Opinion of the Committee of the Regions on the 'Green Paper on the convergence of the telecommunications, media and information technology sectors and the implications for regulation: Towards an information society approach` (98/C 373/05)

THE COMMITTEE OF THE REGIONS,

having regard to the Green Paper on the convergence of the telecommunications, media and information technology sectors, and the implications for regulation: Towards an information society approach (COM(97) 623 final);

having regard to the decision taken by the European Commission on 5 December 1997, under the first paragraph of Article 198c of the Treaty establishing the European Community, to consult the Committee of the Regions on the matter;

having regard to the decision taken by the Bureau of the Committee of the Regions on 13 May 1998 to instruct Commission 3 - Trans-European Networks, Transport, Information Society - to draw up the relevant opinion;

having regard to the draft opinion (CdR 149/98 rev) adopted by Commission 3 on 7 July 1998 (rapporteurs: Mr Koivisto and Mr Nash),

adopted unanimously the following opinion at its 25th plenary session of 16 and 17 September 1998 (meeting of 17 September).

The Committee of the Regions

1) considers the launch of a debate on the development of regulation in response to convergence to be of the utmost importance;

2) endorses the Commission's view that regulation should be kept to the bare minimum;

3) believes that extensive international standardization and the global competition it leads to is a better option from the regional standpoint than market protection based mainly on pan-European standards and regulation;

4) points out that the green paper places too much emphasis on market development and not enough on general social objectives; these objectives will undoubtedly accentuate the need for competition legislation;

5) notes that, while convergence entails risks for regions, it offers new opportunities for active players;

6) in assessing the effects of convergence, draws attention to the existence of large regional disparities as regards media and infrastructure, a factor which does not receive adequate attention in the green paper;

7) notes that it is considers the threat posed by convergence to content production in Europe to be a cause for serious concern;

8) does not believe that the positive effects of convergence on the level of total employment will be significant, although there are likely to be major changes in the location of jobs within the sectors affected by convergence;

9) cautions against overestimating the speed of development and stresses that the development of traditional infrastructure in the sectors affected by convergence will continue to be important for the majority of the population for a long time to come;

10) hopes there will be recognition of the important role played in fostering regional cohesion by research projects which enable existing infrastructure to be upgraded;

11) highlights the need to develop a universally applicable code of practice for all communication services in place of legislation, particularly with regard to the protection of privacy, the protection of minors and other public interest objectives. Such a code must go hand in hand with legislation penalizing such offences. European rules may be necessary since it is doubtful whether such legislation at national level will suffice;

12) reminds the Commission of the continuing importance for remote regions of networks which use analogue frequencies and of the reduced opportunities for operators in a competitive environment to undertake replacement investment in these regions, and hopes that these special circumstances will be taken into account when considering the future of frequencies in these regions;

13) considers it important to ensure access to competing information network services in all regions in the future by, for example developing the universal service obligation and exploiting the opportunities offered by convergence;

14) stresses that, in public broadcasting in particular, national and regional operators have far the best information at their disposal for taking decisions on, for example, licensing;

15) believes that the best option in the adaptation of existing regulation is to create a new framework for many on-line and interactive services, to co-exist with those currently applied and needed to be built on to traditional telecommunications and broadcasting services.

16) Recommends, in respect of the options put forward by the Commission, a combination of option 1 and option 2, i.e. the creation of a new framework for on-line and interactive services to co-exist with those currently applied and needed still to be built on.

1. Background

1.1. The Commission's Green Paper on the convergence of the telecommunications, media and information technology sectors and the implications for regulation seeks the views of all the players in the communications market with a view to deciding the scope and extent of a regulatory framework to cover this whole area.

1.2. The green paper responds to the requirement for debate. It is deliberately interrogative. It analyses issues, it identifies options and it poses questions for public comment. It does not take positions at this stage nor reach conclusions.

2. Content of the green paper

2.1. Convergence in the field of communications is defined at its simplest as the ability of different network platforms to carry essentially similar kinds of services, or the coming together of consumer devices such as the telephone, television and personal computer.

2.2. Perhaps the most radical examples of the diversity of convergence in the telecommunications area is the Internet. The green paper points out that the Internet is both the symbolic and prime driver of convergence. It is a vehicle for the delivery to users of both existing services (electronic mail, video, sound voice telephones and completely new services, e.g. the Worldwide Web). In this context it is interesting to note that the Internet is doubling its number of users each year.

