NoC161/20 OfficialJournaloftheEuropeanCommunities 14.6.93
OpinionontheCommunication fromtheCommissionontheEuropeantelecommunications
equipmentindustry:thestateofplay,issuesatstakeandproposalsforaction
(93/C161/07
On22September1992,theEconomicandSocialCommittee,actingunderthethirdparagraph
ofArticle20ofitsRulesofProcedure,decidedtodrawupanOpinionontheCommunication
fromtheCommissionontheEuropeantelecommunications equipmentindustry:thestateof
play,issuesatstakeandproposalsforaction.
TheSectionforIndustry,Commerce,CraftsandServices,whichwasresponsibleforpreparing
theCommittee'sworkonthesubject,adopteditsOpinionon31March1993.TheRapporteur
wasMrFlum.
Atits305thPlenarySession(meetingof28April1993),theEconomicandSocialCommittee
adoptedthefollowingOpinionunanimously .
missionandtheCouncilawareofitsviewsonexisting
telecommunications servicesassoonaspossible.
1.6.Inthistext,theterm'Europeanmanufacturers '
meansfirmswhich—regardlessoftheirownership—
carryoutresearch,development ,technicaldesignand
productionactivitiesinEurope.
2.BriefsummaryoftheCommission'sCommuni­
cation
2.1.Preliminaryremark1.Introduction
1.1.InresponsetotheCommunication fromtheEC
Commissionof15July1992whichassessesthesituation
intheEuropeantelecommunications equipmentindus­
try,theCommitteewishestoputforwardtherec­
ommendations setoutbelowforactioninthefieldof
industrialpolicy.ThisOpinionthussupplementsthe
Committee'sOpinion(*)ontheCommunication of16
November1990onIndustrialPolicyinanOpenand
CompetitiveEnvironment [doc.COM(90)556final].
1.2.InaccordancewiththeCommission'sNovember
1990blueprintforanindustrialpolicyinanopenand
competitiveenvironment ,theCommunication under
reviewnotonlytakesstockofthesituationbutalso
setsoutspecificproposalsforactionwithregardtothe
Europeantelecommunications equipmentindustry.
1.3.TheCommitteewelcomestheCommission's
initiativeandconsidersthattheproposedmeasuresin
thisimportantsectoroftheeconomyrepresentagood
basisforfurtherdevelopment .
1.4.IntheCommittee'sview,theCommission's
Communication clearlydemonstratesthatacoordi­
natedEuropeanindustrialpolicyisalsoanessential
requirementforthetelecommunications equipment
industry.
1.5.TheCommitteenoteswithapprovaltheCom­
mission'sstatementthatitwillshortlyalsoconsultthe
CommitteeonCommissiondocumentSEC(92)1048
finalof21October1992whichaddressesthesituation
inthetelecommunications serviceindustry.Sincean
ESCOpiniononthissectorrepresentsanecessaryand
importantcomplementtotheworkalreadycarriedout
bytheCommitteeinthisimportantfield,theabsence
ofthisconsultationisextremelyregrettable .TheCom­
mitteeshouldthereforebeaskedwithoutdelayto
deliversuchanOpinion—ifnecessary,onthebasisof
itsrightofinitiative—sothatitcanmaketheCom­2.1.1.Thestrategicimportanceofthetelecommuni­
cationsmarketextendsfarbeyonditscurrentshare—
barely3%—ofgrossdomesticproduct.Thereis
alreadyavisibletrendtowardslinkingalleconomic
activitiesbydataprocessingsystems.Expertsestimate
thatthetelecommunications sector'sshareofnational
productintheCommunitywillmorethandoublebythe
year2000,accountingforsome7%ofgrossdomestic
productanddirectlyorindirectlyaffectingabout60%
ofalljobs.TheeconomicpotentialoftheEuropean
telecommunications equipmentindustryiscompara­
tivelygood.Nevertheless ,industrialpolicymeasuresare
neededinthecourseoftheunificationoftheEuropean
marketinordertoensureanefficient,low-cost
exchangeofinformationbetweenallECregions.The
ESCaccordinglywelcomesthefactthattheCom­
missionhastakenupthismatter.
2.2.GistoftheCommission'sCommunication
2.2.1.Thecommunications industryisoneofthe
mostimportantsectorsoftheeconomyintheEC.The
ECmarketasawholewasworthsomeMECU116000
in1990andtheannualrateofgrowthisbetween7and
8%.(i)OJNoC40,17.2.1992,p.31.

