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Global Media and Communications Watch The International Legal Blog for the Tech, Media and Telecoms Industry
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French court says peering link not “essential facility”

Cogent accused major European telecom operators of violating antitrust rules in their Internet peering and transit practices.  The European Commission is investigating, and launched dawn raids this summer.  Meanwhile, Cogent suffered a legal setback in France. On December 19, 2013, the Paris Court of Appeals denied Cogent’s antitrust claims against France Telecom.

In 2012, Cogent sued France Télécom before the French competition authority, arguing (among other things) that France Télécom had abused its dominant position by requiring payment from Cogent in exchange for increasing direct peering capacity.  The French competition authority dismissed Cogent’s claims on September 20, 2012.  Cogent appealed, and on December 19, 2013, Paris Court of Appeals upheld the Competition Authority’s findings.

The December decision confirms the following points:

1. There is no separate market for direct peering with France Telecom. Direct peering and indirect access via transit are substitutable from a quality and pricing standpoint. Although France Telecom controls a physical bottleneck for conveying packets to France Telecom subscribers, France Telecom does not control a commercial bottleneck for access to its Internet customers. Internet content and service providers, and CDNs, can look to a number of alternatives, including transit providers, to gain access to France Telecom’s subscribers. Direct peering with France Telecom is one alternative but not the only one. Consequently, direct peering with France Telecom does not constitute an essential facility.

2. Unpaid peering is based on traffic balances between peers that are roughly equivalent. Where traffic is imbalanced, and France Telecom asks for payment as a condition to increasing peering capacity, the request for payment does not constitute in itself a discriminatory practice by France Telecom as long as France Telecom applies the same rule to others.

The Court of Appeals decision covered many other aspects, but these two are the most important.

This decision should not be confused with regulated data termination tariffs, which some network operators have argued should be imposed by regulators to help compensate for traffic imbalances.

The court decision reaffirms that Internet peering and transit are governed by individual negotiation, and that last-mile operators can in some cases request payment in exchange for increasing peering capacity where traffic flows are imbalanced.  Naturally, the other party can decline the request for payment, in which case peering links will not be increased.  Where peering links are saturated, overflow traffic simply goes through transit links instead of through direct peering. This can have an effect on quality, but content is not blocked.

The outcome of this case may have been different if France Telecom had selectively blocked or throttled Cogent’s (or its customers’) traffic. The case then would have raised significant net neutrality issues.