Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions – Connecting Europe at high speed: recent developments in the sector of electronic communications’(COM(2004) 61 final)
Date: 2004-10-27
Institutions: European Economic and Social Committee
Subjects: ESC opinion, Internet, economic and social cohesion, economic growth, information technology, investment, productivity, telecommunications

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Official Journal of the European Union

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Opinion of the European Economic and Social Committee on the ‘Communication from the
Commission to the Council,
the European Economic and Social
Committee and the Committee of the Regions – Connecting Europe at high speed: recent develop-
ments in the sector of electronic communications’

the European Parliament,

(COM(2004) 61 final)

(2005/C 120/05)

On 29 March 2004 the European Commission decided to consult the European Economic and Social
Committee, under Article 262 of the Treaty establishing the European Community, on the abovementioned
communication.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee's work on the subject, adopted its opinion on 5 October 2004. The rapporteur
was Mr McDonogh.

At its 412th plenary session of 27 and 28 October 2004 (meeting of 27 October) the European Economic
and Social Committee adopted the following opinion by 163 votes to one with three abstentions:

1. Introduction

shows that it has been the largest contributor to European
labour productivity growth.

1.1
The Committee welcomes the analysis and recommenda-
tions in COM(2004) 61 final ‘Connecting Europe at high speed:
communications’
sector of
recent developments
communication from the Commission.
is an astute and
timely report that combines strategic acuity with executive will
to guide the European electronic communications
sector
through its next stage of growth.

electronic
It

in the

1.2 While providing support for the analysis and thrust of
the communication,
this opinion also emphasises areas of
specific concern to the Committee.

2. Background

On 3 February 2004,

the Commission adopted its
2.1
communication ‘Connecting Europe at high speed: Recent develop-
ments in the sector of electronic communications’. This communica-
tion responds to the request of the 2003 spring European
Council for a report on developments in the sector ahead of its
spring 2004 meeting. It is a summary report on the electronic
communications sector in Europe as it affects the Lisbon
strategy, including an analysis of the key issues affecting future
growth. It is also a call for political support of the actions
necessary to support the further development of the sector.

The Lisbon Strategy recognises that

2.2
information and
communication technologies (ICT) are a key drivers of growth,
improvements in productivity and competitiveness. They help
to improve both economic performance and social cohesion.
The Communication underlines the importance of the elec-
tronic communication sector – which includes both a service
segment and an equipment segment – for the health of the
European economy and its key role in boosting productivity.
The sector plays such a role because of its size, dynamism and
impact on nearly all other economic activities. Recent evidence

In spite of vigorous growth in the early 1990s and the
2.3
ambitions of the Lisbon strategy, Europe has fallen behind the
USA and some Asian countries with the pace of production
and use of information and communications technologies (ICT)
and this shortfall in ICT investment hurts European competi-
tiveness (1). Progress in the sector of electronic communications
over the next 18 months is critical
to the success of the
eEurope 2005 Action Plan, and to the longer-term goals of the
Lisbon strategy. This sector grew fast in the late nineties, but
underwent a sharp downturn in 2000 and 2001 which led the
Council and the Commission to closely monitor the situation
in the electronic communications sector and to report ahead of
the 2003 Spring European Council meeting.

2.4
After two years of consolidation the conditions now
seem right for a return to higher rates of growth. According to
the Commission, these conditions include improved financial
conditions for operators, and continued growth in revenue
from services. However, sustainable growth in this sector can
be achieved only through a revival
in capital spending and
further deployment of new innovative services.

2.5
Since the burst of the Internet bubble, telecom operators
have been reducing capital expenditure as part of their consoli-
dation plans. A return to renewed growth for the whole sector
requires a revival in capital spending. The rate of investment
will be affected by what public policy makers do: the imple-
mentation of
the new regulatory framework will provide
greater legal certainty for investment; the implementation of
national broadband strategies will increase access to service; the
encouragement of new services and the availability of innova-
tive content will stimulate demand; and the removal of regula-
tory and technical barriers will facilitate the roll-out of 3G
networks.

(1) Van Ark, B. and Mahony, O. (2003), EU Productivity and Competitive-
ness: An Industry Perspective, http://europa.eu.int/comm/enterprise/
enterprise_policy/competitiveness/doc/eu_competitiveness_a_sector-
al_perspective.pdf.

