Opinion of the Economic and Social Committee on the 'Green Paper on the Convergence of the telecommunications, media and information technology sectors, and the implications for regulation - Towards an information society approach'
Date: 1998-04-29
Institutions: European Economic and Social Committee
Subjects: competition law, economic convergence, information industry, information technology, telecommunications, trade licence

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Opinion of the Economic and Social Committee on the ‘Green Paper on the Convergence of
the telecommunications, media and information technology sectors, and the implications for
regulation — Towards an information society approach’

(98/C 214/23)

On 5 December 1997 the Commission decided to consult the Economic and Social Committee,
under Article 198 of the Treaty establishing the European Community, on the above-mentioned
Green Paper.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 1 April 1998. The rapporteur
was Mr Morgan.

At is 354th plenary session (meeting of 29 April 1998), the Economic and Social Committee
adopted the following opinion by 91 votes in favour, 5 votes against and 6 abstentions.

1.

Introduction

The ESC recognizes that the green paper is a
1.1.
major initiative within the Rolling Action Plan for
Europe at the Forefront of the Global Information
Society (1) while at the same time creating a new
regulatory framework for the future of that society.

1.2.
Convergence is an issue of vital importance for
economic success and social progress in Europe. The
issues are wide-ranging and complex. If Europe can
harness this development by creating an environment
which encourages change, then we will have a powerful
motor for economic growth, creating jobs, increasing
customer choice and promoting cultural diversity. If
Europe fails to embrace convergence quickly enough
(and it is already behind in the key domain of the
Internet) then there are real risks that our businesses
and citizens will be left in the slow lane of the information
revolution which is energising businesses, users and
governments around the world.

The Committee takes the view that the ever
1.3.
increasing degree of convergence between the individual
fields will act as a driving force and pace-setter for the
information society. This convergence will bring changes
to living and working conditions, the nature and extent
of employment and the production of goods and services.
The regulatory framework in these areas is a determining
factor in respect of (a) safeguarding and strengthening
the innovative capacity of the EU and (b) employment
and future living and working conditions in Europe.

the questions which follow, the Committee has focused
on the specifics of convergence and regulation. In
particular, the Committee considers that other aspects
of the Information Society have been (and will be) dealt
with by the Committee in opinions on other elements of
the ‘rolling action plan’.

1.5.

The central question in the green paper asks:

If convergence requires adaptation of existing regulatory
approaches, should that adaptation:

(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 those currently
applied to traditional
telecommunications and
broadcasting activities; or

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

1.6.
The Committee is against the second approach
to regulation and favours a combination of the first and
third to the extent that it is practicable in the longer
term. In the immediate future, regulation should build
on the existing principles, but as competition emerges
the regulation can become less onerous. Looking forward
to when the new infrastructures and services are more
established and new user preferences known, the whole
regulatory infrastructure can then be re-considered.

1.4.
In the context of the ‘rolling action plan’, this is
a green paper about convergence and the regulation of
convergence. Getting regulation right is seen as the key
to getting Europe into the fast lane. In the answers to

2. Summary of the green paper

(1) OJ C 296, 29.9.1997.

The Information Society is becoming a reality.
2.1.
Its development is fuelled by the rapid technological

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change which is transforming the information industries.
The nature and speed of this transformation may pose
new challenges to policy-makers.

2.2. One of the most significant factors is the increas-
ing use by different sectors, notably the telecommuni-
cations, media and information technology (IT) sectors,
of the same technologies. Evidence of such convergence
has been mounting in recent years with the emergence
of the Internet and with the increasing capability of
existing networks to carry both telecommunications and
broadcasting services. 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.

2.3.
There is broad agreement 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.

2.3.1.
Some consider that convergence will lead to
the complete and rapid transformation of existing
telecommunications, media and information technology
services in such a way that these currently separate
groups of services will merge into one another, substan-
tially blurring the previously clear distinctions between
them.

2.3.2. Others feel that the specificity of the existing
separate sectors will limit the scope for service conver-
gence, 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.

