~^l I COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 22.01.97 
COM(97) 7 final 
COMMUNICATION FROM THE COMMISSION 
TO THE COUNCIL, THE EUROPEAN PARLIAMENT, 
THE ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 
COHESION AND THE INFORMATION SOCIETY 

TABLE OF CONTENT 
FOREWORD 
THE ISSUE 
THE CONTEXT 
• THE REGULATORY FRAMEWORK 
• THE ROLE OF THE STRUCTURAL FUNDS 
THE WAY FORWARD 
• ADVANCING COHESION THROUGH THE REGULATORY PROCESS, 
• ... COMPLETING THE NETWORK INFRASTRUCIURE ... 
• ... AND STIMULATING DEMAND 
CONCLUSIONS 
STATISTICAL ANNEX 
EXPLANATORY NOTES 
FOREWORD 
The Commission has recently adopted its first Report on economic and social cohesion, under 
Art. 130b of the Treaty. This Communication forms part of the follow-up to the 
recommendations and analysis of the Report in the area of the information society. It 
complements the Green Paper "Living and Working in the information society - People first", 
(which undertook an analysis of the issues related to social cohesion), notably by highlighting 
the regional aspects of the problem. 
In the context of the globalisation process and of the need to become more competitive at the 
world level, the opportunities offered by the emerging information society are huge: in terms of 
competitive gains to be grasped by firms and territories; more efficient organisational forms; 
new trading opportunities; new educational and new employment possibilities. Making these 
opportunities available throughout Europe is one of the central objectives of the gradual 
liberalisation of telecommunication markets. However, not all European regions, citizens or 
firms are equally well equipped to enjoy these benefits because of geographical, social and 
economic reasons, yet in a globalising environment, it is clear that they have to compete not 
just at EU level, but at a global level as well. 
Though the opening of telecommunications market and the harmonisation measures should in 
principle reach out to the whole territory of the Union, the principal risk is that investments in 
some regions will be delayed. 
Thus, the development of the information society needs to be complemented, where necessary, 
by policy action in order to close the existing gaps and ensure that the information society 
develops at the desired rate throughout the Union. This calls for the participation and co­
ordination of regions, national governments and the European Institutions so as to aven a 
polarisation between "information haves" and "information have-nots" as the new technologies 
spread. 
This document, having identified the need for action, indicates the issues, the context and the 
way forward in the areas of regulatory, investment and demand support policies. Coherent 
progress in these three areas will be important for harmonious regional development. 
THE ISSUE 
1) The information society is making possible profound economic, social and institutional 
transformation across all realms of human activity1. As such, it also has considerable 
potential for strengthening economic and social cohesion within the meaning of Art. 
130a by reinforcing regions' competitiveness. The latter is increasingly determined by 
the ability of regions to integrate the new technologies made available by the 
information society. 
Information and communication technologies (ICTs) can widen the efficient locational 
choices for firms so that they can take advantage of differential costs of operations 
and/or market opportunities. They can help regions, both, retain a larger share of total 
value added and attract and develop new activities with high value added. The 
information society could also help breakdown the barriers to location of business 
outside urban centres, attracting increased investment to rural areas where relative 
business-location costs are typically lower and which can offer a high quality of life. 
2) The information society also offers a great potential for the development of new forms 
of employment and high skilled jobs, especially by providing SMEs, as the main 
dynamic source of employment creation, growth and competitiveness, with the 
instruments to innovate and adapt to a rapidly changing economic environment. 
Research undertaken by the Commission2 suggests that liberalisation of 
telecommunication markets combined with a rapid adoption for ICTs will yield positive 
effects in terms of employment, largely compensating for any job losses that could take 
place in the telecommunication sector. The problem, however, is in managing the time 
lag between these processes: those who adapt first and manage to anticipate the 
emerging products and services are likely to gain dynamic "first mover" competitive 
advantages, while the inability to rapidly adopt these technologies will certainly have a 
negative effect on employment3. 
From a socio-economic perspective, the information society opens up opportunities for 
new working schemes such as teleworking, potentially providing wider access to .jobs 
and more flexible timing of work; it provides a basis for overcoming mobility and 
access problems arising, for example, from remoteness and/or poor transport 
infrastructure, especially in rural areas; it opens up new opportunities in the areas of 
education, health and caring activities; and provides for increased transparency in the 
public administration - to mention but a few examples4. 
3) All these processes also have profound spatial and social implications. Though ICTs are 
not, by themselves, bringing about or determining any particular spatial outcome, their 
up-take affects regions' ability to exploit and develop their humar: resources, 
infrastructures and the like, thus determining a region's development potential. This is 
important, in particular, for SMEs which represent the backbone of regioD I economic 
structures, especially in LFRs. At the same time if all citizens are not offered equal 
opportunities of access to the information society, we risk the creation of new forms of 
social exclusion. 
H*:-.: «s 
The quality of information and telecommunication infrastructure is a key determinant of 
the effective capacity to participate in the information society. Other actors include: 
the level of qualification and the educational level so as to support the widespread use 
of information society services; a pro-active role played by the private and public 
sectors in promoting the information society; organisational and investment capacities 
for pursuing an effective information society strategy; availability of the technical 
support for facilitating the diffusion of information society activities; and the creation of 
public awareness for the information society. 
4) For the opportunities of the information society to be grasped by individuals, 
institutions and firms independent of their location, these enabling factors need to be 
put in place throughout the EU. A review of the available data as taken up in the 
Statistical Annex to this document suggests that an important gap still exists between 
the richest and the less favoured regions (LFRs) of the Union at the level of basic 
infrastructure provision, the cost and reliability of services, and the availability of 
advanced services. 
For example, looking at the proportion of all households passed by cable network 
(which indicates the nature potential for rapid deployment of local loop competition and 
broad band services), about 97% of the Belgian population and 84% of the Dutch 
population had access in 1993 to cable TV networks compared to 0% in Italy and 
Greece, 2% in Portugal and 8% in Spain. Another example concerns the cost of using 
information society services: at the beginning of 1996, the residential installation of a 
telephone line costs respectively on average 32.5% more in cohesion regions than in the 
European core; 65.0% more in Ireland and 76.0% more in Greece. 
