Overview (April 2001) - International Law Office

The following is a general overview of the regulatory regime for telecommunications in France, as well as some of the recent developments occurring in the field of telecommunications and multimedia law. It is not an exhaustive review.

The French telecommunications market was opened up to competition by the law of July 26 1996, which ended the monopoly held by the public operator, France Telecom. The 1996 law also amended the French Posts and Telecommunications Code (FPTC) to define the new parameters for the public provision of telecommunications services. This became known as the 'the universal service', as its financing was shared among the operators.

The deregulated telecommunications market is undergoing a surge of growth. The independent telecommunications regulatory authority (ART) estimated a turnover in the French retail market of almost Ffr176 billion in 1999, an increase of 12.4% compared to 1998 (ART 1999 Annual Report, Volume 1, page 14). This increase is principally due to the development of the mobile telephone market (which showed an increase in turnover of 52.2% from 1998 to 1999) and traffic over the Internet. The retail market is divided into four main markets:

• fixed telephones;
  
  
• mobile telephones;
  
  
• data on rented connections; and
  
  
• internet and computer services.

Operators

Telecommunications is taken to mean "any form of transmission or reception of signs, signals, text, image, sound or other information by wire, optical fibre, radio or other electromagnetic means" (Article L 32 FPTC).

A telecommunications network infrastructure is defined as:

"any form of installation or group of installations which ensure either the transmission or the transmission and routing of telecommunications signals and the associated exchange of the control and operational information, between network termination points" (Article L 32 FPTC).

Since deregulation under the law of July 26 1996, all telecommunications activities may be carried out freely in accordance with the terms of the licences and declarations provided for in the code. All telecommunications operators (ie, any company which establishes or operates a telecommunications network) must be authorized by a licence granted by the telecommunications minister, following an inquiry into the company in which the ART participates.

The licensing regime is based on a distinction between service operators and network operators. Operators are defined as "the persons exercising a telecommunications activity destined for the general public, whether they are exploiting a public telecommunications network or providing services" (ART's Annual Report 1998 Volume II page 25).

The FPTC distinguishes between the two types of activities in order to create two separate licensing schemes. Article L 33-1 of the code states that "the establishment and operation of public networks shall be authorized by the telecommunications minister." Any telecommunications network established or used for the provision of public telecommunications services is regarded as a public network (Article L 32).

All providers of a public telephone service must be authorized by the telecommunications minister under a licence granted in accordance with Article L 34-1 of the code.

Network operators
The opening up of the telecommunications market to competition has resulted in the creation of new networks. Several types of infrastructure have been built in this way, for example, infrastructure for local telephone exchanges allowing access to end users and national or international long-distance infrastructure (eg, the creation of pan-European networks or transoceanic connections using submarine cables).

Several different types of company have been considered as network operators and must therefore hold a licence enabling them to establish and operate a public communications network. These include:

• construction companies;
  
  
• companies installing cables or fibre-optic cables;
  
  
• owners or licence-holders of rights of way; and
  
  
• operators with existing transmission equipment which they transform in order to transmit telecommunications signals.

Examples of such companies are Eurotunnel SA and NETs SA, which offer their clients high-capacity cross-Channel connections, and Global Telesystem Europe (GTS) and Farland, which establish pan-European networks with the aim of making them available to other operators.

In addition, new types of operators have recently appeared, known as carriers' carriers, that:

• establish and operate networks with a view to selling transmission capacity to other operators;
  
  
• ensure the switching on their networks by offering whole minutes in transit between two operators; or
  
  
• ensure the long-distance calls and their termination, usually on international calls.

Service operators
Service operators provide either a public telephone service or services using hertz frequencies to the public, requiring a licence under Article L 34-1, or other telecommunications services which do not require an individual licence.

Network and service operators
Some operators combine both activities. They offer an integrated telecommunications product providing telecommunications services, in particular public telephone services, via their own network.

