COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 03.12.1997 
COM(97) 623 final 
TOWARDS AN INFORMATION SOCIETY APPROACH 
(Presented by the Commission) 

EXECUTIVE SUMMARY 
There is widespread agreement that convergence is occurring at the technological 
level. That is to sai that digital technology now allows both traditional and new 
communication services -whether voice, data, sound or pictures -to be provided 
over many different networks. 
Current activity in the market suggests that operators from the sectors affected by 
convergence are acting on the opportunities provided by technological advances to 
enhance their traditional services and to branch out into new activities. 
Telecommunications, Media and Information Technology sectors are seeking cross­
product and cros~-platform development as well as cross-sector share-holding. 
Examples of new products and services being delivered include: 
-Home-banking and home-shopping over the Internet, 
-Voice over the Internet; 
-E-mail, data and World Wide Web access over mobile phone networks, and the 
use of wireless links to homes and businesses to connect them to the fixed 
telecommunications networks; 
-Data services over digital broadcasting platforms; 
-On-line services combined with television via systems such as Web-TV, as well 
as delivery via digital satellites and cable modems; 
-Webcasting of news, sports, concerts and of other audiovisual services. 
Such developments represent concrete examples of an Information Society in 
Europe. They show its potential to touch the lives of every citizen. They also 
highlight a significant change in the range and diversity of traditional 
telecommunications and media services. 
The implications of these developments are far reaching. Convergence is not just 
about technology. It is about services and about new ways of doing business .and of 
interacting with society. The changes described in this Green Paper have the 
potential to substantially improve the quality of life for Europe's citizens; to better 
integrate Europe's regions into the heart of the European economy, and to make 
businesses more effective and competitive on global and national markets. 
The emergence of new services and the development of existing services are 
expected to expand the overall information market, providing new routes to the citizen 
and building on Europe's rich cultural heritage, its potential for innovation and its 
creative ambitions. 
The global nature of communications platforms today, in particular, the Internet, are 
providing a key which will open the door to the further integration of the world 
economy. This will open opportunities and challenges not only for the European 
Union, but also for our neighbours in Central and Eastern Europe, the Mediterranean, 
ii 
and more broadly, in the developing world. At the same time, the low cost of 
establishing a presence on the World Wide Web, is making it possible both for 
businesses of all sizes to develop a regional and global reach, and for consumers to 
benefit from the wider choice of goods and services on offer. Globalisation will 
therefore be key theme in future developments, as changes in Europe are mirrored 
by developments all over the World. 
If Europe can embrace these changes by creating an environment which supports 
rather than holds back the process of change we will have created a powerful motor 
for job creation and growth, increasing consumer choice and promoting cultural 
diversity. If Europe fails to do so, or fails to do so rapidly enough, there are real risks 
that our businesses and citizens will be left to travel in the slow lane of an information 
revolution which is being embraced by businesses, users and by Governments 
around the World. 
Governments and policy makers will have a key role in ensuring that such an 
environment is in place. However, beyond the regulatory framework which is the 
central focus of this Green Paper, efforts will continue to be needed, as recognised at 
the recent Jobs Summit, to equip Europe's workforce with the skills which the 
Information Society requires. Continuing support should be given to research and 
development activities. Governments, regional and local authorities, as well as the 
European institutions must lead, by example, by fully embracing the technologies and 
services which the process of convergence is making possible. 
The future regulatory environment will be of crucial importance. The European Union 
has already developed a comprehensive framework for managing the transition in 
telecommunications from a monopoly to a fully competitive world from 1 January 
1998. We have also put in place a framework supporting an internal market for 
broadcasting. Getting the right regulatory framework must be firmly placed within 
these existing achievements. At the same time, this Green Paper represents a 
milestone in allowing the Community to look beyond the 1998 deadline and to assess 
the implications for the sectors affected by convergence. 
This Green Paper argues that the development of new services could be hindered by 
the existence of a range of barriers, including regulatory barriers, at different levels of 
the market. There are, however, differing views on the adequacy of existing 
regulatory frameworks to deal with the changing environment. One view is that the 
development of new products and services is being held back by regulatory 
uncertainty -that existing rules were defined for a national, analogue .and .mono­
media environment, but that services increasingly cut across different traditional 
sectors and geographical boundaries, and that they may be provided over a variety of 
platforms. This calls into question the underlying rationale beneath regulatory 
approaches in the different sectors affected by convergence. Proponents of this view 
would argue that such regulatory uncertainty holds back investment and damages the 
prospects for the implementation of the Information Society. 
An alternative view would hold that the specific characteristics of the existing 
separate sectors will limit the scope for service convergence. It further would contend 
that the role of the media industry as the bearer of social, cultural and ethical values 
within our society is independent of the technology relied upon to reach the 
consumer. This would mean that regulation of economic conditions and that of the 
iii 
provision of information services should be separated to ensure efficiency and 
quality. 
These matters need to be debated and resolved. Finding solutions will need to take 
account of the full range of interests in the various sectors affected by convergence. 
At the same time, the potential for change will be felt in different ways and at different 
levels (e.g. technology, industry, services and markets). Whilst digitalisation means 
that convergence is well advanced at the level of technology, this Green Paper does 
not automatically assume that convergence at one level inevitably leads to the same 
degree of convergehce at other levels. Equally, there is no assumption that 
convergence in technologies, industries, services and/or markets will necessarily 
imply a need for a uniform regulatory environment. 
This Green Paper responds to the requirement for debate. It is consciously 
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. 
In Chapters I and II, the Green Paper analyses the convergence phenomenon -its 
technological underpinnings, current developments in the market, and their possible 
impact on the telecommunications, media and information technology sectors. 
In Chapter Ill, actual and potential barriers are identified which may hold back these 
technological and market developments. Some of these reflect current market or 
industrial issues of the sectors affected by convergence, whilst others arise from 
current regulatory approaches. Some of these issues are already being dealt with in 
Community initiatives, (for example, in areas of intellectual property, media 
ownership, electronic commerce and digital signatures) and where this is the case 
those initiatives are identified. In other cases, these barriers serve as a basis for 
considering the need, if any, to adapt current regulatory frameworks in the light of the 
convergence phenomenon. 
Chapter IV provides a detailed discussion of issues associated with existing and 
possible future regulatory frameworks or approaches. These issues fall into eight 
broad areas: 
• Definitions 
• Market entry and licensing 
• Access to networks, to conditional access systems and to 
content 
• Access to frequency spectrum 
• Standards 
• Pricing 
• Individual consumer interests. 
The chapter concludes with a discussion of public interest objectives, options for 
possible future regulatory models and issues raised at an international level. 
iv 
Finally, in Chapter V, a set of principles for the future regulatory policy in the sectors 
affected by convergence are set out, and possible options for future regulatory 
approaches are identified as a basis for discussion. 
The Commission believes that the 5 months public consultation period will allow 
broad participation and debate around issues which are important for citizens, 
business and for the further development of the Information Society. Comments can 
be sent in paper or electronic form, and the debate will be assisted by the creation of 
a specific web-site on which electronic comments can be accessed.1 There will also 
be public hearings during the course of the consultation. On the basis of the 
comments received, the Commission intends to produce a Communication by June 
1998. 
This Green Paper represents a step on the way to securing the benefits of 
convergence for European social and economic development. The June 
Communication, setting out the results of the public consultation, will allow political 
positions to be taken by the European Parliament, the Council of Ministers, the 
Economic and Social Committee and the Committee of the Regions, and for clear 
objectives for future policy to be established. 
This Green Paper initiates a new phase in the European Union's policy approach to 
the communications environment. As such it represents a key element of the overall 
framework put in place to support the development of an Information Society. It 
builds on the current strengths of the frameworks for telecommunications (launched 
by the landmark 1987 Green Paper on telecommunication2) and for media 
(established by various Community legislative initiatives). This Green paper builds on 
these achievements, and offers all interested parties an opportunity to comment on 
the future shape of regulation, in the post-1998 communications environment, in the 
sectors affected by convergence. 
This first step is intended to pave the way for the development of an appropriate 
regulatory environment which will facilitate the full achievement of the opportunities 
offered by the Information Society, in the interests of Europe and its citizens as the 
21st century begins. 
1 World-wide Web address is http://www.ispo.cec.be/convergencegp. Both written and electronic comments will 
be made available in paper form in parallel with the publication of the Communication on the results of the 
consultation, subject to any requests made for confidentiality. 
2 COM(87) 290 final 
v 
,.,,;.:;. ... '. 
I. 
1. Convergence -defining its scope 
2. The enabling role of technology 
3. Current market developments 
4. Summary and questions 
II. 
1. The social and economic-context 
2. Market trends 
3. The consumer perspective 
4. Summary and questions 
Ill. Barriers to Convergence 
1. Existing barriers 
2. Potential barriers 
3. Question 
IV. Regulatory 'rjlpl_i~at\qp~', 
1. Challenge to existing regulatory approaches 
2. Tackling the barriers -The regulatory issues 
3. Meeting public· interest objectives 
4. Options for a future regulatory model 
5. Issues at an international level 
v. Principles and options· for theJuture 
1. Principles for future regu.latory approaches in the sectors affected by 
convergence 
2. Options for regulatory development 
3. · Timetable for future action 
4. Conclusions 
Annex: Existing regulation 
vi iii 
1 
8 
15 
18 
33 
37 
The Information Society is becoming a reality; 
Its development is fuelled by the rapid 
technological change which is transforming the 
information industries. The nature and speed of 
this transformation may pose new challenges to 
policy-makers. 
One of the most significant factors is the 
increasing use by different sectors, notably the 
telecommunications, media and information 
technology (IT) sectors, of the same 
technologies. Evidence of such convergence 
has been mounting in recent years with the 
emergence of the Internet and with the 
increasing capability of existing networks to 
carry both telecommunications and broadcasting 
services. 
The phenomenon of convergence is relatively 
new and a range of different views exist on what 
its implications are for society and for economic 
activity. There is broad agreement that 
developments in digital electronics, and software 
are creating the technological potential for a new 
approach to the delivery and consumption of 
information services. There is less agreement 
on how much these developments will change 
existing practices and over what time-scales. 
Some consider that convergence will lead to the 
complete and rapid tra~sformation of existing 
telecommunications, media and information 
technology services in such a way that these 
currently separate groups of services will merge 
into one another, substantially blurring the 
previously clear distinctions between them. 
Others feel that the specificity of the existing 
separate sectors will limit the scope for service 
convergence, and that the media industry has a 
role as the bearer of social, cultural and ethical 
values within our society, independent of the 
technology relied upon to reach the consumer. 
This would mean that regulation of economic 
conditions and that of the content of information 
services should be separated to ensure 
efficiency and quality. Others believe that, if it 
does occur, it will evolve over an extended time­
scale. 
It is nevertheless clear that the implications of 
these developments are potentially far reaching. 
The emergence of new services and the 
developments of existing services is expected to 
expand the overall information market. This will 
provide new opportunities for economic growth 
and employment. At the same time the new 
vii communication services environment will also 
provide opportunities to enhance the quality of 
European citizen's lives, by increasing consumer 
choice, facilitating access to the benefits of the 
Information Society and promoting cultural 
diversity. 
These developments are therefore positive for 
European economic and social development and 
should be encouraged. F'ublic policy will need to 
provide a supportive environment for 
convergence in order to ensure that the potential 
opportunities are grasped in a timely fashion. 
What is needed now is wide ranging and deep 
debate on the convergence phenomenon and its 
implica!ions as an input to such policy 
formulation. The objective of this Green Paper 
is to start such a debate. 
This debate needs to be set into context in 
respect of other important Commission actions 
in the telecommunications, media and 
information technology sectors. In particular, 
this debate is central to the future 
communications landscape following the full 
liberalisation of telecommunications services 
and infrastructure by 1 January 1998. The 
process started by the Green Paper should 
ensure that during the overall review of the 
effectiveness of the 1998 regulatory package for 
telecommunications (to take place at the end of 
1999), full account can be taken of the impact of 
convergence on that sector. Furthermore, the 
Cable Review, carried out in the light of 
liberalisation and more specifically as a result of 
the commitment contained within the Cable 
Directive3 and the (telecommunications) · Full 
Competition Directive4 is the subject of a 
separate Commission communication. The 
review aims to create an open and pro­
competitive market structure in the provision of 
telecommunications and cable TV networks 
which may have a significant impact on the 
markets affected by convergence. In particular, 
it will encourage competition and prevent the 
emergence of new anti-competitive gatekeeper 
positions or bottlenecks. Vigorous competition 
in these areas will encourage the development 
of innovative new services which will benefit 
consumers in the European Community, and will 
provide European industry and service providers 
with the expertise to compete on global markets. 
3 Commission Directive 95/51/EC, OJ L256, 26.11.95 
4 Commission Directive 96/19./EC, OJ L74, 223.96 
Against the background of ensuring a 
competitive basic market structure, the 
timeliness of this Green Paper stems from the 
fact that new markets may develop rapidly, and 
that they will be essentially global in nature. If 
the applicable regulatory frameworks in 
individual Member States or, indeed, in Europe 
are not appropriate to the development of these 
new markets and even hinder their development, 
then Europe may find itself at a competitive 
disadvantage vis-a-vis its more flexible global 
competitors. This could restrict consumer 
participation by limiting choice and weakening 
consumer confidence in the new services, and 
have negative consequences for economic 
growth and employment creation in Europe. 
The Green Paper addresses the nature of the 
convergence phenomenon, and focuses on the 
provision of services and the underlying 
networks over which they are.c.arried. It further 
deals with the implications for both the shape 
and substance of regulation which may arise 
from convergence. Although the Green Paper 
deals with certain aspects of the regulatory 
framework for service provision, any future 
initiatives in this field would be without prejudice 
to existing on-going work within the Commission 
or the implementation of existing Community 
legislation. 
The Green Paper does not take definitive 
positions with respect to new regulatory 
structures. Indeed, it recognises that 
convergence may lead to less regulation in 
telecommunications and media sectors, and 
should not lead to more regulation in areas such 
as IT. Rather it analyses the convergence 
phenomenon as evident in the market; it 
identifies issues relating to regulation arising 
from these developments, and it poses 
questions in relation to these issues. 
viii All interested parties are invited to contribute to 
the debate by responding to these questions and 
by making any submission they wish on the 
subject. The period of such consultation is set 
for five months from the date of publication of 
this Green Paper. It is intended to produce a 
report on the results of the consultation by June 
1998. 
Submissions may be sent via E-mail, fax or post 
(4 copies please) to: 
European Commission, DG XIII A4 
Attn. Mr. E. Lalor 
200 rue de la Loi, BU31 0/62 
B-1049 BRUSSELS 
Belgium 
Fax (+32 2) 296 9009 
and/or 
European Commission, DG X C1 
Attn. Mr. G. Paulger 
200 rue de la Loi, L-102 5/25 
B-1049 BRUSSELS 
Belgium 
Fax: (+32.2) 299 9201 
and/or 
E-mail: convergencegp@cec.be 
Hard copies of all submissions will be made 
available at the conclusion of the consultation, 
unless a request for confidentiality is received. 
A Web site has been opened for the posting of 
both the Green Paper and submissions 
received. The web address is: 
http://www.ispo. cec. belconvergencegp 
This Green Paper represents a further step in 
the realisation of an Information Society in 
Europe. It examines a key set of policy issues 
relating to the broad infrastructure of 
telecommunications, media and information 
technology sectors, for convenience referred to 
as the 'relevant' sectors in much of this 
document. 
The Green Paper does not examine policy 
issues related to the wider set of services which 
will make the Information Society a reality -
services such as Electronic Commerce, which 
encompasses a range of activities having the 
potential to revolutionise sectors as diverse as 
retailing, travel and financial services. The 
policy issues relating to this wider set of services 
include those where Community action is 
already well advanced, for example, in 
intellectual property rights, copyright and related 
rights; media pluralism; privacy and data 
protection; encryption and digital signatures. 
These are part of the broader framework which 
is emerging for new services and activities within 
the Information Society. They are therefore 
regarded as outside the scope of the Green 
Paper and are given only passing reference 
where relevant to the issues at hand. 
Instead, the Green Paper concentrates on the 
underlying infrastructure 'which will helps create 
and deliver the services of the Information 
Society to customers. It is made up of the 
systems of components, networks and services 
associated with the relevant sectors. In all three 
sectors, those systems are undergoing 
fundamental change, primarily through the 
application of digital technology. This is likely to 
have consequences for policy and regulation. 
The Paper focuses on the on-line delivery of 
services, dealing with off-line publishing, for 
example, only insofar as it represents a potential 
market for the on-line business. 
The Green Paper deals with broad future trends 
and does not attempt to define markets for the 
purposes of the application of Community 
competition law. The positions discussed in this 
Green Paper cannot prejudge the positions the 
Commission may take in the assessment of 
pending or future cases under the competition 
rules. 
From this perspective, Chapter I describes the 
convergence phenomenon and the technological 
developments which underpin it. It also 
identifies current developments in the market -and how suppliers, service providers and 
consumers are reacting to them -as indicative of 
the possible direction of future change. As in 
any consideration of new markets, the activities 
of suppliers and service providers give the first 
indication of how things might develop. Their 
reactions are tempered by those of consumers, 
who must accept and embrace the new services 
before the markets can become a reality. 
111ji"~1rI~~r9~-n_~~~",~~!!,at6'9I•·i,~~~,~-~9~~-·:1·•,· ···· 
The term convergence elJdes precise definition, 
but it is most commonly expressed 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 
pers'onal computer. 
This latter expression of convergence is one 
most often cited in the popular press -it is easily 
understood by consumers and has the added 
interest of reflecting a wider struggle between 
computer, telecommunications and broadcasting 
industries for the control of future markets. 
Despite this popular image however, any 
convergence of consumer devices is today much 
less real than network convergence. Telecom­
munications operators are already offering 
audiovisual programming over their networks 
(albeit on an experimental basis) and have 
become major players in the provision of Internet 
access, as well as backbone infrastructure. 
Broadcasters have provided data services over 
their networks for some years and these 
services will be enhanced over the next 12-18 
months by the prospect of digital transmission of 
both radio and television, and by the addition of 
interactivity. 
Cable operators are providing a range of 
telecommunications services, including voice 
telephony in some Member States and are 
starting to deploy cable modems to offer high 
speed Internet access, in addition to their 
traditional business of television programming 
distribution. Beyond· the provision of services to 
the public, both audio and video technologies 
are also starting to be deployed within corporate 
'intranets' as an additional medium for 
distributing real-time information. Such 
applications are also starting to appear on web 
sites targeted at prospective customers. 5 
5 See Webcasting and convergence : Policy implications. 
OECD, DSTl/ICCPfflSP(97)6 -to be published 
December 1997 
The network platform and the consumer/user 
environment constitute two elements of the 
supply or value chain extending from content 
creation through content packaging, service 
provision and final delivery to customers (see 
Fig.1 ). The value chain is a useful concept for 
analysing the behaviour of firms and markets in 
the light of convergence. 
Content & 
service 
packaging 
· Platform & Tailoring & 
Content supply 
branding connectivity Delivery Access control 
Function 
Fig. 1: The emerging value chain 
Source: Squires Sanders Dempsey LLP and Analysys Ltd. 
