Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions - Globalisation and the Information Society - The need for strengthened international coordination
Date: 1998-02-04
Institutions: European Commission
Subjects: Universalism, electronics, mass media, single market, telecommunications

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 04.02.1998 
COM(1998) 50 final 

COMMUNICATION FROM THE COMMISSION 

TO THE COUNCIL, THE EUROPEAN PAB&IAMENT, 
THE ECONOMIC AND SOCIAL COIVMTTEE 
AND THE COMMITTEE OF THE REGIONS 

TABLE OF CONTENTS 

1. INTRODUCTION: NEW POLICY CHALLENGES 

Page 

1 

2.  PROGRESSING TOWARDS THE GLOBAL ELECTRONIC  MARKETPLACE 

2 

2.1 The emergence of a global electronic marketplace 

2.2 The need for interoperable technical solutions 

2.3 Ensuring market access and competition 

2.4 The need for a consistent legal framework 

2.5 Conclusions: requirements for an international framework 

2 

4 

5 

6 

9 

3. DEFINING THE WAY FORWARD FOR INTERNATIONAL COORDINATION 

9 

3.1 Strengthening international coordination 

3.2 Identifying the most urgent issues and ways to tackle them 

3.3 Developing a method of coordination: An International Charter 

4. THE NEXT STEPS 

Glossary 

9 

10 

11 

12 

A3 

1.  INTRODUCTION: 

The European Union has made substantial 
progress in putting in place the necessary 
framework  conditions for the development 
of the  lnformatfôp*$ociety1 wl% a  %k  to 
unleashing  its  growth  and  employment 
potential  bringing  benefits  to  all.  The 
dynamism  of  the  Information  Society  is 
putting pressure on both public and private 
sectors  to be  more flexible  and to rapidly 
take up new challenges. 

For  this  reason,  the  Commission  has 
recently  launched  a  broad  consultation to 
regulatory 
explore 
implications  of  convergence  between  the 
telecommunications, 
and 
media 
information technology sectors2. 

the  nature  and 

The  present  Communication  responds  to 
the  need  for  strengthened  international 
coordination in order to create an enabling 
the  global  electronic 
framework 
marketplace  ("on-line"  economy)  which  is 
a  fundamental  element  of  the  Information 
Society. 

for 

The  European  Union  has  begun 
to 
formulate several policy  lines on electronic 
commerce  by  stimulating  the  development 
of  an  internal  market  for  those  services 
whilst  safeguarding  public  interests  (cf. 
Communications  on "A  European  Initiative 
in  Electronic  Commerce"3,  "Harmful  and 
Internet"4  and 
Illegal  Content  on 
"Ensuring  Security  and  Trust  in  Electronic 
Communication"5, and the Green Paper on 
"Protection  of  Minors  and  Human  Dignity 
in Audiovisual and Information Services6). 

the 

the  European  Union 
to 

is 
In  parallel, 
contributing 
the  development  of 
favourable  conditions  at  international  level 
and 
for 
commerce, for  instance  through  the WTO7 

communications 

electronic 

agreement  on  basic 
telecommunication 
services,  the  ITA  agreement  on  tariffs  for 
information  technology  products,  and  the 
WIPO  agreement  on  the  protection  of 
intellectual  property.  This  policy  is  based 
Information 
on  the  conviction 
Society  can only  be a global one, with  the 
international 
wide  participation  of 
community, 
developing 
countries8. 

that  the 

including 

the 

and 

now 

initiatives 

numerous 

sometimes 

Many  of  the  Union's  partners  are  actively 
involved  in  building  a  framework  for  the 
electronic  marketplace.  Worldwide  there 
and 
are 
regulatory  actions  at  national  and  regional 
levels.  These  activities  are  not  always 
coordinated 
reveal 
Ill-adapted  or 
divergent  approaches. 
fragmented regulation, however, will hinder 
the  development  of  the  "on-line"  economy 
from  which  business  and  citizens  have 
much  to  gain.  Decision  makers  in  the 
public  and  private  sectors  are  becoming 
aware  of  the  fact  that  greater  consistency 
in these  national  and  regional  approaches 
is  needed  and  that  this  need  is  becoming 
increasingly acute. 

clarifying 

Against  this  background,  there  is  a  need 
for  the  European  Union  and  its  Member 
States to examine their policies with a view 
to  adapting  or 
traditional 
regulation  to  the  requirements  of  the  "on 
line"  economy. 
This  does  not  mean 
delaying  legislative  activities  at  Member 
States or  Union  level  until global  rules  are 
settled  in  the  respective  fields.  Equally  it 
does  not  mean  surrendering  national  or 
regional  traditions  and  cultures.  What  it 
does  require, however,  is to  engage  in an 
open  debate  and 
awareness-raising 
exercise  about  the  implications  of  the 
global  electronic  marketplace  and 
its 
particular  characteristics  on  certain  rules 
and their  application.  Progress  should  be 
technology 
made 
changes, 
European 
regulatory  actions,  and  cooperation  at 
international level on regulatory principles. 

in  parallel  between 
and 

national 

1 See Rolling Action Plan (COM(96)607): 
wwwJspo.cec.be/infosoc/legreg.html 
2 COM (97) 623: www.ispo.cec.be/convergencegp 
3 COM(97) 157: www.ispo.cec be/ecommerce 
.initiat.html 
* COM(96) 487: www2.echo.lu/legal/ 
en./intemet/.communic.html 
•' COM (97) 503: www.ispo.cec.be/eif 
15 COM(96) 483 finai 
' wwv/.wto.org 

Provided  it  acts  quickly  and  boldly,  the 
European  Union  has  all  the  potential  to 
make a positive contribution to the shaping 
of the new environment, drawing on its rich 

See Communication on "the Information Society 
and Development: the role of the EU": (COM(97)3£1: 
«-ww.ispo.cec.be/isad/isad.htnil 

it 

that 

is  determined 

scientific,  cultural  and  social  assets.  The 
Union  should  signal  to  the  international 
to 
community 
contribute  its  experience  and  vision  to 
building  a 
fair 
investments, 
competition,  private  sector 
inclusion, 
open  markets,  and  social 
accompanied  by  appropriate  safeguards 
covering  both the wider  public  interest and 
the interests of the individual. 

