Green paper on services of general interest
Date: 2003-05-21
Institutions: European Commission
Subjects: citizens' Europe, economic and social cohesion, fund (EU), legislation, service industry, services of general interest, universal service

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 21.5.2003
COM(2003) 270 final

GREEN PAPER

ON SERVICES OF GENERAL INTEREST

(Presented by the Commission)

TABLE OF CONTENTS

Introduction ................................................................................................................................ 3

1.

1.1.

1.2.

2.

2.1.

2.2.

2.3.

3.

Background .................................................................................................................. 6

Definitions and terminology ........................................................................................ 6

An evolving and crucial role for public authorities ..................................................... 7

The Scope of Community action ................................................................................. 8

What kind of subsidiarity? ........................................................................................... 9

Sector-specific legislation and general legal framework ........................................... 13

Economic and non-economic services ....................................................................... 14

Towards a Community concept of services of general interest? ............................... 15

3.1.

A common set of obligations ..................................................................................... 16

3.1.1

Universal service........................................................................................................ 16

3.1.2

Continuity................................................................................................................... 17

3.1.3

Quality of service ....................................................................................................... 17

3.1.4. Affordability............................................................................................................... 18

3.1.5. User and consumer protection.................................................................................... 18

3.2.

Further specific obligations........................................................................................ 19

4.

4.1.

4.2.

4.3.

5.

5.1.

5.2.

6.

Good governance: organisation, financing and evaluation ........................................ 23

Definition of obligations and choice of organisation................................................. 23

Financing of services of general interest.................................................................... 26

Evaluation of services of general interest .................................................................. 28

Services of general interest and the challenge of globalisation ................................. 30

Trade policy ............................................................................................................... 30

Development and co-operation policy ....................................................................... 31

Operational Conclusion.............................................................................................. 31

Summary table of all questions submitted for discussion ........................................................ 32

Public service obligations and instruments of Community policy in the area of services of
general economic interest......................................................................................................... 35

ANNEX

2

1. 

2. 

3. 

4. 

5. 

INTRODUCTION

The  European  Union is  at  a turning point  in  its history.  It  is  preparing  itself  for  an
unprecedented wave of enlargement and, at the same time, within the context of the
Convention,  for  a  redefinition  of  its  tasks  and  how  its  institutions  operate  under  a
new constitutional Treaty. It has also launched a development strategy based on the
synergy  between  economic  and  social  reforms  with  the  added  dimensions  of
sustainability and the environment.

In this context, services of general interest play an increasing role. They are a part of
the  values  shared  by  all  European  societies  and  form  an  essential  element  of  the
European model of society. Their role is essential for increasing quality of life for all
citizens and for overcoming social exclusion and isolation. Given their weight in the
economy  and  their  importance  for  the  production  of  other  goods  and  services,  the
efficiency  and  quality  of  these  services  is  a  factor  for  competitiveness  and  greater
cohesion, in particular in terms of attracting investment in less-favoured regions. The
efficient  and  non-discriminatory  provision  of  services  of  general  interest  is  also  a
condition for the smooth functioning of the Single Market and for further economic
intergration  in  the  European  Union.  Furthermore,  these  services  are  a  pillar  of
European citizenship, forming some of the rights enjoyed by European citizens and
providing  an  opportunity  for  dialogue  with  public  authorities  within  the  context  of
good governance.

In  the  perspective  of  the  accession  of  the  new  Member  States,  the  guarantee  of
efficient  and  high-quality  services  of  general  interest  and  in  particular  the
development  of  the  network  industries  and  their  interconnection  are  essential  to
facilitate integration, to increase citizens’ well-being and to help individuals to make
effective use of their fundamental rights. Also, several new Member States have over
the  last  decade  gone  through  the  transition  towards  a  market  economy  and  their
citizens must be assured as to the importance the Union attaches to everyone's access
to services of general interest.

Services of general interest are at the core of the political debate. Indeed, they touch
on  the  central  question  of  the  role  public  authorities  play  in  a  market  economy,  in
ensuring, on the one hand, the smooth functioning of the market and compliance with
the rules of the game by all actors and, on the other hand, safeguarding the general
interest, in particular the satisfaction of citizens’ essential needs and the preservation
of public goods where the market fails.

In the early  years of the Communities, the objective of  economic integration led to
concentrating efforts on the removal of barriers to trade between Member States. In
particular, since the second half of the 1980s a number of sectors in which mainly, or
at least also, services of general economic interest are provided,have gradually been
opened  up  to  competition.  This  has  been  the  case  with  telecommunications,  postal
the  modernisation,
services, 
interconnection  and  integration  of  these  sectors.  It  increased  the  number  of
competitors and led to price reductions, especially in those sectors and countries that
liberalised earlier. Although there is as  yet insufficient evidence to  assess  the long-
term  impact  of  the  opening  to  competition  of  services  of  general  interest,  there  is,
based  on  the  available  information,  no  evidence  supporting  the  thesis  that
liberalisation has had a negative impact on their overall performance, at least as far

transport  and  energy.  Liberalisation  stimulated 

3

6. 

7. 

as  affordability  and  the  provision  of  universal  service  are  concerned.  The
Community has always promoted "controlled" liberalisation, i.e. gradual opening-up
of the market accompanied by measures to protect the general interest, in particular
through the concept of universal service to guarantee access for everyone, whatever
the economic, social or geographical situation, to a service of a specified quality  at
an affordable price. In this context, it has given special attention to ensuring adequate
standards  for  cross-border  services  that  cannot  be  adequately  regulated  only  at
national level.

Initial fears that market opening would have a negative impact on employment levels
or  on  the  provision  of  services  of  general  economic  interest  have  so  far  proved
unfounded.  Market  opening  has  generally  made  services  more  affordable.  For
consumers  in  the  lowest  income  brackets,  for  example,  the  percentage  of  personal
income needed to buy  a standard basket of telephone calls or a standard volume  of
electricity  consumption  has  fallen  in  most  Member  States  between  1996  and  2002.
The  impact  of  market  opening  on  net  employment  has  also  been  broadly  positive.
Job  losses,  particularly  amongst  former  monopolies,  have  been  more  than
compensated for  by the  creation  of  new jobs thanks to market  growth. Overall, the
liberalisation  of  the  network  industries  is  estimated  to  have  led  to  the  creation  of
nearly one million jobs across the European Union1.

In spite of these results, certain misapprehensions have been expressed after the first
steps  towards  liberalisation.  The  Commission  has  repeatedly  tried  to  clarify  the
relevant  Community  policies.  In  a  first  horizontal  communication  of  1996,2  it
explained the interplay for the citizens’ benefit between Community measures in the
areas  of  competition  and  free  circulation  and  public  service 
tasks.  This
communication also suggests adding the promotion of services of general interest to
the objectives  of the Treaty. It  was  updated  in  20003  with  a  view  to  increasing  the
legal  certainty  for  operators  as  regards  the  application  of  competition  and  internal
market  rules  to  their  activities.  In  2001,  these  two  communications  were
complemented by a Report to the Laeken European Council4. This report responds to
concerns  with  regard  to  the  economic  viability  of  operators  entrusted  with  public
service  tasks.  It  highlights  the  guarantees  offered  by  Article  86  (2)  of  the  Treaty,5
Community  action  and  the  responsibility  of  the  Member  States,  in  particular  as
regards the definition of public service obligations. In addition, the Commission has
made efforts to better assess the performance of the industries providing services of
general interest by carrying out sectoral and horizontal evaluations.

8. 

In the meantime, the debate has evolved and its emphasis has shifted. The Treaty of
Amsterdam recognises the place of services of general economic interest among the

1

2

3

4

5

The Internal Market – Ten Years without Frontiers, SEC(2002) 1417, 7.1.2003
«Services of general interest in Europe», OJ C 281, 26.9.1996, p.3
«Services of general interest in Europe», OJ C 17, 19.1.2001, p.4
COM(2001) 598 final, 17.10.2001
Article  86  (2)  provides:  «Undertakings  entrusted  with  the  operation  of  services  of  general
economic interest … shall be subject to the rules contained in this Treaty, in particular to the
rules  on  competition,  insofar  as  the  application  of  such  rules  does  not  obstruct  the
performance, in law or in fact, of the particular tasks assigned to them. The development of
trade  must  not  be  affected  to  such  an  extent  as  would  be  contrary  to  the  interests  of  the
Community»

4

                                                
shared values of the Union6. It also assigns the Community and the Member States,
«each  within  their  respective  powers»,  responsibility  for  the  smooth  functioning  of
these  services.  In  the  “Protocol  on  the  system  of  public  broadcasting”  it  highlights
that public broadcasting  in  the  Member States  is  directly  related  to  the  democratic,
social and cultural needs of each society and to the need to preserve media pluralism.
In addition, the Union recognises and secures citizens’ right of access to services of
general  economic  interest  in  the  Charter  of  Fundamental  Rights7.  These  new
provisions  are  important  elements  in  the  development  of  the  process  of  European
integration:  from  the  economic  sphere  towards  broader  issues  relating  to  the
European  model  of  society,  to  the  concept  of  European  citizenship  and  to  the
relations between every individual in the Union and the public authorities. They also
raise the question of the means for their effective implementation. The Commission
believes  that  these  questions  deserve  a  broader  and  more  structured  debate.
Naturally, this debate will take into account  and  be  inspired  by  work  in  progress  –
regarding,  for  example,  the  Union’s  values  and  objectives,  the  question  of
competencies  or  the  principles  of  subsidiarity  and  proportionality  -  within  the
European Convention and in the forthcoming intergovernmental conference.

The uncertainties and concerns of citizens remain in evidence and require a response.
The European Parliament suggested the Commission should present a proposal for a
framework  directive  on  services  of  general  interest  and  the  Council  also  asked  the
Commission to look into this question8.

The  reality  of  services  of  general  interest  which  include  services  of  both  general
economic and non-economic interest, is complex and constantly evolving. It covers a
broad range of different types of activities, from certain activities in the big network
industries  (energy,  postal  services,  transport,  and  telecommunications)  to  health,
education and social services, of different dimensions, from European or even global
to purely local, and of different natures, market or non-market. The organisation of
these  services  varies  according  to  cultural  traditions,  the  history  and  geographical
conditions of each Member State and the characteristics of the activity concerned, in
particular technological development.

The  European  Union  respects  this  diversity  and  the  roles  of  national,  regional  and
local  authorities  in  ensuring  the  well-being  of  their  citizens  and  in  guaranteeing
democratic choices regarding, among other things, the level of service quality. This
diversity explains the various degrees of Community action and the use of different
instruments.  The  Union  also  has  its  own  role  to  play  as  part  of  its  exclusive

The Treaty provides in its Article 16 : «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  social  and  territorial  cohesion,  the  Community  and  the
Member States, each within their respective powers and within the scope of application of this
Treaty,  shall  take  care  that  such  services  operate  on  the  basis  of  principles  and  conditions
which enable them to fulfil their missions»
Article 36 of the Charter provides: «The Union recognises and respects access to services of
general economic interest as provided for in national law and practices, in accordance with
the  Treaty  establishing  the  European  Community,  in  order  to  promote  the  social  and
territorial cohesion of the Union»
See  also  the  Presidency  conclusions  of  the  Barcelona  European  Council,  15  and
16 March 2002, para. 42 and of the Brussels European Council, 20 and 21 March 2003, para.
26

5

9. 

10. 

11. 

6

7

8

                                                
competencies. Moreover, throughout the European Union services of general interest
raise  a  number  of  questions  and  issues  that  are  common  to  different  services  and
different competent authorities.

12. 

The debate that this Green Paper intends to launch raises questions with regard to

(cid:1)  the scope of possible Community action that implements the Treaty in full respect

of the principle of subsidiarity,

(cid:1)  the principles that could be included in a possible framework directive or another
general instrument concerning services of general interest and the added value of
such an instrument,

(cid:1)  the  definition  of  good  governance  in  the  area  of  organisation,  regulation,
financing and evaluation of services of general interest in order to ensure greater
competitiveness of the economy and efficient and equitable access of all persons
to high-quality services that are satisfying their needs,

(cid:1)  any measures that could contribute to increasing legal certainty and to ensuring a
coherent  and harmonious  link between  the  objective  of  maintaining  high-quality
services  of  general  interest  and  rigorous  application  of  competition  and  internal
market rules.

The Green Paper consists of five main parts plus an introduction and an operational
conclusion.  The  first  part  outlines  the  background,  the  second  part  discusses  the
scope of Community action in the area of services of general interest, the third part
provides a number of elements for a possible common concept of services of general
economic interest, on the basis of existing sector-specific legislation, the fourth part
looks at issues related to the way services of general interest are organised, financed
and evaluated, and the fifth part addresses the international dimension of services of
general interest. The Green Paper is accompanied by an annex which sets out public
service obligations in more detail, as derived from existing sector-specific legislation
and the policy instruments available to ensure compliance with these obligations.

The  Green  Paper  raises  a  number  of  questions  on  which  the  Commission  seeks
comments from interested parties. A summary table of all the questions is attached to
this document.

BACKGROUND

Definitions and terminology

Terminological  differences,  semantic  confusion  and  different  traditions  in  the
Member  States  have  led  to  many  misunderstandings  in  the  discussion  at  European
level. In the Member States different terms and definitions are used in the context of
services of general interest, thus reflecting different historical, economic, cultural and
political  developments.  Community  terminology  tries  to  take  account  of  these
differences.

13. 

14. 

1.

1.1.

15. 

16. 

The  term  «services  of  general  interest»  cannot  be  found  in  the  Treaty  itself.  It  is
derived  in  Community  practice  from  the  term  «services  of  general  economic
interest», which is used in the Treaty. It is broader than the term «services of general

6

17. 

18. 

19. 

20. 

21. 

1.2.

22. 

9

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

The term «services of general economic interest» is used in Articles 16 and 86(2) of
the  Treaty.  It  is  not  defined  in  the  Treaty  or  in  secondary  legislation.  However,  in
Community  practice there is broad agreement that the term  refers  to  services  of  an
economic  nature  which  the  Member  States  or  the  Community  subject  to  specific
public  service  obligations  by  virtue  of  a  general  interest  criterion.  The  concept  of
services  of  general  economic  interest  thus  covers  in  particular  certain  services
provided by the big network industries such as transport, postal services, energy and
communications.  However,  the  term  also  extends  to  any  other  economic  activity
subject to public service obligations.

The Green Paper focuses mainly, but not exclusively, on issues related to  «services
of  general  economic  interest»,  as  the  Treaty  itself  focuses  mainly  on  economic
activities.  The  term  «services  of  general  interest»  is  used  in  the  Green  Paper  only
where  the  text  also  refers  to  non-economic  services  or  where  it  is  not  necessary  to
specify the economic or non-economic nature of the services concerned.

The  terms  «service  of  general  interest»  and  «service  of  general  economic  interest»
must not be confused with the term «public service». This term is less precise. It can
have  different  meanings  and  can  therefore  lead  to  confusion.  The  term  sometimes
refers  to  the  fact  that  a  service  is  offered  to  the  general  public,  it  sometimes
highlights that a service has been assigned a specific role in the public interest, and it
sometimes  refers  to  the  ownership  or  status  of  the  entity  providing  the  service9
Therefore, this term will not be used in this Green Paper.

The term «public service obligations» is used in this Green Paper. It refers to specific
requirements that are imposed by public authorities on the provider of the service in
order  to  ensure  that  certain  public  interest  objectives  are  met,  for  instance,  in  the
matter of air, rail and road transport and energy. These obligations can be applied at
Community, national or regional level.

The term «public undertaking» is normally also used to define the ownership of the
service  provider.  The  Treaty  provides  for  strict  neutrality.  It  is  irrelevant  under
Community  law  whether  providers  of  services  of  general  interest  are  public  or
private; they are subject to the same rights and obligations.

An evolving and crucial role for public authorities

The market usually ensures optimum allocation of resources for the benefit of society
at large. However, some services of general interest are not fully satisfied by markets
alone  because  their  market  price  is  too  high  for  consumers  with  low  purchasing
power or because the cost of providing these services could not be covered by market
price.  Therefore,  it  has  always  been  the  core  responsibility  of  public  authorities  to
ensure that such basic collective and qualitative needs are satisfied and that services

There is often confusion between the term «public service» and the term «public sector». The
term «public sector» covers all public administrations together with all enterprises controlled
by public authorities

7

                                                
23. 

24. 

25. 

26. 

2.

27. 

10

of general interest are preserved wherever market forces cannot achieve this. To date,
the crucial importance of this responsibility has not changed.

However,  what  has  changed  is  the  way  in  which  public  authorities  fulfil  their
obligations towards the citizens. Indeed, the role of public authorities in the context
of services of general interest is constantly adapting to economic, technological and
social  developments.  In  Europe,  a  number  of  services  of  general  interest  have
traditionally  been  provided  by  public  authorities  themselves.  Nowadays,  public
authorities  increasingly  entrust  the  provision  of  such  services  to  public  or  private
undertakings  or  to  public-private  partnerships  (PPPs)10  and  limit  themselves  to
defining  public  objectives,  monitoring,  regulating  and,  where  necessary,  financing
those services.

that  public  authorities  renounce 

This  development  should  not  mean 
their
responsibility  to  ensure  that  objectives  of  general  interest  are  implemented.  By
means  of  appropriate  regulatory  instruments  public  authorities  should  have  the
capability  to  shape  national,  regional  or  local  policies  in  the  area  of  services  of
general interest and to ensure their implementation. However, this development from
self-provision  towards  the  provision  through  separate  entities  has  made  the
organisation,  the  cost  and  financing  of  these  services  more  transparent.  This  is
reflected in a broader debate and in stronger democratic control of the ways in which
services  of  general  interest  are  provided  and  financed.  This  increased  transparency
also  reduces  the  possibility  to  use  financing  mechanisms  to  limit  competition  on
these markets.

In  the  European  Union,  the  creation  of  the  internal  market  has  accelerated  this
process.  At  the  same  time,  the  changing  role  of  public  authorities  regarding  the
provision  of  services  of  general  interest  has  also  influenced  the  development  of
Community policies.

The  process  of  European  integration  has  never  called  into  question  the  primary
responsibility  or  the  capability  of  public  authorities  for  making  the  necessary
political  choices  regarding  the  regulation  of  market  activities.  The  Commission
intends  to  reaffirm  this  responsibility  by  stimulating  a  European  debate  on  the
political  choices  to  be  made  concerning  services  of  general  interest  at  European
level. The results of this debate will form the basis for future Community policies in
this field.

THE SCOPE OF COMMUNITY ACTION

As  regards  the scope  of Community  action,  three  main  issues  are  addressed  in  this
section:

The Commission intends to publish a Green Paper on public procurement and Public-Private-
Partnerships  in  the  second  semester  of  2003.  In  its  Communication  “Developing  the  trans-
European  transport  network:  innovative  funding  solutions  and  interoperability  of  electronic
toll collection systems”, COM(2003) 132final, 23.4.2003, the Commission examined PPPs in
the light of the need to find funding solutions for the development of the transport network

8

                                                
(cid:1)  How, in the light of the principle of subsidiarity, should responsibilities in the area
of services of general interest be shared between the Community and the Member
States, including regional and local administrations?

(cid:1)  Should Community action be based on an essentially sector-specific approach or

should a general framework be created?

(cid:1)  How  is  the  scope  of  Community  action  affected  by  the  distinction  between

economic and non-economic services?

What kind of subsidiarity?

In the  area of services of general interest the division of tasks and powers between
the  Community  and  the  Member  States  is  complex  and  sometimes  leads  to
misapprehension and frustration on the part of consumers, users and operators.

The  Treaty  does  not  mention  the  functioning  of  services  of  general  interest  as  a
Community objective and does not assign specific positive powers to the Community
in  the  area  of  services  of  general  interest.  To  date,  except  for  a  sector-specific
reference in the title on transport,11 these services are referred to in two provisions of
the Treaty:

(cid:1)  Article 16 confers responsibility upon the Community and the Member States to
ensure,  each  within  their  respective  sphere  of  competencies,  that  their  policies
enable services of general economic interest to fulfil their missions. It spells out a
principle of the Treaty although it does not provide the Community with specific
means of action.

(cid:1)  Article  86(2)  implicitly  recognises  the  right  of  the  Member  States  to  assign
specific  public  service  obligations  to  economic  operators.  It  sets  out  a
fundamental  principle  ensuring  that  services  of  general  economic  interest  can
continue  to  be  provided  and  developed  in  the  common  market.  Providers  of
services of general interest are exempted from application of the Treaty rules only
to  the  extent  that  this  is  strictly  necessary  to  allow  them  to  fulfil  their  general
interest  mission.  Therefore,  in  the  event  of  conflict,  the  fulfilment  of  a  public
service mission can  effectively prevail over  the  application of  Community rules,
including internal market and competition rules, subject to the conditions foreseen
in  Article  86  (2)12.  Thus,  the  Treaty  protects  the  effective  performance  of  a
general interest task but not necessarily the provider as such.

Furthermore, according to the Charter of Fundamental Rights of the European Union,
the Union recognises and respects access to services of general economic interest, in
order to promote the social and territorial cohesion of the Union.13

It  is  primarily  for  the  competent  national,  regional  and  local  authorities  to  define,
organise,  finance  and  monitor  services  of  general  interest.  The  Community  for  its

See Article 73 of the Treaty
In  its  Communcation  on  Services  of  general  interest  in  Europe  of  2000  the  Commission
explained the three principles that underlie the application of this provisions, i.e. the principles
of neutrality, freedom to define and proportionality
See Article 36 of the Charter of Fundamental Rights

9

2.1.

