Source: EURLEX
Language: en
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COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 24.10.1995
COM(95) 492 final

REPORT FROM THE COMMISSION

TO THE COUNCIL. THE EUROPEAN PARIJAMENT

AND THE ECONOMIC AND SOCIAL COMMITTEE

on the main events and developments in the information market 1993-1994

IMPACT programme

(EC programme for the establishment of an information services market)

CONTENTS

INTRODUCTION 9

EXECUTIVE S U M M A R Y 11

1 BUILDING THE I N F O R M A T I O N INFRASTRUCTURE 17

1.1 The Common European Information Area 17
1.2 The US National Information Infrastructure 22

1.3 Developments in Japan 24
1.4 Singapore: A Case Study in Information Infrastructure Devcioprnent 25

1.5 The Internet 26

1.6 Uncertainty 28

2 THE I N F O R M A T I O N SECTOR IN THE EUROPEAN ECONOMY 29

2.1 The Convergence Phenomenon 29

2.1.1 The Composition of the Converging Information Sector 30

2.1.2 The Scale of the Converging information Sector 31

2.2 The Component Sectors 34

2.2.1 The Content Sector: Changing Roles and Opportunities 34

2.2.2 The Delivery Sector: Telecommunications, Cable and Satellite 36

2.2.3 The Handling Sector: Hardware, Software and IT 41

2.3 Industry Repositioning 44

2.3.1 Mergers and Acquisitions 45

2.3.2 Cross-Media Ownership and Media Concentration 48
2.4 The Role of the Advertising Industry 49

3 RELATIVE STRENGTHS A N D WEAKNESSES 51

3.1 The Relative Position 51

3.2 The European Union 52

3.3 Electronic Information Services in the US 54

3.4 Electronic Information Services in Japan 56

3.5 Conclusions 57

4 THE FUTURE D E M A N D FOR INFCRMATiOiSI 61

4.1 The Growing Use of Electronic Communication Facilities 62

4.1.1 Electronic Data Interchange 62

4.1.2 Electronic Mail 63

4.2 Information Use Within Selected European industrial Sectors 64

4.2.1 Transport 65
4.2.2 Insurance 66

4.2.3 Biotechnology 68

4.3 Employment, Education and Training Implications 69

5 RESEARCH A N D TECHNOLOGICAL DEVELOPMENT (RTD) .....71

5.1 Telematic applications of common interest 72
5.2 Information Technologies 73
5.3 Advanced Communication Technologies 73
5.4, Socio-Economic Research 74
5.5 RTD in the fields of information and language engineering and libraries 74

5.5.1 Information Engineering 74
5.5.2 Language Engineering 76
5.5.3 Libraries Programme 76

6 KEY LEGAL A N D REGULATORY ISSUES 79

6.1 Copyright and Intellectual Property Rights 80

6.1.1 Illegal Copying 81

6.1.2 Copyright Clearance 82
6.1.3 Author Rights 82

6.2 Legal Protection of Databases 83
6.3 Data Protection 84

6.4 Access to information held by government bodies 85

7 DEVELOPMENTS IN THE EUROPEAN INFORMATION

CONTENT SECTOR IN 1 S 9 3 87

7.1 On-line Databases 87

7.1.1 The On-line Market 88

7.1.2 Availability and Use of On-line Databases 92

7.2 Optical Information Media, 93

7.2.1 Platforms 93

7.2.2 Installed Base of Readers 94

7.2.3 Availability of Titles 95
.7.2.4 Markets, Sales and Pricing 96
7.3 Multimedia 97

7.4 Videotex 99

7.5 Audiotex 101

7.6 Fax-Based Information Services 103

7.7 Electronic Information Services in the Home 105

7.8 Emerging Media and Markets 107

7.8.1 The Networks 107

7.8.2 Handheld Reference Products a,nd Personal Communicators 110

7.8.3 Video on Demand and Interactive TV 112

7.9 Audio-Visual 114

7.9.1 Television, Cinema and Video 116

7.9.2 Audio 118

**7.10 Print** Publishing 120

**CONCLUSIONS** ! 123

ANNEXA 127

ANNEX **B** 133

ANNEX C 136

LIST.OF TABLES

No. Title Page

1.1 Strategic Projects for the Common Information Area ..20

2.1 The Composition of the Wider Information Industry 32

2.2 Key Figures from the Information Sector, 1992 33 2.3 Breakdown of the EU Information Sector, 1992 34
2.4. Geographical Distribution of the World Market for
Telecommunications Services, 1992 37

2.5 Breakdown of the EU Telecommunications Services

Market by Activity, 1991-1992 37
2.6 Telecommunications Infrastructure in 1992 38

2.7 Top Ten Public Telecommunications Operators, 1992 40
2.8 Cable and Satellite Penetration in Europe, 1993 41
2.9 Percentage IT Market Growth by Region, 1990-1994 42
2.10 Percentage European IT Market Growth by Product Grouping, 1990-1994 43
2.1 1 European Hardware, Software and Home Electronics Markets, 1992-1995 ....44
2.12 A Selection of Mergers and Acquisitions Involving
European Information Companies, 1993/1994 46

3.1 Relative Sizes of the European, US and Japanese Electronic
Information Services Sectors 52

3.2 Perceived Strengths and Weaknesses of the European Union
Electronic Information Services Sector 54

3.3 Perceived Strengths and Weaknesses of the US Electronic
Information Services Sector 55

3.4 Perceived Strengths and Weaknesses of the Japanese
Electronic Information Services Sector 56

4.1 Views on the Influence of Information on Competitiveness 65
4.2 Transport Organisations Reporting Use of Electronic

Media in 1993 and Expected Use in 1998 66
4.3 Insurance Organisations Reporting Use of Electronic
Media in 1993 and Expected Use in 1998 67
4.4 Biotechnology Organisations Reporting Use of
Electronic Media in 1993 and Expected Use in 1998 68

7.1 Professional EU On-line Revenues, (Including Videotex) 1989-1992 88
7.2 Geographical Analysis of On-line Revenues (Excluding Videotex) 89

7.3 Real-Time/Non-Real-Time Revenue Breakdowns 90

7.4 Subject Analysis of EU Electronic Information Revenues, 1990-1992 91
7.5 Subject Analysis of Worldwide On-line Revenues, 1988-1992 91
7.6 Worldwide On-line Service Sales Forecast 92

7.7 Databases by Subject Area, 1992 93
7.8 Worldwide CD-ROM Drive Installed Base and Sales, 1 993-1 999 94
7.9 Top Ten Subject Areas for CD-ROM by Number of Titles, 1 994 ...95
7.10 Origin of CD-ROM and Multimedia CD Companies and Titles, 1994 _96_
7.11 European Market Forecast for CD-i Titles Sales 99
7.12 Installed Base Penetration of Videotex Terminals, 1993 100

.7 13 Videotex in Europe 100
7.14 Breakdown of Européen Pramium Rata Markets, Launch Dates
and DTMF Penetration.: 102
7.15 Breakdown of Organisations in Franco Offering Premium Hate
Services and Percentage of Lines Controlled 102
7.16 Penetration of Technology into European and US Homes, 1332 10:5
7.17 Penetration of Technology per Thousand Inhabitants/ 1333 .108
7.18 Internet Hosts Worldwide 108
7.19 Research Networks in Europe 110
7.20 Sales of EB Players Worldwide, 112
7.21 Selection of Companies Working on Video on Demand and Interactive TV ... 114
7.22 World Audio-visual Spending, 1992 115
7.23 Revenues of Top 50 Audio-visual Groups by Area of Origin 11 5
7.24 Top Fifteen European Media Owners Ranked by Media Revenues ...116
7.25 EC Audio-visual Trade Deficit with the US, 1990-1992 11 G
7.26 US Television Programming Market Estimates,. 1992 117
7.27 Breakdown of World Television Revenues, 1992....... .......118
7.28 World Music Market - Global Sales and Forecasts 1991-2000 119
7.29 Top Five Markets for Music Sales, 2000 119
7.30 EC's Top Ranking Publishers by 1992 Turnover 121
7.31 EU Publishing Market 1991 .... 121

**INTRODUCTION**

This report is a communication of the Commission to the Council, the Economic and Social
Committee and the European Parliament. Hence, it addresses key policy makers. The report
also addresses decision makers in the industries concerned with and related to the subject, and
all people who have an interest in information market issues. These issues are increasingly
raising political attention and were widely discussed during the reference period of this report.

The strategic value of information is now generally recognised. The Commission's White
Paper, _Growth, Competitiveness, Employment_ - _the challenges andways forward into the 21st_
_century,_ stresses that information and communication technologies have the potential to
promote steady and sustainable growth, to increase competitiveness, to create new job
opportunities and to improve the quality of life of all Europeans.

The report reviews the main developments in the European information services market since
the completion of the previous report in this series in July 1993. These reports originate from
the European Commission's Information Market Observatory, the aim of which is to improve
the understanding of the information market. The annual reports are just one aspect of the
work of the Information Market Observatory, which also publishes Working Papers,
commissions research into specific market issues a id organises workshops and meetings which
provide a platform for the presentation and discussion of recent findings. The Information
Market Observatory is part of the European Commission's IMPACT (Information Market
Policy Actions) programme.

This report includes information collected during the second half of 1993 and the first half of
1994. The content is not exclusively concerned with developments in the EU; wherever
possible, data and analysis have been included on the EFTA countries, on the US and Japan.
This reflects the increasingly global nature of the information industry, as well as the need for
international comparisons in order to assess the competitive position of European information
companies in world markets.

Previously, the Information Market Observatory and its annual reports have concentrated on a
relatively narrow industry: namely the professional electronic inforrnation services sector and
its "classical [1] ASCII on-line database services, videotex and CD-ROM publishing activities and
closely related areas such as audiotex and fax-based services. During 1993 and 1994, the
focus of the Information Market Observatory's work has been widened to take into account the
wider context in which the information services industry now operates. It reflects the
convergence of a number of information-related sectors, including the hardware and software
industries, telecommunications, cable and satellite industries, as well as those industries
concerned with information content, such as film, television, music, print publishing and, of
course, the electronic information services sector. All of these industries now appear to be
converging in their market aspirations and in common technology developments.

_IMO_ _Annual Report 1993 - 1994_ _Introduction_

As a result of this extended focus, the following report covers a wider range of issues and
market sectors than its predecessors. As far as possible, it takes into account such diverse
topics as telecommunications infrastructure development, multimedia and Video on Demand
markets, take-up of applications such as electronic data interchange (EDI) and electronic mail
by industry, and the effects of convergence on the information content industry. Inevitably,
this means that there has not been space to cover all subjects in exhaustive detail. However,
the report should provide a fairly comprehensive overview of the forces at work in the wider
information sector and of current and future information markets.

10

EXECUTIVE SUMMARY

From among all markets, technologies and trends discussed in this report, four key issues can
be emphasised which have emerged during the study period of this report. These are issues
which will have a crucial impact on future developments in the information market.

Firstly, the emergence of electronic superhighways, and the debate which this has stimulated
on the Information Society, should be liighlighted. These ideas have captured the attention of
the world and brought the concept of electronic information services to many people for the
first time. ' Convergence is also a theme which requires special attention. It has featured
strongly in the discussions of the business community and has already had a marked impact in
terms of industry repositioning. The third issue dealt with in this summary is the creation of a
clear and stable regulatory framework. Finally, the dramatic take-off of CD-ROM and
multimedia during the second half of 1993 and first half of 1994 should be highlighted as an
indicator of the [-] growing strength of the electronic publishing sector.

Governments around, the world are increasingly convinced that the development of information
infrastructures is essential if businesses, public administrations and individuals are to benefit
from the "digital revolution'. Most of the policies and actions which will be required in order
to realise the vision of a global information society are only just being formulated.

It is almost impossible to make. sound predictions as to the exact nature of an information
society, or Jo suggest when it-might finally emerge. Yet the industries and governments of the
major industrialised countries are confident that their societies will be transformed and that the
benefits will be substantial. Exponential growth in Internet users over the course of the year,
(estimated by the Internet Society in June 1994 to have reached 30 million), and in the number
of applications available, has given us a feeling for the level of opportunities and demand we
can expect.

Countries such as the USA, Japan, Canada and the European Union are laying the foundations
for an information society. The European Union, which has lagged behind the USA and Japan
in the digitisation process, is now trying to make up lost ground with a bundle of initiatives
including the Common European Information Area, the White Paper on Growth,
Competitiveness and Employment, the Bangemann Report and the Action Plan on Europe's
Way to the Information Society. These initiatives are important for Europe: they will help the
Union to take its place amongst those countries setting the ground rules for the global
information society.

Like the USA, the European Union considers that it is primarily the private sector which must
rise to the challenge of the information revolution. Private investment should be the driving
force even for investment in infrastructure. The ro [1] ^ of the Community and the Member States
will be to back up this development by giving political impetus, co-operating with the private
sector in experimental applications, and creating a clear and stable regulatory framework. The

11

_IMO_ _Annual Report 1993_ - _1994_ _Executive Summary_

latter will be particularly important in relation to access to markets, interoperability of
networks and basic services, intellectual property rights and data protection.

It remains to be seen how readily the private sector will generate the initial investment
required. Furthermore, the full implications and impact of an information society are difficult
to assess. There will certainly be significant opportunities, but there are also concerns over the
socio-economic and cultural effects which accompany technological revolution.

While information infrastructures are being established, work is taking place to develop
information and entertainment applications to be delivered via the superhighways.
Applications which are being developed in the context of electronic superhighways range from
on-line games and Video on Demand, to video conferencing and multimedia database access,
to name but a few dealt with in this report.

Services such as these are likely to require different forms of technology development and
different levels of investment. They will also require partnerships between previously diverse
industry sectors, such as consumer electronics and IT industries, infrastructure providers such
as telecommunications, cable and satellite operators, as well as information and entertainment
content owners. Telecommunications and cable companies are already beginning to build the
necessary infrastructure. Software giants and major content companies are collaborating in
order to bring products to the market. This leads us to the second issue of convergence.

Convergence is a term which has been widely used by the press and by business analysts, and
can be defined in terms of the development of a common technology base by industries sharing
a similar objective: the creation of a mass market for integrated communications, computing,
information access and entertainment products. A good example is CD-ROM technology,
which can now be found in computers, electronic games players and multimedia players for
television sets. Standardised memory cards, smart cards and modem cards feature in set-top
boxes for televisions, handheld organisers and communicators as well as computers. But at a
more fundamental level, convergence is the result of the ability to convert all kinds of content including text, images and sound into a common digital format which can then be manipulated
and exploited across a number of platforms.

All of this is good news for the information sector in so far as it helps to build a range of new
outlets for information products and services, which nevertheless share many of the technology
characteristics of existing electronic information services.

Convergence has also led to a certain amount of industry repositioning. The need to address
global markets and to offer integrated information, entertainment and communications services
has led to a wave of merger and acquisition activity and a growing number of strategic
alliances and partnerships. Hence we see telecommunications companies joining forces, and
hardware and software companies buying into their competitors and counterparts throughout
the world. But we also see information sector companies buying into related new markets
through acquisition. The purchase of a 25 per cent stake in Time Warner Entertainment by US
West, Pearson's acquisition of Software Toolworks and the purchase of Thomson Directories
by US West are all recent examples of such deals.

12

_MO Annual Report 1993_ - _1994_ _Executive Summary_

The increasing availability of high quality infrastructure will necessitate a mass market for
information products and services as a means of generating return on investment and ensuring
long-term cost effectiveness. The importance and value of the content industry (including print
and electronic publishing, films, video, audb and television programme production) is likely to
increase as a result. The current repositioning of the in brmation industry supports this view.

The content industry now has a great deal to live up to. The expectations of users have been
raised and they are demanding increasingly high standards of information content and
presentation. ICT industries look to the information and entertainment services sectors to
provide content for running on the computers, consumer electronics goods and networks
which are now being developed. Governments around the world are looking at the
information industries as a whole to generate employment and stimulate economic growth.

The biggest challenge to the content industry in meeting these expectations will be its ability to
invest time, labour and financial resources in the development of innovative information
products and services. Such investment will be essential if European content companies are to
compete with their counterparts in the USA and Japan, and share the rewards of industry
growth with ICT industries.

The enormous implications of convergence have meant that legal and regulatory issues have
come into the foreground of discussion, and featured strongly in the Bangemann report on the
Information Society. Deregulation of telecommunications and the directive on Open Network
Provision will be instrumental in allowing European telecommunications companies to compete
internationally, but there are many other regulatory issues which still need to be addressed,
both at a national and European level. Not least of these is cross-media ownership and the
restrictions which may apply to telecommunications and cable TV companies in entering each
others' markets.

The process of trying to reach a European consensus on major legal issues such as the legal
protection of databases and personal data protection is underway. Meanwhile, the industry
itself is developing a self-regulatory framework for cross-border audiotex and videotex
services and for information brokers, and may do so in other areas as well.

The flurry of interest and excitement associated with electronic superhighways and
convergence, and the prospect of clarification of the legal framework has, of course, made this
a very interesting time for the electronic information services industry. But they have not yet
brought immediate market opportunities. Even the Internet, which is now firmly at the centre
of research and experimentation for many information companies, has so far brought limited
rewards for the commercial information industry.

Under these circumstances, it is not surprising to find that many content companies are
reluctant to invest heavily in developing electronic superhighway applications. The European
content industry is faced with particular challenges in that it is made up of a greater number of
smaller, less vertically integrated, and more nationally focused companies than its US
counterpart. To take advantage of the global opportunities which lie ahead, European content

13

_MO Annual Report 1993_ - _1994_ _Executive Summary_

companies will often need to enter joint ventures and-alliances with companies in other regions.
At the same time, policies at a national and European level will be required in order to
guarantee the continued availability of a diverse, multi-cultural information content and to
strengthen the competitiveness of small European companies.

Building on the results of the IMPACT programme, the European Commission will reflect on
ways to stimulate the creation of favourable conditions for information providers to adapt their
skills and products to the changing environment and to stimulate increased usage.

As debates have continued over electronic superhighways, convergence, information
legislation, and European competitiveness, a dramatic take-off has occurred in the CD-ROM
and multimedia _CD_ industry. CD-ROM drives, once a rare sight in offices and almost unheard
of in homes, have become commonplace.- The installed base of CD-ROM drives is estimated
to have grown by 155 per cent during 1993, bringing the worldwide total to around 11.4
million. Nearly 5,400 CD-ROM titles were in circulation at the beginning of 1994, and overall
revenues for CD-ROM commercial and in-house titles have been estimated at ECU 8.25bn.

Commercial CD-ROM titles alone are expected to bring in revenues of nearly ECU 35bn by
1996. Sales of multimedia CD-ROMs through retail outlets increased enormously in the US
during the second half of 1993, and the same trend is beginning to take hold in Europe.

The on-line industry, however, still dominates the professional electronic information services
market in Europe. The professional on-line sector has performed well, especially considering
the economic climate and had a turnover of more than ECU 3.6bn in 1992. This represents
growth of around 17 per cent since the previous year. The on-line industry will benefit from
the growing awareness of electronic information services within the business community and
amongst the general public. In Europe, awareness has in the past been low in comparison with
the US, but now appears to be increasing steadily. This argument is supported by the results
of case studies in the transport, insurance and biotechnology sectors which were undertaken by
the IMO in 1993.

Within the European on-line market, financial information services are particularly strong.
Print publishing and content creation are also areas where Europe is considered to be in a
strong competitive position. The overall European information sector (comprising hardware
and software manufacturing, consumer electronics, service delivery and content industry) was
estimated to be worth approximately ECU 370bn in 1992, of which content accounted for
more than a third. When compared with the US, however, it seems that there is still plenty of
room for expansion in content markets.

The electronic information services industry has high added-value and strong growth potential,
but the European market for information services is still fragmented. In the financial and
academic sectors, a pan-European market does exist to a greater extent. Elsewhere, a number
of barriers still exist to the emergence of a European market for information services, not least
of which is language. Efforts continue to seek a technological solution to language barriers,
and the European Commission's Language Engineering programme will contribute to this
work.

14

_MO_ _Annual Report 1993_ - _1994_ _Executive Summary_

But technology alone will not solve all of the problems. In order to address fundamental
problems, such as the increasing dominance of a few languages over others, there will be a
need for awareness and action on the part of politicians, the public sector and the general
public. In particular, we will need a greater understanding of language use in the evolving
information society and of the relationship between market size and language versioning for
information products. To this end, the Commission is preparing a new strategy document for
the Council and the European Parliament with the working title 'Language and the Infor iiation
Society'.

The uneven penetration of information technology and infrastructure in Europe also presents a
barrier to the development of a European information services market, and a combination of
legal and political barriers still impedes the development of pan-European videotex and
audiotex interconnections. But there has been greater communication and collaboration
between European network operators and new efforts have been made to create links between
European research networks, as well as bi-lateral interconnections between national audiotex
and videotex systems. The legal barriers are also being addressed.

The réalisa ion of the information society described by the Bangemann report and the
Commission's Action Plan will depend to a large extent upon the ability of the information
industries to take the initiative in addressing new markets and adopting new technologies.
National governments and the European Commission will also have a role to play. Finally,
citizens of the information society will need to adapt themselves to the digital environment if
they are to take full advantage of the new opportunities it will offer in employment, leisure,
education and training.

**ij>**

1 BUILDING THE INFORMATION INFRASTRUCTURE

1993 was a significant year for the information services sector. In both the European Union
and the United States major infrastructure investment programmes were launched and, in the
years to come, they will greatly stimulate the supply of, and the demand for, information.

These infrastructure programmes mark a recognition of the fact that information is an
important resource in a modern society. Effective communication and use of information can
contribute to increased productivity and competitiveness in industry and commerce; it can
make a valuable contribution to public services like education and healthcare; it can give effect
to the rights of citizens; it can change employment and working patterns and create new jobs,
and it can open up new opportunities and markets for leisure and recreation.

What the developments in Europe and in the United States have done is to acknowledge that
large-scale investment in communications networks is needed to make these things possible.
These network investments need to be supported by the development of standards, regulations
and protocols and by the creation of information content services.

In the European Union, the United States and in Japan, the creation of the information
infrastructure is being stimulated by government policy but is reliant on the investment impetus
of the private sector.

1.1 The Common Eurcpean Information Area

The aim of the Common Information Area is to create within the European Union an
environment within which information is widely and easily communicated and used as a
resource to promote growth; to increase competitiveness; and to expand employment.

The plans for development are set out in the European Commission's White Paper, _Growth,_
_competitiveness and employment: the challenges andways forward into the 21st century:_

v A system of information highways for the Community that will allow the best means to create,
manage, transfer and access information. It involves:

 - the creation of infrastmctures (cable and land or satellite-based broadcast communication),
including integrated digital networks;

 - the development of sen/ices (electronic images, databases, electronic mail);

 - promoting applications (teleworking, telctraining, telemedicine and linked
administrations).'

17

_**MO Annual Report 1993 - 1994**_ _**Section 1**_

The plan for a Common Information Area is part of-a wider strategy to develop and improve
European transport, energy and communications networks.

The idea for network improvement to stimulate growth and employment was first set out at the
Edinburgh meeting of the European Council in December 1992. It was developed further at
the Copenhagen Summit in June 1993 and the full plans were embodied in the _White Paper_
that was agreed at the Brussels Summit in December 1993. The discussion was continued in
1994, with the presentation of a report entitled _Europe and the global information society;_
_recommendations to the European_ _Council,_ presented at the Corfu Summit. Finally, it has
resulted in a Communication from the Commission to Council and Parliament entitled _Europe's_
_**Way**_ _**to**_ _**the**_ _**Information Society**_ **-** _**An Action Plan.**_

The proposals for the Common Information Area involve much more than the creation of the
telecommunications networks. The _White Paper_ emphasises the importance of developing
services and applications that will stimulate demand for the networks. The action plan is based
on five priorities:

_**1 Promote the use of information technologies**_

 - Launch European projects on applications and public service and strengthen co-operation
between administrations,

 - Promote teleworking.

 - Ensure closer involvement of users in the drafting and implementation of technology
policies. . ',   - •

_**2 Provide basic trans-European services**_

_•_ Develop the basic ISDN and broadband networks.

 - Ensure network interoperability.

 - Ensure closer co-operation between telecommunications policies and aid from the
Structural Funds.

_**3**_ _**Create an appropriate regulatory framework**_

 - End distortions of competition.

 - Guarantee a universal service.

 - Speed up standardisation.

 - Protect privacy and ensure the security of information and communication systems.

 - Extfend intellectual property law.

1!

_MO Annual Report 1993_ _-_ _1994_ _Section 1_

_**4 Develop training on**_ _**n&v**_ _**technologies**_

 - Encourage acquisition of the basic knowledge required to use the new technologies and to
exploit their potential.

 - Ensure widespread use of new technologies in teaching and training.

 - Adapt the training for engineers and researc vers.

**t**

_**5 Improve industrial and technological performance**_

 - Increase the RTD effort and adapt it to the new market conditions.

 - Promote industry and technology watch.

 - Take up the results of RTD in industrial applications.

 - Negotiate equitable conditions of access to the competitive market at world level.

To achieve these goals the _White Paper_ sets out nine strategic projects that are planned to take
place between 1994 and 1999. These projects are listed in Table 1.1.

Table 1.1 shows that the strategic projects will require an investment of ECU 67bn. This is
only part of a total investment of ECU 150bn that is estimated to be needed over the next six
to ten years. Most of this investment will come from the private sector. The Member States
and the European Union will play a marginal role to provide the incentive for private investor;-.
ECU 5bn could be contributed from the Union's Structural Funds and from the Fourth

Framework Programme. It is clear, however, that the main cost of creating the Conunon
Information Area will fall to the private investors. The role of the European Union will be:

 - To act as a catalyst in providing a financial contribution for feasibility studies, pilot
projects, developing common standards, etc.

 - To promote co-operation and co-ordination between operators.

 - To create platforms to bring together customers, industry and operators with a common
goal of interconnectivity and interoperability.

 - To reduce uncertainty by creating a stable regulatory framework and by studying market
demand.

19

_MO Annual Report 1993 - 1994_ _Section 1_

Tsbte 1.1 Strategic Projects for the Common Information Area

Network elements Strategic projects Investment
required

1994-1999

, (BECU)
Interconnected advanced Establishment of high-speed 20

networks communication network

Consolidation of integrated 15
services digital network

Genera! electronic Electronic access to information 1

services

Electronic mail 1

Electronic images: interactive video 10

I ser^iœs

ïelemalic applications Teleworking 3

Links between administrations 7

Teletraining 3

I Telemedicine 7_

I Total I 67 1

To take forward the _Wliite_ _Paper_ recommendations a Task Force on European Information
Infrastmctures was established with a direct mandate from the European Council. The Task
Force was Chaired by Martin Bangemann, Commissioner for Industry and
Telecommunications. The Task Force established two working groups. One, headed by Carlo
de Benedetti of Olivetti, examined the economic and technical aspects. The other, lead by
Etienne Davignon of the Société Générale de Belgique, considered the regulatory and political
aspects. The Task Force was responsible for the submission of a report entitled _Europe and_
_the_ _global_ _information society; recommendations to the European Council_ at the Corfu
Summit in June 1994.

The Bangemann report stressed that the creation of an information society was an inevitable
result of the teciinological revolution currently underway, and that it was therefore essential for
government and industry to develop strategies for the exploitation of new opportunities. The
strategy proposed for Europe was based upon the opening up of markets to competition and
the deregulation of those infrastructures and services which are still under monopoly. The
objective of such action would be to stimulate information infrastructure and service markets,
so that they rapidly achieve a critical mass.

The report's main recommendations to Member States were to:

 - accelerate the continuing process of liberalisation of the telecommunications sector;

20

_MO Annual Report 1993_ - _1994_ _Section 1_

- implement interconnection and interoperability of information infrastmctures and
services;

- review the European standardisation process so as to increase its speed and
responsiveness to markets;

 - adjust tariffs in order to bring them into line with rates in other advanced industrialised
regions;

_9_ establish a common and agreed regulatory framework for the protection of intellectual
property rights, privacy and security;

 - make a swift decision on the Commission's proposed Directive on data protection;

0 pay attention to the adverse effects of national media ownership rules with a view to
harmonisation.

ensure an efficient application of competition rules to allow for market forces to drive
innovation and development of the new markers.

The report stressed the need to strengthen the network infrastructure, and special priority was
given to the extension of Euro-ISDN and broadband infrastructure. The need for reduction of
mobile and satellite network tariffs and the promotion of global systems in Europe and
internationally was also discussed. Immediate applications for the new infrastructure would
need to be demonstrated, and the report suggested ten priority areas: teleworking; distance
learning; a network for universities and research centres; telematics services for SMEs; road
traffic management; air traffic control; healthcare networks; electronic tendering; transEuropean public administration networks and city information highways. The investment
required for infrastructure development should come from the private sector, although the
public sector would have a role in refocussing existing expenditure.

Following the European Council's discussion of the report, the Greek Presidency concluded
that _"the_ _current unprecedented technological revolution in the area of information opens up_
_vast possibilities for employment and the quality of life while simultaneously representing a_
_major_ _challenge'._ Member State governments would have an important role to play in backing
up technology developments, giving political impetus and providing a clear regulatory
framework. They would also need to set an example in the ten. application areas recommended
by the report.

Given the complexity of the issues at stake, it was suggested that a permanent co-ordination
instrument was set up to ensure all parties involved were working along the same lines. It was
also suggested that each Member State should appoint a person at ministerial level to coordinate political, financial and regulatory aspects and to ensure a co-ordinated approach in the
Council.

_MO Annual Report 1993 - 1994_ _Section 1_

In response to the Bangemann report and the discussions held at the Corfu Summit, a
Communication from the Commission was presented to the Council and the European
Parliament on _Europe's Way to the Information Society_ - _An Action Plan._

The Communication embraced the principles of the Bangemann report and focused in
particular on the legal and regulatory framework, the need for liberalisation of networks and
provision of basic services, applications and content, social and cultural implications, and the
Commission's promotional activities. For each area, a timetable was provided, outlining
targets for adoption of directives, implementation of research and development programmes
and the submission of Commission proposals on future action.

**1.2** **The US National Information infrastructure**

The election of the Clinton Administration in the United States marked the beginning of a
programme of investment in the information infrastmcture. The goal is very similar to that of
the Common Information Area:

to create 'a seamless web of communications networks, computers, databases and
consumer electronics that will put vast amounts of information at users' fingertips.
Development of the National Information Infrastmcture can help to unleash an information
revolution that will change forever the way people live, work and interact with each other.'
_(Tlie_ _National Information Infrastructure: Agenda for Action_ 1993.)

The programme is the culmination of a number of initiatives taken by the US Congress in
recent years and it is closely associated with Vice-President Al Gore who, for example,
introduced the high performance computing and communications initiative in 1991 when he
was a Senator. Many commentators have drawn the analogy between the National
Information Infrastmcture programme and the creation of the inter-state highway network in
the 1950s following the initiative of President Eisenhower.

The expected scale of the development is considerable. John Scully, Chairman of the Apple
Corporation is quoted as having estimated that by the beginning of the next century, the
information infrastmcture will be generating annual revenues that are equivalent to half of the
current US GNP. Such revenues will not, however, be possible without major investment.
The US Government has estimated that a total investment of over ECU 86bn will be required
between 1994 and 1997. ECU 52bn of this had been announced by the end of 1993. Just as in
Europe, -however, the private sector was the main contributor with the government
contributing only ECU 4.3bn over the period from 1993 to 1997.

