considerably modify the principles underpinning the price structure, the DGPT decided to undertake a close and exhaustive examination of the impact of the reform, which established the principles of linearization, i.e. prices calculated by weight and no longer by weight bracket. This makes it possible to modulate charges for reserved services, notably bulk mailing, in line with customer demand.

In compliance with the objectives set by the Contrat de Plan, the project presented by La Poste provides for a moderate price increase. In particular, the DGPT must make sure that the price capping clause is respected. For postal services open to competition, the average suggested increase will also remain below the rate of inflation.

In addition to the linearization of tariffs, the proposed reform is based on two main principles:

- a different price policy for each segment of the customer base:

	·	for the general public, a simple pricing policy associated with the development of prepaid products (e.g. Diligo, and simple, prepaid illustrated envelopes launched in 1995);

	·	for companies, more flexible and more appropriate pricing, taking into account new criteria that offer a greater incentive to the development of mail services (sales contracts, linearized charges aimed at rebalancing the pricing structure and make it clearer). 

- the cost oriented pricing recommended by the European Commission should enable La Poste to consolidate its position in markets where competition is becoming increasingly fierce.

Cost-oriented pricing, which complies with the principles set out in the European draft directive, should enhance La Poste's ability to withstand creaming-off by eliminating sources of guaranteed income that could be targeted by competing operators. The structure also highlights a need to reduce cross-subsidies, whereby individuals are subsidized by companies. 

The wave of industrial unrest that affected France at the end of 1995 led La Poste to defer application of the general price increase in postal services.

The new postal charges are scheduled to come into effect on 18 March 1996. The readjustment corresponds to an average increase of 3% , i.e. lower than the cumulative rate of inflation between July 1993, date of the last increase, and December 1995. In accordance with the agreement, price increases have been lower than the INSEE index of consumer prices. The price increase on the basic stamp (+36% between 1985 and 1995) is among the lowest for everyday consumer goods.

However, the average planned increase of 3% is not global. It conceals discrepancies between products that emerged as a result of tariff linearization. The increase is greater for lighter products than for those in the higher weight brackets. For example, the increase for letters weighing between 20 g and 50 g is just 2.27% (10 centimes), while the charges for letters weighing more than 50 g remains unchanged. The price of pre-paid products (stamped envelopes, Dilgo) and Ecoplis over 20 g remains unchanged.

The price structure was simplified for the product ranges most frequently used by companies. The lower weight bracket of Postimpact (addressed direct mailing) has been extended from three to four products and the weight has been increased from 20 g to 35 g in order to ensure that price differences between brackets is not excessive.

 

Chapter 9
THE POSTAL AND TELECOMMUNICATIONS SECTORS 
CONTRIBUTE TO REGIONAL DEVELOPMENT

Regional development is a subject of fundamental concern to the French people and to their elected representatives. The detailed guidelines for action in this area were laid down by the Town and Country Planning and Regional Development Act of February 1995.
The DGPT makes sure that operators in the postal and telecommunications sectors are all involved in the regional development effort. It also plays an active role in defining the national programmes on regional development and sectoral telecommunications, and has also helped draft a circular on the best way of eliminating "environmental eyesores".

1. Town and Country Planning and Regional Development Act

The main event of 1995 was a new law on town and country planning and regional development, introduced on 4February. The new Act changed the general operating environment for both La Poste and France Télécom. 

The main points are set out below. (Note that France is divided into 22 regions and 100 administrative departments.)

- a national programme on regional development;
- the programme comprises regional and departmental sections; once complete, it will have force of law;. 
- the national programme incorporates a number of sectoral programmes, including one for the telecommunications sector through to 2015.

The Act also sought implicitly to lift the moratorium on the freezing of public services in rural areas, as adopted by the Mende regional development committee (CIAT) on 10 May 1993. It implies payment of financial compensation for costs arising from public-service and regional development commitments.

Moreover, article 29 of the Act gives a detailed description of a procedure for overseeing cuts or closures in public services at local level. When the enabling decrees have been adopted, this procedure will make it possible to phase out the moratorium on public services in rural areas.

A circular from the prime minister dated 25 August 1995 sets out the procedures for implementing the national programme on regional development. The programme is to have a two-fold purpose, which forms the core of regional development policy and emphasizes respect of the environment and sustainable development. 

Drawing up the national programme for town and country planning and regional development?

	The programme is defined at five levels. The first three levels - regional, ministerial and nationwide cross-functional groups - is  seeking to provide a diagnosis, a prospective analysis and a summary of the main choices to be made at sectoral and territorial level. The findings of these groups are being used in the work of five commissions - each one looking at a specific topic - set up to present their report to the government. The regional development delegation, DATAR, will prepare a summary of all these contributions to be used as part of the preliminary project for the national plan.
1 - At regional level, the Chairman of the Regional Council and the Regional Prefect are responsible for consultation with local partners (elected representatives, municipalities, socio-professional and consular bodies). The Prefect sends a summary report to the DATAR. 
2 - At national level, each minister and each organization or public company placed under his authority, are requested to draft a contribution setting out all the policies and structural initiatives to be undertaken BY 2015 and to assess the impact on town and country planning. This contribution is then sent to the DATAR.
3 - Four cross-functional groups were set up to undertake a prospective analysis. Secretarial services are provided by the Commissariat Général au Plan. All group reports are made public.
4- Five national commissions, each studying a specific topic. Secretarial services are provided by the DATAR. The role of the commissions is to study the following and divulge their conclusions:
	- Commission I: economic development, employment and population,
	- Commission II: towns, territorial organization and collective services,
	- Commission III: networks and territories,
	- Commission IV: rural development,
	- Commission V: environment and sustainable development.
These consultation bodies are made up of national and local elected representatives, representatives of central administrative offices, economic and social bodies and other experts.
The DGPT is involved in the work of Commissions II, III and IV (with La Poste for Commission IV). At the beginning of 1996, the commissions are to meet in a plenary session with the elected representatives of the Conseil National de l'Aménagement et du Développement du Territoire (CNADT) . The final decision on the make-up of the commission will be taken by the government at the beginning of 1996. 

The DATAR is responsible for organizing and coordinating the different levels of study. It will also summarize each group's findings in the form of a preliminary project for the national plan.

2. La Poste's contribution to regional development

2.1- A postal network to serve rural areas

Postal services in rural areas: a long-standing tradition

The dense network operated by La Poste makes it one of the leading service providers for France's *** regions. La Poste is among the biggest employers in each department, with 80% of jobs being outside the Paris metropolitan area. It is a leading economic player, injecting an average of almost FF700 million into the economy of each department every year.

La Poste provides mail delivery and over-the-counter services, with 73,000 postal rounds completed regularly and 17,000 points of contact, including 14,000 post offices.

Owing to its history, La Poste has put down strong roots in rural areas. A total 38,000 postal rounds, i.e. more than half of the total, concern communities of less than 10,000 inhabitants. Moreover,16,800 daily postal rounds and 10,000 points of contact - 60% of the whole - serve communities with fewer than 2,000 inhabitants. Moreover, the density of postal outlets in rural areas (1 for 800 inhabitants) is far higher than in urban areas (1 for 2,500 inhabitants). People living in the country therefore have a far denser postal service than city dwellers. 