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This is why four priority areas for action are identified in the
communication:

uncertainty.

proceedings

Infringement

a) Addressing regulatory challenges. Late or incorrect transposi-
tion by Member States of the new regulatory framework for
electronic communications is holding back competition and
creating
are
underway against a number of Member States who have
failed to transpose the new measures. Securing full and
effective implementation of these rules by both existing and
the new Member States remains a top priority for 2004. In
addition, the new rules must be applied consistently by
national regulatory authorities. The common guidelines due
later this year on the remedies that may be imposed on
operators with significant market power will be of particular
importance. They should help regulators to provide the
right investment incentives and to ensure that emerging
markets are not subject to inappropriate obligations.

b) Increasing broadband coverage in underserved areas. In accord-
ance with the eEurope Action Plan, Member States agreed
the
to publish national broadband strategies and all of
EU15, plus a number of the new accession countries, have
now done so. A particular focus should be identifying areas
that risk being placed in the slow lane of the information
society because of insufficient demand – under operator's
profitability criteria - to justify the roll out of broadband
services. EU funding may play a role alongside action at a
national, regional or local
level. Guidelines exist on how
structural funds can be used in such areas. The exchange of
best practice and innovative solutions will be helped by the
creation of a Forum on the Digital Divide later this year.
The Commission will report on the national strategies this
summer.

c) Stimulating demand. While the majority of households in the
EU can access broadband, only a fraction of them have
chosen to do so. Use rather than roll out is becoming the
biggest issue for the broadband market. Experience of coun-
tries with the highest levels of broadband take-up show the
importance of effective network-based competition to drive
down prices and promote innovative on-line services.
In
addition, action by Member States to stimulate demand can
also play a role. They are promoting the use of ICT within
more and more key services – local and national govern-
ment, health and education - and shifting them on-line. This
must be accompanied by further steps to address security,
rights' management and the inter-operability of
digital
different services and devices. The mid-term review of the
eEurope 2005 Action Plan, due to be completed by the
summer, provides an opportunity for further supportive
action.

This converged, data-driven 3G world will be more complex
than the voice-based world of GSM. If mastered, this can
offer exciting new services and a significant boost
to
productivity in the Union. The Commission has outlined its
approach to the mobile communications sector
in its
Communication of 30 June (1) and will continue to work
with stakeholders to define strategic research priorities in
the mobile communications area.

2.6
At the European Telecom Council meeting, which took
place on 8–9 March 2004 in Brussels, the Council underlined
the political commitment
to the Lisbon Strategy goals of
sustainable growth, jobs and social cohesion by endorsing the
calls to action in the communication [COM(2004) 61 final],
and the e-Europe Mid-Term Review communication [COM(2004)
108 final].

Comments

3. General remarks

3.1
The communication deals with a wide and complex
domain of critical importance to the Lisbon vision – the elec-
tronic communications industry. Over the years the Committee
has adopted many opinions dealing with aspects of policy
concerning the sector (2). We now welcome the opportunity to
the electronic
comment on the general development of
communications industry,
the
development of the mobile communications sector and the
new regulatory framework for the industry.

the provision of Broadband,

an excellent

The Commission has done

3.2
job in
supporting the development and execution of policy to support
the growth of the electronic communications sector. With the
vigorous efforts of commercial and social
interests pursuing
their own goals, aided by the strong political support of the
Council of Ministers, national governments and regional autho-
rities, this is a very fast moving and rapidly evolving domain.

d) Successfully launching third-generation mobile communications
(3G). The report of the Mobile Communications and Tech-
nology Platform (comprised of key sector players) set-out a
strategic vision for the future of mobile services, high-
lighting a range of commercial and regulatory challenges.

(1) COM(2004) 447 final Mobile Broadband Services.
(2) See OJ C 169 of 16/6/1999, p. 30; OJ C 368 of 20/12/1999, p. 51;
OJ C 14 of 16/1/2001, p. 35; OJ C 123 of 25/4/2001, p. 61; OJ C
123 of 25/4/2001, p. 36; OJ C 139 of 11/5/2001, p. 15; OJ C 311
of 7/2/2001, p. 19; OJ C 48 of 21/2/2002, p. 33; OJ C 48 of
21/2/2002, p. 27; OJ C 221 of 17/9/2002, p. 22; OJ C 241 of
7/10/2002, p. 119; OJ C 61 of 14/3/2003, p. 32; OJ C 61 of
14/3/2003, p. 184; OJ C 220 of 16/9/2003, p. 33; OJ C 220 of
16/9/2003, p. 36; OJ C 80 of 30/3/2004, p. 66 and others.

