Chapter 1
The information society -
new ways of living and working together

A revolutionary challenge to decision makers

Throughout the world, information and communications technologies are generating a new industrial revolution already as significant and far-reaching as those of the past.

It is a revolution based on information, itself the expression of human knowledge. Technological progress now enables us to process, store, retrieve and communicate information in whatever form it may take - oral, written or visual - unconstrained by distance, time and volume.

This revolution adds huge new capacities to human intelligence and constitutes a resource which changes the way we work together and the way we live together.

This revolution adds huge new capacities to human intelligence and.... changes the way we work together and the way we live together.

Europe is already participating in this revolution, but with an approach which is still too fragmentary and which could reduce expected benefits. An information society is a means to achieve so many of the Union's objectives. We have to get it right, and get it right now.

Europe's ability to participate, to adapt and to exploit the new technologies and the opportunities they create, will require partnership between individuals, employers, unions and governments dedicated to managing change. If we manage the changes before us with determination and understanding of the social implications, we shall all gain in the long run.

Our work has been sustained by the conviction expressed in the Commission's White Paper, Growth, Competitiveness and Employment, that "...the enormous potential for new services relating to production, consumption, culture and leisure activities will create large numbers of new jobs...". Yet nothing will happen automatically. We have to act to ensure that these jobs are created here, and soon. And that means public and private sectors acting together.

All revolutions generate uncertainty, discontinuity - and opportunity. Today's is no exception. How we respond, how we turn current opportunities into real benefits, will depend on how quickly we can enter the European information society.

In the face of quite remarkable technological developments and economic opportunities, all the leading global industrial players are reassessing their strategies and their options.

The first countries to enter the information society will reap the greatest rewards. They will set the agenda for all who must follow. By contrast, countries which temporise, or favour half-hearted solutions, could, in less than a decade, face disastrous declines in investment and a squeeze on jobs.

Given its history, we can be sure that Europe will take the opportunity. It will create the information society. The only question is whether this will be a strategic creation for the whole Union, or a more fragmented and much less effective amalgam of individual initiatives by Member States, with repercussions on every policy area, from the single market to cohesion.

The only question is whether this will be a strategic creation for the whole Union, or a more fragmented and much less effective amalgam of individual initiatives by Member States.

What we can expect for...

• Europe's citizens and consumers:
  A more caring European society with a significantly higher quality of life and a wider choice of services and entertainment.

• the content creators:
  New ways to exercise their creativity as the information society calls into being new products and services.

• Europe's regions:
  New opportunities to express their cultural traditions and identities and, for those standing on the geographical periphery of the Union, a minimising of distance and remoteness.

• governments and administrations:
  More efficient, transparent and responsive public services, closer to the citizen and at lower cost.

• European business and small and medium sized enterprises:
  More effective management and organisation, access to training and other services, data links with customers and suppliers generating greater competitiveness.

• Europe's telecommunications operators:
  The capacity to supply an ever wider range of new high value-added services.

• the equipment and software suppliers; the computer and consumer electronics industries:
  New and strongly-growing markets for their products at home and abroad.

The social challenge

The widespread availability of new information tools and services will present fresh opportunities to build a more equal and balanced society and to foster individual accomplishment. The information society has the potential to improve the quality of life of Europe's citizens, the efficiency of our social and economic organisation and to reinforce cohesion.

The information society has the potential to improve the quality of life of Europe's citizens, the efficiency of our social and economic organisation and to reinforce cohesion.

The information revolution prompts profound changes in the way we view our societies and also in their organisation and structure. This presents us with a major challenge: either we grasp the opportunities before us and master the risks, or we bow to them, together with all the uncertainties this may entail.

The main risk lies in the creation of a two-tier society of have and have-nots, in which only a part of the population has access to the new technology, is comfortable using it and can fully enjoy its benefits. There is a danger that individuals will reject the new information culture and its instruments.

Such a risk is inherent in the process of structural change. We must confront it by convincing people that the new technologies hold out the prospect of a major step forward towards a European society less subject to such constraints as rigidity, inertia and compartmentalisation. By pooling resources that have traditionally been separate, and indeed distant, the information infrastructure unleashes unlimited potential for acquiring knowledge, innovation and creativity.

