675'î7 
COMMISSION OF THE EUROPEAN COMMUNITIES 
COMC87) 2~0 final 
Brussels, 30 June 1987 
TOWARDS A DYNAMIC EUROPEAN ECONOMY 
/ 
GREEN PAPER 
ON THE DEVELOPMENT OF THE COMMON MARKET 
FOR ·TELECOMMUNICATIONS SERVICES AND EQUIPMENT 
COMC87) 290 final 
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' PRESENTATION OF THE GREEN PAPER 
ON TELECOMMUNICATIONS 
Information, exchanges _.of knowledge, and communications are of 
vital importance in economic activity and in the balance of ~ower 
in the world today. Policy makers a·re therefore concentrating on 
ways of acquiring, processing, stor.ing and transmitting 
information. Telecommunications is the most critical area for 
influencing the "nervous system".of modern society. To flourish, it 
has to have optimum environmental conditions. In this respect, the 
convergence of telecommunications, computing and applications of 
electronics in general has now made possible the introduction of a 
wide variety of new services. The traditional form of organsation 
of the sector does not allow the full development of the potential 
of these new services. In order to create an open and dynamic 
market in this area it therefore seems necessary to introduce 
regulatory changes to improve the sector' s environment. The se 
changes should allow the full development of the supply.of services 
and equipment, thus making it possible for industry to take full 
advantage of this potential. In particular, national frontiers 
should not be allowed to hamper the deve l<?pment of a consistent 
communications system within the European Conununity. The purpose of 
the Green Paper on telecommunications is to initiate wide-ranging 
discussions with all those concerned so as to help the Community 
and its Member States to introduce the necessary changes to their 
systems of regulation. 
. THE INEVITABLE TREND 
For more than a century, te le communications po 1 icy has been 
conducted by the Telecommunications Administrations. In general a 
fair balance has been achieved between national research and 
development, and industrialisation capacities for user equipment 
and services. Apart from the establishment of the single market 
scheduled for completion by 1992, there are many reasons why 
telecommunications structures and policies now need to be 
fundamentally reviewed. The earlier balance is now being upset by 
several phenomena with a variety of eff ects : 
the speed of technological diversification 
digi tisation, optical cab les, computer networks, 
telephony, satellites, etc.) ; (signal 
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the expanding range of new forms of access to sources of 
information (television, data bases and banks, knowledge banks, 
image banks, expert systems, etc.) ; 
the explosive growth in communications requirements (financial 
and commercial transactions, research networks, international 
tourism, cultural exchanges, world wide interdependence, 
etc.) ; 
the major importance of scale effects through multinational 
participants. 
Under pressure of events the authori ties concerned are being 
forced to review telecommunications regulations thoroughly, 
partly in response to the measures taken in the United States 
and Japan. These reviews must not ignore the Community 
dimension which alone can make them consistent and optimise 
their effects. 
The issues at stake 
Telecommunications are already, and will increasingly be ·of 
critical importance to economic, social and cultural development in 
Europe. 
In economic terms, the importance of the· sector can be seen from 
the following figures. The conglomerate sector of the management 
and transport of information already represents more than ECU 500 
billion for the whole world. The world market for 
telecornmunications equipment had reached ECU 90 billion by 1986, of 
which ECU 17.5 billion was accounted for by the Community. 
In 1985 world revenue from telecommunications services was almost 
ECU 300 billion, of which the Community represented ECU 62.5 
billion. 
While in 1984 the telecommunications sector was slightly over 2% of 
Community GDP, this proportion may ri se to 7% by the end of the 
century; between now and the year 2000, over ECU 500 billion will 
have been invested in telecommunications in the Community. Growth 
and investment in the sector on this scale will inevitably have 
major effects on such crucial areas as data-processing, 
electronics, software production, the suppl y of services, and 
broadcasting. 
In social and cultural terms, the accessibility to economic actors 
of an effective system of production and transport of information 
will give rise to profound transformations in the organisation o·f 
production, its geographic location, and in the efficiency and 
nature of services, with a beneficial effect on both the level and 
the ~ature of employment, as on life-styles. 
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The telecommunications sector (manuf acturing and service provision) 
currently supplies 1.3 million jobs, and it is further estimated 
that the competitiveness of over 60 million jobs will be highly 
dependent on information services and telecommunications by the end 
of the century. 
THE CONVERGENCE OF CERTAIN TRENDS AT NATIONAL LEVELS 
The Green Paper provides an analysis of the ideas and positions, 
which are ·already well def ined in some cases of the var ious 
partners in the Community. The undoub~ed complexity of the 
s i tu a t i on i s due t o se ver a 1 f ac tors :" the e f f e c t s of n.e w 
technological influences; the understandable attachment of staff, 
manufacturers and users to established traditions that they are 
reluctant to discard; and the diversity of the new services that 
will have to be provided. On analysis, however, this complexity 
shows a number of converging features that can and must prepare the 
way for consensus. These include agreement on the need : 
to promote the development of new services by setting them in a 
more competitive framework 
to safeguard the role of the Telecommunications 
Administrations, operators of national public or private 
networks, in the supply of infrastructure to carry information 
and to this end to assure them of the resources to make them 
financially viable ; 
to allow these administrations to compete alongside other 
suppliers in the provision of new services ; 
to approach the decision-making process through consultations 
with other parties directly conc~rned (users, equipment 
manufacturers, Telecommunications Admini-strations staff) ; 
to ~nsure the necessary transitions with regard to all European 
manufacturers accustomed to living in symbiosis with their 
Teleconununications Administrations ; 
to ensure the interoperability of networks, terminals and 
services by actively promoting the standardisation policy 
conducted at European level since 1984. i 
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THE BASES FOR COMMUNITY ACTION 
In the past the telecommunications monopoly was bound up with the 
idea of national policy and public service. The new regulations 
that have to be developed in each Member State to obtain 
consistency throughout the Community are therefore a particularly 
difficult problem. It seems out of the question to define iri the 
near future a complete set of criteria governing al! the new 
regul a t ions. The Member S ta tes have theref ore embarked u pon a 
lengthy process of an iterative nature. Technology and its 
applications are setting out on a course of continuing development 
in which there are still many unknown factors. 
Sorne rules and principles adopted and implemented at Community 
level will, however, supply the criteria which define the direction 
of this movement : 
as regards terminals, gradua! but complete opening up of the 
market to competition 
as regards networks and prov1s1on of services, complete freedom 
of access from any connection point 
complete separation of the regulatory and operational 
functions 
as regards the social impact, close consultations with all 
those involved to ensure a smooth transition and optimum 
utilisation of network and service developments to create new 
jobs ; 
as regards coherence, assistance in the opeJing up and economic 
development of outlying regions through the advantages of the 
new telecommunications services ; 
as regards competition, application of the provisions of· the 
Treaty to all those concerned ; 
as regards international decisions, the preparation of common 
positions for negotiations within the organisations concerned 
(CEPT, ITU, GATT, etc.). 
·.,.. 5. 
THE COMMISSION'S PROPOSALS FOR ACTION 
The Commission has for some years been exam1n1ng Community measures 
for European telecommunications. The Green Paper sets out the 
history of the decisions adopted by the Council. The development of 
a broad-band network for the new integrated services is not the 
sole objective of the RACE programme. Its main. advantage is the 
creation of a climat~ of co-operation between the various 
Telecommunications Administrations working on its design and 
implementation and between those administrations and the industry. 
Like ESPRIT which laid the foundations for sound co-operation 
between European manufacturers and researchârs in computing, RACE 
is essential to establish mutual confidence between the public and 
private sectors in telecommunications. The rapid adoption of the 
main phase of the RACE project is therefore a priority goal. As 
regards cohesion, the situation is similar with the STAR programme, 
designed to bring the outlying regions out of their isolation and 
reduce development inequali ties. The Green Paper also recommends 
the rapid adoption of proposals on Digital Mobile Communications 
and the full application of Recommendation 86/659/EEC on the 
Co-ordinated Introduction of the Integrated Services Digital 
Network (ISDN). 
The extension of Directive 86/361/EEC is also proposed. It covers 
the mutual recognition of tests required for type approval. 
Recommendation 84/ 550/EEC on the gradua! opening up of access to 
public contracts should become a directive. 
Alongside the se proposals, (already familiar to specialists) the 
implementation of which is to be speeded up, the Commission is 
putting forward a number of proposals designed to promote the 
transition towards a more competitive environment on a 
Community-wide scale. The Green Paper therefore proposes : 
reinf orcement of the rapid development of standards and 
specifications at national and European level. This should be 
supported by the creation of a European Telecommunications 
Standards Institute ; 
definition of the conditions needed for Open Network Provision 
to service providers and users ; 
the stimulation of the development of new· services and setting 
up of an information market 
definition of a coherent European position on satellite 
communications ; 
common definition of a consistent concept on relations with 
non-member countries ; 1 1 
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comparative analysis of the economic and social impact in the 
different Community countries (acceptance by staff and users, 
international division of labour, etc.) and common study of the 
social consequences and impact on life-styles of the combined 
applications of telecommunications, computing and audiovisual 
facilities. 
CONCLUSIONS 
Decisions are urgently required. Under pressure from the measures 
already adopted by the United States and Japan, and under pressure 
from users, anxious to reduce. state dominance and give a freer 
reign to competition, several Community governments are now 
defining their deregulation / reregulation policies. These must 
take account of the requirements of the Single Act and its 
application. In turn, European integration can move forward only if 
it has at its disposa! efficient networks of information systems 
and services accessible at low cost that will make a vital 
contribution to the establishment of the single market, the 
competitiveness of its industry and the interna! and external 
cohesion which the Community has adopted as its goals. 
The Green Paper acknowledges the differences in current situations 
and the variety of trends. It proposes essentially a "hard core" of 
proposals designed to ensure Community consis.tency in 
telecommunications. The proposed process is iterative; it accepts 
the existence of a movement, not all aspects of which can be 
defined today. The fundamental purpose of the measures is therefore 
to set off a dynamic process that will give the political, economic 
and social ac tors invol ved a bet ter understanding of their own 
interests and to optimise their activities in the construction of 
the Community. After consulting these actors, the Commission will, 
bef ore the end of 1987, present proposals al lowing the Conununi ty 
and the Member States to ensure the regulatory consistency required 
for the best possible development of telecommunications as the 
target of 1992 approaches. 
,. TOWARDS A DYNAMIC EUROPEAN ECONOMY 
SUMMARY REPORT 
concerning the 
GREEN PAPER 
ON THE DEVELOPMENT OF THE COMMON MARKET 
FOR TELECOMMUNICATIONS SERVICES AND EQUIPMENT 
(Communication from the Commission) 1 
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TABLE OF CONTENTS 
I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 
II. ACHIEVEMENTS OF COMMUNITY TELECOMMUNICATIONS POLICY 
TO DATE ..................................................... 4 
III CURRENT ADJUSTMENT OF INSTITUTIONAL AND 
REGULATORY CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 
IV CONVERGENT TRENDS IN THE CURRENT DEBATE IN THE COMMUNITY 
ON STRUCTURAL ADJUSTMENT IN 
TELECOMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 
V POINTS TO BE CONSIDERED FOR A COMMON APPROACH .............. 12 
VI PROPOSED COMMUNITY POSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 
VII LINES OF ACTION TO HELP IMPLEMENTATION 
OF THESE POSITIONS .....................•................... 19 -\, 
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I. INTRODUCTION 
The strengthening of European telecomrnunications has become one of 
thè major conditions for promoting a harmonious development of 
economic activities and a competitive market thr~ughout the 
Community and for achieving the completion of the Community-wide 
market for goods and services by 1992. 
The current wave of technical innovation resulting from the 
convergence of telecommunications and computer technology has now 
led to reviews in all Member States, and elsewhere, of the future 
organisation of the telecommunications sector and its necessary 
regulatory adjustment. The Commission considers it timely to aim 
at achieving maximum synergy between current developments and 
debates in the Member States, drawing fully on the potential 
offered by them to meet the objectives of the Treaty. 
This report is intended to launch a debate and to attract comment 
f rom a broad spectrum of opinion : the Council ; the European 
Parliament and the Economie and Social Comrnittee ; the 
Telecornrnunications Administrations and Recognized Private 
Operating Agencies, hereinafter referred to as the 
"Telecornrnunicati6ns Administrations" ; the European 
telecommunications, data processing and services industry the 
users who must be the main beneficiaries of the new 
opportunities ; and the trade unions and other organisations who 
represent the social interests in this area. 
Ensuring that the varying national situations are fully ·taken into 
account in a European approach requires a wid~-ranging debate over 
the whole of the Comrnunity. 
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. ·~--The Paper advances proposals for cornrnon positions and lines of 
action, in order to ease the current transition. 3 
The overriding airn is to develop the conditions for the market to 
provide European users with a greater variety of 
telecornrnunications services, of better guality and at lower cost, 
affording Europe the full internal and external benefits of a 
strong telecornrnunications sector. . ·1 
4 
II. ACHIEVEMENTS OF COMMUNITY TELECOMMUNICATIONS POLICY TO DATE 
A .technically advanced, Europe-wide and low-cost telecornrnuni­
cations network will provide.an essential infrastructure for 
irnproving the competitiveness of the European economy, achieving 
the Interna! Market and strengthening Cornrnunity cohesion -which 
consti tu te priori ty Comrnuni ty goals reaff irmed ·in the Single 
European Act. Telecommunications have a great influence not only 
on services in general, such as financial services, transport and 
tourism, but also on trade in goods and on European industrial 
co-operation. 
The emerging new telecommunications services -and notably 
so-called value-added and information services -will have a major 
impact on the future tradeability of services in general and on 
the location of economic activities. 
By the end of the century up to seven per cent of the Gross 
Domestic Product of the Community will result from 
telecommunications, as against over two per cent today. The 
combined world equipment and services market for 
telecommunications and information technology already represents 
more than ECU 500 billion. It is estimated that, via information 
technology, more than 60% of Comrnunity employment may depend on 
telecornmunications by the end of the century. 
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Since 1984, the Community has made substantial progress in this 
field, by implementing a policy aimed at : 5 
promoting the creation of an advanced European telecomrnunica­
tions infrastru~ture 
contributing to the creation of a Community-wide market for 
services and equipment ; 
contributing to the competitiveness of European industry and 
service providers. 
In following these objectives, the Commission has, within the last 
two years, made proposals and achieved rapid agreement by Council 
along five main lines : 
.Co-ordination regarding future development of teiecommunica­
tions in the Cornrnunity and cornrnon infrastructure projects. 
This concerns in particular the principal future stages of 
network development the Integrated Services Digital 
Network (ISDN), digital mobile communications, and the 
introduction of future broadband communications ; 
creation of a Community-wide market for terminals and 
equipment. This concerns in particular the promotion of 
Europe-wide open standards, in order to give equal opportunity 
to all market participants ; 
the launch of a programme of pre-competitive and "pre­
normative" R&D covering the technologies required for 
integrated broadband communications (the RACE programme) '< 
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promoting the introduction and development of advanced 
services and networks in the less-favoured peripheral regions 
of the Comrnunity ; 
building up cornmon European positions with regard. to 
international discussions in this area. 
During 1986 alone, Council achieved agreement, on proposa! by the 
Commission, on six major measures which will become fully 
effective during 1987. Fig. 1 gives an overview of decisions 
taken and of proposals currently before Council. 
In parallel, the Commission has taken up a number of cases, 
related to the opening of telecornrnunications markets, under the 
Treaty's competition rules. 
_ Figure l 
COUNCIL DECISIONS TAKEN IN THE FIELD OF TELECOMMUNICATIONS 
SINCE 1984 
COUNCIL RECOMMENDATION OF li NOVEMBER 1984 concerning the 
implementation of a comrrion approach in the field of 
telecornmunications (84/549/EEC) 
·cOUNCIL RECOMMENDATION OF 12 NOVEMBER 1984 ~oncerning the f irst 
phase of opening. up.access to public telecornmunications.contracts 
(84/550/EEC) 
COUNCIL. DECISION OF 25 JULY 1985 on a definition phase for _an R&D 
programme in advanced communications technologies for Europe (RACE) 
(85/372/EEC) 
COUNCIL RESOLUTION OF 9 JUNE 1986 on the use of videoconf erence and 
videophone techniques for intergovernmental applications (86/C 
160/01) 
COUNCIL DIRECTIVE OF 24 JULY 1986 on the initial stage of the 
mutual recognition of type approval for telecommunications terminal 
equipment (86/361/EEC) 
COUNCIL REGULATION OF 27 OCTOBER 1986 instituting a Community 
programme for the development of certain less-favoured regions of 
the Community by improving access to advanced telecommunications 
services (STAR programme) (86/3300/EEC) 
COUNCIL DIRECTIVE OF 3 NOVEMBER 1986 on the adoption of common 
technical specif ications of the MAC/packet family of standards for 
direct satellite television broadcasting (86/529/EEC) 
COUNCIL DECISION OF 22 DECEMBER 1986 on standardisation in the 
field of information technology and telecommunications (87/95/EEC) 
COUNCIL RECOMMENDATION OF 22 DECEMBER 1986 on the co~ordinated 
introduction of the Integrated Services Digital Network (ISDN). in 
the European Communi ty ·( 86/659/EEC} .:!:'.-' 
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PROPOSALS CURRENTLY BEFORE COUNCIL 
PROPOSAL FOR A COUNCIL ~EGULATION OF 29 OCTOBER 1986 on a Comrnunity 
action in· the field of telecommunications technologies {RACE) · 
PROPOSAL "FOR A COUNCIL REGULATION OF 1 DECEMBER 1986 introducing 
the preparatory phase of a Community programme on trade electronic 
data interchange systems (TEDIS) 
PROPOSAL FOR A COUNCIL RECOMMENDATION OF 9 FEBRUARY 1987 on the 
co-ordinated introduction of public pan-European digital mobile 
communications in the European Community and PROPOSAL FOR A COUNCTL 
DIRECTIVE on _the frequency bands to be made available for the 
co-ordinated introduction of public pan-European digital mobile 
communications in the European Community (*). 
{*) approved by Council on llth June 1987 I". • 
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III CURRENT ADJUSTMENT OF INSTITUTIONAL AND REGULATORY CONDITIONS 
To complement the progress achieved to date, it now seems timely 
to initiate a common thinking process regarding the fundamental 
adjustment of the institutional and regulatory conditions which 
the telecommunications sector now faces. This world-wide 
transformation is due to the prof ound technical change which is 
currently taking place : the progressive merger of 
telecommunications and computing technology, and the growing 
integration of spoken, written and audio-visual communication .. 
Telecommunications has taken 140 years to develop from a single 
service to a dozen services in the early eighties. The new 
technological capabilities will now lead to. considerable growth 
and multiplication of services and applications within a· single 
decade. [Fig. 2] 
Mastering this transformation requires certain readjustments in 
the organisation of the sector in all Member States. The forrn of 
these adjustments must take into account the particular position 
of European countries ànd the requirements of the establishment of 
a unif ied market. 
As set out in this Green Paper, the Community must make sure 
that : 
the necessary European scale and dimension are introduced into 
the current phase of transformation ; 
no new barriers are created within the Community during the 
adjustrnent of regulatory conditions ; 
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TELECOMMUNICATIONS: 
PROSPECTS FOR THE YEAR 2000 ./ Telegraphy ~ Telex 
T 1 h Broadband dola 
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1 Telephony 
1877 Telephony 
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1920 eegrap y 
Packel·swilched dola 
Circuit ·swllched dola 
Telemelry 
~ Telegraphy Telelex 
Text facslmlle 
Facsimlle 
High-speed dola Colour facslmlle Telegraphy 
Medlùm-speed dola Electronlc Mali 
1 Clrcult-swltched Telenewspaper 
_ Low-speed data data Vldeotex 
Photo Photo Telemetry Speech facslmlle Photo 
Facslmlle 
Telephony 
19JO Fdcslmlle Facslmlle Facslmlle Telephony 
Facslmlle Teletex ·.Hifi telephony Facslmlle 
Telephony Telephony Focslmlle Telephone-conrerence 
Vldeofex Vldeoconference 
Telephony Vldeotelephony 
Vldeocon • Stereo hifi sound 
~re~e Quadrophony 
Colour telévl~lon----------_ ~'ifir~iund Colour televlslon 
Colour televlslon Stereo televlslon 
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1975 Colour televislon High·deflnitlon televlslon 
St·ereo Mobile vldeotelephony 
Mobile lelephony 
Mobile lext 
Mobile .racslml.1.e 
Mobile data 
Mobile vldeotex 
Paging 
2 000 
Source: Consorlium Brillsh Telconsull/Consullel/Delecon/Neposlel/Sofrecom el al. 
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f ·,. existing barriers are removed in the course of this 
adjustment. 8 
The search for common positions in the complex field of future 
regulation of the telecommunications sector must take into account 
a number of major requirements, if it is to contribute to 
strengthening the European economy 
firstly, differing regulatory traditions in the sector. 
Careful analysis of current reviews and debates in the Member 
States must identify those areas on which common positions can 
be reached. It is on those areas that efforts towards 
developing consensus should be concentrated, in order to 
increase convergence over time in the Community 
secondly, opportunities and obligations deriving from the 
Treaty, in particular regarding : the free movement of 
goods ; the freedom to provide services ; competition rules 
the cornmon commercial policy ; 
thirdly, the external relations of the Community, in 
particular regarding its major trading partners .-the EFTA 
countries, the United States and Japan, the Third World. The 
opportunities and obligations deriving for the Community from 
the GATT agreement and the new GATT round must be taken into 
account. The impact on the Cornrnunity's industrial and trading 
position must be kept clearly in rnind ; 
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fourthly, the evolution of social perceptions in the Member 
States regarding the new technologies. This concerns the 
social consequences of the new technologies and associated 
regulatory policies, the.conditions for the integration of 
these technologies into both private and work life, and 9 
measures to facilitate the transition by generating new 
employrnent opportunities and protecting le~jtirnate interests. 
The convergence of telecomrnunications, data processing and 
audio-visual technologies is outdating traditional boundary lines 
between the telecornmunications network and the terminals sector, 
and between services traditionally provided under monopoly and 
those provided in a competitive environment. Satellites are now 
able to provide services within and between countries, at a world 
level. 
There are now many service functions and features that can be 
performed either by the public network or by a private network or 
the terminal equipment attached to the network. All countries are 
conf ronted by two options 
either to t~y to maintain the current regulatory framework, 
which would imply irnposing additional and permanent 
restrictions and regulations on the use of data processing 
equipment connected to the network ;. 
or to def ine the telecommunications regulatory framework more 
narrowly and to give more room for competition. 
The worldwide trend points towards the latter. /· 
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/ ,· IV CONVERGENT TRENDS IN THE CURRENT DEBATE IN THE COMMUNITY ON 
STRUCTURAL ADJUSTMENT IN TELECOMMUNICATIONS 10 
In the Cornrnunity, the situation is iri flux. The United Kingdorn 
has. substantially modif ied the organisation of its 
telecornrnunications sector and issued rece.ntly a new general 
licence for value-added and data services. France has seen 
substantial changes of legislation in the telecomrnunications / 
audio-visual field and will introduce major new proposals for its 
future telecommunications policy in 1987. Reviews or changes are 
underway in Germany, the Netherlands, Belgium, Italy, Spain, 
Portugal, and other Member States. For its part, the European 
Conference of Postal and Telecomrnunications Administrations (CEPT) 
is reviewing its organisation, in response to, and in close 
interaction with, the development of Cornmunity telecornrnunications 
policy, and in close co-operation with the Commission. 
Analysis of the regulatory situation and of current trends of 
adjustrnent in the Mernber States shows that there are convergent 
trends in current thinking. There is therefore the genuine 
possibility of finding agreement for broad comrnon regulatory airns 
for the telecornmunications sector in the Comrnunity. 
There seems to be agreement on the following basic orientations : 
New services and terminal equiprnent require market conditions 
which faveur innovatjon, experimentation, and a high degree of 
flexibility. 
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the curr~nt and future integrity of the basic network 
infrastr_ucture must be maintained or created. This implies in 
particular a continuing strong role for Telecommunications 
Administrations in the provision of network infrastructure, 
and strong emphasis on Europe-wide standards in this area. It 
also implies safeguarding the financial viability of 
Telecommunications Administrations in order to ensure the 
build-up of the new generations of telecommu~ications 
infrastructure and the necessary level of investment. 
securing a wide range of choice for the consumer requires that 
Telecommunications Administrations be able to provide, 
alongside other suppliers, those services which are opened to 
competition even if this may involve complex problems of 
regulation. 
employment growth requires a growth-oriented policy, 
particularly in the future conglomerate sector of telecommuni-
cations / information technologies within which jobs will 
shift from traditional activities to new opportunities. An 
intense dialogue with the social partners will be necessary, 
in order to ensure a smooth transition. 
12 
V POINTS TO BE CONSIDERED FOR A COMMON APPROACH 
The f ollowing points to be considered for a solution are discussed 
in more detail in the Green Paper 
Given their importance and wide ramifications, regulatory 
changes in telecommunications can only be introduced 
progressively. Time must be allowed for present structures, 
which have grown up historically over a long period, to adjust 
to the new environment. The major objective must be the 
completion of the Internal Market by 1992. 
Regulatory changes in telecommunications must take account of 
the views of all parties concerned, in particular private and 
business users, Telecornrnunications Administrations, the 
_Administrations' work force, competing enterprises and the 
telecommunications and data-processing industry ; 
There is consensus in the Community that competition in the 
telecommunications services and terminal equipment· sectors 
must be substantially expanded, in order to react to 
technological, economic and world market trends ; 
There is also consensus that the role of the Telecommunica­
tions Administrations in the provision of network infra­
structure must be essentially safeguarded, in order to allow 
them to fulf il their public service mandate ; 
A stable "natural" boundary line between a "reserved services" 
sector and a "competitive services" sector (including in 
particular "value-added services"} is not possible. Due to 
technological development -the trend towards integration 
any def inition (and reservation) of a service can only be 
13 
temporary and must be subject to review if it is not to impede 
the overall development of telecommunications services. There 
is however in practice consensus between the Member States 
that voice telephone service is a basic service. Currently, 
this service is reserved in all Member States for provision by 
the Telecommunications Administrations. At present, this 
service corresponds to 85% -90% of telecommunications 
revenues. 
As one counterpart of a more open market environment, the time 
it takes for the establishment and common application of 
international standards must be substantially reduced, in 
order to ma~ntain future network integrity and to promote the 
availability and interoperability of efficient Europe-wide and 
worldwide services. 
Telecommunications Adminstrations generally are and should 
be allowed to participate in the newly emerging 
competitive services and terminal equipment market. This 
requires that in the future regulatory responsibility must be 
separated from operational responsibility. Regulation 
concerns in particular licensing, control of conformity 
testing and obligatory interface specifications, frequency 
administration, and general surveillance including tariff 
principles ;: 
Entry of the Telecommunications Administrations but also of 
the computer and data-processing multi-national companies 
into a competitive telecommunications sector implies the 
danger of abuse of a dominant position. Control measures with 
regard to both types of dominant market participants will have 
to be strengthened ; .. /i 1 
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Action. at Community level must be taken towards narrowing the 
differences between Member States regardin9 the provision of 
network facili~ies ta the newly emerging competitive services 
and terminal equipment sector. Otherwise a Community market 
for services will not develop rapidly. This has implications 
both for technical regulations and network termination points 
and for usage conditions and tariff principles ; 
The long-term convergence of telecommunications with 
audio-visual technologies must be taken into account, in 
addition to the current convergence between the 
telecommunications and data-processing sectors. This affects 
in particular policies concerned with satellite communications 
and cable-TV networks. 
Where cable-TV network infrastructure and satellite 
communications are also used for two-way communications, close 
surveillance with regard to their relationship and interfacing 
with the overall telecommunications network will be needed, in 
order to ensure the long-term overall integrity of the 
telecomrnunications infrastructure. 
Two-way satellite communications and the regulation of 
up-links will need case-by-case consideration. Closely 
monitored competiticn should be a possibility in those cases 
where unacceptable interference with other satellite or radio 
communications systems is not to be expected and where the 
revenue base and f inancial viability of the general network 
infrastructure provider is not put into question.· In the case 
of very small satellite antennae (VSAT or "microterminals") 
suitable for data exchange only, this situation should 
normally be assumed automatically. 
15 
Given the trend in satellite communications towards point to 
multi-point 'broadcasting' applications for closed user 
groups, the regulatory regime for receive only earth stations 
(ROES) for satellite communications should be assimilated to 
the regime for telecommun.ications terminals and TV 
receive-only satellite antennae and fully opened to 
competition. 
With the growing importance of services, the Community will 
face in its external relations a growing number of tele­
comrnunications-related issues. Consensus must be achieved in 
time for the preparation of the new GATT round which will 
include telecommunications services. 
Consensus must be further developed at Community level 
regarding telecomrnunications issues and the Community's 
overall framework of external relations, in particular with 
the EFTA countries and CEPT, with the United States and Japan 
and with the international organisations in this field, such· 
as the International Telecommunications Union (ITU). ii 
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VI PROPOSED COMMUNITY POSITIONS 
With these points in mind, in the Green Paper proposals for 
positions are developed, which are set out in Fig. 3. 16 
The proposals concentrate on those issues which must be resolved 
at Comrnunity level for all Member States. They leave out 
questions which are important but fall to the national level, such 
as which status for Telecommunications Administrations is best 
suited to facing the developing competitive market environment, 
and related questions of finance, organisation, and employment 
relations. 
The proposals f oresee the continuation of those aspects of the 
current regimes where there is compatibility with the Treaty. 
Within the framework of the current adjustment and according to 
their economic appreciation and perception, Member States may, of 
course, choose their own position with regard to these aspects, 
such as a more liberal regime regarding the whole or parts of the 
network infrastructure. As regards required change at the 
Community level, the proposals in Fig. 3 insist on three essential 
modifications : 
PHASED COMPLETE OPENING OF THE TERMINAL EQUIPMENT MARKET TO 
COMPETITION 
In the long run this must include all terminals including the 
subscriber's first telephone set, given the trend towards 
integration of functions and the Integrated Services Digital 
Network. ---.... ! ': 
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PROPOSED POSITIONS 
The general objective o! the positions set out is the development in the Comnunity 
of a strong teleconmunications infrastructure and of efficient services : 
providing the European user with a broa~ variety of telecommunications services on 
the most favourable tenns, ensuring coherence of development between Hember 
States, and creating an open competitive environment, taking full account of the 
dynamic technological developments underway. 
A) Acceptance of continued exclusive provision or special rights for the 
Teleconmunications Administrations regarding provision and operation of the 
network infrastructure. Where a Hember State chooses a more liberal regime, 
either for the whole or parts of the network, the short and long term 
integrity of the general network infrastructure should be safeguarded. 
Closely monitored competitive offering of two-way satellite coomunications 
systems will need further analysis. It should be allowed on a case-by-case 
basis, where this is necessary to develop Europe-vide services and where 
impact on the f inancial viability of the main provider(s) is not 
substantial • 
Coomon understanding and definition regarding infrastructure provision should 
be worked out under E) below. 
B) Acceptance of continued exclusive provision or special rights for the 
Teleconmunications Administrations regarding provision of a limited number of 
basic services, where exclusive provision is considered essential at this 
stage for safeguarding public service goals. 
Exclusive provision must be narrowly construed and be subject to review 
within given time intervals, taking account of technological development and 
particularly the e~olution towards a digital infrastructure. "Reserved 
services" may not be defined so as to extend a Telecoumunications 
Administration service·monopoly in a way inconsistent with the Treaty. 
Currently, given general understanding in the Community, voice telephone 
service seems to be the only obvions candidate. 
C) Free (unrestricted) provision of all other services ("competitive services", 
including in particular "value-added services") within Hember States and 
between Hember States (in competition with the Telecoomunications 
Administrations) for own use, shared use, or provision to third parties, 
subject to the conditions for use of the network infrastructure to be defined 
under E). 
"Competitive services•• would comprise all services except basic services 
explicitly reserved for the Telecommunications Administrations (see B). ï ·: 
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E) 
F) 
G) Strict requirements regarding standards for the network infrastructure!and 
services provided by the Telecoomunications Administrations or service 
providers of comparable importance, in order to maintain or create 
Conmunity-wide interoperability. These requirements must build in pa~ti.cular 
on Directives 83/189/EEC and 86/361/EEC, Decision 87/95/EEC and 
Reconmendation 86/659/EEC. 
Hember States and the Community should ensure and promote prov1s1on by the 
Telecoomunications Administrations of efficient Europe-vide .and worldwide 
coamunications, in particular regarding those ·services (be they reserved or 
competitive) recomnended for Coumunity-wide provision, such as according to 
Reconmendation 86/659/EEC. 
Clear definition by Community Directive of general requirements imposed by 
Telecommunications Administrations on providers of competitive services for 
use of the network, including definitions regarding network infrastructure 
provision. 
This must include clear interconnect and access obligations by 
Telecoomunications Administrations for trans-frontier service providers in 
order to prevent Treaty infringements. 
Consensus must be achieved on standards, frequencies, and tariff principles, 
in order to agree on the general conditions imposed for service provision on 
the competitive sector. Details of this Directive on Open Network Provision 
(0 N P) should be prepared in consultation with the Hember States, the 
Telecomnunications Administrations and the other parties concerned, in the 
framework of the Senior Officiais Group on Teleconmunications (SOG-T). 
Free (unrestricted) provision of terminal equipment within Hember States and 
between Hember States (in competition with Teleconmunications 
Administrations), subject to type approval as compatible with Treaty 
obligations and existing Directives. Provision of the first (conventional) 
telepbone set could be excluded from unrestricted provision on a temporary 
basis. 
Receive Only Earth Stations (ROES) for satellite down-links should be 
assimilated with terminal equipment and be subject to type approval only 
Separation of regul~tory and operational activities of Telecom:nunications 
Administrations. Regulatory activities concern in particular licensing, ·-·1 ... 
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H) Strict continuous reviev of operational (commercial) activities of 
Teleconmunications Administrations according to Articles 85, 86 and 90, EEC 
Treaty. This applies in particular to practices of cross-subsidisation of 
activities in the competitive services sector and of activities in 
manuf acturing 
I). Strict continuous reviev of all private providers in the newly opened sectors 
according to Articles 85 and 86, in order to avoid the abuse of dominant 
positions ; 
J) Full application of the Con:munity's common con:mercial policy to 
telecoumunications. Notification by Telecoomunications Administrations under 
Regulation 17/62 of all arrangements between them or vith Third Countries 
vbich may affect competition vithin the Conmunity. Provision of information 
to the extent required for the Coomunity, in order to build up a consistent 
Coumunity position for GAlT negotiations and relations with Third Countries. l 
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In the short term, transitional solutions will have to be 
found, taking into account that at the present stage the large 
majority of Member States wish to maintain their monopoly 
covering the f irst (conventional) telephone set. 
ACCEPTANCE BY THE TELECOMMUNICATIONS ADMINISTRATIONS OF CLEAR 
OBLIGATIONS TO INTERCONNECT WITH AND PROVIDE ACCESS TO 
TRANS-FRONTIER SERVICE PROVIDERS 
Generally, the network must be opened, under fair competitive 
conditions, to service providers from other Member States. 
This is a pre-condition for implementation of the Internal 
Market for the Community's future service economy. 
Insofar as Member States continue, for the time being, to 
reserve certain basic services for exclusive provision by 
their Telecommunications Administrations, reserved services 
must be construed narrowly and not interfere with service 
provision from other Member States, in accordance with Treaty 
rules. 
CLEAR SEPARATION OF REGULATORY AND OPERATIONAL FONCTIONS OF 
TELECOMMUNICATIONS ADMINISTRATIONS, 
in those Member States where this still has not been carried 
out. In a more competitive environment, the Telecommunica­
tions Administrations cannot continue ~o be both regulator and 
market participant, i.e. referee and player. Regulatory 
functions concern in particular licensing, control of type 
approval and binding specifications, frequency allocation, and 
surveillance of usage conditions. -1 
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The need for this separation is conf irmed by the trends and 
debates in all Member States which are envisaging more 
competition for the sector. 
The Telecon;munications Administrations should be market 
participants in the competitive sectors, in an improved 
competitive environment, in order to ensure full service to 
the whole spectrum of users and industry. 18 
Substantial dif f erences will continue to exist between Member 
States but must be accommodated. This concerns the different 
status of the network operators (public/private) but also the 
policy regarding provision of leased lines and resale of capacity. 
All Member States agree currently on the necessity of securing the 
financial viability of their Administrations, either by excluding 
pure resale of voice (telephone} on leased lines or by tariff 
schemes which make resale of voice to third parties unattractive, 
such as usage-based tariffs. Both methods will have to be 
accommodated in the Community. However, both methods must be 
limited to a legitimate level of protection of f inancial viability 
and must not represent the abuse of a dominant position. Current 
charges for leased lines both at the national and Community level 
show in some casés wide and unexplained divergences. 
The proposals aim at progressively introducing full Community-wide 
competition to the terminal equipment market, and as far as 
possible and justif ied at this stage to telecommunications 
services. In pursuing the implementation of these proposals, and 
the lifting of existing restrictions, the Commission will take 
full account of the fact that the competition rules of the Treaty 
apply to Telecommunications Administrations, in particular to the 
extent that they engage in commercial activities. 
---~ .. -------------------- ----'----------------~-~~-- -==---""""'---
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VII LINES OF ACTION TO ·HELP IMPLEMENTATION OF THESE.POSITIONS 
In order to create the environment for reaching the objectives set 
out, the Commission proposes a number of actions : 
to smooth the transition towards a more competitive 
Community-wide market ; 
to promote a strong European presence in both the services and 
industrial field ; 
to prepare the Community for its discussions of future trading 
relations in this field with its outside partners, in' 
particular in the framewo.rk of "GATT. 
It is envisaged: 
to accelerate the implementation of existing action lines_ ; 
to initiate a number of new action lines needed to complement 
and facilitate the transition. ·.r: .. 
20 
VII.l ACCELERATION OF EXISTING ACTION LINES 
As regards the acceleration of implementation of the action lines 
'aef ined by Council in Decem_ber 1984 for the Communi ty' s tele­
communications policy, the Commission foresees : 
ACCELERATED ADOPTION OF THE PROPOSALS FOR ENSURING THE LONG 
TERM CONVERGENCE AND INTEGRITY OF THE NETWORK INFRASTRUCTURE 
IN THE COMMUNITY 
A pan-European telecommunications infrastructure with full 
interoperability is the only basis on which a Community-wide 
open competitive terminal equipment and services market can 
thrive. Intensified industrial cooperation within the 
Community must ensure that European industry will fully 
benefit from the opening of this market. 
This concerns in particular : 
rapid adoption of the RACE MAIN programme which is. 
fundamental to longer term nètwork development in the 
Community and for Community-wide standards for the future 
Integrated Broadband Communications, and promotion of 
related projects for the progressive Community-wide 
introduction of broadband communications ; 
rapid adoption of the proposals for the introduction of 
digital mobile communications ; 
full application of Recommendation 86/659/EEC on the 
co-ordinated introduction of the Integrated Services 
Digital Network (ISDN) ; il ''.1 
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rapid application of the STAR programme for advancing 
infrastructure in the regions, with the aim of increasing 
economic cohesion during the current transition. 
RAPID EXTENSION OF DIRECTIVE 86/361/EEC TO INCLUDE FULL MUTUAL 
RECOGNITION OF TYPE APPROVAL FOR TERMINAL EQUIPMENT 
According to the current Directive 86/361/EEC on the mutual 
recognition of testing required for type approval, proposals 
for full mutual recognition of type approval must be submitted 
by July 1989 at the la test. ··The Commission proposes to 
accelerate this measure which is vital for the development of 
a competitive, Community-wide terminal market. 
REPLACING RECOMMENDATION 84/550/EEC ON THE FIRST PHASE OF 
OPENING UP ACCESS TO PUBLIC TELECOMMUNICATIONS CONTRACTS BY A 
DIRECTIVE 
on the opening of procurement contracts applying to public and 
private Telecommunications Administrations to which the Member 
States confer exclusive or special rights. 
The future participation of Telecommunications Administrations 
in the competitive markets requires more transparency in their 
purchasing behaviour. 
VII.2 INITIATION OF NEW ACTION LINES 
As regarps new action lines needed to facilitate the transition 
t~wards a more competitive, Community-wide environment, the 
Commission believes that the-following are necessary 22 
I SUBSTANTIAL REINFORCEMENT OF THE DEVELOPMENT OF STANDARDS AND 
SPECIFICATIONS IN THE COMMUNITY / CREATION OF A EUROPEAN 
TELECOMMUNICATIONS STANDARDS INSTITUTE 
based on the current co-opèration of the Telecommunications 
Administrations within CEPT and with CEN-CENELEC. A 
substantial reinf orcement of resources applied to 
standardisation is a necessary requirement for a truly open 
competitive market. 
Jointly financed, the institute, based on a small core team of 
permanent staff and independently managea according to best 
business practice, should draw flexibly on experts from bath 
the Telecommunications Administrations a~d industry, in order 
substantially to accelerate the elaboration of standards and 
. technical specifications, indispensable for an open 
cornpetitive market environment and the development of 
Europe-wide;services. 
This action would build on and complement the Community's 
current policy on telecommunications and information 
technology standards. 
II COMMON DEFINITION OF AN AGREED SET OF CONDITIONS FOR OPEN 
NETWORK PROVISION ("ON P") TO SERVICE PROVIDERS AND USERS 23 
Working out in common the principles of the provision of the 
network to competitive service providers is a necessary 
requirement for· a Community-wide competitive market for 
terminal equipment and for competitive services, including in 
particular value-added services, if a long period of 
case-to-case decisions is to be avoided. 
This concerns in particular the definition of clear 
Europe-wide network termination points, usage conditions and 
tariff principles and availability of frequencies where 
relevant. 
The work should be carried out by the Commission in close 
collaboration with the Senior Officials Group on 
Telecornmunications (SOG-T), based on hearings with all parties 
concerned. Subsequently, the Commission would submit a 
corresponding Directive on ONP to Council. 
24 
III COMMON DEVELOPMENT OF EUROPE-WIDE SERVICES 
Future intra-Comrnunity communications will depend on achieving 
three objectives : 
Europe-wide compatibility and inter-operability of those 
services provided by the Telecornmunications 
Administrations. In addition to efficient telephony and 
telex, new services such as teletex, videotex, 
packet-switched and circuit-switched data services, mobile 
communications and the future ISDN, as defined in 
Recornmendation 86/659/EEC should be available universally 
at the European level. This could concern joint 
Community-wide service provision, network planning, and 
tariff principles 
Rapid development of intra-Community provision of 
value-added services. It is proposed to set into motion 
at the Comrnunity level a number of measures aimed at 
promoting the emergence of European value-added services, 
building on current efforts such as the TEDIS initiative. 
Rapid d~~elopment of the Comrnunity's policy on the 
information market, to prornote Europe-wide information 
services, in particular fully mobilising the potential of 
private initiatives. 
