National information infrastructure

The trend toward telecommunications liberalization

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The trend toward telecommunications liberalization

Since 1987, the European Commission has steadily pushed the liberalization of the European telecommunications market. A series of directives has gradually opened the European market to (internal) competition: terminals (1988), Open Network Architecture and telecommunication services - with the exception of telephony (1990). The Commission is currently working on a directive which will lift restrictions on the use of cable TV networks for the carriage of all liberalized telecommunications services. Further steps have been recently taken with the European Council's decision to liberalize voice telephony and infrastructures by January 1, 1988.

Most member states have modified their national legislation in consequence. Although it was not required by the Commission telecommunications policy, many of them have also engaged the privatization (at least partial) of their public operators (PTO). The move is aimed at preparing the PTO to the new market conditions (see appendix 1).

In France, the liberalization of telecommunications has been on the political agenda since 1986. While the market of cable TV was opened to private operator as early as September 1986, but a first attempt to introduce a tiny dose of competition in the provision of telecommunication(s services failed during the summer of 1987 because of unions opposition. In 1990, a law was passed which partially and gradually liberalized two segments of the telecommunications market: mobile services and value added services.7 With respect to telecommunications infrastructures, they remain under France Télécom's monopoly. However private networks infrastructures are allowed as long as they are not open to third party.

Over years, the French government' position in regard to telecommunications liberalization has changed. Until 1994, France resisted the European Commission push toward liberalization. Since this date, France has speeded up the liberalization of its telecommunications, sometimes ahead of European deadlines. This move followed a report prepared by Bruno Lasserre, Head of the Regulatory Directorate at the Ministry of PTT. Lasserre argued - and convinced the government - that the monopoly of the France Télécom could not resist technological progress and the liberalization of mobile and satellite communications. He advocated an early de-monopolization of French telecommunications in order to gradually prepare the public operator to a tougher environment and to foster the emergence of new stable ( and French) actors (Lasserre, 1994).

During the Fall 1995, the French government unveiled an orientation paper for future telecommunications legislation in view of the 1998 liberalization in Europe. In January 1996, the Minister of PTT, François Fillon, presented a draft law in view to have it adopted by the French parliament in the Spring of 1996, so that licenses can be attributed in the Spring of 1997. According to the document, the number of licenses for new entrants would not be limited except for non-European companies whose country of origin doesn't offer similar market access. Universal service would be nationally provided by the public operator France Télécom. The question of the financing is still under discussion. It seems that competitors would share the costs of universal service through payment to a special fund in addition to local network access and interconnection fees.

The status of the public operator changed in 1990 when France Télécom was transformed from a State administration into a public corporation and fully separated from the Postal branch. However, the privatization of France Télécom remains a highly sensitive issue, the discussion of which is constantly postponed. The privatization is supported by the company's top managers as a means to face competition, but opposed by unions and a large number of employees who want to keep their civil servant status8. During the summer of 1994, a report on the future of France Télécom submitted to the French government by the former chairman of France Télécom, Marcel Roulet, called for the sell-off of a minority share of the public operator while maintaining the employees' civil servant status. This strategic reform was not endorsed by the French government which decided to drop its privatization plans and concentrate instead on the internal reorganization of the public operator to prepare it for the 1998 liberalization of telecommunications in Europe. The government argued that privatization should follow the completion of the liberalization of the market rather than precede it.

Visions and Goals: Growth, Competitiveness, Employment

The European frame

The White paper on Growth, Competitiveness and Employment: The critical role of trans-European networks in the single market.

The White Paper, prepared under the active direction of Jacques Delors and released in June 1993, is certainly the key document to understand the European approach to IS. Not only did it pave the way to subsequent actions by the European Union, it also articulated a cognitive map of the challenges facing Europe and shaped a frame within which Member states designed their strategies and policies.

The White paper presents a straightforward portrayal of Europe's economic crisis, consisting mainly of the highest unemployment rate since 1945 and a decline in Europe's position vis-à-vis its main trading partners (the US and Japan) with respect to market shares, research and development activities and the capacity to design and launch new products. The "insufficient progress in adapting the structures of the Community's economy to the changing technological, social and international environment" is identified as the main factor of this crisis (p.49).

The aim of the White paper is not to justify the necessity of a single market - which was enacted previously by State members. The single market is considered to be a living reality (with the outstanding exception of the free movement of people) which allows firms to benefits from economies of scale, reduce their administrative and financial costs and cooperate more efficiently with one another (p. 57). The White paper examines ways "to make the most of the internal market" and to boost competitiveness. In this prospect, the White paper calls for two main actions:

· the building up of trans-European networks in the field of transport, energy and information. Such networks are seen as "the arteries of the single market" and the "lifeblood of competitiveness". Their malfunction is reflected in lost opportunities to create new markets and hence in a level of job creation that falls short of Europe's potential (p. 75).

· a sound redirection of research and development activities to encourage a broader cooperation among European firms and public research centers, especially in the fields of information technology and biotechnology.

The White paper also provides a vision of the Information society which can be summed up in three ideas:

· the Information society is an inevitable process, and "not a technological dream for the next century". This process has started in the USA and will gain ground in Europe.

· the Information society will have large and long-term effects comparable to the first industrial revolution. It can provide an answer to the new needs of European societies.

· compared with its leading competitors, Europe holds comparative advantages such as a powerful telecommunications industry and its cultural diversity.

Overall, the vision of the Information society which is provided by the White paper is deterministic, optimistic and economist. The Information society cannot be refused or even slowed down. One can only adapt to this change, and try to direct it so that negative effects be avoided or minimized. The White paper underlines the economic benefits that the Information society will bring, but does not really address societal issues. Especially striking is the way the White Paper insists on the urgency of actions to take and denies social debate on the impact of IS: "The first economies which successfully complete this change (to the Information society) in good condition will hold significant competitive advantages.(...) In any event, it would be fruitless to become embroiled in a fresh dispute about the machine age" (p. 23).

The Bangemann report on information society: “In the marketplace, we believe.”

In June 1994, a report untitled "Europe and the global information society", prepared by the High-level Group on the Information society chaired by Martin Bangemann, was presented to the European Council at Corfu. This report had been asked for by the White paper in order to establish priorities, decide on procedures and define the resources required for the Information society.

For the group, the information society is a technology and market-driven revolution which will create new social and economic opportunities. In order to turn these opportunities into benefits, the report calls for a break with past practices (public money, financial assistance, subsidies, dirigism, protectionism) and a new regulatory environment allowing full competition. This regulatory framework should also deal with issues related to the protection of intellectual property rights, privacy, encryption and media ownership. The report also deals with a major problem in Europe's policy with respect to IS. While competition can overcome market fragmentation along national lines, it may create another kind of fragmentation, which is technical. That is why the plea in favor of competition is complemented by a call for interconnection and interoperability provisions.

The Bangemann report has often been presented as a liberal piece9 and indeed is. However, despite its faith in market forces, the Bangemann group underlines that competition alone cannot provide a critical mass necessary to get adequate return on investment. Therefore, the group recommends the launching of experimental applications which will create a virtuous circle of supply and demand. Namely, the report advocates an Action plan based on 10 specific initiatives linking public and private interests: teleworking, distance learning, network for universities and research centers, telematics services for SMEs, road traffic management, air traffic control, healthcare networks, electronic tendering, administrative, city IS.

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