Local authorities
Local authorities are investing more and more in the telecommunications market by making passive fibre infrastructure, also called black fibres, available to operators. It has been queried whether this type of activity falls within the remit of local authorities. In June 1999 this question was answered in the affirmative, although local authorities' capacity for intervention was limited.(1)

Article L 1511-6 of the General Code of Regional Authorities states that local authorities may:

"create infrastructures intended to support telecommunications networks to make them available to operators of telecommunications networks holding a licence granted under Article L 33-1."

However, the legislators have imposed two limits. First, local authorities cannot enter the telecommunications market as operators. Second, the authorities can only establish their own networks if the services or high capacity telecommunications networks required by these authorities are not available on the market at an affordable price, or do not meet the authorities' technical and quality requirements.

Licences

Types of licences for operators
The telecommunications minister authorizes the establishment and operation of public networks by granting licences under Article L 33-1. This authorization may only be refused in specific circumstances, namely:

• for the maintenance of public order or national defence and public security;
  
  
• where there are inherent technical constraints due to limited frequency availability;
  
  
• where the applicant does not have the technical or financial capacity to meet its obligations; or
  
  
• where the applicant has faced penalties under the code in connection with its telecommunications activities.

To date, no application for a licence has been refused. However, two points should be noted. First, any operator with an annual turnover in the telecommunications market exceeding a certain amount (fixed at Ffr300 million by the order of August 14 1997) must keep separate accounts for its telecommunications activities. In addition, where an operator has a monopoly or a dominant position in a sector other than the telecommunications sector and the infrastructure it uses for this activity can be physically separated, the operator must separate its telecommunications activities from its other activities in terms of its legal form (Article L 33-1 II of the code). This forces the largest operators to create specific subsidiaries for their telecommunications activities.

Second, the code limits the chance for a foreign company to operate in the telecommunications sector in France. For this reason, when the application for a licence concerns a network using radio frequencies, the licence may not be granted to a company in which more than 20% of the share capital or the voting rights are held, either directly or indirectly, by foreign nationals (Article L 33-1 III of the code). In the same way, no foreign national may purchase shares in a licensed operator if that would result in more than 20% of the share capital being held by foreign nationals. 'Foreign national' means any individual who does not have the nationality of a member state of the European Union (EU) or any company that was not formed in a member state.

Provision of a public telephone service
This must be authorized by the telecommunications minister in accordance with Article L 34-1.

Independent network infrastructure
This is defined under the code as:

"a telecommunications network intended for private or shared use. An independent network infrastructure is 'privately used' when it is reserved for use by the private individual or corporate entity which established it".

It is 'shared' when it is:

"reserved for use by several private individuals or corporate entities constituting one or several closed groups of users, with a view to exchanging internal communications within the same group" (Article L 32).

The concept of a closed users group (CUG) is not defined by the regulations. In its decision of May 30 1997, the ART defined a CUG as "a group which is based on a commonality of interests which are sufficiently stable as to be identified and which existed prior to the provision of the telecommunications service".

The ART is the proper authority to grant licences allowing the operation of such networks.

Procedure for granting licences
Decree 99-25 of January 13 1999 sets out a list of documents that must be attached to an application for a licence under Articles L 33-1 or 34-1 of the FPTC.

According to Article R 9-6 of the code, each application must specify the type of authorization requested. The application must also contain the following documents:

• Details of applicants: (Article R 9-6, para 1) including registered name, head office, corporate registration number, by-laws and articles of association, the share capital as well as the balance sheet and income statement of the applicant for the last two years. The application must also contain a description of the industrial and business activities of the applicant, particularly in the telecommunications sector, as well as a description of the business and industrial cooperation agreements signed in this sector. A list of licences already held by the applicant - and any penalties imposed under the code - must also be attached to the licence application.
  
  
• Details of the project: (Article R 9-6, para 2) including the measures taken to guarantee the operating hours, quality and availability of the network, the standards applied, transmission, switching, and access media envisaged and interconnections planned.
  
  
• Market position: a description of the commercial characteristics of the project and its position on the market.
  
  
• Technical and financial capacities of the applicant: evidence of the applicant's financial and technical capacity to realize the project, and of compliance with the schedule of conditions and information (at least during the five-year period following the grant of the authorization).
  
