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The European Commission



Clarifying how recent EU Policies & Decisions will foster effective competition : Who should be Europe's Digital Gatekeepers

Dr Herbert UNGERER

European Cable & Satellite 96 Conference




The information sector today represents 450 bn ECUs (600bn US$) in the European Union alone. Some predict that we will be facing a 3 trillion dollar worldwide market by the end of the 90s. The catch words are : convergence, digitalization, broadband switched services.

The Mega-Trends are determined by liberalisation, change of technology, and market restructuring.


The information sector is being fundamentally re-shaped by the convergence of the telecoms sector with information technology and the "content industries" of television broadcasting and publishing. This poses decisive and unprecedented challenges for public policy at both national and EU level,as we run up to full telecommunications liberalisation by 1998.

The date has been formally written in EU-law by the Full Competition Directive adopted by the Commission on 13 March, last week.

There is massive potential for growth in Europe especially in the market for broadband services to the home. Compared with the US where 35% of households are equipped with PCs, we are still below 20% - though growing rapidly. Over 60% of US homes are linked to cable networks whereas in Europe six of the Member States have less than 25% of households passed, and three have no cable network to speak of yet.

The impulse of market players to pick up the slack between potential and market penetration is remarkably rapid. As we speak a wave of mega mergers and joint ventures are being formed in Europe. Much of these are spurred on by developments in multimedia services and applications. This is characterised by the vertical integration of content producers and various distributers and carriers, and also a horizontal convergence between the telecoms, cable and computer networks.

All these radical developments imply a complete transformation of the core of the economy comparable only to the Industrial Revolution of the nineteenth century. Similar shifts of global economic and market conditions will occur but much more rapidly and dramatically, within a time frame of as little as ten years.

Key to this development is digitalization. We saw the effect of this on the telecoms sector in the 80s.

As regards the television sector, the initial structure of public broadcasters providing service to the public under strict national regulation and funded directly by the audience via licence fees is being rapidly eroded in a process which began in the late 1980s with the progress of private broadcasters in a number of Member States and emergence of advertising revenue as a second major - and for private broadcasters, in many cases, only - revenue source.

Commercial television is now starting to look for pay-Tv subscription or pay- view revenues as a third main revenue source.

The diversification of supply, a resulting squeeze on fee-income for the public broadcasters, increasing competition for advertising revenues under a growing number of market participants and the search for new revenue sources are introducing intense competition in the European television sector.

Competition will be amplified by the entering of digitisation in the television sector which may have similar effects in the television sector in the nineties as the introduction of digitisation had in the telecommunications sector in the eighties. Its first consequence is further multiplication of channels and supply.

A second is convergence with telecommunications and software services, in the context of the Information Society concept.

The resulting new opportunities of packaging of offerings across sectors, particularly in fields like video-on-demand, special interest offerings and on- line services is leading to repositioning and alliances across technologies and markets in the move towards multi-media.The media sector is undergoing substantial restructuring in Europe as in the United States.

These developments have led to a dramatically increased role of EU competition law for the sector. We are in favour of commercial initiative and partnerships when they are in the interests of the Information Society. But alliances must have a competitive not an anti-competitive logic behind them.

With this in mind we have two general conditions: The first is that such a powerful and radical revolution in telecoms as we are experiencing must be overseen by competition safeguards: basic principles which need to be as flexible and global as the moves and the players themselves The second is that the markets must be liberalised before we can allow their dominant players to join forces. We cannot risk that markets such as digital interactive TV, or global mobile satellite systems, are sewn up by defensive commercial moves before they are even opened to competition. New gateways must be opened to avoid gatekeepers strengthening their positions.

III. EU Competition Policy

This talk will therefore cover the major strands of EU competition policy in the area of telecoms and multimedia : I Lifting Government restrictions on market entry II Setting down general rules of fair play III Controlling the behaviour of dominant players A key issue concerning both regulation and competition in the communications and information sector is the creation of the right incentives for investment. Competition policy is not only responsible for abolishing restrictions on market entry, but also for setting down the rules of fair play regarding the commercial relations between old and new players, and between such undertakings and the government.

