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LEGAL ADVISORY BOARD
Position paper on the Green Paper on the convergence of the telecommunications, media and information technology sectors
Table of Contents
1. General observations
2. Competition policy
3. Licensing of converged networks and services
4. Type and scope of regulation
5. Computer, broadcasting and telecommunications regulation
6. Access and interconnection
7. Public service and universal service
8. The issue of a single communications' regulator
9. Global implications
The Legal Advisory Board (LAB) has studied with great interest the Green Paper on the convergence of the telecommunications, media and information technology sectors and the implications for regulation - towards an information society approach (COM(97)623 - hereafter: Green Paper) adopted by the European Commission on 3 December 1997.
At the meeting of the Convergence Task Force, as well as in the full LAB meeting, both held in Brussels on 12 and 31 March 1998 respectively, the members of the LAB discussed the Green Paper and some of the many important questions contained therein. The present document contains the LAB positions on the Green Paper.
1. In the opinion of the LAB, the Information Society should - as a starting point for the discussion of the appropriateness of regulatory models - not only be viewed as a promising new marketplace, governed by competition forces. The concept of the Information Society also represents the hope and chance to let Europe benefit from the convergence phenomenon in terms of job creation, consumer choice, cultural diversity, improvements for the democratic society, social and regional cohesion and growth. Appropriate models for regulation follow from the social and cultural objectives Europe wishes to achieve in these fields and, more specifically, from how content-rich services may best be delivered to all citizens under fair economic conditions.
2. Regulatory questions are normative questions: The future regulatory framework should meet the objectives in a competitive as well as in a technologically-neutral way. To achieve this aim a broader and deeper analysis of why existing rules differ across media and national areas seems to be required to determine which of these rules depend on still valid social and cultural context and historical experiences. To the extent they simply represent situation-dependent and adaptive steps, they will need reconsideration in view of technological, economic and social change as exemplified in the convergence phenomenon.
3. The way convergence is perceived co-influences the ambit of regulation. Under a minimalist approach where convergence simply means the coming together of computer, media and broadcast networks only some purely technical adjustments to the existing legal regimes may be deemed necessary. Under a much broader approach, convergence is a phenomenon potentially affecting the way businesses and citizens interact with society. This scenario justifies the introduction of a wider set of harmonised principles and rules.
4. At this early stage of development, only detailed normative and economic analysis and market surveys per service segments may serve as a secure indicator of the socio-economic, business and consumer impact of convergence. Published studies and available market data e.g. tend to agree that, despite the fact that the residential market is growing faster than the business sector in terms of number of users, most new services still remain targeted on the business sector.
5. In as far as an appropriate operative framework for the electronic communications industry is to be determined, the EU should identify clear policy objectives, initiate stable and predictable regulation, build on existing European policies in the converging media, IT and telecommunications sectors, introduce certainty in service definitions and create a positive climate for investment. Moreover, account should be taken of the need to promote competition, regulatory flexibility, transparency, accountability, interconnection of networks and interoperability of services. Consideration should also be given to the enhancement of public access, the strengthening of consumer and data protection and the ensuring of compatibility between European and national solutions.
6. Regulation should tend neither to privilege one medium or one specific technology nor to artificially force convergence between competing infrastructures. Any future legislation should be targeted on those points of the multimedia value chain susceptible to abuse. What is sometimes perceived as a barrier to convergence is not per se and not always a barrier to the Information Society: Legal rules should be seen as an innovative force providing for stable and predictable as well as acceptance generating rules for the realisation of the Information Society within the framework of Community law.
7. Convergence should not lead to additional regulation. The range of rationales in play, combined with current technological and market uncertainties suggests that at this transitional stage of development no far reaching, detailed or premature legislative measures should be initiated until clear regulatory priorities are identified.
However, the apparent alternative of a "no rules - no authority" situation is largely illusory. Complete lack of any minimum international or self-regulatory provisions on the Internet neither reflects the current state of the law nor will it be a desirable option should the Web intend to make a 'leap forward' to become a virtual global marketplace.
