COMMISSION OF THE EUROPEAN COMMUNITIES 
COM(94) 682 final 
Brussels, 25.01.1995 
GREEN PAPER ON THE LIBERALISATION OF 
TELECOMMUNICATIONS INFRASTRUCTURE AND 
CABLE TELEVISION NETWORKS 
PART II 
A COMMON APPROACH 
TO THE PROVISION OF INFRASTRUCTURE FOR 
TELECOMMUNICATIONS IN THE EUROPEAN UNION 
(presented by the Commission) 
PREFACE 
On 25 October 1994 the European Commission adopted Part I of a Green Paper on 
the liberalisation of telecommunications infrastructure and cable television networks. 
In that document the Commission set out the general principles and timetable for 
action which form the basis for the consultation on the development of a common 
approach to infrastructure in the European Union. 
Part I, together with Part II of the Green Paper, launch the process of formulating 
Union policy on infrastructure, which was called for in Council Resolution 
93/C213/01 of 22 July 1993 on the 1992 Telecommunications Review. This was 
seen by Council as a prerequisite to extending the process of liberalisation beyond 
voice telephony to the whole of the telecommunications sector. 
The Commission's White Paper on Growth, Competitiveness and Employment 
(COM(93) 700 final) and the Report on Europe and the global Information Society 
by the group of leading industrialists under the Chairmanship of Commissioner 
Bangemann, emphasise the need within Europe for an efficient and effective 
communications infrastructure, capable of supporting the emerging Information 
Society. 
This priority was reflected in the Bangemann Group Report whose first 
recommendation is a request to Member States to "accelerate the on-going process 
of liberalisation of the telecommunications sector by opening up to competition 
infrastructures and services still in the monopoly area". 
The Commission's Action Plan on the Information Society (COM(94) 347 final, 
17.7.94) subsequently gave highest priority to the early formulation of a policy on 
infrastructure, both in relation to alternative telecommunications networks and cable 
networks and in relation to establishing a general regulatory framework for 
infrastructure liberalisation for the delivery of voice telephony services to the general 
public after 1 January 1998. 
Finally, the Council of Telecommunications and Industry Ministers, meeting together 
on 28 September 1994 stressed "..the importance and urgency with respect to 
rapidly evolving market conditions of setting a clear and stable regulatory and legal 
framework allowing market operators to engage in business activities, to invest and 
to take initiatives to bring about the Information Society ". 
It is against this political background that Part I of this Green Paper proposed, in 
order to provide a coherent approach to infrastructure competition, a clear principle; 
namely, "that provided the necessary safeguards are in place, the providers of 
telecommunications services which are open to competition should have a free 
choice of underlying infrastructure for the delivery of such services". 
In response the Council of Telecommunications Ministers meeting on 17 November 
adopted a resolution confirming the principle of general liberalisation of 
Conclusions of the 1787th session of Council 9561/94 (Press 197 - G), 28.9.94 
-r 
infrastructure by 1 January 1998 for the full liberalisation of infrastructure2, including 
additional transitional periods for certain Member States in line with Council 
Resolution 93/C213/023, and asked the Commission to develop the necessary 
regulatory framework. 
Part II of the Green Paper now launches a broad discussion with all interested parties 
of the major issues involved in the future regulation of network infrastructure. This 
will allow the development of a common approach to infrastructure provision in the 
European Union. This approach must be fully integrated with the range of Union 
policies designed to support the Information Society. 
A number of Member States have urged the Commission in an associated statement to come forward 
as quickly as possible with proposals to provide for the use of alternative infrastructure for 
telecommunications services which have already been liberalised. 
Council Resolution of 22 July 1993, OJ C213/02, 6.8.93 
iii 
SUMMARY I 
I. INTRODUCTION 1 
II THE APPROACH CHOSEN AND THE SCOPE OF THIS GREEN PAPER 9 
III THE CURRENT SITUATION 14 
III. 1 Communications Infrastructures 14 
111.2 The Market Situation.: 17 
111.3 The Regulation of Infrastructure in Member States 19 
111.4 Conclusions 24 
IV THE MAJOR DRIVERS FOR CHANGE 25 
IV.l Market and Commercial Developments 25 
IV.2 Technological Developments 29 
IV.3 Regulatory Agenda 33 
IV.4 Conclusions on the Major Developments 40 
V UNIVERSAL SERVICE 41 
V.l Universal Service in telecommunications 41 
V.2 The development of Universal Service 46 
VI. EMPLOYMENT, SOCIETAL AND CULTURAL ISSUES 47 
VI. 1 Employment and the Information Society 47 
VI.2 Employment and the telecommunications sector 48 
VI.3 Societal and cultural aspects 52 
VE THE EXTENSION OF THE PRINCIPLES OF THE EUROPEAN 
UNIONS TELECOMMUNICATIONS POLICY TO INFRASTRUCTURE 55 
Vn.l General Principles 56 
Vn.2 Exclusive and Special Rights over Infrastructure 58 
~7îr~ 
VII.3 Licence award procedures, selection criteria and the conditions which 
may be attached to licences for infrastructure 59 
V1I.4 Interconnection and interoperability 70 
VII. 5 Open access to public infrastructure - application of the competition 
rules and ONP principles 75 
VII.6 Safeguarding and developing universal service in a competitive 
environment 80 
VII. 7 The particular circumstances of peripheral regions with less developed 
networks .88 
VII.-8 Competitive Safeguards 92 
Vn.9 The international dimension - international trade in 
telecommunications services 95 
VII. 10 Access to rights of way, numbers, frequencies, and directory services 103 
VII.ll Action in Neighbouring Fields 108 
VIII FUTURE DEVELOPMENT OF THE REGULATORY FRAMEWORK TO 
MEET THE CHALLENGES OF CONVERGENCE 112 
IX ISSUES FOR CONSULTATION 115 
IX.l Towards the Information Society 115 
IX.2 Major changes and positions 115 
IX.3 Timetable for action 128 
IX.4 Public consultation 128 
ANNEX 1 : GLOSSARY OF TECHNICAL TERMS 130 
ANNEX 2 : STUDIES CARRIED OUT FOR THE COMMISSION IN 
PREPARATION FOR THIS GREEN PAPER .....140 
ANNEX 3 ; LIST OF KEY REGULATORY MEASURES AND PENDING 
PROPOSALS IN THE FIELD OF TELECOMMUNICATIONS 141 
1Ï 
SUMMARY 
Europe is shifting towards an information-based economy, where networks and 
network infrastructure play as significant a role as did the rail networks in 
transforming the European economies in the last century. 
For Europe to meet the challenges presented by this Information Society, it is vital 
to ensure that business, industry and Europe's citizen's can access modern, 
affordable and efficient communications infrastructures over which a rich and 
diverse range of traditional and new multi-media services will be offered. 
This revolution has been recognised at the highest political level. In their 
conclusions on the Bangemann Group Report, the Heads of State and 
Government meeting in Corfu considered "that the current unprecedented 
technological revolution in the area of the Information Society opens up vast 
possibilities for economic progress, employment and the quality of life". These 
changes are being driven by technology and by market forces. New global and 
regional partnerships are being formed to enable business and ordinary citizens to 
benefit from the opportunities offered by the convergence of broadcasting, 
telecommunications and information technologies. 
Given the political consensus on the liberalisation of telecommunications 
infrastructure, it is now vital for Europe to put in place a clear and predictable 
regulatory environment. Such a framework will ensure: 
• the completion of the internal market for telecommunications, stimulating 
the development of both basic and advanced infrastructures in the Union; 
• providing Europe with efficient and cost effective telecommunications 
services, benefiting both business and consumers ; 
• stimulating public and private sector investment, growth and innovation, 
thereby contributing to employment and cohesion; 
This Green Paper now launches a broad consultation on the issues surrounding 
such a future telecommunications environment. The key questions are : 
How cm universal service Ce developed? How much does it cost m4 who 
Should pay for it? "* \ 
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Major market and technological developments 
Despite the turndown in economic activity in much of the OECD area, the 
telecommunications sector continues to grow substantially in both volume and 
value terms. Total turnover for telecommunications services in the European 
Union in 1993 was about 120 billion ecu or nearly 3 per cent of overall GDP, 
despite falling price levels in the sector. The nominal growth rate over the last 5 
years has averaged about 7 per cent annually. 
As an indicator of telecommunications usage and growth, international public 
telephone traffic in the Union rose by just over 10 per cent in 1993 compared to 
volume increases of about 11 per cent in 1991 and 1992. 
It is the new service market areas that are producing the largest growth rates, 
particularly where competitive service provision has occurred. In particular, mobile 
communications has displaced data communications and value-added services as 
the most dynamic part of the service market. In the Union, mobile services 
account for about 5 per cent of subscriber lines and nearly 10 per cent of service 
revenues. In the rest of the European Economic Area the figure is significantly 
higher. By the beginning of 1998, the date already agreed for the full liberalisation 
of telecommunications services, there is the real prospect of well over 10 per cent 
of telephone subscribers in the enlarged Union being served by competing 
wireless operators. 
Table III.2 - Turnover of EU information sector in 1993.4 
Electronic publishing 
2% 
Publishing 
22% 
Telecom services 
27% 
Micro-electronics 
2% 
Audiovisual services 
10% ,<===_= 
Telecom equipment 
6% 
Consumer electronics 
5% ,=^^=, 
Computer equipment 
11% 
Software & Services 
15% 
Total Market : 414 billion ECU 
Source : ID ATE 
In contrast, despite the development of integrated or multimedia services 
(combinations of voice, data and images), and considerable speculation about the 
emergence of multimedia networks, turnover for these new markets in Europe is 
as yet limited. The first applications are occurring in specific business markets 
such as intra-company advanced communications, video-conferencing, electronic 
data interchange, broadcasting and news services for the financial sector, certain 
ISDN applications, the emergence of some tele-working and the exploitation of 
some CD ROM products. 
However, there is no significant turnover yet from the provision of multimedia 
services to the residential sector. Moreover, telecommunications and television or 
broadcasting services are in the main currently supplied by quite separate 
networks. This is the case even in the UK where in some areas telephone and 
cable TV services are being marketed jointly by companies with local cable TV 
and telecommunications franchises. 
Total subscribers to cable television in the Union at the end of 1993 were 26 
million, half of which were in Germany. This total corresponds to approximately 15 
per cent of telephone lines. 
The total turnover of broadcasters in the Union at the end of 1993, which includes 
both content and transport or transmission revenues, was about 27 billion ecu. 
Turnover for the provision of cable television was approximately 3 billion ecu. 
These totals are equivalent to about 22 per cent and about 2.5 per cent 
respectively of telecommunications services revenues. 
The rapidity of technological and commercial developments combined with 
evolution in the regulatory environment in many parts of the world is already 
leading to a substantial degree of services and network competition and is making 
infrastructure competition inevitable. 
Moreover, because of the risks and uncertainties associated with some 
applications and technologies, market forces are required to unlock the significant 
potential for innovation and investment for the development of 
telecommunications and the Information Society. Many of the fastest growing 
parts of the telecommunications sector are in niche markets, subject to 
competition from new players. 
At the same time, attention must be paid to the social challenges and 
consequences of harnessing these market, technological and regulatory trends. 
The Major issues raised 
Universal service 
The Commission reaffirms the fundamental importance of maintaining and 
developing universal service in the European Union, on the basis of a common 
minimum set of services and infrastructure. This political priority was recognised 
in Council Resolution 93/C213/01 on the review of the situation of the 
telecommunications sector and the need for further development in that market, 
which established as a major goal for Community telecommunications policy the 
liberalisation of all public voice telephony services, whilst maintaining universal 
service. 
VII 
This Resolution recognised the importance, for the individual consumer and for 
the competitiveness of industry and commercial users, of a Union-wide 
telecommunications system offering to all users, including specific social groups, 
reasonable and affordable charges for access and use, high quality of service and 
technological innovation. The importance of universal service was equally 
emphasised in the Resolution of the European Parliament of the 20th April 1993 
whilst supporting the liberalisation timetable and recognising the need to take full 
advantage of the potential for exploiting alternative infrastructures in Europe to 
supply and develop telecommunications services. 
The Green Paper launches discussion on three key issues which must be 
addressed at a Union level with respect to universal - service in the 
telecommunications sector. The first concerns the elements that comprise 
universal service, the second the methods for costing universal service and the 
third, the means of financing uneconomic aspects of universal service provision in 
a competitive telecommunications environment. 
While recognising the political consensus that the core of universal service 
currently consists of voice telephony service, the Green Paper reinforces the view 
that the concept of Universal Service must evolve over time as technology and 
user needs develop. 
With regard to the cost of universal service, the Green Paper reinforces the view 
that a common and progressive approach is required at a European level, even 
though the costs involved will be different in different Member States. In 
particular, the approach must be based on a calculation of the net cost to the 
operator of serving customers in terms of : (i) the revenue generated by a 
customer (including rental and call charges paid by the customer, and the 
revenue generated by in-coming calls to that customer), and (ii) the actual cost of 
providing service to that customer. The calculation of universal service costs must 
also recognise the fact that even low-profit customers have a marketing 'value' to 
a commercial organisation. 
With regard to financing, the Green Paper recognises that all market players 
should in principle contribute to the provision and/or financing of universal service. 
The financing mechanisms would be put in place at a national level, but within a 
framework set at a Union level. 
The Green Paper considers two financing methods in detail, either (i) the use of 
access charges or (ii) the use of independently administered universal service 
funds. The initial preference expressed is for Universal service funds. 
Interconnection and interoperability 
Interconnection of competing telecommunications infrastructures and services will 
be the central commercial issue in a competitive environment. Interconnection will 
be primarily a matter for national regulatory authorities, but within an overall 
European framework. All interconnection agreements can be subject to the 
competition rules, but additionally, in the case of interconnection with public 
telecommunications infrastructure, it is important that there is a common 
regulatory approach at a European level. 
The Green Paper outlines the scope of an Interconnection Directive - already 
foreseen in the Commission's Action Plan on the Information Society. The 
TfllT 
Directive would provide a framework for negotiating interconnection terms, 
including interconnection charges, and provide dispute resolution mechanisms at 
a national and European level. It would also provide the legal mechanism for 
implementing schemes for sharing the cost of universal service among the market 
players. 
Licensing procedures and conditions for infrastructure for the provision of 
telecommunications services 
The Green Paper addresses many of the licensing issues which would have been 
raised in the context of services liberalisation, even without the agreement on 
infrastructure liberalisation. These are : 
• Who will licence ? 
• How will licences be granted and what are the grounds for limiting numbers ? 
• What conditions can be put into licences ? 
Part II indicates that licensing of telecommunications infrastructure, networks and 
services will remain a matter for national regulators, but again within a framework 
provided at a European level. In terms of licensing procedures and conditions, 
the framework builds on the approach already followed in the telecommunications 
sector since 1990, based on the two categories of legitimate restrictions which 
define the scope of licensing procedures and conditions. These are (i) the 
essential requirements as defined in Community law, (such as rights of way or 
availability of frequency), which would be expanded to include environmental 
protection and (ii) public service specifications in the form of trade regulations 
(which are rules relating to the quality, availability and permanence of 
telecommunications services provided over the licensed infrastructure. 
The Green Paper proposes that the number of licences for public télécoms 
infrastructure can only be restricted on the basis of these two categories; and in 
the case of private infrastructure, only on the basis of essential requirements. 
The Green Paper also makes proposal concerning the procedures and criteria for 
awarding licenses and comments are invited on the degree to which these should 
be harmonised at a European level. It also considers the range of conditions 
which may be attached to licences, which again is delimited by the essential 
requirements and public service requirements in the form of trade regulations, 
depending on whether the infrastructure concerned is public or private. 
Finally, any approach must be proportional to size and market position of the 
licensed operator, and take account of whether the operator enjoys rights of way 
or not. 
The conditions for fair competition 
The Green Paper recognises the need for fair and effective competition in the new 
environment through the enforcement of the Treaty competition rules. This will be 
significant not only in encouraging market entry, but also in addressing the new 
if 
players and the new co-operative ventures, straddling a number of industries 
which are going to shape the emerging telecommunications markets. 
In this context it is important that companies can plan and invest within a 
predictable environment; the competition rules will have a role to play in providing 
such predictability. 
The Green Paper at the same time recognises that those rules complement the 
application of other provisions in the Treaty in relation for example to the free 
movement of services or the right of establishment. 
Employment and the Information Society 
The issue of employment constitutes an essential part of the consultation on this 
Green Paper. The current employment situation in the telecommunications sector, 
as identified in Part II, can be summarised thus: 
• employment levels of the main traditional source of telecommunications 
employment, the dominant TOs, has been declining for several years. This is 
a feature of competitive and monopoly markets alike and results from the 
adjustment by TOs to technological and commercial changes; 
• New employment opportunities for the sector result from new entrants and 
new service areas, for example, in the area of mobile communications. 
• The best means of reversing the overall trend is through the increased 
investment and market expansion which would flow from liberalisation, 
strengthening growth and employment in every sector of the European 
economy. 
However, quantitative employment effects within the telecommunications sector 
alone should not be the principal consideration in the liberalisation debate. The 
central and overriding argument for telecommunications liberalisation must be that 
it will lead to greater efficiency in the information sector generally, and to 
productivity and competitiveness gains for the wider European economy taken as 
a whole. As such, it will be an important step in the fight against unemployment in 
all sectors of European industry. 
In all of these areas, the liberalisation of infrastructure will be a facilitator of the 
improved services and choice which the Information Society may bring about. At 
the same time, full account must be taken in the consultation of the risks which 
future social changes present. In particular, consideration must be given to the 
potential impact of new patterns of work on individuals, for example, in respect of 
home working and/or tele-working. 
The social challenges 
As recognised in the Bangemann Group Report on Europe and the Global 
Information Society, information and communication technologies now pervade 
our lives, affecting the way we work, the way we learn, the way we spend our 
leisure time and the way we interact with each other. The Information Society is 
rapidly developing; new investment opportunities are being created everywhere 
and the application of information and communication technologies are affecting 
all industries and services in our society. The Green Paper considers these 
developments. 
The major investments in communications infrastructures and networks are being 
undertaken to widen and develop the provision of telecommunications services to 
industry, commerce and individual customers. Communications technologies are 
already being exploited in many industrial and service sectors. There is the 
prospect of further widespread expansion of IT into banking and insurance, 
publishing and the media, marketing and household applications. 
The Structural Funds have been contributing substantial amounts to the 
modernisation of telecommunications infrastructures in Member States, 
particularly in less developed ones, and important telecommunications 
programmes have been agreed in the context of the 1994-1999 Structural Fund 
programmes. The Commission has been careful to choose the appropriate 
intervention rates to ensure that the benefit of Community financial assistance 
goes to the consumer and that this assistance is intended to materialise 
investments which would not have otherwise taken place. This is particularly true 
for investment programmes in telecommunications with revenue bearing potential 
and also in cases where the investor, from the Member State point of view, is not 
a public body but private capital has also been mobilised. The Commission will 
ensure that these principles, which of course are applied after careful examination 
of the economic and other aspects of the investments concerned, will continue to 
apply in a liberalised environment in the telecommunications sector. 
The potential fields of application are many and include major areas of public 
expenditure, such as education, healthcare and transportation. 
In pursuing general societal goals, such as ensuring equal opportunities for every 
citizen, and extending the benefits of the Information Society to households, 
industry, government and public services, Member States are likely to be faced 
with situations which will require regulatory intervention in order to guarantee the 
provision of infrastructure. 
An example addressed in the Green Paper is the need to avoid the emergence of 
a dual society based on information "haves" and "have nots". This could result 
where parts of the population were either unable to access new services or were 
not comfortable in using such services. In such a situation the 'social case' for 
regulatory intervention might, for example, lead to action to facilitate access for 
schools or educational centres to the Information Society. 
The international dimension 
Full account must be taken in the consultation of the broader international agenda 
and, in particular, the current WTO/GATS negotiations on basic 
telecommunications services (which include infrastructure). The political 
agreement on 17 November has given a clear signal to our negotiating partners 
on the direction which the Union is taking. The Green Paper, by providing the 
detail behind the principle of liberalisation, can only help the negotiations. 
At the same time, the Green Paper takes account of the Community's existing 
commitments within that negotiating framework, whilst clearly indicating our 
objective of ensuring comparable and effective access to global markets. 
XI 
Towards the Information Society 
The Green Paper also views the common approach to infrastructure more broadly 
in the context of the overall approach to the Information Society. A clear 
framework for infrastructure liberalisation is complementary to the evolution of 
Union policy in other neighbouring fields, such as intellectual property rights, 
audio-visual policy and media concentration - all areas which are central to the 
emerging Information Society. The Green Paper draws on these various initiatives 
and builds on the substantial work and consultation already carried out in these 
areas. 
The Green Paper does not aim to extend telecommunications regulation to other 
sectors of the economy. Rather it recognises that there are very different policy 
objectives which underlie the regulatory approach in these different sectors and 
that these different objectives will remain, even when technology and markets 
converge. Nevertheless, the consulation provides all those interested in the 
telecommunications sector an opportunity to address these issues, and to look 
ahead to the need for a coherent approach to regulation between the different 
sectors which the Information Society will demand. 
In placing infrastructure liberalisation within the more general context of the 
Information Society, the Green Paper recognises that immediate problems of 
terminology arise in distinguishing between infrastructure and services, or in 
delineating different types of service involving telecommunications, broadcasting 
and/or multimedia components. This Green Paper often refers generically to 
"services" ( - the offerings delivered over or via infrastructure) to encompass 
traditional telecommunications services (voice telephony, data transmission, 
valued-added services (such as voice mail or video conferencing) as well as 
network management services) and new information, multimedia and other 
services. 
At the same time, where appropriate for regulatory purposes, reference is also 
made more narrowly to "telecommunications services" in order to indicate that the 
proposed regulatory regime distinguishes between telecommunications activities 
and radio and television broadcasting to the public. It must nevertheless be 
recognised that distinctions should be drawn in a flexible manner. 
Infrastructure as the delivery mechanism for the new interactive information flows 
is an essential raw material for the Information Society. The future regulatory 
environment for infrastructure is therefore central to achieving the full potential 
which that Society can offer. 
• Firstly, by removing restrictions on the combination of different wired and 
wireless network infrastructures and technologies, this common approach will 
bring about a fully integrated personal communications environment. This will 
offer every business and every citizen full mobility and Europe-wide access to 
all the range of new services which the Information Society will offer. 
• Secondly, the establishment of a predictable regulatory environment will 
stimulate innovation in the delivery of, and affordable access to, broadband 
capacity, this will be the backbone for innovative multi-media products, 
offering the user exciting new services fully integrating voice, data and images, 
from distance learning and video-conferencing in the office environment to 
telebanking and video on demand in the home. 
X(l 
Finally, the combination of these first two elements - full mobility and 
broadband capacity - will be the driver of major changes in society and will 
stimulate new approaches to communications, information services and to 
content. These changes, which lie outside the scope of this Green Paper, will 
have a major impact or the way we live and the way we work, as our lives 
become increasingly "interactive" and "on-line". 
The major changes and positions 
On the basis of the priorities established by Union policy in the field of 
telecommunications, the need for a coherent regulatory framework regarding the 
establishment and provision of telecommunications infrastructure, the analysis of 
market and technological developments and taking into account the applicable 
Treaty rules, the Commission invites comments on the proposals and on the 
application of the measures set out in the Table below. 
1 Removal of special and exclusive rights over the use of infrastructure 
for the provision of telecommunications services 
Part I of the Green Paper has proposed the basic principle that where services are 
open to competition there should be a free choice of the underlying infrastructure 
for their delivery. 
From this basic principle two positions followed : 
- The removal of restrictions on the use of own or third party infrastructure 
authorised in Member States for services already liberalised in the following 
areas: 
• for the delivery of satellite communications services. 
• for the provision of all terrestrial telecommunications services already 
liberalised (including the use of cable television infrastructures for this 
purpose). 
• to provide links, (including microwave links) within mobile networks for 
the provision of mobile communications services. 
- The lifting of exclusive and special rights over the use of own or third party 
infrastructure for the delivery of voice telephony services to the general public, 
once those services are liberalised from 1st January 1998, and the 
replacement by licensing and authorisation schemes setting out the 
necessary safeguards within the framework of the overall review of Directive 
90/388/EEC (the Services Directive) and of the ONP-framework to be tabled 
by 1 January 1996 in the context of the preparation for the full liberalisation of 
voice telephony services foreseen by Council Resolution 93/C213/02. 
The Telecoms Council on the 17th November 1994 in considering Part 1 of the 
Green Paper, recognised the general principle according to which the provision of 
telecommunications infrastructure should be liberalised by 1st January 19985, 
including the additional transition periods for certain Member States in line with 
Council Resolution 93/C213/02. 
5 A number of Member States have urged the Commission in an associated statement to come forward 
as quickly as possible with proposals which provide for the use of alternative network infrastructure 
for the services already liberalised. The Commission in turn preserved its right to take action in this 
area within its competence and according to its obligations. On 21 December 1994 the Commission 
adopted in draft a Directive amending Commission Directive 90/388/EEC regarding the abolition of 
the restrictions on the use of cable television networks for the provision of telecommunications 
services. 
Tîf 
2. Safeguarding and developing universal service 
Universal service consists of access to a defined minimum service of specified 
quality to all users at an affordable price based on the principles of universality, 
equality and continuity. The detailed elements of such a service are set out in 
Council Resolution and Commission statement 94/C 48 of 7 February 1994. 
The underlying aim is to ensure that the benefits of cheaper and better quality 
telephone service and other benefits of increased competition and choice are 
passed on to all users 
In the context of the current structural adjustments being undertaken in 
preparation for the liberalisation of telecommunications services, NRAs should 
seek to replace general across the board subsidies for access or local calls. 
This- can be achieved by (i) completing tariff re-balancing in line with Council 
Resolution 93/C213/02 and (ii) the development of targeted schemes to 
ensure universal service for needy or uneconomic customers. Targeted or 
social tariffs should be provided by operators within the framework of an 
optimal tariff structure. 
The basic principles for universal service in the context of liberalised 
infrastructure provision in the European Union should be: 
• Only telecommunications-related public service obligations should be 
treated as universal service obligations. Network operators should be freed 
from non-telecommunications related obligations. 
• Transparent schemes for the determination of the cost of universal service 
obligations and their financing should be established 
• As regards the determination of the cost of universal service obligations, 
NRAs should calculate this cost as the net cost of providing service to 
uneconomic customers, plus any costs associated with the uneconomic 
provision of public telephones, emergency services and other social 
obligations. 
• As regards the establishment of transparent schemes for financing 
universal service obligations, the uneconomic costs of particular elements 
of universal service obligations should be financed, either through national 
universal service funds or, where not fully covered, via access charges to 
be added to interconnection charges. 
• Preference should be given to financing USOs through universal service 
funds rather than via access charges. Eligible operators and service 
providers should contribute and the financial responsibility should be spread 
as fairly as possible, subject to the principle of proportionality. 
• Financing schemes should be administered either by the NRA or an NRA 
appointed body, should be subject to regulatory control and consistent with 
Treaty competition rules. They should encompass assessment by the NRA 
of the cost of universal service according to a transparent and published 
methodology, which may need to evolve to take account of changing 
competitive conditions. 
yr 
In the context of services and infrastructure liberalisation, Member States 
should work towards (i) determining the cost of universal service and (ii) 
instituting means to finance universal service at a national level, taking into 
account the specific circumstances of Member States with less-developed 
networks or very small networks. 
With this in mind, the Commission will propose a common framework before 
the end of 1995. 
NRAs in conjunction with the Commission should periodically survey main 
indicators of universal service, in particular penetration of residential lines, 
waiting times, provision of public pay phones and the availability of targeted 
schemes for the needy and uneconomic customers. 
Given the rate of technological progress and its effect on the costs and 
availability of increasingly sophisticated services, together with the need to 
ensure that the benefits of the Information Society extend to all citizens and 
not just to the privileged minority, the definition of universal service must be 
dynamic and reflect such progress. 
3. Interconnection and interoperability 
The basic framework 
Interconnection agreements fall within the scope of the competition rules. The 
application of these rules to interconnection agreements should be clarified to 
the extent necessary. This should include the removal of the current 
restrictions on the interconnection of all types of communications 
infrastructure, comprising public and private networks (i.e. fixed - mobile -
cable television - satellite-based networks). 
As regards public telecommunications infrastructure, the principles of Open 
Network Provision should be extended as far as ONP applies, within the 
context of a specific Directive on interconnection, to create a harmonised 
approach for public telecommunications infrastructures and to enhance 
interoperability of public networks and service throughout the Union. The 
Directive should: 
• set out the rights and obligations on public telecommunications 
infrastructure providers with regard to interconnection requests, including 
obligations to interconnect and provide standard interconnect offerings. 
• give priority to the commercial negotiation of public telecommunications 
interconnection agreements, within an overall framework to be supervised 
by national regulatory authorities. 
• provide as elements of that framework, common rules promoting fair 
competition; transparency of interconnection agreements, technical 
standards (priority to be given to voluntary standards) and compliance with 
essential requirements. 
• establish dispute resolution mechanisms at a national and European level. 
xii 
K"( 
An ONP Interconnection Directive should also lay down charging principles for 
interconnection of public telecommunications networks and services, and in 
particular: 
• common principles for interconnection charges 
• identification and recovery of uneconomic universal service costs based on 
net cost calculations 
• cost accounting systems 
Open access to infrastructure - application of ONP principles and the 
competition rules 
Open access to the facilities of public telecommunications infrastructure 
providers will be fundamental in establishing an effective, competitive 
environment for telecommunications infrastructure and services within the 
Information Society. In addition to the application of the competition rules, the 
basic principles set out within the Open Network Provision framework must be 
extended and, where necessary, adapted to provide a common regulatory 
approach to communications infrastructure in the European Union. This 
approach entails: 
• harmonised application of the general principles of ONP by the national 
regulatory authorities within their national regulatory regimes, alongside the 
application of the Treaty competition rules to the sector. 
• In the context of ONP, such conditions will generally be applied through 
class licences or in the framework of authorisations for the provision of 
communications infrastructure. 
• Such conditions are concerned with ensuring rights to access and 
compliance with essential requirements and ensuring cost orientation. 
• adequate transmission capacity being guaranteed throughout the Union, in 
particular, through revision of the ONP leased lines directive. 
• transparent accounting structures to be put in place by providers of public 
telecommunications infrastructures, including the separation of accounts 
for telecommunications and non-telecommunications activities, as well as 
the implementation of transparent cost accounting systems concerning 
infrastructure provision and service provision. 
• Voluntary implementation of common technical standards (based on 
European standards)* with consultative mechanisms for mandatory 
implementation where necessary to satisfy user needs. 
• the relaxation, in a competitive environment, of current regulatory 
mechanisms to ensure cost-orientation of tariffs. 
XIII 
W 
4. Licensing 
Licence award procedures 
In order to promote a common regulatory framework for the licensing of 
communications infrastructure in the European Union, award procedures should 
respect the following principles: 
• Member States should licence and/or authorise the establishment and 
provision of infrastructure in the European Union using open, non­
discriminatory and transparent procedures. 
• The number of licences granted may only be restricted on the basis of the 
essential requirements and in the case of networks intended for the general 
public, public service requirements in the form of trade regulations. 
As regards the establishment of new communications infrastructures, these 
essential requirements should also include, in justified cases, the protection of 
the environment and town planning objectives. 
As regards limitations on the number of licences with respect to essential 
requirements, only radio ' spectrum and environmental and town planning 
objectives would apply. 
Any limitation must be consistent with the Treaty competition rules and the 
Treaty provisions concerning the right of establishment and the free circulation 
of services. 
• Award procedures must indicate clearly the selection criteria and the 
conditions which will be attached to the grant of any licence. 
• In order to promote the development of trans-European telecommunications 
networks and services, the grant of national licences for such networks should 
be co-ordinated, where appropriate, to facilitate the networks becoming 
operational throughout the countries covered at the same time. 
Selection criteria for the award of licences and authorisations 
• Licences must be granted on the basis of pre-announced criteria. In cases 
where networks are intended for use by the general public and the number of 
licences awarded is limited, criteria may be based on public service 
requirements in the form of trade regulations. In the absence of harmonisation 
at a Union level, such criteria should in any case be published in advance and 
be subject to prior scrutiny for compatibility with the Treaty rules. 
• Under the EC and EEA rules, selection criteria may not discriminate on the 
grounds of nationality, nor take into account factors such as the sourcing of 
equipment. 
• Any limitation on the number of licences granted and any refusal to licence a 
particular undertaking (including the exclusion of particular undertakings from 
a licensing process) must be duly justified to allow for assessment under the 
applicable Treaty rules and also with the principle of proportionality. 
XIV 
~x^i 
The principle of mutual recognition of licences or authorisations is not normally 
applicable to infrastructure licences. This is the case, for example, with 
national licences for the provision of fixed networks encompassing rights of 
way. Mutual recognition should, however, apply to certain elements used in 
licensing procedures, such as evidence relating, for example, to the technical 
competence or financial standing of the applicant. 
Conditions attached to communications infrastructure licences 
Building on the framework provided by Community law, future licenses for 
infrastructure should respect the following principles : 
• Licensing conditions for infrastructure must be based on objective grounds, be 
transparent, be non discriminatory and respect the principle of proportionality. 
Any fees for licences should respect the same criteria. 
• Licences must not contain conditions other than those justified on the grounds 
of essential requirements and, in the case of public telecommunications 
infrastructure, public service requirements set out in the pre-announced 
criteria. 
• Infrastructure not intended for the use of services for the general public (such 
as infrastructure for corporate networks or closed user groups), should only be 
subject to conditions based on the essential requirements. 
• With regard to ownership restrictions, licences may not contain conditions 
which restrict ownership by nationals of Member States or of the European 
Economic Area or undertakings controlled by such nationals. 
Any other restrictions on ownership or control must be compatible with 
Community law and with the European Community's commitments taken on a 
multi-lateral basis. 
• Licensing conditions must ensure a high standard of consumer protection and 
respect competition rules. 
Provision of Telecommunications Services 
• Service provision (as opposed to network establishment and operation) should 
not be subject to individual licensing in the Member States. It may be subject 
to class licences, general authorisations or to a requirement for declaration by 
Service Providers of their activities to the National Regulatory Authority(ies) of 
the Member State(s) where they choose to operate. 
• Nevertheless, in the case of independent service providers offering voice 
telephony services to the general public on a resale basis, consideration may 
need to be given as to how and when such resellers should be obliged to 
make a contribution, appropriate to their market position, to the provision of or 
financing of universal service, (via access charges or a universal service fund, 
as set out in the following point 3). 
"VTV 
Access for Service Providers to any infrastructure should be based on 
commercial agreements, subject to the competition rules, and where 
appropriate, the framework of Open Network Provision rules set out below. 
The Commission will regularly review if additional safeguards for consumers 
are considered necessary. If so, they should be fully consistent with the 
Treaty provisions and respect the principle of proportionality. Preference 
should be given to rules agreed by sector participants (such as a code of 
conduct) over binding regulatory measures, and to general or class regimes 
over specific individual licenses or authorisations. However, where this Code 
of Conduct does not adequately protect consumer interests, binding regulatory 
measures should be introduced. 
5. Ensuring fair competition 
In a market which will, for many years, be characterised by the presence of 
dominant operators controlling bottleneck facilities, the full implementation of the 
competition rules will be indispensable to allow for the emergence of a competitive 
environment. This will imply, where required, the establishment of the appropriate 
procedures and safeguards. These will concern, in particular: 
screening interconnection agreements, 
reviewing the conditions for access granted to infrastructure providers and to 
service providers, 
monitoring joint ventures. 
assessing any scheme established for financing universal service; 
ensuring open and non-discriminatory access to rights of way. 
reviewing the effects of cross-ownership of different networks and of joint 
provision of network and services; 
The latter requires transparent accounting structures and practices to be 
established by providers of communications infrastructures, including the 
separation of accounts for telecommunications and non-telecommunications 
activities, as well as the implementation of transparent cost accounting systems 
for infrastructure providers who also provide telecommunications services. 
6. Access to rights of way, frequencies and numbering 
In order to guarantee the successful development of a competitive market for 
infrastructure, access to certain basic resources must be guaranteed. This 
concerns rights of way, frequency for wireless network components, numbering 
and directory services. 
XVI 
xl 
Rights of Way 
• Member states should grant rights of way to communications network 
operators according to open and transparent procedures. 
• Where environment requirements (such as avoiding road congestion), or other 
essential requirements, prevent the granting of rights of way to all potential 
applicants, the Member States should introduce schemes for the sharing of 
ducts on a voluntary basis and consider, where it is deemed necessary to 
avoid bottleneck situations, the introduction of mandatory duct-sharing. 
• To introduce competition in the market for infrastructure provision, Member 
States will need to ensure that the incumbent telecommunications 
organisations are subject to the same regulatory conditions as their 
competitors regarding rights of way, and provide for mandatory sharing of 
facilities where necessary to bring down barriers to entry. 
Frequencies 
Access to frequency spectrum will be increasingly important in ensuring the 
optimum combination of fixed and wireless technologies in future networks. In 
order to support this development a number of measures should be taken, in 
particular: 
• CEPT/ERC should initiate a comprehensive review of the balance of 
frequency usage between broadcasters, fixed network operators and 
mobile and personal communications operators. This will also need to 
address the balance between these uses and the use of spectrum for 
defence and security purposes. 
• Pan-European network operation requires greater co-ordination of frequency 
allocation across Member States. 
Numbering 
In order to facilitate network investments, an appropriate framework ensuring 
access to numbers must be put in place. In particular, this requires: 
• Creation of a European numbering space for special services (e.g. 
freephone, premium rate, shared cost services ) must be a priority for the 
EU. 
• A "best practice" guidance for NRAs on the administration and control of 
the national numbering schemes is under development in the ETO, 
• The reform package for submission to the Council before 1 January 1996 
will address inter alia the subject of numbering reform in Europe. 
XVII 
Directories 
Access to subscriber data for network operators and service providers and 
access for subscribers to a comprehensive directory service will be important 
elements. Such access should proceed, inter alia, on the following basis: 
• Access to subscriber databases and to raw subscriber data must be 
ensured on the basis of objective, transparent and non-discriminatory 
criteria, and in conformity with Community legislation, in particular the 
competition rules of the Treaty, the principles of open network provision 
(ONP) and the provisions on the protection of personal data and privacy, as 
well as, where applicable, IPR legislation. 
• Maintaining a complete universal telephone directory and at least one 
enquiry service which contains the details of all subscribers of fixed and 
mobile telephony services and is available for all users. 
7. Action in Neighbouring Fields (Data Protection, Audio-visual, Media and 
IPRs 
Common rules concerning data protection and privacy are fundamental for the 
development of the information society and for removing other constraints on 
effectively exploiting the competitive provision of communications infrastructures. 
In this context rapid progress should now be made on the proposed General Data 
Protection Directive and the proposed specific Directive on the protection of 
privacy in the digital network environment. 
