New Rules for Leased Lines

Regulator Settles Leased Line Dispute

ART, the French telecommunications regulator, has settled a dispute between France Télécom and MFS Communications (WorldCom). MFS Communications had asked ART to rule that:

• France Télécom's leased lines for data transfer services, comprising between 64 kilobits per second (kbps) and 155 megabits per second (Mbps), be considered interconnection services;
  
  
• as a result, all France Télécom's leased line tariffs be cost-oriented and thus reduced;
  
  
• MFS Communications should be reimbursed for the amounts paid in 2001 on the basis of this reduction; and
  
  
• France Télécom should undertake to comply with requirements of quality of service contained in agreements between France Télécom and MFS Communications.

On February 12 2002 ART stated that:

• France Télécom must propose to MFS Communications a new leased lines offer in accordance with France Télécom's interconnection reference offer and must sign an interconnection agreement before September 30 2002;
  
  
• France Télécom must make a new leased lines offer to MFS Communications for high-speed data transfer services (between 34 Mbps and 155 Mbps) and sign an interconnection agreement before December 31 2002;
  
  
• France Télécom must not invoice any additional costs due to the new interconnection offer and the possible interruption of services resulting from the necessary migration of lines;
  
  
• France Télécom must comply with conditions of quality of services; and
  
  
• France Télécom must offer MFS Communications a 27% discount on retail tariffs for leased lines for data transfer services between 64 kbps and 2Mbps until September 30 2002, and the same discount applicable to leased lines for data transfer service between 34 Mbps and 155 Mbps until July 31 2003.

ART's decision has major consequences for telecommunications operators, which will no longer be bound by France Télécom's retail leased line tariffs. The substantial reduction in tariffs should enable them to review the leased line tariffs that they charge their clients and consequently improve the competitiveness of their offers for data transfer services.

New Recommendation on Leased Lines

In March 2001 ART carried out a study on competition in the broadband services market in France. This showed that the majority of telecommunications operators offering broadband data transfer services could not connect their network to their clients' premises without using France Télécom's broadband services.

Following this study ART published a recommendation on July 25 2001 stating that France Télécom's leased lines offers should be included in its interconnection reference offer and should be cost-oriented. The recommendation was designed to achieve effective competition on the broadband data transfer services market, which is estimated at around €2.3 billion, of which France Télécom has a market share of 85%. On February 12 2002 ART approved France Télécom's proposal to include data transfer service comprising between 64 kbps and 2Mbps in its leased lines offer. The regulator approved France Télécom's tariffs, which are now 40% cheaper than the retail tariff before discount. This represents a major change, since leased line tariffs will now have to be cost-oriented and annually approved by ART. Moreover, France Télécom's leased lines offer must comply with requirements of quality of service and guarantee delivery deadlines in favour of new-entrant operators.

Reducing Bills for the Underprivileged and Disabled

Under its obligation to provide a universal service France Télécom must offer telephone services to underprivileged and disabled individuals at a reduced cost. In 2001 the telephone service subscription was reduced by €5.03 each month. On February 4 2002 the minister in charge of telecommunications ordered that this figure be reduced to €4.21.

For further information on this topic please contact Eric Morgan de Rivery or Carole Arribes at Lovells by telephone (+33 1 53 67 47 47) or by fax (+33 1 53 67 47 48) or by email ([email protected] or [email protected]).