TOWARDS A DYNAMIC EUROPEAN ECONOMY, GREEN PAPER ON THE DEVELOPMENT OF THE COMMON MARKET FOR TELECOMMUNICATIONS SERVICES AND EQUIPMENT
Date: 1987-06-30
Institutions: European Commission
Subjects: EU policy, postal and telecommunications services, provision of services, regulation of telecommunications, single market, telecommunications equipment, telecommunications industry, telecommunications policy, trans-European network, transmission network

COMMISSION  OF  THE  EUROPEAN  COMMUNITIES 

675'î7 

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 

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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 
The se 
regulatory  changes 
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  sector' s  environment. 

improve 

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. THE  INEVITABLE  TREND 

than  a  century, 

For  more 
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 
cellular 

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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 
international 
and  commercial  transactions,  research  networks, 
tourism,  cultural  exchanges,  world  wide  interdependence, 
etc.)  ; 

the  major 
participants. 

importance  of  scale  effects  through  multinational 

Under  pressure  of  events  the  authori ties  concerned  are  being 
to  review  telecommunications  regulations  thoroughly, 
forced 
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. 

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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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3. 

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 

i  s  due 

The  Green  Paper  provides  an  analysis  of  the  ideas  and  positions, 
which  are  ·already  well  def ined  in  some  cases 
the  var ious 
partners  in  the  Community.  The  undoub~ed  complexity  of  the 
t  o  se ver a 1  f  ac tors :"  the  e f  f  e c t  s  of  n.e w 
s i  tu a t  i  on 
the  understandable  attachment  of  staff, 
technological  influences; 
manufacturers  and  users 
they  are 
reluctant  to  discard;  and  the  diversity  of  the  new  services  that 
will  have 
this  complexity 
shows  a  number  of  converging  features  that  can  and  must  prepare  the 
way  for  consensus.  These  include  agreement  on  the  need  : 

to  be  provided.  On  analysis,  however, 

to  established  traditions  that 

of 

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. 

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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 
theref ore  embarked  u pon  a 
regul a t ions. 
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. 

The  Member  S ta tes  have 

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 

the  social 

as  regards 
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.). 

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5. 

THE  COMMISSION'S  PROPOSALS  FOR  ACTION 

The  Commission  has  for  some  years  been  exam1n1ng  Community  measures 
the 
for  European  telecommunications.  The  Green  Paper  sets  out 
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 
type  approval. 
the  mutual  recognition  of  tests  required  for 
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 
the  Commission  is 
implementation  of  which  is  to  be  speeded  up, 
putting  forward  a  number  of  proposals  designed 
the 
transition  towards  a  more  competitive  environment  on  a 
Community-wide  scale.  The  Green  Paper  therefore  proposes  : 

to  promote 

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  ; 

6. 

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 
to  reduce.  state  dominance  and  give  a  freer 
from  users,  anxious 
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 
the  interna!  and  external 
competitiveness  of  its  industry  and 
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 
target  of  1992  approaches. 

the  best  possible  development  of 

telecommunications  as 

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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) 

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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 

2 

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 
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. 

the 

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. 

. ·1 

3 

The  Paper  advances  proposals  for  cornrnon  positions  and  lines  of 
action,  in  order  to  ease  the  current  transition. 

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. 

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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. 

----------~-~===~ii'S> 

'< 

5 

Since  1984,  the  Community  has  made  substantial  progress  in  this 
field,  by  implementing  a  policy  aimed  at  : 

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 
Network  (ISDN),  digital  mobile  communications,  and  the 
introduction  of  future  broadband  communications  ; 

the  Integrated  Services  Digital 

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) 

6 

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 

.:!:'.-' 

·1~·.·· 

-- .. 

[ 
.  ;~ 

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} 

I " .   • 
:·1 
,, 

1 

' 

1 

1  1  i 
1  .'1  '' 
11,· 

t.igure  1. 

\CUllL.lllUt!U} 

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 

7 

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] 

( 

:1, 

1 

I, 

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  ; 

b.,-..,.-,"'"·~·_c =-c- - - - - . 

-

-

-

- - - - -- -

TELECOMMUNICATIONS: 
PROSPECTS FOR THE YEAR  2000 

. /  Telegraphy 

~ Telex 

eegrap y 
T 1 

h 

Broadband dola 

Packel·swilched  dola 
Circuit ·swllched dola 
Telemelry 
Telelex 
Text  facslmlle 
Facsimlle 

~ Telegraphy 

Telegraphy 

_ 

Photo 
Facslmlle 

Photo 
Fdcslmlle 
Facslmlle 

Telephony 

Telephony 

Telephony 

High-speed dola  Colour facslmlle 

Medlùm-speed dola 

Electronlc Mali 
1  Clrcult-swltched  Telenewspaper 

data  Vldeotex 

Low-speed data 
Photo 
Facslmlle 
Facslmlle 

Telephony 
·.Hifi  telephony 
Telephone-conrerence 
Vldeoconference 

Telemetry  Speech facslmlle 
Facslmlle 
Teletex 
Focslmlle 
Vldeofex 
Telephony  Vldeotelephony 
Vldeocon •  Stereo hifi sound 
~re~e Quadrophony 

Colour telévl~lon----------_ ~'ifir~iund 
Colour televlslon 

Colour televlslon 
Stereo televlslon 

Telephony 

Telephony 

1 
1 
1 
1 
1 
1 
1 
1 
1 
1 

1847 

1877 

1 
1 
1 
1 
1 
1 
1 
1 
1920 

19JO 

1960 

St·ereo 

Colour televislon  High·deflnitlon televlslon 
Mobile vldeotelephony 
Mobile lelephony 
Mobile lext 
Mobile .racslml.1.e 
Mobile data 
Mobile vldeotex 
Paging 

