Opinion on the Draft Commission Directive amending Commission Directive 90/388/EEC regarding the abolition of the restrictions on the use of cable television networks for the provision of telecommunications services () (95/C 236/05)

On 27 February 1995, the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the abovementioned Draft Commission Directive.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 3 May 1995. (The Rapporteur was Mr Ramaekers.)

At its 326th Plenary Session (meeting of 1 June 1995), the Economic and Social Committee adopted the following Opinion by 98 votes to 72 with 4 abstentions.

1. Introduction

1.1. The Committee notes the Commission's desire to take measures to guarantee:

- the right of all operators to provide telecommunications services other than public voice telephony and services specifically excluded from Directives 90/388/EC and 94/46/EC;

- the effectiveness of measures to liberalize the telecommunications sector.

1.2. The Committee congratulates the Commission on its concern, before adopting the Draft Directive, to consult all the parties involved () on this matter and to collate the views expressed for the purpose of submitting a report on this consultation to the Council in June this year.

1.3. The Committee notes the Commission's desire to abolish forthwith the existing constraints on the use of cable networks for non-reserved services, so as fully to exploit the existing infrastructure's potential. The Commission does, however, also point out that the cable TV networks could provide even more services if additional investments were made.

1.4. The Committee notes the Commission's observation that a number of Member States have removed the restrictions on the supply of certain non-reserved data and services via cable television networks, while other Member States maintain significant restrictions.

The Committee would point out that these restrictions can only be justified on grounds of public interest or if they are considered to be fundamental requirements.

1.5. The Committee observes that the Commission takes the view that, under Directive 90/388/EEC, Member States retain the right to continue to allow only national telecommunications organizations to provide voice telephony services up to a specified date, in order to enable these bodies to obtain sufficient revenue to establish a universal telephony network.

The Committee notes that a temporary ban on the provision of voice telephony via cable television networks could be justified for the same reason.

1.6. The Committee notes that the Draft Directive under review would not, the Commission believes, prevent the specific rules adopted by the Member States from being applied to television broadcasting.

2. General comments

2.1. The Committee points out that a public consultation procedure was open until 15 March 1995 in respect of the Green Paper on the liberalization of telecommunications infrastructures and cable television networks. It is unfortunate that the Committee does not have the findings of this procedure at its disposal when drawing up this Opinion.

The Committee believes that the Draft Commission Directive and the above Green Paper must be taken together.

2.2. In the Committee's view there is a link between the issues covered by the Draft Commission Directive under review and the general issues addressed by the Green Paper (Parts 1 and 2).

2.3. The Committee refers to its Opinion () on the Commission's Action Plan entitled 'Europe's way to the information society' and, in particular, points 3.1.2.5, 3.1.2.6, 3.1.2.7 and 3.1.2.8. The Committee expressed concern over the schedule proposed by the Commission and noted that 'the Council meeting of 17 November 1994 did not call for a liberalization of alternative infrastructure before 1 January 1998. In this connection it is to be regretted that on 21 December 1994 the Commission adopted a Draft Directive on the liberalization of cable distribution infrastructure from 1 January 1996. This initiative changes the rules of the game regarding timetables, and consequently industrial strategy'.

2.4. In point 3.1.2.8 of the same Opinion (), the Committee pointed out that 'the Commission's proposed timetable for the liberalization of infrastructure cannot reasonably be introduced without having first clearly defined the concept of universal service - including the reasons for it, the stakes involved, the safeguard mechanisms that go with it, its developments, and the financial arrangements.' In that same context, the Committee welcomed the Commission's intention to provide a concrete solution to the problem of financing the universal service by means of a fund proposed in Part II of the Green Paper.

2.5. The Committee Opinion on the draft Council Directive amending Directives 88/301/EEC and 90/388/EEC on satellite communications (SEC(93) 1891 final) () reiterated the view expressed in the Opinion of November 1993 () on The Situation in the Telecommunications Services Sector (COM(93) 159 final) that 'before liberalization of the entire voice telephony service it is necessary to define the scope, organization and financing of the universal service'.