The Commission has already identified in its Action Plan on Europe's Way to the 
Information Society that work will continue in the area of Information Security, and, 
in particular, that it will : 
• publish a Communication on security issues and the role of Member States 
• make proposals with regard to the harmonisation of national rules on 
unauthorised access, and 
• prepare a Green Paper on the legal protection of encrypted'broadcasts. 
Action in all of these areas can substantially contribute to the creation of an 
appropriate environment for infrastructure competition. 
The Commission has also identified in its Action Plan on Europe's Way to the 
Information Society, initiatives in a range of areas which will help to shape the new 
regulatory environment both for infrastructure and for services. These policies will 
substantially influence the extent to which investment can be mobilised to finance 
competing networks. 
These actions include : 
~7fW 
In the field of media ownership, the recently adopted Communication on the follow 
up to the Green Paper on media pluralism and subsequent public consultation; 
In the field of audio-visual policy, the possible revision of Directive 89/552/EEC 
(the "television without frontiers" directive) and following up the Audio-visual Green 
Paper with regard to the issue of content. 
In the field of intellectual property, the adoption as a matter of priority of the 
pending proposal on the legal protection of data bases; the preparation of a 
Green Paper on intellectual property in the Information Society and the 
preparation of a directive on private copying. 
Additionally, the Commission has already proposed a Directive aimed at the 
harmonisation of the laws, regulations and administrative provisions on contracts 
negotiated at a distance between suppliers and consumers. 
The Commission will undertake work during 1995 on the regulatory approach to 
be applied to ensure the free circulation of new services, which will help ensure 
that the Commission's actions in the relation to infrastructure and the services to 
be provided over them remains consistent 
8. The Societal and Social Impact 
The services carried over infrastructure in Europe will have a major effect on the 
quality and way of life for Europe's citizens. Priority attention will also be given to 
studying and monitoring the societal and social impact of the diffusion of new 
technologies and of a competitive environment for communications infrastructure 
(in particular, in relation to the areas of employment and cultural policy, as well as 
the need to avoid the development of a society of information "haves" and "have 
nots"). 
In this regard the Commission's Action plan announced a number of reports and 
Communications in this area, including a report by the High Level Group of 
Experts. 
Consideration in this context must also be given to the need for retraining and re 
deployment of employees as the traditional telecommunications sector adapts to a 
competitive environment. 
The Commission also proposes setting in motion a comprehensive action 
programme to investigate potential health hazards associated with the proliferation 
of fixed and wireless infrastructures and to accelerate the preparation of 
necessary safety standards, as well as providing general guidance. 
9. A global approach to infrastructure and ensuring fair access to third 
country markets 
The Union must actively contribute to on-going discussions at a global level 
concerning the Information Society, and, in particular, the evolution of common 
global approaches to issues promoting the development of infrastructures, 
capable of meeting the needs for global communications. The meeting of the G7 
in February to be hosted by the Commission will substantially assist this aim. 
XIX 
The main principles with regard to worldwide developments are : 
• Common Community positions are required in international fora to assist in 
developing a global approach to standards, frequency and numbering. (This 
concerns, in particular, positions within the International Telecommunications 
Union and the World Radio Conferences. 
• Emphasis on the on-going multi-lateral talks on basic telecommunications as 
the key to opening up access to third country markets. The overall aim must 
be to ensure comparable and effective market access, and, in particular, the 
lifting of ownership restrictions, for EU network operators and service 
providers. 
• Until the results of the GATT/WTO negotiations are clear, it is important that 
the Union reserves its right to maintain equivalent conditions to those currently 
prevailing in third country markets with regard to market entry or the licensing 
of non-EU or EEA nationals or companies controlled by such nationals, the 
objective of imposing such conditions would be to promote open markets in 
third countries for European network operators and service providers through 
negotiations. 
• Common Community positions on issues having a direct impact on the 
operation and interconnection of networks, such as restrictions on encryption, 
rules on intellectual property and data protection and privacy. 
10. Future Evolution of the Regulatory Environment - Towards the 
Information Society 
The Commission is looking beyond the immediate steps needed to liberalise 
telecommunications infrastructure by 1 January 1998 and to put in place the 
accompanying regulatory framework. 
This Green Paper is intended to initiate the debate, in parallel with that launched 
by action in other neighbouring fields, on the future evolution of the regulatory 
environment beyond 1998 to meet the challenges of technological and market 
convergence. 
In addressing these issues, certain basic principles derived from the experience in 
the telecommunications will assist the debate: 
• Liberalisation of telecommunications infrastructure and services must go hand 
in hand with the implementation of a clear regulatory framework, which can 
help to mimic competition (through principles of non-discrimination, 
transparency, etc.) pending the emergence of genuinely competitive markets. 
• Effective and independent regulation at the appropriate level will be essential. 
• The regulatory framework should lay down basic principles at a European level 
on the basis of the rules in the* Treaty, as well as clear criteria for their 
application in a predictable manner at a national level. Increasing reliance on 
competition rules is to be expected. 
M 
• Effective competition in the markets for telecommunications equipment and 
services should evolve without rigid structural safeguards, such as those 
developed in the mid-eighties in North American markets. 
Where safeguards have been considered necessary proportional solutions 
have been chosen, such as transparent cost-accounting and separate 
accounting for different parts of a business. 
These principles must be applied to the challenges of multi-media and the 
Information Society, taking full account of the regulatory patterns established in 
the converging sectors. 
XXI 
~w 
Timetable for action 
Council Resolution 93/C 213 of 22 July 1993 called for the Commission to 
prepare, before 1st January 1996, the necessary amendments to the Community 
regulatory framework, in order to achieve liberalisation of all public voice 
telephony services by 1 January 1998. Linking the liberalisation of infrastructure 
to liberalisation of voice telephony means that the same time scale must be 
observed for the regulatory measures identified in this Green Paper. 
The specific measures in the 'reform package' are expected to include measures 
to be adopted by the Commission and measures to be adopted by the European 
Parliament and the Council. 
The proposed timetable is as follows: 
By 15 March 1995 Submission of public comments on the Green Paper 
May 1995 Commission Communication to the European Parliament 
and the Council on the public consultation on the 
infrastructure Green Paper 
June 1995 Council Resolution on Infrastructure . 
Before 1 January 1996 Publication by the Commission of proposals for specific 
measures to extend the existing EC regulatory framework 
Commission Communication to the European Parliament 
and the Council on the principles and financing of 
Universal service 
Public consultation 
The Commission invites comments on all the issues raised by this Green Paper, 
including, in particular, on the major changes required and on the evolution of the 
regulatory framework to meet the challenges of convergence. 
The Commission intends to organise a series of hearings in Brussels with 
interested parties early in 1995, allowing an opportunity for discussion of the 
issues raised in both parts of the Paper. 
In order to respond urgently to the evolving Information Society, the Commission 
would ask that written comments on both Parts I and II to be forwarded to the 
Commission by no later than 15th March 1995-
The Commission will subsequently report to the European Parliament and Council 
on the results of the consultation process. 
XXII 
-vxur 
I. INTRODUCTION 
Europe is shifting towards an information-based economy, where networks and 
network infrastructure play as significant a role as did the rail networks in 
transforming the European economies in the last century. 
For Europe to meet the challenges presented by this Information Society, it is vital to 
ensure that business, industry and Europe's citizen's can access modern, affordable 
and efficient communications infrastructures over which a rich and diverse range of 
traditional and new multi-media services will be offered. 
This revolution has been recognised at the highest political level. In their conclusions 
on the Bangemann Group Report, the Heads of State and Government meeting in 
Corfu considered "that the current unprecedented technological revolution in the 
area of the Information Society opens up vast possibilities for economic progress, 
employment and the quality of life ". These changes are being driven by technology 
and by market forces. New global and regional partnerships are being formed to 
enable business and ordinary citizens to benefit from the opportunities offered by the 
convergence of broadcasting, telecommunications and information technologies. 
In fostering this evolution it is now vital for Europe to put in place a clear and 
predictable regulatory environment which will promote a maximum of choice and 
facilitate the emergence of new services and new means of providing services. 
Given the political consensus on the liberalisation of telecommunications 
infrastructure, it is now vital for Europe to put in place a clear and predictable 
regulatory environment. Such a framework will ensure: 
• the completion of the internal market for telecommunications, stimulating the 
development of both basic and advanced infrastructures in the Union; 
• providing Europe with efficient and cost effective telecommunications 
services, benefiting both business and consumers ; 
• stimulating public and private sector investment, growth and innovation, 
thereby contributing to employment and cohesion; 
This Green Paper now launches a broad consultation on the issues surrounding such 
the future telecommunications environment. The key questions are : 
How cm universe service t?e developed? How rm*ch does il cost am* who 
should pay for it? 
What should b& the future framework for interconnection and inter<)perabaîty? 
, How will ielêcôm<nOtwàks fee licensed?% What restrictions' can tegitïmâtély be-
* placed ori numbers «Sel whalc^ndiSc^$cirife^a^crîedloiic^cè$? ' '* ^ 
% How can 3 fafir compete environment be ensured? s 
Conclusions of the European Council, Corfu, 24-25 June 1994 
The common approach to infrastructure must also be viewed more broadly in the 
context of the overall approach to the Information Society. A clear framework for 
infrastructure liberalisation is complementary to the evolution of Union policy in 
other neighbouring fields, such as intellectual property rights, audio-visual policy and 
media concentration - all areas which are central to emerging Information Society. 
In placing infrastructure liberalisation within the more general context of the 
Information Society, immediate problems of terminology arise in distinguishing 
between infrastructure and services, or in delineating different types of service 
involving telecommunications, broadcasting and/or multimedia components. This 
Green Paper will often refer genetically to "services" ( - the offerings delivered over 
or via infrastructure) to encompass traditional telecommunications services (voice 
telephony, data transmission, valued-added services (such as voice mail or video 
conferencing) and network management services), as well as new information, 
multimedia and other services. 
At the same time, where appropriate for regulatory purposes, reference is also made 
more narrowly to "telecommunications services" in order to indicate that the 
proposed regulatory regime distinguishes between telecommunications activities and 
radio and television broadcasting to the public. It must nevertheless be recognised 
that distinctions should be drawn in a flexible manner and one which promotes rather 
than holds back the transition to the Information Society. 
Infrastructure as the delivery mechanism for the new interactive information flows is 
an essential raw material for the Information Society. The future regulatory 
environment for infrastructure is therefore central to achieving the full potential 
which that Society can offer. 
• Firstly, by removing restrictions on the combination of different wired and 
wireless network infrastructures and technologies, this common approach will 
bring about a fully integrated personal communications environment. This will 
offer every business and every citizen full mobility and Europe-wide access to all 
the range of new services which the Information Society will offer. 
• Secondly, the establishment of a predictable regulatory environment will 
stimulate innovation in the delivery of, and affordable access to, broadband 
capacity. This will be the backbone for innovative multi-media products, offering 
the user exciting new services fully integrating voice, data and images, from 
distance learning and video-conferencing in the office to telebanking and video 
on demand in the home. 
• Finally, the combination of these first two elements - full mobility and broadband 
capacity - will be the driver of major changes in society and will stimulate new 
approaches to communications, information services and to content. These 
changes, which lie outside the scope of this Green Paper, will have a major 
impact or the way we live and the way we work, as our lives become increasingly 
"interactive" and "on-line". 
The positions set out in this Paper are consistent with the general approach followed 
by the Union in the area of telecommunications since the 1987 Green Paper on the 
development of a common market for telecommunications services and equipment . 
This means that the positions are based on an evolving balance between 
liberalisation, the creation of a common regulatory framework and the application of 
rules ensuring fair competition in Information Society. 
The global aims and positions of the Green Paper are summarised below 
COM(87) 290, 30.6.87 
SUMMARY OF THE GLOBAL AIMS AND POSITIONS OF THE GREEN PAPER 
The global aims and positions of this Green Paper, in implementing the general 
principle of liberalisation of infrastructure within the timetable envisaged in Part I of 
the Paper, can be summarised as follows: 
1. LIBERALISATION OF COMMUNICATIONS INFRASTRUCTURE IS THE SINGLE 
MOST IMPORTANT STEP TO BE TAKEN IN THE CONTEXT OF EUROPEAN 
TELECOMMUNICATIONS POLICY. 
Liberalisation will mobilise private capital, stimulate the emergence of new 
multi-media markets and applications, and lead to users having more choice of 
services and better value for money. Liberalisation of infrastructures will 
maximise the benefits of the planned liberalisation of telecommunications 
services in Europe in 1998. 
2. UNIVERSAL SERVICE REMAINS A MAJOR POLICY REQUIREMENT WITHIN THE 
EUROPEAN UNION. 
• Universal service remains a major policy requirement within the European 
Union. Universal telephone service at an affordable price should continue to 
be guaranteed to all European users in the future competitive environment. 
The dual aim should be to provide consumers and business with a diverse 
offering and choice of telecommunications services at competitive prices, 
whilst guaranteeing universal access to basic telecommunications services for 
all citizens. 
• In the context of the liberalisation of telecommunications services and the 
pricing and structural adjustment that is required, infrastructure liberalisation 
will not undermine the provision of universal service. Indeed, as long as the 
universal service burden is shared appropriately between competitors, 
infrastructure liberalisation is more likely to lead to positive benefits for the 
sector by encouraging innovation, the exploitation of new technologies and 
increased choice of services. 
• Three key issues must be addressed at a Union level. The first concerns the 
identification of the elements that comprise universal service, the second the 
costing of universal service and the third the means of financing uneconomic 
aspects of universal service provision in a competitive environment. 
A secure mechanism for dealing with the burden of uneconomic universal 
service obligations is crucial. The goal of providing affordable access to basic 
telecommunications services for all citizens is not an argument in favour of 
maintaining inefficient across-the-board subsidies for access, but rather it is a 
reason for developing targeted schemes for needy citizens and uneconomic 
customers. The particular needs of peripheral regions with less developed 
networks should also be taken into account. 
Given the rate of technological progress and its effect on costs and availability 
of increasingly sophisticated services, together with the need to ensure that 
the benefits of the Information Society extend to all citizens, the definition of 
universal service must be dynamic. 
3. NETWORK INTERCONNECTION MUST BE GUARANTEED AT A EUROPEAN LEVEL 
IN ORDER TO ENSURE INTER-OPERABILITY OF TELECOMMUNICATIONS 
SERVICES. 
A new regulatory framework for interconnection will be developed, drawing 
upon the principles of open network provision and the application of Treaty 
competition rules. The framework will provide a predictable regulatory 
environment, which will: 
• remove current restrictions on interconnection; give priority to the commercial 
negotiation; set out the rights and obligations on infrastructure providers; 
promote fair competition; and identify suitable technical standards. 
• establish dispute resolution mechanisms, alongside existing means of recourse, 
at a national and European level. 
• lay down common and efficient charging principles for interconnection, 
taking account of universal service obligations. 
THERE MUST BE OPEN ACCESS TO INFRASTRUCTURE FOR NETWORK 
OPERATORS AND SERVICE PROVIDERS. ADEQUATE PROVISION OF 
TELECOMMUNICATIONS TRANSMISSION INFRASTRUCTURE SHOULD BE 
GUARANTEED THROUGHOUT ALL MEMBER STATES. 
Telecommunications infrastructure makes use of a national resource, and 
those who have rights to provide public infrastructure, (particularly where 
rights are linked to rights of way), carry particular responsibilities to make 
their facilities available to other market players. 
Principles for open access and use are laid down in the specific European 
Union framework of open network provision, as well as through the general 
application of the competition rules. These principles should be applied in a 
proportional and non-discriminatory manner to telecommunications 
infrastructure. Specifically, transmission capacity in the form of a guaranteed 
set of market offerings should be available throughout the European Union. 
4. COMMON PRINCIPLES FOR THE LICENSING / AUTHORISATION BY MEMBER 
STA TES SHOULD BE IMPLEMENTED. 
The priorities with respect to licensing the establishment and operation of 
infrastructure are: 
- a common approach to licensing at a European level, in order to minimise 
barriers to market entry. 
New market entrants need a clear and predictable regulatory environment with 
minimum variation between Member States. Common licensing principles -
covering both the criteria for awarding licences (and for limiting their number 
where such limitation is justified), and the conditions within them - must be 
agreed at a European level. 
- co-ordinated licensing between Member States for trans-European 
infrastructure projects 
Europe has an urgent need for long distance, high quality, high capacity, low 
cost telecommunications circuits. New responsive procedures must be set in 
place so that organisations wishing to install long distance telecommunications 
circuits crossing several Member States can receive the necessary 
authorisations quickly and in a co-ordinated manner. 
5. FAIR COMPETITION SHOULD BE PROMOTED THROUGH THE FULL 
APPLICA TION OF THE TREA TY COMPETITION RULES 
In order to provide a fair competitive environment, the application of 
competition rules will become increasingly important alongside the common 
regulatory framework put in place at a European level. The competition rules 
will have a particular role in helping to define future market structures and in 
setting the conditions under which networks and services can rapidly develop. 
To provide greater coherence in market developments, particularly in relation 
to the provision of cross-border networks and services, new procedures may 
be required to allow the assessment of the terms for interconnection and 
access (including mechanisms for financing universal service) to networks and 
to rights of way. 
6. TRANSPARENT AND RESPONSIVE MECHANISMS MUST BE ESTABLISHED TO 
ENSURE FAIR ACCESS TO COMMON RESOURCES, IN PARTICULAR, RIGHTS OF 
WAY, NUMBERS AND FREQUENCIES 
Rights of way are essential for the establishment of any fixed communications 
infrastructure, whilst numbering is an indispensable resource for the operation 
of and access to both networks and services. Additionally, access to 
frequencies is essential for all mobile and some fixed telecommunications 
services. 
7. ACTION IS NEEDED IN NEIGHBOURING FIELDS IN ORDER TO EXPLOIT THE 
BENEFITS OF LIBERALISATION OF TELECOMMUNICATIONS INFRASTRUCTURE. 
This includes action to strengthen data protection and privacy for the 
individual; to ensure security of information; to clarify and develop the 
situation with regard to intellectual property rights; and action in the audio­
visual field. 
Adoption of current Commission proposals on data protection and privacy is 
becoming urgent, in order to give the public reassurance about their rights to 
privacy in the Information Society. Commission initiatives in the areas 
mentioned have been announced in the Commission's Action Plan to the 
Information Society (COM(94) 347). 
A COHERENT FRAMEWORK FOR CONTENT REGULATION SHOULD BE 
DEVELOPED 
These future frameworks, building on current Union policy, must take into 
account the fact that in the future the same material may be transmitted over a 
variety of different delivery systems, including broadcast systems and 
telecommunications systems. 
8. THE SOCIETAL AND SOCIAL IMPACT MUST BE EXAMINED 
PUBLIC HEALTH AND SAFETY, AND ENVIRONMENTAL NEEDS MUST BE 
SAFEGUARDED 
Environmental requirements will increase pressure for the sharing of facilities 
and/or rights of way by infrastructure providers. This should be allowed and 
encouraged by Member States, and in exceptional cases, it may be necessary 
to impose sharing arrangements. 
Increasing use of radio-based links raise potential hazards with regard to 
health and electromagnetic interference. Accelerated research into these 
areas and the development and implementation of the necessary standards is a 
priority. 
THE FULL IMPACT OF THE INFORMATION SOCIETY MUST BE EXAMINED. 
The potential of the Information Society for the lives of every European 
citizen calls for an approach which is open, transparent and consultative, 
involving all sectors of society. Issues related to consumer protection, social 
cohesion and cultural diversity, employment and patterns of work, must be 
subject to wide public debate in the course of implementing the measures 
outlined above. 
9. UNION POLICY MUST ACTIVELY PURSUE THE ON-GOING MULTI-LATERAL 
NEGOTIATIONS ON BASIC TELECOMMUNICATIONS WITHIN THE GATS IN 
ORDER TO OPEN UP FOREIGN MARKET A CCESS. 
As long as comparable and effective market access to third countries has not 
been achieved, the ability to take measures with regard to third countries 
should not be restricted, subject to Community commitments on a multi­
lateral or bilateral basis. 
10. THE FUTURE EVOL UTION OF THE REGULA TORY ENVIRONMENT TO MEET THE 
NEEDS OF THE INFORMA TION SOCIETY MUST BE ADDRESSED 
A coherent regulatory framework for the licensing of infrastructure which 
avoids the current distinctions based upon the services provided must be 
developed. 
Future infrastructure will be able to carry all forms of information and 
communications services (TV and radio programmes, simple and advanced 
telecommunications services, multi-media applications). 
In the medium term (beyond 1998), new regulatory, frameworks are needed 
which address the issue of convergence of telecommunications and 
broadcasting. Current differences between the Member States in their 
regulatory regimes for cable TV and broadcasting, and differences within 
Member States between the treatment of broadcasting and 
telecommunications, threaten to impede the development and distribution of 
advanced information/communications services. In relation to the new 
services to be provided in the Information Society the Commission will be 
undertaking work during the course of 1995 to put in place an appropriate 
regulatory framework. 
n THE APPROACH CHOSEN AND THE SCOPE OF THIS GREEN PAPER 
The establishment of a consistent approach for the Union towards the development 
of telecommunications infrastructure must be seen against the overall objectives of 
the Union's policy. The approach chosen focuses on those issues which have a clear 
European dimension and for which solutions are essential in order to assist the 
development of the Information Society in Europe. Such an approach is mandated 
by the principle of subsidiarity. Agreement on these issues will stimulate the further 
development of both advanced and basic communications networks and services at a 
European as well as a national level. The approach is summarised below. 
The approach builds on the market and technological developments in Member 
States, as well as the political initiatives in certain countries seeking to introduce 
greater network competition. (These trends are analysed in Sections III and IV). It 
examines in Sections V and VI the social challenges and, in particular, the 
opportunities for new employment which a competitive infrastructure environment 
may offer and the adaptation of that environment to the priority of universal service. 
The approach proposed is consistent with main lines of Union policy in 
telecommunications to date (which are set out in detail in Section VII and VIII). It 
must also be viewed in the context of the new political priorities flowing from the 
Treaty of European Union, in particular, the importance attached in Title XII of the 
o 
Treaty to the establishment of Trans European Networks . 
The European Union is actively pursuing the development of trans-European 
telecommunications networks in the context of a number of proposals in the fields, 
such as the Integrated Services Digital Network (ISDN) and Integrated Broadband 
Communications (TEN-IBC) . The Commission has indicated that it will propose 
overall Guidelines on Trans-European Networks in telecommunications. Beyond 
these initiatives the European Union is actively engaged in promoting advanced 
communications networks and services through its research programmes . 
Finally, the common approach must also look beyond the Union to take full account 
of developments throughout Europe and in the markets of our major trading 
partners. The Union is actively pursuing the multi-lateral negotiations on Basic 
Telecommunications Services in order to open up the global trading environment for 
networks and services within the context of the GATS. 
8 Article 129b of the EC Treaty indicates that "within a framework of a system of open and competitive 
markets, action by the Community shall aim at promoting interconnection and interoperability of 
national networks as well as access to such networks". 
9 Communication from the Commission to the Council and the European Parliament on preparatory 
actions in the field of Trans-European Networks: Integrated Broadband Communications (TEN-DBC) 
COM(93) 372 final, 22.7.93 and Communication from the Commission related to the development of 
the Integrated Services Digital Network (ISDN as a trans-European Network and the related 
proposals for a guidelines for the development of ISDN as a trans-European network and for a multi-
annual Community action, COM(93) 347 final, 1.9.93 
10 See, in particular, Council Decision of 7th June 1991 adopting a specific research and technological 
development programme in the field of communications technologies (1990 to 1994)(91/352/EEC; 
OJ L192/8, 16.7.91 - the RACE programme. 
12 THE APPROACH CHOSEN : 
1. Builds on the existing principles of the Union's telecommunications policy 
and in neighbouring fields and, in particular, the future vision of 
telecommunications as most recently set out in the Commission's Green 
Paper on Mobile and Personal Communications11 ; 
2. Promotes the emergence of a fair competitive environment in the 
Information Society both within the European Union and in third country 
markets, in particular, with regard to access to such markets ; 
3. Draws on developments in current national environments, and, in 
particular, the moves undertaken in a number of Member States to develop 
infrastructure competition , as well as taking into account technological 
and market developments both within the European Union and world­
wide. 
The studies carried out for the Commission in preparation for this Report 
form an integral part of the consultation process and will be made 
available on request (Details are set out in Annex 2); 
4. Develops pan-European and global approaches to the future regulatory 
framework for telecommunications; 
5. Points towards a coherent regulatory framework which strengthens 
existing Union policies in neighbouring areas, such as in the fields of 
broadcasting, culture and intellectual property rights, needed to bring 
about the Information Society and in particular, to spread the benefits of 
stronger growth, competitiveness and employment throughout the Union 
to each of Europe's citizens. 
The debate on infrastructure is also high on the global political agenda, with 
important initiatives being undertaken in all regions of the World. For that reason it 
is especially appropriate that early in 1995 the Commission is hosting a meeting of 
Ministers from the Group 7 countries on issues associated with the Information 
Society. 
11 Green Paper on a common approach in the field of mobile and personal communications in the 
European Union, COM(94) 145 final, 27.4.94 
See in particular : 
- Consultation Publique organisée par Bruno Lasserre à la demande de Gérard Longuet : Quelle 
réglementation pour les télécommunications françaises?, Direction Générale Postes et 
Télécommunicadons, April 1994, and Les autoroutes de l'information, Rapport au Premier ministre 
par Gérard Théry, September 1994 
- Study of the International Competitiveness of the UK Telecommunications Infrastructure, DTI, 
February 1994, and 
- Report by McKinsey for the Ministerie van Verkeer en Waterstaat, Telecommunicate in 
Nederland : op weg naar wereldklasse, June 1993 
10 
The scope of infrastructure covered by the Green Paper 
Part II of the Green Paper covers issues of telecommunications infrastructure as a 
whole, drawing on the policies already set out in relation to the specific sectors of 
satellite communications and mobile and personal communications . It does not 
therefore specifically address those sectors, though they are part of the overall vision 
of the rapid evolution towards a completely new telecommunications environment 
based on the full integration of fixed, mobile and satellite technologies. 
The focus of this Green Paper is nevertheless terrestrial transmission infrastructure 
for telecommunications. ' Terrestrial transmission infrastructure for telecom­
munications means the basic transmission capacity which is the raw material from 
which telecommunications networks and services are built (see figure II-1). 
The ensemble of telecommunications services available in a country or region may 
also be referred to as its "telecommunications infrastructure", The Council has 
recognised that the provision of adequate "telecommunications infrastructure" in this 
sense is best achieved in a competitive market environment. The liberalisation of 
telecommunications transmission infrastructure as discussed in this Green Paper is a 
key step in stimulating the establishment of such a market for telecommunications 
services. 
The scope of issues affecting infrastructure covered by the Green Paper 
Council resolution 93/C213 of 22 July 199314 places this Green Paper in the context 
of the on-going liberalisation of the telecommunications sector. For that reason and 
in order to ensure a coherent and comprehensive approach the Paper must also 
address issues related to service provision, (such as the framework for 
interconnection and the licensing of telecommunications services) and access to 
common resources, (such as frequency or numbers), which might be considered to be 
more strictly an issue of service competition. Nevertheless such issues are so closely 
bound to the establishment and operation of infrastructure that issues associated with 
these areas must at least be raised. 
Beyond the regulatory agenda immediately connected with infrastructure 
competition, the Information Society raises fundamental challenges brought about by 
13 Green Paper on a common approach in the field of mobile and personal communications in the 
European Union, COM(94) 145 final, 27.4.94 and Green Paper on a common approach in the field 
of satellite communications in the European Community, COM(90), 20.11.90 and Commission 
Communication on Satellite communications : the provision of and the access to - space segment 
capacity, COM(94) 210 final, 10.6.94 
14 OJC213,6.8.94 
11 
Figure II.l. Telecommunications Infrastructure in the context of 
telecommunications networks and services 
The shaded boxes in the diagram below represent telecommunications 
infrastructure 
User Applications 
Telecommunications Services 
Switched telecommunications 
networks 
(including switching signalling 
network management) 
Tô!ecpmm««iûatloiis transmission capacity 
;Ëti8!iII!iiIi!I 
^^^^^^^^Ê ^^^^^^^^H Radio ïniks 
?ll:liliÉiiHliiill! 
llllÉlllillÉllI Satellite links 
Satellites 
Satellites Earth 
stations 
I I I 
Requires access to 
Rights of way Requires access to 
Frequency 
spectrum Requires access to 
space segment 
12 
the convergence of telecommunications, information technology and broadcasting. 
This Green Paper contributes to the debate on these issues in examining the question 
of how the future regulatory environment should evolve to meet the challenges of 
convergence. Consideration of those developments is not however a precondition 
for either discussion of the principle of infrastructure liberalisation set out in Part I or 
steps to apply and extend existing principles of telecommunications policy to 
infrastructure. 
Many of the issues raised in looking beyond infrastructure competition are not only 
relevant to telecommunications, but are central to the overall process of developing a 
framework for the Information Society. The Commission is actively developing 
policies inNmany of these neighbouring areas, such as in relation to intellectual 
property rights, the regulation of broadcasting and rules promoting plurality in the 
media. These initiatives in neighbouring fields are highlighted in the Green Paper. 
This Green Paper does not claim to find solutions to these issues which are at the 
heart of longer term and broader regulatory evolution within the Union. It 
nevertheless is vital to launch a debate now on many of these issues, in order to view 
them in a European, rather than purely national context. 
13 
Ill THE CURRENT SITUATION 
m.l Communications Infrastructures 
As pointed out in the first part of the Green Paper, a number of infrastructures 
capable of carrying telecommunications services exist in Member States. However, 
the major part of public telecommunications services are provided by the national 
networks operated by the Telecommunications Organisations (TOs). 
III. 1.1 Public telecommunications networks 
Table III.l.I provides a list of the entities currently licensed to provide fixed 
telecommunications networks in Member States and the three accession countries 
and the corresponding numbers of main telephone lines. 
Infrastructure competition for public telecommunications networks exists in Finland, 
Sweden and the UK. In Denmark and Italy, regional operators or operators with 
responsibility for different service areas have recently been consolidated and this 
process is also in progress in Portugal. 
14 
Table HI.l.l - Operators licensed 
telecommunications services. to provide infrastructure for public 
Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
UK 
Austria 
Finland 
Sweden Operators) Infrastructure Thousands of 
regulation mainlines 
(end 1993)15 
Belgacom 
Tele Danmark 
Telecom Danmark 
Four regional operating 
companies 
DBP Telekom 
OTE 
Telefonica 
France Telecom 
Telecom Eireann 
Telecom Italia 
P & T Administration 
PTT Telecom 
Portugal Telecom 
CPRM 
BT 
Mercury 
Kingston Telecom 
CATV operators 
Other licensed operators 
PTV 
Radio Austria 
Telecom Finland 
48 Local telephone 
companies 
Telia 
Tele 2 Monopoly 4396 
Monopoly 3030 
Monopoly 
Monopoly 
Monopoly 
Monopoly 
Monopoly 
Monopoly 
Monopoly 
Monopoly 
Monopoly 
Competition 
Monopoly 
Competition 
Competition 37000 
4744 
14254 
31000 
1150 
24167 
221 
7630 
3300 
26500 
200 
200 
300 
Negligible at 
this time 
3579 
747 
2014 
5972 
0.8 
15 Source : IDATE, 1994, except for UK (Office of Telecommunications), Finland (Ministry of 
Communications Finland) and Sweden (National Regulatory Authority for Sweden) 
15 
///. 1.2A Iternative infrastructure 
In addition to the licensed operators listed in Table III.l.I, two other types of 
network currently exist which have the potential to carry public telecommunications 
services: own-use infrastructure operated by public utilities and cable television 
(CATV) networks. 
The extent to which these alternatives to the public network are used varies between 
Member States, and is largely dependent on the regulatory framework in each 
Member State. 
Utility networks 
In all European countries there are utilities which already have telecommunications 
networks or which have access to rights of way which are a pre-requisite for such 
networks. However, their potential for immediate deployment for commercial 
purposes if regulation allowed this is limited. 
On the basis of studies carried out for the Commission on alternative infrastructures, 
Part I of the Green Paper concluded that further investment in additional facilities by 
the utilities would be required. In particular, the study found that the benefits for 
utilities were more likely to be lie in the construction of long distance rather than 
local infrastructure. Exploitation of long distance infrastructure would require either 
construction of local access or use of existing TO connections. 
CATV 
Cable television networks, by contrast, already consist of local as well as long 
distance infrastructure. However, the level of development of these networks varies 
considerably across Europe. 
In two Member States, Greece and Italy, CATV does not exist and development of 
cable is still very limited in Spain and Portugal. In the remaining Member States, 
penetration rates for cable vary considerably from more than 90% in Belgium, 
Holland and Luxembourg to around 5% in France and the United Kingdom. In 
terms of subscribers Germany represents the biggest national market with nearly 15 
million subscribers and a penetration rate of around 45%.16 
16 For further details, see IDATE, 1994. 
16 
Table m.1.2 - Cable TV Networks in the European Union17 
Number of Households Subscribers19 
Operators passed18 
Belgium 38 97.4% 95.5% 
Denmark 650020 73.6% 57.3% 
Germany 1 64.6% 40.5% 
Greece 
Spain 30 8.1% 1.1 % 
France 16 25.8% 6 % 
Ireland 13 >50 % 40 % 
Italy r.. 
Luxembourg 120 99.5% 81.4% 
Netherlands 358 90.3% 86.4% 
Portugal 1 1.6% 0.3% 
UK 23 12.6% 2.8% 
m.2 The Market Situation 
Despite the turndown in economic activity in much of the OECD area, the 
telecommunications sector continues to grow substantially in both volume and value 
terms. Total turnover for telecommunications services in the European Union in 
1993 was about 120 billion ecu or nearly 3 per cent of overall GDP, despite falling 
price levels in the sector. The nominal growth rate over the last 5 years has averaged 
about 7 per cent annually. 
17 Source : IDATE, 1994 
18 Percentage of television-owning households passed by the cable TV networks 
19 Percentage of television owning households actually subscribing to a cable TV network. 
20 These are networks serving more than 25 subscribers. There are around 4,800 additional networks 
with less than 25 subscribers. 
17 
As an indicator of telecommunications usage and growth, international public 
telephone traffic in the Union rose by just over 10 per cent in 1993 compared to 
volume increases of about 11 per cent in 1991 and 1992. 
It is the new service market areas that are producing the largest growth rates, 
particularly where competitive service'provision has occurred. In particular, mobile 
communications has displaced data communications and value-added services as the 
most dynamic part of the service market. In the Union, mobile services account for 
about 5 per cent of subscriber lines and nearly 10 per cent of service revenues. In the 
rest of the European Economic Area the figure is significantly higher. By the 
beginning of 1998, the date already agreed for the full liberalisation of 
telecommunications services, there is the real prospect of well over 10 per cent of 
telephone subscribers in the enlarged Union being served by competing wireless 
operators. 
Table m.2 - Turnover of EU information sector in 1993.21 
E lectronic publishing 
2% 
Publishing 
22% 
Micro-electronics 
2% 
Audiovisual services 
10% 
Consumer electronics 
5% Telecom services 
27% 
Telecom equipment 
6% 
Computer equipment 
11% 
Software & Services 
15% 
Total Market : 414 billion ECU 
21 Source : IDATE 
18 
In contrast, despite the development of integrated or multimedia services 
(combinations of voice, data and images), and considerable speculation about the 
emergence of multimedia networks, turnover for these new markets in Europe is as 
yet limited. The first applications are occurring in specific business markets such as 
intra-company advanced communications, video-conferencing, electronic data 
interchange, broadcasting and news services for the financial sector, certain ISDN 
applications, the emergence of some tele-working and the exploitation of some CD 
ROM products. 
However, there is no significant turnover yet from thé provision of multimedia 
services to. the residential sector. Moreover, telecommunications and television or 
broadcasting services are in the main currently supplied by quite separate networks. 
This is the case even in the UK where in some areas telephone and cable TV services 
are being marketed jointly by companies with local cable TV and telecommunications 
franchises. 
Total subscribers to cable television in the Union at the end of 1993 were 26 million, 
half of which were in Germany. This total corresponds to approximately 15 per cent 
of telephone lines. 
The total turnover of broadcasters in the Union at the end of 1993, which includes 
both content and transport or transmission revenues, was about 27 billion ecu. 
Turnover for the provision of cable television was approximately 3 billion ecu. 
These totals are equivalent to about 22 per cent and about 2,5 per cent respectively 
of telecommunications services revenues. 
in.3 The Regulation of Infrastructure in Member States 
///. 3. J Public telecommunications infrastructures 
Among the Member States and accession countries, only Finland, Sweden and the 
UK currently permit competition in the provision of public telecommunications 
infrastructure. 
The extent to which public telecommunications operators are permitted to provide 
broadcasting or multimedia services is unclear, although in the UK, BT is expressly 
prohibited from supplying broadcasting services on its telecommunications network. 
19 
Table BQT.3.1 - Current restrictions on the activities of Telecommunication 
Operators in the EU22 
Production and Transmission of "Broadcast and Multimedia 
Services" 
BELGIUM Uncertain area of the law due to the division of competence within the federal structure. The 
combination of the various applicable legal provisions at Federal and Flemish and French 
Community levels suggest that there is currently a prohibition on TOs producing content or 
transmitting "broadcast" services. There exists the possibility that services in response to 
individual requests may be provided . 
DENMARK No explicit barriers to transmission of multimedia services (TeleDenmark being the main 
provider of infrastructure for the transmission of broadcast services). However, explicit 
restrictions preventing national TOs from producing such services 
GERMANY There are no explicit barriers to the transmission of multimedia services by TOs. DBP 
Telekom is scheduled to be able to produce such services in 1995 after privatisation. 
GREECE The combination of the various applicable legal provisions (including telecommunications 
licensing requirements) indicates in practice that TOs may neither be involved in the 
production of content nor transmit "broadcast" services; these restrictions may extend to 
services in response to individual request. 
FRANCE No explicit barriers 
SPAIN Implicit barrier against the production and transmission "broadcast" services (subject to 
possible future change in government policy). It is arguable that a TO can transmit services in 
response to individual requests. 
IRELAND No explicit barriers. 
The Constitution of Ireland explicitly protects freedom of expression, subject to rules on 
obscenity and public policy 
ITALY No explicit barriers. However, the right to freedom of speech protected by the Constitution is 
subject to the following : 
1. broadcasting services expressly excluded from télécoms licence; 
2. broadcasting licences not granted to operators not engaged in the "entertainment market" 
pursuant to their charter, and 
3. private broadcasting licence cannot be granted to State-owned companies. 
LUXEMBOURG There areno explicit barriers preventing TOs from producing content for multimedia services, 
nor from transmitting such content over the TO's infrastructure. 
The There are no explicit barriers to the production of content by TOs, but there is a restriction on 
NETHERLANDS *he transmission of such content over their own infrastructure, although transmission may 
occur via CATV networks; transmission might also be possible over CATV networks owned 
by the TO, subject to it obtaining a broadcasting licence. 
PORTUGAL No explicit barriers 
UK All national TOs may not use national licences for the provision of content (to be reviewed in 
2001), but can do so at a regional level in specified circumstances. 
