Opinion of the Economic and Social Committee on the 'Green Paper on the Convergence of the telecommunications, media and information technology sectors, and the implications for regulation - Towards an information society approach` (98/C 214/23)

On 5 December 1997 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned Green Paper.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 1 April 1998. The rapporteur was Mr Morgan.

At is 354th plenary session (meeting of 29 April 1998), the Economic and Social Committee adopted the following opinion by 91 votes in favour, 5 votes against and 6 abstentions.

1. Introduction

1.1. The ESC recognizes that the green paper is a major initiative within the Rolling Action Plan for Europe at the Forefront of the Global Information Society () while at the same time creating a new regulatory framework for the future of that society.

1.2. Convergence is an issue of vital importance for economic success and social progress in Europe. The issues are wide-ranging and complex. If Europe can harness this development by creating an environment which encourages change, then we will have a powerful motor for economic growth, creating jobs, increasing customer choice and promoting cultural diversity. If Europe fails to embrace convergence quickly enough (and it is already behind in the key domain of the Internet) then there are real risks that our businesses and citizens will be left in the slow lane of the information revolution which is energising businesses, users and governments around the world.

1.3. The Committee takes the view that the ever increasing degree of convergence between the individual fields will act as a driving force and pace-setter for the information society. This convergence will bring changes to living and working conditions, the nature and extent of employment and the production of goods and services. The regulatory framework in these areas is a determining factor in respect of (a) safeguarding and strengthening the innovative capacity of the EU and (b) employment and future living and working conditions in Europe.

1.4. In the context of the 'rolling action plan`, this is a green paper about convergence and the regulation of convergence. Getting regulation right is seen as the key to getting Europe into the fast lane. In the answers to the questions which follow, the Committee has focused on the specifics of convergence and regulation. In particular, the Committee considers that other aspects of the Information Society have been (and will be) dealt with by the Committee in opinions on other elements of the 'rolling action plan`.

1.5. The central question in the green paper asks:

If convergence requires adaptation of existing regulatory approaches, should that adaptation:

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

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

(iii) seek to create a comprehensive framework applying similar regulatory approaches to all three sectors?

1.6. The Committee is against the second approach to regulation and favours a combination of the first and third to the extent that it is practicable in the longer term. In the immediate future, regulation should build on the existing principles, but as competition emerges the regulation can become less onerous. Looking forward to when the new infrastructures and services are more established and new user preferences known, the whole regulatory infrastructure can then be re-considered.

2. Summary of the green paper

2.1. The Information Society is becoming a reality. Its development is fuelled by the rapid technological change which is transforming the information industries. The nature and speed of this transformation may pose new challenges to policy-makers.

2.2. One of the most significant factors is the increasing use by different sectors, notably the telecommunications, media and information technology (IT) sectors, of the same technologies. Evidence of such convergence has been mounting in recent years with the emergence of the Internet and with the increasing capability of existing networks to carry both telecommunications and broadcasting services. The phenomenon of convergence is relatively new and a range of different views exist on what its implications are for society and for economic activity.

2.3. There is broad agreement that developments in digital electronics and software are creating the technological potential for a new approach to the delivery and consumption of information services. There is less agreement on how much these developments will change existing practices and over what time-scales.

2.3.1. Some consider that convergence will lead to the complete and rapid transformation of existing telecommunications, media and information technology services in such a way that these currently separate groups of services will merge into one another, substantially blurring the previously clear distinctions between them.

2.3.2. Others feel that the specificity of the existing separate sectors will limit the scope for service convergence, and that the media industry has a role as the bearer of social, cultural and ethical values within our society, independent of the technology relied upon to reach the consumer. This would mean that regulation of economic conditions and that of the content of information services should be separated to ensure efficiency and quality.

2.3.3. Others believe that, if it does occur, it will evolve over an extended timescale.

2.4. It is nevertheless clear that the implications of these developments are potentially far reaching. The emergence of new services and the development of existing services is expected to expand the overall information market. This will provide new opportunities for economic growth and employment. At the same time the new communication services environment will also provide opportunities to enhance the quality of European citizens' lives, by increasing consumer choice, facilitating access to the benefits of the Information Society and promoting cultural diversity.