  
• Article L 33-1 authorization: in the case of an authorization given on the basis of Article L 33-1 of the code certain information should be given about the licence application on the nature, characteristics and geographic coverage of the network, network roll-out and deployment schedule, and types of terminal equipment used.

Strict timetable for regulatory authorities
The public regulatory authorities (ie, both the telecommunications minister and the ART) must respect the strict deadlines set by Decree 99-25 when delivering telecommunications licences necessary for the establishment and operation of a network open to the public or for the provision of a public telephone service.

By providing a strict time schedule, the government is reinforcing the guarantees for the licence applicants.

Examination of the application by the ART
Applications must be addressed to the president of the ART (Article R 9-7), who informs the applicant of the result within 10 days of receipt of the complete application. For licences granted under Article L 33-1 or under both Articles L 33-1 and 34-1, this period is extended to 20 days. If the application is not complete, the applicant must provide the information required by the ART within the time limits fixed by the regulatory authority.

Article R 9-8 provides a time limit during which the ART must examine the application. An application for a licence under Article L 34-1 of the code must be examined within four weeks from the receipt of the complete application file. Licence applications under Articles L 33-1 or under both Articles L 33-1 and 34-1 must be examined within three months.

The president of the ART may ask applicants for additional information concerning their licence application within this time limit.

Telecommunications minister's decision
Decree 99-25 provides for a strict time limit during which the minister must make a decision. Under Article R 9-9 of the code the ART transmits applications to the telecommunications minister within the time limits fixed by Article R 9-8. The minister may decide to grant or refuse the licence. Licences under Article L 34-1 must be granted within two weeks of the application being received by the minister. The time limit to grant the licence under Article L 33-1, or both Articles L 33-1 and 34-1, of the code is one month.

According to French administrative law (Article R 9-10), inaction by the minister has legal consequences. The type of licence required determines the legal consequences of the silence. Pursuant to new Article R 9-10 of the code, the telecommunications minister's silence constitutes a refusal after a period of:

• six weeks (licence under Article L 34-1);
  
  
• four months (licence under Article L 33-1 and Articles L 33-1 and 34-1); and
  
  
• eight months in the particular case of Article L 33-1 V, which limits the number of licences granted in the case of technical restrictions due to the scarcity of frequencies.

The ART 's Annual Report (1999, Volume II, page 23) gives the average time limits for consideration of licence applications as follows:

Rights of way
Articles L 45-1 and R 20-45 of the code state that every telecommunications operator who holds an L 33-1 licence has a right of way to install its telecommunications network on public roads. This right of way takes the form of a unilateral authorization to occupy the public domain granted by the authority responsible for it. The decree of May 30 1997(2) and the circular of December 22 1997(3) define the practicalities.

However, the operator has no right of way as regards establishing a telecommunications network on any public land other than roads. In such a case, the establishment of a network must follow an agreement between the operator and the local authority negotiated in a transparent and non-discriminatory manner.

Regulatory Authority

The ART is an independent administrative authority, composed of five members appointed for a fixed term of six years. Three of its members are appointed by decree, and the remaining two members are appointed by the presidents of the Senate and the General Assembly.

The ART has three types of function:

• consultation and assistance;
  
  
• regulation of the sector; and
  
  
• inspection and sanction.

Consultation and assistance
The consultative functions of the ART include:

• giving opinions on proposals for new laws, decrees or regulations relating to the telecommunications sector;
  
  
• giving opinions on the universal service tariffs, the multi-annual tariff objectives and tariffs for services for which there are no competitors on the market, prior to their approval by the telecommunications minister; and
  
  
• proposing to the minister the amount of contributions payable by the operators holding an L 33-1 or L 34-1 licence for the funding of the universal service obligations.

The ART assists the minister in his or her consideration of applications for L 33-1 and L 34-1 licences.

Regulatory powers
The ART exercises its regulatory power by enacting rules for operators, in particular regarding technical and financial conditions for interconnection or technical rules applicable to the networks. The ART's regulations must be approved by the minister.

