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Erkki LIIKANEN Member of the European Commission responsible for Enterprise and the Information Society "IT in the future eEurope" Comité européen des assurances Helsinki, 15 June 2001

European Commission - SPEECH/01/290   15/06/2001

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SPEECH/01/290

Erkki LIIKANEN

Member of the European Commission responsible for Enterprise and the Information Society

"IT in the future eEurope"

Comité européen des assurances

Helsinki, 15 June 2001

1. EUROPE IN THE INTERNET AGE

Ladies and gentlemen,

One and a half year ago, there wasn't much optimism regarding Europe's position in the information age. Progress in the take up of the Internet and digital technologies was slow. Europe seemed bound to fall behind its main trading partners. But things have changed. Today, the overall picture is very positive. Progress in the last year has been striking:

Internet penetration is growing fast. About a third of EU households are now connected to the Internet, and close to 40% of the EU population uses the Internet. The gap with the USA remains but it is narrowing. A growing number of EU countries have similar or superior usage levels. The main source of concern are the important discrepancies between EU countries.

Mobile phone penetration is growing even faster. In May, there were 256 million cellular users in Europe, which represents 68% of the EU population. This compares to a 43% mobile penetration in the US population. All EU countries have high take-up levels. Mobile phones have really become part of Europeans' lifestyle. Mobile communications are therefore important from two points of view:

  • First, they are set to become a major platform for Internet access maybe "the" major platform when the Internet gets mobile. The current upgrade of GSM networks with GPRS technology, which allows for faster transmission and always-on connections, will give it a major boost. This will ease the transition to the next generation of fully-fledged multimedia mobile communications: UMTS.

  • Second, mobile communications are likely to be a key factor for cohesion between EU Member States in the information society. Indeed, unlike in the Internet, discrepancies are very limited between EU countries.

Alternative ways to connect to the Internet are also rapidly gaining momentum in Europe: PDAs, game consoles, TV set-top boxes, etc.

Digital TV is of particular importance and grows very rapidly in Europe: the number of digital TV households has increased from 10 to 14 million between 1999 and 2000. The penetration rate is now above 10% of European TV households. This will help bringing the Internet and e-commerce to users who otherwise wouldn't get on-line because they don't own a computer or because they don't feel comfortable using one.

Of course, digital TV doesn't necessarily mean full Internet access: that depends on the set-top box and the type of connection. But digital TV subscriptions increasingly include an array of innovative interactive services based on the TV set: email, news on demand, near video-on-demand, TV shopping, access to selected Internet sites, etc.

High-speed Internet connections are also taking-off in Europe. Europe has a head-start in faster Internet: over 15% of connected households have an ISDN line. Of course, ISDN isn't broadband. Yet it creates a strong market basis for its natural follower: ADSL. The development of ADSL is further stimulated by the Union's recent legal initiatives I will come back to that.

In parallel, the high rate of cable TV penetration in several EU countries is very favourable ground for the development of cable modems. Europe is also doing well on this account.

To sum up, what we are seeing today is the emergence of a specific European information society. It is not PC-centric. On the contrary, it is increasingly diversified. With computers, mobile terminals and digital TV, we can look forward to soon getting close to a 100% Internet penetration in Europe.

Different access terminals will correspond to different places of use as well as different usage patterns, allowing users to get on-line anytime, anywhere, anyhow, for any purpose. The underlying vision is that of "an information society for all", and at the same time, "everybody his or her own information society".

2. THE eEUROPE CONTRIBUTION

This dynamic picture doesn't come out of the blue. It corresponds to a radical change of atmosphere in Europe. Gloom and pessimism are no longer on the agenda. The economic and social situation is very favourable in Europe, though we always have to remain vigilant. What's more, the importance of the Internet is now recognised by all EU governments and the public. So is the contribution of the knowledge-based economy to competitiveness, growth and employment.