National TOs cannot convey "broadcast services" but may convey services in response to 
individual requests (to be reviewed in 1998). 
AUSTRIA There are no explicit barriers to the production of broadcast services, however, their 
transmission is subject to the de facto monopoly of the public broadcasting entity, it may be 
possible to provide services in response to individual requests. 
FINLAND No explicit barriers 
SWEDEN There are no explicit barriers preventing TOs from engaging in either the production or 
1 transmission of television and radio programmes over their networks. 
Content refers to information, other than voice telephony, data communications or value added services, of an audio, 
visual or audio-visual character, for its commercial transmission over infrastructure. 
Production of Content refers to the right to produce or compile content (as defined). 
22 Source : Coudert, 1994 
20 
///. 3.2 A Iternative network infrastructures 
An overview with regard to current alternative network infrastructure licensed in the 
Member States for defined telecommunications purposes is given in Table III.3.2. 
In six Member States (Belgium, Germany, Greece, Spain, Italy and Portugal) the 
possibility exists for the self-provision of infrastructure by utilities for their own 
internal communication needs, such as the railways, motorways, energy and water 
companies. 
In four Member States (Belgium, Spain, Ireland and the Netherlands) wider rights 
exist for licensing, on a discretionary basis, the self-provision of infrastructure by 
non-utility corporate or closed user groups. However, the use of that infrastructure 
is limited to the internal communications needs of the organisations concerned. 
In two Member States (Germany and France) in addition to the discretionary 
licensing of corporate/closed user group networks for internal communications , 
such alternative infrastructure can be used by third parties, subject to specified 
conditions . 
In Denmark there is a general possibility to self-provide infrastructure. In the United 
Kingdom, full infrastructure competition is permitted, either on the basis of specific 
individual licences, or through the grant of class licences for certain types of 
infrastructure provision. 
Among the accession countries, Austria permits the self-provision of infrastructure 
by utilities for internal communications purposes, but otherwise reserves 
infrastructure provision to PTV. Sweden and Finland both allow full infrastructure 
competition. 
23 This includes those networks belonging to the utilities in the case of France. France has established a 
system for authorising independent networks ("réseaux indépendants") for such purposes. 
24 For example, in Germany, certain entities, (primarily public utilities) can set up their own 
infrastructure for internal communications, whilst private networks can be set up only within a 25 km 
area, or beyond that only if conforming with certain technical configurations. For further detail see 
Coopers & Lybrand, 1994. 
21 
Table HL3.2 - Current regulation of alternative telecommunications 
transmission infrastructure 
CJ*HT" " 55<r*5o*wr7 jbistrcUonaty " Commercial 
Exw»j>tto*i For XJctftslne for Licking for Third fatty Geftfcral 
Alternative 
Provision Utilities Srfr-ProvlAk>n cue*26. Provision 
Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
UK No 
No 
No 
No 
No 
No 
No 
No 
No 
No 
No 
Yes Yes 
Yes 
Yes 
Yes 
Yes 
No30 
No 
Yes 
No 
No 
Yes 
No No27 
Yes 
Yes 
No 
No 
Yes 
Yes 
No3* 
Yes 
Yes 
No 
Yes No 
Yes 
Yes 
No 
No 
Yes 
No 
No 
No 
No 
No 
Yes No 
No .28 
29 Yes 
No 
No 
Yes 
No 
No 
No 
No32 
No 
Yes 
Austria 
Finland 
Sweden34 No 
Yes 
Yes Yes 
No 
No .33 No 
Yes 
No No 
Yes 
No No 
Yes 
Yes 
Source : "The impact of liberalisation of alternative Terrestrial Infrastructure for non-reserved 
services", Coopers & Lybrand, 1994, and additional analysis. 
25 
26 
27 
28 
29 
30 
31 
32 
33 
34 The exact categories of exempt organisations and nature of exemptions from the general obligation to use TO infrastructure vary 
according to the Member State concerned. 
Corporate networks / Closed User Groups 
Belgian regulation provides in principle for licensing of private transmission links, but only where Belgacom is not prepared to 
provide a technically equivalent link at a normal tariff and within a reasonable period. 
Shared use of internal networks is possible under certain circumstances. 
However limited to particular configurations and maximum distances. 
No specific exemption for utility companies - application must be made by them for an authorisation to operate an independent 
network ("réseau indépendant") 
The Italian Postal Code provides for the possible discretionary licensing of private telecommunications systems, but only if there is 
no or an inadequate public service between the points to be linked. 
Proposals are currently before the Dutch Parliament to introduce competitive infrastructure provision by the creation of a second 
national infrastructure provider. 
Austrian regulation provides in principle for licensing of private transmission links, but only where PTV is not prepared to provide a 
technically equivalent link at a normal tariff and within a reasonable period. 
There are no restrictions on the building or use of infrastructure for the provision of telecommunications services in Sweden, so there 
is no need for discretionary licensing for self-provision or class exemption for utilities. 
22 
HI. 3.3 Cable TV infrastructures 
Current provisions concerning use of cable TV networks for the provision of 
telecommunications services are summarised in Table III.3.3. In most cases, CATV 
networks are either barred from carrying telecommunications services, (both public 
voice telephony and liberalised services) or do not because the current legal situation 
is unclear, (due to absence of express provisions in the national regulatory 
framework) 
Table Hl.3.3 - Use of CATV networks for the delivery of telecommunications 
services 
Use of cable TV networks for télécoms services 
Belgium 
Denmark 
France 
Germany 
Greece 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
Spain 
UK No 
No 
Non-voice services only 
No 
35 
No legal provision 
36 
no legal provision 
limited use 
No 
No 
Yes 
Austria 
Finland 
Sweden No 
Yes 
Yes 
Source: "L'impact de I'authorisation de la fourniture de services de télécommunications libéralisés 
par les câblo-opérateurs", IDATE, 1994, ECCA and additional analysis 
In France, the regulatory framework has since 1990 permitted CATV networks to 
apply for licences to offer telecommunications services other than voice telephony, 
but take-up has been limited because of limited geographic coverage and the 
exclusion of telephone service. 
35 No cable TV networks available 
36 No cable TV networks available 
23 
In Holland, CATV operators constituting about 55 per cent of the Dutch market are 
participating with the railway company and other utilities in a consortium which will 
form the basis of a second national telecommunications operator. 
Following the duopoly review in the UK, CATV companies have been permitted to 
provide a full range of telecommunications services. 
m.4 Conclusions „ 
Currently, telecommunications services are provided for the most part over the 
infrastructures of the public telecommunications network operators. In the Union 
and accession countries, only Finland, Sweden and the UK permit competition in 
public telecommunications infrastructure provision. 
In general, the exploitation of alternative infrastructures such as utility networks or 
cable TV networks to provide telecommunications services in the Union is extremely 
limited due to the restricted regulatory situation. 
In addition, the current legal situation for the use of cable TV networks in providing 
telecommunications services is unclear. 
The current restrictive regulatory situation on infrastructure is not only holding back 
the cost effective development of pan-European networks and services in Europe but 
also threatens to impede the development and distribution of multimedia products 
and services. 
24 
IV THE MAJOR DRIVERS FOR CHANGE 
IV.l Market and Commercial Developments 
The telecommunications industry is in a period of transition. The two major features 
of technological change - fragmentation and convergence - are shaping the 
commercial environment; fragmentation because new services and new operators are 
emerging, and convergence because the traditional divisions between the 
transmission media for communications are blurring. The telephone is moving from 
the wires in favour of the air and television is moving from the air to utilise wires. 
Moreover, companies from historically quite distinct sectors, telecommunications, 
computing and software, publishing, and broadcasting and entertainment are 
beginning to explore avenues of mutual interest. 
At the heart of the major commercial changes underway in the telecommunications 
sector is the move to digitisation and the tremendous growth in electronic processing 
power both within networks and by terminal equipment. But in addition, the 
advances in transmission (both wire and radio-based) and switching technologies are 
now being actively exploited commercially. 
IV. J. 1 Changing Market Structures 
Although significant competition in fixed infrastructure has only been introduced in a 
small number of European countries, (the UK, Sweden and Finland), traditional 
market structures in the telecommunications sector are changing everywhere as a 
result of competition in some service areas, the development of new services and 
infrastructure competition in other countries outside Europe. 
Firstly, the rapid development of mobile or wireless networks has led to the entry of 
new companies to the telecommunications sector, (for example from the banking, 
utilities and construction sectors) who are participating in some of the consortia 
involved in mobile network investments. 
Secondly, increasing competition in telecommunications services is leading to a 
proliferation of new companies in the sector (both equipment and service providers) 
and a greater involvement of established companies providing various kinds of 
communications services to business, e.g., Reuters, Visa, IBM, Sita, EDS, Swift etc. 
Thirdly, increasing competition and market opening in the international business 
telecommunications sector has meant that traditional telecommunications operators 
are now moving outside their traditional geographic boundaries, following their 
larger customers and also forming joint ventures. In many cases the traditional 
operators are also following individual customers abroad by means of card-based 
service, where telecommunications services can be used on the move and billed 
domestically or to a credit card account. 
In addition, corporatisation and privatisation of many established publicly owned 
TOs, is reinforcing these trends through new entities entering the sector and alliances 
25 
involving strategic partnerships from both inside and outside Member States. Within 
the European Union, most Member States have at established an arms length 
relationship with their operator through the implementation of a formal contractual 
relationship, whilst private share holdings in the established TOs exist in the UK, 
Holland, Denmark, Spain, Italy and Portugal and plans are underway to increase the 
level of private investment in the latter two countries. Privatisation is also actively 
being considered in most of the other Member States and throughout central and 
Eastern Europe. The shift away from traditional public sector management of the 
telecommunications sector, combined with the development of new service markets 
is leading to an increasingly complex picture of alliances, groupings and partnerships. 
Rapid technological and commercial developments and the prospect of thé take-off 
of multimedia services in the context of the further growth of the information 
economy are also leading to significant alliances and agreements in anticipation of 
market opportunities. This is most noticeable in the US where companies are also 
attempting to overcome the established lines of business restrictions imposed 
between local and long distance and between fixed and wireless operations. 
However, the changing market structures also encompasses forward integration into 
new service areas, though securing access to content (films, TV programming, 
published media) and link-ups between telecommunications and cable operators, 
service providers and software companies. 
Finally, the development of telecommunications services competition and the growth 
in mobile and wireless operators has led to the emergence of a new breed of service 
provider which packages and prices services to the final customer. In some 
instances, particularly for larger business clients, this intermediary between the 
infrastructure or network operator and the customer may add significant value by 
integrating a number of communications systems. In other cases, particularly for 
international services, suppliers resell services at prices below normal tariffed levels. 
The increasing commercial importance of the systems integrator or service provider 
is aided by digitisation and the adding of intelligent features to both the network and 
to terminal equipment, making it easier to tailor services to customers and bill them 
accordingly. 
26 
Table IV.1.1 - Recent alliances/acquisitions37 
Successful bids 
Date 
Aug-94 
Jul-94 
Jul-94 
Jul-94 
. Jul-94 
Jun-94 
Jun-94 
Dec-93 
Nov-93 
Oct-93 
Aug-93 
Jun-93 
Jun-92 
Oct-91 
Sep-91 
Sep-90 
Aug-90 
Apr-90 Purchaser 
LDDS 
US West 
Bell Atlantic 
Cellular 
AirTouch 
Nextel 
AT&T 
Eunetcom 
US West 
Nextel 
Bell Atlantic 
AT&T 
BT 
US Sprint 
Bell Atlantic 
AT&T 
Bell Atlantic & 
Ameritech 
GTE 
MCI Purchaser 
turnover 
$bn 
î 
u 
n/a 
1 
0.1 
67 
n/a 
11 
0.1 
13 
67 
20 
10 
13 
58 
25 
20 
12 Target/Partner 
WilTel 
Wometco/Georgia Cable 
Nynex Cellular 
US West Cellular 
OneComm 
Unisource 
Sprint Corporation 
Time Warner 
Motorola mobile licences 
Iusacell 
McCaw Cellular 
MCI 
Centel 
Metro Mobile CTS 
NCR 
Telecom 
New Zealand 
Contel 
Telecom USA Activity of 
target 
Inter-exchange 
CATV 
Mobile 
Mobile 
Mobile 
Global outsourcing 
Inter-exchange 
Media/CATV 
Mobile licences 
Mobile 
Mobile 
Inter-exchange 
LEC 
Mobile 
IT manufacture 
PTO 
LEC 
Inter-exchange Value 
of deal 
$bn 
2.5 
1.2 
13.0 
18.0 
0.7 
n/a 
4.2 
2.5 
1.8 
1.0 
12.3 
5.3 
2.9 
2.5 
7.4 
2.5 
6.3 
1.3 Share 
of 
target 
% 
100 
100 
100 
100 
100 
n/a 
20 
23 
100 
42 
100 
20 
100 
100 
100 
68 
100 
100 
Unsuccesful bids 
Date 
Aug-94 
Jun-94 
Apr-94 
Mar-94 
Feb-94 Purchaser 
MCI 
EDS 
SWBell 
AT&T 
Bell Atlantic Purchaser 
turnover 
$bn 
12 
10 
11 
67 
13 Target/Partner 
Nextel 
Sprint 
Cox Enterprises 
Energis 
Tele 
Communications Activity of target 
Mobile 
Inter-exchange 
CATV 
Transporter 
CATV Value of 
deal^bn 
1.3 
20.0 
5.0 
0.3 
22.0 Share 
of 
target 
% 
17 
100 
100 
33 
100 
IV.I.2 Blurring of the traditional boundaries 
Until quite recently, telecommunications and broadcasting networks could be 
distinguished very clearly from one another and from other communications means, 
not only by the networks themselves but by the services provided on them. 
Commercial developments are already blurring these distinctions. 
37 Source: Mercer, 1994 
27 
Telecommunications networks have traditionally provided two-way private voice 
communications between parties whilst broadcast networks have supplied 
simultaneous open communications, (sound only or sound and image), from one to 
many points. 
However, an increasing proportion of telecommunications traffic consists of one way 
communications or of non-voice communication. Adding a personal computer or 
other terminal to the end of a telecommunications line instead of a telephone 
multiplies the possibilities. Accessing information services, databases or premium 
services by telephone or PC is already common. Use of fax machines is also now 
widespread. Although video-conferencing and more particularly video-telephony 
have yet to take-off, Reuters is already providing specialised television services in 
addition to its traditional telecommunications market information services to the 
financial sector or anyone who wishes to subscribe. Security services such as the 
surveillance of premises are also being marketed by telecommunications operators. 
In addition, the popularity of Internet and other interconnected networks has now 
spurred the development of electronic mail, beyond the confines of private local or 
intra-company networks. Some telecommunications operators are also 
experimenting with video on demand or related services, mostly in response to 
competition or the prospect of competition in telephone services. 
On the broadcasting* side, more specialised and targeted services are also appearing 
even if these are currently more developed in North America than in Europe. The 
limited capability of the return path in many of these cable TV networks, means, 
however, that services are limited to pay TV packages or home shopping, the latter 
used in conjunction with the telephone. However, networks could be upgraded to 
provide more sophisticated services, particularly if restrictions on supplying 
telephone service are lifted. 
TV. 1.3 Market opening 
The combination of market and commercial developments described above, and the 
blurring of traditional divisions between services and between service providers or 
operators, is leading to an inevitable opening of markets even if the major part of 
telecommunications services are still provided by the traditional operators. 
This inevitably implies that in some markets, service providers may be competing 
against fully integrated network and service operators or even against integrated 
equipment and service providers. In addition, mergers, alliances and agreements are 
being agreed or planned in advance of the opening of some markets. 
These commercial developments raise the important issue of competitive safeguards 
at a number of levels and the need for the definition of an appropriate regulatory 
framework. These are highlighted in Section VI of the Green Paper. 
28 
IV.2 Technological Developments 
Technological developments are one of the main forces shaping the 
telecommunications sector. Over recent years, developments in integrated circuits 
and digital technology have led to the modernisation of fixed telecommunications 
networks in order to achieve cost savings and performance improvements. This has 
also led to the rapid emergence of mobile telephone networks. 
Over the coming years, the sector will be influenced by technology developments in 
four main areas: 
• broadband transmission and switching 
• multimedia applications 
• wireless technologies 
• intelligent networks. 
The implications are explored more fully below. 
IV.2.1 Broadband technologies will permeate the network infrastructure 
The widespread deployment of optical fibres supporting Synchronous Digital 
Hierarchy (SDH) transmission and Asynchronous Transfer Mode (ATM) switching 
technologies, ultimately in both local access and core networks, will change the 
fundamental nature of infrastructure. It will evolve from one that is today limited in 
the capacity it can provide to customers, to one of virtually unlimited capacity. The 
task of operators and service providers will be to ensure that such capacity is made 
available to users as efficiently as possible by deploying appropriate technologies in 
the local access network. 
SDH represents an evolution of current transmission hierarchies, not only allowing 
optical fibre capacities to be more suitably exploited, but adding flexibility of access 
and superior reliability through topological and network management features. 
ATM, based on fast packet switching concepts, will complement SDH by providing 
high bit-rate switched services to end users. It is this technique which is generally 
regarded as the basis for the future Broadband ISDN. 
Although capacity may be huge, using the available bandwidth and sharing it among 
users is still a problem. In the shorter term, novel methods of enhancing the 
information-carrying capacity of existing copper-based cables are emerging, spurred 
on by current regulatory constraints and market conditions in the US. HDSL 
provides high-speed digital capacity to the customer premises over copper-pair cable. 
A similar copper-based technology, ADSL,39 is being employed by some operators 
38 High-bandwidth Digital Subscriber Line 
39 Asymmetric Digital Subscriber Loop 
29 
for video-on-demand services, as a means of addressing the entertainment market. 
Such approaches can be seen as both complementary and competitive to optical fibre 
solutions, depending on the configuration chosen. They are complementary in that 
they provide high-speed terminations in partial-fibre networks. They are competitive 
insofar as advances in data compression technology are able to compensate for lack 
of available bandwidth, thereby enabling the copper pair to deliver a sufficient 
number of video channels to the home. 
Developments in broadband technology, complemented by parallel developments in 
techniques for data compression, mean that future telecommunications networks will 
be able to handle real-time television in a way that was previously the preserve of the 
cable TV and broadcasting networks. This technological convergence of two 
previously separate fields paves the way for innovation and increased investment in 
the fixed network infrastructure. 
IV. 2.2 Convergence will encourage multimedia applications 
The fields of computers and telecommunications began to converge over a decade 
ago, resulting in the birth of a new family of innovative services which became 
known as value-added telecommunications services (such as voice mail or video­
conferencing). À similar convergence between telecommunications and audio-visual 
worlds now promises to bring with it even more radical changes through the 
introduction of multimedia services. The real significance of this convergence is that, 
unlike the previous case of information technologies (IT), the services resulting from 
this new combination of telecommunications and audio-visual sectors will not be 
limited to business users, but will have mass market appeal. The consequences in 
terms of both service and manufacturing industry impact are potentially enormous. 
The convergence arises primarily from technological synergies which enable both 
media and telecommunications vehicles to be combined into a single delivery 
platform. This platform has been popularly labelled the information superhighway; 
in essence it refers to tomorrow's telecommunications infrastructure. 
Multimedia services will require convergence at the user terminal level, in the form of 
a multifunction processing and display device combining the attributes of an 
advanced PC and a digital television receiver. Until digital television becomes a 
reality, PCs are leading the way with local multimedia applications being produced 
on CD-ROMs, identical in make-up to Compact Discs. The evolution of new 
terminal products into a mass market consumer electronics item will take a number 
of years, but the challenge for the telecommunications industry will be to encourage 
users to migrate from local CD-ROM-based applications to those supplied over 
remote connections via a cheap and efficient broadband network infrastructure. 
IV.2.3 Wireless solutions are playing an increasingly important role in the access 
network 
The 1994 Green Paper on Mobile and Personal Communications reviewed the main 
technology and market trends in the mobile area. The Paper recognised that the 
30 
advent of personal communications promises to revolutionise the sector and expand 
the market. However, this requires a convergence of fixed and mobile networks, not 
only at the level of a single, global service offering to users, but also through a 
substitution by wireless technologies of network elements hitherto made up of wired 
cable systems. 
Early examples of such substitution include the use of analogue mobile technology 
for fixed rural communications by operators in Spain and eastern Germany, and the 
application of DECT-based systems to the local subscriber loop by Ionica, recipient 
of a new operating licence in the UK. Although both solutions represent new ways 
to tackle old problems, it is perhaps significant that the truly innovative approach is 
that proposed by the new market player. It is also noteworthy that speed of service 
roll-out appears to be as important as cost in assessing the viability of radio-based 
solutions, an indication of the changing competitive market. 
By granting mobile telephone licences to at least two operators in all Member States, 
governments have already taken an important step towards the introduction of 
parallel alternative radio-based infrastructures. 
IV. 2.4Network Intelligence will cement elements of infrastructure together 
The requirement of mobile communications networks to track the whereabouts of 
thousands of users, and the meshing of fixed and mobile networks to implement 
future concepts of terminal and personal mobility will raise new demands for 
enhanced intelligence in the fixed telecommunications network. This requirement 
will be compounded by an increasing need to provide for customer control of 
bandwidth-on-demand and network management services in the context of 
broadband infrastructures. 
The market for value-added telephony services, expected to receive a new impetus 
when voice telephony services are liberalised in 1998, has already resulted in a shift 
of the architecture of switched telephone networks towards the so-called Intelligent 
Network concept. 
Closely linked to the development of the intelligent network is that of network 
management. Sophisticated telecommunications network management systems will 
allow diverse telecommunications infrastructures to be managed as a whole. 
Network intelligence and network management systems are the cement holding 
together the various elements which make up an end-to-end service, allowing 
multiple organisations to compete and co-operate in order to supply services to the 
customer. 
40 Digital European Cordless Telecommunications, see Glossary 
31 
IV. 2.5Different network architectures are possible; some will depend on 
convergence between telecommunications and audio-visual sectors 
Table IV.2.1 below shows four possible configurations of network infrastructure 
based on the technological trends described above. These are based on studies 
carried out on behalf of the Commission41 and represent current perceptions of 
network architectures most likely to be implemented over the next decade. They 
reflect the widely-held views that: 
• the fibre-to-the-home concept requires a convergence of telecommunications 
and audio-visual services to become financially viable; 
• - the large investment already made in existing copper-based networks will lead 
operators to apply technologies aimed at enhancing its capacity; 
• a combination of optical fibres and coaxial cable will constitute the standard 
cable television network architecture for some time to come; 
• new possibilities are opened up by the use of wireless technologies in the local 
access network. 
Whilst at present separate services tend to use separate infrastructures, in the future 
it will be possible for at least two of the network infrastructures highlighted in Table 
IV.2.1 to handle both telecommunications and broadcasting services, as well as the 
many new services associated with multimedia. The table comments on each 
configuration without making any predictions as to which is most likely to be taken 
up. It is probable that all four architectures will be deployed in the light of specific 
circumstances and needs. 
The technological developments associated with the evolution of network 
infrastructure, and the inevitable convergence between telecommunications and 
audio-visual sectors that this makes possible, emphasise the need for a review of the 
current regulatory environment concerning telecommunications infrastructure to 
ensure that unnecessary barriers to these developments are removed. 
41 See, in particular, Impact of liberalisation of alternative terrestrial infrastructure for non reserved 
services, Coopers & Lybrand, 1994 
32 
Table IV.2.1: Evolution of access network architecture 
Architecture Comments 
- Needs convergence of telecommunications and audio-visual fields 
Fibre - Requires sufficient revenues to support investment 
to the - High costs due to both equipment and civil works 
Home - Application may be limited to high-density areas 
(FTTH) - High investment requirement may lead to high usage tariffs and risk of 
cross-subsidy from basic telephony services 
Fibre - Can be supported by entertainment services alone. 
to the - No obvious solution for voice services - at present mainly overlay, with 
Curb trials of integrated solutions under way in the US 
(FTTC) - Probably the standard CATV architecture over the coming decade 
plus - High costs mainly due to civil works associated with installation 
coax 
- Maximises use of existing infrastructure 
FTTC - Allows continued separation of telecoms/audio-visual service provision 
plus - Needs sufficient revenues from télécoms & qwow'-entertainment services 
copper - Defensive TO strategy for entertainment services, but currently seen as 
expensive in relation to potential revenues 
- Requires separate provision of télécoms and audio-visual services in the 
short term, due to narrow bandwidth available on radio path 
FTTC - European mobile/PCN leadership is crucial 
plus - Under-developed fixed infrastructure areas are the initial beneficiaries 
Radio tail - Needs rapid evolution of data compression technology 
- Evolution to UPT could result in low per-user costs and greater capacity 
IV.3 Regulatory Agenda 
The combination of the market developments and technological innovation outlined 
above have been the driving force behind the shifting regulatory agenda for 
telecommunications in Europe. This pattern, mirrored in other jurisdictions, such as 
in the United States and Japan, has led to political recognition that regulatory reform 
of the telecommunications sector is a key element in maintaining economic 
competitiveness, sustaining growth and employment, and in opening to every citizen 
the opportunities provided by new, advanced networks and services. 
These trends were a key element in the acceptance of the inevitability of the 
liberalisation of voice telephony services for the general public during the 1992 
Telecoms Review. They were also a factor in the Council Resolution agreed at the 
Council Meeting of 17 November 1994 which endorsed the liberalisation of 
infrastructure in parallel with the liberalisation of voice telephony services i.e. by 1 
January 1998, subject to certain transitional arrangements. 
33 
That regulatory agenda at a national and European level, both inside and outside of 
the Union, is itself a major driver of further change in the sector. The successful 
opening up of telecommunications services and equipment to competition has 
inevitably created pressures for the extension of this approach to communications 
infrastructure, whilst at the same time technology has increasingly provided ways to 
stretch the boundaries of current arbitrary delimitation between the monopoly and 
liberalised areas. With the advent of the Information Society and the linked 
challenges flowing from the convergence of the telecommunications, broadcasting 
and information technology sectors, new momentum for the removal of unnecessary 
restrictions on the development of new markets and services has been created. 
IV. 3.1 Regulatory trends at a national level within the EU 
At a national level the growing political importance of telecommunications and, in 
particular, the role of advanced networks and services has been recognised by every 
Member State42. This is reflected in the speed with which some Member States are 
opening infrastructure provision to competition. 
As indicated in Section IH.3, the United Kingdom has allowed fully competitive 
provision of infrastructures (both self provision and use of third party infrastructures) 
for all telecommunications services since the early nineties. This is also the position 
in two of the accession Member States, namely, Sweden and Finland. 
As indicated in Table III.3.2 the self- or competitive provision of infrastructures for 
various telecommunications services is allowed to at least a limited extent in every 
Member State. At the same time, the Netherlands and Spain both have plans to 
licence a second national infrastructure provider, and the further relaxation of 
restrictions on the use of alternative infrastructure is under consideration in France. 
Equally, some Member States43 are already actively addressing regulatory issues 
raised by convergence as they recognise the difficulties created by divergent 
regulatory regimes within their own systems for telecommunications and 
42 See in particular : 
- Consultation Publique organisée par Bruno Lasserre à la demande de Gérard Longuet : Quelle 
réglementation pour les télécommunication françaises?, Direction Générale des Postes et 
Télécommunications, April 1994, and Les autoroutes de l'information, Rapport au Premier ministre 
par Gérard Théry, September 1994 
- Study of the International Competitiveness of the UK Telecommunications Infrastructure, DTI, 
February 1994 
- Report by McKinsey for the Ministerie van Verkeer en Waterstaat, Telecommunicatie in 
Nederland : op weg naar wereldklasse, June 1993 
- See also the text of the recent agreement concerning telecommunications submitted by the Ministry 
of Public Works to the Council of Ministers in Spain, 7.10.94 
43 See for example Théry Report referred to above. 
34 
broadcasting. Decisions at a national level to introduce infrastructure competition 
are speeding this process. 
IV. 3.2 The regulatory developments at a European level 
At a European level, since the publication of the 1987 Green Paper, the 
telecommunications sector has been subject to a gradual process of liberalisation, 
accompanied by the creation of a common regulatory framework and the application 
of competition rules. 
The successful liberalisation of the terminal market increased pressure for the 
measure which opened up first value-added services and then data communications. 
Market pressures from users, combined with new technologies, were the determining 
factor in the 1992 Telecoms Review. However, agreement on voice liberalisation 
raised regulatory issues, such as interconnection, the content and financing of 
universal service and tariff rebalancing, which could only be given a partial answer, if 
the future framework for infrastructure provision remained an unknown quantity. 
IV. 3.3 The regulatory agenda in North America and Japan 
Information Highways 
In 1993, early on in the new Presidency, the Clinton/Gore Administration launched 
its National Information Infrastructure initiative44. In the two years that followed the 
launch, the concept of Nil gradually developed into a comprehensive approach 
towards the future communications infrastructure in the United States. Its main 
emphasis is on three closely related elements: (i) the realisation of sufficient capacity 
in a broadband backbone infrastructure in the US, (ii) on the improvement of the 
44 President Clinton, Vice President Gore : Technology for America's Economic Growth, A new 
Direction to Build Economic Strength, February 22, 1993. 
In the report the importance of high-speed communication links for businesses such as banks and 
insurance companies was emphasised. It further noted that such a network, or "Information 
Superhighways", would also be of enormous value to schools, hospitals and other public 
organisations. The report compared the potential of such "Information Superhighways" with the 
effect that public investment in the railroads had on US economic and social development in the 19th 
Century. It announced 5 specific programs: 
- Implementation of the High Performance Computing and Communications Act program established 
by the High-Performance Act of 1991 introduced by then Senator Gore; 
- Create a Task Force on Information Infrastructure; 
- Create an Information Infrastructure technology program; 
- Provide Funding for networking pilot projects though the NTIA of the Department of Commerce; 
- Promote dissemination of federal information 
35 
accessibility of that backbone infrastructure, and (iii) on the development of 
applications to be carried over the networks. 
An extensive organisational structure was established for the discussion and 
elaboration of issues related to the 'Information Highway*. In this overall structure, 
the Information Infrastructure Task Force45 serves as a platform for government 
officials, and the later established IITF Advisory Council46 as a platform for the 
industry. 
Some of the support for Nil initiatives that the Administration provides, concerns 
funding. This is the case for the high-capacity backbone via the High-Performance 
Computer and Communications Program which was launched in 1991. 
The Department of Commerce's NTIA had in 1994 a total of $26 million at its 
disposal for the development of applications. With matching additional funding, the 
NTIA fund was awarded to approximately 100 different projects, ranging from tele-
education to tele-medicine. 
A second important element of the Nil initiative is regulatory reform. In this regard, 
the Administration serves as a motor, while at the same time setting an overall 
framework. That framework has been set out in a White Paper47 and a related 
Memorandum48 at the beginning of 1994. Five important principles were set out: 
• encourage private investment; 
• provide and protect competition; 
• provide open access to the network; 
• take action to avoid creating a society of haves and have-nots; 
• encourage flexible and responsive governmental action. 
Later in 1994, the US Administration extended this view on telecommunications to 
the international arena, and Vice President Gore advocated the implementation of the 
above 5 principles to the international environment at two major ITU conferences49. 
45 The National information Infrastructure: Agenda for Action, Information Infrastructure Task Force: 
Realising the Information Future, September 15,1993 
46 Presidential Documents, Executive order 12864 of September 1993, United States Advisory Council 
on the National Information Infrastructure 
47 Administration White Paper on Communications Act Reforms, January 1994 
48 Memorandum to distribution, February 17, 1994, Subject: Title VH of the Administration's 
Communications Act Reform White Paper 
49 ITU Conference, Buenos Aires, March 21,1994 
ITU Conference, Kyoto, September 1994 
36 
In Japan the concept of Information Society and the infrastructures that this requires 
has been the focus of considerable government attention over the last two years. 
Important efforts were made to develop a comprehensive policy for the Information 
Society. 
In May 1994 the Telecommunications Council, the advisory board of the Ministry of 
Post and Telecommunications, published a major policy document50, which was 
complemented by MITI's publication later in May of a paper addressing similar 
issues51. 
In relation to the establishment of fibre-optic networks, the MPT policy paper 
emphasised the importance of competition from private companies. It underlined the 
role of the Government as one of formulating policies for the promotion of private 
investment. It further expressed the expectation that telecommunications carriers and 
CATV, operators will build networks competitively. 
The MITI report addressed a wide range of issues relating to multimedia applications 
and Information Technology. With regard to infrastructures, the report concluded 
that "it is considered to be of the greatest importance that the government, through 
deregulation in telecommunications, broadcasting, and other areas, creates an 
environment in which private enterprises improve telecommunications infrastructures 
in a competitive situation". 
Regulatory initiatives in the United States and Japan 
The United States 
The main thrust of telecommunications regulation in the United States over the last 
10 years has been the increase of competition, building on its gradual introduction 
from the middle of the fifties. Through a combination of legislative / regulatory 
intervention and by legal actions brought under the US anti-trust legislation, 
competition had been established by the mid-1980s in the provision of equipment, in 
services, and in long distance infrastructures. In particular, a settlement of the anti­
trust action brought against AT&T led in 1984 to the so-called Modified Final 
Judgement (MFJ) which required the divestiture of AT&T. This removed the 
provision of local voice telephony services from AT&T (which were subsequently 
provided by spun off Regional Bell Operating Companies (collectively known as the 
RBOCs52) ), leaving it to provide international / long distance and other enhanced 
50 Telecommunications Council: Reforms toward the Intellectually Creative Society of the 21st Century. 
Program for the Establishment of High-Performance Info-Communications Infrastructure. Summary 
Report, May 1994 
51 Ministry of International Trade and Industry: Program for Advanced Information Infrastructure, May 
1994 
52 There are 7 RBOCs: Nynex, Bell Atlantic, Ameritech, BellSouth, Southwestern Bell, Pacific Telesis 
and US West 
37 
53 
54 
55 
56 
57 
58 telecommunications services. The RBOCs were in turn restricted from 
manufacturing or providing long distance telecommunications. 
A central feature of the US telecommunications and also CATV markets has been, 
firstly, the distinctions drawn between local and non-local services and between 
telecommunications and broadcasting services, and secondly, the use of line of 
business restrictions to maintain these market restrictions. 
In the long distance market, there are now hundreds of carriers in the US, the largest 
of which are AT&T, MCI and Sprint. In contrast, the local exchange business is still 
predominantly monopolistic53 with the local exchange carriers having exclusive rights 
to provide and operate infrastructure in each local area. There are at present about 
1,328 local exchange carriers54, owned by the RBOCs (75% of the 145 million 
access lines in the USA) or by independents (25%). 
Until a Court ruling three years ago, the RBOCs under the terms of the MFJ were 
not allowed to provide information services (which were taken to include cable 
television). The independently owned local exchange companies whilst not subject 
to the MFJ, were restricted by the Cable Act of 198455 from providing cable TV 
services and even after the relaxation of the MFJ, the RBOCs faced the same 
constraints on providing video programming. 
In effect the Cable Act allows telecommunications companies to construct and 
operate cable services only in service areas other than their own56. They may not 
operate a cable network in their own service area57. This policy is being reshaped by 
the emergence of a regulatory policy at a federal level on so-called 'video-dialtone 
services' . At the same time, court actions have been brought with some success to 
challenge the restrictions in the Cable Act. 
Although in certain areas increasingly the pressure is felt of the Competitive Access Providers or 
CAPs, or of competitors providing switched telephony where State legislation allows for this. Such 
States are few however. 
FCC: 58th Annual Report/Fiscal year 1992 
According to the Cable Act it is "unlawful for any common carrier to provide video 
programming directly to subscribers in its telephone service area, either directly or indirectly through 
an affiliate owned by, operated by, controlled by, or under common control with the common carrier". 
Communications Act, Section 613 
They are allowed to construct and then lease a network to a cable company in their own service area. 
This is the so-called "channel service". 
Regulators in the US appear supportive of the attempts of local operators, particularly, the RBOCs to 
enter fully into the cable market. This has a been a major factor in the Federal Communications 
Commission policy on video dialtone which would allow market entry as "common carriers", i.e. 
giving access their cable networks on a non-discriminatory basis. See also: US Department of 
Commerce, NTIA: Telecommunications in the Age of Information, October 1991 
See, inter alia : CC Docket No.87-266 Telephone Company-Cable Television Cross-ownership Rules, 
ss 63.54-63.58.and Second Report and Order, Recommendation to Congress, and 2nd Further notice 
of proposed rule-making, 7 FCC Red. 5781, Aug 1992 
38 
On the other hand long distance and CATV companies are keen on entering the local 
telecommunications market. Cable TV networks are, in terms of geographical 
coverage, as ubiquitous as the public telecommunications network. Of the 93 million 
households in the United States more than 55 million (or 60%) subscribe to cable 
television59, the networks of which pass 97% of all households. 
The telecommunications market is substantially larger than the CATV market, 
however, in terms of revenues. The market for local exchange companies alone 
generated revenues of $95 billion in 199260, while the 1993 total revenues for the 
cable companies was around $22 billion61. 
Regulation of telecommunications services over cable networks is generally a matter 
for State rather than Federal Authorities. The legislation in most States prevents 
cable companies from providing public switched telecommunications services. Only 
6 out of 50 States presently allow cable entry into telecommunications, though such 
restrictions are currently under review. Cable companies are, however, allowed to 
provide non-switched telecommunications services and are increasingly active as 
CAPs (Competitive Access Providers)62. 
Recently, not least because of the National Information Infrastructure initiative of the 
Clinton/Gore Administration, regulatory and market pressure has grown for a 
relaxation of all these current restrictions. The legislative initiatives (reflecting many 
of the same concerns confronted by the EU) which were presented to Congress 
during 1993/94 had as their main objective the abolition of the business restrictions 
on RBOCs, long distance carriers and CATV companies. They also sought to 
creating certain safeguards, in particular in relation to universal service. Whilst the 
legislation failed to complete its passage through Congress before the mid-term 
elections, the underlying pressures for legislative reform are unlikely to disappear. 
Japan 
With the adoption of new legislation in 1985, competition was introduced in Japan to 
the existing carriers NTT (for domestic telecommunications) and KDD (for 
international telecommunications) in both services and infrastructures. Now, 9 years 
later, there are 84 Type I carriers in Japan, carriers that are allowed to have their 
own infrastructure. 
59 Cable Television Developments, NCTA (National Cable Television Association), April 1994 
60 USTA (United States Telephone Association): Phone facts 1993 
61 Cable Television Developments, NCTA (National Cable Television Association), April 1994 
62 MFS and Teleport are the most well-known CAPs. Teleport is now owned by a consortium of major 
cable companies, including Cox, TCI, Comcast Corp., Continental Cablevision Inc. and Time-
Warner Entertainments. 
39 
Among the Type I carriers are three international carriers63 and four national 
carriers64. There are 66 mobile communications carriers, two satellite carriers65 and 
9 regional carriers66 (that provide leased line services in limited regions such as 
Kansai around Osaka, and Kanto around Tokyo). 