2 000 

1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1975 

Fig.  2 

Source: Consorlium Brillsh Telconsull/Consullel/Delecon/Neposlel/Sofrecom el al. 

~~~~a::;-~~~~~Z _ _:;~=: ~ . .  . -

--_· ~:~ :-_:~- -~~-- 7-~ -~ --~~:;-~~;~~ ~>>= 

-

-·- -- -- --- --· 

.-----=----

' 

existing  barriers  are  removed  in  the  course  of  this 
adjustment. 

8 

;. 
1~~~- • 

. .. 
t·t 
·\. 

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 

1' 

f ·,. 

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  ; 

'"t:============--:_:_:· -·- . - - -

- - - ---o _:,-_o.  . .  ----"~ -- - . -

9 

/· 
.·.,  ·; 
·'' 

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 
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. 

10 

IV  CONVERGENT  TRENDS  IN  THE  CURRENT  DEBATE  IN  THE  COMMUNITY  ON 

STRUCTURAL  ADJUSTMENT  IN  TELECOMMUNICATIONS 

j,1 

/ ,· 

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. 

..~~~ .. , 

~........L 

11 

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  / 
shift  from  traditional  activities  to  new  opportunities.  An 
intense  dialogue  with  the  social  partners  will  be  necessary, 
in  order  to  ensure  a  smooth  transition. 

information  technologies  within  which  jobs  will 

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 

-

..  /i  1 

1 
1  ':  :1 

1

' 

1  /1 
'I  ·I 
·.!; 
i::  ·'l  I 

'.·1 

, 

,1.i  11 

1 
:  1  11· 
·: 

1 
: 
.,  ;.  1 
·,  1 
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1: 
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, 
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: ; j::il:,:  I! 
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. :  :'::t'11I 
,, 
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:  ,.; 

/.;, 

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;  \11:1 

1 
1 

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. 

and  should 

allowed  to  participate  in  the  newly  emerging 

Telecommunications  Adminstrations  generally  are 
be 
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  ; 

14 

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.· 
of  very  small  satellite  antennae  (VSAT  or  "microterminals") 
suitable  for  data  exchange  only,  this  situation  should 
normally  be  assumed  automatically. 

In  the  case 

IV 

:.i·ri1 
·r .· 
tl1' 1 
:I:'' 

..1 

r. 

i ,.1 

,. 
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~. 

r-

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t 

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l 

1 

15 

ii 

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1 

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1 

·1 

' 
1·' 

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). 

---....  ! 
' :  

16 

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. 

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. 

- ~~ ::-~-:i.  • 

.r~.~-/  '. 

.  !·L 

. 

~ 

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. 

ï 

·: 

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. 
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. 

"Reserved 

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). 

·-·1 

... 

::.'-

LO  ~ • 

D) 

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. 

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. 

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). 

F) 

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 

G) 

Separation  of  regul~tory and  operational  activities  of  Telecom:nunications 
Administrations.  Regulatory  activities  concern  in  particular  licensing, 
cc:mtrol  of  type  approval  and  interface  specifications,  allocation  of 

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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. 

-1 
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17 

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  a  more  competitive  environment,  the  Telecommunica 

in  those  Member  States  where  this  still  has  not  been  carried 
out. 
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. 

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18 

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. 

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. 
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 
extent  that  they  engage  in  commercial  activities. 

In  pursuing  the  implementation  of  these  proposals,  and 

to  the 

-- - -- --------------- - ---'----------------~-~~-- -==---""""'---

---~ .. 

19 

·.r: .. 

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. 

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It  is  envisaged: 

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to  accelerate  the  implementation  of  existing  action  lines_  ; 

to  initiate  a  number  of  new  action  lines  needed  to  complement 
and  facilitate  the  transition. 

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 

il  ''.1 

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) 

; 

21 

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. 

·i 
(:. 

The  future  participation  of  Telecommunications  Administrations 
in  the  competitive  markets  requires  more  transparency  in  their 
purchasing  behaviour. 

22 

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 

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. 

23 

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  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. 
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. 

It  is  proposed  to  set  into  motion 

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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25 

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. 
described  in  Fig.  3,  based  on  prevailing  technological  trends, 
common  positions  will  in  particular  be  required  regarding 

In  the  light  of  the  positions 

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. 

V 

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. 

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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  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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27 

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. 

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. 

·: •I 

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  ; 
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 

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. 

2. 

The  convergence  of  the  telecommunic~tions, ...........  24 
data-processing  and  audio-visual  sectors 

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. 

3. 

4. 

S. 

6. 

The  trend  towards  integration  .......................  32 
the  possibility  of  carrying  many  services  via 

one  telecommunications  network 

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 

Evolution  of  Satellite  technology ....................  37 

Evolution  of  Cable-TV  Technology .....................  39 

Conclusions ..........................................  41 

2 

V 

ECONOMIC  ASPECTS.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4 4 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

The  growth  of  the  service  econorny ....................  44 

Frorn  local  to  traded  services ........................  46 

Investing  in  the  infrastructure ......................  48 
for  tomorrow's  service  economy 

Developing  the  basic  network  infrastructure ..........  49 

The  requirement  for  a  more  competitive  market ........  51 

Employrnent  and  social  effects ........................  53 

Conclusions ..........................................  57 

VI 

OUTLINE  OF  A  REGULATORY  FRAMEWORK .........................  59 
TOWARDS  WHICH  CURRENT  TRENDS  COULD  DEVELOP 

1.  National  approaches ..................................  59 

2. 

3. 

4. 

Convergent  trends.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  60 

The  Common  Market  in  terrnfnal  equipment ..............  61 

The  Common  Market  in  telecommunications ..............  63 
services 

4.1.  Growing  consensus:  giving  room ..................  64 

for  new  technological  opportunities 

4.1.1. 

4.1.2. 

4.1.3. 

Competitive  environrnent  for ................  64 

"value-added  services" 

Narrow  definition.of  exclusive .............  64 
provision 
"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 

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 

5. 

6. 

The  Comrnon  Market  in  network  equipment ......... ~ .....  89 

Conclusions. . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  94 

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4 

VII  COMMUNITY  TELECOMMUNICATIONS  POLICY  ......................  98 

THE  ACHIEVEMENTS  TO  DATE 

1. 

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 

2. 

Promoting  the  co-operative  development  of ............ 114 
advanced  telecornmunications  in  Europe 

· ~,  ,·. 

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. 

'-. 

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 

3. 

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 

4. 

5. 

5 

VIII  TELECOMMUNICATIONS  IN  THE  CONTEXT  OF  OTHER ................ 136 

COMMUNITY  POLICIES 

1. 

2. 

Telecommunications  in  the  c6ntext  of······~···· ..... 136 
the  Interna!  Market 

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. 
3.2.2. 
3.2.3. 
3.2.4. 
3.2.5. 
3.2.6. 

Data  protectipn . . . . . . . . . . . . . . . . . . . . . . . . . . . .  142 
Copyright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  143 
Authentication  of  transaction .............. 144 
Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  144 
Electronic  Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . .  145. 
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 
Services ................................... 151 
1.1.1. 
1.1.2. 
Telecommunications  equipment ........... ~  ... 152 
1.2.  Issues .......................................... 152 
Services ................................... 152 
1.2.1. 
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 
Access  to  market ........................... 166 
3.3.1. 
Standards .................................. 167 
3.3.2. 
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. 

3. 

4. 

The  application  of  the  Treaty  to  the ................. 179 
telecommunications  sector 

Pr~posed Community  positions  ........................ 184 

Proposed  Community  Action  Lines ...................... 186 

4.1.  Acceleration  of  existing  Action  Lines ........... 187 
4.2.  Initiation  of  new  Action  Lines ... ~ .............. 189 

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8 

APPENDIX  1 

THE  REGULATORY  TRENDS  IN  THE  MEMBER  STATES  AND 
THE  UNITED  STATES  AND  JAPAN 

APPENDIX  2 

SATELLITE  SERVICES  IN  EUROPE 

CURRENT  TRENDS 

APPENDIX  3 

THE  EUROPEAN  CONFERENCE  OF  POSTAL  AND 
TELECOMMUNICATIONS  ADMINISTRATIONS  (CEPT) 
MECHANISMS  AND  CO-OPERATION  WITH  THE  COMMUNITY 

APPENDIX  4 

INTERNATIONAL  TELECOMMUNICATIONS  UNION  (+TU) 
IMPACT  ON  THE  REGULATORY  ENVIRONMENT  OF  THE 
COMMUNITY 

GLOSSARY  OF  TECHNICAL  TERMS 

:_ .. 

9 

I 

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 
Integrated  Services  Digital  Network  (ISDN),  digital 
