ARENA Working Papers
WP 98/11

 

 


National Compromises and Transnational Alliances: The Battle of Universal Service Regulations in Europe*
 



Eli Skogerbø** & Tanja Storsul***



 


Abstract

Access to telecommunications infrastructure and services is an increasingly important communicative resource, and accordingly, the distribution of telecommunications services can be regarded a matter of distributive justice in the information society and as a necessary requirement in order to avoid creating a two-tier information society. Yet, what services should be universal, and what `universal service provision' should mean in terms of price, quality and geographical coverage are questions that have been recurring in the international debate. The development of new services and the transition from monopoly to competitive regulatory regimes break up historical compromises on telecommunications regulation, and have brought these issues to the forefront both of the national and international debates. This article investigates the development of these debates by means of empirical analyses of data from a comparative project on communications policy in three small West European states: Norway, Denmark and the Netherlands.

To explain the development of the universal service issue within national communications politics, we have emphasized three sets of institutional dynamics; first, the historical background, and in particular, the institutionalization of universal provision in each country; second, the quality and level of networks and services in each country as an indicator of the impact of new technologies on politics and society; and third, the Europeanization of national policy-making by the establishment of a regional telecommunications regime in Europe. These dynamics are specified as hypotheses in the empirical analysis. The data material consists of documentation of the legislative processes and interviews with participants in the public debate in each country, i.e. representatives for businesses and organized interests. [1]


Universal service provision in a historical perspective

It has been argued that the development of universal service provision was less a result of the farsightedness and great ideals of former politicians than it was an outcome of bargaining processes between different interests (Garnham and Mansell 1991; Sawhney 1994). This is also true for the countries that we have studied. After decades of political debates and conflicts between private interests demanding access to the growing telephone market and political and consumers' interests demanding nation-wide distribution of services, political compromises were reached on public responsibility for the provision of communicative services (Rafto 1955, Dahl et al. 1993, Blüdnikow 1994, de Wit 1995). The solutions were not identical but some form of public ownership and public control of telecommunications operators were introduced in each of these countries. [2]

In Denmark, from the beginning of this century onwards, private telephone companies operated regional monopolies whereas the state controlled the right to issue licenses, served sparsely populated areas, and held a monopoly on long-distance and international telephony [3]. In the 1940s, the state acquired a majority of the shares of the (remaining) four regional companies but the regional monopolies continued to exist until the 1990s. During the entire period there were demands for a centralized system but this solution was not politically attainable, in spite of dissatisfaction with the quality of services offered by the regional companies. It was not until the 1990s, when Tele Danmark was established and the centralization became a fact. In 1991 Tele Danmark replaced the regional companies and held a national telecommunications monopoly until competition was introduced in 1996 (Thestrup 1992, Blüdnikow 1993, 1994, Davies 1994).

In the Netherlands, the state gradually acquired control over the entire telephone network in the first decades of the twentieth century. However, a mixed system where telephone companies were owned and operated either by municipalities, private companies or the state remained until 1940, when the last three municipal companies were divested by the German occupants and the provision of telecommunications services fully centralized within the (already existing) PTT. The gradual take-over by the state can be explained by a number of reasons, among them the poor quality and the incapacity of private companies to serve the entire country, but also the fact that over time telecommunications came to be regarded as an economic asset for the state. From the beginning of the 1980s, there was a re-transference of responsibility for service provision from the state to the market (Hogesteeger 1984, 1989, Davies 1994, De Wit 1995).

In Norway, the state-owned telephone operator was given a legal national monopoly in 1899, but the success and proliferation of private companies [4] combined with the lack of economic resources on behalf of the state, maintained a mixed system for more than 70 years. [5] The topographical and geographical characteristics of Norway as a vast, mountainous and sparsely populated territory were conducive to this effect, yet pressure from the regional peripheries to ensure nation-wide coverage was strong. As a response to domestic demands which originated in the fact that private companies neither had the capacity to serve sparsely populated areas nor were allowed to establish long-distance telephony, the state-owned telegraph operators obtained the responsibility for providing telephone services on a nation-wide basis. The transformation of the public telecommunications operator Televerket in 1994 from a part of the public administration into a commercial corporation caused major conflict, as the institutional set-up by trade unions and several political parties were regarded as a guarantee that an equal service level could be maintained in the entire country (Rafto 1955, Lenæs 1966, Dahl et al. 1993, Skogerbø 1996, Storsul 1997).

