Digital Media Convergence News - Europe at High Speed
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Europe at High Speed: Growth and the Information Economy
Viviane Reding - 26 January 2006Fibre-To-The-Home CouncilVienna, 26 January 2006
Introduction
Ladies and gentleman, thank you for inviting me to address this Fibre-To-The-Home Council today.
The Commission has just adopted the first Annual Progress Report on the renewed Lisbon strategy on growth and jobs.
The worrying news is that Europe is faced with many challenges: slow growth, budget deficits, high unemployment, an ageing population and globalisation. If we want to be well off in the future, Europe has to get back on track as regards investment, innovation and productivity growth.
The good news is that it is possible to achieve these changes. The area I am responsible for – Information Society and Media – is a leading example of an area where we have a good starting position which will allow us to act.
1) Its official: ICT is the motor of growth.
What are the macro-economic headlines?
Today, ICT represents a modest, but growing, 6% of the EU economy. But this sector generates 25% of the EU’s growth and 40% of its productivity gains.
ICT is also transforming micro and sectoral level economics. Productivity gains at firm level through innovations such as e-procurement are transforming business performance. ICT creates new markets (and ways to re-energise mature markets). For example, last Friday the former Prime Minister of Finland, Esko Aho, submitted a report of a High-Level expert group to Commission President Barroso which identified digital content as one of seven key strategic areas for an Innovative Europe if Europe succeeds in finally overcoming the fragmentation of 25 different intellectual property right regimes.
Look also at the new services that are transforming existing business such as IPTV which is predicted to rise from 700,000 subscribers today to nearly 9 million by 2009.
New e-business web-services are predicted to be adopted by 90% of EU firms by 2010, up from the 20% we see today (IDC predictions 2004). This will transform the productivity of all firms down to the smallest enterprise and create many new market opportunities for e-business services in the finance, accounting, security, facilities management, logistics, etc....
I believe we are at the start of a steep curve of growth of demand for content-rich, networked services. And, as the economics of networks tells us, the more these services grow and interconnect the more value they will create from each other.
Let us not forget the cost savings in the public sector. It is estimated that widespread adoption of e-Procurement could save 19€bn per year for purchasers. While, another new report estimates that the German public sector could save up to €27bn a year through full implementation of e-government.
Let me give a pause for thought. This same German report suggests that consistent exploitation of ICT productivity potential in Germany alone could achieve extra growth by around 75bn€ by 2008. Just imagine the growth we could generate if we were resolute enough to do this at a European scale! We would really be on the way to a high speed economy.
2) Broadband is the infrastructure of the high speed economy
If we want to achieve a high speed economy we also need a high speed knowledge infrastructure. My i2010 initiative, which was adopted by the Commission on 1 June last year and received a very warm welcome from the European Parliament, all 25 Member States and in particular by Industry, identifies digital convergence as a key driver of growth. But to get digital convergence in Europe we need infrastructures that are fast; that can support rich content; that are interoperable; and that are secure.
The purpose of this conference is to discuss exactly how we can achieve a high speed infrastructure for the knowledge economy. Let me give two examples of the need for speed:
a) Rich content services - such as on demand video - will require a lot more bandwidth than we have today as take-up rises.
b) As demand for interactive video rises, symmetrical bandwidth will be needed that today’s networks cannot offer.
The latest data indicates that broadband subscriptions continue to climb in Europe. In the year to October 2005, it grew nearly 60% in the 25EU Member States. This is good news. But the penetration rate is still only 11.5% of the population and this still does not compare well to other parts of the world (the United States, Japan and Korea), where there is not only higher penetration, but much higher speeds.
3) What are we doing about it? i2010
My i2010 initiative lays out a strategic framework for promoting an open and competitive European digital economy.
“i2010” aims to address the challenges posed by digital convergence by aiming at the “Creation of a Single European Information Space offering affordable and secure high bandwidth communications, rich and diverse content and digital services.”
Television without Frontiers: Some important steps have already been taken, last year I presented proposals for a modernisation of the rules for audiovisual media services that will create a single market framework for all types of TV services irrespective of the technology used to transmit or receive them. This common framework will raise legal certainty for investments in innovative services and thereby increase the choice for consumers. It will also encourage new multimedia business models by allowing, for example, a video-on-demand provider in Austria to deliver his services to all 25 EU Member States on the basis of Austrian law only, and without the need to respect at the same time 24 other legal regimes.