8. The Community should adopt a comprehensive approach to convergence. The output of the public debate on the Green Paper should be used as an input to other on-going EU policies or initiatives. The actions to be undertaken as a result of the on-going public consultation are closely related to other major policy instruments and Community Initiatives for the Information society (e.g.. the Information Society Forum, the Commission White Paper on Teaching and Learning, the Green Paper on Living and Working in the Information Society, the Rolling Action Plan). Public access and information availability, to be dealt with by the long awaited Green Paper on Public Sector Information, is also particularly relevant in this context.
9. Technical and market convergence does not necessarily imply the same degree of regulatory convergence. A clash of rules arising from the clash of technology models, exacerbated by competing market players with different corporate structures, cultures and interests is inevitable. In the short term a certain degree of 'regulatory forbearance', relying less on industry-specific rules and more on industry practices shaped through competition law, would be even helpful, provided it facilitates the articulation of clear regulatory goals. However, forbearing from regulation should not lead to institutional inertia. Failure to provide a stable and predictable regulatory framework by leaving market forces as the sole driver of convergence might in the longer term result in uncertainty.
1. The starting positions for moving into the convergent markets must be in conformity with competition rules. Technological developments in the sectors affected by convergence require in principle less detailed regulation and more reliance on competition rules and market forces. Nevertheless, the new markets require the creation of new rights better tailored to the interests of cross-product and cross-sector development as well as to cross-sector share-holding.
2. Convergence must not lead to new multimedia market monopolies but to the creation of growth-oriented, job-rich new economic structures. Regulation must support the development of a broad base of competitive infrastructures run by various market players. Adequate regulatory safeguards are necessary in order to prevent dominant telecommunications operators or cross-border media conglomerates from abusing their position when expanding into new multimedia markets or cable systems.
The LAB recognises that there is a problem of market entry in the converged environment. Consequently, rules and criteria of cross-ownership and concentration have to be re-examined in the digital era.
3. The LAB believes the actions that the European Commission intends to undertake as a result of the Cable Review are complementary to the Green Paper.
4. Future regulation should not compromise the extremely rapid pace of technological innovation favouring new successful and market oriented services. By respecting the subsidiarity principle, the Commission should seek to avoid a situation whereby national regulators would continue to define and structure regulatory rules in ways that, almost by definition, favour incumbents over new entrants.
5. The LAB recognises that change toward the Information Society is strongly conditioned by economic factors. Nonetheless, if the sole criteria of power and profit are applied to the converged environment, the clash of strong vested interests could stifle innovation and potentially lead to new monopolies. Socially acceptable and consumer oriented regulatory models could only inadequately develop and foster the achievement of the regulatory objectives underlying the Green Paper with regard to citizens access, transparency and consumer choice. In order to remedy possible market inconsistencies the European Commission should actively enhance 'public access' for all citizens, including the disadvantaged, to the new communications services, on the basis of effective citizenship and participation in political, economic and social life.
3. LICENSING OF CONVERGED NETWORKS AND SERVICES
1. The LAB considers that the success of the emerging communications market largely depends upon the introduction of consistent licensing mechanisms throughout Europe. Divergent definitions of converging services on the European level may lead to fragmented licensing and compromise ''one- stop'' type regulation, where a single licence (class licence, declaration or authorisation), granted by a competent regulatory authority, would be sufficient to provide the service Europe-wide.
2. Service providers should in principle be subject only to a requirement for declaration of their activities to the National Regulatory Authority(ies) of the member State(s) where they choose to operate. If it is considered that licensing is needed to provide a service, then there should be an effort towards achieving harmonised rules with a view to reach mutual recognition of licences. Full mutual recognition of licences should be avoided without a prior high degree of harmonisation.
3. It is necessary to establish, at the European level, clear classification, demarcation and licensing criteria between various types of service offerings in order to achieve regulatory consistency, avoidance of overlapping and the imposition of undue restrictions on operators. A transparent, user-friendly and simplified glossary of basic technologies and service delivery platforms should be published on the Commission web site and updated regularly. Such a systematic and comprehensive inventory of new technologies and applications would serve both as a navigation tool for all parties concerned by convergence and as instrument of internal management for the Commission.
4. TYPE AND SCOPE OF REGULATION
1. Regulation of converging media, telecommunications and IT sectors should range from mutual recognition of equipment certification, network and service licensing, effective, acceptable and legitimised self-regulatory regimes as well as, where necessary, harmonised full-scale regulation. Convergence should also lead to a common approach to approval and enforcement of standards.
