Green Paper on the convergence of the telecommunications, media and information technology sectors, and the implications for Regulation - Towards an information society approach
Date: 1997-12-03
Institutions: European Commission
Subjects: information technology, mass media, new technology, research and development, telecommunications

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 03.12.1997 
COM(97) 623  final 

TOWARDS AN INFORMATION SOCIETY APPROACH 

(Presented  by  the  Commission) 

EXECUTIVE SUMMARY 

There  is  widespread  agreement  that  convergence  is  occurring  at  the  technological 
level.  That  is  to  sai that  digital  technology  now  allows  both  traditional  and  new 
communication  services  - whether  voice,  data,  sound  or  pictures  - to  be  provided 
over many different networks. 

Current  activity  in  the  market  suggests  that  operators  from  the  sectors  affected  by 
convergence  are  acting  on  the  opportunities  provided  by  technological  advances  to 
enhance 
into  new  activities. 
Telecommunications,  Media  and  Information  Technology  sectors  are  seeking  cross 
product  and  cros~-platform  development  as  well  as  cross-sector  share-holding. 
Examples of new products and  services being  delivered  include: 

traditional  services  and 

to  branch  out 

their 

- Home-banking and  home-shopping over the  Internet, 

- Voice over the  Internet; 

- E-mail,  data and  World  Wide Web  access over mobile phone  networks,  and  the 
use  of wireless  links  to  homes  and  businesses  to  connect  them  to  the  fixed 
telecommunications networks; 

- Data services over digital broadcasting  platforms; 

- On-line services  combined  with  television  via  systems  such  as  Web-TV,  as  well 

as delivery via  digital satellites and  cable  modems; 

- Webcasting of news,  sports,  concerts and  of other audiovisual services. 

Such  developments  represent  concrete  examples  of  an  Information  Society  in 
Europe.  They  show  its  potential  to  touch  the  lives  of  every  citizen.  They  also 
highlight  a  significant  change 
traditional 
the 
telecommunications and  media services. 

range  and  diversity  of 

in 

The  implications  of these  developments  are  far  reaching.  Convergence  is  not just 
about technology.  It is  about services and  about new ways  of doing  business .and  of 
interacting  with  society.  The  changes  described  in  this  Green  Paper  have  the 
potential  to  substantially  improve  the  quality  of  life  for  Europe's  citizens;  to  better 
integrate  Europe's  regions  into  the  heart  of  the  European  economy,  and  to  make 
businesses more effective and  competitive on  global and  national  markets. 

The  emergence  of  new  services  and  the  development  of  existing  services  are 
expected  to  expand the overall  information market,  providing new routes to the  citizen 
and  building  on  Europe's  rich  cultural  heritage,  its  potential  for  innovation  and  its 
creative ambitions. 

The  global  nature  of communications  platforms  today,  in  particular,  the  Internet,  are 
providing  a  key  which  will  open  the  door  to  the  further  integration  of  the  world 
economy.  This  will  open  opportunities  and  challenges  not  only  for  the  European 
Union,  but also for our neighbours in  Central and  Eastern  Europe,  the  Mediterranean, 

ii 

and  more  broadly,  in  the  developing  world.  At  the  same  time,  the  low  cost  of 
establishing  a  presence  on  the  World  Wide  Web,  is  making  it  possible  both  for 
businesses  of all  sizes  to  develop a regional  and  global  reach,  and  for consumers  to 
benefit  from  the  wider  choice  of  goods  and  services  on  offer.  Globalisation  will 
therefore  be  key  theme  in  future  developments,  as  changes  in  Europe  are  mirrored 
by developments all  over the World. 

If  Europe  can  embrace  these  changes  by  creating  an  environment  which  supports 
rather than  holds  back the  process  of change  we  will  have  created  a powerful  motor 
for  job  creation  and  growth,  increasing  consumer  choice  and  promoting  cultural 
diversity.  If Europe fails  to do so,  or fails  to  do so  rapidly enough,  there  are  real  risks 
that our businesses and  citizens will  be  left to travel  in  the  slow lane of an  information 
revolution  which  is  being  embraced  by  businesses,  users  and  by  Governments 
around the World. 

Governments  and  policy  makers  will  have  a  key  role  in  ensuring  that  such  an 
environment  is  in  place.  However,  beyond  the  regulatory  framework  which  is  the 
central focus of this  Green  Paper,  efforts will  continue to  be  needed,  as  recognised  at 
the  recent  Jobs  Summit,  to  equip  Europe's  workforce  with  the  skills  which  the 
Information  Society  requires.  Continuing  support  should  be  given  to  research  and 
development  activities.  Governments,  regional  and  local  authorities,  as  well  as  the 
European  institutions must lead,  by example,  by fully embracing the  technologies  and 
services which the  process of convergence is  making possible. 

The future  regulatory environment will  be  of crucial  importance.  The  European  Union 
has  already  developed  a  comprehensive  framework  for  managing  the  transition  in 
telecommunications  from  a  monopoly  to  a  fully  competitive  world  from  1  January 
1998.  We  have  also  put  in  place  a  framework  supporting  an  internal  market  for 
broadcasting.  Getting  the  right  regulatory  framework  must  be  firmly  placed  within 
these  existing  achievements.  At  the  same  time,  this  Green  Paper  represents  a 
milestone in  allowing the  Community to  look beyond  the  1998 deadline and  to  assess 
the  implications for the sectors affected  by convergence. 

This Green  Paper argues that the  development of new services could  be  hindered  by 
the existence of a range  of barriers,  including  regulatory barriers,  at different levels  of 
the  market.  There  are,  however,  differing  views  on  the  adequacy  of  existing 
regulatory  frameworks  to  deal  with  the  changing  environment.  One  view  is  that  the 
development  of  new  products  and  services  is  being  held  back  by  regulatory 
uncertainty  - that  existing  rules  were  defined  for  a  national,  analogue .and .mono 
media  environment,  but  that  services  increasingly  cut  across  different  traditional 
sectors and  geographical boundaries,  and  that they may be  provided  over a variety of 
platforms.  This  calls  into  question  the  underlying  rationale  beneath  regulatory 
approaches in  the  different sectors affected  by convergence.  Proponents of this  view 
would  argue that such  regulatory uncertainty holds back investment and  damages the 
prospects for the implementation of the  Information Society. 

An  alternative  view  would  hold  that  the  specific  characteristics  of  the  existing 
separate sectors will  limit the  scope for service  convergence.  It further would  contend 
that the  role  of the  media  industry as  the  bearer of social,  cultural  and  ethical  values 
within  our  society  is  independent  of  the  technology  relied  upon  to  reach  the 
consumer.  This  would  mean  that  regulation  of economic  conditions  and  that  of the 

iii 

provision  of  information  services  should  be  separated  to  ensure  efficiency  and 
quality. 

These  matters  need  to  be  debated  and  resolved.  Finding  solutions  will  need  to  take 
account of the  full  range  of interests  in  the  various  sectors  affected  by  convergence. 
At the  same time,  the potential for change will  be  felt  in  different ways  and  at different 
levels  (e.g.  technology,  industry,  services  and  markets).  Whilst  digitalisation  means 
that convergence  is  well  advanced  at the  level  of technology,  this  Green  Paper does 
not automatically assume that  convergence  at one  level  inevitably leads  to  the  same 
degree  of  convergehce  at  other  levels.  Equally,  there  is  no  assumption  that 
convergence  in  technologies,  industries,  services  and/or  markets  will  necessarily 
imply a need for a uniform regulatory environment. 

This  Green  Paper  responds  to  the  requirement  for  debate. 
It  is  consciously 
interrogative.  It analyses issues,  it identifies options  and  it poses  questions for public 
comment.  It does not take  positions at this stage nor reach  conclusions. 

In  Chapters  I  and  II,  the  Green  Paper analyses  the  convergence  phenomenon  - its 
technological  underpinnings,  current  developments  in  the  market,  and  their  possible 
impact on  the telecommunications,  media and  information technology sectors. 

In  Chapter Ill,  actual  and  potential  barriers  are  identified  which  may  hold  back  these 
technological  and  market  developments.  Some  of  these  reflect  current  market  or 
industrial  issues  of  the  sectors  affected  by  convergence,  whilst  others  arise  from 
current  regulatory approaches.  Some  of these  issues  are  already being  dealt with  in 
Community 
in  areas  of  intellectual  property,  media 
ownership,  electronic  commerce  and  digital  signatures)  and  where  this  is  the  case 
those  initiatives  are  identified. 
In  other  cases,  these  barriers  serve  as  a  basis  for 
considering  the  need,  if any,  to  adapt current regulatory frameworks  in  the  light of the 
convergence  phenomenon. 

(for  example, 

initiatives, 

Chapter  IV  provides  a  detailed  discussion  of  issues  associated  with  existing  and 
possible  future  regulatory  frameworks  or  approaches.  These  issues  fall  into  eight 
broad  areas: 

•  Definitions 

•  Market entry and  licensing 

•  Access  to  networks,  to  conditional  access  systems  and  to 

content 

•  Access to frequency spectrum 

•  Standards 

•  Pricing 

• 

Individual consumer interests. 

The  chapter  concludes  with  a  discussion  of  public  interest  objectives,  options  for 
possible future  regulatory models and  issues raised  at an  international level. 

iv 

Finally,  in  Chapter V,  a set of principles for the  future  regulatory  policy  in  the  sectors 
affected  by  convergence  are  set  out,  and  possible  options  for  future  regulatory 
approaches are identified as a basis for discussion. 

The  Commission  believes  that  the  5  months  public  consultation  period  will  allow 
broad  participation  and  debate  around  issues  which  are  important  for  citizens, 
business and for the further development of the  Information Society.  Comments can 
be  sent in  paper or electronic form,  and  the  debate will  be  assisted  by  the  creation  of 
a specific web-site on  which  electronic comments  can  be  accessed. 1  There will  also 
be  public  hearings  during  the  course  of  the  consultation.  On  the  basis  of  the 
comments  received,  the  Commission  intends  to  produce  a  Communication  by  June 
1998. 

This  Green  Paper  represents  a  step  on  the  way  to  securing  the  benefits  of 
convergence 
The  June 
for  European  social  and  economic  development. 
Communication,  setting  out  the  results  of the  public  consultation,  will  allow  political 
positions  to  be  taken  by  the  European  Parliament,  the  Council  of  Ministers,  the 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions,  and  for  clear 
objectives for future policy to  be  established. 

This  Green  Paper initiates  a  new phase  in  the  European  Union's  policy  approach  to 
the  communications environment.  As  such  it  represents  a key  element of the  overall 
framework  put  in  place  to  support  the  development  of  an  Information  Society. 
It 
builds  on  the  current  strengths  of the  frameworks  for  telecommunications  (launched 
for  media 
by 
(established  by various  Community legislative  initiatives).  This  Green  paper builds  on 
these  achievements,  and  offers  all  interested  parties  an  opportunity  to  comment  on 
the  future  shape  of regulation,  in  the  post-1998  communications  environment,  in  the 
sectors affected  by convergence. 

landmark  1987  Green  Paper  on 

telecommunication 2

)  and 

the 

This  first  step  is  intended  to  pave  the  way  for  the  development  of  an  appropriate 
regulatory  environment  which  will  facilitate  the  full  achievement  of the  opportunities 
offered  by  the  Information  Society,  in  the  interests  of Europe  and  its  citizens  as  the 
21st century begins. 

1  World-wide  Web  address  is  http://www.ispo.cec.be/convergencegp.  Both  written  and  electronic  comments  will 
be  made  available  in  paper  form  in  parallel  with  the  publication  of  the  Communication  on  the  results  of  the 
consultation,  subject to any requests  made for confidentiality. 

2  COM(87) 290 final 

v 

,.,,;.:;. ... '. 

I. 

1. 

2. 

3. 

4. 

II. 

1. 

2. 

3. 

4. 

Convergence - defining its scope 

The enabling role of technology 

Current market developments 

Summary and questions 

The social and economic-context 

Market trends 

The consumer perspective 

Summary and questions 

Ill. 

Barriers to Convergence 

1. 

2. 

3. 

IV. 

1. 

2. 

3. 

4. 

5. 

v. 

1. 

2. 

3. 

4. 

Existing barriers 

Potential barriers 

Question 

Regulatory 'rjlpl_i~at\qp~', 

Challenge to existing regulatory approaches 

Tackling the barriers - The regulatory issues 

Meeting public· interest objectives 

Options for a future regulatory model 

Issues at an  international level 

Principles and options· for theJuture 

Principles for future regu.latory approaches in the sectors affected by 
convergence 

Options for regulatory development 

· Timetable for future action 

Conclusions 

Annex: Existing regulation 

vi 

iii 

1 

8 

15 

18 

33 

37 

is 

fuelled  by 

The  Information  Society  is  becoming  a  reality; 
Its  development 
rapid 
technological  change  which  is  transforming  the 
information  industries.  The nature  and  speed  of 
this  transformation  may pose  new challenges  to 
policy-makers. 

the 

is 

(IT) 

factors 

One  of  the  most  significant 
the 
increasing  use  by  different  sectors,  notably  the 
information 
telecommunications,  media  and 
technology 
same 
the 
of 
sectors, 
technologies.  Evidence  of  such  convergence 
has  been  mounting  in  recent  years  with  the 
the 
emergence  of 
increasing  capability  of  existing  networks  to 
carry both  telecommunications and  broadcasting 
services. 

Internet  and  with 

the 

There 

is  broad  agreement 

The  phenomenon  of  convergence  is  relatively 
new and a range of different views  exist on  what 
its  implications  are for  society  and  for  economic 
activity. 
that 
developments  in  digital  electronics, and  software 
are creating the technological  potential for a new 
approach  to  the  delivery  and  consumption  of 
information  services.  There  is  less  agreement 
on  how  much  these  developments  will  change 
existing  practices  and  over  what  time-scales. 
Some consider that convergence will  lead  to  the 
complete  and  rapid  tra~sformation  of  existing 
information 
telecommunications,  media  and 
technology  services  in  such  a  way  that  these 
currently  separate  groups of services  will  merge 
into  one  another,  substantially  blurring 
the 
previously clear distinctions between them. 

Others  feel  that  the  specificity  of  the  existing 
separate  sectors  will  limit  the  scope  for  service 
convergence,  and  that  the  media  industry  has  a 
role  as  the  bearer  of social,  cultural  and  ethical 
values  within  our  society,  independent  of  the 
technology  relied  upon  to  reach  the  consumer. 
This  would  mean  that  regulation  of  economic 
conditions  and  that  of the  content  of information 
services  should  be  separated 
to  ensure 
efficiency  and  quality.  Others  believe  that,  if  it 
does occur,  it will  evolve over an  extended  time 
scale. 

It  is  nevertheless  clear  that  the  implications  of 
these  developments  are  potentially  far  reaching. 
The  emergence  of  new  services  and 
the 
developments of existing services  is  expected  to 
expand  the  overall  information  market.  This  will 
provide  new  opportunities  for  economic  growth 
and  employment.  At  the  same  time  the  new 

communication  services  environment  will  also 
provide  opportunities  to  enhance  the  quality  of 
European citizen's lives,  by increasing consumer 
choice,  facilitating  access  to  the  benefits  of the 
Information  Society  and  promoting  cultural 
diversity. 

These  developments  are  therefore  positive  for 
European economic and social development and 
should be encouraged.  F'ublic policy will  need to 
provide 
for 
convergence in  order to ensure that the potential 
opportunities are grasped in a timely fashion. 

environment 

supportive 

a 

What  is  needed  now  is  wide  ranging  and  deep 
debate on  the convergence  phenomenon  and  its 
implica!ions  as  an 
to  such  policy 
formulation.  The  objective  of this  Green  Paper 
is  to start such a debate. 

input 

in 

the 

the 

debate 

the 
following 

central 
landscape 

telecommunications,  media 

This  debate  needs  to  be  set  into  context  in 
respect  of  other  important  Commission  actions 
in 
and 
In  particular, 
information  technology  sectors. 
future 
to 
is 
this 
communications 
full 
liberalisation  of  telecommunications  services 
and  infrastructure  by  1  January  1998.  The 
process  started  by  the  Green  Paper  should 
ensure  that  during  the  overall  review  of  the 
effectiveness of the  1998  regulatory  package for 
telecommunications  (to  take  place  at  the  end  of 
1999), full  account can  be  taken  of the  impact of 
convergence  on  that  sector.  Furthermore,  the 
Cable  Review,  carried  out 
light  of 
liberalisation  and  more  specifically as  a  result of 
the  commitment  contained  within 
the  Cable 
Directive3  and 
the  (telecommunications)  · Full 
Competition  Directive4 
the  subject  of  a 
separate  Commission  communication. 
The 
review  aims 
to  create  an  open  and  pro 
competitive  market  structure  in  the  provision  of 
telecommunications  and  cable  TV  networks 
which  may  have  a  significant  impact  on  the 
markets  affected  by  convergence. 
In  particular, 
it  will  encourage  competition  and  prevent  the 
emergence  of  new  anti-competitive  gatekeeper 
positions  or  bottlenecks.  Vigorous  competition 
in  these  areas  will  encourage  the  development 
of  innovative  new  services  which  will  benefit 
consumers  in  the  European  Community,  and  will 
provide  European  industry and  service providers 
with the expertise to compete on global markets. 

the 

is 

3  Commission Directive 95/51/EC, OJ  L256, 26.11.95 
4  Commission Directive 96/19./EC, OJ  L74,  223.96 

vii 

structure, 

applicable 

frameworks 

basic  market 

the  background  of  ensuring  a 
Against 
competitive 
the 
timeliness  of this  Green  Paper  stems  from  the 
fact  that  new  markets  may develop  rapidly,  and 
If 
that  they  will  be  essentially  global  in  nature. 
the 
in 
regulatory 
individual  Member  States  or,  indeed,  in  Europe 
are  not appropriate  to  the  development  of these 
new markets and  even hinder their development, 
then  Europe  may  find  itself  at  a  competitive 
disadvantage  vis-a-vis  its  more  flexible  global 
competitors. 
restrict  consumer 
participation  by  limiting  choice  and  weakening 
consumer  confidence  in  the  new  services,  and 
for  economic 
have  negative  consequences 
growth and employment creation  in  Europe. 

This  could 

The  Green  Paper  addresses  the  nature  of  the 
convergence  phenomenon,  and  focuses  on  the 
the  underlying 
provision  of  services  and 
networks  over which  they  are.c.arried. 
It  further 
deals  with  the  implications  for  both  the  shape 
and  substance  of  regulation  which  may  arise 
from  convergence.  Although  the  Green  Paper 
deals  with  certain  aspects  of  the  regulatory 
framework 
future 
initiatives  in  this  field  would  be  without  prejudice 
to  existing  on-going  work within  the  Commission 
or  the  implementation  of  existing  Community 
legislation. 

for  service  provision,  any 

Indeed, 

respect 

recognises 

take  definitive 
The  Green  Paper  does  not 
regulatory 
to  new 
positions  with 
that 
structures. 
it 
convergence  may  lead  to 
less  regulation  in 
telecommunications  and  media  sectors,  and 
should  not lead  to  more  regulation  in  areas  such 
as  IT.  Rather  it  analyses  the  convergence 
phenomenon  as  evident 
it 
identifies  issues  relating  to  regulation  arising 
it  poses 
these  developments,  and 
from 
questions in  relation  to  these issues. 

the  market; 

in 

All  interested  parties  are  invited  to  contribute  to 
the debate by responding to these questions and 
by  making  any  submission  they  wish  on  the 
subject.  The  period  of such  consultation  is  set 
for  five  months  from  the  date  of  publication  of 
this  Green  Paper. 
It  is  intended  to  produce  a 
report  on  the  results  of the  consultation  by  June 
1998. 

Submissions  may be sent via  E-mail,  fax  or post 
(4 copies please) to: 

European Commission,  DG XIII A4 
Attn.  Mr.  E.  Lalor 
200 rue de la Loi,  BU31  0/62 
B-1049 BRUSSELS 
Belgium 

Fax (+32 2) 296 9009 

and/or 

European Commission,  DG  X C1 
Attn.  Mr.  G.  Paulger 
200 rue de la Loi,  L-102 5/25 
B-1049 BRUSSELS 
Belgium 

Fax:  (+32.2) 299 9201 

and/or 

E-mail:  convergencegp@cec.be 

Hard  copies  of  all  submissions  will  be  made 
available  at  the  conclusion  of  the  consultation, 
unless  a  request  for  confidentiality  is  received. 
A  Web  site  has  been  opened  for  the  posting  of 
both 
the  Green  Paper  and  submissions 
received.  The web  address is: 

http://www.ispo. cec. belconvergencegp 

viii 

Information  Society 

This  Green  Paper  represents  a  further  step  in 
in 
the  realisation  of  an 
It  examines  a  key  set  of policy  issues 
Europe. 
infrastructure  of 
relating 
the 
to 
telecommunications,  media  and 
information 
technology  sectors,  for  convenience  referred  to 
as 
in  much  of  this 
the 
document. 

'relevant'  sectors 

broad 

travel  and  financial  services. 

The  Green  Paper  does  not  examine  policy 
issues  related  to  the  wider set of services which 
will  make  the  Information  Society  a  reality  -
services  such  as  Electronic  Commerce,  which 
encompasses  a  range  of  activities  having  the 
potential  to  revolutionise  sectors  as  diverse  as 
retailing, 
The 
policy issues relating to this wider set of services 
include 
is 
in 
already  well  advanced, 
intellectual  property  rights,  copyright  and  related 
rights;  media  pluralism;  privacy  and  data 
protection;  encryption  and  digital  signatures. 
These  are  part  of the  broader  framework  which 
is emerging for new services and  activities within 
the  Information  Society.  They  are  therefore 
regarded  as  outside  the  scope  of  the  Green 
Paper  and  are  given  only  passing  reference 
where relevant to the issues at hand. 

those  where  Community  action 
for  example, 

Instead,  the  Green  Paper  concentrates  on  the 
underlying  infrastructure 'which  will  helps  create 
Information 
and  deliver  the  services  of  the 
Society  to  customers. 
It  is  made  up  of  the 
systems  of components,  networks  and  services 
associated  with  the  relevant sectors.  In  all  three 
undergoing 
are 
systems 
sectors, 
fundamental  change,  primarily 
the 
application  of digital  technology.  This  is  likely to 
have consequences for policy and regulation. 

through 

those 

The  Paper  focuses  on  the  on-line  delivery  of 
services,  dealing  with  off-line  publishing, 
for 
example,  only insofar as  it  represents  a potential 
market for the on-line business. 

The  Green  Paper deals  with  broad  future  trends 
and  does  not  attempt  to  define  markets  for  the 
purposes  of 
the  application  of  Community 
competition  law.  The  positions discussed  in  this 
Green  Paper  cannot  prejudge  the  positions  the 
Commission  may  take  in  the  assessment  of 
pending  or  future  cases  under  the  competition 
rules. 

From  this  perspective,  Chapter  I  describes  the 
convergence phenomenon  and the technological 
developments  which  underpin 
It  also 
identifies  current  developments  in  the  market  -

it. 

and  how  suppliers,  service  providers  and 
consumers are reacting to them - as indicative of 
the  possible  direction  of  future  change.  As  in 
any  consideration  of new  markets,  the  activities 
of  suppliers  and  service  providers  give  the  first 
indication  of  how  things  might  develop.  Their 
reactions  are  tempered  by  those  of consumers, 
who must accept and  embrace the  new services 
before the markets can  become a reality. 

111ji"~1rI~~r9~-n_~~~",~~!!,at6'9I•·i,~~~,~-~9~~-·:1·•,· ···· 
The term  convergence  elJdes  precise  definition, 
but it is  most commonly expressed as: 

• 

• 

the  ability  of  different  network  platforms  to 
carry essentially similar kinds of services, or 

the  coming  together  of  consumer  devices 
television  and 
telephone, 
such .  as 
pers'onal  computer. 

the 

This  latter  expression  of  convergence  is  one 
most often cited  in  the  popular press - it  is  easily 
understood  by  consumers  and  has  the  added 
interest  of  reflecting  a  wider  struggle  between 
computer,  telecommunications  and  broadcasting 
industries for the control  of future markets. 

this  popular 

Despite 
image  however,  any 
convergence of consumer devices is today much 
less  real  than  network  convergence.  Telecom 
munications  operators  are  already  offering 
audiovisual  programming  over  their  networks 
(albeit  on  an  experimental  basis)  and  have 
become major players in  the provision of Internet 
infrastructure. 
access,  as  well  as  backbone 
Broadcasters  have  provided  data  services  over 
their  networks 
these 
services  will  be  enhanced  over  the  next  12-18 
months by the  prospect of digital  transmission  of 
both  radio  and  television,  and  by  the  addition  of 
interactivity. 

for  some  years  and 

in  addition 

Internet  access, 

Cable  operators  are  providing  a 
range  of 
including  voice 
telecommunications  services, 
telephony  in  some  Member  States  and  are 
starting  to  deploy  cable  modems  to  offer  high 
speed 
their 
traditional  business  of  television  programming 
distribution.  Beyond· the  provision  of services  to 
the  public,  both  audio  and  video  technologies 
are  also  starting  to  be deployed  within  corporate 
for 
'intranets'  as  an 
distributing 
Such 
applications  are  also  starting  to  appear  on  web 
sites targeted at prospective customers. 5 

additional  medium 

information. 

real-time 

to 

5  See  Webcasting  and convergence  :  Policy  implications. 
to  be  published 

-

OECD,  DSTl/ICCPfflSP(97)6 
December 1997 

The  network  platform  and  the  consumer/user 
two  elements  of  the 
environment  constitute 
supply  or  value  chain  extending  from  content 
creation 
through  content  packaging,  service 
provision  and  final  delivery  to  customers  (see 
Fig.1 ).  The  value  chain  is  a  useful  concept  for 
analysing  the  behaviour of firms  and  markets  in 
the light of convergence. 

involve  companies  operating 

opportunities  offered  by  market  convergence 
in 
generally 
different  parts  of  the  value  chain,  resulting  in 
increased  vertical  integration.  Some  of  these 
alliances  have  met  with  early  difficulties, 
illustrating the  uncertainty of the  markets and  the 
risks  involved. 