Often, averages hide the existence of major differences within countries. In Portugal, 
for example, 62 main telephone lines per hundred inhabitants were available in Lisbon 
against 29 in the rest of the country and 18 in the Acores; in Spain, Madrid had 45.2 
lines against 36 in the rest of the country and 22 in Estremadura; and in Greece, 52 
lines were available in the Athens region against only 27 in Anatoliki Makedonia. 
Evidence also suggests that some particular groups or individuals may face problems of 
adaptation to the information society and that their needs should be addressed. 
The central issue is, therefore, how to combine developments in information society 
and telecommunication policies with the role to be played by structural interventions in 
order to rapidly reduce these disparities and promote a cohesive information society. 
THE CONTEXT 
The regulatory framework 
5) Recognising the need to accelerate the diffusion of telecommunication networks, to 
facilitate service and network innovation, and to bring down the costs of usage, leading 
to further innovation and the development of new applications, the European 
Commission has promoted and supported the liberalisation of teiecommunication 
v markets. At the same time, Commission policy is based on the recognition that also in 
the emerging pro-competitive environment in the field of telecommunications, it is 
essential to ensure the provision of universal service and, where necessary, the 
financing through the creation of specific mechanisms funded by market players. This 
regulatory approach has been chosen partly to avoid "cherry picking" by new entrants 
who are not themselves required to deliver universal service and who are likely to focus 
their activities on both business and residential customers in and around major cities5, 
but also to ensure that all citizens of the Union have access to certain services of high 
quality at prices they can afford. As such, the concept of universal service is a central 
part of the European model of society contributing to solidarity and equal treatment, 
and an essential element of economic and social cohesion. The importance of universal 
service for cohesion has also been stressed in the First Report on Economic and Social 
Cohesion. 
6) It is often said that the forces of liberalisation and competition will reach out to the 
whole territory of the Union6. Yet, given the rapid pace of technological change, 
frequently, there will be fresh rounds of investment, service innovation and competitive 
entry in the core regions which, if not reciprocated, will affect development and 
employment opportunities and sustain the relative gap between different types of areas. 
Therefore, from a cohesion perspective, there is a need to keep the regulatory 
framework and, more particularly, the scope of universal service, under review so as to 
ensure that all territories participate in the full range of benefits of liberalisation in terms 
of affordable price, level of service and innovation. Targeted support, where necessary, 
for investment expenditures to spread the beneficial effects to the less developed, 
peripheral and/or rural areas of the Union, in line with the competition rules, should 
complement the regulatory framework. 
The role of the Structural Funds 
7) A recent analysis7 of European Regional Development Fund (ERDF) and European 
Social Fund (ESF) interventions suggests that, overall, only a surprisingly small part 
(about 2.0%) of expenditure goes to investment in the telecommunication sector. 
Furthermore, the most significant part of these investments (about 1.5%) is used for 
upgrading and completing the information and communication infrastructure, especially 
the basic telephony network. A tiny portion (approximately 0.3% of total expenditure) 
of the Community Support Frameworks (CSFs) is then dedicated to demand-side 
measures. An analysis Objective by Objective does not reveal substantial differences. 
Hence, it is fair to say that, with few exceptions8 and despite having received increased 
attention under the current programming period, efforts for supporting the emergence 
of the information society and preparing regions to grasp the related benefits remain 
modest and insufficient. 
TABLE 1 - TOTAL EXPENDITURE OF CSFS FOR OBJECTIVES 1,2,3,4 AND SBINTHE 
TaECOMMUNICATlON SECTOR (1994-99) 
MECU MEMBER STATES 
Private Public EUROPEAN UNION 
SFs %(i) TOTAL 
Value %(ii) 
Telecom(iH) 33 2.005 1.332 39.5 3.370 1,2 
-Basic 
•Advanced 0 1.417 
27 524 877 38,2 
369 40,1 2.295 
920 0,8 
0,3 
Telematics <M 46 382 437 50,5 865 0,3 
TOTAL(v) 81.504 85.087 117.280 100.0 283.871 100.0 
Percentage of the total Community Support Frameworks (CSFs) on the Total Value of the line. 
(li) Percentage of the total budget for the item on the total budget allocated forthe CSFs (i.e ECU 283.871 million). 
fui) Total funds allocated to axes, measures or simple actions covering telecommunications (infrastructures and service) 
mentioned in the Community Support Frameworks. A further distinction is made between Basic (provision and modernisation of basic 
telephony, including digitalisation and optical fibre in national or regional networks) and Advanced (implementation of advanced 
infrastructures and services such as optical fibre in local access, satellite links, ISDN and broadband network) 
f,v) Budget allocated to telematic applications in several fields like health, education, transport. This line include actions like 
teleworking schemes, teleleaming and multimedia applications 
(v) This is me total of CSFs and not the sum of the hems above. 
8) The nature of the Commission's initiatives to support and stimulate a wider diffusion of 
information infrastructures and applications in LFRs has evolved over time from the 
STAR programme9 with a strong infrastructural focus, to the TELEMATIQUE 
programme10 which stressed the stimulation of demand for telecommunication services 
and the efficient use of telecommunication infrastructures among the public and the 
private sectors. 
TABLE 2 - TOTAL EXPENDITURE OF COMMUNITY INITIATIVES IN THE 
TELECOMMUNICATION SECTOR(I> 
MECU MEMBER STATES 
Private Public EUROPEAN UNION 
SFs % TOTAL 
Telecom 41 41 46,6 87 0,7 
-Basic 
- Advanced 0,7 
24 0,7 50,0 
24 46,0 1,4 
52 0,8 
0,4 
Telematics 66 112 166 48,3 344 2,7 
TOTAL 3.337 3.280 5.910 100.0 12.527 100,0 
(0 The same footnotes of TaWe 1 apply to Table 2. 