Our goal is, of course, a market structure and regulatory framework which stimulates optimal progress in the interests of both consumers and economic growth. This is no less true in the telecoms and media sector than anywhere else. The problem is that this sector has been characterised by high levels of government involvement and public monopoly over the last decades.

We know that we now want to allow, to the greatest extent possible, commercial decision making and commercial negotiations to develop the shape of the information society. And we know that we want to maintain maximum flexibility concerning developing technological applications and sectoral convergence. However, we also know that all this must take place within a framework of rules. Policy makers must recognise that the nature of these rules, however minimal, will (and does) inevitably play an important role in determining where investment will flow to and where the most important competition will emerge.

The major deadlines for lifting restrictions are : * Aug 1995: satellite services and equipment * Jul 1996: transmission capacity on cable networks * Jul 1996: transmission capacity on alternative networks * Jan 1998: public voice telephony and public network provision, with additional possible transition periods for Greece, Ireland, Portugal, Spain, and Luxembourg. The first two deadlines are fixed by the Satellite and Cable Liberalisation Directives, the two latter by the Full Competition Directive. Let me now look in more detail at the first two areas, most relevant to the topics discussed at this conference.


Liberalisation Our first entry point for developing an EU-wide multi-media policy framework came with a measure adopted by the Commission in 1994 which applies competition principles to open the market for satellite communications and access to the space segment. This should now have been implemented in all Member States. For the most part progress has been very encouraging, but six Member States are behind on this time table : Greece, Ireland, Italy, Luxembourg, Portugal, Spain. In all of these cases we have, in the meantime, initiated the necessary legal procedures, in order to correct this situation.

The aim is to stimulate without delay greater use of satellite communications in the EU.

Member State broadcasting policy is unaffected by the satellite directive. One has, however, to distinguish between the provision of programming content of broadcasting and the provision of the technical means to carry and distribute such services. The provision of the satellite network services for the conveyance of radio and television programmes is, by its very nature, a telecommunications service and there is therefore no justification for treating it differently from any other telecommunications service. The Directive, thus, makes a clear distinction between: i the services provided by the carrier (transmission, switching and other activities) necessary for the conveyance of the signals, which are telecommunications services liberalised under the Directive, and ii the activities of those bodies which produce and control the contents of the messages to be broadcasted, which are broadcasting activities falling outside the scope of this Directive.

Services liberalised under this Directive therefore include services provided over telecommunications operator's feeder links from studios/events to uplink sites, as well as uplink services for point to point, point to multipoint, direct- to-home (DTH) satellite broadcast services and services to cable-head ends.

direct access to space segment Member States are required by the Directive to abolish all restrictions on the offer of space-segment capacity on their territory.

This means, in particular, that governments must ensure that: - any regulatory prohibition or restrictions on the offer of space segment capacity to any authorised satellite earth station network operator are abolished, and that - any space segment supplier is authorized, within its territory, to verify that the satellite earth station network for use in connection with its space capacity conforms to the published standards Reform of the International Satellite Organisations Member States are obliged, however, to ensure that there are no restrictive provisions in their national regulations which would have the effect of preventing the offer of space segment capacity in their territory by either another signatory or by independent systems. Member States must also abolish restrictions which prevent space segment capacity, already leased from the International Satellite Organizations by a licensed operator in one Member State, from being freely accessed by users from their own national territory.

This means, for example, that companies and service providers in Italy would have the freedom to choose to use capacity provided by BT, France Telecom or STET. The main aim is to achieve maximum commercial flexibility for all concerned parties within the context of the current regulations. Restrictions preventing parties other than the national signatory from verifying the technical and operational specifications of satellite earth stations must also be abolished.

The directive also emphasises that measures relating to international satellite organisations must comply with the competition rules of the Treaty.