2.6. The Committee notes that the Council was unanimous in its approval for implementing - by 1 January 1998 at the latest - liberalization of all telecommunications' services, including voice telephony, and all telecommunications infrastructures. A number of Member States have decided to act in advance of this deadline.

2.7. The Committee notes the speed of technological developments in the multimedia field and takes the view that the use of cable-television networks may lead to an expansion of services using these technologies.

2.8. The Committee considers that liberalization of the non-reserved services and the use of cable-television networks may usher in competition which could improve the quality of the proposed services and reduce the costs.

2.9. In this context, the Committee would draw attention to its desire to see the emergence of an information society which gives all EU citizens access to a comprehensive range of high-quality services, at reasonable prices. This goal does not require monopolies of any kind to be kept in place.

3. Specific comments

3.1. The Committee notes the Commission's desire to abolish restrictions on supplying mobile communications services via cable networks (Communication on the consultation on the Green Paper on mobile and personal communications (COM(94) 492 final chapter VI 2.1)); this matter has to be taken together with the issues covered by this Opinion.

3.2. The Committee also notes that in Part II of the Green Paper, the Commission states (page 84/85) that 'contributions to universal service should avoid delaying the development of new services, which currently have higher costs and lower volumes, such as mobile telephony. Such services might be exempted as long as, given their underlying costs and tariffs, they could not be said to undermine the ability of the voice telephony providers to finance universal service'.

3.3. This approach is unacceptable, since mobile telephony will capture the most profitable slice of the market, thereby depriving the static voice telephony network of these customers. There is therefore a real danger that a high quality mobile network will be created, accessible only to the most affluent users, alongside a static voice telephony network which is becoming increasingly unprofitable and therefore offers a lower quality service to less well-off users: such a development may thus flesh out the fears expressed in the Bangemann report and the Commission's plan of action about the emergence of a two-tier telecommunications society.

3.4. The Committee does, however, accept that continuing restrictions on the use of cable television networks could hamper the development of new interactive services. The Committee would, however, draw attention to its Opinion on the Commission Communication entitled 'Europe's way to the information society - an action plan' () which pointed out that 'at the same time as getting to grips with the social consequences of the new technologies, there is also a case for studying needs so that the information society can satisfy the real demand of European society and not merely supply services that offer immediate financial gain'.

3.5. The Committee notes that the proposal to abolish restrictions on the use of cable television networks with effect from 1 January 1996 could lead to action being taken before the clear, stable regulatory framework specified in the Commission's plan of action had been defined.

3.6. The Committee is particularly concerned that it will not be possible, by 1 January 1996, to clarify how the universal service is to be defined and how it is to be financed.

3.7. The Committee acknowledges that the issue of media convergence, particularly as regards telecommunications and broadcasting, is still a subject of considerable debate from a legislative point of view.

Point 4.2 of the Committee's Opinion on the Commission Communication entitled 'Europe's way to the information system' () states that: 'Adoption of the Commission's proposal for a programme to liberalize services and infrastructure must depend on certain pre-conditions first being fulfilled in such fields as the establishment of a stable and legal regulatory framework, particularly with regard to:

- media concentration and ownership;

- the definition and preservation of the concept of universal service;

- privacy;

- intellectual property rights;

- legal protection and security;

- the audiovisual sector:

- ethnical considerations;

- information;

- culture;

- standardization: interoperability;

- tariffs (equalization, cross-subsidization)'.

The Committee notes that the Member States have already adopted rules for those services which have already been liberalized.

3.8. There is a considerable discrepancy in cable television network density in the various EU Member States. A Directive designed to abolish restrictions on the use of cable networks would have a considerably different impact from one Member State to another, particularly as regards the national telecommunications undertakings.

3.9. Whilst Greece and Italy do not have a cable television network, over 90 % of households in Belgium, Netherlands and Luxembourg are cable subscribers.

The Committee notes that although the United Kingdom is the only Member State which has so far authorized deregulated services and voice telephony to be provided via cable television networks, the network penetration rate in Britain is only 5 %. In France and the Netherlands a number of deregulated services may be provided via the cable television networks.

