COMMUNICATION FROM THE COMMISSION - SERVICES OF GENERAL INTEREST IN EUROPE
Date: 1996-09-11
Institutions: European Commission
Subjects: EU market, economic and social cohesion, productivity, public service, services contract

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

Brussels,  11.09.1996 
C()M(96)  443  final 

COMMUNICATION  FROM  THF  COMMISSION 

SERVICES  OF  GENERAL  INTEREST  IN  EUROPE 

SERVICES  OF  GENERAL  INTEREST  IN  EUROPE 

INTRODUCTION 

CONTENTS 

I.  SERVICES  OF  GENERAL  INTEREST:  A  KEY  ELEMENT  IN THE  EUROPEAN  MODEL  OF  SOCIETY 

A. 

SERVING  THE  PUBLIC 

1. 

2. 

3. 

Shared  values 

Different  organizational  set-ups 

The  challenge  of  change 

B. 

GENERAL  INTEREST  AND  THE  SINGLE  EUROPEAN  MARKET:  WORKING  FOR  EACH 
OTHER 

1. 

2. 

3. 

Respecting  diversity 

Striking  a balance: the  Community  objective 

Promoting  the  European  general  interest 

II.  THE  COMMUNITY  CONTRIBUTION:  DYNAMISM,  FLEXIBILITY  AND  SOLIDARITY 

A. 

A  SECTOR-SPECIFIC  APPROACH 

•3" 

Telecommunications 

* 

"^ 

Postal  services 

"3* 

Transport 

"S" 

Electricity 

"** 

Broadcasting 

B. 

THE  CONTRIBUTION  OF  OTHER  COMMUNITY  POLICIES 

III. 

OBJECTIVES  FOR  THE  FUTURE 

A. 

A  EUROPEAN  PERSPECTIVE 

1. 

2. 

3. 

Making  the  most  of  operations  to  boost  European  competitiveness 

Strengthening  European  coordination  and  solidarity 

Deploying  Community  instruments 

B. 

A  REFERENCE  IN THF  VREAÏY 

//  .-. 

INTRODUCTION 

1.  Solidarity  and  equal treatment  within  an  open  and dynamic  market  economy  are  fundamental  European 
Community  objectives;  objectives  which  are furthered  by services  of general interest.  Europeans  have  come 
to expect high-quality services at affordable  prices. Many of them even view general interest services as social 
rights  that  make  an  important  contribution  to  economic  and  social  cohesion.  This  is  why  general  interest 
services  are at the  heart  of the European  model of society, as acknowledged  by the Commission  in its  recent 
report  on the  reform  of the  European  Treaties.1 

2.  The importance  of general  interest services was  brought  out  by the Heads  of State  and Government,  who 
acknowledged  them  as  part  of the  set  of  values  shared  by  all our  countries  that  helps  define  Europe.2 

3.  There  are,  however,  differences  between  one  Member  State  and  another  and  between  one  sector  and 
another  in the  design,  scope  and  organizational  approaches  of general  interest  services,  owing  to  different 
traditions and practices. More recently, adjustments have had to be made in response to technological change, 
the  globalization  of the  economy  and  users'  expectations. 

4.  These  developments  have  given  rise  to  worries  about  the  future  of  these  services  accompanied  by 
concerns  over  employment  and  economic  and social  cohesion. The  economic  importance  of these  services 
is  considerable:  for  instance,  public-sector  companies,  which  provide  only  some  of these  services,  account 
for  around  9% of employment,  11%  of non-agricultural  activity and  16% of investment  within the  Community. 
Hence  the  importance  of  modernizing  and  developing  services  of general  interest,  since  they  contribute  so 
much to  European  competitiveness,  social solidarity  and quality  of  life.  It was  against  this  backdrop  that  the 
Commission  felt  it was  time  to  re-affirm  the  principles  of  its  policies  and set  out  its  objectives  for the  future. 

Reinforcing  political  union  and  preparing  for  enlargement 
Conference, COM(96) 90 final, 28 February 1996: 

Commission  opinion  for  the  Intergovernmental 

"Europe  is  built  on  a set  of  values  shared by  all its  societies  and combines  the  characteristics  of  democracy -
human nghts  and institutions based on the rule of law - with those of an open economy  underpinnedby  market 
forces,  internal  solidarity  and  cohesion.  These values include  access  for  all  members  of  society  to  universal 
services  or to services  of general benefit, thus contributing to solidarity and equal treatment " 
Cannes European Council, 26-27 June  1995-  Conclusions of the  Presidency-  SN  211/95, point A. 1.1.7. 

1  ,'-, 

DEFINITION  OF  TERMS 

Services  of  general  interest 
This  term  covers  market  and non-market  services  which  the  public  authorities  class  as 
being  of general  interest  and subject  to  specific  public service  obligations. 

Services  of  general  economic  interest 
This  is the term  used  in Article  90 of the Treaty  and  refers  to  market  services  which  the 
Member States subject to specific public service obligations  by virtue of a general  interest 
criterion.  This  would  tend  to  cover  such  things  as  transport  networks,  energy  and 
communications. 

Public  service 
This  is  an  ambiguous  term  since  it  may  refer  either  to  the  actual  body  providing  the 
service  or to the general interest role assigned to the  body concerned.  It is with  a view to 
promoting  or facilitating  the  performance  of the general  interest  role that  specific  public 
service  obligations  may be imposed by the public authorities  on the  body  rendering the 
service,  for  instance  in  the  matter  of  inland,  air  or  rail  transport  and  energy.  These 
obligations  can  be applied at national or regional  level. There  is often  confusion  between 
the term public  service,  which  relates to the  vocation  to  render  a service  to the  public  in 
terms  of  what  service  is  to  be  provided,  and  the  term  public  sector  (including  the  civil 
service), which  relates  to the  legal status  of those  providing  the  service  in terms  of who 
owns the  service. 