In the local loop the pro-competitive policies have had considerably less impact. This 
appears to be largely due to the low tariffs of NTT and to certain regulatory 
constraints in relation to, in particular, interconnection. Potential new entrants are 
the CATV network operators. About 20% of Japanese households are connected to 
a CATV network67. In December 1993 the Ministry of Post and 
Telecommunications decided to relax the rules on the usage of CATV networks and 
to allow the provision of telecommunications over CATV networks. So far, only 
two CATV operators have decided to introduce voice telephony over their networks. 
Although the situation and trends in Japan and the USA may differ in the detail, they 
do not in their overall direction. In both countries competition in infrastructure has 
been allowed, already some time ago. In both the United States and in Japan, based 
on the experienced benefits in long distance and international telecommunications, 
measures are now being taken to extend competition to the local infrastructure. 
IV. 4 Conclusions on the Major Developments 
The rapidity of technological and commercial developments combined with evolution 
in the regulatory environment in many parts of the world is already leading to a 
substantial degree of services and network competition and is making infrastructure 
competition inevitable. 
Moreover, because of the risks and uncertainties associated with some applications 
and technologies, market forces are required to unlock the significant potential for 
innovation and investment for the development of telecommunications and the 
Information Society. Many of the fastest growing parts of the telecommunications 
sector are in niche markets, subject to competition from new players. 
At the same time, attention must be paid to the social challenges and consequences 
of harnessing these market, technological and regulatory trends. 
63 NTT, International Telecom Japan Inc. and International Digital Communications Inc. 
64 NTT, DDI, Japan Telecom (linked to the railway companies) and Teleway Japan 
65 Japan Satellite Systems Inc. and Space Communications Corp. 
66 Often linked to regional energy companies. 
67 Including all facilities, also those of less than 50 drop terminals, there were more than 8 million 
subscribers to CATV in Japan. White Paper on Telecommunications, 1994, Ministry of Post and 
Telecommunications, Japan 
40 
V UNIVERSAL SERVICE 
V.l Universal Service in telecommunications 
The agreement to liberalise all telecommunications services from 1 January 1998, has 
necessarily focused attention on the adjustment of tariff structures whilst 
safeguarding universal service and financing any remaining burden through internal 
transfers, access fees or other mechanisms. In the context of the liberalisation of 
telecommunications services, it is therefore important to establish common principles 
for universal service and the means by which any uneconomic or non-commercial 
burdens of provision are financed. Additionally, in the context of the liberalisation of 
infrastructure, it is important to establish whether there exists any additional burden 
on the ability of telecommunications organisations to finance universal service tasks. 
The. Commission reaffirms the fundamental importance of maintaining and 
developing universal service in the European Union, on the basis of a common 
minimum set of services and infrastructure. This political priority was recognised in 
Council Resolution 94/C48/01 on universal service principles in the 
telecommunications sector, which set out certain policy orientations concerning the 
major elements constituting universal service68 at Community level. It also stated 
that national regulatory authorities must take due account of the fact that in 
numerous cases, market forces would be expected to lead to such provision being 
made on a commercial basis, without further intervention69. 
However, it recognised that the obligation to provide a basic voice telephony service 
at an affordable price to all customers reasonably requesting it could result in market 
operators being obliged to provide service to customers whom they would otherwise 
have insufficient economic incentive to serve. 
The Resolution, therefore, recognised that "universal service might be financed 
through internal transfers, access fees or other mechanisms, which take due account 
of the principles of transparency, non-discrimination and proportionality, while 
ensuring compliance with competition rules in order to make a fair contribution to 
any burden which the provision of universal service represents". In addition, it noted 
the particular circumstances associated with the provision of universal service in 
peripheral regions with less developed networks and "that the concept of universal 
service needed to evolve to keep pace with advances in technology, market 
development and changes in user demand". 
At the current time, most of the TOs internally cross-subsidise less profitable 
telecommunications services and/or less profitable customers with revenues from 
more profitable services and/or more profitable customers. However, the agreement 
68 Commission Directive 90/388/EEC on competition in the markets for telecommunications services, 
identified the provision and exploitation of a universal network as a service of general economic 
interest within the meaning of Article 90(2) and from that basis proceeded to examine whether a 
derogation from the Treaty rules was justified (i.e., the maintenance of special and exclusive rights 
for the provision of voice telephony as defined in the Directive) in order to derive sufficient revenue 
to finance this task. 
69 OJ C48/1, 16.2.94 
41 
to liberalise all telecommunications services by 1998, subject to possible transitional 
periods for certain Member States, means that TOs in conjunction with national 
regulatory authorities have already embarked on the necessary adjustment of tariff 
structures. It was in order to allow Member States with less developed networks, 
i.e. Spain, Ireland, Greece and Portugal, to achieve the necessary structural 
adjustments, in particular of tariffs, that an additional transitional period of up to five 
years was granted to these countries. 
General commercial and technological trends provide the potential to improve 
universal service, within a competitive environment. 
The dramatic technological and commercial changes in the telecommunications 
sector mean that the real cost of telecommunications is continuing to fall as quality 
rises. The real task of policy in the context of universal service must be to ensure 
that the potential benefits associated with these changes are passed on to all 
consumers and users and not just to a privileged few. Although provision of the 
local loop70, or at least new provision of the local loop, continues to be one of the 
more expensive aspects of building telecommunications networks, a number of 
factors are mitigating the real cost burden of this item. 
Firstly, wireless or radio connections are becoming a realistic and potentially cheaper 
alternative to connecting customers on fixed networks. This emphasises the need for 
TOs to be allowed full freedom with respect to the technologies they are permitted to 
use to connect customers to the public network. It also raises the issue of permitting 
the use of radio technologies in the provision of public telephones by other 
operators. 
Secondly, competition and technological progress is bringing down the unit cost of 
the transmission and switching equipment required to service the local loop and 
through digitisation is improving service quality and enabling new services to be 
provided, even though many TOs have so far failed to market these services to 
customers. 
Thirdly, the provision of telecommunications services jointly with other services, 
such as cable television, is reducing the cost of supplying telephony, particularly to 
residential customers. 
At the same time that the cost of supplying telecommunications services is falling in 
real terms, technological changes are shifting the balance of network costs from 
usage sensitive to fixed costs and reducing the importance of distance in determining 
costs. This is a further argument for national regulatory authorities to support the 
re-balancing and reduction of prices. 
Reducing usage and distance sensitive tariffs yields substantial gains. Many users are 
better off, telecommunications usage is stimulated leading to further reduction in unit 
costs and peripheral and isolated customers benefit. However, customers who use 
70 The local loop is the connection from customer premises (residential or business) to the local 
concentration point and then on to the local exchange. 
42 
the telephone as a lifeline or whose usage is low may be vulnerable to re-balancing. 
This emphasises the importance of national regulators managing the re-balancing 
process, removing general tariff distortions and developing targeted schemes to deal 
with customers with particular needs. 
The economic interests of consumers and users - an appropriate adjustment of 
pricing structures 
The agreement on liberalisation of telecommunications services means that a process 
of adjusting and re-balancing pricing structures is underway. This process is a key 
factor in the development of the sector and the full exploitation of existing and new 
telecommunications services. It is high and distorted tariff structures which are 
holding back the widespread development of both traditional and advanced 
telecommunications and information services in Europe. Infrastructure liberalisation 
can serve to reinforce the move towards more efficient pricing structures, stimulate 
demand and further encourage development of the sector 
The dual aim, therefore, should be to provide consumers and business with a diverse 
offering of quality telecommunications services at competitive prices whilst 
guaranteeing universal access to basic telecommunications services for all citizens. 
The goal of providing affordable access to basic telecommunications services for all 
citizens emphasises the need to provide service as cost effectively as possible and 
implies that access should be provided at prices below cost for some, if the process 
of re-balancing pricing structures leads to some customers leaving the network, being 
dissuaded from joining or facing unreasonably high prices for basic 
telecommunications services. This is not an argument for maintaining inefficient, 
across the board subsidies for access but for developing targeted schemes for needy 
citizens and uneconomic customers. 
In several countries, such special tariff packages targeted at the needs of low income, 
"lifeline" or low user customers have already been introduced. Some schemes work 
automatically by offering a multiple tariff package. Customers pay a reduced line 
rental for usage up to a given number of units. Beyond a certain level of usage, it 
becomes cheaper to switch to standard tariffs. Also significant, in terms of the 
volume of subsidy required are schemes which aim at providing basic 
telecommunications services at affordable rates in the context of varying 
geographical conditions and population densities. This issue is dealt with further in 
the section on less developed networks. 
43 
Table V.l - Special tariff schemes for targeted user groups 
Description of scheme 
Belgium Reduced tariffs for several groups including 
persons over 65 years and the handicapped. 
Denmark * 
Germany * 
Greece * 
Spain * 
France * 
Ireland Free rental and subsidised usage scheme provided 
to specific user groups 
Italy * 
Luxembourg * 
Netherlands * 
Portugal * 
UK BT's customers are covered by a special tariff, the 
Light User scheme. Under this scheme customers 
consuming less than 240 units pay a reduced line 
rental. Current scheme under review. 
Austria * 
Finland There are no special schemes. Finnish legislation 
requires all tariffs to be cost oriented. 
Sweden * 
Up to date details on actual or planned targeted schemes not available. 
As price structures re-balance, the traditional "access loss" declines. The "access 
loss" is the loss associated with the shortfall of revenue from rental and connection 
charges with respect to the non-traffic sensitive costs allocated to the provision of 
44 
exchange lines or access. However, it may well be that even with no constraints on 
re-balancing, commercially minded TOs will still choose to retain some cross-subsidy 
from usage revenue to fixed or access charges. After all, Telecommunications 
operators benefit from the close relationship they have with a large base of 
customers. 
It is important not to confuse this "access loss" with the cost of providing universal 
service. The latter arises principally because of the obligation on TOs to provide 
service to customers at common tariffs irrespective of geographical location or 
usage. If TOs were permitted to fully price discriminate between customers, or de-
average tariffs, the only cost associated with the universal service obligation would 
be the provision of loss making schemes for needy customers and the cost of 
providing emergency services and other related requirements. 
However, the obligation on TOs to provide service at common tariffs to all is 
expected to remain in place for the foreseeable future, even if TOs are being allowed 
more flexibility in the way they can offer tariff packages to groups of customers. It is 
also likely that TOs are increasingly required to provide special tariff packages or 
options targeted at needy customers as tariff structures adjust and re-balance. This 
raises the question of how any financial burden associated with this obligation to 
supply service at common tariffs to uneconomic customers and other aspects of 
universal service obligations (USOs) are financed in a competitive environment. This 
is dealt with in Section VII. 
Infrastructure liberalisation will not undermine the provision of universal service in 
the context of services liberalisation. 
There is no stable or non-contentious answer concerning the cost of universal service 
and why it occurs. The actual burden of universal service can not be estimated 
simply by considering the existing cost structures of the current TOs, since these do 
not reflect potential productivity increases and cost savings which could occur in a 
competitive environment. 
In addition, the full and effective implementation of the provisions of the ONP 
Leased Line Directive in conjunction with pricing adjustment in preparation for full 
telecommunications services liberalisation implies that the pricing structures of TOs 
for their core services (leased capacity and voice telephony) must move in the line 
with costs. The adoption of the measures proposed in Part One of the Infrastructure 
Green Paper to allow immediate alternative provision of leased capacity for currently 
liberalised telecommunications services would further reinforce pricing adjustment 
for leased lines. 
In addition the implementation of full liberalisation of telecommunications services 
implies that competing service providers will take a share of the market and a 
consequent share of the burden of uneconomic universal service obligations. 
The question arises as to whether full infrastructure liberalisation has significant 
additional impacts on the ability of TOs to fulfil their share of the obligation to 
provide a universal network. 
45 
The adjustment of pricing and revenue structures implied by the liberalisation of 
telecommunications services means that this ability is not additionally threatened by 
infrastructure liberalisation. Indeed, so long as the universal service obligation is 
shared appropriately between competitors, infrastructure liberalisation is far more 
likely to lead to positive benefits for the sector by encouraging innovation, an 
extension of coverage, the exploitation of new technologies and the creation of new 
services. One example is competition in mobile and cellular telephony. In contrast, 
competition on the basis of simple re-sale is limited to the adjustment of pricing 
structures and the offer of new tariff packages. 
Full infrastructure liberalisation may have important financial impacts if new 
operators, for example, market high capacity leased circuits to large users or use 
access to large users to market service to very profitable customers or are able to 
cross-subsidise their activities from other areas. This, however, is an argument for 
allowing TOs greater flexibility in their tariff offerings to large users and in applying 
fair competition rules. 
In any case, there is no evidence that full infrastructure liberalisation undermines the 
financial ability of TOs to continue to fulfil their share of uneconomic universal 
service obligations, even where significant inroads into the relevant market share 
have been made. This is the case in the US where a number of states have allowed 
local infrastructure competition (in addition to inter-exchange competition), in the 
UK, Sweden, Australia and Finland. Experience does emphasise, however that well-
functioning mechanisms must be in place for dealing with interconnection and 
interoperability, financing uneconomic universal service obligations and indeed 
monitoring universal service provision. 
V.2The development of Universal Service 
It has taken the best part of a century for the voice telephone network to evolve to 
its current state with much of the change in terms of new services coming in the last 
decade or so. Thirty five years ago, average telephone penetration in Europe was 
about 10 lines per 100 inhabitants as opposed to the current average of about 45. 
In several Member States, universal telephone service is not yet a reality because 
waiting times exist, penetration rates are low or access to telephone service in some 
form is limited. At the same time, the current rapid take-off and growth of mobile or 
wireless based telecommunications now offers the prospect, in conjunction with the 
fixed telephone network, of mass market development in personal communications. 
This in time will lead to substantially higher levels of telephone penetration than has 
been the case even in the mature or "saturated" traditional telephone markets. 
Developments in integrated or multimedia communications services and the 
emergence of the Information Society raise the important question of access to such 
services for all citizens. 
At the current time, the local access part of the public telephone network is only used 
on average for several minutes daily. Bearing this in mind and the currently limited 
development of new services, the Commission believes that it is premature to extend 
the notion or definition of universal service to new areas. 
46 
At the same time, access to new forms and means of information provision can be 
supported via public initiatives using for example the "public library" approach. 
For the moment, in the context of the new integrated services, emphasis should be 
put on action in the neighbouring fields of data protection and privacy, the audio­
visual area and content, intellectual property rights and the economic interests of 
consumers so that, in conjunction with the measures proposed here relating to the 
lifting of restrictions on the use of telecommunications infrastructures, service 
development in the new areas can be fostered. 
These neighbouring areas have been outlined in the Commission's Action Plan on the 
Information Society and the Commission is currently pursuing its work in these fields 
with the objective of ensuring the development of a coherent and effective regulatory 
framework for the benefit of both economic operators and every citizen in the 
Information Society. 
However, it is important to keep under review the question of universal service in the 
communications sector in the light of technological and market developments. 
VI. EMPLOYMENT, SOCIETAL AND CULTURAL ISSUES 
VI. 1 Employment and the Information Society 
The productivity gains which come from computerisation techniques, and the ability 
rapidly to access, process, mobilise and disseminate information, are already essential 
to the competitiveness of modern industry. This will become even more true as 
advanced technologies and new, high value-added services become widely available. 
Small businesses stand to benefit the most: the new communication services will 
enable them to make savings of, on average, 4% of their turnover71. 
Increased competitiveness will impact employment, both safeguarding jobs which 
would otherwise have been lost and allowing new jobs to be created as European 
companies benefit from the competitive advantage derived from new 
telecommunications technologies and services. Particularly important in employment 
terms will be the effects of the new technologies in small and medium sized 
enterprises - traditionally the principle source of employment generation in Europe. 
Recognition of the benefits of an early transition to the Information Society is a 
major driving force behind the political initiatives in Europe, the United States and 
other countries to build and develop national or regional information infrastructures. 
At the same time, the impact on employment must be monitored and appropriate 
strategies formulated to help adjustment across industries and services to new 
technologies and new ways of working, which in enhancing business efficiency 
inevitably impact more traditionally labour intensive sectors. In the context of the 
71 White Paper on Growth, Competitiveness and Employment, COM(94) 700 
47 
follow-up to the White Paper on Growth, Competitiveness and Employment, the 
Commission is paying particular attention to these issues. 
The reformed European Social Fund, is designed to contribute to this adjustment 
process, in particular as regards the development of appropriate training and 
retraining measures. Complementary?to these actions are various training initiatives 
envisaged under the Leonardo programme, as well as measures under the new 
Community Initiative programmes ADAPT and SME which actively promote the 
facilitation of industrial change. 
A number of studies will assess the relationship between the Information Society and 
employment, including one assessing the impact and benefits of the information 
society for regional, economic and social cohesion. Work is also underway to define 
the conditions necessary to capitalise on employment growth linked to technological 
change. This will include guidelines designed to facilitate the process of economic 
and social adaptation. The analysis will be assisted by the work of a High Level 
Group of Experts, set up under the Commission's Action Plan on Europe's Way to 
the Information Society (COM(94) 347), as well as by the outcome of a major 
colloquium on the social and societal issues of the Information Society to be held in 
late 1995. 
VI.2 Employment and the telecommunications sector 
Europe needs a dynamic telecommunications sector 
The telecommunications industry is a key sector of the European economy, 
representing over 3% of GDP. In addition to being large in absolute terms, it is also 
subject to greater than average long-term growth - an estimated rate of 7% over the 
next two decades compared with only 2-4% (equivalent to projected GDP growth) 
in other, larger sectors such as other utilities, motor industries, chemicals and food.72 
However, such figures do not fully reflect the situation in the Union, because they 
focus on the contribution of the TOs to the European economy, rather than including 
the contribution to the economy made by other facilities providers, resale companies, 
value-added service suppliers and equipment manufacturers. Moreover, 
technological developments - in particular, digitisation techniques and broadband 
communications systems - are expanding the scope of the sector by blurring the 
boundaries between it and other industries such as broadcasting. Studies carried out 
in the United States suggest that a full definition of the information sector shows it to 
be responsible for over 16% of US GNP, rising to 40% if financial and legal services 
are included. 
The information industry is therefore central to the economic health of Europe. 
Consequently, it is essential that the European telecommunications sector, which 
provides the fundamental infrastructure of the Information Society, is a dynamic and 
innovative one. Experience has shown that the best spur to innovation, investment 
72 Study for CEC by Arthur D Little, October 1991 
48 
and technological progress in the telecommunications industry is competition. This 
is why the White Paper on Growth, Competitiveness and Employment identified the 
removal of distortions to competition in the European telecommunications sector as 
a priority for action. To give shape to that priority, Part I of this Green Paper calls 
for the liberalisation of telecommunications infrastructure in Europe within the time 
scale already agreed for liberalising telecommunications services. 
In implementing this principle it is essential to monitor the effects such liberalisation 
can have on employment. In fact in the short term, and only in relation to the 
traditional employers - the TOs, there is likely to be a negative impact on 
employment. On a wider canvas, the liberalisation process should have a positive 
effect on employment as has been indicated. It is important to bear in mind that the 
key issue must not be the impact on employment in the telecommunications sector 
alone, or in individual organisations within the sector, but the wider impact of an 
efficient and innovative telecommunications sector on the European economy as a 
whole. 
Without liberalisation, the current decline in telecommunications employment 
cannot be reversed 
The general trend in Europe over recent years has been for employment in the 
telecommunications sector to fall, largely reflecting the decrease in employment 
within the TOs in Member States. 
The reduction in TO workforces is a global phenomenon, which is as much a result 
of technological and commercial evolution as of increased competition in the sector. 
There is no doubt of course that the prospect of greater competition is one incentive 
to reduce labour costs. Equally, however, it is clear that other important factors are 
also at work: 
• in particular, changes in technology - most significantly, the increasing 
convergence between communication and computing technologies - are having a 
fundamental effect, leading to a shift in both the overall size and the skill-level of 
the optimal TO workforce. Modern equipment requires fewer, more highly 
skilled people to operate it, and is more reliable, requiring less maintenance. 
• Another important factor is the impact of modern management techniques. Like 
many other large corporations over recent years, TOs have sought to "down­
size" their organisation by contracting out those support functions which do not 
need to be carried out in-house. 
These are pressures which all TOs are facing, irrespective of whether they operate in 
a liberalised market.73 Under current conditions, therefore, the downward trend in 
sector employment seems likely to continue. 
73 OECD studies show that the phenomenon exists irrespective of whether there is competition in a 
market "Between 1982 and 1992, employment in PTOs was reduced by over 10% in nine member 
countries. Five of these countries had competitive markets and four monopoly provision of PSTN 
services." 
49 
Infrastructure liberalisation can create new jobs as part of a structural re­
adjustment of employment 
In contrast, experience elsewhere suggests that liberalisation of European 
infrastructure markets would result in job creation in the sector. 
Liberalisation leads to increased investment, faster expansion of markets and greater 
innovation in both service and technology development. This is the clear lesson from 
sectors such as mobile74 and satellite communications75. The experience in 
liberalised markets has been that this expansion of investment and service provision 
has also been accompanied by shifts of employment away from traditional operators 
and towards job creation in other areas: firstly, through employment within the new 
market players76; secondly, through the creation of 'in-house' and 'out-house' 
employment in managing private facilities and networks which exploit the newly 
liberalised markets77, and finally, increased investment following liberalisation 
underpins growth in the equipment sector and so impacts employment. 
However, much of the employment created in these areas does not figure in 
telecommunications employment statistics, which have traditionally focused on the 
incumbent TO in each Member State. A fully quantified analysis of the employment 
impact of liberalisation in the European telecommunications sector is therefore not 
available at this time. Nevertheless, a range of estimates already exists. OECD 
studies, for example, suggest that overall telecommunication employment has not 
74 Competitive licensing of GSM operators, for example, has been the trigger for an explosion in the 
European market for cellular telephony, with users increasing by 3 million to a total of 11 million in 
1994 alone. 
75 The "open skies" policy on satellite communications in the United States has resulted in an annual 
30-40% growth rate in VSAT network sales in the US - compared with only marginal development in 
the non-liberalised EC market - and has made the US industry the world leader in this area. Only 
now that the EU market has been liberalised by Commission Directive 94/46/EEC of 13 October 
1994) are major growth opportunities of 50% annually forecast. 
76 In the US, redundancies in AT&T and the RBOCs have been off-set by a generally consistent pattern 
of employment growth in companies such as Sprint and MCI (The Benefits of Telecommunications 
Infrastructure Competition, November 1993, OECD). In the UK, new entrant operators and service 
providers have directly created 25,000 jobs, 17,000 of them since the market was opened to full 
competition following the 1992 duopoly review. Studies have suggested that even a more established 
market entrant such as Mercury has indirectly contributed to the creation of as many as 10,000 jobs 
in addition to its direct employment of 10,500 staff by the beginning of 1994 (Communications 
Outlook, 9 June 1994, OECD). In Japan as many jobs have been created in the New Common 
Carriers and Type II carriers (i.e. resale, valued-added services) as have been shed by NTT - even 
though the restructuring of NTT has been more radical over recent years than in any other TO in the 
OECD. 
77 In the US, for example, the number of organisations seeking interconnect arrangements between their 
own networks and those of local telephone companies has grown from 42 to 692 since divestiture of 
the Bell system. Around half of these organisations do not offer telecommunications services to 
others. (Source: The Benefits of Telecommunications Infrastructure Competition, November 1993, 
OECD) 
50 
been impaired by liberalisation78. Other observers believe that liberalisation would 
result in positive overall employment growth in the sector. 
The Commission has launched a major study which should give a firmer quantitative 
basis for assessing the extent to which competition is creating new job opportunities. 
Conclusion 
The current employment situation in the telecommunications sector can be 
summarised thus: 
• the traditional source of telecommunications employment, the dominant TOs, has 
• been in decline for several years. This is a feature of competitive and monopoly 
markets alike and results from the adjustment by TOs to technological and 
commercial changes; 
• New employment opportunities for the sector result from new entrants and new 
service areas, in particular, in the area of mobile communications. 
• The best means of reversing the overall trend is through the increased investment 
and market expansion which would flow from liberalisation, strengthening 
growth and employment in every sector of the European economy. 
However, quantitative employment effects within the telecommunications sector 
alone should not be the principal consideration in the liberalisation debate. As 
stressed at the beginning of this chapter, the central and overriding argument for 
telecommunications liberalisation must be that it will lead to greater efficiency in the 
information sector generally, and to productivity and competitiveness gains for the 
wider European economy taken as a whole. As such, it will be an important step in 
the fight against unemployment in all sectors of European industry. 
78 The Benefits of Telecommunications Infrastructure Competition, November 1993, OECD 
51 
VI.3 Societal and cultural aspects 
As recognised in the Bangemann Group Report on Europe and the Global 
Information Society, information and communication technologies now pervade our 
lives, affecting the way we work, the way we learn, the way we spend our leisure 
time and the way we interact with each other. Moreover, this process is accelerating 
as we approach the 21st century. The Information Society is rapidly developing; 
new investment opportunities are being created everywhere and the application of 
information and communication technologies are affecting all industries and services 
in our society. 
These technologies will have a strong impact on our whole economic system, 
growth, competitiveness and employment. They will also have other significant 
effects on our society, and on our ability to attain societal goals. 
The major investments in communications infrastructures and networks are being 
undertaken to widen and develop the provision of telecommunications services to 
industry, commerce and individual customers. Communications technologies are 
already being exploited in many industrial and service sectors. There is the prospect 
of further widespread expansion of IT into banking and insurance, publishing and the 
media, marketing and household applications. 
However, the series of recent reports on the development of the Information Society 
and information highways have also rightly emphasised the important role that new 
communications technologies can play in the provision of public services and 
improving the quality of work and of life. 
The potential fields of application are many and include major areas of public 
expenditure, such as education, healthcare and transportation. 
• Education and training 
The development of the Information Society will have an especially important 
impact on systems of education and training at every level. Not only will 
appropriate systems be required to equip young people (and to retrain adults) to 
deal with the new technologies and new ways of working, but the Information 
Society itself is dependent on the ability of people to use it. In consequence, 
education and training have an important role to play. A successful introduction 
of new information and communication technologies will demand successful 
education and training systems at all levels . 
In education and training, applications range from linking up universities, 
research centres, schools and training centres to developments in on-line and in 
open and distance learning. Under LEONARDO, the Community action 
programme on training and SOCRATES (the proposed Community action 
programme on education), measures are also included for the promotion of 
information and communication technologies and open and distance education 
and learning. Telematic links between the training centres, schools and 
universities is envisaged and is therefore included within these programmes. 
The use of broadcast media (cable, television, interactive) can play an important 
role in stimulating the use of new technolgies within educational and training 
52 
institutions. This will encourage awareness of new technologies amongst the 
general public, including amongst those not actively in full-time education. 
• Healthcare 
In medicine, exploitation of communications offers the possibility of both 
improvements in quality and lower cost healthcare. The benefits include in 
particular improved and more rapid access to information for health 
professionals; the possibility of providing remote expert services over long 
distance links; improvements in providing near 'real time' toxico- and pharmaco-
vigilance and epidetniology; improved organisation of health care services, 
reducing time lost spent in transmitting data and test results and other 
administrative procedures, and improved quality of diagnostic tools. 
" T.he "new" telematics currently available can make a considerable contribution 
towards improved ergonomics for many jobs and also to reducing both health 
and safety risks of certain activities by removing the employee from the site of 
the particular hazard (e.g. heat or chemicals, etc.). It can also be of assistance to 
workers in isolated sites by providing rapid and an improved quality of medical 
attention in the case of accidents or illness. 
• Transport 
The applications in the area of transport cover both public and private means, 
including the management of road traffic congestion, travel guidance systems and 
improved air traffic control. Telework and more flexible working times can also 
contribute to a reduction of traffic and resulting improvements in the 
environment. 
Developments in communications infrastructures and networks offer the potential 
in many other areas for simultaneously improving efficiency and the quality of 
life. For instance communications networks and services can assist in care for 
the elderly and other community initiatives. 
There is also the potential to develop teleworking and other more flexible working 
practices which are better suited to the needs and mutual benefits of both individuals 
and employers. Telework may be particularly interesting for persons who have 
difficulties accessing the work place, such as people with disabilities, people involved 
in caring for family members, or those living in remote areas. 
In addition, the new communications technologies can be exploited in other public 
service areas such as libraries, museums and related informational, educational and 
cultural fields. Many of these concerns are at the heart of the applications 
programmes being supported by the European Union. 
Assessing the risks for Society and meeting the challenges 
In all of these areas, the liberalisation of infrastructure will be a facilitator of the 
improved services and choice which the Information Society may bring about. At 
the same time, full account must be also taken of the risks which future social 
changes present. In particular, consideration must be given to the impact of new 
patterns of work on individuals, for example, the need to combat isolation amongst 
53 
patterns of work on individuals, for example, the need to combat isolation amongst 
home workers or those employed in geographically dispersed offices for teleworkers. 
Any examination of these issues must also address the potential impact on, and any 
necessary resulting changes to, the organisation of work and current employment and 
other social legislation. 
At the same time greater competition will lead to an explosion in the volume and 
types of information available to each citizen, with a need as a result to avoid an 
"information over-load". Adequate measures will be needed, as highlighted above in 
relation to education and training, to prepare our society for these changes. 
Additionally, it is essential in this new environment to avoid the emergence of a two-
tier Information Society, based on "information haves and have nots", in which only 
part of the population has access to new technologies, is comfortable using it and can 
fully enjoy its benefits. 
In pursuing general societal goals, such as ensuring equal opportunities for every 
citizens, and extending the benefits of the Information Society to households, 
industry, government and public services, Member States are likely to be faced with 
situations which will require regulatory intervention in order to guarantee the 
provision of infrastructure. 
The need to avoid the emergence of a dual society based on information "haves" and 
"have nots" could result, for example, in a 'social case' for regulatory intervention to 
facilitate access for schools or educational centres were connected to the Information 
Society. 
Identifying the solutions to avoid these risks lies outside the scope of this Green 
Paper, but is nevertheless an important element in the various measures being 
prepared in connection with the Commission's Action Plan on Europe's Way to the 
Information Society. 
The cultural dimension 
The Bangemann Group Report, recognised "the enormous richness of the European 
heritage", which, once new products and services are available to every citizen, will 
lead to "more opportunities for expression of the multiplicity of cultures and 
languages in which Europe abounds". For that reason the Action Plan recognised 
the role of the Information Society and of cultural goods (particularly, the cinema 
and television programmes, as "privileged mediums of identity, pluralism and 
integration. It called for them to "retain their specificity within the framework of 
new multimedia products and services". 
A final area of consideration is the need to take account of the linguistic diversity 
within the Union, in order to ensure that this does not unduly limit the development 
of new multimedia services, as well as the possibilities for Europe's audio-visual 
industry. For that reason the Action Plan foresees the adoption of a Communication 
addressing European linguistic issues and the means to stimulate the emerging 
language-based industry. 
54 
VII THE EXTENSION OF THE PRINCIPLES OF THE 
EUROPEAN UNION'S TELECOMMUNICATIONS 
POLICY TO INFRASTRUCTURE 
The European Union's policy with regard to the regulatory framework for the 
telecommunications sector has evolved along three main axes : 
• liberalisation (in order to stimulate competition in equipment, services and 
now infrastructure provision); 
• harmonisation (to support the evolution of a common regulatory framework 
"for access to telecommunications networks and services which have remained 
within the monopoly domain, as well as providing a framework for a basic 
minimum offering of telecommunications services within the Union and the 
development of harmonised standards, and 
• fair competition (through the full application of the Union's competition rules 
to the sector) 
This framework has been developed in an evolutionary and gradual fashion on the 
basis of the Commission's 1987 Green Paper on the development of the common 
market for telecommunications services and equipment , and subsequent Green 
Papers addressing the areas of satellite communications and mobile 
communications81, as well as important Communications from the Commission, such 
as those on the consultation on the 1992 Telecoms Review and on the development 
of universal service . 
These policies have also been shaped by key Resolutions of the European 
Parliament84 and of the Council85, which have set the overall political framework for 
79 COM(87) 290, 30.6.87 
80 Green Paper on a common approach in the field of satellite communications in the European 
Community, COM(90) 490, 20.11.90 
81 COM(94) 145 final 
82 Communication on the Consultation on the Review of the situation in the telecommunications 
services sector, COM(93) 159 final, 28.4.93 
83 Communication on developing universal service for telecommunications in a competitive 
environment, COM(93) 543 final, 15.11.93 
84 See, inter alia, Resolution of the European Parliament on the Commission Communication of 21st 
October 1992 concerning the 1992 Review of the situation in the telecommunications services sector, 
20.4.1993 and Resolution of the European Parliament on the Commission Communication of 15 
November 1993 on developing universal service for telecommunications in a competitive 
environment, 4.5.94 
85 Council Resolution of 30th " June 1988 on the development of the common market for 
telecommunications services and equipment (88/C257/EEC OJ C257/1,4.10.88) ; 
55 
telecommunications in the Union, as well as important policy documents in 
neighbouring fields. The policy has then been turned into concrete form through a 
series of adopted and proposed legislative measures since 1987. (Details of the most 
important measures and proposals are set out in Annex 3). 
A common approach to infrastructure must build on these elements, but must also 
take full account of key policy objectives relating to the trans-European 
telecommunications networks and services; economic and social cohesion within the 
Union; the strengthening of competitiveness of the European economy and 
supporting growth and development of employment. 
The approach is consistent with the Commission's Green Paper of April. 1994 on 
Mobile and Personal Communications which promoted the vision of the emerging 
personal communications environment, based on the full convergence of wireless and 
wired technologies and networks, as well as with the challenges posed by the 
development of the Information Society. 
The common approach is therefore based on the extension and development of 
existing Union policies in telecommunications and in neighbouring fields which are 
considered below. 
VII.1 General Principles 
In developing a coherent policy towards infrastructure, it is necessary to build on the 
principles already successfully applied to the development of the markets for 
telecommunications services and equipment in relation to the fixed, satellite and 
mobile communications networks. These principles, which flow from the obligations 
set out in the EC Treaty, form the basis of the political consensus which has emerged 
concerning the development of the telecommunications sector, in particular, the 
consensus flowing from the 1992 Telecommunications Review86. They are set out 
below: 
Council Resolution of 19th December 1991 on the development of the common market for satellite 
communications services and equipment (92/C 8/01 ; OJ C8/1,14.1.92) ; 
Council Resolution of 22nd July 1993 on the review of the situation in the telecommunications sector 
and the need for further development in that market (93/C 213/01, OJ C213/1,6.8.1993). 
Council Conclusions of 28th September 1994 on the recommendations to the European Council in 
Europe and the global Information Society and on the Commission's Action Plan on Europe's Way to 
an Information Society. 
86 See Council Resolution 93/C213/01 of 22 July 1993 and Council Resolution 94/C48 of 7 February 
1994 on universal service principles for telecommunications. 
56 
MAIN TREATY PROVISIONS RELEVANT TO TELECOMMUNICATIONS POLICY 
The general principles applied to the sector are derived from the provisions of the EC 
Treaty ("the Treaty"), in particular: 
Article 3(c) requiring the creation of an internal market characterised by the 
abolition, as between Member States, of the obstacles to the free movement of 
goods, persons, services and capital; 
Article 3(g) requiring the institution of a system ensuring that competition in the 
internal market is not distorted; 
Article 3(1) strengthening the competitiveness of Community industry; 
Article 3(n) encouraging the establishment and development of trans-European 
networks; 
Article 3(s) contributing to the strengthening of consumer protection 
Article 5 under which the Member States are bound to fulfil their obligations under 
the Treaty; 
Articles 30 to 37 concerning the free movement of goods; 
Articles 52 to 66 concerning the freedom to provide services and the freedom of 
establishment; 
Articles 85, 86 and 90 setting out the Community competition rules; 
Article 100(a) concerning the adoption of directives for the approximation of 
provisions laid down by law, regulation or administrative action in the Member 
States as directly affect establishment or functioning of the internal market. 
Articles 110 to 115 concerning the common commercial policy; 
Article 129a requiring the Community to contribute to the attainment of a high level 
of consumer protection 
Articles 129b concerning the establishment and development of creation of Trans-
European Networks. 
Beyond the Treaty Articles and the principles of the 1987 and subsequent Green 
Papers, the Commission has issued Guidelines on the application of competition rules 
to the telecommunications sector87. 
87 OJ C233, 6.9.91. 
57 
VII.2 Exclusive and Special Rights over Infrastructure 
In Part I of the Green Paper a simple principle was put forward in relation to 
telecommunications infrastructure; namely, that there should be a free choice of 
underlying infrastructure for the delivery of services which are open to competitive 
provision88. 
This approach reflects the proposals already set out in the Green Paper on Mobile 
and Personal Communications. 
The application of this principle would require the limitation of the scope of 
exclusive and special rights89 over infrastructure to the provision of voice telephony 
services to the general public (until 1 January 1998). In order to comply with this 
requirement, it would be necessary to show that, where the number of licences in any 
given geographical area is limited, that limitation results from objective, proportional 
and non-discriminatory factors90. 
According to Part I of the Green Paper the maintenance of such restrictions is 
currently justifiable only in relation to the provision of voice telephony services for 
the general public. Action is therefore proposed in two stages. 
In a first stage restrictions were to be removed on "the use of infrastructures for the 
delivery of satellite communications, mobile communications and terrestrial 
communications services already liberalised". 
Action during the first stage would be limited to allowing such telecommunications 
to be provided over third party or own infrastructure already authorised in Member 
88 The applicable principles of Union telecommunications policy and law applied to exclusive and 
special rights, from which the proposal for free choice of the underlying infrastructure for competitive 
services is derived, are set out in detail in Part I of the Green Paper sections V and VI. 
89 Directive 90/388/EEC on competition in the market for telecommunications services as amended by 
Directive 94/46/EC defines both exclusive and special rights. 
"Exclusive rights" means the rights that are granted by a Member State to one undertaking through 
any legislative, regulatory or administrative instrument, reserving it the right to provide a 
telecommunication service or undertake an activity within a given geographical area." 
"Special rights" are defined as "the rights that are granted by a Member State to a limited number of 
undertakings through any legislative, regulatory or administrative instrument which, within a given 
geographical area, 
- limits to two or more the number of such undertakings authorised to provide a service or undertake 
an activity, otherwise than according to objective, proportional and non-discriminatory criteria, or 
- which designates, otherwise than according to such criteria, several competing undertakings as 
being authorised to provide a service or undertake an activity, or 
- confers on any undertaking or undertakings, otherwise than according to such criteria, legal or 
regulatory advantages which substantially affect the ability of any other undertaking to provide the 
same telecommunications service or to undertake the same activity in the same geographical area 
under substantially the same conditions.11 
90 One example of this would be limitations imposed on the number of licences on the basis of essential 
requirements, such as the effective use of radio frequency spectrum, within radio-based networks or 
on the grounds of protection of the environment or town planning objectives. 
58 
States. The proposals would permit the use of both fixed and wireless networks, 
and, in particular, networks such as those operated by utility companies or cable 
television networks. 
The second stage would, as indicated in Part I, "involve licensing providers of new 
infrastructures for liberalised services and the full use of such new, and existing, 
infrastructure for the provision of public voice telephony service, once liberalised". 
