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Trans-European networks and the Common Information Area: The development of a European strategy
[•UTTERWORTH I"IJ'IE i N E M A N N
Telecommunications Policy, Vol. 19, No. 6, pp. 501-508, 1995
0308-5961(95)00015-1
Copyright © 1995 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0308-5961/95 $10.00 + 0.00
Trans-European networks and the Common Information Area The development of a European strategy
Colin Turner
The EU has set out to introduce information and communication technologies into all areas of the socioeconomic structure. Initially, however, a Common Information Area (ClA) needs to be established to ensure that information and communication are freely mobile throughout the economic and social space. To this end the EU needs to develop a strategy to ensure that a series of high-powered telecommunication networks emerge in an integrated and coordinated fashion. While several initiatives to assist the market-based provision of the CIA have been estabIished, there seems to be an absence of an overarching coordinsted strategy to aid its development. A single body to oversee the EU telecommunication sector may need to be established. The author may be contacted at the School
of Economics, University of Humberside, Cottingham Road, Kingston upon Hull, HU6 7RT, UK (Tel: +44 1482 440550; fax; +44 1482 448750). 1See the initial report of the Bangemann Group, Europe and the Global Information Society (June 1994).
Increasingly competitiveness relies, within the global economy, upon the ability to use information and communication, and the associated technologies, in an effective and efficient manner. Information and communication technologies (ICTs) assist the mobility of factors of production and thus aid the efficient allocation of resources upon which the competitiveness of an economy relies. In response to these changes, the E U has launched a programme to aid the development of the Information Society. ICTs are to become infused within most, if not all, economic and social structures. However, before these grand longer-term objectives can be met the E U needs initially to establish an effective telecommunications network that is able to deal with the vast increases in traffic that are likely to result from these socioeconomic changes. The aim is to establish a C o m m o n Information Area (CIA) where information and communication flows are freely mobile around the economic space within a single set of interconnected and interoperable networks. It is vital to ensure that all factor markets have access to these information and communication resources if the development of the CIA is to aid the competitiveness of the E U into the 21st century. Following adoption of the White Paper on Growth, Competitiveness and Employment, the E U Council mandated the Bangemann group (see later) to investigate the means via which the network requirements of the Information Society could be met, as far as possible, by the market. 1
501
Trans-European networks and the Common Information Area: C Turner
While these advanced networks are emerging across the EU, different member states are tending to develop them independently. This raises the spectre of new networks developing in an incompatible fashion, thus endangering the achievement of the CIA. In such a scenario there is a role for the EU to play in both aiding market provision and addressing areas of perceptible market failure. Thus the success of the EU strategy to attain the CIA rests upon, first, establishing a legal and regulatory environment that encourages the CIA to emerge from the market and, second, ensuring that the necessary applications and networks which underpin the CIA develop in a coherent and integrated fashion.
Priorities for the CIA As mentioned, at the heart of the CIA is a set of EU-wide telecommunications networks supporting flows of information and communication throughout the area. If these networks are to prove to be the anticipated powerful aid to the reorganization of the EU's society and economy then they must develop in an integrated and coherent fashion so as to promote the diffusion of information as broadly as possible across the economic space. At its simplest level, this objective requires that the raw material - information - must be in digital format and that the basic physical infrastructure and services are in place. These basic objectives need to be complemented by, first, the development of technical equipment (hardware, software and components), second, applications that facilitate the efficient and effective use of information and communication and, third, by promoting an awareness of, and training in, ICTs. It is from this base that the CIA may develop most comprehensively, as technology is developed and diffused throughout the economic space, common applications are produced, legal and regulatory hurdles are overcome, basic services are established and the skills in making use of ICTs broaden. In short, the notion of the Information Society extends beyond the development of the network. A viable strategy must ensure that these networks, and the services they offer, are used in the manner most conducive to aiding the competitiveness of the EU. Clearly there is no point in developing the networks if the applications provided are not used. It is only by extending the use of ICTs, via the network, that the EU's economy will perceptibly benefit. The desire for the CIA to emerge via the market is symptomatic of a number of key issues. It is believed that the market has greater scope than the public sector to develop the necessary innovative applications and services. Additionally, it is believed that competition within the sector will lower tariffs and encourage broader access to these services and thus aid the diffusion of ICTs. In more practical terms, the market-based approach is a feature of the redefinition of the role of the state in an era where the public sector cannot afford the required investment. The basis of the EU's strategy is an applications-based approach to network development in which developing applications, and thereafter services, creates via the market the necessary inducement to develop infrastructures. However, such a policy must go hand in hand with an educative policy to create the need for these marketable services. It is hoped that, from the base provided by the CIA, indigenous firms will be able to establish a successful global presence in the ICT market.