framework  based  on 

This  Communication  advances  views  on 
how  to  define  the  key  issues  that  require 
strengthened  international  coordination.  It 
does  not  propose  concrete  solutions  to 
these  issues  as  such, in particular  it is not 
suggesting  thai  there  is  a  need  for  global 
regulation of the Internet or for the creation 
of  new  international  organisations.  The 
Communication  essentially  argues  that the 
time  is  ripe  to  seek  a  better  international 
understanding  on  how  to  proceed  in  the 
near  future  to achieve  a "friction" free  and 
borderless  marketplace  while  meeting 
general public interest objectives. 

in this way, the global community can work 
together  to  maximise  the  potential  of  the 
Information  Society  to  stimulate  growth 
and innovation, to create new employment, 
and 
to  promote  social  and  economic 
cohesion. 

To this end, it is proposed to invite experts 
from  industry  and other  involved  parties to 
a round table  meeting  in  1998, to initiate a 
debate  at  Ministerial  level, and  to  seek  an 
understanding on a method of coordination 
in the form of an International  Charter. 

2. PROGRESSING TOWARDS THE 
GLOBAL ELECTRONIC 
MARKETPLACE 

2.1  Tha emergence of a global 
electronic  marketplace 

communications 

Growth  in trans-border  traffic  over  the  last 
two decades  has been a striking  feature of 
landscape. 
the 
International  telephone  calls  have  risen 
from  under  4  billion  minutes  in  1975  to 
over  80  billion  (estimated9)  in  1997  -  a 
growth  rate  of  15  per  cent  a year.  At  the 
same  time,  they  have  contributed  over 
8  per  cent  of  telecommunications  service 
revenue  worldwide. 
is 
forecast to continue. 

This  growth 

International telephone 
traffic 
(billions of minutes) 

80 

60 

40 

20  —  ^jllt 

l |W |1 \m \u |B (1 [• \m \m \m \m \m (I 

1M  M M il  il M  M M  il  M m M il il  M 
•* 
oo 
O) 

*- 
oo 
Oi 

oo 
I*» 
Oi 

oo 
O) 

m 
f— 
O) 

r*-

Source: ITU 

digital 

recently, 

in  particular 

mobile 
More 
through 
communications, 
GSM,  are  providing  global  mobility 
in 
personal  communications.  Today,  more 
live 
than  200  GSM  networks  are 
commercial  operation 
100 
countries  worldwide  serving  55  million 
users. 

in  over 

in 

In  the  future,  new  satellite  systems  will 
have  a  major  impact  on  the  development 
of  global  communications  services.  The 
total  addressable  market  for  broadband 
multimedia world-wide  is expected to grow 
steadily  from  100  million  users  up  to  330 
millions in 2010 of which about  16 per cent 
(i.e.  50  million  users)  are  forecast  to  be 
The 
captured  by  satellite  systems. 
cumulative  service  revenues  for  satellite 

ITU 

of  goods  and  services  traded 
companies over m  ïnhmeiWU approach 300 
billion ecu 

These developments  are giving  rise  to the 
emerging electronic marketplace.  Not only 
is  communication 
itself  emerging  as  a 
worldwide business, it is also  underpinning 
the  globalisation  and  networking  of 
economic activities. 

business 

Companies, 

are 
linking 

configurations 
in 

are 
New 
information-
appearing,  particularly 
including 
based  sectors. 
establishing  worldwide 
SMEs, 
networks 
research,  production, 
assembly  and  distribution.  Services,  in 
particular 
(e.g. 
consultancy,  banking,  insurance,  travel, 
publishing,  marketing,  sales,  advertising, 
etc.), can now be produced  in one country 
and  exported  to  another  via  electronic 
networks. 

information  services 

if  an 

emerges. 

The  wide 
range  of  activities  now 
technically  possible  can  only  be  fully 
exploited 
international  enabling 
International 
framework 
agreements  have  always  played  an 
important  role  in  the  development  of  the 
communications  industry.  Figure  1  shows 
how  the  character  of  these  international 
public  and  private  sector  arrangements  is 
being  progressively  extended  from  mainly 
technical  to  commercial  and  increasingly 
the  communications 
legal 
environment evolves. 

issues  as 

systems  over  the  period  2000-2010  is 
estimated to be around 110 billion ECU. 

This  considerable  growth  over 
recent 
years  has  coincided  with  significant  price 
reductions  driven  by  falling  costs  snd 
increasing  competition,  and the  expansion 
of data  networks,  in particular  the  Internet, 
which will account for a growing  proportion 
of international traffic in coming years. 

Approximately  100  countries  now  enjoy 
Internet  access.  Recent  surveys10  report 
that  there  are  around  20  million  Internet 
hosts worldwide, and the number of actual 
internet  users  is  currently  estimated  to  be 
in the region of  100 million11.  It is forecast 
that this figure will increase  to a quarter of 
a billion users by the year 200.012. 

Internet Hosts 
(Thousands) 

Source: Network  Wizards 

environment 

communications 

Figure 1 below illustrates how the nature of 
the 
is 
changing.  The scope of activities  possible 
(e.g.  medical,  educational,  recreational, 
commercial)  and  the  number  of  different 
actors  concerned  has  expanded  through 
liberalisation  and  the  development  of  new 
multimedia products and services. 

