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Regulatory, infrastructure and tariff aspects of electronic communications and broadband connectivity in the Outermost Regions (OR) A comparison of the current situation with that in the rest of the Community and neighbouring countries

Prepared for the European Commission DG Regional Policy

December 2005

This study was financed by the European Community and was performed by IDATE and LL&A in partnership with INESC PORTO (Portugal) and MM (Spain). The opinions expressed herein are those of the authors only and under no circumstances are to be construed as those of the European Commission.

IDATE – BP4167 – 34092 Montpellier cedex 5 – Tel : +33(0)467 144 444 – Fax : +33(0)467 144 400 – [email protected] Regulatory, infrastructure and tariff aspects of electronic communications and broadband connectivity in the ORs: A comparison of the current situation with that in the rest of the Community and neighbouring countries Final report

Contents

Introduction...... 7

1. State of the art of telecommunications in the ORs...... 9 1.1. Networks and services...... 9 1.2. Regulation and competition ...... 12 1.3. Tariff comparison ...... 16 1.4. Service offerings ...... 20

2. Cross-analysis of issues ...... 21 2.1. Reducing the access gap...... 21 2.1.1. Tariff continuity impacts in the Iberian ORs...... 21 2.1.2. The impact of not acting to reduce the access gap in the four DOMs ...... 25 2.2. The issue of intercontinental connectivity ...... 28 2.2.1. Telecoms operator positioning and strategies ...... 28 2.2.2. The impact of intercontinental connectivity on the tariff situation in the ORs...... 31 2.3. Regional strategies and action plans ...... 35 2.3.1. The difficulty of developing overall strategies and integrated action plans ...... 35 2.3.2. The importance of European leverage ...... 37 2.3.3. Primary action orientations of Information Society programmes ...... 38 2.3.4. Implementation of priority action orientations ...... 39 2.4. Authorities and structures in place to address Information Society challenges...... 44 2.4.1. Regional teams still tenuous and lacking sufficient coordination...... 44 2.4.2. Lack of consultation and coordination among players...... 46 2.4.3. Weak tools for IS monitoring and analysis...... 47

3. Conclusions: Recommendation guidelines ...... 48 3.1. Introduction: Framing the issues...... 48 3.2. Intercontinental, interregional and intraregional connectivity...... 50 3.2.1. Conclusions...... 50 3.2.2. Recommendations ...... 51 3.3. Electronic communications public policy and governance...... 60 3.3.1. Improve regional governance of the Information Society...... 60 3.3.2. Strengthen and improve ICT public policies ...... 63 3.3.3. Turn the ORs into laboratories for Information Society experiments ...... 64 3.4. Concerning regulation...... 68 3.4.1. Conclusion...... 68 3.4.2. Recommendations ...... 69

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4. Appendices ...... 74 4.1. Telecommunications tariff benchmarks ...... 74 4.2. National regulatory frameworks ...... 77 4.2.1. France ...... 77 4.2.2. Spain ...... 78 4.2.3. Portugal...... 80 4.3. Maps of OR telecommunications networks and services ...... 81 4.3.1. Map of the Azores ...... 81 4.3.2. Map of the Canaries ...... 82 4.3.3. Map of Guadeloupe...... 83 4.3.4. Map of French Guiana...... 84 4.3.5. Map of Madeira ...... 85 4.3.6. Map of Martinique...... 86 4.3.7. Map of Reunion ...... 87 4.4. Glossary ...... 88

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EXECUTIVE SUMMARY The situation of the outermost regions -- the ORs – with respect to the development and penetration of electronic communication services and broadband connectivity is distinctive and can be summarised as follows: − Lagging levels of fixed telephony which, in every case, are behind national averages. − Mobile telephony penetration approaching, and sometimes surpassing, national averages. − Greatly disparate levels of broadband penetration. The Iberian ORs appear to be close to narrowing the gap with their respective national averages; the DOMs greatly lag their national average. − Great technological upheaval in all of the ORs, which are developing satellite/WiFi, WiMAX, WLL, Power Line Carrier, cable modem, 2G and 3G solutions.

Our analysis of the status of telecommunication networks and services in the ORs leads us to conclude that there is an access gap between these regions and their countries of origin and, more generally, between these regions and European averages, both in terms of service quality and in terms of tariffs.

The crux of the problem as concerns penetration of the Information Society in the ORs lies in the distance separating these regions from their countries of origin.

This is reflected especially in notions of geographic isolation and remoteness, the exiguity of the markets involved, and the status of optical submarine infrastructure.

The excess cost of intercontinental telecommunication links imposes significant constraints on competition development, network deployment and service availability, quality of service offered, and the reliability of international electronic communications.

In summary, the ORs have distinctive characteristics that differentiate them from the continental European regions and which cumulatively and in combination translate into three major structural handicaps: 1. The factor of remoteness and isolation – particularly significant for the DOMs, which are 6,700- 9,400km distant – takes on greater importance in the case of broadband in that most exchanges occur at the international level: depending on the methods used, only about 5% of traffic remains within a regional entity. In the Iberian ORs, this factor is less significant but is manifested nevertheless in problems with link throughput, service quality, and reliability. 2. The competitive weakness of offerings The prospects for developing retail markets have been limited by incumbent operators’ de facto monopoly of intercontinental connectivity and very dominant position in intraregional connectivity. Last-mile markets are highly concentrated in the hands of incumbent operators, who notably command more than 80% of ADSL access lines: as of the end of 2004, France Telecom had an average of 81% of the market in the four DOMs, Telefonica had 80% of the Canaries market, and Portugal Telecom had 90% of the market in Madeira and the Azores. 3. The ORs’ exiguity and geographic distribution constitutes a third major factor differentiating these regions from their countries of origin. Except for the Canaries, no OR has a population exceeding that of a large town. Therefore, the operators’ target markets are small. Moreover, and this is true for the Canaries, as well, the population is concentrated in a few locations, most of the territory being practically deserted.

There are other handicaps that might explain one or another aspect of telecommunications network development and access development in the ORs, but those described above are the fundamental ones, others generally being little more than variations on these themes.

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Three main action orientations, presented here in the form of recommendation focus areas, flow from the status reports and cross-analyses. They involve: − Intercontinental, interregional and intraregional connectivity. − Electronic communications public policy and governance. − Regulation.

Intercontinental, interregional and intraregional connectivity Two recommendations apply to all ORs. − Facilitate public sector initiatives – of Governments and Regional Councils -- to implement new public electronic communication networks that are neutral and open to all. Do so particularly by allowing directly leased lines to receive public funding under 2007-2013 infrastructure budgets. − Analyse the specific criteria used for setting wholesale prices. Do so by sending questionnaires to the telecommunication operators. The excess cost evaluation model allows trends in wholesale tariffs, retail tariffs, and tariff components to be monitored and, thus, the use of compensation funds to be determined according to the situation in each OR.

Intercontinental and interisland recommendations are as follows: policy support for negotiations with the incumbent operator (Azores and Madeira), an initiative to construct an intercontinental submarine cable (Canaries and Martinique), support for alternative operators to use neutral and open interisland capacity (Canaries), financial support for the purchase of long-term capacity (IRU or long- term lease) through a call to tender services (French Guiana and Reunion).

At the intraregional level, it would be prudent for the Iberian ORs to contract technical, economic, and juridical feasibility studies that take into account the experience of the DOMs in order to determine the best model and specific implementation methodologies to be adopted under a national planning policy given existing infrastructure (cable networks in particular). The DOMs already have committed to the process of creating a broadband public network, so in their case Europe ought to provide them with financial support for their investment as well as operating support, particularly for the certain isolated parts of French Guiana that are accessible only via satellite.

Electronic communications public policy and governance The recommendations fall into three main focus areas: 1. Strengthen the regions' capacity for governance in the area of telecommunications, as set forth in six recommendations: − Affirm the “juridical” capacities of the Regions with respect to ICT. − Encourage the Regions to strengthen their organisational capacities (strengthening ICT services/management). − Encourage the Regions to develop their own consultation capacities (creating dedicated venues: fora, consultative committees, steering groups, etc.). − Encourage the Regions to develop their own observational and analytical capacities (regional observatories of the Information Society). − Improve strategic planning and operating capacities (ICT strategies and action plans, regional broadband master plans, etc.) − Improve the Regions’ European and international cooperation capacities (developing ICT cooperation among the RUPs and with Europe, facilitating the ORs’ opening up to their international surroundings). 2. Strengthen and improve the ORs’ ICT public policies through two main recommendations: − Expand and update the ICT public financing methods that are established in regional development programmes. − Improve the content of public policy through a more comprehensive approach and by developing applications that are particularly relevant to the distinctive characteristics of the ORs.

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3. Turn the ORs into laboratories for Information Society experiments The ORs’ openness to technological experimentation is reinforced through pilot projects developed through innovative programmes. The ORs nevertheless are relatively absent from national and European initiatives. To improve the ORs’ visibility, participation and integration in European and national initiatives, actions that the European Commission, the Member States and the Regions hold in common priority could be launched simultaneously.

Concerning regulation Despite the special situation of the ORs relative to their countries of origin and the European Continent as a whole – see the earlier reference to cumulative and combined handicaps – existing regulatory designs provide no special regime for the ORs. The ORs are subject a priori to regulations that apply in the country to which they belong and, more generally, to principles defined by the European Union, those arising from "Packet Telecom" in particular.

The action orientations may be grouped as three broad recommendations.

1. Develop a regionalised approach for relevant markets, which requires: − on the one hand, conducting regional analyses in a way that takes the distinctive characteristics of the ORs into account and contributes to the emergence of competitive offerings, and − on the other hand, segmenting the markets by role in the supply chain in order to clarify which points need to be addressed and their priority based on the excess cost analysis.

2. Establish a framework for network and service quality and reliability While tariff-related handicaps are evident only in the French ORs, all ORs share concerns about quality and reliability deficits in networks and services. It is important, therefore, particularly in framing public initiatives, to take account of these elements at all levels, not only for retail offerings (real ADSL access speeds) but also and above all for wholesale offerings.

3. Use experimental technologies as a means of reducing isolation The ORs are already relatively advanced in this regard. Certain new developments in transmission and access technologies, particularly if wireless, are immediately attractive given the territories’ organisational circumstances and geography. It would be interesting to study the extent to which the ORs might benefit from a specific law concerning the introduction and corresponding deployment of new technologies and associated services. For example, experimental licensing laws might be extended or even the conditions for awarding radio licences amended.

The recommendation focus areas presented here flow very directly from our analysis of the situation in each outermost region. To date, we have discovered several directions that might be pursued to improve OR access to electronic communication networks and services.

Certainly, any recommendation that is adopted should undergo further study in order to fully understand its feasibility (technical, juridical, etc.).

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Introduction

On 2 June 2003, the governments of the three Member States presented a Joint Memorandum to the European Commission recounting the problems faced by the ORs and proposing ways to address current challenges to the ORs’ development and derive the full benefit of Article 299.2 of the Treaty of Amsterdam by introducing flexibility into both Regional Policy and other policies of the European Union. For its part, the Conference of Presidents of the seven ORs made a contribution to the Memorandum from the Member States highlighting four action principles -- equal opportunity, the development of regional strengths, stronger partnerships, and the quest for coherence -- which should guide the development of Community policies relating to the outermost regions.

In response to the request of the Seville European Council and requests of the ORs and their Member States, the European Commission on 26 May 2004 adopted a Communication introducing a Community strategy to promote “a coherent and comprehensive approach to the special characteristics of the situation of the outermost regions and to ways of addressing them". This strategy, entitled “A stronger partnership for the ORs” and complemented subsequently by a highly detailed report issued in August 2004, sets three priorities for implementation: • Improving the competitiveness of the ORs. • Reducing accessibility problems. • Promoting the ORs’ integration into the geographic areas that surround them.

Through the Lisbon Strategy, commitments under the eEurope 2005 plan, and earlier studies of the impact of information and communication technologies, the European Commission reaffirms the importance of ICT in the ORs’ development. In particular, the Commission emphasises the matter of applying the set of electronic communication services directives adopted by the Commission and in force in all of the Member States since July 2003 concerning broadband network access and the elimination of discriminatory tariffs. More precisely, the Commission insists that telecommunication service tariffs and pricing be controlled and has made clear that, for the period 2003-2005, it “will ensure that … the outermost regions do not suffer from discriminatory practices … and … it will encourage price reductions through increased competition". The Commission when it made that statement also announced that in the near term it would launch a study of telecommunication service access constraints on the outermost regions.

Telecommunications issues and issues relating to information society development resonate particularly with the outermost regions. In effect, telecommunications network and services development constitutes a tool for national planning where geographic obstacles otherwise are difficult to overcome, and thus it plays a role in reducing isolation and the constraints associated with insularity, remoteness and, on occasion, climate. Besides reducing handicaps, it represents a genuine opportunity for these regions to construct new models for development and become platforms for experimentation with innovative technologies and applications. However, if the conditions for deploying such networks and services are not brought about, the already-significant development lags in these regions could expand rapidly and the digital divide widen.

Therefore, as the terms of reference for the present study indicate, it appears both opportune and urgent to promote a true development policy for electronic communication network and services because such a policy plays an essential role in sustainable local development and assures the success of other policies beneficial to the ORs.

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According to the European Commission, a comprehensive electronic communication services policy rests on three pillars: - Regulation. - Infrastructure development (availability, universal service, speeds, etc.). - Tariffs.

With respect to the ORs, the list might be expanded to include implementation of true competition among operators, funding policy (specifically, public-private partnerships), promotion of uses, and application development.

The ORs thus evoke the existence of telecommunications service access constraints -- within regions, between regions and States, and between regions and the international community – as engendering ruptures and discrimination and they wish to see the principle of territorial continuity applied and enforced.

What is the situation today? What is the nature of the inequalities in plans for infrastructure availability and access, the effective implementation of European regulation, and policies relating to quality and tariffs? What is the magnitude of the inequalities in each case? In particular, how may discriminatory practices be evaluated in the areas most often cited, namely those relating to additional costs and unjustified tariff differences? On the positive side, what measures should be taken to avoid aggravating the situation for the ORs?

It has become a matter of urgency to closely examine the problems underscored by the ORs and Member States by drawing up a detailed status report of the situation in order to determine whether corrective actions should be proposed, if in fact they are deemed necessary.

This is the purpose of the present study launched by the Regulatory DG and entitled “Regulatory, infrastructure and tariff aspects of electronic communications and broadband connectivity in the ORs: A comparison of the current situation with that of the rest of the Community and neighbouring countries.”

This report is divided into three parts:

• First, a report of the current status of the ORs based on telecommunication penetration measures, the service offerings available in each territory, operator development strategies as evidenced by competition regulation, and tariff analyses that permit comparison of the current situation in each region and the differentials that apply.

• Second, a cross-analysis revealing the four main themes that emerge from the status report and from discussions underway: - The principle of territorial continuity. - The issue of intercontinental connectivity. - Regional strategies and action plans. - Authorities and structures in place to address Information Society challenges.

• Third and last, the three focus areas for action are sketched out in the form of recommendations which flow from the preceding analyses of: - Intercontinental, interregional and intraregional connectivity. - Electronic communications public policy and governance. - Regulation.

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1. State of the art of telecommunications in the ORs

1.1. Networks and services

The situation of the ORs with respect to telecommunications networks and services is varied. Though all of the ORs lag their countries of origin in fixed telephony penetration, they approximate or exceed national averages in mobile penetration. In broadband access, however, the DOMs’ severe lag behind mainland France stands in notable contrast to the Portuguese islands’ relatively advanced status when compared with the Peninsula. The position of the Canaries relative to Spain falls in the middle.

Declining penetration of fixed telephony

In every case in the ORs, fixed telephony penetration, measured in "main lines/100 inhabitants", is below the national average. Access constraints in certain parts of the territories, scattered populations in these areas, and the small size of potential markets have caused (incumbent) operators to limit their investment. In French Guiana, the very low rate observed is precisely because the villages there are small in size and highly dispersed over a very large territorial expanse (equivalent to 15% of the mainland area). The development of mobile access in recent years has been able to compensate for some of the deficit in fixed telephone access (see the next paragraph).

Comparison of fixed telephony penetration at the end of 2004 (fixed lines/100 inhabitants)

60%

50%

40%

30%

20%

10%

0% Açores Madère UE-25 France* Canaries moyenne Portugal* Guyane** Espagne* Réunion** Martinique** Guadeloupe**

* National average. ** DOM data for the end of 2002. Source: Statistics from operators, ITU, and IDATE databases.

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High penetration of mobile telephony

Though mobile networks were introduced in the ORs later than in the countries of origin, network coverage today is extensive (at levels approaching or exceeding 90%, and at rates much higher in the Iberian ORs than in the DOMs) and penetration most of the time is close to if not higher than the national average.

Comparison of mobile telephony penetration at the end of 2004 (cellular subscribers/100 inhabitants)

100%

90%

80%

70% 60%

50%

40%

30%

20%

10%

0% Açores Madère UE-25 France* Guyane Réunion Canaries Portugal* moyenne Espagne* Martinique Guadeloupe

* National average. Source: Statistics from operators and from IDATE databases.

Moreover, local populations turn to mobile networks as an alternative to compensate for the lack of fixed networks. Therefore, in all of the ORs the offering is very active, generally with three operators providing service now or expected to provide service by the end of 2005 (see Section 2.2) and enjoying vigorous competition.

Greatly disparate levels of broadband access penetration

The situation is completely mixed with respect to broadband. On the French side, development in the DOMs is particularly backward compared with mainland France: while at the end of 2004 the national average penetration of ADSL was more than 10%, in Reunion it was less than 3%! In the other DOMs, the situation was not much better. ADSL penetration in the DOMs is at least five percentage points lower than on the mainland: coverage as of the end of March 2005 was 84-87% as compared with 92% on the mainland!

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However, it should be emphasised that the discrepancy in France appears all the more pronounced given that mainland France has an especially high penetration of ADSL. Only a few other countries in the heart of the European Union (Netherlands, Denmark, Finland) have such high penetration rates. As of the end of 2004, the average for Western Europe was still less than 8%, which was two percentage points below the French average. The national averages for Spain and Portugal also were below the Western European average. While the difference between the Canaries and Spain is much smaller, a totally opposite situation is observed in Portugal, where penetration in the islands is higher than on the Peninsula. Not only is ADSL fairly developed there, but cable is very significant, especially in Madeira: more than 16% of Madeira households have cable modem access. That said, if one compares the penetration levels of the ORs alone, the situation of the French DOMs is altogether less advanced than that of the Spanish and Portuguese islands. The retail tariffs for broadband offerings (see section 2.3) clearly provide much of the explanation for this situation.

Comparison of ADSL penetration at the end of 2004 (ADSL access lines/100 inhabitants)

12%

10%

8%

6%

4%

2%

0% Açores Madère UE-25 France* Guyane Réunion Canaries Portugal* moyenne Espagne* Martinique Guadeloupe * National average. Source: Statistics from operators and from IDATE databases.

Other infrastructure and services

In spite of all this, one of the characteristics of the ORs as a group is tremendous technological upheaval, which can be understood in light the demographic and topographic characteristics of these regions: extreme variations in population density within the territories and the occasional difficulty of reaching some areas encourage the introduction of alternatives to fully wired solutions.

Thus, WLL solutions are implemented in the DOMs and in Madeira. Satellite/Wi-Fi solutions have been launched in French Guiana and, more generally, secure Wi-Fi offerings are implemented for business customers. In the Canaries, the La Palma Digital project relies on experimental broadband Internet access via satellite to offer public teleservices. As for wired access, cable networks are particularly developed in the Portuguese islands and are emerging in Guadeloupe and Martinique. Finally, experimentation with PLC has begun.

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With respect to transport networks, most still belong to incumbent operators. In the DOMs, two key initiatives have risen up in support of competitive alternatives: on the intercontinental side, the Guadeloupe region is linking the island to Puerto Rico via a cable constructed by the GCN consortium, and on the intraregional side, the Reunion region has invested in optical fibre, installed by EDF, in its own transport network. In addition, French Guiana, Martinique and Reunion have created DSPs (Délégations de Service Public, or public service delegations) to commercialise intraregional transport networks. In the Canaries, only Auna, acting within the framework of the Cablo Submarino project, has committed funds for a dedicated connection linking the archipelago’s principal islands, Tenerife and Grand Canary initially (via submarine cable) and the smaller islands subsequently (via submarine cable and MW). 1.2. Regulation and competition

There is no regulatory framework specified a priori for the ORs, so they follow whatever applies in their respective national markets (see Appendix 4.2). In particular, universal service regulation applies in the same way in the DOMs as in mainland France, in the Canaries as in mainland Spain, and in Madeira and the Azores as in mainland Portugal.

Differences in how regulation is applied

There are numerous differences in application.

In the case of France, licences for mobile and broadband networks in the ORs are awarded on a regional basis (on the mainland, only shared radio networks and WLL networks receive similar treatment). The structure of competition in these two markets in the ORs therefore is naturally different than on the mainland: in fact, so far it has led to a low number of competitors, very high market concentration (mostly in the hands of the incumbent), and access conditions that (in terms of quality and price) often are less attractive for users than on the mainland, particularly where broadband is concerned. In the case of France, then, it is clear that this does not result from ex ante regulation but from how disputes are handled -- from regulatory intervention in setting tariffs for submarine cable access (see May 2004 decision concerning the pricing of SAFE links between the mainland and Reunion).

In Spain, the regulator has imposed the principle of tariff continuity: operators must offer the same services under the same price and quality conditions everywhere in the territory. This applies to all retail services. The regulator also has circumscribed the tariffs for continental transport links by imposing a “credit” of 1,000km on the price calculation for any link longer than 1,500km (in practice, applicable almost exclusively to the Canaries), which ends up eliminating a significant part of the submarine portion from the price.

Finally, in Portugal, the regulator makes no regulatory or tariff distinction between the islands, the archipelagos and the Continent except by special intervention, again to limit the price of submarine cable access, which unfortunately alternative operators continue to find too high. However, the alignment of retail tariffs throughout the entire Portuguese territory, including the Azores and Madeira, is not the product of a regulatory decision but arises from the operators' own strategy.

These several distinctive characteristics create special market conditions, in addition to which the level of competition definitely seems to be a major differentiator between the situation in the ORs and that in the countries of origin. In every case, there is no doubt that the mobile sector is where market liberalisation has had the most impact, even if the number of operators is inherently limited. In fixed services, on the other hand, the intensity of competition in the ORs is still low.

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Competition that bears fruit in the mobile sector

In Spain and Portugal, the licences awarded to mobile operators cover the entire national territory, including the ORs. The configurations found on the islands and archipelagos are identical to those on the mainland, and coverage commitments are defined at the national level: in practice, mobile network coverage levels in the Iberian ORs are very good (99% for Portuguese operators in the Azores and Madeira).

In France, the situation is different. First, the approach to awarding cellular licences has been specific and unique to each DOM. Second, the DOM licences were awarded much later than those on the mainland (see table below). Finally, the mainland operators have been very selective in how they position themselves in the DOMs: only Orange is present in all four departments (it is the second entrant in Reunion) while Bouygues Telecom serves only the French Antilles-French Guiana area, and SFR, by contrast, is active only in Reunion. On the other hand, many local operators have obtained licences and some -- such as Outremer Telecom, which is present in French Guiana and, as of 2005, in Guadeloupe -- have launched or are in the process of launching service.

Service launch dates of the principal cellular operators

Country/region Operator Service launch date Mainland France Orange (formerly FT 1986 (analogue)/1992 (digital) Mobile/Itinéris) 1989 (analogue)/1992 (digital) SFR 1996 Bouygues Telecom Guadeloupe Orange Caraïbe 1996 Bouygues Telecom Caraïbe 2000 Outremer Telecom 2005 (planned) Dauphin Telecom 2003 (Saint-Martin only) Martinique Orange Caraïbe 1996 Bouygues Telecom Caraïbe 2000 French Guiana Orange Caraïbe 1998 Bouygues Telecom Caraïbe 2001 Outremer Telecom End of 2004 Reunion SRR (an SFR service) 1995 Orange Réunion 2000 Spain Telefonica Moviles 1982 (analogue)/1995 (digital) Airtel (Vodafone) 1995 Amena (Auna Group) 1999 Portugal PT 1988 (analogue)/1992 (digital) Telecel (Vodafone) 1992 Optimus 1998 Source: IDATE, based on information from operators

However, in every case, the intensity of competition in the ORs is different than in the countries of origin. The number one player's share tends be larger while that of the number three player, and more so that of smaller players, is relatively marginal.