The modernisation of the EU’s TV rules is necessary because old market structures are breaking down. Broadcasters are selling telephony. Telecom operators are providing television services. The market is evolving and the decisions we take today will shape the TV of the future. Now is the moment to stimulate innovative TV gives us new services, greater choice, lower prices and higher quality. This is precisely what i2010 aims to do.
Infrastructure: If the priority for i2010 last year was modernising the audiovisual rules, this year my attention will be mainly on the review of the e-communications framework, thus on the infrastructure of the Information Society.
Evidently we are just at the start of the debate and I am not yet taking a position about this process which is open ended. But I would like to indicate to you the steps ahead:
Currently, I am evaluating how well the framework has met its objectives and whether the legislation will need changing to reflect technological or market developments. A ‘call for input’ has been launched on the existing framework: I am glad that many are profiting from this opportunity, that more than 400 experts from industry, governments, regulators and other interested parties have participated actively in a public workshop on this matter this Tuesday in Brussels, and I invite also you to submit your comment and reflections before 31 January 2006.
In July 2006, I will report to the European Parliament and the Council any regulatory changes that could be required, and indicate also the options to achieve the required changes. A second round of stakeholder consultation will follow on this basis and I aim to bring forward concrete legislative proposals, as needed, towards the end of the year.
In parallel, the Commission will review the recommendation on the markets that are susceptible to ex ante regulation. Where competition has emerged sufficiently I will propose that competition law and market forces replace such ex ante regulation.
4) Telecommunication services development: a European process
In my work on the review, I am still at the stage of evaluation. I can not yet give you answers. But I can tell you what I want: I want to make sure that we get the best conditions for investment and growth in e-communications markets in Europe. And I want to build on the successes of Europe as the world leader in communications in technology, infrastructure and services.
It is essential to remember that telecommunications and e-communications markets are becoming more European; a process which the European Commission has always promoted. More and more companies from one EU Member State are starting to invest in other EU countries. This is positive. It promotes competition and investment; two of the main objectives of the EU telecom framework.
However, let me make one point crystal clear: In our European internal market for e-Communications, the decision to find the right balance between competition and investment can no longer be solely a national decision.
This is why the EU Member States and the European Parliament agreed on common rules, joint principles and joint procedures at the end of the 1990s, and again in the review of the rules in 2002.
The European Commission is currently looking whether further adjustments are required. It is absolutely crucial that we all understand that this is a European process, and that the European Commission cannot tolerate fragmented national approaches which may favour only the former national incumbents and could thereby block the development of a true European eCommunications market.
5) The review: four questions we must ask.
A) Is competition the enemy of investment?
The answer is a resounding no!
Economics tells us that robust competition is the best way to ensure the long term innovativeness and choice for consumers.
But more convincing for me than economic theory is the empirical evidence. Competition is a driver of broadband adoption. The highest penetration rates are seen where there is facility-based competition, with head to head competition between cable and telephone networks.
Significant progress in unbundling local loops has stimulated also markets. This especially encouraging where effective regulation is stimulating competition in triple-play services.
But, the success story of 2005 was a threefold increase in shared access lines. This was directly due to appropriate regulatory intervention in countries such as the UK, France and Denmark.
To move forward, we must build on our current success in promoting competition. In particular, we must ask to what extent the framework incites or inhibits strong and sustainable competition and investment.
What we have seen from the implementation of the framework is a growth of competition in services. This can be deemed a success of these directives.
But we also note that adoption is highest where there is infrastructural competition. Does the regulatory framework always provide the right tools for promoting such competition? I have fears that the “ladder of investment” is missing some steps!
And this may get more important. With the growth of Internet Protocol services, the crucial point of competition will be high speed connection to the user. All the other services will depend upon this access. This is the new locus of competition for e-communications. If we don’t have competition at this point there is a danger that we will have to regulate for ever – and this is certainly not my intention. I firmly believe that sector-specific regulation can and should be phased out when we have achieved efficient and sustainable competition on the relevant markets.