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3.3
Given the complex dynamic character of this topic and
its importance to the economic and social development of the
Union, the Committee believes it is important for all interested
parties to regularly have their say so that a more complete and
integrated policy can be implemented. The Committee supports
the Commission's intention to continue working with stake-
holders to inform policy in areas such as Intellectual Property
Rights, Digital Rights Management, trust and security issues,
interoperability and standardisation, spectrum management and
coverage of
remote and rural areas. The Committee will
continue to take an active interest in the sector and all these
issues.

levels of

3.4 We particularly support the emphasis the Commission
has put on the need for interoperability and openness at
the technology and services: device to
various
network; device to device; network to network; and between
content and/or applications. Without appropriate interoper-
ability and platform openness,
the development of a mass
market for the new technologies will be severely hampered.

3.5
As stated at 1.1 above, the Committee is supportive of
the communication and congratulates the Commission on the
excellent work it is doing in this area. We note that extensive
research and consultation has gone into the understanding of
the electronic communications sector and the development of
policy to foster strong and sustained growth: we are strongly
supportive of the eEurope 2005 Action Plan and support the
actions recommended in the communication COM(2004) 61
final.

For the sake of emphasis, we would like to stress the

3.6
Committee's particular interest in a few areas:

3.6.1 R e g u la tor y fr a me w or k

The Committee welcomes

the new Regulatory
3.6.1.1
Framework for electronic communications which provides
greater predictability, coherence and a more harmonised
approach to the way markets operate across the Union. The
greater certainty and transparency provided by the framework
will encourage investment in the electronic communications
sector and speed-up the pace of competition, and the introduc-
tion of new innovative services.

3.6.1.2 We agree with the Commission that a technology-
neutral, open-standards, coordinated approach to the develop-
ment of facilities-based competition on the supply-side of the
electronic communications sector is critical to the creation of a
vibrant and competitive market. The Committee is pleased that
the new framework encourages
fair competition between
diverse access technologies (broadband, 3G, digital TV etc.).

Such an approach will lower network costs and the prices for
services, and it will increase the ease of use and mobility for
customers. A technology-neutral, open-platform approach to
the sector will also greatly stimulate the demand for services.

3.6.1.3
Thus we welcome the technology-neutral approach
taken by the new regulatory framework to reflect the conver-
gence between fixed and mobile services, on-line and broadcast
content and a whole range of different delivery platforms. We
want the Commission to ensure that interoperable platforms
are implemented in accordance with the Framework Directive
2002/21/EC.

A truly competitive market for services depends on
3.6.1.4
competitive pricing for the connection to the customer's home
or premises (the local loop). At present, in most markets, the
introduction of new services and lower prices is hampered by
control of
loop by the dominant operators. The
Commission should keep under review whether the regulatory
framework is adequate to un-bundle the local loop from the
dominant operators' control in every market.

the local

3.6.1.5
The Committee deplores the fact that it was neces-
sary for the Commission to take infringement proceedings in
the European Court of Justice against Member States for failing
to implement the new regulatory framework. We ask that the
Commission continues to prosecute the full implementation of
the framework in all States, including the new entrants.

3.6.1.6 We support the recent agreement among the Euro-
pean Regulators Group on a Common Position on how they
apply remedies to address competition problems in the newly
opened markets for electronic communications (1). Recognising
that the purpose of the regulatory framework is to roll-back
regulation and promote competition, the Committee asks the
Commission to ensure the framework is implemented in a way
that stimulates the emerging markets and services, and does
not hinder their development. We ask the Commission to scru-
tinise the adequacy of remedies for infringement and their
consistent application in the Member States.

3.6.2 B r oa db a nd r oll-ou t

eHealth,

such as

3.6.2.1
A widespread, secure broadband infrastructure is
essential for the development and delivery of services and appli-
and
cations
eLearning, making broadband vital to European growth and
quality of life in the years ahead. Broadband access is a public
good, a utility that should be available to all EU citizens as a
right. We recommend that the Commission consider the inclu-
sion of broadband in the list of Universal Services.

eGovernment

eBusiness,

(1) http://erg.eu.int/doc/whatsnew/erg_0330rev1_remedies_common_-

position.pdf.

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3.6.2.2
The eEurope 2005 Action Plan calls for widespread
broadband availability and use in the European Union by
2005, but we are lagging behind our ambitious targets. Unless
the pace of broadband roll-out increases, particularly outside
urban centres, the Union will not achieve the Barcelona objec-
tive (1).

in the communication on the need to roll-out broadband to
underserved areas. And, in the detailed review of the national
broadband strategies, we ask the Commission to emphasise the
need for broadband networks to be extended to cover the
whole of
the Union in a timely fashion and to highlight
network gaps in future reports.