The European Social Fund (ESF)11-, through its interventions under the different 
objectives and the Community Initiatives EMPLOYMENT and ADAPT, has been 
particularly attentive in promoting training and supporting structures for jobs and skills 
related to the information society. In 1996 the ADAPT Initiative was reinforced with a 
new set of actions, ADAPT-BIS (Building the Information Society), aimed at 
promoting pro-active social policies facilitating the transition to the information society. 
The Structural Funds are also an important tool in seeking to address the risk that rural 
areas be left behind by both financing provisions of ICT infrastructure to remote rural 
areas (particularly in Objective 1 regions) and by offering help to rural areas to exploit 
new employment opportunities12. 
In 1994, the Commission launched the Interregional Information Society Initiative 
(IRISI), which aims to demonstrate a methodology based on subsidiarity and a bottom-
up approach for creating awareness among the general public and decision makers, 
including the private sector. The objective here is to define information society actions 
which are relevant to the economic fabric of the region and to develop synergies 
between regional resources, private capital and the Structural Funds, and to provide 
inter-regional guidance and learning13. Based on the success of IRISI a new generation 
of innovative actions for the information society (RISI) under Art. 10 of the ERDF and 
Art.6 of the ESF has been launched14. 
THE WAY FORWARD 
9) The debate and more policy initiatives relating to the information society, which have 
initially focused on technological and supply-side aspects, are now also focusing on 
social and demand side aspects. The pervasive and systemic nature of the changes 
brought about by the information society necessitate both the integration of all pertinent 
areas of action and the participation of all interested actors at local, regional, national 
and EU level. 
Advancing cohesion through the regulatory process... 
10) Taking into account the dynamic and evolutive nature of umversal service, which must 
be kept under continuous review, the Commission is due to report15, for the first time, 
on the scope, quality, level and affordability of universal service by January 1st, 1998. It 
must also examine and report to the European Parliament and to the Council on the 
functioning of the Directive on the application of Open Network Provision (ONP) to 
voice telephony and on universal service before December 31st, 199916. 
There is a broad recognition that universal service must respond to technological 
evolution and changes in the needs and expectations of Europe's citizens. In the future, 
in the context of the development of the concept of universal service or the 
development of public service obligations, different levels of minimum service could be 
imaginable, adapted to different user groups, such as SMEs, health centres or 
educational institutions. Access to more advanced services and subscriber connection 
to digital switch might pave the way towards ISDN provision. 
Public and "community" access, involving the connection of schools, colleges, 
hospitals, public offices, libraries and other public access points may be of particular 
importance to LFfts where there may be a risk of delay in accessing advanced 
telecommunications services if left to market forces alone17. In that context, assessing 
periodically also the need for any reshaping of the concept of universal service and/or 
universal access at a European level will be part of the review exercise. 
Indeed, if all the population is to share the benefits of the information society, then a 
consensus must be achieved around the shape universal service should take and the 
ways to pay for it. 
Therefore, in order to aid the review process, the Commission urges and supports 
Member States and regions to continue in the course of 1997, and thereafter, a wide 
and structured consultation on universal service and on public access involving the 
general public, SMEs, community organisations, educational institutions and local 
communities. The outcome of that consultation will constitute a fundamental and 
necessary input for the future shape of universal service and to the mandate of National 
Regulatory Authorities in each Member country. In this way, the full transparency of 
the review process will be ensured18. 
Complementary to any evolution in the scope of umversal service, developing public 
access as part of a demand stimulation strategy is an important element and will be 
further discussed under point 13. 
11) Member States have a key responsibility in rapidly adapting the regulatory framework 
to the new competitive environment. The Commission recommends that they complete 
the liberalisation process as soon as possible. The slow pace of regulatory reform in 
some countries is likely to be counter-productive in terms of cohesion since uncertainty 
in the regulatory environment may well deter new investments. The licences awarded to 
telecommunications operators represent a powerful cohesion instrument which, taking 
into account the proportionality principle and the necessity of open and competitive 
markets in the European Union, could be explored in view of integrating coverage 
targets including less favoured regions. Competition policy plays an important role and 
the Commission will continue to ensure that recently liberalised markets and/or newly 
emerging markets are not foreclosed. 
... completing the network infrastructure... 
12) The primary responsibility for the development and deployment of the information 
society rests in the hands of private business, telecom operators and service providers. 
Even within LFRs, investment in telecommunications infrastructure is potentially 
profitable in many sub-regions. The digitalisation of trunk lines and local exchanges and 
the extension of GSM, to take a few examples, are likely to be profitable from the very 
outset in the most densely populated urban areas. 
Yet the investment gap in cohesion regions compared to the rest of the Union remains 
significant. In addition, in Objective 1 regions (and, more in general, in 
9 
poor/rural/peripheral areas) the cost of installing and operating new lines is often higher 
than in other areas and levels of GDP per capita tend to be lower. For example, the cost 
of digftahang the last 10% of the network in Greece, Ireland, Italy, Portugal and Spain 
has been estimated to be in the range of ECU 4 to 5 billion19. A truly universal digital 
network would thus require considerable extra investment. Furthermore, there may be a 
"time gap" concern which justifies public interventions, whereby support is meant to 
anticipate the diffusion of a given infrastructure or service (as the STAR Programme 
has amply demonstrated). As acknowledged in the First Report on economic and social 
cohesion, the cohesion countries may require accompanying measures to help 
accelerate the development of networks under a liberalisation regime. 
The Commission invites Member States and the regions concerned to carefully assess 
investment decisions (also in the framework of the current ERDF programming 
period), identifying the link between investment and regional performance, and to 
target investment on projects that optimise the contribution to cohesion and on areas 
where investment would not otherwise be forthcoming under market conditions. In the 
context of EU structural policies, the Commission, in partnership with Member States, 
will strictly evaluate where and when there is a strong case for public support for 
telecommunications investment in line with the competition rules. 
... ami stimulating demand 
13) The role of policy action for demand stimulation as a means to speed up and smoothen 
the transition to the information society has been emphasised, for example, by the 
Competitiveness Advisory Group20 and has been widely acknowledged21. 