The first decades of the political history of the telephone, thus show a record of parallel national processes, as licenses, public ownership and national or regional monopolies were the instruments implemented in the regulation of the growing telecommunications sectors in several countries. In Norway and the Netherlands the operators were state-owned, in Denmark the regional companies had mixed ownership structures. One factor that motivated state intervention was the fact that the telephone rapidly developed into a successful competitor to the state-controlled telegraph, and threatened to make it unprofitable only years after major investments in infrastructure had been made (Davies, 1994, De Wit 1995, Rafto 1955, Thestrup 1992).

Public ownership and a system of privileges (the exclusive rights to exploit the market and access to the treasury for investment capital) and obligations (universal coverage and equal treatment of customers within the license areas) [6] that were bestowed on telephone operators became the regulatory framework for universal service provision in the three countries. The specific set of obligations imposed on the operators in each country can be seen as outcomes of a historical resolution of conflicts. That is, as compromises between different views and interests that were embedded in the institutions and which, accordingly, became permanent distinctive characteristics of national systems. Historical accounts of the development of telecommunications point to how the compromises resulted in differences in institutions and regulatory frameworks, in spite of the fact that the issues at stake were almost identical across states. [7] Since the institutional differences can be regarded as the resolution of deeply rooted political conflicts, we expect them to have a permanent impact on the provision of communications and other public services in the different states. This expectation can be set out as a hypothesis: national differences that have been embedded in institutions, legislation and mechanisms for conflict resolution, will prevail when new regulatory regimes are introduced.

The system of obligations and privileges constituted until the 1990s the conception and regulations of universal service provision. The specific obligations originated in the conflict structures in each country. In all the three states, demands for a relatively equal service level in the entire country resulted in obligations to provide universal coverage, but regional politics have been more dominant in Norway than elsewhere. Similarly, although conflicts in the labour market have been important in all the three states, leading to a demand for fair and regulated prices, the class conflict historically have dominated Danish politics whereas religion used to be most important in the Netherlands (Andersen 1993, Rokkan 1966, Lijphart 1968). These historical cleavages have been reduced and ameliorated over time, but they are still represented in the party structures and in systems for inclusion of organized interests in the three states.

Since the operators until the early 1980s had major problems in meeting the constantly increasing demands for telephone lines, there were little conflict regarding the content of the obligations and the compromises were not seriously challenged. As the telephone changed from being a luxury service into a social necessity, new obligations were imposed, as for instance services for disabled people. Denmark, the Netherlands and Norway have all been classified as 'social-democratic' welfare-state regimes (Esping-Andersen 1990) in which the main distinctive criterion is the granting of welfare benefits to citizens on the basis of universal rights instead of proven needs. The provision of telecommunications services over time gained the character of a public good and was institutionalized and provided as a public service that should be available to all citizens at relatively equal conditions, similar to public service broadcasting, health care and social services. Accordingly, as the conflicts over the extent of the welfare state increased, universal services became more contested. Following this reasoning, we expect political parties and organized interests to classify universal service provision in line with their positions in different markets (e.g. the commodity market, the labour market), on welfare state issues and on regional policy.

In the 1980s and 90s, telecommunications regimes were increasingly politicized for several reasons. One was the developments in the USA and UK, the divestiture of AT&T and the liberalization of the British market in 1982 and the privatization of British Telecom in 1984. In 1984, the EU published its first guidelines for the telecommunications sector, and the events influenced policy-making in countries such as Norway and the Netherlands, too. In the Netherlands, a new and liberal telecommunications legislation was implemented in 1989 after years of debate (De Wit 1995, Hulsink 1993), whereas the first decisions to liberalize the telecommunications markets were taken by the Norwegian Parliament in 1987 (Muggerud and Skogerbø 1995). In Denmark, the restructuring of the telecommunications sector was initiated about the same time (Skouby and Christoffersen 1991, Johansen 1993). As in the early decades of the telephone, the first steps towards liberalization can thus be regarded as parallel national processes of adaptation to a changing international environment. From the late 1980s onwards, external constraints became increasingly important as explanations for the shift of regulatory regimes in individual states.