2.3.3. Others believe that, if it does occur, it will
evolve over an extended timescale.

It is nevertheless clear that the implications of
2.4.
these developments are potentially far reaching. The
emergence of new services and the development 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
citizens’ lives, by increasing consumer choice, facilitating
access to the benefits of the Information Society and
promoting cultural diversity.

2.5.
These developments are therefore potentially
positive for European economic and social development
and should be encouraged. Public policy will need to
provide a supportive environment for convergence in
order to ensure that the potential opportunities are
grasped in a timely fashion.

2.6. What is needed now is wide ranging and deep
debate on the convergence phenomenon and its impli-
cations as an input to such policy formulation. The
objective of this green paper is to start such a debate.
This debate needs to be set into context in respect of
other important Commission actions in the telecom-
munications, media and information technology sectors.
to the future
this debate is central
In particular,
communications
full
the
liberalisation of telecommunications services and infra-
structure since 1 January 1998.

landscape

following

2.6.1.
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 (1), carried out
2.6.2.
in the light of liberalization and more specifically as a
result of the commitment contained within the cable
directive (2) and the telecommunications full competition
directive (3) is 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 compe-
tition 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.

2.7.
Against the background of ensuring a competitive
basic market structure, the timeliness of this green paper
stems from the fact that new markets may develop
rapidly, and that they will be essentially global in nature.
If the applicable regulatory frameworks in 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

(1) SEC(97) 2390 final.
(2) OJ L 256, 26.11.1995.
(3) OJ L 74, 22.3.1996.

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at a competitive disadvantage vis-à-vis its more flexible
global competitors. This could restrict consumer partici-
pation by limiting choice and weakening consumer
confidence in the new services, and have negative
consequences for economic growth and employment
creation in Europe.

2.8.
The green paper addresses the nature of the
convergence phenomenon, and focuses on the provision
of services and the underlying networks over which they
are carried. 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 for
service provision, any future initiatives in this field
would be without prejudice to existing ongoing work
within the Commission or the implementation of existing
Community legislation.

2.9.
The green paper does not take definitive positions
with respect to new regulatory structures. Indeed, it
recognises that convergence may lead to less regulation
in telecommunications and media sectors, and should
not lead to more regulation in areas such as IT (except
in areas outside the scope of the green paper). Rather it
analyses the convergence phenomenon as evident in the
market; it identifies issues relating to regulation arising
from the developments, and it poses questions in relation
to these issues.

3. Question 1

The nature and impact of convergence today:

3.1. Question 1A

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?

The Committee anticipates that this question will
be answered by the industry during the consultation
process.

3.2. Question 1B

3.2.1.
into four classes:

If one were to divide roughly the population

(i)

Professional business people at work;

(ii) Professional business people (and retired business

professionals) at home;

(iii) The young;

(iv) The rest of the population (about half of the total)

at work and at home;

then the impact on the first group is profound, on the
second group it is important, for the third group it is
becoming a way of life, while for the fourth group there
is little impact yet.

3.2.2.
For the first group, the business professional
at work, there is a PC on every desk, portable computers
and mobile phones are normal equipment for mobile
employees and multimedia presentations are a basic tool
of business. E-mail from the desk or the portable, and
mobile communications generally, make converging
technologies a must for business communication. In
addition, electronic publishing and electronic commerce
are rapidly becoming standard business processes. Busi-
ness-to-business electronic commerce is certainly more
significant than is business-to-consumer.

3.2.3.
For the second group, which is essentially the
first group in a different environment, the home becomes
an extension of the office. Home PCs can, of course,
also provide domestic and personal facilities, such as
those used by retirees, and word processing has a place
in many homes.

3.2.4.
word processing,
indispensable adjunct to personal life.

The youth, via schooling, games, hobbies and
is coming to see the PC as an

3.2.5.
About half the population is not exposed to
technology at home except for the telephone and
television. It may be that this group may be persuaded
to use Internet and other value added services when they
are offered via the TV. So far there is no evidence on
which to base any conclusions.

