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Press Update

The Development of

high-speed Internet in France

ART’s opinion on France Télécom IP/ADSL offers

18 July 2002

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The development of the high-speed market in Europe

•Rapid development: from 5.6 million high-speed subscribers in Europe in late 2001 to 9.5 million at end 2002*

•The price of network access is a critical factor for market development

*source: CMA consulting

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The high-speed Internet value chain

Consumer Access Collection and transport

ISP

France Télécom

Competing operators

France Télécom

Competing operators

Wanadoo

Competing ISPs

Full unbundled accessShared access

Option 5

Option 3

Option 1

Effective competition must be present along the entire value chain

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ART’s goals for the development of ADSL in France

• Effective competition along the entire value chain

– Access: the decision dated 16 April 2002 on the pricing and operational conditions of unbundling (full unbundled access and shared access: option 1)

– Collection and transport: the need for an option 3 offer, to allow operators to complete deployment for unbundling and to compete with France Télécom’s option 5 offers (IP/ADSL)

– Internet service: making ISPs’ ADSL offers viable, while ensuring that operators benefit from viable market entry conditions, via unbundling and option 3

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What ART is doing (1)

•Access: the decision of 16 April 2002 and France Télécom’s reference offer of June 2002 for unbundling (option 1):

– Fees that are among the lowest in Europe:

– Collocation conditions that have been simplified considerably

€ July 2001 June 2002 ChangeFull unbundled access(monthly fee)

14.50 10.50 -28%

Shared access(monthly fee)

6.10 + filter onestimate

2.86 includingloan of filtering

Service access fee 107.90 78.70 -27%

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What ART is doing (2)

•Option 5: the pricing opinion of 18 July 2002

Major improvements in the conditions of option 5

for ISPs, to benefit market development

€ (excl. VAT) Current conditions October 2002 ChangeCost persubscriber paid bythe ISP (option 5)

€39.70 per month €30.00 per month

through an extendedrange:

128 kbits/s: €23.00512 kbits/s: €28.001024 kbits/s: €54.70

1024 kbits/s pro:€75.90

-25%

-29%

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What ART is doing (3)

• Option 3: changes made by France Télécom in early July, compatible with IP/ADSL prices

– Two offers now available:

– Functional improvements, in particular the elimination of pre-reservation of access, which allows operators to order access by unit

– Improvements still to be made: access to the lower level (1st cross connect)

€ per subscriber per month currenty 01 july 2002 change IP/ADSL pricesoperator's economic

space

option 3 "standard" offer (all speeds)

€ 42,20 € 23,00 -40% € 30,00 € 7,00

128 kbits/s: €16.60 128 kbits/s: €23.00 128 kbits/s: €6.40

new option 3 offer 512 kbit/s: €21.00 512 kbit/s: €28.00 512 kbit/s: €7.00

(different speds) 1024 kbit/s: €44.50 1024 kbit/s: €54.70 1024 kbit/s: €10.20

1024 kbit/s pro: €65.60 1024 kbit/s pro: €75.90 1024 kbit/s pro: €10.20

average: €23 .00 average: €30.00 average: €7.00

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Conclusion

• A measure that is highly beneficial to the dynamic development of the market for all players:

– ISPs: significantly improved economic conditions, extension of the range of offered services

– operators: viable entry conditions on the market, to complement unbundling

• For consumers: competition that will encourage a decline in prices (cf. current market price: €45 VAT included, for a 512 kbits/s offer); prices will drop as a result of market competition

• Implementation as of 15 October 2002 to ensure that France Télécom and competing operators are able to launch their offers to ISPs at the same time