2.5. These developments are therefore potentially positive for European economic and social development and should be encouraged. Public policy will need to provide a supportive environment for convergence in order to ensure that the potential opportunities are grasped in a timely fashion.

2.6. What is needed now is wide ranging and deep debate on the convergence phenomenon and its implications as an input to such policy formulation. The objective of this green paper is to start such a debate. This debate needs to be set into context in respect of other important Commission actions in the telecommunications, media and information technology sectors. In particular, this debate is central to the future communications landscape following the full liberalisation of telecommunications services and infrastructure since 1 January 1998.

2.6.1. The process started by the green paper should ensure that during the overall review of the effectiveness of the 1998 regulatory package for telecommunications (to take place at the end of 1999), full account can be taken of the impact of convergence on that sector.

2.6.2. Furthermore, the cable review (), carried out in the light of liberalization and more specifically as a result of the commitment contained within the cable directive () and the telecommunications full competition directive () is the subject of a separate Commission communication. The review aims to create an open and pro-competitive market structure in the provision of telecommunications and cable TV networks which may have a significant impact on the markets affected by convergence. In particular, it will encourage competition and prevent the emergence of new anti-competitive gatekeeper positions or bottlenecks. Vigorous competition in these areas will encourage the development of innovative new services which will benefit consumers in the European Community, and will provide European industry and service providers with the expertise to compete on global markets.

2.7. Against the background of ensuring a competitive basic market structure, the timeliness of this green paper stems from the fact that new markets may develop rapidly, and that they will be essentially global in nature. If the applicable regulatory frameworks in individual Member States or, indeed, in Europe are not appropriate to the development of these new markets and even hinder their development, then Europe may find itself at a competitive disadvantage vis-à-vis its more flexible global competitors. This could restrict consumer participation by limiting choice and weakening consumer confidence in the new services, and have negative consequences for economic growth and employment creation in Europe.

2.8. The green paper addresses the nature of the convergence phenomenon, and focuses on the provision of services and the underlying networks over which they are carried. It further deals with the implications for both the shape and substance of regulation which may arise from convergence. Although the green paper deals with certain aspects of the regulatory framework for service provision, any future initiatives in this field would be without prejudice to existing ongoing work within the Commission or the implementation of existing Community legislation.

2.9. The green paper does not take definitive positions with respect to new regulatory structures. Indeed, it recognises that convergence may lead to less regulation in telecommunications and media sectors, and should not lead to more regulation in areas such as IT (except in areas outside the scope of the green paper). Rather it analyses the convergence phenomenon as evident in the market; it identifies issues relating to regulation arising from the developments, and it poses questions in relation to these issues.

3. Question 1

The nature and impact of convergence today:

3.1. Question 1A

Whilst convergence is occurring at the technology level, to what extent and at what speed is this happening at the industry, service and market levels?

The Committee anticipates that this question will be answered by the industry during the consultation process.

3.2. Question 1B

Are the effects of convergence already being felt in the business world and in our everyday lives, and if so, in what way?

3.2.1. If one were to divide roughly the population into four classes:

(i) Professional business people at work;

(ii) Professional business people (and retired business professionals) at home;

(iii) The young;

(iv) The rest of the population (about half of the total) at work and at home;

then the impact on the first group is profound, on the second group it is important, for the third group it is becoming a way of life, while for the fourth group there is little impact yet.

3.2.2. For the first group, the business professional at work, there is a PC on every desk, portable computers and mobile phones are normal equipment for mobile employees and multimedia presentations are a basic tool of business. E-mail from the desk or the portable, and mobile communications generally, make converging technologies a must for business communication. In addition, electronic publishing and electronic commerce are rapidly becoming standard business processes. Business-to-business electronic commerce is certainly more significant than is business-to-consumer.

