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The French regulatory authority ART has decided to conduct a formal market analysis, with a view to determining whether a "wholesale market for the termination of SMS messages" should be identified as a relevant market (susceptible to specific ex-ante regulation) in application of the new EU regulatory framework for electronic communications, which has recently been transposed into French law.


There is a possibility that this exercise will result in a conclusion by the ART that an additional market should be defined, i.e. in addition to the 18 markets that are listed in the European Commission's Recommendation on Relevant Markets Susceptible to Ex-Ante Regulation.


T-REGS note: The definition of an additional market is subject to a veto power of the European Commission, in application of Article 7.4 of the Framework Directive 2002/21/EC, and the European Commission has set out (in the Recommendation on Relevant Markets) 3 criteria which must be met for defining a relevant market susceptible to ex-ante regulation. In extreme summary, these 3 criteria are:



  • presence of high and non-transitory entry barriers;
  • absence of tendency towards effective competition;
  • competition law alone would not adequately address market failure(s).

Major questions arise as to whether a single wholesale SMS termination market, or individual wholesale markets (operator-by-operator) can be identified. In order to define a market, a substitutability analysis, at the wholesale level and at the retail level, will have to be conducted.


The ART has developed an extensive questionnaire, consisting of 18 pages of detailed questions, covering retail and wholesale SMS markets, and an associated spreadsheet, to be completed in particular by mobile network operators.



The questionnaire goes well beyond the pure market definition issues, and also contains questions about:



  • market participants (end-users, aggregators, operators)
  • prices and costs;
  • competitive dynamics of SMS markets;
  • presence or absence of Significant Market Power;
  • possible imposition of certain regulatory obligations (e.g. publication of a reference interconnection offer, cost-orientation, etc.).

Furthermore, the questionnaire contains a tentative quantitative assessment, which is put to consultation, suggesting that the cost of terminating an SMS message, at least as far as the radio access segment is concerned, may be 1/428th of the cost of terminating a mobile voice minute. The ART questionnaire recognises that there are other specific costs (e.g. it estimates the cost of an adequately equipped SMS-C, capable of handling peak loads in France, at €3 million) and that SMS is also strongly affected by common costs. 


The full text (in French) of the ART questionnaire, and the associated spreadsheet, can be accessed by clicking here.


The deadline for responding to this questionnaire is 30 Sep 2004.


For an in-depth discussion, please contact Yves Blondeel.