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In the case of France, Orange (through Orange Caraïbe) is the market leader in the Caribbean Islands and French Guiana, where its market share approximates or exceeds 80%, while its share of the mainland market is less than 50%. In Reunion, SRR plays the role of “incumbent” in the mobile sector: again, its share of the local market is greater than 70%. On the flip side, more often than not competitive operators other than the principal challenger are reduced to a congruent share (0.9% for Outremer Telecom in French Guiana, 1.5% for Dauphin Telecom in Guadeloupe). Surely, this very modest share can be explained by the new operators' very recent entry into the market, but it may also underscore the fact that these markets are too small in size to support more than two large-scale network deployments (see the interviews with Outremer Telecom concerning the use of its mobile licence in Reunion). In any case, it appears that a first level of competition via duopoly significantly improves consumer market supply and certainly improves the range and price of service offerings.

There are other ways that competition might be opened up further, such as by introducing MVNOs. A case in point is the experience of Trace Mobile, a mobile virtual operator created on April 20, 2005 by Trace TV, the music television channel of the CanalSatellite programming line-up. This new mobile operator offers unique innovative services (free unlimited SMS, advanced technologies allowing real- time access to video and music) and plans to deploy services in all the DOMs as of 2005, beginning with the French Antilles.

The interviews produced similar findings in Spain with respect to the positioning of Amena, the third operator in the Canaries, whose market share is not even 7%.

Finally, in Portugal, it appears that the third operator, Optimus, likewise lags in the islands relative to its position on the Peninsula. The difficulty of simultaneously developing three high-density networks in these regions is further illustrated by the 3G network-sharing agreement that the three Portuguese operators signed in 2001 and which affects the Azores in particular.

The delicate position of third operators in the ORs: the example of Spain

Cellular market share Nationwide In the Canaries

7%

24%

Telefonica Moviles 28% 48% Vodafone Amena

65%

28%

Source: IDATE, based on information from operators

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Competition remains underdeveloped in the fixed and broadband service sectors

Generally speaking, competition in fixed services is less advanced in the ORs than in the country of origin. In a singular way in the broadband sector incumbents still have a tremendous hold on the market.

Thus, at the end of 2004, France Telecom's ADSL market share ranged from 75% in Guadeloupe to 85% in French Guiana, clearly well above its nationwide share of 46.5%. In particular, unbundling, which is essential for alternative operators whose services depend on the incumbent’s wholesale offerings, is in its infancy in the DOMs. In addition, while unbundling is available, it basically is for operators who are targeting niche business markets.

In Spain, Telefonica’s market share in the Canaries was 80% as compared with slightly less than 70% nationwide.

In Portugal, the differences are less pronounced because Portugal Telecom still commands a very large share of the ADSL market nationwide (nearly 90% of subscribers as of the end of 2004). In a way, since cable modem service is particularly developed in the Portuguese ORs, one could say that competition there is more advanced, even though Cabo TV, the main local cable operator, is a subsidiary of the incumbent. Notably, in Madeira, cable accounts for nearly two-thirds of broadband access, while nationwide the split between ADSL and cable is about 50/50.

Lag in broadband competition in the ORs: the example of France

ADSL market share Nationwide In the DOMs (average of 4)

2% 17% 26% France Télécom

Opérateurs 49% alternatifs (wholesale) Opérateurs alternatifs (dégroupage)

25% 81%

Source: IDATE, based on information from operators

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1.3. Tariff comparison

For certain services, telecommunications tariffs appear to be another point of discrimination between the ORs and their countries of origin. In France, particularly in broadband, the impact of the excess cost of intercontinental links is seen in retail tariffs that are very much higher than on the mainland and are viewed as prohibitive. In the Iberian ORs, though retail tariffs by design or default are identical to those on the Peninsula (or, in the case of the Canaries, even less expensive because of the lack of VAT), the cost of transport nevertheless is a constraint on operators.

Retail tariffs

With respect to retail tariffs, incumbent operators, by virtue of their position or (in the case of Spain) because of regulatory constraints, provide the reference level: alternative operators set their prices by seeking a compromise between the competitive imperative, which leads them to offer rates that in principle are less expensive or at least better in terms of quality-for-price, and the economic imperative of overall profitability for their business.

In broad terms, the rules and the situation in each country can be characterised thus: - In France, the price of services offered by the incumbent is not fixed ahead of time and, even in the case of tariffs subject to regulatory approval, may be different in the DOMs, except of course where universal service is concerned. - In Spain, while wholesale transport prices continue to be set by customary rules, which is to say they are distance-sensitive, the regulator requires that dominant operators tariff their services in the Canaries and the Peninsula identically, even when other arrangements might be agreeable. - Finally, in Portugal, the situation falls in the middle, there being few constraints on retail price- setting but de facto harmonisation by operators, and by Portugal Telecom in particular, of prices on the Peninsula and prices in the islands.

For fixed telephony, the practical impact in all cases is that tariffs in the various ORs and their countries of origin are equivalent where the price of subscription and local communications are concerned. Moreover, the countries studied differ only very slightly from one another and have price levels close to the European average; in Ireland, which is treated as a reference because of its territorial structure, tariffs are very noticeably higher.

For long distance communications, the situations vary greatly. While in the cases of Spain and Portugal calls between the ORs and their country of origin are tariffed at the same level as all other national long distance communications, remoteness is price where DOM-mainland communications are concerned, with tariffs being more than double those applied to national long distance calls within mainland France: however, the tariffs for all DOMs are identical and below the “purely” international tariffs. For example, the cost of a 3-minute peak-hour call from French Guiana to mainland France is 40% of the cost of a call of the same duration under the same conditions from French Guiana to Germany.

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Comparison of fixed telephone tariffs

Connection, subscription, and local communications

120

100

80

60

40

20

0 France Espagne Portugal Irlande

installation (€) abonnement (€/mois) appel local de 10 minutes (cents d'€)

Source: IDATE-INESC Porto-MM, based on information from operators

National and international long distance communications € 0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0 France Espagne Portugal

appel de 3 minutes RUP vers pays d'origine appel de 3 minutes interurbain continent appel de 3 minutes RUP vers voisin pays d'origine

Source: IDATE-INESC Porto-MM, based on information from operators

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It is very difficult to compare mobile service prices because of the very great variety of offerings. In Spain and Portugal, the offerings in the islands (Canaries, Azores and Madeira) are identical to those offered on the Peninsula and the tariffs are equivalent. This means in particular that calls between the islands and their countries of origin are billed on the same terms as intraregional calls. The differences that can be noted in the Canaries’ mass market offerings are due only to the local exemption from VAT.

In France, the situation is altogether different. In general, the offerings (flat-rate or pre-paid) available in the DOMs are different from those on the mainland. For example, Orange, which is active on the mainland and, through two different subsidiaries, in the four DOMs, has three different portfolios and therefore its offerings cannot be compared directly (see graphic showing the three basic flat-rate offerings associated with Orange and the two subsidiaries). In broad terms, the offerings in the DOMs generally feature lower start-up prices than are offered on the mainland (where the terminal is included) but carry very heavy constraints: time charges and/or billing in increments of 15 or 30 seconds, surcharges for off-net calls, etc.

Orange mainland and DOM basic flat-rate offerings

€ 35 2H Up to 2H 30

25 Up to 1H45 20

15 10

5 0 Orange Caraïbe Orange Réunion Orange France

Source: IDATE, based on service portfolios

Finally, for broadband services, retail tariffs prove once again to be identical in every way between the ORs and their countries of origin where Spain and Portugal are concerned but very different in the case of France. For example, inclusive of taxes, Wanadoo’s monthly charge for unlimited 512kbps ADSL access is €74.90 in the DOMs but only €25.90 on the mainland, a difference of 3:1 between the two tariffs. The situation of mainland France is very particular, however. If one compares the French DOM tariffs with the Portuguese and Spanish tariffs, the differences are smaller. For a monthly charge of €29.40, Portugal Telecom offers a 512kbps service with a 2GB limit on international downloads: this offering falls between the unlimited Wanadoo offering and an offering which limits downloads to 5GB and is billed at €44.90 inclusive of taxes (a new offering was launched in May 2005 featuring a 2GB download limit for a monthly charge of €36.90 inclusive of taxes). In Spain, Telefonica bills unlimited 512kbps access at €33 per month inclusive of taxes.

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Comparison of tax-inclusive prices for 512kbps ADSL € 80 70 60 5 Go/ 50 mois 2 Go/ 2 Go/ 40 mois mois 30 20 10 0 France DOM Espagne Canaries Portugal Açores- Irlande Madère

limité illimité

Source: IDATE-INESC Porto-MM, based on operator portfolios

Wholesale transport prices

Transport prices, and intercontinental transport prices in particular, constitute a major constraint on operators. Most of the time, intercontinental links (which today are mainly undersea) represent high excess costs relative to the price of intracontinental leased lines.

Even in the Canaries, where links to the Peninsula are tariffed on the same basis as terrestrial links (including, among other things, a 1,500-km "credit"), remoteness is an inflationary factor in the equation: thus, according to information supplied by the operators, the average cost per Mbps transported from a point on the islands to the Spanish capital is in the range of €500-1000.

One alternative operator estimates that the cost of intercontinental transport per Mbps is 2.75 times more in Madeira and the Azores than within the continental territory. The average price is estimated at €400/Mbps.

In the DOMs, too, the price of submarine cables creates significant distortions. The price per Mbps on Americas II is in the range of €1,500-3,000. On SAFE, before the May 2004 ART decision, the end-to- end price per Mbps between mainland France and Reunion was €17,000 (€3,000 for IP transit). Certain recent actions, particularly tariff reductions on the SAFE cable, have reduced the difference but do not permit operators to secure the same terms offered on the mainland. Taking IP aggregation as an example, the price at the national level is €298/Mbps/month whereas the adjusted tariff for aggregation at the DOM level is in the range of €1,500-1,650/Mbps/month, a ratio greater than 1:5, with the actual price varying according to the volume of traffic handled.

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1.4. Service offerings

While the range of service offerings is relatively complete in telephony, both fixed and mobile, this is not the case in broadband.

Given the cost constraints and limited competition, broadband access offerings remain few.

Service portfolios for the mass market tend to be limited to speeds of 512kbps and business service speeds rarely exceed 1Mbps, even in business districts. Some offerings include a cap on downloads, which allows operators to introduce tariffs that are more attractive than the ones on unlimited service offerings. In the Azores and Madeira, Portugal Telecom and ONI Telecom have no unlimited offering but they do set caps, either on connection time or download capacity. In the DOMs, France Telecom, alongside a very expensive unlimited offering, has an offering that caps downloads at 5GB per month and provides a 40% discount on the price of access. In May 2005, to further lower its basic tariffs, the operator launched an offering with a 2GB cap on downloads. Still, the tariff is 40-80% higher than any mainland tariff for totally unlimited service.

Today, more than 65% of subscribed ADSL lines in Western Europe provide speeds above 512kbps. If France (with a little more than 50% of access lines above 512kbps at the end of 2004), Portugal (less than 15%) and Spain (about 10%) appear to lag the European average, the lag in the ORs is all the more striking.

On the other hand, users often point out that there is a discrepancy between offered speed and effective speed. Most estimate that the true speed on a 512kbps access line seldom exceeds 40kbps.

Thus, we have problem at multiple levels: - First, a portfolio of services that is very much more limited than in the country of origin. - Second, commercial offerings that are degraded in order to offer "attractive" tariffs. - Finally, an effective quality of service which itself is often degraded because of very high contention rates.

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2. Cross-analysis of issues

The crux of the problem concerning penetration of the Information Society in the outermost regions lies in the distance separating the ORs from their countries of origin.

This is reflected especially in notions of geographic isolation and remoteness, the exiguity of the markets involved, and the status of optical submarine infrastructure.

The resulting excess cost of intercontinental telecommunication links imposes significant constraints on competition development, network deployment and service availability, and ultimately, the quality of service offered.

In order to better understand the implications of this structural problem, we will examine each of the following in turn: - To the extent that an access gap exists in the ORs, reducing the gap and its effects. - Problems raised by the cost of intercontinental links, and their impact. - Strategies differentiating the regional approaches and the action plans being implemented. - Regional authorities devoted to ICT development in the regions.

2.1. Reducing the access gap

Reducing the access gap shown here between the ORs and their countries of origin involves the following three criteria: tariff continuity, the quality of service offered to users, and telecommunications link reliability (see Section 3.4.2).

The situations appears to be fairly diverse based on the ORs analysed.

The main distinction between the three Iberian ORs -- the Canaries, Azores, and Madeira – and the four DOMs – Guadeloupe, Martinique, French Guiana and Reunion – lies in the fact that the principle of tariff continuity is applied to telecommunication services in the former but not in the latter.

This significant difference between the two regional groups leads to different outcomes in telecommunications network and service deployment and in the initiatives developed by local private and public players.

2.1.1. Tariff continuity impacts in the Iberian ORs

First of all, it is useful to underscore this principle’s very positive impact on end users who, as a result, obtain access to basic telecommunication service offerings at rates identical to and (where the local VAT rate is lower than on the mainland) sometimes even lower than those in their country of origin.

It should be recalled that the distances between regional capitals and national capitals are relatively short: Canaries-Madrid (2,000km); Madeira-Lisbon (1,040km); Azores-Lisbon (1,500km).

Paradoxically nevertheless, this situation reveals certain constraints and weaknesses that are becoming evident now and which in time may bear upon network and service deployments and upon the access conditions and quality of service which users rightfully expect.

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Many factors allow the situation to be understood even at this juncture.

In the Iberian ORs, a reduced, even eroding, presence of alternative operators due to the high access resale prices charged by service operators

In the three regions, leasing the capacity necessary to participate in the market entails excess financial costs, which accrue from the wholesale prices offered to alternative operators and cannot be recovered in retail prices. The impact is immediate, as evidenced by operator withdrawals and market concentration.

In the Canaries, several of the operators still physically present after two years – Jazztel, Uni2, and Equant – are leaving, their offerings from now on to be offered by resellers. Except where the Grand Canary-Tenerife link is concerned, Telefonica is the only operator owning intraregional links. Auna, the second operator, is pursuing a strategy that basically focuses on the residential and short-haul markets. Auna recently entered into transport networks by joining the Cablo Submarino association which provides the link between Grand Canary and Tenerife. BT has a niche strategy that mainly targets major accounts in the two capitals. Idecnet, a local operator, is encountering major problems as it tries to strike an economic balance.

In the Azores and Madeira, the number of alternative operators continues to be very limited. The only one that might be considered an alternative regional operator today is ONI Telecom, which has invested in alternative infrastructure in both regions.

In Madeira, ONI Madeira (ONI Telecom with local shareholders) has built WLL infrastructure in Funchal, and today targets basically business and institutional customers for value-added services. The operator is in negotiations with EMACOM, the telecommunications subsidiary of regional electrical power company (EEM), to commercialise optical fibre installed in the electrical networks and under EMACOM management today. ONI Madeira also plans to experiment with broadband Internet over Power Line Carrier

In the Azores, ONI Azores (a venture of ONI Telecom and Electricidade dos Açores, or EDA) is already commercialising fibre optic cables installed in the regional electrical network -- and managed by GlobalEDA, EDA’s telecoms subsidiary – so that it can offer telecommunications services to the islands of São Miguel and Terceira. ONI also has wireless access points in Horta, on the island of Faial.

Other operators offering telecommunications services in the two regions are national operators, but they have no physical presence: they are resellers of Portugal Telecom’s wholesale offering or they use PT infrastructure (such as NOVIS and Tele2) to concentrate on one or several very specific markets (such as Madeira's international business centre or the Açores Digital municipalities project).

Certain operators believe that if the market is to grow, the burden of intercontinental wholesale prices will become too great and will force retail prices up.

The conclusion, therefore, is that in the present environment where intercontinental excess costs are not recovered in retail prices it is extremely difficult for alternative operators to be competitive, especially if they are small local operators.

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There is another negative impact that results from reduced operator presence in the ORs: to date there is no physical unbundling of Internet access. Only the cable broadcast operators (Cabo TV Açoreana and Cabo TV Madereisen) offer high-speed Internet access on their cable networks. Moreover, in the Portuguese ORs, these cable operators are subsidiaries of Portugal Telecom and, while the network is well-developed in Madeira (providing two-thirds of Internet access), it is not available in the Azores except in Ponta Delgada.

Uneven quality of telecommunications network infrastructure and services deployed inter- and intra-island

A result of the lack of competition and the concentration of population in major cities is a degree of telecoms infrastructure obsolescence (underlying numerous disconnects and inadequate bandwidth quality) despite certain initiatives of alternative operators (see above).

However, there are regional projects: - In the Canaries, Cablo Submarino wishes to cover the outlying islands and connect to the Continent; Atlantic TIC is a project that aims to cover the rural regions of La Palma via satellite; etc. - In the Azores and Madeira, ONI is considering partnering with the telecommunications network management arms of the regional electrical power companies (EMACOM of EDM and GlobalEDA of EDA) to deploy alternative regional networks. EMACOM wishes both to open up its telecommunication infrastructure to other telecommunication operators (selling services but not dark fibre) and to become a telecommunications operator itself.

Good penetration rates mask disparities in broadband network deployment and territorial coverage

Generally speaking, in the major islands and large cities, coverage and penetration rates for telecommunications services1 – mobile telephony, low-speed Internet, and high-speed Internet (ADSL, cable networks) – are comparable to or better than those in the countries of origin.

In the Canaries, the penetration of broadband is around 7.5-7.9%, as compared with 8% on the Spanish mainland.

In the Portuguese ORs, broadband penetration is about 7.3% in the Azores and 9.6% in Madeira, as compared with 8.2% on the Portuguese mainland. The situation is identical with respect to mobile telephony2.

Note that only Vodafone has implemented a POP in the Canaries and in the Azores, the archipelagos being an important tourist destination for the operator.

As a rule, broadband service deployments occur to the detriment of the rest of the territory, in particular the rural areas.

1 In the Azores and Madeira, because of mobile telephony licence coverage obligations, about 99% of the population is covered by at least one mobile operator. 2 Refer to the first part of this document for service penetration rates.

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Public player initiatives focus primarily on content, identification of several telecoms infrastructure projects notwithstanding

Particularly beyond the city centres, economic opportunities for private and public players are stunted by the weakness and unattractiveness of telecoms operators’ offerings.

Some initiatives are being introduced by public players: - In the Canaries, institutions of higher learning and research have created their own network to connect sites to the national IRIS network; hospitals connect to develop remote diagnostics. Increasingly, the Government of the Canaries3 is assuming a very active role in initiatives aimed at providing new communication alternatives to the incumbent operator’s offering and constructing links between the islands and with the Content. Through SODECAN, the government has assumed investment shares in Cablo Submarino. It hopes to turn the Canaries into a communication hub by connecting it to Madeira and the Azores and ensuring continuity with the Continent; ITC (Instituto Tecnológico de Canarias, the Canaries technological institute) therefore is developing a teleport satellite infrastructure project that will cover part of West Africa, etc. Additionally, it is acting directly as an operator in the installation of the Las Canteras and Puerto de la Cruz Wi-Fi network to connect underserved industrial areas. Finally, it is in the process of developing a GIX project supporting outbound international traffic (Punto Neutro project). An umbrella initiative has been adopted to bring all these different projects together: Proyecto Atlantida. - In the Azores, the regional government, which already controls 90% of EDA (see earlier description of GlobalEDA and ONI Azores projects), recently launched a very ambitious call to tender that could significantly change the telecommunications landscape. In effect, it involves constructing a broadband regional network that, by June 2006, will support the connection of 700 sites (administrative locations, schools, etc.) on the nine islands of the archipelago, or 80% of the regional territory. It thus will facilitate the deployment of infrastructure in the smallest islands, thereby reducing the digital divide, all the more so since the government also wishes to extend the submarine cable to the two western islands of Flores and Corvo. - In Madeira, there is nothing that might be called a government development strategy for an alternative regional infrastructure. There are, however, numerous opportunities and projects: the development of telecommunications activities using the electrical network’s fibre optic network, which is managed by EMACOM, a subsidiary of the regional government's electrical company, EMACOM; Power Line Carrier experiments with ONI Madeira (ONI Telecom); dedicated networks for health education, etc., in particular within the framework of POPRAM III, PRAI Madeira and, above all, the "Digital Madeira" project (POSI).

Tariff continuity affects service offerings in several ways - A retail tariff “disconnect” between the de facto resale price and the excess cost of the wholesale price. - Market concentration benefiting the incumbent operator. - A regional telecommunications network that needs to be updated and extended. - Weak service deployments outside of captive markets, which are the large urban centres and the principal islands of the archipelagos. - Service quality that tends to decrease relative to quality in the country of origin, particularly because of bandwidth problems on external connections, which contribute to very low data speeds.

3 It appears that the Canaries government is undergoing internal changes, which could call into question ICT policies followed to this point.

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Thus, paradoxically, the principle of tariff continuity with the Continent (identical tariffs for service access) creates an intraregional territorial divide: - A significant segment of the population has no access to broadband Internet services. - Quality of service and reliability guarantees for electronic communications are not the same as on the Continent.

2.1.2. The impact of not acting to reduce the access gap in the four DOMs

The special problem of the DOMs remains that, relative to the mainland, these four regions are handicapped in terms of tariffs, quality of service offered to users, and telecommunications link reliability (see Section 4.4.2).

Here, remoteness is very much more an important factor than in the Iberian ORs: the distance from these islands to Paris is 6,760km for Guadeloupe, 6,830km for Martinique, 7,500km for French Guiana, and 9,370km for Reunion; air travel times are 8 hours or more; and time differences range from +3 to -6 hours, depending on the time of year.

This situation has significant negative impacts on broadband Internet access penetration in the DOMs. The effects of this constraint and its impact on socio-economic development in the DOMs can be explained by several factors:

In these territories, the presence of alternative fixed, mobile and Internet service operators alongside the incumbent operator in fact hides great territorial disparities and does not resolve the important matter of the cost of broadband Internet access

There is true competition in the part of the DOMs where operators have a captive market and where, ideally, the investment cost is lower. Such competition is developing in the sale of pre-paid cards, traditional fixed and mobile telephony subscriptions, dialup Internet access and wholesale offerings, but less so in physical unbundling at the distribution frame: in 2005, one-third of the population of Martinique and French Guiana had access to unbundled offerings.

Several local Internet service providers are positioned to offer niche market value-added services aimed mainly at business users.

The incumbent's ADSL coverage rate is close to the French national average, lagging by a few months, however: in March 2005, 85% of the population in the DOMs was covered by an ADSL offering, as compared with 90% nationwide. By the end of 2006, all distribution frames should be ADSL-equipped, according to the plans of France Telecom, which has 90% coverage of the population.

Currently, WLL and WiMAX/Wi-Fi operators with 3.5GHz licences are well-positioned. In most of the DOMs, these services will begin to appear in 2005 at the latest, but only in certain very attractive parts of the territory: the regional capital, large employment catchment areas, and commercial districts.

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High retail tariffs reflect the resale price of intercontinental transport

The comparative analysis of wholesale and retail prices in the following section of this document emphasises the very significant differences in retail tariffs: 512kbps broadband Internet access in the DOMs is three to four times more expensive than on the mainland, which prevents service penetration throughout the population. As a rule, the intercontinental part of the resale price constitutes more than 60% of the retail price4.

The impact is obvious: while the rate of Internet penetration is more than 10% on the mainland (identical to the rate in 15 EU countries), the range in the DOMs ranges from 2.9% in Reunion to 5.4% in Martinique.

To offset the intercontinental cost constraint, certain operators use very much higher contention rates than are used on the mainland, which produces a corresponding reduction in the quality of service and ultimately creates another block to further subscriber growth. “Why pay more for what is supposedly broadband access when I can get nearly the same speed using dialup?"