Ultimately, if it appears that signatories continue to maintain mechanisms which dissuade multiple access and thus favour market sharing for the provision of space segment, the Commission will consider taking legal action against the relevant signatories.

* COMMON POSITIONS AND POLICY WITH REGARD TO NEW LEO SYSTEMS > Alongside mobile terrestrial communications, satellite networks are central > to the development of personal communications whereby a user can be identified regardless of geographical position. We are convinced that this goal is central to the future information society in Europe.

The Commission has put forward a Council decision on the future licensing of LEOs system in the EU which will be on the agenda of the telecoms Council in Brussels tomorrow. The benefits of liberalisation we can expect in the EU market include: * Reduction of costs of deploying and operating satellite capacity which will be translated into lower prices for service providers and consumers: Competition and liberalisation will mean more space segment and easier space segment access.

* The rapid deployment multimedia applications and access to the developing data superhighways of the information society. * Removal of prohibitions on service provision and interconnection * Simplification of operations such as licensing, equipment registration and installation * Increased confidence of users, operators and investors in satellite solutions for Europe * More generally, a confirmation of Europe's satellite infrastructure in its role of carrying the future digital telecoms and entertainment services across Europe.

Let me then turn to the other major carrier of the future broadband services, the cable networks.



The EU Cable Directive has entered into force by 1st January. Member States have a further nine months for implementations. The Directive allows use of cable networks for telecom services across the Union. It will unleash a substantial amount of growth potential, particularly for multi-media services, in the run up to full services liberalisation in 1998.

Article 1 of the Directive thus abolishes restrictions on the use of transmission capacity on CATV networks for all telecoms services, apart from public voice telephony. Where applicable changes to national legislation must be notified to the Commission no later than July 1996. This provision covers, in particular data communications, corporate networks and multi-media services (which however will include, according to the Full Competition Directive, public voice telephony from 1st January 1998 onwards). The article also ensures that cable TV networks are allowed to (a) interconnect with the national public telecoms network, and (b) directly interconnect with each other.

In many of the Member States national regulation still restricts use of cable TV networks to simple, one-way television broadcasting services. The regulatory restrictions thus effectively prevent cable TV operators from offering carriage or provision of any of the new switched broadband services.

The main goal of the Commission is thus to lift those restrictions in order to allow an enlarged economic base by joint use for entertainment and telecommunications services of the cable networks.

Lifting restrictions on cable network usage will introduce new alternative means for telecoms service providers throughout the EU to gain switched access to end customers. What this means is that we open up a new gateway between service providers and customers and at the same time seriously reduce the power of the old gatekeepers.

Joint provision of telecoms and broadcasting services I want to make four main points here : i a particular aim of the cable TV directive is to provide a viable platform for local access for both telecoms and media services ii where one operator controls both links to the consumer (cable and telecommunications) and no one else is allowed in, then there must be rules to ensure non-discriminatory behaviour, particularly separation of financial accounts as concerns the provision of each network and the provision of telecom services. This is to prevent unfair cross subsidies between monopoly areas and areas where new players are attempting to gain a foothold. By 1st January 1998, the Commission will carry out in overall assessment whether accounting separation is enough to ensure the aims of the cable TV Directive iii On the other hand we have also taken account of the concerns of the European Parliament regarding lifting restrictions on telecoms operators from providing broadcasting services: Although, in principle the carriage of broadcasting signals is a telecoms service, and we all know that with convergence the distinction between telecoms and broadcasting is increasingly blurred, EU telecoms liberalisation has not, so far encroached upon the specific rules in certain member states regarding distribution of audiovisual programmes for the public. However, according to the Full Competition Directive, the Commission will carry out, in parallel with the review of joint ownership, an overall assessment of the situation regarding restrictions on use of public telecom networks for provision of cable TV capacity.

