Key Benefits:
The Telecommunications Regulatory Authority,
Seen the postal code and telecommunications, and in particular Articles D. 99-19 and D. 99-20;
In view of Parliament Directive 97 /33/EC European and Council of 30 June 1997 on interconnection in the telecommunications sector with a view to ensuring a universal service and interoperability through the application of the principles of the provision of an open network (ONP);
Commission Recommendation 98 /195/EC of 8 January 1998 concerning interconnection in a liberalised telecommunications market;
Having regard to the order of 12 March 1998 authorising Société France Télécom to establish and operate a network of Telecommunications open to the public and provide telephone service to the public;
Having regard to the order of 27 September 2002 amending the order of 12 March 1998 authorising Société France Télécom to establish and operate a telecommunications network Open to the public and provide telephone service to the public;
After consultation with the Interconnection Committee from May 17 to June 12, 2001;
After public consultation on the implementation of incremental average costs Long term as reference costs for the interconnection rates of France Télécom, carried out from 31 July to 14 September 2001;
After deliberation on 5 November 2002,
I. -Regulatory framework
Article D. 99-19 of the Postal and Telecommunications Code defines the Reference costs for determining the interconnection rates of France Télécom and provides that " from the 1997 rates, as long as the Telecommunications Regulatory Authority has not adopted another method under Article D. 99-20, [...], interswitching rates for a given year shall be based on the relevant estimated average accounting costs for the year considered, evaluated by the Telecommunications Regulatory Authority, taking into account:
-efficiency New investments made or planned by the operator in relation to the best available industrially available technologies;
-international references to tariffs and interconnection costs. "
The postal code and telecommunications code also provides for the possibility of adopting other reference costs, in accordance with the provisions of Article D. 99-20 which states that" after consultation within the Interconnection Committee and Public consultation, the Telecommunications Regulatory Authority will define a method for better long-term efficiency of the costs taken into account than that resulting from the initial method laid down in Article D. 99-19 Respecting the principles set out in Article D. 99-17. To this end, it relies on the comparison of the results of techno-economic models and models based on operator accounting by maintaining the reference to available international comparisons ". This article specifies that " The Telecommunications Regulatory Authority shall involve operators in the development of the method " And " Publishes the method it has adopted ".
In 2001, the Authority undertook work for adoption in 2002. Incremental long-term average or CMILT costs, as reference costs for interswitching. This change is justified both by reasons of better economic efficiency but also in the interests of consistency with the unbundling of the local loop, where these costs are already used.
The process followed complied with the provisions of the Article D. 99-20, associating the sector with both the definition of the method and the development of a technical-economic model. In the context of this consultation, the Authority has defined a methodology similar to that followed in many European countries, based on the comparison between two models, one said " Bottom-up " Developed with the sector, the other says " Top-down " Based on a history operator model.
II. -Method of passage to CMILT
The Authority proceeded to consult with the members of the Interconnection Committee from May 17 to June 12, 2001, followed by a public consultation from July 31 to September 14, 2001, including: Annex I to this Decision.
Following this consultation and public consultation, the Authority has adopted both the definition of the CMILT and the methodology for the evaluation of the reference costs Interconnect.
II.1. -Definition and method of determining CMILT
CMILT has already been defined and described in the context of the unbundling of the local loop and in particular in Annex II of Decision No. 2000-1171 of the Relate Authority To the calculation method. The same principles have been adopted and adapted to the specific framework of the France Télécom interswitching rates.
The CMILT covers two concepts:
-these are average incremental costs. Their calculation is to place themselves at a given level of production, to define a production increment and to estimate the average cost associated with this increment and only in this increment. Interswitching rates must incorporate, in addition to the costs calculated on the basis of CMILT, a fair contribution to the common costs in order to respect the operator's budgetary constraint;
-the ILCMs are calculated from a perspective of In the long term, all costs are considered to be variable, that is, the operator can optimize all of its cost items in relation to the level of production under consideration. In addition, the approach is intended to be prospective and the operator is considered to be efficient, that is, it uses the best available technology.
The ILCMs must meet a principle of efficiency and can be estimated on the basis of Two types of techno-economic models:
-top-down, that is, based on replacement costs based on France Telecom's cost accounting and network evolution forecasts, and on a network correctly Size for traffic;
-bottom-up, that is, based on a network optimized under certain constraints incorporating best practices in the market. This model is built in consultation with the sector.
It is finally a question of comparing the results of the two models in a so-called conciliation phase.