28. 

29. 

30. 

31. 

11

12

13

                                                
part has competencies in areas that are also relevant for services of general interest,
such as: the internal market, competition and State aid, free movement, social policy,
transport, environment, health, consumer policy, trans-European networks, industry,
economic  and  social  cohesion,  research,  trade  and  development  co-operation,  and
taxation. The competencies and responsibilities conferred by the Treaty provide the
Community with a whole range of means of action to ensure that every person in the
European Union has access to high-quality services of general interest.

Services of general interest linked to the function of welfare and social protection are
clearly a matter of national, regional and local responsibilities. Nevertheless, there is
a recognised role for the Community in promoting co-operation and co-ordination in
these areas. A particular concern for the Commission is promoting the co-operation
by  Member  States  in  matters  related  to  the  modernisation  of  social  protection
systems.

32. 

Three  categories  of  services  of  general  interest  can  be  distinguished  as  regards  the
need and intensity of Community action and the role of the Member States:

(1)

Services of general economic interest provided by large network industries

Since the 1980s the Community has pursued the gradual opening of the markets for
large network industries such as telecommunications, postal services, electricity, gas
and transport in which services of general economic interest can be provided. At the
same time,  the  Community has  adopted  a  comprehensive  regulatory  framework  for
these  services  which  specifies  public  service  obligations  at  European  level  and
includes aspects such as universal service, consumer and user rights and health and
safety  concerns.  These  industries  have  a  clear  Community-wide  dimension  and
present a strong case for developing a concept of European general interest. This is
also  recognised  in  Title  XV  of  the  Treaty,  which  gives  the  Community  specific
responsibility 
transport,
telecommunications and energy infrastructure, with the dual objective of improving
the smooth functioning of the internal market and strengthening social and economic
cohesion.

trans-European  networks 

areas  of 

the 

for 

in 

(2) Other services of general economic interest

Other  services  of  general  economic  interest,  such  as  waste  management,  water
supply or public service broadcasting, are not subject to a comprehensive regulatory
regime  at  Community  level.  In  general,  the  provision  and  organisation  of  these
services are subject to internal market, competition and State aid rules provided that
these  services  can  affect  trade  between  Member  States.  In  addition,  specific
Community rules, such as environmental legislation, may apply to certain aspects of
the provision of these services.

For the disposal of waste (e.g. landfill), for example, provisions in Community waste
legislation establish the “principle of proximity”14. According to this principle, waste
should be disposed of as near as possible to the place it was generated.

14

See  in  particular  Council  Directive  75/442/EEC  on  waste,  OJ  L  194,  25.7.1975,  p.  47,  and
Council Regulation (EEC) 259/93 on shipment of waste, OJ L 30, 6.2.1993, p. 1

10

                                                
As  regards  television  broadcasting,  the  regulatory  regime  is  co-ordinated  at
Community level by the “Television without Frontiers Directive”,15 in  particular in
respect of events of major importance for society, promotion of European works and
independent  production,  advertising  and  protection  of  minors.  Because  of  the
importance  of  public  service  broadcasting  for  the  democratic,  social  and  cultural
needs of each society a specific Protocol on the systems of public broadcasting in the
Member States has been annexed to the Amsterdam Treaty. In its communication on
“Principles  and  guidelines  for  the  Community’s  audio-visual  policy  in  the  digital
age”16,  the  Commission  sets  out  regulatory  principles  concerning  public  service
broadcasting.  The  Commission  has 
in  a
Communication of 17 October 2001 on the application of the state aid rules to public
service broadcasting17. It takes into account in particular the fact that the audio-visual
landscape in the European Community is characterised by a dual system comprising
public and private broadcasters.

further  explained 

its  approach 

33. 

34. 

15

16

17

(3) Non-economic services and services without effect on trade

Services of general interest of a non-economic nature and services without effect on
trade  between  Member  States  are  not  subject  to  specific  Community  rules,  nor  are
they  covered  by  the  internal  market,  competition  and  State  aid  rules  of  the  Treaty.
However,  they  are  covered  by  those  Community  rules  that  also  apply  to  non-
economic  activities  and  to  activities  that  have  no  effect  on  intra-Community  trade,
such as the basic principle of non-discrimination.

Thus, the Community has developed a policy on services of general interest based on
various degrees of  action  and  on  the  use  of  different  instruments.  However,  on  the
one hand, the creation of a sector-specific framework at Community level does not in
itself guarantee that every individual has access to efficient and high-quality services
throughout the European Union. It is up to the competent authorities in the Member
States to specify and complement the Community rules on public service obligations
and  to  monitor  their  implementation.  On  the  other  hand,  the  Commission  can  take
specific direct measures to enforce Community rules in the areas of competition and
State aid. This could give the impression of an imbalance in Community action that
could ultimately affect its credibility.

Community legislation on network industries has taken account of the importance of
public administrations of the Member States in the implementation of legislation in
the  area  of  services  of  general  interest  by  requiring  the  creation  of  independent
regulatory  authorities.  Community  legislation  leaves  the  detailed  institutional

Council Directive 89/552/EEC of 9 October 1989 on the  co-ordination  of  certain  provisions
laid down by law, regulation or administrative action in Member States concerning the pursuit
of television broadcasting activities, OJ L 298, 17.10.1989, p.23
COM(1999) 657, 14.12.1999
OJ C 320, 15.11.2001, p. 5. In this Communication, the Commission recognises the particular
role of public service broadcasting in the promotion of democratic, social and cultural needs
of  each  society,  as  acknowledged  by  the  Protocol  to the  Amsterdam  Treaty.  Member  States
are  competent for  the  definition  and  choice  of  funding  of  the  public  service  and  are  free  to
define  as  public  service  remit  a  braod  programme  spectrum  that  may  include,  for  instance,
entertainment and sports events. The Commission retains a duty to check for abusive practices
and  absence  of  overcompensation  according  to  the  specific  criteria  laid  down  in  the
Communication

11

                                                
arrangements regarding the regulatory authority to the discretion of Member States.
It can thus be an existing body or the Ministry responsible for the sector, a solution
adopted  by  a  limited  number  of  Member  States.  This  solution  has  proven  to  be
problematic in terms of the independence of the national regulatory authority in some
instances  where  Member  States  also  retain  ownership  or  control  over  companies
active in the sector concerned. The importance and ongoing, complex and evolving
nature of the regulatory tasks involved often requires the expertise and independence
of a sector-specific regulatory body18. Such a regulator is important to complement
the  action  of  competition  authorities  in  terms  of  objectives,  sectoral  expertise,  and
timing  and  continuity  of  the  intervention.  In  particular,  specific  regulatory  bodies
have a major role to play to ensure the provision of services of general interest, to put
in  place  the  conditions  for  fair  competition,  to  prevent  disruptions  of  service  or
supply, and to ensure an adequate level of consumer protection. Nearly all Member
States  have  set  up  such  a  body  for  the  sectors  concerned.  However,  even  where  a
sector-specific  regulatory  authority  exists,  the  government  –  i.e.  the  competent
Ministry – often retains responsibility for certain regulatory decisions.

35. 

Furthermore,  Community  legislation  and  practice  encourages  co-operation  and
exchanges  of  best  practice  among  regulatory  authorities  in  the  Member  States  and
between  them  and  the  Commission.  Whilst  the  creation  of  national  regulatory
authorities  is  to  a  large  extent  a  reality,  the  creation  of  European  regulators  for
services  of  general  interest  or  the  deepening  of  co-operation  between  regulators  of
each Member State (e.g. structured networks) has not yet been widely discussed and
could raise questions. Among  the objectives are  the necessity  to obtain  a degree of
consistency  of  national  regulatory  approaches  to  avoid  distortions  stemming  from
different  approaches  that  could  have  an  impact  on  the  good  functioning  of  the
internal market as well as the need to improve the operation of these services.

36. 

The following questions are submitted for discussion:

(1)  Should the development  of  high-quality  services  of  general  interest  be  included  in  the
objectives of the Community? Should the Community be given additional legal powers
in the area of services of general economic and non-economic interest?

(2)  Is  there  a  need  for  clarifying  how  responsibilities  are  shared  between  the  Community
level  and  administrations  in  the  Member  States?  Is  there  a  need  for  clarifying  the
concept of services without effect on trade between Member States? If so, how should
this be done?

(3)  Are  there  services  (other  than  the  large  network  industries  mentioned  in  para.  32)  for

which a Community regulatory framework should be established?

(4)  Should the institutional framework be improved? How could this be done? What should
be  the  respective  roles  of  competition  and  regulatory  authorities?  Is  there  a  case  for  a
European regulator for each regulated industry or for Europe-wide structured networks
of national regulators?

18

A  definition  of  a  sector-specific  regulatory  authority  is  contained  in  Commission  Decision
2002/627/EC  of  29  July  2002  establishing  the  European  Regulators  Group  for  Electronic
Communications  Networks  and  Services,  OJ  L  200/38,  30.7.2002:  «For  the  purpose  of  this
Decision:  'relevant  national  regulatory  authority'  means  the  public  authority  established  in
each Member State to oversee the day-to-day interpretation and application of the provisions
of  the  Directives relating to  electronic  communications  networks  and  services  as  defined  in
the Framework Directive»

12

                                                
2.2.

37. 

38. 

39. 

40. 

41. 

Sector-specific legislation and general legal framework

Up to now, the Community has adopted legislation on services of general interest on
a sectoral basis. Thus, a comprehensive body of sector-specific legislation has been
developed for different network industries such as electronic communications, postal
services,  gas  and  electricity,  and  transport,  in  which  services  of  general  economic
interest  can  be  provided.  In  the  light  of  the  experience  gained,  the  question  was
raised  whether  a  common  European  framework  should  be  developed  in  order  to
ensure coherent implementation of the principles underlying Article 16 of the Treaty
at  Community  level.  In  this  context,  the  Commission  made  a  commitment  to  the
Laeken European  Council to find  the best instrument to ensure the development  of
high-quality  services  of  general  interest  in  the  European  Union,  in  strict  coherence
with all Community policies.

A  general  instrument  could  set  out,  clarify  and  consolidate  the  objectives  and
principles common to all or several types of services of general interest in fields of
Community  competence.  Such  an  instrument  could  provide  the  basis  for  further
sectoral legislation, which could implement the objectives set out in the framework
instrument, thus simplifying and consolidating the internal market in this field.

Consolidation  of  the  Community  “acquis”  could  be  based  on  common  elements  of
existing  sector-specific  legislation  and  would  help  to  ensure  overall  consistency  of
approach  across  different  services  of  general  interest  sectors.  It  could  also  have
important  symbolic  value  in  that  it  would  clearly  demonstrate  the  Community’s
approach  as  well  as  the  existence  of  a  Community  concept  of  services  of  general
interest.  Furthermore,  consolidation  could  help  the  new  Member  States  to  develop
their regulatory strategies in this area.

However,  such  an  approach  would  also  have  its  limitations  in  that  a  framework
instrument setting out common objectives and principles would be general in nature,
as it would have to be based on the common denominator of different services with
very different characteristics. If current levels of protection were to be maintained, it
would still have to be complemented by sector-specific legislation laying down more
detailed  provisions  which  take  into  account  the  specific  characteristics  of  different
services of  general  interest. Moreover,  Article 16 does not  provide  a  legal  base  for
the adoption of a specific instrument. Other Treaty provisions could serve as a legal
basis, depending on the content of the instrument. For example, Article 95 could be
used, but a framework instrument based on this provision would have to be limited to
services  of  general  economic  interest  having  an  effect  on  intra-Community  trade.
This would mean that many important sectors would be excluded from the scope of
the  instrument  because  of  their  non-economic  nature  or  because  of  their  limited
effect  on  trade.  If  Community  legislation  such  sectors  is  considered  desirable,  an
amendment  of  the  Treaty  might  be  the  best  way  of  providing  an  appropriate  legal
basis.

As regards its legal form, consolidation of common objectives  and principles could
be set out in a legislative instrument (i.e. in a directive or in a regulation) or in a non-
legislative 
inter-
institutional  agreement).  Apart  from  their  different  legal  effects,  the  various

(recommendation,  communication,  guidelines, 

instrument 

13

instruments  also  differ  from  the  point  of  view  of  the  degree  of  involvement  of  the
different Community institutions in the adoption procedure19.

42. 

The following questions are submitted for discussion:

(5)  Is  a  general  Community  framework  for  services  of  general  interest  desirable?
What would be its added value compared to existing sectoral legislation? Which
sectors and which issues and rights should be covered? Which instrument should
be used (e.g. directive, regulation, recommendation, communication, guidelines,
inter-institutional agreement)?

(6)  What has been the impact of sector-specific regulation so far? Has it led to any

incoherence?

2.3.

43. 

44. 

45. 

ECONOMIC AND NON-ECONOMIC SERVICES

The  distinction  between  services  of  an  economic  nature  and  services  of  a  non-
economic  nature  is  important  because  they  are  not  subject  to  the  same  rules  of  the
Treaty.  For instance, provisions such as the principle of non-discrimination and  the
principle of free movement of persons apply with regard to the access to all kind of
services.  The  public  procurement  rules  apply  to  the  goods,  services  or  works
acquired by public entities with a view to providing both services of economic  and
non-economic  nature.  However,  the  freedom  to  provide  services,  the  right  of
establishment,  the  competition  and  State  aid  rules  of  the  Treaty  only  apply  to
economic activities. Also, Article 16 of the Treaty and  Article  36  of the  Charter of
Fundamental Rights refer only to services of general economic interest.

As regards the distinction between services of an economic nature and services of a
non-economic  nature,  any  activity  consisting  in  offering  goods  and  services  on  a
given market is an economic activity20. Thus, economic and non-economic services
can  co-exist  within  the  same  sector  and  sometimes  even  be  provided  by  the  same
organisation.  Furthermore,  while  there  may  be  no  market  for  the  provision  of
particular services to the public, there may nevertheless be an upstream market where
undertakings  contract  with  the  public  authorities  to  provide  these  services.  The
internal market, competition and state aid rules apply to such upstream markets.

The  range  of  services  that  can  be  provided  on  a  given  market  is  subject  to
technological,  economic  and  societal  change  and  has  evolved  over  time.  As  a
consequence,  the  distinction  between  economic  and  non-economic  activities  has
been  dynamic  and  evolving,  and  in  recent  decades  more  and  more  activities  have
become of economic relevance. For an increasing number of services, this distinction
has  become  blurred.  In  its  Communication  of  2000,  the  Commission  set  out  a
number  of  examples  of  non-economic  activities21.  These  examples  concern  in
particular matters which are intrinsically prerogatives  of  the  State,  services  such  as

19

20

21

In  this  context  it  should  be  noted  that  the  Union’s  legal  instruments  are  the  subject  of
discussions  within  the  European  Convention.  Indeed,  Articles  24  to  28  of  the  Preliminary
Draft Constitutional Treaty set out the proposed range of legal instruments
Judgment  of  the  Court  of  Justice  in  joint  cases  C-180-184/98  Pavel  Pavlov  and  Others  v
Stichting Pensioenfonds Medische Specialisten [2000] ECR I-6451
OJ C 17, 19.1.2001, p. 4 (Nos 28-30)

14

                                                
national  education  and  compulsory  basic  social  security  schemes,  and  a  number  of
activities conducted by organisations performing largely social functions, which are
not meant to engage in industrial or commercial activity. Given that the distinction is
not  static  in  time,  the  Commission  stressed  in  its  Report  to  the  Laeken  European
Council that it would neither be feasible nor desirable to provide a definitive a priori
list of all services of general interest that are to be considered «non-economic»22.

Although  the  evolving  and  dynamic  character  of  this  distinction  has  not  created
problems in Commission practice so far, it has raised concerns, in particular among
providers of non-economic services who ask for more legal certainty regarding their
regulatory environment.

Furthermore,  the  future  of  non-economic  services  of  general  interest,  whether  they
are related to prerogatives of the State or linked to such sensitive sectors as culture,
education,  health  or  social  services,  raises  issues  on  a  European  scale,  such  as  the
content  of  the  European  model  of  society.  The  active  role  of  charities,  voluntary
organisations  and  humanitarian  organisations  explains  in  part  the  importance  that
European citizens attach to these issues.

46. 

47. 

48. 

The following questions are submitted for discussion:

(7)  Is it necessary to further specify the criteria used to determine whether a service
is  of  an  economic  or  a  non-economic  nature?  Should  the  situation  of  non-for-
profit  organisations  and  of  organisations  performing  largely  social  functions  be
further clarified?

(8)  What  should  be  the  Community’s  role  regarding  non-economic  services  of

general interest?

3.

49. 

TOWARDS A COMMUNITY CONCEPT OF SERVICES OF GENERAL INTEREST?

It  is  probably  neither  desirable  nor  possible  to  develop  a  single  comprehensive
European definition of the content of services of general interest. However, existing
Community legislation on services of general economic interest contains a number of
common  elements  that  can  be  drawn  on  to  define  a  useful  Community  concept  of
services of general economic interest. These elements include in particular: universal
service,  continuity,  quality  of  service,  affordability,  as  well  as  user  and  consumer
protection.  These  common  elements  identify  Community  values  and  goals.  They
have been transposed into obligations in the respective legislations and aim to ensure
objectives such as economic efficiency, social or territorial cohesion and safety and
security for all citizens. They can also be complemented by more specific obligations
depending on the characteristics of the sector concerned. Developed in particular for
certain network industries they could also be relevant for social services.

22

COM(2001)598, 17.10.2001 (No 30)

15

                                                
3.1.

A common set of obligations

3.1.1

Universal service

50. 

51. 

52. 

53. 

54. 

The  concept  of  universal  service  refers  to  a  set  of  general  interest  requirements
ensuring  that  certain  services  are  made  available  at  a  specified  quality  to  all
consumers  and  users  throughout  the  territory  of  a  Member  State,  independently  of
geographical  location,  and,  in  the  light  of  specific  national  conditions,  at  an
affordable  price23.  It  has  been  developed  specifically  for  some  of  the  network
industries  (e.g.  telecommunications,  electricity,  and  postal  services).  The  concept
establishes  the  right  for  every  citizen  to  access  certain  services  considered  as
essential  and  imposes  obligations  on  industries  to  provide  a  defined  service  at
specified conditions, including complete territorial coverage. In a liberalised market
environment, a universal service obligation guarantees that everybody has access to
the  service  at  an  affordable  price  and  that  the  service  quality  is  maintained  and,
where necessary, improved.

Universal service is a dynamic concept. It ensures that general interest requirements
can take account of political, social, economic and technological developments and it
allows these requirements, where necessary, to be regularly adjusted to the citizens’
evolving needs.

It is also a flexible concept that is fully compatible with the principle of subsidiarity.
Where the basic principles of universal service are defined at Community level, the
implementation of these  principles  can  be  left  to  the  Member  States,  thus  allowing
different  traditions  and  specific  national  or  regional  circumstances  to  be  taken  into
account. Furthermore, the concept of universal service can apply to different market
structures  and  can  therefore  be  used  to  regulate  services  in  different  stages  of
liberalisation and market opening.

During  the  last  two  decades,  the  concept  of  universal  service  has  developed  into  a
major  and  indispensable  pillar  of  the  Community’s  policy  on  services  of  general
economic  interest.  It  has  allowed  public  interest  requirements  to  be  addressed  in
various domains, such as economic efficiency, technological progress, environmental
protection,  transparency  and  accountability,  consumer  rights  and  specific  measures
regarding disability, age or education. The concept has also contributed to reducing
the levels of disparity in living conditions and opportunities in the Member States.

Implementation  of  the  principle  of  universal  service  is  a  complex  and  demanding
task for national regulators which in many cases have only been recently created and
whose experience is therefore necessarily still limited. At Community level, rights of
access to services are defined in different directives, but the Community institutions
alone cannot ensure that these rights are fully granted in practice. There is a risk that
these rights as set out in Community legislation remain theoretical, even where they
are formally transposed in national legislation.

23

Cf. Article 3(1) of Directive 2002/22/EC of the European Parliament and of the Council of 7
March  2002  on  universal  service  and  users'  rights  relating  to  electronic  communications
networks and services (Universal Service Directive), OJ L 108, 24.4.2002, p. 51

16

                                                
3.1.2

Continuity

55. 

56. 

A  number  of  services  of  general  interest  are  characterised  by  a  continuity
requirement,  i.e.  the  provider  of  the  service  is  obliged  to  ensure  that  the  service  is
provided  without  interruption.  As  regards  some  services,  uninterrupted  provision
may already be in the commercial interest of the provider and it might therefore not
be  necessary  to  impose  a  legal  continuity  requirement  on  the  operator.  At  national
level, the continuity requirement needs to be reconciled with the employees’ right to
strike and with the requirement to respect the rule of law.

The  requirement  of  ensuring  a  continuous  service  is  not  consistently  addressed  in
sector-specific  Community  legislation.  In  some  cases,  sector-specific  Community
legislation explicitly sets out a continuity obligation24. In other cases, sector-specific
regulation  does  not  contain  a  continuity  requirement,  but  it  explicitly  authorises
Member States to impose such an obligation on service providers25.

3.1.3

Quality of service

57. 