Today, firms tend to be present in one or more 
elements of the value chain. Some argue that a 
shift towards convergence will lead many of 
today's current players to consider extending 
their activities beyond their core businesses, and 
argue that this trend is already visible in some 
recent mergers and acquisitions (see below). 
The potential for change as a result of the 
phenomenon of convergence can be seen at 
three different levels (technology, industry, 
services and markets) (see Fig 2) though there 
can be no automatic assumption that 
convergence at one level inevitably leads to the 
same degree of convergence at other levels, nor 
that convergence in technologies, industries, 
services or markets will necessarily lead to a 
need for a uniform regulatory environment. 
Technology convergence, of which the examples 
cited above are illustrative, is based on the 
common application of digital technologies to 
systems and networks associated with the 
delivery of services. As section 1.2 
demonstrates, technological convergence is 
already happening, and continuing advances in 
technology will further consolidate the process 
along the different elements of the value chain. 
Many commentators identify a trend towards 
industry convergence, seen in alliances, 
mergers and joint ventures which build upon the 
technical and commercial know-how of the 
partners in order to exploit existing and new 
markets. Such alliances, mergers and joint 
ventures will continue to be subject to scrutiny 
under the Community competition rules. Many 
such alliances are 'horizontal', that is, between 
firms operating in the same part of the value 
chain. Those aimed at addressing the potential 
2 opportunities offered by market convergence 
generally involve companies operating in 
different parts of the value chain, resulting in 
increased vertical integration. Some of these 
alliances have met with early difficulties, 
illustrating the uncertainty of the markets and the 
risks involved. 
Policy and Regulation 
Services and Markets 
l,ndust..Y.c:1lliit~~~s··e1n~ m~fg~rs···. 
• ~·.·' <·. .:: ·~t· .. "~ ' ~ ,,,~. :·;; ·;~-' :,· .. 
Fig. 2: The stages of convergence 
It is also difficult to be precise about the services 
arising from convergence. Many new services 
will result from technological progress within 
given sectors, and may not result from cross­
sectoral activity at all. Others will be a direct 
result of cross-fertilisation between sectors, 
telecommunications and broadcasting for 
example. Where there is a suggestion of the 
latter, the term "convergent services" will be 
used in this document. Where a more general 
reference is appropriate, the Paper will simply 
refer to the term "new services", without 
signifying any precise legal definition. 
1.2Jhe enabli11g role of technology 
This Green Paper is not primarily concerned with 
technology; rather it addresses the new 
business and market phenomena which are 
being enabled by technological developments, 
and which are altering traditional provider­
consumer relationships. An understanding of 
the nature of these developments can lead to a 
better appreciation of the potential for change. 
Digital technologies underpin convergence 
As already stated, the underlying trend is the 
common adoption of digital technologies by the 
relevant sectors. Digital technologies cover a 
range of disciplines generally associated with 
the computer and telecommunications industries 
-digital micro-electronics, software and digital 
transmission. Applied piecemeal within each of 
the relevant sectors, these technologies have 
already demonstrated their greater efficiency, 
flexibility and cost-effectiveness, and have 
shown how they can enhance creative potential 
and promote innovation. 
Computer technology now plays a key role in 
content creation and production in both cinema 
and broadcasting worlds. The ways in which 
audio-visual material is produced, delivered and 
consumed are evolving. Content is becoming 
"scaleable" so that it can be used in different 
environments and delivered on different network 
infrastructures. The basic building block is the 
MPEG family of standards for the digital 
encoding of moving images.6 Once encoded in 
this format, images may be modified, 
manipulated, or transmitted in the same way as 
any other digital information. The systems and 
networks handling such information are of 
course indifferent to the nature of the source 
material, be it image, sound or text. Digital 
source encoding thus forms the basis of 
technological convergence. 
Digital transmission may be carried over 
broadcast networks or over terrestrial wired or 
wireless infrastructure. When applied to 
broadcasting networks, the most significant 
impact of digitalisation is the immediate 
expansion of capacity, effectively removing a 
scarcity which has limited growth of the sector 
since its inception. But processing power and 
software are also helping generalise consumer 
devices like the set-top box. Implementing 
functionality in software helps overcome the 
product life-cycle problems associated with 
hardware, reducing market inertia and facilitating 
innovation. It also gives such devices a level of 
intelligence which allows broadcasting networks 
to emulate the switching capabilities normally 
associated with telecommunications. For 
example, satellite pay-television operators can 
today address individual customers through 
conditional access systems, often combined with 
the terrestrial telecommunications network to 
provide a 'hybrid' return path for interactive 
services. 
Network technologies for convergence. 
As alternative telecommunications infra­
structures become more widespread, high-speed 
networks based on optical fibres will soon be 
capable, in combination with modern server 
technology, of operating cost-effectively in a 
virtual broadcast mode.7 The high data rates 
and spectral efficiency achievable through digital 
transmission open up the possibility of delivering 
high-quality audio and video signals over a 
variety of different network infrastructures. 
Transmission technologies such as narrow-band 
MPEG -Motion Picture Experts Group. The family of 
standards extends from MPEG-1 to MPEG-4, of which 
MPEG-2 (studio-quality television and multiple CD­
quality audio channels) is the most widely used. 
That is, the same content delivered to many consumers, 
but upon their individual request and not necessarily at 
the same time. 
3 ISDN8, xDSL9 and ATM10 will ensure that both 
existing and new infrastructures can play a role 
in carrying the new services. The capabilities of 
existing networks are also enhanced by the 
compression techniques implicit in the MPEG 
standards, allowing networks of limited 
transmission capacity to carry services 
previously considered possible only on 
sophisticated and more costly wide-band 
infrastructures. 
ATM is of considerable interest as a multimedia 
transport technology. It is a high-speed cell­
relay technology, capable of transporting 
telecommunications traffic of different 
characteristics (voice, data, video) over the 
same network, and has been designated by the 
ITU as the basis for broadband ISDN, the 
successor generation of its narrow-band 
counterpart. 
This continuing competition between different 
technologies can change the fortunes of one 
approach or another, making it difficult to be 
prescriptive about tomorrow's network 
architectures. This may be a relatively minor 
problem given that today's applications and 
services are becoming increasingly independent 
of the underlying infrastructure which carries 
them. 
Internet technology is leading to platform 
independence 
The most relevant example of such platform 
independence is that of the Internet Protocol 
(IP). IP has developed into the de facto network 
protocol for the Internet, able to route and 
transport all the elements of a multimedia 
service (text, image, motion video and sound). 
IP is also used in Intranet products, providing an 
ISDN -Integrated Services Digital Network. The narrow­
band version was standardised over the last 30 years by 
Telecommunications Operators wishil)g to digitise the 
customer access network. Its long gestation period has 
caused risks of technical obsolescence which have been 
mitigated by other technologies (notably data 
compression) and the emergence of suitable 
applications (notably Internet access). 
xDSL -x-Digital Subscriber Loop whereas x refers to 
the technology of the moment. These are 
technologies which exploit the existing 
telecommunications network copper-pair cable for 
high-speed data transmission. ADSL (A for 
Asymmetric) runs typically at 1.5Mbps in the 
downstream direction and HDSL (H for High-speed) 
at 6Mbps. These are now being superseded by 
higher-speed technologies. 
10 ATM -Asynchronous Transfer Mode, a high-speed 
switching technology operating at a basic transport 
level. This contrasts with higher-level application 
protocols such as IP (Internet Protocol) which may 
ride on top of transport protocols such as ATM. 
infrastructure for multimedia applications within a 
company or other closed user group. 
The Internet can best be described as a network 
of networks interconnected on an open basis 
using IP, usually running over transmission links 
leased from telecommunications operators 
(TOs ). It has evolved very rapidly over the past 
decade from a largely academic- and 
government-sponsored network with a backbone 
capacity of 56kbit/s in 1986, increased to 45 
Mbit/s in 1993, and to 155Mbit/s in 1996. This 
huge change in the capacity of the Internet's 
infrastructure has been in response to the 
remarkable growth in the number of people 
using the Internet and the range of applications 
and software tools developed for it. 
The open, non-proprietary approach to 
standards for the Internet has made it easy for 
companies to take advantage of, and build on, 
the advances made by others in the industry. 
For example, many would argue that the rapid 
development of the capabilities of the World­
Wide Web (WWW) has been enhanced by the 
open approach to browser development taken by 
vendors such as Netscape, Microsoft and Sun. 
The Internet will be further enhanced as a 
vehicle for multimedia transport by the 
development of several improved or new 
protocols which Internet service providers expect 
to implement within the next three years. 
This brief review of the salient technological 
developments is not meant to be exhaustive, but 
to illustrate the role of technology as the motor of 
change. Technology is developing constantly; 
its application to innovative services and the 
bringing of those services to market promise 
even further dramatic change in the future. 
1:;~,:'~y,rr~~nfrn~-r~~ra~v~1C?em~rlt!':?··,·-
sign ificant changes are now being realised 
through the application of new technology to the 
individual sectors, and these are examined in 
turn. Such changes are not in themselves 
evidence of convergence, but as suggested 
earlier, the commonality of technology applied 
could provide a basis for that convergence to 
develop. 
Digital television and digital audio 
broadcasting services are changing today's 
audiovisual landscape 
In the early 1990s it became apparent that digital 
technology could be efficiently and cost 
effectively used for the delivery of television and 
audio signals. Of particular interest was the 
possibility of delivering many more channels 
over the same infrastructure (cable TV, satellite 
transponders, terrestrial spectrum) by using 
4 digital compression rather than existing 
analogue transmission. 
In the television area, building on the work of the 
Digital Video Broadcasting (DVB) project, 11 and 
against the background of a regulatory 
framework provided by the Television without 
Frontiers Directive, the Television Standards 
Directive and other measures, 12 digital TV 
services have recently been launched in Europe. 
Other countries around the world are also 
making use of DVB technology and European 
standards. The first commercial services started 
in France in April 1996. Other digital services 
rapidly followed and at the time of writing, more 
than 200 digital TV channels are targeted at 
viewers in France, Germany, Spain, Italy, the 
Benelux and the Nordic area. Of the order of 
one million digital receivers are believed to be 
currently in operation in Europe -figures which 
could double by the end of 1998. 
Although it is early days in the development of 
this market a number of interesting phenomena -
which are either new to TV or significant 
developments of past practice -are appearing as 
digital compression is cost-effectively reducing 
capacity constraints: 
-Programme bouquets and thematic 
channels -Broadcasting companies are 
marketing their digital services in the form of 
'bouquets' of programme channels. The 
"bouquet" complements 'generalist' TV 
channels with thematic channels 
concentrating on news, sports, movies etc. 
offering viewers greater choice and coverage 
of areas of specific interest to them. Already 
evident in the analogue era, thematic 
channels are set to increase in number and 
to achieve ever finer levels of segmentation 
with digital technology. Such channels will 
need to seek wider audiences for economic 
viability, and pan-European operation could 
be a way of securing them. 
-Near Video-on-demand -The. availability of 
substantial transmission capacity at 
reasonable prices will soon make "near 
video-on-demand" (NVOD) services possible. 
11 The DVB is a body comprising more than 200 
organisations from 30 countries in Europe and around 
the world. It includes broadcasters (both public and 
private), manufacturers (of consumer and professional 
equipment), operators (of satellite, cable and terrestrial 
networks) and regulators. It has defined a complete set 
of specifications for digital TV broadcasting over 
including: cable, satellite, terrestrial and microwave radio 
distribution systems. These specifications have since 
been converted into ETSI standards. 
12 The 1989 Television without Frontiers Directive 
(89/552/EEC) was recently revised and updated as 
Directive 97/36/EC. The Television Standards Directive 
(95/47/EC) was adopted in October 1995. 
Example: With 60 satellite channels, ten 90-
minute films could be broadcast simultaneously, 
each one starting at 15-minute intervals. 
-Pay-per-view -Similarly, it is possible to 
market specific events or movie-showings on 
an individual subscription basis. Such pay­
per-view services have been provided in the 
UK on analogue channels (for boxing 
championships) and Spain in digital format 
(for football league matches). The greater 
capacity of digital television allows the 
simultaneous broadcast of several such 
events (the most obvious case being 
matches played in a football league), giving 
viewers the choice of access to a particular 
event on a 'pay-per-view' basis. 
These phenomena, which constitute a significant 
departure from classic schedule-based 
broadcasting, have the potential to improve 
consumer choice. In addition, and because the 
"digital channel" is inherentJy more flexible than 
an analogue channel, it can deliver other 
services in the form of data, graphics, moving 
pictures or combinations of these. Digital 
television shares these characteristics with 
digital audio broadcasting, which also offers 
listeners near CD quality sound. "Multimedia 
data broadcasting" already provides for the 
downloading of computer programmes including 
video games, data files and direct access to the 
Internet from the TV set or network computer. 
Example: Hughes Olfretti Telecom launched the 
DirecPC satellite Internet access service in 1996. It 
connects some 2000 sites across Europe to the 
Internet at speeds up to 20 times greater than 
conventional modems. 
The arrival of digital radio offers exciting 
possibilities for the combination of radio and 
images, or links to Internet sites marketing CDs 
or tickets for band being broadcast13. 
Broadcasters such as CNN and the BBC are 
starting to make parts of their broadcast content 
available on the Internet, extending their normal 
geographical ·reach, whilst a new breed of 
webcasters is emerging to broadcast particular 
live events, such as sports coverage, concerts, 
major events, etc .. 
Example: Coverage of the recentlrish elections was 
available to Irish citizens all over the world via a 
webcast site (l-vww.itv.com) 
Other innovations in the broadcasting field 
include Widescreen TV using 16:9 format, the 
technical possibility of higher definition pictures. 
13 Radio with Images, Financial Times, 11 November 1997 
5 Telecommunications liberalisation is 
widening choice and lowering prices 
In less than ten years, the European telecom­
munications sector has experienced a radical 
transformation from one characterised by rigid 
and inefficient monopoly to a sector facing full 
and vigorous competition, with the total 
liberalisation of services and infrastructure due 
to take place in most Member States from 
January 1998. This transformation owes its 
beginnings in part to an earlier phase of 
convergence -that between telecommunications 
and computing -over a decade ago. 
Technological convergence rapidly gave rise to 
market convergence, and to "value-added" 
services -innovative services which borrowed 
concepts from both sectors, and which allowed 
businesses to extend the power of computing 
beyond the geographical confines of their 
immediate locations. 
The regulatory traditions of the telecommunic­
ations sector contrasted sharply with the free­
market environment in which the computing 
industry had developed, and their coming 
together meant that some rationalisation of these 
different regulatory philosophies would be 
needed if the new services were to flourish. The 
1987 Green Paper 14 concluded that greater 
harmonisation and gradual market opening in 
telecommunications would provide the most 
fertile environment for such growth. The first 
measures were initiated in 1988 and culminated 
in the introduction of full liberalisation of the 
telecommunications sector by 1 January 199815 
This step-by-step process of telecommunic­
ations liberalisation and global market opening is 
already bringing substantial benefits to many 
businesses and consumers, with lower prices, 
improved customer service and innovative 
service offerings. Even so, the overall level and 
structure of prices continue to have a major 
impact on the take-up of new services. 
The mobile communications business is 
particularly dynamic. 
Example: Close to one in three people in 
Scandinavia have a mobile phone and there are more 
than 3 7 million mobile telephony users in Europe. 
Increasingly, such mobile systems are adding a 
multimedia component. One aspect of market 
convergence occurring within the 
14 Towards a dynamic European economy, Green Paper 
on the development of a common market for 
telecommunications services and equipment, 
COM(87)290, Brussels, 30.06.1987 
15 Commission Directive 96/19/EC and the body of 
legislation adopted by the European Parliament and 
Council. Certain additional transition periods are 
provided for some Member States. 
telecommunications sector is that between fixed 
and mobile telephony, as in certain Member 
States and amongst certain . groups of the 
population (e.g. students, small businesses), 
mobile phones are replacing fixed connections. 
However, this practical example of how fixed 
and mobile networks are converging is only part 
of a wider trend towards the full integration of 
wired and wireless technologies, which is the 
key goal of the next generation of digital mobile 
communications systems. This will offer users a 
platform on which to receive a seamless set of 
voice, data, multimedia and audio-visual 
services wherever they are. This vision, which 
has important implications for all the sectors 
affected by convergence was first recognised in 
the 1994 Mobile Green Paper16 and has most 
recently been returned to in the Commission's 
two Communications . on Universal Mobile 
Communications 17• 
The Internet is bringing new services to 
business and the public at large 
It is, however, in a third sector, the Internet, that 
changes have been the most radical. 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 telephony, for example) and 
completely new services (e.g. World-wide Web). 
It has rapidly evolved from a governmenU 
academic network to a powerful communication 
and trading platform. Characterised by an 
unprecedented growth rate (doubling its number 
of users every year), the Internet has started to 
influence a number of economic sectors, with the 
emergence of a fast-growing electronic­
commerce economy. 
The Internet is displacing traditional computer 
networks, and showing the first signs of how it 
may provide a platform which over time replaces 
traditional methods of trading. For example, 
traditional business-to-business trading on 
closed corporate networks is giving way to 
multidimensional commerce on global open 
networks. The Internet is also providing an 
alternative means of offering the core 
telecommunications business activity (even if 
differences in quality still distinguish the two 
services) through the delivery of Internet 
telephony, without in some cases either party 
needing to have a computer. The Internet is 
also a significant platform for broadcasting 
services. 
16 Green Paper on a common approach in the field of 
mobile and personal communications in the European 
Union, COM(94) 145 final, 27.4.94 
17 COM(97) 217, 29.5.97 and COM(97) 513, 15.10.97 
6 Example: Today, there are 650 Webcast radio 
stations and 2 70 "Real-Video" enabled sites on the 
Internet, 1a offering video material of cun·ent 
European and US broadcasters. 
New Internet techniques, such as multicasting, 
offers the possibility of delivering audio and 
visual content to up to 50,000 users at any one 
time instead of 50,000 individual messages, 
narrowing the borderlines between previously 
separate sectors. Many consider that Internet 
will become a major conduit for video and sound 
(especially music) distribution. 
However, the Internet as a platform has 
developed differently from traditional 
broadcasting and telecommunications. It has 
been essentially user-driven, with user-owned 
equipment (the routers performing central rather 
than peripheral network functions) and users 
· themselves continuing to generate a substantial 
part of the content. The decentralised nature of 
Internet is seen by many as the single main 
reason for its success, and as a lesson for the 
converging environment. A characteristic of the 
Internet which is indicative of convergence is 
that it functions simultaneously as a medium for 
publishing and communication. Unlike 
traditional media, the Internet simultaneously 
supports a variety of communication modes, 
both transactional and broadcast in nature: one­
to-one, one-to-many, many-to-many. An Internet 
user may "speak" or "listen" interchangeably, 
interweaving public communication (the content 
of which is -at least in the case of broadcast 
content -traditionally regulated) with private 
communication (traditionally unregulated). This 
constant shift from publishing to private 
communication modes, each regulated through 
very different principles, constitutes one of the 
main challenges of Internet regulation. 