The expected role of the US Government is quite clear: its prime purpose is to create the
conditions that will stimulate private sector investment. To do this it will implement a
programme of deregulation, create tax and other incentives and undertake direct investment
through grants for public-sector projects. These direct grants are expected to ensure that
public services like schools, research institutes, libraries and healthcare services benefit fully
from the programme.

_MO Annual Report 1993 - 1994_ _Section 1_

During 1993 the process of deregulation began. For example, the 1984 Cable Act was
amended to remove the cross-ownership restriction. This enables telephone companies to offer
cable television. In exchange, the telephone companies are required to make their networks
available to independent providers of telephone and cable services. Another barrier removed
during the year was the regulation that prevented local telephone companies competing with
AT&T and MCI for long-distance traffic.

Encouraged by these deregulatory measures, there has been a flurry of mergers and joint
venture deals. One of the most widely reported was the Nynex/Viacom/Paramount deal, which
reflected the converging interests of telecommunications, cable and content industries. The
largest of the deals announced in 1993 was the proposed ECU 28bn merger of the Bell
Atlantic corporation and Tele-Communications Inc. This v/ould have been the biggest
corporate merger ever. Although the deal was called off early in 1994, the companies are
continuing to work together on joint ventures and the failure of the merger is seen by many to
be a temporary halt in a general trend towards merger and corporate acquisition. Other deals
that were successfully completed, such as that between US West and Time Warner, brought
together information infrastmcture and information content services to take advantage of the
opportunities offered by the National Information Infrastmcture. (See Section 2.3.1.)

There is considerable debate about the technological nature of the development. Some people
argue that the goal should be a full optical fibre network. Others claim that to connect all US
homes and businesses with optical fibres would cost ECU 345bn and would take over 20
years. They argue instead for optical fibres to be used for the main tmnk routes and longdistance lines but for the local connections to be by means of coaxial copper cable that has a
similar capacity over distances of up to 0.5 kilometres. Some influential commentators, like
Mitchell Kapor from the Electronic Frontier Foundation, argue that an ISDN network would
be sufficient to meet foreseeable needs, while others criticise this approach arguing that it can
only ever be an interim solution. It is clear that there is still a long way to go before the
operational parameters of the infrastmcture are decided upon. 1993 saw the terms of the
debate being more clearly defined.

To carry through the development, the US Government has established an Information
Infrastructure Task Force chaired by Secretary of Commerce Ron Brown. This will work
through a series of four committees and an advisory council.

In September 1993 the Task Force published its _Agenda for action._ This sets out the basic
principles and objectives that will shape future developments. The principles and objectives are

to: .

 - promote private sector investment through appropriate tax and regulatory policies;

« extend the 'universal service' concept to ensure that the information resources are available
to all at affordable prices;

c act as a catalyst to promote technological innovation and new applications;

_MO Annual Report 1993_ - _1994_ _Section 1_

promote seamless, interactive, user-driven operation of the National Information
Infrastmcture;

ensure information security and network reliability;

improve management of the radio frequency spectrum;

protect intellectual property rights;

co-ordinate with other levels of government and with other nations;

provide access to government information and to improve government procurement.

It is clear that there is a great deal to be achieved before the National Information
Infrastmcture becomes a reality. There are also obvious parallels between the drive towards a
National Information Infrastmcture and the European Union's Common Information Area.
Currently the US has a significant lead in developments. The existing networks are better
established and there are fewer barriers than in Europe where national borders and cultural and
linguistic differences complicate the development of trans-European networks. There also
appears to be a greater public awareness of, and enthusiasm for, the development of
information networks in the US than there is within Europe.

1.3 Developments in Japan

The Japanese Government has also identified the need to develop information networks and
information sendees to stimulate growth and to improve further the productivity of Japanese
industry and commerce. There are, however, significant differences in the way they have
approached the development.

The first point to note is the fact that the approach has been gradual and has been taking place
over a number of years. The Japanese Government also plays a more significant role in
stimulating and in meeting the cost of the development.

The initial emphasis in Japanese information policy was firmly directed towards scientific
information. In the mid-eighties, however, the scope of policies broadened and became more
concerned with the use of information as an industrial and commercial resource to improve the
overall level of productivity within the Japanese economy. There have been a range of policies
to stimulate the computer industiy, the telecommunications netv/ork and the information
services and content sectors. 1993 saw the advancement of the Japanese information sector on
all these fronts.

The Japanese Government has been investing heavily in the telecommunications infrastmcture
for many years. Recently, two programmes have been launched to increase the carrying
capacity of the network. The government has announced plans for a ECU 24m high-speed
network linking academic and research communities through a scries of national institutes.

_MO Annual Report 1993_ - _1994_ _Section 1_

This will provide access to database services and to computing resources. The network should
be complete by 1997.

In May 1994, MITI's Industrial Structure Council issued a report entitled _Program for a_
_Communication Infrastructure_ which dealt with the diversification of Japan's information
infrastmcture strategy, covering the need for optical fibre networks and multimedia
applications. At the same time, the Telecommunications Council of the Ministry of Posts and
Telecommunications produced a report on _Reforms to Build an Intellectually Intensive Society_
_Towards the 21st Century._ According to this report, multimedia industries will overtake the
automobile industry in economic significance and job creation. The report forecasts that by
2010 a market worth over Y 123,000bn (ECU 820bn) will have been created, thanks to the
availability of high capacity network infrastmcture. It also forecasts 2.4 million jobs by the
same year, with 75 million people having access to interactive and multimedia services via
optical fibre. Investment of Y 128,000bn (ECU 850bn) will be required for the installation of
% fibre to the pavement' and Tibre to the home', with private enterprise playing a central role.

Meanwhile, Japan has signed an agreement with South Korea to create links between the two
countries' information infrastructures. The South Korean Minister of Communications recently
announced that a high speed information network would be completed by 2015 - a project of
some US$ 55bn (ECU 47.3bn). Investment money will come partly from the sale of Korea
Telecom shares by the government.

A number of other developments have taken place in Japan which are linked to its network
strategy. The government has done much to stimulate the development of the Japanese
database industry. It is estimated that in 1993, the government spent in excess of ECU 400m
on direct activities to stimulate the database industry and the use of electronic information
services. In addition to these direct activities, the Ministry of International Trade and Industry
has initiated a wide range of measures to strengthen the Japanese database industry, including
tax concessions to cover the cost of compiling databases. Initially these were aimed at
strengthening the internal Japanese electronic information services market. In recent years the
emphasis appears to be shifting towards globalisation and exporting.

Japan has not identified, an overall goal to compare with the Common Information Area or the
National Information Infrastmcture. What it has is a range of policy initiatives, some of which
began ten or 15 years ago, that are backed by substantial levels of public investment. The
outcome, however, is likely to be similar to that which is planned for Europe and the US: an
information-intensive society.

1.4 Singapore: A Case Study in Information Infrastructure
Development

The country that has gone furthest in developing an infonnation society is Singapore. The
scope for expanding its economy is limited by the size of the country and, in particular, by the
necessary constraint on population growth. To achieve higher levels of prosperity, the
government embarked in the early 1980s _on_ a programme of economic development aimed at

25

_MO Annual Report 1993 - 1994_ _Section!_

increasing the value-added per worker in Singapore. The means of achieving this was. the
creation of an information-intensive society or, as they put it, the creation of an intelligent
island.

The overall strategy involved a combination of strong government and free market-forces,
linked to a growth plan that emphasised both the supply side and the demand side of the
information technology sector, coupled with the importation of technology and the
development of an indigenous information technology industry.

The first phase of development was aimed at stimulating the use of computers in government.
From 1980 to 1985 the government invested heavily in the education and training of computer
professionals and worked to stimulate the demand for information technology by introducing
computing throughout the public service. It established the National Computer Board to
oversee the work.

From 1985 to 1989 the emphasis shifted to the extension of computing use throughout the
country, linked to the development of telecommunications networks. The island now has the
world's most sophisticated telecommunications system offering high speed and high capacity at
veiy low cost. To stimulate use of the networks, the government launched a number of key
applications like Electronic Data Interchange to handle administrative transactions in the Port
of Singapore. This alone brought about net savings estimated at over ECU 850m a year.

The third phase, running from 1989 to 2007 is the creation of a fully intelligent island. In this
phase the emphasis has shifted from computing and telecommunications to information
content. Further efforts are being made to introduce electronic applications and information
services to make full use of the capacity of the system. Support is also given to the creation of
information content services like the educational programmes that are being made available
through the Singapore videotex service.

Throughout, the development has been firmly led by the Singapore Government and the
creation of the information infrastmcture has been seen as a key element in the overall national
economic strategy. It has set out its overall aims and objectives in clear policy documents and
has taken the lead in developing products and services and in stimulating take-up by the private
sector. It has also invested heavily in education and training at all levels and has sought to
ensure that all parts of the public sector make full use of the electronic information
opportunities that exist.

The result is the emergence of a significant nodal point in the global information system - an
information-rich society that is proving to be an attractive location for multi-national
companies. More significantly, the process of development has been associated with
consistently high annual rates of growth of GNP. In 1993 the GNP increased by 9.7 per cent.

1.5 The Internet

The Internet provides an example of what could happen if the information infrastmcture
developments take off. In the US, the Internet is expected to represent a major focus for

26

_MO Annual Report 1993 - 1994_ _Section 1_

infrastmcture development, at least in the short term. (The development and use of the
Internet is considered in greater detail in Section 7.8.1.)

During 1993 use of the Internet has grown exponentially. In June 1994 the Internet Society
said that 3.2 million host computers were connected, linking 45,000 networks and 30 million
users in over 100 countries. The number of users and the volume of traffic has grown so
quickly that the network is slowing down, but for the moment this does not appear to have
deterred new users from joining. Slow response times do, however, represent an annoyance to
frequent users. .

The Internet originated in a telecommunications network developed for military and civil
defence purposes by the US Government. In 1983 the non-military functions were separated
out into Arpanet, a public access network mainly for the support of communication between
academics and researchers, with the National Science Foundation as the co-ordinating body.
Since then it has grown beyond recognition.

It is misleading to describe it as a network. In reality it is a federation of computer networks
throughout the world, linked by a set of protocols known as TCP/IP. These protocols were
widely adopted by universities in the US and in the late 1980s spread worldwide through thenincorporation into the UNIX operating system. Within Europe an attempt was made to adhere
to the ISO/CCITT standards but these have, to a great extent, been overtaken by TCP/IP. The
system was easy to operate and the access that it provided was very cheap. The Internet took
off first among the academic community and, more recently, within industry and commerce.

Three applications dominate Internet use: electronic mail, interactive access and file transfer.
Together they are encouraging people to make much more use of information as a resource.
Users are also encouraged by the fact that they do not require dedicated contracts and
passwords for information access.

There are, however, problems. The quantity of information available through the Internet is so
vast that users experience significant difficulties navigating their way around the system.
Software of varying degrees of sophistication, such as the World-Wide-Web and Mosaic, has
been introduced to reduce the navigational problems but they have not been fully overcome. It
is also easy to become over-loaded with information through participation in electronic bulletin
boards and other services. Other problems concern the quality of the information. The lack of
any editorial control means that there will always be doubts about the accuracy and currency of
the information contained in the system.

Users have to subscribe to an agency that provides connections to the Internet. In some cases
these connection agencies are themselves networks linking institutions together, like EARN,
the European Academic Research Network or EUnet the European Network that links
companies and institutions. Other connections are provided by specialist agencies like
DEMON. In some cases the connection agencies provide a range of added value services.

Until now the Internet has made relatively little impact on most conventional commercial online database services. Many users do, however, access databases, mainly those aimed at
academic markets, through the Internet and it is likely that this form of use will increase

**27**

_MO Annual Report 1993 -1994_ _Section 1_

significantly in the future. Commercial hosts, publishers and information providers are
beginning to explore the opportunities and there is likely to be a gradual emergence of a range
of new information services on the networks. The extent to which the Internet is used to

access commercial information services will depend on the establishment of procedures and
practices to deal with issues such as pricing, copyright and usage metering. Some progress has
been made in this area, and CommerceNet is an interesting recent example of an attempt to
create a commercial 'space' on the Internet where business can be transacted.

Above ail else, the Internet provides some form of confirmation that the increased capacity that
will be offered by the Common Information Area or the National Infonnation Infrastmcture
will be taken up.

1.6 Uncertainty

Many confident forecasts have been made in support of these large-scale information
infrastmcture development plans. Commentators have drawn analogies with the creation of
the railway and road networks and have argued that the information super-highways will make
a major contribution to. future economic success. Yet, despite all this confidence and
enthusiasm, there is still a considerable amount of uncertainty about the viability of the plans
and a degree of scepticism about the return on the investments involved.

The uncertainty is, in part, due to the confusion that surrounds the plans: confusion about the
appropriateness of the technologies; confusion about the scale and the nature of the demand;
confusion about the measures, that will be needed to trigger use of the networks; and confusion
about the respective roles of the public and private sectors.

The current pace of change is such that infrastmcture policy formulation is inevitably
somewhat tentative at this stage. The plans being developed in Europe, the USA and in Japan
represent positive first moves which can be built upon as the technology and market
environment settles down. Clarification of legal issues should bring some stability, as will the
co-ordinating activities of governments and the widespread introduction of public sector
applications.

_**no**_

2 THE INFORMATION SECTOR IN THE EUROPEAN ECONOMY

There is a general consensus amongst industrialists, technologists and politicians that the dawn
of the Information Age is upon us. Information, and access to electronic information delivery
channels, is expected to have a fundamental impact on the way in which we work, learn and
spend our leisure time. The increased demand for electronic information and entertainment
will have implications for all companies involved in these industries, whether they supply the
networks, computers, televisions or other consumer electronics. In anticipation of this
demand, companies in IT and communications are investing in new technologies from fibre
optic networks to intelligent set-top boxes for televisions.

The expected growth in demand for electronic information and entertainment will stimulate
investment in technology development, and the information sector is likely to take on a greater
overall importance in the European economy. If the predictions are correct, then the sector
will grow significantly in terms of revenues and employment. It also seems likely that the
various different elements of the information sector, previously represented by a number of
disparate industries, will come together to work on projects of mutual interest. In the longer
term, these alliances will be formalised through mergers and acquisitions - indeed, we are
seeing the beginnings of this process (see section 2.3.1). This phenomenon is one of the
factors which has led to an almost obsessive discussion of "convergence' in the information
sector, encompassing the information content and media industries, network providers,
software industry, computer and consumer electronics manufacturers.

2.1 The Convergence Phenomenon

Traditionally, the electronic information services industry has been considered to be made up
of the providers of information services and, to a lesser extent, the organisations involved in
providing the means of distribution and processing of such services. Thus, within its traditio ai
boundaries, the major stakeholders of the industry were the on-line database providers and
vendors, the real-time information service providers, the CD-ROM publishers and so on. As
such, the electronic information industry was an innovative, fast-growing, but nevertheless
small concern.

However, the range of organisations now wishing to claim a stake in the industry is far wider.
In particular, the organisations which provide the distribution infrastmcture and the equipment
which we use to access information services are consciously moving towards a position where
they form an integral part of the information industry, rather than acting as providers of
products or services to that industry. At the same time, the traditional electronic information
services industry, (and in particular, those who provide the information content), have
recognised the importance of making alliances with the companies which provide the means of
access to their services. These trends, together with technology developments across the

29

_MO Annual Report 1993_ - _1994_ _Section 2_

content, delivery and processing sectors, are increasingly being discussed under the umbrella
term - convergence.

The advent of multimedia and the promise of new markets in the provision of interactive
information and entertainment to consumers has perhaps been the decisive element in bringing
about these trends. Without the promise of interactive TV, CD-based multimedia and the like,
the opportunities offered by the traditional information industry would perhaps have been
insufficient to draw the interest or participation of media giants such as film and cable
companies and that of politicians.

The fact that the film, cable and telecommunications industries are gearing themselves up to
participate in the future of electronic information and entertainment services has meant that
general awareness of the electronic information world has been significantly raised. For the
first time, the concept of an information industry is beginning to take on meaning for a much
wider range of sectors and for the public in general. Governments have also recognised the
strategic importance of information infrastmctures, as highlighted in the first section of this
report.

Convergence is also a feature of technology change. In one sense, this can be seen in the
movement of consumer electronics and computing manufacturers towards a common
technology base. In broad terms, a computer was previously for processing text and figures
and a television was for viewing images - these distinctions are now being broken down and
computers and television sets are likely to resemble each other more and more in terms of
technology components.

In a wider sense, technology convergence can be seen in movements towards the creation of
the all-in-one information machine, incorporating a range of elements such as voice and fax
communication, word processing, access to local and remote data sets through portable
storage media and data networks and, of course, video, film and television viewing. A machine
capable of all of these functions is still a long way off, but during 1993 it became clear that it
was technically possible to integrate three or four of them quite successfully. At an even more
fundamental level, technology convergence is about the ability to store all kinds of data in a
digital format, and to exploit that data across a range of delivery channels.

2.1.1 The Composition of the Converging Information Sector

It is becoming increasingly difficult to scope and define the composition of the wider
information sector because so many organisations are moving beyond their traditional areas of
activity and operating across the full range of information-related industries. A symptom of
this trend is the growing number of cross-industry mergers, acquisitions and strategic alliances,
and the extent to which companies are making major investments in order to enter related
industry sectors. Nevertheless, Table 2.1 provides a broad view of the main components of the
consolidated information industries. The three broad groupings used in this table consist of:

information content - the intellectual property which forms the basis of an information
service, whether this be a piece of text, a collection of photographs, a film or a piece of music;

30

_MO Annual Report 1993_ - _1994_ _Section 2_

information delivery - electronic communications channels (such as telecommunications,
cable and satellite), or off-line distribution channels which are used by infonnation content
providers to distribute their services, and by users to access these services;

information processing - the hardware, software and communications equipment required by
users in order to view and process information and entertainment services, and by information
content producers in order to develop and design their services.

It is generally considered that the highest level of value resides with the information content.
After all, the delivery and processing sectors are there to fulfil the demand for information (and
to stimulate that demand), but are of little value without the content itself. Some
manufacturers and network providers now seem to be moving along the value chain towards
information content. Companies like Microsoft, as well as many of the public
telecommunications operators, are buying into content as a way of ensuring that they have a
role in the high-value end of the market. Again, this is dealt with in greater detail in the section
on Mergers and Acquisitions below.

Table 2.1 is by no means intended to be exhaustive in the primary and secondary industry
elements it includes, but provides an indicator of the breadth of products and services which
can be placed within the information sector grouping.

These elements form three very different industries, each with its own structure and valueadded service elements, and the differences between them in terms of scale and revenues are
enormous. And yet, these three industries are finding that, without a high level of cooperation, they will be unable to take full advantage of the information future. Without
alliances and, in some cases, investment in, the channels of delivery and viewing/receiving
equipment, information content producers have little hope of getting their services to the users.
Equally, the hardware manufacturers are finding that their products will not sell unless their
potential customers have a range of suitable content applications from which to choose. For
the carrier companies, multimedia, interactive TV and Video on Demand all offer good
prospects for major traffic increase. It is therefore in their interests to ensure that there is a
lively content industry to stimulate demand and network traffic. It may also be in their interest
to become content originators or suppliers themselves.

2.1.2 The Scale of the Converging Information Sector

There are, of course, dangers in over-stressing the convergence factor, and it would be foolish
to suggest at this stage that a coherent industry will arise incorporating electronics, information
technology, carrier, entertainment and infonnation businesses. Neither, in the first instance,
will the amalgamated turnovers, competitive strengths and employment capacities of each
sector be combined to form a super-industry with a huge influence upon the rest of economy
and society.

31

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Table 2.1 The Composition of the Wider Information Industry

I INFORMATION I INFORMATION I INFORMATION I

CONTENT DELIVERY PROCESSING

PRIMARY PRODUCERS PRIMARY INFRASTRUCTURE PRIMARY EQUIPMENT .

Print, electronic and multimedia Public telecommunications Computer & peripherals manuf.
publishing (PSTN)

Processor manufacturing
Film, video and TV programme Fibre optic networks
production/publishing Consumer electronics
Cable networks
Audio production/publishing Telecoms/satellite receiving
Satellite networks equipment

Radiowave, cellular and Operating software
mobile networks

Applications software
SECONDARY AGENTS SECONDARY SECONDARY PRODUCTS/SERVICES |
'& SERVICES INFRASTRUCTURE I

Trade, retail and specialist TV/radio broadcast channels Distribution, bundling and
distribution replication
Value-added network services
Design, specialist production Specialist programming/
and replication Intelligent 'superhighways' interface design

Rights brokerage and clearance Software production tools
Source: Policy Studies Institute |

_MO Annual Report 1993_ - _1994_ _Section 2_

Whilst keeping this proviso in. mind, it is useful to look at the comparative sizes of the
industries likely to play a role in.the wider information sector. In particular, employment in
this sector is the subject of close attention, largely because the EC White Paper on _Growth,_
_competitiveness and employment_ looks to the development of an'information infrastructure
and an information society as one of the key opportunities for employment growth. (See also
section 1.1.)

Table 2.2 fÇey Figures from tho Information Sector, TS32

Employees
, (Thousands)

Market Size
(BECU)

EU

93.4.,

8.4

35.6

118.0

95,0

US

1,500.0

1,210.0

1,048.1

145.0

120.0

1 ' »

Print Pub.

Electronic Pub.

Audio-visual**

Telecom

; IT, - ; ' )'.'.

EU

885.5

43.5

313.2

1,231.8

670.0

US

128.0

12.8

54.1

Consumer Elec.

110.0

78.0

Consumer Elec. 110.0 78.0 21.0 17.0

Source: _Key Indicators of the_ _Information_ _Industry_ _1992,_
IDATE

21.0

** Excludes the music industry

One of the dangers of devising comparative tables such as these is the difficulty in reconciling
discrepancies between market figures for the various sectors. IDATE's figures on print
publishing, for instance, vary from those of Consulting Trust quoted in section 7.10 of this
report. Neither is it particularly easy to make a comparative judgement of IDATE's audiovisual figures against those of OMSYC provided in section 7.9. Such discrepancies can only
partly be explained by the slightly different time periods referred to. Whilst accepting that
these figures are not necessarily definitive, they.do enable a preliminary comparison of the
various industry elements.

Placing all of these elements together, ÎDATE has estimated that the EU information sector
was worth some ECU 371bn in 1992 and around ECU 4771m in the US. Table 2.3 indicates

that the content sector as a whole makes up over a third of this total.

**: > j**

_MO Annual Report 1993_ - _1994_ _Section 2_

**Table 2.3** **Breakdown of the EU Information-Sector, 1992**

Audiovisual
10%
Consumer electronics
6% _jtf&_

IT equipment /vv^vzosx^
10% _vyyyyyffifr_

r [—] Print publishing
: E = ^ 25%

_WÈÊÊÊÊÈ_ 2%

IT services \ _£%s&w_
**15%** **^ ^ ^ P**

Telecom eqpt
6%

_z&z&y^_ Telecom services
26%

**Source:** **IDATE**

**2.2 The Component Sectors**

Having assessed the scale of the wider information sector as a whole, it is worth looking in
closer detail at the sizes and key trends in the component sectors: content, delivery and
processing.

**2.2.1 The Content Sector: Changing Roles and Opportunities**

Within th s great scheme of things, the traditional electronic information services sector bef ins
to look very small and insignificant. Certainly, there can be little comparison between the
combined turnovers of database producers, CD-ROM and multimedia publishers^ and those of
the IT and telecommunications giants. Even within the sector we have called information
content, the electronic publishing sector is dwarfed by the film and music businesses. IDATE's
calculations show electronic publishing to represent a mere 2 per cent of the total information
sector. (Detailed infDrmation about the size of the content markets is provided in section 7 of
this report.)

On the other hand, the perceived value of information content is rising rapidly. In particular,
the value of data sets from which individual data elements can be retrieved for interactive

searching (as opposed to linear data resources such as films) are becoming increasingly sought

**34**

_MO Annual Report 1993_ - _1994_ _Section 2_

after. The early signs are that this will manifest itself in a spate of acquisitions, industry
flotations and investments in content companies in the immediate future, pusliing up the market
value of the content business.

Certain elements of the electronic information services sector are likely to become closely
allied with, and structurally similar to, the applications software, games software and video and
audio industries. This will be particularly true of CD-ROM and other portable media,
including high-capacity floppy disks. Consumer and general interest CD-ROM publishers are
making use of distribution mechanisms already established in the mainstream software, games
and audio sectors, such as bundling of 'free' software with hardware, mail order and specialist
retail. As the market grows in terms of volume sales, such distribution methods are likely to
become more widely used by the infonnation industry, beginning in the consumer sector and
spreading to the business sector. The information industiy in turn will almost certainly be
influenced by the pricing and deaf structures for rights and distribution which have become
established in other software industries.

The trends towards convergence discussed here represent both a threat and an opportunity to
the electronic information services sector. The threat comes in the shape of the hardware,
software and delivery giants, many of which look set to develop their own electronic content,
avoiding expensive rights deals and taking greater control of their markets. Almost all of the
companies involved in the development of multimedia hardware, for instance, have their own
publishing programmes: Philips, Sony, 3DO, Apple and, of course Microsoft. Much of their
publishing activity is still based on licensing materials produced by third parties, but it is likely
that they will move towards content creation as well.

Another threat comes in the form of the hundreds of small multimedia development companies
which have sprung up over Europe. They started out as development houses for content
publishers, but many now aspire to electronic publishing and rights ownership themselves.
Franklin fore-shadowed this trend in the early 1990s by re-styling what was previously a small
handheld electronics company into an electronic reference publisher in its own right - and,
indeed, changing its name to Franklin Electronic Publishers. Similarly, moves by entertainment
and telecommunications network operators to acquire or invest in content companies are a
symptom of the desire to avoid dependence on the outside content industry.

It is not suggested that convergence will sweep away the electronic information services
sector. These trends will undoubtedly pass some electronic information companies by, just as
electronic publishing has so far passed by some print publishing companies. Such companies
will not necessarily collapse as a result, but their inability to adapt restricts the market
opportunities open to them.

So what opportunities are offered by the market forces which form the basis of convergence?
Companies which own content, and which are able to present that content in a digital format
for manipulation in a number of applications are in a strong position. In the short to medium
term at least, there is likely to be greater network capacity than there is suitable content,
placing such resources under considerable demand. This position will be re-inforced as
industries are further deregulated and competition betv/cen operators of delivery channels and
networks gets fiercer.

35

_MO Annual Report 1993_ - _1994_ _Section 2_

To exploit this opportunity, content companies will need to pursue alliances with the
technology and network providers, or set up rights deals with electronic publishing partners for
third-party development across a suitable range of sectors and technologies. It is likely to be
some while before the high capacity networks are fully functional, and content companies
therefore have a little time to develop their rights acquisition strategies, build up a portfolio of
electronically manipulable products and foster expertise in software development.

The CD-ROM, multimedia and on-line businesses which have been built up by publishing and
infonnation companies will not be destroyed by the availability of other forms of distribution or
by the effects of convergence. The efforts of converging industries to create a mass market for
electronic information and entertainment products can only help to raise awareness of, and
demand for, such products, whether they be delivered on optical disc for computer use, down a
telephone line or as part of a handheld reference device.

The professional information sector is likely to be under less of a threat from the computing
and network giants: their expertise and market penetration would be much harder to replicate
than those in some of the entertainment sectors. Furthermore, the skills and expertise offered
by the publishing industry in commissioning, editing, rights handling and distribution will
continue to have a unique value in the new information world.

2.2.2 The Delivery Sector: Telecommunications, Cable and Satellite

The world market for telecommunications services (as opposed to services _and_ equipment,
indicated in Table 2.2) was worth ECU 328.7bn in 1992, according to research carried out by
IDATE. Of this total, the EU accounted for an estimated ECU 91.9bn, or approximately 28
per cent of the total, as indicated in Table 2.4 below.

The breakdown of the EU market by service type shown in Table 2.5 indicates that data
networks, value-added network services (VANS) and mobile services account for a relatively
small proportion of the total, but are experiencing high growth rates.

The penetration of PSTN lines per 100 inhabitants varies considerably throughout the EU, with
only 27.3 lines per 100 inhabitants in Portugal by 1992, but 59.1 in Denmark. Similarly, the
development of digital telephone networks in the local area (local loop) varies considerably.
Table 2.6 shows that in Germany, the proportion of the local loop digitised was estimated at
13 per cent in 1992, whilst in France it may have been as high as 83.2 per cent.

36

_MO_ _Annual Report 1993 - 1994_ _Section 2_

Table 2.4 Geographical Distribution of the World Market for
Telecommunications Services, 1S92

North America 38%

Japan 13%

Oceania 2%

EFTA 4%

Devlp'g Countries 15%

European Union 28%

Source: IDATE

Table 2.5 Breakdown of the EU Telecommunications Services Market by
Activity, 1991-1992

Annual

Growth - %

+ 4.1

   - 10.0

+ 14.0

+ 20.0

Services

Basic services on the PSTN

Telex, télétex and telegraph

Data transmission

Generic services and VANS

1991

BECU

71.7

1.1

6.8

2.9

1992

BECU

74.6

1.0

7.8

3.5

Mobile telecomms services 4.2 5.0 + 20.0

Sources: Operators' Annual Reports, IDATE, CIT Research, Saoatel, ITU

5.0

Mobile telecomms services

4.2

37

_MO Annual Report_ _1993_ - _1994_ _Section_ _2_

Table 2.6 Telecommunications infrastructure in 1932

Main telephone
lines in operation

(millions)

Penetration of
PSTN lines per
100 inhabitants

Digitisation rate of
the local loop
(% estimates)

**42.3**

59.1

44.8

**31.1**

35.7

**53.0**

**43.7**

**41.1**

50.6

49.3

27.3

45.9

44.3

Belgium
Denmark
Germany
Ireland
Spain
France

Greece

Belgium 4.3 **42.3** **52.0**
Denmark 3.0 59.1 **40.0**
Germany 35.6 44.8 **13.0**
Ireland **1.1** **31.1** **65.0**
Spain **13.8** 35.7 **36.4**
France 30.1 **53.0** **83.2**
Greece 4.4 **43.7** **20.0**

Italy **23.7** **41.1** **48.4**
Luxembourg 0.2 50.6 **56.0**
Netherlands 7.4 49.3 **80.0**
Portugal 2.9 27.3 **50.0**
UK 26.1 45.9 **61.6**

Total/Ave rage 152.6 44.3 **49.0**

Source: ITU, BIS Strategic Decisions, IDATE

Italy
Luxembourg
Netherlands
Portugal
UK

Total/Ave rage

4.3

3.0

35.6

**1.1**

**13.8**

30.1

4.4

**23.7**

0.2

7.4

2.9

26.1

152.6

The widespread availability of standard and digital telephone lines is an essential feature of the
electronic information industry. Moreover, an even coverage of telecommunications
infrastructure is fundamental to the concept of a Common Information Space. Policy-making
and investment decisions (both public and private sector) will therefore need to be made in the
light of these issues. Meanwhile, as deregulation gathers pace and further attention is paid to
reducing and harmonising tariff structures, an increased demand for telecommunications
services is expected, especially for international and mobile communications.

Tariff reductions for mobile communications were recommended by the Bangemann report and
Commission Action Plan, and the Green Paper on Mobile and Personal Communications
proposed a number of deregulation and network interconnection activities. These
developments, together with the prospect of an upsurge in demand, will encourage private
sector initiatives to create global, mobile communications networks for a mass market.