Assessing real need and demand, as part of the exercise to review the scope of 
universal service, is particularly complicated in the information society because services 
may require more up-front resources, acting as barriers for many potential users, who 
cannot experiment the new services to determine their utility22. Supporting the direct 
access of the public to new information services in institutions such as schools, public 
libraries and local development centres can provide a cost-effective solution23. In these 
circumstances, the general public would be given access that would otherwise be denied 
them, but at a tiny fraction of the cost of providing the service to every home; training 
and support can be offered in a cost-effective form; and the utility and popularity of 
different services can be tested. The feasibility of using the Structural Funds to provide 
assistance for such schemes will be explored. 
Currently, regional ICT programmes often lack the adequate measures complementary 
to the development of new advanced infrastructures and applications. Initiatives need to 
be taken to integrate ICT programmes with ICT training and awareness schemes, 
regional structural economic support, project seed money and risk capital for users24. 
Also, LFRs are often characterised by traditional organisational structures and lack of 
intermediary institutions, resulting in many cases in the inability of decision-makers to 
formulate relevant information society objectives and to implement effective plans, 
Initiatives should be launched to offer training courses for the development of 
organisational and managerial skills and to support the dissemination of such skills in 
the region25. In addition, stimulating co-operation between enterprises and between 
10 
companies and knowledge resource centres seems an effective way to mobilise demand 
for new services and applications. 
Finally, lack of experience in using ICTs represents a barrier to the participation of 
some LFRs in the information society. Effective use of advanced ICT applications 
requires computer literacy, availability of appropriate supporting and maintenance 
services, and language skills - to mention but a few. Therefore, initiatives are necessary 
to reinforce educational programmes on ICTs, to support the ability to develop 
distance working relations, to promote awareness campaigns and training and re­
training schemes in communication and information inquiry26. 
15) The information society is a dynamic concept. As the IRISI initiatives have 
demonstrated, it is likely to take different forms in different contexts depending on the 
structure of local productive systems, local institutions, and the demand expressed by 
the population. For this reasons, the Commission has no ready-made solutions; it does, 
however, have a methodology to propose and the instruments to accompany it. The 
point of departure is the recognition that the regional level is the most appropriate for 
identifying the opportunities offered to it by the information society. Only an approach 
based on consensus, partnership and dialogue among users and ICT providers within 
the regional context can make the information society a reality adapted to the needs of 
people and firms rather than a celebration of technology. This bottom-up approach 
mirrors the approach of the territorial employment pacts as launched by the European 
Confidence Pact for employment and supports the role of small and medium-sized 
enterprises as the driving force for regional development and employment creation. It 
should contribute to realising the potentially powerful role of the information society in 
building European awareness of indigenous regional potential, identifying and 
encouraging expanded cross-border trading possibilities and economic opportunities. 
The regions involved in the IRISI and RISI initiatives exemplify this approach. 
Mainstreaming these types of actions through the use of the Structural Funds in close 
co-ordination with other financing mechanisms available at the EU level, in particular 
projects within the framework of the Information Society Action Plan, will be one of 
the priorities27. 
The Commission will carry out an in-depth assessment of the information society 
content of the new Obj.2 programmes and of Obj.l programmes, both before and after 
the review due by mid-1997. This analysis will assist the Commission, Member States 
and regions to identify opportunities for supporting information society activities within 
existing programmes and to define their priorities for the future. 
Already, the Commission has recently issued guidelines for programmes in Obj.2 
regions for the programming period 1996-99 which affirm that the emphasis "should be 
on practical IT applications and services proven to be effective for employment and 
business creation and retention" with particular attention to awareness and training 
actions. With the same spirit, the Commission is preparing the new guidelines for Obj. 1 
regions whose programmes are due for revision in mid-1997. Within the margins 
available, Obj 1, 5(b) and 6 regions and Member states are invited to explore how to 
increase the number of actions related to the information society. 
11 
Further to operations in Obj. 1 and 2 regions, the Commission intends to harness the 
possibilities offered by operations in Obj. 3 and 4 to support the provision of 
information society skills training in favour of those unemployed and those at risk of 
being unemployed. In particular, the development of preventive approaches in 
enterprises, and facilitating the introduction and adaptation to new forms of work 
organisation combined with training and retraining of workers, is seen as essential in 
the process of transition to the information society. 
16) The participation of actors from LFRs in the 4th Framework Programme already 
provides a basis for the take-up and diffusion of results, applications and best practices. 
The preparation of the 5th Framework Programme for RTD provides a further 
opportunity for better integrating the cohesion dimension in RTD policy and 
responding to users' needs, particularly in the area of the information society. The 
guidelines proposed by the Commission28 identify the creation of a "user-friendly 
information society" as one of the priorities of the 5th Framework Programme. In order 
to improve the complementarity with structural policies, the active participation of 
regions in the implementation phase will need to be promoted. 
CONCLUSIONS 
17) Information is increasingly recognised as a key resource on which the world economy 
depends. Progress in ICTs has the potential to reduce the economic significance of 
distance, potentially affording firms and households with access to vital information 
independent of their location. By uniting traditionally separate sectors (i.e. 
telecommunications, computers and media) it has created vast possibilities for the 
emergence of new activities, services and jobs. Yet, the capacity to access and 
effectively use the information society is unevenly distributed across European regions. 
18) Aiming at reducing these disparities and improving economic and social cohesion, this 
Communication attempts to lay down some key working principles in the area of 
regulation, infrastructure investment and demand stimulation. 
• Member states should ensure appropriate development of their regulatory 
framework. In particular they should: 
=> continue the debate on the scope of universal service and on the concept of 
public access in the information society in order to contribute towards the 
future development of the regulatory framework involving individuals, 
SMEs, community organisations, educational institutions, regions and local 
communities; 
=> provide for early completion of the liberalisation process; 
=> explore licensing regimes with a view of integrating coverage targets 
including less favoured regions, taking account of the proportionality 
12 
principle and the development of open and competitive markets throughout 
the European Union. 
