Rec to the EU Council Europe and the GII -- sorry for the format but ..

[David Farber <farber () linc cis upenn edu>]

       installed.
       
       
       
   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.