EN

Brussels, 01.06.2005

SEC(2005) 717/2

COMMISSION STAFF WORKING PAPER

COMMUNICATION FROM THE COMMISSION

“i2010 – A European Information Society for growth and employment”

EXTENDED IMPACT ASSESSMENT

{COM(2005) 229 final}

Executive Summary

This impact assessment identifies options for policy actions in the field of ICT beyond 2005. It is based upon extensive consultation and empirical evidence. In the context of the renewed Lisbon strategy for European growth and employment, it offers a timely opportunity to assess information society initiatives to follow the current eEurope Action Plan which comes to an end in 2005. This Extended Impact Assessment is presented as a supporting document to a forthcoming Communication which will take into account the following assessment and go one step further to deliver the policy strategy for the next five years.

Information and communication technologies (ICT) now penetrate all parts of society. They bring efficiency benefits to businesses and organisations, and new lifestyle options to individuals. Recent economic evidence confirms that ICT drive growth and improve competitiveness. However, the EU is not fully exploiting the opportunities offered by these technologies and is still behind its major competitors both in terms of investment and use. [1] These technologies have the potential to move the EU to a higher growth path and thereby achieve the growth and jobs objectives of the revised Lisbon strategy [2]. To realise this potential, the EU needs a comprehensive policy approach.

The new Information Society policy initiative is to be designed to respond to this need. It should aim to ensure that Europe gets the full benefits in terms of prosperity, jobs and growth. It should provide a consistent approach to information society and media policies in the EU covering regulation, research and deployment; it should also be comprehensive, covering a wide range of public policies from promotion of innovation to new forms of governance, security or innovative services of public interest. It should look for immediate and visible results in the context of a coherent long-run strategy that promotes inclusion and cultural diversity.

The key message of the recently adopted “Spring Report” [3] is that, despite important progress in several areas, the EU is some way behind the targets set in the Lisbon agenda. The Commission proposes to revitalise the Lisbon strategy by introducing changes around three central concepts: give the EU’s actions more focus, establish broad ownership of the Lisbon goals, and improve governance. The EU should concentrate on its most urgent priorities, e.g. growth and employment. While sustainable development remains the overall goal of EU policies, the new Lisbon strategy will concentrate on the economic pillar. More specifically, the Commission proposes three key areas for policy action: i) make the EU a more attractive place for investment and work, ii) invest in knowledge and innovation, and iii) create better employment.

The Spring Report acknowledges the contribution of ICT to productivity and innovation, and therefore, to growth, but it recalls that the EU is underperforming in this domain. It recommends i) increasing investment in and furthering the use of ICT, ii) taking actions in specific areas, such as ICT research and development, e-Government, broadband and rural development, and iii) proposing various policy measures where ICT has a role to play, e.g. workers’ adaptability and skills for the knowledge society.

At the Spring Council in March 2005, Member States deemed that it is essential to build a fully inclusive Information Society, based on widespread use of information and communication technologies (ICT) in public services, SMEs and households. To that end, the new initiative for the next five years should focus on ICT research and innovation, content industry development, security of networks and information, as well as convergence and interoperability in order to establish a seamless information area.

The European innovation performance, crucially, is dependent on strengthening investment and the use of new technologies, particularly ICT, by both the private and public sectors. Information and Communication technologies provide the backbone for the knowledge economy. They account for around half of the productivity growth in modern economies. However, investment in ICT in Europe has been lower and later than in the United States, especially in service sectors such as transport, retail or financial services.

The Information Society has become a reality in the European Union. The regular EU benchmarking exercises reveal the huge deployment of ICT amongst individuals, households and businesses. Below are some key figures [4] for 2004:

· 83% of the population of the EU25 is the average GSM penetration rate;

· 43% of households of the EU25 is the average for internet access;

· 89 % of all enterprises in the EU 25 countries have an internet access;

· 87 % of large enterprises in the EU25 (250 + employees), 71 % of medium sized enterprises (50-294), and 52% of small firms have broadband Internet access;

· 85% of the EU15 population has broadband coverage via DSL, the dominant platform in Europe;

· 8.6 % of the EU25 population have broadband internet access; and

· 40 % of all basic public services are available online with full interactivity in the EU 25 countries.

The further the progress of the Information Society, the scope of issues to be handled by the public authorities is steadily increasing. For instance, the main focus of eEurope is economic and social. Although not currently within the scope of eEurope, ICT also has the capacity to contribute to sustainable development. Therefore, an overall picture is more and more difficult to elaborate. This document does not aim to be totally comprehensive but aims to identify the main challenges and improvements or adaptations to be made for the next five years.

Rationale for a new policy initiative

The need for a new initiative is driven by three factors that call for a reassessment of the objectives:

· New challenges: Information Society is moving from a “pilot phase” to a “wide deployment” as the ICT world becomes more mature and global. Since 2000, the ICT context has changed radically, not only from a technological point of view (e.g. 3G, Ipv6, nanotechnologies, convergence, a new generation of computers, ambient intelligent scenarios…) but also for economic players: for instance, with the entrance into a major deployment phase, after the burst of the Internet bubble, better internal market regulation, and the development of public-private partnerships.

· The forthcoming closure of the eEurope 2005 Action Plan: the current Action Plan will finish at the end of 2005. Following from this, a natural expectation arises to discuss the future of an Information Society (IS) policy initiative at EU level.

· The revision of the Lisbon Strategy: The last year of eEurope 2005 coincides with the mid-term review of the Lisbon Agenda. The focus on ICT in the renewed Lisbon vision is based on the recognition of their pivotal role of Knowledge and Innovation. What is needed now is a comprehensive and holistic strategy. The integrated guidelines are providing guidance to the Member States on how to translate these new priorities in the field of information society in their National Reform Programmes. At the same time the Commission has identified key EU level actions which will contribute to the overall information society objectives within Lisbon.

Main challenges for the next five years

Preparatory work for the new initiative was undertaken in three steps described in the section below on the consultation process. Member States have mentioned new expectations for the future and by doing so, given ideas for a new approach: the follow-up of eEurope should be an umbrella for all the Information Society activities; any new Information Society Strategy should be made more visible, more interesting, more relevant and more understandable to people.

In addition to these orientations, the Member States consultation stressed the need for a strategic dimension for any further EU initiative in the field of ICT. The Member States emphasised the support that the EU provides to ensure national IS policies remain high on the political agenda. This also influences national policy-makers in the allocation of resources to deliver Information Society objectives. The contributions highlight the role of catalyst of EU initiatives by creating common targets which help to prioritise and align national activities with those implemented at EU level. Some Member States clearly indicate that their current national policy for Information Society is based on the eEurope initiative.

The public consultation on a new policy initiative gave an indication about main developments that public authorities will have to take into account, by identifying “Mega-trends” in political, economic, social, and environmental areas which will constitute the environment of the future Information Society.

Domains | Mega-Trends |

Political | An enlarged Union |

Economic | The global economy/Employment |

Social | The ageing population |

Environmental and Quality of life | Health Protection / Energy efficiency |

All these mega-trends will impact on the Information Society environment and will influence the definition of further objectives within a new policy framework at EU level. In any case, Information Society and Media policies have to face a few top challenges: to progress in an enlarged Union, to act as a global player in a global economy, to address the specific demographic trends of Europe (e.g. ageing population) and to win the investment competition, as well as to take its large part of the Lisbon challenge. Information Society challenges cover a wide range of issues: development of network and electronic services, adoption of ICT by businesses, to increase competitiveness, inclusion aspects and development of public electronic services. The stakeholders’ consultations helped to identify key challenges to build up a relevant policy initiative and this section reflects the debate which took place in the preparatory phase but not necessarily the positions of the Commission services.

Growth and Competitiveness: ICT is a driver for productivity. The gains from ICT stem directly from investment in ICT, a fast growing and innovative ICT sector, and indirectly from improvements in business processes through wider use of these technologies across the economy. According to recent studies [5], the overall contribution to labour productivity growth from ICT investments and from technical progress in the production of ICT goods and services, accounted for about 40% of EU labour productivity growth over the second half of the 1990s, compared with 60% in the US.

The ICT sector, as a whole, performs fairly well in comparison with the US in terms of size (10% of GDP in the US against 8% in the EU, and also in productivity and employment creation), but less so in terms of contribution to R&D (in the US, ICT account for 30% of R&D). However, in these developments the EU has suffered from lower and delayed investments in ICT and, possibly, a less efficient use of ICT.

Convergence: Convergence of technologies, infrastructure and applications is expected to provide consumers with an access to a great diversity of attractive services and rich media and content on a wide range of devices. [6] Availability of content and services is becoming critical as the market moves to a phase where value-added services and content are key to revenue growth. The policy focus for 2010 should be the creation of a favourable environment that stimulates the competitive deployment of new converging services.