1

Type of community	communities as a  %	population as a  %	total offices as a %	
 < 2,000 inhabitants 	87.8	25.1	58.15	
 2,000 inhabitants	12.2	74.,9	41.85	
Total	100	100	100	

THE DIFFICULTIES OF DEFINING RURAL AREAS

Over 140 years ago, rural communities in France were defined as those with fewer than 2,000 inhabitants in the chef lieu (administrative centre), and therefore not forming part of an urban area. Rural communities form a category that does not always coincide with the rural world per se. Many of the communities defined as rural are in fact outlying suburbs of towns or cities. On the other hand, many small towns and villages with more than 2,000 inhabitants are an integral part of the rural world, but are never counted in the statistics. 

	Recognizing the need to make a more detailed analysis, the French statistical office, INSEE, created a new category in 1975: "Industrial or Urban Population Zones. These are areas encompassing rural and urban communities, defined on the basis of daily commuter patterns, the relative importance of the farming population and the presence of  industrial or service establishments. Rural communities in these areas are considered as  fringe municipalities. Rural communities located outside these areas are considered to be part of the so-called remote rural countryside.

	Thus, INSEE considers any community of less than 2,000 inhabitants to be rural and makes a distinction between fringe municipalities and remote rural communities. This difference is difficult to incorporate into the policy on postal services, which is organized on a national basis and does not take into account the numerous and varied components of rural areas. It could also be said, however, that La Poste helps to iron out differences between urban and rural lifestyles by not taking rural diversity iTto account. 
2

2-2  The "zero closures" policy introduced by the chairman of La Poste

At the request of the President of France on 21 June 1995, the chairman of La Poste resolved not to close down any post offices in rural areas before 1997, the last year of the current Contrat de Plan. He also stated that no staff cuts would be made in small post offices employing fewer than five people. 
In return, La Poste undertook to increase productivity and to improve the profitability of post offices in rural areas by giving priority to commercial activities. 

2-3- Changing organizations and infrastructure

Changes that may be expected as part of the legal and regulatory framework put in place by the Act of 4February1995 and by the forthcoming Contrat de Plan

The DGPT is already looking at how best to lift the moratorium set by La Poste in its role as public operator on 21 June 1995, notably with respect to network management after 1997. This will involve substantial changes to the service offering and to service quality (e.g. the opening hours of post offices) as well as the definition of objectives in terms of regional development and user services. 

Pursuant to the Town and Country Planning and Regional Development Act, the government could set La Poste precise targets to be met before the next Contrat de Plan (1997/2001), while allowing the operator considerable leeway in choosing the means of achieving them. The objectives of universal service quality must comply with those set by the future directive on postal services in the EU, adapted to each member state. Such objectives could include next-day letter delivery nationwide (including rural areas), daily delivery before a certain time depending on local conditions, without deterioration in service quality, set times for the last collection according to local requirements and opening hours for post offices and over-the-counter services (these indicators have yet to be defined). 

Developments organized and controlled through independent management

Maintaining postal services and activities on a nationwide basis gives a boost to rural areas. Under the terms of the planning policy defined by the government in the Act of 4 February 1995, La Poste is required to provide access to the collection and sales network, to organize a nationwide daily delivery service (on working days), and to apply the same tariffs for services in its reserved area of activity, irrespective of geographical location.

Nevertheless, in compliance with the Contrat de Plan, the company must cover its costs. It must therefore streamline the network and make it more flexible.

La Poste demands the right to modify its in-house organization. Its aim is to narrow the gap between the additional cost of maintaining a nationwide presence, estimated at some FF3bn, and the finagcial consideration it receives in the form of a 85% rebate on local taxes.

Since the middle of the 1970s, efforts to revitalize postal services have focused on extending its range of administrative services and introducing work-sharing. These attempts to diversify have had mixed results. 

A total 800 post offices now offer a broader range of administrative services, most of which come within the ambit of the Ministry of Finance, e.g. the sale of road tax licences and excise stamps. However, in other areas -- the sale of train tickets, the display of job offers on behalf of the national employment agency, and other administrative services (identity card and passport applications, car logbooks, etc.) -- little progress has so far been made.

The introduction of work-sharing has had more promising results. This involves the use of personnel who combine a part-time job at the post office with another activity, either as salaried employee or freelance workers.

Work is under way to develop new ways of optimizing the network. These are part of the guidelines set out in the Contrat de Plan, which urges the company to form partnerships with public or private operators to maintain or develop postal services. 

To develop the flexibility of post offices, trials are currently under way in collaboration with private-sector networks (e.g. retailers authorised to sell stamps), and public partners (local authorities, multi-service points or postal points). These new activities, and particularly the agreements signed by La Poste with local authorities, have yet to be consolidated -- or, in some cases, validated -- at the regulatory level. This means they must not impinge on the jurisdiction of municipalities or violate the rules governing competition in the distribution of financial products. 

A vital boost from the government

The new activities and partnerships have definite possibilities in terms of regional development and have already been adopted in a number of local projects. Nevertheless, the DGPT notes that even though a policy based on new services and partnerships can make a useful contribution to regional development, it could quickly run into trouble unless legislation establishing the jurisdiction of municipalities is rapidly adopted. 

Whatever the case, La Poste's principal contribution to regional development in years to come consists in developing new activities for post offices and employees. The state must foster innovative forms of network management on the basis of the existing network.

More generally, and looking forward to 2015, the presence of post offices in rural areas cannot be separated from the broader issue of maintaining a nationwide "minimum local service" in a number of high-priority fields (communications, social services, transport, etc.). Also, forthcoming technological and demographic trends must be taken into account. The aim is to offer a modern and open-ended solution that can satisfy, both quantitatively and qualitatively, service requirements in all areas of the country where population flight or social problems have contributed to the closure of local services.

Negotiating an agreement for sub-post offices

La Poste's network comprises 14,000 post offices and 3,000 postal branches. Of this total, 85% are in rural areas and 50% in municipalities with fewer than 1,000 inhabitants. Two-thirds of the postal branches have a workload equivalent to two hours daily, while half have a workload equivalent to one hour daily. Two-thirds are managed by private individuals and one-third by  the municipalities on the basis of various agreements that have no real basis in law.

In order to keep this contact network going, and to ensure its viability, these branches require a clear legal status..

In March 1995, the DGPT began negotiations with the Direction Générale des Collectivités Locales, the Direction du Budget, the Direction du Trésor and the DATAR with a view to defining a service agreement that establishes a partnership between La Poste and local authorities.

Under the terms of the planned agreement, the municipalities offer their services to La Poste in pursuit of a dual objective: to promote regional development and balance the company's books. 

Working in conjunction with the relevant ministerial departments, the DGPT must verify that the legal framework complies with the rules of competition (since La Poste offers services in financial products) as well as with the rules governing the right of municipalities to provide national public services. Under the terms of the law of 1983, municipalities cannot exceed the functions invested in them by national laws and legislation.  

The DGPT is currently finalizing the legal basis of the system in order to give these agreements substance in law.
3

CONTACT POINTS BY CATEGORY OF POSTAL ESTABLISHMENT
	 AT 31 DECEMBER 1994
 
Post offices			
Postal branches and postal correspondents		
urban area	rural area	Additional
postal service counters		TOTAL	
9,825	2,397	1,629	3,068	16,919

	 Source: 1994 key figures for La Poste

	 
BRIEF HISTOR  OF LA POSTE'S ROLE IN REGIONAL DEVELOPMENT
 
 1960-1974: Public services are gradually closed in rural areas as people flock to the cities in search of jobs in industry or services. La Poste is slow to follow the movement and is therefore frequently seen, in the most remote rural communities, as the last public service to remain open, together with the town hall and the school. 
 