502
Trans-European networks and the Common Information Area: C Turner Table 1. Trans-European telecommunlcatlons networks. Information highways
Target area for strategic projects
Investment required (ECU billion)
Interconnected advanced networks
Establishment of high-speed communication network Consolidation of ISDN
20 15
General electronic services
Electronic access to information Electronic mail Electronic images: interactive video services
1 1 10
Telematic applications
Teleworking Links between administrations Teletraining Telemedicine
3 7 3 7 67
Total Source: EU.
Table 2. EU financing of telecommunications networks. Inveatment(ECU million) 1994 1995 1996 1997 1998 1999
14 20 55 70 110 155
T~al
422
Source: EU.
In this sector cooperation between enterprises, at least over the short term, is frequently seen as a desirable way of facilitating economies of scale in R&D, lowering the cost of access to networks on a broader scale and fostering network interoperability at a very early stage of development. Such benefits might enable indigenous companies to establish a cost advantage in the domestic market and thereby enter the global arena on a similar scale to their major competitors. However, while cooperation is desirable, it has to be taken within the context of the need to maintain effective competition in the EU telecommunications market. Therefore effective limits upon the scope and form of cooperation need to be established alongside an appropriate definition of the relevant market. 2 Thus the CIA is about developing the necessary high-powered telecommunications networks and associated applications and services that would underpin the move to the Information Society. It appears unlikely that the market would provide all the necessary networks and applications to aid the development of the CIA. Therefore, in cases of market failure, the need for a strategy to assist market-based provision of these networks emerges.
Financing the C I A
2For full details on how the Commission intends to manage this apparent conflict see 'Guidelines on the Application of EEC Competition Rules in the Telecommunications Sector' OJ C 233 (6 September 1991).
As mentioned above, the development of the CIA is to be a largely market-led process, with the commercial sector taking a primary role. However, the public authorities have a function too. The strategy of the EU should seek to narrow the perceived divergence between public and private interest in the development of these infrastructures. Thus the major financing issue for the EU is how to encourage commercial economic operators to become involved in developing the necessary networks which support the broad establishment of the CIA. In the White Paper the EU estimated - and this is a conservative estimate - that the cost of network provision to ensure the proper functioning of the CIA would be ECU 150 billion up to the turn of the century, including ECU 67 billion for the priority projects outlined in Table 1. The EU clearly does not have this level of resources. Those that it does possess (see Table 2) have been devoted to smoothing the path for private finance by, for example, offering money for feasibility studies, largely as part of the trans-European networks (TENs) initiative. However, the commercial sector has already been contributing large sums to the development of these networks and is planning to commit 503
Trans-European networks and the Common Information Area: C Turner
more funds in the future. The success of the EU's strategy depends upon it being able to relieve possible market failures, first by ensuring that developments are in line with the overall strategy and conceptual framework for the development of TENs, and second, by guaranteeing that these infrastructures develop in a comprehensive and coherent fashion. To achieve these objectives, the EU has prioritized certain networks and applications (see Table 1) that are arguably central to the development of the Information Society such as telematic applications, general electronic services and interconnected advanced networks. EU initiatives, and therefore funding, have tended to be directed towards these priority projects. This is complemented by the development of a number of incentives to the commercial sector to develop projects, especially priority schemes, of uncertain economic viability. Currently the EU has either developed, or is proposing to develop, several initiatives such as the declaration of European interest. This will be aided by initiating a separate line for TENs within the budget, supported by the use of existing monies, for example from the structural and cohesion funds, that are specifically earmarked for projects linked to TENs. However, such financial incentives provide a mere fraction of the level of funding required and are likely only to cover the initial costs of project development. These actions must be complemented by a third factor - education. Educative activities are central to the development of the Information Society in promoting the diffusion and broad appreciation of the need for ICTs among the general populace. They could stimulate sufficient demand to justify the investment by the private sector in developing these networks and, additionally, assist indigenous ICT firms to establish a global presence. Arguably, the definitive role for the EU, within the framework of the open and competitive markets under which these infrastructures are expected to emerge, is to ensure that the environment is suitable to encourage private sector investment. The experience of service and equipment liberalization has been to entice investment by the commercial sector in these areas of the telecommunications market. The EU now intends to extend this process to the provision of infrastructure itself, 3 hopefully with the same results. This should feed through to a greater level of investment by the private sector in the advanced infrastructures, notably broadband, which underpin the development of the CIA. It is believed that greater competition in infrastructure provision leads to lower costs of access to these advanced networks, greater innovation and the alleviation of bottlenecks. Given the rather parlous financial situation of member states, leaving these necessary investments in infrastructure to state-owned monopolies could result in a fundamental underinvestment in these network enhancements. Thus the provision and ownership of infrastructure have to broadened.