Broadband networks: Broadband now reaches 85% of the population in EU15, take–up grew by 75% in the past year and there are now around 40 million subscribers or approximately 9% of the EU25 population. This has produced a critical mass and there is already evidence that markets for high-quality content and service development are taking off. However, speeds are often still limited to enable the transmission of bandwidth-hungry applications. The review of the regulatory framework for electronic communications will start in 2006. The framework should stimulate incentives to invest and roll-out new services with increased capabilities while ensuring that competitive forces remain effective. Furthermore, new developments in wireless broadband have made spectrum availability crucial to new services and applications, and the efficient management of spectrum key to further broadband developments. Finally, the enhancement of interoperability and security are essential to and increase consumers’ choice and facilitate take-up.

Contents and information society services: Convergence is creating a promising range of opportunities for the development of content and information society services making the most of ICT. The challenge for the single information space is to create the appropriate environment that will meet both business and consumer expectations while promoting the European content industry. This requires a competitive environment, where interoperability allows cross-platform competition and usage. This also requires a clear European regulatory framework with respect to content regulation and a secure environment for the distribution of digital content. Ensuring consumer acceptance pass by offering access to a great variety of flexible content and services adapted to user needs. Improving security and privacy as well as minor protection and media literacy, will allow European citizens to benefit fully form these n content and services.

Trust and security: One of the biggest challenges is to ensure the improved security of the underlying infrastructure, particularly the internet, but also other communication networks, mobile wireless and future generations. The problem is complex since the origin of the intrusions/attacks knows no geographical boundaries, attacks often exceeds the defence tools (security features deriving from regulatory obligations, anti-virus detectors, filters and firewalls) that we have at our disposal for protection and prosecution (law enforcement). The scale of these abuses will increase with further penetration of broadband and the growth of wireless Internet. Urgent action is, therefore, necessary and should combine all forces in a co-ordinated effort to develop policies and regulations, technology, education and awareness. Another key challenge is improving business and citizen confidence in using electronic services by providing a secure environment, greater awareness of potential risks and favourable environment for public services, citizens and business. Security is a key enabler for the deployment of the next generation of electronic services, and is a pre-requisite for privacy. This calls for a strong partnership with Member States and an integrated approach at EU level involving actions across research, deployment and regulation.

Innovation and research: If Europe wishes to catch-up with the levels of productivity growth of other regions of the world, it should strengthen innovation and concentrate these efforts in those sectors, like the ICT, where the value added is the highest. A pre-requisite is to increase investment in research: at present the EU devotes only 18% of research expenditure to ICT whereas the leading OECD countries allocate more than 30%. In absolute amounts, Europe’s investment in ICT research is only two thirds of that of Japan and one third of that seen in the USA. Research and development is making technology simpler to use, more available and affordable; providing new ICT-based solutions that are trusted, reliable, and adaptable to users’ contexts and preferences. However, research alone is not sufficient. It must be consolidated by organisational innovation. ICT must be widely adopted and supported by adequate reorganisation of business processes and by a skilled workforce. Businesses in the EU are increasingly adopting advanced ICT and are engaging in on-line transactions but are lagging behind in the adoption of integrated business applications. This is particularly true for European SMEs.

Standardisation: Standardisation is a prerequisite for the use of ICT, and will generate and enable new business. ICT technologies are pervasive; all industries are ICT users. Industry and business want standards and standardisation infrastructures to offer timely solution driven standards. The standardisation process should be flexible and able to evolve quickly in response to market requirements. There are two different models within the IT sector: infrastructure standardisation; this sector is characterised by long term solutions and large investments, and the IT business: this sector is characterised by short term development, a fragmented market with aggressive competitors. The lack of interoperability between systems/applications and services will prevent emergence of e-services and undermine the possibility of a long term competitive market. The shift from hardware to software and the convergence between telecommunications and IT will create new forms of standardisation. Projects such as COPRAS should be further promoted.

Skills and work: The development of the ICT sector and the wide-spread diffusion and use of ICT in the economy and in the society bring opportunities for new employment and more creative and fulfilling jobs. Changing needs for ICT and e-Business skills (e-Skills) in the future heavily depend on innovation and the introduction of new technologies. The greatest challenge is to assess forward-looking innovations and understand what new skills will be needed, to be able to anticipate and manage changes and be effective, quick and efficient in creating new, innovative jobs.

e-Business: Though nearly all enterprises are connected to the internet, a large section of the business community is only beginning to exploit the potential of ICT. E-commerce is expected to continue to grow rapidly. More efforts are needed to improve business processes in European enterprises and fully integrate ICT providing new opportunities to reduce their costs and improve performance. Factors which will contribute to increase e-Business include promotion of take-up of e-business solutions and best practices security, addressing privacy and security concerns, availability of content and new services, increase automation of business processes, acceptance of payment for content and services, e-invoicing and e-procurement.

Public services: Public services are at the heart of the European social model, playing a key role in growth, innovation and cohesion. There is increasing evidence that a better exploitation of ICT through combined improvement of facilities, working processes and skills can significantly enhance public service’s organisation provision. However, the potential remains unfulfilled due to technical, legal or organisational obstacles. For example, government services are widely available online but the demand is not sufficient and efficiency gains from back-office reorganisation are still largely underexploited. Specific challenges relate to friendly user-centric services, back-office streamlining, interoperability of key infrastructures and facilities, identity management, or privacy and trust.

e-Inclusion: Increasing impact of ICT on social inclusion and participation creates new opportunities but also barriers. Significant progress on ICT penetration across all EU regions and socio-demographic groups is not always decreasing disparities. Some specific challenges concern accessibility of ICT equipment and user-friendly interfaces, digital literacy or improved confidence and support for ICT use. Some important concerns will be: “design for all” of ICT equipment; human mediation and support for e-services; intuitive use of affordable value-added e-content and services accessible; and efficient solutions for threats to privacy, security and harmful content threats.

Quality of life and environment: ICT can have a direct impact on the environment but also indirect social and economic consequences as a result of its application. ICT positive impact on the environment includes environmental modelling (forecasting), the miniaturisation of devices (which reduces the resources needed for manufacture and distribution), micro/nano technology and embedded systems which improve disaster management, and reduce the environmental impact of farming and fishing. ICT also enables a less resource-intensive production, thereby reducing the environmental impact of economic activities. e-Work contributes to environmental sustainability as travelling to work is reduced. Innovative transport planning systems can ease traffic congestion and optimise transport capacity. ICT can also contribute to quality of life by delivering more efficient and more effective public services and goods to individuals which in turn can improve their life chances. ICT support for comprehensive life-long learning policies (through e-learning, digital competence actions) can enable all individuals to adapt and keep the pace with the continuous social, economic and technological changes.

Objectives of the proposal

Putting all these reflections together has provided a strong orientation for policy-makers in order to build on the new trend of technological and economic developments, and to ensure that Europe gets the full benefits in terms of prosperity, employment and growth. Following on from the analysis of the issue and the needs in the previous section, the main objectives of a new strategy could be summarised around four policy priorities, which are:

· to promote a single European information space, with the aim of progressing towards an internal market to secure electronic communications and on-line services;

· to stimulate innovation or investment in research, development and deployment of ICT, by encouraging, in particular, the take up of ICT by business;

· to make the European Information Society as inclusive and participative as possible, to promote trust and confidence, and to enhance services of public interest and quality of life; and

· to contribute to the new start of the Lisbon Strategy by making Europe attractive to investment and innovation in knowledge-based goods and services.

To that effect, a new strategy should be designed as an umbrella initiative for EU information society and media policies. It should, however, not be intended as an initiative that tries to cover the enormous plethora of ongoing activities. It would try to drive the development of ICT in Europe through focused actions. Therefore, its structure should combine the three main priorities with actions for the period 2006-2010. These actions are to be defined by the Member States and the European Commission, and should be revised during the period if needed.

A single European information space

The single European information space requires an appropriate and predictable legal environment for converging markets. The current EU regulatory framework for electronic communication services stimulates competition and encourages investment in the emerging on-line service economy. It is essential that it be transposed into national law and implemented effectively. The regulations should be reviewed to keep pace with new technological and market developments. In particular, with more advanced networks, it is essential to keep a balance between incentives to invest and roll-out new services, and effective competitive forces. New developments in wireless broadband have made spectrum availability crucial to the development of services and applications and efficient management of spectrum is key to further broadband developments. Legislation on audio-visual services, content and public sector information may need to extend to the on-line world.

New policies may prove necessary to facilitate the accessibility, use, reuse and creation of high quality online content. This may include issues such as management of rights, payments, interoperability and consumer protection. Policies may be needed to facilitate access, development and preservation of European digital content, including material in the public domain, to strengthen the single market and to preserve Europe’s cultural diversity.

Convergence also raises issues of interoperability. Interoperable solutions at the levels of networks, devices and services facilitate the development of innovative applications that can be delivered on all platforms and increase consumers’ choice. It should be intended to further support the development of open standards and facilitate discussions among stakeholders in this area.

Further improvement of network security and service reliability is essential to foster users’ acceptance and confidence. Action is needed at the level of network dependability and with regard to the security of individual usage. Any proposals need to be carried out in cooperation with all stakeholders at Member State level as well as EU level. They should address Internet threats, and Critical Information Infrastructure protection, and should consider the interaction between legal, technological and societal issues.