Inspection and sanction
The ART's powers include:

• monitoring the operators' compliance with regulations;
  
  
• supervising compliance with competition laws and cooperating with the competition regulatory authority to fight discriminatory and anti-competitive practices;
  
  
• settling disputes in certain areas (eg, interconnection, commercial negotiations, and contractual disputes); and
  
  
• imposing sanctions on operators in case of breach of the telecommunications laws.
  

Interconnection Regime

Interconnection is defined by the ART's Annual Report (1997, Volume II, page 75) as "the linking together of different telecommunications networks to allow all users to communicate freely." Interconnection is an essential requirement of the deregulation of the telecommunications sector, as it requires every operator of a public network to permit another operator access to its network under conditions that are transparent and non-discriminatory.

The FPTC provides that the ART, after receiving the opinion of the competition regulatory authority, will establish a list of powerful operators. These operators must publish an interconnection catalogue describing the principal interconnection services and associated prices. Operators are considered powerful if they hold more than 25% of a telecommunications market covered by the requirements of Article L 34-8 (II) of the code. The ART has established that only France Telecom met this criterion for fixed telephone services in 2001(4). France Telecom was therefore required to publish its interconnection catalogue, which was approved by the ART(5). In the mobile telephone market, both France Telecom and SFR were found to be powerful operators(6), although in this market there is no requirement to file an interconnection catalogue.

Decree 97-188 of March 3 1997 relates to interconnection and sets out the legal regime and the conditions under which the interconnection fees must be fixed. It clearly states that "the interconnection fees pay for the actual use of the transport and delivery network and correspond to those actual costs." Under Article L 36-8 disputes may be brought before the ART in the case of:

• a refusal of interconnection;
  
  
• a failure of commercial negotiations; or
  
  
• a disagreement about the conclusion or performance of an interconnection agreement.
  

Consumer Protection

The Law of July 26 1996 contains provisions to protect consumers in terms of:

• the maintenance of the universal service - a high-quality telephone service which is generally available at an affordable price (Article 35);
  
  
• privacy and the protection of personal data;
  
  
• the confidentiality and security of communications; and
  
  
• rights to information on tariffs, general conditions of the service and recourse in case of disputes.

These latter obligations are imposed on operators in the form of conditions attached to licences delivered under Article L 33-1 and 34-1.

Competition in the Local Market

Unbundling the local copper-wire loop
Despite the formal introduction of full competition in the French telecommunications market from January 1 1998, effective competition has so far only been achieved in the long-distance market. The major challenge for the regulators is to enable real competition in the local market, which is heavily dominated by France Telecom, via its copper telephone wires. Since 1998 the ART has been following a process aimed at opening up this market to competition in the fairest way possible.

On September 12 2000 the French government adopted a decree setting out the terms of the unbundling of France Telecom's local copper-wire loop.(7) This refers to the complete liberalization of the final access wires (the copper pair) leading to the individual customer. According to the decree, which entered into force on January 1 2001, new operators can rent these final access wires from France Telecom and offer local telecommunications services over them in direct competition with France Telecom. These operators may access the local loop by installing their own equipment on France Telecom's copper wires in order to offer high-speed internet services only, thereby leaving France Telecom to provide traditional telephony services on the lower frequencies. Alternatively, they may opt for full access to the copper wires in order to offer both internet and telephony services to subscribers.(8)

The decree complies with the European Commission's timetable for unbundling the local loop in all member states by January 1 2001.

The precise terms of France Telecom's reference offer (concerning conditions for access to France Telecom's premises and equipment, and the fees to be charged to new operators) are still to be finalized. At present, this is hindering the effective implementation of unbundling in the local copper wire loop.

The local radio loop
In late 2000 the French government approved the grant of licences for the establishment and operation of local radio loop networks, with the aim of further stimulating competition in the local loop.

The two national licences were granted to FirstMark Communications and Fortel, and the two regional licences (per region) were divided among 15 other operators.(9)

Internet Access

The huge increase in internet use in France in recent years (10) has raised various legal issues for the telecommunications companies and service providers who carry internet traffic over their infrastructure. These include competition law issues concerning access to consumers and liability issues in relation to the content of the web sites accessed.