Progress so far 3See Green Paper on the Liberalization of Telecommunications Infrastructure and Cable Television Networks Communication to the Council and the European Parliament, Part One: Principle and Timetable.
504
Progress towards the establishment of the CIA would tend to happen in a rather piecemeal fashion without some form of overarching strategy and rationale. So far progress towards the CIA, based upon the themes developed in the White Paper, has centred upon the need for the EU economy to establish an effective 'nervous system'; to this end the EU
Trans-European networks and the Common Information Area: C Turner Table 3. Fourth Framework Programme for Research and Technological Development (1994-98): funds for information and communications technology (ECU '000).
Telematics Advancedcommunicationstechnology Informationtechnology Total
843 630 1932 3405
Source: EU.
4See for example Rietbroek 'EC initiatives on trans-European networks' Information Economics and Policy 1993 5 (4).
has established several priority projects (see Table 1). The plan now is to put these ideas into action. This was, in essence, the function of the TENs initiative and, more latterly, the Bangemann Report. It has been noted elsewhere 4 that most of the priority networks within this sector are slowly emerging. It is entirely feasible that, with EU political and (albeit limited) economic support, these TENs could emerge in a comprehensive fashion. At the moment they are either evolving (ISDN) or are at the feasibility study stage (broadband and telematic networks). ISDN is now prevalent in most member states, with only Greece and Portugal not having the network available commercially. The issue is to extend the range and scope of services, giving the network more complete coverage. It is hoped that out of the development of ISDN at the national level a common standardized Euro-ISDN network will emerge. However, its full development has hit problems of access cost, a lack of awareness on the part of potential users and difficulties in developing more advanced networks. In other areas the EU has proved successful, for example, in the development of the global system for mobile communications (GSM). To a degree, such developments show how infrastructure provision is responding to the need to establish the CIA. However, the Telematics programme suffered a setback when the Council refused to fund a network between administrations because they were not convinced of its need. Additionally, across the EU, islands of broadband networks are emerging which, it is hoped, will be interlinked to form a TEN in advanced communications. If all goes well, the end point of these advances will be a network of networks covering a wide range of uses and formats. These networks would be at the heart of the much-vaunted 'Information Highway' that is central to the socioeconomic changes predicted. So far there has been a limited amount of commercial involvement in the development of advanced infrastructures. Most of this has come from the public telephone operators who have often formed alliances, of both a horizontal and a vertical nature, to offer advanced services to the lucrative corporate market. Most of the old monopolists have been given greater commercial freedom to enable them to invest in advanced infrastructures without stretching tight public finances. After this initial investment the key issue is how to encourage the rolling out of these networks into the broader populace. It is expected that these broadband networks will expand from the corporate sector into the professional market and thereafter into the mass market. However, such a scenario appears distant. A number of broadband networks are emerging, especially within the cable television sector, but regulatory constraints in many member states are preventing the emergence of these into multimedia networks. To complement the development of the Information Highway, the EU has, within the Fourth Framework Programme for Research and Development, earmarked nearly a third of its available funds for the enhancement of the ICT sector (see Table 3). The programme has concentrated upon developing applications which, it is hoped, will provide the basis for an enhanced infrastructure. Thus policy has focused on three main areas. The first is the Telematics programme, in which research will be geared towards the attainment of other common policies and to the needs of users. The second is the Advanced Communication Programme, linked to the RACE initiative, which is geared towards the establishment of an integrated digital broadband
505
Trans-European networks and the Common Information Area: C Turner
network within the EU, ultimately offering multimedia services. Finally, the EU proposes to devote funds to particular information technology projects aiming specifically to develop usable, correct and reliable software. It is important, if these programmes are to be a success, that they should as far as possible be coordinated so that any interrelationships and synergetic effects are exploited. Both the TENs and the respective R&D initiatives are important policies in aiding the free flow of information around the EU. However, if they are to attain their longer-term objectives, these policies have to be set in the context of a broader, potent, political initiative. This is the importance of the Bangemann group. The Bangemann Report puts flesh on the bones of the strategy to attain the CIA, and the Information Society thereafter. One of its principal points is that there is no need for an active sectoral policy since the private sector, in new forms of partnership with the public sector, could develop the necessary networks. The most effective role for the EU is to establish stable political and economic conditions within which this investment can occur. There is a limited proactive role for the supranational institutions in seeking to address possible areas of market failure, but these are minor compared with the function the private sector will play in network development. What is needed, the report concludes, is more competition, not less, as cheap services will encourage the development and use of innovative applications which will feed through into advanced network development. Indeed the report prioritizes 10 applications which are aimed at personal and business uses. To aid the development of the broadband networks the report advocates the establishment of a European broadband working party that will develop a common vision and perspective on the evolution of these advanced networks. Overall the report's main perspective is that measures have to be in place to ensure that the EU has a coherent and comprehensive network of networks which will be accessible to the majority of Europeans. One