The objective of the single European information space should be to offer affordable and secure high bandwidth communications, rich and diverse content and digital services.

Innovation and investment in research

The 6th and 7th Framework Programmes for RTD are key financial instruments for EU information society policies. For the forthcoming 7th Framework Programme on Research and Technological Development (RTD), the Commission has proposed to double the amount of Community research funds up to € 67.8 bn and, as in the current 6th Framework Programme, ICT research receives the largest share (€ 11.2 bn).

The Framework Programmes influence research in the EU in many ways. Collaborative research projects and networks and the development of pan-European research infrastructures make the EU more attractive for private investment; they strengthen the excellence of its research poles and their capabilities. The Commission has set up pilot technology platforms to facilitate the development of public-private partnerships. In addition, the EU has an important role in directing public research spending towards productivity-enhancing technologies.

A simultaneous increase in the engagement of Member States through national ICT research-related programmes is equally important. The Commission can facilitate further the coordination of Member States strategies and efforts in ICT research, including development of joint initiatives. Moreover, EU policies play a key role in developing a favourable environment for research and innovation, for instance through standardisation, competition, intellectual property and cohesion policies.

The Commission, wishing also to strengthen the link between research and deployment initiatives, has proposed the creation of an ICT policy support programme. [7] This is intended to facilitate the development of common approaches, interoperable solutions and co-ordinated actions for the wider adoption and best use of ICT across the Union. Wide-scale pilot projects should prove the feasibility and the benefits of ICT solutions, and can be a widely applied to help a faster and more efficient roll-out of innovative services for businesses and citizens.

Innovation in business strategy is important. Adoption of ICT by businesses of all sizes can increase efficiency and streamline internal business processes, open up new markets, create new business models and facilitate collaboration with other organisations. This is currently hindered by lack of interoperability of enterprise applications and business processes. The analysis of the impact of ICT use shows that the best results are obtained by a combination of reorganisation of the processes, investment in ICT skills, collaborative working methods, organisational design, mobile applications and new workplace concepts.

The objective of innovation and investment in research should be to achieve world class performance in research and innovation in ICTs by closing the gap with Europe’s leading competitors.

Inclusion, better public services and quality of life

The societal impact of ICT is growing in parallel to their increasing availability and use. This challenges public policy in three main areas: social inclusion and participation; the way in which public services are organised and delivered; and the quality of the living and working environment.

There is wide political consensus on the potential of ICT as a driver of welfare for society at large, beyond their direct economic impact. Recent consultations with Member States and the public set a priority for this dimension to be reinforced. Therefore, the new policy initiative should introduce a comprehensive policy approach that:

· provides a strategic policy framework for all EU initiatives affecting electronic inclusion and participation;

Actions would address issues such as accessibility of ICT equipment and user-friendly interfaces, digital literacy or improved confidence and support for ICT use. Some important concerns will be: “design for all” of ICT equipment; human mediation and support for e-services; intuitive use of affordable value-added e-content and services; and efficient solutions for threats to privacy, security and harmful content.

· further develops EU initiatives on electronic public services established under the eEurope action plans;

Actions would seek to strengthen a common EU area where ICT-enabled public services, at European and other levels, stimulate free and secure circulation of people, services and products across internal borders. In addition, they would address operational issues relating to interoperability aspects, key infrastructures and facilities, identity management and privacy protection, open access to information and inclusive services, and other areas where European co-ordination is particularly relevant to develop horizontal solutions that can be replicated in different sectors and local contexts.

· introduces a new priority on ICT and quality of life, with the double aim of raising the profile of existing initiatives and providing a platform for addressing emerging challenges.

Actions would focus on ICT contribution to different areas, including demographic challenges associated with ageing or migration, the improved and safer mobility of people and goods, or ways to better monitor the environment and manage natural disasters.

As ICT use becomes commonplace, policy should become more ambitious: enabling full participation of everyone through appropriate access to relevant ICT facilities and competences. This will generate broad socio-economic and cultural benefits, e.g. boosting commercial and public services online, stimulating new patterns of exchange, active contribution and knowledge creation by the largest number of people.

The objective of this priority should be to build up an Information Society that is inclusive, provides high quality public services and promotes quality of life.

These policy objectives could be supported by several Community instruments: legislation, financial support and communication. It will also be necessary that Member States, the private sector and other stakeholders support the new initiative. Nevertheless, there could be an important role for the public sector to act as driver and enabler, even to act as a catalyst, according to the objective.

Options

Three broad options for the new initiative beyond 2005 can be discerned:

· Option 1: No further Action Plan and a return to separate but parallel IS policy strands

· Option 2: A continuation of the eEurope Action Plan as in 2000-2005

· Option 3: A new and more flexible policy framework, an umbrella approach covering research, regulatory, deployment and policy

The main guide to identifying and selecting options for the new initiative are, the need for:

· Relevance: in particular with respect to the renewed Lisbon Agenda;

· A clear focus: through the three policy priorities;

· Major changes: taking into account such as the move from a “pilot phase” to a “wide deployment” as the ICT world becomes more mature and global, the emphasis on convergence, public services and quality of life, and new ways to implement;

· Impact: covering the whole of EU Information Society and Media policies (Regulation, Research and Deployment) involves a wider range of instruments beyond the traditional tools of the Open Method of Co-ordination. Partnership between all players is a key issue for better efficiency, creativity and visibility of achievements. To complement this, benchmarking aims to provide a picture of the progress towards these commonly agreed targets. This analysis should seek ways to increase the performance of these tools in meeting the goals identified.

· Respecting subsidiarity.

Impacts

The Impact assessment will focus on the priority areas, and then use some illustrations to validate its conclusions. For each option (no Action Plan, Another Action Plan, and a new policy framework), it will be examined what needs to be done to carry out the actions outline in each cluster of policy priorities (mechanisms), what economic, social, and environmental sustainability impacts, these actions will generate (impacts). Also, there is the opportunity that something could go horribly wrong or unexpectedly right, as well as remain unpredictable. (risks and uncertainties).

Impacts of various domains to be addressed in the next five years, according to each option proposed, are presented in detail in the body of the Impact Assessment.

Domains | Option 1:No EU initiative | Option 2:An Action Plan | Option 3:A new policy framework |

Convergence | A serious risk not to be addressed by EU policy | Lack of flexibility to fully address the convergence challenge | A cross-sectoral approach, promoting a dynamic and competitive ICT and Media sector |

Security | Diverse national security strategies | Maintaining status quo, better linked with the ENISA work programme | Increased focus on a coherent security strategy for the European Union |

Public services | Continuation of eHealth and eGov action plans and specific new initiatives such as public procurement | Reinforce co-operation between Member States | Take a more proactive approach, building on achievements in eGov and eHealth |

Inclusion | No political promotion of inclusion issues in the information society – eInclusion limited to eAccessibility | Status quo with a risk of lack of specific targets | A comprehensive framework for monitoring and stimulating inclusion and participation |

Innovations and research in ICT | Separate programmes | A tighter link to the ICT support fund | Enhanced synergies of Programmes |

The consultation process

The preparation of a new policy initiative was based on an extensive reflection process, particularly by allowing all stakeholders to express their views. In fact, the evaluation was organised around a consultation which took place between May 2004 and March 2005. The different steps followed to collect all views, provided clear orientations to policy-makers, not only by identifying policy priorities, but also by justifying some targeted improvements in areas where significant gains might be expected in the short term.

The consultation for the preparation of a new strategy took place through three main steps. The first step was launched during the second half of 2004 on the basis of the outcomes from the eEurope 2005 mid-term review [8], which provided some valuable inputs to improve policy guidance and to launch new actions. The period focused on thematic goals, through the Dutch presidency study “Rethinking the European ICT Agenda”, carried out by Price Waterhouse Coopers [9], which was presented and discussed among Member States during the Dutch High Level conference in Amsterdam on 29 and 30 September 2004. This first orientation was completed by the work done by the Expert Section of the eEurope Advisory Group [10] on the post-eEurope strategy, delivered in October 2004.

All these reflections were compiled and developed by the European Commission in a Commission Communication “Challenges for the European Information Society beyond 2005”, adopted in November 2004. In its communication, the Commission identified a number of issues that will require the attention of policy makers during the coming years. These issues were put to the test through two consultations launched in parallel both with Member States and stakeholders, between November 2004 and February 2005. The public on-line consultation was launched on 30 November and received 70 contributions. These contributions unanimously covered the three traditional components of our society: public sector, private sector, and civil society. This situation provides a valuable support to the validity and relevance of this consultation, and can, therefore, be considered as a success [11]. Moreover, with 21 responses, the questionnaire to the Member States provided a good view of their expectations on the main issues, and the implementation approach for a new strategy.

Those views were confirmed and fine-tuned through meetings with the Member States. The Challenges Communication was discussed at the December 2004 Telecom Council, and the Council Resolution invited the Commission to prepare the follow-up of the eEurope 2005 Action Plan. Formal discussions were also undertaken with government representatives within the eEurope Advisory Group, during meetings on 22 October 2004 and 22 February 2005. At the last meeting, the draft benchmarking report [12] gave additional input to the discussion. A number of key conclusions emerged from the consultation process and these provided the main direction of the orientations proposed in the Communication.