14.6.93 OfficialJournaloftheEuropeanCommunities NoC161/21
2.2.2.TheCommissionhasalreadytakenseveral
measurestoharmonizetelecommunications policyin
theMemberStatesandtocreate,bymeansofspecially
targetedliberalizationmeasures,theconditionsnecess­
aryforagenuineinternalmarket.Theinteroperability
oftelecommunications networksisalsotobepromoted
andthedevelopmentofthenecessarytechnologies ,
systems,standardsandservicesistobestimulated
throughcooperationinresearchandtechnological
development (R&TD).thedisposaloftheEuropeaneconomyaswellas
allowingindustrytocompetestronglyontheworld
market;
—theimprovementoftheindustry'spositioninthe
terminalequipmentsector,agrowingsegmentof
thetelecommunications market;
—thesearchforfairconditionsofcompetitioninthe
worldmarketallowingEuropeanindustryaccessto
thirdcountrymarkets,especiallywheredifficulties
arecurrentlyexperienced ;thisisofvitalimportance
forthedevelopmentofEuropeanindustryandin
ordertoenableittoenjoythefulladvantagesof
economiesofscopeandscale.2.2.3.Severaldifferentgroupsofeconomicagents
areinvolvedinthisdomain:licensedoperators,service
providers,equipmentmanufacturers andusers.Their
respectivesectorsareallverycloselyinterdependent .
Thelicensedoperatorsare,forexample,themaincus­
tomersoftheequipmentmanufacturers .
2.2.4.Inpursuanceofthepolicyithaspursuedup
tonow[seetheCommission'sCommunication on
industrialpolicyinanopenandcompetitiveenviron­
ment—Doc.CC)M(90)556final],theCommission
takestheviewthatthemainresponsibilityforimprov­
ingindustrialcompetitiveness liesessentiallywithcom­
paniesthemselves .Theroleofgovernmentsmustbeto
providecompanieswithaclearframeworkandoutlook
fortheiractivities,whilerespectingECcompetition
rulesandtheprincipleofsubsidiarity .
2.2.5.AfterexaminingthesituationofECmanufac­
turersandlookingattheirstrengthsandweaknesses,
theCommissionconcludesthattheEuropeanindustries
inthetelecommunications sectorenjoyafavourable
overallsituation.However,theymustaddressboth
insufficiencies inleadingsegmentsofthemarketand
potentialproblemsresultingfromimperfectconditions
ofcompetitionintheworld.3.IndustrialpolicyrequirementsasseenbytheCom­
mittee
3.1.Economicandregulatorychangecurrentlyaffect­
ingthetelecommunications sector
3.1.1.Technological andproductinnovationsand
theopening-upoftheformerlyhermeticnationalmar­
ketsarecreatingmajorupheavalsintheEuropean
telecommunications industry.Intermsofproduct
groups,thetelecommunications sectorcanbebroken
downinto:networksandswitchingsystems;services;
andterminalequipment.Majortechnicalchangesare
currentlytakingplaceinallthreesub-sectors :
(a)networksandswitchingsystems.Digitaltechnology
isalreadysupplantinganalogueinmainnetworkequip­
mentalthoughanaloguewillcontinueinuseforsome
timeinlocalconnectiontomanyusers.Thesame
appliestofibreopticsreplacingcoppercable.Cellular
radiosystemsarealsobeingintroducedonanincreasing
scale;
(b)services:besidestraditionalvoiceandtexttrans­
missionservices,dataandpicturetransmissionservices
aresettogrow;theboundariesbetweentheseservices
anddataprocessing/consumerelectronicsarebecoming
blurred;newareasofdemandfortelecommunications
arethusopeningup;
(c)terminalequipment :thefuturewillbringvideophon­
esandasubstantiallyhigherproportionoffaxmachines
andmobiletelephones,includingcordlessphones;here,
too,thankstotheuseofdigitaltechnology,weare
fastapproachingtherealmsofdataprocessingand
consumerelectronics .
3.1.2.Intechnological terms,thetelecommuni­
cationsindustryhasmovedbeyondtheelectromechani­
calstageandisexpandingtheuseofdigitaltechnology;
atthesametime,themoveintooptoelectronics is
wellunderway.Thecurrenttrendtowardsdigital
technologyalsocreatesneweconomicconditions :
—ontheproductionside,productsarebecomingmore
complexwiththeincorporationofsemiconductors2.2.6.Specificactionneedstobetakentoremedy
structuralproblemsandmakecompaniesfullycompeti­
tive.Animportantstrategicangleinvolvescompanies
makingthosechangeswhichwillallowthemtomake
maximumuseofthenewopportunitiesofferedbythe
setting-upoftheinternalmarket.
