Opinion of the Economic and Social Committee on the 'Communication from the Commission on "Cohesion and the information society"` (97/C 355/04)

On 5 June 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 communication.

The Section for Regional Development and Town and Country Planning, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 16 September 1997. The rapporteur was Dame Jocelyn Barrow.

At its 348th plenary session (meeting of 1 October 1997) the Economic and Social Committee adopted the following opinion by 91 votes, with one dissenting vote and one abstention.

1. Introduction

1.1. There is a growing realization in the EU of the importance of information and communication technologies (ICT). It is also apparent that the EU is lagging behind its global competitors, notably the US and Japan, in its response to the challenges of ICT. A strategy to boost Europe's commitment to and achievements in ICT and its application to the creation of a vibrant Information Society is, therefore, a matter of profound concern and a challenge for the EU as a whole. It requires a comprehensive approach in which the different facets of the information society, including its effects on cohesion, are recognized.

1.2. The challenges of the information society have been recognized in a series of Commission communications, themselves drawing on consultancy studies and reports by, for example, the High Level Expert Groups on the information society. The Economic and Social Committee has been invited to provide opinions on different aspects of the development of the information society ().

1.3. In these opinions, the Committee has consistently articulated its view that there is a need to develop a European model for the information society which recognizes the social dimension of the information society, especially the impacts on employment and cohesion ().

1.4. The Commission communication is welcome as a necessary starting-point for boosting the information society in less-favoured regions. However, the Committee takes the view that the Commission proposals are not yet sufficiently developed and should take more account of the rapidly changing character of the telecommunications sector and of the information society more generally.

2. The Commission Communication

2.1. The purpose of the communication is to put forward a strategy for ensuring that the information society develops in a regionally balanced manner across the regions of the EU, so as to 'avert a polarization between "information haves" and "information have-nots"` which could aggravate regional imbalances. It complements an earlier Green Paper 'Living and Working in the information society - People first` () which focused on social aspects of the information society.

2.2. The communication presents a brief overview of the disparities between different parts of the EU in telecommunications provision, comments on the regulatory framework and the current (rather limited) role of the Structural Funds in preparing less-favoured regions for the information society, and sets out a vision of the way forward.

2.3. The communication has three components: using the regulatory process to provide guarantees that all regions are able to benefit from advances associated with the information society; ensuring that relevant infrastructure networks are complete; and supporting initiatives to raise awareness of the opportunities afforded by the information society and to stimulate demand for information-related activities.

2.4. A series of working principles aimed at securing progress is then laid out, covering regulation, infrastructure investment and demand stimulation.

3. General Comments

3.1. The Commission communication furthers the development of policy on the information society by looking explicitly at how cohesion should be taken into account. As the Committee has indicated in previous opinions, this is a welcome evolution of policy.

3.2. However, the communication does not pay sufficient heed to the more general problem facing the EU that it lags behind the US and Japan in this strategically vital area of economic activity. It is worth recalling that the information technology industries world-wide now account for a larger share of GDP than automobiles.

3.3. Developing the information society in the EU as a whole must be the core policy aim, while ensuring that cohesion is respected.

3.4. At the same time, measures to improve the opportunities for all, especially the less-favoured regions, to compete effectively for activities related to the information society are desirable. These aims are not necessarily easy to reconcile, and difficult choices can be foreseen in deciding when to use policy intervention to over-ride market-led investment decisions. In this regard, it is important that fair and transparent rules are established to govern the development of activities associated with the information society.

3.5. Disparities in telecommunications infrastructure between regions may well be sizeable, as the Commission Communication asserts, and this may militate against the emergence of vibrant ICT-related activity in regions where the information industries lag behind. But it is open to question whether this is necessarily a direction in which policy should go. Regional development can be pursued by a number of different routes and, with scarce resources, the issue should be how these can best be used. Within the limited budgets available for structural policies, if a greater effort is called for in enhancing telecommunications infrastructure, this can only be justified if a case can be made for cutting (or foregoing) other initiatives.