Universal  service 
This  evolutionary  concept,  developed  by  the  Community  institutions,  refers  to  a  set  of 
general 
requirements  which  should  be  satisfied  by  operators  of 
telecommunications  and  postal  services,  for  example,  throughout  the  Community.  The 
object  of  the  resulting  obligations  is  to  make  sure  that  everyone  has  access  to  certain 
essential  services  of  high quality  at  prices they  can  afford. 

interest 

I. SERVICES  OF  GENERAL  INTEREST  : A  KEY  ELEMENT  IN  THE 
EUROPEAN  MODEL  OF  SOCIETY 

5.  The  Community's  involvement  with  services  of general  interest  is within the context  of  an open  economy 
which  is  based  on  a  commitment  to  mutual  assistance  ("solidarity"  for  short),  social  cohesion  and  market 
mechanisms. 

SERVING  THE  PUBLIC 

1. 

Shared  values 

6.  European  societies  are  committed  to  the  general  interest  services  they  have  created  which  meet  basic 
needs. These services play an important  role as social cement over and above simple practical considerations. 
They also have a symbolic value, reflecting a sense of community that people can identify with. They form part 
of the  cultural  identity  of  everyday  life  in  all  European  countries. 

The  roles  assigned  to  general  interest  services  and  the  special  rights  which  may  ensue  reflect 
consociations  inherent  i>i me concept  of serving the  public, such  as ensuring that  needs  are  met,  protecting 
the environment,  economic  and social cohesion, land-use  planning and promotion of consumer interests. The 
particular concern of consumers  is to obtain high-quality services at prices they can afford. The  sector-specific 
economic characteristics  of the activities they cover also enter into the equation, since they  have  considerable 
knock-on  effects  for  the  economy  and  society  as  a whole  and  may  require  the  use  of  scarce  resources  or 
large-scale  long-term  investment.  This  implies  certain  basic  operating  principles:  continuity,  equal  access, 
universality  and  openness. 

8.  Central to all these  issues  are the  interest  of the public, which in our societies  involves guaranteed  access 
to  essential  services,  and  the  pursuit  of  priority  objectives.  General  interest  services  are  meant  to  serve  a 
society  as  a whole  and  therefore  all those  living  in  it. The  same  applies  in the  Community  to  the  universal 
service  concept. 

2. 

Different  organizational  set-ups 

9.  These shared values translate  into different  ways of organizing general interest services, varying from one 
country or region to another and from one sector to another. Althougfrthe same sort of services are provided, 
the  way  in  which  this  is  done  will  reflect  the  different  circumstances,  such  as  geographical  or  technical 
limitations, the  political  and  administrative  set-up, history  and traditions. 

10.  The  services  may  be  provided  -  in  either  a monopoly  or a competitive  situation  -  by  private  companies, 
public  bodies  or  by  public-private  partnerships. The  activities  of these  operators, who  are sometimes  known 
as  service  managers,  may  be  regulated  by  local,  regional  or  national  authorities  with  different  roles  and 
statuses.  There  may  also  be  considerable  variation  in the  nature  of the  relationship  between  the  regulatory 
authority  and the  operator. 

11.  This diversity  may give rise to a certain amount of terminological confusion. It is all too easy to treat  public 
sector  and  public  service  as  synonyms  and  fail to  distinguish  the  legal status  of a service  provider  from the 
nature  of the service  being  provided.3 European  policy  is concerned with general  interest, with what  services 
are  provided  and  on what  terms,  not with the  status  of the  body  providing them. 

See the definitions on page 2. 

12.  Be  this  as  it  may,  these  very  different  circumstances  constitute  a  challenge  for  European  economic 
integration.  But  rather than  being  an obstacle, they  provide  a range  of  possibilities  that  may  be drawn  on to 
identify  the  methods  of  organization  that  are  the  best  suited  both  to  the  general  interest  in  a  fast-moving 
economic  context  and, that  are the  most  effective  for  achieving  European  integration. 

~~ 

3. 

The  challenge  of  change 

13.  The  context  in which  general interest  services  are provided  has  changed  enormously  over  recent  years 
and  differs  in  important  respects  from  the  context  in  which  they  were  originally  introduced.  The  major 
developments  are  as  follows: 

consumers  are becoming increasingly  assertive in exercising their rights and desires as users 
of general  interest  services,  including  at  European  level, and  are  more  demanding  in terms 
of choice,  quality  and price; 

worldwide  competition  is  forcing  companies  using  services  to  seek  out  better  price  deals 
comparable  to those  enjoyed  by their  competitors; 

in contrast to the years  immediately  following the Second World War,  it would now seem that 
private  funding  for  maintaining  and  developing  infrastructure  networks  is  not  as  difficult  to 
raise  as  public  resources; 

new  technologies  are  changing  the  economic  profile  of  sectors  traditionally  operated  as 
monopolies,  such  as  telecommunications,  television  and  transport,  paving  the  way  for  new 
services; 

in  certain  countries  and  sectors  modernization  has  been  slow  to  get  off the  ground,  leaving 
little  scope  for  change. 

14.  The creation of the single market and the introduction of greater competition  requires  providers  of general 
interest  services  to  meet  the  challenge  of these  developments  and turn them  to  good  account  by  improving 
range and quality and by lowering prices. This shift goes hand in hand with the implementation  of an economic 
and social  cohesion  policy.  The Community  is also  helping the  modernization  of general  interesi services to 
ensure that  essential  needs  continue to  be  met  and to improve  performance. This  dynamism  is the  life  blood 
of the  European  model  of society, without  which  European  citizenship  will  never  become  a reality. 

B. 

