ARCHIVES HISTORIQUES 
DE LA COMMISSION 
 
 
 
COLLECTION RELIEE DES 
DOCUMENTS "COM" 
 
 
 
 
COM (84) 277 
 
 
 
Vol. 1984/0 126 
  
 
Disclaimer  
Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents 
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
règlement. 
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the opening to the public of the historical archives of the European Economic 
Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
27.9.2003, p. 1), t his file is open to the public. Where necessary, classified documents in this 
file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1. 
Februa r 1983 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. September 2003  
(ABI. L 243 v om 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit  
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5  
der genannten Verordnung freigegeben.  
COMMISSION OF THE EUROPEAN COMMUNITIES
C O M (84) 277 final
Brussels, 18th M a y  1984
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL  
ON TELECOMMUNICATIONS
Progress Report on the Thinking and Work done  
in the field
and initial Proposals for an Action Programme
C O M (84) 277 final

CONTENTS
Page
2Preamble
Introduction 3
I ■  .ECPUPHIC IMPORTANCE OF THE SECTOR 3
A. Telecommunications already plays a major role
in the economies of Member States (§ 2 and 3)  3
8.  This role will increase (§ 4 to 6)  4
C. The economic and social impact will be
considerable (§ 7 to 10)  5
1 1 · THE S TA TU S OF THE COMMUNITY'S TELECOMMUNICATION
INDUSTRY AND INFRASTRUCTURE 7
A· It is a sector where situation seems still
satisfactory (§ 11-12)  7
8.  The evolution taking place shows weaknesses
and disturbing vulnerabilities that give cause  
for alarm (§ 13 to 15) 8
C. European industry does not work under favourable
conditions (§ 16 to 18) g
III· THE PARTICULAR SITUATION OF CARRIERS IN THIS CONTEXT
.15 19 to 21) ■ )  !
IV. OBJECTIVES AND STRATEGY OF THE PROPOSED ACTION
PROGRAMME (§ 22 to 27) 1 2
DESCRIPTION OF PROPOSED ACTION IN THE FRAMEWORK
OF THE COMMUNITY PROGRAMME 14
A .  Cx_ea tion and stimulation of a Community
wide market for telecommunications 14
a) Terminals market (§ 28-29) 14
b) Network components (§ 30-31) 15

Pflriiicing the strategic uncertaiirUAS-
Creation of a common study and consultation
framework (§ 33)
Establishment of joint infrastructures 
(§ 34 to 36)
improving basic technology sKiAl. S. <§ 371
Aid for modernization an.d— 5. /tr 9n3theni.na of 
networks in the least favoured Çqmmunif c . y-  
raaions (§ 38 to 40)
VI. CONCLUSIONS20

PREAMBLE
The Commission has sent to the Council two communications on  
telecommunications. At the meeting of Ministers for Industry on November  
4, 1983 the Council agreed that the Commission would call together a  
Senior Officials Group (SOGT), which would work closely with Ministers  
for Industry with a view to determining - in conjunction with the  
industrial circles concerned and with the PTT authorities - the basis for  
proposing an action programme for the balanced development of the  
telecommunications sector.
This Group met six times between November 24, 1983 and March 13, 1984.  
Thanks to its cooperation and the highly constructive attitude prevailing  
throughout its discussions, the Commission was able to assess the degree  
of consensus on the arrangements for implementing the six action lines  
proposed,  and the following communication sets out its proposals to the  
Council.

In earlier communications, the Commission has demonstrated  
the increasing importance of telecommunications to the  
economic development of the Community.
The stakes involved and the challenges with which Europe is  
confronted in this sector are considerable. The capacity to  
meet these challenges, and to cope in a timely manner with the  
opportunities born out of the development of  
telecommunications, is outside the capability of national  
operators on their own.
If the European countries are divided, their weaknesses will  
increase and the gap between them and the United States and  
Japan will widen irredeemably, as was the case in data  
processing ten years ago. If Europe takes concerted action on  
both economic and technological fronts, it is capable of  
exploiting its assets and potential to the best effect in  
facing up to thi3 challenge.
ECONOMIC IMPORTANCE OF THE SECTOR
Telecommunications already plays a major role in the economies  
of Member States.
The direct economic importance of the sector can be gauged  
both by the contribution it makes to the GDP (some 2% in the  
Community) and the amount of investment it requires
(approximately 0.7% of Community GDP, i.e. over 16 000
million ECU in 1981).
The importance of the telecommunication sector (both equipment  
and services) is comparable to that of the largest industrial  
sectors, such as aerospace, electricity generation or the  
electronics industry.
Furthermore, telecommunications equipment accounts for a  
substantial proportion of the production of the electronics  
industry in the majority of the Member states (12% in France,  
17% in Italy and nearly 20% in Belgium).
The indirect impact of telecommunications is no less  
significant. The multiplier effect of telecommunications  
investments is one of the highest, equivalent to that of the  
building and civil engineering industry :  1 million ECU
invested today in telecommunications infrastructures brings  
about a total increase in activity of 1.5 million ECU.  
Telecommunications constitutes the essential vector for  
information flows and new services which help to create  
industrial and commercial activities. It also represents a  
large market for electronics and data-processing components.

4 -
B. This role will increase
New technologies will fulfil a pump-priming role in the  
evolutionary process that is taking place. Such technologies  
are at work not only in telecommunications terminals, but also  
in the components sphere.
These technologies are, in particular:
- *^&itization,  which makes it possible to process much more  
sophisticated data ;
- the use of optical fibres, which makes it possible to trans­
mit information at considerably higher rates and at much lo­
wer cost ;
- the integration of micro—electronics components and software
- the development of cable and satellite links.
These technological advances, which will sooner or later  
render current techniques obsolete, will bring about a  
decisive improvement in the way in which the human voice,  
writing and images are processed, and will make it possible to  
make the interactive use of communication networks more  
widespread.
5. The resulting convergence of telecommunications, data  
processing and audio-visual media will alter the nature of  
telecommunications and considerably widen the range of  
services proposed.
These technological innovations will initially make it  
possible to improve and generalize the existing services,  
which use extent networks :  the telephone, telex, teletex and
low-speed data transmission. However, they will above all  
lead to tjie creation of new telecommunications
infrastructure ,  especially in the commercial sector, and the  
development of entirely new services :
— "second—generation" services, which presuppose the
improvement of the existing infrastructures with digital  
data transmission. Demand for this category of services is  
already making itself felt. Such demand comes from business  
users and concerns electronic mail, text processing  
(including electronic storage and retrieval), high-  
resolution videotex, teleconferencing, etc. Demand for  
services of this type, which accounts for some 3% of today's  
traffic, should grow considerably by the end of the decade  
in order to reach 10% of traffic around 1993 ;
The term "generation" used here does not imply that there is any break  
in the sequence of generations :  the transition from one generation to  
another will take place through the gradual emergence of new types of  
networks and services that will coexist (and sometimes be superimposed  
on the networks and services of the preceding generation).

- 5 -
- "third generation" or broadband services (person-to-person  
video communications incorporating text, voice and  
pictures), the introduction of which will require new  
telecommunications infrastructures (cables and/or  
satellites). Some of these services are being offered to  
business or residential users under experimental programmes  
designed to test their impact and feasibility (the Biarritz,  
Bigfon and Milton Keynes Projects). The demand for third-  
generation services will not really make itself felt until  
the beginning of the next decade and will initially stem  
from businesses, before gradually spreading to homes, where  
such services will fulfil various functions (education and  
leisure, working from home, household management, the safety  
of appliances, day-to-day medical supervision, etc.).
6. In the last few years, demand for telecommunications, both  
equipment and services, has seen especially vigourous growth,  
as evinced by the 1% growth rate in GNP being matched by a 7%  
rise in Europe's demand for telecommunications.
The annual growth rate of this demand could be further boosted  
through the development and diffusion of new services. From  
now on, the strength of demand for second generation services  
(and ultimately third generation services) relies on a speedy  
and appropriate response (in terms of the cost of both  
equipment and services to users, not to mention the  
availability and quality of the services) by Community  
carriers and telecommunications equipment manufacturers.  
Without this response, they will lack the wider prospective  
necessary to develop the market, as was the case with sectors  
that emerged a few years ago, such as office automation and  
computer-aided manufacturing ;  these have seen significant  
growth since then, mainly to the greater profit of suppliers  
from outside the Community.
C. The economic and social impact will be considerable
7. The progressive dissemination of new services will make it  
possible to improve substantially the management of  
businesses, to increase productivity and to reinforce the  
competitiveness of the economy as a whole.
The introduction of new communications and management and  
data-processing systems will exert a considerable impact on  
the productivity of the information services sector, whose  
activities account for 55% of added value and occupy 62% of  
the Community workforce.
The automation of office work, the acceleration of decision­
making processes, rapid access to information (making it  
possible, for example, to improve stock management), and the  
possibility of offering customers a more sophisticated  
service, sometimes in return for their cooperation (at  
electronic cash dispensers, for example) are all examples of  
applications which generate both increased profits and  
substantial savings for businesses. The total net benefit for  
business using these new services could be five times greater  
than the costs generated by introducing them.
T

-  6 -
The telecommunications market will grow quickly,  since demand  
will relate to all of the following :
- infrastructures, which will be necessary in order to satisfy  
the needs for extending first-generation services (at a cost  
of 20-30 billion ECU over 10 years if the Community is to  
catch up on the level of residential and business  
penetration attained in the United States or Sweden), and to  
prepare for the introduction of second-and third-generation  
services (digital switching, cabling, ground networks,  
optical fibres and satellite communications);
- terminals (telephone receivers, automated office equipment,  
VDUs fitted with keyboards, etc);
- services, which will undoubtedly constitute the sector with  
the highest added value, in view of the amount of investment  
required in software.
The equipment market, which currently amounts to some USD  
50.000 million, should thus represent by 1990 some USD 100.000  
million at current prices, whereas the forecast for  
investment throughout the world in the eighties devoted to the  
installation of new networks and services is something over  
USD 150.000 million.
Of these figures, Europe's share should amount to 20-25% of  
the world total. At the same time, the growth of capital  
expenditure and of the income generated by network operation  
will, by 1990, make telecommunications the Community's largest  
economic sector, overtaking the motor industry. On the whole,  
the contribution of telecommunications to Community GDP should  
rise from 2% to 7% between now and the year 2000.
9. The social impact represented by these fundamental changes is  
initially reflected in terms of new indirect jobs created by  
the development of services and the design, manufacture and  
installation of equipment and infrastructures. To these jobs  
should be added the number of jobs saved or maintained as a  
result of the increased competitiveness of firms that are  
threatened today. The net employment balance of these  
transformations is obviously difficult to assess. It will  
nevertheless depend on the following factors :
- the ability of Community operators (telecommunications firms  
and network carriers) to respond to demand ;
- the adjustment of education and training to the new  
requirements for qualifications ;
- the impact on employment of the increased productivity  
brought about by the introduction of new services.