 1974: 	The prime minister makes a declaration of general policy to prevent public services in rural areas from being closed and to introduce specific measures to revitalize rural France.
 
 1979: 	New administrative services are introduced in rural areas. Up to 2,500 post offices begin to offer rural communities new non-postal services on behalf of the government (e.g. identity card application forms for the Ministry of the Interior, excise stamps and road tax licences for the Ministry of Finance and the display of job offers for the national employment agency).
 
 beginning 1990: The first departmental "postal presence" plans are drawn up to help the departmental directors of La Poste decide, on the basis of economic, social and demographic criteria, where post offices should be opened.
 
 April and September 1990: Senator Delfau publishes his report on consolidating the postal network in rural areas. La Poste later applied most of the 11 measures recommended in the report (creation of local postal councils, introduction of the "Allô Facteur" system, faxes and travelling financial consultants). La Poste also brought into general use the concept of postal points and diversified its offering (signing agreements with private partners such as the Total network, tobacconists and shopkeepers involved in the "1,000 villages" operation.).
 
 1991: 	The prime minister imposes a moratorium on the closure of public services. At the same time, he sets up a number of public service commissions and programmes for the 25 rural departments most at risk from the effects of depopulation.
 
 1993: 	The prime minister extends the moratorium, commissions and programmes to all rural departments. 
 
 February 1995: The Town and Country Planning and Regional Development Act is passed.
 
 1995: 	The prime minister extends the measures on public service commissions and plans to all departments. On 11 October 1995, the government publishes the enabling decree with a circular for prefects concerning article 28 of the Act. The texts refer to the departmental commission responsible for organizing and modernizing public services and to the departmental programme of public services. 
4

3. The role of telecommunications in regional development

In the telecommunications sector, a number of points can be raised to illustrate the major role played by the DGPT in satisfying concerns related to regional development.

31.France Télécom's Contrat de Plan and its contribution to regional development

	On 13 April 1995, France Télécom signed a Contrat de Plan with the government, setting objectives to be met by France Télécom in the field of regional development.

	The Contrat de Plan sought to develop the service offering and to improve the quality of customer relations throughout France. 

	The tariff policy adopted by France Télécom makes a substantive contribution to regional development. Lower prices for telecommunications services play a fundamental role, modifying the way in which the problem of telecommunications services costs is addressed from a regional development perspective.

	National calls may still seem costly. However, prices have already started to fall and the process may be expected to continue.

	Moreover, tariffs are evened out on a geographical basis, pursuant to the principle that everyone is entitled to equal access to telephone services. Disparities in terms of distance do exist in certain areas, where tariff districts are superimposed on extended local zones. A number of adjustments to the geographical tariff structure will therefore be made. 

	France Télécom undertakes to develop tele-activities and teleworking on its own behalf in order to facilitate job relocations (see chapter 12). Teleservices could be further developed through partnerships with municipalities and businesses. 

32. Respecting the moratorium

The moratorium introduced on 10 May 1993 by the Mende CIAT set three objectives:
	–keep the number of contact points with the public,
	–maintain user services by keeping the same service offering,
	–make no changes to opening hours. 

This moratorium was respected by the public operator.

33. Active preparation of the sectoral telecommunications programme

	The law of 4 February 1995 (article 20) stated that a sectoral telecommunications programme had to be defined by decree, eighteen months after the law was passed. The role of this programme was to identify a number of initiatives to be conducted before 2015.

	The programme had to specify the objectives pursued in developing and modernizing the infrastructure and basic services in this sector, while also showing how to develop new forms of remote access to public services and new advanced services in communication or information.

	The DGPT played an active role in discussions. A working group set up under the aegis of the Institut de l'Audiovisuel et des Télécommunications en Europe (IDATE) drew up a report establishing the guidelines for the national telecommunications programme. 

	The working group put forward a number of guidelines, taking into account the development of new technologies and new legislation paving the way for greater competition:

	–provide the whole country with advanced telecommunciations services;
	–promote the principles that will ensure equal access to services for users and a level playing field for
                  operators;
	–promote the use of innovative services;
	–assess the implementation of these initiatives.

	This study will make a valuable contribution to discussions, and particularly to the work of the commissions, which will each begin work on a specific topic relating to the regional development programme at the beginning of 1996.

34 . Increased efforts for the environment

	France Télécom's Contrat de Plan also incorporates a policy of making telecommunications networks more environment-friendly.

	The memorandum of agreement on the installation of new telephone lines - signed by France Télécom and the government in 1993 - was pursued. The number of agreements signed by France Télecom with departmental councils, notably with respect to financing, has now doubled to about sixty.

	EDF and France Télécom have made major efforts to coordinate civil engineering work, notably through agreements signed with the authorities in charge of electrification. The number of questions addressed to the minister in parliament was lower than the previous year.

	In agreement with the DGPT, moreover, the Minister of the Environment requested a two-fold increase in the budget for concealing telecommunications lines around protected sites in 1995. The amount provided now totals FF50m.

	A new circular sent out to prefects, dated 27 February 1995, concerned efforts to remove "environmental eyesores". The text was drafted jointly by the ministry of industry, posts and telecommunications and the ministry of the environment, with the DGPT playing an active role. The text sought primarily to list priorities by department and to promote greater efficiency in removing blackspots by setting up grassroots discussions between EDF and France Télécom.

35. Regional development and terms of reference for network operators and service providers

	Under their terms of reference, mobile telephone and paging operators are required to cover a given percentage of the population according to a strict timetable. The objective is twofold: to make sure that operators do not concentrate their efforts solely on the most profitable areas of the country, and to give as many people as possible access to such services. For example, the GSM networks licensed in 1991 were required to cover 70% of the population by 1995, i.e. three years after the commercial launch of the France Télécom and SFR networks, and 85% at the end of 1997. Moreover, the licence obtained by Bouygues Télécom to run the DCS 18000 network requires that 15% of the population be covered in June 1996 - i.e. six months after the commercial launch - 54.2% at the end of 1988 and 86.6% at the end of 2005.

Chapter10:
Preparing for the new ten-digit numbering plan

France will adopt a ten-digit numbering plan on 18 October 1996.

This minor upheaval in everyday habits follows the decision taken at the beginning of 1994 by the DGPT and France Télécom to replace the old system  - introduced in October 1985 and approaching total saturation - with ten-digit numbering. 

The date of implementation for the new system was decided by the DGPT on 2 May 1995, following lengthy discussions.

While the new system is easy to use, it proved more difficult to implement. Once the parameters had been defined after a process of public consultation, the players sprang into action. The DGPT orchestrated this collective effort, inviting key participants to sit on a system monitoring committee.

1. Preparing and coordinating the new ten-digit numbering plan

	Alongside the DGPT, the members of the system monitoring committee are: France Télécom, the telecommunications industry federation, the business communication federation and representatives of different user categories: the association of telephone and telecommunications users, the large-company IT group and the transport and communications union. 

	The committee met regularly throughout 1995, every two months in general, in order to define the appropriate procedures and pursue concerted action.

	The main focus of activity was the effort to adapt private installations to the new numbering system. 