The Green Paper sets out four key objectives:

 - to allow the creation of an EU market for services, equipment and
mobile terminals;

 - to establish common principles for the establishment of an
infrastructure for mobile communications;

to promote the transformation or the market for mobile
communications into a mass market for personal communications;

_MO Annual Report 1993 - 1994_ _Section 2_

_•_ to facilitate and promote the creation of pan-European networks and
services and ensure that the sector develops according to the public
interest.

The support given to these principles by the Bangemann report and by the Action Plan
produced by the Commission in response to the Bangemann report is likely to encourage rapid
action. The target date set out in the Action Plan for adoption of the Green Paper on Mobile
and Personal Communications by the Commission is the end of 1994 or early 1995.

Meanwhile, deregulation in the US has led to a flurry of activity in the area of global satellite
networks for mobile communications. During the spring of 1994, a number of
communications giants put proposals into the US Federal Communications Commission for the
development of such networks.

Teledisc, for instance, is a Washington-based company with investment from McCaw Cellular
and Microsoft. Teledisc's proposal involves launching 840 satellites and is intended to provide
wireless access to data communications channels of all bandwidths and be available to users

worldwide, regardless of the sophistication of national telecommunications infrastructure.
Motorola's Iridium will use 66 sophisticated satellites to offer mobile services all over the
world. Networks such as these will allow fast delivery of complex digital signals, enabling
teleconferencing and access to multimedia services. They will therefore have a significant
impact upon the creation of a mass market for such services and will not be constrained by the
ability of national administrations and PTOs to invest heavily in fibre optic infrastructure.

However, following the excitement surrounding the initial' announcements, there has been
some scepticism as to the actual implementation of these proposals. At this stage, it seems
unlikely that high-bandwidth, mobile satellite networks will be fully functional much before the
end of the century. Although there are some rather less ambitious projects which will bear
fruit in the next couple of years (Orbeomm in Virginia, for example, hopes to have a 26
satellite network in place by 1996 for simple digital message transmission), the impact of
mobile communications on the market for electronic information and entertainment services is

likely to be relatively minor in the short term. Over a longer period, however, the signs are
that they will have a fundamental effect on the transmission and use of multimedia services.

According to the International Telecommunications Union (ITU) _World Telecommunications_
_Development Report_ published in March 1994, globalisation in telecommunications markets is
a growing trend and structural changes in the market in response to the globalisation and
deregulation processes will continue to take place.

Liberalisation in European telecommunications policy has already served to encourage
competition amongst operators and, indeed, to stimulate investment in Europe from US
companies, in particular from AT&T, MCI, Sprint and the Regional Bell companies. US
investment and joint venture projects are likely to play an important role in the development of
an advanced information infrastructure in the EU, but there are concerns within the
telecommunications industry that, in the .longer term, this may result in European operators
having less control over their home market.

39

_MO Annual Report 1993_ - _1994_ _Section 2_

European PTOs have tended to perform quite well against their counterparts worldwide, and in
1992 accounted for four of the top ten. The US accounted for five and Japan one. (See Table
2.7.)

Table 2.7 Top Ten Public Telecommunications Operators, 1992

Revenues US$bn

Operator
NTT

AT&T

DBP Telekom

BT

France Telecom

SIP

BellSouth
Nynex
GTE

Bell Atlantic

Country

Revenues BECU

Japan

NTT Japan 51.354 44
AT&T USA 39.580 34
DBP Telekom Germany 34.550 30
BT UK 23.379 20

France Telecom France 23.164 20
SIP Italy 17.492 15
BellSouth USA 15.202 13
Nynex USA 13.155 11
GTE USA 12.644 11
Bell Atlantic USA 12.093 10

Source: International Telecommunications Union

USA
Germany

51.354

39.580

34.550

23.379

23.164

17.492

15.202

13.155

12.644

12.093

UK

France

Italy
USA

USA

USA

USA

The cable and satellite sectors both grew substantially in 1993, mainly on the back of television
services, but with a certain amount of penetration into the telecommunications sector and a
promising outlook for satellite-based business services. According to _Cable and Satellite_
_Europe,_ there were at least 10.7 million satellite dishes installed in Europe in 1993, of which up
to 64 per cent could be accounted for by Germany and the UK. Around 1.1 million dishes are
thought to have been installed throughout Europe in 1993. Surprisingly, Poland emerged as
Europe's third largest market, with conservative estimates putting the installed base at around
750,000. The penetration of cable, which is likely to be a crucial factor in the early
development of intelligent, interactive network services, also increased substantially during
1993. (See Table 2.8.)

The lion's share of cable and satellite industry revenues continues to be concentrated around
consumer entertainment services, although there are signs that business markets are growing
rapidly. The European market for satellite business services was estimated to have grown by
nearly 27 per cent in. 1992 from ECU 267m to ECU 339m (source: CIT Publications, 1994).
Major European pla} [r] ers in the provision of satellite communications for business include DBP
Telekom and Maxat (a France Telecom / Cogecom subsidiary), as well as SIS, a private UK
operator which also dominates the market for the distribution of racing data to betting shops in
the UK.

Business infonnation services delivered by satellite constitute a small market and are mainly
concentrated around financial and trading information. The use of satellite for video
conferencing has grown insubstantially, possibly as a result of the wider availability of ISDN.
In 1992, video conferencing service revenues amounted to around ECU llm, a rise of ECU
2m since the previous year. Meanwhile, one of the biggest growth areas in the satellite market
is expected to be business television.

40

_MO Annual Report 1993 - 1994_ _Section 2_

Table 2.8 Cable and Satellite Penetration in Europe, 1S33

Country Cable Connections
(000s)

Satell
(000.«

te Dishes

```
    500

    10

    150

    15

    350

   4,200

    180

    50

    100

     2

    250

    160

    750

    100

    150

    325

```

Austria

Belgium
Denmark

Finland

France
Germany
Hungary
Ireland
Italy
Luxembourg
Netherlands
Norway
Poland
Portugal
Spain
Sweden

Switzerland

```
UK

```

```
 967

3,725

 1,323

  780

 1,206

13,116

  749

 '400

 negl.

  117

 5,700

```

```
 643

 600

  10

 749

1,931

1,908

```

Cable Penetration

Per Cent*

```
       32.3

       98.0

       57.3

       36.3

       5.9

       39.3

       21.4

       40.0

       negl.

       81.4

       92.0

       36.6

```

```
 6.0

 0.3

 6.6

50.3

77.1

```

Switzerland `1,908` `77.1` `40`
```
UK 504 2.3 2,662
```

Source: Cable and Satellite Europe, January 1994

```
504

```

```
2.3

```

 - indicates per cent penetration into TV homes
** rough estimates only

2.2.3 The Processing Sector: Hardware, Software and IT

The European IT market has suffered alongside many others from the effects of recession.
The hardware sector has faced considerable difficulties in adapting to a number of new market
conditions: shrinking demand for mainframes, dramatic falls in PC prices and the emergence of
a new form of demand from the small office and home office sectors. Meanwhile, price
competition and battles between applications manufacturers for market domination have made
this a challenging period for the software industry. Hardware and software growth rates
during the last half of 1992 and first half of 1993 slowed considerably throughout most of
Europe, although general economic recovery during 1994 was expected to prevent growth
rates from falling further. Growth rates in double figures, however, are only expected in
countries where IT market development started later, such as Greece and Portugal. Table 2.9
shows growth rates between 1990 and 1994 in European countries.

Lack of substantial growth in the IT sector can largely be accounted for by the decline in the
hardware market, which has been particularly severe for multi-user systems, especially large
and medium-scale computers. The European Information Technology Observatory (EITO)
estimates that hardware revenues shrank by 3.1 per cent during 1993. Table 2.10 shows that,

41

_MO Annual Report 1993 - 1994_ _Section 2_

in comparison, the software market has performed well, achieving growth rates of 8.2 per cent,
expected to rise to 8.5 per cent during 1994.

Table 2.9 Percentage IT Market Growth by Region, 1990-1994

1990/1991

1993/1994

1991/1992 | 1S92/1S93
4.1

3.5

2.5

Austria

Austria 1.4 4.1 5.6 6.2

Belgium 5.9 1.1 3.0 3.2
Denmark 3.0 -1.0 3.0 .3.0

Finland -2.4 -6.0 0.2 4.0

France 3.1 1.7 0.6 3.2
Germany 7.7 6.2 2.0 4.9
Greece 19.3 16.6 17.3 19.0

Ireland 5.0 6.6 5.2 5.5
Italy 5.8 2.0 0.5 2.4
Netherlands 4.2 2.9 1.5 3.9
Norway 6.3 -1.8 1.0 1.4
Portugal 20.6 18.5 16.3 16.4
Spain 5.6 -1.2 -0.2 2.0
Sweden 2.0 -5.7 -0.7 3.2
Switzerland 1.2 -0.6 1.7 3.2
UK 1.2 3.5 2.4 5.5
Western Europe 4.4 2.5 1.6 4.2

Source: EITO

Belgium
Denmark

Finland

France
Germany
Greece

Ireland
Italy
Netherlands
Norway
Portugal
Spain
Sweden

Switzerland

UK

Western Europe

1.4

5.9

3.0

-2.4

3.1

7.7

19.3

5.0

5.8

4.2

6.3

20.6

5.6

2.0

1.2

1.2

4.4

1.1

-1.0

-6.0

1.7

6.2

16.6

6.6

2.0

2.9

-1.8

18.5

-1.2

-5.7

-0.6

5.6

3.0

3.0

0.2

0.6

2.0

17.3

5.2

0.5

1.5

1.0

16.3

-0.2

-0.7

1.7

2.4

1.6

The home market is becoming increasingly important for the PC industry. A growing
proportion of demand is generc-ed by professionals using computers at home, self-employed
professionals and small, home-based companies. Such demand is already thought to be outstripping traditional office demand in the US. In 1993, 5.3 million PCs were shipped for home
use by professionals in the US, compared with 4.3 million for professional use at the place of
work (source: Inteco). These figures are expected to rise to 9.5 million and 6.3 million
respectively by 1997. The technology base in homes is dealt with more thoroughly in section
7.7, Electronic Infonnation Services in the Home.

In the home market, expenditure on consumer entertainment media as a whole is expected to
grow by some 7.9 per cent a year, but home electronics spending is likely to remain fairly
stable, with stronger growth expected in the second part of the 1990s. Table 2.11 shows the
relative sizes of the European software, hardware, IT and home electronics markets in 1992,
with projections for 1995.

42

_MO_ _Annual Report_ _1993_ _- 1994_ _Section_ _2_

Table 2.10 Percentage European IT Market Growth by Product Grouping,
1990-1994

1992/

1991

-5.3

-9.0

-2.5

11.0

-4.5

-2.9

29.1

9.0

2.3

-1.9

9.3

7.6

1993/

1992

-19.1

-11.3

0.7

10.8

-0.8

-2.8

15.3

8.0

-1.6

-3.1

8.2

7.0

Large, scale systems
Medium scale systems
Small scale systems
Workstations
Personal computers
PC Printers

LAN hardware
Datacom equipment
Office equipment

- Total IT hardware

- Software products
Professional services
Network/process servs.

- Services

- Support servs.
Total IT market

1991/

1990

-10.0

-3.7

1.2

20.1

-2.0

9.0

17.3

9.0

2.1

-0.2

12.6

11.0

5.6

6.6

0.4

1.6

6.7

9.6

4.2

4.4

5.5

7.0

2.1

2.5

1994/ I

1993

-15.0

-9.0

7.1

13.3

4.0

0.0

5.1

-0.6

-1.3

0.0

   - 8.5

8.2

5.2

7.8

 - Support servs. 4.2 2.1 0.4 1.4
Total IT market 4.4 2.5 1.6 4.2

Source: EITO
**|L** **"•** _**"V**_ **'**

43

_MO Annual Report 1993 - 1994_ _Section 2_

**Table** **2.11** **European Hardware, Software and Home Electronics Markets,**
**1992-1995**

BECU

IT

h a r d w a r e

**Source:** **EITO-BIS**

Software

p r o d u c t s services

1992 _M_ 1995

Home

electronics

**2.3** **Industry** **Repositioning**

The globalisation of the information market and the trends in technology and industry
convergence have already led to a certain amount of repositioning. Some of the trends noted
in the convergence discussion are reflected in merger and acquisitions in information industries.
Repositioning of this kind is expected to gather pace over the next few years, as companies
seek to penetrate new geographical markets and to fulfil technology and content demand with
an integrated product range. Where a range of content and delivery options are contained
within a single company, cross-media ownership regulation tends to come into play.
Companies from the same sector which merge in order to exploit local and global markets also
run the risk of contravening media ownership regulations. The need to globalise and diversify
may make differences in these laws (which seek to safeguard pluralism) become far more
apparent than in the previous typically national market situations. It is because of this that
regulators and the content and delivery industries are currently considering whether there is a
need to harmonise these laws such that more effective market strategies could be undertaken
whilst ensuring that pluralism is protected.

44

_MO Annual Report 1993 - 1994_ _Section 2_

_**2.3A**_ **Mergers and Acquisitions**

The mergers and acquisitions which have taken place in the information sector in the last year
or so can be placed in two categories: those which are intended to extend penetration in
existing or new geographical markets, and those whose rationale is diversification into new,
but related markets. Many of the headline djeals have taken place in the US, although
European activity is gathering pace.

In their report _Mergers and Acquisitions in European Information Technology Companies,_
Broadview Associates detailed 895 mergers and acquisitions in the European IT sector in
1993, worth some US$ 14.3bn (ECU 12.3bn) in total. Almost half of these were accounted
for by the information services sector, where the average deal size was US$ Urn (ECU 9.5m).
An IMO Working Paper of May 1994 dealt with nearly 45 deals in the database and
information services sector during the period 1993 to early 1994. It is impossible in a report of
this size to describe the full range of merger and acquisition activity. The objective of this
section is therefore to identify a selection of deals in key areas and examine emergent trends.

The deals which have attracted most attention over the last year or so were the purchase of a
25 per cent stake in Time Warner Entertainment by US West, the. Viacom/Blockbuster merger
and their joint purchase of Paramount and, of course, the proposed TCI/Bell Atlantic merger,
called off in February 1994. These few deals, and the wranglings which took place before they
finally went through, were the subject of countless newspaper column inches - most of which
explained them in terms of. convergence. Thus, US West is expanding from
telecommunications into entertainment content, whilst Viacom and Blockbuster are
strengthening their positions as distributors by combining their cable delivery and media
retailing activities. Both are extending their control over content by their purchase of
Paramount films. Such analyses are, of course, simplistic, but such deals indicate that
convergence is more than a media myth.

In Europe, a number of deals have taken place which have tended to be slightly smaller but
which are no less interesting. From the vast number of mergers and acquisitions which have
taken place over the last year or so, we have selected the sample presented in Table 2.12
below.

_**MO Annual Report 1993**_ **-** _**1994**_ _**Section 2**_

**Table** **2.12** **A Selection of Mergers and Acquisitions Involving European**
**Information Companies,** **1993/19Ô4**

US West (US)

Pearson (UK)

Pearson (UK)

Reed/ Elsevier

(UK/NL)

Questel (FR)

Financial
Times (UK)

Reuters (UK)

Reuters (UK)

Knight Ridder
(US)

Year Target
Company

Acquirer Price / Comments

Buying into
content/new

market

New market
entry/expertise
(US$ 460m)

TV expansion
(US$ 150m)

Extending market
share

(US$ 417m)

Buying market
share (US$ 15m)

Buying market
share (US$
110m)

Buying into US
market share

Expanding into
medical sector
(US$ 20m)

Buying market
share

(US$ 25m)

1994

1993

Thomson

Directories (UK)

Software
Toolworks (US)

Nature of

Business

Telephone
directories

Multimedia

software/

videogames

TV

broadcasting

Airline date &

reservations

On-line host

Financial data

services

Real-time

financial data

services

Computer
services for UK

doctors

On-line host

Thames
(UK)

TV

Official Airline
Guide (US)

InfoPro (US)

Extel (UK)

Quotron (US)

Vamp Health
(UK)

Data-Star
(Ch)

Elsevier (NL) Publisher Reed (UK) Merger

Source: _Mergers and Acquisitions in the Electronic Information Services Industry_
(IMP Working Paper 94/2) / _Interactive Media International_

Elsevier (NL)

Publisher

Reed (UK)

This is by no means a comprehensive list, but is intended to give an indication of the range of
deals taking place. Microsoft's purchase of a stake in image content via Dorling ICindersley is
now a widely quoted example of expansion into content by hardware and software companies.
The deals listed also provide examples of delivery companies buying into content and content
companies extending their product range and software capabilities.

46

_**MO**_ _**Annual**_ _**Report 1993**_ **-** _**1994**_ _**Section 2**_

Also worthy of specific mention is the purchase of a significant stake in the publishing and
multimedia company Andromeda Interactive by the UK PTO, Mercury, and the proposed
purchase of multimedia developer and publisher Broderbund by Electronic Arts. Broderbund's
pull-out from the latter probably has much to do with its awareness of the increased potential
value of the company as an established and respected software developer and publisher,
especially in the light of the price paid by Pearson for Software Toolworks.

Outside the information services and publishing sector, a number of related information sector
deals have taken place involving European companies. In 1993, British Telecom bought a 20
per cent stake in the US telecommunications company MCI, thereby expanding its international
interests. In the same year, PolyGram bought Motown records, again expanding its interests
into new geographical markets.

Further merger and acquisition activity can be expected in Europe during 1994 and into 1995,
and a number of companies have made no secret of the fact that they are on the acquisition
trail. Philips, for instance, told the press in May 1994 that it intended to expand its media
interests through acquisition. Thorn EMI has said that it will build upon its experience of
copyright management in the music industry by expanding its book and CD-ROM publishing
activities. Pearson's chairman Lord Blakenham, speaking in connection with, the Software
Toolworks bid, told _The Times_ newspaper that he saw many opportunities ahead for Pearson's
book and newspaper publishing activities, but that 'as the multi-media markets become a
reality, we must grow the television and software capabilities that will be needed in the longer
term to make the most of what we have'. Other publishing and information content companies
which are in a position to do so would be wise to follow a similar course.

In addition to formal merger and acquisition activity, Europe has seen many announcements of
joint ventures in the information sector. Springer Verlag and AT&T have announced that they
will collaborate in Europe to explore opportunities in the delivery of STM information. The
Italian PTO, Stet and Bell Atlantic will work together in a joint venture to create Video on
Demand and interactive information services in Italy and to upgrade Italy's copper wire
network. Olivetti and Redgate Communications in the US will form a joint venture to exploit
the European multimedia market. Meanwhile, French and German PTOs France Telecom and
Deutsche Telekom are to enter a partnership with Sprint and are said to be seeking similar
alliances in Japan.

Strategic alliances and joint ventures in the US information sector have been even more
numerous, with Microsoft and TCI to work together on interactive TV experiments (Microsoft
is also said to be working with Japan's NTT on multimedia networks), and Paramount
Publishing entering a joint venture with the multimedia software company Davidson &
Associates, to name but two. Some of these ventures will no doubt turn out to be transient, as
companies settle down to practical working relationships - Microsoft was quick to play down
its role in developing operating software for Sega's Saturn CD-ROM games machine after
collaboration between the two companies was widely reported in the press.

Some of the deals which have taken place in the information sector have undoubtedly been
opportunistic, and some reflect a consolidation process already well underway. Nevertheless, a
significant proportion of'deals reflect movement of information sector companies beyond their

**47**

_MO Annual Report 1993 - 1994_ _Section 2_

traditional boundaries of activity and their desire to penetrate international markets, bringing
together content, software development and delivery capability in order to exploit new market
opportunities.

**2.3.2 Cross-Media Ownership and Media Concentration**

Industry repositioning and the resultant mergers, acquisitions and joint ventures mentioned
above have helped to bring cross-media ownership, media concentration, monopolies and
related regulation to the forefront of discussion, especially in audio-visual and delivery
industries. In particular, regulation dealing with the participation of companies in a range of
media activities has come under scrutiny in Europe.

Since the mid-1980's, the Member States have put in place (alongside their national
competition law) specific rules on media ownership in order to prevent media concentration
becoming a threat to pluralism. At the Community level, disparities between national rules on
media ownership ceate a number of obstacles to the smooth operation of the internal market.

Following the presentation of the Green Paper "Pluralism and media concentration in the
internal market" and after more than a year of consultation with interested parties, the
Commission adopted a communication on the follow-up to the Green Paper. The
communication analyses the results of the consultations and concludes that (i) a Community
initiative on media ownership might prove necessary; (ii) a second phase of the work is
therefore going to be embarked upon in order to examine certain questions in more detail, in
particular those concerning the content of a possible initiative; (iii) after this second phase, the
Commission will adopt during 1995 a definitive position on the need and the content of a
possible initiative.

The Bangemann report on Europe and the Global Information. Society highlighted media
ownership as one of the areas of regulation requiring particular attention. According to the
report, there is a risk that inconsistent national media ownership laws could impede companies
from taking advantage of opportunities in Europe and could place them at a competitive
disadvantage in world markets. The development of regulation at a European level will be
essential in order to avoid undermining the single market and to ensure the competitiveness of
Europe's media industry.

At present, for example, the UK PTO British Telecom is not permitted to deliver entertainment
services, although it has argued that the building of an optical fibre network in the UK will only
become economically viable if it is permitted to participate in the ensuing content delivery
market. Meanwhile, some of the alliances struck by European PTOs with their US
counterparts are likely to attract the attention of US regulators. The proposed alliance
between France Telecom, Deutsche Telekom and Sprint has already provoked fierce argument
in the US, where AT&T has said that the alliance should be blocked unless France and
Germany open their markets to competition before 1998.

**48**

_MO Annual Report_ _1993-1994_ _Section 2_

The complex regulatory environment has been blamed as one of the causes for the failure of
the TCI/Bell Atlantic Merger. The proposed merger of Rogers Communications and Maclean
Hunter, Canada's two largest cable television operators, has also suffered considerable delay as
a result of investigation into media concentration. Regulation in media concentration and in
cross-media ownership will need to adapt to allow companies to take firll advantage of global
markets and multimedia opportunities. The difficulty will be in finding a balance between the
prevention of abuse in media ownership and the creation of an environment which fosters
competition and diversification - and in reaching consensus on these issues at a European level.

**2.4 The Role of the Advertising Industry**

Advertising is a well-established form of revenue generation in the print and audio-visual media
businesses, representing the biggest single source of income for many newspapers, consumer
and business magazines, radio and television channels. The relationship between the
advertising and electronic information industries, however, is only just being established, with
some new media formats proving more suitable than others as advertisement carriers.
Advertising on videotex and teletext, for instance, has a long history, but is rare in on-line
services, at least in Europe, and is only just beginning to penetrate into CD-ROM. In the case
of emergent services, the role of advertising is likely to vary from one format to another:
interactive television, for instance, will offer significant opportunities, whereas there is little
prospect for on-screen advertising on the Internet at present.

The availability of mechanisms to monitor the retrieval of advertising information by service
users will have a significant impact on the willingness of advertisers to use new media formats,
as will the ability to deliver images and sound as part of an on-line advertisement. The reaction
of users to advertisements embedded within the general content of services, and their ability to
distinguish between an electronic advertisement and editorial material will need to be
thoroughly tested. In this respect these advertising and other forms of commercial
communication services must be able to circulate freely across borders, given the international
dimension of the networks. In this respect the Commission's Green Paper on commercial
communications will examine, on the basis of a recently completed extensive European survey
undertaken by DG XV, the extent to which differing national regulations could prevent such
services from circulating across the networks.

Whatever direction new media advertising takes, it is certain that it will have a profound
impact upon both the media and the advertising industries. The ability to include
advertisements in electronic information products would encourage more publishers to develop
electronic versions of their titles, and enable them to make them available more cheaply. On
the other hand, the impact of such developments on advertising spend across other media is
difficult to predict. The potential importance of advertising for the electronic information
industry, and the wider significance for the advertising and media industries has been
recognised by the European Commission. This is reflected in the preparation of the Green
paper on Commercial Communications due to be published later this year and the more specific
study initiated by the Information Market Observatory of DG X M E during 1994.

49

**3 RELATIVE STRENGTHS AND WEAKNESSES**

Electronic information services are to a large extent traded on a global market. Within Europe
much of the demand for electronic information is met by companies based outside Europe.
Most of these companies come from the United States. Increasingly, however, Japanese
information suppliers are perceived to be potential exporters of information to Europe.

At the same time, European information suppliers are active in export markets and, in some
cases, derive substantial proportions of their revenue from export sales outside the European
Union. Clearly, in such circumstances the competitive position of the European information
services sector relative to counterparts in the US and Japan is an important, factor in
determining the long-term viability of the industry. Not only must European suppliers compete
successfully in home markets, they must also be able to compete globally.

During 1993, the Information Market Observatory conducted a study of the relative strengths
and weaknesses of the information services sectors in Europe, the US and Japan. The results
of the study indicate that European information suppliers face a range of constraints that are
not experienced by their counterparts in the US. In particular, economies of scale in the home
market tend to give a competitive edge to US companies. Within Europe, language, cultural,
administrative and technical barriers tend to fragment the market into a series of national submarkets, thus reducing the potential for scale economies and raising production and
distribution costs, with the consequence that European firms are in a disadvantageous position
compared to US competitors. Language barriers in Japan have tended to discourage Japanese
suppliers from trading on global markets although there are signs that the government is
encouraging Japanese database providers to enter export markets.

The development of the Common Information Area in Europe and comparable developments
in the US and in Japan are likely to increase the amount of global competition.

**3.1** **The Relative Position**

At first glance, the European Union has a larger home market than either Japan or the US.
The population of the European Union in 1993 was 344 million compared to 252 million in the
US and 124 million in Japan. Despite this, the electronic information services sector is more
than two and a half times bigger in revenue terms in the US than it is in Europe.

51

_1M0 Annual Report 1993_ - _1994_ _Section 3_

Table 3.1 Relative Sizes of the European,
Information Services Sectors

Electronic information service revenues (BECU)

US and Japanese Electronic

1988

1989

1990

1992

1991

3.1

6.9

1.2

EU

USA
Japan

2.5

,5.0

2.8 
6.0

EU 2.5 2.8 - 3.1 3.3 3.6
USA,5.0 6.0 6.9 8.2 9.3
Japan 0.7 1.0 1.2 1.3 1.3

Source: Information Market Observatory

3.3

8.2

1.3

0.7

1.0

The relatively'Iarge size of the US sector is mainly accounted for by the fact that some 30 per
cent- of revenues are derived from the export of information services, the European Union
being the largest export market.

The US is not just big in revenue terms. The US has almost twice as many database producers
as the European Union and almost twice as many gateway services. Rates of growth have
been higher than in Europe although in recent years these appear to have slowed, probably as a
result of the recession.

The European market is almost three times as big as the market in Japan but this corresponds
to the relative population sizes. After rapid growth in the late 1980s the turnover of Japanese
database suppliers actually decreased slightly at the beginning of the 1990s. Despite this, the
Japanese electronic information services sector is strong, following a sustained period of
support from the government. The Ministry of International Trade and Industry is actively
encouraging Japanese information suppliers to be more active in global markets.

**3.2** **The European Union**

It is difficult to identify a European market for electronic information services. For many of
the information services, the demand generated within Europe forms part of a much broader
global market. Other information services operate in a number of local, niche markets that are
often delimited by national, language, cultural or regulatory boundaries. The market for such
services remains strong and has considerable potential for development.

The existence of local, niche markets presents the European information suppliers with both
problems and opportunities. The small size of the markets prevents firms from benefiting from
economies of scale in production and distribution. The fragmentation also hampers the
creation of a truly common market for European Union information services. On the other
hand, market fragmentation offers opportunities to some European firms because it makes it
difficult for suppliers from outside the Union to compete - there is, for example, significant
demand across all sectors for local services in the national language.

Some non-European companies, particularly those based in the US, have formed strategic
alliances with companies in Europe in order to take advantage of the niche market

52

_MO Annual Report 1993_ - _1994_ _Section 3_

opportunities and to overcome some of the problems that market fragmentation causes. There
has also been a spate of acquisition activity, an important recent example being the acquisition
during 1993 of Data-Star, one of Western Europe's leading distributors of on-line information
services in the areas of business and biomedicine, by the US-owned Knight-Ridder Inc.
Knight-Ridder is the owner of DIALOG Information Services against whom Data-Star had
been struggling to compete and retain its market share. The acquisition doubled DIALOG'S
presence in the European market. (Details of other mergers and acquisitions can be found in
Section 2.3.)

Concerns that such activity leads to increasing domination by US providers can be countered
by arguments that this can actually improve the level of service offered to users and thereby
enhance the overall efficiency (and competitiveness) of European enterprises. US partnership
in R&D activities is also a real advantage to many European hosts, for whom there would
otherwise be insufficient capital available.

Collaboration seems to work particularly well for small and medium sized enterprises as it
opens up additional distribution opportunities and spreads the cost of marketing. There is little
evidence to show that a loss of ownership by European Union players inevitably leads to a loss
of presence in the marketplace. This is largely because many of the functions of an information
company are location-specific. Thus, even where an information provider is owned by a global
player, control of distribution, marketing and personnel needs to take place at the local level.
For example, one of the biggest world suppliers of corporate information, (Dun & Bradstreet),
is a US company that derives 30 per cent of its total revenue from Europe and employs 3,500
people within the European Union.

On the supply side, the European Union electronic information service sector is characterised
by a small number of large firms and many smaller firms who in general are less vertically
integrated and more nationally oriented than their US counterparts. European Union
information providers are nevertheless strong in certain sectors, such as chemicals,
pharmaceutical and financial services.

The competitiveness of European Union electronic information service providers depends on a
number of key factors. These include: quality and reliability; reputation or brand image;
product range; price; product differentiation; user friendliness; geographical or market spread;
marketing and after-sales support, and exclusive distribution rights.

The strengths and weaknesses of European Union players in the global market place for
professional information services are set out in Table 3.2.

_1M0 Annual Report 1993_ _-1994_ _Section 3_

Table 3.2 Perceived Strengths and Weaknesses of the European Union
Electronic Information Services Sector

Strengths     - Presence of world-ranking information and media
conglomerates

                  - Long publishing tradition and rich information content
base

                  - Large and established markets for professional electronic
information in key industrial sectors

                  - Wide availability of ISDN services and rapid migration to
Euro-ISDN standards

                  - European Commission's Fourth Framework programme's
emphasis on ICT

                  - Language diversity: an advantage for penetrating new
markets

Weaknesses    - Market fragmentation

                  - Perceived overpricing of services

                  - Cross-border transactions costs

                   - Regulatory and infrastructural difficulties

                   - Technical barriers, for example, the incompatibility of
national standards

                   - Restricted access to government-held information in some
Member States

                  - Relatively expensive telecommunications services j

3.3 Electronic Information Services in the U

The US electronic information industry is the largest in the world. It has developed over a
longer period, it has benefited greatly from the existence of a large domestic market that has
enabled firms to take advantage of economies of scale and, in particular, to spread the high
compilation costs of databases over a large number of users. The strength of this home
market, however, may have encouraged some companies to neglect the export potential of
markets overseas even though the use of English language as a world language enables them to
compete on favourable terms.

US suppliers have also benefited from public support, both in the creation and development of
databases within federal agencies and in the relative ease and freedom of access to government

**1)4**

_1M0 Annual Report 1993_ - _1994_ _Section 3_

information. The government actively supports the use of the private sector for the
dissemination and exploitation of government information.