2. Services need not be regulated in the same way just because they are delivered on a common medium and existing rules do not simply apply by analogy to new sectors. Regulation should tend neither to privilege one medium or one specific technology nor to artificially force convergence between competing infrastructures. No immediate EU intervention would be needed in market segments where the absence of regulation or any existing national measures are not conflicting with current European legislation nor have restrictive effects on the freedoms established in the EC Treaty.
3. The provision of content should be kept separate from the transmission path or delivery infrastructure. In the case of cable TV and broadcasting e.g., this dichotomy ensures freedom of communication and would avoid the entanglement of the carrier regulator in highly contentious political issues related to programming. Additionally, it would offer a workable regulatory alternative to current dysfunctional attempts to regulate service provision and competition through network regulation or by using broadcast transmission licensing as a means of content regulation.
4. Regulation of content should make place to regulation of access to content. Statutory content regulation should be transformed into consumer-oriented regulation. Content rules should - as envisaged in current Community documents - distinguish between 'illegal content' and 'harmful content', with appropriately discriminating rules on access and liability.
5. Regulatory attention must turn to the control of 'gateways' or 'bottlenecks' (conditional access systems, decoders, set top boxes, navigation systems, electronic programming guides), which determine customer access to premium contents. Any abuse of market power or undue technical and economic restrictions imposed by 'gate-keeping' companies at all stages of delivery to customers would be likely to reduce plurality and consumer choice. Being justified by strong public policy considerations, there should be continuing investigations as to whether there is a need to mandate access to certain types of 'essential information services' following the rationale that is laid down by the new TWF-Directive with regard to broadcasting major sporting events and current reflections on extending the concept of "universal service" .
6. The direct delivery to home and to business of new satellite and mobile based services with a pan-European dimension requires an efficient use of the frequency spectrum. Traditionally, licensing the access to the broadcasting network under conditions of spectrum scarcity had a direct effect on content transmitted by licensed operators in terms of 'must carry' obligations, programme quota etc. Similarly, in the telecommunications domain, transport and applications are often bundled, so that most of the 'intelligence' of the medium resides in the network. In the digital era, there is no spectrum scarcity. However, the LAB agrees with the Green Paper which considers that radio spectrum will remain a rare resource. This is evident in view of the growing demand for mobile services from users requiring mobility and physical independence from the distribution network.
5. COMPUTER, BROADCASTING AND TELECOMMUNICATIONS REGULATION
1. The convergence phenomenon challenges the rationale for current differences in regulation. Differences in regulation will have to be maintained where the extent of differences in social and cultural context, patterns of usage, social and economic effects in view of the regulatory objectives pointed out under I. above require different approaches.
After careful examination of the extent of such structural differences, in the view of the LAB change might be required wherever regulations have merely been based on technological and to some extent organisational differences built on these technological differences such as e.g. the expansion of the scope of both the ONP Framework Directive (90/387/EEC) or the Interconnection Directive (97/33/EC) and of the recently amended (by Directive 97/36/EC) Television without Frontiers Directive (89/552/EEC).
2. As convergence proceeds the new market will coexist with the traditional one. Regulators will not be able to avoid to continue making short-term incremental adjustments to existing regulatory frameworks in order to bring more and more of the economy of the converging media into the embrace of the regulations. Member states should be allowed to 'carve out' new services and activities that cross traditional boundaries, regulating them in accordance with a different set of rules, if regulation is deemed necessary. In view of subsidiarity this will be a necessary albeit not an easy exercise.
3. Against this background it seems to the LAB that e.g. classification of converged services under broadcasting or telecommunications law would still depend on whether services are made accessible to the public at large. Rules on pluralism and media concentration have to be assessed against market shares and degree of publicness of services. Transport will require economic regulation.; content involves issues of public policy. The regulation of most new on-line services implying selective distribution to specific user groups, might profitably be inspired by a transport-oriented telecommunications model. Broadcasting rules on diversity, programming requirements or quota are not tenable for the new, selective distribution channels.
