Source: EURLEX
Language: en
Format: md

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COMMISSION OF THE EUROPEAN COMMUNITIES

                          COM(94) 682 final

                          Brussels, 25.01.1995

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**GREEN PAPER** **ON** **THE LIBERALISATION OF**

**TELECOMMUNICATIONS INFRASTRUCTURE AND**

**CABLE TELEVISION NETWORKS**

_**PART II**_

_**A COMMON APPROACH**_

_**TO**_ _**THE PROVISION**_ _**OF**_ _**INFRASTRUCTURE FOR**_

_**TELECOMMUNICATIONS**_ _**IN**_ _**THE EUROPEAN UNION**_

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               (presented by the Commission)

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PREFACE

On 25 October 1994 the European Commission adopted Part I of a Green Paper on
the liberalisation of telecommunications infrastructure and cable television networks.

In that document the Commission set out the general principles and timetable for
action which form the basis for the consultation on the development of a common
approach to infrastructure in the European Union.

Part I, together with Part II of the Green Paper, launch the process of formulating
Union policy on infrastructure, which was called for in Council Resolution
93/C213/01 of 22 July 1993 on the 1992 Telecommunications Review. This was
seen by Council as a prerequisite to extending the process of liberalisation beyond
voice telephony to the whole of the telecommunications sector.

The Commission's White Paper on Growth, Competitiveness and Employment
**(COM(93)** **700 final) and the Report on** _**Europe and the global Information Society**_
by the group of leading industrialists under the Chairmanship of Commissioner
Bangemann, emphasise the need within Europe for an efficient and effective
communications infrastructure, capable of supporting the emerging Information
Society.

This priority was reflected in the Bangemann Group Report whose first
recommendation is a request to Member States to _"accelerate the on-going process_
_**of liberalisation of the telecommunications sector by opening up to competition**_
_**infrastructures and services still in the monopoly area".**_

The Commission's Action Plan on the Information Society (COM(94) 347 final,
17.7.94) subsequently gave highest priority to the early formulation of a policy on
infrastructure, both in relation to alternative telecommunications networks and cable
networks and in relation to establishing a general regulatory framework for
infrastructure liberalisation for the delivery of voice telephony services to the general
public after 1 January 1998.

Finally, the Council of Telecommunications and Industry Ministers, meeting together
**on 28 September 1994 stressed** _**"..the**_ _**importance and urgency with respect to**_
_**rapidly evolving market conditions of setting a clear and stable regulatory and legal**_
_**framework allowing market operators to engage in business activities, to invest and**_
_**to take initiatives to bring about**_ _**the Information**_ _**Society ".**_

It is against this political background that Part I of this Green Paper proposed, in
order to provide a coherent approach to infrastructure competition, a clear principle;
**namely,** _**"that**_ _**provided the necessary safeguards are in place, the providers of**_
_**telecommunications services which are open to competition should have a free**_
_**choice of underlying infrastructure for the delivery of such services".**_

In response the Council of Telecommunications Ministers meeting on 17 November
adopted a resolution confirming the principle of general liberalisation of

Conclusions of the 1787th session of Council 9561/94 (Press 197 - G), 28.9.94

**-r**

**infrastructure by 1 January** **1998** **for the full liberalisation of infrastructure** **[2]** **, including**
**additional transitional periods for certain Member States in line with Council**
**Resolution 93/C213/02** **[3]** **, and asked the Commission to develop the necessary**
**regulatory framework.**

**Part II of the Green Paper now launches a broad discussion with all interested parties**
**of the major issues involved in the future regulation of network infrastructure. This**
**will allow the development of a common approach to infrastructure provision in the**
**European Union. This approach must be fully integrated with the range of Union**
**policies designed to support the Information Society.**

**A number of Member States have urged the Commission in an associated statement to come forward**
**as quickly as possible with proposals to provide for the use of alternative infrastructure for**
**telecommunications services which have already been liberalised.**

**Council Resolution of 22 July 1993,** **OJ** **C213/02,** **6.8.93**

iii

SUMMARY I

I. INTRODUCTION 1

II THE APPROACH CHOSEN AND THE SCOPE OF THIS GREEN PAPER 9

III THE CURRENT SITUATION 14

III. 1 Communications Infrastructures 14

111.2 The Market Situation.: 17

111.3 The Regulation of Infrastructure in Member States 19

111.4 Conclusions 24

IV THE MAJOR DRIVERS FOR CHANGE 25

IV.l Market and Commercial Developments 25

IV.2 Technological Developments 29

IV.3 Regulatory Agenda 33

IV.4 Conclusions on the Major Developments 40

V UNIVERSAL SERVICE 41

V.l Universal Service in telecommunications 41

V.2 The development of Universal Service 46

VI. EMPLOYMENT, SOCIETAL AND CULTURAL ISSUES 47

VI. 1 Employment and the Information Society 47

VI.2 Employment and the telecommunications sector 48

VI.3 Societal and cultural aspects 52

VE THE EXTENSION OF THE PRINCIPLES OF THE EUROPEAN

UNIONS TELECOMMUNICATIONS POLICY TO INFRASTRUCTURE 55

Vn.l General Principles 56

Vn.2 Exclusive and Special Rights over Infrastructure 58

_~7îr~_

VII.3 Licence award procedures, selection criteria and the conditions which

may be attached to licences for infrastructure 59

V1I.4 Interconnection and interoperability 70

VII. 5 Open access to public infrastructure - application of the competition

rules and ONP principles 75
VII.6 Safeguarding and developing universal service in a competitive

environment 80

VII. 7 The particular circumstances of peripheral regions with less developed

networks .88

VII.-8 Competitive Safeguards 92

Vn.9 The international dimension   - international trade in

telecommunications services 95

VII. 10 Access to rights of way, numbers, frequencies, and directory services 103

VII.ll Action in Neighbouring Fields 108

VIII FUTURE DEVELOPMENT OF THE REGULATORY FRAMEWORK TO

MEET THE CHALLENGES OF CONVERGENCE 112

IX ISSUES FOR CONSULTATION 115

IX.l Towards the Information Society 115

IX.2 Major changes and positions 115

IX.3 Timetable for action 128

IX.4 Public consultation 128

ANNEX 1 : GLOSSARY OF TECHNICAL TERMS 130

ANNEX 2 : STUDIES CARRIED OUT FOR THE COMMISSION IN

PREPARATION FOR THIS GREEN PAPER .....140

ANNEX 3 ; LIST OF KEY REGULATORY MEASURES AND PENDING

PROPOSALS IN THE FIELD OF TELECOMMUNICATIONS 141

_**1Ï**_

**SUMMARY**

Europe is shifting towards an information-based economy, where networks and
network infrastructure play as significant a role as did the rail networks in
transforming the European economies in the last century.

For Europe to meet the challenges presented by this Information Society, it is vital
to ensure that business, industry and Europe's citizen's can access modern,
affordable and efficient communications infrastructures over which a rich and
diverse range of traditional and new multi-media services will be offered.

This revolution has been recognised at the highest political level. In their
conclusions on the Bangemann Group Report, the Heads of State and
Government meeting in Corfu considered _"that_ _the current_ _unprecedented_
_technological revolution in the area of the Information Society opens up vast_
_possibilities for economic progress, employment and the quality of life"._ These
changes are being driven by technology and by market forces. New global and
regional partnerships are being formed to enable business and ordinary citizens to
benefit from the opportunities offered by the convergence of broadcasting,
telecommunications and information technologies.

Given the political consensus on the liberalisation of telecommunications
infrastructure, it is now vital for Europe to put in place a clear and predictable
regulatory environment. Such a framework will ensure:

- the completion of the internal market for telecommunications, stimulating
the development of both basic and advanced infrastructures in the Union;

- providing Europe with efficient and cost effective telecommunications
services, benefiting both business and consumers ;

- stimulating public and private sector investment, growth and innovation,
thereby contributing to employment and cohesion;

This Green Paper now launches a broad consultation on the issues surrounding
such a future telecommunications environment. The key questions are :

How _cm_ universal service Ce developed? How much does it cost _m4_ who
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Major market and technological developments

Despite the turndown in economic activity in much of the OECD area, the
telecommunications sector continues to grow substantially in both volume and
value terms. Total turnover for telecommunications services in the European
Union in 1993 was about 120 billion ecu or nearly 3 per cent of overall GDP,
despite falling price levels in the sector. The nominal growth rate over the last 5
years has averaged about 7 per cent annually.

As an indicator of telecommunications usage and growth, international public
telephone traffic in the Union rose by just over 10 per cent in 1993 compared to
volume increases of about 11 per cent in 1991 and 1992.

It is the new service market areas that are producing the largest growth rates,
particularly where competitive service provision has occurred. In particular, mobile
communications has displaced data communications and value-added services as
the most dynamic part of the service market. In the Union, mobile services
account for about 5 per cent of subscriber lines and nearly 10 per cent of service
revenues. In the rest of the European Economic Area the figure is significantly
higher. By the beginning of 1998, the date already agreed for the full liberalisation
of telecommunications services, there is the real prospect of well over 10 per cent
of telephone subscribers in the enlarged Union being served by competing
wireless operators.

Table **III.2** - Turnover of EU information sector in 1993.4

Electronic publishing
2%

Publishing
22%

Telecom services

27%

Micro-electronics

2%

Audiovisual services

10%, < = = = _ =

Telecom equipment
6%

Consumer electronics

5%, = ^ ^ =,

Computer equipment
**11%**

**Software & Services**

**15%**

**Total Market :** **414** **billion ECU**

Source : ID ATE

**In contrast, despite the development of integrated or multimedia** **services**
**(combinations of voice, data and images), and considerable speculation about the**
**emergence of multimedia networks, turnover** **for** **these new markets in Europe is**
**as yet limited. The first applications are occurring in specific business markets**
**such as intra-company advanced communications, video-conferencing, electronic**
**data interchange, broadcasting and news services for the financial sector, certain**
**ISDN** **applications, the emergence of some tele-working and the exploitation of**
**some CD ROM products.**

**However, there is no significant turnover yet from the provision of multimedia**
**services to the residential sector. Moreover, telecommunications and television or**
**broadcasting services are in the main currently supplied by quite separate**
**networks. This is the case even in the UK where in some areas telephone and**
**cable TV services are being marketed jointly by companies with local cable TV**
**and telecommunications franchises.**

**Total subscribers to cable television in the Union at the end of 1993 were 26**
**million,** **half of which were in Germany. This total** **corresponds** **to approximately** **15**
**per cent of telephone lines.**

**The total turnover of broadcasters in the Union at the end of** **1993,** **which includes**
**both content and transport or transmission revenues, was about 27 billion ecu.**
**Turnover for the provision of cable television was approximately 3 billion ecu.**
**These totals are equivalent to about 22 per cent and about 2.5 per cent**
**respectively of telecommunications services revenues.**

**The rapidity of technological and commercial developments combined with**
**evolution in the regulatory environment in many parts of the world is already**
**leading to a substantial degree of services and network competition and is making**
**infrastructure competition inevitable.**

**Moreover, because of the risks and uncertainties associated with some**
**applications and technologies, market forces are required to unlock the significant**
**potential** **for** **innovation** **and** **investment** **for** **the** **development** **of**
**telecommunications and the Information Society.** **Many of the fastest growing**
**parts of the telecommunications sector are in niche markets, subject to**
**competition from new players.**

**At the same time, attention must be paid to the social challenges and**
**consequences of harnessing these market, technological and regulatory trends.**

**The Major issues raised**

**Universal service**

**The Commission reaffirms the fundamental importance of maintaining and**
**developing universal service in the European Union, on the basis of a common**
**minimum set of services and infrastructure. This political priority was recognised**
**in Council Resolution** **93/C213/01** **on the review of the situation of the**
**telecommunications sector and the need for further development in that market,**
**which established as a major goal for Community telecommunications policy the**
**liberalisation of all public voice telephony services, whilst maintaining universal**
**service.**

_VII_

**This Resolution recognised the importance, for the individual** **consumer** **and for**
**the competitiveness of** **industry** **and commercial users, of a Union-wide**
**telecommunications system offering to all users, including specific social groups,**
**reasonable and affordable charges for access and use, high quality of service and**
**technological innovation.** **The importance of universal service was equally**
**emphasised in the Resolution of the European Parliament of the 20th April 1993**
**whilst supporting the liberalisation timetable and recognising the need to take full**
**advantage of the potential for exploiting alternative infrastructures in Europe to**
**supply and develop telecommunications services.**

**The Green Paper launches discussion on three key issues which must be**
**addressed at a Union level with respect to universal** **-** **service in the**
**telecommunications sector.** **The first concerns the elements that comprise**
**universal service, the second the methods for costing universal service and the**
**third,** **the means of financing uneconomic aspects of universal service provision in**
**a competitive telecommunications environment.**

**While** **recognising the political consensus that the core of universal service**
**currently consists of voice telephony service, the Green Paper reinforces the view**
**that** **the** **concept of Universal Service must evolve over time as technology and**
**user needs develop.**

**With regard to the cost of universal service, the Green Paper reinforces the view**
**that a common and progressive approach is required at a European level, even**
**though the** **costs** **involved will be different in different Member States.** **In**
**particular, the approach must be based on a calculation of the net cost to the**
**operator of serving customers in terms of :** **(i) the revenue** **generated** **by a**
**customer (including rental and call charges paid by the customer, and** **the**
**revenue generated by in-coming calls to that customer), and (ii) the actual cost of**
**providing service to that customer. The calculation of universal service costs must**
**also recognise the fact that even low-profit customers have** **a** **marketing** **'value'** **to**
**a commercial organisation.**

**With regard to** **financing,** **the Green Paper recognises that all market players**
**should in principle contribute to the provision and/or** **financing** **of universal service.**
**The financing mechanisms would** **be** **put in place at a national level, but within a**
**framework set at a Union level.**

**The Green Paper considers two financing methods in detail, either (i) the use of**
**access charges or (ii) the use of independently administered universal service**
**funds.** **The initial preference expressed is for Universal service funds.**

**Interconnection and interoperability**

**Interconnection of competing telecommunications infrastructures and services will**
**be the central commercial issue in a competitive environment. Interconnection will**
**be primarily a matter for national regulatory authorities, but within an overall**
**European framework.** **All interconnection agreements can be subject to the**
**competition rules, but additionally, in the case of interconnection with public**
**telecommunications infrastructure, it is important that there is a common**
**regulatory** **approach** **at a European level.**

**The Green Paper outlines the scope of an Interconnection Directive - already**
**foreseen in the Commission's Action Plan on the Information Society.** **The**

TfllT

Directive would provide a framework for negotiating interconnection terms,
including interconnection charges, and provide dispute resolution mechanisms at
a national and European level. It would also provide the legal mechanism for
implementing schemes for sharing the cost of universal service among the market
players.

**Licensing procedures and conditions for infrastructure for the provision of**
**telecommunications services**

The Green Paper addresses many of the licensing issues which would have been
raised in the context of services liberalisation, even without the agreement on
infrastructure liberalisation. These are :

- Who will licence ?

- How will licences be granted and what are the grounds for limiting numbers ?

- What conditions can be put into licences ?

Part II indicates that licensing of telecommunications infrastructure, networks and
services will remain a matter for national regulators, but again within a framework
provided at a European level. In terms of licensing procedures and conditions,
the framework builds on the approach already followed in the telecommunications
sector since 1990, based on the two categories of legitimate restrictions which
define the scope of licensing procedures and conditions. These are (i) the
essential requirements as defined in Community law, (such as rights of way or
availability of frequency), which would be expanded to include environmental
protection and (ii) public service specifications in the form of trade regulations
(which are rules relating to the quality, availability and permanence of
telecommunications services provided over the licensed infrastructure.

The Green Paper proposes that the number of licences for _public_ _télécoms_
_infrastructure_ can only be restricted on the basis of these two categories; and in
the case of _private_ _infrastructure,_ only on the basis of essential requirements.

The Green Paper also makes proposal concerning the procedures and criteria for
awarding licenses and comments are invited on the degree to which these should
be harmonised at a European level. It also considers the range of conditions
which may be attached to licences, which again is delimited by the essential
requirements and public service requirements in the form of trade regulations,
depending on whether the infrastructure concerned is public or private.

Finally, any approach must be proportional to size and market position of the
licensed operator, and take account of whether the operator enjoys rights of way
or not.

**The** **conditions** **for fair competition**

The Green Paper recognises the need for fair and effective competition in the new
environment through the enforcement of the Treaty competition rules. This will be
significant not only in encouraging market entry, but also in addressing the new

##### **if**

players and the new co-operative ventures, straddling a number of industries
which are going to shape the emerging telecommunications markets.

In this context it is important that companies can plan and invest within a
predictable environment; the competition rules will have a role to play in providing
such predictability.

The Green Paper at the same time recognises that those rules complement the
application of other provisions in the Treaty in relation for example to the free
movement of services or the right of establishment.

**Employment and the Information Society**

The issue of employment constitutes an essential part of the consultation on this
Green Paper. The current employment situation in the telecommunications sector,
as identified in Part II, can be summarised thus:

- employment levels of the main traditional source of telecommunications
employment, the dominant TOs, has been declining for several years. This is
a feature of competitive and monopoly markets alike and results from the
adjustment by TOs to technological and commercial changes;

- New employment opportunities for the sector result from new entrants and
new service areas, for example, in the area of mobile communications.

- The best means of reversing the overall trend is through the increased
investment and market expansion which would flow from liberalisation,
strengthening growth and employment in every sector of the European

economy.

However, quantitative employment effects within the telecommunications sector
alone should not be the principal consideration in the liberalisation debate. The
central and overriding argument for telecommunications liberalisation must be that
it will lead to greater efficiency in the information sector generally, and to
productivity and competitiveness gains for the wider European economy taken as
a whole. As such, it will be an important step in the fight against unemployment in
all sectors of European industry.

In all of these areas, the liberalisation of infrastructure will be a facilitator of the
improved services and choice which the Information Society may bring about. At
the same time, full account must be taken in the consultation of the risks which
future social changes present. In particular, consideration must be given to the
potential impact of new patterns of work on individuals, for example, in respect of
home working and/or tele-working.

**The social challenges**

As recognised in the Bangemann Group Report on _Europe and the Global_
_Information Society,_ information and communication technologies now pervade
our lives, affecting the way we work, the way we learn, the way we spend our

leisure time and the way we interact with each other. The Information Society is
rapidly developing; new investment opportunities are being created everywhere
and the application of information and communication technologies are affecting
all industries and services in our society. The Green Paper considers these
developments.

The major investments in communications infrastructures and networks are being
undertaken to widen and develop the provision of telecommunications services to
industry, commerce and individual customers. Communications technologies are
already being exploited in many industrial and service sectors. There is the
prospect of further widespread expansion of IT into banking and insurance,
publishing and the media, marketing and household applications.

The Structural Funds have been contributing substantial amounts to the
modernisation of telecommunications infrastructures in Member States,
particularly in less developed ones, and important telecommunications
programmes have been agreed in the context of the 1994-1999 Structural Fund
programmes. The Commission has been careful to choose the appropriate
intervention rates to ensure that the benefit of Community financial assistance
goes to the consumer and that this assistance is intended to materialise
investments which would not have otherwise taken place. This is particularly true
for investment programmes in telecommunications with revenue bearing potential
and also in cases where the investor, from the Member State point of view, is not
a public body but private capital has also been mobilised. The Commission will
ensure that these principles, which of course are applied after careful examination
of the economic and other aspects of the investments concerned, will continue to
apply in a liberalised environment in the telecommunications sector.

The potential fields of application are many and include major areas of public
expenditure, such as education, healthcare and transportation.

In pursuing general societal goals, such as ensuring equal opportunities for every
citizen, and extending the benefits of the Information Society to households,
industry, government and public services, Member States are likely to be faced
with situations which will require regulatory intervention in order to guarantee the
provision of infrastructure.

An example addressed in the Green Paper is the need to avoid the emergence of
a dual society based on information "haves" and "have nots". This could result
where parts of the population were either unable to access new services or were
not comfortable in using such services. In such a situation the 'social case' for
regulatory intervention might, for example, lead to action to facilitate access for
schools or educational centres to the Information Society.

The international dimension

Full account must be taken in the consultation of the broader international agenda
and, in particular, the current WTO/GATS negotiations on basic
telecommunications services (which include infrastructure). The political
agreement on 17 November has given a clear signal to our negotiating partners
on the direction which the Union is taking. The Green Paper, by providing the
detail behind the principle of liberalisation, can only help the negotiations.

At the same time, the Green Paper takes account of the Community's existing
commitments within that negotiating framework, whilst clearly indicating our
objective of ensuring comparable and effective access to global markets.

**XI**

**Towards the Information Society**

**The Green Paper also views the common approach to infrastructure more broadly**
**in the context of the overall approach to the Information Society.** **A clear**
**framework for infrastructure** **liberalisation** **is complementary to the evolution of**
**Union policy in other neighbouring fields, such as intellectual property rights,**
**audio-visual** **policy and media concentration - all areas which are central to the**
**emerging Information Society. The Green Paper draws on these various initiatives**
**and builds on the substantial work and consultation already carried out in these**

**areas.**

**The Green Paper does not aim to extend telecommunications regulation to other**
**sectors of the economy. Rather it recognises that there are very different policy**
**objectives which underlie the regulatory approach in these different sectors and**
**that these different objectives will remain, even when technology and markets**
**converge.** **Nevertheless, the consulation provides all those interested in the**
**telecommunications sector an opportunity to address these issues, and** **to** **look**
**ahead to the need for a coherent approach to regulation between the** **different**
**sectors which the Information Society** **will** **demand.**

**In placing infrastructure liberalisation within the more general context of the**
**Information Society, the Green Paper recognises that immediate problems of**
**terminology arise in distinguishing between infrastructure and services, or in**
**delineating different types of service involving telecommunications, broadcasting**
**and/or multimedia components. This Green Paper often refers generically to**
**"services" ( - the offerings delivered over or via infrastructure) to encompass**
**traditional telecommunications services (voice telephony, data transmission,**
**valued-added services (such as voice mail or video conferencing) as well as**
**network management services) and new information, multimedia and other**
**services.**

**At the same time, where appropriate for regulatory purposes, reference is also**
**made more narrowly to "telecommunications services" in order to indicate that the**
**proposed regulatory regime distinguishes between telecommunications activities**
**and radio and television broadcasting to the public.** **It must nevertheless be**
**recognised that distinctions should be drawn in a flexible manner.**

**Infrastructure as the delivery mechanism for the new interactive information flows**
**is an essential raw material for the Information Society. The future regulatory**
**environment for infrastructure is therefore central to achieving the full potential**
**which that Society can offer.**

**•** **Firstly, by removing restrictions on the combination of different wired and**
**wireless network infrastructures and technologies, this common approach will**
**bring about a fully integrated personal communications environment. This will**
**offer every business and every citizen full mobility and Europe-wide access to**
**all the range of new services which the Information Society will offer.**

**•** **Secondly, the establishment of a predictable regulatory environment will**
**stimulate innovation in the delivery of, and affordable access to, broadband**
**capacity,** **this will be the backbone for innovative multi-media products,**
**offering the user exciting new services fully integrating voice, data and images,**
**from distance learning and video-conferencing in the office environment to**
**telebanking and video on demand in the home.**

**X(l**

Finally, the combination of these first two elements - full mobility and
broadband capacity  - will be the driver of major changes in society and will
stimulate new approaches to communications, information services and to
content. These changes, which lie outside the scope of this Green Paper, will
have a major impact or the way we live and the way we work, as our lives
become increasingly "interactive" and "on-line".

**The major changes and positions**

On the basis of the priorities established by Union policy in the field of
telecommunications, the need for a coherent regulatory framework regarding the
establishment and provision of telecommunications infrastructure, the analysis of
market and technological developments and taking into account the applicable
Treaty rules, the Commission invites comments on the proposals and on the
application of the measures set out in the Table below.

**1** **Removal of special and exclusive rights over the** use **of infrastructure**
**for the provision of telecommunications** services

Part I of the Green Paper has proposed the basic principle that where services are
open to competition there should be a free choice of the underlying infrastructure
for their delivery.

From this basic principle two positions followed :

    - The removal of restrictions on the use of own or third party infrastructure
authorised in Member States for services already liberalised in the following

areas:

      - for the delivery of satellite communications services.

      - for the provision of all terrestrial telecommunications services already
liberalised (including the use of cable television infrastructures for this
purpose).

      - to provide links, (including microwave links) within mobile networks for
the provision of mobile communications services.

    - The lifting of exclusive and special rights over the use of own or third party
infrastructure for the delivery of voice telephony services to the general public,
once those services are liberalised from 1st January 1998, and the
replacement by licensing and authorisation schemes setting out the
necessary safeguards within the framework of the overall review of Directive
90/388/EEC (the Services Directive) and of the ONP-framework to be tabled
by 1 January 1996 in the context of the preparation for the full liberalisation of
voice telephony services foreseen by Council Resolution 93/C213/02.

The Telecoms Council on the 17th November 1994 in considering Part 1 of the
Green Paper, recognised the general principle according to which the provision of
telecommunications infrastructure should be liberalised by 1st January 1998 [5],
including the additional transition periods for certain Member States in line with
Council Resolution 93/C213/02.

**5** A number of Member States have urged the Commission in an associated statement to come forward
as quickly as possible with proposals which provide for the use of alternative network infrastructure
for the services already liberalised. The Commission in turn preserved its right to take action in this
area within its competence and according to its obligations. On 21 December 1994 the Commission
adopted in draft a Directive amending Commission Directive 90/388/EEC regarding the abolition of
the restrictions on the use of cable television networks for the provision of telecommunications
services.

**Tîf**

2. Safeguarding and developing universal service

Universal service consists of access to a defined minimum service of specified
quality to all users at an affordable price based on the principles of universality,
equality and continuity. The detailed elements of such a service are set out in
Council Resolution and Commission statement 94/C 48 of 7 February 1994.

The underlying aim is to ensure that the benefits of cheaper and better quality
telephone service and other benefits of increased competition and choice are
passed on to all users

In the context of the current structural adjustments being undertaken in
preparation for the liberalisation of telecommunications services, NRAs should
seek to replace general across the board subsidies for access or local calls.
This- can be achieved by (i) completing tariff re-balancing in line with Council
Resolution 93/C213/02 and (ii) the development of targeted schemes to
ensure universal service for needy or uneconomic customers. Targeted or
social tariffs should be provided by operators within the framework of an
optimal tariff structure.

The basic principles for universal service in the context of liberalised
infrastructure provision in the European Union should be:

- Only telecommunications-related public service obligations should be
treated as universal service obligations. Network operators should be freed
from non-telecommunications related obligations.

- Transparent schemes for the determination of the cost of universal service
obligations and their financing should be established

- As regards the determination of the cost of universal service obligations,
NRAs should calculate this cost as the net cost of providing service to
uneconomic customers, plus any costs associated with the uneconomic
provision of public telephones, emergency services and other social
obligations.

- As regards the establishment of transparent schemes for financing
universal service obligations, the uneconomic costs of particular elements
of universal service obligations should be financed, either through national
universal service funds or, where not fully covered, via access charges to
be added to interconnection charges.

 - Preference should be given to financing USOs through universal service
funds rather than via access charges. Eligible operators and service
providers should contribute and the financial responsibility should be spread
as fairly as possible, subject to the principle of proportionality.

 - Financing schemes should be administered either by the NRA or an NRA
appointed body, should be subject to regulatory control and consistent with
Treaty competition rules. They should encompass assessment by the NRA
of the cost of universal service according to a transparent and published
methodology, which may need to evolve to take account of changing
competitive conditions.

#### **_yr_**

In the context of services and infrastructure liberalisation, Member States
should work towards (i) determining the cost of universal service and (ii)
instituting means to finance universal service at a national level, taking into
account the specific circumstances of Member States with less-developed
networks or very small networks.

With this in mind, the Commission will propose a common framework before
the end of 1995.

NRAs in conjunction with the Commission should periodically survey main
indicators of universal service, in particular penetration of residential lines,
waiting times, provision of public pay phones and the availability of targeted
schemes for the needy and uneconomic customers.

Given the rate of technological progress and its effect on the costs and
availability of increasingly sophisticated services, together with the need to
ensure that the benefits of the Information Society extend to all citizens and
not just to the privileged minority, the definition of universal service must be
dynamic and reflect such progress.

3. Interconnection and interoperability

The basic framework

Interconnection agreements fall within the scope of the competition rules. The
application of these rules to interconnection agreements should be clarified to
the extent necessary. This should include the removal of the current
restrictions on the interconnection of all types of communications
infrastructure, comprising public and private networks (i.e. fixed - mobile cable television - satellite-based networks).

As regards public telecommunications infrastructure, the principles of Open
Network Provision should be extended as far as ONP applies, within the
context of a specific Directive on interconnection, to create a harmonised
approach for public telecommunications infrastructures and to enhance
interoperability of public networks and service throughout the Union. The
Directive should:

- set out the rights and obligations on public telecommunications
infrastructure providers with regard to interconnection requests, including
obligations to interconnect and provide standard interconnect offerings.

 - give priority to the commercial negotiation of public telecommunications
interconnection agreements, within an overall framework to be supervised
by national regulatory authorities.

 - provide as elements of that framework, common rules promoting fair
competition; transparency of interconnection agreements, technical
standards (priority to be given to voluntary standards) and compliance with
essential requirements.

 - establish dispute resolution mechanisms at a national and European level.

xii

**K"(**

An ONP Interconnection Directive should also lay down charging principles for
interconnection of public telecommunications networks and services, and in
particular:

- common principles for interconnection charges

- identification and recovery of uneconomic universal service costs based on
net cost calculations

- cost accounting systems

**Open access to infrastructure - application of ONP principles** and the
**competition rules**

Open access to the facilities of public telecommunications infrastructure
providers will be fundamental in establishing an effective, competitive
environment for telecommunications infrastructure and services within the

Information Society. In addition to the application of the competition rules, the
basic principles set out within the Open Network Provision framework must be
extended and, where necessary, adapted to provide a common regulatory
approach to communications infrastructure in the European Union. This
approach entails:

- harmonised application of the general principles of ONP by the national
regulatory authorities within their national regulatory regimes, alongside the
application of the Treaty competition rules to the sector.

- In the context of ONP, such conditions will generally be applied through
class licences or in the framework of authorisations for the provision of
communications infrastructure.

- Such conditions are concerned with ensuring rights to access and
compliance with essential requirements and ensuring cost orientation.

- adequate transmission capacity being guaranteed throughout the Union, in
particular, through revision of the ONP leased lines directive.

- transparent accounting structures to be put in place by providers of public
telecommunications infrastructures, including the separation of accounts
for telecommunications and non-telecommunications activities, as well as
the implementation of transparent cost accounting systems concerning
infrastructure provision and service provision.

- Voluntary implementation of common technical standards (based on
European standards)* with consultative mechanisms for mandatory
implementation where necessary to satisfy user needs.

- the relaxation, in a competitive environment, of current regulatory

mechanisms to ensure cost-orientation of tariffs.

**XIII**
### **W**

4. Licensing

Licence award procedures

In order to promote a common regulatory framework for the licensing of
communications infrastructure in the European Union, award procedures should
respect the following principles:

- Member States should licence and/or authorise the establishment and
provision of infrastructure in the European Union using open, nondiscriminatory and transparent procedures.

- The number of licences granted may only be restricted on the basis of the
essential requirements and in the case of networks intended for the general
public, public service requirements in the form of trade regulations.

As regards the establishment of new communications infrastructures, these
essential requirements should also include, in justified cases, the protection of
the environment and town planning objectives.

As regards limitations on the number of licences with respect to essential
requirements, only radio ' spectrum and environmental and town planning
objectives would apply.

Any limitation must be consistent with the Treaty competition rules and the
Treaty provisions concerning the right of establishment and the free circulation
of services.

- Award procedures must indicate clearly the selection criteria and the
conditions which will be attached to the grant of any licence.

- In order to promote the development of trans-European telecommunications
networks and services, the grant of national licences for such networks should
be co-ordinated, where appropriate, to facilitate the networks becoming
operational throughout the countries covered at the same time.

Selection criteria for the award of licences and authorisations

- Licences must be granted on the basis of pre-announced criteria. In cases
where networks are intended for use by the general public and the number of
licences awarded is limited, criteria may be based on public service
requirements in the form of trade regulations. In the absence of harmonisation
at a Union level, such criteria should in any case be published in advance and
be subject to prior scrutiny for compatibility with the Treaty rules.

- Under the EC and EEA rules, selection criteria may not discriminate on the
grounds of nationality, nor take into account factors such as the sourcing of
equipment.

- Any limitation on the number of licences granted and any refusal to licence a
particular undertaking (including the exclusion of particular undertakings from
a licensing process) must be duly justified to allow for assessment under the
applicable Treaty rules and also with the principle of proportionality.

**XIV**

**~x^i**

The principle of mutual recognition of licences or authorisations is not normally
applicable to infrastructure licences. This is the case, for example, with
national licences for the provision of fixed networks encompassing rights of
way. Mutual recognition should, however, apply to certain elements used in
licensing procedures, such as evidence relating, for example, to the technical
competence or financial standing of the applicant.

Conditions attached to communications infrastructure licences

Building on the framework provided by Community law, future licenses for
infrastructure should respect the following principles :

- Licensing conditions for infrastructure must be based on objective grounds, be
transparent, be non discriminatory and respect the principle of proportionality.
Any fees for licences should respect the same criteria.

- Licences must not contain conditions other than those justified on the grounds
of essential requirements and, in the case of public telecommunications
infrastructure, public service requirements set out in the pre-announced
criteria.

- Infrastructure not intended for the use of services for the general public (such
as infrastructure for corporate networks or closed user groups), should only be
subject to conditions based on the essential requirements.

- With regard to ownership restrictions, licences may not contain conditions
which restrict ownership by nationals of Member States or of the European
Economic Area or undertakings controlled by such nationals.

Any other restrictions on ownership or control must be compatible with
Community law and with the European Community's commitments taken on a
multi-lateral basis.

- Licensing conditions must ensure a high standard of consumer protection and
respect competition rules.

Provision of Telecommunications Services

- Service provision (as opposed to network establishment and operation) should
not be subject to individual licensing in the Member States. It may be subject
to class licences, general authorisations or to a requirement for declaration by
Service Providers of their activities to the National Regulatory Authority(ies) of
the Member State(s) where they choose to operate.

- Nevertheless, in the case of independent service providers offering voice
telephony services to the general public on a resale basis, consideration may
need to be given as to how and when such resellers should be obliged to
make a contribution, appropriate to their market position, to the provision of or
financing of universal service, (via access charges or a universal service fund,
as set out in the following point 3).

"VTV

Access for Service Providers to any infrastructure should be based on
commercial agreements, subject to the competition rules, and where
appropriate, the framework of Open Network Provision rules set out below.

The Commission will regularly review if additional safeguards for consumers
are considered necessary. If so, they should be fully consistent with the
Treaty provisions and respect the principle of proportionality. Preference
should be given to rules agreed by sector participants (such as a code of
conduct) over binding regulatory measures, and to general or class regimes
over specific individual licenses or authorisations. However, where this Code
of Conduct does not adequately protect consumer interests, binding regulatory
measures should be introduced.

**5. Ensuring fair competition**

In a market which will, for many years, be characterised by the presence of
dominant operators controlling bottleneck facilities, the full implementation of the
competition rules will be indispensable to allow for the emergence of a competitive
environment. This will imply, where required, the establishment of the appropriate
procedures and safeguards. These will concern, in particular:

screening interconnection agreements,

reviewing the conditions for access granted to infrastructure providers and to
service providers,

monitoring joint ventures.

assessing any scheme established for financing universal service;

ensuring open and non-discriminatory access to rights of way.

reviewing the effects of cross-ownership of different networks and of joint
provision of network and services;

The latter requires transparent accounting structures and practices to be
established by providers of communications infrastructures, including the
separation of accounts for telecommunications and non-telecommunications
activities, as well as the implementation of transparent cost accounting systems
for infrastructure providers who also provide telecommunications services.

**6. Access to rights of** **way,** **frequencies and numbering**

In order to guarantee the successful development of a competitive market for
infrastructure, access to certain basic resources must be guaranteed. This
concerns rights of way, frequency for wireless network components, numbering
and directory services.

**XVI**

**xl**

**Rights of Way**

**•** **Member states should grant rights of way to communications network**
**operators according to open and transparent procedures.**

**•** **Where environment requirements (such as avoiding road congestion), or other**
**essential requirements, prevent the granting of rights of way to all potential**
**applicants, the Member States should introduce schemes for the sharing of**
**ducts on a voluntary basis and consider, where it is deemed necessary to**
**avoid bottleneck situations, the introduction of mandatory duct-sharing.**

**•** **To introduce competition in the market for infrastructure provision, Member**
**States will need to ensure that the incumbent** **telecommunications**
**organisations are subject to the same regulatory conditions as their**
**competitors regarding rights of way, and provide for mandatory sharing of**
**facilities where necessary to bring down barriers to entry.**

**Frequencies**

**Access to frequency spectrum will be increasingly important in ensuring the**
**optimum combination of fixed and wireless technologies in future networks. In**
**order to support this development a number of measures should be taken,** **in**
**particular:**

**•** **CEPT/ERC should initiate a comprehensive review of the balance of**
**frequency usage between broadcasters, fixed network operators and**
**mobile and personal communications operators.** **This will also need to**
**address the balance between these uses and the use of spectrum for**
**defence and security purposes.**

**•** **Pan-European network operation requires greater co-ordination of frequency**
**allocation across Member States.**

**Numbering**

**In order to facilitate network investments, an appropriate framework ensuring**
**access to numbers must be put in place. In particular, this requires:**

**•** **Creation of a European numbering space for special services (e.g.**
**freephone, premium rate, shared cost services ) must be a priority for the**
**EU.**

**•** **A "best practice" guidance for NRAs on the administration and control of**
**the national numbering schemes is under development in the ETO,**

**•** **The reform package for submission to the Council before 1 January** **1996**
**will address** _**inter**_ _**alia**_ **the subject of numbering reform in Europe.**

**XVII**

**Directories**

Access to subscriber data for network operators and service providers and
access for subscribers to a comprehensive directory service will be important
elements. Such access should proceed, inter alia, on the following basis:

- Access to subscriber databases and to raw subscriber data must be
ensured on the basis of objective, transparent and non-discriminatory
criteria, and in conformity with Community legislation, in particular the
competition rules of the Treaty, the principles of open network provision
(ONP) and the provisions on the protection of personal data and privacy, as
well as, where applicable, IPR legislation.

- Maintaining a complete universal telephone directory and at least one
enquiry service which contains the details of all subscribers of fixed and
mobile telephony services and is available for all users.

7. Action in Neighbouring Fields (Data Protection, Audio-visual, Media and
IPRs

Common rules concerning data protection and privacy are fundamental for the
development of the information society and for removing other constraints on
effectively exploiting the competitive provision of communications infrastructures.

In this context rapid progress should now be made on the proposed General Data
Protection Directive and the proposed specific Directive on the protection of
privacy in the digital network environment.

The Commission has already identified in its Action Plan on Europe's Way to the
Information Society that work will continue in the area of Information Security, and,
in particular, that it will :

- publish a Communication on security issues and the role of Member States

- make proposals with regard to the harmonisation of national rules on
unauthorised access, and

- prepare a Green Paper on the legal protection of encrypted'broadcasts.

Action in all of these areas can substantially contribute to the creation of an
appropriate environment for infrastructure competition.

The Commission has also identified in its Action Plan on Europe's Way to the
Information Society, initiatives in a range of areas which will help to shape the new
regulatory environment both for infrastructure and for services. These policies will
substantially influence the extent to which investment can be mobilised to finance
competing networks.

These actions include :

_~7fW_

In the field of media ownership, the recently adopted Communication on the follow
up to the Green Paper on media pluralism and subsequent public consultation;

In the field of audio-visual policy, the possible revision of Directive 89/552/EEC
(the "television without frontiers" directive) and following up the Audio-visual Green
Paper with regard to the issue of content.

In the field of intellectual property, the adoption as a matter of priority of the
pending proposal on the legal protection of data bases; the preparation of a
Green Paper on intellectual property in the Information Society and the
preparation of a directive on private copying.

Additionally, the Commission has already proposed a Directive aimed at the
harmonisation of the laws, regulations and administrative provisions on contracts
negotiated at a distance between suppliers and consumers.

The Commission will undertake work during 1995 on the regulatory approach to
be applied to ensure the free circulation of new services, which will help ensure
that the Commission's actions in the relation to infrastructure and the services to
be provided over them remains consistent

**8. The Societal and Social Impact**

The services carried over infrastructure in Europe will have a major effect on the
quality and way of life for Europe's citizens. Priority attention will also be given to
studying and monitoring the societal and social impact of the diffusion of new
technologies and of a competitive environment for communications infrastructure
(in particular, in relation to the areas of employment and cultural policy, as well as
the need to avoid the development of a society of information "haves" and "have
nots").

In this regard the Commission's Action plan announced a number of reports and
Communications in this area, including a report by the High Level Group of
Experts.

Consideration in this context must also be given to the need for retraining and re
deployment of employees as the traditional telecommunications sector adapts to a
competitive environment.

The Commission also proposes setting in motion a comprehensive action
programme to investigate potential health hazards associated with the proliferation
of fixed and wireless infrastructures and to accelerate the preparation of
necessary safety standards, as well as providing general guidance.

**9.** **A global approach to infrastructure and ensuring fair access to third**
**country markets**

The Union must actively contribute to on-going discussions at a global level
concerning the Information Society, and, in particular, the evolution of common
global approaches to issues promoting the development of infrastructures,
capable of meeting the needs for global communications. The meeting of the G7
in February to be hosted by the Commission will substantially assist this aim.

**XIX**

The main principles with regard to worldwide developments are :

- Common Community positions are required in international fora to assist in
developing a global approach to standards, frequency and numbering. (This
concerns, in particular, positions within the International Telecommunications
Union and the World Radio Conferences.

- Emphasis on the on-going multi-lateral talks on basic telecommunications as
the key to opening up access to third country markets. The overall aim must
be to ensure comparable and effective market access, and, in particular, the
lifting of ownership restrictions, for EU network operators and service
providers.

- Until the results of the GATT/WTO negotiations are clear, it is important that
the Union reserves its right to maintain equivalent conditions to those currently
prevailing in third country markets with regard to market entry or the licensing
of non-EU or EEA nationals or companies controlled by such nationals, the
objective of imposing such conditions would be to promote open markets in
third countries for European network operators and service providers through
negotiations.