mobile  communications,  and  the  introduction  of  future 
broadband  communications  ;  · 

the 

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  ; 

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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  ; 

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TELECOMMUNICATIONS: 
PROSPECTS  FOR  THE  YËAR  2000 

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no  new  barriers  are  created  within  the  Community  during 
the  adjustment  of  regulatory  conditions  ; 

existing  barriers  are  removed  in  the  course  of  the 
adjustment. 

I · 

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 
the 
particular  regarding  its  major  trading  partners 
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. 

.· · .. ~ 

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. 

as  discussed  in 

The  United  Kingdom  has 

In  the  Community,  the  situation  is  in  flux, 
Chapter  VI  of  the  Paper. 
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. 
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  ; 

It  also  implies  safeguarding  the 

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  / 
dialogue  with  the  social  partners  will  be  necessary,  in 
order  to  ensure  a  smooth  transition. 

information  technologies.  An  intense 

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. 

14 

The  Paper  proposes  the  following  policy  orientations 

phased  full  opening  of  the  terminal  market  to 
competition 

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  ; 

! ~ 

;I  1 
.  µj. 
/·· 

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  ; 

;_i 

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. 

1 

1 

'I 
'il 

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. 

17 

Telecommunications  has  become  a  factor  of  major  economic 
importance  during  recent  years. 
fundamental  transformation  as  a  result  of  changes  in 
technology. 
technology.  The  new  conglomerate  sector  of  information 
movement  and  management 
telecommunications  and  data-processing  equipment 
estimated  to  represent  more  than  ECU  500  billion  annually 
world-wide. 

telecommunications  services  and 
is  now 

It  is  converging  rapidly  with  information 

It  is  undergoing  a 

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 
Business  Communications  in  Europe",  Round  Table  of  European 
Industrialists,  October  1986] 

A  Users'  View  on 

"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]. 

18 

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. 

According  to  the  Union  of  Industries  of  the  European 
Community, 
developments  in  the  information  and  telecommunications 
technologies  if  we  are  to  ensure  the  future·competitiveness  of 
European  industry  and  information  markets. 

''it  is  extremely  important  to  keep  abreast  of 

· 

"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 
than  total  gross  investment  in  the  Comrnunity  for  a  single 
year. 

far  more 

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 

-

-

-····  ______  __._ _______ ~~-------~_::. 

i 
;; 
"· 

' •   .. · 

·:,-' 
:'J~.:" ,-

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 

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." 

that  "the  economic  and  social  impact 

The  report  ernphasised 
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) 

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. 

"  ( b) 

improving  the  developrnent  of  advanced 
telecommunications  services  and  network 

Il  (  i) 

by  opening  discussions,  based  on  available 
studies,  on  : 

Il 

the  implementation  of  infrastructure  projects  of 
common  interest  ; 

"· ~. ~~·  ·.  -

21 

" 

launching  a  development  programme.  for  the 
technology.  required  in  the  long  term  for  the 
implementation  of  future  wide-band  networks  ; 

..  ( ii) 

by  def ining  and  progressively  setting  up  a 
video-communications  system  to  link  the  various 
political  authorities  in  the  Community  ; 

"(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. 

._,;.·,.... 
·~~. ' :  

'• 

1f 

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  ; 

./,~-h  '1 c, .. 

:'.d~f 

~' "·::;~ 

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 
·t.~~ 

"i' i 
·.°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  application  of  computer 

the  convergence  of  telecommunications  and  data-
processing  technologies 
technology  to  telecommunications 
involves  f irst  of 
all  digitisation  of  the  networks.  Digitisation  and  the 
associated  new  transmission  techniques 
and  satellites 
the  industry.  Co-operation  and  economies  of  scale  and 
scope  become  an  indispensable  requirement  for  the 
European  telecommunications  sector. 

optical  fibre 
have  dramatically  raised  R&D  costs  in 

This  is  one  of  the  objectives  of  the  RACE  programme 

' .i;  " 
'  il 

;'1 

1 

,, 
i 

(' 
,1 
y 
'·'I 
, I~ 
' ~  ! 1 ; 
iil': 

' 

1 
1 

___________________ _J i 

25 

digitisation  pèses  major  problems  for  future  generations 
of  networks  in  Europe.  The  new  generations 
Integrated  Services  Digital  Network  (ISDN),  the  future 
digit.al  mobile  communications  and  the  Integrated 
Broadband  Communications  (IBC) 
degree  of  co-operation  between  the  network  operators  in 
Europe  over  co-ordinated  introduction  strategies  if 
Europe-wide  communications  are  to  be  maintained. 

will  require  a  new 

the 

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, 
ISDN  and,  within  the~framework  of  the  RACE  initiative, 
on  IBC  ; 

notably  on 

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. 

2. 

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 
between  the  telecornrnunications  sector,  which  has 
sectors 
been  traditionally  dorninated  by  state  monopolies  and  subject 
to  strict  regulation,  and  the  computer  sector  which  has 
developed  in  a  competitive  environment. 

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. 

26 

All  countries  are  subject.to  these  changes.  The  United  States 
and  Japan  have  reacted  according  to  their  perception  of  the 
In  the  Comrnunity,  Member  States  have 
situation. 
undertaken 
- or  have  announced 
the  regulation  of  the  telecommunications  sector  and  the 
status  of  their  Telecommunications  Administrations. 
Member  States,  an  in-depth  discussion  and  review  is  underway. 

fundamen.tal  changes  in 

In  all 

-

At  the  same  time,  a  reconfiguration  of  industrial  alliances 
and  international  relations  in  this  field  is  taking  place. 

3. 

The  search  for  common  positions 

Two  separate  requirements  seem  to  dominate  the  current  search 
for  solutions  in  the  Member  States. 

a) 

b) 

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 
ISDN. 

such  as  the 

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 
States  has  more  than  35%  and  Japan  11%.  Taken  as  a  whole, 
the  Community's  telecommunications  market  corresponds  to  more 
than  20%. 

- whereas  the  United 

I'· 
\,1 

.. --:---·1 
.  ~ 
·.  '( 

27 

Combined,  Europe  will  be  able  to  build  a  sound  economic  base 
for  its  telecommunications,  information  services  and 
information  technology  industries. 
.regulatory  reforms  in  the  Member  States  will  not  be  able  to 
bear  fully  their  economic  fruit. 

In  isolation,  the  current 

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 

~J. 
·.-·· 

1 

\ 

, · '  

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. 

28 

IV 

TECHNICAL  ASPECTS 

l .  

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 

1  1 ! .  

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 
l 
1. 
1 

1 
! 
\' 
\:~· 
,'I 

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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30· 

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 
restructuring  of  the  manufacturing  side  of 
telecommunications. 

one  of  the  main  factors  behind  the  current  dramatic 

1. 3. 

Developrnent  of  "single"  (multifunctional}  terrninals 

Up  until  recent  technological  developments,  a 
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. 

terminal  {for 

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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.31 

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. 

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. 

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 
greatly  increased. 

at  least  from  a  technical  point  of  view 

has 

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. 

2. 

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) 

---1 
1 

1 

1 
1 

1 

Tranamlaalon 

Local awltctiig  Trurk ewltcttng 

COmnullfy totaJ averaged ov« 12 Member. stat88 

Source:  CEPT  IGSI},  CEC  studies. 

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1987  :  20Ô  BILLION 

PUBLIC  SWITCHING  + 

% 

IV 

11.5 

ÎRANSMISSION 

17.6 
~ PRIVATE  ÎELEPHONE 
NETWORKS  WITH  DATA 
AND  ÎEXT  CAPABILITY 

9.8 
6.6 

PRIVATE  ÜATA  AND 
ÎEXT  SYSTEMS 

~ 

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AFTER  1993  : 
ECU  3 ro  40U  BILLION 

PUBLIC  NETWORKS 

INTEGRATED 
BUSINESS 
l NFORMAT 1 ON" 
SYSTEMS 

1 
,.. 

23 

18 

19 

STAND-ALONE 

PRODUCTS 

~ 

42 

9 .7 
5.1 
11.4 

14.6 

STANO.-ALONE 

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PRODUCTS 

'1980  :  ECU  90  BILLION 

PUBLIC  SWITCHING 

~ANSMI SSION. 

PRlVATE  SWITCHlNG 
ÎELEPHONE  ÎERMINALS 

PRlVATE  NETWORKS 

ÜECENTRALIZED 
DATA  SYSTEMS 

NoN-Vo1cE  ÎERMINALS 

ÜFFICE  ÎYPEWRITERS 
ÜUTPUT  SYSTEMS  / 

ÜEVICES 

STORAGE  SYSTEMS/ 
DEVI CES 

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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. 

to  long-term,  modern  telecommunications 

In  the  medium-
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. 

It  is  estimated  that  the  integrated  office 

In  the  terminal  eguipment  market  the  trend  towards 
integration  of  functions  will  show  up  strongly  before  the  end 
of  this  decade. 
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%. 

. 

3. 

The  difficulty  of  defining  boundary  lines 
and  "value-added"  services 

"basic"  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. 

34 

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. 

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. 

) 

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35 

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  : 

in  the  basic  network  by  incorporating  additional 
features,  typically  in  the  exchanges  ; 

or 

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. 
that  has  been  used  in  sorne  countries  to  atternpt  to 
differentiate  between  "basic"  services  and  "enhanced"  (or 
"value  added")  services. 

Indeed,  it  is  just  this  definition 

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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". 

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4. 

Evolution  of  satellite  Technology 

37 

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. 

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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. 

