“Convergence of Information and

Communications Technologies: Devising an

Effective Policy for the European Union”

by Seamus Simpson.

Department of Information and Communications, Manchester

Metropolitan University, UK.

Paper presented at the European Consortium for Political Research

(ECPR) Workshop, “Regulating Communications in the Multimedia

Age”, ECPR Joint Sessions of Workshops, Mannheim, 26th-31st

March 1999.

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Abstract.

The topic of ICT convergence is now of primary interest to policy-makers in industry

and government at the national and international level, as well as the academic

community. At the European Union level, the European Commission has published a

policy Green Paper on convergence, proceeded by a consultation process which ended

in April 1998. As a result, the EU is aiming to devise and begin to implement a policy

on convergence. This paper argues that in recent years - in the context of arguments

propounding the value of creating an Information Society - much enthusiasm has

surrounded ICT convergence. In many respects, it is viewed as both a technological

and economic inevitability, especially in an era of inexorable globalisation of the ICT

economy. In the context of devising a European Union ICT policy, this is a rather

simplistic perspective, largely propagated by players in the ICT industry for self-

interest’s sake and, most importantly, ignoring the different regulatory traditions and

social factors which have shaped, and are likely to be relevant in, any would-be

converged sector’s constituent parts. It is argued that the Commission’s Green Paper

on convergence largely embraces a pro-industry agenda and in many ways pays lip-

service to public interest considerations. In particular, its apparent enthusiasm for

establishing a new regulatory order for a converged ICT sector reflects the preferences

of those parts of the Commission recently successful in liberalising and re-regulating

telecommunications at EU level. However, the post-Green Paper consultation exercise

strongly suggests that there are many differing interests in ICT convergence and that

the slow track, rather than the fast, is likely to be the approach chosen by member

states, in the short-term at least.

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Introduction.

Until recently, the sectors of broadcasting, Information Technology (IT), publishing

and telecommunications were largely separate with their own highly specific

characteristics in terms of technology (and technological change), commerce and

regulation. However, over the course of the last 30-40 years each of these sectors has

undergone considerable transformation, a prominent feature of which is that they have

come closer together in number of ways. So significant has this process been, that it

is now commonplace to speak of a new hybrid sector - Information and

Communications Technologies (ICTs). ICT convergence has been defined as an

ongoing process, involving the coming together of information distribution

infrastructures; interactive information storage and processing capabilities; and

widespread availability of consumer electronics products, publishing and IT content

(KPMG 1996, p87)1 .

Evidence suggests that such convergence is occurring in technological, commercial

and regulatory contexts, a complex process, which is unevenly distributed across

countries and regions. The first seeds of ICT convergence were technological, serving

as opportunities for commercial players involved in the broadcasting, IT and

telecommunications in particular, to create new markets offering customers a plethora

of services embodying various combinations of voice, data, text and video. The

nature and quality of service provided is an evolving one - firms are on a learning

curve, the ultimate aim of which is to provide a wide range of customers, both

business and private, with high speed, sophisticated, interactive facilities which can

be selectively chosen and paid for by electronic means. One of the first practical

examples was the coming together of certain technical elements of IT and

telecommunications, which manifested itself in the digitisation of

telecommunications switching and the application of IT to telecommunications

terminal equipment. According to Taylor (1997), “digital technology has made it

possible to convert text, sound, graphics and moving images into coded digital

messages which can be combined, stored, manipulated and transmitted quickly,

efficiently and in large volumes over wired and wireless networks without loss of

quality” (p1). Such technological convergence provided an opportunity for companies

from both sides of the telecommunications/IT fence to capitalise on the creation of

new products (e.g. digital switches) and services (Value Added Network Services).

Another development which, because of its large bandwidth, facilitated early

convergence was fibre optic technology. Early evidence of embryonic convergence

between broadcasting and telecommunications was the use of copper coaxial (and

later fibre optic) cable for the delivery of TV pictures. One consequence of this was

that players from each industry saw the possibility of moving into each other’s

commercial territory. For example, telecommunications operators have become

interested in providing TV services and vice versa for cable TV companies,

particularly commercially lucrative VANS. However, in terms of inter-sectoral

coalescence, the OECD (1990) argued that “Whereas the marriage between

telecommunications and computer technology now seems to have been consummated,

the convergence between telecommunications and broadcasting is still in the planning

stage” (cited in Joseph 1993, p1).

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Generally, new service possibilities created by convergent ICTs have created

considerable expectations of a brave new world, promising the availability of a

panorama of sophisticated, interactive and affordable services for all. As a

consequence, terms such as multimedia, Integrated Broadband Communications, the

Information Superhighway and the Information Society have become part of common

parlance. This has rightly been viewed as part industry and government-fueled hype in

many quarters. Some have even gone as far as to suggest that such terms may well be

a political myth allowing policy-makers to provide simplified solutions to highly

complex problems (Joseph 1997)2 . Nonetheless, new services are being developed at

a considerable pace. Examples include home-banking and home-shopping over the

Internet; advanced mobile communications services and integrated television and on-

line services through the Internet (European Commission 1997, p11). Thus far, the

development of new ICT services is characterised more by technology push

(Schumpeter 1942) on the part of industry than market or demand pull (Schmookler

1966) on the part of consumers. However, there are indications from the USA that

time spent watching television is being replaced by usage of the Internet (KPMG

1996).

Defining Value Chains in a convergent ICT Environment.