Monitoring and evaluation

Monitoring and evaluation are conceived at two levels. At a ‘meta’ level, the effectiveness of a new strategy depends upon regular evaluation of its overall performance in relation to objectives, impacts, relevance, utility and lessons learned. However, a continuous monitoring of progress is needed to stimulate informed action towards meeting agreed targets. Monitoring is effected principally through measuring performance in relation to benchmarking and exchange of best practices, and is supported by a range of statistical surveys, studies and other empirical analyses. Clearly both levels are inter-linked. The following section sets out the activities being conducted or planned for each of these two levels of evaluation.

Regular evaluation of the whole initiative would be an essential component of its effective delivery. To that effect, it is proposed to draw up regular progress reports that are supported by benchmarking to measure progress and to identify new priority areas for the following period. Actions could be revised regularly to ensure flexibility in view of new developments and new initiatives launched by the European Commission, or to take account of developments and progress reported in the context of the new Lisbon governance cycle

In that context, benchmarking activities are likely to be needed to monitor progress, to assess the relevance of the implementation process followed, and to encourage Member States to make more efforts to achieve goals. To that effect, the benchmarking exercise would have to follow the move suggested by a new policy framework and to become more impact-oriented. Amongst the general principles that would lead the new initiative, the move from connectivity to impact may be a major one. Progress with connectivity has been rapid and the policy priority has switched to usage of ICT and their impact on businesses, governments and citizens. In addition, it is important for benchmarking to show market developments and these are not easy to identify from fixed indicators. A core policy aim would be to promote advanced services, and benchmarking should then include a mechanism to identify and monitor market developments. Current examples would be the growth of Voice over IP, or music and film download services. Benchmarking should also show the availability of underlying technology that is in principle capable of supporting future services and markets.

Conclusion

It is proposed that the follow up to the eEurope 2005 Action Plan should be to adopt a new policy framework (Option 3) for the development of a new ICT strategy, providing a combination of focused policy development, and a communications layer to increase the visibility and impact of actions:

· The following main policy clusters are proposed as the basis of the new ICT strategy: (i) information space, (ii) innovation and investment in research, and (iii) inclusion, public services and quality of life;

· These main policy priorities could be associated with several objectives for the medium-term (2010). Priority actions and targets can be reviewed regularly to ensure flexibility to adapt to changing requirements;

· The objectives would consolidate ongoing or planned policy initiatives (broadband, e-Business, e-Government, e-Learning…). These sectoral policy initiatives would continue;

· The idea would be to select some of those sector-specific targets and actions, in order to provide further political support and/or visibility; and

· Such support and visibility could come through a range of EU instruments, i.e. political, legal, and financial instruments, as well as co-ordination and communication mechanisms.

The proposed line to take is the option most consistent with the message from the different consultations, particularly to make more explicit the contribution of ICT to the Lisbon Strategy. In the consultation and at the eEurope Advisory Group meeting in February 2005, Member States agreed with this new policy approach.

TABLE OF CONTENTS

1. Introduction (...)18

2. The rationale for a new policy initiative (...)20

2.1. eEurope 2005 Action Plan coming to an end (...)20

2.2. A renewed Lisbon Agenda (...)22

2.3. Challenges and obstacles (...)26

3. Objectives for a new Strategy (...)58

3.1. A single European information space (...)59

3.2. Innovation and investment in research (...)59

3.3. Inclusion, better public services and quality of life (...)60

3.4. The link with the renewed Lisbon Strategy (...)61

4. Options (...)63

5. Policy priority impacts (...)66

5.1. A single European information space (...)67

5.2. Innovation and investment in research (...)68

5.3. Inclusion, better public services and quality of life (...)69

5.4. Summary (...)71

6. Implementation mechanisms impacts (...)72

6.1. Ggovernance (...)72

6.2. Financial instruments (...)74

6.3. Better ownership (...)75

6.4. Summary (...)76

7. Consultation (...)77

7.1. The consultation process (...)77

7.2. Main results from the consultations (...)78

7.3. Summary (...)80

8. Plans for monitoring, follow-up and evaluation (...)80

8.1. At the Meta-level: progress reports (...)81

8.2. Monitoring, review and development of indicators for the new initiative (...)81

8.3. At the level of specific actions: opportunities for regular adjustments (...)82

8.4. Promotion, exchange and communication (...)82

9. Conclusion: Commission draft proposal and justification (...)83

10. Annex 1: Indicative list of Actions (...)85

11. Annex 2: Electronic Glossary (...)89

1. Introduction

The subject of this extended impact assessment is the ex-ante evaluation of the new European Information Society policy initiative, which will follow the eEurope 2005 Action Plan [13].

eEurope 2005 is the successor of the eEurope 2002 Action Plan, which was launched in June 2000 to support the Lisbon Strategy, to make the European Union the most competitive and dynamic knowledge-based economy in the world by 2010. A parallel initiative, eEurope+ 2003, was adopted by the Acceding and Candidate Countries with the encouragement of the European Council. Then in 2002, building on the success of the first action plan [14] in meeting most of its 65 targets, the eEurope 2005 Action Plan was launched.

Whereas the 2002 Action Plan targeted Internet connectivity, eEurope 2005 aimed to support economic growth and social cohesion through the take up of on-line services and e-business based on a secure broadband infrastructure.

eEurope is intended to act as a catalyst for actions within Member States. It is based upon the Open Method of Co-ordination (OMC) in which the benchmarking of targets agreed by Member States and exchanges of good practice form the key supports for policy delivery. As such, eEurope is of itself an evaluative activity providing an informed and consultative basis for action.

Five years after the launch of the ‘eEurope initiative’ (in March 2000 at the European Council in Lisbon), there is evidence that Europe could better exploit the advantages that information and communication technologies (ICT) have to offer, to encourage ICT deployment to the maximum.

This impact assessment document identifies options for policy initiatives in the field of ICT beyond 2005 as a basis for a new strategy for the next five years, which is a product of the lessons drawn from eEurope. It is based upon extensive consultation and empirical evidence. The need for a new initiative is driven by three factors that call for a reassessment of the objectives:

· New challenges: Information Society is moving from a “pilot phase” to a “wide deployment” as the ICT world becomes more mature and global. Since 2000, the ICT context has changed substantially, not only from a technological point of view (e.g. 3G, Ipv6, nanotechnologies, convergence, a new generation of computers, ambient intelligent scenarios…) but also for economic players (for instance, with the entrance into a major deployment phase, after the burst of the Internet bubble, better internal market regulation, and the development of public-private partnerships).

· The forthcoming closure of the eEurope 2005 Action Plan: the current Action Plan will finish at the end of 2005. Following from this, a natural expectation arise to discuss the future of an Information Society (IS) policy initiative at the EU level.

· The revision of the Lisbon Strategy: The last year of eEurope 2005 coincides with the mid-term review of the Lisbon Agenda. The Report from the High Level Group chaired by W. Kok makes a strong recommendation for Europe to reap the full benefits of ICT: “In order to ensure future economic growth, the EU needs a comprehensive and holistic strategy to spur on the growth of the ICT sector and the diffusion of ICT in all parts of the economy” [15]. The focus on ICT in the renewed Lisbon Agenda is based on the recognition of the pivotal role of Knowledge and Innovation.

This evaluation was undertaken in three steps. During the second half of 2004, there was an extensive reflection process launched on the basis of the outcome from the eEurope 2005 mid-term review [16]. Information Society policy post-eEurope 2005 has to consider both thematic goals and delivery mechanisms. Work started mid-2004 on the thematic question, through the Dutch presidency study carried out by Price Waterhouse Coopers [17], the Dutch High Level conference in Amsterdam on 29 and 30 September 2004 and, in parallel, through the work of the eEurope Advisory Group [18].

In November 2004, the European Commission published a Communication on the challenges to be addressed by a European Information Society strategy up to 2010 [19]. This Communication highlights the need to increase research and investment in information and communication technologies, and to promote their take-up throughout both public and private sectors. The adoption of the Challenges Communication gave the opportunity to go one step further by consulting stakeholders more directly. The results of these consultations highlight the changes expected for a new strategy and provide a valuable contribution to its definition [20].

The Challenges Communication was discussed at the December Telecom Council and the Council Resolution invited the Commission to prepare the follow-up of the eEurope 2005 Action Plan. This present Extended Impact Assessment provides a further opportunity to deepen analysis on options for policy approaches, and is presented here as a supporting document to the Communication ‘i2010 – A European Information Society for growth and employment’.

This document is organised in the following manner. Section 2 explains the rationale for a new initiative, and provides an overview of the main issues and obstacles that a new initiative would aim to address. Section 3 examines the objectives which are set up to overcome problems. Section 4 summarises the main options. These are: (i) no further EU initiative, (ii) another action plan as in 2000 – 2005, and (iii) a new policy framework. Sections 5 and 6 provide justification for the selection of the options in relation to their potential impacts on policy priorities and implementation mechanisms. Section 7 gives more details of the extensive consultation process. Section 8 outlines the procedures for monitoring, follow-up and evaluation. Section 9 gives a short summary and justification of the overall package of options proposed. Finally, an annex 1 provides an indicative list for actions. An annex 2 proposes an electronic glossary of the technical terms mentioned in the document.

