Communication from the Commission - Services of general interest in Europe
Date: 2000-09-20
Institutions: European Commission
Subjects: competition, provision of services, public service, single market

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 20.9.2000
COM(2000) 580 final

COMMUNICATION FROM THE COMMISSION

Services of General Interest in Europe

COMMUNICATION FROM THE COMMISSION

Services of General Interest in Europe

TABLE OF CONTENTS

EXECUTIVE SUMMARY .................................................................................................... 3

1.

2.

3.

INTRODUCTION ....................................................................................................... 5

THE MISSION OF SERVICES OF GENERAL INTEREST ....................................... 7

SERVICES OF GENERAL INTEREST AND THE SINGLE MARKET..................... 9

EXPERIENCE WITH THE LIBERALISATION OF CERTAIN SERVICES OF
4.
GENERAL INTEREST ....................................................................................................... 16

4.2. Transport.............................................................................................................. 17

4.3. Energy.................................................................................................................. 18

4.4. The appreciation of services of general interest by consumers .............................. 18

5.

A EUROPEAN PERSPECTIVE ................................................................................ 20

5.1. Making the most of market opening ..................................................................... 21

5.2.

Strengthening European co-ordination and solidarity............................................ 23

5.3. Other Community contributions in support of services of general interest ............ 23

ANNEXE I: STATE OF PLAY FOR INDIVIDUAL SECTORS.......................................... 26

ANNEXE II: DEFINITION OF TERMS.............................................................................. 37

2

EXECUTIVE SUMMARY

Services of general interest are a key element in the European model of society. The new
Article 16 in the EC Treaty now confirms their place among the shared values of the
Union and their role in promoting social and territorial cohesion. These services also
contribute to the overall competitiveness of the European economy and are provided in
the context of continuously evolving markets and technologies. The globalisation of
trade, the completion of the internal market and rapid technological change bring about
increasing pressure to open new sectors to competition. It is against this background that
the European Council of Lisbon requested the Commission to update its Communication
of 1996 on services of general interest in Europe.

It is above all the responsibility of public authorities at the appropriate local, regional or
national level and in full transparency to define the missions of services of general
interest and the way they will be fulfilled. The Community will ensure in the application
of the Treaty rules and with the instruments at its disposal that the performance of such
services, in terms of quality and prices, responds best to the needs of their users and of
citizens at large.

In some sectors, whose dimension and network structure, give them a natural European
dimension, Community action has already been taken. The Communication provides
currently available information on the positive impact of this action on the availability,
quality and affordability of services of general interest in the sectors concerned.

The experience gained so far also confirms the full compatibility of the Treaty rules on
competition and the internal market with high standards in the provision of services of
general interest. In certain circumstances, in particular where market forces alone do not
result
in a satisfactory provision of services, public authorities may entrust certain
operators of services with obligations of general interest and where necessary grant them
special or exclusive rights and/or devise a funding mechanism for their provision.

Member States and the operators concerned need legal certainty. The Communication
clarifies both the scope and criteria of application of internal market and competition
rules. First of all, such rules apply only inasmuch as activities concerned are economic
activities that affect trade between Member States. Where the rules apply, compatibility
with those rules is based on three principles:

–

–

–

Neutrality with regard to the public or private ownership of companies;

Member States’ freedom to define services of general interest, subject to control
for manifest error;

Proportionality requiring that restrictions of competition and limitations of the
freedoms of the Single Market do not exceed what is necessary to guarantee
effective fulfilment of the mission.

3

As the context continues to evolve and the Commission gains further experience in the
application of internal market and competition rules, it will provide further clarification.

The Communication also gives perspectives on how, building upon Article 16, the
Community in partnership with local, regional and national authorities can develop a
proactive policy at European level to ensure that all the citizens of Europe have access to
the best services.

4

1.

1.

2.

3.

4.

INTRODUCTION

in Europe1. In that Communication,

In 1996 the Commission presented a Communication on services of general
interest
the Commission stressed the
importance of missions of general interest in order to attain the fundamental
objectives of the European Union. It advocated that a reference be inserted in
this sense in the EC Treaty. The definitions of terms,2 the views and the
objectives laid down in the 1996 communication on the future role of these
services in the context of
remain valid today. This
the Single Market
Communication updates that of 1996.

Since the adoption of the first Communication, a number of developments have
occurred. As suggested by the Commission, the Amsterdam Treaty introduced a
reference to the role of services of general interest. The new Article 16 of EC
Treaty recognises the fundamental character of the values underpinning such
services and the need for the Community to take into account their function in
devising and implementing all its policies, placing it among the Principles of the
Treaty:

“Without prejudice to Article 73, 86 and 87, and given the place occupied by
services of general economic interest in the shared values of the Union as well
their role in promoting social and territorial cohesion, the Community and the
Member States, each within their respective powers and within the scope of
application of this Treaty, shall take care that such services operate on the basis
of principles and conditions, which enable them to fulfil their missions.”

The 1996 communication stated that, from the point of view of the Commission,
far from being incompatible, services of general economic interest, internal
market and Community competition policy were complementary in the pursuit
of the fundamental objectives of the Treaty. Their interplay must benefit
individual citizens and society as a whole.

liberalisation under

Since 1996, markets, technology and user needs have continued to develop
apace. Experience has been gained with those sectors that were then in the
process of
the Single Market programme. Further
liberalisation occurred at Community level, while securing and in some cases
improving the level of quality and protection for users. As the internal market
deepened, new issues have arisen relating to the delimitation of certain services
that were previously supplied primarily on a non-competitive basis, but which
now elicit, or may elicit, competitors. Moreover, technological developments
and in particular the advent of the Information Society lead to the conclusion
that the territorial approach to some of these services is outdated and that they
should be considered from a cross-border perspective.

1

2

OJ C 281/3 of 26.09.1996.
See Annexe II.

5

5.

6.

7.

In spite of the positive effects of liberalisation, concerns have continued to be
expressed concerning services of general interest and the Community action.
Linked to changes in technology and the overall regulatory environment as well
evolving consumer demand, a concern exists on the part of citizens that the
quality of services of general interest might suffer. Building on this concern,
traditional providers and the public authorities that support them claim that the
application of Community law could jeopardise the structures for the provision
of such services, which have proved their worth over a long period, and with
them the quality of services to the public. Competing providers in the private
sector on the contrary claim that existing arrangements give an unfair advantage
to the organisation entrusted by the public authorities with the provision of such
services and infringe Community law.

Against that background and at the request of the European Council of Lisbon,
reiterated by that of Feira,
the Commission has undertaken to update its
Communication of 1996. The objective is twofold:

–

–

to provide further clarification on the respective roles of different levels of
public authorities and of the competition and internal market provisions
applied to services of general interest in order to respond to the request for
greater legal certainty on the part of operators. Of special concern is the
field of application of the rules on State aid.

to further develop the European framework relating to the good
functioning of services of general interest, in which local, regional and
national authorities as well as the Community have their role to play, in
line with Article 16 EC Treaty.

The Communication is organised in several sections.
In Section 2 the
Commission sets out its views on the mission fulfilled by services of general
interest. Sections 3 provides clarification on the application of competition and
Single Market rules to services of general interest. Section 4 presents some
preliminary results from experience with the application of the universal service
principle in sectors liberalised under the Single Market Programme. Further
information on the situation of individual sectors is provided in Annexe I.
Section 5 provides orientation for further action to enhance the quality and
efficient provision of services of general interest as a key element
in the
European model of society.

6

2.

8.

9.

10.

THE MISSION OF SERVICES OF GENERAL INTEREST

At the heart of Community policy on services of general interest lies the interest
of citizens. Services of general interest make an important contribution to the
overall competitiveness of European industry and to economic, social and
territorial cohesion. As users of these services, European citizens have come to
expect high quality services at affordable prices. It is thus users and their
requirements that are the main focus of public action in this domain. The
Community protects the objectives of general interest and the mission of serving
the public.

In order to fulfil their mission, it is necessary for the relevant public authorities
to act in full transparency, by stipulating with some precision the needs of users
for which services of general interest are being established, who is in charge of
setting up and enforcing the relevant obligations and how these obligations are
going to be fulfilled. Action at appropriate level, Community, national, regional
or local level needs to be taken to establish criteria for services of general
interest. Such action must be mutually supportive and coherent.

The needs of users should be defined widely. Those of consumers clearly play
an important role. For consumers, a guarantee of universal access, high quality
and affordability constitute the basis of their needs. Enterprises, and in
particular, small and medium sized enterprises, are also major users of services
of general interest, whose needs must be met. Citizens concerns are also of a
wider nature, such as :

–

–

–

that for a high level of environment protection;

specific needs of certain categories of the population, such as the
handicapped and those on low incomes;

complete territorial coverage of essential
inaccessible areas.

services

in remote or

11.

A number of principles can help define users’ requirements for services of
general interest. These principles include:

–

–

–

–

clear definition of basic obligations to ensure good quality service
provision, high levels of public health and physical safety of services;

full transparency e.g. on tariffs, terms and conditions of contracts, choice
and financing of providers;

choice of service and where appropriate, choice of supplier and effective
competition between suppliers;

existence, where justified, of regulatory bodies independent of operators
and redress in the form of complaint handling and dispute settlement
mechanisms;

7

12.

13.

They may also include representation and active participation of users in the
definition of services and choice of forms of payment.