• It is recommended that Member states should: 
=> give priority to the completion and upgrading of the telecom networks, 
identifying the link between investment and regional performance. Given the 
existing budgetary constraints, support should be targeted on 
télécommunication infrastructure investments that optimise the contribution 
to economic and social cohesion and which do not distort competition in the 
new environment; 
=> adopt a strategic and integrated approach to the information society in 
partnership with regional and local authorities, social partners, infrastructure 
and service providers and other relevant actors; 
=> establish public/private partnerships, where necessary, so as to involve the 
private sector thus ensuring the selection of suitable projects, their effective 
implementation and their long-term economic sustainability. 
=> launch a range of initiatives (including within the. framework of the 
Structural Funds) in the areas of education, training and work organisation 
as already proposed in the Commission action plan "Learning in the 
information society" and the Green Paper "living and working in the 
information society - People first". Increasingly, efforts must concentrate on 
education and training; 
• The Commission intends to: 
=> take into account the results of the consultation carried out at the Member 
state level (see above) when developing further its policy on universal 
service in the context of its legislative initiative and in view, particularly, of 
the report on the Directive on the application of ONP to voice telephony and 
on universal service due by 31 December 1999; 
=> increase the coherence of its actions in the field of the information society; in 
particular, in the relation between the 4th Framework Programme for RTD 
and the Structural Funds. It will also intensify its efforts for mobilisation and 
awareness raising and ensure that the needs of users continue to be truly 
represented in the 5th Framework Programme for RTD; 
=> prepare for spring 1997 a communication describing the set of actions to be 
undertaken as a follow-up to the consultation and debate process on the 
Green paper "Living and working in the Information Society". .This will 
develop a focused "People first" approach to social policy in the information 
society that responds to the demand for practically oriented activities; 
=> grant technical assistance to Member States and regions for promoting new 
ICTs including electronic commerce, and increase, in the framework of its 
13 
enterprise policy, the access of SMEs to the opportunities granted by the 
information society, both considering their specific needs and reinforcing the 
information efforts as regards these opportunities; 
=> accompany and continuously support the actions of Member states and 
regions in the framework of the Structural Funds, in particular, in order to 
dévise integrated and strategic approaches to the information society, to 
enhance regional capacity building at all levels. The Commission will also 
carry out an in-depth assessment of the information society content of Obj. 1 
and Obj.2 programmes; highlight the importance of the information society 
in the new guidelines for Obj.l regions and harness the possibilities offered 
in the framework of Objectives 3 and 4 and ADAPT-BIS. 
14 
STATISTICAL ANNEX 
GENERAL TELECOMMUNICATION/INFORMATION SOCIETY INDICATORS29 
1.1 Access indicators 
The first prerequisite for active participation in the information society is for firms and 
households to have ready access to the underlying networks and devices. Though converging in 
many aspects, significant geographical variations remain in the European Union in terms of the 
time a subscriber may have to wait for the installation of a line; the quality of the service on 
that line and the range of services which mat line can support. 
NETWORKOR SERVICE 
PSTN 
- Faults per 100 Main Lines '94 
- Digital lines (%) '94 
ISDN (Primary Rate) 
- Geographic coverage 1994 
- Projected Coverage 1996 
Public On-line services 
- CompuServe nodes per 1M *95 
- Dial-up numbers per 1M '95 CORE 
AVERAGE® 
11,3 
71,2 
85,0 
100,0 
0,54 
1,94 COHESION 
AVERAGE 
32,6 
60,6 
32,3<fi) 
80,0 
0,05 
0,36 COHESION 
DIVERGENCE 
(%) 
+ 188.0 
-15,0 
-62,0 
-20,0 
-91,0 
-81,0 
® The European core, as defined in the NEXUS study, includes all EU Member states except the 
cohesion countries (Ireland, Greece, Spain and Portugal) and the cohesion regions in Italy. 
<U) At the end of 1993, the Spanish Operator Telefonica claimed a full geographical coverage either 
directly from an ISDN exchange or by using remote links. Similarly, Portugal Telecom declared a 
virtually 100% coverage (including Atlantic islands like Madeira). The installation time is typically 
4 weeks, in many areas it is much shorter, but in remote regions operations take up to 8 weeks. 
For example, in 1995, the actual time for being connected to the network amounts to 20 
working days in the German Western Lander, to 8 working days in the UK and in France 
compared to 80 days in Greece. 
Similarly, the quality and reliability of Public Switched Telephone Networks (PSTN) lines 
vary quite considerably both between Member States and between different regions. In 1994, 
for example, Greece had on average 53.0 faults per 100 main telephone lines compared to an 
average of the European core of 11.3 faults (an almost fourfold difference). 
A further indicator of accessibility relates to Integrated Service Digital Network (ISDN)30 
provision: almost 85% of the territory of the European core was covered by ISDN in 1994 
against only 32.3% in the cohesion regions. 
Another indicator for the different national and regional levels of access to the information 
society can be derived from the prevalence of commercial on-line services. In 1995, there were 
180 dial-up numbers to on-line services (1 every 320.000 inhabitants) in the UK, 63 in 
Germany (1 every 1.150.000 inhabitants), 3 in Portugal (1 every 3.200.000 inhabitants) and 6 
in Spain (1 every 6.600.000). 
Ih 
1.2 Aflbidability indicators 
The physical accessibility of networks and services is a necessary but not sufficient condition: 
firms and households should be able to afford to use mem. Again, important differences emerge 
between countries when tariff structures31 are compared. 
For example, in 1994, the cost of a residential subscription to the telephone (as a percentage of 
GDP) was two times more expensive in the cohesion regions (3 and 2,5 times so in Portugal 
and Ireland respectively). 