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

For full scale development of converged services
3.2.6.
in the home, bandwidth increases via xDSL (Digital

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Subscriber Loop) over twisted pair telephone lines and
coaxial cable and, in due course, by wireless bandwidth
will be essential.

4. Question 2

The socio-economic, business and consumer impact of
convergence:

4.1. Question 2A

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?

4.1.1.
Convergence is already impacting employment
significantly, and is likely to have a bigger impact as the
converged services further penetrate European society.
Within its ‘Rolling action plan for Europe at the forefront
of the global information society’, the Commission has
dealt extensively with the impacts on company structure,
work organisation, education and training, social
cohesion and other socio-economic aspects. While this
opinion relates to the regulatory regime for the three
industries involved in convergence,
the Committee
would like to emphasize its interest in the socio-economic
aspects of convergence and the need for regulatory
development in that sphere as well.

4.1.2. On the positive side, there is certainly going to
be an insatiable demand for ‘content’, whether films,
shows, sport, games, etc. For example, the fees for TV
rights are creating more professional sportsmen and
women. Discovery and National Geographic channels
put the natural world into an audiovisual context.
Audiovisual publishing has enormous potential.

4.1.3. On the other hand, electronic commerce and
electronic publishing are likely to be disruptive as virtual
access replaces physical high street outlets. Banking is
an industry which immediately comes to mind. Even so
certain high street outlets will continue to thrive in a
new form. For example, multiplex cinemas have boomed
in parallel with films on television and coffee lounge book
stores are developing alongside Internet booksellers.

concerned, not everyone can have the aptitude to work
with technology. It is also important not to lose sight of
the need to train a proportion of the population into
the traditional crafts and skills, which, however, are
increasingly likely to require a basic IT education. The
Internet is, of course, a powerful education and training
medium as the success of the Internet University in the
USA demonstrates.

4.1.5.
The impact in the way we work is likely to be
qualitative. One way of looking at it is to consider the
advances of the last twenty years. Twenty years ago
there were no PCs, word processors, colour screens,
colour printers, CDs, CD-ROMS, faxes, mobile phones,
satellite broadcasting, video conferencing or Internet.
ATM and credit card facilities did not have the inter-
national dimension of today. All these developments
have made the professional
job more effective and
immediate but the work itself has not changed substan-
tially. It is difficult to predict whether there will be such
a change in the future.

4.1.6.
There will of course be changes in some
categories of job. Fewer bank clerks, more staff in
customer response centres, etc. There will also be more
scope for remote working, home working and for higher
value self-employed work. The difference between
working on a self-employed basis and on an employee
basis is becoming increasingly blurred. This gives rise
to new questions regarding the status of employees (e.g.
with regard to the risk of liability of employees,
protection of data relating to employees, the law
concerning
co-
determination in businesses).

representation

employees’

and

4.1.7.
The move to the information society is putting
a premium on information technology skills. Unless
sufficient hardware and software engineers are trained
in Europe, key jobs will be exported e.g. software to
India.

4.1.8.
There is no reason to suppose that these
impacts will not be felt in all regions of the European
Union. The objective should be that the negative job
impact is not disproportionately concentrated in Europe
whereas job creation benefits non-European regions.

For all regions to benefit fully from the Infor-
4.1.9.
mation Society,
it will be necessary that universal
broadband access be provided everywhere and at com-
petitive prices. There is no doubt that the success of the
Internet in the USA has been encouraged by the universal
low-cost local call regime.

4.1.4.
There is also a generational effect. The young
have an easy familiarity with the technology, whereas
redundant 50 year olds do not. As far as training is

4.1.10.
The ability of consumers and employees to
use new technology is a further prerequisite for the
success of multimedia services (see 4.3.4).

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4.2. Question 2B

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?