Suppliers of services of general interest also play an important role and through
their long experience in meeting the needs of users have much to contribute to
the further development of such services. They therefore require adequate
consultation alongside that of users3. However, when organising consultation,
public authorities need to clearly separate the needs of users from those of
suppliers.

Public authorities are faced with the question of how to ensure that the missions
they assign to services of general interest are executed according to a high
standard of quality and in the most efficient manner. There are several ways in
which such missions can be fulfilled. The choice will be made taking into
account in particular:

–

–

–

technical and economic characteristics of the service in question;

the specific requirements of users;

cultural and historical specificity in the member state concerned.

The choice of different means for different services – or even for the same
service where circumstances vary from a Member State to another or within a
Member State- should therefore not be seen as contradictory, but on the contrary
as an essential feature of effectiveness.

3

The ETUC and the CEEP have proposed a Charter of Services of general interest which represents
an important contribution to the current debate on the future of services of general interest.

8

3.

14.

15.

16.

SERVICES OF GENERAL INTEREST AND THE SINGLE MARKET

Services of general economic interest are different from ordinary services in that
public authorities consider that they need to be provided even where the market
may not have sufficient incentives to do so. This is not to deny that in many
cases the market will be the best mechanism for providing such services. Many
basic requirements, such as for food, clothing, shelter, are provided exclusively
or overwhelmingly by the market. However, if the public authorities consider
that certain services are in the general interest and market forces may not result
in a satisfactory provision, they can lay down a number of specific service
provisions to meet
interest
these obligations may trigger, albeit not
obligations. The fulfilment of
necessarily, the granting of special or exclusive rights, or the provision for
specific funding mechanisms. The definition of a specific mission of general
interest and the attendant service required to fulfil that mission need not imply
any specific method of service provision. The classical case is the universal
service obligation4, i.e., the obligation to provide a certain service throughout
the territory at affordable tariffs and on similar quality conditions, irrespective
of the profitability of individual operations.

these needs in the form of service of general

Public authorities may decide to apply general
interest obligations on all
operators on a market or , in some cases, to designate one or a limited number of
operators with specific obligations, without granting special or exclusive rights.
In this way, the greatest competition is allowed and users retain maximum
freedom with regard to choice of service provider. Where only one or a limited
number of all operators competing in a certain market are charged with public
service obligations while the others are not, it may be appropriate to involve all
operators active in that market in the financing of the net extra costs of the
service of general interest by a system of additional charges or a public service
fund. In this case, it is important that the share borne by any undertaking should
be proportionate to its activity on the market and be clearly separated from other
charges that it may bear in the normal exercise of its activities.

for example,

is provided throughout

the
Today, public voice telephony,
Community under universal
service obligations defined in Community
legislation, notwithstanding the complete liberalisation of the telecom sector in
1998. Indeed, the decisions taken in the early 1990’s in favour of gradual
liberalisation were themselves a reflection of market and technological
developments, which meant that retaining special and exclusive rights in the
sector was no longer an effective and proportionate means of securing the
revenue needed by operators to provide universal service. Within a competitive
market, the Community framework allowed Member States to put in place
mechanisms to share the costs of providing universal service as defined at

4

The notion of universal service and that of public service obligation have been acknowledged by
the case law of the Court (Case C-320/91 Corbeau [1993]; Case C-393/92 Almelo [1994]) and
developed in Community legislation for
for which a common regulatory
framework has been put in place to achieve a single European market (see below, Section 4).

those services,

9

17.

18.

19.

Community level. However most Member States have in fact not found it
necessary to activate such schemes, given the relatively low costs involved.

However, certain services of general interest do not
lend themselves to a
plurality of providers, for instance where only one single provider can be
economically viable. In these circumstances, public authorities will usually grant
exclusive and special rights for providing the service of general interest by
awarding concessions
limited periods through tendering procedures.
Competition at the moment of the award of the tender is meant to ensure that the
missions assigned to a service of general interest are met at least public cost.

for

Where neither of the first two options allows for satisfactory fulfilment of the
mission of general interest, it may be necessary to combine entrustment of one
single operator or a limited number of operators with the particular public
service task, with granting or maintaining special or exclusive rights in favour of
that single operator or group of operators. In this situation, as well as in the
above-described situation where exclusive rights have been granted subject to a
tendering procedure, public authorities may ensure appropriate funding enabling
the entrusted operators to perform the particular public service task assigned to
them.

Observing the EC Treaty provisions and in particular those on competition and
the internal market is fully compatible with ensuring the provision of services of
general interest. Article 86 of the Treaty, and in particular Article 86(2), is the
central provision for reconciling the Community objectives including those of
competition and internal market freedoms on the one hand, with the effective
fulfilment of the mission of general economic interest entrusted by public
authorities on the other hand. This Article reads:

1.

2.

3.

“In the case of public undertakings or undertakings to which Member
States grant special or exclusive rights, Member States shall neither enact
or maintain in force any measure contrary to the rules contained in this
Treaty, in particular to those rules provided in Article 12 and Articles 81
to 89.

Undertakings entrusted with the operation of services of general economic
interest or having the character of a revenue-producing monopoly shall be
subject to the rules contained in this Treaty, in particular to the rules on
competition, insofar as the application of such rules does not obstruct the
performance, in law or in fact, of the particular tasks assigned to them.
The development of trade must not be affected to such an extent as would
be contrary to the interest of the Community.

The Commission shall ensure the application of the provisions of this
Article, and shall, where necessary, address appropriate directives or
decisions to Member States.”

10

20.

21.

22.

23.

To understand how these provisions affect the arrangements made by the public
authorities to ensure that certain services are provided to the public, it is useful
to articulate three principles that underlie the application of Art. 86. They are:
neutrality, freedom to define, and proportionality.

Neutrality as regards the public or private ownership of companies,
is
guaranteed by Article 295 of the EC Treaty. On the one hand, the Commission
does not question whether undertakings responsible for providing general
interest services should be public or private. Therefore, it does not require
privatisation of public undertakings. On the other hand, the rules of the Treaty
and in particular competition and internal market rules apply regardless of the
ownership of an undertaking (public or private).

Member States' freedom to define means that Member States are primarily
responsible for defining what
they regard as services of general economic
interest on the basis of the specific features of the activities. This definition can
only be subject
to control for manifest error. They may grant special or
exclusive rights that are necessary to the undertakings entrusted with their
operation, regulate their activities and, where appropriate, fund them. In areas
that are not specifically covered by Community regulation Member States enjoy
a wide margin for shaping their policies, which can only be subject to control for
manifest error. Whether a service is to be regarded as a service of general
interest and how it should be operated are issues that are first and foremost
the means
decided locally. The role of the Commission is to ensure that
employed are compatible with Community law. However, in every case, for the
exception provided for by Article 86 (2) to apply, the public service mission
needs to be clearly defined and must be explicitly entrusted through an act of
public authority (including contracts)5. This obligation is necessary to ensure
legal certainty as well as transparency vis-à-vis the citizens and is indispensable
for the Commission to carry out its proportionality assessment.

Proportionality under Article 86(2) implies that the means used to fulfil the
general
interest mission shall not create unnecessary distortions of trade.
Specifically, it has to be ensured that any restrictions to the rules of the EC
Treaty, and in particular, restrictions of competition and limitations of the
freedoms of the internal market do not exceed what is necessary to guarantee
effective fulfilment of the mission. The performance of the service of general
economic interest must be ensured and the entrusted undertakings must be able
to carry the specific burden and the net extra costs of the particular task assigned
to them. The Commission exercises this control of proportionality, subject to the
judicial review of the Court of Justice, in a way that is reasonable and realistic,
as illustrated by the use it actually makes of the decision-making powers
conferred to it by Article 86(3)6.

5

6

Case C-159/94 EDF [1997].
See the Commission’s annual reports on competition policy.

11

24.

25.

26.

27.

28.

7

8

9

The principles formulated in Article 86 allow for a flexible and context-sensitive
balance that takes account of the Member States' different circumstances and
objectives as well as the technical constraints that may vary from one sector to
another.

Experience provides a sufficiently large typology, concerning the specific ways
of reconciling the requirements of general interest and those of competition and
internal market7. As described above Member States have several options for
ensuring the provision of services of general interest, ranging from opening up
the market
to competition over imposing public service obligations up to
conferring exclusive or special rights to a single operator or a limited number of
operators, with or without provision of funding.

Concerning the particular issue of funding, the European Court of First Instance
recently decided that compensation granted by the State to an undertaking for
interest duties constitutes State aid within the
the performance of general
meaning of Article 87(1) EC Treaty8 . In so far as it does not benefit from the
exemptions foreseen in Article 73 or 87, it may , however, be compatible with
the EC Treaty on the basis of Article 86(2). This is the case where all conditions
of this provision are fulfilled and, in particular, the compensation does not
exceed the net extra costs of the particular task entrusted to the undertaking. The
the compensation is fixed for an
Commission considers that whenever
appropriate period following an open,
transparent and non-discriminating
procedure , there is the presumption that such aid is compatible with the State
aid rules of the Treaty9.

Even before delimiting the extent of the derogation from competition and
internal market rules afforded by Article 86, it is worth assessing whether such
Community rules apply at all. In making this assessment, one should bear in
mind three considerations: the distinction between economic and non-economic
activities, the effect on trade between Member States and the Community policy
towards cases of minor importance.