Technological developments and political change

Another reason for the increased politicization during the 1980s, was the increasing implementation of information and communication technologies that on the one hand improved the possibilities for bypass of the public telecommunications providers, and, on the other, inspired large-scale information technology initiatives. In Norway, a proposal for an advanced telematics network was presented in 1983 (NOU 1983: 32), several trials of advanced telematics services were carried out, and a national action plan for information technology was implemented in 1987 (Buland 1996). In Denmark, the so-called 'hybrid network', which originally was intended to form the backbone in a planned broadband network to the home, was built by the public telecommunications operators during the late 1980s (Skouby and Christoffersen 1991).

By the mid-1990s, governments in many countries had published strategic plans for ICT-development, inspired by initiatives such as the National Information Infrastructure (Clinton and Gore 1993) in the USA, and similar documents from the EU (CEC 1993, Bangemann et al. 1994). From 1994 to 1996 the Danish, Dutch and Norwegian governments presented national plans that can be read as strategic documents that declared which measures they would launch and how they conceived of their own resources and position in relation to the international environment (Skogerbø 1996). Although the content of these plans varied from state to state, the three states had common ambitions in bringing their countries to the forefront of the international community in terms of liberalization of telecommunications policies and promoting increased use of information and communications technology by individuals, business and public administration. In terms of decision-making, the IT-plans worked to speed up and finalize the liberalization of telecommunications markets.

The development of technical infrastructures and the introduction of information and communication technology (ICT) in society, may explain similarities and differences between the countries in terms of universal service provision. The level of ICT development in each country does not determine political outcomes but is an important part of the context in which decisions are taken. For instance, by the beginning of the 1980s, the telephone queues were rapidly disappearing and the infrastructure was being upgraded and increasingly digitized (table 1). This situation opened the possibilities for construction of advanced infrastructures and introduction of new services to large segments of the population. As the following tables illustrate, this development followed somewhat different paths in the three countries.

Table 1. Telecommunications infrastructure in Norway, Denmark and the Netherlands 1985 - 1998.

Telecommunications mainlines per 100 inh Digitalization (fixed network)
  1985 1990 1995 1985 1990 1995 1998*
Denmark 49,7 56,6 61,3 46,0 53,0 61,0 86,0
Netherlands 40,2 46,4 51,8 93,0 100,0 100,0 100
Norway 42,3 50,3 55,8 59,9 70,9 81,8 100
OECD 35,4 41,3 47,2 63,9 71,7 82,8 -

Source: OECD: Communication Outlook 1997, table 4.2, and table 4.9.

*For 1998, the figures for Norway are from Telenor (1998), figures from Denmark from Tele Danmark (1998).

Table 1 gives some indications of the quality and accessibility to telecommunications services and infrastructure. Measured by the penetration of telecommunications main lines, all three countries show figures well above OECD average and a considerable growth over the past decade. There was, nevertheless, a marked difference between Denmark, which has the highest number of lines per inhabitants and the Netherlands with the lowest, indicating a difference in access opportunities. The table also shows that the public telephone networks are of relatively high quality as they were completely or nearly fully digitized by 1998. Norway shows a rapid transition from well below OECD average in 1985 to full digitization in 1998, whereas in the Netherlands digitization started earlier and has been a more gradual process. The telephone in Denmark is supposed to be fully digitized by the end of 1998. Despite the differences, the figures suggest that in terms of access to networks, universal service provision was not a major problem in any of the three countries.

Another indicator of the access to information and communication technologies (ICT), is the number of internet hosts [8] (table 2). These figures indicate differences in access to the internet but the measures are crude and should be cautiously interpreted. [9]

Table 2. Internet host per 1000 inhabitants in Denmark,

the Netherlands, Norway and OECD average 1993 - 1997.*

1991 1993 1995 1997
Denmark 0.3 1.2 7.1 20.4
Netherlands 0.5 2.3 8.8 17.5
Norway 1.9 5.8 15.3 39.4
OECD 0.6 1.9 6.2 14.9

*The data are collected in July except in 1997, when they are from January.

