Opinion of the Economic and Social Committee on the 'Proposal for a European Parliament and Council Decision on an action at a Union level in the field of satellite personal communications services in the European Union` ()

(96/C 204/04)

On 19 February 1996, the Council decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Transport and Communications, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 10 April 1996. The Rapporteur was Mr Mobbs.

At its 335th Plenary Session (meeting of 25 April 1996), the Economic and Social Committee adopted the following Opinion by 46 votes for, 7 votes against and 7 abstentions.

1. Introduction

1.1. The introduction of global satellite personal communication services (SPCS) means a fundamental step will be made towards the implementation of a truly world-wide global information infrastructure. Satellite systems will enable global interconnectivity and mobility via the use of personal handheld equipment for voice, data and in the future, video. They will consequently be used for many applications and services, typically using low or intermediate earth orbit and comprise 'constellations` of between 10 to 66 satellites in elliptical or, in some cases, geostationary orbit.

1.2. Satellite systems will often be used in conjunction with or instead of terrestrially-based mobile or fixed systems. In regions where fixed infrastructures are little or not at all developed, satellite communications will provide a means of replacing these infrastructures so that everyone can send or receive communications. This is in line with the International Telecommunication Union's (ITU) backing of the 'seamless orientation` of SPCS with existing terrestrial networks worldwide.

1.3. The size and needs of the market and how these will be satisfied are far from clear.

1.3.1. Huge sums of money of the order of ECU 2-4 billion are being invested in each SPCS constellations. There is considerable interest in developing such capital intensive systems. Already there have been over fifty filings made with the ITU for the purpose of technical frequency coordination of such systems, although only a few are expected to be operational. It is an area in which the USA has a substantial lead.

1.3.2. European industry is already well positioned to participate in the development of SPCS and some network operators and equipment manufacturers are already investing in systems which will supply support services or equipment to SPCS operators. European industrial involvement in such supportive roles is likely to increase for space segment operators or service providers, or as equipment suppliers (gateways and handheld equipment, for example). Yet with terrestrial coverage in Europe, particularly of GSM handsets already extensive, and given the extra investment that SPCS would require, many doubt whether there would be much commercial demand for a 'European` SPCS.

1.3.3. Given the global nature of these services, SPCS operators will need to interconnect with some terrestrial operators. That will need commercial arrangements negotiated party to party. The success of the European GSM system, with extensive coverage both in Europe and many other parts of the world, will ensure European involvement. Satellite PCS operators are therefore already looking to their handsets having 'dual mode` capability to enable compatibility with GSM. Not to do so would severely limit use and lose potential SPCS revenues in markets where GSM is strong.

1.4. In considering SPCS, the following, which cover only some of the major issues involved, need to be appreciated.

1.4.1. European industry faces a much more competitive US civil space industry as a result of the transfer of technology from military to civil sector (the 'peace dividend`) especially in certain satellite systems.

1.4.2. Inherent in all issues are the international aspects, of particular significance in the context of SPCS. Agreement on radio frequency spectrum use, assignment of allocated frequencies and mutual recognition of licences must be achieved at international level if these global services are to be commercially viable.

1.4.3. Radio frequency spectrum bands available for use by SPCS are limited. This requires global agreements in order to ensure compatibility (interconnection and interoperability) throughout the coverage zones of the satellites. The radio frequency spectrum bands were originally set aside at the 1992 ITU World Administrative Radio Conference (WARC-1992) and new agreements reached during the World Radio Conferences of 1993 and 1995. The ITU sets forth the internationally agreed method of coordinating satellite systems.

1.5. Each innovative type of satellite system poses new issues in relation to national and international radio frequencies spectrum management.

1.5.1. Each proposed satellite system has quite different characteristics, and this will affect everything from investment profile for each operator to the size of satellite footprints and system reliability as well as the range and type of service offered.

1.5.2. Each aspect of the SPCS and how it operates raises different regulatory issues, which are presently being addressed under existing laws and regulations, both internationally and nationally. This is most notable in space segment authorization, licensing gateways, licensing of proposed services and of the type approval of the hand sets to be used. Apart from licensing issues, issues of competition or anti-trust law will be raised.

1.5.3. 'Space segment authorization`

The ITU Convention and Radio Regulations lay out the principle of equitable access to scarce communications resources. For SPCS it is effectively a 'first-come, first-served` approach. This is one of the major areas of concern to the Commission, since most of the attractive frequency allocations for SPCS may initially, at least, be held by licensees of those national administrations which first notified a requirement.

1.5.3.1. Thus, in parallel with the US Federal Communications Commission's (FCC) notification of US systems at the ITU, the UK administration has begun the necessary steps for the establishment of the Inmarsat-P system (International Mobile Satellite Organization - a treaty-based international organization) to be operated through an affiliated commercial company known as ICO. Other governments have notified the ITU of their planned systems.