2.3. The Internet has developed differently from traditional broadcasting and the telecommunications services. It has essentially been user-driven. The decentralized nature of the Internet is seen by many as the single main reason for its success. Its convergence of separate communication systems is exemplified in its broadcast content, which is traditionally regulated, and private communication, which is traditionally unregulated. These different traditions constitute one of the main challenges of Internet regulation.

2.4. In the area of economic and industrial competitiveness the green paper points out the danger that if Europe fails to take advantage of the opportunities provided by convergence it could be left behind, as other major trading blocks reap the benefits of a more positive approach.

2.5. The green paper points out that the EU needs to strengthen the competitiveness of its companies so that the public can get the most out of opportunities offered by the media, and so that market growth can be transformed into jobs.

2.6. It also points out the need for greater staff training so that people can be provided with the right mix of skills in an ever changing telecommunications workplace.

2.7. One example that the green paper gives is the regulatory uncertainty that arose during the last French general election campaign, where rules prohibiting the publication of opinion polls one week prior to the election applied to off-line media but not to polls published on the Internet. A number of editors in these circumstances ignored the ban which placed traditional media at a disadvantage.

2.8. It is feared that the process of obtaining regulatory clearance in all Member States and potentially from different regulatory bodies for a particular package of services may create substantial overheads for those wanting to operate on a pan-European basis.

2.9. The green paper identifies some regulatory barriers. These are:

1) definitions;

2) market entry and licensing;

3) access to networks, to conditional access systems and to content;

4) access to frequency spectrum;

5) standards;

6) pricing;

7) individual consumer interests.

2.10. The green paper offers a set of five principles which could offer a common basis for the future approaches in the sectors affected by convergence. These are:

- regulation should be limited to what is strictly necessary to achieve clearly identified objectives;

- future regulatory approaches should respond to the needs of users;

- regulatory decisions should be guided by a need for a clear and predictable framework;

- ensuring full participation in a converged environment;

- independent and effective regulators will be central to a converging environment.

3. General comments

3.1. The Committee of the Regions congratulates the European Commission for launching this very important debate. Although a term of recent origin, convergence is proving to be one of the key concepts of the information society.

3.2. Convergence in both markets and technologies is an intrinsic part of the development of the information society which must be accepted as such, along with its benefits and drawbacks, and which in terms of the form it takes and the regulatory issues it raises does not differ essentially from, for example, the changes currently under way in the financial sector.

3.3. Like the information society in general, convergence implies major structural changes at local and regional level, with a potentially adverse impact on regional development.

3.4. But like the information society too, convergence offers regions new tools and opportunities.

3.5. The primary objective of Union measures to be drawn up on the basis of the green paper and the feedback it generates should be to find a balanced approach which, on the one hand,

a) guarantees cultural development and the competitiveness of markets and the relevant sectors in Europe;

b) but which, on the other hand, ensures that regions are able through their own action, backed up where necessary by EU regional policy, to exploit the opportunities provided by convergence and the development of the information society in general.

3.6. Although convergence has major implications for Europe's regions in particular, the green paper takes no account at all of the regional viewpoint, not even the very marked regional differences in the way the services of the sectors affected by convergence are used. Some studies show that at national level alone the share of the press in the media markets of Member States ranges from 25 % to 75 %, that of television from 9 % to 62 % and that of radio from 3 % to 17 %. Differences between Member States and regions as regards use of the Internet are even larger.

4. General implications of convergence for regions

4.1. The Committee of the Regions notes that convergence could have a negative impact on regions and regional cohesion in Europe if:

a) large global companies operating in the content and communications sectors gain a position where they alone can determine the content of information society services and geographical access to these services, in accordance with their own commercial needs;

b) regulation continues to develop solely on the basis of broadcasting and communications technologies;

c) job losses in traditional sectors affected by convergence (radio, television, press) exceed the capacity of mainly small firms to create new jobs in these sectors.

4.2. In the view of the Committee of the Regions, convergence affords regions new opportunities such as:

a) access to the same services via different user interfaces, thus enabling regions to utilize the solution which is the best possible from the point of view of the consumer and the region, such as for example:

- access to the Internet via a computer, television and/or mobile telephone using a fixed data network, a telephone network, satellites, a cable TV network and/or networks originally intended for energy distribution;

- the Internet's driving force in promoting convergence, with the development of new capacity in telecommunications networks and other technical solutions has become an increasingly diversified tool;

b) regardless of location, both private and public producers of information can reach larger numbers of consumers because the options for accessing these services are increasing;

c) convergence is forecast to lead to the setting-up of numerous new small firms whose activities will not be dependent on location.