Example; Electronic Commerce 

Electronic commerce definitions may differ and 
estimates may vary, but nevertheless there are 
clear indications  of strong  growth.  Estimates 
published in July 199T* Indicate that business-
to-business  commerce  over  the  Internet  will 
reach 7 billion ECU in 1997 - a tenfold increase 
from 1996. In 2002, It is forecast that the value 

10  Network Wizards: www.nw.com 
"  www.nua.ie/surveys 
12  Global Internet Project: www.gip.org 
'•'  Forrester  Research: www.forrester.com 

Increasing 
Demand 

Commercial 
market-access 
competitive 
framework 

Technical 
interconnection 
interoperability 
frequencies 

' 

Legal 
jurisdiction 
liability 
taxation 
copyright 
authentication 
encryption 
data protection 
content 
consumer 
protection 

Increasing 
Scope  of 
Services 

Interactive 
Services 
(online 
multimedia) 

' 

Enhanced 
communications 
services 
(video-conf., e-mail, 
Internet) 

Basic 
Telephony 
(voice,  tax) 

Telegraphy 

Past 

Present 

Future 

Figure 1 : Enabling Framework for the global electronic  marketplace 

2.2  The need for Interoperable 

technical solutions 

Example: Global System far Mobile 

Communication (GSM) 

in 

telecommunications,  a 
Historically, 
number  of international  public  bodies were 
set up to oversee agreements  on technical 
issues, 
the  connection  and 
interoperability  of  national  networks, 
ITU14, 
standards  and  frequencies  (e.g. 
ISO15, ETSI16, CEPT17, etc.). 

including 

Example: International interconnection 

The  first telegraph linos did not cross national 
frontiers because each country used a different 
system and each  had its own telegraph  code. 
Messages  had to be handed over at  frontiers 
before  being retransmitted  over the  telegraph 
network of the neighbouring country.  Countries 
than  decided  to  conclude  agreements to 
interconnect national networks. 

to 
to  offer  users  access 
The  ability 
personal 
facilities 
communications 
wherever they travel in the world would not 
have been possible had it not been for the 
conclusion  of 
international  accords  on 
standards, frequencies, and "roaming". 

14 www.itu.int 
,s  www.iso.ch 
"* www.etsi.fr 
!7 wv/w,ink.fi/cept/englanti/ceptinfo.htm 

The mobile phone  scene in the eariySOs  was 
akin to a  car being driven freely around  the 
motorways of Germany,  but stopping dead on 
crossing  the  border  into  France.  The 
introduction  of  GSM  -  the  result  of  close 
collaboration  between industry,  governments 
and  users at  an  international  level  (CEPT, 
ETSI,  EU) -  opened  the way for trans-border 
mobility  or 
networks, irrespective of  their  geographical 
location. 

"roaming"  between  different 

New 
technological  developments  are 
giving rise to new needs.  These are linked 
to  issues  such  as  the  development  of 
Internet  architecture,  the  frequency  and 
the  next 
requirements  of 
technical 
generation 
wireless 
mobile 
communications  and  new  satellite  and 
navigational 
including 
reconciliation  of  requirements  posed  by 
commercial 
interest 
applications, as well as the legal protection 
of user interfaces for multimedia services. 

systems, 

public 

and 

of 

concerned 

The  speed  of  technological  developments 
combined  with  the  changing  role  of  the 
that 
actors 
standardisation  is  beginning  to  follow  a 
different  mechanism  to  that  which  has 
operated 
in 
télécommunications  (public  bodies)  and  in 
the  IT  sector  (agreements  between  "big" 

historically 

mean 

players,  proprietary 
leading 
sometimes  to  de  facto  monopolies):  a 
more open and flexible  consensus-building 
process. 

systems 

A  particularly  striking  illustration  is  the 
"Internet  community"  (e.g.  IETF,  W3C, 
IANA).  Unlike  the  international  switched 
telephone network, which has largely been 
built up within a formal and institutionalised 
framework  agreed  by  governments,  the 
Internet  has  developed  according  to  its 
own unique user-driven model into a loose 
federation  of 
interconnected  computer 
It  is  made  up  of 
networks  worldwide. 
groups  which  are  open  and follow  a  more 
spontaneous  organisational  model, but are 
therefore more difficult to define. 

Example: the domain name system (DNS)18 

In an increasingly commercialised Internet,  the 
most coveted  domain  is  ".com",  intended  for 
commercial organisations.  But ".com" is a non-
country-specific  generic  top level domain  that 
can be  used by  anyone in  the  world.  The 
availability of useful names  is quickly running 
out and registering under the narrow confines 
of ". com" cannot work for much longer.  In 1996 
there  were  around  40,000 
Today,  there are over 4 million.  In the  future, 
questions  such as who should be  responsible 
for managing  the funding,  administration,  and 
assigning  of  domain names in  generic  Top 
Level Domains,  and  how to  introduce  more 
competition  into the management of the  DNS 
system, will have to be answered. 

registrations. 

Because  of  an  open  and  flexible  model, 
Internet standardisation  up to now  is quick 
and  agile.  Measures  to  facilitate 
the 
continued  growth  of  the  Internet  as  an 
important feature in global communications 
this  open,  user-led 
will  need  to 
approach into account. 

take 

2.3  Ensuring market access and 

competition 

The  electronic  marketplace  will  reinforce 
the  ongoing  trend  towards  globalisation, 
which,  as  trade figures  show,  is  gathering 
speed.  As  a  share  of  world  output,  trade 
has  more than tripled  since  1950  - from  7 
per cent  to over  22  per  cent.  Investment, 
too,  has  become  a  powerful  force  for 
economic 
integration  with  cumulative 
assets  of  foreign  investment  trebled  since 
1987  - 
trillion  ECU.  A 
significant  proportion  of  trade  in  money 
markets  takes  place  on-line.  The  daily 
volume  of 
foreign  exchange  deals 
worldwide exceeds  1,000 billion ECU19. 

to  over  2.5 

A  number  of  agreements  have  given  an 
added  impetus  to  these  trends,  notably 
within the WTO, through the GATT, GATS 
and  TRIPS  agreements,  which  will 
in 
continue  to  play  an 
promoting trade liberalisation, including the 
recent  agreement  on  telecommunication 
services. 

important  role 

The  Internet  community  is  trying  to  build 
on  open  standards 
that  allow  both 
interoperability  and  competition.  Open 
standards  are  particularly  important  with 
regard  to  hardware  and  software  tools  for 
Internet  use  and  access. 
Items  such  as 
browser  software  are  in  a  way  the  "entry 
ramps"  to  the  information  superhighway, 
and  it  is  important  that  they  be  based  on 
open standards so that all users may have 
equal  access  to  the  Internet.  Otherwise 
proprietary  standards  and  their  attendant 
licensing  schemes  will  control  access  to 
content 
commerce 
transactions,  and  will  adversely  influence 
licensing and other market  behaviour. 