Let me here add some facts and figures : It is interesting to note that * The most recent OECD figures show that PTOs enjoy an increasing share of the cable subscriber market and, thus, the platform for alternative provision of local telecoms access is shrinking. PTOs are in fact twice as likely to be able to offer cable TV services than cable operators are to provide switched public telecom services. Restrictions on PTOs from providing cable TV services are the exception not the rule. The PTO share of the cable communication market is increasing in those countries with monopoly markets After having virtually identical market share of the EU cable TV market in 1990, by 1995 this had shifted to 60:40 in favour of the PTOs (In 1990 52.7% of subscribers in the EU were customers of PTO owned cable

networks. By the end of 1994 the PTO share had increased to 58.5%) * In Member States where there are still monopolies in telecoms infrastructure and voice telephony, this increasing cable TV market share of PTOs in the run up to 1998 is worrying. It means that the platform for local loop competition may be shrinking and that incumbent monopolists may well be entrenching bottleneck control of access to customers * This is especially problematic in the global context: Many parts of the EU area are already at a tremendous disadvantage compared to, for example, Canada and the US, in terms of the independent infrastructure available for the provision such competition. This is a clear result of cable TV networks being owned or controlled by incumbent telecom monopolists. Close watch * The application of EU competition rules generally prevent the extension of dominant position from one market, for example telecoms, into another, for example cable TV. We are therefore keeping a very close watch on the moves of incumbent telecom operators. This concerns (a) relations or agreements with broadcasters and content suppliers; and (b) their plans to roll out their own cable infrastructure, especially in those countries where the cable networks are not yet developed (such as in Spain and Italy). We are in fact currently conducting investigations in this area. Of course the interests of the consumer are paramount: some might argue that competition policy should not stand in the way of the kind of investment that only the incumbent telecom operator is prepared to make in broadband networks given the synergy of building upon the existing telecoms network (including ducts and wayleaves) to develop an integrated telecoms - audiovisual service The short term gains however must be weighed against the significant disadvantages of effectively locking in a monopoly in local loop customer access (for both telecoms and cable). This means one very powerful gatekeeper between the individual consumer and the information superhighway. Here again we are faced with the challenge of finding the right balance of deregulation and restrictions, of opening gates onto the playing field and then controlling the most powerful players, to best serve the individual consumer. The review by 1st January 1998 will give opportunity to draw the right balance. VI. DIGITAL TV AND CONDITIONAL ACCESS SYSTEMS Let me then turn to the issue of access to digital services. First, a short comment on a hotly debated topic : where to class the new multi-media services ; Content or carriage ; Point - to - point ; or point to multi-point ? The key questions in this onrunning debate at EU level include: Are the new interactive services of the information society to be regarded as telecoms or broadcasting for regulatory purposes, or are they in fact to be considered separately from both? What are the implications? How does the introduction of competition impact on concerns about cultural protection, political pluralism and education? What about pornography, censorship and protection of minors in the information society? Are the on-line or on-demand programmes to be treated like books and magazine sin this context, or more like broadcasting content? Background In March 1995 the Commission adopted a proposal for a revision of the TV without frontiers directive which would establish a clearer legal framework for broadcasting policy and promote the development of the European audiovisual services market. The main scope of application remained the same under the original review proposal: ie to continue to apply to all "point-to-multipoint" broadcasting services (including pay-per-view and near-video-on-demand). However, the proposed revision clarified that the provisions of the directive would not apply to the new "point-to-point" audiovisual interactive services like video-on- demand. The Commission decided not to extend the scope of the directive to the latter since the services are qualitatively very different from traditional broadcasting services for which the directive was specifically developed. In particular because they allow the viewer, not the service provider, to choose and control the content. The new audiovisual services excluded from the broadcasting directive are the subject of a special Green Paper on New Audio-visual services on the basis that they need particular internal market measures "tailor made" for such new applications. The main issues to be addressed are: Public interest criterion to be further studied and clarified cultural and linguistic diversity to be protected and promoted Development of new services to be supported; The future legal framework should facilitate (not alienate) significant investments in the industry and should be sensitive to the significant financial risks involved. It should also aim for coherence at national, Community and international level. The Green paper will be published this year. Recent Developments A main issue of debate on the broadcasting directive review has been its limited scope vis a vis the new audiovisual services such as on-line and on- demand services. Initially this was discussed from the point of view of the quotas issue, i.e. should "cultural" quotas apply to the new audio-visual services ? Now the discussion is centring more on the pornography and censorship issue, i.e. how can minors be protected from pornography on-line? The European Parliament has proposed in its recent Resolution extending the scope of the Broadcasting directive to cover new