3.6.2.3
The Committee welcomes the submission of national
broadband roll-out strategies by the EU15 Member States and
notes that the new Member States will table their strategies
before the end of 2004. We note the positive first assessment
of the plans by the Commission (2) and we look forward to a
more detailed report on the strategies in June.

3.6.2.7 We support the Quick-Start initiatives and the avail-
ability of structural funds to provide access in the rural and
commercially less attractive areas of the Union, however we
want the Commission to maintain close scrutiny of the imple-
mentation of the National Broadband Strategies of the member
states and to focus on problems of pace, coverage and quality.

3.6.2.4
However, we dislike the wide definition of ‘broad-
band’ used in various studies and reports (for example, access
capacity as low as 144kbs is considered ‘broadband’ by the
COCOM04-20 FINAL report referenced below, and the same
report includes 3G connections in Italy's total of broadband
access lines but not for other Member States). This lack of
precise definition greatly reduces the transparency and useful-
ness of the term 'broadband' in all deliberations. We call on the
Commission to legislate for a precise and demanding definition
of the term 'broadband' for use in the Union.

3.6.2.5 We also dislike that the broadband coverage statis-
tics do not deal with the quality of access available. We call on
the Commission to include a minimum standard of connection
quality in its precise definition of ‘broadband’. Only then will
broadband statistics be meaningful.

The Committee regrets that

the Communication
3.6.2.8
from the Commission deals only with the geographical digital
divide (underserved areas) and does not deal with the financial
digital divide (inability to afford network access). The Commis-
sion's argument that high-speed services improve living condi-
tions by reducing distances and by facilitating access to health-
care, education and public services applies not only to geogra-
phically isolated citizens but also to the poorest.

3.6.2.9
The Committee believes that the Commission's asser-
tion that any government intervention to counter the digital
divide must be carried out in accordance with the principles of
and laws on competition is a fallacy: the digital divide exists
because the market is not interested in the target population.
There is therefore a need for a statutory public service remit
setting out the precise nature of the public service obligations.

3.6.2.6
The Committee is strongly aware of the need to
aggressively bridge the digital divide opening-up across Europe,
which hurts the less advantaged and e-Inclusiveness. Although
we note that the Council of Ministers has endorsed a shift in
policy emphasis from connectivity to the development and the
effective use of innovative services, we are concerned about the
momentum and coverage of the roll-out of broadband. We are
particularly concerned about
the disparity between certain
countries and regions in the latest broadband penetration statis-
tics from the Communications Committee of
the Commis-
sion (3). Within the EU15, 20 % of the European population is
currently excluded from broadband access because network
coverage is insufficient. We welcome the Commission's focus

(1) COM(2002) 263 final eEurope 2005: An information society for all.
(2) IP/04/626 Connecting Europe at high speed: Commission takes stock of

national broadband strategies.

(3) COCOM04-20 FINAL Communications Committee Working Docu-

ment Broadband Access in the EU: Situation at 1 January 2004.

3.6.3 R oll-ou t a nd de ve lop me nt of 3G

The Committee welcomes the setting-up of

3.6.3.1
the
Mobile Communications & Technology Platform by the
Commission,
last October, to bring together leading players
from among mobile operators, equipment and component
manufacturers and content providers. We also welcome the
first report of this group (4) which set-out 20 recommendations
on steps needed to support and sustain the roll-out of mobile
networks and services across Europe – including action on
international
research, standards, content, security, spectrum,
co-operation and regulation.

(4) IP/04/23 3rd Wave Mobile for Europe.

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3.6.3.2 We are pleased that in the Mobile Platform report,
and in statements from the Commission, the emphasis for 3G
is on providing a customer-focused, secure, environment to
support ‘anytime’, any place access to high-speed data and
entertainment services on the move through a range of broad-
band-enabled devices.

3.6.4 N e w se r vi c e s a nd th e st i mu la ti on of de ma nd

The Committee fully endorses the views expressed
3.6.3.3
by all parties that open, interconnected networks and interoper-
ability in applications and services is the goal and we welcome
the commitment of the Mobile Platform to preparing a strategic
research agenda for a future Wireless World within the 7th
Research Framework Programme.

3.6.3.4
The Committee would like the Commission to
bring-to-bear whatever pressure it can to make it easier and
more cost effective to roll out the new 3G networks. In particu-
lar, the Member States must help to quickly resolve the plan-
ning and environmental impact problems that are holding-up
the roll-out of this important new platform.

3.6.4.1
The Commission advises that even in areas where
there is 90 % availability of broadband access, take-up is low
(average of 12 %) and decelerating. The reasons for this are
high prices, poor quality and lack of relevant content – consu-
mers do not have sufficient interest in acquiring broadband
service.