- Common Community positions on issues having a direct impact on the
operation and interconnection of networks, such as restrictions on encryption,
rules on intellectual property and data protection and privacy.

**10.** **Future Evolution of the** Regulatory Environment - Towards the
Information Society

The Commission is looking beyond the immediate steps needed to liberalise
telecommunications infrastructure by 1 January 1998 and to put in place the
accompanying regulatory framework.

This Green Paper is intended to initiate the debate, in parallel with that launched
by action in other neighbouring fields, on the future evolution of the regulatory
environment beyond 1998 to meet the challenges of technological and market

convergence.

In addressing these issues, certain basic principles derived from the experience in
the telecommunications will assist the debate:

 - Liberalisation of telecommunications infrastructure and services must go hand
in hand with the implementation of a clear regulatory framework, which can
help to mimic competition (through principles of non-discrimination,
transparency, etc.) pending the emergence of genuinely competitive markets.

 - Effective and independent regulation at the appropriate level will be essential.

 - The regulatory framework should lay down basic principles at a European level
on the basis of the rules in the* Treaty, as well as clear criteria for their
application in a predictable manner at a national level. Increasing reliance on
competition rules is to be expected.

_**M**_

**•** **Effective competition in the markets for telecommunications equipment and**
**services should evolve without rigid structural safeguards, such as those**
**developed in the mid-eighties in North American markets.**

**Where safeguards have been considered necessary proportional solutions**
**have been chosen, such as transparent cost-accounting and separate**
**accounting for different parts of a business.**

**These principles must be applied to the challenges of multi-media and the**
**Information Society, taking full account of the regulatory patterns established in**
**the converging sectors.**

**XXI**

###### **_~w_**

Timetable for action

Council Resolution 93/C 213 of 22 July 1993 called for the Commission to
prepare, before 1st January 1996, the necessary amendments to the Community
regulatory framework, in order to achieve liberalisation of all public voice
telephony services by 1 January 1998. Linking the liberalisation of infrastructure
to liberalisation of voice telephony means that the same time scale must be
observed for the regulatory measures identified in this Green Paper.

The specific measures in the 'reform package' are expected to include measures
to be adopted by the Commission and measures to be adopted by the European
Parliament and the Council.

The proposed timetable is as follows:

By 15 March 1995 Submission of public comments on the Green Paper

May 1995 Commission Communication to the European Parliament
and the Council on the public consultation on the
infrastructure Green Paper

June 1995 Council Resolution on Infrastructure .

Before 1 January 1996 Publication by the Commission of proposals for specific

measures to extend the existing EC regulatory framework

Commission Communication to the European Parliament
and the Council on the principles and financing of
Universal service

Public consultation

The Commission invites comments on all the issues raised by this Green Paper,
including, in particular, on the major changes required and on the evolution of the
regulatory framework to meet the challenges of convergence.

The Commission intends to organise a series of hearings in Brussels with
interested parties early in 1995, allowing an opportunity for discussion of the
issues raised in both parts of the Paper.

In order to respond urgently to the evolving Information Society, the Commission
would ask that written comments on both Parts I and II to be forwarded to the
Commission by no later than 15th March 1995

The Commission will subsequently report to the European Parliament and Council
on the results of the consultation process.

**XXII**

-vxur

I. INTRODUCTION

Europe is shifting towards an information-based economy, where networks and
network infrastructure play as significant a role as did the rail networks in
transforming the European economies in the last century.

For Europe to meet the challenges presented by this Information Society, it is vital to
ensure that business, industry and Europe's citizen's can access modern, affordable
and efficient communications infrastructures over which a rich and diverse range of
traditional and new multi-media services will be offered.

This revolution has been recognised at the highest political level. In their conclusions
on the Bangemann Group Report, the Heads of State and Government meeting in
Corfu considered _"that the current unprecedented technological revolution in the_
_area of the Information Society opens up vast possibilities for economic progress,_
_employment and the quality of life "._ These changes are being driven by technology
and by market forces. New global and regional partnerships are being formed to
enable business and ordinary citizens to benefit from the opportunities offered by the
convergence of broadcasting, telecommunications and information technologies.

In fostering this evolution it is now vital for Europe to put in place a clear and
predictable regulatory environment which will promote a maximum of choice and
facilitate the emergence of new services and new means of providing services.
Given the political consensus on the liberalisation of telecommunications
infrastructure, it is now vital for Europe to put in place a clear and predictable
regulatory environment. Such a framework will ensure:

    - the completion of the internal market for telecommunications, stimulating the
development of both basic and advanced infrastructures in the Union;

    - providing Europe with efficient and cost effective telecommunications
services, benefiting both business and consumers ;

    - stimulating public and private sector investment, growth and innovation,
thereby contributing to employment and cohesion;

This Green Paper now launches a broad consultation on the issues surrounding such
the future telecommunications environment. The key questions are :

How _cm_ universe service t?e developed? How rm*ch does il cost am* who
should pay for it?

What should _b&_ the future framework for interconnection and inter<)perabaîty?

, How will ielêcôm<nOtwàks fee licensed? [%] What restrictions' can tegitïmâtély be
   - placed ori numbers «Sel whalc^ndiSc^$cirife^a^crîedloiic^cè$? ' '* ^

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Conclusions of the European Council, Corfu, 24-25 June 1994

**The common approach to infrastructure must also be viewed more broadly in the**
**context of** **the** **overall approach to the Information Society. A clear framework** **for**
**infrastructure liberalisation is complementary to the evolution of Union policy in**
**other neighbouring fields, such as intellectual property rights, audio-visual policy and**
**media concentration - all areas which are central to emerging Information Society.**

**In placing infrastructure liberalisation within the more general context of the**
**Information Society, immediate problems of terminology arise in distinguishing**
**between infrastructure and services, or in delineating different types of service**
**involving telecommunications, broadcasting and/or multimedia components. This**
**Green Paper will often refer genetically to "services" ( - the offerings delivered over**
**or via infrastructure) to encompass traditional telecommunications services (voice**
**telephony, data transmission, valued-added services (such as voice mail or video**
**conferencing) and network management services), as well as new information,**
**multimedia and other services.**

**At the same time, where appropriate for regulatory purposes, reference is also made**
**more narrowly to "telecommunications** **services"** **in order to indicate that the**
**proposed regulatory regime distinguishes between telecommunications activities and**
**radio and television broadcasting to the public. It must nevertheless be recognised**
**that distinctions should be drawn in a flexible manner and one which promotes rather**
**than holds back the transition to the** **Information** **Society.**

**Infrastructure as the delivery mechanism for the new interactive information flows is**
**an essential raw material for the Information Society.** **The future regulatory**
**environment for infrastructure is therefore central to achieving the full potential**
**which that Society can offer.**

**•** **Firstly, by removing restrictions on the combination of different wired and**
**wireless network infrastructures and technologies, this common approach will**
**bring about a fully integrated personal communications environment. This will**
**offer every business and every citizen full mobility and Europe-wide access to all**
**the range of new services which the Information Society will offer.**

**•** **Secondly, the establishment of a predictable regulatory environment will**
**stimulate innovation in the delivery of, and affordable access to, broadband**
**capacity. This will be the backbone for innovative multi-media products, offering**
**the user exciting new services fully integrating voice, data and images, from**
**distance learning and video-conferencing in the office to telebanking and video**
**on demand in the home.**

 - Finally, the combination of these first two elements - full mobility and broadband
capacity - will be the driver of major changes in society and will stimulate new
approaches to communications, information services and to content. These
changes, which lie outside the scope of this Green Paper, will have a major
impact or the way we live and the way we work, as our lives become increasingly
"interactive" and "on-line".

The positions set out in this Paper are consistent with the general approach followed
by the Union in the area of telecommunications since the 1987 Green Paper on the
development of a common market for telecommunications services and equipment .
This means that the positions are based on an evolving balance between
liberalisation, the creation of a common regulatory framework and the application of
rules ensuring fair competition in Information Society.

The global aims and positions of the Green Paper are summarised below

COM(87) 290, 30.6.87

SUMMARY OF THE GLOBAL AIMS AND POSITIONS OF THE GREEN PAPER

The global aims and positions of this Green Paper, in implementing the general
principle of liberalisation of infrastructure within the timetable envisaged in Part I of
the Paper, can be summarised as follows:

**1.** _**LIBERALISATION**_ _**OF COMMUNICATIONS INFRASTRUCTURE**_ _**IS THE SINGLE**_

_**MOST IMPORTANT STEP TO BE TAKEN IN THE CONTEXT OF**_ _**EUROPEAN**_

_**TELECOMMUNICATIONS**_ _**POLICY.**_

Liberalisation will mobilise private capital, stimulate the emergence of new
multi-media markets and applications, and lead to users having more choice of
services and better value for money. Liberalisation of infrastructures will
maximise the benefits of the planned liberalisation of telecommunications
services in Europe in 1998.

**2.** _**UNIVERSAL SERVICE REMAINS A MAJOR POLICY REQUIREMENT WITHIN THE**_

_**EUROPEAN UNION.**_

- Universal service remains a major policy requirement within the European
Union. Universal telephone service at an affordable price should continue to
be guaranteed to all European users in the future competitive environment.

The dual aim should be to provide consumers and business with a diverse
offering and choice of telecommunications services at competitive prices,
whilst guaranteeing universal access to basic telecommunications services for
all citizens.

- In the context of the liberalisation of telecommunications services and the

pricing and structural adjustment that is required, infrastructure liberalisation
will not undermine the provision of universal service. Indeed, as long as the
universal service burden is shared appropriately between competitors,
infrastructure liberalisation is more likely to lead to positive benefits for the
sector by encouraging innovation, the exploitation of new technologies and
increased choice of services.

- Three key issues must be addressed at a Union level. The first concerns the
identification of the elements that comprise universal service, the second the
costing of universal service and the third the means of financing uneconomic
aspects of universal service provision in a competitive environment.

A secure mechanism for dealing with the burden of uneconomic universal
service obligations is crucial. The goal of providing affordable access to basic
telecommunications services for all citizens is not an argument in favour of
maintaining inefficient across-the-board subsidies for access, but rather it is a
reason for developing targeted schemes for needy citizens and uneconomic
customers. The particular needs of peripheral regions with less developed
networks should also be taken into account.

Given the rate of technological progress and its effect on costs and availability
of increasingly sophisticated services, together with the need to ensure that
the benefits of the Information Society extend to all citizens, the definition of
universal service must be dynamic.

**3.** _**NETWORK INTERCONNECTION MUST**_ _**BE**_ _**GUARANTEED**_ _**AT**_ _**A EUROPEAN LEVEL**_

_**IN ORDER TO ENSURE**_ _**INTER-OPERABILITY**_ _**OF**_ _**TELECOMMUNICATIONS**_

_**SERVICES.**_

A new regulatory framework for interconnection will be developed, drawing
upon the principles of open network provision and the application of Treaty
competition rules. The framework will provide a predictable regulatory
environment, which will:

- remove current restrictions on interconnection; give priority to the commercial
negotiation; set out the rights and obligations on infrastructure providers;
promote fair competition; and identify suitable technical standards.

- establish dispute resolution mechanisms, alongside existing means of recourse,
at a national and European level.

- lay down common and efficient charging principles for interconnection,
taking account of universal service obligations.

_**THERE MUST BE OPEN ACCESS**_ _**TO INFRASTRUCTURE**_ _**FOR**_ _**NETWORK**_

_**OPERATORS**_ _**AND**_ _**SERVICE**_ _**PROVIDERS.**_ _**ADEQUATE**_ _**PROVISION**_ _**OF**_

_**TELECOMMUNICATIONS**_ _**TRANSMISSION**_ _**INFRASTRUCTURE**_ _**SHOULD**_ _**BE**_

_**GUARANTEED**_ _**THROUGHOUT**_ _**ALL**_ _**MEMBER STATES.**_

Telecommunications infrastructure makes use of a national resource, and
those who have rights to provide public infrastructure, (particularly where
rights are linked to rights of way), carry particular responsibilities to make
their facilities available to other market players.

Principles for open access and use are laid down in the specific European
Union framework of open network provision, as well as through the general
application of the competition rules. These principles should be applied in a
proportional and non-discriminatory manner to telecommunications
infrastructure. Specifically, transmission capacity in the form of a guaranteed
set of market offerings should be available throughout the European Union.

**4.** _**COMMON PRINCIPLES FOR THE LICENSING / AUTHORISATION BY MEMBER**_

_**STA**_ _**TES**_ _**SHOULD**_ _**BE**_ _**IMPLEMENTED.**_

The priorities with respect to licensing the establishment and operation of
infrastructure are:

**-**
_**a common approach to licensing at a European level, in order to minimise**_
_**barriers to market entry.**_

New market entrants need a clear and predictable regulatory environment with
minimum variation between Member States. Common licensing principles covering both the criteria for awarding licences (and for limiting their number
where such limitation is justified), and the conditions within them - must be
agreed at a European level.

**-**
_**co-ordinated licensing between Member States for trans-European**_
_**infrastructure**_ _**projects**_

Europe has an urgent need for long distance, high quality, high capacity, low
cost telecommunications circuits. New responsive procedures must be set in
place so that organisations wishing to install long distance telecommunications
circuits crossing several Member States can receive the necessary
authorisations quickly and in a co-ordinated manner.

**5.** _**FAIR**_ _**COMPETITION**_ _**SHOULD**_ _**BE**_ _**PROMOTED**_ _**THROUGH**_ _**THE**_ _**FULL**_

_**APPLICA**_ _**TION**_ _**OF THE TREA TY COMPETITION RULES**_

In order to provide a fair competitive environment, the application of
competition rules will become increasingly important alongside the common
regulatory framework put in place at a European level. The competition rules
will have a particular role in helping to define future market structures and in
setting the conditions under which networks and services can rapidly develop.

To provide greater coherence in market developments, particularly in relation
to the provision of cross-border networks and services, new procedures may
be required to allow the assessment of the terms for interconnection and
access (including mechanisms for financing universal service) to networks and
to rights of way.

**6.** _**TRANSPARENT**_ _**AND RESPONSIVE MECHANISMS MUST BE ESTABLISHED TO**_

_**ENSURE**_ _**FAIR**_ _**ACCESS TO COMMON RESOURCES, IN PARTICULAR, RIGHTS OF**_

_**WAY, NUMBERS AND FREQUENCIES**_

Rights of way are essential for the establishment of any fixed communications
infrastructure, whilst numbering is an indispensable resource for the operation
of and access to both networks and services. Additionally, access to
frequencies is essential for all mobile and some fixed telecommunications
services.

**7.** _**ACTION IS NEEDED IN NEIGHBOURING FIELDS IN ORDER TO EXPLOIT THE**_

_**BENEFITS OF LIBERALISATION OF TELECOMMUNICATIONS INFRASTRUCTURE.**_

This includes action to strengthen data protection and privacy for the
individual; to ensure security of information; to clarify and develop the
situation with regard to intellectual property rights; and action in the audiovisual field.

Adoption of current Commission proposals on data protection and privacy is
becoming urgent, in order to give the public reassurance about their rights to
privacy in the Information Society. Commission initiatives in the areas
mentioned have been announced in the Commission's Action Plan to the

Information Society (COM(94) 347).

_A COHERENT_ _FRAMEWORK_ _FOR_ _CONTENT_ _REGULATION_ _SHOULD_ _BE_

_DEVELOPED_

These future frameworks, building on current Union policy, must take into
account the fact that in the future the same material may be transmitted over a
variety of different delivery systems, including broadcast systems and
telecommunications systems.

8. _THE SOCIETAL AND_ _SOCIAL_ _IMPACT_ _MUST_ _BE_ _EXAMINED_

_PUBLIC_ _HEALTH_ _AND SAFETY,_ _AND ENVIRONMENTAL_ _NEEDS_ _MUST_ _BE_

_SAFEGUARDED_

Environmental requirements will increase pressure for the sharing of facilities
and/or rights of way by infrastructure providers. This should be allowed and
encouraged by Member States, and in exceptional cases, it may be necessary
to impose sharing arrangements.

Increasing use of radio-based links raise potential hazards with regard to
health and electromagnetic interference. Accelerated research into these
areas and the development and implementation of the necessary standards is a
priority.

_THE FULL IMPACT_ _OF_ _THE_ _INFORMATION_ _SOCIETY MUST_ _BE_ _EXAMINED._

The potential of the Information Society for the lives of every European
citizen calls for an approach which is open, transparent and consultative,
involving all sectors of society. Issues related to consumer protection, social
cohesion and cultural diversity, employment and patterns of work, must be
subject to wide public debate in the course of implementing the measures
outlined above.

9. _UNION POLICY MUST ACTIVELY_ _PURSUE THE ON-GOING_ _MULTI-LATERAL_

_NEGOTIATIONS_ _ON_ _BASIC_ _TELECOMMUNICATIONS_ _WITHIN_ _THE_ _GATS_ _IN_

_ORDER_ _TO_ _OPEN_ _UP_ _FOREIGN_ _MARKET_ _A_ _CCESS._

As long as comparable and effective market access to third countries has not
been achieved, the ability to take measures with regard to third countries
should not be restricted, subject to Community commitments on a multilateral or bilateral basis.

10. _THE FUTURE EVOL_ _UTION_ _OF THE REGULA TORY ENVIRONMENT TO MEET THE_

_NEEDS OF THE INFORMA_ _TION_ _SOCIETY_ _MUST_ _BE ADDRESSED_

A coherent regulatory framework for the licensing of infrastructure which
avoids the current distinctions based upon the services provided must be
developed.

Future infrastructure will be able to carry all forms of information and
communications services (TV and radio programmes, simple and advanced
telecommunications services, multi-media applications).

In the medium term (beyond 1998), new regulatory, frameworks are needed
which address the issue of convergence of telecommunications and
broadcasting. Current differences _between_ the Member States in their
regulatory regimes for cable TV and broadcasting, and differences _within_
Member States between the treatment of broadcasting and
telecommunications, threaten to impede the development and distribution of
advanced information/communications services. In relation to the new

services to be provided in the Information Society the Commission will be
undertaking work during the course of 1995 to put in place an appropriate
regulatory framework.

n THE APPROACH CHOSEN AND THE SCOPE OF THIS GREEN PAPER

The establishment of a consistent approach for the Union towards the development
of telecommunications infrastructure must be seen against the overall objectives of
the Union's policy. The approach chosen focuses on those issues which have a clear
European dimension and for which solutions are essential in order to assist the
development of the Information Society in Europe. Such an approach is mandated
by the principle of subsidiarity. Agreement on these issues will stimulate the further
development of both advanced and basic communications networks and services at a
European as well as a national level. The approach is summarised below.

The approach builds on the market and technological developments in Member
States, as well as the political initiatives in certain countries seeking to introduce
greater network competition. (These trends are analysed in Sections III and IV). It
examines in Sections V and VI the social challenges and, in particular, the
opportunities for new employment which a competitive infrastructure environment
may offer and the adaptation of that environment to the priority of universal service.

The approach proposed is consistent with main lines of Union policy in
telecommunications to date (which are set out in detail in Section VII and VIII). It
must also be viewed in the context of the new political priorities flowing from the
Treaty of European Union, in particular, the importance attached in Title XII of the

**o**
Treaty to the establishment of Trans European Networks .

The European Union is actively pursuing the development of trans-European
telecommunications networks in the context of a number of proposals in the fields,
such as the Integrated Services Digital Network (ISDN) and Integrated Broadband
Communications (TEN-IBC) . The Commission has indicated that it will propose
overall Guidelines on Trans-European Networks in telecommunications. Beyond
these initiatives the European Union is actively engaged in promoting advanced
communications networks and services through its research programmes .

Finally, the common approach must also look beyond the Union to take full account
of developments throughout Europe and in the markets of our major trading
partners. The Union is actively pursuing the multi-lateral negotiations on Basic
Telecommunications Services in order to open up the global trading environment for
networks and services within the context of the GATS.

8 Article 129b of the EC Treaty indicates that _"within a framework of a system of open and competitive_
_markets, action by the Community shall aim at promoting interconnection and interoperability of_
_national networks as well as access to such networks"._

9 Communication from the Commission to the Council and the European Parliament on preparatory
actions in the field of Trans-European Networks: Integrated Broadband Communications (TEN-DBC)
COM(93) 372 final, 22.7.93 and Communication from the Commission related to the development of
the Integrated Services Digital Network (ISDN as a trans-European Network and the related
proposals for a guidelines for the development of ISDN as a trans-European network and for a multiannual Community action, COM(93) 347 final, 1.9.93

10 See, in particular, Council Decision of 7th June 1991 adopting a specific research and technological
development programme in the field of communications technologies (1990 to 1994)(91/352/EEC;
OJ L192/8, 16.7.91 - the RACE programme.

**THE APPROACH CHOSEN :**

**1.** **Builds on the existing principles of the Union's telecommunications policy**
**and in neighbouring fields and, in particular, the future vision of**
**telecommunications as most recently set out in the Commission's Green**
**Paper on Mobile and Personal Communications** **[11]** **;**

**2.** **Promotes the emergence of a fair competitive environment in the**
**Information Society both within the European Union and in third country**
**markets, in particular, with regard to access to such markets ;**

**3.** **Draws on developments in current national environments, and, in**
**particular, the moves undertaken in a number of Member States to develop**
**infrastructure competition, as well as taking into account technological**
**and market developments both within the European Union and** **world-**
**wide.**

_**The**_ _**studies carried out for the Commission**_ _**in**_ _**preparation for this Report**_
_**form an integral part of the consultation process and will be made**_
_**available on request (Details are set out in Annex 2);**_

**4.** **Develops pan-European and global approaches to the** **future** **regulatory**
**framework for telecommunications;**

**5. Points towards a coherent regulatory framework which strengthens**
**existing Union policies in neighbouring areas, such** **as** **in the fields of**
**broadcasting, culture and intellectual property rights, needed to bring**
**about the Information Society and in particular, to spread the benefits of**
**stronger growth, competitiveness and employment throughout the Union**
**to each of Europe's citizens.**

**The debate on infrastructure is also high on the global political agenda, with**
**important initiatives being undertaken in all regions of the World. For that reason it**
**is especially appropriate that early in 1995 the Commission is hosting a meeting of**
**Ministers from the Group 7 countries on issues associated with the Information**
**Society.**

1 _1_ Green Paper on a common approach in the field of mobile and personal communications in the
European Union, COM(94) 145 final, 27.4.94

**12**

See in particular :
- _Consultation_ _Publique_ _organisée_ _par_ _Bruno Lasserre_ _à la demande de_ _Gérard_ _Longuet : Quelle_
_réglementation pour les télécommunications françaises?,_ Direction Générale Postes et
Télécommunicadons, April 1994, and _Les_ _autoroutes_ _de_ _l'information,_ Rapport au Premier ministre
par Gérard Théry, September 1994
- _Study of_ _the_ _International_ _Competitiveness_ _of_ _the_ _UK_ _Telecommunications_ _Infrastructure,_ DTI,
February 1994, and

- Report by McKinsey for the Ministerie van Verkeer en Waterstaat, _Telecommunicate_ _in_
_Nederland : op weg naar_ _wereldklasse,_ June 1993

**10**

_The scope of_ _infrastructure_ _covered by the Green Paper_

Part II of the Green Paper covers issues of telecommunications infrastructure as a
whole, drawing on the policies already set out in relation to the specific sectors of
satellite communications and mobile and personal communications . It does not
therefore specifically address those sectors, though they are part of the overall vision
of the rapid evolution towards a completely new telecommunications environment
based on the full integration of fixed, mobile and satellite technologies.

The focus of this Green Paper is nevertheless terrestrial transmission infrastructure
for telecommunications. ' Terrestrial transmission infrastructure for telecom
munications means the basic transmission capacity which is the raw material from
which telecommunications networks and services are built (see figure II-1).

The ensemble of telecommunications services available in a country or region may
also be referred to as its "telecommunications infrastructure", The Council has
recognised that the provision of adequate "telecommunications infrastructure" in this
sense is best achieved in a competitive market environment. The liberalisation of
telecommunications transmission infrastructure as discussed in this Green Paper is a
key step in stimulating the establishment of such a market for telecommunications
services.

_The scope of issues affecting infrastructure covered by the Green Paper_

Council resolution 93/C213 of 22 July 1993 [14] places this Green Paper in the context
of the on-going liberalisation of the telecommunications sector. For that reason and
in order to ensure a coherent and comprehensive approach the Paper must also
address issues related to service provision, (such as the framework for
interconnection and the licensing of telecommunications services) and access to
common resources, (such as frequency or numbers), which might be considered to be
more strictly an issue of service competition. Nevertheless such issues are so closely
bound to the establishment and operation of infrastructure that issues associated with
these areas must at least be raised.

Beyond the regulatory agenda immediately connected with infrastructure
competition, the Information Society raises fundamental challenges brought about by

13 Green Paper on a common approach in the field of mobile and personal communications in the
European Union, COM(94) 145 final, 27.4.94 and Green Paper on a common approach in the field
of satellite communications in the European Community, COM(90), 20.11.90 and Commission
Communication on Satellite communications : the provision of and the access to - space segment
capacity, COM(94) 210 final, 10.6.94

14 OJC213,6.8.94

**11**

**Figure** **II.l.** **Telecommunications Infrastructure** **in the** **context** **of**
**telecommunications networks and services**

_The shaded boxes_ _in_ _the diagram below represent telecommunications_
_infrastructure_

User Applications

**Telecommunications Services**

Switched telecommunications

networks
(including switching signalling
network management)

Tô!ecpmm««iûatloiis transmission capacity

;Ëti8!iII!iiIi!I

Radio ïniks

_**^^^^^^^^Ê**_
**^^^^^^^^H**

?ll:liliÉiiHliiill!
llllÉlllillÉllI

Satellite links

Satellites

Satellites Earth

stations
# **I I I**

**Requires access** **to** **Requires access** **to** **Requires access**
**Rights of way** **Frequency** **space segment**

**Requires access** **to**
**Frequency**
**spectrum**

**Requires access** **to**
**space segment**

**12**

the convergence of telecommunications, information technology and broadcasting.
This Green Paper contributes to the debate on these issues in examining the question
of how the future regulatory environment should evolve to meet the challenges of
convergence. Consideration of those developments is not however a precondition
for either discussion of the principle of infrastructure liberalisation set out in Part I or
steps to apply and extend existing principles of telecommunications policy to
infrastructure.

Many of the issues raised in looking beyond infrastructure competition are not only
relevant to telecommunications, but are central to the overall process of developing a
framework for the Information Society. The Commission is actively developing
policies in [N] many of these neighbouring areas, such as in relation to intellectual
property rights, the regulation of broadcasting and rules promoting plurality in the
media. These initiatives in neighbouring fields are highlighted in the Green Paper.

This Green Paper does not claim to find solutions to these issues which are at the
heart of longer term and broader regulatory evolution within the Union. It
nevertheless is vital to launch a debate now on many of these issues, in order to view
them in a European, rather than purely national context.

**13**

**Ill** **THE CURRENT SITUATION**

**m.l Communications Infrastructures**

**As pointed out in the first part of the Green Paper, a number of infrastructures**
**capable of carrying telecommunications services exist in Member States. However,**
**the major part of public telecommunications services are provided by the national**
**networks operated by the Telecommunications Organisations (TOs).**

_**III.**_ _**1.1**_ _**Public**_ _**telecommunications networks**_

**Table** **III.l.I** **provides a list of the entities currently licensed to provide fixed**
**telecommunications networks in Member States and the three accession countries**
**and the corresponding numbers of main telephone lines.**

**Infrastructure** **competition for public telecommunications networks exists in Finland,**
**Sweden and the UK. In Denmark and Italy, regional operators or operators with**
**responsibility for different service areas have recently been consolidated and this**
**process is also in progress in Portugal.**

**14**

Table H I . l . l - Operators licensed

telecommunications services.

to provide infrastructure for public

Operators) Infrastructure Thousands of
regulation mainlines

(end 1993) [15 ]

Belgium

Denmark

Germany

Greece

Spain

France

Ireland

Italy

Luxembourg

Netherlands

Portugal

UK

Austria

Finland

Sweden

Belgacom

Tele Danmark

Telecom Danmark

Four regional operating
companies

DBP Telekom

OTE

Telefonica

France Telecom

Telecom Eireann

Telecom Italia

P & T Administration

PTT Telecom

Portugal Telecom
CPRM

BT

Mercury
Kingston Telecom
CATV operators

Other licensed operators

PTV

Radio Austria

Telecom Finland

48 Local telephone
companies

Telia

Tele 2

Monopoly 4396

Monopoly 3030

Monopoly

Monopoly

Monopoly

Monopoly

Monopoly

Monopoly

Monopoly

Monopoly

Monopoly

Competition

Monopoly

Competition

Competition

```
37000

4744

14254

31000

1150

24167

221

7630

3300

26500

200

200

300

```

Negligible at
this time

3579

747

2014

5972

0.8

15 Source : IDATE, 1994, except for UK (Office of Telecommunications), Finland (Ministry of
Communications Finland) and Sweden (National Regulatory Authority for Sweden)

**15**

**///.** _**1.2A**_ _**Iternative infrastructure**_

In addition to the licensed operators listed in Table III.l.I, two other types of
network currently exist which have the potential to carry public telecommunications
services: own-use infrastructure operated by public utilities and cable television
(CATV) networks.

The extent to which these alternatives to the public network are used varies between
Member States, and is largely dependent on the regulatory framework in each
Member State.

Utility networks

In all European countries there are utilities which already have telecommunications
networks or which have access to rights of way which are a pre-requisite for such
networks. However, their potential for immediate deployment for commercial
purposes if regulation allowed this is limited.

On the basis of studies carried out for the Commission on alternative infrastructures,
Part I of the Green Paper concluded that further investment in additional facilities by
the utilities would be required. In particular, the study found that the benefits for
utilities were more likely to be lie in the construction of long distance rather than
local infrastructure. Exploitation of long distance infrastructure would require either
construction of local access or use of existing TO connections.

CATV

Cable television networks, by contrast, already consist of local as well as long
distance infrastructure. However, the level of development of these networks varies
considerably across Europe.

In two Member States, Greece and Italy, CATV does not exist and development of
cable is still very limited in Spain and Portugal. In the remaining Member States,
penetration rates for cable vary considerably from more than 90% in Belgium,
Holland and Luxembourg to around 5% in France and the United Kingdom. In
terms of subscribers Germany represents the biggest national market with nearly 15
million subscribers and a penetration rate of around 45%. [16 ]

16 For further details, see IDATE, 1994.

**16**

**Table** **m.1.2** **- Cable TV Networks in the European Union** **[17 ]**

Number of Households Subscribers [19 ]

Operators passed [18 ]

Belgium 38 97.4% 95.5%

Denmark 6500 [20] 73.6% 57.3%

Germany 1 64.6% 40.5%

Greece

Spain 30 8.1% 1.1 %

France 16 25.8% 6 %

Ireland 13 >50 % 40 %

Italy r [.. ]

Luxembourg 120 99.5% 81.4%

Netherlands 358 90.3% 86.4%

Portugal 1 1.6% 0.3%

UK 23 12.6% 2.8%

**m.2 The Market Situation**

Despite the turndown in economic activity in much of the OECD area, the
telecommunications sector continues to grow substantially in both volume and value
terms. Total turnover for telecommunications services in the European Union in
1993 was about 120 billion ecu or nearly 3 per cent of overall GDP, despite falling
price levels in the sector. The nominal growth rate over the last 5 years has averaged
about 7 per cent annually.

17 Source : IDATE, 1994

18 Percentage of television-owning households passed by the cable TV networks

19 Percentage of television owning households actually subscribing to a cable TV network.

20 These are networks serving more than 25 subscribers. There are around 4,800 additional networks
with less than 25 subscribers.

**17**

As an indicator of telecommunications usage and growth, international public
telephone traffic in the Union rose by just over 10 per cent in 1993 compared to
volume increases of about 11 per cent in 1991 and 1992.

It is the new service market areas that are producing the largest growth rates,
particularly where competitive service'provision has occurred. In particular, mobile
communications has displaced data communications and value-added services as the
most dynamic part of the service market. In the Union, mobile services account for
about 5 per cent of subscriber lines and nearly 10 per cent of service revenues. In the
rest of the European Economic Area the figure is significantly higher. By the
beginning of 1998, the date already agreed for the full liberalisation of
telecommunications services, there is the real prospect of well over 10 per cent of
telephone subscribers in the enlarged Union being served by competing wireless
operators.

Table m.2 - Turnover of EU information sector in 1993. [21 ]

**E** **lectronic publishing**
**2%**

**Publishing**
**22%**

**Telecom services**

**27%**

**Micro-electronics**

**2%**

**Audiovisual services**

**10%**

**Telecom equipment**
**6%**

**Consumer electronics**

**5%**

**Computer equipment**
**11%**

**Software &** **Services**

**15%**

**Total Market : 414 billion** ECU

21 Source : IDATE

**18**

In contrast, despite the development of integrated or multimedia services
(combinations of voice, data and images), and considerable speculation about the
emergence of multimedia networks, turnover for these new markets in Europe is as
yet limited. The first applications are occurring in specific business markets such as
intra-company advanced communications, video-conferencing, electronic data
interchange, broadcasting and news services for the financial sector, certain ISDN
applications, the emergence of some tele-working and the exploitation of some CD
ROM products.

However, there is no significant turnover yet from thé provision of multimedia
services to. the residential sector. Moreover, telecommunications and television or
broadcasting services are in the main currently supplied by quite separate networks.
This is the case even in the UK where in some areas telephone and cable TV services
are being marketed jointly by companies with local cable TV and telecommunications
franchises.

Total subscribers to cable television in the Union at the end of 1993 were 26 million,
half of which were in Germany. This total corresponds to approximately 15 per cent
of telephone lines.

The total turnover of broadcasters in the Union at the end of 1993, which includes
both content and transport or transmission revenues, was about 27 billion ecu.
Turnover for the provision of cable television was approximately 3 billion ecu.
These totals are equivalent to about 22 per cent and about 2,5 per cent respectively
of telecommunications services revenues.

**in.3** **The Regulation of Infrastructure in Member States**

///. _3._ _J_ _Public telecommunications infrastructures_

Among the Member States and accession countries, only Finland, Sweden and the
UK currently permit competition in the provision of public telecommunications
infrastructure.

The extent to which public telecommunications operators are permitted to provide
broadcasting or multimedia services is unclear, although in the UK, BT is expressly
prohibited from supplying broadcasting services on its telecommunications network.

**19**

**Table** **BQT.3.1** **- Current restrictions on the activities of Telecommunication**
**Operators in the EU** **[22 ]**

Production and Transmission of "Broadcast and Multimedia

Services"

B E L G I U M Uncertain area of the law due to the division of competence within the federal structure. The
combination of the various applicable legal provisions at Federal and Flemish and French
Community levels suggest that there is currently a prohibition on TOs producing content or
transmitting "broadcast" services. There exists the possibility that services in response to
individual requests may be provided .
D E N M A R K No explicit barriers to transmission of multimedia services (TeleDenmark being the main
provider of infrastructure for the transmission of broadcast services). However, explicit
restrictions preventing national TOs from producing such services
G E R M A N Y There are no explicit barriers to the transmission of multimedia services by TOs. DBP
Telekom is scheduled to be able to produce such services in 1995 after privatisation.
G R E E C E Th [e] combination of the various applicable legal provisions (including telecommunications
licensing requirements) indicates in practice that TOs may neither be involved in the
production of content nor transmit "broadcast" services; these restrictions may extend to
services in response to individual request.
F R A N C E No explicit barriers

SPAIN Implicit barrier against the production and transmission "broadcast" services (subject to
possible future change in government policy). It is arguable that a TO can transmit services in
response to individual requests.
I R E L A N D No explicit barriers.
The Constitution of Ireland explicitly protects freedom of expression, subject to rules on
obscenity and public policy
I T A L Y No explicit barriers. However, the right to freedom of speech protected by the Constitution is
subject to the following :

1. broadcasting services expressly excluded from télécoms licence;
2. broadcasting licences not granted to operators not engaged in the "entertainment market"
pursuant to their charter, and
3. private broadcasting licence cannot be granted to State-owned companies.
LUXEMBOURG There areno explicit barriers preventing TOs from producing content for multimedia services,
nor from transmitting such content over the TO's infrastructure.
The There are no explicit barriers to the production of content by TOs, but there is a restriction on
NETHERLANDS *h [e] transmission of such content over their own infrastructure, although transmission may
occur via CATV networks; transmission might also be possible over CATV networks owned
by the TO, subject to it obtaining a broadcasting licence.

P O R T U G A L No explicit barriers

U K All national TOs may not use national licences for the provision of content (to be reviewed in
2001), but can do so at a regional level in specified circumstances.
National TOs cannot convey "broadcast services" but may convey services in response to

individual requests (to be reviewed in 1998).
A U S T R I A There are no explicit barriers to the production of broadcast services, however, their
transmission is subject to the de facto monopoly of the public broadcasting entity, it may be
possible to provide services in response to individual requests.
F I N L A N D No explicit barriers

S W E D E N There are no explicit barriers preventing TOs from engaging in either the production or
1 transmission of television and radio programmes over their networks.

_Content_ refers to information, other than voice telephony, data communications or value added services, of an audio,
visual or audio-visual character, for its commercial transmission over infrastructure.

_Production_ _of_ _Content_ refers to the right to produce or compile _content_ (as defined).

2 2 Source : Coudert, 1994

**20**

**///.** _**3.2**_ _**A**_ _**Iternative**_ _**network**_ _**infrastructures**_

An overview with regard to current alternative network infrastructure licensed in the
Member States for defined telecommunications purposes is given in Table III.3.2.

In six Member States (Belgium, Germany, Greece, Spain, Italy and Portugal) the
possibility exists for the self-provision of infrastructure by utilities for their own
internal communication needs, such as the railways, motorways, energy and water
companies.

In four Member States (Belgium, Spain, Ireland and the Netherlands) wider rights
exist for licensing, on a discretionary basis, the self-provision of infrastructure by
non-utility corporate or closed user groups. However, the use of that infrastructure
is limited to the internal communications needs of the organisations concerned.

In two Member States (Germany and France) in addition to the discretionary
licensing of corporate/closed user group networks for internal communications,
such alternative infrastructure can be used by third parties, subject to specified
conditions .

In Denmark there is a general possibility to self-provide infrastructure. In the United
Kingdom, full infrastructure competition is permitted, either on the basis of specific
individual licences, or through the grant of class licences for certain types of
infrastructure provision.

Among the accession countries, Austria permits the self-provision of infrastructure
by utilities for internal communications purposes, but otherwise reserves
infrastructure provision to PTV. Sweden and Finland both allow full infrastructure
competition.

23 This includes those networks belonging to the utilities in the case of France. France has established a
system for authorising independent networks ("réseaux indépendants") for such purposes.

24 For example, in _Germany,_ certain entities, (primarily public utilities) can set up their own
infrastructure for internal communications, whilst private networks can be set up only within a 25 km
area, or beyond that only if conforming with certain technical configurations. For further detail see
Coopers & Lybrand, 1994.

**21**

**Table HL3.2** **-** **Current regulation** **of** **alternative telecommunications**
**transmission infrastructure**

**Geftfcral** CJ*HT" " 55<r*5o*wr7 jbistrcUonaty " Commercial
**Alternative** Exw»j>tto*i For XJctftslne for Licking for Third fatty
Provision **Utilities** **Srfr-ProvlAk>n** **cue*** **[26]** **.** Provision

**Belgium**

**Denmark**

**Germany**

**Greece**

**Spain**

**France**

**Ireland**

**Italy**

**Luxembourg**

**Netherlands**

**Portugal**

**UK**

**Austria**

**Finland**

**Sweden** **[34 ]**

**No**

**No**

**No**

**No**

**No**

**No**

**No**

**No**

**No**

**No**

**No**

**Yes**

**No**

**Yes**

**Yes**

**Yes**

**Yes**

**Yes**

**Yes**

**Yes**

**No** **[3 0 ]**

**No**

**Yes**

**No**

**No**

**Yes**

**No**

**Yes**

**No**

**No**

**No** **[2 7 ]**

**Yes**

**Yes**

**No**

**No**

**Yes**

**Yes**

**No** **[3]** *****

**Yes**

**Yes**

**No**

**Yes**

**.33**
**No**

**Yes**

**No**

**No**

**Yes**

**Yes**

**No**

**No**

**Yes**

**No**

**No**

**No**

**No**

**No**

**Yes**

**No**

**Yes**

**No**

**No**

**No** **[.28 ]**

**Yes** **29**

**No**

**No**

**Yes**

**No**

**No**

**No**

**No** **[3 2 ]**

**No**

**Yes**

**No**

**Yes**

**Yes**

**25**

**26**

**27**

**28**

**29**

**30**

**31**

**32**

**33**

**34**

Source : "The impact of liberalisation of alternative Terrestrial Infrastructure for non-reserved

services", Coopers & Lybrand, 1994, and additional analysis.

