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Towards The Information Society In Europe - The European Union's Contribution

This article is based on the Keynote Speech delivered by Bernard Smith, Head of the Cultural Heritage Applications Unit of the European Commission at World E-com in Perth, Australia on 9th November 1999.

1. Introduction

It's been over a decade now since the EU launched an ambitious series of R&D programmes to promote the development of information and communication based technologies, services and applications in Europe. The rationale behind this was the belief that these technologies were going to play an increasingly important role in our society, especially as regards quality of life, industrial competitiveness and the creation of new jobs.

But just supporting R&D alone was no guarantee that the benefits of these technologies will be made available to all our citizens and businesses. Thus our R&D effort was partnered by the launch, in 1987, of an ambitious telecoms liberalisation policy. The aim was to free-up private sector innovation and investment power.

By 1994, and following on from the so-called Delor White Paper, we were able to integrate our liberalisation policy and R&D programmes into a comprehensive package which we in Europe call "The Information Society".

The appropriateness and timeliness of this approach has been confirmed in recent years. Let me illustrate this through a few essential facts and trends:

The Internet

The development of both information and communication technologies has given birth to the Internet. Over the past five years, this has shown itself to be a powerful and open medium for communication and business. The number of Internet users globally is now around 190 million and will reach 250 million by the end of the year 2000. During the recent Telecom99 conference held in Geneva Larry Ellison of Oracle said that they predicted that Europe would overtake the US in Internet access within the next 4 years. His view was that Europe would be the driving force behind the next generation of wireless e-commerce services, and that within 4 years more users will be accessing the Internet through mobile technology than on fixed-lines. In any case we can certainly expect that at least one third of these 250 million Internet users will be European. To these Internet users we can add the 100 million PCs and 400 million wireless devices world-wide forecast for next year. On top of that we can start to think about the one billion mobile phone users and 500 million Internet users some have predicted by 2003. It is clear now that the future will be a multi-network, multi-device environment delivering a quasi-infinite variety of interactive data-based services over IP.

In five years time, the Internet will be used routinely by half of the European population. This does not necessarily mean that there will be a computer in half the homes in Europe, but access will become commonplace as other devices are used to connect to the Internet. Already access is possible through digital TV set-top boxes, digital assistants and mobile phones. Increasingly this will extend to virtually all consumer appliances such as road navigation systems, house alarms, and why not microwave ovens, refrigerators, and so on. This might not be so far fetched since NTT estimates that by 2010 only one-third of their customers will be people, the rest will be cars, bicycles, portable PCs, boats, vending machines, and even pets. Again during Telecom99 Bill Gates announced that Microsoft was changing its mission statement from "a computer on every desk and in every home" to "empowering users with great software any time, any place, with any device". This can certainly be paraphrased as "the Internet in your pocket" and clearly reflects the shift from today's visible stand-alone PC to tomorrows ubiquitous Internet enabled access device.

The Networked Economy

Today, information and communication technologies and the Internet have become the most significant factors shaping our economies. This will remain the case for the foreseeable future. The world is clearly moving towards the networked economy.

The Information Society is already the fastest growing sector of the EU economy. The underpinning information and communications industries are growing in Europe at more than 5% points faster than other industrial sectors. Overall the Information Society now accounts for 5% of the EU GDP and 15% of total EU economic growth. In the last 3 years the EU telecoms market has increased by one-third, an increase of 38 billion euro. Last year (1998) the EU mobile communication market grew by 21%, whereas the networking services market grew by 14%, and mobile revenues could well overtake fixed-line revenues in the next 5 years. All this despite the fact that tariffs have dropped by more than 40% over the last 3 years.

The Internet is also the driving force for the rapid emergence of electronic-commerce, which is expected to be worth world-wide 200 billion euro in 2000 and up to 850 billion euro by 2005.

It is therefore vital to our future competitiveness and growth that Europe masters this new context.

Furthermore, the take-up of the Internet and associated information and communication technologies is also vital to solving Europe's employment problem. Already over 4 million people in the EU work in Information Society sectors. The Information Society now creates one out of four new jobs and demand largely outpaces supply. It is estimated that there are more that 500,000 unfilled IT-related job vacancies in the EU, and the gap is expected to widen to 1.2 million jobs by 2002. In fact Mr. Wilson, the CEO of Anderson Consulting, at Telecom99 strongly underlined the fact that new PC companies are no longer being created. He pointed out that mobile and data traffic are the key growth sectors today and that IP-centric start-ups are winning substantial market share and are growing 60% faster than incumbent telecoms operators. At a time where high levels of unemployment remain a major challenge for Europe, these expanding areas represents a potential for job creation that cannot be ignored. For example it is estimated that the GSM market sector could create an additional 150,000 jobs in the coming years. Also the European audio-visual sector is predicted to expand by 70% between 1995 and 2005, creating 300,000 new jobs.