Two paradoxes are evident in the broadband Internet market

On the one hand, competition in the DOM employment catchment areas is very high, population coverage rates are high, approaching those on the mainland, and niche operators are pitching their markets aggressively.

On the other hand, considering the players in the market and their level of participation, penetration rates are very low, essentially because prices are high and the quality of service is very low (with some exceptions in the business sector).

Infrastructure initiatives of public players

Recognising the dual challenge of national planning and economic development associated with an affordable, high-quality broadband service offering, the four regional Councils have undertaken initiatives under the law on confidence in the digital economy and within existing regulation (Article L1425-1 of the CGCT) which authorise them under certain conditions to establish telecommunications infrastructure that is neutral and open to all.

Those projects that currently are underway are expected to invigorate the market over the coming 12- 18 months. Opening these public networks to all alternative operators should encourage competitive deployments nearly everywhere in the territories.

One objective of the Councils is to provide for a future operator’s operator to offer telecommunications services at tariffs close to those found on the mainland and, thereby, to encourage submarine cable operators to lower the price of access to their infrastructure – whether the capacity is leased or is sold as IRUs.

4 Generally speaking, the price per Mbps transported intercontinentally from the DOMs is on the order of €1,500-2,500 per month. This needs to be incorporated into the sales price to the end customer.

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Content and service initiatives of public players

Competition in international access from fixed and mobile telephones (via pre-paid cards) gives users a choice of at least two or three operators The recurring problem lies in Internet access for the population as a whole.

Currently, all public communities in the DOMs – in education, institutions of higher learning and research, health, government, etc. -- and the economic world are waiting for implementation of alternative public telecoms infrastructures that will allow competition to develop in these territories and provide affordable, good-quality broadband Internet access services at a choice of access speeds.

It is estimated that a great number of structural projects by local players are stalled today because these communities are at an impasse with respect to broadband Internet access. This is particularly true in the educational, health and economic sectors.

Thus, in French Guiana, it is imperative that genuine intraregional distance learning organisations be created to overcome distance constraints. Apart from the considerable investment that this involves, and which cannot be assumed by the authorities and the Rectorat (the French educational authority) alone, it is essential that European assistance and financial support for operations be established to ensure ongoing access to education for all.

Similarly, in order to bring these territories out of their current educational and cultural isolation, operating assistance should be created to facilitate distance learning inter-island (University of the Antilles-French Guiana) and with the mainland.

This situation has several consequences for service offerings: - A retail tariff “disconnect” resulting from the excess cost of the intercontinental segment. - Very poor broadband Internet service quality. - In most cases, practically no provision for communications reliability. - Very low broadband Internet penetration owing to very high tariffs, the lack of capacity, and poor quality of service. - Competition concentrated mainly in employment catchment areas and unable to overcome the “distance effect”. - Regional authorities with a strong political will to create the conditions necessary for true competition throughout their territory. - In the DOMs, enormous delays for the local players – in these local initiatives – who await conditions for economic, cultural and social development in keeping with the requirements for market globalisation.

Thus, with respect to broadband Internet service access, the situation in the DOMs creates a dual divide, which is both territorial and social and is found also at the intraregional level.

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2.2. The issue of intercontinental connectivity

In recent years, all of the ORs have become connected to – at least – one submarine cable: ECFS in Martinique and Guadeloupe; Americas II in Martinique and French Guiana; SAFE in Reunion; SAFE, PENCAN VI and VII in the Canaries: Atlantis II in Madeira; Columbus III and CAM Ring in the Azores; not to mention the international satellite operators that cover the ORs.

Local players and decision-makers welcomed the arrival of submarine cables as a major shot in the arm for socioeconomic development in their territory. These very high capacity cables allow the ORs at last to have access to all the same services that are available in their countries of origin and, what is more, at a cost that is affordable thanks to the traffic scale economies on this infrastructure and amortisation (of the satellite networks and transponders in service until now).

As seen earlier, the current situation varies greatly among the ORs: while the Iberian ORs benefit from the principle of territorial continuity, their experience has been quite different from that of the French DOMs, which feel the negative effects of remoteness in their IP transit costs.

Remember that the current regulation applicable to submarine cable landing station access, backhaul services, and IP transit costs is as follows: - Cable landing station access agreements between consortium members (possibly covering exclusivity rules, related terms, etc.) generally are drawn up as private law contracts that are established when a submarine cable is installed. These agreements regularly constrain the choice of third-party operators, which in the end restricts competition. National regulators therefore do not intervene in this type of transaction. - On the other hand, within the scope of their authority over wholesale markets, national regulators do frame tariffs -- particularly reference costs5 – and define the methods permitted for providing access to backhaul services, IP transit, and leased line transport (LLT)

In any case, in all the ORs, the scale economies one might expect from these cables have no significant impact on resale prices, which remain very high as compared with the country of origin.

In order to understand the current situation and short-term outlook, it is helpful to analyse operator positioning and strategy and also the public initiatives undertaken in recent months.

In addition, an in-depth analysis of the composition of resale prices for 512kbps and 1Mbps ADSL service provides insight into the role that IP transit costs play in overall resale pricing.

2.2.1. Telecoms operator positioning and strategies

National incumbent operators exercise tight control over intercontinental cables

Two operators have optical infrastructure providing access to the Canaries from Spain. However, the access offerings are controlled by Telefonica (via its PENCANs) and all operators use the incumbent’s infrastructure to connect to the Peninsula. At present, the SAFE cable landing station in Altavista, which belongs to BT, is not operational.

5 See ART decision No. 04-374 dated 27 April 2004.

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The cost for an alternative operator to access the Canaries from the Continent -- on the order of €500- 1,000/Mbps/month -- is high enough to play a definite role in blocking access to the Canaries market because it cannot be included in the retail price to the end user6.

In the Azores and Madeira, only Portugal Telecom has optical fibre access infrastructure, and access to the islands must be through the incumbent operator. Even though alternative operators may recognise the quality and availability of these intercontinental links, the price is prohibitive and blocks access to these two markets. The price of IP transit between the Portuguese ORs and the Continent is estimated to be €400/Mbps/month.

The situation in the DOMs is somewhat different. In practice, alternative operators may whip-saw operators that are shareholders of the submarine cable consortia. However, France Telecom retains control of the link from the cable landing station (which it owns) up to the operator POP, and the cost of backhaul generally is very high, which appreciably inflates the final tariff paid by the operator: cost of IP transit to the Internet POP + cost of backhaul.

Even though these costs are high, current prices are lower than they were 12 months ago owing to the combined effects of competition, market forces, operator complaints filed with ARCEP (Autorité de Régulation des Communications Electroniques et des Postes, the French regulatory body for electronic and postal communications), and initiatives of local authorities and, in particular, the regional Councils.

Based on information gathered from the operators, in the past year alone the cost of IP transit has fluctuated between €1,500 and €3,000, depending on the territory involved. In the following section, we will evaluate the true impact of these tariffs on broadband Internet access resale pricing.

Local players consider these tariffs prohibitive because they very significantly inflate the price that the end user pays for service access, and the excess cost results in a price that is three to four times higher than on the mainland.

Therefore, the Regional Councils have undertaken many initiatives.

Initiatives undertaken by the Regional Governments and Councils

In the DOMs, three distinct types of initiatives were undertaken by the Regions to work around the incumbent operators' monopolies in intercontinental connectivity and find the solutions best-suited to the level of urgency.

In Reunion, the Region together with two alternative operators petitioned ARCEP for a judicial review in seeking a reduction in SAFE tariffs. The parties’ requests concerned the tariffs applied to leased lines, IRUs and IP transport/transit. In its decision, ARCEP fixed the leased line price at €1,550/Mbps/month, which was the price level requested. Moreover, the authority performed its own calculations, arriving at an average rate of €750 per LLT. ARCEP did not set the price of IP transport/transit, but France Telecom negotiated this directly with the region's alternative operators. The operator believes that IP transit prices are aligned with LLT prices.

6 It should be recalled that in the Iberian ORs, the principle of territorial continuity has the effect of rendering the retail tariff for Internet access exclusive of tax the same as in the country of origin. This is translated into access prices that appear lower because of the fact that VAT is lower in the ORs than in their respective mainland countries.

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It is useful to note that the Regional Council’s filing with ARCEP was not admissible because the Council was not considered an operator7. Nevertheless, by thus action alongside the two operators involved, the Council was allowed to take part in the entire process, participate in putting together the economic and legal cases, and contribute its human and financial resources. Finally, it gave the Council an opportunity to report on its action aimed at reducing territorial isolation.

In French Guiana, the Region launched a DSP process to find a public delegatee to build and commercialise a regional broadband network. One of the elective requirements in the terms of reference is to consider the cost of intercontinental access and estimate its impact on end user retail pricing for broadband Internet access. The process is underway. It should be possible to drive down the cost of IP transit, currently at about €1,500/Mbps/month, to less than €1,000, and approach ARCEP's estimated price for Reunion, which is €750.

In Guadeloupe, the cost of IP transit is high, with the average estimated at €2,500/Mbps/month. These costs are viewed as a shackle that prevents alternative operators from providing competitive offerings and restricts broadband market development. This is why the Region has launched the “Global Caribbean Network” cable project under the Guadeloupe Numérique (Digital Guadeloupe) programme. As of November 2005, Guadeloupe will have its own submarine cable connecting Guadeloupe to Puerto Rico with two landing stations, one in Jarry and another in Basse-Terre, for continental Guadeloupe, and two more in St. Martin and St. Barthelmy. The selected delegatee is Global Caribbean Network – GCN, a company organised for purposes of heading up the project and majority-held by the LORET Group, which also wholly owns ISP Mediaserv. GCN offered €375/Mbps/month for IP transit end to end between cable landing stations. This IP transit tariff is about 15% of the estimated current average price in Guadeloupe, a considerable reduction.

Such a project could have repercussions for another part of the Antilles, since it seems that Dominica and St. Lucia would be very interested in connecting to this cable if a link can be made with Martinique. In August 2005, the World Bank launched a call to tender a study of the technical and economic feasibility of implementing a submarine cable that extends the GCN cable to the following countries: St. Kitts & Nevis, Antigua, Anguilla, Martinique, Saint Lucia, Saint Vincent & The Grenadines, and Grenada. The results should be known by the end of 2005.

In the Canaries, the Government and ITC are pursuing joint initiatives to create telecommunications networks with Madeira, the Azores and West Africa.

In the Azores, since 40% of investment was made with the help of public funds, the regional Government is renegotiating the terms of intraregional and continental submarine cable access provided by Portugal Telecom.

In Madeira, the regional Government has no specific policy for ICT. However, the POPRAM III programme is expected to create a “true connectivity hub for Europe, the Americas and Africa."

We point out that, under the INTERREG III B Macaronesia program, a project for Madeira and the Canaries was proposed to construct a submarine fibre optic cable connecting Madeira and the Canaries to the Continent. The regional governments, as owners of this infrastructure, could have made it available to all operators. Because the cost was too high, the project was abandoned.

7 See ART decision No. 04-374 dated 27 April 2004 ruling on a dispute between the Regional Council of Reunion and France Telecom, accessible at: www.arcep.fr

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The positioning and strategies of intercontinental connectivity players can lead to some alarming conclusions for the ORs

- Whatever the retail price-setting policies, the excess cost associated with the cost of intercontinental connectivity constitutes a major obstacle and constraint on all ORs. - This negatively affects not only Internet penetration rates but all socioeconomic activity in these regions. - Of even greater concern, it emphasises the “digital divide” between the ORs and other European countries and also between the ORs and their neighbouring countries, handicapping -- with long-term effect -- the OR economies, already weakened by their competitive situation. - Numerous projects initiated by public players – in e-learning, open education and distance education, telemedicine, e-culture, e-government, etc. -- today are stalled, indeed blocked, because of the lack of telecommunications capacity, the exorbitant cost of broadband Internet access, and also poor quality of service.

2.2.2. The impact of intercontinental connectivity on the tariff situation in the ORs

The purposes of this section are to contribute to an appreciation of how intercontinental link costs impinge on the resale price for ADSL access in the countries of origin and in the ORs and to analyse the discrepancy.

The calculations are based on the following assumptions8: - Access costs are calculated by adding together the costs of the various physical elements that comprise DSL access apart from IP transport, international IP interconnectivity, and personnel. - The contention rate is calculated based on the average actual speed measured for each theoretical speed offered (measurements usually produced by the NRA): For example, in France, the average actual speed per 512kbps access is 23kbps, which yields a contention rate of 512/23=22.3, while the average speed for 1024kbps access is 30kbps, which yields a contention rate of 34.1. - Wholesale access is calculated according to “Option 5”. - Amortisation principles: the cost of service access is amortised over 3 years, DSLAMs and return cables over 5 years, and buildings over 10. - For unbundling, we have assumed 500 subscribers per DSLAM installation.

In a second round, we have calculated the total resale price of ADSL access based on historical tariffs (in effect in 2004) and current tariffs (as revised for 2005).

8 The appendix contains Excel tables that will shed light on the approach taken, the assumptions made, and the incremental costs estimated for each region.

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Resale price of wholesale 512kbps ADSL access (France)

Assumption taking into account 2004 IP transit costs

Estimated price per Mbps/month: mainland France (€298); Guadeloupe (€2,500); French Guiana (€1,500); Martinique (€2,000); Reunion (€3,000).

The calculations shown were performed using available figures for the DOMs and mainland France.

Coût du transit IP Charges d'accès coût total Réunion 67.38 22.66 90.04 Guadeloupe 56.15 22.66 78.81 Martinique 44.92 22.66 67.58 Guyane 33.69 22.66 56.35 France métropole 6.69 18.33 25.02

This table illustrates several points:

In the four French DOMs, the IP transit segment accounts for 60% (for French Guiana) to 75% (for Reunion) of total physical costs, a very significant share in every case, even given the differences between regions. - However, on the mainland, the price of IP transit is not insignificant given that it accounts for 27% of overall physical costs.

The intercontinental segment therefore will greatly influence retail prices as long as it is unregulated.

Total physical cost of wholesale 512kbps ADSL access

Charges d'accès Coût du transit IP 100 90 80 22.66 70 22.66 60 22.66 R 50 EU 22.66 40 67.38 30 56.15 20 44.92 33.69 18.33 10 6.69 0 Guyane Réunion France métropole Martinique Guadeloupe

For Spain and Portugal, the highest-level calculations (see end of section) indicate that, even though the differences are less pronounced, the resale price of equivalent quality ADSL access is much higher in the ORs than in their countries of origin.

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Assumption taking into account 2005 IP transit costs

Estimated price in Mbps/month: mainland France (€298); Guadeloupe (€375); French Guiana (€750); Martinique (no change); Reunion (€1,550).

The calculations shown were performed using available figures for the DOMs and mainland France.

Coût du transit IP Charges d'accès coût total Réunion 34.81 22.66 57.47 Guyane 16.85 22.66 39.51 Guadeloupe 8.42 22.66 31.08 France métropole 6.69 18.33 25.02

This table illustrates several points:

- A drop of about 50% in the price of IP transit in Reunion generates a 36% drop in the total physical cost. - The expected price of €375/Mbps/month for IP transit in Guadeloupe significantly affects the resale price, putting it at €31 as compared with €25 on the mainland, for a difference of about 24%.

Taking into consideration the “historical” role of intercontinental connectivity in resale prices, price drops in this segment do cause drops in total cost, certainly not proportionally, but nevertheless significantly.

Total resale price of wholesale 512kbps ADSL access

Charges d'accès Coût du transit IP 100 90 80 70 60 R 50

EU 22.66 40

30 22.66 20 22.66 34.81 18.33 10 16.85 8.42 6.69 0 Guyane Réunion France métropole Guadeloupe

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Evolution of IP transit costs in Reunion

IP transit costs for 2004 (€3,000), for 2005 (€1,550), and as modelled (€750).

100 90

80 22.66 70 60

R Charges d'accès 50 EU 22.66 Coût du transit IP 40 67.38 30 22.66 20 34.81 18.33 10 16.85 6.69 0 Réunion Réunion Réunion

Tarif 2004 Tarif 2005 Simulation France métropole

It should be noted that: - Reunion’s case is indicative of the work that needs to be done on IP transit prices if ADSL resale prices are to be lowered appreciably. - A 75% drop in IP transit prices leads to a reduction of 130% in overall physical cost. - Even when IP transit is charged at €750/Mbps/month, the total cost is still 50% more expensive than on the mainland: €39.50 versus €25. Just one reduction bringing the price of transit down to that of national aggregation on the mainland (i.e., less than €300/month) could erase the difference. - Instead, in the absence of such a reduction, the question raised within the context of determining SAFE cable costs (see attachment containing the ART decision) is to determine what an affordable ADSL price is for the people of Reunion.

Impact of the price of intercontinental connectivity on the cost of ADSL access in Spain and Portugal

Based on statements provided by the operator representatives with whom we met and using the same “technical" ratios as we applied to France, particularly the contention rate (22.3), for both countries of the Iberian peninsula we were able to develop overall estimates of the price of transit capacity between each country of origin and its ORs (€500-1,000/Mbps/month between Spain and the Canaries and about €400/Mbps/month between Portugal and the Azores or Madeira). According to our calculations, which assume an intercontinental transit price of €500/Mbps/month, wholesale 512kbps access in the Canaries costs 9% more than equivalent access in mainland Spain. If an intercontinental transit price of €1,000/Mbps/month is assumed, the excess cost of access in the Canaries rises to 53%. For partially unbundled access, the excess cost is in the range of 10-59%, depending on the transit price assumed. Therefore, depending on the tariff paid by the operator, remoteness will account for genuine excess costs and inevitably reduced margins as long as retail tariffs remain unchanged relative to the Continent. For Portugal, the same calculations for partially unbundled access revealed an excess cost of 14% for 512kbps access in the Azores and Madeira as compared with the Continent. However, this difference has some impact on retail pricing since ADSL tariffs are aligned based on prices inclusive of tax and the lower VAT in Madeira and in the Azores allows a higher retail price exclusive of tax to be charged (see benchmark table).

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2.3. Regional strategies and action plans

2.3.1. The difficulty of developing overall strategies and integrated action Principal background documents, master plans, studies and plans action programs

Guadeloupe As reflected in the ORs' Memorandum of June 2003, which ranked ○ Incorporation of “Guadeloupe Numérique” program into DOCUP 2000- telecommunications and the Information 2006 (Measure 4 of the transport and switching, "Transports et Society as strategically important for Echanges" strand, with five objectives: Internet access for all and at lower cost; ICT adoption by businesses; training of young people; development in the regions, developing sociocultural development; administration modernisation. the Information Society has become a ○ 2002 : Phased implementation of Guadeloupe Numérique in two priority issue for the ORs. stages: Opening to the exterior by external connections; creation of a regional network. The approaches taken by the ORs in this ○ 2002 : Launch of PRAI Guadeloupe for the period 2003-2004. area are similar to one another in some ○ 2003 : Launch of a technical and economic study of submarine cable ways, but they also are particular to the laying between Guadeloupe and Puerto Rico and launch of a DSP by the Region. regional territories’ country of origin, ○ 2004 : Assignment of the cable DSP and launch of a study to juridical status (or rather scope of their implement an intraregional broadband network for the Region jurisdiction), and distinctive characteristics

(size, economy, culture, etc.). At the most basic level, they usually can be separated French Guiana into two major groups: the French ORs ○ April 2001: Creation of a State-Region workgroup and initiation of and the Iberian ORs. At other levels, discussion about establishing a steering committee to draft a regional depending on the issues studied, IS strategy and programme. subgroups may emerge, such as ○ Incorporation of a specific ICT measure into DOCUP 2000-2006 (€4.4 "archipelago" regions versus million). Priorities: Reducing the isolation of very isolated areas via "monoterritorial" regions. teleservices for the public; economic and scientific development; initial and professional training; culture; infrastructure.

○ Mid-term revision of DOCUP taking better account of ICT. As already shown in the 2001 study, it is ○ 2003 : Launch of a telecommunications master plan by the Region. rare that there are structured, overarching ○ Launch of the 2005-2006 PRAI for networking communities in French public documents that provide detailed Guiana, “Communautés guyanaises en réseau” (€4 million), with five and regularly updated reports on the strands: e-administration, e-culture, e-education; e-economy; Resource status of the Information Society, Centre. objectives being pursued, actions ○ 2004 : Launch of a DSP process for the regional broadband network. underway, resources implemented, progress indicators to be used, players to Martinique be mobilised, etc. ○ 1998 : Implementation of a steering committee headed by the CCIM, and launch of several studies to prepare an umbrella project to "make While the Regions have succeeded in Martinique an advance post of the Information Society”. launching certain studies, more often than ○ 2001 : IS status not the studies have not been distributed ○ Incorporation of the regional strategy, “Martinique: zone avancée de la or have failed to win the regional-level SI – Martinique Valley” (Martinique: Martinique Valley IS Advance Area) “ownership” necessary to for them to be in the 2000-2006 CPER and DOCUP (€67 million). Seven objectives: used as the basis for preparing a regional telecommunications infrastructure; improvement of the IS environment, strategy. establishing Martinique on the Internet; sensitising players; equal ICT access opportunity; strengthening of ICT channels; human resources and employment. The drafting process for European ○ 2003 : 2nd IS status report and proposal from the steering committee to programmes generally makes provision for construct a true telecoms master plan for Martinique. channelling strategic input and preparing ○ 2004: Regional Council launch of a study of the technical and background documents. However, rarely economic feasibility of implementing a regional broadband network. is this for purposes of overall strategic ○ July 2005: Launch of a DSP process. planning.

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In several regions, unrelated programmes on closely related subjects run in parallel, reinforcing the impression of fragmentation and, indeed, of “silos”.

In most regions, either there is a lack of information or information is limited and even contradictory. The paucity of regional statistics on telecommunications and the Information Society must also be emphasised, because it exacerbates the problems of drafting and implementing strategies and policies for these sectors.

There are several explanations for this Principal background documents, master plans, studies and action programs (continued) situation: • Sectoral approaches tend to be preferred Canaries because of the difficulty of managing forecasting, strategic planning, operations ○ 1996-1997 : Preparation of IS development notes document, "Notas para el Desarrollo de la Sociedad de Información en planning, and trends analysis efforts for Canarias” and publication of the report about mobilising IS in the region in an overarching way. the Canaries, "Dinamización de la Sociedad de Información • OR awareness of issues relating to the en Canarias", Information Society is only recent, and ○ September 2000: Preparation of the Canaries 2000-2006 IS development plan, "Plan para el Desarrollo de la Sociedad de regional and local elected officials remain la Información en Canarias 200-2006" (PDISC or "Canarias insufficiently sensitised. The number of Digital"), prepared under the Canaries development plan local decision-makers who are convinced (Plan de Desarrollo de Canarias, PDCAN) and the Canaries of the importance of a collective infrastructure master plan (Plan Director de Infraestructura Canarias, PDIC). Canaries system of Information Society overarching approach still has not reached indicators, “Sistema de indicadores de la sociedad de la critical or sufficient mass. Many of them do información en Canarias” (SISIC). not yet see a real urgency -- particularly as ○ Incorporation of a €120 million Knowledge Society strand compared with other economic and social (Innovation, R&D and the Information Society) in the Canaries development concerns -- or perhaps they 2000-2006 comprehensive operational programme. feel overwhelmed by the technical aspects ○ December 2001: Adoption of INTERREG III B Macaronesia, of these issues. which includes Information Society actions (Objective 2). • In the French regions, a major obstacle is ○ Adoption of the Canaries program of innovative actions (Programa Riojano de Acciones Innovadoras (PRAI), which the way that jurisdiction is allocated under succeeds RIS+ Canarias, which replaced RITTS PEINCA decentralisation. Responsibility for (€4.3 million). telecommunications and the Information ○ 2003 : “Canarias Digital” suspended. Society is shared among several players ○ April 2005: Creation of the Canaries IS forum, Foro Canario (the State, Departments, Regions, etc.), de la Sociedad de la Información, and the Information Society which makes it more difficult, without close observatory. cooperative effort, to establish an overarching strategic framework (see Reunion below). Likewise, in the Canaries, the complex territorial organisation there, ○ 1988 : Regional plan for the development of advanced involving numerous levels of local telecommunications (Plan Régional de Développement des Télécommunications Avancées, PROTEL) and launch of authority, makes coordinating action more several studies. difficult. ○ 2001-2002 : Launch of a regional telecommunications • It is difficult to obtain data from master plan. telecommunications operators. Because of ○ Incorporation of Measure A9, “Intégration des TIC dans la strategic business concerns, operators société réunionnaise”, covering the incorporation of ICT into often are reluctant to divulge such figures. Reunion society, in CPER and DOCUP 2000-2006 (€61 million). Five priorities: Development of businesses; Also, “incumbent operators” are strengthening of ICT channels; modernisation of public disinclined to provide figures because of services and general interest applications; access for all; liberalisation. Moreover, requirements shared telecommunications infrastructure; cooperation in the about communicating and distributing South Indian Ocean employment catchment area. regional data vary depending on national ○ Adoption of Reunion PRAI 2002-2003. regulation. For example, there is no 2004 : Launch of a DSP to implement a regional broadband regional data for mobile telephony in network (Gazelle). Portugal. To further complicate matters, in the Portuguese ORs, for example, the extremely low number of operators makes data distribution very difficult.

