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Viviane Reding - Member of the European Commission, responsible for Information Society and Media

For many years, experts from all over the world talked about the digital convergence of communication networks, media content and devices. Today, we see that technological convergence actually happening.

Traditionally separate markets – such as telephony, internet and television – are changing fast and converging while market players quickly have to adjust their strategies to this new reality. This is, for example, why telecoms and cable operators are moving into each other’s markets.

The European Commission’s initiative i2010: European Information Society 2010 is a comprehensive strategy for modernising EU policy and deploying regulatory instruments to encourage the development of the digital economy. As the European Commissioner responsible for Information Society and Media, it is my task to ensure that an appropriate framework for the digital economy and for investment in ICT is in place. In practice, this means two things: creating an open and competitive single market for information society and media services within the EU, and creating the right regulatory environment for business and citizens. This is essential for delivering sustained growth and skilled jobs in Europe.

Today’s regulatory framework for electronic communications builds on principles of competition law and technology neutrality. It takes account of the convergence of telecommunications, data transmission and broadcasting services, by dealing with all communications networks and services (fixed, mobile, satellite, broadcasting and so forth) in a consistent way. The relevant Directives are a balanced and well-considered attempt to provide a coherent framework for the delivery of different services which traditionally have been subject to different regulatory regimes. However, it needs attention in a number of areas to remain effective for the coming decade.

Regulation fit for the future

In June 2006, the Commission launched a public consultation on the review of the rules that govern electronic communications. The revised framework could enter into force around 2009-2010.

Therefore, the timing of this book seems to be just right, providing food for thought for possible improvements to the regulatory processes and contributing to the policy debate. The forward-looking focus – which includes trends and challenges for the ICT sector going beyond 2010 – fits well with that of the Commission’s review, which aims at ensuring that the framework remains valid for that timeframe also. So many changes in technology, markets and consumer expectations will have occurred by then – a century of the ICT industry! – that there will be a need for comprehensive reflection on possible evolutions and scenarios from a diverse set of authors.

Globalisation raises challenges and new opportunities to all economies, whether for industrialised or developing countries. The revamped Lisbon strategy aims to make the European economy more flexible so that it is better prepared for such challenges.

On the one hand, technology has contributed to globalisation par excellence by shortening distances and reducing the cost-of-use of most information society services. On the other, we should be aware of the positive impact of technologies, products and services developed by the ICT industry for the rest of the economy. These technologies have largely contributed to the growth of productivity of the European economy.

Technology has especially changed some key parameters of the e-communication industry. Digital convergence has brought together the world of audio, video, data and voice communications, changing forever the distinction between the different types of services. Borders have become increasingly artificial and, thanks to the internet, certain services are accessible from any place in the world.

The next generation of upgraded networks (the so-called NGNs) are likely to be based on the IP protocol, leaving the historic differences between different network infrastructures far behind. We may find that this ultimately has significant effects on business models: in particular, that the services consumers receive over communications networks will be offered separately from the connection to the network. This is likely to have a significant impact on the traditional vertically-integrated structure that has characterised telecoms incumbents since their creation. The price of voice calls is likely to decrease towards zero, as is already the case for some PC-to-PC calls.

Against this background, policy makers, regulators, legislators and market players can no longer confine themselves to narrow and sectorspecific approaches. Convergence requires new ways of coping with this reality. The EU regulatory framework of 2002 already responds to such challenges by relying on two main: technological neutrality and a market–based approach to economic regulation.

Regulation that is based on specific technology, or which is unrelated to market dynamics, is destined to become quickly outdated. In contrast, the principle of technological neutrality delivers coherent regulation of all the services provided over such networks whatever the communication network used for its delivery. Regulation aimed at promoting a specific sector, company or technology can introduce significant distortion in the markets, leading to inefficient investment by market players and an uneven playing field for those players.

This will only dampen the interest of innovators and entrepreneurs to invest in Europe. Technological neutrality and a marketbased approach to regulation mean that we devote the right resources to the objectives of regulation (promotion of innovation, fostering competition and protecting consumers) while making Europe an attractive place for investment and innovation.

But what does a good regulator look like?

Regulation requires regulators. From an institutional point of view, the question is whether a ‘converged’ regulator is the most suitable model for dealing with future challenges? Member States have followed different approaches: in some, (e.g. Italy and Finland) the same regulator is responsible for regulating both content and transmission services. In the UK, Ofcom is the independent regulator and competition authority for the communications industries, with responsibilities across television, radio, telecommunications and wireless communications services.