SERVICE COST 
PSTN (ECUs) 
- Residential installation 
- Residential subscr. (bimonthly) 
- Local call (peak 5 minutes) 
Cellular Mobile costs (1994 US$) 
-Connection 
- Monthly subscription 
- Local Call (3 minutes) 
Leased line tariffs 
- Connection (ECU) 
- Monthly Reniai 50km (ECU) 
- Monthly Rental 250km (ECU) CORE 
AVERAGE 
107.5 
21.7 
0.22 
64.6 
42.7 
1.4 
502.2 
353.0 
844.0 COHESION 
AVERAGE 
142.4 
18.4 
0.16 
83.8 
29.6 
1.73 
396.6 
429.0 
829.0 COHESION 
DIVERGENCE 
(%) 
+32,46 
-15,44 
-26,45 
+ 29,7 
-30,7 
+ 23.6 
-21,0 
+21,4 
-1,8 
Moreover, the ongoing process of tariff rebalancing32 tends to modify tariff structures in the 
sense of a faster increase of the residential component of fixed charges and of an absolute 
increase of local call charges and a decrease in the price of long-distance and international 
calls. According to an OECD study33, between 1990 and 1994, the average monthly 
subscription for business users rose by 5.5% in real terms, and the average residential monthly 
subscription rose 15.5% in real terms. The same study indicates that between 1990 and 1994 
local charges increased by 37.3%, while long-distance and international charges decreased by 
24% and 25.5% respectively. 
1.3 Uptake indicators 
Affordable access, however, does not guarantee that people will use the services, and uptake 
indicators are also a central feature in any attempt to measure the cohesion gap and its 
implications. A common indicator used for measuring the uptake of basic telephony is the 
number of main lines per 100 inhabitants. In 1995, on average, there were 54.3 main lines for 
every 100 inhabitants in the core regions against 40.2 in the cohesion regions. 
Though voice telephony represents the main form of communication for most firms and 
households, the advent of an information society presupposes an increasing use of other forms 
of electronic communication such as text, images and other forms of data. An indicator of the 
capacity of regions and countries to participate in the information society is, for exemple, the 
number of Internet hosts. On average, in 1995, there was 1 Internet host every 200 people in 
the core regions compared to 1 every 1300 in the cohesion regions. 
((* 
UPTAKE OF USAGE INDICATOR 
Teledensity «95 
- Main lines per 100 inhabitants 
Mobile telephony '95 
- Cellular terminals per 100 
Cable television 
- % of cabled households '95 
- % of satellite households '95 
Data Communications 
- Packet switched subscrip. per k 
- Videotex subscrip. per k 
- ISDN subscrip. per k 
Internet 
- Internet Hosts per 1000 ('95) Core 
average 
54,3 
9,1 
51,4 
13,8 
1,5 
32,5 
2,4 
5,3 Cohesion 
Average 
40,2 
3,7 
8,0 
4,4 
1,3 
6,3 
0,2 
0,6 Cohesion 
Divergence 
(%) 
-26,0 
-59,4 
-84,4 
-68,1 
-13,3 
-80,6 
-91,7 
-88,7 
An additional mdicator is the telecom mvestment per head of population: on average, the 
cohesion regions invested 40% less than the core regions in the telecommunication sector. 
Especially startling are the figures concerning the penetration of PCs, the indispensable tool for 
entering the information society: in 1995, there were 15.2 PCs per 100 population in the core 
regions against 3.1 in Greece, 8.6 in Spain, 6 in Portugal and 8.9 in Italy. 
/? 
EXPLANATORY NOTES 
1 "Without any doubt, new ICTs provide tremendous opportunities for new growth and 
employment creation; for a more efficient use of inputs f... J; for higher income and more broadly 
higher welfare; for more decentralised organisations forms [...]; for more consistent regional and 
urban development patterns; for individual enrichment as well as more democratic decision making. 
All of these opportunities for higher economic productivity growth crucially depend on congruence 
between the technological, economic and social dimensions. " CEC, "Building the European 
Information Society for Us All - First reflection of the High Level Group of Expert", p. iii, 
Interim Report, January 1996. 
2 The study "Effects on employment of the liberalisation of the telecommunication sector", 
undertaken on behalf of the Commission by BIPE Conseil, IFO and LENTIC in 1996, has examined 
the impact of the liberalisation of telecommunications under different scenarios of liberalisation and 
dimision of technologies. All scenarios examined in the study suggest that the liberalisation of 
telecommunications should lead to an accelerated diffusion of telecommunications and price 
reductions. These should have indirect positive effects on the economy as a whole, largely offsetting 
the negative effects of the liberalisation of telecommunications on employment at public operators. In 
a scenario of rapid liberalisation and rapid technological diffusion there could be a net creation or 
maintenance of 1.3 million jobs throughout Europe by 2005, of which 93.000 jobs will be in the 
telecommunications sector itself. The latter figure is explained by the fact that the employment 
creation induced by liberalisation in new telecom service providers, equipment manufacturers, 
distributors of telecom equipment and direct suppliers of operators will more than offset the losses for 
the traditional telecom operators. 
3 "It is essential and urgent for companies and organisations of all sizes to adapt their 
organisations and structures. Until this process is well underway, the Information Society looks likely 
to destroy more jobs than it creates." "Networks for People and their Communities - Making the 
Most of the Information Society in the European Union", Information Society Forum, First Annual 
Report, Executive summary, 1996. 
4 See, for a comprehensive debate on these aspects, the Green Paper "Living and working in 
the information society: people first", CEC July 1996. The social cohesion aspects of the 
information society will be further developed in the forthcoming action plan that the Commission is 
preparing as a follow-up to the Green Paper. 
5 "Because of their social and industrial composition, effective use varies widely across 
different types of regions. [...]. The geographical gradient of demand declines more or less smoothly 
outward from the central business districts of so-called world cities, rising here and there where there 
are concentrations of business users and falling away more rapidly in sparsely settled or particularly 
poor regions. [...]. At the same time, and no less importantly, there is also a characteristic geography 
to the cost of providing telecommunications services which, in general, inverts the pattern of effective 
demand On this side of the equation, costs are generally lower in areas which are more densely 
settled [...]." NEXUS et al. "An assessment of the social and economic cohesion aspects of the 
development of the Information Society in Europe'1, January 1996, Vol.IV, p.9. The Commission 
has fully recognised this problem by elaborating a range of policy and regulatory documents defining 
the place of universal service in its telecommunication policy. See, for example, the Directive 
90/388/EEC on the "Implementation of full competition in telecommunications markets" (OJ 22/3/96) 
which define universal service principles and explains how the net cost of universal service shall be 
shared and, more recently, COM(96)608 of 27 November 1996 on the "Criteria for the assessment of 
national schemes for the costing and financing of universal service and guidelines for the operation of 
such schemes". Moreover, COM(96)73 of 13 March 1996 on "Universal service for 
telecommunications in the perspective of a fully liberalised environment" provides the definition, 
scope, and revision mechanisms for universal service highlighting its dynamic and evolutive 
character. 