2. The rationale for a new policy initiative

The Information Society has great potential to improve both productivity and the quality of life in Europe. It makes it possible to increase productivity and as a result, the growth, employment, cohesion and sustainable development. ICT will also provide citizens with more convenient access to information and communication tools.

The Information Society has become a reality in the European Union. The regular EU benchmarking exercises reveal the huge deployment of ICT amongst individuals, households and businesses. Below are some key figures [21] for 2004:

· 83% of the population of the EU25 is the average GSM penetration rate;

· 43% of households of the EU25 is the average for internet access;

· 89 % of all enterprises in the EU 25 countries have an internet access;

· 87 % of large enterprises in the EU25 (250 + employees), 71 % of medium sized enterprises (50-294), and 52% of small firms have broadband Internet access;

· 85% of the EU15 population has broadband coverage via DSL, the dominant platform in Europe;

· 8.6 % of the EU25 population have broadband internet access; and

· 40 % of all basic public services are available online with full interactivity in the EU 25 countries.

The further the progress of the Information Society, the scope of issues to be handled by the public authorities is steadily increasing. For instance, the main focus of eEurope is economic and social. Although not currently within the scope of eEurope, ICT also has the capacity to contribute to sustainable development. Therefore, an overall picture is more and more difficult to elaborate. This section does not aim to be totally comprehensive but aims to identify the main challenges and improvements or adaptations to be made for the next five years.

2.1. eEurope 2005 Action Plan coming to an end

As the current Action Plan finishes at the end of 2005, an expectation to discuss the future of an Information Society policy initiative at EU level arose, particularly because, overall, eEurope has been a success. It stands out as a political initiative. It addressed the right issues at the right time and in so doing, stimulated IS policy debate at national level. There were many imitations, and the eEurope label has been widely used as a rationale for IS policy action around the world. It set the Commission agenda as regards IS policy issues. It also provides a good example of the Open Method of Co-ordination in action, with its balance of joint target setting and sharing of information about achievements and ways to achieve. It was, moreover, highly cost effective, given that the level of resources engaged was small compared to the visibility achieved.

However, in the consultation launched to provide input for the preparation of a new strategy, Member States stressed that the targets of the eEurope 2005 Action Plan had not yet been achieved in most EU countries. Therefore, there is call for continuity in EU initiatives. Also, all policy initiatives yield lessons from their weak spots. In the case of eEurope, these stem largely from the limitations of a detailed action plan as a policy tool. It is characteristic of an action plan that is short-term, simple in structure, and guided by concrete targets that can be verified. For an action plan, eEurope is fast becoming obsolete and some ‘eEurope fatigue’ is apparent amongst Member States. With the increased attention to demand and impact in eEurope 2005 the (mostly supply-side oriented) targets became less adequate and the demand-side targets turn out to be less verifiable. The impact on mainstream policies (including the Lisbon Agenda) has also been ‘light’, at both national and Community level. This is not surprising as such impacts were not direct goals of the 2005 Action Plan. However, with the increased interest in solutions and impact, the relatively simple and quantifiable targets symptomatic of an Action Plan are more difficult to define.

Beyond that, Member States have mentioned new expectations for the future and by doing so, given ideas for a new approach:

· The follow-up of eEurope needs to be an umbrella for the all Information Society activities: the regulatory framework for electronic communications, the audiovisual sector and ICT research, and to ensure the visibility of these activities within the renewed Lisbon framework.

· Information Society issues have been present in the Spring Report of 2004 and 2005. The Kok report has called for a “holistic and comprehensive strategy on ICT”.

· The European Union may be at a turning point in the development of the Information Society. Today we are far from exploiting the advantages that these technologies offer, and we are far from having created an environment which encourages ICT deployment to the maximum.

· Any new Information Society Strategy should be made more visible, more interesting, more relevant and understandable to people. There is a need for a communications plan that delivers a simple set of messages on what ICT is doing for Europe that can be easily communicated.

In addition to these orientations, the Member States consultation stressed the need for a strategic dimension for any further EU initiative in the field of ICT. The Member States emphasised the support that the EU provides to ensure national IS policies remain high on the political agenda. This also influences national policy-makers in the allocation of resources to deliver Information Society objectives. The contributions highlight the role of catalyst of EU initiatives by creating common targets which help to prioritise and align national activities with those implemented at EU level. Some Member States clearly indicate that their current national policy for Information Society is based on the eEurope initiative.

Member States emphasised the specific role that the European Commission plays in harmonising and strengthening regulations and in checking the correct implementation of regulatory frameworks at national level. In a more general sense, the European Commission has to ensure greater coherence between all ICT domains and other sectors. In addition, a specific role is expected to facilitate cross-border co-ordination.

Finally, Member States welcome an EU role in implementation. They believe that EU initiatives help to better understand ICT issues in general, to concentrate on the main issues and to raise some cross-sector items. Moreover, through the exchange of best practices, raising awareness activities, and dissemination of information, EU initiatives create appropriate guidance for national activities.

These observations indicate the need to rethink the approach for the successor to eEurope. The key issues concern the need to repeat the success of eEurope, whilst responding to the new circumstances in which policy attention is increasingly focused on delivering solutions and impact, e.g. better quality and more efficiency, rather than promoting the quantitative supply of ICT services. The successor to eEurope needs to avoid longer term policy programmes (e.g. 5 or 10 year plans) that are likely to be rendered obsolete in the course of a 2-3 year time frame. Furthermore, five years is a long period for the ICT world and could cause a high degree of uncertainty. Consequently, the new initiative would aim at covering the widest scope of potential developments.

2.2. A renewed Lisbon Agenda

The key message of the recently adopted “Spring Report” [22] is that, despite important progress in several areas, the EU is seriously lagging behind the targets set in the Lisbon strategy. The Commission proposes to revitalise the Lisbon strategy by introducing changes around three central concepts: to give the EU’s actions more focus, to establish broad ownership of the Lisbon goals, and to improve governance. The EU should concentrate on its most urgent priorities, e.g. growth and employment. While sustainable development remains the overall goal of EU policies, the new Lisbon strategy will concentrate on the economic pillar. More specifically, the Commission proposes three key areas for policy action: i) make the EU a more attractive place for investment and work, ii) invest in knowledge and innovation, and iii) create better employment.

The Spring Report acknowledges the contribution of ICT to productivity and innovation, and therefore, to growth, but it recalls that the EU is underperforming in this domain. It recommends i) increasing investment in and furthering the use of ICT, ii) taking actions in specific areas, such as ICT research and development, e-Government, broadband and rural development, and iii) proposing various policy measures where ICT has a role to play, e.g. workers’ adaptability and skills for the knowledge society.

At the Spring Council in March 2005, Member States deemed that it is essential to build a fully inclusive Information Society, based on widespread use of information and communication technologies (ICT) in public services, SMEs and households. To that end, the new initiative for the next five years would focus on ICT research and innovation, content industry development, security of networks and information, as well as convergence and interoperability in order to establish a seamless information area.

The European innovation performance, crucially, is dependent on strengthening investment and the use of new technologies, particularly ICT, by both the private and public sectors. Information and Communication technologies provide the backbone for the knowledge economy. They account for around half of the productivity growth in modern economies. However, European investment in ICT has occurred much later than in the United States, and the expenditure is also much less, especially in service sectors such as transport, retail or financial services.

2.2.1 Growth and competitiveness

A competitive economy is an economy which experiences high and sustained productivity gains leading to an increase in the standard of living. Higher productivity gains in the EU than in the US were a consistent feature of the post world war II period, allowing EU standards of living to converge towards US levels. This favourable trend was reversed in the mid-1990s, with a sharp contrast between the revival of US productivity and the slowdown in the EU. The annual productivity growth per hour worked dropped from 2.4 in the 1980s to 1.6% in 1996-2000 in the EU, while it increased from 1.1 to 2.3% in the US. Various factors explain these differences, including diverging trends of fiscal policies or labour market structures. But, with reference to the US, the concurrent rapid expansion of ICT was pointing to structural changes. A consensus has emerged on the central role played by ICT to boost productivity and competitiveness.

ICT is a driver for productivity. The gains from ICT stem directly from investment in ICT, a fast growing and innovative ICT sector, and indirectly from improvements in business processes through wider use of these technologies across the economy. According to recent studies [23], the overall contribution to labour productivity growth from ICT investments and from technical progress in the production of ICT goods and services, accounted for about 40% of EU labour productivity growth over the second half of the 1990s, compared with 60% in the US. In these developments the EU has suffered from lower and delayed investments in ICT and, possibly, a less efficient use of ICT.

The ICT sector is a major economic sector, covering Information Technology plus telecommunications equipment and services:

· The sector has grown from 4% of EU GDP in the early ‘90s to around 8% in 2000 [24] and 6% of employment in 2000; and

· The ICT sector is one of the most innovative sectors, accounting for 18% of the overall R&D spending in 1999, and one of the most productive, with an annual productivity growth of 9% on average over the period 1996-2000.