audio-visual services in order to apply broadcasting rules to these services. The Commission and the Member States have continued to support the separation of the new audiovisual services a formal position on the Parliament's proposed amendment is due in the coming weeks. Sector specific regulation must remain flexible and not technology-based. Treaty competition rules always apply. Let me then touch on a second topic of major importance for digital services : Set Top Boxes and conditional access systems We recognise that such systems are particularly important for the new digital TV market. What we are saying is that although conditional access is necessary gateway, it should preferably be neutral and transparent, and, in any case it should be non-exclusive. The Commission is hoping to prevent that mass customer access may be jealously guarded by one gatekeeper. It is however an extremely complex regulatory issue and one which has been, and continues to be, negotiated intensely with the industry. Given the high levels of risk and investment involved it was untenable for the Commission to seek to rigidly impose a common interface at the set top box level. After extensive consultation through the digital video broadcasting group we proposed a directive which ensured: i a common European Scrambling System, and ii an open interface socket on all TVs with screens larger than 42cms What this means is that, even where different decoder bases and conditional access systems are adopted by competing consortia there should be no technical reason why the customers of one system should not be able to gain access to the services of another. The commercial negotiations that would need to be involved between the competing players is, of course, another matter. Naturally, the pay-TV broadcasters who will actually be launching the market for digital TV support Proprietary Conditional Access systems embedded in dedicated decoders. In the short term its looks like a better bet for a large investment. However it is clear that a transparent common interface is a much better solution for customers for the long term development of the market because it unbundles consumer hardware from the necessarily proprietary and secret aspects of conditional access systems.
We hope that market forces (through increased consumer awareness) may favour the decline of the propriety access system. What EU policy now stipulates, as expressed in the Directive of 24th October of last year on the use of standards for the transmission of television signals, is that manufacturers must incorporate an open interface socket on all TVs with screens larger than 42cms.
This supports the current trend towards making new technology products more consumer friendly: one box and all services should be available simply by changing the plug. This is often referred to as the "plug and play" model. Firstly, the Television Standards Directive requires that digital TV service use standardized transmission systems but does not dictate the actual details of the particular standards.
That is left to the industry and users working together in the Digital Video Broadcasting (DVB) project and in ETSI.
Secondly it addresses this problem of the risk of gatekeepers at the conditional access gateway Following intensive industry consultation, particularly with the DVB, the Directive also sets down some requirements on conditional access systems for digital television which follow the principles I have mentioned. Provisions include:
The requirement that the agreed Common European Scrambling Algorithm be included in all consumers equipment. This will result in the creation of a common infrastructure in Europe for scrambling and will enable, in principle, any Pay-TV service providers to access any consumer terminals in the Union.
The requirement that it is technically and economically feasible that control of Conditional Access can be transferred between broadcasters and Cable TV network operators. This will ensure that Cable TV operators will be enabled to address their customers in a straightforward manner without the requirement of several boxes in the home
Principles for licensing of proprietary Conditional Access technology to manufacturers.This will allow manufacturers to build in full functionality into consumer equipment for the benefit of consumers. Principles relating to fairness in commercial relations between Conditional Access providers and Broadcasters, together with dispute resolution procedures if there are problems. Given the rapid change and unpredictability characterising the digital market, the Directive also contains a review mechanism which will ensure that initial market development will be closely monitored and the Commission will propose modifications to the directive when necessary. I believe I do not have to stress that wherever individual cases of abuse of a dominant position or restrictive agreements are found in the area of conditional access we can always apply directly the Treaty competition rules. Before going on I should mention the link between the ex-ante regulatory framework and the investigation and impact of various multi-media alliances which I will come onto later. As all of here today are aware there are two very significant consortia in the making concerning digital pay TV services in Europe: one involving Bertelsmann and Seca and the other led by Kirsch. It looks like they will be adopting different technical standards for the decoder base of the conditional access systems. The EU measure should mean that such a scenario should take the pressure off the consumer regarding their choice and investment in one or the other system. Encryption and legal protection A Green Paper on the legal protection of encrypted signals has been published on 19th December. It is centrally concerned with the problem of theft by pirates of the revenues which should properly flow to the legitimate providers. Piracy may well be facilitated by digital technology while at the same time the financial significance of the practice will be dramatically increased. The main thrust of the Encryption Green Paper is therefore to ensure adequate antipiracy legislation throughout the Union. New Audiovisual Services This leads me back to the specific treatment of new interactive audiovisual services in the EU policy