4.2.1.
It seems likely that the traditional copper wire
based PTO (Public Telecommunications Operator) is
going to come under most attack. On the one hand there
is the World Com phenomenon, where new Internet
Service Providers challenge the traditional operations of
the incumbent PTO. On the other hand, because some
of the incumbent PTOs are restrained by regulation
from entering the cable and mobile business, they may
not be able to change their businesses to exploit
convergence as quickly as they might want. It may
become necessary to restructure these PTOs to enable
them to diversify and compete in new markets as
indicated in the draft cable directive (1). Whatever
happens in that respect, the introduction of xDSL
technology to increase the bandwidth available for
twisted pair telephone lines is a strategic priority for the
PTOs to address.

4.2.2. When the capacity restraints of analogue
broadcasting have been removed by the greater digital
spectrum, the unique position of the public sector
broadcasters will be changed. The ethos and objectives
of public service broadcasting will not change but the
means of achieving them may have to be adapted to this
new situation. Moreover, this should not affect the
existing national regimes for public service broadcasting
as permitted by Community law.

4.2.3.
At the level of consumer equipment, the cost
of the set top box is likely to inhibit the take up of
digital TV. Nevertheless, the ability of the manufacturing
industry to continue to miniaturise and reduce cost
suggests that there are ultimately few barriers to the
power, mobility or the multi-media functionality which
can be achieved. What is needed is an easy-to-use PC
for broadcast reception which will undoubtedly be
produced in due course.

4.3. Question 2C

What evidence is there of changes in Europe in the way
services, information, entertainment and culture is being

(1) OJ L 256, 26.11.1995 .

accessed in the home and in 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?

4.3.1.
shot of the present situation:

The following grid is designed to give a snap

Office

Home

Services

Information

Entertainment

Culture

Many

Much

N/A

N/A

Few

Little

Multi-channel
TV/Games

Multi-channel
TV

4.3.2.
The implications of the current levels of PC
penetration, Internet use and TV penetration for the
take-up of new services are as previously discussed.
Business professionals at work, in or outside the office
or on the phone, have increasing opportunities to use
new services, especially Internet, and within that, e-mail.
Digital television penetration is minimal and few new
services are available.

4.3.3.
For full exploitation of the converged services,
especially in the home, an ‘ease of use’ revolution is
needed. The PC user interface is unacceptable for the
lay user.

4.3.4.
Education and training are central to achieving
higher levels of multimedia computer penetration and
Internet use. The rate of technological change is high-
lighting the need for life-long learning and putting
pressure on existing education and training facilities.
Public authorities need to reinforce the capacity of
primary, secondary and tertiary educational institutions
to train students in the computer technologies and their
exploitation, while extra capacity will also be needed
for adult education. Larger employers, both public and
private, should have the capacity to train their employees,
but smaller employers may rely on initiatives from
chambers of commerce and employers’ organisations as
well as training providers. Public programmes to support
the re-employment of the unemployed also need to
identify candidates capable of learning these skills. The
ESC believes that a major effort is needed throughout
the Union and that an initiative from the Commission
would be appropriate.

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4.4. Question 2D

In the light of the positions put forward in the Com-
mission Working Paper on the Fifth Framework Pro-
gramme, what kinds of Community RTD projects
should be launched in the context of convergence?

4.4.1.
The ESC has already given an opinion on the
priorities for the Fifth Framework Programme (RTD
1998-2002) (1) and is preparing a further opinion in
response to its specific programmes (2).

5. Question 3

Barriers to convergence:

5.1. What 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?

The Commission has correctly identified the
5.1.1.
range of actual and potential barriers to convergence.
Where the Committee has identified specific issues, these
are dealt with in the replies to Questions 4 to 9 below.

6.1.3.
Beyond the market perspective, regulation may
be needed to meet the general public interest objectives
(see paragraphs 7.5.1 and 8.2.3 below).