- 7 -
10. Telecommunications therefore emerge as a strategic sector for  
the Community. It constitutes a special tool for reviving  
the economy and protecting employment in the Community via  
productive investment thanks to their high multiplier effect  
and stimulus to demand. At the same time, the development of  
telecommunications represents a key factor in economic and  
social change, in view of the increasing impact it will have  
on :
- the fabric of European culture (organization of information  
networks, the content and nature of educational or leisure  
applications, etc);
- the territorial location of activities and the restoration  
of the balance between regions thanks to greater freedom of  
location and the prospects held out by working from home  
with the aid of telematic equipment.
The expansion of telecommunications represents a quantum  
leap that will wreak a qualitative change on the type of  
services available to businesses and individuals, and  
transform the means of production, the pattern of  
consumption and lifestyles. Europe must stake its all on a  
Community response to these developments.
II. THE STATUS OF THE COMMUNITY'S TELECOMMUNICATION INDUSTRY AND
INFRASTRACTURE
A. Telecommunications is one information technology sector where  
the overall situation seems most favourable.
11. The Community still dominates its internal market in the  
telecommunications field. A total of a dozen European firms  
satisfy most of the requirements of a market which, taken as a  
whole, accounts for approximately 20% of the world market.
Whereas imports account for only 15% of production, Community  
firms succeed in exporting 30% of their production, thus  
achieving a trade surplus of 1.7 billion ECU in 1982.
All the same, a number of factors render this situation more  
fragile in the medium and long-term, especially the semi­
conductor deficit. This weakness could hamper the EEC's  
commercial prospects in the "systems" sector. Moreover, as far  
as products from traditional technologies are concerned, the  
EEC is vulnerable because of the advent of competition from  
newly industrialized countries in its traditional markets.
12. During the seventies, the technological performance of the  
telecommunications sector in Europe was remarkable. It is in  
the countries of the Community that time-switching systems  
were developed and then put into service in the networks. This  
was a crucial step towards digital networks. Moreover,  
Community operators (both industrialists and carriers) lead  
the field in the development of broadband networks.

-  8
®·  The evolution taking place shows weaknesses and disturbing  
vulnerabilities that give cause for alarm
13· The EEC market is compartmentalized and more limited  
therefore.  The proportion of homes in which the telephone has  
been installed is considerably lower (25-40%) than that of  
countries whose cultural standard is comparable (Switzerland,  
Sweden, Japan and the United States). This situation
aggravates the handicap of national telecommunications  
carriers in the EEC, since the latter collect less revenue in  
proportion to GDP than their American or Japanese counterparts  
and a considerable proportion of their resources will have to  
be devoted during the coming decade to making up for lost  
ground in the installation of first-generation services to the  
detriment of the promotion of new ones. The gap between the  
Community and the world leaders is liable to widen:
- data transmission accounts for only 3% of traffic in Europe,  
as compared with 5% in the United States;
- above all, the growth of the equipment market appears  
likely, on the basis of current trends, to be appreciably  
slower in Europe (+ 5% per year) than in the rest of the  
world or the United States (+ 8%). Lastly, the Community  
market, which represents 18-20% of the world market, exists  
only in embryonic form because of its fragmentation into ten  
national markets.
14. The Community's position is particularly vulnerable in the  
field of the basic technologies which determine the  
development of networks and services, i.e. micro-electronics  
and data-processing equipment. The EEC imports most (83%) of  
the micro-electronic components which will be used  
increasingly in telecommunications equipment (they already  
account on average for 7% of the cost equipment).
Innovation in services and in supporting systems and networks  
is increasingly reliant on performance in advanced integrated  
circuits.
Although the majority of European firms are present in the  
field of the critical technologies necessary for the  
development of the second and third-generation telecommuni­
cations services, none of them is in the position of having  
realized world-wide technological leadership in any of those  
technologies.
15. The Community is confronted with two major investment  
difficulties:
recovering R&D expenses will become increasingly  
difficult to guarantee; this will adversely affect the  
development of new products, and their price;
Europe is lagging behind as far as investment in  
equipment and infrastructure are concerned.
The cost of investment in R&D will be increasingly difficult
to recoup as a result of:

- 9 -
- the amount of expenditure to be allocated (the cost of  
developing a new generation of digital switching systems  
lies between 500 and 1 000 million ECU);
- the shortening of the innovation cycle;
- increasingly rapid obsolescence of equipment;
- the impossibility at the present time of manufacturing  
products on a large enough scale, due to the lack of an  
adequate internal market. The minimum market volume required  
to recoup the R&D and engineering costs associated with the  
development and production of new equipment and systems  
varies, according to the case in point, between 5% and 10%  
of the world market, which is greater than the size of any  
national market within the EEC.
Investment in telecommunications equipment is markedly lower  
in Europe than in the countries which are our main  
competitors. Admittedly, the effort devoted to the PTT  
infrastructure is comparable with what is made in the United  
States or in Japan. But the total expenditure allocated to  
infrastructure is distributed differently between purchases of  
equipment and the staff expenditure needed to put the  
infrastructure into service. The multiplier effect of  
infrastructure expenditure on the equipment market is higher  
in the United States and Japan than in Europe, as witness the  
volume of per capita equipment purchases (USD 32 in the EEC,  
as compared with USD 45 in Japan and USD 80 in the United  
States).
C. Furthermore, European industry is hardly going to be working  
under favourable conditions.
15. The fragmentation of markets is aggravated by national  
standardization and type-approval policies relating both to  
specific PTT equipment and apparatus that is liable to be  
connected at some time to the telecommunication networks.
The lack of consultation and of an overall standards policy  
taking into account the technological continuum of
telecommunications, data processing and audio-visual media  
emphasizes the internal walling-off of the markets and leads  
to the independent development of incompatible equipment and  
to narrow markets that fall below the economic optimum.
The recent adoption in the ten Member States of three  
different standards for mobile communications, in which the  
market is limited but will probably expand rapidly,  
illustrates the difficulties and challenges involved in a  
harmonized standards policy.
17. Lastly, one of the major weaknesses of the Community resides  
in the multiplier effect of the uncertainty stemming from lack  
of consultation at European levels between telecommunications  
carriers and industrialists, on the future development of
telecommunications. Even though long-time contacts exist

-  10 -
between national administrations, through the medium of UIT  
and CEPT, these bodies are primarily concerned with sorting  
out technical difficulties arising from international  
transmission of traditional services, such as telephone and  
telex.
The "objective" uncertainties in each Member State surrounding  
the choice of technologies (which ones will prove to be the  
most efficient and the most profitable in terms of  
operations?) and national demand (which products? in which  
sectors? when?) are compounded by uncertainties associated  
with inadequate knowledge of the strategies of agents acting  
in the other Member States, since the latter can, by the  
decisions they take, affect the forecasting environment and  
throw into doubt technological or commercial choices made too  
early.
The lack of common viewpoints concerning the strategies of the  
economic operators, market potential and the ways of
stimulating demand in a coordinated fashion reduces the scope  
of forecasts and increases the risk inherent in any national  
devlopment option that is not followed by other countries or  
partners, because of the narrowness of the national markets.
18·  Europe's main competitors are not standing still and have  
taken action which bears witness to their resolve to establish  
their technological and commercial leadership in the
telecommunications field, in order to dominate the world  
market.
Europe is faced firstly, as far as the United States are  
concerned, with the challenge presented by the deregulation  
that is taking place on the other side of the Atlantic. The  
FCC's decision breaking AT&T's virtual monopoly in the
operation of networks and the supply of equipment has opened  
up the American telecommunications market to broad competition  
and has led American firms to seek to extend their market  
outside the United States.
Japan's current and medium-term strategy is geared more to  
technologies (integrated circuits) and equipment (in
particular the consumer audio-visual sector). However, the  
decisions taken by the MITI and NTT, as illustrated in  
particular by the INS (Information Network System) project,  
reflect the desire to make an integrated services network  
available as quickly as possible at national level, NTT  
devoted 70% of its investments in 1982 to this end.

- 11 -
III. The particular situation of carriers in this context
19. It shows two characteristics :
In the first place, telecommunications have to comply with the  
obligations applicable to public services,  and
telecommunications services are provided in nine Member States  
by a state monopoly. In all the Member States, the carriers  
(whether public or private) strongly influence the development  
of the industry (hardware and software manufacturers) and the 
behaviour of the users of the services (businesses and  
individuals).
They exert this influence on two levels :
- as customers of the industry, since the market for  
switching and transmission equipment and certain  
terminals is dominated by carrier procurements, which  
account for 70—90% of the total ;
- as network carriers, since they stipulate :
.  network configurations and performance;
.  the conditions under which access to the network is  
obtained;
.  the standards applicable;
.  costs.
20. Secondly, the telecommunications sector (both services and  
networks) is undergoing rapid and far-reaching change and will
- require major investments in R&D (some 20% of annual  
turnover) and in infrastructure;
- these investments involve technologies that are still  
being developed and that
- generate products whose life and investment payback time  
is generally much shorter than before.
21. Carriers are therefore faced with a twin challenge :
- their investment requirements are increasing, whereas  
their traditional management structure and constraints  
arising from their public service role, or resulting  
from general economic policy, (tariff structure, equal  
access to services for users and price supervision by  
the authorities)are adversely affecting their revenue  
and limiting their capacity to plough back profits or  
raise loans;
- they have to take greater commercial and technological  
risks. Since we are dealing with new products, the state  
of the market and the receptiveness of demand are  
largely unknown factors when decisions are taken to  
launch a product; such decisions have lead times of  
between two and five years.