The conditions of Article 86 refer to services of general economic interest. In
general, internal market and competition rules, do not apply to non-economic
activities and therefore have no impact on services of general interest to the
extent to which these services constitute non-economic activities. This means in
the first place that matters which are intrinsically prerogatives of the State (such
as ensuring internal and external security, the administration of justice, the
conduct of foreign relations and other exercises of official authority) are
excluded from the application of competition and internal market
rules.
Therefore, Article 86 and its conditions do not come into play. The European

As an example for the compatibility of funding public service broadcasting with competition law
on the basis of Article 86(2) see Commission Decision of 24.2.1999 in case NN 70/98
Kinderkanal and Phoenix OJ 1999 C 238/3, and Commission Decision of 29.9.1999 in case NN
88/98 BBC News 24 OJ 2000 C 78/6.
Case T-106/95 FFSA [1997]; case T-46/97 SIC [2000]; case C-174/97P FFSA.[1998].
For an application of the same principle, see the draft regulation on land transport COM(7) 2000/9
of 26 July 2000 and the directive on transparency Commission Directive 2000/52/EC of 26 July
2000 amending Directive 80/723/EEC, OJ L193 of 29.7.2000.

12

29.

30.

Court of Justice has held, for example,
that an organism controlling and
supervising the air space and collecting charges for the use of its air navigation
system10, or a private law body carrying out anti-pollution surveillance in a sea
port11, exercise powers which are typically those of a public authority and which
are not of an economic nature.

In the second place, services such as national education and compulsory basic
social security schemes are also excluded from the application of competition
and internal market rules. With regard to the former, the European Court of
Justice ruled that the State, in establishing and maintaining such a system, is not
seeking to engage in gainful activity but is fulfilling its duty towards is own
population in the social, cultural and educational fields.12 With regard to the
latter, the European Court of Justice held that organisations charged with the
management of State-imposed social security schemes, such as compulsory
sickness insurance, which are based on the principle of solidarity, non-profit
making and where the benefits paid are not proportional to the amount of the
compulsory contributions, fulfil an exclusively social function and do not
exercise an economic activity13.

More generally, according to the case law of the Court of Justice14, many
activities conducted by organisations performing largely social functions, which
are not profit-oriented and which are not meant to engage in industrial or
commercial activity, will normally be excluded from the Community
competition and internal market rules. This takes into account several non-
economic activities of organisations such as trade unions, political parties,
churches and religious societies, consumer associations,
learned societies,
charities as well as relief and aid organisations. However, whenever such
task, engages in economic
organisation,
activities, application of Community rules to these economic activities will be
guided by the principles in this Communication respecting in particular the
social and cultural environment in which the relevant activities take place.
Moreover, where Community law would apply to these activities,
the
Commission will also examine, in the light of a more general reflection on the
use of its discretionary powers, whether the interests of the Community require
to proceed with regard to these cases, subject to its legal obligations established
in the EC Treaty.

in performing a general

interest

31.

It should also be pointed out that Community competition law only applies
where the conduct in question is liable to affect trade between Member States.
Likewise, the rules in the Treaty establishing the freedom to provide services do
not apply when all the aspects of such activities are confined within a single
Member State.

10

11

12

13

14

Case C-364/92 SAT/EUROCONTROL [1994].
Case C-343/95 Diego Calí [1997].
Case 263/86 Humbel [1988].
Cases C-159/91 and C-160/91 Poucet [1993].
Case C-109/92 Wirth [1993].

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32.

33.

34.

15

16

17

18

Concerning antitrust rules (Article 81 and 82 EC Treaty), an activity which
affects the market only insignificantly – and this may be the case of a number of
services of general interest of local character - will normally not affect trade
between Member States and therefore will not be subject to the Community
rules15. Reference should also be made to the policy of not pursuing under the
Community competition rules, cases of minor
importance, which the
Commission has explained in detail16. Again, many local services are likely to
be considered cases of minor importance and therefore the Commission will not
have to pursue alleged violations of antitrust rules in this context.

As for the assessment under the State aid rules of the EC Treaty, it is true that
the relatively small amount of aid or the relatively small size of the undertaking
which receives it does not as such exclude the possibility that intra-Community
trade might be affected. However, under settled case-law, the criterion of trade
being affected is only met if the recipient undertaking carries on an economic
activity involving trade between Member States. The Commission also sets
ceilings, under which it considers that State aid rules do not apply17. As a result,
many local services are likely to be excluded from the scope of State aid rules.

Moreover, public funding for services of general economic interest that may be
liable to affect trade must be examined in the light of the specific provisions on
State aid in the Treaty to see whether it is nevertheless permissible. Besides the
exception provided for by Article 86(2) explained above, a number of specific
exemptions from the ban on State aid are available. Of particular interest are, for
instance, the derogations provided under Article 73 for aid to transport and
under Article 87(3)(d) for aid to promote culture and heritage conservation18.
Conditions for compatibility under Article 87(3) have been laid down in

According to the European Court of Justice (Cases C-215/96 and C-216/96 Bagnasco [1999]),
there is effect on trade between Member States where it is possible to foresee with a sufficient
degree of probability on the basis of a set of objective factors of law or fact that the conduct in
question may have an influence on the pattern of trade between Member States, such as might
prejudice the realisation of the aim of a single market in all the Member States. In establishing
these criteria, reference must be made to the position and the importance of the parties on the
relevant market.
Notice concerning agreements of minor importance falling outside Art.81(1), OJ 1997 C 372/13.
Notice on the de minimis rule for State aid, OJ C 68, 6.3.1996, p. 9, to be succeeded by a de
minimis Regulation in State aid, draft published in OJ C 89, 28.3.2000, p. 6.
In order to be able to benefit from the derogation to the general prohibition of State aid laid down
in Art. 87 (3) (d), the aid must be used for cultural purposes, e. g. film production. See for instance
the Commission decision of 29 July 1998 not to raise objections to the French support scheme for
the production of films (N 3/98, OJ 1998 C 279) and the subsequent decisions not to raise
objections to the support schemes for the production of films in Germany (Bund) (N 4/1998,
Decision of 21.4.1999, OJ 1999 C 272/4), Ireland (N 237/2000, Decision of 28.6.2000, not yet
published in the OJ), The Netherlands (N 486/1997, Decision of 25.11.1998, OJ 1999 C 120/2)
and Sweden (N 748/1999, Decision of 2.2.2000, OJ 2000 C 134/3). As can be seen from these
decisions, Art. 87 (3) (d) allows to grant aid to film production according to the specific
circumstances in each Member States, and notably for the flexibility in the assessment of aid to
difficult and low budget films. Pending the outcome of the review of the support schemes in other
Member State, the Commission will assess the need for a more precise framework. This will be
done in close consultation with the Member States (see the Commission Communication of
14 December 1999 on ‘The principles and guidelines for the Community’s audio-visual policy in
the digital age’, COM (1999) 657 final).

14

enterprises19

frameworks or guidelines such as those for State aids for small and medium
areas20,
sized
undertakings
employment21 and training22, national regional aid23, environmental protection24
and research and development25.

deprived

(SMEs),

urban

in

35.

36.

19

20

21

22

23

24

25

26

The principles laid down in this Communication apply to any economic sector.
For example, following a request of the European Council, the Commission
adopted in 1998 a Report to the Council of Ministers on services of general
economic interest in the banking sector26, based on a questionnaire addressed to
all Member States. The result of the Commission's investigation was that a
number of Member States consider that certain credit institutions fulfil specific
tasks that constitute services of general economic interest. These tasks comprise
mainly the promotion of small and medium sized enterprises, the granting or
guaranteeing of export credits, social housing loans, municipal financing,
financing of infrastructure projects and regional development. Two Member
States consider the supplying by a certain group of credit institutions of a
as
comprehensive
indicated in para. 10 as being a service of general economic interest. The Report
concludes that the compatibility of each of these systems and tasks with Article
86 (2) of the EC Treaty has to be examined on a case to case basis.

infrastructure providing territorial coverage

financial

Finally, as technologies and markets evolve, public authorities and operators are
progressively faced with new uncertainties regarding the application of EC law
to their activities. The Commission will therefore continue to reflect on the best
use it can make of the instruments at its disposal to increase legal certainty.
Once it will have gained experience in dealing with new situations arising in the
field of services of general interest, the Commission will endeavour to further
clarify the scope of the application and the criteria for compatibility with EC
in close
rules. This will be done,
consultation with Member States.
include
communications, guidelines and block exemption regulations.

in conformity with established practice,
for doing so

Instruments

Guidelines on State aid for SMEs, OJ C 213, 23.7.1996, p.4 ; to be succeeded by a block
exemption. Regulation for State aid to SMEs, draft published in OJ C 89, 28.3.2000, p.15.
Guidelines on State aid for undertakings in deprived urban areas, OJ C 146, 14.5.1997, p.6.
Guidelines on aid to employment, OJ C 334, 12.12.1995, p. 4.
Framework on training aid, OJ C 343, 11.11.98, p. 10; to be succeeded by a block exemption
Regulation for State aid for training, draft published in OJ C 89, 28.3.2000.
Guidelines on national regional aid, OJ C 74, 10.3.1998, p. 9.
Community guidelines on State aid for environmental protection, OJ C 72, 10.3.1994, p. 3.
Community framework for State aid for research and development, OJ C 45, 17.2.1996, p. 5.
Report of the European Commission to the Council of Ministers, ‘Services of general economic
interest in the banking sector’, adopted by the Commission on 17 June 1998 and presented to the
ECOFIN Council on 23 November 1998.

