Communication from the Commission — Services of general interest in Europe
Date: 2001-01-19
Institutions: European Commission
Subjects: competition law, economic policy, public authorities, social policy, survivor's benefit

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COMMUNICATION FROM THE COMMISSION

Services of general interest in Europe

(2001/C 17/04)

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 circum-
stances, 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:

(cid:151) neutrality with regard to the public or private ownership of companies,

(cid:151) Member States’ freedom to define services of general interest, subject to control for manifest error,

(cid:151) 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.

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 part-
nership 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.

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1. INTRODUCTION

1.

the Commission stressed the

In 1996 the Commission presented a Communication on
services of general interest in Europe (1). In that communi-
cation,
importance of
missions of general interest in order to attain the funda-
mental 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 the single market remain
valid today. This communication updates that of 1996.

2. Since the adoption of the first communication, a number
of developments have occurred. As suggested by the
Commission,
a
the Amsterdam Treaty
reference to the role of services of general interest. The
new Article 16 of the EC Treaty recognises the funda-
mental
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:

values underpinning

character of

introduced

the

social

(cid:145)Without prejudice to Articles 73, 86 and 87, and given the
place occupied by services of general economic interest in
the shared values of the Union as well as their role in
promoting
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.(cid:146)

territorial

cohesion,

and

the Commission,

3. The 1996 communication stated that, from the point of
far from being incompatible,
view of
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.

4. Since 1996, markets,

the
occurred

technology and user needs have
continued to develop apace. Experience has been gained
with those sectors that were then in the process of liberali-
single market programme. Further
sation under
liberalisation
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 delimi-
tation of certain services that were previously supplied
primarily on a non-competitive basis, but which now

at Community

(1) OJ C 281, 26.9.1996, p. 3.
(2) See Annex II.

and in particular

elicit, or may elicit, competitors. Moreover, technological
developments
the
Information Society lead to the conclusion that the terri-
torial approach to some of these services is outdated and
they should be considered from a cross-border
that
perspective.

advent of

the

the overall

in technology

5. In spite of the positive effects of liberalisation, concerns
have continued to be expressed concerning services of
interest and the Community action. Linked to
general
changes
regulatory
and
environment as well as 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
application of
Community law could jeopardise the structures for the
such services, which have proved their
provision of
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.

them claim that

support

the

6. Against

that background and at

the
European Council of Lisbon, reiterated by that of Feira,
the Commission has undertaken to update its communi-
cation of 1996. The objective is twofold:

the request of

levels of public authorities and of

(cid:151) to provide further clarification on the respective roles
of different
the
competition and internal market provisions applied to
services of general interest in order to respond to the
request
legal certainty on the part of
operators. Of special concern is the field of application
of the rules on State aid,

for greater

(cid:151) 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 of the EC Treaty.

7. 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. Section 3
provides clarification on the application of competition
interest.
and single market rules to services of general
Section 4 presents
from
experience with the application of the universal service
principle in sectors liberalised under the single market
programme. Further information on the situation of indi-
vidual sectors is provided in Annex 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.

some preliminary

results

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2. THE MISSION OF SERVICES OF GENERAL INTEREST

8. 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.
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.

It

9. 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
interest are being established,
which services of general
who is
setting up and enforcing the
relevant obligations and how these obligations are going
to be fulfilled. Action at the appropriate level, Community,
level, needs to be taken to
national, regional or local
interest. Such
establish criteria for services of general
action must be mutually supportive and coherent.

in charge of

10. 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 affor-
dability constitutes the basis of their needs. Enterprises,
and in particular, small and medium-sized enterprises,
are also major users of
interest,
whose needs must be met. Citizens’ concerns are also of
a wider nature, such as:

services of general

(cid:151) that for a high level of environment protection,

(cid:151) full transparency, e.g. on tariffs, terms and conditions

of contracts, choice and financing of providers,

(cid:151) choice of service and where appropriate, choice of
supplier and effective competition between suppliers,

(cid:151) existence, where justified, of regulatory bodies inde-
pendent of operators and redress in the form of
complaint handling and dispute settlement mech-
anisms.

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

12. Suppliers of services of general

role and through their

interest also play an
important
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 users (3).
However, when organising consultation, public authorities
need to clearly separate the needs of users from those of
suppliers.