-  12  -
The simultaneous growth of the financial needs and of the  
risks will not have the counterpart of substantial benefits  
for the carriers.
Furthermore, the benefits deriving from the introduction of  
new services or of a new system will be shared very unevenly  
between carriers, users and industrialists. In the case of  
second-generation services, the thrust will benefit chiefly  
suppliers of terminals that are not specifically dedicated to  
telecommunications. Studies conducted in France or in the  
United Kingdom appear to demonstrate that the introduction of  
new services will be of considerable benefit to users (see  
point 7) .  Taken as a whole, the new services will have a  
greater overall economic impact on industrial activities and  
services in general than on the revenue of the  
telecommunications sector, since 80-85% of the latter will  
continue to come from the telephone traffic in 1990.
IV.  Objectives and strategy of the proposed action programme.
22. The above analysis has set out the key factors affecting the  
future of telecommunications, namely :
- compartmentalized markets,
- the scale of investment necessary, the difficulty of  
funding it and of assuring an economic return,
- Europe's enfeebled technological grasp on this area
- strategic uncertainties
This state of affair is contrary to the interests of
users, companies and carriers in this sector; they have to
confront the following problems :
- The risk of lagging behind in the introduction of  
networks and services;
- the fact that it is difficult for the European industry
" to benefit from the advantages deriving from large scale
production, which correspondingly hampers its capacity  
to invest, conduct research and manufacture competitive  
products;
- the uncertainty surrounding the strategies to be  
promoted and the chances of technical and commercial  
success, even though investment choices and decisions to  
develop products and services cannot be postponed.
23. The Community risks being unable to take full advantage of the
opportunities made available by developments in
telecommunications and by acceleration in two associated areas

- 13 -
- the telematics markets
- the market for wide band services and networks
Current estimates are that the multiplier of infrastructure  
expenditure (on advanced second and third generation networks  
up to 1995) will be of the order of 1 to 10 ;  and that this  
total investment (infrastructure and terminals) will in turn  
generate a burst of economic activity equal to twice the sum  
invested in equipment.
Thus, prolonging the present state of technological weakness'  
and political uncertainty means that Europe has a lot to lose  
as compared with Japan and the U.S.
At this point, Europe's more sluggish growth rate in  
telecommunications (5% agains 8% in the U.S. or Japan) means a  
potential loss of 500 millions ECUs per annum.  This figure  
does not take into account the costs of the resulting loss of  
competitive edge to the Community's economy; this is difficult  
to assess, but will be caused by tardier take-up by European  
businesses of new telecommunications networks and services.
24. Will Europe, with its industrial and technological resources,  
be capable of stimulating demand and coping with the social  
and cultural impact of the proliferation of networks and the  
dissimination of new products and services ? or will it allow  
its market to be dominated by non-European firms and products,  
through failure to identify what is at stake and anticipate  
European and world demand at a sufficiently early stage ?
The Member States, acting alone, are no longer able to take up  
these challenges and master the crucial problems posed by the  
development of telecommunications.
Europe's potential resides in its ability to use the Community  
framework and instruments.
In view of the transformations that lie ahead, it nevertheless  
has little time to preserve the favourable positions it  
currently holds and to endeavour to penetrate new world  
markets.
Rapid decision are necessary and require aims and proposals  
for action at Community level, in order to overcome these  
handicaps and to take full advantage of developments in  
telecommunications
25. It is in the light of these inherent problems that, in  
September 1983, the Commission presented a communication  
describing certain lines of action and approached the Council,  
which agreed to set up a group of senior officials from the  
Member States. Discussions within this Group proceeded at a  
steady pace (six meetings Bince the end of November) and  
proved highly constructive. In the light of these discussions,  
the Commission proposes that the outline set out in its  
communication of 29 September 1983 and approved by the Senior  
Officials Group provide the broad lines for an initial  
Community action programme.

- 14 -
26. This action programme must attain three objectives :
1) placing at the disposal of users, as quickly as  
possible and at the lowest cost, the equipment and  
services they require in order to ensure that they are  
sufficiently competitive;
2) stimulating European production of telecommunications  
equipment and services in order to create a climate in  
which the Community industry can maintain its strong  
position on the European market and stay in first place  
among world exporters;
3) allowing carriers to take up the technological and  
industrial challenges with which they will be faced.
27. These objectives can be achieved by Community initiatives to  
overcome the handicaps which beset the Community :
- compartmentlized market which stunt supply and  
demand ;
- the uncertainty of carriers and companies over what  
development strategies to put in hand;
- weakness in the fundamental technologies of
telecommunications ;
- backwardness of less favoured areas in respect of  
networks, equipment, and advanced telecommunications  
services.
Detailed elaboration of the different categories of action  
that make up this Community programme forms the annex to this  
document. Principle elements of the plan of action are  
outlined below.
V. DESCRIPTION OF PROPOSED ACTION IN THE FRAMEWORK OF THE COMMUNITY  
PROGRAMME' — —
The actions proposed are intended to overcome, through Community  
invervention and with regard to the rules of the Treaty (especially  
the competition rules), the 4 major handicaps (see §27 above) which  
inhibit the development of telecommunications, and hinder the  
Community in taking full advantage of the opportunities offered by  
this development.
A. Creation and stimulation of a Community wide market for  
telecommunications.
a) Terminals market
28. If the Community is to become more competitive, it must have a  
common terminals market, expanded to cover its entire area. The  
existence of such a market will promote the development of new  
services in that it will be easier for user to select the  
equipment best suited to their requirements, at the most  
favourable rates.

- 15 -
Furthermore,  producers will benefit from a larger internal  
market since inherent economies of scale will then permit them  
to distribute their products both within the Community's  
internal market and abroad.
In turn, the dynamism of this market will stimulate the demand  
for new services, which in itself is likely to encourage  
operators to transform their networks more rapidly, thereby  
creating a snowball effect.
29. Broadening of the terminals market involves two complementary  
types of action concerning:
- standards,
- approval procedures.
With regard to standards,  suitable procedures should be adopted  
with a view to ensuring the uniform application throughout the  
Community of either international standards or those most  
widely acknowledged at world level.
As far as approval is concerned,  the eventual aim should be to  
achieve mutual recognition by network operators of the approval  
certificates issued in respect of this terminal equipment. This  
should not, however, rule out the possibility there being in  
future some form of Community approval for certain types of new  
equipment. This last objective can only be achieved in stages  
(see annex §34 and notev  below).
In addition, it is proposed that operators purchasing  
terminals, either for their own use or that of users, should  
open their invitations to tender to all Member States of the  
Community.
b) Network components
30. Any broadening of the market in this equipment to Community
scale can be achieved only very gradually, given certain
inflexible technological and institutional factors, as shown  
for example in the adoption of 9 different switching systems  
within the Community.
The market must, however, be opened up in order to allow  
carriers greater choice of equipment at the lowest possible  
cost. At the same time, if all Community carriers are able to  
deal with a gradually expanded market, an increasing
convergence of technological options will result and risks be  
reduced.
The Commission intends proposing that the Council adopt an updated  
version of the Recommendation concerning the implementation of  
harmonisation in the field of telecommunications (C0M(80) 422).

Producers will benefit from the size of the market and be  
encouraged to seek cooperation on the basis of complementarity,  
a factor that is likely to produce improved structures  
(together with a certain degree of specialisation). The user  
should reap the benefit of this market enlargement policy (i.e.  
the reduced cost of services and the increasingly uniform  
conditions of network use).
In view of the present state of affairs, characterized by  
nationally compartmentalized markets,type approval procedures,  
R&D efforts, standards and network development strategies, the  
Commission considers that the opening-up of national markets  
will only be achieved gradually. The first step towards this  
can be taken immediately,  namely asking network carriers to  
extend initiatives to tender to all Member States of the  
Community for a minimum percentage to be determined by the  
value of their annual procurement (for example 10%) of
network components. With the assistance of an  
advisory liaison group, the Commission would supervise  
implementation of these measures. It will shortly be presenting  
a suitable proposal, based on the text of the draft  
Recommendation concerning the first pahse of opening-up of  
public telecommunications markets (C0M(80) 422) and on the
results of the Council's discussions of the draft (see Council  
Document ECO 55 ref. 10538 of 29 October 1982).
The existing compartmentalization should break down gradually  
under the combined effects of demand for services, evolution of  
networks and increasing realization of the significance of the  
Community-wide dimension; therefore the Commission considers  
that the Community's aim should be nothing less than the total  
opening—up of markets for the new network components, 
especially third generation types.
However this aim can only be achieved gradually, depending on  
variables such as equipment types, schedules and geographical  
locations involved. The Commission proposes to gear the speed  
of this process to the implementation of the action programme.
Reducing the uncertainties (of carriers and manufacturers)  
concerning the development strategies to be put in hand.
Three types of action can contribute to this aim:
- the broadening of the market and a Community policy on  
standards, which will reduce commercial risks by causing  
easier amortization of R&D costs and by lowering unit prices  
(economies of scale)
This action is described above, in A, (§ 28 to §  31);
- the creation of a common study and consultation framework;
- the establishment of joint telecommunications infrastructure  
projects.