This is a product of the eEurope initiative which the European Commission launched in December 1999. eEurope came at the right time. For the first time ever, EU leaders devoted a large part of their summit to the information society. They asked the Commission to prepare an eEurope Action Plan to speed up Europe's entry into the knowledge-based economy.

With eEurope, Europe has moved into the next gear:

  • For the first time, there is true integration of actions undertaken by the Union and by the Member States. This is the only way to achieve coherence between the respective paces and policies of the different EU countries. The way things were going, the digital gap between EU countries was only going to widen.

  • This integrated EU approach is reflected in the setting of common goals to be implemented at national level by all Member States by the end of 2002. This includes ambitious targets in areas where EU intervention is limited, such as education and training.

  • To ensure a thorough implementation of the eEurope Action Plan, EU leaders have asked the Commission to benchmark the progress achieved at national level in pursuing the eEurope objectives. This puts Member States under pressure to meet their commitments by the given deadline.

3. COMPLETING EU TELECOMS LIBERALISATION

As far policy measures are concerned, the EU telecoms policy remains the main building block of our information society strategy. The launch of the EU policy telecoms policy dates back to 1987, but its three core objectives remain perfectly valid today:

  • First, liberalise the market segments under monopoly.

  • Second, harmonise the European market through common rules.

  • Third, strictly apply EU competition rules to liberalised segments of the market. The aim is to prevent collusive agreements, abuse of dominant positions or the creation of dominant positions.

The EU telecoms liberalisation process culminated in 1998 with the full liberalisation of services and infrastructures. Thanks to competition, telecoms services have become the fastest growing sector of the European economy, with an overall growth rate of 12.6% in 2000.

Competition keeps intensifying, leading to lower prices, more choice and better quality of service. Liberalisation also had a positive impact on incumbent operators, turning them into innovative companies that expand into new market segments, particularly the Internet, as well as internationally.

We have achieved a lot, but much remains to be done to create a level-playing field for all competitors:

  • This is particularly the case in local communications, which remain largely dominated by former monopolies.

  • Furthermore, the EU telecoms market remains fragmented along national lines. This was, for instance, illustrated by incoherence in the licensing process for next-generation mobile services.

To overcome these obstacles, the Commission last summer tabled proposals for a new regulatory framework for electronic communications. The aim is to have this new telecoms package adopted in 2001, so that the new framework is in place by early 2002:

  • The new telecoms package aims to streamline the existing framework, which is the result of a complex procedure over more than a decade.

  • It would adapt the existing framework to the Internet-driven convergence between telecoms, computers and the media.

  • The telecoms framework would also incorporate a new area of responsibility: Radio spectrum. Radio spectrum, which is for instance used for wireless telecoms or broadcasting, is of growing economic importance. But airwaves are a scarce resource. Their use must be optimised. This requires a coordinated EU approach, both at European and international level.

As a first step in this process, a major piece of legislation already came into force in January 2001: the unbundling of the local loop. Unbundling means that new entrants no longer have to construct their own network to enter the local market. Instead, they can use the local network of the former monopolies under fair conditions.

The resulting competition will drive tariffs down and encourage innovation in Internet access. We already see the rapid emergence of competition in flat-fee, high-speed Internet based on ADSL a technology which allows for fast Internet access over regular telephone wires.

Furthermore, given the importance of mobile communications in Europe, it is absolutely vital to achieve a timely rollout of next-generation high-speed mobile systems. But inconsistencies in the attribution of UMTS licenses have created uncertainty. EU leaders at their Stockholm Summit, in March, gave reassurance to the market that things will happen quickly and smoothly.

They made a commitment to adopt firm policy measures that will ensure faster and smoother deployment of next-generation mobile systems. A further commitment concerns the accelerated introduction of the new Internet Protocol, IPv6, that will enhance the diversity and quality of third-generation mobile services. EU leader also committed themselves to supporting the development of European multilingual content for new mobile services.