Asymmetric digital subscriber line services
The full unbundling of France Telecom's local copper-wire loop took effect on January 1 2001. Since this date, new operators have been theoretically able to access copper wires in order to provide local telephone and internet services directly to final consumers in competition with France Telecom. Unbundling is particularly important in the context of internet access as a result of Direct Subscriber Line (x-DSL) technology, and in particular Asymmetric Digital Subscriber Line (ADSL technology), which allows high-speed internet access over regular copper telephone wires. Because of France Telecom's monopoly over these wires, it has been able to offer high-speed ADSL internet services to consumers more quickly and more efficiently than its competitors. This issue led several operators (such as 9 Telecom) to bring proceedings against France Telecom before the French competition authority in late 1999, alleging abuse of its dominant position in the market.(11)

To date, the precise terms of France Telecom's reference offer (concerning the conditions for access to France Telecom's premises and equipment, and the fees to be charged to new operators) have not yet been finalized, as the matter has become embroiled in disputes between France Telecom and the ART (12).

In the meantime, consumers in certain parts of France (in particular the major cities) have been able to obtain high-speed internet access via cable, as proposed by NC Numericable and Noos, among others. Eventually, high-speed internet access will also be available via the local radio loop and the mobile telephone network.

Liability of intermediaries
While it is clear that content providers are liable for material appearing on their web site, the potential liability of intermediaries, such as internet hosting providers and internet service providers (ISPs), has been less clear. A hosting provider makes space available on its own server for others to set up web sites, whereas an ISP simply provides access to the Internet (although many ISPs also provide a hosting function).

Until recently, the liability of hosting providers in France was uncertain, as case law followed two different lines of authority. For example, in the Estelle Hallyday Case (13) the hosting provider was found liable for illicit content on a hosted site. However, in the Lynda Lacoste Case (14), the hosting provider was found not liable for the content of a web site it hosted on the grounds that it had developed reasonable means to detect illicit content on web sites and had blocked access to the site as soon as it was informed of such content.

The position has been clarified by a recent amendment to the Law on Freedom of Communications, which came into force on August 1 2000.(15) The amendment states that internet hosting providers will be criminally or civilly liable for the content of hosted web sites only if, having been ordered to block access to a particular web site by a judicial authority, they do not take this action promptly. This amendment is intended to implement the provision on the liability of hosting providers in the recent European Directive on E-commerce.(16)

For further information on this topic please contact Eric Morgan de Rivery, Pierre de Girard or Kate Thackeray at Lovells by telephone (+33 1 53 67 47 47) or by fax (+33 1 53 67 47 48) or by email (e.morgan@lovells.com, pm.de-girard@lovells.com or k.thackeray@lovells.com).

Endnotes

(1) Law 99-533 of June 25 1999 relating to town and country planning, Article 17 inserting Article L 1511-6 of the Code Général des Collectivités Territoriales.

(2) Decree 97-683 of May 30 1997 relating to rights of way on the public domain.

(3) Circular 97-109 of December 22 1997 relating to applications for rights of way over national public roads.

(4) Decision of July 26 2000.

(5) Decision 00-1109 of October 27 2000.

(6) Decision 99-767 of September 15 1999.

(7) Decree 2000-881 of September 12 2000.

(8) Article D 99-23 of the Posts and Telecommunications Code.

(9) ART press releases of July 11 2000 and December 20 2000.

(10) Figures from the Benchmark Group (December 1999) show 6.5 million internet users in France, an increase of 117% from 1998; and 85,000 web sites in France, an increase of 70% from 1998. (See www.declic.net).

(11) 9-Telecom v France Telecom, complaint to Competition Council dated November 29 1999

(12) ART press release dated March 2 2001 and Les Echos, March 5 2001.

(13) Estelle Hallyday v Valentin Lacambre, Paris Court of Appeal, in summary proceedings, February 10 1999.

(14) Multimania v Lacoste, Versailles Court of Appeal, June 8 2000.

(15) Law 2000-719 of August 1 2000.

(16) EC Directive 2000/31/EC on electronic commerce dated June 8 2000, OJ L 178, July 17 2000.