Since I have mentioned several times the Telecom99 conference perhaps it is useful for us to look at some of the key trends seen there. I think most observers would agree that the dominant trend was one of convergence between Internet and mobile communications, or in the words of Mr. Ollila, the CEO of Nokia, "the mobile information society". If wireless Internet access was the major trend then certainly the Wireless Application Protocol (WAP) was the most attractive technology. Whilst WAP was holding the centre of the stage I think it is also worthwhile mentioning another trend that confirmed itself at Geneva. That is the open-source software model. This is quite a change in the fundamental philosophy of marketplaces. Internet has underlined the importance of openness, with some impressive examples such as Apache, Java and Linux. We are now seeing the effect of this in the way companies are starting to build partnership networks, and finally understanding that no single company can do it all. You will see later in my talk how important this new model is to the research objectives in electronic commerce in the IST programme.

One final observation from Telecom99 was the relative absence of multimedia content providers. They had been very present during Telecom95, and their absence was noted by many in this year's conference. Some speakers, including Bill Gates, predicted that Telecom2003 will be dominated by interactive services and content. Larry Ellison predicted that the explosion of mobile services in Europe would create a major demand for multi-lingual and multi-cultural content. The focus for the future will certainly be on connecting people and not just devices, and on location-sensitive services which by definition will integrate both global and local content. That is to say services with unique cultural and linguistic characteristics. It is sufficient here to note that multimedia content also plays a key role in the IST Programme.

With these observations in mind, I would like to present an overview of our information society policy.

2. Guiding Principles of the EU Approach

The Information Society concept is about the optimal use of information and communication technologies in all of our activities. As I have already pointed out, our policy aim is to improve Europe's performance in the global economy, as well as to increase the efficiency of public services, leading to greater economic growth, the creation of new jobs and a substantial improvement in the quality of life.

To achieve this, the EU has based its approach on a series of guiding principles:

  1. The Information Society must be market-driven: only the private sector has the required investment and innovation capacity to turn such a society into reality.
  2. Public authorities must accompany this process of change: only then will all our citizens and businesses reap the full benefits of the information age.
  3. From the European Commission's standpoint that means focusing on two essential tasks at EU level:

a) Firstly, creating a favourable legislative environment for businesses and citizens, and:

b) Secondly, supporting research, development and innovation in information and communication technologies.

  1. To ensure that its action meets the needs of businesses and citizens, the Commission has established a continued dialogue with all involved parties. This includes industry, users and consumers. This is mainly done through the publishing of Green Papers, which provide an opportunity for all interested parties to give input to the Commission before the launching of a new policy or regulatory initiative.

A cornerstone in this desire for dialogue was the 1997 (6-8 July) Bonn Ministerial Conference. This provided a very valuable final Declaration listing eight key principles to guide Governments action with respect to global information networks:

  1. Regulation must be light-handed and as flexible as possible
  2. Legal rules must be consistent across boarders
  3. Markets should be opened up rapidly to reduce telecoms costs and foster increased competition
  4. Consumers and industry need confidence in the security, privacy and authenticity of electronic communications and transactions
  5. Let open technical standards be established by market forces
  6. Discriminatory taxes should not be imposed
  7. Intellectual property rights must be properly protected
  8. Education and training for literacy is essential.

In that same year the Commission issued a Framework Communication entitled "A European Initiative in Electronic Commerce". The priorities identified in this Communication included those related to liberalisation, regulation and R&D, but added a fourth priority, namely "creating a favourable, open and competitive business environment". Let us look a little more closely at this last priority before returning to the others. The Communication identified four key themes which touch directly on the business environment, namely:

Consumers: creating awareness and confidence

A number of key issues have already been addressed such as data protection, electronic signatures, and so on. The real issue here is consumer confidence in e-commerce processes. "Hard trust" issues are certainly at the heart of many of the actions in the Commissions R&D programmes that I will describe later. Yet this needs to be complimented by softer form of "psychological trust". On this issue much has already been achieved with European industry, trade and consumer associations, but much more is still to be done. The Commissions ISPO Web site is an excellent source of information concerning our awareness building activities. The promotion of e-commerce is also an important task in our R&D programme which I will touch on later.

Business: creating awareness and encouraging best practice

Experts estimate that, in the US alone, business-to-business e-commerce over the Web will grow from $43 billion in 1998 to $1.3 trillion in 2003. Global e-commerce could reach anything from $3.2 to $5 trillion by 2003, which amounts to between 5% and 7.2% of total world trade. This is dependent upon the creation of complex webs of commercial activities, transacted between a large number of participants, using global open networks. The focus for Europe must thus be on the rapid adoption of e-commerce processes by a large number of small businesses. Programmes such as Commerce 2000 and the G7 project on SMEs have helped to create substantial awareness concerning e-commerce options. Again the ISPO Web site is an excellent source of information on these activities.

