The French regulatory authority ARCEP has issued an eagerly awaited decision, resolving a dispute that arose between France Télécom (the fixed incumbent operator, initiator of the complaint) and Neuf Télécom (an infrastructure-based fixed alternative operator, utilising mainly unbundled local loops, bitstream access, and fibre in its access network) relating to the wholesale call termination charges applied by Neuf Télécom.

T-REGS Note: This is a very important precedent, because it is the first interconnection arbitration decision to be issued since the entry into force of ARCEP's market analysis decision for Market 9 "call termination on individual public telephone networks provided at a fixed location". In this market analysis decision (valid until 1 Sep 2008), ARCEP had imposed a regulatory obligation on alternative fixed operators which was expressed as "not to apply excessive tariffs for call termination to geographic numbers". After the entry into force of this decision, several alternative fixed operators, including Neuf Télécom, had increased their wholesale call termination charges.

The essence of ARCEP Decision n° 06-0551 of 30 May 2006 (published today) is as follows:

1) Neuf Télécom is entitled to apply an average per-minute wholesale interconnection (call termination) charge for calls to its geographic numbers of 1,110 c€/min. for the period from 1 Jan 2006 to 31 Dec 2006 and 1,088 c€/min. for period from 1 Jan 2007 to 1 Sep 2008.

2) These amounts are the equivalent of France Télécom's regulated single transit interconnection charge of 3 years earlier (concept of 'delayed reciprocity' N-3), plus 10%.

3) The new 10% mark-up is justified by ARCEP as representing a 'risk premium' for an alternative operator which is building up its customer base and does not enjoy the same economies of scale as the incumbent operator which remains dominant on retail markets.

4) The operators are required to modify their interconnection agreement to reflect the ARCEP decision within 4 weeks from notification of the dispute resolution decision.

T-REGS Notes: In decisions taken under the previous regulatory framework, ARCEP had applied 'delayed reciprocity' N-5 (5 years), without a mark-up, and taking into account the interconnection architecture established between the fixed incumbent and the new entrants (the extent of reliance on single transit and local interconnection) for calls flowing from the new entrant to the incumbent. In this decision, the incumbent's single transit interconnection charge is taken as the reference for the first time, and a mark-up is added for the first time. This dispute resolution decision is valid until 1 Sep 2008, to synchronise its duration with the validity of the market analysis decision for Market 9.

The full text (84 pages, in French only) of ARCEP Decision n° 06-0551 can be accessed by clicking here.

For a discussion of wholesale call termination charge issues, in France and in other European countries, please contact Yves Blondeel.