**The exact categories** **of** **exempt organisations and nature** **of** **exemptions from** **the** **general obligation** **to use** **TO infrastructure vary**
**according to the Member State concerned.**

**Corporate networks** **/** **Closed User Groups**

**Belgian regulation provides** **in** **principle** **for** **licensing** **of** **private transmission** **links,** **but** **only where Belgacom** **is not** **prepared** **to**
**provide a technically equivalent link at a normal tariff** **and** **within a reasonable** **period.**

**Shared use of internal networks is possible** **under** **certain circumstances.**

**However limited to particular configurations and maximum distances.**

**No specific exemption for utility companies** **-** **application must be made** **by** **them** **for an** **authorisation** **to** **operate** **an** **independent**
**network** **("réseau** **indépendant")**

**The Italian Postal Code provides for the possible discretionary licensing of private telecommunications** **systems,** **but only if there** **is**
**no** **or** **an** **inadequate public service between the points to be** **linked.**

**Proposals are currently before the Dutch Parliament to introduce competitive** **infrastructure** **provision by the creation** **of** **a second**
**national infrastructure provider.**

**Austrian regulation provides in principle for licensing of private transmission** **links,** **but only where PTV** **is** **not prepared to provide** **a**
**technically equivalent link at a normal tariff** **and** **within a reasonable** **period.**

**There are no restrictions on the building or use of infrastructure for the provision of telecommunications services in** **Sweden,** _**so**_ **there**
**is no need for discretionary licensing for** **self-provision** **or class exemption for utilities.**

**22**

_**HI.**_ _**3.3**_ _**Cable TV infrastructures**_

**Current provisions concerning use of cable TV networks for the provision of**
**telecommunications services are summarised in Table III.3.3. In most cases, CATV**
**networks are either barred from carrying telecommunications services, (both public**
**voice telephony and liberalised services) or do not because the current legal situation**
**is unclear, (due to absence of express provisions in the national regulatory**
**framework)**

**Table** **Hl.3.3** **- Use of CATV networks for the delivery of telecommunications**
**services**

**Use of cable TV networks for** **télécoms** **services**

**Belgium**

**Denmark**

**France**

**Germany**

**Greece**

**Ireland**

**Italy**

**Luxembourg**

**Netherlands**

**Portugal**

**Spain**

**UK**

**Austria**

**Finland**

**Sweden**

**No**

**No**

**Non-voice services only**

**No**

**35**

**No legal provision**

**36**

**no legal provision**

**limited use**

**No**

**No**

**Yes**

**No**

**Yes**

**Yes**

**Source: "L'impact** **de** **I'authorisation** **de la** **fourniture de services de** **télécommunications libéralisés**

**par les** **câblo-opérateurs",** **IDATE,** **1994,** **ECCA and additional** **analysis**

**In France, the regulatory framework has since 1990 permitted CATV networks to**
**apply for licences to offer telecommunications services other than voice telephony,**
**but take-up has been limited because of limited geographic coverage and the**
**exclusion of telephone service.**

**35** **No cable TV networks** **available**

**36** **No cable TV networks available**

**23**

In Holland, CATV operators constituting about 55 per cent of the Dutch market are
participating with the railway company and other utilities in a consortium which will
form the basis of a second national telecommunications operator.

Following the duopoly review in the UK, CATV companies have been permitted to
provide a full range of telecommunications services.

m.4 Conclusions „

Currently, telecommunications services are provided for the most part over the
infrastructures of the public telecommunications network operators. In the Union
and accession countries, only Finland, Sweden and the UK permit competition in
public telecommunications infrastructure provision.

In general, the exploitation of alternative infrastructures such as utility networks or
cable TV networks to provide telecommunications services in the Union is extremely
limited due to the restricted regulatory situation.

In addition, the current legal situation for the use of cable TV networks in providing
telecommunications services is unclear.

The current restrictive regulatory situation on infrastructure is not only holding back
the cost effective development of pan-European networks and services in Europe but
also threatens to impede the development and distribution of multimedia products
and services.

**24**

**IV THE** **MAJOR** **DRIVERS FOR CHANGE**

**IV.l** **Market and Commercial Developments**

The telecommunications industry is in a period of transition. The two major features
of technological change - fragmentation and convergence - are shaping the
commercial environment; fragmentation because new services and new operators are
emerging, and convergence because the traditional divisions between the
transmission media for communications are blurring. The telephone is moving from
the wires in favour of the air and television is moving from the air to utilise wires.
Moreover, companies from historically quite distinct sectors, telecommunications,
computing and software, publishing, and broadcasting and entertainment are
beginning to explore avenues of mutual interest.

At the heart of the major commercial changes underway in the telecommunications
sector is the move to digitisation and the tremendous growth in electronic processing
power both within networks and by terminal equipment. But in addition, the
advances in transmission (both wire and radio-based) and switching technologies are
now being actively exploited commercially.

_IV._ _J._ _1 Changing Market Structures_

Although significant competition in fixed infrastructure has only been introduced in a
small number of European countries, (the UK, Sweden and Finland), traditional
market structures in the telecommunications sector are changing everywhere as a
result of competition in some service areas, the development of new services and
infrastructure competition in other countries outside Europe.

Firstly, the rapid development of mobile or wireless networks has led to the entry of
new companies to the telecommunications sector, (for example from the banking,
utilities and construction sectors) who are participating in some of the consortia
involved in mobile network investments.

Secondly, increasing competition in telecommunications services is leading to a
proliferation of new companies in the sector (both equipment and service providers)
and a greater involvement of established companies providing various kinds of
communications services to business, e.g., Reuters, Visa, IBM, Sita, EDS, Swift etc.

Thirdly, increasing competition and market opening in the international business
telecommunications sector has meant that traditional telecommunications operators
are now moving outside their traditional geographic boundaries, following their
larger customers and also forming joint ventures. In many cases the traditional
operators are also following individual customers abroad by means of card-based
service, where telecommunications services can be used on the move and billed
domestically or to a credit card account.

**In** addition, corporatisation and privatisation of many established publicly owned
TOs, is reinforcing these trends through new entities entering the sector and alliances

**25**

**involving strategic partnerships from both inside and outside Member States. Within**
**the European Union, most Member States have at established an arms length**
**relationship with their operator through the implementation of a formal contractual**
**relationship, whilst private share holdings in the established TOs exist in the UK,**
**Holland, Denmark, Spain, Italy and Portugal and plans are underway to increase the**
**level of private investment in the latter two countries. Privatisation is also actively**
**being considered in most of the other Member States and throughout central and**
**Eastern Europe. The shift away from traditional public sector management of the**
**telecommunications sector, combined with the development of new service markets**
**is leading to an increasingly complex picture of alliances, groupings and partnerships.**

**Rapid technological and commercial developments and the prospect of** **thé** **take-off**
**of multimedia services in the context of the further growth of the information**
**economy are also leading to significant alliances and agreements in anticipation of**
**market opportunities. This is most noticeable in the US where companies are also**
**attempting to overcome the established lines of business restrictions** **imposed**
**between local and long** **distance** **and between fixed and wireless operations.**
**However, the changing market structures also encompasses forward integration into**
**new service areas, though securing access to content (films, TV programming,**
**published media) and link-ups between telecommunications and cable operators,**
**service providers and software companies.**

**Finally, the development of telecommunications services competition and the growth**
**in mobile and wireless operators has led to the emergence of** **a** **new breed of service**
**provider which packages and prices services to the final customer.** **In some**
**instances, particularly for larger business clients, this intermediary between the**
**infrastructure or network operator and the customer may add significant value by**
**integrating a number of communications systems. In other cases, particularly for**
**international services, suppliers resell services at prices below normal tariffed levels.**
**The increasing commercial importance of the systems integrator or service provider**
**is aided by digitisation and the adding of intelligent features to both the network and**
**to terminal equipment, making it easier to tailor services to customers and bill them**
**accordingly.**

**26**

**Table** **IV.1.1** **- Recent alliances/acquisitions** **[37 ]**

**Successful bids**

Purchaser

turnover

$bn

**î**

**u**

**n/a**

**1**

**0.1**

**67**

**n/a**

**11**

**0.1**

**13**

**67**

**20**

**10**

**13**

**58**

**25**

**20**

**12**

Purchaser

turnover

$bn

**12**

**10**

**11**

**67**

**13**

Target/Partner

**Nextel**

**Sprint**

**Cox Enterprises**

**Energis**

**Tele**

**Communications**

Target/Partner

**WilTel**

**Wometco/Georgia** **Cable**

**Nynex Cellular**

**US** **West Cellular**

**OneComm**

**Unisource**

**Sprint Corporation**

**Time Warner**

**Motorola mobile licences**

**Iusacell**

**McCaw Cellular**

**MCI**

**Centel**

**Metro Mobile CTS**

**NCR**

**Telecom**

**New Zealand**

**Contel**

**Telecom USA**

Value

of deal

$bn

2.5

1.2

13.0

18.0

0.7

n/a

4.2

2.5

1.8

1.0

12.3

5.3

2.9

2.5

7.4

2.5

6.3

1.3

Value of

deal^bn

1.3

20.0

5.0

0.3

22.0

Date

Aug-94

Jul-94

Jul-94

Jul-94

. Jul-94

Jun-94

Jun-94

Dec-93

Nov-93

Oct-93

Aug-93

Jun-93

Jun-92

Oct-91

Sep-91

Sep-90

Aug-90

Apr-90

Purchaser

**LDDS**

**US** **West**

**Bell** **Atlantic**

**Cellular**

**AirTouch**

**Nextel**

**AT&T**

**Eunetcom**

**US** **West**

**Nextel**

**Bell Atlantic**

**AT&T**

**BT**

**US Sprint**

**Bell Atlantic**

**AT&T**

**Bell Atlantic &**

**Ameritech**

**GTE**

**MCI**

Activity of
target

Inter-exchange

CATV

Mobile

Mobile

Mobile

Global outsourcing

Inter-exchange

Media/CATV

Mobile licences

Mobile

Mobile

Inter-exchange

LEC

Mobile

IT manufacture

PTO

LEC

Inter-exchange

Share

of

target

%

100

100

100

100

100

n/a

20

23

100

42

100

20

100

100

100

68

100

100

Share

of

target

%

17

100

100

33

100

**Unsuccesful bids**

Date

Aug-94

Jun-94

Apr-94

Mar-94

Feb-94

Purchaser

**MCI**

**EDS**

**SWBell**

**AT&T**

**Bell Atlantic**

Activity of target

Mobile

Inter-exchange

CATV

Transporter

CATV

_**IV.I.2 Blurring of the traditional**_ _**boundaries**_

**Until quite recently, telecommunications and broadcasting networks could be**
**distinguished very clearly from one another and from other communications means,**
**not only by the networks themselves but by the services provided on them.**
**Commercial developments are already blurring these distinctions.**

**37** Source: Mercer, 1994

**27**

**Telecommunications networks have traditionally provided two-way private voice**
**communications between parties whilst broadcast networks have supplied**
**simultaneous open communications, (sound only or sound and image), from one to**
**many points.**

**However, an increasing proportion of telecommunications traffic consists of one way**
**communications or of non-voice communication. Adding a personal computer or**
**other terminal to the end of a telecommunications line instead of a telephone**
**multiplies the possibilities. Accessing information services, databases or premium**
**services** **by telephone or PC is already common. Use of fax machines is also now**
**widespread. Although video-conferencing and more particularly video-telephony**
**have yet to** **take-off,** **Reuters is already providing specialised television services in**
**addition to its traditional telecommunications market information services to the**

**financial sector or anyone who wishes to subscribe. Security services such** **as** **the**
**surveillance of** **premises** **are also being marketed by telecommunications operators.**
**In addition, the popularity of Internet and other interconnected networks has now**
**spurred the development of electronic mail, beyond the confines of private local or**
**intra-company** **networks.** **Some telecommunications** **operators** **are also**
**experimenting with video on demand or related services,** **mostly** **in response to**
**competition or the prospect of competition in telephone services.**

**On the** **broadcasting*** **side,** **more specialised and targeted services are also appearing**
**even if these are currently more developed in North America than in Europe. The**
**limited capability of the return path in many of these cable TV networks, means,**
**however, that services are limited to pay TV packages or home shopping, the latter**
**used in conjunction with the** **telephone.** **However, networks could be upgraded to**
**provide more sophisticated services, particularly if restrictions on supplying**
**telephone service are lifted.**

_**TV.**_ _**1.3**_ _**Market opening**_

**The combination of market and commercial developments described above, and the**
**blurring of traditional divisions between services and between service providers or**
**operators, is leading to** **an** **inevitable opening of markets even if the major part of**
**telecommunications services are still provided by the traditional operators.**

**This inevitably implies that in some markets, service providers may be competing**
**against fully integrated network and service operators or even against integrated**
**equipment and service providers. In** **addition,** **mergers, alliances and agreements are**
**being agreed or planned in advance of the opening of some markets.**

**These commercial developments raise the important issue of competitive safeguards**
**at a number of levels and the need for the definition of an appropriate regulatory**
**framework. These are highlighted in Section VI of the Green Paper.**

**28**

**IV.2 Technological Developments**

**Technological** **developments** **are one** **of the** **main forces** **shaping the**
**telecommunications sector. Over recent years, developments in integrated circuits**
**and digital technology have led to the modernisation of fixed telecommunications**
**networks in order to achieve cost savings and performance improvements. This has**
**also led to the rapid emergence of mobile telephone networks.**

**Over the coming years, the sector will be influenced by technology developments in**
**four main areas:**

**•** **broadband transmission and switching**

**•** **multimedia applications**

**•** **wireless technologies**

**•** **intelligent networks.**

**The implications are explored more fully below.**

_**IV.2.1**_ _**Broadband technologies will permeate the network**_ _**infrastructure**_

**The widespread deployment of optical fibres supporting Synchronous Digital**
**Hierarchy (SDH) transmission and Asynchronous Transfer Mode (ATM) switching**
**technologies, ultimately in both local access and core networks, will change the**
**fundamental nature of infrastructure. It will evolve from one that is today limited in**
**the capacity it can provide to customers, to one of virtually unlimited capacity. The**
**task of operators and service providers will be to ensure that such capacity is made**
**available to users as efficiently as possible by deploying appropriate technologies in**
**the local access network.**

**SDH represents an evolution of current transmission hierarchies, not only allowing**
**optical fibre capacities to be more suitably exploited, but adding flexibility of access**
**and superior reliability through topological and network management features.**
**ATM, based on fast packet switching concepts, will complement SDH by providing**
**high bit-rate switched services to end users. It is this technique which is generally**
**regarded as the basis for the future Broadband ISDN.**

**Although capacity may be huge, using the available bandwidth and sharing it among**
**users is still a problem.** **In** **the shorter** **term,** **novel methods of enhancing the**
**information-carrying capacity of existing copper-based cables are emerging, spurred**
**on by current regulatory constraints and market conditions in the US. HDSL**
**provides high-speed digital capacity to the customer** **premises** **over copper-pair cable.**
**A similar copper-based technology, ADSL,** **[39]** **is being employed by some operators**

**38** High-bandwidth Digital Subscriber Line

39 Asymmetric Digital Subscriber Loop

**29**

**for video-on-demand services, as a means of addressing the entertainment** **market.**
**Such approaches can be seen as both** **complementary** **and competitive to optical fibre**
**solutions, depending on the configuration chosen. They are complementary in that**
**they provide high-speed terminations in partial-fibre networks. They are competitive**
**insofar as advances in data compression technology are able to compensate for lack**
**of available** **bandwidth,** **thereby enabling the copper pair to deliver a** **sufficient**
**number of video channels to the home.**

**Developments in broadband technology, complemented by parallel developments in**
**techniques for data** **compression,** **mean that future telecommunications networks will**
**be able to handle real-time television in a way that was previously the preserve of the**
**cable TV and broadcasting networks.** **This** **technological** **convergence of two**
**previously separate fields paves the way for innovation and increased investment in**
**the fixed network infrastructure.**

_**IV.**_ _**2.2**_ _**Convergence will**_ _**encourage**_ _**multimedia applications**_

**The fields of computers and telecommunications began to converge over a decade**
**ago,** **resulting in the birth of a new family of innovative services which became**
**known** _**as value-added**_ **telecommunications services (such as voice mail or** **video-**
**conferencing). À similar convergence between telecommunications and audio-visual**
**worlds now promises to bring with it even more radical changes through the**
**introduction of multimedia services. The real significance of this convergence is that,**
**unlike the previous case of information** **technologies** **(IT), the services resulting from**
**this new combination of telecommunications and audio-visual sectors will not be**

**limited to business users, but will have mass market appeal. The consequences in**
**terms of both service and manufacturing industry impact are potentially enormous.**

**The convergence** **arises** **primarily from** **technological** **synergies which enable both**
**media and telecommunications vehicles to be combined into a single delivery**
**platform. This platform has been popularly labelled the** _**information superhighway;**_
**in essence it refers to tomorrow's telecommunications infrastructure.**

**Multimedia services will require convergence at the user terminal level, in the form of**
**a multifunction processing and display device combining the attributes of an**
**advanced PC and a** **digital** **television receiver. Until digital television becomes a**
**reality, PCs are leading the way with local multimedia applications being produced**
**on CD-ROMs, identical in make-up to Compact Discs.** **The evolution of new**
**terminal products into a mass market consumer electronics item will take a number**
**of** **years,** **but the challenge for the telecommunications industry will be to encourage**
**users to migrate from local CD-ROM-based applications to those supplied over**
**remote connections via a cheap and** **efficient** **broadband network infrastructure.**

_**IV.2.3**_ _**Wireless solutions are playing**_ _**an**_ _**increasingly important role in the access**_
_**network**_

**The 1994 Green Paper on Mobile and Personal Communications reviewed the main**
**technology and market trends in the mobile area. The Paper recognised that the**

**30**

**advent of personal communications promises to revolutionise the sector and expand**
**the market. However, this requires a convergence of fixed and mobile networks, not**
**only at the level of a single, global service offering to users, but also through a**
**substitution by wireless technologies of network elements hitherto made up of wired**
**cable systems.**

**Early examples of such substitution include the use of analogue mobile technology**
**for fixed rural communications by operators in Spain and eastern Germany, and the**
**application of DECT-based systems to the local subscriber loop by** **Ionica,** **recipient**
**of** **a** **new operating licence in the UK. Although both solutions represent new ways**
**to tackle old problems, it is perhaps significant that the truly innovative approach is**
**that proposed by the new market player. It is also noteworthy that speed of service**
**roll-out appears to be as important as cost in assessing the viability of radio-based**
**solutions, an** **indication** **of the changing competitive market.**

**By granting mobile telephone licences to at least two operators in all Member States,**
**governments have already taken an important step towards the introduction of**
**parallel alternative radio-based infrastructures.**

_**IV.**_ _**2.4Network**_ _**Intelligence will**_ _**cement elements**_ _**of infrastructure**_ _**together**_

**The requirement of mobile communications networks to track the whereabouts of**
**thousands of users, and the meshing of fixed and mobile networks to implement**
**future concepts of terminal and personal** **mobility** **will raise new demands for**
**enhanced intelligence in the fixed telecommunications network. This requirement**
**will be compounded by an increasing need to provide for customer control of**
**bandwidth-on-demand and network management services in the context of**
**broadband infrastructures.**

**The market for value-added telephony services, expected to receive a new impetus**
**when voice telephony services are liberalised in 1998, has already resulted in a shift**
**of the architecture of switched telephone networks towards the so-called Intelligent**
**Network concept.**

**Closely linked to the development of the intelligent network is that of network**
**management. Sophisticated telecommunications network management systems will**
**allow diverse telecommunications infrastructures to be managed as a whole.**
**Network intelligence and network management systems are the cement holding**
**together the various elements which make up an end-to-end service, allowing**
**multiple organisations to compete and co-operate in order to supply services to the**

**customer.**

40 Digital European Cordless Telecommunications, see Glossary

**31**

_**IV.**_ _**2.5Different**_ _**network architectures**_ _**are**_ _**possible;**_ _**some will depend on**_
_**convergence between**_ _**telecommunications**_ _**and audio-visual sectors**_

**Table** **IV.2.1** **below shows four possible configurations of network infrastructure**
**based on the technological trends described above. These are based on studies**
**carried out on behalf of the Commission** **[41]** **and represent current perceptions of**
**network architectures most likely to be implemented over the next decade. They**
**reflect the widely-held views that:**

**•** **the** **fibre-to-the-home** **concept requires a convergence of** **telecommunications**
**and audio-visual services to become** **financially** **viable;**

**•** **- the** **large investment already made in existing copper-based networks will lead**

**operators to apply technologies aimed at enhancing its capacity;**

**•** **a combination of optical fibres and coaxial cable will constitute the standard**
**cable television network architecture for some time to come;**

**•** **new possibilities are opened up by the use of wireless technologies in the local**
**access network.**

**Whilst at present separate services tend to use separate infrastructures, in the future**
**it will be possible for at least two of the network infrastructures highlighted in Table**
**IV.2.1** **to handle both telecommunications and broadcasting services, as well as the**
**many new services associated with multimedia.** **The table comments on each**
**configuration without making any predictions as to which is most likely to be taken**
**up.** **It is probable that all four architectures will be deployed in the light of specific**
**circumstances and needs.**

**The technological developments associated with the evolution of network**
**infrastructure, and the inevitable convergence between telecommunications and**
**audio-visual sectors that this makes possible, emphasise the need for a review of the**
**current regulatory environment concerning telecommunications infrastructure to**
**ensure that unnecessary barriers to these developments are removed.**

41 See, in particular, _Impact of_ _liberalisation_ _of_ _alternative_ _terrestrial_ _infrastructure_ _for non_ _reserved_
_services,_ Coopers & Lybrand, 1994

**32**

**Table** **IV.2.1:** **Evolution of access network architecture**

Architecture Comments

            - Needs convergence of telecommunications and audio-visual fields
Fibre      - Requires sufficient revenues to support investment
to the       - High costs due to both equipment and civil works
Home     - Application may be limited to high-density areas
(FTTH)     - High investment requirement may lead to high usage tariffs and risk of
cross-subsidy from basic telephony services

Fibre      - Can be supported by entertainment services alone.
to the       - No obvious solution for voice services - at present mainly overlay, with
Curb trials of integrated solutions under way in the US
(FTTC)     - Probably the standard CATV architecture over the coming decade
plus       - High costs mainly due to civil works associated with installation

coax

             - Maximises use of existing infrastructure
FTTC     - Allows continued separation of telecoms/audio-visual service provision
plus       - Needs sufficient revenues from télécoms & qwow'-entertainment services
copper      - Defensive TO strategy for entertainment services, but currently seen as

expensive in relation to potential revenues

             - Requires separate provision of télécoms and audio-visual services in the
short term, due to narrow bandwidth available on radio path
FTTC     - European mobile/PCN leadership is crucial
plus       - Under-developed fixed infrastructure areas are the initial beneficiaries
Radio tail      - Needs rapid evolution of data compression technology

             - Evolution to UPT could result in low per-user costs and greater capacity

**IV.3 Regulatory Agenda**

**The** **combination** **of the market developments and technological innovation outlined**
**above have been the driving force behind the shifting regulatory agenda for**
**telecommunications in Europe. This pattern, mirrored in other jurisdictions, such as**
**in the United States and Japan, has led to political recognition that regulatory reform**
**of the telecommunications sector is a key element in maintaining economic**
**competitiveness, sustaining growth and employment, and in opening to every citizen**
**the opportunities provided by new, advanced networks and services.**

**These trends were a key element in the acceptance of the inevitability of the**
**liberalisation of voice telephony** **services** **for the general public during the 1992**
**Telecoms Review. They were also a factor in the Council Resolution agreed at the**
**Council Meeting of 17 November 1994 which endorsed the liberalisation of**
**infrastructure in parallel with the liberalisation of voice telephony services i.e. by 1**
**January 1998, subject to certain transitional arrangements.**

**33**

**That regulatory agenda at a national and European level, both inside and outside of**
**the Union,** **is** **itself a major driver of further change in the sector. The successful**
**opening up of telecommunications services and** **equipment** **to competition has**
**inevitably created pressures for the extension of this approach to communications**
**infrastructure, whilst at the same time technology has increasingly provided ways to**
**stretch the boundaries of current arbitrary delimitation between the monopoly and**
**liberalised areas.** **With the advent of the Information Society and the linked**
**challenges flowing from the convergence of the telecommunications, broadcasting**
**and information technology sectors, new momentum for the removal of unnecessary**
**restrictions on the development of new markets and services has been created.**

_**IV.**_ _**3.1**_ _**Regulatory trends at a national level within**_ _**the**_ _**EU**_

**At a national level the growing political importance of telecommunications and, in**
**particular, the role of advanced networks and services has been recognised by every**
**Member State** **[42]** **. This is reflected in the speed with which some Member States are**
**opening infrastructure provision to competition.**

**As indicated in Section IH.3, the United Kingdom has allowed fully competitive**
**provision of infrastructures (both self provision and use of third party infrastructures)**
**for all telecommunications services since the early nineties. This is also the position**
**in two of the accession Member States, namely, Sweden and Finland.**

**As indicated in Table III.3.2 the** **self-** **or competitive provision of infrastructures for**
**various telecommunications services is allowed to at least a limited extent in** **every**
**Member State. At the same time, the Netherlands and Spain both have plans to**
**licence a second national** **infrastructure** **provider, and the further relaxation of**
**restrictions on the use of alternative infrastructure is under consideration in France.**

**Equally, some Member States** **[43]** **are already actively addressing regulatory issues**
**raised by convergence as they recognise the difficulties created by divergent**
**regulatory regimes within their own systems for telecommunications and**

42 See in particular :

   - _Consultation_ _Publique_ _organisée_ _par_ _Bruno Lasserre_ _à la_ _demande_ _de Gérard Longuet : Quelle_
_réglementation pour les télécommunication françaises?,_ Direction Générale des Postes et
Télécommunications, April 1994, and _Les_ _autoroutes_ _de_ _l'information,_ Rapport au Premier ministre
par Gérard Théry, September 1994

   - _Study of_ _the_ _International_ _Competitiveness_ _of_ _the_ _UK_ _Telecommunications_ _Infrastructure,_ DTI,
February 1994

  - Report by McKinsey for the Ministerie van Verkeer en Waterstaat, _Telecommunicatie_ _in_
_Nederland :_ _op_ _weg naar_ _wereldklasse,_ June 1993

  - See also the text of the recent agreement concerning telecommunications submitted by the Ministry
of Public Works to the Council of Ministers in Spain, 7.10.94

43 See for example Théry Report referred to above.

**34**

broadcasting. Decisions at a national level to introduce infrastructure competition
are speeding this process.

_**IV.**_ _**3.2**_ _**The**_ _**regulatory developments at a European level**_

At a European level, since the publication of the 1987 Green Paper, the
telecommunications sector has been subject to a gradual process of liberalisation,
accompanied by the creation of a common regulatory framework and the application
of competition rules.

The successful liberalisation of the terminal market increased pressure for the
measure which opened up first value-added services and then data communications.
Market pressures from users, combined with new technologies, were the determining
factor in the 1992 Telecoms Review. However, agreement on voice liberalisation
raised regulatory issues, such as interconnection, the content and financing of
universal service and tariff rebalancing, which could only be given a partial answer, if
the future framework for infrastructure provision remained an unknown quantity.

_**IV.**_ _**3.3**_ _**The**_ _**regulatory agenda in North America and Japan**_

_**Information Highways**_

In 1993, early on in the new Presidency, the Clinton/Gore Administration launched
its National Information Infrastructure initiative [44] . In the two years that followed the
launch, the concept of Nil gradually developed into a comprehensive approach
towards the future communications infrastructure in the United States. Its main

emphasis is on three closely related elements: (i) the realisation of sufficient capacity
in a broadband backbone infrastructure in the US, (ii) on the improvement of the

44 President Clinton, Vice President Gore : Technology for America's Economic Growth, A new
Direction to Build Economic Strength, February 22, 1993.

In the report the importance of high-speed communication links for businesses such as banks and
insurance companies was emphasised. It further noted that such a network, or "Information
Superhighways", would also be of enormous value to schools, hospitals and other public
organisations. The report compared the potential of such "Information Superhighways" with the
effect that public investment in the railroads had on US economic and social development in the 19th
Century. It announced 5 specific programs:

  - Implementation of the High Performance Computing and Communications Act program established
by the High-Performance Act of 1991 introduced by then Senator Gore;

   - Create a Task Force on Information Infrastructure;

   - Create an Information Infrastructure technology program;

   - Provide Funding for networking pilot projects though the NTIA of the Department of Commerce;

  - Promote dissemination of federal information

**35**

**accessibility of that backbone infrastructure, and (iii) on the development of**
**applications to be carried over the networks.**

**An extensive organisational** **structure** **was established for the discussion and**
**elaboration of issues related to the 'Information** **Highway*.** **In** **this** **overall structure,**
**the Information** **Infrastructure** **Task Force** **[45]** **serves as a platform for government**
**officials, and the later established** **IITF** **Advisory Council** **[46]** **as a platform for the**
**industry.**

**Some of the support for** **Nil** **initiatives that the Administration provides, concerns**
**funding. This is the case for the high-capacity backbone via the** **High-Performance**
**Computer and Communications Program which was launched in** **1991.**

**The Department of Commerce's** **NTIA** **had in 1994 a** **total** **of $26 million at its**
**disposal** **for the development of applications. With matching additional funding, the**
**NTIA fund was awarded to approximately 100 different projects, ranging from tele-**
**education to tele-medicine.**

**A second important element of the** **Nil** **initiative is regulatory reform. In this regard,**
**the Administration serves as a motor, while at the same time setting an overall**
**framework. That framework has been set out in a White Paper** **[47]** **and a related**
**Memorandum** **[48]** **at the beginning of** **1994.** **Five important principles were set out:**

**• encourage private** **investment;**

**• provide and protect competition;**

**• provide open access to the network;**

**• take action to avoid creating a society of haves and have-nots;**

**• encourage flexible and responsive governmental action.**

**Later in 1994, the US Administration extended this view on telecommunications to**
**the international** **arena,** **and Vice President Gore advocated the implementation of the**
**above 5 principles to the** **international** **environment at two major ITU conferences** **[49]** **.**

45 The National information Infrastructure: Agenda for Action, Information Infrastructure Task Force:
Realising the Information Future, September 15,1993

46 Presidential Documents, Executive order 12864 of September 1993, United States Advisory Council
on the National Information Infrastructure

47 Administration White Paper on Communications Act Reforms, January 1994

48 Memorandum to distribution, February 17, 1994, Subject: Title VH of the Administration's
Communications Act Reform White Paper

49 ITU Conference, Buenos Aires, March 21,1994
ITU Conference, Kyoto, September 1994

**36**

**In Japan the concept of Information Society and the infrastructures that this** **requires**
**has been the focus of considerable government attention over the last two years.**
**Important efforts were made to develop a comprehensive policy for the Information**
**Society.**

**In May 1994 the Telecommunications Council, the advisory board of the Ministry of**
**Post and Telecommunications, published a major policy document** **[50]** **, which was**
**complemented by MITI's publication later in May of a paper addressing similar**
**issues** **[51]** **.**

**In relation** **to** **the establishment of fibre-optic networks, the MPT policy paper**
**emphasised the importance of competition from private companies. It underlined the**
**role of** **the** **Government as one** **of** **formulating policies for the promotion of private**
**investment. It further expressed the expectation that telecommunications carriers and**
**CATV,** **operators will build networks competitively.**

**The** **MITI** **report addressed a wide range of issues relating to multimedia applications**
**and Information Technology. With regard to infrastructures, the report concluded**
**that "it is considered to be of** **the** **greatest importance that the government, through**
**deregulation in telecommunications, broadcasting, and other areas, creates an**
**environment in which private enterprises improve telecommunications infrastructures**
**in a competitive situation".**

_**Regulatory initiatives in the United States and Japan**_

_**The United States**_

**The main thrust of telecommunications regulation in the United States over the last**
**10 years has been the increase of competition, building on its gradual introduction**
**from the middle of the fifties. Through a combination of legislative / regulatory**
**intervention and by legal actions brought under the US anti-trust legislation,**
**competition had been established by the** **mid-1980s** **in the provision of equipment, in**
**services, and in long distance infrastructures. In particular, a settlement of the anti-**
**trust action brought against AT&T led in 1984 to the so-called Modified Final**
**Judgement (MFJ) which required the divestiture of AT&T.** **This removed the**
**provision of local voice telephony services from AT&T (which were subsequently**
**provided by spun off Regional Bell Operating Companies (collectively known as the**
**RBOCs** **[52]** **) ), leaving it to provide international / long distance and other enhanced**

**50** **Telecommunications** **Council:** **Reforms toward the** **Intellectually Creative Society of** **the 21st** **Century.**
**Program** **for the Establishment of High-Performance** **Info-Communications** **Infrastructure. Summary**
**Report,** **May** **1994**

**51** **Ministry** **of International** **Trade and** **Industry:** **Program for Advanced** **Information Infrastructure,** **May**
**1994**

**52** **There are** **7** **RBOCs:** **Nynex,** **Bell** **Atlantic,** **Ameritech,** **BellSouth,** **Southwestern Bell, Pacific Telesis**
**and US** **West**

**37**

**53**

**54**

**55**

**56**

**57**

**58**

**telecommunications** **services.** **The RBOCs were in turn restricted** **from**

**manufacturing or providing long distance telecommunications.**

**A central feature of the US telecommunications and also CATV markets has been,**
**firstly, the distinctions drawn between local and non-local services and between**
**telecommunications and broadcasting services, and secondly, the use of line of**

**business restrictions to maintain these market restrictions.**

**In the long distance market, there are now hundreds of carriers in the US, the largest**
**of which are AT&T, MCI and Sprint. In contrast, the local exchange business is still**
**predominantly monopolistic** **[53]** **with the local exchange carriers having exclusive rights**
**to provide and operate infrastructure in each local area. There are at present about**
**1,328 local exchange carriers** **[54]** **, owned by the RBOCs (75% of the 145 million**
**access lines in the USA) or by independents (25%).**

**Until a Court ruling** **three** **years ago, the RBOCs under the terms of the MFJ were**
**not allowed to provide information services (which were taken to include cable**
**television). The independently owned local exchange companies whilst not subject**
**to the MFJ, were restricted by the Cable Act of 1984** **[55]** **from providing cable TV**
**services and even after the relaxation of the MFJ, the RBOCs faced the same**
**constraints on providing video programming.**

**In effect the Cable Act** **allows** **telecommunications companies to construct and**
_**operate**_ **cable services only in service areas other than their own** **[56]** **. They may not**
**operate a cable network in their own service area** **[57]** **. This policy is being reshaped by**
**the emergence of a regulatory policy at a federal level on so-called** **'video-dialtone**
**services' . At the same time, court actions have been brought with some success to**
**challenge the restrictions in the Cable Act.**

**Although in certain areas increasingly the pressure is felt of the Competitive Access Providers or**
**CAPs, or of competitors providing switched telephony where State legislation allows for this. Such**
**States** **are** **few however.**

**FCC:** **58th Annual** **Report/Fiscal** **year 1992**

**According to the Cable Act it is** **"unlawful** **for any common carrier** **to provide video**
**programming directly** **to** **subscribers in its telephone service** **area,** **either directly or indirectly through**
**an affiliate owned** **by,** **operated** **by,** **controlled** **by,** **or under** **common control with the common carrier".**
**Communications Act, Section 613**

**They are allowed to construct and then** _**lease**_ **a network to a cable company in their own service area.**
**This is the** **so-called "channel** **service".**

**Regulators in the US** **appear** **supportive of the** **attempts** **of** **local** **operators, particularly, the** **RBOCs** **to**
**enter fully into the cable market. This has a been a major factor in the Federal Communications**
**Commission policy on video dialtone which would allow market entry as "common carriers", i.e.**
**giving access their cable networks on a** **non-discriminatory** **basis. See also: US Department of**
**Commerce, NTIA: Telecommunications in the Age of** **Information,** **October** **1991**

**See,** **inter alia** **: CC** **Docket No.87-266 Telephone** **Company-Cable** **Television** **Cross-ownership** **Rules,**
**ss** **63.54-63.58.and** **Second Report and Order, Recommendation to Congress, and 2nd Further notice**
**of proposed rule-making, 7** **FCC** **Red.** **5781, Aug 1992**

**38**

On the other hand long distance and CATV companies are keen on entering the local
telecommunications market. Cable TV networks are, in terms of geographical
coverage, as ubiquitous as the public telecommunications network. Of the 93 million
households in the United States more than 55 million (or 60%) subscribe to cable
television [59], the networks of which pass 97% of all households.

The telecommunications market is substantially larger than the CATV market,
however, in terms of revenues. The market for local exchange companies alone
generated revenues of $95 billion in 1992 [60], while the 1993 total revenues for the
cable companies was around $22 billion [61] .

Regulation of telecommunications services over cable networks is generally a matter
for State rather than Federal Authorities. The legislation in most States prevents
cable companies from providing public switched telecommunications services. Only
6 out of 50 States presently allow cable entry into telecommunications, though such
restrictions are currently under review. Cable companies are, however, allowed to
provide non-switched telecommunications services and are increasingly active as
CAPs (Competitive Access Providers) [62] .

Recently, not least because of the National Information Infrastructure initiative of the
Clinton/Gore Administration, regulatory and market pressure has grown for a
relaxation of all these current restrictions. The legislative initiatives (reflecting many
of the same concerns confronted by the EU) which were presented to Congress
during 1993/94 had as their main objective the abolition of the business restrictions
on RBOCs, long distance carriers and CATV companies. They also sought to
creating certain safeguards, in particular in relation to universal service. Whilst the
legislation failed to complete its passage through Congress before the mid-term
elections, the underlying pressures for legislative reform are unlikely to disappear.

_**Japan**_

With the adoption of new legislation in 1985, competition was introduced in Japan to
the existing carriers NTT (for domestic telecommunications) and KDD (for
international telecommunications) in both services and infrastructures. Now, 9 years
later, there are 84 Type I carriers in Japan, carriers that are allowed to have their
own infrastructure.

59 Cable Television Developments, NCTA (National Cable Television Association), April 1994

60 USTA (United States Telephone Association): Phone facts 1993

61 Cable Television Developments, NCTA (National Cable Television Association), April 1994

62 MFS and Teleport are the most well-known CAPs. Teleport is now owned by a consortium of major
cable companies, including Cox, TCI, Comcast Corp., Continental Cablevision Inc. and TimeWarner Entertainments.

**39**

**Among the Type I carriers are three international carriers** **[63]** **and four national**
**carriers** **[64]** **. There are** _**66**_ **mobile communications carriers, two satellite carriers** **[65]** **and**
**9 regional carriers** **[66]** **(that provide leased line services in limited regions such as**
**Kansai around Osaka, and Kanto around Tokyo).**

**In the local loop the pro-competitive policies have had considerably less impact. This**
**appears to be largely due to the low tariffs of NTT and to certain regulatory**
**constraints in relation to, in particular, interconnection. Potential new entrants are**
**the CATV network operators. About 20% of Japanese households are connected to**
**a CATV network** **[67]** **.** **In December** **1993 the Ministry of Post and**
**Telecommunications decided to relax the rules on the usage of** **CATV** **networks and**
**to allow the provision of telecommunications over CATV networks. So far, only**
**two CATV operators have decided to introduce voice telephony over their networks.**

**Although the situation and trends in Japan and the USA may differ in the detail, they**
**do not in their overall direction. In both countries competition in infrastructure has**
**been allowed, already some time ago. In both the United States and in Japan, based**
**on the experienced benefits in long distance and international telecommunications,**
**measures are now being taken to extend competition to the local infrastructure.**

**IV.** **4 Conclusions on the Major Developments**

**The rapidity of technological and commercial developments combined with evolution**
**in the regulatory environment in many parts of the world is already leading to a**
**substantial degree of services and network competition and is making infrastructure**
**competition inevitable.**

**Moreover, because of** **the** **risks and uncertainties associated with some applications**
**and technologies, market forces are required to unlock the significant potential for**
**innovation and investment for the development of telecommunications and the**
**Information Society. Many of the fastest growing parts of the telecommunications**
**sector are in niche markets, subject to competition** **from** **new players.**

**At the same time, attention must be paid to the social challenges and consequences**
**of harnessing these market, technological and regulatory trends.**

**63** **NTT,** **International** **Telecom Japan** **Inc.** **and International Digital Communications** **Inc.**

**64** **NTT,** **DDI,** **Japan Telecom (linked to the railway companies) and Teleway Japan**

**65** **Japan** **Satellite** **Systems** **Inc.** **and Space** **Communications** **Corp.**

**66** **Often** **linked to** **regional** **energy** **companies.**

**67** **Including all facilities, also those of** **less** **than 50 drop terminals, there were more than 8 million**
**subscribers to CATV in Japan. White Paper on Telecommunications, 1994, Ministry of Post and**
**Telecommunications,** **Japan**

**40**

**V** **UNIVERSAL SERVICE**

**V.l** **Universal** **Service** **in telecommunications**

The agreement to liberalise all telecommunications services from 1 January 1998, has
necessarily focused attention on the adjustment of tariff structures whilst
safeguarding universal service and financing any remaining burden through internal
transfers, access fees or other mechanisms. In the context of the liberalisation of
telecommunications services, it is therefore important to establish common principles
for universal service and the means by which any uneconomic or non-commercial
burdens of provision are financed. Additionally, in the context of the liberalisation of
infrastructure, it is important to establish whether there exists any additional burden
on the ability of telecommunications organisations to finance universal service tasks.

The. Commission reaffirms the fundamental importance of maintaining and
developing universal service in the European Union, on the basis of a common
minimum set of services and infrastructure. This political priority was recognised in
Council Resolution 94/C48/01 on universal service principles in the
telecommunications sector, which set out certain policy orientations concerning the
major elements constituting universal service [68] at Community level. It also stated
that national regulatory authorities must take due account of the fact that in
numerous cases, market forces would be expected to lead to such provision being
made on a commercial basis, without further intervention [69] .

However, it recognised that the obligation to provide a basic voice telephony service
at an affordable price to all customers reasonably requesting it could result in market
operators being obliged to provide service to customers whom they would otherwise
have insufficient economic incentive to serve.

The Resolution, therefore, recognised that "universal service might be financed
through internal transfers, access fees or other mechanisms, which take due account
of the principles of transparency, non-discrimination and proportionality, while
ensuring compliance with competition rules in order to make a fair contribution to
any burden which the provision of universal service represents". In addition, it noted
the particular circumstances associated with the provision of universal service in
peripheral regions with less developed networks and "that the concept of universal
service needed to evolve to keep pace with advances in technology, market
development and changes in user demand".

At the current time, most of the TOs internally cross-subsidise less profitable
telecommunications services and/or less profitable customers with revenues from
more profitable services and/or more profitable customers. However, the agreement

68 Commission Directive 90/388/EEC on competition in the markets for telecommunications services,
identified the provision and exploitation of a universal network as a service of general economic
interest within the meaning of Article 90(2) and from that basis proceeded to examine whether a
derogation from the Treaty rules was justified (i.e., the maintenance of special and exclusive rights
for the provision of voice telephony as defined in the Directive) in order to derive sufficient revenue
to finance this task.