	For an ordinary telephone, there is no significant difference between an eight-digit and a ten-digit number. The same is not true, however, for corporate PABXs performing highly complex functions such as speed dialling, preferential call routing and a number of other specific services. 

	Two major surveys were commissioned in order to gauge the impact of the operation and to ensure that all the necessary information had been properly disseminated.

	An appraisal was drawn up on the basis of impact studies requested from industrial firms in 1994 in order to evaluate the consequences of the new system on different types of approved telephone equipment and facilities. This appraisal was published on the national videotex server. (Minitel access code 3614 10CHIFFRES.)

	For a total 2,674 models examined, the main findings were as follows:

	10 have no numbering function,
	23 have to be renewed (0.8 %),
	32 have to be modified (1.2 %),
	665 have to be brought into compliance (24.9 %),
	1,132 have to be updated (42.3 %),
	431 are not concerned (16.2 %),
	381 cannot be evaluated.

	These figures show that few models are obsolete, but most need to be modified to a greater or lesser extent. 

	On the basis of this data, the committee decided to conduct a survey of complex installations in order to ensure that each one was monitored by an approved installer. Answers to the survey continued to trickle in throughout 1995. On 30 July, 423,161 installations had been examined out of a total assessed at more than 500,000. The DGPT therefore sent another letter to owners at the end of 1995, encouraging them to respond. 

	The results of the second survey confirmed the findings of the first one.

	Out of 548,615 installations studied:

	1,222 have to be replaced (0.2 %),
	7,066 have to be modified  (1.3 %),
	82,459 have to be brought into compliance (15 %),
	368,891 have to be updated (67.3 %),
	43,806 are not concerned (8 %),
	45,171 cannot be assessed.

	Most installations require some sort of modification to bring them into compliance with the new system.

	As soon as the installers received the necessary technical data and price proposals from manufacturers, they sent out their estimates to customers.

	At this point, many customers expressed strong dissatisfaction. Reactions ranged from total bewilderment to outright protest. Responding to requests, the DGPT undertook a number of different operations in order to justify the principles underpinning the new system. It offered advice to owners while also reminding them that under the terms of article D 447 of the PTT code, they were legally required to bring their installations into compliance with the new numbering system. A survey was commissioned on the prices submitted by manufacturers. The press, France Télécom and a number of professional organizations set up a series of briefings in which the DGPT played an active role.

	Special attention was given to the professions using automatic call terminals, alarm terminals and electronic payment terminals. Some two million terminals are currently in operation and it would be impossible to visit each and every one of them on the evening of 18 October in 1996 in order to make the necessary change. Special arrangements must be made for a smooth transition. To this end, some terminals will be changed over before 18 October and some afterwards. In-depth studies were performed on the basis of the proposals put forward by France Télécom. A number of alternative solutions were defined to satisfy the broad range of requirements expressed. The DGPT ratified the result of these collective studies, in which it played a significant role.

	In the same way, the DGPT finalized the comparative list of old and new numbers. This was needed to programme the installers that will update private installations. In view of the leadtime required for developing the installers, the DGPT had to make a decision in the summer of 1995, i.e. before the resources of the new numbering system had been fully allocated. These lists apply to France Télécom subscribers as well as to subscribers of radiocommunications networks open to the public.

2. The consultative committee for the new numbering system

	While this monitoring work was underway, the DGPT set up a consultative committee for the new numbering system. The decision to set up the committee was taken following the public consultation organized by the regulator in 1993.

	The commission brings together many different partners: operators, industrial firms and users. Its role is to make proposals on the main guidelines governing the use of numbering resources.

	The new numbering system is henceforth considered as a collective asset, intended for the benefit of all users and all telecommunications professionals. The national regulator is therefore responsible for managing this common resource with maximum efficiency.

	The consultative committee met three times in 1995, the first meeting being held on 10 February 1995. Several topics were addressed by ad-hoc sub-groups.

	- numbering of videotex services;
	- numbering of mobile services;
	- management of portable freephone numbers;
	- carrier selection mechanisms;
	- "special" numbers (1XYT format).

	The committee also examined international studies on numbering systems, and notably the CEPT projects concerning a European dialling area. 

European and international studies on numbering systems

Until recently, the ITU managed subscriber numbers on a purely geographical basis. Each number begins with a "country code" of one to three figures, e.g. 33 for France, 81 for Japan and 506 for Costa Rica. The country in which the subscriber is located is indicated by the first figures of his telephone number.

This regime of national juxtaposition, in existence for some thirty years, is currently under pressure for a variety of reasons:

-	a shortage of country codes
-	the existence of cross-border mobile subscribers (GSM, DCS 1800 etc.), which eliminates national boundaries;
-	"country codes" are now being challenged by a demand for "worldwide service codes". For example, the "800" code will become a universal freephone number. With this code, it will be possible to dial a number anywhere in the world, at the expense of the person called; 
-	transnational operators who are no longer identified with a single national base; 
-	the forthcoming introduction of life-long numbers or universal personal telecommunications (UPT), i.e. calls that follow subscribers wherever they go.

The ITU has become a de facto world regulator although it has no formal mandate. Nevertheless, it is the sole forum of discussion for players that are forced, by dint of circumstance, to reach an understanding. Will each commercial subscriber, each service provider and each telecommunications operator enjoy fair and satisfactory access to available numbers in the future? Will the national authorities be able to provide the necessary numbers? Will the worldwide system have sufficient numbers for national authorities?

This analysis provides the basis of the European initiatives taken by the Council (Resolution of 19 November 1992) and the CEPT* with its ECTRA** committee and its ETO*** permanent office. The purpose of these initiatives is to set up a European numbering system with the continental code "388". The DGPT is therefore playing an active role in the negotiations conducted by the ECTRA within the ITU to gain acceptance of a continental code in principle and then to obtain the attribution of code 388. These negotiations are long and difficult. An alternative solution of lesser value would be to juxtapose sections of national areas in order to constitute a European area.

CEPT		Europan Conference of Postal and Telecommunications Administrations
ECTRA		European Committee for Telecommunications Regulatory Affairs
ITU			International Telecommunication Union
ETO		European Telecommunication Office

	The topic pursued in greatest depth was undoubtedly the allocation of numbering resources to different operators of radiocommunications networks. The block Z = 6 in the new system was shared in order to give equivalent capacities to the main competing networks and to allow sufficient space for the many mobile services. This division of resources was formalized in the summer of 1995.

	The committee established the basis for a collective number management system involving block management for operators, as well as individual management of portable numbers. Functionalities will be chosen to provide the basis for defining the future role of the national telecommunications operator, which will be responsible for numbering. The committee also sketched the broad outlines of a number pricing policy.

3. Technical consultation concerning management of the numbering system

	The management of the numbering system was examined at year's end via a restricted technical consultation process with a view to contributing to the section of the Telecommunications Act dealing with numbering. Questions were raised about the role of the national and European regulator, resource management methods, portability and number-provision fees.

	The results of this consultation process were of high quality and confirmed the consensus view that the regulator should be heavily involved in the numbering system. The results clearly showed that all partners appreciated cooperation processes that had been introduced. Furthermore, the consultation stressed the sensitive character of the portability of numbers. 

PROVISIONS OF THE TELECOMMUNICATIONS ACT 
DEALING WITH NUMBERING

	The Act gives the telecommunications authority the task of drawing up a national numbering system applicable to all operators. 