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• Expertise at the regional level is insufficient to conduct telecommunications studies. Often, it is necessary to turn to consultants from outside the region. • More generally, at the regional authority level, the regions, whatever their status, face the problem of insufficient human resources dedicated to tracking these matters (see below).

2.3.2. The importance of European leverage

Principal background documents, master plans, As already emphasised above, the conception and studies and action programs (continued) implementation of Community programmes, both general and specialised, has played a key role in Madeira moving OR players to develop a strategic framework and conceive ICT development ○ 1998 : Creation of IS strategic hub NESI (“Noyau projects for their territories. Stratégique pour la SI”), led by the Madeira Technolpole, which has become the promoter of the Region’s IS policy.

○ 2000 : Preparation of the “InfoMadeira 2006” strategy, Since 1996, and especially for the 2000-2006 which was not monitored for effectiveness. budget period, the European Union has allotted Four "programmes“ coexist today: significant resources in this regard, which has ○ Incorporation of Measure 1.2 of the strategic strand for profoundly encouraged the regions, especially the development of a Euro-Atlantic platform for excellence ORs, to incorporate an Information Society strand (“Développement d’une plate-forme d’excellence Euro- into their development programmes and Atlantique”) in POPRAM III, the 2000-2006 multifund operational programme for the Madeira region. participate in various European initiatives aimed at promoting the Information Society. ○ December 2001: Incorporation of an IS objective into INTERREG III B Macaronesia (Objective 2). ○ January 2003: Approval of the “Madeira Digital” The programmes ensuing from the “traditional” programme prepared under Measure 2.3 (Comprehensive budget for structural funds (DOCUP or OP) Digital Cities Projects) of POSI 2000-2006 (POSI is now known as POCT). €26 million over 3 years. provide examples: ○ 2004 : PRAI-Madeira adopted. • The various DOCUP "Information Society" measures in the DOMs. Some have been re- evaluated in the mid-term structural funding Azores review in order to better incorporate new Four programmes play an important role: priorities such as telecommunications and ○ PRODESA 2000-2006 – The Azores operational program ICT. Operacional para o Desenvolvimento Económico e Socia • The Objective 1 Regional Operating development. Programmes for the Portuguese regions and ○ December 2001: Incorporation of an IS objective into INTER the Canaries that most often have included an ○ 2003 : Approval of the digital Azores programme, “Programa ICT/telecommunications strand are: POPRAM (Comprehensive Digital Cities Projects) of POSI 2000-2006 in Madeira, PRODESA in the Azores, million. PDCAN/PDIC/PDSIC Digital Canaries ○ March 2003: PRAI-Açores adopted. programme (“Canarias Digital”) and the Preparation of a new strategic plan for science and technology Canaries integrated operational programme in the Azores Autonomous Region is underway. Of seven ("Programa Operativo Integrado de programmes planned, two involve telecommunications and the Information Society: Canarias"). ○ PRATICA: Azores regional development plan for ICT • Regional breakdown of national operational (“Plano Regional para o Desenvolvimento de TIC nos programmes in the “Information Society” Açores”). sector. This is the case of the “Madeira Digital” ○ CIDEF: Centro de Inovação para Deficientes, a regional and “Açores Região Digital” (digital Madeira program to include persons with disabilities and special and Azores Region) programmes, which needs in the Information Society. involve implementing Step 2.3 Integrated Projects: Portugal’s digital cities programme, introduced under the national information society operational programme, formerly called POSI and now named POSC (Programa Operacional Sociedade do Conhecimento, or the Knowledge Society Operational Program).

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Alongside the DOCUP and OP programmes are Community-initiated programmes, in particular the INTERREG III B Macaronesia-Atlantic programmes (covering the Azores, Madeira, the Canaries, and third countries in the area), the “Caribbean” programme (Guadeloupe, Martinique, French Guiana, and third countries in the area), and the Indian Ocean programme (Reunion and third countries in the area). All of them have an ICT strand, especially the Macaronesia programme, whose Information Society component appears to function particularly well, having a large number of projects approved and underway.

Finally, with respect to innovative programmes under ERDF Article 10, six of seven ORs have drafted Regional Programmes of Innovative Action (RPIAs) containing a telecommunications/ICT strand that is more or less confirmed. Region 7, Martinique, is in the process of preparing a programme plan.

In sum, these various European programmes have helped inspire the emergence and launch of projects in way that is relatively structured. However, for lack of an overarching strategic framework and coordination of the parties responsible for oversight, this multiplicity of programmes is not yet coherent. Also, the Community nature of the programmes has sometimes resulted in too many instances of leadership by "financial engineers" rather than by policymakers.

2.3.3. Primary action orientations of Information Society programmes

In general, these programmes reveal eight major strands of priority action orientation for the development of the Information Society: • Development of telecommunications “infrastructures”: Regional broadband platforms and external connectivity. • Education, training and research. • Modernisation of administrations via e-government. • Economic and technological development: integration of ICT into the manufacturing sector and electronic commerce, ICT channel development, creation of centres of technological excellence. • The struggle against infoexclusion: Internet for all, public access points, sensitisation. • Culture: creation of regional multimedia content, appreciation of regional cultures. • Health – telemedicine. • Appreciation and protection of natural resources and the environment, and risk management.

The extent to which these strands are developed depends on the region, as a function of, for example: • Regional geographic, economic, social and cultural characteristics. • Initial level of telecommunications infrastructure and services development and, thus, the needs to be addressed. • Distribution of authority: Madeira and the Azores, as Autonomous Regions of Portugal endowed with legislative and executive power, and the Canaries, as an Autonomous Community, have their own far-reaching authority and are called to intervene in numerous sectors. In contrast, the French regional Councils are local authorities which, on the one hand, have limited ability to act because of decentralisation laws (and associated financial resources) and, on the other hand, as monodepartmental regions, should share jurisdiction with other levels of government (the State and local players).

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The degree of integration into existing national structures has also played an important role in determining the nature and scope of actions taken in the ORs. For example, the direction of the Iberian regions’ thinking and programmes tends to have been set by the central government’s national “Information Society” strategies and programmes (in Spain ,the INFO XXI action plan, then the “españa.es” plan; in Portugal, the “Information Society Action Plan – A New World of Opportunities”, sectoral action plans adopted in 2003, etc.). Thus, the Iberian ORs, like the other Continental regions, tend to participate in programmes that are national (virtual campuses, digital cities, Internet in schools, electronic commerce, etc.).

This is less the case in France, where the DOMs more often are the object of "separate treatment", including with respect to the Information Society. Thus, the DOMs have not been directly involved in PAGSI, the national programme to enter the Information Society, but they have benefited from PSIOM (Plan pour la Société de l’Information dans l’Outremer), a programme specifically for France’s overseas departments, In July 2003, CISI (Comité Interministériel sur la Société de l'Information), France's interministerial commission on the Information Society, formulated for the DOMs recommendations aimed at facilitating digital continuity with the rest of the French territory and adopted various measures of support. The French ORs rarely take part in national initiatives those in particular sectors, such as the ICTE programmes of the national ministry of education.

In sum, one could say, no doubt at some risk of stereotyping, that as a rule the French ORs appear to have placed higher priority on infrastructure than the Iberian ORs, which have invested more in content. The Canaries Region is in an intermediate position, however, since it has also invested in cables (Cablo Submarino) and applications. As concerns content, e-government applications constitute a powerful focal point in the Iberian ORs, doubtless because of their standing as an autonomous government.

2.3.4. Implementation of priority action orientations

These various programmes, which began to be implemented at the turn of the century, have not yet met initial expectations. Of course, the players underscore the progress made in developing electronic communications infrastructure, services and applications, which has allowed them to narrow the gap with the Continental regions. However, there have been delays in structural projects, such that it is only in 2005 that projects approved in the early years of the century will begin to be implemented.

One of the most frequently offered explanations is the insufficiency and/or cost of broadband services in the ORs. Certain projects will be blocked because of the investment required to access higher-capacity bandwidth.

Infrastructure development

In the French ORs, developing regional telecommunications infrastructure is considered a priority: in Martinique, a technical and economic study conducted in 2004 to determine the feasibility of a broadband network is expected to lead to a DSP; in Guadeloupe, there is the GCN submarine cable and a project to deploy infrastructure in the region; in French Guiana, there is a DSP to implement a regional broadband network; in Reunion, Gazelle, a shared regional broadband network (of optical fibre rolled out on the EDF power grid) has been under construction since 2003 and Gazelle use trials with Outremer Telecom has been underway since mid-2004; a DSP has been launched to select a delegatee to enter into a 12-year contract to ensure deployment of a live network and implementation of a public electronic communications service. In the Portuguese ORs, the situation is a little different since very diverse networks exist there already. It appears that the wish of regional governments today is to give preference to existing alternative public networks in which they have a certain degree of control (see preceding sections).

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These infrastructure projects, which carry very high costs, are financed through Community programmes. Likewise, we emphasise that usually in the French regions, but also in the Canaries, public funds (national, DOCUP or OP) have been used to finance the development of alternative infrastructure by new operators (substituting WLL, WiMAX, Wi-Fi, and PLC for wired networks) and improvements to mobile telephony network coverage.

While these investments present considerable economic challenges, they also tend to absorb a great deal of local energy and available funds, which were underbudgeted when the programmes were adopted in 2000. For example, it may not be possible to implement Strand 2 of the digital Guadeloupe programme under the current DOCUP because the allocation is nearly depleted.

Education, training and research strand

The Iberian ORs have given first priority to equipping and connecting, and in fact implementing networks for, primary and secondary schools. Equipment penetration rates are much better than they were several years ago. For example, in Madeira, the number of education projects is particularly high: they include "Um professor, um computador" ("One teacher, one computer"), "Wireless Labs", the platform for the PLACE educational community, “Sitio da Educação” (“Education Site”), “educ@tif", etc. A network connecting the schools was installed by the Regional Secretariat for Education, and ADSL is being installed at all school sites (REI XXI “Rede Escolar Integrada”, the integrated schools network).

In the French regions, the situation is quite different for several reasons. Educational authority – and therefore educational ICT – is shared by the State (in the “Rectorat”) and local authorities (school districts, college boards of directors, and regional councils for secondary schools). Having multiple authorities makes it difficult to implement comprehensive programmes, especially when coordination is weak, which too often is the case. Moreover, the French ORs face particular difficulties that hinder implementation of an ICT policy for education: high demographic growth, which engenders a large requirement to meet basic needs (for example, in French Guiana and Reunion, for building construction); very significant constraints on equipment maintenance (because of climate) and on reliability; very high costs for Internet connectivity, especially if it is broadband. Because of this, the penetration rates for sites equipped and sites connected remain poor, below the national average, particularly in French Guiana and Guadeloupe, and above all in primary schools. Martinique and Reunion appear to well-advanced in primary and secondary schools alike. For example, the Reunion Academy was among the first French academies to give priority to ICT development. At the primary level today, 80% of schools are connected to the Internet (as compared with 66% in 2001). The General Council has developed an ambitious policy to equip and connect colleges under an ICT plan for 2004-2006. The Regional Council is drafting a master plan under the PRAI to network secondary schools and develop innovative applications

In higher education and research, the needs for instructional, research and management applications are very great. These applications require high-speed intersite and intercontinental links. Significant progress has been made, thanks particularly to the efforts of the national research networks (RENATER, RCTS, IRIS).

For example, in the Canaries, the universities of Las Palmas and La Laguna (Tenerife) have constructed their own local network for their most important buildings, which connects to the national research network using enhanced capacity. Likewise, Portuguese universities and research centres have telecommunications infrastructure that is well-developed and diversified and which connects various types of sites using capacity that is upgraded regularly and is considered sufficient for current needs. The two universities in the Azores and Madeira participate in “e-U”, the national “virtual campus” initiative led by UMIC. In the Azores, using Wi-Fi, this project supports full mobility among three campuses. In the French ORs, RENATER capacity has been increased. Moreover, in Reunion, REUNIX, a peering point for current operators and access providers was inaugurated in July 2004. Its full extent will be known only with time, as operators and ISPs are connected.

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Despite this progress, there are two abiding problems: • In the French regions: although capacity has increased, outbound connectivity remains worrisome and the discrepancy is still large compared to the regional needs expressed and compared to the connectivity available on the mainland (2.5Gbps on average for outbound IP transit as opposed to 8Mbps in French Guiana, for example, or 10Mbps in Martinique and Guadeloupe). In Reunion, thanks to one year of combined European, Regional and GIP financing, in April 2003 RENATER capacity reached 10Mbps. Apart from the fact that this supplemental capacity still is by no means sufficient, it has been provided extraordinarily and temporarily, for “experimental” purposes for just one year, which is to say only to April 2005. • The cost of high-speed bandwidth remains an obstacle particularly to the adoption of two-way videoconferencing, the development of which appears to be indispensable and particularly relevant in the case of the ORs. In effect, the regions comprise numerous campuses that are multipolar (especially in the archipelagos) and interregional (as is the University of the Antilles in French Guiana, which in 2003 began very successful trials of first-year medical university courses via videoconference between Martinique and Guadeloupe and which is scheduled to being trials with French Guiana in 2005, etc.).

The Iberian ORs are particularly active in professional training and e-learning. In Reunion, RESINTER (“Réseau pour l’intégration des Nouvelles Technologiques Educatives à la Réunion"), the Reunion network for the integration of new educational technologies, contributes to the development of open and distance education.

E-government strand

Public teleservices and general interest applications are particularly well-developed in the Portuguese regions and in the Canaries, where the public sector is considered a driver of the transition to the Information Society.

In the Canaries, the Canaries government uses its own network to connect all public buildings. Among the many e-government projects that have been drafted, of particular note are the citizens portal “Canarias.es” and the PLYCA project providing contract-related electronic services.

In Madeira, the regional administration is preparing to launch a call to tender telecommunication infrastructure improvements and implement electronic government projects. Projects include the “Governo Electrónico da Madeira” government portal, the online services of the local power company Electricidade da Madeira, the Regional Secretariat’s SIG on public facilities and transport, online forms (of the regional directorate for local public administration), the electronic payment system of the Horarios de Funchal transportation company, etc.

In the Azores, the government, through a large call to tender now underway, is preparing for infrastructure improvements that will allow it to develop e-government services. Many projects have been launched already, such as the creation of a regional government network, the government portal RIAC (“Rede Integrada de Apoio ao Cidadão”, or Integrated Citizen Support Network), and the DRCT data centre.

Municipal involvement appears to vary greatly from region to region, depending on the existence and energy of town associations, the support provided by other authorities, and the existence of national programmes for digital cities (in Spain, the “Ciudades Digitales” programme, and in Portugal, the “Cidades Digitais” programme). For example, the association of municipalities in Madeira has charged EIMRAM, Madeira’s intercity enterprise made up of the 11 municipalities in the region, with a digital towns project (“Municipios Digitais”) and a project to create 80 public Internet access points (”Esp@aço Net”).

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In the Azores, AMRAA, the mayors' association of the Azores, is in the process of implementing a €5 million "Digital Azores" project aimed at developing local e-government by installing a municipal broadband network, a regional technology platform, and public Internet access points in 19 municipalities. Additionally, the OR town associations have implemented a digital local administration programme through INTERREG III B Macaronesia and Caribbean Space (DIGIRUP).

Certain cities also are particularly dynamic, such as Port in Reunion, Funchal in Madeira, Fort-de- France in Martinique, La Horta in the Azores, and La Palma in the Canaries (which has the “Atlantic TIC” and “La Palma Digital” projects to develop satellite broadband Internet access and associated public teleservices). The municipality of Funchal, for example, has many projects, such as the Funchal website "Município Digital”.

Economic and technological development

Businesses and professional organisations generally commend the progress seen in recent years with the arrival of unbundling, the deployment of ADSL and cable modem, WLL, improved mobile coverage, etc. Today, the primary zones of economic activity are well-equipped for telecommunications or are receiving reinforcement (with optical fibre, cable, WLL, WiMAX, Wi-Fi, etc.) as they benefit from the interest shown by all incumbent and alternative operators: the industrial complexes in the Canaries, Jarry 2000 in Guadeloupe, the Madeira international business centre, the Saint-Denis Technopole site, the Port business district, etc. In certain regions, these are tapped to become “technological showcases".

Businesses in the traditional sector, which make little use of ICT, appear to be quite satisfied, even with broadband costs. But these also are the ones that show limited interest in ICTs and which are not very active in terms of integrating these tools into their activities, still using only very basic applications. On the flip side, heavy business users, such as those in tourism, and particularly ICT channels such as call centres, the digital audiovisual sector, remote data processing companies, content editors, software developers, etc., appear to be stalled in their development because of the low speeds offered, the cost of special high-speed links, the lack of reliability and quality (of security, especially), and poor value-added services, above all as compared with the Continent.

In Madeira, in spite of particularly attractive incentives (especially tax incentives), occasionally international businesses that are heavy users of bandwidth have chosen not to establish themselves locally, in part because of the high cost of leased lines. In Reunion, while steps have been taken to help reduce transaction costs and render the territory more attractive to businesses that might establish themselves there, telecoms costs constitute a veritable handicap, especially for businesses such as offshore call centres.

Over all, the development of business-friendly policies has not been given much attention in the ORs. There are examples, however, including ICT integration assistance for businesses, ICT awareness- raising and training initiatives for businesses, the creation of business websites or multimedia business hubs, and support for website development as well as for development of electronic commerce platforms (such as PRAI Guadeloupe). Madeira's tourism sector, which is very important to the economy, has benefited from several ICT projects: Madeiratourism.org, the information and management system for tourist resources (called SIGRT), the intranet for tourism services, etc. The same interest is found in the Canaries. Several INTERREG III B Macaronesia projects involve the business sector, among them the VEREDAS project (electronic commerce), the “B@N -- Business Atlantic Network” (portal for innovation and entrepreneurism), etc.

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Health – telemedicine

The ORs have taken stock of the advantages that ICTs can provide in the area of health. Thus, several of the Regions have implemented projects with that focus.

The telemedicine kits used in French Guiana are now to be tested in Reunion for telediagnosis in Cirque de Mafate. Also in Reunion, GIETOI (Groupement d’Intérêt Economique “Télémedecine Océan Indien”, the economic interest group for telemedicine in the Indian Ocean) and the PIRES WLL network have been established by public and private health establishments to provide operational leverage for telemedicine projects. Madeira has developed an integrated health network (“Rede Integrada da Saúde – RISM”) as has the Azores (“Sistema de Informação da Saúde – Açore Região Digital” -- SIS-ARD). In the Canaries, the “RX numérique” project aims to connect hospitals with the goal of developing telemedicine and telediagnosis applications for underprivileged areas. Through INTERREG III B Macaronesia, the Canaries is also developing several projects with the Azores and Madeira: SAMAC (teleradiology), INTELHOMA (telesurgery), MEREMA (telemedicine network), etc.

The problem with these projects that are heavy users of bandwidth (medical imaging network, telemedicine, etc.) is the cost of connectivity, which limits their being widely adopted.

The struggle against infoexclusion: Internet for all, public access points, sensitisation

The most frequently encountered initiative in the ORs is the creation of public Internet access points and occasionally their implementation in networks. Thus, in Martinique and Reunion, the Councils General have entered into partnerships with the CDC, the State and towns in creating “cyberbases”. In Reunion, the Region also has implemented "cybercases". In Madeira and the Azores, it is the municipalities that are developing public access points (see above).

Regional culture and content

This strand is most pronounced in the Portuguese and Spanish ORs where there is a desire to promote content in the Portuguese and Spanish languages as well as "Atlantic (Macaronesian) culture" In the French ORs, despite pronounced distinctive cultural characteristics (Creole, Caribbean, Amazonian) and a clear desire to appreciate them, there are few definite projects other than archiving and developing multimedia cultural databases. Today, throughout the ORs, broadband is used mainly to access content external to the regions. Regional content still tends to be limited and superficial.

Appreciation, protection and management of natural resources, the environment and risks

This is a major concern in the ORs. In the Iberian ORs, this interest is expressed mainly through the implementation of ICT projects. In Madeira in particular, resource protection and management are facilitated by implementation of several ICT projects in the areas of biodiversity, environmental information systems, rural development information systems, energy conservation, and even fishery management. In the Azores, the problems of risk prevention (volcanic, seismic, incendiary, etc.) and of sustainable development have inspired numerous projects that favour significant use of telecommunications (for remote monitoring, preparedness and public safety network). INTERREG III B Macaronesia has also provided support for innovative projects in this area, such as the SAMARCAN network ("Red Salvavidas Interinsular para la zona Canarias – Azores – Madeira”, an interisland rescue network for the Canaries, the Azores and Madeira) and “ALERTA II” (addressing seismic and volcanic risks).

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2.4. Authorities and structures in place to address Information Society challenges

2.4.1. Regional teams still tenuous and lacking sufficient coordination

ICT issues in the regions are National governance of Telecommunications and Information Society (IS) monitored at several levels: policy national (see textbox), regional and local. Portugal

Since 2005, the new UMIC, the Agência para a Sociedade do Conhecimento (Agency At the local level in France, for the Knowledge Society), is under MCTES, the Ministry of Science, Technology and departments (general councils) Higher Education. This new agency is a legally mandated public institution whose are involved to the extent that mission is to plan, coordinate, and develop IS and "electronic government" projects. ICT touches on other areas for A national IS strategy was approved in June 2003. It establishes seven action which they are responsible, orientations. Two national action plans were adopted (PASI, the IS action plan, and an particularly colleges and social e-government action plan) as well as three specific programmes: the national broadband initiative; the national programme for citizen participation in IS solutions to specific action. But their role needs; the public e-markets programme. nevertheless is variable. Note In July 2005, Government XII announced "LigarPortugal", a new IS plan adopted under that, to improve their ADSL the framework of Portugal's new technology plan and aimed at constructing a "Digital coverage, several departments Portugal” by 2010. It complements POSC, the new operational programme for the have signed “Chartes knowledge society, which replaced POSI. Départements Innovants”, or Spain plans for innovative departments, with France Since June 2004, SETSI, a new secretariat of state for telecommunications and the IS, Telecom. We emphasise the within the Ministry of Industry, Tourism and Commerce is responsible for tracking ICT special situation of the ORs as through two directorates general: a DG for IS development, and a DG for the only French regions that are telecommunications and information technology. Also, RED.ES, an agency associated with SETSI, is tasked with facilitating the development of IS and monitoring the monodepartmental. In other telecommunications sector. words, the regional territory and In July 2003, a new Information Society strategy was announced, replacing the strategy the departmental territory are adopted in January 2000 (INFO XXI, an Information Society for All”). “España.es”, the one and the same, which new programme of measures for SI development in Spain, comprises six action occasionally causes problems orientations, three vertical (administración.es, educación.es and, for businesses, pyme.es) and three that are more horizontal in nature (navega.es, for citizenship because of overlap. In the building; contenidos.es for promoting Internet content and security; and comunicación.es Canaries, both provinces --Las for awareness-raising campaigns). Palmas and Tenerife – plus the France seven “cabildos” (insular councils) and the municipalities Inter-ministry coordination occurs via periodic meetings, in particular the meetings of (jointly under the umbrella of CISI (“Comités interministériels pour la SI”, the interministerial committees for IS) and FECAM) are equally involved in CIADT (“Comité Interministériel d’Aménagement et de Développement du Territoire”, the the Information Society, interministerial committee for national planning and development, which addresses questions related to broadband development and ensuring IS access for all territories). particularly where e-government In addition, there is a particularly large number of specialised governmental projects are concerned. In organisations: ADAE, which addresses matters related to electronic administration; MEN Portugal, only the municipalities ("Mission pour l'économie numérique") which deals with business-related issues; the are involved at the intraregional Direction Générale des Entreprises du Ministère de l’Economie, des Finances et de l’Industrie, which is the finance ministry’s directorate general for business and is charged level: 11 in Madeira and 19 in with developing information technologies and services; DATAR, which tracks digital the Azores. Their municipal resource planning in the territories; DUI (Délégation aux usages de l’Internet), which is associations, EIMRAM in tasked with matters related to Internet applications; etc. Since 2001, every regional Madeira and AMRAA in the prefecture across the nation has had a person tasked with the ICT mission and charged Azores, are engaged in several with ensuring coordination with State actions. local e-government projects as With respect to strategic directions at the national level, in November 2002, the RESO 2007 programme ("Programme pour une Republique numérique dans la Sociéte de well as projects to facilitate l’information”, aimed at a digital republic in the Information Society) replaced PAGSI citizen access to the Internet ("Programme d'action gouvernementale pour la SI", programme of government action (see above). for the IS), which had been in effect since 1998. RESO aims to revive interest in IS through more efficient management of infrastructures and applications.