5. Convergence and the European Information Society

5.1. The Committee wishes to draw special attention to the fact that in formulating the questions serving as a basis for debate the Commission gives no indication of its position as regards the kind of information society it would like to see Europe guided towards through, inter alia, regulation of convergence.

5.2. In the green paper the Commission gives clear priority to the general market interest whereas public interest objectives are frequently seen as barriers or factors which passively adapt. Even this is an acceptable starting point, because it is essential for employment that the business sector can respond quickly to change on global markets. The Committee of the Regions nevertheless feels that the easiest way to give shape and substance to regulation would be to state from the outset what kind of information society it is wished to achieve in Europe.

6. Question 1: The nature and impact of convergence today

6.1. The green paper describes the many forms which the convergence phenomenon takes. While, of course, these are indicative of the direction of change, overall the volumes involved are still small. The Committee of the Regions notes that it is very difficult on the basis of current trends to forecast consumer behaviour, although ultimately it is the latter which determines the substance and speed of change. Convergence is currently impacting on the behaviour of individuals and businesses at many different levels and in different ways, but having no impact at all on the behaviour of the major part of the population.

6.2. The Committee of the Regions considers the weakened position of European content in the sectors affected by convergence to be a worrying development. Indeed, one of the key issues of the debate is how to secure European content in the light of convergence characterized as a largely market-driven process.

7. Question 2: The socio-economic, business and consumer impact of convergence

7.1. The Committee of the Regions considers the job-creation impact of convergence to be a very short-lived phenomenon. It is nonetheless clear that convergence will lead to major changes as regards the location of jobs. It is equally clear that many traditional occupations in the sectors affected by convergence will eventually disappear.

7.2. On the other hand, convergence is conducive to conditions which make it easier for very small but flexible firms to enter the sectors concerned and operate successfully. The cycle of change in the business world is likely to accelerate among the smallest and largest firms; it is unlikely that a significant number of medium-sized firms will be able to operate in the sectors affected by convergence for a prolonged period in the future.

7.3. Since overall job losses will depend primarily on how easily new small firms can enter the sectors and perhaps on the ability of individuals who lose their jobs to find work on a self-employed basis, a crucial question here is whether the red tape associated with regulation in the sectors will pose insurmountable barriers for new entrants. Looked at from this perspective, ease of entry could mean less regulation (in terms of licensing, etc.) but also stricter regulation, particularly as regards public interest objectives. In that case a comprehensive approach, for example with regard to protection of privacy, will help new businesses and the sectors in general to better understand the content of these objectives.

7.4. Given the major differences that exist between Europe's regions in terms of usage rates and patterns for television, radio, the press, new network services etc., it is only natural that the effects of convergence vary greatly as well. In the case of technological infrastructure (broadband data, cable TV and mobile telephone networks) convergence can be expected to be most rapid and widespread in regions with the highest usage rates.

7.5. The Committee of the Regions draws the Commission's attention to the great differences that currently exist between Member States, and hence regions, as regards use of various means of communication.

7.6. Not even in the most advanced countries do multimedia computers and the Internet enjoy a dominant position, and it is possible that the present rate of growth will level off in the future. Although Europe must remain competitive in this area, the Committee of the Regions takes the view that the definition of objectives and values at enterprise or individual level must not, for a long time yet, be made solely in terms of a business world based on information networks.

7.7. The Committee of the Regions stresses that it must not be forgotten in the debate on convergence in telecommunications that traditional media forms are still very important for Union citizens and democracy, for example. It is therefore necessary to invest in the development of communications media such as digital radio and television as well, and not just in information networks.

7.8. As regards the large differences which exist between regions, the Committee of the Regions attaches particular importance to RTD projects which enable better use to be made of investment that has already been carried out rather than to projects which, if implemented on a wide scale, would require the expenditure of exorbitant sums on infrastructure. It is therefore interesting to note in this context the work which has been done to upgrade the transmission speed of ordinary copper telephone cable to the level required by multimedia.