The process of ICT convergence has been so far uneven in nature, and is likely to

continue as such. Attempts have been made to categorise this rather haphazard

evolution. According to Adstead and McGarvey (1997), primary convergence can be

defined as the coming together of various different parts of the consumer and business

ICT value chains (see fig 1)3 . Secondary convergence is described as the complete

fusion of IT, media and telecommunications to form a new convergent sector, whilst

tertiary convergence reflects the joining of the retail, travel and financial services

sectors with the parties which have created secondary convergence4.

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Fig 1.

--------------------------------------------------------------------------------------------------------

Constituents of new ICT Convergence Value Chains

--------------------------------------------------------------------------------------------------------

The Consumer Interactive Services Value Chain.

Content - video games, music, film, magazines and general information such as

education and news.

Services - customer care systems, on-line services and Internet access.

Access - all functions which allow the customer to connect to any interactive

service.

The Business Value Chain

Network - defines the infrastructure which links users to the access environment

and includes such functions as data communication service provision.

Access - Access refers to end-user hardware and software (includes browser

software)

Navigation - Internet navigation and content aggregation e.g. search engines,

Webcast news services

Content - information, communication, entertainment and commerce/transaction

VANS - Web consulting, systems integration and graphic design.

Adapted from Adstead and McGarvey (1997)

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The European Commission (1997) has suggested that various stages of convergence

may be defined (Fig 2), although this assumption that ICT convergence is something

of a chronological process, strongly suggests that it is viewed as inevitable, moving

inexorably forward from the technological through to the regulatory level. However,

as this paper will illustrate, the pattern of convergence’s evolution is much less certain

than this.

Fig 2. The Stages of ICT Convergence

Policy and Regulation

Services and Markets

Industry Alliances/Mergers

Technology and Network Platforms

Source: European Commission (1997 p2)

Corporate Maneuvering in a Convergent Marketplace.

In a commercial environment that is as yet largely unmapped, companies with

expertise in various aspects of ICTs are eagerly and expectantly awaiting the

opportunity to avail of new opportunities (Kehoe 1997) and there is evidence that

significant corporate reorganisation is taking place to facilitate this. For example,

telecommunications service providers are using their fixed-link networks to deliver

new services, such as Internet access (Nairn 1998). Cable and Wireless

Communications (UK) has bought the internet “backbone” business of US

telecommunications operator MCI. The latter rather unwillingly relinquished control

of this part of its activities to placate regulatory authorities which were considering

whether or not to give clearance to its proposed $37 bill takeover by Worldcom (Cane

1998b), itself a significant intra-sectoral consolidation. Telecommunications operators

are also attempting to acquire IT companies - examples include C&W’s purchase of

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Anite’s group’s networking division, GTE’s purchase of Bolt Beranek Newman and

Worldcom’s purchase of UUNet Pipex (Cane 1998a).

However, whilst converging ICTs hold opportunity, there are also risks attached to

entering such new commercial territory. Large telecommunications service

companies, because of their sound resource base, are well-placed to reach the mass

market in theory (Shillingford 1998), though there is evidence that creating and

maintaining a global size and presence is proving a challenge for even the largest

operators (Cane 1998a). As a consequence of convergence, significant competition is

predicted from Internet service providers, since increasing quantities of

telecommunications data and voice traffic will be delivered over networks using

Internet Protocols (IP), in a data communications market which is expected to reach a

value of $60 bill in 2001 from $8 bill in 1996. The ability to customise and tailor

services to a particular group of users will be crucial for ICT companies and, as a

result, several telecommunications companies have created specialist systems

integration companies e.g. Synchcordia (BT), Solutions (AT&T), Systemhouse (MCI)

and Paranet (Sprint) (Cane 1998a).

For media companies with expertise in the creation of content, the gradual removal of

spectrum scarcity has meant commercial opportunity to avail of growing demand for

content to fill network space from such quarters as Internet service providers,

telecommunications operators and broadcast network companies. There is evidence of

convergence with the IT sector whose expertise is essential for the production of

content in digital form. Conversely, whilst these companies are proficient in

commissioning and sometimes creating content, they are less experienced in dealing

with customers. Equally, because of the falling cost of content creation due to

digitisation, new competitors can set up quickly and cost effectively to compete with

established providers. The Internet may provide another source of competition for

broadcasting companies (Shillingford 1998). There is also some evidence of media

and telecommunications sectors converging, ( e.g. the British Interactive

Broadcasting consortium linked BT and BSkyB) as well as intra-sectoral activity,

notably the recently proposed merger between BSkyB and Canal Plus, which raises

considerable regulatory concerns (Gapper 1999).

The Shape of Regulation in a Converging ICT Environment - EU Policy on

Convergence.

The above activity has increasingly called into question the existing regulatory

arrangements governing each part of ICTs. A complex array of issues presents itself,

which has already exercised the minds of policy-makers and excited a considerable

degree of divergent viewpoints regarding future choices to be made. The OECD

(1997) has argued that, “Since it will become increasingly difficult to have technical

or practical separation between broadcasting or telecommunications markets, and

given the dynamics of the convergence of infrastructures and services, a review of the

existing regulations, and the maintenance of distinct administrative bodies and

procedures should be considered” (p50).

