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To meet this challenge successfully, it is necessary to establish rules and to make sure they are complied with. Such a deep-seated process of change must be carefully orchestrated and based on clear objectives, set within the framework of public policy. The Telecommunications Act of July 1996 sets the guidelines for liberalizing the sector and entrusts the task of regulation - in other words, of applying the ground rules - to the Telecommunications Regulatory Authority (ART).

In the eighteen months since it was created, ART has concentrated on laying the foundations for balanced, fair and sustainable competition. But competition must be consistent with the objectives of the public service, whose underlying principles are established by law. To achieve that aim, ART works closely with the government, using a concerted approach that involves all interested parties.

The new authority's main concern has been to give substance to the legislator's intentions, allowing new players to enter the market while overseeing the financing of the universal service, the cornerstone of a public telecommunications service. In numerous fields, ART has implemented technical arrangements that are often complex but vital to competition. To do so, it has relied on its main regulatory instruments: issuing authorizations, managing the numbering plan, allocating frequencies, setting the technical and financial conditions for interconnection, and instituting mechanisms for the financing of the universal service and the supervision of its tariffs.

In addition, ART has placed constant emphasis on ensuring that market participants abide by both the spirit and the letter of the law. Bringing almost all its regulatory powers to bear, it rendered 459 decisions in 1997. Thanks to the concerted efforts of parliament, the government and ART, France has been able to prepare for the arrival of full competition and to respond to market expectations by constructing the necessary legal, regulatory and technical framework.

Full competition arrived just a few months ago, so it is too early to gauge the full impact of ART's decisions. A handful of appeals have been lodged, in accordance with legal principles and procedures. The resulting precedents are helping to shed light on the interpretation of a new and complex body of law. Notwithstanding, the system put in place not has not only permitted effective competition; it has also begun to deliver benefits to consumers, both businesses and individuals.

This annual report takes stock of what has been achieved thus far and reviews the application by ART of legal and regulatory provisions. It methodically outlines the framework within which the authority has operated since its inauguration. Placing a premium on clarification and transparency, the authors have tried to explain the key issues involved in liberalization in layman's terms, while respecting the demands of rigour, and technical and legal accuracy. One of ART's main aims in pursuing this difficult exercise has been to clarify the terms of the debate, making it less technical and hence more open.

In sum, the report attempts to draw pertinent conclusions from ART's regulatory action -including the legislative and regulatory aspects - as regards fostering competition and providing a high quality public service. It also tries to place ART's activity within the context of fast-paced technological progress, a defining feature of today's telecommunications industry. Lastly, the main texts that help to explain the regulator's activity have been included in the appendix.

The annual report has been designed as a practical, comprehensive tool for the French parliament and government. But it is also intended for anyone who wants an overview of current trends in the telecommunications industry. The economic and social implications of those trends will have a crucial bearing on the future of our country.

Jean-Michel Hubert