- 17 -
33. The creation of a common (study and consultation) framework for  
the development of services and networks (action line I of the  
annex) should enable the Community :
- to establish common long-term objectives for the development  
of telecommunications,
- to define the intermediate stages and to identify problems  
that should solved in order to attain these objectives,
- and to analyse measures likely to help solve these problems  
at the various decision-making levels (industry, carriers, 
individual states, Community).
The effort to achieve converging strategies and approaches in  
this field should benefit industry by giving it greater  
confidence as regards its forecasts and investments. Users  
would also be in a better position to plan their investments  
(especially if the study and consultation also embrace aspects  
such as price-fixing and price structures). By pooling their  
best skills to exploit and stimulate the most favourable  
developments, carriers would be able to minimise their  
uncertainties and the risk of making mistakes, whilst synergy  
would be effected by the simultaneous implementing of jointly  
chosen options.
In order for this type of joint study and consultation on the  
development of telecommunications in the Community to be  
successful, the Commission proposes the creation of a
multidisciplinary analysis and forward study group, consisting  
of technologists, economists and decision-makers.
34. Establishment of joint telecommunications infrastructure  
projects (action line IV of the annex)
Another means of bringing together the interests of users,  
producers and carriers would be to carry out transnational  
projects, at pilot level or on a large scale. Their mobilising  
effect would be beneficial as far as the implementation of new  
technologies, market expansion and industrial competitiveness  
are concerned. A group of consultants, closely connected with  
network operators, is currently considering the general concept  
of such projects and the full results of their study will be  
made available in June of this year.
35. Such projects of common interest will provide a suitable  
opportunity for implementing joint solutions to technical  
problems and will lead to increased standardisation. They  
should also permit cooperation between European companies thus  
contributing to market expansion. Lastly, they will allow  
choices concerning technology to be made on a joint basis.
Three projects can already be put forward :
- the establishment of broadband pilot network to provide  
advanced communications services (video-conference,  
videophony, data transmission) to policy-makers in the Member  
States and those in the Community institutions. The  
Commission has initiated a feasability study, as requested by  
the Council at its meeting of 28 February 1984. Project  
design, Community-level consultations and implementation will  
form part of the extended INSIS programme, with all the  
benefits of the experience acquired under that heading;

- 18 -
- two other projects, with results in the longer term, should  
be launched :
one involves the setting-up of second-generation  
transnational cellular radio-telephony services ,  the other,  
the establishment of main trans-Community lines for  
integrated service broadband networks.
The Commission proposes to begin feasibility studies for both  
projects immediately. The results could be examined by the  
analysis and forward studies group, whose creation is proposed  
in §33 above.
36. In order to carry out these common interest projects and 
mobilize the investments required to set up the
infrastructures, the Commission proposes that the EIB make use  
of both its own funds and those of the NCI.
C. Improving basic technology skills (action line II of the  
annex)
37. For the reasons stated above (see §  14 and 15) and in order to  
allow optimum use of limited resources, whilst reducing the  
time required to master a technology, the Commission considers  
it necessary to implement Community R&D activities, in  
addition to those performed under the ESPRIT programme.
The Commission has already begun consultations with a view to  
determining the R&D sectors likely to benefit most from this  
Community level activities and from exploitation of results.  
During the second half of 1984, the Commission will present a  
proposal concerning an R&D programme in the field of  
telecommunications .  Moreover, the creation of transnational  
infrastructure projects described in §34 and 35 above will  
enable
- easier identification of what upstream research is needed
- to have a fixed applications area for these Community-scale  
R&D efforts whose effectiveness will thus be improved.
D .  Aid for modernisation and strengthening of networks in the  
least favoured Community regions (action line V of the annex)
38. The density of telecommunications network and its performance,  
in terms of cost availability and access to more or less  
"sophisticated" services, differ very much from one region to  
another within the Community. Network modernization and  
reinforcement in the least favoured EEC regions will  
contribute to :
- a stimulation of their economic development,
- correcting their disadvantaged status,
- allow them to take advantage more quickly of the benefits  
from 2nd and 3rd generation services (see §5 above).
^The estimate of a Community contribution to such a programme could  
amount roughly +/- 25 MECUs per year during 5 years.

- 19 -
39. Implementation of this objective implies at the outset,  
overcoming the investment problem. This problem is one that  
will loom large in the next decades as the infrastructure and  
networks required to launch the new services are installed.
In some cases, it will be necessary, for economic reasons, to  
■ > ;  anticipate the demand for new services at the risk of
increasing the serious financial difficulties already  
experienced by operators. A judicious use of the Community  
financial instruments (EIB), NCI, ERDF)  should make it  
possible to bridge the gap between the investments required  
immediately and the longer-term returns anticipated as demand  
gradually increases.
This general problem is growing increasingly acute in the  
Community's least well-developed regions.
40. The Commission proposes that the level of financing provided  
by the Community's financial instruments with respect to the  
development of telecommunications infrastructure in such 
regions remains the same as over the past three years, i.e.  
720 million ECU. Furthermore, it proposes that the supported  
projects be designed to exploit as far as possible the  
potential of the new telecommunications technologies and  
combined with projects of common interest, the objectives and  
content of which are described in §34 to 36 above.

-  20  -
VI CONCLUSIONS
The Commission requests the Council:
1. To approve the implementation of a Community programme, aimed  
at creating a consolidated European telecommunications  
territory, which would give both carriers and industry the  
benefits and added dimension of working on the Community-wide  
scale, and would put at users' disposal the services essential  
to promote competitiveness, through :
- creation and stimulation of a Community-wide  
telecommunications market,
- reducing the strategic uncertainties,
- mastery of technologies necessary to the development of  
telecommunications,
- helping to modernize and strengthen networks in the least  
favoured regions of the Community.
2. To approve immediately the following measures relating to :
2.1. the creation and stimulation of a Community-wide market  
for telecommunications
2.1.1. Broadening the terminals market  
A. as regards standards
to instruct the Commission, assisted by an advisory liaison group :
(a) to identify the requirements specific to the Community as regards  
standardization in telecommunications;
(b) to adopt a Community standardization programme in the field of  
telecommunications. This programme would cover both the  
preparation of "refined" international standards and the  
formulation of interim or provisional standards.
It would define :
- the common priorities;
- a timetable and a schedule to be complied with;
- the procedures for cooperation with the CEPT;
- a procedure for monitoring, evaluating and updating the work.
An initial Community programme should be established before the  
end of 1984.
B .  - a s  regards type approvals
a) to request the operators of networks under the conditions  
referred to in this communication (see §21-23 of the Annex to  
this Communication) to take whatever measures are necessary with  
a view to progressively achieving mutual recognition of type  
approvals of terminal equipment connected to the networks (  in  
certain cases such approvals may be delivered at Community

-  21  -
level), the first stage to consist of mutual recognition of test  
results to ensure conformity of this equipment with standards,  
such tests to be carried out by approved national laboratories;  
the first results should be achieved before July 1985.
to instruct the Commission to request the CEPT to perform  
whatever technical work is needed to attain this objective and  
to negotiate with that body in respect of the procedures for  
carrying out such work.
Progressive broadening of those parts of the equipment markets  
which are dominated by carrier procurement
(a) as regards the terminals used by the carriers or placed by  
them at the disposal of users, in particular the new  
terminals for computerized telecommunications,  to request  
the operators to extend their invitations to tender to all  
member states of the Community ;
This opening up of markets should be effective from 1984 and  
proceed in parallel with the setting up of common standards  
and type approval procedures
(b) as regards the other categories of equipment,  to initiate an
experimental phase during which the carriers would be called  
upon to extend their invitations to tender to all member  
states of the Community in respect of a minimum percentage  
to be determined (for example 10%) of the value of their  
annual procurement of these types of equipments. In parallel  
with progressive application of the overall programme  
outlined in the present proposal, carriers would
increasingly open up their markets. For equipment of new  
networks (especially wideband networks), the Commission  
considers that the goal should be nothing less than a  
complete opening up of markets.
(c) to instruct the Commission, assisted by an advisory liaison  
group, to ensure that these measures are implemented and to  
supervise the application thereof.
to reduce the strategic uncertainties by setting up a  
multidisciplinary group for analysis and forward study, under  
the conditions set out in detail in action line I of the Annex  
to this communication,  which will conduct analyses and  
discussions and coordinate work on the setting up of new  
services and new telecommunications networks in the Community  
over the next 20 years.
The work of that group would initially cover three topics :
- the development of new services through the rapid setting-up  
of integrated-service digital networks (narrow-band ISDNs);
- the introduction of cellular radiotelephony services;
- the development of video communications and the introduction  
of transnational broad-band networks.

-  22  -
A report on the results of work on the first topic should be  
available before 31 Dcember 1984 to be followed by a second  
report on the two other topics before 30 June 1985.
3. to stress the importance it attaches to the least favoured  
regions of the Community being able, through appropriate use of  
the Community instruments, to improve their telecommunications  
infrastructure and to participate in adequate measure in  
Community projects.
4. to renew the mandate of the Senior Officials Group, instructing  
it to assist the Commission in the implementation of the  
decisions referred to in points 2 and 3 above and in performing  
the work referred to in point 5.
5. to take note that :
(a) the Commission will shortly put forward new proposals  
relating to harmonization in the field of telecommunications  
and to an initial phase of calling for tenders in the  
telecommunications sector on the basis of draft  
recommendations I and III set out in document C0M(80) 422 
final, forwarded to the Council in September 1980, and of  
the results qf the Council discussions on those  
recommendations ;“
(b) the Commission, in consultation with the parties concerned,  
will conduct studies for the purpose of defining the  
research sectors which are suitable for cooperation at  
Community level and of recommending the procedures for such  
cooperation, with the aim of placing a proposal before the  
Council during the second half of 1984.
(c) The Commission will pursue the idea of setting up a  
Community programme to further telecommunications  
development in the least favoured regions of the Community,  
within a revived ERDF framework.
(d) the Commission will follow up the feasibility study of the  
vidéocommunications broadband network between political  
authorities. Its first results are already available.
Cf. Council Document ECO 55 Ref. 10538/82, 29th October 1982.

A N N E X
ACTION PROGRAMME
I N  T H E  F I E L D
O F
TELECOMMUNICATIONS

INTRODUCTION
The programme contained in this annex details the 6 action lines  
prepared by the Commission in its communication of September 1983,  
namely :
1) establishment of medium and long term objectives at Community  
level ;
2) definition and implementation of an R&D programme ;
3) broadening of the terminals market and development of  
Community solidarity towards the outside world ;
4) joint development of transnational parts of the future  
telecommunications infrastructure within the Community ;
5) intensive use of modern telecommunication techniques for the  
advancement and development of infrastructure in the last  
favoured regions of the Community;
6) progressive broadening of those parts of telecommunications  
équipement markets which are dominated by carrier procurement.
Some categories of action have already been developed into precise  
proposals, while others (action line II and V for instance) must  
still be subject to additional study.