15

4.

37.

38.

39.

4.1.

40.

EXPERIENCE WITH THE LIBERALISATION OF CERTAIN
SERVICES OF GENERAL INTEREST

At the time of the 1996 Communication, liberalisation of the markets for several
major services of general interest had been decided under the Single Market
Programme, but it was too early to judge what the effects in terms of quality,
price and availability of services might be. In certain sectors, particularly
telecommunications, this is no longer the case. Generally, however, availability
timely data on key dimensions with which to evaluate
of good quality,
experience in these services
lacking. The most comprehensive
still
information relates to telecommunications followed by air transport. With
to energy considerable data exist regarding price levels, and the
respect
Commission has now launched a study, building on the work already undertaken
by Eurostat to constantly monitor “competition indicators”, a number of factors
the
indicating the real
Commission has now received replies by Member States regarding public
service levels and objectives in the gas and electricity sectors, and on this basis
is preparing a Communication that will serve as a benchmarking tool
to
maintain and increase public service standards to the higher level.

level of competition on the market. Furthermore,

is

On the basis of currently available information, liberalisation of services under
the Single Market Programme appears to have had a positive impact on the
availability, quality and affordability of services of general interest. However,
this does not mean that such services are necessarily functioning satisfactorily.
Other factors come in to play, such as the price of equipment required for
connection, congestion or various anti-competitive practices which have not yet
been adequately addressed or the lack of effective redress mechanisms for users
when services do not function properly. As a result,
the full benefits of
liberalisation have yet to be reaped for all sections of society and all parts of the
Community.

Universal service,
in particular the definition of specific universal service
obligations is a key accompaniment to market liberalisation of service sectors
such as telecommunications in the European Union. The definition and
guarantee of universal service ensures that the continuous accessibility and
quality of established services is maintained for all users and consumers during
the process of passing from monopoly provision to openly competitive markets.
Universal
competitive
an environment
telecommunications markets, is defined as the minimum set of services of
specified quality to which all users and consumers have access in the light of
specific national conditions, at an affordable price. These provisions set the
starting point for competition-driven improvements in service quality and price.

service, within

of open and

Telecommunications

Universal service as currently defined in Community telecommunication
legislation includes the provision of voice telephony, fax and voice band data
transmission via modems (i.e. access to the Internet). Users must have access at
a fixed location to international and national calls, as well as emergency
services. The definition also covers the provision of operator assistance,

16

directory services, public pay phones and special facilities for customers with
disabilities or with special social needs. It does not cover mobile telephony or
broadband access to the Internet.

Concerning voice telephony, according to a recent study27 96% of European
households have voice telephony access at home. Just over half of the remaining
households either are not interested or have alternative means of access. Less
than 2% do not have access to voice telephony for financial reasons. Since the
beginning of 1998, all consumers have profited from significant price
reductions: in the first year alone, prices went down by 40% for international,
30% for long-distance and 30% for regional calls; however, local calls have seen
no major price decreases. On average, over the period 1997-1999, prices have
decreased by more than 40% for residential consumers.

Competition has boosted the development of mobile telephony. Penetration rates
have gone up since liberalisation from 11% to 48% of the population. Low
income households are more likely to rely exclusively on mobile telephony than
high income ones (6% of households compared to 2%) even though the overall
rate of usage rises with income. This shows that, for substantial numbers of low
income households, mobile telephones constitute an acceptable alternative to
fixed telephony, even in the absence of universal service obligations.

As Internet access via third generation mobile telephony and Internet over TV
will break the dependency on computers (33% of EU households) to obtain
Internet access, penetration rates are expected to grow extremely rapidly over
the next five years.

Rural subscribers do not appear to be disadvantaged in terms of the spatial
distribution of essential services. Overall, rural households have in fact more
telephone equipment than households in metropolitan areas. It appears that
income has much more influence on services than does rural/urban distinctions..

Transport

The process of gradual market opening for air transport was completed by 1 July
1998. In its Communication adopted last year, the Commission assessed the
consequences of ten years of liberalisation.28 Liberalisation of air transport has
led to an increase in the number of carriers from 132 in 1993 to 164 in 1998.
The market share of incumbent national carriers has been declining steadily and
the number of routes with more than two operators has trebled since 1992. An
increasingly large number of promotional fares have increased the range of
attractive fares for users. Flexible fares in contrast have kept on increasing. They
are twice the level of promotional ones.

The degree of competition on a route has a substantial impact on the price of air
transport. The level of fares decreases when a market passes from monopoly to
duopoly or towards more than two carriers. The price reduction for business

Gallup Europe, Report: ‘The situation of telecommunications services in the regions of the
European Union’, April 2000.
COM(1999) 182 final of 20 July 1999.

17

41.

42.

43.

44.

4.2.

45.

46.

27

28

47.

48.

49.

4.3.

50.

4.4.

51.

29

30

fares from monopoly towards three or more carrier routes is 10%, that for full
economy fares 17% and for promotional fares 24%.

A number of factors retard or diminish the impact of liberalisation. Access to
slots and limitations on airport capacity represent a real problem for new
entrants. Loyalty schemes such as frequent flier programmes favour airlines
with large networks, which offer passengers greater chances to accumulate and
use FFP points. This discriminates particularly against cost effective, small-scale
airlines. The high cost and low quality of ground handling services adds a fixed
cost element which diminishes the ability of new entrants to compete on price.
Finally, congestion and poor use of available air space means that the quality of
service suffers and delays become more frequent.

Through the imposition of public service obligations, some of these difficulties
may be overcome. Choice of the route and standards imposed are subject to
control of the Commission. Since 1993, public service obligations have been
imposed on more than one hundred routes within the Community, mainly in
France, Ireland and Portugal but also in Sweden, Germany, Italy and the United
Kingdom. But this represents only a very low percentage of the total air traffic
of the Community.

Driven by market developments, the provision of passenger services in the rail
and road sectors are undergoing important changes at present. Several operators
have started to play an active role in other Member States. In parallel, Member
States have started to open home markets to competition. Harmonisation of a
basic level of competition and minimum requirements for transparency when
awarding service contracts were considered necessary to guaranty high levels of
quality. The Commission has proposed a new framework29, which will ensure
that public transport operators are under competitive pressure to offer
passengers better services, keep costs under control and ensure the highest
safety level.

Energy

Compared with telecommunications or air transport, much less information is
available on the impact of energy liberalisation on services of general interest.
The opening to competition of the electricity and gas sectors is indeed too recent
to draw operational conclusions. In most countries with the exception of
Belgium, Denmark and Ireland households have benefited from a reduction in
price between July 1996 and January 2000 averaging 5.2% in the EU. Small
enterprises have benefited from larger reductions averaging 7.9%, albeit with
substantial increases in Denmark and Greece.

The appreciation of services of general interest by consumers

As part of the Eurobarometer series of polls of public opinion30, a number of
questions were asked to the households surveyed concerning their opinion about
a number of services of general interest. The survey complements the more

COM 2000 /9 of 26 July 2000.
Eurobarometer N° 53 of July 2000, ‘The Europeans and Services of General Interest’.

18

52.

53.

detailed data available for telecommunications from the residential report
presented above. The results are of interest because they enable a comparison to
be made across different types of service. However, no indication of how
services have developed over time is possible. Substantial differences in the
nature of responses between Member States would seem to indicate that
expectations concerning services constitute an important determinant of the
perceived level of satisfaction. For this reason comparisons between the
different types of services are probably more illuminating than the absolute
values of responses.

Consumer satisfaction on a number of dimensions (access, price, quality,
information available,
terms and conditions, complaints) was measured
individually for a fixed basket of services, composed of telephony, electricity,
gas and water supply, postal services, urban transport and inter-city rail services.
Both access and take up of the different services varied considerably. For
instance nearly 13% do not have access to gas. Even nearly 7% claimed to have
no access to inter-city rail services and nearly 5% to local transport services.
Electricity, the post and water supply were the services most nearly of truly
universal availability. Based on the reply “not applicable” to subsequent
questions, it would appear that the actual take up of services follows quite
closely physical availability.

In terms of price, postal services received the most positive rating, followed by
public utilities. Even so substantial dissatisfaction with the current level of
prices can be deduced from the fact that over 30% of respondents considered
them to be unfair or excessive in every case. Telephony and long distance rail
services elicited the most unfavourable response. Quality ratings for services are
generally good with the exception of transport and to a lesser extent postal
services. Combining the appreciation of price with quality, long distance rail
services clearly do not appear to be performing well. Consumers consider public
their expectations, with
utilities (electricity, gas and water) to best meet
communications and local
transport more mixed. Treatment of complaints
receive also a very low level of satisfaction, deduced from the fact that for every
service measured, over 45% of respondents considered the treatment to have
been either badly or very badly.

19

5.

54.

55.

56.

57.