6.2. Question 4B

principles

Whether and if so, to what extent convergence challenges
the
regulatory
approaches in the telecommunications, media and IT
sectors?

underpinning

existing

Convergence does challenge existing regu-
6.2.1.
lation. Voice communications on Internet is a case in
point. Voice licensing dates back to the era when
networks were more or less dedicated to voice and the
licence gave both the guarantee of quality and the
measure of monopoly needed to provide the return on
investment. In the era of digital infrastructures voice is
just another digital bit-stream. Whether or not a voice
service should be licensed needs to be reconsidered. In
principle the Committee would prefer that competing
voice services were simply subject to the competitive
pressures of market forces.

6. Question 4

7. Question 5

The impact of convergence on current regulation:

6.1. Question 4A

Overcoming the barriers — Getting the right regulatory
framework for business and for consumers:

Do current developments require more or less regulation
in the sectors affected by convergence, more or less
reliance on market forces to achieve the objectives
identified?

7.1. Question 5A

6.1.1.
dence in two respects.

Regulation is required to ensure public confi-

6.1.2.
From a market perspective, regulation is only
necessary where competition does not yet fully apply or
does not fully meet the objectives of the market.
Otherwise, the competition rules alone should be relied
upon. Current developments emphasize the advantages
of eliminating monopolies and establishing alternative
means for providing services of general economic inter-
est. These require guaranteed access to networks and
unrestricted competitive markets as well as price trans-
parency with a view to guaranteeing the highest quality
service to consumers.

(1) OJ C 355, 21.11.1997.
(2) COM(97) 553 final and COM(98) 8 final.

Are the definitions in the telecommunications, media
and IT sectors in national and/or Community legislation
adapted to the convergence process?

7.1.1.
From the example in the preceding paragraph,
it is clear that legislation must conceptually separate
infrastructure from content services and recognize the
novel character of the digital infrastructures. Clearly,
the 1999 review of the EU telecoms legislation should
ensure that this separation is properly reflected, and
that the definitions currently in use should be updated.

7.1.2.
As for the development of new ‘converged’
services such as electronic commerce, a new class
of regulation is not necessary. Consumer protection,
privacy etc., should be handled by the adaptation of
existing laws in the public interest and to ensure that
the market keeps growing.

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7.2. Question 5B

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

L i c e n s i n g

7.2.1.
Exclusive licensing of a broadband operator
for a finite period is justified for infrastructure market
entry, whether for telecom, cable or satellite broad-
casting. Limitations on what may be carried on existing
networks can also be justified where the carrier con-
cerned is dominant, or where new players are being
encouraged to enter the market. As highlighted in the
Commission’s green paper, digital terrestrial broad-
casting is a new environment requiring a new approach
to licensing, to encourage new operators to enter the
market.

7.2.2.
A common set of licensing principles through-
out the Community would be appropriate, especially if
they are designed to promote market entry.

A c c e s s

Internet service providers should be given the
7.2.3.
same access as other service providers; there is no case
for them to assume universal service obligations.

7.2.4.
Cable, wireless telephones and electricity lines
are some of the alternatives to the local loop. Regulatory
policies encouraging sustainable competition in the
provision of local infrastructure should be adopted.

7.2.5.
The Committee endorses the approach taken
by the Television Standards Directive on Conditional
Access Systems (1), and would support the extension of
its underlying principles to the new services environment.

7.2.6.
The commercial and regulatory situation in
respect of browser and search engines is changing
rapidly. The Committee’s view is that the abuse of
dominant positions should be constrained.

7.2.7.
The Committee accepts the analogy between
Electronic Programme Guides (EPG) systems and airline
reservation systems. EPG systems in the traditional

broadcasting context should be non-discriminatory.
EPG systems in an Internet environment will compete
in the same way that browsers compete.

The Committee also accepts the Application
7.2.8.
Programming Interface (API) analogy between PCs and
set top boxes. However, it is important not to force the
issue of standardisation from outside the industry.
Market forces should be given time to establish a de
facto standard for set top boxes.