of the key points it stresses is that in the telecommunication sector the biggest barrier to the development of the Information Society is neither technical nor financial but a 'psychological' one of inducing people to accept how important these ICTs are to the EU economy. Once this has been achieved there will exist the basis for the establishment of a successful application of ICTs to many aspects of human life. It is hoped that this will support a successful indigenous ICT industry. The process of global competition should persuade enterprises of its benefits, and the adoption of ICTs is unlikely to prove a problem to future generations. Therefore the major issue for the future will be to ensure that networks evolve as technology changes. Over the longer term any strategy has to reflect this concern. One of the more controversial recommendations of the Bangemann Report was the establishment of a single, overarching regulatory authority to oversee the development and management of the CIA. The founding of such a body seems logical in that a single set of networks would require a single regulator. The role of such an authority would be to aid standardization, to regulate the activities of enterprises within the sector and generally to form a global perspective on the needs of the CIA. Developing the networks for the CIA clearly requires a regulatory and institutional structure that treats the network in a unified and harmonized fashion. In the past, different and fragmented systems of
506
Trans-European networks and the Common Information Area: C Turner
regulation have impeded the emergence of the necessary networks. If such fragmentation were to persist, the CIA could emerge in an uneven and incompatible fashion. One of the problems of the telecommunication sector is the large number of institutions and organizations that have an influence over its development. To some extent the development of a single body to handle these issues should overcome this problem. The effective power of such a body is a matter for debate, but even without strong powers it could achieve a degree of legitimacy among the major actors in the sector if there were prominent industrial and political figures among its membership. An E U equivalent of the US Federal Communications Commission could emerge. However, some m e m b e r states would be loath to establish such a strong supranational body. Ultimately the form and nature of the institutional arrangements surrounding the development of the CIA are a matter for the member states. It is evident from the nature of institutional relations exhibited within the sector that member states differ on their priorities in the management of telecommunications. Only once a unified approach has been attained will the institutional structures be put into place to aid the commercial development of a set of interoperable and interconnected networks. It is clear - and this is something which has to be addressed that before the moves towards the CIA can take on a momentum of their own there has to be greater degree of political and economic commitment by m e m b e r states to it. In the light of the initial conclusions of the Bangemann group, the Commission has developed an action plan which embraces many of the points raised in the initial document. It is apparent that this action plan is not a plan for action but merely a series of complementary measures to ensure that the desired transformation and adjustment occurs. Over the initial period the primary preoccupation will be with establishing the right legal and regulatory environment that will complement the market-led provision of the CIA. The action plan includes a timetable for the attainment of a number of objectives contained within it. It is likely that in 1995 a large number of proposals will come forward to initiate the development of the CIA more fully.
Conclusion Any strategy for the attainment of the CIA has to concentrate on aiding the market-based provision of the necessary applications and networks, and overcoming areas of perceived market failure. To this end, a strategy for the development of these high-powered telecommunications networks is emerging at both the national and supranational levels. The need for a strategy to develop these networks in a coordinated fashion is apparent if new divergences are not to emerge. The first function of any strategy is to ensure the uniform treatment of enterprises throughout the sector. This must be complemented by a number of specific initiatives aimed at developing the necessary applications and infrastructures for the CIA. However, the level of funding the E U has at its disposal prevents it from being more active in developing a strategy for their evolution. Such initiatives as it can undertake are aimed at enticing the private sector to become involved in the development of these programmes. Thus the EU's strategy is to act as a complement to the market; its activities are geared to pushing the private sector in the
507
Trans-European networks and the Common Information Area: C Turner
desired direction of developing integrated, coherent and comprehensive networks. Ultimately the success of the strategy will depend on the size and nature of market failures. So far policy directed towards the development of the CIA has tended to develop in an ad hoc and piecemeal fashion. This is probably due to the number of different institutions involved within the sector. Differing priorities between these institutions both at, and between, the national and supranational levels impede the formation of a coordinated and overarching strategy. In such circumstances, and given the importance of the issue, the idea of developing a single institution to oversee the development of the CIA has a lot to commend it. By providing a global perspective on the needs of the sector it can ensure that a unified strategy is formed. While some member states may move faster towards the provision of advanced networks than others, this body could ensure that the development of the CIA is not thereby endangered. In addition, it could act as a forum for research into ICTs and could promote awareness of these new technologies across a broader spectrum of the population. Even if it did get the blessing of the member states, the establishment of such an institution would be no panacea for the problems of attaining the CIA; nevertheless it could provide an important fulcrum for its market-based provision. The ability to maintain a stable regulatory environment within the context of rapid technological, economic and social change would be perhaps its greatest contribution. In such a stable environment the market-based provision of trans-European networks can occur and the economic transformation of the E U can take off.