Source: OECD: Communications Outlook 1997, table 4.8.

There has been a rapid growth of internet hosts in all three countries. The major difference was between Norway, where there were almost 40 internet hosts per 1000 inhabitants in 1997, and Denmark and the Netherlands where the corresponding figures were about 18 and 20, respectively. Denmark had an explosive growth between 1995 and 1997, without reaching the Norwegian level. The number of internet hosts in Norway have since the early 1990s been well above OECD average, whereas the Netherlands has been closer to the average of the OECD countries in the entire period. It is difficult to explain these differences. The high quality of the networks in all countries would allow for more similarities but the offensive public policies of the Danish government may explain some of the rapid growth after 1995. The early experiments with advanced telematics in the 1980s in Norway may have led to an early `domestication' of information technologies. Reinforced by the economic high conjuncture that coincided with the extension of internet from 1993 onwards, these factors contribute to explaining the high number of internet hosts in the country. Yet, instead of exaggerating national differences, we would expect that the high quality of networks and the relatively equal distribution of communicative resources that characterize these states are indicators that the level of universal services relatively easily can be maintained. These conditions should also be conducive to extending the universal service concept to a higher level.


Europeanization of telecommunications policy

Dang-Nguyen et al. (1993) and Sandholtz (1993, 1996) argue that the process of liberalizing telecommunications in Europe from the 1980s onwards, was driven by the EU. Although we share this view, it should be nuanced to allow for the national processes of liberalization that took place before a common European policy was introduced. During the 1980s the European Commission formed alliances with industrial interests in order to overcome the resistance among the member states to liberalize telecommunications. These policy networks, developed on the supra-national level in Europe, had the effect of strengthening the Commission's position towards the national governments. At the national level, the industrial actors used similar arguments and the alliance with the Commission to enforce a break-up monopolies and deregulate markets (Dang-Nguyen et al. 1993). Since then, national policy-making in the communications area have been influenced by the fact that all legislation has to be negotiated on the supranational level as well as on the national level. We expect the formation of policy networks involving actors that take part in negotiations within and across states in the EEA, to play an increasingly important role in the multi-level governance systems that are developing in and around the European Union.

The process in the European Union ended with the full liberalization of the telecommunications markets by 1 January 1998. [10] This process has increasingly constrained national policy-making. Denmark and the Netherlands, on the one hand, and Norway, on the other, have different formal relationships to the EU. They are, however, joint members of the European Economic Area (EEA), the regulatory framework for states that have complete or partial access to the European Single Market. Accordingly, the states are subject to the EU-regulations and have to follow the same principles of regulation of their national communications markets. In this respect, the regionalization of policy-making that takes place through the EU consequently contributes to reduce and level out national differences.

The telecommunications policy of the European Union recognizes the use of special measures to protect universal service provision, but, at the same time, balances intervention in the market so that it should not distort competition. Accordingly, voice telephony providers may be obliged to contribute to the cost of universal service provision in proportion to their usage of public telecommunications networks. The services which can be financed through these mechanisms are voice telephony and a few other basic services (e.g. pay phones). Specific measures may be enforced to secure access to and affordability of telephone services for disabled users and users with special needs. These rules are maximum regulations in the sense that no other services can be subsumed under the universal service financing mechanisms. The cost of extending universal service provision to e.g. broadband services will have to be covered by the state or the operators without compensation. Considering these constraints, we expect that regulations and policies in the states are converging as the EU-regulation constitutes the framework for national legislation and debates on universal service obligations.

The Europeanization of policy-making does not, however, exclude national variation. Considering the fact that the states have varying formal and informal ties to the EU, and therefore varying negotiating power, we would expect that they exploit their individual 'degrees of freedom': The Netherlands is a founding member and well integrated into the power structure and networks in all areas of the EU. European politics is generally regarded as an integrated part of Dutch politics and even when there are conflicts these are never considered threatening for Dutch membership. Denmark acceded the European Communities in 1973 and has since been a 'recalcitrant' member, exemplified in the Danish exemptions to the Maastricht Treaty and resistance to the European Monetary Union (EMU). Controversies over the EU have for 25 years been part of the Danish political debate. The Danish Government has nevertheless adopted a strategy of identifying national approaches within this framework.