In my view, regulation should promote competition, not monopolies. What, for example, is the role of ex-ante competition on certain high speed networks when effective facilities based competition emerges? Let me remind you, I am not in favour of regulation when competition is delivering. But I want so see clear commitments of all players that they will move to competition, and not allow to go backwards in time.
So the first question we have to ask is: are there regulatory steps that we can take to encourage stronger more sustainable competition and in particular more facilities-based competition?
B) Where is the single market for e-communications?
The set of directives on e-communication are meant to provide a common legal framework for e-communications across the EU. This is certainly positive as it helps to provide legal certainty and helps regulators to learn from each other.
But, our real aim is to give consumers the benefits of a large single market. When I look at the market structure, I see relatively little evidence of a single market emerging. Rather we have a lot of players at national level, responding to quite different national circumstances. There are signs of market consolidation and cross-border investments. But these are rather slight.
In addition, we see very different interpretations of the law in different countries. To some degree this makes sense – national regulators can reflect circumstances on the ground. But there is no built in convergence path that might encourage scale efficient provision of services and the emergence of robust and sustainable competition.
So second question we have to ask is: can we do more to promote the emergence of a single market for e-communications?
C) Is the framework too complex and bureaucratic?
The framework is widely seen as intellectually sound. But, with the large number of markets for national regulators to analyse (18) and the need to demonstrate that there are competition failures the system is heavy to implement.
Many countries, not always the smaller ones, argue that this places a heavy burden on them. Some analysts also that say that in the not so distant future many of these markets will become steadily less important, as IP services take over traditional switched networks. Thus should we already be starting to think about simplifying the market analyses? Is there scope for cutting red tape, in line with one of the central thrusts of the Barroso Commission?
The third question therefore that we have to ask is: Can the regulatory overhead be reduced, particularly by streamlining the market analyses and other procedures?
D) Is technological neutrality still valid?
Adopting technological neutrality is sage advice. We all know the examples where politicians have taken strong promotional stances behind particular technological solutions and where these have been significant failures. Our watchword today is: Let the market decide. Investors and consumers are risking their own funds, let them choose.
However, policy cannot afford to be completely blind. The choices that confront consumers and investors are often not technologically neutral. They reflect the existing investments in technologies and services and it is very difficult for disruptive technologies to enter the market.
The subject of your conference is an example. Fibre offers the fastest connection speeds currently available. And, in the United States, companies like Verizon are already replacing copper with fibre. In Europe, meanwhile, operators currently prefer the deployment of very fast DSL, using copper for the local loop. Critics point out that speeds are low in Europe, that we are lagging behind and that we are in danger of missing the train of economic development.
But let me remind you that, where competition is effective, speeds are improving. France is a good example: in September 2005 a new entrant was offering 20 Mega Bits per second and 93 video channels at the lowest subscription price in Europe.
The issue is that we have to be aware not only of competition between incumbent firms and new entrants, but also between incumbent and new potentially disruptive technologies.
The fourth question we should ask, therefore: is the way we implement the technology neutrality principle of the regulatory framework slowing down the roll out of innovative networks?
This conference is interested in fibre, but we might pose the question about other wireless services and hybrid solutions of fixed and wireless.
In particular, is the framework flexible enough to keep Europe in its leading position in the development of communication technologies, markets and services? Is it time to rethink our concept of technological neutrality in order to stimulate innovation and investment in innovative networks?
We see these investments happening in other parts of the world and I really fear that Europe is being left with a late 20th Century infrastructure to meet 21st Century challenges.
6) Conclusions
This is my first set of questions as regards the review of the regulatory framework for electronic communications.
When I launched i2010 last year I made a pledge to use my mandate in order to modernise the European Information Society. Last year I made my first major step on this road with my proposal to modernise the audio visual regime to take account of convergence.
The review of the e-coms framework is the second big step in this process. It will be my main focus for 2006. As you can see I am open to rather radical proposals.
Now is the moment for us to think openly because the regulations we are talking about are the backbone of the knowledge economy in Europe.
We have an economic duty to think ambitiously, to consider all alternatives and in the end to get it right. I look forward to your help and support in this exciting year ahead.
-----
Lots more articles and reviews like this are at http://www.ipods-and-onlinevideo-reviews.com.
