Europe 1992—Opportunity or Threat for U.S. Business: The Case of Telecommunications

“(The goal to integrate Europe by) ‘1992’, has been adopted by almost all politicians with evangelical enthusiasm.” The Economist, “A Survey of France,” March 12, 1988, p.18.

A good example is provided by the opposition of some of the member-states and CEPT (the association of European PTTs) to the EC directive to give Europe-wide access to any piece of telecom equipment that already has been cleared for network access by a European PTT. The disagreement seems to reflect different interpretations of the EC commission's powers rather than principle. The commission claims that article 90 of the Treaty of Rome gives it the right to impose deregulation by directive. The U.K., Germany, and France oppose the EC interpretation, because they are afraid that it might set dangerous precedents. The American reporting of this issue has been entirely misleading (Cf., “Europe's Phone-Deregulation Drive Slips,” Wall Street Journal, March 31, 1988 p.18).

“They have designed the future and it might just work,” The Economist, February 13, 1988, p.45.

The integration of the EC's economy requires the adoption of about 300 laws, to be passed by the Council of Ministers. About 60 have been adopted so far, 120 are before the Council and should be passed this year. The rest will be submitted to the Council over the next 12 months.

“Leading industries,” according to Schumpeter, drive economic growth and change and determine a country's economic strategic strength. Cf. Business Cycles, 1939.

Subsequent activities of the EC that culminated in the Greenpaper responded to the instructions of the council of (industry) ministers. Cf. Neumann Karl-Heinz “Die Deutsche Bundespost vor der Herausforderung der Europäischen Telekommunikations-Politik” Discussion Paper, Wissenschaftliches Institut für Telekommunikationsforchung (WIK), #23, November 1986. See also Ungerer Herbert “The European Community Strategy.” Paper presented at the Communications Policy Research Conference, Windsor, U.K., June 18–20, 1986.

Actually, European R&D efforts, if taken together, are quite comparable to the American performance. The German IFO-Institut für Wirtschaftsforschung, measures R&D efficiency by percentage of patents obtained in IT, material science, and biotechnology and presents the following figures for 1984: Country Patents USA 33% Japan 26% West Germany 17% U.K. 8% France 6% European Community 31% Others 10% Source: Statistische Angaben: IFO, 1985. Also quoted in ZPF (Journal of the DBP) January 26, 1988 p.4.

The ESPRIT and RACE budgets allocate their funds as follows:

ESPRIT

Advanced Information Processing 22.2%.

Software Technology 18.7%.

Microelectronics 24.5%.

Computer Integrated Manufacturing 13.4%.

Office Equipment Suppliers 21.2%.

RACE

Integrated Broadband Communication (IBC) Technologies 66%.

IBC development and implementation 12.2%.

Integration of Functions 21.8%.

Source: Siemens Review (January 1988), pp.7,8.

ESPRIT and RACE are the two most significant European research efforts. Others worth mentioning are EUREKA sponsored by France in the early 1980s to launch “Europe's technological renaissasnce” and its spin-off EURECOM devoted to the development of broadband transmission; STAR, which will spend $1 billion on upgrading Iberian and Greek telecom systems, is also worth noting.

Introductory sentence in the E.C.'s Greenbook Summary: The Development of the Common Market for Telecommunication Services and Equipment. Commission of the European Community, Brussels, April 1986, page 1. The quotation is the author's translation from the German version of the E.C. Greenbook.

“Towards a Competitive Community-Wide Telecommunications Market in 1992,” Implementing the Green Paper on the Development of the Common Market for Telecommunication Services and Equipment, Commission of the European Communities, COM (88)48 final, Brussels, February 9, 1988, p.3.

Nevordnung der Telekommunikation (Report of the Government commission on Telecommunication), Vorsitz (Chairman) Eberhard Witte, R.v. Decker's Verlag, Heidelberg, 1987.

Jean-Pierre Chamoux, Chef de la Mission a Réglementation, The Current French Telecommunication Policy, Ministére des Postes et Télécommunications, 1988. The current Socialist Telecommunications Minister Paul Quiles has been much less enthusiastic about deregulation than his predecessor Gerard Longuet. We can expect France Telecom to lag behind the DBP in liberalization measures.

“ISDN: Oceans apart,” Network World, August 4, 1986, p.1. Though written nearly two years ago, these comments are as true today as they were then.