Many US companies have used their competitive position to advantage on world markets. The
US electronic information services sector generates about 30 per cent of its revenue overseas
and a large proportion of this comes from sales in the European Union.

The number of users of electronic information services in the US is increasing. In many
organisations there is a shift towards direct use by end-users, partly stimulated by the take-off
of publicly accessible information services, notably the Internet, which are increasing
awareness and familiarity. The National Information Infrastructure proposals are likely to
stimulate demand further.

Despite these trends, the highest volumes of use are generated by large organisations. Small
and medium-sized enterprises continue to make relatively low levels of use of electronic
information services.

Table 3.3 Perceived Strengths and Weaknesses of the US Electronic
Information Services Sector

Strengths

Weaknesses

Economies of scale in large domestic market

English language provides access to export markets

Economies of scope through major host services

Mature information market

Increasingly sophisticated user community

Strong hardware and software industry

Good general access to government information

Market-driven investment in fibre-optic

Slower domestic growth due possibly to maturity

Relatively low use of information services by SMEs

Relatively weak co-operation between government and
private sector

Need to focus more on real needs of export markets

Relatively weak in consumer electronics

_1M0 Annual Report 1993_ - _1994_ _Section 3_

**3.4** **Electronic Information Services in Japan**

The Japanese electronic information services sector has grown rapidly throughout the 1980s
and has strong further potential, both at home and overseas. The Japanese Government has
actively supported and encouraged the development of the sector through a range of measures.
It supports, for example, the Database Promotion Centre and provides tax incentives and lowinterest loans to creators of databases. Through these and other measures a relatively strong
Japanese electronic information sector has emerged. Japan's strengihs and weaknesses are
summarised in Table 3.4 below.

**Table 3.4 Perceived Strengths and Weaknesses of the Japanese Electronic**
**Information Services Sector**

Strengths Large potential domestic market

Considerable overseas market potential, especially in
South-East Asia

Strong in computers, consumer electronics and CD-ROM

Highly competitive telecommunications infrastructure

High investment in IT and IT-related R&D

Strong policy commitment to the development of the
sector

Strong public sector vision of the information economy and
society

Weaknesses Language barriers

Cultural barriers to information as a commodity

Immature information market

High production costs, poor profitability

Relatively weak in software

Relatively weak in database construction, quality and
development

Weak in export markets

Language remains the greatest issue in the development of the sector and it is expected that the
focus will remain on the domestic market. With a population of over 120 million there is

56

_MO Annual Report 1993_ _-1994_ _Section 3_

enough scope to realise economies of scale for database production and distribution.
Furthermore, whilst language may have acted as a barrier for further development of the
sector, it has also prevented foreign firms entering the domestic market and has thus provided
Japanese companies with a breathing space in which to get established. In recent years, a great
deal of research into machine translation has bee:i funded and it is hoped that this will help
reduce Japanese-English translation costs.

There are signs, however, that the emphasis is sliifting to export markets. The Ministry of
International Trade and Industry has recently commissioned a study of the scope for
internationalisation of Japanese databases and it seems likely that government policy will
encourage firms to explore overseas markets more actively. The strongest potential for
international sales may lie in the first instance in the South-East Asian market.

**3.5** **Conclusions**

Compared with the US, the European electronic information services sector is weak and fairly
uncompetitive. It is stronger than the sector in Japan but there are signs that the Japanese
information suppliers are growing in strength and that European suppliers may well face
significant competition from their Japanese counterparts, particularly in the markets of South
East Asia.

The relative position of the information services sectors in the US, the European Union and
Japan can, to a great extent, be explained by the home market conditions within which the
sectors have developed. US suppliers have been able to take advantage of a large and
relatively mature home market. This has provided significant economies of scale. US
information companies have also been well-placed by their use of the English language to
compete on global markets. English is an international language and, increasingly, it is the
common language of global business and commerce as well as science and technology.

Japan also benefits from a relatively large home market which provides for economies of scale.
It is, however, a market that is isolated by the Japanese language which makes it difficult for
non-Japanes - . language information services to compete within Japan. The language also
places a barrier on Japanese information suppliers wanting to export. It is likely that the
Japanese information services sector will continue to expand and to strengthen without
necessarily posing a significant threat to European suppliers either within Europe or in global
markets.

European suppliers are hampered by their lack of a large home market. Within Europe there
are a number of local markets which are mostly defined by linguistic and cultural factors.
Where markets for information services stretch across Europe they are, in fact, part of a larger
global market. For example, there are few significant local markets for real-time financial
services within Europe but there is not a distinctive pan-European market either. The market
for such information is global.

European suppliers are therefore in a position where they can aim to meet the needs of niche
markets and local markets that are linguistically and culturally defined. In. both cases the size

57

_1M0 Annual Report 1993_ - _1994_ _Section 3_

of the market does not permit any significant economies of scale. Alternatively, they can
compete on the much larger global markets that do offer economies of scale. In such markets,
however, they are competing directly with US suppliers which have been able to benefit from
the economies of scale provided by their large home market in the States. Furthermore, other
than suppliers in Britain and Eire, European suppliers face the added costs of producing
information services in English if they are to compete globally.

It seems likely that, with some exceptions, European infonnation suppliers are destined to
remain weak relative to those in the US. They will, however, be able to compete successfully
in world markets against Japanese suppliers for some years.

The emerging markets in central and eastern Europe or in Latin America offer a range of
market opportunities for European.suppliers. These markets could be thought of as extensions
to the linguistic or niche markets that already exist within Europe. They offer attractive
possibilities to information service suppliers that are used to working in German, Spanish and
Portuguese. They also present opportunities to exploit further databases and other information
resources that are held in these languages. It seems likely, however, that these markets will
take some time to develop to a position where they generate significant flows of revenue.

The markets within which information services companies compete are volatile. This offers
opportunities to companies that can innovate and develop new products to take advantage of
changed market requirements or new streams of demand. The rapidly expanding market for
CD-ROM products is a case in point. If European suppliers can innovate successfully and
bring new products and services to the market more rapidly than their US competitors they
may be in a good position to capture a significant share of the market.

Recent discussions on Europe's relative weakness in the information market have focused on
the comparative availability of infrastructure and the extent to which this is exploited in the
EU. In a paper entitled _Construire un Marché Européen de_ _l'Information,_ René Mayer has
argued that, in many ways, the European information sector as a whole is on a par with the
US. Turnover and numbers of employees in the IT and telecommunications sectors are
comparable, and although the US has tended to enjoy slightly higher revenues in these sectors
than the EU, European growth has outstripped that of the US in recent years. In content
sectors, however, the US is clearly way ahead of the EU in revenue and employment terms.

According to Mayer, the comparative weakness of the EU electronic information services
industry is not a result of the lack of necessary technology. The installed base of computers is
similar, as is the overall availability of telephone lines. Expenditure on satellite equipment in
1993 was about the same in Europe and the US, and in Europe USS 784m (ECU 682m) was
spent on fibre optic networks, compared with US$ 424m (ECU 369m) spent by the US.

Where Europe falls far behind the US is in the actual use of telecommunications services and in
the installed base of modems. Mayer takes this as being symptomatic of the fact that the EU,
whilst enjoying a sound infrastructure base, has been slow to exploit these resources to the full.
Thus, Europeans may be equipped with computers and have access to ihe relevant network
infrastructure, but are- much less likely to use them to search and retrieve the information
services available to them.

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_MO_ _Annual Report 1993_ - _1994_ _Section_ _3_

This is largely a problem of awareness and education. The Common Information Area
initiatives and the growing attention paid by the media to electronic information services
should both help to improve awareness, as will the teaching of computer-aided research in
European schools.

**4 THE FUTURE DEMAND FOR INFORMATION**

An "information society' is emerging where information is a valuable resource. Easy access to
information, the quality of that information and speedy methods of exchange are essential
elements of economic success. This was reflected in the announcements of major infonnation
infrastructure investment programmes made in 1993 by the European Union and the US
Government. These acknowledge that mobility of, and access to, information have become
key economic and social issues. In this climate the demand for information is likely to expand
rapidly.

The evidence is that those organisations which make good use of information in decisionmaking, and which use new technologies to access, process and exchange information will be
best placed to survive in increasingly competitive world markets. The extent to which
information and information technology are being exploited varies widely between different
sectors and particular regions within the EU.

But prediction is never easy, and forecasting demand for information is no exception. It is
particularly difficult in the absence of reliable data to describe the present situation. Later on in
this section, some of the research which has taken placein assessing future growth in demand
for information services will be reviewed in a range of sectors. Firstly, however, it is useful to
take a preliminary view of the extent to which companies are using other IT-based
applications, as this may provide a useful indicator of growth.

It has been argued that growth in the use of electronic information services will be closely
linked to the take-up of applications such as Electronic Data Interchange (EDI) and electronic
mail. The gains in efficiency and competitive advantage offered by such applications are more
immediately obvious and more easily quantifiable than those offered by use of electronic
information services. Nevertheless, through the adoption of EDI and electronic mail,
companies will acquire much of the technology required in order to access information
services. Furthermore, they are increasingly likely to become aware of information services
through their use of these applications. In using electronic mail, the availability -of bulletin
board information services may become apparent. Users of EDI networks are increasingly
likely to come across electronic information services. Dunn & Bradstreet, for example,
announced in 1994 that it would make its company information services available over'EDI
networks, and the insurance community is already served by news and information services
delivered via trading networks.

As a pointer to the potential growth in demand for electronic information services, the uptake
of EDI and E-mail may therefore be significant. Whilst adoption of these facilities has been
slower than originally anticipated, there are signs that they are now spreading more rapidly,
especially in Europe.

61

_**MO Annual**_ _**Report 1993**_ _**-1994**_ _**Section 4**_

**4.1 The Growing Use of Electronic Communication Facilities**

Companies wishing to trade effectively are coming under increased pressure to adopt EDI and
E-mail. Large organisations, particularly in the retail and automotive sectors, may insist that
suppliers use EDI. Gradually this trend is spreading into other sectors. There are also moves
to eliminate the one-sided nature of many EDI links between large organisations and their
smaller suppliers, as this often leads to a situation where incoming EDI messages are printed
out and re-keyed into the in-house system or processed manually by companies without fully
integrated EDI facilities. This problem also presents a barrier to EDI communication between
SMEs. Software houses are being lobbied to include EDI capability in standard business
software, and this may also help to encourage wider implementation.

The European Electronic Messaging Association (EEMA), promotes the use of all forms of
electronic messaging, including EDI and E-mail, and the European Commission funds a
programme entitled Trade Electronic Data Interchange Systems, (TEDIS), which aims to
promote EDI and resolve the barriers cunently hindering more widespread implementation.
There are many other sector-specific and regional initiatives. In Italy, for instance,
EDIFORUM is supporting a network of regional centres to promote EDI among small and
medium sized enterprises.

**4.1.1 Electronic Data Interchange**

EDI originated as a means of exchanging trading information electronically, an answer to the
'paper mountain', and a possible route to the paperless office. So far, the impact has been less
dramatic with only 1 per cent of transactions in Europe taking place electronically.

Within Europe, the UK is one of the leaders in terms of numbers of EDI users. However,
despite somewhere in the region of 10,000 organisations at the end of 1993, most
organisations make use of only two or three message types, typically those for ordering and
invoicing. This confirms that even within those organisations which have adopted EDI, there
is scope for greater exploitation of the facility. However, despite the slow start, expectations
are that by the end of 1994 70 per cent of UK firms employing at least 2,000 people will be
using EDI.

There is no reason why non-trade-relàted information should not also be exchanged via EDI
and indeed it is becoming increasingly common for administrative data to be circulated in this
way. In the UK, for example, there are a growing number of educational establishments using
EDI to exchange information. Another example is the EC sponsored, pan-European Frame
project, which is intended to develop systems for monitoring and controlling the movement of
hazardous goods. The construction industry, through EDICON, is exploring the use of EDI
for the exchange of CAD drawings and project documentation.

Electronic transfer of data has several attractive features: reduction in manual processing and
avoidance of repeated data entry; reduction of errors and repetition of errors; time flexibility;
permanent availability not constrained by time-zone barriers; and speedy processing for the
exchange of up-to-date information. It is also useful in the implementation of just-in-time

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_MO_ _Annual Report 1993 - 1994_ _Section 4_

**ordering, warehousing and delivery procedures. These advantages can represent significant**
**time and cost savings making organisations more productive and efficient.**

**There are, however, issues of security and legality, which have to be addressed and resolved**
**before EDI becomes a commonplace method of data exchange. Given that one of the major**
**benefits of EDI is the ease of exchange inespective of distance and national borders, any**
**solutions to security and legal issues must also be applicable across national boundaries. These**
**issues are being investigated as part of the EC** **TEDIS** **programme.**

**The European Article Numbering Association International reports that among its membership**
**(whose area of operation extends throughout Europe to South and Central** **America,** **Asia**
**Pacific, and South Africa) the number of EDI end users of national EDI standards reached**
**18,089 in 1993, an increase of 26.7 per cent on 1992. In 1994 this figure is expected to**
**increase to 25,583 (although there may of course be other users not associated with the**
**European Article Numbering Association). In** **addition,** **in 1993 there were 2,889 users of the**
**EANCOM** **Electronic** **Data Interchange standard, a rise of 199 per cent with a 100 per cent**
**increase projected for 1994. The EANCOM standard operates within the** **framework** **of the**
**UN/EDIFACT** **standards and is intended to provide a multi-industry EDI communication**
**standard.**

**The potential importance of EDI as a contributor to competitive advantage in world markets**
**has led the European Commission to try to ensure that all regions and all sectors are able to**
**take advantage of EDI. In particular, it recognises the need to focus particularly on SMEs and**
**the less favoured regions. Whilst the UK is one of** **the** **leading users of** **EDI,** **other countries,**
**for example Spain, are** **only** **just beginning to participate in electronic trading networks.**

**EDI has been given a boost in the US, with the Clinton Administration announcement that**
**there will be** **'government-wide** **implementation of electronic commerce for appropriate federal**
**purchases by** **1997'.** **Electronic tendering was also one of the ten areas where action was**
**recommended by the Bangemann report to the Corfu Summit.**

4.1.2 Electronic Mail

**In** **1993** **there were estimated to be about 30 million electronic mail users worldwide. Annual**

**growth rates in the order of 20-30** per **cent are expected,** **so** **that by 1995 at least 50 million**
**users** are **anticipated (source: Electronic Mail** Association).

**Use** of **electronic mail** by organisations is certainly increasing, particularly as **an** internal
communication mechanism. Governments are also stepping **forward to take** advantage **of** the
technology and to give a lead to encourage other organisations to do likewise. The General
Secretariat of the Council of Ministers of the European Union is to be supplied with electronic
mail software that **will** give access to 1,700 users across five sites in Brussels. The existing
Commission electronic mail facility system is being replaced by an- X.400 system which will
eventually give access to over 60 sites. The Commission currently generates some 180,000 Email messages a month (figures for June 1994), of which around 35,000 are external
communications. About 13 000 of the public officiais of the European Commission are already

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_**MO Annual Report 1993**_ **-** _**1994**_ _**Section 4**_

equipped with E-mail facilities and about half of the-officials use it on a regular basis also with
the 20-30% growth rate mentioned above. With the replacement of its in-house developed Email system by a fully X.400 (88) conformant system, the Commission plans to have a
homogeneous advanced system available at almost every workplace by the end of 1995. The
choice of X.400 (88) in all European Institutions permits a high quality E-mail communication.
Moreover, every E-mail work-place at the Commission can also exchange messages with
INTERNET and has electronic access to telex and fax services. In the US it is possible to send
E-mail direct to the President and Vice-President via several commercial services as well as the

Internet.. The UK Government has said that it will implement similar measures for
communication with government ministers.

The major European public electronic messaging services are now interconnected using the
internationally recognised communications standard protocol, X.400. The European
Electronic Messaging Association (EEMA), is promoting electronic mail communication,
issuing a regularly updated matrix indicating which European ADministration Management
Domains, (ADMDs), are connected to each other and to other ADMDs worldwide. As yet
there is no equivalent for the X.500 standard protocol for electronic directory services. The
X.500 standard is intended to make it easier to perform directory searches via an E-mail
connection to networks such as the Internet.

During 1993 EEMA developed closer links with the Internet community and sponsored
projects looking at the interworking between X.400 E-mail users and the Internet, recognising
that overall growth in E-mail traffic is best promoted by co-operation across different delivery
systems.

E-mail is a popular facility in large, multi-site organisations where it is a cost-effective
communications link between employees. Whilst smaller organisations have a less pressing
need for internal communications mechanisms, the benefits which they can derive from E-mail
for external communications are arguably greater for SMEs than for larger organisations. The
full potential of E-mail is, as yet, nowhere near realised and there is scope for a much wider
application of E-mail as a communication tool between organisations.

**4.2** **Information Use within Selected European Industrial Sectors**

The European Commission has attempted to confront the problem of lack of accurate data on
information demand through a series of research studies. The European Commission's
Information Market Observatory has commissioned research to identify how organisations are
using information, how this impacts on their competitiveness and how the situation will
develop in the future. These studies are particularly interesting because they review the use of
applications such as EDI and electronic mail as well as electronic information services.

In 1993 studies of the transport, insurance and biotechnology sectors within Europe were
undertaken. In addition, telephone surveys were carried out with 2,000 executives across
Europe, 750 from each of the transport and insurance sectors and 500 from the biotechnology
sector. The main aim of these surveys was to establish the significance of information in
relation to competitiveness. Executives were questioned about a variety of information and

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_**MO Annual Report 1993**_ **-** _**1994**_ _**Section 4**_

**technology related issues and were specifically asked to comment on their organisation's**
**cunent use of electronic media and expected use in the future.**

**In the three sectors surveyed in 1993 there was a clear indication that information is thought to**
**play an important role in competitiveness. This is represented in Table** **4.1** **below.**

**Table 4.1 Views on the Influence of Information on Competitiveness**

Influence of

information on
competitiveness

Strong
Medium

Low/unknown

Total

Biotechnology

40%

35%

25%

100%

Transport

38%

43%

19%

100%

Sector

Insurance

.47%

40%

13%

100%

Sample size

750

750

Sample size 750 750 500

Source: _Impact_ _of Information_ _Usage on Companies'_ _Performance,_ BIS
Strategic Decisions

**Where organisations are coming to recognise the relationship between information and**
**competitive advantage, the trend towards an increasing demand for reliable, timely and easily**
**accessible information is likely to continue. This will certainly hold true if the European**
**Commission's efforts to communicate the commercial advantages of infcrmation to small and**
**medium sized enterprises succeed. At present the evidence is that smaller companies (less than**
**50 employees) believe that information has a low influence on competitiveness.** **This**
**emphasises the need for a continuing programme of education and support for SMEs.**

**4.2.1 Transport**

**The transport sector in Europe suffers from overcapacity and competition is intensifying with**
the **additional pressure from eastern Europe. The evidence from the case studies is that the**
application **of information technology can significantly improve the reliability and speed of**
**delivery of transport mechanisms. Applications such as EDI are becoming more widely used.**
**Within** the **larger organisations there is already a realisation that the choice may be** **'EDI** **or**
die'. In small and medium sized enterprises the message has yet **to** be received. **In a** sector
dominated by price and not by service quality and where SMEs are **reluctant to** invest in
information technology which is perceived to be of primary benefit **to the** customer, there is
clearly an urgent need for continuing education and awareness programmes.

A further barrier to the flow of information in the transport sector is the lack of standardised
messages and communication links. The European Commission is addressing this v/ith
activities such as supporting the standardisation project, International Forwarding and

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_**MO**_ _**Annual Report 1993**_ **-** _**1994**_ _**Section 4**_

Transporting Message Framework, IFTMR. This is necessarily a long and complex process,
but is seen as an essential contribution to dismantling barriers to electronic trading and
communication.

The extent to which electronic media have penetrated the transport sector in 1993 is shown in
Table 4.2 below along with the projections for use in 1998.

**Table 4.2** **Transport Organisations Reporting Use of Electronic Media in** **1993**
**and Expected Use in 1998**

Per cent

100

**Online** **Videotex CD-ROW** **E-Mail** **EDI** **Oedlcated** **Video-Mobile**
**databases** **networks** **conf** **comms** **sys**

1993 H 1 9 9 8

**Sample** **silze** **750**

Source: _Impact of Information_ _Usage_ _oh_ _Companies' Performance,_ BIS Strategic
Decisions.

The anticipated increases in the use of CD-ROM (100 per cent), E-mail (55 per cent), videotex
(24 per cent), EDI (23 per cent), and dedicated networks (22 per cent) and the continued
popularity of on-line databases, expected to be in use in 14 per cent more organisations by
1998, confirms that the message of the electronic information age is reaching a wider audience,
and that these technologies are not in competition but are a complementary set of facilities in
the new electronic business framework.

**4.2.2 Insurance**

The Insurance sector is also highly competitive, with high growth rates not only in the less
developed markets such as Spain, Italy and Portugal but also in more mature markets, for

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_MO_ _Annual Report 1993 - 1994_ _Section 4_

example, in Germany and the UK. As deregulation in Europe proceeds the pressure will
increase for competitive products and premiums across Europe via international brokers.
These developments will increase the need for speedy access to flexible electronic information
services and communication links.

Survey participants from the insurance industry were asked which electronic media were in use
in their organisations in 1993 and which they expect to be using in 1998. Their responses are
shown in Table 4.3 below.

**Table 4.3** **Insurance Organisations Reporting Use of Electronic Media** **in** **1993**
**and Expected Use in 1998**

Per cent

100

Online Videotex CD-ROM E-Moil EDI Dedicated V i d e o 
databases networks conf

1993 ^ 1 9 9 1

Sample size 750

Source: _Impact of Information_ _Usage on Companies' Performance,_ BIS Strategic
Decisions.

Insurance is a sector where many organisations, particularly the larger companies, have already
seized upon the advantages which new technology, and particularly electronic information
exchange, can convey. Therefore it is not surprising to find that 72 per cent of organisations
are already using on-line databases and that by 1998 approximately 70 per cent also expect to
be using EDI and E-mail. This despite the uncertainties about the legal status of electronic
documents.

The prime reason for adopting electronic media is the potential for time saving. In this sector,
as for the others surveyed, cost savings are of less significance than access to a wider range of
better quality information.

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_MO_ _Annual Report 1993_ - _1994_ _Section_ _4_

**4.2.3 Biotechnology**

The case studies and telephone surveys suggest that, although this is a sector which is aware of
the importance of access to information and the advantages which electronic storage media and
networks can offer, there is still scope for significant growth in the use of new technology and
the new sources of information.

At present, printed matter is the dominant form of exchange for both internal and external
information. A third of organisations reported using E-mail though this was typically an
internal mechanism, extending to multiple sites. The comments in the case studies suggest that
even where E-mail is in use it is not yet being used to its full potential. A similar pattern
emerges for EDI and dedicated networks.

Table 4.4 illustrates how use of electronic media is expected to develop over the next five
years, showing how many organisations were using each medium in 1993 and how many
expect to be using them, in 1998. It also seems likely that, in addition to the increase in the
number of users, there will be more widespread use of existing E-mail facilities for external
communications.

**Table 4.4** **Êiotechnôlogy** **Organisations Reporting Use of Electronic Media in**
**1993** **and Expected Use in 1998**

Par. cent.

Online Videotex CD-ROM E-Mail EDI Dedicated V i d e o 
databases networks conf

1993 131998

Sample size 500

Source: _Impact_ _of Information_ _Usage_ _on Companies'_ _Performance,_ BIS Strategic

Decisions.

Go

_MO_ _Annual Report 1993 - 1994_ _Section 4_

By 1998 over 50 per cent of organisations in the biotechnology sector expect to be using online databases, EDI, E-mail, and videotex. Also 44 per cent of organisations will be using CDROM and 41 per cent dedicated networks. There is less variation in the types of electronic
media in use in biotechnology than in the other sectors where on-line, EDI and E-mail tend to
dominate.

**4.3** **Employment, Education and Training Implications**

The impact which the growing demand for information will have on employment, education
and training is under consideration by European governments. For the success of the proposed
European Common Information Area, and for Europe to realise the full potential of the coming
information-age, it will be necessary to ensure that the population is well educated and trained
in the skills demanded by the new technologies. There is a need for a commitment to 'life long
learning'. Given that the required skills are subject to continual and rapid change, there must
be access to training and development throughout life. It is highly desirable that all segments
of the population have equal access to information and the ability to use it. Two documents
published by the European Commission in 1993 discuss these issues. The White Paper,
_Growth, competitiveness, employment: the challenges_ _andways_ _forward into the_ _21st_ _century_
and the Green Paper, _European social policy: options for the Union._

The acquisition of a variety of information-related skills is likely to become essential for full
participation in society for the individual. At work the growth in demand for information will
be matched by a growth in demand for individuals who can access and interpret the
information. In addition to increased opportunities for information specialists there will also be
a need for other individuals to adjust to the new ways of working which the information-rich
future will demand. It will be necessary to improve everyone's information-processing skills,
such will be the extent of the permeation of information technology applications into all aspects
of life.

**5 RESEARCH AND TECHNOLOGICAL DEVELOPMENT (RTD)**

For the European electronic information services sector to achieve its full potential there
remain a number of barriers to be dismantled. The diversity of languages within Europe means
that for companies to reach the pan-European market, products and services must be
accessible in a variety of languages. Ease of access to the technology and retrieval of
information is also critical. Individual organisations are investing in research programmes to
address these issues. The European Commission is also providing support in this area. There
is widespread acknowledgement that research and technological development (RTD) activity is
critical to European economic performance, particularly in the less favoured regions, and that
therefore RTD will be one of the critical factors in any economic recovery.

The European Commission's proposals for RTD, under its Fourth Framework Programme,
were completed on 16 June 1993 and have subsequently been accepted by the European
Council, on 26 April 1994, and by the Parliament two weeks later. The programme follows
the successful implementation of the three earlier programmes. Whilst the Fourth Framework
Programme builds on the achievements of the Third Framework, there is a new emphasis.
Earlier programmes focused on technology with little scope for practical application. The coordination of research and dissemination of the results and the need for practical applications
are now priorities. The transfer of results from the research laboratories to companies across
different sectors is seen as a key element in the stimulation of innovation.

The importance of private and national RTD activity is acknowledged and the programme aims
to support and enable the fullest exploitation of these initiatives by facilitating co-operation
between Member States and European firms. The intention is also to create the conditions for
collaborative research efforts on a scale to compete with the US and Japan.

In the current economic climate a high priority is attached to RTD activities which will sustain
current employment and create new employment opportunities. The research will therefore be
a contribution to strengthening the competitiveness of the European economy. There is high
growth potential in new markets which could arise from successful telematics applications.
There are opportunities in fields as diverse as distance learning and road traffic management
and in creating opportunities which facilitate the independence of the elderly or disabled.

The European electronic information industry is expected to generate new commercial
opportunities for other sectors. By providing access to, adding value to, or making use of, the
products and services of the electronic information industry, sectors such as education, health,
leisure and manufacturing should achieve additional growth. For this to be possible, products
and services have to meet the needs of the potential users and be easily accessible.

The Fourth Framework Programme has been allocated ECU 12.3bn. Its objectives are to
implement research and technological development (RTD) programmes and demonstration
programmes by promoting co-operation with and between enterprises, research centres and

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_MO_ _Annual Report 1993_ - _1994_ _section_ _5_

universities, to promote co-operation in the field of Community **RTD** and demonstration with
third countries and international organisation; to disseminate and optimise the results of
Community **RTD and** demonstration activities, and to stimulate the training and mobility of
researchers in the Community.

The scientific and technological objectives are built around four activities:

- The first activity (ECU 9,432 million) covers research, technological development and
demonstration programmes. For information and communications technologies ECU
3,405 million has been allocated, for industrial technologies ECU 1,995 million, for
environment ECU 1,080 million, for life sciences and technologies ECU 1,572 million, for
non-nuclear energy, ECU 1,002 million, for research for **a** transport policy ECU 240
million and for targeted socio-economic research ECU 138 million.

The second activity (ECU 540 million) covers the promotion of co-operation in the field of
Community research, technological development and demonstration with third countries
and international organisations.

The third actvity (ECU 330 million) covers dissemination and optimisation of the results of
activities in Community research, technological development and demonstration.

The fourth activity (ECU 774 million) will stimulate the training and mobility of
researchers in the Community.

Specific programmes relevant to the information industry and market are described briefly
below.

**5.1** **Telematic applications of common interest**

The specific programme of RTD and demonstration in the area of telematic applications of
common interest 1994-1998 has a budget allocation of ECU 843 million. The objectives are to
develop and technically validate telematics systems and services that are interoperable
throughout the European Union. These should satisfy user requirements and, maximise the use
of generic infrastructures and equipment to them as economically viable as possible.

The programme is composed of five areas of activity:

 - telematics for services of public interest;

 - telematics for knowledge;

 - telematics for improving employment and the quality _of_ life;

 - horizontal RTD activities;

 - horizontal actions.

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_MO_ _Annual Report_ _1993-1994_ _Section 5_

**5.2** **Information Technologies**

The **specific research** and **technological development programme in the field of infonnation**
technologies 1994-1998 has a budget allocation of ECU 1,932 million. The objectives are to
contribute towards the construction of **a** European information infrastructure in order to
ensure the future competitiveness of European industry as a whole and to improve the quality
of life.

Programme activities are organised under three headings:

 - software technologies;

 - technologies for IT components and subsystems;

 - multimedia technologies.

**5.3 Advanced Communication Technologies**

The specific programme of RTD and demonstration in the area of advanced communications
technologies and services 1994-1998 has a budget allocation of ECU 630 million. The
programme objectives are to develop advanced communication systems and services for
economic development and social cohesion in Europe, taking account of the rapid evolution in
technologies, the changing regulatory situation and opportunities for the development of
advanced trans-European networks and services.

Advanced Communication Technologies are composed of six areas of activity:

 - interactive digital multimedia services;

 - photonic technologies;

 - high-speed networking;

 - mobility and personal communications networks;

 - 'intelligence in networks and service engineering;

 - quality, security and safety of communication services and systems.

A number of horizontal actions exist which include: consensus development and concertation
of national and regional activities; international co-operation; dissemination and exploitation of
results; and, professional training in advanced communications technologies and service
management.

_**T\**_

_**MO**_ _**Annual Report 1993**_ **-** _**1994**_ _**Section 5**_

**5.4** **Socio-Economie** **Research**

The **specific programme of** targeted socio-economic research 1994-1998 has received a budget
allocation of **ECU 138** million. Its objectives are to elucidate decision-making at decentralised,
national **or Community level** and lay the foundation for **the** sustainable development of
Europe's economies, enabling them to withstand international competition and create jobs.
The activities will concentrate on:

- evaluation of science and technology policy options in Europe;

 - research on education and training;

 - research into social integration and social exclusion in Europe.

**5.5** **RTD** **in** **the fields of information and language engineering and**
**libraries**

The horizontal RTD activities, which include information engineering and language
engineering, are those which impact across the boundaries of other research areas, and are of
particular importance for the development of the electronic information services market and
European competitiveness. Issues such as accessibility, ease of information retrieval and
language barriers are addressed by the programmes outlined below. A brief description of the
libraries programme,which is also key to developing and meeting demand for electronic
information, is also provided.

**5.5.1 Information Engineering**

Information Engineering (IE) is a new sphere of activity under the Telematics Applications
area of the Commission's Fourth Framework R&D programme. The driving force is user
involvement and the aim is to permit easier and more selective access to and better usability of
information in all its forms.