Policy and Regulation 

Services and Markets 

Content & 

service 

packaging 

Content supply 

Tailoring  & 

·  Platform  & 

branding 

connectivity 

Delivery 

Access  control 

Function 

• 

l,ndust..Y.c:1lliit~~~s··e1n~ m~fg~rs···. 

~·.·'  <·. 

.::  ·~t· 

.. 

"~  ' 

~  ,,,~. :·;; 

·;~-'  :,· .. 

Fig. 1:  The  emerging value chain 

Fig. 2:  The  stages of convergence 

Source: Squires Sanders Dempsey LLP and Analysys Ltd. 

Today,  firms  tend  to  be  present  in  one  or  more 
elements  of the  value  chain.  Some  argue  that  a 
shift  towards  convergence  will  lead  many  of 
today's  current  players  to  consider  extending 
their activities  beyond  their core businesses,  and 
argue  that  this  trend  is  already  visible  in  some 
recent mergers and  acquisitions (see below). 

be 

levels 

(technology, 

The  potential  for  change  as  a  result  of  the 
phenomenon  of  convergence  can  be  seen  at 
three  different 
industry, 
services  and  markets)  (see  Fig  2)  though  there 
can 
that 
convergence  at  one  level  inevitably  leads  to  the 
same degree of convergence at other levels,  nor 
that  convergence 
industries, 
services  or  markets  will  necessarily  lead  to  a 
need for a uniform regulatory environment. 

technologies, 

assumption 

automatic 

no 

in 

Technology convergence,  of which  the  examples 
cited  above  are  illustrative,  is  based  on  the 
common  application  of  digital  technologies  to 
the 
systems  and  networks  associated  with 
1.2 
delivery  of 
section 
demonstrates, 
is 
already  happening,  and  continuing  advances  in 
technology  will  further  consolidate  the  process 
along the different elements of the value chain. 

services. 
technological  convergence 

As 

in 

seen 

convergence, 

Many  commentators  identify  a  trend  towards 
alliances, 
industry 
mergers  and  joint ventures  which  build  upon  the 
technical  and  commercial  know-how  of  the 
partners  in  order  to  exploit  existing  and  new 
markets.  Such  alliances,  mergers  and  joint 
ventures  will  continue  to  be  subject  to  scrutiny 
under  the  Community  competition  rules.  Many 
such  alliances  are  'horizontal',  that  is,  between 
firms  operating  in  the  same  part  of  the  value 
chain.  Those  aimed  at  addressing  the  potential 

It is  also difficult to  be  precise about the  services 
arising  from  convergence.  Many  new  services 
will  result  from  technological  progress  within 
given  sectors,  and  may  not  result  from  cross 
sectoral  activity  at  all.  Others  will  be  a  direct 
result  of  cross-fertilisation  between  sectors, 
telecommunications 
for 
and 
example.  Where  there  is  a  suggestion  of  the 
latter,  the  term  "convergent  services"  will  be 
used  in  this  document.  Where  a  more  general 
reference  is  appropriate,  the  Paper  will  simply 
refer 
"new  services",  without 
term 
signifying any precise legal definition. 

broadcasting 

the 

to 

1.2Jhe enabli11g role of technology 

rather 

it  addresses 

This  Green  Paper is  not primarily concerned with 
technology; 
the  new 
business  and  market  phenomena  which  are 
being  enabled  by  technological  developments, 
and  which  are  altering 
traditional  provider 
consumer  relationships.  An  understanding  of 
the  nature  of these  developments  can  lead  to  a 
better appreciation of the potential for change. 

Digital technologies underpin convergence 

As  already  stated,  the  underlying  trend  is  the 
common  adoption  of  digital  technologies  by  the 
relevant  sectors.  Digital  technologies  cover  a 
range  of  disciplines  generally  associated  with 
the  computer and  telecommunications  industries 
- digital  micro-electronics,  software  and  digital 
transmission.  Applied  piecemeal  within  each  of 
the  relevant  sectors,  these  technologies  have 
already  demonstrated  their  greater  efficiency, 
flexibility  and  cost-effectiveness,  and  have 
shown  how  they  can  enhance  creative  potential 
and  promote innovation. 

Computer  technology  now  plays  a  key  role  in 
content  creation  and  production  in  both  cinema 

2 

family  of  standards 

and  broadcasting  worlds.  The  ways  in  which 
audio-visual  material  is  produced,  delivered  and 
consumed  are  evolving.  Content  is  becoming 
"scaleable"  so  that  it  can  be  used  in  different 
environments  and  delivered  on  different network 
infrastructures.  The  basic  building  block  is  the 
the  digital 
MPEG 
encoding  of moving  images.6  Once  encoded  in 
this 
be  modified, 
images  may 
manipulated,  or  transmitted  in  the  same  way  as 
any  other  digital  information.  The  systems  and 
networks  handling  such 
information  are  of 
course  indifferent  to  the  nature  of  the  source 
material,  be  it  image,  sound  or  text.  Digital 
the  basis  of 
source  encoding 
technological convergence. 

format, 

forms 

thus 

for 

is 

the 

infrastructure.  When  applied 

Digital 
transmission  may  be  carried  over 
broadcast  networks  or  over  terrestrial  wired  or 
wireless 
to 
the  most  significant 
broadcasting  networks, 
impact  of  digitalisation 
immediate 
expansion  of  capacity,  effectively  removing  a 
scarcity  which  has  limited  growth  of  the  sector 
since  its  inception.  But  processing  power  and 
software  are  also  helping  generalise  consumer 
devices  like  the  set-top  box. 
Implementing 
functionality  in  software  helps  overcome  the 
product 
life-cycle  problems  associated  with 
hardware,  reducing  market inertia and facilitating 
innovation.  It  also  gives  such  devices  a level  of 
intelligence  which  allows  broadcasting  networks 
to  emulate  the  switching  capabilities  normally 
associated  with 
For 
example,  satellite  pay-television  operators  can 
through 
today  address 
conditional access  systems,  often  combined  with 
the  terrestrial  telecommunications  network  to 
provide  a  'hybrid'  return  path 
for  interactive 
services. 

individual  customers 

telecommunications. 

Network technologies for convergence. 

alternative 

telecommunications 

As 
infra 
structures become more widespread,  high-speed 
networks  based  on  optical  fibres  will  soon  be 
capable, 
in  combination  with  modern  server 
technology,  of  operating  cost-effectively  in  a 
virtual  broadcast  mode. 7  The  high  data  rates 
and  spectral  efficiency achievable through  digital 
transmission  open  up  the  possibility of delivering 
high-quality  audio  and  video  signals  over  a 
infrastructures. 
variety  of  different  network 
Transmission  technologies  such  as  narrow-band 

MPEG  - Motion  Picture  Experts  Group.  The  family  of 
standards  extends  from  MPEG-1  to  MPEG-4,  of  which 
MPEG-2  (studio-quality 
television  and  multiple  CD 
quality audio channels) is  the  most widely used. 
That is,  the  same  content delivered  to  many  consumers, 
but  upon  their  individual  request  and  not  necessarily  at 
the  same  time. 

,  xDSL9  and  ATM 10  will  ensure  that  both 
ISDN 8
existing  and  new  infrastructures  can  play  a  role 
in  carrying  the  new services.  The  capabilities  of 
existing  networks  are  also  enhanced  by  the 
compression  techniques  implicit  in  the  MPEG 
limited 
standards, 
services 
transmission 
previously 
on 
sophisticated  and  more  costly  wide-band 
infrastructures. 

capacity 
considered 

to 
possible 

networks 

allowing 

carry 

only 

of 

capable  of 
traffic 

ATM  is  of considerable  interest  as  a  multimedia 
It  is  a  high-speed  cell 
transport  technology. 
transporting 
relay 
technology, 
different 
telecommunications 
characteristics  (voice,  data,  video)  over  the 
same  network,  and  has  been  designated  by  the 
ITU  as 
the 
ISDN, 
its  narrow-band 
successor  generation  of 
counterpart. 

the  basis  for  broadband 

of 

about 

This  continuing  competition  between  different 
technologies  can  change  the  fortunes  of  one 
approach  or  another,  making  it  difficult  to  be 
prescriptive 
network 
architectures.  This  may  be  a  relatively  minor 
problem  given 
that  today's  applications  and 
services  are  becoming  increasingly  independent 
of  the  underlying  infrastructure  which  carries 
them. 

tomorrow's 

Internet technology is leading to platform 
independence 

The  most  relevant  example  of  such  platform 
independence  is  that  of  the  Internet  Protocol 
(IP).  IP  has  developed  into the  de  facto  network 
Internet,  able  to  route  and 
protocol  for  the 
transport  all 
the  elements  of  a  multimedia 
service  (text,  image,  motion  video  and  sound). 
IP  is  also used  in  Intranet products,  providing an 

the 

by  other 

emergence 

technologies 

ISDN - Integrated Services Digital Network.  The  narrow 
band  version  was  standardised  over the  last 30  years  by 
Telecommunications  Operators  wishil)g  to  digitise  the 
customer access  network. 
Its  long  gestation  period  has 
caused  risks  of technical  obsolescence which  have been 
(notably  data 
mitigated 
suitable 
compression)  and 
applications (notably Internet access). 
xDSL - x-Digital Subscriber Loop whereas x  refers  to 
These  are 
the 
technologies 
existing 
telecommunications  network  copper-pair  cable  for 
for 
high-speed  data 
Asymmetric) 
the 
runs 
downstream  direction  and  HDSL  (H  for  High-speed) 
at  6Mbps.  These  are  now  being  superseded  by 
higher-speed technologies. 

transmission.  ADSL 
typically  at  1.5Mbps 

the  moment. 
exploit 

technology  of 

(A 
in 

which 

the 

of 

10  ATM  - Asynchronous  Transfer  Mode,  a  high-speed 
switching  technology  operating  at  a  basic  transport 
level.  This  contrasts  with  higher-level  application 
protocols  such  as  IP  (Internet  Protocol)  which  may 
ride on top of transport protocols  such as ATM. 

3 

infrastructure for multimedia applications within a 
company or other closed user group. 

digital 
analogue transmission. 

compression 

rather 

than 

existing 

a 

from 

from 

largely  academic-

The  Internet can  best be described as  a network 
of  networks  interconnected  on  an  open  basis 
using  IP,  usually running  over transmission  links 
telecommunications  operators 
leased 
It has  evolved very rapidly  over the  past 
(TOs ). 
decade 
and 
government-sponsored network with  a backbone 
capacity  of  56kbit/s  in  1986,  increased  to  45 
Mbit/s  in  1993,  and  to  155Mbit/s  in  1996.  This 
huge  change  in  the  capacity  of  the  Internet's 
infrastructure  has  been 
the 
remarkable  growth  in  the  number  of  people 
using  the  Internet  and  the  range  of applications 
and  software tools developed for it. 

in  response 

to 

open, 

approach 

The 
to 
non-proprietary 
standards  for  the  Internet  has  made  it  easy  for 
companies  to  take  advantage  of,  and  build  on, 
the  advances  made  by  others  in  the  industry. 
For  example,  many  would  argue  that  the  rapid 
development  of  the  capabilities  of  the  World 
Wide  Web  (WWW)  has  been  enhanced  by  the 
open  approach to browser development taken by 
vendors  such  as  Netscape,  Microsoft  and  Sun. 
Internet  will  be  further  enhanced  as  a 
The 
transport  by 
vehicle 
the 
for  multimedia 
development  of  several 
improved  or  new 
protocols which  Internet service providers expect 
to  implement within the next three years. 

This  brief  review  of  the  salient  technological 
developments  is  not meant to  be  exhaustive,  but 
to  illustrate the role of technology as  the  motor of 
change.  Technology  is  developing  constantly; 
its  application  to  innovative  services  and  the 
bringing  of  those  services  to  market  promise 
even further dramatic change in  the future. 

1:;~,:'~y,rr~~nfrn~-r~~ra~v~1C?em~rlt!':?··,·-

sign ificant  changes  are  now  being  realised 
through  the  application  of new technology  to  the 
individual  sectors,  and  these  are  examined  in 
turn.  Such  changes  are  not  in  themselves 
evidence  of  convergence,  but  as  suggested 
earlier,  the  commonality  of  technology  applied 
could  provide  a  basis  for  that  convergence  to 
develop. 

Digital television and digital audio 
broadcasting services are changing today's 
audiovisual landscape 

In  the early 1990s it became apparent that digital 
technology  could  be  efficiently  and  cost 
effectively  used  for the  delivery of television  and 
audio  signals.  Of  particular  interest  was  the 
possibility  of  delivering  many  more  channels 
over  the  same  infrastructure  (cable  TV,  satellite 
terrestrial  spectrum)  by  using 
transponders, 

the  background  of  a 

In  the  television  area,  building on  the  work of the 
Digital  Video  Broadcasting  (DVB)  project, 11  and 
against 
regulatory 
framework  provided  by  the  Television  without 
Frontiers  Directive, 
the  Television  Standards 
Directive  and  other  measures, 12  digital  TV 
services  have recently been  launched  in  Europe. 
the  world  are  also 
Other  countries  around 
making  use  of  DVB  technology  and  European 
standards.  The first commercial  services started 
in  France  in  April  1996.  Other  digital  services 
rapidly  followed  and  at  the  time  of writing,  more 
than  200  digital  TV  channels  are  targeted  at 
viewers  in  France,  Germany,  Spain,  Italy,  the 
Benelux  and  the  Nordic  area.  Of  the  order  of 
one  million  digital  receivers  are  believed  to  be 
currently  in  operation  in  Europe  - figures  which 
could  double by the end of 1998. 

Although  it  is  early  days  in  the  development  of 
this  market a number of interesting  phenomena -
which  are  either  new 
to  TV  or  significant 
developments of past practice - are  appearing as 
digital  compression  is  cost-effectively  reducing 
capacity constraints: 

- Programme 

with 

thematic 

bouquets  and 

thematic 
channels  - Broadcasting  companies  are 
marketing  their  digital  services  in  the  form  of 
'bouquets'  of  programme  channels. 
The 
'generalist'  TV 
"bouquet" 
complements 
channels 
channels 
concentrating  on  news,  sports,  movies  etc. 
offering  viewers  greater choice  and  coverage 
of areas  of specific  interest to  them.  Already 
evident 
thematic 
channels  are  set  to  increase  in  number  and 
to  achieve  ever  finer  levels  of  segmentation 
with  digital  technology.  Such  channels  will 
need  to  seek  wider  audiences  for  economic 
viability,  and  pan-European  operation  could 
be  a way of securing them. 

the  analogue  era, 

in 

- Near Video-on-demand - The.  availability  of 
substantial 
at 
transmission 
reasonable  prices  will  soon  make  "near 
video-on-demand" (NVOD) services possible. 

capacity 

11  The  DVB 

than  200 
is  a  body  comprising  more 
organisations  from  30  countries  in  Europe  and  around 
It  includes  broadcasters  (both  public  and 
the  world. 
private),  manufacturers  (of  consumer  and  professional 
equipment),  operators  (of  satellite,  cable  and  terrestrial 
networks) and  regulators. 
It has  defined  a  complete  set 
of  specifications 
for  digital  TV  broadcasting  over 
including:  cable,  satellite,  terrestrial  and  microwave  radio 
distribution  systems.  These  specifications  have  since 
been  converted  into ETSI  standards. 

12  The  1989  Television  without  Frontiers  Directive 
(89/552/EEC)  was  recently  revised  and  updated  as 
Directive  97/36/EC.  The  Television  Standards  Directive 
(95/47/EC) was  adopted in  October 1995. 

4 

Example:  With  60  satellite  channels,  ten  90-
minute films  could  be  broadcast  simultaneously, 
each one starting at 15-minute intervals. 

- Pay-per-view  - Similarly,  it  is  possible  to 
market specific events  or movie-showings  on 
an  individual  subscription  basis.  Such  pay 
per-view  services  have  been  provided  in  the 
UK  on  analogue  channels 
(for  boxing 
championships)  and  Spain  in  digital  format 
(for  football  league  matches).  The  greater 
capacity  of  digital 
the 
simultaneous  broadcast  of  several  such 
events 
(the  most  obvious  case  being 
matches  played  in  a  football  league),  giving 
viewers  the  choice  of access  to  a  particular 
event on  a 'pay-per-view' basis. 

television  allows 

to 

from 

classic 
the  potential 

These phenomena,  which  constitute a significant 
schedule-based 
departure 
broadcasting,  have 
improve 
consumer  choice. 
In  addition,  and  because  the 
"digital  channel"  is  inherentJy  more  flexible  than 
an  analogue  channel, 
it  can  deliver  other 
services  in  the  form  of  data,  graphics,  moving 
pictures  or  combinations  of  these. 
Digital 
television  shares 
these  characteristics  with 
digital  audio  broadcasting,  which  also  offers 
"Multimedia 
listeners  near  CD  quality  sound. 
data  broadcasting"  already  provides 
the 
for 
downloading  of computer  programmes  including 
video  games,  data  files  and  direct access  to  the 
Internet from the TV set or network computer. 

Example:  Hughes  Olfretti  Telecom  launched  the 
DirecPC satellite  Internet access  service  in  1996.  It 
connects  some  2000  sites  across  Europe  to 
the 
Internet  at  speeds  up  to  20  times  greater  than 
conventional modems. 

for 

band 

being 

tickets 

radio  offers  exciting 
The  arrival  of  digital 
possibilities  for  the  combination  of  radio  and 
images,  or links  to  Internet  sites  marketing  CDs 
broadcast13
or 
. 
Broadcasters  such  as  CNN  and  the  BBC  are 
starting  to  make  parts  of their  broadcast  content 
available  on  the  Internet,  extending  their  normal 
geographical  ·reach,  whilst  a  new  breed  of 
webcasters  is  emerging  to  broadcast  particular 
live  events,  such  as  sports  coverage,  concerts, 
major events,  etc .. 

Telecommunications liberalisation is 
widening choice and  lowering prices 

the 

In  less  than  ten  years,  the  European  telecom 
munications  sector  has  experienced  a  radical 
transformation  from  one  characterised  by  rigid 
and  inefficient  monopoly  to  a  sector  facing  full 
and  vigorous  competition,  with 
total 
liberalisation  of  services  and  infrastructure  due 
to  take  place  in  most  Member  States  from 
January  1998.  This  transformation  owes  its 
beginnings 
to  an  earlier  phase  of 
convergence  - that  between  telecommunications 
and 
over  a  decade  ago. 
Technological  convergence  rapidly  gave  rise  to 
market  convergence,  and 
"value-added" 
services  - innovative  services  which  borrowed 
concepts  from  both  sectors,  and  which  allowed 
businesses  to  extend  the  power  of  computing 
beyond 
their 
immediate locations. 

the  geographical  confines  of 

computing 

in  part 

to 

-

The  regulatory  traditions  of  the  telecommunic 
ations  sector  contrasted  sharply  with  the  free 
the  computing 
market  environment 
in  which 
industry  had  developed,  and 
their  coming 
together meant that some rationalisation  of these 
regulatory  philosophies  would  be 
different 
needed  if the  new services were to  flourish.  The 
1987  Green  Paper 14  concluded 
that  greater 
harmonisation  and  gradual  market  opening  in 
the  most 
telecommunications  would  provide 
fertile  environment  for  such  growth.  The  first 
measures  were  initiated  in  1988  and  culminated 
in  the  introduction  of  full  liberalisation  of  the 
telecommunications  sector  by  1  January  199815 
This  step-by-step  process  of  telecommunic 
ations  liberalisation and  global  market opening  is 
already  bringing  substantial  benefits  to  many 
businesses  and  consumers,  with  lower  prices, 
improved  customer  service  and 
innovative 
service  offerings.  Even  so,  the  overall  level  and 
structure  of  prices  continue  to  have  a  major 
impact on  the take-up of new services. 

The  mobile 
particularly dynamic. 

communications 

business 

is 

in 
Example:  Close 
Scandinavia have a mobile phone and there are more 
than  3 7 million mobile telephony users in  Europe. 

three  people 

to  one 

in 

Example:  Coverage  of the recentlrish elections  was 
available  to  Irish  citizens  all  over  the  world  via  a 
webcast site (l-vww.itv.com) 

innovations 

Other 
field 
include  Widescreen  TV  using  16:9  format,  the 
technical possibility of higher definition pictures. 

the  broadcasting 

in 

13  Radio with  Images,  Financial Times,  11  November 1997 

5 

Increasingly,  such  mobile  systems  are  adding  a 
multimedia  component.  One  aspect  of  market 
the 
convergence 

occurring 

within 

14  Towards  a  dynamic  European  economy,  Green  Paper 
for 
equipment, 

the  development  of  a  common  market 
services 

on 
telecommunications 
COM(87)290,  Brussels,  30.06.1987 
15  Commission  Directive  96/19/EC  and 

the  body  of 
legislation  adopted  by  the  European  Parliament  and 
transition  periods  are 
Council.  Certain  additional 
provided  for some  Member States. 

and 

telecommunications  sector  is  that  between  fixed 
and  mobile  telephony,  as  in  certain  Member 
States  and  amongst  certain  . groups  of  the 
population  (e.g.  students,  small  businesses), 
mobile phones are replacing fixed connections. 

However,  this  practical  example  of  how  fixed 
and  mobile  networks  are  converging  is  only  part 
of  a  wider  trend  towards  the  full  integration  of 
wired  and  wireless  technologies,  which  is  the 
key  goal  of the  next generation  of digital  mobile 
communications systems.  This will  offer users a 
platform  on  which  to  receive  a  seamless  set  of 
voice,  data,  multimedia  and  audio-visual 
services  wherever  they  are.  This  vision,  which 
has  important  implications  for  all  the  sectors 
affected  by  convergence  was  first  recognised  in 
the  1994  Mobile  Green  Paper16  and  has  most 
recently  been  returned  to  in  the  Commission's 
two  Communications  . on  Universal  Mobile 
Communications 17

• 

The Internet is bringing new services to 
business and the public at large 

It  is,  however,  in  a third  sector,  the  Internet,  that 
changes  have  been  the  most  radical. 
The 
Internet  is  both  the  symbolic and  prime  driver of 
convergence. 
It  is  a  vehicle  for  the  delivery  to 
users  of  both  existing  services  (electronic  mail, 
video,  sound,  voice  telephony,  for  example)  and 
completely new services  (e.g.  World-wide Web). 
It  has  rapidly  evolved 
from  a  governmenU 
academic  network  to  a  powerful  communication 
and 
trading  platform.  Characterised  by  an 
unprecedented  growth  rate  (doubling  its  number 
of users  every  year),  the  Internet  has  started  to 
influence a number of economic sectors, with the 
emergence  of  a 
fast-growing  electronic 
commerce economy. 

trading 

The  Internet  is  displacing  traditional  computer 
networks,  and  showing  the  first  signs  of  how  it 
may provide a platform which  over time  replaces 
traditional  methods  of  trading.  For  example, 
traditional  business-to-business 
on 
closed  corporate  networks  is  giving  way  to 
multidimensional  commerce  on  global  open 
networks.  The  Internet  is  also  providing  an 
alternative  means 
core 
telecommunications  business  activity  (even  if 
differences  in  quality  still  distinguish  the  two 
Internet 
services) 
telephony,  without  in  some  cases  either  party 
needing  to  have  a  computer.  The  Internet  is 
also  a  significant  platform 
for  broadcasting 
services. 

the  delivery  of 

of  offering 

through 

the 

16  Green  Paper  on  a  common  approach  in  the  field  of 
mobile  and  personal  communications  in  the  European 
Union, COM(94) 145 final,  27.4.94 

Example:  Today, 
there  are  650  Webcast  radio 
stations  and 2 70  "Real-Video"  enabled sites  on  the 
Internet, 1a  offering  video  material  of  cun·ent 
European and US broadcasters. 

New  Internet  techniques,  such  as  multicasting, 
offers  the  possibility  of  delivering  audio  and 
visual  content  to  up  to  50,000  users  at  any  one 
time  instead  of  50,000  individual  messages, 
narrowing  the  borderlines  between  previously 
separate  sectors.  Many  consider  that  Internet 
will  become a major conduit for video and  sound 
(especially music) distribution. 

the 

Internet  as  a  platform  has 
However, 
traditional 
developed 
from 
differently 
broadcasting  and  telecommunications. 
It  has 
been  essentially  user-driven,  with  user-owned 
equipment  (the  routers  performing  central  rather 
than  peripheral  network  functions)  and  users 
· themselves  continuing  to  generate  a  substantial 
part  of the  content.  The  decentralised  nature  of 
Internet  is  seen  by  many  as  the  single  main 
reason  for  its  success,  and  as  a  lesson  for  the 
converging  environment.  A characteristic  of the 
Internet  which  is  indicative  of  convergence  is 
that  it  functions  simultaneously  as  a medium  for 
communication. 
publishing 
Unlike 
and 
traditional  media, 
the  Internet  simultaneously 
supports  a  variety  of  communication  modes, 
both  transactional  and  broadcast  in  nature:  one 
to-one,  one-to-many,  many-to-many.  An  Internet 
user  may  "speak"  or  "listen"  interchangeably, 
interweaving  public  communication  (the  content 
of  which  is  - at  least  in  the  case  of  broadcast 
traditionally  regulated)  with  private 
content  -
communication  (traditionally  unregulated).  This 
constant  shift 
to  private 
communication  modes,  each  regulated  through 
very  different  principles,  constitutes  one  of  the 
main  challenges of Internet regulation. 

from  publishing 

Mergers and Alliances are reshaping existing 
industries 

The  on-going  process  of  convergence, 
the 
opening  up  of the  telecommunications  sector  to 
full  competition  both  in  Europe  and  globally,  and 
the  rapid  growth  of  the  Internet  and  on-line 
services,  is  leading to the  creation  of new market 
structures  and  new  roles  for  market players. 
In 
1996  more  than  15%  of the  total  value  of world 
wide  mergers  and  acquisitions  (US  $1  trillion) 
was  generated  by activity in  what can  broadly be 
termed 
communication 
industries.  Such  ventures  represent  a  wide 
range  of  transactions,  from  horizontal  alliances 
which  share risk and  match complimentary skills, 
to  vertical  integration  as  players  in  one  market 

information 

and 

17  COM(97) 217,  29.5.97 and COM(97) 513,  15.10.97 

18  www.timecast.com cited in OECD report op cit note 5. 