A EUROPEAN PERSPECTIVE

The Community's aims remain: supporting the competitiveness of the European
economy in increasingly open world markets; contributing to a high level of
consumer protection and confidence by among others giving consumers more
choice, better quality and lower prices, strengthening economic, social and
territorial cohesion. General
interest services have a key role to play in
achieving these aims. Efficient services are a major determinant in the location
of production activities, on account of the benefits both for the firms using them
and the workers living in the area. The existence of a network of services of
general interest
the
disappearance of such services is a telling sign of the desertification of a rural
area or the degradation of a town. The Community is committed to maintaining
the function of these services intact, while improving their efficiency.

is an essential element of social cohesion; conversely,

In pursuing these aims, the Community takes due account of the principle of
subsidiarity. Respect of this principle, in particular Member States’ freedom to
define what constitutes a service of general
requires a careful
examination of the appropriate roles of the different levels of government in the
regulation of such services. The Commission will further elaborate its position
on the subject in the context of the forthcoming White Paper on Governance.

interest,

The new Article 16 of the Treaty explicitly recognises the economic, social and
territorial cohesion role of services of general economic interest and envisages a
Community duty to facilitate the achievement of their mission. The importance
of these provisions was brought out by the Heads of State or Government at
their summit in Lisbon in March 200031:

“The European Council considers it essential that, in the framework of the
internal market and of a knowledge-based economy, full account is taken of the
Treaty provisions relating to services of general economic interest, and to the
undertakings entrusted with operating such services.”

Both this political statement and the changes currently under way point to the
need for a pro-active stance on general interest services, which incorporates and
goes beyond the approach based on the Single Market. In this vein,
the
Commission, in partnership with the national, regional and local levels, will
continue to promote a European perspective on general interest services for the
benefit of citizens on three fronts: by making the most of market opening; by
strengthening European co-ordination and solidarity; and by developingother
Community contributionsin support of services of general interest.

31

Lisbon European Council, 23-24 March 2000, Conclusions of the Presidency, SN 100/00,
point 19.

20

5.1.

58.

Making the most of market opening

The opening up of markets for economic services, notably networked services,
and the corresponding introduction of universal or public service obligations,
need to be pursued in accordance with the characteristics of each sector,
including the degree of market
integration already achieved. The common
objective is to benefit Europe’s citizens through the development of a
competitive single market. This objective was strongly reaffirmed by The
European Council of Lisbon, which called for an acceleration of liberalisation in
the areas of gas, electricity,
transport and postal services and asked the
Commission to prepare a progress report and appropriate proposals for its
meeting in the Spring of 2001.

59.

The Commission will continue to pursue the following principles in its policy of
opening up markets:

–

to assess

the operation, performance and
using evaluation tools
competitiveness of general interest services, so that the regulation can be
adapted in line with technological changes (which increase the cross-
border possibilities of providing services within the Internal Market), new
consumer needs and new public interest demands. The Broad Economic
Policy Guidelines together with the Report on their implementation and
the annual Commission Communication on ‘Economic Reform - Report
on the functioning of product and capital markets’ (Cardiff Report)32
provide- the framework for, among other things, assessing on a regular
basis the functioning of services of general economic interest in the single
market. For specific sectors, notably telecommunications, reviews of
regulatory reform and its effects are made available on a regular basis33;
the practice of periodic reviews could be usefully generalised to all sectors
for which a common framework exists at Community level34;

32

33

34

COM(1999) 10 of 20 January 1999, COM(2000) 26 of 26 January 2000.
‘Fifth Report on the Implementation of the Telecommunications Regulatory Package’, COM(99)
537 of 11 November 1999.
The Commission is currently preparing a review of regulatory reform and service standards in the
gas and electricity industries.

21

–

–

maintaining a step-by-step approach based on evaluation of reform and
consultation with the various parties concerned, including consumers. The
Commission will continue to follow the practice of preparing for changes
in the regulatory framework through the issue of Green Papers35
accompanied or complemented by further stages of public consultation36;

so-called Transparency Directive37

enforcing transparency in the operation of the suppliers of services of
general economic interest, be they public or private, notably as regards
possible distortions of competition. The Commission Directive amending
the
such
transparency by extending the rules on separation of accounts, currently
applicable to specific sectors, to any undertaking that enjoys a special or
exclusive right granted by a Member State pursuant to Article 86(1) of the
Treaty, or that is entrusted with the operation of a service of general
economic interest pursuant to Article 86(2) of the Treaty and receives
including any grant, support or
State aid in any form whatsoever,
compensation,
in relation to such service and which carries on other
activities.

enforcing

aims

at

60.

it

is important

the markets,

If the European economy is to make the most of the opportunities afforded by
the opening of
the decisions on the
Commission's pending proposals should be taken as soon as possible. The
Commission expects the new regulatory framework for telecommunications,
based on its proposals for a framework Directive and four specific Directives38,
to be adopted in the course of 2001, in accordance with the timetable set by the
European Council in Lisbon39 for the completion of the internal market. The
Commission is also counting on the Council and the European Parliament to
adopt as soon as possible its proposals on postal services and transport40.

that

61.

Following the same reasoning, and in particular to ensure that public and private
the Commission has submitted a
operators are put on an equal footing,

35

36

37

38

39

40

Examples of Green Papers include: ‘The citizens' network: Fulfilling the potential of public
passenger transport in Europe’, COM(1995) 601; ‘Towards fair and efficient pricing in transport -
Policy options for internalising the external cost of transport in the European Union’, COM(1995)
691; ‘Green Paper on a numbering policy for telecommunications services in Europe’ COM(1996)
590; ‘Green Paper on the convergence of the telecommunications, media and information-
technology sectors, and the implications for
regulation - Towards an information-society
approach’, COM(1997) 623.
See, for example, the Communication on ‘The public consultation on the draft notice on the
application of the competition rules to the postal sector and in particular on the assessment of
certain State measures relating to postal services’, COM(1996) 480 following the Commission
Green Paper on ‘The development of the single market for postal services’, COM(1991) 476; the
Communication on ‘The results of the public consultation on the 1999 Communications Review
and Orientations for the new Regulatory Framework’, COM(2000) 239.
Commission Directive 2000/52/EC of 26 July 2000 amending Directive 80/723/EEC, OJ L 193 of
29.7.2000, p. 75.
See Annexe I
Lisbon European Council, 23-24 March 2000, Conclusions of the Presidency, SN 100/00, point
17.
COM(2000) 319 of 30 May 2000 and Annexe I on transport.

22

proposal41 allowing, inter alia, to exempt from the scope of Directive 93/38/EEC
transport and
those sectors or services to which it applies (water, energy,
telecommunications) which, in a given Member State, operate in conditions of
effective competition, after the relevant activity has been effectively liberalized
according to relevant EC legislation. The telecommunications liberalization has
already had an impact on the application of procurement rules. By virtue of
specific provisions in Directive 93/38/EEC,
the Commission stated in a
Communication42 that it regards most of the services in this field within the EU
to be exempted (with some exceptions) from the scope of Directive 93/38/EEC.

Strengthening European co-ordination and solidarity

Increasing European integration in certain sectors suggests a parallel increase in
European co-ordination for monitoring the activities of regulators and operators.
The appropriate institutional arrangements will vary depending on the degree of
market integration achieved and the potential failures to be addressed, including
in the performance of existing national regulators.

In order to facilitate the evaluation of services of general economic interest the
Commission could envisage an examination of the results achieved overall in
the Member States in the operation of these services and the effectiveness of the
regulatory frameworks. Such an examination should take into particular account
the interactions between different infrastructure networks, and the objectives of
both economic efficiency, consumer protection and economic, social and
territorial cohesion.

The special place of services of general economic interest in the shared values of
the Union, recognised by Article 16 of the Treaty, calls for a parallel recognition
of the link between access to services of general
interest and European
citizenship. While Member States retain ample freedom as to means by which
the objectives of solidarity served by services of general interest are to be
interest may be
accomplished, a core common concept of such general
necessary to sustain allegiance to the Union. The Commission considers the
provisions on access to services of general economic interest in the draft Charter
of Fundamental rights as an important step in this direction.

Other Community contributions in support of services of general interest

The Community involvement with services of general interest goes beyond
developing the Single Market, including providing for instruments to ensure
standards of quality,
the co-ordination of regulators and the evaluation of
operations. Other Community policy instruments and actions share the same
objectives of consumer protection, economic, social and territorial cohesion and
help services of general economic interest
in fulfilling their mission. Such
contributions are meant to enhance, and by no means replace, the national,

5.2.

62.

63.

64.

5.3.

65.

41

42

Proposal for a Directive of the European Parliament and of the Council co-ordinating the
procedure of entities operating in the water, energy and transport sectors, COM(2000)276,
10 May 2000.
OJ C 156 of 03.06.99, p. 3-4.

23

regional and local roles in their respective fields. Specific developments since
the 1996 Communication on services of general interest include:

–

–

–

–

–

the adoption, by the Commission and the Member States, of a European
Spatial Development Perspective setting out the framework and the key
policy options for the development of the European territory;

the implementation of the trans-European networks programme, in line
with the commitments made by the Heads of States or Government and
the sectoral guidelines adopted by the Council and the European
Parliament. A revision of the guidelines for the transport networks is
expected to further advance the achievement of the objectives in that area;

the initiative for the creation a European Research Area to improve the co-
ordination between national and Community policies43, including aspects
on the “territorialisation” of research and electronic networks;

the adoption, by the Commission of the 1999-2001 Action Plan on
Consumer Policy, establishing as a priority the area of services of general
interest;

the e-Europe action plan for an information society for all aimed at
accelerating the uptake of digital technologies across Europe. To this
purpose, the action plan focuses on affordable access, the development of
the necessary skills and on measures to stimulate Internet use (such as
eLearning, eHealth, eGovernment).