3.2.3. For the second group, which is essentially the first group in a different environment, the home becomes an extension of the office. Home PCs can, of course, also provide domestic and personal facilities, such as those used by retirees, and word processing has a place in many homes.

3.2.4. The youth, via schooling, games, hobbies and word processing, is coming to see the PC as an indispensable adjunct to personal life.

3.2.5. About half the population is not exposed to technology at home except for the telephone and television. It may be that this group may be persuaded to use Internet and other value added services when they are offered via the TV. So far there is no evidence on which to base any conclusions.

3.2.6. For full scale development of converged services in the home, bandwidth increases via xDSL (Digital Subscriber Loop) over twisted pair telephone lines and coaxial cable and, in due course, by wireless bandwidth will be essential.

4. Question 2

The socio-economic, business and consumer impact of convergence:

4.1. Question 2A

Will convergence have a significant impact on job creation, as well as on education and training in the European Union? How is convergence likely to impact the way in which we work? Will its effects be spread evenly throughout the European Community?

4.1.1. Convergence is already impacting employment significantly, and is likely to have a bigger impact as the converged services further penetrate European society. Within its 'Rolling action plan for Europe at the forefront of the global information society`, the Commission has dealt extensively with the impacts on company structure, work organisation, education and training, social cohesion and other socio-economic aspects. While this opinion relates to the regulatory regime for the three industries involved in convergence, the Committee would like to emphasize its interest in the socio-economic aspects of convergence and the need for regulatory development in that sphere as well.

4.1.2. On the positive side, there is certainly going to be an insatiable demand for 'content`, whether films, shows, sport, games, etc. For example, the fees for TV rights are creating more professional sportsmen and women. Discovery and National Geographic channels put the natural world into an audiovisual context. Audiovisual publishing has enormous potential.

4.1.3. On the other hand, electronic commerce and electronic publishing are likely to be disruptive as virtual access replaces physical high street outlets. Banking is an industry which immediately comes to mind. Even so certain high street outlets will continue to thrive in a new form. For example, multiplex cinemas have boomed in parallel with films on television and coffee lounge book stores are developing alongside Internet booksellers.

4.1.4. There is also a generational effect. The young have an easy familiarity with the technology, whereas redundant 50 year olds do not. As far as training is concerned, not everyone can have the aptitude to work with technology. It is also important not to lose sight of the need to train a proportion of the population into the traditional crafts and skills, which, however, are increasingly likely to require a basic IT education. The Internet is, of course, a powerful education and training medium as the success of the Internet University in the USA demonstrates.

4.1.5. The impact in the way we work is likely to be qualitative. One way of looking at it is to consider the advances of the last twenty years. Twenty years ago there were no PCs, word processors, colour screens, colour printers, CDs, CD-ROMS, faxes, mobile phones, satellite broadcasting, video conferencing or Internet. ATM and credit card facilities did not have the international dimension of today. All these developments have made the professional job more effective and immediate but the work itself has not changed substantially. It is difficult to predict whether there will be such a change in the future.

4.1.6. There will of course be changes in some categories of job. Fewer bank clerks, more staff in customer response centres, etc. There will also be more scope for remote working, home working and for higher value self-employed work. The difference between working on a self-employed basis and on an employee basis is becoming increasingly blurred. This gives rise to new questions regarding the status of employees (e.g. with regard to the risk of liability of employees, protection of data relating to employees, the law concerning employees' representation and co-determination in businesses).

4.1.7. The move to the information society is putting a premium on information technology skills. Unless sufficient hardware and software engineers are trained in Europe, key jobs will be exported e.g. software to India.

4.1.8. There is no reason to suppose that these impacts will not be felt in all regions of the European Union. The objective should be that the negative job impact is not disproportionately concentrated in Europe whereas job creation benefits non-European regions.

4.1.9. For all regions to benefit fully from the Information Society, it will be necessary that universal broadband access be provided everywhere and at competitive prices. There is no doubt that the success of the Internet in the USA has been encouraged by the universal low-cost local call regime.