	The system must guarantee certain service characteristics, notably equal access and portability.

	Equal access refers to the possibility for the user to access different telecommunications services and networks under the same conditions, i.e. without giving preference to a specific operator. In particular, the system must verify the correspondence between different numbering formats. 

	Portability refers to the possibility for the user to keep the same number when he changes operators or geographical locations. The law makes a distinction between these two categories of portability.

	Portability between operators will become a reality when the telephone service is opened up to competition on 1 January 1988. Without changing address, users will be able to change local operators, while keeping the same telephone number. This service is vital to efforts to optimize the benefits of competition on the local loop. 

	From the year 2001, a general portability service will become available. Specific portable numbers will be allocated independently of geographical area or operator. Users will thereby be able to keep the same number, even if they move or change local operators.  

	It should be noted that these measures do not apply to portability between mobile network operators. However, the mobility of radiocommunications brings other advantages.

	The regulatory authority provides operators with the numbers or blocks of numbers necessary for their activity, on an equitable basis and in exchange for a fee.  The authority also ensures that resources are used correctly.

	Last, the Act states that numbers or blocks of numbers cannot be protected by industrial or intellectual property rights. They are only placed at the disposal of operators. 

The new numbering system

In the new numbering system, scheduled to come into service in 1996, all French telephone numbers will have ten digits, on the basis of the format EZ ABPQ MCDU. Callers ringing a number anywhere in France will have to dial ten digits. 

The system is homogeneous and usambiguous, since no two subscribers will have the same number. This marks a change from the current system in which two subscribers - one in Paris and one in the provinces - can have the same ABPQMCDU, a situation that may generate errors.

The plan is easy to apply and requires no denumbering. Each subscriber will simply add two figures, EZ, in front of his current phone number ABPQMCDU. The content of EZ will depend on the geographical area of the subscriber:

- 01 in the Paris region
- 02 in the north-west
- 03 in the north-east
- 04 in the south-east
- 05 in the south-west.
	
For example, the number 44 44 22 22 in the Paris region will become  01 44 44 22 22.

Specific provisions, also based on ten digits, will be introduced for French overseas departments.

Mobile services are grouped in a specific block beginning with the number 06. National, non-geographic services such as freephone numbers, will be grouped  in a block beginning with the number 08.

Blocks 07 and 09 are reserved. 

In the long term, the figure E could take values other than "0", according to the needs arising from the arrival of competitors in the telephone service after 1 January 1988.

The new system will have no impact on call charges. 	

Ten-digit numbering system: INFO-SERVICE
.  For companies : 36 14 10CHIFFRES
	- impact on terminal equipment
	- cost of updating installations
	- detailed information on the new numbering system

. For the general public: Internet: http://www.telecom.gouv.fr/10 chiffres
	- table for automatic conversion of telephone numbers

Chapter 11 
Technical regulations: providing operators and users with a sound basis for expansion

	Competition to provide telecommunications networks and services is constantly intensifying, and the number of competitors is increasing. Consequently, regulatory authorities have to take increasingly decisive action in many highly specific technical areas. The ultimate objective is to achieve a fair competitive market, a trouble-free changeover to open networks, and a lasting contribution to public service.

	Technical regulation was once restricted to formalizing specific constraints governing domestic public networks. Now, the emphasis is shifting towards an instrumental function that seeks to establish a firm common ground on which all those directly and indirectly concerned by telecommunications will be able to proceed with the harmonious development and interconnection of their systems.

	So, far from considering it as an predestined constraint, operators and users now expect technical regulation to provide a sound basis for future expansion. And regulation now derives extensively from a set of carefully formalized consultation procedures of domestic and international scope.

The frequency management agency

	The forthcoming creation of a national frequency management agency (ANF), provides a good example of this kind of approach to regulatory matters. 

	Telecommunications operators and users see this agency as a valuable instrument that France, unlike most of its international partners, has so far been lacking. Radio frequencies constitute a precious and essential resource, since frequency availability determines the development capability for radiocommunication systems. Given the current boom in mobile telecommunications, digital broadcasting and satellite communication, optimization of the available spectrum is obviously a matter of crucial importance.

	In France today, responsibility for spectrum allocation is too widely dispersed among the ministries concerned. And the coordinating bodies that have traditionally been in charge of ensuring peaceful cohabitation between major user sectors are not able to cope efficiently with the intensive nature of frequency management today. In today's context of fast-moving developments, we need a faster response to frequency allocation problems, with implementation of economic incentives and more precise rules for frequency sharing in general.

	Experts have long recognized the need for an interministerial technical organization responsible for optimizing the use of our collective spectrum resources. Suggestions along these lines have appeared in a number of successive reports, the most recent being the Pierre Huet report, submitted in February 1994. Following this report, a draft decree covering the formation of a new organization was examined by the State Council on 14 February 1995, but rejected on the grounds that such an organization could only be founded by legislative means.

	The government therefore decided that the project should be covered by the new Telecommunications Act, which would include a special article stipulating the foundation of a new ANF. In 1995, the text of this law was adapted to accommodate provisions for the new agency, a draft decree was drawn up, and discussions were held on staffing for the future agency. Here, special attention was given to mechanisms for integrating the National Radiocommunications Service into the new agency. Work on the new systematic frequency tariff policy included drawing up a preliminary report and a draft decree.

Frequency regulation

	Throughout 1995, frequency regulation operations continued under the existing structures, pending establishment of the new frequency agency.

	Among the many international meetings held in 1995, special mention must be made of to the World Radiocommunications Conference (23 October to 17 November 1995), which was preceded by the Radiocommunications Assembly (16 to 20 October 1995).

	The 1995 World Radiocommunications Conference at Geneva was attended by 1,300 delegates representing 149 administrations and 29 international or regional organizations. The French delegation had 45 members. The two main items on the conference agenda were the simplification of Radio Regulations (working from proposals put forward by a volunteer Select Committee), and implementation of a mobile satellite service. The United States also managed to introduce a third important item (fixed services using low-earth orbit satellites —the Teledesic project) at the last minute, despite Europe's opposition to discussing a subject that was not initially on the agenda. Without actually giving its opinion on the utility of the Teledesic system as such, Europe was eager to maintain the potential for coexisting systems (European, for example) in other frequency bands.

	Except for the Teledesic issue, France achieved most of the objectives that it had set during the preparatory period, including those that diverged from European objectives (e.g. postponing the enforcement of the simplified Radio Regulations, using certain short-wave bands for radio broadcasting, defining the 5 GHz band for satellite mobile service connection lines).

	The United States forced through a last-minute examination of the Teledesic project, but Europe and France managed to contain this unexpected offensive, especially as regards the fixed-wire terrestrial service. Specifically, it was agreed that regulatory changes would only concern 400 MHz in the 20/30 GHz bands, and that this arrangement would be reexamined at the 1997 World Radiocommunications Conference. The other US projects were rejected; in particular, the United States failed to obtain additional allocations for satellite mobile services below 1 GHz (small low-earth orbit satellites for data transmission).

	Two main lessons were learned from the 1995 World Radiocommunications Conference:

	-	Preliminary meetings are most important, especially the ITU's RPC meeting. The report issued by this meeting provides an invaluable basis for subsequent discussions on technical and regulatory matters, and it proves very difficult to go back on the findings of this report during the conference. For this reason it is clearly essential to take part in the RPC meeting, as the DGPT did in April 1995.