The sector, as a whole, performs fairly well in comparison with the US in terms of size (10% of GDP in the US against 8% in the EU, and also in productivity and employment creation), but less so in terms of contribution to R&D (in the US, ICT account for 30% of R&D).

Overall, the EU invested half the US amounts in ICT: the EU total investment in ICT only grew from 2.2 to 2.6% of GDP from 1990 to 2001, while in the same period it grew from 3.3% to 4.2% in the US. Overall the EU economy is less ICT-intensive.

A consensus is emerging on the fact that ICT intensive industries have experienced higher productivity gains. ICT are general-purpose technologies. They improve business efficiencies if their use is combined with organisational changes and adequate investment in skills. Benefits reported by firms as a result of the use of ICT include: faster product development, cost and overhead reductions, faster and more reliable transactions, better relationships with customers and suppliers, and an improved level of customer service.

A key factor in the relative competitive strength of the US economy is that companies have applied ICT in a consistent way, combined with organisational renewal and improvement of skills. EU firms seem to have met more structural rigidities, which do not allow them to benefit from ICT to the same extent. This is harder to quantify, and even more difficult to trace in some specific sectors. Moreover, account must be taken of the fact that reorganisation of business process takes time and with the EU having invested later, is likely to benefit from ICT with some delay.

The ICT sector can be split into 6 segments: telecommunications services, telecommunications equipment, hardware, office equipment, software, and other IT services. The US and the EU have similar market segmentation: overall in the OECD in 2001, telecommunications accounted for the largest share (40%) and the remaining part corresponded to IT and mainly covered software and IT services.

The EU represents a large market, 30% of expenditures on ICT in the OECD in 2001, against 40% for the US and 20% for Japan. However, in terms of supply capacity, the EU is in a weaker position. For instance for ICT goods, the EU represents only 20% of world production, comparable to Japan and less than the US, who have 30%. The EU has a stronger position on services. This performance relies on strong EU global players: out of the world’s top 250 companies (in terms of revenues in 2003), 25 were EU ones, representing 19% of world ICT revenues in 2003.

Within the most important individual industries, telecommunications is where the EU has an undoubted advantage over the US:

· The top 10 firms, in terms of annual revenues of the worldwide ICT sector after 2000, include major European telecom operators (France Telecom and Deutsche Telekom);

· When looking more specifically at the top-10 telecommunications service firms in the OECD, six [25] are EU companies, accounting for 50% of the total top-10 revenues in 2003 (38% in 2000) and 56% of the total top-10 employment in 2002;

· Three European companies (Nokia, Alcatel and Ericsson) are also among the top-10 communications equipment and system firms. Their combined revenues in 2003 accounted for 45% of the total revenues of the top-10 firms; and

· Telecommunications services have been the largest contributor to the growth of European productivity over the last few years (around 24% in the period 1996-2000, compared to 14% in the US in the same period). This good European performance reflects the size of the sector (around € 240 bn in 2003, e.g. 84% of the total of telecommunications) and its large productivity gains (10% per year in 1996-2000), compared to other sectors (1.6% for the whole economy) but also by international standards (5.9%).

In the IT segment, the EU has mixed performance:

· European firms are among the world leaders in key areas such as electronics and components, with companies like Siemens and Philips ranking 1 and 6 respectively in the top-10 electronics and components firms, a sector dominated by Asian large companies. This sub-sector, though small, has also experienced large productivity gains (+57% per year in 1996-2000), also compared to other sector and compared to the US (+53%);

· SAP (Germany), the only EU company in the top-10 software firms, ranks third in a market dominated by Microsoft (almost 50% of total top-10 revenues), Oracle and other American firms; and

· The EU does not have leading firms in the IT service segment, although Cap Gemini Ernst and Young rank 7 in the top 10.

2.2.2 Employment and ICT skills

The wide-spread diffusion and use of ICT modify employment, work and skill patterns. In the ICT sector, although there is no evidence that employment levels have changed significantly, employment has adjusted to shifts in the sector driven by the growth in ICT services. But the impact of ICT goes well beyond the sector and in the last 10 years, the share of the labour force with ICT skills [26] has steadily increased. It has been estimated that around 20% of total employment in modern economies can be classified as ICT-skilled employment [27] (using the broad definition). The share of ICT-skilled employment has been on the increase in the EU15, also after 2000 when it started to decrease in the US. The increasing trend in Europe is consistent with employment growth in the service sector while the more rapid rate of adoption of new technologies in the US, leading to a higher loss of jobs through automation might explain the decrease in the US.

Another explanation could be the recent increase in the outsourcing of ICT-related activities. The US have been outsourcing jobs considerably more than the EU (mainly to emerging countries such as India), while European companies tend to outsource less but within Europe. At the same time, some European countries are the recipients of jobs outsourced from the US.

Outsourcing is not a new phenomenon. Manufacturing jobs have been moving heavily from industrialised countries to less developed countries characterised by lower wages and lower production costs. The new aspect of this phenomenon is that the displaced workers are now white collars in the ICT service sector, i.e. highly educated employees with training and educational needs highly different from those of the blue collars in manufacturing. There are no reliable indicators for tracking outsourcing of ICT services to off-shore locations. Published statistics are very volatile and vary considerably according to the source and after each revision, but even when looking at the largest projections of off-shore employment, the figures are smaller than normal “churning”. A report on “Outsourcing of ICT and related services in the EU” [28] indicates that a number of forecasts converge to estimate that between 2 and 3% of all EU service employment may be outsourced by 2015. However, it also shows that this loss of employment is typically less than normal “churn” in the sectors concerned.

Businesses outsource their activities, seeking to reduce costs and remain competitive, while facing the increasing pressure of globalisation and the challenge of an ageing population. The outsourcing economies must then be able to reallocate resources towards new activities characterised by higher added value, but also requiring different types of employment and qualifications.

Outsourcing, together with migration, has also been largely used by countries to fill skill gaps (competence shortfalls, skill shortages or education mismatches).

e-Skill gaps can have a significantly negative impact on productivity growth both in ICT-producing and on the ICT-using sectors and, as a consequence, on European competitiveness. The improvement of both ICT-practitioner skills and ICT-user skills, at the workplace, is a fundamental medium-term objective for the European Union.

It is, nevertheless, very difficult to estimate the exact level of skills deficiencies, and to forecast what will be the medium and long term situation of supply and demand at EU level.

The greatest challenge is to acknowledge the new applications of the future and which new skills will be needed. Relevant and effective research will create the knowledge and innovation will promote the spread of new technologies, improving efficiency and productivity of businesses and the quality of life of citizens. Education and training, with a strong emphasis on skills and life-long learning, will improve workforce expertise.

In addition, skills and human capital are increasingly regarded as major factors in development and growth. A broad consensus is emerging that there is a positive association between investment in human capital and economic growth. [29] Information and communication technologies play a vital role in advanced economies and new business which make new demands on skills.

2.3. Challenges and obstacles

The stakeholders’ consultations helped to identify key challenges to build up a relevant policy initiative and this section reflects the debate which took place in the preparatory phase but not necessarily the positions of the Commission services. This aims at addressing those concerned by the specific actions implemented by public authorities, and with an added-value if addressed at EU level.

2.3.1 Dealing with top challenges

The public consultation on a new policy initiative gave an indication about the main developments that public authorities will have to take into account, by identifying “Mega-trends” in political, economic, social, and environmental areas which will constitute the environment of the future Information Society.

Domains | Mega-Trends |

Political | An enlarged Union |

Economic | The global economy/Employment |

Social | The ageing population |

Environmental and Quality of life | Health Protection / Energy efficiency |

All these mega-trends will impact on the Information Society environment and which will influence the definition of further objectives within a new policy framework at EU level. In any case, Information Society and Media policies have to face a few top challenges: to progress in an enlarged Union, to act as a global player in a global economy, to address the specific demographic trends of Europe (e.g. ageing population) and to win the investment competition, as well as to take its large part of the Lisbon challenge. Obviously, Information Society challenges are more related to technology and need to be more specified in the context of this impact assessment.

2.3.2 Convergence: new markets and usage forms create opportunities and challenges

“Convergence describes a process change in industry structures that combines markets through technological and economic dimensions to meet merging consumer’s needs. It occurs either through competitive substitution or through the complementary merging of products and services or both at once” [30].

Convergence of technologies, infrastructure and applications is expected to provide improved and more user friendly tools. Convergence is driven by several forces, including the continued decline in the price and the continued increase in the performance of processors that lead to improved functionalities of devices, the increases in storage capacities, the improvements in compression techniques and digitisation of content; and by advances in optical and radio technologies, which lead the migration to seamless networks and improvements in network speeds.