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V COMMON DEFINITION OF A COHERENT EUROPEAN POSITION REGARDING 
THE FUTURE DEVELOPMENT OF SATELLITE COMMUNICATIONS IN THE 
COMMUNITY 25 
The international satellite communications sector is currently 
going through rapid changes. In the light of the positions 
described in Fig. 3, based on prevailing technological trends, 
common positions will in particular be required regarding 
development of the earth station market in Europe, in 
particular with regard to common standards 
future development of satellite links (space segment), in 
particular the relationships between EUTELSAT, national, 
and private systems, and the full use of the technological 
potential of the European Space Agency 
development of international-satellite communications, in 
particular with regard to INTELSAT and INMARSAT. 
COMMON DEFINITION OF A COHERENT CONCEPT ON TELECOMMUNICATIONS 
SERVICES AND EQUIPMENT WITH REGARD TO THE COMMUNITY'S 
RELATIONS WITH THIRD COUNTRIES 
An intensification of cc-ordination with regard to Third 
Countries and the position on the international regulatory 
environment is urgently needed. 
This concerns in particular the preparation of the new GATT 
ROUND and future relations with international organisations 
such as the Internationai Telecomrnunications Union. 
VI 26 
It concerns further the evolving relationship in this field 
with the EFTA countries, with the United States and Japan and 
with the Third World. 
COMMON ANALYSIS OF SOCIAL IMPACT AND CONDITIONS FOR A SMOOTH 
TRANSITION 
In the long term, the most important factor for the future 
evolution of the telecommunications and information technology 
sector and its regulatory environment, both at the national 
and the Community level, will be the degree of social 
consensus which can be achieved regarding the new 
technologies. 
Common discussions and positions will be needed regarding the 
best ways to master the shift in job qualifications required 
by the change in technology and to expand ernployrnent in new 
service provision. 
An essential condition for achieving a true Cornrnon Market in 
this area will therefore be the developrnent of a Europe-wide 
consensus in the analysis of the social consequences of the 
new technologies and the associated regulatory evolution and 
policies. Analysis of the conditions for acceptability of new 
services and activities, and the impact on work life and 
employment will be a permanent task. '.!. 
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·: •I This must include continuous in-depth research of evolving 
user requirements for the new services, taking fully into 
account broader trends in economic activity, in the 
transformation of life-styles and in the social concerns of 
the European citizen. 27 
A vital contribution which can be made at Community level 
towards evolving this consensus should be the launching of 
joint analysis and study, in order to lay a better factual 
basis of knowledge, increase the perception of developments in 
t~e other Member States, prepare informed debate and 
facilitate discussions and negotiations between the social 
partners. 
1'.'1 
; 
•·' 
TOWARDS A DYNAMIC EUROPEAN ECONOMY 
G R E E N P A P E R 
ON THE DEVELOPMENT OF THE COMMON MARKET 
FOR TELECOMMUNICATIONS SERVICES AND EQUIPMENT 
(Communication from the Commission) 
FOREWORD 
Facing a telecommunications ~nd information technology world 
market developing at full speed; the Community needs to establish 
competitive market structures which will allow it to match the 
dynarnism developed in this field by the United States and Japan. 
Efficient telecommunications n~twork infrastructures and 
telecomrnunications services will be essential for the development 
of the Comrnunity's information technologies sector and the growth 
and flexibility of its economy as a whole ; for the completion of 
the Comrnunity-wide market for goods and services by 1992 and the 
development of future trade flows within the Community and with its outside partners; and for the efficient functioning of 
enterprises; 
The current wave of technical innovation resulting frorn the 
convergence of telecornmunications and data-processing technology 
has now led to reviews in all Member States of the future 
organisation of the telecommunications sector and its necessary 
regulatory adjustment. 
No Member State accounts for more than 6% of the world 
telecommunications market. The United States account for more 
than 35%, Japan for 11%. National reform of the 
telecommunications sector in Europe will only be economically 
successful if it is tied into the larger Community context. 
The Green Paper aims at launching the debate and attracting 
comment from a broad spectrum of opinion : the Council ; the 
European Parliament and the Economie and Social Committee ; the 
Telecommunications Administrations and Recognized Private 
Operating Agencies, hereinafter referred to as "Telecommunications 
Administrations" ; the European telecommunications, 
data-processing, and services industry ; the users who must be the 
main beneficiaries of the new opportunities ; and the trade unions 
and other organisations representing the social interests·in this 
area. 
The Paper aims at creating more freedom of action for the European 
user ; for European industry ; and for the European 
Telecommunications Administrations. .... ·,._ 
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TABLE OF CONTENTS 
I SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 
II THE PURPOSE OF THE GREEN PAPER ............................ 17 
III THE CURRENT ADJUSTMENT OF THE TELECOMMUNICATIONS .......... 24 
SECTOR 
1. The convergence of the telecommunic~tions, ........... 24 
data-processing and audio-visual sectors 
2. New issues on the way towards a Community ............ 25 
telecommunications market 
3. The search for common positions ...................... 26 
IV TECHN ICAL ASPECTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 2 8 
1. Main technological developments.. . . . . . . . . . . . . . . . . . . . . 28 
1.1. Growing "intelligence" of network and ........... 28 
terminals 
1. 2. Changes of network economics .................... 29 
1. 3. Development of "single" ........................ 30 
(multifunctional) terminals 
1. 4. Development of the sophisticated, ............... 31 
multi-purpose Private Branch Exchange (PABX) 
1. 5. Development of intelligent. ..................... 31 
private networks. 
2. The trend towards integration ....................... 32 
the possibility of carrying many services via 
one telecommunications network 
3. The difficulty of defining boundary lines : .......... 33 
"basic" services and "value-added" services 
3.1. "Basic services" ................................ 34 
3.2. "New basic services" ............................ 34 
3.3. Provision of additional functionality ........... 35 
3. 4. "Value-added services" .......................... 35 
3.5. Integrated Services Digital Network ............. 36 
4. Evolution of Satellite technology .................... 37 
S. Evolution of Cable-TV Technology ..................... 39 
6. Conclusions .......................................... 41 
V 
VI 2 
ECONOMIC ASPECTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 
1. The growth of the service econorny .................... 44 
2. Frorn local to traded services ........................ 46 
3. Investing in the infrastructure ...................... 48 
for tomorrow's service economy 
4. Developing the basic network infrastructure .......... 49 
5. The requirement for a more competitive market ........ 51 
6. Employrnent and social effects ........................ 53 
7. Conclusions .......................................... 57 
OUTLINE OF A REGULATORY FRAMEWORK ......................... 59 
TOWARDS WHICH CURRENT TRENDS COULD DEVELOP 
1. National approaches .................................. 59 
2. Convergent trends.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 
3. The Common Market in terrnfnal equipment .............. 61 
4. The Common Market in telecommunications .............. 63 
services 
4.1. Growing consensus: giving room .................. 64 
for new technological opportunities 
4.1.1. Competitive environrnent for ................ 64 
"value-added services" 
4.1.2. Narrow definition.of exclusive ............. 64 
provision 
4.1.3. "Competitive services" ..................... 65 
4.2. Evolving towards a cornpetitive .................. 67 
Community-wide market 
4.2.1. 
4.2.2. 
4.2.3. Growing tradeability of .................... 67 
telecornrnunications services 
Cross border provision of services ......... 68 
Open Network Provision -ON P ............ 69 
5. 
6. 3 
4.3. Strong Telecornmunications ....................... 70 
Administrations in a competitive 
·cornmunity market 
4.3.l. 
4.3.2. 
4.3.3. 
4.3.4. 
4.3.S. Provision of network infrastructure ........ 70 
Three essential changes .................... ·73 
required 
Financial viability: ...................... 74 
Transparency and problems of cross ......... 76 
subsidisation 
Tariff principles .......................... 79 
4.4. Adjacent infrastructures/ services ............ 82 
4.4.1. 
4.4.2. 
4.4.3. Satellite communications .................. 83 
Mobile radio communications ................ 87 
Cable TV networks .......................... 88 
The Comrnon Market in network equipment ......... ~ ..... 89 
Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 ' '11 i i' 
! 1 
' ~ 1 
4 
VII COMMUNITY TELECOMMUNICATIONS POLICY ...................... 98 
THE ACHIEVEMENTS TO DATE · ~, ,·. 
1. 
2. 
3. 
4. 
5. Standardisation in Information Technologies .......... 99 
and telecommunications and co-operation with CEPT 
1.1. Objectives ...................................... 103 
1.2. Legal Instruments ..... · .......................... 103 
1.2.1. 
1.2.2. Council Directive 86/361/EEC ............... 103 
Council Decision 87/95/EEC ................. 105 
1.3. Organisational framework ........................ 107 
1.3.1. 
1.3.2. 
1.3.3. 
1.3.4. 
1.3.5. Memorandum of understanding between ........ 107 
the CEPT and the Commission 
The guidelines on co-operation ............. 108 
agreed with CEN/CENELEC 
Promoting the development of ............... 110 
recognised conformance testing centres 
Co-operation with industry ................. 110 
The continuing lack of resources ........... 111 
Promoting the co-operative development of ............ 114 
advanced telecornmunications in Europe 
2.1. The RACE programme .............................. 11-S 
2.2. The Integrated Services Digital ................. 117 
Network (ISDN) 
2.3. Advanced telecommunications services ............ 119 
for the less-favoured regions (STAR programme) 
2.4. Digital mobile communications ................... 120 
2.5. Trade Electronic Data Interchange (TEDIS) ....... 120 
Application of Community competition policy to ....... 121 
the telecommunications sector to date 
3.1. The British Telecom Case ...... ; ................. 122 
3. 2. The terminal equipment cases .................... 124 
3.3. The IBM undertaking on SNA interfaces ........... 126 
3. 4. Other cases ..................................... 128 
' Transparency of public procurement procedures ........ 130 
Conclusions ... ~ ...................................... 132 :i 
. .. ~· .' 
. ~ .. ' 
~ ' -,-
. '-. 
5 
VIII TELECOMMUNICATIONS IN THE CONTEXT OF OTHER ................ 136 
COMMUNITY POLICIES 
1. Telecommunications in the c6ntext of······~···· ..... 136 
the Interna! Market 
2. Telecommunications in the context of the ............. 137 
Community's R/D/T policy 
3. Telecommunications. as the basis of a free ............ 139 
market for information 
3.1. The Commission's Work Programme.for ·the ......... 141 
creation of a common inf ormatio~ market 
3.2. Legal issues affecting the free flow ............ 142 
of information 
3.2.1. Data protectipn ............................ 142 
3.2.2. Copyright .................................. 143 
3.2.3. Authentication of transaction .............. 144 
3.2.4. Liability .................................. 144 
3.2.5. Electronic Fraud ........................... 145. 
3.2.6. Protection of confidentiality of the ....... 145 
content of users' communications with 
information services 
4. Telecommunications and the Community's ............... 145 
policy for an audio-visual space in Europe 
4.1. Creating the technical environment : ........... 146 
Council Directive 86/529/EEC 
4.2. The establishment of a European space ........... 147 
for broadcasting and television 
s. Conclusions .......................................... 148 
6 
IX THE EXTERNAL DIMENSION OF A COMMUNITY ..................... 150 
TELECOMMUNICATIONS POLICY 
1. Telecommunications in the Uruguay Round .............. 151 
1.1. Scope ........................................... 151 
1.1.1. Services ................................... 151 
1.1.2. Telecommunications equipment ........... ~ ... 152 
1.2. Issues .......................................... 152 
1.2.1. Services ................................... 152 
1.2.2. Telecommunications equipment ............... 153 
1. 3. Approach ........................................ 154 
2. Requests by outside providers for inter-............. 155 
connection and service provision 
2.1. Growing international competition ............... 155 
2.2. Issues .......................... · ................ 156 
2.3. Approach ........................................ 157 
3. Relations with the Community's major trading ...... ~ .. 158 
partners : EFTA, US, Japan and Third World 
3.1. Co-operation with the EFTA countries ............ 159 
3.2. Dialogue with the United States ................. 161 
3.3. Relations with Japan ............................ 166 
3.3.1. Access to market ........................... 166 
3.3.2. Standards .................................. 167 
3.4. Developing relations in telecornmunications ...... 168 
with other industrial countries 
3.5. Relations with Africa, Latin America, Asia ...... 169 
and the Mediterranean 
4. The future development of the international .......... 170 
telecomrnunications system 
4.1. Standards and international connectivity ........ 170 
4.2. ITU and im~act on the Community's ................ 171 
regulatory environment 
4.3. International satellite ...................... i •• 172 
organisations : INTELSAT and INMARSAT 
5. Conclusions .......................................... 174 
7 
X THE INGREDIENTS OF A SOLUTION ............................. 177 
1. Major points to be considered for a solution ......... 177 
2. The application of the Treaty to the ................. 179 
telecommunications sector 
3. Pr~posed Community positions ........................ 184 
4. Proposed Community Action Lines ...................... 186 
4.1. Acceleration of existing Action Lines ........... 187 
4.2. Initiation of new Action Lines ... ~ .............. 189 
: ,' 
1· 
'1 
i '.: i 
1 :j 
1i:' 
1' 
' : ' ~ 
:' 
:r 
APPENDIX 1 
APPENDIX 2 
APPENDIX 3 
APPENDIX 4 8 
THE REGULATORY TRENDS IN THE MEMBER STATES AND 
THE UNITED STATES AND JAPAN 
SATELLITE SERVICES IN EUROPE CURRENT TRENDS 
THE EUROPEAN CONFERENCE OF POSTAL AND 
TELECOMMUNICATIONS ADMINISTRATIONS (CEPT) 
MECHANISMS AND CO-OPERATION WITH THE COMMUNITY 
INTERNATIONAL TELECOMMUNICATIONS UNION (+TU) 
IMPACT ON THE REGULATORY ENVIRONMENT OF THE 
COMMUNITY 
GLOSSARY OF TECHNICAL TERMS 
:_ .. 
I 9 
SUMMARY 
A technically advanced, Europe-wide and low-cost 
telecommunications network will provide an essential 
infrastructure _for improv ing the competi ti veness of the 
European economy, achieving the Internal Market and 
strengthening Community cohesion -which constitute priority 
Cornmunity goals reaffirmed in the Single European Act. This 
does not only apply· to services in generali such as financial 
services, transport and tourism, which already generate 
nearly two thirds of Community GDP. It also applies to trade 
in goods ; and to the goal of European industrial 
co-operation. 
The emerging new telecommunications services -and notably 
so-called value-added and information services -will have a 
major impact on the future tradeability of services in 
general and on the location of economic activities. 
Since 1984, the Community has made substantial progress in this field. The objectives have been three-fold : 
promoting the creation of an advanced European 
telecommunications infrastructure 
contributing to the creation of a Cornrnunity-wide market 
for services and equipment ; 
contributing to the competitiveness of European industry 
and service providers. 
In followiqg these objectives, the Commission has, within the last two years, made proposals and achieved rapid agreement 
by Council along five main lines : 
cc-ordination regarding future development of 
telecommunications in the Community and common infrastructure projects. This concerns in particular the 
principal future stages of network development the 
Integrated Services Digital Network (ISDN), digital 
mobile communications, and the introduction of future 
broadband communications ; · 
creation of a Community-wide market for terminals and 
equipment. Promotion of Europe-wide open standards, in 
order to give equal opportunity to all market 
participants ; li 
1. '.·; 
:1•' i' 1 
1 1 
11~ f !' 
1.' 
10 
the launch of a programme of pre-competitive and "pre­
normative" R&D covering the technologies required for 
integrated broadband communications {the RACE programme) 
promoting the introduction and developrnent of advanced 
services and networks in the less-favoured peripheral 
regions of the Comrnunity ; 
building up common European positions with regard to 
international discussions in this area. 
In 1986 alone, Council achieved agreement, on proposal by the 
Commission, on six major measures which will become fully 
effective during 1987. A detailed overview of decisions taken 
and of proposals currently before Council is given in Chapter 
VII. 
In parallel, the Commission has taken up a number of cases, 
related to the opening of telecornmunications markets, under 
the Treaty's competition rules. 
Building on the progress achieved, it now seems timely to 
initiate a common thinking process regarding the fundamental 
adjustment of the institutional and regulatory conditions 
which the telecommunications sector now faces. This 
world-wide transformation is due to the profound technical 
change which is currently taking place : the progressive 
merger of telecornmunications, data-processing, and, 
ultimately, audio-visual and TV technology. 
Telecornmunications took 140 years to develop from a single 
service to a dozen services in the early eighties. The new 
technological capabilities will now lead to explosive growth 
and multiplication of services and applications within a 
single decade. [Fig. l] 
It is the management of this transformation which sets the 
scene for the current adjustment of the organisation of the 
sector and the reviews in all Mernber States. 
As set out in this Green Paper, the Community must make sure that : 
the necessary European scale and dimension are introduced 
into the current phase of transformation ; ;'.i~~::i 
. , ~r1..!-_. ..... 
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1: .. : Fig. TELECOMMUNICATIONS: 
PROSPECTS FOR THE YËAR 2000 
Telephony Telephony _ ~Telegraphy 
Telegraphy 
Photo 
Facslmile Photo 
Facslmile 
Facslmlle 
Telephony Telephony 
Sound Stereo hifi sound / Telegraphy ~ Telex 
Telegraphy · Broadband data 
High-speed data 
Medium-speed dot 
1 Circuit·switched 
Low-speed data data 
Photo T elemetry 
Facslmile Facslmile 
Facslmlle Tel et ex 
Telephony Facslmlle 
Vldeotex 
Telephony 
Videocon. 
~rance Packet-switched data 
Circuit ·switched polo 
Telemetry 
Teletex 
Text facsimile 
Facsimile 
Colour facsimile 
Electronlc Mail 
Telenewspoper 
Vldeotex 
Speech facslmlle 
TeJephony 
Hifi telephony 
Telephone-conference 
Vldeoconference 
Vldeotelephony 1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 1 
1 
1 
1 
1 
1 Colour televi~ion Stereo 
hifi sound Stereo hifi sound 
Quadrophony 
Colour televlslon 
Colour television 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 i 1 
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 
1847 1877 1920 1930 1960 1975 
Source: Consorlium British Telconsull/Consullel/Delecon/Neposlel/Sofrecom el al. St.ereo televlslon 
High·deflnitlon televlsion 
Mobile vldeotelepho ny 
Mobile telephony 
Mobile text 
Mobile facsimile -. . .. 
Mobile data 
Mobile vldeotex 
Paging 
2 000 
1:'.S·"··~· ~~-- ~'---~· . ._ ·----~-.-_---f-=-----~~----==-=~-===-------~---~-~~-~~~~:7-;~-~~---~~--~-=-=~~~~~~~~~~-~~·-~:·:~~·~>~~~-:~~~~~-~~~-~":-=~=-=--=--=-- -
I · no new barriers are created within the Community during 
the adjustment of regulatory conditions ; 
existing barriers are removed in the course of the 
adjustment. 11 
The search for common positions in the complex field of future 
regulation of the telecommunications sector must take into 
account a number of major requirements, if it is to contribute 
to strengthening the European economy : 
firstly, differing regulatory traditions in the sector. 
Careful analysis of current reviews and debates in the 
Member States must identify those areas on which common 
positions can be reached. It is on those areas that 
efforts towards developing consensus should be 
concentrated, in order to increase convergence over time 
in the Community ; 
secondly, opportunities and obligations deriving from the 
Treaty, in particular regarding : the free movement of 
goods ; the freedom to provide services ; competition 
rules ; the comrnon commercial policy ; 
thirdly, the external relations of the Community, in 
particular regarding its major trading partners -the 
EFTA countries, the.United States and Japan, the Third 
World. The opportunities and obligations deriving for the 
Community from the GATT agreement and the new GATT Round 
must be taken into account. The impact on the Community's 
industrial and trading position must be kept clearly in 
mind ; 
fourthly, the convergence of social perceptions in the 
Member States regarding the new technologies. This 
concerns the social consequences of the new technologies 
and associated regulatory policies, the conditions for 
acceptability in both private and work life, and measures 
to facilitate the transition by generating new employment 
opportunities and protecting legitimate interests. 
The convergence of telecomrnunications, data-processing and 
audio-visual technologies is outdating traditional boundary 
lines between the telecommunications network and the terminals 
sector, and between services traditionally provided under 
monopoly and those provided in a competitive environment. 
Satellites are now able to provide services within and between 
countries, at a world level. ' 1 
l 
.~;j 
.· · .. ~ 
12 
There are now many service functions and features that can be 
performed either by the public network or by a private network 
or the terminal equipment attached to the network. All 
countries are confronted by two options : 
either to try to maintain the current regulatory 
framework, which woul<l imply impo~ing additional and 
permanent restrictions and regulations on the use of data­
processing equipment connected to the network ; 
or to def ine the telecommunications regqlatory framework 
more narrowly and to give more room for competition. 
The worldwide trend points towards the latter. 
In the Community, the situation is in flux, as discussed in 
Chapter VI of the Paper. The United Kingdom has 
substantially modified the organisation of its 
telecommunications sector and issued recently a new 
comprehensive general licence for value-added services. 
France has seen substantial changes of legislation in the 
telecommunications / audio-visual field and will introduce 
major new proposals for its future telecommunications policy 
in 1987. Reviews or changes are underway in the Netherlands, 
Germany, Belgium, Italy, Spain, Portugal, and other Member 
States. At the same time, the European Conference of Postal 
and Telecommunications Administrations (CEPT) is reviewing its 
organisation, in response to, and in close interaction with, 
the development of Community telecommunications policy, and in 
close co-operation with the Commission. 
Analysis of the regulatory situation and of current trends of 
adjustrnent in the Member States shows that there a~e 
convergent trends in current thinking. There is therefore the 
genuine possibility of reaching agreement on broad common 
regulatory aims for the telecommunications sector in the 
Comrnunity. 
There seerns to be agreement on the following basic 
orientations : 
New services and terminals require market conditions which 
favour innovation, experimentation, and a high degree of 
flexibility : a more open competitive environment is 
required ~ 
the current and future integrity of the basic network 
infrastructure must be maintained or created. 
13 
This irnplies in particular a continuing strong role for 
Telecornmunications Administrations in the provision of 
network infrastructure, and strong emphasis on Europe-wide 
network standards. It also implies safeguarding the 
financial viability of Telecommunications Administrations 
in order to ensure the build-up of the new generations of 
telecomrnunications infrastructure and the necessary level 
of investrnent ; 
optimal consumer choice requires that Telecornmunications 
Administrations participate together with others in those 
markets which are opened to competition even if this may 
involve complex problems of regulation ; 
ernployment growth requires a policy promoting the shift of 
jobs from traditional activities to new opportunities, 
particularly in the future conglornerate sector of 
telecornmunications / information technologies. An intense 
dialogue with the social partners will be necessary, in 
order to ensure a smooth transition. 
On this basis, proposals for the ingredients of a solution are 
developed in Chapter X. 
The proposals concentrate on those issues which must be 
resolved at Comrnunity level for all Member States. They leave 
out questions which are important but fall to the national 
level, such as which status for Telecommunications 
Administrations is best suited to facing the developing 
competitive market environment, and related questions of 
finance, organisation, and employment relations. 
The proposals rest on accepting the continuation of those 
aspects of the current regimes where there is justification 
and compatibility with the Treaty. Within the framework of 
the current adjustment and according to their economic 
appreciation and perception, Member States may, of course, 
choose their own position with regard to these aspects, such 
as a more 11beral regime regarding the whole or parts of the 
network infrastructu~e. 
The Paper proposes the following policy orientations 
phased full opening of the terminal market to 
competition 14 
substantial opening of the services market to competition, 
with the exception, at ~his stage, of a limited number of 
basic services, where this is considered indispensable to 
satisfy current public service goals. Basic services 
reserved for provision by the Telecommunications 
Administrations should be essentially res~ricted to voice 
telephony only. 
The right for transborder provision of services under the 
Treaty must be translated into operational reality ; 
acceptance of the continuation of the Telecommunications 
Administrations' monopoly of network infrastructure. 
Recognition of the central role of the Telecommunications 
Administrations in the establishment of the future 
generations of infrastructure and of their right to 
protect their f inancial viability by legal means. 
Where Member States introduce competition in the whole or 
parts of network infrastructure, Community-wide integrity 
of network standards and interoperability must be 
ensured ; 
separation of the regulatory and operational functions of 
Telecommunications Administrations where this has not 
already been effected, in order to allow the participation 
of both the Telecommunications Administrations and other 
providers on fair terrns. 
The commercial activities of the Telecomrnunications 
Administrations, as well as those of .other providers are 
subject to the Treaty's_competition provisions ; 
partial opening of the market in satellite ground stations 
to competition, insofar as such equiprnent should properly 
be assimilated with telecommunications terminals rather 
than with telecornrnunications infrastructure. This applies 
in particular to receive-only earth stations.; 
recognition of the fact that telecornrnunications tariffs 
should f ollow cost trends and that a certain amount of 
rebalancing of tar iffs will be inevi table, a.s far as 
compatible with public service goals. ;I 1 ! ~ 
. µj. 
/·· 
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1 1 
111; . ' !I ·,, 
11111,' ,; 
15 
A more competitive environment will move tariffs closer to 
evolving cost patterns ; 
a vital condition for achieving a true common market in 
this area must be developing consensus in the Member 
States on the analysis of the social conseguences of the 
new technologies and the associated regulatory evolution. 
Analysis of the conditions for acceptability of new 
services and activities, and the impact on work life and 
employment must be intensified. 
Substantial dif f erences will continue to exist between Member 
States but must be accommodated. This concerns the different 
status of the network operators (public/private) but also the 
policy regarding provision of leased lines and resale of 
capacity. All Member States agree currently on the necessity 
of securing the financial viability of their Administrations, 
either by excluding pure resale of voice (telephone) on leased 
lines or by tariff schemes which prevent large "arbitrage 
gains" by pure resale of voice to third parties, such as 
usage-based tariffs. Both methods will have to be accommodated 
in the Community. 
However, both methods·must be limited to a legitimate level of 
protection of financial viability and must not represent the 
misuse of a dominant position. Current charges for leased 
lines both at the national and Community level show in some 
cases wide and unexplained divergences. 
The proposals aim at progressively introducing full 
Community-wide competition to the terminal market, and as far 
as possible and justified at this stage, to telecommunications 
services. In pursuing the implementation of these proposals, 
and the lifting of existing restrictions, the Commission will 
take full account of the fact that the competition rules of 
the Treaty apply to Telecommunications Administrations to the 
extent that they· engage in commercial activities. 
In order to create the environment for reaching the objectives 
set out, the Commission proposes a number of actions : 
to smooth the transition towards a more competitive 
. Community-wide market ; .(' 
,, .,. 
·,. 
. ' ~ i' 
! 
. •\ 
16 
to promote a strong European .presence in both the services 
and industrial field ; 
to prepare the Community for its discussions of future 
trading relations in this field with its outside partners, 
in particular in the f~amework of GATT. 
These proposed actions are set out in Chapter X. 
1t 
1' 
" 
I. 
II THE PURPOSE OF THE GREEN PAPER. 
Telecommunications has become a factor of major economic 
importance during recent years. It is undergoing a 
fundamental transformation as a result of changes in 
technology. It is converging rapidly with information 
technology. The new conglomerate sector of information 
movement and management telecommunications services and 
telecommunications and data-processing equipment is now 
estimated to represent more than ECU 500 billion annually 
world-wide. 17 
Up to seven per cent of the Comrnunity's GDP will derive by the 
turn of. the century fr·om the expanding telecomrnunications 
sector -compared with over two per cent today. As stated by a 
recent report ["Clearing the Lines A Users' View on 
Business Communications in Europe", Round Table of European 
Industrialists, October 1986] 
"demand for data communications capacity is growing among 
Europe's big industrial companies at a rate of as rnuch as 40 
per cent a year. New services, new tariffs, new corporate 
structures are crowding onto the marketplace. Cornpanies which 
make consumer goods are using these services to f ind out more 
rapidly what their customers want ; others are using 
electronic communications to reduce stocks of parts, to manage 
cash, to link research centres, to transmit and develop 
designs, to monitor remote installations and for hundreds of 
other tasks aimed at securing a competitive edge. In rnany 
trading and financial service activities, the availability of 
the most advanced communications is already essential to 
commercial success. The same is becoming increasingly true for 
industry. This applies not only to large companies, which need 
to move large amounts of data between installations, but to 
smaller f irms for which advanced ·telecommunications open up 
markets which were previously out of ·range". 
According to the European Council of Telecommunications Users 
Associations, "technological and regulatory changes currently 
being introduced and considered provide the opportunity for a 
common European telecommunications policy. This policy should 
be flexible enough to take account of further developments and 
should be produced with full participation of user 
representatives" ["ECTUA position on European 
Telecommunication Policy", March 1987]. 
Industry's ability to communicate, whether as market 
participants or within continent-wide networks of research, 
manufacturing, production, and office systems, is an 
increasingly crucial element in an integrated European 
economy. 18 
According to the Union of Industries of the European 
Community, ''it is extremely important to keep abreast of 
developments in the information and telecommunications 
technologies if we are to ensure the future·competitiveness of 
European industry and information markets. · 
"It is therefore vital for the telecommunications setter that 
national governments and the EEC should take decisions now 
that will haye the desired long-term effects" ["A 
Telecomrnunications Policy for Europe", UNICE, January 1987]. 
The European Committee of Postal, Telegraph and Telephone 
Trade Unions consider that "the ability to send and receive 
information and communications is becoming increasingly 
important, not only for business, but for all individuals if 
they are to play their full part in society and that to deny 
access to communications to any sections of the comrnunity is 
unjust and socially divisive" [PTTI Postal, Telegraph and 
Telephone International, 19th European Congress, Copenhagen, 
Derunark, 1986] .. 
The various parties concerned, public and private, will invest 
between 500 and 1,000 billion ECUs over the next twenty years 
in the telecommunications sector in the Community far more 
than total gross investment in the Comrnunity for a single 
year. 
It will be essential for the Comrnunity and its Member States 
to work out the conditions best·$uited to draw ~aximum benefit 
from these enormous investments. They can and must create 
substantial benefits for the European user and the Community•s· 
growing service economy ; for European industry and its future 
share of the world market ; and for the telecornrnunications 
network operators which will grow to be Europe's largest 
civilian investors in high technology. 
---···· ______ __._ _______ ~~-------~_::. ;. :: 
1 ·' . 
19 
At the same time, the telecommunications sector itself will 
grow to be the largest consumer of information technologies 
and components and one of the main benef iciaries and supports 
of current national and Community programmes for developing a 
new capability in these areas, such as the European Strategic 
Programme for Research and Development in Information 
Technologies (ESPRIT). 
The purpose of the Green Paper is thus to start a common 
thinking process and to be a basis for discussions aimed at 
the achievement of maximum synergy between current 
developments in the Member States, drawing fully on the 
potential offered by the Treaty of Rome and the Community 
framework. This process should center on : 
identifying common positions on the critical elements of 
the framework conditions currently under review in the 
Member States ; 
analysing cornrnon objectives and agreeing those means .for 
achieving them which are best carried out in the Community 
f ramework 
examining the external problems posed to all Member States 
by the rapid evolution of the world market. 
Changes in regulation at a European level must take account of 
and build on the differing regulatory histories and national 
features of the Member States. This implies that change must 
be introduced progressively, to allow re-organisation to take 
place smoothly over the whole of the Cornrnunity. 
The effort can and must build on the consensus achieved since 
1984, in order to build a sound basis for European growth and 
competitiveness in the information sectors of the future. 
In its "Progress Report on the Thinking and Work done in the field and initial Proposals for an Action Programme" 
[Communication from the Commission to Council on 
Telecommunications COM(84)277, 18.5.1984 ], the Commission 
undertook a first in-depth analysis of the economic, social 
ana· technical importance of the sector. It stated that the 
"new technologies will fulfil a pump-priming role in the 
evolutionary process that is taking place. Such technologies 
are at work not only in telecommunications terminals, but also 
in the components sphere........ These technologies are, in 
particular : digitisation, which makes it possible to process 
much more sophisticated data ; the use of optical fibres, 
which makes it possible to transmit information at i ;; 
"· 
'• .. · 
·:,-' 
:'J~.:" ,-
20 
considerably higher rates and at much lower cost ; the 
integration of micro-electronics components and software : the 
developrnent of cable and satellite links ......... The 
resulting convergence of telecornrnunications, data-processing 
and audio-visual media will alter the nature of 
telecommunications and considerably widen the range of 
services proposed." 
The report ernphasised that "the economic and social impact 
will be considerable" and set out a six-point "Action 
Programme in the. Field of Telecommunications" with the 
following objectives : "placing at the disppsal of users, as 
quickly as possible and at the lowest cost, the equipment ~nd 
services they require in order to ensure that they are 
sufficiently competitive ; stimulating European production of 
telecomrnunications equipment and services in order to create a 
climate in which the Cornrnunity industry can maintain its 
strong position on the European market and stay in first place 
among world exporters ; allowing carriers to take up the 
technological and industrial challenges with which they. will 
be faced." 
The Council of Ministers confirmed these proposals at its 
meeting of 17th December 1984 and agreed the following 
programme of work [Minutes of 979th Meeting of the Council, 
17th December 1984 ] 
" (a) 
" 
" 
" 
" ( b) 
Il ( i) the creation of a Community market for 
telecomrnunicatiori equipment and terminals via 
a standardisation policy aimed at the effective 
implementation in the Community of cornrnon standards 
derived from international standards ; 
the progressive application of procedures for the 
mutual recognition of type approval for terrninals 
the opening up of access to public telecomrnunications 
contracts, the first phase of which was.initiated by 
the Council's Recommendation of 12 November 1984. 
improving the developrnent of advanced 
telecommunications services and network 
Il by opening discussions, based on available 
studies, on : 
the implementation of infrastructure projects of 
common interest ; 
" 
.. ( ii) launching a development programme. for the 
technology. required in the long term for the 
implementation of future wide-band networks ; 
by def ining and progressively setting up a 
video-communications system to link the various 
political authorities in the Community ; 21 
"(c)improved access for less-favoured regions of the 
Cominunity, through the appropriate use of Community 
financial instruments, to the benefit of the development 
of advanced services and networks ; 
"(d)co-ordination of negotiating positions within the 
international organisations dealing with 
telecommunications, based on discussions carried out 
jointly with the Working Party of Senior Officials on 
Telecommunications." 
In following this programme of work, the Commission has 
rapidly ·made proposals and achieved agreement by Council on a 
number of major decisions. 
Details of this progress are given in Chapter VII. 
For its part, the European Parliament noted in its resolution 
of 3rd March 1984 [Re ort of the Euro ean Parliament on 
Telecommunications in the Community, Doc.· 1-477 3, 3rd March 
1984] 
"the great importance of telecommunications for the Community 
as a sector in its own right, and in terms of its significance 
for other industries and services". It pointed out, inter alia, the "need for re-regulation". 
According to the resolution, the European Parliament 
"considers that the traditional system of Telecommunications 
Administration regulation has served the public well in the past, but.that it lacks the necessary flexibility to permit 
the development of new products and services at the necessary 
speed to keep pace with the rapid rate of innovation in this 
sector ; believes, therefore, that there needs to be a 
liberalisation of the existing equipment supply monopolies in 
order to permit greater freedom for individual users to 
connect their equipment to the telecommunications 
infrastructure, and for suppliers to sell their products in 
other Community countries ; "· ~. ~~· ·. -
._,;.·,.... '• 
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22 
"further believes that other carriers beside the Telecommuni­
cations Administrations should be allowed to offer the new 
value added services which are currently evolving ; 
"recognises the vital public service obligations of 
Telecommunications Administrations, and does not believe that 
·deregulation on the American model could be applied within the 
COrnrnunity. Considers, therefore, that what is needed is 
're-regulation' which would permit more rapid development 
while still providing necessary safeguards ; 
"recommends that the widest possible cornpeti t~ion be encouragea 
for markets and equipment. The ability of Community 
undertakings to compete in overseas markets will depend to a 
large extent on their capacity to do so in the internal 
Cornrnunity market." 
In the White Paper from the Commission to the European Council 
of Milan of 28-29 June 1985, concerning the completion of the 
Internal Market, the Commission stated its view that it was 
"no exaggeration to see the establishment of a comrnon market 
in services as one of the main pre-conditions for a return to 
economic prosperity" [Communication from the Commission to the 
Council, COM(85)310, 14th June 1985]. 
The Commission emphasises that 
"the development of new technologies has led to the creation 
and development of new cross-border services which are playing 
an increasingly important role in the economy. However, these 
services can develop their full potential only when they serve 
a large, unobstructed market. This applies equally to 
audiovisual services, information and data-processing services 
and to computerised marketing and distribution 
services .............. The information market is also undergoing 
far reaching changes as a result of the application of new 
information technologies ". 
The Commission stressed that "a market free of obstacles at 
Cornmunity level necessitates the installation of appropriate 
telecommunications networks with common standards " 
23 
The strengthening of European telecommunications is one of the 
major reguirements for improving the competitiveness of the 
European economy, strengthening Community cohesion and 
achieving the completion of the Community-wide market for 
goods and services by 1992. The current wave of technical 
innovation in the field of telecomrnunications has now resulted 
in reviews of the future organisation of the 
telecommunications sector and its necessary institutional -• 
adjustment in all Community Member States. 
The Comrnunity must now take the necessary steps to benefit 
fully from these new technological and economic opportunities. 
:·.v . 
.. • . ;·fil 
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·.°j~:~,, \:~ .. 
24 
III THE CURRENT ADJUSTMENT OF THE TELECOMMUNICATIONS SECTOR 
1. The convergence of the telecommunications, data-processing 
and audio-visual sectors. 
The telecommunications sector·is currently undergoing a 
profound and accelerating transformation world-wide -the 
convergence of telecommunications, data-procéssing, office 
and business information systems, and in the fonger term, the 
·audio-visual sector. 
Simple office systems are being replaced by office work 
station terminals ; these in turn are connected via 
telecommunications networks ; telecommunications networks are 
integrating transmission, switching and data-processing 
functions. 
Telecommunications took 140 years to develop from a single 
service to a dozen services in the early eighties. The new 
technological capabilities will now lead to explosive growth 
and multiplication of services within one decade. 
It is the management of this transformation which sets the 
scene for the current intense debate and review of the 
telecommunications sector in all Member States. Special 
problems are posed for Europe and the implementation of a 
Community telecommunications market. 
Certain of these problems are being dealt with under the 
current Community initiatives [see Chapter VII] 
the convergence of telecommunications and data-
processing technologies the application of computer 
technology to telecommunications involves f irst of 
all digitisation of the networks. Digitisation and the 
associated new transmission techniques optical fibre 
and satellites have dramatically raised R&D costs in 
the industry. Co-operation and economies of scale and 
scope become an indispensable requirement for the 
European telecommunications sector. 
This is one of the objectives of the RACE programme ' .i; " 
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2. 25 
digitisation pèses major problems for future generations 
of networks in Europe. The new generations the 
Integrated Services Digital Network (ISDN), the future 
digit.al mobile communications and the Integrated 
Broadband Communications (IBC) will require a new 
degree of co-operation between the network operators in 
Europe over co-ordinated introduction strategies if 
Europe-wide communications are to be maintained. 
This is the objective of the Cornmission's initiatives on 
advanced telecommunications infrastructure, carried on 
in close co-operation with the Senior Officials Group on 
Telecornmunications (SOG-T) and the CEPT, notably on 
ISDN and, within the~framework of the RACE initiative, 
on IBC ; 
agreement on high-level protocols for services and on 
network interface standards for terminals is needed to 
ensure proper communications between the highly 
sophisticated computer based terminals of the future. 
The standardisation bodies in the Cornrnunity, both in 
telecommunications and in the computer field, face a 
situation characterised by a new degree of complexity. 
Coping with this challenge is a major objective of the 
Commission's initiatives on· standards in the field of 
information technologies and telecornmunications. These 
activities are developed in close collaboration with 
SOG-T and CEPT on the one hand, the Senior Officials 
Group on Information Technology Standards (SOGITS) and 
CEN-CENELEC on the other. 
New issues on the way towards a Cornmunity telecomrnunications 
market 
The convergence of telecommunications and information 
technologies leads to a nurnber of new problems. 
It involves the "collision" between two differently regulated 
sectors between the telecornrnunications sector, which has 
been traditionally dorninated by state monopolies and subject 
to strict regulation, and the computer sector which has 
developed in a competitive environment. 
3. 26 
New boundary lines are being drawn between the network sector 
and the terminal sector and between the network sector and 
services. Establishing consensus regarding boundaries 
between these sectors, with compatibility between Member 
States, is therefore becoming an essential prerequisite of a 
future Community-wide market. 
All countries are subject.to these changes. The United States 
and Japan have reacted according to their perception of the 
situation. In the Comrnunity, Member States have 
undertaken -or have announced -fundamen.tal changes in 
the regulation of the telecommunications sector and the 
status of their Telecommunications Administrations. In all 
Member States, an in-depth discussion and review is underway. 
At the same time, a reconfiguration of industrial alliances 
and international relations in this field is taking place. 
The search for common positions 
Two separate requirements seem to dominate the current search 
for solutions in the Member States. 
a) There is a need fully to exploit the economies of scale 
and scope offered by digitisation. This requires strong 
network operators, able to plan and to create 
leading-edge markets through the major innovations 
required in the telecommunications network inf rastruc-
ture within a long term perspective such as the 
ISDN. 
b) There is also a requirement to allow for dynamic growth 
in the sector of terminals and new telecommunications 
service$. There is a growing tendency to give new room 
in this area for public and private initiatives, in order to promote innovation and diversification. 
A delicate balance will have to be struck regarding these two . 
requirements for future growth. 
No Community Member State currently represents more than 6% 
of the world telecommunications market -whereas the United 
States has more than 35% and Japan 11%. Taken as a whole, 
the Community's telecommunications market corresponds to more 
than 20%. I'· 
\,1 
27 
Combined, Europe will be able to build a sound economic base 
for its telecommunications, information services and 
information technology industries. In isolation, the current 
.regulatory reforms in the Member States will not be able to 
bear fully their economic fruit. 
Innovative new service offerings require the larger Community 
market to operate to full dimension, to have the necessary 
commercial and market potential, and to enjoy the requisite 
economies of scale. 
The current phase of review in all Member States offers a 
unique opportunity to eliminate old barriers which have 
separated the Member States' telecommunications markets in 
the past and to promote convergence. 
A debate on common objectives and the means to reach them is 
required concerning a number of basic regulatory issues 
future rights and obligatio~s of the network 
operator(s) ; 
conditions of use of the network infrastructure provided 
by the network operator(s) ; 
future degree of freedom for the services carried over 
this network infrastructure ; 
cross-border provision of services in the Community ; 
availability of certain vital "basic" services under 
reasonably equal conditions everywhere in the 
Community ; 
conditions for connection of terminal and customer 
premises equipment to the network infrastructure ; 
the creation of a Community-wide market .for this 
equipment ; 
standardisation and compatibility. 
The Community must take up these issues now, if a common 
market in telecommunications is to become a full reality by 
1992. .. --:---·1 
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IV 
l. 28 
TECHNICAL ASPECTS 
Main technological developrnent~ 
Recent years have seen a tremendous change in the technology 
available for the construction of telecomrnunications 
networks. 