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Apart from actions at the local level and government policies at the national level, it is the regional level (of Regional Councils and Governments) that increasingly is taking the central role in Information Society development. Nevertheless, there are not yet resources at the regional level to fulfil their ambition. Within the seven ORs, only two have created directorates general responsible only for tracking telecommunications/ICT issues and made up of teams that are relatively robust and specialised: the Canaries and Reunion.

In Reunion, the regional Council traditionally is the lead player in ICT, having created PROTEL in 1998 and then implemented a true ICT directorate at the heart of the Region’s services, equipped with a team of engineers, research project managers, and a particularly dynamic document monitoring service. This team heads up an on-line observatory (http://tic.regionreunion.com/). It also publishes a monthly journal dedicated to ICT (www.protelnews.net) and regularly organises seminars.

In the Canaries, the Autonomous Government’s ministry responsible for industry, commerce and new technology is the “Consejería de Industria, Comercio y Nuevas Tecnologías”. Two directorates are charged with tracking telecommunications and ICT issues. the Dirección General de Telecomunicaciones y Sociedad de la Información (DGTSI, the directorate general for telecommunications and the Information Society) and the Dirección de la Industria (the directorate for industry), each of which has a well-structured and expert team. There was an informational site called “Canarias Digital”, but it has not been updated since 2003.

In the Azores, a single organisation to take charge of both these issues is gradually being put into place within the Government. Telecommunications matters are taken up by the regional directorate for public works and terrestrial transport (DROPTT, Direcção Regional de Obras Públicas e Transportes Terrestres), which is equipped and housed by the Regional Secretariat. Issues relating in an overall way to information technology and the Information Society are tracked by the Direcção Regional da Ciência e Tecnologia (DRCT, the regional directorate for science and technology), created in 2000 and now a dependent of the Secretaria Regional da Educação e Ciencia, the regional secretariat for education and science.

In the other regions, there is at least a person tasked with the ICT mission or a director, but this person is often in charge of tracking multiple sectors. − In Guadeloupe, following the internal reorganisation of the regional Council, a new ICT directorate was created, dedicated to both telecommunications and tourism and entrusted to the same team as before, which provided for a certain degree of continuity, even if the human resources available for the service were still limited. − In Martinique, since the beginning, the CCIM historically has been the one to head the Information Society steering committee and therefore to coordinate initiatives. Currently, the regional Council has assumed the lead toward implementation of a broadband network but there is no longer an ICT service. − In French Guiana, IS questions are tracked by a head of ICT mission associated with the Direction Planification et Prospective, the directorate responsible for planning and forecasting. − In Madeira, the regional administration has no designated service or even a person charged with overseeing issues in this area, even though regional decree No. 5/2005 Article 3b formally charges the regional Secretariat with directing and supervising Information Society issues. In practice, the Secretariat has entrusted the Madeira Technopole with coordinating and promoting a certain number of ICT projects. Therefore, today it is the Madeira Technopole that plays a central role in all matters relating to the Information Society. However, each Secretariat within the Regional Government launches its own initiatives. Many people bemoan the regional public bodies’ lack of political interest in these issues, the Regional Government’s relative absence from relevant discussions, and the fragmentation of initiatives arising from a lack of coordination.

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It is troubling that the regional teams are fragile even as IS policies and budgets have received conspicuous new support in recent years. The Regions occasionally have the problem that operators do not recognise them or, indeed, regard them as credible. Operators still do not view them as valuable allies.

Also, in the French regions, the way that responsibility is shared significantly hinders progress: on the one hand, “telecommunications” jurisdiction is not recognised in the regions and, on the other hand, the regions are not authorised to intervene in any sectors affected by telecommunications, even when they have jurisdiction over national planning and economic development. This lack of legitimacy makes it even more difficult for the French regions to administer an overall policy. Moreover, as far as the public authorities are concerned, there are multiple bodies (DATAR, the Ministry for the DOMs, Prefectures, Regions, Departments, towns) which have difficulty working together and coordinating their actions. The “Innovative Department” plans provide an example, as they usually are signed by the General Councils without consideration of the policies being pursued by the Regional Councils.

The problem of jurisdiction has also had recent repercussions for the Association de Régions de France, the association of French regions. In a preliminary document dated March 2005, ARF presented an argument for strengthening the role of the Regional Council whip. According to ARF, broadband should “above all serve the ends of a development policy plan to digitise the territory based on an approach that is federative and cuts across all activities in the Region: education and training, health and social services, the economy and employment, public administration and transportation -- all sectors can set forth a digitisation policy". Thus, the Regions “ought to demand that the government and ART give back to them the coordination function which the law defines but does not assign".

2.4.2. Lack of consultation and coordination among players

As a rule, when it comes to deploying telecommunications infrastructure or developing ICT projects, there is a lack of cooperation and consultation among local public and private players (State structures, local authorities, consular bodies, association and private sector representatives, operators, businesses, etc.).

Thus, in Madeira and the Azores, there is no consultative or procedural forum to coordinate territorial partnerships.

In Reunion, though the Regional Council regularly organises meetings with other decision-makers and partners, there is no forum for consultation.

In Guadeloupe, the official launch of the Digital Guadeloupe programme in May 2001 led the Region to establish a committee to promote discussion of Digital Guadeloupe by bringing together the various groups of public and private stakeholders (the “college” for territorial economic development and national planning, the “college” for research, education and training, and the “college” for democratisation and social and cultural development). The Committee meetings appear to have become less frequent since 2003.

In Martinique, an Information Society steering committee formed by the Chamber of Commerce and Industry, the Regional Council, the General Council, and a number of town councils was created in 1998 to promote the Information Society in Martinique. The Martinique Region has perpetual chairmanship.

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It should be remembered this lack of coordination makes it even more difficult to ensure a degree of coherence in the French ORs because the variety of players there is so great: the Regional Council organisations, the Prefecture's head of ICT mission for the State, DRIRE, the Rectorat’s head of ICTE mission, the General Council’s head of ICT mission (when there is one, or alternatively the head of ICT mission from the directorate of information technology and telecommunications, or even from the directorate for education), chambers of commerce and industry, town councils, etc.

In the Canaries, April 2005 creation of an Information Society Forum ("Foro Canario de la Sociedad de la Información"), through the same decree mentioned earlier, should lead to improved dialogue.

In field visits, the lack of ongoing formally structured dialogue has often been cited since it not only leads to incoherence but can even result in blockage.

2.4.3. Weak tools for IS monitoring and analysis

The tools for monitoring and reporting on the status of telecommunications and Information Society, strategies being tracked, projects, assistance available to project owners, etc., are genuinely weak.

Apart from Reunion, a region that is particularly active in this area, none of the regions has implemented an ICT observatory or a portal/site for reporting purposes. However, in the Canaries, the April 2005 decree did announce the creation of an observatory (“Observatorio Canario de las Telecomunicaciones y la Sociedad de la Información”).

There is strong demand among players for the creation of tracking tools and reporting infrastructure. In Martinique, the CCIM would like the Steering Committee to take action to create a Martinique portal so that ICT initiatives might be brought under a common umbrella. UGETIC in French Guiana feels that it is a matter of urgency that a true ICT observatory be implemented so that public officials and businesses can understand in concrete terms the country’s evolution toward and penetration of the Information Society.

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3. Conclusions: Recommendation guidelines

3.1. Introduction: Framing the issues

Our analysis of the status of telecommunication networks and services in the ORs thus leads us to the conclusion that there is an access gap between these regions and their countries of origin and even more so between these regions and the European averages with respect to service quality delivered and tariffs.

The situation in the mobile sector, however, is less worrisome than it is for fixed networks and services (even though roaming tariffs between an OR and its country of origin continue to be problematic for the DOMs). In the fixed sector, a fairly significant lag in switched network access is still observable in the DOMs, the persistent lack of tariff continuity with the French mainland giving rise to high prices for "national" communications, but the problem applies to the entire group of ORs in the matter of high- speed access.

Though in this area the tariff issue applies more pointedly to the DOMs (for Spain and Portugal, the it applies more generally to the national plan), the issue of service quality is one that appears in all seven regions to one degree or another in at least three kinds of service quality gap : - First, a portfolio of services that usually is (very much!) more limited than in the country of origin. - Second, commercial offerings that increasingly are intentionally degraded in order to offer "attractive" tariffs. - Finally, an effective quality of service which itself is degraded because of very high contention rates.

This phenomenon has various contributing factors, deriving especially from the ORs’ distinctive structural characteristics. Clearly, chief among them is the factor of remoteness. This is of particular importance for DOMs that are 6,700-9,400km distant from the mainland. The use of long-haul submarine cables for intercontinental national communications clearly carries a cost, and certainly is a matter for discussion, but it is only one measure of the how the situation at this level differs from that at the intraregional level. With respect to high-speed data communications, it likewise is the case that critical exchanges take place at the international level and that, because of the methods employed, only about 5% of traffic remains within any regional entity. Even if the cost of existing alternative solutions for repatriating traffic to the metropolitan area can be lowered (and other solutions put in place for the Antilles and French Guiana in particular), this nevertheless represents an additional cost in the economic equation.

Remoteness is less of a factor for the Iberian ORs but seems to play a role in speed problems nevertheless to the extent that aligning local retail tariffs with those in the country of origin puts operators “under pressure” to accommodate wholesale prices, which are driven, at least in part, by distance.

Add to this a second factor, which is the status of competitive offerings in the ORs, seen first of all in wholesale markets. Especially in France, it is precisely the presence of multiple competitive network operators that has allowed the market for last-mile ADSL access, indeed broadband generally, to enjoy relatively low tariffs and has stimulated demand.

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In the ORs, until recently, the prospects for developing retail markets have been limited by the incumbent operators’ de facto monopoly of intercontinental connectivity and very dominant position in intraregional connectivity.

Last-mile markets are highly concentrated in the hands of incumbent operators, who notably command more than 80% of ADSL access lines: as of the end of 2004, France Telecom had an average of 81% of the market in the four DOMs, Telefonica had 80% of the Canaries market, and Portugal Telecom had 90% of the market in Madeira and the Azores. Competition is reduced to a few operators who operate in certain niche markets. On this point, a difference can still be observed between the DOMs and the Iberian ORs; whereas in the DOMs competition is provided by local operators whose activity in every case is concentrated in the DOMs, in the Spanish and Portuguese regions, the providers of alternative access are basically the main competitors at the national level.

Finally, the exiguity and geographic distribution of the ORs constitutes a third major factor which differentiates these regions from their countries of origin. Except for the Canaries, no OR has a population exceeding that of a large town. The operators’ target markets therefore are small (which presents a problem of critical mass). Moreover, and this is true also for the Canaries, the population is concentrated in a few locations, with most of the territory being practically deserted. In the islands, the population centres are located along the seacoast and, especially in the case of French Guiana, along the Maroni River; in the Iberian archipelagos there are significant population density differences between the principal islands and the rest of the regions.

It should also be pointed out that the population’s concentration along the seacoast, while due largely to the need to be close to ocean resources, in many cases is due also to the difficulty of settling in those parts of the territory that are very much more craggy and hard to reach. When it comes to installing telecommunications networks, these accessibility problems further complicate the situation. These characteristics contribute to the regions’ marked interest in experimenting with new transmission technologies, particularly wireless solutions.

In summary, the ORs have distinctive characteristics that differentiate them from the continental European regions and which (contribute to one or another handicap in the regions but) cumulatively and in combination translate into three major structural handicaps, as mentioned earlier: • The factor of remoteness and isolation. • The weakness of competitive offerings, particularly in the wholesale market. • Exiguity and geographic distribution.

The excess cost of intercontinental telecommunication links imposes significant constraints on competition development, network deployment and service availability, the quality of service offered, and the reliability of international electronic communications.

There are other distinctive characteristics that might explain one or another aspect of telecommunications network development and access development in the ORs, but we believe that the ones described above are foundational, as most others generally vary little if at all from these themes. We will revisit this topic in further detail in the proposed recommendations, which follow.

The recommendation guidelines presented here flow very directly from the foregoing analysis of the situation and associated expectations. To date, we have discovered made a number of recommendations that might be pursued to improve the situation of the ORs with respect to access to electronic communication networks and services. Certainly, at least those recommendations that are adopted should undergo further study in order to fully understand their feasibility (technical, juridical, etc.).

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The recommendations presented in the following sections are organised according to the main action orientations involved: − Intercontinental, interregional and intraregional connectivity. − Electronic communications public policy and governance. − Regulation.

Within each action orientation, recommendation guidelines are highlighted for the group of ORs and then, as needed, for individual ORs.

To the extent possible, we specify for each the level of intervention necessary for implementation: Community, national, or regional.

3.2. Intercontinental, interregional and intraregional connectivity

3.2.1. Conclusions

All of the ORs currently have at least one telecommunications submarine cable connection to the rest of the world.

Depending on the region, one or several cable landing stations are available. Though the telecommunications operators participating in the consortia that manage these cables are numerous, they also are the incumbent operators who control the points of access in the ORs: France Telecom, Portugal Telecom, and Telefonica.

Several conclusions emerge from the preceding analyses: − Incumbent operators exercise full or partial control over submarine cable links. Some submarine cable capacity may in fact be commercialised by several operators who are shareholders in part of the cable. − Incumbent operator control over cable landing stations translates into high backhaul tariffs, which are the tariffs on the connection between the point where the submarine cable terminates in the regional territory and the POP of the operator leasing capacity on the cable. − Thus, an operator wishing to lease transport or IP transit capacity between its POP in the country of origin and its POP in the OR has to pay a tariff corresponding to both strands: the submarine segment and the terrestrial segment.

Operator POP Cable landing station Cable landing station Operator POP Terrestrial segment Submarine segment Terrestrial segment in the country of origin in the ORs

− Because incumbent operators have significant power to influence the price of both the terrestrial segment and the submarine segment, they maintain a degree of tariff control over wholesale prices and, ultimately, over competitive deployments in the ORs. − Access prices have been declining but they are still very high, which is having lasting impacts on resale and retail prices: o €400-1,000/Mbps/month in the Iberian ORs. o €1,500-1,650/Mbps/month in the French ORs except for Guadeloupe, where the wholesale price should reach €375 by the end of 2005.

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− The calculations show that as of June 2005 these tariffs for the most part were well above national tariffs and, over all, represented an excess cost in alternative operator resale pricing as seen in prices on the order of twice the national price in the Iberian ORs and five times the national price in the DOMs. − The example of Guadeloupe is very useful because the wholesale price there at the end of 2005 is 24% above that on the mainland. Allowing for geographic distance, a price that is no more than 20-25% above the mainland price may be considered an "affordable price". − Intraregionally and interregionally, it was observed that incumbent operators enjoy a quasi- monopoly in access to telecommunications infrastructure. Competition development and the take-up of new technologies – WLL, WiMAX, Wi-Fi, PLC, etc. -- result when this infrastructure is opened up to alternative operators. Here also, the conclusion is the same, and Governments and Regional Councils should expand the scope of their activity by studying the opportunity for and feasibility of implementing regional broadband networks that are neutral and open to all. − In any case, the question of telecommunications link reliability is a particularly important one to bear in mind, especially at the intercontinental level given recent submarine cable breaks (affecting French Guiana and Reunion).

The electronic communication infrastructure recommendations flowing from this conclusion naturally should differ according to applicable law: intercontinental, interregional or intraregional.

Backhaul infrastructure financing should be incorporated into the support solution. In effect, experience shows that incumbent operators have the monopoly in this market segment and that tariffs in practice can double the price of an intercontinental link, thereby threatening the overall economics of the project.

3.2.2. Recommendations

Generally speaking, two recommendations can be made for all regions and implemented according to the specific situation in each OR, whether the assistance objective is investment to create public telecommunications networks or operations to remedy discrepancies in the resale cost of access to existing cable resources:

1/ With respect to investment assistance, initiatives by public players – Governments and Regional Councils -- should be facilitated in order to implement new electronic communication networks that are neutral and open to all. In effect, existing telecoms networks are owned by operators, either as sole owners or through a consortium. Thus, they cannot be required to open their networks to third parties without contravening the ownership rights of existing owners.

Therefore, within the framework of structural funding that will come under OR management as of 2007, the Commission can flag directly leased lines for this type of financing in order to facilitate regional actions in this area: intercontinental, interregional and intraregional connectivity

Since the regional authorities and Regional Governments are undertaking initiatives to implement broadband telecommunication networks, link reliability should be incorporated into the implementation of those networks. The terms of reference prepared for operators bidding to build and commercialise these networks should emphasise that this is a mandatory requirement of any solution that is proposed.

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It is useful to recall the context in which new networks might be financed. In cases where the market's provision of services in the territory is neither complete nor satisfactory because of the lack of adequate infrastructure, authorities can state that it is in the public interest for network operators to create open infrastructure. It is important to note here that financing available from SIEG (“Service d’Intérêt Economique Général"9, the economic general interest service) is limited to investments related to networks and may not be used for services related to delivering broadband services to the end user premises10.

The levels of intervention are: - First, the Regional Governments and Councils, in taking the initiative to contract technical, economic, and juridical feasibility studies and launching programmes to implement public broadband electronic communication networks. - Then, telecommunication operators, in responding to public calls to tender to construct and commercialise these public networks and participating financially in their implementation and operation. - Finally, the European Commission, in authorising investment assistance through upcoming DOCUPs and OPs.

2/ With respect to operational assistance, the specific conditions that determine wholesale pricing need to be analysed as they pertain to the structural handicaps of the regions. Wholesale tariffs are calculated as a function of distance, they are not published, and they very often depend on the client operator’s ability to negotiate with the infrastructure owner. This analysis could be done on the basis of a mandatory half-yearly questionnaire sent by national regulatory authorities to operators who own telecoms infrastructure. Such an evaluation model would permit tracking of changes in wholesale prices, retail tariffs, and their composition. Specific measures could then be implemented based on the results of observing the behaviour of the users: service providers and end users. Compensation funds could be used to support the ORs.

The possible levels of intervention are: - On the one hand, the affected national regulatory authorities, in analysing how wholesale prices are determined, which could be done by management, and in following up on questionnaires completed by telecommunication operators. - On the other hand, the European Commission, in using compensation funds flagged for this type of account based on the feedback provided by operators.

Iberian ORs

With respect to the three Iberian ORs – the Canaries, the Azores and Madeira -- it was shown earlier that retail tariffs are determined according to the principle of tariff continuity with the country of origin. Excess costs are absorbed differently, depending on the alternative operator and the OR.

9 Four conditions must be met to merit SIEG compensation: the beneficiary should be charged with a clearly identified public service mission; the calculation parameters should be established objectively and transparently; compensation may not exceed the cost of providing the public service less the revenue obtained; the beneficiary is selected through a true and effective competitive process. 10 See DG COMP H3 article, “State aid rules and public funding of broadband”, available at: www.europa.eu.int/comm/competition/publications/cpn/cpn2005_1.pdf

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The results are of three kinds: − First, local alternative operators “manage” the excess cost by raising the contention rate on the bandwidth, which introduces a poor quality of service for the end user. − Second, certain operators withdraw from the market as a result of the excess cost, having determined that they cannot absorb it, particularly because of the exiguity of the market, which introduces market concentration and reduces competition. − Finally, to the detriment of the rest of the territory, local alternative operators basically address only the captive markets, which are the urban centres and principal islands of the archipelagos, and then only with niche services.

Recommendations for the Canaries

Currently, Telefonica, via PENCAN, alone controls the intercontinental network access offerings available to operators. BT, for its part, has a SAFE cable landing station in Altavista, put the station is not operational as of this writing.

A public cable from the Spanish mainland represents a 2,000km construction project. Studies undertaken for the Guadeloupe-Puerto Rico cable estimate construction costs on the order of €25,000-30,000/km.

Among the transport solutions considered, it might be relevant to include a new telecommunications transport model based on the Spanish electrical power model. In this case this would involve creating a network that belongs to a private company in which all telecommunications operators are shareholders. This company would be both owner and manager of the transport network and would act as an operator’s operator, offering operators network access services under terms that are non- exclusive, non-discriminatory and transparent. At all points across the archipelago, there would be competition in service availability and quality.

This new company would manage and operate the interisland network and connectivity with the Continent.

With respect to interisland links, operator Cablo Submarino has already invested in connecting Gran Canaria and Tenerife and plans to connect the other islands. Financial support appears to be essential if the society is to secure the necessary investment quickly. The distance spanned by the interisland link is about 1,500km.

In addition, a mechanism for compensating operating expenses needs to be included based on a model for tracking excess costs (as described above), and several such mechanisms need to be established for service providers so that they are not penalised by the wholesale tariffs imposed by network operators. This will allow local ISPs – Auna, Idecnet, etc. -- to find an economic balance, facilitate their deployment across the archipelago, and facilitate the return of ISPs that have left the archipelago – Jazztel, Uni2, etc.

In any case, tracking the retail price changes remains a determinative component of the approach in order to be sure that operators transfer reductions in whole prices to retail prices (see regulatory recommendations).

Finally, with respect to the question of ensuring the reliability of the link with the Continent, the SAFE cable could provide backup in the case of a break in the main cable. This therefore involves broaching discussions with BT to study the terms and ways in which access to its cable landing station might be practical.

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The intraregional segment should be studied to evaluate the opportunity for and determine the technical, economic and juridical feasibility of creating a public broadband network throughout or in part of the Canaries archipelago.

Recommendations for the Azores and Madeira

Outbound telecommunications links in the intercontinental segment are relatively well-developed but they are burdensome and under Portugal Telecom’s control.

In the Azores, the regional interisland loop and the Azores-Continent link (on COLUMBUS III) were financed through REGIS II, in other words in part by using public and European funds. The cost of the Azores-Continent link was €33 million, of which 38% was financed through REGIS II. Nonetheless, this public support has had not led to lower Portugal Telecom tariffs, and the new government has undertaken to renegotiate the agreement with Portugal Telecom so that it can extract a real benefit from these public investments.

For this it is necessary that the Regional Government of the Azores receive backing from the Commission, ANACOM (the national regulatory authority) and the national Government to support negotiations with the operator. Public financing ought to allow Portugal Telecom to lower wholesale tariffs significantly (by 38% according to automated estimates), which should permit the relaunch of competition development in the Azores.

Interisland connectivity in the archipelago currently is provided by the regional optical loop which connects seven of the nine islands (Flores and Corvo are connected by microwave). In this case, as well, Government support was very significant since REGIS II financing covered 46% of the total €20 million investment. The approach should be similar in this case, allowing wholesale prices to come down by close to half of today's tariffs.