Since December 1986, the EC has worked with the three European standards organizations CEN (Comité Européen de Normalisation), CENELAC (Comité Européen de Normalisation), and CEPT's telecommunication standard's office to accelerate the formulation of European standards. In accordance with a 1986 E.C. decision, member states are required to implement these European standards. The formation of a European standards Institute is supposed to increase this process and prevent foot-dragging by the standards bureaucracies. International Standards Organization (ISO) and CCITT protocols are fully accepted by CEPT.

Queisser Hans-Joachim , “Der Sprung vom Komponierten zum Integrierten” Zeitschrift für Post-und Fernemeldewesen (ZPF), February 26, 1988, p.10 (ZPF is published by the DBP).

Ibid.

“Single European Market,” The Economist, April 23, 1988, pp.52–53.

Two very recent and ambitious forecasts of 1992 benefits are: Cecchini Paolo , The Economics of 1992 (London: Wildwood House, 1988) and the “Economics of 1992” in European Economy, No. 35 (March 1988), Luxembourg.

Kessler Claus Dr. , Senior Vice President, Siemens at the March 1986 CeBIT fair in Hanover, FRG. See also his “Markt, Technik and Gesellschaft” Frankfurter Allgemeine Zeitung, March 15, 1988.

“The liberalization of telecommunication services must deal emphatically with the DBP's tariff structure. The proposed liberalization (i.e., Witte recommendation) will only lead to new services and competition if today's usage-dependent rates for national (i.e., DBP) services are lowered, and replaced by a different system over a transition period… Usage dependent tariffs for data and voice transmission will be replaced in the near future by a cost oriented flat rate structure.” Schwartz-Schilling C. , “1988: An Important Year for the DBP,” ZPF, January 26, 1988, p.1. My translation, my italics.

Sweden's Ericsson has made great efforts to appear as a European and not as a Swedish (EFTA) firm. Especially its acquisition of 10% of France's state-owned CGCE has helped its “European” posture. EFTA-EC cooperation will intensify during the next four years. The second five-year ESPRIT research effort approved in April 1988 encourages explicitly cooperation with EFTA firms.

Berger W. G. Dr. , “Establishing the European Internal Market: Implications for Information Technology,” Siemens Review (January 1988), p.4.

A paraphrase of views frequently expressed by leading “fair trade” advocates in Europe. For a typical example of a European “level playing-field” speech see also Michel M. Carpentier's “The Future of European Telecommunication Policy: Moving Beyond the Green Paper,” published by the U.S. Council on International Business (March 1988) p.3, p.9–14.

The last figures are quotes from a Kaske interview in the Wirtschafts Woche, February 5, 1988, p. 42, The balance of the views ascribed to Kaske are gleaned from a number of speeches and articles by or about Kaske. Note expecially “Siemens: Kultur-Revolution,” Wirtschafts Woche, February 5, 1988, pp.34–43; and Kaske Karlheinz , “Europe's Response to the World Economy,” Siemens Review (January 1987), pp.4–8.

Kaske K. , “Europe's Response to the World Economy,” op. cit., p.8.

Kaske K. , ibid, p.4, my italics.

Kaske K. in the Wirtschafts Woche interview, op. cit., my translation.

Neumann Karl-Heinz , “Die Deutsche Bundespost vor der Herausforderung der Europäischen Telekommunikationspolitik,” Discussion paper 23, WIK (WIK is the German acronym for Scientific Institute for telecommunications services). WIK is sponsored by the DBP and serves as its think-tank, but is completely free to publish research in accordance with the views of its staff.

1986 Exports to the U.S. $368 million

1986 Imports from the U.S. $988 million

EC deficit $620 million

Quoted by M.M. Carpentier, Director-General, EC Telecommunication, Information Industries in The Future of European Telecommunication Policy, op. cit. p.11.

“Single European Market,” The Economist, April 23, 1988, p. 54.

See Schnöring Thomas , Die Deutsche Informations—und Kommunikation-technische Industrye und Ihre Internationale Wettbewersbsposition, WIK Discussion Paper #39 (January 1988), p.89.

Note for instance Schwarz-Schillings kind words about the free-trade policies of the Reagan Administration: The [Reagan] Administration … worried about the continuation of free world trade, attempts with all its strength to prevent the progress of protectionist measures [in the U.S.] but does demand market-access [in Germany] … We [must], as quickly as possible, further liberalize equipment and services in the telecommunications area. There must not be any delay or it is possible that the U.S. will retaliate. Cf. “Schwarz-Schilling; 1988: An Important Year for the DBP” ZPF, January 26, 1988, p. 6, my translation.