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Cablegate: Arcep Response to Comptel 1377 Complaint

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UNCLAS SECTION 01 OF 02 PARIS 000647

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/CIP, EUR/WE, AND EUR/ERA
DEPT PLEASE PASS TO USTR JMCHALE, KSCHAGRIN, AND CHINCKLEY
FCC FOR TWEISLER
COMMERCE FOR NTIA CSPECK AND ITA JBURTON
JUSTICE FOR KWILLNER, JHORVATH, TBURROWS
DEPT PLEASE PASS TO FTC FOR HSTEVENSON
BRUSSELS FOR USEU JUNDERWOOD

E.O. 12958: N/A
TAGS: ECPS ETRD FR
SUBJECT: ARCEP RESPONSE TO COMPTEL 1377 COMPLAINT

REF: JANUARY 31 USTR/HINCKLEY-SULLIVAN E-MAIL

1. (U) Summary. On October 9, 2006 French telecoms regulator ARCEP
issued a decision on the business leased lines market, which
introduced a more transparent framework for price setting. ARCEP
hosts a meeting every other month with all operators, including
France Telecom (FT), to compare prices that FT is offering to
operators, and to pressure FT to lower rates. The October 9 ARCEP
decision required unbundling not only at France's 10,000 local
exchanges, but also at its 40 regional exchanges. ARCEP is forcing
FT to share its ducts with other operators so the latter can develop
their own fiber networks. ARCEP consults OECD and European
Regulatory Group benchmarks in rate-setting, and monitors France
Telecom rates periodically. ARCEP reps say they have not received
complaints from operators about the amount of time it takes to
receive a line, nor regarding pricing. End summary.

Reaction to the Comptel submission
----------------------------------

2. (SBU) On February 14, econoff met with French Electronic
Communications and Postal Services Regulator (ARCEP) International
Division Deputy Director Joel Voisin-Ratelle and FTTx and Unbundling
Head Sebastian Soriano to discuss Comptel's submission to USTR as
part of the 1377 review of compliance with telecommunications trade
agreements. Both expressed surprise at Comptel's comments since
ARCEP was working closely with Verizon on its operations, and no
other U.S. carrier had approached ARCEP directly about the length of
time needed to gain access to unbundled loops or interconnection
pricing.

Rate Setting Process
--------------------

3. (U) ARCEP has a transparent rate setting process that extends to
all types of wholesale offers including Local Loop Unbundling (LLU);
bitstream wholesale offers in which FT activates the end customer's
copper pair with its own access equipment and routes the Internet
flows to the closest delivery point between its backhaul network and
that of the alternate provider; and access to FT's regional
exchanges so that the alternate provider can meet the needs of
Internet service providers that have not deployed national networks.
ARCEP requires FT to provide full Local Loop Unbundling (LLU) at
cost-oriented tariffs.

4. (U) On October 9, 2006, ARCEP issued a decision on the business
leased lines market, which the EU Commission approved. Soriano said
this decision introduced a more transparent framework for price
setting, and greater investment by the incumbent and alternative
operators in fiber optic networks to businesses' premises. Soriano
outlined a new system of monitoring the fairness of competition
between operators on the wholesale and retail markets. ARCEP hosts
a meeting every other month with all operators, including FT, to
compare prices that FT is offering and to pressure FT to lower
rates. In this way, ARCEP is ensuring that FT does not offer lower
prices to its end-user customers than those provided to competitors.
ARCEP initiated this process based on its experience with local
loop unbundling in which operators met with FT as a group to apply
pressure to lower rates, Soriano explained. Finally, Soriano
indicated that the October 9 ARCEP decision required unbundling not
only at France's 10,000 local exchanges, but also at its 40 regional
exchanges, which he said is a unique requirement. FT has to publish
a reference offer for products and services that provide access to
France's regional exchanges.

The Wholesale Market -- ARCEP Carefully Monitors Rates
--------------------------------------------- ---------

5. (U) Soriano said that ARCEP carefully monitors wholesale rates,
particularly for Ethernet and Bitstream, which is an ARCEP
"priority." As a result, ARCEP is forcing FT to share its ducts
with other operators so that they can develop their own fiber
networks. He stressed that ARCEP has received no complaints on
rates so far. ARCEP consults OECD and European Regulatory Group
benchmarks in rate-setting and monitors France Telecom rates
periodically.

No Delays in Receiving Lines
----------------------------

6. (U) Soriano and Ratelle said that operators had not complained to

PARIS 00000647 002 OF 002


them about the time it takes to receive a line. If operators want
to deviate from FT's reference offer (as negotiated with ARCEP) to
structure unique packages, Soriano allowed that there could be a
delay. In practice operators were not complaining to ARCEP about
postponements. However Soriano and Ratelle said they were preparing
for such an eventuality.

Stapleton

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