Mergers and Alliances are reshaping existing 
industries 
The on-going process of convergence, the 
opening up of the telecommunications sector to 
full competition both in Europe and globally, and 
the rapid growth of the Internet and on-line 
services, is leading to the creation of new market 
structures and new roles for market players. In 
1996 more than 15% of the total value of world­
wide mergers and acquisitions (US $1 trillion) 
was generated by activity in what can broadly be 
termed information and communication 
industries. Such ventures represent a wide­
range of transactions, from horizontal alliances 
which share risk and match complimentary skills, 
to vertical integration as players in one market 
18 www.timecast.com cited in OECD report op cit note 5. 
segment seek to leverage technological 
convergence, expand into other higher value 
segments or develop scale economies. One 
study being carried out for the European 
Commission interpreted the motivations behind 
some the main types of transactions (not all 
successfully concluded), shown in Tables 1 and 
2 below.19 Although they do not necessarily 
reflect the views of the Commission and cannot 
be considered as an assessment under the 
Community competition rules, they are 
nonetheless useful illustrative pointers to the 
evolving market situation. 
Table 1: Horizontal Mergers and Alliances 
Rationale Examples 
Increasing market Vebacom -Urbana 
power/gaining Systemtechnik, Cable and 
minimum efficient Wireless Communications, 
scale Demon -Cityscape 
High cost of new Canal Plus -Nethold 
{digital) technologies 
Uncertain demand for Multimediabetriebsgesellschaft 
new services (Kirch, Bertelsmann, etc.) 
Internationalisation BT-MCI, Global One, UUNet-
Unipalm Pipex 
Opportunities arising MFS/Worldcom, Telenet 
from regulatory reform Flanders, NYNEX/Bell Atlantic 
Table 2: Vertical Mergers and Alliances 
Rationale Examples 
Uncertainty of demand Hughes Olivetti Telecom 
(DirecPC), @Home 
Market positioning and Bertelsmann -AOL, BBC 
access to new skills WorldWide -ICL, STET -IBM 
Gaining control of BT -BSkyB, Disney -ABC -
channels to the Capital Cities 
customer 
Moving into higher Microsoft Network -NBC 
margin areas of the (MSNBC Internet new 
value chain channel) 
Stave off competition US West -Time Warner, 
from companies in Oracle -Sun -Netscape 
related markets (Network Computer) 
The same Study concludes that two trends can 
be identified in such activity. One towards 
consolidation of current activities and the other 
towards diversification in response to new 
opportunities opened up by liberalisation of EU 
and World markets, and with a view to the 
opportunities offered by convergence. Vertical 
merger activity is seen as more significant 
indicator of a change in industry structures in 
response to the convergence phenomenon. 
19 Study on Adapting the EU Regulatory Framework to the 
Developing Multimedia Environment, Squire, Sanders & 
Dempsey LLP and Analysys Ltd., to be published in 
December 1997. 
7 Underlying that analysis is the reality that few, if 
any of today's market players will have the skills 
or resources to straddle the whole of the value 
chain within a converged environment, so that 
the emergence of major players in the sectors 
affected by convergence will inevitably rely on 
partnering to varying degrees. In such a context, 
the Competition rules will continue to play a key 
role in assessing new ventures as the emerge. 
Competition policy: the need to keep markets 
competitive 
In the past, the Commission has applied the 
Community competition rules to convergence 
cases,20 including some of the cases mentioned 
in the table above. Global One and BT/MCI are 
examples of the cases where the Commission, 
following changes to the arrangements to protect 
competition, has been able to approve under the 
competition rules agreements considered likely 
to promote technical progress. However, the 
Commission has taken action against other 
arrangements which unduly foreclosed markets 
and which were therefore incompatible with 
Community competition rules. Notable amongst 
these were the MSG and Nordic Satellite 
Distribution operations, where the combination of 
market players in the converging markets and 
the market positions which they were likely to 
hold in the future would have led to a foreclosure 
of the market on a lasting basis. This would 
have, in turn, been likely to result into excessive 
pricing as well as a loss of innovation and 
product variety, to the detriment of the fast 
development of these markets in Europe. As this 
could not be remedied with changes to the 
arrangements, therefore the agreements were 
prohibited. · 
In the future, the Commission will continue to 
favour agreements which promote technical 
progress, and which promote market entry. On 
the other hand, the Commission will not allow 
agreements or mergers which have the effect of 
foreclosing markets or strengthening or creating 
dominant positions, or giving the parties the 
possibility of denying access to new entrants. 
The Commission will also prevent market actors 
who enjoy an existing dominant position from 
abusing that dominant position, such as it did in 
the Microsoft case, or in the case of 
telecommunications operators on liberalised 
markets. 
2° For further details, refer to the European Commission's 
Annual Report on Competition for 1994, 1995 and 1996. 
ma~~r~·radoar,, .. ,, ....... ,JY~ .. Q .. ,.,!!,,,..,......._ ___ ., 
This chapter has attempted to define the 
phenomenon of convergence between 
telecommunications, media and IT sectors. It 
described the enabling technologies of 
convergence and its initial manifestation in the 
network platforms associated with the on-line 
distribution and delivery of services. The 
chapter concluded that while there is general 
agreement on the notion of technological 
convergence, there is less certainty regarding 
the likelihood and/or timing of a full convergence 
of the services and markets. 
(A) Whilst convergence is occurring at the 
technology level, to what extent and at what 
speed is this happening at the industry, service 
and market levels? 
(B) Are the effects of convergence already 
being felt in the business world and in our 
everyday lives, and if so, in what way? 
8 Following a discussion of the social and 
economic context for convergence, Chapter II 
~xamines market trends in order to assess the 
potential impact of convergence on the relevant 
sectors. The chapter concludes with a 
discussion of how consumers may be 
responding to these developments. 
~.~a~~r~~!r,:Q.§r~u~n.iI~:;!£9n9Jn1~['.~?ht~#···. 
Social aspects 
The concept of the Information Society provides 
the political background for convergence. The 
Information Society permeates current thinking 
on future economic development and is 
predicted to have an equivalent impact on 
society and employment as the industrial 
revolution did a century before. 
Within this context, the new services and 
activities made possible through the range of 
technological and market trends identified above 
have the potential to impact every aspect of our 
lives, from our homes to our work place; from the 
way we do business to the way we learn; from 
access to healthcare to the management and 
delivery of public services and to the way 
citizens participate in a democratic society. 
Today people are already using telephone­
based services in some Member States in areas 
such as banking, insurance and ordering of 
computers or theatre tickets. It is only a 
relatively short step before the delivery of such 
services becomes common place over the 
television or via a PC. A key issue in that 
context is ensuring that users are familiar with 
and comfortable using new technologies and 
services, whilst as will be seen later the 
regulatory framework has a role to play in 
ensuring user confidence in the new 
environment. 
A range of Community initiatives have attempted 
to give a concrete form to the impact of the 
social and societal implications of the 
Information Society following the landmark White 
Paper in 1993,21 and the Bangemann Report 
published the following year.22 Similar high­
profile initiatives were undertaken at the same 
time in the USA and other parts of the world, and 
21 White Paper on growth, competitiveness, and 
employment -The challenges and ways forward into the 
21st century, COM(93) 700, Brussels, 5 December 1993 
22 Europe and the global information society, 
Recommendations of the Bangemann Group to the 
European Council, 26 May 1994 
an international dimension was added in 1995 
when the G7 countries met in Brussels to devise 
a global strategy for developing towards the 
Information society. 
Community initiatives for 
the Information Society 
Broad social aspects are being addressed by a 
number of initiatives in which the Commission is 
involved. These include the Information Society 
Forum, 23 the High-Level Group of Experts on the 
social aspects of the Information Society,24 the 
Commission White Paper on Teaching and 
Learning,25 the Green Paper on Living and 
Working in the Information Society26, and a 
reconvened Bangemann Group reviewing 
progress since its 1994 report. At an early 
stage, the Commission recognised the 
importance of convergence for the European 
audiovisual programme industry, a prime vector 
of social and cultural values.27 Two recent 
Commission documents, one a Green Paper and 
the other a Communication, addressed issues of 
illegal content and content which could be 
damaging to minors.26 The European 
Parliament29 and the Council30 have been active 
in this area, and a recently-adopted 
Communication describes how the Information 
Society must transcend a wide range of EU 
policies.31 
The many initiatives now under way in 
furtherance of the Information Society are being 
pulled together in a Rolling Action Plan32 which 
constitutes the secon'd phase of the 
Commission's response to the Bangemann 
23 First Annual report of the Information Society Forum to 
the European Commission, Networks for people and 
their Communities -June 1996 
24 Building the European Information society for us all, 
Final report of the High Level Experts Group, April 1997. 
25 Leaming in the Information Society -Action Plan for a 
European Education Initiative, (96) 471, 2October1996 
26 Green Paper on Living and Working in the Information 
Society: People First, COM(96) 389, 22 July, 1996 
21 Green Paper on Strategy Options to Strengthen the 
European Programme Industries in the context of the 
Audiovisual Policy of the European Union COM(94)96 of 
6 April 1994. 
28 See Green Paper on the protection of minors and human 
dignity in audiovisual and information services, COM 
(96) 483, 16.10.97 and Communication on the illegal 
and Harmful content on the Internet, COM(96) 487, 
16.10.97. 
29 The Herman Report, 19 September 1996 
3° Council Resolution on New political priorities regarding 
the information society, of 21 Nov. 96 OJ C386, 
12.12.96, p.1 
31 Commission Communication on The Implications of the 
Information Society for European Union Policies 
Preparing the next steps, COM(96)395, 24.07 .1996 
32 Commission Communication on Europe at the Forefront 
of the Global Information Society: Rolling Action Plan, 
COM(96)607 final, 27.11.1996. 
9 Report. The first phase covered the regulatory 
framework, the network, services and content 
aspects, and the social and cultural issues.33 
The second phase, an outcome of the Corfu 
summit, 34•35 is based on a updated set of 
priorities: the business environment, education 
and training, protection of the public interest, and 
the international dimension. 
Impact on economic and industrial 
competitiveness 
The convergence debate which this Green 
Paper raises, is much more than an academic or 
theoretical exercise. The ability of the European 
Community to use convergence, whilst tailoring 
it to the European version of an Information 
Society, will be at the heart of growth, 
competitiveness and job creation in the years to 
come. The danger is 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. 
The socio-economic and business implications 
of the Information Society are currently being 
studied in different fora at a Community level.36 
The impact of the new services resulting from 
convergence will be felt in the economy as a 
whole as well as in the relevant sectors 
themselves. 
The most significant example is the emerging 
field of electronic commerce. It includes both 
indirect (electronic ordering of tangible goods), 
and direct (on-line ordering and delivery of 
services) forms. Electronic commerce makes it 
possible to trade at low cost across regions and 
national frontiers. 
A recent Commission Communication pointed to 
the potential opportunities provided by Electronic 
Commerce for consumers and for businesses in 
Europe, particularly for SMEs.37 It estimated that 
electronic commerce revenues, both direct and 
indirect, are set to increase to 200 ·billion ECU 
world-wide by the year 2000: It arso highlighted 
33 Europe's way to the information society: An Action Plan 
COM (94) 347, 19 July 1994 
34 Communication of the Commission to the Council, the 
European Parliament, the Economic and Social 
Committee and the Committee of the Regions. on The 
Information Society: From Corfu to Dublin -The new 
emerging priorities, :OM(96)395, 24 July 1996. 
35 Commission Communication "The implications of the 
information society for European Union policies -
Preparing the next steps". COM (96) 395, 24 July 1986 
36 See for example, Action Plan for employment in Europe: 
A confidence pact, CSE/1262/96, OJ C56, 24 February 
1997 and Cohesion and the Information Society, 
COM(97)7,22 January 1997. 
37 Commission Communication, A European Initiative in 
Electronic Commerce, COM(97) 157, April 1997 
the creation of a favourable regulatory 
framework on both EU and global levels as a 
prerequisite for further development. 
With regard to the impact of convergence on its 
component sectors, one study indicated that 
revenues in the relevant sectors could suffer by 
some 40% by the year 2005 if the market does 
not develop in a direction which takes full 
advantage of convergence.38 To give some idea 
of scale, Fig. 3 shows that the relevant sectors 
represented some ECU 175P billion in 1996, of 
which ECU 508 billion was attributed to EU 
markets.39 
Fig.3: 1996 distribution of global revenues (ECU 
1750 billion) for the relevant sectors 
(Source !DA TE) 
Expansion of the market for services and the 
means of their distribution seems likely to have a 
knock-on effect in content production, though 
often as a result of regulatory obligations placed 
on particular broadcasters. There is evidence, 
for example, that the success of Canal+ pay 
television in France has had a positive impact on 
the French cinema industry. Likewise, in­
dependent content producers in the UK were 
given a boost when Channel 4 arrived on the 
scene. 
Future developments may impact on the 
fulfilment of the public service mission. First, as 
the pay-TV market matures, operators may need 
to increase their investment in local content to 
maintain quality and product differentiation. For 
example, British satellite pay-TV operator, 
BSkyB, is now a major investor in the UK film 
38 See KPMG Report, Public Policy Issues arising from 
Telecommunications and Audiovisual Convergence, 
September 1996 
39 Source: Market developments in telecommunications 
and integrated communications services_ to the year 
2010, Study by IDATE for the Commission, 12/97 
10 industry, and Canal+ is acqumng rights in 
French cinema libraries. Secondly, competition 
in conveyance (terrestrial, cable, satellite, etc.) is 
likely, particularly in a digital environment, to 
shift the bottleneck from delivery to content, with 
a resulting hike in the prices for content rights. 
Employment effects 
The signals this sends to the marketplace should 
lead to greater investment and hence 
employment in the content business to satisfy 
the increasing demand. Europe is well-placed to 
meet this challenge by harnessing its creative 
capacities to the diversity of cultural 
environments under its roof. However, EU 
production is not increasing rapidly and the EU 
therefore needs to strengthen the 
competitiveness of its companies so that the 
public can get the most out of the opportunities 
offered by the new media, and so that market 
growth can be transformed into jobs to bring the 
number of people employed in the industry in 
Europe (1.8 million) closer to the level in the 
United States (2.6 million). 
Quite apart from the multiplier effects generated 
by convergence in its role as an enabler of the 
Information Society, there is likely to be a direct 
and positive impact on employment in the 
relevant sectors. Expansion of the market and 
the attendant demand for new content and 
services will generate a need for people with the 
requisite creative talents. This will be felt both in 
large companies seeking to reorient themselves 
towards the new markets, and in SMEs seeking 
to exploit niche markets. SMEs will combine 
their use of standardised digital platforms such 
as the Internet with software skills to develop 
applications and services aimed at both 
professional users and residential consumers. 
The task will be to take full advantage of 
technological convergence by integrating the 
diverse components of telecommunications, 
media and IT sectors to produce innovative 
services. 
Staff retraining will be an important requirement, 
Gearing up for the new markets will need people 
with the right mix of skills, for which specialised 
training will be required. The Commission has 
launched a number of initiatives in the field of 
education and training, notably the action plan, 
Teaching and Learning in the Information 
Society,40 as well as certain activities in the 
context of the Leonardo (training) and Socrates 
(education) programmes. 
40 Op.cit Note 25 
Research and Development 
European support for co-operative research and 
development activity, through the ACTS 
(Advanced Communications Technologies and 
Services), Esprit and Telematics programmes, 
has played an important part in many of the 
technical developments which has made the 
convergence phenomenon possible. It has 
contributed to the strength of European IT, 
telecommunications and software industries. 
Much of this work has supported the 
development of technical standards 
subsequently adopted by the industry and 
formalised by European standardisation bodies, 
and has contributed to the development of 
technical platforms and tools supporting 
electronic commerce. 
Research and Technological Development 
(RTD) Programme activities during the Fourth 
Framework Programme have equally 
encouraged greater participation by SMEs, who 
can benefit, for example, from systems and 
services which stimulate tele-working. A specific 
example of an integrated approach to systems 
and services of benefit to SM Es is the 
Integrated Applications for Digital Sites.41 Here, 
on-line and off-line multimedia applications 
supply integrated services from central/local 
government -in transport management, tele­
medicine, education and training -to local 
citizens, businesses and other organisations in a 
cost-effective, user-friendly manner. 
Following the adoption of the proposal for the 
Fifth Framework Programme in April 1997, the 
Commission has reviewed research activities in 
IT, telecommunications and telematics with a 
view to grouping them into a single integrated 
programme. In the context of convergence, this 
includes R&D activity in the area of multimedia 
and audiovisual content.42 
11.2' Marlcef'fr~ffd_s _ 
This section looks at market trends without 
however providing an assessment under the 
Community competition rules. The activities and 
investment strategies of market players in 
response to new developments are now 
becoming evident, and give a good indication of 
41 Subject of a Call for proposals in 1997 under the 
Telematics Applications Programme. Digital sites are 
physical sites in geographical areas such rural areas, 
small towns, cities or regions, in which local needs of 
citizens and businesses can be met through IT and 
telecommunications multimedia applications. 
42 See COM(97)553final of 5.11.97, Fifth Framework 
Programme. Research and Technological Development 
(1998-2002), Commission Working Paper on the Specific 
Programmes: Starting points for discussion. 
11 how those players perceive future trends. One 
indicator of convergence is the willingness of 
market players to exploit the possibilities 
provided by new platforms, in particularly, the 
Internet to expand their activities beyond the 
confines of their traditional core markets in both 
a geographical and product sense. Webcasting 
highlighted above is one such example. The 
entry of telecoms operators into the area of 
Internet service provision and Internet voice 
telephony provision is arguably another. Such 
services are new only in the sense that they 
represent an excursion into new areas for the 
provider in question. But some are new to all­
comers. 
New services 
The flexibility of digital information is creating the 
possibility for more and enriched conventional 
services, (such as digital television and radio 
and better quality mobile communications), as 
well as a whole range of new services and 
applications. These new services are as varied 
as electronic newspapers. on-line supermarkets 
and catalogues, home-banking, and the use of 
multimedia web sites for both internal 
communications, and as a key tool for business. 
Examples: 
• Broadcasters who are branching into new areas, 
such as data broadcast, Internet webcasting and 
telecommunications transport and services; 
• Telecommunications operators who are providing 
audiovisual services, such as video-on-demand 
and cable television. 
• Internet service providers· who are starting to 
distribute audiovisual material, and Internet 
access providers supplying voice telephony 
capability. 
Despite current limitations a number of 
applications are closing the gap between smart 
television and video Internet. The area where 
these two areas converge curref!tlY constitutes 
the most fertile ground for innovation and 
entrepreneurial activity -as well as for creation 
of entirely new types of content. Innovative 
forms of graphic-rich "Internet channels" are 
building on the creativity of previously separate 
metiers of video production, computer imaging 
and information management. Similarly, high­
end networked video-games are building 
devoted constituencies of players across 
national borders. In a seamless and scaleable 
digital environment, innovative hybrid multimedia 
applications are appearing -such as digital 
television 'infomercials' with Internet response 
mechanisms (for immediate ordering), CD-ROM 
catalogues with Internet connections (for content 
or price updates) and commercial Web sites with 
local CD-ROM extensions (for memory-intensive 
multimedia demonstrations). 
At the delivery end of the value chain, players 
are moving into what are for them new areas of 
activity. New features are being added to 
services on all networks. In addition, the 
services themselves are changing by combining 
the features of hitherto separate services. Thus 
television programmes are 'data-enhanced' by 
the parallel availability of text and graphics. One 
pilot project, for example, supplements 
broadcasts of horse-races with supporting text 
and facilities for on-line betting. The same 
possibilities are offered by digital radio. 