13. 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:

(cid:151) technical and economic characteristics of the service in

question,

(cid:151) specific needs of certain categories of the population,
such as the handicapped and those on low incomes,

(cid:151) the specific requirements of users,

(cid:151) complete territorial coverage of essential services in

remote or inaccessible areas.

(cid:151) cultural and historical specificity in the Member State

concerned.

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

The choice of different means for different services (cid:151) or
even for the same service where circumstances vary from
one Member State to another or within a Member State (cid:151)
should therefore not be seen as contradictory, but on the
contrary as an essential feature of effectiveness.

(cid:151) clear definition of basic obligations to ensure good
quality service provision, high levels of public health
and physical safety of services,

(3) The ETUC and the CEEP have proposed a (cid:145)Charter of services of
general interest(cid:146), which represents an important contribution to the
current debate on the future of services of general interest.

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3. SERVICES OF GENERAL INTEREST AND THE SINGLE

MARKET

14. 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
food, clothing, shelter, are provided exclusively or over-
whelmingly by the market. However, if the public auth-
orities 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 these needs in the form of service of
general interest obligations. The fulfilment of these obli-
gations may trigger, albeit not necessarily, the granting of
special or exclusive rights, or the provision of 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
obligation (4),
the obligation to provide a certain
service throughout the territory at affordable tariffs and
on similar quality conditions,
irrespective of the profit-
ability of individual operations.

i.e.

15. Public authorities may decide to apply general

interest
in some
obligations on all operators in a market or,
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 in the market and
be clearly separated from other charges that it may bear in
the normal exercise of its activities.

16. Today, public voice telephony, for example,

is provided
throughout the Community under universal service obli-
gations defined in Community legislation, notwithstanding
the complete liberalisation of the telecom sector in 1998.
Indeed, the decisions taken in the early 1990s in favour of

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

the Court

liberalisation were themselves a reflection of
gradual
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
the
Community framework allowed Member States to put in
place mechanisms to share the costs of providing universal
service as defined at Community level. However, most
found it necessary to
Member States have in fact not
activate such schemes, given the relatively low costs
involved.

competitive market,

service. Within a

17. 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
interest by awarding concessions
general
limited
through tendering procedures. Competition at
periods
to
the moment of
ensure that the missions assigned to a service of general
interest are met at low cost to the public.

the tender is meant

the award of

for

interest,

the mission of general

18. Where neither of the first two options allows for satis-
factory fulfilment of
it
may be necessary to combine entrustment of one single
operator or a limited number of operators with the
particular public service task, with the granting or main-
taining of special or exclusive rights in favour of
that
single operator or group of operators. In this situation,
above-described situation where
as well
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.

in the

as

19. 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
including those of competition and internal
objectives,
freedoms on the one hand, with the effective
market
fulfilment of
the mission of general economic interest
entrusted by public authorities on the other hand. This
Article reads:

(cid:145)1.

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.

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2. 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, in so far 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.

3. The Commission shall ensure the application of the
provisions of this Article, and shall, where necessary,
address appropriate directives or decisions to Member
States.(cid:146)

the freedoms of

23. 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 limi-
tations 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 propor-
tionality, subject to the judicial review of the Court of
Justice, in a way that is reasonable and realistic, as illus-
trated by the use it actually makes of the decision-making
powers conferred to it by Article 86(3) (6).

20. To

provisions

understand

how these

the
arrangements made by the public authorities to ensure
that certain services are provided to the public,
is
useful
that underlie the
application of Article 86. They are: neutrality, freedom
to define, and proportionality.

to articulate three principles

affect

it

21. 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).

22. Member States’

special or exclusive rights

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 defi-
nition can only be subject to control for manifest error.
They may grant
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
for manifest error. Whether a service is to be
control
regarded as a service of general
interest and how it
should be operated are issues that are first and foremost
decided locally. The role of the Commission is to ensure
that the means 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-(cid:224)-vis the citizens and is indis-
pensable for the Commission to carry out
its propor-
tionality assessment.

(5) Case C-159/94 EDF [1997].

24. 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.

a

specific ways

provides
the

sufficiently
of

large
reconciling

typology,
25. Experience
the
concerning
requirements of general interest and those of competition
and internal market (7). 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.

the

26. Concerning the particular issue of funding, the European
Court of First Instance recently decided that compensation
to an undertaking
granted by
the
State
interest duties constitutes State
performance of general
the EC
aid within the meaning of Article 87(1) of
Treaty (8).
from the
exemptions
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 compen-

In so far as it does not benefit
foreseen in Article 73 or 87,

for

(6) See the Commission’s annual reports on competition policy.
(7) 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.