1.5.4. 'Gateway licensing`

This is an issue for National Regulatory Authorities (NRAs). ITU does not give an SPCS operator the right to set up gateway earth stations, or to interconnect with the public switched network (PSTN) of a country, or to provide end user service. NRA consent will be required to connect the space segment to the relevant PSTN(s).

1.5.5. 'Service licensing`

National laws may require SPCS operators to 'switch-off` service and hand sets in their country. However because of the mobility of SPCS hand sets, it would be difficult in practice to authorize use purely on a national basis. Regional coordination of frequency use through the Conference of European Post and Telecommunications (CEPT) is essential.

1.5.6. 'Type approval`

Steps are well advanced in relation to type approval of SPCS handsets not only in the USA but also in Europe through CEPT/ETSI procedures. The approach in Europe is similar to the introduction of GSM.

1.5.7. Each of the four types of authorization is under way and they are at different regulatory approval stages in each NRA.

1.6. For SPCS systems to operate successfully they will need to negotiate interconnection agreements with the operators of the PSTN. This will be a national matter which may be handled differently in different countries. It may be done on a unilateral or bilateral basis negotiated with operators in each country or across regional groupings, such as within the CEPT area. There will also be the need to set up roaming agreements, as has been done with GSM.

1.7. The signals from handheld units are retransmitted via a satellite to another handheld unit or to their final destination which can be a gateway (fixed earth stations of considerable size) which route the signals into the PSTN or other mobile units. The gateways will contain switching and networking functions. Only a limited number of gateways are foreseen and the number may be different for each satellite system. On average only two or three gateways per satellite system are expected to be installed in Europe.

1.8. The market in Europe is expected to be relatively different because of the existing and planned terrestrial digital cellular coverage (GSM, DECT, DCS 1800). Nevertheless, the SPCS operators believe that there is a considerable primary market in the less well developed terrestrial areas, especially in Central and Eastern Europe in addition to parts of some Mediterranean countries, i.e, where the poor fixed network infrastructure or unfavourable topography or both, have impeded taking advantage of technological developments in mobile telephony or other wireless systems.

1.9. The most significant interest for European industry will be in the use of handheld equipment outside European territory by GSM users and in the export opportunity for the European industry (an existing industry strong point). The market for handheld equipment is estimated (according to the Commission) to rise to 20-30 million subscribers world-wide and may account for around ECU 2-3 billion sales per annum world-wide.

1.10. Satellite communication services fall outside the normal Commission definition of 'voice telephony`. Nevertheless Member States may submit the provision of SPCS services to licensing, general authorizations (class licences) and the like to ensure compliance with essential requirements ().

1.11. The Commission does not consider that Satellite PCS is a mobile service in the traditional sense. Therefore, it excludes the service from the scope of its amendment to Commission Directive 90/388. Consequently Satellite PCS will be subjected to the essential requirements listed in Directive 94/46.

1.12. Thus it will be seen that the subject of SPCS is technically complex and involves the world at large from the outset. Europe's spectrum availability will involve every Member State.

1.13. One particular relevant policy issue, is the European Union work to date on harmonization of licences, which could apply to mobile and personal communications services including SPCS. Under the proposal where a particular service operator obtains a licence in one Member State, there are mechanisms (One Stop Shop or provisions for pan-European services) which would facilitate the issuing of licences under commonly agreed principles, including 'essential requirements`, and lead to roll-out of services across the Union on that basis.

1.14. Given the finite nature of the radio frequency spectrum, particularly for services such as SPCS, the Commission has been active in making a case for a broad pan-European approach for access to space segment as opposed to national regulation. In the communication 'The provision of and access to satellite capacity` (COM(94) 210) of 10 June 1994 (which was not referred to the Committee), the Commission proposed 'Joint management in the future of the space segment as a common resource of the Union, in particular concerning future applications to the ITU` and close cooperation with European Committee of Telecom Regulatory Agencies (ECTRA) and the European Radio Communication Committee (ERC).

1.15. The role of existing international institutions cannot be ignored. Reference has been made to the ITU but the World Trade Organization (WTO) is also important. Following the Uruguay Round of GATT, an international policy framework was agreed in a 'Telecommunication Annex`, the cornerstone of which is a provision requiring each Member State of the WTO (as it is now), to provide for international access to and the use of its 'public telecommunication network and services`. The European Union Member States address common issues together currently in WTO work in this area.

2. The Commission proposal

2.1. In this complex setting, the Commission proposal covers some sixty plus pages, but only about ten are actually concerned with the legal Articles (including some four pages of recitals). The rest is devoted to the introduction of technological, regulatory and policy aspects.

2.2. The Commission proposes an action at European Union level to be based on this Decision by means of coordinated action, but limited to three years with a possible extension for a further two years.

