On 30 July 2008 the French Competition Council issued an opinion to the French Minister of economy in which it analysed the reasons for the poor development of MVNOs (mobile virtual network operators) in France and examined how some clauses of contracts between MVNOs and traditional mobile operators restrict their development.

The Council notes that MVNOs in France have the weakest market penetration ratio in Europe, less than 5% of mobile phone subscribers are MVNO customers. It also shows that there is no direct competition between MVNOs and network operators. Furthermore, MVNOs are involved in the less attractive segments of the market which are neglected by the network operators. This positioning restricts their ability to develop.

The Competition Council considers that this lack of competitiveness is due to the hosting conditions offered to MVNOs by the network operators. For example, some contracts provide that MVNOs can only propose offers to the public (which is defined narrowly in that it excludes professionals). Restrictive conditions were also imposed by Orange and SFR, who retricted the MVNOs in the design of their offers. Furthermore, some types of clauses tie the MVNOs to their hosting operators and prevent them from renegotiating the initial hosting conditions whatever the evolution of the market.

Thus, in order to enhance the development of the MVNOs, the Competition Council recommends, on the one hand, strengthening competition on the wholesale hosting market, and on the other hand, removing the constraints imposed on MVNOs. The fact that the contracts between MVNOs and hosting operators are unbalanced is due to the weak competitive incentives of the hosting operators, it is thus essential to create new incentives which may be derived from:

  • The market itself: the recent contract concluded between Noos and Bouygues Télécom distinguishes itself by its favourable technical conditions and its lack of exclusivity. This evolution, if it was confirmed, could show an improvement of the competition conditions on the wholesale market.
  • The arrival of a fourth operator: the Council considers that it could have the effect to directly enhance the competition both on the retail market and on the hosting market.

The Council observes that some initiatives on the part of the regulator could be necessary for more balanced contracts to be concluded, particularly regarding the technical and pricing aspects which could enable MVNOs to have a greater role in competition on the retail market. The Council recommends a significant reduction of contracts’ duration and exclusivity clauses and the supervision or even the removal of pre-emption clauses concerning the sale of MVNOs’ assets.

Source: Decision of the Competition Council No 08-A-16 of 30 July 2008 http://www.conseil-concurrence.fr/pdf/avis/08a16.pdf