4.1.10. The ability of consumers and employees to use new technology is a further prerequisite for the success of multimedia services (see 4.3.4).

4.2. Question 2B

What effect are current developments likely to have on telecommunications, media and IT sectors, in terms of the underlying economics of those sectors, the services offered and the likely service providers?

4.2.1. It seems likely that the traditional copper wire based PTO (Public Telecommunications Operator) is going to come under most attack. On the one hand there is the World Com phenomenon, where new Internet Service Providers challenge the traditional operations of the incumbent PTO. On the other hand, because some of the incumbent PTOs are restrained by regulation from entering the cable and mobile business, they may not be able to change their businesses to exploit convergence as quickly as they might want. It may become necessary to restructure these PTOs to enable them to diversify and compete in new markets as indicated in the draft cable directive (). Whatever happens in that respect, the introduction of xDSL technology to increase the bandwidth available for twisted pair telephone lines is a strategic priority for the PTOs to address.

4.2.2. When the capacity restraints of analogue broadcasting have been removed by the greater digital spectrum, the unique position of the public sector broadcasters will be changed. The ethos and objectives of public service broadcasting will not change but the means of achieving them may have to be adapted to this new situation. Moreover, this should not affect the existing national regimes for public service broadcasting as permitted by Community law.

4.2.3. At the level of consumer equipment, the cost of the set top box is likely to inhibit the take up of digital TV. Nevertheless, the ability of the manufacturing industry to continue to miniaturise and reduce cost suggests that there are ultimately few barriers to the power, mobility or the multi-media functionality which can be achieved. What is needed is an easy-to-use PC for broadcast reception which will undoubtedly be produced in due course.

4.3. Question 2C

What evidence is there of changes in Europe in the way services, information, entertainment and culture is being accessed in the home and in the office? What are the implications of current levels of PC penetration, Internet use and TV penetration for the take-up of new services? What action (if any) is needed to overcome low levels of multimedia computer penetration and Internet use?

4.3.1. The following grid is designed to give a snap shot of the present situation:

>TABLE>

4.3.2. The implications of the current levels of PC penetration, Internet use and TV penetration for the take-up of new services are as previously discussed. Business professionals at work, in or outside the office or on the phone, have increasing opportunities to use new services, especially Internet, and within that, e-mail. Digital television penetration is minimal and few new services are available.

4.3.3. For full exploitation of the converged services, especially in the home, an 'ease of use` revolution is needed. The PC user interface is unacceptable for the lay user.

4.3.4. Education and training are central to achieving higher levels of multimedia computer penetration and Internet use. The rate of technological change is highlighting the need for life-long learning and putting pressure on existing education and training facilities. Public authorities need to reinforce the capacity of primary, secondary and tertiary educational institutions to train students in the computer technologies and their exploitation, while extra capacity will also be needed for adult education. Larger employers, both public and private, should have the capacity to train their employees, but smaller employers may rely on initiatives from chambers of commerce and employers' organisations as well as training providers. Public programmes to support the re-employment of the unemployed also need to identify candidates capable of learning these skills. The ESC believes that a major effort is needed throughout the Union and that an initiative from the Commission would be appropriate.

4.4. Question 2D

In the light of the positions put forward in the Commission Working Paper on the Fifth Framework Programme, what kinds of Community RTD projects should be launched in the context of convergence?

4.4.1. The ESC has already given an opinion on the priorities for the Fifth Framework Programme (RTD 1998-2002) () and is preparing a further opinion in response to its specific programmes ().

5. Question 3

Barriers to convergence:

5.1. What is the likely impact of the barriers identified and are there other barriers or factors which may have a significant impact on the convergence process in Europe?

5.1.1. The Commission has correctly identified the range of actual and potential barriers to convergence. Where the Committee has identified specific issues, these are dealt with in the replies to Questions 4 to 9 below.

6. Question 4

The impact of convergence on current regulation:

6.1. Question 4A

Do current developments require more or less regulation in the sectors affected by convergence, more or less reliance on market forces to achieve the objectives identified?