Mastering risks, maximising benefits

Thus, we have to find ways to master the risks and maximise the benefits. This places responsibilities on public authorities to establish safeguards and to ensure the cohesion of the new society. Fair access to the infrastructure will have to be guaranteed to all, as will provision of universal service, the definition of which must evolve in line with the technology.

A great deal of effort must be put into securing widespread public acceptance and actual use of the new technology. Preparing Europeans for the advent of the information society is a priority task. Education, training and promotion will necessarily playa central role. The White Paper's goal of giving European citizens the right to life-long education and training here finds its full justification. In order best to raise awareness, regional and local initiatives - whether public or private - should be encouraged.

Preparing Europeans for the advent of the information society is a priority task. Education, training and promotion will necessarily play a central role.

The arrival of the information society comes in tandem with changes in labour legislation and the rise of new professions and skills. Continuous dialogue between the social partners will be extremely important if we are to anticipate and to manage the imminent transformation of the work place. This concerted effort should reflect new relationships at the work place induced by the changing environment.

More detailed consideration of these issues exceeds the scope of this Report. The Group wishes to stress that Europe is bound to change, and that it is in our interest to seize this opportunity. The information infrastructure can prove an extraordinary instrument for serving the people of Europe and improving our society by fully reflecting the original and often unique values which underpin and give meaning to our lives.

At the end of the day, the added value brought by the new tools, and the overall success of the information society, will depend on the input made by our people, both individually and in working together. We are convinced that Europeans will meet this challenge.

Why the urgency? Because competitive suppliers of networks and services from outside Europe are increasingly active in our markets. They are convinced, as we must be, that if Europe arrives late our suppliers of technologies and services will lack the commercial muscle to win a share of the enormous global opportunities which lie ahead. Our companies will migrate to more attractive locations to do business. Our export markets will evaporate. We have to prove them wrong.

Tide waits for no man, and this is a revolutionary tide, sweeping through economic and social life. We must press on. At least we do not have the usual European worry about catching up. In some areas we are well placed, in others we do need to do more - but this is also true for the rest of the world's trading nations.

The importance of the sector was evident by its prominence during the Uruguay Round of GATT negotiations. This importance is destined to increase.

We should not be sceptical of our possibilities for success. We have major technological, entrepreneurial and creative capabilities. However, the diffusion of information is still too restricted andtoo expensive. This can be tackled quickly through regulatory reforms.

Public awareness of the technologies has hitherto been too limited. This must change. Political attention is too intermittent. The private sector expects a new signal.

Political attention is too intermittent. The private sector expects a new signal.

This Report outlines our vision of the information society and the benefits it will deliver to our citizens and to economic operators. It points to areas in which action is needed now so we can start out on the market-led passage to the new age, as well as to the agents which can drive us there.

As requested in the Council's mandate, we advocate an Action Plan based on specific initiatives involving partnerships linking public and private sectors. Their objective is to stimulate markets so that they can rapidly attain critical mass.

In this sector, private investment will be the driving force. Monopolistic, anticompetitive environments are the real roadblocks to such involvement. The situation here is completely different from that of other infrastructural investments where public funds are still crucial, such as transport.

This sector is in rapid evolution. The market will drive, it will decide winners and losers. Given the power and pervasiveness of the technology, this market is global.

The market will drive ... the prime task of government is to safeguard competitive forces....

The prime task of government is to safeguard competitive forces and ensure a strong and lasting political welcome for the information society, so that demand-pull can finance growth, here as elsewhere.

By sharing our vision, and appreciating its urgency, Europe's decision-makers can make the prospects for our renewed economic and social development infinitely brighter.

Information has a multiplier effect which will energise every economic sector. With market driven tariffs, there will be a vast array of novel information services and applications:

• from high cost services, whose premium prices are justified by the value of benefits delivered, to budget price products designed for mass consumption;

• from services to the business community, which can be tailored to the needs of a specific customer, to standardised packages which will sell in high volumes at low prices;

• from services and applications which employ existing infrastructure, peripherals and equipment (telephone and cable TV networks, broadcasting systems, personal computers, CD players and ordinary TV sets) to those which will be carried via new technologies, such as integrated broadband, as these are installed.