58. 

The  definition,  monitoring  and  enforcement  of  quality  requirements  by  public
authorities  have  become  key  elements  in  the  regulation  of  services  of  general
interest.

In the sectors that have been liberalised the Community did not rely on market forces
alone to maintain and develop the quality of services. Whilst in general it is for the
Member States to define quality levels for services of general interest, in some cases,
quality standards  are  defined  in  Community  legislation.  They  include,  for  instance,
safety  regulations,  the  correctness  and  transparency  of  billing,  territorial  coverage,
and protection against disconnection. In other cases, Member States are authorised or
required  to  set  quality  standards.  Furthermore,  in  some  cases  Member  States  are
required  to  monitor  and  enforce  compliance  with  quality  standards  and  to  ensure
publication of information on quality standards and actual performance by operators.
The  most  developed  regulation  of  quality  at  Community  level  can  be  found  in  the
legislation on postal services and on electronic communications services.

59. 

In  addition,  the  Commission  has  developed  non-regulatory  measures  to  promote
quality  in  services  of  general  economic  interest  –  including  financial  instruments,
voluntary European standards, and exchanges of  good practice. For instance, in the

24

25

For instance, Article 3(1) of the postal directive (97/67/EC) obliges Member States to "ensure
the  permanent  provision  of  a  postal  service."  Cf.  Directive  97/67/EC  of  the  European
Parliament and of the Council of 15 December 1997 on common rules for the development of
the internal market of Community postal services and the improvement of quality of service,
OJ L 15 , 21.1.1998, p. 14
Article  3(2)  of  the  electricity  directive  provides  that  "Member  States  may  impose  on
undertakings  operating  in  the  electricity  sector,  in  the  general  economic  interest,  public
service obligations which may relate to security, including … regularity… of supplies… . Such
obligations must be clearly defined, transparent, non-discriminatory and verifiable; they, and
any  revision  thereof,  shall  be  published  and  notified  to  the  Commission  by  Member  States
without delay." Cf. Directive 96/92/EC of the European Parliament and of the Council of 19
December  1996  concerning  common  rules  for  the  internal  market  in  electricity,  OJ  L  27,
30.1.1997, p. 20

17

                                                
electricity and gas sectors, the Community promotes voluntary co-operation between
regulators.

3.1.4.

Affordability

60. 

61. 

The  concept  of  affordability  was  developed  in  the  context  of  the  regulation  of
telecommunications services. Subsequently, it was also introduced into the regulation
of postal services.26 It requires a service of general economic interest to be offered at
an  affordable  price  in  order  to  be  accessible  for  everybody.  Application  of  the
principle  of affordability helps  to  achieve  economic  and  social  cohesion  within  the
Member States.

The sector-specific legislation in place does not specify the  criteria for  determining
affordable  prices.  These  criteria  must  be  defined  by  the  Member  States.  Relevant
criteria could be linked, for example, to the penetration rate or to the price of a basket
of basic services related to the disposable income of specific categories of customers.
Particular  attention  should  be  paid  to  the  needs  and  capacities  of  vulnerable  and
marginalised  groups.  Finally,  once  an  affordable  level  has  been  set,  the  Member
States should ensure that this level is effectively offered, by putting in place a price
control  mechanism  (price  cap,  geographical  averaging)  and/or  by  distributing
subsidies to the persons concerned.

3.1.5. User and consumer protection

62. 

63. 

In services of general interest, horizontal consumer protection rules apply as they do
in other sectors of the economy. In addition, because of the particular economic and
social importance of these services, specific measures have been adopted in sectoral
Community legislation to address the specific concerns and needs of consumers and
businesses,  including  their  right  to  have  access  to  high-quality  international
services27.  Consumer  and  user  rights  are  set  out  in  sector-specific  legislation  on
electronic  communications,  postal  services,  energy  (electricity,  gas),  transport  and
broadcasting.  The  Commission’s  consumer  policy  strategy  2002-200628  has
identified  services  of  general  interest  as  one  of  the  policy  areas  where  action  is
needed to ensure a high common level of consumer protection.

The  Commission  Communication  on  services  of  general  interest  of  September
200029 sets out a number of principles that can help to define consumers’ and users’
requirements  for  those  services.  These  principles  include  good  quality  of  service,
high levels of health protection and physical safety of services, transparency (e.g. on
tariffs,  contracts,  choice  and  financing  of  providers),  choice  of  service,  choice  of
supplier,  effective  competition  between  suppliers,  existence  of  regulatory  bodies,
availability  of  redress  mechanisms,  representation  and  active  participation  of
consumers and users in the definition and evaluation of services and choice of forms
of  payment.  The  Communication  highlighted  that  a  guarantee  of  universal  access,
continuity,  high  quality  and  affordability  constitute  key  elements  of  a  consumer

26

27

28

29

In  the  context  of  the  proposed  amendment  of  the  electricity  and  gas  directive  the  broader
concept of “reasonable pricing” is being dicussed
For example, in air transport, this includes measures against over-booking and a compensation
scheme for denied boarding
COM(2002) 208; OJ C 137, 8.6.2002, p. 2
OJ C 17, 19.1.2001, p. 4

18

                                                
policy in the area of services of general economic interest. It also stressed the need to
address  citizens’  concerns  that  are  of  a  wider  nature,  such  as  a  high  level  of
environment protection,  specific needs of certain categories of the population,  such
as  the  handicapped  and  those  on  low  incomes  and  complete  territorial  coverage  of
essential services in remote or inaccessible areas.

64. 

The following questions are submitted for discussion:

(9)  Are there other requirements that should be included in a common concept of services of
general  interest?  How  effective  are  the  existing  requirements  in  terms  of  achieving  the
objectives of social and territorial cohesion?

(10) Should all or some of these requirements be extended to services to which they currently

do not apply?

(11) What aspects of the regulation of these requirements should be dealt with at Community

level and which aspects left to the Member States?

(12) Have these requirements been effectively implemented in the areas where they apply?

(13) Should some or all of these requirements also be applied to services of general interest of

a non-economic nature?

3.2.

65. 

Further specific obligations

A number of sector-specific related obligations that are in the general interest could
add to a common set of public service obligations. These obligations include safety
and  security,  security  of  supply,  network  access  and  interconnectivity,  and  media
pluralism.

66. 

Safety and Security

In a world that is rapidly and dramatically changing, citizens in the European Union
need  to  feel,  and  be,  safe  and  secure.  This  is  becoming  increasingly  important
following  a  number  of  events.  In  particular  after  11  September  2001,  safety  and
security has even come on stage as a priority for Europe as  a whole.  Various other
events  have  recently  underlined  this  concern.30  One  of  the  basics  of  the  European
model of society is therefore security and safety.

Safety  and  security  refer  to  a  common  set  of  objectives  that  exist  in  almost  all
Member  States.  Notably,  the  idea  is  to  prevent  prejudices  to  or  attacks  against
society.  They  can  take  on  different  forms.  Typically,  these  objectives  have  been
pursued in Europe by means of services of general interest. Traditionally they  have
been  carried  out  under  the  umbrella  of  the  State  and  without  always  pursuing
commercial objectives.

Lately,  the  Commission  is  committed  to  increasing  the  level  of  security  as  well  as
adopting  a  more  European  approach  in  certain  fields,  for  instance  in  transport  and

30

Sinking of the Petrol vessel “Prestige” and the recent SARS

19

                                                
energy.  It  is  worth  mentioning  the  Commission’s  Communication  on  “the
repercussions  of  the  terrorist  attacks  in  the  United  States  or  the  air  transport
industry”31,  its  proposals  after  the  various  major  maritime  accidents  along  the
European  coasts32 or the recent nuclear package towards a Community  approach to
nuclear safety33. These texts underline various objectives to be pursued by Europe as
a whole. Major impetus has been given and the levels of safety and security should
thus be increased. The reasons for this new approach are widespread and various. For
example,  problems  usually  exceed  national  frontiers,  international  conventions  and
rules  do  not  usually  have  binding  force,  and  Member  States  are  sometimes
confronted with the limitations imposed by Community rules.

67. 

Security of supply

A high level of service quality implies that a sustainable provision of the services is
ensured  in  the  long  term.  In  general,  the  development  of  the  internal  market  has
generated a considerable increase in the level of security of supply of  products and
services,  to  the  extent  that  the  markets  concerned  are  functioning  competitively.
However,  in  some  cases  of  services  of  general  interest  public  intervention  may  be
necessary to improve the security of supply, in particular in order address the risk of
long-term  underinvestment  in  infrastructure  and  to  guarantee  the  availability  of
sufficient capacity.

In  the  energy  sector,  the  issue  of  supply  security  has  been  the  subject  of  a  broad
public  debate  at  Community  level  on  the  basis  of  a  Green  Paper  the  Commission
published  in  200134.  The  Green  Paper  aims  to  initiate  a  debate  with  a  view  to
defining a long-term strategy for energy supply security that is geared to ensuring the
uninterrupted physical availability of energy products on the market, at a price which
is  affordable  for  consumers  and  users,  while  taking  account  of  both  environmental
concerns  and  sustainable  development.  The  Commission  reported  on  the  results  of
the  public  debate  in  a  communication  in  June  200235.  On  the  basis  of  this
consultation,  the  Commission  concluded  in  its  Report  that  it  was  necessary  to
increase  the  co-ordination  of  measures  ensuring  security  of  supply  in  the  field  of
energy.  As  a  follow-up,  the  Commission  submitted,  in  September  2002,  two
proposals  for  directives,  which  will  help  to  improve  the  security  of  supply  of
petroleum products and natural gas in the European Union36.

Dated 10.10.2003
In addition to the most recent proposals following the Prestige accident, see also the proposals
put forward by the European Commission after the sinking of the Erika vessel in 1999: COM
(2000) 142 and COM (2000) 802
Adopted  on  the  6  November  2002.  See  in  particular  the  Communication  on  nuclear  safety
(COM 2002) 605 final
Towards a European strategy for the security of Energy supply, Green Paper, COM(2000)769,
29.11.2000
Final  Report  on  the  Green  Paper  "Towards  a  European  strategy  for  the  security  of  Energy
supply", COM(2002)321, 29.6.2002
Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  concerning  the
alignment of measures with regard to security of supply for petroleum products, OJ C 331 E,
31.12.2002,  p.  249;  and  Proposal  for  a  Directive  of  the  European  Parliament  and  of  the
Council  concerning  measures  to  safeguard  security  of  natural  gas  supply,  OJ  C  331  E,
31.12.2002, p. 262

20

68. 

31

32

33

34

35

36

                                                
69. 

Some  services  of  general  interest  outside  the  energy  sector  may  also  give  rise  to
supply  security  concerns  Yet  Community  secondary  legislation  generally  does  not
address  the  issue.  It  may  therefore  be  useful  to  consider  whether  there  are  other
sectors in which the issue of supply security should be raised specifically. However,
any  assessment should  take into account  that specific additional  measures  aimed  at
increasing the security of supply usually entail an additional economic cost and could
reduce  competition.  Any  action  proposed  to  increase  security  of  supply  therefore
needs to ensure that the ensuing cost is not greater than the expected benefits37.

70. 

Network access and interconnectivity

Where there is effective competition, market mechanisms may ensure the provision
of  affordable  services  of  an  adequate  quality,  thus  greatly  reducing  the  need  for
regulatory intervention. Where services of general economic interest are provided on
the  basis  of  networks  with  universal  coverage,  the  incumbent  undertaking  enjoys  a
substantial competitive advantage, mainly due to substantial sunk costs involved in
establishing  and  maintaining  alternative  networks.  In  cases  where  competitors  can
only operate as service providers, access to the incumbent network is indispensable
for  market  entry.However,  even  in  sectors  where  competitors  do  have  the  right  to
deploy  their  own  network  infrastructure  network  access  may  be  necessary  for
competitors  to  be  able  to  compete  with  the  incumbent  on  downstream  markets.  If
third party access to existing networks at fair and non-discriminatory conditions was
not  possible,  de  facto  monopolies  or  at  least  the  incentive  for  the  incumbent  to
discriminate in the access terms, thus distorting competition  downstream,  would be
maintained.  Therefore,  in  order  to  meet  competition  policy  and  internal  market
objectives, thereby offering customers more choice, higher quality and lower prices,
sector-specific Community legislation for the sectors liberalised at Community level
harmonises and regulates the access to network infrastructures.

The  Community  has  adopted  different  regulatory  strategies  for  different  network
industries and services of general interest. This is because these industries are indeed
different and at  different stages of the liberalisation process. They  differ notably in
their profitability, their production structure, their capital intensity, their methods of
service delivery, and their demand structure. In some sectors, the incumbent operator
can remain vertically integrated, but must grant network access to allow market entry
by  competitors.  In  telecommunications,  public  operators  have  an  obligation  to
negotiate  interconnection  their  networks.  In  addition,  competitors  have  the  right  to
use the incumbent’s infrastructure. This is also the current system in electricity and
gas. In the postal sector, new entrants have established networks for the distribution
of  parcels  without  requesting  access  to  the  incumbent’s  infrastructure.  Where  an
obligation  to  grant  access  exists,  the  pricing  of  access  has  proven  to  be  the  crucial
regulatory issue.

71. 

72. 

Experience shows that there is probably no single ideal approach to the regulation of
network  access.  Choices  must  take  account  of  the  characteristics  of  each  industry.
For  this  reason,  the  Community  has  so  far  pursued  a  sector-specific  approach  in
regulating access in the network industries. However, consideration could be given to

37

Cf. Commission Staff Working Paper, Security of supply, The current situation at European
Union level, SEC(2002)243, 28.2.2002

21

                                                
whether  useful  lessons  could  be  learned  from  a  cross-sectoral  comparison  of
regulatory strategies and techniques.

73. 

Media pluralism

74. 

Measures  to  ensure  media  pluralism  typically  limit  maximum  holdings  in  media
companies  and  prevent  cumulative  control  or  participation  in  several  media
companies at the same time. Their aim is to protect the freedom of expression and to
ensure  that  the  media  reflect  a  spectrum  of  views  and  opinions  that  characterise  a
democratic society.

It should first be noted that the protection of media pluralism is primarily a task for
the  Member  States.  At  present,  secondary  Community  legislation  does  not  contain
any  provisions  directly  aiming  to  safeguard  the  pluralism  of  the  media.  However,
Community law  allows  the application  of national safeguards  with  regard  to  media
pluralism. The purpose of existing Community law instruments is to ensure a certain
economic balance between market operators: these  instruments, therefore affect  the
media sector as an area of economic activity and not – or at least only very indirectly
-  as  a  means  of  delivering  information  to  the  citizen.  Back  in  December  1992,  the
Commission published a Green Paper38 designed to launch public debate on the need
for  Community  action  in  this  field.  The  debate  did  not  allow  clear  operational
conclusions to be drawn and no formal initiative was taken by the Commission. Ten
years  later,  given  the  progressing  concentration  of  the  media  sector  and  the
proliferation  of  electronic  media,  the  protection  of  media  pluralism  remains  an
important  issue39.  Views  are  sought  as  to  whether  the  Commission  should  re-
examine the need for Community action in this field in more detail.

75. 

The following questions are submitted for discussion:

(14) Which types of services of general interest could give rise to security of supply concerns?

Should the Community take additional measures?

(15) Should additional measures be taken at Community level to improve network access and
interconnectivity? In which areas? What measures should be envisaged, in particular with
regard to cross-border services?

(16) Which  other  sector-specific  public  service  obligations  should  be 

taken 

into

consideration?

(17) Should  the  possibility  to  take  concrete  measures  in  order  to  protect  pluralism  be  re-

considered at Community level? What measures could be envisaged?

38

39

Pluralism  and  Media  Concentration  in  the  Internal  Market,  An  Assessment  of  the  need  for
Community action, Commission Green Paper, COM(92)480, 23.12.1992
See  also  the  specific  Protocol  on  the  system  of  public  broadcasting  in  the  Member  States
annexed to the EC Treaty by the Treaty of Amsterdam

22

                                                
4. GOOD GOVERNANCE: ORGANISATION, FINANCING AND EVALUATION

76. 

As  regards  the  intervention  of  public  authorities  in  the  Member  States  in  the
provision of services of general interest, three aspects can be highlighted to provide
greater clarity:

(cid:1)  definition and enforcement of obligations and choice of organisation,

4.1.

77. 

78. 

79. 

(cid:1)  financing of services of general interest,

(cid:1)  evaluation of services of general interest.

Definition of obligations and choice of organisation

As stated above, the national, regional and local authorities of each Member State are
in principle free to define what they consider to be a service of general interest. This
freedom to define also includes the freedom to impose obligations on the providers
of such services, provided that these obligations are in conformity with Community
rules. In the absence of specific Community legislation, it is therefore in principle for
the  Member  States  to  define  requirements  such  as  universal  service  obligations,
territorial  coverage  requirements,  quality  and  safety  standards,  user  and  consumer
rights, and environmental requirements.

Only  in  the  case  of  the  big  network  industries  has  the  Community  harmonised
provisions  on  public  service  obligations  and  defined  common  requirements  in
specific  Community  legislation.  This  is  the  case,  for  instance,  in  the  electronic
communications  and  postal  sectors.  However,  where  such  harmonised  obligations
exist, Member States are also responsible for their specification and implementation
in  line  with  the  specific  characteristics  of  the  sector.  In  general,  sector-specific
harmonisation  of  public  service  obligations  does  not  prevent  Member  States  from
imposing  more  far-reaching  or  additional  obligations  compatible  with  Community
law,  unless  otherwise  provided  for  in  the  harmonisation  measures40.  In  electronic
communications,  such  additional  obligations  cannot  be  financed  from  within  the
sector.

Also, as regards the organisation of the  provision of a  service of  general  economic
interest,  Member  States  are  free  to  decide  how  the  service  is  operated,  provided,
however,  that  Community  rules  are  observed.  In  any  event  the  degree  of  market
opening  and  competition  in  a  certain  service  of  general  economic  interest  will  be
decided by the relevant Community rules on the internal market and on competition.
As far as the participation of the state in the provision of services of general interest
is  concerned,  it  is  for  the  public  authorities  to  decide  whether  they  provide  these
services directly through their own administration or whether they entrust the service
to a third party (public or private entity)41.

40

41

For  instance,  the  postal  directive  obliges  Member  States  to  ensure  a  minimum  of  five  daily
deliveries to end users per week. Member States could impose a higher number of deliveries
or specify the delivery requirement further
As regards local inland transport, the Commission has proposed legislation that would require
Member States to use public service concessions. Cf. Amended proposal for a Regulation of
the  European  Parliament  and  of the  Council  on  action  by  Member  States  concerning  public

23

                                                
80. 

81. 

However,  providers  of  services  of  general  economic  interest,  including  in-house
service  providers,  are  undertakings  and  therefore  subject  to  the  competition
provisions of the Treaty. Decisions to award special or exclusive rights  to  in-house
service providers, or to favour them in other ways, , can amount to an infringement
of  the  Treaty,  despite  the  partial  protection  offered  by  Article  86.  Case  law  shows
that this is true, in particular, where the public service requirements to be fulfilled by
the  service  provider  are  not  properly  specified;42  where  the  service  provider  is
manifestly  unable  to  meet  the  demand;43  or  where  there  is  an  alternative  way  of
fulfilling the requirements that would have a less detrimental effect on competition44.

Where  a  public  authority  of  a  Member  State  chooses  to  entrust  the  provision  of  a
service  of  general  interest  to  a  third  party,  selection  of  the  provider  must  respect
certain rules and principles in order to ensure a level playing field for all providers,
public  or  private,  that  are  potentially  capable  of  providing  that  service.  This  will
ensure  that  these  services  are  provided  under  the  economically  most  advantageous
conditions  available  on  the  market.  Within  the  framework  of  these  rules  and
principles, public authorities remain free to define the characteristics of the service to
be provided, including any conditions regarding the quality of the service, in order to
pursue its public policy objectives. Two situations can be distinguished:

(cid:1)  If the act by which public authorities entrust the provision of a service of general
economic interest to a third party is a public service or works contract, as defined
by  the  procurement  directives  or  a  works  concession,  as  defined  by  Directive
93/37/EEC,45  it  must  comply  with  the  procedural  requirements  defined  by  the
relevant procurement directive, provided it reaches or exceeds a threshold defined
in the relevant directive and is not excluded from its scope.

(cid:1)  If the act by which public authorities entrust a third party with the provision of a
service of general economic interest is not covered by the procurement directives,
such act must nevertheless comply with the principles that derive directly from the
EC  Treaty,  and  in  particular  the  provisions  relating  to  the  freedom  to  provide
services and the freedom of establishment. This is the case for instance of public
contracts or work concessions falling below the thresholds, of service concessions
(i.e. contracts stipulating that the consideration for the service provider consists, at
least in part, in the right to exploit the service) or of unilateral acts assigning the
right to provide a service of general economic interest. These rules and principles
include equal treatment, transparency, proportionality, mutual recognition and the
protection of the rights of individuals46.

82. 