Chip Tarver
Europe at High Speed: Growth and the Information Economy
Viviane Reding - 26 January 2006Fibre-To-The-Home CouncilVienna, 26 January 2006
Introduction
Ladies and gentleman, thank you for inviting me to address this Fibre-To-The-Home Council today.
The Commission has just adopted the first Annual Progress Report on the renewed Lisbon strategy on growth and jobs.
The worrying news is that Europe is faced with many challenges: slow growth, budget deficits, high unemployment, an ageing population and globalisation. If we want to be well off in the future, Europe has to get back on track as regards investment, innovation and productivity growth.
The good news is that it is possible to achieve these changes. The area I am responsible for – Information Society and Media – is a leading example of an area where we have a good starting position which will allow us to act.
1) Its official: ICT is the motor of growth.
What are the macro-economic headlines?
Today, ICT represents a modest, but growing, 6% of the EU economy. But this sector generates 25% of the EU’s growth and 40% of its productivity gains.
ICT is also transforming micro and sectoral level economics. Productivity gains at firm level through innovations such as e-procurement are transforming business performance. ICT creates new markets (and ways to re-energise mature markets). For example, last Friday the former Prime Minister of Finland, Esko Aho, submitted a report of a High-Level expert group to Commission President Barroso which identified digital content as one of seven key strategic areas for an Innovative Europe if Europe succeeds in finally overcoming the fragmentation of 25 different intellectual property right regimes.
Look also at the new services that are transforming existing business such as IPTV which is predicted to rise from 700,000 subscribers today to nearly 9 million by 2009.
New e-business web-services are predicted to be adopted by 90% of EU firms by 2010, up from the 20% we see today (IDC predictions 2004). This will transform the productivity of all firms down to the smallest enterprise and create many new market opportunities for e-business services in the finance, accounting, security, facilities management, logistics, etc....
I believe we are at the start of a steep curve of growth of demand for content-rich, networked services. And, as the economics of networks tells us, the more these services grow and interconnect the more value they will create from each other.
Let us not forget the cost savings in the public sector. It is estimated that widespread adoption of e-Procurement could save 19€bn per year for purchasers. While, another new report estimates that the German public sector could save up to €27bn a year through full implementation of e-government.
Let me give a pause for thought. This same German report suggests that consistent exploitation of ICT productivity potential in Germany alone could achieve extra growth by around 75bn€ by 2008. Just imagine the growth we could generate if we were resolute enough to do this at a European scale! We would really be on the way to a high speed economy.
2) Broadband is the infrastructure of the high speed economy
If we want to achieve a high speed economy we also need a high speed knowledge infrastructure. My i2010 initiative, which was adopted by the Commission on 1 June last year and received a very warm welcome from the European Parliament, all 25 Member States and in particular by Industry, identifies digital convergence as a key driver of growth. But to get digital convergence in Europe we need infrastructures that are fast; that can support rich content; that are interoperable; and that are secure.
The purpose of this conference is to discuss exactly how we can achieve a high speed infrastructure for the knowledge economy. Let me give two examples of the need for speed:
a) Rich content services - such as on demand video - will require a lot more bandwidth than we have today as take-up rises.
b) As demand for interactive video rises, symmetrical bandwidth will be needed that today’s networks cannot offer.
The latest data indicates that broadband subscriptions continue to climb in Europe. In the year to October 2005, it grew nearly 60% in the 25EU Member States. This is good news. But the penetration rate is still only 11.5% of the population and this still does not compare well to other parts of the world (the United States, Japan and Korea), where there is not only higher penetration, but much higher speeds.
3) What are we doing about it? i2010
My i2010 initiative lays out a strategic framework for promoting an open and competitive European digital economy.
“i2010” aims to address the challenges posed by digital convergence by aiming at the “Creation of a Single European Information Space offering affordable and secure high bandwidth communications, rich and diverse content and digital services.”
Television without Frontiers: Some important steps have already been taken, last year I presented proposals for a modernisation of the rules for audiovisual media services that will create a single market framework for all types of TV services irrespective of the technology used to transmit or receive them. This common framework will raise legal certainty for investments in innovative services and thereby increase the choice for consumers. It will also encourage new multimedia business models by allowing, for example, a video-on-demand provider in Austria to deliver his services to all 25 EU Member States on the basis of Austrian law only, and without the need to respect at the same time 24 other legal regimes.