6 

to 

for 

seek 

leverage 

segment 
technological 
convergence,  expand  into  other  higher  value 
segments  or  develop  scale  economies.  One 
study  being  carried  out 
the  European 
Commission  interpreted  the  motivations  behind 
some  the  main  types  of  transactions  (not  all 
successfully  concluded),  shown  in  Tables  1 and 
2  below. 19  Although  they  do  not  necessarily 
reflect  the  views  of the  Commission  and  cannot 
be  considered  as  an  assessment  under  the 
Community 
are 
nonetheless  useful  illustrative  pointers  to  the 
evolving market situation. 

competition 

rules, 

they 

Table  1: Horizontal Mergers and Alliances 

Rationale 

Examples 

Increasing market 
power/gaining 
minimum efficient 
scale 

High cost of new 
{digital) technologies 

Vebacom - Urbana 
Systemtechnik, Cable and 
Wireless Communications, 
Demon - Cityscape 

Canal Plus - Nethold 

Uncertain demand for 
new services 

Multimediabetriebsgesellschaft 
(Kirch,  Bertelsmann, etc.) 

Internationalisation 

BT-MCI, Global One,  UUNet-
Unipalm Pipex 

Opportunities arising 
from regulatory reform 

MFS/Worldcom, Telenet 
Flanders,  NYNEX/Bell Atlantic 

Table  2:  Vertical Mergers and Alliances 

Rationale 

Examples 

Uncertainty of demand 

Hughes Olivetti Telecom 
(DirecPC),  @Home 

Market positioning and 
access to new skills 

Bertelsmann - AOL,  BBC 
WorldWide - ICL,  STET - IBM 

Gaining control of 
channels to the 
customer 

Moving into higher 
margin areas of the 
value chain 

Stave off competition 
from companies in 
related  markets 

BT - BSkyB,  Disney - ABC -
Capital Cities 

Microsoft Network - NBC 
(MSNBC Internet new 
channel) 

US West - Time Warner, 
Oracle - Sun  - Netscape 
(Network Computer) 

The  same  Study  concludes  that  two  trends  can 
be  identified  in  such  activity.  One  towards 
consolidation  of  current  activities  and  the  other 
towards  diversification 
to  new 
opportunities  opened  up  by  liberalisation  of  EU 
and  World  markets,  and  with  a  view  to  the 
opportunities  offered  by  convergence.  Vertical 
merger  activity 
is  seen  as  more  significant 
indicator  of  a  change  in  industry  structures  in 
response to  the convergence phenomenon. 

response 

in 

Underlying  that  analysis  is  the  reality  that  few,  if 
any of today's  market players will  have the  skills 
or  resources  to  straddle  the  whole  of the  value 
chain  within  a  converged  environment,  so  that 
the  emergence  of  major  players  in  the  sectors 
affected  by  convergence  will  inevitably  rely  on 
partnering to varying degrees.  In  such a context, 
the  Competition  rules  will  continue  to  play  a  key 
role in  assessing new ventures as the emerge. 

Competition policy:  the need to keep markets 
competitive 

In  the  past,  the  Commission  has  applied  the 
Community  competition  rules  to  convergence 
cases, 20  including  some  of the  cases  mentioned 
in  the  table  above.  Global  One  and  BT/MCI  are 
examples  of  the  cases  where  the  Commission, 
following  changes to  the arrangements to protect 
competition,  has  been  able to  approve under the 
competition  rules  agreements  considered  likely 
to  promote  technical  progress.  However,  the 
Commission  has 
taken  action  against  other 
arrangements  which  unduly  foreclosed  markets 
and  which  were 
incompatible  with 
therefore 
Community  competition  rules.  Notable  amongst 
these  were 
the  MSG  and  Nordic  Satellite 
Distribution operations, where the combination of 
market  players  in  the  converging  markets  and 
the  market  positions  which  they  were  likely  to 
hold  in  the future would  have led  to  a foreclosure 
of  the  market  on  a  lasting  basis.  This  would 
have,  in  turn,  been  likely  to  result  into  excessive 
pricing  as  well  as  a  loss  of  innovation  and 
product  variety,  to  the  detriment  of  the  fast 
development of these  markets in  Europe. As  this 
could  not  be  remedied  with  changes  to  the 
arrangements,  therefore  the  agreements  were 
prohibited. 

· 

In  the  future,  the  Commission  will  continue  to 
favour  agreements  which  promote 
technical 
progress,  and  which  promote  market  entry.  On 
the  other  hand,  the  Commission  will  not  allow 
agreements  or mergers  which  have  the  effect  of 
foreclosing  markets  or  strengthening  or creating 
dominant  positions,  or  giving  the  parties  the 
possibility  of  denying  access  to  new  entrants. 
The  Commission  will  also  prevent  market actors 
who  enjoy  an  existing  dominant  position  from 
abusing  that  dominant  position,  such  as  it  did  in 
the  case  of 
the  Microsoft  case,  or 
liberalised 
telecommunications  operators  on 
markets. 

in 

19  Study on  Adapting the  EU Regulatory Framework  to  the 
Developing  Multimedia  Environment,  Squire,  Sanders  & 
Dempsey  LLP  and  Analysys  Ltd.,  to  be  published  in 
December 1997. 

2°  For  further  details,  refer  to  the  European  Commission's 
Annual  Report on Competition for 1994,  1995 and  1996. 

7 

ma~~r~·radoar,, 
.. ,, ....... ,JY~ .. Q .. ,.,!!,,,..,......._ ___ ., 

of 

the 

to  define 

technologies 

convergence 

the 
This  chapter  has  attempted 
between 
phenomenon 
telecommunications,  media  and  IT  sectors. 
It 
of 
enabling 
described 
convergence  and  its  initial  manifestation  in  the 
network  platforms  associated  with  the  on-line 
distribution  and  delivery  of  services. 
The 
chapter  concluded  that  while  there  is  general 
technological 
agreement  on 
convergence,  there  is  less  certainty  regarding 
the  likelihood  and/or timing  of a full  convergence 
of the services and  markets. 

the  notion  of 

(A) 
Whilst  convergence  is  occurring  at  the 
technology  level,  to  what  extent  and  at  what 
speed  is  this  happening  at  the  industry,  service 
and  market levels? 

(B) 
Are  the  effects  of  convergence  already 
being  felt  in  the  business  world  and  in  our 
everyday lives,  and  if so,  in  what way? 

8 

Following  a  discussion  of 
the  social  and 
economic  context  for  convergence,  Chapter  II 
~xamines market  trends  in  order  to  assess  the 
potential  impact of convergence  on  the  relevant 
concludes  with  a 
sectors.  The 
consumers  may  be 
discussion  of  how 
responding to these developments. 

chapter 

~.~a~~r~~!r,:Q.§r~u~n.iI~:;!£9n9Jn1~['.~?ht~#···. 
Social aspects 

The  concept  of the  Information  Society  provides 
the  political  background  for  convergence.  The 
Information  Society  permeates  current  thinking 
on 
is 
future  economic  development  and 
impact  on 
predicted 
society  and  employment  as 
industrial 
revolution did a century before. 

to  have  an  equivalent 

the 

to 

this  context, 

Within 
the  new  services  and 
activities  made  possible  through  the  range  of 
technological  and  market trends  identified  above 
have  the  potential  to  impact every  aspect  of our 
lives, from  our homes to our work place;  from  the 
way  we  do  business  to  the  way  we  learn;  from 
access  to  healthcare  to  the  management  and 
the  way 
delivery  of  public  services  and 
in  a  democratic  society. 
citizens  participate 
Today  people  are  already  using 
telephone 
based  services  in  some  Member States  in  areas 
insurance  and  ordering  of 
such  as  banking, 
computers  or  theatre  tickets. 
is  only  a 
It 
relatively  short  step  before  the  delivery  of  such 
services  becomes  common  place  over 
the 
television  or  via  a  PC.  A  key  issue  in  that 
context  is  ensuring  that  users  are  familiar  with 
and  comfortable  using  new  technologies  and 
the 
services,  whilst  as  will  be  seen 
in 
regulatory  framework  has  a  role 
ensuring 
new 
in 
environment. 

later 
to  play 
the 

confidence 

user 

and 

societal 

A range of Community initiatives have attempted 
to  give  a  concrete  form  to  the  impact  of  the 
social 
the 
Information Society following  the landmark White 
Paper  in  1993,21  and  the  Bangemann  Report 
published  the  following  year. 22  Similar  high 
profile  initiatives  were  undertaken  at  the  same 
time  in  the  USA and  other parts of the world,  and 

implications 

of 

21  White  Paper  on 

growth, 

competitiveness, 

and 
employment - The  challenges  and ways  forward  into  the 
21st century,  COM(93) 700,  Brussels,  5 December 1993 
society, 
global 
Recommendations  of  the  Bangemann  Group  to  the 
European Council, 26  May 1994 

information 

and 

the 

22  Europe 

an  international  dimension  was  added  in  1995 
when  the G7 countries  met in  Brussels to  devise 
a  global  strategy  for  developing  towards  the 
Information society. 

Community initiatives for 
the Information Society 

the  Commission 

Information  Society26

Broad  social  aspects  are  being  addressed  by  a 
number of initiatives  in  which  the  Commission  is 
involved.  These  include the  Information  Society 
Forum, 23  the  High-Level Group of Experts on  the 
social  aspects  of  the  Information  Society, 24  the 
Commission  White  Paper  on  Teaching  and 
Learning, 25 
the  Green  Paper  on  Living  and 
,  and  a 
the 
Working  in 
reconvened  Bangemann  Group 
reviewing 
progress  since  its  1994  report.  At  an  early 
stage, 
the 
importance  of  convergence  for  the  European 
audiovisual  programme  industry,  a  prime  vector 
of  social  and  cultural  values. 27 
Two  recent 
Commission documents, one a Green  Paper and 
the  other a Communication,  addressed  issues  of 
illegal  content  and  content  which  could  be 
damaging 
European 
Parliament29  and  the  Council 30  have  been  active 
recently-adopted 
in 
Communication  describes  how  the  Information 
Society  must  transcend  a  wide  range  of  EU 
policies. 31 

to  minors.26 

recognised 

area, 

The 

and 

this 

a 

Report.  The  first  phase  covered  the  regulatory 
framework,  the  network,  services  and  content 
aspects,  and  the  social  and  cultural  issues. 33 
The  second  phase,  an  outcome  of  the  Corfu 
summit, 34
is  based  on  a  updated  set  of 
priorities:  the  business  environment,  education 
and training,  protection of the public interest, and 
the  international dimension. 

35 
•

Impact on economic and industrial 
competitiveness 

The  convergence  debate  which 
this  Green 
Paper raises,  is  much  more than  an  academic or 
theoretical  exercise.  The  ability of the  European 
Community  to  use  convergence,  whilst  tailoring 
it  to  the  European  version  of  an  Information 
Society,  will  be  at 
the  heart  of  growth, 
competitiveness  and  job  creation  in  the  years  to 
come.  The  danger is  that  if Europe  fails  to  take 
advantage  of  the  opportunities  provided  by 
convergence,  it  could  be  left  behind  as  other 
major trading  blocks  reap  the  benefits  of a more 
positive approach. 

The  socio-economic  and  business  implications 
of  the  Information  Society  are  currently  being 
studied  in  different  fora  at  a  Community  level.36 
The  impact  of  the  new  services  resulting  from 
convergence  will  be  felt  in  the  economy  as  a 
whole  as  well  as 
relevant  sectors 
themselves. 

the 

in 

initiatives  now  under  way 

The  many 
in 
furtherance  of the  Information  Society  are  being 
pulled  together  in  a  Rolling  Action  Plan 32  which 
the 
secon'd 
constitutes 
phase 
the  Bangemann 
Commission's 

response 

the 

of 

to 

23  First  Annual  report  of the  Information  Society  Forum  to 
the  European  Commission,  Networks  for  people  and 
their Communities - June 1996 

24  Building  the  European  Information  society  for  us  all, 
Final report of the  High  Level Experts Group,  April  1997. 
25  Leaming  in  the  Information  Society  - Action  Plan  for  a 
European  Education Initiative,  (96) 471,  2October1996 
26  Green  Paper on  Living  and  Working  in  the  Information 
Society: People First,  COM(96) 389,  22 July,  1996 
21  Green  Paper  on  Strategy  Options  to  Strengthen  the 
European  Programme  Industries  in  the  context  of the 
Audiovisual Policy of the  European  Union  COM(94)96 of 
6 April  1994. 

28  See  Green Paper on  the protection of minors and human 
dignity  in  audiovisual  and  information  services,  COM 
(96)  483,  16.10.97  and  Communication  on  the  illegal 
and  Harmful  content  on  the  Internet,  COM(96)  487, 
16.10.97. 

29  The Herman Report,  19 September 1996 
3°  Council  Resolution  on  New  political  priorities  regarding 
information  society,  of  21  Nov.  96  OJ  C386, 

the 
12.12.96, p.1 

31  Commission  Communication  on  The  Implications  of the 
for  European  Union  Policies 

Information  Society 
Preparing the next steps,  COM(96)395,  24.07 .1996 
32  Commission  Communication  on  Europe  at the  Forefront 
of the  Global  Information  Society:  Rolling  Action  Plan, 
COM(96)607 final,  27.11.1996. 

The  most  significant  example  is  the  emerging 
field  of  electronic  commerce.  It  includes  both 
indirect  (electronic  ordering  of  tangible  goods), 
and  direct  (on-line  ordering  and  delivery  of 
services)  forms.  Electronic  commerce  makes  it 
possible  to  trade  at  low  cost  across  regions  and 
national frontiers. 

A recent  Commission  Communication  pointed  to 
the  potential opportunities provided by Electronic 
Commerce  for consumers  and  for  businesses  in 
Europe,  particularly for SMEs. 37  It estimated that 
electronic  commerce  revenues,  both  direct  and 
indirect,  are  set  to  increase  to  200 ·billion  ECU 
world-wide  by  the  year 2000:  It arso  highlighted 

33  Europe's  way  to  the  information  society:  An  Action  Plan 

COM  (94) 347,  19 July 1994 

34  Communication  of  the  Commission  to  the  Council,  the 
European  Parliament, 
the  Economic  and  Social 
Committee  and  the  Committee  of the  Regions.  on  The 
Information  Society:  From  Corfu  to  Dublin  -The  new 
emerging priorities,  :OM(96)395, 24 July 1996. 

35  Commission  Communication  "The  implications  of  the 
-

information  society 
for  European  Union  policies 
Preparing the next steps".  COM  (96) 395,  24 July 1986 
36  See  for example, Action Plan  for employment in  Europe: 
A  confidence  pact,  CSE/1262/96,  OJ  C56,  24  February 
1997  and  Cohesion  and 
Information  Society, 
COM(97)7,22 January 1997. 

the 

37  Commission  Communication,  A  European  Initiative  in 

Electronic Commerce,  COM(97) 157,  April  1997 

9 

creation  of  a 

the 
regulatory 
framework  on  both  EU  and  global  levels  as  a 
prerequisite for further development. 

favourable 

With  regard  to  the  impact  of convergence  on  its 
component  sectors,  one  study  indicated  that 
revenues  in  the  relevant  sectors  could  suffer  by 
some  40%  by  the  year 2005  if the  market  does 
not  develop 
full 
advantage of convergence. 38  To give some  idea 
of scale,  Fig.  3  shows  that  the  relevant  sectors 
represented  some  ECU  175P  billion  in  1996,  of 
which  ECU  508  billion  was  attributed  to  EU 
markets. 39 

in  a  direction  which 

takes 

Fig.3:  1996  distribution  of global  revenues  (ECU 
1750 billion) for the relevant  sectors 

(Source !DA TE) 

Expansion  of  the  market  for  services  and  the 
means of their distribution seems likely to  have a 
knock-on  effect  in  content  production,  though 
often  as  a result  of regulatory  obligations  placed 
on  particular  broadcasters.  There  is  evidence, 
for  example,  that  the  success  of  Canal+  pay 
television  in  France has had  a positive impact on 
in 
the  French  cinema 
dependent  content  producers  in  the  UK  were 
given  a  boost  when  Channel  4  arrived  on  the 
scene. 

Likewise, 

industry. 

impact  on 

the 
Future  developments  may 
fulfilment  of the  public  service  mission.  First,  as 
the pay-TV market matures,  operators may need 
to  increase  their  investment  in  local  content  to 
maintain  quality  and  product  differentiation.  For 
example,  British  satellite  pay-TV  operator, 
BSkyB,  is  now  a  major  investor  in  the  UK  film 

38  See  KPMG  Report,  Public  Policy  Issues  arising  from 
Telecommunications  and  Audiovisual  Convergence, 
September 1996 

39  Source:  Market  developments  in 

telecommunications 
and  integrated  communications  services_  to  the  year 
2010,  Study by IDATE for the  Commission,  12/97 

is  acqumng  rights 

industry,  and  Canal+ 
in 
French  cinema  libraries.  Secondly,  competition 
in  conveyance (terrestrial, cable,  satellite,  etc.) is 
likely,  particularly  in  a  digital  environment,  to 
shift the  bottleneck from  delivery to  content,  with 
a resulting  hike in  the prices for content rights. 

Employment effects 

to 

to 

greater 

diversity 

investment  and 

The signals this sends to the marketplace should 
hence 
lead 
employment  in  the  content  business  to  satisfy 
the  increasing demand.  Europe is  well-placed  to 
meet  this  challenge  by  harnessing  its  creative 
capacities 
cultural 
the 
of 
roof.  However,  EU 
its 
environments  under 
production  is  not  increasing  rapidly  and  the  EU 
therefore 
the 
to 
competitiveness  of  its  companies  so  that  the 
public  can  get  the  most  out  of the  opportunities 
offered  by  the  new  media,  and  so  that  market 
growth  can  be  transformed  into jobs to  bring  the 
number  of  people  employed  in  the  industry  in 
Europe  (1.8  million)  closer  to  the  level  in  the 
United States (2.6 million). 

strengthen 

needs 

in 

impact  on  employment 

Quite  apart  from  the  multiplier effects  generated 
by  convergence  in  its  role  as  an  enabler  of the 
Information  Society,  there  is  likely  to  be  a  direct 
and  positive 
the 
relevant  sectors.  Expansion  of the  market  and 
for  new  content  and 
the  attendant  demand 
services  will  generate a need  for  people with  the 
requisite creative talents.  This will  be  felt both  in 
large  companies  seeking  to  reorient  themselves 
towards  the  new  markets,  and  in  SMEs  seeking 
to  exploit  niche  markets.  SMEs  will  combine 
their  use  of  standardised  digital  platforms  such 
as  the  Internet  with  software  skills  to  develop 
applications  and  services  aimed  at  both 
professional  users  and  residential  consumers. 
take  full  advantage  of 
The 
technological  convergence  by 
integrating  the 
diverse  components  of 
telecommunications, 
media  and  IT  sectors  to  produce  innovative 
services. 

task  will  be 

to 

Staff retraining  will  be  an  important requirement, 
Gearing up  for the  new markets will  need  people 
with  the  right  mix  of skills,  for  which  specialised 
training  will  be  required.  The  Commission  has 
launched  a  number  of  initiatives  in  the  field  of 
education  and  training,  notably  the  action  plan, 
Information 
Teaching  and  Learning 
Society, 40  as  well  as  certain  activities  in  the 
context  of  the  Leonardo  (training)  and  Socrates 
(education) programmes. 

the 

in 

40  Op.cit Note 25 

10 

Research and Development 

through 

European  support for co-operative  research  and 
development  activity, 
the  ACTS 
(Advanced  Communications  Technologies  and 
Services),  Esprit  and  Telematics  programmes, 
has  played  an  important  part  in  many  of  the 
technical  developments  which  has  made  the 
It  has 
convergence  phenomenon  possible. 
IT, 
contributed 
industries. 
telecommunications  and  software 
the 
Much  of 
development 
standards 
subsequently  adopted  by 
industry  and 
formalised  by  European  standardisation  bodies, 
the  development  of 
and  has  contributed 
to 
technical 
supporting 
electronic commerce. 

the  strength  of  European 

technical 
the 

this  work  has 

platforms  and 

supported 

tools 

of 

to 

have 

Programme 

Research  and  Technological  Development 
(RTD)  Programme  activities  during  the  Fourth 
Framework 
equally 
encouraged  greater  participation  by  SMEs,  who 
can  benefit,  for  example,  from  systems  and 
services which  stimulate tele-working.  A specific 
example  of  an  integrated  approach  to  systems 
and  services  of  benefit 
the 
Integrated  Applications  for  Digital  Sites. 41  Here, 
on-line  and  off-line  multimedia  applications 
supply 
from  central/local 
government  - in  transport  management,  tele 
local 
medicine,  education  and 
citizens,  businesses  and  other organisations  in  a 
cost-effective,  user-friendly manner. 

integrated  services 

to  SM Es 

training  -

to 

is 

Following  the  adoption  of  the  proposal  for  the 
Fifth  Framework  Programme  in  April  1997,  the 
Commission  has  reviewed  research  activities  in 
IT,  telecommunications  and  telematics  with  a 
view  to  grouping  them  into  a  single  integrated 
In  the  context  of convergence,  this 
programme. 
includes  R&D  activity  in  the  area  of multimedia 
and  audiovisual content. 42 

11.2' Marlcef'fr~ffd_s _ 
This  section 
looks  at  market  trends  without 
however  providing  an  assessment  under  the 
Community competition  rules.  The  activities  and 
investment  strategies  of  market  players 
in 
response 
to  new  developments  are  now 
becoming  evident,  and  give  a good  indication  of 

41  Subject  of  a  Call  for  proposals  in  1997  under  the 
Telematics  Applications  Programme.  Digital  sites  are 
physical  sites  in  geographical  areas  such  rural  areas, 
small  towns,  cities  or  regions,  in  which  local  needs  of 
citizens  and  businesses  can  be  met  through  IT  and 
telecommunications  multimedia applications. 

42  See  COM(97)553final  of  5.11.97,  Fifth  Framework 
Programme.  Research  and  Technological  Development 
(1998-2002),  Commission  Working Paper on the  Specific 
Programmes: Starting points for discussion. 

11 

how  those  players  perceive  future  trends.  One 
indicator  of  convergence  is  the  willingness  of 
market  players 
the  possibilities 
to  exploit 
provided  by  new  platforms,  in  particularly,  the 
Internet  to  expand  their  activities  beyond  the 
confines  of their traditional  core  markets  in  both 
a  geographical  and  product  sense.  Webcasting 
highlighted  above  is  one  such  example.  The 
entry  of  telecoms  operators  into  the  area  of 
Internet  service  provision  and 
Internet  voice 
telephony  provision  is  arguably  another.  Such 
services  are  new  only  in  the  sense  that  they 
represent  an  excursion  into  new  areas  for  the 
provider  in  question.  But  some  are  new  to  all 
comers. 

New services 

The flexibility of digital  information is  creating the 
possibility  for  more  and  enriched  conventional 
services,  (such  as  digital  television  and  radio 
and  better  quality  mobile  communications),  as 
well  as  a  whole  range  of  new  services  and 
applications.  These  new services  are  as  varied 
as  electronic  newspapers.  on-line  supermarkets 
and  catalogues,  home-banking,  and  the  use  of 
multimedia  web 
internal 
sites 
communications,  and  as  a key tool for business. 

both 

for 

Examples: 

•  Broadcasters  who  are  branching  into  new areas, 
such  as  data  broadcast,  Internet  webcasting  and 
telecommunications transport and services; 

•  Telecommunications operators who  are providing 
audiovisual  services,  such  as  video-on-demand 
and cable television. 

• 

Internet  service  providers· who  are  starting  to 
distribute  audiovisual  material,  and  Internet 
telephony 
access  providers  supplying  voice 
capability. 

for 

fertile  ground 

Despite  current 
limitations  a  number  of 
applications  are  closing  the  gap  between  smart 
television  and  video  Internet.  The  area  where 
these  two  areas  converge  curref!tlY  constitutes 
the  most 
innovation  and 
entrepreneurial  activity  - as  well  as  for  creation 
Innovative 
of  entirely  new  types  of  content. 
forms  of  graphic-rich  "Internet  channels"  are 
building  on  the  creativity  of previously  separate 
metiers  of  video  production,  computer  imaging 
and  information  management.  Similarly,  high 
end  networked  video-games  are  building 
devoted  constituencies  of  players  across 
national  borders. 
In  a  seamless  and  scaleable 
digital environment,  innovative hybrid  multimedia 
applications  are  appearing  - such  as  digital 
television  'infomercials'  with  Internet  response 
mechanisms  (for  immediate  ordering),  CD-ROM 
catalogues with  Internet connections  (for content 

or price updates) and  commercial Web  sites with 
local  CD-ROM  extensions (for memory-intensive 
multimedia demonstrations). 