The technological process of convergence effectively started a decade ago, and its effects are already visible today. Communication networks and content services are increasingly accessed through different terminal devices, and through different platforms providing converging services. Convergence increases choice at the network, device and content level, creating new content delivery systems and channels for existing content. By enabling the mutual interaction of content, and the way content is delivered, convergence is also opening the path for ground-breaking content services. The development of online gaming or interactive TV demonstrates that the potential of convergence is not only about providing new distribution channels for existing content. Many content sectors are still in the pilot phase for the development of innovative content services, and will fully benefit from the possibilities offered by ICT, such as a high level of interactivity or community building.

Convergence also strengthens the relationship across the value chain. As such, it brings about significant industry changes and calls for a comprehensive policy framework that takes synergies into account. For the users, the aim is to create more accessibility, more services, more choices and diversity in an easier and more user friendly way. For instance, accessing movies can be done in a number of ways: by traditional broadcast in its many forms, by purchasing DVDs, by ADSL-TV broadcasting or on-demand, by downloading online, by ad-hoc network or Internet sharing, by mobile TV over 3G or via digital broadcast in various forms built into mobile devices. Telephony can likewise be performed through a series of networks and services: using IP-telephony over broadband at home or in the office, using normal mobile telephony, even using Voice over IP over Wi-Fi or, in some countries, on a mobile phone.

Deployment of broadband communications was originally delayed by a difficult financial climate. Broadband take-up started significantly in 2003. Its rapid spread, combined with the large potential market for high-speed mobile communications and for digital TV, set the scene for new opportunities of delivering content on-line. Content is becoming increasingly critical as the market moves from the initial model focussed on access to a phase contents are key to revenue growth. New opportunities, however, are accompanied by concerns regarding the viability of new business models. Content owners are still unclear about consumers’ willingness to pay for content on-line, and whether new e-services will cannibalise traditional revenue flows.

Communication networks and content services are increasingly accessed through different terminal devices and through different platforms providing converging services. Three main platforms can be identified: TV, PC and mobile phones. Convergence in delivery devices is likely to come from the evolution of existing platforms as they take on new functionalities. Smart phones and mobile TVs are good examples, although their success will depend on the removal of technological constraints, such as battery life and new chipsets. Taking on new functionalities implies collaboration, and the blurring of lines between equipment manufacturers and consumer electronics.

A new wave of development is, therefore, characterising the electronic communications sector. The policy focus for 2010 should be the creation of a favourable environment that stimulates the competitive deployment of new converging services. The task facing policy makers, however, is complex. Technological and market changes are affecting the effectiveness of some of the current policies. Policies may also require integrated consideration of issues that were previously addressed separately, such as legislation concerning networks and content.

From a different perspective, it is important to also note here the fundamental “convergence” trend in the underlying basic hardware and software that fuels convergence in several, up to now well differentiated, markets: the convergence between “general purpose” (i.e. PC) microprocessors and “embedded” microprocessors (in broad terms, microprocessors for all devices that are not computers). This convergence has as result the convergence (or collision) of several market sectors: PC software and non-PC software, PC and home entertainment systems, mobile phones and video consoles, etc.

In terms of figures, embedded systems have a market size of 100 times the desktop PC market. In 2003, there was an average of 8 billion embedded programmable micro components worldwide. Conservative estimates foresee a doubling of this figure to 16 billion by 2010, or 3 embedded devices for every person on earth. An average household has easily 50 embedded systems [31]. The digitisation and networking of consumer electronics and home appliances and the convergence of PCs and home entertainment systems, are already giving rise to a new breed of intelligent consumer electronics devices.

Whilst the PC market is a highly concentrated market, the market for embedded systems is characterised by significant diversity.

This “new” convergence is at the same time a threat and an opportunity for Europe:

· A strong dominance of suppliers in the market for embedded systems, whether those suppliers are European or not, would have obvious negative consequences for European consumers and companies in this area. In this context, it is vital that the embedded system markets remain characterised by a significant and diverse presence of players, whether European or not, so as to avoid a repetition of the PC platform story in the embedded systems markets. We are already seeing Intel moving into providing chips for mobile phones and Microsoft providing operating systems for PDAs and smartphones.

· On the other hand, Europe has strong presence in high added-value system solutions (hardware and software) in important market sectors such as automotive and aeronautics) Europe, through R&D and policy measures should build and improve this strong position and seek possibilities of using this successful experience as guidance for capturing new markets.

2.3.3 Broadband networks

Among the most vital networks enabling the development of the information space are the Internet broadband networks. Broadband infrastructure has now been rolled out in all Member States, and there has been a rapid growth in the number of users. By October 2004, there were 34 million subscribers in the EU, an increase of 75% in the previous year. The October 2004 figure of 34 million is equivalent to 7.3 subscribers per 100 of the population; however, there is wide variation between Member States.

Broadband coverage is widespread in EU15. In June 2004, around 85% of the EU15 population could access broadband, an increase of 9% on the previous year. Broadband has not yet been deployed in 50% of rural areas. No data is, as yet, available for the new Member States.

DSL is by far the dominant platform, with 79% of broadband subscribers followed by cable with 19%. There is, as yet, little roll out of new networks such as wireless, fibre or third generation mobile networks. The 2004 household survey also showed few people were as yet accessing via Digital TV, with only the UK having any significant roll-out with 6% of households, although this is a slight reduction on last year’s figure. Overall, 2004 was the first year in which signs of platform competition and convergence between fixed and mobile broadband were visible.

Although broadband is growing fast in Europe, it remains a long way behind the main international competitors. The EU is behind in terms of network speed. For example, Japan had 15.4 million broadband subscribers in April 2004, and nearly 10% of these were connected via fibre optic with downlink rates of up to 26Mbps. In the EU there are few connections with bandwidth above than 3Mbps. In most countries (the exceptions being Norway and the UK) entry price has fallen. A key factor in lowering prices is competition, especially competition between alternative platforms.

The competitive pressure has increased in the broadband market in the course of 2004. The new entrants’ share of the broadband market has continued to rise and is now at 43.7%, an increase of 2.2 percentage points on last year. However, competition in broadband access is still weak in most countries.

The objective of the eEurope 2005 Action Plan was to stimulate the development of new services, applications and content based on a secure and widely available broadband infrastructure. Data shows that the infrastructure is largely available in the EU 15. No information is available yet on the new Member States. Broadband is now being rolled out across the EU, and the number of subscribers is growing very rapidly.

The main challenge is the achievement of advanced widespread seamless networks. There are three main tools available for achieving this objective: (i) the regulatory framework for electronic communications, aiming to promote and sustain competition; (ii) national broadband strategies, aiming to increase broadband coverage and stimulate take-up; and (iii) the research framework, aiming at stimulating innovation in broadband technologies.

(1) Evidence shows that the competitive environment is an important factor for improvements in price and performance. Prices and performance promote take-up and stimulate the provision of online content as the target audience grows. The review of the regulatory framework for electronic communications is due to start in 2006. The 2006 Review could give rise to modifications of the existing regulatory framework, which will not be adopted, transposed and eventually implemented before 2009-2010.

The framework takes the next steps in the liberalisation of the electronic communications market, enhancing competition in markets previously characterised by historical monopolies, and applying the same rules to all networks. It incorporates policies designed to:

· Prevent anti-competitive behaviour by firms enjoying significant market power;

· Ensure appropriate access to infrastructure through local loop unbundling and access provisions;

· Ensure that consumers have access to basic services, which might not be provided by the market (universal service obligations); and

· Allocate resources, such as spectrum, in ways that encourage efficient use.

The review of the regulatory framework is foreseen by the relevant Directives. It will have to take into account technological developments, and remove the barriers towards the migration to more advanced networks. As required investment costs are high, there is a concern that a move to increasingly advanced networks may occur at the expense of competition. The main challenge, therefore, is the ability to stimulate incentives to invest and roll-out new technologies and services, while ensuring that competitive forces remain effective.

This review aims to improve the functioning of the regulatory framework, and the efficiency of the institutional mechanisms on which it is based at European and national levels. It is expected that the outcome of this exercise will contribute to deliver more competition in the eCommunications markets, and to keep attracting investments in the sector. This review will be an opportunity to strengthen the internal market objective with respect to the development of competitive trans-national markets, and to the need for a greater level regulatory harmonisation at EU level. It will address a number of important issues in the areas of implementation and harmonisation mechanisms, universal service and user’s rights, emerging markets and legal certainty for investors, and platform competition for the delivery of broadcasted content.

As regards radio spectrum, a more flexible management would ensure a better efficiency and spectrum availability for new wireless applications.

Television broadcasting has been defined as the initial transmission of programmes intended for reception by public. It does not include communication services providing items of information and other messages on individual demand. These services are considered as Information society services. In the context of convergence, the growing interactivity of television broadcasts may seem to blur the limits between television broadcasting services subject to the Television without frontiers Directive, and Information Society services subject to the e-Commerce Directive [32]. Therefore, the 2003 Commission Communication of the future of European audio-visual regulatory policy concluded that a revision of the Television without frontiers Directive may be necessary to take into account technological developments.