508
Telecommunications Policy, Vol. 19, No. 6, pp. 501-508, 1995
0308-5961(95)00015-1
Copyright © 1995 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0308-5961/95 $10.00 + 0.00
Trans-European networks and the Common Information Area The development of a European strategy
Colin Turner
The EU has set out to introduce information and communication technologies into all areas of the socioeconomic structure. Initially, however, a Common Information Area (ClA) needs to be established to ensure that information and communication are freely mobile throughout the economic and social space. To this end the EU needs to develop a strategy to ensure that a series of high-powered telecommunication networks emerge in an integrated and coordinated fashion. While several initiatives to assist the market-based provision of the CIA have been estabIished, there seems to be an absence of an overarching coordinsted strategy to aid its development. A single body to oversee the EU telecommunication sector may need to be established. The author may be contacted at the School
of Economics, University of Humberside, Cottingham Road, Kingston upon Hull, HU6 7RT, UK (Tel: +44 1482 440550; fax; +44 1482 448750). 1See the initial report of the Bangemann Group, Europe and the Global Information Society (June 1994).
Increasingly competitiveness relies, within the global economy, upon the ability to use information and communication, and the associated technologies, in an effective and efficient manner. Information and communication technologies (ICTs) assist the mobility of factors of production and thus aid the efficient allocation of resources upon which the competitiveness of an economy relies. In response to these changes, the E U has launched a programme to aid the development of the Information Society. ICTs are to become infused within most, if not all, economic and social structures. However, before these grand longer-term objectives can be met the E U needs initially to establish an effective telecommunications network that is able to deal with the vast increases in traffic that are likely to result from these socioeconomic changes. The aim is to establish a C o m m o n Information Area (CIA) where information and communication flows are freely mobile around the economic space within a single set of interconnected and interoperable networks. It is vital to ensure that all factor markets have access to these information and communication resources if the development of the CIA is to aid the competitiveness of the E U into the 21st century. Following adoption of the White Paper on Growth, Competitiveness and Employment, the E U Council mandated the Bangemann group (see later) to investigate the means via which the network requirements of the Information Society could be met, as far as possible, by the market. 1
501
Trans-European networks and the Common Information Area: C Turner
While these advanced networks are emerging across the EU, different member states are tending to develop them independently. This raises the spectre of new networks developing in an incompatible fashion, thus endangering the achievement of the CIA. In such a scenario there is a role for the EU to play in both aiding market provision and addressing areas of perceptible market failure. Thus the success of the EU strategy to attain the CIA rests upon, first, establishing a legal and regulatory environment that encourages the CIA to emerge from the market and, second, ensuring that the necessary applications and networks which underpin the CIA develop in a coherent and integrated fashion.
Priorities for the CIA As mentioned, at the heart of the CIA is a set of EU-wide telecommunications networks supporting flows of information and communication throughout the area. If these networks are to prove to be the anticipated powerful aid to the reorganization of the EU's society and economy then they must develop in an integrated and coherent fashion so as to promote the diffusion of information as broadly as possible across the economic space. At its simplest level, this objective requires that the raw material - information - must be in digital format and that the basic physical infrastructure and services are in place. These basic objectives need to be complemented by, first, the development of technical equipment (hardware, software and components), second, applications that facilitate the efficient and effective use of information and communication and, third, by promoting an awareness of, and training in, ICTs. It is from this base that the CIA may develop most comprehensively, as technology is developed and diffused throughout the economic space, common applications are produced, legal and regulatory hurdles are overcome, basic services are established and the skills in making use of ICTs broaden. In short, the notion of the Information Society extends beyond the development of the network. A viable strategy must ensure that these networks, and the services they offer, are used in the manner most conducive to aiding the competitiveness of the EU. Clearly there is no point in developing the networks if the applications provided are not used. It is only by extending the use of ICTs, via the network, that the EU's economy will perceptibly benefit. The desire for the CIA to emerge via the market is symptomatic of a number of key issues. It is believed that the market has greater scope than the public sector to develop the necessary innovative applications and services. Additionally, it is believed that competition within the sector will lower tariffs and encourage broader access to these services and thus aid the diffusion of ICTs. In more practical terms, the market-based approach is a feature of the redefinition of the role of the state in an era where the public sector cannot afford the required investment. The basis of the EU's strategy is an applications-based approach to network development in which developing applications, and thereafter services, creates via the market the necessary inducement to develop infrastructures. However, such a policy must go hand in hand with an educative policy to create the need for these marketable services. It is hoped that, from the base provided by the CIA, indigenous firms will be able to establish a successful global presence in the ICT market.