framework. We certainly need to establish a clearer legal framework at EU level for the new "point-to-point" audiovisual services. In particular we want to encourage and promote this fledging European market, so we must ensure that regulation is not burdensome. As I noted before, the Commission's position will be defined in a Green paper on Audiovisual Services which should be published during this year. VII. THE GROUND BREAKING CASES Competition Safeguards on commercial agreements At this point we come to the final section of my talk: how the Commission applies the competition rules to individual agreements in the developing digital multi-media arena where we have seen some breathtaking re- arrangements of alliances during the last weeks in Europe which are on everybody's mind. The deregulation of the core telecommunications market, and the diversification of television and broadcasting, with the expansion of private broadcasters and the transformation of the original public broadcasting entities which is now beginning, combined with the entry of new actors from the publishing and software industries into the market (a consequence of convergence) is contributing to a substantial accelerating in the overall development. In many instances, the new possibilities for horizontal and vertical integration, the small number of powerful actors holding bottleneck positions allowing them to control market development, and the rush by market actors to occupy the major growth positions, all generate a high potential for anti-competitive behaviour which has become a major challenge for EU competition policy during the last two years. The Commission must try to ensure that the current restructuring process will lead to competitive and growth oriented market structures. As regards general principles, the whole point of case by case analysis is, of course, that there are no a prioiri judgements or assumptions. This is especially important in a market sector experiencing such rapid development and change. Competition rules are being applied in a firm but flexible manner to adapt to the changing situations as they arise. The exact timing and context is critical to the outcome of the case. The most important elements in assessing this context concern : exclusive rights or market dominance barriers to entry for other players state of liberalisation of the relevant market I will not go into detail on the cases. However, let me say a few words on two of them which have been trendsetting for the audio-visual sector : the MSG case (1994) and the Nordic Satellite case (1995). Leading cases : the MSG case The MSG case concerned the German companies Bertelsmann AG, Deutsche Telekom and Taurus Beteiligungs GmbH (Taurus), a company of the Kirch- Group (Kirch). They proposed to create a joint venture called MSG Media Service GmbH (MSG). The object of MSG was the technical, business and administrative handling of payment-financed television and other communication services. The relevant market affected was that for technical and administrative services for pay-TV and other TV services financed through subscription or payment by viewers in Germany. The most interesting element of the case was that a public telecommunications operator holding a monopoly for telephone network services and owning nearly the totality of TV-cable networks in a Member State would combine its future activities in the joint venture's market with those of the leading pay TV suppliers. The conclusion of the Commission investigation at that time was that the proposed operation would create or aggravate a dominant position on the market for administrative and technical services for pay TV, where MSG would obtain a lasting dominant position.
Consequently, Bertelsmann and Kirch would have a dominant position on the German market. Furthermore, the dominant position of Deutsche Telekom on cable infrastructure would have been protected and strengthened by MSG. The Commission considered in particular that in view of the position of Telekom, the facts of the liberalisation of cable infrastructure would be limited by the creation of MSG.
The Commission therefore declared the joint venture incompatible with the common market under competition rules.
Leading cases : the NSD case Nordic Satellite Distribution (NSD) intended to transmit satellite TV programmes to cable TV operators and households receiving satellite TV on their own dish ("direct-to-home" market).
However, the Commission concluded that the establishment of NSD in its proposed form would have led in effect to a concentration of the activities of its parents, creating a highly vertically integrated operation extending from production of TV programmes (through operation of satellites and cable TV networks) to retail distribution services for pay-TV and other encrypted channels.
NSD's parents were important companies in TV transmission and media in the Nordic area.
Norwegian Telecoms (NT) is the main cable TV operator in Norway with about 30% of household connections and controls the satellite capacity on one of the two allocated Nordic satellite positions, and it is an important pay-TV distributor in Norway through its company Telenor CTV. TeleDanmark (TD) is the largest cable TV operator in Denmark with about 50% of household connections, and will retain a privileged position for its cable TV operations possibly until 1 January 1998, the deadline for liberalization of the telecommunications markets.
In addition, TD, together with Kinnevik, controls most of the satellite capacity on the other Nordic satellite position. Kinnevik, the Swedish conglomerate with interests in TV programming, magazines and newspapers as well as in steel, paper, packaging and telecommunications, is the most important provider of Nordic satellite TV programmes including the most popular channels.
The company is the largest pay-TV distributor in the Nordic countries through its Viasat companies and also has an important stake in Kabelvision, the second largest cable TV company in Sweden, as well as in TV4, the largest advertising-financed Swedish channel.
The Commission concluded that the creation of the NSD joint venture would have resulted in the creation or strengthening of a dominant position on three markets: - the market for provision of satellite TV transponder capacity to the Nordic region (Denmark, Norway, Sweden, and Finland) - this would have meant the creation of a dominant position for NSD itself.