electronic 

and 

18 As many as 9 different organisations are directly 
involved in decision-making for the Internet's Domain 
Name System (IETF, IESG, IAB, ISOC, IANA, FNC, 
NSF, InterNIC, NSI) and an international debate on 
its future governance is underway. 

for 

One  of 
the 
the  major  obstacles 
development  of  advanced  communication 
services which are at the basis  of the  "on 
line" 
high 
economy 
Dramatic 
telecommunications 
reductions  in the cost  of  computing  power 
together  with  competition  are  pushing 
tariffs  and  giving 
to  a  global 
infrastructure  where  distance  becomes 
meaningless. 

costs. 

rise 

are 

The Irrelevance of Distance 

A  transatlantic  telephone  call now costs just 
1.5 percent of what it cost 60 years ago. And 
the World Bank predicts that by 2010  the  cost 
will have fallen by another two-thirds,  making 
for instance  trans-Atlantic  telecommunications 
increasingly  affordable  to all.  This will  allow 
small businesses  and individuals  to  establish 
remote  presence,  beyond  the geo-political 
borders of their physical location.  Doing global 

19 Financial Times - "The Banker", 27.11.97 

business  is  already no  longer limited to big 
multi-national  companies  but  within reach  of 
everyone  who,  for  instance  by  using the 
Internet,  is able to set up a global business at 
low costs. 

and 

access 

Falling  tariffs  will  create  further  dynamism 
in 
the  electronic  marketplace,  notably 
when  broadband  communications  become 
more affordable.  The current  limitations of 
also  mobile 
Internet 
narrow 
to 
communications 
to  be  overcome  as 
bandwidth  needs 
quickly  as  possible. 
In  most  cases,  the 
necessary  incentives  will  be  provided  by 
competition. 
and 
market 
Therefore  effective 
implementation  of 
agreed WTO rules are crucial. 

relatively 

demand 

2.4  Tho  need  for  a  consistent  legal 

framework 

like  the 

As a principle, the legal frameworks  of the 
off-line  world  will  be applied  to  the  on-line 
world  and  public  interest  will  also  need  to 
be safeguarded  in a proportionate  manner. 
However  the technical possibilities  of open 
Internet  are  already 
networks 
beginning to put legal structures to the test 
in  various  fields  of  existing  law.  In  some 
cases, 
the 
borderless  electronic  marketplace  and the 
transmissions which circulate within  it may 
therefore  require clarification  or  adaptation 
of 
and 
enforcement  mechanisms.  The  following 
illustrative  examples  aim  to  demonstrate 
the diversity of these issues. 

the  specific  character  of 

frameworks 

existing 

legal 

The  question  of  how  taxes  and  tariffs 
should  be  applied  and  implemented  to 
electronic  commerce  is  a  major  issue  in 
this  area.  For  instance,  the  impact  of 
electronic commerce in the area of indirect 
taxation needs to be examined. 

Example: Value-Added Tax 

The musical content of CDs Is delivered on-line 
from  a  country A  to  a  Country B;  i.e. no 
physical goods are sent,  the "music" is  simply 
downloaded by the customers.  Unlike  a  hard-
copy, it  passes  from  supplier to  consumer 
without being  subject  to  customs  controls. 
Country 8 is unable to collect the VAT unless it 
is  voluntarily  declared  by 
consumer. Furthermore,  a supplier in  country 
3  wGuld be obliged to charge  VAT on all sales, 
iewing  him ai  a  disadvantage. To put  both 
suppliers  on an equal footing,  the tax  regime 

the  resident 

would  require  modifications  which  might 
involve charging VAT  on  the  basis  of  the 
location of the customers. 

the  on-line  world 

In  some  cases, 
is 
beginning to expose differences  in national 
laws,  even  though  such  differences  may 
be  entirely  compatible  with  the  markets 
and  activities  for  which  those  rules  were 
originally  developed.  A central  legal  issue 
for  users  of  open  networks,  such  as  the 
Internet,  is  that  of  identifying  which  party 
should  be  liable  for  legal  violations  in  the 
network  environment. 
The  current 
situation  is  characterised  by  considerable 
legal  uncertainty  to  the  detriment  of  some 
parties. 

the 

Moreover, 
increased  use  of  open 
electronic networks has also resulted in an 
increasing number of jurisdictional conflicts 
between  States.  The  explosive  growth  in 
networked  communications  means 
that 
such  jurisdictional  conflicts  are  likely  to 
become more and more common. 

Example: Jurisdiction 

A company In Country A establishes a site  on 
the Internet  by  which  it  sells products. The 
company's  site can be accessed  by  Internet 
users in Country B, but it sells no products and 
otherwise transacts no  business there.  A 
consumer  in  Country  B  files suit against  the 
company in  Country B,  claiming  that  the 
information on its web site is misleading under 
the laws of that country. The court in Country 
B asserts jurisdiction  over the company based 
on its web site being accessible  there,  forcing 
the company to defend a costly suit in a foreign 
country wfth which H otherwise has no ties. 20 

in 

The networking of activities  is encouraging 
the  "virtual"  mobility  of  human  resources 
and  is  giving  rise  to  a  more  global  labour 
market. 
this 
Trans-national  work 
context  is  likely  to  have  implications  with 
regard  to  the  applicable  law  for  labour-
related  issues.  Adequate  mechanisms 
which  can  soive  disputes  regarding  trans-
border  work  and  which  can  serve  as 
guidelines  for  the  parties  when  trans 
national  work  is  agreed  upon  may  be 
needed. 

At the European level, jurisdiction in the field of 

civil and commercial matters is regulated by the 
Brussels and Lugano Conventions on Jurisdiction 
and the Enforcement of Judgements  in Civil and 
Commercial matters (1968 and 1988. respectively) 

Example: labour law 

A  teleworicer  employee  with  residence in 
Country A, works (or a company established in 
Country B. What 'iito the legal implications? 

Technology  allows  intellectual  property  to 
be  copied  and  transmitted  worldwide  with 
relative  ease.  As  a  result,  different  levels 
of  legal  protection  in  different  countries 
become more relevant for  rightholders  and 
users. 