3.10. Cable television operators, who frequently hold monopolies at local level, must not step into the shoes of state monopolies, as this would fly in the face of goals being pursued by the liberalization drive.

3.11. It is also essential to ensure that the establishment of new multimedia-type services does not give rise to competition on the voice-telephony market before rules are introduced in this respect.

3.12. It will also be necessary to introduce provisions under which the cost of the new multimedia services is not borne by all cable television subscribers.

Initially, the development of multimedia services will only cover professional applications; domestic applications, such as video on demand or home shopping, may be developed by the year 2004.

In this context the Committee congratulates the Commission on the provision, in Article 2, that cable TV operators shall keep separate financial accounts for their activities as network capacity providers and providers of telecommunications services.

3.13. We have to face the problem of reconciling (a) the rapid pace of technological development with (b) the slow pace of drawing up a regulatory framework. Against this background, consideration should be given to the establishment of a European regulatory body for the purpose of protecting the rights and interests of both citizens and consumers.

3.14. The Committee considers that, in order to clarify the objectives of the Draft Directive, the text of Article 1(1) should be amended to read as follows: '... any mainly wire-based infrastructure authorized by a Member State for the transmission and distribution of radio and television signals ...', and that in Article 1(2) the text should be amended to read as follows: '... with draw all restrictions in respect of the supply of signal transmission and distribution capacity on cable networks ...'.

4. Conclusions

4.1. The Committee acknowledges that the abolition of restrictions on the use of cable television networks will enable new telecommunications networks to be developed.

4.2. The Committee does, however, take the view that the restrictions should not be abolished until a clearly-defined regulatory framework has been established, primarily with regard to the universal service.

4.3. In the Committee's view, the financing of the universal service is a matter of fundamental importance; before any steps are taken to liberalize the use of cable television infrastructures, it must be clearly specified which service providers will have to contribute to the fund for financing the universal service.

4.4. The Committee considers that it is particularly important to determine the contribution of mobile communications suppliers to the funding of the universal service before liberalizing the use of cable television networks.

4.5. The Committee points to the different penetration levels of cable networks in the various EU Member States and the very patchy impact that the Draft Directive would have. Implementation of the Directive would also even create unfair competition for some national telecommunications undertakings; some of them would be exposed to real competition, while others would only be theoretically exposed to competition, as there are no cable television networks in their countries.

4.6. The Committee notes that the implementation schedule was discussed by the Council on 17 November 1994. The Council did not take a decision on the abolition of the restrictions on the use of cable television before 1 January 1998.

4.7. For all the above reasons, the Committee considers that it would be premature to bring the Directive into force by 1 January 1996.

4.8. Bearing in mind the decision taken by the Council of Ministers, the different stages of development of cable television networks in the various Member States and the different impact which the Draft Directive would have on the various Member States, the Committee takes the view that each Member State should be free to decide whether it wishes to implement the proposed measure before 1 January 1998.

Done at Brussels, 1 June 1995.

The President

of the Economic and Social Committee

Carlos FERRER

() OJ No C 76, 28. 3. 1995, p. 8.

() OJ No C 110, 21. 4. 1995, p. 37.

() OJ No C 127, 7. 5. 1994.

() OJ No C 34, 2. 2. 1994.

() OJ No C 379, 31. 12. 1994.

() OJ No C 76, 28. 3. 1995, p. 8.

APPENDIX to the Opinion of the Economic and Social Committee

The following amendment was defeated in the course of the debate but received at least a quarter of the votes cast:

Counter Opinion

Replace the text of the Opinion of the Section by the following:

'1. Introduction

1.1. Commission Directive 90/388 of 28 June 1990 removed restrictions on the provision of value-added telecommunications, data and private voice telephony. This Directive has been identified as a cornerstone of the EU framework for liberalizing the European telecommunications market.

1.2. Council Resolution 93/C 213/01 of 22 July 1993 on the further development of the telecommunications market set the basic framework for the evolution of the regulatory environment in the EU and has established 1 January 1998 as the date for full liberalization (with additional transition periods for certain Member States).

1.3. Regulatory restrictions currently prevent the use of alternative infrastructures, such as the use of cable TV networks, for third party or self-provision of telecommunication services which are already liberalized.

