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Subject: Rec to the EU Council Europe and the GII -- sorry for the format but .... djf
Markets for business
Large and small companies and professional users are already leading
the way in exploiting the new technologies to raise the efficiency of
their management and production systems. And more radical changes to
business organisation and methods are on the way.
Business awareness of these trends and opportunities is still lower
in Europe compared to the US. Companies are not yet fully exploiting
the potential for internal reorganisation and for adapting
relationships with suppliers, contractors and customers. We have a
lot of pent up demand to fill.
Business awareness of these trends and opportunities is still
lower in Europe compared to the US.
In the business markets, teleconferencing is one good example of a
business application worth promoting, while much effort is also being
dedicated worldwide to the perfection of telecommerce and electronic
document interchange (EDI).
Both offer such cost and time advantages over traditional methods
that, once applied, electronic procedures rapidly become the
preferred way of doing business. According to some estimates,
handling an electronic requisition is one tenth the cost of handling
its paper equivalent, while an electronic mail (e-mail) message is
faster, more reliable and can save 95% of the cost of a fax.
Electronic payments systems are already ushering in the cashless
society in some parts of Europe. We have a sizeable lead over the
rest of the world in smart card technology and applications. This is
an area of global market potential.
Markets for small and medium sized enterprises
Though Europe's 12 million SMEs are rightly regarded as the backbone
of the European economy, they do need to manage both information and
managerial resources better.
They need to be linked to easy access, cost-effective networks
providing information on production and market openings. The
competitiveness of the whole industrial fabric would be sharpened if
their relationships with large companies were based on the new
technologies.
Networked relationships with universities, research institutes and
laboratories would boost their prospects even more by helping to
remedy chronic R&D deficiencies. Networking will also diminish the
isolation of SMEs in Europe's less advantaged regions, helping them
to upgrade their products and find wider markets.
Markets for consumers
These are expected to be richly populated with services, from home
banking and teleshopping to a near-limitless choice of entertainment
on demand.
In Europe, like the United States, mass consumer markets may emerge
as one of the principal driving forces for the information society.
American experience already shows that the development markets
encounters a number of obstacles and uncertainties.
Given the initial high cost of new pay-per-view entertainment
services, and of the related equipment, as well as the high cost of
bringing fibre optics to the home, a large mass consumer market will
develop more easily if entertainment services are part of a broader
package. This could also include information data, cultural
programming, sporting events, as well as telemarketing and
teleshopping. Pay-per-view for on-line services, as well as
advertising, will both be necessary as a source of revenue. To some
extent, existing satellite and telephone infrastructure can help to
serve the consumer market in the initial phase.
At the moment, this market is still only embryonic in Europe and is
likely to take longer to grow than in the United States. There, more
than 60% of households are tapped by cable TV systems which could
also carry text and data services. In Europe, only 25% are similarly
equipped, and this figure masks great differences between countries,
e.g. Belgium (92%) and Greece (1-2%).
Another statistic: in the United States there are 34 PCs per hundred
citizens. The European figure overall is 10 per hundred, though the
UK, for instance, at 22 per hundred, is closer to the US level of
computer penetration.
Lack of available information services and poor computer awareness
could therefore prove handicaps in Europe. Telecommunication networks
are, however, comparable in size and cover, but lag behind in terms
of utilisation. These networks, therefore, can act as the basic port
of access for the initial services, but stimulation of user
applications is still going to be necessary.
Such structural weaknesses need not halt progress. Europe's
technological success with CD-ROM and CD-I could be the basis for a
raft of non-networked applications and services during the early
formative years of the information society. These services on disk
have considerable export potential if Europe's audio-visual industry
succeeds in countering current US dominance in titles.
In terms of the market, France's Minitel network already offers an
encouraging example that European consumers are prepared to buy
information and transaction services on screen, if the access price
is right. It reaches nearly 30 million private and business
subscribers through six million small terminals and carries about
15,000 different services. Minitel has created many new jobs,
directly and indirectly, through boosting business efficiency and
competitiveness.