	- Close coordination between European countries is also of the highest importance. Europe-wide coordination is progressing constantly and has now reached a very high level. Since 1992, it is clear that a number of other world regions are taking Europe's example on this (e.g. the American CITEL initiative, and the united front presented by Arab countries).

	It is also important to stress the key role that the ITU plays in providing a high-level forum for the development of space telecommunication applications.

	DGPT experts also took part in a number of other important conferences, such as the European Post and Telecommunications Conference on European frequency harmonization.

	A conference on planning for terrestrial digital audio broadcasting systems (T-DAB) was held at Wiesbaden from 3 to 21 July 1995.

	The bands for developing this new service in France were chiefly determined by cooperation between the broadcasting authority (CSA) and the DGPT. Objectives have been met with the allocation of two T‑DAB blocks per service area around 1.5 GHz. France is the only country that has chosen to deploy the service solely in this band; most countries opt for VHF deployment as well. A project team for digital television planning has been set up.

	The CEPT ERC committee has published a table addressing the issue of harmonized use of millimetre waves. This document, derived from the DSI (Detailed Spectrum Investigation) phase 1 survey, establishes a common horizon for all countries, setting the date of 2008 for use of frequencies from 3.4 GHz to 105 GHz.

	Along similar lines, a report on the perspectives for harmonization in bands below 1 GHz has been submitted for comment under the name of DSI phase 2.

	In France, coooperation under CCT guidance has focused primarily on international meetings, while a number of specific decisions have also been reached. These include the decision to deploy the ACROPOL police band in the European 380-400 MHz band. And agreement has been reached with the armed forces on deployment of radio local area networks (RLAN) in the 2.45 GHz band. Initial agreement has also been reached on frequencies for MMDS multiplexed television networks (see text box). In addition, the CSA, the DGPT and the ministry of the interior have signed an agreement on how to share the 38 GHz band for their respective radio communication needs.

Multichannel Multipoint Distribution System 
(MMDS)

What is MMDS?

	MMDS broadcasting techniques can be used in one two ways:

- for full-scale broadcasting, as authorized by the Information Technologies and Services Act
- for simple transmissions (not covered by the Information Technology and Services Act)

	Because of the economic potential of MMDS techniques, notably as a complement to cable systems, the draft law opens up new possibilities for MMDS broadcasting while specifying complementarity with cable delivery (because MMDS can only be authorized outside cable network coverage areas). The law also specifies that MMDS broadcast services should not use frequencies in the bands allocated to broadcasting services, since they concern audiovisual communication services rather than telecommunications applications.
                   
Which frequency bands?

	For MMDS broadcasting to develop, the technique must be contained within a frequency band authorized for this purpose by international Radio Regulations. Adopting a CEPT-harmonized frequency band will ensure favourable pricing on extended markets covering our European partners, and thus improve French industry's export potential. Any other choice would bring regulatory difficulties (especially outside France) and require more expensive dedicated technologies. It would also hold back the development of other standardized services such as satellite and radio links.

	So far, the CEPT has been recommending frequencies around 40 GHz, though this band may prove to be a little high for future applications. For this reason, the Comité de Coordination des Télécommunications (CCT) has decided that the 3.6-3.8 GHz band may be used for internal transmission to cable networks provided this is coordinated with the ministry of telecommunications, which is co-user on this band for the fixed satellite service. And CCT also recognizes that it will be necessary to reconsider the longer-term development of MMDS  services.

	To coordinate the use of frequency bands across the French borders, bilateral cooperation between neighbouring countries must be conducted on an ongoing basis.

	Meetings have been held with Spain to coordinate the deployment of ERMES and GSM networks, and meetings with Belgium, Luxembourg, Germany, Switzerland and the Netherlands have concluded that the 380‑400 MHz band should be reserved for the use of national security forces. An agreement was also concluded with Belgium on DCS 1800 startup. In addition to these meetings, a number of technical meetings are held by virtue of general cooperation agreements, such as the Vienna convention, which are continually being upgraded.

	At all these levels, the DGPT works in the general interest of telecommunication services for all bands over which it exercises control. And on a wider scale, it also represents all national telecommunications users.

A unique role for the DGPT: managing frequencies allocated to overseas department offices

The DGPT manages the radio frequencies allocated to the offices and services of France's overseas departments, which it represents on the CCT, in particular the CMF and CAF.

 . In French Polynesia, 100 frequency allocations for a GSM mobile radiotelephony system in the 890-915 MHz and 935-960 MHz bands were successfully submitted for approval by the Commission Exécutive d’Assignation de Fréquences. 
. In New Caledonia; 176 frequency allocations for a GSM mobile radiotelephony system in the 890-913 MHz and 935-958 MHz bands were successfully submitted for approval by the Commission Exécutive d’Assignation de Fréquences.
. In Wallis and Futuna, a study was begun into a radio management system requiring 18 frequency allocations for the ORSEC emergency plan. CAF will be examining these allocation applications in early 1996.

Amateur radio: the DGPT also keeps a list of the 324 amateur radio operators in the French overseas territories:
	. French Polynesia: 178
	. New Caledonia: 141
	. Wallis and Futuna : 2
	. Southern and Antarctic territories: 3

Billing for authorized radio networks

	Radio network operators authorized by the telecommunications minister under articles L33-1 and L33-2 of the PTT Code are required to pay two annual licence fees, covering the use of radio frequencies and the management services that this entails for the public authorities. These licence fees are determined by decree and are linked to the granting of the operator's licence. The National Radiocommunications Service (SNR) manages administrative, technical and financial aspects of over 65,000 files in all.

	This billing activity, previously performed by France Télécom, was transferred to the SNR in late 1992, following the creation of the public operator, France Télécom.

	The establishment of this new billing system, managed by the SNR, is running behind schedule owing to the complexity of the technical work involved in obtaining a full and reliable description of the networks, and in ensuring that billing methods follow on seamlessly from the last licence fee billing operation in 1992. For this reason, licence fee billing was suspended in early 1993 because of technical availability problems with the computer system. Then at the end of 1994, a trial run of the billing process revealed major discontinuities in billed amounts, and the administration was required to hold an investigation.

	Following in-depth remedial action, conducted with the help of specialized service companies, a reliable billing system was set up, the database was corrected to remove a whole series of anomalies, and a number of points were modified in the decree that sets licence fees.

	This regulatory and technical upgrade was completed in late 1995, and a catch-up billing operation was initiated on 29 December 1995 to stem losses to the state budget. To implement the upgrade plan, the DGPT and SNR set up a project structure with representatives from all the organizations involved (the DGPT, ministry of industry, ministry of the budget, computer service companies). As a result, bills totalling FF535m were finally sent out to the 65,000 independent radio networks, covering the first two years of the catch-up period (1993 and 1994). 

	The government organization in charge would naturally make allowance for the special difficulties that the plan might entail for licence holders.

	For this reason, an information system was set up jointly with associations representing professional radiocommunication installers and the main professions concerned to ensure that licence holders were suitably informed on the billing operation. A circular was sent out in December 1995, and a explanatory document was enclosed with the bill.  

	A exceptionally long payment period was granted (5.5 months), and requests to further extend this period were examined sympathetically. 

	Moreover, the catch-up process will operate progressively, since the first bill covered only the years 1993 and 1994. The billing schedule for 1995 and 1996 will be determined after examining the results from the 1993/1994 campaign. And, again, this will be done jointly with the professions concerned.