It 
6 The British experience, however, suggests some caution. "In the United Kingdom, which has 
one of the most liberal telecommunications regimes in the EU, the landscape of telecommunications 
provision is highly differentiated. In the City of London, firms are confronted with a host of 
competing suppliers and the most advanced services. In the central business districts of other major 
cities, and on business parks and other concentrations of business activities, firms have a range of 
potential suppliers and access to most advanced services. In the remaining urban areas firms have a 
more restricted choice of supplier, with direct connections only usually available from the former 
PTT and, where infrastructures have been built, from the local cable operator. In many small towns 
and rural areas customers are confronted with a de facto monopoly supplier in the former PTT. 
Indeed, in a number of areas, mainly rural, customers do not even have direct access to digital 
exchanges capable of providing services as basic rate ISDN. " See "Regional Development in the 
Information Society: A Review of Analysis", p. 23, CURDS 1996, paper prepared for the European 
High Level Expert Group on the Social and Societal Aspects of the Information Society. In this 
respect, the Commission intends to examine existing experiences of liberalisation (e.g. UK, USA, 
Finland, Sweden and New Zealand). 
7 CEC internal working document, "Telecommunications, Postai and RTD aspects of 
structural interventions plans for 1994-1999", Brussels 1996. The cross-sector and pervasive 
character of the information society on the one hand; the nature of the Structural Funds programming 
procedure, the different approaches of Member States in structuring their plans, and their different 
timetables on the other; call for caution in interpreting and using the figures derived from this 
analysis. Information society related expenditures are often extrapolated from aggregate figures which 
are associated with other domains such as industry and R&D. Nevertheless, they provide a good idea 
of the importance of the information society in Member States' policy agendas. 
8 For example, Sweden and Finland do have a comprehensive approach to the information 
society. These two countries not only allocate a bigger chunk of the available funds to information 
society-related measures but also concentrate their efforts on improving the conditions of the demand, 
e.g. by improving the information society-related skills of the workforce, providing schools with the 
necessary connections, and developing appropriate services and applications. From the outset, the 
strategy of the Swedish single programming document (SPD) for Obj .6 identifies one of the 
horizontal criteria for assessing the quality of specific actions as "making the best use of information 
technology in all areas of socio-economic activity". Thus, a central characteristic of the information 
society - its cross-sectoral, pervasive nature - is immediately recognised. Then, "the increased use of 
information technology applications and the acquisition of information technology skills and 
expertise" is set as one of the general targets of the SPD paving the way for creating new jobs, the 
central objective of the Swedish plan. Moreover, the information society appears as a key element for 
developing all the five priorities set in the SPD and is recognised as a key tool in virtually all subr 
themes. 
9 The Special Telecommunications Action for Regional Development (STAR) provided, 
between 1987 and 1991, 780 million ECUs of funding from the European Regional Development 
Funds (ERDF) in order to "break the cycle by which demand for advanced telecommunications 
sendees (ATS) is too low to justify supply on commercial grounds, in which case lack of awareness of 
the benefits of ATS depresses demand still further" in the LFRs of seven Member States. Although 
the STAR programme included measures to stimulate demand (e.g., the development and promotion 
of databases and videotext services for SMEs), 80% of the budget was spent on improving 
infrastructures with the main thrust being towards network digitalisation, public data networks and 
cellular mobile. The programme was successful in bringing forward the investment plans of the 
public telecom operators, including accelerating network digitalisation in Greece by two years and 
bringing forward the launch of the cellular radio network in Portugal, again try two years. See 
Ewbank Preece Ltd, "STAR - Community level evaluation", Final report, Executive summary, CEC, 
1993. 
10 The TELEMATIQUE programme, which took over from STAR in 1991 with a budget of 
about 233 million ECUs, sought to step up the introduction and use of advanced telecommunications 
services, especially data services, within SMEs and national administrations. The approach was at 
once distinct from and complementary to STAR, involving stimulation of demand for practical 
fi 
applications in various sectors of activity so as to promote the development of one or more regions. A 
parallel aim was to enable these regions to benefit from the services opened up to competition by 
Community law. Thus, the TELEMATIQUE programme reflected a new priority for Community 
measures favouring applications and the telematics services capable of supporting them. 
11 ESF interventions through the different Objectives intended to support human resources 
development directly related to the information society have been roughly estimated to amount to 4 
MECUs for the 1994-99 programming period. 
12 The Commission is already co-financing some actions, e.g. for setting up tele-cottages in 
rural areas, under Objectives 1, 5(b) and 6, and local telematics projects under the Community 
Initiative LEADER II. For example, under a 5(b) programme in Finland, the South-West and the 
Archipelago region of Finland has a project to develop a network to promote tele-working and 
training in telematics. Clearly, there are many other Community actions related to the information 
society. For example, stimulating the use of electronic commerce among SMEs in LFRs was the task 
of the WOLF pilot projects. Seven regions collaborate with the Commission to identify the social, 
economic and technical factors affecting the deployment of telecommunication services in 
disadvantaged regions. WOLF, with a budget of 530 000 ECUs, is financed under the Article 10 of 
the ERDF. Other examples are represented by the IMPLACE initiative to stimulate the use of 
advanced ICTs by manufacturing SMEs in LFRs and the MARSOURCE initiative to favour the use of 
electronic trade systems for fishery products thereby contributing to overcome the disadvantages of 
remote areas. 