Example:  copyright 

the  basis  of 

research/teaching 

Country A provides for a exception to the right 
of  communication  to  the public (on-line)  for 
teaching  and scientific  research.  Country  B 
does not.  A university in Country A  includes, 
the 
on 
exception,  works protected by copyright in its 
site  without  the  authorisation of  imp  right 
holder.  The sip  is  accessible  in  Coynfry B. 
The  university therefore  Infringes rights which 
exist in  country 8  end in  any other  country 
where it  is  accessible.  The university  must 
ensure that it has authorisation, if necessary, in 
all countries where the site is accessible. 

Similarly,  significant  differences  in  data 
protection  regulation,  or  the  absence  of 
data  protection  provided  at  regional  and 
national  levels  are  likely  to  hinder  cross-
border  electronic  trade  and  deter  citizens' 
use of communications services. 

Example: date protection22 

An individual hi ûout^ryA visits the !.. 
a company based in Country B.  the 
before allowing entry, requires all  users to 
complete  an  oh-Une  questionnaire,^ftftfafi 
requests the user's personal details ahdviher 

21 An improved international commercial and legal 
framework for intellectual property is emerging 
through the TRIPS agreement, and the WIPO 
treaties of December 1996 on Copyright, and on 
Performances and Phonograms.  The Commission 
has recently adopted a proposal for adirective on 
copyright and related rights in the Information Society 
(COM(97)628fin).  This directive will complement the 
existing Community framework on copyright and 
related rights, which addresses already certain 
copyright issues related to the Information  Society. 
22 In the field of data protection, the EU has adopted 
a directive  on the protection of Individuals with 
regard to the processing of personal data and on the 
free movement of such data (Directive 95/46/EC) and 
a Directive concerning the processing of personal 
data and the protection of privacy in the 
telecommunications sector (Directive 97/66/EC). 
Data protection is also being tackled by the Council 
of Europe (1981 Convention on Data Protection) and 
the OECD. 

daté  pà th0 user's  We  style preferences. No 
|fte likely uses of 
lnfc^^0^$.^j^^4e^4rdkg 
the^:^^>W0:'éànpany 
$en  sells  on the 
//$$pi§ife  ^#;ï--ceÈ|6fe-.  *>"  many  other 
cWipt$êè.  The individual receives unsolicited 
e-màtl messages  and  telephone calls from 
companies wishing to sell their products. The 
individual knows  that  under  legislation  in 
Country A, they have legal right to object to the 
use of personal  data for such purposes  and 
that there is a national scheme to do so easily 
and without charge. No such legal right exist in 
Country B and the individual therefore  has  no 
remedy to this problem. 

Trademark  laws  are  also  affected.  Oniine 
advertising  with  national  or  supranational 
trademarks 
in  the  absence  of  agreed 
principles may also not be without its risks. 

For example, the limitations  of the  Internet 
domain  name  system  are  giving  rise  to 
legal battles  involving national  rightholders 
sharing the same trade mark.  Companies 
are  rapidly  becoming  aware  of  the  great 
value of easily  memorable  Internet  domain 
names.  Trade  marks  are  territorial,  yet 
names  registered  under  the  domain  name 
system are both unique and international. 

Example: trade marks** 

Two francophone  companies  In  two  different 
countries  have a  national Trademark  for two 
different  products which includes the name 
Vitfi&nf.  Which  company  should be able to 
trade internationally on the internet under the 
donSatnnattfa Vumont.com"? 

require 

commerce 

As  well  as  challenging  existing  laws,  the 
technical  characteristics  of  networks  and 
new 
on-line 
agreements,  for  example  in  the  field  of 
security and authentication.  Measures  will 
need  to  provide  legal  security  and  trust  in 
the  medium  and  prevent  the  appearance 
of  "weak  links  in  the  chain"  in  countries 
where 
are 
insufficient24. 

guarantees 

security 

Example: authentication 

23 WIPO prepared in 1997 new dispute settlement 
mechanisms and specific guidelines  to solve 
potential conflicts between, domain names and 
trademarks. 
24 The Telecommunications  Council of  1/12/97 asked 
the European Commission to propose a Directive on 
"digital signatures". The OECD agreed on "Guidelines 
for Cryptography Policy" in 1997. 

The absence of  a  harmonised  approach  to 
Certification  Authorities  (CA) which  can  verify 
the identity and authenticity of correspondents 
could seriously undermine  the development of 
cross-border trust. Certificates issued by a  CA 
in one country  might not be recognised  by a 
CA in another country, especially if one country 
has foreseen  a licensing scheme  for CAs  and 
the certificate  has been issued by  a  foreign 
unlicensed CA. 

Existing  laws  and  mechanisms  providing 
consumer  protection  will  also  need  to  be 
clarified.  A major  inhibitor to consumers is 
the  difficulty 
the  origin  of 
liabilities  where 
products,  establishing 
these  products  fali  short  of  the  advertised 
quality  standards  or  prove  to  be  unfit  for 
the intended use. 

locating 

in 

Example: consumer protection 

In  th8  electronic market place,  a  customer 
could be  misled into thinking that he or she 
was  purchasing  a  product  from  a  firm 
registered  in  his or her own country  (thereby 
subject to its laws or regulations) and using the 
corresponding country  code  in  its domain 
name,  only to find that the product  emanated 
frcm  another  country,  where  In  fact  the 
company is  subject to  a  different regime  of 
controls. 

