Mr Erkki Liikanen Member of the European Commission, responsible for Enterprise and the Information Society "Challenges and perspectives for the Information Society: the vision of the European Commission and its plan of action" CII (Confederation of Indian Industry) Partnership Summit 2002: Local boundaries, global frontiers Bangalore, 11 January 2002

SPEECH/02/5

Mr Erkki Liikanen

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

"Challenges and perspectives for the Information Society: the vision of the European Commission and its plan of action"

CII (Confederation of Indian Industry) Partnership Summit 2002: Local boundaries, global frontiers

Bangalore, 11 January 2002

1. Introduction

I am delighted to visit Bangalore and to be here at the initiative of the CII. Your agenda for this session demonstrates the range of local boundaries and global frontiers within the IT-based economy.

I would like to recall the EC-India Joint Commission that took place in New Delhi last February, where the Trade and Investment Initiative was launched. Since then, business on both sides has assumed responsibility for this important cooperation process, of which Information Society aspects form a pivotal part. Industry leaders, government representatives and others are now here to follow up on the Business Summit that took place alongside the New Delhi EU-India Summit last November.

It is always necessary to take a step back and make a regular "reality check". To review the situation after the "hype" of the so-called New Economy, based on technological developments. To review the role of new technologies and services in developing our economies, to assess the challenges they pose, and the political action needed to address them. I intend to use the short time I have to look at the activities of the EU in this context.

2. Back to rationality and the search for quality after the burst of the dot com bubble

At a European Council in Lisbon, in Portugal, in March 2000, European leaders set a key goal of creating a Europe that is truly competitive.

Information and communications technologies (ICTs) initiatives are seen as a major way to achieve the objective. These initiatives have been gathered together under the heading of a project known as eEurope.

However, this was the time of the Internet boom. What nobody knew at the time was that high tech stocks had already reached their height. Few imagined the economic slow down would be so sharp.

But we have carried out reality checks, and we are quite clear that the so-called new economy is not dead. Rather, investors have become more selective in funding start-ups, which is a sure sign of maturity.

Two points need to be made:

• First, the new economy model is one which concerns the entire economic fabric, not just the IT sector. As government and business in India - and particularly Karnataka state - well know, a growing number of companies of all sizes and sectors are taking up the Internet, as are public administrations. The hype may be over, but the integration of the old and the new economy goes on. The main challenge is to enable e-commerce to re-engineer corporate structures: procurement, logistics, production, marketing, distribution, communications. The potential benefits are huge: reduced costs, reduced time-to-market, and competitiveness.

• Second, the shift towards a networked and knowledge-based economy is still going on: Network externalities lead to self-reinforcing growth. The use of Internet and GSM (or, in the past, telephone and fax) is dynamic. Much of this is attributable to "Metcalf's law". That is to say that the total value of a network increases as the square of the number of people connected.

3. Role of the EU in the European Information Society

So what is the role of the EU in the development of the Information Society in Europe?

The key question for policy makers nowadays is : What should and could be the contribution of public policies to create an environment that stimulates innovation, competitiveness and growth ?

The difficulty lies in the fact that there are many different policy components to a good environment. These include the legal framework, economic regulation, infrastructures, level of education, and many different levels of policy making - local, national, regional and international. The challenge is to succeed in articulating these different levels in the most efficient way.

But the key underlying point is that the Information Society needs to be firmly on government agendas, so that ICT policies are coordinated with social and economic issues. This is something that is clearly understood by both the EU and India. But it needs to be continuously underlined.

3.1. Telecom policy

Before speaking about eEurope as a whole, I must say something about one its key building blocks, telecom policy.

From the outset, EU telecom policy had the objective of providing high quality services at low prices to all European citizens, including rural areas. It had three guiding principles:

• First, liberalisation of the sectors under monopoly. Through a step by step approach, the EU liberalised all segments of the telecoms market. This process came to a head in 1998 with the liberalisation of voice telephony and infrastructures, including international.

• Second, harmonisation of the European market. Common rules were needed to create a unified EU-wide telecoms market, to avoid the need for 15 different ways of having to do business.

• Third, application of EU competition rules to liberalised segments of the telecoms market.

We learned that much depended on the way in which liberalisation takes place. The existence of an independent regulatory authority was and is crucial. Each Member State has a National Regulatory Authority, with responsibilities for overseeing the sector. They are similar in concept to TRAI here in India.

What was the impact of this deregulation process? The picture today is that of a very dynamic market:

• Telecoms continues to represent a substantial growth factor in the European economy. The EU market grew to an estimated Eur 217 bn by the end of last year, representing growth of over 9%. Growth is highest in the mobile sector around 22%.

• Competition keeps intensifying. In most Member States customers can choose between at least five alternative operators for long distance and international calls.

• Prices continue to fall. During last year, incumbents' tariffs fell by 10% for local calls and by 25% for long distance and international calls.

Clearly, competition has led to lower prices, more choice, better services, and increased access geographically. In particular, lower prices puts Internet access in reach of the whole population.

Also, liberalisation has had a positive impact on the traditional, or incumbent, operators. In a matter of a few years, most of them have evolved from public administrations to innovative and competitive companies.

But the EU liberalisation process is still not yet complete. Take local calls for example. These are still largely dominated by former telecoms monopolies.

We have achieved a lot. But a lot remains to be done to achieve genuine competition in all market segments. There are many things an incumbent operator can do to block competition. This is something which requires a continuous effort.