The developments that have most affected te1ecornmunications 
have taken place in four rnajoi areas as follows 
rnicro-electronic development, in particular the 
manufacture of complex circuits on a single integrated circuit chip ; 
digitisation, i.e. the operation of telecommunications 
functions, both switching and transmission, in a digital 
f orm ; 
the introduction of Stored Program Control (SPC) 
exchanges ; 
new transmission techniques : optical fibre, improvement 
in microwave and satellites and the revolution in 
communications and the audio-visual sector resulting from 
them. 
Regarding impact on the future regulatory environment, -major 
consequences have been: 
growing "intelligence" of network and terminal 
equipment; 
changes in network economics; 
the trend towards integration, with the resulting 
development of multipurpose terminal equipment, the 
multipurpose "neutral" digital network infrastructure, 
and the blurring of boundary lines between services. 
Details and consequences of these developments are reviewed 
briefly below. 
1.1. Growing "intelligence" of network and terminals 
The technological developments have led to corresponding 
advances in telecommunications networks. 1 1!. 
1 
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1 
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29 
Firstly, the introduction of digital, transparent networks 
controlled by sophisticated computers has rneant that many of 
the functions that were previously carried out inside the 
network (and thus could only be carried out by the 
controlling administration) can now be performed outside the 
network by the increasingly sophisticated terminal eguipment. 
Secondly, the range of services that can be offered by the 
switching systems is increasing. Telecommunications 
exchanges can now perform many additional functions in 
addition to switching simple calls." For example the exchange 
can also store, process and retrieve information, i.e., it 
can perform a mixture of telecommunications functions and 
electronic data-processing {EDP) functions. 
1. 2. Changes of network economics 
The cost of technology has dropped drarnatically in real terms 
over the last few years. Thus the cost of implementing a 
given function in hardware has fallen, or conversely, the 
level of sophistication available for a given unit cost has 
increased. 
For telecommunications major trends can be sumrnarised as 
f ollows 
the importance of the cost element "distance" has fallen 
compared with the cost element "usage time" or 
"connection time". Thus the cost of provision of long 
distance has fallen much more than the cost of provision 
of local traff ic 
the cost base of international, and in particular 
inter-continental traff ic has fallen substantially in 
real terms ; 
the cost to the user for terminal equiprnent is declining, at the same time that the level of sophistication is 
increasing. 
Technological developrnents are, furtherrnore, changing the 
distribution of the econornic costs of telecomrnunications. ~ ·: ''. 
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Years ago the cost of the provision of bandwidth between 
switches was high compared to that of the switches. Today 
the reverse is true, with transmission bandwidth being 
relatively cheap and there being now much less incentive to 
employ bandwidth saving techniques, except on the longest 
distance circuits. 
The "computerisation" of switches has lowered substantially 
the per unit cost of switching and other ne~work 
intelligence. At the same time, the share of software in the 
overall development cost of switches has risen dramatically 
over the last decade. It now represents 80% of development 
costs one of the main factors behind the current dramatic 
restructuring of the manufacturing side of 
telecommunications. 
1. 3. Developrnent of "single" (multifunctional} terrninals 
Up until recent technological developments, a terminal {for 
example a single telephone or a telex machine) was a device 
with a very limited range of capabilities, performing only 
those functions that were necessary for it to act as a 
terminal. For exarnple a telephone had a dial, a bell, a 
h~ndset and passive electronic equipment to perform 
transmission and signalling. 
In order that this terminal interf aced correctly and saf ely 
with the telecommunications network, standards were developed 
by the controlling Telecommunications Administrations that 
detailed all of the functions that the terminal had to be 
capable of performing. Thus for a telephone, the dial speed 
and make / break ratio were defined, as were the impedance 
and sound output of the bell and the transmission 
characteristics of the electrical· ta acoustic conversion. 
Over the last ten years, however, it has become posiible ta 
construct single terrninals with a wide variety of functions, 
some of which relate to telecommunications needs, some to 
improving the performance or usability of the terminal when 
connected to the network {for example a memory dialler) and 
some which are completely divorced from the telecommunica­
tions functions (for example a clock in a telephone or 
off-line preparation capabilities in a telex terminal}. '\ 1 
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The trend towards multifunctional terminals will become. 
wide-spread with the introduction of ISDN -capable 
terminals. 
These current and future combinations of 
telecornmunications-related technology and other functions 
makes it now necessary to review the arrangements whereby 
specif ication preparation and approval certification are 
performed by the Telecommunications Administrations. .31 
1.4. Development of the sophisticated rnulti-purpose Private 
Branch Exchange (PABX) 
As with single terminals, the PABX has seen a considerable 
number of changes over the last few years. 
Modern PABXs provide many features in excess of basic 
telephony requirements ; for example the PABX will usually 
have a number of additional telephony-based features (ring 
back when free, diversion on busy, etc.} as well as providing 
access to a variety of internal and external resources. 
Furtherrnore the PABX may form the basis of an "office 
automation" centre, including funétions such as word 
processing, electronic mail distribution, etc. The PABX rnay 
also be the hub of an intelligent network and may be 
programmed to perforrn as the controller of network routing, 
including least cost and traffic deterrnined routines. 
Thus modern (digital} PABX's are a key locus of the two 
tendencies of: 
the convergence of EDP functions with 
telecomrnunications; 
the blurring of the distinction between network 
functions and premises equipment functions. 
l.S. Development of "intelligent" private networks 
In a sirnilar way to that indicated in the previous sections, 
the in-house private network has developed considerably over 
the last few years. 
2. 32 
Private networks may now be very large, may convey a mixture 
of private and public traffic, may be constructed of a wide 
variety of equipment.operating with a range of different 
techniques (e.g. PBXs, LANs, etc.) and may have dynamic 
switching and routing capabilities. They.may also 
simultaneously switch both voice and data traffic. 
In particular, because of the introduction of transparent, 
digital networks, most of the topological constraints that 
h1therto restricted the development of private networks have 
been.removed and the,freedom .with which traffic can be 
routed at least from a technical point of view has 
greatly increased. 
At the same time, the absolute cost in real terms of 
performing switching and transmission.within a private 
network have both fallen, while the relative cost of 
transmission has diminished. 
Thus private networks are increasingly technically able to 
execute the functions of switching and routing which have 
hitherto been in the domain of public networks. 
The trend towards integration : the possibility of carrying 
many services via one telecommunications network. 
The full impact of the new technologies will be felt only 
during the second half of this decade, with the introduction 
of full scale digitisation, the Integrated Services Digital 
Network (ISDN) and later Integrated Broadband Communications 
( IBC} . 
Fig. 2 shows the planned degree of digitisation of networks in the Member States for 1990. 
Prier to the introduction of processor controlled . 
telecommunications exchanges and digitisation of the 
networks, telecommunications transport and data-processing 
were largely separate. 
Fig. 2 
Degree of digitisation of the telephone network 
in the Communlty (1990) 
(according to current planning by the network oper.3f ors) 
Tranamlaalon Local awltctiig Trurk ewltcttng 
COmnullfy totaJ averaged ov« 12 Member. stat88 
Source: CEPT IGSI}, CEC studies. ---1 
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'1980 : ECU 90 BILLION 1987 : 20Ô BILLION AFTER 1993 : 
ECU 3 ro 40U BILLION 
% 1 IV ,.. -f 
:0 % m 
PUBLIC SWITCHING 11.5 PUBLIC SWITCHING + PUBLIC NETWORKS 23 ÎRANSMISSION 
~ANSMI SSION. 17.6 
~ PRIVATE ÎELEPHONE 
PRlVATE SWITCHlNG 9.8 NETWORKS WITH DATA 18 AND ÎEXT CAPABILITY INTEGRATED 
ÎELEPHONE ÎERMINALS 6.6 BUSINESS 
PRlVATE NETWORKS ~ PRIVATE ÜATA AND l NFORMAT 1 ON" 
ÜECENTRALIZED ÎEXT SYSTEMS 19 SYSTEMS 
DATA SYSTEMS • 
~ NoN-Vo1cE ÎERMINALS 9 .7 
ÜFFICE ÎYPEWRITERS 5.1 STAND-ALONE 
ÜUTPUT SYSTEMS / 11.4 
ÜEVICES PRODUCTS 42 STANO.-ALONE 
"' STORAGE SYSTEMS/ 14.6 PRODUCTS 
DEVI CES z 
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3. 33 . 
Technological developments have largely removed this 
division. · 
Traditional telecommunications networks generally support 
only a single service. For example, the telephorie network . 
supports only telephony while the telex network supports only 
telex. The introduction of new technological capabilities 
has caused two moves away from this position. 
Firstly there is the introduction of new services where the 
service is fully defined within the terminal functions, and 
thus the service is independent of the network over which it 
is required to run. 
Secondly, the introduction of ISDN will create the potential 
for a service-independent network i.e., one that will support 
a wide range of services all running on a single "neutral" 
network. 
In the medium- to long-term, modern telecommunications 
networks will be more and more "neutral", that is, they will 
be largely independent of the service being carried, or, 
conversely, they will be able to carry a broad range of 
services independently of network operation. 
In the terminal eguipment market the trend towards . 
integration of functions will show up strongly before the end 
of this decade. It is estimated that the integrated office 
systems market will be worth more than $200 bn annually 
world-wide, with at least 20% of this accounted for by the. 
Community (Fig. 3). Recent surveys amongst major industrial 
companies in Europe show correspondingly large growth 
expectations for non-voice (data, information and text) 
communications of 25-40%. 
The difficulty of defining boundary lines "basic" services 
and "value-added" services 
The new technological possibilities have led to the 
emergence of a multitude of new services and to the blurring 
of traditional boundary lines between services. The future 
def inition of services has become a major issue. J 
• -f~ 
) 3. l. "Basic Services" 
The traditional "basic" telecommunications services were 
telephony and telex. These represent world-wide fully 
interconnected networks which are widely understood and. 
widely used. 34 
The basic principles of these two services have changea very little over the years, although both have benefited from an 
increasing level of technical sophistication, both in network 
equipment and terminal equipment. · 
3. 2. "New basic services" 
<~' 
-------------- As technology has evolved, Telecommunications Administrattons 
have introduced new services, some of which have become \, 
accepted as basic services in some Member States (but not in 
others). Examples of these differ throughout the Community 
but include : 
Packet Switched Data Networks ; 
Circuit Switched Data Networks ; 
Teletex ; 
Electronic Mail ; 
Videotex. 
There is no universal agreement even within the Community 
Member States on the constitution of "basic services". The 
irnpossibility of agreeing on precise ''technically-based" 
def initions is a major new fact resulting from technological 
developrnent. ! 1: 1 1 ~ ' : . 
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3.3. Provision of additional functionality 
Taking advantage of the technological advances it is possible 
to· enhance the "basic services" by providing additional 
functionality either : 
or in the basic network by incorporating additional 
features, typically in the exchanges ; 
in the customer terminal equipment. 
To a large degree bath methods can provide equivalent 
features (for example for telephony it is possible to provide 
a feature such as "short code dialling" either from the 
exchange software or incorporated within the terminal). 
Similarly it is possible to incorporate a range of 
complementary features, some implemented from the network, 
some f rom the customer terminal equipment and some partly 
implemented in each. 
It becomes more and more diff icult for the Telecornrnunications 
Administrations to have complete control of the implementa­
tion of functions, even within "basic" services. 
3.4. "Value-Added Services" 
As well as a range of "basic" services there is also a 
growing variety of "value-added" services, defined in sorne 
countries as "enhanced" services. 
"Enhanced" services are generally services where there are 
additional functions provided over and above the basic 
conveyance functions. Indeed, it is just this definition 
that has been used in sorne countries to atternpt to 
differentiate between "basic" services and "enhanced" (or 
"value added") services. ~. 
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36 
However, the problem in defining enhanced services is to do 
so in an era of evolving technology and with a rapidly 
growing number of services. 
Therefore if a definition of "value-added" services is used 
in order to maintain boundary lines between those (basic) 
services that can be provided as an exclusive function of the 
Telecornmunications Administration and the (value-added or 
enhanced) services which could be provided by any other 
operator, then : 
firstly, there would appear to be fundamental 
diff iculties in classifying existing services 
secondly, at the very least, the regulatory powers will 
need to be constantly updated as technical capability 
evolves. 
This second aspect would leave "value-added" service 
providers in the position of not knowing in advance whether a 
new service that they may wish to introduce will be 
classif ied as "enhanced" or not and whether that 
classification rnay change with tirne. This position could 
clearly hamper the introduction of new services. 
3. 5. Integrated Services Digital Network (ISDN) Services 
Agreement has been achieved on the co-ordinated introduction 
of ISDN in the Community (see Chaper VII). There is however 
at present neither an agreement between Member States on 
which ISDN services may be "basic" and which are not. Nor 
is there any agreement as to the relationship (if any) tOlJe 
adopted between basic and enhanced services and the ISDN 
definitions of "bearer services" and "teleservices". i 
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37 
4. Evolution of satellite Technology 
Over the last ten years the use of satellites has grown very 
rapidly and satellites are currently used to provide a number 
of different services, in particular broadcasting and 
telecommunications services. A detailed description of 
satellite services in Europe, current arrangements, and 
future trends is given in APPENDIX 2. 
There have been corisiderable developments in satellite 
systems. These have primarily corne about as a result of 
technical innovation, in particular in the design of 
satellites. The satellites themselves now have more power 
available for on board transmission, have increasingly 
lengthened lif etimes and can provide increasing numbers of 
shaped service area footprints. 
The ground station equipment has also substantially evolved, 
in particular with the advent of the new generation of front 
end receiving equipment. The recent trend has been towards 
developrnent of very srnall satellite antennae (VSAT or 
"microterminals"). 
Operational techniques applied to satellite communications 
have impr·oved wi th FDM, TDM, TDMA and combinations of these 
now all in operation, more frequency bands being exploited 
and rnoves towards the "intelligent" sa tel li te (i.e. sa tel li te 
incorporating on-board real-tirne switching) now at the 
planning stage. 
Satellite based systems are capable of providing transmission 
capacity with a unique ~et of attributes, in particular very • 
wide geographic coverage and the ability to provide point to • 
point, point to multi-point, or multi-point to multi-point 
services. Satellites can also provide transmission capacity 
between two locations for one way or two way transmission. 
---
38 
Thus satellites present a number of challenges : 
firstly, they can provide services over wide geographic 
areas usually straddling many country boundaries ; 
furthermore, the economics of providing sate~lite 
services have a different structure compared with those 
that apply for terrestrially based services. Satellites 
in general have truly distance independent costs, and 
thus pave the way for the introduction of distance 
independent tariffs ; 
finally, the cost of bandwidth on a satellite is not a 
linear function, but, for various technical reasons 
including spectrum allocation and transponder design, 
increases disproportionately as bandwidth demands 
increase. 
For the purposes of regulation, traditionally, a distinction 
has been made between "broadcasting" and "f ixed transmission" satellites. These two aspects often corne under the control 
of dif ferent arms of government and are typically operated by 
different organisations having different ownership regimes · 
(public or private). Usually the fixed transmission satellite services are provided in the Community by the 
Telecommunications Administrations under a monopoly 
arrangement whereas broadcasting services are provided, at 
least in part, by government controlled or independent 
broadcasting cornpanies (for details see APPENDIX 2). 
Between the roles of broadcasting and f ixed transmission satellites is a growing grey area. This area includes aspects 
such as fixed satellite services providing a point to 
multi-point setvice (which begins to look very much like a 
broadcast service) or a sirnilar arrangement where the 
operators of the up-link (to the satellite) and the down-link 
(frorn the satellite) rnay be different parties. 1: 
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Within Europe, the space segment is currently provided by one 
of three possibile satellite systems, namely EUTELSAT, 
INTELSAT and TELECOM 1. The ground station equipment is 
however provided by the various Administrations concerned. 
In addition, INMARSAT provides mobile satellite ·services to 
·ships at sea, and in the longer term may also be providing 
services to other mobiles, in particular to aircraft and 
trucks. 
At this stage, the situation is characterised by the 
introduction of point-to-point satellite business services 
and by a growing potential of point-to-multipoint 
applications linked to the emergence of the very small 
antenna (VSAT) earth stations, suited for receive-only 
operation or low rate two-way data exchange. 
The regulation of satellite services is one of the major 
problems that has to be faced by the regulatory authorities 
in the Cornmunity. Because of the international nature of 
satellite transmission, there will need to be a degree of 
commonality between Member States to ensure the development 
of Europe-wide satellite communications and the development 
of the market potential. 
Evolution of ·cable-TV Network Technology 
Cable TV networks were originally introduced as a means of 
providing an improved service to domestic customers of 
broadcast television services that could be provided by f ixed 
station broadcasting. While this remains the primary aim of 
most Cable TV networks in Europe, increasing emphasis is 
being placed on the introduction of other services, running 
over the Cable TV network. In particular "interactive" (i.e. 
telecommunications) services (two-way use) are now being 
introduced on a trial basis on Cable TV networks in a number 
of countries. 
Cable television (CATV) and master antenna televison (MATV) 
services have been established for many years in various 
Member States. Regulation has reflected the local character 
of these services , often treated as local utilities. As 
long as CATV and MATV consisted of one-way systems relaying terrestrially broadcast services, they could be considered 
outside the mainstream of telecommunications regulation. .J 
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Changes in technology mean that CATV and MATV networks and 
services can no longer be considered in isolation. The rnost 
signif icant technological change is the incorporation of 
switching into more recent CATV networks and upgrades to 
older systems. This enables operators to segment their 
services and make networks technically capable of offering 
two-way services, including potentially voice telephony. 
Inclusion of fibre optic çable rneans the capacity of CATV 
networks is increasing. · 
The long-terrn technological trend is toward·s integration into 
one homogeneous telecornrnunications network infrastructure 
Integrated Broadband Communications (IBC) (see Chapter VII 
RACE Programme). 
In conclusion, CATV networks can be seen in relative 
isolation, as long as they are developed for the purpose of 
one-way TV programme distribution only. As two-way usage 
becomes a technological possibility in the.longer term, the 
developrnent of econornies of scale and scope with a view 
towards the evolution of general integrated broadband 
communications is likely to become a major regulatory 
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41 
6. Conclusions 
The introduction of modern technology has had, and will 
increasingly have, a far· reaching effect on the development 
of telecommunications networks ana· services, and on the 
future evolution of satellite communications and Cable TV 
networks. Furthermore, this introduction has highlighted the 
need for changes to be made in the regulatory control of 
telecommunications. In particular the convergence of 
telecommunications and data-processing gives rise to a need 
to review the situation, since two converging industries are 
doing so from opposite ends of the regulatory framework. 
The implication is that changes will invariably have to be 
made in the methods of organisation of the telecommunications 
sector : 
the introduction of digital technology has made it 
possible that many functions that were previously 
possible only inside the network can now be performed 
outside the network by increasingly sophisticated 
terminal eguipment including PABXs. The multiplication 
of possible functions has led to a substantial potential 
for service differentiation and innovation which is at 
the heart of the new so-called value-added services. 
the cost economics of the network have been substantially 
changea. The cost of provision of long distance traffic 
has f allen much more than the cost of provision of local traffic. 
modern telecommunications network infrastructure will be 
technically more and more able to carry a broad range of 
services independent of the network infrastructure 
operator and provided by operators outside the network. 
while the digitisation of the network infrastructure has 
opened new opportunities for other providers, the trend 
towards integration has led at the same time to 
substantial economies -of scope for integrated service 
offerings, such as made possible by the Integrated 
Services Digital Network (ISDN). . 1 
• 
1 
) 42 
the trend towards integration has also led to a blurring 
of traditional boundaries between services. There is at 
present no agreed definition of "basic services" within 
the Cornrnunity, nor at the international level such as in 
the f ramework of the International Telecommunications 
Union ; 
both additional "basic services'' and enhancernents to the 
existing "basic services" -brought ·about prirnarily by 
technological evolution rnean that <it will be 
, extrernely diff icult to maintain a technically-based 
definition of "basic services", except on a ternporary 
basis and subject to review 
if there is no comrnon definition of basic services, then 
by extension there is, at present, no cornrnon definition 
of "enhanced" or "value-added" ·services ; 
There are now many service functions and featùres that can be 
performed either by the public network or by a private 
network or the terminal equipment attached to the network. 
This factor tends to make traditional regulatory boundary 
lines of services more and more unstable. All countries are 
confronted with the option of either extending the 
application of telecornmunications regulation to the sector of 
data-processing terminals and imposing more and more 
restrictions (many of which will be difficult to control) on 
the growing capability of private installations in switching 
and intelligent functions, such as on digital PABXs or 
personal computers connected to the network, or defining the 
telecomrnunications regulatory frarnework more narrowly, 
allowing the full benef its of technical progress to be 
reaped. 
The trend points world-wide towards the latter solution. 
The question f acing Europe is how to translate this trend 
into a step-by-step transformation of the regulatory measures 
in force. 
Re ardin evolution of satellite technolo , the future 
regu atory environrnent for the new types of point-te-point 
and point-to-rnultipoint uses will have to be carefully 
exarnined if the technological and market potential is to be 
realised. Special attention will have to be given to the 
emergence of very srnall antenna earth stations (VSAT 
"micro-terminals"), suited mainly for receive-only use and 
low rate data exchange. 
43 
Regarding Cable TV network evolution, the growing potential 
for two-way use brings Cable TV networks into the rnainstrearn 
of telecomrnunications policy considerations. Careful 
consideration will have to be given to their relationship 
with the telecomrnunications network infrastructure, if 
econornies of scale and scope deriving frorn the long-terrn 
evolution towards an integrated broadband infrastructure are 
to be exploited. 1 
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V ECONOMIC ASPECTS 
The opportunities presented by the new telecommunications 
technologies will have a potentially very important impact on 
future economic growth in the Community. Three distinct but 
interlinked growth processes are at work: 
firstly, improved access to better information raises 
productivity throughout the economy; 
secondly, improvements in communicatio~s raise the utility, and consequently the marketability, of both old 
and new services. This leads to their expansion; 
thirdly, transition to the new service-driven and 
information-based economy requires very large public and 
priva te investm·ent in a new infrastructure, both . 
physical -cable, switches,. terminals -and human -the 
development of value-added telecommunications services. 
1. The growth of the service economy 
The quality -both technical and organisational -of 
telecommunications will be crucial for future economic growth 
since it determines the capacity of the economy both to 
generate, and to use efficiently, the single most important 
factor of modern "production" : knowledge. The geographic 
organisation of the infrastructure will strongly influence, just like the 19th century railways, the economic, social and 
cultural space of tomorrow. 
By providing the conduit for the enhanced exchange of 
information and for enhanced information services, the merger 
of EDP and telecommunications will play the role in the field 
of knowledge and intelligence which was formerly played by 
energy in the physical enhancement of human streng~h .. 
As poin~ed out in the Annual Economie Review 1986-87, 
nover the last 25 years, there has been a significant shift 
in the shares of the major sectors in nominal gross 
value-added of the Community. The main thrust of this 
movement has been a steady decline in shares of manufactured 
and agricultural products on the one hand and an expansion of 
both market and non-market services on the other hand ..• ~ ' : . ,·.' 
1 
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45 
"At current market prices, the share of manufactured products 
in gross value-added in the Comrnunity (EUR 6) has declined 
from 33% in 1960 to about 26% in 1983 ... This declining 
pattern is mirrored by the corresponding share of market 
services, which expanded frorn 36% to over 43%. The share of 
non-market services ... also grew steadily ... frorn 11% to 15%. 
[Annual Economie Review 1986-1987, European Econorny, No. 29, 
July 1986.] 
"Between 1970 and 1983, the share of employrnent in the 
Cornmunity (EUR 6) accounted for by market and non-market 
services rose frorn 48% to 59%. [Annual Economie Review 
1986-1987, European Econorny, No. 30, Novernber 1986)." 
Thus services already account for nearly two-thirds of 
Comrnunity output and ernployment. By the year 2000, two 
thirds of the GDP of advanced countries will be generated in 
strongly information related activities. 
Indeed, current statistics underestimate by a considerable 
margin the share of services in the econorny : services within 
rnanufacturing firms are counted as industrial value-added. 
Yet, to take an extrerne exarnple, up to 80 per cent of the 
cost of computers (including, for instance, 
telecornmunications switches) is made up of software and other 
services. Even blue-collar workers on the assembly line may 
simply exercise a service function, e.g. monitoring 
tele-guided robots. 
The role of telecommunications is crucial in this 
development. Traditionally, most services, excluding 
transport and tourism, were produced and consumed 
locally : through face-to-face contact (e.g. financial 
services : legal, technical, and economic consulting) or, 
in the case of informatics, generated through largely local 
man-machine interactions. 
The combined effect of digitisation and the phenornenal increase in carrying capacity of modern telecornrnunications 
introduces services into the exchange econorny at least on a 
par with goods. ) . 
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One result of this opportunity to exchange services is a 
potentially decisive increase in the productivity -in 
qualitative and quantitative terms -of the whole 46 
economy : of local services; of manufacturing due to 
techniques such as Computer Integrated Manufacturing (CIM); 
and of agriculture. Figure 4 illustrates the manifold links 
between "exchange servicés" and the rest of the econo~y. 
2. From local to traded seivices 
Unlike any other factor of production, knowledge has the 
property that it is not consumed when it is used. It must 
however be produced, and hence requires a market as an 
incentive for production. Here lies the "supply-side" 
significance of creating a European market for services (in 
addition to the market advantages of scale economies, 
specialisation, and competition.) 
Nevertheless, the final beneficiaries of better access to 
(more and better) knowledge are the users, especially 
enterprises. If knowledge is to enter continuously into the 
production and marketing processes of locally produced goods 
and services it must be "transported" via an efficient 
conduit at low cost and high speed. Last, but not least, it 
must be packaged in ways which maximise its utility. This is 
·the task of a growing part of the services industry, whose 
productivity, again, depends on the size of the market. 
It is in. this context that the European dimension of 
developing an integrated, telecomrnunications-based services 
market becomes particularly important. In purely technical 
terms, modern telecommunications reduce the economic 
significance of geographic distance. But it depends a) on the 
physical infrastructure ; and b) on the regulatory 
environment, whether this property draws Europe closer 
together or pulls it further apart : the technical and 
regulatory properties of telecommunications systems may 
favour the development of predominantly national circuits of 
inf orrnation exchange ; or exclude certain parts of the 
Community with inadequate infrastructure ; or again lead to 
the Comrnunity as a whole occupying a subordinate position in 
the global information market. 
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One example is provided by the problem of the Community's 
peripheral regions. At present, these are prevented from 
making a full contribution to the European economy both by 
physical transport costs and by an often sub-standaid 
telecomrnunications infrastructure. As the "knowledge-content" 
of economic output increases, this last factor represents a 
larger danger of isolation than mere geography ever did. 
On the other hand, proper telecomrnunications can suppress 
geographic distance like no other technology before. They 
can also, at very low cost, supply missing inputs in economic 
regions characterised by ·an uneven scierttific, technological, 
and services infrastructure. An accelerated programme of 
investment in digitised, and later broad-band, technologies, 
as foreseen in the STAR programme (see Chapter VII), could 
turn the potential danger to the development of the periphery 
posed by the informatics society, into a unique opportunity 
to overcome the handicap of geographic isolation. 11 
A second example is the impact of telecommunications 
infra-structure and regulation on the location of tomorrow's 
information based-service industries. Services like data 
banks, data-processing and, more importantly, financial 
.services, are highly sensitive to infrastructure and the 
conditions under which that infrastructure can be used. 
It is on these two elements : technical quality and access 
conditions to the telecommunications infra-structure, that 
Europe must compete for the location of the 
tradeable-services industries of tomorrow. 
For the sake of the eff iciency and competitiveness of the 
users of services, access to the best information is crucial. 
Equally, European firms producing marketable knowledge -
engineers, market analysts, etc. -have an interest in a 
functioning global network of communications through which to sel! their products. Easy two-way access of European service providers and users to the global market is therefore 
necessary. 
On the other hand, if Europe's interna! services market 
remains fragmented, and hampered by restrictive access 
conditions, economies of scale will faveur outside suppliers 
with large home markets. Such an outcome would have obvious 
effects on employment ; and less tangible effects on the 
content of knowledge. 
;, 
.11 
3. 48 
The Commission has made, and is making, efforts to create a 
European information market (see Chapter VIII). It is now for 
the regulators and providers of telecomrnunications services 
to create the technical and regulatory conditions to let that 
market flourish. 
Investing in the infra-structure for tomorrow's service 
economy 
Provided the present opportunity for 91v1ng a modern 
regulatory framework to the telecommunications sector is 
used, short-, medium- and long-term growth and employment in 
the Community could receive a decisive boost from : 
the investments to be made in telecommunications network 
infrastructure ; 
the investments stimulated in the terminals 
manufacturing industry and the new telecomrnunications 
services ; 
the lowering of costs in industry and service in the 
economy as a whole. 
Total investment by the Community's Telecommunications 
Administrations per annum is running currently at 
approximately 17 billion ECU (1985). 
Such investment has a high short-term multiplier in 
macro-economic terms : 1 billion ECUs invested brings 
1.5 billion in extra activity directly. In addition, 
infrastructure investment has a very high multiplier effect 
on the terminals market and the market for (new) 
telecomrnunications services, doubling its direct impact. 
Telecommunications repr_esent the biggest and most signif icant civil investment in new technologies and services in the 
Comrnunity in the foreseeable future. •I 
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4. At least as -important as the macro-economic ef f ects of a 
flourishing European telecomrnunications sector is its 
strategic importance for the micro-electronics and 
informatics sector of which it is part, and which is 
generally considered the key to Europe's econornic future. 
Telecommunications not only provides just under a fifth of 
the market directly for the products -micro-chips, 
computers, software, etc. -of this sector. 49 
They also create market opportunities for the industry 
indirectly by enhancing the use, and usef~lness, of presently 
unconnected, non-comrnunicating computers i~ the home, school, 
and, above all, office and factory. The ability of the 
European micro-electronics and telecomrnunications industries 
to capture an adequate share of an expanding market at home,· 
and hence to be able to compete abroad, must be a major 
concern. 
To reap these economic benefits, the telecommunications 
system of the future must fulfil two,· partially 
contradictory, conditions : 
The scope for market forces, competition and innovation 
must be increased, both for manufacturers and for 
services providers in the Comrnunity ; 
At ·the same time, the financial viability of the network 
infrastructure providers must be assured if they are to 
engage in the massive front-loaded investment needed to 
prepare the infrastructure of tomorrow's service 
economy. 
Developing the basic network infrastructure 
The policy f ramework in which this infrastructure investment 
takes place has major implications for the supplier 
industries and the network providers. 
The network providers must be in a position to finance the 
required investments. The obstacles to this lie partly in the 
regulatory context. But the economics differ for the 
extension of current first-generation services (telephony and 
telex) on the one hand, and preparing for second and 
third-generation services on the other. 
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Telephone penetration is still relatively low in many parts 
of the Community. Expanding basic telephony is thus an 
economic proposition for the carriers, even without taking 
into account the broader impact on business eff iciency and 
overall welfare. If that investment has not yet been 
forthcoming, it has often been because of controls on both 
investment plans and user tariffs in pursuit of laudable 
short-term macro-economic goals, but damaging a dynamic 
source of overall economic growth in the process. 
The problem is more complex as regards investment in 
digitised and broad-band capable infrastructure for the 
future advanced services. This is rendered difficult by the 
f act that there will be a considerable time lag between the 
investment and its full commercial benefit. This is a 
familiar problem in telecommunications. But today it is 
rendered much more acute by two factors : 
the novelty of the technologies -requiring innovation, 
investment and market development on the part of the 
user and industry far more complex than that involved in 
the spread of simple telephony ; 
the necessity of making assumptions about traffic growth 
regarding uses which are still net in existence, such as 
future video-services. 
Yet unless investments by the main network infrastructure 
provider(s) are carried out on the requisite scale now, 
manufacturers or terminals and service providers will not 
have the security and incentive to engage in the -necessary 
R&D and capital investment in their turn. 
Since it is· in the public interest that this potential 
deadlock be broken, it must be the part most closely under 
public control, i.e., the central network infrastructure , 
which takes the lead. It must be ensured that the new digital 
narrow-band and broadband infrastructure will be provided in all Member States within a reasonably equal time to ensure 
the pre-requisite for future efficient national, 
Comrnunity-wide and world-wide communications; essential both 
for future economic and social development but also for 
emergency and security purposes. . ~ 
•• 
• 
) 
7) 51 
To ensure that this costly investment task is carried out1 
re-regulation of the telecommunications sector must safeguard 
the revenue-earning capacity of the central network 
infrastructure provider(s). This includes reasonable 
protection against excessive "cream-skimming" : exploitation 
by competitors of the most profitable parts of the market (i.e., high-density business traffic}. 
S. The reguirement for a more competitive market 
Against this must be set the reguirements of the rest of the 
telecommunications system which is served by the central 
network : new services and an increasingly specialised and 
sophisticated terminal market. 
The digitisation of switching and transmission, and the ever 
increasing capacity of semi-conductors and transmission media 
(fibres and satellites) are creating new needs and 
opportunities for voice, data and ultimately video 
communications (see Chapter IV). Two facts stand out 
regarding these developing telecommunications markets they 
are an essential part of the emerging information-based 
service economy ; and they are specialised, innovative, and 
therefore very dif f erent f rom the centrally provided 
telecommunications services of the past. 
Non-voice "value-added/enhanced services" presently 
designated as such in Europe (for the def initional problems 
see Chapter IV) include services such as EDP time-sharing and 
database services, videotex services, ticket reservation, 
automatic bank tellers and other financial services, other 
retail services including teleshopping, electronic data 
interchange within industries for ordering, supply, etc., 
rnailbox services, wordprocessing/facsimile/telex 
interfacing/protocol conversion, telernetry and telecontrol 
services, etc. In addition to non-voice value-added 
services, new specialised telephony-like services sueh as 
conference calls, deferred transmission, telephone message 
services, are emerging. 
Videophone, videoconferencing and other inter-active services 
to be provided over the future broad-band network are being 
introduced at the pilot stage in some Member States ; and 
among several Member States due to Comrnunity prornotional 
policies. 
.Ji 
52 
Many of these services require specialised software, and many 
of them special, or specially adapted terminal equipment, i.e., computers which store, switch, and display 
messages/signals. Even when the terminal is a simple persona! 
computer (in the US 25% of PC's are already connected to the 
telecomrnunications network; for the Community this ratio is 
estimated at 10%), there is a knock-on effect on that market 
in terms of quantity and performance. 
In nearly all Member States, approval of user premises 
equipment was historically controlled by the 
Telecomrnunications Administrations -who often acted as 
supplier, hence competitor, to the private sector. Similarly, 
the right to provide new services is in many cases reserved 
to, or controlled by the Telecommunications Administrations. 
This situation was acceptable when the number of services and 
of dif f erent types of user terminals and equipment was very 
limited. It has now become less appropriate in terms of 
management of change and of economics. An excessively 
restricted structure of supply deprives the emerging 
technologies of the creative impulses of a competitive 
market. This therefore constitutes one of the reasons for 
the current efforts of the Member States at re-regulating the 
telecommunications sector. 
In certain cases, the providers of basic network 
infrastructure and services, may indeed be in the best 
position to act as innovator : especially when introducing 
those of the new services which are destined to become 
universal, such as the basic ISDN network infrastructure and 
the videophone. They can generate high volumes more quickly, 
as has been demonstrated with the introduction of the 
Teletel/Minitel service in France, setting up a positive spiral of lower cost, fast diffusion, hence greater 
usefulness for subscribers. 
But in general, an open, competitive market for new service 
providers and terminal manufacturers can rnake a substantial 
contribution to the rapid spread of the new services, under 
the current conditions of rapid development of technology and 
market opportunities. .~ 
• 
• 
Securing a wide range of choice for the consumer requires 
creating this flexibility for all European market 
participants -including the strongest ones : the 
Telecornmunications Administrations even if the 53 
cc-existence of dominant and other providers in a competitive 
market can lead to complex regulatory problems, as 
experience elsewhere has shown. 
6. Employment and social effects 
In the Comrnunity's co-operative growth strategy for more 
employment, "paying due regard to the social aspects, the 
adaptability of markets for goods, services, capital and 
labour must be improved, and, in particular, the 
establishment of new firms, the development of vocational 
training and the introduction of new technologies must.be 
promoted ..• 
"The reinforcement of the potential_for growth and the 
resulting employment performance necessarily go hand in hand 
with structural adjustment. But this structural adjustment 
will be that much smoother if it unfolds against a background 
of dynamic growth in which the social dimension of the 
adjustment can be more easily taken into consideration." 
[Annual Economie Review 1986-1987, European Economy, No. 30, 
Novernber 1986, p. 9, 61.] 
The ernergence of an advanced and efficient European 
telecommunications system will cause deep changes in the 
econorny : more efficient organisation of production, 
narrowing differences in geographic location, growing 
efficiency / innovation of services, etc. Changes of this 
magnitude cannot fail to have a deep impact on society and 
on the nature of work. 
The broader social impact ranges frorn changes in leisure 
through new forrns of inter-personal and inter-group 
communication made possible through inter-active broadband 
technologies to decentralised individual education. The possibilities offered for those rnost isolated in society, 
invalids and the elderly, are only beginning to be explored. 
The enhanced possibilities for the flow of information must 
be matched by the development of legislation serving to 
protect the public interest in certain key areas, notably the 
protection of privacy of the individual (see Chapter VIII). 1' 1 
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54 
As regards the level of employment, the macro-economic growth 
effects point clearly in the direction of overall job 
creation, although, in the short term, labour displacing 
ef f ects can still be expected in the telecommunications 
industry and in the Administrations. It has been estimated 
that by the year 2000, up to 60% of al! employment 
opportunities in the Community will depend heavily on the 
telematics technologies. 
For one sector of the emerging communications market, the 
exchange of data, i.e., the linking of computers, the impact 
will corne earlier. Present narrow-band networks, upgraded 
through digitisation and the introduction of ISDN, allow 
considerable expansion of data exchanges, especially if 
regulatory obstacles to such expansion are removed. Here the 
question of the ernployrnent and social impact rnerges with that 
of informatics in general. For one effect of better 
telecornmunications is simply to increase the value of 
presently unconnected computers and/or reduce the cost of the 
services they can provide -and hence accelerate the spread 
of information. Wordprocessors become terminals for 
electronic mail or facsimile tele-printing ; data banks 
become accessible to more customers, etc. 
Most directly concerned by the technological changes are 
those employed by the Telecornrnunications Administrations and 
by telecommunications industry . 
. The Telecomrnunications Administrations employ nearly one 
million people in the.Member States. The telecommunications 
equipment industry employs a further 350,000 people. Those 
whose work is the maintenance and operation of 
electromechanical telephone exchanges are faced with the 
prospect of prof ound changes in the nature of their jobs 
resulting from the introduction of computer-controlled 
exchanges. ·• 
• .e 
·.e 
55 
Ways to counter-balance this must be found. The most 
important compensation can be achieved on the basis of the 
active introduction of new telecornrnunications services. 
"PTT's must meet the needs and demands of all customers by 
extending the range and improving the quality of services 
they provide". "To this end PTTs must have the possibility 
to master and use technqlogical developments and must ensure 
the most efficient use of public resources" (19th European 
Congress, Postal, Telegraph and Telephone International 
(PTT!) ·unions, Copenhagen 1986). 
In order to ensure a smooth transition towards new job 
opportunities created by the growth of new services, 
appropriate schemes for retraining and mobility of personnel 
are needed. In a period of far-reaching changes in the job 
content of a high number of employees suff icient 
consideration for employees' needs for security and for 
assistance will need to be shown by all those concerned. 
Moreover, mobility schemes should be so designed as to take 
into account the social problems which may arise for the 
workers concerned, particularly when they imply the 
relocation of the workers and their families. Only with the full co-operation of all personnel can the needed changes in 
the methods, tasks and technology of telecornmunications 
operations take place. 
It will be in the employees' medium-and long-term interest to 
create in Europe for this sector a growth-oriented stable 
environment. But acceptance of change and a smooth transition 
can only result from an intensive dialogue with the social 
partners at the national and the Community level. This must 
be an important consideration for any modification of the 
conditions under which the sector operates. 
In the long-term, the most important factor for the future 
evolution of the telecornmunications and information 
technology sector and its regulatory environment will be the 
degree of social consensus which can be achieved regarding 
the new technologies. ': 1 
'::[ 1 
1l1 .. 1 
• 1 ' !. • 
! !1·:1 
,':' J 
1.1 .1 
'·i 1 
' j 
1 1 
' ~ l 
56 
As pointed out in a joint statement of UNICE, CEEP and ETUC, 
"the internal market must be completed rapidly. This will 
make it possible to release considerable growth potential 
which will reinforce the positive effects which the 
implementation of the co-operative strategy will have on 
investment and growth. Completion of the internal market 
should be accompanied by taking account of social policy and 
by the development of structural policies to strengthen the 
Communi ty' s economic and social cohesion as i t is ·def ined in 
the Single European Act." (Joint opinion of the Social 
Partners on the co-operative strategy for more employment, 
European Economy, November 1986, p. 109.] · 
,. 
1 ,. 
i 
j •• 
1 
F~ 
57 
7. Conclusions 
With the emergence of the service economy, a strong 
telecommunications infra.structure becomes an essential 
component for promoting ·a harmonious. development of economic 
activities throughout the Comrnunity and for achieving the 
.Comrnunity-wide market for goods and services by 1992. 
The emerging new telecommunications services -and 
notably value-added services -will play a major role in 
the future tradeability of services in general and the 
location of economic activities ; 
The f inancial viability of the Telecommunications 
Administrations must be maintained in .order to ensure 
the build-up of the new generations of 
telecomrnunications' infrastructure and the required 
investments and to guarantee efficient national, 
Community-wide and world-wide communications, essential 
both for the future economic and social development but 
also for emergency and security purposes ; 
Th~ new services and terminals reguire market conditions 
which faveur innovation, experimentation, and a high 
degree of flexibility : a more open competitive 
environment is required ; 
Securing a wide range of choice for the consumer 
requires that the Telecommunications Administrations be 
able to participate together with others in those 
markets which are opened to competition even if the 
cc-existence of dominant and other providers in a 
competitive market may involve complex problems of regulation. 
The emergence of an advanced European telecommunications 
system will have a deep impact on society and on the 
nature of work. 
The broader pàssibilities for information flow must be 
matched by the development of legislation serving to 
protect the privaci of the individual. 1 
1 
1 
l 
1 
i 
58 
Questions of employment are a major aspect of the 
transition. In the Community, Telecomrnunications 
Administrations employ one million people, while the 
telecommunications equipment industry employs a further 
350,000 people. 
Employment growth requires a growth-oriented policy, 
particularly in the future conglqmerate sector of 
communications/information technologies within which 
jobs will shift from traditional activities to new 
opportunities. An intensive dialogue with the social 
partners will be necessary in order to ensure a smooth 
transition. 
In the long term the most important factor for the 
future evolution of the telecornrnunications and 
information technology sector and its regulatory 
environment will be the degree of social consensus which 
can be achieved regarding the new technologies. 