(8) Case T-106/95 FFSA [1997]; case T-46/97 SIC [2000]; case

C-174/97P FFSA [1998].

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sation does not exceed the net extra costs of the particular
task entrusted to the undertaking. The Commission
considers that whenever the compensation is fixed for an
appropriate period following an open,
transparent and
there is the presumption
non-discriminating procedure,
that such aid is compatible with the State aid rules of
the Treaty (9).

27. 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
distinction between
mind
the effect on
economic and non-economic activities,
trade between Member States and the Community policy
towards cases of minor importance.

considerations:

three

the

interest.

internal market

28. The conditions of Article 86 refer to services of general
economic
and
In general,
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 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
system (10), or a private law body carrying out anti-
pollution surveillance in a sea port (11), exercise powers
which are typically those of a public authority and
which are not of an economic nature.

29. In the second place, services such as national education
and compulsory basic social security schemes are also
excluded from the
competition and
the
internal market rules. With regard to the former,
European Court of Justice ruled that the State, in estab-

application of

(9) 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
26.7.2000
of
29.7.2000).

amending Directive

80/723/EEC (OJ

L193

(10) Case C-364/92 SAT/Eurocontrol [1994].
(11) Case C-343/95 Diego Cal(cid:237) [1997].

that

held

lishing and maintaining such a system, is not seeking to
engage in gainful activity but is fulfilling its duty towards
its own population in the social, cultural and educational
fields (12). With regard to the latter, the European Court of
the
organisations
Justice
management of State-imposed social security schemes,
such as compulsory sickness insurance, which are based
on the principle of solidarity, non-profit making and
to the
where the benefits paid are not proportional
an
the
amount of
exclusively social
an
economic activity (13).

compulsory contributions,
function and do not

fulfil
exercise

charged with

such as

into account

30. More generally, according to the case law of the Court of
Justice (14), 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
several non-economic activities of
takes
organisations
trade unions, political parties,
churches and religious societies, consumer associations,
learned societies, charities as well as relief and aid organi-
in
sations. However, whenever
interest task, engages in economic
performing a general
activities,
to these
application of Community rules
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
Community require to proceed with regard to these
cases, subject to its legal obligations established in the
EC Treaty.

such an organisation,

interests of

the

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.

32. Concerning antitrust rules (Articles 81 and 82 of the EC
Treaty), an activity which affects the market only insig-
nificantly (cid:151) and this may be the case of a number of
local character (cid:151) will
services of general

interest of

(12) Case 263/86 Humbel [1988].
(13) Cases C-159/91 and C-160/91 Poucet [1993].
(14) Case C-109/92 Wirth [1993].

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trade between Member States and
normally not affect
therefore will not be subject to the Community rules (15).
Reference should also be made to the policy of not
pursuing under the Community competition rules, cases
importance, which the Commission has
of minor
explained in detail (16). Again, many local services are
likely to be considered cases of minor importance and
therefore
to pursue
the Commission will not have
alleged violations of antitrust rules in this context.

for aid to promote culture and heritage conservation (18).
Conditions for compatibility under Article 87(3) have been
laid down in frameworks or guidelines such as those for
small and medium-sized enterprises (19)
State aids
areas (20),
(SMEs),
employment (21)
regional
aid (23), environmental protection (24) and research and
development (25).

undertakings
and

in
training (22),

urban
national

deprived

for

33. 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
intra-
it does not as such exclude the possibility that
Community trade might be affected. However, under
settled case-law, the criterion of trade being affected is
the recipient undertaking carries on an
only met
economic
trade between Member
States. The Commission also sets ceilings, under which it
considers that State aid rules do not apply (17). As a result,
many local services are likely to be excluded from the
scope of State aid rules.

if
activity

involving

that may be liable to affect

34. Moreover, public funding for services of general economic
interest
trade must be
examined in the light of the specific provisions on State
aid in the Treaty to see whether
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)

it

(15) 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.

35. 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 sector (26), 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 guar-
anteeing of export credits, social housing loans, municipal
financing, financing of infrastructure projects and regional
development. Two Member States consider the supplying

(18) 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
Ireland (N 237/2000, Decision of 28.6.2000, not yet
272/4),
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 aid to be granted to film production
according to the specific circumstances in each Member State, and
notably for the flexibility in the assessment of aid to difficult and
low budget
the
support schemes in other Member States, 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 (cid:145)The principles and
guidelines for the Community’s audiovisual policy in the digital
age(cid:146), COM(1999) 657 final).

films. Pending the outcome of

the review of

(19) 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.