Approval for telecommunication terminal equipment

	European Union directive 91/263/EEC stipulates that telecommunication terminal equipment requires approval. 

	The approval procedure is applied to ensure that telecommunication equipment complies with the essential requirements in the technical specifications published by decree in the Official Journal of the French Republic.

	During 1995, the DGPT continued its work on reviewing national approval regulations, making due allowance for ETSI standardization and the introduction of the new common technical regulations (CTRs).

	For terminals providing analogue access to the switched telephone network (telephones, modems, etc.), a new approval specification (derived from NET 4 and aligned to essential requirements) has been implemented. The DGPT has also monitored ETSI preparatory work on a draft CTR that should lead to Europe-wide modem approval procedures.

BOX

STATISTICS ON NUMBER OF APPROVALS
1995 AT 31/12/95 - REVIEW 1994 AND 1993

DESCRIPTION OF EQUIPMENT	FRANCE	* EEA	OTHER COUNTRIES	TOTAL
1995	%
95/94	TOTAL
1994	%
94/93	TOTAL
1993	
	Qty	%	Qty	%	Qty	%						

1 -	DATA TRANSMISSION

	APPROVED
	REFUSED
	NO ACTION

2 - ISDN

	APPROVED
	REFUSED
	NO ACTION

3 - TELEPHONY

	APPROVED
	REJECTED
	NO ACTION

4 - SWITCHES

	APPROVED
	REJECTED
	NO ACTION

5 - RADIOCOMMUNICATIONS

	APPROVED
	REJECTED
	NO ACTION

TOTAL (1+2+3+4+5)

	APPROVED
	REJECTED
	NO ACTION

148
1
13

30
1
0

93
0
3

71
0
2

247
4
1

589
6
19	

47
20
48

29
100
0

45
0
43

70
0
29

37
29
20

43
24
38	

43
1
4

19
0
3

24
0
1

25
1
3

251
3
0

362
5
11	

14
20
15

18
0
75

12
0
14

25
33
43

38
21
0

26
20
22	

121
3
10

54
0
1

88
2
3

5
2
2

166
7
4

434
14
20	

39
60
37

52
0
25

43
100
43

5
67
29

25
50
80

31
56
40	

312
5
27

103
1
4

205
2
7

101
3
7

664
14
5

1 385
25
50	

- 2
- 29
- 68

91
- 91
- 82

8
- 83
- 86

- 12
0
- 79

3
- 65
- 94

5
- 66
- 81	

317
7
85

54
11
22

189
12
51

115
3
33

643
40
79

1318
73
270	

51
- 81
25

4
- 8
29

26
- 48
240

- 26
- 77
43

38
3
49

28
- 41
53	

210
37
68

52
12
17

150
23
15

155
13
23

466
39
53

1 033
124
176	

* : EEA (except FRANCE)

	As regards ISDN, terminal approval conditions have more or less stabilized owing to the generalization of European procedures (interim CTRs plus national adjuncts for compatibility with the EuroNumeris network).

	ETSI radio equipment standards are increasingly used as support for technical approval purposes. This tendency is apparent in low-power devices, RLANs, radio links, independent radio network terminals, maritime radio equipment, and CB equipment (for which ETSI has published a standard based on the work of a group chaired by the DGPT).

	In all, 1,385 approvals were issued in 1995, an increase of 5% with respect to 1994. Approval requests are automatically submitted along with laboratory reports for examination by the DGPT.

	Again working in consultation with all parties concerned, the DGPT has also initiated an inquiry into the future of terminal equipment certification, in the run-up to the forthcoming review of the European directive on terminal equipment, as announced by the European Commission.

	Highlights of the year's work are outlined in the text box.
	
	On 9 November 1995, a ruling by the Luxembourg Court of Justice on a prejudice issue submitted by the Paris courts (Tribunal de Grande Instance) raised serious questions as to the validity of current approval procedures.

	The ruling considered that an approval procedure would not comply with Commission directive 88/301 on free competition in the telecommunication terminal equipment market if the test laboratory responsible for determining conformity was related in any way to a telecommunications operator or industrial firm.

	This is indeed the case in France, where, until late 1995, the main laboratory responsible for approval tests was the LET telecommunications testing laboratory, a department of France Télécom. Similar situations exist in other European countries. The court rejected the French administration's claim of technical objectivity, which was based on the fact that the LET had received EN 45001 accreditation in 1995 from COFRAC. It is worth noting that COFRAC's decision tends to cast doubt on the significance of the accreditation procedure.

	Because of the court's ruling, the DGPT encouraged France Télécom to change the LET's status. On 5 January 1996 the CETECOM laboratory was appointed to proceed with tests on interfaces with the general telephone network. However, given the number of French and European laboratories that are authorized to conduct electrical safety and electromagnetic compatibility tests, and to verify the compliance of ISDN terminals and radio equipment with harmonized standards, manufacturers now have a wide choice of facilities for most regulatory tests. Thus, since there is no compulsion to use the LET's services, the French system can be deemed to comply fully with the principles laid down by the European directives.

	During 1995, the DGPT was also required to negotiate with manufacturers and accredited laboratories on conditions for implementing directives 89/336 and 92/31 on electromagnetic compatibility and the associated CE marking. These regulations prove difficult to interpret for application to radiocommunication transmitters, and appear to overlap with approval procedures. Manufacturers were very reluctant about the implementation date of 1 January 1996, and capacity at certified organizations was saturated. It was therefore necessary to determine an acceptable transition procedure. The Emitech laboratory was certified following a DGPT proposal in August 1995, and various other laboratories expressed an interest in becoming one-stop outlets for regulatory services on radiocommunication terminals.

APPROVAL STATISTICS FOR 1995

In 1995, a total of 1,385 telecommunication terminals received approval, an increase of 5% on 1994.

Analogue access data transmission devices: 312 approvals (-2%)
ISDN access terminals: 103 approvals (+ 91%)
Analogue telephone sets: 205 approvals (+ 8%)
Switches: 101 approvals (- 12%)
Radiocommunications devices: 664 approvals (+ 3%). Note that radio terminals account for almost 50% of all approvals.

GEOGRAPHICAL BREAKDOWN
	Geographical breakdown by country of manufacture confirms the trend observed in 1994, with French-built devices (43%) outnumbered by those from other countries (26% from other European countries and 31% from non-European countries, making a total of 57%).

	This breakdown varied significantly with the type of product:
ISDN products:
	France = 30%			Other = 70%
Switches:
	France = 70%			Other  = 30%
Radio devices:
	France = 37%			Other  = 63%	

Enforcement

	Technical regulation will only be effective if it is efficiently enforced. Here, a delicate balance must be struck between before-the-fact tests and after-the-fact checks, and that this balance must be free to adapt with changing circumstances. At the European Commission there is a tendency to streamline upline processes and shift the emphasis toward declarative procedures and statements of compliance. This requires national authorities to perform downline checks to verify the accuracy of manufacturers' and operators' claims. This tendency raises serious problems of cost and efficacy, since legal action is a very unwieldy instrument in this context and does not always have the required dissuasive effect. Moreover, the cost of checks is currently borne by the regulatory authority itself.

	Given current practice, characterized by a prevalence of type approval, with prior technical tests conducted by independent laboratories, the scope for DGPT checks remains limited.