Fig Sa/b surnrnarises key data on the economic importance of 
Telecomrnunications in the Community. i < 
.i 
1 t 
!· 
t> { 
OYERYIEW or TEL[CORRUIIClTIOIS Il THE CORRUIITY 
Telephone Sets connected to the public Network 
( 1000) 
Nu1ber of Main lines 
( 1000) 
Total Staff in Teleco••unications Services 
( '000) 
Total Inco1e fro1 the Telephone Service 
(1illion ECU) 
Total Inco•e f ro1 all Telecommunications Services 
(1illion ECU) 
Total annual gross invest1ent in Teleco11unications 
excluding land and buildings 
(1illion ECU) 
Annual gross invest1ents in telephone switching equip1ent 
(1illion ECU) 1984 
160,290 . 
108,40 
940 
48,182 
54,459 
15,872 (1) 
3,075 (2) 
Telephone main lines per 100 inhabi tants 33.7% 
(% average) 
Telephone stations (sets) of all kinds per 100 inhabitants 49.9% 
(i average) 
-------------------------------------------------------------------------
Source : latest edition of the International Teleco11unications Union (ITU) 
Yearbook available -1987 edition 
(1) Ireland 1983 -Italy excluded . 
(2) Ireland 1983 -Denurk, Italy and United Kingdo• excluded 
(3) France and Greece 1984 -Italy excluded 
{4) France and Greece 1984 -Den1ark, ltaly and United Kingdo1 excluded Fig. 5 {a) 
1985 
167,715 
113,805 
936 
53, 127 
62,556 
17,037 (3) 
3,100 (4) 
35.3% 
52.1% '1 
• 1 
,1 
:, i 
; 1: :1 
; ~ \ 1 
i. 
1 
~ 1 
Figure 5 (b) 
1 
N° of telephone sets 1 Main lines 1 T o t al Staff i n 1 Total incoae fro• 1 Country 1 
1 connected to the ( 1000) 1 teleco••unications 1 all telecoa•unicationsl 
1 public network (1000) 1 services ( 1000) 
1 1 
1 1 
BelgiH 1 4346 3061 1 28 
1 1 
0.Hark 1 4005 2543 17 {l) 
1 
Fruce 1 34347 23032 167 
1 
Ctraaay F.R. 1 37899 25589 212 
1 
Creece <2> 1 3721 3111 1 31 
1 1 
1 
Irelaatl 1 942 703 1 16 
1 1 
1 
Italy 1 25615 17396 1 110 
1 1 
252 ( l) 1 
luHbHrg 1 154 1 0.7 
1 1 
1 
Tbt letherlaa4s 1 8840 5822 1 29 
1 1 
Portugal 1835 1400 23 
Spab 14259 9340 72 
Ul 31654 (4) 21654 230 
EEC 167715 113805 936 
Source : ITU Yearbook of Coaaon Carrier Teleco1munications Statistics -1987 
Referenee year : 1985 
~!~ Source : Statens Teletjeneste 
(J) Source : OTE 
(4) Sou~ce : luxconsult 
estnate 
1 
1 i 
1 
1 
1 
'1 1 services (•illion ECU)j 
1 1 
1 1 
1 1394 1 
1 
1 1179 
1 
1 
1 14182 
1 
1 
1 15108 
1 
1 
1 714 
1 
1 
1 624 
1 
1 
1 8351 
' 1 
1 74 
1 
1 
1 2542 
1 
856 
3293 
14239 
62556 'J 
\V 
tt'I~ 
f 
·1 
(;> 
1 -\ 
l 
l 
1 
1 
~ 
*· 
f!/J.'. 
1 
J 
1 
1 
_: 
59 
VI. OUTLINE OF A REGULATORY FRAMEWORK TOWARDS WHICH CURRENT TRENDS 
COULD DEVELOP 
The main aims for the Community compatible with technical and 
economic development and with current trends in the Member 
States should be the f ollowing : 
a common market in telecommunications terminal 
equipment ; 
a common market in telecommunications.services 
a common market in telecommunications network 
equipment ; 
1. National approaches 
An overview of the main characteristics of regulatory 
developments in each Member State is provided in APPENDIX 1, 
covering : 
current features of telecommunications 
the current regulatory erivironment ; 
the main features of the current regulatory debate and 
expected developments. 
Fig 6 and 7 illustrate the current situation in the Community. 
Certain Mernber States have already separated the regulatory 
from the operational funct~on, others have not. The United 
Kingdom has licensed two Public Telecomrnunications Operators, 
which are in competition ; the other Member States either only 
one each, or provision by several, but non-competing entities 
such as in Denrnark and Italy. Postal and telecomrnunications 
functions are split in the United Kingdom, Belgium, Greece, 
Ireland and Portugal and are about to be in the Netherlands, 
while they are not in others. Telecornmunications 
Administrations in the United Kingdom, Spain and Italy are 
involved in manufacturing; in Germany the Bundespost is 
forbidden from entering the manufacturing sector. 1 
1 r 
l j Ji 
,. 
i ' 
'1 
1 ! 
1 '. 
. , 
-:;_._ :7·.:. • -~ -
Coumtry CHANGES IN THE PROVISION OF TELECOMMUNICATIONS 
IN THE COMMUNITY 
1977 1987 Figure 6 
1 
(changes si•ce 1977 aRd futare 1 
+-------~~~~--~~~~--~~~~~~--~~~-+---•_r1_·e_•_t_at_i_•_n_s~>~~~------~~I 
' Belgiua RTl (Régie des Télégraphes et des 
Té liphones), · .. · ! · .-: .· · -··· · _:_. · 
reporting to the Secretary of St~te of 
the Ministry "of Posts and 
Telec onunications. · Possibility of transforaing RTT . 1 
into an entity with a auch greaterl 
degree of autono•y is under 1 
discussion ("four wise aen" 1 
couission). 1 
--~~--~~~----~~~----~--~~~~~r------~--~----~-------' 1 
Oen•ark 
France 
6eruay FR 1 P&T, Government Oepartaent, reporting to 
1 Minister of Public Works. Telegraphs, 
1 sou telephone 
j KTAS, JTAS (50% state-ovned) and PKT 
1 (owned by local authorities) telephone 
1 only. 
1 1 Following the report of the 1 
1 Bernstein Co••Îttee (1985), so•e 1 
1 restructuring took place in 1986. 1 
1 Statens Teletjenste runs national 1 
1 trunk network and international 1 
1 services. 1 
1 1 
1 
OGT (Direction Générale des Téléc08•uni- 1 -Setting up of COGECO" (Co•pagniel 
cations), depart•ent of Rinistry of Posts) Générale des Co••unications), 1 
and Teleco••unications. 
FCR (France Cable et Radio), 
state-owned Coapany. 
·, k.-
OBP, Oeutsche BundesPost, a Federal 
Ad•inistration 1 holding co•pany of all the PTT 1 
1 subsidiaries (Société Transpac, 1 
I Telesystà•es, FCR, Entreprise I 
1 Génirale des Téléco••unications)I 
1 Co••unication Law of 1 
1 30th Septe•ber 1986 ; a further I 
1 hw on coapetition in 1 
1 teleco••unications is to be 1 
1 introduced by the end of ·1987. 1 
1 -1987: opening of •obile radio 1 
1 service provision to co•petitionl 
1 l 
1 
l Setting up of a "6overn•ent 1 
1 Couission" to report on future 1 
1 regulation of teleco••unications 1 
1 in August 1987. 1 
----------+~------------------------4---~----------------' 1 1 
6reece OTE,publicly-owned but financially 
autono•ous corporation, founded 1949. 1 No change 1 
1 1 
~---------t-------------------------~'--------------------1 1 Irelud P&T, headed by Minis ter of Posts and 
Te legr aphs. TE, state ovned public corporation! 
set-up in 1984. The regulatory 1 
authority lies with the Oepart•entl 
of Co•1unications. 1 
----~~---~-------~---------------------.J----~-------------~-----' ·,.] 
:1,l 
: .• 1 
••• : > ~ 
.• l t; •, . 
-.. -.-~-·'r .i 
: ; j" . '· 
. 1 .. . . · if 
.1 ,{: 
'~ 
: j 
~. .•,·11 
'1 li 
. i 
i 
1 
~ 
Couatry 
Italy 
laxeabo•rg 
The lttherlandsl 
1 
1 
1 
1 
1 
1 
Pert.gal 
' Spai• 
1 
1 
1 
1 
1 
1 
1 
' Il 1 
1 1 
1 1 
1 1 
1 1 
1 1 
1 1 
1 1 
1 1977 
ASST (Azienda di Stato per i Servizi 
Telefonici), 
OCST (Oirezione Centrale Servizi 
Telegrafici), 
OCSR (Direzione Centrale Servizi 
Radi~elettrici), directly controlled by 1 
1 
1 
1 
1 
1 
Ministry of Posts and Teleco••unications 1 
S IP, 1 talc able, Te lespazi o :· concessionary 1 
coapanies, subsidiaries of the state- 1 
controlhd STET group. 1 
1 
P&T, govern•ent ad•inistration. 
PTT, statal organization under 
responsibility of the Ministry of 
Traffic and Civil Works. 
CTT for services outside Lisbon and r 
Oporto, TLP for Lisbon and Oporto ; both 1 
state-owned but financially autono1ous. 1 
CPRM for intercontinental services. 1 
r 
1 
1 
1 
1 
CYT, Govern•ent Oepartaent for ' Telegra1, telex services. CTIE, s,t-up byl 
ITT in 1924 but large state share:since 1 
1945, for ~el ephone, data transaÜsion. 1 
1 1 
1 
1 
1 
1 Post Office, state-owned corporation 1 
r ep o r t i ng t o the Secretary of Sta~e for 1 
Indus try. 1 
1 
1 
1 
1 
1 -2 -
1987 
(changes si•ce 1977 and fature 
oriHtatÏHS) 
Increase of SIP privatisation. 
Bill on the institutional 
reorganization of the sector 
proposed by the PT Minister. 
Bill on the liberalisation of 
•aintenance has been approved 
(March _1987). 
Bill on ~iscipline of ttleaatic 
services is in discussion. 
Govern•ent is considering whether 
to introduce a new law on 
teleco••unications to redefine 
boundaries between the aonopoly 
and th~ co•petitive sectors. 
Govern•ent decision to convert PTT! 
fro• a state organisation to a 1 
li1ited liability co•pany (govern-1 
•ent owned},starting fro• 1989, 1 
f ollowing reports fro• Swarttouw 1 
and Steenbergen Coaaittees. 1 
1 
1 
CTT C TLP boards 1erged in 1978 ; 1 
operationally still independent. 1 
Two co••issions have been 1 
appointed to report on a new 1 
telecoaaunications law, and on 1 
reorganisation of the sector 1 
(reports expected in first half 1 
1987). 1 
1 
1 
CTNE re-naaed Telefonica .and 1 
granted greater autono•y. 1 
A new c o•prehensi ve bi 11 on 1 
teleco••unications has been 1 
drafted February 1987, and is 1 
being considered by Parlia•ent. 1 
1 
1 
Bd ti sh Teleco•, 49% governmen t 1 
owned private co•pany. 1 
"ercury Co11unications Li•ited, 1 
private co•pany. 1 
Private services providers 1 
supplying 1obile and value-added 1 
services, new general VADS licensel 
has been issued in February 1987. 1 
1 
i 
1 60 
On the protection of network operators from "cream-skimming" 
by operators of leased lines, tihe positions adopted by the 
Member States also vary. All currently prevent simple resale 
(for voice traffic) on leased circuits. Sorne plan to approach 
the problem in the future by ~ general system of 
volume-sensitive tariffing. Other Member States are likely to 
introduce a selective element tif usage-sensitive tariffs on 
leased lines used t~ supply val~e-added services to third 
parties. 
The situation is changing rapidly. The United Kingdom has 
substantially modif ied the organisation of its 
telecommunications sector and recently issued a general 
licence for value-added and data services. France has 
undergone substantial change of legislation in the 
telecommunications / audio-visual field and will introduce 
major new legislation on future. telecommunic_ation,s policy in 
1987. As indicated in APPENDIX!l, reviews or changes aré 
underway in the Netherlands, Ge~rnany, Belgiurn, Italy, Spain, 
Portugal, and other Member States. 
At the same time, the European Gonference of Postal and 
Telecornmunications Administrations is reviewing its 
organisation, in close interaction with, and in response to, 
the development of Community tetecommunications policy (see 
Chapter VII). , 
2. Convergent trends 
Yet despite the current diversity of national situations, 
convergent regulatory trends are becorning apparent. These 
trends· are towards ; 
opening of the terminal markets to cornpetition 
a cornpetitive value-added $ervices (VANs) sector 
separation of the regulatory and operational 
f unctions ; 
maintenance "of exclusive or special rights for the 
provisiq.n of 'the network .infrastructure and a restr icted 
number of basic services ; and · 
more cost-oriented pricing for·these services. 
Telecornrnunications Administrations would be able to cornpete in 
the cornpetitive markets. 
------ ---------·-··-----~--· '~=:o======~-=--==.:.. -~-~~__::_-=:..r-=---
Fig. 7/2 
PRESENT TELECOMMUNICATIONS MARKET STRUCTURES IN THE EUROPEAN COHMUNITIES [l] 
COUNTRIES !!!.!1 Luxembourg The f!~ther 1~1'1~ Portugal Spain United K ingdom 
1. Relations with S/PTT (5) PTT PTT (10) PTT (5) s (16) s 
posta 1 services 
2. Basic Service Network 
a) Local GM (PC) GM GM (li) GM (PC) OH (16) RC (LIM) 
b) Long-distance GM (PC) GM GM { 11) GM (PC) OM (16) RC (LIM) 
c) International . GM (PC) GH GH (11) GM (PC + OH) (5) OM (16) RC (LIM) 
d) Mobile GM (PC) GM GM (11) - OH (16) RC (LIM) 
3. Terminal Equipment 
a) Supply : 
Main Telephone set M H M (12) H M L 
PBX L L M L RC (LIB) (19) L Telex M (3) L M M L L 
Modem M (3) PL L PL M· L 
Data Termin-al L L L L L L Mobile L L M (13) - L L 
b) Maintenance : 
Main Teiephone set M M M M M L 
PBX L L M L L L 
Telex M L M M L L 
Modem M PL L PL M L 
Data Terminal L L L L L L Mobile L L M ( 13) - L L 
4. Use of leased circuits 
a) Domestic : 
Shared use/resale N (9) N N ( 14) N ( 15) N y {17) 
lnterconnection with N (9) N (14) N (15) N y (17) 
pub 11 c network 
b) International : 
Shared use/resale N N (4) N (4) N (4) N (4) y ( 18) 
lnterconnection with N N (4) N ( 4) N ( 4) N ( 4) y (18) 
pub 1 k network 
(1] SOURCES : Hember States (SOG-T) 
Abbreviations : see fol lowing page 
.. ... 
·~ . 
·:.:.:. LEGE ID 
PTT Posts and telecommunications services provided by the same organisation 
S Separate organisation 
M Monopoly 
PL Partly liberalised (some types liberalised, others not) 
L Liberalised 
GM Government monopoly (government agency) 
GM (PC) Government monopoly ·(public corporation) 
NOTES 
(1) RTT and Régie des Postes depend on the same PTT Minister 
(2) First te'lex terminal under monopoly, progressive liberalisation announced. 
(3) On request by the CEC, progressive liberalisation announced. 
(4) Subject to exceptions. OM 
RC (LIM) 
RC (LIB) 
FC (LIB) 
y 
N Monopoly of other types (private entity, etc). 
Regulated competition with ·11mited entry 
Regulated competition with liberalised entry 
Free competition with liberalised entry 
Generally permitted 
Generally prohibited 
(5) Telecommunications service providers exist in addition to PTT, on a monopolistic basis (concessionary basis, regional monopoly, etc)~ 
(6) Licensing of additional providers to be announced. 
(7) Steps regarding licensing of private· providers of Value-Added Services announced. 
(8a) Shared use permitted, resale prohibited .. 
(8b) Voice-band circuits : as far as technically possible, but atone end only (TKO, July 1986). 
(8c) International fixed connections without restrictions ; "flat-rate" circuits with restrictions. 
(9) New legislation on VANS is being discussed in Parliament. 
(10) . A larger degree of separation between postal and telecommunication organisations within PTT has been announced for 1989. 
(11) PTT to be converted to limited liability company in 1989. 
(12) Government has decided to liberalise all terminal equipment as of January 1989. 
(13) Cordless telephone /car telephone /public pagers under monopoly; closed mobile systems, radio telephones on ships, etc ... liberalised. 
(14) Usage for VANS ta be liberalised. · 
(15) Currently under consideration in commissions . 
. (lô) Telex, telegram, public facsimile (Burofax), etc ... are provided by the PTT. 
(17) Pure resale prohibited until at least 1989. 
(18) As (17), subject to additional restrictions. 
(19) Digital PBX's are supplied under monopoly. 
(20) Complete liberalisation has now been implemented after agreement with the European Commission on July 30th 1986 and w.ill take place after 
conversion of CCITT Recommendations into specifications and definition of testing procedures. 
(21) T.E. does not hold a monopoly, but is at present exclusively licensed by the Ministry. 
~~- - ---------..-.-: --~.~-~~~~ .. ~'=~.,-~~~~ ~~~?~~~=-~-;-=;;.:0::.:-=:::-""?-~""'~~==-L_:,::~~'~>::__-=-:_~_:-~ ::~=t--~~-:?-~ --=:"":--- __;;~.t -~<~- :-,~-~--=--;-:c-~ Fig. 7/3 
1 
i -
! 
11 
J 61 
The outline of the new situation that appears to be emerging is reflected in three "freedoms" -to use the network, to 
provide services over the network and to connect terminals to 
the network . 
. Current trends are converging. These converging trends 
provide the opportunity to achieve a common regulatory 
framework in the Comrnunity, allowing a common market for 
telecomrnunications to develop rapidly. 
The Community has an obligation to ensure that no new barriers 
to trade in goods or services are erected between Member 
States during this de/re-regulati6n process, and that existing 
barriers are dismantled. It should benefit from the 
opportunity afforded by current changes to promote a single 
Community-wide market for telecommunications eguipment and 
services. 
3. The Commori Market in terminal eguipment 
The current regulatory situation regarding· the terminal sector 
in the Community is shown in Fig 8. · 
The trend in all Member States is towards progressive full 
opening of the terminal market to competition. However, 
provision is still currently reserved for the 
Telecommunications Administrations for a number of items of 
terminal equipment, in particular the first telephone set. 
The current technological eyolution towards multifunctional 
'computer based terminal eguiprnent, including ISDN terminals 
(see Chapter IV), will make the current trend towards 
competitive provision more and more inevitable. However, the 
change from·the existing situation of sole supply of certain 
terminal equipment, in particular the first telephone set, to 
a competitive environment will have to ·allow, in certain 
instances, for a sufficient but defined time period for 
industry to adapt to the new situation. 
Survey of Terminal Equlpment Regulatory Supply Conditions 
" ' 
1 ,· .. ~ • • 1 ·: • ~ • N•iwork 
Op•r•tor 
EHolualv• 
Provlslor. MOBILE 1 RADIO 
T'PHONES PAOERS IV100EN1S 
r-/ -ZJMIH•d Supply: 
/ / , N•twork 
/ Operator/ 
Privat• 1 .. 1 Priva te 
Supply 
or1l~1 
r~ •::> T &: : • t ab I • of th 1 s k 1 n d 1 • 1n•v1t•b1 y • • 1mpIlf1 o a t ton i 1 t d • s or 1 b • • . th• Non• 
C----:] __ _ ..... . ,,-~ __ .,,,,,,,,. ....... 
·:::I o m 1 n an t f • a t u r • • o 4 t t-1 • r • g u 1 a t or y s I t '-' a t I •:::) n 1 n • a oh o ou n t r y f o r ~· '-' b 11 o ,-, • t ,...., o r 1-~ t ,. r n-i In a t 1 n g • q u 1 P rn • n t Fig. 8 
---------­
=..::--~~.- --------------------------·-------------- ---- ---------- --
~~5~~-~~~~;;~~:-~~~~_:~-:~:-~:::~_-:--~~-c:-0~i;_~-~--=~-=~i~~~d~~~~~=----~~~-~:~:~~~~~'°-~~:"J-'=::-':~-·--_~===-~~--~--~~-o--:~-~-~:-~~~,,-o--=:_:-_;·--=:~~---~:-~'--
-----~---~ .. -----:::=-__ .. _ • .::, __ ---. .:___:.-.-~---~~------- ---· --------:,...; 
62 
The f ramework for synchronising the current move towards full 
cornpetition in the terminal sector at the Cornrnunity level does 
exist : it is supplied by the provisions of the Treaty on the 
free movement of goods, by the decisions taken on cornmon 
standards and mutual recognition of type approval, and by 
progress on the opening of public procurement. 
It consists of the following main elements (for details see 
Chapter VII) : 
i) the general surveillance and control function imposed by 
the Treaty regarding the f ree movement of goods and the 
adjustment of state monopolies of a commercial 
character. The Commission has made clear in the past 
that it will apply Articles 37 and 86 of the Treaty 
directly, as well as Article 90 in conjunction with 
Article 86 and more particularly the means at its 
disposal under Article 90(3) of the Treaty, 
progressively to terminal equipment, in order to support 
the curre~t opening process. 
ii) rapid and effective application of : 
Council Directive 86/361/EEC concerning the f irst phase 
of the establishment of mutual recognition of type 
approval for telecommunications terminal equiprnent, 
which was adopted by the Council on 9 June 1986 ; 
Council Decision 87/95/EEC on standardisation in the 
field of information technology and telecomrnunications, 
which was adopted on December 22nd, 1986. 
iii) on this basis, Community-wide definition of the 
technical interfaces of the network with the subscriber 
terminal equipment, i.e. the Network Termination Points 
(NTPs). 
iv) Clear guidelines in this respect are given in Council 
Recommendation 86/659/EEC on the co-ordinated 
introduction of ISDN. 
Extensive application of Recommendation 84/550/EEC under 
which Member States agreed to open bidding on a 
proportion of the supply contracts being awarded by 
their Telecommunications Administrations to suppliers in 
other Member States. Regarding terminal equipment, the 
Recommendatlon provides for an experimental period 
during which network operators will give unrestricted 
access to their tender calls for all new terminals and 
for 10% by value of their total annual orders of 
conventional terminal equipment. 
63 
Telecommunications Administrations would be able to offer 
terminal equipment in a competitive environment alongside 
other equipment suppliers. A key issue here will be careful 
supervision under competition rules. 
The transition towards a Community-wide cornpetitive terminal 
eguipment market could be substantially accelerated by three 
measures : 
clear definition of network terrnination~points in the 
overall context of fixing the conditions under which the 
network infrastructure is provided by the 
Telecommunications Administrations to users and 
competitive services providers (Open Network Provision 
ONP, see VI.4.2.3). This coula build on the guidelines 
provided by Recornmendation 86/659/EEC ; 
rapid extension of Directive 86/361/EEC to full mutual 
recognition of type approval {see Chapter VII) ; 
regarding future participation of Telecornmunications 
Administrations in the market, broadening ~f 
Recornmendation 84/550/EEC into a binding Directive on 
terminal equiprnent, in order to establish full 
transparency and Cornmunity-wide opening of procurement 
by Telecomrnunications Administrations in the terminal 
market. {see Chapter VII). 
4. The Cornrnon Market in telecornrnunication services 
As shown in the preceding chapter, telecornrnunication services 
are increasingly characterised by two trends: 
technicql progress makes a multitude of new uses and 
services possible ; 
the network infrastructure can carry more and more services operated independently of network operation. 
Telecornrnunications services are becorning more and rnorè 
tradeable. 
Both f acts set the frarnework for current regulatory trends in 
the Cornrnunity. 
1 
i.' 
~ 1 
; ]:; 
1 :: • 
1 !": 
I• 
i 
64 
4.1. Growing consensus 
opportunities giving room for new technological 
All Member States now envisage allowing more room for the use 
of technological opportunities to users of the network and to 
competitive service providers. This consensus is strongest in 
the field nearest to that of computer services, i.e., in the field of "value-added services". --
4.1.1.Competitive environment for "value-added services" 
As set out in Chapters IV and V, there is no agreement between 
the Member States on the precise definition of ''value-added 
services". "Value-added services" range frorn services where 
the "transport-component" is low (eg 5-15%) such as for 
computer bureau service offerings, to services where this 
component is high (eg 90%) such as for telex agencies. Given 
the technological. development, the trend in the Mernber States 
currently is clearly towards a competitive environrnent for 
more and more of these services with a correspondingly 
narrower interpretation of those traditional "basic services" 
which continue to be reserved for exclusive provision by the 
Telecommunication Administrations. 
4.1.2.Narrow definition of exclusive provision 
The new technological opportunities .(see Chapter IV) allow the 
provision of many functions and services by users which were 
previously only possible technically and economically for the 
Telecommunications Administrations. The maintenance of the 
principle of exclusive provision therefore inevitably 
translates into imposing certain restrictions on the ·ways in 
which terminal eguipment connected to the network such as 
PABXs may be used. 
Although the Commission has under normal circumstances lirnited 
power to forbid the granting of exclusive rights it can 
monitor the use Telecommunications Administrations are making 
of such rights (Article 90 (1) of the Treaty). 
65 
Competition rules of the Treaty are applicable to undertakings 
entrusted with the operation of services of general economic 
interest ''insofar as the application of such rules does not 
obstruct the performance, in law or in .fact of the particular 
tasks assigned to them. Furthermore, Article 90 (2) provides 
that "the development of trade must not be affected to such an 
~xtent as would be contrary to the interests of the 
Community". 
Thè European Court of Justice has explicitly recognised the 
right of network users to benefit fully from-~ew opportunities 
offered by technological progress (British Telecom Case 41/83, 
Commission -v-Italy of 20th March 1985, see Chapter VII). 
The justification of continued exclusive provision of certain 
basic services must therefore be weighed carefully against the 
restrictions which this may impose on users' applications for 
their own use, shared use or provision of services to third 
parties. Major conclusions are : 
exclusive provision of services must be narrowly 
construed 
the ongoing iritegration -0f services caused by the 
technological trend makes it necessary that exclusive 
provision is made subject to periodic review. 
4.1.3."Competitive services" 
Given the blurring of boundary lines between value-added 
services and basic services and the i~possibility of a stable 
natural distinction, the discussion will concentrate 
theref ore more and more on the distinction between those 
services which may still be reserved for exclusive provision 
and those services for which competitive provision should be 
allowed. 
The relevant distinction in the future will therefore be 
between services for which exclusive provision by the . 
Telecommunications Administrations continues to be acceptable 
for the time being ("reserved services") and all other 
services open to competition ("competitive 
services")."Competitive services" will by definition comprise 
all services not explicitly reserved. I' 
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66 
Competitive services will in particular include "value-added 
services". 
Historically, reserved services in the Member States have been 
telephony and telex, which have been regarded generally as 
"basic services". Both services are offered on a universal 
basis. This is taken to mean : 
i) provided with general geographical coverage ; 
ii) provided on demand to all users on reasonably the 
same terms regardless of the users' location within 
the service provider's territory or franchise area 
and the cost of connection to the network. 
Voice telephony alone currently accounts for 85%-90% of 
the ECU 63 billion per annum which make up 
telecornmunications revenues in the Community (cf. 
Fig.5). 
In the forthcorning years, the financial revenues of the 
Telecommunications Administrations -and thus their 
financial viability -will continue to be essentially 
determined by voice revenue. Competitive provision of 
non-voice services, including value-added services, with 
unrestricted shared use or provision to third parties, 
is unlikely to have substantial impact on the revenues 
of the Telecommunications Administrations and therefore 
on their ability to carry out the particular tasks 
assigned to them. 
Telex services are converging rapidly with data and 
value-added services. Moreover, technological 
development is likely to make it more and more difficult 
to maintain a strict telex service monopoly. Even now 
personal computers are available on the market which can 
operate data and telex services via both the telephone 
and· telex networks. 
With its decisiori of 20th March 1985, the European Court 
of Justice has clearly authorised the operation of telex 
agencies which receive telexes via the telex network and 
retransmit thern via more efficient telecommunications 
means, e.g. the voice telephone network (British 
Telecom Case 41/83, id. cit.). i"' 
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67 
In conclusion, 
"reserved services" are def ined as services reserved for 
exclusive provision by the Telecommunications 
Administrations. Reserved services must be narrowly· 
defined, in order to avoid restrictions or distortions 
of competition. They must be provided on a universal 
basis. "Competitive services" would include all other 
services, in particular "value-added services". 
as far as exclusive provision of services is currently 
justif ied by the need to safeguard the financial 
viability of Telecommunications Administrations, only 
voice telephony seems to be an obvious candidate. 
rnaintaining or extending exclusive provision over other 
services will lead to the imposition of additional 
restrictions on users : restrictions which will becorne 
more and more difficult to control. 
current trends in a number of Member States seem to 
point towards convergence on this position. 
4.2 Evolving towards a competitive Community market 
4.2.l Growing tradeability of telecommunications services 
The provision of telecommunications network infrastructure and 
_services is characterised by certain trends 
the provision of telecommunications network 
infrastructures continues generally t6 require the 
physical presence of the provider in the geographical 
area in question 
the provision of telecommunications services can 
· increasingly take place across borders, without any 
major technical constraints being involved ; 
68 
the position of telecornmunications satellites is 
somewhat hybrid since they can form part of network 
infrastructure on the one hand whilst on the other they 
can be part of provision of services. 
The technological possibility of providing services across 
borders makes the issue of access to network infrastructure 
and the irnplementation of a cornrnon market for 
telecommunications services a major issue. 
4.2.2.Cross border provision of services 
The framework for the effective developrnent of a 
Community-wide market for telecommunications services is given 
by the Treaty. Article 59 guarantees, as a general rule, the 
freedom to provide cross-border services. 
Article 59 deals with .the case of a service provider in Member 
State A who wishes to make a service available to persans in 
Member State B without the former's residing there. This 
could lead to a conf lict if Member State B wished to reserve 
such.service exclusively toits Telecommunications 
Administration, or if it imposed restrictions on such service 
provided by others. 
According to Article 90 (1), Member States "shall neither 
enact or maintain in force any measure contrary to the rules 
~ontained in this Treaty, regarding public undertakings and 
undertakings to which Member States grant special or exclusive 
rights". 
Measures which would restrict service providers from other 
Member S~ates from exercising their rights under Article 59 
will therefore have to be abolished unless they fall under the 
exceptions to which Article 59 is subject. 
Exceptions must be interpreted narrowly. 1 
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The potential for conf lict will be reduced if : 
comparable definitions of services which rnay be reserved 
exist in the Mernber States ; 
reserved services are defined narrowly. 
In practice, given existing dif~erences in definitions in the 
field of non-voice services, and the likely narrow 
interpretation of exceptions by the Court of Justice, 
reservation of services which goes substantially beyond voice 
services is likely to lead to conflict. 
4.2.3. Open Network Provision (ONP} 
If a series of contentious cases and lengthy conflict (which 
would have to be resolved by the Commission under Articles 
52, 59, 85, 86, and 90 of the Treaty) is tq be avoided, the 
Community will have to develop comrnon principles regarding--:UÏe 
general conditions for the provision of the network 
infrastructure by the Telecommunications Administrations to 
users and competitive service providers, in particular for 
trans-frontier provision. 
The conditions of access to the network concern mainly 
standards and interfaces offered for interconnection tariff 
principles ; and provision of frequencies. 
The transition towards a Community-wide competitive services 
market could theref ore be substantially accelerated by 
Community Directives on Open Network Provision (ONP), based on 
Articles 100 A and 90(3) for technical specifications and 
network access respectively. 
Such Directives would aim at the Cornrnunity-wide harmonisation 
of principles of access. 
These Directives would have to include clear access conditions 
by Telecommunications Administrations for trans-f rontier 
service providers for use of the network, regarding at least 
three "layers" : .l l. 
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70 
technical interfaces, i.e. specification of facilities 
and standards requirernents, building in particular on 
Council Directive 86/361/EEC, .Decision 87/95/EEC and 
Recornmendation 86/659/EEC ; 
This may include conditions for availability of 
frequencies where of relevance. 
tariff principles, in particular separate tariffing 
( "unbundling") of "hearer". and "value-added" 
capabilities (cf. VI.4.3.5.) ; 
restrictions of use which rnay be inevitable for the tirne 
being, such as implied by reservation of certain 
services, e.g. voice telephony. Restrictions would have 
to be subject to review within given tirne intervals, 
taking account of technological developrnents. 
4.3. Strong Telecornmunications Administrations in a 
cornpetitive Community market 
The evolution of a cornpetitive services sector and the need to 
allow other service providers fair access to the netw~rks will 
have a major impact on the future operations of the 
Telecomrnunications Administrations. On the other hand, 
participation in the competitive market will offer new 
Dpportunities to them, if at the same tirne organisational and 
financial constraints imposed on thern are relaxed. 
An outline of the framework towards which developrnents in the 
·Member States could converge is given in Fig 9. 
4.3.1.Provision of network infrastructure 
Currently, all Member States have granted exclusive rights for 
the provision of the network infrastructure to their 
Telecornmunications Administrations. 
In the case of the United Kingdom, these functions are run on 
the basis of a duopoly (British Telecom / Mercury) with 
cornpetition between the two providers. In Italy these 
functions are split between different (non-cornpeting) publicly 
owned entities while in Denrnark they are run regionally on the 
basis of public concessions. 
-~ 
:' 
Figure 9 
CHANGES IN ROLE OF TELECOMMUNICATIONS ADMINISTRATIONS 
operation 
a) exclusive prov1s1on of network 
infrastructure (monopoly/duopoly) 
b) exclusive prov1s1on of limited number 
of basic services ("reserved services") 
c)-participation in competitive services 
market (including VANS) 
d) combination of regulatory and 
operational functions 
e) protection from "cream skimming" 
f). acceptance of common interconnect 
and access obligations for trans­
f ron tier service providers 
g) offer of certain terminal equipment 
on exclusive basis 
h) offer of terminal equipment on 
competitive basis at present 
yes 
yes 
yes 
YES 
yes 
NO 
YES 
yes in future 
yes 
yes ( 1) 
yes 
NO 
yes 
YES 
NO 
yes 
(1) In the future, exclusive provision of services will have to be 
defined narrowly and be subject to review. Voice telephone service seems to be the only obvious candidate. 11 ' 
1 
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71 
As set out, the provision of telecommunications network 
infrastructures generally requires the physical presence of 
the provider in the geographical area in question. 
Article 90 (1) implies that Member States are entitled to 
grant ~xclusive rights to undertakings. Thus per se-Member 
States enjoy the right to provide that telecommunications 
.network be operated and/or owned by the Telecommunications 
Administrations. On the other hand Article 90 (1) states 
unequivocally that such undertakings are subject to the 
provisions of the Treaty, although the· exception provided by 
Article 90{2) might apply in certain limited circumstances. 
Article 222 provides that the Community shall in no way 
prejudice the system of property ownership in Member States. 
Therefore, the determination of the appropriate ownership of 
-Telecommunications Administrations -in particular whether 
they should be in public or private ownership -falls to the 
Member States. 
However, Article 222 does not withdraw Telecommunications 
Administrations from the full application of the Treaty. 
Currently, in a number of Member States, an intense debate is 
under way at the economic and political level regarding the 
-advantages and disadvantages of maintaining- the current 
ooncept of exclusive provision of network infrastructure by 
one Telecommunications Administration, or whether some degree 
-of competition should be introduced, as has been done by the 
United States and Japan, and in the Community, by the United 
Kingdom. 
Generally ,· the situations in Europe, and in the· United States 
and Japan regarding network infrastructure dif fer substantially. 
The United States had a vast, homogeneous, vertically 
jntegrated system -the Bell system : one supplier of 
equipment, one network, one market corresponding to more than 
35% of the world market. This system has been broken up after 
the 1982 divestiture agreement. The long-distance market 
continues to be dominated by AT&T, now followed by MCI and 
GTE-Sprint, each of which has the size of a smaller European 
T~lecommunications Administration. The major part of the Bell 
system has been re-arranged under the seven Regional Holding 
Companies. Regarding technical standards and specifications, 
the Bell Operating :, 
1 . \ 
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72 
Companies remain closely co-ordinated through a jointly owned 
organisation, Bellcore, thus maintaining the technical 
integrity of the system (for details see APPENDIX 1, Analysis 
of trends in the United States). 
In the Community, none of the twelve Member States has more 
than a 6% share of the world market. No Telecommunications 
Administration in any Member ~tate is substantially larger 
than any of the seven US Regional Holding Companies which 
continue to operate under monopoly conditions, as far as 
network provision is concerned. 
Given the more limited national dimension in Europe, public 
service goals, required economies of scale, and the trade-off 
to be made between more flexibility from competition on the 
one hand and higher transaction costs which c~n result from 
parallel networks on the other, it seems likely that the 
positions in the Member States will converge on maintaining 
exclusive provision of network infrastructure on their territory by a single Telecommunications Administration or a 
very limited number of Administrations (cf. APPENDIX 1, 
national trends). 
From a Community perspective the following seems most 
relevant : 
whichever organisational scheme the Member States choose 
for provision of the network infrastructure by their 
Telecommunications Administrations, the short and long 
term integrity of the network infrastructure should be 
safeguarded. 
Member States should ensure that Telecommunications 
Administrations provide efficient national, 
Community-wide and world-wide communications ; 
The ~reaty, and in particular Community competition 
rules, apply to Telecommunications Administrations 
whether they have an absolute monopoly or rnerely a 
dominant position 
Exclusive network infrastructure provision must be 
narrowly defined. New technologies in adjacent fields, 
such as in satellite communications, mobile radio and 
cable-TV networks will need special consideration (see 
VI. 5, 6, 7) . 
73 
4.3.2. Three essential changes reguired 
Fig 9. lists three essential changes concerning 
Telecommunications Administrations which seem required to 
advance towards a competitive common market : 
( l) 
( 2) 
( 3) Progressive lifting of remaining exclusive provision of 
certain terminal equipment 
This is the action needed on the part of the 
Telecommunications Administrations to allow the 
establishment of a Community-wide fully competitive 
terminal market (cf. above, Chapter VI.3). 
Acceptance by the Telecommunications Administrations of 
clear obligations to interconnect with and provide 
access for trans-f rontier service providers 
This is the action needed on the part of the 
Telecommunications Administrations to allow cross-border 
provision of services (cf. above, Chapter VI.4). 
Two requirements will have to be met : 
Telecommunications Administrations must interconnect 
their own network infrastructures with appropriate 
means and at the appropriate technical level in 
order to allow efficient Community-wide 
communications ; 
details for allowing access for competitive service 
providers to the network infrastructures must be 
fixed. An appropriate means would seem to be the 
development of a Directive on Open Network Provision 
(0 NP) (cf. above, Chapter VI 4.2.3.). 
Clear separation of regulatory functions from 
operational functions 
This is a fundamental pre-condition for the establishment of a cornpetitive market and the 
participation of the Telecornmunications Administrations 
in this market. 
In a more cornpetitive environrnent, the 
Telecommunications Administrations cannot continue to be 
both regulator and market participant, i.e. referee and 
player. .; 
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4.3.3. 74 
Regulatory functions concern in particular licensing, 
control of type approval and rnandatory specifications; 
frequency allocation and surveillance of usage 
conditions. 
The need for this separation is conf irmed by trends and 
debates in all Mernber States which are envisaging more 
cornpetition for the sector. The separation of regulatory 
and operational activities is a rnost important 
prereguisite for any effective application of 
cornpetition rules to the providers of telecornrnunications 
services. 
Financial viabilitv 
There seems to be general agreement in the Mernb~r States on 
the need to safeguard the financial viability of the 
Telecornmunications Administrations, especially in view of the 
massive investrnents in network infrastructure that are going 
to be required in the future, in order to cornply with their 
public service mandate. 
The biggest -and under present. conditions only ·real -threat 
is the potential loss of voice traff ic -which currently 
accounts for 85 to 90% of all telecornrnunications ·revenues -by 
the public switched network. Competitive service providers 
could make their leased lines available for the pure resale of 
voice capacity (with very limited or zero "value-added"). 
They could thus be able to "cream off" traff ic on the most 
profitable routes, diverting traffic away from the public · 
switched network to leased lines hired by themselves. 
Telecommunications Administrations rnay not be able to cornpete 
with them pricewise on these high-profit routes because of their requirement to provide universal basic service at 
comparable prices throughout their national territory. 
There are currently two approaches followed -or considerea .. -
in the Member States to avoid extreme cases of "cream 
skimming". 
1. 
2. 75 
banning simple voice resale on leased lines 
apply usage-based tariff elernents to leased lines. 
Re: 1. Most Member States ban simple voice resale. Som~ 
of thern, such as the United Kingdom and the Netherlands 
are cornrnitted to reviewing the ban after a predetermined 
tirne period. 
For exarnple, in the new value-added and data serv1ces 
(VADS) license which will replace the existing VANS 
license, the UK governrnent announces that simple voice 
resale will be banned at this stage. Conditions are 
attached to carrying voice traff ic as part of a wider 
enhanced service which ·rnake pure resale of the voice 
element unattractiv.e. 
Re: 2. Sorne Member States, such as Germany, are 
proposing usage-based tariffs on leased lines as the 
main instrument of avoiding extreme cases of cream­
skimming. Sorne are envisaging applying a mixed system 
of flat-rate and usage based elements for the tariffing 
of leased lines, based on the principle of 
proportionality. Other Member States are considering 
the issue. 
Leased circuits have traditionally been priced at a flat 
rate and it has been argued that this price structure is 
required if the developrnent of value-added services and 
the attendant innovation are to be encouragea. But if a 
Member State wants to be liberal in allowing voice 
re-sale (perhaps on the grounds that technically it will 
becorne difficult to control it at some future stage), it 
may have to f ind another means of securing f inancial 
viability. Thus it may propose to introduce usage-~ased tariff elements for leased lines. 
Usage-based tariffs raise two difficult and interlinked 
issues. One is that by increasing the relative cost of 
leased lines in certain cases (very large usage), the 
incentive to stimulate the development of competitive 
services will be dirninished, especially if this rnakes 
their relative cost more than that in Member States who 
have chosen a less costly (for the private-sector 
service provider) forrn of tariff regirne. i 
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The other is that usage-based tariffing, if its impact 
on potential service providers is to make access to the 
national market more difficult -because more expensive 
-than entry into other Community markets, may be an 
obstacle in certain cases to the transfrontier provision 
of services. 
The decision whether to charge usage-sensitive or 
f lat-rate or a mixture of both tariffs for leased lines 
is essentially a decision to be taken by each 
Telecommunications Administration subject to the power 
of the Commission to investigate and terminate abuses 
coming to its attention. Any method must follow the 
principle of proportionality and not go beyond what is 
absolutely necessary to ensure the fulf ilment of the 
tasks assigned to the Telecommunications 
Administrations. 
Thus neither must the application of usage-based tariffs 
lead to excessive burdens for certain user categories, 
nor must a ban.on resale of voice operate to bring 
services with only a voice element into the 
Telecommunications Administrations' monopoly. 
A major potential for hindering the trans~border 
provision of services arises in the case of differences 
in policies between Member States. Potential for 
conflict would be reduced if a set of tariff principles 
governing the access to the network for trans-frontier 
providers were established (see above VI.4.2.3., ON 
P ; see below VI. 4. 3 .. 5. , tar iff pr inciples) . 