2.3. The Commission approach is based on recognition of the fact that only a limited number of European gateways will be required for SPCS and that given the seeming head start of the USA and the UK with ICO, the SPCS market will be dominated by US led consortia, if a European Union approach is not developed.

2.4. The Commission considers that action at European Union level is necessary.

2.5. In view of the limited radio frequency spectrum resources, the Commission believes a selection and comparative bidding process may be required for the introduction of SPCS. A European Union level process is required, to minimize 'incompatible` national decisions on selection and licensing of satellite systems.

2.6. The primary objectives of the Commission proposal are to:

2.6.1. select satellite space segment operators using a 'call for Declaration of Interest` to be published in the Official Journal;

2.6.2. adopt common conditions for authorization of SPCS space segment operators;

2.6.3. adopt common and harmonized conditions for authorizations, established by Directive 96/46 (for providers of SPCS services and gateway operators), if necessary with selected space segment operators;

2.6.4. establish international cooperation to promote development of SPCS and remove obstacles to their development in Europe;

2.6.5. establish a selection process for space segment operators with the National Regulatory Authorities of the Member States;

2.6.6. involve various European bodies such as CEPT, ETSI, and its Committees (ERC, ECTRA) to study the necessary technical criteria and conditions to assist in the adoption of common and harmonized conditions;

2.6.7. establish and be assisted by Advisory and Regulatory Committees, and

2.6.8. take action at an international level by negotiating on behalf of the European Union with third countries and international organizations like ITU and WTO.

2.7. The Commission states that urgency is required because of the imminence of the first generation of SPCS in 1997 or thereabouts.

3. General comments

3.1. There have been references to satellite communication services in a number of Council Resolutions and some earlier Commission proposals, and a communication on 'satellite personal communications` (COM(93) 171) which was not referred to the Committee for an opinion. Thus this is the first time that the Committee has an opportunity to give an opinion on the subject.

3.2. The Committee welcomes the Commission's work in this area on the basis of the evidence presented. However, it is concerned about the future, given that the European Union is lagging behind in this sector. It recommends that - over and above the measures taken as a result of this proposed decision - the Commission put together a genuine civil research programme with the hope of subsequently undertaking, in the medium term, a programme for developing a European satellite communications service which would allow the European Union to be at the forefront of these hi-tech sectors. This would allow a much more dynamic approach to industrial development in the race to produce personal satellite communications services.

3.3. The Committee believes Europe should respond effectively to the potential for European involvement presented by SPCS. This is particularly the case because ground segment work may provide substantially greater opportunities for European equipment manufacturers to build ground segment facilities and to manufacture other germane equipment. As stated in Section 1, a number of European companies are investing in various USA-led constellations and also in ICO. Thus European companies have not closed their minds to investing in these systems.

3.4. Because the USA led consortia and ICO have built up a considerable lead in development of such satellite systems, the question arises - what action should Europe take? This raises both policy issues and practical considerations.

3.4.1. One major policy issue is the Commission request to be mandated by all Member States to act on their behalf in international matters associated with SPCS. If Member States agree with this, they must be clear they are surrendering sovereignty over a number of matters.

3.4.2. Another aspect of the sovereignty issue (and therefore a policy matter) is whether any decision by the Regulatory Committee (proposed to be established pursuant to Article 9 of the proposed Decision) to select a SPCS system operator infringes NRAs decision-making rights in respect of licences. The Commission proposes that any disagreement between Member States and the Commission can be referred under comitology procedures back to the Council for decision by qualified majority. The policy issue squarely raised by that is, that a Member State which disagrees can have its objection overruled by qualified majority; its NRA would then have to grant the licence notwithstanding its objections. This is contrary to previous Council decisions that such matters are for NRAs on the basis of subsidiarity. It also raises practical issues - such as meeting the Commission timetable of 1997.

3.5. In view of the basic issue at stake it is worth summarizing the arguments for and against the Commission proposal.

3.6. The arguments in favour seem to be that:

3.6.1. time may be of the essence (the first USA SPCS is scheduled to be operational in 1997), in which case, only action coordinated and led by the Commission stands any chance of success;

3.6.2. the limited radio frequency spectrum available to SPCS (world wide) requires an urgent coordinated selection procedure;

3.6.3. certain aspects of the Commission proposal are fully supported by industry;

3.6.4. the essential actions involving CEPT are voluntary and not legally binding;

3.6.5. Regulation 94/46 has already brought the provision of satellite services and equipment under EU law;

3.6.6. satellite services etc. will be subject to international negotiations and agreement and this can best be managed at EU level;

3.6.7. EU level action will be required in trying to obtain a licence to operate within the USA.

3.7. The arguments against include:

3.7.1. the proposal is inconsistent with established principles that licensing of telecommunications and radiocommunication services is a matter for Member States;

3.7.2. satellite and mobile applications, technologies and regulatory matters overlap with existing CEPT work. Why duplicate? CEPT has a proven track record as the focal point for all of Europe and not just the 15 Member States. The Commission will have to use CEPT in any event as it does not have the expertise itself;

3.7.3. whilst industry is supportive of the Commission in certain areas, there is concern that implementation must be done by fully independent national regulatory authorities within a co-operative framework, allowing Member States to safeguard their concerns. Technical coordination of satellite systems is done within the ITU framework but through NRAs; type approval of equipment by CEPT/ETSI; competition questions under Articles 85/86. So how does the proposal assist matters which are already under way?