	In 1995, the DGPT and SNR conducted 35 trade inquiries, and detected a total of 2,656 infringements. Over the same period, the DGPT filed six complaints for advertising of non-approved equipment.

	Spots checks were conducted on samples from 48 manufacturers, following which 62 different models of terminal equipment were tested in certified laboratories to assess compliance. After examining the results of these tests, the DGPT suspended twelve approvals and withdrew one.

	The 1995 inspections produced 48 convictions, 74 amnesties and four acquittals. The advertising complaints produced three convictions, fourteen amnesties and one acquittal. (In France, it is customary to grant amnesties for certain offences following a presidential election).

	The DGPT encourages manufacturers to set up full quality assurance procedures that replace type-examination. In 1995, full quality assurance approval was awarded to Matra Communication for the design and manufacture of telephone sets. Eight other applications for full quality assurance approval were registered.

	In 1995, the DGPT granted three approvals to Alcatel and seven approvals to Matra Communication under full quality assurance submissions.

	The DGPT delegated a number of technical experts to handle telecommunications aspects of the audits conducted by the French quality assurance association, AFAQ, on the design and manufacture of wireline and radio terminals.

Standardization

	Standardization work on telecommunications networks and systems involves many experts in this sector and is continually expanding to cover areas in which standardization is sought on a voluntary basis rather than in direct response to regulatory requirements. International organizations are currently debating the roles that regulatory authorities, operators and manufacturers should play in the standardization process. At the same time, a number of more fundamental questions are being raised on the degree of detail that standardization should seek, on the relative merits of traditional standardization structures and ad hoc forums, and on the balance that should be struck between immediate market requirements and structure-creating strategies.

	In this collaborative context, the DGPT has opted to take a high profile with the management of major institutional structures, in order to participate in major decisions and discussions on the development of these structures, and also in a few specific working groups tackling questions of direct relevance to its own responsibilities.

	The DGPT also attends all plenary assemblies of ETSI, the European standardization organization, and was particularly attentive to the 1995 debates on ETSI reorganization (combined general and technical assemblies; new management council, and flexible decentralized work groups). The DGPT also takes part in the French ETSI committee, run by AFNOR, the French standardization authority. It sends delegates to the technical committees on networks (NA), radio systems (RES), and mobile systems (SMG).

	Aside from the ITU meetings on radiocommunications, the DGPT also sits on committees discussing numbering and general aspects of network architectures. It also takes part in the work of the commission that sits to reexamine the rights and duties of ITU members. In 1995, this commission's work focused on four main subjects:

	- rules for ITU membership
	- financial issues
	- methods for conducting work and taking decisions
	- consequences on ITU convention and constitution

Security and defence

	On 17 January 1995, the European Council passed a resolution determining international specifications for the legal surveillance of telecommunications, as part of work on the third Pillar of the Treaty on European Union. This document will henceforth provide a basis for technical measures to be taken into account in the definition of future telecommunication systems.

	Working from this document, the DGPT has contributed to the definition of interception methods for modern networks, working with the ministerial departments concerned and consulting with our main European partners. In-depth work has been initiated on future low-earth orbit satellite systems, after examination of the dossier on GSM networks.

	As part of preparatory work on the Telecommunication Act, the DGPT took part in an interministerial debate on developments in cryptology regulations. The DGPT also assists the specialized European group, SOGIS, and contributed to defining the work of trustworthy third-parties, i.e. recognized organization that manage encoding keys on their customers' behalf.

	Intergovernmental cooperation on defence aspects of telecommunication networks took shape with the definition of a mandate and working structure, which will be proposed to five European countries by the secretariat-general for national defence. In France, the interministerial commission for coordination of telecommunication networks and services (CICREST) has met twice to discuss the same subject. This body was also involved in the work that concluded on 29 April 1995 with publication in the Official Journal of a decree on the priorities for restoring telecommunications resources in the event of major network incident. Henceforth, CICREST will refer to priority requirements for establishing communications. Finally, it was decided that the operators of networks open to the public should liaise with the Prefectures on defining the local reception point for users' emergency calls.

	Operators' specifications are thus beginning to include more comprehensive coverage as regards clauses on security and defence. The DGPT is also seeking ways to guarantee the quality of defence services, and, among other measures, is considering dual network connection for emergency services. All this work is conducted in close cooperation with the French defence authorities (Services du Haut Fonctionnaire de Défense) with backing from the Inspectorate General for Posts and Telecommunications.

	Note also that the French Criminal Code requires the telecommunications minister to investigate applications for authorization to sell or use equipment that is liable to compromise the privacy of correspondence (Articles R 226-3 and 226-7 of the Criminal Code).

	In 1995, 116 applications were received requesting authorization to purchase, possess or use this kind of equipment. Of these applications, 86 authorizations were granted, for 105 different types of equipment.

	A further 33 applications requested authorization to manufacture, import, exhibit, rent or sell this kind of equipment. Of these applications, 32 authorizations were granted, covering 418 different types of equipment.

	One critical area for forthcoming regulatory work is the protection of personal data associated with telecommunication networks. A draft directive on this issue is currently being prepared and is bound to have considerable technical impact, specifically as regards caller identification and communication tracing mechanisms. All new regulations in these areas will obviously call for close investigation.

ENCRYPTION

The recent law on telecommunications relaxes regulations on the use of encryption methods.

Why? The development of the information highway will cause a considerable increase in electronic transactions which require security to guarantee their reliability and confidentiality. The State must, moreover, be careful to conserve the instruments which contribute to public security, such as that of interception.

Furthermore, the new legislation includes a proposal to considerably simplify the possibility, for the end user, of using encryption methods, whereas up to now, explicit authorisation was more often than not required.

It will be possible to use encryption methods freely to authenticate or guarantee the integrity of messages. This means that when information is transmitted and not encoded, it will be possible to freely use encryption for an electronic signature or to guarantee that the message is indeed authentic. This is fundamental for electronic mail or commerce, for example.

It will also be possible to freely use encryption methods to make a message confidential on the condition that the confidentiality services employed are managed by a trustworthy third party.

The trustworthy third party is a recognised organisation which manages encoding keys on the user’s behalf. The user signs a contract with the trustworthy third party which regularly transmits the keys to use to encode information to the user. A clause is written into the licensing agreement with the trustworthy third party which stipulates that it must submit the encoding keys to the proper authorities according to the law. Thus, users can use an encryption professional who guarantees a high quality service to them, while the State can, if need be, have access to the information.

These liberal provisions, which are of interest to the user, place the weight of regulations on encryption professionals. The latter must inform the public authorities of the instruments that they are to market. They must also request authorisation if they wish to become trustworthy third parties. They must adhere to a strict code of conduct to which they subscribe and special penal provisions are foreseen if they do not conform.

Chapter 12 : The DGPT and labour relations
1 - Relaying and advancing governement policies
A - Election of the boards of directors
B - Annualised worktime
C - Supervision of social security regulations
D - Work contracts specific to La Poste and France Télécom
E - Work conditions
F - Urban regeneration policy 
G - Relocation
2 - Supporting and adpating human resources policies
A - France Télécom: agreement on youth employment and retirement planning
B - Employee evaluation
C - Action related to joint organisations
D - Active service and regrading
3 - Specific action
A - Regrading in Polynesia
B - The end of automatic secondment
C - Monitoring social issues
D - Management of higher professional bodies