France Telecom Sees Competition Fine Doubled

by Ulrika Lomas, for LawAndTax-News.com, Brussels

14 January 2005

It emerged this week that France Télécom has had its penalty for failing to allow ISPs to access its ADSL technology at competitive prices doubled by the Court of Appeals in Paris.

In order to retail broadband Internet access in France, Internet Service Providers take advantage of wholesale offers proposed by France Télécom or alternative operators.

The system developed by France Télécom and these operators divides the wholesale market between them according to three options, defined by the Autorité de Régulation des Télécommuncations (ART, the French Telecommunications Regulation Authority).

At one end of the spectrum, Option 1 enables the alternative operator to connect his equipment and begin his service from the point at which the end customer's line arrives at the central telephone exchange, which represents unbundled access to the local loop.

At the other, Option 5 gives France Télécom almost complete responsibility for collecting and transmitting the end customer's Internet communications.

Under Option 3, the service under dispute, France Télécom and the alternative operator share the tasks between them on an intermediate basis.

In order to accomplish this, Option 3 gives the competing operator access to and management of "virtual circuits" within France Télécom's own existing equipment. Consequently, subscribers are able to use an alternative operator for broadband data transmission services, whilst continuing to use France Télécom for standard telephone communications.

Following a complaint from rival provider, 9 Télécom, the French Competition Council (Conseil de la Concurrence) observed that France Télécom was not offering alternative operators the possibility of taking up option 3 as defined by the ART. This in turn effectively prevented them from proposing their own specific offers.

The Council therefore handed down interim measures and ordered France Télécom: "...to propose to third party operators a new technical and commercial offer giving them access to the permanent virtual circuit. The offer in question must enable the operators to provide Internet access via ADSL technology or any other equivalent technical and economic solution that might allow them to compete effectively, both in terms of prices and in terms of the nature of services offered".

The telecoms provider failed to abide by the Council's decision, leading the government body to find the firm guilty of anti-competitive behaviour and impose a EUR20 million fine in May of last year.

France Télécom decided to appeal the ruling, but reports published this week revealed that the Paris appeals court sided with 9 Télécom and the Competition Council, and doubled the fine to EUR40 million.

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