ACTION LINE I :
SETTING MEDIUM- AND LONG-TERM OBJECTIVES AT COMMUNITY LEVEL
The emergence of new communication services and the expansion of  
networks over the next 20 years are bound to give rise to many  
problems (technological choices, standards to be used, equipment to  
be developed, financing of investment, etc.) but will also create  
vast opportunities for technological and industrial development.
A Community approach to these problems must help find optimum  
solutions. Similarly, it will be easier to take advantage of the  
economic prospects opening up if industry can be informed as rapidly  
as possible of coordinated decisions taken in a joint planning  
framework.
Consequently, the Commission proposes the setting-up of a  
pluridisciplinary group to analyse, study jointly and reach  
coordinated conclusions on the development of telecommunications in  
the Community.
This group, made up of technical people, economists and decision­
makers, would analyse the interplay between technical options, the  
services offered and the networks, the resultant economic, industrial  
and institutional issues and prospects and finally the way in which  
the various developments are likely to interact in the short, medium  
and long term.

- 4 -
This concerted forward analysis should make it possible :
— to identify and define the problems of various kinds to be  
solved in order to ensure that the new services and networks  
can develop under optimum conditions, especially from the  
viewpoint of the market, the technologies involved, industrial  
competitiveness and investment ;
— to define measures likely to overcome these problems at  
different decision-making levels (companies, administrations,  
national governments, the Community).
As far as the Community is concerned, the work of this group should  
help to define activities in which the Community dimension and the  
resources offered by the EEC Treaty would be useful or even essential  
factors.^
p
3. Analyses performed by the Commission and confirmed by the SOGT  
demonstrate that, in view of the increasingly well-established  
convergence of telecommunications, computing and audiovisual  
techniques and the fast development of new services resulting from  
the combined action of this convergence and the emergence of new  
technologies, each Member State is at present assessing - against the  
background of its own economic and social framework - the potential  
evolution of telecommunications at national, European and worldwide  
level.
These facilities are numerous and varied :
- implementation of cooperative research programmes (see line  
II);
- legislative measures concerning the market ;
- launching of promotional projects (see line IV);
- use of the Community financial instruments (see line V), in  
particular where the least favoured regions in the Community  
are faced with specific difficulties ;
- definition and harmonized implementation of international  
standards (see line III);
>
Senior Officials Group in Telecommunications.

- 5 -
4. Current market fragmentation, scattered development efforts (notably  
R&D) and the lack of coordination in this field not only have adverse  
effects on Community's technological and industrial development, but  
are also likely to hamper the emergence and deployment of new  
services that can greatly improve the competitiveness of companies  
and generate new markets and fresh employment opportunities.
5. Although during the past decades, telecommunications services  
featured little diversity and progressed comparatively slowly,  
disparities between countries could be tolerated easily, the same is  
not true today. With the establishment of worldwide markets and  
economic relationships and the explosion of new services, homogeneous  
and modern telecommunications systems throughout the world have  
become a key prerequisite for the development of the economy.
6. The Commission therefore considers it necessary that a forward  
analysis should be conducted at Community level to investigate  
possible development scenarios for services and networks. The  
analysis should concentrate on :
a) interplays between technical options, the services offered, types  
of networks and users and, at a higher level, the related  
economic, industrial and institutional issues ;
b) the way in which the various development scenarios interact in  
the short-, medium- and long-term time scales ;
c) ways and means of ensuring that economic activity in the  
Community will obtain the largest possible return from those  
developments.
7. Synergy between demand for new services and the dynamics of  
infrastructure changes create three main lines of developments :
3
- narrow-band ISDN ;
^ISDN = Integrated Services Digital Network.

-  6 -
- business communications
- consumer vidéocommunications.
8. The first line (ISDN) corresponds to the evolution of public networks  
to meet the growing demand for narrow—band IT services (text and data  
at low bit rates) from professional users and small business.
9. The business communication line is of immediate concern. There is,  
indeed, in this sector made up of medium to large companies, public  
bodies and administrations, a convergence in the nature of demand for  
new telecommunications and IT services stemming from internal needs.
By its very nature, this line is characterized by a strong interplay  
between computing and office automation :  it therefore generates a
strong pull on the IT industry at large.
In addition, although only 2 to 3 % of main telephone lines are  
involved, business communications are potentially the leading edge in  
several areas, e.g. for multi-service technologies evolving from  
private communication infrastructure, or for interpersonal  
'  vidéocommunications and for videoconferences. (It should be pointed
out here that business communications already have a sufficient  
impact on transmission capabilities to be a major incentive to the  
development of long-haul optical links and dedicated satellites for  
I *  data communications ) .
This includes :
- voice and data services of narrow band ISDN type,
- wide-band services for large businesses and administrations using  
in a judicious manner satellite and terrestrial systems and also  
mobile communications systems.

- 7 -
10. It is, however, the third line of development that is the most likely  
to trigger a radical move by public networks towards broadband  
throughout consumer interactive vidéocommunication. In actual fact,  
the emergence of the person-to-person video phone, which implies two  
key changes, the use of broadband switching and a large traffic  
demand, is unlikely to come about for another ten years. This period  
is necessary both to bring the new generation of exchanges up to the  
industrial stage and to allow the development of a significant and  
viable demand.
Meanwhile, from 1985-1990 on, a first phase of this development is  
expected to lead to networks able to support interactive television  
and designed so as to form, in the long term, the local
infrastructure for broadband networks.
Compared to the first two lines, consumer vidéocommunications will  
obviously require a high level of investment resulting from the very  
nature of the services and the laying down of new infrastructures  
which can make little or no use of equipment now in service.
11. The issues at stake, commercial opportunities and operational  
arrangements for these three lines have yet to be studied in detail.  
The impact on markets of the concerted and fairly rapid development  
of all or some of these lines, the optimisation of these measures by  
implementing them from the outset in a Community context and the  
drive that could result from the launching of European projects have  
yet to be assessed.
12. The Commission has initiated a forward study on advanced  
telecommunication structures and services in the Community. This 
study is intended to provide material for the study on the  
development of Community telecommunications, and its results will be  
available by June 1984.
13. The Group for Analysis and Forward Study, which the Commission  
proposes, should (its general terms of reference are outlined at the  
start of this chapter) initially tackle three main themes :

-  8 -
- theme 1 :  the development of new services through the rapid  
launching of narrowband ISDN at European level so as to ensure  
transnational compatible working for users. The problems caused by  
the earliest possible establishment of digital connectability on a  
Community scale should be examined immediately ;
- theme 2 :  the establishment of transnational cellular
radiotelephony services of the first and second generations ;
- theme 3 :  a study of the development of vidéocommunications  
business vidéocommunications, interactive television, picture  
phones, consumer video communications) and the establishment of  
transnational broadband networks.
14. In its work, the Group for Analysis and Foreward Study should take  
into consideration the result of the work and studies carried out by  
the Commission and the CEPT on these various subjects.
The results of its work will be given in reports which should also  
set out proposals for action and be available as follows :
-for theme 1 :  by 31 December 1984
-for themes 2 and 3 :  as soon as possible, but at all events by 30
June 1985.

ACTION LINE II :
DEFINITION AND IMPLEMENTATION OF
COMMON ACTION ON RESEARCH AND DEVELOPMENT
15. The Commission is now holding consultations to determine the research  
and development fields where work made in the Community and  
utilization of results could be done more efficiently and at lower  
cost through Community cooperation.
Once these fields have been identified and analysed, the most  
suitable cooperation arrangements will have to be determined,  bearing  
in mind the ESPRIT programme which, although it is not specifically  
geared to the development of telecommunications, supports basic  
projects that could be useful in that field.
The Commission will present a proposal on a R&D programme for  
telecommunications during the second half of 1984.
16. Although R&D expenditure on telecommunications in the Community is  
difficult to evaluate^, it can nevertheless be estimated that 1500 to  
2000 million ECU are spent yearly on R&D in telecommunications,  
averaging about 17% of the total sales of telecommunications
The main reasons for this difficulty are as follows :
- differences in methods of assistance from one country to another;
- the strategic importance which the companies accord to them;
- differing definitions of what should be included under the heading  
telecommunications R&D in view of the interrelations existing between  
telecommunications and basic technologies developed in other sectors  
(computing, electronics).

-  10  -
®Quipment by manufacturers. This matches the Japanese figure but is  
lower than that of the United States.
17. This high level of expenditure seems unlikely to fall in the years  
ahead.
On the contrary, increasing investment will be necessary to remain or  
become competitive in leading-edge technologies. One of the main  
problems for the Community is therefore to obtain maximum benefit  
from financial resources that will remain modest in comparison with  
requirements in fields (new technologies) where work in common would  
allow to save money, to master technologies in a shorter time, and to  
have a beneficial effect on competitiveness and market.
18. Implementation of this line of action will require the gradual  
definition of :
a) a Community view of the main features of future broadband multi-  
service networks (see line I) ;
b) common understanding of the relationship between R&D on the one  
hand and standards and industrial capability on the other ;
c) the guidelines for a Community R&D programme specific to  
telecommunications, the launching of which would be justified on  
economic grounds and for reasons of lead times and optimum  
exploitation of results.
19. The Commission is now organizing a number of talks with the various  
parties concerned - PTT research centres and industry - in order to  
identify fields in which a Community cooperative research effort for  
telecommunications would be justified alongside the research  
conducted at national level and within the Community framework (i.e.  
ESPRIT). The Community effort required could take different forms  
depending on the type of R&D activity involved.

- 11 -
20. Four types of possible action in this field have been identified and  
are now being investigated :
a) exchange of information and coordination, as in the case of the  
projects undertaken in the COST1 framework (concerted actions) ;
b) support for precompetitive research of the ESPRIT type (cost  
sharing actions) ;
c) technological feasibility demonstration projects, addressing the  
field between development and production ;
d) Demonstration prospects, showing full scale tests and covering  
R&D and engineering requirements involved in the realisation of  
infrastructure prospects in leading edge technologies (see Action  
Line IV).
21. In the definition of a telecommunication R&D programme, there is a  
need to establish clearly the relationship with the ESPRIT programme,  
which, although not specifically geared to telecommunications,  
nevertheless has four research areas of great interest for the  
development of that industry :
The COST programme covers a limited number of projects in the  
telecommunications field, the most significant being :
- COST Project 202 bis :  research on broadband local networks (switching,
network architecture, transmission);
- COST Project 208 :  optical fibre communication systems ;
- COST Project 211 bis :  coding of video signals.
Some half dozen other COST Projects are also in progress on topics such as  
phased antennae and signal propagation through the atmosphere.