The modernisation of the EU’s TV rules is necessary because old market structures are breaking down. Broadcasters are selling telephony. Telecom operators are providing television services. The market is evolving and the decisions we take today will shape the TV of the future. Now is the moment to stimulate innovative TV gives us new services, greater choice, lower prices and higher quality. This is precisely what i2010 aims to do.
Infrastructure: If the priority for i2010 last year was modernising the audiovisual rules, this year my attention will be mainly on the review of the e-communications framework, thus on the infrastructure of the Information Society.
Evidently we are just at the start of the debate and I am not yet taking a position about this process which is open ended. But I would like to indicate to you the steps ahead:
Currently, I am evaluating how well the framework has met its objectives and whether the legislation will need changing to reflect technological or market developments. A ‘call for input’ has been launched on the existing framework: I am glad that many are profiting from this opportunity, that more than 400 experts from industry, governments, regulators and other interested parties have participated actively in a public workshop on this matter this Tuesday in Brussels, and I invite also you to submit your comment and reflections before 31 January 2006.
In July 2006, I will report to the European Parliament and the Council any regulatory changes that could be required, and indicate also the options to achieve the required changes. A second round of stakeholder consultation will follow on this basis and I aim to bring forward concrete legislative proposals, as needed, towards the end of the year.
In parallel, the Commission will review the recommendation on the markets that are susceptible to ex ante regulation. Where competition has emerged sufficiently I will propose that competition law and market forces replace such ex ante regulation.
4) Telecommunication services development: a European process
In my work on the review, I am still at the stage of evaluation. I can not yet give you answers. But I can tell you what I want: I want to make sure that we get the best conditions for investment and growth in e-communications markets in Europe. And I want to build on the successes of Europe as the world leader in communications in technology, infrastructure and services.
It is essential to remember that telecommunications and e-communications markets are becoming more European; a process which the European Commission has always promoted. More and more companies from one EU Member State are starting to invest in other EU countries. This is positive. It promotes competition and investment; two of the main objectives of the EU telecom framework.
However, let me make one point crystal clear: In our European internal market for e-Communications, the decision to find the right balance between competition and investment can no longer be solely a national decision.
This is why the EU Member States and the European Parliament agreed on common rules, joint principles and joint procedures at the end of the 1990s, and again in the review of the rules in 2002.
The European Commission is currently looking whether further adjustments are required. It is absolutely crucial that we all understand that this is a European process, and that the European Commission cannot tolerate fragmented national approaches which may favour only the former national incumbents and could thereby block the development of a true European eCommunications market.
5) The review: four questions we must ask.
A) Is competition the enemy of investment?
The answer is a resounding no!
Economics tells us that robust competition is the best way to ensure the long term innovativeness and choice for consumers.
But more convincing for me than economic theory is the empirical evidence. Competition is a driver of broadband adoption. The highest penetration rates are seen where there is facility-based competition, with head to head competition between cable and telephone networks.
Significant progress in unbundling local loops has stimulated also markets. This especially encouraging where effective regulation is stimulating competition in triple-play services.
But, the success story of 2005 was a threefold increase in shared access lines. This was directly due to appropriate regulatory intervention in countries such as the UK, France and Denmark.
To move forward, we must build on our current success in promoting competition. In particular, we must ask to what extent the framework incites or inhibits strong and sustainable competition and investment.
What we have seen from the implementation of the framework is a growth of competition in services. This can be deemed a success of these directives.
But we also note that adoption is highest where there is infrastructural competition. Does the regulatory framework always provide the right tools for promoting such competition? I have fears that the “ladder of investment” is missing some steps!
And this may get more important. With the growth of Internet Protocol services, the crucial point of competition will be high speed connection to the user. All the other services will depend upon this access. This is the new locus of competition for e-communications. If we don’t have competition at this point there is a danger that we will have to regulate for ever – and this is certainly not my intention. I firmly believe that sector-specific regulation can and should be phased out when we have achieved efficient and sustainable competition on the relevant markets.