Norwegian membership in the EU was rejected by the electorate in a referendum in 1994 and the relationship to the EU is one of the most controversial political issues in Norwegian post-war history. The high level of conflict on the membership issue and the fact that the signing of the EEA Agreement has the character of a national compromise, may explain the positions taken by Norwegian decision-makers. There are mutual interests uniting the major political parties and other actors both in protecting and defending the EEA Agreement and in keeping issues concerning the EU as low as possible on the political agenda. [11] In contrast to membership in the EU, the EEA gives its signatories only limited possibilities for political influence on the development of new legislation in the EU. No formal influence in the initiating phases of the policy-making process within the EU is allowed for, and the Norwegian Parliament is left with the option of accepting or vetoing [12] legislation that has been decided on by the EU.


Conflicting views

The main consequence of the inclusion of telecommunications in the Single European market has been liberalization of the markets. Still, this does not resolve the conflicts over whether and how universal service provisions should be provided in the future. Robin Mansell's (1993;1997) two scenarios of the effects of liberalization, the idealist and the strategic, illustrate the two predominant views on the need for regulations in this area. According to the idealist view, there is no need to implement regulatory measures in order to obtain universal service provision as the market will reallocate resources through fair and free competition (Mansell et al. 1995:16). On the contrary, universal service obligations imposed on telecommunications carriers can set barriers to market entrance and thereby distort competition (Noam 1994; KPMG 1996). The opposite view is represented by the strategic perspective, where full competition is not regarded as a likely outcome. The market structure will be dominated by a few actors that will try to avoid non-profitable customers (Collings 1994, Mosco 1990). Because of this market failure the provision of universal services will have to be protected by regulatory measures (Garnham 1991, Hills 1993, Mosco 1988).

In the on-going debates on universal services obligations, disagreements are also constructed around what services should be included in the obligations. These debates concern whether universal service provision should include advanced services and broadband connections as well as pricing, quality and funding. According to proponents of electronic democracy the definition of universal services should include access to advanced broadband services. This would allow for a fair and just distribution of communicative resources. This view is opposed by the argument that services other than the plain telephone connection are not demanded by customers nor can they be regarded as public goods and subsumed under the universal service obligations.

We assume that views on the need for regulation and the views on the extension of universal service obligation are connected. Those who want an extended universal service concept do not believe that the market will lead to a fair distribution of advanced services and are more likely to adopt a strategic view on the outcomes of competition. Adherents to an idealist view would be expected to argue that obligations to provide advanced services would distort competition as obligations to provide advanced services could mean increased costs for telecommunications operators and service providers. Accordingly, we would expect these actors to oppose any extension of the present universal service definition.

In the following, we present the views of actors and institutions that take part in the public debates on universal service provision on the national and European level. The tables cross-tabulate the actors adherence to a strategic or an idealist model of the market, with their views on the extension of the universal service obligations. We have defined 'advanced' as ranging from ISDN-connections and beyond. The tables are generated on the basis of the views on universal service obligations and regulations at the time the legislation liberalizing telecommunications was adopted in each country.

Legislation - national differences

In the previous sections, we presented a set of hypotheses that partly point towards increasing similarities and levelling out of national differences concerning future universal service provision, partly indicate prevailing or maybe increasing differences in legislation, quality and service level. Table 3 offers some support to the hypothesis that national differences are still existent, as the governments took different positions on the need for specific regulation in order to maintain universal services provision. Dutch legislators adhered to an idealist model, whereas the Danish and Norwegian governments tended to be more sceptical towards the market. The Danish government had included ISDN in the universal service obligations and thereby had taken a somewhat radical position, whereas in the Netherlands and Norway a minimal definition was applied, in line with the EU guidelines.