(20) Guidelines on State aid for undertakings in deprived urban areas

(OJ C 146, 14.5.1997, p. 6).

(21) Guidelines on aid to employment (OJ C 334, 12.12.1995, p. 4).
(22) 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.

(23) Guidelines on national regional aid (OJ C 74, 10.3.1998, p. 9).
(24) Community guidelines on State aid for environmental protection

(OJ C 72, 10.3.1994, p. 3).

(25) Community framework for State aid for research and development,

(16) Notice concerning agreements of minor importance falling outside

(OJ C 45, 17.2.1996, p. 5).

Article 81(1) (OJ C 372, 9.12.1997, p. 13).

(17) 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 on State aid, draft
published in OJ C 89, 28.3.2000, p. 6.

(26) Report of the European Commission to the Council of Ministers,
(cid:145)Services of general economic interest
in the banking sector(cid:146),
adopted by the Commission on 17 June 1998 and presented to
the ECOFIN Council on 23 November 1998.

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infrastructure

institutions of a compre-
by a certain group of credit
hensive
territorial
financial
coverage as indicated in paragraph 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.

providing

36. Finally, as technologies and markets evolve, public auth-
orities 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
the
application and the criteria for compatibility with EC
in conformity with established
rules. This will be done,
consultation with Member States.
practice,
Instruments
communications,
doing
guidelines and block exemption regulations.

to further clarify the scope of

in close
for

so include

such as

interest.
quality and affordability of services of general
However, this does not mean that such services are neces-
sarily functioning satisfactorily. Other factors come in to
play,
required for
the price of equipment
anti-competitive
or
connection,
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.

congestion

various

39. Universal service,

in particular the definition of specific
universal service obligations is a key accompaniment to
market liberalisation of service sectors such as telecom-
munications in the European Union. The definition and
guarantee of universal service ensures that the continuous
accessibility and quality of established services is main-
tained 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
an affordable price. These
provisions set the starting point for competition-driven
improvements in service quality and price.

conditions,

at

4. EXPERIENCE WITH THE LIBERALISATION OF CERTAIN

SERVICES OF GENERAL INTEREST

4.1. Telecommunications

37. 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
In
quality, price and availability of services might be.
certain sectors, particularly telecommunications,
this is
no longer the case. Generally, however, availability of
good quality, timely data on key dimensions with which
to evaluate experience in these services is still lacking. The
most comprehensive information relates to telecommuni-
cations followed by air transport. With respect to energy,
considerable data exist regarding price levels, and the
Commission has now launched a study, building on the
work already undertaken by Eurostat to constantly monitor
(cid:145)competition indicators(cid:146), a number of factors indicating the
real level of competition on the market. Furthermore, the
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.

40. Universal service as currently defined in Community tele-
communication legislation includes the provision of voice
fax and voice band data transmission via
telephony,
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, directory
for
services, public pay phones and special
customers with disabilities or with special social needs. It
does not cover mobile telephony or broadband access to
the Internet.

facilities

41. Concerning voice

access

telephony,

at home.

according to a

Just over half of

recent
study (27) 96 % of European households have voice
telephony
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.

38. On the basis of currently available information,

liberali-
sation of services under the single market programme
appears to have had a positive impact on the availability,

(27) Gallup Europe, Report:

(cid:145)The situation of

telecommunications

services in the regions of the European Union(cid:146), April 2000.

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42. Competition has boosted the development of mobile
telephony. Penetration rates have gone up since liberali-
sation from 11 % to 48 % of
the population. Low
income households are more likely to rely exclusively on
(6 % of
telephony than high income ones
mobile
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 obli-
gations.

43. 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.

44. 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
It
appears
influence on
income has much more
services than does rural/urban distinctions.

in metropolitan areas.

than households

that

4.2. Transport

45. The process of gradual market opening for air transport
In its Communication
was completed by 1 July 1998.
the Commission assessed the conse-
adopted last year,
quences of 10 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.

frequent

such as

capacity represent a real problem for new entrants.
Loyalty schemes
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
the quality of service suffers and delays become
that
more frequent.