These two initiatives should strengthen the regional administration, which recently launched a large call to tender that is designed to meet its own needs but which should have a strong impact on the overall development of regional infrastructure.

With respect to reliability, Columbus III and CAM Ring connect the Azores to the Continent. Therefore, a backup mechanism should be considered to guarantee that communications over the two cables are monitored.

Given that the intraregional network currently in place belongs to Portugal Telecom and is not open to third-party operators, particularly for use of optical fibre facilities, once public financial support for the intercontinental and interregional links is in place, the intraregional segment should be studied to evaluate the opportunity for and determine the technical, economic and juridical feasibility of creating a public broadband network throughout or in part of the Canaries archipelago.

With six fibre optic submarine cables passing Madeira today, the island has the potential to leverage its geographically strategic position in the international submarine cable network. However, the operators depend on Portugal Telecom’s submarine cable offerings for external connectivity, and therefore are blocked in offering their own services.

Within the framework of the INTERREG III B Macaronesia program, a project for Madeira and the Canaries was proposed to construct a submarine fibre optic cable connecting Madeira and the Canaries to the Continent. The regional governments, as owners of this infrastructure, could have made it available to all operators. Nevertheless, the project was abandoned because the cost was considered too high.

There are, therefore, many solutions to “open up” Madeira.

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Depending on the outcome of negotiations now in progress, one solution is to connect Madeira to the Azores cable which belongs to Portugal Telecom but is co-financed by the Government of the Azores. To do that, it could be useful to use the CAM Ring from Madeira to the Azores (which will be connected to Columbus III by a link to the Continent). As in the Canaries, the use of compensation funds should allow the Government of Madeira to offer tariffs that represent affordable costs for alternative operators.

Another solution is to launch a study of the feasibility of constructing a submarine cable that connects the Azores, Madeira, Canaries and the Continent (Portugal and Spain). The objective of such a study would be to pressure PT and Telefonica to lower the tariffs on their respective offerings. The study would also allow the detailed cost of implementing such a cable to be established. Initial estimates call for: €30 million for the Azores-Madeira link, €15 million for the Madeira-Canaries link, and €30 million for the Madeira-Continent link, for an estimated total investment of €75 million.

A third solution would take advantage of the numerous cables connecting to Madeira, and would have the operators who are shareholders in the consortia now present (Sat 2, Eurafrica, Atlantis 2) compete with one another in order to obtain differentiated offerings from them, which tariffs could then be made available to local alternative operators to facilitate access to current cable facilities. Once these offerings are available, they will also enable implementation of a mechanism for ensuring link reliability for the operators that are present. This definitely involves making transparent the information that consortium operators provide: identifying the operators who are making offers to access their capacity in Madeira, and making public to all of them the tariffs proposed by each, the terms and types of access, and the location/purchase of capacity, etc. Implementation of an observatory that could be managed by ANACOM and/or the Regional Government would allow this information to be made public and accessible.

The intraregional segment should be studied to evaluate the opportunity for and determine the technical, economic and juridical feasibility of creating a public broadband network throughout or in part of Madeira’s two islands, which network would compete with the existing Portugal Telecom network (in the same way as is currently done in the four DOMs, to circumvent the constraints imposed by the incumbent operator).

French ORs

The distinctive feature of the DOMs is that these four regions – Guadeloupe, Martinique, French Guiana, and Reunion – do not benefit from the principle of territorial continuity with the mainland. Here, the factor of remoteness is very much more important than in the Iberian ORs: the distance between these islands and Paris is 6,760km for Guadeloupe, 6,830km for Martinique, 7,500km for French Guiana, and 9,370km for Reunion.

The impacts are of several kinds: − A retail tariff “disconnect” resulting from the excess cost of the intercontinental segment. − Very low broadband Internet penetration owing to very high tariffs, the lack of capacity, and poor quality of service. − Competition concentrated mainly in employment catchment areas and unable to overcome the “distance effect”. − Regional authorities with a strong political will to create the conditions necessary for true competition throughout their territory.

This leads to tremendous expectations in local players who await conditions for economic, cultural and social development in the DOMs in keeping with the requirements for market globalisation.

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Recommendations for the DOMs

At the intercontinental level, Guadeloupe stands apart from the other DOMs and all the ORs in having undertaken an initiative to create a broadband cable network by means of a DSP (Délégation de Service Public) process. By the end of 2005, this infrastructure, which represents a €21.9 million investment with European co-financing, will connect the island to the networks of global telecommunications operators by means of a 760km fibre optic link with Puerto Rico.

Can this type of investment be replicated in the other DOMs?

An opportunity exists to extend this model to Martinique for an estimated investment cost of €10 million. This, it appears today, is the solution that will ensure Martinique long-term external access over which it will have nearly total control. The Americas II cable would provide a backup link in case of a break in the new cable. The DSP approach appears to be the best for undertaking this initiative.

In these two cases, backup links can be provided using ECFS capacity in Guadeloupe and ECFS and Americas II capacity in Martinique.

The situation is different in French Guiana and Reunion. In effect, both regions are too isolated to undertake such works, even with European financing.

French Guiana is connected only via the Americas II cable, which traverses the region. This cable is accessible via the incumbent operator and via certain other consortium members that have resources up to France Telecom’s cable landing station in Cayenne. These are Sprint, Cable & Wireless, and Brazilian operator Embratel.

Preliminary research concerning these operators confirmed interest in opening them up to competition and leasing capacity long-term (either in the form of a "capital lease" or as an IRU). In effect, the tariffs currently being proposed to the Regional Council of French Guiana by on candidate for the DSP to construct and commercialise the broadband network are entirely compatible with the models we used to develop our estimates (see Section 3.2.2), and the amounts indicate that the cost per Mbps of transport is very close to the cost on the Continent.

Earlier studies of operators that are Americas II shareholders show tariffs of about €400/Mbps/month where a long-term location or an IRU purchase is involved, which suggests that this could be an “affordable price” in context of our calculations (25% higher than the wholesale tariff on the mainland). However, the IRU cost involves financing by “investment”, which requires European assistance by way of structural funds.

Redundancy would continue to be provided by satellite links, which can be used for backup, based on offerings from Intelsat and Eutelsat in particular.

Reunion is connected only via the SAFE cable, which runs from South Africa to India via Mauritius. The rules governing operators in the private consortium give France Telecom the prerogative to offer its own access tariffs. Following ARCEP's May 2005 decision, the operator significantly lowered its tariffs. However, our simulations (see Section 3.2.2) show that the excess cost is still well beyond that of the mainland price: the ratio is 1:5. ARCEP’s estimates would allow the difference to be reduced to 1:2.5. If alternative operators’ retail prices were to fully reflect such a drop, this would approach the affordable price that takes into account distance, assuming that quality of service is met. In this case, it therefore seems necessary to consider closely tracking changes in tariffs that are offered. The Region could then go back before ARCEP – under new prerogatives that would allow it to intervene directly before the regulatory authority – to ask that a new price drop be considered based on ARCEP's analysis.

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Another solution for achieving more clearly articulated tariffs would be for the Reunion Region to launch a call for SAFE consortium operators to tender capacity, either directly, with the Region "buying" capacity in the form of IRUs, or indirectly, with the Region facilitating the release of a call to tender from the alternative operators themselves. However, experience shows that the first of the two options is preferable in this case.

As in French Guiana, redundancy would continue to be provided by satellite links, which could be used for backup, based on offerings from Intelsat in particular.

As concerns the intraregional segment, all of the DOMs currently are launching DSP processes. The Reunion Region has chosen to lease, and having launched a public works contract for implementation of an optical network on EDF’s electrical grid, is currently seeking to retain an operator to commercialise the future broadband network. Guadeloupe, Martinique and French Guiana have chosen to award a concession, and have been pursuing delegation for some months.

The case of French Guiana should be considered separately since the territory’s geographic area is not all comparable to that of the other regions and it is sparsely populated. Because of the geographic constraints, one part of the territory should be served using satellite solutions, which entail high operating costs.

In this case, in order to ensure the success of the project now underway, Europe should release specific ERDF funding as of 2007, and should also use compensation funds to cover operating expenses.

In summary, these recommendations take into account the distinctive characteristics of each OR in its current circumstances.

At the intercontinental and interisland levels: - Policy support for negotiations with the incumbent operator (Azores and Madeira), an initiative to construct an intercontinental submarine cable (Canaries and Martinique), support for alternative operators to use neutral and open interisland capacity (Canaries), financial support for the purchase of long-term capacity (IRU or long-term lease) through a call to tender services (French Guiana and Reunion). - For French Guiana and Reunion, financial support to purchase long-term capacity (via IRU or long-term lease) through a call to tender services.

At the intraregional level, it would be prudent for the Iberian ORs to contract technical, economic, and juridical feasibility studies that take into account the experience of the DOMs in order to determine the best model and the specific implementation methodologies to be adopted under a national planning policy given existing infrastructure (cable networks in particular).

The DOMs have already committed to the process of creating a broadband public network, so in their case Europe ought to provide them with financial support for the investment and with operating support as well, particularly in French Guiana for the certain isolated parts of that territory which are accessible only via satellite.

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Summary table of recommendations concerning intercontinental, interregional and intraregional connectivity [1] - Intercontinental, interregional and intraregional connectivity Recommendations for intercontinental links French Canaries Azores Madeira Guadeloupe Martinique Reunion Guiana Studies and financial support of Priority/in investment to construct a Priority Priority Priority Completed progress submarine cable. Financial support of investment Priority/in in backhaul infrastructure. Priority Priority Priority Completed Priority Priority progress

Financing of capacity purchased via IRU or long-term lease (10 to Priority Priority Priority Priority 15 years) Political support in negotiations with the operator(s) Priority Priority Priority Priority Priority

Study of the reliability terms for Priority Priority Priority Priority Priority Priority Priority telecoms links Recommendations for interregional links in the archipelagos Financial support of investment to construct a submarine cable. Priority Priority Priority Priority

Study of a new transport model Priority Priority Priority In progress Financing of capacity purchased via IRU or long-term lease (10 Priority years) Political support in negotiations with the operator(s) Priority Priority

Recommendations for intraregional links Technical, economic and Priority Priority Priority In progress Completed Completed Completed juridical feasibility studies Financial support of investment Priority/in in regional broadband Priority Priority In progress progress infrastructure. Study of a new transport model Priority Priority Priority In progress In progress In progress In progress

Implementation and monitoring Priority/in Priority/in Priority/in of experiments Priority Priority Priority Priority progress progress progress

(*) The price to construct a submarine cable is estimated to be about €25,000-30,000/km, based on the Guadeloupe-Martinique cable study. (**) The technical and economic feasibility studies estimate this at about €100,000. (***) The financial support required for investment in backhaul is estimated to be €500,000 on average. (****) The cost of financing a 155Mbps link under an IRU or a 10- or 15-year lease is estimated to be €5-8 million.

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Level of intervention in intercontinental, interregional and intraregional connectivity

Proposed measures All ORs Iberian ORs DOMs Recommendations for intercontinental links Studies and financial support of European Commission Regional Governments Regional Councils investment to construct a submarine World Bank Telecoms operators Telecoms operators cable. National Governments Financial bodies Financial bodies Financial support of investment in European Commission Regional Governments Regional Councils backhaul infrastructure Telecoms operators Telecoms operators Financing of capacity purchased via European Commission Regional Governments Regional Councils IRU or long-term lease (10 to 15 years) Telecoms operators Telecoms operators Political support in negotiations with Regulatory authorities Regional Governments Regional Councils the operator(s) National Governments ANACOM, CMT ARCEP Study of the reliability terms for European Commission Regional Governments Regional Councils telecoms links ANACOM, CMT ARCEP Recommendations for interregional links in the archipelagos Financial support of investment to European Commission Regional Governments Regional Councils construct a submarine cable. Telecoms operators Telecoms operators Study of a new transport model Regulatory authorities Regional Governments Regional Councils National Governments ANACOM, CMT ARCEP Financing of capacity purchased via European Commission Regional Governments Regional Councils IRU or long-term lease (10 years) ARCEP Political support in negotiations with Regulatory authorities Regional Governments Regional Councils the operator(s) National Governments ANACOM, CMT ARCEP Recommendations for intraregional links Technical, economic and juridical European Commission Regional Governments Regional Councils feasibility studies ARCEP Financial support of investment in European Commission Regional Governments Regional Councils regional broadband infrastructure. Telecoms operators Telecoms operators

Study of a new transport model Regulatory authorities Regional Governments Regional Councils National Governments ANACOM, CMT ARCEP

Implementation and monitoring of Regulatory authorities Regional Governments Regional Councils experiments National Governments ANACOM, CMT ARCEP

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3.3. Electronic communications public policy and governance

The recommendations fall into three main focus areas: Improve regional governance of telecommunications and ICT matters. Strengthen and improve the ORs’ ICT public policies. Turn the ORs into laboratories for Information Society experiments

3.3.1. Improve regional governance of the Information Society

Good governance is founded on four pillars: - Clarity in distributing roles to the players in charge of overseeing public policy and in defining the tools for consultation and coordination. - Sufficient well-trained human resources. - Tools for gathering, analysing and distributing information. - A comprehensive strategic vision, an action plan, and sufficient funding.

On these four points, the cross-subject analyses revealed deficiencies.

This situation can be explained mainly by the lack of recognition of the key role that the Regions can play in the territories’ digital resource planning. This lack of recognition is not unique to the ORs, as the European regions regularly demonstrate by the positions that they adopt, thereby establishing that regional roles and responsibilities need to be clarified. But the matter is particularly sensitive in the ORs, especially in the French ORs, because of their status as decentralised authorities and their "youth", whereas the Iberian ORs, as Autonomous Regions, have much more leeway.

Thus, even though the situation is not exactly the same in all seven ORs, it appears desirable to strengthen the governance capacity of the Regions over all with respect to telecommunications and the Information Society, a task that can be broken down following six associated recommendations: 1. Affirm the “juridical” capacities of the Regions with respect to ICT. 2. Strengthen the organisational capacities of the Regions. 3. Encourage the Regions to develop their own consultation capacities. 4. Encourage the Regions to develop their own observational and analytical capacities. 5. Improve the Regions' strategic and operations planning capacities. 6. Give more importance to ICT issues in inter-OR cooperation and improve the Regions' capacities for international cooperation.

Recognise the well-established “juridical” capacities of regional authorities in ICT matters

It appears that national telecommunications regulatory authorities need to give additional consideration to OR electronic communications markets because of these markets’ distinctive characteristics.

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This could be done by instituting mandatory consultation mechanisms for the Regions. Procedures by which the Regions might appeal to the Authorities likewise could be facilitated11.

In addition, and of particular importance for the French authorities, it appears desirable that the State clarify the jurisdiction of each of the various levels of governance where electronic communications are concerned (such as jurisdiction in defining regional telecommunications schemes, per ARF) and recognise the role of the regional governing bodies’ whips.

Encourage regional authorities to strengthen their organisational capacities

It appears essential to organise and strengthen regional teams, especially in the five regions of the Azores, Madeira, Martinique, French Guiana and Guadeloupe. The regional authorities should implement permanent organisations (Directorates, Services) equipped with juridical, financial engineering, strategic and technical expertise so that they are able to play the roles of "support platform", sensitizer and trainer of elected officials, and cross-disciplinary coordinator of actions undertaken by other services of the authority or government. As concerns external relations, the teams that are organised should become regular spokespersons for other local actors, national bodies (regulatory authorities and operators’ directorates general), and the European Commission. The existence of such organisations should be a prerequisite for undertaking ICT measures in regional programmes funded by European funds.

Encourage the regional authorities to develop their own consultation venues

So that the Regions might be better able to play their role of “whip", and the various actors might better coordinate their actions and engage in ongoing constructive dialogue, we propose that each Region be encouraged to implement venues for consultation, for example a “Regional forum on the Information Society" along the lines of the one created recently in the Canaries. The "committees” that already exist, such as in Guadeloupe and Martinique, should be "revitalised". In terms more of operations, an option is to create groupings of public authorities (as "mixed associations”) and indeed of public and private governing bodies together (public-private partnerships).

Encourage regional authorities to implement regional ICT observatories

The lack of regional indicators, statistical data, management tools and analytical tools particularly complicates efforts to evaluate current policies, draft remedial measures, and design new policies. We recommend that each Region, as soon as possible, with a view particularly to preparing for the next regional operating programmes, equip itself with an Information Society observatory and distribute its information using publications, the Internet and seminars. This could include, among other things: − Deployment indicators for open networks, usable infrastructure, population and geographic coverage, service penetration, quality of service, etc. − Indicators and criteria for tracking wholesale and retail tariffs at the regional level and comparing them with tariffs in the country of origin and with more broad-based benchmarks. − An inventory of regional (infrastructure and content) projects and international projects (in the OR regions and countries that are geographic or organisational neighbours). − Geomarketing analyses and a Geographic Information System (plotting the networks).

11 It should be recalled that until the introduction of Article L1425 of the Code Général des Collectivités Territoriales, the general code for French local governing bodies, local authorities could not appear before ART because they were not recognised as operators. This caused problems for the Reunion Regional Council in April 2004 when ART deemed its petition inadmissible.

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The regional and national statistical institutes should be encouraged to implement solutions for gathering and aligning telecommunications-related data, and especially to establish mechanisms for exchanging information with telecommunications operators.

It is important also to encourage the ORs to exchange information with each other concerning their initiatives (the Reunion Region's experience and the works in progress in the Canaries can be especially instructive). In the short term, work can be started on an observatory, thanks to the creation of a short-term “Inter-OR Workgroup on Regional Observatories”. In the medium term, an “Observatory of OR regional observatories” might also be set up, perhaps through inter-OR cooperation under INTERREG. Finally, it seems important that the Regions ultimately interconnect their observatories with initiatives of the same kind in other European regions (such as IRIS, ORTEL, ERISA, ERIK Network, IT4ALL, IANIS, eRegion Hub, etc.) and/or that they propose to develop OR strands within these initiatives.

Help regional authorities to develop their ICT strategic and operational planning capacities

As defined, the upcoming 2007-2013 European programmes will allow players to take part in drafting contract documents. While this approach is necessary, it is not however sufficient: it seems essential that the Regions develop a more overarching approach.

The Regions should be asked to define, within given guidelines: − A regional strategy for electronic communications. − A strategy implementation action plan, which is to be continuously monitored, evaluated, and updated. − A regional telecommunications master diagram, including a regional land-use diagram for broadband. These diagrams and designs, undertaken in consultation with the other players, should have a certain normative power. They also should be widely distributed to the public.

Improve the Regions' capacities for European and international cooperation

With respect to inter-OR cooperation, we recommend that a telecommunications and ICT strand be systematically incorporated into the meeting agendas of the Commission, the Member States and the ORs, just as components for agriculture, fishing, transportation, etc., are included now. More generally, the ORs should be encouraged to share with one another their experiences in these matters, in particular through the creation of a formal OR interregional exchange and coordination network that meets regularly on the basis of a commonly agreed action plan and uses common tools, to be developed (tools such as the Observatory, mentioned above, an annual conference, thematic workgroups, Internet site, etc.). Such a network could be funded through INTERREG.

With respect to cooperation at the international level, the Regions should be encouraged to monitor international ICT initiatives in their own regions (Caribbean, Indian Ocean, Latin America, Mediterranean third countries) and to participate in regional telecommunications projects. The European Commission and national governments should more systematically include them in international workgroups on these topics, particularly where international lending institutions (such as the World Bank) and regional cooperation organisations are involved. One project that comes to mind is Project EASSY on the East African coast. Another is Guadeloupe’s GCN project, for which the World Bank, at the request of ECTEL (Eastern Caribbean Telecommunications Authority), in August 2005 launched a call to tender a study of the feasibility of extending the project to other Caribbean islands.

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For the French regions, which today are relatively isolated in their regional environment because of their status as decentralised authorities, we suggest that the French State officially grant them juridical capacities of representation and participation in regional cooperation venues, in the same way that Reunion acts in the Indian Ocean Commission.

3.3.2. Strengthen and improve ICT public policies

To strengthen and improve ICT public policy, we propose two major recommendations: - Expand and update the ICT public financing methods established in regional development programmes. - Improve the content of public policy through a more comprehensive approach and by developing applications that are particularly relevant given the distinctive characteristics of the ORs.

Strengthen the Telecommunications and ICT Strand in future regional development programmes

Structural funding programme documents constitute a useful tool to stimulate and coordinate local initiatives in these areas. The upcoming 2007-2013 programme should continue to give priority consideration to the area of "Telecommunications and the Information Society"

Several changes are proposed to the European Commission: − Increase allocations for ICT projects. − Fund certain infrastructure investments as general interest services (see recommendations concerning intercontinental and regional links). − Consider covering some portion of telecommunications expenditure with future compensation funds awarded for OR-specific handicaps. − In addition to investment assistance, take closer account of project mobilisation and implementation expenditures, which are essential for tracking and ensuring the long-term success of projects undertaken. − Improve coordination of ERDF and FED/MEDA/ALA assistance for interregional cooperation projects between the ORs and neighbouring third countries (in constructing submarine cables, for example).

Identify actions suited to each territory’s distinctive characteristics

Identifying priority action areas for the regions is outside the scope of this study’s objectives. That work requires a forward-looking in-depth analysis of each region and consultation and negotiation with the players involved. This is the purpose the regional strategies and action plans yet to be drafted (see above).

However, it seems important to emphasise several key points and action principles for future programmes.

It is essential that the Regions develop a more comprehensive approach than in the past, more fully encompassing "infrastructure, applications and services". Thus, the upcoming 2007-2013 programmes should more effectively incorporate the “infrastructure” dimension and follow the broadband master plan and strategy for each region when scheduling investment. The Regions likewise will have a key role to play in stimulating applications and developing services that are tailored to their local territories and know-how.

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Besides addressing needs, this will invigorate these "markets", spur a very large number of operators to mobilise, and prepare the way for competitive conditions that are more conducive to socioeconomic development in the Regions.

We cite a few, by no means exhaustive, examples shown by our analyses to be particularly relevant.

Education and o Accentuate efforts to equip and interconnect primary and secondary research educational networks in the ORs that lag very greatly (French ORs in the Americas) o Increase affordable broadband capacity in the French ORs where problems persist (Reunion in particular) o Encourage virtual campus projects and adopt two-way videoconferencing. o Connect the ORs’ networks to GEANT2, the European research and education network, and establish preferred gateways to international networks supported by the European Commission (for example, EUMEDCONNECT for Mediterranean countries and ALIS for Latin America). o Pursue efforts to develop organisations that provide training in ICT-specific skills (engineering schools, professional training centres). Administration o Speed up the development and interconnection of broadband networks for regional and local public administration. o Further develop e-government applications (internal management, inter- administration management, user relations). Health o Fortify the resources reserved for broadband health network projects and telemedicine projects/experiments. Economic o Act with urgency to apply suitable measures to lift the handicap of high-cost development special links, particularly where the Region's strategy relies greatly on attracting heavy users of telecommunications, such as teleservices and information technology firms, to dedicated business districts (Madeira and Reunion). o Develop e–business projects suited to the OR’s economic characteristics (tourism, international and maritime trade, handicrafts, etc.). o Strengthen efforts to sensitise and train entrepreneurs and to have them pass along what they learn. Content o Require that local content development projects be relevant (in terms of culture, language, and heritage).

3.3.3. Turn the ORs into laboratories for Information Society experiments

A degree of technological upheaval is evident in these regions, particularly in the Portuguese ORs, which operators recognised very early on as places suited to experimentation with certain technologies. It seems useful to reinforce this tendency and generalise it to all of the ORs by encouraging pilot projects developed within the framework of innovative programmes. Today, however, the ORs, and the French ORs especially, participate less than other European regions in national and European requests for proposal. The reasons are several: poor information about the ORs and within the ORs, which are often "forgotten" by the programmes and partners mounting innovative projects; lack of time and expertise to assemble applications; the handicaps of distance and isolation; etc.

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Nevertheless, market demand is very high – among households, businesses, and public services. Public services constitute a sufficiently large and motivated market and incubator to make the regions laboratories for ICT experimentation.