Table 3. The views of national governments and the EU on the extension of USO

Telephone only Advanced services

(min. ISDN)

STRATEGIC

USO regulations

desirable and necessary

European Union

Norwegian government

Danish government
IDEALIST

USO regulations

undesirable

Dutch government  

The observation that both Norwegian and Danish governments adopted the strategic scenario is not surprising. In both states, scepticism towards the market as distributive mechanism and reliance on a principle of universalism concerning the provision of welfare services, have prevailed in spite of the liberalization and privatization of public services that have taken place in the past decades (Esping-Andersen 1990, Stephens 1996). In Norway and Denmark the concern about present or future development of inequalities was far more prevalent than in the Netherlands. We expected this to have implications for the service level, too, by finding at least as extensive obligations in Norway as in Denmark, and more ambitious objectives in the Scandinavian countries than in the Netherlands. It is therefore a somewhat surprising observation that not only the Netherlands, but also Norway is in accord with the European Union concerning the extension of universal services, while Denmark is the more ambitious one. Dutch policy-makers seemed to analyze the market in idealist terms, in spite of the fact that the Netherlands have been classified according to many of the same characteristics as the two Nordic states. Our findings correspond to that of Mansell et al (1995: 79) who concluded their review of Dutch policies concerning universal service provision as follows: «the expectation was that the market will solve any problem».

We may explain these differences by reference to the hypotheses outlined above: different political cultures; the quality of the infrastructures; and the different status of the European issue. First, the differences in national traditions and changes related to national politics: in the Netherlands, the main political conflict, that over religion, have been considerably weakened since the 1960, to the extent that the Netherlands have more or less lost its character as a 'pillarized' society (Hupe 1993). The reduction of the traditional social and cultural differences and therefore less demands for redistribution among social groups, may be one explanation of the Dutch position. In the Nordic countries, the historical cleavages have also been reduced but maybe less so: differences between social groups and between centre and periphery still are important conflicts in Norwegian and Danish politics.

Second, the Netherlands has the most favourable geographical and topographical factors to establishing and maintaining telecommunications infrastructure at low costs, shown in the early digitization of the networks. Accordingly, there is less fear of market failure and little emphasis on the need for introducing additional regulatory measures to secure universal service provision, as the conception is that service provision in the Netherlands is already universal. We saw earlier that the Netherlands had the lowest telephone penetration and the lowest number of internet hosts, and these differences may indicate that the threshold for accepting inequalities in these areas are somewhat lower in the Netherlands than in Norway and Denmark. This assumption seems to be supported by the fact that price reductions on broadband services was part of the strategy of bringing Denmark into the information society (Ministry of Research 1994), and universal access to ISDN was raised as an objective in the action plan published in 1996 (Ministry of Research 1996). Our expectation that the quality of networks and easy access to services would be conducive to introduce advanced services seems to be only partly valid, and only for Denmark. Denmark had the highest telephone service level but the infrastructure was less advanced than in the other countries. Accordingly, technological explanations have to be supplemented. In this case, political ambitions directed at extending the information society may thus be a more adequate explanation than the level of technological development.

Third, the status of the European issue in national politics seems to be a crucial factor for explaining the different positions. In Norway, the European issue is capable of revitalizing the former political front lines in Norwegian politics and split the major parties. Accordingly, there was pressure to keep the level of conflict as low as possible by selecting the decisions that could be presented as faites-accomplies, namely those that were adopted by the EU. The Danish Government has adopted a strategy of identifying national approaches within the EU, and Denmark followed a more radical approach by including ISDN in the universal service obligations. It does not, however, conflict with the European legislation. The Netherlands also seems to define its own course which is more liberal than that of the EU.

Parties - national consensus

Arguing that national universal service regulation originated in the conflicts that historically have been dominating the political and cultural public spheres in each country, we hypothesized that the positions that political parties would have on universal service regulation would be in accordance with their views on equality, the welfare state and other central conflicts. If this expectation was correct, it would also mean that parties sharing ideologies across borders (e.g. Social-Democratic parties) could be expected to agree with each other and not with parties arguing conflicting ideologies in their own countries. According to our data, however, this is not the case.