In my view, regulation should promote competition, not monopolies. What, for example, is the role of ex-ante competition on certain high speed networks when effective facilities based competition emerges? Let me remind you, I am not in favour of regulation when competition is delivering. But I want so see clear commitments of all players that they will move to competition, and not allow to go backwards in time.
So the first question we have to ask is: are there regulatory steps that we can take to encourage stronger more sustainable competition and in particular more facilities-based competition?
B) Where is the single market for e-communications?
The set of directives on e-communication are meant to provide a common legal framework for e-communications across the EU. This is certainly positive as it helps to provide legal certainty and helps regulators to learn from each other.
But, our real aim is to give consumers the benefits of a large single market. When I look at the market structure, I see relatively little evidence of a single market emerging. Rather we have a lot of players at national level, responding to quite different national circumstances. There are signs of market consolidation and cross-border investments. But these are rather slight.
In addition, we see very different interpretations of the law in different countries. To some degree this makes sense – national regulators can reflect circumstances on the ground. But there is no built in convergence path that might encourage scale efficient provision of services and the emergence of robust and sustainable competition.
So second question we have to ask is: can we do more to promote the emergence of a single market for e-communications?
C) Is the framework too complex and bureaucratic?
The framework is widely seen as intellectually sound. But, with the large number of markets for national regulators to analyse (18) and the need to demonstrate that there are competition failures the system is heavy to implement.
Many countries, not always the smaller ones, argue that this places a heavy burden on them. Some analysts also that say that in the not so distant future many of these markets will become steadily less important, as IP services take over traditional switched networks. Thus should we already be starting to think about simplifying the market analyses? Is there scope for cutting red tape, in line with one of the central thrusts of the Barroso Commission?
The third question therefore that we have to ask is: Can the regulatory overhead be reduced, particularly by streamlining the market analyses and other procedures?
D) Is technological neutrality still valid?
Adopting technological neutrality is sage advice. We all know the examples where politicians have taken strong promotional stances behind particular technological solutions and where these have been significant failures. Our watchword today is: Let the market decide. Investors and consumers are risking their own funds, let them choose.
However, policy cannot afford to be completely blind. The choices that confront consumers and investors are often not technologically neutral. They reflect the existing investments in technologies and services and it is very difficult for disruptive technologies to enter the market.
The subject of your conference is an example. Fibre offers the fastest connection speeds currently available. And, in the United States, companies like Verizon are already replacing copper with fibre. In Europe, meanwhile, operators currently prefer the deployment of very fast DSL, using copper for the local loop. Critics point out that speeds are low in Europe, that we are lagging behind and that we are in danger of missing the train of economic development.
But let me remind you that, where competition is effective, speeds are improving. France is a good example: in September 2005 a new entrant was offering 20 Mega Bits per second and 93 video channels at the lowest subscription price in Europe.
The issue is that we have to be aware not only of competition between incumbent firms and new entrants, but also between incumbent and new potentially disruptive technologies.
The fourth question we should ask, therefore: is the way we implement the technology neutrality principle of the regulatory framework slowing down the roll out of innovative networks?
This conference is interested in fibre, but we might pose the question about other wireless services and hybrid solutions of fixed and wireless.
In particular, is the framework flexible enough to keep Europe in its leading position in the development of communication technologies, markets and services? Is it time to rethink our concept of technological neutrality in order to stimulate innovation and investment in innovative networks?
We see these investments happening in other parts of the world and I really fear that Europe is being left with a late 20th Century infrastructure to meet 21st Century challenges.
6) Conclusions
This is my first set of questions as regards the review of the regulatory framework for electronic communications.
When I launched i2010 last year I made a pledge to use my mandate in order to modernise the European Information Society. Last year I made my first major step on this road with my proposal to modernise the audio visual regime to take account of convergence.
The review of the e-coms framework is the second big step in this process. It will be my main focus for 2006. As you can see I am open to rather radical proposals.
Now is the moment for us to think openly because the regulations we are talking about are the backbone of the knowledge economy in Europe.
We have an economic duty to think ambitiously, to consider all alternatives and in the end to get it right. I look forward to your help and support in this exciting year ahead.
-----
Lots more articles and reviews like this are at http://www.ipods-and-onlinevideo-reviews.com.
Chip Tarver
posted by Chip Tarver at
1:01 PM