-  12  -
- in the field of microelectronics,  priority is given to silicon  
technologies (bipolar MOS) which are of great importance for  
telecommunications. Although some activities relate to III-V  
materials and opto-electronics, the planned effort in this field is  
small. It will have to be determined whether the opto—electronics  
resources assigned to the development of telecommunications should  
be increased within the ESPRIT programme or outside it ;
- the chapter on office automation in the ESPRIT programme  
specifically refers to ISDN concepts and local area networks and  
covers office communication systems and workstations. Here,  
coordination with the telecommunications R&D projects on broadband  
systems (networks and terminals) is essential, but the scope of the  
ESPRIT programme on office systems would have to be excessively  
widened if it were to include all network and terminal  
developments. It would be better to give consideration to a new  
programme specifically concerned with broadband telecommunication  
networks and to coordinate the developments under Esprit's office  
systems section with the work in the new programme.
- The sections in Esprit concerned with software technology and  
advanced information processing are directed at general objectives  
(software production methods and expert systems). Consequently the  
results of the Esprit programme could be useful in the development  
of software for specific telecommunications applications. As these  
developments would be linked either to the micro- and opto­
electronics aspects of the telecommunications programme or to the  
broadband aspects, they should be tackled under those two headings,  
every effort being made to put the Esprit results to optimum use.  
In addition, however, it might prove useful to include in Esprit  
the study of software or dataprocessing concepts needed in  
particular for telecommunications applications.

- 13 -
22. On the basis of its talks, the Commission will submit specific  
proposals in the second half of 1984.
23. As regards the financial assistance, the activities discussed above  
could involve :
- a modest use of budget resources which would be devoted mainly to  
precompetitive cooperative research projects and demonstration  
projects on equipment ;
- more extensive use of the Community's financial instruments to  
finance pilot and infrastructure projects.

- 14 -
ACTION LINE III :
COMMUNITY ACTION AIMED AT OPENING UP  
THE TERMINALS MARKET AND DEVELOPING COMMUNITY  
SOLIDARITY TOWARDS THE WORLD AT LARGE
24. The Commission proposes expanding the market for terminal equipment  
connected to networks by progressively bringing into effect a  
procedure for the mutual recognition of type approval granted by  
carriers in respect of this equipment.1 The first stage would be the  
mutual recognition by carriers of the results of tests carried out in  
approved laboratories to verify the conformity of terminal equipment  
with standards.
The Community would define the equipment to be given priority for  
this procedure and would monitor its application, while the necessary  
technical work would be entrusted to the CEPT. Discussions between
the Commission and the CEPT should continue with a view to
establishing the precise details of this arrangement.
The Commission also intends to propose that the Council adopt an
updated version of recommendation COM(80) 422 on harmonization in the
field of telecommunications.
An advisory liaison committee consisting of experts from the Member
States should be set up to ensure that the procedures established for
attaining the desired goals are properly applied.
Such type of approval could in some cases be granted at Community level.

- 15 -
25. The expansion of European markets for terminals and private  
installations, which are mainly geared to business communications,  
merits priority because of :
— the strategic importance of these markets ;
— the future impact on Community industry that this liberalization  
measure would have.
26. The proposed action covers apparatus which, in some Member States, is  
allowed to be supplied to the end user by private suppliers but  
which, in others, must be supplied exclusively by the carriers.  
However, it is not intended under this action line to cover apparatus
— such as network terminating equipment - which, throughout the  
Community, is regarded as part of public carriers networks. That is  
the province of action line IV.
The Commission's proposals under this action line do not call into  
question the different supply responsibilities prevailing in the  
Member States. However, if the Community market for terminal  
apparatus is to be effectively opened up, measures must be taken  
which apply both to apparatus supplied under PTT monopolies and  
privately supplied apparatus.
This establishes an important link between action lines III and VI.
^ The word "terminal" is understood here to include all apparatus which sends  
or receives communications over a telecommunication system (including simple  
and complex telephones, PABXs, data terminals, telex terminals and facsimile  
apparatus). It also covers apparatus, such as certain modems, used to convert  
or process communications into a form suitable for transmission or reception  
via a telecommunication system.

- 16 -
27. In all Member States, before it can be connected to communications  
network, terminal equipment (the number and diversity of which are  
steadily increasing with the introduction of computing techniques) is  
subject to compulsory type—approval procedures (sometimes combined  
with requirements in the form of mere recommendations) which are  
imposed by carriers, mainly on grounds of security and the proper  
functioning of the networks.
Where the equipment is to be supplied in quantity, these procedures  
include examination of the results of tests to verify conformity with
Onational interface standard imposed by carriers.
These tests are carried out in national laboratories approved by the  
carriers.
Obviously, then, the enlargement of terminal markets at Community  
level will, be greatly eased by the mutual recognition of type  
approval granted by carriers and, at all events, the mutual  
recognition of the results of tests to verify conformity with  
standards (which in turn implies the harmonized use of identical  
standards) .
28. The terminal apparatus referred to here may be subdivided into two  
categories on the basis of its inherent characteristics and its  
situation with regard to standards and type—approval procedures :
National type-approval procedures may include verification of quality  
control during manufacture and may also necessitate preconnection testing or  
the inspection of individual installations.

- 17 -
a) New apparatus,  mainly equipment which links to a public carrier
network via a digital interface or equipment for connection to  
new broadband services. This category includes types of
apparatus (sophisticated IT terminals) which will support and  
determine the future development fo telecommunications in the  
Community.
For apparatus in this category, the aim is to harmonize standards  
and to arrive at mutual recognition of the results of tests to  
verify conformity with these standards and mutual recognition of  
type approval granted by carriers, where appropriate at Community  
level.
b) Existing apparatus,  mainly apparatus which links to a public  
carrier network through an analogue interface. This type makes  
up a major part of the terminal apparatus market today and  
therefore should not be neglected in the effort to open up the  
market.
For apparatus in this category, and especially for those which  
are already linked to a digital network, every effort should be  
made to achieve all the aims for category (a) apparatus, but full  
harmonization of standards could prove impracticable because of  
built-in differences between national carriers's networks.
Instead the Commission proposes that test methods should at least  
be aligned, so as to permit national authorities to grant type  
approval on the basis of tests conducted in accredited test  
laboratories, the results of which would be recognized on a  
reciprocal basis by carriers anywhere in the Community.
29. The proposed action programme has a section specific to each type of
apparatus and another section common to both types.

- 18 -
30. Catagory (a )  app aratus.
a) Where an international standard already exists, action under the  
programme should be aimed at narrowing down the options and  
alternatives offered by the international standard so as to  
produce a common version for use in all Member States. Where  
this is different from the version already implemented in one or  
more Member States, transitional arrangements will be needed,  
based on the mutual acceptance of test results along the lines  
proposed for category (b) apparatus.
b) Where an international standard has not yet been agreed the  
Community should adopt an intercept strategy. It should monitor  
relevant international work that has already been carried out  
and, when the content of the international standard can reliably  
be foreseen, implement a common European version of the draft  
international standard throughout the Community in agreement with  
the national carriers' operational and commercial plans. This  
strategy would minimize the risk of market fragmentation  
resulting from the implementation of different versions of the  
international standard within the Community and would exert  
pressure on other countries to adopt the same version of the  
standard, thus increasing the opportunies for Community exports.
31. Category (b) Apparatus
a) An essential pre-condition for the target proposed by the
Commission is the publication throughout the Community of the
4national standards for the apparatus included in the programme.
4 The Commission will generally apply the prescriptions of directive 83/189,  
which sets up an information procedure between member states, in the field of  
standards and technical regulations.

- 19 -
b) Should harmonization of standards prove possible, the target and  
procedures will be the same as for category (a) apparatus.  
Otherwise, once the standards are all available, an attempt must  
be made to convert these standards into clear testing routines so  
that any competent laboratory can undertake the necessary test  
work. Some minor amendments to the national standards may be  
possible at this stage, to simplify the work. However, the task  
is a difficult one, and may not prove possible for all kinds of  
category (b) apparatus.
c) Transparent procedures must be developed for making type-approval  
applications, submitting test reports, carrying out quality-  
control verification (if required) and other similar matters.
32. Action common to both categories of apparatus
a) Generally speaking, it is important to draw a clear distinction  
between mandatory requirements, which must be met before type  
approval can be granted, and recommendations. The technical  
problems of opening up markets will be simplified if mandatory  
requirements can be kept to a minimum. This in turn will be made  
easier if suppliers can easily obtain, on a voluntary basis,  
certification of compliance with the advisory parts of harmonized  
(or even unharmonized) standards. The Commission proposes that  
this question be examined by the advisory liaison group described  
in Point 11.
b) The establishment of procedures for the accreditation of test  
laboratories will be an important part of the work under action  
line III. Careful account must be taken of the obligations of  
national approval authorities under thier national law, and  
bureaucratic procedures must be kept to the minimum necessary.

-  20  -
33. The proposed procedure and arrangements for implementation are  
described below :
34. Definition of priorities
The proposed targets can only be achieved through a series of steps,  
and will be achieved more easily for some kinds of terminal apparatus  
than for others. A programme of priorities must be worked out,  
including a target timetable, according to the type of apparatus  
concerned and the sequence of steps to be taken. These priorities  
and the timetable must take account of the priorities of users, the  
Community telecommunications industry and national carriers, as well  
as the intrinsic difficulty in each case. An advisory liaison group^  
consisting of national experts should assist the Commission in  
defining priorities.
The Commission considers that the initial priorities selected should  
include some technically straightforward cases so that action line  
III can achieve its first practical results at an early stage. This  
will not only make it possible to maintain the momentum of the  
programme and increase confidence in Community action, but also  
enable early experience to be gained and used later in the programme.  
Certain apparatus for connection to circuits leased from carriers for  
private use might be chosen as an early priority.
This group could also be given the task of assisting the Commission in  
monitoring the implementation of action line VI.