C o n t e n t

7.2.9.
As far as content and exclusivity are concerned,
these are indeed issues for commercial agreement and
competition law. There is a distortion created by
market forces in relation to the vertical integration of
broadcasting. It relates to the price which pay-TV
broadcasters are prepared to pay for premium rights in
order to promote their infrastructure. It remains to be
seen whether the evolution of infrastructure ownership
and use and the development of premium events will
result in wider public access to premier events. At
the moment, premier content serves to promote new
converged services although wider public access can be
achieved through re-broadcast rights. Member States
are reviewing the position in the light of the TV Without
Frontiers Directive (2).

7.2.10.
The Committee does not believe that in the
world of commercial sport the general public has a basic
right to free viewing. Access to the sporting event must
be paid for by the spectating public in one way or the
other. Because premium access helps to sell pay-TV
subscriptions it may be worth more to some broadcasters
than others. In due course, the sports promoters will
have to balance the return from a television audience
paying for the spectacle against a television audience as a
target for advertisers. In many cases, a larger advertising
audience may be worth more than a smaller premium
viewing audience. The Committee nonetheless believes
that the broadcasting of top commercial sporting events
and other major events forms part of the basic infor-
mation supply to the public. Under the Television
Without Frontiers Directive, Member States have the
facility to nominate sporting and other major events
which should be available on free television.

(1) COM(97) 356 final, 16.10.1997.

(2) COM(97) 523 final, 24.10.1997.

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P r i c i n g

The Committee broadly accepts the view
7.2.11.
expressed in the green paper that market forces and
competition would take care of the pricing for market
penetration. There may be a role for regulation to ensure
price transparency where the market does not guarantee
it.

7.5.2.
As far as individuals with disability are con-
cerned, the key user device is the PC. PCs are already
adapted for disability. As the PC evolves, it should be
possible to improve the interfaces to disabled users.

8. Question 6

7.3. Question 5C

Securing public interest objectives in the light of conver-
gence:

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

There should be a deadline for the complete
7.3.1.
switch from analogue to digital services. It would
be appropriate to have a Community-wide 1992-type
deadline.

7.4. Question 5D

What should be the objectives of standardization in the
light of convergence and what should be the relationship
between regional and international standardization?

Standardization should be

7.4.1.
led,
although certain standards may be dictated by the
requirements of public bodies. The ESC has recently
given an opinion on standardization (1).

industry

7.5. Question 5E

What additional action (if any) is required to ensure
that the interests of consumers and of users with
disabilities are respected in the light of convergence?

7.5.1.
In general, the interests of consumers are
protected by the laws and regulations which apply to
information, television etc. already. There is a specific
issue with the Internet in that it provides facilities for
individuals to communicate relatively anonymously
with other individuals and groups. The ESC has adopted
opinions on the action plan on promoting safe use of
the Internet (2) and on the protection of minors and
human dignity in audiovisual and information ser-
vices (3).

(1) OJ C 89, 19.3.1997.
(2) COM(97) 582 final, 26.11.1997; ESC Opinion 627/98,

29.4.1998.

(3) COM(97) 570 final, 18.11.1997; ESC Opinion 626/98,

29.4.1998.

8.1. Question 6A

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

In

the

telecommunications

8.1.1.
convergence
phenomenon is neutral, because the networks are already
independent of the services, although on-going regu-
lation needs to ensure users’ access to new services. This
will best be achieved by ensuring access to broadband
networks.

8.1.2.
In broadcasting, convergence, or rather the
digital platform development, is resulting in vertical
integration. This development provides the challenge
for regulation.

8.1.3.
In the IT sector, the main issue relates to
control of the de facto standards and the bundling
of services. Hence, the Microsoft/Sun Microsystems
dispute over Java and the bundling of Microsoft Internet
Explorer into Windows are key issues. For competition
and innovation to flourish there must be publicly
accessible standards and interfaces and restrictions on
bundling to the exclusion of choice by dominant players.
The same issues will apply to Windows CE.