Horizontal consumer protection legislation also applies to all services of general
interest. This horizontal
legislation deals with issues of basic consumer
protection such as unfair contract terms, distance selling, etc. However, there is
a need to develop effective and non-discriminatory enforcement of horizontal
and sectoral consumer legislation across the EU. This will require a systematic
effort by all concerned including closer administrative co-operation between
Member States, national regulatory authorities, service providers and consumer
representatives.

In the context of the World Trade Organisation, and more particularly the
General Agreement on Trade in Services, the Community is also committed to
maintain its services of general economic interest. It should be noted that the
GATS Agreement preserves WTO Members’ sovereign right
to regulate
economic and non-economic activities within their territory and to guarantee the
achievement of
legitimate public objectives. Thus, even in areas where
commitments have been entered into, countries have the possibility to maintain
the quality standards and the social objectives which are at the basis of their
system. This being said,
the legitimate right for Members to establish an
adequate regulatory framework to ensure an effective functioning of the services
sector must not be used as an inappropriate barrier to trade.

66.

67.

43

‘Towards a European research area’, COM(2000) 6 of 18 January 2000.

24

68.

General interest services linked to the function of welfare and social protection
are a matter of national or regional responsibility. Nevertheless, there is a
recognised role for the Community in promoting co-operation and co-ordination
in these areas. A particular concern of the Commission is promoting the co-
operation by Member States in matters related to the reform of social protection.
Following the endorsement by the Council of the Communication on the
modernisation of social protection44 and the mandate from the European Council
of Lisbon to the High-Level Group on social protection, the Commission will
develop its activities in monitoring reform and animating the debate on policies
as a means toward establishing a European consensus in this area.

44

‘A concerted strategy for modernising social protection’, COM(1999) 347 of 14 July 1999.

25

ANNEXE I: STATE OF PLAY FOR INDIVIDUAL SECTORS

Certain services of general
to market opening through the
application of Single Market legislation and EU competition policy. This section reviews
developments in sectors subject to Community rules. It does not cover the entire range of
services of general interest. In particular non-economic services are excluded45.

interest have been subject

Electronic communications

Since 1990, the European Commission has progressively put
in place a comprehensive
regulatory framework for the liberalisation of the telecommunications market. By allowing
competition to thrive, this policy has had a major impact on the development of the market,
contributing to the emergence of a strong communication sector in Europe, and allowing
consumers and business users to take advantage of greater choice, lower prices and innovative
services and applications.

The provisions of the existing framework liberalised all telecommunications services and
networks from January 1998. This has transformed a sector traditionally characterised by
State monopolies into a dynamic industry ready to take full advantage of the global market.

Underpinning the resulting regulatory framework has been the political objective of
promoting growth, employment creation and competitiveness, protecting the interests of
consumers, ensuring a wide choice of providers and services for all users and fostering
innovation, competitive prices and quality of service.

The regulatory framework put in place for the 1998 liberalisation has been reviewed in the
light of market and technological developments and the experience of the implementation
process. Many areas of the EU telecommunications market remain dominated by incumbent
operators in Member States, notwithstanding a growing number of operators and service
providers. The Review provides an opportunity to re-assess existing regulation, to ensure that
it reinforces the development of competition and consumer choice, and to continue to
safeguard objectives of general interest. To this end the new framework, which would be
effective from 1st January 2002, proposes five new directives46 including one which specially
addresses services of general public interest, namely “universal service and users’ rights
relating to electronic communications networks and services”.

Universal service obligations, which the Community has asked Member States to impose on
operators, ensure the provision of a wide range of basic services. The current regulatory
framework on universal service requires that a defined minimum set of services of specified
quality are available to all users, independent of their geographical location, at an affordable
price. The legislation goes into detail on the services covered, the process for designating
operators with specific obligations where this is necessary and the framework for the

45

46

See §28-30.
See <http://www.ispo.cec.be/infosoc/telecompolicy/review99/Welcome.html>

26

financing of any net costs relating to these service obligations by market actors. This
approach to universal service is maintained in the proposed new directive.

The evidence from Member States is that this balancing of universal service obligations
alongside the continuing opening up of the market has encouraged operators to take a
dynamic view of the notion of universal service. Whilst the formal legislative framework
effectively provides minimum guaranteed provision, the competitive process has encouraged
undertakings to offer new tariff packages and contract terms which further enhance the
services which consumers can expect as standard throughout the Community. This is already
evident in the provision of mobile communications services which are not subject to specific
universal service obligations but where extensive competition has produced rapid service
innovation including the widespread provision of pre-paid service options to users. The latest
survey evidence47 in the Community shows that significant proportions of residential users are
now opting for mobile telephone service only (in place of fixed line service) and that, if
anything,
lower income households are as likely or more likely to have mobile only
subscriptions as are higher income households.

Postal services

The existing regulatory framework48 has opened approx. 3% of the European market for
postal services (i.e. items of correspondence weighing more than 350gr or priced more than 5
times the basic tariff). Seven Member States (e.g. Denmark, Germany, Finland, Italy,
Netherlands, Sweden, Spain) have gone further in some respects in the market opening than
required by the postal Directive.

On 30 May 2000,
the European Commission adopted a new proposal for a Directive
proposing to further open on average 20% of the market for postal services in 2003 (i.e. full
market opening of the express mail and outgoing cross-border mail, weight/price limits
decreased to 50gr and 2.5 times the basic tariff for all other items of correspondence). It also
expands existing consumer protection rights with regards to redress and complaint handling
mechanisms to include all postal service providers and not only public service ones.

The existing Directive defines a “universal service” as one accessible to all users “involving
the permanent provision of a postal service of a specified quality at all points of the Member
States territory at affordable prices for users”. Moreover, the postal Directive defines more
specifically a minimum universal service involving daily clearance and delivery (at least 5
days a week) of postal items up to 2kg and packages up to 10 kg as well as registered and
insured items. The Member States have to ensure that cross-border packages up to 20kg are
delivered and are free to expand the minimum domestic universal service in order to include
packages weighing up to 20kg. Finally, the postal Directive also defined European standards
for quality of service for the cross-border mail of the “fastest delivery category” available. A
national regulatory authority, independent of the postal operators, is in charge of ensuring
compliance with the obligations of the Directive.

47

48

Commission studies, ‘The situation of telecommunications services in the regions of the EU’, April
2000, undertaken by EOS Gallup.
EC Directive 97/67 O.J. L15, 21.1.1998, p. 14.

27

For non-reserved services which are outside the scope of the universal service, Member States
can introduce general authorisation procedures to the extent necessary to guarantee
compliance with essential requirements. For non-reserved services which are within the scope
of the universal service, Member States may introduce individual licences, to the extent
necessary to guarantee compliance with essential requirements and to safeguard the universal
service. Member States can also award licenses to alternative operators to provide the
universal service in particular geographic areas. Finally, a compensation fund can be
established in order to ensure that the universal service is safeguarded in case the universal
service obligations create an unfair financial burden for the universal service providers.

Experience so far has shown that the universal service is maintained throughout the Union,
including in the seven Member States that have gone further in some respects in the market
opening than required by the postal Directive. Overall, Postal operators including universal
service providers are more efficient and the services have improved compared with several
years ago (e.g. range of services, quality of service for both domestic and cross-border mail).
A good example of such an improvement is the quality of service for cross-border priority
mail that have improved from 84% delivery in D+3 to 91% delivery in D+3 over the period
1997 to 1999.

The postal sector is likely to evolve quite rapidly over the coming years because the
development of electronic mail can replace traditional mail to a certain extent, automation of
mail processing allows productivity to increase and the need to develop new or improved
services (e-commerce will require efficient logistics networks to deliver goods and services
throughout the Union). The evolutive character of universal service will allow access to all
users of those services.

Transport

1.

Liberalisation

The Treaty reflects the specific challenges faced in opening transport market to Community
wide competition, by creating, in Article 70, the Common Transport Policy. In so doing, the
Member States recognised the fact
transport markets,
liberalisation, and the attainment of public service objectives are all central parts of what is, in
fact, an integrated policy approach. Thus, the Community has taken a gradual approach to
liberalising transport markets, in order to ensure that security standards are met, and to
guarantee essential public service objectives. Considerable progress has been made in opening
markets to EU-wide competition:

the creation of

Internal

that

Air transport:

The process of gradual opening up of the markets started in 1987 and was finalised by the
‘Third Aviation package’49 entering into force in 1993. The package fully liberalised intra-

49

Council Regulation (EEC) 2407/92 of 23 July 1992 on licensing of air carriers, Council Regulation
(EEC) No 2409/92 of 23 July 1992 on access for Community carriers to intra-Community air routes,
Council Regulation (EEC) 2409/92 of 23 July 1992 on fares and rates for air services.

28

Community traffic by 1 April 1997 when air carriers were permitted cabotage rights in a
Member State, in which the company was not established.

Ground handling of airport services has been liberalised for airline self handling by
Community legislation from 199650 for airports with more than 1 million passengers a year as
of 1 January 1998. Third party handling is liberalised since 1 January 1999 (3 million
passengers, further step 2 million passengers as of 1 January 2001).