6.1.1. Regulation is required to ensure public confidence in two respects.

6.1.2. From a market perspective, regulation is only necessary where competition does not yet fully apply or does not fully meet the objectives of the market. Otherwise, the competition rules alone should be relied upon. Current developments emphasize the advantages of eliminating monopolies and establishing alternative means for providing services of general economic interest. These require guaranteed access to networks and unrestricted competitive markets as well as price transparency with a view to guaranteeing the highest quality service to consumers.

6.1.3. Beyond the market perspective, regulation may be needed to meet the general public interest objectives (see paragraphs 7.5.1 and 8.2.3 below).

6.2. Question 4B

Whether and if so, to what extent convergence challenges the principles underpinning existing regulatory approaches in the telecommunications, media and IT sectors?

6.2.1. Convergence does challenge existing regulation. Voice communications on Internet is a case in point. Voice licensing dates back to the era when networks were more or less dedicated to voice and the licence gave both the guarantee of quality and the measure of monopoly needed to provide the return on investment. In the era of digital infrastructures voice is just another digital bit-stream. Whether or not a voice service should be licensed needs to be reconsidered. In principle the Committee would prefer that competing voice services were simply subject to the competitive pressures of market forces.

7. Question 5

Overcoming the barriers - Getting the right regulatory framework for business and for consumers:

7.1. Question 5A

Are the definitions in the telecommunications, media and IT sectors in national and/or Community legislation adapted to the convergence process?

7.1.1. From the example in the preceding paragraph, it is clear that legislation must conceptually separate infrastructure from content services and recognize the novel character of the digital infrastructures. Clearly, the 1999 review of the EU telecoms legislation should ensure that this separation is properly reflected, and that the definitions currently in use should be updated.

7.1.2. As for the development of new 'converged` services such as electronic commerce, a new class of regulation is not necessary. Consumer protection, privacy etc., should be handled by the adaptation of existing laws in the public interest and to ensure that the market keeps growing.

7.2. Question 5B

Will the convergence phenomenon require adaptation of existing approaches or the adoption of new approaches to be applied to issues of market entry and licensing; access to networks, customers (including conditional access systems), content; and pricing?

Licensing

7.2.1. Exclusive licensing of a broadband operator for a finite period is justified for infrastructure market entry, whether for telecom, cable or satellite broadcasting. Limitations on what may be carried on existing networks can also be justified where the carrier concerned is dominant, or where new players are being encouraged to enter the market. As highlighted in the Commission's green paper, digital terrestrial broadcasting is a new environment requiring a new approach to licensing, to encourage new operators to enter the market.

7.2.2. A common set of licensing principles throughout the Community would be appropriate, especially if they are designed to promote market entry.

Access

7.2.3. Internet service providers should be given the same access as other service providers; there is no case for them to assume universal service obligations.

7.2.4. Cable, wireless telephones and electricity lines are some of the alternatives to the local loop. Regulatory policies encouraging sustainable competition in the provision of local infrastructure should be adopted.

7.2.5. The Committee endorses the approach taken by the Television Standards Directive on Conditional Access Systems (), and would support the extension of its underlying principles to the new services environment.

7.2.6. The commercial and regulatory situation in respect of browser and search engines is changing rapidly. The Committee's view is that the abuse of dominant positions should be constrained.

7.2.7. The Committee accepts the analogy between Electronic Programme Guides (EPG) systems and airline reservation systems. EPG systems in the traditional broadcasting context should be non-discriminatory. EPG systems in an Internet environment will compete in the same way that browsers compete.

7.2.8. The Committee also accepts the Application Programming Interface (API) analogy between PCs and set top boxes. However, it is important not to force the issue of standardisation from outside the industry. Market forces should be given time to establish a de facto standard for set top boxes.

