ART approves France Telecom's 2002 interconnection catalogue

1. ART approves France Telecom's 2002 interconnection catalogue 30 November 2001

2. The 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

3. How 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

4. Strengths of the 2002 catalogue 1. Internet 2. Voice 3. Other developments

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

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

7. 1. INTERNET: flat-rate offer for Internet interconnection (FII) The overflow principle With overflow, when flat-rate circuits are all busy, additional traffic can be switched to other circuits which are billed on a time basis

8. 1. INTERNET: flat-rate offer for Internet interconnection (FII) • For 2002 and at the subscriber switch, operators can choose a formula with or without overflow • 2002 offer without overflow: Local Regional 15 600 € 30 000 € Price per year and per 2 Mbits port 102 330 francs 196 787 francs (-30%) (-30%)

9. 1. INTERNET: flat-rate offer for Internet 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) temporary 21 000 € 38 000 € 137 751 francs 249 264 francs Price per year and per 2 Mbits/s port (-5%) (-11%)

10. 2/ VOICE • Changes in time-based prices • Elimination of the local exchange

11. VOICE: prices Decrease in time-based prices (1/2) • ART uses an identical basket of interconnection consumption services for 2001 and 2002 Panier moyen 2,6 millions minutes per 2 Mibts port BPN and per year 3 minutes 20 sec Average duration of calls Répartition du trafic : 60% - Peak hours 35% - Off peak hours 5% - « blue night » hours (super off-peak)

12. VOICE: prices 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 Price per minute (average basket) evolution evolution 1998 1999 2000 2001 2002 eurocents per minute 2001/2002 over 4 years Local level 0,579 -6,0% 0,928 0,707 0,667 0,616 -37,6% single transit 1,051 -16,0% 1,948 1,537 1,356 1,252 -46,0% double transit 1,342 -23,5% 2,679 2,163 1,918 1,755 -49,9%

13. VOICE: prices European comparisons: local level (1/3) Values are calculated including all pricing components, including 2Mbit/s port

14. VOICE: prices European comparisons: single transit (2/3) Values are calculated including all pricing components, including 2Mbit/s port

15. VOICE: pricesEuropean comparisons: double transit (3/3) Values are calculated including all pricing components, including 2Mbit/s port

16. 2 1 3 1 2 3 VOICE: pricesTermination diagram New New Operator Operator TS TS New SS Operator TS: Transit switch SS: Subscriber switch Single transit Double transit Local level Direct interconnection offer for L.33-1 operators

17. 2 1 3 1 2 3 VOICE: pricesCollection diagram New New Operator Operator TS TS New SS Operator TS: Transit switch SS: Subscriber switch Subscriberdials a prefix Single transit Double transit Local level Direct interconnection offer for L.33-1 operators

18. VOICE:Introducing the carrier selection in the local sorting zone . 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

19. The consumer at the heart of the operation . 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.

20. Introducing the carrier selection in the local sorting zone . The catalogue follows ART's decision:- the operation is conducted by transit area - operators must inform their client twice prior to the operation

21. ART'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)

22. 3/ 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.

23. 3/ 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

24. 3/ 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

25. 3/ 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)

26. 3/ 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