Maritime transport:

Liberalisation is complete in international transport as between Member States. Community
legislation51
liberalised maritime cabotage services as of 1 January 1993. Temporary
exemptions were granted to France, Italy, Spain, Portugal and Greece. The last sector to have
been liberalised in these Member States has been that of island cabotage services, which
became open on 1 January 1999 with the exception of two sectors in Greece which enjoy an
additional temporary exemption until 1 January 2004. In the port sector future Community
legislation will undertake to tackle the problem of market access and financing.

Road transport:

international

Community competition has first been introduced in 1969 through a system of Community
quotas for
In 1992 this system was replaced by Community
authorisation52 allowing access to the EU markets under objective quality criteria. Community
legislation lead to a complete abolition of any quantitative restrictions on the provision of
cabotage services by 1 July 199853.

journeys.

Access to the international market for the carriage of persons has been liberalised since 1 June
199254. The respective regulation lays down market access conditions for each type of road
passenger
regular services).
Cabotage rights, except for national regular services, were introduced by two regulations55
and grant free access under an authorisation system since 1 January 1996.

transport service (occasional,

regular, shuttle and special

50

51

52

53

54

55

Council Directive 96/67/EC of 15 October 1996 on access to the groundhandling at Community airports
(OJ L272, 25.10.1996, p. 36).
Council Regulation (EEC) 3577/92 of 7 December 1992 applying the principle of freedom to provide
services to maritime transport within a Member State (maritime cabotage).
Council Regulation abolishing quantitative restrictions on access to the market in the international
carriage of goods by road (EEC) 881/92 (OJ L95/1, 9.4.1992).
Council Regulation (EEC) 4059/89 (OJ L390/3, 30.12.1989), Council Regulation (EEC) 3118/93 (OJ L
279, 12.11.1993, p.1.).
Council Regulation (EEC) 684/92 of 16 March 1992 on common rules for the international carriage of
passengers by coach and bus (OJ L 74/1, 20.3.1992).
Council Regulation (EEC) 2454/92 of 23 July 1992 laying down the conditions under which non-
resident carriers may operate national road passenger transport services within a Member State (OJ L
251/1, 29.8.1992) replaced by Council Regulation (EEC)12/98 of 11 December 1997 laying down the
conditions under which non-resident carriers may operate national road passenger transport services
within a Member State (OJ L 4/10, 8.1.1998).

29

The market for providing combined transport services (rigid definition, intending to avoid that
transport by road becomes the major leg of a combined transport journey) has now been fully
liberalised since 1 July 199356.

Inland waterways:

Historically, national systems of “chartering by rotation” have existed. Community
legislation57 now required Member States to abolish such systems from 1 January 2000 from
which time contracts in the field of national and international inland waterway transport in the
Community are to be freely concluded and prices freely negotiated.

Rail transport:

It became clear that existing Community legislation on market access and the organisational
and financial structure of railway companies as well as on licensing and allocation of tracks
were too vague to be effective. The Commission has responded with a package of proposals58
to strengthen these elements. It extends the licensing rules to all railway undertakings in the
Community and establishes clear and extensive rules and processes for setting charges and
allocation of capacity. And most important it opens access for goods transport to the core
Community railway net. The package was adopted by the Commission in July 1998 and is
forwarded to the Council for adoption in early 2001.

2.

General principles for public service instruments

In all cases of liberalisation introduced by Community legislation, a high level of transport
services in the general interest was safeguarded in practice. The legislation provided for
instruments to be applied when minimum standards of quality have to be ensured. Intense
competition in the air and maritime industries has not endangered the provision of services
meeting public needs as Member States have adopted appropriate safeguard measures.

It is clear that a key element in this process has been the adoption of a series of measures and
policies that ensure that essential public service standard, are maintained and improved within
the context of this gradual market opening, notably with respect to the following:

–

56

57

58

Guaranteeing service on non-profitable routes. When liberalisation takes place, it is
often necessary to take measures to ensure the continued service of routes that are
not profitable. This can be done in two ways. First, through direct subsidy, available
to all carriers operating the route on a non-discriminatory basis. Second, through the
award of exclusive rights to operate a service, with or without compensation.

Council Directive 92/106/EEC on the establishment of common rules for certain types of combined
transport of goods between Member States (OJ L 368/38, 17.12.1992).
Council Directive 96/75/EEC of 19 November 1996 (OJ L 304/12, 27.11.1996).
COM (1998) 480 final, adopted by the Commission on 22 July 1998, OJ C321/6, 20.10.98, and
amended proposal COM(1999) 616 final, adopted by the Commission on 25 November 1999; Proposal
for a Council directive amending Directive 91/440/EEC on the development of the Community’s
railways; Proposal for a Council directive amending Directive 95/18/EC on the licensing of railway
undertakings; Proposal for a Council directive relating to the allocation of railway infrastructure
capacity and the levying of charges for the use of railway infrastructure and safety certification.

30

Examples of such awards concern services feeding airports or ports of islands or
remote regions. These arrangements ensure the essential mobility for residents as
well as businesses situated in such areas and allow the supply of necessary goods.

In many circumstances, such arrangements require approval under the state aid rules.
The Commission has, in such cases, consistently accepted such schemes, providing
that they are designed in a manner least likely to distort trade and competition and
are reasonably necessary in the case in question. For example, if exclusive rights are
in principle,
put out
compatible with the Treaty.

to open non-discriminatory tender,

they are viewed as,

–

Guaranteeing continued minimum service standards on any given route. When
opening markets to competition it is often necessary in the transport sector to ensure
that service standards do not fall, as companies may sacrifice quality and regularity
for cost reduction. This can be contrary to public service objectives. To cover this,
Member States typically have recourse to minimum access conditions for the grant of
an operating license, applied in a non-discriminatory manner to all potential entrants.
Access by sea, between islands and the EU mainland is often ensured through certain
minimum requirements on regularity, capacity and pricing for services for passengers
and for goods. Direct subsidies may have to be made available to balance
incremental costs caused by such conditions. Those subsidies would for example
reduce the ticket price per passenger or per goods carried. They are supposed to be
granted to all operators of the same route on a non-discriminatory basis.

The application of these principles in practice can for example, be seen in the air and inland
transport sectors.

3.

Examples from transport sectors

Air transport

The aviation sector is an excellent example of how a full liberalisation process can be
compatible with the maintenance of public service obligations. This liberalisation was
accompanied by the right for Member States to impose a public service obligation when it
considers that this route is vital for the economic development of the region in which the
airport is located. This may concern routes serving an airport a peripheral or development
region in its territory or on a thin route to any regional airport in its territory. The standards
imposed under the public service obligation may concern prices, the number of seats offered,
frequencies etc., where a similar level of service would not be provided if air carriers were
solely considering their commercial interest. Choice of the route and standards imposed are
subject to the control of the Commission.

Once a public service obligation is imposed on a route, the access to this route remains
opened to any air carrier under the constraint of respecting the public service obligation.
However, if nobody is willing to operate on the route because it
is not commercially
interesting, Member States may limit access to the route to only one air carrier for a period of
maximum three years. In this case the right to operate such services is offered by public
tender at Community level.

31

Apart from the possibility of imposing public service obligations, Member States may also
give aid of a social character. Spain, Portugal and France have used this way of subsidising
non viable routes. This approach may be combined with the imposition of a public service
obligation guaranteeing a level of service on the route concerned. The aid has a social
character if it covers only specific categories of passengers travelling on the route, like
children or handicapped people. In the case of underprivileged regions like islands, the aid
may cover the entire population of the region in question.

These two types of system for maintaining minimum service standards on non commercial
routes have so far proved to be quite satisfactory in air transport.

Inland transport

Harmonisation of a basic level of competition and minimum requirements for transparency
when awarding service contracts are considered necessary to guaranty high levels of quality.
The Commission has adopted a draft regulation on public services in passenger transport59,
which will ensure that public transport operators are under competitive pressure to offer
passengers better services, keep costs under control and ensure the highest safety level. It also
establishes an explicit obligation for transport authorities to pursue adequate services in order
to protect quality, integration of services and interests of the employees. Efficient public
transport is considered as playing an essential role in beating congestion and cleaning up the
environment.

Energy

The electricity Directive60 requires Member States to open up a minimum of 30 % of
domestic demand to EU-wide competition in 2000, the gas Directive61 requires a 20 %
minimum market opening. In creating an open and competitive internal gas and electricity
market, the Community has taken a gradual approach. The first liberalisation Directives in
these sectors had to be implemented by Member States by February 19996263 and August
200064 respectively. This approach was taken to enable industry to adapt to the change, and to
ensure that necessary measures can be taken to ensure the maintenance and increase of
services of general interest in these areas.

Although the two Directives reflect the particular differences of the sectors concerned, they
both follow similar approaches; introducing phased minimum opening levels of liberalisation
of demand65, requiring non-discriminatory third party access to networks and essential
facilities such as gas storage, requiring unbundling measures for transmission and distribution
facilities, and requiring effective regulation to prevent discrimination.

59

60

61

62

63

64

65

COM (7) 2000 /9 of 26 July 2000.
Directive 96/92/EC concerning common rules for the internal market in electricity.
Directive 98/30/EC concerning common rules for the internal market for the natural gas.
Belgium and Ireland had one additional year , Greece two.
Directive 96/92/EC concerning common rules for the internal market in electricity.
Directive 98/30/EC concerning common rules for the internal market for the natural gas.
Regarding electricity, Member States had to open 28 % of demand in 1999, among to 35 % by 2003.
Regarding Gas, Member States had to open a minimum of 20% of demand in 2000, among to 28 % in
2003.