In the  area  of  environmental services, in particular as  concerns waste management,
public  authorities  may  grant  exclusive  rights  to  organisations  created  by  producers
for the recycling of certain wastes. Such organisations are subject to the competition

42

43

44

45

46

service requirements and the award of public service contracts in passenger transport by rail,
road and inland waterway, OJ C 151 E, 25.6.2002, p. 246
See the Court’s judgment in Silver Line Reisebüro (C-66/86, judgment of 11.4.89)
See the Court’s judgment in Höfner (C-41/90, judgment of 23.4.91)
See the Court’s judgment in Vlaamse Televisie Maatschappij (T-266/97, judgment of 8.7.99)
Independently of the definition used in national law
Cf.  the  Commission  Interpretative  Communication  on  Concessions  under  Community  Law,
OJ C 121, 29.4.2000, p. 2

24

                                                                                                                                                        
83. 

rules.  They  are  often  created  in  the  context  of  innovative  approaches  to  ensure
prevention and recycling of waste, e.g. the application of «producer responsibility».
This involves the attribution of financial responsibility for waste management to the
producers of the products at the origin of the waste.

Thus, public authorities in each Member State retain considerable freedom to define
and  enforce  public  service  obligations  and  to  organise  the  provision  of  services  of
general interest. On the one hand, this allows Member States to define policies that
take  into  account  specific  national,  regional  or  local  circumstances.  For  example,
remote or sparsely populated areas may have to be treated differently from central or
densely  populated  areas.  On  the  other  hand,  the  absence  of  specific  legislation  can
lead  to  legal  uncertainty  and  and  market  distortions47.  At  European  level,  different
forms  of  co-operation  between  national  regulators  have  developed  in  an  attempt  to
improve  consistency  of  policies  across  Member  States,  but  a  European  regulatory
authority  does  not  exist  for  any  service48.  A  broader  process  of  exchange  of  best
practice and experience involving not only regulators but also other interested parties
could also be useful.  The  Commission believes  that a broad debate is necessary  on
these points.

84. 

The following questions are submitted for discussion:

(18) Are you aware of any cases in which Community rules have unduly restricted the
way  services  of  general  interest  are  organised  or  public  service  obligations  are
defined at national, regional or local level? Are you aware of any cases in which
the  way  services  of  general  interest  are  organised  or  public  service  obligations
are  defined  at  national,  regional  or  local  level  constitutes  a  disproportionate
obstacle to the completion of the internal market?

(19) Should service-specific  public service obligations be harmonised  in  more  detail

at Community level? For which services?

(20) Should  there  be  an  enhanced  exchange  of  best  practice  and  benchmarking  on
questions  concerning  the  organisation  of  services  of  general  interest  across  the
Union? Who should be involved and which sectors should be addressed?

47

48

For  instance,  in the  water  sector the  absence  of  specific,  relevant  regulation  has  led  to  very
different  industry  structures  across  Member  States.  Cf.  WRC/Ecologic,  Study  on  the
Application  of  the  Competition  Rules  to  the  Water  Sector  in  the  European  Community,
December 2002, available at:
http://europa.eu.int/comm/competition/publications/studies/water_sector_report.pdf
However,  while  commercial  aspects  are  addressed,  the  Water  Framework  Directive
2000/60/EC, OJ L 327, 22.12.2000, p. 1, sets out some transparency rules for water services.
Article 9 of the Directive deals with pricing policies and requires Member States in particular
to  take  account  of  the  principle  of  recovery  of  costs,  including  environmental  and  resource
costs, and of the polluter pays principle
See Annex for more detail

25

                                                
4.2.

85. 

86. 

87. 

88. 

FINANCING OF SERVICES OF GENERAL INTEREST

Many services of general interest cannot be  viably provided on the basis of market
mechanisms  alone  and  specific  arrangements  are  necessary  in  order  to  ensure  the
financial  equilibrium  of  the  provider.  For  instance,  universal  access  or  full
geographical coverage may not be offered by the market itself. Currently, it is for the
Member States to ensure the financing of services of general interest and to calculate
the extra cost of the provision of such services. In some cases, the Community may
contribute by way of co-financing to the funding of specific projects, e.g. through its
structural funds or its TEN programmes.

Depending  on  historical  traditions  and  the  specific  characteristics  of  the  services
concerned,  Member  States  apply  different  mechanisms  in  order  to  ensure  the
financial  equilibrium  of  providers  of  services  of  general  interest.  The  financing
mechanisms applied by the Member States include:

(cid:1)  Direct financial support through the State budget (e.g. subsidies or other financial

advantages such as tax reductions).

(cid:1)  Special or exclusive rights (e.g. a legal monopoly).

(cid:1)  Contributions by market participants (e.g. a universal service fund).

(cid:1)  Tariff  averaging  (e.g.  a  uniform  country-wide  tariff  in  spite  of  considerable

differences in the cost of provision of the service).

(cid:1)  Solidarity-based financing (e.g. social security contributions).

Whilst different forms of financing continue to co-exist, a clear trend has developed
in recent  decades: Member States  have  increasingly  withdrawn  exclusive  rights  for
the provision of services of general interest and opened markets to new entrants. This
has  made  it  necessary  to  resort  to  other  forms  of  financial  support,  such  as  the
creation  of  specific  funds  financed  by  market  participants  or  direct  public  funding
through the budget, the least distorting  way of  funding49.  These forms of  financing
have  made  the  cost  of  providing  services  of  general  interest  and  the  underlying
political choices more transparent and fed the political debate on these services.

As  a  general  rule,  Member  States  can  choose  which  system  they  apply  to  finance
their  services  of  general  interest.  They  have  only  to  ensure  that  the  mechanism
chosen does not distort unduly the  functioning of the  internal market.  In particular,
Member States can  grant public service compensations  which are  necessary  for the
functioning of the service of general economic interest. State aid rules only prohibit
over-compensation.  In  order  to  increase  legal  certainty  and  transparency  in  the
application  of  state  aid  rules  to  services  of  general  interest  the  Commission
announced in its Report to the Laeken European Council its intention to establish a
Community framework for state aid granted for services of general eonomic interest,
and then, if and to the extent justified by the experiencegained with the application of
this framework, adopt a block exemption regulation in the area of services of general

49

See  Liberalisation  of  Network  Industries,  Economic  implications  and  main  policy  issues,
European Economy No. 4, 1999

26

                                                
89. 

90. 

91. 

92. 

economic interest. Work on guidelines on the application of state aid rules to services
of general economic interest is currently underway50.

In some cases, sector-specific legislation lays down specific rules for the financing of
the  extra  cost  of  public  service  obligations.  For  electronic  communications,  sector-
specific  regulation  requires  Member  States  to  withdraw  all  special  or  exclusive
rights, but it provides for the possibility of creating a fund to cover the extra cost of
providing a universal service on the basis of contributions from market participants51.
As regards the postal service, the postal directive allows a defined postal monopoly
to  be  maintained  and  a  universal  service  fund  to  be  created  for  the  purposes  of
financing the postal service52. In air transport, Member States can grant a temporary
exclusive licence on the basis of an open tender in order to ensure a regular service
on certain routes for which the market does not offer an adequate service53. In public
transport, the Community has laid down rules for the calculation of compensation54.

Internal  market,  competition  and  State  aid  rules  aim  to  ensure  that  any  financial
support granted to providers of services of general economic interest does not distort
competition  and  the  functioning  of  the  internal  market.  Also,  the  sector-specific
legislation in place seeks only to ensure that the financing mechanisms put in place
by the Member States are least distortive of competition and facilitate market entry.
As  a  consequence,  Community  legislation  allows  in  particular  for  selective  market
entry.

Other relevant criteria for selecting a financing mechanism, such as its efficiency or
its  redistributive  effects,  are  currently  not  taken  into  account  in  Community
legislation.  Neither  have  the  effects  of  the  selected  mechanism  on  the  long-term
investment of providers of services and infrastructure and on security of supply been
specifically considered.

At this stage, the Commission considers it appropriate to launch a debate on whether
these criteria could lead to the conclusion that specific financing mechanisms should
be preferred and whether the Community should take measures in favour of specific
financing mechanisms.

93. 

The following questions are submitted for discussion:

50

51

52

53

54

Report on the state-of-play in the work on the guidelines for state aid and services of general
economic interest, 13.12.2002
Article 13 of Directive 2002/22/EC of the European Parliament and of the Council of 7 March
2002  on  universal  service  and  users’  rights  relating  to  electronic  communications  networks
and services (Universal Service Directive), OJ L 108, 24.4.2002, p. 51
Articles 7 and 9(4) of Directive 97/67/EC of the European Parliament and of the Council of 15
December 1997 on common rules for the development of the internal market of Community
postal  services  and  the  improvement  of  quality  of  service,  OJ  L  15  ,  21.1.1998,  p.14,  as
amended by EP and Council Directive 2002/39/EC, OJ L 176, 5.7.2002, p. 21
Article 4 of Council Regulation (EEC) No 2408/92 of 23 July 1992 on access for Community
air carriers to intra-Community air routes, OJ L 240, 24.8.1992, p. 8
Council  Regulation  (EEC)  No  1169/69  of  26  June  1969  on  action  by  the  Member  States
concerning the obligations inherent in the concept of a public service in transport by rail, road
and inland waterway, OJ L 156, 28.6.1969, p. 1 as last amended by Council Regulation (EEC)
1893/91, OJ L 169, 29.6.1991, p. 1

27

                                                
(21) Are you aware of any cases in which Community law, and in particular the application of
State  aid  rules,  has  impeded  the  financing  of  services  of  general  interest  or  led  to
inefficient choices?

(22) Should a specific way of financing be preferred from the point of view of transparency,
accountability,  efficiency,  redistributive  effects  or  competition?  If  so,  should  the
Community take appropriate measures?

(23) Are  there  sectors  and/or  circumstances  in  which  market  entry  in  the  form  of  «cream-

skimming» may be inefficient and contrary to the public interest?

(24) Should  the  consequences  and  criteria  of  solidarity-based  financing  be  clarified  at

Community level?

4.3.

94. 

Evaluation of services of general interest

The  changing  regulatory  and  technological  environment  as  well  as  the  growing
impact  of  Community  policies  on  services  of  general  interest  has  highlighted  the
need for a proper evaluation of the performance of these services at  Community as
well  as  at  national  level.  The  evaluation  of  these  services  of  general  interest  is
important because of the significance of these services for the economy  as  a whole
and  for  everyone’s  quality  of  life.  It  is  necessary  in  order  to  monitor  whether  the
general interest tasks assigned by public authorities to the providers of such services
are  effectively  achieved.  A  comprehensive  evaluation  increases  transparency  and
provides  the  basis  for  better  policy  choices  and  an  informed  democratic  debate.  It
allows  to  assess  both  the  economic  efficiency  of  a  service  and  the  effective
achievement  of  other  public  policy  objectives  pursued  by  public  authorities.  At
Community level the evaluation of services of general economic interest is essential
to  ensure  that  objectives  of  social  and  terrotorial  cohesion  and  of  environment
protection  are  attained.  Performance  evaluation  can  also  assist  in  exchanging  best
practices  across  borders  and  between  economic  sectors.  It  is  a  central  element  of
good European governance55.

95. 

In  recent  years,  the  Commission  has  increased  its  evaluation  efforts  in  the  area  of
services  of  general  interest  and  developed  an  evaluation  strategy  that  is  based  on
three strands of assessments:56

(cid:1)  The Commission conducts regular evaluations of the network industries that have

been liberalised at Community level (sectoral evaluation).

(cid:1)  In  addition, the  Commission started in 2001  to  perform  an  annual  cross-sectoral

evaluation of the network industries (horizontal evaluation).

55

56

Commission White Paper on European Governance, COM(2001)428, 25.7.2001; Report to the
Laeken European Council, COM(2001)598, 17.10.2001
Report to the Laeken European Council,  COM(2001)598,  17.10.2001;  Communication from
the Commission: A Methodological Note for the Horizontal Evaluation of Services of General
Economic Interest, COM(2002)331 final, 18.6.2002

28

                                                
96. 

97. 

98. 

(cid:1)  Thirdly, the Commission carries out regular consumer satisfaction surveys in the
area  of  services  of  general  economic  interest  (e.g.  Eurobarometer  opinion  polls
and qualitative surveys).

The  evaluation  of  services  of  general  interest  is  a  complex  task.  A  comprehensive
evaluation  must  be  multidisciplinary  and  multidimensional  and  include  political,
economic,  social  and  environmental  aspects,  including  externalities.  It  should  also
take  account  of  the  interests  and  views  of  all  interested  parties.  It  is  important  to
know  what  users  and  consumers  (including  vulnerable  and  marginalised  groups),
social partners and other parties consider a good performance for these services and
their expectations for the future. For these reasons, this Green Paper aims at opening
a discussion on the criteria that, in the view of interested parties, should be used for
evaluation purposes. In the context of its horizontal evaluation, the Commission has
submitted  a  methodology  for  the  evaluation  of  services  of  general  interest57.  It  has
stressed the need to gradually develop and improve its regular horizontal evaluations
over the coming  years. The huge disparity in data  availability  and  data  quality  is  a
main  stumbling  block  for  a  comprehensive  evaluation  and  ways  to  improve  data
quality and availability should be examined58.

the
At  Community  level,  the  Commission  produces  evaluation  reports  on 
performance of network industries providing services of general economic interest. It
submits its results to the European Parliament, the Council, the European Economic
and  Social  Committee,  the  Committee  of  the  Regions  and  to  all  interested  parties,
with a view to informing the widest possible audience. However, the Commission’s
resources available for evaluation are limited, and the Commission cannot present a
consolidated  view  representing  all  the,  often  diverging,  views  of  the  different
interested  parties.  It  should  therefore  be  discussed  how  the  evaluation  should  be
performed at Community level and how responsibilities should be shared.

Furthermore,  performance  evaluation  at  Community  level  is  currently  limited
essentially  to  the  network  industries  covered  by  sector-specific  Community
legislation. Other sectors are not included in the Commission’s evaluation strategy. It
could be considered whether there is a need to extend Community evaluation beyond
its current scope without infringing the principle of subsidiarity.

99. 

The following questions are submitted for discussion:

(25)  How  should  the  evaluation  of  the  performance  of  services  of  general  interest  be
organised at Community level? Which institutional arrangements should be chosen?

(26)  Which aspects should be covered by Community evaluation processes? What should be
the  criteria  for  Community  evaluations?  Which  services  of  general  interest  should  be
included in an evaluation at Community level?

(27)  How could citizens be involved in the evaluation? Are there examples of good practice?

(28) How  can  we  improve  the  quality  of  data  for  evaluations?  In  particular,  to  what  extent

should operators be compelled to release data?

57

58

Communication from the Commission: A Methodological Note for the Horizontal Evaluation
of Services of General Economic Interest, COM(2002)331 final, 18.6.2002
See Annex for detail

29

                                                
5.

SERVICES OF GENERAL INTEREST AND THE CHALLENGE OF GLOBALISATION

5.1.

Trade policy

100. 

101. 

102. 

International  trade  agreements,  within  the  framework  of 
the  World  Trade
Organisation (WTO) and often at a bilateral level, include provisions with regard to
services that are not provided in the exercise of governmental authority (i.e. that are
supplied  on  a  commercial  basis  or  in  competition  with  one  or  more  service
suppliers).  Such  provisions  concern  the  exchange  of  services  and  the  conditions
under  which  service  suppliers  can  operate  in  foreign  markets.  Under  the  General
Agreement on Trade in Services (GATS) each member freely determines the service
sectors that it is prepared to open to foreign service providers (the so-called “bottom-
up-approach”)  and  under  what  conditions.  Furthermore,  the  GATS  explicitly
recognises  the  WTO  members’  sovereign  right  to  regulate  economic  and  non-
economic  activities  within  their  terrotory  in  pursuance  of  public  policy  objectives.
With  regard  to  the  services  covered  by  these  agreements,  each  contracting  party
maintains the right to determine the specific obligations that can be imposed on the
operators.  Members  fully  retain  the  possibility  of  excluding  from  its  GATS
commitments sectors where it believes an opening to competition could threaten for
example  the  availability,  quality  and  affordability  of  such  services.  Thus,  members
can maintain the service as  a (public or  private) monopoly.  The negotiations in the
WTO  framework  has  no  direct  or  indirect  influence  on  the  decisions  of  Member
States to privatise certain undertakings.

In  this  context,  the  European  Community  has  freely  decided  to  undertake  binding
commitments  in  respect  of  certain  services  of  general  interest  already  open  to
competition within the internal market. Through these commitments, foreign services
suppliers are granted market access to the European Community under the same, or
sometimes  more  restrictive,  conditions  as  any  European  service  supplier.
Commitments undertaken in the WTO multilateral context (GATS commitments) or
in  a  bilateral  context  have  so  far  had  no  impact  on  the  way  in  which  services  of
general interest are regulated in Community law. They have also  had  no impact  on
the way in which they are financed. Indeed, the most far-reaching obligations in this
respect have been assumed at bilateral level and are limited to territorial extension of
the Community State aid regime.

Further negotiations in the areas of liberalisation  of trade  in services,  as well as on
disciplines on subsidies related to trade in services, are under way within the context
of  the  Doha  Development  Agenda.  The  European  Community  is  also  negotiating
bilateral  trade  agreements  in  the  services  sector.  In  this  context,  as  in  the  past,  the
European Community approaches services of general interest with a view to ensuring
full  coherence  with  the  level  of  liberalisation  and  with  the  regulation  that  applies
within the internal market.

103. 

The following question is submitted for discussion:

(29) Is  there  any  specific  development  at  European  Community  internal  level  that  deserves
particular  attention when dealing with  services  of  general  interest  in  international  trade
negotiations? Please specify.

30

5.2.

Development and co-operation policy

104. 

105. 

The  main  objective  of  the  European  Community‘s  development  policy  is  the
reduction of poverty in the developing countries. Ensuring access to a minimum level
of  services  of  general  interest  is  an  essential  prerequisite  for  achieving  this  goal,
since  services  of  general  interest  not  only  satisfy  some  of  the  basic  human  needs,
they  also  provide  an  indispensable  platform  for  developing  the  economy  of  the
poorest countries.

Private investment in services of general interest can help to improve the provision of
essential  services  in  these  countries.  However,  market  opening  and  privatisation  in
developing countries can also give rise to legitimate concerns about governance and
regulation.  Therefore,  any  reform  should  take  account  of  the  need  for  an  adequate
regulatory and institutional framework and be based on a comprehensive assessment
of  its  impact  on  economic  growth,  employment,  service  delivery,  equitable  access,
environmental conditions and the national budget.

106. 

The following question is submitted for discussion:

(30) How can the Community best support and  promote investment in the essential services
needed in developing countries in the framework of its development co-operation policy?

6.

OPERATIONAL CONCLUSION

107. 

The Commission invites all interested parties to comment on the questions set out in
this  Green  Paper.  Replies  and  any  additional  comments  can  be  sent  by  mail  to  the
following address:

European Commission
Green Paper on Services of General Interest Consultation
BREY 7/342
B-1049 Brussels

or by email to the following address:

SGI-Consultation@cec.eu.int

Comments  should  be  sent  to  the  Commission  by  15  September  2003  at  the  latest.
Replies and comments should mention the number of the questions they are referring
to.  For  the  information  of  interested  parties,  the  Secretariat-General  of  the
Commission will put contributions received electronically, together with the sender’s
contact data, on the Green Paper website

http://europa.eu.int/comm/secretariat_general/services_general_interest/

provided the senders concerned have explicitly agreed to their publication.

108. 

Basing  itself  inter  alia  on  the  contributions  received,  the  Commission  intends  to
draw conclusions  in  the  autumn and, where  appropriate,  submit  concrete  initiatives
as a follow-up.

31

SUMMARY TABLE OF ALL QUESTIONS SUBMITTED FOR DISCUSSION

What kind of subsidiarity?

(1) 

(2) 

(3) 

(4) 

Should the development of high-quality services of general interest be included in the
objectives  of  the  Community?  Should  the  Community  be  given  additional  legal
powers in the area of services of general economic and non-economic interest?

Is there a need for clarifying how responsibilities are shared between the Community
level  and  administrations  in  the  Member  States?  Is  there  a  need  for  clarifying  the
concept of services without effect on trade between Member States? If so, how should
this be done?

Are there services (other than the large network industries mentioned in para. 32) for
which a Community regulatory framework should be established?

Should  the  institutional  framework  be  improved?  How  could  this  be  done?  What
should be the respective roles of competition and regulatory authorities? Is there a case
for  a  European  regulator  for  each  regulated  industry  or  for  Europe-wide  structured
networks of national regulators?

Sector-specific legislation and general legal framework

(5) 

Is  a  general  Community  framework  for  services  of  general  interest  desirable?  What
would be its added value compared to existing sectoral legislation? Which sectors and
which  issues  and  rights  should  be  covered?  Which  instrument  should  be  used  (e.g.
directive,  regulation,  recommendation,  communication,  guidelines,  inter-institutional
agreement)?

(6)  What  has  been  the  impact  of  sector-specific  regulation  so  far?  Has  it  led  to  any

incoherence?

Economic and non-economic services

(7) 

Is it necessary to further specify the criteria used to determine whether a service is of
an  economic  or  a  non-economic  nature?  Should  the  situation  of  non-for-profit
organisations  and  of  organisations  performing  largely  social  functions  be  further
clarified?

(8)  What  should  be  the  Community’s  role  regarding  non-economic  services  of  general

interest?

32

A common set of obligations

(9) 

Are there other requirements that should be included in a common concept of services
of general interest? How effective are the existing requirements effective in terms of
achieving the objectives of social and territorial cohesion?