This approximation of the models is in line with the recommendations of the European Commission Which recommends using a bottom-up model in conjunction with a top-down model closer to the network of the historical operator. The use of two models also respects the provisions of Article D. 99-20 which provides for the establishment by the Authority of a " Method of achieving a better long-term efficiency of the costs taken into account than that resulting from the method Initial ... " Which specifies that the Authority will be able to rely for this purpose " Comparison of the results of techno-economic models and models based on operator accounting by maintaining the reference to comparisons Available international ".
II.2. -Principles retained in the
framework for the determination of interswitching rates
In addition to the general principles outlined above, the establishment of ILCMs for interswitching requires clarification of the points The following:
-the definition of the increment and a reference network;
-the economic valuation of assets and the determination of cost functions;
-conditions for switching to CMILT at the end of the model reconciliation phase.
Incremental
In the context of interconnect, the increment considered is the traffic transiting the switching and transmission elements of the general network of France Télécom. This traffic includes minimum commuted traffic, but can also integrate traffic generated by other types of services, such as leased routes for transmission.
For interconnect base services (intra-CA, simple transit and double transit), an operator interconnected to France Télécom remunerates through the interswitching rates the use of the general network of France Télécom, i.e. the use of transmission elements and
Or, these network elements are not necessarily dedicated to switched traffic only. This is particularly the case for transmission elements that can be shared with other traffic: for example, fibre optics or civil engineering can be used in conjunction with telephone communications (switched traffic)
This pooling of certain resources of the general network of France Télécom requires, for each network element concerned by the interconnection, to identify at first the set of services using it (Switched traffic, leased links ...).
It is then appropriate to determine from these services those retained for increment. The incremental cost is then the cost of production of all services (included or excluded from the increment) decreased production costs isolated from the services not retained in the increment.
For equity reasons, the increment retained Must then understand a sufficient number of services because the incremental cost, calculated as the cost of production of the increment from a reference production level, only benefits the services included in the incremental Increasing returns to scale, characteristics of network economies.
If one considers, as an illustration, an operator transiting the same civil engineering artery from switched and leased traffic, the incremental cost of a Increment limited to switched traffic would benefit this service only from the effects of increasing returns, with the leased lines supporting the entire civil engineering costs.
These principles were followed in the definition of increment Which, in both models, is not limited to the only switched tratic:
-the bottom-up model developed with the sector includes in the increment, in addition to the switched traffic, the leased links up to a flow rate of 155 Mbit/s. The limitation to these two forms of trafficking is a compromise between an approach considered too simple, including only switched traffic, and an overly complex approach, consisting of modelling on the public data base of other traffic;
-the top-down model Of France Télécom is based on a global model which includes all services transiting through the general network (switched services, broadband ...), including therefore, a minima, switched traffic and leased links.
Network of Reference
A compromise was sought between costs reflecting a network architecture using the best available industrially available technologies and those corresponding to the existing architecture of the operator History.
In network modeling, optimization has been done, as a constant service, by dimensioning transmission links in relation to traffic over the network and by integrating transmission and transmission equipment.
The optimization has not challenged the number and position of the nodes in this network. It was, in fact, both to retain an efficient architecture and dimensioning, while at the same time allowing to model the costs of an interswitching service similar to that actually used by operators, both in terms of quality and Service and geographic area covered.
The bottom-up model did not challenge the current architecture of the France Telecom network, considered to be effective, but incorporated foreseeable developments for 2002 in terms of a fleet of switches and Has dimensioned the transmission network based on estimated traffic.
Asset Valuation
Assets were evaluated using the proxy cost method. This method has already been described in Annex II to Decision No. 2000-1171 dated 31 October 2000. Replacement costs allow the effect of technical progress to be taken into account in the difference in accounting costs calculated on the basis of the historical acquisition price of the asset. They integrate the evolution of asset prices over time.
Cost functions
ILCMs reflect the costs of an efficient operator for a given quality of service.
Models Bottom-up and top-down must therefore be able to justify the modelled cost levels in the light of efficient choice on the part of the operator concerned. It is therefore necessary that they present a sufficient level of detail to explain the relationships between the cost drivers and the corresponding cost of receipt.
Ideally, modeling will be based on cost functions Explicit linking units of work (traffic, length of civil engineering ...) The costs considered. Failing this, the model will provide the volumes of units of work, allowing the deduction of implicit cost functions (costs per BPN for a switch, cost per kilometre of civil engineering for transmission).
The bottom-up model is constructed by
the case of the top-down model, the Authority has defined in consultation with France Télécom a reporting format showing the costs and the Corresponding units of work, with a sufficient level of detail to allow comparison with the bottom-up model. France Telecom sent the 2002 reporting information to the Authority in July 2002.