48. Through the imposition of public service obligations, some
of these difficulties may be overcome. Choice of the route
the
and standards imposed are subject
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.

to control of

at

present.

important

49. Driven by market developments,
services

the provision of
in the rail and road sectors are
passenger
undergoing
Several
changes
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 guarantee high levels of quality.
The Commission has proposed a new framework (29),
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.

46. 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
from monopoly towards
fares
reduction for business
full
for
routes
three or more carrier
economy fares 17 % and for promotional fares 24 %.

is 10 %,

that

47. A number of

factors retard or diminish the impact of
liberalisation. Access to slots and limitations on airport

4.3. Energy

50. 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
In most
to draw operational conclusions.
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.

(28) COM(1999) 182 final of 20 July 1999.

(29) COM(2000) 9 of 26 July 2000.

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4.4. The appreciation of services of general interest by

5. A EUROPEAN PERSPECTIVE

consumers

results

are of

interest. The

services of general

51. As part of the Eurobarometer series of polls of public
opinion (30), a number of questions were asked to the
households surveyed concerning their opinion about a
number of
survey
complements the more detailed data available for telecom-
munications from the residential report presented above.
a
The
comparison to be made across different types of service.
However, no indication of how services have developed
over
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 satis-
faction. For this reason comparisons between the different
types of services are probably more illuminating than the
absolute values of responses.

time is possible. Substantial differences

interest because

they enable

52. 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 intercity 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
intercity 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 (cid:145)not applicable(cid:146) to subsequent questions,
it
would appear that the actual take up of services follows
quite closely physical availability.

53. In terms of price, postal services received the most positive
followed by public utilities. Even so, substantial
rating,
level of prices can be
dissatisfaction with the current
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
utilities (electricity, gas and water) to best meet their expec-
tations, with 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 bad or very bad.

54. The Community’s aims remain: supporting the competi-
tiveness 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 deter-
minant 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 is an essential element of social
cohesion; conversely, 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.

States’

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

56. 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 2000 (31):

the

(cid:145)The European Council considers it essential that, in the
framework
a
of
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.(cid:146)

internal market

and

of

57. Both this political statement and the changes currently
under way point to the need for a proactive stance on
general
interest services, which incorporates and goes
beyond the approach based on the single market. In this
in partnership with the national,
vein, the Commission,

(30) Eurobarometer No 53 of July 2000, (cid:145)The Europeans and services of

(31) Lisbon European Council, 23-24 March 2000, Conclusions of the

general interest(cid:146).

Presidency, SN 100/00, point 19.

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levels, will continue to promote a
regional and local
European perspective on general interest services for the
benefit of citizens on three fronts: by making the most of
market opening; by strengthening European coordination
and solidarity; and by developing other Community
contributions in support of services of general interest.

Commission will continue to follow the practice of
preparing for changes in the regulatory framework
through the issue of Green Papers (35) accompanied
or complemented by further stages of public consul-
tation (36);

5.1. Making the most of market opening

58. 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 accel-
eration 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:

(cid:151) 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 so-called Transparency Directive (37) aims
at enforcing 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
is
pursuant
entrusted with the operation of a service of general
economic interest pursuant
the
Treaty and receives State aid in any form whatsoever,
including any grant,
in
relation to such service and which carries on other
activities.

support or compensation,

to Article 86(2) of

to Article 86(1) of

the Treaty, or that

(cid:151) using

to assess

evaluation tools

the operation,
performance and 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 implemen-
tation and the annual Commission Communication on
(cid:145)Economic reform (cid:151) report on the functioning of
(Cardiff Report) (32)
product
provide the framework for, among other
things,
functioning of
assessing on a regular basis
services of general economic interest
in the single
specific sectors, notably telecommuni-
market. For
cations, reviews of regulatory reform and its effects
are made available on a regular basis (33); the practice
of periodic reviews could be usefully generalised to all
sectors for which a common framework exists at
Community level (34);(cid:146)

and capital markets’

the

(cid:151) maintaining

a

evaluation of
various parties concerned,

approach

step-by-step

on
reform and consultation with the
including consumers. The

based

60. If the European economy is to make the most of

that

the
opportunities afforded by the opening of the markets, it
the decisions on the Commission’s
is important
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 Directives (38), to
in accordance with
be adopted in the course of 2001,
the timetable set by the European Council in Lisbon (39)
for
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 transport (40).