Large and small companies and professional users are already leading the way in exploiting the new technologies to raise the efficiency of their management and production systems. And more radical changes to business organisation and methods are on the way.

Business awareness of these trends and opportunities is still lower in Europe compared to the US. Companies are not yet fully exploiting the potential for internal reorganisation and for adapting relationships with suppliers, contractors and customers. We have a lot of pent up demand to fill.

Business awareness of these trends and opportunities is still lower in Europe compared to the US.

In the business markets, teleconferencing is one good example of a business application worth promoting, while much effort is also being dedicated worldwide to the perfection of telecommerce and electronic document interchange (EDI).

Both offer such cost and time advantages over traditional methods that, once applied, electronic procedures rapidly become the preferred way of doing business. According to some estimates, handling an electronic requisition is one tenth the cost of handling its paper equivalent, while an electronic mail (e-mail) message is faster, more reliable and can save 95% of the cost of a fax.

Electronic payments systems are already ushering in the cashless society in some parts of Europe. We have a sizeable lead over the rest of the world in smart card technology and applications. This is an area of global market potential.

Markets for small and medium sized enterprises

Though Europe's 12 million SMEs are rightly regarded as the backbone of the European economy, they do need to manage both information and managerial resources better.

They need to be linked to easy access, cost-effective networks providing information on production and market openings. The competitiveness of the whole industrial fabric would be sharpened if their relationships with large companies were based on the new technologies.

Networked relationships with universities, research institutes and laboratories would boost their prospects even more by helping to remedy chronic R&D deficiencies. Networking will also diminish the isolation of SMEs in Europe's less advantaged regions, helping them to upgrade their products and find wider markets.

Markets for consumers

These are expected to be richly populated with services, from home banking and teleshopping to a near-limitless choice of entertainment on demand.

In Europe, like the United States, mass consumer markets may emerge as one of the principal driving forces for the information society. American experience already shows that the development markets encounters a number of obstacles and uncertainties.

Given the initial high cost of new pay-per-view entertainment services, and of the related equipment, as well as the high cost of bringing fibre optics to the home, a large mass consumer market will develop more easily if entertainment services are part of a broader package. This could also include information data, cultural programming, sporting events, as well as telemarketing and teleshopping. Pay-per-view for on-line services, as well as advertising, will both be necessary as a source of revenue. To some extent, existing satellite and telephone infrastructure can help to serve the consumer market in the initial phase.

At the moment, this market is still only embryonic in Europe and is likely to take longer to grow than in the United States. There, more than 60% of households are tapped by cable TV systems which could also carry text and data services. In Europe, only 25% are similarly equipped, and this figure masks great differences between countries, e.g. Belgium (92%) and Greece (1-2%).

Another statistic: in the United States there are 34 PCs per hundred citizens. The European figure overall is 10 per hundred, though the UK, for instance, at 22 per hundred, is closer to the US level of computer penetration.

Lack of available information services and poor computer awareness could therefore prove handicaps in Europe. Telecommunication networks are, however, comparable in size and cover, but lag behind in terms of utilisation. These networks, therefore, can act as the basic port of access for the initial services, but stimulation of user applications is still going to be necessary.

Such structural weaknesses need not halt progress. Europe's technological success with CD-ROM and CD-I could be the basis for a raft of non-networked applications and services during the early formative years of the information society. These services on disk have considerable export potential if Europe's audio-visual industry succeeds in countering current US dominance in titles.

In terms of the market, France's Minitel network already offers an encouraging example that European consumers are prepared to buy information and transaction services on screen, if the access price is right. It reaches nearly 30 million private and business subscribers through six million small terminals and carries about 15,000 different services. Minitel has created many new jobs, directly and indirectly, through boosting business efficiency and competitiveness.

In the UK, the success of the Community-sponsored Homestead programme, using CD-I, is indicative, as is the highly successful launch of (an American) dedicated cable teleshopping channel.