New players 
As convergence enables incumbent players in 
the telecommunications broadcasting sectors to 
expand their roles, it also marks the entry of 
powerful new players from publishing and IT industries. For information providers, such as 
publishers, database operators and financial 
information services, the Internet constitutes a 
crucial extension of their traditional know-how, 
and an ideal means of recycling and 
"repurposing" rich stores of information. 
Similarly, IT companies are exercising significant 
influence on shaping the new services market in 
Europe -as they move towards generalised on­
line distribution of software and multimedia 
content, make substantial investments into cable 
and television business, and act as integrators of 
advanced television trials in Europe. 
Underpinned by the exponential growth of 
computing power, kept responsive to change by 
shortened product life-cycles, used to operating 
in a fiercely competitive environment, and 
historically unhampered by cumbersome 
regulation, the contribution and potential of thP. 
IT industry to first drive and then benefit from 
convergence should not be underestimated. 
Fig.4: Locations of the Major Players in the Value Chain and Relationships between them 
TO Broadcaster 
Content creation 
Packaging 
Service Provision --Infrastructure 
provision 
Terminal vending 
- Core strength 
IE~#I Partial competence 
(Source: Squires, Sanders Dempsey LLP and Analysys Ltd.) 
New market structures 
The significant merger, acquisition and alliance 
(M&A) activity described in Chapter I are 
motivated by a range of commercial and 
strategic factors. The trend towards 
convergence would be one of these, albeit an 
important one. Some argue that new market 
structures reflect a substantial shift in the value 
chain, with value migrating from simple delivery 
to the production and packaging of content or 
the offer of on-line of services and transactions. 
Liberalisation and competition, coupled with 
digitisation and significant increases in network Electronic Internet service Content Software 
developer publisher provider creator 
12 Existing relationship or contractual link 
_____. Potential contractual link to another player 
capacity of both broadcasting and 
telecommunications networks, is rendering the 
transmission and delivery of services a 
commodity item, converting it into a low-margin 
high-volume business. Firms currently operating 
in the lower parts of the value chain are 
therefore seeking to increase volume on their 
core activity, through horizontal alliances or 
organic growth into new geographical markets. 
At the same time, they are moving up the value 
chain to higher margin activities through vertical 
concentration. Telef6nica's purchase of Antena3 
TV in Spain, the STET group's creation of· 
Stream in Italy and Microsoft's acquisition of 
cable television operator Comcast in the USA 
are all examples of companies moving across 
sectors as much for strategic as for commercial, 
profit-motivated reasons. Fig.4 maps out these 
strategies by type of market player and by 
element of the value chain brought into play. It 
also indicates the types of commercial 
relationship which are emerging between 
different actors. It should be noted, however, 
that the representation is schematic and, that 
neat distinctions between content creation, 
packaging and service provision are sometimes 
difficult to establish. 
The situation is reinforced by the emergence of 
new industries filling in the gaps between 
adjacent sectors; some of the start-up 
companies pioneering on-line computer 
networking services a decade ago have grown 
into multi-billion dollar groups today. 
CompuServe and American On-line are two 
cases in point. The recent linking of those two 
businesses together with Worldcom is a further 
example of the fluidity of current market 
structures . 
11~$T~.~'.,~eh~ilrr1~f per,sP,~~tiv~ 
The nature and potential growth of market 
demand for the new services is the greatest 
uncertainty facing market players. The signals 
from the marketplace are conflicting. Supply­
side indicators, in terms of M&A activity and 
investment in new service development, give a 
positive impression of market potential. On the 
other hand, although growth rates in Internet 
services are impressive, only around 8% of 
European citizens are using the Internet at work, 
and around 4% at home. This represents a 
small proportion of the total consumption of 
audiovisual material, in which TV set penetration 
exceeds that of the telephone. Moreover, many 
view the passive consumption of family 
television viewing to be the mainstay of 
audiovisual consumption for the foreseeable 
future.43 
However, there are some indications of potential 
change in the patterns of consumption of 
services and in ttie home environment. Some of 
these are taken from market developments in 
North America, where the use of PCs in homes 
is currently much greater than in Europe. 
Parallels drawn from the US market will only be 
valid therefore to the extent that a similar level of 
PC use can be achieved in Europe. 
43 See Economic Implications of New Communication 
Technologies on the audio visual markets. Study carried 
out for the European Commission by Norcontel (Ireland) 
Ltd., March 1997. 
13 The changing patterns of consumption 
Consumers are likely to use new products and 
services offered through convergence only 
insofar as those services are useful to them. 
The take-off of new services cannot therefore be 
simply supply-driven, but must take account of 
demand and, in particular the consumer 
viewpoint. This is reflected in consumption 
trends which are beginning to show the first 
signs of a convergence in the home: 
-in 1998, for the first time more personal 
computers will be sold in the world than 
television sets; this must of course be set 
against the very high penetration of TVs in 
the home, and the fact that PCs are sold to 
both businesses and homes; 
in 1995, Americans spent less than half of all 
screen-viewing time in front of computers; 
recent US audience measurements indicate 
that Web users already consume 59% less 
television than average viewers and it is 
estimated that the TV set's share of screen 
time will be half that of the personal computer 
in 2005; on the other hand, audience figures 
for 1995/96 show that the average daily 
viewing time in Europe increased by 4 
minutes, compared to a decrease of 2 
minutes in the US; 
-research into activities displaced by 
increased personal computer usage shows 
that watching television loses out rather than 
reading books and magazines, or playing 
console video games. According to Price 
Waterhouse, young adults in the US between 
18 and 35 who used to spend 4 hours a day 
watching TV now spend one of those hours 
'surfing the net'. 
In terms of available leisure time and 
expenditure, the youth segments are already 
opting for interactivity. Video games alone 
represent nearly 20% of under sixteen year olds' 
total media consumption in som·e markets, 
according to Arthur Andersen.44 
Changing home environment for 
consumption 
A key factor in the take up of new services will 
be the penetration of PCs in the home, and 
particularly multimedia and Internet capable 
PCs. Here whilst PC penetration levels of up to 
30% are common in most Member States, 
penetration of multimedia PCs is considerably 
lower and Internet usage in the home as 
mentioned above is growing steadily but from a 
low base. On the other hand, the current 
44 "He who hesitates has no audience", Jolyon Barker, 
Broadcast. 10 May 1996 
average life of a PC is three years suggesting 
the current stock of PCs will become multimedia 
capable fairly quickly, wh.ilst increasing 
familiarity with these technologies at work and in 
schools will help to boost home take up further. 
One major change in the home has been the 
transition from collective, family viewing of two or 
three generalist TV channels to individual family 
members viewing alone, selecting from the much 
broader range of channels on offer in today's 
multi-channel environment. The multi-channel 
broadcast environment itself competes with 
packaged media, played on video recorders and 
video-game consoles. All of this will increasingly 
compete with the computer, particularly with its 
use on line. 
Aware of the changing patterns of consumption, 
the television and computing industries are vying 
for viewers' attention. Broa~kasters and TV 
manufacturers are enhancing the interactive 
capabilities -of their services and equipment. 
Today's digital television set-to'p boxes already 
combine television and telecommunication 
functionality. TV sets can already double as 
monitors when connected to low cost Internet 
appliances. Many in the consumer electronics 
industry predict that TV sets with built-in PC 
capability, including Internet access, will become 
an important feature of the consumer market in 
the near term. 
From the other end of the spectrum, the 
computer industry is already offering multimedia 
PCs which allow viewing of television channels. 
Hybrid WebTV set-top boxes combine Internet 
and digital TV reception with facilities allowing 
storage and manipulation of video content, 
enabling applications as diverse as downloading 
of films and sending of video-clips as E-mail. 
Whether the PC/TV or the TV/PC will win this 
battle is, at the moment, quite unclear. What is 
certain however is that the consumer's "home 
platform" is set for significant evolution over the 
next few years. Yet at the same time and in 
parallel, consumer demands and needs for 
better access to information will also allow for 
convergence of those telecommunications, 
media and information technology products and 
services that cater to public interest domains 
such as education, health, environment and 
transport. 
:~.~~~1:~9fi:Iffi~-™:.!~.~~*q~!!f'¥?~ij~!~·J~E•···:~0'.lJ~~~:::;~~~gT~:::·~;·· >, 
This chapter discussed the overall political and 
economic context for convergence, placing it 
against the background of the Information 
Society, and describing the range of Community­
level activity in this area. 
14 It then went on to discuss market trends from 
both supply and demand perspectives, 
punctuating optimistic views on the future 
realisation of convergence with a realistic view 
of today's patterns of consumption, and the 
relative starting points of different platforms such 
as the Internet and free-to-air broadcasting. 
(A) Will convergence have a significant 
impact on job creation, as well as on education 
and training in the European Union? How is 
convergence likely to impact the way in which 
we work? Will its effects be spread evenly 
throughout the European Community? 
(8) What effect are current developments 
likely to have on telecommunications, media and 
IT sectors, in terms of the underlying economics 
of those sectors, the services offered and the 
likely service providers? 
(C) What evidence is there of changes in 
Europe in the way services, information, 
entertainment and culture is being accessed in 
the home and in the office? What are the 
implications of current levels of PC penetration, 
Internet use and TV penetration for the take up 
of new services? What action (if any) is needed 
to overcome low levels of multimedia computer 
penetration and Internet use? 
(D) In the light of the positions put forward in 
the Commission Working Paper on the Fifth 
Framework Programme,45 what kinds of 
Community RTD projects should be launched in 
the context of convergence? 
45 Op. Cit. Note 42 
Convergence is already showing signs of being 
a key driver of current developments in 
telecommunications, media and information 
technology industries. The range of 
developments and trends for comment identified 
in Chapters I and II above have the potential to 
impact substantially on the take off of the 
information society in Europe. 
In order to formulate an appropriate response to 
current developments, it is important to launch a 
broad debate on what, if any, barriers exist -
actual or potential -which may hold back the 
trend towards convergence. 
Chapter 111 attempts to identify such barriers and 
invites comments on their impact. Not all the 
barriers identified are regulatory in nature, nor is 
a regulatory solution the only means of resolving 
potential problems. Nevertheless, it seems 
sensible in the overall context of this Paper to 
invite reflections on a wide range of factors 
which might impact upon the process of 
convergence. 
Where regulatory barriers are identified 
therefore, there should not be an automatic 
assumption that a regulatory response is 
required. As stated earlier, the application of 
competition rules to this sector is important, and 
market solutions which remove barriers to 
convergence within tt.ie context of those 
solutions will often be more appropriate. 
At a Community level, actual or potential barriers 
must be assessed against the basic objectives 
of the Treaty, such as the establishment and 
functioning of an Internal Market; the promotion 
of a system of undistorted competition; the 
realisation of trans-European networks, or the 
maintenance of a high standard of consumer 
protection. They must also be examined as well 
as against the specific freedoms envisaged in 
the Treaty, such as the rules relating to the 
freedom to provide services or the right of 
establishment. 
Rules creating restrictions need to follow a 
general public interest objective (as laid down in 
the EC Treaty or by the ECJ) and must be 
proportionate to that objective to be acceptable. 
At the same time, any Community action 
(including action to harmonise divergent national 
rules), would pursue these general public 
interest objectives, and would be subject to the 
principle of subsidiarity. 
15 In the following sections, we attempt to identify 
key actual and potential barriers to the 
development of the convergence phenomenon . 
and ultimately to the realisation of the 
Information Society in Europe. 
Access to users. Approaches differ between 
sectors with regard to the ownership and 
operation of networks. This means that many 
services will have a limited choice of routes to 
the customer. Even v... here legal monopolies 
have been abolished, the economics of the local 
loop may leave current telecommunications and 
cable TV network owners with a predominant 
role in connecting customers in many markets. 
Where bottleneck facilities are controlled by 
vertically-integrated players, there is the 
potential to limit competition at the service level. 
Regulatory restrictions on use of 
infrastructure. Current restrictions in some 
Member States (and not others) regarding what 
types , of services can be carried on different 
infrastructures could make it difficult for 
operators to formulate unified strategies 
addressing pan-European markets. It may also 
prevent economies of scale being realised. The 
resulting higher unit costs, and hence tariffs, 
could hold back the delivery of innovative 
services. 
Prices for telecommunications services. High 
prices for telecommunication services and for 
the underlying network infrastructure used to 
deliver services may impact significantly on the 
demand for services. Among the reported 
reasons for Internet's success in North America 
is the widespread application of a flat-rate tariff 
structure offering 'free' local telephone calls, and 
the fact that competition has led to lower 
charges for leased network capacity. 46 This 
results in significantly lower costs for access 
providers. 
Availability of content. As mooted in Section 
11.1, expansion in the means of delivery brought 
on by improvements in technology and by 
convergence may shift the bottleneck from 
delivery to content, and may lead to a shortage 
of adequate content in the medium term. 
Premium content is already a key factor for 
success in both digital and analogue television 
markets, Continued shortages could inhibit new 
market entry, and with it competition and 
innovation. 
46 According to a 1997 OECD report, 20 hours of Internet 
use cost $38 in Finland, $64 in the UK, and $74 in 
Germany, compared to $29 in the US. 
Fragmentation of EU market. Expansion in the 
number of broadcast television channels will be 
likely to be at the expense of the market shares 
of existing broadcasters. Shrinking market 
shares could be offset by widening the target 
audience beyond national frontiers. Similarly, as 
new services develop, much innovation will 
come from small players exploiting niche 
markets, or from large players funding large 
R&D budgets. Either way, they will both need 
larger volumes than can be provided by national 
markets in order to defray their costs. Whilst TV 
channels are free to seek larger audiences as a 
consequence of the Television without Frontiers 
Directive, the principle challenge for them may 
be one of multilingual, multi-cultural audiences, 
rather than potential barriers to establishment in 
countries in which they wish to establish a 
commercial. presence. 
Insufficient IPR protection. Content providers 
will only be willing to make content available if 
their intellectual property rights are sufficiently 
protected. Similarly, publishers and operators 
will only invest in innovative services if they are 
confident that new means of delivering 
information and/or services provides an 
adequate degree of protection for the intellectual 
and industrial effort of their organisations and 
those of content providers. Insufficient 
protection is already a barrier for off-line 
electronic content, and this could project into the 
on-line world. Recent WIPO ag'reements 
referred to later in the Paper are helping to 
clarify the current situation. 
In view of advanced state of current Community 
initiatives which adapt the existing legal 
framework in this area to the digital environment, 
this Green Paper does not address regulatory 
issues raised by copyright and related rights. 
These particular issues have been extensively 
dealt with in the Green Paper on Copyright and 
Related Rights in the Information Society and in 
its follow up Communication,47 and the resulting 
approach takes due account of the evolution of 
technologies towards convergence. 
Regulatory uncertainty Regulatory uncertainty 
resulting from the scope of current definitions; 
the way they are applied or whether they fit 
changing market structures or service 
characteristics could constitute an important 
barrier to investment by market players. Whilst 
many definitions today (at both a national and 
Community level), such as those of 
47 COM(95) 383 19.7 .95 and COM(96) 568, 20.11.96, 
respectively. 
16 telecommunications, voice telephony, television 
broadcasting or information society services will 
continue to remain valid for many activities, the 
provision of services may be nevertheless be 
held back where those definitions leave 
businesses uncertain as to the regulatory 
treatment which their services will receive. 
In some cases, this may simply be a risk that, 
notwithstanding current definitions at a 
Community level for both broadcasting and 
telecommunications activities, regulators in 
some Member States may place a particular 
novel service under one regulatory regime, 
whilst it is considered to fall under another 
regime in other Member States.48 
Furthermore, within Member States barriers 
could result if similar services were regulated 
differently, for example on the basis of the 
platform over which they are delivered. 
In other cases, the characteristics of services in 
the future may mean that they straddle more 
than one regulatory area on the basis of current 
definitions. This may result in a disproportionate 
regulatory burden on certain services. 
Finally, the technological and market trends 
identified in Chapters I and 11 may also challenge 
the basis on which definitions are currently 
drawn up. 
One example of regulatory uncertainty arose 
during the recent French election campaign, 
where rules prohibiting the publication of opinion 
polls in the 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 disadvantage49• 
Multiple regulatory bodies. The process of 
obtaining regu~atory 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. The 
provision of services may be held back where 
market players are subject to a number of 
regulatory regimes or must deal with multiple 
regulatory bodies, for example, where a network 
is required to be licensed both as 
telecommunications infrastructure and as a 
48 One example is Video-on-Demand which according to 
the Squire Sanders Dempsey Study is considered either 
treated as a value-added telecommunications service or 
has not yet been formally categorised in all Member 
States, except France and the UK, where it falls under 
the broadcasting framework and Germany, where it falls 
within the new category of "teleservices". 
49 OECD op cit note 5 
broadcasting network (because it is used to offer 
both services). 
Market entry and licensing. There are 
differences within the telecommunications, 
media and IT sectors with regard to whether or 
not market entry is unrestricted, limited or 
subject to monopoly or special rights. The IT 
sector is generally free of licensing procedures. 
Any use of licensing or any regulatory limitation 
on market entry represents a potential barrier to 
the provision of services, to investment and to 
fair competition and should therefore be limited 
to justified cases. In particular, the trend should 
be towards limiting regulation where potential 
barriers exist, rather than extending heavier 
regulation to more lightly regulated sectors in 
order to equalise market conditions. 
Where licensing continues to be important, there 
is considerable variation between sectors and 
between Member States in the length of time it 
takes to obtain licences; the transparency of 
procedures; the duration of licences and the fees 
paid. Many telecommunications and broadcast 
network licences are national in scope, but 
others -particularly for cable lV delivery are 
regional or local in scope. All of these factors, 
whilst acceptable in the context of the specific 
sectors, may make it harder or more expensive 
for organisations to offer an integrated package 
of services, particularly across borders. This 
may represent a disproportionate burden given 
that the technology promotes such integration 
and there is likely to be increasing demand from 
both business users and consumers for such 
integration. 
Access to networks, conditional access 
systems and content. The issue of access is 
principally a matter for commercial negotiation, 
subject to the overall safeguards provided by 
competition rules. Nevertheless, there is 
currently an asymmetry in that access rules are 
in place only for certain networks (for example, 
the interconnection and open network rules 
which apply to telecommunications networks, 
but not to infrastructure used for broadcasting 
activities. Similarly, a framework exists for 
conditional access systems for digital television, 
but not for all types of digital services. (Note that 
in the latter case, the UK is currently consulting 
on the development of common framework for 
conditional access systems for all digital 
services). 
Where market players control the access to the 
customers, for example, through ownership of 
the local loop, or through control of conditional 
access technologies, the company concerned 
may be able to discriminate in favour of its own 
services. 
17 With regard to access issues linked to content, 
normal commercial principles generally apply, 
tempered only by applicable competition rules. 
One exception to this is the treatment of certain 
"premium" content in Member States, such as 
national sporting events where the revision to 
the Television without Frontiers Directive has 
provided for the mutual recognition across the 
Community of events reserved by Member 
States for free-to-air television broadcasting. 