-  21  -
35. The work referred to in Points 7, 8 and 9 is highly technical and
must therefore be carried out in a suitable framework. It is closely  
related to work being undertaken by technical organizations  
specializing in telecommunications, in particular the CEPT and the  
CCITT.
To avoid any duplication in a field which already requires a great  
deal of work by experts whose number is limited, the Commission  
proposes that the Community should invite the CEPT to undertake the  
technical work identified above on its behalf. The Commission notes  
that, since the meeting of Directors-General of Telecommunications  
Administrations on January 19, 1984, the CEPT has taken steps to
speed up the work of the CCH on mutual recognition of test results  
and type approvals. This coincidence and the initial discussions that  
have taken place hold out promise that an arrangement can be found  
between the Community and the CEPT whereby the latter would carry out  
the technical work referred to above, possibly with some Community  
aid, in accordance with priorities and conditions in particular  
deadlines set by the Commission after consulting the advisory liaison  
group.
36. The Commission will closely monitor the execution of the programme  
entrusted to the CEPT and will take suitable steps to ensure that it  
is completed by the agreed deadlines, with the assistance of the  
advisory liaison group. Should difficulties hold up the technical  
work carried out by the CEPT under the programme entrusted to it, the  
Commission would seek a solution in consultation with the other  
interested parties and refer to the Council any differences arising  
between the Member States.

-  22  -
More generally, it will consult the advisory liaison group on the  
implementation of this action line and, where necessary, will consult  
through appropriate channels other interested parties such as  
Community manufacturers of telecommunications equipment and certain  
users (for example the members of the INSIS Users Committee).
37. Member States'administrations account for less than half of the  
membership of the CEPT, most of the other members being the  
administrations of EFTA countries. These countries constitute a  
significant market in their own right. The Commission considers that  
it would be advantageous to the Community if the targets of action  
line III were also pursued by the other CEPT countries. Moreover, the  
necessary unity of the Community internal market should be watchfully  
preserved.
The Commission also underlines that the Community will have to define  
a common point of view (based on art.113 of the Treaty), as to the  
impact on its relations, particularly towards GATT and OECD, under  
the condition that this approach meets the obligations which the  
Community and the Member States have subscribed to, by approving the  
Code on technical obstacles to trade.
38. -Following the consensus in the Senior Officials's Group on
Telecommunications, the Commission will also consider resubmitting an  
appropriately amended version of the recommendation concerning the  
"implementation of harmonization in the field of telecommunications"
(ref.COM (80 )  422)6 .
■  c
0
This recommondation stipulates that the telecommunications administrations
of the Member States should:
a) consult each other before they introduce any new service, with a view to  
establishing common guidelines;
b) ensugf^ that new services are introduced on the basis of a common
harmonized approach, so that the services offered are compatible;
c) from .....  onwards, order digital transmission and switching systems for
ISDNs c
onsisting of harmonized equipment.

- 23 -
ACTION LINE IV :
COMMON DEVELOPMENT OF THE TRANSNATIONAL PART OF  
THE FUTURE TELECOMMUNICATIONS INFRASTRUCTURE  
IN THE COMMUNITY
39. Cooperation between European companies, the broadening of certain  
markets, joint solutions to technical problems (especially standards)  
and common technological choices will be much more likely to succeed  
if they are given practical effect as part of major catalytic  
projects launched on a Community-wide scale.
At the occasion of the Council meeting of 28 February 1984, the  
Ministers for Research asked the Commission to conduct, in  
consultation with the circles concerned, a feasibility study on the  
establishment of a broadband network providing communications  
services for decision-making centres in the Member States and the  
European institutions. This project is to be considered in
conjunction wiht some of the projects launched or planned under the  
INSIS (Inter-institutional Information System) programme.
In the longer term, the Commission feels that two other projects  
should be envisaged :
- the setting-up of transnational cellular radiotelephony services  
of the second generation ;
- the establishment of large transcommunity axes for broadband  
integrated services networks.

- 24 -
The Commission will undertake, in coordination with the Group for  
Analysis and Forward Study, the preliminary feasibility studies  
related to the two projects.
The action recommended in the area of transnational infrastructure at  
European level is to tackle four fronts, with the following
objectives :
a) to speed up the availability of voice and data services of the  
narrow-band ISDN type at European level so as to ensure  
transnational compatible working for users. This requires digital  
connectability to be established as quickly as possible on a  
Community-wide scale ;
b) to promote the coordinated development of broadband business  
services for large enterprises and administrations through  
judicious use of satellite and land systems, based in particular  
on optical fibres ;
c) to set up mobile communications systems that can provide the most  
advanced services throughout the Community ;
d) to prepare for the creation of a European optical fibre—based  
broadband integrated communications network for providing multi­
purpose vidéocommunications services.

- 25 -
The Commission has underlined in this context the potential value of  
launching joint projects of Community interest geared to the  
development of new services with a high technological content. The  
multiplying effect of such projects should have beneficial  
repercussions on the exploitation of new technologies, the broadening  
of markets and industrial competitiveness. The approach to be  
adopted by these projects is still being examined by a group of  
consultants close to network operators :  the full results of this
analysis will be available by June 1984.
Meanwhile, at the request of the Ministers of Research, the  
Commission has undertaken a feasibility study on a project concerning  
a European advanced communications network including  
vidéocommunications services intended in particular, to improve  
communication between government decision-making centres and the EEC  
institutions.
In addition, it is the Commission's opinion that it could be useful 
to initiate two other projects in the medium term, one aimed at  
setting up transnational cellular radiotelephony services and the  
other oriented towards the establishment in the Community, in the  
longer term, of large transnational axes for broadband ISDNs.
The Commission considers it useful to start studying the procedures  
for launching a project whereby second-generation transnational  
cellular radiotelephony services could be set up in the medium term.  
The harmonious development of industrial society increasingly depends  
on the mobility of individuals, whose movements are closely  
associated with the efficiency of economic and social life. This  
greater mobility makes it all the more necessary to ensure that the  
communication function - all too often interrupted by travel - is  
maintained.

-  26  -
Mobile communications systems, by their very nature, call for  
compatible designs which enable users to communicate irrespective of  
their location. The current situation in Europe is unsatisfactory  
since three incompatible standards are or will be used in the EEC.  
Community action therefore appears necessary to avoid a repetition of  
this situation when the next generation of mobile communications  
comes into existence.
Recent technological progress now makes it possible to consider much  
more attractive solutions for meeting new needs in this field.  
Cellular radiotelephony systems, in particular, hold out
new prospects for providing communications services which allow a  
high degree of mobility.
The project envisaged should take account of the fact that if these  
new services are introduced in a sufficiently coordinated manner and  
in specific harmonization conditions, they should be able to offer  
mobility inside the Community both within and outside the frontiers  
of individual Member States.
The project envisaged should therefore be aimed at the following  
objectives :
a) providing mobile radiotelephony links with the various fixed and  
mobile services throughout the Community. This will require  
end-to-end compatibility and a degree of synchronization in  
starting up such services ;
b) guaranteeing a cross-border service integrity, when the mobile  
moves outside national frontiers.
c) ensuring that these links are digitized so as to allow data to be  
transmitted and enable the system to be developed to incorporate  
new services in the future.

- 27 -
During an initial phase, the technical and economic feasibility of  
such a project should be examined in the light of studies conducted  
by the Commission and work carried out by the CEPT, on the one hand,  
and by the Group for Analysis and Forward Study, the setting-up of  
which is proposed in the context of action line I, on the other  
hand.
45. In the field of the general development towards the integrated  
broadband networks of the end of this century, a choice will quickly  
have to be made between :
- relying exclusively on national developments and concepts which,  
although useful at the R&D and pilot project stage, may well lack  
from the outset the advantage of market scale, thus slowing down  
the introduction of the networks and leading to international  
link-ups between national networks which sire suboptimal ;  or
- setting up in common, from the skeleton broadband structure between
Member States, anticipating national developments. Such a
transnational network would work in the Community as an integrating  
concept, promoting common standards and providing the necessary  
market scale, while leaving the necessary degree of flexibility for  
national developments specific to different national situations and  
regulatory concepts.
The latter choice would involve :
- agreeing on a framework for the international development of  
advanced high-speed business communication services in the  
Community, with initial use of satellite services to allow market  
development, in cooperation with leading-edge users ;

- 28 -
- creating a future-oriented optical fibre broadband structure for  
international communications in the Community which would have to  
bear the bulk of international traffic, as soon as the new  
broadband services take off on a large scale ;
- subsequently considering the most appropriate forms of Community  
participation in such a project, both with regard to existing  
organisations in this field, such as Eutelsat, and with regard to  
the "development groupings" which may spring up between Member  
States or network operators.
46. The Community's financial instruments could, each within their  
specific field, play an important role in creating synergies between  
national sub-programmes and supporting projects of common European  
interest.

- 29 -
ACTION LINE V :
MAKING FULL USE OF MODERN TELECOMMUNICATIONS TECHNOLOGIES FOR  
PROMOTING THE COMMUNITY'S LEAST-FAVOURED REGIONS AND  
DEVELOPING THEIR INFRASTRUCTURE
47. The Commission emphasizes the importance of telecommunications for  
the development of the Community's least-favoured regions and points  
out that in the past three years the Community's financial  
instruments (ERDF, EIB and NIC) have contributed an average of some  
720 million ECU to telecommunications infrastructure projects in  
these regions. The Commission proposes that :
—the Community policies, with full respect to their own aims,
undertake all efforts to ensure that the resources provided by the  
Community financial instruments for telecommunications infrastructure  
in the Community's least favoured regions be increased in the years  
ahead ;
- the projects supported be aimed at exploiting to the greatest extent  
the potential of the new telecommunications technologies ;
- such projects be appropriately combined with the projects of common  
interest envisaged under action line IV ;
- the Group for Analysis and Forward Study proposed in action line I  
devote special attention to the regional development aspects.