It is generally estimated that Europe lags behind the US consumer marketplace by about 18 months. In contrast, in business-to-business applications Europe is already well positioned, and this is where the real marketplace for e-commerce is today. Europe is the worlds leading exporter and is particularly strong in areas such as automotive, aeronautics, tourism, and so on. However, studies have shown that EU companies move into e-commerce to protect their market positions and retain their customers, rather than as a strategic move to capture new markets and consumers. More than 40% of EU companies are influenced by competitors, and they tend to see e-commerce as an add-on activity and are not prepared to commit themselves to the process re-engineering often needed to fully benefit from the available technologies. Many experts feel that it is not so much the cost or technical complexity that is a barrier, nor is it a lack of understanding of the opportunities provided by the technologies, but it is a lack of European specific success stories and "role models". Therefore one key issue here is the creation and showcasing of best practice pilots. Given that individual small companies hesitate to try out new applications, widely publicised pilot projects with detailed business models can be very valuable. Again the Commission's R&D programme has a specific action dedicated to this issue.

Public Administrations: promoting a more pro-active public service

The public sector also has an important part to play in the promotion of e-commerce. Interaction with public administrations forms part of the day-today activities of small businesses. In Europe about 70% of the data handled by public administrations has its origins in industry, this covers customs and taxes, social security, employment services, public registry and public procurement. In addition, more than 50% of EU GDP is still generated by governments, local and regional administrations, utilities and public owned companies. Already the IDA programme has focused on the networking interoperability of Europe's public administrations, and the Commission is working to encourage electronic procurement in national administrations. A recent Communication on Access to Public Information also contributes to this debate in offering options for the commercial re-exploitation of publicly held information. The present R&D programme includes a focus on administrations both as providers of services for the citizen, and as enablers and facilitators in business-driven e-commerce processes.

Putting e-commerce at the service of the citizen

The Commission is very conscious of the fact that European citizens are not yet fully equipped to deal with many of the new technologies on offer. The Information Society Forum clearly placed the emphasis on improving education and network literacy, with a focus on new models for life-long learning. It is clear that the basis for such skills must be laid in primary and secondary schools. Numerous European programmes are already attacking this problem, notably the Socrates and Leonardo programmes for vocational (re-)training, and the structural and regional development funds to promote greater understanding of e-commerce issues by small enterprises. The present R&D programme has a substantial section devoted to education and training and the 2000 work programme will specifically look at the school of tomorrow and the individual learner in society.

Access to the Information Society still remains closely linked to wealth, education and employment. Price is still a significant barrier to entry, and household computer ownership in Europe is still too low. For many people the main route of access in the EU is still the workplace. There is a lack of awareness with those who have the most to gain, notably the elderly, the unemployed, and the handicapped and disabled. Regional disparities are still very marked within the EU, and public access points - for example in libraries, schools and community-based knowledge resource centres - will be central to building an inclusive European Information Society.

3. Creating A Favourable Legal Environment At European Union Level

Telecommunications

The entry into force, on 1 January 1998, of an EU-wide liberalised regulatory framework for telecoms set the essential conditions for the expansion of the communications sector:

  1. Much of this framework is about introducing mechanisms to foster competition in a market characterised by strong incumbent positions.
  2. This liberalisation process, which took place over a decade, was both gradual and transparent, thus allowing market players to anticipate upcoming developments. Its impact is already far-reaching.

Today, the EU telecoms market is a dynamic and rapidly evolving market worth 148 billion euro. It is regarded as the single most important contributor to economic growth in the EU:

  1. The mobile communications market alone is growing annually at a rate of 21% while fixed-network services are expanding by 14% per annum. Furthermore, Europe is the undisputed technical and market leader in this sector thanks to the success of the pan-European GSM standard, which has become a global standard used by 330 operators and 170 million subscribers in over 130 countries, or more than 40% of the worlds mobile users. In addition we expect 3rd Generation mobile telephony to build on this success. It looks as if the results of the IMT-2000 process will produce a global 3rd Generation solution, even it has to be a 'flexible" standard. This would be a major achievement since it is forecast that world-wide there will be over 600 million mobile phones with e-commerce capabilities by 2004. Already the EU has established the essential conditions for the introduction of its Universal Mobile Telecoms System (UMTS) by 1 January 2002. This covers pan-European roaming based upon harmonised licences, frequency allocation and EU standards development.
  2. In addition, prices for telecoms services and equipment are falling. In particularly, tariffs for long-distance and international calls, historically priced at a premium rate, are falling rapidly. In addition European consumers and businesses are receiving new and better services, such as faster line installation, more efficient information services, the development of call centres, forward calling services, and so on. Today we take these services for granted - yet many of us can still remember when installing a telephone line could take months in some European countries.