Allocation of radio frequency and other 
resources. The provision of services (and the 
development of effective competition) will 
depend on the availability of sufficient network 
capacity, which for many services means access 
to radio spectrum. The parallel expansion of 
television broadcasting, mobile multimedia and 
voice applications, and the use of wireless 
technologies within fixed networks will lead to a 
significant growth in demand. Where there are 
marked differences in the amount of spectrum 
available or the way in which it is allocated, 
potential barriers are likely to arise, impacting 
the underlying cost-bases of network operation 
in the different sectors, potentially encouraging 
competitive entry into one sector rather than 
another. 
Varying approaches to the achievement of 
public interest objectives. The regulatory 
frameworks for each of the sectors affected by 
convergence contain a variety of measures 
seeking to ensure particular public interest 
objectives which are specific to those sectors 
and which are consistent with Community 
objectives. Indeed the Commission attaches 
great importance to the delivery of general 
. interest services50 in particular, in ensuring 
social and regional cohesion in the Community, 
whilst in the telecommunications area, the steps 
taken to ensure universal service at a national 
level now flow from a framework established at a 
Community level. Nevertheless, the manner in 
which such objectives are pursued (rather than 
the objectives themselves). may. represent a 
potential burden to the organisations subject to 
obligations in respect of their implementation .. 
In the context of the cross-border provision of 
services, tensions between differing approaches 
between sectors and between Member States, 
could deter such service provision or investment 
in innovative services or networks. 
Public confidence in new environment. 
Where the level of . protection relating to 
consumer protection, the legal treatment of 
electronic transactions, or data protection and 
privacy vary across sectors, users and 
so See COM(96)443 
consumers may lack confidence in the services 
and systems made available, holding back the 
development of converged services. 
Lack of standards supporting interoperability 
and interconnection of converging networks. 
The goal of ensuring that any user can 
communicate with any other user will be held 
back where market action is unable to deliver 
products and services which are interoperable. 
Proprietary standards controlled by dominant 
players could limit such interoperability. 
~~at is the likely impact of the barriers identified 
and are there other barriers or factors which may 
have a significant impact on the convergence 
process in Europe? 
18 In examining the impact of barriers identified 
above, Chapter IV considers first whether certain 
features of the convergence phenomenon create 
new and specific challenges for regulation. 
Section IV .2 identifies possible approaches 
towards key regulatory. Section IV.3 looks at 
meeting public interest objectives and Section 
IV.4 examines options for a possible future 
regulatory model. The chapter concludes with 
an overview of relevant international issues. 
··1y:'~, •·''•~.~.a•l.i~JS9~!:.it9::!~i~jf~9;re9y~~t~IY 
•.· ;;;··· · ~P.pfq~~tt:i~J1;1::~~:~::i1:.:;r:.··:.·· ;;.}''J'.{>;x;2·•····••"··.····••.·······~, 
Areas where the convergence phenomenon 
could raise difficulties for existing regulatory 
approaches are identified below. These 
challenges apply both to the substance of 
regulation and to its practical implementation. 
Possible solutions to these issues are discussed 
in Sections IV.3 to IV.5. 
The role of regulation 
Regulation is r'tot an end in itself. Instead, it is 
simply a tool, alongside the use of market 
forces, for achieving wider social, economic and 
general policy objectives, such as those 
highlighted in Chapter II. This has already been 
recognised in the Commission's Communication 
on electronic commerce, which proposed the 
principle of "no regulation for regulation's 
sake".51 This principle applies equally to all 
areas of convergence. The fundamental 
objectives underpinning regulation in the 
Member States are not undermined by 
convergence. These objectives are varied and 
tailored to the specific needs of different sectors, 
but include national goals such as promoting 
efficiency, economic welfare, and the public and 
consumer interest. At a Community level, 
similar aims are reflected in the provisions and 
objectives of the EC Treaty. 
Nevertheless, the nature and characteristics of 
convergence which are examined below, as well 
as the perceived need of industry actors for 
regulatory intervention to be limited and closely 
targeted, should lead public authorities at both a 
national and a European level to re-examine the 
role and weight of regulation in a converging 
51 Op,cit. The three other principles set out in that 
Communication are also important in the context of 
convergence. These were that any regulation must be 
based on Single Market freedoms; must take account of 
business realities; and, must meet general interest 
objectives effectively and efficiently. 
marketplace. 
highlighted: Three key issues can be 
• The role of market forces. Some 
commentators place particular stress on the 
need to place greater reliance on the ability of 
market forces to ensure regulatory objectives. 
They would argue that this philosophy is 
reflected in the evolving approach in most 
Member States to universal service in 
telecommunications, or in the IT and 
broadcasting worlds by the industry-led 
development of interoperable standards ar:ld 
software. Others are doubtful about the 
ability of market forces to provide adequate 
ex ante guarantees for consumers, and 
recognise an important role for regulation in 
safeguarding public interest objectives. 
• The balance between sector-specific 
regulation and competition rules. A further 
key issue is the balance between competition 
rules and sector-specific regulation, with 
many arguing for a preference to be given to 
the application of competition rules to 
individual cases within a converged 
environment, rather than the further 
development of extensive regulation. 
• Finding workable solutions. Where regulation 
is in place it must apply in a workable and 
timely manner. The global nature of the 
Internet or the regional nature of satellite­
delivered services point to the potential 
difficulties of enforcing the rules of one 
Member State in other countries; whilst the 
rapid pace of change in terms of services and 
products, measured in months and weeks, 
presents a real challenge for anyone seeking 
a legislative solution to any particular 
problem. Such solutions at a Community 
level tend to be measured in months and 
years. 
The challenge to the consistency of 
regulation 
A key feature of a converged environment is the 
possibility that any network can be used to 
deliver a much wider range of services than is 
currently the case. It does not automatically 
follow that the delivery of different services over 
a single network or via a single service platform 
makes those services the same, nor that the 
public interest objectives underpinning regulation 
automatically transpose from one service to 
another. 
For example, whilst a film, a song, a railway 
timetable and a phone conversation may all be 
carried in a digital form, this does not result in 
the user treating these different services/ 
activities as interchangeable. In the same way, 
19 regulatory approaches to each of these services, 
whilst potentially based on similar general 
principles, are likely to continue to be tailored to 
the specific characteristics of these different 
services. 
Nevertheless, as stated in chapter Ill, regulating 
essentially similar services differently, 
particularly, on the basis of the technology used 
to deliver the service, could represent 
discriminatory treatment which might hold back 
competition, investment and the provision of 
services. One example of the treatment of 
opinion polls under French election law was 
already cited. Another example could be the 
limited scope of the current Interconnection 
regime in telecommunications which would offer 
interconnection rights to an organisation 
operating a public telecommunications network, 
but not to someone operating a broadcasting 
network. Interconnection between the two may 
be of particular importance in the context of 
services which use broadcast media to 
download information and services, but rely on 
the telecoms network to provide a return 
channel. 
In assessing such differences in regulatory 
treatment both across sectors and between 
Member States, any analysis at a Community 
level would need to consider whether continuing 
differences were consistent with public interest 
objectives identified in the Treaty and by the 
Court of Justice and whether the rules in place 
were proportionate to the objective sought. 
Where the answer to either question is no, the 
rules in question could be attacked before the 
Court of Justice. 
Where the barriers resulted from measures 
which are fully consistent with the Treaty and 
where principles of mutual recognition could not 
be applied, Community measures (such as 
harmonising legislation) might be then justified. 
The challenge of globalisation 
The globalisation of services is a ·feature of the 
new landscape. While satellite television broad­
casting represents one example, it is the Internet 
which constitutes the quintessential global 
network. The Internet's structure and ubiquity 
potentially allow it to defy attempts to apply 
existing regulatory objectives at national level. 
In the new global environment, the way in which 
networks and services are regulated in different 
regions has the potential to impact substantially 
on investment in those regions. Excessive or 
inadequate regulation in one region could result 
in a migration of economic activity elsewhere, . 
with adverse consequences on the development 
of the Information Society in the former region. 
The challenge of abundance to regulation 
based on scarcity 
Convergence may challenge current regulatory 
approaches, particularly, with regard to the 
licensing of networks and allocation of 
resources, where such approaches reflect a 
perceived scarcity of both radio-frequency and of 
content. 
Current market technological trends, such as 
substantial increases in network capacity; the 
possibility of content and services to be 
delivered over a number of platforms; the 
increase in competing routes to customers and 
improvements in digital compression suggest 
that in a fully digital environment, scarcity may 
over time become a less significant issue, calling 
for current regulatory approaches to be 
reassessed. 
Nevertheless, the removal of scarcity in the 
transmission network will not necessarily be 
accompanied by a corresponding increase in 
content or services (in particular, "premium" 
content or services needed to fill those 
channels.) In any event, pending the complete 
migration of the broadcasting sector from 
analogue to digital services, capacity bottlenecks 
are likely to continue for the foreseeable future. 
The challenge to distinctions between public 
and private activities 
Convergence will not prevent the implementation 
of regulation based on distinctions between what 
is private or public, but it may shift the 
boundaries of where lines between the two can 
be drawn. This could have consequences for 
the level of regulation applied to a particular 
service. To the extent that rules have been 
formulated on the basis that particular networks, 
services or activities are public rather than 
private, 52 a reassessment may be required to 
determine whether current boundaries between 
what is public and what is private remain valid in 
the light of technological developments. For 
example, new means of delivering services, 
interactivity, and the possibility of per-transaction 
payments may make it harder to draw those 
lines in the future. 
Another practical example, is reflected in the two 
recent WIPO treaties which relate, inter alia, to 
52 One example in telecommunications, is that whilst public 
telecommunications networks may be subject to 
conditions relating to both public interest objectives and 
to technical requirements, private telecommunications 
networks may only be subject to technical requirements. 
In broadcasting, the definitions of broadcasting in a 
number of Member States specifically include the 
element of delivery to the public to categorise services 
falling within the broadcasting regime. 
20 copyright. These have clarified that a "public 
communication" for the purposes of copyright 
law includes the situation where a work is made 
available to the public (for example, via a web 
site) in an interactive way. 
The challenge to regulatory structures 
The fragmentation, complexity and diversity of 
regulatory structures involved in the converging 
sectors was one of the issues highlighted in 
Section 111.2 above. To the extent that a risk of 
overlapping regulation exists or the need to deal 
with multiple regulators within or between 
Member States, market players may call for a 
rationalisation of current structures in order to 
avoid unnecessary administration creating 
barriers. For example, where services can be 
offered over a single network, organisations may 
benefit from dealing with a single regulatory 
authority in a Member State on questions linked 
to that network, irrespective of the services 
offered over the network. 
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(A) Do current developments require more 
or less regulation in the sectors affected by 
convergence, more or less reliance on 
competition rules, and more or less reliance on 
market forces to achieve the objectives identified 
in earlier Chapters? 
(B) Whether and if so, to what extent 
convergence challenges the principles 
underpinning existing regulatory approaches in 
the telecommunications, media and IT sectors? 
IV.2 Tackling th~ barriers ~ The regulatory 
issues 
This section examines seven broad areas where 
potential regulatory barriers have been 
identified: 
• Definitions 
• Market entry and Licensing 
• Access to networks, to conditional access 
systems and to content 
• Access to frequency spectrum 
• Standards 
• Pricing 
• Individual consumer interests 
The section does not address a number of 
issues which are currently the object of separate 
initiatives within the Commission. These include 
areas such as media ownership, digital 
signatures, and encryption, and as mentioned 
above, intellectual property rights, copyright and 
related rights. 
IV.2.1 A need for new definitions? 
Current definitions delimit the boundaries· 
between different sectoral regulation and 
different regulators. Regulation is linked to the 
definitions of activities. Although regulation can 
be "technology neutral", as in the broadcasting 
sector (and increasingly in the telecoms sector) 
it may be linked to the technology used to offer 
services, as well as between areas which are 
regulated and those which are largely free from 
detailed rules. 
The convergence process will not remove the 
need for definitions, but uncertainty about the 
regulations applicable to activities or different 
definitions at national level could create barriers 
to investment or to the provision of services. At 
the same time, it should be noted that the fact 
that different services can be delivered over the 
same network does not in itself alter the 
character of the services so that they become 
one and the same service. 
In the light of the potential barriers identified 
above, current approaches to regulatory 
definitions (and the way in which those 
definitions are applied by regulatory authorities) 
should be examined to consider whether they: 
• are sustainable in the light of technological 
developments; 
• result in the same service falling under a 
more than one regulatory regime, and where 
it does, whether that is justified. 
• lead to discrimination by allowing similar 
networks or services to be regulated 
differently. 
A number of Member States have provided 
definitions for certain new activities. In 
Germany, new concepts of "teleservices" and 
"media services" have been created, focused on 
the nature of the activity rather than the 
underlying technology. Audiovisual law in 
France has also focused on the nature of the 
service rather than its underlying platform. 
Possible options 
One option would be to continue to work with 
existing definitions, recognising that these 
21 remain valid for the majority of services offered 
and to extend, where appropriate, the principles 
underpinning current regulation, whilst adapting 
the way in which it is applied to take account of 
the specific characteristics of the "new" services. 
A second option might be the creation of a 
separate category of "new" services to co-exist 
with existing definitions. 
A third option would be the adaptation of current 
definitions used in telecommunications, and/or 
broadcasting to reflect current trends and 
developments. 
IV.2.2 Market entry and Licensing 
Among the potential barriers identified in 
Chapter 111 were a number resulting from the 
impact of the differing market entry, licensing 
and operating conditions in the sectors affected 
by convergence. This raises a number of issues 
which are considered below: 
Market Entry 
The grant of special and exclusive rights by 
Member States is not incompatible with the 
Treaty rules, where such rights are justified for 
the fulfilment of a task of general economic 
interest assigned to the undertaking concerned 
and proportionate to the achievement of the 
objective in question, even if those rights result 
in a restriction of competition or a barrier to the 
free movement of services. 
In this context, some would advocate that where 
any network can potentially carry any service, 
public authorities should ensure that regulation 
does not stop this happening. They would argue 
that to allow artificial restrictions on the use of 
networks, or to maintain monopolies where other 
parts of the converged environment are fully 
open to competition, may deny users access to 
innovative services, and create unjustified 
discrimination. Such an approach would be 
seen by them as running counter to the 
technological and market trends identified earlier 
in this Paper. 
Barriers could occur in a number of ways: 
(i) the grant of monopoly or special rights over 
networks or services to one or a small 
number of companies, may prevent others 
from providing the same service; 
(ii) limiting the services that can be offered over 
a given network (for example, preventing a 
telecoms operator from using its network to 
offer entertainment services) 
(iii)requiring certain services (such as free-to-air 
broadcast channels) to be carried, which 
reduces the scope for other services to be 
provided, 
Others would argue that the grant of limited 
rights or limiting the use of networks to particular 
purposes are important ways of encouraging 
investment. 
Some also argue that these types of restrictions 
are particularly important where competition is at 
an early stage or where a particular player 
enjoys a very strong position (for example, over 
a competing network or over "premium" content). 
In such cases, specific safeguards can ensure 
that potential competitors are not discriminated 
against or that there are adequate incentives for 
them to enter the market. According to this 
argument, appropriate safeguards might take the 
form of accounting separation or transparency 
requirements, structural separation or even full 
line-of-business restrictions. 
Licensing 
Many activities and areas in the computing, and 
IT areas are not subject to licensing 
requirements. That is likely to continue to be the 
case in the future and the Commission sees no 
reason why there should be any change in this 
practice, providing IPR issues are effectively 
addressed. 
At the same time, licensing is likely to remain a 
key regulatory tool through which public 
authorities can exercise control over their 
national markets, particularly in relation to the 
prov1s1on of telecommunications and 
broadcasting networks and services. 
Any assessment of the justification for, and 
effectiveness of, licensing procedures must in 
the first instance be made in the context of the 
specific sector to which these rules are applied. 
Nevertheless, the range of potential barriers 
identified in Chapter Ill linked to licensing 
suggests that this issue could need to be 
examined more closely in the light of technology 
and market trends. 
Some commentators argue that a key aim must 
be to make it easier to get into the market and to 
move towards lighter obligations applied in a 
consistent manner across the converged 
environment. They are therefore encouraged by 
examples in the computing, Internet and on-line 
publishing industries, where a degree of self­
regulation, for example, in relation to harmful or 
illegal content on the Internet, has supplemented 
the application of general laws, such as 
competition or consumer protection rules 
applying across whole range of economic 
activity. Even so, self-regulation is not without 
risks for the Internal Market given the greater 
possibility for divergent approaches in 
developing self-regulation, unless co-ordinated 
to some degree at a Community level. 
22 At the same time, even where licensing systems 
are not needed and self-regulatory solutions are 
proposed, consumers may still require 
guarantees that their interests are adequately 
protected and that the respective responsibilities 
of service providers and operators are identified 
with regard to the consumer. Consumers should 
be fully involved with the development and 
operation of any self-regulatory approaches. 
The global dimension of the Internet and other 
communications and broadcast services will also 
impact on approaches to the enforcement of 
licensing, and call into question the relevance of 
national licensing of activities carried out either 
within a Member State or delivered by regional 
platforms, for example, by satellite. 
Encouraging innovation and efficient 
operation through licensing. Awarding 
authorities could consider moving away from 
licensing approaches which prevent innovation 
or limit efficient operation. One example, in the 
telecommunications area, would be tying the 
delivery of services to a particular technological 
platform -for instance, by requiring separate 
licensing (beyond frequency assignment 
procedures) for a fixed network operator wishing 
to use wireless-based systems in the local loop. 
A new approach to the licensing of broadcast 
services may be necessary. At present 
broadcasters are, generally speaking, licensed 
or authorised on a channel-by-channel basis by 
the relevant authorities within each Member 
State. These systems, which .are a product of 
tradition and the historical development of 
television broadcasting services may require 
reviewing in a new multichannel digital 
environment. Possibilities such as the licensing 
of broadcasters for a set of services (such as a 
satellite package or a terrestrial multiplex), rather 
than for individual .channels should be evaluated. 
The 1996 UK Broadcasting Act, which provides 
for multiplex services licences for digital 
terrestrial television, is an example. of what is 
perhaps the beginning of a trend !hat should be 
encouraged. · 
Common principles for the award of licenses 
As indicated in Chapter Ill, divergent licensing 
conditions may deter market entry and act as a 
barrier to an internal market. Where such 
barriers are identified, they would have to be 
justified by a public general interest objective 
and be proportional to that objective. 
To avoid such divergence, there may be scope 
for applying a common set of principles across 
the Community. These could include: 
• the awarding authorities should be 
independent from actors in the sector, 
• procedures should be transparent and non­
discriminatory, set against defined timetables, 
leading to decisions which should be open to 
appeal and 
• Any fees associated with a licence be in 
proportion to the level of effort involved in 
aaministering the licensing process, and not 
constitute a discriminatory levy on expected 
profits. 
• Notwithstanding the previous principle, fees 
may, in the case of licensing of radio­
frequency be set at a level which encourages 
the efficient use of the resources allocated. 