- 30 -
48. The vital importance of telecommunications for the development of the
Community's least favoured regions is widely recognized :  this field
therefore emerges as an essential area of involvement for the  
Community's financial instruments, for which maximum effectiveness  
must be sought.
49. The resources devoted in recent years by these instruments to  
supporting telecommunications investments in such regions are already  
substantial :
during the 1981-83 period, their involvement amounted to an average  
of some 720 million ECU a year, of which approximately 70% was  
provided by the lending instruments (mainly the EIB and the NIC) and  
30% by the budgetary instruments (the ERDF). This amount corresponds  
to approximately 5% of total investments by telecommunications  
carriers in the Community.
50. The Commission stresses the major contribution such investments can
make to attaining the objectives of the Community telecommunications  
policy (offering modern telecommunications services to users with a  
view to stimulating economic development and maintaining the
competitiveness of the sector). They also constitute a powerful tool  
for helping the economic development of the Member States to converge  
in the long run. The Commission accordingly proposes that these  
interventions be increased in this field.
51. In order to ensure that these investments, carried out using the  
Community financial instruments, bring maximum benefit for the  
economy of the regions concerned, the Commission proposes that :
- they be geared to the future, i.e. seek to exploit to the greatest  
possible extent the potential of the new telecommunications  
technologies ;

- 31 -
- they be appropriately combined with projects of common European  
interest, as envisaged under action line IV.
52. In view of the foregoing, the Commission proposes that the Group for  
Analysis and Forward Study mentioned in action line I devote special  
attention to the needs of regional development during its  
proceedings. It will carry on the further studies which are  
necessary to define this action line in detail.

ACTION LINE VI :
THE PROGRESSIVE BROADENING OF THOSE SECTORS OF
THE COMMUNITY COMMUNICATIONS EQUIPMENT MARKETS  
THAT ARE DOMINATED BY CARRIER PROCUREMENT
For the reason set out earlier, particularly in those parts of action  
line III which are devoted to measures aimed at broadening the market  
in terminals, the Commission proposes that contracts concluded by  
carriers for the purchase of equipment which is intended either to  
form and integral part of public networks or to be connected to the  
latter be gradually opened up to all Member States of the entire  
Community.
This broadening of the market would be achieved :
a) in the case of terminals used by carriers or placed by them at  
the disposal of users (particularly the new telematics terminals)  
by extending invitations to tender for such equipment to all  
member states of the Community ;

- 33 -
1b) as regards the other categories of equipment, by requiring  
carriers during an experimental phase, to extend their  
invitations to tender to all the Community Member States in  
respect of a minimum proportion to be determined (e.g. 10%) of
the value of their annual orders of such types of equipment. In  
parallel with progressive application of the overall programme  
outlined in the present proposal, carriers would increasingly  
open up their markets. For equipment of new networks (especially  
wideband networks), the Commission considers that the goal should  
be nothing less than a complete opening of markets. Carriers  
would be invited to report regularly to the Commission on the  
steps they have taken to implement this policy.
The Commission, assisted by an advisory liaison group,1 would monitor  
the effective implementation of these measures, report to the Council on  
the subject at the end of a two-year period at the latest and, propose  
at that stage additional measures aimed at gradually broadening the  
market.
With a view to introducing these measures in detail, the Commission will  
submit soon :
— an appropriate proposal based on the text of the project of  
recommendation concerning " a first phase of the opening-up of public  
telecommunications markets"(COM(80)422);
This group could be the same as the one described in action line III

-  34  -
- and on the results of the Council decisions on this project (cf. doc  
Council ECO 55 ref. 10538 of 29-10-1982).
54. Total investment by network carriers was estimated at 18 000 million  
ECU
in 1983, of which 9 000—10 000 million ECU were devoted to the  
purchase of equipment intended either to be incorporated in public  
networks or to be connected thereto.
This market, which account for 75-90% of telecommunications equipment  
purchases in the Community, is fragmented into national markets that  
are effectively closed-off in the majority of the Member States.
55. The telecommunications revolution which is taking place may make it  
impossible for industrialists to recoup their expenditure (in  
particular their development costs) if this market situation  
continues. If they are to do so, they will very quickly need a  
broader base, in order to take advantage of economies of scale,  
sustain the rapid tempo that is essential for innovation, while  
shortening investment payback times,  and cope with increasing  
competition on export markets.
56. The public telecommunications markets cover a range of products whose  
incorporation in networks subjects the carriers to constraints of a  
different type, which have repercussions on the methods of  
procurement.

- 35 -
These products can be classified into four main categories :
a) consumer terminals (in particular basic telephone receivers);
b) business terminals (modems, terminals, telex equipment, etc);
c) transmission systems (using cables, optical fibres and microwave  
links);
d) switching systems (electromechanical, space or time switching).
57. The procurement policy pursued by carriers must take account of the
objective constraints imposed by the co-existence of different
products within the same network ;  the components of a network must :
a) be compatible with one another as regards their basic functions,  
such as interconnectability.  These problems are solved, as far as  
international telecommunications are concerned, by the CCITT  
recommendations ;
b) mesh with the method of operation of the network under  
consideration;
c) be able to be covered by pre-existing maintenance schemes and 
arrangements under favourable economic conditions.

- 36 -
58. Irrespective of the industrial policy standpoint, the dialectic of  
the diversification of public telecommunications procurements must  
therefore give due regard to objective arguments springing from  
technical, economic and organizational considerations.
59. It will be possible to open up the markets for consumer and business  
terminals to Community competition when the technical specifications  
concerning connection to networks have been harmonized sufficiently  
to ensure compatibility between receivers and public automatic  
switching units in a "standardized" area covering a major proportion  
of public procurements made by the carriers in the Community. The  
procedures proposed in action line III,  whereby the results of tests  
to verify conformity with standards and type approval would be  
recognized on a reciprocal basis, should make it possible to satisfy  
this requirement.
60. Transmission systems
With the transmission function, we leave the realm of "single-cell"  
products and enter that of systems, which are by definition composed  
of a number of sub-systems.
If we look at complete long-haul transmission systems, including the  
transmission medium in the case of cable systems, it can be concluded  
that the technical obstacles standing in the way of diversified  
procurement for a given telecommunications network are relatively  
small.

-  37  -
It is technically possible in the short term to open up the markets  
at this product level.
Nevertheless, setting up a complete system - even if only partly  
equipped - is a major project, which places a limit on the number of  
such systems and may therefore make it difficult to open up the  
markets completely.
It would therefore be desirable to extend the opening-up of the  
markets to the procurement of sub-systems, which are by nature much  
more numerous than the complete transmissions systems of which they  
form part. At technical and functional level, thanks in particular  
to work carried out by international standardization organizations  
such as the CEPT and the CCITT, this appears in theory to be  
practicable :  especially in modular sub-systems multiplex. For the  
sub—systems which make up on line equipment, the interdependance  
between sub—systems themselves and between sub—systems and support  
systems does not appear to be sufficient on existing systems to  
permit them to be separated.
In the medium term, by contrast, the effective interchangeability  
between modular sub-systems which make up the transmission systems  
must be an objective to be obtained within the Community, especially  
for fibre optics systems.

- 38 -
This objective could be attained provided that a body of common  
standards based on the CCITT standards can succeed in making  
functional sub-systems, including line equipment, effectively  
interchangeable.
61. Switching systems
The situation in this area is complex, not only because the amount of  
turnover at stake, but also and especially as a result of the  
industrial standing of European manufacturers, their strategy,  
Europe's position with respect to the United States and Japan and the  
difficulties involved in developing future systems. The Member  
States realized at a very early stage the importance of electronics  
and computer technologies in the future generations of switching  
systems. After the era of space switching in the sixties, R&D has  
been directed towards time-switching systems. Firms became involved  
without fully realizing the difficulties to be overcome in order to  
master the electronics, produce the necessary complex software and  
train the staff. There are nine switching systems in the Community ;  
when it is borne in mind that the development of a switching system 
for between 5 000 and 30 000 lines, for a given network, costs some  
150-300 million ECU, it comes as no surprise that firms are not sure  
of being able to recoup their development costs. It has become all  
the more difficult to do so, because, in the countries in which one  
or more systems have been developed, the market has been reserved for  
industrialists whose development effort had been supported at  
national level.

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If these circumstances continue, it appears hardly likely that the  
situation could quickly be changed so that a smaller number of  
switching systems would be available on a unified Community market  
and development costs could be recouped.
The solution must therefore be sought as part of a gradual process,  
which would rely on the development of switching for broadband  
networks and would involve deliberate re-shaping of the industrial  
structure, in particular through cooperation between manufacturers  
for the development of the future generation of switching systems.
62. The considerations set out in the foregoing lead to the conclusion  
that only a gradual process is likely to enable the market for  
telecommunications equipment procured by network carriers to be  
broadened.
The Commission proposes that this gradual expansion of the market be  
attained :
a) in the case of consumer and business terminals purchased by  
carriers (particularly new telematics terminals), by asking the  
carriers to extend their invitations to tender for such equipment  
to all member states of the Community ;

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for any other category of equipment and in view of the present  
state of the affairs,  characterized by nationally  
compartmentalized markets, R&D efforts, procedures of type  
approval, standards and network development strategies, the  
Commission considers that the opening-up of national markets will  
only be achieved gradually.
The first step towards this can be taken immediately, namely  
asking network carriers to extend their invitations to tender to  
all the Community Member States in respect of a minimum  
proportion to be determined (for example 10%) of the value of  
their annual orders of network components.
The existing compartmentalization should break down gradually  
under the combined effects of demand for services, evolution of  
networks and increasing realization of the significance of the  
Community-wide dimension; therefore the Commission considers that  
the Community's aim should be nothing less than the total opening  
up of markets for the new network components, especially third  
generation types.
However this aim can only be achieved gradually, depending on  
variables such as equipment types, schedules and geographical  
locations involved. The Commission proposes to gear the speed of  
this process to the implementation of the action programme.

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63. Carriers would be invited to report regularly to the Commission on  
the measures they have taken to implement this policy. The  
Commission, assisted by an advisory liaison group, which could be the  
same as the one mentioned in action line III, would monitor the  
effective application of these measures, report to the Council on the  
subject at the end of a two-year period and, at the latest,propose at  
that stage additional measures aimed at gradually broadening the  
market.
With a view to introducing these measures, the Commission intends to  
submit to the Council a new version, amended along the lines set out  
in the foregoing, of its proposal for a recommendation concerning the  
first phase of the opening-up of public telecommunications markets  
(COM(80)422X
this recommendation broadly provides that :
- for at least 10% of the total value of their annual equipment purchases,  
national carriers should call for tenders from firms established in other  
Member States ;
- for their purchases of "new telematic terminals", network carriers should  
call for tenders in other Member States ;
- a liaison group should be established to oversee and guarantee  
implementation of these plans.