(10)  Should  all  or  some  of  these  requirements  be  extended  to  services  to  which  they

currently do not apply?

(11)  What  aspects  of  the  regulation  of  these  requirements  should  be  dealt  with  at

Community level and which aspects left to the Member States?

(12)  Have these requirements been effectively implemented in the areas where they apply?

(13)  Should some or all of these requirements also be applied to services of general interest

of a non-economic nature?

Sector-specific Obligations

(14)  Which  types  of  services  of  general  interest  could  give  rise  to  security  of  supply

concerns? Should the Community take additional measures?

(15)  Should additional measures be taken at Community level to  improve network access
and  interconnectivity?  In  which  areas?  What  measures  should  be  envisaged,  in
particular with regard to cross-border services?

(16)  Which  other  sector-specific  public  service  obligations  should  be  taken  into

consideration?

(17)  Should  the  possibility  to  take  concrete  measures  in  order  to  protect  pluralism  be  re-

considered at Community level? What measures could be envisaged?

Definition of Obligations and Choice of Organisation

(18)  Are you aware of any cases in which Community rules have unduly restricted the way
services of  general interest are organised or public  service  obligations  are  defined  at
national, regional or local level? Are you aware of any cases in which the way services
of general interest are organised or public service obligations are defined at national,
regional or local level constitutes a disproportionate obstacle to the completion of the
internal market?

(19)  Should  service-specific  public  service  obligations  be  harmonised  further  at

Community level? For which services?

(20)  Should there be an enhanced exchange of best practice and benchmarking on questions
concerning  the  organisation  of  services  of  general  interest  across  the  Union?  Who
should be involved and which sectors should be addressed?

Financing

(21)  Are you aware of any cases in which Community law, and in particular the application
of State aid rules, has  impeded the  financing  of  services of  general interest  or  led to
inefficient choices?

33

(22)  Should  a  specific  way  of  financing  be  preferred  from  the  point  of  view  of
transparency,  accountability,  efficiency,  redistributive  effects  or  competition?  If  so,
should the Community take appropriate measures?

(23)  Are there sectors and/or circumstances in which market entry in the form of «cream-

skimming» may be inefficient and contrary to the public interest?

(24)  Should  the  consequences  and  criteria  of  solidarity-based  financing  be  clarified  at

Community level?

Evaluation

(25)  How  should  the  evaluation  of  the  performance  of  services  of  general  interest  be

organised at Community level? Which institutional arrangements should be chosen?

(26)  Which aspects should be covered by Community evaluation  processes? What  should
be the criteria for Community evaluations? Which services of general interest should
be included in an evaluation at Community level?

(27)  How  could  citizens  be  involved  in  the  evaluation?  Are  there  examples  of  good

practice?

(28)  How can we improve the quality of data for evaluations? In particular, to what extent

should operators be compelled to release data?

Trade Policy

(29) 

Is there any specific development at European Community internal level that deserves
particular attention when dealing with services of general interest in international trade
negotiations? Please specify.

Development Co-operation

(30)  How can the Community best support and promote investment in the essential services
needed  in  developing  countries  in  the  framework  of  its  development  co-operation
policy?

34

ANNEX
Public service obligations and instruments of Community policy in the area of services
of general economic interest

This Annex examines, in more detail, a set of public service obligations that can be derived
from existing sector-specific  Community  legislation and that  can characterise  a  Community
concept of services of general economic interest (Section I). It also discusses, in more detail,
the policy instruments available in order to  ensure that these public service obligations are
complied  with  and  that  the  public  interest  objectives  pursued  with  these  obligations  are
effectively achieved (Section II).

I.

1. 

1.

1.1

2. 

3. 

1

PUBLIC SERVICE OBLIGATIONS IN COMMUNITY LEGISLATION

Existing  Community  legislation  on  services  of  general  economic  interest  is  sector-
specific. However, it contains a number of common elements that can be drawn on to
define  a  Community  concept  of  services  of  general  economic  interest.  These
elements  include  in  particular:  universal  service,  continuity,  quality  of  service,
affordability,  as  well  as  user  and  consumer  protection  (see  point  1  below).  These
common  elements  identify  Community  values  and  objectives.  They  have  been
transposed  into  obligations  in  the  pertinent  legislations.  They  can  also  be
complemented  by  more  specific  obligations  depending  on  the  characteristics  of  the
sector concerned (see point 2 below).

A common set of obligations

Universal service

The  concept  of  universal  service  refers  to  a  set  of  general  interest  requirements
ensuring  that  certain  services  are  made  available  at  a  specified  quality  to  all
consumers  and  users  throughout  the  territory  of  a  Member  State,  independently  of
geographical  location,  and,  in  the  light  of  specific  national  conditions,  at  an
affordable  price1.  It  has  been  developed  specifically  for  some  of  the  network
industries  (e.g.  telecommunications,  electricity,  postal  services).  The  concept
establishes  the  right  of  everyone  to  access  certain  services  considered  as  essential
and  imposes  obligations  on  industries  to  provide  a  defined  service  at  specified
conditions,  including  complete  territorial  coverage.  In  a  liberalised  environment  a
universal  service  obligation  guarantees  that  all  persons  within  the  European  Union
have  access  to  the  service  at  an  affordable  price  and  that  the  service  quality  is
maintained and, where necessary, improved.

Universal service is a dynamic concept. It ensures that general interest requirements
can take account of political, social, economic, and technological developments and
it  allows,  where  necessary,  for  regular  adjustment  of  these  requirements  to  the
evolving needs of users and consumers.

Cf. Article 3(1) of Directive 2002/22/EC of the European Parliament and of the Council of 7
March  2002  on  universal  service  and  users'  rights  relating  to  electronic  communications
networks and services (Universal Service Directive), OJ L 108, 24.4.2002, p. 51

35

                                                
4. 

5. 

6. 

7. 

8. 

2

It is also a flexible concept that is fully compatible with the principle of subsidiarity.
Where the basic principles of universal service are defined at Community level, the
implementation of these  principles  can  be  left  to  the  Member  States,  thus  allowing
account  to  be  taken  of  different  traditions  and  specific  national  or  regional
circumstances.  Furthermore,  the  concept  of  universal  service  can  apply  to  different
market structures and can therefore be used to regulate services in different stages of
market opening.

The concept of universal service refers to the content of the service and its method of
provision.  The  content  of  the  service  is  defined  in  a  dynamic  way.  Its  definition
covers  the  scope  of  the  services,  and  their  characteristics  in  term  of  price  (which
should  be  affordable)  and  quality  (which  should  be  satisfactory).  As  regards  the
method of provision, a Member  State does not have to intervene or  take  additional
measures  if  it  finds  that  the  provision  of  universal  service  is  ensured  by  the  mere
functioning  of  the  market,  i.e.  affordable  commercial  offers  are  available  for
everyone. However, if Member States find that the market alone does not ensure the
provision  of  universal  service,  Community  law  allows  Member  States  to  designate
one  or  more  universal  service  providers  and  possibly  compensate  the  net  cost  of
providing universal service in order to minimise market distortion.

Existing  sector-specific  directives  defining  universal  service  contain  a  number  of
common elements: a set of universal service requirements, principles on the selection
of the universal service provider, rules on the compensation of the cost of provision
of universal service, the right of Member States to introduce additional requirements,
plus rules on an independent regulator2.

Existing secondary legislation is based on the following principles. If Member States
find that market mechanisms alone are not sufficient to provide a universal service,
they  should  intervene  to  ensure  that  it  is  provided.  Any  intervention  should  be
objective,  transparent,  non-discriminatory  and  proportionate.  It  should  entail  no
distortion of competition, in the sense that it must not create discrimination between
undertakings  active  on  the  same  relevant  market,  and  it  should  minimise  market
distortion, in the sense that the service should be provided in the most cost-effective
manner and any compensation should be recovered by contributions that are spread
as  broadly  as  possible.  These  principles  will  ensure  that  public  intervention  is
transparent and efficient, thereby increasing the rule of law (democratic dimension)
and overall welfare (economic dimension).

Furthermore,  in  order  to  ensure  the  effectiveness  of  universal  service,  the  rules  on
universal service should be complemented by a number of user and consumer rights.
These  include  physical  access  regardless  of  disability  or  age,  transparency  and  full
information  on  tariffs,  terms  and  conditions  of  contracts,  quality  performance
indicators  and  customer  satisfaction  indexes,  complaint  handling  and  dispute
settlement mechanisms.

Cf.  Directive  2002/22/EC,  OJ  L  108,  24.4.2002,  p.  51;  Directive  97/67/EC  of  the  European
Parliament and of the Council of 15 December 1997 on common rules for the development of
the internal market of Community postal services and the improvement of quality of service,
OJ L 15 , 21.1.1998, p. 14; Amended Proposal for a Directive of the European Parliament and
of the Council amending Directives 92/96/EC and 98/30/EC concerning rules for the internal
markets in electricity and natural gas, OJ C 227 E, 24.9.2002, p. 393

36

                                                
9. 

10. 

1.2

11. 

12. 

1.3.

13. 

3

4

Universal  service  requirements  may  entail  a  substantial  cost.  When  considering
whether such obligations should be maintained or extended, it is therefore important
to consider the alternative uses to which the resources concerned could be put.

During  the  last  two  decades,  the  concept  of  universal  service  has  developed  into  a
major  and  indispensable  pillar  of  the  Community’s  policy  on  services  of  general
economic  interest.  It  has  allowed  public  interest  requirements  to  be  addressed
regarding  in  particular  economic  efficiency,  technological  progress,  environmental
protection,  transparency  and  accountability,  consumer  and  user  rights,  and  specific
measures regarding disability, age or education. Also, the concept has proven to be
fully  in  line  with  the  principle  of  subsidiarity.  Furthermore,  application  of  the
concept  can  be  based  on  extended  participation  of  interested  parties  (e.g.  industry,
small  and  medium-sized  enterprises,  consumers,  and  other  representative  social
groups). This process may include periodic evaluation of subsequent developments.

Continuity

A  number  of  services  of  general  interest  are  characterised  by  a  continuity
requirement,  i.e.  the  provider  of  the  service  is  obliged  to  ensure  that  the  service  is
provided  without  interruption.  Continuity  is  sometimes  not  seen  as  an  independent
requirement, but defined as part of  a  universal  service  obligation.  As  regards  some
services,  uninterrupted  provision  may  already  be  in  the  commercial  interest  of  the
provider  and  it  might  therefore  not  be  necessary  to  impose  a  legal  continuity
requirement on the operator. At national level, the continuity requirement obviously
needs  to  be  reconciled  with  employees’  right  to  strike  and  with  the  requirement  to
respect the rule of law.

The  requirement  of  ensuring  a  continuous  service  is  not  consistently  addressed  in
sector-specific  Community  legislation.  In  some  cases,  sector-specific  Community
legislation explicitly sets out a continuity obligation. For instance, Article3 (1) of the
postal  directive  (97/67/EC)  obliges  Member  States  to  «ensure  the  permanent
provision  of  a  postal  service»3.  In  other  cases,  sector-specific  regulation  does  not
contain  a  continuity  requirement,  but  it  explicitly  authorises  Member  States  to
impose such an obligation on service providers. Art. 3(2) of the electricity directive4
provides  that  «Member  States  may  impose  on  undertakings  operating  in  the
electricity sector, in the general economic interest, public service obligations which
may  relate  to  security,  including  …  regularity…  of  supplies…  .  Such  obligations
must  be  clearly  defined,  transparent,  non-discriminatory  and  verifiable;  they,  and
any revision thereof, shall be published and notified to the Commission by Member
States without delay...».

Quality of service

The  definition,  monitoring  and  enforcement  of  quality  requirements  by  public
authorities has become a key element in the regulation of services of general interest.
Achieving a socially acceptable level of service quality often justifies public service

Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on
common rules for the development of the internal market of Community postal services and
the improvement of quality of service, OJ L 15 , 21.1.1998, p. 14
Directive  96/92/EC  of  the  European  Parliament  and  of  the  Council  of  19  December  1996
concerning common rules for the internal market in electricity, OJ L 27, 30.1.1997, p. 20

37

                                                
obligations. In some cases, quality is seen as being so important that it is the rationale
behind  the  provision  of  the  public  service  obligation  and  it  is  the  subject  of  close
supervision and regulation. In areas in which the provision of a service is entrusted to
a  third  party,  the  establishment  of  quality  standards  by  public  authorities  is  often
indispensable  in  order  to  ensure  that  public  policy  objectives  are  met.  Also  where
services  are  provided  by  public  administrations  the  definition  and  monitoring  of
quality requirements may help to increase transparency and accountability. There is,
however,  no  agreement  on  a  general  definition  of  quality,  except  that  user  and
consumer  protection  and  safety  should  be  part  of  it.  Environmental  protection  and
sustainable  development  are  also  being  taken  increasingly  into  account  when
defining  service  quality  criteria.  Qualitative  objectives  will  vary  across  sectors,
depending on their characteristics.

In  the  sectors  which  were  opened  to  competition  at  Community  level,  the
Community did not rely on market forces alone to maintain and develop the quality
of services.  In  some cases, quality standards  are  defined  in  Community  legislation.
They  include,  for  instance,  safety  regulations,  the  correctness  and  transparency  of
billing,  territorial  coverage,  and  protection  against  disconnection.  In  other  cases,
Member  States  are  authorised  or  required  to  set  quality  standards.  In  some  cases,
Member  States  are  also  required  to  monitor  and  enforce  compliance  with  quality
standards  and  to  ensure  the  publication  of  information  on  quality  standards  and
actual  performance  of  operators.  The  most  developed  regulation  of  quality  at
Community level can be found in the legislation on postal services and on electronic
communications services.

In  addition,  the  Commission  has  developed  non-regulatory  measures  to  promote
quality  in  services  of  general  economic  interest  –  including  financial  instruments,
voluntary  European  standards,  and  exchange  of  good  practice.  For  instance,  in  the
electricity and gas sectors, the Community promotes voluntary co-operation between
regulators.

In discussing the question of quality of service, it is important to bear  in  mind that
there  is  a  trade-off  between  the  quality  and  the  cost  of  a  service.  It  would  be
inefficient,  for  example,  for  a  public  authority  to  impose  a  costly  obligation  to
provide  a  very  high  quality  of  service  when  consumers  and  users  would  prefer  a
lower but satisfactory quality at a lower price. Furthermore, the imposition of quality
standards  might  be  unnecessary  in  markets  where  there  is  effective  competition,
provided  that  consumers  and  users  are  able  to  make  an  informed  choice  between
competing service providers. This emphasises the role for regulators in ensuring that
adequate and accurate information is available to users and consumers.

Affordability

The  concept  of  affordability  was  developed  within 
regulation  of
telecommunications services. Subsequently, it was also introduced into the regulation
of postal services. It requires a service of general economic interest to be offered at
an  affordable  price  in  order  to  be  accessible  for  all  persons.  Application  of  the
principle  of  affordability  helps  to  achieve  economic  and  social  cohesion  in  the
European Union.

the 

14. 

15. 

16. 

1.4

17. 

18. 

Affordability should not be confused  with, and does not necessarily  equate to,  cost
orientation. Indeed, the best the market could offer is a price oriented towards cost.

38

But if this cost is not judged to be affordable, the State may choose to step in ensure
that  everybody  has  affordable  access.  In  some  cases,  affordability  can  imply  that  a
service is offered free to everyone  or to specific  groups  of persons. Member States
may, in the light of national conditions, require that designated undertakings provide
tariff options  or packages to  persons that  depart  from  those  provided  under  normal
commercial  conditions,  in  particular  to  ensure  that  those  on  low  incomes  or  with
special  social  needs  are  not  prevented  from  accessing  or  using  a  service5.  The
concept  of  affordability  appears  to  be  narrower  than  the  concept  of  “reasonable
prices” that is currently discussed in the  context of the proposed amendment of  the
internal  market  directives  for  gas  and  electricity.  While  affordability  is  a  criterion
that  takes  account  mainly  of  the  customer  perspective,  the  principle  of  “reasonable
pricing” suggests to take account also of other elements.

The sector-specific legislation in place does not specify the  criteria for  determining
affordable  prices,  leaving  it  to  the  Member  States  to  verify  whether  prices  are
affordable. Some of the criteria for determining affordability must be defined by the
Member States. These criteria could be linked, for example, to the penetration rate or
to the price of a basket of basic services related to the disposable income of specific
categories of customers. Finally, once the affordable level has been set, the Member
States should ensure that this level is effectively offered, by putting in place a price
control  mechanism  («price  cap»,  geographical  averaging)  and/or  by  distributing
subsidies to the consumers and users concerned.

Therefore, it might be considered whether this concept should be developed further
at Community level. Furthermore, it could be discussed whether the concept should
be extended to other services of general economic interest.

User and consumer protection

EU  consumer  policy  is  an  integral  part  of  the  political  approach  underpinning  the
European model of society. Its overarching aim is to ensure that the internal market
delivers progressively better outcomes for consumers and that market failures to the
detriment  of  consumers  are  remedied.  This 
the  market
transparency and the fairness of commercial practices. In services of general interest,
horizontal user and consumer protection rules apply as they do in other sectors of the
economy.  In  addition,  because  of  the  particular  economic  and  social  importance  of
these  services,  specific  measures  have  been  adopted  in  sectoral  Community
legislation to address the specific concerns and needs of  consumers and businesses.
Consumer  and  user  rights  are  set  out  in  sector-specific  legislation  on  electronic
communications,  postal 
transport  and
broadcasting.

includes  ensuring 

(electricity,  gas), 

services,  energy 

The  Commission  Communication  of  September  20006  sets  out  a  number  of
principles that can help to define the requirements of citizens for services of general
economic  interest.  These  principles  include  good  quality  of  service,  high  levels  of
health  protection  and  physical  safety  of  services,  transparency  (e.g.  on  tariffs,
contracts, choice and  financing  of  providers),  choice  of  service,  choice  of  supplier,
effective competition between suppliers,  existence of regulatory bodies,  availability

19. 

20. 

1.5

21. 

22. 

5

6

See Article 9(2) of Directive 2002/22/EC
OJ C 17, 19.1.2001, p. 4

39

                                                
of  redress  mechanisms,  representation  and  active  participation  of  users  and
consumers in the definition of services, and choice of forms of payment.

23. 

The  Communication  highlighted  that  a  guarantee  of  universal  access,  continuity,
high quality and affordability form key elements of a consumer policy in the area of
services  of  general  economic  interest.  It  also  stressed  the  need  to  address  citizens’
concerns that are of a wider nature, such as a high level of environment protection;
specific needs of  certain  categories  of  the  population,  such  as  the  handicapped  and
those  on  low  incomes;  and  complete  territorial  coverage  of  essential  services  in
remote or inaccessible areas.

24. 

In  addition,  services  of  general  interest  should  be  covered  by  the  following
user/consumer rights and principles:

(cid:1)  Transparency  and  full  information:  This  must  include  clear  and  comparable
information on tariffs; terms and conditions of contracts; complaint handling; and
dispute settlement mechanisms.

(cid:1)  Health and Safety: This includes the need to guarantee the highest level possible

of health protection and the physical safety of services.

(cid:1)  Independent regulation: Regulatory bodies that are independent of industry, with
adequate  resources,  powers  of  sanction,  and  clear  duties  with  regard  to  the
protection of user and consumer interests.

(cid:1)  Representation and active participation: Provisions should be made to  allow for
the systematic consultation of consumer representatives to give consumers a voice
in decision making.

(cid:1)  Redress: Fast  and  affordable  complaint-handling  systems  and  alternative  dispute

resolution mechanisms.

25. 

On  the  basis  of  the  user  and  consumer  protection  principles  that  were  identified  in
the Communication, a set of rights for  users  and consumers as  regards a service of
general interest could be based on the following principles:

(cid:1)  access (complete geographical coverage, including cross-border access, access for

persons with reduced mobility and for the disabled);

(cid:1)  affordability (including special schemes for low income people);

(cid:1)  safety (safe and reliable service, high level of public health);

(cid:1)  quality  (including  reliability  and  continuity  of  services  and  compensation

mechanisms in case of shortfalls);

(cid:1)  choice  (widest  possible  choice  of  services  and,  where  appropriate,  choice  of
supplier  and  effective  competition  between  suppliers,  right  of  switching
suppliers);

(cid:1)  full transparency and information from providers (e.g. on tariffs, bills, terms and

conditions of contracts);

40

(cid:1)  right of access to the information collected by regulators (data on service quality,

choice and financing of providers, complaint handling);

(cid:1)  security  and  reliability  (continuous  and  reliable  services,  including  protection

against disconnection);

(cid:1)  fairness (fair and genuine competition);

(cid:1)  independent regulation (with adequate powers of sanction, clear duties);

(cid:1)  representation and active participation of consumers and users (in the definition of

services, choice of forms of payment);

(cid:1)  redress  (availability  of  complaint  handling  and  dispute  settlement  mechanisms,

compensation schemes);

(cid:1)  evolutionary  clause  (user/consumer  rights  are  evolutionary,  in  accordance  with
changing user/consumer concerns and changes in the environment: economy, law,
technology);

(cid:1)  equal  access  and  treatment  for  users  and  consumers  when  using  cross-border

services within Member States.

Further specific obligations

Security of supply

The  need  to  ensure  continuous  and  sustainable  provision  of  services  of  general
economic  interest  calls  for  security  of  supply.  In  general,  the  development  of  the
internal  market  has  generated  a  considerable  increase  in  the  level  of  security  of
supply  of  products  and  services,  to  the  extent  that  the  markets  concerned  are
functioning competitively.