In parallel, the telecoms industry is undergoing a major restructuring process:

  1. Incumbent operators have extended their businesses beyond their traditional markets into networking equipment and Internet services
  2. The number of network operators has grown to over 500 and there are now over 1,000 service providers
  3. Massive investments are being made in upgrading infrastructures and several pan-European high-speed network projects are being planned or implemented
  4. Mergers, acquisitions and joint ventures are multiplying and changing the face of the industry. They often include overseas partners and reach beyond the traditional boundaries of the telecoms sector
  5. The latter reflects the growing convergence between the different industrial segments of the information society, particularly between: telecoms and cable operators; network operators and broadcasters; telecoms equipment manufacturers and networking equipment providers.

The 1999 Telecoms Review

Overall the EU policy framework is functioning well. However, improvements are necessary. This is the object of a review of the telecoms framework that will be carried out before the end of 1999. The Telecoms Review will cover four key issues:

  1. Some tariffs have fallen considerably whilst others, for example leased lines, remain unacceptably high. A recent report indicated that an EU cross boarder high bandwidth line could cost as much as 18 times an equivalent US domestic line. This makes it harder for Europe to take full advantage of the Internet. We are envisaging a number of pro-competitive measures in this regard and we also expect the different Member State regulators to examine this situation closely.
  2. We see wide variations in the degree of competition within each Member State. To some extend this is inevitable given their different starting points. However, this is also the result of differences in the regulatory framework, which in some areas in not consistently applied. Thus our aim will be to enhance, clarify and simplify this regulatory framework - one that is currently composed of 25 separate legal measures. What should emerge is a revised framework that is transparent, clear, predictable, proportionate and non-discriminatory.
  3. Despite the progress made in many market segments, incumbents still dominate the European national markets. The biggest problem in this respect is their overwhelming dominance of the local access networks. Some Member States have already acted to force incumbents to un-bundle the local loop. Our first concern must be to strengthen competition thus further reducing tariffs. This is particularly true for local communications, where prices remain relatively high. From a regulatory standpoint, effective competition very much depends on the unbundling of the local loop. This point was strongly underlined during the public consultation of the Green Paper on Convergence. It was concluded that opening access to infrastructure, and in particular the local loop, is essential for the development of a large variety of Information Society content services (fast online access, streaming video, video-on-demand, and so on). Giving operators access to a critical mass of customers at the earliest possible moment will lead to a more rapid introduction of competition in the provision of services, where the opportunities for innovation and the benefits in terms of consumer choice are greatest.
  4. We will also examine how the EU framework should be adapted in the light of market and technology developments, in particular convergence. A key issue in this respect is related to the co-existence of different regulatory frameworks for different infrastructures. It is clear that the regulation of networks according to the content carried is no longer appropriate.

Let us have a look at some of the problems involved. A good example is licensing. Licensing can work as an obstacle to the development of competition as it can be used to block market entry. Today we have a situation where authorisation regimes differ, so the same operator must adapt its request for authorisation to fifteen different regimes.

In some Member States an operator can start providing services immediately. In others he must seek an individual licence from the regulator. The conditions attached to these licences vary. Such differences constitute obstacles to service provisions by pan-European providers such as satellite operators. This is one reason why most operators remain focused on operating in national markets, rather than seeking to pursue pan-European strategies.

In some cases the regulatory regime is conditioning how an operator provides the service. This can not be right. This is the tail wagging the dog. We need to reduce the red tape so operators are free to innovate. We need to make changes to the framework to encourage more effective competition. In doing so we need also to continue to protect consumers and to guarantee a minimum level of service to the disadvantaged in society.

As I have already said the European Commission will soon issue a policy document that will suggest options to address these shortcomings. Our intention is to hear the views of the national authorities, market players and user associations. In the light of their reactions we will make proposals for a new regulatory framework.>

I hope it is evident that the European Union not only welcomes global competition, but also has now created one of the most open market in the world. If Europe is to be an effective competitor and to have a first-class communications infrastructure then an open market is essential. With the regulatory review the aim will be to create markets that will be even more open.

E-Commerce

At the same time as the new telecommunications framework was being implemented in the 15 Member States, the Commission was also undertaking to consolidate the Internal Market for e-commerce, a task which is to be completed in the year 2000.

Very recently the Commission has tabled an amended proposal for a coherent legal framework for electronic commerce in the Single Market. The amendments touch on the definitions of the types of Information Society services and their respective consumers, the link between e-commerce and existing consumer protection and data protection Directives, the treatment of unsolicited commercial communications via e-mail and the determination of the moment when an online contract is concluded. The Commission has kept the proposal to limit the liability of online service providers who act as intermediaries.

