New drive on info highway

Date: 23/11/1995

By Tim Jones and

Fiona McHugh

INFORMATION, awarded a hallowed status within the decision-making institutions of the EU in recent years, will be centre stage again next week as a meeting of telecoms ministers coincides with a major conference on the future of information technology.

The economic reform framework which became the 1993 White Paper on Growth, Competitiveness and Employment pinpointed the information industries as crucial to Europe's future if it were to cope with the competitive challenge from not only the US and Japan, but also from emerging manufacturing economies.

Telecommunications, media and information technology all offered huge scope for growth in high-skilled jobs. This was an area where the Union could feasibly compete without having to fight solely on cost reduction, where it was always going to come second to Asian tigers.

The growth of complex data transmission systems for companies and access for individuals to electronic data exchange, interactive television, home shopping, video-on-demand and video-conferencing are opening up a whole new world to Europe's citizens.

The Commission christened these concepts and technologies the 'information society', suggesting that information has become a basic resource and that those without - or with only restricted access to - its technologies would lose out.

“The competitiveness of the European economy will, to a great extent, depend both on the conditions of utilisation and on the development and application of these technologies,” the White Paper said.

The 'information society' will be in the Brussels spotlight once again next Monday (27 November). In one part of town, the European Commission is hosting a three-day conference on information technology, looking at its application in various industrial sectors, opportunities for small companies, regulation and data protection for citizens.

On the same day, the Justus Lipsius building will play host to a vital meeting of the EU telecommunications ministers. With the 1998 deadline for the liberalisation of basic telephony services looming, ministers will try to wade through a mountain of unfinished business.

At the top of the list will be two Open Network Provision (ONP) directives, which will set the regulatory scene for a liberalised market. One forces national operators to allow rivals to hook up to their networks on fair terms. The second lays the ground rules for liberalised voice telephony services, setting price targets, billing procedures and non-discriminatory access to networks for all operators.

Revised versions of two other ONP directives - one on leased lines and the other a framework law - will be discussed for the first time.

The new framework directive obliges governments involved in the day-to-day running of telecoms businesses to be stripped of their regulatory function. At the moment, the two roles are often performed by the same department in the Post, Telegraph and Telecoms (PTT).

The idea is to prevent governments from using regulatory power to bolster dominant positions enjoyed by state-owned telephone companies.

The other draft directive would relax certain requirements which increased competition would make redundant. For instance, companies would no longer be forced to publish rental price changes in advance.

Troubled plans to allow alternative networks run by railways, electricity and other utility companies to compete with telecoms companies will return to the ministers' table.

This aspect of liberalisation, which was supposed to happen on 1 January 1996, is now unlikely to take place before July next year. This is partly because the Commission took longer than expected to adopt the draft and partly because France and Germany insisted they would not comply with the Commission's wishes.

But by threatening to block a huge business communications joint venture between Deutsche Telecom and France Télécom, dubbed 'Atlas', the Commission managed to force the hand of both. As a result, the German and French networks will be opened by next summer.

The approval of 'Atlas' was vital to the interests of French and German national operators. As the market liberalises, the scope for profits growth in basic telephone services is shrinking.

This has fuelled competition between European telecommunications companies for a slice of lucrative new markets: business communications, data transmission and multimedia.

At a first glance, evidence suggests that Europeans are streaming onto the information highways to avoid being left out and firms are keen to attract this new kind of consumer.

Personal computer sales are booming, with 10 million in Europe already and another 3.6 million expected to be bought next year. Sales of modems, the key to allowing a PC to communicate, rose 40&percent; last year.

The US market is more developed and the Commission is anxious to nurture Europe's superhighways at a time when US companies are threatening to take the market by storm.

Microsoft's trumpeted 'Windows 95' also offers access to the commercial on-line service Microsoft Network (MSN), causing concern that a company which dominates the running of personal computer software could also stitch up access to information networks.

MSN's biggest established competitor is CompuServe, which has operated in Europe for five years and has more than 300,000 subscribers, in addition to the three million in the US.

Europe On-line, a venture of several leading European publishing houses, has had a troubled birth but has finally confirmed that it will begin services in English, French and German from 15 December.

Aiming to attract three million subscribers over five years, Europe On-line will provide a gateway to link personal computers with a range of on-line services such as home shopping, travel details, banking and educational services and interactive games.

The venture has suffered from rapid turnover among its shareholders. While Germany's Burda and the UK's Pearson have stayed on board, the French publishing group Matra-Hachette and Axel Springer of Germany have pulled out.

With all this activity going on, some recent evidence suggests the immediate prospects for this market may not be as lucrative as had been previously envisaged.

Research company Inteco warns cable, satellite and telecoms companies against relying on a rapid take-up of multimedia offerings such as video-on- demand and home shopping.

In a study of 11,500 personal computer users in the UK, Italy, France and Germany, Inteco found a generally sceptical public. Interactive television could be as far as ten years away, since most people intend to use their personal computers to access these multimedia services.

“One of the major barriers to interactive services is simply that existing delivery media from newspapers through to broadcasting do their jobs very well,” said Inteco.

“The trouble that would-be competitors all face is that they are having to cram into a year or so what newspapers have taken 250 years to perfect.”

Adam Daum, an Inteco consultant who helped compile the study, warned that the cost of creating superhighway infrastructures could be prohibitive in the next few years.

“Video-on-demand would not be sufficient to fund the superhighway so the television is unlikely to emerge as a serious multimedia platform,” he said.