There  is  also  uncertainty  concerning  the 
validity  of  contracts  entered  into  over  the 
network,  and 
redress 
available  when  undertaking  transactions 
via the Internet. 

the  means  of 

Example: terms and conditions of contract 

A consumer in Country A desires to purchase a 
product from s company in Country 8 over the 
Internet  As  part  of  the  on-line offer,  the 
consumer  is  supposed  to  accept  the 
company's  general  terms  and conditions, 
which  are quite lengthy,  by clicking "OK".  The 
consumer does click  OK",  but did not read the 
terms end conditions as he would have had to 
stay  on-line  too  long.  When  the  product 
develops  a defect,  the company defends itself 
based on the disclaimer  of liability  in  the  on 
line terms and conditions,  which  the consumer 
claims  should  not  apply  since  the  law  of 
Country A requires terms and conditions to be 
of reasonable length and complexity. 25 26 

Networks  can also be misused for  criminal 
purposes.  Examples  of  such  high-tech 
crime  include  various  forms  of  computer 
manipulations,  computer  sabotage  and 
extortion,  computer  hacking,  computer 
espionage  and  software  piracy.  Fighting 
hi-tech crime calls for more cooperation.27 

The  wide  accessibility  of  content  of  all 
kinds  also  raises  issues  of  public  interest 
with  numerous  social  and  cultural,  as  well 
as  economic  implications.  Differences  in 
national or regional cultures and moral and 
ethical  codes  also  give  rise  to  divergent 
national laws.  In the on-line economy, this 
may  lead  to  situations  where  a  site  may 
contain  what  one  nation 
regards  as 
indecent  or  unethical,  whilst  the  same 
content  may 
legal 
elsewhere. 

considered 

be 

Example: harmful and Illegal content 

In an effort to prevent the spread of  what  it 
regards  as "unsuitable" or "offensive" material 
in its jurisdiction,  Country A decides to make all 
content of this kind illegal. Country B's content 
standards  are incompatible  with Country  A's. 
Should  content,  for  example contained in 
advertising on certain  Internet sites emanating 
from Country  B, be considered  "indecent"  by 
authorities in Country A, it may decide  to  take 
legal  action  against  information service 
providers originating in Country B.  Authorities 
in Country 8  might dispute  such  a charge  on 
the grounds  that.  H  is an infringement  of their 
citizens'  fundamental  rights  to  freedom of 
expression. 

2.5  Conclusions:  Requirements  for  an 

international  framework 

framework 

appropriate 

The global electronic  marketplace  requires 
an 
covering 
technical,  commercial,  and  legal  aspects. 
This  should  foster  interoperable  technical 
solutions,  competitive  business  practices 
It  does  not  need  to 
and  consistent  rules. 
consist  of  detailed  and  harmonised  rules 
on all relevant aspects. 

25 At the European level, applicable law to contractual 
obligations is determined by the Rome Convention 
on the Law applicable to Contractual obligations of 
1980. 

26 At the European level, such disclaimers of liability 
are prohibited by the product liability directive 
(85/374/EEC) 
27 High tech crime was discussed at the G8 Summit 
in Denver (1997) and at the ministerial meeting in 
Boston in December 1997. 

A  number  of  obstacles  needing  to  be 
addressed  by  this  framework  have  been 
identified above.  As to their  priority, views 
may  differ,  but  some  of  the  issues  can 
already  be  recognised  today  as  requiring 
the urgent and coordinated attention of the 
international  community.  Among  these 
priorities 
issues  such  as 
consensus  on  the  Domain  Name  System, 
agreement  on  binding  data  protection 
reducing  communication  costs, 
rules, 
taxation,  and 
in 
providing  certainty 
agreeing  on 
implications  of 
legal 
electronic authentication. 

there  are 

the 

characterises 

Because  of  the  fast-moving  environment 
which 
electronic 
communications  and  commerce,  some  of 
issues  may  be  resolved  relatively 
the 
soon,  others  may  prove  to  be  significant 
bottlenecks,  whilst  others  are  yet 
to 
emerge. 
The  development  of  an 
international  framework  must  therefore  be 
based  on  a  forward-looking  and  flexible 
approach. 

The  above  analysis  makes  it  clear  that 
issues 
increasingly 
legal 
touch  upon 
frameworks. 
It  is  increasingly  necessary 
to  examine  them  at  a  global  level  as 
uncertainty  surrounding  different  national 
these 
and 
challenges  will  hamper 
further 
development of the electronic marketplace. 

responses 

to 
the 

regional 

Therefore,  a  broad  dialogue  on  the  key 
authorities, 
issues 
public 
amongst 
industry,  consumers  and 
international 
organisations should be envisaged. 

DEFINING THE WAY FORWARD 

FOR INTERNATIONAL 
COORDINATION 

3.1 

Strengthening international 
coordination 

at 

organisations 

Already, 
inter 
governmental  and  private  sector  levels 
have  been  mobilised  into working  towards 
solutions  within  a  variety  of  formal  and 
A  host  of 
cooperative 
conferences 
involving 
and 
private 
governments, 
international organisations have been held. 

frameworks. 

events 

sector 

and 

conference 

For example, electronic  commerce-related 
issues  were  discussed  during  the  G7 
in  Brussels28 
ministerial 
(February  1995),  the  Midrand  conference 
(May  1996),  UNCITRAL  adopted  a "Model 
Law" on electronic  commerce  in  1996, the 
Bonn  Ministerial  conference  (July  1997)29, 
the  ITU  "Telecom  Interactive"  event  in 
Geneva (September  1997), the ISO Global 
in  Brussels 
Standards  Conference 
(October  1997), the OECD30 conference  in 
Turku  (November  1997),  the  TABD  in 
Rome  (November  1997),  the  Council  of 
Europe  Ministerial  conference  on  Mass 
(Thessaloniki,  December 
Media  Policy 
1997)  and  at 
(Vancouver 
November  1997),  EU-US  (Washington, 
December  1997),  and  EU-Japan  (Tokyo, 
January  1998) summits. 

the  APEC 

Much  work  has  already  been  achieved 
within the WTO, notably  the GATT,  GATS 
and  TRIPS  Agreement,  which  will  remain 
an  important  motor  of  trade  liberalisation. 
The successful  conclusion  of the  Uruguay 
Round  of  multi-lateral  trade  negotiations 
and  the  recent  agreements  achieved  in 
information 
products, 
technology 
telecommunications  and financial services, 
have given a new impetus  to global trade. 
They  have  also  demonstrated  that  many 
countries  share a strong mutual  interest  in 
improving trade conditions. 