5 .. 

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. 
telecommunications)  services  (two-way  use)  are  now  being 
introduced  on  a  trial  basis  on  Cable  TV  networks  in  a  number 
of  countries. 

In  particular  "interactive"  (i.e. 

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. 

40 

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 
concern. 

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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. 
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. 

In  particular  the  convergence  of 

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. 

.  1 

• 

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. 

1 

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). 

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" 
technological  evolution 

- brought ·about  prirnarily  by 
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 
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. 

,  the  future 

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 
evolution  towards  an  integrated  broadband  infrastructure  are 
to  be  exploited. 

long-terrn 

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44 

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 ..• 

' : . 

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1 
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%. 
1986-1987,  European  Econorny,  No.  30,  Novernber  1986)." 

[Annual  Economie  Review 

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 
or, 
services  :  legal,  technical,  and  economic  consulting) 
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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46 

One  result  of  this  opportunity  to  exchange  services  is  a 
potentially  decisive  increase  in  the  productivity  -
qualitative  and  quantitative  terms  - of  the  whole 
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. 

in 

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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lnfrastrudure: cables, swltches, satellltes 
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47 

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. 

1 1 

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 

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. 

3. 

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 

~ 

·l .J,. 

49 

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. 

i 
'I 

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. 

4. 

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. 

:  1 

Il, 
,) 
_•· ... ~ 

50 

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. 

1 

1 

l 
l 

1 

.  ~ 

•• 

• 

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 
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. 

they 

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. 
services,  new  specialised  telephony-like  services  sueh  as 
conference  calls,  deferred  transmission,  telephone  message 
services,  are  emerging. 

In  addition  to  non-voice  value-added 

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. 

) 

7) 

.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. 

It  has  now  become  less  appropriate  in  terms  of 

This  situation  was  acceptable  when  the  number  of  services  and 
of  dif f erent  types  of  user  terminals  and  equipment  was  very 
limited. 
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. 

.~ 

• 

• 

53 

1' 

1 

Securing  a  wide  range  of  choice  for  the  consumer  requires 
creating  this  flexibility  for  all  European  market 
including  the  strongest  ones  :  the 
participants  -
Telecornmunications  Administrations 
cc-existence  of  dominant  and  other  providers  in  a  competitive 
market  can  lead  to  complex 
experience  elsewhere  has  shown. 

regulatory  problems,  as 

even  if  the 

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.] 

1 

'' 1 '  

1·1. 

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  / 
magnitude  cannot  fail  to  have  a  deep 
on  the  nature  of  work. 

innovation  of  services,  etc.  Changes  of  this 

impact  on  society  and 

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). 

li 
' .  1 . 

: 
1' 

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:  1 
,1 

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i. 

:1: 
jl:i 

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. 
that  by  the  year  2000,  up  to  60%  of  al!  employment 
opportunities  in  the  Community  will  depend  heavily  on  the 
telematics  technologies. 

It  has  been  estimated 

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  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). 

"To  this  end  PTTs  must  have  the  possibility 

In  a  period  of  far-reaching  changes  in  the  job 

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. 
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 

1 

' 
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1 
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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 
location  of  economic  activities  ; 

future  tradeability  of  services  in  general  and  the 

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 
i 

1 

i < .i 

1 t !· 
{ 

t> 

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. 

Fig.  5  {a) 

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) 

1984 

1985 

160,290  . 

167,715 

108,40 

113,805 

940 

936 

48,182 

53, 127 

'1 
•  1 

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) 

Telephone  main  lines  per  100  inhabi tants 
(%  average) 

Telephone  stations  (sets)  of  all  kinds  per  100  inhabitants 
(i average) 

54,459 

62,556 

15,872  (1) 

17,037  (3) 

3,075  (2) 

3,100  (4) 

33.7% 

49.9% 

35.3% 

52.1% 

-------------------------------------------------------------------------

Source  :  latest  edition  of  the  International  Teleco11unications  Union  (ITU) 
Yearbook  available  - 1987  edition 

Ireland  1983  - Italy  excluded 
Ireland  1983 

(1) 
(2) 
(3)  France  and  Greece  1984  - Italy  excluded 
{4)  France  and  Greece  1984  - Den1ark,  ltaly  and  United  Kingdo1  excluded 

- Denurk,  Italy  and  United  Kingdo•  excluded 

. 

:, 
1: 

; 

; 

,1 

i 
:1 
~  \ 1 

i. 

1 

~ 1 

Figure  5  (b) 

N°  of  telephone  sets  1  Main  lines  1  T o t al  Staff  i n 
1 
connected  to  the 
1 
1 public  network  ( 1000) 
1 
1 
1 
1 

1 
1 
1  teleco••unications  1  all  telecoa•unicationsl 
1  services  ( 1000) 
1 services  (•illion  ECU)j 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 

1  Total  incoae  fro• 

(  1000) 

3061 

4346 

1394 

28 

Country 

BelgiH 

0.Hark 

Fruce 

Ctraaay  F.R. 

Creece  <2> 

Irelaatl 

Italy 

luHbHrg 

1 

1 
1 

1 
1 

1 
1 

1 
1 

1 
1 

1 
1 

1 
Tbt  letherlaa4s  1 
1 

Portugal 

Spab 

Ul 

EEC 

4005 

2543 

17  {l) 

1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 

34347 

37899 

3721 

942 

23032 

25589 

3111 

703 

25615 

17396 

252  ( l) 

8840 

1835 

14259 

154 

5822 

1400 

9340 

31654  ( 4 ) 

21654 

167715 

113805 

167 

212 

31 

16 

110 

0.7 

29 

23 

72 

230 

936 

1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 

' 1 

1 
1 
1 
1 
1 

1179 

14182 

15108 

714 

624 

8351 

74 

2542 

856 

3293 

14239 

62556 

Source  :  ITU  Yearbook  of  Coaaon  Carrier  Teleco1munications  Statistics  - 1987 
Referenee  year  :  1985 

~!~  Source  :  Statens  Teletjeneste 
(J)  Source  :  OTE 
(4)  Sou~ce  :  luxconsult 

estnate 

1 
i 

1 

1 

1 

1 

'1 

'J 

\V 

tt'I~ 

f 

·1 

(;> 

1 -\ 
l 1 

l 

1 
~ 

*· 

f!/J.'. 

1 

J 
1 
1 
_: 

59 

1 

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  : 

1  r 
Ji 

l  j 

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; 
forbidden  from  entering  the  manufacturing  sector. 

in  Germany  the  Bundespost  is 

,. 
i ' 

'1 

1 
1 

! 
' .  

.  , 

-

:;_._ 

:7·.:. 

• -~  -

Figure  6 

CHANGES  IN  THE  PROVISION  OF  TELECOMMUNICATIONS 

IN  THE  COMMUNITY 

' 

Coumtry 

1 
1 
+-------~~~~--~~~~--~~~~~~--~~~-+---•_r1_·e_•_t_at_i_•_n_s~>~~~------~~I 

(changes  si•ce  1977  aRd  futare 

1977 

1987 

·  _:_. · 

France 

Belgiua 

..  · !  · .-: .·  ·  -··· 

RTl  (Régie  des  Télégraphes  et  des 
Té liphones),  · 
reporting  to  the  Secretary  of  St~te  of 
the  Ministry "of  Posts  and 
Telec onunications. · 

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 
Possibility  of  transforaing  RTT 
into  an  entity  with  a  auch  greaterl 
1 
degree  of  autono•y  is  under 
discussion  ("four  wise  aen" 
1 
couission). 
1 
--~~--~~~----~~~----~--~~~~~r------~--~----~-------' 
1 
1  Following  the  report  of  the 
1 
Oen•ark 
1 Bernstein  Co••Îttee  (1985),  so•e  1 
1 restructuring  took  place  in  1986.  1 
1  Statens  Teletjenste  runs  national  1 
1 
1 trunk  network  and  international 
1 
1  services. 
1 
1 
1 
OGT  (Direction  Générale  des  Téléc08•uni- 1 - Setting  up  of  COGECO"  (Co•pagniel 
1 
cations),  depart•ent  of  Rinistry  of  Posts)  Générale  des  Co••unications), 
holding  co•pany  of  all  the  PTT 
and  Teleco••unications. 
1 
1 
subsidiaries  (Société  Transpac,  1 
1 
I  Telesystà•es,  FCR,  Entreprise 
I 
1  Génirale  des  Téléco••unications)I 
1  Co••unication  Law  of 
1 
30th  Septe•ber  1986  ;  a  further  I 
1 
1 
1 
hw  on  coapetition  in 
teleco••unications  is  to  be 
1 
1 
introduced  by  the  end  of ·1987.  1 
1 
1 
1 - 1987:  opening  of  •obile  radio 
1 
service  provision  to  co•petitionl 
l 
1 
1 
1 
l  Setting  up  of  a  "6overn•ent 
1 Couission"  to  report  on  future 
1 
1  regulation  of  teleco••unications  1 
1 
1  in  August  1987. 
----------+~------------------------4---~----------------' 
1 
6reece 
1 
1 
~---------t-------------------------~'--------------------1 1 

OTE,publicly-owned  but  financially 
autono•ous  corporation,  founded  1949. 

OBP,  Oeutsche  BundesPost,  a  Federal 
Ad•inistration 

FCR  (France  Cable  et  Radio), 
state-owned  Coapany. 

6eruay  FR 

No  change 

1 
1 
1 

·, k.-

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 
1 
of  Co•1unications. 
----~~---~-------~---------------------.J----~-------------~-----' 

·,.] 

:1,l 

1 

: .• 
••• :  >  ~ 
t; 
. 
. •   l 
•, 
·'r 
-.. -.-~-
.i 
. '· 
:  ;  j" 
. . · if 
.  1  .. 

.1   ,{: 

'~ 

:  j 
~. 
.•,·11 
'1 
li 

.  i 
i 
1 
~ 

- 2  -

Couatry 

1977 

1987 

(changes  si•ce  1977  and  fature 
oriHtatÏHS) 

Italy 

ASST  (Azienda  di  Stato  per  i  Servizi 
1 
Telefonici), 
1 
OCST  (Oirezione  Centrale  Servizi 
1 
Telegrafici), 
1 
OCSR  (Direzione  Centrale  Servizi 
1 
Radi~elettrici),  directly  controlled  by 
1 
Ministry  of  Posts  and  Teleco••unications  1 
S IP,  1 talc able,  Te lespazi o :·  concessionary 1 
1 
coapanies,  subsidiaries  of  the  state-
1 
controlhd  STET  group. 
1 

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. 

laxeabo•rg 

P&T,  govern•ent  ad•inistration. 

Govern•ent  is  considering  whether 
to  introduce  a  new  law  on 
teleco••unications  to  redefine 
boundaries  between  the  aonopoly 
and  th~ co•petitive  sectors. 

PTT,  statal  organization  under 
responsibility  of  the  Ministry  of 
Traffic  and  Civil  Works. 

The  lttherlandsl 
1 
1 
1 
1 
1 
1 