Transparency and problems of cross-subsidisation 
There is a broad consensus in the Member States that 
Telecommunications Administrations should be allowed to 
participate in the newly emerging competitive services and 
terminal market, in order to provide for a broad range of 
choice for the consumer. 
The participation of the Telecommunications Administrations in 
the competitive sector of the market will require careful 
attention, in order to avoid cases of distortion of 
cornpetition. iiiIT, 
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77 
Transparency must be created regarding the activities of the 
Administrations, especially regarding cross-subsidisation 
between activities in the monopoly sector and the competitive 
services and terminal equipment sectors. A sufficient degree 
of transparency will also be required concerning the · 
Telecommunications Administrations' financial and fiscal 
environment. 
The term cross-subsidisation can be used to cover at least the 
following practices: 
(i) the financing of the launch of new products until dernand 
puts supply into profit ; 
(ii) the financing of Research and Development, again in 
areas of potential future growth, obviously out of 
profits realised elsewhere ; 
(iii) the financing of a loss-making subsidiary or 
product-line by profits made elsewhere in the same 
group. In the case of Telecommunications 
Administrations, such operations may have to be carried 
out in order to achieve, in certain cases, certain 
public service goals, such as universal service for 
certain basic services or emergency services. 
A certain amount of cross-subsidisation is permissible 
in any commercial venture. Existing product lines may 
subsidise new product lines during their crucial phase 
of initial market entry in virtually every corporate 
marketing strategy. 
However, where a dominant undertaking 
Telecommunications Administration or other provider 
engages in predatory pricing to weaken or drive out 
competitors, it abuses its dominant position. Where the 
funds for.preâatory pricing are taken from· another 
product line in the same group, a form of cross-subsidisation would take place, but it should be 
noted that any abuse would not consist in the act of 
cross-subsidisation, but in the act of predatory 
pricing. 
Close surveillance of cross-subsidisation practices in 
·the operational activities of bath Telecommunications 
Administrations and private providers in the newly 
opened competitive services and 1: 
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78 
terminal sectors will be required, in order to avoid 
illegal practices and misuse of dominant positions. 
While details of ·the organisation of the sector fall to 
the Member States, the conditions of transparency 
created must be suff icient to allow this surveillance to 
take place. 
Transparency of the activities of Telecommunications 
Administrations should include transparency regarding 
activities in non-telecommunications areas, in 
particular postal services. Transparency ·should also be 
established regarding the f inancial and fiscal 
environment. 
Regarding combined provision of postal and 
telecommunications services by a single administration, 
most Member States currently seem to be moving towards a 
gradual separation of their postal and 
telecommunications services. While the details of 
organisation of the Telecommunications Administrations 
and combination with other tasks, such as combined 
provision of telecommunications services and postal 
services, falls under the authority of the Member 
States, it would seem incompatible with the Treaty if a 
combined Posts and Telecommunications Ad~inistration 
used its exclusive rights in both fields in a way 
distorting competition. 
Regarding the f inancial environment of Tele­
communications Administrations, Directive 80/723/EEC 
requires transparency in the f inancial relations between 
Member States' governments and their public 
undertakings. The Directive has been expanded to apply 
to the telecommunications sector. 
Regarding the fiscal environment of Telecommunications 
Administrations, it is notable that a number of Member 
States currently exempt public telecommunications from 
Value-Added Tax. This treatrnent is a result of the 
right to derogate from·the taxation provisions in 
Directive 77/388/EEC. In view of the abolition of 
fiscal frontiers and in order to arrive at a state of 
equal competitive conditions in this sector the 
Commission will shortly present an amended proposal for 
an 18th VAT Directive which will make provision for 
obligatory taxation of those supplies with effect from 
1.1.1990. 11 
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With the increased introduction of cornpetition into the 
telecommunications services sector, the fiscal 
environrnent of Telecornrnunications Administrations will 
therefore need thorough review. 
T~riff principles 
One important determinant of the implementation of a 
Community-wide market for competitive telecommunications 
services is the tariff principles applied by the 
Telecommunications Administrations for use of network 
infrastructure and servicei. 
Tariff principles applied by the Telecommunications 
Administrations have developed historically out of a cornplex 
trade-off between commercial considerations·and universal 
service goals, such as subsidising telephone service in rural 
areas from revenue from higher density routes. For 
international services, tariff-setting has been greatly 
influenced by the respective CCITT recommendations (cf. 
APPENDIX 4) . 
Tariff structures are currently undergoing major ·changes in all Member States, and internationally in the Comrnunity, for 
a nurnber of reasons, notably the following 
rapid technological development has dramatically changed 
the cost structure of the network. The cost of 
provision of long.distance traffic has fallen much more 
than the cost of provision of local traffic (see Chapter 
IV) ; 
growing international cornpetition is increasingly 
leading international tariffs to follow basic cost 
trends ; 
fair and open access of users and competitive service 
providers requires a clear definition of tariff 
principles by the Telecommunications Administrations. 
A . ~ 
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80 
According to a report previously cited ["Clearing the Lines 
A Users' View on Business Communications in Europe", Round 
Table of European Industrialists, October 1986), "although 
comparison of telecommunications tariffs in different 
countries is made difficult by volatile exchange rates, the 
scale of inconsistencies is evident ... "The report goes on to 
make two central points : "that charges for trans-European 
services are generally much higher than domestic charges 
(between half and four times as much in the case of packet 
switching volume charges, for example) and that charges vary 
greatly and according to no self-evident logic between 
countries. In particular,. trans-European prices-look high in 
comparison with US prices. There is a danger that excessive 
long-distance communications charges are creating a 
signif icant handicap to the efficient development of the 
European internal market". 
International tariffs in Europe are based on bilateral 
agreements (including transit agreements). Mutually agreed 
accounting rates are multiplied by the Administrations by 
so-called x~factors, in order to arrive at the final 
collection charge. K-factors are applied with a wide 
variance. As a consequence, the charge for a telephone call 
from country A to country B may vary by well over 100% from 
the charge collected for the same call f rom country B to 
country A, as is the case for certain Member States. 
Regarding leased lines, current charges both at the national 
and the Community level show in some cases wide and 
unexplained div~rgences. 
In its resolution of 3rd March 1984, the European Parliament 
noted the "current divergence of tariff structures within the 
Community, both for switched and leased circuits" [Report of 
the European Parliament on Telec6mmunications in the 
Community, Doc. 1~477/3, 3rd March 1984, OJC 117/80, 
30.4.1984]. ; 1: 
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81 
The Parliament went on to state that it "considers it 
necessary, as a first step towards establishing a Community 
preferential area for telecommunications, to adopt a single 
method for determining the tariffs applied within the 
Community for all int~rnational intra-Community 
telecommunications services, based on the principle that 
national frontiers are irrelevant to the calculation of the 
. tariffs, which should be expressed in ECUs. This system for 
international intra-Community services should subsequently be 
harrnonised, as regards the structure of the tariffs, with 
national tariff systems." 
In Council Recommendation 86/659/EEC of 22nd December 1986, 
the Council has invited the Telecommunications Administrations 
to study, inter alia, the following tariff principles 
regarding the co-ordinated introduction of ISDN, the future 
basic network infrastructure (see Chapter VII) : 
" In accordance with current trends, tariffs for all 
services, including telephony, should be less dependent 
on distance than at present (always bearing in mind the 
problems of transit costs through other countries) ; 
tariffs for teleservices which use the same bearer. 
capabilities should be independent of the teleservice. 
On the contrary, all value-added by the network should 
be charged independently of the utilisation of the 
bearer capabilities. 
" 
(ernphasis added). 
Separate tariff offerings for "bearer" and "value-added" 
components (as implied by the last indent) could be one 
general principle in the overall .context of Open Network 
Provision (cf. above, Chapter VI 4.2.3). There seerns to be an 
opportunity to agree on a broad set of tariff principles for 0 
N P. 
The setting of tariffs is a major cornponent of a 
Telecommunications Adrninistration's overall commercial 
strategy. The Commission has made clear in the past that 
measures to halt the abuse of dominant positions cannot be 
converted into systematic monitoring of prices [Sth Report on 
Competition Policy, 1978 ] . However, Telecomrnunications 
Administrations are subject to Competition Rules, in 
partjcular Article 85 and 86 of the Treaty, and Member States 
are subject to Article 90(1) as regards the use of exclusive 
rights made by these Administrations. Cases of unfair pricing 
must be avoided. 1. 
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Building consensus on tariff principles would substantially 
reduce the possibility of conflict. 
Tari~f principles could include : 
4.4 recognition of the fact that telecommunications tariffs 
should follow overall cost trends and that a certain 
amount of rebalancing of tariffs will be inevitable, as 
far as compatible with public service goals. This 
applies in particular to tariffs for national and 
intra-Community long-distance traffic. 
A fair trade-off between cost-orientation and the aim of 
universal service on reasonably the same terms for all 
will have to be developed 
regarding intra-Community and international tariffs, 
higher transparency and convergence of accounting rates 
and K-values should be sought, in order to avoid 
excessive divergences of tariffs and possible distortion 
of competition. This should show the way to the gradual 
emergence of a European tariff zone ; 
consensus should be achieved oh general tariff 
principles for access by users and providers of 
competitive services, in the framework of Open Network 
Provision. This should include agreement on the degree 
of "unbundling" of tariffs required for fair access, and 
general principles for the provision of leased lines. 
Adjacent infrastructures / services 
A nurnber of infrastructures / services adjacent to the main 
network infrastructure need soecial consideration. This 
concerns in particular satellite communications, mobile radio 
communications and cable TV networks. 
83 
4.4.1 Satellite Communications 
As stated previously, telecornmunications satellites are hybrid 
in the sense that they can either form part of the network 
infrastructure, or they can be part of the provision of services. · 
As set out in Chapter IV, over the last ten years the use of satellites has grown very rapidly. Satellites are currently 
used to provide a number of different services, in particular 
broadcasting and telecommunications services. 
From a iegulatory point of view, satellite systems may be 
divided into three distinct elements, namely 
uplink 
satellite or space segment 
downlink 
For details see APPENDIX 2. 
The uplink is always considered a f ixed point-to-point 
service, and in general it is linked to the right to transmit 
a ~adio signal. In Europe at present monopoly rights are 
normally held by the Telecommunications Administrations. 
The availability of space segment capacity in Europe is 
governed mainly by the following factors : 
the exclusive right of the EUTELSAT / INTELSAT 
signatories of the respective operating agreements to 
purchase and resell EUTELSAT ;·INTELSAT space segment 
capacity. 
the virtually exclusive rights of EUTELSAT and INTELSAT 
to provide space segment capacity " to meet the 
requirements of international public telecommunications 
services" within the respective services as specified by Articles XVI and XIV of their respective Operating 
Agreements. 
''tilf 
84 
the ability of EÙropean Telecornrnunications 
Administrations to utilise the space segment capacity of 
these organisations to fulfil their ma~ket objectives in 
Europe .. 
The downlink is specif ied in terrns of services such as a fixed 
service, a broadcasting service .. , a mobile service, etc. 
Traditionally, in most Member States the Telecommunications 
Administrations had the exclusive rnonopoly position on the 
ownership and operation of all satellite communications links, 
including down links where the ground station provided only 
receive capability. 
However, regarding satellite broadcasting, from 1984 there was 
~ considerable pressure to relax this position and to allow both 
private companies and individual consumers to own and operate 
(at least) receive-only satellite equipmenL Now Cable TV 
companies and individual subscribers are able to install, 
operate and rnaintain reception equipment for satellite 
broadcast reception in most.Member States. 
The general trend in Europe now seerns to be that dornestic 
receive-only installations (TVROs) designed to receive high 
power DBS (Direct Broadcast Satellite) services will not 
~eguire a licence. 
Regarding the use of satellite links for telecommunications 
services, a detailed review of the situation in the Community is given in APPENDIX 2. 
Technological advances are causing a discernible trend within 
Europe to allow the private supply and operation of satellite 
ground stations, in particular.for those providing only 
down-link capability. 
It further appears that in a ·number of Member States, the 
Telecommunications Administrations are permitting the installation of ground stations for "own-use" .in limi ted 
circurnstances. i:.·. 
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At the same time, as set out in Chapter IV. 4, there is a 
growing grey area of point-to-multipoint services serving 
large user groups, closely linked to the emergence of very 
small antenna (VSAT or micro-terminals) earth stations. VSAT 
systems operate in star network configuration, offering 
uni-directional -and in certain cases bi-directional -low 
data-rate communications between relatively large central hub 
earth stations and a large number of VSATs located at user 
prernises. 
In the United States, receive-only VSATs have been available 
for a number of years. Transmit / receive VSATs have become 
available more recently. 
Very small satellite antenna systems for receive only purposes 
now have dish sizes of .Q.6 metres in diameter, for low data 
rate receive / transmit 1.2 -1.8 metres. This compares with 
diameters of 30 metres for Type A INTELSAT earth stations 
which traditionally have been considered as_part of the 
Telecommunications Administrations' network infrastructure. 
VSAT earth stations should therefore be more properly 
considered as "micro-terminals", the operation of which should 
be associated with the regime under which telecommunications 
t~rminals are supplied and operated. Given technological 
development, it will become more and more difficult to justify 
for VSAT terminals a regulatory regime different f rom the 
regime applied to domestic receive-only DBS antennae {TVROs). 
In parallel to the technological development of the ground 
segment, the space segment accessible in Europe will develop 
dramatically over the next few years. As set out in APPENDIX 
2, both new generations of satellites and services of 
EUTELSAT, INTELSAT and INMARSAT will enter into operation, as 
well as a number of national and private satellite systems 
with both broadcasting and point-to- point and 
point-to-multipoint capabilities. Together with technological 
·development in the ground segment, this will make a review of 
regulatory conditions for the provision of both the space 
segment and the ground segment inevitable. 
From a Community perspective the following seems most 
relevant: .1 
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users should have the possibility fully to benefit from 
technical progress. This will make the review of 
certain regulatory arrangements necessary. 
Article 59 of the Treaty guarantees, as a general rule, 
the freedom to provide cross-border services. Regarding 
satellite broadcasting services, the Commission has 
stated the full implementation of this principle as a 
principal goal of its audio-visual policy (see Chapter 
VII. 4). 
satellites for telecommunications purposes can form part 
of network infrastructures on the one hand.whilst on the 
other they can be part of the provision of services. 
However, as a general rule, exclusive provision of 
network infrastructure must be narrowly defined. 
Given these positions and current trends, the following 
should be envisagea : 
(1) Given the hybrid nature of satellites as bath 
provision of infrastructure and service, two-way satellite communications and the regulation of 
up-links will need case-by-case consideration. 
However, given the principle of narrow definition of 
exclusive provision of network infrastructure, 
competition should be a possibility in those cases 
where unacceptable interference with other satellite 
or radio communication systems is not to be expected 
and where the revenue base and the f inancial 
viability of the general network infrastructure 
provider is not put into question. In the case of 
VSAT antennae (micro-terminals) suitable for low 
rate data exchange only, authorisation should be 
given automatically. Special consideration should 
be given to the development of Europe-wide satellite 
services. 
(2) Given the trend in satellite communication towards 
point-to-multipoint Hbroadcast" applications for 
closed user groups, the regulatory regime for 
receive-only earth stations (ROES) for satellite 
downlinks should be fully assimilated with the 
regime for telecommunications terminals and TV 
receive-only antennae (TVROs) and should be fully 
open to competition, subject only to appropriate 
type approval procedures. ,; ; 
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(3) given the expected dramatic changes in technology in 
the provision of both satellite ground and space 
segments, the Community urgently needs the 
definition of a coherent European position 
regarding: 
development of the earth station market in Europe, 
in particular with regard to common standards ; 
common positions regarding the future development 
of the space segment, in particular the 
relationships between Eutelsat, national and 
private systems, and the full use of the 
technological potential of the European Space 
Agency. 
This should include common positions on ownership 
and operation of uplink earth stations and direct 
access to space segment capability in certain 
cases ; 
-common positions regarding the future development 
of INTELSAT and INMARSAT (cf. Chapter IX). 
4.4.2. Mobile radio communications 
The evolution of mobile communications in the Community has 
been particularly affected by two characteristics: 
mobile communications are dependent on the availability 
of frequencies, which are a limited resource. The use 
of f requencies is theref ore closely regulated in all 
. Member States. 
On a local basis, a nurnber of systems for specific 
private purposes have developed, such as despatch 
systems for car fleets, emergency purposes, etc. In a 
number of Mernber States the number of users of local licensed private systems for specific purposes currently 
exceeds by far the number of subscribers to the public 
systems. 
With the development of the current generation of cellular 
systems allowing frequency re-use in neighbouring cells, a way 
has been f ound to circumvent the shortage of frequencies and 
substantially to increase the future number of subscribers to 
the public systems. Efficiency of systems will be further 
increased with.the introduction of digital mobile 
communications. '" 1.· 
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While in most Member States a single public system is operated 
by the Telecommunications Administrations, the United Kingdom 
has licensed two operators in competition (see APPENDIX 1). 
France has announced its intention to authorise a.second 
system. 
Mobile communications thus is seen by a number of Member 
States as a major candidate for competitive supply. Exclusive 
provision of the main network infrastructure must not hinder 
the use of new technological opportunities by private systems. 
On the other hand, compatibility of mobile systems with the 
main network infrastructure will be a.precondition for 
achieving truly efficient mobile communications, allowing full 
communications between any f ixed and mobile telephone 
terrninals both at the national and the European level. 
Mobile systems have been one of the worst examples of lack of 
Community-wide compatibility. Regarding public systems, five dif f erent incompatible systems have been i~plemented in the 
Member States. 
Close surveillance will be needed to ensure the integrity of 
mobile communication and the main network infrastructure. 
The Commission has submitted proposals to Council to ensure 
the co-ordinated introduction of public pan-European digital 
mobile communications in the Community by 1991 (cf. Chapter 
VII). 
4.4.3 Cable TV networks 
The European cable TV market is highly fragmertted. The range 
of regulatory regimes currently applied in the Member States 
includes the situation where only public ownership is · 
perrnitted; where public and private ownership is permitted; 
and where no public ownership exists. 
89 
In a number of Member States, the typical unit of operation is 
the municipality. Networks are often run as utility services 
in the same way as gas or electricity distribution. For 
example, in the BENELUX countries, the growth of cable 
television has been an extension of the electricity supply 
industry. This has occured without the participation of the 
Telecomrnunications Administrations. In other countries, such 
as Germany and France the Telecommunications Administrations 
·have played a central role in cable TV, in France jointly with 
the municipalities. · 
As stated in Chapter IV, as long as cable TV systems consist 
of one-way systems relaying broadcast services only, they can 
be considered outside the mainstream of telecommunications 
regulation. 
As two-way usage becomes a technological possibility, the 
relationship of cable TV networks to the general 
telecommunications network infrastructure will have to be more 
closely defined. 
Current trends indicate that there will be a growing number of 
two-way cable TV applications in the Community. Technically, 
the main network infrastructure and cable TV networks will 
grow more and more closely together, as part of the general 
evolution towards integrated broad-band communications. In 
the long term the future relationship of Telecommunications 
Administrations and céble TV operators will have to be more 
clearly defined, in order to ensure the future overall 
integrity of the telecommunications infrastructure. 
5. The Common Market in network eguipment 
The network equipment market -transmission and public 
pWitching equipment -currently accounts for 65 -70% of the 
ECU 17.5 billion telecommunications equipment market in the 
Cornrnunity. This market is dominated by the purchasing 
behaviour of the Telecomrnunications Administrations. 
The economics of the network equipment market have changea 
dramatically over recent years. l' 
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Digitisation -and the associated new transmission techniques 
of optical fibre and satellite -have dramatically pushed up 
the industry's research and development costs. In one of 
Europe's traditionally strong sectors -public switching 
systems -the cost structures have been completely reversed. 
In 1970, software, the major component of R & D costs, 
accounted for 20% of total deveiopment costs, while hardware 
accounted for 80%. By 1990, this ratio will be reversed -80% 
for software development and 20% for hardware. Currently, the 
software to operate a public switching system comprises some 
one million programmed instructions. For the early 1990s, with 
the growing complexity of switches, it is estimated that this 
figure will have risen to three million. A new public digital 
switching system will have to secure 8% of the world market in 
order· to obtain sound economic viability (see below) . But no 
national telecommunications market in the Community -the traditional base of manufacturers in the Community 
corresponds to more than 6% of this market. 
According to the Union of Industries of the .European 
Community, "in the future the size of national markets will be 
increasingly inadeguate for dealing in the quantities . 
necessary to cover the costs of the research, development and 
marketing of most telecommunications products. The cost of 
developing a digital telephone exchange system, including the 
development of the software, is over US$ l billion. If the 
introduction of a digital telephone exchange system is to be 
economically viable, the system must reach 8% of the world 
market. It is therefore important, while exercising 
appropriate caution in opening up the markets, to bring about 
the common internal market -which accounts for 20% of the 
world market -without undue delay" 
" .... in future the rules of competition in Europe must be 
geared more to world market requirements, and should not 
hinder cross-border consortia of telecommunications companies. 
Telecommunications requirements must be tackled on a common 
front, not individually. To ensure the future international 
competitiveness of European firrns, it is vital to have increased cross-border co-operation in R & D. The European 
Community has an important initiating and co-ordinating 
function in this regard." 
("A Telecommunications Policy for Europe", Report by UNICE, 
Dec 1986). 
91 
This change in the economics of the sector has led to 
substantial restructuring of the Community's 
telecommunications industry recently. European industry has 
reacted and has formed new trans-national alliances to build a 
new economic base for successful competition on the world 
market. 
This restructuring of the supply side of the Community's 
telecommunications market must now be matched by a 
reorientation of the Telecommunications Administrations' 
procurement policies away from a purely national base towards 
a European base. 
According to the report cited above, the Telecommunications 
Administrations " ... are able to exert a very substantial 
influence on the telecommunications markets and thus on their 
countries' economies as a whole ... " 
" ... In the medium term the solution to the European 
"problématique" lies in opening up the system of public 
procurement in Europe." (UNICE, Report, op. cit. ) 
The Telecommunications Administrations dominate traditional 
~telecommunications equipment markets. The development of a 
common market in network eguipment must therefore go hand in 
hand with a substantial increase in the transparency of 
procurement procedures of the Telecommunications 
Administrations, in order to ensure an open market in 
telecommunications equipment. 
As the Commission has pointed out previously, an efficient 
policy aimed at opening up public procurement in the network 
equipment market 
"must take account of ·the objective constraints imposed by the 
co~existence of different products within the same network 
the components of a network must: 
"a) be compatible with one another as regards their basic 
functions, such as interconnectability. These problems 
are solved, as far as international telecommunications 
are concerned, by the CCITT recommendations ; l ') 
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mesh with the rnethod of operation of the network under 
consideration 
"c) be able to be covered by pre-existing maintenance 
schernes and arrangements under f avourable economic 
conditions." 
{"Progress Report on the Thinking and Work done in the field 
of Telecornrnunications and initial Proposals for an Action 
Programme", Communication from the Commission to the Council 
on Telecornmunications, COM (84) 277, 18.5.1984) ·. 
The Commission has made it clear that it considers the opening 
of public procurernent as a precondition for achieving the 
completion of the internal market by 1992. Given the specifics 
of the telecommunications network equipment market, a 
step-by-step approach is called for. -
The main elements needed are as follows (for details see 
Chapter VII) : 
1) Rapid progress towards common specif ications for network 
eguipment. Open specifications for network equipment 
are a precondition for progress towards open 
procurement. Council Recommendation 84/549/EEC calls on 
the Member States to ensure that Telecornrnunications 
Administrations "from 1986 onwards, when they order 
digital transmission and switching systems ... do so 
taking full account of recognised standards in the 
Community." 
2) Full application of Council Recommendation 84/550/EEC 
requiring that Member States ensure that 
Telecommunications Administrations provide opportunities 
for undertakings established in other Cornrnunity 
countries to tender for at least 10% in value of their 
annual orders regarding contracts for switching and 
transmission apparatus. 
3) Close surveillance to ensure that tenderers from other 
Member States are not discriminated against. Article 7 
of the Treaty expressly prohibits discrimination on the 
grounds of nationality. This surveillance must also 
ensure that no breach of Article 30 is occasioned. Il L 'I . '! 
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The transition towards a Community-wide market for network 
eguipment could be substantially accelerated by rapid progress 
towards more transparencv in procurement orders by 
Telecommunications Administrations, in particular by : 
Substantial acceleration of the use of common 
specif ications. While network equipment is currently 
excluded from application of Council Decision 87/95/EEC 
the Commission has announced its intention to present a 
further proposal requiring comrnon specifications to be 
used in public purchasing. 
Progressive extension of the application of 
Recomrnendation 84/550/EEC to a larger percentage of the 
total volume of orders by Telecornrnunications 
Administrations. The final airn should be replacement of 
the Recommendation by a Directive, in order to establish 
a firm basis for market transparency in the sector. 
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6. Conclusions 
Analysis of the regulatory situation and the current trends of 
adjustment in the Membet States shows that there are 
convergent trends in current thinking. There is therefore the 
genuine possibility of reaching agreement on broad cornrnon 
regulatory aims for the. telecommunications sector in the 
Community. 
Trends are converging towards 
opening of the terminal markets to cornpetition 
a cornpetitive value-added services (VANs) sector 
separation of the regulatory and operational functions 
maintenance of exclusive or special rights for the 
provision of the network infrastructure and a restricted 
number of basic services and 
more cost-oriented pricing for these services. 
Telecommunications Administrations would be able to compete in the competitive markets. 
The common objectives at the Cornmunity level should lead to 
the progressive irnplementation of : 
a common market in telecommunications terminal· 
equipment ; 
a common market in telecornmunications services 
a common market in telecommunications network equiprnent. i ! 
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Fig. 9 lists three essential changes required to advance 
towards a competitive common market. 
Progressive complete opening of the terminal market to 
competition. 
The change from the existing situation of sole supply of 
certain terminal equipment, in particular the first 
telephone set, to a competitive environment will have to 
allow, in certain instances, for a sufficient but 
defined tirne period for industry to adapt to the new 
situation. 
Acceptance of clear interconnect and access obligations 
by the Telecommunications Administrations for 
trans-frontier service providers within the Community. 
Details of ways of allowing access for cornpetitive 
service providers to the network infrastructure must be 
defined. An appropriate means would seern the 
development of a Directive on Open Network Provision (0 
N P). 
A clear separation of regulatory and operational 
functions where this still has not been brought about. 
In a more competitive environment, the 
Telecommunications Administrations cannot continue to be 
both referee and player. 
All-Member States currently face the difficult task of 
adapting their Telecommunications Administrations to their 
future role as participants in the new competitive markets and 
to choose a status (public/private) most appropriate, 
according to their perception, to match the new market 
conditions. 
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96 
While it seerns likely that the positions in the Member States 
will converge on maintaining exclusive provision of network 
infrastructure on their territory by a single 
Telecommunications Administration, or a very limited number of 
Administrations, their future interface with the competitive 
sector must be def ined anew : 
regarding service provision, and given the blurring of 
boundary lines between basic services and enhanced 
services, the relevant distinction in the future will be 
between those services for which exclusive provision by 
the Telecommunications Administrations continues to be 
acceptable for the time being, and all other services 
which will be open to competition ("cornpetitive 
services"). Voice telephony seems to be the only 
obvious candidate for exclusive provision. "Value-added 
services" and other services would fall under 
"competi tive services" ·; 
regarding the provision of leased lines and resale of 
capacity, all Member States currently_agree on the 
necessity of securing the financial viability of their 
Administrations, either by excluding pure resale of 
voice on leased lines or by tariff schernes which rnake 
pure resale of voice to third parties unattractive, such 
as usage-based tariffs. Both rnethods will have to be 
accornmodated in the Community. However, both rnethods 
must be limited to a legitimate level of protection of 
financial viability and must not represent the misuse of 
a dominant position ; 
regarding tariff principles, tariff structures are 
currently undergoing major changes in all Member States, 
and internationally. There is growing recognition of 
the fact that telecornmunications tariffs should follow 
overall cost trends and that a certain arnount of 
re-balancing of tariffs will be inevitable. A fair 
trade-off between cost-orientation and the airn of 
universal service on reasonably the sarne terrns for all 
will have to be developed ; 
regarding adjacent infrastructures / services, exclusive 
provision will have to be narrowly defined. 
97 
Given the trend in satellite communications towards 
point to multi-point 'broadcasting' applications for 
closed user groups, the regulatory regime for receive 
only earth stations (ROES) for satellite communications 
should be assimilated to the regime for 
telecommunications terminals and TV receive-only 
satellite.antennae and fully opened to competition. 
Two-way satellite communications and the regulation of 
up-links will need case-by-case consideration. 
Competition should be a possibility in those cases where 
interference with other satellite or radio 
communications systems is not to be expected and where 
the revenue base and financial viability of the general 
network infrastructure provider is not put into 
question. In the case of very small satellite antennae 
(VSAT or "microterminals") suitable for data exchange 
only, these conditions should normally be automatically 
assumed to be met. 
Where cable-TV network infrastructure .is also used for 
two-wav communications, its relationship and interfacing 
with the overall telecomrnunications network will have to 
be more clearly defined, in order to ensure the 
long-term overall integrity of the telecomrnunications 
infrastructure. :1 
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VII COMMUNITY TELECOMMUNICATIONS POLICY 
DATE THE ACHIEVEMENTS TO 98 
The overall policy framework for Community goals and 
initiatives was made explicit and formalised in the 
Com~ission's Telecommunications Action Programme, detailed 
after intensive consultation with the Senior Officials' Group 
on Telecommunications (SOG-T) 1Communication by the 
Commission to Council on Telecommunications, COM (84)277, 
18.5.1984] and approved by Council the same year [Minutes of 
979th Meeting of the Council, 17.12.1984]. 
In following the Action Programme, the Commission has, within 
the last two years, made proposals along five main lines : 
cc-ordination regarding future development of 
telecommunications in the Community and common 
infrastructure projects. This concerns in particular 
the principal future stages of network development 
the Integrated Services Digital Network (ISDN), digital 
mobile communications, and the introduction of future 
broadband communications ; 
creation of a Community-wide market for terminals and 
equipment. Pro~otion of Europe-wide open standards, in 
order to give equal opportunity to all market 
participants ; 
the launch of a programme of pre-competitive and 
"pre-normative" R&D, covering the technologies required 
for Integrated Broadband Communications (the RACE 
Programme) ; 
promoting the introduction and development of advanced 
services and networks in the less-favoured peripheral 
reg ions of the c·omrnuni ty ; 
building up comrnon European positions with regard to 
international discussions in this area. ; .: 
1 
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Since then, in close co-operation with the Senior Officials 
Group on Telecommunications (SOG-T), substantial progress has 
been made. Fig. 10 shows the Decisions, Regulations, 
Directives and Recommendations adopted and the major 
proposals currently before Council. 
Progress to date has been founded mainly on three factors : 
implementation within the context of a consistent Action 
Programme fully backed by Council and the SOG-T ; 
creation of a framework of co-operation with the 
Telecommunications Administrations and industry, in 
particular with CEPT and CEN-CENELEC ; 
full alignment with the main broad goals of the 
Community : completion of the Internal Market ; general 
policy on standardisation ; Research/Development/ 
Technology policy ; economic and social cohesion ; 
competition policy. 
A detailed review of progress is given in Communication frorn 
the Commission to the Council on European Telecommunications 
Policy, COM(86)325, 5.6.1986 . 
Those decisions most essential to the current restructuring 
process are reviewed below. 
Standardisation in Information Technologies and 
telecommunications, and co-operation with CEPT 
Digitisation requires agreement on high-level protocols for 
services and on network interface standards for terrninals to 
ensure proper communications. Standardisation therefore has 
become a cornerstone of a policy for : 
ensuring the future integrity of the telecommunications · 
infrastructure in the Community ; 
ensuring future open competitive markets 
promoting future interoperability of telecommunications 
services. 1 1. 
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COUNCIL DECISIONS TAKEN IN THE FIELD OF TELECOMMUNICATIONS 
SINCE 1984 
COUNCIL RECOMMENDATION OF 12 NOVEMBER 1984 concerning the 
impleme~tation of a common approach in the field of 
telecommunications (84/549/EEC) 
COUNCIL RECOMMENDATION OF 12 NOVEMBER 1984 concerning the f irst 
phase of opening up access to public telecommunicati_ons contracts 
(84/550/EEC) 
COUNCIL DECISION OF 25 JULY 1985 on a def inition phase for an R&D 
programme in advanced communications technologies for Europe (RACE) 
(85/372/EEC) 
COUNCIL RESOLUTION OF 9 JUNE 1986 on the use of videoconference and 
~ideophone techniques for intergovernmental applications (86/C 
160/01) 
COUNCIL DIRECTIVE OF 24 JULY 1986 on the initial stage of the 
mutual recognition of type approval for telecommunications termjnal 
equipment (86/361/EEC) 
COUNCIL REGULATION OF 27 OCTOBER 1986 instituting a Community 
programme for the development of certain less-f avoured regions of 
the Community by improving access to advanced telecommunications 
services (STAR programme) (86/3300/EEC) 
COUNCIL DIRECTIVE OF 3 NOVEMBER 1986 on the adoption of common 
technical specif ications of the MAC/packet family of standards for 
direct satellite television broadcasting (86/529/EEC) 
COUNCIL DECISION OF 22 DECEMBER 1986 on standardisation in the 
field of in~ormation technology and telecommunications (87/95/EEC) 
COUNCIL RECOMMENDATION OF 22 DECEMBER 1986 on the co-ordinated 
introduction of the Integrated Services Digital Network (ISDN) in 
the European Community (86/659/EEC) 
Fig. 10 Ccont'ed) 
PROPOSALS CURRENTLY BEFORE COUNCIL 
PROPOSAL FOR A COUNCIL REGULATION OF 29 OCTOBER 1986 on a Community 
action in the field of telecommunications technologies (RACE) 
PROPOSAL FOR A COUNCIL REGULATION OF 1 DECEMBER 1986 introducing 
the preparatory phase of a Community programme on trade electronic 
data interchange systems (TEDIS) 
PROPOSAL FOR A COUNCIL RECOMMENDATION OF 9 FEBRUARY 1987 on the 
co-ordinated introduction of public pan-European digital mobile 
communications in the European Community and PROPOSAL FOR A COUNCIL 
DIRECTIVE on the frequency bands to be made available for the 
co-ordinated introduction of public pan-European digital mobile 
communications in the European Community (*). 
(~) approved by Council on llth June 1987 ~·· 
. i 
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The Cornmunity's standardisation policy in information 
technologies and telecommunications must be seen in the 
context of the general new approach to harmonisation, as 
approved by Council in 1985 [Council (Internal Market 
meetings) on 26.10.1983, 25.11.1983, 8.3.1984, 7.5.1985.] 
concentrating harmonisation on essential aspects and 
acting to promote the drawing up of advanced standards 
and technical specif ications through European 
standardisation bodies. The Commission is to ensure 
that common standards become_binding on all Member 
States through Directives and be used in calls for 
tender for public contracts. 
deterrnining whether national regulations arè excessive 
in relation to the mandatory requirements thus created 
and, if so judged, designating them as unjustified 
barriers to trade as defined in Articles 30-36 of the 
Treaty 100 
application of Directive 83/189/EEC aim1ng to prevent 
the introduction of new national regulations potentially 
impeding intra-Community trade. This obliges Member 
States to notify the Commission in advance of all draft 
regulations concerning technical specif ications that 
they intend to introduce. A legislative standstill must 
be observed by the notifying State, following the 
exarnination of the draft regulation, if the Commission 
or a Member State has expressed a justif ied opinion, as 
in the case where the proposed regulation rnight create 
barriers to trade and especially if specific action 
under Articles 30 or 100 is envisaged. A similar 
obligation exists regarding the advance notification of 
drafts of national standards by the National Standard 
Bodies. This Directive also makes it possible to 
realise European Standards. ........ , '•11 1· 
'J l ; 
As the Commission has pointed out in its White Paper 
çoncerning the Interna! Market [White Paper concerning the 
completion of the Internal Market, Communication from the 
Commission to the Council, COM(85)310, 14.6.1985 ] : 101 
"while a strategy based purely on mutual recognition would 
remove barriers to trade and lead to the creation of a 
genuine comrnon trading market, it might well prove inadequate 
for the purposes of the building up of an expanding market 
based on the cornpetitiveness which a continental-scale 
uniform market can generate. On the other hand, experience 
has shown that the alternative of relying on a strategy based totally on harmonisation would be over-regulatory, would take 
a long tirne to irnplernent, would be inflexible and stifle 
innovation. 
"What is needed is a strategy that combines the best of both 
approaches but, above all, allows for progress to be made 
more quickly than in the past." 
However, within this general framework, standardisation in 
information technologies and telecommunications must take 
account of the specif ics of the sector : 
guaranteeing a maximum of interoperability and 
inter-working between systems · 
recognising the importance of international 
standardisation in this field (in particular CCITT, ISO) 
and the need to achieve comrnon interpretation of these 
international standards for the Cornmunity ; 
insisting on the requirement for open systems, such as 
guaranteed by the OSI and ISDN standards system. 
In May 1984, the Council of ~inisters expressed its agreement 
with the following general points : 
the priority to be given to international 
standardisation (ISO, IEC, CCITT, CCIR) and in 
particular to the most recent work leading to the 
preparation of standards furthering Open Systems 
Interconnection (OS!) ; J 
.. 1·.: ,. 
._,. 
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102 
the essential need to ensure harmonised application, at 
European level, of international standards to ensure 
data communication and interfunctioning between 
systems ; 
the creation of a Senior Off icials Group on Information 
Technology Standards {SOGITS) in the field of 
Information Technologies which, in conjunction with the 
Senior Officials Group on Telecommunications {SOG-T), 
assists the Commission in the implementation of a 
European policy. 
the systematic us~ of the structures and p~ocedures 
already available ;. 
the convergence of Information and Telecommunications 
Technologies, with the consequences for maintaining 
coherence in standards relating to these two fields ; 
encouragement of the creation of strong, co-ordinated 
support for the European standardisation policy. 
The Council of Ministers stressed the need to implément this 
policy urgen1=_!y. 
The implementation of these guidelines has led to a number of 
Council Directives and Decisions, reviewed below. It has 
further led to close co-6peration with CEPT (on 
telecommunications standards), CEN-CENELEC (on information 
technology standards) and industrial organisations such as 
ECMA and the newly formed SPAG. 
Details of these relationships are given in Fig.Il. Further 
details of the co-operation with, and the set-up of, CEPT are 
given in APPENDIX 3. 
Objectives, legal instruments, organisational framework and 
current problems are briefly reviewed below. 
Fig. 11 
ORGANISATIONAL RELATIONSHIPS IN 
STANDARDS DEV~LOPM~NT I_~ EUROPE 
CEPT ITSTC CEN-CENELEC 
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--soGT 
USERS 
INDUSTRV INTRODUCTION 
INTO 
NATIONAL 
STANDARDISATION . 
SOGITS 
ECMA 
TElECOMS IT 
Legend 
CEN-CENELEC: 
CEPT: 
ECMA: 
ITSTC: 
NET: 
50$-T: 
SOGITS: 
SPAG: Joint Europeon Standards lnstiMion (European Committee for standardisation / · 
· Europeon Committee for electrcrtechnical standardisation) 
Eurooe0n Conference of Postal and Telecommunications Administrations 
European Computer Manufacturers' Association . 
Information Technology Steering Committee (made up of representatives from 
CEN-CENELEC and CEPT) 
Normes Européennes de Télécommunications 
Senior Officiais Group on Telecommunications 
Senior Officiais Group on Information Technology Standards 
Standards Promotion and Application Group ' f. 
_a\." 
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1 
1.1. Objectives 
The Community aims to use to the maximum standards and 
specif ications based on international standards and 
recommendations. This concerns in particular the 
recommendations of CCITT and CEPT. 
These international standards or recommendations must be 
reviewed at the technical level in order to make them 
a) precise ; 
b) unambiguous 
c) complete, and this might include the addition of 
conformance testing procedures. 
On this basis are produced 
common standards and 
common conformity specifications 
with the aim of 
development of a Community-wide market and 
Community-wide compatibility of terminal equipment. 
1.2. Legal Instruments 103 
Since 1984, the Community has built up a set of legal 
instruments which will form the framework for Community 
standardisation policy in information and telecommunications 
standardisation, as they corne into force. 
1.2.1. Council Directive 86/361/EEC on the initial stage 
of the rnutual recognition of type approval for 
telecornrnunications terminal eguiprnent of 24th July 
1986. ' 1 
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104 
In July 1986, an important step forward was taken with the 
adoption by the Council of a Directive on the mutual 
recognition of the results of conformity tests on terminal 
equipment. The directive, which will corne into force in July 
1987, says that no further tests for a particular type of 
terminal equipment are needed where the results of tests 
carried out have already led to the issuing of a certificate 
of conformity with the relevant common conformity 
specif ication. With a few exceptions, such certificates of 
conformity shall be recognised for the purpose of type 
approval of the terminal equipment in question by all Member 
States. The common conformity specifications should be drawn 
up in view of their uniform application in al! Member States 
of the Community. 
Member States shall also ensure that the Telecommunications 
Administrations use common conformity specifications when 
purchasing terminal equipment covered by such specifications. 
The Directive gives the Commission a brief : 
to draw up each yeai a list of international standards 
.and technical specif ications in telecomrnunications to be 
harmonised, and a list of terminal equipment for which 
comrnon conformity test specifications should be drafted 
as a matter of priority ; 
to draw up a timetable for this work ; 
to request the CEPT to draw up the common conformity 
specif ications in the form of European 
Telecommunications Specif ications (NETs Normes 
Européennes de Télécommunications see below and 
APPENDIX 3). 
the Commission shall be aèsisted in its work by a 
Committee which shall be the Senior Officials Group on 
Telecommunications (SOG-T). 
The Directive defines "essential reguirements" as 
"those aspects of common conformity specifications of such 
importance as to necessitate compliance as a matter of legal 
·obligation for the irnplernentation of the rnutual recognition 
of the results of conformity tests on terminal equipment as 
an integral part of the type approval procedure. These 
essential requirements are at present 1 
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user safety in so far as this requirernent is not covered 
by directive 73/23/EEC 
safety of ernployees of public telecornrnunications network 
operators in so far as this requirernent is not covered 
by Directive 73/23/EEC 
protection of public telecornrnunications networks from 
harm ; 
interworking of terminal equipment in justi"f ied cases." 
The last point applies, in the Commission's interpretation, 
in particular to terminals related to services for universal 
provision, in particular those services recommended by 
Council for Community-wide provision, such as according to 
Council Recommendation 86/659/EEC on the Co-ordinated 
Introduction of ISDN (see below). This may require, 
depending on the case given, specifying NETs up to layers 6 
and 7 of the OS! seven layer model. 
The Commission has also announced that it will submit to 
Council shortly a general Directive on safety of machines and 
radio-electric compatibility which together with Directive 
73/23/EEC will be of relevance regarding general requirements 
for telecommunications equipment. · 
Mutual recognition of type approval will play a central role. 
for a Community-wide terminal market (see Chapter VI). 