The primary activity will be the development of pilot applications covering the three main areas
of the information chain

 - electronic publishing;

 - information dissemination;

 - information retrieval.

Following a call for proposals for exploratory actions in multimedia publishing (re'*. OJ
C78/S51 of 15th March 1994), 22 feasibility projects were selected to run over a six-month

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_MO_ _Annual Report 1993_ - _1994_ _Section 5_

period. Their objective is to define and test the feasibility of pilot applications in the following

areas:

- asset trading;

- technical services and documentation;

- electronic newspapers and magazines;

- multimedia catalogues;

- scientific, technical and medical (STM) publishing.

The results of the feasibility projects will contribute to the first call for proposals in IE under
the 4th Framework programme, to be published on 15th March 1995. Other exploratory
actions have also been undertaken, including studies in the following areas:

Europe-wide high capacity network - what is available?

information transactions;

project organisation, structure and management;

telepublishing survey;

usability study;

status review of non-text based information retrieval;

information Engineering 2001 - identifying the influential technologies and their effects;

corporate publishing.

The studies will run in parallel with the feasibility projects, and the results will provide input
into the call for pilot applications to run under the main phase of the Telematics Applications
programme. IE pilot applications will be accompanied by supporting actions in the following

areas:

IE research centres network;

IE academic cormection;

standards;

usability test centres;

international co-operation.

_**15**_

_**MO**_ _**Annual**_ _**Report 1993 -1994**_ _**Section 5**_

Work has already begun in two of these areas. A research panel has been established to
develop links between the programme and the academic information science community, while
the investigation of the feasibility of a pan-European network of IE research centres is the
subject of a current study.

**5.5.2 Language Engineering,**

With widespread use of information technology to access an increasing range of information
services, both at work and in the home, the development of a strong European Information
Services sector will in large part depend on how successful the industry is in overcoming
language barriers in domestic and global markets.

An important objective of the Language Engineering programme is to support the
incorporation of language engineering techniques into telematic systems to ensure that access
is not limited by language. This will allow the applications developed to play a two-fold role,
broadening the base of participation in a society increasingly dominated by information, and
ensuring that the potential market for these applications is sufficient to make these, and future
projects, viable undertakings, particularly for SMEs.

The language engineering research activities under the Third Framework generated significant
scientific and technological results, and sought an opportunity for industrial impact. The need
for practical applications is now a driving force behind RTD activities and projects will be
undertaken in the following areas:

management systems for the life cycle of electronic documents in multiple languages;

transactional teleservices such as telebanking and electronic directories;

electronic mail and teleconferencing facilities;

telematic translation services;

tools for language acquisition and use in an interactive and multimedia environment.

RTD activities will enhance the linguistic infrastructure. Dictionaries and typical expressions
are among the most important of the linguistic databases to which direct access will be
required by any information system implying the use of written or spoken language. Progress
will be made towards a fine-grained network of these linguistic tools accessible throughout
Europe.

**5.5.3 Libraries Programme**

Developments within libraries will influence, and be influenced by, developments in the
electronic information services market. By providing a point of access, and offering value

_**16**_

_MO Annual Report 1993_ - _1994_ _Section 5_

added services, libraries have a role to play in the stimulation of demand for particular products
and services.

The long-term aim of the libraries programme is to assist in the creation of a modern libraries
infrastructure in support of economic, social and cultural life in the European Union. Under
the Fourth Framework Programme, the aim is to achieve further progress towards making the
vast store of information within European libraries accessible to a much wider audience, and to
facilitate user access through libraries to the world of networked information.

While ensuring continuity with current work, the new programme is more clearly focused on
telematics priorities for libraries backed by stronger horizontal co-ordination. It consists of
three action lines designed to enhance the role of libraries in providing services linking the
more traditional collection-based resources with the evolving world of electronic information:

» network-oriented internal library systems, designed to prepare individual libraries for
entering the networking world;

_«_
telematics applications for interconnected library services, the key part of the programme,
encouraging libraries to work in networked environments providing interconnections
between libraries themselves as well as with their suppliers and end users;

© library services for access to networked information services, catering for links with the
evolving electronic information world at large.

The general objective of the new work programme is thus to achieve systems integration based
on an applications-oriented approach rather than one which is driven by technology.

Special emphasis has been given to the reduction of disparities at various levels (types of
library, degree of access to technology, regional and cultural differences), the development of
human resources and skills and the need to achieve concrete practical results (e.g. through
demonstrators).

The new programme will therefore build on the achievements of the start-up programme
(1990-1994) while allowing libraries to adapt their skills and expertise to better access-based
services for a wide variety of users across Europe. Two calls are planned, the first for 15
March 1995.

**//**

**6 KEY LEGAL AND REGULATORY** **ISSUES**

Legislation and regulation are required in the information industry in order to protect the
interests of the users of services and to preserve the rights of service producers and content
owners. In, theory, they should provide a framework within which information and
communications industries can flourish. This section looks at a few of the most pressing legal
issues faced by the industry today.

At present, national and European law is under examination in the light of the development of
the information society. This is partly because technologies are changing so rapidly and
legislation in the Member States varies widely. This has proved to be a significant cause of
delay for debates on data protection, copyright, the legal protection of databases and, more
recently, media concentration law. In spite of these difficulties, it is recognised that efforts
must continue to reach consensus if a truly European market is to be established for
information and communications services.

One of the key statements of the Bangemann report to the European Council on _Europe and_
_the global information society_ was that it was essentiai to develop [ x] a common regulatory
approach to bring forth a competitive, Europe-wide, market for information services.' The
report also acknowledged that 'disparate national regulatory reactions carry a very real threat
of fragmentation to the internal market [1] . The areas which required priority attention were:
protection of intellectual property rights; personal data protection and privacy; electronic
protection (encryption), legal protection and security; media ownership and competition policy.

The Commission's Communication on _Europe's Way to the Information Society - An Action_
_Plan_ also focused on the areas noted in the Bangemann report, and set out a timetable for
adoption of legislation. The emphasis placed on legal and regulatory issues by both of these
reports is likely to mean that legislation and regulation will be pushed forward more rapidly
than would otherwise have been the case.

Meanwhile, progress has already been made on harmonising copyright legislation in Europe.
The following directives have been adopted with regard to:

. the legal protection of comuter programs,

 - the rental and lending right and certain neighbouring rights,

 - the term of protection of copyright and neighbouring right, and
certain rules concerning copyright and neighbouring rights applicable to satellite
broadcasting and cable retransmission.

However, there are still many areas of law where harmonisation is a long way off, and this may
contribute to barriers to trading outside national boundaries. Moreover, the degree of

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_**MO**_ _**Annual**_ _**Report 1993**_ **-** _**1994**_ _**Section 6**_

variation between national information-related legislation outside Europe makes it difficult for
publishers and others to protect and manage their infonnation services in export markets.

During 1993 and 1994, the copyright debate took on another dimension with the investigation
of the Financial Times by the UK Monopolies and Mergers Commission (MMC). The enquiry
was into the FT Profile database and was sparked off by the FT's decision to discontinue
licensing the database to other hosts. The rationale behind the MMC's enquiry was the
question of whether the FT's management of its copyright materials constituted an abuse of
monopoly power in the on-line historical news market. After a year-long investigation, during
which the MMC heard evidence from the Financial Times, its competitors and trade
associations active in the industry, the Financial Times was cleared of monopoly abuse - much
to the relief of many other copyright holders, who feared that a contrary judgement would
have marked a blow to the ability of major information companies to exploit market
opportunities through justifiable copyright and licensing management.

In other areas, progress has been made over the last year in self-regulation by the European
information industry. This includes the submission of _Guidelines for Cross-Border Control of_
_Audiotex and Videotex_ by the European Information Industry Association in July 1993 and
which is expected to be finalised by Autumn 1994. Although these Guidelines will not be
incorporated into national statutes and are still to be fully agreed, they are expected to facilitate
the development of cross-border markets in audiotex and videotex, where there is considerable
variation in national regulation. A code of practice for information brokers was also drawn up
in 1993 by EUSIDIC, EIIA and EIRENE. Again, this does not have the force of law, but it is
hoped that information brokers who subscribe to the code will be recognised by their clients as
having sound business principles and a professional approach to their work.

The issue of synergy between-the public and private sector in the information market and the
exploitation of government-owned information by the private sector was the subject of further
study during 1993. The EC-funded PUBLAW 2 project examined the impact of Guidelines for
public/private synergy originally drawn up in 1989. The study found that awareness and
application of the Guidelines varied considerably amongst Member States, and a further study
(PUBLAW 3) is due to take place to suggest ways forward on this issue.

A great deal has already been published on the detail of legal developments in these and other
information-related areas. The aim of following sections is therefore to place some of the key
legal issues in a practical context, assess their impact on the information community and
examine the possible solutions which have come to light.

6.1 Copyright and Intellectual Property Rights

Providing high levels of legal and technical protection of creative content will be one of the
essential conditions to ensure the necessary climate for the investment needed for the
development of the Information Society. Thus, there is a need for internationally recognised
protection for the creators and providers of materials that will be disseminated over the Global
Information Infrastructure as was agreed at the G-7 Conference on 25-26 February 1995 in
Brussels. However, much of the copyright framework enshrined in national and EU legislation

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_**MO**_ _**Annual**_ _**Report 1993**_ **-** _**1994**_ _**Section 6**_

was originally developed in the context of print media, and there is a growing requirement fot
additional legislation for the protection of other forms of content, such as electronic databases.

Practical copyright issues have manifested themselves in the form of several distinct problems.
Those which have caused particular difficulties for the information industry are the prevention
of illegal copying, management of copyright clearances and negotiation of authors' rights.

**6.1.1 Illegal Copying**

Electronic storage media are much better suited to quick and cheap copying than are print
media - and here lies one of the problems which has faced the electronic information industry
since its birth. More recently, this problem has been exacerbated by the growing ease with
which multiple copies of electronic files can be distributed over networks such as the Internet.
Unlike most forms of piracy, this kind of illegal copying can be carried out without the need
for a physical distribution medium (such as a floppy disk), at minimal cost and, in many cases,
leaving very little trace. The digital environment is well suited to extraction and manipulation
of information, and the temptations are strong. The fear of uncontrollable copying is probably
the single biggest factor in discouraging information providers. from making their services
available over networks such as the Internet.

As with most crime, prevention would be better than cure in the case of illegal copying. The
best way of tackling the problem may be to make it so quick, easy and cost effective to obtain
copies legally, that illegal copying on an individual or large scale basis becomes unnecessary.
This may be an unrealistic dream at present, but research taking place into systems for taking
on-line payments for information transactions, (such as the EC CITED project), is a step in the
right direction. So too are moves on the part of information providers to make it easier for
users to make legal copies. In Spring of 1994, for example, Dialog-DataStar announced that it
would offer corporate users a service by which they could make legal copies within their
organisation. For services such as electronic document delivery, it will be absolutely essential
that a workable copyright framework is established, and this will require considerable
discussion and negotiation between information providers and users.

A very recent dimension to the copying problem is the question of liability for files illegally
copied over bulletin boards. In the US, for instance, CompuServe is fighting a claim by the US
National Music Publishers Association that it is liable for the illegal copying of MIDI music
files over its bulletin boards. CompuServe says that it takes exhaustive steps to prevent illegal
copying, and that as the distributor it is not liable for copyright infringements by users. The
outcome of this and other bulletin board disputes will be watched closely by those in the
electronic information business.

Looking at other content industries, there is still a great deal to fear from piracy. The Business
Software Alliance (BSA) has initiated a campaign in Europe to crack down on software theft.
It recently found that, in 1993, the Spanish software industry lost £330m (ECU 256m) in 1993
as a result of piracy, and that illegal copying in Italy costs software houses some £166.5m
(ECU 129m). a year. However, the Software Directive passed by the Council in 1991 had to
be implemented by 1 January 1993 nto national legislation and there are signs of improvement.

31

_**MO Annual**_ _**Report 1993**_ **-** _**1994**_ _**Section 6**_

In Italy, for example, the proportion of software in use which is pirated dropped from 86 per
cent in 1992 to 50 per cent in 1993, according to BSA. In the UK, business software piracy
fell from almost 50 per cent in 1992 to 27 per cent in 1993. Meanwhile, the Software
Publishers Association has estimated that in 1993, some £4.4bn (ECU 3.4bn) worth of PC
software was stolen world-wide.

**6.1.2 Copyright Clearance**

The widespread development of multimedia applications will require the clearance of rights for
small elements of text, images, video and sound. The publisher of a multimedia encyclopaedia,
for example, might be faced with thousands, if not millions, of clearances. The cost of this
process, (including a huge administrative cost as well as actual rights payments), could easily
account for more of the total production bill than design and software development.

Although a few fixed price databases of copyright cleared materials have been put together for
developers to exploit (such as Andromeda's Resource Bank), the volume and range of
materials they contain represent no more than a drop in the ocean. The cost and delay of
copyright clearing for multimedia products is one of the biggest motivations behind the
investment in content ownership by applications developers. In turn, these practical difficulties
help to increase the perceived value of content rights and content companies.

One of the possible solutions to the problem may be the establishment of a single electronic
information copyright clearing house, which would co-ordinate functions handled by
organisations like the UK's Copyright Licensing Agency and Performing Rights Society. This
would enable developers to approach a single organisation for its clearances and with which to
carry out transactions. This concept is already the subject of considerable debate within the
industry, but a great deal more work will be needed to develop a workable solution.

**6.1.3 Author Rights**

Authors' interests do not always coincide with these of publishers seeking to maximise their
revenues through electronic versioning and outside licensing of electronic rights, and tending
to view author rights clearances as something which must be accomplished with the minimum
cost and time outlay. Originators may be aware of the opportunities which electronic
publishing affords, but are rarely in a position to judge the value of intellectual properties in a
market of which they may have very sketchy knowledge and where standard author/publisher
royalty relationships are yet to emerge.

The very fact that publishers need to get permission from authors in order to create electronic
versions of their works is becoming commonly known in the publishing community.

So far, attempts to bring together publishers and originators in discussion-over electronic rights
have been less than productive. In the longer term, it is possible that standard rights fonnulas
will be developed alongside those used in print publishing. In the meantime, authors, their

_**MO**_ _**Annual**_ _**Report 1993**_ **-** _**1994**_ _**Section 6**_

agents and the associations representing them-will need to inform themselves as to the nature
of the opportunity.

**6.2** **Legal Protection of Databases**

The proposed Directive for the legal protection of databases regulates the specific problems
which arise as a result of the use of electronic data processing equipment for storage,
processing and retrieval of information. It addresses both the creative and economic aspects of
the protection of databases to stimulate investment and to keep pace with the demand for online information services. The proposed Directive sets out to harmonise copyright protection
of compilations of data and other materials that fulfil common eligibility criteria for protection.

One of the fundamental problems associated with copyright in databases is the notion of
originality, which forms the basis for much of the national copyright legislation and which
varies considerably from country to country. Telephone directories and other reference
databases have been the subject of discussion in this context, partly because they do not fit into
traditional interpretations of originality and represent a comprehensive dataset, rather than one
which requires originality in the method of selection. At present, it is possible for a database to
be copyright protected under the legislation of one country and not in another.

In addition, the proposed Directive provides for a legal innovations by giving protection to the
investment into a database. It is a _sui generis_ right to prevent unauthorised extraction and/or
reutlisation from the database that réfères to infringing acts committed by users of competitors.
Unoriginal databases are not copyrightable. _A posteriori_ protection against parasitic behaviour
by competitors, is provided by unfair competition law only in some Member States but not in
others. _Sui generis_ right is therefore intended to create a common legal environment in which
investment can be stimulated and protected against misappropriation.

The initial proposal for. a Directive resulted in various amendments during the first reading in
the European Parliament. An amended proposal (issued by the Commission in October 1993)
attempted to clarify some of the issues. In the meantime, additional progress has been made
and it is to be hoped that the legislative process will lead to adoption of the Directive without
undue delay. It should be recalled that the Commission's Action Plan on Europe's Way to the
Information Society indicates that the Council is invited to adopt the Directive on the legal
protection of databases as a matter of urgency.

The future Directive will be a cornerstone in the construction of the European Union's
regulatory framework related to the intellectual property aspects of the Information Society.

_**9'1**_

_**MO**_ _**Annual**_ _**Report 1993**_ **-** _**1994**_ _**Section 6**_

**6.3** **Data Protection**

Since the Convention on Data Protection produced by the Council of Europe in 1981, the
storage and use of data concerning individuals has been a significant issue for the industry in
general and for the information industry in particular. Following the Convention,
developments in legislation have taken place at a national, European and international level
which are too numerous and complex to discuss in depth here. However, it is worth
considering the key issues at stake and examining the possible implications of the EC's Draft
Directive on Data Protection.

Data protection legislation is intended to protect the fundamental rights and freedom of natural
persons, and in particular their right to privacy. Depending on the stringency of the national
jurisdiction, this might include any electronic file in which names of individuals are found and
might even include manual records. Data protection therefore has major implications for the
information industry: most obviously for companies involved in activities such as credit rating,
list services and direct mail, but also for directory publishers, bibliographical database
producers and, in some countries, the press. The problem faced by regulators and by industry
at present is the degree to which national law varies, even within Europe. In this field,
however, the European Union is ahead of all other regions in the world.

Most European countries share a lowest common denominator of data protection
requirements. This includes principles such as the fair and lawful processing of personal data.
Moreover, a certain number of rights are granted to the persons whose personal data are
processed (data subjects). For example, data subjects have the right to know what information
is held about them, to inspect that information and to sue for damage caused by inaccurate
data. Naturally, there are exceptions where national security and crime prevention are
concerned, but in general, users of personal data must abide by certain general principles and
must have systems in place to prevent unauthorised access, deletion or amendment of records.

In addition, in some cases, personal data may be processed only if the data subject has given
his/her consent. Some legislation also says that data subjects should know to whom
information about them has been passed, and some extend all of their data protection
legislation to print records.

For the information services industry, where data collections are increasingly global in their
coverage and target markets are often international, the degree of variation can present serious
problems. Different media may attract different treatment; in the UK, Ireland and
Luxembourg, for example, microfilm is not covered by data protection legislation, although it
is in most other European countries. There are differences in the definition of data and of
personal data which can lead to debates such as whether real-time or other transitory electronic
data is subject to data protection.The problems extend to information users too. For example,
buyers of CD-ROMs in some countries are liable to data protection law (on the basis that they
can download and manipulate the data if they so choose), although in others they are not (on
the basis that the content of CD-ROMs cannot be amended).

The wide variation in national legislation (to the extent that Greece and Italy have not yet
ratified the 1981 Convention and even have no law at all) prompted the Commission to press

**84**

_MO_ _Annual Report 1993_ - _1994_ _Section_ _6_

forward with a European Directive. The Council adopted its common position on the draft
directive on the protection of individuals with regard to the processing of personal data and the
free movement of such data on 20 February 1995 and final adoption after the second reading
the European Parliament is expected at the beginning of 1996. Furthermore, discussion on the
proposal for a directive concerning the protection of personal data and privacy in the context
of digital telecommunications networks (ISDN) should continue in the Council with a view to
adopting a common position.

The general directive seeks to facilitate the free movement of personal data within the
Community by affording individuals a high level of protection with regard to the processing of
personal data. Harmonisation of the relevant national laws has proved necessary because of
the wide divergence between them and of the increasing need to exchange data resulting from
the completion of the internal market. The specific directive in the telecommunications field
will adapt and complete the general principles in order to ensure protection in this specific
environment and the free movement of telecommunications equipment and services in the
Community.

The protection of personal data and privacy is essential for the development of the Information
Society and the information market at a global level. Therefore, work: on the two proposals
should be finished as soon as possible. International co-operation should be intensified with a
view to establishing an international legal framework on personal data protection and privacy.

**6.4 Access to information held by government bodies**

One of the largest gatherers of information is government and the public sector, in its various
forms. In the United States access to such information by the private sector for commercial
purposes is expressly permitted by statute (at least as far as the activities of the Federal
government and its agencies are concerned). The information service industry has benefited as
a result.

In many European countries, the right of business to use information collected by the public
sector is much more restricted. As demonstrated in the PUBLAW study, the legal situation
and government policies vary from Member State to Member State. Access to different types
of information may be permitted by law, or there may be no general provisions. Commercial
re-use of such information may be expressly forbidden. Some countries have restrictive legal
conditions on free access, but aim to maximise financial returns.

The PUBLAW 2 study examined the impact of the Guidelines for public/private sector synergy
originally drawn up in 1989. The study showed that awareness and application of the
Guidelines varied considerably amongst Member States. The North American situation was
also examined in detail. A well-attended meeting in 1993 discussed these issues and showed
that the private sector was dissatisfied with existing rules, while the public sector was not
convinced of the need for Community intervention in the form of a directive.

If the European information industry is to compete effectively in the global market place,
considerable attention needs to be paid to practical ways of encouraging co-operation on fair

85

_**MO Annual**_ _**Report**_ _**1993**_ **-** _**1994**_ _**Section 6**_

**terms between the public and private sectors. The next step in this direction has been launched**
**with the start of study PUBLAW** **3.**

**7 DEVELOPMENTS IN THE EUROPEAN** **INFORMATION**

**CONTENT SECTOR IN 1993**

The following section is intended to provide an overview of developments across the full range
of the information industry over the last year, although it is inevitably impossible to cover all of
the technologies and markets represented by the ever-growing information industries. The
breadth of coverage in this section, (ranging from traditional on-line databases to music
publishing and Video on Demand), reflects the widening context of the electronic information
sector as discussed in section 2.1 of this report.

The range of media and platforms available for information service delivery is growing rapidly.
This makes it increasingly difficult for information providers to assess the potential of the
various technologies for their target markets. The technologies themselves are changing so
rapidly that publishers are often wary of developing electronic products because they fear that
new technologies will supersede their chosen delivery media and that investment in electronic
product development will therefore be wasted.

In fact, it is becoming clear that the publishers and information providers which have most to
gain from new media markets are those which maintain their data resources in standardised
digital formats, which can then be exploited through as many or as few delivery media as
appropriate. Furthermore, the emergence of a specialist electronic publishing and development
sector means that information owners can exploit their resources through licensing to third
parties, even if they are not yet ready to carry out electronic product development themselves.

The extent to which new technologies will supersede their older counterparts is a question
which faces the industry at regular intervals. In the late eighties and early nineties, some
forecasters warned that CD-ROM would be the death of on-line. The reality has been that
some on-line business has migrated to CD-ROM, but that the two media have very different
merits which allow them to co-exist. Indeed, CD-ROM has helped to expand the overall
market rather than merely splitting it. In recent months, it has been suggested by some
commentators that the Internet will be the agent which finally kills off the on-line business.
This is unlikely to be the case, although those on-line companies which are able to exploit
network opportunities in addition to their other businesses will be in a strong position.

**7.1** **On-line Databases**

The on-line sector is the oldest and most established of the information businesses and, not
surprisingly, it no longer enjoys the exponential growth rates seen in newer areas like CDROM and multimedia. Nevertheless, on-line market growth in Europe was around 13 or 14
per cent in the period 1989 to 1991, which is encouraging bearing in mind the overall
economic climate. Figures for 1992 suggest that growth since the previous year may have

_MO Annual Report 1993_ - _1994_ _Section 7_

been as high as 20 per cent. Real-time information services still make up the biggest share of
the European on-Une market, and the bulk of sales continue to be generated by. large
corporations with on-line budgets and information professionals at their disposal. Meanwhile,
growth in the number and range of databases available continues apace.

**7.1.1 The On-line Market**

Reliable and up-to-date figures for the on-line sector are still difficult to find. The joint
EIIA/EC Co-ordinated Host Survey provides useful European data for the supply side up to
1992, and a few market research reports have been published which cover the demand side,
although these have varied in quality and accuracy. The Host Survey provide the most
consistent overview of the European situation over a period of years. Table 7.1 shows on-Une
revenues between 1989 and 1992, and indicates that, in spite of general recession, the on-line
industry sustained relatively high levels of growth between 1989 and 1991, and that during the
period 1991 to 1992, revenues grew by nearly 17 per cent.

**Table 7.1** **Professional EU On-line Revenues (Including Videotex), 1989-1992**

EU On-line Revenues Percentage Growth
(MECU)
1989 2,203.1
1990 2,491.6 13.1
1991 3,121.7 25.3
1992 | 3,643.2 | 1GL7
Source: EIIA/EC Fourth Co-ordinated Survey
(Figures re-stated at 1992 exchange rates)

The EIIA/EC survey also breaks down these figures by origin of revenues (see Table 7.2).
Interestingly enough, these suggest that the proportion of total revenues earned in export
markets outside the EU fell slowly but steadily between 1989 and 1992, from 39 per cent to 32
per cent. This may be partly accounted for by unfavourable exchange rates. The proportion of
intra-EU sales also fell back slightly in 1992, whilst national sales grew substantially as a
proportion of the total. The largest proportion of non-EU export sales continued to be
generated in North America, where exports amounted to 288.2 MECU in 1992. Sales to the
US represented 11.5 per cent of the total in 1992, compared with 14.9 per cent in 1989.

_MO Annual Report 1993_ - _1994_ _Section 7_

**Table 7.2** **Geographical Analysis of On-line Revenues (Excluding Videotex)**

% of total

1989 1990 1991 1992

BNational Sales I I Intra-EU Sales LJ Export Sales

Source: EIIA/EC Fourth Co-ordinated Survey
(Percentages re-stated using 1992 exchange rates)

The Simba/Communications Trends 1993 _Online Services_ report indicated that in 1992,
Europe-based on-line companies generated revenues of US$ 3.24bn (ECU 2.79bn). According
to Simba, Europe's overall share of the on-line market fell by three per cent during 1992,
bringing it down to 32 per cent. Simba's figures for Europe appear quite low when compared
with those produced by the EIIA/EC survey. This might be partly because they have not
included independent subsidiary companies based in the EU but ultimately owned by US
companies.

In the US, the electronic information services market grew by 16 per cent in 1993, according
to the 1994 US Industrial Outlook, reaching US$ 13.6bn (ECU 11.7bn). Around 65 per cent
of this total (ie around ECU 7.6bn) was thought to be attributable to on-Une revenues. The
market for all electronic information services is expected to grow by a further 15 per cent
during 1994, with revenues up to US$ 15.6bn (ECU 13.4bn).

Real-time services continue to play a crucial role in the on-line industry, and still represented
over half of total EU revenues (nearly 54 per cent) in 1992. Having said that, the proportion
of real-time revenues has fallen steadily since 1990, when they accounted for 59 per cent.
Falling growth rates in real-time services has partly been a resuit of general recession in
financial and banking industries, but is also a sign of the comparative maturity of this sector.

ro

_MO_ _Annual Report 1993 - 1994_ _Section 7_

Non-real-time services, on the other hand, enjoyed growth of nearly 27 per cent in the period
between 1991 and 1992.

**Table 7.3** **Real-Time / Non-Real-Time Revenue Breakdowns**

MECU

2000

1500H

1000h

500 h

1989 1990 1991

MReal-Time ^ N o n —Real —Time

Source: EIIA/EC Fourth Co-ordinated Survey
(Figures re-stated at 1992 exchange rates)

1992

Reuters and Telekurs continue to dominate the European real-time market. In 1993, Reuters
acquired Quotron, Citicorp's real-time news, equities analysis and stock price division.
Although Quotron is widely considered to be a declining business in the US, it does give
Reuters a lever into the US market. Reuters' results for 1993 indicated a turnover of £1,874m,
(ECU 2,436m) representing an increase of 19.5 per cent since the previous year. Profit before
tax was up 14.9 per cent on the previous year to £440m (ECU 572m).

It is comparatively easy to split out real-time and non real-time revenues, but analysis of
industry revenue by subject or sector is rather more difficult. The only subject analysis
provided by the EIIA/EC survey relates to electronic information service revenues generally
and not just on-line, and these are indicated in Table 7.4.

_MO_ _Annual Report 1993_ - _1994_ _Section 7_

**Table 7.4 Subject Analysis of EU Electronic** **Information** **Revenues, 1990-1992**

%

Total

60.2

28.8

%

Total

60.2

28.8

1991

MECU

_-_
1,841.7

883.0

1992

MECU

1611.1

Finance

Business

Govt.

STM

Other

1990

MECU

1,815.6

649.5

41.7

50.3

15.9

%

Total

70.6

25.2

1.6

2.0

0.6

178.6

96.7

60.8

993.4

230.2

104.4

53.4

Govt. 41.7 1.6 178.6 5.8 230.2 5.8
STM 50.3 2.0 96.7 3.2 104.4 3.2
Other 15.9 0.6 60.8 2.0 53.4 2.0

Source: EIIA/EC Fourth Co-ordinated Survey
(Figures re-stated at 1992 exchange rates)

5.8

3.2

2.0

Simba provides a more detailed breakdown of on-line markets by subject, (Table 7.5) although
unfortunately, these are not broken down by region.

**Table 7.5 Subject Analysis of Worldwide On-line Revenues, 1988-1992**

% of

Total

1990
(MECU)

1988
(MECU)

1989
(MECU)

1991
<MECU)

1992
(MECU)

1988 1989 1990 1991 1992 in
(MECU) (MECU) (MECU) <MECU) (MECU) 1992

Brokerage 2,698.2 3,055.8 3,385.3 3,580.9 3,847.7
Credit 1,405.2 1,468.9 1,493.8 1,521.8 1,633.6
Fin.News/Rch. 1,051.8 1,160.1 1,301.2 1,426.7 1,591.0
Legal/Reg. 399.0 509.7 577.5 611.5 649.7
Profssnl. 354.5 446.4 499.9 529.0 568.6
End User 90.3 123.8 205.3 295.5 398.5
Marketing 8.2 12.9 19.3 26.7 34.4

2,698.2

3,385.3

1,493.8
1,301.2

3,580.9

1,521.8
1,426.7

3,847.7

1,633.6
1,591.0

44

19

18

1,405.2
1,051.8

3,055.8

1,468.9
1,160.1

577.5

499.9

205.3

399.0
354.5

611.5
529.0
295.5

Legal/Reg. 399.0 509.7 577.5 611.5 649.7 7
Profssnl. 354.5 446.4 499.9 529.0 568.6 7
End User 90.3 123.8 205.3 295.5 398.5 5
Marketing 8.2 12.9 19.3 26.7 34.4 >1

Source: Simba/Communications Trends, 1993

649.7
568.6
398.5

90.3

509.7
446.4

123.8

34.4

19.3

26.7

8.2

12.9

Forecasting the on-line market becomes more and more difficult as new technologies emerge.
The potential impact of the Internet on traditional on-line sales is particularly difficult to assess,
and depends largely upon the ability of on-line companies to innovate and diversify in terms of
delivery options. Simba have estimated that growth in on-line sales worldwide will be around
8 tô 8.5 per cent in the period 1994 to 1997, bringing worldwide revenues up to 13 BECU at
the end of that period. (See Table 7.6.)

91

_MO_ _Annual Report 1993 - 1994_ _Section 7_

**Table 7.6** **Worldwide On-line Service Sales Forecast**

```
                Sales (BECU)

            14
                                            13.09

              1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

```

Source: Simba/Communications Trends, 1993

**7.1.2 Availability and Use of On-line Databases**

Work carried out by Gale Research Inc. as part of their 1993 Directory of Databases indicates
that the overall volume of on-line searches continues to grow rapidly, with an estimated 44.4
million searches having taken place in 1992, excluding searches on transactional services. The
previous year, the figure had been estimated at 34.5 million. The same irectory listed a total
of 7,907 databases in its 1993 edition (reflecting the position in 1992), up from 7,637 the
previous year and 6,750 in 1990. It is unclear, however, what proportion of databases were
available in portable formats (such as CD-ROM) as opposed to on-line. Furthermore, the Gale
directory is very much geared towards the American market, although it claims to cover all
regions. It nevertheless appears to be the most comprehensive of the on-line directories
currently available and is therefore useful as a general indicator of trends.