To improve the visibility, participation and integration of the ORs in European and national initiatives, actions that are priority for the European Commission, the Member States and the Regions alike could be launched simultaneously.

At the European Commission level

The European Commission could launch several actions aimed at stimulating and facilitating partnerships with the ORs.

Raise the ORs’ visibility on the Commission’s Internet sites Support the ORs’ participation in European research programmes, especially in ICT: The ultrapheripheral nature of these regions makes it very difficult for them to participate effectively in European research programmes. Recital 14 of the Sixth Framework Programme for RTD aimed at facilitating OR participation in Community RTD actions has not been monitored. Preparation of the Seventh FPRTD -- which notably includes a new “Capacities Programme” for convergent regions and the ORs -- should include clear incentives, such as in the rules for project financing, to facilitate and encourage OR participation in research projects, especially ICT research projects. The Commission could establish a workgroup on this topic. Encourage OR participation in other European ICT programs launched under either internal or external policies The ORs participate marginally in activities conducted by European ICT programmes (eLearning, eTen, eContentplus, eHealth, eBusiness, etc.). Likewise, they seldom are present in external cooperation programmes such as @LIS (Alliance for the Information Society) with Latin America and the EUMEDIS (Euro-Mediterranean Information Society) initiative, even though they could assert their role as Europe's "active frontier". Various measures could be adopted to stimulate and support increased OR participation in these programmes: Improvements in distributing information in the ORs, planning financing rules (particularly so that they cover the costs of coordination and management), and sensitising European Commission directorates general and services which are likely to be affected. Reserve an OR strand within the i2010 strategic framework: More generally, a request could be made to install an OR-specific strand in the upcoming strategic framework, “i2010 – A European Information Society for Growth and Employment", which has as an objective to reinforce "social, economic and territorial cohesion by making ICT products and services more accessible, including in regions lagging behind”.

At the Member State level

The Governments of the three Member States likewise should make an effort to promote further OR participation in national initiatives by systematically including their ORs in national programmes and initiatives (especially valuable for the French ORs) and to facilitate OR participation in calls to national projects or experiments by providing suitable (mainly operational) assistance.

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At the level of the ORs themselves

For their part, the Regions’ public and private players should improve their position and be more proactive in assuring that they are present in national and European partnerships. They should make an effort to make more applications in response to calls for innovative projects and to learn to "sell themselves" better using approaches based on territorial marketing and valuation of their assets.

This occurs mainly by: − Improving, at the regional administration level, the distribution of information on European and national initiatives related to the Information Society and innovation. − Publishing, on the Internet, updated information about the OR's technological resources (sites, regional portals, etc.). − Preparing expressions of interest, written by OR players (public authorities and operators), in participating in projects or in serving as a base for experimentation with new technologies and applications that are particularly relevant. − Developing an OR presence in Brussels and in regional cooperation networks.

Summary table of recommendations for governance and public policy

Governance and public policy Recommendations for regional ICT governance French Canaries Azores Madeira Guadeloupe Martinique Reunion Guiana Recognise juridical capacities of the regions in ICT Priority Priority Priority Priority Strengthen and organise regional ICT Completed In progress Priority Priority Priority Priority Completed teams Implement/reactivate venues for In progress Priority Priority Priority Priority Priority Priority consultation Implement regional observatories Priority / in In progress Priority Priority Priority Prioritaire Completed progress Improve strategic and operational Priority / in Priority / in planning capacities (see 2007-2013) Priority Priority Priority Priority Priority progress progress

Develop European and international Priority / in Completed In progress In progress Priority Priority In progress cooperation progress Recommendations for regional ICT public policy French Canaries Azores Madeira Guadeloupe Martinique Reunion Guiana Increase and better adpat ICT Priority Priority Priority Priority Priority Priority Priority financing in RDPs Develop applications relevant to OR Priority / in Priority / in Priority / in Priority / in Priority / in Priority / in Priority / in distinctive characteristics progress progress progress progress progress progress progress Recommendations for the ORs as laboratories for ICT experimentation French Canaries Azores Madeira Guadeloupe Martinique Reunion Guiana Facilitate OR visibility, participation, Priority / in Priority / in Priority / in and integration into European Completed Priority Priority Priority progress progress progress initiatives Facilitate OR visibility, participation, Priority / in Priority / in Priority / in and integration into national In progress Priority Priority Priority progress progress progress initiatives OR's own improvement of their Priority / in Priority / in In progress Priority Priority Priority Priority position progress progress

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Levels of intervention in recommendations for governance and public policy

Proposed measures All ORs Iberian ORs DOMs Recommendations for regional ICT governance Recognise the juridical capacities of the regions in ICT European Commission Regional Governments Regional Councils National Governments Regulatory authorities Strengthen and organise regional ICT teams European Commission Regional Governments Regional Councils (initiative) (guidelines/incentives) (initiative) Implement/reactivate venues for consultation European Commission Regional Governments Regional Councils (initiative) (guidelines/incentives) (initiative) Other regional players Other regional players Implement regional observatories European Commission Regional Governments Regional Councils (initiative) (guidelines/incentives) (initiative) Operators (suppliers) Operators (suppliers)

Improve the Regions' strategic and operational European Commission Regional Governments Regional Councils (initiative) planning capacities (see- 2007-2013) (guidelines/incentives) (initiative) French Government: DATAR and Prefectures (co-initiative) Develop European and international cooperation European Commission (initiative) Regional Governments Regional Councils (monitoring) International organisations (initiative and monitoring) French Government (initiative) National Governments (support) Recommendations for regional ICT public policy Increase and better adapt ICT financing in RDPs European Commission Regional Governments Regional Councils (guidelines/incentives) (initiative) French Government (DATAR and Prefectures) Develop applications relevant to OR distinctive European Commission Regional Governments Regional Councils characteristics (guidelines/incentives) (initiative) French Government (DATAR and Prefectures) Recommendations for ORs as laboratories for ICT experimentation Facilitate OR visibility, participation and integration in European Commission (initiative) Regional Governments Regional Councils (monitoring European initiatives National Governments (support) (monitoring – – implementation) implementation) Facilitate OR visibility, participation and integration in National Governments (initiative) Regional Governments Regional Councils (monitoring national initiatives (monitoring – – implementation) implementation) ORs’ own improvement of their position National Governments (support) Regional Governments Regional Councils (initiative) (initiative)

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3.4. Concerning regulation

3.4.1. Conclusion

Our findings show that there is no specific regime for the ORs under current regulation. They are subject a priori to regulations that apply in the country to which they belong and, more generally, to principles defined by the European Union, in particular those arising from "Packet Telecom". As our field analysis clearly shows, it by no means follows that the competitive situation in the Regions is comparable to that in the countries to which they belong: in nearly every case, the incumbent’s share of the market is very large12, the number of competitors is relatively limited, and tariffs – especially for broadband -- are high.

Therefore, the situation in these Regions is very different from that in most countries on the Continent: - First, the local markets are relatively small in size, so operators do not have the same scale economies as usually are available in the largest countries: the largest OR, the Canaries, has a population of 2 million, comparable to that of a medium-size region within Spain or France. The other six are even smaller, and none of the three French departments in the Americas has a population exceeding that of a large urbanised area. - Second, large expanses of the OR territories are nearly deserted, the population being concentrated along the seacoast or, where there are rivers, riverbanks. Given the infrastructure to be implemented where telecommunications are concerned, this, quite apart from the issue of market size, significantly adds to the cost of serving one segment of the population. In the case of the archipelagos, it is the interisland links in many instances that contribute to excess cost. - Finally, the factor of remoteness, already discussed, is a discriminatory factor. Unfortunately, though distance as a factor in telecommunications costs has diminished over the past two decades, it remains very significant for ultra-long-haul links, mostly because traffic levels remain modest compared to certain other routes, such as inter-State links in Europe or the link between Europe and the United States.

Thus, these objective factors create a certain number of obstacles to development and functional competition in these regions, and it appears that applying regulation in a nondiscriminatory manner automatically produces barriers to entry for telecommunications players in the ORs. In Spain, for example, requiring operators to offer identical retail prices for a given service throughout the territory limits the potential, or at least the ambitions, of alternative operators who must bear a higher wholesale price for their link connecting the Canaries to the rest of the country than applies to other long distance links on the Continent.

12 The rare exception involves cellular services in Reunion, where the local SFR subsidiary has an “incumbent” advantage.

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3.4.2. Recommendations

A regionalised approach for relevant markets

Generally speaking, the question in the ORs is how to apply the analysis of relevant markets as established by the European Commission. The “Packet Telecom” framework provides for national- level analyses to be conducted for a certain number of markets, divided into subgroups.

The Commission has proposed an indicative list of 18 relevant markets. National regulators may regroup some and add others; the list they wish to propose must be communicated to the Commission, which has veto power. Most often, national regulators use the suggested list without modification: in a certain number of cases, the broadcast market has been treated separately, mainly because it could come under an authority other than the telecommunications regulator. Likewise, once established, the list has been applied to all territories in a country.

Perform regional-level analyses for the ORs

In the case of the ORs (which is different again from that of the microstates which have proven also to have singular circumstances), this national treatment raises several questions: - On the one hand, should the scope and definition of relevant markets be identical to those used for territories on the Continent? - On the other hand, should the solutions for a given market be applied in non-discriminatory fashion throughout a country's territory?

In France, ARCEP decided to conduct complementary analyses for the DOMs, particularly for fixed markets. Specifically, this initiative transfers to these analyses the idea that a certain form of regionalisation is necessary since the territories involved have very particular characteristics.

In Spain, the question posed about the squeeze effect of tariffs on the Canaries should be asked in these market analyses, as well. Similarly, in Portugal, though this question is asked more because of the dominant operator’s strategy than because of regulatory constraints, it is no less an impediment to competition development.

Through the implementation of “Packet Telecom”, particularly at the moment when the first Review, slated for 2006, is about to begin, national regulators should be encouraged to perform very granular analyses of the ORs’ situation in a way that takes into account the numerous distinctive characteristics of these regions (see above) and contributes to the emergence of competitive offerings.

Segment markets specifically

By way of example, a principal bottleneck in the ORs is connectivity with the European continent, which today is provided mainly by submarine cables to which local backhaul links can be connected. Incumbent operators have the dominant position, indeed a de facto monopoly. In the French DOMs, the high tariffs associated with these links are highlighted as justification for exorbitant prices, not only for broadband access but for mobile roaming; as well. In the case of the Iberian ORs, though retail tariffs benefit from the principle of territorial continuity, quality of service and the state of competition seem to suffer.

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Though regulatory, economic and political measures have been taken (the ART May 2005 decision to revise tariffs on transport links between France and Reunion, the construction – by a private consortium -- of a cable between Guadeloupe and Puerto Rico, the “credit” imposed on the price of links between continental Spain and the Canaries, etc.), most have not been initiated by the national regulator but by alternative operators or territorial authorities. Moreover, alternative operators consider most of these measures insufficient. For example, in Portugal, as the operators see it, excess costs are not offset by the combination of ANACOM’s intervention to reduce the price of submarine links and the small retail price supplement produced by the difference between VAT rates of 15% in the Azores and Madeira and 21% on the Portuguese mainland.

Considering the essential role of the intercontinental segment of the supply chain in implementing and sustaining competition in the ORs, the market for this connectivity should be considered apart and an analysis undertaken to determine whether rules should be applied ex ante by prescribing tariffs, access, availability, etc.

Even in Spain where certain rules already have been imposed on how these links are provided, the situation on the ground does not reflect compliance with these obligations. Specifically, though the incumbent operator is required to provide the same (wholesale) services at the same price to all operators, in fact prices vary greatly depending on the client operator and that operator’s negotiation skill. In relation to structural handicaps, the regulator may (should!) have the right to examine the specific conditions that determine wholesale pricing: this clearly is outside the scope of the Spanish framework.

The ORs’ singular circumstances arise not only from remoteness but also, in more local terms, from the complexity of territorial organisations and the particularly difficult conditions associated with accessing certain segments of the population. More broadly, therefore, regulators should adopt models for evaluating and monitoring excess costs and be in a position to establish compensation mechanisms if necessary. The European Commission, for its part, should establish a framework under which such compensatory measures will be acceptable and, in particular, not contravene rules governing competition: this framework could be defined in advance but, like the current analysis of relevant markets, any analysis by a national regulator should be submitted to the Commission. It should be emphasised that the Commission’s right to examine, indeed to veto, such matters applies only to the justification for considering a given market and to the analysis of that market, which is to say it applies only to the argument in favour of adopting specific measures but not the measures themselves.

Establish a framework for network and service quality and reliability

Apart from tariff handicaps, which are particularly salient in the case of France, the ORs very much across the board suffer from poor quality of service (see especially Section 2.4 on broadband service offerings). As mentioned repeatedly in this report, all the evidence shows that network quality and reliability are of major concern for inhabitants of the ORs.

The quality of service deficit seen in broadband offerings is principally the result of high bandwidth prices, which lead service providers to restrict the capacities and speeds that they offer. This is manifests itself in several ways: - First, a portfolio of services that is very much more limited than in the country of origin. - Second, commercial offerings that are downgraded in order to offer "attractive" tariffs. - Finally, an effective quality of service which itself is downgraded because of very high contention rates.

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Submarine network reliability is a problem, as well. The Canaries have experienced four voice and data telecommunications cable breaks in the past 30 months. In Reunion, after the January 2005 tsunami, a 60km SAFE cable break along the South African coast reduced transmission quality between the island and the mainland for many months, and one alternative operator (Outremer Telecom), which directly leased transport capacity on this cable, was particularly affected. In French Guiana, because of shears caused by fishing trawls, the Americas II cable has been cut several times since it was placed in service.

Regulators therefore also should be vigilant as to the nature of quality guarantees and the contractual clauses governing them.

Special care should be taken to see that this aspect of link reliability is incorporated into the terms of reference for public initiatives to implement electronic communication networks.

It cannot be denied that including provisions for network reliability will significantly increase the cost of network access.

As concerns specific framework rules that might be defined (particularly in the form of service quality indicators), a number of the spokespersons we interviewed raised the prospect of expanding universal service as a possible tool to improve service in the ORs.

Of course, the Commission concluded in its recent communication on the matter (COM [2005] 203) that “broadband has not yet become necessary for normal participation in society, such that lack of access implies social exclusion” and that, as a result, “at the present time, the conditions for including broadband services within the scope of universal service (as set out in the Directive) are not fulfilled”.

It nevertheless is the case that the inhabitants of the ORs, and of the DOMs especially, live with their “lack of synchronisation” with the Continent (as of 2004, penetration of more than 10% penetration on the mainland but less than 5% on average for the four DOMs) as a veritable handicap. Moreover, the measures being considered do not appear able to totally eliminate the effects of remoteness on either cost or reliability.

This point, with its numerous complex implications, should not, however, be pursued further until and unless broadband access is used by effectively the “majority of consumers” at the European level and the discrepancies between the ORs and the Continent continue to be considered discriminatory even after implementation of the technical and regulatory measures that can be taken now (reducing the price of intercontinental links, wholesale offerings accompanied by quality and reliability guarantees, etc.).

Use of experimental technologies as a means of reducing isolation

An issue that takes up both of the preceding points is that of national planning. In general terms, although universal service calls for essential services to be provided throughout a territory on a nondiscriminatory basis, it does not stop fracture lines from developing between the territory’s interior and the rest of the territory, which happens increasingly as new technologies are introduced.

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Thus, for example, when an incumbent operator wants to offer a new service and is constrained from developing a wholesale offering that allows its competitors to offer the same service, this in a way creates the conditions for such a fracture. Alternative operators are driven to invest in the most profitable markets and therefore to provide these areas with services that are advanced, differentiated, etc., while in the other areas they offer very limited, simple solutions based on reselling the incumbent operator’s wholesale offering. This is a problem that has been studied particularly in the context of broadband access services13: this involves finding the correct price level for each variant of a wholesale offering (the price ladder) in order to give alternative operators the incentive to invest in their deployments gradually and thus advance steadily from simple resale to unbundling.

However, this principle does not address the imperative of national planning: on the contrary, it is an argument for operators to differentiate their approach by geography. However, it is a case that could motivate operators to move forward: they can do this by experimenting with new technologies. In addition, the ORs clearly are already relatively advanced in this regard. Certain new developments in transmission and access technologies, particularly those that are wireless, are immediately attractive given the regions’ particular circumstances, particularly the organisation and geography of their territories.

For example, WiMAX is often proposed as a remedy for underserved populations in craggy or very sparsely populated areas or to interconnect the islands of an archipelago. Though the terminal costs are still prohibitive for mass market implementations, the applications and, therefore, opportunities for adoption appear to be extensive. Then follows the question whether the purpose of deploying these new technologies in these particular spaces far exceeds the aim of deployments in the larger continental territories and whether "exceptional" rules need to be defined (such as for a high number of licences, licence fees based on different criteria14, etc.).

Such rules should specify the conditions circumscribing the use of these technologies and, above all, the new services that they will support. Currently, Europe is debating certain services, such as VoIP. To return to one of our earlier recommendations, it would be interesting to study the extent to which the ORs might benefit from a specific law concerning the introduction and corresponding deployment of new technologies and associated services. Thus, the experimental period for innovative technologies, which is exempt from regulation, might be extended to relieve investors of the worry that their projects might be jeopardised by too-early exposure to constraints. These experiments could also allow branching out to explore technology combinations (such as satellite-Wi-Fi for VoIP services). Private players in the community (such as user groups) and public players (such as local authorities, public associations, etc.) might also be invited to participate

In summary, the main avenues to pursue with respect to regulation are: - Separate consideration of the ORs when analysing relevant markets. - A framework for basic service quality and reliability. - Expanded experimental resources for the ORs.

13 See in particular the work of Martin Cave on the notion of the “ladder of investment” as applied to telecommunications. 14 This point is illustrated by the problem created in French Guiana when a calculation method based on proration of the regional territory’s area was used to award WLL licences.

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Summary table of recommendations for regulation

2 – Regulatory aspects Recommendations on analysing relevant markets French Canaries Azores Madeira Guadeloupe Martinique Reunion Guiana Perform regional-level Priority/ Priority/ Priority/ Priority/ Priority Priority Priority analyses In progress In progress In progress In progress Segment wholesale market in highly granular way … an analyse certain retail markets Priority Priority Priority Priority (submarine (submarine (submarine (submarine Priority Priority Priority cable cable cable cable (submarine (submarine (submarine links/backhaul; links/backhaul; links/backhaul; links/backhaul; cable cable cable national roaming national roaming national roaming national roaming links/backhaul) links/backhaul) links/backhaul) for mobiles; for mobiles; for mobiles; for mobiles; retail ADSL retail ADSL retail ADSL retail ADSL market) market) market) market)

Recommendations for a quality and reliability framework Take into account an extended set of criteria (QoS, reliability, Priority Priority Priority Priority Priority Priority Priority …)

Recommendations for experiments/new technologies Extend the term of experimental licences Priority Priority Priority Priority Priority Priority Priority Relax the terms for awarding radio licences Priority Priority Priority Priority Priority Priority Priority

Levels of intervention in regulatory aspects

Proposed measures All ORs Iberian ORs DOMs Recommendations on analysing relevant markets Perform regional-level analyses National regulators Segment wholesale market in highly National regulators granular way … and analyse certain retail markets Recommendations for a quality and reliability framework Take into account an extended set of European Commission criteria (QoS, reliability, …) National regulators Recommendations for experiments/new technologies Extend the term of experimental licences European Commission National regulators Relax the terms for awarding radio National regulators licences

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4. Appendices 4.1. Telecommunications tariff benchmarks Domestic retail services € exclusive of taxes Mainland Guadeloupe Martinique French Reunion Continental Canaries Continental Azores Madeira Ireland France Guiana Spain Portugal Connection to the switched telephone network (1) 45.99 (8) 45.99 45.99 45.99 45.99 59.50 59.50 71.83 71.83 71.83 107.43 Subscription to basic telephone service 11.7 (8) 11.7 11.7 11.7 11.7 13.43 13.43 12.66 12.66 12.66 19.98 (2) Price of a 10-minute fixed-telephone local call (peak) (3) 0.30 (8) 0.299 0.299 0.299 0.299 0.24 (9) 0.24 (8) 0.34 (9) 0.34 (9) 0.34 (10) 0.49 Price of a 3-minute fixed-telephone toll 0.28 (8) 0.31 (11) 0.31 (11) 1.04 (14) 1.52 (14) (12) 0.28 0.28 0.19 0.19 0.19 0.12 call (peak) (3) (4) 1.04 (12) 1.04 (12) 1.52 (13) 1.52 (13) 1.52 (13) Mobile flat rate for 2 hours per month (5) 31.35 (15) 28.57 (16) 28.57 (16) 28.57 (16) 22.12 (17) 28.80 (18) 28.80 (18) na na na na Monthly price for a 2Mbps local leased 611.85 (19) 611.85 611.85 611.85 611.85 na na 331.10 331.10 331.10 na line (amortised over two years) (6) Monthly price for a 10km 2Mbps leased line (amortised over two years) (6) 1094.84 1094.84 1094.84 1094.84 1094.84 na na 771.10 771.10 771.10 na Monthly subscription for 512kbps ADSL 21.66 69.03 69.03 74.90 69.03 33.00 33.00 29.40 33.22 (20) 33.22 (20) 33.05 access (7)

(1) Price to connect a basic (residential) telephone for a new installation (11) Between Guadeloupe and Martinique. (2) Monthly lease exclusive of supplemental services. (12) To French Guiana. (3) This includes connection taxes and/or possibly time charges. (13) To Reunion. (4) For the French ORs, exclusive of communications to the mainland. (14) Between Guadeloupe and Martinique. (5) Lowest flat rate for the operator specified exclusive of promotional offers and packages. (15) Orange France tariffs. (6) Monthly lease for one line (including the price of both ends if applicable) + 1/24 of the (16) Orange Caraïbe tariffs. connection price. (17) SRR tariffs (first minute indivisible, all-inclusive flat rate for about 100 call minutes to Reunion (7) Unlimited ADSL access without supplemental services. fixed and SRR mobile phones plus 20 call minutes to other Reunion mobiles). (8) Tariffs applied as of 3 March 2005. (18) Movistar 24H plan based on 60 1.5-minute calls and 30 2-minute calls. (9) There is a provincial tariff of €0.47 per 10 minutes. (19) Transfix 2.048 based on the 1-5km tariff for Paris and Band 1. (10) There is a provincial tariff of €0.53 per 10 minutes. (20) Same as tax-tax inclusive tariff as in continental Portugal but with reduced VAT.

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International retail services

€ exclusive of taxes Mainland Guadeloupe Martinique French Reunion Continental Canaries Continental Azores Madeira France Guiana Spain Portugal

Price of a 1-minute fixed-telephone 0.15 (3) 0.29 (4) 0.29 (4) 0.29 (4) 0.29 (4) 0.15 0.15 0.07 0.07 0.07 call (peak hour in the country of call origination) to the country of origin (1) Price of a 1-minute fixed-telephone 0.28 (5) 0.74 (5) 0.74 (5) 0.74 (5) 0.74 (5) 0.24 (8) 0.24 (8) 0.33 (9) 0.33 (9) 0.33 (9) call (peak hour in the country of call origination) to an EU third country (1) Price of a 1-minute fixed-telephone 0.28 (6) 0.46 (6) 0.46 (6) 0.74 (10) 0.29 (11) 0.24 (6) 0.24 (6) 0.33 (6) 0.33 (6) 0.33 (6) call (peak hour in the country of call 1.02 (7) 0.92 (7) 0.92 (7) 0.37 (12) 0.37 (12) 0.60 (10) 0.60 (10) 0.60 (10) origination) to a country outside of 0.80 (10) 0.47 (12) 0.47 (12) 0.47 (12) the EU (1) 1.11 (11)

Price of a 2Mbps leased line 6612.54 (13) 33849.67 33849.68 33849.69 33849.70 na 5171.00 na 5687.67 5687.67 (between the OR principal administrative centre and the capital in the country of origin) Price of a 2Mbps leased line na na na na na na na 4931.25 (14) 4931.25 (14) 4931.25 (14) (between the OR principal administrative centre and the capital of a country neighbouring the country of origin) (2) Price of a 2Mbps leased line na na na na na na na 8131.25 (15) 8131.25 (15) 8131.25 (15) (between the OR principal administrative centre and the capital of a third country) (2)

(1) This includes connection taxes and/or possibly time charges. (9) To Spain. (2) Amortised over two years. (10) To Brazil. (3) Tariffs applied as of 3 March 2005. (11) To Mauritius. (4) Id. mainland to DOM. (12) To Morocco. (5) To Germany. (13) 800km domestic leased line. (6) To USA. (14) Portugal-Spain link. (7) To Puerto Rico. (15) Portugal-USA link. (8) To Portugal.