69 OJ C48/1, 16.2.94

**41**

**to liberalise all telecommunications services by 1998, subject to possible transitional**
**periods for certain Member States, means that TOs in conjunction with national**
**regulatory authorities have already embarked on the necessary adjustment of tariff**
**structures. It was in order to allow Member States with less developed networks,**
**i.e. Spain, Ireland, Greece and Portugal, to** **achieve** **the necessary structural**
**adjustments, in particular of tariffs, that an additional transitional period of up to five**
**years was granted to these countries.**

_**General commercial and technological trends provide the potential to improve**_
_**universal**_ _**service,**_ _**within a competitive**_ _**environment.**_

**The dramatic technological and commercial changes in the telecommunications**
**sector mean that the real cost of telecommunications is continuing to fall as quality**
**rises. The real task of policy in the context of universal service must be to ensure**
**that the potential benefits associated with these changes are passed on to all**
**consumers and users and not just to a privileged few. Although provision of the**
**local loop** **[70]** **, or at least new provision of** **the** **local loop, continues to be one of the**
**more expensive aspects of building telecommunications networks, a number of**
**factors are mitigating the real cost** **burden** **of this item.**

**Firstly, wireless or radio connections are becoming a realistic and potentially cheaper**
**alternative to connecting customers on fixed networks. This emphasises the need for**
**TOs to be allowed full** **freedom** **with respect to the technologies they are permitted to**
**use to connect customers to the public network. It also raises the issue of permitting**
**the use of radio technologies in the provision of public telephones by other**
**operators.**

**Secondly, competition and technological progress is bringing down the unit cost of**
**the transmission and switching equipment required to service the local loop and**
**through digitisation is improving service quality and enabling new services to be**
**provided, even though many TOs have so far failed to market these services to**

**customers.**

**Thirdly, the provision of telecommunications services jointly with other services,**
**such as cable television, is reducing the cost of supplying telephony, particularly to**
**residential customers.**

**At the same time that the cost of supplying telecommunications services is falling in**
**real terms, technological changes are shifting the balance of network costs from**
**usage sensitive to fixed costs and reducing the importance of distance in determining**
**costs.** **This is a further argument for national regulatory authorities to support the**
**re-balancing and reduction of prices.**

**Reducing usage and distance sensitive tariffs yields substantial gains. Many users are**
**better** **off,** **telecommunications usage is stimulated leading to further reduction in unit**
**costs and peripheral and isolated customers benefit. However, customers who use**

**70** **The local loop is the connection from customer premises (residential or business) to the local**
**concentration point and then on to the local exchange.**

**42**

the telephone as a lifeline or whose usage is low may be vulnerable to re-balancing.
This emphasises the importance of national regulators managing the re-balancing
process, removing general tariff distortions and developing targeted schemes to deal
with customers with particular needs.

_The economic interests of consumers and users - an appropriate adjustment of_
_pricing structures_

The agreement on liberalisation of telecommunications services means that a process
of adjusting and re-balancing pricing structures is underway. This process is a key
factor in the development of the sector and the full exploitation of existing and new
telecommunications services. It is high and distorted tariff structures which are
holding back the widespread development of both traditional and advanced
telecommunications and information services in Europe. Infrastructure liberalisation
can serve to reinforce the move towards more efficient pricing structures, stimulate
demand and further encourage development of the sector

The dual aim, therefore, should be to provide consumers and business with a diverse
offering of quality telecommunications services at competitive prices whilst
guaranteeing universal access to basic telecommunications services for all citizens.
The goal of providing affordable access to basic telecommunications services for all
citizens emphasises the need to provide service as cost effectively as possible and
implies that access should be provided at prices below cost for some, if the process
of re-balancing pricing structures leads to some customers leaving the network, being
dissuaded from joining or facing unreasonably high prices for basic
telecommunications services. This is not an argument for maintaining inefficient,
across the board subsidies for access but for developing targeted schemes for needy
citizens and uneconomic customers.

In several countries, such special tariff packages targeted at the needs of low income,
"lifeline" or low user customers have already been introduced. Some schemes work
automatically by offering a multiple tariff package. Customers pay a reduced line
rental for usage up to a given number of units. Beyond a certain level of usage, it
becomes cheaper to switch to standard tariffs. Also significant, in terms of the
volume of subsidy required are schemes which aim at providing basic
telecommunications services at affordable rates in the context of varying
geographical conditions and population densities. This issue is dealt with further in
the section on less developed networks.

**43**

**Table** **V.l** **- Special tariff schemes for targeted user groups**

Description of scheme

Belgium Reduced tariffs for several groups including

persons over 65 years and the handicapped.

Denmark 

Germany 

Greece 

Spain 

France 

Ireland Free rental and subsidised usage scheme provided

to specific user groups

Italy 

Luxembourg 

Netherlands 

Portugal 
UK BT's customers are covered by a special tariff, the
Light User scheme. Under this scheme customers
consuming less than 240 units pay a reduced line
rental. Current scheme under review.

Austria 

Finland There are no special schemes. Finnish legislation
requires all tariffs to be cost oriented.

Sweden 

**Up to date details on actual or planned targeted schemes not available.**

**As price structures re-balance, the traditional "access** **loss"** **declines. The "access**
**loss"** **is the loss associated with** **the** **shortfall of revenue from rental and connection**

**charges with respect to the non-traffic sensitive costs allocated to the provision of**

**44**

**exchange lines or access. However, it may well be that even with no constraints on**
**re-balancing, commercially minded TOs will still choose to retain some cross-subsidy**
**from usage revenue to fixed or access** **charges.** **After all, Telecommunications**
**operators benefit from the** **close** **relationship they have with a large base of**
**customers.**

**It is important not to confuse this "access loss" with the cost of providing universal**
**service. The latter arises principally because of the obligation on TOs to provide**
**service to customers at common tariffs irrespective of geographical location or**
**usage. If TOs were permitted to fully price discriminate between customers, or de-**
**average tariffs, the only cost associated with the universal service obligation would**
**be the provision of loss making schemes for needy customers and the cost of**
**providing emergency services and other related requirements.**

**However, the obligation on TOs to provide service at common tariffs to all is**
**expected to remain in place for the foreseeable future, even if** **TOs** **are being allowed**
**more flexibility in the way they can offer tariff packages to groups of customers. It is**
**also likely that TOs are increasingly required to provide special tariff packages or**
**options targeted at needy customers as tariff structures adjust and re-balance. This**
**raises the question of how any financial burden associated with this obligation to**
**supply service at common tariffs to uneconomic customers and other aspects of**
**universal service obligations (USOs) are** **financed** **in a competitive environment. This**
**is dealt with in Section VII.**

_**Infrastructure liberalisation will not**_ _**undermine the**_ _**provision of universal service in**_
_**the context of services liberalisation.**_

**There is no stable or non-contentious answer concerning the cost of universal service**
**and why it occurs. The actual burden of universal service can not be estimated**
**simply by considering the existing cost structures of** **the** **current TOs, since these do**
**not reflect potential productivity increases and cost savings which could occur in a**
**competitive environment.**

**In addition, the full and effective implementation of the provisions of the ONP**
**Leased Line Directive in conjunction with pricing adjustment in preparation for full**
**telecommunications services liberalisation implies that the pricing structures of TOs**
**for their core services (leased capacity and voice telephony) must move in the line**
**with costs. The adoption of the measures proposed in Part One of the Infrastructure**
**Green Paper to allow immediate alternative provision of leased capacity for currently**
**liberalised telecommunications services would further reinforce pricing adjustment**
**for leased lines.**

**In addition the implementation of full liberalisation of telecommunications services**
**implies that competing service providers will take a share of the market and a**
**consequent share of the burden of uneconomic universal service obligations.**

**The question arises as to whether full infrastructure liberalisation has significant**
**additional impacts on the ability of TOs to fulfil their share of the obligation to**
**provide a universal network.**

**45**

**The adjustment of pricing and revenue structures implied by the liberalisation of**
**telecommunications services means that this ability is not additionally threatened by**
**infrastructure liberalisation. Indeed, so long as the universal service obligation is**
**shared appropriately between competitors, infrastructure liberalisation is far more**
**likely to lead to positive benefits for the sector by encouraging innovation, an**
**extension of coverage, the exploitation of new technologies and the creation of new**
**services. One example is competition in mobile and cellular telephony. In contrast,**
**competition on the basis of simple re-sale is limited to the adjustment of pricing**
**structures and the offer of new tariff packages.**

**Full infrastructure liberalisation may have important financial impacts if new**
**operators, for example, market high capacity leased circuits to large users or use**
**access to large users to market service to very profitable customers or are able to**
**cross-subsidise their activities from other areas. This, however, is an argument for**
**allowing TOs greater** **flexibility** **in their tariff offerings to large users and in applying**
**fair competition rules.**

**In any case, there is no evidence that full infrastructure liberalisation undermines the**
**financial ability of TOs to continue to fulfil their share of uneconomic universal**
**service obligations, even where significant inroads into the relevant market share**
**have been made. This is the case in the US where a number of states have allowed**
**local infrastructure competition (in addition to inter-exchange competition), in the**
**UK, Sweden, Australia and Finland. Experience does emphasise, however that well-**
**functioning mechanisms must be in place for dealing with interconnection and**
**interoperability, financing uneconomic universal service obligations and indeed**
**monitoring universal service provision.**

**V.2The** **development** **of Universal Service**

**It has taken the best part of** **a** **century for the voice telephone network to evolve to**
**its current state with much of the change in terms of new services coming in the last**
**decade or so. Thirty five years ago, average telephone penetration in Europe was**
**about 10 lines per 100 inhabitants as opposed to the current average of about 45.**

**In several Member** **States,** **universal telephone service is not yet a reality because**
**waiting times exist, penetration rates are low or access to telephone service in some**
**form is limited. At the same time, the current rapid take-off** **and** **growth of mobile or**
**wireless based telecommunications now offers the prospect, in conjunction with the**
**fixed telephone** **network,** **of mass market development in personal communications.**
**This in time will lead to substantially higher levels of telephone penetration than has**
**been the case even in the mature or "saturated" traditional telephone markets.**

**Developments in integrated or multimedia communications services and the**
**emergence of the Information Society raise the important question of access to such**
**services for all citizens.**

**At the current time, the local access part of the public telephone network is only used**
**on average for several minutes daily. Bearing this in mind and the currently limited**
**development of new services, the Commission believes that it is premature to** **extend**
**the notion or definition of universal service to new areas.**

**46**

**At the same time, access to new forms and means of information provision can be**
**supported via public initiatives using for example the "public** **library"** **approach.**

**For the moment, in the context of the new integrated services, emphasis should be**
**put on action in the neighbouring fields of data protection and privacy, the audio-**
**visual area and content, intellectual property rights and the economic interests of**
**consumers so that, in conjunction with the measures proposed here relating to the**
**lifting of restrictions on the use of telecommunications infrastructures, service**
**development in the new areas can be fostered.**

**These neighbouring areas have been outlined in the Commission's Action Plan on the**
**Information Society and the Commission is currently pursuing its work in these fields**
**with the objective of ensuring the development of** **a** **coherent and effective regulatory**
**framework for the benefit of both economic operators and every citizen in the**
**Information Society.**

**However, it is important to keep under review the question of universal service in the**
**communications sector in the light of technological and market developments.**

**VI.** **EMPLOYMENT, SOCIETAL AND CULTURAL ISSUES**

**VI.** **1 Employment and the Information Society**

**The productivity gains which come from computerisation techniques, and the ability**
**rapidly to access, process, mobilise and disseminate information, are already essential**
**to the competitiveness of modern industry.** **This will become even more true as**
**advanced technologies and new, high value-added services become widely available.**
**Small businesses stand to benefit the most: the new communication services will**
**enable them to make savings of, on average, 4% of their turnover** **[71]** **.**

**Increased competitiveness will impact employment, both safeguarding jobs which**
**would otherwise have been lost and allowing new jobs to be created as European**
**companies** **benefit from the** **competitive** **advantage** **derived** **from** **new**
**telecommunications technologies and services. Particularly important in employment**
**terms will be the effects of the new technologies in small and medium sized**
**enterprises - traditionally the principle source of employment generation in Europe.**

**Recognition of the benefits of an early transition to the Information Society is a**
**major driving force behind the political initiatives in Europe, the United States and**
**other countries to build and develop national or regional information infrastructures.**

**At the same time, the impact on employment must be monitored and appropriate**
**strategies formulated to help adjustment across industries and services to new**
**technologies and new ways of working, which in enhancing business efficiency**
**inevitably impact more traditionally labour intensive sectors. In the context of the**

71 White Paper on Growth, Competitiveness and Employment, COM(94) 700

**47**

**follow-up to the White Paper on Growth, Competitiveness and Employment, the**
**Commission is paying particular attention to these issues.**

**The reformed European Social Fund, is designed to contribute to this adjustment**
**process, in particular as regards the development of appropriate training and**
**retraining measures.** **Complementary?to** **these actions are various training initiatives**
**envisaged under the Leonardo programme, as well as measures under the new**
**Community Initiative programmes ADAPT and SME which actively promote the**
**facilitation of industrial change.**

**A number of studies will assess the relationship between the Information Society and**
**employment, including one assessing the impact and benefits of the information**
**society for regional, economic and social cohesion. Work is also underway to define**
**the conditions necessary to capitalise on employment growth linked to technological**
**change. This will include guidelines designed to facilitate the process of economic**
**and social** **adaptation.** **The analysis will be assisted by the work of a High Level**
**Group of** **Experts,** **set up under the** **Commission's** **Action Plan on Europe's Way to**
**the Information Society** **(COM(94)** **347), as well as by the outcome of a major**
**colloquium** **on the social and societal issues of the Information Society to be held in**
**late 1995.**

**VI.2 Employment and the telecommunications sector**

_**Europe needs a dynamic**_ _**telecommunications**_ _**sector**_

**The** **telecommunications** **industry is a key sector of the European economy,**
**representing over** **3%** **of GDP. In addition to being large in absolute terms, it is also**
**subject to greater than average long-term growth - an estimated rate of** **7%** **over the**
**next two decades compared with only 2-4% (equivalent to projected GDP growth)**
**in other, larger sectors such as other utilities, motor industries, chemicals and food.** **[72 ]**

**However, such figures do not fully reflect the situation in the Union, because they**
**focus on the contribution of the TOs to the European economy, rather than including**
**the contribution to the economy made by other facilities providers, resale companies,**
**value-added** **service suppliers and equipment manufacturers.** **Moreover,**
**technological developments - in particular, digitisation techniques and broadband**
**communications systems - are expanding the scope of the sector by blurring the**
**boundaries between it and other industries such as broadcasting. Studies carried out**
**in the United States suggest that a full definition of the information sector shows it to**
**be responsible for over 16% of US GNP,** **rising** **to 40% if** **financial** **and legal services**
**are included.**

**The information industry is therefore central to the economic health of Europe.**
**Consequently, it is essential that the European telecommunications sector, which**
**provides the fundamental infrastructure of the Information Society, is a dynamic and**
**innovative one. Experience has shown that the best spur to** **innovation,** **investment**

**72** **Study for** **CEC** **by Arthur D Little, October 1991**

**48**

**and technological progress in the telecommunications industry is competition. This**
**is why the White Paper on Growth, Competitiveness and Employment identified the**
**removal of distortions to competition in the European telecommunications sector as**
**a priority for action. To give** **shape** **to that priority, Part I of** **this** **Green Paper calls**
**for the liberalisation of telecommunications infrastructure in Europe within the time**
**scale already agreed for liberalising telecommunications services.**

**In implementing this principle it is essential to monitor the effects such liberalisation**
**can have on employment. In fact in the short** **term,** **and only in relation to the**
**traditional employers - the TOs, there is likely to be a negative impact on**
**employment. On a wider canvas, the liberalisation process should have a positive**
**effect on employment as has been indicated. It is important to bear in mind that the**
**key issue must not be the impact on employment in the telecommunications sector**
**alone, or in individual organisations within the sector, but the wider impact of an**
**efficient and innovative telecommunications sector on the European economy as a**
**whole.**

_**Without liberalisation, the current decline in telecommunications employment**_
_**cannot be reversed**_

**The general trend in Europe over recent years has been for employment in the**
**telecommunications sector to fall, largely reflecting** **the decrease** **in employment**
**within the TOs in Member States.**

**The reduction in TO workforces is a global** **phenomenon,** **which is as much a result**
**of technological and commercial evolution as of increased competition in the sector.**
**There is no doubt of course that the prospect of greater competition is one incentive**
**to reduce labour costs. Equally, however, it is clear that other important factors are**
**also at work:**

**•** **in particular, changes in technology - most significantly, the increasing**
**convergence between communication and computing technologies - are having a**
**fundamental effect, leading to a shift in both the overall size and the skill-level of**
**the optimal TO workforce. Modern equipment requires fewer, more highly**
**skilled people to operate it, and is more reliable, requiring less maintenance.**

**•** **Another important factor is the impact of** **modern** **management techniques. Like**
**many other large corporations over recent years, TOs have sought to "down-**
**size" their organisation by contracting out those support functions which do not**
**need to be carried out in-house.**

**These are pressures which all TOs are facing, irrespective of whether they operate in**
**a liberalised market.** **[73]** **Under current conditions, therefore, the downward trend in**
**sector employment seems likely to continue.**

**73** **OECD studies show that the phenomenon exists irrespective of whether there is competition in a**
**market** **"Between** **1982 and 1992, employment** **in PTOs** **was reduced** **by** **over** **10%** **in nine member**
**countries. Five of** **these** **countries had competitive markets and four monopoly provision of** **PSTN**
**services."**

**49**

_**Infrastructure**_ _**liberalisation**_ _**can create new jobs**_ _**as part of a structural**_ _**re-**_
_**adjustment of employment**_

**In contrast,** **experience elsewhere suggests that liberalisation of European**
**infrastructure markets would result** **in** **job creation in the sector.**

**Liberalisation** **leads** **to increased investment, faster expansion of markets and greater**
**innovation in both service and technology development. This is the clear lesson from**
**sectors such as mobile** **[74]** **and satellite communications** **[75]** **.** **The experience in**
**liberalised markets has been that this expansion of investment and service provision**
**has also been accompanied by shifts of employment away from traditional operators**
**and towards job creation in other areas: firstly, through employment within the new**
**market players** **[76]** **; secondly, through the creation of** **'in-house'** **and 'out-house'**
**employment in managing private facilities and networks which exploit the newly**
**liberalised markets** **[77]** **, and finally, increased investment following liberalisation**
**underpins growth in the equipment sector and so impacts employment.**

**However, much of the employment created in these areas does not figure in**
**telecommunications employment statistics, which have traditionally focused on the**
**incumbent TO in each Member State. A fully quantified analysis of** **the** **employment**
**impact of liberalisation in the European telecommunications sector is therefore not**
**available at this time. Nevertheless, a range of estimates already exists.** **OECD**
**studies, for example, suggest that overall telecommunication employment has not**

**74** **Competitive licensing of GSM operators, for example, has been the trigger for an explosion in the**
**European market for cellular telephony, with users increasing by** **3** **million to a total of** **11** **million in**
**1994 alone.**

**75** **The "open skies" policy on satellite communications in the United States has resulted in an annual**
**30-40%** **growth rate in** **VSAT** **network sales in** **the US** **- compared with only marginal development in**
**the non-liberalised EC market - and has made the US industry the world leader in this area. Only**
**now that the EU market has been liberalised by Commission Directive** **94/46/EEC** **of 13 October**
**1994)** **are major growth opportunities of** **50%** **annually forecast.**

**76** **In** **the** **US,** **redundancies in** **AT&T and** **the** **RBOCs have been** **off-set** **by** **a generally consistent pattern**
**of employment growth in companies such as Sprint and MCI (The Benefits of Telecommunications**
**Infrastructure Competition, November 1993, OECD). In the UK, new entrant operators and service**
**providers have directly created 25,000 jobs, 17,000 of them since the market was opened to full**
**competition following the** **1992** **duopoly review. Studies have suggested that even a more established**
**market entrant such as Mercury has indirectly contributed to the creation of** **as** **many as 10,000 jobs**
**in addition to its direct employment of 10,500 staff by the beginning** **of** **1994 (Communications**
**Outlook,** **9 June 1994, OECD). In Japan as many jobs have been created in the New Common**
**Carriers and Type II carriers (i.e. resale, valued-added services) as have been shed by NTT - even**
**though the restructuring of NTT** **has** **been more radical over recent** **years** **than in any other** **TO** **in the**
**OECD.**

**77** **In the** **US,** **for** **example,** **the** **number** **of organisations seeking interconnect arrangements between their**
**own networks and those of** **local** **telephone companies has grown** **from** **42 to 692 since divestiture of**
**the Bell system. Around half of these organisations do not offer telecommunications services to**
**others. (Source: The Benefits of Telecommunications Infrastructure** **Competition,** **November** **1993,**
**OECD)**

**50**

been impaired by liberalisation [78] . Other observers believe that liberalisation would
result in positive overall employment growth in the sector.

The Commission has launched a major study which should give a firmer quantitative
basis for assessing the extent to which competition is creating new job opportunities.

_Conclusion_

The current employment situation in the telecommunications sector can be
summarised thus:

   - the traditional source of telecommunications employment, the dominant TOs, has

    - been in decline for several years. This is a feature of competitive and monopoly

markets alike and results from the adjustment by TOs to technological and
commercial changes;

   - New employment opportunities for the sector result from new entrants and new
service areas, in particular, in the area of mobile communications.

   - The best means of reversing the overall trend is through the increased investment
and market expansion which would flow from liberalisation, strengthening
growth and employment in every sector of the European economy.

However, quantitative employment effects within the telecommunications sector
alone should not be the principal consideration in the liberalisation debate. As
stressed at the beginning of this chapter, the central and overriding argument for
telecommunications liberalisation must be that it will lead to greater efficiency in the
information sector generally, and to productivity and competitiveness gains for the
wider European economy taken as a whole. As such, it will be an important step in
the fight against unemployment in all sectors of European industry.

**78** The Benefits of Telecommunications Infrastructure Competition, November 1993, OECD

**51**

**VI.3 Societal and cultural aspects**

**As recognised in the Bangemann Group Report on** _**Europe and the Global**_
_**Information Society,**_ **information and communication technologies now pervade our**
**lives,** **affecting the way we** **work,** **the way we** **learn,** **the way we spend our leisure**
**time and the way we interact with each other. Moreover, this process is accelerating**
**as we approach the 21st century. The Information Society is rapidly developing;**
**new investment opportunities are being created everywhere and the application of**
**information and communication technologies are affecting all industries and services**
**in our society.**

**These technologies will have a strong impact on our whole economic system,**
**growth, competitiveness and employment. They will also have other significant**
**effects on our society, and on our ability to attain societal goals.**

**The major investments in communications infrastructures and networks are being**
**undertaken to widen and develop the provision of telecommunications services to**
**industry, commerce and individual** **customers.** **Communications technologies** **are**
**already being** **exploited** **in many industrial and service sectors. There is the prospect**
**of further widespread expansion of IT into banking and insurance, publishing and the**
**media,** **marketing and household applications.**

**However, the series of recent reports on the development of the Information Society**
**and information highways have also rightly emphasised the important role that new**
**communications technologies can play in the provision of public** **services** **and**
**improving the quality of work and of** **life.**

**The potential fields of application are many and include major areas of public**
**expenditure, such as education, healthcare and transportation.**

**•** **Education and training**

**The development of the Information Society will have an especially important**
**impact on systems of education and training at every level.** **Not only will**
**appropriate systems be required to equip young people (and to retrain adults) to**
**deal with the new technologies** **and** **new ways of working, but the Information**
**Society itself is dependent on the ability of people to use it. In consequence,**
**education and training have an important role to play. A successful introduction**
**of new information and communication technologies will demand successful**
**education and training systems at all levels .**

**In education and training, applications range from linking up universities,**
**research centres, schools and training centres to developments in on-line and in**
**open and distance learning.** **Under LEONARDO, the Community action**
**programme on training and SOCRATES (the proposed Community action**
**programme on education), measures** **are** **also included for the promotion of**
**information and communication technologies and open and distance education**
**and learning.** **Telematic links between the training centres, schools and**
**universities is envisaged and is therefore included within these programmes.**

**The use of broadcast media (cable,** **television,** **interactive) can play an important**
**role in stimulating the use of new** **technolgies** **within educational and training**

**52**

institutions. This will encourage awareness of new technologies amongst the
general public, including amongst those not actively in full-time education.

- Healthcare

In medicine, exploitation of communications offers the possibility of both
improvements in quality and lower cost healthcare. The benefits include in
particular improved and more rapid access to information for health
professionals; the possibility of providing remote expert services over long
distance links; improvements in providing near 'real time' toxico- and pharmacovigilance and epidetniology; improved organisation of health care services,
reducing time lost spent in transmitting data and test results and other
administrative procedures, and improved quality of diagnostic tools.

" T.he "new" telematics currently available can make a considerable contribution
towards improved ergonomics for many jobs and also to reducing both health
and safety risks of certain activities by removing the employee from the site of
the particular hazard (e.g. heat or chemicals, etc.). It can also be of assistance to
workers in isolated sites by providing rapid and an improved quality of medical
attention in the case of accidents or illness.

- Transport

The applications in the area of transport cover both public and private means,
including the management of road traffic congestion, travel guidance systems and
improved air traffic control. Telework and more flexible working times can also
contribute to a reduction of traffic and resulting improvements in the
environment.

Developments in communications infrastructures and networks offer the potential
in many other areas for simultaneously improving efficiency and the quality of
life. For instance communications networks and services can assist in care for

the elderly and other community initiatives.

There is also the potential to develop teleworking and other more flexible working
practices which are better suited to the needs and mutual benefits of both individuals
and employers. Telework may be particularly interesting for persons who have
difficulties accessing the work place, such as people with disabilities, people involved
in caring for family members, or those living in remote areas.

In addition, the new communications technologies can be exploited in other public
service areas such as libraries, museums and related informational, educational and
cultural fields. Many of these concerns are at the heart of the applications
programmes being supported by the European Union.

_**Assessing the risks for Society and meeting**_ _**the**_ _**challenges**_

In all of these areas, the liberalisation of infrastructure will be a facilitator of the
improved services and choice which the Information Society may bring about. At
the same time, full account must be also taken of the risks which future social
changes present. In particular, consideration must be given to the impact of new
patterns of work on individuals, for example, the need to combat isolation amongst

**53**

**patterns of work on individuals, for example, the need to combat isolation amongst**
**home workers or those employed in geographically dispersed offices for teleworkers.**
**Any examination of these issues must also address the** **potential** **impact on, and any**
**necessary resulting changes to, the organisation of work and current employment and**
**other social legislation.**

**At the same time greater competition will lead to an explosion in the volume and**
**types of information available to each citizen, with a need as a result to avoid an**
**"information over-load". Adequate measures will be needed, as highlighted above in**
**relation to education and training, to prepare our society for these changes.**

**Additionally, it is essential in this new environment to avoid the emergence of a two-**
**tier Information Society, based on "information haves and have nots", in which only**
**part of the population has access to new technologies, is comfortable using it and can**
**fully enjoy its benefits.**

**In pursuing general societal goals, such as ensuring equal opportunities for every**
**citizens, and extending the benefits of the Information Society to households,**
**industry, government and public services, Member States are likely to be faced** **with**
**situations which will require regulatory intervention in order to guarantee the**
**provision of infrastructure.**

**The need to avoid the emergence of a dual society based on information "haves" and**
**"have nots" could result, for example, in a 'social** **case'** **for regulatory intervention to**
**facilitate access for schools or educational centres were connected to the Information**

**Society.**

**Identifying the solutions to avoid these risks lies outside the scope of this Green**
**Paper, but is nevertheless an important element in the various measures being**
**prepared in connection with the Commission's Action Plan on Europe's Way to the**
**Information Society.**

_**The**_ _**cultural dimension**_

**The** _**Bangemann Group**_ _**Report,**_ **recognised "the** **enormous** **richness of the European**
**heritage",** **which,** **once new products and** **services** **are available to every citizen, will**
**lead to "more opportunities for expression of the multiplicity of cultures and**
**languages in which Europe abounds". For that** **reason** **the Action Plan recognised**
**the role of the Information Society and of cultural goods (particularly, the cinema**
**and television programmes, as "privileged mediums of identity, pluralism and**
**integration. It called for them to "retain their specificity within the framework of**
**new multimedia products and services".**

**A final area of consideration is the need to take account of the linguistic diversity**
**within the** **Union,** **in order to ensure that this does not unduly limit the development**
**of new multimedia services, as well as the possibilities for Europe's audio-visual**
**industry. For that reason the Action Plan foresees the adoption of a Communication**
**addressing European linguistic issues and the means to stimulate the emerging**
**language-based** **industry.**

**54**

**VII THE EXTENSION OF THE PRINCIPLES OF THE**

**EUROPEAN** **UNION'S** **TELECOMMUNICATIONS**

**POLICY TO INFRASTRUCTURE**

The European Union's policy with regard to the regulatory framework for the
telecommunications sector has evolved along three main axes :

     - **liberalisation** (in order to stimulate competition in equipment, services and
now infrastructure provision);

     - **harmonisation** (to support the evolution of **a** common regulatory framework
"for access to telecommunications networks and services which have remained

within the monopoly domain, as well as providing a framework for a basic
minimum offering of telecommunications services within the Union and the
development of harmonised standards, and

     - **fair** **competition** (through the full application of the Union's competition rules
to the sector)

This framework has been developed in an evolutionary and gradual fashion on the
basis of the Commission's 1987 Green Paper on the development of the common
market for telecommunications services and equipment, and subsequent Green
Papers addressing the areas of satellite communications and mobile
communications [81], as well as important Communications from the Commission, such
as those on the consultation on the 1992 Telecoms Review and on the development
of universal service .

These policies have also been shaped by key Resolutions of the European
Parliament [84] and of the Council [85], which have set the overall political framework for

79 COM(87) 290, 30.6.87

80 Green Paper on a common approach in the field of satellite communications in the European
Community, COM(90) 490, 20.11.90

81 COM(94) 145 final

82 Communication on the Consultation on the Review of the situation in the telecommunications
services sector, COM(93) 159 final, 28.4.93

83 Communication on developing universal service for telecommunications in a competitive
environment, COM(93) 543 final, 15.11.93

84 See, inter alia, Resolution of the European Parliament on the Commission Communication of 21st
October 1992 concerning the 1992 Review of the situation in the telecommunications services sector,
20.4.1993 and Resolution of the European Parliament on the Commission Communication of 15
November 1993 on developing universal service for telecommunications in a competitive
environment, 4.5.94

85 Council Resolution of 30th " June 1988 on the development of the common market for
telecommunications services and equipment (88/C257/EEC OJ C257/1,4.10.88) ;

**55**

**telecommunications in the Union, as well as important policy documents in**
**neighbouring fields. The policy has then been turned into concrete form through a**
**series of adopted and proposed legislative measures since 1987. (Details of the most**
**important measures and proposals are set out in Annex 3).**

**A common approach to infrastructure must build on these elements, but must also**
**take full account of key policy objectives relating to the trans-European**
**telecommunications networks and services; economic and social cohesion within the**
**Union; the strengthening of competitiveness of the European economy and**
**supporting growth and development of employment.**

**The approach is consistent with the Commission's Green Paper of April. 1994 on**
**Mobile and Personal Communications which promoted the vision of the emerging**
**personal communications environment, based on the full convergence of wireless and**
**wired technologies and networks, as well as with the challenges posed by the**
**development of the Information Society.**

**The common approach is therefore based on the extension and development of**
**existing Union policies in telecommunications and in neighbouring fields which are**
**considered below.**

**VII.1 General Principles**

**In developing a coherent policy towards infrastructure, it is necessary to build on the**
**principles already successfully applied to the development of the markets for**
**telecommunications services and** **equipment** **in relation to the fixed, satellite and**
**mobile communications networks. These principles, which flow from the obligations**
**set out in the EC Treaty, form the basis of the political consensus which has emerged**
**concerning the development of the telecommunications sector, in particular, the**
**consensus flowing from the 1992 Telecommunications Review** **[86]** **. They are set out**
**below:**

**Council Resolution of** **19th** **December** **1991** **on the development of** **the** **common market for satellite**
**communications** **services and equipment (92/C** **8/01** **; OJ C8/1,14.1.92)** **;**
**Council Resolution** **of** **22nd July 1993 on the review** **of** **the** **situation** **in the** **telecommunications sector**
**and the need** **for** **further development in that market (93/C** **213/01,** **OJ** **C213/1,6.8.1993).**
**Council Conclusions of** **28th** **September** **1994** **on the recommendations to the European Council in**
**Europe and the global** **Information** **Society and on the** **Commission's** **Action Plan on Europe's Way to**
**an** **Information Society.**

**86** **See Council Resolution 93/C213/01 of** **22** **July 1993 and Council Resolution 94/C48 of** **7** **February**
**1994 on universal service principles for** **telecommunications.**

**56**

**MAIN TREATY PROVISIONS RELEVANT TO TELECOMMUNICATIONS POLICY**

**The general principles applied to the sector are derived from the provisions of the EC**
**Treaty ("the Treaty"), in particular:**

_**Article**_ _**3(c)**_ **requiring the creation of an internal market characterised by the**
**abolition,** **as between Member States, of the obstacles to the free movement of**
**goods, persons, services and capital;**

_**Article 3(g)**_ **requiring the institution of a system ensuring that competition in the**
**internal market is not distorted;**

_**Article**_ _**3(1)**_ **strengthening the competitiveness of Community industry;**

_**Article 3(n)**_ **encouraging the establishment and development of trans-European**
**networks;**

_**Article 3(s)**_ **contributing to the strengthening of consumer protection**

_**Article 5**_ **under which the Member States are bound to fulfil their obligations under**
**the Treaty;**

_**Articles**_ _**30**_ _**to 37**_ **concerning the free movement of goods;**

_**Articles 52 to**_ _**66**_ **concerning the freedom to provide services and the freedom of**
**establishment;**

_**Articles**_ _**85,**_ _**86 and 90**_ **setting out the Community competition rules;**

_**Article 100(a)**_ **concerning the adoption of directives for the approximation of**
**provisions laid down by law, regulation or administrative action in the Member**
**States as directly affect establishment or functioning of the internal market.**

_**Articles 110 to 115**_ **concerning the common commercial policy;**

_**Article 129a**_ **requiring the Community to contribute to the attainment of** **a** **high level**
**of consumer protection**

_**Articles 129b**_ **concerning the establishment and development of creation of Trans-**
**European Networks.**

**Beyond the Treaty Articles and the principles of the 1987 and subsequent** **Green**
**Papers, the Commission has issued Guidelines on the application of competition rules**
**to the telecommunications sector** **[87]** **.**

87 OJ C233, 6.9.91.

**57**

**VII.2 Exclusive and Special Rights over Infrastructure**

**In Part I of the Green Paper a simple principle was put forward in relation to**
**telecommunications infrastructure; namely, that there should be a free choice of**
**underlying infrastructure for the delivery of services which are open to** **competitive**
**provision** **[88]** **.**

**This approach reflects the proposals already set out in the Green Paper on Mobile**

**and Personal Communications.**

**The application of this principle would require the limitation of the scope** **of**
**exclusive and special rights** **[89]** **over infrastructure to the provision of voice telephony**
**services to the general public (until 1 January 1998). In order to comply with this**
**requirement, it would be necessary to show that, where the number of licences in any**
**given geographical area is limited, that limitation results from objective, proportional**
**and non-discriminatory factors** **[90]** **.**

**According to Part I of the Green Paper the maintenance of such restrictions is**
**currently justifiable only in relation to the provision of voice telephony services for**
**the general** **public.** **Action is therefore proposed in two stages.**

**In a first stage restrictions were to be removed on** _**"the use of infrastructures for the**_
_**delivery**_ _**of satellite**_ _**communications,**_ _**mobile**_ _**communications**_ _**and**_ _**terrestrial**_
_**communications services already liberalised".**_

**Action during the first stage would be limited to allowing such telecommunications**
**to be provided over third party or own infrastructure already authorised in Member**

**88** **The applicable principles of Union telecommunications policy and law applied to exclusive and**
**special** **rights,** **from which** **the** **proposal for** **free** **choice of the underlying infrastructure for competitive**
**services is** **derived,** **are set out** **in detail in** **Part I** **of the** **Green Paper** **sections V** **and** **VI.**

**89** **Directive** **90/388/EEC** **on competition in the market for telecommunications services as amended by**
**Directive** **94/46/EC** **defines** **both** **exclusive** **and** **special rights.**

**"Exclusive** **rights"** **means the rights that are granted by a Member State to one undertaking through**
**any legislative, regulatory or administrative** **instrument,** **reserving it the right to provide a**
**telecommunication service** **or undertake an** **activity** **within** **a given geographical area."**

**"Special** **rights"** **are defined as** **"the** **rights that are granted by a Member State to a limited number of**
**undertakings through any legislative, regulatory or administrative instrument** **which,** **within a given**
**geographical** **area,**

**- limits** **to two** **or more the number of** **such** **undertakings authorised to provide a service** **or** **undertake**
**an activity, otherwise than according to objective, proportional and** **non-discriminatory** **criteria,** **or**

**- which designates, otherwise than according to such** **criteria,** **several competing undertakings as**
**being authorised** **to** **provide** **a** **service** **or undertake an** **activity, or**

**- confers on any undertaking or undertakings, otherwise than according to such** **criteria,** **legal or**
**regulatory advantages which substantially affect the ability of any other undertaking to provide the**
**same telecommunications service or to undertake the same activity in the same geographical area**
**under substantially** **the** **same** **conditions.** **[11 ]**

**90** **One example of this would** **be** **limitations imposed on the number of licences on the basis of essential**
**requirements,** **such as the effective use of radio** **frequency** **spectrum,** **within** **radio-based** **networks or**
**on the grounds of protection of the environment** **or town** **planning objectives.**

**58**

**States. The proposals would permit the use of both fixed and wireless** **networks,**
**and, in** **particular,** **networks such as those operated by utility companies or cable**
**television networks.**

**The second stage would, as indicated in Part I,** _**"involve**_ _**licensing providers of new**_
_**infrastructures for liberalised services and**_ _**the**_ _**full use of such new, and existing,**_
_**infrastructure for the provision of public voice telephony service, once liberalised".**_

**The Council, in its Resolution of** **17th** **November** **1994** **concerning Part I of the**
**Green Paper, has confirmed the principle of general liberalisation of infrastructure by**
**1 January 1998, including the additional transition periods for certain Member States**
**in line with Council Resolution** **93/C213/02.** **A number of Member States have**
**urged the Commission in an associated statement to come forward as quickly as**
**possible with proposals to provide for the use of alternative network** **infrastructure**
**for services which are already liberalised.**

**It is in this context that Part II of the Green Paper now examines the competitive and**
**other safeguards that need to be put in place with regard to infrastructure**
**competition in line with existing telecommunications policy, set against the context**
**of liberalisation of voice services for the general public. These issues are addressed**
**below.**

**VII.3 Licence award procedures, selection** **criteria** **and the conditions which**
**may be attached to** **licences** **for infrastructure**

_**VII. 3.1**_ _**The basic approach to licensing**_ _**infrastructure;**_ _**licensing**_ _**infrastructure,**_
_**and**_ _**the**_ _**position of services**_

_**The basic approach to**_ _**licensing infrastructure**_

**In the telecommunications field, Directive 90/388/EEC (the Services Directive) as**
**amended by Directive** **94/46/EC,** **Directive** **90/387/EEC** **of** **30** **June 1990** **[91]** **(the ONP**
**Framework Directive) and the Green Paper on Mobile and Personal Communications**
**recognise the continuing role for Member States in licensing the provision of**
**telecommunications infrastructure and services.**

**Such national licensing must be consistent with the overall framework provided by**
**Community law. The manner in which licences are granted must not lead to the**
**creation of special** **rights** **(see section above).**

**In order to promote the** **development** **of trans-European telecommunications**
**networks and services, the grant of national licences for such networks should be co-**

**91** **Council Directive** **90/387/EEC** **of 28 June 1990 on the establishment of the internal market for**
**telecommunications services through the implementation of open network** **provision,** **OJ** **L192/1,**
**24.7.90**

**59**

**ordinated to facilitate the networks becoming operational throughout the** **countries**
**covered at the same time.**

**The Services Directive, the ONP measures and the two Directives ensuring the**
**mutual recognition of type approvals for terminal equipment established the overall**
**framework for national licensing by identifying the limited range of restrictions which**
**may be imposed within national authorisations for** **telecommunications** **or equipment**
**intended for use by the general public.** **These restrictions are limited to those**
**justified by:**

**•** _**essential requirements**_ **(namely, network security, network integrity,**
**prevention of frequency interference, the effective use of the frequency**
**spectrum,** **environment** **protection,** **rights of way and, in justified cases,**
**interoperability of services and data protection, and in the case of terminal**
**equipment, user safety and the safety of the employees of the operator).**

**•** _**public service requirements in the form of trade regulations**_ **(concerning**
**conditions to ensure the availability, permanence and quality of the service)** **[9 ]**

**These two categories of restrictions also form the basis for determining the approach**
**to the future licensing of infrastructure.** **As regards the establishment of new**
**communications infrastructures, these essential requirements should also include,**
**where applicable,, the protection of the environment and town planning objectives.**

_**Licensing of infrastructure, and the position of services**_

**In addressing licensing for infrastructure, it is important to recall the basic distinction**
**drawn earlier in this Paper between communications infrastructure and services. In**
**most Member States the monopoly provision of infrastructure has meant that a**
**formal distinction has not been necessary in licensing both telecommunications**
**networks and the provision of reserved and non-reserved telecommunications**
**services over them.**

**In practice, future infrastructure licences will almost always be granted to licensees**
**who also intend to provide a range of telecommunications services (which might**
**nevertheless be confined to the** **provision** **of leased line capacity).** **This has**
**implications both for the licence award procedures and for** **the** **specific conditions**
**which may be attached to future licences, which will include conditions likely to**
**relate both to the infrastructure and the services.**

**92** **Council Directive** **91/263/EEC** **of 29 April 1991** **on the** **approximation of the laws of Member States**
**concerning telecommunications terminal** **equipment** **including the mutual recognition of their**
**conformity; OJ L128/1, 23.5.91, as supplemented by Council Directive of 29 October 1993**
**supplementing Directive** **91/263/EEC** **in respect of** **satellite earth** **station equipment** **(93/97/EEC;** **OJ**
**L290/1,** **24.11.93.**

**93** **The** **Services** **Directive,** **limited the** **imposition of** **trade** **regulations** **to basic data** **services,** **namely the**
**provision of** **packet** **and circuit-switched data services for the public, subject to verification by the**
**Commission of** **their** **compatibility with Treaty. The provision of** **such** **basic services were seen as**
**forming a particular task entrusted by the Member States to** **telecommunications organisations.**

**60**

**At the same** **time,** **a** **framework** **for infrastructure licensing must also ensure :**

**•** **an appropriate level of regulatory supervision of independent service providers**
**who sell capacity** **and/or** **combine a range of telecommunications services from**
**different network operators. Such a** **framework** **must address, in particular, how**
**and to what extent such service providers should contribute to** **the** **cost of**
**universal service.**