All the required Directives have now been tabled and some have already entered into force, for instance those regarding the legal protection of databases and the protection of personal data. Other key Directives concern:

  1. Copyrights and authors rights in the information society
  2. The creation of an harmonised EU-wide framework for electronic signatures and electronic certification services
  3. A horizontal Directive which aims to remove the remaining obstacles to the free movement of electronic services, in particular regarding the establishment of service providers, the provision of commercial communications, the treatment of electronic contracts and the liability of intermediaries.

4. Creating a Sound Global Framework for the Internet and Electronic Commerce

Policy initiatives must reflect the global nature of the Internet and e-commerce. This also calls for globally agreed rules and principles. However this ideal is difficult to achieve for several reasons, primarily:

  1. Achieving progress at a global level is a complex and time-consuming process
  2. Convergence sometimes makes it difficult to draw a clear borderline between the respective responsibilities of the international bodies involved - for example WTO, WIPO, UNCITRAL (United Nations Commission on International Trade Law) and the OECD. This entails an increased risk of overlaps, duplications and inconsistencies.

A new approach at the international level was needed to overcome these difficulties. The Commission's contribution to this new approach was an initiative launched in February 1998:

  1. Its aim was to encourage clarification of the global rules for e-commerce through strengthened international co-operation and a stronger involvement of the global business community.
  2. In response to the Commission's initiative, the global business community launched, in January 1999, the Global Business Dialogue on electronic commerce (GBDe).

The GBDe's main aim is to develop business consensus on those priority issues where swift global action is needed. For example, authentication and security; consumer confidence; content; information infrastructure and market access; intellectual property rights; jurisdiction; liability; protection of personal data; taxes and tariffs.

On this basis, recommendations to governments, parliaments and international organisations were tabled by the GBDe at its first conference held in Paris in September 1999:

  1. Public authorities have been requested to reply to these recommendations within six months
  2. Working groups will be established to develop new policy initiatives as well as monitor and report, by April 2000, on the implementation of the recommendations
  3. A second GBDe conference will be held in the year 2000.

5. Some Key E-Commerce Issues

Given the theme of this conference I think it appropriate to look more closely at some of the more important issues facing Europe. Today we have six problems that need global solutions, namely:

Liability

One of the main aspects concerning liability is that of intermediary service providers. The amended EU Electronic Commerce Directive clearly defines four issues, namely:

  1. Service provides should not be held liable for the information transmitted if they are neither initiators of the transmission nor selectors of the receivers of the transmission, nor select or modify the information being transmitted.
  2. That this extends to temporary caching of information as part of the normal transmission process, and where everything is done to ensure that they act quickly should the information transmitted prove to be illegal.
  3. That intermediaries can store information provided that they have no actual knowledge of the illegal nature of the content, but a "notice and take-down" procedure is to be implemented where once informed they must act quickly to remove the illegal content from their machines.
  4. Finally intermediary service providers are not obliged to monitor the information they store or transmit, not seek facts indicating illegal activities.

Data Protection

Protection of privacy is considered a fundamental right and there is already in place a European Directive concerning the protection of personal data. Today the Commission is monitoring its implementation in all Member States. More recently it has been agreed to extend the implementation of the Directive without modification to personal data on the Internet. Concerning the processing of personal data on the Internet the following recommendations have recently been made:

  1. Users be informed when their personal data is being collected, stored or transmitted, and for what purpose it is being done
  2. Default conditions should not be set to automatically allow the collection of personal data
  3. Tools should be provided to allow the user to reject or modify personal data being stored, received or sent
  4. Finally the user should be able easily to remove their cookies etc. from their systems in a simple and effective way.

There is an on-going discussion between the EU and the US concerning the ways that complaints from people who have had personal data transferred from the EU should be treated. The EU favours an independent public body or third party organisations for this purpose, and is in discussion with the US concerning the "safe harbour principles" and the role and nature of the associated FAQ.

IPR Protection

In May (21 May 1999) of this year an amended proposal for harmonising certain aspects of copyright and related rights was presented. The proposed Directive would establish a level playing field for copyright protection in the new environment. This covers reproduction rights, the communication to the public right, distribution rights, and the legal protection of anti-copying and rights management systems. Throughout the legislative process, the Commission has paid particular attention to ensuring a fair balance between all the rights and interests involved. The amended proposal incorporates fully or partially 44 of the 56 amendments sought by the European Parliament in its 10 February 1999 Opinion. However the Commission did not incorporate the Parliament's suggestion that certain technical acts of reproduction (such as 'cache' copies) should only benefit from an exception to the reproduction right subject to prior authorisation by right-holders to putting their protected material on the networks. This is because such a requirement would have seriously hindered the effective operation of the Internet and upset the balance of interests in the original proposal.