502
Trans-European networks and the Common Information Area: C Turner Table 1. Trans-European telecommunlcatlons networks. Information highways
Target area for strategic projects
Investment required (ECU billion)
Interconnected advanced networks
Establishment of high-speed communication network Consolidation of ISDN
20 15
General electronic services
Electronic access to information Electronic mail Electronic images: interactive video services
1 1 10
Telematic applications
Teleworking Links between administrations Teletraining Telemedicine
3 7 3 7 67
Total Source: EU.
Table 2. EU financing of telecommunications networks. Inveatment(ECU million) 1994 1995 1996 1997 1998 1999
14 20 55 70 110 155
T~al
422
Source: EU.
In this sector cooperation between enterprises, at least over the short term, is frequently seen as a desirable way of facilitating economies of scale in R&D, lowering the cost of access to networks on a broader scale and fostering network interoperability at a very early stage of development. Such benefits might enable indigenous companies to establish a cost advantage in the domestic market and thereby enter the global arena on a similar scale to their major competitors. However, while cooperation is desirable, it has to be taken within the context of the need to maintain effective competition in the EU telecommunications market. Therefore effective limits upon the scope and form of cooperation need to be established alongside an appropriate definition of the relevant market. 2 Thus the CIA is about developing the necessary high-powered telecommunications networks and associated applications and services that would underpin the move to the Information Society. It appears unlikely that the market would provide all the necessary networks and applications to aid the development of the CIA. Therefore, in cases of market failure, the need for a strategy to assist market-based provision of these networks emerges.
Financing the C I A
2For full details on how the Commission intends to manage this apparent conflict see 'Guidelines on the Application of EEC Competition Rules in the Telecommunications Sector' OJ C 233 (6 September 1991).
As mentioned above, the development of the CIA is to be a largely market-led process, with the commercial sector taking a primary role. However, the public authorities have a function too. The strategy of the EU should seek to narrow the perceived divergence between public and private interest in the development of these infrastructures. Thus the major financing issue for the EU is how to encourage commercial economic operators to become involved in developing the necessary networks which support the broad establishment of the CIA. In the White Paper the EU estimated - and this is a conservative estimate - that the cost of network provision to ensure the proper functioning of the CIA would be ECU 150 billion up to the turn of the century, including ECU 67 billion for the priority projects outlined in Table 1. The EU clearly does not have this level of resources. Those that it does possess (see Table 2) have been devoted to smoothing the path for private finance by, for example, offering money for feasibility studies, largely as part of the trans-European networks (TENs) initiative. However, the commercial sector has already been contributing large sums to the development of these networks and is planning to commit 503
Trans-European networks and the Common Information Area: C Turner
more funds in the future. The success of the EU's strategy depends upon it being able to relieve possible market failures, first by ensuring that developments are in line with the overall strategy and conceptual framework for the development of TENs, and second, by guaranteeing that these infrastructures develop in a comprehensive and coherent fashion. To achieve these objectives, the EU has prioritized certain networks and applications (see Table 1) that are arguably central to the development of the Information Society such as telematic applications, general electronic services and interconnected advanced networks. EU initiatives, and therefore funding, have tended to be directed towards these priority projects. This is complemented by the development of a number of incentives to the commercial sector to develop projects, especially priority schemes, of uncertain economic viability. Currently the EU has either developed, or is proposing to develop, several initiatives such as the declaration of European interest. This will be aided by initiating a separate line for TENs within the budget, supported by the use of existing monies, for example from the structural and cohesion funds, that are specifically earmarked for projects linked to TENs. However, such financial incentives provide a mere fraction of the level of funding required and are likely only to cover the initial costs of project development. These actions must be complemented by a third factor - education. Educative activities are central to the development of the Information Society in promoting the diffusion and broad appreciation of the need for ICTs among the general populace. They could stimulate sufficient demand to justify the investment by the private sector in developing these networks and, additionally, assist indigenous ICT firms to establish a global presence. Arguably, the definitive role for the EU, within the framework of the open and competitive markets under which these infrastructures are expected to emerge, is to ensure that the environment is suitable to encourage private sector investment. The experience of service and equipment liberalization has been to entice investment by the commercial sector in these areas of the telecommunications market. The EU now intends to extend this process to the provision of infrastructure itself, 3 hopefully with the same results. This should feed through to a greater level of investment by the private sector in the advanced infrastructures, notably broadband, which underpin the development of the CIA. It is believed that greater competition in infrastructure provision leads to lower costs of access to these advanced networks, greater innovation and the alleviation of bottlenecks. Given the rather parlous financial situation of member states, leaving these necessary investments in infrastructure to state-owned monopolies could result in a fundamental underinvestment in these network enhancements. Thus the provision and ownership of infrastructure have to broadened.