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 
1987). 

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 

1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
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 

' 

CTNE  re-naaed  Telefonica .and 
granted  greater  autono•y. 
A new  c o•prehensi ve  bi 11  on 
teleco••unications  has  been 
drafted  February  1987,  and  is 
being  considered  by  Parlia•ent. 

1 

1 

1 
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 

Bd ti sh  Teleco•,  49%  governmen t 
owned  private  co•pany. 
"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 

Pert.gal 

Spai• 

' 

1 
1 
1 
1 
1 
1 
1 

I l  

' 

1 
1 
1 
1 
1 
1 
1 
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. 

i 

1 

-- ---- ---------·-··-----~--· 

'~=:o======~-=--==.:.. -~-~~__::_-=:..r-=---

COUNTRIES 

1.  Relations  with 
posta 1  services 

2.  Basic  Service  Network 

a)  Local 
b)  Long-distance 
c)  International 
d)  Mobile 

. 

3.  Terminal  Equipment 

a)  Supply  : 

Main  Telephone  set 
PBX 
Telex 
Modem 
Data  Termin-al 
Mobile 

b)  Maintenance  : 

Main  Teiephone  set 
PBX 
Telex 
Modem 
Data  Terminal 
Mobile 

4.  Use  of  leased  circuits 

a)  Domestic  : 

Shared  use/resale 
lnterconnection  with 
pub 11 c  network 
b)  International  : 

Shared  use/resale 
lnterconnection  with 
pub 1 k  network 

(1]  SOURCES  :  Hember  States  (SOG-T) 
Abbreviations  :  see  fol  lowing  page 

PRESENT  TELECOMMUNICATIONS  MARKET  STRUCTURES  IN  THE  EUROPEAN  COHMUNITIES  [l] 

!!!.!1 

Luxembourg 

The  f!~ther 1~1'1~ 

Portugal 

S/PTT  (5) 

PTT 

PTT  (10) 

PTT  (5) 

Spain 

s  (16) 

United  K ingdom 

s 

Fig.  7/2 

GM 
GM 
GH 
GM 

H 
L 
L 
PL 
L 
L 

M 
L 
L 
PL 
L 
L 

N 

N  (4) 
N (4) 

GM  (li) 
GM  { 11) 
GH  (11) 
GM  (11) 

M (12) 
M 
M 
L 
L 
M (13) 

M 
M 
M 
L 
L 
M ( 13) 

N  ( 14) 
N (14) 

N  (4) 
N  ( 4) 

GM  (PC) 
GM  (PC) 
GM  (PC) 
GM  (PC) 

M 
L 
M (3) 
M (3) 
L 
L 

M 
L 
M 
M 
L 
L 

N  (9) 
N  (9) 

N 
N 

.. 

GM  (PC) 
GM  (PC) 
GM  (PC  +  OH)  (5) 
-

OH  (16) 
OM  (16) 
OM  (16) 
OH  (16) 

RC  (LIM) 
RC  (LIM) 
RC  (LIM) 
RC  (LIM) 

M 
RC  (LIB)  (19) 
L 
M· 
L 
L 

M 
L 
L 
M 
L 
L 

N 
N 

N  (4) 
N ( 4) 

L 
L 
L 
L 
L 
L 

L 
L 
L 
L 
L 
L 

y  {17) 
y  (17) 

y  ( 18) 
y  (18) 

H 
L 
M 
PL 
L 
-

M 
L 
M 
PL 
L 
-

N ( 15) 
N (15) 

N  (4) 
N ( 4) 

... 

Fig.  7/3 

LEGE ID 

PTT 
S 
M 
PL 
L 
GM 
GM  (PC)  Government  monopoly  ·(public  corporation) 

Posts  and  telecommunications  services  provided  by  the  same  organisation 
Separate  organisation 
Monopoly 
Partly  liberalised  (some  types  liberalised,  others  not) 
Liberalised 
Government  monopoly  (government  agency) 

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 

NOTES 

(1) 
(2) 
(3) 
(4) 
(5) 
(6) 
(7) 
(8a) 
(8b) 
(8c) 
(9) 
(10) 
(11) 
(12) 
(13) 
(14) 
(15) 
. (lô) 
(17) 
(18) 
(19) 
(20) 

(21) 

RTT  and  Régie  des  Postes  depend  on  the  same  PTT  Minister 
First  te'lex  terminal  under  monopoly,  progressive  liberalisation  announced. 
On  request  by  the  CEC,  progressive  liberalisation  announced. 
Subject  to  exceptions. 
Telecommunications  service  providers  exist  in  addition  to  PTT,  on  a  monopolistic  basis  (concessionary  basis,  regional  monopoly,  etc)~ 
Licensing  of  additional  providers  to  be  announced. 
Steps  regarding  licensing  of  private· providers  of  Value-Added  Services  announced. 
Shared  use  permitted,  resale  prohibited .. 
Voice-band  circuits  :  as  far  as  technically  possible,  but  atone  end  only  (TKO,  July  1986). 
International  fixed  connections  without  restrictions  ;  "flat-rate"  circuits  with  restrictions. 
New  legislation  on  VANS  is  being  discussed  in  Parliament. 

. A  larger  degree  of  separation  between  postal  and  telecommunication  organisations  within  PTT  has  been  announced  for  1989. 

PTT  to  be  converted  to  limited  liability  company  in  1989. 
Government  has  decided  to  liberalise  all  terminal  equipment  as  of  January  1989. 
Cordless  telephone  /car  telephone  /public  pagers  under  monopoly;  closed  mobile  systems,  radio  telephones  on  ships,  etc ... liberalised. 
Usage  for  VANS  ta  be  liberalised.  · 
Currently  under  consideration  in  commissions . 
Telex,  telegram,  public  facsimile  (Burofax),  etc ... are  provided  by  the  PTT. 
Pure  resale  prohibited  until  at  least  1989. 
As  (17),  subject  to  additional  restrictions. 
Digital  PBX's  are  supplied  under  monopoly. 
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. 
T.E.  does  not  hold  a  monopoly,  but  is  at  present  exclusively  licensed  by  the  Ministry. 

·~  . 
·:.:.:. 

~~-

- - - - - - ----..-.-: 

-- ~.~-~~~~ .. ~'=~.,-~~~~ ~~~?~~~=-~-;-=;;.:0::.:-=:::-""?-~""'~~==-L_:,::~~'~>::__-=-:_~_:-~ ::~=t--~~-:?-~ - -=:"":---

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61 

The  outline  of  the  new  situation  that  appears  to  be  emerging 
is  reflected  in 
provide  services  over  the  network  and  to  connect  terminals  to 
the  network . 

to  use  the  network,  to 

three  "freedoms"  -

. 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. 
opportunity  afforded  by  current  changes  to  promote  a  single 
Community-wide  market  for  telecommunications  eguipment  and 
services. 

It should  benefit  from  the 

3.  The  Commori  Market  in  terminal  eguipment 

1 

i  -
! 

11 

J 

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 
instances,  for  a  sufficient  but  defined  time  period  for 
industry  to  adapt  to  the  new  situation. 

·allow,  in  certain 

Survey  of  Terminal  Equlpment  Regulatory  Supply  Conditions 

MOBILE 
T'PHONES  PAOERS 

1 RADIO 

IV100EN1S 

Fig.  8 

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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). 

Clear  guidelines  in  this  respect  are  given  in  Council 
Recommendation  86/659/EEC  on  the  co-ordinated 
introduction  of  ISDN. 

iv) 

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" 

"Value-added  services"  range  frorn  services  where 

As  set  out  in  Chapters  IV  and  V,  there  is  no  agreement  between 
the  Member  States  on  the  precise  definition  of  ''value-added 
services". 
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). 

11(,: 
11 
· 
1 ,, 
. 
1
.  ;I 

.  1  i 

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" 

I' 

1  i; ·: 

i  \,\: 
' !   1 
1 

Given  the  blurring  of  boundary  lines  between  value-added 
services  and  basic  services  and  the  i~possibility  of  a  stable 
natural  distinction, 
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  discussion  will  concentrate 

for  which  exclusive  provision  by  the 

The  relevant  distinction  in  the  future  will  therefore  be 
between  services 
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. 

. 

!\ 

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il. 
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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, 
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. 

technological 

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. 
Telecom  Case  41/83,  id.  cit.). 

the  voice  telephone  network  (British 

i"' 

1 

•\ 

In  conclusion, 

67 

"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. 
services,  in  particular  "value-added  services". 

"Competitive  services"  would  include  all  other 

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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69 

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, 
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 

The  conditions  of  access  to  the  network  concern  mainly 
standards  and  interfaces  offered  for  interconnection 
principles  ;  and  provision  of  frequencies. 

tariff 

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 .  

: 

1 

;  r·· 
1 
1 
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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. 
functions  are  split  between  different  (non-cornpeting)  publicly 
owned  entities  while  in  Denrnark  they  are  run  regionally  on  the 
basis  of  public  concessions. 

In  Italy  these 

-~ 

:' 

Figure  9 

CHANGES  IN  ROLE  OF  TELECOMMUNICATIONS  ADMINISTRATIONS 

operation 

at  present 

in  future 

a)  exclusive  prov1s1on  of  network 

infrastructure  (monopoly/duopoly) 

yes 

yes 

b)  exclusive  prov1s1on  of  limited  number 

of  basic  services  ("reserved  services") 

yes 

yes 

( 1) 

11 

' 

c)- participation  in  competitive  services 

market  (including  VANS) 

yes 

yes 

d) 

combination  of  regulatory  and 
operational  functions 

YES 

NO 

e)  protection  from  "cream  skimming" 

yes 

yes 

1 

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f).  acceptance  of  common  interconnect 

and  access  obligations  for  trans 
f ron tier  service  providers 

NO 

YES 

g)  offer  of  certain  terminal  equipment 

on  exclusive  basis 

YES 

NO 

h)  offer  of  terminal  equipment  on 

competitive  basis 

yes 

yes 

1 

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. 

1 
1 

(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. 

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  -
they  should  be  in  public  or  private  ownership  - falls  to  the 
Member  States. 

in  particular  whether 

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 

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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) 

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). 

( 2) 

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.). 

( 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. 

.; 

-:.'rl 

,: 

.1 

...  ~9) 

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. 

4.3.3. 

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  -
is  the  potential  loss  of  voice  traff ic 
accounts  for  85  to  90%  of  all  telecornrnunications  ·revenues  - by 
the  public  switched  network. 
could  make  their  leased  lines  available  for  the  pure  resale  of 
voice  capacity  (with  very  limited  or  zero  "value-added"). 

Competitive  service  providers 

- which  currently 

threat 

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. 

banning  simple  voice  resale  on  leased  lines 

apply  usage-based  tariff  elernents  to  leased  lines. 

75 

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. 

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76 

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) . 

4.3.4. 

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. 

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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 
In  the  case  of  Telecommunications 
group. 
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 

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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. 
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. 

In  view  of  the  abolition  of 

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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. 

.  4.3.5. 

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, 
a  nurnber  of  reasons,  notably  the  following 

and  internationally  in  the  Comrnunity,  for 

