France Queried on Universal Telecom Service Fees

The European Commission today announced that it has given France two months to respond to European Union concerns that the way it funds universal services in the telecommunications sector puts new entrants at a disadvantage.

Universal services are basic telecommunications services that are provided to all parts of a country, no matter how remote. Traditionally, before the telecommunications sector was opened up to competition last year, the incumbent EU national carriers provided universal services, financing them through the fees its customers paid.

Now, although EU legislation fully acknowledges the right of member nations to impose a fee on new telecom companies to help finance the provision of universal services, it requires that the fee be in line with the actual cost of providing the service. Fees can be levied on new carriers that hold a significant market share.

The EU want to ensure that in France's case the "financing of universal service are justified with regard to the net costs effectively incurred by the universal service operator and that the methods of calculation of such costs are in line with the relevant directives," according to a Commission statement.

The procedure by which France has been given a two-month period to respond to these concerns, also called a "reasoned opinion," represents the second stage in the EU's infringement proceedings against member nations. If France fails to satisfy the Commission with its response or declines to modify its funding mechanism, the Commission will start the final stage involving a complaint to the Luxembourg-based Court of Justice.

France is the only EU nation to have put in place a financing mechanism for universal services.

In 1997 Competition Commissioner Karel Van Miert opened the first stage of formal infringement proceedings against France. The Commission's case was reinforced in May 1998 when both the French telecommunications operators' association (AFOPT) and the association of telecommunications service operators (AOST) complained that the universal funding mechanism represented an abuse of a dominant position on the part of France Telecom.

In March 1999 France did reduce the estimated cost of providing universal services to slightly under 3 billion francs (US$500 million), from 5 billion francs (US$825 million) in 1997, and it did revise its calculations. While welcoming this improvement, the Commission said it believes the current system still infringes EU rules because payments made by individual operators for financing universal services are not published, the fees were introduced in 1997 before the voice-telephony market in France was even open to new entrants, and there appear to be costs that have no relation to the accounting data provided by France

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