In  addition, 

At  the  delivery  end  of the  value  chain,  players 
are  moving  into what  are for  them  new  areas  of 
activity.  New  features  are  being  added  to 
services  on  all  networks. 
the 
services  themselves  are  changing  by  combining 
the  features  of hitherto  separate  services.  Thus 
television  programmes  are  'data-enhanced'  by 
the parallel availability of text and  graphics.  One 
pilot 
supplements 
broadcasts  of  horse-races  with  supporting  text 
and  facilities  for  on-line  betting.  The  same 
possibilities are offered by digital radio. 

example, 

project, 

for 

New players 

As  convergence  enables  incumbent  players  in 
the  telecommunications  broadcasting  sectors  to 
expand  their  roles,  it  also  marks  the  entry  of 
powerful  new  players  from  publishing  and  IT 

industries.  For  information  providers,  such  as 
financial 
publishers,  database  operators  and 
information  services,  the  Internet  constitutes  a 
crucial  extension  of  their  traditional  know-how, 
and  an 
recycling  and 
"repurposing" rich  stores of information. 

ideal  means  of 

television 

Similarly,  IT companies are exercising significant 
influence on  shaping  the  new services  market in 
Europe  - as  they  move  towards  generalised  on 
line  distribution  of  software  and  multimedia 
content,  make substantial  investments  into cable 
and television  business,  and  act as  integrators of 
advanced 
Europe. 
the  exponential  growth  of 
Underpinned  by 
computing  power,  kept  responsive  to  change  by 
shortened  product  life-cycles,  used  to  operating 
fiercely  competitive  environment,  and 
in  a 
cumbersome 
historically 
regulation,  the  contribution  and  potential  of  thP. 
IT  industry  to  first  drive  and  then  benefit  from 
convergence should  not be  underestimated. 

unhampered 

trials 

by 

in 

Fig.4:  Locations of the Major Players in the Value Chain and Relationships between them 

TO 

Broadcaster 

Electronic 
publisher 

Internet service 
provider 

Content 
creator 

Software 
developer 

Content creation 

Packaging 

Service  Provision 

-

Infrastructure 
provision 

Terminal vending 

-

-

Core strength 

Existing  relationship  or contractual  link 

IE~#I  Partial competence 

_____. 

Potential  contractual  link  to  another player 

(Source:  Squires,  Sanders Dempsey LLP and Analysys Ltd.) 

New market structures 

The 

factors. 

The  significant  merger,  acquisition  and  alliance 
(M&A)  activity  described 
I  are 
in  Chapter 
range  of  commercial  and 
motivated  by  a 
strategic 
towards 
trend 
convergence  would  be  one  of  these,  albeit  an 
important  one.  Some  argue  that  new  market 
structures  reflect  a  substantial  shift  in  the  value 
chain,  with  value  migrating  from  simple  delivery 
to  the  production  and  packaging  of  content  or 
the  offer of on-line  of services  and  transactions. 
Liberalisation  and  competition,  coupled  with 
digitisation  and  significant  increases  in  network 

of 

both 

broadcasting 

and 
capacity 
telecommunications  networks,  is  rendering  the 
transmission  and  delivery  of  services  a 
commodity  item,  converting  it  into  a  low-margin 
high-volume business.  Firms currently operating 
in 
lower  parts  of  the  value  chain  are 
therefore  seeking  to  increase  volume  on  their 
core  activity, 
through  horizontal  alliances  or 
organic growth into new geographical markets. 

the 

At  the  same  time,  they  are  moving  up  the  value 
chain  to  higher  margin  activities  through  vertical 
concentration.  Telef6nica's  purchase  of Antena3 
TV  in  Spain, 

the  STET  group's  creation  of· 

12 

Stream  in  Italy  and  Microsoft's  acquisition  of 
cable  television  operator  Comcast  in  the  USA 
are  all  examples  of  companies  moving  across 
sectors  as  much  for strategic as  for commercial, 
profit-motivated  reasons.  Fig.4  maps  out  these 
strategies  by  type  of  market  player  and  by 
element  of the  value  chain  brought  into  play. 
It 
also 
types  of  commercial 
relationship  which  are  emerging  between 
It  should  be  noted,  however, 
different  actors. 
that  the  representation  is  schematic  and,  that 
neat  distinctions  between  content  creation, 
packaging  and  service  provision  are  sometimes 
difficult to establish. 

indicates 

the 

the 

filling 

on-line 

industries 

pioneering 

some  of 

The  situation  is  reinforced  by  the  emergence  of 
the  gaps  between 
new 
in 
start-up 
adjacent  sectors; 
computer 
companies 
networking  services  a  decade  ago  have  grown 
into  multi-billion 
today. 
dollar 
CompuServe  and  American  On-line  are  two 
cases  in  point.  The  recent  linking  of those  two 
businesses  together  with  Worldcom  is  a  further 
example  of 
fluidity  of  current  market 
structures . 

groups 

the 

11~$T~.~'.,~eh~ilrr1~f per,sP,~~tiv~ 
The  nature  and  potential  growth  of  market 
demand  for  the  new  services  is  the  greatest 
uncertainty  facing  market  players.  The  signals 
from  the  marketplace  are  conflicting.  Supply 
side  indicators,  in  terms  of  M&A  activity  and 
investment  in  new  service  development,  give  a 
positive  impression  of market  potential.  On  the 
other  hand,  although  growth  rates  in  Internet 
services  are  impressive,  only  around  8%  of 
European  citizens  are  using  the  Internet at work, 
This  represents  a 
and  around  4%  at  home. 
small  proportion  of  the  total  consumption  of 
audiovisual material,  in  which  TV  set penetration 
exceeds  that  of the  telephone.  Moreover,  many 
family 
the  passive  consumption  of 
view 
the  mainstay  of 
television  viewing 
to  be 
audiovisual  consumption 
foreseeable 
future. 43 

the 

for 

in 

However,  there  are  some  indications  of potential 
change 
the  patterns  of  consumption  of 
services and  in  ttie home environment.  Some  of 
these  are  taken  from  market  developments  in 
North  America,  where  the  use  of PCs  in  homes 
is  currently  much  greater 
in  Europe. 
Parallels  drawn  from  the  US  market will  only  be 
valid  therefore to the  extent that a similar level  of 
PC use can  be achieved in  Europe. 

than 

43  See  Economic 

Implications  of  New  Communication 
Technologies  on  the  audio  visual markets.  Study  carried 
out  for the  European  Commission  by  Norcontel  (Ireland) 
Ltd.,  March  1997. 

The changing patterns of consumption 

Consumers  are  likely  to  use  new  products  and 
services  offered 
through  convergence  only 
insofar  as  those  services  are  useful  to  them. 
The  take-off of new services cannot therefore be 
simply  supply-driven,  but  must  take  account  of 
the  consumer 
demand  and, 
in  particular 
viewpoint. 
in  consumption 
This  is  reflected 
trends  which  are  beginning  to  show  the  first 
signs of a convergence in  the  home: 

-

in  1998,  for  the  first  time  more  personal 
computers  will  be  sold  in  the  world  than 
television  sets;  this  must  of  course  be  set 
against  the  very  high  penetration  of  TVs  in 
the  home,  and  the  fact  that  PCs  are  sold  to 
both  businesses and homes; 

in  1995,  Americans  spent less  than  half of all 
screen-viewing  time  in  front  of  computers; 
recent  US  audience  measurements  indicate 
that  Web  users  already  consume  59%  less 
it  is 
television  than  average  viewers  and 
estimated  that  the  TV  set's  share  of  screen 
time will  be  half that of the personal  computer 
in  2005;  on  the  other  hand,  audience  figures 
for  1995/96  show  that  the  average  daily 
increased  by  4 
viewing 
minutes,  compared 
to  a  decrease  of  2 
minutes in  the US; 

in  Europe 

time 

-

into 

displaced 

by 
activities 
research 
increased  personal  computer  usage  shows 
that  watching  television  loses  out  rather  than 
reading  books  and  magazines,  or  playing 
console  video  games.  According  to  Price 
Waterhouse,  young  adults  in  the  US  between 
18  and  35  who  used  to  spend  4  hours  a day 
watching  TV  now  spend  one  of  those  hours 
'surfing the net'. 

leisure 

terms  of  available 

In 
time  and 
expenditure,  the  youth  segments  are  already 
opting  for  interactivity.  Video  games  alone 
represent nearly 20%  of under sixteen  year olds' 
total  media  consumption 
in  som·e  markets, 
according to Arthur Andersen. 44 

Changing home environment for 
consumption 

A  key  factor  in  the  take  up  of  new  services  will 
be  the  penetration  of  PCs  in  the  home,  and 
Internet  capable 
particularly  multimedia  and 
PCs.  Here  whilst  PC  penetration  levels  of up  to 
30%  are  common 
in  most  Member  States, 
penetration  of  multimedia  PCs  is  considerably 
the  home  as 
lower  and 
mentioned  above  is  growing  steadily  but  from  a 
the  current 
low  base.  On 

the  other  hand, 

Internet  usage 

in 

44 

"He  who  hesitates  has  no  audience",  Jolyon  Barker, 
Broadcast.  10 May  1996 

13 

average  life  of a  PC  is  three  years  suggesting 
the current stock of PCs will  become multimedia 
capable 
increasing 
familiarity with  these technologies  at work and  in 
schools will help to boost home take up further. 

quickly,  wh.ilst 

fairly 

One  major  change  in  the  home  has  been  the 
transition from  collective, family viewing of two or 
three  generalist TV channels  to  individual  family 
members viewing alone, selecting from the much 
broader  range  of  channels  on  offer  in  today's 
multi-channel  environment.  The  multi-channel 
broadcast  environment 
itself  competes  with 
packaged  media,  played  on  video  recorders  and 
video-game consoles.  All of this will  increasingly 
compete  with  the  computer,  particularly  with  its 
use on  line. 

the 

Aware  of the  changing  patterns  of consumption, 
the television  and  computing  industries are vying 
Broa~kasters  and  TV 
for  viewers'  attention. 
manufacturers  are  enhancing 
interactive 
capabilities  -of  their  services  and  equipment. 
Today's  digital  television  set-to'p  boxes  already 
combine 
telecommunication 
functionality.  TV  sets  can  already  double  as 
monitors  when  connected  to  low  cost  Internet 
appliances.  Many  in  the  consumer  electronics 
industry  predict  that  TV  sets  with  built-in  PC 
capability,  including  Internet access,  will  become 
an  important  feature  of the  consumer  market  in 
the near term. 

television  and 

the  other  end  of  the  spectrum, 

From 
the 
computer  industry  is  already offering  multimedia 
PCs  which  allow  viewing  of television  channels. 
Hybrid  WebTV  set-top  boxes  combine  Internet 
and  digital  TV  reception  with  facilities  allowing 
storage  and  manipulation  of  video  content, 
enabling  applications  as  diverse as  downloading 
of films  and  sending of video-clips as  E-mail. 

Whether  the  PC/TV  or  the  TV/PC  will  win  this 
battle  is,  at  the  moment,  quite  unclear.  What  is 
certain  however  is  that  the  consumer's  "home 
platform"  is  set  for  significant  evolution  over  the 
next  few  years.  Yet  at  the  same  time  and  in 
parallel,  consumer  demands  and  needs 
for 
better  access  to  information  will  also  allow  for 
convergence  of 
telecommunications, 
media  and  information  technology  products  and 
services  that  cater  to  public  interest  domains 
such  as  education,  health,  environment  and 
transport. 

those 

:~.~~~1:~9fi:Iffi~-™:.!~.~~*q~!!f'¥?~ij~!~·J~E•···:~0'.lJ~~~:::;~~~gT~:::·~;·· >, 
This  chapter  discussed  the  overall  political  and 
economic  context  for  convergence,  placing  it 
against 
Information 
Society, and describing the  range of Community 
level activity in  this  area. 

the  background  of 

the 

and 

supply 

demand 

It  then  went  on  to  discuss  market  trends  from 
perspectives, 
both 
punctuating  optimistic  views  on 
future 
realisation  of  convergence  with  a  realistic  view 
of  today's  patterns  of  consumption,  and  the 
relative starting  points of different platforms such 
as the  Internet and free-to-air broadcasting. 

the 

(A) 
Will  convergence  have  a  significant 
impact  on  job  creation,  as  well  as  on  education 
and  training  in  the  European  Union?  How  is 
convergence  likely  to  impact  the  way  in  which 
we  work?  Will  its  effects  be  spread  evenly 
throughout the  European Community? 

(8) 
What  effect  are  current  developments 
likely to  have on  telecommunications,  media and 
IT sectors,  in  terms  of the  underlying  economics 
of  those  sectors,  the  services  offered  and  the 
likely service providers? 

in 

What  evidence  is  there  of  changes  in 
(C) 
information, 
the  way  services, 
Europe 
entertainment  and  culture  is  being  accessed  in 
the  home  and 
the  office?  What  are  the 
implications  of current  levels  of PC  penetration, 
Internet  use  and  TV  penetration  for  the  take  up 
of new  services?  What action  (if any)  is  needed 
to  overcome  low  levels  of  multimedia  computer 
penetration and  Internet use? 

in 

In  the light of the  positions put forward  in 
(D) 
the  Commission  Working  Paper  on  the  Fifth 
Framework  Programme,45  what 
of 
Community  RTD  projects  should  be  launched  in 
the context of convergence? 

kinds 

45  Op.  Cit.  Note 42 

14 

Convergence  is  already  showing  signs  of being 
a  key  driver  of  current  developments 
in 
information 
telecommunications,  media  and 
technology 
of 
range 
developments  and  trends for comment identified 
in  Chapters  I and  II  above  have  the  potential  to 
substantially  on  the  take  off  of  the 
impact 
information society in  Europe. 

industries. 

The 

In  order to  formulate  an  appropriate  response  to 
current developments,  it  is  important to  launch  a 
broad  debate  on  what,  if  any,  barriers  exist  -
actual  or  potential  - which  may  hold  back  the 
trend towards convergence. 

Chapter 111  attempts  to  identify such  barriers  and 
invites  comments  on  their  impact.  Not  all  the 
barriers  identified  are  regulatory  in  nature,  nor is 
a regulatory solution  the only  means  of resolving 
it  seems 
potential  problems.  Nevertheless, 
sensible  in  the  overall  context  of  this  Paper  to 
invite  reflections  on  a  wide  range  of  factors 
which  might 
the  process  of 
convergence. 

impact  upon 

are 

that  a 

barriers 

regulatory 

regulatory 

Where 
identified 
therefore,  there  should  not  be  an  automatic 
assumption 
is 
required.  As  stated  earlier,  the  application  of 
competition  rules  to  this  sector is  important,  and 
to 
market  solutions  which 
convergence  within 
those 
solutions will  often  be  more appropriate. 

tt.ie  context  of 

remove  barriers 

response 

At a Community level,  actual or potential barriers 
must  be  assessed  against  the  basic  objectives 
of  the  Treaty,  such  as  the  establishment  and 
functioning  of an  Internal  Market;  the  promotion 
of  a  system  of  undistorted  competition; 
the 
realisation  of  trans-European  networks,  or  the 
maintenance  of  a  high  standard  of  consumer 
protection.  They must also  be  examined  as  well 
as  against  the  specific  freedoms  envisaged  in 
the  Treaty,  such  as  the  rules  relating  to  the 
freedom  to  provide  services  or  the  right  of 
establishment. 

Rules  creating  restrictions  need 
to  follow  a 
general  public interest objective  (as  laid  down  in 
the  EC  Treaty  or  by  the  ECJ)  and  must  be 
proportionate  to  that  objective  to  be  acceptable. 
At 
time,  any  Community  action 
(including  action  to  harmonise divergent national 
rules),  would  pursue 
these  general  public 
interest  objectives,  and  would  be  subject  to  the 
principle of subsidiarity. 

the  same 

In  the  following  sections,  we  attempt  to  identify 
key  actual  and  potential  barriers 
the 
development  of  the  convergence  phenomenon  . 
and  ultimately 
Information Society in  Europe. 

realisation  of 

the 

the 

to 

to 

regard 

Access  to  users.  Approaches  differ  between 
sectors  with 
the  ownership  and 
to 
operation  of  networks.  This  means  that  many 
services  will  have  a  limited  choice  of  routes  to 
the  customer.  Even  v... here  legal  monopolies 
have been  abolished,  the  economics  of the  local 
loop  may  leave  current  telecommunications  and 
cable  TV  network  owners  with  a  predominant 
role  in  connecting  customers  in  many  markets. 
Where  bottleneck  facilities  are  controlled  by 
the 
vertically-integrated  players, 
potential to limit competition at the service level. 

there 

is 

on 

use 

restrictions 

Regulatory 
of 
infrastructure.  Current  restrictions  in  some 
Member  States  (and  not  others)  regarding  what 
types  , of  services  can  be  carried  on  different 
infrastructures  could  make 
for 
strategies 
operators 
formulate  unified 
It  may  also 
addressing  pan-European  markets. 
prevent  economies  of scale  being  realised.  The 
resulting  higher  unit  costs,  and  hence  tariffs, 
could  hold  back 
innovative 
services. 

the  delivery  of 

it  difficult 

to 

for  services.  Among 

Prices for telecommunications services.  High 
prices  for  telecommunication  services  and  for 
the  underlying  network  infrastructure  used  to 
deliver  services  may  impact  significantly  on  the 
demand 
reported 
reasons  for  Internet's  success  in  North  America 
is  the  widespread  application  of a  flat-rate  tariff 
structure offering  'free' local  telephone calls,  and 
the 
lower 
charges  for  leased  network  capacity.  46  This 
results  in  significantly  lower  costs  for  access 
providers. 

that  competition  has 

fact 

the 

led 

to 

improvements 

Availability of content.  As  mooted  in  Section 
11.1,  expansion  in  the  means of delivery  brought 
technology  and  by 
on  by 
in 
from 
the  bottleneck 
convergence  may  shift 
delivery  to  content,  and  may  lead  to  a  shortage 
of  adequate  content 
term. 
in 
Premium  content  is  already  a  key  factor  for 
success  in  both  digital  and  analogue  television 
markets,  Continued  shortages  could  inhibit  new 
market  entry,  and  with 
it  competition  and 
innovation. 

the  medium 

46  According  to  a  1997  OECD  report,  20  hours  of  Internet 
use  cost  $38  in  Finland,  $64  in  the  UK,  and  $74  in 
Germany, compared to $29 in the  US. 

15 

Fragmentation of EU market.  Expansion  in  the 
number of broadcast  television  channels  will  be 
likely to  be  at  the  expense  of the  market shares 
of  existing  broadcasters. 
Shrinking  market 
shares  could  be  offset  by  widening  the  target 
audience beyond national frontiers.  Similarly, as 
new  services  develop,  much 
innovation  will 
come 
from  small  players  exploiting  niche 
markets,  or  from  large  players  funding  large 
R&D  budgets.  Either  way,  they  will  both  need 
larger volumes than  can  be  provided  by  national 
markets in  order to  defray their costs.  Whilst TV 
channels  are  free  to  seek  larger audiences  as  a 
consequence  of the  Television  without  Frontiers 
Directive,  the  principle  challenge  for  them  may 
be  one  of  multilingual,  multi-cultural  audiences, 
rather than  potential  barriers  to  establishment  in 
countries  in  which  they  wish  to  establish  a 
commercial. presence. 

and/or 

Insufficient IPR protection.  Content  providers 
will  only  be  willing  to  make  content  available  if 
their  intellectual  property  rights  are  sufficiently 
protected.  Similarly,  publishers  and  operators 
will  only  invest  in  innovative  services  if they  are 
that  new  means  of  delivering 
confident 
an 
information 
adequate degree of protection for the  intellectual 
and  industrial  effort  of  their  organisations  and 
Insufficient 
those  of  content  providers. 
for  off-line 
is  already  a  barrier 
protection 
electronic content,  and  this  could  project into  the 
on-line  world. 
Recent  WIPO  ag'reements 
referred  to  later  in  the  Paper  are  helping  to 
clarify the current situation. 

provides 

services 

the  existing 

In  view of advanced  state  of current  Community 
initiatives  which  adapt 
legal 
framework in  this area to the digital environment, 
this  Green  Paper  does  not  address  regulatory 
issues  raised  by  copyright  and  related  rights. 
These  particular  issues  have  been  extensively 
dealt with  in  the  Green  Paper  on  Copyright  and 
Related  Rights  in  the  Information  Society  and  in 
its  follow  up  Communication, 47  and  the  resulting 
approach  takes  due  account  of the  evolution  of 
technologies towards convergence. 

Regulatory  uncertainty  Regulatory  uncertainty 
resulting  from  the  scope  of  current  definitions; 
the  way  they  are  applied  or  whether  they  fit 
changing  market 
service 
or 
characteristics  could  constitute  an 
important 
barrier to  investment  by  market  players.  Whilst 
many  definitions  today  (at  both  a  national  and 
of 
Community 

structures 

level), 

those 

such 

as 

47  COM(95)  383  19.7 .95  and  COM(96)  568,  20.11.96, 

respectively. 

16 

telecommunications,  voice  telephony,  television 
broadcasting  or information  society services  will 
continue  to  remain  valid  for  many  activities,  the 
provision  of  services  may  be  nevertheless  be 
held  back  where 
leave 
regulatory 
businesses  uncertain  as 
treatment which their services will  receive. 

those  definitions 

the 

to 

In  some  cases,  this  may  simply  be  a  risk  that, 
current 
notwithstanding 
a 
definitions 
for  both  broadcasting  and 
Community  level 
telecommunications  activities, 
in 
some  Member  States  may  place  a  particular 
novel  service  under  one  regulatory  regime, 
whilst  it  is  considered  to  fall  under  another 
regime  in  other Member States. 48 

regulators 

at 

Furthermore,  within  Member  States  barriers 
could  result  if  similar  services  were  regulated 
the  basis  of  the 
differently,  for  example  on 
platform over which they are delivered. 

In  other cases,  the  characteristics  of services  in 
the  future  may  mean  that  they  straddle  more 
than  one  regulatory  area  on  the  basis  of current 
definitions.  This may result in  a disproportionate 
regulatory burden on  certain services. 

the  technological  and  market  trends 
Finally, 
identified  in  Chapters  I and  11  may also challenge 
the  basis  on  which  definitions  are  currently 
drawn up. 

One  example  of  regulatory  uncertainty  arose 
during  the  recent  French  election  campaign, 
where  rules  prohibiting  the  publication  of opinion 
polls  in  the  week  prior  to  the  election  applied  to 
off-line  media,  but  not  to  polls  published  on  the 
Internet. 
these 
A  number  of  editors 
circumstances  ignored  the  ban  which  placed 
traditional media at a disadvantage49

in 

• 

Multiple  regulatory  bodies.  The  process  of 
obtaining  regu~atory  clearance  in  all  Member 
States  and  potentially  from  different  regulatory 
bodies  for  a  particular  package  of services  may 
create  substantial  overheads  for  those  wanting 
to  operate  on  a  pan-European  basis. 
The 
provision  of  services  may  be  held  back  where 
market  players  are  subject  to  a  number  of 
regulatory  regimes  or  must  deal  with  multiple 
regulatory  bodies,  for example,  where  a network 
be 
is 
as 
required 
infrastructure  and  as  a 
telecommunications 

licensed 

both 

to 

48  One  example  is  Video-on-Demand  which  according  to 
the  Squire  Sanders  Dempsey Study is  considered  either 
treated  as  a  value-added  telecommunications  service  or 
has  not  yet  been  formally  categorised  in  all  Member 
States,  except  France  and  the  UK,  where  it  falls  under 
the  broadcasting  framework  and  Germany,  where  it falls 
within  the new category of "teleservices". 

49  OECD op cit note 5 

broadcasting network (because it  is  used  to  offer 
both  services). 

There  are 
licensing. 
Market  entry  and 
differences  within 
telecommunications, 
the 
media  and  IT  sectors  with  regard  to  whether  or 
limited  or 
not  market  entry 
subject  to  monopoly  or  special  rights.  The  IT 
sector is generally free of licensing procedures. 

is  unrestricted, 

Any  use  of licensing  or  any  regulatory  limitation 
on  market  entry  represents  a potential  barrier to 
the  provision  of  services,  to  investment  and  to 
fair  competition  and  should  therefore  be  limited 
to justified  cases.  In  particular,  the  trend  should 
be  towards  limiting  regulation  where  potential 
barriers  exist,  rather  than  extending  heavier 
regulation  to  more  lightly  regulated  sectors  in 
order to equalise market conditions. 

Where licensing continues to  be  important,  there 
is  considerable  variation  between  sectors  and 
between  Member  States  in  the  length  of time  it 
takes  to  obtain  licences;  the  transparency  of 
procedures;  the duration of licences and  the fees 
paid.  Many  telecommunications  and  broadcast 
network  licences  are  national 
in  scope,  but 
others  - particularly  for  cable  lV  delivery  are 
regional  or  local  in  scope.  All  of these  factors, 
whilst  acceptable  in  the  context  of  the  specific 
sectors,  may  make  it  harder  or  more  expensive 
for  organisations  to  offer  an  integrated  package 
of  services,  particularly  across  borders.  This 
may  represent  a  disproportionate  burden  given 
that  the  technology  promotes  such  integration 
and  there  is  likely to  be  increasing  demand  from 
both  business  users  and  consumers  for  such 
integration. 

there 

rules. 

Nevertheless, 

Access 
to  networks,  conditional  access 
systems  and  content.  The  issue  of  access  is 
principally  a  matter  for  commercial  negotiation, 
subject  to  the  overall  safeguards  provided  by 
competition 
is 
currently  an  asymmetry  in  that  access  rules  are 
in  place  only  for  certain  networks  (for  example, 
the 
interconnection  and  open  network  rules 
which  apply  to  telecommunications  networks, 
but  not  to  infrastructure  used  for  broadcasting 
activities.  Similarly,  a 
for 
conditional  access  systems  for  digital  television, 
but not for all  types of digital services.  (Note that 
in  the  latter  case,  the  UK  is  currently  consulting 
on  the  development  of  common  framework  for 
conditional  access  systems 
for  all  digital 
services). 

framework  exists 

Where  market players  control  the  access  to  the 
customers,  for  example,  through  ownership  of 
the  local  loop,  or  through  control  of  conditional 
access  technologies,  the  company  concerned 
may  be  able  to  discriminate  in  favour  of its  own 
services. 

With  regard  to  access  issues  linked  to  content, 
normal  commercial  principles  generally  apply, 
tempered  only  by  applicable  competition  rules. 
One  exception  to  this  is  the  treatment  of certain 
"premium"  content  in  Member  States,  such  as 
national  sporting  events  where  the  revision  to 
the  Television  without  Frontiers  Directive  has 
provided  for  the  mutual  recognition  across  the 
Community  of  events  reserved  by  Member 
States for free-to-air television broadcasting. 