The breakdown of services by subject area in 1992 is indicated in Table 7.7.

_**MO**_ _**Annual Report 1993**_ **-** _**1994**_ _**Section 7**_

**Table 7.7 Databases by Subject Area,** **-1992**

1 — 1 Ï Ï — — — — — — — — — ~ — — ^ " » « ™« = » — ' — — - m g - g — — — ~ — ~ — ~ — — ~ — i i . i u n . i i g » ^ - — - — — _ _
Subject __ Number of Databases Percentage of Total
Business 2,624 33
Science/Technical/Engineering 1,492 19
Law _._ 885 11

Health/Life Sciences 728 9

General     - 700 9

Social Sciences 447 6

News 385 5

Humanities 314 4
Multidisciplinary (Academic) | 296 | 4
Source: Gale Directory of Databases, 1993

According to Gale, the proportion of commercial database producers is still rising significantly,
and reached 75 per cent in. 1992, up from 70 per cent the previous year. Meanwhile, the
proportion of databases produced by government institutions and by not-for-profit
organisations appears to be falling slowly, making up 15 per cent and 9 per cent respectively in
1992. The remainder is made up of databases published jointly by the public and private
sectors. Within Europe, however, the proportion of public sector databases is higher,
reflecting the more active role which governments tend to play in information provision.

Details of the provision and use of on-line services in the home are contained in section 7.7 of
this report.

**7.2** **Optical Information Media**

Since the publication of the first CD-ROMs in the mid 1980's, industry commentators have
been predicting an explosion in optical disc publishing. For many years it seemed as though
the prediction was yet another instance of the widening gap between hype and reality which is
typical of high-tech industries. 1993, however, will probably go down as the year that CDROM really took off, in the sense that many more organisations actually started to make
money out of CD-ROM publishing and that optical discs began to enter the consciousness of
the general public. 1993 was also the year that many computer hardware manufacturers
started including CD-ROM drives as standard on their top range computers, and low-cost
multimedia upgrade kits became a common sight in generalist computer mail order catalogues
and retail outlets.

**7.2.1 Platforms**

The availability of these kits and the gn wing installed base of multimedia-capable PCs has
meant that multimedia publishing on the standard CD-ROM XA (extended architecture) format
gained much wider acceptance, although the number of proprietary multimedia platforms based
on the CD-ROM standard has continued to increase. By the end of 1993, these included not

93

_MO Annual Report 1993_ - _1994_ _Section 7_

only Philips' CD-i, Commodore's CD-TV, Tandy's VIS and Kodak's Photo CD, but also 3DO,
Sony's MMCD and Commodore's CD32 games console, not to mention the Sega CD-based
console, Saturn. Agreement was also reached on a standard for video publishing on CD
(Video CD) towards the end of 1993.

**7.2.2 Installed Base of Readers**

According to the sixth edition of the Optical Publishing Industry Assessment (OPIA) report,
(published by Infotech), the installed base of CD-ROM drives grew by 155 per cent in 1993,
bringing the total base to a figure of around 11.4 million worldwide. The report suggests that
this was mainly a result of bundling of drives and "vigorous sales of aftermarket readers [ie
drives purchased for connection to PCs already in use] especially in American and European
markets'. The European installed base by mid-1994 is estimated at between 1.5 to 2 million,
whilst the US is way ahead with an estimated installed base of over 7 million. The price of
CD-ROM drives have been slower to fall in Europe than in the. US, which partly accounts for
the difference. Things are changing, though: in France for example, 80,000 drives were sold in
1993 - a fourfold increase since 1992 when 20,000 were sold (source: EuroCD).

Suggestions of growth at the level quoted in the OPIA report came as something of a surprise
to the information industry, although Infotech claims that its previous estimates had erred on
the side of caution, and that it had not anticipated such a take-off in 1993. At the beginning of
1994, it was thought that over 10 per cent of desktop computers worldwide had CD-ROM
drives, the expectation being that by 1999, almost every desktop PC will have access to either
a standalone or networked CD-ROM reader. The report forecasts that the installed base of
readers will more than double in 1994 to reach almost 24.9 million.

These figures indicate a major take-off in CD-ROM over the past year and, according to a
report published by Freeman Associates in California in May 1994, the current installed base of
drives may be even greater than that estimated by OPIA, (see Table 7.8 below), although the
rate of growth in terms of installed base and shipments is likely to fall off after 1994, according
to the Freeman report.

**Table 7.8 Worldwide CD-ROM Drive Installed Base and Sales,** **1993-1999**

% Growth Since

Previous Year

Installed Base at
Year End (000s)

Shipments (000s)

1993

1994

1995

1996

1997

1998

1999

8,322
13,699
18,600
22,700
25,600
28,150
29,600

141

63

37

22

13

10

5

1993 8,322 141 12,997
1994 13,699 63 25,696
1995 18,600 37 42,141
1996 22,700 22 60,396
1997 25,600 13 78,245
1998 28,150 10 94,597
1999 29,600 5 108,050

Source: Freeman Associates Inc.

94

_**MO**_ _**Annual Report 1993 - 1994**_ _**Section**_ _**7**_

**OPIA,** **on the other hand, forecasts another rapid growth phase between 1997 and 1999, at the**
**end of which the worldwide installed base of drives will be over 250 million. Of this total,**
**OPIA forecasts that over 50 million will be made up of TV set-top drives.**

**7.2.3 Availability of Titles**

**The tremendous growth in the number of CD-ROM titles available continued throughout**
**1993,** **with TFPL's figures indicating 3,597 published titles worldwide at the beginning of**
**1993,** **rising to** **4,731** **by the middle of** **the** **year. TFPL's 1994 CD-ROM Directory (published**
**in early January 1994 and therefore reflecting the position towards the end of 1993), showed**
**another huge leap in numbers to 5,379. TFPL predicts that if the growth continues at the same**
**rate, 3,000 new titles will be produced in 1994.**

**The OPIA report indicates an even higher number of titles than that** **suggested.by** **TFPL.**
**OPIA gives a figure of 8,100 CD-ROM titles in print worldwide in 1993, although this figure**
**includes nearly 3,600 titles produced in-house by companies for internal use, for applications**
**such as in-house training and reference. Such titles are** **not** **counted in the TFPL directory.**
**The OPIA report indicates growth of 54 per cent in the number of titles in print during 1992,**
**and suggests that numbers of titles will reach around 10,700 during 1994 and around 13,000**
**during 1995.**

**The growing number of consumer and general interest CD-ROM titles is partly responsible for**
**substantial growth in the number of titles available, although the number of arts and**
**humanities, business and language titles all grew by over 60 per cent between 1993 and 1994**
**according to TFPL. Table 7.9 shows the biggest subject areas for CD-ROM in terms of**
**number of titles published.**

**Table 7.9 Top Ten Subject Areas for CD-ROM by Number of Titles, 1994**

Subject

Number of

Titles

% of Total

###### £ j

Increase j
93/94

General Interest, Leisure
Arts, Humanities
Education, Training, Careers
Computers, Computer Programmes
Advertising, Design, Marketing
Business and Company
Languages, Linguistics
Crime, Law, Legislation
Science, Technology
Maps, Geography

General Interest, Leisure 1,043 19.0 73.8
Arts, Humanities 724 13.2 61.9
Education, Training, Careers 631 11.5 48.8
Computers, Computer Programmes 510 9.3 47.8
Advertising, Design, Marketing 429 7.8 5'3'.2
Business and Company 426 7.7 60.7
Languages, Linguistics 417 7.6 61.6
Crime, Law, Legislation 399 7.3 34.3
Science, Technology 386 7.0 37.8
Maps, Geography 332 6.0 26.7

Source: TFPL Publishing

1,043
724

631

510

429

426

417

399

386

332

19.0

13.2

11.5

9.3

7.8

7.7

7.6

7.3

7.0

6.0

_MO Annual Report 1993 - 1994_ _Section 7_

**Compared with the US, Europe has a larger number of companies engaged in CD-ROM**
**related activities, but this is a symptom of the** **fragmented** **nature of the market. Indeed, the**
**difficulties of selling to the whole of the European market is reflected in the fact that there are**
**almost twice as many distributors in Europe as there are in the US (829 in Europe and 449 in**
**the US according to TFPL's 1994 CD-ROM Directory).** **The relative positions in the**
**publishing of CD-ROM titles has remained fairly constant since 1990, with the US accounting**
**for a little over 60 percent of titles and Europe around 30 per cent.** **The geographical**
**breakdown of CD-ROM companies and titles is provided in Table** 7.10.

**Table 7.10** **Origin of CD-ROM and Multimedia CD Companies and Titles, 1994**

```
            3500

            3000

```

Source: TFPL Publishing

```
      3299

              84 89 32 1 3 6 6

                  — I, i
```

Europ» North/South Asia AustralaslaMiddle East Africa
America

No. of C o m p a n i e s U N o . of Titles

**7.2.4 Markets, Sales and Pricing**

Worldwide revenues for CD-ROM titles in 1993 were estimated by OPIA to be US$ 9.6bn
(ECU 8.25bn), although this figure includes in-house as well as publicly available discs.
Combined revenues for titles and drives were estimated at US S 12.2bn (ECU 10.5bn), and
were expected **to** reach around US$ 22bn (ECU 18.9bn) by 1994 and around US$ 56bn (ECU
48.2bn) by 1995. Revenues for commercial titles are forecast to reach nearly US$ 120bn
(ECU 103.2bn) by 1999, up from around USS 40bn (ECU 34.4bn) in 1996. However, these
figures should be treated with a certain amount of caution. This is a very dynamic and young
market and, although prospects for growth are good, it is difficult at this stage to quantify the

96

_**MO Annual Report 1993 - 1994**_ _**Section 7**_

**impact** **of developments in other areas, especially those taking place in the network**
**environment.**

**According to** **OPIA,** **the traditional CD-ROM sector, (namely professional, library corporate**
**and government), continues to form the core of the market, largely because of the higher**
**margins which can be achieved on products in this range. Average prices of professional and**
**business CD-ROMs during 1993 were said to range between US$ 700 and US$ 900 (ECU**
**600-775), whilst consumer multimedia titles, which accounted for a large proportion of unit**
**sales,** **ranged** **from** **US$** **50-US$'125** **(ECU** **45-110).**

**During the period** **1991** **to 1992, Europe may have accounted for only 20 per cent of the world**
**CD-ROM market, although this is expected to have grown significantly by the end of 1994.**
**Growth in revenues from professional CD-ROM titles in Europe has been dramatic in recent**
**years.** **The** **EIIA/EC** **Fourth Co-ordinated Survey indicated that revenues grew by 173 per cent**
**between 1990 and 1991 to ECU** **79.3m,** **and by a further 93 per cent between 1991 and 1992**
**to ECU** **152.7m.**

**Retail sales of CD-ROM are growing in Europe, as major retail outlets begin stocking games,**
**entertainment and consumer reference titles. In** **mid-1993,** **the market research firm Gallup**
**reported zero sales for retail CD-ROM in the UK, the amounts being negligible in comparison**
**to other media. When Gallup reported again six months later, CD-ROM accounted for 4 per**
**cent of the total. Admittedly, reference CD-ROMs made up a small part of this, with the**
**greatest proportion of** **sales** **represented by games formats (1.4 per cent for CD32 titles and 1.6**
**per cent for Sega titles). Nevertheless, CD-ROM is becoming firmly established in the retail**
**market.**

**7.3** **Multimedia**

**Despite the huge volume of material published about multimedia in 1993, in both the specialist**
**and the newspaper press, there is still a great deal of confusion as to the meaning of** **the** term.
In its **broadest sense, multimedia is an expression used to describe services where a number of**
**media elements are combined and an interactive environment created. Such media elements**

**might include searchable text, sound and still and moving images. Multimedia is frequently**
**associated with CD-based products, although it is by no means confined to such media.**

**The availability of** **broadband** **communications and compression technologies makes it possible**
to offer interactive **multimedia** services **over networks, although in practical terms in the EU,**
this type of multimedia is at present largely confined to ISDN-based services **for** business.
Two UK-based companies, On-Demand Information and Perfect Information have begun
offering business information services via ISDN in the past year, and others **are** likely to
follow, especially in the product information sector. Fully interactive, networked multimedia is
unlikely to be a feature in the home until there has been significant **further development** of
cable and ATM switching and of compression techniques. Meanwhile, developments such as
interactive TV are also being described under the multimedia umbrella, although the level of
interactivity offered by such services is likely to be restricted in the first instance. (See section
7.8.3 for further discussion of interactive TV technologies and markets).

97

_**MO Annual Report**_ _**1993-1994**_ _**Section 7**_

Information Workstation Group in the US predicts that multimedia in its widest sense will be
worth US$ 30bn (ECU 25.8bn) by 1998 in North America alone. Their report entitled
_Multimedia Opportunities_ suggests that the three biggest application areas will be
entertainment, with US$ 9.1bn (ECU 7.8bn) multimedia-attributable revenues, the publishing
process (multimedia production and publishing activities), US$ 4.7bn (ECU 4bn) and special
effects US$ 3.5bn (ECU 3bn). Education and training applications are expected to generate
multimedia-attributable revenues of US$ 3.3bn (ECU 2.8bn) by 1998.

CD-based multimedia has captured the imagination of the public and of the press over the last
year, although the European market for consumer multimedia is still small in comparison with
the traditional CD-ROM market. The OPIA report suggests that consumer multimedia may
account for as little as 20 per cent of overall CD-ROM revenues.

However, a consumer boom in multimedia and games CDs was experienced in 1993, mainly
during the last quarter of the year. The American Software Publishers Association said that
sales of products from 62 major CD-ROM software publishers in 1993 amounted to US$
202m (ECU 173.7m) from eight million units sold. US$ 102m (ECU 87.72m) of this total
came during the fourth quarter, when four million units were sold. Reference products such as
encyclopaedias and dictionaries accounted for 40 per cent of sales, games and home
entertainment 30 per cent and home education 24 per cent. Whether or not this can be
replicated in Europe will depend partly on the willingness of bookshop chains, music and video
stores, and consumer electronics retailers to stock CD-ROM products.

Much of the activity surrounding the development of multimedia CD technology has been
undertaken by hardware companies and consumer electronics manufacturers. Thus, companies
like Philips, Commodore and Tandy have developed multimedia players based on proprietary
architectures which often require application developers to pay a license fee or royalties for the
right to publish titles for the platform.

More recently, developments in compression standards on CD-ROM (especially the MPEG
video standard), has made it possible to create multimedia applications on a standard CD-ROM
with extended Architecture for audio-visual material (hence CD-ROM XA). CD-ROM XA is
an industry standard and is not proprietary to any single manufacturer. Unlike platforms like
CD-i or 3DO, it does not require users to buy dedicated hardware, although full multimedia on
CD-ROM XA does require add-on equipment such as sound and video cards. The installed
base of multimedia PCs appears to be growing enormously and developers of general reference
and "edutainment [1] titles may therefore decide to opt for CD-ROM XA rather than be tied to an
individual manufacturer's platform. The growth in installed base of Windows PCs and the
popularity of the Windows environment has led many CD-ROM XA publishers to choose this
format. Distinct markets are likely to emerge for PC-based and television-based multimedia,
and whilst CD-ROM XA and Windows may dominate in the former, the proprietary platforms
will continue to play a strong role in the latter.

Philips' multimedia CD player, CD-i, was first launched in the US in October 1991 and
European launches began with the UK in April 1992. At the end of 1993, Philips announced
that sales of their CD-i player had reached 300,000 worldwide, that there were some 150 titles
already on the market and that 75 further titles were to be launched during 1994. They also

_**MO Annual Report 1993 - 1994**_ _**Section 7**_

**indicated that three million discs had been sold so far, which suggests an average 10 titles**
**purchased per player. The number of retail outlets selling CD-i was said to have risen to**
**13,000.**

**Digital video upgrades for CD-i players were launched in the US and UK during the last**
**quarter of** **1993,** **and Philips signed a deal with MGM allowing films from their catalogue to be**
**produced in CD-i format. Many industry commentators believe that the availability of feature**
**films on disc will be the stimulus needed for a more widespread take-off of CD-i, and Philips is**
**expected to launch a Digital Video campaign during 1994. A forecast of** **the** **market for CD-i**
**titles is provided in Table** **7.11.**

**Table** **7.11** **.European** **Forecast for CD-i Title Sales**

l I Europe (MECU) I US (MECU) |

1994 59.8 39^6

1997 727.4 545.2 I

2000 1 5,676.0 1 3,096.0 I

Source: _The Market for CD-i,_ Alan Barker 1993 I

**Commodore launched the first consumer multimedia player (CDTV) in April 1991, which** was
originally **expected to compete head on with** **Philips'** **CD-i. However, it was later re-positioned**
**as** a **games machine rather than a multimedia player and has since been superseded by** **CD32,** **a**
**32-bit computer game platform. In the meantime, other proprietary multimedia platforms have**
**continued to emerge, including** **3DO.** **Announced at the end of 1992,** **3DO** **was backed by**
**Matsushita, AT&T and Electronic Arts, amongst others, and the first player was launched** by
Panasonic in 1993.

**7.4** **Videotex**

Videotex has a very patchy history in Europe, with France's Télétel service as **a** showcase of
government-led videotex initiatives, whilst other markets have shown minimal growth in recent
years. By December 1993, 6.5 million videotex terminals were installed **in France, and a**
further 500,000 computers with modems were being used for videotex access using Minitel
emulation standards. Videotex services generated 112 million hours of connect time and
brought in revenues of some FF 6.7bn (ECU lbn) during 1993. By contrast, the UK installed
base of videotex terminals was just over 100,000 at the same period.

France has the highest penetration of videotex terminals in the world, with Spain a very distant
second. Table 7.12 below indicates that growth in the Spanish installed base of videotex
terminals has been dramatic in recent years. Italy has experienced high growth, although

**Q Q**

_MO Annual Report_ _1993_ _-_ _1994_ _Section 7_

overall penetration remains comparatively low. More recently, penetration of videotex
terminals in Germany has also grown substantially.

**Table** **7.12** **Installed Base and** **Penetration** **of Videotex Terminals,** **1993**

<

Germany
Canada
Spain
France
Italy
Japan

Installed Base

(000s)

**378**

**105**

**480**
**6,540**
**200**

**128**

**104**

Penetration per
1000 Inhabitants

**4.7**

**3.7**

**12.3**

**113.3**

3.5

**1.0**

**1.8**

% Average Annual
Penetration Growth,

1988-1993

**14.3**

63.8

185.8

8.4

117.8

15.1

UK

UK **1.8** 2.8

Source: _Les Chiffres Clés des Télécommunications Mondiales,_ OMSYC !

France has also been in the forefront of development of high-speed videotex services. This
year, the Télétel Vitesse Rapide service will be put in place, allowing transmission at 9,600 bits
per second, which will enable photographic images to be delivered to videotex terminals. The
possibility of integrating credit card readers into the Minitel terminal is also being investigated.
A comparative view of videotex elsewhere in Europe is provided in Table 7.13.

**Table 7.13 Videotex in Europe**

Date of
Update

01/92

05/93

12/91

05/93

08/93

07/93

12/92

05/93

05/93

10/92

02/92

05/93

02/92

10/92

07/93

12/92

Number of

Hours per

Month
(000s)

30

4

33

2,200

7

130

9,200

167

<1

200

9

200

1985

1986

1988

1984

1983

1990

1986

1982

1993

1987

1986

1990

1986

1988

1987

1980

_Audio_ _tel,_ F

Year of

Launch

Country
Austria

Number of

Calls per

Month
(000s)

250

25

320

9,000

37

620

148,000

540

2

2,200

55

1,500

Belgium
Denmark

Finland
Germany
Ireland
Spain
France

Greece
Italy
Luxembourg
Netherlands
Norway
Portugal
Switzerland

UK

Source: _La Le_

Name of

Service

Bildschirmtex

RTT Videotex

Teledata
Telesampo

BTX

Minitel

Ibertex

Télétel

Hellastel

Videotel

Videotex

Videotex NL

Teledata

SPV

Videotex

Prestel

_nre de Télétel et d_

ranco Télécom

!

ICO

_MO_ _Annual Report 1993_ - _1994_ _Section 7_

**7.5** **Audiotex**

Audiotex was first introduced to Europe in 1986 in the UK and France. In the years between
1987 and 1993, almost every other western European country launched either national or
regional audiotex services, although in some countries these were later suspended. Audiotex is
the term used to describe information and entertainment services delivered by the telephone.
Such services are often made available over premium rate lines, although some are offered over
standard telephone lines and are charged via credit card billings or subscriptions. Other types
of services, such .as those providing advertising or government information, might be offered
over free phone lines. In Europe, however, most of the audiotex industry is concentrated
around the premium rate market.

A report published by Eurodata Foundation in autumn 1993 entitled _Premium Rate Services_
suggests that the European premium rate services market will be worth US$ 2bn (ECU
1.72bn) by 1995, up from US$ lbn (ECU 0.86bn) in 1992. Eurodata's report argues that
premium rate is becoming an increasingly acceptable way of accessing information services,
and that it no longer has such a strong association in people's minds with "adult [1] entertainment.

Eurodata's study included a survey of 1,400 people in 12 countries and, in particular,
awareness, usage and willingness to pay premium rate tariffs were assessed. Across Europe,
12 per cent of business people and 9 per cent of consumers had used premium rate telephone
services, although in the Netherlands and the UK the figures were significantly higher (20 per
cent of business people and 10 per cent of consumers in the UK; 38 per cent of business people
and 31 per cent of consumers in the Netherlands). Willingness to pay premium rates for access
to information services was found to be particularly high in France, where the market is well
established and where widespread videotex usage has increased overall familiarity with the
concept of paying for information. Business people seemed most willing to pay premium rates
for government and public information, whilst consumers were more likely to be prepared to
pay for advice lines and financial information. Table 7.14 shows the breakdown of European
markets, launch elates and penetration of DTMF telephones.

Although much of the revenues for premium rate services still comes from ' adult' services, the
range of professional and business services available via audiotex has grown in Europe. The
Fourth EIIA/EC Host Survey indicated revenues of ECU 97.4m for professional audiotex
services in 1992. This suggests that audiotex still plays a minor role in the professional
electronic information services market, representing only 2.3 per cent of total revenues in
1992.

A study by Geste called _Panorama de VEdition Audiotel_ provides a detailed picture of the
range of services available in France and the nature of the organisations offering them.
Informal indicators suggest that the European audiotex industry has a large number of small
operators. The Geste report provides a detailed case study which appears to confirm that this
is the case. Around 60 per cent of French service providers were found to have only one line,
controlling 10 per cent of the total number of lines, whereas" only 3 per cent of service
providers had more than 20 lines, but together controlled 40 per cent of the total. The type of
organisations offering audiotex services are broken down in Table 7.15.

101

_MO Annual Report_ _1993_ _-_ _1994_ _Section 7_

Table 7.14 Breakdown of European Premium Rate Markets, Launch Dates and
**DTMF** Penetration

1995

Year of

Launch

DTMF Line

Pénétrât.
1992 (%)

1992

Market Size
(MECU)

1993

Belgium
Denmark
Germany
Spain
France

Greece

10.100

10.789

24.773

11.712

54.062

279.990

15.413

25.500

53.678

117.000

348.355

23.712

30.600

487.981

139.018

435.443

Belgium 10.789 15.413 23.712 1989 55
Denmark 24.773 25.500 30.600 1990 95
Germany 11.712 53.678 487.981 1992 10
Spain 54.062 117.000 139.018 1992 40
France 279.990 348.355 435.443 1986 62
Greece 10.100 20.200 1993 10

Ireland 6.503 8.750 14.000 1986 60
Italy 0.741 144.000 290.223 1993 35
Luxembourg 1.000 1.600 1993 77
Netherlands . 99.587 105.000 127.731 1990 40
Portugal 1.756 15.600 41.600 1991 10
UK 346.707 367.934 424.540* 1986 33

Source: _Overview of the Audiotex_ _PRS Service_ _Market,_ IMO Working Paper
93/3, _EPJoumal_

20.200

Ireland
Italy
Luxembourg
Netherlands
Portugal
UK

1.756

346.707

6.503

0.741

8.750

144.000

1.000

105.000

15.600

367.934

14.000

290.223

1.600

127.731

41.600

424.540*

. 99.587

1989

1990

1992

1992

1986

1993

1986

1993

1993

1990

1991

1986

Table 7.15 Breakdown of Organisations in France Offering
Services and Percentage of Lines Controlled

ndependent

Media Groups
27%

(18)

Public Services

8%

(14)

( ) = % of lines controlled

Source: _Panorama_ _de_ _l'Edition_ _Audiotel,_ Geste

102

Premium Rate

_MO Annual Report 1993 - 1994_ _Section 7_

The more mature European audiotex markets, such as the UK and France, seem to be
stabilising and becoming more established. However, in countries where audiotex has been
introduced relatively recently, it is unfortunate that the same problems relating to adult and
chatline services, and concern over premium rate bills, are still occurring. In Italy, national
audiotex services were launched for the first time during 1993, but by the end of the year there
had been so much public outrage over bills generated through use of Audiotel services that the
Italian-PTO decided to ban chatlines and live'services until July 1994, from which date an optout facility for Audiotel 144 services will be available nationally.

Spain, which had suffered similar problems in the early days of its audiotex industry and had all
of its services closed down by the Spanish government in December 1992, re-opened audiotex
lines to all service providers in December of 1993, but with the proviso that audiotex services
are opt-in only, so that customers have to apply to the PTO, Telefonica for this facility. In
addition to the 903 lines originally used for premium rate services, a new 906 prefix has been
introduced for services which are no;.i-profit making, including weather and stock market
services. These are available to all telephone subscribers without an opt-in requirement. The
Belgian market grew by over 180 per cent between 1991 and 1992, mainly as a result of adult
services and chatlines, but there has now be a harsh regulatory clamp-down and growth has
slowed considerably.

Audiotex markets in Europe are almost entirely national, although bilateral talks between
European PTOs have been taking place in order to establish mechanisms for cross-border
activity. It has therefore been necessary to establish a Code of Practice for the provision of
audiotex services across boundaries, and work has been carried out by the EIIA on this front.
(See also section 6.)

**7.6** **Fax-Based Information Services**

Fax-based information services represent a niche sector and, whilst the number of information
services delivered by fax has grown substantially over the past few years, it is still a small and
specialist market. The most promising applications for fax as an information medium are those
which offer access to specified sets of information on demand (fax on demand).

Fax on demand services are often operated over premium rate telephone lines, allowing users
to select the documents they require using the touch tone keys on a telephone or fax machine.
Typical applications are detailed weather information, share prices and currency rates, business
summaries and company infonnation. Another application wliich has proved very successful in
the US and which is becoming common in Europe is on-demand access to reader enquiry
information. A premium rate or free phone number is published along side an advertisement,
which the reader can dial in order to receive by fax further details of the product or company
advertised. This allows publishers to offer an additional service to advertisers, and to generate
revenue through charging readers per call or by charging advertisers for storage and delivery of
promotional information.

One of the reasons why fax-based publishing has remained a fairly small concern is the
inflexibility of the premium rate tariff structure. Tariffs vary from country to country., but even

103

_MO_ _Annual Report 1993 - 1994_ _Section 7_

in Member States where service providers are allowed to charge per call (rather than per
minute), the rates are often too low to make the provision of high-value business information
worthwhile. Consequently, some fax operators have turned to other methods of service
delivery. An interesting example of fax on demand innovation is I-Fax, a service offered by a
company of the same name originating in Nova Scotia, which opened a UK office during 1993.
The company acts as a service developer and bureau, and uses technology based on pattern
recognition. Users fill in a form by shading boxes' corresponding to letters and numbers, thus
specifying the information they require, then fax the request to I-Fax. When the request is
received by the I-Fax computer, it is automatically converted into a database search and the
results faxed back in a matter of minutes.

So far, the I-Fax system is being used by HPI, (the UK's motor vehicle registration database
holder) for access to vehicle ownership and information, and by Infocheck for company reports
and credit rating. In both cases, users are pre-registered and are provided with account and
identification numbers, which they fill in on their information request forms. This type of
system has the advantage of allowing information providers to choose their own pricing
structure, and of allowing the user to specify requirements much more closely than is possible
through touch tone or voice recognition. And, of course, it allows remote database searching
without a computer and without formal searching skills.

Fax on demand methods such as this one are likely to represent a greater opportunity for
business information providers than premium rate, which requires significant call volumes
before it becomes profitable. Fax on demand still makes up a small proportion of the total
premium rate market (it is unlikely to represent more than 10 per cent, even in well established
markets), although it is difficult to get an accurate picture of the fax-based information market
as distinct from other service revenues.

Fax delivery of paid-for information is likely to increase substantially as new forms of
document delivery and Inter-Library Loans services become established. The number of
electronic document delivery and CASIAS (Current Awareness Services with Individual
Article Supply) services available on the networks is growing rapidly, and many of these offer
fax as a delivery option. This is likely to be an area of substantial growth in terms of volume of
traffic and number of transactions, although the long-term financial benefits to providers of
these services are not yet clear.

A report by Ovum entitled _VANs Markets Europe_ suggests that value-added fax services will
grow twelvefold by 1997, although the definition of value-added fax includes enhanced
communications and messaging networks as well as information services. It also predicts that
the Spanish market, where value-added fax suppliers have their own networks and can
significantly undercut international PSTN rates, the market will be worth ECU 67m by 1997.
The UK was said to have the most developed value-added fax market, accounting for 70 per
cent of the total European market in 1992, followed by France, Italy, Germany and
Switzerland.

104

_MO Annual Report 1993 - 1994_ _Section 7_

**7.7** **Electronic Information Services in the Home**

It became evident in 1993 that the use of electronic entertainment and consumer information

services in the home was becoming a fact of life in most European countries. However, a
number of indicators also suggest that Europe is beginning to mirror the US in the trend
towards work-related information access in the home. The single biggest factor in this
development has been the growing base of computer technology in the home, resulting largely
from the fall in price of office equipment and the marketing efforts of the equipment
manufacturers, anxious to establish themselves in new markets before the growth of the office
market slows too dramatically. In particular, growth has been significant in home PC and fax
ownership (especially in low-cost combined telephone/fax machines) and modems. As onboard modems drop in price and become standard on PCs, growth in the installed base of fax
machines may be somewhat reduced. But either way, the ability of home users to
communicate electronically is becoming an important consideration in information service
delivery.

It has proved very difficult to produce reliable figures on the installed base of technology in
homes, but Table 7.16 provides an overview of the comparative position in the EU and US as
regards the penetration of three indicator technologies: CD-ROM drives, video recorders and
cellular telephones.

Table 7.16 Penetration of Technology into European and US Homes, 1992

Percentage Population

US

1.2

25.1

Percentage Households |
EU US !

CD-ROM Drives

Video Recorders

EU

0.2

20.5

0.5

54.9

US !

3.1

68.3

Cellular Phones*

1.2

Cellular Phones* 1.2 4.0 3.2 10.7 |

Source: IDATE - Relates to subscriptions rather than handsets.

