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ART approves France Telecom's 2002 interconnection catalogue

30 November 2001

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The principles of interconnectionThe principles of interconnection

• France Telecom, the operator with significant market power, is obliged to propose an reference interconnection offer

• This offer is presented in a catalogue which is valid for a period of one year (from 1st january to 31 december)

• The offer presents a minimal set of services and prices which must be implemented via interconnection agreements

• Using these intermediate services, the operators must create the most advantageous retail offers for consumers

• The catalogue must be approved by ART prior to its publication

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How it worksHow it works

• Operators consulted in early 2001

• ART sets work schedule

• Discussions at the interconnection committee : operators express their needs

• Negotiations with France Telecom

• Result: 2002 catalogue approved on 30 November

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Strengths of the 2002 Strengths of the 2002

cataloguecatalogue

1. Internet

2. Voice

3. Other developments

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1. INTERNET: 1. INTERNET: flat-rate offer for Internet interconnection flat-rate offer for Internet interconnection

(FII)(FII)• What is FII?

= Flat-rate Internet interconnection

= New approach introduced in 2001 in a small number of European countries

= The possibility of paying for interconnection according to the number of accesses used regardless of the number of minutes carried

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1. INTERNET: 1. INTERNET: flat-rate offer for Internet flat-rate offer for Internet

interconnection (FII)interconnection (FII)

• ART starts work in late 2000 and publishes its recommendations in April 2001

• France Telecom defines an offer, not included in its catalogue, in the second quarter 2001:– FRF 145 000 (€22 105) per year for 30 circuits on the subscriber switch

(local level) and FRF 280 000 (€ 42 686) per year for 30 circuits on the CPFI (*) (regional level)

– with overflow (cf. see next transparency)

• First offers implemented in September 2001

(*) Connection point for fixed-rate interconnection at the transit level

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1. INTERNET: 1. INTERNET: flat-rate offer for Internet flat-rate offer for Internet

interconnection (FII)interconnection (FII)

Operatorpoint of presence

France Telecomsubscriber switch

IFI circuits

Time-based circuits

Overflow

With overflow, when flat-rate circuits are all busy, additional traffic can be switched to other circuits which are billed on a time basis

The overflow principle

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• For 2002 and at the subscriber switch, operators can choose a formula with or without overflow

• 2002 offer without overflow:

1. INTERNET: 1. INTERNET: flat-rate offer for Internet flat-rate offer for Internet

interconnection (FII)interconnection (FII)

Local Regional

Price per year and per 2 Mbits port15 600 €

102 330 francs(-30%)

30 000 €196 787 francs

(-30%)

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1. INTERNET: 1. INTERNET: flat-rate offer for Internet flat-rate offer for Internet

interconnection (FII)interconnection (FII)• 2002 offer with overflow

• Compared with the prices in the 2001 catalogue set on a minute basis, before the introduction of flat-rate interconnection, prices for France Telecom's 2002 flat-rate offer represents a savings of between 30% and 40% depending on the operator's situation.

Local Regional (PRIF)

Price per year and per 2 Mbits/s port21 000 €

137 751 francs(-5%)

38 000 €249 264 francs

(-11%)

temporary

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2/ VOICE2/ VOICE

• Changes in time-based prices

• Elimination of the local exchange

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VOICE: prices VOICE: prices Decrease in time-based prices (1/2)Decrease in time-based prices (1/2)

• ART uses an identical basket of interconnection consumption services for 2001 and 2002

Panier moyenminutes per 2 Mibts port BPN and per year 2,6 millions

Average duration of calls 3 minutes 20 secRépartition du trafic :

- Peak hours 60%- Off peak hours 35%- « blue night » hours (super off-peak) 5%

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VOICE: pricesVOICE: prices Decrease in time-based prices(2/2) Decrease in time-based prices(2/2)

• The drop in time-based prices is between 6% for local to 23.5% for double transit between 2001 and 2002

eurocents per minute 1998 1999 2000 2001 2002evolution2001/2002

evolution over 4 years

Local level 0,928 0,707 0,667 0,616 0,579 -6,0% -37,6%

single transit 1,948 1,537 1,356 1,252 1,051 -16,0% -46,0%

double transit 2,679 2,163 1,918 1,755 1,342 -23,5% -49,9%

Price per minute (average basket)

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VOICE: pricesVOICE: prices European comparisons: local level (1/3) European comparisons: local level (1/3)

Comparaison européenne des tarifs d'interconnexion intra-CA

0,47

0,550,57 0,58

0,620,64

0,67

0,730,77

0,87

0,94 0,94

0,0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1,0

Royaume-Uni

Allemagne Suède FT 2002 FT 2001 Danemark Irlande Autriche Belgique Pays-Bas Italie Espagne