GENERAL  INTEREST  AND  THE  SINGLE  EUROPEAN  MARKET:  WORKING  FOR  EACH 
OTHER 

15.  Market forces produce a better allocation of resources and greater effectiveness  in the supply of services, 
the  principal  beneficiary  being  the  consumer,  who  gets  better  quality  at  a  lower  price.  However,  these 
mechanisms  sometimes  have  their  limits;  as  a  result  the  potential  benefits  might  not  extend  to  the  entire 
population  and  the  objective  of  promoting  social  and  territorial  cohesion  may  not  be  attained.  The  public 
authority  must  then  ensure  that  the  general  interest  is  taken  into  account.  This  is  the  reason  for  the 
Commission's  action  on the  following  fronts. 

1. 

Respecting  diversity 

16.  The  Community's  commitment  to the  European  model of society  is based on respect  for the diversity  of 
the  organization  of general  interest  services  in Europe, which  is  underpinned  by two  basic  principles: 

neutrality  as  regards  the  public  or  private  status  of  companies  and  their  employees,  as 
guaranteed  by  Article  222  of  the  Treaty.  The  Community  has  nothing  to  say  on  whether 
companies  responsible for providing general interest services should be public or private  and 
is  not,  therefore,  requiring  privatization.  Moreover,  the  Community  will  continue  to  clamp 
down on unfair practices, regardless of whether the operators concerned are private or public; 

Member  States' freedom to define what  are general interest services, to grant  the  special  or 
exclusive  rights that  are necessary to the companies  responsible for providing them, regulate 
their  management  and,  where  appropriate,  fund  them,  in  conformity  with  Article  90  of  the 
Treaty. 

17.  Respect  for national  choice  over economic  and social organization  is a clear  example  of subsidiarity  in 
action.  It is for the Member States to make the fundamental choices concerning their society, whereas the job 
of  the  Community  is  merely  to  ensure  that  the  means  they  employ  are  compatible  with  their  European 
commitments. 

18.  It should  be pointed  out that the  conditions  of Article  90 do not apply to non-economic  activities  (such as 
compulsory  education  and social security)  or to matters  of vital national interest, which  are the  prerogative  of 
the State (such as security, justice, diplomacy or the registry of births, deaths and marriages). The  contribution 
these  services  make  to  various  Community  policies  is  essential  hence  the  development  of  European-level 
cooperation  and  partnerships  in these  areas.  However,  it is clear that  general interest  services  that  are non-
economic  or  the  prerogative  of  the  State  are  not  to  be  treated  in  the  same  way  as  services  of  general 
economic interest.  Any  Community  action in such areas, as is made clear in the Treaty, can be no more than 
complementary. 

2. 

Striking  a balance: the  Community  objective 

19.  The real challenge is to ensure smooth interplay between, on the one hand, the requirements  of the single 
European  market and free competition in terms of free movement, economic performance  and dynamism and, 
on the  other,  the  general  interest  objectives.  This  interplay  must  benefit  individual  citizens  and  society  as a 
whole.  This  is  a very  tricky  balancing  act,  since  the  goalposts  are  constantly  moving:  the  single  market  is 
continuing  to  expand  and  public  services,  far from  being  fixed  are  having  to  adapt  to  new  requirements. 

20.  The  Community  approach  is,  therefore,  necessarily  a  gradual  one  and  the  balance  sought  must  be 
capable  of  responding  rapidly  to  developments.  Services  of  general  economic  interest  are  normally  subject 
to the  Community  rules  designed  to  create the  single  market.  This  includes  monopolies,  which  may  obstruct 
the  smooth  functioning  of the  market,  in  particular  by sealing  off  a particular  market  sector.  The  operation  of 
these  rules  encourages  these  services  to  evolve  accordingly,  but the  general  interest  services  must  be  kept 
intact. 

21.  The suppliers of certain services  of general interest  may be exempted from the rules  in the Treaty, where 
the  rules  would  obstruct  the  performance  of  the  general  interest  tasks  for  which  they  are  responsible. 
Definitions  of general  interest  duties do not  necessarily  determine  how they  are to  be carried  out. This  is why 

any  exemption  from  the  rules  is  subject  to  the  principle  of  proportionality.  This  principle,  which  underlies 
Article  90 of the Treaty,  is designed to  ensure the  best  match  between  the  duty  to  provide  general  interest 
services  and the way  in which  the services  are  actually  provided, so that  the  means  used  are  in  proportion 
to the ends sought. The  principle is formulated to allow for a flexible and context-sensitive  balance that takes 
account of the Member States' different  circumstances  and objectives  as well as the technical and budgetary 
constraints that  may vary from one sector to another.  It also  makes for the best  possible  interaction  between 
market  efficiency  and  general  interest  requirements,  by  ensuring  that  the  means  used  to  satisfy  the 
requirements do not unduly interfere with the smooth  running of the single European  market and do not affect 
trade  to  an extent that  would  be contrary  to the  Community  interest. 

22.  The  results  achieved  to  date  by  this  interaction  have  been  extremely  positive,  in  terms  of  both 
effectiveness  of general  interest  services  and implementation  of the  rules. 

23.  In terms  of efficiency  and quality, the  provision  of general  interest  services  in the  Community  compares 
favourably  with  other  areas  of the world  in many  cases.  Europe's  showing  is often  very  good when  it  comes 
to,  say,  the  reliability  of  energy  distribution,  air  transport  safety  or  the  quality  of  radio  and  television 
broadcasting. These achievements  owe something to the Community's  arrangements, which weed  out  unfair 
advantages,  encourage  openness  in  management  and  require  general  interest  remits  to  be  clearly  and 
precisely  defined. Gains  in efficiency  as a result  of competition  are, indeed, one of the  best ways  of  lowering 
the  cost  of services  and, in  many  cases,  making them  accessible  to  a  larger  number  of  people.  They  also 
make  firms,  in  particular  smaller  firms,  more  competitive.  There  is  none  the  less  scope  for  improvement  in 
many  areas.  The  quest  for  higher quality  and  greater  cost-effectiveness  in services  of general  interest  can 
in  many  cases  require  new  approaches  and  a substantial  effort  to  enhance  efficiency. 

