Friday, December 12, 2014

EC to Investigate French Regulator’s SMS Termination Directive

On 28 November, the European Commission (EC) approved the decision of the Autorité de Régulation des Communications Électroniques et des Postes (ARCEP), the French regulator, regarding the fixed line and mobile call termination markets from 2014 to 2017. However, the EC is conducting a two-month investigation into ARCEP’s proposal to continue regulating the SMS termination market. The EC has argued that new SMS termination regulation could impede the development of OTT messaging apps and decrease the benefits more choices provide to consumers in terms of selection, quality and price. ARCEP has defended its proposal by saying that the regulation is pro-competition because it allows each operator to determine its own strategy for SMS termination rates and that its supervision of the rates has resulted in the inclusion of unlimited SMS in 9 out of 10 plans in the French retail market.

According to a press release from ARCEP, since 2006 SMS termination regulation has made it possible to improve the terms and conditions under which operators exchange text messages, by ensuring their mutual interconnection, and by ordering a significant decrease in the wholesale rates they charge one another. So far it has facilitated competition among MNOs by enabling the ubiquitous development of retail plans that include unlimited SMS. In addition France’s telecom regulator has stated that the advantages of SMS over OTT services are that SMS are universal, interoperable among all operators and devices and can be relayed in an optimal fashion.
France’s smartphone penetration was 58 percent in 2014, which indicates that almost half of the country’s mobile phone users do not have access to OTT apps and therefore cannot avail themselves of the advantages of OTT messaging as the EC suggests they should. The markets that the EC oversees vary widely among themselves. When the current economic environment of each country is considered, the fact that SMS termination is not regulated in 25 out of the 28 EU member states—a fact to which the EC is drawing attention—may not justify the removal of ARCEP’s regulatory proposal on the SMS termination market in France. If the final decision, which will be determined after discussions between ARCEP, the EC and the Body of European Regulators (BEREC) results in ARCEP no longer regulating SMS termination rates, there may be an adverse effect on the country’s mobile operators. All three entities need to work together to ensure that the proper amount of regulatory control will be beneficial to market development and to consumers in the short and long terms.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues or to speak with the research team:

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