In the energy sector, in particular, the issue of supply security has been the subject of
a  broad  public  debate  at  Community  level,  based  on  a  Green  Paper  that  the
Commission  published  in  20017.  The  Green  Paper  aims  to  initiate  a  debate  with  a
view  to  defining  a  long-term  strategy  for  energy  supply  security  that  is  geared  to
ensuring the uninterrupted physical availability of energy products on the market, at
a  price  which  is  affordable  for  consumers  and  users,  while  taking  account  of  both
environmental concerns and sustainable development. The Commission reported on
the results of the public debate in a communication in June 20028. On the basis of the
consultation,  the  Commission  concluded  in  its  Report  that  it  was  necessary  to
improve  the  co-ordination  of  measures  to  ensure  security  of  supply  in  the  field  of
energy.  As  a  follow-up,  the  Commission  submitted,  in  September  2002,  two

2.

2.1.

26. 

27. 

7

8

Towards  a  European  strategy  for  the  security  of  Energy  supply,  Green  Paper,  COM(2000)
769, 29.11.2000
Final  Report  on  the  Green  Paper  «Towards  a  European  strategy  for  the  security  of  Energy
supply», COM(2002) 321, 29.6.2002

41

                                                
28. 

2.2.

29. 

30. 

(1) 

9

10

11

12

proposals  for  directives  which  will  help  to  improve  the  security  of  supply  of
petroleum products and of natural gas in the European Union9.

Some  services  of  general  interest  outside  the  energy  sector  may  also  give  rise  to
supply  security  concerns,  e.g.  because  of  the  risk  of  long-term  underinvestment  in
infrastructure or capacity. Yet, Community secondary legislation generally does not
address the issue. In the telecommunications sector the Commission has proposed a
comprehensive  strategy  to  ensure  the  security  of  electronic  communications
networks10. It may be useful to consider whether there are other sectors in which the
issue  of  supply  security  should  be  raised  specifically.  However,  any  assessment
should  take  into  account  that  specific  additional  measures  aimed  at  increasing  the
security  of  supply  usually  entail  an  additional  economic  cost.  For  any  action
proposed  to  increase  security  of  supply  therefore  needs  to  ensure  that  the  ensuing
cost is not greater than the expected benefits11.

Network access and interconnectivity

In cases of natural monopolies with significant sunk costs, increasing returns of scale
and decreasing average cost, market entry is particularly difficult. Such services are
typically provided by means of stable and long-life technologies. In such cases, the
mere  application  of  common  rules  (e.g.  competition  or  public  procurement  rules)
may  prove  insufficient  and  thus  needs  to  be  complemented  by  more  intense  and
continuous sector-specific oversight (regulation), the minimum scope of which is in
many cases specified in Community legislation.

A number of the industries concerned are network industries in which fair access – in
particular  for  new  entrants  - 
to  existing  networks,  e.g.  electricity  grids,
telecommunication  networks  or  rails,  will  often  be  a  prerequisite  to  operating
successfully  in  downstream  markets12.  The  Community  has  addressed  the  issue  of
access in four main ways:

Retaining a vertically integrated incumbent with an exclusive right to operate services.
This  was  the  standard  form  of  organisation  of  these  industries  at  the  time  the
Community  came  into  being.  In  most  network  industries  it  has  now  been  prohibited
through  specific  Community  legislation.  It  is  currently  not  forbidden  for  water;  for
bus/metro/light rail; and for residual parts of the electricity, gas and postal industries.
In bus/metro/light rail there are no plans for public authorities to be obliged to separate
the  operation  of  infrastructure  from  the  provision  of  passenger  services,  and  public
authorities  will  be  able  to  continue  to  grant  exclusive  rights  to  operators,  provided
such rights are awarded following competition.

Proposal for a Directive of the EP and of the Council concerning the alignment of measures
with regard to  security  of supply  for  petroleum  products,  OJ  C  331  E  ,  31.12.2002,  p.  249;
proposal  for  a  Directive  of  the  EP  and  of  the  Council  concerning  measures  to  safeguard
security of natural gas supply, OJ C 331 E , 31.12.2002, p. 262
COM(2001) 298
Cf. Commission Staff Working Paper, Security of supply, The current situation at European
Union level, SEC(2002) 243, 28.2.2002
Furthermore,  many  markets  of  services  of  general  interest  were  only  recently  opened  to
competition and the incumbent providers often maintain a dominant position in their national
market for a certain period of time. A certain degree of regulatory oversight and control is thus
necessary to avoid abuse of market power

42

                                                
(2) 

(3) 

(4) 

31. 

Retaining  a  vertically  integrated  incumbent,  which  must  open  its  infrastructure  to
competitors.  Community  law  obliges  incumbents  to  give  competitors  access  to  the
local loop in the telecommunications sector, to the electricity grid and to gas pipelines
(both  at  transmission  and  distribution  level)  in  energy  markets,  and  to  national  rail
networks for international services.

Enabling vertically integrated competitors to create their own duplicate infrastructure.
This approach has been applied in telecommunications, postal services, aviation [and
broadcasting]13.

Separating the functions of operator and infrastructure manager. This is the approach
chosen so far for access to the electricity network and in rail14. The Commission has
now also proposed the same for gas and this proposal has been endorsed by the Energy
Council.

There  is  clearly  no  single  ideal  approach  to  the  regulation  of  network  industries.
Choices depend on the characteristics of each industry. The table below shows how
Community  regulation  approaches  access  regulation  differently  according  to  the
specificities of the industries concerned and the stage of the liberalisation process.

Electricity
and gas

National
rail

Bus/metro
/light rail

Air

Do  competitors  create
competing  infrastructure
networks?

Minimal  in
practice

No

In  a  few
places

Yes

Telecoms
(fixed line)

Post

Telecoms
(mobile
telephony)

Yes

Yes

but
Yes, 
limited 
to
to  certain
MS

Yes

Yes

Yes

Yes

Yes

Can 
managers 
operators?

infrastructure
be

also 

(new

No 
Directives
will
require
legal
separation)

No
(independe
nt
allocation
and
charging
function
required by
Communit
y law)

there  Community
Is 
legislation
secondary 
preventing 
Member
States  awarding  a  single
operator  an  exclusive
right?

Yes  (non-
households
by 
2004,
all
customers
by 2007)

Yes
(freight)

No

(exception:
internat-
ional  bus
services)

No
(domestic
passen-
ger)

Yes,
except  on
certain
routes
where
public
service
obligations
are

Yes

Yes

Yes/NO
(weight/pri
ce 
limit
applies)

13

14

In other sectors this is not a technically or economically attractive option
The infrastructure manager and operator can be part of the same legal entity, but the process
of allocating capacity on the network and charging for its use have to be performed by a body
which  is  legally,  organisationally  and  managerially  independendent  of  any  railway
undertaking (Cf. Directive No 2001/14/EC, OJ L 75, 15.3.2001, p. 29)

43

                                                
imposed

By 
open
competitio
n

Historical
operator
(Commissi
on  wants
change)

Historical
operator
(Commiss-
ion  wants
change)

n.a.

n.a.

Historical
operator

Yes

n.a.

Yes

No

Yes

No

If 
there  are  exclusive
rights, how  are  operators
usually selected?

Historical
operator

If  there  are  no  exclusive
rights,  are  there  capacity
limits  to  the  volume  of
services 
by
operators?

provided 

Yes,  in  the
case 
of
congested
networks

If  so,  how  is  capacity
allocated?

n.a.

Independ-
ent
infrastr-
ucture
manager/al
location
body

unbundled
transmissio
n 
system
operator
with  rules
on
congestion
manageme
nt 
for
electricity

n.a.

Grand-
father
rights;
informal
market
mechan-
isms; 
slot
coordinato
rs

What  do 
managers charge?

infrastructure

Cost
recovery

third

Cost
recovery

No 
party
access

Increment-
al 
cost
(narrow
definition)
+ 
State
subsidy

Cost
according
to  national
methodolo
gy 
plus
mark-up

Beauty
contests

Spectrum
auctions

Administra
tive
allocation

Service
providers
charged  on
a 
“retail
minus
basis”
(retail
price
minus 
certain
profit
margin)

a

Do  public  authorities  get
involved 
new
infrastructure
development?

in 

Normally
regulated

Regulated
and
subsidised

Regulated
and
subsidised

Commerci
ally driven

Commer-
cially
driven

Commer-
cially
driven

n.a.

For  cross-
border
services,
charges
must 
cost-
related

be

Commer-
cially
driven
outside  the
reserved
area

32. 

33. 

In cases of low sunk costs, the degree of public intervention can be lower. Short-term
contracts can be awarded to a single provider and quality evaluation by the customers
will be taken into account for assessing the provider’s performance.

Implementation of each of the  above-mentioned  approaches may  be  constrained  by
the public procurement directives or the general rules of the Treaty. The transparent
and non-discriminatory selection (whether by tender procedure or not) of the single
provider  –  who  will  benefit  from  exclusive/special  rights  -  ensures  that  the  highest
quality is delivered at the lowest net extra cost.

44

2.3

34. 

35. 

36. 

37. 

II.

1.

1.1.

38. 

15

16

17

Requirements aiming to ensure media pluralism

Since  the  mid-1980s  Member  states  have  introduced  legislation  regarding  media
ownership. The legislation put in place typically limits maximum holdings in media
companies  and  prevents  cumulative  control  or  participation  in  several  media
companies at the same time. The objective of these legislative measures is to protect
freedom of expression and to ensure that the media reflect a spectrum of views and
opinions that characterise a democratic society.

Whilst the protection of media pluralism is primarily a task for the Member States, it
is for the Community to take due account of this objective within the framework of
its  policies.  Currently,  secondary  Community  legislation  does  not  contain  any
provisions  directly  aiming  to  safeguard  the  pluralism  of  the  media.  However,
Community law  allows the application  of  national safeguards  with  regard  to  media
pluralism. This is highlighted, for example, in Art. 21(3) of the Merger Regulation,
which explicitly provides for the possibility of applying national measures protecting
the plurality of the media alongside Community merger rules or in Article 8 of the
Framework  Directive  on  electronic  communications15  which  provides  that  national
regulatory authorities may contribute to media pluralism.

Back  in  December  1992,  the  Commission  published  a  Green  Paper16  designed  to
launch a public debate on the need for Community action in this field. The options
considered  in  the  Commission  Green  Paper  included  taking  no  action,  proposing  a
recommendation  to  enhance  transparency  and  proposing  Community  legislation
harmonising national restrictions on media ownership. The debate did not allow clear
operational  conclusions  to  be  drawn  and  no  formal  specific  initiative  was  taken  by
the Commission.

Ten  years  later,  given  the  progressing  concentration  of  the  media  sector  and  the
proliferation of electronic media, the protection of media pluralism remains an issue,
including  within  the  context  of  the  Amsterdam  Protocol  on  public  broadcasting17.
Views  are  sought  as  to  whether  the  Commission  should  re-examine  the  need  for
Community action in this field in more detail.

POLICY INSTRUMENTS

Organisation of regulatory intervention

Community regulation and National Regulatory Authorities (NRA)

Community  and  Member  States’  primary  and  secondary  legislation  contains  the
basic rules applicable to markets of services of general interest. However, in order to
ensure that the objectives of regulation are achieved it would be insufficient to rely

Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a
common  regulatory  framework  for  electronic  communications  networks  and  services
(Framework Directive), OJ L 108, 24.4.2002, p. 33
Pluralism  and  Media  Concentration  in  the  Internal  Market,  An  Assessment  of  the  need  for
Community action, Commission Green Paper, COM(92) 480, 23.12.1992
Cf. the Protocol on the system of public broadcasting in the Member States annexed to the EC
Treaty by the Treaty of Amsterdam

45

                                                
exclusively  on  the  application  and  usual  mechanism  of  enforcement  of  legislation.
Furthermore, Community legislation may oblige Member States to designate one or
several  «national  regulatory  authorities»  to  be  responsible  for  carrying  out  these
regulatory  tasks.  Such  provisions  exist  for  electronic  communications,  postal
services, railway and aviation. For electricity and gas, the Commission suggested, in
its proposal of March 2001 and its amended proposals of June 2002, an obligation on
Member States to  «designate one or  more competent bodies as national regulatory
authorities».  As  regards  the  services  that  are  not  covered  by  a  comprehensive
regulatory  regime  at  Community  level,  some  Member  States  ,  such  as  the  United
Kingdom,  have  decided  to  create  a  regulatory  authority  in  the  field  of  water
(OFWAT).

The  detailed  institutional  arrangements  regarding  the  national  regulatory  authority
required in the relevant Community legislation are left to the discretion of Member
States. It can thus be an existing body or the ministry responsible for the sector, an
approach  adopted  by  a  number  of  Member  States.  However,  this  approach  has
proven  to  be  problematic  in  terms  of  the  independence  of  the  national  regulatory
authority  in  some  instances  where  Member  States  also  retain  ownership  or  control
over  companies  active  in  the  sector  concerned.  The  communications  framework
directive  requires  in  such  cases  «effective  structural  separation  of  the  regulatory
function from activities associated with ownership or control». The designation of a
Ministry as the predominant regulatory authority in charge of all regulatory decisions
remains the exception. The importance as well as ongoing and complex nature of the
regulatory tasks involved often requires the expertise and independence of a sector-
specific regulatory body18. Nearly all Member States have set up such a body for the
sectors  concerned,  including  electricity  and  gas,  for  which  current  Community
legislation does not yet require the designation of a national regulatory authority.

It  should,  however,  be  noted  that  even  where  a  sector-specific  regulatory  authority
exists, the government – i.e. the competent Ministry – often retains responsibility for
certain  regulatory  decisions.  A  situation  where  the  sector-specific  regulator  is
responsible  for  all  regulatory  issues  is  currently  the  exception.  Such  regulators  are
most prevalent in communications and, to a lesser extent, in energy or post, whilst in
aviation and railways responsibilities are usually shared between the ministry and the
civil  aviation  or  railway  agencies.  In  the  water  sector,  OFWAT  in  the  UK  has  the
power  to  regulate  prices  and  the  level  of  service  to  be  provided,  whilst  the  water
agencies in France could be considered as environmental regulators, given that they
collect environmental charges.

39. 

40. 

41. 

The key characteristic of a sector-specific regulator is its independence from market
operators in the sector concerned. This requirement is essential to avoid conflicts of

18

A  definition  of  a  sector-specific  regulatory  authority  is  contained  in  Commission  Decision
2002/627/EC  of  29  July  2002  establishing  the  European  Regulators  Group  for  Electronic
Communications  Networks  and  Services,  OJ  L  200/38,  30.7.2002:  «For  the  purpose  of  this
Decision:  'relevant  national  regulatory  authority'  means  the  public  authority  established  in
each Member State to oversee the day-to-day interpretation and applications of the provisions
of  the  Directives relating to  electronic  communications  networks  and  services  as  defined  in
the Framework Directive»

46

                                                
42. 

43. 

44. 

45. 

46. 

interest and to ensure the impartiality of the regulator19 and is therefore stipulated in
Community legislation whenever the designation of a national regulatory authority is
mandatory.  More  specific  rules  are  in  place  in  Member  States  to  ensure  this
independence,  e.g.  regulator  staff  are  not  permitted  to  hold  shares  of  companies  in
the sector.

Sector-specific  regulators  also  have  a  high  degree  of  independence  from  the
government.  In most cases,  the  government appoints  the Head  and  the members  of
the  regulatory  authority  and  determines  its  general  policy  objectives20.  However,
regulatory  authorities  are  normally  not  subject  to  instructions  from  the  government
on individual decisions; furthermore, members of the authority could be specifically
required  to  have  a  good  knowledge  of  the  rules  applicable  to  the  sector.  This
increases the impartiality of the regulator and enhances the continuity of regulatory
approaches.  Some  regulatory  authorities  finance  their  budgets  through  autonomous
sources  of  income,  as  opposed  to  the  general  budget  administered  by  the
government, which enhances their independence.

It  is  important  to  note  that  independence  does  not  mean  lack  of  accountability  for
performance.  Regulators  usually  have  to  report  regularly  to  government  and/or
parliament  and,  most  importantly,  the  parties  concerned  can  appeal  against  their
decisions  in  court.  On  the  other  hand,  appeal  possibilities  must  be  proportional.  If
decisions of the regulator become mired in years of controversy before they become
effective, the objective of regulation will not be achieved. Therefore, in a number of
cases appeals against decisions of the regulator have no suspensive effect.

Before  taking  decisions,  regulators  need  to  consult  with  interested  parties  and  the
public,  in  order  to  ensure  that  all  relevant  aspects  are  taken  into  account.  Equally
important,  regulators  are  required  to  consult  and  co-ordinate  their  work  with  other
public authorities, such as competition authorities and consumer protection bodies, to
ensure compatibility and consistency of decisions taken.

In  order  to  carry  out  their  tasks  effectively,  regulators  often  rely  on  information
which  only  regulated  undertakings  can  provide.  Therefore,  regulators  usually  have
the  power  to  require  from  undertakings,  within  a  time  limit,  any  information
necessary for the task in question. In the case of commercially sensitive information,
regulators have to  respect the rules on business  confidentiality.  In order to regulate
network  access  tariffs,  for  instance,  the  regulator  needs  to  have  reliable  and
comprehensive information on the costs incurred by the network operators.

The  powers  and  responsibilities  of  regulators  in  the  Member  States  vary  between
sectors  and  in  the  legislation  of  the  Member  States,  including  the  division  of  tasks
between  the  sector  regulator  and  the  competent  ministry.  This  division  of  tasks  is
largely  influenced  by  national  legal  and  administrative  traditions  prevailing  in  the
Member  States.  Some  core  responsibilities  are,  however,  shared  by  nearly  all
regulators of the sectors concerned. Regulation of the terms and conditions of access
to  existing  networks  and  regulation  of  retail  prices,  in  order  to  exclude  abuses  of

19

20

Cf.  ECJ,  Case  C-202/88,  France  v  Commission  [1991]  ECR  I-1223,  para  51,  52;  Case  C-
91/94, Thierry Tranchant [1995] ECR I-3911, para. 18, 19
In  some  cases,  such  as  in  electronic communications, overall  policy  goals  and  objectives  of
the «national regulatory authority» are specified in Community legislation

47

                                                
dominant positions in the market, are probably the most prominent examples. In this
respect  regulators  supplement  the  activities  of  competition  authorities:  whilst  the
latter apply general competition law to a specific sector by taking measures ex-post,
i.e. after the abuse has taken place, a regulator typically intervenes ex-ante by setting
rules intended to reduce the risk of the occurrence of abuses from the outset21.

Usually, the legislative act in question defines the obligations related to the provision
of  universal  service.  However,  regulators  often  play  an  important  role  in  further
defining  and  implementing  such  rules.  For  instance,  where  a  universal  service
provider  receives  compensation  for  providing  the  service,  the  general  rules  of  the
cost  calculation  and  the  financing  mechanism  are  usually  defined  by  Parliament  or
the competent Ministry. The implementation of these rules is left to the regulator.

An  important  element of the universal  service  concept  is  affordability  of  prices  for
final  users  and  consumers.  Where  necessary  to  achieve  this  objective,  price
regulation measures are applied  by regulators.  Since the  market should in principle
determine  the  price,  such  regulation  usually  takes  the  form  of  maximum  prices,
which  exist  in  many  Member  States,  for  instance  for  electricity.  Price  regulation
may,  however  also take the  form  of minimum prices,  in  order to prevent  predatory
behaviour by dominant players (e.g. in communications).

Particularly  important  from  a  consumer  or  user  perspective  is  the  role  regulators
often play in developing and implementing binding standards of security and quality
of  service.  These  are  important  in  terms  of  meeting  expectations  with  regard,  inter
alia, to access choice, transparency (including on price), affordability, quality, safety,
security  and  reliability.  Adequate  redress  mechanisms  for  consumers  and  users  are
essential where operators fail to meet standards in this respect.

Licensing  is  an  important  tool  to  ensure  compliance  with  binding  standards.  If  a
market operator does not meet the standards set by  the  regulator  – and specified in
the licence granted to market operators – regulators can withdraw the licence. Other
means to ensure compliance with rules include the imposition of penalties.

Consumers and users must have the possibility to file complaints, for instance, in the
event  of  non-compliance  of  an  operator  with  the  kind  of  standards  outlined  above.
Such complaints are usually handled by the regulator and in many cases legislation
obliges regulators to take a decision rapidly (i.e. within a certain time limit).

47. 

48. 

49. 

50. 

51. 

52. 