Under existing European law, the scope of activity of national regulators is part of the institutional autonomy of Member States; it is not dealt with by Community policy. Moreover, regulation of infrastructure (i.e. the EU regulatory framework for e-communications networks and services) is separate from the regulation of broadcasting content (i.e. the TV Without Frontiers Directive) as they respond to different policy objectives. These frameworks will continue to remain separate in the near future, though the two sets of rules will have to be consistent as digitalisation and technological progress go on.

One point I often stress – and bear this in mind when we design and implement policies – is that technology is not about a better ‘lifestyle’; rather, it is about a better life for everyone through better services for consumers and citizens and new opportunities for growth and jobs. This is the thinking that has guided the i2010 initiative for a European information society.

For consumers, convergence means the possibility of accessing the same services and content (email, music, television) using different terminals over different types of networks. In a convergent world, consumers will be in control of their entertainment and media content.

Here, Europe has great potential as regards the development of innovative services (e.g. mobile TV) and the provision of diverse offerings of content, including content production. The global marketplace of the internet creates new economics which allow content producers to address even very specialised niche demands. This means new offers and choice for consumers – wherever they are in the world – as long as these products are accessible. Current proposals in the area of spectrum are aimed at facilitating the development of innovative products and wireless services.

Competition: the catalyst

Effective competition in the markets benefits consumers in terms of increased choice and lower prices. The framework provides a basis both to control the exercise of significant market power and the means to allow national regulators to take steps to allow self-sustaining competition to emerge. As markets become effectively competitive, the framework provides that sector-specific regulation will be removed. Thereafter, competitive markets will be subject only to competition law and consumer protection regulation. As market dynamics are difficult to predict (notably in the long-term), the EU model of regulation based on market analysis is more sustainable than pre-fixing a date for the phasing out of ex ante regulation.

One question is often asked: to what extent does the framework incite or inhibit strong and sustainable competition and investment? Undoubtedly, investments can flourish in a variety of situations and it is difficult to isolate the impact on investment of such a specific factor as the framework. Many factors have a positive influence on investment (e.g. the level of GDP per capita, population density, size of the company, and so on).

However, the available evidence suggests that competition remains its main driving force and that the countries that have applied the EU regulatory framework in an effective and pro-competitive manner have attracted more investment. For example, the highest penetration of broadband rates are seen where there is facility-based competition, with head to- head competition between cable and telephone networks.

Some argue that we need a regulatory forbearance to encourage investment in new network infrastructure. But in my view there is no evidence to show that ‘regulatory holidays’ would generate more investment than competition. We have to be clear on this point: regulation should promote competition, and should not favour monopolies. Investment in new and competing infrastructure will accelerate the day when transitional access obligations can be further relaxed – or even removed.

Efficient spectrum management is key to the European ICT industry. We have started to implement a new strategy within the 2006 review of the electronic communications framework. Flexibility can facilitate the use of spectrum by a multiple number of wireless technologies, greatly reducing inefficiency and, therefore, spectrum scarcity. Greater flexibility in the use of spectrum will release the economic potential of this resource, stimulate the development of innovative products and increase competition in services and technologies. This in turn will improve our overall macro-economic competitiveness, will create jobs and increase the range of services available to citizens.

The Commission’s plan includes giving spectrum users more flexibility in deciding how to use radio resources. Firstly, this would be achieved by strengthening the use of unlicensed spectrum. Secondly, owners of spectrum usage rights would be enabled to apply the principles of technology and service neutrality where possible. Thirdly, using criteria based on economic efficiency, selected bands agreed at EU level could be subject to secondary trading across the EU as one way to facilitate access to spectrum. Fourthly, in specific cases to be agreed at EU level, undertakings who develop services with a wider reach than a single country should be able to obtain a single common authorisation, or be granted the right of use for frequencies enabling them to provide services on a European basis.

Putting the new course in place will require the collaboration of the Council and the European Parliament at first, and of all stakeholders in general. We need to put together all the tools and instruments available to the EU and the Member States to promote and accelerate a favourable development of the communications and media industries. In the meantime, I am confident that this book will be a very useful resource for all those concerned with policy in the field of electronic communications and media and will facilitate stakeholders to better understand the challenges faced by the actors of the ICT industry – whether independent regulators, ministries, undertakings, content and media companies, or citizens.

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