(2) National Broadband Strategies were drawn up by the EU15 Member States by the end of 2003. The new Member States committed to present them by the end of 2004, but only four of them have done so. Given the limited availability of broadband and the limited penetration of the PSTN in most of these countries, national broadband strategies are extremely important tools. Strategies may reveal the use of national and EU funding (such as Structural Funds) to increase broadband coverage. They may also stimulate take-up by announcing financial incentives for consumers, and/or proposing targeted actions for government procurement (for example, connecting all schools, health centres and public administrations).

(3) The EU Research Framework (FP6 and the upcoming FP7) include specific calls for proposals to develop the network technologies and architectures, allowing a generalised and affordable availability of wired and wireless broadband access to European users. Research and Development of new wired and wireless broadband access technologies are critical in improving the competitive environment for broadband.

Technological issues, such as interoperability and standardisation, can also be addressed through Technology Platforms’ results. The research agendas of Technology Platforms might be supported partially from the Framework Programme using instruments such as Integrated Projects, Networks of Excellence or STREPs. Community programmes and Member States’ programmes can support any modification of the research agenda emerging from Technological Platforms. A clear added value for Platforms is to be able to mobilise enough public and private resources in order to support the research agenda. This includes the pooling of public funding from the Member States, the Commission and other bodies, and combining it with private funding.

Finally, through the Framework Programme, Europe has created a pan-European research networking infrastructure, GÉANT, to exploit the emerging developments in telecommunication technology and to support all fields of collaborative research. GÉANT provides a stable, ubiquitous, high-capacity, public transport network for production-quality data communications. This infrastructure also constitutes an environment for demonstration and validation of advanced networking applications based on new services. The innovative characteristics of GÉANT, and the synergies being exploited through complementary research actions on IPv6, GRIDs and optical networks constitute major successes on which further actions may be built in the future. New complementary activities (notably strengthening the high-end computing infrastructure in Europe, and support to ubiquitous access to the European research infrastructure) may be deployed.

2.3.4 Content on-line

Communication networks and devices enable the development of on-line contents. In turn, increased availability of high-quality content stimulates the evolution of devices and applications. The development of innovative content and information society services, supported by attractive business models, is a vital step towards growth in the converging sectors.

Convergence will be supported by the wide availability of content and information through ICT. Content available through ICT includes content that is the digital or a digitized version of traditional content. The growing availability of business content, public domain content and information, television and radio programmes, movies, games, music, and books under digital form is facilitating the creation of services.

Content available through ICT also includes new forms of content born in the digital age. This covers a wide range of publicly accessible websites that are used by organisations to communicate and provide information. This also consists of content created by individuals or groups of users, such as personal websites or digital pictures that have a growing impact on the social aspects of the information space.

Given the variety and the large amount of digital content available in the information space, content search services, such as internet search engines or the Electronic Programme Guide for TV programmes, are revolutionising the way consumers search and access content. To a large extent, these services are also conditioning the type of content consumers can access.

The information space is also made up of a wide range of services that are not based on the provision of on-line content. Communication services are the first beneficiaries of ICT development, with an increase of communication channels (broadband, satellite, cable, mobile networks), applications (email, SMS, MMS, VoIP, visio conference, etc.), and devices (mobile phone, PC, portable devices, game consoles, etc.).

Transaction services allow the realisation of financial and commercial transactions, such as the online purchasing of goods, or access to banking and payment services. The development of the information space calls for the development of e-transaction services, such as micro or wireless payments (see section 2.3.5).

The information space content and services are delivered through software running on a wide range of devices. At the same time, access to software or computer resources can constitute an information space service on its own. Computer services, such as utility computing, allows the provision of computing power on a flexible, metered-usage, pay-as you go basis.

Localisation services consist of the provision of spatial and location information, (e.g. maps and directions). Increasingly associated to mobile devices with location features, localisation services allow real time provision of content and information based on consumer location.

The challenge for the single information space is to create the appropriate environment to enable businesses to make the most of convergence, and to meet European consumers’ expectations, while promoting the European content industry.

The need for new business models

Content, as well as technical solutions to access and protect content, are protected by IPR. Since IPR consists in granting usage monopoly on content or technology at national level, ensuring non discriminatory access to a competitive single market for on-line content is a real challenge.

Increasingly, interoperability and open standards are becoming prerequisites of functional competition in the internal market. The convergence of devices and increasing multi-platform access strengthens this development; interoperability of content and services is a cross-platform issue. For these reasons, the promotion of interoperability and standardisation is a long-standing Community policy objective.

Public content defined as content in the public domain, and publicly funded content also play a crucial role in the creation of new on-line services. Availability of geographical, location or meteorological data allows the creation of innovative information and location services. By making this type of publicly funded information available to businesses, the Public Sector Information Directive will facilitate the creation of new services. However, additional actions are needed to ensure that the investments in publicly funded content have a maximum impact in economic, societal and cultural terms.

Many economic players are still reluctant to move into the digital age, due to uncertainties regarding the possibilities of securing their investments, or to protect the access to their content and services. Therefore, it would seem necessary to secure the distribution of on-line content by tackling the problem of the online distribution of illegal content, and to deploy DRM solutions. In tackling the problem of illegal distribution of on-line content, this will accelerate the migration to legitimate services, and the development of an attractive content offer in a DRM protected environment should create appropriate conditions for the e-content market.

However, DRM as a key enabling technology for the development of content and services could also have the potential to be a commercial or technology licensing control point, restricting consumers’ choice and hampering competition. The public consultation on the DRM high level group’s report has pointed some risks and shortcomings. If not interoperable, DRM technologies are capable of transferring control of the way on-line content is used and distributed to some of the content value or other chain players. At the same time, discriminatory cost and access terms to DRM solutions could also prevent small players having access to the on-line content market. The effects of the deployment of proprietary and non interoperable DRM standards on the development of open source software may need to be examined. Therefore, while promoting the development of a secure environment for the distribution of on-line content and services, it is crucial to promote interoperability and strengthen competition in the internal market.

Meeting European consumers’ expectations

The stakeholders’ consultation indicates that, for the consumer, the business models should provide clear billing, predictable pricing and transparency to ensure both user acceptance and consumer rights. Consumer acceptance will also depend on the choice and flexibility of the content and services available.

Content needs to be diverse and adapted to user needs. Strong market dominance, whether by European or non-European players, in key enabling technologies may hinder the development and diversification of European digital content and services." Online privacy is becoming a serious concern for citizens and consumer organizations in Europe. Many of the new services and technologies have openings for both strengthening and weakening online privacy. Technologies intended to control and secure transactions and rights, also have the potential of serious invasions of privacy. Specific concerns have been raised regarding the monitoring of content use and services, by technologies like DRMs and RFID. Since some pricing mechanisms for content and services specifically rely on monitoring users, the issue of privacy is of particular concern for healthy development in this area: an unbalanced approach may have the potential of leading to either the erosion of rights or consumer defection from the technologies.

Minors are heavy and active users of online content and services. According to EC studies, parents are not always even aware of their children’s’ online access and behaviour. There are challenges to face regarding unwanted access to unsuitable, extreme, adult, or harmful content and to risky communications. Convergence expands the area of attention: mobile internet communications and content, as well as new forms of online, interactive TV, and mobile communities create new, beneficial, and popular arenas for minors. However, they also create new risks that need to be addressed. Ensuring digital media literacy and critical sense among children and their parents is the main challenge, alongside an understanding of risk areas and risk behaviour online, and of existing protection systems.

Increasing access to content and services lead to a potential increase in consumers’ exposure to advertising. While advertising in itself is not an issue, ICT based advertising practices could raise specific concerns. Advertising in digital media, as well as new forms of advertising based on consumer’ profiling, are raising privacy as well as minor protection concerns. Given the increase of information sources, the clear differentiation between editorial content and advertising also raises the issue of media literacy.

Finally, usability is a key factor for improving take-up. For instance, the power of efficient distribution and usability inherent in peer-to-peer systems and other super-distribution systems, promise great potential for the consumer content market, but have been hindered by the lack of robust and popular legitimate commercial applications. A serious obstacle for mining the huge potential of peer-to-peer-distribution is the lack of a solution between the copyright holders’ need to enforce their rights, while keeping the usability and efficiency offered by peer-to-peer-systems.

2.3.5 e-Payments

A major new market for electronic services is emerging in the current mobile market, the emerging 3G-market, and on the internet. Cheap and flexible payment solutions will be fundamental in improving the conditions of European producers of electronic content services, and in strengthening Europe’s strategic position in the global market.

Some payment services already exist but are not covered by the existing legal framework (like the e-money Directive). These services would have the potential to become EU-wide schemes in fulfilling some payment needs, such as micro payments in the internet or wireless communication services. Some payment products on the market, such as mobile operator accounts and virtual accounts (e.g. PayPal), are closer to credit transfers in a centralised account system than real bearer instruments.

Given the existence of a wide range of new payment services and the needs of the market, it would be important to analyse what would be the right legal framework for these services. This would be the objective of the New Legal Framework for Payments in the Internal Market. This New Legal Framework would not inhibit innovation, technical development and discriminate between payment instruments, and would cover all payment services. This new legal measure would intend to encourage the introduction of new payment instruments by providing legal certainty for this activity acros