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Wholesale services € exclusive of taxes Mainland Guadeloupe Martinique French Reunion Continental Canaries Continental Azores Madeira France Guiana Spain Portugal

Local interconnection (10 peak minutes) 0.05 0.05 0.05 0.09 0.05 0.07 0.07 0.05 0.05 0.05 One-way transit interconnection (3 peak 0.03 0.21 (3) 0.21 (3) 0.21 (3) 0.21 (3) 0.03 0.03 minutes) 0.03 0.03 0.03 Two-way transit interconnection (3 peak minutes) na na na na na 0.06 0.06 0.04 0.04 0.04 International interconnection (1 peak minute) na na na na na na na 0.0279 0.0279 0.0279 Full unbundling 55 + 55 + 55 + 55 + 55 + 22.4 + 22.4 + 49 + 49 + 49 + 9.5/month (2) 9.5/month (2) 9.5/month (2) 9.5/month (2) 9.5/month (2) 11.4/month 11.4/month 11/month 11/month 11/month

Partial unbundling 55 + 55 + 55 + 55 + 55 + 30.1 + 30.1 + 49 + 49 + 49 + 2.85/month 2.85/month 2.85/month 2.85/month 2.85/month 3/month 3/month 2.95/month 2.95/month 2.95/month 34Mbps local leased line (1) na na na na na na na 2097.83 2097.83 2097.83 10km 34Mbps leased line (1) na na na na na na na 5397.88 5397.88 5397.88

(1) Amortised over two years. (2) New tariff as of 1 June 2005 (monthly tariff formerly €10.50). (3) Mainland-DOM link.

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4.2. National regulatory frameworks

4.2.1. France

Regulatory Electronic communications law passed July 2004. framework Régulation Under the new law, ART’s functions have been strengthened, particularly as concerns setting retail tariffs when necessary. In May 2005, ART became ARCEP with responsibility also for the postal sector. ARCEP AND DGCCRF (Directorate for Competition) cooperate closely and efficiently. Regulatory proceedings (and any calls that result) are considered to be too long. Industry structure More than 200 operators and service providers are registered with ART. The main fixed operators are: - France Telecom - Cegetel (merged with Neuf Telecom during the summer of 2005) - Neuf Telecom - Tele2 - Ypso (cable operator, merger of FT Cable and NC Numericable) - Noos-UPC (cable operator) Three cellular network licences have been awarded on the mainland: - Orange France - SFR - Bouygues Telecom In the DOMs, cellular licences have been awarded in a specific way. Following a consultation undertaken in 2002, the government decided to process requests for 3G licence authorisation in the DOMs using an approach similar to the one used since the end of 2000 to award 2G licences there, which is to say gradually, as requests are received from the players. The procedure used for the first time in the summer of 2005 to award WiMAX licences was used on the mainland only. Competition The issues of DSL squeeze and incumbent domination of the local loop weaken as unbundling progresses. Broadband For its wholesale DSL offerings, FT has obtained relief from requirements for uniform tariffs (between areas with unbundling and those without), which threatens to limit competition in less populated areas). In addition, a broad-ranging debate about local authorities’ initiatives favouring broadband has begun (Portugal Telecom’s plan for "innovative departments" versus initiatives to construct their own networks). Mobile voice Consumer associations have been pressuring for tariff changes (offerings tariffed per second beginning with the first second) and continue to demand that SMS pricing be reviewed. Orange and SFR launched their 3G services during the second half of 2004. Universal service The way that universal service operators are designated is not in line with Commission recommendations (no regional approach, financing issues).

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4.2.2. Spain

Regulatory The November 2003 General Law on Telecommunications designates five framework regulatory authorities within the government. The distribution of responsibilities has created some confusion for operators. Régulation The CMT (Comisión del Mercado de las Telecomunicaciones, the telecommunications market commission) and the Ministerio de Industria Turismo y Comercio (the ministry for industry, tourism and commerce) are primarily responsible for regulating the sector. The retail tariff oversight responsibility recently entrusted to the CMT may allow the price squeeze concerns of alternative operators to be addressed. On the other hand, market players criticise the CMT for not being transparent in the way it analyses markets. Market structure More than 200 operators and service providers are registered. The main fixed operators are: - Telefónica de España (incumbent operator) - Auna Telecomunicaciones (in the process of merging with ONO) - Euskaltel - Jazztel - ONO - Uni2 Four cellular network licences have been awarded. - Telefónica Móviles España - Vodafone Spain (formerly Airtel) - Amena (bought back by France Télécom at the beginning of the summer of 2005) - Xfera Móviles Access and The principle of call termination charge reciprocity between the incumbent interconnection operator and alternative operators has been revised. Interconnection tariffs (for minutes and leased lines) continue to exceed European averages despite measures adopted (but not executed!) to reduce them. However, unbundling tariffs are among the lowest in Europe. Broadband Telefónica’s ADSL tariffs became deregulated in November 2003. The incumbent operator lowered its retail prices without modifying its wholesale tariffs, thereby limiting the margins of alternative operators. Because of the squeeze effect, the CMT has blocked several offerings. The CMT has defined a procedure for evaluating Telefónica tariffs in order to preserve the margin between retail and wholesale prices, but alternative operators disagree with the cost calculation. The CMT is trying to impose the principle of “retail minus”. In July 2004, the CMT revised its reference unbundling offer (RUO). Alternative operators continue to point to the absence of a wholesale SDSL offering as well as the heavy constraints on accessing the GigADSL offering (the requirement for 107 POPs). Alternative operators likewise protested when Telefónica announced that it would double the speed of its retail ADSL offerings without changing price and they pointed to public authorities' lack of transparency in supporting the deployment of broadband. At the beginning of 2005, the CMT rejected Telefónica’s proposal to introduce measured ADSL tariffs based on time (in contrast to existing flat-rate offerings): the operator is proposing offerings invoiced by volume.

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In general, consumers are pressing for lower ADSL tariffs. Mobile Both of the leading operators (Telefónica Móviles España and Vodafone Spain) are designated SMP operators. Despite the measures taken to reduce call termination charges, fixed operators remain dissatisfied (e.g., indivisible first minute, 2004 price based on 2001 costs). Authorisations, The 2003 Law provides for establishment of an authority specifically to manage spectrum, rights of and assign spectrum (pending) and also for the possibility of spectrum resale way (likewise pending). Also, little progress has been made in the dispute between operators and local and regional authorities over obtaining rights of way. Universal service Telefónica was finally designated a universal service operator in 2005.

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4.2.3. Portugal

Regulatory Electronic communications law was published 10 February 2004. framework Régulation ANACOM's independence, which new entrants have criticised, is written into the new law as is the regulator’s (still problematic) cooperation with the national competition authority. ANACOM is responsible for spectrum management. New entrants fault ANACOM's for being slow and taking "mixed" positions (according to our consensus research). For its part, the incumbent operator opposes the predefinition of SMP operators’ leased line obligations. Industry structure The main fixed operators are: - PT Comunicaçoes (incumbent operator) - ONI Telecom - Jazztel Portugal Serviços de Telecomunicaçoes - Cabovisao (cable operator) Three cellular network licences have been awarded: - TMN (subsidiary de Portugal Telecom) - Vodafone Portugal - Optimus Access and The 2004 revision of the interconnection catalogue introduced new tiers (leased interconnection interconnection lines to 155Mbps, connection to the subscriber terminal) and new benchmarks (based no longer on lowest costs but on average EU costs). Alternative operators still consider the incumbent operator’s cost information insufficient. They also consider the tariffs for number preselection and number portability to be too high. In the ADSL market, price squeeze problems continue to be highlighted. Competition Broadband competition has declined (besides which, PT has just introduced cable broadband and controls a large share of the market). Unbundling is hardly developed at all. Mobile call termination charges are very high. ANACOM has obtained a leased line price reduction from PT (by rebalancing between transport and access). However, alternative operators still complain that delivery times are too long. They also complain about the terms of submarine cable access (they are forced to lease capacity on cables operated by the incumbent). Authorisations Operators appears to be satisfied with the way that the new law handles the issue of rights of way, but they worry about implementation problems, especially as concerns setting taxes for public domain use. The incumbent operator is required to open up its cable ducts. Universal service Portugal Telecom has a universal service concession until 2025. However, the other operators acknowledge that no contribution is required of them for this purpose.

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4.3. Maps of OR telecommunications networks and services 4.3.1. Map of the Azores

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4.3.2. Map of the Canaries

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4.3.3. Map of Guadeloupe

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4.3.4. Map of French Guiana

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4.3.5. Map of Madeira

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4.3.6. Map of Martinique

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4.3.7. Map of Reunion

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4.4. Glossary

ADSL (Asymmetrical Digital Subscriber Line): ADSL is one of the xDSL technologies that enable access network performance improvements, particularly on traditional copper-wire telephone subscriber lines. The principle underlying ADSL involves reserving one part of the bandwidth for transporting voice, another part for transporting data to the core network (upstream data), and -- most important -- a third part for transporting data to the subscriber (downstream data). IP address: Address identifying equipment attached to the Internet network. ALA: European Union cooperation programme with the countries of Asia and Latin America. ANACOM: Autoridade Nacional de Comunicações. National communications authority (Portugal). ATM (Asynchronous transfer mode): Technique for the asynchronous transfer of digital broadband communications using short, fixed-length packets. ATM allows for super-fast data transmission and optimal use of line capacity, and is particularly suited to broadband multiservice networks. ARCEP: Autorité de Régulation des Communications Electroniques et des Postes (France). Regulatory authority for electronic and postal communications (France). New name for ART (Autorité de Régulation des Télecommunications), the telecommunications regulatory authority. Backbone or core (of a network): This denotes the backbone of a telecommunications network. An operator’s backbone network is made up of high-speed transmission lines that interconnect the main network nodes and to which lower-capacity transmission lines are connected. A distinction is made between national, regional and worldwide backbone networks depending on whether the lines cover one country, a group of countries (such as European backbones), or all countries on the planet. Backhaul (network): Telecommunication connection between a submarine cable landing station and the alternative operator's switching point of presence (PoP). Bandwidth: Denotes the transmission capacity of a transmission line. It determines (in bps) how much information can be transmitted simultaneously. Local loop: The group of wired or wireless facilities connecting the subscriber terminal to the serving subscriber switch. The local loop therefore is the part of an operator’s network that provides direct access to the subscriber. Wireless local loop: This involves establishing a local loop network by using radio technology instead of the copper facilities typically found in networks today, and has the advantage of providing very high flexibility for infrastructure deployment. CAA (Commutateur à Autonomie d’Acheminement or subscriber switch): France Telecom telephone network switch to which subscribers are connected. The structure of the France Telecom network is hierarchical, and the CAA is at the lowest level of the network switch hierarchy. Thus, there are two types of switch. Reference interconnection offer (ROI): Annual publication required of any operator deemed in the Authority’s annual review to be dominant pursuant to Article L. 36-7 of the postal and telecommunications code. It reports the technical and tariff aspects of that operator’s interconnection offerings so that other operators may establish their own service and tariff offerings. The ROI also states the conditions for physical interconnection with operators.. Room Zero: In the context of remote collocation, the site providing operators access to France Telecom’s distribution frame cables and premises. CIADT: Comité interministériel d'aménagement de territoire (France). Interministerial committee for land-use planning (France). CMT: Comisión del Mercado de las Telecomunicaciones. Telecommunications Market Commission. Spanish telecommunications regulator. Network core (backbone): A network’s structure is divided into two parts: The local loop or access network, which corresponds to the subscriber’s line and in a fixed telephony network is the part of the network in which each subscriber has a physically unique line, generally of copper pair. The backbone or core network, consisting of all the transmission and switching infrastructure beginning with the subscriber switch. COI: Commission de l’Océan Indien. Indian Ocean Commission. Third-party collection: In the context of interconnection, a service enabling a network operator to collect traffic from the incumbent's network on behalf of an operator that has no infrastructure in a geographic area involved. Switch: Equipment permitting calls to be directed to their destinations by establishing a temporary connection between two circuits on a telecommunications network or by routing information organised as packets.

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Interconnection agreement: Private contract negotiated and signed by two operators to define, case by case, the conditions of interconnection between them. Usually, an agreement signed with a dominant operator is based on that operator's reference interconnection offer. Alternatively, the agreement sets the terms of interconnection without referring to a reference offer. Convergence: This term is used to denote two different phenomena: Convergence of the audiovisual and telecommunications sectors, made possible by technological advances that allow various types of infrastructure (cable networks, terrestrial or satellite wireless networks, and computing or television terminals) to be used to transport and handle all sorts of information and services involving sound, images and data; the result of a technological shift (the digitisation of information), this convergence also has economic and regulatory implications. Fixed-mobile convergence, which involves harmonising the technologies used for and the services offered by fixed and mobile telephony. The possibilities raised by this convergence could lead operators to offer the same services to all users regardless of technology and network used. PLC: Power Line Carrier. Technology that allows digital signals to be carried on electrical power distribution lines at frequencies between 1MHz and 30MHz. Speed: Amount of data transiting a network during a given period. DECT: Digital European Cordless Telephone. European standard for cordless telephony at 1880-1900MHz. It is digital and employs compression. Local loop unbundling: Local loop unbundling, or unbundled access to the local network, allows new operators to use the incumbent’s local copper-pair network to serve their subscribers directly. In this case, the new entrant of course of course pays the incumbent for use of the local network. DOCUP: Document Unique de Programmation. Unique Programming Document. DOM: Département d'Outremer. French designation for its four overseas departments.. DSP: Délégation de Service Public (Public Service Delegation). Under French law, the delegator (a public authority) entrusts the delegatee (a third-party concessionaire) with a public service requiring both investment in the service and commercialisation of it, remuneration being obtained directly from the users. The authority may assist the delegatee financially, but the delegatee must assume at least 30% of the risk. Otherwise, it is no longer a public service delegation but a public market. DSLAM (Digital Subscriber Line Multiplexer): Located in the distribution frame of the local operator’s network, this is one of the devices used to convert a conventional telephone line into an ADSL line for data transmission and, especially, Internet access at high speeds. The function of the DSLAM is to concentrate multiple ADSL lines at a single device that routes data to and from these lines. ECFS: Eastern Caribbean Fibre System submarine cable. Terminal equipment: Hardware (e.g., telephone, fax, modem, etc.) that allows the user to transmit, process or receive information. Extranet: An extranet is an external network that uses IP (Internet Protocol) technology. It allows an enterprise or organisation to exchange digital information with its main correspondents (subsidiaries, customers, suppliers, etc.) by taking advantage of transmission based on the IP protocol and user-friendly information displays based on HTML, a language which permits non-linear reading of pages visited. IAP: Internet Access Provider. Sometimes used interchangeably with ISP (Internet Service Provider). ERDF: European Regional Development Fund. EDF: European Development Fund. Dark fibre or bare fibre: Telecommunications infrastructure that is called passive because the network is inactive unless the fibre is "lit", which requires telecoms equipment such as routers and multiplexers. Unlimited flat rate: Denotes an Internet access offering on the switched telephone network, providing unlimited connection time under a flat-rate tariff to the end user. CUG (Closed User Group): A CUG is an independent network for shared or private use. It is considered private- use since it is established for the use of individuals or legal entities organised as one or multiple closed user groups for purposes of internal information exchange within the group(s). GSM (Global System for Mobile communications): Digital wireless transmission standard used for mobile telephony. GPRS (General Packet Radio Services): Packet switching system that enables improved data rates on GSM networks (see "Switching"). 3G: Third-generation mobile system. These networks will support access to a broad range of new services, chiefly high-speed access to the Internet, thanks to the gradual introduction of packet-switching technology into mobile networks. 2G, 2.5G: Mobile systems that are precursors to 3G (such as GSM (2G) and GPRS (2.5G).

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Wi-Fi Hot Spot: This is a high-traffic public location (train station, airport, café, hotel, etc.) equipped with wireless network access points that provide easy connection to the Internet for users who have a compatible device. portable PC with Wi-Fi adapter or integrated Wi-Fi, PDA, etc. Interconnection: Mechanism for connecting various telecommunication networks in order that the subscribers of any one of the operators may call the subscribers of the others. Internet: Group of networks of various sizes which are interconnected via IP (Internet Protocol) and which support the provision and use of a vast number of services. Dialup Internet: Denotes Internet access via the switched telephone network, France Telecom’s public network that routes conventional telephone calls. IP (Internet Protocol): Telecommunications protocol, used by networks that support the Internet, which allows information to be packetised for transmission and the various packets to be addressed, transferred independently of one another, and reassembled into the original message on arrival. The protocol thus employs a technique called “packet switching”. Because on the Internet it is associated with the data transmission control protocol TCP (Transmission Control Protocol), reference is made to TCP/IP. Interoperability: Service interoperability refers to the possibility of different services functioning seamlessly on different networks. Thus, as concerns interconnection, the degree of service interoperability between different operators is determined in part by the technical functionality of the interconnection interface. Intranet: An intranet is an IP (Internet Protocol) based network established for the internal communication of an enterprise or organisation. It takes advantage of information exchange based on IP (Internet Protocol) and user- friendly information displays based on HTML, a language which -- thanks to the use of hypertext -- permits non- linear reading of pages visited (one can navigate from one section to another with the simple click of a mouse). IRU (Indefeasible Right of Use): Contract between telecommunication operators concerning the long-term right to use capacity or optical fibre. ISO: International Organization for Standardization, international standards body. ISP (Internet Service Provider): See “IAP, Internet Access Provider”. L1425-1 of the CGCT: Article of the Code Général des Collectivités Territoriales authorising territorial authorities to act as operator’s operators. Least cost routing: Routing optimisation provided by a call routing system that systematically selects the lowest- cost path based on destination and time of day. Leased line: Technically, a leased line is defined as a permanent connection consisting of one or multiple public network segments that are reserved for the exclusive use of one user. Digital link: Link over which information is transmitted digitally. The term “digital” is the opposite of “analogue” and describes all basic information (sound, text, and image) that has been encoded and converted into a string of numbers. Microwave link: Terrestrial radiocommunications link between fixed points. LMDS (Local Multipoint Distribution Service): Broadband technology that uses radio waves to provide access, in particular, to telephone, Internet and television broadcast services. LOOM: Loi d'orientation pour l'outre-mer (France). Law for the orientation of France’s overseas departments. MEDA: European partnership programme with Mediterranean countries. Megabits per second: Unit measurement of speed based on millions of data bits delivered per second. MMDS: Multichannel Multipoint Distribution Service. Method of broadcasting analogue and digital television programmes via microwave. MVNO: Mobile Virtual Network Operator. The “new virtual mobile operator” does not own the cellular network it uses yet is able to provide a complete mobile telephony service. ONP (Open Network Provision): The principle of open network provisioning allows the incumbent’s network to be made available to new operators by dissociating network ownership from the provisioning of services that rely on the network, thereby allowing a distinction to be made between providing infrastructure and commercialising service. Dominant operator: A dominant operator is one which has significant market power (SMP) if, individually or jointly with others, it commands a position equivalent to a dominant position, which is to say that it has considerable ability to behave independently of its competitors, its customers and, ultimately, consumers. Operator’s operator: This involves establishing an active telecommunications network and selling it to service providers who serve the end user. PDA: Personal Digital Assistant, pocket computer. Peering: Denotes a kind of interconnection agreement between two IP backbone networks that exchange Internet traffic destined for each other's networks. These exchanges may take place at public or private peering points. OP: Operating programme PoP: Point of presence

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RPIA: Regional Programme of Innovative Actions OCP: Operator Connection Point Reach ADSL (READSL): New technology that reduces the loss effects found on those lines that extend furthest from the switch. Regulation: in the telecommunication sector, regulation may be defined as the application, by a competent authority, of all legal, economic and technical provisions that allow telecommunications activities to be pursued freely, as provided by law. Distribution frame: Device that distributes subscriber-line copper wires among the cables connected to a subscriber switch, its purpose being to concentrate multiple lines on a single cable. Networks: Combination of telecommunication resources, such as all the switches and transmission links, both wired transmission (metallic wire or cable, optical fibre) and wireless (terrestrial or satellite, using electromagnetic waves). Switched network: Analogue network that supports telephone communications. Access network: Network to which users connect their terminal equipment in order to access services. Wired network: Network based on metallic or optical fibre cable. Public network: Any telecommunications network established or used to provide telecommunication services to the public. Mobile radio network: Network that uses wireless frequencies to connect mobiles to a fixed or mobile network. Satellite network: Network that uses wireless frequencies relayed by satellite. Roaming: The capability of a mobile telephone subscriber to send and receive calls when in territories or countries outside of the home coverage area. VPN (Virtual Private Network): A virtual private network involves the shared use or one or several public networks for the internal purposes of a closed user group, which is defined "as a group based on a community of interest that is stable enough to be identifiable and which pre-exists provision of the telecommunications service". This offering allows both internal and external communication needs to be addressed (i.e., needs for communication within the user group and also with users on the public network). STN: Switched telephone network. ORs: Outermost Regions Quality of service: Network ability to satisfy performance criteria by application (voice, videoconferencing, critical data, multimedia). They include guarantees concerning minimum throughput, time to restore, availability of network resources, etc. Universal service: Underlying principle of public telecommunications service, defined by law, with the objective of making high-quality, affordable telephone service available to all. It establishes specific tariff and technical conditions tailored to individuals who have difficulty accessing telephone service because of a handicap or their income level. Shelter: Enclosure for housing an operator’s co-located equipment in the context of local loop unbundling. SMS:: Short Message Service – Mini-messages Telecommunications: Any transmission, broadcast or reception of signals, images, sounds or information of any nature by wired, optical, radioelectric or other electromagnetic systems. Telephony over IP: Voice communication service using the Internet Protocol, the communications protocol created for the Internet and known also as “IP”. ICTE: Information and Communication Technologies in Education Transmission: In a telecommunications network, the transmission function ensures that information is transported from one point in the network to another. The transmission medium may be copper or optical fibre cable or radiowaves. (See “Switching”). ITU (International Telecommunication Union): International body under the auspices of the UN, headquartered in Geneva and responsible for developing telecommunications standards. UMTS (Universal Mobile Telecommunications System): Name of the third-generation mobile wireless telecommunication standard adopted in Europe. It permits a broad range of services to be offered, including voice, data and images. Within the ITU, the many competing standards for such systems are classified under the general category of IMT-2000. URA (Unité de Raccordement d’Abonné): In the France Telecom network, the part of a telephone switch to which subscriber lines are connected and which digitises information. VoIP: Voice over IP. The use of voice to communicate telephonically over the Internet. VSAT (Very Small Aperture Terminal): Satellite telecommunication service that supports low- and medium- speed information exchange through the use of a small transceiver and a small portion of overall satellite capacity.

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WAP (Wireless Application Protocol): Standard for adapting the Internet to the limitations of mobile phones, particularly by formatting content appropriately. The new communication protocol occurs within the framework of a gradual migration of GSM mobile networks to the Internet. Wholesale: Wholesale trade. Wi-Fi: IEEE802.11 wireless local area network standard commercialised and referenced by the Wi-Fi Alliance. The technology enables the creation of local broadband wireless networks in buildings but can also be used to provide local service within a range of several hundred metres. WiMAX: WiMAX (Worldwide Interoperability for Microwave Access) has many points in common with WLL and follows the 802.16 standard, which describes an economical communication system capable of supporting speeds up to 70Mbps within a range of 45km. WiMAX is expected to support mobility, portability, voice services, and high-speed applications that compete with ADSL and cable.

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