8.2. Question 6B

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

8.2.1.
There is a case in broadcasting and IT for the
objectives to be more clearly identified and particular
obligations to be established. As already mentioned, the
general economic interest objectives must apply in due
course to the operators of broadband networks. It may
be premature to place a broadband access obligation on
developing networks but this has to be the long term
goal.

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8.2.2.
In broadcasting, as channels become thematic,
the objectives of public service broadcasting may not be
necessarily achieved within the envelope of generalist
channels. Any change will be dependent on the experi-
ence gained in a multi-channel environment.

The proliferation and globalization of broad-
8.2.3.
cast and information services does inevitably raise public
interest issues in relation to content. It is beyond the
scope of this opinion to decide for or against new
regulation. The Committee would expect to give its
opinions on these issues in due course and is already
working on a submission in respect of the protection of
minors.

9. Question 7

The future shape of regulation

9.1. Question 7A

Do current developments require a reassessment of the
way in which rules are applied to the telecommuni-
cations, broadcasting and IT sectors?

9.1.1.
The Committee considers that the Commission
poses the right questions. It broadly agrees that regu-
lation should be founded upon the principles referred to
in the green paper, namely:

(i)

no regulation for regulation’s sake;

(ii)

regulation must be based on single market free-
doms;

(iii) regulation must take account of business realities;

and

(iv) regulation must meet social and general interest

objectives effectively and efficiently.

9.1.2.
Broadband infrastructure competition is more
of an issue in the converged market and convergence
therefore offers an opportunity to consider the telecom-
munications regulatory approach taken by the Com-
mission and to reconsider whether monopoly rights
can be maintained other than in totally exceptional
circumstances. Historic PTOs will want to introduce
broadband services while competition will come from
digital cable, wireless telecommunications and from
terrestrial and satellite digital broadcasting.

9.2. Question 7B

Does the existence of different regulatory authorities or
ministries responsible for different aspects of telecom-
munications, media and IT activities offer a workable
structure for regulatory supervision in the light of
convergence?

9.2.1.
In a converged industry and market environ-
ment with identified policy objectives, separation of
regulatory functions between government departments
or national regulatory authorities is likely to create
barriers to the efficient delivery of old and new services to
consumers. Where regulation is necessary, enforcement
and compliance should be determined by the policy
objectives sought and not the type of activity regulated;
it should be a stimulus rather than a hindrance to
efficiency and economic progress.

9.2.2.
There is merit therefore in having a single or
common regulator for networks. The same does not
apply for media content.

9.3. Question 7C

Will convergence require a reassessment of regulatory
responsibilities at a national, Community or inter-
national level, and, if so which areas?

9.3.1.
An assessment as to whether competition
rules are sufficient to control the future converged
environment is necessary. Once convergence has elimi-
nated, through digitalisation, many of the reasons which
have necessitated regulation in the relevant sectors
(e.g. scarcity of frequency spectrum, network capacity,
industry and market structures), competition rules may
be sufficient. Furthermore, EC competition rules may
provide a more adequate platform than regulation for
uniform control of the converged sectors at a European
level.

The Committee agrees that the principle of
9.3.2.
subsidiarity should apply within the overall framework
of Community legislation.

10. Question 8

The international aspects of convergence:

10.1. Question 8A

Is further action required at an international level in
light of convergence?

10.1.1.
The US government has recently produced a
green paper on the technical management of the Internet.
For these purposes, the ESC believes that the Commission

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should pursue the policy outlined in its recent Communi-
cation on the need for strengthening international
co-operation. These are fundamental issues and the ESC
encourages the Commission to pursue this initiative.

11.1.4. P r i n c i p l e 3

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

10.1.2.
Convergence will require continued support
within the WTO and other relevant international bodies
to ensure open access to infrastructure for new and
converged services.

The Committee endorses this principle. In particular,
there should be a clear distinction between infrastructure
and content.

10.2. Question 8B

11.1.5. P r i n c i p l e 4

What additional steps (if any) are required to encourage
other countries, particularly in central and eastern
Europe, to create conditions within which current
developments can be exploited?