- the Danish market for operation of cable TV networks - this would have strengthened the dominant position already held by TD. - the market for distribution of satellite pay-TV and other encrypted TV channels to direct-to-home households - this would have created a dominant position for NSD.
The operation was vertically integrated, and thus the downstream market positions (cable TV operations and pay-TV) and those upstream (satellite transponders, provision of programmes) would have been mutually reinforcing. The parties would have achieved such strong positions that they would have been able to foreclose the Nordic satellite TV market for competitors.
Essentially NSD would have obtained a "gatekeeper" function for the Nordic market for satellite TV broadcasting. The Commission therefore prohibited the joint venture in the form submitted.
Conclusions to be drawn
The affected markets are currently in a transitional phase, since telecommunications markets are about to be liberalized and the new digital technologies and services are currently under development and are about to be introduced.
In this situation the decision of the Commission took on a particular importance, since this is the period during which future market structures are being defined.
However, let me stress that the Commission also re-stated, in the context of the NSD Decision, that joint ventures, particularly transnational joint ventures, could be instrumental in developing the media and telecommunications sectors to their full potential. The policy of the Commission was to take new developments into account and the Commission therefore remained open to examine new proposals from the parties.
Both the MSG and the Nordic Satellite decision clearly indicate that the sole entry in a newly emerging market does not constitute as such a dominant position as a result of which competition would be significantly impeded. By nature, the first entrant in a new market is always initially in a monopoly-like situation.
However the situation is different when such dominant position is likely to be long lasting and a long-term monopoly is going to be created.
Overall, the record shows that the Commission - and Competition Commissioner van Miert has confirmed this on a number of occasions - is taking a positive position on restructuring and alliances, once the necessary conditions for keeping markets open are fulfilled. Let me just mention, as examples, the decisions on IPSP ; Cable&Wireless VEBA ; and CLT-Disney- SuperRTL. But, as I have said, we have to be careful to avoid market foreclosure. Let me here mention areas which call for special attention. Leading cases : Global Mobile Satellite Systems - the new LEO (Low Earth Orbit) satellite systems.
The Commission has launched an in-depth and comprehensive examination of the newly emerging strategic alliances which are formed to offer mobile satellite telecommunications services on a worldwide basis.
In this sector with only a few global market players, it is essential that competition is safeguarded in the downstream markets involved, namely local service provision, distribution and equipment supply. One of the examined systems, namely Inmarsat-P, has already received a positive sign from the Commission. Leading cases : Investigation of On-line Joint Ventures
The Commission's main objective in dealing with online cases is to prevent at an early stage the establishment of anti-competitive situations which could stifle the development of online services and the 'Information Society' by ruling out viable competition before an effective market has had a chance to grow.
In both the Europe Online case and the AOL/Bert/DT case, the Commission is looking into whether
(i) access to the publications controlled by the partners would be available at fair conditions to other online services, both concerning advertising for the new services and online provision of their content,
(ii) publications not belonging to the founding groups would have access to subscribers at conditions similar to those enjoyed by the partners' publications, and
(iii) anti-competitive agreements with other companies would be avoided. With the current rush in the US - after the adoption of the new US Telecom Act last month - of both telecoms and cable operators to line up with major Internet providers, the importance of these cases will increase.
The Commission has also indicated that it would follow closely the developments related to Microsoft Network when Microsoft launched Windows'95 (on August 24), it became clear that included with Windows'95 would be the small piece of software necessary to connect to Microsoft's new online service, the Microsoft Network (MSN). This caused concerns among other online service providers, including Compuserve and America Online, and caused the US Department of Justice (DoJ) to launch a high profile investigation.
The reason for this concern was that when an "icon" for the MSN appears prominently on the screen of the computer, this may make it much easier for a user to choose to use MSN than another online service.
Here the Commission is limiting itself currently to gather information, in order to understand better the issue in the context of the industry. Leading cases : global telecom alliances In the field of global telecom alliances, we have investigated BT / MCI, the DT / FT / Sprint alliance - now called GlobalOne - and we have stated a number of conditions, as is well known.
We are doing currently the same with the Unisource / Uniworld / AT&T alliance.
Current re-alignments in the digital TV market
We are of course following with full attention the recent major re- arrangements in the pay-TV field in the European Union in preparation for EU-wide digital television. The Commission has continued to follow - and will examine - the efforts to find more open solutions for the access to pay- TV systems, subsequent to the prohibition of MSG - such as the developments related to MMBG. Commissioner van Miert has also announced that the Commission will look closely at the recent major re- arrangements of alliances in the market, such as the recently announced Bertelsmann, Canal+, Havas and Murdoch alliance.