2.2.7.TheCommissionproposesthatECaction
shouldaimatfourfundamentalobjectives :
—theestablishmentofagenuineinternalmarketasa
baseforthedevelopmentofthetelecommunications
industryandthepermanentstimulationofdynamic
demandconditions ;
—thesupportoftechnologicaldevelopment—an
essentialprerequisiteinarapidlyadvancingsector
whichshouldaimatputtinginnovativeservicesat

NoC161/22 OfficialJournaloftheEuropeanCommunities 14.6.93
andsoftware,whichentailshigherdevelopment
costs;thismakeseconomiesofscaleallthemore
important;therequirementsofmassproductionare
oneofthecausesofthecurrentrashofmergers;
—onthedemandside,morecustomizedsolutionsare
nowrequired,whichincreasestheneedforsoftware
inparticular .This,inturn,necessitatesswifterinno­
vation.
3.1.3.Inordertofaceuptothesetwodevelopments ,
verticalmergersareontheincrease:networkoperators
areincreasinglycooperatingwithsoftwarehousesand
equipmentmanufacturers withsemiconductor pro­
ducers.Thisconstitutesachangeofstrategyinthis
sector.Alliancesbetweenpublicsectornetworkoper­
atorsandnationalmarketleadersarenowbeing
replacedbyinternationalalliances,sometimeshorizon­
tal(withinthesector),sometimesvertical(e.g.,between
semiconductor andtelecommunications equipment
manufacturers ).Theinternalmarkethasreinforcedthis
trendand,byextendingthemarket,hasalsoprovided
theprerequisiteforeconomiesofscale,ofwhichfull
advantageshouldbetaken.Thereis,however,areal
riskthatsmallandmedium-sized enterprises (SMEs)
willnotbeabletocompeteunderthesecircumstances .
Theyalsohaveavitalroletoplay,notleastinthe
developmentofnewconceptsandinnovations .The
Committeethereforecallsforspecialmeasurestoassist
SMEs;thispointwillbetakenuplaterintheOpinion.3.2.2.TheCommissionreportidentifiesfourobjec­
tiveswhichapackageofmeasurestailoredtotheneeds
ofthetelecommunications industryisdesignedtofur­
ther:
—theestablishment ofarealinternalmarket,which
istakentomean,inparticular :
•theexpansionofnewsegmentsofthemarket(e.g.
mobilecommunications ,developmentofintelli­
gentnetworks,etc.);
•theresoluteenforcementofECprovisionsonthe
awardingofcontracts;
•theharmonization ofservicesandequipmentby
introducingaEuropeansystemofstandardsand
certification ;
—supportfortechnological development ,which
implies,inparticular :
•moreeffectivecooperationinthefieldofresearch
anddevelopment (R&D);
•extensionofECR&cDmeasures;
•exploitationofsynergybetweentheequipment­
manufacturing industryandtheelectronics
industry;
•greatertargetingofresearchtowardsprojects
withatechnologicalpriority;
—theimprovementofthepositionofterminal-equip­
mentmanufacturers —agrowingsegmentofthe
telecommunications market—whichimplies,in
particular :
•continuationofthepolicyofliberalizingthemar­
ketforterminalequipmentandmaintenanceof
competitionbetweenfirmsinthefieldsofbasic
engineering,production,distributionandser­
vices;
—thesearchforfairconditionsofcompetitioninthe
worldmarket,whichimplies,inparticular :
•theeliminationofunsatisfactoryconditionsgov­
erningaccesstomarketsofnon-ECstates;
•theestablishmentofappropriatecompetitionrul­
esatinternational level.
TheCommitteecan,byandlarge,agreewiththeabove
objectives,althoughitwouldstresstheimportanceof
Europeanterminalequipmentmanufacturers regaining
designleadershipintheirfield.Inadditiontothe
measuressetoutintheCommissionreport,particular
attentionshouldbepaidtothefollowingaspects:
(a)Fairworldtradeconditions
TheCommitteewouldstresstheimportanceofthe
commercialpolicymeasuresoutlinedinPoints72and
73oftheCommission'sCommunication .(Point72con­
cernscommercialpolicyandrefers,interalia,to
negotiationsonmarketaccessandtherenewalofthe3.2.Objectivesandmeasurestobetaken
3.2.1.TheeconomicpotentialofEuropeanmanufac­
turersoftelecommunications equipmentisstrongand
theprospectsforgrowtharegood.Itisthereforefirst
andforemostuptocompaniesthemselvestoassertand
extendtheircompetitiveness .Thisisalsotheassessment
madeintheCommissionreport.TheCommission
pointsoutthatthreetasks,inparticular,needtobe
carriedoutbycompaniesand,aboveall,smalland
medium-sizedenterprises .Theywillhaveto:
—switchfromhardware-tosoftware-assisted activi­
ties;
—tapnewconsumermarketsandgroupsofcus­
tomers;and
—openupnewmarketingchannels.