The proposal meets the main requirements of the new international treaties on the protection of authors, performers and phonogram producers agreed in December 1996 by the World Intellectual Property Organisation (WIPO). This will allow ratification of these treaties by both the European Community as such and the individual Member States, as well as by all countries associated with the EU (including European Economic Area members and the countries of Central and Eastern Europe).>

Taxation and Tariffs

Concerning taxation and tariffs no official EU position has yet been formulated, however, the issue was discussed at the WTO (GATS, GATT, TRIPS). A product ordered though the Internet and shipped though conventional means is subject to the normal customs regime. The actual method of ordering should not make a difference. The tariffs on a product ordered and delivered through the Internet (for example software) is a complicated question and in May 1998 the World Trade Organisation (WTO) approved an agreement to temporarily refrain from imposing customs duties on electronic transmissions. There are ongoing discussions on the classification of goods that can be delivered both electronically and in a physical form (again the example of software comes to mind).

Whatever the outcome of these on-going discussions it is evident that the solutions must be technologically neutral, efficient to implement, simple to understand and promotes certainty and trust in the minds of all.

An important contribution to the issue of indirect taxation is the 1998 Commission Communication on electronic commerce and indirect taxation. Some of the principles outlined in the communication are:

  1. All efforts should to be concentrated on adapting existing taxes and more specifically VAT to the developments of e-commerce. No new or additional taxes are therefore to be considered.
  2. A transaction that results in a product being delivered in digital form via an electronic network is to be treated, for VAT purposes, as a transaction of services. These electronically delivered products may also be delivered by more conventional means and be treated for VAT purposes either as a sale of services or of goods. Products currently treated as goods, such as supplies of music or video on disc or cassette may be subject to customs duties at importation. Products that, in their tangible form are treated for VAT purposes as goods are treated as services when they are delivered by electronic means.
  3. High priority should be given to co-operation between EU and other countries to ensure prevention of abuse in the use of international electronic invoicing.
  4. The Commission believes that its VAT system can continue to serve as a model for the taxation of global electronic commerce.

Encryption

There is a European Directive on a framework for electronic signatures, which covers considerable ground concerning market access issues, legal implications, liability, data protection and international aspects. The core considerations involve:

  1. The conditions for the creation and introduction of accredited certification service providers and their operation across Member State frontiers
  2. The establishment of standards for electronic signature products
  3. The equivalence of electronic signatures and hand-written signatures for legal purposes, including the fact that electronic signatures are to admissible as evidence in legal proceedings
  4. That certification service providers should be liable for damages should they act negligently in implementing certification, signature creation or verification
  5. Personal data should be protected
  6. Mutual recognition through bilateral or multilateral agreement with third countries, and the effective implementation of relevant standards and international agreements.

Whilst encryption and the specific issue of digital signatures are still treated differently by different Member States in the EU it is now evident that market forces are pushing all parties to adopt similar approaches. It is notable that France, who until recently only permitted a 40-bit encryption technology, recently authorised the use of 128-bit technology. In addition France has announced it intention to lift all restriction and also remove the obligation to deposit encryption keys with Trusted Third Parties. This is seen as being critical in encouraging electronic commerce and Internet usage.

Illegal Content

Concerning illegal content the Commission is implementing an Action Plan to promote the safer use of the Internet and to combat illegal and harmful content on global networks. This Plan recognises that, whilst aiming at a high level of protection, any action taken to deal with atypical use for illegal and harmful content should not have a disproportionate impact on Internet users and the industry as a whole. What is fundamentally illegal in the real world is illegal on the Internet. Information on the Internet should be allowed the same free flow as paper-based information. Any restrictions should respect fundamental rights such as freedom of expression and the right to privacy. Responsibility for prosecuting and punishing those responsible for illegal content remains with the national law-enforcement authorities assisted by structures such as EUROPOL and INTERPOL. Industry has a responsibility to remove illegal content from their systems, and can be assisted by self-regulatory bodies. Users should also be able to report illegal content through hotlines. Filtering software and rating systems can help users to avoid harmful contents.

Concerning ongoing actions the EU is working on four initiatives:

  1. The first is to help establish a European network of hotlines
  2. The second is to develop a self-rating schema, which is at this moment being tested by user groups
  3. The third is to develop third-party rating services
  4. The fourth is to build awareness of the issues with children and young people.

On a final issue concerning child pornography a recent international conference in Vienna made some important recommendations, namely:

  1. Zero tolerance
  2. World-wide criminalisation
  3. The creation of special cyber-crime units.

and there is Consumer Protection

Another important issue relates to consumer protection. The EU has always maintained that consumer protection should be based upon a small number of basic principles, namely:

  1. Consumers should be protected against any exclusions of their basic rights through the use of standard contracts
  2. Consumers should be protected against economic damage due to bad service
  3. Presentations and promotions of good and services should not be misleading.