Meanwhile in the US, where the consumer market is more advanced, video-on-demand and home shopping could emerge as the most popular services.

Audio-visual markets

Our biggest structural problem is the financial and organisational weakness of the European programme industry. Despite the enormous richness of the European heritage, and the potential of our creators, most of the programmes and most of the stocks of acquired rights are not in European hands. A fast growing European home market can provide European industry with an opportunity to develop a home base and to exploit increased possibilities for exports.

Linguistic fragmentation of the market has long been seen as a disadvantage for Europe's entertainment and audio-visual industry, especially with English having an overwhelming dominance in the global market - a reflection of the US lead in production and, importantly, in distribution. This lead, which starts with cinema and continues with television, is likely to be extended to the new audio-visual areas. However, once products can be easily accessible to consumers, there will be more opportunities for expression of the multiplicity of cultures and languages in which Europe abounds.

...once products can be easily accessible to consumers, there will be more opportunities for expression of the multiplicity of cultures and languages in which Europe abounds.

Europe's audio-visual industry is also burdened with regulations. Some of these will soon be rendered obsolete by the development of new technologies, hampering the development of a dynamic European market.

As a first step to stimulating debate on the new challenges, the Commission has produced a Green Paper on the audio-visual industry.

The Group is convinced that technological progress and the evolution of the market mean that Europe must make a break from policies based on principles which belong to a time before the advent of the information revolution.

The key issue for the emergence of new markets is the need for a new regulatory environment allowing full competition. This will be a prerequisite for mobilising the private capital necessary for innovation, growth and development.

In order to function properly, the new market requires that all actors are equipped to participate successfully, or at least that they do not start with significant handicaps. All should be able to operate according to clear rules, within a single, fair and competitive framework.

The Group recommends Member States to accelerate the ongoing process of liberalisation of the telecom sector by:

• opening up to competition infrastructures and services still in the monopoly area

• removing non-commercial political burdens and budgetary constraints imposed on telecommunications operators

• setting clear timetables and dead lines for the implementation of practical measures to achieve these goals

Ending monopoly

This is as true for the telecommunications operators (TOs) as for others. It is now generally recognised as both necessary and desirable that the political burdens on them should be removed, their tariffs adjusted and a proper regulatory framework created. Even the operations of those TOs whose status has already evolved over recent years are not fully in line.

It is possible to end monopoly. In future, all licensed public operators should assume their share of public service responsibilities (e.g. universal service obligation and the provision of equal access to networks and services).

A competitive environment requires the following:

• TOs relieved of political constraints, such as:
  • subsidising public functions;

  • external R&D activities;

  • contributions to land planning and management objectives;

  • the burden to carry alone the responsibility of universal service;

• a proper regulatory framework designed to achieve:
  • market regulation to enable and to protect competition;

  • a predictable environment to make possible strategic planning and investment;

• adjustment of tariffs.

Enabling the market

The Group recommends the establishment at the European level of an authority whose terms of reference will require a prompt attention.

In order for the market to operate successfully, the Group has identified the following objectives and recommendations:

Evolution in the regulatory domain

Identify and establish the minimum of regulation needed, at the European level, to ensure the rapid emergence of efficient European information infrastructures and services. The terms of reference of the authority which will be responsible for the enforcement of this regulation is a question that will require a prompt attention.

The urgency of the matter is in direct relation to the prevailing market conditions. A clear requirement exists for the new "rules of the game" to be outlined as soon as possible. The market place will then be in a position to anticipate the forthcoming framework, and the opportunity will exist for those wishing to move rapidly to benefit from these efforts.

The authority will need to address:

• the regulation of those operations which, because of their Community-wide nature, need to be addressed at the European level, such as licensing, network interconnection when and where necessary, management of shared scarce resources (e.g. radio-frequency allocation, subscriber numbering and advice to Member States regulatory authorities on general issues.

• a single regulatory framework valid for all operators, which would imply lifting unequal conditions for market access. It would also ensure that conditions for network access and service use be guided by the principles of transparency and non-discrimination, complemented by practical rules for dispute resolution and speedy remedy against abuse dominance.