4.0

3.2

OMSYC's figures on the penetration of fax machines, modems, pagers and mobile telephones
per thousand inhabitants also provide an interesting view of technololgy take-up in EU
countries, the US and Japan (see Table 7.17 below). Whilst they do not refer solely to
technology in homes, they do appear to confirm the impression given by IDATE's figures that
Europe is still lagging behind, especially on mobile telephone penetration.

105

_MO_ _Annual Report 1993 - 1994_ _Section 7_

**Table 7.17** **Penetration** **of Technology per Thousand Inhabitants, 1993**

Fax Machines

Mobile

Phones

17.3

42.9

6.9

52.8

Modems

9.2

28.0

9.7

76.0

19.9

10.0

n.a.

13.0

5.9

4.1

59.4

12.2

Germany
Canada
Spain
US

France
Italy
Japan

17.4

20.6

20.5

48.6

20.6

27.2

55.3

19.7

Pagers

6.4

17.8

3.9

61.9

France 20.6 19.9 5.9 7.8
Italy 27.2 10.0 4.1 17.3
Japan 55.3 n.a. 59.4 18.3

UK 19.7 13.0 12.2 27.7

Source: _Les Chiffres Clés des Télécommunications Mondiales,_ OMSYC

UK

Figures on the penetration of personal computers into homes have tended to be unreliable and
misleading. However, there is a growing consensus that in the most advanced regions of
Europe, between 20 and 25 per cent of homes in 1994 have personal computers.

The widespread availability of technology in US homes has helped to stimulate a consumer
market for electronic information services. In the US, consumer on-line is already well
established, with Prodigy and CompuServe the biggest providers of on-line services to the
general public and home-based workers. At the end of 1993, Prodigy had 2.1 million
subscribers - a growth of just 5 per cent since the previous year - whilst CompuServe
experienced growth of 41.6 per cent, bringing its total number of subscribers up to 1.6 million.
America Online is much smaller than these two, although its subscriptions grew by 165 per
cent during 1993 to 0.53 million. US consumer on-line is likely to grow substantially in the
area of specialist computer information services. A number of on-line computer magazines
already exist and Apple looks set to make a serious entry into this market with its own
consumer service, eWorld. This will be launched during 1994 and, according to Apple, will
attract millions of users over the next five years. At the end of 1993, Ziff Davis also
announced that it would launch its own on-line service targeted at its 3.5 million computer
magazine subscribers. Ziff Davis Interactive will be launched in the last quarter of 1994 and is
expected to attract 185,000 subscribers in its first 12 to 18 months of operation.

Until recently, consumer use of on-line services in Europe has been low, but CompuServe has
begun to make in-roads into the European market, with 130,000 subscribers as at June 1994.
CompuServe says that the number of European subscribers has doubled in each of the last
three years and is expected to double again to over 250,000 during 1994/5. However,
growing awareness and use of the Internet in Europe may make it harder for consumer on-line
operators to establish themselves at this stage. CompuServe has addressed this problem by
developing a full Internet connection, which it will make available during 1994.

1C6

_MO Annual Report 1993 - 1994_ _Section 7_

**7.8** **Emerging Media and** **Markets**

**7.8.1 The Networks**

During 1993 and 1994, access to international data networks such as the Internet and national
equivalents grew significantly, with huge increases in the number of users and services, and in
the amount of information available over these networks.

The background to the Internet has already been discussed in Chapter 1 of this report, but it is
worth looking in a little more detail at recent Internet growth. In a report published in 1994,
Infonortics gave the following indicators of Internet growth:

 - between July 1992 and July 1993, the number of networks linked into the Internet
rose from 5,739 to 13,293, with new networks connecting to the Internet at an
estimated rate of one every 10 minutes;

 - between July 1993 and October 1993, the number of Internet hosts rose from
approximately 1.8 million to just over 2 million;

 - between February 1993 and December 1993, the number of articles posted on
USENET rose from 35,000 to 43,000.

It has become almost impossible to make accurate calculations of the number of Internet endusers, but figures from the beginning of 1994 suggested a total of 25 million end-users in 137
countries, using some 2.2 million host computers. The Internet Society's figures for June 1994
suggested that the number of hosts had now risen to just over 3.3 million, (representing an 81
per cent increase since the previous year), and that the number of users had grown to 30
million. One million new hosts were added in the first six months of 1994 alone, with much of
this growth attributable to countries* outside the US (see table 7.18 below). SMEs and
freelance individuals aire thought to make up a growing proportion of users, although large
companies are also heavily represented on the Internet. Digital Equipment Corp, for example,
has over 31,000 computers linked to the Internet.

107

_MO Annual Report 1993 - 1994_ _Section_ _7_

**Table 7.18 Internet Hosts Worldwide**

Country
US - educational

US - commercial
US - government
US - defense
USr non profit org.
US - net operator
US - local

US - total

UK
Germany
Canada

Australia
Japan

France

Netherlands

Sweden

Finland

Switzerland
Norway
Italy
Spain
Austria

Number of Hosts

856,234
774,735

169,248
130,176

66,459
30,993

16,556
2,044,401

155,706
149,193
127,516
127,514

72,409
71,899
59,729
53,294
49,598
47,401
38,759
23,616
21,147
20,130

15,595
14,830
12,107
12,107

7,392
4,518
3,308
2,958

Percentage of Total

27

24

5

4

2

1

1

63

5

5

4

4

2

2

2

2

2

Percentage Change
Since Jan 1994

41

36

31

26

31

146

153

38

37

51

48

42

69

117

43

40

n.a.

24

22

38

79

30

42

157

175

147

55

25

103

249

South Africa

New Zealand

Denmark
Belgium
Poland
Portugal
Ireland

Greece
Luxembourg

Luxembourg 420 <1 37

Source: Internet Society, July 1994

420

1

1

1

1

1

<1

<1

<1

<1

<1

<1

<1

<1

<1

According the Internet Society, if the number of users continues to grow at the same pace as
that experienced during 1993, by 1995 there will be 38 million Internet users and 5 million
Internet hosts. Other estimates suggest that by 1999, 100 million users a day will be logging
onto the Internet to send E-mail messages.

A huge variety of information services exists on the networks, ranging from obscure bulletin
boards run by individuals in their backrooms, to business and academic databases made
available by commercial publishers and information providers. In the US alone, there were
thought to be over 50,000 'cottage-industry bulletin boards' at the end of 1993, with new ones
being added at the rate of a few hundred a week (source: _The Economist,_ December 1993).
However, not all bulletin boards are amateur services made available free to users - and neither
are they all in the business of disseminating reference material or providing a forum for serious

103

_MO Annual Report 1993 - 1994_ _Section_ 7

discussion. The US' biggest bulletin board, Event Horizons, has over 35,000 subscribers and
an estimated turnover of US$ 3.5m (ECU 3.01m) per year. It offers hardcore pornography in
the form of a catalogue of still and moving images which can be downloaded and viewed on a
Windows PC.

A growing number of European information companies are making their services available
over the Internet and over national networks. Many more, however, are waiting until
workable copyright and payment mechanisms are available, or are still confused about what the
Internet actually is and what commercial opportunities it can offer.

Those European companies which have ventured into network publishing have tended to be
those offering academic and research information, or information aimed at librarians and
information scientists. This is largely because national research networks are better established
in the academic and library community, and in some cases because universities have joined
together to negotiate flat-rate deals for database access. This has been the case in the UK,
where Bath University has co-ordinated deals with information providers such as ISI and the
British Library, whereby universities pay a flat fee and students and staff can access the
databases, which are "free at the point of use'. Many more information companies are starting
to use the Internet to promote their services and support users (SilverPlatter, for example,
offers the SPIN-L bulletin board for this purpose), and for providing advance information on
forthcoming articles and publications. This type of activity allows information companies to
experiment with the medium and offers new marketing opportunities.

In Europe-, Elsevier and Springer Verlag have both taken active roles in developing services for
the Internet, as have many smaller publishers and academic societies, such as the Institute of
Physics Publishing and Imperial Cancer Research Fund in the UK. Elsevier's Tulip project has
brought 60 electronic journals to the Internet. Bibliographic databases, current awareness
services (such as Springer's Journal Preview) and document delivery services (such as
Blackwell's UnCover) are also making an impact in the European academic community.

Although most of the media attention has been focused on the Internet, a great deal of
development work has taken place at a regional and national level in Europe to create
academic and research networks, which have later been extended to the commercial
community (see Table 7.19). The French network, Renater (Réseau national de
télécommunications pour la technologie, l'enseignement et la recherche) began as a connection
between several regional, networks and then expanded nationwide. It has recently been opened
to the commercial world. National networks in Europe are connected by means of
EuropaNET, and an agreement was signed by six network operators at the end of 1992 for the
development of pilot ATM research network. Meanwhile, ATM and broadband network
experiments continue to take place at a regional and national level. These networks are
interconnected with the Internet, although access to some may be restricted to the academic
community.

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_MO Annual Report 1993 - 1994_ _Section 7_

**Table 7.19 Research Networks in Europe**

First Generation National Networks

GARR Italy
JANET UK

GARR Italy
JANET UK

RCCN Portugal
RedIRIS Spain
RENATER France

Regional ATM Network Experiments
BBA Belgium
BREHAT Paris,
EXPLOIT Basle
RECIBA Madrid
RIA Aveiro
SGN Stockholm

SURFnet Netherlands

RCCN

RedIRIS

RENATER

BBA Belgium
BREHAT Paris, Rennes and Lannion
EXPLOIT Basle
RECIBA Madrid
RIA Aveiro
SGN Stockholm

SURFnet Netherlands

National Broadband Networks

BAT MAN Denmark
DPN Germany
SUPERJanet UK
Supernet Norway

BAT MAN Denmark
DPN Germany
SUPERJanet UK
Supernet Norway

Cross-Border Networks

EuropaNET Europe
BETEL

HPC-Vision

ISABEL

TIRONET

EuropaNET Europe
BETEL Greece/France/Switzerland
HPC-Vision France/Germany
ISABEL Spain/Portugal
TIRONET Northern/Southern Ireland

Source: _Les réseaux à large-bande en Europe: quel futur?_ J.P Euzen, EC
Brussels

**7.3.2 Handheld Reference Products and Personal Communicators**

Since the introduction of the first calculator-like electronic dictionaries by the likes of Franklin
and Selectronics in the 1980's, the handheld reference and communicator industry has
mushroomed. Whilst a number of reference-only handheld products still play an important role
in this market, they now have to compete with a new generation of handheld products which
also offer data entry and communication facilities. Of these, the product which really broke
new ground in 1993 in terms of media coverage and general awareness was Apple's Newton,
the first of a new range of pen-based products which allow the user to handwrite messages on
screen, convert these into ASCII text, and transmit them by way of fax modem, as well as
offering diary and address book facilities and, of course, published data sets for reference and
annotation. Portable, pen-based computing is not new (early pioneers of such technology were
GO Corporation and EO Inc.), but this was the first serious attempt by a manufacturer to make
an impact on the consumer market.

A number of European manufacturers have become involved in the personal communicator
market, although they have tended to do this through alliance with US-based companies rather
than striking out on their own. Siemens, for instance, has an alliance with Apple and is

110

_**MO Annual**_ _**Report 1993**_ **-** _**1994**_ _**Section 7**_

supporting Newton technology, whilst Philips has taken a stake in General Magic and Olivetti
has bought a minor stake in EO Inc. AT&T meanwhile acquired a 51 per cent stake in EO,
which itself had recently merged with the UK-based Active Book Company.

The personal communicator and handheld reference market must be one of the most overhyped in the consumer electronics industry, with forecasts for the handheld computers and
communicators market as high as US$ 7.4bn (ECU 6.7bn) worldwide in 1997 (source:
Technologic Partners, New York). Olivetti predicts that in Europe alone, 40 million units will
be in use by the. end of 2000. Estimates released by Dataquest in March 1993 seem rather
more reasonable, however, suggesting 11.5 million users by 1997. Dataquest suggests two
possible scenarios for the development of the handheld computer/ communicator market. The
first indicates that initial growth in Europe will be small, with take-off not occurring until 1996.
Critical factors in this scenario are:

 - The point at which products reach an acceptable price level in Europe (around US$
350/ECU301 or under).

 - Further development of handwriting recognition.

 - Adoption of standards in mobile data communications technologies generally.

 - Accustomisation by the market to the new technology.

In Dataquest's second scenario, the take-off point occurs in 1994/5 and is followed by rapid
growth. The vital factor here will be the establishment of de-facto standards across all
personal communicators, allowing the market to develop more coherently. In addition to the
points made by Dataquest, however, the issue of pan-European mobile communications
networks and the availability of GSM is crucial in Europe. So far, progress has been slow and
Dataquest's early take-off scenario therefore appears unlikely. Having said that, a great deal of
emphasis has been placed on interconnection, deregulation and tariff reduction for panEuropean mobile networks by the Bangemann report and the Commission's Action Plan which
followed. The combination of government action and new market opportunity is likely to
stimulate intense activity in the mobile communications sector in the next couple of years.
(See section 2.2.2 on telecommunications for a fuller discussion ofmobile communications.)

Since its launch in Japan in 1990, the proprietary Sony Electronic Book (EB) has been through
a number of modifications in order to improve its functionality and make the platform more
accessible to software producers and users. Towards the end of 1993, Sony announced that
the caddy surrounding the EB disc would become removable and that users would now be able
to play EBs on a CD-ROM drive attached to a PC. The EB is an 20cm CD-ROM which has a
capacity of 200 MB, in other words around 100,000 pages of text, 32,000 graphics or 5.6
hours of digital sound.

Since the launch of the EB, Sony claims that over 300 software titles have been produced in
eight languages, and that sales have expanded into 17 countries, with Panasonic, Sanyo and
Sharp all having introduced their own EB players. European hardware companies have been
less active in the EB market than their Japanese counterparts, although a few European

111

_MO_ _Annual Report 1993_ _-1994_ _Section 7_

publishers (such as Langenscheidt) have produced EB titles. The total number of EB players
sold worldwide, according to Sony, was around 500,000 by the end of 1993, and sales during
1994 are expected to reach between 200,000 and 300,000 (see Table 7.20).

Table 7.20 Sales of EB Players Worldwide

No. of soles (Thousands)

```
            250
                                         230

            200

            150h

            100h

```

```
1990

```

```
1991 1992 1993 1994

```

```
Source: Sony

```

The bulk of these sales, however, are still taking place in Japan, with Japanese sales accounting
for 65 per cent of the total in 1993 and expected to make up the same proportion in 1994.

7.8.3 Video on Demand and Interactive TV

Video on Demand (VOD) is likely to be one of the major applications for high capacity
networks, or information super highways. In this sense, it is useful to examine Video on
Demand within the context of emerging information markets, although it will also represent a
significant development for the wider audio-visual sector discussed in section 7.9.

The idea behind Video on Demand is that a film or video archive is made available over a

network via the sendee provider's server, wliich can then be searched by users via their
television sets and intelligent set-top boxes. A selection is then made and an electronic
transaction carried out using a credit card or smart account card. De-encryption and
decompression devices in the set-top box will then allow the user to download the film for
viewing. In the future, it may also be possible to make a video CD recording of the film for an

112

_MO_ _Annual Report 1993 - 1994_ _Section 7_

additional payment. The speed of development of Video on Demand will depend to a large
extent on the availability of high-bandwidth telecommunications networks, and on the level of
success achieved by US companies currently experimenting with simple interactive services.
Full Video on Demand over ATM-switched, broadband networks is probably several years and
a few billion ECUs of investment away.

In spite of the excitement in the media industries, the potential market for Video on Demand is
still an unknown quantity. For this reason, operators are experimenting with applications
which can run on existing infrastructure. Satellite broadcasters, for example, are working on
Near-Video on Demand, which will allow access to existing programme resources using
infrastructure currently available. A number of films are broadcast continuously, so that the
user makes his or her selection and then waits for the next broadcast of the film. Depending on
the number of broadcast channels used and the number of films offered, this could be anything
from every 10 minutes to every half hour. In this respect, it is similar to teletext broadcasting.

Fully interactive television is a more distant prospect, partly because of the two-way
communications requirement and partly because developing content for interactive searching as
part of a film or television programme will be costly and time consuming. In the meantime, a
certain amount of interactivity can be offered by linking a telephone set to a television via
audiotex and teletext services. This technology is currently being used for applications such as
tele-voting, games and shopping.

Some of the companies already involved in providing services, initiating trials and carrying out
development work are indicated in Table 7.21.

The range and prominence of companies involved in Interactive TV and Video on Demand
projects reflects the fact that this is expected to be a very lucrative market, both for the
network providers and for the content owners. There is already strong competition for the
supply of set-top boxes and the consumer electronics manufacturers look set to engage in a
battle for market domination in this area.

Beyond the hype, however, very little reliable data is available which puts a value on the
interactive TV market or provides forecasts for the future. A 1993 report by Quadrature
entitled _Interactive TV_ _in_ _Europe and the USA_ suggests that the US market was already worth
some US$ lbn (ECU 0.86bn) in mid-1993. It also claims that more people in Europe have
access to interactive TV services than in the US, mainly because European companies like
Radio Television Luxembourg (RTL), Canal+ and News Corporation have begun
experimenting by offering fairly simple interactive services, such as simple gaming and survey
applications. Additional impetus for interactive service development is expected to come from
US companies with European cable interests.

113

_**MO Annual Report 1993**_ _-_ _**1994**_ _**Section**_ _7_

**Table 7.21 Selection of Companies Working on Video on Demand and**
**Interactive TV**

Origin
USA

USA

USA

USA

USA

USA

USA

USA

USA

USA

USA

USA

UK

France

Lux

France

France

Key Partners
News Corp, ComStream
Philips, Discovery Chnl.

Liberty Cable

Intel, Gen. Instruments

Hewlett-Packard

Prodigy, X* Press
AT&T, Gen. Instruments
BSkyB
IBM

Lyonnaise Comms.

Company
AT&T

GTE

Bell Atlantic
Nynex
Ameritech

Microsoft

TCI

TV Answer

Viacom
Liberty Media
Time Warner

QVC

BT

France Telecom

CLT

Canal +

France 2/3

Main Activity
Telecoms

Telecoms

Telecoms

Telecoms

Telecoms

Software

Cable TV

Radio Wave TV

Satellite TV

Cable

Cable TV

Cable TV

Telecoms

Telecoms

Satellite TV

TV

TV

Canal + TV France News Corp
France 2/3 TV France Hachette, Virgin Megastore,

3 Suisses

Source: Quadrature / Delphic, 1993

**7.9** **Audio-Visual**

The world audio-visual market, including hardware and software, was valued at US$ 289bn
(ECU 248bn) in 1992 and, according to the International Observatory for Communication
Systems (OMSYC) in Paris, limited growth will occur in 1993/4 to bring the market up to US$
295bn (ECU 254bn) at the end of this year. Within this timescale, equipment revenues are
expected to rise 1.7 per cent, whilst income for services will grow as little as 0.5 per cent. This
continues the trend of low growth experienced in the early 1990s (overall growth was 0.6 per
cent in the period 1990-1992) and marks a sharp contrast to the average annual growth rate of
6.3 per cent calculated for the years 1985 to 1990.

According to OMS YC's report _Les Chiffres-Clés de l'Audiovisuel_ _Mondial,_ published at the
end of 1993, the market is broken down as follows in Table 7.22:

114

_**MO**_ _**Annual Report 1993 - 1994**_ _**Section 7**_

**Table 7.22 World Audio-visual Spending, 1992**

ECUbn

Percentage

Av. An.

Growth Since

1987

AV Hardware*

TV Revenues**
Radio Advertising
Cinema Box Office
Pre-rec. Video Tapes
Total

,114.3
85.8

10.7

11.5

26.5

248.8

4.3

4.6

10.7

100.0

45.9

34.5

AV Hardware*,114.3 45.9 5.4
TV Revenues** 85.8 34.5 4.2
Radio Advertising 10.7 4.3 0.5
Cinema Box Office 11.5 4.6 -1.5
Pre-rec. Video Tapes 26.5 10.7 6.1
Total 248.8 100.0 4.4

Source: OMSYC / _Television Business International,_ January 1994 I

- includes professional and consumer equipment
** includes broadcast and cable TV

The same report indicates that the US represents the biggest audio-visual share, accounting for
38.4 per cent of world spending, with Europe accounting for 26.4 per cent and Japan 16.8 per
cent. However, Table 7.23 shows that there is a concentration of audio-visual giants in
Europe, with 34.4 per cent of top audio-visual companies' revenues being generated in the in
the EU in 1992. This represents a slight drop since the previous year, but a significant
improvement on the position in 1988.

**Table 7.23 Revenues of Top 50 Audio-visual Groups by Area of Origin**

by Top 50 |
1992

32.6

34.4

27.8

Region

Percentage of Revenues Generated

1988

1991

36.8

36.4

23.2

US

EU
Japan
Other

41.5

29.4

22.5

6.7

Other 6.7 3.6 5.2

Source: IDATE

3.6

A 1994 analysis of the _Top Fifty European Media Owners_ by Zenith indicates that the top
three rankings for 1992 remain the same as the previous year, with lleed/Elsevier, Fininvest
and Bertelsmann at the top in terms of media revenues. Advertising on television, radio,
newspapers, magazines, cinema and outdoor media are included in the definition of media
revenues, but publishing and production activities unrelated to advertising (such as printing,
book publishing and programme production) are excluded.

In putting together their Top 50, Zenith concluded that commercial television was continuing
to experience high growth, and that state-owned, terrestrial television was often suffering in
direct proportion. Zenith also concluded that media companies had reacted to recession by
cost-cutting, and that the disappointing performance of press titles in Europe (especially in
France and Germany), had led many press owners to diversify further into broadcast media.

115

_MO_ _Annual Report 1993 - 1994_ _Section 7_

The effects of convergence and the emergence of multimedia markets were not discernible in
Zenith's analysis, as these two phenomena had made little practical impact on the media
industries during the period in question. Table 7.24 below shows an extract of the top 10
media owners, their media revenues and their total revenues.

**Table 7.24 Top Fifteen European Media Owners Ranked by Media Revenues**

1992 Total

Revenues

(MECU)

1992 Media

Revenues

(MECU)

Ranking

Company
Reed/Elsevier

Fininvest

Bertelsmann
Axel Springer
CLT

Havas

Heinrich Bauer

Matra/Hachette

Hersant

RCS Editori
United Newspapers
Canal Plus

TF1

News International
Daily Mail and General Trust

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

3,198.3
2,629.9
2,067.4
1,711.1
1,606.3
1,569.5
1,483.5
1,429.5
1,397.1
1,330.9
1,170.8
1,112.4
1,028;3
1,016.8
975.5

Reed/Elsevier 3,198.3 9,453.1
Fininvest 2,629.9 3,739.5
Bertelsmann 2,067.4 9,453.1
Axel Springer 1,711.1 1,963.4
CLT 1,606.3 1,680.3
Havas 1,569.5 4,578.3
Heinrich Bauer 1,483.5 1,584.9
Matra/Hachette 1,429.5 8,950.9
Hersant 1,397.1 1,397.1
RCS Editori 1,330.9 2,039.1
United Newspapers 1,170.8 1,263.4
Canal Plus 1,112.4 1,289.3
TF1 1,028;3 1,207.6
News International 1,016.8 1,057.8
Daily Mail and General Trust 975.5 1,008.4

Source: _Top 50 European Media Owners_ _1994,_ Zenith Media Worldwide

**7.9.1 Television, Cinema and Video**

In terms of the EUs competitive position, it is clear from figures relating to 1990-1992 that
there is a significant deficit in EU/US audio-visual trade. In 1990, US revenues in the EU for
TV cinema and video were ECU 3,198m (ECU 3,150m in 1992), whereas EU revenues in the
US amounted to only ECU 212m (ECU 248m in 1992). Whilst this reflects a very slight
narrowing of the gap, the EU deficit in 1992 was still ECU 2,902m (see Table 7.25).

**Table 7.25 EC Audio-visual Trade Deficit with the US,** **1990-1992**

US Receipts in the EU (MECU)

EU Receipts in the US (MECU)

1990

1990

1992

1992

Cinema 975.2 733.6 43 63.6
Television 1,099.1 1,417.3 80.8 81.7
Video 1,124.0 999.3 88.6 102.3
Total 3,198.3 3,150.2 212.4 247.6

EC Deficit 2,985.P. 2,902.9

Source: IDATE

733.6

1,417.3

999.3

3,150.2

43

80.8

88.6

212.4

2,985.P.

Cinema

Television

Video

Total

EC Deficit

975.2

1,099.1
1,124.0
3,198.3

116

_MO Annual Report 1993 - 1994_ _Section 7_

The European Commission has recognised that the European film and television industries will
need a radical overhaul if they are to compete on international markets, but disagreements
amongst Member States over proposed measures during the GATT negotiations have made it
difficult to reach a position of consensus on audio-visual policy. In April 1994, a Green Paper
on _Strategy Options to Strengthen the European Programme Industry in the Context of_
_Audio-visual Policy of the European Union_ was presented by the Commission. This was later
discussed at the European Audio-visual Conference in Brussels in June/July 1994 and adopted
by the EU. Further action in the audio-visual sector was recommended by the Bangemann
report and subsequently by the Commission's Action Plan. The latter indicated that a revised
Directive on Television without Frontiers should be adopted by the Commission during 1994,
and that follow up to the Green Paper on Media Pluralism was currently underway.

According to Frost & Sullivan, the world television programming market was worth US$ 80bn
in 1993 (ECU 69bn), and is rising at a rate of 10 per cent a year. Meanwhile, ownership of
television sets looks set to continue rising at 5 per cent a year until the year 2000; in spite of a
saturated market, continued growth in television sales is largely thanks to replacement and
second-set purchasing. The figures in Table 7.26, compiled by _The Economist_ from Morgan
Stanley and Frost & Sullivan, indicate that the US accounts for nearly 40 per cent of the
programming market, and that pay-TV and home shopping services are now generating
significant revenues.

**Table 7.26** **US Television Programming Market Estimates, 1992**

BECU

30

25.8

**B r o a d c a s t** **Horn»** **' V i d e o** **Boiic** **coble** **Prog** **Pay** **cab!» Horn»** **Cablo** **TV**
**TV Advt'g** **video** **cassette network** **sales** **network»** **s h o p p i n g advertising**

      - Rentals & Sales

Source: Morgan Stanley, Frost & Sullivan / _The Economist,_ February 1994

117

_**MO Annual**_ _**Report 1993 - 1994**_ _**Section 7**_

**The proportion of television revenues sourced from advertising seems to be increasing steadily,**
**with cable advertising revenues growing particularly quickly. Table 7.27 below indicates that**
**terrestrial advertising accounted for almost half of world television revenues in** 1992.

**Table 7.27** **Breakdown of World Television Revenues, 1992**

BECU

Terrestrial
Adv'ing 47.7 [r] .ill Ml til 11 III llll Ill

ffffrh Terrestrial Subsp'tn 1.5
1111|111^ Cable Advertising 3.2

\ License

Fee/Gov't 13.2

Cable Subscription 20.3

Source: OMSYC / _Television_ _Business International,_ January 1994

Home video has continued to show higher rates of growth than either television or cinema,
with annual growth of around 6.1 per cent since 1987, bringing worldwide revenues for rentals
to ECU 14.4bn in 1992 and ECU 6.96bn for sell-through in the same year. The sell-through
market is growing particularly quickly, (at an annual rate of 26 per cent according to
OMSYC), mainly thanks to falling retail prices. In Europe, retail sales of videos amounted to
over US$ 6bn (ECU 5.16bn), according to a report entitled _Video Entertainment Europe_
published by Dodona Research. The same report indicates that in three years' time the market
will be worth over 12 per cent more in real terms than it was in 1993, partly thanks to new
forms of delivery such as Video on Demand.

7.9.2 Audio

An MBI World Report for 1994 suggests that the world market for music sales will reach USS
31.65bn (ECU 27.2bn) in 1994. This is an increase of 5 per cent since 1993, when the figure
was US$ 31.14bn (ECU 26.8bn), and the market is expected to grow at between five and
seven per cent a year to reach USS 44.2bn (ECU 38bn) by 2000 (see Table 7.28).

_MO Annual Report 1993 - 1994_ _Section 7_

Table 7.28 World Music Market - Global Sales and Forecasts 1991-2000

Music Sales (MECU) Percentage Annual Growth
```
      1992 " 24,686 8.0

      1993 25,920 5.0
      1994 27,216 . 5.0
      1995 28,850 6.0
      1996 . 30,292 5.0
      1997 32,412 6.5
      1998 34,681 7.0
      1999 36,054 4.5
      2000 I 38,015 | 5,5
```

Source: MBI Worid~Report, 1994 j

The US is expected to remain well ahead in terms of the biggest share of the market, although
Germany, the UK and France will continue to feature in the top five. Table 7.29 provides
forecasts of geographical market shares in the year 2000.

Table 7.29 Top Five Markets for Music Sales, 2000

```
         MECU

                       USA 10797

                          43%

```

```
Japan 5827
  23%

```

```
            France 2626

               10%

         UK 2745

Germany 3265 1 1 %
   13%

```

Source: MBI World Report, 1994

119

_MO_ _Annual Report 1993 - 1994_ _Section 7_

Compact dise sales have now exceeded those of cassettes and vinyl records in almost every
national market.

Across Europe, the British Phonographic Industry estimates that 230,000 people were
employed in the music industry in 1992, with a high proportion of these employed in retailing.
In the UK alone, 48,600 were employed in the music industry, some 30 per cent of which are
involved in retail, 16 per cent as professional musicians and 8 per cent in record company
administration and marketing.

**7.10** **Print Publishing**

In February 1993, a report entitled _New Opportunities or Publishers in the Information_
_Services Market_ was published by the Information Market Observatory. The report was
welcomed by print and electronic publishers alike as one of the first published studies to
address systematically the impact of electronic information services upon the traditional
publishing industry and to set out new opportunities as they relate to the print publishing
sector. The report also provided useful background to the print publishing market itself and,
although it has been summarised in an IMO Working Paper (93/4) and well publicised at the
Frankfurt Bookfair, its findings are worth summarising here as they form a useful reference
point.

EU-based publishers were estimated to have generated revenues of 75.5 BECU in 1991 from
newspapers (25 BECU), magazines (22 BECU), books (18.5 BECU) and corporate publishing
(10 BECU). In the same year, production in the US was worth 39 per cent more than that of
Europe, according to INTERGRAF and nearly double that of Japan. Whilst the volume of
trade between the US and Europe remained low, the EUs export trade balance has remained
positive since 1982, although according to Eurostat, the actual value of trade surplus fell
slightly in 1991 to 2,104 MECU from 2,136 MECU the previous year.

Europe continues to be a dominant force in world print publishing markets, especially in books
and scholarly publishing. A ranking by Kagan World Media of the world's top 20 publishers by
revenue included 10 EU-based publishing and media conglomerates, whose combined turnover
in 1991 was 24.1 BECU. Table 7.30 shows the EUs top ranking publishers by 1992 turnover
their ranking alongside a general Top 500 by turnover.

120

_MO Annual Report 1993 - 1994_ _Section 7_

**Table 7.30 EC's Top Ranking Publishers by 1992 Turnover**

Ranking Company Location of HQ `Sales` `(MECU)`
`89` Bertelsmann Germany 7,042
`151` Hachette France 4,360
`252` Reed Int. UK 2,319
`256` Pearson UK 2,284
`309` Axel Springer* Germany 1,795
`417` VNU Netherlands 1,182
`422` United Newspapers* UK 1,160
`450` Wolters Kluwer* Netherlands 1,030
`464` Elsevier* Netherlands 982
`469` Mondadori* Italy 958
`473` Groupe de la Cité France 951
`489` Ply Mail/Gen Trust UK 920

Bertelsmann

Hachette

Reed Int.