13 The innovative aspect of the IRISI approach rests on the institutional mechanisms by which 
the strategy has been developed, i.e. a partnership between regional and local institutions and the 
business associations plus representatives from training and education institutions, trade unions, 
chambers of commerce, the co-operative movement and the voluntary sector. The six participating 
regions - Saxony (D), Northwest England (UK), Nord-Pas de Calais (F), Piemonte (I), Valencia (E) 
and Central Makedonia (EL) - had to outline a strategy for the information society by analysing the 
base-line situation and assessing the opportunities for building the information society, through a 
concerted effort bringing together all the relevant regional actors. 
14 With a budget of 6 million ECUs, the RISI1 projects concerns 23 regions across Europe. This 
means that, overall, nearly 25% of all eligible regions under the Structural Funds are currently 
engaged in this process of strategy building and of its translation into an action plan. Moreover, the 
Commission is planning to launch 10 pluri-regional pilot applications under Art. 10 of the ERDF and 
Art.6 of the ESF, with a budget of 15 million ECUs, for demonstrating best practice in the regional 
deployment of the information society (RISI2). 
15 See COM(96)73 of 13 March 1996 on "Universal service for telecommunications in the 
perspective of a fully liberalised environment". 
16 See COM(96)419 of 11 September 1996, proposal for a European Parliament and Council 
Directive on the "Application of open network provision (ONP) to voice telephony, and on 
universal service for telecommunications in a competitive environment" (replacing European 
Parliament and Council Directive 95/62/EC). 
17 See the section on "Public access to information society services" of COM(96)73 of 13 March 
1996 on "Universal service for telecommunications in the perspective of a fully liberalised 
environment", section IV, p. 19. 
18 "The way we develop the information society, the most fundamental change of our time, 
must reflect the ideas and values upon which the European Union is shaped. These ideas and values 
should be transparent in order to gain and deserve the broad support of European citizens'''' in 
"Living and working in the information society: people first", Green Paper, Executive summary, 
July 1996. Furthermore, any evolution of universal service must also be consistent with the general 
approach to general interest services in Europe. See, in particular, COM(96)443 final of 11 September 
1996 on "General interest service in Europe". 
2Jb 
19 See NEXUS et al., vol.11, pp.20-21. 
20 See the First Report of the Advisory Group on Competitiveness, June 1995, p. 17. 
21 See, among other, the recently-published First Report on Economic and Social Cohesion 
(CEC, November 1996), chapter 4, pp.78-81. 
22 Insufficient income and consumption capacity may indeed constitute important barriers. The 
1995 US Department of Commerce's Survey "Falling" through the net: a survey of the have nots of 
rural and urban America", shows a clear positive correlation between the level of income of 
households and the availability of a computer at home: between 4.5 and 8.1% of the households in the 
lowest income bracket (less than 10 000 US$) have a computer at home, whereas between 59.6 and 
64.4% of the households in the upper bracket (75 000 US$ or more) have one. Similar data are not 
available for the Community. 
23 See COM(96)73 of 13 March 1996. This view is supported, among others, by the 
Information Society Forum which indicates the "creation of local access points at public libraries, 
schools and other community meeting places" as a way to minimise the dangers of a two-tier society. 
In addition, it is worthwhile to mention here the High Level Expert Group which, in its interim 
report, stresses the need to investigate the notion of "universal community services", extending 
universal service provision to incorporate a basic level of access to new information service, but 
limited in scope to educational, cultural, medical, social or economic institutions in local 
communities. Similarly, the First Report on Economic and Social Cohesion indicates the provision of 
"broader access to the Information Society to, for example, schools, hospitals and libraries" an 
option to be considered by policy-makers. 
24 It is also necessary to encourage the implementation of ICTs by public administration (i.e. 
the IDA programme at Community level) which can have a catalyst effect for the region and trigger 
many private sector initiatives. 
25 See tiie Green Paper "Living and working in the information society: people first", CEC 
July 19%. 
26 See for a comprehensive approach to the question of education and training in the 
information society the Commission Action Plan "Learning in the information society" 
COM(96)471 of September 1996. 
27 It is, for example, already co-financing training in telematics applications, for setting up telé-
cottages in rural areas under Obj.l, 5(b) and 6, and local telematics projects under the Community 
Initiative LEADER II. 
28 See COM(96)332 final of 10 July 19% on "Inventing tomorrow - Europe's research at the 
service of its people" and COM(96)595 final of 20 November 19% on "Additional elements to the 
guidelines for the 5th Community RTD Framework Programme". 
29 Some data can be found in the study "An assessment of the social and economic cohesion 
aspects of the development of the Information Society in Europe" prepared by NEXUS et al. for 
the Commission and concluded in December 1995. Although an attempt has been made in this annex 
to provide more updated data, some caution is warranted because the evolution in the 
telecommunication sector is very fast. The reader must be aware that the evolution of information 
society in the less favoured regions is far from being a linear, statistically predictable phenomena. For 
example, the number of mobile subscribers in Spain grew from 230.000 to more than a million during 
1996; ISDN coverage in cohesion countries evolved from nil to almost full coverage during the last 
three years; and more that 500.000 Internet users at the end of 1996 could be spotted in Spain by the 
end of 1996, while usage of Internet there was almost anecdotal a few years ago. Moreover, current 
developments on digital satellite broadcasting (DSB) are likely to offer an alternative to cable TV thus 
helping LFRs to catch up in this area. 
oil 
30 ISDN is an acronym describing the provision of a wide range of existing and new 
telecommumcations services over digital network. ISDN removes barriers between speech, data, text 
and video services, integrating them into a single digital telecommumcations network. ISDN provides 
significant benefits to the customers in terms of availability of services and usage flexibility. 
31 The term "tariff structure" defines the balance between fixed (installation and subscription) 
and usage (call) charges in the customer's total bill. 
32 The process known as "tariff rebalancing" is intended to bring the costs of providing each 
tariffed service into balance with the prices charged. 
33 Y.Kato and S. Paltridge, "Telecom tariffs and the move to markets", The OECD Observer, 
No. 191, December 1994/January 1995. 
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