As regards the provision of, and access to 
new  information  services,  however,  the 
trade  community  faces  the  challenge  of 
the  global 
ensuring 

free  access 

to 

28 www.i8po.cee.be/g7/g7main.html 
26 www2.ectio.lu/bonn/conference.html 
30 www.oecd.org 

through 

they  apply 

this  challenge, 

the 
electronic  marketplace 
implementation  of  competition 
effective 
rules.  The  WTO  provides  a  basis  to 
address 
in  particular 
through  the  GATS, 
in  this  respect,  a 
debate is currently emerging as to whether 
there  is  a  need  to  adjust  those  provisions 
when 
to  services  provided 
electronically.  The  new  round  of  services 
negotiations  scheduled  to  start  before  the 
for 
year  2000  could  have 
further  liberalisation.  In addition, the WTO 
working  group  on  "trade  and  competition" 
should eventually lead to the strengthening 
of  competition  rules  at  world-wide  level, 
which  would  apply  across 
sectors, 
including  electronic  communication  and 
commerce. 

implications 

Besides  the work  undertaken  in the WTO, 
ongoing  discussions  in other fora, such as 
the  OECD, WiPO,  ITU,  UNCTAD, etc.,  as 
the 
well  as  bilateral  discussions  with 
Community's  major  trading  partners,  such 
as the United States and Japan, are widely 
contributing 
to  building  consensus  on 
electronic commerce issues. 

the 

understandings 

Although  good  progress  has  been 
achieved, 
and 
agreements  arrived  at  within  these  fora 
consist  either  of  principles,  which  are  not 
necessarily  compatible, or do not cover  all 
elements  of  a  comprehensive  framework. 
Also, 
to 
continue with as wide a participation  of the 
international 
community  as  possible, 
including  the  developing  countries.  As 
chapter  2  shows,  there  are  a  growing 
awaiting 
number 
solutions. 

the  process  will  now  need 

urgent 

issues 

of 

the 

Since  electronic  commerce 
is  adding 
rapidly  a  new  dimension  to  the  global 
international  community 
economy, 
should  define  an  appropriate  mechanism, 
which  can  help  the  different  actors  to 
respond more quickly  to new  requirements 
as they  arise  in a coordinated  manner.  In 
this  context,  they  need  to  answer  two 
questions: 

Two questions 

•  What  are  the  most  urgent  obstacles 

and what are the most effective  means 
to remove them? 

»  What method of  coordination  is  best 

suited to respond rapidly and effectively 
to new challenges? 

3.2  Identifying  the  most  urgent  issues 

and ways to tackle them 

them 

to  address 

the  problems  and 

What  is required  is an  urgent  and  detailed 
examination  of 
the 
priorities, in order to allow the  international 
community 
in  a 
substantive  and  coordinated  manner. 
is  growing  experience  amongst 
There 
industry,  consumer  groups,  governments. 
and  international  organisations,  of  the  key 
problems  needing  solutions  in  order  to 
the  global 
foster 
electronic marketplace. 

the  development  of 

The  difficulty  lies  in  obtaining  a  consistent 
approach in view of the number of different 
groups engaged in parallel activities, which 
are  not  always  coordinated.  One  can 
however  observe 
in  many  areas  an 
emerging  convergence  of  views  on  the 
definition  of  problems.  These  include, for 
instance,  requirements  from  industry  for 
technology  neutral 
proportionate  and 
regulations, 
groups 
consumer 
from 
seeking  adequate  data  protection,  as  weli 
as 
of 
consistent 
competition rules. 

implementation 

Opportunities  to exchange  information  can 
help  to  identify  and  solve  problems  which 
arise  from  a  lack  of  sufficient  knowledge 
on  applicable  frameworks  and  help  to 
those  problems 
from 
distinguish 
which  will  require 
the  clarification  or 
adaptation  of  binding  or  non-binding 
regulations. 

them 

The  Commission  will  support 
such 
activities  where  necessary  and  possible. 
In  particular,  it  will  use  its  own  fora  and 
planned  events  as  opportunities 
to 
contribute to the debate  (e.g. expert  group 
meeting  in  Copenhagen  on  cryptography 
in April  1998,  Information  Society  Forum31 
- in which major business and social group 
the 
interests 
consultation  launched by the  Green  Paper 
Initiatives  may  also  be 
on  convergence). 
inspired  by  activities  such  as 
the 
Memorandum  of  Understanding  "Open 

represented 

are 

-, 

31  www.ispo.cec.be/infoforum/isf.html 

10 

to  Electronic  Commerce 

Access 
for 
European  SMEs",  signed  by  over  100 
organisations32  and  open  for  membership. 
Furthermore,  it  will  seek  to  promote  an 
active  EU  contribution  to  the  consensus 
building  process,  both  in  the  private  and 
public sectors. 

Among  the  various  groups,  industry  is 
currently  particularly  active  as  it  develops 
new  global  business  structures  and 
services.  They  are  at  this  stage  probably 
most  advanced 
the 
in 
drawbacks of existing rules. 

confronting 

invite 

industry 

For this  reason, in the course of  1998, the 
Commission  will 
to 
participate  in a  round  table  at  expert  level 
(to  which  experts  from  Member  States, 
international  partners  and 
consumer 
groups  will  also  be  invited),  to  provide  an 
opportunity  for  all to  present  their  views  in 
and 
a  more 
encourage an exchange of information. 

coordinated  manner 

It  is  however  also  important  that  these 
views  are  presented 
to  public  policy 
makers at a global level.  For this purpose, 
it  is  proposed,  in  the  course  of  1998  or 
early 1999 at the latest, to: 

(i)  either  organise  a  specific  International 

Ministerial Conference; 

(ii) take  advantage  of  one  of  the  already 
at 
international 

events 

planned 
Ministerial level. 

The outcome of  such a meeting  could  be 
an  understanding  on  priority  issues  and 
how to tackle them. 