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Historically, the national telecommunications and broadcasting sectors of the EU have

been tightly regulated by governments. They have also been structurally

uncompetitive and, in most cases, nationally-owned and run. This structure was

justified in the case of telecommunications by the desire to achieve universal service

goals (Steinfield, Bauer and Caby 1994) and in broadcasting to fulfill a public service

remit aimed at protecting moral values, cultural traditions and pluralism (Humphreys

1996, Siune and Treusztler 1993). By contrast, the IT sector was relatively

unregulated but has been the subject of government intervention in the shape of both

significant public procurement, R&D initiatives and competition policy (Vernon

1974, Hills 1986, Gannon 1997).

The topic of ICT convergence and its regulatory implications has recently become the

focus of attention at EU level. In December 1997, the European Commission

published what may turn out to be a landmark Green Paper on the subject. This

marked the start of a discussion period in which a variety of interested parties from the

public and private sector submitted comments to the Commission on its proposals.

The launching of this kind of exercise has now become one of the Commission’s

favoured political tactics; most notably it was successfully used to drive forward the

re-regulation and liberalisation of telecommunications at EU level (European

Commission 1992). The task of creating an appropriate regulatory environment for a

converged ICT sector is complex and potentially very difficult, though most see it as

essential. As Hills and Michalis (1997) note, “convergence of technologies creates

problems for governments in that it produces or intensifies concentration across

markets while, at the same time, demonstrating the fragmentation of regulation”

(p219).

If any regulatory reorganisation does occur, the main focus of attention is likely to be

what are separately constituted at present as telecommunications and broadcasting. A

major issue is whether a set of common regulatory criteria exists, which might form

the parameters of a system governing new hybrid services and commercial

arrangements for their creation, provision and conveyance. Another concerns the

possible regulatory fusion of arrangements for existing facilities and services across

ICTs.

Mechanisms for Creating a New Regulatory System

In its Green Paper, the European Commission undertook a survey of the state of

convergence in ICT technologies and services and presented three possible alternative

policy routes for the EU. Firstly, current structures in broadcasting, IT, publishing and

telecommunications could evolve separately, perhaps reinforced by some form of

European co-ordination to guard against fragmentation. Secondly, a separate

horizontal battery of legislation to cater for the new convergent services could be

created, whilst maintaining vertical separation between sectors in all other respects.

Finally, an all-embracing new horizontal regulatory model could be developed for

both existing and new services.

As has become customary in the ICT policy field in recent years, the Commission, in

proactive fashion, underlined the gravity of the situation to member states noting that,

“the pace and scope of change, if not co-ordinated at a European level, could risk

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creating significant new barriers between member states and slowing the transition to

the Information Society” (European Commission, 1997c, p34). It similarly used

“stick and carrot” tactics, arguing that successfully embracing convergence could

bring benefits in terms of employment, consumer choice and cultural diversity, yet

failure to do so risked being outflanked by Europe’s major global competitors

(European Commission 1997c, p36). The ability of the Commission to shape the EU

policy-making agenda has been underlined by Smyrl (1998), who argues that “a focus

on the internal process of policy conception brings the light of analysis to bear on the

Commission’s role in specifying and at times reconceptualising the alternatives

among which member states will ultimately choose. In the process, the Commission

contributes to shaping the preferences of the member states” (p96). It has been

suggested that the Commission in recent years has displayed considerable eagerness to

incorporate new ideas into policy developed at EU level (Laffan 1997, p423).

Policy Differences Within the Commission on ICT Convergence.

However, the Green Paper also illustrates some of the inherent conflicting preferences

within the Commission on the ICT convergence issue, which is in part reflective of a

wider divergence in existence among interests involved in broadcasting, IT,

publishing and telecommunications in Europe. ICT convergence touches the work of a

number of important parts of the Commission, principally, Directorate-General IV

(Competition Policy), Directorate-General V (Employment, Industrial Relations and

Social Affairs), Directorate General X (Information, Communication, Culture,

Audiovisual media) and DGXIII (Telecommunications, Information and Exploitation

of Research). The existence of fissures within an organisation as complex and diverse

as the European Commission is nothing new. Pressman and Wildavsky (1973) have

noted the tendency for organisational units to be riven with sub-surface divisions.

There is also considerable evidence of cultural differences and rivalries within the

Commission itself. Fuchs (1994), describing the telecommunications sector, notes the

existence of conflict between DGIV and DGXIII (p183). This conflict is confirmed

by Nugent (1995) who notes that “in many respects, the Commission is highly

pluralistic, with a divergence of preferences, styles, working procedures and cultures

at both college and administrative levels” (p612). The difficulty of achieving

agreement between the DGs of the Commission has also been noted by Christiansen

(1996).

The interests and agendas at work within the Commission has resulted in different

DGs establishing sometimes opposing relationships with certain sectoral actors,

notably business (Cram 1994, p201). Coen (1997) has shown how, in recent years,

large firms in particular have successfully developed strategies to gain influence with

the Commission and influence policy-making as a result. In ICTs, there is

considerable evidence that such overtures have been favourably received by the

Commission. An important feature of the evolution of DGXIII’s policy on ICTs has

been the development of a strong relationship with big business in IT and

telecommunications. Cram (1994) notes that it “enjoys a rather symbiotic relationship

with industry which is involved at almost every stage of policy deliberation in the IT

area” (p203). Similarly, in the telecommunications policy-making arena, DGXIII has

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developed a close relationship with the telecommunications industry (through, for

example, the RACE [Research and Development in Advanced Communications for

Europe] and ACTS [Advanced Communications Technologies and Services]

programmes) and telecommunications corporate business users, with whom there is

evidence of a policy axis in favour of liberalisation of the sector (see Simpson 1992).