**•** **sufficient flexibility to tackle the convergence between broadcasting, information**
**technologies** **and** **telecommunications.** **Increasingly,** **communications**
**infrastructure will be the vehicle over which both telecommunications services**

**and non telecommunications services are delivered.**

**In relation to convergence, a parallel can usefully be drawn with broadcasting where**
**cable television networks may be entirely independent of** **the** **content / programming**
**passing over them. Whilst the customer is aware of a single cable** **network,** **the**
**network and programming may be subject to quite different types of regulatory**
**supervision.**

**The basic approach to licensing proposed in this Green Paper does not extend the**
**framework governing the provision of telecommunications infrastructure or services**
**to non-telecommunications activities, primarily broadcasting, nor does it regulate the**
**use of infrastructure for such activities. Nevertheless, in the context of broadband**
**networks and convergence, the future approach to licensing must ensure that**
**telecommunications-related** **safeguards on services and networks are not**
**undermined.**

**SUMMARY** **OF** **THE APPROACH TO THE OVERLAP BETWEEN THE LICENSING OF**

**INFRASTRUCTURE AND SERVICES** **IN** **THE CONTEXT OF CONVERGENCE.**

**To provide the** **necessary flexibility, licensing** **must be** **considered** **at three** **levels:**

**•** **A harmonised approach must be developed to the licensing of communications**
**infrastructure, independent of its ultimate use.**

**•** **The conditions which may be** **attached to the** **use of that infrastructure for the delivery of**
**telecommunications services are defined in line with existing telecommunications policy**
**in the Union (essential requirements and, in the case of public telecommunications**
**infrastructure providers enjoying** **rights** **of** **way,** **public service requirements in the form**
**of trade regulations). That should** **not prevent** **subject** **to the** **provisions of the Treaty the**
**application of** **other** **conditions** **related to** **non-telecommunications activities,** **in** **particular,**
**broadcasting or indeed the requirement for a separate licence or authorisation for such**
**activities.**

**•** **Finally, conditions may also be imposed in certain cases on the provision of the**
**telecommunications services over that infrastructure. These will in most cases continue**
**to be regulated** **through** **a single licence for both the underlying infrastructure and the**
**telecommunications services provided over it, with the exception of independent service**
**providers who do not own infrastructure over which they operate. In parallel, the**
**provision and content of non-telecommunications services, in particular, broadcasting,**
**may** **continue to** **be** **subjected to** **a different supervisory controls.**

**61**

**These elements in the basic approach must now be extended to address (i) the**
**procedures for awarding licences for infrastructure, (ii) the criteria used for selecting**
**licensees and (iii) the conditions which may be attached to licences.**

_**VII.**_ _**3.2**_ _**Licence award procedures**_

**In line with the requirement for the withdrawal of special and exclusive rights over**
**infrastructure, market forces, rather** **than** **regulatory authorities at a national or Union**
**level, should generally decide future market structures, subject to the application of**
**the Community competition rules and the overall safeguards found in the Treaty.**
**Licensing procedures should not be regarded as a mechanism for imposing a**
**particular market structure.**

**It is nevertheless accepted that essential requirements linked in particular to**
**environmental, frequency and other physical considerations and public** **service**
**requirements in the form of** **trade** **regulations will continue to justify the grant of a**
**limited number of licences or authorisations for the establishment and operation of**
**infrastructure. Where the number of operators is limited by a Member State, this is a**
**potential restriction on the** **freedom** **to provide services and may distort competition.**
**It must therefore be justified under European law.**

**Future** **licence** **awards should be made by the Member States or their National**
**Regulatory Authorities on the basis of common principles:**

**•** **Licensing award procedures must respect the principle of the separation of**
**regulatory and operational functions established in Union telecommunications**
**policy.**

**•** **Award procedures must be open, non-discriminatory, and transparent.**

**In order to guarantee that licensing procedures are open, non-discriminatory and**
**transparent, Member States should ensure that :**

**ail applicants are subject to the same assessment procedures, unless there is an**
**objective reason for differentiation;**

**all selection criteria and conditions to be attached to the licence are known to**

**the applicants in advance;**

**reasonable time limits are set and applied**

**effective and rapid appeal procedures are established for unsuccessful**
**applicants.**

**•** **Any limitation on numbers should be based on the essential requirements and in**
**the case of public telecommunications infrastructure, and/or public service**
**requirements in the form of trade regulations and should respect the provisions of**
**the Treaty relating to the free circulation of services as well as the principle of**
**proportionality, by imposing the solution which is least limiting and must give**
**priority to competitive provision.**

**•** **The granting of national licences for infrastructure to support trans-European**
**telecommunications networks and services should be co-ordinated, in order to**

**62**

**94**

**encourage the growth of such networks and to allow them to become operational**

**at the same time in all the Member States traversed.**

_**VII.**_ _**3.3**_ _**The selection criteria for the award of licences and authorisations**_

**Licenses must be granted on the basis of pre-announced criteria.** **In cases of**
**networks intended for the general public, criteria may be based on public service**
**requirements in the form of trade regulations** **[94]** **.**

**Such selection criteria should be proportional to the scope and object of the licence,**
**and may include criteria related to the permanence, availability and quality of**
**services. This may imply also the infrastructure provider satisfying criteria relating to**
**technical competence and financial resources.**

**Common principles governing the award of licences and the selection criteria** **[95]** **which**
**may be used in selecting licensees should be developed on a harmonised basis,**
**alongside the overall limits imposed by the competition rules on the conditions which**
**may be attached to licences. In the absence of harmonisation at a Union level, such**
**criteria should be subject to prior scrutiny for compatibility with the Treaty rules** **[96]** **.**

**Member States should refrain from the automatic grant of new licences to particular**
**undertakings, or from the automatic exclusion of certain undertakings (such as other**
**telecommunications companies or utility companies) from the grant of a licence.**

**Selection criteria related to the use of the infrastructure concerned for non-**

**telecommunications activities (such as broadcasting) are not precluded, although any**
**such limitations would also have to be compatible with Community law..**

**Any refusal to licence a particular undertaking (including the exclusion of particular**
**undertakings from a licensing process) must be duly justified to allow for its**
**assessment under the applicable Treaty rules and also with the principle of**
**proportionality.**

**Furthermore, the prohibition on discrimination on the grounds of nationality in the**
**EC Treaty and EEA Agreement prevents restrictions being imposed to limit**
**applications from undertakings based in other Member States or in the EEA.**

**Public service requirements in the form of trade regulations are defined in Community law (See**
**section** **VII.3.1** **above).**

**95** **Examples of criteria which would not be an acceptable basis for assessing bids because they would**
**discriminate against non-national bids would include the impact of a particular bid on local**
**employment; local souring of equipment or components comprising infrastructure, willingness to**
**sub-contract to** **local firms or to enter into partnerships or other arrangements with companies in that**
**Member State.**

**96** **Examples of criteria which would not be an acceptable basis for assessing bids because they would**
**discriminate against non-national bids would include the local sourcing of equipment or components**
**comprising infrastructure, willingness to** **sub-contract** **to local firms or to enter into partnerships or**
**other arrangements** **with** **companies in** **that Member** **State.**

**63**

**The principle of mutual recognition of licences or authorisations is not fully**
**applicable to national licences for the provision infrastructure encompassing rights of**
**way. However, in order to facilitate licence applications in Member States other**
**than an applicant's home Member State, evidence relating, for example, to the legal**
**status or** **financial** **standing of the applicant may be the subject of mutual recognition.**

_**VII.**_ _**3.4**_ _**The**_ _**range of conditions**_ _**which**_ _**may attached to infrastructure licences**_

_**Basic principles**_

**Any conditions attached to licenses for the establishment and operation of**
**communications infrastructure must proportionate to the objective sought,**
**transparent and non-discriminatory. The requirement of transparency means that**
**licences should be published. The requirement of non-discrimination means that the**
**same licence conditions should in principle apply to publicly and privately owned**
**infrastructure operators. At the same time differential licensing conditions may be**
**appropriate between infrastructure supporting public telecommunications services**
**and infrastructure supporting corporate networks, or between public infrastructure**
**providers facing different market conditions (for example, a significant difference in**
**the date on which each is allowed to enter the market).**

_**Restrictions on establishment / ownership linked to nationality**_

**The principle of non-discrimination on grounds of nationality mentioned above**
**requires that the** **conditions** **attached to a licence must not restrict the establishment**
**(and therefore indirectly the ownership) of infrastructure by nationals of Member**
**States or companies or** **firms** **controlled by nationals of Member States .**

**Any other restrictions on ownership or control must be compatible with Community law and**
**with** **the Community's commitments taken on a multi-lateral basis.**

_**The scope of essential requirements and public service requirements in the form of**_
_**trade regulations**_

**Building on the** **framework** **provided by Community law, licenses for infrastructure**
**should not contain conditions other than those justified on the grounds of (i) essential**
**requirements, and (ii) in the case of public telecommunications infrastructure, public**
**service requirements in the form of trade regulations as published in advance.**

**Infrastructure not intended for the use of services for the general public (such as**
**infrastructure for corporate networks) should only be subject to conditions based on**
**the essential requirements.**

**97** **Articles 4 and 36 of the Treaty establishing the European Economic Area** **from** **1 January 1994**
**extends those principles to prevent restrictions being imposed on ownership by nationals of** **EEA**
**States or undertakings** **controlled** **by nationals of EEA** **States.** **Similar provisions are contained in the**
**European Agreements and Interim Agreements entered into between the Community and** **Poland,**
**Hungary,** **the Czech** **Republic,** **the Slovak** **Republic,** **Romania and** **Bulgaria.**

**64**

**Conditions attached to licences must be consistent with Community law relating to**
**the freedom of establishment and the free circulation of services and ensure a high**
**standard of consumer protection and respect for competition rules.**

_**Essential requirements.**_

**Conditions imposed on the basis of essential requirements should respect the**
**following principles:**

**•** **Restrictions linked to** _**network**_ _**security,**_ _**integrity and interoperability**_ **of services**
**are likely to apply, in particular, to interconnection with other networks. The**
**prevention of** **frequency** **interference and the effective use of frequency spectrum**
**are specific concerns for radio-based communications.**

**•** **Conditions in licences should encourage** _**efficient use of both physical**_
_**infrastructure and other resources**_ **(e.g. duct sharing, required spectrum for**
**wireless communications).**

**•** **The** _**protection of**_ _**the**_ _**environment**_ **is a concern which is relevant specifically to**
**the establishment of network infrastructures, and the definition of essential**
**requirements in the context of new infrastructure licences should be expanded to**
**include it. In this respect an in-depth assessment** **should** **be made in order to**
**provide precise information on the possible negative environmental impact of**
**telecommunications infrastructure projects.**

**•** **The** _**restriction of access to rights of way**_ **is primarily an issue for national law,**
**but subject to compatibility of the application of those national rules with the EC**
**Treaty and, in particular, the competition rules. Rights of way are essential to the**
**provision of competitive infrastructure and should be granted in a non-**
**discriminatory manner.**

**Nevertheless, it is accepted that national or local authorities may wish to limit the**
**numbers of undertakings granted rights of way, in order to limit the potential**
**impact** **on,** **for example, the environment, traffic management and urban planning.**
**Equally such limitation may be justified in order to protect the legitimate interests**
**of owners of private land.**

**At the same time, certain types of infrastructure provider may be licensed to**
**establish and operate networks** **and/or** **services without being granted their own**
**rights of way. This could be the case, for example, with the establishment of**
**metropolitan area networks, using the ducts and rights of way of an unrelated**
**company, such as a local water or electricity company.** **No restrictions should**
**be imposed on the ability of** **such** **infrastructure providers to deal with public or**
**other authorities in the case of public land, or with private landowners.**

**Furthermore, licence conditions applied to infrastructure providers who do not**
**benefit from rights of way should be subject to less onerous obligations,**
**especially as regards coverage and interconnection requirements**

**•** _**Data protection and privacy**_ **are issues of general concern and the scope for**
**national intervention (and therefore licensing conditions) in these areas will be**

**65**

**determined by the framework provided by the Commission's proposals in the**

**area .**

_**Public service requirements in**_ _**the**_ _**form of trade regulations.**_

**Public service requirements in the form of trade regulations may be applied in the**
**case of licences for public telecommunications infrastructure". These conditions** **[100 ]**

**could be included in individual licences or in the form of trade regulations or** _**"cahier**_
_**de charges"**_ **applicable to public infrastructure providers. These obligations should**
**be subject to verification of compatibility with the Treaty, in particular as regards**
**their proportionality and their adequacy to attain the pursued objectives of general**
**interest.**

**This requirement of proportionality implies in particular using the least restrictive**
**means of achieving the pursued objective. For example, to achieve the objective of**
**securing permanence of service,** **a system of interconnection payments is less**
**restrictive than preventing competing infrastructures.** **A subjective economic**
**assessment of the capacity of a specific market should not normally be used.**

_**VII.**_ _**3.5**_ _**Other aspects of licensing**_ _**infrastructure**_

_**VII.3.5.1**_ _**Duration.**_

**In line with the approach proposed in relation to mobile communications where there**
**is currently considerable variation in licence duration in different Member States, the**
**duration of licences for the provision of infrastructure remains an issue for national**
**rather than Union determination.**

**In general, however, to accord with the Community competition rules and the rules**
**on the free movement of services, Member States in setting licence terms should take**
**full account of market forces and the need to avoid restricting the introduction of**
**new technologies and services.**

**98** **See, in particular, the amended proposal for a Council Directive covering the protection of personal**
**data and privacy in the context of public digital telecommunications and in particular the Integrated**
**Services Digital Network (ISDN) and Public Digital Mobile Networks,** **COM(94)** **128 final, 13.06.94.**
**These initiatives are** **discussed** **in greater detail below.**

**99** _**Article 3 of**_ **Commission Directive 90/388/EEC acknowledged the use of such additional conditions**
_**in the form of trade regulations**_ **for the provision of packet or circuit switched data services for the**
**general public, (subject to verification by the Commission of their compatibility with the Treaty).**
**Such trade regulations** **relate** **to conditions to ensure the availability, permanence and quality of the**
**service. Companies without rights of way should not be subject to the same level of obligations as**
**those with rights of way, especially with regard to coverage.**

**100** **Such conditions are currently applied** **in** **national licences, and relate, inter alia, to price levels,**
**minimum service quality, geographical coverage, access to emergency services, provision of** **facilities**
**for the customers with special needs,** **billing,** **and conditions ensuring the financial standing and**
**technical competence of the** **licensee.** **Not all such conditions are directly applicable to infrastructure.**

**66**

**In order to ensure no unfair restrictions on competition or undue limitation of new**
**technologies and services, initial licence terms and** **'standstills'** **on further licences**
**should be based on the period required to ensure a sufficient start up period** **and/or** **a**
**commercial return on the investment made in the network concerned.**

_**VII.3.5.2**_ _**Licence fees.**_

**One-off and annual fees levied on infrastructure operators should comply with the**
**principles of non-discrimination, transparency and** **proportionality.**

**The** **levying** **of excessive fees on operators in the form of** **licence,** **frequency or other**
**fees (such as payments to local authorities for the use of** **public** **land) can potentially**
**create** **barriers incompatible with the internal market. They may also raise important**
**competition issues, where the practical effect is to deter market entry or deny users a**
**fair share of the benefits which lower fees might be expected to produce.**

**In assessing whether fees charged are proportional, account must be taken of the**
**balance between coverage of administrative costs and the real commercial value of**
**the resource being allocated. Fees should not be levied in a discriminatory fashion.**

_**VII.**_ _**3.5.3**_ _**Changes of ownership.**_

**Provisions restricting changes in the ownership of the licensee must be justifiable in**
**terms of the need to ensure continuing compliance with the essential requirements or**
**public service requirements in the form of trade regulations imposed in licences.**

_**VII.3.5.4**_ _**Freeing**_ _**TO's**_ _**from non**_ _**telecommunications-related**_ _**obligations**_

**The range of potential conditions for licensing set out above are consistent with the**
**Union's telecommunications policy in general. It follows, therefore, that only in**
**exceptional cases should obligations be placed on network operators which do not**
**relate to the telecommunications tasks carried out by that undertaking.**

**The imposition by Member States of non-telecommunications-related obligations**
**harms the competitive position of network operators both in their national markets**
**and in attempting to meet the pan-European needs of customers for networks and**
**services. It also risks creating barriers within the internal market for networks and**
**services in the Union because of the divergent obligations imposed in different**
**Member States on the operators of networks in that territory.**

**Concerns over such obligations led the Commission in the 1992 Review to indicate**
**that** _**"with**_ _**further progress towards a competitive**_ _**environment,**_ _**telecommunications**_
_**operators must be free to respond to**_ _**the**_ _**dynamics of the**_ _**marketplace**_ _**if they are to**_
_**operate effectively. The degree of freedom must be proportionate to the**_ _**level**_ _**of**_

**67**

_**liberalisation. Major aspects of this freedom include tariff policy and equality of**_
_**treatment. "**_

**The Bangemann Group Report made a similar recommendation for the acceleration**
**of the on-going process of liberalisation of the telecommunications sector by, inter**
**alia,** _**"removing**_ _**non-commercial**_ _**political burdens and budgetary constraints**_
_**imposed**_ _**on telecommunications**_ _**operators".**_

**In order to allow telecommunications organisations to effectively compete once**
**voice telephony services have been opened to competition, Member States must by 1**
**January 1998 adapt existing licensing conditions or bring to an end other obligations,**
**(imposed through other means than a licence) which are unrelated to a specific**
**operator's telecommunications** **activities.**

_**VII.**_ _**3.5.5**_ _**Promotion of competitive service provision : obligations on**_ _**infrastructure**_
_**providers**_

**As recognised in the consultation on the Green Paper on Mobile and Personal**

**102**
**Communications** **, service providers, whether integrated into or independent of**
**network** **Operation** **will play a central role in the development of the future**
**telecommunications environment. A key factor in this development will be ensuring**
**the ability of service providers to obtain and offer a range of different**
**telecommunications services, particularly, in meeting the needs of users for full**
**personal communications on a pan-European basis.**

**The relationship between infrastructure provider and service provider is primarily a**
**matter of commercial agreement (within the framework provided by Community**
**law).** **At the same time, it is important to recall that Article 4 of Directive**
**90/388/EEC imposes an obligation on the Member States to ensure that**
**telecommunications organisations make access available to their networks on**
**objective and non-discriminatory terms and that they supply leased lines within a**
**reasonable period. Even after 1998 it is likely that such an obligation will continue to**
**apply on a transitional basis until effective competition is established.**

**Furthermore, account must also be taken of the obligations placed on Member States**
**within the framework of Directive** **92/44/EEC** **(the ONP leased lines Directive) to**
**make sure a minimum set of leased lines is made available throughout the** **Union.**

**Nevertheless, in order to promote competition and, in particular, innovative**
**combinations of networks and services, providers of public telecommunications**
**infrastructure should make their** **facilities** **available to independent service providers,**

**101** **COM(93) 159** **final**

**102** **Communication concerning** **the** **consultation on the Green Paper on mobile and Personal**
**Communications,** **COM(94)** **492,** **23.11.93.** **During the consultation process, a consensus amongst**
**market participants emerged in favour** **of** **priority being given to the** **commercial autonomy of market**
**players.**

**68**

**with a requirement for operators to justify to the national regulatory authority on**
**request any refusal to deal.**

**Whilst priority should be given to commercial agreements between service providers**
**and infrastructure providers at this stage, the position should be kept under review to**
**see whether refusals by infrastructure providers to deal with independent service**
**providers is restricting competition.**

**The terms on which such facilities are made available should respect Open Network**
**Provision principles as far as they apply.**

_**VII.**_ _**3.5.6**_ _**Service**_ _**providers**_

**Whilst the focus of this Section remains on the licensing of communications**
**infrastructure, both this Green Paper and the Commission's Green Paper on Mobile**
**and Personal Communications point to the development of independent service**
**provision as one of** **the** **future distribution channels for telecommunications services,**
**alongside** **service** **provision activities of businesses where service provision and**
**network operation are fully integrated activities.**

**Consideration must nevertheless be given to what, if any, constraints are to be placed**
**on such independent service providers, in order to clarify the overall regulatory**
**picture in the emerging communications market.**

**This evolution in service provision contrasts with today's markets where the**
**provision of** **the** **voice telephony service (and hence the regulatory controls on such**
**provision,** **including guarantees of universal service) is an integral part of network**
**operation.**

**To accommodate the emergence of new types of distribution channels and innovative**
**services, existing Union principles should be applied and adapted. In particular,**
**consideration must be given to whether, where service providers do not provide their**
**own infrastructure, it is disproportionate for Member States to require an individual**
**licence for the service provider. The conditions attached to the licence simply**
**duplicate the conditions already applied in the licence covering the third party**
**infrastructure which the service provider is using. Such duplication might act to**
**restrict the free movement of services within the Union and limit the introduction of**

**new innovative services.**

**In the light of this, service provision (as opposed to network establishment and**
**operation) should not be subject to individual licensing in the Member States. It may**
**be subject to class licences or to a requirement for declaration by Service Providers**
**of their activities to the National Regulatory Authority(ies) of the Member State(s) in**
**which they choose to** **operate.**

**Nevertheless, in the case of independent service providers offering voice telephony**
**services on a resale basis, consideration may need to be given as to how and when**
**such resellers should be obliged to make a** **contribution,** **appropriate to their market**
**position,** **to the provision of universal** **service** **(via access charges or a universal**
**service fund).**

**69**

If additional safeguards are considered necessary, they should fully respect the
principle of proportionality.

**VIJ.4** **Interconnection and interoperability**

_VII._ _4.1_ _The importance_ _of interconnection_

The emergence of interconnection as a priority issue for European
telecommunications policy is emphasised in the Bangemann report on _Europe and_
_the Information_ _Society._

_**"Two features are essential to the deployment of the information**_
_**infrastructure needed by the Information Society: one is a seamless**_
_**interconnection of networks and the other that the services and**_
_**applications which build on them should be able to work together**_
_**(interoperability}.**_

_**"In the past the political will to interconnect national telephone**_
_**networks resulted in hundreds**_ _**of**_ _**millions of subscriber connections**_
_**world-wide. Similar political**_ _**determination**_ _**and corresponding effort are**_
_**required to set up the considerably more complex information**_
_**infrastructures.**_

_**"Interconnection of networks and interoperability of services and**_
_**applications are recommended as primary Union objectives. "**_

Interconnection of networks and their underlying infrastructure is a pre-requisite for
interoperability of telecommunications services. Users are physically connected to a
network via the physical infrastructure, but they subscribe to one or more services
supplied over that network. The traditionally integrated nature of fixed voice
telephony has hitherto made such distinction largely invisible, but increasingly it is
becoming important to separate conceptually services from networks and
infrastructure. .

Issues of interconnection may arise whenever there is a (potential) competitive
relationship between two organisations, and the one demands the use of facilities
from the other for the delivery of its telecommunications . Issues also arise, on the
other hand, when the relationship between the organisations is complementary, such
as between a long distance and local operator, or between national operators in
different countries handing on international calls for termination. Both types of
relationship can raise problems concerning abuse of dominant position.

Interconnection issues generally involve services (in particular voice telephony),
networks and infrastructure, and are therefore closely related to the ongoing reform
process leading to the full liberalisation of voice telephony in 1998 [103] . The future
regulatory framework for interconnection will be based on application of the
competition rules in conjunction with a specific ONP Directive on interconnection,

103 Derogations exist for certain Member States up to 2003

**70**

**and will be** **contained** **in legislative proposals that the Commission will be** **submitting**
**in the course of** **1995.**

**The goal is an open interconnected environment, where there are no** _**a priori**_
**restrictions on network** **interconnection,** **and where telecommunications-based**
**services can** **operate** **seamlessly over interconnected networks.** **The regulatory**
**approach to interconnection in this open environment will involve:**

**• removal of current barriers on interconnection**

**• commercial negotiation as the basis of interconnection agreements, within a**
**defined framework which will ensure a fair and timely dispute resolution**
**mechanism when called for**

**• supervision of the negotiation by the national regulatory authorities**

**• common principles for interconnection set at EU level.**

_**VII.**_ _**4.2**_ _**Application of the competition rules**_

**All interconnect agreements are subject to screening under Articles 85 and 86 of the**
**EC Treaty. In the context of Article 85, all agreements, which restrict competition**
**and have an effect on trade between the Member States are prohibited. Interconnect**
**agreements may not therefore, for example, in principle, limit the commercial**
**freedom of one of the parties by determining the pattern of its action or abstention**
**from action in the market. Network** **operators/infrastructure** **providers who are also**
**service providers should not restrict their customers' ability to** **access**
**telecommunications-based services provided by others.**

**Up to now in the telecommunications sector Article 85 has normally been**
**implemented on a case-by-case basis by** **the** **Commission and the national courts.**
**Given the calls from sector** **players** **for a stable and predictable regulatory**
**environment for interconnection** **[ 04]** **,** **the Commission will consider further measures**
**setting out the conditions under which interconnection agreements are compatible**
**with the principle of undistorted competition.**

**Another principle applying to interconnect agreements is set out by Article 86 of the**
**Treaty which prohibits the abuse of a dominant position. The implications of this**
**Treaty provision are in particular that:**

**• a network operator with a dominant position in the market for infrastructure**
**provision should normally not be able to prevent another party from offering**
**services by refusing interconnection.;**

**104** **Commission Communication on the consultation on the Green Paper on Mobile and Personal**
**Communications,** **COM(94)** **492 final,** **23.11.94**

**71**

**• infrastructure providers with a dominant** **position** **should not place unreasonable**
**restrictions on the** **customer's** **choice of service provision nor set unreasonable or**
**unjustified charges;**

**These obligations apply in principle only to dominant network providers. There is no**
**general definition of** **a** **dominant position set out in Article 86. However, the Court of**
**Justice has defined the concept as a position of economic strength enjoyed by an**
**undertaking which enables it to prevent effective competition from being maintained**
**on the relevant market by affording it the power to behave to an appreciable extent**
**independently of** **its** **competitors, its customers, and ultimately of consumers** **[105]** **. In**
**the telecommunications** **area,** **the existence of dominance depends on the availability**
**of alternatives. The ownership of a universal fixed public switched telephone**
**network connecting most of the population of the Member States means that the**
**owners of such networks are likely to retain a dominant position with regard at least**
**to the local loop even after** **liberalisation,** **given the current high cost of duplicating**
**the local loop. Indeed, termination of international, long distance fixed network** **calls**
**and mobile network calls will in most case not be possible without co-operation of**
**the relevant telecommunications organisations, giving those companies the power to**
**control the price of interconnection. The ability of a firm to set or control market**
**prices is a sign of dominance.**

**Given the importance of the local loop in providing access for new market entrants**
**to potential customers, the analysis of interconnection agreements under Article** **86**
**EC will therefore focus inter alia on agreements involving local infrastructure**
**providers, in order to prevent abuses of dominant position.**

**In a** **first** **phase, specific rules could further be envisaged to deal with the issue of the**
**opening up of the current** **infrastructure** **monopolies involving, for example,**
**organisations to which the right to interconnection should be granted (in principle**
**those providing services to the public), terms (including tariff principles) and**
**conditions, notably the access points.** **The aim would be to require Member States**
**to set out a regulatory** **framework** **allowing the emergence of effective competition.**

_**VII.4.3Proposalfor**_ _**a Directive on interconnection concerning public networks**_

**With regard to** **interconnection** **to public telecommunications networks, there is a**
**need to set out a specific and harmonised regulatory framework at the level of the**
**Union to ensure the European-wide provision of services by setting conditions for**
**access to and use of these telecommunications networks.**

**The aim is to ensure that the users** **needs** **for "any-to-any" communication are met**
**(subject to technical feasibility and the willingness of both parties to communicate). It**
**is neither necessary nor practicable to insist on direct interconnection of every**
**network to every other network. A** **mbrture** **of direct and indirect interconnection of**
**networks, with associated end-to-end interoperability of telecommunications**

105 See Case 27/76 _United_ _Brands_ _v_ _Commission_ [1978] ECR 207

**72**

**services, driven by market needs, will meet the customer demand for** **'any-to-any***
**communication.**

**Discussion between Member States and the Commission on the proposal for a**
**Directive on the application of open network provision to Voice Telephony resulted**
**in agreement on a number of basic principles in relation** **«to** **voice telephony**
**interconnection.** **Building on this consensus and the market need for well defined**
**regulatory environment for** **interconnection,** **the Commission has announced its**
**intention to propose a Directive on interconnection in the context of open network**
**provision, (subject to the outcome of the review of ONP) in order to harmonise**
**conditions for public network access.**

**The main lines of the proposed ONP Interconnection Directive would be as follows:**

_**General principles for open access**_

**All parties should have the right to enter into commercial and technical agreements**
**to interconnect.**

**Requests for interconnection should be normally be met, by those undertakings**
**within the scope of the directive under mutually agreed terms.**

**Conditions for interconnection should be based on the established principles of open**
**network provision i.e. conditions on access and use should:**

**- be based on objective criteria**

**- be transparent and published in an appropriate manner**

**- guarantee equality of access and must be non-discriminatory, in accordance**
**with EU law.**

**- comply with essential requirements (interoperability of services,** **protection**

**of** **data,** **network integrity, network security, etc.)**

_**A framework for negotiation**_

**A negotiating** **framework** **should be set ensuring that commercial negotiations result**
**in a fair and timely agreement. Regulatory authorities should have a responsibility to**
**prevent any abuse of negotiating power, and for ensuring the provision of adequate**
**information,** **cost-oriented pricing** **structures,** **and for issues of unbundling,**
**collocation,** **end-to-end quality, network integrity and security, etc.**

**106** **Commission Communication on the present status and future approach for open access to**
**telecommunications** **networks and services (Open Network** **Provision),** **COM(94) 513** **final,** **29.11.94**

**73**

_**A common approach to**_ _**interconnection**_ _**charges.**_

**The approach will take account of the current** **consultation** **between the Commission**
**and Member States being carried out in the context of Council Resolution 94/C48 on**

**•** **107**
**Universal Service principles in the telecommunications sector**

**It will establish clear, Europe-wide rules for the setting of interconnection charges,**
**the financing of universal service, and for implementing appropriate cost accounting**
**systems. (See section** **VH.4.4** **below)**

_**A mechanism for dispute resolution.**_

**A timely mechanism for dispute resolution between the parties must be established,**
**with defined roles for the national regulatory authorities and the Commission.**

_**VII.4.4Principles for interconnect charges to public networks**_

**Principles for interconnect charging, to be agreed at EU level, are identified below.**

**a) Interconnection charges should be a matter for commercial agreement between the**
**parties involved, subject to supervision and if necessary timely intervention by the**
**National Regulatory Authority, and subject to the competition rules.**

**b)** **Interconnection charges should encourage efficient and sustainable market entry.**
**Charges should be based on underlying costs of an efficient operator.**

**c) The cost of inefficiencies should not be passed on to interconnecting operators.**
**Charges should promote efficiency gains by the incumbent operator. It should not**
**threaten the** **financial** **ability of any operator to fulfil its licence obligations.**

**d)** **Charges should be transparent, non-discriminatory and sufficiently unbundled.**
**Published interconnect tariffs are the best mechanism for ensuring this.**

**e)** **Charges related to recovering losses due to tariff imbalances resulting from**
**obligations imposed by the National regulatory authority should be identified**
**separately. It is anticipated that these charge elements will quickly decline as**
**tariffs are progressively rebalanced in Europe. Until then, they may be recouped**
**through charges on interconnecting operators.**

**f) Any residual charges related to the provision of uneconomic universal service**
**obligations should also be separately identified. Such charges relate to the cost of**
**serving uneconomic customers (i.e. customers who do not generate sufficient**
**revenue to recoup the cost of providing service to them), or to providing services**
**such as emergency services.** **(The imposition of a geographically averaged**
**standard connection cost is covered in the above** **formulation,** **in that it makes**
**some customers uneconomic.)**

**107** **OJ C** **48,16.2.1994,** **p.** **1.**

**74**

**Residual costs of this type may remain** **for** **the foreseeable future. They may be**
**recouped through charges on interconnected operators, but in order to reflect the**
**underlying costs, the charges should not generally be traffic or capacity dependent.**
**Costs of this type may also be recouped via Universal Service Funds.**

**g) Approved cost accounting systems should be implemented by the operators under**
**the supervision of the National regulatory authority in order to ensure**
**transparency and non-discrimination for interconnection charges.**

**The Commission is currently consulting the sector on specific application of these**
**principles, based on recommendations contained in independent studies carried out**
**for** **the** **Commission by Arthur Anderson** **[108]** **and** **WIK/EAC** **[109]** **.** **These studies are**
**available from the European Commission on request. (See Annex 2 for details.)**

**Vn.5 Open access to public infrastructure - application of the competition rules**
**and ONP principles**

_**VII. 5.1**_ _**A policy of**_ _**Open**_ _**Access**_

**A policy of open access to public telecommunications infrastructure will ensure that**
**the Union goal of a rich choice of** **public** **telecommunications services delivered over**
**an interconnected mesh of separately owned and operated network infrastructures**
**can be achieved.**

**Principles for open access have already been drawn up in Community law** **and**
**further harmonised under the Union policy of open network provision. In applying**
**these principles to public telecommunications infrastructure, the aim must be to**
**ensure a coherent regulatory** **framework** **across all Member States for access to and**
**use of infrastructure, while at the same time not imposing a regulatory burden that**
**would hinder future development of the market. Failure to observe these principles**
**could result in distortion and lack of choice in the future telecommunications and**

**information services** **market.**

**Telecommunications infrastructure is the foundation of all telecommunications**

**services. As shown in Figure** **II..** **1,** **telecommunications infrastructure covers the**
**physical facilities which enable and support the provision of telecommunications**
**transmission capacity.** **Public infrastructure providers with privileged access to**
**limited national resources (e.g. rights of way,** **radio frequencies) have certain**
**responsibilities towards other market players.**

**108** **Study on cost allocation and the general accounting principles to be used in the estabhshment of**
**access charges in the context** **of** **telephone** **liberalisation** **in the** **EC.**

**109** **Study on** **Interconnection** **in the** **context of** **Open Network Provision**

**110** **Services Directive** **90/388/EEC.** **OJL** **192,** **24.7.1990,** **p.** **10.**

**75**

**The principle of open access requires public telecommunications** **infrastructure**
**providers to provide access to their facilities on an equal and non-discriminatory**
**basis,** **and not to restrict the choice of services available over their infrastructure.**
**According to the competition** **rules,** **infrastructure providers which enjoy a dominant**
**position must provide access in this way and may not refuse to deal with potential**
**users.** **Application of** **this** **principle to non-dominant players requires a more flexible**
**approach depending on the market conditions and the technology in question.**

**The competition rules, in conjunction with the existing open network provision**
**framework, contain the necessary flexibility with which to apply the policy in a**
**developing technological and market environment, in accordance with the principles**
**of proportionality and subsidiarity. The aim is to ensure that:**

**. a) Separately owned and operated public network infrastructures are**
**interconnected** **in Europe**

**b) Adequate transmission capacity** **[111]** **is assured throughout the European**
**Union, allowing organisations to build telecommunications systems for**
**their own and third party use.**

**c) National licensing conditions for public** **telecommunications** **infrastructure**

**providers include the ONP principles of transparency and non-**
**discrimination,** **and do not limit users' choice of telecommunications-based**
**services lawfully provided in the EU.**

**d) There is transparent accounting for infrastructure provision, to ensure fair**
**competition and avoid unfair cross-subsidies.**

**e) Common technical specifications, based on European standards, are used.**

**The main lines of action are as follows:**

_**VII.**_ _**5.2**_ _**A new**_ _**ONP**_ _**Directive on interconnection to public networks.**_

**In line with the re-examination of scope of** **the** **open network provision rules**
**currently underway, a new European Parliament and Council Directive on**
**interconnection in the context of open network provision will be proposed in 1995,**
**to take effect after** **1.1.98** **when voice telephony and/or infrastructure has been**
**liberalised. It will ensure a harmonised approach to the interconnection of separately**
**owned and operated public networks and infrastructures.**

**Details of the proposed Directive are given in Section** **VEL4** **above.**

**111** **Transmission capacity is used as a general term to cover facilities like leased lines. In the future, the**
**precise transmission capacity made available to the customer could vary under customer control, and**
**may not conform precisely to the definition of leased** **lines** **given in Council Directive** **92/44/EEC.**

**76**

_**VIL**_ _**5.3**_ _**Revision of the ONP Leased Lines Directive to cover infrastructure**_
_**provision.**_

**Adequate provision of public transmission capacity on a Union-wide basis is seen as**
**an essential foundation for a flourishing telecommunications services market.**
**Market demand is expected to lead to adequate provision to serve** **trie** **major**
**metropolitan areas, but reliance on market demand alone is unlikely to lead to full**
**coverage of outlying areas.** **In order to encourage development of less favoured**
**regions within a Member State, and cohesion throughout the Community, the**
**availability of adequate transmission capacity** **should** **be guaranteed by Member**
**States throughout their territory.**

**A revision of the ONP Leased Lines Directive** **is therefore proposed, such that**
**Member States would have to ensure that a minimum level of transmission capacity**
**was available throughout their territory and between Member States. The revised**
**Directive would apply to organisations offering public transmission capacity of major**
**importance (subject to the outcome of the review of** **ONP** **with regard to its scope of**
**application), with the likely exception of new entrants with limited market share**

**Recognising that competition in the market will serve to keep down prices, the**
**requirements in the current ONP Leased lines Directive for cost-oriented pricing and**
**pre-publication of tariffs would be relaxed once effective competition was in place.**
**Safeguards against collusive behaviour leading to higher prices are provided in the**
**EC competition rules.**

**The transmission capacity to be made available would be the** **'minimum** **set'** **defined**
**in Annex II of the ONP leased lines Directive,** **which** **currently specifies:**

**- ordinary and special quality voice bandwidth analogue circuits**

**- 64 kbit/s digital circuits**

**- 2** **Mbit/s** **digital circuits** **(structured/unstructured).**

**ETSI** **standards for these types of circuit are becoming available.** **ETSI** **are also**
**developing** **standards for higher capacity leased lines (at 34 Mbit/s, 140 Mbit/s and**
**155 Mbit/s).**

_**VII.**_ _**5.4**_ _**Application of open network provision principles to the provision of**_
_**public telecommunications**_ _**infrastructure**_

**As noted above, public telecommunications infrastructure providers with rights of**
**way or** **frequency** **allocations have privileged access to limited national resources, and**
**therefore carry some responsibility towards other market players in the**
**telecommunications sector. It is proposed that the principles established under the**

112 Council Directive 92/44/EEC. OJL 165, 19.6.1994, p.27.

113 Discussions on the future application of specific ONP Directives are currently underway. A proposal
to make a link between market share and the obligations under ONP to provide a minimum set of
harmonised offerings, is being considered.

**77**

**policy of** **open** **network provision should apply in a general way in the** **form** **of**
**harmonised** **national** **licensing** **conditions** **for** **the** **provision** **of** **public**
**telecommunications** **infrastructure.**

**General open network provision conditions are set out Directive 90/387/EEC. They**
**call for technical specifications, supply and usage conditions and tariffs to be:**

**- transparent**

**- non discriminatory, offering equality of access**

**- based on objective criteria.**

**Examples of specific cases where these principles should be incorporated into the**
**licences or authorisations of public infrastructure providers are given below.**

_**Vertically integrated infrastructure providers**_

**Application of open network provision conditions should be envisaged** **when**
**infrastructure provision is a business activity carried out by a vertically integrated**
**supplier who also offers telecommunications services, in view of the possible conflict**
**of** **interest.** **Application of harmonised conditions according to ONP principles will**
**ensure transparency and fair access to the underlying infrastructure.**

**Such infrastructure providers should meet all reasonable requests for use of facilities,**
**on commercially** **negotiated** **terms. Refusal to allow access to or use of a facility**
**should be referred to the national regulatory authority.** **Conciliation and dispute**
**resolution procedures established under ONP measures may then apply. In the case**
**of a dominant infrastructure provider, refusal to allow access could constitute an**
**infringement of obligations under the competition rules, giving rise to the additional**
**legal remedies under those rules.**

_**Shared**_ _**use**_ _**of facilities**_

**It will often be in the public interest to encourage third party access to facilities such**
**as underground ducts, radio towers, and buildings in order to minimise the**
**environmental impact of duplication. Such facility-sharing arrangements should be**
**on the basis of commercial and technical agreements between the parties concerned,**
**subject to possible examination under the competition rules. Supervision of such**
**agreements by the National Regulatory Authority according to the principles of open**
**network provision would** **also** **help to avoid any unfair allocation of resources.**

**To end current bottleneck** **situations** **or to avoid such situations in relation to**

**concerns linked to the protection of the environment and town planning objectives,**
**National Regulatory Authorities could make the shared use of facilities mandatory.**

**78**

_**Non-discriminatory**_ _**access to services**_

**As noted in the above Section VII.4 on Interconnection, access for many customers**
**will, even in a competitive environment, continue to be controlled by the owner of**
**the local network infrastructure. That infrastructure may be** **copper,** **fibre or radio**
**technology. It will commonly be the case that the local network infrastructure**
**provider is also a service provider. In addition to the application of** **the** **competition**
**rules,** **the application of ONP principles in this situation will ensure that users can**
**access services provided by other service providers on fair and non-discriminatory**
**terms.**

**Circumstances where** **users'** **ability to access services may be legitimately constrained**

**are:**

**- technical incompatibility which prevents certain services being offered over**
**certain networks or to certain users**

**- limitations imposed by the regulatory authorities for public policy reasons, in**
**accordance with the Treaty.**

**As these examples show, the approach of defining basic principles for public**
**telecommunications infrastructure at a Union level, while ensuring that those**
**principles are applied at a national level through relevant licences or authorisations,**
**provides an appropriate balance for the variety and complexity of the infrastructure**
**market structure. The approach is particularly suited to the evolving switched broad**
**band local network infrastructures.**

_**VII.5.5The need**_ _**for urgent adoption by**_ _**the**_ _**European Parliament and**_ _**the Council**_ _**of**_
_**the Re-submitted**_ _**proposal for an ONP Voice**_ _**Telephony**_ _**Directive**_

**This Directive concerns the harmonisation of conditions for open and efficient access**
**to and use of fixed public telephone networks and public telephony services, and the**
**availability throughout the Community of a harmonised voice telephony service.**

**Rapid implementation of** **this** **Directive will ensure that service providers have open**
**and non-discriminatory access to the public telephone network infrastructure.**

_**VII.5.6**_ _**Application of cost accounting principles established**_ _**under**_ _**ONP to public**_
_**telecommunications infrastructure provision.**_

**Transparent accounting is necessary to allow the National Regulatory Authorities to**
**deal with interconnection disputes.** **It would also help the application of the**
**competition rules. This is important in the case of vertically integrated organisations**
**offering telecommunications services and/or broadcasting services in addition to**
**infrastructure.**

**Many infrastructure providers will be vertically integrated organisations offering**
**telecommunications services** **and/or** **broadcasting services over their infrastructures.**

**79**

Other organisations will be purely service providers who rely on infrastructure
purchased from the vertically integrated organisations.