1.4. The European Parliament Resolution of 20 April 1993 (A3-0113/93) and the Council Resolution of 22 December 1994 () have called upon the Commission to adopt measures to take advantage of the potential of existing cable TV infrastructure for telecommunication services and to abolish without delay the existing restrictions in Member States on the use of cable networks for non-reserved services.

1.5. Some Member States have already abolished restrictions on the provision of some data and/or non-reserved telephone services on cable TV networks. At least two Member States permit voice telephony. (See the Green Paper COM(94) 682 - Section III.3 for full details).

1.6. As part of the strategy for preparing for the information society, the Commission attaches considerable weight to the many calls for faster but limited infrastructure liberalization now. The Committee anticipates that the Commission will be putting forward separate proposals to amend Directive 90/338 progressively.

1.7. The Commission is currently working on an overall regulatory framework environment which should be in place to allow the full liberalization of telecommunication services and networks by 1 January 1998. According to Council Resolutions, the required proposals and measures for this framework must be made before 1 January 1996.

1.8. As part of this process, the Commission has submitted this Cable TV Network proposal. The Committee is pleased that the Commission is consulting all parties involved before adopting the Draft Directive () and will submit a report on this consultation to the Council in June this year.

2. Commission proposal

2.1. Under Directive 90/388/EEC telecommunications services, other than voice telephony to the general public and those services excluded from the scope of the Directive, were opened to competition.

2.2. The regulatory restrictions preventing the use of alternative infrastructures for liberalized services are the cause of bottlenecks in areas such as data communication, value added services, and the provision of data and voice services to corporate and closed user groups.

2.3. The Commission proposal withdraws all restrictions on the use of transmission capacity on cable TV networks, lets operators use the cable networks to deliver their services and authorizes interconnection with the public telecommunication network. In addition it requires transparent and non-discriminatory behaviour where a single operator provides both telecommunications and cable TV networks, and separation of financial accounts.

3. General comments

3.1. The Committee welcomes the Commission proposal.

3.2. In many Member States the proposal will have little initial effect since cable TV networks are either very local and do not offer national coverage or are nonexistent. Furthermore the time required to create a cable TV network is substantial, as is the cost.

3.3. However, where cable TV networks exist and service providers wish to use them, this proposal is a move in the right direction. It will also permit planning for the future.

3.4. The point about planning is an important one given the limited technical capacity of many incumbent operators' networks and the greater capacity and improved technical quality available from the TV cable. When supplemented with the rapid advantages coming from new technologies, this will offer opportunities for a variety of new services and encourage growth in the market.

3.5. The Committee is aware of concern about possible job reductions. However the Committee notes from experience in many instances that potential job reductions may be offset by job creation brought about by new products and services.

3.6. The Commission has assured the Committee that this proposal will neither prejudice nor compromise proposals concerning the universal service which are eagerly awaited (Part II of the Green Paper).

4. Specific comments

4.1. Article 1

Whilst welcoming the extension of the Directive to include cable TV networks, the Committee regrets that the proposal does not encompass other alternative infrastructures, such as those available from a number of rail and utilities' networks. The Committee hopes that this will be rectified soon.

4.2. Article 4

The Directive should come into force, as proposed, on 1 January 1996. It is an important and positive step forward for those Member States who already have cable TV (in part or whole). It will have a minimal effect on other Member States.

5. Conclusions

5.1. Whilst the Committee welcomes the Commission's proposal, it is aware that many important telecommunication and related matters remain to be resolved before the full effect of the new less restrictive regulatory arrangements can be seen. Such matters, many of which are referred to in the Committee Opinion on the Information Society (CES 193/95) are:

- universal service in telecommunications

- open access and interconnection to public telecommunication networks and services

- licensing in the field of telecommunication

- fair competition environment

- the international agenda

- the employment challenge

- media concentration and ownership

- intellectual property rights

- legal protection and privacy.

The Committee notes the proposed timetable in the Green Paper Part II and looks forward to receiving and commenting upon Commission proposals. In the meantime, this proposal should proceed.'

Result of the vote

For: 77, against: 97, abstentions: 2.