Some  regulatory  authorities  are  also  active  in  systematically  providing  market
information to consumers,22 whilst in most cases this task is carried out by consumer

21

22

It  should  be  noted  that  the  responsibilities  of  competition  and  regulatory  authorities  usually
overlap  to  an  extent.  Inappropriate  pricing  may  be  incompatible  with  the  rules  set  by  the
regulator and at the same time constitute an abuse of dominant position within the meaning of
competition  law.  It  is  important,  therefore,  that  the  respective  roles  of  regulators  and
competition authorities are clear in practice. In general, it can be said that the regulator applies
sector-specific  rules,  which  will  often  obviate  the  need  for  intervention  by  the  competition
authority. On the other hand, it is for the competition authority to intervene when the regulator
does not have the power to ensure that horizontal competition rules are respected or fails  to
take action
For instance, the energy regulator in the UK and Denmark; in communications,  Community
legislation stipulates that regulators must encourage the provision of information to consumers

48

                                                
organisations.  Apart  from  the  above-mentioned  core  responsibilities  of  regulators,
many  Member  States  entrust  them  with  further  tasks,  for  instance,  in  energy  the
implementation  of  social  and  environmental  policy23  and  long-term  planing  on
security of electricity and gas supply24. These additional tasks are usually determined
by  specific  national  circumstances.  The  reason  for  transferring  such  tasks  to  the
regulators is in many cases their technical expertise and knowledge of the sector.

1.2 Institutional co-operation arrangements at Community level

53. 

Sector-specific  regulators  are  set  up  by  Member  States  and  regulate  the  national
market of the sector concerned. However, national markets form part of the internal
Community  market  and  regulatory  decisions  taken  by  national  regulators  often
impact  on  cross-border  transactions.  Therefore,  a  degree  of  consistency  of  national
regulatory  approaches  is  necessary  to  avoid  distortions  stemming  from  different
approaches  that  could  have  an  impact  on  the  smooth  functioning  of  the  internal
market.  In  railways  and  communications,  Community  legislation  contains  a
provision  obliging  regulators  expressly  to  co-ordinate  their  decision-making
principles25.

54. 

Currently, a number of organisational arrangements aimed at encouraging regulatory
consistency exist for the sectors concerned.

European  associations  have  been  established  for  a  number  of  sectors,  which  bring
together  regulators  from  the  Member  States  and  often  third  countries.  Examples
include:

(cid:1)  The  Council  of  European  Energy  Regulators  (CEER)  acts  as  a  focal  point  for
contacts between regulators and the European Commission's Directorate-General
for  Energy  and  Transport.  It  maintains  close  working  relations  with  regulatory
authorities in North America and EU candidate countries. The work of the CEER
has  focused  on  issues  linked  to  cross-border  transactions  and  it  plays  an  active
part in the Florence Regulatory Process  and  the  Madrid Regulatory Process  (see
below).

from 

the  CEPT 

(cid:1)  The  European  Committee  for  Postal  Regulation  (CERP)  is  composed  of
representatives 
(European  Conference  of  Postal  and
Telecommunications  Administrations)  countries’  postal  regulatory  authorities,
including  EU  and  candidate  countries,  EFTA  and  others  like  Albania  or  the
Russian Federation. The CERP discusses regulatory and operational postal issues
and  facilitates  contacts  with  the  relevant  bodies,  in  order  to  develop  a  common
approach that can lead, where appropriate, to proposals and recommendations.

(cid:1)  The  Joint  Aviation  Authorities  (JAAs)  is  the  umbrella  organisation  for  national
civil aviation agencies. It has developed common safety, regulatory standards and

23

24

25

in  order  to  enable  customer  choice  (Articles  21  and  22  of  the  universal  service  directive
(2002/22/EC))
For instance, in the UK and Sweden
For instance, in Belgium
Article  31  of  Directive  EC/2001/14  and  Art.  7(2)  of  the  Communications  Framework
Directive

49

                                                                                                                                                        
55. 

procedures  for  most  areas  of  civil  aviation.  These  standards  are  non-binding,
unless transformed into either EU or national legislation.

A unique form of co-ordination and co-operation between national regulators exists
in the field of electricity and gas. In order to build consensus between all parties on
issues  relating  to  cross-border  transactions  in  the  gas  and  electricity  sectors,  two
regulatory forums, the Madrid Forum and the Florence Forum, were created. These
forums,  which  are  chaired  by  the  Commission,  bring  together  the  national  energy
regulators  and  high-level  representatives  of  the  Member  States,  industry  and
consumers. The decisions taken by the forums are not formally binding, but they are
taken  with  the  understanding  that  national  regulators  will  implement  them  at  the
national  level26.  The  limits  of  the  two  forums  have,  however,  increasingly  become
apparent,  in  particular  when  it  comes  to  taking  decisions  on  controversial  issues.
Therefore,  in  March  2001  the  Commission  proposed  a  regulation  on  cross-border
exchanges of electricity providing for a comitology procedure on issues which have
been discussed within the context of the Florence Forum.

56. 

European groups of regulators

Recently  a  new  organisational  form  of  involvement  of  national  regulators  at
Community level has developed in the form of European groups of regulators which
aim to reinforce and formalise the role of sector-specific regulatory authorities at EU
level. Unlike Comitology committees, such groups must be composed of the national
regulators in the sector concerned. This concept was, for instance, discussed in detail
in  the  «Lamfalussy  report»  on  the  future  legislative  and  regulatory  process  for  the
European  securities  market,  with  a  view  to  developing  a  new  and  more  effective
form  of  regulation.  As  regards  services  of  general  economic  interest,  a  «European
group  of  regulators»  was  recently  created  by  Commission  decision27  for  electronic
communications.  Its  aims  are:  (a)  to  advise  and  assist  the  Commission  in
consolidating  the  internal  market  for  electronic  communications  networks  and
services; (b) to provide an interface between national  regulatory  authorities and the
Commission;  and  (c)  to  assist  in  ensuring  consistent  application  of  the  regulatory
framework in all Member States.

57. 

For electricity and gas, the Commission has suggested in its amended proposals for
the completion of the internal energy market, in response to a proposal made by the
European Parliament, that such a group of electricity and gas regulators should be set
up.

58. 

Comitology

In  most  of  the  sectors  concerned,  Community  legislation  provides  for  Comitology
procedures to define the details of implementation of the rules contained in the basic
Community  legislation.  The  common  pattern  under  such  procedures  is  that  the
Commission adopts decisions after consultation of either an advisory or a regulatory
committee made up of representatives of Member States. Issues dealt with are often

26

27

For more detail on the Florence and Madrid Forum see
http://europa.eu.int/comm/energy/en/elec_single_market/florence/index_en.html;
http://europa.eu.int/comm/energy/en/gas_single_market/madrid.html
OJ L 200, 30.7.2002, p. 38

50

                                                
standards 

for  cross-border  postal 

those  which  are  particularly  relevant  for  cross-border  transactions,  such  as,  for
railway
instance,  quality 
interoperability. Comitology Committees exist  for  communications,  postal  services,
railways and aviation. It should be noted that it is for the Member States to determine
how  they  are  represented  in  these  Committees  and,  therefore,  participation  of  the
sector-specific regulatory authority is not guaranteed. However, in practice, in most
cases  where  regulators  exist  they  are  kept  involved  in  the  procedure  by  Member
States.  For  electricity,  the  Commission  proposes  in  its  proposals  to  complete  the
internal energy market a comitology procedure for issues relevant to the cross-border
transmission of electricity.

services  or 

1.3 Is there a need for European regulators?

59. 

2.

60. 

61. 

A European regulatory authority does not exist at the moment for any of the sectors
concerned. However, the idea of setting up such a body at European level has been
discussed  for  certain  sectors  for  some  time,  in  particular  in  communications28.  In
aviation,  for  example,  the  Council  decided  recently,  on  the  basis  of  a  Commission
proposal,  to  set  up  a  European  Aviation  Safety  Agency  (EASA).  This  agency  will
assist  the  Commission  in  adopting  common  standards  on  air  transport  safety  and
environmental  protection  issues  under  a  comitology  procedure.  It  will  also  be
responsible  for  the  airworthiness  and  environmental  certification  of  aeronautical
products designed or used in the Member States. This task has until now been carried
out by the national aviation authorities. In this (limited) respect the new agency could
be  considered  a  European  regulator.  In  railways,  the  Commission  proposed,  in  its
2nd railway package of January 2002 setting up  a  European Railway  Agency. This
agency would not, however, have a direct regulatory role. That said, in certain areas
the  Agency  would  have  an  advisory  role  which  is  comparable  to  the  role  of  the
«European group of regulators» in communications.

Financing of services of general interest

While  for  a  significant  number  of  services  of  general  economic  interest  market
mechanisms alone may ensure their viability, some services of general interest need
specific financing schemes in order to maintain a financial equilibrium.

In general, Community law does not impose a specific form of financing of services
of general interest and it is for the Member States to decide how these services are
financed. Yet, whatever financing scheme is applied, this scheme must comply with
the  competition  and  State  aid  rules  as  well  as  with  the  internal  market  rules  of  the
Treaty.  In  any  event,  the  Treaty  allows  providers  of  services  of  general  economic
interest  to  be  compensated  for  the  extra  cost  of  fulfilling  a  public  service  mission.
Any compensation that exceeds what is necessary to discharge the public service task
is, as a matter of principle, not compatible with the Treaty.

62. 

Financing  schemes  can  take  different  forms,  such  as  direct  financing  through  the
State  budget,  contributions  made  by  market  participants,  the  granting  of  special  or

28

See  the  two  independent  studies  undertaken  for  the  Commission:  Eurostrategies/Cullen
International,  The  possible  added  value  of  a  European  Regulatory  Authority 
for
telecommunications, Dec. 1999; Nera & Denton Hall, Issues associated with the creation of a
European Regulatory authority for telecommunications, March 1997

51

                                                
exclusive  rights,  tariff  averaging  or,  in  the  case  of  non-market  social  services,
solidarity-based financing.

(a) Direct compensation through a Member State’s budget

One  form  of  providing  financial  support  to  services  of  general  interest  consists  in
direct compensation through  a Member State’s budget. This compensation can take
the  form  of  direct  payments  to  the  provider  of  the  service  or  of  other  financial
advantages, such as tax exemptions, that reduce the Member State’s budget revenues.
In  some  cases,  direct  compensation  by  a  Member  State  can  be  complemented  by
Community  funding  based  on  the  principle  of  co-financing,  e.g.  through  structural
funds.

Direct compensation shares the burden of financing a public service task among all
tax payers. This form of financing does not create a barrier to entry. It is subject to
parliamentary  control  in  the  Member  States  as  part  of  the  budgetary  procedure.

(b) Contributions by market participants

Member  States  may  also  decide  that  the  net  costs  of  the  provision  of  a  service  of
general interest should be recovered from those the service is provided to by means
of  levies  on  undertakings.  This  possibility  is  explicitly  provided  for  in  Community
legislation on telecommunications and on postal services.

In this case, Member States should ensure that that the method of allocation among
undertakings  is  based  on  objective  and  non-discriminatory  criteria  and  is  in
accordance  with  the  principle  of  proportionality.  This  principle  should  not  prevent
Member  States  from  exempting  new  entrants  that  have  not  yet  achieved  any
significant  market  presence.  Any  funding  mechanism  should  ensure  that  market
participants  only  contribute  to  the  financing  of  universal  service  and  not  to  other
activities  which  are  not  directly  linked  to  the  provision  of  the  universal  service
obligations.  The  mechanism  should  in  all  cases  comply  with  the  principles  of
Community law, especially, in the case of sharing mechanisms, the principles of non-
discrimination and proportionality.

The  net  cost  of  universal  service  obligations  may  be  shared  between  all  or  certain
specified  classes  of  undertakings.  National  regulatory  authorities  should  satisfy
themselves  that  those  undertakings  benefiting  from  funding  provide  sufficiently
detailed information on the  specific  costs requiring such  funding in order to  justify
their request. There are incentives for designated operators to raise the assessed net
cost of public service obligations. Therefore, Member States should ensure effective
transparency and control of amounts charged to finance universal service obligations.

In addition, Directive 2002/22/EC on universal service in electronic communications
provides  that  Member  States'  schemes  for  the  costing  and  financing  of  universal
service  obligations  must  be  communicated  to  the  Commission  for  verification  of
compatibility with the Treaty. Furthermore, recital 21 of this directive provides that
“any  funding  mechanism  should  ensure  that  consumers  and  users  in  one  Member
State  do  not  contribute  to  universal  service  costs  in  another  Member  State,  for
example when making calls from one Member State to another.”

52

(c)

Special and exclusive rights

In some cases, Member States grant special or exclusive rights in order to ensure the
financial  viability  of  a  provider  of  a  service  of  general  economic  interest.  The
granting  of  such  rights  is  not  per  se  incompatible  with  the  Treaty.  The  Court  of
Justice ruled29 that Article 86(2) of the Treaty «permits the Member States to confer
on undertakings to which they entrust the operation of services of general economic
interest exclusive rights which may hinder the application of the rules of the Treaty
on  competition  insofar  as  restrictions  on  competition,  or  even  the  exclusion  of  all
competition, by other economic operators  are  necessary  to  ensure  the  performance
of  the  particular  tasks  assigned  to  the  undertakings  possessed  of  the  exclusive
rights».  However, Member  States  must  ensure  that such  rights are  compatible  with
internal market rules and do not amount to abuse of a dominant position within the
meaning of Article 82  by  the  operator  concerned.  Generally  speaking,  exclusive  or
special  rights  may  limit  competition  on  certain  markets  only  insofar  as  they  are
necessary for performing the particular public service task.

In addition, Member States' freedom to grant special or exclusive rights to providers
of  services  of  general  interest  can  also  be  restricted  in  sector-specific  Community
legislation30.

(d)

Tariff averaging

For  some  services,  such  as  certain  telecommunications  or  postal  services,  Member
States require that a universal service is provided at a uniform tariff throughout the
whole territory of the Member State. In these cases the tariff is based on an average
of the cost of providing the services, which can be differ appreciably, e.g. depending
on whether the services are provided in a densely populated area or in a remote rural
area. In general, and subject to control of abuse by the Commission, tariff averaging
is  compatible  with  Community  law  provided  it  is  imposed  by  a  Member  State  for
reasons of territorial and social cohesion and it meets the conditions set out in Article
86(2) of the Treaty31 .

(e)

Solidarity-based financing and compulsory membership

Because of its importance this form of financing is mentioned here, although it only
concerns  support  for  services  of  general  interest  of  a  non-economic  nature.  Basic
social  security  systems  in  the  Member  States  are  generally  based  on  schemes  that
pursue a social objective and embody the principle of solidarity. They are intended to
provide cover for all persons to whom they apply against risks such as sickness, old
age, death and invalidity, regardless of their financial status and their state of health
at the time of affiliation. The principle of solidarity, for instance, in health insurance
schemes,  can  be  embodied  in  the  fact  that  the  scheme  is  financed  by  contributions

29

30

31

ECJ Case 320/91, judgment of 17 May 1993, Corbeau, [1993] I-2533 (point 14)
Cf. Article 2(1) of Commission Directive 2002/77/EC of 16 September 2002 on competition
in the markets for electronic communications networks and services, OJ . L 249, 17.9.2002, p.
21; Article 7(1) of Directive 97/67/EC of the European Parliament and of the Council of 15
December 1997 on common rules for the development of the internal market of Community
postal services and the improvement of quality of service, OJ L 15, 21.1.1998, p. 14
ECJ Case 320/91, judgment of 19 May 1993, Corbeau, [1993] ECR I-2533 (point 15)

53

                                                
proportional  to  the  occupational  income  of  the  persons  making  them,  whereas  the
benefits  are  based  on  the  needs  of  thosewho  receive  them.  In  this  case,  solidarity
entails the redistribution of income between those who are better off and those who,
in  view  of  their  resources  and  state  of  health,  would  be  deprived  of  the  necessary
social cover. It also mitigates market failures associated with health insurance linked
to economies of scale, risk selction an moral hazard. In old-age insurance schemes,
solidarity can be embodied in the fact that the  contributions paid by active workers
serve  to finance  the pensions of retired workers.  It is also  reflected  by  the  grant  of
pension rights where no contributions have been made and of pension rights that are
not proportional to the contributions paid. Finally, there can be solidarity between the
various social security schemes, in that those in surplus contribute to the financing of
those with structural financial difficulties. Such social security schemes are based on
a  system  of  compulsory  contribution,  which  is  indispensable  for  application  of  the
principle of solidarity and the financial equilibrium of those schemes.  Furthermore,
the  management  of  such  schemes  is  generally  subject  to  comprehensive  control  by
the State.

According  to  the  case  law  of  the  Court  of  Justice,  organisations  entrusted  with  the
provision of such activities that are based on the principle of national solidarity and
are  entirely  non-profit-making  fulfil  an  exclusively  social  function.  These
organisations  do  not  engage  in  an  economic  activity  and  are  not  to  be  considered
undertakings  within  the  meaning  of  Community  law32.  Nevertheless,  it  could  be
considered whether the criteria and the consequences of solidarity-based financing of
social security schemes should be clarified at Community level.

Internal market, competition and State aid rules aim to ensure that financial support
granted  to  services  of  general  interest  does  not  distort  competition  and  the
functioning of the internal market. Also, the sector-specific legislation in place seeks
only to ensure that the financing mechanisms put in place by the Member States are
least distortive of competition and facilitate market entry. Other relevant criteria for
its
choosing  a  financing  mechanism,  such  as  efficiency,  accountability  or 
redistributive  effects,  are  not  taken  into  account.  At  this  stage,  the  Commission
considers it appropriate to launch a debate on whether these criteria could lead to the
conclusion that specific financing mechanisms should be preferred and whether the
Community should take measures in favour of specific financing mechanisms.

Evaluation of services of general interest

Evaluating  services  of  general  interest  is  intrinsically  linked  to  evaluating  the
performance  of  the  industries  providing  these  services.  This  performance  rests  on
delivering  quantitative  and  qualitative  benefits  to  users  and  consumers,  and
consequently  on  increasing  their  satisfaction.  Evaluating  the  performance  of  these
sectors  to  ensure  that  objectives  of  economic,  social  and  territorial  cohesion  and
environment protection are attained is an essential task at Community level. From a
purely  economic  perspective,  the  evaluation  of  services  of  general  interest  is
important because the sectors providing these services account for a substantial part
of EU GDP and prices in these industries have an influence on costs in other sectors.

63. 

3.

64. 

32

ECJ joint Cases 159/91 and 160/91, judgment of 17 February 1993, Poucet and Pistre, [1993]
ECR I-637 (points 18, 19); Case C-218/00, judgment of 22 January 2002 Cisal di Battistello
Venanzio & C. Sas ./. INAIL [2002] ECR I-691 (point 44)

54

                                                
3.1

65. 

66. 

Evaluating network industries providing services of general economic interest at this
particular time is also justified by the fact that these sectors are currently undergoing
major  structural  reforms  due  to  regulatory,  technological,  social  and  economic
changes.  Nevertheless,  the  evaluation  of  performance  should  be  undertaken  in  all
industries  providing  services  of  general  interest,  whether  they  are  subject  to
structural  changes  or  not.  Evaluation  is  also  essential  because  the  information  it
provides  is  an  important  input  for  broad-based  political  discussions  and  informed
regulation of the sectors. Finally, evaluation is justified in terms of good governance.
Evaluation  provides  evidence,  judgment  and  information  for  policy  conception,
adaptation and accountability. For all these reasons, the Commission considers that it
is important to assess services of  general interest  and  has  defined  a  strategy  in  this
respect.

A three pillar-approach

As  already  stated  in  the  2000  Communication  on  services  of  general  interest  in
Europe,  "the Community involvement with services  of  general  interest  goes  beyond
developing  the  Single  Market,  including  providing  for  instruments  to  ensure
standards  of  quality,  the  co-ordination  of  regulators  and  the  evaluation  of
operations. (…) Such contributions are meant to enhance, and by no means replace,
the  national,  regional  and  local  roles  in  their  respective  fields"33.  Guided  by  these
principles,  the  European  Commission  carries  out  regular  evaluations  of  the
performance  of  industries  providing  services  of  general  economic  interest.  This
evaluation is based on three pillars.

The Commission has made «horizontal assessments» part of its strategy for efficient
evaluation  of  services  of  general  economic  interest.  In  December  2001,  the
Commission presented a first horizontal assessment34 annexed to the «Report on the
functioning  of  product  and  capital  markets»35.  It  provided  a  baseline  for  future
horizontal  monitoring  and  regular  evaluation  of  these  services,  as  requested  by  the
Council.  In  line  with  the  Council’s  invitation  to  present  a  methodology  for  the
evaluation  of  services  of  general  interest,  the  Communication  «A  Methodological
Note  for  the  Horizontal  Evaluation  of  Services  of  General  Economic  Interest"36
defined  a  methodology  to  be  applied  by  the  Commission  in  future  horizontal
evaluations.  The  Commission  will  produce  annual  reports  presenting  the  results  of
the  horizontal  evaluation  of  services  of  general  economic  interest.  The  reports  will
consist  of  three  main  parts:  an  analysis  of  structural  changes  and  market
performance, the results of the ongoing consumer consultation process, and a cross-
sectoral  review  of  horizontal  topics.  Initially,  horizontal  evaluations  will  cover  the
sectors,  in  the  Member  States,  of  air  transport,  local  and  regional  public  transport,
electricity, gas, postal services, railway transport, and telecommunications.

33

34

35

36

COM(2000) 580, p. 23-24
Market  performance  of  network  industries  providing  services  of  general  interest:  a  first
horizontal assessment, SEC(2001) 1998
COM(2001) 736 final
COM(2002) 331 final

55

                                                
67. 

68. 

3.2

69. 