Progress so far 3See Green Paper on the Liberalization of Telecommunications Infrastructure and Cable Television Networks Communication to the Council and the European Parliament, Part One: Principle and Timetable.
504
Progress towards the establishment of the CIA would tend to happen in a rather piecemeal fashion without some form of overarching strategy and rationale. So far progress towards the CIA, based upon the themes developed in the White Paper, has centred upon the need for the EU economy to establish an effective 'nervous system'; to this end the EU
Trans-European networks and the Common Information Area: C Turner Table 3. Fourth Framework Programme for Research and Technological Development (1994-98): funds for information and communications technology (ECU '000).
Telematics Advancedcommunicationstechnology Informationtechnology Total
843 630 1932 3405
Source: EU.
4See for example Rietbroek 'EC initiatives on trans-European networks' Information Economics and Policy 1993 5 (4).
has established several priority projects (see Table 1). The plan now is to put these ideas into action. This was, in essence, the function of the TENs initiative and, more latterly, the Bangemann Report. It has been noted elsewhere 4 that most of the priority networks within this sector are slowly emerging. It is entirely feasible that, with EU political and (albeit limited) economic support, these TENs could emerge in a comprehensive fashion. At the moment they are either evolving (ISDN) or are at the feasibility study stage (broadband and telematic networks). ISDN is now prevalent in most member states, with only Greece and Portugal not having the network available commercially. The issue is to extend the range and scope of services, giving the network more complete coverage. It is hoped that out of the development of ISDN at the national level a common standardized Euro-ISDN network will emerge. However, its full development has hit problems of access cost, a lack of awareness on the part of potential users and difficulties in developing more advanced networks. In other areas the EU has proved successful, for example, in the development of the global system for mobile communications (GSM). To a degree, such developments show how infrastructure provision is responding to the need to establish the CIA. However, the Telematics programme suffered a setback when the Council refused to fund a network between administrations because they were not convinced of its need. Additionally, across the EU, islands of broadband networks are emerging which, it is hoped, will be interlinked to form a TEN in advanced communications. If all goes well, the end point of these advances will be a network of networks covering a wide range of uses and formats. These networks would be at the heart of the much-vaunted 'Information Highway' that is central to the socioeconomic changes predicted. So far there has been a limited amount of commercial involvement in the development of advanced infrastructures. Most of this has come from the public telephone operators who have often formed alliances, of both a horizontal and a vertical nature, to offer advanced services to the lucrative corporate market. Most of the old monopolists have been given greater commercial freedom to enable them to invest in advanced infrastructures without stretching tight public finances. After this initial investment the key issue is how to encourage the rolling out of these networks into the broader populace. It is expected that these broadband networks will expand from the corporate sector into the professional market and thereafter into the mass market. However, such a scenario appears distant. A number of broadband networks are emerging, especially within the cable television sector, but regulatory constraints in many member states are preventing the emergence of these into multimedia networks. To complement the development of the Information Highway, the EU has, within the Fourth Framework Programme for Research and Development, earmarked nearly a third of its available funds for the enhancement of the ICT sector (see Table 3). The programme has concentrated upon developing applications which, it is hoped, will provide the basis for an enhanced infrastructure. Thus policy has focused on three main areas. The first is the Telematics programme, in which research will be geared towards the attainment of other common policies and to the needs of users. The second is the Advanced Communication Programme, linked to the RACE initiative, which is geared towards the establishment of an integrated digital broadband
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network within the EU, ultimately offering multimedia services. Finally, the EU proposes to devote funds to particular information technology projects aiming specifically to develop usable, correct and reliable software. It is important, if these programmes are to be a success, that they should as far as possible be coordinated so that any interrelationships and synergetic effects are exploited. Both the TENs and the respective R&D initiatives are important policies in aiding the free flow of information around the EU. However, if they are to attain their longer-term objectives, these policies have to be set in the context of a broader, potent, political initiative. This is the importance of the Bangemann group. The Bangemann Report puts flesh on the bones of the strategy to attain the CIA, and the Information Society thereafter. One of its principal points is that there is no need for an active sectoral policy since the private sector, in new forms of partnership with the public sector, could develop the necessary networks. The most effective role for the EU is to establish stable political and economic conditions within which this investment can occur. There is a limited proactive role for the supranational institutions in seeking to address possible areas of market failure, but these are minor compared with the function the private sector will play in network development. What is needed, the report concludes, is more competition, not less, as cheap services will encourage the development and use of innovative applications which will feed through into advanced network development. Indeed the report prioritizes 10 applications which are aimed at personal and business uses. To aid the development of the broadband networks the report advocates the establishment of a European broadband working party that will develop a common vision and perspective on the evolution of these advanced networks. Overall the report's main perspective is that measures have to be in place to ensure that the EU has a coherent and comprehensive network of networks which will be accessible to the majority of Europeans. One of the key points