1. 0 Blending competition and regulation New Dehli, December 5, 2006 Benoit Loutrel, Director, Regulation of fixed and mobile markets Department AUTORITE DE REGULATION DES COMMUNICATIONS ELECTRONIQUES ET DES POSTES (ARCEP)

2. 1 1 Overview of Arcep’s institutional frameworkOverview of Arcep’s institutional framework Overview of Arcep’s challenges in the mobile marketsOverview of Arcep’s challenges in the mobile markets AGENDA

3. 2 2 The liberalization of the telecommunication sector : an EU framework implemented on a national basis EU level : 1996 Telecommunication directives -> mandates the liberalization of the sector through the introduction of carrier selection for international, national and local traffic. 2001 Local loop unbundling direct regulation -> mandates incumbent operator to give access to the “last mile”. 2002 Electronic communication directives -> a toolbox for regulators and a set of check and balances. 2007 European roaming direct regulation (?) National level : the case of France 1997 Telecommunication law -> creates the independent regulator, Arcep. 2004 Electronic communication law

4. 3 3 Independence and accountability Legislative BranchExecutive BranchJudiciary Branch Upper Chamber Lower Chamber Government ARCEP - Set the objectives - Issue tier I regulation - Appoints 4 board members of - Issue tier II regulation - Endorse tier III regulation - Appoints 3 board members, including the president - Set license & frequency fees - Issue opinion on draft Tier I & II regulation - Issue tier III regulation - Implement & enforce Tier I-II-III regulation - Consult stakeholders prior to any decision - Report to Parliament Supreme Court (Administrative Law) Supreme Court (Commercial Law) Supreme Court (Constitutional Law) Stakeholder : consumers, corporate clients, … telcos

5. 4 4 Symmetric and asymmetric sectoral regulation Symmetric regulation : - derives from the specificities of the sector - numbering plan, frequencies, intercommunion, public order,… - may impact the level of competition Asymmetric regulation : - non-competitive market (structurally or temporarily) - derives from the liberalization process - should be transitory to the extent possible and articulated with general competition law

6. 5 5 Principles of asymmetric regulation : market, significant market power, obligations 1996 EU framework2002 EU Framework Market Defined by law: 3 retail markets (fixed, mobile, leased line) 1 Wholesale market (interconnection) Defined by the regulator According to EU competition law Significant Market Power Defined by law: Market shares > 25% Equivalent to dominant position Identified by the regulator According to EU competition law Obligations Defined by law for each market: Carrier selection, cost orientation, transparency, non discrimination… Defined by law but imposed as needed by the regulator Possibility to invent new obligation

7. 6 6 Check and balances in asymmetric regulation Market definition : - 18 pre-identified markets at EU level by the EU Commission - Creating new markets : the test for expanding regulation - High barriers to entry - No perspective for effective competition - Insufficient effectiveness of competition law Ex-ante check and balances : - Requirement to conduct a public consultation - Requirement to receive the opinion of the competition authority - Prior notification of draft decision to EU Commission and 24 other EU Regulator. The Commission can veto the market definition & designation of SMP operator and can issue public comments on proposed obligations Ex-post check and balances : - Judicial review on obligation

8. 7 7 NRA and NCA : Substitute or complementary NRA = national regulation authority in each EU member NCA = national competition authority in each EU member - Symmetric regulation : Complementary. - Asymmetric regulation : - Complementary at the beginning of the liberalization process - Substitute in case of success ! - In any case, NRA is not a substitute of NCA even in early stage of regulation.

9. 8 8 Overview of Arcep’s challenges in the mobile markets Phase I – 1997 – 2003 – light touch symmetric regulation - allocating frequencies, checking that coverage targets were met - allocating numbering resources - Setting the limit to the “calling party pay” principle (Mobile termination rate) Phase II – Since 2004 – Strengthening symmetric regulation and considering asymmetric regulation - Low intensity of competition on retail markets - High barriers to entry on the supply side - Importance of switching costs for end-users  Strengthen portability requirement and reduce artificial switching costs  Introduce mobile virtual operator and thus create a competitive wholesale market  Introduce specific regulation for roaming services

10. 9 9 THANK YOU Additional information onwww.arcep.fr