4. ACCOMPANYING MEASURES

Revolving around the telecoms policy are a number of very important policy areas. Some are necessary complements to the telecoms liberalisation. Indeed, competition alone will not be enough to ensure widespread Internet take-up in Europe.

This is the case, in particular, regarding a high level of security and privacy protection on the Internet. All the same, European citizens must be able to find diversified and high-quality contents in their own language on the Internet.

Other policy areas will directly benefit from the telecoms liberalisation process but may requires additional, targeted measures.

This is the case for social inclusiveness in the information age. A cheaper Internet will contribute to universal Internet access but won't solve all problems. Similarly, competition will contribute to stimulating on-line public services. Indeed, the greater the number of citizens on-line, the greater the pressure on public services to deliver state of the art on-line services. But again, that won't be enough.

The eEurope Action Plan addresses these issues.

In some areas, the EU itself is in the front line:

This is the case regarding security and privacy, for which extensive EU-wide legislation has been approved. This covers the protection of personal data, the free trade of encryption products between Member States, the lawfulness and mutual recognition of electronic signatures. Proposals will be submitted regarding the fight against cyber-crime and a common policy approach for network and information security.

The EU is also finalising the Internal Market for e-commerce. The aims is to combine, on the one hand, the high degree of safety and confidence for consumers and businesses which only legislation can secure; and on the other hand, the benefit of having as little legislation as possible to avoid creating obstacles to market development. Striking the right balance necessitates to clearly identify what is essential, and what is not.

Fundamental principles must be upheld through legislation in essential areas such as personal data, privacy, copyrights, legal responsibility, illegal and harmful content, cybercrime, taxation, etc. Industry is encouraged to be in charge of non-essential areas, for instance through codes of good conduct or alternative dispute resolution mechanisms. Legislation must also give industry the freedom to choose the most suitable technology to respect their legal obligations.

In other areas, the main responsibility rests with the Member States. This is particularly the case regarding education and training, the fight against social discrepancies, e-government, e-health, transports and culture.

However, accompanying measures have been adopted at EU level. They are often small programmes with maximised Community added-value, for instance eContent, or programmes aimed at better co-ordinating all available Community instruments to maximise their impact, for instance eLearning.

The main contribution by far comes from the EU's research programmes. Information Society Technology Programme, which supports the development of technologies and applications in all of the areas covered by the eEurope Action Plan: security and privacy-enhancing technologies, applications for the disabled, sick and elderly, e-government and e-democracy, new technologies and applications for transport and health, etc.

EU research played an instrumental role in the development of pan European standards for cellular mobile communications and digital TV. This was key to market expansion. For instance, the existence of a single, Europe-wide and now international high-quality standard for mobile telephone, has triggered the commercial and societal success of GSM in Europe.

IST research in the 6th Framework Programme for 2002 to 2006 will pursue these efforts. The keywords will remain: economic competitiveness, sustainable growth, quality of life, and social inclusiveness.

5. THE CHALLENGES OF THE GLOBAL DIMENSION

I believe it is fair to say that Europe is now on the right track. Yet there are still major challenges ahead of us. I believe the main ones are related to the global nature of the Internet.

Cyberspace is not, and cannot be a law free zone. I have indicated before how the EU regulates only on essential matters and is limiting rules to the necessary minimum. However, the difficulty is to apply rules in cyberspace. It is a realm that ignores existing jurisdictions based on physical borders. In these conditions, any national or EU rule can be easily circumvented.

No individual government can regulate the Internet in isolation. Efficient rules in cyberspace require a common framework at international level. Of course, this is an easy thing to say but a lot more difficult to realise. In practice, it is difficult to find a common approach at global level. At best, it is a lengthy process. At worse, it is impossible.