In the UK, the success of the Community-sponsored Homestead
programme, using CD-I, is indicative, as is the highly successful
launch of (an American) dedicated cable teleshopping channel.
Meanwhile in the US, where the consumer market is more advanced,
video-on-demand and home shopping could emerge as the most popular
services.
Audio-visual markets
Our biggest structural problem is the financial and organisational
weakness of the European programme industry. Despite the enormous
richness of the European heritage, and the potential of our creators,
most of the programmes and most of the stocks of acquired rights are
not in European hands. A fast growing European home market can
provide European industry with an opportunity to develop a home base
and to exploit increased possibilities for exports.
Linguistic fragmentation of the market has long been seen as a
disadvantage for Europe's entertainment and audio-visual industry,
especially with English having an overwhelming dominance in the
global market - a reflection of the US lead in production and,
importantly, in distribution. This lead, which starts with cinema and
continues withtelevision, is likely to be extended to the new
audio-visual areas. However, once products can be easily accessible
to consumers, there will be more opportunities for expression of the
multiplicity of cultures and languages in which Europe abounds.
...once products can be easily accessible to consumers, there will
be more opportunities for expression of the multiplicity of
cultures and languages in which Europe abounds.
Europe's audio-visual industry is also burdened with regulations.
Some of these will soon be rendered obsolete by the development of
new technologies, hampering the development of a dynamic European
market.
As a first step to stimulating debate on the new challenges, the
Commission has produced a Green Paper on the audio-visual industry.
_________________________________________________________________
CHAPTER 2
A MARKET-DRIVEN REVOLUTION
A break with the past
The Group is convinced that technological progress and the evolution
of the market mean that Europe must make a break from policies based
on principles which belong to a time before the advent of the
information revolution.
The key issue for the emergence of new markets is the need for a new
regulatory environment allowing full competition. This will be a
prerequisite for mobilising the private capital necessary for
innovation, growth and development.
In order to function properly, the new market requires that all
actors are equipped to participate successfully, or at least that
they do not start with significant handicaps. All should be able to
operate according to clearrules, within a single, fair and
competitive framework.
The Group recommends Member States to accelerate the ongoing
process of liberalisation of the telecom sector by:
* opening up to competition infrastructures and services still in
the monopoly area
* removing non-commercial political burdens and budgetary
constraints imposed on telecommunications operators
* setting clear timetables and dead lines for the implementation
of practical measures to achieve these goals
Ending monopoly
This is as true for the telecommunications operators (TOs) as for
others. It is now generally recognised as both necessary and
desirable that the political burdens on them should be removed, their
tariffs adjusted and a proper regulatory framework created. Even the
operations of those TOs whose status has already evolved over recent
years are not fully in line.
It is possible to end monopoly. In future, all licensed public
operators should assume their share of public service
responsibilities (e.g. universal service obligation and the provision
of equal access to networks and services).
A competitive environment requires the following:
* TOs relieved of political constraints, such as:
+ subsidising public functions;
+ external R&D activities;
+ contributions to land planning and management objectives;
+ the burden to carry alone the responsibility of universal
service;
* a proper regulatory framework designed to achieve:
+ market regulation to enable and to protect competition;
+ a predictable environment to make possible strategic
planning and investment;
* adjustment of tariffs.
Enabling the market
The Group recommends the establishment at the European level of an
authority whose terms of reference will require a prompt
attention.
In order for the market to operate successfully, the Group has
identified the following objectives and recommendations:
Evolution in the regulatory domain
Identify and establish the minimum of regulation needed, at the
European level, to ensure the rapid emergence of efficient European
information infrastructures and services. The terms of reference of
the authority which will be responsible for the enforcement of this
regulation is a question that will require a prompt attention.
The urgency of the matter is in direct relation to the prevailing
market conditions. A clear requirement exists for the new "rules of
the game" to be outlined as soon as possible. The market place will
then be in a position to anticipate the forthcoming framework, and
the opportunity will exist for those wishing to move rapidly to
benefit from these efforts.