completion of

the

the

transport

(35) Examples of Green Papers include: (cid:145)The citizen’s network: Fulfilling
the potential of public passenger transport in Europe(cid:146), COM(95)
(cid:145)Towards fair and efficient pricing in transport (cid:151) Policy
601;
options for internalising the external cost of
in the
European Union(cid:146), COM(95) 691;
(cid:145)Green Paper on a numbering
policy for telecommunications services in Europe(cid:146) COM(96) 590;
(cid:145)Green Paper on the convergence of the telecommunications, media
and information-technology sectors, and the implications for regu-
lation (cid:151) Towards an information-society approach(cid:146), COM(97) 623.
(36) See, for example, the communication on (cid:145)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
services(cid:146), COM(1996) 480
following the Commission Green Paper on (cid:145)The development of
the single market
the
communication on (cid:145)The results of the public consultation on the
1999 communications review and orientations for the new regu-
latory framework(cid:146), COM(2000) 239.

services(cid:146), COM(1991) 476;

relating to postal

for postal

(32) COM(1999) 10 of 20 January 1999, COM(2000) 26 of 26 January

2000.

(33) (cid:145)Fifth Report on the implementation of the telecommunications
regulatory package, COM(1999) 537 of 11 November 1999.(cid:146)
(34) The Commission is currently preparing a review of regulatory
reform and service standards in the gas and electricity industries.

(37) Commission Directive 2000/52/EC of 26 July 2000 amending

Directive 80/723/EEC (OJ L 193, 29.7.2000, p. 75).

(38) See Annex I.
(39) Lisbon European Council, 23-24 March 2000, Conclusions of the

Presidency, SN 100/00, point 17.

(40) COM(2000) 319 of 30 May 2000 and Annex I on transport.

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alia,

inter

from the

61. Following the same reasoning, and in particular to ensure
that public and private operators are put on an equal
the Commission has submitted a proposal (41)
footing,
allowing,
scope of
to exempt
Directive 93/38/EEC those sectors or services to which it
applies (water, energy, transport and telecommunications)
which, in a given Member State, operate in conditions of
effective competition, after the relevant activity has been
effectively liberalised according to relevant EC legislation.
The telecommunications liberalisation has already had an
impact on the application of procurement rules. By virtue
the
of
Commission stated in a Communication (42)
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.

in Directive 93/38/EEC,

specific provisions

that

5.3. Other Community contributions

in support of

services of general interest

the

regulators

coordination of

65. The Community involvement with services of general
interest goes beyond developing the
single market,
including providing for instruments to ensure standards
of quality,
and the
evaluation of operations. Other Community policy
instruments and actions share the same objectives of
social and territorial
consumer protection, economic,
cohesion and help services of general economic interest
in fulfilling their mission. Such contributions are meant
to enhance, and by no means
the national,
regional and local roles in their respective fields. Specific
developments since the 1996 Communication on services
of general interest include:

replace,

5.2. Strengthening European coordination and solidarity

(cid:151) 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,

62. Increasing European integration in certain sectors suggests
increase in European coordination for moni-
a parallel
regulators and operators. The
toring the activities of
appropriate
vary
depending on the degree of market integration achieved
and the potential failures to be addressed, including in the
performance of existing national regulators.

arrangements

institutional

will

the

results

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

networks,
efficiency,

achieved overall

both

of

to services of general

64. 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
and
between access
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 accom-
plished, a core common concept of such general interest
may be 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 Funda-
mental Rights as an important step in this direction.

interest

(41) Proposal for a Directive of the European Parliament and of the
Council coordinating the procedure of entities operating in the
water, energy and transport sectors, COM(2000) 276, 10 May
2000.

(cid:151) 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
transport networks is expected to further advance the
achievement of the objectives in that area,

the guidelines

for

(cid:151) the initiative for the creation of a European research
area to improve the coordination between national and
Community policies (43), including aspects on the (cid:145)terri-
torialisation(cid:146) of research and electronic networks,

(cid:151) 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,

(cid:151) the e-Europe action plan for an information society for
all aimed at accelerating the uptake of digital tech-
nologies across Europe. To this purpose, the action
plan focuses on affordable access, the development of
the necessary skills and on measures to stimulate
Internet
eHealth,
as
use
eGovernment).

eLearning,

(such

66. Horizontal consumer protection legislation also applies to
all services of general interest. This horizontal legislation
deals with issues of basic consumer protection such as
terms, distance selling, etc. However,
unfair contract
there is a need to develop effective and non-discriminatory

(43) (cid:145)Towards a European research area(cid:146), COM(2000) 6 of 18 January

(42) OJ C 156, 3.6.1999, p. 3.