IV.2.3 Access to networks, conditional 
access systems and to content 
The question arises as to whether rules for open 
access currently applied to telecommunications 
and digital television conditional access 
infrastructures should be applied more widely in 
the sectors affected by convergence. If market 
and technology trends develop as suggested in 
Chapters I and II of this Green Paper, 
convergence is likely to see a shift in the value 
chain, such that content production, packaging 
and service provision increase in value (though 
not necessarily as separate business activities), 
whilst carrying services over a fixed or wireless 
network may, as reflected in some merger 
activity, become comparatively low value 
activities. This trend will be accompanied by 
attempts on the part of today's network 
operators to extend their activities into higher 
value business areas. 
Access at either end of the transmission network 
(i.e. the delivery of the service to the user's 
phone, PC or television and the ability to access 
the network in the first place to offer services or 
content) will be of crucial importance. 
In general the terms on which access is granted 
to networks, to conditional access systems, or to 
specific content is a matter for commercial 
agreement between market actors. Competition 
rules will continue to play a central role in 
resolving problems which may arise. 
This raises the issue of the role for sector 
specific rules at a Community level alongside the 
general Treaty provisions promoting undistorted 
competition and the free movement of services. 
EC legislation is now in place supporting 
commercial agreements for the interconnection 
and interoperation of telecommunications 
networks and services. Similar legislation is in 
place in relation to digital television, in particular 
23 regarding Access by third-party broadcasters to 
conditional access systems.53 
The emerging market will consist of players of 
very different sizes, but as indicated above there 
will also be strong vertically-integrated operators 
from the telecommunications, audiovisual 
(principally broadcasting) and IT/software 
industries building on their traditional strengths 
and financial resources. Issues which could 
arise across the different sectors include 
bundling of content and services, or of network 
capacity and services, predatory pricing, cross­
subsidisation of services or equipment, and 
discrimination in favour of own activities. 
Furthermore, the predominant position of current 
fixed telecommunications and broadcasting 
operators in the residential market will mean that 
for the foreseeable future they will control 
bottlenecks for accessing customers. Apart from 
the local subscriber loop, these include 
conditional access and navigation systems. 
Access to networks 
As stressed above, as a general rule issues of 
access to networks or to content, are a matter 
for commercial agreement, subject to the 
application of competition rules. Nevertheless, 
in some areas, regulatory intervention to support 
the commercial process has been provided for 
within current frameworks. 
In the telecommunications sector, the framework 
agreed for interconnection ensures that users 
can contact any other user and that service 
providers can access those customer on fair, 
non-discriminatory and proportionate terms. 
Additionally, powers to intervene and resolve 
qisputes are given to the national regulatory 
authorities for telecommunications and a number 
of safeguards are put in place to ensure greater 
transparency and non-discriminatory behaviour. 
As indicated in Chapter Ill, the fact that an open 
framework is applied to one set of infrastructure 
but not to others may create barri~rs and distort 
investment, particularly, if convergence of 
technologies extends over time to the industry 
and market and service levels. The issue in the 
context of possible convergence may therefore 
be whether there is a case for the extension of 
open access principles such as those applied to 
telecommunications infrastructure to other 
networks, or whether there are other principles 
which might be developed. 
Even within the telecommunications sector, the 
development _of the Internet is raising a range of 
53 Directive 95/47/EC on the use of standards for the 
transmission of television signals, O.J. No. L 281/51, 
23.11.95. 
issues connected to the terms on which Internet 
access providers get access to current fixed and 
mobile networks. One issue is whether they 
should enjoy the same interconnection rights as 
other players and whether they should be able to 
get access to unbundled service elements, 
whilst another issue is whether such providers in 
offering a range of telecommunications services 
should share some of the obligations of 
providing telecoms services.54 
The issue of access to conditional access 
systems may become more significant than the 
issue of control over the pipe up to the point at 
which it connects to such a system. 
Again, in the telecommunications sector, 
Community policy does not require a full 
unbundling of the local loop, or a structural 
separation of the associated infrastructure, from 
-the provision of services carried over it. This 
does not exclude appropriate safeguards or 
requirements being introduced under the 
competition rules. In reality, the issue of 
unbundling of the local enc of transmission 
networks is complex and must be closely linked 
to the degree of overall competition in the market 
concerned, the availability of viable alternative 
distribution channels and the starting point for 
competition in the particular market. Some 
argue that unbundling may act against the 
consumer interest in the longer term by 
removing economic incentives for orgar:iisations 
to put their own wired or wireless networks in 
place. 
Conditional access systems 
Conditional access systems are the technical 
means by which content and service providers 
can recoup their investment either through 
subscriptions or charges for individual 
consumption. The Television Standards 
Directive provides a regulatory framework for 
conditional access to digital television services, 
based on a requirement for those operating such 
systems to offer broadcasters technical services 
on a fair, reasonable and non-discriminatory 
basis. The Directive takes a deliberately 
balanced position for the start-up phase of this 
new industry. Its requirements are sufficiently 
light to encourage innovation and investment in 
a rapidly evolving technical and commercial 
environment, and sufficiently strong to protect 
fair competition and consumer welfare. The 
Commission is concerned at the pace of 
implementation of this Directive into national law 
54 For further discussion, see the OECD Report Op cit at 
note 5. A number of the issues linked to the provision of 
telephony over the Internet are also considered in the 
Commission's forthcoming Communication on the status 
of Internet telephony under Directive 90/388/EC 
24 in the Member States. It is actively employing 
the powers given to it by the Treaty to ensure 
timely and correct implementation. Where 
incorrect implementation has occurred1 the 
Commission has acted vigorously to ensure 
proper compliance with the Treaty. 
Navigation systems have emerged as a tool to 
help users manage the growth and range of 
information and services in the Information 
Society. Examples of navigation systems 
include Browsers (e.g. Netscape, Microsoft 
Explorer), search engines {Altavista, Yahoo, 
etc.) and electronic programme guides (EPGs). 
Currently, they form two distinct market 
segments -Browsers and search engines are 
tools for exploring Internet web pages, whereas 
EPGs represent the electronic ''zappers" of the 
future, guiding viewers through a myriad of 
digital television programmes and channels. 
Many consider that this new mode of programme 
selection will lead to the demise of the channel 
concept as we know it today, to be replaced by 
strong umbrella brands complemented by a la 
carte choices on the part of consumers. 
Browsers and search engines are inherently 
independent, able to explore the Internet 
universe without tying themselves to particular 
sources of information, or to particular operating 
hardware or software. Recently, however, 
competition concerns have been raised about 
the possibility of Browsers being packaged with 
other software or even becoming fully integrated 
to the software itself. 
Conditional access and Navigation systems 
depend for their success on the co-operation of 
market players present in different parts of the 
value chain, raising the spectre of a gate­
keeping role which could be abused, especially 
by vertically-integrated players, to foreclose 
market entry by others. An extension of the 
principles already applied to the digital television 
field with the object of ensuring that new entrants 
will not be excluded from access to such 
systems should be considered. 
In contrast to Browsers, EPGs are linked to the 
'information' accessed via them developing as 
support devices for specific digital television 
programme bouquets, or for offerings of 
television and interactive services. Issues of 
ensuring listing of third-party services or 
programming, and the quality of such listings, 
will be of critical importance.ss Exclusive 
55 Analogous problems have already been addressed 
under European competition rules, for example, in 
relation to computer reservation systems for air travel 
which are governed by Council Regulations 2299/89, 
arrangements tying particular EPGs to particular 
service bundles may become a problem 
requiring regulatory intervention to ensure third­
party access on fair, transparent and non­
discriminatory terms. 
A new feature of the consumer's home terminal 
is the Application Programming Interface (API). 
The API is a set of software in the terminal, 
resembling the operating system of a PC. It is 
used to manage interactive applications, 
including EPGs, carried by the terminal, and to 
provide a specified interface for the development 
of applications by third-parties. The PC industry 
owes its success in a large part to the role of de 
facto standard APls in facilitating the creation of 
a wide variety of third-party- developed 
applications software. At the time of writing 
there are a number of different APls used in set­
top boxes in Europe, risking fragmentation of the 
market and problems of interoperation. 
Furthermore the combined use of proprietary 
APls together with EPGs and conditional access 
leads to increased of risks of abuse by operators 
controlling access to services. 
The market implementation of digital television is 
occurring in an environment of rapid 
technological change, the ·eventual outcome of 
which is not yet clear. Comments on this issue 
should therefore assist the Commission in 
assessing whether the Television Standards 
Directive is adequate to cope with this 
technological change and its market 
consequences. 
Access to content 
As a general rule, arrangements made between 
content providers, rights owners and content 
carriers are a matter for commercial agreement. 
If exclusivity is granted, this may be an issue for 
competition rules. Exclusive agreements 
between content providers and content carriers 
may limit consumer choice by excluding access 
to content provided by competitors, especially 
until there is effective competition in the 
provision of delivery channels to the user. 
Possession of rights to key content, such as 
major sporting events, may give market players 
particular commercial power. 
Although the content industry is heavily scale­
dependent, it generally exploits such economies 
of scale by careful management of distribution 
windows (e.g. cinema, video rental, video sell­
through, pay-per-view, pay television, free-to-air 
television). Exclusivity of distribution is often a 
feature which secures this process for content 
owners. Convergence may impact on the 
3089/93, reviewed in COM(97)246 final, Brussels, 9 July 
1997. 
25 current basis for window management, and 
could lead to a greater dependence on non­
exclusive electronic distribution as a more 
effective means of maximising revenues. 
Likewise, convergence may have the effect of 
dissolving conveyance bottlenecks. For 
example, the exclusive distribution rights 
awarded to cable television companies may no 
longer translate automatically into monopoly 
power at the service level. Cable companies are 
likely to compete with digital satellite and 
terrestrial television broadcasters, Internet 
access providers and telecommunications 
operators. 
IV.2.4 Access to the Frequency Spectrum 
Despite the fact that the digitisat1on underlying 
convergence significantly expands the potential 
capacity of transmission networks, the growth of 
demand, both in terms of market players and 
bandwidth, means that resource issues will 
continue to be a key regulatory issue; principle 
amongst these is access to radio-spectrum. 
Frequency spectrum remains a key, but finite 
resource even in the digital age. Whilst 
significant gains will ultimately result from a 
switch from analogue to digital technologies, 
both for mobile telephony and for broadcasting, 
any transition will remain a slow one. For 
Internet access and other on-line services, 
satellite-based delivery offers the possibility of 
high speed delivery to a PC or television and the 
use of the fixed telecommunications network as 
a return path. In addition, the take up of wireless 
local loops and the arrival of Universal Mobile 
Telecommunications Services (UMTS) early in 
the next century all point to a steady growth in 
· . demand for spectrum. 
Given the importance of spectrum, variations 
identified in Chapter Ill between sectors with 
regard to how much spectrum is available and 
how much that spectrum will cost may have an 
important impact on the development of existing 
and new delivery channels. Whilst overall 
allocations are determined at an international 
and regional level, current differences across 
sectors to the pricing of frequency may create 
potential competitive distortions. One example 
could be where a broadcaster offering 
multimedia or on-line services uses spectrum 
obtained free or at low cost, competes with 
operators from the telecommunications sector 
who have paid a price reflecting the commercial 
value of the resource allocated. 
Many commentators argue that, from an 
economic standpoint, pricing spectrum may 
encourage its more efficient use and may help to 
ensure that frequency is al.located to the areas 
where it is most needed. They would argue that 
similar commercial principles should influence 
frequency policies at the stage that allocation is 
determined within the World Radio­
communications Conferences or at a regional 
level, so that allocation decisions should seek to 
make spectrum available to high value users in 
preference to low value users. 
Were all spectrum to be subject to a commercial 
valuation this might have a knock-on effect of 
encouraging existing public users, such as the 
military or the police, to use more cost-effective 
technological solutions, freeing up certain 
frequency bands for new services. 
Frequency auctioning is favoured by many 
economists as the way to best ensure outcomes 
which are in the consumer's ultimate interest. 
Although others express concern about the 
impact of such pricing on prices charged to 
users. 
With regard to efficient use of spectrum, one 
approach could be to move away from current 
practices of assigning particular blocks of 
spectrum to particular services, or to the use of 
particular technologies to deliver such services. 
In such a situation, certain minimum technical 
safeguards would still be required, (e.g. against 
electro-magnetic interference between different 
systems). This is one of the issues raised in the 
context of the introduction of UMTS, but could be 
of wider application. In practice this might mean 
that instead of assigning a particular band of 
spectrum exclusively for the provision of mobile 
communications or broadcasting, the assignee 
could be allowed to use the spectrum for the 
services of its choice. 
Finally, increasing demand for spectrum, 
particularly for UMTS and for satellite-based 
services puts increasing pressure on existing 
mechanisms for frequency co-ordination at a 
regional level. 
Chapters I and 11 have illustrated how each part 
of the converging sectors are moving from 
analogue to digital technologies. Member States 
could play a key role in this process by 
developing clear timetables for such a switch in 
order to give clarity to service planning Others 
argue that this is an issue of user preference and 
should be left to market forces. Nevertheless, 
the level of demand for spectrum is likely to 
outstrip currently available frequency resources, 
so that Governments may have a key role in 
reassessing the current balance between 
telecommunications, broadcasting and civil/ 
State usage of available resources. 
Additionally, consideration might need to be 
given to whether such a switch over needs to be 
26 co-ordinated at a European level. It can be 
argued that a clear timetable for the complete 
transition from analogue to digital transmission 
of services using the frequency spectrum would 
avoid not only the fragmentation of the Internal 
Market, but also delays in releasing valuable 
spectrum used by analogue services today, to 
other users. Other argue that issues of 
frequency allocation such .as this are governed 
by the subsidiarity principle and that the 
Community has no role to play in their 
resolution. 
IV.2.5 Standards 
It has been argued in this Paper that one of the 
most important consequences of the blurring of 
technological borders between information 
technology, telecommunications and consumer 
electronics is the increasing globalisation of 
services. The inherently global nature of the 
Information Society calls for any standardisation 
in support of its development to be similarly 
global. Users may want access from any 
terminal to any service, independently of the 
technology used, or the geographical point of 
such access, within a multi-vendor environment. 
A major objectite for standardisation therefore is 
to achieve interoperability between networks and 
services. Technological harmonisation is not an 
objective. However, standardisation is a tool 
which can reinforce both general policy 
objectives, such as the creation of an Internal 
Market for communications services, and the 
regulatory framework. Encouraging best 
business practices in areas related to data 
protection and security of digital signatures may 
be supported by standardisation and consensus­
building within an appropriate regulatory 
framework.56 
There is a legitimate public interest in providing 
industry, users and public authorities with 
efficient platforms for consensus building both at 
European and international level. Even though 
the Information Society is global, s_tandardisation 
can start at regional level, provided that players 
from other regions can participate in the 
activities. The workshop mechanism has the 
potential to offer the platform for consensus­
building while it also allows European players to 
increase their impact on the international 
standardisation scene. 
IV.2.6 Pricing 
The IT and on-line publishing markets operate 
almost entirely free of specific price controls. In 
the broadcasting sector, price controls (e.g. on 
the licence fee), where they exist, are generally 
56 Op.cit. Note 60 
motivated by public interest objectives seeking 
to ensure that service remains affordable for 
viewers and listeners, so that high penetration is 
achieved for free-to-air channels. The 
affordability requirement for universal service in 
telecommunications is based on the same 
premise and translates, in a number of Member 
States, into a price cap mechanisms applying to 
a basket of retail and/or business services and 
to subsidised social tariffs for particular groups 
of users. Pay TV channels including premium 
services, as well as commercial activities of free 
to air regulators are not generally subject tb 
price regulation, but are subject to competition 
from other market operators. 
Additionally, under specific telecommunications 
regulation, as part of the transition to fully 
competitive markets, controls apply to operators 
with significant market power to require that the 
charges for interconnection, voice services and 
leased infrastructure are cost-oriented. In that 
situation, price regulation is acting in as a proxy 
for the effects of competition. There has been 
no direct analogy in the case of point to multi­
point broadcasting, but interconnect issues are 
now arising where interactive or transactional 
elements are being introduced -conditional 
access is the first such area. 
Innovative pricing packages will play a key role 
in promoting services in the Information Society. 
The take-off of many on-line and transactional 
services is directly influenced by the cost of the 
underlying infrastructure. A key commercial 
message must be that innovative pricing will be 
central to a much wider take up and use of on­
line and other services. 
Additionally, an assessment may need to be 
made as to whether there are potential 
distortions where differing pricing rules apply to 
different networks, even though in a converged 
environment any network may be able to offer 
any service. At the same time, the existence of 
competitive delivery channels is likely to limit the 
possibility to set prices, for example for network 
access, independently of competitors, so the 
case for regulatory intervention may not be 
made. 
Finally, convergence may over time expose 
public broadcasters to commercial pressures. 
The experience in telecommunications may be 
illustrative, as operators in this sector have 
moved over time to price their services in a 
manner more consistent with the increasingly 
competitive environment, notwithstanding the 
regulatory constraints on such pricing.. Such 
experience demonstrates that such adjustment 
in pricing structure can occur in a manner which 
does not affect adversely the overall affordability 
27 of the services delivered. The manner in which 
public broadcasters are currently funded (licence 
fee, advertising, public subsidy) does not allow a 
direct analogy with telecommunications to be 
drawn. Whether this should prevent 
broadcasters wishing to introduce different 
pricing structures is a matter for comment, as is 
the impact that more commercial pricing 
approaches would have on eligibility for State 
funding or the ability to access other revenue 
sources, such as advertising, subscription 
funding or exploitation of rights. 
,:1~;~!¥ 
(A) Are the definitions in the telecommunic-
ations, media and IT sectors in national and/or 
Community legislation adapted to the 
convergence process? 
(B) Will the convergence phenomenon 
require adaptation of existing approaches or the 
adoption of new approaches to be applied to 
issues of market entry and licensing; access to 
networks, customers (including conditional 
access systems), content; and pricing? 
(C) Will convergence require changes in the 
approaches to the award and pricing of 
frequency spectrum, and in particular what 
approach should be taken, in the light of 
convergence, to the issue of completing the 
transition from analogue to digital services, 
including the need for a timetable for analogue 
switch-off? 
(D) What should be the objectives of 
standardisation in the light of convergence and 
what should be the relationship between regional 
and international standardisation? 
(E) What additional action (if any) is 
required to ensure that the interests of 
consumers and of users with disabilities are 
respected in the light of convergence? 
IV.2. 7 Individual consumer interests 
The objective of maximising benefits and 
minimising the risks of consumers implies the 
need for the creation of adequate regulatory 
instruments to protect the fundamental rights 
and responsibilities of consumers arising from 
the wide circulation of information in the sectors 
affected by convergence. Privacy issues, 
responsibility for c9ntent and the protection of 
minors, free speech versus libel, appropriate 
jurisdiction and consumer representation, are 
some of the issues that need to be addressed in 
the new environment. 
:'1Yi~IM!~ltii9le@I~lli!!Ii~J~~!¥1!~,!l~!,~ff~ -_.J_:: __ _ 
Rules seeking to ensure the achievement of 
certain public and general interest objectives are 
found in all sectors affected by convergence. As 
highlighted above, this is fully consistent with the 
importance attached at a European level to the 
role of services of general economic interest 
within the Community concept of European 
Society. The trends identified in Chapters I and 
II do not remove the value of universal service 
regulation for telecommunications, or a public 
service mission in the broadcasting field. 