Allocation  of  radio 
frequency  and  other 
resources.  The  provision  of  services  (and  the 
development  of  effective  competition)  will 
depend  on  the  availability  of  sufficient  network 
capacity, which  for many services means access 
to  radio  spectrum.  The  parallel  expansion  of 
television  broadcasting,  mobile  multimedia  and 
the  use  of  wireless 
voice  applications,  and 
technologies  within  fixed  networks  will  lead  to  a 
significant  growth  in  demand.  Where  there  are 
marked  differences  in  the  amount  of  spectrum 
available  or  the  way  in  which  it  is  allocated, 
potential  barriers  are  likely  to  arise,  impacting 
the  underlying  cost-bases  of  network  operation 
in  the  different  sectors,  potentially  encouraging 
competitive  entry  into  one  sector  rather  than 
another. 

in  particular, 

Varying  approaches  to  the  achievement  of 
public  interest  objectives. 
The  regulatory 
frameworks  for  each  of  the  sectors  affected  by 
convergence  contain  a  variety  of  measures 
seeking 
interest 
to  ensure  particular  public 
objectives  which  are  specific  to  those  sectors 
and  which  are  consistent  with  Community 
Indeed  the  Commission  attaches 
objectives. 
the  delivery  of  general 
great  importance  to 
. interest  services50 
in  ensuring 
social  and  regional  cohesion  in  the  Community, 
whilst  in  the  telecommunications  area,  the  steps 
taken  to  ensure  universal  service  at  a  national 
level  now flow from  a framework established at a 
Community  level.  Nevertheless,  the  manner  in 
which  such  objectives  are  pursued  (rather  than 
the  objectives  themselves).  may.  represent  a 
potential  burden  to  the  organisations  subject  to 
obligations  in  respect  of  their  implementation .. 
In  the  context  of  the  cross-border  provision  of 
services,  tensions  between  differing  approaches 
between  sectors  and  between  Member  States, 
could  deter such  service  provision  or investment 
in  innovative services or networks. 

in  new  environment. 
Public  confidence 
to 
level  of  . protection 
Where 
the 
treatment  of 
the 
consumer  protection, 
electronic  transactions,  or  data  protection  and 
sectors,  users  and 
privacy  vary  across 

relating 

legal 

so  See COM(96)443 

17 

consumers  may  lack  confidence  in  the  services 
and  systems  made  available,  holding  back  the 
development of converged services. 

Lack of standards supporting interoperability 
and interconnection of converging networks. 
that  any  user  can 
The  goal  of  ensuring 
communicate  with  any  other  user  will  be  held 
back  where  market  action  is  unable  to  deliver 
products  and  services  which  are  interoperable. 
Proprietary  standards  controlled  by  dominant 
players could limit such interoperability. 

In  examining  the  impact  of  barriers  identified 
above,  Chapter IV considers first whether certain 
features  of the convergence phenomenon create 
new and  specific challenges for regulation. 

IV .2 

Section 
identifies  possible  approaches 
towards  key  regulatory.  Section  IV.3  looks  at 
meeting  public  interest  objectives  and  Section 
IV.4  examines  options  for  a  possible  future 
regulatory  model.  The  chapter  concludes  with 
an  overview of relevant international issues. 

~~at is  the likely impact of the barriers identified 
and  are there other barriers or factors which  may 
have  a  significant  impact  on  the  convergence 
process in  Europe? 

··1y:'~, 
•·''•~.~.a•l.i~JS9~!:.it9::!~i~jf~9;re9y~~t~IY 
•.· ;;;···  · ~P.pfq~~tt:i~J1;1::~~:~::i1:.:;r:.··:.·· ;;.}''J'.{>;x;2·•····••"··.····••.·······~, 
the  convergence  phenomenon 
Areas  where 
could  raise  difficulties  for  existing  regulatory 
approaches  are 
These 
challenges  apply  both 
the  substance  of 
regulation  and  to  its  practical  implementation. 
Possible  solutions  to  these  issues are discussed 
in  Sections  IV.3 to  IV.5. 

identified  below. 

to 

The role of regulation 

for 

Regulation  is  r'tot  an  end  in  itself. 
Instead,  it  is 
simply  a  tool,  alongside  the  use  of  market 
forces,  for  achieving  wider  social,  economic  and 
those 
general  policy  objectives,  such  as 
highlighted  in  Chapter  II.  This  has  already  been 
recognised  in  the  Commission's  Communication 
on  electronic  commerce,  which  proposed  the 
principle  of  "no 
regulation's 
regulation 
sake". 51 
This  principle  applies  equally  to  all 
fundamental 
areas  of  convergence. 
objectives  underpinning 
the 
in 
Member  States  are  not  undermined  by 
convergence.  These  objectives  are  varied  and 
tailored  to  the  specific needs of different sectors, 
but  include  national  goals  such  as  promoting 
efficiency,  economic welfare,  and  the  public  and 
level, 
consumer 
similar  aims  are  reflected  in  the  provisions  and 
objectives of the EC Treaty. 

At  a  Community 

regulation 

interest. 

The 

Nevertheless,  the  nature  and  characteristics  of 
convergence which  are  examined  below,  as  well 
as  the  perceived  need  of  industry  actors  for 
regulatory  intervention  to  be  limited  and  closely 
targeted,  should  lead  public authorities  at  both  a 
national  and  a European  level  to  re-examine  the 
role  and  weight  of  regulation  in  a  converging 

51  Op,cit. 

The  three  other  principles  set  out  in  that 
Communication  are  also  important  in  the  context  of 
convergence.  These  were  that  any  regulation  must  be 
based  on  Single  Market freedoms;  must  take  account of 
interest 
business  realities;  and,  must  meet  general 
objectives effectively and  efficiently. 

18 

marketplace. 
highlighted: 

Three  key 

issues  can  be 

•  The 

role 

forces. 

of  market 

Some 
commentators  place  particular  stress  on  the 
need to place greater reliance on  the ability of 
market forces to ensure regulatory objectives. 
They  would  argue  that  this  philosophy  is 
reflected  in  the  evolving  approach  in  most 
Member  States 
in 
IT  and 
telecommunications,  or 
broadcasting  worlds  by 
industry-led 
development  of  interoperable  standards  ar:ld 
software.  Others  are  doubtful  about  the 
ability  of  market  forces  to  provide  adequate 
ex  ante  guarantees 
for  consumers,  and 
recognise  an  important  role  for  regulation  in 
safeguarding public interest objectives. 

to  universal  service 

in 
the 

the 

•  The 

balance 

sector-specific 
between 
regulation  and  competition  rules.  A  further 
key  issue is  the  balance between  competition 
rules  and  sector-specific  regulation,  with 
many  arguing  for  a preference  to  be  given  to 
the  application  of  competition 
to 
converged 
cases  within 
individual 
environment, 
further 
the 
rather 
development of extensive regulation. 

rules 

than 

a 

to 

•  Finding  workable  solutions.  Where  regulation 
is  in  place  it  must  apply  in  a  workable  and 
timely  manner.  The  global  nature  of  the 
Internet  or  the  regional  nature  of  satellite 
delivered  services  point 
the  potential 
difficulties  of  enforcing 
the  rules  of  one 
Member  State  in  other  countries;  whilst  the 
rapid  pace of change in  terms of services and 
products,  measured  in  months  and  weeks, 
presents  a real  challenge  for  anyone  seeking 
a 
to  any  particular 
problem.  Such  solutions  at  a  Community 
level  tend  to  be  measured  in  months  and 
years. 

legislative  solution 

The challenge to the consistency of 
regulation 

A key feature  of a converged  environment  is  the 
possibility  that  any  network  can  be  used  to 
deliver  a  much  wider  range  of  services  than  is 
currently  the  case. 
It  does  not  automatically 
follow  that the  delivery  of different  services  over 
a single  network or via  a single  service  platform 
makes  those  services  the  same,  nor  that  the 
public interest objectives underpinning regulation 
automatically  transpose  from  one  service  to 
another. 

For  example,  whilst  a  film,  a  song,  a  railway 
timetable  and  a  phone  conversation  may  all  be 
carried  in  a  digital  form,  this  does  not  result  in 
these  different  services/ 
the  user 
In  the  same  way, 
activities  as  interchangeable. 

treating 

19 

regulatory approaches to  each of these services, 
whilst  potentially  based  on  similar  general 
principles,  are  likely  to  continue  to  be  tailored  to 
the  specific  characteristics  of  these  different 
services. 

the 

could 

similar 

services 

Nevertheless,  as  stated  in  chapter  Ill,  regulating 
essentially 
differently, 
particularly,  on  the  basis  of the  technology  used 
to  deliver 
represent 
service, 
discriminatory  treatment  which  might  hold  back 
competition,  investment  and  the  provision  of 
services.  One  example  of  the 
treatment  of 
opinion  polls  under  French  election  law  was 
already  cited.  Another  example  could  be  the 
limited  scope  of  the  current 
Interconnection 
regime  in  telecommunications  which  would  offer 
interconnection 
to  an  organisation 
operating  a  public  telecommunications  network, 
but  not  to  someone  operating  a  broadcasting 
network. 
Interconnection  between  the  two  may 
be  of  particular  importance  in  the  context  of 
to 
services  which  use  broadcast  media 
download  information  and  services,  but  rely  on 
the 
to  provide  a  return 
channel. 

telecoms  network 

rights 

in 

regulatory 
In  assessing  such  differences 
treatment  both  across  sectors  and  between 
Member  States,  any  analysis  at  a  Community 
level  would  need  to  consider whether continuing 
differences  were  consistent  with  public  interest 
objectives  identified  in  the  Treaty  and  by  the 
Court  of Justice  and  whether  the  rules  in  place 
were  proportionate 
the  objective  sought. 
Where  the  answer  to  either  question  is  no,  the 
rules  in  question  could  be  attacked  before  the 
Court of Justice. 

to 

the  barriers  resulted 

Where 
from  measures 
which  are  fully  consistent  with  the  Treaty  and 
where  principles  of mutual  recognition  could  not 
be  applied,  Community  measures  (such  as 
harmonising legislation) might be then justified. 

The challenge of globalisation 

The  globalisation  of  services  is  a ·feature  of  the 
new landscape.  While  satellite  television  broad 
casting  represents  one  example,  it is the  Internet 
which  constitutes 
the  quintessential  global 
network.  The  Internet's  structure  and  ubiquity 
potentially  allow  it  to  defy  attempts  to  apply 
existing regulatory objectives at  national level. 

In  the  new global  environment,  the way  in  which 
networks  and  services  are  regulated  in  different 
regions  has  the  potential  to  impact  substantially 
on  investment  in  those  regions.  Excessive  or 
inadequate  regulation  in  one  region  could  result 
in  a  migration  of  economic  activity  elsewhere, . 
with  adverse  consequences  on  the  development 
of the  Information Society in  the former region. 

The challenge of abundance to regulation 
based on scarcity 

Convergence  may  challenge  current  regulatory 
approaches,  particularly,  with 
the 
licensing  of  networks  and  allocation  of 
resources,  where  such  approaches  reflect  a 
perceived scarcity of both radio-frequency and  of 
content. 

regard 

to 

Current  market  technological  trends,  such  as 
substantial  increases  in  network  capacity;  the 
to  be 
possibility  of  content  and  services 
delivered  over  a  number  of  platforms; 
the 
increase  in  competing  routes  to  customers  and 
improvements  in  digital  compression  suggest 
that  in  a  fully  digital  environment,  scarcity  may 
over time become a less significant issue,  calling 
to  be 
for  current 
reassessed. 

regulatory  approaches 

Nevertheless,  the  removal  of  scarcity  in  the 
transmission  network  will  not  necessarily  be 
accompanied  by  a  corresponding  increase  in 
content  or  services  (in  particular,  "premium" 
content  or  services  needed 
those 
In  any  event,  pending  the  complete 
channels.) 
from 
migration  of 
analogue to digital services, capacity bottlenecks 
are likely to continue for the foreseeable future. 

the  broadcasting  sector 

fill 

to 

The challenge to distinctions between public 
and private activities 

it  may  shift 

Convergence will  not prevent the implementation 
of regulation  based on  distinctions between what 
the 
is  private  or  public,  but 
boundaries  of where  lines  between  the  two  can 
be  drawn.  This  could  have  consequences  for 
the  level  of  regulation  applied  to  a  particular 
service.  To  the  extent  that  rules  have  been 
formulated  on  the  basis  that  particular networks, 
services  or  activities  are  public  rather  than 
private, 52  a  reassessment  may  be  required  to 
determine  whether  current  boundaries  between 
what is  public and  what is  private remain  valid  in 
the 
light  of  technological  developments.  For 
example,  new  means  of  delivering  services, 
interactivity, and  the possibility of per-transaction 
payments  may  make  it  harder  to  draw  those 
lines in  the future. 

Another practical  example,  is  reflected  in  the  two 
recent  WIPO  treaties  which  relate,  inter  alia,  to 

52  One  example in  telecommunications,  is  that whilst public 
telecommunications  networks  may  be  subject 
to 
conditions  relating  to  both  public  interest  objectives  and 
to  technical  requirements,  private  telecommunications 
networks  may only  be  subject  to  technical  requirements. 
In  broadcasting,  the  definitions  of  broadcasting  in  a 
number  of  Member  States  specifically 
the 
element  of  delivery  to  the  public  to  categorise  services 
falling within  the  broadcasting regime. 

include 

copyright.  These  have  clarified  that  a  "public 
communication"  for  the  purposes  of  copyright 
law includes  the  situation  where a  work  is  made 
available  to  the  public  (for  example,  via  a  web 
site) in  an  interactive way. 

The challenge to regulatory structures 

The  fragmentation,  complexity  and  diversity  of 
regulatory  structures  involved  in  the  converging 
sectors  was  one  of  the  issues  highlighted  in 
Section  111.2  above.  To  the  extent  that  a  risk  of 
overlapping  regulation  exists  or the  need  to  deal 
with  multiple 
regulators  within  or  between 
Member  States,  market  players  may  call  for  a 
rationalisation  of  current  structures  in  order  to 
avoid  unnecessary  administration 
creating 
barriers.  For  example,  where  services  can  be 
offered over a single network,  organisations  may 
benefit  from  dealing  with  a  single  regulatory 
authority  in  a  Member State  on  questions  linked 
to  that  network,  irrespective  of  the  services 
offered over the network. 

>. 

. 

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the' CPf'\Y~r9~~~~".;:"pro(;~§.S1trna~t'ir:riPact,,·on c;the 
prin9ipl·~'~YDA~fgipmngi9u~ent'·~eg4l~tiof1 . in·.the 
telecommuo'icatiohs;r·~media·and IT sectors. 

·  ; ··,·J:  :  · ._ . . :· ~~~::  · . .-··. 

.:._. .. ~5-'<':!:'; :.:·.,:·:·.· 

,.  :·  ·.· 

. 

,. 

.: 

.,> 

(A) 
Do  current  developments  require  more 
or  less  regulation  in  the  sectors  affected  by 
convergence,  more  or 
reliance  on 
competition  rules,  and  more  or  less  reliance  on 
market forces to achieve the objectives  identified 
in  earlier Chapters? 

less 

if  so, 

Whether  and 

to  what  extent 
(B) 
convergence 
principles 
the 
underpinning  existing  regulatory  approaches  in 
the telecommunications,  media and  IT sectors? 

challenges 

IV.2 Tackling th~ barriers ~ The regulatory 

issues 

This  section  examines  seven  broad  areas where 
potential 
been 
identified: 

regulatory 

barriers 

have 

•  Definitions 

•  Market entry and  Licensing 

•  Access  to  networks,  to  conditional  access 

systems and  to  content 

•  Access to  frequency spectrum 

•  Standards 

20 

•  Pricing 

• 

Individual consumer interests 

The  section  does  not  address  a  number  of 
issues which  are currently the  object of separate 
initiatives within  the Commission.  These include 
areas  such  as  media  ownership,  digital 
signatures,  and  encryption,  and  as  mentioned 
above,  intellectual  property  rights,  copyright  and 
related rights. 

IV.2.1  A need for new definitions? 

the  boundaries· 
Current  definitions  delimit 
regulation  and 
between  different  sectoral 
different  regulators.  Regulation  is  linked  to  the 
definitions  of activities.  Although  regulation  can 
be  "technology  neutral",  as  in  the  broadcasting 
sector  (and  increasingly  in  the  telecoms  sector) 
it  may  be  linked  to  the  technology  used  to  offer 
services,  as  well  as  between  areas  which  are 
regulated  and  those  which  are  largely  free  from 
detailed rules. 

The  convergence  process  will  not  remove  the 
need  for  definitions,  but  uncertainty  about  the 
regulations  applicable  to  activities  or  different 
definitions  at  national  level  could  create  barriers 
to  investment or to  the  provision  of services.  At 
the  same  time,  it  should  be  noted  that  the  fact 
that  different  services  can  be  delivered  over  the 
the 
same  network  does  not 
character  of  the  services  so  that  they  become 
one and  the same service. 

itself  alter 

in 

current  approaches 

In  the  light  of  the  potential  barriers  identified 
regulatory 
above, 
definitions 
those 
the  way 
definitions  are  applied  by  regulatory  authorities) 
should  be examined to  consider whether they: 

to 
in  which 

(and 

•  are  sustainable  in  the  light  of  technological 

developments; 

• 

• 

result  in  the  same  service  falling  under  a 
more  than  one  regulatory  regime,  and  where 
it does, whether that is justified. 

to  discrimination  by  allowing  similar 
regulated 

lead 
networks  or  services 
differently. 

to  be 

for  certain  new  activities. 

A  number  of  Member  States  have  provided 
definitions 
In 
Germany,  new  concepts  of  "teleservices"  and 
"media  services" have  been  created,  focused  on 
the 
the  nature  of  the  activity  rather 
underlying 
in 
technology. 
France  has  also  focused  on  the  nature  of  the 
service rather than  its underlying platform. 

Audiovisual 

than 

law 

Possible options 

One  option  would  be  to  continue  to  work  with 
these 
existing  definitions, 

recognising 

that 

remain  valid  for  the  majority  of services  offered 
and  to  extend,  where  appropriate,  the  principles 
underpinning  current  regulation,  whilst  adapting 
the  way  in  which  it  is  applied  to  take  account  of 
the specific characteristics of the "new" services. 

A  second  option  might  be  the  creation  of  a 
separate  category  of "new"  services  to  co-exist 
with existing definitions. 

A third  option  would  be  the  adaptation  of current 
definitions  used  in  telecommunications,  and/or 
broadcasting 
trends  and 
developments. 

reflect  current 

to 

IV.2.2 Market entry and Licensing 

identified 

the  potential  barriers 

Among 
in 
Chapter  111  were  a  number  resulting  from  the 
impact  of  the  differing  market  entry,  licensing 
and  operating  conditions  in  the  sectors  affected 
by convergence.  This  raises  a number of issues 
which  are considered below: 

Market Entry 

The  grant  of  special  and  exclusive  rights  by 
Member  States  is  not  incompatible  with 
the 
Treaty  rules,  where  such  rights  are  justified  for 
the  fulfilment  of  a  task  of  general  economic 
interest  assigned  to  the  undertaking  concerned 
and  proportionate  to  the  achievement  of  the 
objective  in  question,  even  if those  rights  result 
in  a restriction  of competition  or  a  barrier  to  the 
free movement of services. 

In  this  context,  some would  advocate that where 
any  network  can  potentially  carry  any  service, 
public  authorities  should  ensure  that  regulation 
does not stop this  happening.  They would  argue 
that  to  allow  artificial  restrictions  on  the  use  of 
networks,  or to  maintain  monopolies where other 
parts  of  the  converged  environment  are  fully 
open  to  competition,  may  deny  users  access  to 
innovative  services,  and  create  unjustified 
discrimination.  Such  an  approach  would  be 
the 
seen  by 
technological  and  market trends  identified  earlier 
in  this  Paper. 

running  counter 

them  as 

to 

Barriers could occur in  a number of ways: 

(i)  the  grant  of  monopoly  or  special  rights  over 
networks  or  services  to  one  or  a  small 
number  of  companies,  may  prevent  others 
from  providing the same service; 

(ii) limiting  the  services  that  can  be  offered  over 
a  given  network  (for  example,  preventing  a 
telecoms  operator  from  using  its  network  to 
offer entertainment services) 

(iii)requiring  certain  services  (such  as  free-to-air 
broadcast  channels)  to  be  carried,  which 
reduces  the  scope  for  other  services  to  be 
provided, 

21 

Others  would  argue  that  the  grant  of  limited 
rights or limiting the use of networks to  particular 
purposes  are  important  ways  of  encouraging 
investment. 

Some also  argue that  these  types  of restrictions 
are particularly important where competition  is  at 
an  early  stage  or  where  a  particular  player 
enjoys  a  very strong  position  (for example,  over 
a competing network or over "premium" content). 
In  such  cases,  specific  safeguards  can  ensure 
that  potential  competitors  are  not  discriminated 
against or that there  are  adequate  incentives  for 
them  to  enter  the  market.  According  to  this 
argument,  appropriate safeguards might take the 
form  of  accounting  separation  or  transparency 
requirements,  structural  separation  or  even  full 
line-of-business restrictions. 

Licensing 

subject 

are  not 

Many activities  and  areas  in  the  computing,  and 
IT  areas 
licensing 
requirements.  That is  likely to  continue to be the 
case  in  the  future  and  the  Commission  sees  no 
reason  why  there  should  be  any  change  in  this 
practice,  providing  IPR  issues  are  effectively 
addressed. 

to 

regulatory 

At  the  same  time,  licensing  is  likely  to  remain  a 
through  which  public 
key 
tool 
authorities  can  exercise  control  over 
their 
national  markets,  particularly  in  relation  to  the 
prov1s1on 
and 
broadcasting networks and services. 

telecommunications 

of 

Any  assessment  of  the  justification  for,  and 
effectiveness  of,  licensing  procedures  must  in 
the  first  instance  be  made  in  the  context  of the 
specific  sector to  which  these  rules  are  applied. 
Nevertheless,  the  range  of  potential  barriers 
licensing 
identified 
suggests 
to  be 
examined  more closely  in  the  light of technology 
and market trends. 

linked 
issue  could  need 

in  Chapter 
that 

this 

to 

Ill 

the 

Some  commentators  argue  that  a  key  aim  must 
be to make it easier to  get into the market and  to 
move  towards  lighter  obligations  applied  in  a 
converged 
consistent  manner  across 
environment.  They are therefore  encouraged  by 
examples  in  the  computing,  Internet  and  on-line 
publishing  industries,  where  a  degree  of  self 
regulation,  for example,  in  relation  to  harmful  or 
illegal content on  the  Internet,  has supplemented 
laws,  such  as 
the  application  of  general 
competition  or  consumer  protection 
rules 
applying  across  whole 
range  of  economic 
activity.  Even  so,  self-regulation  is  not  without 
risks  for  the  Internal  Market  given  the  greater 
possibility 
in 
divergent 
developing  self-regulation,  unless  co-ordinated 
to some degree at a Community level. 

approaches 

for 

consumers  may 

At the same time,  even  where licensing  systems 
are  not needed  and  self-regulatory  solutions  are 
proposed, 
require 
guarantees  that  their  interests  are  adequately 
protected  and  that the respective  responsibilities 
of service  providers  and  operators  are  identified 
with regard  to the consumer.  Consumers should 
be 
the  development  and 
operation of any self-regulatory approaches. 

involved  with 

fully 

still 

The  global  dimension  of  the  Internet  and  other 
communications and  broadcast services will  also 
impact  on  approaches  to  the  enforcement  of 
licensing, and  call  into  question the relevance of 
national  licensing  of activities  carried  out  either 
within  a  Member  State  or  delivered  by  regional 
platforms, for example,  by satellite. 

and 

(beyond 

through 

frequency 

licensing. 

innovation 

Encouraging 
efficient 
operation 
Awarding 
authorities  could  consider  moving  away  from 
licensing  approaches  which  prevent  innovation 
or limit  efficient  operation.  One  example,  in  the 
telecommunications  area,  would  be  tying  the 
delivery  of services  to  a  particular  technological 
platform  - for  instance,  by  requiring  separate 
licensing 
assignment 
procedures) for a fixed  network operator wishing 
to  use wireless-based  systems  in  the  local  loop. 
A  new  approach  to  the  licensing  of  broadcast 
services  may  be  necessary. 
At  present 
broadcasters  are,  generally  speaking,  licensed 
or authorised  on  a  channel-by-channel  basis  by 
the  relevant  authorities  within  each  Member 
State.  These  systems,  which  .are  a  product  of 
the  historical  development  of 
tradition  and 
television  broadcasting  services  may  require 
reviewing 
in  a  new  multichannel  digital 
environment.  Possibilities  such  as  the  licensing 
of broadcasters  for  a  set  of services  (such  as  a 
satellite package or a terrestrial multiplex),  rather 
than for individual .channels should be evaluated. 
The  1996  UK  Broadcasting  Act,  which  provides 
for  digital 
for  multiplex  services 
terrestrial  television,  is  an  example.  of  what  is 
perhaps  the  beginning  of a  trend  !hat  should  be 
encouraged. 

licences 

· 

Common principles for the award of licenses 
As  indicated  in  Chapter  Ill,  divergent  licensing 
conditions  may  deter  market  entry  and  act  as  a 
barrier  to  an 
internal  market.  Where  such 
barriers  are  identified,  they  would  have  to  be 
justified  by  a  public  general  interest  objective 
and be proportional to that objective. 

To  avoid  such  divergence,  there  may  be  scope 
for  applying  a  common  set  of principles  across 
the Community.  These could include: 

awarding 

the 
independent from actors in  the sector, 

authorities 

should 

be 

• 

22 

•  procedures  should  be  transparent  and  non 
discriminatory, set against defined timetables, 
leading to  decisions which  should  be  open  to 
appeal and 

•  Any  fees  associated  with  a  licence  be  in 
proportion  to  the  level  of  effort  involved  in 
aaministering  the  licensing  process,  and  not 
constitute  a  discriminatory  levy  on  expected 
profits. 