the  Member  States 

24.  The Community  has always applied the rules impartially and been responsive to the concerns of industry, 
society  and the  political world. The  legislative framework  has been set  up by the Council  of Ministers  and the 
European  Parliament.  All  the  legal  instruments  concerning  air  transport,  rail  transport  and  electricity  were 
adopted  unanimously  by 
for 
telecommunications  and the  postal  service  was  also  adopted  by the  Council  and  the  European  Parliament. 
In one-off  cases the Commission  has had to adopt  measures  on the basis of Article  90.4 However,  before the 
final  adoption  of any such  measure, the  Commission  always  takes  care to  carry  obit extensive  consultations 
with  *hn  F"»!rnr<  M'  Parliament,  the  Council,  the  Member  States  and  the  parties  concerned  to  reach  the 
••':•  v us  Fur  example,  the  two  main  directives  adopted  on  the  basis  of  Article  90 
nïoac't  -• ' 
concerning  1 
'  *don  ?<  rminals  and  telecommnmoeMon^  services  and  the  amendments  to  them 
< 
received  the  _.uppo'f  oi  ihe  Member  States  within  the  Council, 

in  the  Council.  The  universal  service  concept 

25.  As  the  appeal  body  and  interpreter  of  the  law,  the  Court  of  Justice  has  confirmed  these  instruments, 
making  its  own  contribution  to  achieving  the  right  h--•;  «nee.  The  Court  has  accepted  that  economic 
considerations, such  as the overall cost-effectivenes<  of  i a  rieral interest  service, and other  considerations, 
such  as  environmental  protection,  are  admissible  a  koc da te  grounds.5 

26.  In their approaches, the Commission„the European Parliament, the Council and the Court of Justice have 
also  respected the different  national definitions  of the general  interest, which are based on the each  country's 
special  social  and  cultural  characteristics  and their  choice  of  society. 

3. 

Promoting  the  European  general  interest 

27.  As  a source  of economic  vigour  and efficiency,  the  economic  integration  of  Europe,  based  on the  single 
market  and the  cohesion  policy, has^had to take  on board the  issue of the general  interest  at  European  level 
with  the  concept  of  universal  service  or  other  public  service  obligations.  The  concept  of  universal  service, 
which was originated by the Commission, has been developed in European Parliament and Council resolutions 
and  implemented  in various  sector-specific  pieces  of legislation.6 

Since  1958 only 8 directives plus amendmentsand  7 decisions have been based on this article. 
Case  C-320/91 Corbeau v Kingdom  of Belgium (Public Prosecutor)  (1993] ECR  I-2565;  Case  C-392/92  Almelo 
v Energiebedrijfljsselmij  NV [1994] ECR  1-1509; Case T-32/93 Ladbroke v Commission  [1994] ECR  11-1994. 
European  Parliament  Resolutions  of:  22  January  1993,  OJ  C  42,  15.2.1993, p.240; 6  May  1994,  OJ  C  205, 
25.7.1994,p.551; 25 June  1995, OJ  C  166, 3.7.1995, p.109; and 14 July  1995.0J  C 249, 25.9.1995, p.212 
Council  Resolutions of:  22 July  1993, OJ  C  213, 6.8.1993, p. 1 ; 7  February  1994, OJ  C  48,  16.2.1994, p. 1 ; 22 
December 1994, OJ  C 379, 31.12.1994,p.4; and  18 September 1995, OJ  C 258, 2.10.1995, p.1. 

28.  The  basic  concept  of  universal  service  is to  ensure  the  provision  of  high-quality  service  to  all  at  prices 
everyone  can  afford.  Universal  service  is defined  in terms  of  principles:  equality,  universality,  continuity  and 
adaptability; and in terms of sound practices: openness in management,  price-setting and funding and scrutiny 
by bodies  independent  of those  operating the services. These  criteria  are not always  all met aTnational level, 
but  where  they  have  been  introduced  using  the  concept  of  European  universal  service,  there  have  been 
positive  effects  for the  development  of general  interest  services.7 

29.  Universal  service  is,  none  the  less,  a  flexible  concept,  which  evolves  gradually  in  line  with  specific 
structural  and technical  features  and sector-specific  requirements.  It is also  evolutionary  in the way  it  has to 
adapt  to technological  change,  new general  interest  requirements  and  users'  needs. 

30.  There  is  nothing to  prevent the  Member  States  from defining  additional general  interest  duties  over  and 
above  universal  service  obligations,  provided  that  the  means  used  comply  with  Community  law.  For  some 
services, the  provisions  of the  universal  service  concept  leave  Member  States  the  choice  of whether  or  not 
to  impose  the  general  interest  obligations  and to  offer  compensations. 
In this  way  the  development  of the 
universal  service  concept  at  European  level  is  sensitive  to  diversity,  by  continually  taking  account  of  the 
different  national  views  of  general  interest,  determined  by  each  country  in  line  with  its  own  traditions  and 
needs. 

31.  Public  service  obligations  may  also  be  imposed,  subject  to  certain  conditions,  for  reasons  of  general 
interest  connected  with  matters  such  as  land-use  planning, security  of supply  and the  environment. 

32.  The  completion  of  the  single  market  provides  consumers  with  better  services  and  puts  European 
businesses  in a stronger  position to  face  up to  international  competition. The  universal  service  principle  and 
the  other  public  service  obligations  contribute  to the  objectives  of  equal treatment.  They  protect  the  general 
interest  for the  benefit  of the  public  and  European  society.  Universal service  is the  expression  in  Europe  of 
the requirements  and special features of the European model of society  in a policy which combines  a dynamic 
market,  cohesion  and  solidarity. 

See the  example  of telecommunicationsin point 35. 