it stresses is that in the telecommunication sector the biggest barrier to the development of the Information Society is neither technical nor financial but a 'psychological' one of inducing people to accept how important these ICTs are to the EU economy. Once this has been achieved there will exist the basis for the establishment of a successful application of ICTs to many aspects of human life. It is hoped that this will support a successful indigenous ICT industry. The process of global competition should persuade enterprises of its benefits, and the adoption of ICTs is unlikely to prove a problem to future generations. Therefore the major issue for the future will be to ensure that networks evolve as technology changes. Over the longer term any strategy has to reflect this concern. One of the more controversial recommendations of the Bangemann Report was the establishment of a single, overarching regulatory authority to oversee the development and management of the CIA. The founding of such a body seems logical in that a single set of networks would require a single regulator. The role of such an authority would be to aid standardization, to regulate the activities of enterprises within the sector and generally to form a global perspective on the needs of the CIA. Developing the networks for the CIA clearly requires a regulatory and institutional structure that treats the network in a unified and harmonized fashion. In the past, different and fragmented systems of
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regulation have impeded the emergence of the necessary networks. If such fragmentation were to persist, the CIA could emerge in an uneven and incompatible fashion. One of the problems of the telecommunication sector is the large number of institutions and organizations that have an influence over its development. To some extent the development of a single body to handle these issues should overcome this problem. The effective power of such a body is a matter for debate, but even without strong powers it could achieve a degree of legitimacy among the major actors in the sector if there were prominent industrial and political figures among its membership. An E U equivalent of the US Federal Communications Commission could emerge. However, some m e m b e r states would be loath to establish such a strong supranational body. Ultimately the form and nature of the institutional arrangements surrounding the development of the CIA are a matter for the member states. It is evident from the nature of institutional relations exhibited within the sector that member states differ on their priorities in the management of telecommunications. Only once a unified approach has been attained will the institutional structures be put into place to aid the commercial development of a set of interoperable and interconnected networks. It is clear - and this is something which has to be addressed that before the moves towards the CIA can take on a momentum of their own there has to be greater degree of political and economic commitment by m e m b e r states to it. In the light of the initial conclusions of the Bangemann group, the Commission has developed an action plan which embraces many of the points raised in the initial document. It is apparent that this action plan is not a plan for action but merely a series of complementary measures to ensure that the desired transformation and adjustment occurs. Over the initial period the primary preoccupation will be with establishing the right legal and regulatory environment that will complement the market-led provision of the CIA. The action plan includes a timetable for the attainment of a number of objectives contained within it. It is likely that in 1995 a large number of proposals will come forward to initiate the development of the CIA more fully.
Conclusion Any strategy for the attainment of the CIA has to concentrate on aiding the market-based provision of the necessary applications and networks, and overcoming areas of perceived market failure. To this end, a strategy for the development of these high-powered telecommunications networks is emerging at both the national and supranational levels. The need for a strategy to develop these networks in a coordinated fashion is apparent if new divergences are not to emerge. The first function of any strategy is to ensure the uniform treatment of enterprises throughout the sector. This must be complemented by a number of specific initiatives aimed at developing the necessary applications and infrastructures for the CIA. However, the level of funding the E U has at its disposal prevents it from being more active in developing a strategy for their evolution. Such initiatives as it can undertake are aimed at enticing the private sector to become involved in the development of these programmes. Thus the EU's strategy is to act as a complement to the market; its activities are geared to pushing the private sector in the
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desired direction of developing integrated, coherent and comprehensive networks. Ultimately the success of the strategy will depend on the size and nature of market failures. So far policy directed towards the development of the CIA has tended to develop in an ad hoc and piecemeal fashion. This is probably due to the number of different institutions involved within the sector. Differing priorities between these institutions both at, and between, the national and supranational levels impede the formation of a coordinated and overarching strategy. In such circumstances, and given the importance of the issue, the idea of developing a single institution to oversee the development of the CIA has a lot to commend it. By providing a global perspective on the needs of the sector it can ensure that a unified strategy is formed. While some member states may move faster towards the provision of advanced networks than others, this body could ensure that the development of the CIA is not thereby endangered. In addition, it could act as a forum for research into ICTs and could promote awareness of these new technologies across a broader spectrum of the population. Even if it did get the blessing of the member states, the establishment of such an institution would be no panacea for the problems of attaining the CIA; nevertheless it could provide an important fulcrum for its market-based provision. The ability to maintain a stable regulatory environment within the context of rapid technological, economic and social change would be perhaps its greatest contribution. In such a stable environment the market-based provision of trans-European networks can occur and the economic transformation of the E U can take off.
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