According to the Directive, the Commission should make 
proposals to extend·the current Directive to full recognition 
of type approval before July 1989. Given the importance of 
rapid progress, the submission of these proposals is to be 
accelerated. 
1.2.2. Decision 87/95/EEC on standardisation in the field 
of information technology and telecommunications, 
of 22nd December 1986 
The Decision was adopted in December 1986. It will corne into 
force in February 1988, one year after its publication in the 
Official Journal. 
106 
The Decision covers : 
" standards in the field of information technology 
functional specif ications for the services specif ically 
offered over the public telecommunications networks for 
exchange of information and data". 
It excludes common technical specif ications for terminal 
equipment covered by Directive 86/361/EEC (see above) and 
equipment belonging to any part of the telecommunications 
network infrastructures themselves. 
According to the Decision, the following measures will 
ap.ply : 
regular, at least annual, determination of priority 
standardisation requirements ; 
requesting European standards institutions and· 
specialised technical bodies in the information 
technology sector to establish "European standards" 
(ENs), "European pre-standards" (ENVs) or 
telecommunications functional specif ications based, as 
far as possible, on international standards. If 
necessary, they will have recourse to the drafting of 
functional standards to ensure the precision required by 
users for the exchange of information and data and 
system interoperability ; 
facilitating the application of standçrds in the 
verification and certification of products ; 
Member States shall ensure that reference is made to ENs 
and ENVs and international standards in public 
procurement orders. 
The application of standards in public procurement is an· 
inseparable part of the proposed approach and is justif ied by 
a dual relationship : 
~ the preparation of national and proprietary 
specif ications is a serious obstacle to the opening-up 
of the market ; .. 
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i 
the use of standards for public procurernent helps to 
prornote thern, and rnany users outside the public sector 
readily follow the exarnple given once they know that 
these standards are in common use. 
Regarding network equipment, currently excluded from the 
application of the Decision, the Council and the Commission 
have asked the CEPT to work progressively towards 107 
specif ications for such equiprnent. The Commission has stated its intention to present a further proposal to reqvire such 
specif ications to be used in public purchasing [Statements 
for the Council Minutes, Council Meeting of 22.12.1986]. 
Network equipment specif ications are currently excluded in 
relation to procurement; but it should be noted that, in the 
new digital environment, the provision of end to end 
compatibility requires that functional specifications should 
be well harmonised, especially in relation to signalling. 
Regarding telecommunications network interface 
specifications, the Decision states (Article 5.2} 
-"In order to provide end-to-end cornpatibility, Member States 
shall take the necessary steps to ensure that their 
Telecornmunications Administrations use functional 
-specif ications for the means of access to their public 
telecommunication networks for those services specif ically 
intended for exchange of information and data between 
information technology systems which themselves use the 
standards mentioned in paragraph l." 
This'means that network interface specifications of 
Telecommunications Administrations will have to be based on 
NETs, ENs, ENVs or other accepted international standards. 
1.3. Orqanisational framework 
1.3.l. Memorandum of Understanding between the European 
Conf erence of Postal and Telecommunications 
Administrations and the Commission concerning 
standards and type approval 
The Memorandum of Understanding establishing a f ramework of 
co-operation between the Community and CEPT was signed in 
July 1984 .. According to the Memorandum, the CEPT produces 
common standards and specif ications for type approval in 
priority sectors, determined at Community level. 108 
Current priorities considered under the agreement are : ISDN, 
OSI, mobile telephony, teletex, telefax group IV, videotex 
and criteria for recognised test laboratories. 
Parallel to the adoption of the Directive on the mutual 
recognition of type approval for telecommunications terminal 
equipment (see above), the CEPT took complementary action to 
streamline its work and to make the application of its own 
recomrnendations more effective. It therefore established 
mechanisms to select those recommendations which should 
become binding in those countries which signed an agreement 
drawn up by the CEPT at Copenhagen on lSth November 1985, in 
the form of so-called NETs (Normes Européennes de 
Télécommunications) Csee above). 
Similar to the provisions in the Directive, those signatories 
of the agreement which are not Member States of the Community 
have also resolved to use NETs or parts thereof for type 
approval purposes. They have furthermore decided to create 
within CEPT an autonomous Technical Recommendations 
Application Committee {TRAC) which will be responsible for 
the implementation of the agreement. Within this Committee 
unanimity is required to decide which terminal equipment 
technical recommendations are candidates for mandatory 
application. The decision whether a terminal equipment 
technical recommendation shall become a NET is taken by 
(weighted) majority voting. 
1.3.2. The general guidelines approved with the joint 
standardisation organisation European Committee for 
Standardisation/European Committee for Electro­
technical Standardisation (CEN/CENELEC) l . l f 
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109 
The Commission has concluded an agreement with CEN/CENELEC 
similar to the Memorandum of Understanding with CEPT .. Since 
June 1984, these bodies have agreed to carry out the 
necessary work in the field of information technology and 
have reorganised their structure ând procedures. 
Under the arrangement : 
CEN/CENELEC can be comrnissioned to carry out the 
necessary technical work, in particular for the 
preparation·of an EN standard. According to framework 
contracts signed in 1985 between CEN/CENELEC oh the one 
hand and the EC and EFTA on the other, the placing of 
orders for such work can involve a f inancial 
participation. 
The adoption of rules cornmon to CEN and CENELEC now 
facilitates-work carried out jointly (for exarnple 
standards are now adopted by the same weighted rnajority 
balloting system). 
The setting-up of a Steering Cornmittee specific to 
information technology (ITSTC) enables the work to be 
monitored and ensures proper links with other committees 
responsible, for example, for certification or 
standardisation of advanced manufacturing equipment. 
The reverse procedures also provide for a f irst stage 
whereby development standards (ENV standards) can be 
rapidly adopted and verified experirnentally. After a 
two-year period, the ENV standard becomes an EN standard 
in accordance with the normal procedure. 
110 
The current priorities, determined in October 1984, 
include : 
OSI -layers 1 to 3 
network interface, LAN connectors, etc. 
OSI -higher layers· 
transport, file transfer, etc. 
electronic message handling and document transfer 
MHS -teletex 
character sets 
formal description techniques -security 
supplements to standards for exchange of data stored on 
magnetic media and printer interfaces 
This list has been updated and CEN/CENELEC/CEPT is f ollowing 
up the proposed work programme, published under the reference 
"IT -Memorandum N 2". 
l. 3. 3 Promoting the development of recognised conf ormance 
testing centers 
.Th~ Community has given high priority to the area of testing 
by launching projects for the promotion of conformance 
testing services capable of verifying conformity with 
functional standards. 
On the basis of a Call for Proposals published in 1985, a 
programme for the development of test facilities and 
provision of conformance testing services was launched at the 
end of 1985 and the contracts were signed early in 1986. 
1.3.4. Co-operation with industry 
The European telecommunications and information industry has 
substantially stepped up its commitment to open international 
standardisation, in particular based on co-operation and 
commmon projects in the framework of ESPRIT and RACE. . : . ~ 
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111 
As early as January 1984, twelve major European IT companies 
clearly indicated their support for a standardisation policy 
based on a harmonised implementation of international OSI 
{Open Systems Interconnection) standards and expressed their 
commitment to the implementation of such standards in their 
products. 
The creation of the Standards Promotion and Applications 
Group (SPAG) has allowed these companies to ~trengthen their 
contribution to the standardisation work and to establish 
further links with other similar organisations (USA and 
Japan} to promote international co-operation i~ this field. 
At the same time, European industry has created a broader 
organisational base for this work. In 1985, the European . 
Telecomrnunications and Prof essional Electronics Association 
(ECTEL) was founded as a joint conference by ECREEA and 
EUCATEL ("European Conference of Radio and Electronic 
Equipment Associations" and "European Conference of 
Associations of Telecommunications Industries''). ECTEL has 
created the "ECTEL Study Group for CEPT harmonisation" in 
order closely to interact with standardisation work in CEPT. 
1.3.5. The continuing lack of resources 
Cornmon standards and specifications are a pre-condition for 
an·operi competitive market. The substantial reinforcement of 
the international standards process and its application to 
network infrastructure and services is a pre-condition for 
the development of a Common ~arket for equipment and 
services. 
The f ramework for accelerating the process is in place 
the Directives set out above provide a f irm legal 
basis ; 
the co-operation agreements with CEPT and CEN-CENELEC 
provide the framework for working out NETs, ENs, and 
ENVs with the required technical authority. ,. 
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112 
The major objective must now be to make this framework work. 
Directive 86/361/EEC and Decision 87/95/EEC can only become 
effective if NETs and EN/ENVs are produced by the standards 
organisations on time and in sufficient quantity. 
As discussed in Chapter III, the convergence of 
telecommunications and information technology has made the 
international standardisation process substantiaily more 
complex. Agreement on highly detailed network interface 
standards and on high-level protocols is needed to ensure 
proper connection and interworking of the highly 
sophisticated digital terminals of the future. 
If Telecommunications Administrations are to provide open 
network access to competitive services, and if they want to 
guarantee efficient national, Community-wide and world-wide 
communications, the production of standards will have to be 
dramatically accelerated. 
Shortages in standardisation have been one reason for the 
insufficient provision of Community-wide communications in 
new services such as X.25 networks, teletex, videotex 
[see "Clearing the Lines, a User•s view on Business 
Communications in Europe", Round Table of European 
Industrialists, October 1986]. 
CEPT and CEN-CENELEC have shown a noteworthy ability to adapt 
to the new requirements. In the framework of their 
co-operation agreements with the Commission, they have 
streamlined their working methods and a number of NETs and 
EN/ENVs are expected to be produced on schedule. 
But the two organisations have to continue to 
basis of non-industrial working methods, based 
group meetings and part-time availability of 
Telecommunications Administrations' experts. 
with industry which is now indispensable, has 
st~engthened, but is still not on a permanent work on the 
on working 
Co-ordination 
be en 
working level. [; 
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J 
In the past, lack of resources for the international 
standards process has been one major contributing factor 
leading to incompatible national or proprietary 
specifications. National or proprietary specifications can 
be anti-competitive. 113 
The United States have substantially strengthened their 
standards setting process and input to CCITT in the wake of 
deregulation. Within BELLCORE, jointly owned by the now 
independent Bell Operating Companies (see APPENDIX 1), 8000 
permanent staff work jointly on technological development, at 
least 20-30% of which is on standards and specif ications 
(Fact Finding Mission Report by the Commission of the 
European Communities, June 1986]. 
The establishment of a more competitive market must go in 
parallel with a substantial strengthening of resources in the 
standardisation process. The Community can contribute 
substantially, as has been shown by the programme for the 
promotion of recognised conformance testing centers, carried 
out jointly with the Telecommunications Administrations. 
It is now time to consider together with CEPT and CEN-CENELEC 
the best way to establish industrial working methods based on 
permanent teams, including an increased contribution by 
industrial and user experts. The strengthening of the 
process must go substantially beyond current resources 
available for the TRAC mechanisms and for a number of 
permanent nuclei which have been set up by CEPT. The only 
efficient solution for creating a permanent basis will be the 
establishment of a stable physical centre. Such a European 
Telecommunications Standards Institute could provide the 
permanent core functions on which the acceleration of 
standards work can be based. In this way it would create the 
institutional conditions for a strengthening of the current 
framework of co-operation of the Telecommunications 
Administrations and industry within CEPT and CEN-CENELEC. 
2. Promoting the co-operative developrnent of advanced 
telecornmunications in Europe 114 
A future Cornrnon Market in services and equiprnent in the 
Community will only becorne effective if efficient 
Community-wide advanced network infrastructures is made 
available. The Action Programme since 1984 has strongly 
emphasised this aspect, closely related to the establishment 
of Community-wide specifications for network infrastructure 
and services. 
Depending on the time horizon, advanced infrastructure and 
service development need a combination of : 
R&D, in areas where technology still needs to be 
developed and "pre-norrnative" work needs to be 
undertaken ; 
agreement on standards, in areas wher~ technological 
feasibility and capability has been established but 
agreement on specif ications is needed to create the 
necessary economies of scale and scope 
investrnent,in areas where the economic and technological 
basis has been established. 
It is with this framework in mind that within the mandate 
given by Council, the Action Programme in telecornmunications 
has been developed. 
Details are set out below. The actions aim at developing a 
favourable environrnent for telecomrnunications investments. 
. Beyond the programmes set out the Community makes, via its 
financial instruments, a substantial contribution to 
telecommunications investment. In 1985, loans for 
telecommunications investment by the European Investment Bank 
and the New Community Lending Instrument (NIC) have totalled 
572 million ECUs. Total contributions from the European 
Regional Fund, within the framework of its annual operations 
were 162 million ECUs. 
In order to facilitate the determination of concrete medium­
and long-term objectives the Analysis and Forecasting Group 
(GAP) has been set up as a sub-group of the Senior Off icials 
Group on Telecommunications (SOG-T). GAP is cornposed of 
representatives of the Telecommunications Administrations and 
their ministries, officials from the ministries of economics, 
industry and science and representatives of the Commission. 1 1 
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115 
In addition to the GAP members, designated participants from 
supplier industries have taken part in the deliberations on 
specif ic subjects. Detailed work undertaken in GAP and 
conf irmed by the SOG-T has been the basis of important 
Community initiatives, notably on the co-ordinated 
introduction of ISDN and on second-generation mobile 
communications. GAP has also worked on the introduction of 
broadband services and has contributed to the development of 
the.RACE programme. 
The RACE pr0gramme itself was conceived and developed since 
1984 on the basis of broad consultation and participation of 
industry ~nd the European Telecommunications Ad~inistrations. 
2.1. The RACE programme 
In March and April 1985,· the Commission submitted proposals 
to the Council for a programme on R&D in Advanced 
Communications technologies for Europe {RACE) (Report of the 
Commission to the Council on R&D Requirements in 
Telecommunications Technologies as a contribut~on to the 
preparation of the R&D programme RACE, COM{85)145, 25.03.85 
Proposal for a Council Decision on a Preparatory Action for a 
Community Research and Development Programme in the field of 
Telecommunications Technologies, COM(85)113, 01.04.85]. In 
July 1985 the Council authorised an 18 month RACE Definition 
Phase beginning_on lst July 1985 [Council Decision on a 
Definition Phase for a Community action in the field of 
telecommunications technologies (85/372/EEC), L210/24, 
07.08.85]. 
In October 1986, with the Definition Phase drawing to a 
close, the Commission submitted proposals and a workplan for 
RACE Main Phase [Proposal for a Council Regulation on a 
Community action in the field of telecommunications 
technologies, COM(86)547 final, 29.10.86]. The Council is still considering this proposa!. 
This work-plan proposed a contribution of 800 million ECUs 
for the first phase (1987-1991). . . ,,. 
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The object~ves of RACE are ambitious. It aims at the 
introduction of Integrated Broadband Communications (IBC} 
taking into account the evolving ISDN and national 
introduction strategies, progressing to Community-wide 
services by 1995. Moreover, RACE requires co-operation 
between a large number of players, including the 
Telecommunications Administrations and telecommunications 
user industries and services. It involves concrete planning 
of the introduction of broadband services in the Cornrnunity 
and it involves the elaboration of common standards and 
specif ications. 
The "pre-normative" activities are extremely important. They 
not only avoid the familiar diff iculties of ex-post 
harmonisation and hence create the conditions for an 
efficient, unif ied single market in a key technology : they 
also ensure the interoperability of the future systems. 
The RACE Definition Phase (July 1985-December 1986) allowed 
the work on performance requirements and technical 
specifications to be conducted at Comrnunity level and, 
through the participation of CEPT, involving Western Europe 
as a whole. 400 experts belonging to 109 public and private 
organisations and firms participated in this definition 
phase. 
The elaboration of an IBC reference mode! the basic 
design of the European broadband network .and services -was 
carried out by three groups : 
"networks", which defined standards requirements, and 
was handled by GSLB ("Groupe Spécial Large Bande") of 
CEPT. For this purpose a permanent technical team has 
been established in Darmstadt 
"terrninals", ·involving shared cost contracts with 
rnanufacturers, research laboratories and 
Telecomrnunications Administrations ; and 
"services" carried out in the SOG-T/GAP. l,. 
., 
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RACE will provide a major tool for ensuring Community-wide 
network integrity for the telecommunications infrastructure 
of the 1990s. Regulatory reforrn of the European 
telecommunications environment must now catch up with the 
potential created by technological planning and technology 
development. Manufacturers and service providers require 
clear indications of the terms under which they will be 
allowed to operate, and of the prospects for a single 
European market. Certainty on these points will help to 
determine the degree of enthusiasrn with which industry ·will 
tackle the ~&D phase of RACE and the formation of 
cross-national alliances between Telecornmunications 
Administrations and industry. 117 
While clarifying the technical and regulatory environment is 
vital for business planning, the network operators must 
provide the needed network infrastructure well ahead of full 
commercial use. The Commission has studied, together with 
the network operators, proposals for a Comrnunity-wide pilot 
. joint infrastructure project, the Transnational Broadband 
Backbone (TBB) which is to accelerate the establishment of 
high bandwidth cross-frontier transmission links. This is at 
the final stage of evaluation in GAP and SOG-T. The 
Commission has announced for 1987 a communication to Council 
on this proposal. 
2.2. The Integrated Services Digital Network 
In December 1986 the Council issued a Recommendation for 
Co-ordinated Introduction of ISDN {Council Recommendation on 
the co-ordinated introduction of the integrated services 
digital network (ISDN) in the European Comrnunity 
(86/659/EEC), O.J. 1382/36, 31.12.86). 
The co-ordinated introduction of ISDN provides a stepping 
stone towards a future broadband network. By adapting the 
increasingly available digital narrowband infrastructure, 
ISDN will allow voice, data, text and simple video 
communication on the existing network. At the same time ISDN 
allows the creation of a ·single market for advanced 
terminals, and lays the basis for the Community-wide 
introduction of new services (see Chapter IV) .. : 1 
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118 
Unlike RACE which reaches further into the future, ISDN does 
not require substantial R&D at Comrnunity-level~ Rather it is 
based on the on-going digitisation of the telephone network. 
Joint planning at Community level was only initiated after 
some national Administrations had already advanced 
considerably on the elaboration of different ISDN versions. 
On these def initional problems, the Recommendation lays down 
timetables for agreement on the various elements, notably 
with CEPT, and a requirement for annual progress reports to 
the European Parliament. 
As to the co-ordinated introduction of ISDN, the 
Recornrnendation : 
sets an objective for 1993 market penetration, for a 
number equivalent to 5% of main lines ; 
sets an objective for 1993 availability, with 80% of 
customers having the option of ISDN access ; 
invites the Telecornrnunications Administrations to study, 
within CEPT, the question of tariffs, with a view to 
establishing tariffing principles·and rate levels which 
f avour rapid acceptance of new services by business and 
other users ; 
calls for the Community's financial instruments to 
contribute to the ext~a investments required for ISDN. 
ISDN should become the Community's future-oriented open 
network infrastructure on which services can develop. 
The Recommendation sets forth essential elements for 
providing such an open environment : 
specif ication of interfaces between the network and 
terminals ; 
specif ication of a number of end-to-end services to be 
provided with universal availability ; 
general tariff principles for ensuring an open use of 
the network infrastructure. 1 
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2.3 Advanced telecommunications services for the 
less-favoured regions (STAR Programme) 119 
In October 1986 the Council issued a Regulation instituting a 
Community programme for the development of certain 
less-favoured regions of the Community by improving access to 
advanced telecommunications services (STAR programme) 
[Council Regulation instituting a Cornmunity programme for the 
development of certain less-favoured regions of the Community 
by improving access to advanced telecommunications servies 
(STAR programme), 3300/86, O.J. L305/l, 31.lO.e6l. 
This programme is an application of the Regulation covering 
the European Regional Development Fund (ERDF) [Article 7(4), 
Council Regulation 1787/84] which entered into force in 1985. 
This regulation permits a better linkage between regional 
development objectives and other Community goals, in this 
case including peripheral regions in the development of an 
integrated and advanced telecomrnunications network in the 
Cornmunity. 
The programme concerns peripheral regions in Greece, Italy, 
Spain, Portugal, Ireland, the United Kingdom (Northern 
Ireland) and France. The programme will provide during the 
period 1986-1990 780 million ECUs. 
STAR starts from the recognition that the telecommunications 
infrastructure of certain peripheral regions lags badly 
behind the rest of the Community, while at the same time, the 
availability of telecommunications services will be a growing 
factor in the location of new industries and the viability of 
existing ones. Of particular concern are small to medium 
size enterprises (SMEs) which form the backbone of the 
economy in most of these regions. 
Accordingly, the programme involves 
substantial contributions to investment in 
telecomrnunications network infrastructure; 
finance for the development of telecommunications 
service centres, especially for SMEs; 
support, especially to SMEs for the use of terminals, 
modems, and other equipment; 
other promotional measures including technical 
assistance. 'I~ ·11,·li; [' 
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2.4 Mobile Communications 
In Feburary 1987 the Commission submitted two proposals to 
the Council 
for the co-ordinated introduction of public 
pan-European digital mobile communications in the 
Community; and 120 
on the frequency bands to be made available for this 
purpose [Proposal for a Council Recomrnendation on the 
co-ordinated introduction of public pan-European digital 
mobile communications in the Community; Proposal for a 
Council Directive on the freguency bands to be made 
available for the co-ordinated introduction of public 
pan-European digital mobile communications in the 
Community, COM{87)35 final, 09.02.87}. 
In the past, mobile communications has been one of the worst 
examples of lack of Community-wide compatibility. With the 
growing importance of mobile services, the Commission has 
acted together with the Telecornmunications Administrations. 
A"first objective of the Community has been to achieve 
agreement by Member States f irmly to reserve frequencies for 
the second generation pan-European digital system. 
Reservation of frequencies is the major precondition. for a 
future Comrnunity-wide system. The Commissîon's proposal 
referred to above follows from 1985 GAP proposals, as 
discussed by CEPT, the Telecommunications Administrations and 
industry. 
2.5. Trade Electronic Data Interchange Systems (TEDIS) 
In December 1986, the Commission proposed a programme on 
Trade Electronic· Data ·rnterchange Systems [Communication frorn the Commission to the Council on Trade Electronic Data 
Interchange Systems (TEDIS) ; Proposal for a Council 
programme on trade electronic data interchange systems 
(TEDIS), COM(86) 662 final, Brussels, 01.12.86}. 
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Trade increasingly requires a vast volume of data exchange 
between business partners ; and a high proportion is 
international. Often this data exchange is more time 
consuming than the actual manufacture or delivery of the 
traded goods or provision of the traded services. Currently 
data exchange is carried out on paper and through a 
mul~iplicity of incompatible computer systems. 
Standardised Electronic Data Interchange (EDI) has therefore 
developed as one of the most promising lines of value-added 
services, based on co-operative ventures mainly established 
by industry associations. It can afford great s~vings for 
European business -up to 10% of the cost of exported 
f inished products and 10-15% of final transport costs. This 
would clearly enhance the competitiveness of Europe~n 
economies, at a time when EDI is developing fast elsewhere, 
notably in the US. 
The proposed preparatory phase (6 million ECUs in 1987/88) 
would concentrate on developing work on standardisation, on 
promotional activities and other conditions for EDI at 
Comrnunity level, and the development of a strategy for a full 
programme phase. 
3. Application of Community competition policy to the 
telecommunications sector to date 
Rapid technological change and the related growing number of 
new opportunities have led to a rising number of cases 
relating to Community competition law being brought before 
the Commission. 
While the general application of the Treaty to 
telecommunications must be seen against the broader 
background of the Treaty and case-law set by the Court of 
Justice a number of specif ic cases and decisions are reported 
below. 
Telecommunications cases have been treated by the Commission 
under competition law basically according to two aspects : 
a state monopoly's or a public undertaking's (including 
Telecomrnunications Administrations) anti-compet~tive 
behaviour may be due to domestic laws or governm~nt 
instructions. In such cases action has been taken 
under Articles 37 and 90(1) and (3) against the 
infringing Member States ; 
. 122 
enterprises in the telecommunications or information 
technology field may be involved in· anti-competitive 
arrangements or behaviour. This may concern public 
network operators (Telecommunications Administrations) 
or "undertakings" within the meaning of Articles 85 
and/or 86 when they are not simply implementing laws or 
government instructions but are performing independent 
entrepreneurial activities. 
3. l. The "British Telecom case" 
~he case originated from a complaint lodged by a private UK 
message-forwarding agency against the UK telecommunications 
authorities. It concerned prohibitions imposed by the Post 
Office and, after the Telecommunications Act 1981, by British 
Telecom as to the transit of telexes between third countries, 
e.g. between Continental Europe and North America, and as to 
the forwarding in telex or telefax form of messages received 
via computer connections. 
A Commission decision of 10 December 1982 (OJ L 360, 21 Dec. 
1982, p.36; 12th Competition Report (1982), point 94) 
condemned such prohibitions as abuses of a dominant position. 
The Italian government challengea the decision before the 
European Court of Justice. The UK government supported the 
Comrnission's defence before the Court (Case 41/83). 
In its judgement of 20 March 1985 the Court dismissed in its 
entirety the action brought by the Italian Republic. The 
·judgement was reported in the 15th Competition report {1985, 
points 95-101} as follows: 
"In its decision, the Commission had accused BT a 
public corporation established by statute holding a 
statutory monopoly on the running of telecommunications 
systems ~n the United Kingdom -of abusing its dominant 
position within the meaning of Article 86. The main 
infringement of this provision recorded by the 
Commission was the fact that BT prohibited private 
message-forwarding agencies in the United Kingdom from transmitting via the British network messages whose 
originators and recipients were resident in other 
countries. In point of fact, several schemes adopted by 
BT between 1975 and 1981 governing the use of the public 
telecommunications network by private subscribers 
contained such restrictions. 1 
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"The schemes adopted by BT constituted, in the 
Commission's view, an abuse because they (a) prevented 
British message-forwarding agencies from offering a new 
service also to their customers in other Member States, 
(b) subjected the use of public telecommunications 
equipment to obligations which were neither technically 
nor commercially necessary and (c) placed the private 
agencies concerned at a c~mpetitive disadvantage 
vis-à-vis the national authorities and agencies in other 
Member States. 
" .... In this connection the Court like-the 
Commission before it came to the conclusion that, 
when it took action against private message-forwarding 
agencies, BT was acting not as an official body but as 
an undertaking. The management of public 
telecommunications equipment and the placing of such 
equipment at the disposal of private users on payment of 
a fee amounted by its very nature to a business 
activity. The same reasoning must apply to the 
introduction of the contested schemes, which merely laid 
down charges and conditions for the services provided by 
BT to users of the British telecommunications 
network ..... 
" .... The Court also rejected the submission to the 
effect that the application of Article 86 to the case in 
point infringed Article 222 because it encroached on 
Member States' rights to create or preserve national 
monopolies for particular economic adtivities. It noted 
that, whilst BT had a statu~ory monopoly with regard to 
the management of the telecommunications network and to 
making it available to users, it held no monopoly over 
the provision of ancillary services such as the 
retransmission of messages on behalf of third 
parties .... 
" .... The employment of new apparatus and methods which 
accelerated the transmission of messages constituted 
technical progress in conformity with the public 
interest and could not be regarded as an abuse. 
"Nor were the rneasures at issue covered by Article 
90 ( 2) .... 
124. 
" .... In the case in point, however, the conditions for 
the application of the provision were not met. The 
applicant had f ailed to demonstrate that the 
Commission's censure of BT's schemes had put the 
performance of the particular tasks entrusted to BT in 
jeopardy from the economic point of view. Whilst the 
speed of message transmission made possible by 
technological advances undoubtedly led to some decrease 
in revenue for BT, the presence of private agencies 
attracted to the British public network a certain volume 
of international messages and the revenue which werit 
with it. Taken as a whole, the results were therefore 
in no way unfavourable to BT .... " 
The British Telecom judgement clearly confirrned the 
Commission's view that the competition rules .of the Treaty 
apply to Telecommunications Administrations. 
It made also clear that the Court would favour a narrow 
interpretation of rnonopoly rights and ·would strongly 
disfavour the extension of a service monopoly, as new 
technologies arise~ 
The Court's judgement must be seen as a cornerstone for the 
future interpretation of the Treaty with regard to 
telecommunications. 
3.2. The terminal eguipment cases 
The Commission raised these cases with Germany, Belgium, 
Italy, the Netherlands and Denmark. They concern the illegality of extending the monopoly in the terminal 
eguipment sector. 
The cases raised in Germany are 
The "cordless telephone case" which was reported in the 15th 
Competition Report (1985) as follows: 
" .... The Commission challengea the German Federal 
Republic's plans to extend the Bundespost's monopoly to 
cordless telephones. l : . 
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"The German Government wished to give the Bundespost the 
exclusîve right to supply almost all equipment connected 
to the public telephone network. The only equipment 
excluded was that to be connected to private automatic 
branch exchanges (PABXs) supplied by independent f irms. 
The Commission considered that even such a partial 
monopoly fell within the second subparagraph of Article 
37(1) EEC, since equipment imported from other Member 
States could thereby not be f reely sold in Germany even if it met the country's technical standards. After the 
Commission's intervention, the German Government dropped its plans to extend the Bundespost's monopoly to 
cordless telephones." · 
The modem case was also reported in the 15th Competition 
Report which says : 
" .... The Commission also challengea the extension of the 
Bundespost's monopoly to modems (devices which allow 
equipment operating in digital mode to be connected via 
a telephone network operating in analogue mode). Here 
too, the German Government took the view that such 
equipment was an integral part of the telephone network 
and therefore could be supplied only by the Bundespost. 
The only exceptions were modems used to connect private 
digital equipment otherwise than via the public 
telephone network. 
"The Commission considered that such an extension of the 
Bundespost's monopoly fell within the second paragraph 
of Article 37(1) and that the tying of the provision of 
telephone network services to the purchase of modems was 
also an abuse of the Bundespost's dominant position as 
network operator contrary to Article 86. To terminate 
the infringements of Articles 37 and 86, the Commission 
informed the German Government that it was contemplating 
issuing a decision under Article 90 (3) ... " 
In June 1986, the Commission agreed with the Bundespost on 
adequate measures to amend the law which made the Bundespost 
the sole distributor and owner of modems in Germany. 
126 
As regards the situation in Belgiurn : 
The Commission received a complaint about the exclusive 
rights given to the Belgian telecommunications authority to 
import and supply low-speed modems and first telex terminals. 
After being informed that the rnonopoly was incompatible with 
the EEC Treaty because it denied suppliers of equipment from 
other Member States direct access to the Belgian market, the 
Belgian Government told the Commission that it intended to 
reform the provisions within three years. 
Action against Italy : 
A similar complaint was made about a monopoly of importing 
and sale of modems and f irst telex terrninals in Italy. 
Here, modems and first telex terminals to b~.connected to the 
public network may be supplied and installed only by the SIP 
(Società italiana per l'esercizio Telefonico) and the DCST 
(Direzione Centrale Servizi Telegrafici). This arrangement 
affects imports of modems and telex terminals f rorn other 
Member States as the manuf acturers of such equipment in other 
countries cannot approach Italian users directly. 
·After intervention by the Commission, the Italian Government 
announced that it was going to reform the provisions. 
Action against the Netherlands and Denmark : 
The Commission enquired about the existence of exclusive 
rights on importing and sale of terminal equipment in these 
two countries. The Dutch government announced that it was 
going to reform the provisions and negotiations are still 
going on with the Danish authorities. 
Global action 
The Commission is currently e?{amining the possible use of the 
provisions of Article 90 (3) to tackle this problem on a 
global basis. 
~.3. The IBM undertaking on SNA interfaces 
Systems Network Architecture (SNA) is the proprietary network 
standard used by IBM for interconnecting computer systems and 
networks. •l@· .r 
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On 1 August 1984, the Commission accepted a unilateral 
undertaking from IBM to provide other manufacturers with the 
technical interface information needed to permit competitive 
products to be used with IBM's most powerful range of 
computers, the System/370. The Commission thereupon 
suspended the proceedings under Article 86 EEC which it had 
initiated against IBM in Decemb~r 1980. 
In the course of the proceedings, towards the end of 1983, 
some major European computer manufacturers expressed concern 
that IBM's interface disclosure practice was also having an 
adverse ef f ect in the European market for data communication 
products (the interconnection and interaction of 
data-processing systems). Accordingly, the SNA issue was 
included in the informal discussions on interface disclosure. 
The IBM Undertaking was reproduced in full in EC Bulletin 
10-1984 (point 3.4.1.). The commitment relating to SNA 
formats and protocols reads as follows: 
"14. IBM recognizes the widespread interest in 
interconnecting systems and networks of dif f erent 
manufacturers. IBM favours such interconnections and has 
published and will publish extensive information about it 
including formats and protocols which facilitate attachment 
by competitors of their systems or networks to IBM SNA 
networks. IBM understands- that to the extent that SNA is 
different from OSI, cornpetitors depend on IBM information to 
be able to interconnect their products with IBM SNA products. 
IBM has an interest in issuing information on SNA formats and 
protocols as soon as possible and it conf irrns that it will 
take all reasonable steps to expedite the availability of the 
relevant documentation. 
"Accordingly: 
"a) On accouncement of a Systern/370 product that implements 
enhancements' to SNA on System/370, IBM will identify the 
f unctions in such products that implement such 
enhancements. At announcement, IBM will, upon request 
from interested persans, identify use of existing 
formats and protocols. Where that product uses enhanced 
SNA formats and protocols, then subject to paragraph 7, 
IBM will as soon after announcement as the relevant SNA 
formats and protocols are reasonably stable and the 
architecture has been formulated and described or at 
general availability whichever is the earlier, publish · 
the SNA formats and protocols that implement such 
enhancements, together with appropriate product 
documentation, in order to enable attashment of other 
systems (which may be comprised of multiple products) 
and networks to IBM SNA networks. 
128 
"b) IBM will update the IBM SNA formats and protocols manual 
by the following: 
"i) IBM will publish by the end of 1984 such an SNA 
format and protocol manual that will describe LU 
6.2. 
"ii} IBM will make available within 60 days of the 
effective date of this Undertaking a services 
description manual for LU 6.2 and an SNA format and 
protocol manual for SNADS. 
Apart from the foregoing, IBM believes that all 
essential information regarding SNA has been made 
available. 
"c) IBM will identify, in future announcements of the first 
ACF/NCP or successor products that implement 
enhancements to SNA not already identif ied pursuant to 
paragraph (a), the functions that implement the 
enhancements. IBM will release software externals for 
ACF/NCP and successor products on the terms and within 
the periods set forth for System/370 software products 
in Appendix A. 
"d) IBM has actively participated in international standards 
efforts in support of open system interconnection (OS!) 
and will continue its active support of OS! as the 
standard for interconnecting systems, products and 
networks of different manufacturèrs." 
3.4. Other Cases 
The Commission has treated a number of other cases of close 
relevance to the telecomrnunications sector. Amongst these 
are: The International Air Couriers case (Articles 90 (1) 
and 86 EEC) relating to freedom of international air couriers 
activities (EC Bulletin 1-1985, point 2.1.10 Germany, EC 
Bulletin 12 -1985, point 2.1.79 France); Telemarketing -v­
Cie Luxembourgeoise de Télédiffusion (Art. 177, 86 EEC) (ECJ 
preliminary ruling of 3rd October 1985 in case 311/84) relating to the abusive extension of a dominant position to a 
neighbouring but separate market; SWIFT (Society for 
·worldwide Interbank Financial Telecommunications) and SITA 
(Airlines worldwide telecornmunications network) relating to 
the pricing of international leased lines; exemption of 
Corning Glass Works' joint ventures with BICC PLC and Siemens 
AG for the manufacture of optical fibres in the UK and 
Germany. (Commission decision of 14 July 1986, OJ L 236, 22 
August 1986, p.30; 16th Competition Report 1986.) •• 1 
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In the context of the International Air Couriers' case, the 
Commission took the opportunity presented by this case to 
point out: 129 
"that it regards the Member States' postal and 
telecommunications authorities as commercial 
undertakings since they supply goods and services for 
payment and that any ext~nsion by one or more of these 
undertakings of their dominant positions may constitute 
an abuse under Article 86 of the EEC Treaty" 
National courts may apply the prohibitions contained in 
Articles 85 (1) and 86. For a number of years, and especially 
in the last two years, the Commission has tried to move the 
domestic courts to enforce the· EEC Competition rules more 
often. The Brussels court sumrnary injunction of 3lst July 
1986 based on the Tele-marketing ruling (see above), relating 
to the attempt by the Belgian Telecommunications 
Administration to expand its monopoly to PABXs with 50 to 150 
extensions, is afl example of this approach. J, 
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4. 130 
Transparency of public procurement procedures 
In November 1984 the Council approved Council Recommendation 
84/550/EEC concerning the f irst phase of opening up access 
to public telecommunications contracts (16.11.84, OJ L298/51) 
According to the recomrnendation, Member States should "ensure 
that the telecommunications administrations provide 
opportunities for undertakings established in the other 
Community countries, following their usual procedures and on 
a non-discriminatory basis, to tender for: 
"1. all new telematic ter.minals and all conventional 
terminals for which there are common type approval 
specifications; 
"2. their contracts for switching and transmission apparatus 
and conventional terminal apparatus for which there are 
no comrnon type-approval specif ications for at least 10% 
in value of their annual orders" 
The implementation of the recornmendation was to be overseen 
by the Commission, in consultation with the Senior Official's 
Group on Telecommunications. 
The detailed procedures for implementing this Recommendation 
were agreed in 1986. 
The Recommendation, after agreement on certain details of 
irnplernentation had been established, has led to an increasing 
nurnber of calls for tender published in the Official Journal 
according to the procedure agreed. 
In the context of the work plan for achieving completion of 
the Interna! Market by 1992, according to the White Paper, 
further steps have been announced for introducing 
Community-wide competition inter alia in the sector of 
telecomrnunications. The Work Programme of the Commission for 
1987 envisages that the necessary proposals will be 
introduced this year. 
Amongst the measures announced, a major initiative (decided 
by the Commission on 18th March 1987) will be the extension 
of existing Community legislation on the opening of public 
procurement, to the sectors currently still excluded from· the 
supply Directive 77/62/EEC, amongst them telecommunications. 
The Telecommunications Administrations dominate 75 to 90% of 
the traditional telecommunications equipment market in the 
Community. t 
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As set out in Chapter VI, the development of a common market 
in network and terminal equipment must therefore go hand in 
hand with a substantial increase in the transparency of the 
procurement procedures of the Telecommunications 
Administrations. 
A realistic .policy regarding the opening of procurement in 
the telecommunications sector must take into account the 
sp~cifics of the sector. Thia relates closely to the 
availability and use of common specifications. As set out 
above, Directive 86/361/EEC and Decision 87/95/EEC prornote 
the application of standards and functional specif ications 
relating to information technology and telecornrnunications in 
public sector orders and technical regulations. · 
Terminal equipment and network equipment may have to be dealt 
with in different ways 
Regarding new terminal eguipment for which the current 
Recommendation already foresees open procurement procedures, 
transparency will be established by a Directive replacing the 
current Recomrnendation; 
Regarding network eguipment and conventional terminals, for 
which the current Recomrnendation foresees open tendering at 
10% of total tenders, objective technical constraints exist. 
Full opening could be reached progressively, for example, by 
increasing the current rate of 10% to 40%, within the 
frarnework of the Recornrnendation. A Directive could be 
envisaged for 1989, after careful discussion and evaluation 
of mutual benefits and of the results obtained in this sector 
by Recornrnendation 84/550/EEC {part 2), in order gradually to 
achieve full opening of these markets by 1992. 
Progress towards effective opening of the procurement 
procedures of the Public Telecomrnunications Operators is 
closely related to progress on the Community's policy on 
standardisation. As set out above, Directive 86/361/EEC and 
Decision 87/95/EEC promote the application of standards and 
functional specif ications relating to information technology 
and telecommunications in public sector orders and technical 
regulations. Ill Ir~ 1 l 1 ·: l ( ' . r . 
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5. 132 
Conclusions 
The achievernents of the Cornmunity's telecommunications policy 
since 1984 demonstrate the willingness and determination of 
.the Member States to create the frarnework conditions required 
for the current restructuring of the Community's 
telecomrnunications market and industry. 
The decisions taken to date have contributed substantially to 
promotion of European telecornmunication services and 
industry ; and 
preparation for a more competitive Community-wide 
market. 
Regarding standardisation in information technologies and 
telecommunications, 
·The Community's policy on standards is based on the 
international standardisation process. This concerns in 
particular OSI and ISDN. 
Directive 86/361/EEC on the initial stage of rnutual 
recognition of type approval for telecomrnunications 
terminal equipment and Decision 87/95/EEC on 
standardisation in the field of information technology 
and telecommunications have created a comprehensive 
framework in this field, by establishing 
"essential requirements" for testing and type 
approval. 
binding comrnon network interface specifications, 
with the future introduction of NETS (Normes 
européennes des télécomrnunications),in conjunction 
with the CEPT. 
a f irrn frarnework for the common interpretation of 
international standards in the inf orrnation 
technology field, with the introduction of ENs and 
ENVs in conjunction with CEN/CENELEC. 
clear objectives and obligations for the use of 
common specif ications and standards in purchasing 
orders. 
clear objectives and obligations for the rneans of 
access to public telecommunications networks and 
services, and to services of comparable importance. , 
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In certain cases, standardisation requirements must 
ensure full inter-operability of systems. This may 
include specifications up to Layer 7 of the OSI model. 
This concerns in particular ensuring the interworking of 
terminals for those services recommended for 
Community-wide provision, such as according to 
Recommendation 86/659/EEC on the co-ordinated 
introduction of the integrated services digital network 
(ISDN} in the Community. 
The co-operation agreements with CEPT and CEN/CENELEC 
have set a solid organisational framework f6r the 
working out of common specifications, on the'basis of 
the international standardisation process. This 
framework is further reinforced by the current programme 
for the promotion of conformity testing centres, and the 
standards promotion organisations which have been f ormed 
at the industrial level. 
The legal and organisational framework is thus for the 
most part already firmly established. However, 
standards and specif ications development now needs 
highly specialised competence and substantial manpower 
on a permanent basis. Current availability of human 
resources on a permanent basis is insuff icient. In order 
to create a f irm physical basis for the acceleration of 
work, the creation of a European Telecommunications 
Standards Institute, based on the current co-operation 
of the Telecommunications Administrations within CEPT 
and CEN-CENELEC should be envisaged. The institute 
should also draw substantially on industrial and user 
expertise. 
Given the importance of full mutual recognition of type 
approval for the competitive common market in terminal 
equipment, Directive 86/361/EEC on the initial stage of 
the mutual recognition of type approval for 
telecommunications terminal equipment should be rapidly 
supplemented by a Directive establishing the legal basis 
for full mutual type approval. 
Regarding the promotion of co-operative development of 
advanced telecommunications in Europe, 
the co-operative development of advanced 
telecommunications network infrastructures and services 
is· a condition for future Community-wide network 
inter-operability and network integrity. Future network 
integrity is the basis on which an open competitive 
market must build. 
_______ J 
134 
depending on the tirne-horizon, advanced 
infrastructure and service development needs a 
combination of research and development, often of a 
"pre-normative" character; agreement on standards; 
and availability of sufficient investment means. 