The Council, in its Resolution of 17th November 1994 concerning Part I of the 
Green Paper, has confirmed the principle of general liberalisation of infrastructure by 
1 January 1998, including the additional transition periods for certain Member States 
in line with Council Resolution 93/C213/02. A number of Member States have 
urged the Commission in an associated statement to come forward as quickly as 
possible with proposals to provide for the use of alternative network infrastructure 
for services which are already liberalised. 
It is in this context that Part II of the Green Paper now examines the competitive and 
other safeguards that need to be put in place with regard to infrastructure 
competition in line with existing telecommunications policy, set against the context 
of liberalisation of voice services for the general public. These issues are addressed 
below. 
VII.3 Licence award procedures, selection criteria and the conditions which 
may be attached to licences for infrastructure 
VII. 3.1 The basic approach to licensing infrastructure; licensing infrastructure, 
and the position of services 
The basic approach to licensing infrastructure 
In the telecommunications field, Directive 90/388/EEC (the Services Directive) as 
amended by Directive 94/46/EC, Directive 90/387/EEC of 30 June 199091 (the ONP 
Framework Directive) and the Green Paper on Mobile and Personal Communications 
recognise the continuing role for Member States in licensing the provision of 
telecommunications infrastructure and services. 
Such national licensing must be consistent with the overall framework provided by 
Community law. The manner in which licences are granted must not lead to the 
creation of special rights (see section above). 
In order to promote the development of trans-European telecommunications 
networks and services, the grant of national licences for such networks should be co-
91 Council Directive 90/387/EEC of 28 June 1990 on the establishment of the internal market for 
telecommunications services through the implementation of open network provision, OJ L192/1, 
24.7.90 
59 
ordinated to facilitate the networks becoming operational throughout the countries 
covered at the same time. 
The Services Directive, the ONP measures and the two Directives ensuring the 
mutual recognition of type approvals for terminal equipment established the overall 
framework for national licensing by identifying the limited range of restrictions which 
may be imposed within national authorisations for telecommunications or equipment 
intended for use by the general public. These restrictions are limited to those 
justified by: 
• essential requirements (namely, network security, network integrity, 
prevention of frequency interference, the effective use of the frequency 
spectrum, environment protection, rights of way and, in justified cases, 
interoperability of services and data protection, and in the case of terminal 
equipment, user safety and the safety of the employees of the operator). 
• public service requirements in the form of trade regulations (concerning 
conditions to ensure the availability, permanence and quality of the service)9 
These two categories of restrictions also form the basis for determining the approach 
to the future licensing of infrastructure. As regards the establishment of new 
communications infrastructures, these essential requirements should also include, 
where applicable,, the protection of the environment and town planning objectives. 
Licensing of infrastructure, and the position of services 
In addressing licensing for infrastructure, it is important to recall the basic distinction 
drawn earlier in this Paper between communications infrastructure and services. In 
most Member States the monopoly provision of infrastructure has meant that a 
formal distinction has not been necessary in licensing both telecommunications 
networks and the provision of reserved and non-reserved telecommunications 
services over them. 
In practice, future infrastructure licences will almost always be granted to licensees 
who also intend to provide a range of telecommunications services (which might 
nevertheless be confined to the provision of leased line capacity). This has 
implications both for the licence award procedures and for the specific conditions 
which may be attached to future licences, which will include conditions likely to 
relate both to the infrastructure and the services. 
92 Council Directive 91/263/EEC of 29 April 1991 on the approximation of the laws of Member States 
concerning telecommunications terminal equipment including the mutual recognition of their 
conformity; OJ L128/1, 23.5.91, as supplemented by Council Directive of 29 October 1993 
supplementing Directive 91/263/EEC in respect of satellite earth station equipment (93/97/EEC; OJ 
L290/1, 24.11.93. 
93 The Services Directive, limited the imposition of trade regulations to basic data services, namely the 
provision of packet and circuit-switched data services for the public, subject to verification by the 
Commission of their compatibility with Treaty. The provision of such basic services were seen as 
forming a particular task entrusted by the Member States to telecommunications organisations. 
60 
At the same time, a framework for infrastructure licensing must also ensure : 
• an appropriate level of regulatory supervision of independent service providers 
who sell capacity and/or combine a range of telecommunications services from 
different network operators. Such a framework must address, in particular, how 
and to what extent such service providers should contribute to the cost of 
universal service. 
• sufficient flexibility to tackle the convergence between broadcasting, information 
technologies and telecommunications. Increasingly, communications 
infrastructure will be the vehicle over which both telecommunications services 
and non telecommunications services are delivered. 
In relation to convergence, a parallel can usefully be drawn with broadcasting where 
cable television networks may be entirely independent of the content / programming 
passing over them. Whilst the customer is aware of a single cable network, the 
network and programming may be subject to quite different types of regulatory 
supervision. 
The basic approach to licensing proposed in this Green Paper does not extend the 
framework governing the provision of telecommunications infrastructure or services 
to non-telecommunications activities, primarily broadcasting, nor does it regulate the 
use of infrastructure for such activities. Nevertheless, in the context of broadband 
networks and convergence, the future approach to licensing must ensure that 
telecommunications-related safeguards on services and networks are not 
undermined. 
SUMMARY OF THE APPROACH TO THE OVERLAP BETWEEN THE LICENSING OF 
INFRASTRUCTURE AND SERVICES IN THE CONTEXT OF CONVERGENCE. 
To provide the necessary flexibility, licensing must be considered at three levels: 
• A harmonised approach must be developed to the licensing of communications 
infrastructure, independent of its ultimate use. 
• The conditions which may be attached to the use of that infrastructure for the delivery of 
telecommunications services are defined in line with existing telecommunications policy 
in the Union (essential requirements and, in the case of public telecommunications 
infrastructure providers enjoying rights of way, public service requirements in the form 
of trade regulations). That should not prevent subject to the provisions of the Treaty the 
application of other conditions related to non-telecommunications activities, in particular, 
broadcasting or indeed the requirement for a separate licence or authorisation for such 
activities. 
• Finally, conditions may also be imposed in certain cases on the provision of the 
telecommunications services over that infrastructure. These will in most cases continue 
to be regulated through a single licence for both the underlying infrastructure and the 
telecommunications services provided over it, with the exception of independent service 
providers who do not own infrastructure over which they operate. In parallel, the 
provision and content of non-telecommunications services, in particular, broadcasting, 
may continue to be subjected to a different supervisory controls. 
61 
These elements in the basic approach must now be extended to address (i) the 
procedures for awarding licences for infrastructure, (ii) the criteria used for selecting 
licensees and (iii) the conditions which may be attached to licences. 
VII. 3.2 Licence award procedures 
In line with the requirement for the withdrawal of special and exclusive rights over 
infrastructure, market forces, rather than regulatory authorities at a national or Union 
level, should generally decide future market structures, subject to the application of 
the Community competition rules and the overall safeguards found in the Treaty. 
Licensing procedures should not be regarded as a mechanism for imposing a 
particular market structure. 
It is nevertheless accepted that essential requirements linked in particular to 
environmental, frequency and other physical considerations and public service 
requirements in the form of trade regulations will continue to justify the grant of a 
limited number of licences or authorisations for the establishment and operation of 
infrastructure. Where the number of operators is limited by a Member State, this is a 
potential restriction on the freedom to provide services and may distort competition. 
It must therefore be justified under European law. 
Future licence awards should be made by the Member States or their National 
Regulatory Authorities on the basis of common principles: 
• Licensing award procedures must respect the principle of the separation of 
regulatory and operational functions established in Union telecommunications 
policy. 
• Award procedures must be open, non-discriminatory, and transparent. 
In order to guarantee that licensing procedures are open, non-discriminatory and 
transparent, Member States should ensure that : 
ail applicants are subject to the same assessment procedures, unless there is an 
objective reason for differentiation; 
all selection criteria and conditions to be attached to the licence are known to 
the applicants in advance; 
reasonable time limits are set and applied 
effective and rapid appeal procedures are established for unsuccessful 
applicants. 
• Any limitation on numbers should be based on the essential requirements and in 
the case of public telecommunications infrastructure, and/or public service 
requirements in the form of trade regulations and should respect the provisions of 
the Treaty relating to the free circulation of services as well as the principle of 
proportionality, by imposing the solution which is least limiting and must give 
priority to competitive provision. 
• The granting of national licences for infrastructure to support trans-European 
telecommunications networks and services should be co-ordinated, in order to 
62 
94 encourage the growth of such networks and to allow them to become operational 
at the same time in all the Member States traversed. 
VII. 3.3 The selection criteria for the award of licences and authorisations 
Licenses must be granted on the basis of pre-announced criteria. In cases of 
networks intended for the general public , criteria may be based on public service 
requirements in the form of trade regulations94. 
Such selection criteria should be proportional to the scope and object of the licence, 
and may include criteria related to the permanence, availability and quality of 
services. This may imply also the infrastructure provider satisfying criteria relating to 
technical competence and financial resources. 
Common principles governing the award of licences and the selection criteria95 which 
may be used in selecting licensees should be developed on a harmonised basis, 
alongside the overall limits imposed by the competition rules on the conditions which 
may be attached to licences. In the absence of harmonisation at a Union level, such 
criteria should be subject to prior scrutiny for compatibility with the Treaty rules96. 
Member States should refrain from the automatic grant of new licences to particular 
undertakings, or from the automatic exclusion of certain undertakings (such as other 
telecommunications companies or utility companies) from the grant of a licence. 
Selection criteria related to the use of the infrastructure concerned for non-
telecommunications activities (such as broadcasting) are not precluded, although any 
such limitations would also have to be compatible with Community law.. 
Any refusal to licence a particular undertaking (including the exclusion of particular 
undertakings from a licensing process) must be duly justified to allow for its 
assessment under the applicable Treaty rules and also with the principle of 
proportionality. 
Furthermore, the prohibition on discrimination on the grounds of nationality in the 
EC Treaty and EEA Agreement prevents restrictions being imposed to limit 
applications from undertakings based in other Member States or in the EEA. 
Public service requirements in the form of trade regulations are defined in Community law (See 
section VII.3.1 above). 
95 Examples of criteria which would not be an acceptable basis for assessing bids because they would 
discriminate against non-national bids would include the impact of a particular bid on local 
employment; local souring of equipment or components comprising infrastructure, willingness to 
sub-contract to local firms or to enter into partnerships or other arrangements with companies in that 
Member State. 
96 Examples of criteria which would not be an acceptable basis for assessing bids because they would 
discriminate against non-national bids would include the local sourcing of equipment or components 
comprising infrastructure, willingness to sub-contract to local firms or to enter into partnerships or 
other arrangements with companies in that Member State. 
63 
The principle of mutual recognition of licences or authorisations is not fully 
applicable to national licences for the provision infrastructure encompassing rights of 
way. However, in order to facilitate licence applications in Member States other 
than an applicant's home Member State, evidence relating, for example, to the legal 
status or financial standing of the applicant may be the subject of mutual recognition. 
VII. 3.4 The range of conditions which may attached to infrastructure licences 
Basic principles 
Any conditions attached to licenses for the establishment and operation of 
communications infrastructure must proportionate to the objective sought, 
transparent and non-discriminatory. The requirement of transparency means that 
licences should be published. The requirement of non-discrimination means that the 
same licence conditions should in principle apply to publicly and privately owned 
infrastructure operators. At the same time differential licensing conditions may be 
appropriate between infrastructure supporting public telecommunications services 
and infrastructure supporting corporate networks, or between public infrastructure 
providers facing different market conditions (for example, a significant difference in 
the date on which each is allowed to enter the market). 
Restrictions on establishment / ownership linked to nationality 
The principle of non-discrimination on grounds of nationality mentioned above 
requires that the conditions attached to a licence must not restrict the establishment 
(and therefore indirectly the ownership) of infrastructure by nationals of Member 
States or companies or firms controlled by nationals of Member States . 
Any other restrictions on ownership or control must be compatible with Community law and 
with the Community's commitments taken on a multi-lateral basis. 
The scope of essential requirements and public service requirements in the form of 
trade regulations 
Building on the framework provided by Community law, licenses for infrastructure 
should not contain conditions other than those justified on the grounds of (i) essential 
requirements, and (ii) in the case of public telecommunications infrastructure, public 
service requirements in the form of trade regulations as published in advance. 
Infrastructure not intended for the use of services for the general public (such as 
infrastructure for corporate networks) should only be subject to conditions based on 
the essential requirements. 
97 Articles 4 and 36 of the Treaty establishing the European Economic Area from 1 January 1994 
extends those principles to prevent restrictions being imposed on ownership by nationals of EEA 
States or undertakings controlled by nationals of EEA States. Similar provisions are contained in the 
European Agreements and Interim Agreements entered into between the Community and Poland, 
Hungary, the Czech Republic, the Slovak Republic, Romania and Bulgaria. 
64 
Conditions attached to licences must be consistent with Community law relating to 
the freedom of establishment and the free circulation of services and ensure a high 
standard of consumer protection and respect for competition rules. 
Essential requirements. 
Conditions imposed on the basis of essential requirements should respect the 
following principles: 
• Restrictions linked to network security, integrity and interoperability of services 
are likely to apply, in particular, to interconnection with other networks. The 
prevention of frequency interference and the effective use of frequency spectrum 
are specific concerns for radio-based communications. 
• Conditions in licences should encourage efficient use of both physical 
infrastructure and other resources (e.g. duct sharing, required spectrum for 
wireless communications). 
• The protection of the environment is a concern which is relevant specifically to 
the establishment of network infrastructures, and the definition of essential 
requirements in the context of new infrastructure licences should be expanded to 
include it. In this respect an in-depth assessment should be made in order to 
provide precise information on the possible negative environmental impact of 
telecommunications infrastructure projects. 
• The restriction of access to rights of way is primarily an issue for national law, 
but subject to compatibility of the application of those national rules with the EC 
Treaty and, in particular, the competition rules. Rights of way are essential to the 
provision of competitive infrastructure and should be granted in a non­
discriminatory manner. 
Nevertheless, it is accepted that national or local authorities may wish to limit the 
numbers of undertakings granted rights of way, in order to limit the potential 
impact on, for example, the environment, traffic management and urban planning. 
Equally such limitation may be justified in order to protect the legitimate interests 
of owners of private land. 
At the same time, certain types of infrastructure provider may be licensed to 
establish and operate networks and/or services without being granted their own 
rights of way. This could be the case, for example, with the establishment of 
metropolitan area networks, using the ducts and rights of way of an unrelated 
company, such as a local water or electricity company. No restrictions should 
be imposed on the ability of such infrastructure providers to deal with public or 
other authorities in the case of public land, or with private landowners. 
Furthermore, licence conditions applied to infrastructure providers who do not 
benefit from rights of way should be subject to less onerous obligations, 
especially as regards coverage and interconnection requirements 
• Data protection and privacy are issues of general concern and the scope for 
national intervention (and therefore licensing conditions) in these areas will be 
65 
determined by the framework provided by the Commission's proposals in the 
area . 
Public service requirements in the form of trade regulations. 
Public service requirements in the form of trade regulations may be applied in the 
case of licences for public telecommunications infrastructure". These conditions100 
could be included in individual licences or in the form of trade regulations or "cahier 
de charges" applicable to public infrastructure providers. These obligations should 
be subject to verification of compatibility with the Treaty, in particular as regards 
their proportionality and their adequacy to attain the pursued objectives of general 
interest. 
This requirement of proportionality implies in particular using the least restrictive 
means of achieving the pursued objective. For example, to achieve the objective of 
securing permanence of service, a system of interconnection payments is less 
restrictive than preventing competing infrastructures. A subjective economic 
assessment of the capacity of a specific market should not normally be used. 
VII. 3.5 Other aspects of licensing infrastructure 
VII.3.5.1 Duration. 
In line with the approach proposed in relation to mobile communications where there 
is currently considerable variation in licence duration in different Member States, the 
duration of licences for the provision of infrastructure remains an issue for national 
rather than Union determination. 
In general, however, to accord with the Community competition rules and the rules 
on the free movement of services, Member States in setting licence terms should take 
full account of market forces and the need to avoid restricting the introduction of 
new technologies and services. 
98 See, in particular, the amended proposal for a Council Directive covering the protection of personal 
data and privacy in the context of public digital telecommunications and in particular the Integrated 
Services Digital Network (ISDN) and Public Digital Mobile Networks, COM(94) 128 final, 13.06.94. 
These initiatives are discussed in greater detail below. 
99 Article 3 of Commission Directive 90/388/EEC acknowledged the use of such additional conditions 
in the form of trade regulations for the provision of packet or circuit switched data services for the 
general public, (subject to verification by the Commission of their compatibility with the Treaty). 
Such trade regulations relate to conditions to ensure the availability, permanence and quality of the 
service. Companies without rights of way should not be subject to the same level of obligations as 
those with rights of way, especially with regard to coverage. 
100 Such conditions are currently applied in national licences, and relate, inter alia, to price levels, 
minimum service quality, geographical coverage, access to emergency services, provision of facilities 
for the customers with special needs, billing, and conditions ensuring the financial standing and 
technical competence of the licensee. Not all such conditions are directly applicable to infrastructure. 
66 
In order to ensure no unfair restrictions on competition or undue limitation of new 
technologies and services, initial licence terms and 'standstills' on further licences 
should be based on the period required to ensure a sufficient start up period and/or a 
commercial return on the investment made in the network concerned. 
VII.3.5.2 Licence fees. 
One-off and annual fees levied on infrastructure operators should comply with the 
principles of non-discrimination, transparency and proportionality. 
The levying of excessive fees on operators in the form of licence, frequency or other 
fees (such as payments to local authorities for the use of public land) can potentially 
create barriers incompatible with the internal market. They may also raise important 
competition issues, where the practical effect is to deter market entry or deny users a 
fair share of the benefits which lower fees might be expected to produce. 
In assessing whether fees charged are proportional, account must be taken of the 
balance between coverage of administrative costs and the real commercial value of 
the resource being allocated. Fees should not be levied in a discriminatory fashion. 
VII. 3.5.3 Changes of ownership. 
Provisions restricting changes in the ownership of the licensee must be justifiable in 
terms of the need to ensure continuing compliance with the essential requirements or 
public service requirements in the form of trade regulations imposed in licences. 
VII.3.5.4 Freeing TO's from non telecommunications-related obligations 
The range of potential conditions for licensing set out above are consistent with the 
Union's telecommunications policy in general. It follows, therefore, that only in 
exceptional cases should obligations be placed on network operators which do not 
relate to the telecommunications tasks carried out by that undertaking. 
The imposition by Member States of non-telecommunications-related obligations 
harms the competitive position of network operators both in their national markets 
and in attempting to meet the pan-European needs of customers for networks and 
services. It also risks creating barriers within the internal market for networks and 
services in the Union because of the divergent obligations imposed in different 
Member States on the operators of networks in that territory. 
Concerns over such obligations led the Commission in the 1992 Review to indicate 
that "with further progress towards a competitive environment, telecommunications 
operators must be free to respond to the dynamics of the marketplace if they are to 
operate effectively. The degree of freedom must be proportionate to the level of 
67 
liberalisation. Major aspects of this freedom include tariff policy and equality of 
treatment. " 
The Bangemann Group Report made a similar recommendation for the acceleration 
of the on-going process of liberalisation of the telecommunications sector by, inter 
alia, "removing non-commercial political burdens and budgetary constraints 
imposed on telecommunications operators". 
In order to allow telecommunications organisations to effectively compete once 
voice telephony services have been opened to competition, Member States must by 1 
January 1998 adapt existing licensing conditions or bring to an end other obligations, 
(imposed through other means than a licence) which are unrelated to a specific 
operator's telecommunications activities. 
VII. 3.5.5 Promotion of competitive service provision : obligations on infrastructure 
providers 
As recognised in the consultation on the Green Paper on Mobile and Personal 
102 
Communications , service providers, whether integrated into or independent of 
network Operation will play a central role in the development of the future 
telecommunications environment. A key factor in this development will be ensuring 
the ability of service providers to obtain and offer a range of different 
telecommunications services, particularly, in meeting the needs of users for full 
personal communications on a pan-European basis. 
The relationship between infrastructure provider and service provider is primarily a 
matter of commercial agreement (within the framework provided by Community 
law). At the same time, it is important to recall that Article 4 of Directive 
90/388/EEC imposes an obligation on the Member States to ensure that 
telecommunications organisations make access available to their networks on 
objective and non-discriminatory terms and that they supply leased lines within a 
reasonable period. Even after 1998 it is likely that such an obligation will continue to 
apply on a transitional basis until effective competition is established. 
Furthermore, account must also be taken of the obligations placed on Member States 
within the framework of Directive 92/44/EEC (the ONP leased lines Directive) to 
make sure a minimum set of leased lines is made available throughout the Union. 
Nevertheless, in order to promote competition and, in particular, innovative 
combinations of networks and services, providers of public telecommunications 
infrastructure should make their facilities available to independent service providers, 
101 COM(93) 159 final 
102 Communication concerning the consultation on the Green Paper on mobile and Personal 
Communications, COM(94) 492, 23.11.93. During the consultation process, a consensus amongst 
market participants emerged in favour of priority being given to the commercial autonomy of market 
players. 
68 
with a requirement for operators to justify to the national regulatory authority on 
request any refusal to deal. 
Whilst priority should be given to commercial agreements between service providers 
and infrastructure providers at this stage, the position should be kept under review to 
see whether refusals by infrastructure providers to deal with independent service 
providers is restricting competition. 
The terms on which such facilities are made available should respect Open Network 
Provision principles as far as they apply. 
VII. 3.5.6 Service providers 
Whilst the focus of this Section remains on the licensing of communications 
infrastructure, both this Green Paper and the Commission's Green Paper on Mobile 
and Personal Communications point to the development of independent service 
provision as one of the future distribution channels for telecommunications services, 
alongside service provision activities of businesses where service provision and 
network operation are fully integrated activities. 
Consideration must nevertheless be given to what, if any, constraints are to be placed 
on such independent service providers, in order to clarify the overall regulatory 
picture in the emerging communications market. 
This evolution in service provision contrasts with today's markets where the 
provision of the voice telephony service (and hence the regulatory controls on such 
provision, including guarantees of universal service) is an integral part of network 
operation. 
To accommodate the emergence of new types of distribution channels and innovative 
services, existing Union principles should be applied and adapted. In particular, 
consideration must be given to whether, where service providers do not provide their 
own infrastructure, it is disproportionate for Member States to require an individual 
licence for the service provider. The conditions attached to the licence simply 
duplicate the conditions already applied in the licence covering the third party 
infrastructure which the service provider is using. Such duplication might act to 
restrict the free movement of services within the Union and limit the introduction of 
new innovative services. 
In the light of this, service provision (as opposed to network establishment and 
operation) should not be subject to individual licensing in the Member States. It may 
be subject to class licences or to a requirement for declaration by Service Providers 
of their activities to the National Regulatory Authority(ies) of the Member State(s) in 
which they choose to operate. 
Nevertheless, in the case of independent service providers offering voice telephony 
services on a resale basis, consideration may need to be given as to how and when 
such resellers should be obliged to make a contribution, appropriate to their market 
position, to the provision of universal service (via access charges or a universal 
service fund). 
69 
If additional safeguards are considered necessary, they should fully respect the 
principle of proportionality. 
VIJ.4 Interconnection and interoperability 
VII. 4.1 The importance of interconnection 
The emergence of interconnection as a priority issue for European 
telecommunications policy is emphasised in the Bangemann report on Europe and 
the Information Society. 
"Two features are essential to the deployment of the information 
infrastructure needed by the Information Society: one is a seamless 
interconnection of networks and the other that the services and 
applications which build on them should be able to work together 
(interoperability}. 
"In the past the political will to interconnect national telephone 
networks resulted in hundreds of millions of subscriber connections 
world-wide. Similar political determination and corresponding effort are 
required to set up the considerably more complex information 
infrastructures. 
"Interconnection of networks and interoperability of services and 
applications are recommended as primary Union objectives. " 
Interconnection of networks and their underlying infrastructure is a pre-requisite for 
interoperability of telecommunications services. Users are physically connected to a 
network via the physical infrastructure, but they subscribe to one or more services 
supplied over that network. The traditionally integrated nature of fixed voice 
telephony has hitherto made such distinction largely invisible, but increasingly it is 
becoming important to separate conceptually services from networks and 
infrastructure. . 
Issues of interconnection may arise whenever there is a (potential) competitive 
relationship between two organisations, and the one demands the use of facilities 
from the other for the delivery of its telecommunications . Issues also arise, on the 
other hand, when the relationship between the organisations is complementary, such 
as between a long distance and local operator, or between national operators in 
different countries handing on international calls for termination. Both types of 
relationship can raise problems concerning abuse of dominant position. 
Interconnection issues generally involve services (in particular voice telephony), 
networks and infrastructure, and are therefore closely related to the ongoing reform 
process leading to the full liberalisation of voice telephony in 1998103. The future 
regulatory framework for interconnection will be based on application of the 
competition rules in conjunction with a specific ONP Directive on interconnection, 
103 Derogations exist for certain Member States up to 2003 
70 
and will be contained in legislative proposals that the Commission will be submitting 
in the course of 1995. 
The goal is an open interconnected environment, where there are no a priori 
restrictions on network interconnection, and where telecommunications-based 
services can operate seamlessly over interconnected networks. The regulatory 
approach to interconnection in this open environment will involve: 
• removal of current barriers on interconnection 
• commercial negotiation as the basis of interconnection agreements, within a 
defined framework which will ensure a fair and timely dispute resolution 
mechanism when called for 
• supervision of the negotiation by the national regulatory authorities 
• common principles for interconnection set at EU level. 
VII. 4.2 Application of the competition rules 
All interconnect agreements are subject to screening under Articles 85 and 86 of the 
EC Treaty. In the context of Article 85, all agreements, which restrict competition 
and have an effect on trade between the Member States are prohibited. Interconnect 
agreements may not therefore, for example, in principle, limit the commercial 
freedom of one of the parties by determining the pattern of its action or abstention 
from action in the market. Network operators/infrastructure providers who are also 
service providers should not restrict their customers' ability to access 
telecommunications-based services provided by others. 
Up to now in the telecommunications sector Article 85 has normally been 
implemented on a case-by-case basis by the Commission and the national courts. 
Given the calls from sector players for a stable and predictable regulatory 
environment for interconnection 04, the Commission will consider further measures 
setting out the conditions under which interconnection agreements are compatible 
with the principle of undistorted competition. 
Another principle applying to interconnect agreements is set out by Article 86 of the 
Treaty which prohibits the abuse of a dominant position. The implications of this 
Treaty provision are in particular that: 
• a network operator with a dominant position in the market for infrastructure 
provision should normally not be able to prevent another party from offering 
services by refusing interconnection.; 
104 Commission Communication on the consultation on the Green Paper on Mobile and Personal 
Communications, COM(94) 492 final, 23.11.94 
71 
• infrastructure providers with a dominant position should not place unreasonable 
restrictions on the customer's choice of service provision nor set unreasonable or 
unjustified charges; 
These obligations apply in principle only to dominant network providers. There is no 
general definition of a dominant position set out in Article 86. However, the Court of 
Justice has defined the concept as a position of economic strength enjoyed by an 
undertaking which enables it to prevent effective competition from being maintained 
on the relevant market by affording it the power to behave to an appreciable extent 
independently of its competitors, its customers, and ultimately of consumers105. In 
the telecommunications area, the existence of dominance depends on the availability 
of alternatives. The ownership of a universal fixed public switched telephone 
network connecting most of the population of the Member States means that the 
owners of such networks are likely to retain a dominant position with regard at least 
to the local loop even after liberalisation, given the current high cost of duplicating 
the local loop. Indeed, termination of international, long distance fixed network calls 
and mobile network calls will in most case not be possible without co-operation of 
the relevant telecommunications organisations, giving those companies the power to 
control the price of interconnection. The ability of a firm to set or control market 
prices is a sign of dominance. 
Given the importance of the local loop in providing access for new market entrants 
to potential customers, the analysis of interconnection agreements under Article 86 
EC will therefore focus inter alia on agreements involving local infrastructure 
providers, in order to prevent abuses of dominant position. 
In a first phase, specific rules could further be envisaged to deal with the issue of the 
opening up of the current infrastructure monopolies involving, for example, 
organisations to which the right to interconnection should be granted (in principle 
those providing services to the public), terms (including tariff principles) and 
conditions, notably the access points. The aim would be to require Member States 
to set out a regulatory framework allowing the emergence of effective competition. 
VII.4.3Proposalfor a Directive on interconnection concerning public networks 
With regard to interconnection to public telecommunications networks, there is a 
need to set out a specific and harmonised regulatory framework at the level of the 
Union to ensure the European-wide provision of services by setting conditions for 
access to and use of these telecommunications networks. 
The aim is to ensure that the users needs for "any-to-any" communication are met 
(subject to technical feasibility and the willingness of both parties to communicate). It 
is neither necessary nor practicable to insist on direct interconnection of every 
network to every other network. A mbrture of direct and indirect interconnection of 
networks, with associated end-to-end interoperability of telecommunications 
105 See Case 27/76 United Brands v Commission [1978] ECR 207 
72 
services, driven by market needs, will meet the customer demand for 'any-to-any* 
communication. 
Discussion between Member States and the Commission on the proposal for a 
Directive on the application of open network provision to Voice Telephony resulted 
in agreement on a number of basic principles in relation «to voice telephony 
interconnection. Building on this consensus and the market need for well defined 
regulatory environment for interconnection, the Commission has announced its 
intention to propose a Directive on interconnection in the context of open network 
provision , (subject to the outcome of the review of ONP) in order to harmonise 
conditions for public network access. 
The main lines of the proposed ONP Interconnection Directive would be as follows: 
General principles for open access 
All parties should have the right to enter into commercial and technical agreements 
to interconnect. 
Requests for interconnection should be normally be met, by those undertakings 
within the scope of the directive under mutually agreed terms. 
Conditions for interconnection should be based on the established principles of open 
network provision i.e. conditions on access and use should: 
- be based on objective criteria 
- be transparent and published in an appropriate manner 
- guarantee equality of access and must be non-discriminatory, in accordance 
with EU law. 
- comply with essential requirements (interoperability of services, protection 
of data, network integrity, network security, etc.) 
A framework for negotiation 
A negotiating framework should be set ensuring that commercial negotiations result 
in a fair and timely agreement. Regulatory authorities should have a responsibility to 
prevent any abuse of negotiating power, and for ensuring the provision of adequate 
information, cost-oriented pricing structures, and for issues of unbundling, 
collocation, end-to-end quality, network integrity and security, etc. 
106 Commission Communication on the present status and future approach for open access to 
telecommunications networks and services (Open Network Provision), COM(94) 513 final, 29.11.94 
73 
A common approach to interconnection charges. 
The approach will take account of the current consultation between the Commission 
and Member States being carried out in the context of Council Resolution 94/C48 on 
• 107 
Universal Service principles in the telecommunications sector 
It will establish clear, Europe-wide rules for the setting of interconnection charges, 
the financing of universal service, and for implementing appropriate cost accounting 
systems. (See section VH.4.4 below) 
A mechanism for dispute resolution. 
A timely mechanism for dispute resolution between the parties must be established, 
with defined roles for the national regulatory authorities and the Commission. 
VII.4.4Principles for interconnect charges to public networks 
Principles for interconnect charging, to be agreed at EU level, are identified below. 
a) Interconnection charges should be a matter for commercial agreement between the 
parties involved, subject to supervision and if necessary timely intervention by the 
National Regulatory Authority, and subject to the competition rules. 
b) Interconnection charges should encourage efficient and sustainable market entry. 
Charges should be based on underlying costs of an efficient operator. 
c) The cost of inefficiencies should not be passed on to interconnecting operators. 
Charges should promote efficiency gains by the incumbent operator. It should not 
threaten the financial ability of any operator to fulfil its licence obligations. 
d) Charges should be transparent, non-discriminatory and sufficiently unbundled. 
Published interconnect tariffs are the best mechanism for ensuring this. 
e) Charges related to recovering losses due to tariff imbalances resulting from 
obligations imposed by the National regulatory authority should be identified 
separately. It is anticipated that these charge elements will quickly decline as 
tariffs are progressively rebalanced in Europe. Until then, they may be recouped 
through charges on interconnecting operators. 
f) Any residual charges related to the provision of uneconomic universal service 
obligations should also be separately identified. Such charges relate to the cost of 
serving uneconomic customers (i.e. customers who do not generate sufficient 
revenue to recoup the cost of providing service to them), or to providing services 
such as emergency services. (The imposition of a geographically averaged 
standard connection cost is covered in the above formulation, in that it makes 
some customers uneconomic.) 
107 OJ C 48,16.2.1994, p. 1. 
74 
Residual costs of this type may remain for the foreseeable future. They may be 
recouped through charges on interconnected operators, but in order to reflect the 
underlying costs, the charges should not generally be traffic or capacity dependent. 
Costs of this type may also be recouped via Universal Service Funds. 
g) Approved cost accounting systems should be implemented by the operators under 
the supervision of the National regulatory authority in order to ensure 
transparency and non-discrimination for interconnection charges. 
The Commission is currently consulting the sector on specific application of these 
principles, based on recommendations contained in independent studies carried out 
for the Commission by Arthur Anderson108 and WIK/EAC109. These studies are 
available from the European Commission on request. (See Annex 2 for details.) 
Vn.5 Open access to public infrastructure - application of the competition rules 
and ONP principles 
VII. 5.1 A policy of Open Access 
A policy of open access to public telecommunications infrastructure will ensure that 
the Union goal of a rich choice of public telecommunications services delivered over 
an interconnected mesh of separately owned and operated network infrastructures 
can be achieved. 
Principles for open access have already been drawn up in Community law and 
further harmonised under the Union policy of open network provision. In applying 
these principles to public telecommunications infrastructure, the aim must be to 
ensure a coherent regulatory framework across all Member States for access to and 
use of infrastructure, while at the same time not imposing a regulatory burden that 
would hinder future development of the market. Failure to observe these principles 
could result in distortion and lack of choice in the future telecommunications and 
information services market. 
Telecommunications infrastructure is the foundation of all telecommunications 
services. As shown in Figure II.. 1, telecommunications infrastructure covers the 
physical facilities which enable and support the provision of telecommunications 
transmission capacity. Public infrastructure providers with privileged access to 
limited national resources (e.g. rights of way, radio frequencies) have certain 
responsibilities towards other market players. 
108 Study on cost allocation and the general accounting principles to be used in the estabhshment of 
access charges in the context of telephone liberalisation in the EC. 
109 Study on Interconnection in the context of Open Network Provision 
110 Services Directive 90/388/EEC. OJL 192, 24.7.1990, p. 10. 
75 
The principle of open access requires public telecommunications infrastructure 
providers to provide access to their facilities on an equal and non-discriminatory 
basis, and not to restrict the choice of services available over their infrastructure. 
According to the competition rules, infrastructure providers which enjoy a dominant 
position must provide access in this way and may not refuse to deal with potential 
users. Application of this principle to non-dominant players requires a more flexible 
approach depending on the market conditions and the technology in question. 
The competition rules, in conjunction with the existing open network provision 
framework, contain the necessary flexibility with which to apply the policy in a 
developing technological and market environment, in accordance with the principles 
of proportionality and subsidiarity. The aim is to ensure that: 
. a) Separately owned and operated public network infrastructures are 
interconnected in Europe 
b) Adequate transmission capacity111 is assured throughout the European 
Union, allowing organisations to build telecommunications systems for 
their own and third party use. 
c) National licensing conditions for public telecommunications infrastructure 
providers include the ONP principles of transparency and non­
discrimination, and do not limit users' choice of telecommunications-based 
services lawfully provided in the EU. 
d) There is transparent accounting for infrastructure provision, to ensure fair 
competition and avoid unfair cross-subsidies. 
e) Common technical specifications, based on European standards, are used. 
The main lines of action are as follows: 
VII. 5.2 A new ONP Directive on interconnection to public networks. 
In line with the re-examination of scope of the open network provision rules 
currently underway, a new European Parliament and Council Directive on 
interconnection in the context of open network provision will be proposed in 1995, 
to take effect after 1.1.98 when voice telephony and/or infrastructure has been 
liberalised. It will ensure a harmonised approach to the interconnection of separately 
owned and operated public networks and infrastructures. 
Details of the proposed Directive are given in Section VEL4 above. 
111 Transmission capacity is used as a general term to cover facilities like leased lines. In the future, the 
precise transmission capacity made available to the customer could vary under customer control, and 
may not conform precisely to the definition of leased lines given in Council Directive 92/44/EEC. 
76 
VIL 5.3 Revision of the ONP Leased Lines Directive to cover infrastructure 
provision. 
Adequate provision of public transmission capacity on a Union-wide basis is seen as 
an essential foundation for a flourishing telecommunications services market. 
Market demand is expected to lead to adequate provision to serve trie major 
metropolitan areas, but reliance on market demand alone is unlikely to lead to full 
coverage of outlying areas. In order to encourage development of less favoured 
regions within a Member State, and cohesion throughout the Community, the 
availability of adequate transmission capacity should be guaranteed by Member 
States throughout their territory. 
A revision of the ONP Leased Lines Directive is therefore proposed, such that 
Member States would have to ensure that a minimum level of transmission capacity 
was available throughout their territory and between Member States. The revised 
Directive would apply to organisations offering public transmission capacity of major 
importance (subject to the outcome of the review of ONP with regard to its scope of 
application), with the likely exception of new entrants with limited market share 
Recognising that competition in the market will serve to keep down prices, the 
requirements in the current ONP Leased lines Directive for cost-oriented pricing and 
pre-publication of tariffs would be relaxed once effective competition was in place. 
Safeguards against collusive behaviour leading to higher prices are provided in the 
EC competition rules. 
The transmission capacity to be made available would be the 'minimum set' defined 
in Annex II of the ONP leased lines Directive, which currently specifies: 
- ordinary and special quality voice bandwidth analogue circuits 
- 64 kbit/s digital circuits 
- 2 Mbit/s digital circuits (structured/unstructured). 
ETSI standards for these types of circuit are becoming available. ETSI are also 
developing standards for higher capacity leased lines (at 34 Mbit/s, 140 Mbit/s and 
155 Mbit/s). 
VII. 5.4 Application of open network provision principles to the provision of 
public telecommunications infrastructure 
As noted above, public telecommunications infrastructure providers with rights of 
way or frequency allocations have privileged access to limited national resources, and 
therefore carry some responsibility towards other market players in the 
telecommunications sector. It is proposed that the principles established under the 
112 Council Directive 92/44/EEC. OJL 165, 19.6.1994, p.27. 
113 Discussions on the future application of specific ONP Directives are currently underway. A proposal 
to make a link between market share and the obligations under ONP to provide a minimum set of 
harmonised offerings, is being considered. 
77 
policy of open network provision should apply in a general way in the form of 
harmonised national licensing conditions for the provision of public 
telecommunications infrastructure. 
General open network provision conditions are set out Directive 90/387/EEC. They 
call for technical specifications, supply and usage conditions and tariffs to be: 
- transparent 
- non discriminatory, offering equality of access 
- based on objective criteria. 
Examples of specific cases where these principles should be incorporated into the 
licences or authorisations of public infrastructure providers are given below. 