Governments, consumer organisations and business representatives all want electronic commerce to flourish. But the technology issues mentioned above concerning service provision, electronic signatures, data protection, and so on, are not enough. For electronic commerce to develop you need at least three things: technology, a suppliers offering goods and services online, and consumers willing to buy goods and services online. Focusing on the last requirement, namely the demand side of the market, it is certain that the key to consumer participation in electronic commerce is consumer confidence. And let us face reality. Consumer confidence in electronic commerce still leaves much to be desired.

The European Commission is guided by a small set of simple rules:

  1. Consumers using e-commerce should not be less protected than they are when using traditional forms of commerce
  2. Consumer considerations and interests must be integrated in all relevant initiatives aimed at furthering the development of electronic commerce
  3. Electronic commerce does not take place in a legal or regulatory vacuum and existing consumer protection rules are generally applicable to electronic commerce.

7. New Orientations for IST Research

While the previous programme for R&D had been extremely successful, it also showed some shortcomings in the face of the digital revolution. The new Information Society Technologies (IST) Programme has to reflect the political, technological and industrial changes that have taken place since the launch of the previous programme, back in 1994.

Our aim in developing the Fifth Framework Programme was to keep better pace with the changing technological context and take better account of Europe's socio-economic needs. The overall aim of the programme remains intact, and that is to foster collaborative R&D that will help maintenance Europe's position as a leading technological and economic player in the 21st century.

Reflect Convergence

As the frontier between the telecoms, IT and media sectors fades away, the maintenance of three separate programmes focusing on different technologies and sectors was no longer tenable.

Convergence is thus one of the main driving forces behind the integration of all EU IST-related R&D activities into a single programme.

More Responsive To Change

The pace of technological change has increased tremendously over the last years. While the life span of an EU programme is "only" five years, this is already too long to foresee at the outset new challenges that may arise almost overnight.

In order to respond to these challenges in a timely manner, the IST Programme operate on the basis of a rolling work plan, updated annually. Furthermore there will be frequent calls for proposals - two or three each year. New actions can therefore be easily and quickly launched as and when required, while existing actions can be more easily reoriented to reflect new developments.

Because the technological landscape is changing so rapidly today we have decided not to create a too narrow or deterministic techno-centric focus for the programme. The IST Programme thus has as a focus the substantial and measurable improvement of key system functionalities, namely accessibility, affordability, usability, dependability, and interoperability.

In addition, very recently a high-level advisory group has provided a long-term vision for the IST Programme. This vision is based upon the model of an intelligence landscape of seamlessly interwoven services and applications. The practical focus is on large test-beds and open source software, developing non-trivial aspects of user friendliness, and a world-class network infrastructure. What should emerge is a future environment that is embedded, personalised, adaptive and anticipatory.

Quicker To The Market

At the end of the day, R&D activities should lead to new products and services. R&D must contribute to strengthen all sectors of EUindustry and in particular our infrastructure of small and medium sized enterprises. The key indicators of success are market share, global competitiveness and the number of new jobs created.

The IST Programme will therefore place strong emphasis on the take-up of EU R&D results. This includes, in particular, actions supporting the development and diffusion of new methods, techniques and the associated skills required, such as first-user and best-practice actions).

This will be accompanied by consensus-building and standardisation activities, which have proved extremely successful in the past, for instance for GSM and digital TV.

The IST Programme must also reflect economic globalisation. Hence the importance devoted to the international dimension of EU research. It is useful here to mention the role of international co-operation in the IST Programme. At this moment in time the programme is completely open to the 15 Member States, Norway, Iceland, Liechtenstein, Israel and 11 accession states including most the Central and Eastern European countries. Switzerland will also become a full participant in 2001. In addition there are Science & Technology Agreements with USA, Canada, Australia, South Africa, and so on. Finally all the RTD programmes are now open to international co-operation on a project-by-project basis.

Better Serve EU Policy Goals

Finally - and this is in fact an underlying element of the previous points I have just made - EU research must be more closely related to EU policy goals. To achieve this is even more important today than it was in the past, given the fast and widespread penetration of technologies in all aspects of human life.

In practical terms, it means that the research objectives of the IST Programme reflect the political priorities of both Information Society policy and other key EU policies, for instance employment, education and training, health, environment, transport, cohesion or sustainable development.

Overview Of The IST Programme

The new IST Programme has a budget of 3.6 billion euro until 2002, and the budget for 1999 is around 800 million euro. It is focused on four key actions and two horizontal activities:

Key Action I - "Systems and services for the citizen"

Key Action II - "New methods of work and electronic commerce"

Key Action III - "Multimedia content and tools"

Key Action IV - "Essential technologies and infrastructures"

Horizontal Action 1 - "Future and emerging technologies"

Horizontal Action 2 - "Research networking"

Realising the vision behind the IST Programme presents many technical challenges and standardisation problems. The overall aim is the development and application of new technologies in competitive products and services. The Work Programme for 2000 is focussed on these challenges and in particular:

From the technology perspective:

  1. Foster the development and convergence of networking infrastructures including integration of fixed and mobile technologies and of on-line and broadcasting technologies.
  2. Develop embedded technologies, their internetworking and their full integration into the service infrastructure.
  3. Address human factors and dialogue modes through their various facets (for example multi-linguality and multi-modality) and in accordance with both user requirements and provider profiles.
  4. Promote open source software production and use.