It is also a DG which has shown itself unafraid to be associated with controversy,

especially in the telecommunications policy-making domain of the late 1980s (see

Humphreys and Simpson 1996). On the ICT convergence issue, these interests are, in

general, largely in favour of having as liberalised an environment as possible and, as

Levy (1997) points out, in the process of policy-formulation members of the

Commission from DGXIII and DGIV liaised closely with “players they knew best

such as telecommunications companies, manufacturers and national officials from the

Ministries of telecommunications and industry rather than officials of national

ministries of culture or national heritage” (p35). Clearly, it is thus no suprise that

elements of the Green Paper advocate an overhaul of existing structures to create an

“across the board” horizontality in ICT regulation in place of the present vertically

separate structures.

By contrast, DGX of the Commission has a rather different set of interests and

influences motivating it. Issues such as national cultural independence (from the USA,

for example), the promotion of diversity and pluralism, and protection of ethical and

moral standards - enshrined in the concept of public sector broadcasting - have shaped

the sector wherein its remit lies (see Collins 1994). Thus, potential conflicts of

interest on the convergence issue are likely to manifest themselves between the two

DGs. The relationship between the broadcasting and IT/telecommunications parts of

the Commission may also not have been helped by the High Definition Television

(HDTV) affair, which was DGXIII’s responsibility and which turned out to be an

unsuccessful policy initiative to say the least - it weakened the Commission, and

DGXIII in particular, politically (Dai, Cawson and Holmes 1996, p162).

The specifics of ICT convergence clearly point up the difficulty of achieving a united

front within the Commission. The final version of the Green Paper was published on

December 3rd 1997, preceded by a version dated 29th September 1997. There are a

number of important differences between the two documents. The latter affords much

greater emphasis to the economic and industrial implications of convergence, many of

its arguments being both economically and technologically determinist in nature (see

MgGinn 1991 pp-93-96). It forthrightly argues that regulatory structures need to alter

in order to accommodate the effects of technological convergence in ICTs, and that

there is an economic imperative attached to the process whereby it is essential that

market forces are allowed to flourish. There is no mention of the social consequences

of convergence or the fact that it is being shaped by a series of social, as well as

technological, factors. It also argues that, “The rapidity of change poses a serious

challenge to policy-makers, as developments in the market outpace their capacity to

establish an appropriate regulatory framework and adapt it in a timely manner to

changing circumstances......It is clear, therefore, that classical regulatory frameworks

must be reviewed in the light of convergence” (European Commission 1997b, piii).

By contrast, the introduction to the final (December) version of the Green Paper

acknowledges that there are differing views on the inevitability and, equally

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important, the desirability, of ICT convergence. Clear reference is made to its

potential impact on European citizens in cultural terms, strongly suggesting that

those elements of the Commission with an interest in broadcasting policy and the

social dimension of ICTs were influential in ensuring that these changes were made to

the document. In terms of regulation, it is argued that “there is no assumption that

convergence in technologies, industries, services and/or markets will necessarily

imply a need for a uniform regulatory environment” (European Commission 1997c, p

iv).

There are also clear differences in relation to the three options for future regulatory

structures put forward by the Commission. The September version declares that the

least radical option “would do little to ensure a genuine single market for

communications” (European Commission 1997b, p24), whereas in the December

version, it is suggested that, on the contrary, the approach “could be effective in

providing a predictable regulatory framework for investment whilst avoiding the

creation of unjustified barriers within the internal market” (European Commission,

1997c, p34). Regarding the second option, it is argued in the September version that

“Inevitable definitional boundaries will distort the marketplace and be difficult to

police” (European Commission 1997b, p24), whereas, in the final version, a softer

line is taken on the issue, the Commission noting that the “principle (sic) difficulty in

such an approach is determining the boundaries of what may be part of a lightly

regulated new service world and what remains subject to traditional regulation”

(European Commission 1997c, p35). Finally, in the concluding section of the

September version, it is argued that “In effect, a new approach to regulation will be

required to implement and sustain the Information Society” (emphasis added)

(European Commission 1997b, p25). This is omitted from the December version.

The Aftermath of the Green Paper.

The Consultation exercise which proceeded the Green Paper’s release represented the

continuation of a pattern which has emerged in the recent history of EU

telecommunications policy. Similar exercises were conducted for the Green Paper on

the creation of a common market in telecommunications services (European

Commission 1987) and the 1992 Telecommunications Review (European

Commission 1992). These were politically successful from the Commission’s

perspective, since they were followed by a period in which there was significant

legislative activity resulting in re-regulation - mostly in the form of liberalisation - of

telecommunications. It seems clear that those elements of the Commission responsible

for telecommunications policy were confident that, as a result of the consultation

exercise, the Commission would be able to proceed with activity aimed at shaping the

regulatory parameters of a converging ICT sector. The Green Paper’s proposed

timetable for action stipulates that, by the end of 1998, a Convergence Action Plan

would be produced by the Commission. This projection proved to be rather naive. It

is here argued that pro-liberalisation elements of the Commission, bolstered by the

“liberalisation bandwagon” successes in telecommunications and supported by

elements from business in the IT, telecommunications and publishing sectors, were

confident that a broad pro-market liberalisation approach would be accepted and

translated into ICT convergence policy.

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The Implications of the Convergence Consultation Exercise.