2000.

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enforcement of horizontal and sectoral consumer legis-
lation across the EU. This will require a systematic effort
by all concerned,
including closer administrative coop-
eration between Member States, national regulatory auth-
orities, service providers and consumer representatives.

67.

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.

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 cooperation and coor-
dination in these areas. A particular concern of
the
Commission is promoting the cooperation by Member
States in matters related to the reform of social protection.
the
Following the
Communication
social
of
protection (44) 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.

endorsement by the Council of
the modernisation

on

(44) (cid:145)A concerted

strategy

for modernising

social

protection(cid:146),

COM(1999) 347 of 14 July 1999.

ANNEX I

STATE OF PLAY FOR INDIVIDUAL SECTORS

Certain services of general interest have been subject 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 excluded (45).

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 telecommuni-
cations 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
directives (46)
including one which specially addresses services of general public interest, namely (cid:145)universal service
and users(cid:146) rights relating to electronic communications networks and services’.

(45) See paragraphs 28 to 30.
(46) See http://www.ispo.cec.be/infosoc/telecompolicy/review99/Welcome.html

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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 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 evidence (47) 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 framework (48) has opened approximately 3 % of the European market for postal services (i.e.
items of correspondence weighing more than 350 gr or priced more than five times the basic tariff). Seven Member
States (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 50 gr and 2,5 times the basic tariff for all other items of corre-
spondence).
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 (cid:145)universal service(cid:146) as one accessible to all users (cid:145)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(cid:146). Moreover,
the postal Directive defines more specifically a minimum universal service involving daily clearance and delivery (at least
five days a week) of postal items up to 2 kg 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 20 kg are delivered and are free to expand the
minimum domestic universal service in order to include packages weighing up to 20 kg. Finally, the postal Directive
also defined European standards for quality of service for the cross-border mail of the (cid:145)fastest delivery category(cid:146) available.
A national regulatory authority, independent of the postal operators, is in charge of ensuring compliance with the
obligations of the Directive.

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.

(47) Commission studies, (cid:145)The situation of telecommunications services in the regions of the EU(cid:146), April 2000, undertaken by EOS Gallup.
(48) EC Directive 97/67 (OJ L 15, 21.1.1998, p. 14).

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Transport

1. L i b e r a l i s a t i o n

The Treaty reflects the specific challenges faced in opening transport markets to Community-wide competition, by
creating, in Article 70, the Common Transport Policy. In so doing, the Member States recognised the fact that the
creation of Internal 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:

Air transport:

The process of gradual opening up of the markets started in 1987 and was finalised by the (cid:145)Third aviation package(cid:146) (49)
entering into force in 1993. The package fully liberalised intra-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
1996 (50) 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 legislation (51) 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:

Community competition was first introduced in 1969 through a system of Community quotas for international
In 1992 this system was replaced by Community authorisation (52) allowing access to the EU markets
journeys.
under objective quality criteria. Community legislation lead to a complete abolition of any quantitative restrictions
on the provision of cabotage services by 1 July 1998 (53).

Access to the international market for the carriage of persons has been liberalised since 1 June 1992 (54). The respective
regulation lays down market access conditions for each type of road passenger transport service (occasional, regular,
shuttle and special regular services). Cabotage rights, except for national regular services, were introduced by two
regulations (55) and grant free access under an authorisation system since 1 January 1996.

The market for providing combined transport services (rigid definition,
becomes the major leg of a combined transport journey) has now been fully liberalised since 1 July 1993 (56).

intending to avoid that transport by road

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

(50) Council Directive 96/67/EC of 15 October 1996 on access to the groundhandling at Community airports (OJ L 272, 25.10.1996, p.

36).

(51) Council Regulation (EEC) No 3577/92 of 7 December 1992 applying the principle of freedom to provide services to maritime

transport within a Member State (maritime cabotage).

(52) Council Regulation abolishing quantitative restrictions on access to the market in the international carriage of goods by road (OJ L

95/1, 9.4.1992, p. 1).

(53) Council Regulation (EEC) No 4059/89 (OJ L 390, 30.12.1989, p. 3), Regulation (EEC) No 3118/93 (OJ L 279, 12.11.1993, p. 1.).
(54) 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, 20.3.1992, p. 1).