The actions undertaken have been carefully designed 
with regard to these three aspects; 
the RACE programme aims at the pooling of resources 
for the introduction of Integrated Broadband 
Communications (IBC) taking into account the 
evolving ISDN and national introduction strategies 
progressing to Community-wide services by 1995. 
This makes the programme a centre-piece of 
long-term network evolution in the Community. 
The Community's actions on ISDN, mobile 
communications and Trade Electronic Data 
Interchange Systems (TEDIS) emphasise standards and 
the synchronisation.of service introduction in 
order to achieve a Community-wide market effect. 
The STAR programme aims at avoiding growing gaps in 
modern infrastructure and services between the 
peripheral and the core regions of the Community -
an essential goal for future economic cohesion. 
Regarding the application of Community competition policy to 
the telecommunications sector to date:-
The cases treated to date and the rulings by the Court 
of Justice conf irm that the Telecommunications 
Administrations are fully subject to the Treaty Rules, 
notably the competition rules, in particular to the 
extent that they engage in commercial activities. 
The Commission has made it clear that it regards the 
Member States' Telecomrnunications Administrations as 
commercial undertakings since they supply goods and 
services for payment. 
If such an undertaking were to extend its dominant position at its own initiative, this might constitute an 
abuse of dominant position under Article 86. In the 
case of such an action resulting from prescriptions by a 
Mernber State's governrnent, the latter could be sued 
under Article 90 (1) read in conjunction with Article 
86. 
The competition rules apply to both private and public 
undertakings. The Commission has shown in past cases 
that it will scrutinise carefully the activities of 
existing and new providers in both the 
telecommunications and the data-processing field. }.' r. 
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procurement procedures 
The growing opening of the market to competition will 
make further progress in the opening of the procurement 
procedures of Telecommunications Administrations 
necessary. The Commission has announced that it airns at 
achieving rapid opening of public procurement in the 
general f ramework of the completion of the Interna! 
Market by 1992. In telecornmunications, the approach 
should be progressive and take full account of the 
specif ic ·characteristics of the sector .. 
The results achieved by Recomrnendation 841550/EEC are 
currently under review by the Commission. Depending on 
this review the Commission will decide on the options to 
be adopted. 1ill'F 
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VIII TELECOMMUNICATIONS IN THE CONTEXT OF OTHER 
COMMUNITY POLICIES 136 
Since 1984, telecommunications has developed into a 
fully-fledged line of Community policy in its own iight. 
However, in order properly to appreciate the implications of 
policy choices in this field, telecommunications policy 
should be considered in the context of other policy goals of 
the Community closely related to it. 
Telecommunications policy is closely related to major new 
policy goals of the.Community as reaffirmed in the European 
Single Act : completing the Internal Market, achieving a 
European Research and Technology Comrnunity and strengthening 
EJJropean cohesion. 
In this chapter, the relationships between telecommunications 
policy and the following policy goals of the Community are 
considered: 
the completion of the Interna! Market 
Research/Development/Technology policy 
the establishment of a Community-wide information market 
the establishment of a Community-wide audiovisual space 
The special potential represented by telecommunications for 
the less favoured regions of the Community has been discussed 
in Chapter VII (STAR Programme). 
1. Telecommunications in the context of the Interna! 
Market 
The overall priority accorded by the Community to the 
achievement by 1992 of the interna! market as laid out in the 
Commission's June 1985 White Paper [Completing the Interna! 
Market, COM(85)310 final, 29.6.85], and decisions taken since its publication, will greatly benefit the Community's 
telecommunications services providers and equipment 
manufacturers. 
On the other hand, a Community-wide development of the 
telecommunications network infrastructure and of advanced 
services will be indispensable for the attainment of the 
internal market objective. 
The Commission's White Paper on Completing the Internal 
Market was endorsed by the Heads of State at the Milan summit 
meeting in June 1985. It provides for the achievement of the 
internal market by 1992 and sets out an action programme to 
achieve that objective. :-_ . . , . 
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In its section on "A Common Market for Services'', the White 
Paper emphasises the importance of the telecomrnunications 
network infrastructure and of telecommunications services: 
" .... a market free of obstacles at Community level 
necessitates the installation of appropriate 
telecommunication networks with common standards .... 
"New cross-border services ... ··can develop their full 
potential only when they serve a large, unobstructed market. 
This applies equally to audiovisual services, information and 
data-processing services and ta computerised mar~eting and 
distribution services." 
Efficient and advanced telecommunications services will be 
the backbone of the development of intra-Community trade and 
services, and a major component of trade in advanced 
equipment. 
The regulatory aims in telecornmunications must reinf orce 
these overall policy goals. Re-regulation of the 
telecommunications sector must strongly promote the 
development of Community-wide services which support the 
development of intra-Community trade in services and 
eguipment and which enhance overall market efficiency. The 
White Paper draws specific attention to the importance of the 
rapid development on a European scale of certain value-added 
services, such as electronic banking and videotex. (cf also 
Chapter V.) 
2. Telecommunications in the context of the Comrnunity's 
Research/Development/Technology Policy 
The overall context of the Comrnunity's R/D/T policy is set 
out in the Community's Framework Programme for Research and 
Development for the the period 1987 to 1991. The Commission 
submitted detailed proposals in September 1986 (COM(86)430, 
30.6.1986.) 
The total budget proposed was 7.7. billion ECU for the five 
year period. 
Telecommunications now represents a crucial market for wide 
areas of high technology produc~ion and industry. It 
accounts, for example, for 20% of the market for 
micro-electronic products. A dynamic and expanding Europe­
wide telecommunications sector is thus essential ta 
sustaining Europe's general capability in the whole field of 
high technology. The convergence of telecommunications and 
cornputing technology has made the Telecommunications 
Administrations the largest civil investors in high 
technology, with a combined annual investment volume of 16 
billion ECUs. (cf Chapter V.) 1 
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138 
Telecommunications and information technology are now 
characterised jointly by large development costs for new 
products and services and, as a corollary, an especially high 
need for large markets if they are to be viable. 
The proposed Framework Programme fully recogni~es this 
central importance of telecomrnunications and information 
technology for overall R/D/T developrnent. The proposa! 
foresees the allocation of 40% of total R&D expenditure to 
R&D in telecomrnunications and information technology. In 
particular:-
Implernentation of the main phase of the RACE programme 
(see Chapter VII) 
Second phase of the ESPRIT programme, the European 
Strategic Programme for Research .in Information · 
Technologies. In the current first phase, more than 200 
projects ·in advanced information technology are being 
carried out on a cost-shared basis, by transnational 
consortia of industrial enterprises, research 
laboratories and universities. A number of projects are 
closely related to "pre-norrnative" work, such as the 
ROSE project (see report on the f irst phase of ESPRIT 
progress and results, COM(86)687, 8.12.1986) ; 
Application of telecommunications and information 
technology. This concerns inter alia the programmes 
DELTA (Development of European Learning by Technological 
Advance), DRIVE (Dedicated Road and Intelligent Vehicles 
in·Europe) and EUROAIM (European Advanced Informatics in 
Medicine). 
The Community also participates in a number of EUREKA 
projects in the information technology and telecommunications 
field (see EUREKA and the Community Technology Community 
COM(86)664, 20.11.1986). 
In tandem with the development of European research and 
technology capabilities and intra-European industrial 
co-operation, the European market must be developed as a 
necessary complernent, in order to rnake European R/D/T policy in both· the Comrnunity and the wider European context fully 
successful. ·r 
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The potential of the Community's market for advanced 
telecommunications and information technology products is 
vast -providing it is possible to achieve the necessary 
European scale and new growth dynamism. At present, the 
Community·Member States do net consume telecommunications 
products to anyt~ing like the same extent as in the United 139 
Statès and Japan. During the early 1980's telecommunications 
equipment purchases per capita were $32 in the Community, 
compared to $80 in the United States and $46 in Japan. 
The very fact of this relatively low consumption points to 
the unrealised potential of the European market which is the 
largest of the three as measured by its 320 million 
potential consumers. 
The current regulatory transformation must make a major 
contribution towards changing this state of affairs. The 
European industry and the European consumer need both a more 
competitive market, and to see a single Community-wide market 
replace the current web of segmented national markets. 
3. Telecommunications as a basis of a free market for 
information. 
One important economic, political and cultural advantage for 
Europe of advanced Europe-wide telecommunications derives 
from the possibilities created for the enhanced exchange and 
free f low of information. This advantage can only be fully 
materialised with the development of a comrnon market for 
information. 
The free f low of information is closely related to the 
fundamental human rights which underlie the basic political 
and cultural consensus of the Community. Freedom of 
expression is guaranteed by Articl~ 10 of the European 
Convention of Human Rights. This Convention is not only 
binding upon its 21 member states but has also been 
recognised by the Commission, the Council, the European 
Parliament (OJC/103/77) and by the European Court of Justice 
as a basis for the development of civil rights within the 
European Comrnuni ty {ECJ, · 13 .12 .1979, Case 44/79) . 
In the Green Paper "Television without Frontiers'', the 
Commission has emphasised the importance of Article 10 of the 
Convention of Human Rights for the development of a Common 
Market of information and ideas (Green Paper on the 
establishment of the Common Market for Broadcasting, 
especially by Satellite and Cable, COM (84) 300, 14.6.1984, 
cf. below). . ; 'I 
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Adequate telecommunications infrastructures and services are 
a condition sine-qua-non for the free expression and free 
flow of information in the Community in the future. The 
provision of telecommunications network infrastructure and 
telecommunications services will provide the conduit within 
which information can flow. The provision of information 
services and a free market for information content are 
indispensable requirements for putting telecommunications 
network infrastructures and telecommunications services to 
best use. 
The problems of the f ree f low of information closely relat~d 
to the development of trade and the operation and promotion 
of information services are addressed within the Community's 
policy for a common information market. 
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3.1. The Commission's Work Programme for the creation of a 
Common information market 141 
At present the European information market is fragmented and 
underdeveloped. In March 1985 the Council approved the 
realisation of a common information market as a priority goal 
(European Council, 29-30.03.85, Bull.EC. 3-1985, point 
3.4.3). In November of the same year the Commission proposed 
a work prog~amme to develop the common information market 
(Communication from the Commission to the Council: Work 
Programme for Creating a Common Information Market, COM (85) 
658 final, Brussels, 29.11.85). This programme ~as approved 
by the Council on 18.03.86. 
This programme reviews the changes in the European 
information market, and analyses in particular the impact of 
the new information technologies; their economic 
consequences; their regional consequences; their social 
consequences; and their international implications. The 
programme emphasises the impact on the information market of 
public policies regarding telecommunications and data­
processing and the need to optimise the use of the 
telecommunications infrastructure. 
In the framework of this programme, the following priorities 
have been selected for action in consultation with the Senior 
Official Advisory Group for the information market : 
opening up the internal market for information by 
removing barriers to information flow, 
encouraging the private sector in the Community to 
develop new information products, 
promoting the use of Community advanced information 
services. 
These priorities must be seen in the context of the Community 
initiatives to stimulate the dévelopment of the European 
information market: 
promotion of Europe-wide information services, based on 
emerging new technical possibilities. The Community's 
programmes for specialised information services aim 
particularly at this objective. Major steps have been 
the establishment of the Euronet/Diane network; 
promotion of European electronic data bases in the 
economic, scientific and technological fields; and 
promotion of new technologies. 
142 
reducti~n of language ·barriers, by promotion of 
successive programmes of automatic translation systems, 
in particular of the SYSTRAN and EUROTRA systems. 
promotion of standardisation in. the field of data base 
access; 
elimination of legal and regulatory barriers, and the 
harmonisation of legislation in this field. 
Regarding the legal and regulatory· f ramework required for a 
free f low of information , the Work Programme notes that 
apart from regulatory issues related to the conditions of 
provision and use of telecommunications services, convergent 
solutions should be found in a number of areas of legitimate 
public interest profoundly affecting the future environment 
for the free flow of information in the Community. 
These include: 
data protection 
copyright 
authentication of transactions 
liability for information services 
electronic f raud 
protection of confidentiality of content of users' 
communications with information services. 
The Commission has established a "Legal Observatory" to study 
the legal aspects of such issues in more detail. 
3.2. Legal issues affecting the free flow of information 
3.2.1. Data protection 
_Data protection is a shorthand formula for the protection of 
an individual's rights and fundamental freedoms, and in 
particular his/her rights to privacy, with regard to 
automatic processing of personal data relating to him/her (cf 
Article 1 of the Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data, 17th 
December 1980). ~ 
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The merger of telecommunications and information processing 
has created new problems of data protection regarding the 
free flow of information. At this point in time, all Member 
States have recognised the need for appropriate legal 
instruments to selve these problems and have taken regulatory 
measures or are in the process of preparing such measures 
. (for a concise comparative assessment of the data protection 
laws and the statutes concerning access to information in the 
Member States cf "Legal issues affecting the specialised 
information market", study commissioned by the Commission of 
the European Community, 1986). 
The Council of Europe's Convention for the protection of 
individuals with regard to the automatic proèessing of 
personal data which has·been signed by rnost Community Member 
States, provides guidelines for the. protection of 
individuals' rights to the privacy and security of personal 
data relating to themselves. 
The free flow of information within the Comrnunity and the 
orderly development of the Community information market 
require that harmonising Cornmunity legislation is introduced, 
based on existing international conventions and declarations. 
Since 1973, the European Parliament has ernphasised on several 
occasions that the right to privacy should not only be 
protected by national law, but that harmonising legislation 
should be introduced at the Community level. (OJC 140/34, 
5.6. 1979). 
The Work Programme for a common information market f oresees a 
Council decision on ratification of the Council of Europe 
Convention, or a Directive, based on Commission 
Recomrnendation 81/679/EEC and the Resolution of the European 
Parliament of 9.3.1982. 
3.2.2. Copyright 
Electronic information distribution creates new technical possibilities for breach of copyright. It is technically 
easy for users to appropriate information and integrate i~ 
into their own information handling systems, and very difficult to police this. Without adequate guarantees for 
those with property rights with respect to information 
subject to copyright and supplied to users through electronic 
information systems, the economic incentive to supply 
information commercially will be severely blunted. 1 • 
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This rnay require the operational elaboration of such legal 
and commercial distinctions as that between access to 
information and ownership of information, and technical 
developrnent to implement these legal distinctions. 144 
In the Commissi0n's Copyright Green Paper to be published in 
1987 (Programme of the Commission for 1987, ·Commission of the 
European Communities, February 1987) interested parties will 
be invited to make submissions to the Commission on the issue 
in order to allow an assessment of the scope of the problem 
and its possible solutions. 
3.2.3. Authentication of transactions 
Authentication of transactions is among the most difficult 
problems involved in adapting the legal framework to new 
information technolo~ies. Contracts have been traditionally 
established on paper; electronic transactions are by nature 
paperless. Technical methods put forward to date to overcome 
the problem have net yet satisfactorily been able fully to 
substitute for the handwritten signature. However, in 
addition to examining technical approaches, whereby adequate 
m~thods would be found tô offer suff icient guara~tees against 
forgery, the Commission is examing the problem from the legal 
standpoint and intends to issue recommendations with regard 
to admissible evidence in the courts concerning records of 
transactions produced by electronic means. 
3.2.4 Liability 
There is a clear need for consumer protection against the 
risks of incorrect operation of electronic information 
services. However it is frequently not easy to establish 
where liability lies because of the cornplexity of the 
handling process and the nurnber of entities involved 
(originator of information, data base administrator, host, 
operator of telecommunications networks etc.} who may be in 
different Member States and subject to different laws. The 
problem is being urgently tackled in order to·dispel the 
current uncertainty and confusion and strengthen users' 
confidence in the use of electronic information services. 
Two alternative ways of determining liability are proposed, 
where this is not established contractually: either to place liability on one of the entities involved in the provision of 
the seryice, or to presume solidarity among all the parties 
involved in this provision. The latter alternative means 
that the user would be f ree to address him/herself to the 
subject of his/her choice and that the apportionment of the 
real responsibilities could be effected eventually by the 
providers themselves or by the court. The Commission intends 
to present recommendations on this issue in 1988. 1 
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3.2.5 Electronic Fraud 
Fraud using loopholes in electronic information services is 
now reaching major proportions. To overcome this problem, 
close co-operation between legal and technical experts is 
essential. It is also necessary to distinguish between those 
instances which corne within the scope of civil law and those 
which are the abject of criminal law. 
In bath fields, there are considerable divergences in the 
different Member States. The Commission is therefore 
examining the situation, taking in account relevant work 
already undertaken by the Council of Europe,~ the OECD and 
individual countries, in order to establish what would be the 
suitable Community actions in this area. 
3.2.6 Protection of confidentiality of the content of 
users' communications with information services 
A strong concern of users of electronic information services is possible monitoring of their use of such services. While 
certain minimum data are essential for service suppliers for 
billing and other purposes, users emphasise that the content 
of their communications (e.g. online searches to a database) 
must be kept completely confidential. 
This issue could be settled via the contracts among the 
parties cortcerned and the Commission is therefore preparing 
recommendations on this basis. 
4. Telecommunications and the Community's policy for an 
audio-visual space in Europe 
Broadcasting and especially TV technologies are subject to 
rapid technological change, closely related to the change of 
technology in telecommunications. As set out in Chapter IV 
and Chapter VI, the developrnent in neighbouring fields, in 
particular cable TV networks and satellite-based broadcasting is converging in the long-term, with the main stream 
technological development of telecommunications network 
infrastructure. 
Since 1984, the Community has started to develop its 
audio-visual policy on a consistent basis. 111 
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The Policy has developed along three main lines: 
harmonisation of technical standards and technological 
developments. This is closely related to the 
telecommunications sector. 146 
creating the common market for broadcasting, especially 
by satellite and cable. 
promotion of the European audio-visual industry, in 
particular by the launching of the preparatory phase of 
the Media programme to encourage the development of the 
audio-visual industry. 
The Commission has emphasised in the White Book on the 
completion of the Internal Market the high priority which it 
attributes to the development of a Community-wide 
audio-visual space a~d the free flow of broadcasting. 
4.1. Creating the technical environment : Council Directive 
86/529/EEC 
At the beginning of 1986, the Commission put forward a 
Directive concerning standards for direct satellite TV 
broadcasting. The aim is to replace the current PAL and 
SECAM system when satellites for direct television 
b~oadcasting are brought into service in the near future and 
new television sets are subsequently introduced by 
manufacturers. 
The f irst satellites suitable for direct satellite TV 
broadcasting (DBS -Direct Broadcasting Satellites) are due 
to be operational from 1987/1988 onwards (TV Sat, TDF 1, 
Tele-X, Olympus, see APPENDIX 2) The TV programmes 
broadcast by these satellites will be received by individual 
and community (MATV -Master Antenna Television System) 
antennae and the corresponding satellites could broadcast 
some ten new channels from 1987/1988 onwards to the whole of 
Europe. Local cable networks are rapidly developing in 
various European countries (see Chapters IV and VI). They 
can distribute a wide range of products including cable 
originated programmes or programmes transmitted by 
satellites. Major innovations are also expected in the 
medium term in the field of TV reception, with the prospect 
of the development of high-definition television yielding a 
picture quality which was previously unattainable. r . ' ·< 
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The implementation of common technical specif ications 
simplifies the broadcasting of television programmes in all 
countries of the Community and opens the way to truly 
pan-European multilingual television programmes. 
In November 1986 the Council issued a Directive on the 
adoption of common technical specif ication of standards for 
direct satellite television broadcasting (Council Directive 
on the adoption of common technical specif ication of 
standards for direct satellite~television broadcasting 
(86/529/EEC), O.J. L311/28, 06.11.86) 
The Directive is based on the "MAC/packet family. of 
standards". Standards of the MAC/packet family, Rroduced by 
the European Broadcasting Union and the industry, have the 
capacity to evolve in line with market developments, thus 
allowing gradual progress towards high-definition (HDTV) 
television in such a way that each stage is compatible with 
the preceding one. 147 
The Commission played an important role in orchestrating a 
Commuriity consensus against the Japanese proposa! for an initial HDTV standard which would clearly have been 
unfavourably to the European environment and European 
industry. This caused the ITU's CCIR meeting of June 1986 in 
Dubrovnik to postpone the decision on HDTV standards for two 
years. This time will be used to work out an alternative 
based on the evolutionary concept set out above. A research 
project led by four major European companies is currently at 
work defining such a syst~m; in the longer term, the 
Community RACE programme will continue to research HDTV. 
4.2. The establishment of a European space for broadcasting, 
especially television 
The establishment of a common market for broadcasting is a 
declared priority goal. The economic objectives of this 
policy form part of a wider set of goal of which cultural 
objectives are an important component. In this way, the 
Comrnission's policy on cross-frontier broadcasting links up 
with the other initiatives being pursued in the context of 
Comrnunity action in the cultural sphere. Whereas the spread of commercial broadcasting may lead to shifts in emphasis, 
these f undamental assumptions are unlikely to change 
substantially. 1 1 
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5. The Commission transmitted to Council in 1984 a Green Paper 
on the establishment of the common market for broadcasting 
services ["Television without Frontiers", COM (84) 300, 
14.6.1984] 148 
The Paper clearly states the right of free provision of 
services across f rontiers according to Article 59 of the 
Treaty. The Paper then treats in detail those aspects of 
public interest which could be legitimately maintained by 
Member States in the broadcasting field, and which therefore 
need harmonisation at the Community level in order to allow a 
Comrnunity-wide market to operate. 
These aspects concern in particular: rules governing 
broadcast advertising; protection of minors and right of 
reply; and copyright issues. 
In April 1986, the Commission submitted, on the basis of a 
broad consultation on the Green Paper "Television without 
Frontiers", the proposal for a Directive, which is currently 
before Council [Proposal for a Council Directive on the 
cc-ordination of certain provisions laid down by law, 
regulation or administrative action in Member States 
concerning the pursuit of broadcasting activities, COM (86) 
146, 28.4.1986]. The Directive aims to permit broadcasts 
which comply with its requirements to be received and 
retransmitted freely in all Member States. 
The main reguirements concern Community programme promotion, 
advertising, youth protection and copyright. While the 
Directive would allow Member States to apply more detailed 
and stricter rules to broadcasting organisations establishect 
on their territory, they would not be allowed to invoke these stricter national rules to prevent the reception and 
redistribution of television broadcast from other Member 
States, once these comply with the provision of the 
Directive. 
Conclusions 
Telecommunications policy is closely inter-related with a 
number of other key Comrnunity policy goals. While the 
development of a common dynamic market for telecommunications 
services and equipment must fully contribute to the the 
achievement of these other policy goals, the 
telecommunications sector itself will benefit greatly from 
progress on these other policies. 
This concerns in particular: the completion of the Internal 
Market; the Community's Research, Development and Technology 
policy; the establishment of a Community-wide information 
market; and the establishment of a Community-wide 
au.dio-visual space. i 1 
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Regarding the achievement of a Community-wide Internal 
Market by 1992, the development of Community-wide 
sophisticated telecommunication services in an open 
competitive environment is indispensable for 
intra-Community trade in services and for reducing trade 
barriers and transaction costs. This will concern in 
particular the Community-wide development of specialised 
value-added services. 
Regarding the Community's Research & Development and 
Technology Policy, telecommunications now represents a 
crucial market for wide areas of high technology and 
industry. A growth oriented policy for 
telecommunications -exploiting fully the convergence of 
information technology and telecommunications and 
lifting existing restrictions as far as possible -will 
be an essential complement to the Community's research 
and technology effort. 
Regarding the establishment of a Community-wide 
information market, promoting the free flow of 
information is closely linked to the fundamental 
Cornmunity objective of preserving the Community's 
economic, social, cultural and political identity. 
Telecommunications network infrastructure and services 
provide the conduit, via which information content is 
carried. Fundamental issues regarding the free flow of 
information, including data protection and protection 
of privacy, copyright, authentication of transactions 
and liability for information services, will need urgent 
attention in the general ~nformation context. 
Regarding the establishment of a Community-wide 
audio-visual space, the Commission has made clear in the past that it will insist on the citizen's right to 
obtain and irnpart information wherever in the Cornrnunity 
he/she rnay be located. Given the long term convergence 
of the technological base of both telecommunications and 
the audio-visual sector, especially in the satellite and 
cable TV field, the positions taken in both fields must 
evolve towards an open environment regarding the flow of 
information. 
IX THE EXTERNAL DIMENSION OF A COMMUNITY TELECOMMUNICATIONS 
POLICY : CHALLENGE AND OPPORTUNITY 
The creation of a c.omrnon market for telecommunications 
services and equipment within the Comrnunity will help 
overcome its structural problems and contribute to the 
creation of continent-scale advantages which have, so far, 
eluded Europe in this sector. It would, however, be a 
mistake to undertake this task in a manner which would 
insulate the Community market from the outside world. 150 
The Community is and should remain a major exporter of 
telecommunications equipment. There is no reason why it 
should net also attain a significant position as an exporter 
of telecommunications services. The creation of a common 
market will, as in other sectors, greatly contribute towards 
the improvement of the Comrnunity's cornpetitive position in 
telecornrnunications. Market access for telecornrnunications 
equipment remains subject to significant tariff and 
non-tariff barriers in many if not most developed countries; 
developing countries also constitute significant markets. 
For these reasons, the Community should actively pursue the 
goal of further market opening abroad bilaterally and during 
the Uruguay Round. 
In 1983, the sum of experts from OECD countries of 
telecommunications equiprnent ( including in.tra-OECD trade) 
amounted to only 18.5% of OECD investrnent in 
telecommunications equipment. The srnall scale of intra-OECD 
trade in telecommunications equiprnent can be seen f rom the 
fact that only 33.7% of experts of telecornmunications 
equipment from OECD countries had other OECD countries as 
their destinations, whereas OECD countries jointly constitute 
the overwhelming bulk of the world telecornrnunications market. 
There is little if any doubt that some of the Community's 
principal trading partners will also wish to obtain a further 
opening of the Comrnunity market for telecomrnunications 
equipment and services. Far frorn only constituting a risk 
for Comrnunity suppliers, this 
i :9i ' 
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should be viewed as a challenge and as an opportunity, to be 
considered in parallel with the Community's efforts to open 
extra-EC markets. This would appear the more necessary as 
economies of scale are liable to lead to a further 
concentration of important market segments for both 
telecommunications equipment and certain enhanced services. 
Telecommunications in the Uruguay Round 
The negotiations, which ·include trade in services, were 
f ormally launched at Punta del Este in Uruguay on 
20 September 1986. They are likely to lasi for at least four 
years. 
1.1. Scope 
1.1.1. Services 
The general negotiating objectives are as follows 
"Negotiations in this area shall aim to establish a 
rnultilateral frarnework of principles and rules for trade in 
services, including elaboration of possible disciplines for 
individual sectors, with a view to expansion of such trade 
under conditions of transparency and progressive 
liberalisation and as a means of promoting economic growth of all trading partners and the development of developing 
countries. Such framework shall respect the policy 
objectives of national laws and regulations applying to 
services and shall take into account the work of relevant 
international organizations." (Emphasis added). 
The current assumption is that all services which can be 
traded will be covered by the new agreement. An agreement on 
what constitutes tradeability will therefore be an essential 
element in the negotiations. 
With this in rnind, it should be noted that the different 
types of telecomrnunications services differ with respect to 
their tradeability : •' .; 
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The provision of basic infrastructure in general 
requires the physical presence of the provider in the 
geographical area in question. International 
telecommunications infrastructure has traditionally been 
provided jointly by the providers of the national 
facilities which they link,i.e., the Telecommunications 
Administrations (including RPOAs, Recognised Private 
Operating Agencies). This joint provision, based on 
bilateral interconnection agreements, follows ITU 
guidelines, e.g. with respect to accounting rates (see 
APPENDIX IV); 
The provision of certain "value-added" 
telecommunications services is taking place 
internationally across·borders, being produced in one 
country and consumed in another. These services are 
often regulated differently f rom basic infrastructural 
telecommunications services ; 
Satellite communications are a special case. At present 
international organisations, in particular INTELSAT (see 
APPENDIX II), provide international satellite 
communications services, which they produce jointly with 
the Telecommunications Administrations. 
1.1.2. Telecommunications equipment 
Issues of trade in telecomrnunications eguipment will, in 
particular, be dealt with in the context of the GATT 
negotiations on government procurement, technical barriers to 
trade, and tariffs. 
1.2. Issues 
1.2.l. Services 
The discussions on the negotiating approach in the future 
Round are still at an early stage. However, within OECD a 
conceptual framework and principles for discussing trade in 
services have emerged as an important input to the Uruguay 
Round. It is likely that all sectors, including 
telecommunications, will be considered against ·a framework 
derived, at least in part, from these concepts. 
1 g 
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153 
Major concepts identif ied are the following 
Market access 
Transparency 
National treatment 
Non-discrimination 
Service monopolies 
Positions of economic dominance on the international 
level 
Trade distorting measures or practices 
Exceptions and saf eguards 
"Appropriate" or "acceptable" regulation 
Positions on the other points will be largely determined by 
th~ position on the last point "appropriate" or 
"acceptable" regulation. 
1.2.2. Telecommunications eguipment 
As to negotiations on trade in telecornmunications equipment 
during the UFuguay Round, the main issues appear as follows: 
the question of the inclusion of telecommunications 
equipment in the Governrnent Procurernent Code ; 
customs duties (especially relevant where certain 
countries maintain high tariffs) ; 
issues related to the Code on Technical Barriers to 
Trade. 
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1.3. Approach 
In the preparation for the GATT negotiations, a clear 
distinction should be made between trade in services and 
trade in equipment, not that one is necessarily more 
important than the other, but because of the substantial 
difference in the nature of the trade involved and, of 
course, in terms of the signif icant differences in existing 
international obligations. 154 
The general approach of the Community should be based on the 
f ollowing overall considerations : 
1) An evaluation of the Community's interests with regard 
to market opening by non-Community countries (services 
and equiprnent). 
2) On services, taking into account the progress towards 
the establishment of a comrnon European approach towards 
regulatory issues, prepare the Community's approach 
towards the definition of "appropriate.regulation". 
3) In the light of the above, and taking into account the 
progress.made towards the realisation of the internal 
market, 
a) examine the implications of further opening of the 
.community market for telecornmunications equipment 
and se.rv ices 
b) compare this with the prospects of market opening 
in non-Community countries. .. i 
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2. 155 
Reguests by outside providers for interconnection and service 
provision 
Interconnection requests by non-Community operators have 
traditionally been handled bilaterally between the external 
service supplier and the Telecommunications Administration in 
the·community to whose network it is seeking access. 
Traditional services such as international telephone and 
telex are paid for on a bilateral basis : a customer pays his 
or her national administration which then re-imburses the 
overseas administrations on the basis of a sharing formula· 
(based on accounting rates, according to relevan~ CCIT~ 
recommendations, see APPENDIX 4). 
The flow of payment is between service providers, rather than 
between customer and provider. In addition, the national 
network operator holds the exclusive means for the 
"distribution" of incoming traffic and the "importing" of 
telecommunications services. 
So long as network access is regulated in the same way by 
different Member States and/or their licensed carriers there 
should be no distortion of trade flows or of competition. 
However, differences arising from the way European 
Telecommunications Administrations compete with each other to 
capture foreign business could distort trade and competition 
within the Commµnity. 
2.1. Growing international competition 
The situation has become substantially more complex with the 
growing competition on North Atlantic traff ic routes and the 
weakening of the North Atlantic Consultative Process {NACP) 
which had been established between the CEPT and the US 
Federal Communications Commission {FCC). 
Growing international competition has emerged basically as a 
consequence of the extension of US -and now also Japanese -
deregulation to the international arena {see APPENDIX 1). 
156 
For many years, AT&T was the sole US provider of 
international telephone services, with international data 
services provided by ITT World Communications, RCA Global 
Communications and Western Union International. In the course 
of the US deregulatory process, other US service providers, 
such as MCI, US Sprint and Graphnet have expanded into the 
international voice or data markets. 
In 1985 and 1986, the FCC granted permission for the 
establishment of eight international satellite services, 
separate from INTELSAT, subject to certain conditions. 
Currently, the United States is in the process of consulting 
with INTELSAT on one proposed system (PanAmSat), as foreseen 
according to Article XIV of the INTELSAT Convention. Article 
XIV of the convention calls for there to be "no signif icant 
economic harm'' to INTELSAT (see APPENDIX 2). There has been 
no consultation initiated yet for any other system. 
At the same time, the FCC granted applications for licences 
to two US companies to land and operate private cable facilities in which bulk transmission capacity is to be sold 
on a non-common carrier basis. 
The situation has become still more cornplex owing to the 
FCC's decision in 1986, to extend Recognised Private 
Operating Agency (RPOA) status to enhanced service providers 
through a simple and voluntary application procedure designed 
to assist these providers in obtaining operating agreements 
with foreign administrations and to purchase Indefeasible 
Rights of Users (IRUs) in overseas cables. 
2.2. Issues 
International services require that n~tworks ·in individual 
countries be interconnected in an orderly manner. 
A cornrnon position by the Community's Member States will have 
to be worked out on a number of issues : 
interconnection of additional common carriers from third 
countries with RPOA status. l 
·I 
157 
A case in point is the policy followed by Member States 
with regard to operators such as the US common carriers 
MCI and GTE Sprint where differing positions are 
currently taken by Community Telecommunications 
Administrations. 
defining a joint position, in the framework of INTELSAT, 
with regard to new satellite systems and applications 
for allowing operation of such systems according to 
Article XIV of the INTELSAT Convention (see APPENDIX 2). 
future treatment of enhanced service providers frorn 
third countries which may obtain RPOA status according 
to the new FCC procedure. 
future treatment of enhanced service providers from 
third countries without RPOA status. 
drawing up a joint position on interconnection 
conditions. This concerns in particular 
technical interface standards and access facilities 
accounting rates and interpretat~on of the relevant ITU 
recornrnendations ; 
limitations or restrictions irnposed. 
2.3. Approach 
Interconnection between outside service providers and 
Comrnunity networks is an area where a joint Community 
position is urgently needed if distortion of trade and 
cornpetition within the Cornmunity is to be avoided. 
The working out of cornmon positions will be also needed for 
the GATT Round. 
A first step towards building a Community position on these 
issues should be collection of more detailed information on 
interconnection between Community networks and outside 
providers. ï 
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Relations with the Community's major trading partners EFTA, 
United States, Japan and Third World 
An assessment of the Community's external trading position 
in telecommunications equipment, including switching and 
transmission as well as terminal equipment, gives the 
following position: 
1. 
2. The Community continues to have an overall positive 
balance in telecommunications equipment trade. 
The Community's external telecommunications equipment 
trade surplus fell in 1985 for the third year running to 
1247 million ECU from 1533 million ECU in 1984 ; 
3. The Community's deficit with the United States widened 
by 25% in 1985 to 657 million ECU from 525 million ECU 
in 1984. 
4. The EC deficit with Japan increased by 61% to 582 
million ECU in 1985 from 360 million ECU the previous 
year. The deficit of all ten Member States increased. 
Details are shown in Fig. 12. 
The position in the telecommunications-related services 
market is more diff icult to estimate. 
Basic international telecommunications services are dominated 
by joint provision between Community and external 
telecomrnunications operators, with revenues shared according 
to negotiated accounting rates. The high revenue international value-added services market is dominated 
internationally by US providers, with a strong European 
presence in certain market niches. 
Major developrnent trends for international value-added 
services focus on the financial sector, on Electronic Data 
Interchange (EDI) and on videotex-based services. 
Fig. 12 
COMMUNITY TRADE BALANCE IN TELECOMMUNICATIONS 
EQUIPMENT 1984/1985 
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With some prominent exceptions (e.g., French Teletel, Reuters 
f inancial service) the European market for value-added 
services is still in its infancy. 
3.1. Co-operation with the European Free Trade Association 
The Community has traditionally had strong ties in 
telecommunications with the member states of EFTA, both at 
the industrial level and at the Administration level. 
The f ramework of co-operation is two-fold 
Within CEPT close relations have developed between the 
Comrnunity's Telecommu.nications Administrations and the 
EFTA Administrations. The EC and EFTA together 
represent 19 out of the 26 CEPT member countries. 
Relations with the Community have intensified 
f ollowing the signing of the Memorandum of 
Understanding between the CEPT and the Community in 1984 
concerning standards and type approval for 
telecomrnunications equipment and following the general 
guidelines agreed with the Joint European Standards 
Institution CEN-CENELEC, of which the EFTA countries are 
members (see Chapter VII). 
Since the Luxembourg Declaration of April 1984 on 
co-operation between the European Community and. the EFTA 
countries and the follow-up Declaration of the Council 
in Autumn 1986, the Community has further intensified 
its co-operation with EFTA, with thè intention of 
advancing in all areas relevant to the creation of a 
wider European economic space, such as state aids, 
public contracts, intellectual and industrial property 
rights and services (to mention but a few). \,. 
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160 
Within the framework of CEPT, those EFTA countries which are 
signatories of the agreement on a formal adoption procedure 
and an undertaking to implement certain CEPT recommendations 
as NETS (see Chapter VII and APPENDIX 3) will give NETS a 
similar role as will Member States under Council Directive 
86/361/EEC on the initial stage of the mutual recognition of 
type approval for telecommunications terminal equipment. 
This will raise the question of extending the mechanism of 
mutual recognition of test results for type approval foreseen 
in this Directive to those countries. 
Such extension to non-Community c.ountries of .the advantages 
of the Directive presupposes a clear understahding at the 
technical level of the method of application of standards and 
test methods by all parties concerned, as well as assurances 
concerning full reciprocity. Work is now going on in order 
to build up the necessary contacts and confidence at a 
technical level in order to make further progress on this 
issue possible. 
Following the Luxembourg Declaration, the Commission h~s 
concluded with a number of EFTA countries framework 
agreements on co-ordination in Research and Development. At 
the same time, EFTA Administrations have, via the CEPT 
mechanism, participated intensively in the work of the 
definition phase of the RACE programme (see Chapter VII). 
Co-operation on technology has substantially strengthened at 
the industrial level through the creation of ECTEL (see 
Chapter VII). Further, a number of EUREKA projects are being 
carried out jointly. 
Recognising this trend towards stronger co-operation at the 
R/D/T level, the Commission has proposed in COM (86) 547 (see 
Chapter VII) to open participation in the RACE main programme. 
to public or·private organisations established in COST 
(European co-operation in the field of scientif ic and 
technological research) countries when a framework agreement 
on R & D co-operation has been signed w~th the corresponding 
country. For this, implementation agreements will be 
concluded. The COST comprises all EC and EFTA member 
countries plus Yugoslavia and Turkey. : 1 
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The general objective of the Community in telecommunications 
with.regard toits EFTA neighbours is the creation of a wider 
European economic space and the maintenance and development 
of the coherence developed in the CEPT framework. 
Specif ic progress has already been made in the EC/EFTA 
context concerning : 
co-operation on standards and mutual recognition of type 
approval; and 
co-operation on R&D {RACE programme). 
In the medium term, discussions will notably be needed with 
EFTA countries on. regulatory issues such as those outlined in 
Chapter X, as soon as a consensus in the Community has been 
achieved. 
3.2. Dialogue with the United States 
US deregulation of the telecornmunications sector and the 
aftermath of the AT&T divestiture (for details see APPENDIX 
1) have contributed to a highly complex policy environment 
which continues to evolve. The basic reference text is the 
"Modified Final Judgement" of 1982 which specified the 
conditions of divestiture of AT&T; this has, however, been 
evolving as a result of a series of public enquiries -
especially Computer III. Few, if any, observers of the US 
scene would regard the Computer III enquiry as anything but 
one further stage in the developing regulatory environment. 
There is a variety of Federal agencies involved in 
telecommunications -Federal Communications Commission, 
Departments of Justice, Commerce, State, USTR, etc. -as well 
as state and local authorities. 
One consequence is, however, already very clear: the United 
States has become the major force for change in the world telecomrnunications market and in international trading 
relations in the sector. The Comrnunity is directly affected 
in several ways: 
Economie and industrial forces set free by US 
deregulation are·turning to international markets. 
Europe is a major target; ;. 
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The rising number of requests for interconnection from 
outside suppliers and the increasing activity of AT&T 
and the BOCs in the Community are a case in point. The 
rapidly changing US regulatory scene -Computer III 
Inquiry, recent proposals by the Department of Justice 
for lifting the main restrictions of the Modified Final 
Judgement on AT&T and the BOCs, Open Network 
Architecture (see APPENDIX 1) -will increase the 
international activity of US companies. 
While the US continues to register a substantial trade 
surplus in telecommunications with th~~ommunity (657 
million ECUs in 1985 see Fig. 12 ),"the US has 
registered heavy deficits in its trade with the Pacifie 
countries, in particular Japan, leading to a global US 
def ici t in telecommunications of $US 1. 3 billion. in 1985 
and of nearly $US 2 billion in 1986. 
Against the general background of the US trade def icit, 
there is heavy pressure on the United States 
Administration to respond to perceived obstacles in 
telecommunications trade with foreign countries. Draft 
legislation is currently under consideration in the US 
Congress which, inter alia, would result in closing the 
US market to these countries, regardless of the actual 
trading situation. 
Many in the US f ail to distinguish between the dif ferent 
ef f ects of US deregulation on the openness of the US 
market. For example, the situation as regards terminal 
equipment, where the effects of deregulation have been 
perhaps the most signif icant, differs greatly from that 
applying to network switching and transmission 
equipment. 
While the introduction of simplif ied registration 
procedures for terminal equipment since 1976 has led to 
a substantial rise of imports from Pacifie countries, it 
has not led to substantial opportunities for EC 
èompanies. i /: 
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According to the FCC, in 1984, 80% of registration 
applications submitted were for equipment manufactured 
in the Pacifie Basin and Asia. Canada plus EC countries 
were below 5%. However, in one area where Community 
.industry does have strength (network and transmission 
equipment), substantial barriers to entry continue to 
exist (see Report by the EC Fact Finding Mission, 
Commission of the European Communities, July 1986). 
One consequence has been the increase in the US trade 
surplus with the Community in telecommunications 
equipment. With regard to service operations, the FCC 
continues to maintain a number of restrictions on 
foreign-owned service operators. 
The US Federal Communications Commission, responsible 
for regulation of both interstate and (in some instances 
in conjunction with the Department of State) 
international communications, is showing a growing 
tendency to measure foreign situations against its own 
understanding of "appropriate" regulation, classifying 
any deviation as "trade barriers". This tendency is 
shown most clearly by the recent FCC Notice of Inquiry 
and Proposed Rule-making on Regulatory Policies and 
International Telecommunications (January 1987). 
The FCC proposes an "International Model". At the time 
of publication it was not known whether the FCC proposal 
would be adopted. Serious objections have been raised 
by the Community and other trading partners as well as 
the US Administration itself. However the FCC proposa!, 
if implemented, would effectively establish the US 
regulatory situation as a benchmark.for determining the 
degree of "openness" of foreign markets, in accordance 
with a unilaterally defined concept of narrow sectoral 
reciprocity. i 
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Key issues in the "International Model" as at present 
envisagea include the following: 
1. Entry conditions for common carriers and enhance 
service providers to and within foreign countries 
including recognising RPOA status. 