Accounting separation between the telecommunications activities and broadcasting
activities will be necessary. Within the telecommunications business unit, a cost
accounting methodology should be Used which allows the cost of infrastructure
provision to be separated from the cost of providing other telecommunications
services. It should be subject to separate audit.

The aim is to provide the necessary transparency to ensure that third-party service
providers are not being under- or over-charged for the use of telecommunications
infrastructure.

The requirement for separate accounting builds on the existing requirements for
implementation of cost accounting systems in the ONP leased lines Directive.

_**VII.**_ _**5.7**_ _**Technical standards appropriate for infrastructure offerings**_

The ONP leased lines Directive identifies specific technical standards whose
implementation is mandatory for the minimum set of leased lines.

ONP also offers a mechanism whereby standards considered suitable for achieving
Community goals can be referenced in the _Official Journal of the European_
_Communities._ The ONP List of Standards' is published regularly in the _Official_
_**Journal.**_

Publication in the _Official Journal_ does not imply that a particular offering _should_
be made available; rather, it identifies for users and suppliers the preferred standards
to be followed _when_ an offering is made available. It would not in any way impede
the introduction of innovative technologies.

This principle can be readily extended to infrastructure offerings.

The ONP framework Directive also lays down a mechanism, for making the
implementation of particular standards mandatory in exceptional circumstances. This
mechanism provides a safeguard for those situations where normal market forces do
not result in adequate implementation of standards to meet users' needs.

VTI.6 **Safeguarding and** **developing** **universal service in a competitive**
**environment**

_**VII.6.1**_ _**The**_ _**Key Issues**_

Council Resolution 93/C213/01 on the review of the situation of the
telecommunications sector and the need for further development in that market [114 ]

**114** **OJ No C** **213,** **6.8.1993,** **p.l.**

**80**

**established as a major goal for Community telecommunications policy the**
**liberalisation of all public voice telephony services, whilst maintaining universal**
**service.**

**This Resolution recognised the importance, for the individual consumer and for the**
**competitiveness** **of** **industry** **and** **commercial** **users,** **of** **a** **Union-wide**
**telecommunications system offering to all users, including specific social groups,**
**reasonable and affordable charges** **for** **access and use, high quality of service and**
**technological innovation.** **The importance of universal service was equally**
**emphasised in the Resolution of the European Parliament of the 20th April 1993**
**whilst supporting the liberalisation timetable and recognising the need to take full**
**advantage of the potential for exploiting alternative infrastructures in Europe to**
**supply and develop telecommunications services.**

**Three key issues must be addressed** **at** **a Union level with respect to universal service**
**in the telecommunications sector. The first concerns the elements that** **comprise**
**universal service, the second the methods for costing universal service and the third,**
**the means of financing uneconomic aspects of universal service provision in a**
**competitive telecommunications environment.**

_**VIL**_ _**6.2**_ _**The**_ _**elements that comprise**_ _**universal**_ _**service**_

**Council Resolution, 94/C48/01, has confirmed the general principle of universal**
**service in telecommunications, i.e. access to a defined minimum service of specified**
**quality to all users at an affordable price and respecting the principles of universality,**
**equality and continuity.**

**The main elements of a Union-wide definition of universal service have been**

**developed within the context of Open Network Provision, in particular Council**
**Directives** **90/387/EEC** **and** **92/44/EEC,** **the re-submitted position on the proposal**
**for a Directive on the application of open network provision to voice telephony, and**
**Council Recommendations** **92/382/EEC** **and** **92/383/EEC.**

**The basic elements with respect to voice telephony involve the setting of appropriate**
**targets and their implementation by National Regulatory Authorities and include the**
**following :**

**•** **Provision of the basic telephone service**

**includes the publishing of target and achieved delivery periods, specification of**
**contractual terms, etc.**

**•** **Quality of service**

**includes the publication and monitoring of quality targets and actual performance**

**•** **Tariff policy**

**includes tariff flexibility, i.e. the possibility for targeted provision for socially**
**desirable purposes.**

**81**

**Publication of information about the service.**

**Dispute resolution procedure for users**

**Subscriber directories**

**Operator** **assistance** **and directory enquiry services**

**Public pay-telephones**

**Access to emergency services**

**Specific conditions for disabled users and persons with special needs.**

**In** **addition,** **targets or recommendations are proposed for a number of advanced**
**features, including itemised billing, touch-tone dialling, call forwarding, calling line**
**identification, green number or freephone services, call transfer and** **access** **to**
**directory and operator services in other Member States.**

**In order to establish common universal service principles Union-wide, the**
**Commission is re-submitting its proposal for a Directive on ONP** **arid** **Voice**
**Telephony to Council and Parliament and seeks rapid adoption.**

**Given the rate of technological progress and its effect on costs and availability of**
**increasingly sophisticated services, together with the need to ensure that the benefits**
**of the Information Society extend to all citizens and not just** **to** **the privileged**
**minority, the definition of universal service must be dynamic and reflect such**
**progress. Ultimately, the most essential factor is that all users should be connected**
**to a network which offers them access to** **an** **increasing range of services. Which**
**services should actually be subsidised will depend upon political considerations as**
**well as the level of competition in their** **provision,** **which should anyway ensure**
**reasonable prices. .**

**In this way, universal service may be** **structured** **to encourage simultaneously**
**maximum telephone penetration as well as enhanced consumer choice** **among**
**services and service providers.**

_**VII.**_ _**6.3**_ _**Costing and financing uneconomic universal**_ _**service**_ _**in a competitive**_
_**environment.**_

**Two important steps are required in the context of both services and infrastructure**
**liberalisation in the light of the discussion in section** **V.l. ~** **The first is to assess the**
**uneconomic cost of universal service obligations based on common principles. The**
**second is to put in place practical mechanisms for the financing of uneconomic**
**universal service** **obligations.**

**The Commission believes that National Regulatory Authorities should support tariff**
**rebalancing and put in place targeted schemes for needy users and uneconomic**
**customers instead of favouring general subsidies for access.**

**82**

**Only telecommunications-related public service obligations should be treated as**
**universal service obligations in voice telephony. National Regulatory Authorities**
**should calculate the cost of uneconomic Universal Service Obligations as the net cost**
**of providing service to uneconomic customers, plus any costs associated with the**
**uneconomic provision of public telephones, emergency services and other social**
**obligations such as targeted schemes.**

**Uneconomic customers would be those** **whom,** **in the absence of regulatory**
**obligations, the incumbent would choose not to continue to serve at affordable rates.**
**The definition of uneconomic customers is not** **simply** **those whose** **revenues,** **from**
**fixed and usage charges do not cover their share of** **costs** **[115]** **.**

**Such a definition exaggerates the cost of universal service since it fails to take into**
**account the revenues from incoming calls to such customers. If a customer leaves**
**the** **network,** **the TO also loses the usage revenues associated with inward calls to**
**that customer unless a substitute for these calls occurs.** **An individual customer is**

**therefore uneconomic or loss making only if the exchange line rental plus the profits**
**on calls made, plus the profits on additional calls which the customer generated as a**
**result of joining the** **network,** **fails to cover the net cost of service. Moreover, a**
**customer who is currently unprofitable may become commercially desirable in the**
**future.**

**A more appropriate basis, therefore for assessing the uneconomic cost of fulfilling**
**universal service obligations is one that uses long run avoidable or incremental costs.**

**Studies have shown that the burden associated with uneconomic customers in well**

**developed networks is relatively low and generally only a few percentage points of**
**overall turnover.**

115 The universal service cost is the net cost of providing service to uneconomic customers, plus any cost
associated with the uneconomic provision of public telephones, emergency services and other social
obligations. It takes account of all traffic sensitive costs and revenues associated with those
customers. (See also section V.l)

**83**

**Table** **VII.6.3** **-** **Estimated** **cost of USO as a percentage of turnover in 1992.** **[116 ]**

**16**

**14**

**12 4**

**10**

**^ 8** **+**

**4 4-**

**2** **4-**

**O** **CJ**

**In** **principle there are a number of ways of** **financing** **the** **universal** **service obligations**
**imposed on TOs, in a competitive environment. It is assumed in practice that such**
**financing will be generated from within the telecommunications sector.**

**Operators and service providers should contribute and the** **financial** **responsibility for**
**universal service should be spread as broadly and equitably as possible subject to the**
**principle of proportionality.** **The financial mechanism will be set out in the**
**framework of** **the** **amendments to the current regulatory framework, to be proposed**
**before the end of** **1995.**

**Since** **voice** **telephony** **currently** **generates** **the** **main** **turnover** **in** **the**
**telecommunications sector, the revenues could be raised, for example, from all**
**eligible operators who originate or terminate calls on the public switched network.**
**However, the approach to financing universal service should be consistent with the**
**principle** **of** **proportionality. Therefore, contributions to universal service should**
**avoid delaying the development of new services, which currently have higher costs**
**and lower volumes such as mobile telephony. Such services might be exempted as**

**116**
**Source** **:** **Analysys**

**84**

long as, given their higher underlying costs and tariffs, they could not be said to
undermine the ability of the voice telephony providers to finance universal service.

At the same time the financing of uneconomic universal service obligations should be
made quite separate from the issue of interconnection charges. The preferred
method of financing the cost of USOs would be through national universal service
funds. All telecommunications network operators and service providers would
contribute on the basis of their level of activity in the market.

Alternatively the USO burden could be treated like a common cost and recovered in
an access charge that is added to interconnection charges.

Both mechanisms have advantages and disadvantages. Adding access charges to
interconnection charges does not necessitate the creation of new structures. It
involves less transaction costs and bureaucracy, once the amounts have been defined,
since the charges are invoiced together with the interconnection charges by the
incumbent telecommunications organisation responsible for the provision of universal
service.

The disadvantages of this mechanism are:

- the possible conflict of interests which arises because the dominant operator is
granted the right to oversee and collect subsidies from its competitors to cover a
portion of its own expenses. The former will have no incentive to reduce its cost
of providing universal service, since this would also benefit its customers.

- the absence of transparency because the mechanism is based on the TO's
calculation of its costs and on its own price structure and charges. Given the
complexity of accounting systems and the subjective choices to be made as
regards cost allocation, the actual cost of universal service will never be certain.
Access charges might be funding profits instead of compensating costs.

- As the universal service obligation is imposed only on the dominant operator, no
other operator is allowed to compete to provide the uneconomic service (e.g. in a
given rural area) in a more efficient way. New entrants have little incentive (or
possibility) to compete in the more high-cost areas of the market as they are not
entitled to the subsidy which the incumbent enjoys. The logical result is that they
will concentrate their offers on large business users rather than domestic users.
The latter are excluded from the benefits of increased choice and efficiency
brought about by competition.

Although the universal service fund mechanism may be more cumbersome to set up,
it does not involve the distortions that may be inherent in an access charge system.
Moreover, it can be designed to favour more efficient competition and faster
productivity increases and cost savings, since all operators may compete to provide
universal service and be compensated by the universal service fund. The entitlement
to subsidised service can be linked to needy or uneconomic customers or to
particular areas rather than tying the universal service obligation to the incumbent

**85**

**operator. In addition the entitlement could be reduced over time as the gap between**
**costs and affordable prices declines** **[117]** **.**

**In general, therefore, preference should be given to financing universal service**
**obligations by means of universal service funds rather than via access charges.**

_**VIL**_ _**6.4**_ _**Universal service should**_ _**be**_ _**monitored and reviewed**_

**National Regulatory Authorities have a key role to play in developing** **and** **reinforcing**
**universal service as competition in the telecommunications sector occurs. There is a**
**real** **possibility to** **pass** **on the benefits** **of** **cheaper** **and** **better quality**
**telecommunications to all, particularly if, as pricing and structural adjustment**
**proceed,** **universal** **service concerns are targeted rather than dealt with by arbitrarily**
**subsidising access for all.**

**In order to assess progress, transparent measures should be put in place to effectively**
**survey, monitor and review universal service indicators. As a minimum such surveys**
**should include numbers of residential access lines and penetration per household,**
**numbers and availability of public pay phones and should detail the schemes** **available**
**for those on low incomes, or low users or those with particular needs.**

**117** **Universal Service Funds are special arrangements, administered by an independent body, for the**
**collection of contributions from eligible operators to the cost of** **universal** **service obligations and the**
**transfer of funds to operators taking** **on** **these** **obligations.**

**Universal service funds are in operation or under development in a number of countries and are**
**normally established under strict regulatory** **oversight,** **see** **WDC** **study** **on "Network** **Interconnection in**
**the domain of** **ONP"** **for details of universal service funds and their operation in specific countries.**

**There are two important characteristics of universal service funds which distinguish them from the**
**use of access charges to finance the cost of universal service obligations. Firstly, payments and**
**receipts are in a** **lump-sum** **form** **rather than** **added** **to** **interconnection charges and are, therefore, less**
**distortionary. Secondly, the use of universal service funds makes it** **easier** **for competing** **or** **additional**
**operators to share in the provision of universal service by allowing them to share in the possible**
**subsidies associated with it.**

**The idea of universal service funds is based on the understanding that new entrants should have the**
**option of either paying (i.e. directly into a fund)** **or** **providing service (i.e. part of** **the** **actual universal**
**service).** **Where** **they do the latter they should receive the same amount of** **"credit"** **for** **such** **provision**
**as the incumbent would have done. Common basic principles of schemes, currently operating or**
**under** **development,** **include (i)** **un-economic** **customers need to be defined and** **identified,** **(ii) eligible**
**operators are assigned an amount of universal service obligation which is proportional to their**
**revenue or market** **share,** **(hi)** **the obligation** **may be** **discharged** **by** **operators in** **"cash or** **kind",** **i.e. by**
**paying into the fund or providing service to** **un-economic** **customers, or a mixture of the two, (iv)**
**operators who provide un-economic service in excess of their assigned obligation would receive the**
**appropriate payment** **(or** **balance)** **from** **the** **fund,** **and (v) the administration of the** **USFis** **carried out**
**by a regulatory authority or an** **authorised,** **neutral third** **parry.** **The issue of financing universal**
**service was discussed in detail during the public consultation on future regulation in France (See**
**Consultation** **Publique,** **DGPT,** **April 1994).** **It** **is also an issue currently being considered by OFTEL**
**in reviewing** **the UK's current regime** **for interconnection.**

**86**

**In addition, the concept of universal service should be reviewed to assess the**
**implications of the changing technological situation, market developments and**
**changes in user demands.**

_**VII.**_ _**6.5**_ _**Conclusions**_

_**•**_ **Universal service consists of access to a defined minimum service of specified**
**quality to all users at an affordable price based on the principles of universality,**
**equality and continuity. A key aim across the European Union should be to**
**ensure that the benefits of cheaper and better quality telephony and other benefits**
**of increased competition and choice are passed on to all users.**

**•** **Tariff re-balancing remains a major objective in the context of the liberalisation of**
**telecommunications services, whilst catering for the needs of users vulnerable to**
**re-balancing.**

**•** **In the interests of further developing common Union-wide principles and**
**elements of universal service, the Commission is re-submitting to Council and**
**Parliament its proposed Directive on the application of open network principles**
**to voice telephony.**

**•** **Instead of generally subsidising local access, NRAs should favour tariff re-**
**balancing and in conjunction with TOs arrange for specific tariffs targeted at the**
**requirements of needy or uneconomic customers. Such targeted or** **social** **tariffs**
**should be arranged within the framework of an** **optimal** **or multiple tariff**

**structure.**

**•** **Only telecommunications-related public service obligations should be treated as**
**universal service obligations in voice telephony. NRAs should calculate the cost**
**of** **USOs as the net cost of providing service to uneconomic customers, plus any**
**costs associated with the uneconomic provision of public telephones, emergency**
**services and other social obligations. Network operators should be freed from**
**non-telecommunications related obligations.**

**•** **The uneconomic costs of USOs should be financed either through national**
**universal service funds or where not possible via access charges to be added to**
**interconnection charges.** **Preference should be given to financing through**
**universal** **service** **fund rather than via access charges. Operators and service**
**providers should contribute, subject to the principle of proportionality and the**
**financial responsibility should be spread as broadly and equitably as possible.**

**•** **For those countries which have embraced 1998 as the deadline for the full**

**liberalisation of telecommunications services, infrastructure liberalisation will not**
**entail an additional burden on the financial ability of TOs to honour their**
**universal service obligations. In fact universal service may be enhanced to the**
**extent that other** **infrastructures.** **can** **be exploited or service quality improved.**
**However, to the extent that competing infrastructure operators are likely to**
**target high volume or sophisticated users, TOs should be given more** **flexibility** **in**
**responding to competition in their pricing of bulk capacity or bulk usage, subject**
**to competition rules.**

**87**

**In order to thoroughly monitor universal service** **provision,** **NRAs in conjunction**
**with the Commission should periodically survey main indicators of universal**
**service,** **in particular** **penetration** **of residential lines, waiting times, provision of**
**public pay phones and the availability of targeted schemes for the needy and**
**uneconomic customers.**

**The Commission seeks views on the most appropriate and practical means of**
**developing means of financing the burden of uneconomic universal service**
**obligations in a competitive environment, bearing in mind the comments above**
**and the different situations of Member States.**

**Vn.7 The particular circumstances of peripheral regions with** **less** **developed**

**• networks**

**Council Resolution** **93/C213/01,** **which established the deadline of 1 January 1998**
**for the liberalisation of all public voice telephony services, granted Member States**
**with less developed networks, i.e. Greece, Ireland, Portugal and Spain, an additional**
**period of up to five years in order to achieve the necessary structural adjustments, in**
**particular of tariffs.**

**Additionally, Council Resolution** **93/C213/01** **also noted that Member States with**
**very small networks can, where justified, be granted a transitional period of up to**
**two years.**

**Subsequently, Spain has established 1998 as a target date for the total liberalisation**
**of voice telephony. In order to fully prepare for the 1998 deadline, the intervening**
**period is being used to extend service coverage throughout the country, adjust**
**pricing structures to competitive conditions and establish the way in which public**
**service obligations with respect to voice telephony will be defined and financed.**

**Pricing and structural adjustments are also being prepared and undertaken in the**
**other three countries granted additional transition periods for services liberalisation.**
**No firm indication has yet been given on whether these countries intend to use part**
**or all of the additional period granted.**

_**VIL**_ _**7.1**_ _**Pricing and structural**_ _**adjustment**_

**Concern has been expressed about introducing services liberalisation while price**
**structures are substantially out of line with costs because competing operators could**
**target highly profitable telecommunications services or highly profitable customers,**
**such as large business customers for long distance or international services and gain**
**market share merely on the basis of existing substantially distorted tariff structures.**
**This could undermine the ability of the TOs to meet investment requirements.**

**On the other hand, postponing competition is likely to delay structural and pricing**
**adjustments, limit investment** **from** **additional sources and exacerbate divergence with**
**other Member States. The example of the rapid take-off of competitive mobile**
**communications demonstrates that there is considerable pent-up demand for modern,**

**88**

**effective telecommunications even in peripheral regions with** **less-developed**
**networks.**

**Table** **VII.7.1** **- PSTN tariffs in Greece, Ireland, Portugal and Spain, beginning**
**of!994.** **[118 ]**

**Peak 3 minute**

**intra-EU call (ECUs)**

**0.95**

**1.11**

**1.25**

**1.17**

**Greece**

**Ireland**

**Portugal**

**Spain**

**Peak 3 minute**

**local call (ECUs)**

0.03

**0.14**

**0.05**

**0.06**

**EU average** **0.12** **0.84**

**Table VII.7.1 demonstrates that, even taking into account differences in pricing and**
**cost structures because of specific national situations, considerable divergence from**
**Union averages for tariff structures still exist for the countries concerned. This**
**emphasises the need for National Regulatory Authorities to continue their**
**programmes of adjusting and lowering TOs' pricing structures in preparation for**
**liberalisation.**

_**VII.**_ **7.** _**2**_ _**Service coverage and**_ _**investment**_

**The four countries** **whicb** **have been granted additional transition periods for full**
**telecommunications service Hberahsation have levels of network penetration or**
**service coverage which are below the Union average.** **Moreover, within the**
**countries concerned, and indeed in some specific regions in other Member States,**
**there are areas with significantly lower levels of penetration.**

**118**
**Source** **:** **Tarifica,** **Omnicon**

**89**

However, substantial investment programmes have and/or are being undertaken to
close the gap with other Member States. Depending on the priorities which have
been set by national governments for the use of Union Structural Funds, the
extension of coverage to some of these areas is benefiting from financial assistance.

The role of telecommunications in promoting economic development and
competitiveness and ensuring social and regional cohesion has been clearly
recognised by the Commission. Funding under the Community Support Framework
and on-going lending programmes by the European Investment Bank continue to
make a substantial contribution to the development of telecommunications services
and network investment in the Member States concerned.

The Structural Funds have been contributing substantial amounts to the
modernisation of telecommunications infrastructures in Member States, particularly
in less developed one, and important telecommunications programmes have been
agreed in the context of the 1994-1999 Structural Fund programmes. The
Commission has been careful to choose the appropriate intervention rates to ensure
that the benefit of Community financial assistance goes to the consumer and that this
assistance is intended to materialise investments which would not have otherwise
taken place. This is particularly true for investment programmes in
telecommunications with revenue bearing potential and also in cases where the
investor, from the Member State point of view, is not a public body but private
capital has also been mobilised. The Commission will ensure that these principles,
which of course are applied after careful examination of the economic and other
aspects of the investments concerned, will continue to apply in a liberalised
environment in the telecommunications sector.

Current levels of network penetration and investment in the four countries compared
to the Union average are given in Table VII.7.2.

**Table VII.7.2**   - **Network penetration and investment in Greece, Ireland,**
**Portugal and Spain** **[119 ]**

**Mainlines per 100** **Capital expenditure by**
**inhabitants (thousands)** **TOs as a percentage of**
**end of** **1993** **revenue** **[120 ]**

Greece 45.8 40.6 %

Ireland 32.3 23.4%

Portugal 33.5 45.6%

Spain 36.4 57.4%

EU **average** **45.4** **37.0** %

**119**
**Source** **:** **IDATE, 1994**

**120** **Capital expenditure is an average over the five years 1989-1993.**

**90**

_VIL_ _7.3_ _Universal_ _Service_ _Obligations in the context of less-developed networks_

**The** **same** **principles of universal service provision and financing uneconomic**
**universal service** **obligations** **in a competitive environment as outlined in the previous**
**section apply in the context of less developed networks. The objective must be to**
**ensure that the potential benefits associated with commercial and technological**
**changes in a competitive telecommunications environment are passed on to all**
**consumers and users. In particular, this means that all the benefits of increased**
**competition and choice should be made available to users.**

**Less favoured regions face a number of difficulties, in particular, because lower per**
**capita levels of** **GDP** **produce smaller revenues and because low population densities**
**and more difficult geographical conditions cause higher infrastructure costs.**

**Council Resolution 94/C 48/01 recognised that in pursuing the objective of**
**maintaining and developing** **a-** **universal telecommunications service, account will be**
**taken of the specific circumstances of the peripheral regions with less-developed**
**networks and the role which the appropriate Community support framework may**
**play having regard to national priorities.**

**The additional considerations that apply, therefore, in the context of the agreement**
**on the liberalisation of all telecommunications services are firstly, the timing of**
**services liberalisation and secondly, the extent to which Member States exploit**
**additional** **financing** **mechanisms for required investments.**

**At the same time, calculating the cost of providing uneconomic universal service**
**obligations in situations where network coverage is still being increased substantially**
**and where pricing structures are still significantly distorted is more problematic than**
**estimating the burden of uneconomic universal service obligations where coverage is**
**already extensive.**

**A number of policy options are, therefore, available during the transition to a**
**competitive** **environment** **in the context of Member States which have been granted**
**additional periods.** **One is to delay the assessment of the cost of uneconomic**
**universal service obligations until pricing structures are adjusted, network coverage**
**is** **extended and competition is introduced. A second is to exploit network access**
**charges to allow for the introduction of competition in advance of adjustment and**
**extension of network coverage. A third is to examine other means of providing and**
**financing extensions of universal service, in particular by examining requirements for**
**universal service on a regional basis.**

**Nevertheless in choosing between the various policy options, these Member States**
**must continue to focus on the extension of universal service and the development of**
**advanced telecommunications infrastructures and services. This is vital to meet the**

**needs of an advanced economy and will be central to attracting inward investment**
**over** **the** **longer term. In this context full use** **should** **also be made of appropriate**
**Community support frameworks, including Cohesion Funds to assist network**
**development.**

**91**

_**VIL**_ _**7.4**_ _**Infrastructure liberalisation**_

**As argued in Part One of the Green Paper and in the previous section of this**
**document, the Commission believes that there are significant benefits in linking**
**infrastructure liberalisation with the timetable established for the liberalisation of**

**telecommunications services, provided the appropriate safeguards dealt with in this**
**part of the Green Paper are put in place.**

**In the case of the Member States granted (according to Council Resolution**
**93/C213/01)** **additional transition periods for structural adjustment in the context** **of**
**services liberalisation, the Council Resolution of 17 November 1994 recognised the**
**principle of general liberalisation of infrastructures by** **1.** **January 1998 and linked**
**additional transition periods of up to five years for infrastructure liberalisation to the**
**use of the additional transition periods for services liberalisation**

**VH.8** **Competitive Safeguards**

**A major condition for the full development of the potential offered by the removal of**
**exclusive and special rights over infrastructures and the development of a common**
**regulatory** **framework** **will be the strict application of the Treaty competition rules**
**to the provision and operation of communications networks in the Union, and the**
**services delivered over them.**

**Those rules will be central not only to the determination of who will be the main**
**market participants, but also to ensuring that all actors can compete on a fair basis.**

**In a market which will be for many** **years** **characterised by the presence of dominant**
**operators controlling bottleneck facilities, a level playing field will only be possible**
**by reinforced scrutiny of compliance with the competition rules.** **Otherwise the**
**emergence of competition will be stifled.** **This will imply, where required, the**
**establishment of the appropriate procedures and safeguards, in particular in the**
**following areas:**

_**VII.**_ _**8.1**_ _**The examination**_ _**of**_ _**interconnection**_ _**agreements**_

**As mentioned in chapter** **VI.4.2** **procedures, according to a regulation to be adopted**
**by the Council, should be envisaged to set out the conditions under which**
**agreements are compatible with the principle of effective competition.**

**121** **Articles 85, 86 and 90 of the Treaty and the rules of the control of concentrations set out in**
**Regulation** **4064/89/EEC of 21** **December** **1989,** **OJ** **L257,** **21.9.90.** **In order to** **clarify** **the** **application**
**of** **the** **Treaty rules** **to-** **the** **telecommunications** **sector,** **the Commission adopted guidelines in 1991**
**(91/C233/02).**

**92**

_**VIL8.2**_ _**The conditions of access applied to competing infrastructure providers**_
_**and**_ _**for service provision**_

**Refusal, by an infrastructure provider in a dominant** **position,** **to grant access to its**
**network should be closely monitored; as should potential discrimination in cases**
**where such an infrastructure provider also provides services competing with those of**
**the service provider requesting access.**

_**VIL**_ _**8.3**_ _**Schemes established for financing universal service**_

**To** **"avoid** **universal service becoming an excessive burden for new entrants, the**
**neutrality of the mechanisms put in place for its** **financing** **should be assessed.**

_**VII.**_ _**8.4**_ _**Access to rights**_ _**of**_ _**way**_

**When granted to a sole company, rights of way substantially affect the ability of**
**other undertakings to compete. Granting rights to establish infrastructure without**
**granting** **rights** **of way would effectively prevent, or at least delay for many years, the**
**establishment of competition in the local loop. Objective reasons of non-economic**
**nature, such as environmental concerns or the risk of traffic congestion, could justify**
**a limitation on the number of** **rights** **of way granted.**

**The Member States should in those cases, examine how joint use of facilities could**
**be encouraged, and, where required, made mandatory, in order to overcome**
**bottleneck situations.**

**The broader issues of access to rights of way in a regulatory context is addressed in**
**VI.** **10.1** **below.**

_**VII.**_ _**8.5**_ _**Cross-ownership**_ _**of different networks and joint provision of**_ _**network**_ _**and**_
_**services**_

**Cross-ownership should not be excluded a priori,** **given** **the possible synergies and**
**economies of scope and scale, in particular between cable television networks and**
**telecommunications and other utilities.**

**Vertical** **integration,** **i.e.** **infrastructure** **providers** **who** **also** **provide**
**telecommunications services, also may offer considerable advantages to** **the** **users.**
**Allowing end-to-end** **responsibility** **by the same company may, for example, be**
**perceived as important.**

**Such combination of activities across distinct markets should, however, be closely**
**monitored.** **This implies, firstly, the establishment of transparent accounting**
**structures, including the separation of accounts for telecommunications and non-**
**telecommunications activities, as well as the implementation of transparent cost**

**93**

**accounting** **systems** **for** **infrastructure** **providers** **who** **also** **provide**
**telecommunications services. Secondly, it implies a review at a certain date to assess**
**whether such transparency suffices to avoid possible abuses, such as cross**
**subsidisation, or whether further action is required.**

**Even with the inclusion of appropriate safeguards in both the European and national**
**regulatory frameworks, the role of the Treaty competition rules is likely to be of**
**increasing importance.**

**This is particularly true, given the fact that they give rights to businesses which can**
**be relied on within the national legal system, as well as through the intervention of**

**the Commission.**

**The competition rules, alongside national** **legislation,** **will also** **determine** **to** **a** **large**
**extent who will be the major market players, as clearance from competition**
**authorities will be required for many of the new global and regional partnerships and**
**alliances involving European partners, such as** **those** **between BT and MCI, DBPT**
**and France Telecom and now with Sprint, and between Unisource and AT&T.**

**According to their co-operative or concentrative nature, such ventures will continue**
**to be considered either under the provisions of Article 85** **EC** **[122]** **or under the rules**
**relating** **to** **the control of concentrations** **[123]** **.**

**One factor in any such assessment will be the potentially positive benefits of such** **co-**
**operation through the promotion and creation of pan-European networks and**
**services or improved interconnection and interoperability at a European level.**

**122** **Article 85(1) EC indicates : The following shall be prohibited as incompatible with the common**
**market: all agreements between undertakings, decisions by associations of undertakings and**
**concerted practices which** **may** **affect trade between Member States and which have as their object or**
**effect the prevention, restriction or distortion of competition within the common** **market,** **and in**
**particular, those which: (a) directly or indirectly fix purchase or selling prices or any other trading**
**conditions; (b) limit or control production, markets, technical** **development,** **or investment; (c) share**
**markets or sources of** **supply;** **(d) apply dissimilar conditions to equivalent transactions with other**
**trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of**
**contracts subject to acceptance by the other parties of supplementary obligations which, by their**
**nature or according to commercial usage, have no connection with the subject matter of such**
**contracts.**

**2.** **Article 85(2) Any** **agreements** **or decisions prohibited pursuant to this Article shall be**
**automatically** **void.**
**3.** **The provisions of paragraph 1 may, however, be declared inapplicable in the case of [any**
**agreement] which contributes to improving the production or distribution of goods or promoting**
**technical or economic progress, while allowing consumers a fair share of** **the** **resulting** **benefit,** **and**
**which does** **not:** **(a) impose on** **the** **undertakings concerned restrictions which are not indispensable to**
**the attainment of these objectives; (b) afford such undertakings the possibility of eliminating**
**competition in respect of a substantial** **part** **of the products in question.**

**123** **Commission Notice of** **14** **August 1990 regarding** **the** **concentrative and co-operative operations under**
**Council Regulation (EEC)** **4064/89** **of** **21** **December 1989 on the control of concentrations between**
**undertakings,** **(Revised version to be** **published)**

**94**

At the same time, any assessment of the competitive impact of these new
arrangements will have to take into account the extent of competition in the home
markets of the participants.

With the advent of new forms of co-operation across traditional industry divides in
order to meet the demands of the Information Society, the competition rules will
continue to play an important role. Already in North America, there have been a
spate of mergers and joint ventures designed to link network, service, equipment and
content providers within one unit.

Future policy will have to tackle the potential bottleneck created by content, the raw
material for many future services. The Commission will in particular ensure that cooperation across traditional divisions of industry does not reinforce current dominant
positions in the separate markets for content, technical facilities and services. The
Commission has already refused to allow a merger aiming to combine delivery
networks with ownership of programmes and films since this would, in particular,
have allowed the incumbent (EU) telecommunications operator involved to reinforce
its dominant position in the market for cable network service, in which the operator
had _already_ extended its dominant position in the separate market of voice
telephony [124] . The ultimate test will be whether competitors could still reasonably
enter the market if the co-operation was allowed. This test should always be applied
to the least competitive market involved, which is, currently, the market for the
provision of communications networks.

With the development of multimedia applications in parallel with the introduction of
digital TV technology expanding television services possibilities, the Commission is
likely to have other complex multimedia co-operation agreements to consider over
the next few years. The introduction of competition in the public communications
network-provision market as well as the development of open application systems,
would reduce the possible anti-competitive effects of such co-operation and

convergence.

The application of the competition rules must progress alongside with the
achievement of other Union policy goals such as cultural diversity and evolving
policies in areas equally at the core of the Information Society such as media
concentration and intellectual property rights. This is returned to below.

At the same time, currently divergent situations in the Member States should not in
themselves be a pretext to avoid or delay the introduction of competition in network
provision.

**VH.9** **The international dimension - international trade in telecommunications**

services

Measures to create an internal market for telecommunications services have a

substantial external impact in both the Union's bilateral relations and, in particular,
with its relations with:

124 _Media Service_ _GmbH,_ Commission Decision of 9 November 1994, see Press Release IP/94/1045,
9.11.94

**95**

**.** **theGATTAVTO**

**•** **international and regional telecommunications organisations such as the ITU and**
**CEPT, and**

**•** **the Union's bilateral relations.**

**As Union policy is developed internally this needs to be reflected in the international**
**sphere.**

**Further liberalisation in a range of telecommunications** **service** **and in** **infrastructure**
**raises a number of important international considerations, namely : (i) the**
**implications for the Union of third** **country** **entrants into its market; (ii) the interests**
**of Union companies in third countries and whether similar market opportunities are**
**available; (iii) how to ensure comparable and effective access; and (iv) the interaction**
**between the Union and action in international fora promoting market liberalisation.**

_**VH.**_ _**9.1**_ _**Participation by non-EU-or EEA nationals or companies controlled by**_
_**such nationals in**_ _**the**_ _**EU market**_

**Participation of third country companies in the EU is already significant. Many non-**
**EU companies are key players in the Union's value-added and liberalised**
**telecommunications services markets. Increasing participation is seen in the mobile**
**sector, in business communications (outsourcing, one-stop shopping, Virtual Private**
**Networking), as well as in the area of** **'private'** **('non-public') corporate**
**communications.**

**Moreover, market** **access** **has not been limited to areas liberalised through EU**
**legislation:** _**de facto**_ **market access has been available as Member States remove**
**monopolies in fields which have only recently been addressed by EU**
**telecommunications policy. For example, US companies, in particular, are key**
**participants in nearly all of the mobile and cable consortia being set up in the Union.**
**This includes operators with local monopolies in their home markets.** **Similar**
**developments can be seen in the areas of** **satellites,** **simple resale of voice telephony**
**and the provision of call direct or third country calling services.**

_**VIL**_ _**9.2**_ _**Interests of**_ _**Union**_ _**companies in third countries**_

_**Opportunities**_

**European companies, too, are increasingly participating in third country markets, not**
**only in value-added and** **'non-public'** **services but also as** **providers** **of public voice**
**telephony, in so far as this is possible within the constraints of current** **regulatory**
**restrictions in other countries. (See USA and Japan below). Examples include**
**Telefonica's purchase of a three-quarter share (indirect) of the assets of the Puerto**
**Rico long distance telephone company, where it is now providing telephone services**
**in competition with AT&T and others; and British Telecom's joint venture with and**
**participation in MCI, the second largest long-distance carrier in the US. Cable &**
**Wireless has a share of** **17.5%** **in the New Common Carrier IDC in Japan and France**

**-** **96**

**Télécom has created Japan Multimedia Services along with 19 companies (mostly**
**Japanese) to provide information services (financial, tourism, real estate etc.).**
**Currently JMS is in negotiations with NTT to offer a Japanese version of Minitel**
**Videotex service using NTT's circuits.**

_Obstacles_

**Access for EU companies to many third countries is hampered by limitations on**
**services that can be provided, ownership restrictions, unreasonable reciprocity**
**requirements or burdensome conditions imposed that are not applied to domestic**
**companies.** **Difficulties encountered in two key markets, namely the USA and Japan**
**are highlighted.**

_The USA_

**In addition to a number of statutory restrictions on ownership, the US** **government**
**will increasingly make market access for third country companies conditional upon**
**achieving reciprocity in those countries. European industry reports that market**
**access is either prohibited by ownership restrictions or narrow reciprocity**
**requirements, or else the environment is rendered too uncertain to justify**
**participation. In particular this has been achieved by :**

**•** **Use by the FCC of discretionary clauses in statutory legislation** **[125]** **to:**

**- make the level of market access authorised conditional upon the same**
**degree of market access being available in the country of the firm applying**
**for authorisation (leading to long delays); and**

**- impose a number of restrictive conditions on the provision of service, again**
**on the grounds of conditionality (leading to a reduced ability to compete**
**with US firms).**

**These measures raise two sets of questions. Firstly, the justification for**
**seeking equivalence narrowly by telecommunications sub-sector, at the same**
**time as market access in other sub-sectors may be enjoyed.** **Secondly,**
**questions arise as to at** **what** **point, if any, it can be justified to seek**
**reciprocity or impose restrictive conditions to protect** **per** _**se**_ **the position of**
**national carriers, as distinct** **from** **seeking a degree of equivalence in order to**
**protect national carriers** **from** **being unduly penalised by the workings of the**
**international voice telephony system and its increasingly out-dated methods**
**of** **re-imbursement mechanism between carriers.**

125 Section 214 of the Communications Act of 1934 and the Cable Landing Licence Act: Section 214
requires that common carriers may not construct or acquire new lines or extend existing lines unless
the FCC determines it would be in "the present or future public convenience and necessity" and it
provides that the FCC may attach such conditions to the issuing of the certificate of authorisation as it
thinks are in this public interest However, there is no definition of what is in the public interest, nor
are there any set criteria for the FCC to use in order to arrive at a decision. Authorisations for some
foreign companies to provide certain services are currently being delayed while "equivalency" is
being sought. See also Section 2 of the Submarine Cable Landing Act.