The results of the consultation exercise, however, indicate that there is no uniform

agreement on most of the key issues which the Commission put forward for

discussion in the Green Paper. Consequently, it was unexpectedly re-launched, with a

request for further opinions on three crucial areas: access to networks and digital

gateways; the creation of an appropriate framework for investment in and

development of the European ICT content industry; and development of a balanced

approach to regulation (European Commission, 1998b). In fact, an indication of how

much the Commission’s policy ambitions have been reined-in is its contention that, as

a result of this further consultation process, it would aim to work on a

Communication to consider whether any policy proposals were necessary (European

Commission 1998b, p11).

The differing opinions which the Commission received clearly illustrate the policy

issues at the heart of the ICT convergence process that need to be resolved. The

majority of the eclectic range of respondents5 were in favour of the least radical option

put forward in the Green Paper, though, as might be expected, many players from IT,

telecommunications and publishing wanted less regulation overall and advocated a

“fundamental re-examination of whether traditional approaches remained valid in the

longer term” (European Commission, 1998b, p28). On the other hand, respondents

from broadcasting clearly advocated the more conservative approach.

Access Issues and Convergence.

One of the key issues in the convergence debate concerns future access to both ICT

networks and content. This has both commercial and public interest regulatory

considerations at its heart. On the commercial side, Mansell (1997) shows that there

is evidence of a number of large ICT players developing dominant positions in

evolving markets which, if not properly regulated, will allow them to behave in an

anti-competitive fashion regarding access to networks, control of access to customers

and control of access to market information (pp87-90). There is a danger that

vertically and horizontally integrated companies can indulge in practices such as

unfair bundling of services and content, predatory pricing and cross-subsidisation.

From a public interest perspective, a key issue is the ability of the consumer to have

access to new convergent services at affordable prices. This is of particular concern in

relation to the emergence of features such as pay-per-view and proprietary navigation

systems6.

Market Structure and the Public Interest in a Convergent Scenario.

In the Green Paper, the Commission highlighted the issue of what market structures

might exist in a more convergent ICT environment and how these might be regulated.

The emergence of primary, secondary and tertiary convergence in some form or

another certainly poses significant questions for competition policy experts and

regulators alike. As illustrated above, there is some evidence that convergence in these

areas is proceeding and some predict that such change will eventually create a market

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where there are a small number of powerful vertically integrated companies -

leviathans, whose origins lie in media, IT or telecommunications - co-existing

alongside a much greater number of smaller niche market operators (KPMG 1996).

Those in favour of light-touch regulation regard this as an auspicious evolution. Such

an economically determinist view sees an unfettered and converged ICT marketplace

as producing a dynamic, innovative and competitive set of commercial outcomes.

However, its naivety has been highlighted by Mansell (1993) as reflecting an Idealist

model of a future ICT sector. A more likely reality is expressed in the Strategic

model, where it is predicted that the power of large commercial interests will require

the evolution of a new set of regulatory criteria to guard against potential abuses of

dominant position. In this scenario, the danger of the emergence of an Information

Society characterised by global ICT oligopoly (Melody 1991) could be avoided.

From the results of the Green Paper consultation exercise, it is clear that, in the short-

term at least, there is likely to remain in place, a vertical regulatory separation of

broadcasting from other parts of ICT. The view was also expressed that it was likely

that, within the broadcasting sector, fragmentation would continue to exist at the

national level. Such reticence to move to a new regulatory model is underpinned by

the desire in certain quarters to preserve national cultural diversity and the public

service remit. The issue of looking after the public interest in a converged ICT

environment was highlighted in the Green Paper. The concept has been centrally

important to the telecommunications and broadcasting sectors historically. The

gradual infusion of competition into European telecommunications and its re-

regulation towards the EU level, has drawn attention to the concept of universal

service (European Commission 1996; European Parliament and European Council of

Ministers 1997). The debate has centered on which organisations should be

responsible for provision of universal service, how universal service should be funded

and what should be constituted as a universal service. In the context of an evolving

Information Society, it has been argued that universal service should be considered in

functional, rather than technical, terms and should focus on allowing access to

advanced ICT services for all at affordable prices (European Commission 1997a). The

OECD (1997) has suggested that convergence “clearly has an impact on the way

universal service should be conceived and organised. In particular, the identification

of a particular service (for example voice telephony or TV broadcasting) with a

particular access network and network provider (for example, the national incumbent

telecommunications network, or national terrestrial transmission infrastructure)

should be reviewed in the context of convergence” ( p40).

However, a key finding of the Green Paper consultation exercise was the contention

that the concept of public service provision in telecommunications and broadcasting

should be considered separately (European Commission 1998b, p3). Thus, it appears

that across the EU at present, whilst the technologies and services of the two sectors

are coming closer together, no consensus on public interest regulatory convergence is

in place. In this respect, the move in telecommunications towards new ways of

structuring universal service contributions in a more competitive scenario (i.e. sharing

it among industry players) clearly goes against those national governments and public

sector broadcasters interested in maintaining monopoly provision of the public service

remit. It could also be argued that public interest regulation in broadcasting has been

historically different from that of telecommunications since the latter has not regulated

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content with moral, ethical, educational etc.. considerations in mind. On the other

hand, with the emergence of new convergent ICT services, there appears to be a

strong argument for having a single regulator taking responsibility for the regulation

of the full gamut of public service communications issues. Indeed, at the national

level, certain governments (see below) have already taken this step, though any

widespread attempt to create uniformity is destined to precipitate regulatory “turf

wars” (Mitchell 1997).

Allocation of Licences for New ICT Services.