Alongside  horizontal  assessments,  the  European  Commission  pursues  sectoral
assessments of industries providing services of  general  economic interest37.  Indeed,
the economic, technical, and regulatory  frameworks differ across industries, so that
some  issues  are  industry-specific  and  cannot  be  fully  addressed  in  horizontal
assessments.  In  addition,  these  sectoral  assessments  are  suitable  instruments  for
monitoring  the  transposition  of  directives  and  effective  application  of  the  rules  as
transposed  into  national  law,  as  well  as  for  obtaining  a  comparison  of  sectoral
regulation.  This  gives  the  Commission  a  basis  for  guiding  the  Member  States  on
future  regulation  and  for  discussing  best  sectoral  practices.  It  also  provides  a  clear
picture of possible failures to comply with EU laws.

Evaluation  of  the  performance  of  services  of  general  interest  would  not  be
comprehensive if it failed to take into  account the  opinion  of the  various interested
parties (all users/consumers, operators, regulators, social partners, public authorities,
etc.)  concerned  in  these  services.  The  views  of  interested  parties  are  taken  into
account in the assessment by the Commission and provide guidance for future policy
action. Specifically, consumer satisfaction with regard to services of general interest
is surveyed by Eurobarometer opinion polls and qualitative surveys38.

Scope of the evaluation

In  the  current  environment  of  structural  and  regulatory  change,  the  evaluation
process should take four questions into consideration.

(a) Do  the  structural  changes  occurring  in  the  industries  providing  services  of
general interest lead to benefits to users and consumers in terms of lower prices and
better services?

Liberalising industries providing services of general economic interest should foster
competition and therefore increase choice, and should force companies to rationalise
production and to offer better and innovative services at lower prices. These multiple
benefits  should  increase  welfare,  provided  appropriate  measures  are  taken  to
safeguard  consumer  and  user  rights.  However,  the  benefits  of  market  opening  can
only be transmitted to users and consumers if appropriate regulation and competitive
conditions  are  in  place.  The  evaluation  of  services  of  general  economic  interest  is
important  to  detect  evidence  of  possible  shortcomings  in  the  transmission  of  these
benefits and their possible capture  by  certain  economic  operators.  This  objective  is
consistent  with  the  Commission’s  general  initiative  to  improve  governance  and  the
quality of regulation in the European Union.

(b) How are access and quality evolving with regard to the provision of services of
general interest?

Market  performance  includes  the  quality  and  the  affordability  of  the  service
provided.  With  market  opening,  there  is  a  potential  risk  that  a  competitive
environment  could  put  pressures  on  prices  at  the  expense  of  the  quality  of  these
services  or  at  the  cost  of  an  unequal  distribution  of  benefits  among  users  and

37

38

See  the  examples  from  the  telecommunications,  postal,  energy  and  transport  sectors  in  the
Commission Report on services of general interest, COM(2001) 598, 17.10.2001, p. 15
http://europa.eu.int/comm/consumers/cons_int/serv_gen/cons_satisf/index_en.html

56

                                                
consumers. Therefore, the evaluation should take particular account of the interaction
between different infrastructure networks, as well as the objectives of both economic
efficiency,  consumer  and  user  protection  and  economic,  social  and  territorial
cohesion.  In  this  context,  an  essential  aspect  to  be  considered  is  the  degree  of
accessibility to networks. For instance, in energy and transport, it is useful to assess
the  degree  of  interconnection  between  different  networks,  and  in  particular  their
geographical link between the most developed areas and the less favoured regions.

(c) How  is  employment  affected  by  changes  in  the  sectors  providing  services  of
general interest?

Industries  providing  services  of  general  interest  have  traditionally  been  run  by  the
public  sector  and  are  major  employers.  The  introduction  of  competition  raises  the
fear of substantial employment adjustment costs. These fears represent a main source
of resistance to the structural  changes.  For  this  reason,  it  is  important  to  assess  the
extent  to  which  these  costs  occur.  The  aim  of  the  assessment  is  to  appraise  both
direct  and  indirect effects on employment. Therefore, it is  particularly  important  to
broaden the scope of the analysis and to assess long-term impacts on the economy as
a whole, alongside the short-term effects in the industries providing the services.

(d) How are these developments perceived by users/consumers?

The  last  issue  to  be  dealt  with  is  how  developments  in  the  performance  of  these
sectors  are  perceived  in  practice.  A  mismatch  may  indeed  arise  between  the
developments observed  and their perception by the public. As users and consumers
should be the ultimate beneficiaries of the services provided by these industries, it is
crucial  to  canvas  their  opinion.  It  should  nevertheless  be  borne  in  mind  that  the
beneficiaries  are  a  multiplicity  of  actors  ranging  from  private  households  to
companies  with  differences  in  revenues,  size  and  other  characteristics.  Therefore,
different groups should be considered separately in any evaluation.

Issues

One  of  the  main  stumbling  blocks  for  a  comprehensive  evaluation  is  the  huge
disparity in data availability. By providing guidance, the European Commission has
played  an  important  role  in  streamlining  and  standardising  data  collection.  Since
2000, the Commission has published a list of structural indicators,39 some of which
are related to  industries  providing  services  of  general  interest.  The  Communication
on a Methodology to evaluate services of general interest contains in its annex a list
of indicators, some of which are currently unavailable, that provide an ideal map for
evaluation. This list could be the basis for discussion with potential data providers to
improve  data  collection.  Alongside  a  lack  of  resources  of  national  regulatory  or
statistical bodies and remaining differences in methodologies that make comparisons
difficult,  one  increasing  difficulty  is  that  the  process  of  market  opening  itself  can
affect  the  availability  and  quality  of  data.  On  the  one  hand,  the  introduction  of
competition  has  in  some  cases  led  to  more  comprehensive  data  gathering  and

3.3

70. 

39

See  COM(2002)  551,  16.10.2002  and  Commission  Staff  Working  Paper  in  support  of  the
Report from the Commission to  the  Spring  European  Council in  Brussels  –  Progress  on the
Lisbon Strategy (COM(2003) 5), SEC(2003) 25/2, 7.3.2003

57

                                                
71. 

72. 

73. 

evaluation  than  existed  before  the  emergence  of  private  sector  operators.  On  the
other  hand,  some  Member  States  are  having  difficulty  where  private  companies
refuse  to  disclose  strategic  information  on  the  grounds  that  it  is  market  sensitive,
though it is not always apparent that this is the case.  One issue  for discussion is to
strike the balance between the need to obtain data for evaluation and policy-making
and the right of companies to treat this information as confidential.

In  addition,  the  evaluation  needs  to  reach  the  right  balance  between  economic  and
social  policy  considerations,  especially  as  regards  service  quality  provision  and
social and territorial cohesion. This is an issue on which the existing legal framework
relating to services of general interest provides only partial guidance.

To  grasp  these  issues,  the  Commission  has  developed  an  evaluation  strategy  and
provides the necessary input for the debate. So far, its role has included carrying out
horizontal  evaluations  across  countries  and  sectors,  plus  the  task  of  ensuring  more
co-ordination between national regulators to make the conditions of competition and
regulation  more  similar  across  Member  States.  However,  the  Commission  cannot
encompass,  summarise  and  present  a  consolidated  view  representing  all  the  often
diverging views of the different interested parties on the performance of services of
general  interest.  This  means  that  there  is  a  need  for  a  broad  debate  on  how  to
evaluate and on who should carry out this task. In addition, the evaluation carried out
by the Commission at Community level does not preclude supplementary evaluations
at other levels (in accordance with the principle of subsidiarity) or by other bodies.
The  question  of  whether  an  evaluator  at  Community  level  should  be  independent
from the Commission and/or the Member States remains open to debate.

As suggested in the European Parliament’s resolution,40 public participation could be
greatly  expanded.  The  Parliament  proposes  to  «organise  the  debate  within  the
various existing forums (Economic and Social Committee, Committee of the Regions,
consultative  bodies,  associations  involved  in  services  of  general  interest  initiatives
and consumer associations)». The results of this debate should be taken into account
and provide guidance for the evaluations, and the evaluations should themselves be
the subject of debate. Such a broad social debate on the performance of services of
general  interest  is  welcome,  provided  that  the  interests  of  all  interested  parties  are
well balanced and properly represented. Within the current institutional framework,
it remains unclear what the respective roles should be of the different institutions and
organisations  in  the  evaluation  of  services  of  general  interest  and  how  the  debate
should be structured and organised.

40

European  Parliament  report  on  the  Commission  Communication  on  «Services  of  general
interest in Europe», COM(2000) 580 C5-0399/2001 – 2001/2157/COS; Final A5/0361/2001.
Rapporteur: Werner Langen. 17.10.2001

58

                                                
4.

4.1

74. 

The international dimension: trade policy

Liberalisation of trade in services of general interest within the context of the World
Trade Organisation (WTO)

The  Community  and  its  Member  States  are  parties  to  the  General  Agreement  on
Trade in Services (GATS),41 which is the main multilateral set of disciplines on trade
in services, where WTO members have undertaken binding commitments to open up,
subject  to  listed  limitations,  specific  services  sectors  to  competition  from  foreign
providers.

4.1.1

Services of general interest are not excluded as such from the GATS

75. 

The  term  «services  of  general  interest»  cannot  be  found  in  the  GATS.  GATS
disciplines apply to all committed services with two exceptions:

(cid:1)  in  the  air  transport  sector,  traffic  rights  and  all  services  directly  related  to  the

exercise of traffic rights, and

(cid:1)  for  all  sectors,  services  provided  to  the  public  in  the  exercise  of  governmental
authority, which means any service that is supplied neither on a commercial basis,
nor in competition with one or more service suppliers.

It may be added that the supply of services to public entities through procurement –
including  services  of  general  interest  –  is  not  currently  subject  to  the  GATS  core
obligations  (most-favoured-nation,  national  treatment,  market  access,  possible
additional  commitments).  However,  the  Community  has  undertaken  to  grant  most-
favoured-nation  and  national  treatment  vis-à-vis  the  contracting  parties  of  the
Agreement  on  Government  Procurement  (GPA),  also  negotiated  within  the  WTO
framework.

The  GATS  provides  for  general  and  security  exceptions,  which  to  a  large  extent
correspond to the exceptions of the EC Treaty

Subject  to  the  requirement  that  such  measures  are  not  applied  in  a  manner  which
would  constitute  a  means  of  arbitrary  or  unjustifiable  discrimination  between
countries where like conditions prevail, or a disguised restriction on trade in services,
nothing in the GATS can be construed to prevent the adoption or enforcement by any
Member of measures necessary to protect public morals or to maintain public order,
to protect human, animal or plant  life  or health,  to  secure  compliance  with  laws  or
regulations relating to the prevention of deceptive and fraudulent practices or to deal
with  the  effects  of  a  default  on  services  contracts,  the  protection  of  the  privacy  of
individuals in relation to the processing  and dissemination of personal data and  the
protection  of confidentiality of  individual  records  and  accounts,  and  safety  (Article
XIV of the GATS).

In addition, nothing in the GATS can be construed to require any Member to furnish
any information, the disclosure of which it considers contrary to its essential security

See  the  Commission  publication  «GATS.  A  guide  for  business»  and  the  WTO  publication
«GATS. Facts and fiction». The text of the GATS is published in  OJ  L  336,  23.12.1994,  p.
190

59

4.1.2

76. 

77. 

41

                                                
4.1.3

78. 

4.1.4

79. 

80. 

81. 

interests  or  to  prevent  any  Member  from  taking  any  action  which  it  considers
necessary for the protection of its essential security interests (Article XIV bis of the
GATS). The GATS preamble also provides for the right of Members to regulate the
supply of services in order to meet national policy objectives.

The  liberalisation  of  trade  in  services  of  general  interest  depends  on  commitments
undertaken by WTO Members

For  those  services  of  general  interest  that  are  not  excluded  from  the  scope  of  the
GATS, the degree of openness that countries offer is not set automatically and must
be the subject of negotiations. Whereas some GATS disciplines – such as the Most
Favoured Nation obligation and transparency – apply across the board to all services
sectors  covered  by  the  GATS,  the  provisions  concerning  specific  commitments  -
market access, national treatment and possible additional commitments - apply only
insofar  as  countries  have  made  a  commitment  in  a  given  sector.  The  degree  of
sectoral  coverage  of  Members  varies  greatly,  and  no  Member  has  made
commitments  in  all  services  sectors.  Once  undertaken,  commitments  can  still  be
withdrawn or modified under specific conditions. The specific procedure is set out in
Article XXI of the GATS.

The  GATS  does  not  require  privatisation,  nor  deregulation  of  services  of  general
interest. It is up to WTO Members to decide on these issues in the exercise of their
sovereign rights

There is no single model of services of general interest within the WTO membership.
The concept varies according to the different sectors and national traditions and legal
conditions in the Members concerned. The GATS leaves it entirely for Members to
decide  whether  they  provide  services  of  general  interest  themselves,  directly  or
indirectly (through public undertakings), or whether they entrust their provision to a
third  party.  Thus,  services  of  general  interest  can  be  and  are  carried  out  either  by
public or by private undertakings, or jointly.

The objective of the GATS is to establish a multilateral framework of principles and
rules for trade in services with a view to the expansion of such trade under conditions
of transparency and progressive liberalisation. It is not to deregulate services, many
of which are closely regulated for very good reasons. In addition, in terms of general
exceptions,  the  GATS  does  not  prevent  the  adoption  or  enforcement  of  measures
necessary  to  protect  inter  alia  public  morals,  public  order,  and  human,  animal  or
plant life and health.

It must be observed, however, that whenever WTO Members, in the exercise of their
sovereign rights, have undertaken commitments in a given  services  sector,  they  are
obliged  to  administer  their  services  regulation  for  that  sector  in  a  transparent  and
predictable  manner.  In  this  context,  GATS  calls  upon  WTO  Members  to  develop
disciplines  for  certain  specific  measures  that  affect  trade  in  services  (qualification
requirements and procedures, technical standards and licensing requirements). Such
GATS disciplines should ensure that those specific measures are based on objective
and transparent criteria and that  they do  not  unnecessarily  hamper trade  in  services
having regard to the need to ensure the quality of the service. So far, only disciplines
for the accountancy sector have been agreed, but they have not yet entered into force.

60

82. 

WTO Members can in any case, in the exercise of their sovereign  rights, undertake
commitments additional  to  market  access  and  national  treatment,  under  which  they
accept that they will abide by specific regulatory obligations. In this context, it has to
be  noted  that  about  75  WTO  Members  have  agreed  to  certain  common  regulatory
principles applicable to the telecommunications sector by subscribing to a «reference
paper»  which  contains  rules  on,  among  other  things,  competition,  interconnection,
licensing, regulator’s independence.

4.1.5

The GATS agreement does not preclude the imposition of public service obligations

83. 

GATS allows WTO Members to impose public service obligations in a liberalisation
context.  In  their  commitments,  WTO  Members  can  grant  full  market  access  and
national treatment to foreign service providers, and at the same time impose on them
the  same  public  service  obligations  that  apply  to  domestic  service  providers.  Even
when they go further and subscribe to common regulatory principles, as some have
done  through  the  telecommunications  «reference  paper»,  they  can at the same  time
keep their right to define the kind of public (universal) service obligation they wish
to maintain.

4.1.6

Subsidisation of services of general interest is not forbidden by the GATS

84. 

85. 

4.1.7

86. 

87. 

At  present,  the  GATS  only  envisages  negotiations  with  a  view  to  developing  the
necessary disciplines to avoid trade-distortive effects of subsidies (Article XV of the
GATS).  In  the  absence  of  these  multilateral  disciplines,  all  subsidies  are  allowed,
although subject to the national treatment principle, since subsidies are measures that
affect trade in services. Accordingly, for those services where a WTO Member has
undertaken  market  access  commitments,  a  country  that  wants  to  limit  access  to
subsidies  to  domestic  service  suppliers  must  specify  this  in  the  schedule  of
commitments as a national treatment limitation.

A WTO Member that has undertaken commitments in respect of services of general
interest is therefore free to decide whether and to what extent domestic subsidies are
granted to foreign service suppliers that enjoy market access to those services. Such
decision will have to be transcribed in a national treatment commitment.

Community commitments in respect of services of general interest are undertaken in
coherence with the internal market rules applying to these services

In  the  Uruguay  Round,  the  Community  has  undertaken  binding  commitments  for
certain  services  of  general  interest  (e.g.  telecommunications,  privately  funded
education,  environmental,  health  and  social  and 
transport  services).  These
commitments took into account the situation in the internal market, were limited to
certain  activities  specifically  listed  and  were  subject  to  a  number  of  specific
limitations.

The  specific  commitments  undertaken  at  the  Uruguay  Round  have  never  gone
beyond  granting  to  foreign  services  suppliers  the  market  access  and  national
treatment  that  Community  services  suppliers  enjoyed  within  the  internal  market  in
sectors open to competition. The rules of the internal market are also fully respected
by  the  Community  commitment  to  subscribe  to  the  «reference  paper»  in  the
telecommunications sector. None of these commitments has constrained the internal
policy regarding the organisation of these sectors. Member States also maintain the

61

right,  even  in  areas  where  specific  commitments  have  been  undertaken,  to  impose
public  service  obligations  which  are  also  applied  to  foreign  private  providers  (for
example, on universal  service,  quality  standards  or  consumer/user  protection)42.  As
regards  the  financing  of  services  of  general  interest  for  which  market  access
commitments were undertaken, the Community has reserved the possibility, by way
of  a  horizontal  limitation,  of  providing  or  subsidising  services  within  the  public
sector.

As  far  as  the  current  WTO  negotiations  in  services  are  concerned,  the  Community
has addressed requests43 to other  WTO Members for liberalisation  in  most  services
sectors: professional and other business services, telecommunications services, postal
and  courier  services,  construction  services,  distribution  services,  environmental
services,  financial  services,  news  agency  services,  tourism  services,  transport
services  and  energy  services.  No  requests  have  been  made  on  health  services  or
audio-visual services to any country, and on education services only the US received
a  request  limited  to  privately  funded  higher  education  services.  Through  these
requests, the Community does not seek to dismantle services of general interest, nor
to  privatise  State-owned  companies  in  third  countries.  It  is  also  recognised  that
liberalisation of trade in services may, in many cases, have to be underpinned by an
institutional  and  regulatory  framework  to  ensure  competition  and  to  help  improve
access to such services for the poor. In this respect, the requests in no way undermine
or reduce host governments' ability to regulate pricing, availability and affordability
of  services  of  general  interest  as  they  choose.  Indeed,  the  Community  is  simply
asking that Community service suppliers be granted market  access to compete with
domestic services suppliers under the same conditions.

Likewise, the Community offers will not affect the provision of services of general
interest within the Community, or the right of the Community to regulate its services
sector  and  to  design  its  own  regulatory  frameworks.  In  this  context,  the  offer
presented  by  the  European  Community  and  its  Member  States  to  the  WTO  on  29
April 2003,44while being comprehensive, do not propose any new commitments for
health  and  education  services.  For  other  services  of  general  interest  (e.g.
telecommunications services, postal and courier services, environmental services and
transport services), the offer does not go beyond the state of liberalisation within the
internal  market  and  preserve  the  possibility  of  imposing  universal  service
obligations.

As regards the financing of services of general interest, it is proposed that horizontal
limitations  be  maintained  in  respect  of  subsidies  in  order  to  preserve  the
sustainability  of  the  public  sector.  For  the  subsidies  negotiations  provided  for  by
Article XV of the GATS, which are not very advanced, the Community will in any
case  take  internal  developments  in  respect  of  services  of  general  interest  into  full
consideration.

88. 

89. 

90. 

42

43

44

In addition, the Community and the Member States may apply the exceptions of the GATS
See http://europa.eu.int/comm/trade: «GATS: Pascal Lamy responds to Trade Union concerns
on  public services,  Brussels,  7 June  2002»  and  «Summary  Of  The  EC's  Initial  Requests  To
Third Countries In The GATS Negotiations, Brussels, 1 July 2002»
See in http://europa.eu.int/comm/trade.

62

                                                
4.2

91. 

92. 

93. 

Liberalisation  of  trade  in  services  of  general  interest  in  a  plurilateral  and
bilateral context

In  a  bilateral  context,45  a  number  of  agreements  contain  provisions  for  the
liberalisation  of  services  between  the  Community  and  the  relevant  trading  partner.
They  normally  cover  all  trade  in  services,  with  a  few  exceptions  relating  to  audio-
visual, maritime cabotage and air traffic rights. No specific exception for services of
general  interest  is  provided  for  in  these  agreements,  except  in  cases  where  public
utilities enjoy monopolies or exclusive rights.

The  degree  of  liberalisation  of  trade  in  services  varies  from  one  agreement  to
another. The commitments undertaken by the Parties determine therefore the degree
of  liberalisation  envisaged  for  services  of  general  interest.  While  the  number  of
sectors under consideration and the level of ambition for the liberalisation of services
are different under GATS and bilateral agreements, the position of the Community is
essentially the same in both contexts. In all circumstances, commitments undertaken
by the Community in a bilateral context will also be consistent with the Community
internal market.

In  respect  of  subsidies,  some  bilateral  agreements  (the  EEA  and  the  Europe
agreements)  contain  provisions  that  are  based  on  the  Community  State  aid  regime.
The  Community  monitors  their  implementation  to  ensure  coherence  with  the
Community  regime. The other bilateral  agreements entered into by  the  Community
do not cover subsidies in the services sectors or, if they do, their provisions are not
very stringent.

45

See http://europa.eu.int/comm/trade/bilateral/index_en.htm

63