Vertically integrated infrastructure providers 
Application of open network provision conditions should be envisaged when 
infrastructure provision is a business activity carried out by a vertically integrated 
supplier who also offers telecommunications services, in view of the possible conflict 
of interest. Application of harmonised conditions according to ONP principles will 
ensure transparency and fair access to the underlying infrastructure. 
Such infrastructure providers should meet all reasonable requests for use of facilities, 
on commercially negotiated terms. Refusal to allow access to or use of a facility 
should be referred to the national regulatory authority. Conciliation and dispute 
resolution procedures established under ONP measures may then apply. In the case 
of a dominant infrastructure provider, refusal to allow access could constitute an 
infringement of obligations under the competition rules, giving rise to the additional 
legal remedies under those rules. 
Shared use of facilities 
It will often be in the public interest to encourage third party access to facilities such 
as underground ducts, radio towers, and buildings in order to minimise the 
environmental impact of duplication. Such facility-sharing arrangements should be 
on the basis of commercial and technical agreements between the parties concerned, 
subject to possible examination under the competition rules. Supervision of such 
agreements by the National Regulatory Authority according to the principles of open 
network provision would also help to avoid any unfair allocation of resources. 
To end current bottleneck situations or to avoid such situations in relation to 
concerns linked to the protection of the environment and town planning objectives, 
National Regulatory Authorities could make the shared use of facilities mandatory. 
78 
Non-discriminatory access to services 
As noted in the above Section VII.4 on Interconnection, access for many customers 
will, even in a competitive environment, continue to be controlled by the owner of 
the local network infrastructure. That infrastructure may be copper, fibre or radio 
technology. It will commonly be the case that the local network infrastructure 
provider is also a service provider. In addition to the application of the competition 
rules, the application of ONP principles in this situation will ensure that users can 
access services provided by other service providers on fair and non-discriminatory 
terms. 
Circumstances where users' ability to access services may be legitimately constrained 
are: 
- technical incompatibility which prevents certain services being offered over 
certain networks or to certain users 
- limitations imposed by the regulatory authorities for public policy reasons, in 
accordance with the Treaty. 
As these examples show, the approach of defining basic principles for public 
telecommunications infrastructure at a Union level, while ensuring that those 
principles are applied at a national level through relevant licences or authorisations, 
provides an appropriate balance for the variety and complexity of the infrastructure 
market structure. The approach is particularly suited to the evolving switched broad 
band local network infrastructures. 
VII.5.5The need for urgent adoption by the European Parliament and the Council of 
the Re-submitted proposal for an ONP Voice Telephony Directive 
This Directive concerns the harmonisation of conditions for open and efficient access 
to and use of fixed public telephone networks and public telephony services, and the 
availability throughout the Community of a harmonised voice telephony service. 
Rapid implementation of this Directive will ensure that service providers have open 
and non-discriminatory access to the public telephone network infrastructure. 
VII.5.6 Application of cost accounting principles established under ONP to public 
telecommunications infrastructure provision. 
Transparent accounting is necessary to allow the National Regulatory Authorities to 
deal with interconnection disputes. It would also help the application of the 
competition rules. This is important in the case of vertically integrated organisations 
offering telecommunications services and/or broadcasting services in addition to 
infrastructure. 
Many infrastructure providers will be vertically integrated organisations offering 
telecommunications services and/or broadcasting services over their infrastructures. 
79 
Other organisations will be purely service providers who rely on infrastructure 
purchased from the vertically integrated organisations. 
Accounting separation between the telecommunications activities and broadcasting 
activities will be necessary. Within the telecommunications business unit, a cost 
accounting methodology should be Used which allows the cost of infrastructure 
provision to be separated from the cost of providing other telecommunications 
services. It should be subject to separate audit. 
The aim is to provide the necessary transparency to ensure that third-party service 
providers are not being under- or over-charged for the use of telecommunications 
infrastructure. 
The requirement for separate accounting builds on the existing requirements for 
implementation of cost accounting systems in the ONP leased lines Directive. 
VII. 5.7 Technical standards appropriate for infrastructure offerings 
The ONP leased lines Directive identifies specific technical standards whose 
implementation is mandatory for the minimum set of leased lines. 
ONP also offers a mechanism whereby standards considered suitable for achieving 
Community goals can be referenced in the Official Journal of the European 
Communities. The ONP List of Standards' is published regularly in the Official 
Journal. 
Publication in the Official Journal does not imply that a particular offering should 
be made available; rather, it identifies for users and suppliers the preferred standards 
to be followed when an offering is made available. It would not in any way impede 
the introduction of innovative technologies. 
This principle can be readily extended to infrastructure offerings. 
The ONP framework Directive also lays down a mechanism, for making the 
implementation of particular standards mandatory in exceptional circumstances. This 
mechanism provides a safeguard for those situations where normal market forces do 
not result in adequate implementation of standards to meet users' needs. 
VTI.6 Safeguarding and developing universal service in a competitive 
environment 
VII.6.1 The Key Issues 
Council Resolution 93/C213/01 on the review of the situation of the 
telecommunications sector and the need for further development in that market114 
114 OJ No C 213, 6.8.1993, p.l. 
80 
established as a major goal for Community telecommunications policy the 
liberalisation of all public voice telephony services, whilst maintaining universal 
service. 
This Resolution recognised the importance, for the individual consumer and for the 
competitiveness of industry and commercial users, of a Union-wide 
telecommunications system offering to all users, including specific social groups, 
reasonable and affordable charges for access and use, high quality of service and 
technological innovation. The importance of universal service was equally 
emphasised in the Resolution of the European Parliament of the 20th April 1993 
whilst supporting the liberalisation timetable and recognising the need to take full 
advantage of the potential for exploiting alternative infrastructures in Europe to 
supply and develop telecommunications services. 
Three key issues must be addressed at a Union level with respect to universal service 
in the telecommunications sector. The first concerns the elements that comprise 
universal service, the second the methods for costing universal service and the third, 
the means of financing uneconomic aspects of universal service provision in a 
competitive telecommunications environment. 
VIL 6.2 The elements that comprise universal service 
Council Resolution, 94/C48/01, has confirmed the general principle of universal 
service in telecommunications, i.e. access to a defined minimum service of specified 
quality to all users at an affordable price and respecting the principles of universality, 
equality and continuity. 
The main elements of a Union-wide definition of universal service have been 
developed within the context of Open Network Provision, in particular Council 
Directives 90/387/EEC and 92/44/EEC, the re-submitted position on the proposal 
for a Directive on the application of open network provision to voice telephony, and 
Council Recommendations 92/382/EEC and 92/383/EEC. 
The basic elements with respect to voice telephony involve the setting of appropriate 
targets and their implementation by National Regulatory Authorities and include the 
following : 
• Provision of the basic telephone service 
includes the publishing of target and achieved delivery periods, specification of 
contractual terms, etc. 
• Quality of service 
includes the publication and monitoring of quality targets and actual performance 
• Tariff policy 
includes tariff flexibility, i.e. the possibility for targeted provision for socially 
desirable purposes. 
81 
Publication of information about the service. 
Dispute resolution procedure for users 
Subscriber directories 
Operator assistance and directory enquiry services 
Public pay-telephones 
Access to emergency services 
Specific conditions for disabled users and persons with special needs. 
In addition, targets or recommendations are proposed for a number of advanced 
features, including itemised billing, touch-tone dialling, call forwarding, calling line 
identification, green number or freephone services, call transfer and access to 
directory and operator services in other Member States. 
In order to establish common universal service principles Union-wide, the 
Commission is re-submitting its proposal for a Directive on ONP arid Voice 
Telephony to Council and Parliament and seeks rapid adoption. 
Given the rate of technological progress and its effect on costs and availability of 
increasingly sophisticated services, together with the need to ensure that the benefits 
of the Information Society extend to all citizens and not just to the privileged 
minority, the definition of universal service must be dynamic and reflect such 
progress. Ultimately, the most essential factor is that all users should be connected 
to a network which offers them access to an increasing range of services. Which 
services should actually be subsidised will depend upon political considerations as 
well as the level of competition in their provision, which should anyway ensure 
reasonable prices. . 
In this way, universal service may be structured to encourage simultaneously 
maximum telephone penetration as well as enhanced consumer choice among 
services and service providers. 
VII. 6.3 Costing and financing uneconomic universal service in a competitive 
environment. 
Two important steps are required in the context of both services and infrastructure 
liberalisation in the light of the discussion in section V.l. ~ The first is to assess the 
uneconomic cost of universal service obligations based on common principles. The 
second is to put in place practical mechanisms for the financing of uneconomic 
universal service obligations. 
The Commission believes that National Regulatory Authorities should support tariff 
rebalancing and put in place targeted schemes for needy users and uneconomic 
customers instead of favouring general subsidies for access. 
82 
Only telecommunications-related public service obligations should be treated as 
universal service obligations in voice telephony. National Regulatory Authorities 
should calculate the cost of uneconomic Universal Service Obligations as the net cost 
of providing service to uneconomic customers, plus any costs associated with the 
uneconomic provision of public telephones, emergency services and other social 
obligations such as targeted schemes. 
Uneconomic customers would be those whom, in the absence of regulatory 
obligations, the incumbent would choose not to continue to serve at affordable rates. 
The definition of uneconomic customers is not simply those whose revenues, from 
fixed and usage charges do not cover their share of costs115. 
Such a definition exaggerates the cost of universal service since it fails to take into 
account the revenues from incoming calls to such customers. If a customer leaves 
the network, the TO also loses the usage revenues associated with inward calls to 
that customer unless a substitute for these calls occurs. An individual customer is 
therefore uneconomic or loss making only if the exchange line rental plus the profits 
on calls made, plus the profits on additional calls which the customer generated as a 
result of joining the network, fails to cover the net cost of service. Moreover, a 
customer who is currently unprofitable may become commercially desirable in the 
future. 
A more appropriate basis, therefore for assessing the uneconomic cost of fulfilling 
universal service obligations is one that uses long run avoidable or incremental costs. 
Studies have shown that the burden associated with uneconomic customers in well 
developed networks is relatively low and generally only a few percentage points of 
overall turnover. 
115 The universal service cost is the net cost of providing service to uneconomic customers, plus any cost 
associated with the uneconomic provision of public telephones, emergency services and other social 
obligations. It takes account of all traffic sensitive costs and revenues associated with those 
customers. (See also section V.l) 
83 
Table VII.6.3 - Estimated cost of USO as a percentage of turnover in 1992.116 
16 
14 
12 4 
10 
^8 + 
4 4-
2 4-
O CJ 
In principle there are a number of ways of financing the universal service obligations 
imposed on TOs, in a competitive environment. It is assumed in practice that such 
financing will be generated from within the telecommunications sector. 
Operators and service providers should contribute and the financial responsibility for 
universal service should be spread as broadly and equitably as possible subject to the 
principle of proportionality. The financial mechanism will be set out in the 
framework of the amendments to the current regulatory framework, to be proposed 
before the end of 1995. 
Since voice telephony currently generates the main turnover in the 
telecommunications sector, the revenues could be raised, for example, from all 
eligible operators who originate or terminate calls on the public switched network. 
However, the approach to financing universal service should be consistent with the 
principle of proportionality. Therefore, contributions to universal service should 
avoid delaying the development of new services, which currently have higher costs 
and lower volumes such as mobile telephony. Such services might be exempted as 
116 Source : Analysys 
84 
long as, given their higher underlying costs and tariffs, they could not be said to 
undermine the ability of the voice telephony providers to finance universal service. 
At the same time the financing of uneconomic universal service obligations should be 
made quite separate from the issue of interconnection charges. The preferred 
method of financing the cost of USOs would be through national universal service 
funds. All telecommunications network operators and service providers would 
contribute on the basis of their level of activity in the market. 
Alternatively the USO burden could be treated like a common cost and recovered in 
an access charge that is added to interconnection charges. 
Both mechanisms have advantages and disadvantages. Adding access charges to 
interconnection charges does not necessitate the creation of new structures. It 
involves less transaction costs and bureaucracy, once the amounts have been defined, 
since the charges are invoiced together with the interconnection charges by the 
incumbent telecommunications organisation responsible for the provision of universal 
service. 
The disadvantages of this mechanism are: 
• the possible conflict of interests which arises because the dominant operator is 
granted the right to oversee and collect subsidies from its competitors to cover a 
portion of its own expenses. The former will have no incentive to reduce its cost 
of providing universal service, since this would also benefit its customers. 
• the absence of transparency because the mechanism is based on the TO's 
calculation of its costs and on its own price structure and charges. Given the 
complexity of accounting systems and the subjective choices to be made as 
regards cost allocation, the actual cost of universal service will never be certain. 
Access charges might be funding profits instead of compensating costs. 
• As the universal service obligation is imposed only on the dominant operator, no 
other operator is allowed to compete to provide the uneconomic service (e.g. in a 
given rural area) in a more efficient way. New entrants have little incentive (or 
possibility) to compete in the more high-cost areas of the market as they are not 
entitled to the subsidy which the incumbent enjoys. The logical result is that they 
will concentrate their offers on large business users rather than domestic users. 
The latter are excluded from the benefits of increased choice and efficiency 
brought about by competition. 
Although the universal service fund mechanism may be more cumbersome to set up, 
it does not involve the distortions that may be inherent in an access charge system. 
Moreover, it can be designed to favour more efficient competition and faster 
productivity increases and cost savings, since all operators may compete to provide 
universal service and be compensated by the universal service fund. The entitlement 
to subsidised service can be linked to needy or uneconomic customers or to 
particular areas rather than tying the universal service obligation to the incumbent 
85 
operator. In addition the entitlement could be reduced over time as the gap between 
costs and affordable prices declines117. 
In general, therefore, preference should be given to financing universal service 
obligations by means of universal service funds rather than via access charges. 
VIL 6.4 Universal service should be monitored and reviewed 
National Regulatory Authorities have a key role to play in developing and reinforcing 
universal service as competition in the telecommunications sector occurs. There is a 
real possibility to pass on the benefits of cheaper and better quality 
telecommunications to all, particularly if, as pricing and structural adjustment 
proceed, universal service concerns are targeted rather than dealt with by arbitrarily 
subsidising access for all. 
In order to assess progress, transparent measures should be put in place to effectively 
survey, monitor and review universal service indicators. As a minimum such surveys 
should include numbers of residential access lines and penetration per household, 
numbers and availability of public pay phones and should detail the schemes available 
for those on low incomes, or low users or those with particular needs. 
117 Universal Service Funds are special arrangements, administered by an independent body, for the 
collection of contributions from eligible operators to the cost of universal service obligations and the 
transfer of funds to operators taking on these obligations. 
Universal service funds are in operation or under development in a number of countries and are 
normally established under strict regulatory oversight, see WDC study on "Network Interconnection in 
the domain of ONP" for details of universal service funds and their operation in specific countries. 
There are two important characteristics of universal service funds which distinguish them from the 
use of access charges to finance the cost of universal service obligations. Firstly, payments and 
receipts are in a lump-sum form rather than added to interconnection charges and are, therefore, less 
distortionary. Secondly, the use of universal service funds makes it easier for competing or additional 
operators to share in the provision of universal service by allowing them to share in the possible 
subsidies associated with it. 
The idea of universal service funds is based on the understanding that new entrants should have the 
option of either paying (i.e. directly into a fund) or providing service (i.e. part of the actual universal 
service). Where they do the latter they should receive the same amount of "credit" for such provision 
as the incumbent would have done. Common basic principles of schemes, currently operating or 
under development, include (i) un-economic customers need to be defined and identified, (ii) eligible 
operators are assigned an amount of universal service obligation which is proportional to their 
revenue or market share, (hi) the obligation may be discharged by operators in "cash or kind", i.e. by 
paying into the fund or providing service to un-economic customers, or a mixture of the two, (iv) 
operators who provide un-economic service in excess of their assigned obligation would receive the 
appropriate payment (or balance) from the fund, and (v) the administration of the USFis carried out 
by a regulatory authority or an authorised, neutral third parry. The issue of financing universal 
service was discussed in detail during the public consultation on future regulation in France (See 
Consultation Publique, DGPT, April 1994). It is also an issue currently being considered by OFTEL 
in reviewing the UK's current regime for interconnection. 
86 
In addition, the concept of universal service should be reviewed to assess the 
implications of the changing technological situation, market developments and 
changes in user demands. 
VII. 6.5 Conclusions 
• Universal service consists of access to a defined minimum service of specified 
quality to all users at an affordable price based on the principles of universality, 
equality and continuity. A key aim across the European Union should be to 
ensure that the benefits of cheaper and better quality telephony and other benefits 
of increased competition and choice are passed on to all users. 
• Tariff re-balancing remains a major objective in the context of the liberalisation of 
telecommunications services , whilst catering for the needs of users vulnerable to 
re-balancing. 
• In the interests of further developing common Union-wide principles and 
elements of universal service, the Commission is re-submitting to Council and 
Parliament its proposed Directive on the application of open network principles 
to voice telephony. 
• Instead of generally subsidising local access, NRAs should favour tariff re­
balancing and in conjunction with TOs arrange for specific tariffs targeted at the 
requirements of needy or uneconomic customers. Such targeted or social tariffs 
should be arranged within the framework of an optimal or multiple tariff 
structure. 
• Only telecommunications-related public service obligations should be treated as 
universal service obligations in voice telephony. NRAs should calculate the cost 
of USOs as the net cost of providing service to uneconomic customers, plus any 
costs associated with the uneconomic provision of public telephones, emergency 
services and other social obligations. Network operators should be freed from 
non-telecommunications related obligations. 
• The uneconomic costs of USOs should be financed either through national 
universal service funds or where not possible via access charges to be added to 
interconnection charges. Preference should be given to financing through 
universal service fund rather than via access charges. Operators and service 
providers should contribute, subject to the principle of proportionality and the 
financial responsibility should be spread as broadly and equitably as possible. 
• For those countries which have embraced 1998 as the deadline for the full 
liberalisation of telecommunications services, infrastructure liberalisation will not 
entail an additional burden on the financial ability of TOs to honour their 
universal service obligations. In fact universal service may be enhanced to the 
extent that other infrastructures. can be exploited or service quality improved. 
However, to the extent that competing infrastructure operators are likely to 
target high volume or sophisticated users, TOs should be given more flexibility in 
responding to competition in their pricing of bulk capacity or bulk usage, subject 
to competition rules. 
87 
In order to thoroughly monitor universal service provision, NRAs in conjunction 
with the Commission should periodically survey main indicators of universal 
service, in particular penetration of residential lines, waiting times, provision of 
public pay phones and the availability of targeted schemes for the needy and 
uneconomic customers. 
The Commission seeks views on the most appropriate and practical means of 
developing means of financing the burden of uneconomic universal service 
obligations in a competitive environment, bearing in mind the comments above 
and the different situations of Member States. 
Vn.7 The particular circumstances of peripheral regions with less developed 
• networks 
Council Resolution 93/C213/01, which established the deadline of 1 January 1998 
for the liberalisation of all public voice telephony services, granted Member States 
with less developed networks, i.e. Greece, Ireland, Portugal and Spain, an additional 
period of up to five years in order to achieve the necessary structural adjustments, in 
particular of tariffs. 
Additionally, Council Resolution 93/C213/01 also noted that Member States with 
very small networks can, where justified, be granted a transitional period of up to 
two years. 
Subsequently, Spain has established 1998 as a target date for the total liberalisation 
of voice telephony. In order to fully prepare for the 1998 deadline, the intervening 
period is being used to extend service coverage throughout the country, adjust 
pricing structures to competitive conditions and establish the way in which public 
service obligations with respect to voice telephony will be defined and financed. 
Pricing and structural adjustments are also being prepared and undertaken in the 
other three countries granted additional transition periods for services liberalisation. 
No firm indication has yet been given on whether these countries intend to use part 
or all of the additional period granted. 
VIL 7.1 Pricing and structural adjustment 
Concern has been expressed about introducing services liberalisation while price 
structures are substantially out of line with costs because competing operators could 
target highly profitable telecommunications services or highly profitable customers, 
such as large business customers for long distance or international services and gain 
market share merely on the basis of existing substantially distorted tariff structures. 
This could undermine the ability of the TOs to meet investment requirements. 
On the other hand, postponing competition is likely to delay structural and pricing 
adjustments, limit investment from additional sources and exacerbate divergence with 
other Member States. The example of the rapid take-off of competitive mobile 
communications demonstrates that there is considerable pent-up demand for modern, 
88 
effective telecommunications even in peripheral regions with less-developed 
networks. 
Table VII.7.1 - PSTN tariffs in Greece, Ireland, Portugal and Spain, beginning 
of!994.118 
Peak 3 minute 
local call (ECUs) Peak 3 minute 
intra-EU call (ECUs) 
Greece 
Ireland 
Portugal 
Spain 0.03 
0.14 
0.05 
0.06 0.95 
1.11 
1.25 
1.17 
EU average 0.12 0.84 
Table VII.7.1 demonstrates that, even taking into account differences in pricing and 
cost structures because of specific national situations, considerable divergence from 
Union averages for tariff structures still exist for the countries concerned. This 
emphasises the need for National Regulatory Authorities to continue their 
programmes of adjusting and lowering TOs' pricing structures in preparation for 
liberalisation. 
VII. 7.2 Service coverage and investment 
The four countries whicb have been granted additional transition periods for full 
telecommunications service Hberahsation have levels of network penetration or 
service coverage which are below the Union average. Moreover, within the 
countries concerned, and indeed in some specific regions in other Member States, 
there are areas with significantly lower levels of penetration. 
118 Source : Tarifica, Omnicon 
89 
However, substantial investment programmes have and/or are being undertaken to 
close the gap with other Member States. Depending on the priorities which have 
been set by national governments for the use of Union Structural Funds, the 
extension of coverage to some of these areas is benefiting from financial assistance. 
The role of telecommunications in promoting economic development and 
competitiveness and ensuring social and regional cohesion has been clearly 
recognised by the Commission. Funding under the Community Support Framework 
and on-going lending programmes by the European Investment Bank continue to 
make a substantial contribution to the development of telecommunications services 
and network investment in the Member States concerned. 
The Structural Funds have been contributing substantial amounts to the 
modernisation of telecommunications infrastructures in Member States, particularly 
in less developed one, and important telecommunications programmes have been 
agreed in the context of the 1994-1999 Structural Fund programmes. The 
Commission has been careful to choose the appropriate intervention rates to ensure 
that the benefit of Community financial assistance goes to the consumer and that this 
assistance is intended to materialise investments which would not have otherwise 
taken place. This is particularly true for investment programmes in 
telecommunications with revenue bearing potential and also in cases where the 
investor, from the Member State point of view, is not a public body but private 
capital has also been mobilised. The Commission will ensure that these principles, 
which of course are applied after careful examination of the economic and other 
aspects of the investments concerned, will continue to apply in a liberalised 
environment in the telecommunications sector. 
Current levels of network penetration and investment in the four countries compared 
to the Union average are given in Table VII.7.2. 
Table VII.7.2 - Network penetration and investment in Greece, Ireland, 
Portugal and Spain119 
Mainlines per 100 Capital expenditure by 
inhabitants (thousands) TOs as a percentage of 
end of 1993 revenue120 
Greece 45.8 40.6 % 
Ireland 32.3 23.4% 
Portugal 33.5 45.6% 
Spain 36.4 57.4% 
EU average 45.4 37.0 % 
119 Source : IDATE, 1994 
120 Capital expenditure is an average over the five years 1989-1993. 
90 
VIL 7.3 Universal Service Obligations in the context of less-developed networks 
The same principles of universal service provision and financing uneconomic 
universal service obligations in a competitive environment as outlined in the previous 
section apply in the context of less developed networks. The objective must be to 
ensure that the potential benefits associated with commercial and technological 
changes in a competitive telecommunications environment are passed on to all 
consumers and users. In particular, this means that all the benefits of increased 
competition and choice should be made available to users. 
Less favoured regions face a number of difficulties, in particular, because lower per 
capita levels of GDP produce smaller revenues and because low population densities 
and more difficult geographical conditions cause higher infrastructure costs. 
Council Resolution 94/C 48/01 recognised that in pursuing the objective of 
maintaining and developing a- universal telecommunications service, account will be 
taken of the specific circumstances of the peripheral regions with less-developed 
networks and the role which the appropriate Community support framework may 
play having regard to national priorities. 
The additional considerations that apply, therefore, in the context of the agreement 
on the liberalisation of all telecommunications services are firstly, the timing of 
services liberalisation and secondly, the extent to which Member States exploit 
additional financing mechanisms for required investments. 
At the same time, calculating the cost of providing uneconomic universal service 
obligations in situations where network coverage is still being increased substantially 
and where pricing structures are still significantly distorted is more problematic than 
estimating the burden of uneconomic universal service obligations where coverage is 
already extensive. 
A number of policy options are, therefore, available during the transition to a 
competitive environment in the context of Member States which have been granted 
additional periods. One is to delay the assessment of the cost of uneconomic 
universal service obligations until pricing structures are adjusted, network coverage 
is extended and competition is introduced. A second is to exploit network access 
charges to allow for the introduction of competition in advance of adjustment and 
extension of network coverage. A third is to examine other means of providing and 
financing extensions of universal service, in particular by examining requirements for 
universal service on a regional basis. 
Nevertheless in choosing between the various policy options, these Member States 
must continue to focus on the extension of universal service and the development of 
advanced telecommunications infrastructures and services. This is vital to meet the 
needs of an advanced economy and will be central to attracting inward investment 
over the longer term. In this context full use should also be made of appropriate 
Community support frameworks, including Cohesion Funds to assist network 
development. 
91 
VIL 7.4 Infrastructure liberalisation 
As argued in Part One of the Green Paper and in the previous section of this 
document, the Commission believes that there are significant benefits in linking 
infrastructure liberalisation with the timetable established for the liberalisation of 
telecommunications services, provided the appropriate safeguards dealt with in this 
part of the Green Paper are put in place. 
In the case of the Member States granted (according to Council Resolution 
93/C213/01) additional transition periods for structural adjustment in the context of 
services liberalisation, the Council Resolution of 17 November 1994 recognised the 
principle of general liberalisation of infrastructures by 1. January 1998 and linked 
additional transition periods of up to five years for infrastructure liberalisation to the 
use of the additional transition periods for services liberalisation 
VH.8 Competitive Safeguards 
A major condition for the full development of the potential offered by the removal of 
exclusive and special rights over infrastructures and the development of a common 
regulatory framework will be the strict application of the Treaty competition rules 
to the provision and operation of communications networks in the Union, and the 
services delivered over them. 
Those rules will be central not only to the determination of who will be the main 
market participants, but also to ensuring that all actors can compete on a fair basis. 
In a market which will be for many years characterised by the presence of dominant 
operators controlling bottleneck facilities, a level playing field will only be possible 
by reinforced scrutiny of compliance with the competition rules. Otherwise the 
emergence of competition will be stifled. This will imply, where required, the 
establishment of the appropriate procedures and safeguards, in particular in the 
following areas: 
VII. 8.1 The examination of interconnection agreements 
As mentioned in chapter VI.4.2 procedures, according to a regulation to be adopted 
by the Council, should be envisaged to set out the conditions under which 
agreements are compatible with the principle of effective competition. 
121 Articles 85, 86 and 90 of the Treaty and the rules of the control of concentrations set out in 
Regulation 4064/89/EEC of 21 December 1989, OJ L257, 21.9.90. In order to clarify the application 
of the Treaty rules to- the telecommunications sector, the Commission adopted guidelines in 1991 
(91/C233/02). 
92 
VIL8.2 The conditions of access applied to competing infrastructure providers 
and for service provision 
Refusal, by an infrastructure provider in a dominant position, to grant access to its 
network should be closely monitored; as should potential discrimination in cases 
where such an infrastructure provider also provides services competing with those of 
the service provider requesting access. 
VIL 8.3 Schemes established for financing universal service 
To "avoid universal service becoming an excessive burden for new entrants, the 
neutrality of the mechanisms put in place for its financing should be assessed. 
VII. 8.4 Access to rights of way 
When granted to a sole company, rights of way substantially affect the ability of 
other undertakings to compete. Granting rights to establish infrastructure without 
granting rights of way would effectively prevent, or at least delay for many years, the 
establishment of competition in the local loop. Objective reasons of non-economic 
nature, such as environmental concerns or the risk of traffic congestion, could justify 
a limitation on the number of rights of way granted. 
The Member States should in those cases, examine how joint use of facilities could 
be encouraged, and, where required, made mandatory, in order to overcome 
bottleneck situations. 
The broader issues of access to rights of way in a regulatory context is addressed in 
VI. 10.1 below. 
VII. 8.5 Cross-ownership of different networks and joint provision of network and 
services 
Cross-ownership should not be excluded a priori, given the possible synergies and 
economies of scope and scale, in particular between cable television networks and 
telecommunications and other utilities. 
Vertical integration, i.e. infrastructure providers who also provide 
telecommunications services, also may offer considerable advantages to the users. 
Allowing end-to-end responsibility by the same company may, for example, be 
perceived as important. 
Such combination of activities across distinct markets should, however, be closely 
monitored. This implies, firstly, the establishment of transparent accounting 
structures, including the separation of accounts for telecommunications and non-
telecommunications activities, as well as the implementation of transparent cost 
93 
accounting systems for infrastructure providers who also provide 
telecommunications services. Secondly, it implies a review at a certain date to assess 
whether such transparency suffices to avoid possible abuses, such as cross 
subsidisation, or whether further action is required. 
Even with the inclusion of appropriate safeguards in both the European and national 
regulatory frameworks, the role of the Treaty competition rules is likely to be of 
increasing importance. 
This is particularly true, given the fact that they give rights to businesses which can 
be relied on within the national legal system, as well as through the intervention of 
the Commission. 
The competition rules, alongside national legislation, will also determine to a large 
extent who will be the major market players, as clearance from competition 
authorities will be required for many of the new global and regional partnerships and 
alliances involving European partners, such as those between BT and MCI, DBPT 
and France Telecom and now with Sprint, and between Unisource and AT&T. 
According to their co-operative or concentrative nature, such ventures will continue 
to be considered either under the provisions of Article 85 EC122 or under the rules 
relating to the control of concentrations123. 
One factor in any such assessment will be the potentially positive benefits of such co­
operation through the promotion and creation of pan-European networks and 
services or improved interconnection and interoperability at a European level. 
122 Article 85(1) EC indicates : The following shall be prohibited as incompatible with the common 
market: all agreements between undertakings, decisions by associations of undertakings and 
concerted practices which may affect trade between Member States and which have as their object or 
effect the prevention, restriction or distortion of competition within the common market, and in 
particular, those which: (a) directly or indirectly fix purchase or selling prices or any other trading 
conditions; (b) limit or control production, markets, technical development, or investment; (c) share 
markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other 
trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of 
contracts subject to acceptance by the other parties of supplementary obligations which, by their 
nature or according to commercial usage, have no connection with the subject matter of such 
contracts. 
2. Article 85(2) Any agreements or decisions prohibited pursuant to this Article shall be 
automatically void. 
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of [any 
agreement] which contributes to improving the production or distribution of goods or promoting 
technical or economic progress, while allowing consumers a fair share of the resulting benefit, and 
which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to 
the attainment of these objectives; (b) afford such undertakings the possibility of eliminating 
competition in respect of a substantial part of the products in question. 
123 Commission Notice of 14 August 1990 regarding the concentrative and co-operative operations under 
Council Regulation (EEC) 4064/89 of 21 December 1989 on the control of concentrations between 
undertakings, (Revised version to be published) 
94 
At the same time, any assessment of the competitive impact of these new 
arrangements will have to take into account the extent of competition in the home 
markets of the participants. 
With the advent of new forms of co-operation across traditional industry divides in 
order to meet the demands of the Information Society, the competition rules will 
continue to play an important role. Already in North America, there have been a 
spate of mergers and joint ventures designed to link network, service, equipment and 
content providers within one unit. 
Future policy will have to tackle the potential bottleneck created by content, the raw 
material for many future services. The Commission will in particular ensure that co­
operation across traditional divisions of industry does not reinforce current dominant 
positions in the separate markets for content, technical facilities and services. The 
Commission has already refused to allow a merger aiming to combine delivery 
networks with ownership of programmes and films since this would, in particular, 
have allowed the incumbent (EU) telecommunications operator involved to reinforce 
its dominant position in the market for cable network service, in which the operator 
had already extended its dominant position in the separate market of voice 
telephony124. The ultimate test will be whether competitors could still reasonably 
enter the market if the co-operation was allowed. This test should always be applied 
to the least competitive market involved, which is, currently, the market for the 
provision of communications networks. 
With the development of multimedia applications in parallel with the introduction of 
digital TV technology expanding television services possibilities, the Commission is 
likely to have other complex multimedia co-operation agreements to consider over 
the next few years. The introduction of competition in the public communications 
network-provision market as well as the development of open application systems, 
would reduce the possible anti-competitive effects of such co-operation and 
convergence. 
The application of the competition rules must progress alongside with the 
achievement of other Union policy goals such as cultural diversity and evolving 
policies in areas equally at the core of the Information Society such as media 
concentration and intellectual property rights. This is returned to below. 
At the same time, currently divergent situations in the Member States should not in 
themselves be a pretext to avoid or delay the introduction of competition in network 
provision. 
VH.9 The international dimension - international trade in telecommunications 
services 
Measures to create an internal market for telecommunications services have a 
substantial external impact in both the Union's bilateral relations and, in particular, 
with its relations with: 
124 Media Service GmbH, Commission Decision of 9 November 1994, see Press Release IP/94/1045, 
9.11.94 
95 
. theGATTAVTO 
• international and regional telecommunications organisations such as the ITU and 
CEPT, and 
• the Union's bilateral relations. 
As Union policy is developed internally this needs to be reflected in the international 
sphere. 
Further liberalisation in a range of telecommunications service and in infrastructure 
raises a number of important international considerations, namely : (i) the 
implications for the Union of third country entrants into its market; (ii) the interests 
of Union companies in third countries and whether similar market opportunities are 
available; (iii) how to ensure comparable and effective access; and (iv) the interaction 
between the Union and action in international fora promoting market liberalisation. 
VH. 9.1 Participation by non-EU-or EEA nationals or companies controlled by 
such nationals in the EU market 
Participation of third country companies in the EU is already significant. Many non-
EU companies are key players in the Union's value-added and liberalised 
telecommunications services markets. Increasing participation is seen in the mobile 
sector, in business communications (outsourcing, one-stop shopping, Virtual Private 
Networking), as well as in the area of 'private' ('non-public') corporate 
communications. 
Moreover, market access has not been limited to areas liberalised through EU 
legislation: de facto market access has been available as Member States remove 
monopolies in fields which have only recently been addressed by EU 
telecommunications policy. For example, US companies, in particular, are key 
participants in nearly all of the mobile and cable consortia being set up in the Union. 
This includes operators with local monopolies in their home markets. Similar 
developments can be seen in the areas of satellites, simple resale of voice telephony 
and the provision of call direct or third country calling services. 
VIL 9.2 Interests of Union companies in third countries 
Opportunities 
European companies, too, are increasingly participating in third country markets, not 
only in value-added and 'non-public' services but also as providers of public voice 
telephony, in so far as this is possible within the constraints of current regulatory 
restrictions in other countries. (See USA and Japan below). Examples include 
Telefonica's purchase of a three-quarter share (indirect) of the assets of the Puerto 
Rico long distance telephone company, where it is now providing telephone services 
in competition with AT&T and others; and British Telecom's joint venture with and 
participation in MCI, the second largest long-distance carrier in the US. Cable & 
Wireless has a share of 17.5% in the New Common Carrier IDC in Japan and France 
- 96 
Télécom has created Japan Multimedia Services along with 19 companies (mostly 
Japanese) to provide information services (financial, tourism, real estate etc.). 
Currently JMS is in negotiations with NTT to offer a Japanese version of Minitel 
Videotex service using NTT's circuits. 
Obstacles 
Access for EU companies to many third countries is hampered by limitations on 
services that can be provided, ownership restrictions, unreasonable reciprocity 
requirements or burdensome conditions imposed that are not applied to domestic 
companies. Difficulties encountered in two key markets, namely the USA and Japan 
are highlighted. 
The USA 
In addition to a number of statutory restrictions on ownership, the US government 
will increasingly make market access for third country companies conditional upon 
achieving reciprocity in those countries. European industry reports that market 
access is either prohibited by ownership restrictions or narrow reciprocity 
requirements, or else the environment is rendered too uncertain to justify 
participation. In particular this has been achieved by : 
• Use by the FCC of discretionary clauses in statutory legislation125 to: 
- make the level of market access authorised conditional upon the same 
degree of market access being available in the country of the firm applying 
for authorisation (leading to long delays); and 
- impose a number of restrictive conditions on the provision of service, again 
on the grounds of conditionality (leading to a reduced ability to compete 
with US firms). 
These measures raise two sets of questions. Firstly, the justification for 
seeking equivalence narrowly by telecommunications sub-sector, at the same 
time as market access in other sub-sectors may be enjoyed. Secondly, 
questions arise as to at what point, if any, it can be justified to seek 
reciprocity or impose restrictive conditions to protect per se the position of 
national carriers, as distinct from seeking a degree of equivalence in order to 
protect national carriers from being unduly penalised by the workings of the 
international voice telephony system and its increasingly out-dated methods 
of re-imbursement mechanism between carriers. 
125 Section 214 of the Communications Act of 1934 and the Cable Landing Licence Act: Section 214 
requires that common carriers may not construct or acquire new lines or extend existing lines unless 
the FCC determines it would be in "the present or future public convenience and necessity" and it 
provides that the FCC may attach such conditions to the issuing of the certificate of authorisation as it 
thinks are in this public interest However, there is no definition of what is in the public interest, nor 
are there any set criteria for the FCC to use in order to arrive at a decision. Authorisations for some 
foreign companies to provide certain services are currently being delayed while "equivalency" is 
being sought. See also Section 2 of the Submarine Cable Landing Act. 
97 
The Communications Act limits foreign ownership of operators of 
telecommunications services requiring radio licences in the US126. European 
firms are only able to obtain radio licences for common-carrier mobile services 
in the US through minority ownership without control. TOs deemed to be 
representatives of foreign governments are prohibited from holding a radio 
license altogether. ? 
"Dominant carrier rule": The FCC classifies as "dominant" all US or foreign-
owned carriers, irrespective of their size or market power, on those routes 
where their foreign affiliates have the ability to discriminate against unaffiliated 
US international carriers through control of bottle-neck services and facilities 
in the foreign market. Any company affiliated with a major TO will be 
presumed to be dominant on the route to the country of that operator. The 
classification as "dominant" or "non-dominant" for a foreign company is a 
crucial issue because dominant carriers face much heavier regulation. The 
practical effect is that burdensome regulations may be imposed in the United 
States on foreign companies which are far smaller than US companies which 
escape regulation. 