A key aspect of regulation related to ICTs is the allocation of licences to provide

particular services. The emergence of a range of new service possibilities has called

into question the vertical separation of licence allocation which exists not only

between, but within, the various parts of ICT. Unsurprisingly, this was a focus of the

Green Paper, wherein the European Commission argued for a more flexible approach

to be adopted. It suggests, for example, that requiring a fixed-link telecommunications

operator wishing to provide wireless-based systems in the local loop to have two

licences, may be unnecessary. Similarly, it argues for a review of the broadcasting

licence allocation system in the light of a new digital environment to allow media

companies to be licensed for the provision of a set of services such as a satellite

package or a terrestrial multiplex (European Commission, 1997c, p22). Once again,

though, the consultation exercise revealed another distinct divergence of opinion

among the various parties: IT and publishing companies, based no doubt on

conditions in their own markets, argued that there should be minimal, if any, licensing

procedures in place, which clearly contrasts and conflicts with the tradition and

practice of the broadcasting and telecommunications sectors. An important feature of

the results of the consultation exercise was the view that there should be a distinction

made between the regulation of networks and services. Here, “substantial support”

was expressed for a horizontal (common) regulatory approach to network and access

issues, in tandem with a vertical (sector-specific) approach to the regulation of the

provision of services (European Commission 1998b, p3). This may well be one of the

few areas where policy initiatives may be developed in the short-term.

What role has the European Commission Played in ICT Convergence policy thus

far?

Whilst technological change has facilitated, and commercial activity created,

arguments for the dissolution of regulatory barriers between the various parts of ICT,

the political arguments are by no means clear cut. DGXIII of the Commission, in

tandem with DGIV, spearheaded the liberalisation of telecommunications across the

EU and played a part in transforming a nationally-run series of uncompetitive sectors

into a more uniform European-wide market with a new set of regulatory parameters

framed at the EU level. The role of the Commission in this process has led it to be

described by some as a corporate actor (Schneider and Werle 1990, Schneider, Dang

Nguyen and Werle 1994) with its own independent goal vision. Elsewhere, the

Commission’s perceived leadership qualities have lead it to be termed a “policy

entrepreneur” (Sandholtz and Zysman, 1989, p96) and a “purposeful opportunist”

15

(Cram 1994, p201), though, perhaps it is more accurately the case that the DG/s at the

helm of any particular policy initiative deserve this description.

There is, however, not universal agreement on the Commission’s dynamism in IT and

telecommunications policies. Schmidt (1998) points out that it was able to benefit

from exceptionally favourable technological and economic circumstances and in most

cases had, at least, tacit support from the major national governments (p175). More

cynically, Esser and Noppe (1996) argue that the Commission has only apparently

exhibited leadership in the ICT field. On the contrary, in reality it has merely created

an arena within which the most powerful private sector actors have determined policy.

In the case of the landmark EU Information Society policy document, the Bangemann

Report (1994), it is contended that the Commission’s role was merely that of bringing

together the major international business actors in ICTs to “participate in a complex

consultation and advisory process....the actual measures themselves were stipulated

primarily by the participants - first and foremost by economic actors of the respective

functions” (p555). It is argued here that this analysis is of value in relation to many

aspects of the convergence Green Paper. However, it cannot explain the “softer”

approach taken in the final version, or, indeed, the fact that, as a result of the

consultation exercise, the least radical of the options laid out by the Commission is

most likely to be pursued. If this is the way matters proceed, it is clear that, across the

EU, those favouring a gradualistic approach which will ensure the protection of

broadcasting in particular from any radical changes in the near future, will win the day

. Thus, for the short term at least, “technological change alone - even one as dramatic

as digitalisation - seems unlikely to undermine the belief of politicians that the

cultural and political impact of broadcasting must be decided according to priorities

established in each member state” (Levy 1997, p38).

Future prospects for an EU ICT convergence policy

Thus, whilst it may well be true to say that international big business is shaping a lot

of what is going on in IT, telecommunications and to a lesser extent broadcasting, it is

not necessarily the case that it is going to drive EU policy on ICT convergence in the

short-term. What will happen thereafter is harder to predict. Few, for example, would

in the mid- to late 1980s have suggested that the whole of the EU telecommunications

sector would be open to competition within 10 years. Thus, although the will of

powerful public service broadcasters, certain national governments and consumer

groups favours a gradual evolution (if any) from the status quo, it is uncertain whether

this “coalition” will be maintained in the future. The international, if not truly global,

nature of ICT markets may prove too powerful a lure for those governments and

public sector companies (as it did in telecommunications) who wish present

fragmentation to remain in place.

Given the evolution of ICT technology and markets, there appear to be strong

arguments for creating some sort of policy apparatus to encourage the development

and diffusion of new services, whilst at the same time guarding against the negative

16

effects of the excesses of market forces on diversity, plurality and the public interest

in general. What shape, if any, this will take at EU level is very difficult to determine

with accuracy at this stage. However, there is little doubt that the EU can have a

significant role to play in the structures and processes which emerge.

In terms of the regulation, there are a number of features which any efficient and

effective regulatory organisation must possess such as: independence, accountability,

transparency, speed, clarity, simplicity, consistency, commitment, fairness, penalties,

appeal mechanisms and periodic review (Doyle 1996, p618). Successfully creating an

organisation which is able to fulfill all these functions is an almost impossible task,

given the nature of both the EU and the complexity of ICTs. However, in a situation

where certain commercial players in this evolving sector are becoming more and more

internationally powerful and where there will be, in the future, less and less

justification - certainly on commercial grounds - for excluding them from audiovisual

content markets in particular, it appears to be a nettle to be grasped.