**97**

**The Communications Act limits foreign ownership of operators of**
**telecommunications services requiring radio licences in the US** **[126]** **. European**
**firms are only able to obtain radio licences for common-carrier mobile services**
**in the US through minority ownership without control. TOs deemed to be**
**representatives of foreign governments are prohibited from holding a radio**
**license altogether.** **?**

**"Dominant carrier rule": The FCC classifies as "dominant" all US or foreign-**
**owned carriers, irrespective of their size or market power, on those routes**
**where their foreign affiliates have the ability to discriminate against unaffiliated**
**US international carriers through control of bottle-neck services and facilities**
**in the foreign market.** **Any company affiliated with a major TO will be**
**presumed** **to be dominant on the route** **to** **the country of that operator. The**
**classification as "dominant" or "non-dominant" for a foreign company is a**
**crucial issue because dominant carriers face much heavier regulation. The**
**practical effect is that burdensome regulations may be imposed in the United**
**States on foreign companies which are far smaller than US companies which**
**escape regulation.**

_**Japan**_

**In spite of many areas of liberalisation implemented by the Ministry of Posts and**
**Telecommunications, as well as the government's declared general policy objective of**
**deregulation,** **European users and TOs** **find** **that market access is impeded by an array**
**of remaining regulatory obstacles, as well as by the dominant presence of NTT and**
**KDD.** **In** **addition, European companies feel** **they** **need greater transparency in**
**implementation of** **Japan's** **regulatory framework. In particular:**

**•** _**restrictions for type I**_ _**business:**_ **European companies can choose to enter the**
**Japanese market through shares in existing service provider firms. However,**
**only one third foreign ownership is allowed for type I carriers (those which use**
**their own infrastructure) with further restrictions on access to management in**
**the case of NTT and KDD. In** **addition,** **licenses for new type I carrier are**
**authorised by the regulatory authority applying the demand supply clause (e.g.**
**not granting license when MPT estimates that the market and business**
**perspective which must be submitted by the applicant is not realistic).**

**•** _**restrictions for type II**_ _**business:**_ **In case European firms decide to establish**
**themselves independently (and without setting up their own infrastructure to**
**avoid the constraints outlined above) they need to obtain a license as type II**
**carriers. European service** **provider** **firms are primarily interested in offering**
**international** **telecommunications** **services.** **In** **this** **case,** **the**

**126** **Section 310 of the Communications Act imposes limitations on foreign investment in radio**
**communications: no broadcast or common carrier licence may be held by foreign governments, or**
**companies in which more than 20% of the capital stock is owned** **by** **a foreigner (25% if the**
**ownership is indirect). The Act provides for waivers to be made by the FCC in the specific case of**
**indirect ownership, if it finds that this would be in the public** **interest,** **but the FCC has never used**
**this possibility.**

**98**

**Telecommunications Business Law prescribes obtaining the status of special**
**type carrier on the ground that they offer "public"** **services.** **It is this status**
**which is the origin of procedural difficulties and business constraints, such as:**

**the conditions attached to obtaining an authorisation, by MPT**
**(submission and authorisation of "operating agreements", obligation to**
**recruit of local expert** **staff,** **etc.)**

**the obligation to negotiate non-tariff based contracts with a type I**
**carrier is deemed by industry to be onerous and obliges firms to discuss**
**with their potential competitors**

**the obligation to publish tariffs and to obtain authorisation for new**
**services which a** **firm** **wants to introduce**

**the lack of a clear definition of value added services, leading to an**
**uncertainty in obtaining authorisation for services**

**the difficulty to access relevant regulatory rules and legislation** **[127 ]**

**the uncertainty about response times and about the decision criteria**
**applicable when dealing with the regulatory authority** **[128 ]**

_**limitation of international service provision:**_ **Certain international services are**
**subject to** **restrictions** **(third country** **calling,** **breakout,** **re-routing,**
**interconnection to PSTN, resale of international leased lines).**

_**limitations applicable to wireless services:**_ **In principle, no radio station**
**licence is granted to foreign entities** **[129]** **.**

_**VII.**_ _**9.3**_ _**Ensuring comparable and**_ _**effective**_ _**market access in third countries**_

**Liberalisation in the Union must go hand in hand with expanding comparable and**
**effective market access in third countries.**

_**WTO/GATS**_ _**multilateral negotiations**_

**This overall aim is necessarily linked in particular to the on-going negotiations in the**
**WTO (the World Trade** **Organisation).** **These multilateral negotiations provide the**

**127** **The** **Telecommunications** **Business Law** **Enforcement** **Rules are not available in European** **languages.**

**128** **Since** **1** **October** **1994,** **the Administrative Procedure** **Law** **entered into force. As a consequence, the**
**telecommunications** **regulatory** **authority,** **MPT,** **has published "typical response** **times"** **and** **applicable**
**criteria for interaction between applicants and regulatory authority. The practice of** **these** **new rules**
**needs to be** **verified** **in** **practice.**

**129** **i.e.: a** **non-Japanese** **citizen;** **a** **foreign government** **or its** **representative;** **a** **foreign juridical** **person;** **or**
**a juridical** **person one third or more** **of whose senior** **managers** **are,** **or voting** **rights** **are held** **by,** **any**
**of** **the preceding kinds** **of** **persons** **or bodies. .**

**99**

**best way of achieving** **a** **balanced set of commitments in all services sectors, along**

**with the establishment of international trading rules.**

**Trade negotiations in general, and services trade policy in particular, have two key**

**aims:** **firstly, the establishment of trade rules and disciplines which are mutually**

**advantageous; and secondly, a reduction of barriers to trade by means of a balanced**

**contribution by all parties to the removal of trade restrictions, such as foreign**

**ownership restrictions and reciprocity requirements.**

**Furthermore, effective market access for telecommunication services hinges on the**

**conditions of competition within a country or region, and involves a range of issues**

**related to national or regional regulatory frameworks, so that general trade rules and**

**disciplines need to be clarified in order to provide a set of** **rules** **or guidelines** **on**

**access to and use of public telecommunications transport networks and services.**

**The Uruguay Round of trade negotiations on services resulted in a general**

**framework of rules governing trade in all service sectors and the exchange of legally**

**binding liberalisation commitments (together known as the General Agreement on**

**Trade** **in** **Services or GATS)** **The GATS** **framework** **applies to a country's**

**"measures" (legislation or rules) that affect trade in services.** **Some GATS rules**

**apply to trade in all service sectors, notably those concerning Most Favoured Nation**
**Treatment** **[130]** **and Transparency** **[131]** **, whilst others apply** **pnly** **to sectors inscribed in**

**the country's schedule of liberalisation commitments**

**For the telecommunications sector, the general GATS framework is supplemented by**

**the provisions of the Telecommunications Annex on access to and use of the public**

**telecommunications** **transport** **networks** **and** **services** **for** **the** **provision** **of**

**telecommunications and other services.**

**Since most countries were not ready to make commitments on so-called "basic"**

**services at the end of the Uruguay Round, these are being negotiated in an extension**

**of the Round with a deadline scheduled for April 1996. To date about 25 countries**

**have joined these negotiations, including the European Community, the US and**

**Japan.**

**The mandate and modalities for the continuing negotiations are set in a Ministerial**

**Decision,** **supplemented by a second GATS Annex on telecommunications.** **The**

**scope of the negotiations is broad: no "basic" telecommunications services are to be**

**excluded a priori.** **As for the rules applicable during the period of** **negotiations,**

**parties have agreed to a standstill clause.** **This** **standstill** **commitment is a general**

**one,** **whereby countries undertake a broad political commitment not to apply**

**measures (legislation or rules) which would improve their negotiating position. It is**

**intended to provide some guarantees on the overall balance of countries' regulatory**

**behaviour while negotiations are under** **way.** **Parties have also agreed to suspend the**

**130** **« with** **respect to any measure covered by this** **Agreement,** **each Member shall accord immediately and**
**unconditionally to services and service** **suppUers** **of any other Member, treatment no less favourable**
**than that it accords to like services and service suppliers of any other** **country."** **Art II.l, GATS.**

**131** **A requirement to make publicly available information on conditions affecting access to and use of**
**public telecommunications transport networks and services.**

**100**

application of most favoured nation treatment for the course of the negotiations.
This principle (which includes a requirement to list any legislation or rules which are
inconsistent with its provisions) will become applicable to "basic"
telecommunications only when the negotiations end.

In the event of a failure of the negotiations, parties could request an MFN exemption
for measures which are inconsistent with MFN, thereby retaining their right to
discriminate among WTO parties.

_**VII.9.4**_ _**Interaction between liberalisation in the**_ _**Union**_ _**and multilateral processes**_

_**Effect of the**_ _**Uruguay Round**_ _**results on the**_ _**Union**_ _**market**_

The European Community has made a commitment to bind a range of so-called
value-added services, which will come into force at the same time as the WTO itself,
scheduled for January 1995. At this time everything in the commitment will be
subject to the GATS and its Annexes, and will be formally bound open to
competition to third country companies. The commitment, like that of most
countries, excludes "basic" services - the largest part of the market - reserving these
for the on-going negotiations in Geneva, as described above.

_**Possibilities for**_ _**"protection"**_ _**of**_ _**the**_ _**EU market**_

Given that the WTO/GATS process is still ongoing, there is at present no mechanism
to ensure that market access granted in the Union, de jure or de facto, is adequately
compensated elsewhere. Whilst some Member States have in place legislation which
may be used to limit the possibilities for foreign companies to invest in
telecommunications ventures or to provide services, the EC Treaty does not
generally allow the discrimination between EC-owned companies and non-EC owned
companies established in the Community.

Until the results of the WTO/GATS negotiations are clear, it is important that the
Union reserves its right to maintain equivalent conditions to those currently
prevailing in third country markets with regard to market entry or the licensing of
non-EU or EEA nationals or companies controlled by such nationals, the objective
of imposing such conditions would be to promote open markets in third countries for
European network operators and service providers through negotiations.

_**Timing for external trade liberalisation**_

Any future WTO/GATS commitments by the European Community in the area of
"basic" telecommunications services will have to be properly related to the internal
process within the Union and timetable outlined in the Council Resolution of July
1993. Similarly the Union's position on the shaping of the "rules of the game" will
need to remain closely linked to developments in the internal regulatory framework
in order to ensure consistency between its internal and external positions.

_**Common Community positions in international organisations**_

Major future standards, frequency and numbering decisions will be taken in the ITU

(International Telecommunications Union), which will involve co-ordination in the

**101**

**ITU's committees and working groups dealing with these issues. The current global**
**developments in the ITU will facilitate the future development of telecommunications**
**at a world level but will in some cases also require the strengthening of co-ordination**
**mechanisms, as set out in the Council Resolution of 30 June 1988, which provided**
**that common positions are to be adopted in international fora, wherever relevant.**

**The Union's principal trading partners attach major significance to their position in**
**international organisations and commit substantial resources and political weight to**
**their international negotiating position in the ITU. The Union also takes a strong**
**interest in the work of the** **ITUs** **BDT** **[132]** **.**

132 Bureau de Développement des Tel ^communications

**102**

_**Bilateral**_ _**relations**_

**Finally, Union policy must be seen in the context of the overall relations of the EU**
**with regard to other parts of the** **world:** **the deepening of its relations with developed**
**countries and an active role in Europe's regional telecommunications bodies,**
**structured around the CEPT, as well as building up relations** **with** **the Mediterranean**
**countries; the** **contribution** **to the full use of telecommunications in the developing**
**countries in the context of its relations with the African, Caribbean and Pacific (ACP)**
**countries in the framework of the current** **Lomé** **convention; as well as assisting**
**development projects elsewhere, and particularly in Central and Eastern Europe and**
**the New Independent States of the former Soviet Union.**

**For Central and Eastern Europe and the New Independent States of the former**
**Soviet** **Union,** **in** **particular,** **promotion of co-operation and technical assistance to**
**support the integration of their communications networks with the rest of Europe**
**and the world, will remain a major goal during the rest of the decade, on the basis of**
**the relevant Community programmes** **(PHARE/TACIS),** **the respective Association**
**Agreements** **which have been concluded and the** **Partnership** **and Co-operation**
**Agreements which are being negotiated with Russia and other republics of the former**
**Soviet Union. .**

**VÏÏ.10** **Access to rights of way, numbers, frequencies, and directory services**

**In order to guarantee the successful development of a competitive market for**
**infrastructure, steps must be taken to open up access to a number of resources which**
**will be crucial to the effective estabhshment and operation of telecommunications**
**networks and to the offering of services over them. These concern rights of way,**
**frequency for wireless network components, numbering and directory and subscriber**
**information.**

_**VII.**_ _**10.1**_ _**Access to rights**_ _**of**_ _**way**_

**Member states should grant rights of way to communications network operators**
**according to open and** **transparent** **procedures.**

**Where environment requirements (such as avoiding road congestion), or other**
**essential requirements, prevent the granting of rights of way to all potential**
**applicants, the Member States should introduce schemes for the sharing of ducts on a**
**voluntary basis and consider, where it is deemed necessary to avoid bottleneck**
**situations, the introduction of mandatory duct-sharing.**

**To introduce competition in the market for infrastructure** **provision,** **Member States**
**will need to ensure that the incumbent telecommunications organisations are subject**
**to the same regulatory conditions as their competitors regarding rights of way, and**
**provide for mandatory sharing of facilities where necessary to bring down barriers to**
**entry.**

103

_**VIL10.2Numbering**_

**Because of the huge cost involved with major number plan changes, numbers for**
**telecommunications services can be considered as a finite and potentially scarce**
**resource.** **Moreover, numbering is as a key facilitator - a pivot in market liberalisation**
**and the introduction of competition. It is therefore necessary to ensure that**
**developments of telecommunications networks and services are not hampered on**
**numbering grounds. This challenge needs to be addressed by careful management of**
**the overall numbering schemes, at the global, European and national level.**

**Numbering is not an issue which results from infrastructure liberalisation** _**per se;**_
**liberalisation of voice telephony** **services** **in 1998 will in any case lead to new**
**demands for telephone numbers. Infrastructure liberalisation will however stimulate**
**many** **new services, some of which will need new number allocations.**

**Principles of EU telecommunications policy governing numbering and** **number**
**allocation were described in the Mobile Green Paper** **[133]** **.**

**In summary, the Community approach involves:**

**•** **separation of operational and regulatory activities in Member States, with the**
**national numbering plan under the control of the national regulatory authority**

**•** **setting out basic principles for access to and allocation of, numbers**

**•** **adopting specific measures for key access codes** **(112** **for emergency services and**
**00 for international access)**

**•** **recognising ECTRA, and the European Telecommunications Office (ETO) and**
**the** **European** **Numbering Office (ENO) within it, as a forum for developing** **and**
**co-ordinating numbering policy for Europe, under the terms of the MoU with**
**ECTRA and a Framework Contract with the ETO, signed in September 1994,**

**•** **developing common. European positions and setting priorities for action at a**
**European and international level.**

**There are fundamental decisions on numbering reform for Europe which must be**
**taken by the middle of 1995.** **They are centred around four strategic options for**
**numbering of telecommunication services in Europe** **[134]** **, designed to provide a phased**

**133** **COM(94)145,** **27.04.1994,** **Annex** **D,** **section 9**

**134**

**"Strategic** **Options for Numbering** **of Telecommunication Services** **in** **Europe",** **Report by the ECTRA**
**project team on numbering** **(PT/N),** **1994 . This report was based on a Commission study "The**
**potential opportunities afforded** **by a new European** **telephony numbering** **space".** **Its four options are**
**as follows. Option** **1:** **Do nothing until** **market** **forces** **change;** **Option** **2:** **Open** **European numbering**
**space** **for special services e.g. freephone, premium** **rate,** **shared** **costs;** **Option** **3:** **Implement a** **3** **digit**
**country code for** **Europe** **with the last two digits managed** **by** **a European authority, opens** **ways** **for**
**European carrier selection and migration of pan-European services into a common numbering**
**scheme;** **Option** **4:** **Implement** **a open and** **fully integrated numbering scheme for** **Europe** **i.e. such as**
**the North** **American numbering scheme,** **opens ways to** **roll out seamless intelligent network services**
**across** **Europe.**

**104**

evolutionary approach to progress from the present situation to a fully integrated
numbering scheme for Europe.

Priorities for European numbering policy are:

  - opening up a European numbering space for special telecommunications services,
in particular freephone services

Preparatory work is underway on a European numbering space for special
services e.g. freephone, premium rate, shared costs, which will require
allocation by the ITU of a virtual country code for Europe. This virtual
country code can be seen as the first step in establishing a parallel European
numbering space for pan-European services.

   - a"common European approach for numbering plans.

National numbering plans must be stable yet flexible, facilitate the development
of trans-European services, and facilitate the long-term development of
services.

   - a "best practice" guide for NRAs on the administration and control of the national
numbering schemes.

Strong guidelines are required, as a minimum, for the following issues:
customer and number ownership, portability and tradability; number length and
commercial value; access to unique services e.g. access to directory enquiry
services and emergency services; and Data Network Identification Code
(DNIC) and Data Country Code (DCC) allocation procedures.

Work is also done on the issue of user-friendliness of numbering. An investigation of
the possible re-introduction of alpha-numeric dialling is part of this work.

In preparation for the future liberalised telecommunications environment, the
Commission is preparing a reform package for submission to the Council before 1
January 1996. This package will have to address _inter alia_ the subject of numbering
reform in Europe.

_**VII.**_ _**10.3Access**_ _**to**_ _**Frequencies.**_

The availability of radio frequencies is an essential element for the development of
radiocommunications equipment and services, in particular in the fields of mobile and
personal communications, satellite communications, and broadcasting. Principles of
EU telecommunications policy governing frequencies and frequency allocation were
described in the Mobile Green Paper .

A European framework for frequency allocation is now in place, providing:

135 COM(94)145, 27.04.1994, Annex D, section 4

105

**•** **separation of operational and regulatory activities in Member States with regard**
**to** **frequency** **allocation**

**•** **technology-specific measures to promote the co-ordinated introduction of pan-**
**European services (GSM, DECT, ERMES)**

**•** **recognition of the European Radiocommunications Committee (ERC) and** **its**
**European Radiocommunications Office (ERO) as a forum for co-ordination of**
**frequency allocation in Europe, under** **the** **terms of Memorandum of**
**Understanding and a Framework Contract signed with the European Commission**
**on 21 April 1994.**

**Priority actions for Europe in** **the** **area of** **frequencies** **are:**

**- rapid action in the short term in the areas of** **TETRA,** **satellite based personal**
**communications systems, and UMTS** **[136]** **, including the designation of** **harmonised**
**European** **frequency** **bands for crucial systems and services** **[13]** **.**

**- comprehensive review of the frequency spectrum below 2000 MHz., including a**
**review of the balance of** **frequency** **usage between broadcasters, network operators**
**and mobile and personal communications operators.**

**In the medium to long term, the further growth of the mobile and personal**
**communications sector can only be fostered if the sector is designated a bigger**
**share of** **the** **total available spectrum. Best estimates** **available** **call for an extra**
**100-200 MHz in addition to the current allocations** **[138]** **. Because the release of**

**spectrum below 2000 MHz requires a long period, it is important to start this**
**process early.**

**- responsive and co-ordinated** **frequency** **allocation procedures**

136 Replacement of the current ERC Recommendation on DCS-1800 by a Decision. For TETRA, a
major future technology for trunked mobile radio, a similar action is needed to allocate the necessary
frequencies. Further action is required for satellite-based personal communications systems including
LEO systems. Finally, firm decisions are required for implementation of the frequency bands
designated at WARC-92 for the UMTS/FPLMTS, which action is considered vital to the development
of UMTS in Europe.

137 On TETRA a final report is to be submitted by October 1995; on DCS-1800 a final report is due by
March 1995; on Satellite Personal Communications Services (Satellite PCS) a final report is due by
October 1995; on Universal Mobile Telecommunications System (UMTS) a first assessment is
required of how spectrum requirements for second-generation mobile systems (i.e. GSM, DCS-1800,
TETRA, TFTS) are likely to converge to the UMTS and in what time scale.

Other key pan-European systems for which specific work orders have been agreed include: mobile
satellite applications, VSAT/SNG, satellite (sound/TV) broadcasting, T-DAB (Terrestrial Digital
Audio Broadcasting), wireless LAN's, mobile broadband systems, and microwave video distribution
systems.

138 GSM MoU Group, Comments to the Mobile Green Paper of the European Commission, 7 September
1994

**106**

**Liberalisation of infrastructure will place an increasing load on the** **existing**
**framework, in that it will stimulate both the demand for frequencies within**
**Member States and the need for pan-European co-ordination. Increasingly**
**pan-European operators will require co-ordinated frequency allocation across**
**Member States**

_**VII. 10.4Directory services in a fully liberalised**_ _**environment**_

**The diversification of service offerings in a fully liberalised communications**
**environment will lead to an increasing importance of telecommunications directory**
**services. On the one hand, directory services constitute the most important support**
**tool for accessing telecommumcations services and will therefore play a central role**
**for the. use of telecommunications services in a competitive environment. On the**
**other hand, based on new technologies and in particular the interactivity introduced**
**by videotex services, the directory services sector itself is currently entering the**
**multimedia field and could substantially contribute to its development.**

**The introduction of a competitive environment in the telecommunications sector**
**requires the extension of the principles of Community telecommunications legislation**
**to directory and enquiry services. In addition it will also require the** **maintenance** **of a**
**universal directory and of** **an** **enquiry service which easily accessible and affordable**
**for all users.**

**The Commission therefore proposes the following orientations for the future**
**development of the sector:**

**•** **Maintaining a complete universal telephone directory and at least one enquiry**
**service which contains the details of all subscribers of fixed and mobile**

**telephony services and is available for all users at an affordable price.**

**•** **Immediate lifting of all special or exclusive rights still existing in some Member**
**States for the provision of telecommunications directory** **services.**

**•** **Access to raw subscriber data must be ensured on the basis of objective,**
**transparent and non-discriminatory criteria, and in conformity with Community**
**legislation,** **in particular the competition rules of the Treaty, the principles of**
**open network provision (ONP), the provisions on the protection of personal**
**data and privacy and be in compliance with the applicable copyright legislation**
**(Copyright protection of data bases).**

**•** **Promotion of new technologies (electronic directory,** **CD-ROM,** **X.500**
**services) and the evolution towards multimedia.**

**•** **The appropriate safeguards in respect of the protection of privacy and personal**
**data as well as the protection of intellectual property** **rights** **should be ensured.**

**The Commission intends to publish a communication which discusses in detail the**
**regulatory aspects of** **the** **future development of** **the** **directory services sector in** **the**
**European Union.**

107

**Vn.ll** **Action in Neighbouring Fields**

**As indicated in Part I of the Green Paper, "the regulatory principles to be developed**
**must also take full account of Union policies in neighbouring fields, such as in the**
**audio-visual field, in the field of data protection and privacy and of intellectual**
**property as well as in relation to the protection of the economic interests of**
**consumers. This should allow Union policy in relation to infrastructure liberalisation**
**to provide the consistent response called for by the Commission's Action Plan on**
**Europe's way to the Information Society".**

_**VII.**_ _**11.1**_ _**Data protection**_ _**and privacy**_

**For the successful development of the competitive provision of infrastructure, it is**
**essential that rapid progress is made on the pending proposals for both a general**
**Directive on data protection and privacy and a sector specific directive, applying the**
**principles of the general measure to the specific requirements of digital**

**•** **1** **^9**
**communications networks**

**Progress is essential to overcome the barriers to the provision and operation of** **pan-**
**European telecommunications networks and services created by the divergent**
**national rules currently in place. It is also vital in reassuring the public about**
**network liberalisation.** **The proposed rules, once adopted, will provide a clear**
**framework for effective data security, storage, processing and privacy.**

**The** **practical** **operation** **of** **the** **General** **Directive** **and** **the** **specific**
**Telecommunications directive must be monitored, and where necessary, adapted to**
**the challenges of the Information Society.**

**The need for adequate data protection should also be taken into account in**
**developing future network standards.**

**Given the role of operational and** **call** **data as an essential tool in competitive service**
**delivery and network** **operation,** **access to such information must, within the limits of**
**the data protection and privacy, also be subject to Treaty competition rules .**

**Security of Information Systems is addressed in a more general context of the Action**
**Plan from 1992 in** **this** **area** **[140]** **. Additionally, as part of** **the** **Action Plan on Europe's**
**way to the Information Society the Commission has announced that it will publish a**
**Communication on security issues and the role of the Member States.**

**139** **Proposal for a Council Directive concerning the protection** **of individuals in** **relation to the** **processing**
**of personal** **data,** **COM(90)** **314, OJ C277, 15.11.90 and Amended proposal for a European**
**Parliament and Council Directive concerning the protection of personal data** **and** **privacy in the**
**context of** **digital** **telecommunications networks, in particular** **the** **integrated services digital network**
**(ISDN) and** **digital** **mobile** **networks,** **COM(94) 128** **final, 13.6.94.**

**140** **See** **Council** **Decision of** **31 March** **1992** **in the** **field of security information systems** **(92/242/EEC,** **OJ**
**L123/19,** **8.5.92)**

**108**

_**VIL 11.2Audio-visual**_ _**/ media**_

**The new communications environment** **brought** **about by the convergence of**
**telecommunications, information technologies and broadcasting means that any**
**approach to the liberalisation of infrastructures over which services and audio-visual**
**programming will be delivered must take full account of evolving Union policy in**
**these areas.**

**This was recognised by the Commission's Action Plan on Europe's way to the**
**Information Society and, in relation to the cultural implications of any infrastructure**
**policy, is mandated by the new Title IX on culture** **introduced** **by the Treaty on**
**European** **Union and set out in Article 128(4) of the EC Treaty. That provision**
**requires**

_**"The**_ _**Community shall take cultural aspects into account in its action under other**_
_**provisions of the**_ _**Treaty"**_

**The Action Plan foresees a number of policy initiatives in relation to the audio-visual**
**area. In particular, the Commission announced that it will prepare its report on**
**implementation and a proposal for amendment of the 1989** _**Television without**_
_**Frontiers Directive**_ _**l**_

**In the context of infrastructure, it is worth recalling that that Directive sought to**
**promote the free provision of broadcasting services, on the basis of a general rule**
**that regulatory supervision was the responsibility of the Member State in which the**
**programmes concerned originated. Member States were therefore obliged to allow**
**the transmission and retransmission of such programmes in their territory** **[142]** **.**

**The Action Plan recognises that the regulatory framework for audio-visual**
**programmes must apply whatever the mode of transmission of such programmes.**

**An additional issue is the extent to which divergent national regulations concerning**
**content, and, in particular, the scope of** **such** **regulations risks creating barriers to the**
**development of pan-European multi-media services.**

**The Commission is presently examining the possibility of clarifying** **the current**
**framework provided by Directive** **89/552/EEC**

**With regard to the issue of media** **concentration,** **as mentioned in the Action** **Plan,** **the**
**Commission adopted on 5 October after consultation of all interested parties, a**
**Communication** **[143]** **on the follow up to its Green Paper on** _**"Pluralism and media**_

**I**** **Council Directive 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**
**(89/552/EEC;** **OJ** **L298,** **17.10.89).**

**142** **To** **faciUtate this mutual recognition the Directive harmonised certain minimum areas, with** **regard,**
**inter** **aha,** **to** **advertising,** **sponsorship,** **protection** **of** **minors and consumer protection**

**143** **Commission Communication of** **5th** **October 1994** **on** **pluralism** **and** **media concentration** **COM** **(94)**
**353**

**109**

**144**

_**concentration in the internal**_ _**market**_ _**[1]**_ _****".**_ **The Communication analyses the result of**
**the consultation and concludes that a Community initiative on media ownership**
**might prove necessary. A second phase of work is therefore going to be embarked**
**upon in order to examine certain questions concerning the content of a possible**
**initiative. A consultation will start with the distribution of questionnaire and of the**
**results of two studies concerning the definition of media control and the feasibility of**
**using audience measures in order to assess pluralism.**

**In this context the** **competitive** **provision of infrastructure, and hence delivery**
**channels, will add an additional element to the debate.**

**With regard to the content of audio-visual programming, the Action Plan foresees**
**the Commission building on the consultation on its Green Paper on** _**"Strategy**_ _**options**_
_**to strengthen the European programme industry in the context of**_ _**the**_ _**audio-visual**_
_**policy of the**_ _**EU"**_ _**[145]**_ _**.**_ **In order to promote the Information Society, the response**
**should tackle both regulatory aspects, (e.g. promotion of European programmes),**
**and incentive mechanisms (e.g. the follow up to MEDIA programme, the**
**convergence of national support systems).**

_**VII.**_ _**11.3IntellectualProperty**_ _**Rights**_

**The Action Plan on Europe's Way to the Information Society indicated the need to**
**review** **current** **and proposed rules governing intellectual property in the Union to**
**ensure that they were adapted to the needs of the Information Society.**

**The Action plan** **announced** **a Green Paper on** **TPRs** **in the Information Society for**
**early in** **1995.** **The proposal for a directive** **on** **the legal protection of** **data** **bases** **is**
**also seen a critical to the developing framework for networks and for electronic**
**information-based services.**

_**VIL**_ _**11.4Economic**_ _**interests of consumers**_

**A key area which must be safeguarded in developing a competitive framework for**
**infrastructure is that of the economic interests of consumers. In addition to being at**
**the heart of the Treaty competition rules, the interests of consumers have been taken**
**on added importance since the entry into force of the Treaty on Europe Union**

COM(92)480

145 Green Paper on Strategy Options to Strengthen the European Programme Industry in the Context of
the Audio-visual Policy of the European Union, COM(94) 96 final

146 Proposal for a Council Directive on the legal protection of databases, COM(93) 464 final, SYN 393.
The Commission Action plan on Europe's way to an Information Society has announced a Green
Paper on IPRs in the Information Society for early in 1995.

147 Article 129a EC requires the Community to contribute to the attainment of a high level of consumer
protection, either through internal market measures or through "specific action which supports and

**110**

**This importance extends beyond the protection of the consumer, through** **developing**
**universal service, adequate data protection and privacy rules and ensuring social and**
**economic cohesion within the Union. Specific consumer issues in the Information**
**Society were highlighted in the Bangemann Group Report. Mass consumer markets**
**for home banking, teleshopping and entertainment services were seen as one of the**
**principal driving forces behind the Information** **Society,** **which could be held back if**
**adequate rules for consumer protection in this new context were not developed.**

supplements the policy pursued by the Member States to protect the health, safety and economic
interests of consumers and to provide adequate information to consumers".

The concept of consumer is defined in Article 2 of Directive 93/13/EEC of 5 April 1993 on Unfair
Contract Terms in Consumer Contracts (OJ L95/29,21.4.93) as "any natural person who is acting for
purposes which are outside his trade, business or profession".

**111**

VIII FUTURE DEVELOPMENT OF THE REGULATORY

**FRAMEWORK TO** **MEET** **THE CHALLENGES OF CONVERGENCE**

In the previous section the Green Paper set out how the existing principles of the
Union's telecommunications policy can be extended to infrastructure. Yet the
analysis set out in Section III of this Green Paper indicates that in the future any
regulatory framework for infrastructure must be sufficiently flexible to meet the
challenges thrown up by the convergence of telecommunications, information
technology and broadcasting.

It is therefore necessary to highlight a number of issues which a common regulatory
approach will have to address, within the overall framework provided by this Green
Paper and the on-going initiatives in neighbouring fields outlined immediately above.

The basic challenge of convergence is that broadcasting (including cable TV
services) and telecommunications networks and services are subject to different and
separate regulation in all Member States. The content and style of regulation varies
significantly between the sectors, reflecting differing objectives of the regulation
concerned in the different sectors. Such differences in the basic regulatory objectives
are likely to remain even in a converged environment. Furthermore current
differences also reflect regulatory responsibilities often belonging to different
ministries.

Any future regulatory framework must evolve in a manner which continues to take
full account of these different regulatory environments. The reasons which have led
to such differences are already reflected in existing Community action in
neighbouring fields.

A further fundamental distinction can be identified between the three sectors.
Regulation for information technology has been almost entirely technically focused.

Telecommunications regulation has in most Member States been focused on
technical aspects of networks and services, but extending to providing a framework
to ensure the public interest, for example, mandating universal service or basic levels
of service quality for customers.

In addressing these issues, certain basic principles can be derived from the experience
in the telecommunications sector which may assist the debate:

    - Liberalisation of infrastructure and services must go hand in hand with the
implementation of a clear regulatory framework, which can help to mimic
competition (through principles of non-discrimination, transparency, etc.)
pending the emergence of genuinely competitive markets, as well as seeking to
ensure the right of establishment for all market players and the free circulation of
services. A clear and predictable regulatory environment is also an essential
condition for attracting investment into the emerging markets.

    - Effective and independent regulation at the appropriate level will also be
essential.

**112**

- The speed and dynamics of the emerging market may be too fast for detailed
regulation to keep pace. Future structures are likely to require considerable
flexibility and to rely on an increasing application of competition rules.

- Effective competition in the markets for telecommunications equipment and
services have evolved without rigid structural safeguards, such as those
developed in the mid-eighties in North American markets.

Where safeguards have been considered necessary proportional solutions have
been chosen, such as transparent cost-accounting and separate accounting for
different parts of a business.

Without the evolution of common regulatory principles there is a real risks that
divergent regulation and regulatory structures both within individual sectors and
between those sectors will act as significant barriers to the development and
operation of competitive communications infrastructures, and, in particular, the
promotion of inter-operability and interconnection of such networks within the
Union. This raises a number of issues :

**By whom and at what level the evolving sector should be regulated?**

In practice, there are two issues which should be separated : the supervision of
network and service provision in the Union (the means of delivery) and the
regulatory framework for the free circulation of new services over such
infrastructure. The latter has hitherto been an area of concern primarily in the
broadcasting sector.

In relation to the overall approach to network and service provision, this Green
Paper provides a clear picture of the evolving regulatory framework, which draws, in
particular, on the consistent application of competition rules and the framework for
licensing infrastructure and services in the Union and on the Open Network
Provision rules.

This approach also, in line with the principle of subsidiarity, emphasises the role of
national regulatory authorities in the day to day supervision of the sector. Solutions
at a European level, such as the role of the Open Network Provision Committee in
conciliation or the application of the Competition rules is confined to situations
showing a clear European dimension.

In relation to licensing, day to day responsibility remains in the hands of national
regulatory authorities and the Commission has not proposed a central licensing
authority in the context of the draft proposals on the mutual recognition of licences
for terrestrial and for satellite-based services.

At the same time the Green Paper on Mobile and Personal Communications
recommended that :

_"In order_ _to promote_ _the_ _development_ _of_ _trans-European_ _networks,_ _in_ _accordance_
_with Article 129b_ _of the_ _Treaty,_ _licences for future_ _mobile communications systems_
_directly impacting the_ _development_ _of_ _such_ _networks should be_ _awarded,_ _where_
_required and most efficient, in_ _**a**_ _co-ordinated manner between Member States_

**113**

_**and/or**_ _**at a**_ _**Community**_ _**level,**_ _**taking**_ _**due account of Member States interests and**_ _**the**_
_**interests of existing**_ _**licensees"**_ _**[1]**_ _****.**_

**Given the trans-European dimension of certain infrastructure projects, this**
**recommendation cannot be confined to mobile and satellite-based mobile**

**communications sector. Indeed,** **only** **?** **co-ordinated** **national licensing of such trans-**
**national projects will allow them to** **realise** **their full potential.**

**It is not within the scope of this Paper to make proposals on how and by whom the**
**issue of content should be regulated. However, in the light of comments** **expressed**
**during consultation in a number of** **areas,** **such as in relation to media ownership and**
**intellectual property and of the call by the Bangemann Group for** _**"the**_ _**establishment**_
_**at the European level of an authority whose**_ _**terms**_ _**of reference will require prompt**_
_**attention",**_ **comments on all these issues are invited.**

**Who** **will** **be allowed to provide networks and services? Can any infrastructure**
**be used for any service?**

**The issue of who will be allowed to provide infrastructure and also services in a**
**liberalised environment is of fundamental importance. Should telecommunications**
**operators be allowed to enter the broadcast market? What approach should be**
**followed where a market** **player,** **such as the dominant TO, has an important stake in**
**a competitive infrastructure provider?**

**The issue will determine the extent of private sector investment in new**
**infrastructures, and is already the subject of heated debate in markets such as the**
**United Kingdom.** **On the one hand, allowing unrestricted entry for**
**telecommunications operators into the broadcasting market risks undermining the**
**ability of cable networks to invest and compete in the telecommumcations market.**

**On the other hand, significant cost savings and synergies will flow from vertical**
**integration and the linked greater use of networks. Furthermore, the Union has not**
**at a regulatory level in the telecommunications field followed the earlier approach in**
**North America of imposing line of business restrictions. Additionally, a requirement**
**for divestiture would have an important impact on investment in competitive**
**infrastructures in a number of Member States.**

**Discussion on the range of issues raised, within the overall framework provided by**
**Community** **law** **will assist in the timely evolution of regulatory structures in a**
**manner which will foster rather than hold back market development.**

**148** **Green** **Paper,** **Table** **of** **proposed** **positions,** **Vin.7**

**114**

**IX ISSUES FOR CONSULTATION**

**LX.l** **Towards the Information Society**

**The** **purpose** **of this document has been to propose a** **framework** **and timetable for the**
**future regulation of network infrastructure in the European Union by extending the**
**principles of the Union's telecommunications policy to the provision of infrastructure**
**for telecommunications and to launch a wide debate on the issues.**

**Provided the necessary safeguards are in place, opening up infrastructure provision**
**will underpin the further development of the telecommumcations sector, and this**
**development is necessarily at the heart of the transition towards the Information**
**Society in the European Union.**

**Liberalisation of infrastructure will reinforce the benefits of the liberalisation of**

**telecommunications services by encouraging innovation and the exploitation of the**
**new technologies, and by opening up greater possibilities to provide new services in**
**new ways. A clear regulatory framework and timetable is required in order to give**
**predictability to all sector actors, including both the traditional and new investors.**

**In the longer term and as integrated or multimedia services and** **applications** **develop,**
**a regulatory framework will be required that addresses the issue of convergence**
**between telecommunications and broadcasting. It is already possible technically to**
**use communications infrastructure from each of these domains to provide services in**
**either area. The development of the Information Society and of the new integrated**
**applications will make it increasingly difficult to distinguish between the two service**

**areas.**

**Opening up infrastructure provision is an essential step for the future development of**
**the telecommunications sector and the Information Society, and this document puts**
**forward the measures and principles that are required at a Union level to provide the**
**necessary regulatory framework. At the same time it must be recognised that there**
**are currently differences** _**within**_ **Member States between regulatory regimes for**
**telecommunications and for broadcasting and differences** _**between**_ **Member States in**
**the regulatory regime for cable TV services. Such differences threaten to impede the**
**long term development of communications and information services in the Union.**

**This raises the longer term issue of the appropriate regulatory** **framework** **for dealing**
**with the convergence of telecommunications and broadcasting.**

**IX.2** **Major changes and positions**

**On the basis of the priorities established by Union policy in the field of**
**telecommunications, the need for a coherent regulatory framework regarding the**
**establishment and provision of telecommunications infrastructure, the analysis of**
**market and technological developments and taking into account the applicable Treaty**
**rules,** **the Commission invites comments on the proposals and on the application of**
**the measures set out in the Table below..**

**115**

**1** **Removal of special and exclusive rights over the use of infrastructure**
**for the provision of telecommunications services**

Part I of the Green Paper has proposed the basic principle that where services are
open to competition there should be a free choice of the underlying infrastructure
for their delivery.

From this basic principle two positions followed :

   - The removal of restrictions on the use of own or third party infrastructure
authorised in Member States for services already liberalised in the following

areas:

   - for the delivery of satellite communications services.

   - for the provision of all terrestrial telecommunications services already
liberalised (including the use of cable television infrastructures for this
purpose).

   - to provide links, (including microwave links) within mobile networks for the
provision of mobile communications services.

   - The lifting of exclusive and special rights over the use of own or third party
infrastructure for the delivery of voice telephony services to the general public,
once those services are liberalised from 1st January 1998, and the
replacement by licensing and authorisation schemes setting out the
necessary safeguards within the framework of the overall review of Directive
90/388/EEC (the Services Directive) and of the ONP-framework to be tabled
by 1 January 1996 in the context of the preparation for the full liberalisation of
voice telephony services foreseen by Council Resolution 93/C213/02.

The Telecoms Council on the 17th November 1994 in considering Part 1 of the
Green Paper, recognised the general principle according to which the provision of
telecommunications infrastructure should be liberalised by 1st January 1998 [149],
including the additional transition periods for certain Member States in line with
Council Resolution 93/C213/02 [150] .

149 A number of Member States have urged the Commission in an associated statement to come forward
as quickly as possible with proposals which provide for the use of alternative network infrastructure
for the services already liberalised. The Commission in turn preserved its right to take action in this
area within its competence and according to its obligations. On 21 December 1994 the Commission
adopted in draft a Directive amending Commission Directive 90/388/EEC regarding the abolition of
the restrictions on the use of cable television networks for the provision of telecommunications
services.

150
A maximum of five years for Ireland, Greece, Portugal and Spain and a maximum of two years for
Luxembourg. At this stage, it is still not clear to what extent those Member States will exploit these
derogations.

**116**

**2.** **Safeguarding and developing universal service**

**Universal service consists of access to a defined minimum service of specified**
**quality to all users at an affordable price based on the principles of universality,**
**equality and continuity. The detailed elements of such a service are set out in**
**Council Resolution and Commission statement 94/C 48 of 7 February** **1994.**

**The underlying aim is to ensure that the benefits of cheaper and better quality**
**telephone service and other benefits of increased competition and choice are**
**passed on to all users**

**In the context of the current structural adjustments being undertaken in**
**preparation for the liberalisation of telecommunications services, NRAs should**
**seek to replace general across the board subsidies for access or local calls.**
**This can be achieved by (i) completing tariff re-balancing in line with Council**
**Resolution** **93/C213/02** **and (ii) the development of targeted schemes to**
**ensure universal service for needy or uneconomic customers.** **Targeted or**
**social tariffs should be provided by** **operators'** **within the framework of an**
**optimal tariff structure.**

**The basic principles for universal service in the context of liberalised**
**infrastructure provision in the European Union should be:**

**•** **Only telecommunications-related** **public service obligations should be**
**treated as universal service obligations. Network operators should be freed**
**from non-telecommunications related obligations.**

**•** **Transparent schemes for the determination of the cost of universal service**
**obligations and their financing should be established**

**•** **As regards the** **determination** **of the cost of universal service obligations,**
**NRAs should calculate this cost as the net cost of providing service to**
**uneconomic customers, plus any costs associated with the uneconomic**
**provision of public telephones, emergency services and other social**
**obligations.**

**•** **As regards the establishment of transparent schemes for financing**
**universal service obligations, the uneconomic costs of particular elements**
**of universal service obligations should be financed, either through national**
**universal service funds or, where not fully covered, via access charges to**
**be added to interconnection charges.**

**•** **Preference should be given to financing USOs through universal service**
**funds rather than via access charges.** **Eligible operators and service**
**providers should contribute and the financial responsibility should be spread**
**as fairly as possible, subject to the principle of proportionality.**

**•** **Financing schemes should be administered either by the NRA or an NRA**
**appointed body, should be subject to regulatory control and consistent with**
**Treaty competition rules. They should encompass assessment by the NRA**
**of the cost of universal service according to a transparent and published**
**methodology, which may need to evolve to take account of changing**
**competitive conditions.**

117

In the context of services and infrastructure liberalisation, Member States
should work towards (i) determining the cost of universal service and (ii)
instituting means to finance universal service at a national level, taking into
account the specific circumstances of Member States with less-developed
networks or very small networks.

With this in mind, the Commission will propose a common framework before
the end of 1995.

NRAs in conjunction with the Commission should periodically survey main
indicators of universal service, in particular penetration of residential lines,
waiting times, provision of public pay phones and the availability of targeted
schemes for the needy and uneconomic customers.

Given the rate of technological progress and its effect on the costs and
availability of increasingly sophisticated services, together with the need to
ensure that the benefits of the Information Society extend to all citizens and
not just to the privileged minority, the definition of universal service must be
dynamic and reflect such progress.

3. **Interconnection and interoperability**

**The basic framework**

Interconnection agreements fall within the scope of the competition rules. The
application of these rules to interconnection agreements should be clarified to
the extent necessary. This should include the removal of the current
restrictions on the interconnection of all types of communications
infrastructure, comprising public and private networks (i.e. fixed - mobile   cable television - satellite-based networks).

As regards public telecommunications infrastructure, the principles of Open
Network Provision should be extended as far as ONP applies [151], within the
context of a specific Directive on interconnection, to create à harmonised
approach for public telecommunications infrastructures and to enhance
interoperability of public networks and service throughout the Union. The
Directive should:

    - set out the rights and obligations on public telecommunications
infrastructure providers with regard to interconnection requests, including
obligations to interconnect and provide standard interconnect offerings.

    - give priority to the commercial negotiation of public telecommunications
interconnection agreements, within an overall framework to be supervised
by national regulatory authorities.

151 Currently, ONP applies to public networks provided under exclusive or special rights. The future
scope of the application of ONP to operators will be defined in the context of the current review of
ONP.

**118**

- provide as elements of that framework, common rules promoting fair
competition; transparency of interconnection agreements, technical
standards (priority to be given to voluntary standards) and compliance with
essential requirements.