3.3  Developing a method of 

coordination: 
An International Charter 

As  shown  in  chapter  2,  a  number  of 
problems  are  already  visible  but,  as  the 
global  electronic  marketplace  develops, 
one  can  expect  many  new 
issues  to 
appear, whilst  others may  change or  even 
vanish. 
In  addition,  there  is  a  growing 
constellation  of  actors  and  bodies 
involved.  Therefore,  all  actors  should 
examine  how  they  could  work  together  in 
future. What  is  not  required  is to  establish 
an  international  supervisory  authority  or  a 

12 www.eto.org.uk/ttrade/mou/ 

reach 

rules. 
a 

They  should, 
set  of  binding 
forward-looking 
however, 
understanding  on  how  best  to  develop 
common approaches to problems and their 
solutions, 
to  develop  a  sustained 
method of coordination in which public and 
private  sector 
interests  are  adequately 
represented.  This  could  be  agreed  multi-
laterally in an International Charter. 

i.e. 

An International Charter would: 

be  a  multi-lateral  understanding  on  a 
remove 
method  of  coordination 
to 
obstacles 
the  global  electronic 
for 
marketplace; 

be legally non-binding 

recognise 
international organisations 

the  work 

of 

existing 

promote  the  participation  of  private 
sector and relevant social groups 

contribute 
to 
transparency33. 

more 

regulatory 

contain 

An 
International  Charter  would  not 
therefore  define  the  key  issues  to  be 
solved  as 
an 
such,  but 
understanding  on  how  a  process  of 
strengthened 
international  coordination 
should  be  organised,  with  as  wide  as 
possible a participation  of the  international 
community.  The  Charter  could  be  agreed 
by or in the course of 1999. 

•" The G7 Ministerial Conference in Brussels of 
February  1995 established the Global  Inventory 
Project.  This could develop into a suitable 
international forum for the exchange of information 
on legal issues and frameworks relating to the 
Information Society: www.gip.int 

II 

The European Commission will: 

(i)  Discuss  with  Member States and seek 
an  understanding  on  the procedure. 
Such  opportunities  will  arise  in  the 
forthcoming  Telecom  and  Gênerai 
Affairs Councils; 

(ii) Take  advantage of  the  Commission's 
mgufar '  contacts  with  international 
partners  to pursue an open  discussion 
of the concept; 

(III) foyfte experts from industry and others 
including international  partners  to  a 
round table meeting in 1998 to obtain a 
more comprehensive picture; 

(iv)seefc  to  promote an  active,  EU-wide 

contribution  to  the  consensus-building 
process,  by  both  private  and public 
sectors. 

(v) Invite all interested  parties to send by 
31  March  1998 their comments  to the 
address: 
e-mail 
following 
eif@bxl.dg13.cec.be. 

4.';.fHii:iiiiiiiSï 

This Communication sets out: 

» 

the  need  for  an  international  enabling 
the  emerging  global 
framework 
electronic marketplace; 

for 

»  a  preliminary  analysis  of  emerging 
obstacles  to  this  framework  covering 
technical, commercial and legal areas; 

®  a  proposal  for 

immediate  action  to 
coordinate  views  on  the  key  obstacles 
to 
the  most  effective  means 
and 
remove  them  -  building  on  stronger 
private  sector 
(including  consumer 
groups)  involvement; 

•  a  proposai  for  an  international  Charter 
through which  parties would agree on a 
method  of  coordination  between  all 
relevant parties. 

As indicated, this Communication does not 
attempt to propose solutions to the specific 
issues  identified  nor  does  it  set  out  to 
define the  respective  roles  of the  relevant 
international fora.  It outlines how improved 
multi-lateral 
be 
coordination 
developed.  The  next  steps  will  therefore 
depend  upon the responses the  European 
Commission will receive to its proposals. 

could 

\2 

APEC  (Asia-Pacific  Economie Cooperation) 

ÂFWÊC (Asia Pacific Network Information Center) 

APT (Asia-Pacific Tefecommunity) 

ARM  (American Registry for Internet Numbers) 

ASEAN (Association of Southeast Asian Nations) 

BfAC (Business and industry Advisory  Committee) 

ChTEL (Comisiôn Interamericana de Telecommunicaciones) 

DVB (Digital Video Broadcasting Group) 

EFF (Electronic  Frontier  Foundation) 

ETSI (European Telecommunications Standardisation Institute) 

FNC (Federal Networking Council) 

GIP (Global Internet  Project) 

gTLD-MoU ( Generic Top Level Domain Memorandum of Understanding) 

IAE (Internet Architecture  Board) 

IANA (Internet Assigned Numbers Authority) 

ICC (International Chamber of Commerce) 

IESG (The Internet Engineering Steering Group) 

IETF (Internet Engineering Task  Force) 

INTA (International Trademark  Association) 

InterNIC  (Internet Network  Information Center> 

ISO (International Organisation for  Standardisation) 

ISOC (Internet Society) 

ITU (International Telecommunications  Union) 

MERCOSUR (Mercado Comun del Sur) 

NAFTA (North American Free Trade Agreement) 

NCC-RIPE (RIPE Network Coordination Center) 

NSF (National Science Foundation) 

NSI (Network Solutions  Incorporated) 

OAS (Organisation of American  States) 

OECD (Organisation for Economic Cooperation and Development) 

PANAFTEL (PanAfrican Telecommunications  Network) 

PATU (Pan-African Telecommunications  Union) 

POC (Policy Oversight  Committee) 

RASCOM (Regional African Satellite Communications  Organisation) 

RIPE (Réseaux IP Européens) 

TABD (Trans-Atlantic Business Dialogue) 

13 

UMTS - Forum (Univeral Mobile Telecommunications  System -  Forum) 

UN (United Nations) 

UN/ECA (United Nations Economic Commission for Africa)) 

UN/ECE (United Nations Economic Commission for Europe) 

UNCITRAL (United Nations Commission on International Trade Law) 

UNCTAD (United Nations Conference on Trade and Development) 

UNDP (United Nations Development  Program) 

UNESCO (United Nations Educational, Scientific and Cultural Organisation) 
WSC (World Wide Web Consortium) 

WIPO (World Intellectual Property  Organisation) 

WRC (World Radiocommunications  Conference) 

WTO (World Trade Organisation) 

14 

ISSN 0254-1475 

COM(98) 50 final 

DOCUMENTS 

EN 

16  11  15 

Catalogue  number  :  CB-CO-98-067-HN  C 

ISBN  92-78-30888-9 

Office  for Official  Publications of the European  Communities 

L-2985  Luxembourg