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Press Update

Press Update. Developing High-Speed Internet in France ART's opinion on France Telecom's IP/ADSL offers 7 May 2002. The high-speed Internet value chain. Origination and transport. Consumer. A ccess. ISPs. France Telecom Competing operators. France Telecom Competing operators. Wanadoo

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Press Update

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  1. Press Update Developing High-Speed Internet in France ART's opinion on France Telecom's IP/ADSL offers 7 May 2002

  2. The high-speed Internet value chain Origination and transport Consumer Access ISPs France Telecom Competing operators France Telecom Competing operators Wanadoo Competing ISPs Option 1 Full unbundled access Shared access Option 3 Option 5 There must be effective competition along the entire value chain

  3. ART's goals to encourage the development of residential ADSL • Effective competition along the entire value chain • Access: the decision of 16 April 2002 on the pricing and operating conditions of unbundling (full unbundled access and shared access) • Origination and transport: the need for an offer under option 3, allowing operators to complete deployment for unbundling and to compete with France Telecom's option 5 offers (IP/ADSL) • Internetservice: to make ISPs' ADSL offers viable, while ensuring operators benefit from viable equitable conditions on the market, via unbundling and option 3

  4. The current situation on the residential market ADSL Pack: €38 before tax (€45 including VAT) • ISPs currently pay France Telecom a monthly fee of €39.70 (before tax) per subscriber for IP/ADSL offers (collection + access), an amount greater than their revenues. • An operator wishing to compete with IP/ADSL offers using option 3 would bear average monthly costs of €49.20: • monthly payment to France Telecom of €42.20 • own costs of approx. €7.00 Option 3: €49.20 before tax = €42.20 + €7.00 Third party operator FT ISP Subscriber Competing IP/ADSL offer €39.70 before tax Option 5: New estimates based on average speed of 23 kbit/sper subscriber, as per current operating conditions This squeeze effect prevents the development of competing IP/ADSL offers

  5. Observation: France Telecom's proposals lead to a long-lasting impasse • ISPs would pay France Telecom a monthly fee for IP/ADSL offers (collection + access) of €28.00, i.e. a 30% decrease, thereby making their offers profitable. • However, any operator wishing to compete with IP/ADSL offers using option 3 would bear average monthly costs of €39.10: • monthly payment to France Telecom of €32.10 • own costs of approx. €7.00 ADSL Pack: €38 before tax (€45 including VAT) Option 3: €39.10 before tax= €32.10 +€7.00 Third party operator FT ISP Subscriber Competing IP/ADSL offer €28.00 before tax Option 5: A short-term drop in expenses for ISPs, but which would make France Telecom the sole provider for ISPs, with no possible competition on the collection market.

  6. ART's opinion: set reference values adapted to opening competition on the residential ADSL market Reference value of €30: Compatible with the arrival of competitors through unbundling under the conditions established on 16 April 2002 Leads to a 25% decline in the expenses borne by ISPs Calls for a change in the conditions of option 3, whose cost should not exceed €19 (collection at the switch) and €23 (collection at the ADSL area). Adding their own expenses, operators would have estimated monthly expenses of €30, allowing them to compete with France Telecom's IP/ADSL offers. ADSL Pack: €38 before tax (€45 including VAT) €30 before tax = €19 + €11 €30 before tax = €23 + €7 Option 3 Third party operator FT ISP Subscriber Competing IP/ADSL offer Option 5: €30 before tax • a coherent solution • guarantees the best chances of economic viability along the entire chain • suited to the development of competition, which once established, should put downward pressure on prices

  7. The pricing opinion of 30 April (cont'd) • Currently: ART's opinion is unfavourable on the charges for the IP/ADSL collection offer and the IP/ADSL 512 offer (pricing decision submitted on the evening of 29 April, a pricing opinion will be published at a later date for the other measures) • By 28 May 2002: • France Telecom must modify its proposals for IP/ADSL offers which will have to be submitted to a new pricing opinion • France Telecom must make functional changes to its option 3 offer

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