Indeed, the possibilities now offered by 
technology strengthen the need for clear and 
effective rules relating to specific objectives such 
as privacy and data protection; the promotion of 
cultural diversity or the need for a framework for 
the protection of minors and public order. 
Nevertheless, the impact of convergence may 
well be on the way such objectives are achieved 
and by whom. Equally as recognised in Chapter 
Ill, the different rules while adapted to the 
specific characteristics of each sector, may 
nevertheless create potential barriers to 
integrated service provision or cross-border 
operation. 
The need for public interest objectives to be 
clearly defined 
Universal service obligations in general ensure 
the universal availability of defined services at 
an affordable price, whilst the public service 
mission of broadcasters extends beyond issues 
of universal availability and price and lays down 
conditions relating to the content of the services 
provided. Against this background the starting 
point for any analysis of public interest 
objectives in the light of convergence must be 
the need to define public interest objectives so 
that market actors have a clear idea of the 
obligations with which they must comply. Some 
consider that such an assessment is also 
essential in order to gauge whether these 
objectives remain valid in the face of the 
evolving communications and media 
environment, whilst others argue that the 
objectives remain Valid and only the way in 
which they are satisfied may evolve. In either 
case, a proper assessment seems to require a 
clear identification of underlying objectives. 
In the case of certain objectives in the different 
sectors, specific obligations have been placed 
on one or more operator to guarantee these 
28 objectives. This is the case with universal 
service carriers in the telecommunications sector 
or broadcasters who have been given a public 
service m1ss1on. In the telecommunications 
case, the cost of ~hose obligations may, where 
they represent an unfair burden for the operator 
concerned, be shared with other market players. 
Some argue that given that such a framework 
exists within telecommunications, the absence of 
a similar framework for the public service 
mission in broadcasting will deter companies 
wishing to operate on an integrated basis or 
favour the position of those entering the 
telecommunications market from the media side. 
Others respond that convergence does not 
challenge the existence of different approaches, 
given the underlying objectives are quite 
different. They further argue that it is simply not 
possible to cost obligations relating to the public 
service mission in any meaningful way, and that 
comparisons with the experience of telecoms 
are unhelpful in this regard. 
A further issue is who might in future be able to 
fulfil a public service mission or offer universal 
service? Obligations have traditionally fallen on 
a single designated organisation, (though that is 
now changing ill 1he case of universal service in 
some Member States). However, the possibility 
of offering voice telephony services over a 
computer or a television, or the ability to use the 
Internet to read, watch or listen to broadcasters' 
programming illustrates the possibility that new 
platforms may play a role in meeting such 
obligations. The question arises as to whether 
this is an additional reason for such obligations 
to be properly identified. 
Additionally, the issue is whether existing 
frameworks should be changed in order to 
cre3te a coherent framework for both public and 
private broadcasting organisations, for example 
so that different organisations are allowed to bid 
to undertake such obligations, including 
organisations from outside the traditional sector. 
Where specific support in the form of industry or 
even public funding is available for the provision 
of such services, the issue arises, inter a/ia, as 
to whether that mechanism would need to be 
open to any organisation willing to be designated 
as fulfilling public interest obligations. 
Content-related objectives 
Convergence is already leading to a 
reassessment of appro~ches to the means of 
implementing objectives regarding content. This 
has already been the case with approaches to 
harmful and illegal content on the Internet (see 
Section IV.1 ). At its most basic, the central 
issue is not the validity of particular rules but 
whether the impact of technology on particular 
services requires a reassessment of the means 
of achieving the objectives in question. 
Essentially this is an application of the principle 
of proportionality which means that current 
approaches must be assessed in the light of the 
specific characteristics of the service concerned. 
This means that there does not have to be a 
single standard applicable to the same content 
whatever the channel used for distribution. 
Instead, different standards might apply. For 
example, it is likely that the controls applied to 
advertising on a free-to-air broadcast would b~ 
considered inappropriate, if applied to a pay-TV 
programme or an Internet service, because of 
the specific characteristics of the service 
concerned. 
The role of public service broadcasting 
The public service mission entrusted to public 
service broadcasters is recognised as of cultural 
importance and the organisations with 
responsibilities in this regard are entitled to 
appropriate funding, subject to compatibility with 
the rules of the Treaty. The recent Protocol on 
public broadcasting attached to the Amsterdam 
Treaty confirms this point.57 
Convergence may however enable many more 
sources of audiovisual information to be 
accessed by viewers. Public authorities will 
need to monitor on a continuing basis the extent 
to which desired policy objectives are being 
achieved by normal market activity, including the 
impact of other media, and whether, as a 
consequence, regulatory obligations placed on 
broadcasters may be lightened. 
Traditional public broadcasters will need to 
reappraise their role in the convergent 
environment. On the one hand, their market 
share is likely to diminish as users face an 
increasing choice in a market already near to 
saturation in terms of the individual potential for 
consumption of audiovisual services within a 24-
hour day. Moreover, escalating prices for 
premium content could subject them to 
budgetary pressures that might outstrip the 
capabilities of existing funding mechanisms. The 
issue will be whether public broadcasters can 
continue to have access to attractive content in 
the face of fierce competition for the acquisition 
of programme rights, within the constraints of 
their existing funding mechanisms. Many are 
preparing to exploit their reputation and their 
customers' "brand loyalty" to compete with new 
pay-television broadcasters. 
57 Protocol no 32 on the system of public broadcasting in 
the Member States, annexed to the EC Treaty. 
29 On the other hand, technological convergence 
offers public broadcasters a range of new 
possibilities, in terms of both ·activities and 
potential avenues to viewers and listeners. This 
can enhance their current role and provide 
valuable new sources of revenue alongside 
current funding. The regulatory framework 
should allow broadcasters to take advantage of 
these new opportunities. It should atso permit 
them to benefit from economies of scale and 
scope where these also bring benefits for the 
consumer. However, if state funds intended to 
support a public broadcaster in fulfilling its public 
service mission were used to leverage and 
cross-subsidise these new activities or the use 
of new technological platforms, such as the 
Internet, then such practices would be subject to 
the Treaty rules on competition and on the 
freedom to provide services .. 
Other general interest objectives 
Ensuring Privacy and Data Protection. In 
order for convergent services to develop, users 
need to be assured that their privacy is 
adequately protected and, in particular, to have 
confidence in the security of information passed 
over the networks they use. Legislation has 
already been agreed at a Community level 
addressing data protection58 and this will soon 
be complemented by specific rules governing 
data protection and privacy in telecommunic­
ations.59 
Cryptography and digital signatures. A 
receflt Commission Communication on digital 
signatures and encryption has recommended a 
number of actions aimed at ensuring security 
and trust in electronic communications.60 Given 
. the global character of electronic commerce, 
emphasis is being given to the need for the 
international availability of cryptographic 
products and services corresponding to the 
various needs of business and individuals. 
Cultural diversity. The European Court of 
Justice, in a landmark case invoh(ing the media 
sector ("TV10" CJEC 23/9 of 9.10.94), has 
recognised that cultural policy objectives 
constitute public interest objectives that a 
Member State may legitimately pursue. Public 
58 Directive 95/46/EC of the European Parliament and 
Council of 24 October 1995 on the protection of 
individuals with regard to . the processing of personal 
data and the free movement of such data, OJ L281, 
23.11.95. 
59 Proposed directive on the processing of personal data 
and the protection of privacy in the telecommunications 
sector, .... ,Common Position adopted by the Council on 
12.9.96, O.J. 96/C 315/06, 24.10.96. 
60 Commission Communication Towards A European 
Framework for Digital Signatures And Encryption, 
COM(97) 503, October 1997 
service broadcasting has historically been one 
vehicle for achieving this. The Protocol on this 
subject that will be appended to the EC Treaty, 
as amended by the Treaty of Amsterdam, 
highlights the fact that "the system of public 
broadcasting in the Member States is directly 
related to the democratic, social and cultural 
needs of each society and to the need to 
preserve media pluralism". 
At Community level, Article 128 of the EC Treaty 
provides that the Community "shall contribute to 
the flowering of the cultures of the Member 
States" including in the audiovisual sector, and 
that the Community shall also "take cultural 
aspects into account in its action under other 
provisions of the Treaty". The Commission 
intends to draw up a Green Paper in the course 
of 1998 specifically focusing on developing the 
cuJtural aspects of new audiovisual and 
information services. 
Protection of minors and public order. While 
public interest objectives relating to the 
protection of minors and public order have 
traditionally been recognised at national and 
Community level (cf., for example, Art. 22 of the 
"Television without frontiers" Directive), the 
transactional nature of some convergent 
services will imply adjustments in the means 
whereby such objectives are met in order to 
ensure due respect for the principle of 
proportionality. 
Additionally, the difficulty of enforcing 
safeguards in the context of harmful and illegal 
content on the Internet provides another 
example of how convergence is challenging 
traditional regulatory approaches to 
implementation, whilst not invalidating the 
principle that rules are seeking to protect.61 The 
global nature of the platform and the difficulty of 
exercising control within a given Member State 
are leading to solutions which draw on self­
regulatory practices by industry rather than on 
formal re.gulation, accompanied by technological 
solutions to ensure that parents take greater 
responsibility. It is against this background that 
the Commission has adopted a proposal for a 
Council Recommendation on the Protection of 
Minors and Human Dignity.62 This aims to 
promote common guidelines for the implement­
ation, at national level, of a framework for self­
regulation to protect minors and human dignity in 
audiovisual and information services, whatever 
the means of conveyance. 
61 Commission Communication, Action Plan on promoting 
safe use of the Internet, COM(97)583, 26.11.97 
62 Proposal for a Council Recommendation on the 
Protection of Minors and Human Dignity adopted on18 
November 1997. COM(97)570. 
30 (A) Does the convergence phenomenon 
support or challenge the way in which public 
interest objectives are achieved in the 
telecommunications, media and IT sectors? 
(8) Should such objectives be more clearly 
identified and. where they translate into 
particular obligations, should a wider group of 
actors be able to take on such obligations? 
J~~~.-9~!~_qli~~:rer''~J-f«liir~:.tf!11"~1·~*9~;:~oa~1··· 
Options for the structure of regulation 
Chapter Ill highlighted the potential uncertainty 
resulting from separate and multiple regulation. 
Such uncertainty was seen as a barrier to 
current actors wishing to operate across the 
sectors affected by convergence, and to the 
wider delivery of services such as electronic 
commerce or financial services (banking, 
insurance, securities, etc.) over converged 
platforms. 
Some commentators accept that there are 
barriers, but see these as neither insuperable 
nor inconsistent-with the EC Treaty. In practical 
terms they simply represent normal divisions of 
activity common with any business operating 
across a number of sectors of the economy. 
They would argue that current vertical 
approaches to regulation are sustainable and 
provide a high degree of certainty for most 
market actors. 
An alternative view sees these barriers as 
running counter to the logic of current 
technological and market trends. According to 
this view, a single regulatory model for all 
sectors within a converged environment, based 
on common principles, but perhaps maintaining 
certain distinct elements focused on the specific 
services offered, is required. 
Others argue that any horizontal approach 
should reflect the technological reality of the 
possibility of any network carrying any service 
and therefore confine the development of a 
horizontal approach to issues affecting the 
underlying infrastructure. This would allow 
different treatment of the services provided via 
that network. Roles applied at a service level 
might perhaps follow current vertical divisions at 
the service level or perhaps redraw those 
divisions to reflect changes in technologies and 
markets. 
In both of these cases, the approach is 
essentially to shift away from a vertical model of 
sectoral regulation and towards a horizontal 
approach which seeks to distinguish between 
the network or transmission layer within 
converging sectors and the services carried over 
those networks 
Two studies carried out for the Commission63 
suggest that the replacement of current vertical 
structures with horizontal separations between 
service provision/content and conveyance 
appears to offer a possible solution to the types 
of the barriers identified in Chapter Ill. 
Definitional issues of where services may fall will 
remain, but should be more future proof, being 
less linked to underlying technologies. The 
distinction between the two horizontal layers 
nonetheless permits distinct regulatory criteria to 
be applied to each layer, but with due 
recognition of the links between each layer. 
Chapter Ill highlighted the impact on companies 
of having to deal with a number of different 
regulatory bodies for different aspects of their 
integrated activities. Ensuring that these 
barriers are lowered will be important in creating 
a climate for innovation and investment. 
Were the idea of moving from vertical regulatory 
divisions to a more horizontal approach 
accepted, this might make it easier for business 
to benefit from a one-stop shop approach. 
One important question is whether such 
rationalisation should lead to a single regulator 
dealing with all aspects -content as well as 
service provision and delivery, or whether a 
structure dividing responsibilities between 
services and transmission activities might be 
more appropriate, or indeed, multiple regulatory 
bodies at either of those layers. Some would 
view a single body as more able to maintain a 
coherent approach, integrating more seamlessly 
the public interest and economic efficiency 
aspects of regulation within one framework. 
Others would favour a continued separation in 
order to avoid risks of the public interest being 
compromised by economic priorities. 
63 Op.cit. 19 
31 Nevertheless, inherent in the idea of 
convergence is the reality that a strict separation 
between service provision on the one hand, and 
transmission and carriage on the other may not 
be possible and could create difficulties in 
addressing issues of market power and vertical 
integration. 
Balancing Community and Member State 
responsibilities 
In looking at the options for a possible future 
regulatory model, account must be taken of the 
way in which responsibilities will continue to be 
shared between the Community and Member 
States and within Member States, between 
national, regional and sometimes local 
authorities. From a Community perspective, the 
EC Treaty defines on the basis of subsidiarity 
those areas in which the Community has a role 
to play. Such action may be taken, assuming it is 
an area for which the Community is competent, 
"only if and in so far as the objectives of the 
proposed action cannot be sufficiently achieved 
by the Member States and can, therefore, by 
reason of the scale or effects of the proposed 
action, be better achieved by the Community." 
ma' 
s~cfor:,i:; 
s~ct 
·hUm . 
b~tW~~fr 
:_ .... :-<f:., ,> , 
(A} Do current developments require a 
reassessment of the way in which rules are 
applied to the telecommunications, broadcasting 
and IT sectors? 
(B) Does the existence of different 
regulatory authorities or ministries responsible 
for different aspects of telecommunications, 
media and IT activities offer a workable structure 
for regulatory supervision in the light of 
convergence? 
(C) Will convergence require a 
reassessment of regulatory responsibilities at a 
national, Community or international level, and, if 
so which areas? 
Given the regional and global nature of many of 
the services being delivered, that subsidiarity 
test may be met. Diverse national approaches 
may harm rather than promote users' interests, 
could undermine the diversity which the internal 
market offers, and may well introduce distortions 
which favour the establishment of production 
facilities in regions where a lighter regime 
applies. 
Globalisation amplifies the international dimen­
sion of convergence. One clear example is the 
continued rapid expansion of the Internet world­
wide, which will undoubtedly give rise to further 
technological and industrial transformations, as 
well as to exciting social, cultural, and ultimately, 
commercial opportunities. These effects will not 
. be confined ·to the European Community and 
North America only. They are just as likely to 
produce fundamental changes among our 
neighbours in Central and Eastern Europe, and 
more broadly, in the developing world. The 
global reach of the Internet has already shown a 
need for international solutions to a number of 
key issues such as security, intellectual property 
rights, customs, privacy, interoperability and 
cybercrime. 
In contrast, many regulatory issues associated 
with telecommunications and broadcasting have 
until recently been focused at national or 
regional levels in the Community, given the 
national orientation of licensing in those sectors. 
Multilateral dialogue on frameworks covering 
different aspects of telecommunications and 
information technology, and involving govern­
ments and industry, is currently being pursued in 
many international fora. The Commission, 
through a series of international summits on the 
Information Society, has been actively promoting 
a range of regulatory initiatives in the countries 
of Central and Eastern Europe. 
Existing international organisations, such as the 
World Intellectual Property Organisation (WIPO), 
the ITU and the OECD have perceived the need 
to consider the potential impact of convergence 
and to launch Internet and electronic commerce 
related activities. Convergence was the theme 
of the ITU's Sixth Regulatory Colloquium.64 In 
some cases, this has already led to agreement 
on principles or minimal rules. Examples include 
the two WIPO Treaties of December 1996 on 
64 The Regulatory Implications of Telecommunications 
Convergence, Chairman's Report of the Sixth 
Regulatory Colloquium on the changing role of 
government in an era of Telecom deregulation, ITU, 
Geneva, 11-13 December 1996. 
32 copyright and certain related rights (the "WIPO 
Copyright Treaty" and "the WIPO Performance 
and Phonograms Treaty"), and the Bonn 
Declaration of July 1997. 
The Council of Europe is currently working on 
aspects of the Information Society relating to 
human rights, democratic values and the 
freedom of expression and is expected to adopt 
Resolutions on these issues at the 5th European 
Ministerial Conference on Mass Media Policy in 
Thessaloniki in December 1997 
Landmark global agreements such as the 
Information Technology Agreement (ITA), the 
Mutual Recognition Agreements on conformity 
assessment (MRAs ), and the WTO/GATS 
agreement on basic telecommunications 
services (February 1997) have also contributed 
to a new global perspective on regulatory is~ues . 
The WTO agreement · does not apply to 
broadcasting. 
As these efforts are reinforced, it may become 
apparent that they need to take into account new 
factors such as convergence and globalisation, 
as well as the impact of these changes on 
economies beyond the industrialised world. For 
example, the Internet could give rise to spill-over 
between issues dealt with by different 
organisations and currently involves important 
new and less conventional actors, such as the 
Internet Society.65 Furthermore, any formal 
principles and rules will most likely need to draw 
on some element of self-regulation by industry 
players. 
In this context, it might be judged more 
appropriate to launch a process of international 
dialogue with the aim of reaching agreed 
solutions as and when problems arise in 
conjunction with technological, social and 
industrial developments. Such a process would 
be flexible and open. It would have no formally 
fixed time-frame and would be open to all actors 
concerned, including international organisations, 
the various Internet bodies (e.g: the Internet 
Engineering Task Force ·and the Internet 
Advisory Board), and technical experts. Such an 
international dialogue process could give rise to 
the creation of specific working groups with a 
view to focusing on specific issues such as 
digital signatures or customs and taxation. The 
overall aim of such a process, once it has been 
launched, could be to develop an international 
charter on global communications, though the 
scope and aims of such· a charter remain to be 
defined. 
65 The Internet society is a non-governmental professional 
organisation whose aim is to develop a consensus on 
solutions which promote progress of the Internet. 
(A) Is further action required at an 
international level in light of convergence? 
(B) What additional steps (if any) are 
required to encourage other countries, 
particularly, in Central and Eastern Europe, to 
create conditions within which current 
developments can be exploited? 
33 Whilst the aim of this Green Paper is to invite 
comment and stimulate debate, rather than take 
positions at this stage, this Chapter, drawing on 
the previous analysis, sets out in Section V.1 
below a number of principles which could 
provide a common basis for future approaches in 
the sectors affected by convergence. In Section 
V.2, it sets out three options which the 
Commission believes may stimulate debate 
regarding the adaptation of current regulatory 
approaches, where required, in the light of the 
convergence phenomenon. 
Irrespective of whether or not full convergence 
occurs, the range of technological and market 
trends, the potential barriers and the regulatory 
issues identified in this Green Paper, all point to 
a changing environment against which the policy 
objectives of these sectors must be judged. 