7 

II.  THE  COMMUNITY  CONTRIBUTION: 
DYNAMISM,  FLEXIBILITY  AND  SOLIDARITY 

A. 

A SECTOR-SPECIFIC  APPROACH 

33.  The  principles  and  the  approach  outlined  above  combine  the  dynamism  of  opening  up  markets  with 
general  interest  requirements  at  European  and  national  levels. The  Commission  has  already  taken  steps  in 
this direction in several areas, such as telecommunications,  postal services, transport  and energy. These are 
solid examples of how the single market  can protect and improve the satisfactory  provision of general interest 
services  to  the  public  on  the  basis  of  universal  service  or  public  service  obligations.  Each  case  was 
approached in a flexible way, respecting the special characteristics  of each sector, the principle  of subsidiarity 
and the concern to get the best deal for everyone. The approach has always been a gradual one and involved 
consulting  all the  parties  concerned. 

•^  Telecommunications 

34.  The Community  approach to telecommunications  is intended to improve the service provided 
to  the  public  in the  Community,  by  offering  a greater  range, while  at  the  same  time  improving 
quality  and keeping  prices  affordable. The  market  has been opened  up gradually  in  accordance 
with  a precise  schedule.  Since  proposals  made  in  1987, consumers  have  been  able to  choose 
whichever  fixed  or  mobile  phone,  fax  or  modem they  wish.  Measures  were  then  introduced  to 
provide free choice  between at least two  mobile phone or satellite service  operators.  By no later 
than  1 January  1998 (or 2003  in certain countries)  voice  telephony  infrastructures  and  markets 
are to  be opened  up. For this  purpose,  regulatory  bodies  are to  be separate  from the  operators 
and  public  networks  will  be open to  other  operators. 

35.  The  opening  up  of  markets  and  infrastructures  goes  hand  in  hand  with  the  definition  of 
universal  service  obligations,  which  the  Community  has  asked  Member  States  to  impose  on 
operators  to  ensure  the  provision  of  a  wide  range  of  basic  services.  The  Commission 
communication  of 1996 on universal service stipulates that this service should provide  affordable 
access  for  everyone  to  a  network  of  voice,  data  and  fax  transmission  and  a  voice  telephony 
service.  The  regulation  lays  down  a  framework  for  the  financing  of  the  costs  relating  to  this 
service  by  market  actors.  The  definition  of this  universal service  is to  be  reviewed  in  1998  and 
thereafter  at  regular  intervals. The  dynamic  approach  adopted  is designed  to  adapt the  service 
in  line  with  technological  developments,  consumer  needs  and  general  interest  considerations. 
The  treatment  of telecommunications  as  a universal  service  is  already  having  a  positive  effect 
on  how telecommunications  services  are  being  approached  at  national  level.  For  example,  the 
idea  of  guaranteeing  access  at  affordable  prices  for  everyone,  including  the  socially,  medically 
and economically disadvantaged, which was not an established principle in several countries, has 
now  been  introduced  by the  universal  service  concept. 

36. 
In  some  Member  States  which  have  acted  ahead  of  schedule,  telephone  services,  in 
particular  mobile  phone  services,  are  already  being  provided  by  new  operators  and  this  has 
helped  to  increase  the  spread  of  the  telephone  and  the  range  of  new  services.  A  more  open 
market  will  make  it  easier  for  telephone  services  to  take  on  board  the  current  flurry  of 
technological developments  at the  same  time  as meeting  customers'  increasingly  sophisticated 
demands  and  keeping  prices down. 

sS'  Postal  services 

37.  The  measures  proposed  by  the  Commission  in  July  1995  are  being  examined  by  the 
European  Parliament  and the  Council. They  aim to  introduce  common  rules  for developing  the 
postal sector  and improving the  quality  of service, as well as gradually  opening  up the  markets 
to  competition  in a controlled way  by the  year 2000. 

38.  The  basis  of the  proposal is to  safeguard  the  postal  service  as  a  universal  service  in the 
long  term.  Universal  postal  service  means  providing  a  high-quality  service  countrywide  with 
regular  guaranteed  deliveries  at  prices  everyone  can  afford.  This  involves  the  collection, 
transport, sorting  and delivery of letters as well as printed matter, catalogues  and parcels within 
certain price and weight limits. It also covers registered and insured ("valeur déclarée")  items and 
would apply to both domestic  and cross-border deliveries. Due regard is given to  considerations 
of continuity,  confidentiality,  impartiality  and equal treatment  as well as  adaptability. 

39.  To  guarantee  the  funding  of  the  universal  service,  a  sector  is  to  be  reserved  for  the 
operators  of this  universal service. The scope  of the  reserved sector will be  determined  by two 
criteria:  weight  and  price.  The  issue  of  mailing  circulars  is  being  looked  into,  as  is  that  of 
incoming  cross-border  mail.  In any case, the  range of  reserved services will be  reviewed  in the 
year  2000  in the  light  of technological,  economic  and social developments. 

40.  The  remaining  funding for the  universal service  may  be found  by writing certain  obligations 
into  commercial  operators*  franchises;  for  example,  they  may  be  required  to  make  financial 
contributions  to  an  equalization  fund.  There  are  also  plans  to  keep  regulatory  authorities  and 
postal service  operators  separate. 

•^ 

Transport 

41 
in  civil  aviation,  national  airlines  often  used to  enjoy  a monopoly  in their  country  of origin, 
which allowed them to offset profit-making activities against loss-making activities connected with 
their  public  service  role.  The  three  aviation  packages  of  1987,  1990  and  1993  have  gradually 
opened  up the  markets, while  safeguarding the  general  interest. 