Content

7.2.9. As far as content and exclusivity are concerned, these are indeed issues for commercial agreement and competition law. There is a distortion created by market forces in relation to the vertical integration of broadcasting. It relates to the price which pay-TV broadcasters are prepared to pay for premium rights in order to promote their infrastructure. It remains to be seen whether the evolution of infrastructure ownership and use and the development of premium events will result in wider public access to premier events. At the moment, premier content serves to promote new converged services although wider public access can be achieved through re-broadcast rights. Member States are reviewing the position in the light of the TV Without Frontiers Directive ().

7.2.10. The Committee does not believe that in the world of commercial sport the general public has a basic right to free viewing. Access to the sporting event must be paid for by the spectating public in one way or the other. Because premium access helps to sell pay-TV subscriptions it may be worth more to some broadcasters than others. In due course, the sports promoters will have to balance the return from a television audience paying for the spectacle against a television audience as a target for advertisers. In many cases, a larger advertising audience may be worth more than a smaller premium viewing audience. The Committee nonetheless believes that the broadcasting of top commercial sporting events and other major events forms part of the basic information supply to the public. Under the Television Without Frontiers Directive, Member States have the facility to nominate sporting and other major events which should be available on free television.

Pricing

7.2.11. The Committee broadly accepts the view expressed in the green paper that market forces and competition would take care of the pricing for market penetration. There may be a role for regulation to ensure price transparency where the market does not guarantee it.

7.3. Question 5C

Will convergence require changes in the approaches to the award and pricing of frequency spectrum, and in particular what approach should be taken, in the light of convergence, to the issue of completing the transition from analogue to digital services, including the need for a timetable for analogue switch-off?

7.3.1. There should be a deadline for the complete switch from analogue to digital services. It would be appropriate to have a Community-wide 1992-type deadline.

7.4. Question 5D

What should be the objectives of standardization in the light of convergence and what should be the relationship between regional and international standardization?

7.4.1. Standardization should be industry led, although certain standards may be dictated by the requirements of public bodies. The ESC has recently given an opinion on standardization ().

7.5. Question 5E

What additional action (if any) is required to ensure that the interests of consumers and of users with disabilities are respected in the light of convergence?

7.5.1. In general, the interests of consumers are protected by the laws and regulations which apply to information, television etc. already. There is a specific issue with the Internet in that it provides facilities for individuals to communicate relatively anonymously with other individuals and groups. The ESC has adopted opinions on the action plan on promoting safe use of the Internet () and on the protection of minors and human dignity in audiovisual and information services ().

7.5.2. As far as individuals with disability are concerned, the key user device is the PC. PCs are already adapted for disability. As the PC evolves, it should be possible to improve the interfaces to disabled users.

8. Question 6

Securing public interest objectives in the light of convergence:

8.1. Question 6A

Does the convergence phenomenon support or challenge the way in which public interest objectives are achieved in the telecommunications, media and IT sectors?

8.1.1. In telecommunications the convergence phenomenon is neutral, because the networks are already independent of the services, although on-going regulation needs to ensure users' access to new services. This will best be achieved by ensuring access to broadband networks.

8.1.2. In broadcasting, convergence, or rather the digital platform development, is resulting in vertical integration. This development provides the challenge for regulation.

8.1.3. In the IT sector, the main issue relates to control of the de facto standards and the bundling of services. Hence, the Microsoft/Sun Microsystems dispute over Java and the bundling of Microsoft Internet Explorer into Windows are key issues. For competition and innovation to flourish there must be publicly accessible standards and interfaces and restrictions on bundling to the exclusion of choice by dominant players. The same issues will apply to Windows CE.

8.2. Question 6B

Should such objectives be more clearly identified and, where they translate into particular obligations, should a wider group of actors be able to take on such obligations?

8.2.1. There is a case in broadcasting and IT for the objectives to be more clearly identified and particular obligations to be established. As already mentioned, the general economic interest objectives must apply in due course to the operators of broadband networks. It may be premature to place a broadband access obligation on developing networks but this has to be the long term goal.

8.2.2. In broadcasting, as channels become thematic, the objectives of public service broadcasting may not be necessarily achieved within the envelope of generalist channels. Any change will be dependent on the experience gained in a multi-channel environment.

