French competition authority fines mobile operators for on-net pricing strategy
Pricing practices in France’s call termination markets have been in the spotlight for many years. High rate differentiation between on-net calls within the network of an operator and off-net calls to competing networks gave rise to competition law sanctions against Orange Caraibes and France Telecom in December 2009. Each mobile telephony operator holds a monopoly on the market for call termination on its own network, and therefore must refrain from abuse under competition law. In its December 13 decision, the Competition Authority found that the on-net / off-net price differentiation is not objectively justified by a difference between the costs of these two types of calls. It further found that the practices accentuated the "club" effect resulting from the tendency of close friends and relatives to regroup under the same operator. Club effects are difficult to undo because, once locked in, the consumer faces high exit costs from these on-net plans. The Authority found that SFR's and Orange's practices necessarily favoured large operators with the largest number of subscribers and disfavoured small operators unable to align with on-net offerings unless they provide unlimited cross-net plans, at very high costs. The Authority also found that Orange’s and France Telecom’s on-net plans endangered the market survival of the third French operator, Bouygues Telecom and justifies the high fines imposed. The higher fine imposed on Orange and France Telecom reflect the Authority's conclusion that these operators have committed repeated anticompetitive practices.