42  For services to  outlying areas  and low-density  regional services, which are vital for  regional 
development,  but  not  economically  viable  if left to  market  forces, the  regulations  allow  Member 
States  *o  impose  public  service  obligations  for  a  specific  route,  select  a  sole  operator  on  the 
b;i«;i:s of  a Community-wide  invitation to tender and provide financial compensation  for  operating 
!hc<=o .services.  Public  intervention  in the  market  is thus  limited to the  strict  minimum. 

43.  Now that the  process  is nearly  completed, it must  be acknowledged that the  opening  up of 
European  aviation  markets  has  succeeded  in .maintaining  service  and  reliability  levels  and 
improved the quality  of services for travellers appreciably.  Competition is keener in'terms of both 
traffic  and  prices,  making  air transport  more  accessible  to  a wider  public. 

44.  The  regulations  governing  the  freedom  to  provide  maritime  transport  services  within  a 
Member State (known as "cabotage")  allow Member States to impose public service  obligations, 
without  any  discrimination  between  Community  shipowners,  as  a  condition  for  operating 
scheduled  services  to,  from  and  between  islands.  Member  States  may  take  into  account  only 
considerations  relating  specifically  to  the  ports  to  be  served,  the  regularity,  continuity  and 
frequency  of the service, the capacity to provide the service, the prices charged and the crew of 
the  vessels. Apart  from this,  in a communication  entitled "Towards a new  shipping  strategy"  the 
Commission  has put forward^he possibility of public funding to support general interest services. 

45.  For inland transport  (rail,  road  and  inland waterways)  the  Treaty  itself  refers  (Article  77)  to 
certain  obligations  inherent  in  the  concept  of  a  public  service.  In  1969  the  Council  adopted 
regulations  interpreting  this  article  and  guaranteeing  the  supply  of  adequate  transporTservices 
which contribute to sustainable development, social cohesion and regional balance. A great deal 
of  progress  has  already  been  made  in the  process  of  opening  up the  inland transport  markets 
and the importance of the quality of public services  in this area has been fully taken into account. 

46.  In  its  Green  Paper  on the  Citizens  Network  the  Commission  confirmed  this  approach  and 
at  the  same  time  highlighted  the  need  to  improve  the  effectiveness  of  these  regulated  public 
services. Similarly, for rail transport,  in a recent White  Paper the Commission defended  its 1995 
proposals  to  open  up the  freight  and  international  passenger  markets  and  announced  a study 
on the best practical means of introducing market rules in domestic passenger services, with due 
account  for  public service  requirements. Two  other  proposals  have  been  put forward  in  1996 to 
strengthen  the 
in  full  with  the 
internal  road  passenger  transport  market;  they  comply 
proportionality  principle  and the  public service  regulations. 

•5*  Electricity 

47.  The draft directive that is currently going through the adoption procedure  is intended to open 
up electricity  markets to new operators  gradually  over  a period  of nine years.  In order to  protect 
the very long-term investments which are typical of this sector and to take account of the diversity 
of  national  structures,  Member  States  are  being  offered  two  options:  either  access  to  the 
networks  for third  parties  or a single  buyer system. It will  be  up to the  Member  States to  decide 
who  are the  eligible  parties, subject  to  certain  conditions. 

48.  The proposed solution  is based on free competition, but gives  Member States the  possibility 
of laying  down general  interest  obligations.  In line with the  principle  of subsidiarity, the  Member 
States will be responsible for defining these obligations  in terms  of general  interest  objectives on 
the  basis  of  openness,  objectivity  and  equal treatment. 

49.  The Commission  is sure that this  policy will succeed  in reducing  energy  costs for  European 
industry  and therefore  boost  its competitiveness  on the international scene. Lower  prices  should 
also  be  one  of the  benefits  passed  on to  consumers. 

50.  An  initial  mid-term  evaluation  of  the  directive  will  be  carried  out  by  the  Commission,  after 
which  it will  be  reviewed  once  it  has  been  in force  for  nine  years. 

10 

S3»  Broadcasting 

51.  In most Member States, television and radio have a general interest dimension, despite the 
structural and technological changes affecting these markets. The general interest considerations 
basically concern the content of broadcasts, being linked to moral and democratic values, such 
as pluralism, information ethics and protection of the  individual. The way these general interest 
considerations  are  catered  for  varies  considerably  from  one  country  and  region  to  another, 
particularly  as regards  how they are funded. 

52.  The  main  piece  of  Community  legislation  directly  relating  to  this  sector  is the  so-called 
"Television Without Frontiers" Directive of 1989, which provides the legal framework to guarantee 
freedom of movement for television programmes by coordinating the national rules which might 
have  raised  legal  obstacles  to  free  movement.  The  coordinated  areas  are  rules  applying  to 
promotion  of  the  production  and  distribution  of  television  programmes,  advertising  and 
sponsorship, the  protection  of minors  and the  right of reply.  The  Member  States  must ensure 
freedom  to  receive  programmes  and  must  not  hinder  the  retransmission  of  programmes 
broadcast from other Member States for reasons relaing to the coordinated areas. The European 
Parliament  and  the  Council  are  currently  in the  process  of  revising the  directive  to  clarify  and 
adapt the  present rules. 

53. 
In  addition, the  rules  on  competition  provide  a safeguard  against the  abuse  of dominant 
positions and, via the merger control arrangements, prevent the development of oligopolistic and 
monopolistic  market structures.. 