This is no surprise the diversity of political and cultural values. Even between countries that cherish the same democratic values there may be differences of interpretation or perception which might become insurmountable obstacles. This was recently illustrated by the Yahoo! France case, which also pointed at other shortcomings in the international landscape: lack of common rules, lack of cooperation between countries, as well as between industry and government.

This calls for a very pragmatic approach. Whenever possible, we must support multilateral solutions, in particular within the UN system of organisations and the OECD, even if they are limited to minimum rules or essential principles. Where applicable, we must encourage global business solutions, in particular the work of the Global Business Dialogue on electronic commerce (GBDe).

If no global solution can envisaged, whether or regulatory or self-regulatory nature, we must go for bilateral solutions. These may also be useful and more ambitious complements to international agreements, especially with our major trading partners. To this end, and whenever possible, EU legislation embeds international cooperation mechanisms, for instance for the mutual recognition of electronic signatures.

Let me mention two practical examples of international cooperation: copyrights and privacy.

The EU has recently adopted a landmark directive on copyright and related rights in the information society. The directive, which is to enter force before the end of 2002, is one of the last piece of the Internal Market for e-commerce jigsaw puzzle.

The directive is the result of three years of intense discussions aimed at finding a balance between the interests of right holders, rights exploiters and consumers. Its ultimate goal is to stimulate creativity and innovation by ensuring effective protection throughout the Internal Market of all works protected by copyright. This should boost the development of e-commerce in of digitised goods and services.

A key aspect of the copyright directive is that its adoption was a prerequisite for the ratification by the Community of the WIPO Copyright Treaty and the WIPO Performance and Phonogram Treaty. The two treaties were adopted in December 1996 to update existing rules, some of which are more 30, to the requirements of the digital age.

Another particularly hot issue is privacy. The way in which it is addressed will largely determine the future of business-to-consumer e-commerce. On-line retailers want to collect data about their consumers, and track their purchasing habits in order to better target their sales. Yet at the same time, retailers have to respond to growing consumers demands for control over their private data.

A trade-off must be found. The EU approach regarding privacy could set an example. Based on a close collaboration with all parties, it has established a number of user rights. They are technology neutral. It is up to industry to develop mechanisms to enforce them.

The Directive on personal data protection, which entered into force in 1998, grants individuals the right to access personal data and rectify them. Individuals have the right to opt out from the use of personal data for direct marketing. In case of sensitive data, such as race and religion, explicit consent is required.

The Directive also requires that EU companies in possession of the personal data of EU citizens not to transfer such data to third countries operators unless equivalent protection is provided.

Given the lower level of personal data protection in the USA, a "safe harbour" agreement had to be signed between the EU and the USA. It will ensure the free-flow of personal data between EU companies and those US companies which provide "adequate protection" under the safe harbour agreement.

CONCLUSION

To conclude, I wish to underline how deep an impact the evolution I have described will have on businesses. This is particularly the case for services which can be offered entirely on-line. Banking and insurance are prime examples of these sort of services.

In principle, there is no longer any need for any physical exchange between a bank or an insurance company and their clients: signature of contract, exchange of documents, payments and transactions, it can all be done on-line. In fact, only the direct contact with an agent to discuss particularly sensitive matters is irreplaceable though even that could ultimately be done by video link.

There is an opportunity there, and a challenge. There are 3 pre-requisites for all digital financial services becoming a reality:

  • First, the best possible infrastructure must be in place and service suppliers must have access to this infrastructure under optimal conditions. More competition in the market is the key to drive down prices, and this is exactly what EU telecoms liberalisation is all about.

  • Second, on-line services and transactions require a high level of security in the broadest sense: authentication through electronic signatures, confidentiality through encryption, network security through adequate technologies and legal instruments.

  • Third, there won't be a critical mass of "e-clients" unless on-line transactions are not only technologically, but also legally safe. This is what the EU e-commerce legislation is all about. One of the essential aspects if of course privacy. The EU conditions here are the most favourable in the world, and we keep improving them.

I thank you for your attention.


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