8.2.3. The proliferation and globalization of broadcast and information services does inevitably raise public interest issues in relation to content. It is beyond the scope of this opinion to decide for or against new regulation. The Committee would expect to give its opinions on these issues in due course and is already working on a submission in respect of the protection of minors.

9. Question 7

The future shape of regulation

9.1. Question 7A

Do current developments require a reassessment of the way in which rules are applied to the telecommunications, broadcasting and IT sectors?

9.1.1. The Committee considers that the Commission poses the right questions. It broadly agrees that regulation should be founded upon the principles referred to in the green paper, namely:

(i) no regulation for regulation's sake;

(ii) regulation must be based on single market freedoms;

(iii) regulation must take account of business realities; and

(iv) regulation must meet social and general interest objectives effectively and efficiently.

9.1.2. Broadband infrastructure competition is more of an issue in the converged market and convergence therefore offers an opportunity to consider the telecommunications regulatory approach taken by the Commission and to reconsider whether monopoly rights can be maintained other than in totally exceptional circumstances. Historic PTOs will want to introduce broadband services while competition will come from digital cable, wireless telecommunications and from terrestrial and satellite digital broadcasting.

9.2. Question 7B

Does the existence of different regulatory authorities or ministries responsible for different aspects of telecommunications, media and IT activities offer a workable structure for regulatory supervision in the light of convergence?

9.2.1. In a converged industry and market environment with identified policy objectives, separation of regulatory functions between government departments or national regulatory authorities is likely to create barriers to the efficient delivery of old and new services to consumers. Where regulation is necessary, enforcement and compliance should be determined by the policy objectives sought and not the type of activity regulated; it should be a stimulus rather than a hindrance to efficiency and economic progress.

9.2.2. There is merit therefore in having a single or common regulator for networks. The same does not apply for media content.

9.3. Question 7C

Will convergence require a reassessment of regulatory responsibilities at a national, Community or international level, and, if so which areas?

9.3.1. An assessment as to whether competition rules are sufficient to control the future converged environment is necessary. Once convergence has eliminated, through digitalisation, many of the reasons which have necessitated regulation in the relevant sectors (e.g. scarcity of frequency spectrum, network capacity, industry and market structures), competition rules may be sufficient. Furthermore, EC competition rules may provide a more adequate platform than regulation for uniform control of the converged sectors at a European level.

9.3.2. The Committee agrees that the principle of subsidiarity should apply within the overall framework of Community legislation.

10. Question 8

The international aspects of convergence:

10.1. Question 8A

Is further action required at an international level in light of convergence?

10.1.1. The US government has recently produced a green paper on the technical management of the Internet. For these purposes, the ESC believes that the Commission should pursue the policy outlined in its recent Communication on the need for strengthening international co-operation. These are fundamental issues and the ESC encourages the Commission to pursue this initiative.

10.1.2. Convergence will require continued support within the WTO and other relevant international bodies to ensure open access to infrastructure for new and converged services.

10.2. Question 8B

What additional steps (if any) are required to encourage other countries, particularly in central and eastern Europe, to create conditions within which current developments can be exploited?

10.2.1. It is a condition of membership and of negotiating accession that countries of central and eastern Europe align with EU regulation as soon as possible. The Committee supports this approach, particularly in respect of the infrastructure networks.

11. Question 9

Principles and possible approaches in the light of convergence:

11.1. Question 9A

What effect will convergence have on the principles for future regulation applied in the telecommunications, media and IT sectors, and should those principles be adapted in the light of convergence?

11.1.1. The green paper postulates five principles:

11.1.2. Principle 1

Regulation should be limited to what is strictly necessary to achieve clearly identified objectives.

The Committee agrees in particular with the statement that any rules put in place should be tailored to meet clearly identified objectives in a proportionate manner.

11.1.3. Principle 2

Future regulatory approaches should respond to the needs of users.