In conclusion let me turn back to the general principles. As new ways of serving the customer replace the traditional mass media broadcasting concept, on the one hand, and "plain old telephone service" on the other, new policy issues outgrow the traditional regulatory concepts. Multi-media, by its very nature, crosses regulatory frontiers - again this has an impact at both national and EU level. It is not always as easy to convergence policy and its institutions as it is to converge market sectors. One effect of this is increasing responsibility and challenges for competition law to establish the ground rules. Another aspect is the need for closer cooperation between the various agencies and bodies responsible for measure effecting the information society.
In order to avoid regulatory straight jackets, pre-empting such technological and commercial developments, we need to remain as dynamic and flexible as possible.
At the same time we recognise that as investors in a capital intensive, high risk sector regulatory certainty is a priority.
Perhaps the best guidance I can leave you with is a very general principle: we want to establish and open new gateways to the information society, but we must be very cautious when it comes to gatekeepers
This is exactly the aim of our new EU-Cable Directive. In nearly all EU member states switched access to public end users was jealously guarded by one gatekeeper, the national incumbent telecommunications operator.
Liberalisation should provide a brand new gateway benefitting users and service providers alike.
However, in the shorter term where certain gateways remain closed (in either fact or law) we cannot let the gatekeepers entrench their position before anyone else has a chance to gain a foothold.
The General principles to be drawn out Encourage gateways and abolish exclusive gatekeepers Encourage competitive alliances and prevent defensive foreclosure establish competitive safeguards to focus on situations of asymmetrical market power in liberalised markets
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