The decision to adjust the application of the VAT rate to triple-play services is aimed at boosting tax revenues; proponents of the bill hope that it will bring in an additional €1bn annually for the government. At present, telcos categorise large portions of triple-play spend as being derived from TV services and therefore subject to tax at the lower 5.5 per cent rate. As much as 50 per cent of triple-play spend was categorised as TV by some telcos.

Although bundled pricing makes it difficult to calculate the true value of each component of a €30 triple-play offer, telcos have up to now introduced TV as a free add-on to broadband and telephony services. Screen Digest models suggest that paid-for TV packages typically generate approximately €10 in additional spend, suggesting that at most, TV services should be responsible for 25 per cent of consumer spending on a triple-play service.

Telcos would of course argue that the nature of the broadband market has now changed, and that heavy competition has placed TV as the most important component of a triple-play bundle; however for the government, the apparent discrepancy has been viewed as an opportunity to raise the value of the tax revenue taken from the communications market.

The implications for the market are likely to be relatively straightforward - telcos have committed to an across-the-board price rise for triple-play services of between €1.50 and €3.00 a month to compensate for the added tax burden. Some may take the opportunity to raise prices higher; however the competitive nature of the French triple-play market is likely to mean that most of the effects will be passed on to consumers at cost.