€/1

00

/min

Values are calculated including all pricing components, including 2Mbit/s port

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VOICE: prices VOICE: prices European comparisons: single transit (2/3)European comparisons: single transit (2/3)

Values are calculated including all pricing components, including 2Mbit/s port

Comparaison européenne des tarifs d'interconnexion simple transit

0,65

0,76 0,78

0,900,93

1,051,08 1,10 1,10

1,25

1,35

1,51

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

Royaume-Uni

Suède Danemark Allemagne Irlande FT 2002 Pays-Bas Autriche Belgique FT 2001 Italie Espagne

€/1

00

/min

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VOICE: pricesVOICE: pricesEuropean comparisons: double transit (3/3)European comparisons: double transit (3/3)

Values are calculated including all pricing components, including 2Mbit/s port

Comparaison européenne des tarifs d'interconnexion double transit

0,87

1,091,14

1,23

1,34 1,361,42

1,56

1,75

1,88 1,88

2,19

0,0

0,5

1,0

1,5

2,0

2,5

Suède Danemark Royaume-Uni

Irlande FT 2002 Pays-Bas Belgique Allemagne FT 2001 Autriche Italie Espagne

€/1

00

/min

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VOICE: pricesVOICE: pricesTermination diagramTermination diagram

1

2

3

Single transit

Double transit

Local level

2

1

3

NewOperator

NewOperator

NewOperator

Direct interconnection offer for L.33-1 operators

TS TS

SSTS: Transit switch

SS: Subscriber switch

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VOICE: pricesVOICE: pricesCollection diagramCollection diagram

1

2

3

Single transit

Double transit

Local level

2

1

3

NewOperator

NewOperator

NewOperator

Direct interconnection offer for L.33-1 operators

TS TS

SSTS: Transit switch

SS: Subscriber switch

Subscriberdials a prefix

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. What is the local sorting zone ?= the département (except for the Paris region and Corsica)= the zone inside which France Telecom keeps geographical voice calls and inside which the selection of alternative carriers was not possible for geographical calls until the end of 2001.

. ART's decision dated 18 July 2001 announced its elimination for 31 December 2001 at the latest.

. Approved by the Secretary of State for Industry on 26 September 2001

VOICE:VOICE:Introducing the carrier selection in the local Introducing the carrier selection in the local

sorting zonesorting zone

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. Decision taken following consultation of consumer associations

. Can refuse the offer, without penalty

. Maintains call-by-call carrier selection for long distance and local calls

. Maintains the France Telecom subscription with an expected drop in charges for local calls, a market worth FRF 19 billion in 2000, i.e. 30% of the fixed line market excluding Internet.

The consumer at the heart of the The consumer at the heart of the operationoperation

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. The catalogue follows ART's decision:

- the operation is conducted by transit area

- operators must inform their client twice prior to the operation

Introducing the carrier selection in the Introducing the carrier selection in the local sorting zonelocal sorting zone

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ART's decision reflects its prioritiesART's decision reflects its priorities

• Support competition (decrease interconnection prices and improve operating conditions)

• To benefit the consumer (Internet and introducing competition for local calls)

• Including regional development concerns (approach favourable to local connections)

• Encouraging the progress of the information society (flat-rate Internet interconnection)

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3/ Other developments3/ Other developments

• Decrease of interconnection fees for calls originated from phone box– France Telecom adds an extra fee to the single transit

charge for calls from a phone box. This fee represents 3/4 of operator payments to France Telecom

– it falls by 30% from €0.046 in 2001 to € 0.0325 in 2002– this decrease has a direct impact on the services offered to

the consumer by prepaid card operators.

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3/ Other developments3/ Other developments

• Pre-selection charge– the charge paid by the operator to France Telecom to create

a pre-selected line is cut by 30% (from € 8.54 to €6.00 per line)

– this cut will accompany the development of pre-selection which will be expanded to include local calls in 2002

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3/ Other developments3/ Other developments

• The third party invoicing with shared revenues offer is strengthened:– can open new pricing brackets

– defines pricing methods

– includes changes to the ethics framework

• Extends collection for third parties to carrier pre-selection traffic

• Extends third party invoicing to 3B PQ numbers

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3/ Other developments3/ Other developments

• Introduces the quasi-associated mode (a more efficient signalling mode which better manages complex interconnection

architectures)

• Interconnection implementation conditions– Adapts the order process, notably through the reduction in the

minimum duration for 2Mbit/s port contracts from two years to one

– Reduces opening time for area codes and numbers

– Reduces the price of ad hoc services (see next transparency)

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3/ Other developments3/ Other developments

• Ad hoc services– ad hoc services are invoiced by France Telecom for

interconnection architecture modifications (technician intervention to modify connections between switches)

– prices fall 50% between 2001 and 2002– these services are expected to develop because of the

introduction of flat-rate interconnection and the opening of the local exchange