3.7.4. Many commercial agreements already exist between European industry and the USA SPCS consortia and ICO. Is there anything to be gained by putting the clock back?

3.8. The Committee considers that there are many basic questions which need answering before a comprehensive Opinion can be submitted. For instance:

3.8.1. is the position with the USA or the UK too far advanced for there to be any realistic prospect of seriously influencing US actions or those of the UK?

3.8.2. whilst the FCC has authorized provisional licences for a number of systems, matters of technical, financial and a regulatory nature still have to be resolved. In addition there still have to be negotiated, on a national basis, the terms and conditions for operating on a world wide basis. NRAs are competent to deal with domestic licensing and General Directorate IV with matters of competition law. Is the Commission proposal going to add to the bargaining position of the Member States?

3.8.3. the commercial selection of participating companies is in many instances well under way. In such circumstances, what has the Commission to offer?

3.8.4. who will provide the technical support that would be needed to carry out the Commission proposal? If the answer is that it will draw on those already involved in CEPT and ETSI, is not the Commission simply proposing another administrative layer?

3.8.5. harmonizing licence conditions does have merit, but can it be achieved by 1997?

3.8.6. what is so wrong with the existing European coordination processes that the Commission can do better?

3.8.7. Council Resolution of 28 June 1990 () underlined the need to use the CEPT mechanisms to resolve frequency allocation matters in the ITU and recognized the CEPT framework should be used to prepare common positions. Why add another administrative layer?

3.9. The Committee regrets that part way through preparing this Opinion, the date for completion was suddenly brought forward. This has severely curtailed the Committee's discussions.

4. Specific comments

4.1. The Committee is of the view that the Commission could usefully assist the development of SPCS within the Union and the advancement of Europe's industrial interests generally by:

4.1.1. ensuring that the USA appreciates that there are Countries other than the USA even though the USA is a SPCS 'pace setter`. The rest of the world takes note of what Europe does also. (This also applies to other trading groups, e.g. Japan);

4.1.2. consulting with non-Union countries, especially the USA, on the coordinated global introduction of SPCS;

4.1.3. monitoring the licensing by NRAs in accordance with existing Union telecommunications legislation (including any appropriate universal access obligations, essential requirements and the like), competition law and the taking of any necessary enforcement procedures against Member States not in compliance;

4.1.4. coordinating with the CEPT the obtaining of information etc, such as with the Commission 'Call for Information` ();

4.1.5. concentrating on principles and framework for satellites in world markets to ensure fair and open market access (e.g. US/Japan markets) within:

- GATS ()/NGBT () and TransAtlantic dialogue,

- Various bi-lateral/multi-lateral trade discussions,

- EU/US Competition Authority Co-operation Treaty;

4.1.6. giving support to the CEPT but not becoming involved in operational details beyond licensing framework for 'ground segment` aspects (see Commission proposal for a directive on a common framework for general authorizations and individual licences in the field of telecommunications COM(95) 545, cross reference to satellite services). This is currently the subject of a Committee Opinion.

4.2. However, in other areas of the proposal, particularly the specific regulatory proposals for licensing, the Committee is of the view that the proposal is unlikely to achieve more than can be handled by the NRAs and the Commission (including Directorate-General IV).

5. Conclusions

5.1. The Committee is pleased that the Commission is giving SPCS attention. It is aware that timing is important. It believes the Commission does have an important role to play as indicated in Section 4.1.

5.2. The Committee asks the Commission to clarify:

- keys aspects of the proposal which are considered open to differing interpretations,

- how it intends to proceed in those areas where it has a role and especially in the achievement of a coordinated approach by Member States.

Done at Brussels, 25 April 1996.

The President

of the Economic and Social Committee

Carlos FERRER

() OJ No C 15, 20 1. 1996, p. 6.

() Council Directive 90/387/EEC of 28. 6. 1990 on the establishment of the internal market for telecommunications services through the implementation of open network provision (ONP).

() OJ No C 166, 1990

() OJ No C 347, 28. 12. 1995, p. 24.

() General Agreement on Telecommunication Services.

() Negotiating Group on Basic Telecommunications.