Indeed, a new regulatory package for electronic communications has just been adopted by the EU. It was necessary to adapt existing rules to the Internet-driven convergence between telecoms, computers and the media.

4. eEurope Action Plan

This leads me on to the eEurope initiative. ICT related issues - the new economy, the internet, telecom - have been high on the EU agenda for a long time. But this is especially true since the European summit in March 2000 in Lisbon, that I referred to earlier.

The eEurope initiative is seen as one of the major ways to reach this goal. eEurope is intended to speed Europe's transition to the new economy through the implementation of a specific plan of action, which is now well under way.

The eEurope Action Plan's overall goals are to get everyone on-line, to exploit the full potential of the Internet to promote a competitive economy, and to ensure that this is done in an inclusive way, so that the less advantaged in society are not left out.

It sets out a strategy to address key barriers to the uptake of Internet. This strategy is based on three main objectives:

• To achieve the first objective of a cheaper, faster and secure Internet, the e-Europe initiative relies heavily on increasing competition; calls for faster Internet for researchers and students; and encourages the development of secure networks and smart cards.

• Meeting the second objective, of investing in people and skills, involves ensuring young people are digitally literate; reducing the skill gap through life long learning, so that people are able to find work in the knowledge-based economy; and making sure policies are inclusive of all sections of society.

• To achieve the third objective of stimulating use of the Internet, the e-Europe initiative aims at getting rid of barriers to eCommerce; getting government to set an example by offering on-line services (electronic access to public services); stimulating on-line health services; and promoting the production of European digital content.

The e-Europe initiative is largely based on existing policies at both the national and European levels, which it aims to build on and integrate. The common objectives set out in the e-Europe Action Plan will be implemented at national level by all Member States by the end of this year. There is also a "benchmarking" exercise to follow the progress made at national level, which encourages Member States to meet commitments by the given deadline.

5. The continuing challenges

In relation to the changed perceptions of the new economy there remain a number of pressing challenges for eEurope. Government policy must pave the way. We are focusing in particular on six challenges:

completing telecom liberalisation, to drive prices down, and to promote broadband access;

bridge the digital divide by giving skills to all;

accelerate e-commerce, especially for SMEs;

cater for the need for security and confidence in cyberspace for users and businesses;

promote content;

get governments on line;

I will just focus on a few of these.

5.1. Network and Information Security

First of all, network security. All countries face the issue of promoting confidence to boost eCommerce. This is very closely liked to the question of network and information security, which is essential for confidence. Competition and legal guarantees alone will not be enough to ensure widespread Internet and e-commerce take-up in Europe. It must be complemented by a high level of security on the Internet.

Users need to feel safe. But a growing number of users experience security as well as privacy problems. Between October 2000 and last June, spamming almost tripled and virus attacks doubled. The EU has already taken several key measures regarding these issues. For example, it has fully liberalised the trade of encryption technologies between Member States, which allow confidentiality to be secured.

However, more needs to be done. Networks have become critical for the proper functioning of our societies and economies. Therefore, the Commission has recently published a Communication on network and information security, and will follow up in this area.

Privacy

A hot item in this area 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 consumer data and track their purchasing patterns, in order to target their sales and sell this information to direct marketers. Yet at the same time, they 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.

5.2. Promoting digital content

You don't sell a service simply because it is cheap and safe. What the consumer is interested in is its usefulness. In other words, applications and content.

Attracting people to using mobile phones, TV sets and computers depends on the services offered, and the content available. Content encompasses audiovisual and software, on-line entertainment, video games, e-commerce applications, publishing, and so on, but also education and public sector information.

The keywords in this area are personalisation and localisation.

A key part of personalisation involves language. The web today is English dominated (over three quarters of the pages on the worldwide web are in the English language). But there is a clear trend towards the use of local languages on Internet sites, as is very marked here in India. Web site developers are well aware that users prefer to use their own language. But with content in languages other than English being increasingly developed, the predominance of English is set to decline.

Moreover, the push to find ways of accessing content for those without skills for writing and reading the language, is crucial, and I am aware of applications being developed in India in this respect.

As for localisation, governments and local authorities are major players in this context. They own a large amount of high quality content (legal information, or land rights information for example). The possibility to re-use this public content is crucial, and the Commission has just published a Communication on the question of the commercial re-use of public sector information.

5.3. e-Government

Government is not only important because it owns information suitable for digital content. It is also a major driver of Internet uptake through being able to offer high-quality on-line services. Much progress has already been achieved regarding the use of the Internet by governments, rendering them more efficient. I am looking forward in the next few days to learning about the key developments which have been set in train here by the Karnataka government, for example. Also, access to public documents is improving, which is a step forward for openness and transparency.

What is still missing is real interactivity, which is the essence of the Internet. Once we have this, a major reform of public services could become possible. Responsiveness, citizen-friendliness and quality of service could become new standards for public services.

eGovernment is a huge opportunity. Not only could government become more efficient, but eGovernment offers the opportunity for citizens to perceive it as more useful and legitimate.

Addressing these various challenges are the key priorities set in the eEurope Action Plan. We hope to be able to share our experiences and learn from those of India - with the Indian authorities, building on the opportunities for cooperation set out in the Joint Vision Statement on the Information Society adopted at the recent EU-India Summit in New Delhi.

Thank you for your attention.