Pearson
Axel Springer*
VNU
United Newspapers*
Wolters Kluwer*

Germany
France

UK

UK
Germany
Netherlands

UK

Netherlands

Netherlands
Italy
France

UK

7,042
4,360
2,319
2,284

1,795
1,182
1,160
1,030

`464` Elsevier* Netherlands 982
`469` Mondadori* Italy 958
`473` Groupe de la Cité France 951
`489` Ply Mail/Gen Trust UK 920

Source: International Management, 1993

- Includes printing operation

Elsevier*

Mondadori*
Groupe de la Cité

Ply Mail/Gen Trust

Growth rates in EU publishing industry have slowed in the last couple of years from around
3.8 per cent to 2 per cent. The market breakdown in Table 7.31 shows that newspapers have
the largest share of the print publishing market, followed by magazines.

**Table 7.31 EU Publishing Market, 1992**

BECU

Newspapers 25
33%

Magazines 22
29%

_//i_ Corporate 10
1 3%

Books 18.5

25%

Source: Consulting Trust, 1993

121

_MO Annual Report 1993 - 1994_ _Section 7_

The publishing industry is highly concentrated across-Europe and in many countries the top ten
publishing conglomerates control 50-70 per cent of the market. Altogether, there are
estimated to be some 60,000 publishing companies in Europe, the majority of which are book
publishers. By the year 2000, EU-based publishers are forecast by Consulting Trust to reach
sales and advertising revenues of ECU 123.8bn, of which electronic publishing activities will
contribute around ECU 12.1bn.

122

**8** **CONCLUSIONS**

The information society is on its way. Throughout the reference period of this report, the
'digital revolution' has been a major topic of discussion. But one could argue that the
digital revolution actually began in the information sector 25 years ago, with the
emergence of electronic information services. Dramatic changes are now taking place in
the telecommunications sector, with the uptake of ISDN and broadband networks in the
European Union. On the other hand, with the exception of CD-Audio, digitisation is only
just making an impact on the audio-visual sector.

Although digitisation has enhanced many professional processes, it has not yet changed
professional and private life dramatically. The full impact of the digital revolution is still to
be felt and the pace of change will be difficult to predict.

The digital revolution will be more or less complete when the following scenarios have
become a practical reality:

   - open, direct and easy access to all publicly available information held anywhere in
the world, (including text, sound, still and moving pictures), regardless of time
and location, in the mother tongue, customised if necessary, and affordable by

everyone;

    - affordable oral and visual telecommunications worldwide, available regardless of
time, location and language;

    - easy to use transactional services available via electronic media from any location.

We are already moving towards an environment where scenarios such as these are a
possibility, thanks to technical developments and the activities of major information
industry players. Several European Commission research and pilot projects are underway
in support of these developments. The prospect of an infonnation society has also
captured the attention of political and entrepreneurial decision makers.

Many countries are now laying the foundations for future development. Initiatives already
undertaken in the major industrialised countries such as the USA, Japan, Canada and the
European Union will pave the way towards an information society, and further initiatives
will follow. A G7 conference will be organised early in 1995 in Brussels to discuss the
development of an open, competitive and integrated worldwide information infrastmcture.

The European Union, which has lagged behind the USA and Japan in the digitisation
process, is now trying to make up lost ground with a bundle of initiatives including the
Common European Information Area, the White Paper on Growth Competitiveness and

123

_MO Annual Report 1993 - 1994_ _Conclusions_

Employment, the Bangemann Report and the Action Plan on Europe's Way to the
Information Society. These initiatives are important for Europe: they will help the Union
to take its place amongst those countries setting the ground rules for the global
information society.

3. However, the Bangemann report and the European Council response which followed
emphasise the need for the private sector to take the initiative in addressing new markets
and adopting new technologies. Having said that, there are a number of questions which
still need to be answered:

    - How can the private and public sectors co-operate in building basic infrastructure,
especially in those countries of the Union which are less advanced?

    - Once the infrastructure is in place, what kind of services and applications will be
delivered?

    - What forces will drive the market for such services?

    - Who will dominate the European information society - is there a danger that nonEuropean media conglomerates will dominate?

Equally, the likely socio-economic impact of the information society is as yet unclear:

    - What will be the impact on employment?

    - How will it affect regional development?

    - How will the social, societal and cultural environment be affected?

The increasing availability of high quality infrastructure will necessitate a mass market for
information products and services as a means of generating return on investment and longterm cost effectiveness. The importance and value of the content industry (including print
and electronic publishing, films, video, audio and television programme production) is
likely to grow as a result. The current repositioning of the information industry, (evidence
of which can be seen in the growing number of mergers and acquisitions), supports this
view.

Technology convergence, characterised by multifunctional equipment for users and
multimedia products, has led to a re-grouping of IT, software, basic infrastructure and
content industries, which are now coming together to exploit the new opportunities. This
has helped to create headline news in the form of dramatic take-overs in the media
industries and exciting announcements in areas such as Video on Demand. Widespread
media coverage of such developments has helped to raise overall awareness of electronic
information services within governments and companies and amongst consumers.

124

_MO_ _Annual Report 1993 - 1994_ _Conclusions_

The content industry now has a great deal to live up to. The expectations of users have
been raised and they are demanding increasingly high standards of information content and
presentation. ICT industries look to the information and entertainment services sectors to
provide content for running on the computers, consumer electronics goods and networks
which are now being developed. Governments across the world are looking to the
information industries as a whole to generate employment and stimulate economic growth.

The biggest challenge to the content industry in meeting these expectations will be its
ability to invest time, labour and financial resources in the development of innovative
information products and services. Such investment will be essential if European content
companies are to compete with their counterparts in the USA and Japan, and share the
rewards of industry growth with ICT industries.

There is still uncertainty over future consumer behaviour and the level of market demand
for electronic information services and a clear and stable regulatory framework is still
lacking to a great extent. Under these circumstances, it is not surprising to find that
content companies have been reluctant to invest heavily in developing electronic
superhighway applications.

The European content industry is faced with particular challenges in that it is made up of a
greater number of smaller, less vertically integrated, and more nationally focused
companies that its US counterpart. To take advantage of the opportunities which lie
ahead, European content companies will often need to enter joint ventures and alliances
with companies in other regions. At the same time, policies at a national and European
level will be required in order to guarantee the continued availability of diverse, multicultural information content, and to strengthen the competitiveness of small European
companies.

Building on the results of the IMPACT programme, the European Commission will reflect
on ways to stimulate the creation of favourable conditions for information providers to
adapt their skills and products to the changing environment and to stimulate increased

usage.

6. The electronic information services industry has high added-value and strong growth
potential, but the European market is still fragmented. In the financial and academic
. sectors, a pan-European market exists to an extent. Elsewhere, a number of barriers still
exist to the creation of a European market for information services, not least of wliich is
language. The penetration of information technology and infrastmcture varies from region
to region and a combination of legal and political baniers exists to the development of
pan-European videotex and audiotex interconnections. The overall legal and regulatory
framework for the information services industiy also varies considerably.

A certain amount of progress has been made in eliminating these barriers. Efforts continue
to seek a technological solution to language barriers, and the European Commission's
Language Engineering programme will contribute to this work. There has been greater

125

_MO Annual Report_ _1993-1994_ _Conclusions_

communication and collaboration between European network operators. lSfew efforts
have been made to create links between European research networks and bi-lateral
interconnections between national audiotex and videotex systems. IT equipment prices
are falling rapidly and new media and products (like handheld reference devices,
multimedia products and Video on Demand) are emerging. The process of trying to reach
a European consensus on major legal issues such as the legal protection of databases is
underway. All this may facilitate and encourage a greater number of individuals and
organisations to participate actively in the emerging information society.

**ANNEXA**

**GLOSSARY AND DEFINITION OF TERMS**

ATM (Asynchronous Transfer Mode'):
A system for organising a digital signal' in such a way as to allow very high speed transmission of
the signal while making optimum use of the network's transmission capacity. A standard agreed for
B-ISDN networks (see _ISDN)._

AUDIOTEX:

Audiotex is the term for telephone-based voice information services with applications both in
consumer (home user) and business markets. Audiotex services are automated and are directly
accessible by means of a suitable (Dual Tone Multi-Frequency or DTMF) telephone handset or
voice recognition.

BROADCAST SERVICES:

Services where no interactivity is possible on the part of the customer in selecting what is sent by
the service provider.

BUNDLING:

" Free' distribution of software as part of a hardware package. The hardware manufacturer buys the
software (applications software, CD-ROM titles, games, etc.) in bulk from the producer and
markets them as part of a package.

COMMON INFORMATION AREA:
Term used in the EC White Paper on Growth, Competitiveness and Employment to describe the
combination of electronic information and applications, hardware and software, communications
infrastructure and the user community. The combination of these elements in a Common
Information Area is seen to be essential to the development of an Information Society.

COMPRESSION:
The technique of reducing the amount of data in a signal in order to reduce the amount of required
transmission or storage capacity, the signal being reconstructed in its original form at the time of
use. A device to do this is a [ v] codec' (coder-decoder).

CONTENT SECTOR:
Industries supplying information or entertainment content, rather than hardware or network
infrastructure, for example. The sector includes publishing and electronic information, films,
music, games, TV programming, etc.

```
CONVERGENCE:
```

Term used to describe the coming together of IT, télécoms, content, and other related industries as

a result of common technology developments and market aspirations.

DATA SUBJECTS:
Individuals whose names are held on file by third parties - term used in the context of Data
Protection legislation.

DATABASE PRODUCER:
An organisation which holds the intellectual property rights relating to the content of electronic
information products and services and which may licence host services or distributors to make

' 127

_IMO Annual Report 1993_ - _1994_ _Annex A_

available in electronically usable form. Usually the database producers perform the editorial tasks
of collection and organisation of the information contained in electronic information services.

DIGITAL TRANSMISSION:

On a digital network, the original source is transformed into and transmitted as a series of digits in
binary code (i.e. Os or Is). Voice, text, image or data are all equally capable of being coded as a
digital signal, so that a single network can handle all four forms of transmission. The string of
binary digits can be abbreviated and'then re-expanded on arrival, thus economising transmission
capacity (see _Compression)._ Different strings of binary digits can be interleaved and transmitted
together, thus permitting several separate conversations on a single line. The string of digits can be
encrypted prior to transmission, to ensure a high level of information security and privacy (see
_Security)._ Through digitalisation, even a severely degraded transmission can be reconstructed to
reproduce perfectly the original source.

DISTRIBUTOR:

An organisation which performs a function similar in nature to that of a host service, but in relation
to unitised electronic information products (such as magnetic tapes or disks, or CD-ROMs) rather
than information services, delivered via telecommunications.

ECONOMIES OF INTEGRATION. SCOPE AND SCALE:
Digitisation and compression enable different infrastructures such as wire, radio, optical fibre and
satellite to inter-operate, thus allowing for economies of integration. They also enable the same set
of physical infrastructure to support a wide range of services, from traditional telephony to new
interactive video services for entertainment, training and business, thus allowing for economies of
scope. Extending these networks and services over a larger geographical area, that is making them
trans-European, fosters economies of scale as large volumes of production and service provision
reduces costs.

EDI: ' . ' . Electronic Data Interchange, standard format for the exchange of trading data and transactions
without manual intervention.

ELECTRONIC MAIL (E-mail):

A service which allows computer users to send electronic messages to other computer users. The
use of sophisticated software ensures that the sent message will find its way along different
networks until it reaches the addressee.

GATEWAY SERVICE:
A gateway operator provides specialised telecommunications links to on-line information services
provided by third parties. [ v] Pure' gateway services are not hosts in their own right.

HISTORICAL DATABASE SERVICES:
On-line services which are not updated in real-time.

HOST SERVICE:
An organisation which offers its customers direct access to computer-held information via a
telecommunications link. This definition includes services delivered in videotex mode.

**123**

_**MO Annual**_ _**Report 1993 - 1994**_ _**Annex A**_

INFORMATION SERVICES INDUSTRIES: 
The term "information services industries' embraces a range of commercial and non-commercial
activities relating to the creation; publication; and distribution of information goods and services.
In the context of this Report, the term carries a rather **more** precise meaning, relating solely to a
subset of those industries which deliver infonnation services to professional (i.e. non-consumer)
markets on a commercial basis across a range of information media, from print-on-paper to optical
disk.

INTERCONNECTTvTTY:
Devices (computers, lines, application programmes, etc.) are interconnected when they can
communicate with each other, that is send and receive data. They use the same communication
protocols, for example OSI (Open Systems Interconnection).

ISDN (Integrated Services Digital Network). N-ISDN. B-ISDN:
A single network capable of carrying several different types of service - based on voice, text, data,
still or moving image - by means of digital transmission techniques. The ISDN currently being
deployed in Europe carries a communication of up to 2 Megabits per second (Narrowband ISDN).
Future networks will carry higher speed communications (Broadband ISDN).

JPEG. MPEG:

Compression standards for still (JPEG) and moving pictures (MPEG).

LOCAL LOOP:
The section of the telephone transmission network between the local telephone exchange and the
subscriber's premises, which currendy consists of copper wiring. In the future, optical fibre or
wireless will also be used.

MAGNETIC MEDIA:
Tapes and disks of various sizes and formats (including diskettes for personal computers) which use
magnetic storage technology.

MULTIMEDIA:
The concept of closely combining voice, text, data, as well as still and moving image. A
multimedia database, for example, might contain textual information, images, video clips, tables of
data, all equally easy to access. A multimedia telecommunications service (such as B-ISDN) would
permit the user to send or receive any of these forms of information.

NETWORK. COMMUNICATIONS:
Communications networks: correspond to a complete system of communications between users'
terminals. Networks may be "point to point' (the transmission goes from a fixed origin to a fixed
destination), "switched' (the transmission is switched so as to reach a single destination out of
many) or "broadcast' ( the transmission goes simultaneously to multiple destinations). Networks
may be "public' (owned by an operator and open to any member of the public who subscribes) or
" private" ( owned or leased by an individual or company or group of companies exclusively for its
own use). A network may be "real' (physically separate from the public network) or "virtual'
(using public network facilities, which revert to public use when no longer required in the private
network).

129

_**MO**_ _**Annual Report 1993**_ **-** _**1994**_ _**Annex**_ _**A**_

**NETWORK. DATA:**

**A Data Network is specialised in the transmission of data rather than voice. Among such networks**
**are Circuit Switched Data Networks (CSDN; which include the so-called X.21 networks), Packet**
**Switched Data Networks (PSDN, X.25 networks), Frame Relay networks, Switched Multimegabit**
**Data Services networks (SMDS).**

**NETWORK. INTELLIGENT:**

**An intelligent network (IN) includes sophisticated features superior to those of the ordinary**
**telephone service, such as advanced software allowing the customisation of the services provided to**
**individual customers. For example, it allows the called party to redirect calls intended to another**
**terminal (e.g. from a home phone to an office phone during office hours). It allows calls to be**
**billed wholly or in part to somebody other than the caller ("freephone' services). It also provides**
**virtual private network services.**

**NETWORK. OPTICAL FIBRE:**

**Optical fibre networks are telecommunications networks based on fine glass fibres, down which**
**signals may be sent by flashing a laser.** **Compared to earlier "multimode' networks, recent**
**"monomode** **[1]** **networks** **have a much higher transmission capacity and rapidity.**

**NETWORK. SPEED OF:**

**"Speed'** **or "Flow rate,' when used of a digital network, refers to the number of bits per second it**
**can carry, thus being a measure of the network's capacity. To carry voice, Europe's industry has**
**agreed on a standard speed of 64 Kilobits per second.** **Still images may also be transmitted**
**adequately at this** **rate..** **Full-colour moving images require transmission speeds of the order of 150**
**Megabits per second, though using various compression techniques moving images (though of less**
**than normal TV quality) can be transmitted at 2 Megabits per second. Trunk connections, which**
**carry many calls at once, require multiples of these speeds.**

**ON-LINE** **ASCÏÏ** **DATABASES:**

**The term "on-line' is deemed to cover all interactive information services delivered by hosts**
**(direcdy or through gateways.) via telecommunications links.** **Services delivered character by**
**character, rather than page by page or screen-full by screen-full, are distinguished by reference to**
**the internationally recognised ASCII convention for character coding.**

**ONP (Open Network Provision):**
**Principle of** **non-discriminatory** **opening of telecommunications networks to all** **télécoms** **operators**
**and service providers on the basis of the harmonisation of access and usage conditions of**
**telecommunication infrastructures with the view to develop a** **trans-European** **information market.**
**The ONP is being applied to leased lines, packet switching transmission services and ISDN, and**
**will be** **applied** **to voice telephony in 1998.**

**OPTICAL MEDIA:**

**Various types of disc which use optical storage technology, the most common format being CD-**

**ROM.**

**ORIGINATOR:**
**The original creator of** **content** **materials, for instance an author, composer, artist or photographer.**

**130**

_**MO**_ _**Annual Report 1993 - 1994**_ _**Annex A**_

**PDA (Personal Digital Assistant):**
**A hand-held personal computer with advanced features and communications facilities, where text is**
**introduced by handwriting on a screen (rather than conventionally via a keyboard), also referred to**
**as** **"notepad'** **computer.**

**PSTN (Public Switched Telephone Network):**
**The everyday telephone network used for the** **transmission** **of voice conversations, fax images and**
**for low speed data transmission. The basic voice service is also sometimes referred to as POTS**
**(Plain Old Telephone** **Sendee).**

**REAL-TIME INFORMATION SERVICES:**

**On-line services which are updated immediately as new data becomes available.**

**SECURITY (of Information and Systems):**
**Security has three basic components: confidentiality, integrity and availability.** **Confidentiality**
**refers to the protection of sensitive information from unauthorised disclosure.** **Integrity means**
**safeguarding the accuracy and completeness of information and computer software.** **Availability**
**relates to ensuring that information and vital services are available to users when required.**

**TCP-IP:**

**Set of protocols used on the Internet to ensure common communications standards.**

**TELE-WORKING:**

**The capability to carry out one's work at any location by means of telecommunications and**

**computing facilities.**

**TRANSACTION SERVICES:**

**Services where the principal objective is a transaction rather than the delivery of information, such**
**as EDI services.**

**VALUE ADDED SERVICE (VAS). VALUE ADDED NETWORK SERVICE (VAN):**
**In most countries certain basic telecommunications services have been defined and reserved as a**

monopoly **for the national operator. This usually includes voice communication in real-time.**
**Services other than this may be offered by other service suppliers which use the national network as**
the **basic transmission medium but** **"** **add value' to the basic transmission facility (e.g. by storing and**
**forwarding** the **transmission at a later date, by distributing it to multiple destinations, by processing**
the **information** **contained,** **in the transmission then forwarding the result, etc.). Therefore, what**
exactly comprise **the notions** of basic and **value-added** service **depends on the regulatory simation** of
each country.

VIDEOTEX:

On-line services deliverer! page by page or screen-full **by screen-full, rather than character by**
character.

VIRTUAL REALITY (VR):
A system whereby the user is supplied with computer-generated images and sounds giving the
impression of reality. Virtual in this sense means "apparent', "seeming". The user interacts with
the artificial world by means of sensors which detect head and hand movements. Future work in
VR is directed towards increasing the impression of reality, for example by means of 3D images,
and transmitting VR "worlds' to users located remotely from the source computer.

131

_**MO**_ _**Annual Report 1993 - 1994**_ _**Annex**_ _**A**_

**WHITE PAPER:** **:**

**European Commission paper on Growth, Competitiveness and Employment: the Challenges and**
**Ways Forward into the 21st Century. The White Paper was agreed at the Brussels Summit in**
**December 1993.**

**132**

**ANNEX B**

**ACRONYMS AND ABBREVIATIONS**

ADMDs

AIM

ASCII

AT&T

ATM

BAT MAN

BBA

BBC

BREHAT

BSA

BT

CAD

CCITT

CD

CD-i

CD-ROM

CD-ROM/XA

CDTV

CITED

DELTA

DG-XIII

DRIVE

DTMF

EARN

EB

EBU

EC

ECU

EDI

EDICON

EEMA

EFTA

EIIA

EITO

E-mail

ESA/IRS

ESPRIT

EU

Eusidic

FCC

European ADministration Management Domains
Advanced Informatics in Medicine
American Standard Code for Information Interchange
American Telephone & Telegraph
Asynchronous Transfer-Mode

Broadband ATM Access Network (Denmark)
Belgian Broadband ATM
British Broadcasting Corporation
Brasseurs et REseau à Haut débit en ATM (France)
Business Software Alliance

British Telecom

Computer-Aided Design
Comité Consultatif International Télégraphique et Téléphonique
Compact dise
Compact dise - Interactive
Compact disc - Read Only Memory
Compact disc - Read Only Memory/extended, Architecture
Commodore Dynamic Total Vision
Copyright in Transmitted Electronic Documents (EC Research Programme)

Developing European Learning through Technical Advance
EC Directorate-General for Information Technologies
and Industries, and Telecommunications
Dedicated Road Infrastructure for Vehicle safety in Europe
Dual Tone Multi-Frequency

European Academic Research Network
Electronic Book
European Broadcasting Union

European Commission
European Currency Unit (BECU = Billions of ECU,
MECU = Millions of ECU)
Electronic Data Interchange

EDI in Construction
European Electronic Messaging Association

European Free Trade Association
European Information Industry Association

European Information Technology Observatory
Electronic Mail
European Space Agency/Information Retrieval Service
European Strategic Programme for R&D in Information Technology

European Union
European Association of Information Services

Federal Communications Commission (USA)

133

_**MO Annual Report 1993**_ **-** _**1994**_ _**Annex**_ _**B**_

**GATT**

**GSM**

**IBM**

**ICSTIS**

**ICT**

**IDC**

**IE**

**IFPI**

**IFTMR**

**IIA**

**IMO**

**IMPACT**

**ISDN**

**ISO**

**IT**

**ITU**

**JANET**

**JPEG**

**LAB**

**LAN**

**LFR**

**M&A**

**MIDI**

**MMC**

**MMCD**

**MPEG**

**NREN**

**NSF**

**OECD**

**OMSYC**

**ONP**

**OPIA**

**PC**

**PRS**

**PSTN**

**PTO**

```
RACE

RBOC

RENATER

```

**RTD**

**General Agreement on Tariffs and Trade**
**Global System for Mobiles**

**International Business Machines**

**Independent Committee for the Supervision of Standards of**
**Telephone Information Services (UK)**
**Information and communication technologies**
**International Data Corporation**
**Information Engineering**
**International Federation of Phonographic Industry**
**International Forwarding and Transporting Message Framework**
**Information Industry Association (USA)**
**Information Market Observatory**
**Information Market Policy ACTions**
**Integrated Services Digital Network**
**International Standards Organisation**
**Information Technology**
**International Telecommunications Union**

**Joint Academic NETwork (UK)**
**Joint Photographic Expert Group (ISO)**

**Legal Advisory Board**
**Local Area Network**

**Less Favoured Regions**

**Mergers and Acquisitions**
**Musical Instrument Digital Interface**
**Monopolies and Mergers Commission (UK)**
**Multimedia CD (Sony)**
**Motion Picture Expert Group (ISO)**

**National Research and Education Network (USA)**
**National Science Foundation (USA)**

**Organisation for Economic** **Co-operation** **and Development**
**International Observatory for Communications Systems**
**Open Network Provision**
**Optical Publishing Industry Assessment**

**Personal Computer**
**Premium Rate** **Services**

**Public Switched Telephone Network**
**Public Telephone Operator**

**Research & Development in Advanced Communications in Europe**
**Regional Bell Operating Company**
**Réseau National de** **Télécommunications** **pour la Technologie,**
**l'Enseignement et la Recherche (France)**
**Research and Technological Development**

**134**

_MO_ _Annual Report 1993_ - _1994_ _Annex B_

SDI Selective Dissemination of Information
SGML Standard Generalised Markup Language
SGN Stockholm Gigabit Network
SMEs Small and Medium Enterprises
STM Science, Technology and Medicine

TEDIS Trade Electronic Data Interchange System

TFPL Task Force Pro Libra

UIT Union Internationale des Telecommunications

VADS Value Added Data Services

VANS Value Added Network Services

VAT Value Added Tax
VIS Video Information System (Tandy)
WAN Wide Area Network

### **OS i\\ C MU-**

**ANNEXC**

**LIST OF PUBLICATIONS**

_**Amended Proposal for a Council Directive on the Legal Protection of Databases,**_ **EC Brussels,**
October 1993.

Barker, Alan, _**The**_ _**Market**_ _**for**_ _**CD-i,**_ **1993.'**

_**Cable and Satellite Europe**_ **[passim].**

_**Case Studies in the Field of Information**_ _**Economics,**_ _**Biotechnology Sector,**_ **prepared for IMPACT** **2**
by HERTIS Information arid **Research, 1994.**

_**Case Studies in the Field of Information**_ _**Economics,**_ _**Insurance**_ _**Sector,**_ **prepared for IMPACT 2 by**
Fuinca, 1993.

_**Les Chiffres-Clés de**_ _**l'Audiovisuel**_ _**Mondial**_ **OMSYC,** **1993.**

_Convergence in Europe: State of the_ _Art,_ Report for IMO, EC DGXIII/E, Jean-Claude Burgelmann,
February 1994.

_Directory of Online Databases,_ Gale Research Inc., 1993 and 1994.

_**EAN**_ _**International Annual Report 1993.**_

_**The**_ _**Economist,**_ **[passim].**

_**EEMA**_ _**Briefing,**_ **[passim].**

_**EIIA/EC Third**_ _**Co-ordinated Host Survey,**_ **IMO, EC** **DGXIII/E,** **1993.**

_**EIIA/EC**_ _**Fourth**_ _**Co-ordinated Host Survey,**_ **IMO, EC DGXIII/E, 1994.**

_Electronic Books International,_ Conference Proceedings, Mecklermedia, March 1994.

_**EPTournai,**_ **[passim].**

_**Europe and the Global Information Society. Recommendations to the European Council,**_ **Report**
presented by the Bangemann group at the Corfu Summit, 24th - 25th June 1994.

_**European Information Technology Observatory Update,**_ _**WTO,**_ **October 1993.**

_European Multimedia Yearbook,_ Interactive Media Publications, 1994.

_**Europe's Way to the Information Society**_ **-** _**An Action Plan.**_ **Communication from the Commission**
to the Council and the European Parliament, Brussels, July 1994.

_**Facts and Figures of the**_ _**CD-ROM**_ _**Industry,**_ **TFPL 1994.**
_**Financial Times,**_ **[passim].**

**13S**

_**MO Annual Report**_ _**1993-1994**_ _Annex_ _C_

_**Growth,**_ _**competitiveness, employment. The challenges**_ _**and**_ _**ways forward into the**_ _21st century._
**European Commission, 1993.**

_**Guidelines for Cross-Border control of Audiotex and Videotex,**_ **EIIA,** **July 1993.**

_**1DPReport,**_ **Simba [passim].**

_**IDT**_ _-_ _**Marchés et Industries de l'Information,**_ **Conference Proceedings, l'Association des**
**professionels** **de l'information et de la documentation, June 1994.**

_**The Impact of Information Technology Usage in the Transport Sector,**_ **prepared for IMPACT 2 by**
**SISNet, 1993.**

_**Impact of Information Usage on Companies' Competitiveness,**_ **prepared for EC** **DGXIII/B,** **US**
**Strategic Decisions, 1994.**

_**Interactive TV in Europe and the USA,**_ **Quadrature, July 1993.**

_**Interactive Media International,**_ **[passim].**

_**Internet**_ _**World and Document Delivery**_ _**World**_ _International,_ Conference Proceedings,
**Mecklermedia, May 1994.**

_**Key Indicators**_ _**of**_ _**the**_ _**Information**_ _**Industry,**_ _**1992.**_ **IDATE,** April 1994.

_**Latest Internet Measurements Reveal Dramatic Growth in 1994.**_ Internet Society press release, 4
**August 1994.**

_**Legal Advisory Board Files,**_ **working papers of the LAB, 1993/4.**

_**Legal Implications of**_ _**Convergence**_ _**Between Media and**_ _Telecommunications Industries,_ Centre de
**Recherches Informatique et Droit, February 1994.**

_**La Lettre de Télétel et**_ _**d'Audiotel**_ **[passim].**

**Mayer, René,** _**Construire un Marché Européen**_ _de l'Information,_ Paper presented at the IMPACT
**Information Day, May 1994.**

_**Le Marché Audiovisuel Européen**_ - _Audiovisuel et Industries Culturelles,_ IDATE, 1993.

_MBI World Report,_ MBI, **1994.**

_Mergers and Acquisitions in the Electronic_ _Information Sen'ices_ _Industry,_ Working Paper of the
**Information Market Observatory, IMO, EC DGXIII/E, May 1994.**

_National Information Infrastructure: Agenda for Action._ Information Infrastructure Task Force,
**1993.**

_New Opportunities for Publishers in the Infonnation Services Market,_ IMO, EC DGXUI, 1993.

**139**

_**MO**_ _**Annual Report 1993**_ _**-1994**_ _**Annex C**_

_**Online**_ _**Services:**_ _**1993**_ _**Review,**_ _**Trends &**_ _**Forecast,**_ **Simba, 1994.**

_**Optical Publishing Industry**_ _**Assessment,**_ **Infotech, 1994.**

_**An**_ _**Overview**_ _**of Print**_ _**Publishing**_ _**Markets in the**_ _**European**_ _**Community,**_ **Working Paper of** **the**
Information Market Observatory, EC DGXIII/E, September 1993.

_Overview_ _of_ _the_ _Audiotex PRS Market,_ Working Paper of the Information Market Observatory
IMO, EC DGXin, June 1994.

_**Panorama**_ _**de**_ _**l'Edition**_ _**Audiotel,**_ **Geste, 1994.**

_**Personal Communicators**_ _**-**_ _**Analysis**_ _**of**_ _**Industrial**_ _**&**_ _**Technological**_ _**Evolutions,**_ **DGIII,** **EC Brussels,**
1993.

_Premium Rate_ _Services,_ Eurodata Foundation, 1993.

Rietbroek, John, EC initiatives on trans-European networks. _Information Economics_ _and Policy, 5_
(1993)287-294.

_RTD_ _News,_ [passim].

**\**

**I**

_**Television Business International**_ **[passim]'!**

_**Top Fifty European Media**_ _**Owners,**_ **Zenith Media Worldwide, 1994. .**

_**US Industrial**_ _**Outlook,**_ **US Government, 1994.**

_**US**_ _**Telecommunication**_ _**Services in**_ _**European**_ _**Markets,**_ **Office of Technology Assessment, United**
States Congress, August 1993.

_**Vers un environment**_ _**de**_ _**communications**_ _**personnelles.**_ _**Livre Vert sur une approche commune**_ _**dans**_
_**le**_ _**domaine**_ _**des**_ _**communications mobiles etpersonelles au sein**_ _**de**_ _**l'Union**_ _**Européene.**_
EC Brussels, April 1994.

_World Telecommunications_ _Report,_ International Telecommunications Union, March 1994.

_**World Telemedia/Voice International**_ **[passim].**

140

##### ISSN 0254-1475

### COM(95) 492 final

## **DOCUMENTS**

##### EN 16 15 Catalogue number : CB-CO-95-532-EN-C ISBN 92-77-94572-9

Office for Official Publications of the European Communities

L-2985 Luxembourg

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