It also considers entry conditions to the termina 
market including the f irst telephone set in forei 
countries. 
2. Licensing procedures for US provlders for service 
to and in foreign countries ; future application 
accounting rates under ITU recommendations. 
3. 
4 •. It also considers network access for service 
providers, as matched against the future Open 
Network Architecture (ONA) access (see APPENDIX 1 
foreseen by the FCC in the United States. 
"Least restrictive standards". The problem of 
ensuring international interoperability of 
telecommunications services is not addressed in 
depth. Openness includes the request for US 
participation in the "standards-setting bodies of 
foreign countries", a principle which is not yet 
contained in the GATT Standards Code but which ma, 
well be the subject of negotiation in the Uruguay. 
Round. 
Narrow sectoral reciprocity, to be unilaterally 
assessed by ref erence to the US system regarding 
(1) terminal equipment ; (2) core (network 
switching and transmission) equipment ; (3) 
authorisation of facilities, such as ptivate cable 
or satellite facilities ; and (4) network related 
services, such as enhanced services. Reference i~ 
made to expanding the.GATT Public Procurement Code 
to Telecommunications. 
In the rule-making part of the FCC notice it is propose 
that comprehensive requirements are established for 
gathering information on the activities of foreign-owne 
common carrier services and enhanced services as well a 
core network equipment and terminal equipment f rom 
foreign sources. 'i ; 
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US/EC relations are currently evolving in the following way 
contacts have intensified at the EC/US level, in order 
to develop better mutual understanding. A Fact Finding 
Mission to the United States was carried out by an EC 
delegation in June 1986, and a similar visit was made by 
a delegation from the US in February 1987. 
At the meeting of February 4-6, 1987, in Brussels, the 
f ollowing areas for intensifying co-operation between 
the EC and US were agreed : 
closer co-operation on standards, including a regular 
exchange ,of information between the CEPT and the US 
ECSA-ANSI about draft telecommunications 
specif ications ; 
closer exchange of information on the implementation of · 
standards for new network generations, in particular 
ISDN ; 
close exchange of information regarding US/EC trade. 
In conclusion, telecommunications can be expected to remain a 
major issue in EC/US trading relations particularly as the 
pressure to find and develop new market opportunities 
increases and as the Uruguay Round of trade negotiations 
progresses. It would be unfortunate if the opportunities 
for trade expansion and mutual benefit which this situation 
undoubtedly presents were put at risk by narrowly conceived 
trade legislation in the US and the implementation of 
unilateral and unjustified measures against trading partners. ( 
1 1 i ( 
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The Community should continue to adopt a positive profile in 
developing its dialogue with the United States. As part of its input into this process, the Community should : 
seek to define its own· concept of "appropriate 
regulation" in the area of telecommunications; 
discuss bilateral issues in a flexible way, while 
defending its legitimate interests; 
seek to improve the collection at the Community level of 
information required in connection with these 
discussions; 
continue the current dialogue as a contribution towards 
resolving the major issues in this sector in the -common 
f ramework of the Uruguay Round ; 
continue to co-operate with the United States in those 
areas which contribute to developing an open trading 
environment, in particular on international standards. 
3.3. Relations with Japan . 
3.3.l Access to market 
Japan substantially reshaped the regulatory environment of its telecommunications sector in 1985 by privatising NTT 
and introducing competition into the sector (see APPENDIX 1). 
In parallel, a series of discussions has taken place between 
the United States and Japan on the opening of the Japanese 
telecommunications market to US suppliers, based on an 
agreement concluded between the United States and Japan .in 
1980. Subsequent to the liberalisation of the Japanese 
telecomrnunications sector in 1985, a growing number of joint 
ventures with participation of US suppliers and service 
providers have developed. 
Regarding trade relations between the Comrnunity and Japan, there is still no noticeable sign of an opening of the 
Japanese telecommunications market for EC suppliers. The 
EC/Japanese balance in telecommunications equipment is 
characterised by negligeable experts to Japan and steadily 
growing EC imports from Japan. In 1985, EC irnports from 
Ja,Ran in . ,~--.. /" 
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telecommunications equipment totalled ·616 million ECUs, while 
experts totalled only 34 million ECUs. According to 
preliminary statistics for the first half of 1986, the 
Community's deficit with Japan rose further. Japan has 
replaced the US as the country with whiçh the_Community has 
the largest deficit. 
3.3.2. Standards 
In general the Commission is pressing the Japanese 
authorities to adopt standards closer to international ones 
and also to permit place of origin control of standard. 
The Member States took a position at the CCIR meeting at 
Dubrovnik in June 1986 against a Japanese-based standard on 
high definition television which would have substantiaily 
f avoured Japanese industry and which would have been 
incompatible with the European environment, based on the 
evolution of the· MAC/packet standards, according to 
Directive 86/529/EEC on the adoption of cornmon technical 
specif ications of the MAC/packet family of standards for 
direct satellite television broadcasting. 
The Commission further undertook a series of bilateral 
contacts with Japan throughout 1986 to emphasise the 
Community's support for open standards, in particular in the 
ISDN/OSI context. 
At this stage, a Cornrnunity approach could be envisaged along 
the f ollowing lines : 
Important problems remain because of the unsatisf actory 
balance of benefits in trade in telecommunications 
equipment between Japan and the Comrnunity. The 
Comrnunity should pursue its effort towards further 
market opening in Japan, including telecornmunications 
services. 
The Community should insist on being fully consulted 
about arrangements between the United States and Japan that affect its interests. It should rnake every effort 
to ensure that such arrangements are consistent with 
international obligations. 1 
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The Community should continue to exchange information on 
standards with Japan and to press Japan to adopt 
standards closer to international ones and participate 
fully in the international process of developing 
standards. This would help open the Japanese market 
and, more generally, avoid Community firms being at a 
disadvantage on the world market. 
3.4. Developing relations in telecommunications with other 
industrial countries 
. . 
A long-standing relationship exists at the industrial and 
Telecornmunications Administrations .level with Canada, 
Australia and New Zealand. Canada, Australia and New Zealand 
have highly developed telecommunications systems. 
The three countries·have an interest in strengthening the 
international standards organisations and open international 
standards, as has the Community. 
The f ramework for more intense direct co-operation on these 
issues exists. The Commission currently expects the joint 
review of the implementation of the fr.amework agreement with 
Canada, which will also deal with opportunities for increased 
co-opera.tion. The Commission, furthermore, signed an 
arrangement with Australia in Autumn 1986 for co-operation in 
the field of science and technology. 
As regards-the neighbouring countries of Eastern Europe, the 
development of more intense relations in the 
telecommunications field will depend on the general process 
of normalising relations with these countries, which has made 
some progress in the past two years but is by no means 
complete. The multiple applications of some types of 
advanced telecommunications equipment may give rise to sorne 
reservations as to the wisdorn of greatly expanding our trade 
or co-operation with the East in this area, due to the 
undertakings given by the majority of Member States in the 
COCOM f ramework to control experts to Eastern Europe of 
certain products in 1 Î). 
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this field. At the same time the Community has a basic 
interest in promoting the f low of information and an open 
information environment with these countries. Further 
analysis is needed on how future relations with these 
countries in telecomrnunications should evolve. 
3.5. Relations with Africa, Latin America, Asia and the 
Mediterranean 169 
Telecommunications will be the basis of the new inf orrnation 
technologies. It will be an essential cornponent of the 
future world service economy. The Cornrnunity therefore must 
develop a coherent strategy with regard to telecornmunications 
in its relations with the Third World. 
An intense network of relations already exists with many of 
these countries at the industrial level. The Cornmunity's 
Administrations have developed close ties in the f ramework of 
the ITU. Further contacts will be made in the context of the 
Uruguay Round. 
These relations should be further developed. Relations in 
telecommunications must evolve -and must reinforce -the 
general economic relations which have been developed with 
these countries. 
A s~ecial f ramework of co-operation is of fered by the third 
Lerne convention with the 66 ACP states, the implementation of 
which has begun. Telecommunications offers substantial 
potential, particularly for increased regional co-operation. 
The ITU Maitland report ["The Missing Link", International 
Telecommunications Union, 19851 has emphasised the important 
role which telecornmunications projects can play in the 
development of rural areas in developing.countries and for 
resolving problems in distribution, e.g., of food and other 
types of aid. 
In the general framework of consolidating the Community's 
relations with Latin America and of strengthening the 
Cornmunity's relations with South and South East Asia, the 
Commission has, in consultation with the Senior Officials 
Group on Telecommunications, undertaken initial contacts to 
investigate closer ties with some of these countries on 
telecommunications. ··{ 
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1 
There seems to be an interest in closer co-operation on 
standards and on future network technology. The Community 
will have to develop a position on the type of co-operation 
which could be envisaged. 
In recent years, the Community has been developing closer 170 
.contacts with China on information technologies and 
telecommunications. At the same time, the European 
telecommunications industry has been very active in the 
developing Chinese market. At this stage, intensive 
co-operation on standards has developed and a number of pilot 
projects have been initiated. 
The Community will also have to define its future relations 
in telecommunications with the neighbouring Mediterranean 
countries, some of which, such as Turkey, are members of the 
CEPT. 
4. The future development of the international 
telecommunications system 
The world's international telecommunications system is 
currently experiencing a period _of extreme tension and 
uncertainty, as each region and country tries to adjust its 
regulatory environment to the new situation created by the 
changes of technology. The Community will have to formulate 
a joint position with regard to major issues posed at the 
international level. 
4.1. Standards and international connectivity 
Clear international standards established by the appropriate 
organisations must be seen both in the Community and at the 
world level as the basic element for ensuring 
markets open for all participants ; 
maintenance of international connectivity of 
telecommunications networks and services. 
The Community's own standards policy (see chapter VII) has as 
one of its major objectives the support of this international 
process. '· 11 
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171 
The Community should therefore continue fully to support the 
ITU and its CCITT committee in its role as the main body for 
developing recornrnendations on international standards in 
telecommunications ( see APPENDIX 4). It should do whatever it can to increase the efficiency of this international 
process. One of the major ways should be substantially to 
increase the Cornrnunity's own resources in standardisation 
work, _and to increase European input to CCITT comrnittees, in 
the frarnework of its co-operation with the CEPT (see Chapter 
VII ). 
4.2. The ITU and its impact on the Community's regulatory 
environment 
The recommendations and regulations of the International 
Telecornrnunicàtions Union influence the regulatory environment 
of the Community far beyond CCITT activities for 
international standardisation. 
CCITT/CCIR recomrnendations and regulations influence in 
particular international tariffs and accounting rates and 
international operation·of enhanced service providers and use 
of leased lines. The present CCITT D recommendations spell 
out certain restrictions on the international use of these 
lines (see APPENDIX 4). 
For the Comrnunity, the impact of !TU recomrnendations must be 
analysed along two lines : 
implications inside the Community for intra-Community 
traff ic. 
implications for the Comrnunity's outside relations in 
telecommunications, in particular regarding the definition of a cornrnon position on "appropriate 
regulation" for the future GATT negotiations. l l 
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Article 234 of the Treaty expressly recognises the 
international law doctrine of "pacta sunt servanda". 172 
However, Article 234 also states that "to the extent that 
such agreements are not compatible with the Treaty, the 
Member State or States concerned should take all appropriate 
steps to eliminate the incompatibilities established. Member 
States shall, where necessary, assist each other to this end 
and shall, where appropr ia_.te, adopt a common attitude". 
The Community should continue fully to support and strengthen 
the International Telecommunications Union as the major 
stabilising factor in international telecommunications. 
The ITU World Administrative Telegraph and Telephone 
Conference (WATTC) scheduled for late 1988 (see APPENDIX 4) 
will discuss, inter alia, whether and how to regulate 
specialised networks and enhanced services. Currently, ·the 
preparatory WATTC committee is discussing a new set of rules. 
The WATTC 88 conference will have a major influence on the 
Community's future ex.ternal relations in telecommunications. 
The Community will ther.efore have to define a common· position 
with regard to the conference and its preparation. 
4.3. International satellite organisations 
INMARSAT INTELSAT and 
Since their creation in 1964 and 1975 respectively, the 
INTELSAT and INMARSAT systems have developed into a major 
component of the international telecommunications system, 
both for the developed and developing world (see APPENDIX 2). 
The INTELSAT system now carries approximately two thirds of 
international telephone traff ic. For ma~y Third World 
countries, it is the main telecommunications link to the outside world. '· 1 1. 1 
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173 
INTELSAT has corne under pressure for two reasons : 
the extension of US regulatory concepts to the 
international scene and acceptance by the FCC of a large 
number of applications to provide international 
satellite communications threatens INTELSAT's 
profitability on the high-density routes (principally 
North Atlantic) and its basic concept of subsidising 
low-density revenues from high-density routes ; 
the emergence of a number of sub-marine optical cable 
projects will fundamentally change the comparative 
advantages of satellites and cable and erode INTELSAT's 
revenues on traditional fixed point telephony. 
While competition by alternative satellites is subject to the 
"economic harm" procedure under Article 14 of the INTELSAT 
convention, this is not the case with cable projects. 
The current international telecornmunications system thus 
faces two basic challenges 
INTELSAT will have to adapt its organisation and its 
strategy to a more competitive environment ; 
the international telecommunications community will have 
to develop new mechanisms for global cc-ordination, 
including satellite and cable connections. 
Further developrnent is largely linked to the evolution of 
transatlantic traff ic and the interconnection issue regarding 
the newly emerging competitive US service providers (see 
above). · 
At the sarne time, INMARSAT is considering expanding its 
activities into new business areas, in particular land and air mobile radio communications. This may have major 
consequences for the Community. 
The Community Member States have a major interest in 
INTELSAT. The Community will h~ve to develop a common 
position with regard to the future evolution of international 
satellite communications. ~. ~/ 
5. Conclusions 
Telecommunications network infrastructure and 
telecommunications related services are an essential 
infrastructure for the international economy. 
· Trade in services and in equipment will be major issues for 
the Community's external trading relations in the years to 
corne. More specif ically 174 
the Community has a major interest in promoting foreign 
market opening in services and in equipment. 
The major forum for determing the future f ramework for 
trade and telecommunications related services will 
therefore be the new GATT Round. The Cornmunity will 
need to deterrnine a common position on 
telecommunications with a view to these negotiations. 
The starting point must be internal consensus on a 
concept of "appropriate" or "acceptable" regulation. 
Given the close integration of telecommunications with 
other services, the Community's position on 
telecommunications must be influenced by its intention 
to work, in the framework of the GATT negotiations, 
towards a more open trading environment for services in 
general. 
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The Community should fully support the International 
Telecommunications Union as a major stabilising factor 
in international telecommunications. 175 
Where incompatibilities of !TU recommendations and 
regulations may exist regarding the future eyolution of 
intra-Community telecommunications services and 
agreements negotiated in the GATT framework, Member 
States should work jointly towards eliminating such 
incompatibilities. This concerns in particular the ITU 
World Administrative Telegraph and Telephone Conference 
(WATTC-88) which may have a major influence on the 
Community's future external relations in 
telecornrnunications. 
The Comrnunity has a long term interest in preserving 
major stabilising factors of international 
telecommunications provision, such as international satellite organisations. The Comrnunity and the Member 
States should define a common position with regard to 
these organisations, in particular with regard to 
INTELSAT and INMARSAT. 
The Cornrnunity, within its overall interest in developing its external relationships, should develop closer 
relations on telecommunications with Third Countries. 
Co-operation on telecommunications could become an 
important component of the Community's relationship with 
the Third World. -
Within its general trade policy, the Comrnunity has a 
basic interest in developing its trading relations in 
telecommunications with the United States. Such 
relations must be based on the principle of mutual 
benefit, and cannot be based on concepts of narrow 
sectoral reciprocity which only faveur one party. 
Relations with the EFTA countries are of special 
importance. !: 
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176 
The Japanese market remains virtually closed to European 
suppliers, while the Community's deficit in 
telecommunications with this country is steadily 
increasing. This situation is most unsatisfactory. 
The Member States and the Telecommunications 
Administrations face a number of immediate issues, on 
which common positions must be sought: 
interconnection with US other common carriers, such 
as MCI and GTE-Sprint 
the handling of applications for ·interconnection 
and access by US providers of enhanced services 
which may obtain RPOA status 
US requests for facilities for enhanced services 
providers comparable with those which may be 
offered under future US arrangements for Open 
Network Architecture (ONA) 
future interpretation of ITU recommendations 
regarding international accounting rates and 
regulation of enhanced service providers 
Member States must avoid def lection of trade and distortions 
of competition within the Community by taking diverging 
positions on these issues. 
An important requirement for building ·a Communi ty 
position, relative to relations with Third Countries, 
should be the collection of more detailed information 
on interconnection between Community networks and 
outside providers and on the development of the overall 
trading relations of the Community in telecornrnunications 
services and equiprnent. i· 
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177 
X THE INGREDIENTS OF A SOLUTION 
1. Major points to be considered for a solution 
On the basis of the foregoing analysis, the following· seem to 
be major points to be considered for any attempt to f ind 
agreement for broad regulatory aims for the telecommunications 
sector in the Community. 
Given their importance and wide ramifications, regulatory 
changes in. telecommunications can only be introduced 
progressively. Time must be allowed for present 
structures, which have grown up historically over a long 
period, to adjust to the new environment. The major 
objective must be the completion of the Internal Market by 
1992. 
Regulatory changes in telecommunications must take account 
of the views of all parties concerned, in particular 
private and business users, Telecommunications 
Administrations, the Administrations' work force, new 
providers of services and the telecommunications and 
data-processing equipment industry 
There is consensus in the Comrnunity that competition in 
the telecomrnunications services and terminal equipment 
sectors must be substantially expanded, in order to react 
to technological, econornic and world market trends ; 
There is also c6nsensus that the role of the 
Telecommunications Administrations in the provision of 
network infrastructure must be essentially safeguarded, in 
order to allow them to fulf il their public service 
mandate ; 
A stable "natural" boundary line between a "reserved 
services" sector and a "cornpetitive services" sector 
(including in particular "value-added services") is not 
possible. Due to technological development -the trend 
towards integration any def inition (and reservation) 
of a service can only be temporary and must be subject to 
review if it is not to impede the overall development of 
telecommunications services. There is however in practice 
·consensus between the Member States that voice telephone 
service is a basic service. Currently, this service is 
reserved in all Member States for provision by the 
Telecomrnunications Administrations. At present, this 
service corresponds to 85% -90% of telecornmunications 
revenues .. l 
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178 
As one counterpart of a more open market environment, the 
time it takes to establish and apply international 
standards must be substantially reduced, in order to 
maintain future network integrity and to promote the 
availability and interoperability of efficient Europe-wide 
and worldwide services. 
Telecommunications Administrations generally are and 
should be allowed to participate in the newly emerging 
competitive services and terminal eqyipment market. This 
requires that in the future regulatory responsibility must 
be separated from operational responsibility. Regulation 
concerns in particular licensing, control of conformity 
testing and mandatory interface specifications, frequency 
administration, and general surveillance including tariff 
principles ; 
Entry of the Telecommunications Administrations but also 
of the computer and data-processing multi-national 
companies into a competitive telecommunications sector 
implies the danger of abuse of a dominant position. 
Control with regard to both types of dominant market 
participants will have to be strengthened ; 
Action at Community level must be taken towards narrowing 
the differences between Member States regarding the 
provision of network facilities to the newly emerging 
competitive services and terminal equipment sector. 
Otherwise a Community market for services will not develop 
rapidly. This has implications both for technical 
regulations and network termination points and for usage 
conditions and tariff principles ; 
The lo.ng-term convergence of telecommunications wi th 
audio-visual technologies must be taken into account, in 
addition to the current·convergence between the 
telecommunications and data-processing sectors. This affects in particular policies concerned with satellite 
communications and cab le-TV networks .· 
Where cable-TV network infrastructure and satellite 
communications are also used for two-way communications, 
close surveillance with regard to their relationship and 
interfacing with the overall telecommunications network 
will be needed, in order to ensure the long-term overall 
integrity of the telecommunications infrastructure. 
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179 
Two-way satellite communications and the regulation of 
up-links will need case-by-case consideration. Closely 
rnonitored cornpetition should be a possibility in those 
cases where unacceptable interference with other satellite 
or radio communications systems is not to be expected and. 
where the revenue base and financial viability of the 
general network infrastructure provider are not put into 
question. In the case of very small satellite antennae 
(VSAT or "microterminals") suitable for data exchange 
only, this situation should normally be assumed 
automatically. 
Given the trend in satellite communications towards point 
to multi-point 'broadcasting' applications for closed user 
groups, the regulatory regime for receive only earth 
stations (ROES) for satellite communications should be 
assimilated to the regime for telecommunications terminals 
and TV satellite antennae and fully opened to competition. 
With the growing importance of services, the Community 
will face in its external relations a growing number of 
telecommunications-related issues. Consensus must be 
achieved in time for the preparation of the new GATT round 
which will include telecommunications services. 
Consensus must be further developed at Community level 
regarding telecommunications issues and the Community's 
overall framework of external relations, in particular with 
the EFTA countries and CEPT, with the United States and Japan 
and with the international organisations in this field, such 
as the International Telecommunications Union (!TU). 
2. The application of the Treaty to the telecommunications sector 
The current convergence of regulatory positions in the Member 
States provide a unique opportunity to synchronise current 
national moves and give them a European scale and dimension. 
The Treaty sets a clear framework for the achievement of a 
Community-wide market for telecommumnications services and 
equipment. . ... 
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180 
Article 2 of the Treaty provides that 
"The Community shall have as its task, by establishing a 
common market and progressively approximating the economic 
policies of Member States, to promote throughout the 
Community a harmonious development of economic activities, 
a continuous and balanced expansion, an increase in 
stability, an accelerated raising of the standard of 
living and closer relations between the states belonging 
to it". 
All the substantive provisions of the Treaty must be_construed 
in the light of Article 2. As a corollary to this, the 
substantive provisions of the Treaty are often def ined as 
specific manifestations of the Treaty's objectives. Member 
States are obliged by Article 5 of the Treaty to "facilitate 
the achievement of the Community's tasks" and to "abstain from 
any measure which could jeopardise the attainment of the 
objectives of (the) Treaty". Member States are therefore 
likewise reguired to fulfil the goals laid down in Article 2 
and to respect the Treaty as a whole. 
Regarding the framework provided by the Treaty, it is 
important to recall that the provision of telecommunications 
network infrastructure, services and eguipment is 
characterised by certain basic facts : 
While provision of network infrastructure generally requires 
the physical presence of the provider in the geographical area 
in question, provision of services and equipment in most cases 
does not, with the result that the latter are largely 
tradeable. Satellites occupy a hybrid position between 
infrastructure and services. (See section VI.4.2.1). 
It is against this background that the provisions of the 
Treaty of most relevance to the telecommunications sector must 
be considered. These provisions are in particular:-1 • 
' ' 1 1 
the provisions governing competition, in particular 
Articles 85~ 86, and 90 ; 181 
the provisions concerning the freedom to provide services 
and the freedom of establishment, in particular Articles 
52 to 66 ; · 
the provisions concerning the free circulation of goods, 
in particular Articles 30 to 37 ; 
the provisions concerning the common commercial policy, in 
particular Articles 110 to 116. 
the general provision for the approximation of provisions 
laid down by law, regulation or as administrative actions 
in Member States as directly af fecting the establishment 
or functioning of the common market, in particular Article 
100, and after the coming into force of the Single Act, 
Article 100 (a). 
Beyond these Articles analysis needs to take into account 
other provisions of the Treaty, as well as case law developed 
by the Court of Justice with regard to telecommunications and 
to other sectors, in so far as they are of relevance to the 
discussion. Details of specific cases treated by the Court and 
the Commission in the past have been presented in Chapter VII. 
The Commission has stated previously that "it regards the 
Member States' postal and telecommunications authorities as 
commercial undertakings since they supply goods and services 
for payment" which are subject to the application of Community 
competition law, an opinion confirmed by the Court of Justice 
[cf. Case 41/83, Commission v. Italy of 20th March 1985, not 
yet reported (British Telecom)]. 
For easy reference, central prov1s1ons of the Treaty in the 
context of telecornrnunications are cited hereunder : 
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182 
Article 90 (1) provides that 
"In the case of public undertakings and undertakings to 
which Member States grant special or exclusive rights, 
Member States shall neither enact nor maintain in force 
any measure contrary.to the rules contained in this 
Treaty, in particular to those rules provided for in 
Article 7 and Articles 85 to 94." 
Article 90 (2) provides that 
"Undertakings entrusted with the operation of services of 
general economic interest or having the character of a 
revenue-producing monopoly shall be subject to the rules 
contained in this Treaty, in particular to the rules on 
competition, in so far as the application of such rules 
does not obstruct the performance, in law or in fact, of 
the particular tasks assigned to them. The development of 
trade must not be af f ected to such an extént as would be 
contrary to the interests of the Comrnunity." 
Article 90 (3) provides that 
"the Commission shall ensure the application of the 
provisions of this Article and shall, where necessary, 
address appropriate Directives or Decisions to Member 
States" 
Article 86 provides that 
"Any abuse by one or more undertakings of a dominant 
position within the Common Market or in a substantial part 
of it shall be prohibited as incompatible with the Common 
Market in so far as it may affect trade between member 
States. 
"Such abuse may, in particular, consist in 
" (a) directly or indirectly imposing unf air purchase or 
selling prices or other unfair trading 
conditions ; :i 
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" ( b) 
" ( c) 
" ( d) limiting production, markets or technical 
development to the prejudice of consumers 183 
applying dissimilar conditions to equivalent 
transactions with other trading parties, thereby 
placing them at a competitive disadvantage 
making the conclusion of contracts subject to 
acceptance by the other parties of supplementary 
obligations which, by their nature or according to 
commercial usage, have no connection with the 
subject of such contracts." 
Article 37 provides that 
"Member States shall progressively adjust any state 
monopolies of a commercial character so as to ensure that 
when the transitional period has ended no discrimination 
regarding the conditions under which goods are procured 
and rnarketed exists between nationals of Member States. 
"The provisions of this Article shall apply to any body 
through which a Member State, in law or in fact, either 
directly or indirectly supervises, determines or 
appreciably influences imports or experts between Member 
States. These provisions shall likewise apply to 
monopolies delegated by the State to others". 
Article 59 provides that 
"Within the framework of the provisions set out below, 
restrictions on freedom to provide services within the 
Community shall be progressively abolished during the 
transitional period in respect of naiionals of Member 
States who are established in a state of the Community 
other than that of the person for whom the services are 
intended. 
"The Council may, acting unanimously on a proposa! from 
the Commission, extend the provisions of this Chapter to 
nationals of a third country who provide services and who 
are established within the Community." 
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3. Proposed Community positions 
On the basis of the general points to be taken into 
consideration and the analysis of the Treaty, proposals for 
positions have been developed which are set out in Fig. 13. 
The proposals concentrate on those issues which must be 
resolved at Community level for all Member States. They leave 
out questions which are important but fall to the national 
level, such as which status for Telecommunications 
Administrations is best suited to facing the developing 
competitive market environment, and related questions of 
finance, organisation, and employment relations. 
The proposals rest on accepting the continuation of those 
aspects of the current regimes where there is justification 
and compatibility with the Treaty~ Within the framework of 
the current adjustment and according to their economic 
appreciation and perception, Member States may, of course, 
choose their own position with regard to these aspects, such 
as a more liberal regime regarding the whole or parts of the 
network infrastructure. As regards reguired change at the 
Cornrnunity level., the proposals in Fig. 13 insist on three 
essential modifications : 
PHASED COMPLETE OPENING OF THE TERMINAL EQUIPMENT MARKET 
TO COMPETITION 
In the long run this must include all terminals including 
the subscriber's first telephone set, given the trend 
towards. integration of functions and the Integrated 
Services Digital Network. 
In the short terrn, transitional solutions will have to be 
found, taking into account that at the present stage the 
large majority of Member States firmly maintain their 
rnonopoly covering the first (conventional} telephone set. 
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Figure 13 
P~OPOSED POSITIONS 
The general objective of the position• set out is the development in the Community 
of a strong telecoa:munications infrastructure and of efficient services : 
providing the European user Yi.th a broad variety of telecoamunicat.i.ons services on 
the most favourable terms, ensuring coherence of development betveen Member 
States, and creating an open competitive enviro~nt, taking full account of the 
dynamic technological developments undervay. 
A) Acceptance of continued exclusive provision or special rights for the 
Telecommunications Administrations regarding provision and operation of the 
network infrastructure. 1ihere a Member State chooses a a.ore liberal regime, 
either ~or the vhole or parts· of the.network, the short and long term 
integrity of the general netvork infrastructure should be safeguarded. 
B) 
C) Closely monitored competitive offering of tvo-way satellite coamrunications 
systems vill need further analysis. It should be allowed on a case-by-case 
basis, where tbis is necessary to. develop Europe-wide services and where 
impact on the f inancial viability of the ma.in provider(s) is not 
substantial • 
Common understanding and def inition regarding infrastructure provision should 
be worked out under E) belov. 
Acceptance of continued exclusive provision or special rigbts for the 
Telecommunications Administrations regardi.ng provision of a limited number of 
basic services, wbere exclusive provision is considered essential at this 
stage for safeguarding public service goals. 
Exclusive provision must be narrowly con•trued and be subject to reviev 
within given time intervals, taking account of technological dev.elopment and 
particularly the evolution towards a digital infrastructure. "Reserved 
services" ma.y not be defined so as to extend a Telecommunications 
Administration service monopoly in a way inconsistent witb the Treaty. 
Currently, given general understanding in the Community, voice telephone 
service seem.s to be the only obvions.candidate. 
Free (unrestricted) provision of all other services ("competitive services", 
including in particular "value-added services") within Hember States and 
betveen Hember States {in competition witb the Telecommunications 
Administrations) for ovn use. shared use, or provision to third parties, 
subject to the conditions for use of the netvork infrastructure to be defined 
under E). 
"Competitive services" vould comprise all services except basic services 
explicitly reserved for the Telecoa:munications Administrations (see B). ., 
~ 
. ... 
Fig.13 cont 
D) Strict requirements regarding standards for the network infrastructure and 
services provided by the Telecom:mm.ications Administrations or service 
providers of comparable importance, in order to maintain or create 
Com:aunity-vide interoperability. Tbese requirementa must build in pa~ticular 
on Directives 83/189/EEC and_86/361/!ZC, Deciaion 87/95/EE.C and 
Rccommcndation 86/659/EF..C. 
Hember States and the Community abould ensure and promote provision by the. 
Telecommunications Administrations of efficient Europe-wide and worldwi.de 
com:ml:"icatioos, in particular regarding tboae aervicea (be tbey reserved or 
competitive) recoamcnded for CommuDity-wide proviaion~_such as according to 
Recoa:mendation 86/659/EE.C. 
E) Clear definition by Community Directive of general requirements imposed by 
Telecommunications Administrations on providers of competitive services for 
use of the network, including definitions regarding network infrastructure 
provision. 
P) 
G) This must include clear interconnect and access obligations by 
Telecoman.mications Administrations for trana-frontier service providers in 
order to prevent Treaty infringements. 
Consensus must be achieved on standards, frequencies. and tariff principles, 
in order to agree on the general conditions imposed for service provision on 
the competitive sector. Details of this Directive on Open Retwork Provision 
(0 H P) should be prepared in consultation Yi.th the Hember States, the 
Tclecommunications Admini~trations and the otbcr parties concerned. in the 
framework of the Senior Officials Croup on Telecommunications (SOG-T). 
Free (unrestricted) provision of terminal equipment vithin Hember States and 
between Hember States (in competition with Telecoamrunications 
Administrations), subject. to type approval as. compatible vitb Treaty 
obligations and existing Directives. Provision of the first {conventional) 
telephone set. could be excluded from unrestricted provision on a t.emporary 
basis. 
Receive Only Ea.rth Stations (ROES) for satellite dovn-links should be 
assimilated vith terminal equipment and be subject to type approval only 
Separation of regulatory and operat.ional act1v1t1es of Telecoamnmications 
Administrations. Regulatory activities concern in p.articular licensing, 
control of type approval and interface specifications, allocation of 
frequencies, and general surveillance of network usage conditions ; 11.· li 
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Fig.13 cont 
H) Strict continuous review of operational (com:nercial) activities of 
Telecommunications Administrations accordi.n,g to Articles 85. 86 and 90, EEC 
Treaty. This appliea in particular to practices of crosa-sub•idisation of 
activities in the competitive services aector and of activi.tiea in 
I) 
J) ma.nuf acturing ; 
Strict continuous reviev of all private providers in the newly opened sectors 
according to Articles 85 and 869 in order to avoid the abuse of dominant 
positions ; 
Full application of the Coa:munity's common commercial policy to 
telecocmrunications. Notification by Telecoaaunicationa Administrations under 
Regulation 17/62 of all arrangement• between tbea or witb Third Countries 
vhich may affect competition wi.tbin the Cormnnity. Provision of information 
to the extent required for the Commrnity. in order to build up a consistent 
Coamunity position for CATI negotiations and relations Yi.th Third Countries. .'.) 
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185 
ACCEPTANCE BY THE TELECOMMUNICATIONS ADMINISTRATIONS OF 
CLEAR OBLIGATIONS TO INTERCONNECT WITH AND PROVIDE ACCESS 
TO TRANS-FRONTIER SERVICE PROVIDERS 
Generally, the network must be opened, under fair 
competi ti ve condi tio·ns, for service providers from other 
Member States. This is a pre-condition for implementation 
of the Internal Market for the Community's future service 
economy. 
Insofar as Member States continue, for the time being, to 
reserve certain basic services for exclusive provision by 
their Telecommunications Administrations, reserved 
services must be construed narrowly and not interfere 
unduly with service provision.from other Member States, in 
accordance with Treaty rules. 
CLEAR SEPARATION OF REGULATORY AND OPERATIONAL FUNCTIONS 
OF TELECOMMUNICATIONS ADMINISTRATIONS, 
In those Member States where this still has not been 
carried out. In a more competitive environment, the 
Telecommunications Administrations cannot continue to be 
both regulator ànd market participant, i.e. referee and 
player. Regulatory functions concern in particular 
licensing, control of type approval and binding 
specifications, frequency allocation, and surveillance of 
usage conditions. 
The need for this separation is conf irmed by the trends 
and debates in all Member States which are envisaging more 
competition for the sector. 
The Telecommunications Administrations should be market participants in the competitive sectors, in an improved 
competitive environment in order to ensure full service 
to the whole spectrum of users and industry. 
Substantial differences would continue to exist between Member 
States, but must be accommodated. This concerns the different status of the network operators (public/private), and also the 
policy regarding provision of leased lines and resale of 
capacity. All Member States agree currently on the necessity 
of securing the financial viability of their Administrations, 
either by excluding pure resale of voice (telephone) on leased 
lines or by tariff schemes which make resale of voice to third 
parties unattractive, such as usage-based tariffs. Both 
methods will have to be accommodated in the Community. 'I 
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186 
However, both methods must be limited to a legitimate level of 
protection of financial viability and must not represent the 
abuse of a dominant position. Current charges for leased 
lines bath at the natiorial and Community level show in some 
cases wide and unexplained divergences. 
The proposals aim at progressively introducing full 
Community-wide competition to the terminal equipment market, 
and as far as possible and justified at this stage to 
telecommunications services. 
In pursuing the implementation of these proposals, and the lifting of existing restrictions, the Commission will take 
full account of the fact that the competition rules of the 
Treaty apply to Telecommunications Administrations, in 
particular to the extent that they engage in commercial 
activities. It may use, as appropriate, its mandate under 
Article 90 (3) of the Treaty to ptomote, synchronise and 
accelerate the on-going transformation. 
4. Proposed Community Action Lines to create a favourable 
environment for the on-going transformation 
In order to create the environment for reaching the objectives 
set out, the Commission proposes a number·of actions 
to smooth the transition towards a more competitive 
Community-wide market ; 
to promote a strong European presence in both the services 
and industrial field ; 
to prepare the Community for its ~iscussions of future 
trading relations in this field with its outside partners, 
in particular in the framework of GATT. 
It is envisaged : 
to accelerate the implementation of existing action 
lines ; 
to initiate a number of new action lines needed to 
complement and facilitate the transition. ·, 
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187 
4.1 ACCELERATION-OF EXISTING ACTION LINES 
As regards the acceleration of implementation of the action 
lines defined by Council in December 1984 for the Community•s 
telecommunications policy, the Commission foresees : 
ACCELERATED ADOPTION OF THE PROPOSALS FOR ENSURING THE 
LONG TERM CONVERGENCE AND.INTEGRITY OF THE NETWORK 
INFRASTRUCTURE IN THE COMMUNITY 
A pan-European telecommunications infrastructure with full 
inter-operability is the only basis on which an open and 
competitive Community-wide terminal equipment and 
services market can thrive. Intensified industrial 
co-operation within the Community must ensure that 
European industry will fully benefit from the opening of 
this market. 
This concerns in particular : 
rapid adoption of the RACE MAIN programme which .is 
fundamental to longer term network development in the 
Community and to Community-wide standards for the 
future Integrated Broadband .Communications, and 
promotion of related projects for the progressive 
Community-wide introduction of broadband 
communications· 
rapid adoption of the proposals for the introduction 
of digital mobile communications ; 
full application of Recommendation 86/659/EEC on the 
co-ordinated introduction of the Integrated Services Digital Network (ISDN) ; 
rapid application of the STAR programme for advancing 
infrastructure in the regions, with the aim of 
increasing economic cohesion during the current 
transition. 
RAPID EXTENSION OF THE CURRENT·DIRECTIVE 86/361/EEC TO 
INCLUDE FULL MUTUAL RECOGNITION OF TYPE APPROVAL FOR 
TERMINAL EQUIPMENT 1 
1 
!. 
1. 
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188 
According to the current Council Directive 86/361/EEC on 
the mutual recognition of testing required for type 
approval, proposals ·for full mutual recognition of type 
approval must be submitted by July 1989 at the latest. 
The Commission proposes to accelerate this measure which 
is vital for the development of a competitive, 
Community-wide terminal market. 
PHASED REPLACEMENT OF THE CURRENT RECOMMENDATION 
84/550/EEC ON THE FIRST PHASE OF OPENING UP ACCESS TO 
PUBLIC TELECOMMUNICATIONS CONTRACTS BY A COUNCIL DIRECTIVE 
on the opening of procurement contracts applying to public 
and private Telecommunications Administrations to which · 
the Member States confer exclusive or special rights. 
The future participation of Telecommunications 
Administrations in the competitive markets requires more 
transparency in their purchasing behaviour, in order to 
allow these markets to operate efficiently. J • 
.· ~ 
189 
4.2 INITIATION OF NEW ACTION LINES 
As regards new action lines needed to facilitate the 
transition towards a more competitive, Comrnunity-wide 
environrnent, the Cornmi~sion proposes 
I SUBSTANTIAL REINFORCEMENT OF THE DEVELOPMENT OF STANDARDS 
AND SPECIFICATIONS IN THE COMMUNITY -/ CREATION OF A· 
EUROPEAN TELECOMMUNICATIONS STANDARDfr INSTITUTE 
based on the current co-operation of the 
Telecornmunications Administrations wi thin CEPT ·and wi th 
CEN-CENELEC. A substantial reinforcernent of resources 
applied to standardisation is a necessary requirement for 
a truly open competitive market. 
Jointly financed, the institute, based on a small core 
team of permanent staff and independently managed 
according to best business practlce, should draw fl~xibly 
on experts f rom both the Telecomrnunications 
Administrations and industry, in order substantially to 
accelerate the elaboration of standards and technical 
specifications, indispensable for an open and competitive 
market environment, and the development of Europe-wide 
services. 
This action would build on and complement the Cornmunity's 
current policy on telecornmunications and information 
technology standards. 
II COMMON DEFINITION OF AN AGREED SET OF CONDITIONS FOR OPEN 
NETWORK PROVISION ("ON P") TO SERVICE PROVIDERS AND USERS 
Working out in common the principles of the provision of 
the network to cornpetitive service providers is a 
necessary requirement for a Community-wide competitive 
market for terminal equipment and for competitive 
services, including in particular value-added services, if 
a long period of case-to-case decisions is to be avoided. 
This concerns in particular the def inition of clear 
Europe-wide network terrnination points, usage conditions 
and tariff principles and availability of frequencies 
where relevant. 
190 
The work should be carried by the Senior Officials Group 
on Telecommunications (SOG-T), based on hearings with all 
parties concerned. Subsequently, the Commission would 
submit a corresponding Directive on ONP to Cquncil. 
III COMMON DEVELOPMENT OF EUROPE-WIDE SERVICES 
Future intra-Comrnunity communications will depend on 
achieving three objectives : 
Europe-wide compatibility and inter-operability of 
those services provided by the Telecommunications 
Administrations. In addition to efficient telephony 
and telex, new services such as teletex, videotex, 
p~cket-switched and circuit-switched data services, 
mobile communications and the services ,as defined in 
Recommendation 86/659/EEC on the future ISDN should be 
available universally at the European level. This 
could involve joint Community-wide service provision, 
network planning, and tariff principles 
Rapid development of intra-Community provision of 
value-added services. It is proposed to set into 
motion at the Community level a number of measures 
aimed at promoting the emergence of European 
value-added services, building on current efforts such 
as the TEDIS initiative. 
Rapid development of the Community's policy on the 
information market, to promote Europe-wide information 
services, in particular fully mobilising the potential 
of private initiatives. 
IV COMMON DEFINITION OF A COHERENT EUROPEAN POSITION 
REGARDING THE FUTURE DEVELOPMENT OF SATELLITE 
COMMUNICATIONS IN THE COMMUNITY 
The international satellite communications sector is 
currently going through rapid changes. In the light of 
the positions proposed in Fig. 3, based on prevailing 
technological trends, common positions will in particular 
be required regarding : i :.·.1 
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191 
development of the earth station market in Europe, in 
particular· with regard to comrnon standards 
the future development of space se~ments, in 
particular the relationships between EUTELSAT~ 
national, and private systems, and the full use of the 
technological gotential of the European Space Agency ; 
the developrnent of international satellite 
communications, in particular wit~ regard to INTELSAT 
and INMARSAT. 
COMMON DEFINITION OF A COHERENT CONCEPT ON 
TELECOMMUNICATIONS SERVICES AND EQUIPMENT WITH REGARD TO 
THE COMMUNITY'S RELATIONS WITH THIRD COUNTRIES_ 
An intensification of cc-ordination with regard to Third 
Countries and the position on the international regulatory 
environment is urgently needed. 
'This concerns in particular the preparation of the new 
GATT ROUND and future relations with international 
organisations such as the International Telecomrnunications 
Union. 
It concerns further the evolving relationship in this 
field with the EFTA countries, with the United States and 
Japan and with the Third World. 
VI COMMON ANALYSIS OF SOCIAL IMPACT AND CONDITIONS FOR A 
SMOOTH TRANSITION 
In the long term, the most important factor for the future evolution of the telecommunications and information 
technology sector and its regulatory environrnent, both at 
the national and the Community level, will be the degree 
of social consensus which can be achieved regarding the 
new technologies. 
Common discussions and positions will be needed regarding 
the best ways to master the shift in job qualifications 
required by the change in technology and to expand 
employrnent in new service provision. 
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