Electronic communications: common regulatory framework for networks and services. Framework Directive

COMISSION’S IMPACT ASSESSMENT

1- PROBLEM IDENTIFICATION

In December 2003, around 25 million of the 32 million digital receivers in the EU15 included API (application program interface) functionality.  There are five different API systems and they are not interoperable at terminal level.  Given that the majority of the receivers use proprietary APIs, the key question is whether one or more standards should be mandated – or other measures adopted – in order to improve interoperability for I-TV services in the EU.

For more information regarding the context of interactive television (I-TV), please refer to the summary of COM(2004) 0541 on interoperability of digital interactive television services.

1.1- Risks

Both action (to mandate standards) and inaction (maintaining the status quo) carry a degree of risk and no consensus has emerged among market players and policy makers as to which approach entails the most risk.

1.2- Who is affected?  What are the underlying motive forces?

The imposition of API standards for interactive digital TV would affect broadcasters, network operators, equipment manufacturers, software companies and viewers.

 Within these categories, however, there are sub-categories which may have differing views:

-         Pay TV operators (satellite and cable) have made substantial investments in network equipment and set-top boxes (STBs), based on proprietary technologies; they seek to protect their investment and maintain their commercial freedom;

-         Free-to-air broadcasters seek to have their interactive content available on different delivery platforms and seek a migration from proprietary standards to open standards;

-         Providers of first generation proprietary APIs are concerned that any imposition of open standards would force them either to incur costs in changing their systems, or to quit the market;

-         Some manufacturers of set-top boxes and television receiver equipment seek the economies of scale that a single standard could provide;

-         Interactive application and content providers face lower cost with a single API standard. Open standards offer more predictability than proprietary standards.

2- OBJECTIVES

The ‘Framework’ Directive 2002/21/EC lays down a common regulatory framework for electronic communications networks and services.  In this context, the Commission’s objective is to ensure that European citizens benefit from a growing range of I-TV services available on an increasing number of transmission platforms.  The use of proprietary technologies will need to be kept under competition law review.

3- POLICY OPTIONS AND IMPACTS

3.1- Option 1:The Commission imposes mandatory implementation of one or more open standards at European level.

3.1.1- Option 1a: The Commission imposes mandatory implementation of one API standard at European level.

Economic impact: it would provide hardware manufacturers, application developers, broadcasters and, in some cases, platform operators with legal certainty concerning technological decisions which, in turn, could lead to further investment in equipment production and development of services and help achieve economies of scale for MHP. However, the installed base of more than 25 million set top boxes incompatible with MHP implies an important economic cost – with a negative impact on platform operators using proprietary systems and possibly also for their customers.

Social impact: positive by reducing political concerns regarding media pluralism and cultural diversity.

Environmental impact: the mandatory replacement of some or all of the 25 million set top boxes (STBs) already in use would present a disposal problem.

Overall, although this option presents certain positive social and economic impacts, it could block technological progress.

3.1.2- Option 1b: The Commission requires implementation of one of a range of APIs that has been standardised by a European standards body.

Economic impact: The anticipated economies of scale in this option are expected to be lower, as there is a greater range of products.

Social impact: the obligatory use of open standards does not guarantee consumers can receive all content.