3.6.4.2
Developing content and services to stimulate the
take-up of broadband connections is viewed as vital to the
take-up of
ICT, and hence to competitiveness, productivity
growth and employment across the European Union. In this
regard, the Committee welcomes the recent proposal from the
Commission for an eContentplus programme (2005-2008) (1)
which aims to create conditions for broader access to and use
of digital content.

3.6.3.5 We are concerned about the high level of payments
made by network operators for 3G licences in some Member
States, and the negative effect
this might have on future
strategy. We would like the Commission to share its detailed
views on this issue and advise measures to ameliorate any
adverse affects on Union strategy for ICT deployment and use.

3.6.4.3
The Committee recognises that demand stimulation
on deployed broadband and 3G networks, the need for new,
innovative services, competition and the roll-out of networks
are all interrelated. Each development helps the other. Having
dealt with the supply-side issues above, we welcome any initia-
tives taken by the Commission to encourage the development
of new and innovative services that will boost consumer
demand and leverage the power of the new technologies and
networks.

3.6.3.6
In the interests of consumers and the efficient use of
resources in the EU, we would like the Commission to consider
legislating for facility sharing among 3G operators, where this
is practical. Such a policy would speed-up availability of access,
reduce negative environmental concerns, reduce the cost of
providing service. We note the Commission's advice that some
major operators are against
facility sharing for competitive
reasons, but we believe that the best interests of the Union as a
whole should prevail over the narrow commercial motives of a
few operators.

believes

The Committee

3.6.4.4
interoperability
between networks, platforms and devices will provide a big
stimulus to service adoption and growth. We encourage the
Commission to push for interoperability within the regulatory
framework, and in its dealings with all stakeholders in the elec-
tronic communications sector.

that

3.6.3.7 We note that the Mobile Platform believes that a
new overall policy framework is needed to address the 3G
issues coherently. The group is meeting again in June and we
look forward to the communication promised by the Commis-
sion in response to the outcome of the June meeting.

3.6.4.5 We support the Commission's call on Member States
to maintain the momentum behind the roll-out of government
e-services (including eHealth, eLearning etc.) and recognise the
public sector to be a major driver of demand in the early stages
of development of these new information services.

(1) COM(2004) 96 final, Proposal for a Decision of the European Parliament
and of the Council: establishing a multiannual Community programme to
make digital content in Europe more accessible, usable and exploitable.
EESC Opinion: OJ C 117 of 30/4/2004, p. 49.

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In particular, we welcome

3.6.4.6
the Commission's
commitment to work with industry to address the identified
issues hampering the development of new services – Digital
interoperability, micro-
Rights Management
payments, m-payments etc.
In this regard, we welcome the
recent communication (1) and consultative process dealing with
Intellectual Property Rights and we call the attention of the
Commission to the Opinion of the Committee in 2003 on
IPR (2).

(DRM) systems,

3.6.4.7
The Committee stresses the importance of security
issues to the take-up of new services by consumers. Consumer
confidence in new technologies and services will depend on
assurances re the protection of consumers' interests.

3.6.4.9 We also welcome the support given to R&D under
the 6th Research and Development Framework Programme. In
the electronic communications technology sector, as in all
other areas of technology development, we stress the need for
Europe to invest in R&D and innovation,
in line with the
targets we set ourselves under the Lisbon strategy. Recognising
that this sector has undergone a period of consolidation and
retrenchment of investment, the Committee now calls on all
parties – the EU, Member States and the private sector – to
demonstrate renewed commitment to investment in the future
of electronic communications by significantly increasing the
scale and rate of R&D activities.

3.7 Concluding remarks

3.6.4.8
The Committee asks the Commission to continue its
workshops with operators, internet service providers, content
providers, broadcasters and the entertainment industry, on how
they can adapt their activities through new forms of partner-
ships to create new business models and services for a conver-
gent, mobile Union.

Finally, the Committee further welcomes the publication of the
eEurope 2005 Action Plan: Mid-term review [COM(2004) 108
final], and the confirmation that the eEurope 2005 targets
remain valid in the context of the enlargement of the EU to 25
members. We look forward to reviewing the adjusted eEurope
2005 Action Plan and the comments on it by the June Council.

Brussels, 27 October 2004.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

(1) COM(2004) 261 final The Management of Copyright and Related

Rights in the Internal Market.

(2) COM(2003) 46 final Proposal for a directive of the European Parliament
and of the Council on measures and procedures to ensure the enforcement
of intellectual property rights. EESC Opinion: OJ C 32 of 5/2/2004, p.
15.