Nevertheless ,therearevariouspointswhichindicate
theneedforacoordinatedEuropeanindustrialpolicy
forthetelecommunications industry.

14.6.93 OfficialJournaloftheEuropeanCommunities NoC161/23
(c)Standardization GeneralAgreementonTariffsandTrade(GATT)
Government Procurement Code.Point73refersto
measuresinthefieldofcompetitionpolicyandexternal
policywhicharedesignedtoensurefaircompetition.)
AsinitsrecentOpinionontheEuropeanElectronics
andInformationTechnologyIndustry[doc.SEC(91)
565final],theCommitteecalls,inparticular,forthe
implementation ofthereciprocityprincipleintrade.
Theconditionsonthedomesticmarketsofnon-Euro­
peansuppliersmustbeequivalenttothoseobtaining
ontheCommunitymarket.TheCommitteewelcomes,inparticular,theCom­
mission'sdeclaredintentionofcompletingthestan­
dardizationprocess,andpointstotheurgentneed
toensurethatconflictsbetweenEuropeanandother
internationalstandardsareresolvedquickly.TheCom­
mitteeconsidersthatstandardsagreements,relating
inparticulartocentralinterfaceaspects,areurgently
needed.Instandardization work—akeyCommunity
policyarea—aprominentplacemustbegiventouser­
aspectsevenduringtheplanningstage.
(b)Researchanddevelopment
(d)R&DfinancingThepresentstateofthetelecommunications industry
ishall-markedbytherapidpaceoftechnologicalinno­
vation,associatedaboveallwiththetransitiontodigital
technologyandthegrowingimportanceofsoftware.In
particular,accesstolessexpensivedevelopmentand
manufacturing technologiesfortheelectroniccom­
ponentsrequiredbyspecificsectorsisofmajorlong­
termimportance .Companyaccesstofinancedesignedtocoverrapidly
increasingdevelopmentcostsisalsoimportantinthe
contextofcompetitionwithotherinternationalsup­
pliers,despitethefactthattheEuropeansupplierscon­
cernedarefinanciallysound.Atthesametime,the
studyannouncedbytheCommissionintothefiscal
andfinancialenvironmentoftheinternalmarket(see
CommissionCommunication ,Point15),shouldalso
coverinterestratesforR&Dloansandtheroleof
thebanksandotherfinancialinstitutionsinproviding
creditforriskylonger-terminvestments .Communityresearchprojectsinthefieldoftelecom­
munications shouldthereforebecontinued .Withdue
regardtoECcompetitionlaw,effortsmustbemade—
inparticularthroughCommunityR&Dprogrammes
—toprovideEuropewiththetechnologyformanufac­
turingsuchcrucialsemi-conductor productsasinte­
gratedcircuitsforspecificapplicationsandoptoelec­
troniccomponents .Therapidpracticalapplicationof
projectfindingsisimportant .(e)Technicaldesignandassessment of
technological implications
Specialattentionalsoneedstobepaid,inthiscontext,
toensuringthatSMEs,too,receivethenecessarysup­
portwithregardtoR&Dandaregiveneasieraccess
tolow-costtechnologies .Simplifiedproceduresare
neededinfollowingCommissionregulations .Forsometime,thetelecommunications industryhas
hadmajorsocialpolicyimplications .Howcommuni­
cationsbetweenpeopleareorganizedtechnicallyand
institutionally ,howconfidentiality ismaintainedand
howtherighttodecideontheusemadeofone's
personaldatacanbeguaranteedarepoliticalquestions.
Forthisreason,ahighlevelofsensitivityisneeded
whendesigningtechnicalequipment .Thisappliesnot
onlytodataprotectioninthenarrowsense,butalso
tothetechnicalfeaturesofproducts.Forexample:
insteadofincorporatingmoreandmorefunctionsinto
thenetworkandutilizing'dumb'terminalequipment,
theinterestsofusersmight,incertaincases,bebetter
servedbylocatingmoresophisticatedactivitiesinthe
terminalequipment .Thisisanindustryforwhichthe
assessmentofthetechnologicalimplicationsisparticu­
larlyimportant.Suchassessmentmustbeintegrated
intoresearchanddevelopmentplans,inorderthereby
tocontributetothesociallyandenvironmentally sound
developmentofproductionandproducts.Nationalsupportmeasuresmustalsobemadetrans­
parent.Ifitturnsoutthatdifferingsupportpractices
generateunfaircompetitiveadvantages,actionmustbe
takentoprovidealevelplaying-field .Itstillappearsto
bethecasethatinsomecountriesthebulkofthe
researchanddevelopmenteffortisfinancedbythe
nationalnetworkoperators,whileinothersitisfinan­
cedbythemanufacturers .Thismustbemadetrans­
parentwithaviewtoharmonization .TheCommittee
thereforewelcomestheaffirmationintheCommission 's
Communication (*)thatitwillensurethatdistortionof
competitionisavoidedbyapplyingthepolicysetout
inthe'CommunityframeworkforStateaidsfor
researchanddevelopment'(2).