11 

B.  THE  CONTRIBUTION  OF  OTHER  COMMUNITY  POLICIES 

54.  The Community's  involvement  in developing general interest  services  goes  beyond justifie  development  of 
the single  market,  incorporating  other  activities  under  various  Community  policies  such as: 

drawing  up  standards  to  ensure  the  interoperability  and  interconnection  of  networks;  developing 
certification  systems; 

developing  European  plans  for  major  trans-European  transport,  energy  and  telecommunications 
infrastructure  networks  that  form  the  backbone  of  the  information  society;  policy  coordination  and 
financing  for the  development  of these  infrastructures; 

supporting  investment  projects  as  part  of  economic  and  social  cohesion  policy,  particularly  for 
infrastructure 
industrial 
reconstruction,  and for  projects  designed  in general to  promote  general  interest  services  in  partnership 
with  local  and  regional  actors; 

less-advantaged  regions  of  the  Community  and  regions  undergoing 

in 

research and  development  activities  in general interest service sectors, such as rail and air transport, 
the  audiovisual  industry,  information  technology,  education  and training, and  health; 

encouraging  legislators, regulators  and operators  to exchange  experiences  and emulate the  best 
practices,  for  example  as  regards  financing  methods,  price-setting  and serving  the  public.8 

In  all  these  activities  the  Community  is  attentive  in  particular  to  the  need  for  a  healthy  and  sustainable 
environment  and  consumer  interests.  The  Community  is  taking  measures  for  consumers  to  promote  choice, 
quality,  openness,  access  to  objective  information,  rapid and  inexpensive  means  of  redress  and  participation. 

55.  However,  none  of these  Community  activities  will  be  effective,  unless  the  various  parties  concerned  work 
together  in the  necessary way.  Partnerships  between the  public and private sectors will inevitably  play  a decisive 
role, particularly when  it comes to investment  and research, but partnerships  also need to be developed  between 
the  regional,  national  and  European  levels. 

56.  As  regards  non-economic  services9,  various  cooperation  activities  undertaken  at  European  level  may  help 
to support or add an extra  dimension to national policies, for example  in the areas of employment, welfare,  public 
health,  education  and  training  and  culture.  The  Community  is  encouraging  cooperation  between  the  Member 
States on combating cancer. The education and training exchange and cooperation programmes, "Leonardo" and 
"Socrates", involve large numbers of students and young workers. The Community  also supports various activities 
to  preserve  and protect  Europe's  cultural  heritage. These  activities do not, of course, imply  harmonization  at the 
European  level,  but  rather  they  are  additional  ways  in which  the  Community  supports  the  general  interest  and 
are vital for  achieving  the  Community's  cohesion  and solidarity  objectives. 

An  example  of  this  in  the  area  of  public  transport  is  the  recent  Commission  communication  on  "The  Citizens 
Network",  COM(95)601 final, 23 January  1996. 
See point  18. 

12 

III.  OBJECTIVES  FOR  THE  FUTURE 

57.  The  Community's  aim  is  to  support  the  competitiveness  of  the  European  economy  in  an  increasingly 
competitive  world  and  to  give  consumers  more  choice,  better  quality  and  lower  prices,  at  the  same  time  as 
helping, through its policies, to strengthen economic and social cohesion between the Member States and reduce 
certain inequalities. This objective, which is laid down in the Treaty, is served mainly  by the Structural Funds and 
the  Trans-European  Networks.  General  interest  services  have  a  key  role to  play  here, since they  contribute  to 
economic  and social  cohesion  and  economic  performance. The  Community  is  committed  to  maintaining  these 
services  intact, while  improving their  efficiency. 

58.  The  importance  of  striking  this  balance  was  brought  out  by the  Heads  of  State  and  Government  at  their 
summit  in Cannes  in June  199510: 

"The European Council reiterates its concern  that the introduction of greater competition into many sectors in order to 
complete the internal market should be compatible with the general economic tasks facing Europe, in particular balanced 
town and country  planning,  equal treatment for citizens,  -including equal rights and  equal opportunities for men and 
women - the quality and permanence of services to consumers and the safeguardingof long-term strategic interests." 

59.  Both this political statement and the changes currently underway point to the need to clarify future objectives. 
In this vein, the Commission is planning to promote European general interest services on three fronts: by making 
the  most  of  operations  to  boost  the  single  market  and  European  competitiveness;  by  strengthening  European 
solidarity  and coordination; and  by deploying  Community  instruments. These  developments  should  be  reflected 
in the  Treaty,  when  it comes  up for discussion  at the  Intergovernmental  Conference. 

A. 

A  EUROPEAN  PERSPECTIVE 

1. 

Making the  most  of operations  to  boost  European  competitiveness 

60.  The  opening  up of markets  on a sector-by-sector  basis  for economic  services  and, in particular,  networked 
services, and the introduction of universal service obligations should be continued, given the positive effects they 
have on the general interest  functions  and on the competitiveness  of the European economy  in the world. These 
activities  are  crucial for  the  modernization  of the  services,  enabling  Europe to  make  the  most  of its competitive 
advantages  in the sectors  in question  and enabling the companies that use the services to obtain quality at lower 
cost. 

61.  Whatever  happens, the  Commission will continue to  play  its role of impartial  referee.  It intends to apply  the 
following  principles  in its  policy  of opening  up markets  in the future: 

introducing  evaluation  tools  to  assess  the  operation,  performance  and  competitiveness  of  general 
interest services on a sector-by-sector basis, so that the best examples can be emulatetfand the services 
adapted in line with technological changes, new consumer needs and new  public interest demands. The 
Commission  has  already  launched  a  study  to  get  an  overview  of  forms  of  regulation  and  methods  of 
organizing  and financing  networked  services  in the  Member  States; 

adopting  a step-by-step approach  based on consultation  with the various parties concerned, including 
consumers; 

applying  openness  by  issuing  a communication  on the  application  of the  Article  90  procedures. 

This approach should get the best out of the activities  undertaken, particularly  as regards the development  of the 
universal  European  service  concept. 

Cannes European Council, 26-27 June  1995, Conclusions of the  Presidency, SN 211/95, point A.1.1.7. 

13 

62.  It is, however,  important that the decisions  on the Commission's  pending proposals  should be taken as soon 
as  possible.  The  Commission  is  expecting  the  directive  on the  opening  up  of  the  internal  market  in  electricity, 
which had been blocked, to be finalized soon. The Commission is also counting on the Council and the  European 
Parliament  adopting the drafts  on the opening  up of international  markets  in rail passenger transport,  completing 
the  opening  up  of  the  rail  freight  markets  and  the  opening  up  of  the  natural  gas  markets.  These  proposals 
incorporate  the  general  interest  considerations. 