(55) Council Regulation (EEC) No 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, 29.8.1992) replaced by Regulation (EEC) No 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, 8.1.1998, p. 10).

(56) 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, 17.12.1992, p. 38).

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Inland waterways:

Historically, national systems of (cid:145)chartering by rotation(cid:146) have existed. Community legislation (57) 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 proposals (58) 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 importantly, 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. G e n e r a l p r i n c i p l e s f o r p u b l i c s e r v i c e i n s t r u m e n t s

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 standards are maintained and improved within the context of this gradual market opening,
notably with respect to the following:

(cid:151) 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.

Examples of such awards concern services feeding airports or ports of
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.

islands or

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 put out to
open non-discriminatory tender, they are viewed as, in principle, compatible with the Treaty;

(cid:151) 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.

(57) Council Directive 96/75/EEC of 19 November 1996 (OJ L 304, 27.11.1996, p. 12).
(58) COM(1998) 480 final, adopted by the Commission on 22 July 1998 (OJ C 321, 20.10.98, p. 6), 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.

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3. E x a m p l e s f r o m t r a n s p o r t s e c t o r s

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 in 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.

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 transport (59), which will ensure that public transport operators are under competitive
It also
pressure to offer passengers better services, keep costs under control and ensure the highest safety level.
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 Directive (60) requires Member States to open up a minimum of 30 % of domestic demand to EU-wide
competition in 2000, the gas Directive (61) 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 1999 (62), (63) and August 2000 (64)
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 demand (65), requiring non-discriminatory
third-party access to networks and essential facilities such as gas storage, requiring unbundling measures for trans-
mission and distribution facilities, and requiring effective regulation to prevent discrimination.

(59) COM(7) 2000 of 26 July 2000.
(60) Directive 96/92/EC concerning common rules for the internal market in electricity.
(61) Directive 98/30/EC concerning common rules for the internal market for natural gas.
(62) Belgium and Ireland had one additional year, Greece two.
(63) Directive 96/92/EC concerning common rules for the internal market in electricity.
(64) Directive 98/30/EC concerning common rules for the internal market for natural gas.
(65) Regarding electricity, Member States had to open 28 % of demand in 1999, and 35 % by 2003. Regarding gas, Member States had to

open a minimum of 20 % of demand in 2000, and 28 % by 2003.

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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 years (66). 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 licence 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
interest are
the possibility for Member States to take the necessary measures to ensure that services of general
maintained, and that service standards are maintained and improved.

The following mechanisms to ensure the proper provision of services of general
throughout Europe:

interest are becoming the norm

(cid:151) Network security and reliability

The transmission and distribution grids remain (67) 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 company (68), 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.

(cid:151) 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 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.

(cid:151) 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 (cid:145)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(cid:146). Where final consumers are liberalised, owners of the distribution grid can
remain obliged to provide universal connection. It is then for each Member State to decide whether they wish to
make it a licence condition for companies selling electricity to final clients that they be obliged to supply all similar
customers within a given area at identical prices.

(cid:151) 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 are fully liberalised, public service standards are main-
tained through minimum licence conditions. If these conditions are not met, the license to supply electricity or gas
would be withdrawn.

(66) With respect to electricity, for example, UK, FIN, SV, D have already opened 100 % of demand. B, NL, DK, ES will completely open

up their demand in the medium term.

(67) With the exception of certain overlaps of the gas networks, notably in Germany.
(68) Some countries, such as Spain, are in the process of bringing into public ownership the transmission network.

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(cid:151) 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 (cid:151) particularly at the domestic level (cid:151) 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 provide (69) for 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 (cid:151) it is for example for each Member State to
determine the level of protection given from disconnection (cid:151) 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.

in particular in the
The broadcast media play a central role in the functioning of modern democratic societies,
the broadcasting sector has, since its inception, been
development and transmission of social values. Therefore,
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 (cid:145)Television without frontiers(cid:146) 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 (cid:145)Television without frontiers(cid:146) 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 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.

(69) Article 3(2) of both Directives.

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financing schemes that

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 market (70).
It is worth noting that the problems raised by these complaints relate in general to the
implementation 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.

include advertising revenues and public funding. The choice of

The Commission considers that the digital revolution does not call into question the need for audiovisual 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. (cid:145)encryption or in the clear(cid:146)).

(70) See the Commission’s (cid:145)XXIXth Report on Competition Policy (1999)(cid:146), p. 89.

ANNEX 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

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
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.