The European Commission (EC) said France Telecom (FT) would have ...

by the Court of Justice of the European Communities on France’s financing of universal service in telecom. “The way costs were counted wasn’t in compliance” with the court’s decision, an EC spokesman said: “France overestimated the public service burden and overcharged the competitors.” FT didn’t return a call for comment. In Dec. 2001, the court said the lack of transparency in certain aspects of the French arrangements and the methods used to calculate some cost components of universal service were incompatible with the directive on full competition in telecom markets and the directive on interconnection. The EC spokesman said that following the court’s decision, the French govt. had recalculated the net cost of universal service in 1997-2000 that led to a significant reduction in the financial cost of universal service, which was reduced by 4 over that period. However, he said “the recalculation isn’t complete.” The EC said the French authorities had failed to comply with the court’s judgment: (1) France hadn’t published the total respective contributions by the different service providers to financing universal service in 1997-2001. (2) The method used to calculate some net cost components of universal service in 1998-1999 still wasn’t transparent. (3) The arrangements for settlement of overpayments by alternative service providers to FT or to the universal service fund weren’t appropriate. The Commission said the govt. had failed to address “one of the main objectives of the procedure” -- to ensure that service providers that had contributed to the universal service fund could in practice rapidly recover the overpayments. The EC gave France one month to reply to the enforcement proceeding. The spokesman said the Commission would send French authorities a reasoned opinion and, if appropriate, ask the court to impose a fine should France fail to comply with the Court of Justice decision. George Metaxas-Maranghidis, an attorney with Weil, Gotshal & Manges in Brussels, said the reimbursement order wasn’t likely to hurt the company financially: “It’s not a huge deal for them… It depends on how [the EC] is going to structure their payments.” He said financing of the universal fund had “always been complicated. Some [European] countries simply gave up. They have laws, but they don’t implement them. In many cases, the financing doesn’t seem to be operational, except for some countries.” He said universal service financing issue was “a much bigger issue in Eastern Europe because the level of fixed-line penetration and quality of service there isn’t as advanced as in Western Europe.” The EC said France and Italy were the only member states in which responsibility for providing universal service effectively resulted in compensation being paid to the former telecom incumbent. Metaxas-Maranghidis said the reimbursement was “a positive contribution to rivals,” but wouldn’t affect them significantly either.