•  Notwithstanding  the  previous  principle,  fees 
may, 
the  case  of  licensing  of  radio 
frequency  be  set at a level  which  encourages 
the efficient use of the resources allocated. 

in 

IV.2.3  Access to networks, conditional 
access systems and to content 

digital 

I  and 

television 

conditional 

The question  arises  as  to whether rules  for open 
access  currently  applied  to  telecommunications 
and 
access 
infrastructures  should  be  applied  more  widely  in 
the  sectors  affected  by  convergence. 
If  market 
and  technology  trends  develop  as  suggested  in 
Chapters 
this  Green  Paper, 
II  of 
convergence  is  likely  to  see  a  shift  in  the  value 
chain,  such  that  content  production,  packaging 
and  service  provision  increase  in  value  (though 
not  necessarily  as  separate business  activities), 
whilst  carrying  services  over  a  fixed  or wireless 
in  some  merger 
network  may,  as 
reflected 
low  value 
activity,  become  comparatively 
activities.  This  trend  will  be  accompanied  by 
attempts  on 
today's  network 
operators  to  extend  their  activities  into  higher 
value business areas. 

the  part  of 

Access at either end  of the transmission  network 
(i.e.  the  delivery  of  the  service  to  the  user's 
phone,  PC  or television  and  the  ability to  access 
the  network  in  the  first  place  to  offer  services  or 
content) will be of crucial importance. 

In  general  the  terms  on  which  access  is  granted 
to  networks,  to  conditional  access systems,  or to 
is  a  matter  for  commercial 
specific  content 
agreement between  market actors.  Competition 
rules  will  continue  to  play  a  central  role  in 
resolving  problems which may arise. 

This  raises  the  issue  of  the 
role  for  sector 
specific rules  at a Community level  alongside the 
general  Treaty  provisions  promoting  undistorted 
competition and the free movement of services. 

is  now 

legislation 

EC 
in  place  supporting 
commercial  agreements  for  the  interconnection 
and 
telecommunications 
of 
networks  and  services.  Similar  legislation  is  in 
place  in  relation  to  digital  television,  in  particular 

interoperation 

regarding  Access  by  third-party  broadcasters  to 
conditional access systems. 53 

The  emerging  market  will  consist  of  players  of 
very different sizes,  but as  indicated  above there 
will  also  be  strong  vertically-integrated  operators 
audiovisual 
telecommunications, 
the 
from 
(principally 
IT/software 
and 
broadcasting) 
industries  building  on  their  traditional  strengths 
Issues  which  could 
and  financial  resources. 
include 
arise  across 
bundling  of  content  and  services,  or  of network 
capacity  and  services,  predatory  pricing,  cross 
subsidisation  of  services  or  equipment,  and 
discrimination in  favour of own activities. 

the  different  sectors 

Furthermore,  the  predominant position  of current 
fixed 
telecommunications  and  broadcasting 
operators in  the  residential  market will  mean that 
they  will  control 
for 
bottlenecks for accessing customers.  Apart from 
the 
include 
conditional access and  navigation systems. 

local  subscriber 

foreseeable 

future 

these 

loop, 

the 

Access to networks 

As  stressed  above,  as  a  general  rule  issues  of 
access  to  networks  or  to  content,  are  a  matter 
the 
for  commercial  agreement,  subject 
application  of  competition  rules.  Nevertheless, 
in  some areas,  regulatory  intervention  to  support 
the  commercial  process  has  been  provided  for 
within  current frameworks. 

to 

In  the  telecommunications  sector,  the framework 
agreed  for  interconnection  ensures  that  users 
can  contact  any  other  user  and  that  service 
providers  can  access  those  customer  on  fair, 
non-discriminatory  and  proportionate 
terms. 
Additionally,  powers  to  intervene  and  resolve 
qisputes  are  given  to  the  national  regulatory 
authorities for telecommunications  and  a number 
of safeguards  are  put  in  place  to  ensure  greater 
transparency and  non-discriminatory behaviour. 

As  indicated  in  Chapter  Ill,  the  fact  that an  open 
framework  is  applied  to  one  set  of infrastructure 
but  not  to  others  may  create  barri~rs and  distort 
investment,  particularly, 
if  convergence  of 
technologies  extends  over  time  to  the  industry 
and  market and  service  levels.  The  issue  in  the 
context  of  possible  convergence  may  therefore 
be  whether  there  is  a  case  for  the  extension  of 
open  access  principles  such  as  those  applied  to 
other 
telecommunications 
networks,  or  whether  there  are  other  principles 
which might be developed. 

infrastructure 

to 

Even  within  the  telecommunications  sector,  the 
development _of  the  Internet is  raising  a  range  of 

53  Directive  95/47/EC  on  the  use  of  standards  for  the 
transmission  of  television  signals,  O.J.  No.  L  281/51, 
23.11.95. 

23 

issues  connected  to  the  terms  on  which  Internet 
access providers get access to  current fixed  and 
mobile  networks.  One  issue  is  whether  they 
should  enjoy  the  same  interconnection  rights  as 
other players and whether they should  be able to 
to  unbundled  service  elements, 
get  access 
whilst another issue is  whether such  providers  in 
offering  a range  of telecommunications  services 
should  share  some  of 
the  obligations  of 
providing telecoms services. 54 

issue  of  access 

The 
to  conditional  access 
systems  may  become  more  significant  than  the 
issue  of control  over  the  pipe  up  to  the  point  at 
which  it connects to  such a system. 

in 

reality, 

require  a 

introduced  under 

telecommunications 

sector, 
Again, 
the 
Community  policy  does  not 
full 
unbundling  of  the  local  loop,  or  a  structural 
separation  of the  associated  infrastructure,  from 
-the  provision  of  services  carried  over  it.  This 
does  not  exclude  appropriate  safeguards  or 
requirements  being 
the 
issue  of 
In 
competition  rules. 
unbundling  of  the  local  enc  of  transmission 
networks  is  complex  and  must  be  closely  linked 
to the degree of overall competition  in  the  market 
concerned,  the  availability  of  viable  alternative 
distribution  channels  and  the  starting  point  for 
competition  in 
the  particular  market.  Some 
argue  that  unbundling  may  act  against  the 
term  by 
consumer 
removing  economic  incentives  for  orgar:iisations 
to  put  their  own  wired  or  wireless  networks  in 
place. 

interest 

longer 

the 

the 

in 

Conditional access systems 

charges 

their 
or 

investment  either 

Conditional  access  systems  are  the  technical 
means  by  which  content  and  service  providers 
through 
recoup 
can 
subscriptions 
individual 
for 
consumption. 
The  Television  Standards 
Directive  provides  a  regulatory  framework  for 
conditional  access  to  digital  television  services, 
based on  a requirement for those operating such 
systems  to  offer broadcasters  technical  services 
on  a  fair,  reasonable  and  non-discriminatory 
takes  a  deliberately 
basis. 
balanced  position  for  the  start-up  phase  of  this 
new  industry. 
Its  requirements  are  sufficiently 
light  to  encourage  innovation  and  investment  in 
a  rapidly  evolving  technical  and  commercial 
environment,  and  sufficiently  strong  to  protect 
fair  competition  and  consumer  welfare.  The 
Commission 
the  pace  of 
is  concerned  at 
implementation  of this  Directive  into  national  law 

The  Directive 

in  the  Member  States. 
It  is  actively  employing 
the  powers  given  to  it  by  the  Treaty  to  ensure 
implementation.  Where 
timely  and  correct 
incorrect 
the 
Commission  has  acted  vigorously  to  ensure 
proper compliance with the Treaty. 

implementation  has  occurred 1 

Navigation systems have emerged  as  a tool  to 
help  users  manage  the  growth  and  range  of 
information  and  services 
Information 
in 
Examples  of  navigation  systems 
Society. 
include  Browsers 
(e.g.  Netscape,  Microsoft 
Explorer),  search  engines  {Altavista,  Yahoo, 
etc.) and  electronic programme guides (EPGs). 

the 

they 

form 

Currently, 
two  distinct  market 
segments  - Browsers  and  search  engines  are 
tools  for  exploring  Internet web  pages,  whereas 
EPGs  represent  the  electronic  ''zappers"  of  the 
future,  guiding  viewers  through  a  myriad  of 
digital 
television  programmes  and  channels. 
Many consider that this  new mode of programme 
selection  will  lead  to  the  demise  of the  channel 
concept  as  we  know  it  today,  to  be  replaced  by 
strong  umbrella  brands  complemented  by  a la 
carte choices on  the part of consumers. 

the 

to  explore 

Browsers  and  search  engines  are  inherently 
independent,  able 
Internet 
universe  without  tying  themselves  to  particular 
sources  of information,  or to  particular operating 
Recently,  however, 
hardware  or  software. 
competition  concerns  have  been  raised  about 
the  possibility  of  Browsers  being  packaged  with 
other software  or  even  becoming  fully  integrated 
to the  software itself. 

Conditional  access  and  Navigation  systems 
depend  for  their  success  on  the  co-operation  of 
market  players  present  in  different  parts  of  the 
the  spectre  of  a  gate 
value  chain,  raising 
keeping  role  which  could  be  abused,  especially 
by  vertically-integrated  players, 
foreclose 
market  entry  by  others.  An  extension  of  the 
principles  already applied  to  the  digital  television 
field  with  the object of ensuring that new entrants 
will  not  be  excluded 
to  such 
systems should be considered. 

from  access 

to 

In  contrast  to  Browsers,  EPGs  are  linked  to  the 
'information'  accessed  via  them  developing  as 
support  devices  for  specific  digital  television 
for  offerings  of 
programme  bouquets,  or 
Issues  of 
television  and 
ensuring 
third-party  services  or 
programming,  and  the  quality  of  such  listings, 
Exclusive 
will  be  of  critical 

interactive  services. 

importance.ss 

listing  of 

54  For further discussion,  see 

the  OECD  Report  Op  cit  at 
note 5.  A number of the issues linked  to  the  provision of 
telephony  over  the  Internet  are  also  considered  in  the 
Commission's  forthcoming  Communication  on  the  status 
of Internet telephony under Directive 90/388/EC 

55  Analogous  problems  have  already  been  addressed 
under  European  competition  rules, 
in 
relation  to  computer  reservation  systems  for  air  travel 
which  are  governed  by  Council  Regulations  2299/89, 

for  example, 

24 

arrangements  tying  particular EPGs  to  particular 
service  bundles  may  become  a  problem 
requiring  regulatory  intervention  to  ensure  third 
party  access  on 
transparent  and  non 
discriminatory terms. 

fair, 

to  manage 

A  new  feature  of the  consumer's  home  terminal 
is  the  Application  Programming  Interface  (API). 
The  API  is  a  set  of  software  in  the  terminal, 
resembling  the  operating  system  of  a  PC.  It  is 
interactive  applications, 
used 
including  EPGs,  carried  by  the  terminal,  and  to 
provide a specified  interface for the  development 
of applications  by  third-parties.  The PC  industry 
owes  its  success  in  a large part to  the  role  of de 
facto  standard  APls  in  facilitating  the  creation  of 
a  wide  variety  of 
developed 
applications  software.  At  the  time  of  writing 
there  are  a number of different APls  used  in  set 
top  boxes  in  Europe,  risking fragmentation  of the 
market 
interoperation. 
Furthermore  the  combined  use  of  proprietary 
APls together with  EPGs  and  conditional  access 
leads to  increased of risks  of abuse by operators 
controlling access to  services. 

third-party-

problems 

and 

of 

in 

of 

an 

environment 

The  market implementation of digital television  is 
rapid 
occurring 
technological  change,  the ·eventual  outcome  of 
which  is  not  yet  clear.  Comments  on  this  issue 
the  Commission 
should 
in 
the  Television  Standards 
assessing  whether 
to  cope  with 
Directive 
this 
technological 
its  market 
and 
consequences. 

is  adequate 
change 

therefore  assist 

Access to content 

rules. 

As  a general  rule,  arrangements  made  between 
content  providers,  rights  owners  and  content 
carriers  are  a matter for  commercial  agreement. 
If exclusivity  is  granted,  this  may be  an  issue for 
competition 
Exclusive  agreements 
between  content  providers  and  content  carriers 
may  limit  consumer  choice  by  excluding  access 
to  content  provided  by  competitors,  especially 
until 
the 
provision  of  delivery  channels 
the  user. 
Possession  of  rights  to  key  content,  such  as 
major  sporting  events,  may  give  market  players 
particular commercial  power. 

is  effective  competition 

there 

to 

in 

Although  the  content  industry  is  heavily  scale 
dependent,  it  generally  exploits  such  economies 
of  scale  by  careful  management  of  distribution 
windows  (e.g.  cinema,  video  rental,  video  sell 
through,  pay-per-view,  pay  television,  free-to-air 
television).  Exclusivity  of distribution  is  often  a 
feature  which  secures  this  process  for  content 
the 
owners. 

Convergence  may 

impact  on 

3089/93,  reviewed  in  COM(97)246 final,  Brussels,  9 July 
1997. 

25 

current  basis 
for  window  management,  and 
could  lead  to  a  greater  dependence  on  non 
exclusive  electronic  distribution  as  a  more 
effective means of maximising revenues. 

conveyance  bottlenecks. 
the  exclusive  distribution 

Likewise,  convergence  may  have  the  effect  of 
For 
dissolving 
example, 
rights 
awarded  to  cable  television  companies  may  no 
longer  translate  automatically 
into  monopoly 
power at the service level.  Cable companies are 
to  compete  with  digital  satellite  and 
likely 
terrestrial 
Internet 
access  providers 
telecommunications 
operators. 

broadcasters, 

television 

and 

IV.2.4 Access to the Frequency Spectrum 

Despite  the  fact  that  the  digitisat1on  underlying 
convergence  significantly  expands  the  potential 
capacity  of transmission  networks,  the  growth  of 
demand,  both  in  terms  of  market  players  and 
bandwidth,  means 
issues  will 
continue  to  be  a  key  regulatory  issue;  principle 
amongst these is access to  radio-spectrum. 

that  resource 

in 

Frequency spectrum  remains  a  key,  but  finite 
resource  even 
the  digital  age.  Whilst 
significant  gains  will  ultimately  result  from  a 
switch  from  analogue  to  digital  technologies, 
both  for  mobile  telephony  and  for  broadcasting, 
any  transition  will  remain  a  slow  one. 
For 
Internet  access  and  other  on-line  services, 
satellite-based  delivery  offers  the  possibility  of 
high  speed  delivery to  a PC  or television  and  the 
use  of the  fixed  telecommunications  network  as 
a return  path.  In  addition,  the take up  of wireless 
local  loops  and  the  arrival  of  Universal  Mobile 
Telecommunications  Services  (UMTS)  early  in 
the  next  century  all  point  to  a  steady  growth  in 

· . demand for spectrum. 

Given  the  importance  of  spectrum,  variations 
identified  in  Chapter  Ill  between  sectors  with 
regard  to  how  much  spectrum  is  available  and 
how  much  that  spectrum  will  cost  may  have  an 
important  impact on  the  development of existing 
and  new  delivery  channels.  Whilst  overall 
allocations  are  determined  at  an  international 
and  regional  level,  current  differences  across 
sectors  to  the  pricing  of  frequency  may  create 
potential  competitive  distortions.  One  example 
could 
be  where  a  broadcaster  offering 
multimedia  or  on-line  services  uses  spectrum 
obtained  free  or  at  low  cost,  competes  with 
operators  from  the  telecommunications  sector 
who  have  paid  a price  reflecting  the  commercial 
value of the  resource allocated. 

Many  commentators  argue 
from  an 
economic  standpoint,  pricing  spectrum  may 
encourage its  more efficient use and  may help to 
ensure  that  frequency  is  al.located  to  the  areas 

that, 

where it  is  most needed.  They would  argue that 
similar  commercial  principles  should  influence 
frequency  policies  at  the  stage  that  allocation  is 
determined 
Radio 
communications  Conferences  or  at  a  regional 
level,  so  that allocation  decisions  should  seek to 
make  spectrum  available  to  high  value  users  in 
preference to low value users. 

the  World 

within 

Were  all  spectrum to  be  subject to  a commercial 
valuation  this  might  have  a  knock-on  effect  of 
encouraging  existing  public  users,  such  as  the 
military  or the  police,  to  use  more  cost-effective 
technological  solutions, 
freeing  up  certain 
frequency bands for new services. 

is 

Frequency  auctioning 
favoured  by  many 
economists  as  the  way to  best ensure outcomes 
which  are  in  the  consumer's  ultimate  interest. 
the 
Although  others  express  concern  about 
impact  of  such  pricing  on  prices  charged  to 
users. 

With  regard  to  efficient  use  of  spectrum,  one 
approach  could  be  to  move  away  from  current 
practices  of  assigning  particular  blocks  of 
spectrum  to  particular  services,  or  to  the  use  of 
particular  technologies  to  deliver  such  services. 
In  such  a  situation,  certain  minimum  technical 
safeguards  would  still  be  required,  (e.g.  against 
electro-magnetic  interference  between  different 
systems).  This  is  one  of the  issues  raised  in  the 
context of the introduction of UMTS,  but could  be 
of wider application.  In  practice  this  might  mean 
that  instead  of  assigning  a  particular  band  of 
spectrum  exclusively  for  the  provision  of mobile 
communications  or  broadcasting,  the  assignee 
could  be  allowed  to  use  the  spectrum  for  the 
services of its  choice. 

increasing  demand 

for  spectrum, 
Finally, 
particularly  for  UMTS  and  for  satellite-based 
services  puts  increasing  pressure  on  existing 
mechanisms  for  frequency  co-ordination  at  a 
regional  level. 

in 

Chapters  I and  11  have  illustrated  how  each  part 
of  the  converging  sectors  are  moving 
from 
analogue to  digital  technologies.  Member States 
this  process  by 
role 
could  play  a  key 
developing  clear  timetables  for  such  a  switch  in 
order  to  give  clarity  to  service  planning  Others 
argue that this  is  an  issue of user preference and 
should  be  left  to  market  forces.  Nevertheless, 
the  level  of  demand  for  spectrum  is  likely  to 
outstrip  currently  available  frequency  resources, 
so  that  Governments  may  have  a  key  role  in 
the  current  balance  between 
reassessing 
telecommunications,  broadcasting  and  civil/ 
State usage of available resources. 

Additionally,  consideration  might  need 
to  be 
given  to  whether such  a switch  over needs  to  be 

co-ordinated  at  a  European  level. 
It  can  be 
argued  that  a  clear  timetable  for  the  complete 
transition  from  analogue  to  digital  transmission 
of services  using  the  frequency  spectrum  would 
avoid  not  only  the  fragmentation  of the  Internal 
Market,  but  also  delays  in  releasing  valuable 
spectrum  used  by  analogue  services  today,  to 
other  users. 
issues  of 
Other  argue 
frequency  allocation  such  .as  this  are  governed 
the 
by 
Community  has  no 
their 
resolution. 

the  subsidiarity  principle  and 
to  play 

that 
in 

that 

role 

IV.2.5 Standards 

the 

It  has  been  argued  in  this  Paper that  one  of the 
most  important  consequences  of the  blurring  of 
technological  borders  between 
information 
technology,  telecommunications  and  consumer 
increasing  globalisation  of 
electronics  is 
services.  The  inherently  global  nature  of  the 
Information  Society  calls  for  any  standardisation 
in  support  of  its  development  to  be  similarly 
from  any 
global.  Users  may  want  access 
terminal  to  any  service,  independently  of  the 
technology  used,  or  the  geographical  point  of 
such  access, within  a multi-vendor environment. 

A major objectite for standardisation  therefore  is 
to  achieve  interoperability between  networks and 
services.  Technological  harmonisation  is  not an 
objective.  However,  standardisation  is  a  tool 
which  can 
reinforce  both  general  policy 
objectives,  such  as  the  creation  of  an  Internal 
Market  for  communications  services,  and  the 
Encouraging  best 
regulatory 
business  practices 
to  data 
protection  and  security of digital  signatures  may 
be  supported  by standardisation  and  consensus 
building  within 
regulatory 
framework. 56 

in  areas  related 

appropriate 

framework. 

an 

There  is  a  legitimate  public  interest  in  providing 
industry,  users  and  public  authorities  with 
efficient platforms for consensus  building  both  at 
European  and  international  level.  Even  though 
the  Information  Society is  global,  s_tandardisation 
can  start  at  regional  level,  provided  that  players 
the 
from  other 
activities.  The  workshop  mechanism  has  the 
potential  to  offer  the  platform  for  consensus 
building  while  it  also  allows  European  players  to 
international 
increase 
standardisation scene. 

regions  can  participate 

impact  on 

their 

the 

in 

IV.2.6 Pricing 

The  IT  and  on-line  publishing  markets  operate 
In 
almost entirely  free  of specific  price  controls. 
the  broadcasting  sector,  price  controls  (e.g.  on 
the  licence  fee),  where  they  exist,  are  generally 

56  Op.cit.  Note 60 

26 

for 

is  based  on 

free-to-air  channels. 

motivated  by  public  interest  objectives  seeking 
to  ensure  that  service  remains  affordable  for 
viewers and  listeners,  so  that high  penetration  is 
achieved 
The 
affordability  requirement  for  universal  service  in 
the  same 
telecommunications 
premise  and  translates,  in  a number of Member 
States,  into a price  cap  mechanisms  applying  to 
a  basket  of  retail  and/or  business  services  and 
to  subsidised  social  tariffs  for  particular  groups 
of  users.  Pay  TV  channels  including  premium 
services,  as  well  as  commercial  activities  of free 
to  air  regulators  are  not  generally  subject  tb 
price  regulation,  but  are  subject  to  competition 
from  other market operators. 

Additionally,  under  specific  telecommunications 
regulation,  as  part  of  the  transition 
to  fully 
competitive  markets,  controls  apply  to  operators 
with  significant  market  power  to  require  that  the 
charges  for  interconnection,  voice  services  and 
leased  infrastructure  are  cost-oriented. 
In  that 
situation,  price  regulation  is  acting  in  as  a proxy 
for  the  effects  of competition.  There  has  been 
no  direct  analogy  in  the  case  of  point  to  multi 
point  broadcasting,  but  interconnect  issues  are 
now  arising  where  interactive  or  transactional 
elements  are  being 
introduced  - conditional 
access is  the first such area. 

Innovative  pricing  packages  will  play  a  key  role 
in  promoting  services  in  the  Information  Society. 
The  take-off  of  many  on-line  and  transactional 
services  is  directly  influenced  by  the  cost  of the 
underlying  infrastructure.  A  key  commercial 
message  must  be  that  innovative  pricing  will  be 
central  to  a  much  wider  take  up  and  use  of on 
line and  other services. 

to  whether 

Additionally,  an  assessment  may  need  to  be 
there  are  potential 
made  as 
distortions  where  differing  pricing  rules  apply  to 
different  networks,  even  though  in  a  converged 
environment  any  network  may  be  able  to  offer 
any  service.  At  the  same  time,  the  existence  of 
competitive delivery channels  is  likely to  limit the 
possibility  to  set  prices,  for  example  for  network 
access,  independently  of  competitors,  so  the 
case  for  regulatory  intervention  may  not  be 
made. 

Finally,  convergence  may  over  time  expose 
public  broadcasters  to  commercial  pressures. 
The  experience  in  telecommunications  may  be 
illustrative,  as  operators 
in  this  sector  have 
moved  over  time  to  price  their  services  in  a 
manner  more  consistent  with  the  increasingly 
the 
competitive  environment,  notwithstanding 
regulatory  constraints  on  such  pricing..  Such 
experience  demonstrates  that  such  adjustment 
in  pricing  structure can  occur in  a manner which 
does not affect adversely the  overall  affordability 

of the  services  delivered.  The  manner  in  which 
public broadcasters are currently funded  (licence 
fee,  advertising,  public subsidy) does not allow a 
direct  analogy  with  telecommunications  to  be 
drawn. 
prevent 
Whether 
introduce  different 
broadcasters  wishing 
pricing  structures  is  a matter for  comment,  as  is 
the 
that  more  commercial  pricing 
approaches  would  have  on  eligibility  for  State 
funding  or  the  ability  to  access  other  revenue 
sources,  such  as  advertising,  subscription 
funding or exploitation of rights. 

this 
to 

impact 

should 

,:1~;~!¥ 
(A) 
Are  the  definitions  in  the  telecommunic-
ations,  media  and  IT  sectors  in  national  and/or 
Community 
the 
convergence process? 

legislation 

adapted 

to 

Will 

the  convergence  phenomenon 
(B) 
require  adaptation  of existing  approaches  or the 
adoption  of  new  approaches  to  be  applied  to 
issues  of  market  entry  and  licensing;  access  to 
conditional 
networks, 
access systems),  content;  and pricing? 

customers 

(including 

to 

Will  convergence  require  changes  in  the 
(C) 
the  award  and  pricing  of 
approaches 
in  particular  what 
frequency  spectrum,  and 
approach  should  be 
light  of 
convergence,  to  the  issue  of  completing  the 
transition 
to  digital  services, 
including  the  need  for  a  timetable  for  analogue 
switch-off? 

from  analogue 

taken, 

the 

in 

What  should  be 

(D) 
the  objectives  of 
standardisation  in  the  light  of convergence  and 
what should  be the relationship between regional 
and  international standardisation? 

What  additional  action 
the 

(if  any) 
is 
(E) 
interests  of 
required 
consumers  and  of  users  with  disabilities  are 
respected  in  the light of convergence? 

to  ensure 

that 

IV.2. 7 Individual consumer interests 

The  objective  of  maximising  benefits  and 
minimising  the  risks  of  consumers  implies  the 
need  for  the  creation  of  adequate  regulatory 
instruments  to  protect  the  fundamental  rights 
and  responsibilities  of  consumers  arising  from 
the  wide  circulation  of information  in  the  sectors 
issues, 
affected  by  convergence. 

Privacy 

27 

responsibility  for  c9ntent  and  the  protection  of 
minors,  free  speech  versus  libel,  appropriate 
jurisdiction  and  consumer  representation,  are 
some of the  issues  that need  to  be  addressed  in 
the new environment. 