Japan 
In spite of many areas of liberalisation implemented by the Ministry of Posts and 
Telecommunications, as well as the government's declared general policy objective of 
deregulation, European users and TOs find that market access is impeded by an array 
of remaining regulatory obstacles, as well as by the dominant presence of NTT and 
KDD. In addition, European companies feel they need greater transparency in 
implementation of Japan's regulatory framework. In particular: 
• restrictions for type I business: European companies can choose to enter the 
Japanese market through shares in existing service provider firms. However, 
only one third foreign ownership is allowed for type I carriers (those which use 
their own infrastructure) with further restrictions on access to management in 
the case of NTT and KDD. In addition, licenses for new type I carrier are 
authorised by the regulatory authority applying the demand supply clause (e.g. 
not granting license when MPT estimates that the market and business 
perspective which must be submitted by the applicant is not realistic). 
• restrictions for type II business: In case European firms decide to establish 
themselves independently (and without setting up their own infrastructure to 
avoid the constraints outlined above) they need to obtain a license as type II 
carriers. European service provider firms are primarily interested in offering 
international telecommunications services. In this case, the 
126 Section 310 of the Communications Act imposes limitations on foreign investment in radio 
communications: no broadcast or common carrier licence may be held by foreign governments, or 
companies in which more than 20% of the capital stock is owned by a foreigner (25% if the 
ownership is indirect). The Act provides for waivers to be made by the FCC in the specific case of 
indirect ownership, if it finds that this would be in the public interest, but the FCC has never used 
this possibility. 
98 
Telecommunications Business Law prescribes obtaining the status of special 
type carrier on the ground that they offer "public" services. It is this status 
which is the origin of procedural difficulties and business constraints, such as: 
the conditions attached to obtaining an authorisation, by MPT 
(submission and authorisation of "operating agreements", obligation to 
recruit of local expert staff, etc.) 
the obligation to negotiate non-tariff based contracts with a type I 
carrier is deemed by industry to be onerous and obliges firms to discuss 
with their potential competitors 
the obligation to publish tariffs and to obtain authorisation for new 
services which a firm wants to introduce 
the lack of a clear definition of value added services, leading to an 
uncertainty in obtaining authorisation for services 
the difficulty to access relevant regulatory rules and legislation127 
the uncertainty about response times and about the decision criteria 
applicable when dealing with the regulatory authority128 
limitation of international service provision: Certain international services are 
subject to restrictions (third country calling, breakout, re-routing, 
interconnection to PSTN, resale of international leased lines). 
limitations applicable to wireless services: In principle, no radio station 
licence is granted to foreign entities129. 
VII. 9.3 Ensuring comparable and effective market access in third countries 
Liberalisation in the Union must go hand in hand with expanding comparable and 
effective market access in third countries. 
WTO/GATS multilateral negotiations 
This overall aim is necessarily linked in particular to the on-going negotiations in the 
WTO (the World Trade Organisation). These multilateral negotiations provide the 
127 The Telecommunications Business Law Enforcement Rules are not available in European languages. 
128 Since 1 October 1994, the Administrative Procedure Law entered into force. As a consequence, the 
telecommunications regulatory authority, MPT, has published "typical response times" and applicable 
criteria for interaction between applicants and regulatory authority. The practice of these new rules 
needs to be verified in practice. 
129 i.e.: a non-Japanese citizen; a foreign government or its representative; a foreign juridical person; or 
a juridical person one third or more of whose senior managers are, or voting rights are held by, any 
of the preceding kinds of persons or bodies. . 
99 
best way of achieving a balanced set of commitments in all services sectors, along 
with the establishment of international trading rules. 
Trade negotiations in general, and services trade policy in particular, have two key 
aims: firstly, the establishment of trade rules and disciplines which are mutually 
advantageous; and secondly, a reduction of barriers to trade by means of a balanced 
contribution by all parties to the removal of trade restrictions, such as foreign 
ownership restrictions and reciprocity requirements. 
Furthermore, effective market access for telecommunication services hinges on the 
conditions of competition within a country or region, and involves a range of issues 
related to national or regional regulatory frameworks, so that general trade rules and 
disciplines need to be clarified in order to provide a set of rules or guidelines on 
access to and use of public telecommunications transport networks and services. 
The Uruguay Round of trade negotiations on services resulted in a general 
framework of rules governing trade in all service sectors and the exchange of legally 
binding liberalisation commitments (together known as the General Agreement on 
Trade in Services or GATS) The GATS framework applies to a country's 
"measures" (legislation or rules) that affect trade in services. Some GATS rules 
apply to trade in all service sectors, notably those concerning Most Favoured Nation 
Treatment130 and Transparency131 , whilst others apply pnly to sectors inscribed in 
the country's schedule of liberalisation commitments 
For the telecommunications sector, the general GATS framework is supplemented by 
the provisions of the Telecommunications Annex on access to and use of the public 
telecommunications transport networks and services for the provision of 
telecommunications and other services. 
Since most countries were not ready to make commitments on so-called "basic" 
services at the end of the Uruguay Round, these are being negotiated in an extension 
of the Round with a deadline scheduled for April 1996. To date about 25 countries 
have joined these negotiations, including the European Community, the US and 
Japan. 
The mandate and modalities for the continuing negotiations are set in a Ministerial 
Decision, supplemented by a second GATS Annex on telecommunications. The 
scope of the negotiations is broad: no "basic" telecommunications services are to be 
excluded a priori. As for the rules applicable during the period of negotiations, 
parties have agreed to a standstill clause. This standstill commitment is a general 
one, whereby countries undertake a broad political commitment not to apply 
measures (legislation or rules) which would improve their negotiating position. It is 
intended to provide some guarantees on the overall balance of countries' regulatory 
behaviour while negotiations are under way. Parties have also agreed to suspend the 
130 « with respect to any measure covered by this Agreement, each Member shall accord immediately and 
unconditionally to services and service suppUers of any other Member, treatment no less favourable 
than that it accords to like services and service suppliers of any other country." Art II.l, GATS. 
131 A requirement to make publicly available information on conditions affecting access to and use of 
public telecommunications transport networks and services. 
100 
application of most favoured nation treatment for the course of the negotiations. 
This principle (which includes a requirement to list any legislation or rules which are 
inconsistent with its provisions) will become applicable to "basic" 
telecommunications only when the negotiations end. 
In the event of a failure of the negotiations, parties could request an MFN exemption 
for measures which are inconsistent with MFN, thereby retaining their right to 
discriminate among WTO parties. 
VII.9.4 Interaction between liberalisation in the Union and multilateral processes 
Effect of the Uruguay Round results on the Union market 
The European Community has made a commitment to bind a range of so-called 
value-added services, which will come into force at the same time as the WTO itself, 
scheduled for January 1995. At this time everything in the commitment will be 
subject to the GATS and its Annexes, and will be formally bound open to 
competition to third country companies. The commitment, like that of most 
countries, excludes "basic" services - the largest part of the market - reserving these 
for the on-going negotiations in Geneva, as described above. 
Possibilities for "protection" of the EU market 
Given that the WTO/GATS process is still ongoing, there is at present no mechanism 
to ensure that market access granted in the Union, de jure or de facto, is adequately 
compensated elsewhere. Whilst some Member States have in place legislation which 
may be used to limit the possibilities for foreign companies to invest in 
telecommunications ventures or to provide services, the EC Treaty does not 
generally allow the discrimination between EC-owned companies and non-EC owned 
companies established in the Community. 
Until the results of the WTO/GATS negotiations are clear, it is important that the 
Union reserves its right to maintain equivalent conditions to those currently 
prevailing in third country markets with regard to market entry or the licensing of 
non-EU or EEA nationals or companies controlled by such nationals, the objective 
of imposing such conditions would be to promote open markets in third countries for 
European network operators and service providers through negotiations. 
Timing for external trade liberalisation 
Any future WTO/GATS commitments by the European Community in the area of 
"basic" telecommunications services will have to be properly related to the internal 
process within the Union and timetable outlined in the Council Resolution of July 
1993. Similarly the Union's position on the shaping of the "rules of the game" will 
need to remain closely linked to developments in the internal regulatory framework 
in order to ensure consistency between its internal and external positions. 
Common Community positions in international organisations 
Major future standards, frequency and numbering decisions will be taken in the ITU 
(International Telecommunications Union), which will involve co-ordination in the 
101 
ITU's committees and working groups dealing with these issues. The current global 
developments in the ITU will facilitate the future development of telecommunications 
at a world level but will in some cases also require the strengthening of co-ordination 
mechanisms, as set out in the Council Resolution of 30 June 1988, which provided 
that common positions are to be adopted in international fora, wherever relevant. 
The Union's principal trading partners attach major significance to their position in 
international organisations and commit substantial resources and political weight to 
their international negotiating position in the ITU. The Union also takes a strong 
interest in the work of the ITUs BDT132. 
132 Bureau de Développement des Tel ^communications 
102 
Bilateral relations 
Finally, Union policy must be seen in the context of the overall relations of the EU 
with regard to other parts of the world: the deepening of its relations with developed 
countries and an active role in Europe's regional telecommunications bodies, 
structured around the CEPT, as well as building up relations with the Mediterranean 
countries; the contribution to the full use of telecommunications in the developing 
countries in the context of its relations with the African, Caribbean and Pacific (ACP) 
countries in the framework of the current Lomé convention; as well as assisting 
development projects elsewhere, and particularly in Central and Eastern Europe and 
the New Independent States of the former Soviet Union. 
For Central and Eastern Europe and the New Independent States of the former 
Soviet Union, in particular, promotion of co-operation and technical assistance to 
support the integration of their communications networks with the rest of Europe 
and the world, will remain a major goal during the rest of the decade, on the basis of 
the relevant Community programmes (PHARE/TACIS), the respective Association 
Agreements which have been concluded and the Partnership and Co-operation 
Agreements which are being negotiated with Russia and other republics of the former 
Soviet Union. . 
VÏÏ.10 Access to rights of way, numbers, frequencies, and directory services 
In order to guarantee the successful development of a competitive market for 
infrastructure, steps must be taken to open up access to a number of resources which 
will be crucial to the effective estabhshment and operation of telecommunications 
networks and to the offering of services over them. These concern rights of way, 
frequency for wireless network components, numbering and directory and subscriber 
information. 
VII. 10.1 Access to rights of way 
Member states should grant rights of way to communications network operators 
according to open and transparent procedures. 
Where environment requirements (such as avoiding road congestion), or other 
essential requirements, prevent the granting of rights of way to all potential 
applicants, the Member States should introduce schemes for the sharing of ducts on a 
voluntary basis and consider, where it is deemed necessary to avoid bottleneck 
situations, the introduction of mandatory duct-sharing. 
To introduce competition in the market for infrastructure provision, Member States 
will need to ensure that the incumbent telecommunications organisations are subject 
to the same regulatory conditions as their competitors regarding rights of way, and 
provide for mandatory sharing of facilities where necessary to bring down barriers to 
entry. 
103 
134 VIL10.2Numbering 
Because of the huge cost involved with major number plan changes, numbers for 
telecommunications services can be considered as a finite and potentially scarce 
resource. Moreover, numbering is as a key facilitator - a pivot in market liberalisation 
and the introduction of competition. It is therefore necessary to ensure that 
developments of telecommunications networks and services are not hampered on 
numbering grounds. This challenge needs to be addressed by careful management of 
the overall numbering schemes, at the global, European and national level. 
Numbering is not an issue which results from infrastructure liberalisation per se; 
liberalisation of voice telephony services in 1998 will in any case lead to new 
demands for telephone numbers. Infrastructure liberalisation will however stimulate 
many new services, some of which will need new number allocations. 
Principles of EU telecommunications policy governing numbering and number 
allocation were described in the Mobile Green Paper133. 
In summary, the Community approach involves: 
• separation of operational and regulatory activities in Member States, with the 
national numbering plan under the control of the national regulatory authority 
• setting out basic principles for access to and allocation of, numbers 
• adopting specific measures for key access codes (112 for emergency services and 
00 for international access) 
• recognising ECTRA, and the European Telecommunications Office (ETO) and 
the European Numbering Office (ENO) within it, as a forum for developing and 
co-ordinating numbering policy for Europe, under the terms of the MoU with 
ECTRA and a Framework Contract with the ETO, signed in September 1994, 
• developing common. European positions and setting priorities for action at a 
European and international level. 
There are fundamental decisions on numbering reform for Europe which must be 
taken by the middle of 1995. They are centred around four strategic options for 
numbering of telecommunication services in Europe134, designed to provide a phased 
133 COM(94)145, 27.04.1994, Annex D, section 9 
"Strategic Options for Numbering of Telecommunication Services in Europe", Report by the ECTRA 
project team on numbering (PT/N), 1994 . This report was based on a Commission study "The 
potential opportunities afforded by a new European telephony numbering space". Its four options are 
as follows. Option 1: Do nothing until market forces change; Option 2: Open European numbering 
space for special services e.g. freephone, premium rate, shared costs; Option 3: Implement a 3 digit 
country code for Europe with the last two digits managed by a European authority, opens ways for 
European carrier selection and migration of pan-European services into a common numbering 
scheme; Option 4: Implement a open and fully integrated numbering scheme for Europe i.e. such as 
the North American numbering scheme, opens ways to roll out seamless intelligent network services 
across Europe. 
104 
evolutionary approach to progress from the present situation to a fully integrated 
numbering scheme for Europe. 
Priorities for European numbering policy are: 
- opening up a European numbering space for special telecommunications services, 
in particular freephone services 
Preparatory work is underway on a European numbering space for special 
services e.g. freephone, premium rate, shared costs, which will require 
allocation by the ITU of a virtual country code for Europe. This virtual 
country code can be seen as the first step in establishing a parallel European 
numbering space for pan-European services. 
- a"common European approach for numbering plans. 
National numbering plans must be stable yet flexible, facilitate the development 
of trans-European services, and facilitate the long-term development of 
services. 
- a "best practice" guide for NRAs on the administration and control of the national 
numbering schemes. 
Strong guidelines are required, as a minimum, for the following issues: 
customer and number ownership, portability and tradability; number length and 
commercial value; access to unique services e.g. access to directory enquiry 
services and emergency services; and Data Network Identification Code 
(DNIC) and Data Country Code (DCC) allocation procedures. 
Work is also done on the issue of user-friendliness of numbering. An investigation of 
the possible re-introduction of alpha-numeric dialling is part of this work. 
In preparation for the future liberalised telecommunications environment, the 
Commission is preparing a reform package for submission to the Council before 1 
January 1996. This package will have to address inter alia the subject of numbering 
reform in Europe. 
VII. 10.3Access to Frequencies. 
The availability of radio frequencies is an essential element for the development of 
radiocommunications equipment and services, in particular in the fields of mobile and 
personal communications, satellite communications, and broadcasting. Principles of 
EU telecommunications policy governing frequencies and frequency allocation were 
described in the Mobile Green Paper . 
A European framework for frequency allocation is now in place, providing: 
135 COM(94)145, 27.04.1994, Annex D, section 4 
105 
• separation of operational and regulatory activities in Member States with regard 
to frequency allocation 
• technology-specific measures to promote the co-ordinated introduction of pan-
European services (GSM, DECT, ERMES) 
• recognition of the European Radiocommunications Committee (ERC) and its 
European Radiocommunications Office (ERO) as a forum for co-ordination of 
frequency allocation in Europe, under the terms of Memorandum of 
Understanding and a Framework Contract signed with the European Commission 
on 21 April 1994. 
Priority actions for Europe in the area of frequencies are: 
- rapid action in the short term in the areas of TETRA, satellite based personal 
communications systems, and UMTS136, including the designation of harmonised 
European frequency bands for crucial systems and services13 . 
- comprehensive review of the frequency spectrum below 2000 MHz., including a 
review of the balance of frequency usage between broadcasters, network operators 
and mobile and personal communications operators. 
In the medium to long term, the further growth of the mobile and personal 
communications sector can only be fostered if the sector is designated a bigger 
share of the total available spectrum. Best estimates available call for an extra 
100-200 MHz in addition to the current allocations138. Because the release of 
spectrum below 2000 MHz requires a long period, it is important to start this 
process early. 
- responsive and co-ordinated frequency allocation procedures 
136 Replacement of the current ERC Recommendation on DCS-1800 by a Decision. For TETRA, a 
major future technology for trunked mobile radio, a similar action is needed to allocate the necessary 
frequencies. Further action is required for satellite-based personal communications systems including 
LEO systems. Finally, firm decisions are required for implementation of the frequency bands 
designated at WARC-92 for the UMTS/FPLMTS, which action is considered vital to the development 
of UMTS in Europe. 
137 On TETRA a final report is to be submitted by October 1995; on DCS-1800 a final report is due by 
March 1995; on Satellite Personal Communications Services (Satellite PCS) a final report is due by 
October 1995; on Universal Mobile Telecommunications System (UMTS) a first assessment is 
required of how spectrum requirements for second-generation mobile systems (i.e. GSM, DCS-1800, 
TETRA, TFTS) are likely to converge to the UMTS and in what time scale. 
Other key pan-European systems for which specific work orders have been agreed include: mobile 
satellite applications, VSAT/SNG, satellite (sound/TV) broadcasting, T-DAB (Terrestrial Digital 
Audio Broadcasting), wireless LAN's, mobile broadband systems, and microwave video distribution 
systems. 
138 GSM MoU Group, Comments to the Mobile Green Paper of the European Commission, 7 September 
1994 
106 
Liberalisation of infrastructure will place an increasing load on the existing 
framework, in that it will stimulate both the demand for frequencies within 
Member States and the need for pan-European co-ordination. Increasingly 
pan-European operators will require co-ordinated frequency allocation across 
Member States 
VII. 10.4Directory services in a fully liberalised environment 
The diversification of service offerings in a fully liberalised communications 
environment will lead to an increasing importance of telecommunications directory 
services. On the one hand, directory services constitute the most important support 
tool for accessing telecommumcations services and will therefore play a central role 
for the. use of telecommunications services in a competitive environment. On the 
other hand, based on new technologies and in particular the interactivity introduced 
by videotex services, the directory services sector itself is currently entering the 
multimedia field and could substantially contribute to its development. 
The introduction of a competitive environment in the telecommunications sector 
requires the extension of the principles of Community telecommunications legislation 
to directory and enquiry services. In addition it will also require the maintenance of a 
universal directory and of an enquiry service which easily accessible and affordable 
for all users. 
The Commission therefore proposes the following orientations for the future 
development of the sector: 
• Maintaining a complete universal telephone directory and at least one enquiry 
service which contains the details of all subscribers of fixed and mobile 
telephony services and is available for all users at an affordable price. 
• Immediate lifting of all special or exclusive rights still existing in some Member 
States for the provision of telecommunications directory services. 
• Access to raw subscriber data must be ensured on the basis of objective, 
transparent and non-discriminatory criteria, and in conformity with Community 
legislation, in particular the competition rules of the Treaty, the principles of 
open network provision (ONP), the provisions on the protection of personal 
data and privacy and be in compliance with the applicable copyright legislation 
(Copyright protection of data bases). 
• Promotion of new technologies (electronic directory, CD-ROM, X.500 
services) and the evolution towards multimedia. 
• The appropriate safeguards in respect of the protection of privacy and personal 
data as well as the protection of intellectual property rights should be ensured. 
The Commission intends to publish a communication which discusses in detail the 
regulatory aspects of the future development of the directory services sector in the 
European Union. 
107 
Vn.ll Action in Neighbouring Fields 
As indicated in Part I of the Green Paper, "the regulatory principles to be developed 
must also take full account of Union policies in neighbouring fields, such as in the 
audio-visual field, in the field of data protection and privacy and of intellectual 
property as well as in relation to the protection of the economic interests of 
consumers. This should allow Union policy in relation to infrastructure liberalisation 
to provide the consistent response called for by the Commission's Action Plan on 
Europe's way to the Information Society". 
VII. 11.1 Data protection and privacy 
For the successful development of the competitive provision of infrastructure, it is 
essential that rapid progress is made on the pending proposals for both a general 
Directive on data protection and privacy and a sector specific directive, applying the 
principles of the general measure to the specific requirements of digital 
• 1 ^9 
communications networks 
Progress is essential to overcome the barriers to the provision and operation of pan-
European telecommunications networks and services created by the divergent 
national rules currently in place. It is also vital in reassuring the public about 
network liberalisation. The proposed rules, once adopted, will provide a clear 
framework for effective data security, storage, processing and privacy. 
The practical operation of the General Directive and the specific 
Telecommunications directive must be monitored, and where necessary, adapted to 
the challenges of the Information Society. 
The need for adequate data protection should also be taken into account in 
developing future network standards. 
Given the role of operational and call data as an essential tool in competitive service 
delivery and network operation, access to such information must, within the limits of 
the data protection and privacy, also be subject to Treaty competition rules . 
Security of Information Systems is addressed in a more general context of the Action 
Plan from 1992 in this area140. Additionally, as part of the Action Plan on Europe's 
way to the Information Society the Commission has announced that it will publish a 
Communication on security issues and the role of the Member States. 
139 Proposal for a Council Directive concerning the protection of individuals in relation to the processing 
of personal data, COM(90) 314, OJ C277, 15.11.90 and Amended proposal for a European 
Parliament and Council Directive concerning the protection of personal data and privacy in the 
context of digital telecommunications networks, in particular the integrated services digital network 
(ISDN) and digital mobile networks, COM(94) 128 final, 13.6.94. 
140 See Council Decision of 31 March 1992 in the field of security information systems (92/242/EEC, OJ 
L123/19, 8.5.92) 
108 
VIL 11.2Audio-visual / media 
The new communications environment brought about by the convergence of 
telecommunications, information technologies and broadcasting means that any 
approach to the liberalisation of infrastructures over which services and audio-visual 
programming will be delivered must take full account of evolving Union policy in 
these areas. 
This was recognised by the Commission's Action Plan on Europe's way to the 
Information Society and, in relation to the cultural implications of any infrastructure 
policy, is mandated by the new Title IX on culture introduced by the Treaty on 
European Union and set out in Article 128(4) of the EC Treaty. That provision 
requires 
"The Community shall take cultural aspects into account in its action under other 
provisions of the Treaty" 
The Action Plan foresees a number of policy initiatives in relation to the audio-visual 
area. In particular, the Commission announced that it will prepare its report on 
implementation and a proposal for amendment of the 1989 Television without 
Frontiers Directive l 
In the context of infrastructure, it is worth recalling that that Directive sought to 
promote the free provision of broadcasting services, on the basis of a general rule 
that regulatory supervision was the responsibility of the Member State in which the 
programmes concerned originated. Member States were therefore obliged to allow 
the transmission and retransmission of such programmes in their territory142. 
The Action Plan recognises that the regulatory framework for audio-visual 
programmes must apply whatever the mode of transmission of such programmes. 
An additional issue is the extent to which divergent national regulations concerning 
content, and, in particular, the scope of such regulations risks creating barriers to the 
development of pan-European multi-media services. 
The Commission is presently examining the possibility of clarifying the current 
framework provided by Directive 89/552/EEC 
With regard to the issue of media concentration, as mentioned in the Action Plan, the 
Commission adopted on 5 October after consultation of all interested parties, a 
Communication143 on the follow up to its Green Paper on "Pluralism and media 
I** Council Directive on the co-ordination of certain provisions laid down by law, regulation or 
administrative action in Member States concerning the pursuit of television broadcasting activities 
(89/552/EEC; OJ L298, 17.10.89). 
142 To faciUtate this mutual recognition the Directive harmonised certain minimum areas, with regard, 
inter aha, to advertising, sponsorship, protection of minors and consumer protection 
143 Commission Communication of 5th October 1994 on pluralism and media concentration COM (94) 
353 
109 
144 concentration in the internal market1**". The Communication analyses the result of 
the consultation and concludes that a Community initiative on media ownership 
might prove necessary. A second phase of work is therefore going to be embarked 
upon in order to examine certain questions concerning the content of a possible 
initiative. A consultation will start with the distribution of questionnaire and of the 
results of two studies concerning the definition of media control and the feasibility of 
using audience measures in order to assess pluralism. 
In this context the competitive provision of infrastructure, and hence delivery 
channels, will add an additional element to the debate. 
With regard to the content of audio-visual programming, the Action Plan foresees 
the Commission building on the consultation on its Green Paper on "Strategy options 
to strengthen the European programme industry in the context of the audio-visual 
policy of the EU"145. In order to promote the Information Society, the response 
should tackle both regulatory aspects, (e.g. promotion of European programmes), 
and incentive mechanisms (e.g. the follow up to MEDIA programme, the 
convergence of national support systems). 
VII. 11.3IntellectualProperty Rights 
The Action Plan on Europe's Way to the Information Society indicated the need to 
review current and proposed rules governing intellectual property in the Union to 
ensure that they were adapted to the needs of the Information Society. 
The Action plan announced a Green Paper on TPRs in the Information Society for 
early in 1995. The proposal for a directive on the legal protection of data bases is 
also seen a critical to the developing framework for networks and for electronic 
information-based services. 
VIL 11.4Economic interests of consumers 
A key area which must be safeguarded in developing a competitive framework for 
infrastructure is that of the economic interests of consumers. In addition to being at 
the heart of the Treaty competition rules, the interests of consumers have been taken 
on added importance since the entry into force of the Treaty on Europe Union 
COM(92)480 
145 Green Paper on Strategy Options to Strengthen the European Programme Industry in the Context of 
the Audio-visual Policy of the European Union, COM(94) 96 final 
146 Proposal for a Council Directive on the legal protection of databases, COM(93) 464 final, SYN 393. 
The Commission Action plan on Europe's way to an Information Society has announced a Green 
Paper on IPRs in the Information Society for early in 1995. 
147 Article 129a EC requires the Community to contribute to the attainment of a high level of consumer 
protection, either through internal market measures or through "specific action which supports and 
110 
This importance extends beyond the protection of the consumer, through developing 
universal service, adequate data protection and privacy rules and ensuring social and 
economic cohesion within the Union. Specific consumer issues in the Information 
Society were highlighted in the Bangemann Group Report. Mass consumer markets 
for home banking, teleshopping and entertainment services were seen as one of the 
principal driving forces behind the Information Society, which could be held back if 
adequate rules for consumer protection in this new context were not developed. 
supplements the policy pursued by the Member States to protect the health, safety and economic 
interests of consumers and to provide adequate information to consumers". 
The concept of consumer is defined in Article 2 of Directive 93/13/EEC of 5 April 1993 on Unfair 
Contract Terms in Consumer Contracts (OJ L95/29,21.4.93) as "any natural person who is acting for 
purposes which are outside his trade, business or profession". 
111 
VIII FUTURE DEVELOPMENT OF THE REGULATORY 
FRAMEWORK TO MEET THE CHALLENGES OF CONVERGENCE 
In the previous section the Green Paper set out how the existing principles of the 
Union's telecommunications policy can be extended to infrastructure. Yet the 
analysis set out in Section III of this Green Paper indicates that in the future any 
regulatory framework for infrastructure must be sufficiently flexible to meet the 
challenges thrown up by the convergence of telecommunications, information 
technology and broadcasting. 
It is therefore necessary to highlight a number of issues which a common regulatory 
approach will have to address, within the overall framework provided by this Green 
Paper and the on-going initiatives in neighbouring fields outlined immediately above. 
The basic challenge of convergence is that broadcasting (including cable TV 
services) and telecommunications networks and services are subject to different and 
separate regulation in all Member States. The content and style of regulation varies 
significantly between the sectors, reflecting differing objectives of the regulation 
concerned in the different sectors. Such differences in the basic regulatory objectives 
are likely to remain even in a converged environment. Furthermore current 
differences also reflect regulatory responsibilities often belonging to different 
ministries. 
Any future regulatory framework must evolve in a manner which continues to take 
full account of these different regulatory environments. The reasons which have led 
to such differences are already reflected in existing Community action in 
neighbouring fields. 
A further fundamental distinction can be identified between the three sectors. 
Regulation for information technology has been almost entirely technically focused. 
Telecommunications regulation has in most Member States been focused on 
technical aspects of networks and services, but extending to providing a framework 
to ensure the public interest, for example, mandating universal service or basic levels 
of service quality for customers. 
In addressing these issues, certain basic principles can be derived from the experience 
in the telecommunications sector which may assist the debate: 
• Liberalisation of infrastructure and services must go hand in hand with the 
implementation of a clear regulatory framework, which can help to mimic 
competition (through principles of non-discrimination, transparency, etc.) 
pending the emergence of genuinely competitive markets, as well as seeking to 
ensure the right of establishment for all market players and the free circulation of 
services. A clear and predictable regulatory environment is also an essential 
condition for attracting investment into the emerging markets. 
• Effective and independent regulation at the appropriate level will also be 
essential. 
112 
• The speed and dynamics of the emerging market may be too fast for detailed 
regulation to keep pace. Future structures are likely to require considerable 
flexibility and to rely on an increasing application of competition rules. 
• Effective competition in the markets for telecommunications equipment and 
services have evolved without rigid structural safeguards, such as those 
developed in the mid-eighties in North American markets. 
Where safeguards have been considered necessary proportional solutions have 
been chosen, such as transparent cost-accounting and separate accounting for 
different parts of a business. 
Without the evolution of common regulatory principles there is a real risks that 
divergent regulation and regulatory structures both within individual sectors and 
between those sectors will act as significant barriers to the development and 
operation of competitive communications infrastructures, and, in particular, the 
promotion of inter-operability and interconnection of such networks within the 
Union. This raises a number of issues : 
By whom and at what level the evolving sector should be regulated? 
In practice, there are two issues which should be separated : the supervision of 
network and service provision in the Union (the means of delivery) and the 
regulatory framework for the free circulation of new services over such 
infrastructure. The latter has hitherto been an area of concern primarily in the 
broadcasting sector. 
In relation to the overall approach to network and service provision, this Green 
Paper provides a clear picture of the evolving regulatory framework, which draws, in 
particular, on the consistent application of competition rules and the framework for 
licensing infrastructure and services in the Union and on the Open Network 
Provision rules. 
This approach also, in line with the principle of subsidiarity, emphasises the role of 
national regulatory authorities in the day to day supervision of the sector. Solutions 
at a European level, such as the role of the Open Network Provision Committee in 
conciliation or the application of the Competition rules is confined to situations 
showing a clear European dimension. 
In relation to licensing, day to day responsibility remains in the hands of national 
regulatory authorities and the Commission has not proposed a central licensing 
authority in the context of the draft proposals on the mutual recognition of licences 
for terrestrial and for satellite-based services. 
At the same time the Green Paper on Mobile and Personal Communications 
recommended that : 
"In order to promote the development of trans-European networks, in accordance 
with Article 129b of the Treaty, licences for future mobile communications systems 
directly impacting the development of such networks should be awarded, where 
required and most efficient, in a co-ordinated manner between Member States 
113 
and/or at a Community level, taking due account of Member States interests and the 
interests of existing licensees"1**. 
Given the trans-European dimension of certain infrastructure projects, this 
recommendation cannot be confined to mobile and satellite-based mobile 
communications sector. Indeed, only?co-ordinated national licensing of such trans­
national projects will allow them to realise their full potential. 
It is not within the scope of this Paper to make proposals on how and by whom the 
issue of content should be regulated. However, in the light of comments expressed 
during consultation in a number of areas, such as in relation to media ownership and 
intellectual property and of the call by the Bangemann Group for "the establishment 
at the European level of an authority whose terms of reference will require prompt 
attention", comments on all these issues are invited. 
Who will be allowed to provide networks and services? Can any infrastructure 
be used for any service? 
The issue of who will be allowed to provide infrastructure and also services in a 
liberalised environment is of fundamental importance. Should telecommunications 
operators be allowed to enter the broadcast market? What approach should be 
followed where a market player, such as the dominant TO, has an important stake in 
a competitive infrastructure provider? 
The issue will determine the extent of private sector investment in new 
infrastructures, and is already the subject of heated debate in markets such as the 
United Kingdom. On the one hand, allowing unrestricted entry for 
telecommunications operators into the broadcasting market risks undermining the 
ability of cable networks to invest and compete in the telecommumcations market. 
On the other hand, significant cost savings and synergies will flow from vertical 
integration and the linked greater use of networks. Furthermore, the Union has not 
at a regulatory level in the telecommunications field followed the earlier approach in 
North America of imposing line of business restrictions. Additionally, a requirement 
for divestiture would have an important impact on investment in competitive 
infrastructures in a number of Member States. 
Discussion on the range of issues raised, within the overall framework provided by 
Community law will assist in the timely evolution of regulatory structures in a 
manner which will foster rather than hold back market development. 
148 Green Paper, Table of proposed positions, Vin.7 
114 
IX ISSUES FOR CONSULTATION 
LX.l Towards the Information Society 
The purpose of this document has been to propose a framework and timetable for the 
future regulation of network infrastructure in the European Union by extending the 
principles of the Union's telecommunications policy to the provision of infrastructure 
for telecommunications and to launch a wide debate on the issues. 
Provided the necessary safeguards are in place, opening up infrastructure provision 
will underpin the further development of the telecommumcations sector, and this 
development is necessarily at the heart of the transition towards the Information 
Society in the European Union. 
Liberalisation of infrastructure will reinforce the benefits of the liberalisation of 
telecommunications services by encouraging innovation and the exploitation of the 
new technologies, and by opening up greater possibilities to provide new services in 
new ways. A clear regulatory framework and timetable is required in order to give 
predictability to all sector actors, including both the traditional and new investors. 
In the longer term and as integrated or multimedia services and applications develop, 
a regulatory framework will be required that addresses the issue of convergence 
between telecommunications and broadcasting. It is already possible technically to 
use communications infrastructure from each of these domains to provide services in 
either area. The development of the Information Society and of the new integrated 
applications will make it increasingly difficult to distinguish between the two service 
areas. 
Opening up infrastructure provision is an essential step for the future development of 
the telecommunications sector and the Information Society, and this document puts 
forward the measures and principles that are required at a Union level to provide the 
necessary regulatory framework. At the same time it must be recognised that there 
are currently differences within Member States between regulatory regimes for 
telecommunications and for broadcasting and differences between Member States in 
the regulatory regime for cable TV services. Such differences threaten to impede the 
long term development of communications and information services in the Union. 
This raises the longer term issue of the appropriate regulatory framework for dealing 
with the convergence of telecommunications and broadcasting. 
IX.2 Major changes and positions 
On the basis of the priorities established by Union policy in the field of 
telecommunications, the need for a coherent regulatory framework regarding the 
establishment and provision of telecommunications infrastructure, the analysis of 
market and technological developments and taking into account the applicable Treaty 
rules, the Commission invites comments on the proposals and on the application of 
the measures set out in the Table below.. 
115 
1 Removal of special and exclusive rights over the use of infrastructure 
for the provision of telecommunications services 
Part I of the Green Paper has proposed the basic principle that where services are 
open to competition there should be a free choice of the underlying infrastructure 
for their delivery. 
From this basic principle two positions followed : 
- The removal of restrictions on the use of own or third party infrastructure 
authorised in Member States for services already liberalised in the following 
areas: 
• for the delivery of satellite communications services. 
• for the provision of all terrestrial telecommunications services already 
liberalised (including the use of cable television infrastructures for this 
purpose). 
• to provide links, (including microwave links) within mobile networks for the 
provision of mobile communications services. 
- The lifting of exclusive and special rights over the use of own or third party 
infrastructure for the delivery of voice telephony services to the general public, 
once those services are liberalised from 1st January 1998, and the 
replacement by licensing and authorisation schemes setting out the 
necessary safeguards within the framework of the overall review of Directive 
90/388/EEC (the Services Directive) and of the ONP-framework to be tabled 
by 1 January 1996 in the context of the preparation for the full liberalisation of 
voice telephony services foreseen by Council Resolution 93/C213/02. 
The Telecoms Council on the 17th November 1994 in considering Part 1 of the 
Green Paper, recognised the general principle according to which the provision of 
telecommunications infrastructure should be liberalised by 1st January 1998149, 
including the additional transition periods for certain Member States in line with 
Council Resolution 93/C213/02150. 
149 A number of Member States have urged the Commission in an associated statement to come forward 
as quickly as possible with proposals which provide for the use of alternative network infrastructure 
for the services already liberalised. The Commission in turn preserved its right to take action in this 
area within its competence and according to its obligations. On 21 December 1994 the Commission 
adopted in draft a Directive amending Commission Directive 90/388/EEC regarding the abolition of 
the restrictions on the use of cable television networks for the provision of telecommunications 
services. 
150 A maximum of five years for Ireland, Greece, Portugal and Spain and a maximum of two years for 
Luxembourg. At this stage, it is still not clear to what extent those Member States will exploit these 
derogations. 
116 
2. Safeguarding and developing universal service 
Universal service consists of access to a defined minimum service of specified 
quality to all users at an affordable price based on the principles of universality, 
equality and continuity. The detailed elements of such a service are set out in 
Council Resolution and Commission statement 94/C 48 of 7 February 1994. 
The underlying aim is to ensure that the benefits of cheaper and better quality 
telephone service and other benefits of increased competition and choice are 
passed on to all users 
In the context of the current structural adjustments being undertaken in 
preparation for the liberalisation of telecommunications services, NRAs should 
seek to replace general across the board subsidies for access or local calls. 
This can be achieved by (i) completing tariff re-balancing in line with Council 
Resolution 93/C213/02 and (ii) the development of targeted schemes to 
ensure universal service for needy or uneconomic customers. Targeted or 
social tariffs should be provided by operators' within the framework of an 
optimal tariff structure. 
The basic principles for universal service in the context of liberalised 
infrastructure provision in the European Union should be: 
• Only telecommunications-related public service obligations should be 
treated as universal service obligations. Network operators should be freed 
from non-telecommunications related obligations. 
• Transparent schemes for the determination of the cost of universal service 
obligations and their financing should be established 
• As regards the determination of the cost of universal service obligations, 
NRAs should calculate this cost as the net cost of providing service to 
uneconomic customers, plus any costs associated with the uneconomic 
provision of public telephones, emergency services and other social 
obligations. 
• As regards the establishment of transparent schemes for financing 
universal service obligations, the uneconomic costs of particular elements 
of universal service obligations should be financed, either through national 
universal service funds or, where not fully covered, via access charges to 
be added to interconnection charges. 
• Preference should be given to financing USOs through universal service 
funds rather than via access charges. Eligible operators and service 
providers should contribute and the financial responsibility should be spread 
as fairly as possible, subject to the principle of proportionality. 
• Financing schemes should be administered either by the NRA or an NRA 
appointed body, should be subject to regulatory control and consistent with 
Treaty competition rules. They should encompass assessment by the NRA 
of the cost of universal service according to a transparent and published 
methodology, which may need to evolve to take account of changing 
competitive conditions. 
117 
In the context of services and infrastructure liberalisation, Member States 
should work towards (i) determining the cost of universal service and (ii) 
instituting means to finance universal service at a national level, taking into 
account the specific circumstances of Member States with less-developed 
networks or very small networks. 
With this in mind, the Commission will propose a common framework before 
the end of 1995. 
NRAs in conjunction with the Commission should periodically survey main 
indicators of universal service, in particular penetration of residential lines, 
waiting times, provision of public pay phones and the availability of targeted 
schemes for the needy and uneconomic customers. 
Given the rate of technological progress and its effect on the costs and 
availability of increasingly sophisticated services, together with the need to 
ensure that the benefits of the Information Society extend to all citizens and 
not just to the privileged minority, the definition of universal service must be 
dynamic and reflect such progress. 
