Boundaries blur in info-society

Date: 12/12/1996

By Tim Jones

LIKE competence, subsidiarity or co-decision, 'convergence' has turned into one of those Euro-buzzwords which trip off the tongues of insiders in the EU's corridors of power, but mean very little to ordinary human beings.

Ninety-nine times out of 100, the word is used with reference to economic policy - but now it is coming to the information sector.

For the European Commission's regulators, it has a very real meaning and one which will become increasingly plain to citizens before the end of the century.

Once upon a time, there was the telephone and its infrastructure in one compartment, computers in another, television in a third and letter-writing in a fourth.

They touched on each other occasionally, but were essentially separate - people used the phone to speak to each other, posted letters if the phone was inadequate, used their computers to calculate or type and watched whatever television programmes the broadcasters chose to schedule.

The past few years have seen a technological revolution.

Telecommunications have started to become the infrastructure through which almost everything else operates. Faxes can be used via phone lines to replace or supplement post, computers can speak to each other and to fax machines, and the arrival of online services and the Internet is challenging television on its home ground.

The audio-visual and telecoms worlds are truly converging, but their regulatory regimes are wholly different.

“Convergence is the next regulatory frontier after telecommunications,” says a Commission official. “But if you say that to governments who are changing their telecoms environment, with everything that entails, it frightens the hell out of them. They have no sooner come out of these battles than they will have a new one on their hands.”

Regulators are facing three inter-related conundra.

Digital television offers the opportunity to expand broadcasting capacity from a handful of channels to many hundreds. This increases the incentive for big incumbent firms - be they publishers, telecoms operators or media owners - to take exclusive control of content or limit competitors' access to audiences through the development of proprietary decoding technology.

The growth of online systems, in particular the Internet, has raised questions about the control of content but also, with the improvement of their visual technologies, whether they should be treated in the same way as television services.

As they jostle for position within these markets, firms are changing the nature of their alliances. So-called 'horizontal' coalitions such as Concert or Global One, which combined to improve services in one aspect of the market, are turning increasingly 'vertical'. Companies want to be able to control an information service from the point of production of content through to its distribution and delivery.

Firms involved in pay-TV ventures, for example, are desperate to get their hands on huge film and television libraries - such as that of Germany's Kirch - which can then be broadcast on their networks and even delivered via their boxes.

Even though the Commission knows that this converging market has to be regulated to prevent the formation of monopolies or oligopolies, it is treading a careful path with member states.

“Those working on the convergence dossier have to recognise the need not to destabilise the environment,” said one official. “We must not give the impression to the existing stakeholders that their world is falling apart.”

As a result, a Green Paper on the regulatory aspects of convergence of audio-visual and telecoms services which was expected by the industry before the end of this year will not be completed until next summer.

When a revision to the Television Without Frontiers Directive was first mooted, the Commission needed to buy off those calling for the new online services to be included in the updated proposal. It did so by promising to come forward with a consultative paper on these services and their relationship with telecoms and the audio-visual market.

While Audio-visual Commissioner Marcelino Oreja has already produced a paper covering some of the relevant aspects - including countering depictions on the Internet of violence and the abuse of children - no general paper on competition issues has been published.

Distilling this huge subject into a 25-page consultative report takes time, particularly since the issues cross the Commission's own frontiers, involving officials in the Directorates-General for telecoms (DGXIII), the internal market (DGXV), information (DGX), and competition (DGIV).

However, the problem with the lack of an overall framework for the regulation of information services is that DGIV has to assume the role of gatekeeper for this emerging market. Policing the moving targets has to be left in the hands of anti-trust investigators and they, in turn, have to make policy on the hoof.

But the outlines of a policy have already been drafted for the Commission by consultants KPMG and Ashurst Morris Crisp. Their report points out that the trend towards 'vertical' integration of companies should not necessarily be discouraged since it could well promote economic efficiency.

But it warns that governments and the EU authorities should nevertheless be vigilant in ensuring that conditional access to systems is not abused by infrastructure owners and that services can be operated on alternative networks.

The ownership of rights to content need not be a bad thing, the report concludes, but governments will have to decide at what point the prices charged for access to them become usurious.

In all these areas - telecoms, broadcasting and online services - the costs of entering the market as a new competitor tend to be prohibitive at the moment, so competition will be imperfect for several years and DGIV will have to watch developments closely.

Once the number of competitors starts to rise, many of the market's teething problems should be solved on their own - but no regulator is going to take the risk of leaving the development of a brand new market in the clutches of the incumbent players.