3.6. It is also important to recognize that not every region can (or should) expect to attract a full gamut of economic activity: some regions will be better placed to support ICT related industries than others, not so much because of infrastructure as because there are complementary factors of production. Past policies provide examples of inappropriate policy choices, such as the notorious South Italian 'cathedrals in the desert` (large manufacturing plants that do not fit in with economic structures) or the notion that all localities should have a science park. This is not addressed in the Commission communication, although it is clear that a careful balance needs to be struck between offering opportunities and avoiding wasteful expenditures.

3.7. Major changes are in prospect in the structure of the telecommunications industry and in the way in which it is regulated. These include the progressive privatization of publicly owned networks, entry of new competitors and the emergence of cross-border providers of services. In some Member States, this includes investment in competitive networks. In this context, it is worth asking how any proposed support from the Structural Funds would be reconciled with the presence of private companies in the industry and, more generally, with competition policy. The Committee argues that support should normally be limited to basic infrastructure and that there should be clear guidelines for how the money is used.

3.8. On the regulatory front, major changes will include the implementation of Directive 97/13/EC on licensing and the further evolution of Directive 90/388/EC on services. Directive 95/62/EC on open network provision mentioned in paragraph 10 is also germane to the Communication, because it affects universal service provision and other regulatory measures such as inter-connection charges (the fees charged by the core infrastructure providers for others to use their networks, which have a major impact on the potential profitability of new entrants). The Committee calls on the Commission to carry out a study, and to report soon, on how the various regulatory developments might impinge on what is proposed in the Communication.

3.9. The information society will affect employment in a differing way, and these need to be properly understood. As with all technological advances opportunities for job creation will arise, but some job losses are inevitable as certain categories of jobs are superseded by new forms of capital.

3.9.1. The social and economic partners have a self-evident role to play in this regard in ensuring that such job losses are managed with the minimum of social disruption.

3.10. A gamut of new services and activities linked to the information society will lead, in time, to job generation. For example, advances in telecommunications have facilitated the relocation of back-office activities in financial services away from congested financial centres to smaller cities and towns. Many other services, especially those aimed at businesses, are also amenable to relocation in this way.

3.11. There is sometimes a presumption that the main job creation arising from the information society will be in SMEs, but the scope for larger firms to be attracted to less-favoured regions must not be overlooked, especially in what has been dubbed tele-mediated environments. Examples are call centres for major telecommunications operators, or other forms of decentralized operations in the computing industry.

3.12. The experience of the Highlands and Islands telecommunications initiative is also instructive, because it has facilitated the creation or often (just as important) the retention of jobs. Although the aggregate number of jobs is not vast, an important effect of such initiatives is to create new core activities around which others can develop. It is worth noting, however, that a significant proportion of such jobs will go to, and often be generated by, people moving into the region. The indigenous population nevertheless benefits from increased spending induced by 'multiplier` effects of higher incomes in the region. Enhancing the scope for residents to secure employment requires complementary policies in areas such as training.

4. Specific Comments

4.1. As it has stressed in previous opinions, the Committee emphasizes the importance of tailoring policy initiatives to the actual requirements of business, individuals and the social and economic partners ().

4.2. One area of concern to the Committee is the prospect of significant concentration in ownership of the media and the horizontal integration of further components of the 'information` industries into large conglomerates, many owned outside the EU.

4.3. The Committee notes that there have been delays in the implementation of other components of the Commission's rolling action plan on the information society (). This calls for caution in the setting of targets, but also for circumspection in expectations of what can be achieved. The modest funding of the Structural Funds reinforces this point.

4.4. There is some danger in the way the Communication frames its proposals of treating the less-favoured regions as having common needs. The document alludes to Objective 2 as well as Objective 1 regions, yet it is unrealistic to expect the Structural Funds to attempt to do much for so many regions. The Committee invites the Commission to explain how it proposes to achieve its aims with the limited means at its disposal through the Structural Funds. This needs urgent examination, particularly in view of the differences between regions, and the Committee welcomes the Commission's proposal to 'carry out an in-depth assessment of the new Objective 2 programmes and of Objective 1 programmes`.

4.5. A related point is to recognize that the private sector will play a key role in advancing the information society. The policies that are proposed by the Commission, Member States and regional governments have to reflect the changing character of the various industries involved in the information society: telecommunications, software, value-added service providers and so on. Some of these afford opportunities for SMEs, but the scope for attracting branches of large companies also has to be recognized.