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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1 i -

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. 
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". 

In  particular,.  trans-European  prices-look  high  in 

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]. 

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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. 

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Building  consensus  on  tariff  principles  would  substantially 
reduce  the  possibility  of  conflict. 

Tari~f  principles  could  include  : 

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. 

4.4 

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. 
normally  held  by  the  Telecommunications  Administrations. 

In  Europe  at  present  monopoly  rights  are 

The  availability  of  space  segment  capacity  in  Europe  is 
governed  mainly  by  the  following  factors  : 

the  exclusive  right  of  the  EUTELSAT  / 
signatories  of  the  respective  operating  agreements  to 
purchase  and  resell  EUTELSAT  ;·INTELSAT  space  segment 
capacity. 

INTELSAT 

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 
ground  stations,  in  particular.for  those  providing  only 
down-link  capability. 

the  private  supply  and  operation  of  satellite 

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. 

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85 

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  -
data-rate  communications  between  relatively  large  central  hub 
earth  stations  and  a  large  number  of  VSATs  located  at  user 
prernises. 

low 

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, 
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. 

INTELSAT  and  INMARSAT  will  enter  into  operation,  as 

From  a  Community  perspective  the  following  seems  most 
relevant: 

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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. 

freedom  to  provide  cross-border  services.  Regarding 

Article  59  of  the  Treaty  guarantees,  as  a  general  rule, 
the 
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. 
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. 

In  the  case  of 

(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. 
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. 

In  a 

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. 

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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 
In 
evolution  towards  integrated  broad-band  communications. 
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  -
pWitching  equipment 
ECU  17.5  billion  telecommunications  equipment  market  in  the 
Cornrnunity.  This  market  is  dominated  by  the  purchasing 
behaviour  of  the  Telecomrnunications  Administrations. 

- currently  accounts  for  65  - 70%  of  the 

transmission  and  public 

The  economics  of  the  network  equipment  market  have  changea 
dramatically  over  recent  years. 

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In  one  of 

the  cost  structures  have  been  completely  reversed. 

Digitisation  - and  the  associated  new  transmission  techniques 
of  optical  fibre  and  satellite  - have  dramatically  pushed  up 
the  industry's  research  and  development  costs. 
Europe's  traditionally  strong  sectors  - public  switching 
systems  -
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 
.  But  no 
order· to  obtain  sound  economic  viability  (see  below) 
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. 
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" 

If  the 

" .... 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. 

l 
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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 
influence  on  the  telecommunications  markets  and  thus  on  their 
countries'  economies  as  a  whole ...  " 

" ... are  able  to  exert  a  very  substantial 

" ... 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  ; 

.J 
•  ~~!) 
~ j 

1 

l 

~:. 

92 

"b) 

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) 

2) 

3) 

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." 

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. 

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 
. '! 
j!  i 

· I .  ~,  . 
· 

·1 
1 
jl 

' 
•• 

1 
1 

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  : 

93 

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. 

'•  . 
.Ili 

1 

~-

94 

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 
and 
number  of  basic  services 

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  ! 

'i 
1 

i  1 

1  " 

! 

; 

:  ! 

Fig.  9  lists  three  essential  changes  required  to  advance 
towards  a  competitive  common  market. 

95 

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. 

,If~ 

; ,  

1. 

.A. 

1 

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. 
services"  and  other  services  would  fall  under 
"competi tive  services"  ·; 

"Value-added 

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. 
(VSAT  or  "microterminals")  suitable  for  data  exchange 
only,  these  conditions  should  normally  be  automatically 
assumed  to  be  met. 

In  the  case  of  very  small  satellite  antennae 

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 
·1 

:-. . . /{ 

l 

~ .  I: 

98 

VII  COMMUNITY  TELECOMMUNICATIONS  POLICY 

DATE 

THE  ACHIEVEMENTS  TO 

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 
1  • 

.i 

1 

99 

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. 

1. 

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. 
1 · 

~ 
! 
~' 

..  ~ 
J 

" 1,-

j 

;f(:.; 

' 

: 

1 

, 
·'l.;! 

COUNCIL  DECISIONS  TAKEN  IN  THE  FIELD  OF  TELECOMMUNICATIONS 

SINCE  1984 

Fig.  10 

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 
.-; 

··~ 
.l: 

1, 

-~ 1 
! 
i 

1 

-

........ , 

'J  l  ; 

'•11 

1· 

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.] 

100 

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 

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. 

As  the  Commission  has  pointed  out  in  its  White  Paper 
çoncerning 
completion  of  the  Internal  Market,  Communication  from  the 
Commission  to  the  Council,  COM(85)310,  14.6.1985  ] 

the  Interna!  Market  [White  Paper  concerning  the 

: 

101 

J 

,. 
.. 1·.: 

._,. 

"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!) 

; 

( 

~ ' 
(' 

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. 
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. 

It  has 

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. 

ORGANISATIONAL RELATIONSHIPS IN 
STANDARDS  DEV~LOPM~NT I_~ EUROPE 

Fig.  11 

CEPT 

ITSTC 

CEN-CENELEC 

' f. 
_a\." 

1 

1 

1 

1 
__ CO.VNCIL 

INTRODUCTION 
INTO 
NATIONAL 
STANDARDISATION  . 

--soGT 

SOGITS 

USERS 

TElECOMS 

IT 

INDUSTRV 

ECMA 

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 

. 

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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) 

b) 

c) 

precise  ; 

unambiguous 

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 

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. 

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 
Européennes  de  Télécommunications 
APPENDIX  3). 

see  below  and 

Normes 

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 

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105 

" 

" 

" 

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. 

.. 1 

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. 
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  ; 

If 

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  ; 

~ 

1 
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107 

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 
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 

108 

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. 

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) 

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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  -
network  interface,  LAN  connectors,  etc. 

layers  1  to  3 

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 
[see  "Clearing  the  Lines,  a  User•s  view  on  Business 
Communications  in  Europe",  Round  Table  of  European 
Industrialists,  October  1986]. 

such  as  X.25  networks,  teletex,  videotex 

CEPT  and  CEN-CENELEC  have  shown  a  noteworthy  ability  to  adapt 
to  the  new  requirements. 
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. 

In  the  framework  of  their 

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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113 

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. 

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. 
institutional  conditions  for  a  strengthening  of  the  current 
framework  of  co-operation  of  the  Telecommunications 
Administrations  and  industry  within  CEPT  and  CEN-CENELEC. 

In  this  way  it  would  create  the 

114 

1 

1 

1 ~ 

2. 

Promoting  the  co-operative  developrnent  of  advanced 
telecornmunications  in  Europe 

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  : 

in  areas  where  technology  still  needs  to  be 

R&D, 
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. 
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  1985,  loans  for 

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. 

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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) 
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]. 

(Report  of  the 

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). 

116 

. ,  

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l 

It  aims  at  the 

The  object~ves  of  RACE  are  ambitious. 
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. 
of  the  introduction  of  broadband  services  in  the  Cornrnunity 
and  it  involves  the  elaboration  of  common  standards  and 
specif ications. 

It  involves  concrete  planning 

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. 

(July  1985-December  1986)  allowed 

The  RACE  Definition  Phase 
the  work  on  performance  requirements  and  technical 
specifications  to  be  conducted  at  Comrnunity  level 
through  the  participation  of  CEPT,  involving  Western  Europe 
as  a  whole. 
organisations  and  firms  participated  in  this  definition 
phase. 

400  experts  belonging  to  109  public  and  private 

and, 

The  elaboration  of  an  IBC  reference  mode! 
design  of  the  European  broadband  network  .and  services 
carried  out  by  three  groups  : 

the  basic 

- was 

"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. 

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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. 

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)  .. 

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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. 

. ·i1_ 

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119 

2.3  Advanced  telecommunications  services  for  the 
less-favoured  regions  (STAR  Programme) 

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. 