- establish dispute resolution mechanisms at a national and European level.

An ONP Interconnection Directive should also lay down charging principles for
interconnection of public telecommunications networks and services, and in
particular:

- common principles for interconnection charges

- identification and recovery of uneconomic universal service costs based on
net cost calculations

- cost accounting systems

**Open** access to infrastructure - application of ONP principles and the
competition rules

Open access to the facilities of public telecommunications infrastructure
providers will be fundamental in establishing an effective, competitive
environment for telecommunications infrastructure and services within the
Information Society. In addition to the application of the competition rules, the
basic principles set out within the Open Network Provision framework must be
extended and, where necessary, adapted to provide a common regulatory
approach to communications infrastructure in the European Union. This
approach entails:

- harmonised application of the general principles of ONP by the national
regulatory authorities within their national regulatory regimes, alongside the
application of the Treaty competition rules to the sector.

- In the context of ONP, such conditions will generally be applied through
class licences or in the framework of authorisations for the provision of
communications infrastructure.

 - Such conditions are concerned with ensuring rights to access and
compliance with essential requirements and ensuring cost orientation.

 - adequate transmission capacity being guaranteed throughout the Union, in
particular, through revision of the ONP leased lines directive.

 - transparent accounting structures to be put in place by providers of public
telecommunications infrastructures, including the separation of accounts
for telecommunications and non-telecommunications activities, as well as
the implementation of transparent cost accounting systems concerning
infrastructure provision and service provision.

**119**

**•** **Voluntary implementation of common technical standards (based on**
**European standards), with consultative** **mechanisms** **for** **mandatory**
**implementation where necessary to satisfy user** **needs.**

**•** **the** **relaxation,** **in** **a** **competitive** **environment,** **current** **regulatory**
**mechanisms to ensure cost-orientation of tariffs.**

**4. Licensing**

**Licence award procedures**

**In** **order to promote a common regulatory framework for the licensing of**
**communications infrastructure in the European Union, award procedures should**
**respect the following principles:**

**•** **Member States should** **licence** **and/or authorise the establishment and**
**provision of infrastructure in the European Union using open,** **non-**
**discriminatory and transparent procedures.**

**•** **The number of licences granted may only be restricted on the basis of the**
**essential requirements** **[152]** **and in the case of networks intended for the general**
**public, public service requirements in the form of trade regulations.**

**As regards the establishment of new communications** **infrastructures,** **these**
**essential requirements should also include, in justified cases, the protection of**
**the environment and town planning objectives.**

**As regards limitations on the number of licences with respect to essential**
**requirements, only radio** **spectrum** **and environmental and town planning**
**objectives would apply.**

**Any limitation must be consistent with the Treaty competition rules and the**
**Treaty provisions concerning the right of establishment and the free circulation**
**of services.**

**•** **Award procedures must indicate clearly the selection criteria and the**
**conditions which will be attached to the grant of any licence.**

**•** **In order to promote the development of trans-European telecommunications**
**networks and services, the grant of national licences for such networks should**
**be co-ordinated, where appropriate, to facilitate the networks becoming**
**operational throughout the countries covered at the same time.**

152 Essential requirements are defined in Community law (See section VI.3 above) and relate to, inter
alia, to security of network operation, network integrity, user safety and safety of employees, effective
use of the radio spectrum, electromagnetic compatibility and, in justified cases, interoperability of
services and data protection. ^

In the case of network infrastructure, essential requirements could also be, in justified cases,
environmental and town planning objectives

120

Selection **criteria** **for the award of** licences **and** authorisations

   - Licences must be granted on the basis of pre-announced criteria. In cases
where networks are intended for use by the general public and the number of
licences awarded is limited, criteria may be based on public service
requirements in the form of trade regulations [153] . In the absence of
harmonisation at a Union level, such criteria should in any case be published
in advance and be subject to prior scrutiny for compatibility with the Treaty
rules.

   - Under the EC and EEA rules, selection criteria may not discriminate on the
grounds of nationality, nor take into account factors such as the sourcing of
equipment.

    - Any limitation on the number of licences granted and any refusal to licence a
particular undertaking (including the exclusion of particular undertakings from
a licensing process) must be duly justified to allow for assessment under the
applicable Treaty rules and also with the principle of proportionality.

    - The principle of mutual recognition of licences or authorisations is not normally
applicable to infrastructure licences. This is the case, for example, with
national licences for the provision of fixed networks encompassing rights of
way. Mutual recognition should, however, apply to certain elements used in
licensing procedures, such as evidence relating, for example, to the technical
competence or financial standing of the applicant.

**Conditions** attached **to communications infrastructure** licences

Building on the framework provided by Community law, future licenses for
infrastructure should respect the following principles :

    - Licensing conditions for infrastructure must be based on objective grounds, be
transparent, be non discriminatory and respect the principle of proportionality.
Any fees for licences should respect the same criteria.

    - Licences must not contain conditions other than those justified on the grounds
of essential requirements and, in the case of public telecommunications
infrastructure [154], public service requirements set out in the pre-announced
criteria.

    - Infrastructure not intended for the use of services for the general public (such
as infrastructure for corporate networks or closed user groups), should only be
subject to conditions based on the essential requirements.

153 Public service requirements in the form of trade regulations are defined in Community law (See
section VI.3). Trade regulations concern conditions relating to the permanence, availability and
quality of services provided over infrastructure and may imply the infrastructure provider fulfilling
conditions relating to technical competence and the financial resources of the licensee.

154 Operators without rights of way should not be subject to the same level of obligations as those with
rights of way, especially as regards coverage.

121

**With regard to ownership restrictions, licences may not contain conditions**
**which restrict ownership by nationals of Member States or of the European**
**Economic Area or undertakings controlled by such nationals.**

**Any other restrictions on ownership or control must be compatible with**
**Community law and with the European Community's commitments taken on** **a**
**multi-lateral basis.**

**Licensing conditions must ensure a high standard of consumer protection and**
**respect for competition rules.**

**Provision of Telecommunications Services**

**•** **Service provision (as opposed to network establishment and operation) should**
**not be subject to individual licensing in the Member States. It may be subject**
**to class licences, general authorisations or to a requirement for declaration by**
**Service** **Providers** **of their activities to the National Regulatory Authority(ies) of**
**the Member State(s) where they choose to operate.**

**•** **Nevertheless,** **in** **the case of independent service providers offering voice**
**telephony services to the general public on a resale basis, consideration may**
**need to be given as to how and when such resellers should be obliged to**
**make a contribution, appropriate to their market position, to the provision of or**
**financing of universal** **service,** **(via access charges or a universal service fund,**
**as set out in the following point 3).**

**Access for Service Providers to any infrastructure should be based on**
**commercial** **agreements,** **subject to the competition rules, and where**
**appropriate, the framework of Open Network Provision rules set out below.**

**•** **The Commission will regularly review if additional safeguards for consumers**
**are considered necessary.** **If** **so, they should be fully consistent with the**
**Treaty** **provisions and respect the principle of proportionality.** **Preference**
**should be given to rules agreed by sector participants (such as a code of**
**conduct) over binding regulatory measures, and to general or class regimes**
**over specific individual licenses or authorisations. However, where this Code**
**of Conduct does not adequately protect consumer interests, binding regulatory**
**measures should be introduced.**

**5. Ensuring fair competition**

**In** **a market which** **will,** **for many years, be characterised by the presence of**
**dominant operators controlling bottleneck facilities, the full implementation of the**
**competition rules will be indispensable to allow for the emergence of a competitive**
**environment. This will imply, where required, the establishment of the appropriate**
**procedures and safeguards. These will concern, in particular**

**•** **screening interconnection agreements,**

122

**reviewing the conditions for access granted to infrastructure providers and to**
**service providers,**

**monitoring joint ventures.**

**assessing any scheme established for financing universal service;**

**ensuring open and non-discriminatory access to** **rights** **of way.**

**reviewing the effects of** **crbss-ownership** **of different networks and of** **joint**
**provision of network and services;**

**The latter requires transparent accounting structures and practices to be**
**established by providers of communications infrastructures, including the**
**separation of accounts for telecommunications and non-telecommunications**
**activities, as well as the implementation of transparent cost accounting systems**
**for infrastructure providers who also provide telecommunications services.**

**6. Access to rights of way, frequencies and numbering**

**In** **order to guarantee the successful development of a competitive market for**
**infrastructure, access to certain basic resources must be guaranteed.** **This**
**concerns rights of way, frequency for wireless network components, numbering**
**and directory services.**

**Rights of Way**

**•** **Member states should grant rights of way to communications network**
**operators according to open and transparent procedures.**

**•** **Where environment requirements (such as avoiding road congestion), or other**
**essential requirements, prevent the granting of rights of way to all potential**
**applicants, the Member States should introduce schemes for the sharing of**
**ducts on a voluntary basis and consider, where it is deemed necessary to**
**avoid bottleneck situations, the introduction of mandatory duct-sharing.**

**•** **To introduce competition in the market for infrastructure provision, Member**
**States will need to ensure that the incumbent** **telecommunications**
**organisations are subject to the same regulatory conditions as their**
**competitors regarding rights of way, and provide for mandatory sharing of**
**facilities where necessary to bring down barriers to entry.**

**Frequencies**

**Access to frequency spectrum will be increasingly important in ensuring the**
**optimum combination of fixed and wireless technologies in future networks. In**
**order to support this development a number of measures should be taken, in**
**particular:**

123

    - CEPT/ERC should initiate a comprehensive review of the balance of
frequency usage between broadcasters, fixed network operators and
mobile and personal communications operators. This will also need to
address the balance between these uses and the use of spectrum for
defence and security purposes.

    - Pan-European network operation requires greater co-ordination of frequency
allocation across Member States.

**Numbering**

In order to facilitate network investments, an appropriate framework ensuring
access to numbers must be put in place. In particular, this requires:

    - Creation of a European numbering space for special services (e.g.
freephone, premium rate, shared cost services ) must be a priority for the
EU.

    - A "best practice" guidance for NRAs on the administration and control of
the national numbering schemes is under development in the ETO,

    - The reform package for submission to the Council before 1 January 1996
will address _inter alia_ the subject of numbering reform in Europe.

Directories

Access to subscriber data for network operators and service providers and
access for subscribers to a comprehensive directory service will be important
elements. Such access should proceed, inter alia, on the following basis:

    - Access to subscriber databases and to raw subscriber data must be
ensured on the basis of objective, transparent and non-discriminatory
criteria, and in conformity with Community legislation, in particular the
competition rules of the Treaty, the principles of open network provision
(ONP) and the provisions on the protection of personal data and privacy, as
well as, where applicable, IPR legislation.

    - Maintaining a complete universal telephone directory and at least one
enquiry service [155] which contains the details of all subscribers of fixed and
mobile telephony services and is available for all users.

**7. Action in Neighbouring Fields (Data Protection, Audio-visual, Media and**
**IPRs**

Common rules concerning data protection and privacy are fundamental for the
development of the information society and for removing other constraints on
effectively exploiting the competitive provision of communications infrastructures

155 The terms on which such directories and and enquiry services are made available to the general
public will be discussed in a forthcoming Commission Communication on directories and directory
services.

**124**

**In this context rapid progress should now be made on the proposed General Data**
**Protection Directive arid the proposed specific Directive on the protection of**
**privacy in the digital network environment** **[156]** **.**

**The Commission has already identified in its Action Plan on Europe's Way to the**
**Information Society that work** **will** **continue in the area of Information** **Security,** **and,**
**in particular, that it** **will** **:**

**•** **publish a Communication on security issues and the role of Member States**

**•** **make proposals with regard** **to** **the harmonisation of national rules on**
**unauthorised access, and**

**•** **prepare a Green Paper on the legal protection of encrypted broadcasts.**

**Action in all of these areas can substantially contribute to the creation of an**
**appropriate environment for infrastructure competition.**

**The Commission has also identified in its** **Action** **Plan on Europe's Way to the**
**Information Society, initiatives in a range of areas which will help to shape the new**
**regulatory environment both for infrastructure and for services. These policies will**
**substantially influence the extent to which investment can be mobilised to** **finance**
**competing networks.**

**These actions include :**

**In the field of media** **ownership,** **the recently adopted Communication on the follow**
**up to the Green Paper on media pluralism and subsequent public consultation;**

**In** **the field of audio-visual** **policy,** **the possible revision of Directive 89/552/EEC**
**(the "television without frontiers" directive) and following up the Audio-visual Green**
**Paper** **with** **regard to the issue of content**

**In** **the field of intellectual** **property,** **the adoption as a matter of priority of the**
**pending proposal on the legal protection of data bases; the preparation of a**
**Green Paper on intellectual property in the Information Society and the**
**preparation of a directive on private copying.**

**Additionally, the Commission has already proposed a Directive** **[157]** **aimed at the**
**harmonisation of the laws, regulations and administrative provisions on contracts**
**negotiated at a distance between suppliers and consumers.**

**The Commission will undertake work during 1995 on the regulatory approach to**
**be applied to ensure the free circulation of new services, which will help ensure**
**that the Commission's actions in the relation to infrastructure and the services to**
**be provided over them remains consistent**

i 5 ° Modified proposal for a Council Directive concerning the protection of personal data and privacy in the context
of public digital telecommunications networks, in particular the Integrated Services Digital Network (ISDN) and
public digital mobile networks, COM(94) 128 final, 13.6.94.

157 OJ C156/14, 23.6.92

125

**8. The Societal and Social Impact**

The services carried over infrastructure in Europe will have a major effect on the
quality and way of life for Europe's citizens. Priority attention will also be given to
studying and monitoring the societal and social impact of the diffusion of new
technologies and of a competitive environment for communications infrastructure
(in particular, in relation to the areas of employment and cultural policy, as well as
the need to avoid the development of a society of information "haves" and "have
nots").

In this regard the Commission's Action plan announced a number of reports and
Communications in this area, including a report by the High Level Group of
Experts.

Consideration in this context must also be given to the need for retraining and re
deployment of employees as the traditional telecommunications sector adapts to a
competitive environment.

The Commission also proposes setting in motion a comprehensive action
programme to investigate potential health hazards associated with the proliferation
of fixed and wireless infrastructures and to accelerate the preparation of
necessary safety standards, as well as providing general guidance.

**9.** **A global approach to infrastructure and ensuring fair access to third**
**country markets**

The Union must actively contribute to on-going discussions at a global level
concerning the Information Society, and, in particular, the evolution of common
global approaches to issues promoting the development of infrastructures,
capable of meeting the needs for global communications. The meeting of the G7
in February to be hosted by the Commission will substantially assist this aim.

The main principles with regard to worldwide developments are :

- Common Community positions are required in international fora to assist in
developing a global approach to standards, frequency and numbering. (This
concerns, in particular, positions within the International Telecommunications
Union and the World Radio Conferences.

- Emphasis on the on-going multi-lateral talks on basic telecommunications as
the key to opening up access to third country markets. The overall aim must
be to ensure comparable and effective market access, and, in particular, the
lifting of ownership restrictions, for EU network operators and service
providers.

 - Until the results of the GATT/WTO negotiations are clear, it is important that
the Union reserves its right to maintain equivalent conditions to those currently
prevailing in third country markets with regard to market entry or the licensing
of non-EU or EEA nationals or companies controlled by such nationals, the
objective of imposing such conditions would be to promote open markets in
third countries for European network operators and service providers through
negotiations.

126

Common Community positions on issues having a direct impact on the
operation and interconnection of networks, such as restrictions on encryption,
rules on intellectual property and data protection and privacy.

**10.** **Future Evolution of the Regulatory Environment - Towards the**
**Information Society**

The Commission is looking beyond the immediate steps needed to liberalise
telecommunications infrastructure by 1 January 1998 and to put in place the
accompanying regulatory framework.

This Green Paper is intended to initiate the debate, in parallel with that launched
by action in other neighbouring fields, on the future evolution of the regulatory
environment beyond 1998 to meet the challenges of technological and market

convergence.

In addressing these issues, certain basic principles derived from the experience in
the telecommunications will assist the debate:

- Liberalisation of telecommunications infrastructure and services must go hand
in hand with the implementation of a clear regulatory framework, which can
help to mimic competition (through principles of non-discrimination,
transparency, etc.) pending the emergence of genuinely competitive markets.

- Effective and independent regulation at the appropriate level will be essential.

- The regulatory framework should lay down basic principles at a European level
on the basis of the rules in the Treaty, as well as clear criteria for their
application in a predictable manner at a national level. Increasing reliance on
competition rules is to be expected.

- Effective competition in the markets for telecommunications equipment and
services should evolve without rigid structural safeguards, such as those
developed in the mid-eighties in North American markets.

Where safeguards have been considered necessary proportional solutions
have been chosen, such as transparent cost-accounting and separate
accounting for different parts of a business.

These principles must be applied to the challenges of multi-media and the
Information Society, taking full account of the regulatory patterns established in
the converging sectors.

127

**DC.3** **Timetable for action**

**Council Resolution 93/C 213 of** **22** **July 1993 called for the Commission to prepare,**
**before 1st January 1996, the necessary amendments to the Community regulatory**
**framework, in order to achieve liberalisation of all public voice** **telephony** **services by**
**1 January 1998. Linking the liberalisation of infrastructure to liberalisation of voice**
**telephony means that the same time scale must be observed for the regulatory**
**measures identified in this Green Paper.**

**The specific measures in the** **'reform** **package'** **are expected to include measures to be**
**adopted by the Commission and measures to be adopted by the European Parliament**
**and the Council.**

**The proposed timetable is as follows:**

**By 15 March 1995** **Submission of public comments on the Green Paper**

**May 1995** **Commission Communication to the European Parliament**
**and the Council on the public consultation on the**
**infrastructure Green Paper**

**June 1995** **Council Resolution on Infrastructure .**

**Before** **1** **January 1996 Publication by the Commission of proposals for specific**

**measures to extend the existing EC regulatory framework**

**Commission Communication to the European Parliament**
**and the Council on the principles and financing of Universal**
**service**

**JX.4 Public consultation**

**With the adoption of Part I of the Green Paper on 25 October** **1994** **the Commission**
**opened a broad public consultation on the principle and timetable for the**
**liberalisation of infrastructure in the European Union.** **That debate is now**
**complemented by the publication of Part II which examines the overall regulatory**
**framework for infrastructure which will be required after 1998, when infrastructure**
**competition can be extended to cover voice telephony services for the general public.**

**The Commission invites comments on all the issues raised by this Green Paper,**
**including, in particular, on the major changes required and on the evolution of the**
**regulatory** **framework** **to meet the challenges of convergence.**

**The Commission intends to organise a series of hearings in Brussels with** **interested**
**parties early in 1995, allowing an opportunity for discussion of the issues raised in**
**both parts of the Paper.**

128

**In order to respond urgently to the evolving Information Society, the** **Commission**
**would ask that written comments on both Parts I and II to be forwarded to the**
**Commission by no later than** **15th** **March** **1995** **[158]** **.**

**The Commission will subsequently report to the European Parliament and Council on**
**the results of the consultation process.**

158 Unless a request is made to the contrary, written comments received during the public consultation
will be made available in full after the conclusion of the Consultation process.

129

```
         ANNEX 1 : GLOSSARY OF TECHNICAL TERMS

```

_Access Charges_ **Charges made by owners/operators of telecommunications networks**
**and services to operators and / or service providers interconnecting**
**with them, the** **purpose** **of which is to compensate the network**
**operator for any loss-making obligations imposed upon it through**
regulatory means, such as _Universal Service Obligations_ or
**political constraints to tariff adjustments for local service.**

**Where access charges are used, they are often added to, and**
integrated with, _**interconnection charges.**_

_ADSL_ _Asymmetric Digital_ _Subscriber Loop,_ a digital transmission
**technique for enhancing the information-carrying capacity of**
**copper-pair cables in the local access network. It is designed for**
**video-on-demand** **services by delivering video signals to the**
**customer premises with a low-capacity return** **channel** **for customer**
**ordering purposes.**

_**Alternative network infrastructure**_ **Infrastructure** **capacity established by organisations other than the**
**telecommunications organisations, for own use or for offering**
**capacity to other users or to service providers. When offered to**
**others, it is referred to** **as** **Third Party infrastructure.**

_ATM_ _**Asynchronous Transfer Mode.**_ **A fast packet-switching technology**
**for providing high-speed switched services, including multimedia**
**and video, over optical fibre networks.**

_CAP_ _**Competitive Access Provider.**_ **Term applied in USA to companies**
**providing services directly to customer premises in competition**
**with the local Regional Bell Operating Companies (RBOCs).**

_CATV networks_ _Cable Television Networks._ Systems authorised for the
**distribution of broadcasting / television programmes.** **In many**
**cases also suitable for the transmission of telecommunications.**

_CEN/CENELEC_ _European Committee for Standardisation_ and _European Committee_
_for_ _Electrotechnical_ _Standardisation,_ major European
**standardisation organisations.**

**130**

_**CEPT**_ _**European**_ _**Conference**_ _**of**_ _**Postal**_ _**and**_ _**Telecommunications**_
_**Administrations.**_ **Membership of CEPT is made up of National**
**Regulatory Authorities** _**(NRAs),**_ **and encompasses the twelve EU**
**Member States, and most other European countries, including the**
**countries of Central and Eastern Europe. Following these recent**
**reforms,** **CEPT's** **activities are now divided between: the** _**ERC**_ **(the**
**European** **Radiocommunications** **Committee)** **and** _**ECTRA**_
**(European Committee for Telecommunications Regulatory Affairs)**
**dealing with telecommunications; CERP (the European Committee**
**for Postal Regulation)** **dealing** **with postal** **affairs,** **(see also** _**ECTRA**_
**and** _**ERC).**_

_**Closed User Group (CUG)**_ _**Closed User Groups**_ **(CUGs) refer to entities not necessarily bound**
**by economic links, but which can be identified as being part of a**
**group on the basis of a lasting professional relationship among**
**themselves, or with another entity of the group, and whose internal**
**communications needs result from the common interest underlying**
**this lasting relationship. In general, the link between the members**
**of the group is a common business activity.**

**Examples of activities likely to fall into this category are fund**
**transfers for the banking industry, reservation systems for airlines,**
**information transfers between universities involved in a common**

**research project, re-insurance for the insurance industry, inter-**
**library activities, common design projects, and different institutions**
**or services of intergovernmental or international organisations.**

**In the context of the Commission Directive 90/388/EEC of 28 June**
**1990 on competition in the markets for telecommunications**
**services, individual cases and definitions used in Member States are**
**subject to screening by the Commission. The Directive indeed refers**
**to the public and not to CUGs. The Commission must therefore**
**ascertain that the definitions of CUG by Member States doe not**
**exclude voice telephony between users who have existing common**
**links between themselves, such that they could not reasonably be**
**regarded as being members of the public (i.e. any random person,**
**without distinction of belonging or membership).** _**See Part I of**_
_**this Green Paper,**_ _**COM(94)440,**_ _**25.10.1994, section VI (1).**_

_**Corporate network**_ **Corporate networks are generally networks established by a single**
**organisation encompassing distinct legal entities, such as a**
**company its subsidiaries or its branches in other Member States**
**incorporated under the relevant domestic company law.**

**131**

_**DCS 1800**_ **Standard for micro cellular communications systems developed by**
_**ETSI,**_ **building on the** _**GSM**_ **standard,** **also** **referred to as PCN**
**system** **standard.** **Such systems operate with very small cells,**
**varying in size between a few** **hundred metres** **and a few**
**kilometres.**

_**Digital European Cordless**_

_**Telecommunications (DECT)**_ **New digital cordless standard developed by** _**ETSI,**_ **supported by**
**Directive** **91/288/EEC** **establishing harmonised frequency bands for**
**DECT and a Council Recommendation on its** **co-ordinated**

**introduction.** **DECT is also suitable as a technology for**
**establishing local radio loops for fixed network subscribers.**

_**ECTRA**_ **The** _**European Committee for**_ _**Telecommunications Regulatory**_
_**Affairs (ECTRA),**_ **created as one of the three committees under the**
**new** _**CEPT**_ **structure.** **It currently includes three project teams**
**covering licensing, numbering and testing.**

_**ENO**_ **-** _**European**_

_**Numbering Office**_ **The** _**European Numbering Office**_ **called for in the Council**
**Resolution** **92/C318/02** **of 19 November 1992 on the promotion of**
**Europe-wide** **co-operation** **on numbering of telecommunications**
**services is located in Copenhagen, as part of the** _**European**_
_**Telecommunications Office (see also ECTRA).**_

_**ERC- European**_

_**Radiocommunications Committee**_ **The** _**European Radiocommunications Committee (ERC)**_ **is one of**
**the three committees created under the new structure of** _**CEPT.**_

**The** _**ERC**_ **develops radiocommunications policies, assists** _**ITU**_
**conferences and plays a general** **co-ordinating** **role in frequency**
**matters. It has established the European Radiocommunications**
**Office** _**(ERO)**_

_**ERO - European**_

_**Radiocommunications Office**_ _**The**_ _**European Radiocommunications Office (ERO)**_ **called for in**
**the Council Resolution of 28 June 1990** **90/C166/02** **on the**
**strengthening of the Europe-wide** **co-operation** **on radio**
**frequencies,** **in** **particular with regard to services with a pan-European**
**dimension was created by the** _**ERC**_ **and** **started operations in**
**Copenhagen in May** **1991.**

132

_**Essential Requirements**_ _**Essential requirements**_ **are** **nôn-economic** **reasons in the general**
**interest which may cause a Member State to restrict access to the**
**public telecommunications networks or public telecommunications**
**services.**

_**ETO - European**_

_**Telecommunications Office**_ _**The**_ _**European**_ _**Telecommunications**_ _**Office (ETO)**_ **is an office which**
**is being established under** **the** **umbrella of** _**ECTRA.**_

_**ETS**_ **-** _**European**_

_**Telecommunications Standard***_ **Standards established according to the procedures of the European**
**Telecommunications Standards Institute (ETSI).**

_**ETSI**_ _**- European**_

_**Telecommunications Standards**_

_**Institute**_ **The European standards organisation in the telecommunications**
**field, having the task of producing European Telecommunications**
**Standards** _**(ETS),**_ **having** **European-wide** **application** **and**
**acceptance, in the area of telecommunications.**

_**Exclusive rights**_ **According to Commission Directive** **90/338/EEC** **as amended by**
**Commission Directive** **94/46/EC,** **an exclusive right exists where**
**the service is reserved by the Member State for a single public or**
**private undertaking within a given area.**

_**FTTC**_ **-** _**Fibre to the curb.**_ **Used to designate the laying of optical fibre to a local distribution**
**point (curb).**

_**FTTH**_ **-** _**Fibre to the Home**_ **Used to designate the laying of optical fibre to individual homes**

_**GII**_ **-** _**Global Information**_
_**Infrastructure**_ **US term for world-wide information infrastructure or**
**superhighway. See also** _**Nil**_

133

_**GSM**_ **-** _**Global System for**_

_**Mobile communications**_ **The central standard, developed by** _**ETSI,**_ **for digital (2nd**
**generation) mobile systems, using** _**TDMA**_ _**(Time**_ _**Division Multiple**_
_**Access)**_ **techniques.** _**GSM**_ **has been supported by Directive**
**87/372/EEC** **establishing harmonised frequency bands for** _**GSM**_ **and**
**a Council Recommendation and Resolution on its** **co-ordinated**

**introduction. The system** **supports** **roaming, and a broad range of**
**features.**

_**Green Paper(s)**_ _**Green Papers,**_ **in the European Union context, are European**
**Commission consultative documents setting out basic policy goals**
**for** **public** **debate.** **Key** _**Green Papers**_ **issued** **in** **the**
**telecommunications sector, are the** _**1987 Green Paper on the**_
_**development of a common market for telecommunications services**_
_**and equipment (COM (87) 290);**_ **the** _**1990 Green Paper on satellite**_
_**communications**_ **(COM (90) 490) and the** _**1994 Green Paper on a**_
_**common approach to personal and mobile communications in the**_
_**European Union**_ **(COM(94)** **145).**

_**HDSL - High Bit-rate**_

_**Digital Subscriber Loop**_ **Transmission technique for accommodating 2 Mbit/s Primary Rate**
**ISDN and digital leased lines on existing local access network**
**copper pair cables.** **Two such pairs are required for two-way**
**transmission, and speeds up to 6 Mbit/s are currently possible,**
**albeit over shorter distances. Could complement** _**FTTC.**_

_**1BC**_ _**Integrated Broadband Communications**_

_**Infrastructure**_ _**See telecommunications**_ _**infrastructure**_

_**Intelligent Networks (IN)**_ **Advanced network concept allowing rapid and flexible introduction**
**of new services such as freephone, premium rate customer-**
**controlled routing and bandwidth-on-demand.**

_**Interconnection charges**_ **Charges made by owners/operators of telecommunications networks**
**and services to** **operators.and** **/ or service providers interconnecting**
**with them, for access and use, including the conveyance of their**

134

**telecommunications traffic. Charges for connection and conveyance**
**should be seen as distinct from** _**access charges.**_

_**International Telecommunications**_

_**Union (ITU)**_ **The United Nations specialised agency for telecommunications.**

**The structure of the ITU has recently been reviewed to adapt it to**
**the changing information and telecommunications environment.**
**Formal changes were agreed at an Additional Plenipotentiary**
**Conference in December 1992 and came into operation in March**
**1993.** **These have separated the ITU into three sectors:**
**Standardisation, Radiocommunications and Development.**

_**IPRs**_ **Intellectual Property Rights**

_**Low Earth Orbiting satellite**_

_**(LEOs)**_ **Non-geostationary satellites in low-earth orbits.** _**LEO**_ **concepts**
**play a particular role** **in** **current proposals for** _**satellite-based**_
_**Personal Communications services.**_

_**Memorandum of Understanding**_

_**(MOU)**_ _**MoUs**_ **in the telecommunications field in Europe have been entered**
**into between** **operators** **and/or equipment manufacturers or other**
**market participants for the roll out of new products and services.**

_**Mobile Network Operator**_ **Operator of mobile network infrastructure, supporting** **the**
**transmission and provision of radio-communications** **services.**
**The activities of** _**Mobile Network Operators**_ **in most cases also**
**integrate mobile** _**Service Provider**_ **functions** **(direct service**
**provision to end-users) within their overall business.**

_**NRA - National Regulatory**_

_**Authority.**_ **Directive 88/301 and 90/388 both require Member States to ensure**
**the separation of regulatory activities from the operation and**
**provision of services by** _**Telecommunications Organisations.**_

135

_Nil_ - _National Information_

_Infrastructure_ **The US concept for ubiquitous availability of communications**
**infrastructure (both telecommunications and cable) for the whole**
**range of voice, data, and multi-media services,** **ay** **proposed by the**
**Clinton** **Administration.** **Also** **known** **as** **Information**
**Superhighway.**

_ONP_ - _Open_ _Network_ _Provision_

_Personal_ _Communications_

_Services/Networks_

_(PCS) (PCN)_

**The** _**Open Network Provision**_ **concept defined in Council Directive**
**90/387/EEC.** _**ONP**_ **conditions currently apply to public networks**
**operated under exclusive and special rights.**

**In the context of the reform of** _**ONP**_ **foreseen in anticipation of full**
**liberalisation and the lifting of exclusive and special rights, a**
**debate has been opened on re-placing** **the criteria of**
**special/exclusive rights by other criteria concerning major market**
**importance.**

_Personal_ _Communications Services (PCS)_ is used as a generic term
**for services which** **provide** **person-to-person calling, independent of**
**location, terminal used, the means of transmission (wired or**
**wireless) and/or the choice of technology. In the UK, the term**
_PCN (Personal_ _Communications_ _Networks)_ is more commonly
**applied.**

_Public_ _Service_ _Requirements in the_

_form of_ _Trade_ _Regulations_ **Category of licensing conditions aimed at ensuring permanence,**
**availability** **and quality of services and defined by Commission**
**Directive 90/388/EEC.**

_Public telecommunications_

_infrastructure_

_Public_ _Telecommunications_

_Services_

_**Telecommunications**_ _infrastructure_ intended for use **by** the
**general public (in contrast to private telecommunications**
**infrastructure intended for own use or use by** _**closed user**_ _**groups).**_

_**Telecommunications**_ _**services**_ **provided** **to** **the general public**

136

_**RACE - R&D programme in**_

_**Advanced Communications**_

_**technologies for Europe**_ **The current phase of the RACE programme is defined in Council**
**Decision** **91/352/EEC** **of 7 June** **1991** **adopting a specific research**
**and technological development programme in the field of**
**telecommunications technologies (1990 to 1994).**

_**Service Providers**_ _**Service providers**_ **offer services to end users, either by using the**
**basic service and infrastructure provided by network operators on a**
**re-sale basis, or by providing services via own infrastructure where**
**they form part of a network operation. Service provision may**
**range from provision of basic voice or data service on a re-sale**
**basis to the provision of sophisticated value-added services*.**

_**Special Rights**_ **Special rights are** **defined** **^** **according** **to Commission Directive**
**94/46/EC as:** _**\**_ _**[:]**_ _**^-^:'^%**_

**"the rights that are granted by a Member State to a limited number**
**of** **undertakings** **through** **any** **legislative,** **regulatory** **or**
**administrative instrument which, within a given geographical area.**

**- limits to two or more the number of such undertakings authorised**
**to a service or** **undertake an** **activity,** **otherwise than according to**
**objective, proportional and** **non-discriminatory** **criteria, or**

**- designates,** **otherwisevtjan** **according to such criteria, several**
**competing** **undertakingspifbeing** **authorised to provide a service or**
**undertake an activity, or**

**- confers on any undertaking or undertakings, otherwise than**
**according** **to such criteria, legal or regulatory advantages which**
**substantially affect the ability of any other undertaking to provide**
**the same telecommunications service or to undertake the same**
**activity in the same geographical area under substantially** **the,same**
**conditions**

_**Telecommunications**_

_**Infrastructure**_ **The underlying physical components associated with the provision**
**of telecommunications transmission capacity. The establishment of**
**telecommunications** **infrastructure may require rights of way,**
**frequency** **assignments,** **ducts, manholes, poles, cables, aerials,**
**towers,** **buildings** **etc.** **Telecommunications** **infrastructure**
**specifically excludes switching equipment associated with the**
**provision of switched telecommunications services.** **See also**

**137**

_**Alternative**_ _**infrastructure**_ **and** _**public**_ _**telecommunications**_
_**infrastructure.**_

_**Télécommunications**_

_**Organisation (TO)**_ _**Telecommunications Organisations**_ **as** **defined** **in** **Directive**
**90/388/EEC means public or private bodies to which Member**
**States grant special or exclusive rights for the provision of a public**
**telecommunications network and,** **when** **applicable, service.**

_**1992 Telecoms Review**_ **A review and wide public consultation during 1992 and early 1993**
**led to the adoption by the EU Council of Ministers of Resolution**
**C93/213/01 of 22 July 1993, providing for the liberalisation of the**
**provision of public voice telephony services by 1 January 1998,**
**subject to additional transitional periods of up to 5 years for**
**Greece, Ireland, Portugal and Spain, and a possible delay of up to**
**2000 for Luxembourg.**

**The Resolution also requested the publication of a** _**Green Paper**_ **on**
**mobile and** **personal** **communications, and the production of a**
_**Green Paper**_ **on telecommunications infrastructures and cable TV**
**by 1 January 1995. The Council also requested that the necessary**
**regulatory framework for the 1998 liberalisation deadline be**
**prepared by 1 January 1996. See** _**Alternative Infrastructure.**_

_**Telecommunications services**_ **according to Commission Directive 90/388 (as amended by**
**Commission** **Directive 94/46) telecommunications services means**
**services whose** **provision consists** **currently, wholly or partly, in**
**the** **transmission** **and** **routing** **of** **signals** **on** **the** **public**
**telecommunications networks by means of telecommunications**
**processes, with the exception of radio and television broadcasting**
**to the public.**

**In this context, the term telecommunications services is generally**
**understood to be concerned with the provision of transmission,**
**switching and other activities for the purpose of the conveyance of**
**signals, without regard to the content of the messages transmitted.**

_**Universal Personal**_

_**Telecommunications (UPT)**_ **Concept which should allow** **person-to-person calling across**
**multiple networks at any terminal, fixed or mobile and irrespective**
**of geographical location, based on** **personal** **and portable numbers.**
**Essential concept for implementing full personal mobility in a**
**communications environment.**

**138**

_**Universal Service**_ The provision of telecommunications services permitting "access to
a defined minimum service of specified quality to all users
everywhere and, in the light of specific national conditions, at an
affordable price" . The notion of Universal Service also includes,
in particular, service to disadvantaged users such as deaf and other
disabled users. Political orientations concerning the scope of
Universal Service have been provided by Council Resolution
94/C48/01 and the associated Commission statement.

_**Universal Service Fund**_ Special arrangements for collecting contributions to the cost of
_Universal Service Obligations_ and transferring funds to those
network operators taking on those obligations. Universal Service
Funds are in operation in a number of countries, e.g. in U.S. and
Australia, and are normally established under strict regulatory
oversight. An alternative or supplement to _access charges_ (which
are normally paid directly to the operators of network infrastructure
as a contribution to their cost of Universal Service Obligations).
**See also** _**Access**_ _**Chargés.**_

_**Universal Service Obligation**_

_**(USO)**_ The obligation placed upon one or more operators to provide
**universal** **service**                 - usually the provision of basic services, in
particular telephone service. Uneconomic **universal service**
**obligations** means the provision of such services to those users
whom an operator would not serve if it were to apply its normal
commercial criteria of profitability. (See also section VII.6.2)

**139**

**ANNEX 2** : **STUDIES CARRIED** **OUT FOR** **THE COMMISSION IN**

**PREPARATION** **FOR** **THIS GREEN PAPER**

A number of external studies have been requested by the Commission to assist in the
preparation of this Green Paper and in the subsequent consultation process.

The studies requested are :

_**"Future**_ _**Policy for**_ _**Telecommunications**_ _**Infrastructure and Cable TV**_ _**Networks",**_
by Mercer Management Consultants;

_**"Requirements**_ _**for the Development of a Multimedia Environment based on**_
_**Telecommunications Infrastructure**_ _**and Cable TV**_ _**Networks",**_ **by Devotech;**

_**"Investment**_ _**requirements for Europe to achieve**_ _**convergence",**_ **by KPMG;**

_**"Study to provide quantitative data as background to**_ _**the**_ _**Green**_ _**Paper",**_ **by**
IDATE;

_**"Overview**_ _**and analysis of the legal and regulatory barriers to multimedia**_
_**applications"**_ **',** **by Coudert;**

and in relation to the issue of alternative infrastructures:

_**"The impact of liberalisation of Alternative Terrestrial Infrastructure for Non-**_
_Reserved_ _Services",_ by Coopers and Lybrand;

_**"The**_ _**Effects of Liberalisation of Satellite Infrastructure on the Corporate and**_
_**Closed User Group**_ _**Market",**_ **by Analysys;**

_**"L'impact**_ _**de**_ _**Vauthorisation**_ _**de la fourniture de services de télécommunications**_
_**libéralisés**_ _**par les**_ _**câblo-opérateurs",**_ **by IDATE.**

In addition, two studies on interconnection issues are available which have also been used
in the preparation of this Green Paper:

_**"Network**_ _**interconnection in the domain of open networks provision",**_ **by** **WDC;**
and

_**"Cost allocation and the general accounting principles to be used in the**_
_**establishment of access charges in the context of**_ _**telephone**_ _**liberalisation in the**_
_EC",_ by Arthur Andersen.

These studies will be made available on request. Please address inquiries to: the European
Commission, DG XUI/A/l, Rue de la Loi 200, B-1049 Brussels - Office: BU9-4-185.
Fax: (+32 2) 296.83.91.

**140**

ANNEX 3 : LIST OF KEY REGULATORY MEASURES AND PENDING

PROPOSALS IN THE FIELD OF TELECOMMUNICATIONS

These measures concern:

The Directives on competition in the market for telecommunications services ami for
terminal equipment, setting out the basic principles for liberalisation in the European
Union (as most recently amended to include satellite communications and equipment
within their scope) :

Commission Directive of 16 May 1988 on competition on the markets in
telecommunications terminal equipment (88/301/EEC ; OJ L131/73, 27,5.88)

Commission Directive of 28 June 1990 on competition on the markets for
telecommunications services (90/388/EEC ; OJ L192/10, 24.7.90)

Commission Directive of 13 October 1994 amending Directive 99/301/EEC and
Directive 90/388/EEC in particular with regard to satellite communications
(94/46/EC, OJ L268/15, 19.10.94)

The ONP framework and specific Directives which establish principles for open
access, interconnection and harmonisation:

 - Council Directive of 28th June 1990 on the establishment of the Internal Market

for telecommunications services through the implementation of Open Network
Provision (90/387/EEC ; OJ L192/1,' 24.7.90)

 - Council Directive of 5th June 1992 on the Application of Open Network
Provision to Leased Lines (92/44/EEC ; OJ LI65/27, 19.6.92)

Directives concerning the mutual recognition of terminal equipment which facilitate
the free movement of telecommunications equipment within the single market and
proposals for directive extending the principle of mutual recognition to the licensing
of certain categories of telecommunications and satellite services:

Council Directive of 29th April 1991 on the approximation of the laws of the
Member States concerning telecommunications terminal equipment, including the
mutual recognition of their conformity (91/263/EEC ; OJ L128/1, 23.5.91);

 - Council Directive of 29 October 1993 supplementing Directive 91/263/EEC in
respect of satellite earth station equipment (93/97/EEC; OJ L290/0Î, 24.11.93)

and in the area of services :

Amended proposal for a European Parliament. and Council Directive on the
mutual recognition of licences and other national authorisations for
telecommunications services, COM(94) 41 final, 22.3.94

Proposal for a European Parliament and Council Directive on a policy for the
mutual recognition of licences and other national authorisations for the provision
of satellite network services and/or satellite communications services, COM(93)
652,4.1.94,

141

Directives concerning the protection of the public interest in this field, such as the
proposed Directive on data protection and privacy in the telecommunications field:

Modified proposal for a European Parliament and Council Directive concerning
the protection of personal data and privacy in the context of public digital
telecommunications networks, in particular the Integrated Services Digital
Network (ISDN) and public digital mobile networks, COM(94) 128 final,
13.6.94.

142

**ISSN 0254-1475**

COM(94) 682 final

## **DOCUMENTS**

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Catalog number : CB-GO-95-015-EN-C

ISBN 92-77-85011-6

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