2. 

Strengthening  European  coordination  and  solidarity 

63.  In the  interests  of  solidarity,  the  general  interest  criteria  could  be  extended  to  other  activities  following  the 
evaluations  referred to  above. There are several sectors that  have a cross-border dimension, especially  in terms 
of  their  particular  technical  characteristics,  which  means  that  the  general  interest  role  is  not  necessarily  best 
fulfilled  at national  level. There  are other sectors with  European  implications  too, such  as land-use  planning  and 
environmental  protection. 

64.  To  meet  the  requirements  of  these  sectors  and  ensure  the  best  possible  performance  and  service,  the 
Commission could envisage future activities, in some form or another and using the powers  it already  possesses, 
designed  to  facilitate  the  coordination  of  national  general  economic  interest  bodies  in  matters  such  as  public 
financing  arrangements  and  control  systems.  Development  of  the  universal  service  concept  or  public  service 
obligations  could  be  a fruitful  avenue  to  explore,  particularly  in terms  of the  quality  of service  and  users' rights. 

65.  The  level of European  integration in certain sectors could  also give  food for  thought  on means  of  increasing 
European-level  coordination  for  monitoring  the  activities  of  regulators  and  operators  in these  sectors.  In  some 
cases,  more  developed  forms  of cooperation  could  be envisaged, such  as the  introduction  of a regulatory  body 
for  air traffic  control, which  is  under discussion.11 

3. 

Deploying  Community  instruments 

66.  Economic  and  social  cohesion,  harmonious  urban  and  rural development  and  environmental  conservation 
are  objectives  of shared  interest  in  Europe.  In this  context,  general  interest  services  share  the  same  objectives 
as various  other  common  policies  introduced  by the  Community. 

67.  This  is why the Commission will be pushing  ahead with those  policies which  are  needed to get the  most out 
of  general  interest  services.  With  this  in  mind,  next  year  the  Commission  is  due  to  submit  a  draft  plan  on 
developing  land  use  in  the  Community  to  the  European  Parliament,  the  Council  and  the  Committee  of  the 
Regions.  This  is  to  be  based  on  the  recommendations  of  the  "Europa  2000  plus"  document,  which  will  give 
general  interest  services  the  sort  of  coverage  they  deserve. 

68.  The  Commission  is  planning to  develop the trans-European  networks  in line with the  commitments  already 
made  by  the  Heads  of  States  and  Government.  The  commitments  should  be  acted  on  as  soon  as  possible, 
particularly on the financial level. The networks  have such huge potential that their introduction should not be held 
up any  longer. 

When  presenting  its  initial guidelines  for the fifth  research framework  programme  (1999-2003), the  Commission 
stressed  the  need  for  research  to  be  made to work  resolutely  for the  benefit  of the  European citizen. 

69.  Making  sure  that  everyone  is  provided  with  other  general  interest  services,  such  as  health,  welfare, 
education, water  and  housing, is a matter  of  national or  regional responsibility.  None the  iess, there  are ways  in 
which the Community  can help (cooperation, financial support  and coordination  activities)  and greater use should 
be made of them in connection with these services to promote equality  of opportunity  and to combat  poverty  and 
marginalization  ("social  exclusion"). 

See  Commission White  Paper  entitled "Air  traffic  management: freeing  Europe's airsp;; 

COM(96)57 final 

14 

B. 

A  REFERENCE  IN THE  TREATY 

70.  Now that the  Union  is discussing  reforming  its institutions  in preparation  for the transitiorrto  a new  political 
phase, the debate  is open  on  how to  consolidate  and clarify  our  commitment  to the  European  model  of  society 
and  the  values  on  which  it  is  based,  as  reiterated  by the  Commission  in  its  opinion  for  the  Intergovernmental 
Conference.12  The  provision  of  public  interest  services  is central to these  values. 

71.  One  option would  be to  leave the Treaty  as it stands. Article  90  has  proved  its worth  in fully  guaranteeing 
the  beneficial interaction  between  liberalization  and general interest.  It is best  left  untouched.  The Treaty  also 
contains  various  other  instruments  that  provide  ways  and  means  of supporting  the  European  model  of  society 
in several ways, for example as back-up for general interest roles: trans-European networks, Community research, 
consumer  policy  and social  and  economic  cohesion. 

72.  The Commission  feels, however, that the role of general interest services in the development  of the  concept 
of European citizenship should be commensurate with the place they occupy  among the shared values on which 
the  European  societies  are  founded. With  this  in mind, the  stage  should  be  set  for  developing  general  interest 
services  in  Europe  and for deploying  the  means  available to  achieve this  end  in a coherent  way. 

73.  The  Commission  is  advocating  in  the  Intergovernmental  Conference  that  a  reference  be  inserted  in  the 
Treaty.  This would  mean  adding  a new  paragraph  (u) to Article  3 to  read  as follows: 

"(u) 

a contribution  to the  promotion  of services  of general  interest." 

74.  This would confirm, given the programmatic value of Article  3, that general interest services already fall within 
the  Community  remit.  They  none  the  less  continue  to  be  primarily  an  area  for  action  by  the  Member  State. 
Without  actually  creating  a  new  legal  basis,  this  addition  would  establish  that  general  interest  services  are 
something which the Community  should take into account when drawing up its policies and planning  its activities. 

"Reinforcing  Political  Union  and  Preparing  for  Enlargement".  Commission  Opinion  on  the  Intergovernmental 
Conference, COM(96)90, 28.2.1996. 

15 

ISSN 0254-1475 

COM(96) 443  final 

DOCUMENTS 

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01 

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