It

10.2.1.
is a condition of membership and of
negotiating accession that countries of central and
eastern Europe align with EU regulation as soon as
possible. The Committee supports this approach, par-
ticularly in respect of the infrastructure networks.

11. Question 9

Ensuring full participation in a converged environment.

The Committee considers that the key to this will be the
universal access to broadband services.

11.1.6. P r i n c i p l e 5

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

The Committee particularly endorses the proposal for
regulatory independence.

Principles and possible approaches in the light of
convergence:

11.2. Question 9B

11.1. Question 9A

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

11.1.1.

The green paper postulates five principles:

11.1.2. P r i n c i p l e 1

Regulation should be limited to what is strictly necessary
to achieve clearly identified objectives.

The Committee agrees in particular with the statement
that any rules put in place should be tailored to meet
clearly identified objectives in a proportionate manner.

11.1.3. P r i n c i p l e 2

Future regulatory approaches should respond to the
needs of users.

The Committee considers the important issues to be
broadband access, ease of use, pricing transparency and
the available range of content services.

If convergence requires adaptation of existing regulatory
approaches, should that adaptation:

(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 those currently
applied to traditional
telecommunications and
broadcasting activities; or

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

11.2.1.
The Committee considers that the approach
to the regulatory framework for the emerging converged
environment should strike the right balance between
caution and innovation. A new round of deregu-
lation/regulation should be avoided. The existing rules
which apply in the telecommunications and audiovisual/
broadcasting sectors could continue to apply where
appropriate, subject to an appropriate and uniform
interpretation to adapt them to the changing technologi-
cal and industry environment. The definition of such
services should be based on market perceptions rather
than traditional regulatory approaches. The existing
vertical regulation could be properly adapted and
gradually integrated to the new environment. The
Committee considers that the pace of the introduction

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of new rules and the adaptation of the existing regulatory
framework should be dictated by the changes in the
market place. This approach appears to provide the best
guarantee that the regulatory principles laid down above
are observed.

11.2.2.
second
approach to regulation and favours a combination of

The Committee

is against

the

Brussels, 29 April 1998.

the first and third to the extent that it is practicable
in the longer term. In the immediate future regulation
should build on the existing principles, but as
competition emerges
regulation can become
less onerous. Looking forward to when the new
infrastructures and services are more established and
new user preferences known, the whole regulatory
infrastructure can then be re-considered.

the

The President

of the Economic and Social Committee

Tom JENKINS

APPENDIX

to the opinion of the Economic and Social Committee

The following amendment, which obtained more than one quarter of the votes cast, was rejected during
the discussions.

Point 7.2.10

Delete all after the second sentence, and replace with the following:

‘The Committee nevertheless believes that the broadcasting of top commercial sporting events and other
major public events forms part of the information supply to the public. Where there is a publicly owned
universal or near universal national TV channel, and the public is obliged by law to subscribe to it, the
public is entitled to demand that major sporting events in which its own nationals participate should be
shown on that channel, although not necessarily exclusively on that channel.’

Point 7.2.11 (new)

Insert a new 7.2.11 as follows:

‘An issue in the commercial field is that because premium access helps to sell pay-TV subscriptions it
may be worth more to some broadcasters than others. In due course, the sports promoters will have to
balance the return from a television audience paying for the spectacle against a television audience as a
target for advertisers. In many cases, a larger advertising audience may be worth more than a smaller
premium viewing audience.’

Renumber the existing 7.2.11 as 7.2.12

Reason

The third sentence of 7.2.10 says the ‘only issue’ with regard to the presentation of sport on the media
is a commercial one, which is then described. That is not so. The right of people to see major sporting
(and other) events through their publicly owned and paid for national channels is a central one wherever
such channels operate. 7.2.10 is rewritten to make this point clear, and to put it first. The lesser
commercial issue is then put in a new 7.2.11 and the existing 7.2.11 is renumbered 7.2.12.

Result of the vote

For: 42, against: 45, abstentions: 12.