From the application and services perspective:

  1. Reconsider service provisioning in the context of ubiquitous access and ambient dialogue modes including public services and relevant mediation and commercial transaction systems.
  2. Expand service provision mechanisms and development tools to take advantage of the possibilities offered by the emergence of networked embedded service environments.
  3. Support the tools and methodologies for fostering creativity in content creation and conveyance in the context of converging media and interaction modes.
  4. Emphasise trust and confidence as a general requirement for all technologies, applications and services.

In addition, these priorities are complemented by policy oriented objectives, essentially:

  1. Support European policy objectives with technological developments, for example in areas such as: data security, data protection and privacy, next generation mobile voice and data services, control of illegal and harmful content.
  2. Anticipate market needs and nurture emerging technologies where public funding can make a substantial impact by aggregating fragmented research and building critical mass ahead of market maturity.

In terms of electronic commerce the core activities in the IST programme are found in the Key Action entitled "New Methods of Work and Electronic Commerce". I would like here to focus on two specific issues, action promoting the adoption of e-commerce technologies and practices, and R&D on security and confidence building technologies.

The 2000 work programme is likely to have a strong focus on activities promoting adoption and exploitation of e-commerce technologies and practices. The aim will be to foster the rapid exploitation of research results by providing funds for "trials" and "test-beds". The objective here is to strengthen Europe's technology base for the digital economy by validating and customising novel solutions in very practical situations so that the marketplace can quickly adopt them. An additional action will focus on "best practice" activities aimed at showcasing the benefits of new solutions and facilitating their deployment within small enterprises.

Turning to the challenge to develop novel IST-based solutions and practices is to ensure trust and confidence both at the level of individual solutions as well as at the level of the infrastructures supporting these solutions. The focus is on:

  1. Scalable and usable authentication infrastructures, including infrastructures with embedded electronic signature and/or biometrics.
  2. Global security architectures aimed at providing an optimised solution based upon tamper-proof equipment, such as smart cards, and auditable protocols with strong non-repudiation properties
  3. Protocols and transactional models in support of emerging business processes and practices, with special emphasis on electronic payments of any value
  4. Definition of novel standards and meta-languages to characterise, measure, and assess quality of service
  5. Building technologies to empower users to consciously and effectively manage and negotiate their personal "rights and assets" (for example privacy, confidentiality, copyright, etc.).
  6. Novel technologies and systems to fight abuses perpetrated via IST infrastructures/platforms with a particular emphasis on fraudulent/criminal activities.

A particular action is focused on large-scale trust test-beds which examine generic solutions for global interoperability and supporting a broad array of transactions (for example, e-purses and e-money), applications and business processes.

This last point was just to demonstrate that today the Commissions RTD programme is not only highly focused on key technological challenges but also on ones that have global relevance. It is for this reason that the IST Programme is an excellent tool for a modern policy in international co-operation.

7. Conclusion

In conclusion, the development and effective uptake of Information Society Technologies will be one of the key issues for the European economy in the coming years.

The European Commission, through an extensive and integrated policy, aims to foster the emergence of the Information Society in Europe. The Information Society industries have become one of biggest and fastest growing sectors in the EU. They are creating new jobs, new business opportunities, new products and services, but this is only the beginning. We can expect that these industries will grow in importance, and that the pace of change will continue to accelerate and challenge existing structures and institutions.

In addition to telecoms deregulation and the development of an appropriate regulatory framework, e-commerce is one of the lynchpins of the Commission's strategy in the IST programme. The EU is well placed to exploit the opportunities on offer. We have the largest single market in the world, the single currency, a liberalised telecoms infrastructure, a well structured regulatory framework, and a diverse, creative and innovative pool of talent.

More specifically by fostering collaborative R&D projects, the IST programme helps to bring together Europe's brightest researchers to develop new technologies for the next generation of e-commerce products and services.

Today our problems are global, so it is important that our programmes are as open as possible to collaboration with non-EU partners. We are making progress in this area, but there is still much to do. I would incite you all to consider or re-consider your options, and come and talk to us about future co-operation.

Thank you

Author Details

Bernard Smith
Head of Unit
Cultural Heritage Applications INFSO/D
Directorate General - Information Society
European Commission

For citation purposes:
Smith, B.,"Towards The Information Society In Europe - The European Union's Contribution", Exploit Interactive issue 4, January 2000
<URL: http://www.exploit-lib.org/issue4/smith/>


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