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Brussels, 3rd February 2004

Connecting Europe at high speed: recent developments in the electronic communications sector

The importance of investment and use of information and communication technologies (ICTs) for further growth and jobs in Europe is highlighted in a communication adopted by the Commission today in the run up to the Spring European Council. It underlines the importance of the electronic communication sector for the health of the European economy and its key role in boosting productivity. Further growth will be driven by the provision of new services over high-speed fixed and wireless networks making use of broadband and 3G mobile communications, while policy makers must do more to create the conditions for faster investment. The report singles out the implementation of the new regulatory framework for electronic communications, action to extend broadband coverage in underserved areas, stimulating demand and the successful role out of third generation mobile communications as top priorities. This should be supported by the on-going mid-term review of the eEurope 2005 Action Plan.

"If the Union is to maximise the impact of the Information Society as the engine for growth, productivity and jobs, we have to create the right climate for further investment, said Enterprise and Information Society Commissioner Erkki Liikanen. "Our report takes the temperature of the sector. It shows considerable improvement over the last year, largely due to continuing growth in mobile, broadband and Internet services. For 2004, demand for mobile data services may replace broadband as a key force for recovery. The regulatory framework and technologies are now there, but to exploit their full potential what we now need is clear and renewed political commitment at the highest level to making eEurope a reality".

After two years of consolidation following the sharp downturn in 2000-2001, conditions now seem right for the sector to grow more strongly. The electronic communications sector expanded modestly in 2003. Revenues are estimated to have grown by 2.6%, a rate comparable to that of nominal GDP. Most of the overall increase in revenues came from mobile services, but broadband and Internet services also continued to expand. The number of broadband connections doubled in the twelve months to October 2003 to almost 20 million connections across the EU. However, level of broadband subscriptions varies considerably across Member States, showing that action continues to be needed to avoid a widening digital divide. 3G services also started to make their presence felt with around 500,000 subscribers spread across five Member States. By the end of 2004 more than forty 3G networks should be providing commercial services fuelled by demand for high speed data access for e-mails, internet, and on-line services while on the move.

Further improvement will depend on whether investment in ICTs picks up. Since the burst of the Internet bubble, telecom operators have been reducing capital expenditure as part of their consolidation plans. A return to renewed growth for the whole sector requires a revival in capital spending. The rate of investment will be affected by what public policy makers do: the implementation of the new regulatory framework will provide greater legal certainty for investment: the implementation of national broadband strategies will create additional demand, and the removal of regulatory and technical barriers will facilitate the roll-out of 3G networks.

This is why four priority areas for action are identified in the Commission's report:

Addressing regulatory challenges. Late or incorrect transposition by Member States of the new regulatory framework for electronic communications is holding back competition and creating uncertainty. Infringement proceedings are underway against a number of Member States who have failed to transpose the new measures. Securing full and effective implementation of these rules by both existing and the new Member States remains a top priority for 2004. In addition, the new rules must be applied consistently by national regulatory authorities. The common guidelines due later this year on the remedies that may be imposed on operators with significant market power will be of particular importance. They should help regulators to provide the right investment incentives and to ensure that emerging markets are not subject to inappropriate obligations.

Increasing broadband coverage in underserved areas. Within the eEurope Action Plan, Member States agreed to publish national broadband strategies by the beginning of this year. Denmark, Finland, Greece, Italy, the Netherlands, Portugal, Spain, Sweden and the UK, as well as Poland, have all finalised these strategies. A particular focus should be identifying areas that risk being placed in the slow lane of the information society because of insufficient demand to justify the roll out of broadband services. EU funding may play a role alongside action at a national, regional or local level. Guidelines exist on how structural funds can be used in such areas. The exchange of best practice and innovative solutions will be helped by the creation of a Forum on the Digital Divide later this year. The Commission will also report on those national strategies by the summer.

Stimulating demand. While the majority of households in the EU can access broadband, only a fraction of them have chosen to do so. Use rather than roll out looks set to become the biggest issue for the broadband market. Experience of countries with the highest levels of broadband take up show the importance of effective network-based competition to drive down prices and promote innovative on-line services. In addition, action by Member States to stimulate demand can also play a role. They are promoting the use of ICTs within more and more key services local and national government, health and education - and shifting them on-line. This must be accompanied by further steps to address security, digital rights management and the interoperability of different services and devices. The mid-term review of the eEurope 2005 Action Plan, due to be completed by the Summer, provides an opportunity for further support.

Successfully launching third generation mobile communications. The report of the Mobile Communications and Technology Platform set out a strategic vision of key sector players for the future of mobile services, by highlighting a range of commercial and regulatory challenges (see IP/04/23). This converged, data-driven 3G world will be more complex than the voice-based world of GSM. If mastered this can offer exciting new services and a significant boost to productivity in the Union. The Commission will set out its approach later this year and will continue to work with stakeholders to define strategic research priorities in the mobile communications area.

The Communication can be found at:


1. Implementation of the regulatory framework

The Regulatory framework for electronic communications came into force on 25 July 2003. It comprised a framework directive and four directives covering authorisations, universal service, access and interconnection. In early October 2003 the Commission launched infringement proceedings through letters of formal notice against eight Member States (Belgium, France, Germany, Greece, Luxembourg, the Netherlands, Portugal and Spain).

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