The Committee considers the important issues to be broadband access, ease of use, pricing transparency and the available range of content services.

11.1.4. Principle 3

Regulatory decisions should be guided by a need for a clear and predictable framework.

The Committee endorses this principle. In particular, there should be a clear distinction between infrastructure and content.

11.1.5. Principle 4

Ensuring full participation in a converged environment.

The Committee considers that the key to this will be the universal access to broadband services.

11.1.6. Principle 5

Independent and effective regulators will be central to a converging environment.

The Committee particularly endorses the proposal for regulatory independence.

11.2. Question 9B

If convergence requires adaptation of existing regulatory approaches, should that adaptation:

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

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

(iii) seek to create a comprehensive framework applying similar regulatory approaches to all three sectors?

11.2.1. The Committee considers that the approach to the regulatory framework for the emerging converged environment should strike the right balance between caution and innovation. A new round of deregulation/regulation should be avoided. The existing rules which apply in the telecommunications and audiovisual/broadcasting sectors could continue to apply where appropriate, subject to an appropriate and uniform interpretation to adapt them to the changing technological and industry environment. The definition of such services should be based on market perceptions rather than traditional regulatory approaches. The existing vertical regulation could be properly adapted and gradually integrated to the new environment. The Committee considers that the pace of the introduction of new rules and the adaptation of the existing regulatory framework should be dictated by the changes in the market place. This approach appears to provide the best guarantee that the regulatory principles laid down above are observed.

11.2.2. The Committee is against the second approach to regulation and favours a combination of the first and third to the extent that it is practicable in the longer term. In the immediate future regulation should build on the existing principles, but as competition emerges the regulation can become less onerous. Looking forward to when the new infrastructures and services are more established and new user preferences known, the whole regulatory infrastructure can then be re-considered.

Brussels, 29 April 1998.

The President of the Economic and Social Committee

Tom JENKINS

() OJ C 296, 29.9.1997.

() SEC(97) 2390 final.

() OJ L 256, 26.11.1995.

() OJ L 74, 22.3.1996.

() OJ L 256, 26.11.1995.

() OJ C 355, 21.11.1997.

() COM(97) 553 final and COM(98) 8 final.

() COM(97) 356 final, 16.10.1997.

() COM(97) 523 final, 24.10.1997.

() OJ C 89, 19.3.1997.

() COM(97) 582 final, 26.11.1997; ESC Opinion 627/98, 29.4.1998.

() COM(97) 570 final, 18.11.1997; ESC Opinion 626/98, 29.4.1998.

APPENDIX to the opinion of the Economic and Social Committee

The following amendment, which obtained more than one quarter of the votes cast, was rejected during the discussions.

Point 7.2.10

Delete all after the second sentence, and replace with the following:

'The Committee nevertheless believes that the broadcasting of top commercial sporting events and other major public events forms part of the information supply to the public. Where there is a publicly owned universal or near universal national TV channel, and the public is obliged by law to subscribe to it, the public is entitled to demand that major sporting events in which its own nationals participate should be shown on that channel, although not necessarily exclusively on that channel.`

Point 7.2.11 (new)

Insert a new 7.2.11 as follows:

'An issue in the commercial field is that because premium access helps to sell pay-TV subscriptions it may be worth more to some broadcasters than others. In due course, the sports promoters will have to balance the return from a television audience paying for the spectacle against a television audience as a target for advertisers. In many cases, a larger advertising audience may be worth more than a smaller premium viewing audience.`

Renumber the existing 7.2.11 as 7.2.12

Reason

The third sentence of 7.2.10 says the 'only issue` with regard to the presentation of sport on the media is a commercial one, which is then described. That is not so. The right of people to see major sporting (and other) events through their publicly owned and paid for national channels is a central one wherever such channels operate. 7.2.10 is rewritten to make this point clear, and to put it first. The lesser commercial issue is then put in a new 7.2.11 and the existing 7.2.11 is renumbered 7.2.12.

Result of the vote

For: 42, against: 45, abstentions: 12.