(f)Programmes aimedatimprovinginfra­
structureatCommunity level
(')Point67,p.30.
(2)OJNoC83,11.4.1986,p.2.Giventhecurrentsituationregardingservicesand
industrialproduction ,regionaldevelopmentpotential

NoC161/24 OfficialJournaloftheEuropeanCommunities 14.6.93
isstronglyinfluencedbytelecommunications infra­
structure.Indeed,accesstocommunication facilities
determinesaperson'sparticipationinpublicandcul­
turallife.Inthefinalanalysis,thesuccessofthis
dependsontheauthoritiescommittingalltheiravail­
ableresources.Inthisrespect,thetelecommunications
industryhasapublicdutytoperform.Forittodoso,
regionalinfrastructuremustbedeveloped.Appropriate
supportprogrammesmustthereforeformpartand
parcelofacoordinatedEuropeanpolicyforthetele­
communications sector.Inthisconnection,theCom­
mitteerecommendsthepromptandeffectiveimplemen­
tation—inthoseMemberStateswherethishasnot
yetoccurred—oftheCouncilDirectiveof17Septemb­
er1990ontheprocurementproceduresofentities
operatinginthewater,energy,transportandtelecom­
municationssectors(!).
(g)Qualifications ,jobsecurityand
trainingpolicy
Trainingandqualificationsarecrucialintworespects:
(i)inthemselves,theymakeanimportantcontribution
tothecompetitiveness ofa'high-tech'sectorlikethe
telecommunications industry:thenecessaryinnovative
processdependsontheavailabilityofhighlyqualified
staff;(ii)aforward-looking skillsandtrainingpolicyis
urgentlyneededinordertocreatealternativesintime
forforeseeablechangesinemployment .Inparticular,
thetransitiontodigitaltechnologyisknowntohave
resultedinamajorchangeinmanpowerrequirements
andintherapidobsolescenceoftraditionalskillpro­
files.Aforward-looking policyfortheacquisitionof
skillsandsafeguardingofemployment,andforretrain­
ingtheemployedisthereforeneeded.Resourcesshould
bemobilized,inparticularfromtheEuropeanSocial
Fundandfromspecificregionalsupportprogrammes .
Furthermore ,everyeffortmustbemadetoensure—
withtheaid,wherenecessary,ofsupportmeasuresinthefieldsoflabourmarketandsocialpolicy—that
thegrowthinthetelecommunications industryand
thedevelopmentofnewtelecommunications servicesis
accompaniedbyacorrespondinggrowthinthenumber
ofjobswithpropersocialsecuritysafeguards,as
describedbytheCommitteeinitscommentsonthe
SocialCharter(2).
Intheinterestsofaforward-looking employmentand
skillspolicy,thetransnationalactivitiesofEuropean
telecommunications companiesmust,asamatterof
urgency,beaccompanied bytheestablishment ofa
transnationalbodyrepresentingtheworkersconcerned .
Workersmustaccordinglybeinformed,consultedand
involvedincertaincompanydecisionsatleasttothe
extentprovidedforintheproposalsdrawnupbythe
EconomicandSocialCommitteeinrespectoftheEuro­
peanCompany.
4.Conclusions
4.1.Themainaim,intheCommittee'sview,isto
putintoeffectaclearconsistentECstrategyactively
involvingnon-membercountriesinEasternEuropeand
theformerUSSR.Thisstrategyshouldhavethefollow­
ingaims:
—pressingaheadwithstandardization ofdesignand
componentcriteriaandmaximisingharmonization
betweenTelecomsServiceproviders;
—harnessingR&TDresourcestoassistEuropean
companies;
—encouragingthedevelopmentofEurope'smajor
companiesandastrongersupportingbasefor
SMEs;
—promotingthetrainingandretrainingofaskilled
workforceinallrelevantareasofproductive
activity.
HOJNoL297,29.10.1990,p.1. (2)OJNoC287,4.11.1992,p.39.
DoneatBrussels,28April1993.
TheChairman
oftheEconomicandSocialCommittee
SusanneTIEMANN