Passing conditions to CMILT
at the end of the model reconciliation phase
The establishment of the CMILT is therefore based on two models, a bottom-up developed with the sector and public, the other top-down based on the accounting system of France Telecom.
The use of two models is essential and is Justifies the fact that the establishment of the CMILT cannot:
-nor do the economy of a reflection on the costs of an efficient operator in consultation with the sector and thus of a bottom-up model, which represents one of the characteristics Major of the CMILT approach;
-or be, on the other hand, totally uncorrelated with the historical operator's accounting, whose level of detail in terms of cost allocation and the degree of complexity cannot be matched by a model
The Authority has also made the choice to involve the sector as much as possible in the construction of the bottom-up model and to develop a model that is both simple and based on public data in order to discuss the parameters Selected with sufficient transparency. This choice, however, imposed limits on the model, which could not then integrate confidential data from France Télécom and thus ultimately evaluate all the costs of the incumbent operator.
The process of setting up the CMILT ends with A comparison of the two models, called conciliation, the principles of which have been discussed with the sector.
The Authority has thus ensured that this phase is prepared as far as possible from the process, since the process is only possible if The models are close enough in their design to allow for a discussion of the assumptions used in each model.
In view of the experience of other regulators and the inevitable differences between the two models, the purpose of the Reconciliation is not the result of a perfect convergence of model results to interswitching rates.
On the other hand, it is a tool to identify important differences, to analyse the reasons for this by comparing the rules of the Cost training in the two approaches and lead to a sufficient reconciliation to allow the validation of rates.
The bottom-up model thus allows the Authority to have a repository to analyse the top-down model of France Telecom.
At the end of the comparison of the models, the Authority appreciates the degree of progress of the file and examines the conditions of transition to the CMILT in function:
-the degree of convergence of the two approaches;
-the accuracy and the Quality of information provided by France Télécom.
III. -Development of a bottom-up model with the sector
In early June 2001, the Authority commissioned a consultancy firm to carry out a bottom-up model. It was for the chosen firm:
-to define the architecture of the model in the light of existing models, in particular the model developed by the European Commission, and interviews with operators. The firm has been instructed in this phase to collect maximum assessments on the best available technologies, both on their technical aspects (evolution of the network in place, possibilities for optimization, etc.).) Economic (equipment costs, technical-economic lifetimes ...) ;
-to perform and calibrate the model developed prior to communicating with its results to the sector.
The methodology and network architecture retained in the model were presented to the Interconnection Committee of June 29, 2001. The model was the subject of a more complete presentation to the Economic Sub-Committee of 10 July 2001 and the operators were invited to submit their comments, in particular on the architecture selected and the parameters for the cost of equipment and
The model was finally presented with its results at the Economic Sub-Committee of 11 September 2001 and transmitted to the sector. The Authority therefore ensured that the process was carried out in full transparency and with a genuine involvement of the sector in order to have a robust and representative model of the sector's assessments before the
. In this final submission that the costs resulting from the model could not be considered as the final rates for interswitching services, recalling that the model evaluates only a portion of the relevant costs and that the CMILT method Involves a reconciliation phase.
IV. -Reconciliation of top-down and bottom-up models
IV.1. -Top-down model
France Telecom has built its top-down model on the basis of its traditional analytical accounting model, TCP, with some adaptations.
With regard to investment costs in France Télécom valued them in replacement costs, based on data provided by its network industry in the light of the latest available quotes or the latest audited costs, i.e. 1999, extrapolated in 2002 on the basis of a factor With
to direct operating costs and indirect costs, France Telecom uses its system of analytical accounting extrapolated to the year in question, considering that these levels are justified on the basis of quality
The model and the replacement cost recovery methodology were audited by an external firm during the first half of 2002 and the findings were taken into account in the conciliation phase.
IV.2. -Conciliation process
Bilateral meetings between France Telecom and the Authority were held several times between October 2001 and February 2002.
As a first step, these meetings improved And to complete the bottom-up model:
-with regard to the modelling of trafficking, the model as transmitted to the sector had not modeled, for the sake of simplicity, part of the switched traffic (international, special services off the internet ...) Which represents about 10 % of the total traffic of France Télécom, which has been taken into account in the final model. On the other hand, the model has been fixed in order to resume the same forecasts of traffic volumes as France Télécom to make the two approaches comparable;
-as regards the rates of filling of the circuits, the final model resumed those of the Sheets transmitted by France Télécom;
-in the case of the dimensioning of the network, including the dimensioning of transmission equipment such as multiplexers, the final model has taken into account the rules of design transmitted by France Télécom;
-to model all the relevant costs for interconnection, have been integrated into the final model the local tax costs, the self-consumption costs as well as the specific costs and certain common costs, Not taken into account in the initial bottom-up model.