32

In fact, however, liberalisation has progressed much more quickly across the Community than
either required by the Directives, or expected. Around 65 % of electricity demand and 80 %
of total European gas demand is already fully open to EU-wide competition, and, in most
Member States, it has been decided to move to complete liberalisation within the next few
years66. Furthermore, whilst the Directives provided choices for Member States in their
implementation, for example with respect to types of third party access and unbundling
methods, almost all Member States, both with respect to gas and electricity, have chosen
approaches widely accepted as being most likely to develop effective competition.

Evidently, public service issues are central to the liberalisation of these markets. Indeed, in
many respects the guaranteed supply of electricity at reasonable prices to all EU customers,
and where connected gas, is one of the most essential public services. Both Directives,
therefore, provide a number of provisions and safeguards to ensure that essential public
service objectives, such as guaranteeing security of supply, universal connection to the
electricity grid at reasonable prices, and protection of vulnerable citizens from disconnection,
are safeguarded. In a liberalised market, these objectives are met through the setting of strict
license conditions on market operators.

The maintenance of the highest possible standards throughout the Community in these areas
has therefore been, and will remain, an essential precondition for liberalisation. For this
reason, both the gas and electricity Directives provide for the possibility for Member States to
take the necessary measures to ensure that services of general interest are maintained, and that
service standards are maintained and improved.

The following mechanisms to ensure the proper provision of services of general interest are
becoming increasing the norm throughout Europe:

–

Network security and reliability:

the transmission and distribution grids remain67 monopoly operators. As such the
situation is substantially unchanged pre and post-liberalisation. Member States
remain free to entrust the management and operation of this task to a public
company68, or to a private company. In both cases, Member States commonly
provide for independent review and control of standards either by an independent
regulator, or by Government. Network security and reliability has been and continues
to be high in Europe, and is unaffected by liberalisation.

–

Security of supply:

Under the Directives, Member States remain free to take the measures necessary, as
they always have been, to ensure the security of supply of electricity and gas. Any
measures taken must, however, be necessary to meet the objectives in question, and

66

67

68

With respect to electricity, for example, UK, FIN, SW, D have already opened 100 % of demand. B,
NL, DK, ES will completely open up their demand in the medium term.
With the exception of certain overlaps of the gas networks, notably in Germany.
Some countries, such as Spain, are in the process of bringing into public ownership the transmission
network.

33

may not be discriminatory in nature. Member States may, for example, specify the
fuel for new electricity generation in the event that reliance on one source becomes
excessive, or may take measures to ensure an adequate variety in the source of gas
supplies.

–

Right to be connected to the grid:

Only with respect to electricity is the right to be connected commonly viewed as
necessary by Member States. In this case the Directive specifically provides that
"Member States may impose on distribution companies an obligation to supply
customers located in a given area. The tariff for such supplies may be regulated, for
instance to ensure equal treatment to customers concerned". Where final consumers
are liberalised, owners of the distribution grid can remain obliged to provide
universal connection. It is then for each Member States to decide whether they wish
to make it a license condition for companies selling electricity to final clients that
they be obliged to supply all similar customers within a given area at identical prices.

–

Special consumer protection:

as electricity and gas are essential services, special provisions are necessary to ensure
that vulnerable members of society are not disconnected from supply. Where markets
fully are liberalised, public service standards are maintained through minimum
license conditions. If these conditions are not be met, the license to supply electricity
or gas would be withdrawn.

–

Service standards:

it is clearly in the public interest to ensure that service standards related to the supply
of electricity and gas, such as the speed with which requests for connection are met
and repairs are effected, the accuracy of billing and the quality of other customer
services, are the highest possible, and continually improving. It is vital that these
standards are maintained and increased in a liberalised market. Where liberalisation -
particularly at the domestic level - has taken place, experience indicates that such
standards increase, for two reasons. First, the grant of a license to sell electricity is
always made subject to conditions. Some of the conditions provide minimum service
standards. National regulators, year-by-year, increase and expand these standards.
Second, as service standards represent one important area upon which companies
compete, competition leads to their
improvements. This results in standards
increasing above those minimum levels set by regulators or governments.

Thus, the legislative framework within which the progressive liberalisation of the
electricity and gas industry is taking place in Europe has the dual objective of
lowering prices and maintaining and even increasing services of public interest.
Experience clearly demonstrates that with, where necessary, appropriate regulatory
measures in place, such services of public interest can not only be maintained, but
increased in a competitive market place. Indeed, whilst the Directives provide69 for

69

Article 3(2) of both Directives.

34

the possibility to derogate from their requirements if no other less restrictive way can
be found to achieve legitimate public service objectives, no Member State has in fact
found it necessary to do so.

Of course, in order to achieve the objectives mentioned above, active monitoring
and, where necessary, regulation is necessary. Whilst many of these issues are left to
subsidiarity - it is for example for each Member State to determine the level of
protection given from disconnection - the Commission's objective is to ensure the
highest levels of all forms of services of general public interest throughout the
Community.

Radio and Television

Private television services have developed mainly since the 1980s, establishing the current
public/private dual system of broadcasting. The need for a coexistence of public service and
private commercial broadcasting is recognised and supported by both the Member States and
the Community. At present, the television and radio sector is liberalised at Community level.

The broadcast media play a central role in the functioning of modern democratic societies, in
particular in the development and transmission of social values. Therefore, the broadcasting
sector has, since its inception, been subject to specific regulation in the general interest. This
regulation has been based on common values, such as freedom of expression and the right of
reply, pluralism, protection of copyright, promotion of cultural and linguistic diversity,
protection of minors and of human dignity, consumer protection.

Regulation to ensure that these values are respected is enacted first and foremost by the
Member States in conformity with EC law. The Protocol on the system of public broadcasting
in the Member States, which was annexed to the Treaty establishing the European
Community by the Treaty of Amsterdam, recognises the role and the importance of public
service broadcasting and confirms that the Member States are competent to define and
organise the public service remit and its financing, provided that this does not affect the
trading conditions and competition in the Community to an extent which would be contrary to
the common interest, while the realisation of the public service remit shall be taken into
account.

At Community level,
the "Television without Frontiers" Directive establishes a legal
framework ensuring the freedom to provide television broadcasting services in the internal
market, taking due account of the relevant general interest. However, the transposition of the
amended “Television without Frontiers” Directive has yet to be completed by all Member
States. In addition, the competition rules of the Treaty establishing the European Community
entrust
the Commission with the task of preventing anti-competitive behaviour to the
detriment of the consumers, notably the abuse of dominant positions and, on the basis of
merger control, the creation of oligopolistic or monopolistic market structures.

It is for the Member States, in conformity with EC law, to decide whether they want to
establish a system of public service broadcasting, to define its exact remit and to decide on the
modalities of its financing. Due to the nature of their funding, public service broadcasters may
become subject to the state aid rules of the EC Treaty. The Commission must notably ensure

35

that public funding of public service broadcasters is proportional to the public service remit as
defined by the Member State concerned, i.e. in particular that any State-granted compensation
does not exceed the net extra costs of the particular task assigned to the public service
broadcaster in question.

The funding by Member States of public service broadcasters has been the subject of a
number of complaints to the Commission by private commercial broadcasters, notably about
the presence of public service broadcasters on the advertising market70. It is worth noting that
the problems raised by these complaints relate in general to the implementation of financing
schemes that include advertising revenues and public funding. The choice of the financing
scheme falls within the competence of the Member State, and there can be no objection in
principle to the choice of a dual financing scheme (combining public funds and advertising
revenue) rather than a single funding scheme (solely public funds) as long as competition in the
relevant markets (e.g. advertising, acquisition and/or sale of programmes) is not affected to an
extent which is contrary to the Community interest. The Commission intends to conclude its
analysis of the pending complaints in the coming months. In doing so, it will closely consult with
the Member States.

The Commission considers that the digital revolution does not call into question the need for
audio-visual policy to identify relevant general interests and, where necessary, to protect them
through the regulatory process. Technological developments, however, call for ongoing
evaluation of the means and methods used, in order to ensure that they continue to be
proportionate to the objectives to be achieved.

Whilst the means of distribution (and notably whether point to multipoint or point to point)
clearly remains crucial, some new types of service may also require other factors to be taken
into consideration when assessing the necessity and proportionality of any regulatory
approach (e.g. encryption or “in the clear”).

70

See the Commission’s ‘XXIXth Report on Competition Policy (1999)’, pp. 89 and ff.

36

ANNEXE II: DEFINITION OF TERMS

Services of general interest

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

Services of general economic interest

This is the term used in Article 86 of the Treaty and refers to market services which the
Member States subject to specific public service obligations by virtue of a general
interest criterion. This would tend to cover such things as transport networks, energy and
communications.

Public service

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

Universal service

to market

accompaniment

Universal service, in particular the definition of specific universal service obligations is a
as
liberalisation
key
telecommunications in the European Union. The definition and guarantee of universal
service ensures that the continuous accessibility and quality of established services is
maintained for all users and consumers during the process of passing from monopoly
provision to openly competitive markets. Universal service, within an environment of
open and competitive telecommunications markets, is defined as the minimum set of
services of specified quality to which all users and consumers have access in the light of
specific national conditions, at an affordable price.

service

sectors

such

of

37