One of the major areas of controversy in terms of creating a converged regulatory

model is, undoubtedly, the need to protect the public service and cultural pluralism

principles which have underpinned the development of the broadcasting sector and

which have increasingly come under pressure as new audiovisual media have become

viewed more and more as appropriate for consideration under the broader Information

Society banner, where technical and economic issues have often (certainly by DGXIII)

been given more attention than those of culture (Levy 1997). An obvious concern is

that, to replace the existing vertical regulatory structures with horizontal arrangements

straddling the composite parts of ICTs, will result in issues of competition and

markets taking precedence over what might be described as general social concerns.

Equally, the creation of a pan-European level set of arrangements creates the

likelihood of some control over these matters being transferred to the European level,

with a consequent loss of national sovereignty over them.

One possible option, a dual regulatory structure (Doyle 1996), suggested for the

telecommunications sector, may well be appropriate for ICTs as a whole. In this

model, a set of National Regulatory Authorities should implement common

competition policy rules - devised by some form of EU central authority - and deal

predominantly with matters which arise at the national level. For example, Finland

and the Netherlands have a single regulatory organisation with responsibility for

licensing telecommunications and broadcasting infrastructures whilst most EU

member states regulate frequency allocations through one body. Further, in 1997, Italy

created a single organisation with responsibility for the regulation of all of

telecommunications and broadcasting (Squires, Saunders and Dempsey 1998, p30).

The authorities at national and European level would operate according to Doyle’s 12

principals for proper regulation. He suggests that, at the EU level, the new

organisation might lie inside an existing body such as DGIV of the Commission

(p623). On the other hand, Melody (1997) suggests that “in a dynamic industry

sector, what is needed is fewer, stronger, more independent regulators with

responsibilities for a proactive and forward-looking approach to regulation....Stronger

regulation can minimise the risk of industry capture and political favouritism, and

create confidence that regulatory decisions affecting market opportunities will be

made on their merits and on criteria for achieving stated policy objectives” (pp24-25).

17

Clearly, if such a system were to be created at the EU level to handle convergence,

considerable thought and effort would need to be put into its structure, functions and

responsibilities. In the light of the obvious conflicts of interest which are apparent in

the Green Paper, it may be appropriate to create some new form of European-level

hybrid structure either within or outside of the European Union. This is clearly, in the

light of the post-Green Paper consultation exercise, neither a short nor a medium-term

option.

A regulatory model for ICT convergence has been presented by Squires, Dempsey and

Saunders (1998). They advocate a horizontal approach in principal, which would have

three tiers, corresponding to the regulation of transmission facilities and conditions for

market entry in communications service provision; regulation of operating conditions

for different technical platforms and; the regulation of matters relating to public policy

issues in general. It is suggested that competition law should be applied to all three

layers. Unfortunately, this model is typical of a private sector, pro-market, approach to

convergence. It argues that public policy issues will have only minor relevance in the

regulation of the first two layers and, in effect, suggests that such considerations can

be neatly “boxed off” from those which are technical and commercial. This seems not

only a naive, but a dangerous, perspective. Given that this study was requested and

(presumably) funded by the Commission, it is easy to understand the misgivings that

organisations, particularly those with broadcasting interests, had on the establishment

of the most radical of the three options put forward in the Green Paper. It is clearly not

possible, however convenient it might be in commercial terms, to extricate public

policy issues from those of technology and commerce. All three phenomena tend to

interact with each other in complex ways, producing a variety of outcomes contingent

upon the importance afforded to each in the relevant decision-making structure.

Whatever type of convergence policy does emerge at EU level in the near or distant

future, for the chances of its success to be increased, attention might well usefully be

focused on the role of the European Commission as a policy manager. In this regard,

Laffan (1997) suggests that it is more interested in, and motivated by, the pusuit of

policy innovation than the less high profile role of successful management of agreed

policy. It is hampered by a lack of resources and a reliance on the national member

state. This, combined with the already highlighted problems of internal fragmentation,

may mean that the role of administering an ICT convergence policy may be best

placed in a structure other than the Commission. Whatever structure eventually

emerges (if any) at the European level would, however, face similar problems.

One possibility for the future organisation of European level ICT convergence policy

may be the creation of some form of European agency (Dehousse 1997). This

organisation would have as its aim, the achievement of uniformity in convergence

policy through acting as a network co-ordinator of national administrations, rather

than performing the task of a “top-down” central regulatory agency. Recent advocates

of the European Agency model (Majone 1997) argue that its central aim is the creation

of harmonisation which can be achieved through this “regulation by networks model”

(Dehousse 1997, p253). For the model to operate effectively, a number of criteria need

to be in place such as: agreement by all on the definition of a given problem and the

18

solutions required; use of similar procedures by participants; availability of mutual

information to allow common action and facilitate confidence; agreement on a

common set of rules laying down the rights and duties of all members and; stability in

the network through the creation of a structure to manage co-ordination between

members.

Applied to ICT convergence, the creation of a European ICT agency along these lines

would certainly allow the power base to remain at the national level and would,

perhaps, serve to allay the fears of national governments protective of their

broadcasting sovereignty. Equally, it could involve the European Commission in an

important co-ordinative role without devolving too much power to it. However, given

the complexity of the sector and the diversity of the EU, it might prove very difficult

to operate successfully in practice. It would leave too much scope for abuse and mis-

information at a number of levels and its lack of coercive legal power, most

particularly, would render it a “lame duck” tool of policy.