8. Question 3: Barriers to convergence

8.1. The green paper discusses both existing and potential barriers to convergence. The Committee of the Regions has nothing to add to this list, but would stress that some barriers, such as, for example, fragmentation of public broadcasting and licensing issues in general, are, from the regional point of view, often key factors influencing the supply of content and can with equal justification be regarded as social requirements for convergence.

9. Question 4: The impact of current regulation on convergence

9.1. Market forces are certain to continue to play a key role in regulating development, and convergence both provides an opportunity and imposes an obligation for convergence in legislation and thereby a reduction in legislation. If, as is to be hoped, priority is given to public interest objectives, this is likely to increase the need for competition legislation.

9.2. The green paper gives examples of how the regulatory treatment of a given service differs according to the technology used to deliver it to the consumer. This shows that many of the underlying principles of regulation will have to be called into question. The Committee of the Regions would nevertheless emphasize that, even in the sectors affected by convergence, there are fundamental differences between products so that changing existing principles through convergence in regulation could have undesirable effects.

10. Question 5: Overcoming the barriers - Getting the right regulatory framework for business and for consumers

10.1. The Committee of the Regions takes the view that the technical definitions cited as barriers in the green paper will have to be developed on an ongoing basis by, for example, responding to the convergence process and ensuring that, as far as possible, the same content is accorded the same treatment regardless of the technology which is used to deliver it. The Committee would nevertheless stress that for some means of communication the latter consideration may be less important from the regulatory point of view than the specific features of the sector concerned.

10.2. The Committee of the Regions would stress that the EU's most important regulatory task is to establish an explicit code of practice which would make it easy for businesses, among others, to take on board e.g. requirements relating to the protection of data affecting personal privacy.

10.3. The green paper proposes giving consideration to the setting of a clear timetable for the termination of analogue services. However, in many regions analogue networks have a long history and are operated by telecommunications firms which are in a monopoly position and whose operating licences or the relevant regulation also include responsibility for geographical coverage. For this reason their geographical coverage is often the most extensive. Moreover, with the liberalization of telecommunications, the new digital wireless services have so far been concentrated mainly in areas where user volumes are highest. Up till now, there has been no indication in countries which have extensive analogue mobile telephone networks that digital services are rapidly replacing analogue services in the most remote regions. The Committee of the Regions therefore considers it to be of the utmost importance to retain the frequencies of analogue networks for the time being whilst deploying the available means to speed up the spread of digital services to those regions which market operators have not considered sufficiently attractive. Rather than set a specific date the timing of the changeover should be linked to the situation prevailing in different regions.

10.4. The Committee would stress that it is in no-one's interest to protect one's own markets by means of standardization. Rather, standardization must take place globally, in particular so as to ensure the provision of services to consumers at an affordable price.

10.5. Since in principle convergence allows the same services to be accessed via different types of interface, it has already had a positive impact on the possibilities of various user groups (for example, people with disabilities) to use these services. Clearly, convergence which is driven by market forces is not, as such, receptive to the special needs of small user groups but with public funding the development of these services will become technically easier and cheaper.

11. Question 6: Securing public interest objectives in the light of convergence

11.1. The public interest objectives mentioned in the green paper include:

- universal service, i.e. the universal availability of specified services at an affordable price;

- public broadcasting;

- ensuring privacy and data protection;

- data security, e.g. encryption and digital signatures;

- cultural diversity;

- protection of minors;

- public order.

11.2. In the view of the Committee of the Regions general regulatory frameworks based on codes of good practice should be developed, particularly with regard to public interest objectives such as data protection, cultural diversity and protection of minors. These rules would be universally known and adopted as key principles by all operators in the sectors affected by convergence. As loopholes are continually coming to light in existing regulation, convergence can help to remedy this situation and at the same time meet public interest objectives.

11.3. The Committee considers achievement of universal service to be a key requirement for the information society in Europe. Convergence offers new ways of achieving this objective by enabling the same services to be accessed easily via different user interfaces and networks.

11.4. Convergence has two implications as regards definitional issues: on the one hand the need to define universal service in terms of a specific technology will diminish; on the other hand in some fields, notably data security, there will be a need for more detailed definitions than at present.

11.5. A considerable number of public service objectives are such that the responsibility for them must be borne uniformly and equally by all operators. The Committee of the Regions also considers it important that in the future the universal service obligation be widened to include at least two genuinely competing options. From the regional point of view, there will continue to be a major need for public broadcasting networks in the future, but these same networks could be put at the disposal of an ever-increasing number of service providers.