:'1Yi~IM!~ltii9le@I~lli!!Ii~J~~!¥1!~,!l~!,~ff~ -_.J_:: __ _ 
Rules  seeking  to  ensure  the  achievement  of 
certain  public and  general  interest objectives  are 
found  in  all sectors affected by convergence.  As 
highlighted above,  this  is  fully consistent with  the 
importance  attached  at  a  European  level  to  the 
role  of  services  of  general  economic  interest 
within 
the  Community  concept  of  European 
Society.  The trends  identified  in  Chapters  I and 
II  do  not  remove  the  value  of universal  service 
regulation  for  telecommunications,  or  a  public 
service  mission 
field. 
the  possibilities  now  offered  by 
Indeed, 
technology  strengthen  the  need  for  clear  and 
effective rules relating  to  specific objectives such 
as  privacy  and  data  protection;  the  promotion  of 
cultural  diversity or  the  need  for  a framework for 
the protection of minors and  public order. 

the  broadcasting 

in 

Nevertheless,  the  impact  of  convergence  may 
well  be  on  the way  such  objectives  are  achieved 
and  by whom.  Equally as  recognised  in  Chapter 
Ill,  the  different  rules  while  adapted 
the 
specific  characteristics  of  each  sector,  may 
to 
nevertheless 
integrated  service  provision  or  cross-border 
operation. 

potential 

barriers 

create 

to 

The need for public interest objectives to be 
clearly defined 

Universal  service  obligations  in  general  ensure 
the  universal  availability  of  defined  services  at 
an  affordable  price,  whilst  the  public  service 
mission  of broadcasters  extends  beyond  issues 
of universal  availability  and  price  and  lays  down 
conditions  relating  to  the  content  of the  services 
provided.  Against  this  background  the  starting 
interest 
for  any  analysis  of  public 
point 
objectives  in  the  light  of  convergence  must  be 
the  need  to  define  public  interest  objectives  so 
that  market  actors  have  a  clear  idea  of  the 
obligations with  which  they  must comply.  Some 
is  also 
that  such  an  assessment 
consider 
essential 
these 
in  order 
face  of  the 
objectives  remain  valid 
media 
and 
evolving 
environment,  whilst  others  argue 
the 
objectives  remain  Valid  and  only  the  way  in 
which  they  are  satisfied  may  evolve. 
In  either 
case,  a  proper  assessment  seems  to  require  a 
clear identification of underlying objectives. 

to  gauge  whether 
the 

in 
communications 

that 

In  the  case  of certain  objectives  in  the  different 
sectors,  specific  obligations  have  been  placed 
on  one  or  more  operator  to  guarantee  these 

28 

objectives. 
This  is  the  case  with  universal 
service carriers in  the telecommunications sector 
or  broadcasters  who  have  been  given  a  public 
service  m1ss1on. 
the  telecommunications 
case,  the  cost  of  ~hose obligations  may,  where 
they  represent  an  unfair  burden  for  the  operator 
concerned,  be shared with  other market players. 

In 

framework 

those  entering 

the  position  of 

Some  argue  that  given  that  such  a  framework 
exists within  telecommunications,  the absence of 
the  public  service 
for 
a  similar 
mission  in  broadcasting  will  deter  companies 
wishing  to  operate  on  an  integrated  basis  or 
favour 
the 
telecommunications  market from  the  media side. 
Others  respond 
that  convergence  does  not 
challenge  the  existence  of different  approaches, 
given 
the  underlying  objectives  are  quite 
different.  They further argue  that it  is  simply  not 
possible  to  cost obligations  relating  to  the  public 
service  mission  in  any  meaningful  way,  and  that 
comparisons  with  the  experience  of  telecoms 
are unhelpful in  this  regard. 

A further  issue  is  who  might  in  future  be  able  to 
fulfil  a  public  service  mission  or  offer  universal 
service?  Obligations  have  traditionally  fallen  on 
a single  designated  organisation,  (though  that  is 
now changing  ill 1he  case  of universal  service  in 
some  Member States).  However,  the  possibility 
of  offering  voice 
telephony  services  over  a 
computer or a television,  or the  ability  to  use the 
Internet to  read,  watch  or  listen  to  broadcasters' 
programming  illustrates  the  possibility  that  new 
platforms  may  play  a  role 
in  meeting  such 
obligations.  The  question  arises  as  to  whether 
this  is  an  additional  reason  for  such  obligations 
to  be properly identified. 

the 

issue 

undertake 

is  whether  existing 
Additionally, 
in  order  to 
frameworks  should  be  changed 
cre3te  a coherent  framework for  both  public  and 
private  broadcasting  organisations,  for  example 
so  that  different organisations  are  allowed  to  bid 
including 
to 
organisations  from  outside  the  traditional  sector. 
Where  specific support  in  the  form of industry  or 
even  public funding  is  available for  the  provision 
of such  services,  the  issue  arises,  inter a/ia,  as 
to  whether  that  mechanism  would  need  to  be 
open to  any organisation willing  to  be designated 
as fulfilling public interest obligations. 

obligations, 

such 

Content-related objectives 

is 

to 

leading 

Convergence 
a 
already 
reassessment  of  appro~ches  to  the  means  of 
implementing  objectives  regarding  content.  This 
has  already  been  the  case  with  approaches  to 
harmful  and  illegal  content  on  the  Internet  (see 
Section  IV.1 ).  At  its  most  basic,  the  central 
issue  is  not  the  validity  of  particular  rules  but 
whether  the  impact  of  technology  on  particular 

services  requires  a  reassessment  of the  means 
of achieving the objectives in  question. 

Essentially  this  is  an  application  of the  principle 
of  proportionality  which  means 
that  current 
approaches  must be  assessed  in  the  light of the 
specific characteristics of the service concerned. 
This  means  that  there  does  not  have  to  be  a 
single  standard  applicable  to  the  same  content 
for  distribution. 
whatever 
Instead,  different  standards  might  apply.  For 
example,  it  is  likely  that  the  controls  applied  to 
advertising  on  a  free-to-air  broadcast  would  b~ 
considered  inappropriate,  if applied  to  a  pay-TV 
programme  or  an  Internet  service,  because  of 
the  specific  characteristics  of 
the  service 
concerned. 

the  channel  used 

The role of public service broadcasting 

the 

The  public  service  mission  entrusted  to  public 
service broadcasters  is  recognised  as  of cultural 
importance 
organisations  with 
and 
this  regard  are  entitled  to 
responsibilities  in 
appropriate  funding,  subject to  compatibility with 
the  rules  of the  Treaty.  The  recent  Protocol  on 
public  broadcasting  attached  to  the  Amsterdam 
Treaty confirms this  point.57 

information 

Convergence  may  however  enable  many  more 
sources  of  audiovisual 
to  be 
accessed  by  viewers.  Public  authorities  will 
need  to  monitor on  a continuing  basis  the  extent 
to  which  desired  policy  objectives  are  being 
achieved by normal  market activity,  including the 
impact  of  other  media,  and  whether,  as  a 
consequence,  regulatory  obligations  placed  on 
broadcasters may be lightened. 

in 

the 

their 

content  could 

to 
Traditional  public  broadcasters  will  need 
reappraise 
convergent 
role 
environment.  On  the  one  hand,  their  market 
share  is  likely  to  diminish  as  users  face  an 
increasing  choice  in  a  market  already  near  to 
saturation  in  terms  of the  individual  potential  for 
consumption of audiovisual  services within  a 24-
for 
hour  day.  Moreover,  escalating  prices 
to 
premium 
them 
subject 
budgetary  pressures 
the 
that  might  outstrip 
capabilities  of existing funding  mechanisms.  The 
issue  will  be  whether  public  broadcasters  can 
continue  to  have  access  to  attractive  content  in 
the  face  of fierce  competition  for  the  acquisition 
of  programme  rights,  within  the  constraints  of 
their  existing  funding  mechanisms.  Many  are 
preparing  to  exploit  their  reputation  and  their 
customers'  "brand  loyalty"  to  compete  with  new 
pay-television broadcasters. 

57  Protocol  no  32  on  the  system  of  public  broadcasting  in 

the  Member States,  annexed to  the  EC Treaty. 

29 

in 

funding. 

The  regulatory 

On  the  other  hand,  technological  convergence 
offers  public  broadcasters  a  range  of  new 
possibilities, 
terms  of  both  ·activities  and 
potential  avenues  to  viewers  and  listeners.  This 
can  enhance  their  current  role  and  provide 
valuable  new  sources  of  revenue  alongside 
current 
framework 
should  allow  broadcasters  to  take  advantage  of 
these  new  opportunities. 
It  should  atso  permit 
them  to  benefit  from  economies  of  scale  and 
scope  where  these  also  bring  benefits  for  the 
consumer.  However,  if  state  funds  intended  to 
support a public broadcaster in  fulfilling  its public 
service  mission  were  used  to 
leverage  and 
cross-subsidise  these  new  activities  or  the  use 
of  new  technological  platforms,  such  as  the 
Internet,  then  such  practices  would  be  subject to 
the  Treaty  rules  on  competition  and  on 
the 
freedom to  provide services .. 

Other general interest objectives 

that 

their  privacy 

to  be  assured 

Ensuring  Privacy  and  Data  Protection. 
In 
order  for  convergent  services  to  develop,  users 
need 
is 
adequately  protected  and,  in  particular,  to  have 
confidence  in  the  security  of information  passed 
over  the  networks  they  use.  Legislation  has 
already  been  agreed  at  a  Community 
level 
addressing  data  protection58  and  this  will  soon 
be  complemented  by  specific  rules  governing 
data  protection  and  privacy  in  telecommunic 
ations.59 

A 
Cryptography  and  digital  signatures. 
receflt  Commission  Communication  on  digital 
signatures  and  encryption  has  recommended  a 
number  of  actions  aimed  at  ensuring  security 
and  trust  in  electronic  communications. 60  Given 
. the  global  character  of  electronic  commerce, 
emphasis  is  being  given  to  the  need  for  the 
cryptographic 
international 
availability 
products  and  services  corresponding 
the 
to 
various needs of business and  individuals. 

of 

Cultural  diversity.  The  European  Court  of 
Justice,  in  a  landmark  case  invoh(ing  the  media 
sector  ("TV10"  CJEC  23/9  of  9.10.94),  has 
that  cultural  policy  objectives 
recognised 
constitute  public 
that  a 
Member  State  may  legitimately  pursue.  Public 

interest  objectives 

58  Directive  95/46/EC  of  the  European  Parliament  and 
Council  of  24  October  1995  on 
the  protection  of 
individuals  with  regard  to  . the  processing  of  personal 
data  and  the  free  movement  of  such  data,  OJ  L281, 
23.11.95. 

59  Proposed  directive  on  the  processing  of personal  data 
and the  protection  of privacy in  the  telecommunications 
sector, .... ,Common  Position  adopted  by  the  Council  on 
12.9.96, O.J.  96/C 315/06,  24.10.96. 

60  Commission  Communication  Towards  A  European 
for  Digital  Signatures  And  Encryption, 

Framework 
COM(97) 503,  October 1997 

service  broadcasting  has  historically  been  one 
vehicle  for  achieving  this.  The  Protocol  on  this 
subject  that  will  be  appended  to  the  EC  Treaty, 
as  amended  by 
the  Treaty  of  Amsterdam, 
highlights  the  fact  that  "the  system  of  public 
broadcasting  in  the  Member  States  is  directly 
related  to  the  democratic,  social  and  cultural 
needs  of  each  society  and  to  the  need  to 
preserve media pluralism". 

At Community level, Article  128 of the  EC Treaty 
provides  that  the  Community "shall contribute  to 
the  flowering  of  the  cultures  of  the  Member 
States"  including  in  the  audiovisual  sector,  and 
that  the  Community  shall  also  "take  cultural 
aspects  into  account  in  its  action  under  other 
provisions  of  the  Treaty". 
The  Commission 
intends  to  draw up  a Green  Paper in  the  course 
of  1998  specifically  focusing  on  developing  the 
cuJtural  aspects  of  new  audiovisual  and 
information services. 

to 

relating 

interest  objectives 

Protection of minors and public order.  While 
the 
public 
protection  of  minors  and  public  order  have 
traditionally  been  recognised  at  national  and 
Community level  (cf.,  for  example,  Art.  22  of the 
the 
"Television  without 
transactional  nature  of  some  convergent 
services  will  imply  adjustments  in  the  means 
whereby  such  objectives  are  met  in  order  to 
the  principle  of 
ensure  due 
proportionality. 

frontiers"  Directive), 

respect 

for 

of 

the 

the 

difficulty 

regulatory 

invalidating 

approaches 

Additionally, 
enforcing 
safeguards  in  the  context  of harmful  and  illegal 
Internet  provides  another 
content  on 
example  of  how  convergence  is  challenging 
to 
traditional 
implementation,  whilst  not 
the 
principle that  rules  are  seeking  to  protect. 61  The 
global  nature  of the  platform  and  the  difficulty of 
exercising  control  within  a  given  Member  State 
are  leading  to  solutions  which  draw  on  self 
regulatory  practices  by  industry  rather  than  on 
formal  re.gulation,  accompanied  by  technological 
solutions  to  ensure  that  parents  take  greater 
responsibility. 
It  is  against  this  background  that 
the  Commission  has  adopted  a  proposal  for  a 
Council  Recommendation  on  the  Protection  of 
Minors  and  Human  Dignity. 62 
This  aims  to 
promote  common  guidelines  for  the  implement 
ation,  at  national  level,  of a  framework  for  self 
regulation to protect minors and  human dignity in 
audiovisual  and  information  services,  whatever 
the means of conveyance. 

61  Commission  Communication,  Action  Plan  on  promoting 

safe use of the Internet,  COM(97)583, 26.11.97 

62  Proposal 

for  a  Council  Recommendation  on 

the 
Protection  of  Minors  and  Human  Dignity  adopted  on18 
November 1997. COM(97)570. 

Does 

(A) 
the  convergence  phenomenon 
support  or  challenge  the  way  in  which  public 
interest  objectives  are  achieved 
the 
in 
telecommunications,  media and  IT sectors? 

Should  such  objectives  be  more  clearly 
(8) 
identified  and.  where 
into 
they 
particular  obligations,  should  a  wider  group  of 
actors be able to take on  such obligations? 

translate 

J~~~.-9~!~_qli~~:rer''~J-f«liir~:.tf!11"~1·~*9~;:~oa~1··· 

Options for the structure of regulation 

Chapter  Ill  highlighted  the  potential  uncertainty 
resulting  from  separate  and  multiple  regulation. 
Such  uncertainty  was  seen  as  a  barrier  to 
current  actors  wishing  to  operate  across  the 
sectors  affected  by  convergence,  and  to  the 
wider  delivery  of  services  such  as  electronic 
commerce  or 
(banking, 
insurance,  securities,  etc.)  over  converged 
platforms. 

financial  services 

that 

there  are 
Some  commentators  accept 
barriers,  but  see  these  as  neither  insuperable 
nor inconsistent-with  the  EC  Treaty.  In  practical 
terms  they  simply  represent  normal  divisions  of 
activity  common  with  any  business  operating 
across  a  number  of  sectors  of  the  economy. 
They  would  argue 
vertical 
approaches  to  regulation  are  sustainable  and 
provide  a  high  degree  of  certainty  for  most 
market actors. 

current 

that 

to 

these  barriers  as 
An  alternative  view  sees 
running  counter 
logic  of  current 
the 
technological  and  market  trends.  According  to 
this  view,  a  single  regulatory  model  for  all 
sectors  within  a  converged  environment,  based 
on  common  principles,  but  perhaps  maintaining 
certain  distinct elements  focused  on  the  specific 
services offered, is  required. 

Others  argue 
that  any  horizontal  approach 
should  reflect  the  technological  reality  of  the 
possibility  of  any  network  carrying  any  service 

30 

in 

the 

idea 

inherent 

Nevertheless, 
of 
convergence  is  the reality that a strict separation 
between  service  provision  on  the  one  hand,  and 
transmission  and  carriage  on  the  other  may  not 
be  possible  and  could  create  difficulties 
in 
addressing  issues  of market  power  and  vertical 
integration. 

Balancing  Community and  Member State 
responsibilities 

regional 

sometimes 

In  looking  at  the  options  for  a  possible  future 
regulatory  model,  account  must  be  taken  of the 
way  in  which  responsibilities  will  continue  to  be 
shared  between  the  Community  and  Member 
States  and  within  Member  States,  between 
national, 
local 
and 
authorities.  From  a Community  perspective,  the 
EC  Treaty  defines  on  the  basis  of  subsidiarity 
those  areas  in  which  the  Community  has  a  role 
to  play.  Such  action may be taken,  assuming  it is 
an  area  for  which  the  Community  is  competent, 
"only  if  and  in  so  far  as  the  objectives  of  the 
proposed  action  cannot  be  sufficiently  achieved 
by  the  Member  States  and  can,  therefore,  by 
reason  of  the  scale  or  effects  of  the  proposed 
action,  be better achieved  by the Community." 

ma' 
s~cfor:,i:; 
s~ct 
. 
·hUm 
b~tW~~fr 

:_ .... :-<f:., 

,>  , 

Do  current  developments 

(A} 
require  a 
reassessment  of  the  way  in  which  rules  are 
applied  to  the  telecommunications,  broadcasting 
and  IT sectors? 

the 

Does 

existence 

(B) 
of  different 
regulatory  authorities  or  ministries  responsible 
telecommunications, 
for  different  aspects  of 
media and  IT activities  offer a workable structure 
for 
light  of 
convergence? 

regulatory  supervision 

the 

in 

Will 

convergence 

(C) 
a 
reassessment  of  regulatory  responsibilities  at  a 
national, Community or international level,  and,  if 
so which  areas? 

require 

infrastructure. 

issues  affecting 

and  therefore  confine  the  development  of  a 
horizontal  approach 
the 
to 
This  would  allow 
underlying 
different  treatment  of  the  services  provided  via 
that  network.  Roles  applied  at  a  service  level 
might perhaps follow  current vertical  divisions  at 
those 
the  service 
divisions  to  reflect  changes  in  technologies  and 
markets. 

level  or  perhaps  redraw 

these  cases, 

the  approach 

is 
In  both  of 
essentially to  shift away from  a vertical  model  of 
sectoral  regulation  and 
towards  a  horizontal 
approach  which  seeks  to  distinguish  between 
layer  within 
the  network  or 
converging sectors and  the  services carried  over 
those networks 

transmission 

Two  studies  carried  out  for  the  Commission 63 
suggest  that  the  replacement  of  current  vertical 
structures  with  horizontal  separations  between 
service  provision/content  and 
conveyance 
appears  to  offer  a possible  solution  to  the  types 
of the barriers identified  in  Chapter Ill. 

linked 

to  underlying 

Definitional  issues of where services may fall  will 
remain,  but  should  be  more  future  proof,  being 
less 
technologies.  The 
distinction  between  the  two  horizontal  layers 
nonetheless  permits  distinct regulatory criteria to 
be  applied 
layer,  but  with  due 
recognition  of the links between each  layer. 

to  each 

Chapter  Ill  highlighted  the  impact  on  companies 
of  having  to  deal  with  a  number  of  different 
regulatory  bodies  for  different  aspects  of  their 
these 
integrated  activities. 
barriers  are  lowered  will  be  important  in  creating 
a climate for innovation and  investment. 

Ensuring 

that 

Were  the  idea  of moving  from  vertical  regulatory 
to  a  more  horizontal  approach 
divisions 
accepted,  this  might  make  it  easier for  business 
to benefit from  a one-stop shop approach. 

dividing 

responsibilities 

important  question 

One 
is  whether  such 
rationalisation  should  lead  to  a  single  regulator 
dealing  with  all  aspects  - content  as  well  as 
service  provision  and  delivery,  or  whether  a 
structure 
between 
services  and  transmission  activities  might  be 
more  appropriate,  or  indeed,  multiple  regulatory 
bodies  at  either  of  those  layers.  Some  would 
view  a  single  body  as  more  able  to  maintain  a 
coherent  approach,  integrating  more  seamlessly 
interest  and  economic  efficiency 
the  public 
aspects  of  regulation  within  one 
framework. 
Others  would  favour  a  continued  separation  in 
order  to  avoid  risks  of  the  public  interest  being 
compromised  by economic priorities. 

63  Op.cit.  19 

31 

Given  the  regional  and  global  nature of many of 
the  services  being  delivered,  that  subsidiarity 
test  may  be  met.  Diverse  national  approaches 
may  harm  rather  than  promote  users'  interests, 
could  undermine  the  diversity which  the  internal 
market offers,  and  may well  introduce distortions 
which  favour  the  establishment  of  production 
facilities 
in  regions  where  a  lighter  regime 
applies. 

Globalisation  amplifies  the  international  dimen 
sion  of convergence.  One  clear  example  is  the 
continued  rapid  expansion  of the  Internet world 
wide,  which  will  undoubtedly  give  rise  to  further 
technological  and  industrial  transformations,  as 
well  as  to exciting social,  cultural,  and  ultimately, 
commercial  opportunities.  These effects will  not 
. be  confined  ·to  the  European  Community  and 
North  America  only.  They  are  just  as  likely  to 
produce 
fundamental  changes  among  our 
neighbours  in  Central  and  Eastern  Europe,  and 
more  broadly,  in  the  developing  world.  The 
global  reach  of the  Internet has  already shown  a 
need  for  international  solutions  to  a  number  of 
key  issues  such  as  security,  intellectual  property 
rights,  customs,  privacy, 
interoperability  and 
cybercrime. 

In  contrast,  many  regulatory  issues  associated 
with  telecommunications  and  broadcasting  have 
until  recently  been 
focused  at  national  or 
regional  levels  in  the  Community,  given  the 
national orientation of licensing in  those sectors. 

Multilateral  dialogue  on 
frameworks  covering 
different  aspects  of  telecommunications  and 
information  technology,  and  involving  govern 
ments and  industry,  is currently being  pursued  in 
many 
The  Commission, 
fora. 
through  a series  of international  summits  on  the 
Information Society,  has been  actively promoting 
a  range  of regulatory  initiatives  in  the  countries 
of Central and  Eastern  Europe. 

international 

Existing  international  organisations,  such  as  the 
World  Intellectual Property Organisation (WIPO), 
the  ITU  and  the  OECD  have perceived  the  need 
to  consider  the  potential  impact  of convergence 
and  to  launch  Internet  and  electronic  commerce 
related  activities.  Convergence  was  the  theme 
of  the  ITU's  Sixth  Regulatory  Colloquium. 64 
In 
some  cases,  this  has  already  led  to  agreement 
on  principles or minimal rules.  Examples include 
the  two  WIPO  Treaties  of  December  1996  on 

64  The  Regulatory 

Implications  of  Telecommunications 
the  Sixth 
Convergence,  Chairman's  Report  of 
Regulatory  Colloquium  on 
role  of 
government  in  an  era  of  Telecom  deregulation,  ITU, 
Geneva,  11-13 December 1996. 

the  changing 

copyright  and  certain  related  rights  (the  "WIPO 
Copyright  Treaty"  and  "the  WIPO  Performance 
and  Phonograms  Treaty"),  and 
the  Bonn 
Declaration of July 1997. 

rights,  democratic  values  and 

The  Council  of  Europe  is  currently  working  on 
aspects  of  the  Information  Society  relating  to 
human 
the 
freedom  of expression  and  is  expected  to  adopt 
Resolutions  on  these  issues at the  5th  European 
Ministerial  Conference  on  Mass  Media  Policy  in 
Thessaloniki in  December 1997 

Landmark  global  agreements  such  as 
the 
Information  Technology  Agreement  (ITA),  the 
Mutual  Recognition  Agreements  on  conformity 
assessment 
the  WTO/GATS 
agreement 
telecommunications 
services  (February  1997)  have  also  contributed 
to a new global perspective on  regulatory is~ues . 
The  WTO  agreement  · does  not  apply 
to 
broadcasting. 

(MRAs ),  and 
on 

basic 

As  these  efforts  are  reinforced,  it  may  become 
apparent that they need  to take into account new 
factors  such  as  convergence  and  globalisation, 
as  well  as  the  impact  of  these  changes  on 
economies  beyond  the  industrialised  world.  For 
example,  the  Internet could  give rise  to  spill-over 
between 
by  different 
organisations  and  currently  involves  important 
new  and  less  conventional  actors,  such  as  the 
Internet  Society. 65 
Furthermore,  any  formal 
principles  and  rules  will  most likely need  to  draw 
on  some  element  of  self-regulation  by  industry 
players. 

issues  dealt  with 

it  might  be 

this  context, 

In 
judged  more 
appropriate  to  launch  a  process  of  international 
the  aim  of  reaching  agreed 
dialogue  with 
in 
solutions  as  and  when  problems  arise 
conjunction  with 
technological,  social  and 
industrial  developments.  Such  a  process  would 
be  flexible  and  open. 
It  would  have  no  formally 
fixed  time-frame  and  would  be  open  to  all  actors 
concerned,  including  international  organisations, 
the  various  Internet  bodies  (e.g:  the  Internet 
Engineering  Task  Force  ·and 
Internet 
Advisory Board),  and technical experts.  Such  an 
international  dialogue  process  could  give  rise  to 
the  creation  of  specific  working  groups  with  a 
view  to  focusing  on  specific  issues  such  as 
digital  signatures  or  customs  and  taxation.  The 
overall  aim  of such  a process,  once  it  has  been 
launched,  could  be  to  develop  an  international 
charter  on  global  communications,  though  the 
scope  and  aims  of such· a  charter  remain  to  be 
defined. 

the 

65  The  Internet society  is  a  non-governmental  professional 
organisation  whose  aim  is  to  develop  a  consensus  on 
solutions which promote progress of the  Internet. 