Conclusions.

The convergence Green Paper has, in part, been put forward by the European

Commission as part of the EU’s efforts at creating a flourishing European Information

Society. Since the early 1990s, a number of EU policy proposals and action

programmes have been considered and launched (see the European Union Information

Society Project Office web-site). At the heart of this activity, has been an ongoing

debate about firstly, what an Information Society is and secondly, the policies

necessary for its effective creation. Within the European Commission, broadly two

perspectives have emerged. On the one hand, it is viewed, in rather deterministic

fashion, as being an inevitable consequence of technological and economic change,

wherein these forces have laid out a course of action for policy-makers to follow,

which, if ignored, or followed incorrectly, will result in Europe falling behind its

global competitor countries in the products and services of information and

communications technologies. Emphasis in this approach falls primarily on business

and commercial contexts and the general imperatives of deregulating and liberalising

markets have been prescribed for governments to pursue. This approach is evident in

the Bangemann Report which assumes, at most, that societal benefits will

automatically flow from this course of action. The report takes a very pro-market line

throughout and it could be argued that the seeds of concern over the future of

traditional broadcasting structures were sown with its release. For example, media

ownership rules were described as “a patchwork of inconsistency which tend to distort

and fragment the market.....[and]...impede companies from taking advantage of

opportunities offered by the internal market, especially in multimedia” (p21). This

clearly illustrates the desire to create - in a similar fashion to the evolution of EU

telecommunications policy - as competitive a scenario as possible across the ICT

board. In many respects, it could be argued that, at this relatively early stage, the

writing was on the wall regarding how the pro-Bangemann part of the Commission

was going to proceed in subsequent years. Thus, clearly, “the headlong rush into a

bright new technological future offered by seamless digital information infrastructures

does appear to have influenced the debate over policy choices” (Cawson and Holmes

1995, p666).

19

However, within the European Commission a different orientation towards the

Information Society has emerged. This perspective holds that, rather than technology

and economic forces automatically creating an acceptable Information Society, policy

action must be taken in a number of crucial areas to ensure that its benefits will fall in

sufficient quantity, and with relative equity, across the EU. Thus, to leave the

evolution of the Information Society in Europe to the market alone is neither desirable

nor appropriate. Such views have emanated, in particular, from DGV of the

Commission which was responsible for setting up, inter alia, the High Level Group

on the Information Society7 . This group has argued in respect of ICTs that “the

technology itself is neither good nor bad...it is the way in which any technology is

used which determines both the nature and extent of its benefits....these benefits do

not accrue automatically to all sections of society” ( European Commission 1997a,

p6).

This dichotomy of perspectives on the Information Society is reflected to an extent in

the current debate on devising an EU ICT convergence policy. As shown, from the

consultation exercise on the Green Paper, it is clear that views on the subject are not

uniform across the EU itself. Given the opposition of certain national governments,

public sector broadcasters and consumer groups to radical change, it is likely that

convergence of ICTs will develop in an industry-led and ad hoc manner for the

foreseeable future. Mitchell (1997) predicts, “a scenario in which different

distribution channels, hardware and software will be in state of competitive co-

existence, with recurring competitive and regulatory battles about the technical and

commercial aspects of interchange and mutual access” (p441). Even those parties

from industry advocating change, appear to see it as a long-term phenomenon

(European Commission 1998b).

Within all of this, and in the context of the Information Society, there appears to be an

important present and future role for the European Commission, not as an agenda-

setter, or a policy entrepreneur, but as a facilitator and co-ordinator of the debate on

the manifold complex issues yet to be fully carried out. There is evidence of this role

being undertaken at present within the EU context and, as a result of a recent

proposal by the Commission to devise an International Charter on the Co-ordination

of Global ICT policies (European Commission 1998a), it may well be further

developed in the international domain. Similarly, if the desire, apparent in the results

of the consultation exercise, for horizontal regulation of network and access issues

further materialises, there may be scope for the development of an agreed body of

legislation at EU level (administered, perhaps, by either part of DGIV of the

Commission or a newly created body), though this is by no means certain.

20

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1 There are other definitions of convergence. For example, the European Commission

suggests that it may usefully be considered as the provision of similar services across

different networks or, perhaps less usefully, the joining together of the telephone, television

and computer (European Commission 1997 p1). 2 Joseph defines a political myth as “a widely believed set of political beliefs that give

events and actions a particular meaning....A political myth can include themes on how a

certain society came into being, its present predicament and its likely direction for the future”

(p293). 3 It is argued that the service provision part of the ICT value chain will witness most

competition due to the expectation that conveyance companies and PayTV broadcasters will

attempt to move into this activity

4 An example is Sainsbury’s grocery shopping service on the British Interactive

Broadcasting (BIB) digital satellite service. 5 274 parties made submissions to the consultation exercise: telecommunications operators

(15%); broadcasters (11%); equipment manufacturers (4%); governments and regulators

(12%); general industry associations (35%); trade unions (6%) and individuals (17%)

25

6 an example is the collaboration between Microsoft, Compaq and Intel. The latter two

companies aim to produce a hybrid digital TV/PC which will run an Electronic Programme

Guide to TV programmes provided by Microsoft. It is feared by competing software

providers that this will be used to exclude them from the market (Snoddy 1997). 7 This group is made up predominantly of academics and other public sector representatives