4. The effect of convergence on the way in which public service broadcast policy objectives are delivered will have to be considered in the competitive marketplace, implying increased consumer choice, fragmentation of audiences, channel abundance and premium content scarcity. In the new environment "competitive" regulatory models could be tested giving the Member States the choice as whether the public broadcaster should be equated with the concept of public service provider or if the State should establish a system where all market actors can provide programmes of evident social interest, such as culture, education, science and healthcare.
1. In the short term, the concepts of access and interconnection need to be separated since their respective roles in the emerging multimedia environment are likely to be different. Regulation of access to converged networks in particular should be made by reference to European competition rules together with public policy considerations related to the preservation of pluralism.
2. The application of the telecommunications open network provision rules to the broadcasting sector is an important regulatory question which requires particular attention. Network access for broadcasters does not only concern the transmission of signals but it raises a series of content-related questions pertaining to the preservation of pluralism.
Broadcasters cannot rely on the cable-TV directive when trying to claim access to so far vacant cable channels, regardless of whether distribution takes place in analogous or digital form. The immediate application of ONP rules to cable TV operators could potentially deprive them of the ability to package their premium contents so as to develop a brand image and compel them to act as simple carriers.
The LAB therefore believes that the extension, in the digital era, of ONP rules to non voice telephony applications should be avoided, at least in a short and medium term, in order to avoid favouring the development of some services to the detriment of others.
7. PUBLIC SERVICE AND UNIVERSAL SERVICE
1. In the new multimedia environment, universal service should no longer be defined in relation to dominant operators. It should primarily be a market issue. USO and the list of statutory services should be reviewed frequently, in order to take account of changing technological developments and the requirements of society at large.
2. In order to remedy inconsistencies in the access markets, the LAB endorses the introduction of some concrete supportive 'public access' measures, transparently financed and taking into account reasonable rewards for the authors, to new multimedia services, such as the creation of public access points in schools, libraries, hospitals, the introduction of licensing obligations for service providers to apply lower pricing or grant free subscriptions for low income population groups, education etc. Such a policy would serve to educate people in using new services and promote the new market. The adoption of public access policies is justifiable as furthering 'effective citizenship' and avoidance of social exclusion. This implies a right for all citizens, independently of their income or place of residence, to participate in the benefits of the emerging information society.
3. Access possibilities to converging services of European citizens residing in rural and remote areas can be enhanced through alternative competition models such as the shared ownership or joint use of facilities by providers, the licensing of a single service provider or other measures that would enhance the development and viability of communications in these areas. Besides licence obligations to serve some special categories of customers in licensed areas, supporting measures could include negotiating with operators to introduce subsidised specialist low user schemes or more radical options of franchising or 'bidding' for 'uneconomic' customers.
8. THE ISSUE OF A SINGLE COMMUNICATIONS' REGULATOR
1. Since the existing market economy requires consistency and the avoidance of regulatory overlapping, the LAB assumes that the merger of regulatory functions into a sole body - on a national level - could a priori offer a satisfactory solution. Whichever solution is adopted - one communications regulator or many different regulatory bodies with no overlapping authorities - the European Commission would have to ensure an overall regulatory control consistent with the broad imperatives of the Information market and European Information Society.
2. For various operational, practical, economic, legal and political reasons, the LAB would oppose the perspective of this model of a single regulator been transposed to a European scale.
Instead, the LAB would propose to the Commission to distinguish between issues where unified licensing schemes could be applied (e.g. mutual recognition of licences) and other issues to be dealt with at national level, with the Commission ensuring overall compatibility with the regulatory objectives.
1. In view of the international roll out of networks, the LAB believes that legal issues have to be addressed globally (copyright, data protection, electronic commerce etc.). The LAB strongly supports the idea of the development of an International Charter of Communications as a framework for global dialogue, recognising the work of existing international organisations, promoting the participation of the private sector and relevant social groups and contributing to more regulatory transparency.
Legal Advisory Board Secretariat,
Richard Swetenham,
European Commission DG XIII-E-2,
EUFO 1166, rue Alcide de Gasperi, L-2920 LUXEMBOURG
tel: +352 4301 32400 fax: +352 4301 33190
e-mail: richard.swetenham@lux.dg13.cec.be
Web site: http://www2.echo.lu/legal/en/labhome.html