The authority will need to address:
* the regulation of those operations which, because of their
Community-wide nature, need to be addressed at the European
level, such as licensing, network interconnection when and where
necessary, management of shared scarce resources (e.g.
radio-frequency allocation, subscriber numbering and advice to
Member States regulatory authorities on general issues.
* a single regulatory framework valid for all operators, which
would imply lifting unequal conditions for market access. It
would also ensure that conditions for network access and service
use be guided by the principles of transparency and
non-discrimination, complemented by practical rules for dispute
resolution and speedy remedy against abuse dominance.
Interconnection and interoperability
Two features are essential to the deployment of the information
infrastructure needed by the information society: one is a seamless
interconnection of networks and the other that the services and
applications which build on them should be able to work together
(interoperability).
In the past the political will to interconnect national telephone
networks resulted in hundreds of millions of subscriber connections
world-wide. Similar political determination and corresponding effort
are required to set up the considerably more complex information
infrastructures.
Interconnection of networks and interoperability of services and
applications are recommended as primary Union objectives.
The challenge is to provide interconnections for a variety of
networking conditions (e.g. fixed and new type of networks, such as
mobile and satellite) and basic services (e.g. Integrated Service
Digital Network - ISDN). Currently, the positions of monopoly
operators are being eroded in these fast-developing areas.
Joint commercial decisions must be taken by the TOs without delay to
ensure rapid extension of European basic services beyond telephony.
This would improve their competitive position vis--vis non-European
players in their own markets.
The European information society is emerging from many different
angles. European infrastructure is evolving into an ever tighter web
of networks, generic services, applications and equipment, the
development, distribution and maintenance of which occupy a multitude
of sources worldwide.
In an efficient and expanding information infrastructure, such
components should work together.
Assembling the various pieces of this complex system to meet the
challenge of interoperability would be impossible without clear
conventions. Standards are such conventions.
Open systems standards will play an essential role in building a
European information infrastructure.
Standards institutes have an honourable record in producing European
standards, but the standardisation process as it stands today raises a
number of concerns about fitness for purpose, lack of
interoperability, and priority setting that is not sufficiently market
driven.
Action is required at three different levels:
* at the level of operators, public procurement and investors:
following the successful example of GSM digital mobile telephony,
market players (industry, TOs, users) could establish Memoranda of
Understanding (MoU) to set the specifications requirements for
specific application objectives. These requirements would then
provide input to the competent standardisation body. This type of
mechanism would adequately respond to market needs.
Operators, public procurement and investors should adopt unified
open standard-based solutions for the provision and the
procurement of information services in order to achieve global
interoperability.
* at the level of the European standards bodies:
These should be encouraged to establish priorities based on market
requirements and to identify publicly available specifications,
originated by the market, which are suitable for rapid
transformation into standards (e.g. through fast track
procedures).
* at the level of the Union:
European standardisation policy should be reviewed in the light of
the above. When the market is not providing acceptable technical
solutions to achieve one of the European Union's objectives, a
mechanism should be sought to select or generate suitable
technologies.
World-wide interoperability should be promoted and secured.
The Group recommends a review of the European standardisation
process in order to increase its speed and responsiveness to
markets.
Urgent action to adjust tariffs
Reduction in international, long distance and leased line tariffs
will trigger expansion in the usage of infrastructures, generating
additional revenues, and simultaneously giving a major boost to
generic services and innovative applications
Reduction in international, long distance and leased line tariffs will
trigger expansion in the usage of infrastructures, generating
additional revenues, and simultaneously giving a major boost to
generic services and innovative applications
In most cases, the current unsatisfactory tariff situation results
from the TOs' monopoly status and a variety of associated political
constraints.
The introduction of competitive provision of services and
infrastructures implies that TOs would be able to adjust their tariffs
in line with market conditions. Rebalancing of international and
long-distance versus local tariffs is a critical step in this process.
The Group recommends as a matter of urgency the adjustment of
international, long distance and leased line tariffs to bring these
down into line with rates practised in other advanced
industrialised regions. Adjustment of tariffs should be accompanied
by the fair sharing of public service obligations among operators.
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