TSM

1
TSM Termination rates

• Eric Debroeck AR/ DRG

2006/06/30
2
Agenda

• Interconnection between fixed telecommunications
  networks
• Interconnection rate for fixed legacy networks
• CPS sunset
• Towards symmetric interconnection prices in a NGN
  environment
• Interconnection services provided by Mobile
  Networks
• Mobile call termination issues
• Market development
• Usage prices
• Impact of MVNOs

3
1

• Interconnection between fixed telecommunications
  networks

4
Fixed access networks interconnection (1)

• Termination Rate (TR) Asymmetry in fixed
  interconnection
• Throughout Europe asymmetric TR between
  incumbent and new entrants
• From the regulatory perspective, entry assistance
  due to
• Volume asymmetry
• Interconnection points covering greater zones
• Infancy concept
• Higher TR could be recovered via higher retail
  price / asymmetry level has no material effect on
  the incumbent economic equilibrium
• From an incumbent perspective
• Technologies deployed by competitors are more
  cost effective than those of legacy network
• Asymmetric TR distort retail markets
• Incumbent customers de facto subsidize entrants
  customers
• There is no clear case for a TSM in the
  narrowband market
• narrowband vs broadband ?

5
Fixed access networks interconnection (1)
TR Asymmetry in fixed interconnection
Alternative fixed operators TR
6
Fixed access networks interconnection (2)

• France Télécom starts (at best) on the same
  footing as efficient competitors from a Voice
  over Broadband costs perspective
• No legacy infrastructure (apart from ducts and
  poles)
• Lower volumes (incumbents switch later than new
  entrants from narrowband to broadband access)
• Remedies applicable after recent market analysis
  of legacy termination market should not apply to
  NGN terminations services
• Same obligations for incumbents and new entrants
  on NGN Termination Rates
• Non excessive rates
• Identical costs identical obligations gt
  symmetrical rates

7
Towards the end of carrier selection

• Carrier selection (CPS) Wholesale Line Rental
  (WLR) are substitutes of direct access on legacy
  fixed networks
• Enduring dominant position on copper access
  justify specific remedies on access
• ULL BSA for broadband services
• WLR CPS for remaining narrowband access on NGN
• Those obligations allow vibrant competition on
  the retail market
• Carrier selection on NGN networks would lead to
  costly, cumbersome and socially inefficient
  developments
• Carrier selection on BB access and stand alone
  carrier selection on POTS are no longer
  justified.
• Outdated remedy, such as CPS, should not apply to
  NGN networks

8
2

• Interconnection services provided by Mobile
  Networks

9
Mobile termination issues (1) global market
development

• Mobile termination prices have historically
  favoured the great success of GSM services
  throughout Europe
• GSM development had a positive impact on European
  customers, operators and industry
• Clear TSM case
• Todays challenge is to repeat this success with
  UMTS services
• Mobile termination prices may help is it wise
  to abandon such a tool ?

10
Mobile termination issues (2) usage prices

• GSM services reached very high mass-market
  penetration, thanks to a combination of low
  handset and access prices with initially high
  usage prices
• Once penetration objective reached, commercial
  and regulatory attention focussed at usage prices
  
• The market currently manages to develop low
  marginal prices
• Convergence and NGN will strengthen this trend
• Inappropriate regulatory intervention should be
  avoided as it could destroy market value,
  investment incentive and lead to retail price
  increase

11
MVNOs

• Within a year, MVNOs brought
• Strong brands (Virgin, M6, Tele 2, )
• Competitive convergence (FM) offers
• New prices models
• Service innovation (Ten with integrated SMS and
  IM services, Beautiful Phone from 9)
• The outcome of commercial negotiations, not of
  regulatory intervention
• Commercial dynamics are strong and regulatory
  intervention would slow and distort them.

12
Conclusions

• Fixed NGN
• Symmetric terminations between FT and Alternative
  Operators
• No carrier selection
• Mobile interconnection
• Operators strategy is to lower mobile usage
  prices
• MVNOs based on commercial agreements intensify
  competition and bring innovations on the market
• Inopportune regulatory intervention would lower
  market value and jeopardise 3G development

13
Thanks