Future decisions must therefore not only be 
derived from regulatory approaches closely 
tailored to the sectors involved. They should 
also be able to draw on a common 
understanding of principles which could underpin 
future action. 
In this section, the Commission tentatively puts 
forward five such principles for comment. 
1. Regulation should be limited to what is 
strictly necessary to achieve clearly 
identified objectives. 
Given the speed, dynamism and power of 
innovation of the sectors impacted by 
convergence, public authorities must avoid 
approaches which lead to over-regulation, or 
which simply seek to extend existing rules in 
the telecommunications and media sectors to 
areas and activities which· are largely 
unregulated today. 
Any rules put in place should be tailored to 
meet clearly identified objectives in a 
proportionate manner, 
2. Future regulatory approaches should 
respond to the needs of u_sers 
A key priority of any regulatory framework 
should be to seek to meet the needs of users 
in terms of offering them more choice, 
improving levels of service and lower prices, 
whilst fully guaranteeing consumer rights and 
the general public interest. Such an 
approach is fully consist.ent with wider policy 
goals which recognise the important role of 
many of the sectors in bringing the 
Information Society into citizens' everyday 
lives. 
3. Regulatory decisions should be guided by 
a need for a clear and predictable 
framework. 
Regulators should seek to ensure a clear and 
predictable framework within which business 
can invest. Where issues can be left to 
market players, this should be made clear. 
Where new activities creates uncertainty as 
to how and if they should be regulated, this 
should be clarified. 
This does not mean that the framework may 
not evolve, but it should do so against 
predetermined criteria, maintaining as far as 
possible the flexibility to respond to changes 
in a fast-moving market. 
4. Ensuring full participation in a converged 
environment. 
Building on existing concepts of universal 
service in telecommunications and the public 
service m1ss1on in broadcasting, public 
authorities should seek to ensure that 
everyone is able to participate in the 
Information Society. Convergence in this 
context is likely to offer new means of 
participation. 
5. Independent and effective regulators will 
be central to a converging environment. 
Whilst the general trend is towards lighter 
regulation, the increased competition brought 
on by convergence underlines the need for 
effective and independent regulators. 
Regulatory independence is particularly 
important where the state retains a share­
holding in any market player. 
\f.~.opti9n~··.fc>f r~gulal(>ry d~velopment 
If it is established that there is need to consider 
changes to the overall regulatory approach in the 
face of the trends towards convergence, there 
may be many ways of achieving such an 
adaptation. 
In considering possible approaches, a 
successful formula is likely to require more than 
just the creation of a flexible framework for new 
types of services. It would also be essential to 
provide a road map which allows the existing 
framework to adapt or be adapted at a pace 
which continues to ensure fair, non­
discriminatory market conditions and which 
provides that users' interests are well served. 
34 The speed and manner in which change is 
managed are at the heart of the transitional 
issues. This Green Paper cannot propose a 
specific time table. Nevertheless, the 
Commission anticipates the debate focusing 
around three basic options for regulatory 
developments, though such a list is neither 
intended to be comprehensive nor closed. 
Option 1: Build on current structures 
In this situation, current vertical regulatory 
models would be left in place. This means that 
different rules apply in telecommunications and 
audiovisual/broadcasting sectors, and to a lesser 
extent in publishing and IT. Building on 
established principles, these existing 
frameworks at a EC and national level would be 
extended on an ad hoc basis, principally at 
national level, to meet the demands of a 
competitive market and the challenges of new 
technologies and services. 
Normal principles of interpretation would be 
applied on a case by case basis to resolve 
questions of where particular activities might fall. 
To the extent necessary, co-ordination might be 
strengthened at a European level to attempt to 
minimise the .risk of fragmentation through 
national rules being applied differently in 
different Member States to emerging services. 
The pace of change would be dictated by the 
speed of innovation and the effectiveness of 
competition. This would allow the regulatory 
framework to adapt in response to market forces 
and the need for a fresh round of 
deregulation/regulation could be avoided. 
Such an approach would minimise the need for 
change in the near future, and could be effective 
in providing a predictable regulatory framework 
for investment, whilst avoiding the creation of 
unjustified barriers within the internal market. 
However, it might leave in place certain 
anomalies which today deter investment. 
The pace and scope of change, if not co­
ordinated at a European· level, could risk 
creating significant new barriers between 
Member States and slowing the transition to the 
Information Society. 
Option 2: Develop a separate regulatory 
model for new activities, to co-exist with 
telecommunications and broadcasting 
regulation 
This option would mean that Member States 
would "carve out" new services and activities 
which cross traditional boundaries, placing them 
under a distinct set of rules, if rules are needed 
at all. This would allow a co-ordinated approach 
to be developed in relation to many of the high 
value activities which characterise the 
converging market place, by creating a new 
category of services alongside existing 
regulatory models for telecommunications and 
broadcasting. Essentially, the result would be to 
move away from technology-based or platform­
based market boundaries for a wide-range of 
services, whilst allowing the framework for 
traditional core telecommunications and 
broadcasting activities to be adapted more 
gradually. 
The principle difficulty in such an approach is 
determining the boundaries of what may be part 
of a lightly regulated,· new service world and 
what remains subject to traditional regulation. 
One approach might be to identify certain types 
of service, e.g. Web-TV or the Internet or the 
operation of conditional access systems, 
negatively as neither telecommunications nor 
broadcasting. Experience in the telecommunic­
atiors sector with a delimitation of liberalised 
services, on the basis of defining only what is left 
in the monopoly area, shows the practical 
difficulties of such an approach. 
Option 3: Progressively introduce a new 
regulatory model to cover the whole range of 
existing and new services 
This option is the most far-reaching. It calls for a 
fundamental reassessment and reform of today's 
regulatory environment. 
This does not necessarily imply a whole new set 
of laws, but rather looking to see how existing 
frameworks can be adapted to promote 
flexibility; remove inconsistencies, avoid 
discrimination within and across sectors and 
continue to ensure the achievement of public 
interest objectives. Instead of applying to just 
some services (as proposed in Option 2), this 
option would create a framework covering all 
sectors. 
This option would require a broader definition of 
communication services to supersede those of 
telecommunications and audiovisual services 
within Community legislation. Proportionality 
would be a necessary feature of the new 
environment given that within such a broad 
definition, the level of regulation would have to 
be matched to the nature of the service and the 
intensity of competition. 
Such an option might be considered to be too 
ambitious. However, it would not necessarily 
lead to sudden disruptive change. The approach 
could be graduated, focusing in the first instance 
on priority areas in which a consistent regulatory 
approach is required (e.g. network operation or 
access issues). Another key feature of this 
35 approach would be to allow sufficient time for 
migration from the old to a new regime. 
{A) What effect will convergence have on 
the principles for future regulation applied in the 
telecommunications, media and IT sectors, and 
should those principles be adapted in the light of 
convergence? 
(B) If convergence requires adaptation of 
existing regulatory ~pproaches, should that 
adaptation: 
(i) seek to build on, and if appropriate, extend 
existing frameworks, rather than create new 
ones; 
(ii) create a new framework for many on-line and 
interactive services, to co-exist with the those 
currently applied to traditional telecommunic­
ations and broadcasting activities, or 
(iii)seek to create a comprehensive framework 
applying similar regulatory approaches to all 
three sectors. 
v:~:T•m~.~§(i:!2i:,fq!ijf~.·~.cti9Ji•···:····· 
The following outline schedule of activities is 
envisaged: 
• A five-month public consultation period 
(December 1997 to April 1998 inclusive). 
· • A report on this public consultation to be 
prepared by June 1998. 
• The Council and the European Parliament 
are expected to adopt any Resolutions on 
this matter in the second quarter of 1998. 
• In response to these resolutions, the 
Commission could prepare a Convergence 
Action Plan by the end of 1998. 
• The already-announced Telecommunications 
Review will be conducted in 1999. 
Interleaved with these. milestones will be a 
number of important activities in the media field. 
The Oreja High-level Group on audiovisual 
policy has been convened and is expected to 
report in September 1998. A major conference 
on the matter is scheduled to be held in April 
1998 in Birmingham, under the joint sponsorship 
of the British Presidency and the Commission. 
This Green Paper analyses the convergence 
phenomenon and its implications for the existing 
regulatory frameworks governing the 
telecommunications, media and information 
technology sectors. 
The implications of these developments are far 
reaching. Convergence is not just about 
technology. It is about services and about new 
ways of doing business and of interacting with 
society. The changes described in this Green 
Paper have the potential to improve substantially 
the quality of life for Europe's citizens; to 
integrate Europe's regions better into the heart 
of the European economy, and to make 
businesses more effective and competitive on 
global and national markets. 
The emergence of new services and the 
development of existing services are expected to 
expand the overall information market, providing 
new routes to the citizen and building on 
Europe's rich cultural heritage, its potential for 
innovation and its creative ambitions. 
The global nature of communications platforms 
today, particularly, the Internet, are providing a 
key which opens the door to the further 
integration of the World economy. At the same 
time, the low cost of establishing a presence on 
the World Wide Web, is making it possible for 
businesses of all sizes to develop a regional and 
global reach. Globalisation will be key theme in 
future developments, as changes in Europe are 
mirrored by developments all over the World. 
If Eur.ope can embrace these changes by 
creating an environment which supports rather 
than holds back''the process of change we will 
have created a powerful motor for job creation 
and growth, increasing consumer choice and 
promoting cultural diversity. If Europe fails to do 
so, or fails to do so rapidly enough, there are 
real risks that our businesses and citizens will be 
left to travel in the slow lane of an information 
revolution which is being embraced by 
businesses, users and by Governments around 
the World. 
The issue involved are complex and will require 
much discussion before any new Community 
initiatives can be proposed. The Green Paper is 
intended to launch such a discussion and all 
interested parties are invited to participate. It is 
hoped that this discussion will be profound and 
far reaching. The results of this public 
consultation will be reported in a Commission 
Communication in June 1998. 
3G This Green Paper represents a step on the way 
to securing the benefits of convergence for 
European social and economic development. 
The June Communication will allow political 
positions to be taken by the European 
Parliament, the Council of Ministers, the 
Economic and Social Committee and the 
Committee of the Regions, and for clear 
objectives for future policy to be established. 
This Green Paper initiates a new phase in the 
European Union's policy approach to the 
communications environment. As such it 
represents a key element of the overall 
framework put in place to support the 
development of an Information Society. It builds 
on the current strengths of the frameworks for 
telecommunications (launched by the landmark 
1987 Green Paper on telecommunication66) and 
for media (established by various Community 
legislative initiatives), and offers all interested 
parties an opportunity to comment on the future 
shape of regulation, in the post-1998 
communications environment, in the sectors 
affected by convergence. 
This first step is intended to pave the way for the 
development of an appropriate regulatory 
environment wtiich will facilitate the full 
achievement of the opportunities· offered by the 
Information Society, in the interests of Europe 
and it's citizens as the 21st century begins. 
06 COM(87) 290 final 
This annex describes existing the regulatory 
environments in the European Union for 
telecommunications and media sectors. The 
absence of regulation in the IT field is also 
noted. 
Telecommunications regulation is gearing up 
for full liberalisation 
A clear framework for effective competitio~ 
throughout the European Community has now 
been put in place and is ,at an advanced stage of 
implementation in national law as the 1998 
deadline approaches. In reality the transition 
from monopoly to effective competition has 
required a profound reform of regulation in the 
telecommunications sector, with rules agreed to 
set the dates for liberalisation of the sector and 
to provide a common regulatory framework 
covering, inter alia: 
-conditions for market entry (e.g. common 
framework for licensing -procedures, 
timetable and conditions which may be 
attached) 
-maintenance of public interest (e.g. a 
framework guaranteeing the delivery of 
universal service and specifying consumer 
rights in relation, for example, to the voice 
telephony service; and rules covering data 
protection and privacy); 
-interconnection and interoperability of 
services and networks, and fair allocation 
of resources (e.g. access to numbers, 
availability of radio-frequency spectrum) 
A fundamental consideration has been the need 
to limit regulation to the minimum required to 
secure the overall public interest and to enable 
effective entry and sustainable competition. 
The focus of the regulatory framework for 
telecommunications has been on networks and 
service provision (including aspects linked to 
safeguarding the public interest) and not on the 
regulation of content carried over those 
networks. Three aspects of this focus on an 
internal market for telecommunications can be 
highlighted: 
-the removal of barriers to investment and 
innovation within the internal market; 
-ensuring conditions that support pan­
European networks and services; 
-maintaining a defined level of service for 
users 
37 The WTO/GATS agreement on basic 
telecommunications reached on 15 February 
1997 is fully in line with the EC regulatory 
framework for the sector. This applies not only 
to the dates set for liberalisation, but also with 
regard to the underlying regulatory principles. 
The deal does not cover broadcasting and it only 
applied to telecommunications (transport) 
services. Thus it does not cover any "content 
services67" which may be transmitted through 
telecommunications services .. 
Audiovisual regulation 
At a Community level, current audiovisual 
regulation aims to achieve the free circulation of 
services in accordance with Article 59 of the 
Treaty. It is an example of the application of 
subsidiarity whereby Community legislation has 
been adopted solely when absolutely necessary 
to achieve the aforementioned Treaty objective. 
National rules have been co-ordinated to the 
degree necessary to remove barriers resulting 
from disparities between these regulations, when 
such rules are justified for legitimate public 
interest reasons. 
Historically, the Court of Justice has recognised 
that in the absence of harmonisation at a 
Community level, Member States could impose 
their national rules on service providers from 
other Member States, where those rules pursued 
a general interest objective and were 
proporticff1al to achieving that objective.68 This 
case law led to the adoption of the main 
Community instrument in this area, the so-called 
Television Without Frontiers Directive (TVWF) 
which co-ordinates national regulations in a 
number of fields relating to the provision of 
broadcast services Uurisdiction criteria, 
advertising, sponsorship, tele-shopping, 
protection of minors, public order, right of reply, 
promotion of European programmes). 
This Directive is based on the principle of "home 
country" control, i.e. control by the ciuthorities in 
the country of origin under whose jurisdiction the 
broadcaster falls. It has proved its effectiveness 
67 The EC GA TS commitments on basic 
telecommunications services exclude the economic 
activity consisting of content provision which require 
telecommunications services for its transport, such 
content provision being subject to the specific 
commitments undertaken by the EC in other relevant 
sectors. The EC has not undertaken any GATS 
commitments on audiovisual/broadcasting services. 
There are also some exemptions to the MFN {Most­
Favoured-Nation) principle in audiovisual services in 
order to protect cultural values. 
68 Case n° C52/79 of 18/3/80 Procureur du Roi v. Marc 
J.V.C. Debauve 
in the current broadcasting environment.69• A 
Directive70 amending the original 1989 text was 
recently adopted in order to adapt the legal 
· framework to change within the audiovisual 
landscape. The new Directive must be 
transposed by the end of 1998; the Commission 
will ensure that this process is rigorously brought 
to fruition. 
The Directive leaves certain matters to the 
Member States, one of which is licensing. It was 
not considered that differences in these areas 
would create obstacles to the functioning of the 
Internal Market, i.e. to the free movement of 
television broadcasts. The Member States are 
required to ensure that broadcasters within their 
jurisdiction meet the minimal rules laid down in 
the Directive, but [in accordance with Article 
189(3) of the Treaty] may decide how such 
obligations are to be implemented at national 
level. 
Two further initiatives have been taken, in part 
with the purpose of supplementing the TVWF 
Directive in creating the legal framework for the 
'European audiovisual area'. In 1993, the 
Council adopted a directive on the co-ordination 
of certain rules concerning copyright and rights 
related to copyright, applicable to satellite 
broadcasting and cable retransmission.71 More 
recently, the Commission has proposed a 
directive on the legal protection of conditional 
access services. 72 
Apart from the above-mentioned Community 
initiatives, audiovisual regulation is largely 
national in scope. The typology of regulation of 
audiovisual services is generally either positive 
(an obligation to fulfil e.g. provide a balanced 
range of programming) or negative (regulation to 
limit certain types of materiel e.g. incitement to 
racial hatred). Positive obligations are often met 
in practice, to varying degrees from one Member 
State to another, by broadcasters vested with a 
public service mission. Existing regulation is 
based in part on the widespread availability of 
television (its "pervasiveness"). It is clear that 
regulation must meet a proportionality test, and 
in a digital age it should and indeed is already 
evolving. This means that a lighter regulatory 
touch could be appropriate as a function of the 
nature of the service (e.g. satellite or cable pay­
per-view is generally more lightly regulated than 
69 See "Second Report on the Application of Directive 
89/552/EEC" COM(97)523 final of 24/10/1997 
70 Directive 97/36/EC amending Directive 89/552/EEC, the 
'Television without Frontiers' Directive, 30.06.1997, JO L 
202, 30.07.97, p.60. 
71 Directive 93/83/EEC, OJ L248, 6.10.93 
72 COM(97) 356 final of 9. 7 .1997 
38 terrestrial free-to-air television, arguably the 
most pervasive of all media). 
Publishing and IT 
The publishing sector operates within a 
framework of more limited sector-specific 
regulation compared to telecommunications and 
audiovisual/broadcasting sectors, and there are 
fewer regulatory barriers to entry (in the sense of 
formal licensing requirements), although there 
are stringent rules applying to this sector. 
At the same time, a range of controls are 
applicable to the broadcast media (for example, 
those relating to pluralism, foreign ownership 
and right-of-reply) also apply in some form to the 
publishing sector (and, in particular, the press), 
reflecting public interest objectives common to 
both sectors. However, the implementation of 
some of those principles for the publishing 
sector is through self-regulatory bodies, such as 
Press or Industry Councils or Codes of Practice, 
in contrast to the stronger powers for regulatory 
intervention in the broadcasting field. In addition 
many of the general rules related to public 
morals, advertising, libel, privacy, intellectual 
property protection, access to public documents, 
also apply to the publishing sector. 
The Information Technology and software 
industries have even less of a tradition of sector­
specific regulation, though once again horizontal 
rules relating to issues such as export controls, 
electro-magnetic interference; or consumer 
protection would apply, as would general 
competition law. 
The Internet is more closely associated with IT 
and software industries than with 
telecommunications whose infrastructure its 
uses. Whilst the network over which much of 
the Internet traffic flows is subject to detailed 
regulation; the organisation, management and 
allocation of resources within the Internet has 
been largely industry and user-led. The 
Community has actively supported an industry­
led approach in its work on harmful and illegal 
content on the Internet, and more generally in 
the media.73 
Whilst approaches may be changing, particularly 
in key areas such as naming and addressing, 
there has been little sector-specific regulation of 
the Internet in Europe.74 
73 Op cit. note 28 see Green Paper on the protection of 
minors and human dignity in audiovisual and information 
services, COM (96) 483, 16.10.97 and Communication 
on the illegal and Harmful content on the Internet, 
COM(96) 487, 16.10.97. 
74 This contrasts with the approach in Singapore, Vietnam, 
or China, where restrictions have been put in place. 
ISSN 0254-1475 
COM(97) 623 final 
DOCUMENTS 
EN 04 05 15 16 
Catalogue number CB-C0-97-701-EN-C 
Office for Official Publications of the European Communities 
L-2985 Luxembourg ISBN 92-78-28995- 7