3. Interconnection and interoperability 
The basic framework 
Interconnection agreements fall within the scope of the competition rules. The 
application of these rules to interconnection agreements should be clarified to 
the extent necessary. This should include the removal of the current 
restrictions on the interconnection of all types of communications 
infrastructure, comprising public and private networks (i.e. fixed - mobile -
cable television - satellite-based networks). 
As regards public telecommunications infrastructure, the principles of Open 
Network Provision should be extended as far as ONP applies151, within the 
context of a specific Directive on interconnection, to create à harmonised 
approach for public telecommunications infrastructures and to enhance 
interoperability of public networks and service throughout the Union. The 
Directive should: 
• set out the rights and obligations on public telecommunications 
infrastructure providers with regard to interconnection requests, including 
obligations to interconnect and provide standard interconnect offerings. 
• give priority to the commercial negotiation of public telecommunications 
interconnection agreements, within an overall framework to be supervised 
by national regulatory authorities. 
151 Currently, ONP applies to public networks provided under exclusive or special rights. The future 
scope of the application of ONP to operators will be defined in the context of the current review of 
ONP. 
118 
• provide as elements of that framework, common rules promoting fair 
competition; transparency of interconnection agreements, technical 
standards (priority to be given to voluntary standards) and compliance with 
essential requirements. 
• establish dispute resolution mechanisms at a national and European level. 
An ONP Interconnection Directive should also lay down charging principles for 
interconnection of public telecommunications networks and services, and in 
particular: 
• common principles for interconnection charges 
• identification and recovery of uneconomic universal service costs based on 
net cost calculations 
• cost accounting systems 
Open access to infrastructure - application of ONP principles and the 
competition rules 
Open access to the facilities of public telecommunications infrastructure 
providers will be fundamental in establishing an effective, competitive 
environment for telecommunications infrastructure and services within the 
Information Society. In addition to the application of the competition rules, the 
basic principles set out within the Open Network Provision framework must be 
extended and, where necessary, adapted to provide a common regulatory 
approach to communications infrastructure in the European Union. This 
approach entails: 
• harmonised application of the general principles of ONP by the national 
regulatory authorities within their national regulatory regimes, alongside the 
application of the Treaty competition rules to the sector. 
• In the context of ONP, such conditions will generally be applied through 
class licences or in the framework of authorisations for the provision of 
communications infrastructure. 
• Such conditions are concerned with ensuring rights to access and 
compliance with essential requirements and ensuring cost orientation. 
• adequate transmission capacity being guaranteed throughout the Union, in 
particular, through revision of the ONP leased lines directive. 
• transparent accounting structures to be put in place by providers of public 
telecommunications infrastructures, including the separation of accounts 
for telecommunications and non-telecommunications activities, as well as 
the implementation of transparent cost accounting systems concerning 
infrastructure provision and service provision. 
119 
• Voluntary implementation of common technical standards (based on 
European standards), with consultative mechanisms for mandatory 
implementation where necessary to satisfy user needs. 
• the relaxation, in a competitive environment, current regulatory 
mechanisms to ensure cost-orientation of tariffs. 
4. Licensing 
Licence award procedures 
In order to promote a common regulatory framework for the licensing of 
communications infrastructure in the European Union, award procedures should 
respect the following principles: 
• Member States should licence and/or authorise the establishment and 
provision of infrastructure in the European Union using open, non­
discriminatory and transparent procedures. 
• The number of licences granted may only be restricted on the basis of the 
essential requirements152 and in the case of networks intended for the general 
public, public service requirements in the form of trade regulations. 
As regards the establishment of new communications infrastructures, these 
essential requirements should also include, in justified cases, the protection of 
the environment and town planning objectives. 
As regards limitations on the number of licences with respect to essential 
requirements, only radio spectrum and environmental and town planning 
objectives would apply. 
Any limitation must be consistent with the Treaty competition rules and the 
Treaty provisions concerning the right of establishment and the free circulation 
of services. 
• Award procedures must indicate clearly the selection criteria and the 
conditions which will be attached to the grant of any licence. 
• In order to promote the development of trans-European telecommunications 
networks and services, the grant of national licences for such networks should 
be co-ordinated, where appropriate, to facilitate the networks becoming 
operational throughout the countries covered at the same time. 
152 Essential requirements are defined in Community law (See section VI.3 above) and relate to, inter 
alia, to security of network operation, network integrity, user safety and safety of employees, effective 
use of the radio spectrum, electromagnetic compatibility and, in justified cases, interoperability of 
services and data protection. ^ 
In the case of network infrastructure, essential requirements could also be, in justified cases, 
environmental and town planning objectives 
120 
Selection criteria for the award of licences and authorisations 
• Licences must be granted on the basis of pre-announced criteria. In cases 
where networks are intended for use by the general public and the number of 
licences awarded is limited, criteria may be based on public service 
requirements in the form of trade regulations153. In the absence of 
harmonisation at a Union level, such criteria should in any case be published 
in advance and be subject to prior scrutiny for compatibility with the Treaty 
rules. 
• Under the EC and EEA rules, selection criteria may not discriminate on the 
grounds of nationality, nor take into account factors such as the sourcing of 
equipment. 
• Any limitation on the number of licences granted and any refusal to licence a 
particular undertaking (including the exclusion of particular undertakings from 
a licensing process) must be duly justified to allow for assessment under the 
applicable Treaty rules and also with the principle of proportionality. 
• The principle of mutual recognition of licences or authorisations is not normally 
applicable to infrastructure licences. This is the case, for example, with 
national licences for the provision of fixed networks encompassing rights of 
way. Mutual recognition should, however, apply to certain elements used in 
licensing procedures, such as evidence relating, for example, to the technical 
competence or financial standing of the applicant. 
Conditions attached to communications infrastructure licences 
Building on the framework provided by Community law, future licenses for 
infrastructure should respect the following principles : 
• Licensing conditions for infrastructure must be based on objective grounds, be 
transparent, be non discriminatory and respect the principle of proportionality. 
Any fees for licences should respect the same criteria. 
• Licences must not contain conditions other than those justified on the grounds 
of essential requirements and, in the case of public telecommunications 
infrastructure154, public service requirements set out in the pre-announced 
criteria. 
• Infrastructure not intended for the use of services for the general public (such 
as infrastructure for corporate networks or closed user groups), should only be 
subject to conditions based on the essential requirements. 
153 Public service requirements in the form of trade regulations are defined in Community law (See 
section VI.3). Trade regulations concern conditions relating to the permanence, availability and 
quality of services provided over infrastructure and may imply the infrastructure provider fulfilling 
conditions relating to technical competence and the financial resources of the licensee. 
154 Operators without rights of way should not be subject to the same level of obligations as those with 
rights of way, especially as regards coverage. 
121 
With regard to ownership restrictions, licences may not contain conditions 
which restrict ownership by nationals of Member States or of the European 
Economic Area or undertakings controlled by such nationals. 
Any other restrictions on ownership or control must be compatible with 
Community law and with the European Community's commitments taken on a 
multi-lateral basis. 
Licensing conditions must ensure a high standard of consumer protection and 
respect for competition rules. 
Provision of Telecommunications Services 
• Service provision (as opposed to network establishment and operation) should 
not be subject to individual licensing in the Member States. It may be subject 
to class licences, general authorisations or to a requirement for declaration by 
Service Providers of their activities to the National Regulatory Authority(ies) of 
the Member State(s) where they choose to operate. 
• Nevertheless, in the case of independent service providers offering voice 
telephony services to the general public on a resale basis, consideration may 
need to be given as to how and when such resellers should be obliged to 
make a contribution, appropriate to their market position, to the provision of or 
financing of universal service, (via access charges or a universal service fund, 
as set out in the following point 3). 
Access for Service Providers to any infrastructure should be based on 
commercial agreements, subject to the competition rules, and where 
appropriate, the framework of Open Network Provision rules set out below. 
• The Commission will regularly review if additional safeguards for consumers 
are considered necessary. If so, they should be fully consistent with the 
Treaty provisions and respect the principle of proportionality. Preference 
should be given to rules agreed by sector participants (such as a code of 
conduct) over binding regulatory measures, and to general or class regimes 
over specific individual licenses or authorisations. However, where this Code 
of Conduct does not adequately protect consumer interests, binding regulatory 
measures should be introduced. 
5. Ensuring fair competition 
In a market which will, for many years, be characterised by the presence of 
dominant operators controlling bottleneck facilities, the full implementation of the 
competition rules will be indispensable to allow for the emergence of a competitive 
environment. This will imply, where required, the establishment of the appropriate 
procedures and safeguards. These will concern, in particular 
• screening interconnection agreements, 
122 
reviewing the conditions for access granted to infrastructure providers and to 
service providers, 
monitoring joint ventures. 
assessing any scheme established for financing universal service; 
ensuring open and non-discriminatory access to rights of way. 
reviewing the effects of crbss-ownership of different networks and of joint 
provision of network and services; 
The latter requires transparent accounting structures and practices to be 
established by providers of communications infrastructures, including the 
separation of accounts for telecommunications and non-telecommunications 
activities, as well as the implementation of transparent cost accounting systems 
for infrastructure providers who also provide telecommunications services. 
6. Access to rights of way, frequencies and numbering 
In order to guarantee the successful development of a competitive market for 
infrastructure, access to certain basic resources must be guaranteed. This 
concerns rights of way, frequency for wireless network components, numbering 
and directory services. 
Rights of Way 
• Member states should grant rights of way to communications network 
operators according to open and transparent procedures. 
• Where environment requirements (such as avoiding road congestion), or other 
essential requirements, prevent the granting of rights of way to all potential 
applicants, the Member States should introduce schemes for the sharing of 
ducts on a voluntary basis and consider, where it is deemed necessary to 
avoid bottleneck situations, the introduction of mandatory duct-sharing. 
• To introduce competition in the market for infrastructure provision, Member 
States will need to ensure that the incumbent telecommunications 
organisations are subject to the same regulatory conditions as their 
competitors regarding rights of way, and provide for mandatory sharing of 
facilities where necessary to bring down barriers to entry. 
Frequencies 
Access to frequency spectrum will be increasingly important in ensuring the 
optimum combination of fixed and wireless technologies in future networks. In 
order to support this development a number of measures should be taken, in 
particular: 
123 
• CEPT/ERC should initiate a comprehensive review of the balance of 
frequency usage between broadcasters, fixed network operators and 
mobile and personal communications operators. This will also need to 
address the balance between these uses and the use of spectrum for 
defence and security purposes. 
• Pan-European network operation requires greater co-ordination of frequency 
allocation across Member States. 
Numbering 
In order to facilitate network investments, an appropriate framework ensuring 
access to numbers must be put in place. In particular, this requires: 
• Creation of a European numbering space for special services (e.g. 
freephone, premium rate, shared cost services ) must be a priority for the 
EU. 
• A "best practice" guidance for NRAs on the administration and control of 
the national numbering schemes is under development in the ETO, 
• The reform package for submission to the Council before 1 January 1996 
will address inter alia the subject of numbering reform in Europe. 
Directories 
Access to subscriber data for network operators and service providers and 
access for subscribers to a comprehensive directory service will be important 
elements. Such access should proceed, inter alia, on the following basis: 
• Access to subscriber databases and to raw subscriber data must be 
ensured on the basis of objective, transparent and non-discriminatory 
criteria, and in conformity with Community legislation, in particular the 
competition rules of the Treaty, the principles of open network provision 
(ONP) and the provisions on the protection of personal data and privacy, as 
well as, where applicable, IPR legislation. 
• Maintaining a complete universal telephone directory and at least one 
enquiry service155 which contains the details of all subscribers of fixed and 
mobile telephony services and is available for all users. 
7. Action in Neighbouring Fields (Data Protection, Audio-visual, Media and 
IPRs 
Common rules concerning data protection and privacy are fundamental for the 
development of the information society and for removing other constraints on 
effectively exploiting the competitive provision of communications infrastructures 
155 The terms on which such directories and and enquiry services are made available to the general 
public will be discussed in a forthcoming Commission Communication on directories and directory 
services. 
124 
In this context rapid progress should now be made on the proposed General Data 
Protection Directive arid the proposed specific Directive on the protection of 
privacy in the digital network environment156. 
The Commission has already identified in its Action Plan on Europe's Way to the 
Information Society that work will continue in the area of Information Security, and, 
in particular, that it will : 
• publish a Communication on security issues and the role of Member States 
• make proposals with regard to the harmonisation of national rules on 
unauthorised access, and 
• prepare a Green Paper on the legal protection of encrypted broadcasts. 
Action in all of these areas can substantially contribute to the creation of an 
appropriate environment for infrastructure competition. 
The Commission has also identified in its Action Plan on Europe's Way to the 
Information Society, initiatives in a range of areas which will help to shape the new 
regulatory environment both for infrastructure and for services. These policies will 
substantially influence the extent to which investment can be mobilised to finance 
competing networks. 
These actions include : 
In the field of media ownership, the recently adopted Communication on the follow 
up to the Green Paper on media pluralism and subsequent public consultation; 
In the field of audio-visual policy, the possible revision of Directive 89/552/EEC 
(the "television without frontiers" directive) and following up the Audio-visual Green 
Paper with regard to the issue of content 
In the field of intellectual property, the adoption as a matter of priority of the 
pending proposal on the legal protection of data bases; the preparation of a 
Green Paper on intellectual property in the Information Society and the 
preparation of a directive on private copying. 
Additionally, the Commission has already proposed a Directive157 aimed at the 
harmonisation of the laws, regulations and administrative provisions on contracts 
negotiated at a distance between suppliers and consumers. 
The Commission will undertake work during 1995 on the regulatory approach to 
be applied to ensure the free circulation of new services, which will help ensure 
that the Commission's actions in the relation to infrastructure and the services to 
be provided over them remains consistent 
i5° Modified proposal for a Council Directive concerning the protection of personal data and privacy in the context 
of public digital telecommunications networks, in particular the Integrated Services Digital Network (ISDN) and 
public digital mobile networks, COM(94) 128 final, 13.6.94. 
157 OJ C156/14, 23.6.92 
125 
8. The Societal and Social Impact 
The services carried over infrastructure in Europe will have a major effect on the 
quality and way of life for Europe's citizens. Priority attention will also be given to 
studying and monitoring the societal and social impact of the diffusion of new 
technologies and of a competitive environment for communications infrastructure 
(in particular, in relation to the areas of employment and cultural policy, as well as 
the need to avoid the development of a society of information "haves" and "have 
nots"). 
In this regard the Commission's Action plan announced a number of reports and 
Communications in this area, including a report by the High Level Group of 
Experts. 
Consideration in this context must also be given to the need for retraining and re 
deployment of employees as the traditional telecommunications sector adapts to a 
competitive environment. 
The Commission also proposes setting in motion a comprehensive action 
programme to investigate potential health hazards associated with the proliferation 
of fixed and wireless infrastructures and to accelerate the preparation of 
necessary safety standards, as well as providing general guidance. 
9. A global approach to infrastructure and ensuring fair access to third 
country markets 
The Union must actively contribute to on-going discussions at a global level 
concerning the Information Society, and, in particular, the evolution of common 
global approaches to issues promoting the development of infrastructures, 
capable of meeting the needs for global communications. The meeting of the G7 
in February to be hosted by the Commission will substantially assist this aim. 
The main principles with regard to worldwide developments are : 
• Common Community positions are required in international fora to assist in 
developing a global approach to standards, frequency and numbering. (This 
concerns, in particular, positions within the International Telecommunications 
Union and the World Radio Conferences. 
• Emphasis on the on-going multi-lateral talks on basic telecommunications as 
the key to opening up access to third country markets. The overall aim must 
be to ensure comparable and effective market access, and, in particular, the 
lifting of ownership restrictions, for EU network operators and service 
providers. 
• Until the results of the GATT/WTO negotiations are clear, it is important that 
the Union reserves its right to maintain equivalent conditions to those currently 
prevailing in third country markets with regard to market entry or the licensing 
of non-EU or EEA nationals or companies controlled by such nationals, the 
objective of imposing such conditions would be to promote open markets in 
third countries for European network operators and service providers through 
negotiations. 
126 
Common Community positions on issues having a direct impact on the 
operation and interconnection of networks, such as restrictions on encryption, 
rules on intellectual property and data protection and privacy. 
10. Future Evolution of the Regulatory Environment - Towards the 
Information Society 
The Commission is looking beyond the immediate steps needed to liberalise 
telecommunications infrastructure by 1 January 1998 and to put in place the 
accompanying regulatory framework. 
This Green Paper is intended to initiate the debate, in parallel with that launched 
by action in other neighbouring fields, on the future evolution of the regulatory 
environment beyond 1998 to meet the challenges of technological and market 
convergence. 
In addressing these issues, certain basic principles derived from the experience in 
the telecommunications will assist the debate: 
• Liberalisation of telecommunications infrastructure and services must go hand 
in hand with the implementation of a clear regulatory framework, which can 
help to mimic competition (through principles of non-discrimination, 
transparency, etc.) pending the emergence of genuinely competitive markets. 
• Effective and independent regulation at the appropriate level will be essential. 
• The regulatory framework should lay down basic principles at a European level 
on the basis of the rules in the Treaty, as well as clear criteria for their 
application in a predictable manner at a national level. Increasing reliance on 
competition rules is to be expected. 
• Effective competition in the markets for telecommunications equipment and 
services should evolve without rigid structural safeguards, such as those 
developed in the mid-eighties in North American markets. 
Where safeguards have been considered necessary proportional solutions 
have been chosen, such as transparent cost-accounting and separate 
accounting for different parts of a business. 
These principles must be applied to the challenges of multi-media and the 
Information Society, taking full account of the regulatory patterns established in 
the converging sectors. 
127 
DC.3 Timetable for action 
Council Resolution 93/C 213 of 22 July 1993 called for the Commission to prepare, 
before 1st January 1996, the necessary amendments to the Community regulatory 
framework, in order to achieve liberalisation of all public voice telephony services by 
1 January 1998. Linking the liberalisation of infrastructure to liberalisation of voice 
telephony means that the same time scale must be observed for the regulatory 
measures identified in this Green Paper. 
The specific measures in the 'reform package' are expected to include measures to be 
adopted by the Commission and measures to be adopted by the European Parliament 
and the Council. 
The proposed timetable is as follows: 
By 15 March 1995 Submission of public comments on the Green Paper 
May 1995 Commission Communication to the European Parliament 
and the Council on the public consultation on the 
infrastructure Green Paper 
June 1995 Council Resolution on Infrastructure . 
Before 1 January 1996 Publication by the Commission of proposals for specific 
measures to extend the existing EC regulatory framework 
Commission Communication to the European Parliament 
and the Council on the principles and financing of Universal 
service 
JX.4 Public consultation 
With the adoption of Part I of the Green Paper on 25 October 1994 the Commission 
opened a broad public consultation on the principle and timetable for the 
liberalisation of infrastructure in the European Union. That debate is now 
complemented by the publication of Part II which examines the overall regulatory 
framework for infrastructure which will be required after 1998, when infrastructure 
competition can be extended to cover voice telephony services for the general public. 
The Commission invites comments on all the issues raised by this Green Paper, 
including, in particular, on the major changes required and on the evolution of the 
regulatory framework to meet the challenges of convergence. 
The Commission intends to organise a series of hearings in Brussels with interested 
parties early in 1995, allowing an opportunity for discussion of the issues raised in 
both parts of the Paper. 
128 
In order to respond urgently to the evolving Information Society, the Commission 
would ask that written comments on both Parts I and II to be forwarded to the 
Commission by no later than 15th March 1995158. 
The Commission will subsequently report to the European Parliament and Council on 
the results of the consultation process. 
158 Unless a request is made to the contrary, written comments received during the public consultation 
will be made available in full after the conclusion of the Consultation process. 
129 
ANNEX 1 : GLOSSARY OF TECHNICAL TERMS 
Access Charges Charges made by owners/operators of telecommunications networks 
and services to operators and / or service providers interconnecting 
with them, the purpose of which is to compensate the network 
operator for any loss-making obligations imposed upon it through 
regulatory means, such as Universal Service Obligations or 
political constraints to tariff adjustments for local service. 
Where access charges are used, they are often added to, and 
integrated with, interconnection charges. 
ADSL Asymmetric Digital Subscriber Loop, a digital transmission 
technique for enhancing the information-carrying capacity of 
copper-pair cables in the local access network. It is designed for 
video-on-demand services by delivering video signals to the 
customer premises with a low-capacity return channel for customer 
ordering purposes. 
Alternative network infrastructure Infrastructure capacity established by organisations other than the 
telecommunications organisations, for own use or for offering 
capacity to other users or to service providers. When offered to 
others, it is referred to as Third Party infrastructure. 
ATM Asynchronous Transfer Mode. A fast packet-switching technology 
for providing high-speed switched services, including multimedia 
and video, over optical fibre networks. 
CAP Competitive Access Provider. Term applied in USA to companies 
providing services directly to customer premises in competition 
with the local Regional Bell Operating Companies (RBOCs). 
CATV networks Cable Television Networks. Systems authorised for the 
distribution of broadcasting / television programmes. In many 
cases also suitable for the transmission of telecommunications. 
CEN/CENELEC European Committee for Standardisation and European Committee 
for Electrotechnical Standardisation, major European 
standardisation organisations. 
130 
CEPT European Conference of Postal and Telecommunications 
Administrations. Membership of CEPT is made up of National 
Regulatory Authorities (NRAs), and encompasses the twelve EU 
Member States, and most other European countries, including the 
countries of Central and Eastern Europe. Following these recent 
reforms, CEPT's activities are now divided between: the ERC (the 
European Radiocommunications Committee) and ECTRA 
(European Committee for Telecommunications Regulatory Affairs) 
dealing with telecommunications; CERP (the European Committee 
for Postal Regulation) dealing with postal affairs, (see also ECTRA 
and ERC). 
Closed User Group (CUG) Closed User Groups (CUGs) refer to entities not necessarily bound 
by economic links, but which can be identified as being part of a 
group on the basis of a lasting professional relationship among 
themselves, or with another entity of the group, and whose internal 
communications needs result from the common interest underlying 
this lasting relationship. In general, the link between the members 
of the group is a common business activity. 
Examples of activities likely to fall into this category are fund 
transfers for the banking industry, reservation systems for airlines, 
information transfers between universities involved in a common 
research project, re-insurance for the insurance industry, inter-
library activities, common design projects, and different institutions 
or services of intergovernmental or international organisations. 
In the context of the Commission Directive 90/388/EEC of 28 June 
1990 on competition in the markets for telecommunications 
services, individual cases and definitions used in Member States are 
subject to screening by the Commission. The Directive indeed refers 
to the public and not to CUGs. The Commission must therefore 
ascertain that the definitions of CUG by Member States doe not 
exclude voice telephony between users who have existing common 
links between themselves, such that they could not reasonably be 
regarded as being members of the public (i.e. any random person, 
without distinction of belonging or membership). See Part I of 
this Green Paper , COM(94)440, 25.10.1994, section VI (1). 
Corporate network Corporate networks are generally networks established by a single 
organisation encompassing distinct legal entities, such as a 
company its subsidiaries or its branches in other Member States 
incorporated under the relevant domestic company law. 
131 
DCS 1800 Standard for micro cellular communications systems developed by 
ETSI, building on the GSM standard, also referred to as PCN 
system standard. Such systems operate with very small cells, 
varying in size between a few hundred metres and a few 
kilometres. 
Digital European Cordless 
Telecommunications (DECT) New digital cordless standard developed by ETSI, supported by 
Directive 91/288/EEC establishing harmonised frequency bands for 
DECT and a Council Recommendation on its co-ordinated 
introduction. DECT is also suitable as a technology for 
establishing local radio loops for fixed network subscribers. 
ECTRA The European Committee for Telecommunications Regulatory 
Affairs (ECTRA), created as one of the three committees under the 
new CEPT structure. It currently includes three project teams 
covering licensing, numbering and testing. 
ENO - European 
Numbering Office The European Numbering Office called for in the Council 
Resolution 92/C318/02 of 19 November 1992 on the promotion of 
Europe-wide co-operation on numbering of telecommunications 
services is located in Copenhagen, as part of the European 
Telecommunications Office (see also ECTRA). 
ERC- European 
Radiocommunications Committee The European Radiocommunications Committee (ERC) is one of 
the three committees created under the new structure of CEPT. 
The ERC develops radiocommunications policies, assists ITU 
conferences and plays a general co-ordinating role in frequency 
matters. It has established the European Radiocommunications 
Office (ERO) 
ERO - European 
Radiocommunications Office The European Radiocommunications Office (ERO) called for in 
the Council Resolution of 28 June 1990 90/C166/02 on the 
strengthening of the Europe-wide co-operation on radio 
frequencies, in particular with regard to services with a pan-European 
dimension was created by the ERC and started operations in 
Copenhagen in May 1991. 
132 
Essential Requirements Essential requirements are nôn-economic reasons in the general 
interest which may cause a Member State to restrict access to the 
public telecommunications networks or public telecommunications 
services. 
ETO - European 
Telecommunications Office The European Telecommunications Office (ETO) is an office which 
is being established under the umbrella of ECTRA. 
ETS - European 
Telecommunications Standard* Standards established according to the procedures of the European 
Telecommunications Standards Institute (ETSI). 
ETSI - European 
Telecommunications Standards 
Institute The European standards organisation in the telecommunications 
field, having the task of producing European Telecommunications 
Standards (ETS), having European-wide application and 
acceptance, in the area of telecommunications. 
Exclusive rights According to Commission Directive 90/338/EEC as amended by 
Commission Directive 94/46/EC, an exclusive right exists where 
the service is reserved by the Member State for a single public or 
private undertaking within a given area. 
FTTC - Fibre to the curb. Used to designate the laying of optical fibre to a local distribution 
point (curb). 
FTTH - Fibre to the Home Used to designate the laying of optical fibre to individual homes 
GII - Global Information 
Infrastructure US term for world-wide information infrastructure or 
superhighway. See also Nil 
133 
GSM - Global System for 
Mobile communications The central standard, developed by ETSI, for digital (2nd 
generation) mobile systems, using TDMA (Time Division Multiple 
Access) techniques. GSM has been supported by Directive 
87/372/EEC establishing harmonised frequency bands for GSM and 
a Council Recommendation and Resolution on its co-ordinated 
introduction. The system supports roaming, and a broad range of 
features. 
Green Paper(s) Green Papers, in the European Union context, are European 
Commission consultative documents setting out basic policy goals 
for public debate. Key Green Papers issued in the 
telecommunications sector, are the 1987 Green Paper on the 
development of a common market for telecommunications services 
and equipment (COM (87) 290); the 1990 Green Paper on satellite 
communications (COM (90) 490) and the 1994 Green Paper on a 
common approach to personal and mobile communications in the 
European Union (COM(94) 145). 
HDSL - High Bit-rate 
Digital Subscriber Loop Transmission technique for accommodating 2 Mbit/s Primary Rate 
ISDN and digital leased lines on existing local access network 
copper pair cables. Two such pairs are required for two-way 
transmission, and speeds up to 6 Mbit/s are currently possible, 
albeit over shorter distances. Could complement FTTC. 
1BC Integrated Broadband Communications 
Infrastructure See telecommunications infrastructure 
Intelligent Networks (IN) Advanced network concept allowing rapid and flexible introduction 
of new services such as freephone, premium rate customer-
controlled routing and bandwidth-on-demand. 
Interconnection charges Charges made by owners/operators of telecommunications networks 
and services to operators.and / or service providers interconnecting 
with them, for access and use, including the conveyance of their 
134 
telecommunications traffic. Charges for connection and conveyance 
should be seen as distinct from access charges. 
International Telecommunications 
Union (ITU) The United Nations specialised agency for telecommunications. 
The structure of the ITU has recently been reviewed to adapt it to 
the changing information and telecommunications environment. 
Formal changes were agreed at an Additional Plenipotentiary 
Conference in December 1992 and came into operation in March 
1993. These have separated the ITU into three sectors: 
Standardisation, Radiocommunications and Development. 
IPRs Intellectual Property Rights 
Low Earth Orbiting satellite 
(LEOs) Non-geostationary satellites in low-earth orbits. LEO concepts 
play a particular role in current proposals for satellite-based 
Personal Communications services. 
Memorandum of Understanding 
(MOU) MoUs in the telecommunications field in Europe have been entered 
into between operators and/or equipment manufacturers or other 
market participants for the roll out of new products and services. 
Mobile Network Operator Operator of mobile network infrastructure, supporting the 
transmission and provision of radio-communications services. 
The activities of Mobile Network Operators in most cases also 
integrate mobile Service Provider functions (direct service 
provision to end-users) within their overall business. 
NRA - National Regulatory 
Authority. Directive 88/301 and 90/388 both require Member States to ensure 
the separation of regulatory activities from the operation and 
provision of services by Telecommunications Organisations. 
135 
Nil - National Information 
Infrastructure The US concept for ubiquitous availability of communications 
infrastructure (both telecommunications and cable) for the whole 
range of voice, data, and multi-media services, ay proposed by the 
Clinton Administration. Also known as Information 
Superhighway. 
ONP - Open Network Provision 
Personal Communications 
Services/Networks 
(PCS) (PCN) The Open Network Provision concept defined in Council Directive 
90/387/EEC. ONP conditions currently apply to public networks 
operated under exclusive and special rights. 
In the context of the reform of ONP foreseen in anticipation of full 
liberalisation and the lifting of exclusive and special rights, a 
debate has been opened on re-placing the criteria of 
special/exclusive rights by other criteria concerning major market 
importance. 
Personal Communications Services (PCS) is used as a generic term 
for services which provide person-to-person calling, independent of 
location, terminal used, the means of transmission (wired or 
wireless) and/or the choice of technology. In the UK, the term 
PCN (Personal Communications Networks) is more commonly 
applied. 
Public Service Requirements in the 
form of Trade Regulations Category of licensing conditions aimed at ensuring permanence, 
availability and quality of services and defined by Commission 
Directive 90/388/EEC. 
Public telecommunications 
infrastructure 
Public Telecommunications 
Services Telecommunications infrastructure intended for use by the 
general public (in contrast to private telecommunications 
infrastructure intended for own use or use by closed user groups). 
Telecommunications services provided to the general public 
136 
RACE - R&D programme in 
Advanced Communications 
technologies for Europe The current phase of the RACE programme is defined in Council 
Decision 91/352/EEC of 7 June 1991 adopting a specific research 
and technological development programme in the field of 
telecommunications technologies (1990 to 1994). 
Service Providers Service providers offer services to end users, either by using the 
basic service and infrastructure provided by network operators on a 
re-sale basis, or by providing services via own infrastructure where 
they form part of a network operation. Service provision may 
range from provision of basic voice or data service on a re-sale 
basis to the provision of sophisticated value-added services*. 
Special Rights Special rights are defined ^ according to Commission Directive 
94/46/EC as: \:^-^:'^% 
"the rights that are granted by a Member State to a limited number 
of undertakings through any legislative, regulatory or 
administrative instrument which, within a given geographical area. 
- limits to two or more the number of such undertakings authorised 
to a service or undertake an activity, otherwise than according to 
objective, proportional and non-discriminatory criteria, or 
- designates, otherwisevtjan according to such criteria, several 
competing undertakingspifbeing authorised to provide a service or 
undertake an activity, or 
- confers on any undertaking or undertakings, otherwise than 
according to such criteria, legal or regulatory advantages which 
substantially affect the ability of any other undertaking to provide 
the same telecommunications service or to undertake the same 
activity in the same geographical area under substantially the,same 
conditions 
Telecommunications 
Infrastructure The underlying physical components associated with the provision 
of telecommunications transmission capacity. The establishment of 
telecommunications infrastructure may require rights of way, 
frequency assignments, ducts, manholes, poles, cables, aerials, 
towers, buildings etc. Telecommunications infrastructure 
specifically excludes switching equipment associated with the 
provision of switched telecommunications services. See also 
137 
Alternative infrastructure and public telecommunications 
infrastructure. 
Télécommunications 
Organisation (TO) Telecommunications Organisations as defined in Directive 
90/388/EEC means public or private bodies to which Member 
States grant special or exclusive rights for the provision of a public 
telecommunications network and, when applicable, service. 
1992 Telecoms Review A review and wide public consultation during 1992 and early 1993 
led to the adoption by the EU Council of Ministers of Resolution 
C93/213/01 of 22 July 1993, providing for the liberalisation of the 
provision of public voice telephony services by 1 January 1998, 
subject to additional transitional periods of up to 5 years for 
Greece, Ireland, Portugal and Spain, and a possible delay of up to 
2000 for Luxembourg. 
The Resolution also requested the publication of a Green Paper on 
mobile and personal communications, and the production of a 
Green Paper on telecommunications infrastructures and cable TV 
by 1 January 1995. The Council also requested that the necessary 
regulatory framework for the 1998 liberalisation deadline be 
prepared by 1 January 1996. See Alternative Infrastructure. 
Telecommunications services according to Commission Directive 90/388 (as amended by 
Commission Directive 94/46) telecommunications services means 
services whose provision consists currently, wholly or partly, in 
the transmission and routing of signals on the public 
telecommunications networks by means of telecommunications 
processes, with the exception of radio and television broadcasting 
to the public. 
In this context, the term telecommunications services is generally 
understood to be concerned with the provision of transmission, 
switching and other activities for the purpose of the conveyance of 
signals, without regard to the content of the messages transmitted. 
Universal Personal 
Telecommunications (UPT) Concept which should allow person-to-person calling across 
multiple networks at any terminal, fixed or mobile and irrespective 
of geographical location, based on personal and portable numbers. 
Essential concept for implementing full personal mobility in a 
communications environment. 
138 
Universal Service The provision of telecommunications services permitting "access to 
a defined minimum service of specified quality to all users 
everywhere and, in the light of specific national conditions, at an 
affordable price" . The notion of Universal Service also includes, 
in particular, service to disadvantaged users such as deaf and other 
disabled users. Political orientations concerning the scope of 
Universal Service have been provided by Council Resolution 
94/C48/01 and the associated Commission statement. 
Universal Service Fund Special arrangements for collecting contributions to the cost of 
Universal Service Obligations and transferring funds to those 
network operators taking on those obligations. Universal Service 
Funds are in operation in a number of countries, e.g. in U.S. and 
Australia, and are normally established under strict regulatory 
oversight. An alternative or supplement to access charges (which 
are normally paid directly to the operators of network infrastructure 
as a contribution to their cost of Universal Service Obligations). 
See also Access Chargés. 
Universal Service Obligation 
(USO) The obligation placed upon one or more operators to provide 
universal service - usually the provision of basic services, in 
particular telephone service. Uneconomic universal service 
obligations means the provision of such services to those users 
whom an operator would not serve if it were to apply its normal 
commercial criteria of profitability. (See also section VII.6.2) 
139 
ANNEX 2 : STUDIES CARRIED OUT FOR THE COMMISSION IN 
PREPARATION FOR THIS GREEN PAPER 
A number of external studies have been requested by the Commission to assist in the 
preparation of this Green Paper and in the subsequent consultation process. 
The studies requested are : 
"Future Policy for Telecommunications Infrastructure and Cable TV Networks", 
by Mercer Management Consultants; 
"Requirements for the Development of a Multimedia Environment based on 
Telecommunications Infrastructure and Cable TV Networks", by Devotech; 
"Investment requirements for Europe to achieve convergence", by KPMG; 
"Study to provide quantitative data as background to the Green Paper", by 
IDATE; 
"Overview and analysis of the legal and regulatory barriers to multimedia 
applications"', by Coudert; 
and in relation to the issue of alternative infrastructures: 
"The impact of liberalisation of Alternative Terrestrial Infrastructure for Non-
Reserved Services", by Coopers and Lybrand; 
"The Effects of Liberalisation of Satellite Infrastructure on the Corporate and 
Closed User Group Market", by Analysys; 
"L'impact de Vauthorisation de la fourniture de services de télécommunications 
libéralisés par les câblo-opérateurs", by IDATE. 
In addition, two studies on interconnection issues are available which have also been used 
in the preparation of this Green Paper: 
"Network interconnection in the domain of open networks provision", by WDC; 
and 
"Cost allocation and the general accounting principles to be used in the 
establishment of access charges in the context of telephone liberalisation in the 
EC", by Arthur Andersen. 
These studies will be made available on request. Please address inquiries to: the European 
Commission, DG XUI/A/l, Rue de la Loi 200, B-1049 Brussels - Office: BU9-4-185. 
Fax: (+32 2) 296.83.91. 
140 
ANNEX 3 : LIST OF KEY REGULATORY MEASURES AND PENDING 
PROPOSALS IN THE FIELD OF TELECOMMUNICATIONS 
These measures concern: 
The Directives on competition in the market for telecommunications services ami for 
terminal equipment, setting out the basic principles for liberalisation in the European 
Union (as most recently amended to include satellite communications and equipment 
within their scope) : 
Commission Directive of 16 May 1988 on competition on the markets in 
telecommunications terminal equipment (88/301/EEC ; OJ L131/73, 27,5.88) 
Commission Directive of 28 June 1990 on competition on the markets for 
telecommunications services (90/388/EEC ; OJ L192/10, 24.7.90) 
Commission Directive of 13 October 1994 amending Directive 99/301/EEC and 
Directive 90/388/EEC in particular with regard to satellite communications 
(94/46/EC, OJ L268/15, 19.10.94) 
The ONP framework and specific Directives which establish principles for open 
access, interconnection and harmonisation: 
- Council Directive of 28th June 1990 on the establishment of the Internal Market 
for telecommunications services through the implementation of Open Network 
Provision (90/387/EEC ; OJ L192/1,' 24.7.90) 
- Council Directive of 5th June 1992 on the Application of Open Network 
Provision to Leased Lines (92/44/EEC ; OJ LI65/27, 19.6.92) 
Directives concerning the mutual recognition of terminal equipment which facilitate 
the free movement of telecommunications equipment within the single market and 
proposals for directive extending the principle of mutual recognition to the licensing 
of certain categories of telecommunications and satellite services: 
Council Directive of 29th April 1991 on the approximation of the laws of the 
Member States concerning telecommunications terminal equipment, including the 
mutual recognition of their conformity (91/263/EEC ; OJ L128/1, 23.5.91); 
- Council Directive of 29 October 1993 supplementing Directive 91/263/EEC in 
respect of satellite earth station equipment (93/97/EEC; OJ L290/0Î, 24.11.93) 
and in the area of services : 
Amended proposal for a European Parliament. and Council Directive on the 
mutual recognition of licences and other national authorisations for 
telecommunications services, COM(94) 41 final, 22.3.94 
Proposal for a European Parliament and Council Directive on a policy for the 
mutual recognition of licences and other national authorisations for the provision 
of satellite network services and/or satellite communications services, COM(93) 
652,4.1.94, 
141 
Directives concerning the protection of the public interest in this field, such as the 
proposed Directive on data protection and privacy in the telecommunications field: 
Modified proposal for a European Parliament and Council Directive concerning 
the protection of personal data and privacy in the context of public digital 
telecommunications networks, in particular the Integrated Services Digital 
Network (ISDN) and public digital mobile networks, COM(94) 128 final, 
13.6.94. 
142 
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