This phase enabled a model to calculate the costs of a network that allows for the transmission of traffic identical to that used by France Télécom in its 2002 forecasts and with
France Télécom had presented, before the conciliation phase, the general principles of its model and transmitted the main results:
-detailing the general network costs in the form of a data sheet (known as " Sheet 1);
-by explaining the different cost items for the specific costs and common costs.
France Télécom has completed these results by providing additional information on the points identified by the Authority:
-mode Assignment of transmission costs and indication of cable and trench lengths;
-explanation of the indirect and operating costs assigned to different types of network.
IV.3. -Results of the conciliation
In the analysis of the results of the two models, the Authority focused on identifying for the main switching and transmission elements:
-differences related to units And the architecture of the network, if any;
-differences in the valuation of capital costs, in particular as regards the price of equipment and investment formulae and parameters;
-differences in Operating costs and indirect costs.
At this stage, the Authority has made the following observations:
In relation to switching, the differences remaining at the end of the conciliation are due to differences in the valuation of equipment prices. Switching. France Telecom uses prices higher than those used in the bottom-up model. The Authority did not consider that the elements provided by the bottom-up model were sufficient to call into question the valuations of France Telecom, the analysis of which will continue in future audits
Differences remain at the end of the process:
-the annual capital costs assigned to the transmission for switched traffic are close in both models. However, the valuation of the investment in transmission is more important in the bottom-up domain than in the top-down model. This can be explained in part by the fact that all costs, and in particular civil engineering costs, are allocated only to two types of traffic, namely, leased and switched traffic, in the bottom-up model, while they are Assigned to a much wider range of services in the top-down model, thereby reducing the share allocated to switched traffic and leased routes.
In addition, France Telecom amortizes its costs over a shorter average duration, which Has the effect of leading to a higher ratio between the annual cost and the investment cost than for the bottom-up model.
Operating costs are higher in the top-down model than in the bottom-up model for the Transmission. This can be explained by the fact that France Télécom incurs more real operating costs than the sector considers justified for an efficient operator. This may also result from a lack of precision of the bottom-up model compared to the top-down model, which allows for the finely tracking of the allocation of all indirect costs and the operating costs between the various elements of the Network.
IV.4. -Transition to the CMILT
At the end of the conciliation phase, the Authority considers that it has been able to carry out a thorough examination of the results of the top-down model on the basis of a comparison with the bottom-up model and thus validate the
The Authority therefore considers that the top-down model as presented by France Télécom can be used as a CMILT cost base to assess interswitching rates.
The Authority points out, however, that audits Have been carried out above all for the basic services of commuted interconnection and that, in the case of other services, and in particular partial leased links, it may, if necessary, extend the use of a bottom-up approach to the examination Costs such as the top-down model.
V. -
V. 1 perspectives. -Determination of interswitching rates
Now, the determination of the basic fares of France Telecom will be based on the results of the top-down model after comparison with the results of the bottom-up model, including the Food assumptions will be reviewed on a regular basis.
In the case of other interconnection services, France Telecom will be required to determine rates on the basis of its top-down model and the Authority may, if necessary and in accordance with the Services, use bottom-up modeling for its expertise.
V. 2. -CMILT and principle of non-discrimination
In accordance with Article 13.1 of the terms of reference annexed to the authorisation order of France Télécom of 12 March 1998, France Télécom is required to produce " Product accounts and Charges known as the following individual accounts: general network, dial-up network, interconnection, telephone service to the public, leased links and other activities covered by this authorisation ".
In order to respect the principle Of non-discrimination and thus ensure the conditions necessary for fair competition, Article 13.2 of the same specification states that ' The operator values each of the elements of the general network that it uses at the same unit cost as The one used to establish tariffs for its interconnection services for operators authorised under Article L. 33-1 of the postal code and telecommunications. The method of evaluating the costs used by the operator is the same as the one used to establish interswitching rates. "
As a result, France Télécom is required, as a result of the adoption of the CMILT as a reference cost for Interconnection, to produce all of its customised CMILT accounts calculated on the basis of its top-down replacement cost model,
Decides:
The reference costs used to calculate the interconnection rates of France Télécom are now the incremental average costs of the long term.
Long-term incremental average costs will be determined on the basis of the replacement cost accounting model of France Télécom and Possibly a comparison with the results of a bottom-up model, if deemed necessary by the Authority.
Director General of the Authority shall be responsible for the implementation of this Decision, which shall be published in the Official Journal and notified to France Télécom.
Done at Paris, November 5, 2002.
The President,
J.-M. Hubert