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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 

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 
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. 

frequencies  for 

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) 
programme  on  trade  electronic  data  interchange  systems 
(TEDIS),  COM(86)  662  final,  Brussels,  01.12.86}. 

;  Proposal  for  a  Council 

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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. 
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. 

It  can  afford  great  s~vings  for 

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. 
taken 
under  Articles  37  and  90(1)  and  (3)  against  the 
infringing  Member  States  ; 

In  such  cases  action  has  been 

. 122 

involved  in· anti-competitive 

enterprises  in  the  telecommunications  or  information 
technology  field  may  be 
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: 

a 

- of  abusing  its  dominant 

"In  its  decision,  the  Commission  had  accused  BT 
public  corporation  established  by  statute  holding  a 
statutory  monopoly  on  the  running  of  telecommunications 
systems  ~n  the  United  Kingdom 
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 
In  point  of  fact,  several  schemes  adopted  by 
countries. 
BT  between  1975  and  1981  governing  the  use  of  the  public 
telecommunications  network  by  private  subscribers 
contained  such  restrictions. 

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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. 

like-the 

came  to  the  conclusion  that, 

" .... In  this  connection  the  Court 
Commission  before  it 
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 
monopolies  for  particular  economic  adtivities. 
that,  whilst  BT  had 
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 .... 

It  noted 
a  statu~ory monopoly  with  regard  to 

to  create  or  preserve  national 

" .... 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 
technologies  arise~ 

the  extension  of  a  service  monopoly,  as  new 

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. 
illegality  of  extending  the  monopoly  in  the  terminal 
eguipment  sector. 

They  concern  the 

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. 

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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. 

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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. 
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. 

IBM  understands- that  to  the  extent  that  SNA  is 

"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; 
Corning  Glass  Works'  joint  ventures  with  BICC  PLC  and  Siemens 
AG  for  the  manufacture  of  optical  fibres  in  the  UK  and 
Germany. 
August  1986,  p.30;  16th  Competition  Report  1986.) 

(Commission  decision  of  14  July  1986,  OJ  L  236,  22 

exemption  of 

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129 

In  the  context  of  the  International  Air  Couriers'  case,  the 
Commission  took  the  opportunity  presented  by  this  case  to 
point  out: 

"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. 

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Transparency  of  public  procurement  procedures 

130 

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. 

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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. 

, 

132 

5. 

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. 

for  the 

However, 

The  legal  and  organisational  framework  is  thus 
most  part  already  firmly  established. 
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. 

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134 

depending  on  the  tirne-horizon,  advanced 
infrastructure  and  service  development  needs 
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; 

a 

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:-

treated  to  date  and  the  rulings  by  the  Court 

The  cases 
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. 
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. 

In  the 

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. 

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Regarding  the  establishment  of  more  transparency  in  public 
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. 
should  be  progressive  and  take  full  account  of  the 
specif ic ·characteristics  of  the  sector .. 

In  telecornmunications,  the  approach 

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. 

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136 

VIII  TELECOMMUNICATIONS  IN  THE  CONTEXT  OF  OTHER 

COMMUNITY  POLICIES 

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 
considered: 

following  policy  goals  of  the  Community  are 

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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137 

In  its  section  on  "A  Common  Market  for  Services'', 
Paper  emphasises  the  importance  of  the  telecomrnunications 
network 

infrastructure  and  of  telecommunications  services: 

the  White 

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" .... 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. 
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.) 

It 

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. 

138 

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 
particular:-

telecomrnunications  and  information  technology. 

In 

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 
DELTA  (Development  of  European  Learning  by  Technological 
Advance),  DRIVE  (Dedicated  Road  and  Intelligent  Vehicles 
in·Europe)  and  EUROAIM  (European  Advanced  Informatics  in 
Medicine). 

the  programmes 

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. 

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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 
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 
potential  consumers. 

its  320  million 

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). 

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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 

In  March  1985  the  Council  approved  the 

At  present  the  European  information  market  is  fragmented  and 
underdeveloped. 
realisation  of  a  common  information  market  as  a  priority  goal 
(European  Council,  29-30.03.85,  Bull.EC.  3-1985,  point 
3.4.3). 
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. 

In  November  of  the  same  year  the  Commission  proposed 

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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143 

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, 
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, 
information  commercially  will  be  severely  blunted. 

the  economic  incentive  to  supply 

and  very 

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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. 

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. 

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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. 
instances  which  corne  within  the  scope  of  civil  law  and  those 
which  are  the  abject  of  criminal  law. 

It  is  also  necessary  to  distinguish  between  those 

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. 

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  TV  programmes 

(DBS  - Direct  Broadcasting  Satellites)  are  due 

The  f irst  satellites  suitable  for  direct  satellite  TV 
broadcasting 
to  be  operational  from  1987/1988  onwards  (TV  Sat,  TDF  1, 
Tele- X,  Olympus,  see  APPENDIX  2) 
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. 

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147 

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. 

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. 
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. 

In  this  way,  the 

148 

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] 

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. 

5. 

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. 

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149 

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 
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. 

infrastructure  and  services 

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. 

150 

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. 

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 

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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. 

l. 

Telecommunications  in  the  Uruguay  Round 

151 

The  negotiations,  which  ·include 
f ormally  launched  at  Punta  del  Este  in  Uruguay  on 
20  September  1986.  They  are  likely  to  lasi  for  at  least  four 
years. 

trade  in  services,  were 

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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152 

The  provision  of  basic  infrastructure  in  general 
requires  the  physical  presence  of  the  provider  in  the 
geographical  area  in  question. 
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); 

International 

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. 
telecommunications,  will  be  considered  against  ·a  framework 
derived,  at  least  in  part,  from  these  concepts. 

It  is  likely  that  all  sectors,  including 

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Major  concepts  identif ied  are  the  following 

153 

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 
"acceptable"  regulation. 

"appropriate"  or 

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. 

--------~--.-·-'"'-: . .;_··è:;::__.  -·-

154 

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. 

The  general  approach  of  the  Community  should  be  based  on  the 
f ollowing  overall  considerations  : 

1) 

2) 

3) 

An  evaluation  of  the  Community's  interests  with  regard 
to  market  opening  by  non-Community  countries  (services 
and  equiprnent). 

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". 

In  the  light  of  the  above,  and  taking  into  account  the 
progress.made  towards  the  realisation  of  the  internal 
market, 

a) 

b) 

examine  the  implications  of  further  opening  of  the 
.community  market  for  telecornmunications  equipment 
and  se.rv ices 

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compare  this  with  the  prospects  of  market  opening 
in  non-Community  countries. 

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1. 

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2. 

Reguests  by  outside  providers  for  interconnection  and  service 
provision 

155 

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. 
network  operator  holds  the  exclusive  means  for  the 
"distribution"  of  incoming  traffic  and  the  "importing"  of 
telecommunications  services. 

In  addition,  the  national 

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). 

l ·I 

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. 

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 
the  GATT  Round. 

for 