32 

Is 

(A) 
further  action 
international level in  light of convergence? 

required  at  an 

to 

What  additional  steps 

(if  any)  are 
(B) 
required 
countries, 
particularly,  in  Central  and  Eastern  Europe,  to 
create 
current 
conditions  within  which 
developments can  be exploited? 

encourage 

other 

Whilst  the  aim  of  this  Green  Paper  is  to  invite 
comment  and  stimulate  debate,  rather than  take 
positions  at  this  stage,  this  Chapter,  drawing  on 
the  previous  analysis,  sets  out  in  Section  V.1 
below  a  number  of  principles  which  could 
provide a common basis for future approaches in 
the sectors  affected  by convergence.  In  Section 
V.2, 
the 
Commission  believes  may  stimulate  debate 
regarding  the  adaptation  of  current  regulatory 
approaches,  where  required,  in  the  light  of  the 
convergence phenomenon. 

three  options  which 

it  sets  out 

Irrespective  of  whether  or  not  full  convergence 
occurs,  the  range  of  technological  and  market 
trends,  the  potential  barriers  and  the  regulatory 
issues  identified  in  this  Green  Paper,  all  point to 
a changing  environment against which  the  policy 
objectives  of  these  sectors  must  be  judged. 
Future  decisions  must  therefore  not  only  be 
derived 
regulatory  approaches  closely 
tailored  to  the  sectors  involved.  They  should 
also  be  able 
to  draw  on  a  common 
understanding of principles which could  underpin 
future action. 

from 

In  this  section,  the  Commission  tentatively  puts 
forward  five such principles for comment. 

1.  Regulation  should  be  limited  to  what  is 
to  achieve  clearly 

strictly  necessary 
identified objectives. 

Given  the  speed,  dynamism  and  power  of 
innovation  of 
impacted  by 
the  sectors 
convergence,  public  authorities  must  avoid 
approaches  which  lead  to  over-regulation,  or 
which  simply  seek  to  extend  existing  rules  in 
the  telecommunications  and  media sectors to 
areas  and  activities  which·  are 
largely 
unregulated today. 

Any  rules  put  in  place  should  be  tailored  to 
meet  clearly 
in  a 
proportionate manner, 

identified  objectives 

2.  Future 

regulatory  approaches  should 

respond to the needs of u_sers 

terms  of  offering 

A  key  priority  of  any  regulatory  framework 
should  be  to  seek to  meet the  needs of users 
in 
them  more  choice, 
improving  levels  of service  and  lower  prices, 
whilst fully  guaranteeing  consumer rights  and 
the  general  public 
Such  an 
approach  is  fully  consist.ent  with  wider  policy 

interest. 

33 

goals  which  recognise  the  important  role  of 
the 
many  of 
Information  Society  into  citizens'  everyday 
lives. 

the  sectors 

in  bringing 

3.  Regulatory decisions should be guided by 
for  a  clear  and  predictable 

a  need 
framework. 

Regulators should seek to ensure a clear and 
predictable  framework  within  which  business 
can 
invest.  Where  issues  can  be  left  to 
market  players,  this  should  be  made  clear. 
Where  new  activities  creates  uncertainty  as 
to  how  and  if they  should  be  regulated,  this 
should be clarified. 

This  does  not  mean  that  the  framework  may 
not  evolve,  but 
it  should  do  so  against 
predetermined  criteria,  maintaining  as  far  as 
possible  the  flexibility  to  respond  to  changes 
in  a fast-moving market. 

4.  Ensuring  full participation  in  a  converged 

environment. 

Building  on  existing  concepts  of  universal 
service  in  telecommunications  and  the  public 
in  broadcasting,  public 
service  m1ss1on 
that 
authorities  should  seek 
everyone 
the 
Information  Society.  Convergence  in  this 
to  offer  new  means  of 
context 
participation. 

to  ensure 
in 

to  participate 

is  able 

likely 

is 

5.  Independent  and  effective  regulators  will 
be central to a converging environment. 

Whilst  the  general  trend  is  towards  lighter 
regulation,  the  increased  competition  brought 
on  by  convergence  underlines  the  need  for 
regulators. 
effective 
Regulatory 
is  particularly 
important  where  the  state  retains  a  share 
holding in  any market player. 

independence 

independent 

and 

\f.~.opti9n~··.fc>f r~gulal(>ry d~velopment 

If it  is  established  that  there  is  need  to  consider 
changes to  the overall regulatory approach in  the 
face  of  the  trends  towards  convergence,  there 
may  be  many  ways  of  achieving  such  an 
adaptation. 

considering 

approaches, 

In 
a 
possible 
successful  formula  is  likely  to  require  more  than 
just the  creation  of a  flexible  framework  for  new 
types  of services. 
It  would  also  be  essential  to 
provide  a  road  map  which  allows  the  existing 
framework  to  adapt  or  be  adapted  at  a  pace 
which 
non 
discriminatory  market  conditions  and  which 
provides that users' interests are well  served. 

continues 

ensure 

fair, 

to 

The  speed  and  manner  in  which  change  is 
managed  are  at  the  heart  of  the  transitional 
issues.  This  Green  Paper  cannot  propose  a 
specific 
the 
time 
focusing 
Commission  anticipates 
regulatory 
around 
developments,  though  such  a  list  is  neither 
intended to  be comprehensive nor closed. 

three  basic  options 

Nevertheless, 

the  debate 

table. 

for 

Option 1: Build on current structures 

in  publishing  and 

this  situation,  current  vertical 

In 
regulatory 
models  would  be  left  in  place.  This  means  that 
different  rules  apply  in  telecommunications  and 
audiovisual/broadcasting sectors, and to a lesser 
Building  on 
extent 
established 
existing 
frameworks  at  a  EC  and  national  level  would  be 
extended  on  an  ad  hoc  basis,  principally  at 
national 
the  demands  of  a 
competitive  market  and  the  challenges  of  new 
technologies and  services. 

principles, 

to  meet 

these 

level, 

IT. 

Normal  principles  of  interpretation  would  be 
applied  on  a  case  by  case  basis  to  resolve 
questions of where particular activities  might fall. 
To  the  extent  necessary,  co-ordination  might  be 
strengthened  at  a  European  level  to  attempt  to 
through 
minimise 
national 
in 
different Member States to emerging services. 

the  .risk  of 
rules  being  applied  differently 

fragmentation 

The  pace  of  change  would  be  dictated  by  the 
speed  of  innovation  and  the  effectiveness  of 
competition.  This  would  allow  the  regulatory 
framework to  adapt in  response  to  market forces 
of 
for  a 
and 
deregulation/regulation could be avoided. 

the  need 

round 

fresh 

Such  an  approach  would  minimise  the  need  for 
change  in  the  near future,  and  could  be  effective 
in  providing  a  predictable  regulatory  framework 
for  investment,  whilst  avoiding  the  creation  of 
unjustified  barriers  within  the  internal  market. 
However, 
in  place  certain 
leave 
anomalies which today deter investment. 

it  might 

if  not  co 
The  pace  and  scope  of  change, 
ordinated  at  a  European·  level,  could 
risk 
creating  significant  new  barriers  between 
Member States  and  slowing  the  transition  to  the 
Information Society. 

Option 2: Develop a separate regulatory 
model for new activities, to co-exist with 
telecommunications and broadcasting 
regulation 

This  option  would  mean  that  Member  States 
would  "carve  out"  new  services  and  activities 
which  cross  traditional  boundaries,  placing  them 
under  a distinct  set  of rules,  if rules  are  needed 
at  all.  This  would  allow a co-ordinated  approach 
to  be  developed  in  relation  to  many  of the  high 

34 

of 

services 

alongside 

characterise 

activities  which 

value 
the 
converging  market  place,  by  creating  a  new 
category 
existing 
regulatory  models  for  telecommunications  and 
broadcasting.  Essentially,  the  result would  be  to 
move  away  from  technology-based  or  platform 
based  market  boundaries  for  a  wide-range  of 
for 
services,  whilst  allowing 
traditional 
and 
to  be  adapted  more 
broadcasting  activities 
gradually. 

telecommunications 

framework 

core 

the 

The  principle  difficulty  in  such  an  approach  is 
determining  the  boundaries  of what may  be  part 
of  a  lightly  regulated,· new  service  world  and 
what  remains  subject  to  traditional  regulation. 
One  approach  might  be  to  identify  certain  types 
of  service,  e.g.  Web-TV  or  the  Internet  or  the 
operation  of  conditional  access  systems, 
negatively  as  neither  telecommunications  nor 
broadcasting.  Experience  in  the  telecommunic 
atiors  sector  with  a  delimitation  of  liberalised 
services, on  the basis of defining only what is  left 
in 
the  practical 
difficulties of such  an  approach. 

the  monopoly  area,  shows 

Option 3: Progressively introduce a new 
regulatory model to cover the whole range of 
existing and new services 

This option is  the  most far-reaching.  It calls for a 
fundamental  reassessment and  reform  of today's 
regulatory environment. 

inconsistencies, 

This  does  not necessarily imply a whole  new set 
of  laws,  but  rather  looking  to  see  how  existing 
to  promote 
frameworks  can  be  adapted 
flexibility; 
avoid 
remove 
discrimination  within  and  across  sectors  and 
continue  to  ensure  the  achievement  of  public 
Instead  of  applying  to  just 
interest  objectives. 
some  services  (as  proposed  in  Option  2),  this 
option  would  create  a  framework  covering  all 
sectors. 

This  option  would  require  a broader definition  of 
communication  services  to  supersede  those  of 
telecommunications  and  audiovisual  services 
within  Community  legislation.  Proportionality 
would  be  a  necessary  feature  of  the  new 
environment  given  that  within  such  a  broad 
definition,  the  level  of  regulation  would  have  to 
be  matched  to  the  nature  of the  service  and  the 
intensity of competition. 

Such  an  option  might  be  considered  to  be  too 
ambitious.  However,  it  would  not  necessarily 
lead to sudden  disruptive change.  The approach 
could  be  graduated,  focusing  in  the  first  instance 
on  priority areas  in  which  a consistent regulatory 
approach  is  required  (e.g.  network  operation  or 
access  issues).  Another  key  feature  of  this 

approach  would  be  to  allow  sufficient  time  for 
migration from the old to a new regime. 

What  effect  will  convergence  have  on 
{A) 
the  principles  for future  regulation  applied  in  the 
telecommunications,  media  and  IT  sectors,  and 
should  those  principles  be adapted  in  the  light of 
convergence? 

(B) 
existing 
adaptation: 

If  convergence  requires  adaptation  of 
that 

regulatory  ~pproaches,  should 

(i)  seek  to  build  on,  and  if  appropriate,  extend 
existing  frameworks,  rather  than  create  new 
ones; 

(ii)  create  a new framework for many on-line  and 
interactive services,  to  co-exist with  the  those 
currently  applied  to  traditional  telecommunic 
ations and  broadcasting activities,  or 

(iii)seek  to  create  a  comprehensive  framework 
applying  similar  regulatory  approaches  to  all 
three sectors. 

v:~:T•m~.~§(i:!2i:,fq!ijf~.·~.cti9Ji•···:····· 

The  following  outline  schedule  of  activities  is 
envisaged: 

•  A 

five-month  public  consultation  period 

(December 1997 to April  1998 inclusive). 

·  •  A  report  on  this  public  consultation  to  be 

prepared by June 1998. 

•  The  Council  and  the  European  Parliament 
are  expected  to  adopt  any  Resolutions  on 
this  matter in  the second quarter of 1998. 

• 

to 

response 

In 
the 
these 
Commission  could  prepare  a  Convergence 
Action  Plan by the end of 1998. 

resolutions, 

•  The  already-announced  Telecommunications 

Review will  be conducted  in  1999. 

Interleaved  with 
these.  milestones  will  be  a 
number of important activities  in  the  media field. 
The  Oreja  High-level  Group  on  audiovisual 
policy  has  been  convened  and  is  expected  to 
report  in  September  1998.  A  major  conference 
on  the  matter  is  scheduled  to  be  held  in  April 

35 

1998 in  Birmingham,  under the joint sponsorship 
of the British Presidency and the Commission. 

This  Green  Paper  analyses  the  convergence 
phenomenon  and  its  implications for the  existing 
regulatory 
the 
telecommunications,  media  and 
information 
technology sectors. 

frameworks 

governing 

is  not 

The  implications  of these  developments  are  far 
Convergence 
reaching. 
just  about 
technology. 
It  is  about  services  and  about  new 
ways  of  doing  business  and  of  interacting  with 
society.  The  changes  described  in  this  Green 
Paper have the potential to  improve substantially 
the  quality  of  life 
to 
integrate  Europe's  regions  better  into  the  heart 
to  make 
of 
businesses  more  effective  and  competitive  on 
global and  national markets. 

the  European  economy,  and 

for  Europe's  citizens; 

The  emergence  of  new  services  and 
the 
development of existing services are expected to 
expand  the  overall  information  market,  providing 
new  routes 
the  citizen  and  building  on 
Europe's  rich  cultural  heritage,  its  potential  for 
innovation and  its  creative ambitions. 

to 

to 

the 

the  door 

The  global  nature  of  communications  platforms 
today,  particularly,  the  Internet,  are  providing  a 
key  which  opens 
further 
integration  of the  World  economy.  At  the  same 
time,  the  low  cost  of establishing  a presence  on 
the  World  Wide  Web,  is  making  it  possible  for 
businesses  of all  sizes to  develop a regional  and 
global  reach.  Globalisation  will  be  key  theme  in 
future  developments,  as  changes  in  Europe  are 
mirrored by developments all over the World. 

these  changes  by 
If  Eur.ope  can  embrace 
creating  an  environment  which  supports  rather 
than  holds  back''the  process  of change  we  will 
have  created  a  powerful  motor  for  job  creation 
and  growth,  increasing  consumer  choice  and 
promoting cultural  diversity.  If Europe fails  to  do 
so,  or  fails  to  do  so  rapidly  enough,  there  are 
real  risks that our businesses and  citizens will  be 
left  to  travel  in  the  slow  lane  of  an  information 
revolution  which 
is  being  embraced  by 
businesses,  users  and  by  Governments  around 
the World. 

The  issue  involved  are  complex  and  will  require 
much  discussion  before  any  new  Community 
initiatives can  be  proposed.  The  Green  Paper is 
intended  to  launch  such  a  discussion  and  all 
It  is 
interested  parties  are  invited  to  participate. 
hoped  that  this  discussion  will  be  profound  and 
far 
this  public 
consultation  will  be  reported  in  a  Commission 
Communication  in  June  1998. 

reaching.  The 

results  of 

This  Green  Paper represents  a step  on  the  way 
to  securing  the  benefits  of  convergence  for 
European  social  and  economic  development. 
The  June  Communication  will  allow  political 
the  European 
positions 
the 
Parliament, 
the  Council  of  Ministers, 
the 
Economic  and  Social  Committee  and 
Committee  of 
for  clear 
objectives for future policy to be established. 

the  Regions,  and 

taken  by 

to  be 

to 

to  support 

This  Green  Paper  initiates  a  new  phase  in  the 
the 
European  Union's  policy  approach 
As  such 
communications  environment. 
it 
the  overall 
represents  a  key  element  of 
framework  put 
the 
in  place 
development of an  Information Society.  It builds 
on  the  current  strengths  of the 
frameworks  for 
telecommunications  (launched  by  the  landmark 
1987  Green  Paper  on  telecommunication 66
)  and 
for  media  (established  by  various  Community 
legislative  initiatives),  and  offers  all  interested 
parties  an  opportunity  to  comment  on  the  future 
post-1998 
shape 
the  sectors 
communications  environment, 
affected by convergence. 

regulation, 

the 
in 

of 

in 

This first step  is  intended  to  pave the way for the 
regulatory 
development  of  an  appropriate 
environment  wtiich  will 
full 
facilitate 
achievement  of  the  opportunities· offered  by  the 
Information  Society,  in  the  interests  of  Europe 
and  it's citizens  as  the 21st century begins. 

the 

06  COM(87) 290 final 

3G 

in 

This  annex  describes  existing  the  regulatory 
environments 
for 
telecommunications  and  media  sectors.  The 
absence  of  regulation  in  the  IT  field  is  also 
noted. 

the  European  Union 

Telecommunications regulation  is gearing up 
for full  liberalisation 

A  clear  framework 
for  effective  competitio~ 
throughout  the  European  Community  has  now 
been  put in  place and  is ,at an  advanced  stage of 
implementation  in  national  law  as  the  1998 
In  reality  the  transition 
deadline  approaches. 
from  monopoly 
to  effective  competition  has 
required  a  profound  reform  of  regulation  in  the 
telecommunications  sector,  with  rules  agreed  to 
set  the  dates  for  liberalisation  of the  sector  and 
to  provide  a  common  regulatory 
framework 
covering,  inter alia: 

-

conditions  for  market  entry  (e.g.  common 
framework 
licensing  - procedures, 
timetable  and  conditions  which  may  be 
attached) 

for 

- maintenance  of  public  interest  (e.g.  a 
framework  guaranteeing  the  delivery  of 
universal service and  specifying consumer 
rights  in  relation,  for example,  to the voice 
telephony service;  and  rules  covering  data 
protection and  privacy); 

-

interoperability  of 
interconnection  and 
services  and  networks,  and  fair  allocation 
of  resources  (e.g.  access  to  numbers, 
availability of radio-frequency spectrum) 

A fundamental  consideration  has  been  the  need 
to  limit  regulation  to  the  minimum  required  to 
secure  the  overall  public  interest  and  to  enable 
effective entry and  sustainable competition. 

regulatory 

framework 

focus  of  the 

for 
The 
telecommunications  has  been  on  networks  and 
service  provision  (including  aspects  linked  to 
safeguarding  the  public  interest)  and  not  on  the 
those 
regulation  of  content  carried  over 
networks.  Three  aspects  of  this  focus  on  an 
internal  market  for  telecommunications  can  be 
highlighted: 

-

-

the  removal  of barriers  to  investment  and 
innovation within the  internal market; 

ensuring  conditions 
European networks and services; 

that  support  pan 

- maintaining  a  defined  level  of  service  for 

users 

on 

agreement 

The  WTO/GATS 
basic 
telecommunications  reached  on  15  February 
line  with  the  EC  regulatory 
1997  is  fully  in 
framework  for  the  sector.  This  applies  not  only 
to  the  dates  set  for  liberalisation,  but  also  with 
regard  to  the  underlying  regulatory  principles. 
The deal does not cover broadcasting and  it only 
applied 
(transport) 
telecommunications 
services.  Thus  it  does  not  cover  any  "content 
services67
"  which  may  be  transmitted  through 
telecommunications services .. 

to 

Audiovisual regulation 

At  a  Community 
level,  current  audiovisual 
regulation  aims  to  achieve  the  free  circulation  of 
services  in  accordance  with  Article  59  of  the 
Treaty. 
It  is  an  example  of  the  application  of 
subsidiarity  whereby  Community  legislation  has 
been  adopted  solely  when  absolutely  necessary 
to  achieve  the  aforementioned  Treaty  objective. 
National  rules  have  been  co-ordinated  to  the 
degree  necessary  to  remove  barriers  resulting 
from disparities between  these regulations, when 
such  rules  are  justified  for  legitimate  public 
interest reasons. 

in 

interest 

law  led 

objective 

Historically,  the  Court  of Justice  has  recognised 
the  absence  of  harmonisation  at  a 
that 
Community  level,  Member  States  could  impose 
their  national  rules  on  service  providers  from 
other Member States, where those rules  pursued 
and  were 
a  general 
proporticff1al  to  achieving  that  objective. 68  This 
case 
the  adoption  of  the  main 
Community instrument in  this  area,  the  so-called 
Television  Without  Frontiers  Directive  (TVWF) 
which  co-ordinates  national  regulations 
in  a 
number  of  fields  relating  to  the  provision  of 
broadcast 
criteria, 
tele-shopping, 
advertising, 
protection  of minors,  public  order,  right  of reply, 
promotion of European programmes). 

sponsorship, 

Uurisdiction 

services 

to 

This  Directive is  based  on  the  principle of "home 
country"  control,  i.e.  control  by  the  ciuthorities  in 
the country of origin  under whose jurisdiction the 
broadcaster falls.  It has  proved  its  effectiveness 

67  The 

on 

EC 

GA TS 

basic 
commitments 
the  economic 
telecommunications  services  exclude 
activity  consisting  of  content  provision  which  require 
transport,  such 
telecommunications  services 
content  provision  being  subject 
the  specific 
commitments  undertaken  by  the  EC  in  other  relevant 
sectors.  The  EC  has  not  undertaken  any  GATS 
commitments  on  audiovisual/broadcasting  services. 
There  are  also  some  exemptions  to  the  MFN  {Most 
Favoured-Nation)  principle  in  audiovisual  services  in 
order to  protect cultural values. 

for 

its 

to 

68  Case  n°  C52/79  of  18/3/80  Procureur  du  Roi  v.  Marc 

J.V.C. Debauve 

37 

· framework  to  change  within 

in  the  current  broadcasting  environment. 69
•  A 
Directive70  amending  the  original  1989  text  was 
recently  adopted  in  order  to  adapt  the  legal 
the  audiovisual 
landscape. 
The  new  Directive  must  be 
transposed  by the  end  of 1998;  the  Commission 
will  ensure that this  process is  rigorously brought 
to fruition. 

The  Directive  leaves  certain  matters  to 
the 
Member States,  one  of which  is  licensing.  It was 
not  considered  that  differences  in  these  areas 
would  create  obstacles  to  the  functioning  of the 
Internal  Market,  i.e.  to  the  free  movement  of 
television  broadcasts.  The  Member  States  are 
required  to  ensure  that  broadcasters  within  their 
jurisdiction  meet  the  minimal  rules  laid  down  in 
the  Directive,  but  [in  accordance  with  Article 
189(3)  of  the  Treaty]  may  decide  how  such 
obligations  are  to  be  implemented  at  national 
level. 

Two  further  initiatives  have  been  taken,  in  part 
with  the  purpose  of  supplementing  the  TVWF 
Directive  in  creating  the  legal  framework  for  the 
'European  audiovisual  area'. 
the 
Council  adopted  a  directive  on  the  co-ordination 
of  certain  rules  concerning  copyright  and  rights 
related 
to  satellite 
broadcasting  and  cable  retransmission. 71  More 
recently, 
the  Commission  has  proposed  a 
directive  on  the  legal  protection  of  conditional 
access services. 72 

to  copyright,  applicable 

In  1993, 

is 

the  above-mentioned  Community 
Apart  from 
initiatives,  audiovisual 
largely 
regulation 
national  in  scope.  The  typology  of regulation  of 
audiovisual  services  is  generally  either  positive 
(an  obligation  to  fulfil  e.g.  provide  a  balanced 
range of programming) or negative (regulation  to 
limit  certain  types  of  materiel  e.g.  incitement  to 
racial  hatred).  Positive obligations are often  met 
in  practice,  to varying  degrees from  one  Member 
State to  another,  by  broadcasters  vested  with  a 
public  service  mission.  Existing  regulation  is 
based  in  part  on  the  widespread  availability  of 
television  (its  "pervasiveness"). 
It  is  clear  that 
regulation  must  meet  a  proportionality  test,  and 
in  a  digital  age  it  should  and  indeed  is  already 
evolving.  This  means  that  a  lighter  regulatory 
touch  could  be  appropriate  as  a  function  of  the 
nature  of the  service  (e.g.  satellite  or cable  pay 
per-view  is  generally more  lightly  regulated  than 

terrestrial 
most pervasive of all  media). 

free-to-air 

television,  arguably 

the 

Publishing and  IT 

The  publishing  sector  operates  within  a 
framework  of  more 
limited  sector-specific 
regulation  compared  to  telecommunications  and 
audiovisual/broadcasting  sectors,  and  there  are 
fewer regulatory barriers to entry (in  the sense of 
formal  licensing  requirements),  although  there 
are stringent rules applying to this sector. 

At  the  same  time,  a  range  of  controls  are 
applicable  to  the  broadcast  media  (for  example, 
those  relating  to  pluralism,  foreign  ownership 
and  right-of-reply) also apply in  some form  to the 
publishing  sector  (and,  in  particular,  the  press), 
reflecting  public  interest  objectives  common  to 
both  sectors.  However,  the  implementation  of 
some  of  those  principles  for  the  publishing 
sector is  through  self-regulatory  bodies,  such  as 
Press  or Industry Councils  or Codes  of Practice, 
in  contrast  to  the  stronger  powers  for  regulatory 
intervention  in  the  broadcasting field.  In  addition 
many  of  the  general  rules  related  to  public 
morals,  advertising, 
intellectual 
property protection,  access  to  public documents, 
also apply to  the publishing sector. 

libel,  privacy, 

The 
Information  Technology  and  software 
industries have even  less of a tradition  of sector 
specific regulation,  though  once  again  horizontal 
rules  relating  to  issues  such  as  export  controls, 
electro-magnetic 
interference;  or  consumer 
protection  would  apply,  as  would  general 
competition law. 

software 

industries 

than 
infrastructure 

The  Internet  is  more  closely  associated  with  IT 
with 
and 
telecommunications  whose 
its 
uses.  Whilst  the  network  over  which  much  of 
the  Internet  traffic  flows  is  subject  to  detailed 
regulation;  the  organisation,  management  and 
allocation  of  resources  within  the  Internet  has 
The 
been 
Community  has  actively  supported  an  industry 
led  approach  in  its  work  on  harmful  and  illegal 
content  on  the  Internet,  and  more  generally  in 
the media. 73 

industry  and  user-led. 

largely 

Whilst approaches  may be changing,  particularly 
in  key  areas  such  as  naming  and  addressing, 
there  has  been  little  sector-specific  regulation  of 
the  Internet in  Europe. 74 

69  See  "Second  Report  on  the  Application  of  Directive 

89/552/EEC" COM(97)523 final of 24/10/1997 

70  Directive  97/36/EC  amending  Directive  89/552/EEC,  the 
'Television without Frontiers' Directive,  30.06.1997,  JO  L 
202,  30.07.97, p.60. 

71  Directive 93/83/EEC, OJ  L248,  6.10.93 
72  COM(97) 356 final of 9. 7 .1997 

73  Op  cit.  note  28  see  Green  Paper  on  the  protection  of 
minors and human dignity in  audiovisual and information 
services,  COM  (96)  483,  16.10.97  and  Communication 
on  the  illegal  and  Harmful  content  on  the  Internet, 
COM(96) 487,  16.10.97. 

74  This  contrasts  with  the  approach  in  Singapore,  Vietnam, 
or China, where restrictions have been put in  place. 

38 

ISSN 0254-1475 

COM(97) 623  final 

DOCUMENTS 

EN 

04  05  15  16 

Catalogue  number  CB-C0-97-701-EN-C 

ISBN  92-78-28995-7 

Office for Official Publications of the European Communities 

L-2985  Luxembourg