4.6. Cultural and social diversity are hallmarks of the EU, and there are grounds for questioning whether a uniform, centralized 'information society` would represent a positive development. For many purposes, regions are best-placed to formulate their own strategic plans so that taking account of regional priorities is vital for the elaboration of soundly based plans, as well as being consistent with the principle of subsidiarity.

4.7. The IRISI and RISI initiatives which form part of the demand stimulation component of Commission policy are valuable experiments, although their scale is modest. They also constitute a helpful methodology for assessing the needs of regions. The Committee understands that these are 'bottom-up`, although the Commission played a role in persuading the regions to take part in them. This prompts the question of how amenable other regions are to similar initiatives. It also raises the issue of which level of government is to carry out policy, and suggests that optimal results will be achieved by the different levels of government being responsible for those policies for which they are best suited.

5. Conclusions and Recommendations

5.1. The combination of liberalization of telecommunications and advances in ICT provides new opportunities for regions, but for these to be seized, it is important that the Commission should set out specific measures designed to secure progress, distinguishing between those that do and do not require expenditure. In so doing, it needs to recognize that regions will differ significantly in their needs.

5.2. How the telecommunications sector itself evolves will bear heavily on how the advent of the information society will affect cohesion. The Committee is concerned that the Commission proposals do not take sufficient account of the changed character of the telecommunications and other information industries as a result of privatization, the intensification of competition and the proliferation of new technologies and services. The reality is that, by the time the Communication is translated into actions, far-reaching changes in the ownership and regulation of telecommunications will have occurred.

5.3. Comprehensive and reliable networks are the sine qua non of the information society, so that if there are gaps in infrastructure provision, these should be a first priority.

5.4. The trend towards privatization of telecommunications and the entry of new providers means, however, that infrastructure is increasingly a matter for private operators more than public investment. It is important, therefore, for the Commission to recognize that its regulatory powers, together with those of Member States, will have a substantial effect and that it has to make a judgement of when these powers are likely to be a more effective solution than spending by the Structural Funds.

5.5. The concept of universal service is plainly a crucial one for the information society. But it is open to a number of interpretations that it would be helpful to clarify. The most basic 'service` is access to a fixed telephony point, but the more advanced services require differing configurations of hardware and software, all of which could be deemed to be components of 'service` for which universal provision is at issue. The Committee welcomes the Commission's proposals in relation to universal service, especially those in paragraph 13 of the communication, but encourages the Commission to refine the concept of universal service and to explore how it can best be made operational in reflecting the wide range of services becoming available and the tariffs associated with these. The Committee stresses that the notion of universal service is a moving target and that it is vital to adjust policies in a timely manner to reflect this.

5.6. The Committee therefore calls on the Commission to appraise the consequences for cohesion of anticipated developments in telecommunications and to put forward proposals for linking these to cohesion policies.

5.7. The Committee concurs with the Commission in the emphasis given to partnerships in advancing cohesion. However, it is important to identify specific policy orientations that will encourage progress, and the Committee is concerned that these have not been sufficiently thought out.

5.8. Although the focus in cohesion policy tends to be on SMEs and their lack of adaptation to ICT, especially in less-favoured regions, mobilization of large companies and involvement of universities and research institutes can play an important part in improving the scope for regions to exploit opportunities.

5.9. Building the information society throughout the EU and, more particularly, in the less favoured regions also requires an emphasis on citizens, first, to provide them with the necessary training and education to cope with new skill demands, and second to create awareness of the opportunities that exist.

5.10. Other Commission policies, such as those relating to science and technology policy (the forthcoming fifth framework programme) or actions to boost retraining of workers (including Objective 4 of the Structural Funds) can reinforce cohesion. The Committee invites the Commission to elaborate on these.

Brussels, 1 October 1997.

The President of the Economic and Social Committee

Tom JENKINS

() OJ C 296, 29. 9. 1997; OJ C 206, 7. 7. 1997; OJ C 66, 3. 3. 1997; OJ C 89, 19. 3. 1997; OJ C 212, 22. 7. 1996.

() For example, Opinion on the Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on Europe at the forefront of the global information society, OJ C 296, 29. 9. 1997.

() COM(96) 389 final.

() Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on Europe at the forefront of the global information society: rolling action plan (COM(96)607 final).