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. 

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158 

3. 

Relations  with  the  Community's  major  trading  partners 
United  States,  Japan  and  Third  World 

EFTA, 

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. 

The  Community  continues  to  have  an  overall  positive 
balance  in  telecommunications  equipment  trade. 

2. 

3. 

4. 

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  ; 

The  Community's  deficit  with  the  United  States  widened 
by  25%  in  1985  to  657  million  ECU  from  525  million  ECU 
in  1984. 

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 
Interchange  (EDI)  and  on  videotex-based  services. 

financial  sector,  on  Electronic  Data 

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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. 

the  signing  of  the  Memorandum  of 

Relations  with  the  Community  have 
f ollowing 
Understanding  between  the  CEPT  and  the  Community  in  1984 
concerning  standards  and  type  approval 
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). 

intensified 

for 

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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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. 

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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 
context  concerning  : 

in  the  EC/EFTA 

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 

(for  details  see  APPENDIX 

US  deregulation  of  the  telecornmunications  sector  and  the 
aftermath  of  the  AT&T  divestiture 
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 
Europe  is  a  major  target; 

to  international  markets. 

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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 
Judgement  on  AT&T  and  the  BOCs,  Open  Network 
Architecture  (see  APPENDIX  1)  - will  increase  the 
international  activity  of  US  companies. 

restrictions  of  the  Modified  Final 

While  the  US  continues  to  register  a  substantial  trade 
surplus  in  telecommunications  with  th~~ommunity  (657 
million  ECUs  in  1985 
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. 

see  Fig.  12  ),"the  US  has 

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. 

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163 

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 
Commission  of  the  European  Communities, 

(see  Report  by  the  EC  Fact  Finding  Mission, 

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 
and  Proposed  Rule-making  on  Regulatory  Policies  and 
International  Telecommunications  (January  1987). 

recent  FCC  Notice  of  Inquiry 

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. 

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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. 

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. 

3. 

4 •. 

"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) 
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. 

equipment  ;  (3) 

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. 

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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. 
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. 

It  would  be  unfortunate  if  the  opportunities 

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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). 

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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 

telecommunications  equipment  totalled  ·616  million  ECUs,  while 
experts  totalled  only  34  million  ECUs.  According  to 
preliminary  statistics  for  the  first  half  of  1986, 
Community's  deficit  with  Japan  rose  further. 
replaced  the  US  as  the  country  with  whiçh  the_Community  has 
the  largest  deficit. 

the 
Japan  has 

167 

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. 
to  ensure  that  such  arrangements  are  consistent  with 
international  obligations. 

It  should  rnake  every  effort 

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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 
certain  products  in 

f  ramework  to  control  experts  to  Eastern  Europe  of 

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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 

Telecommunications  will  be  the  basis  of  the  new  inf orrnation 
technologies. 
future  world  service  economy.  The  Cornrnunity  therefore  must 
develop  a  coherent  strategy  with  regard  to  telecornmunications 
in  its  relations  with  the  Third  World. 

It  will  be  an  essential  cornponent  of  the 

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. 

··{ 

1 
1 

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. 

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. 

170 

In  recent  years,  the  Community  has  been  developing  closer 
.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. 

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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  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  ). 

It  should  do  whatever 

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. 

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172 

Article  234  of  the  Treaty  expressly  recognises  the 
international  law  doctrine  of  "pacta  sunt  servanda". 
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. 

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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. 

174 

'  1: 
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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 

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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175 

The  Community  should  fully  support  the  International 
Telecommunications  Union  as  a  major  stabilising  factor 
in  international  telecommunications. 

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, 
sectoral  reciprocity  which  only  faveur  one  party. 

and  cannot  be  based  on  concepts  of  narrow 

Relations  with  the  EFTA  countries  are  of  special 
importance. 

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. 

for  building  ·a  Communi ty 

An  important  requirement 
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. 

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177 

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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 .. 

-

I~ .~· 

" 

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. 

allowed  to  participate  in  the  newly  emerging 

Telecommunications  Administrations  generally  are 
should  be 
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  ; 

and 

Entry  of  the  Telecommunications  Administrations  but  also 
of  the  computer  and  data-processing  multi-national 
companies 
implies  the  danger  of  abuse  of  a  dominant  position. 
Control  with  regard  to  both  types  of  dominant  market 
participants  will  have  to  be  strengthened  ; 

into  a  competitive  telecommunications  sector 

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. 

I', 

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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. 
(VSAT  or  "microterminals")  suitable  for  data  exchange 
only,  this  situation  should  normally  be  assumed 
automatically. 

In  the  case  of  very  small  satellite  antennae 

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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1 

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, 
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. 

the 

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). 

1 

' 

• 

' 1  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:-

181 

the  provisions  governing  competition,  in  particular 
Articles  85~  86,  and  90  ; 

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  : 

1 ... .\. 

1 

l 
·~ 
' 

!Il!~ 

•. ~' 

---------------------------~~ 

1 

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 
'1 

'i  -

183 

"  ( b) 

limiting  production,  markets  or  technical 
development  to  the  prejudice  of  consumers 

"  ( c) 

"  ( d) 

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." 

, 

i 

.  J 

3.  Proposed  Community  positions 

184 

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. 

·! 
1: 
1. 

i 
11,: 
/, 
11 
•I 

I,' 
! i 

.  :-.·-,_;_•  --

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. 

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. 

B) 

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. 
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. 

"Reserved 

C) 

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). 

., 
~ 

. ... 

11.· li 
(: 

li 

1 

" i· 
1: 

1· 

')' 

1" 

'I 

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. 

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). 

P) 

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 

G) 

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  ; 

--·· -- --------=--==== ....... ;;:::-~~··,,.,.;,;-~. 

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 
ma.nuf acturing  ; 

I) 

J) 

Strict  continuous  reviev  of  all  private  providers  in  the  newly  opened  sectors 
according  to  Articles  85  and  86 9  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. 

.'.) 
~ 

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. 

'I 

li .1 

CLEAR  SEPARATION  OF  REGULATORY  AND  OPERATIONAL  FUNCTIONS 
OF  TELECOMMUNICATIONS  ADMINISTRATIONS, 

In  those  Member  States  where  this  still  has  not  been 
In  a  more  competitive  environment,  the 
carried  out. 
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 
to  the  whole  spectrum  of  users  and  industry. 

in  order  to  ensure  full  service 

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. 

---·  -- --·-- ----====~~· = 

.... 

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 
activities.  It  may  use,  as  appropriate,  its  mandate  under 
Article  90  (3)  of  the  Treaty  to  ptomote,  synchronise  and 
accelerate  the  on-going  transformation. 

to  the  extent  that  they  engage  in  commercial 

·, 

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 
the  Commission  proposes  a  number·of  actions 
set  out, 

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. 

~ ' 

( ' .   1 

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. 

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  : 

1 

1 

!. 

1. 

!' 

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 

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 

J 

• 

.·  ~ 

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. 

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. 

i :.·.1 
··.'\ 
·! 
-~ 
. ·~ 

.. 

" j 
~~'~ 
~ ' 

/ 

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. 
the  positions  proposed  in  Fig.  3,  based  on  prevailing 
technological  trends,  common  positions  will  in  particular 
be  required  regarding  : 

In  the  light  of 

•• ,i 

'f 

~~~~----~-~--'-=---~~ 

.  -

·-- -.- --..,--

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. 

V 

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. 

·'·