11.6. The Committee of the Regions would especially like to draw the Commission's attention to the contradiction which exists in the sectors affected by convergence between free competition and the universal service obligation and hopes that workable definitions can be developed in this regard. For example, some operators are subject to regional obligations while others are free to focus on the best and most lucrative markets. One option might be to make wider and systematic use of regional policy instruments, such as the Structural Funds, to ensure wide coverage of universal service, in which case it could be decided at regional level what universal service means in each region. Examples of the use of Structural Funds resources to support the implementation of universal service can be found in at least the cohesion countries and Objective 6 regions in Sweden.

11.7. Existing tax systems could be revamped to bring the sectors affected by convergence better within their scope with a view to using public funds to fulfil the universal service obligation and create alternative jobs.

12. Question 7: The future shape of regulation

12.1. The Committee of the Regions agrees with the Commission on the need for a reassessment of regulation. The green paper discusses the different levels of regulation from a number of angles. Perhaps the key issue here is whether to regulate primarily on the basis of the technology used to deliver services (data network, radio, telephone, television, etc.) or the content of services, in which case the principles related to, for example, data protection, content, intellectual property rights and even commerce and consumer protection would, as far as possible, be independent of the means of delivery. In the view of the Committee of the Regions, regulation which is directed mainly at the technology used to deliver services is quickly losing its relevance as convergence gathers pace.

12.2. In many Member States regulation is based on principles which are old and partly outmoded. Development of the regulatory framework must, of course, take account of the effects of convergence, as indeed has already been done to some extent. Clearly, each Member State can itself decide on a solution which is the best and most effective in relation to its administrative structures.

12.3. The Committee of the Regions considers that a common regulatory approach is still required in areas such as, for example, allocation of frequencies and licensing so as to ensure smooth and balanced development and that, in principle, existing levels of administration are appropriate for this purpose. Nor should any restrictions be placed on the possibility of local and regional authorities to take decisions pertaining to, for example, providers of services over cable TV networks as authorities at this level have the best knowledge as regards consumer needs.

13. Question 8: The international aspects of convergence

13.1. In the view of the Committee of the Regions, the effects of new regulatory measures will be minimal, although they could have a negative impact on the competitiveness of Europe if they are not applied on a global basis.

13.2. In connection with planning additional steps, the Committee of the Regions wishes to draw the Commission's attention to the central role played by local and regional operators in realizing the information society in Europe. The Committee has set out arguments in support of this view in a number of opinions on the information society.

13.3. Consequently, cooperation between EU regions and regions in eastern and central European countries and support for such activities are one of the most important ways of encouraging these countries to exploit the opportunities offered by convergence.

14. Question 9: Principles and possible approaches in the light of convergence

14.1. The Committee of the Regions takes the view that convergence will create an entirely new basis for regulation over the next few years and at the same time partly undermine the justification for existing sector-specific regulation.

14.2. The Committee of the Regions would also like to point out that there are several other regulatory mechanisms at work within the Community which have a major impact on convergence but which are not mentioned in the green paper. The most important of these is, of course, taxation.

14.3. The green paper concludes by presenting three options for the development of regulation, given that it is judged that convergence requires adaptation of existing regulatory approaches:

a) seek to build on, and if appropriate, extend existing frameworks, rather than create new ones;

b) create a new framework for many on-line and interactive services, to co-exist with those currently applied to traditional telecommunications and broadcasting activities;

c) seek to create a comprehensive framework applying similar regulatory approaches to all three sectors.

14.4. As far as public broadcasting is concerned, the Committee of the Regions notes that there is no justification for the transfer to Community level of decision-making powers which currently lie with national and, to some extent, regional authorities.

14.5. A considerable part of existing legislation, or at least the principles underpinning it, is directly applicable to electronic services in areas such as intellectual property rights, privacy protection, etc. Similarly, consumer protection requirements in electronic commerce do not differ significantly from those governed by existing rules in other areas.

14.6. The Committee of the Regions considers a combination of the first and second approaches to be the best solution, namely to create the new framework for many on-line and interactive services, to co-exist with those currently applied and needed still to be built on.

Brussels, 17 September 1998.

The President of the Committee of the Regions

Manfred DAMMEYER