Table 4. The views of political parties on the extension of USO

Telephone only Advanced services

(min. ISDN)

STRATEGIC

USO regulations desirable

and necessary

European Union

Norwegian government

Norwegian parties

Danish government

Danish parties

Dutch Socialist Party

IDEALIST

USO regulations

undesirable

Dutch government

Most Dutch parties

 

Table 4 shows that in each country, a national consensus seems to have been negotiated on the universal service issue, as the parties follow their respective governments and not their sister parties in other countries. The only exception to this pattern was the Dutch Socialist party, which placed itself as a radical market sceptic, thereby complying with our expectations that its position on this issue corresponds with their strategic approach to the market as a regulatory mechanism in general. The consensus among the national parties indicates that they are preoccupied with their national political agendas rather than the parallel processes in other countries. We do not observe the expected similarities between parties with shared views on welfare issues across states. Having stated this, however, there were disagreements among political parties concerning liberalization in general. In order to explain the absence of conflicts on the universal service issue we have to look at the general processes of liberalization of telecommunications that were negotiated in each country.

In Denmark we expected more debate on universal service obligations between the parties on the left-right-axis. However, from 1990 telecommunications policy was developed through political agreements among the main political parties. When the legislation that liberalized the sector were adopted in 1996, all parties in the parliament, except two small parties on the extreme left and right, signed the agreement. In Norway, liberalization of telecommunications was more contested, and until 1996 a majority supported the public monopoly. In 1996, several parties changed their policies and a new majority in favour of liberalization was established. These parties did not propose alternative legislation on universal services, as they were mainly concerned with legitimizing their change of position. [13] The Norwegian consensus on universal service regulation might therefore be explained as a non-decision and not as a negotiated substantial compromise. In the Netherlands, consensus was reached parallel to the gradual liberalization of telecommunications in the 1980s and 1990s. The idealistic view that no specific regulations are necessary to ensure universal access to communication services, was shared by all major political parties. The only party that contested it was the Dutch Socialist Party.

Organized interests - networks across states

It is not until we consider the views of organized interests that we find transnational constellations, which we also expected. Table 5 shows that the views of organized interests did not vary according to nationality, but were related to their members' position in the market place, that is, whether they were producers of goods and services, users, consumers, wage earners or had specific needs.

Table 5. The views of organized interests on the extension of USO

Telephone only Advanced services (min. ISDN)
STRATEGIC

USO regulations desirable and necessary

Consumer organizations Norwegian and Danish organizations for disabled people

Trade unions

Danish Confederation of Industry (DI)

IDEALIST

USO regulations undesirable

Industrial interest organizations,

except DI

PTT Telecom, Tele Danmark, Telenor

 

Consumers' organizations adopted a strategic model of the market and argued to secure the status quo; organizations for the disabled and trade unions shared the strategic analysis, but preferred a more radical universal service concept, whereas industrial organizations and PTOs apply an idealist perspective of analysis and oppose any extension of the obligations. Except for the Danish Confederation of Industries (DI), all industrial organizations press for a minimal definition of USO, and argue in favour of the need to avoid `disturbing' regulations, although they tolerate obligations as a restriction on the dominant provider, the public operators. There was actually a higher degree of unity between different types of industries than we had expected as organizations representing industries from different parts of the value chain in the communication industry agreed on the main issues. The organizations representing the export-oriented hardware producers, which historically were the main producers of hardware for the national PTOs, showed less impatience concerning the introduction of competition in their domestic markets than representatives for software providers, suppliers of communications products and industrial users' organizations, but still the consensus was more conspicuous than the minor variations in views.

The industrial actors were united in the concern that the broader the concept of universal services, the more expensive it would be to provide them, and the larger the chance that universal service obligations would distort competition. They accepted that voice telephony should be universally provided mainly because it did not imply costly infrastructure investments and would not seriously threaten the interests of any of the parties. These organizations also opposed including any advanced services that would depend on extended network capacity and argued that such obligations would be a barrier new market entrants.

There was one exception to this pattern: in the Danish debate there was little opposition among industrial actors to extending universal service obligations to ISDN and the Danish Confederation of Industry supported the extension because it ensured communication services to the industry. Industrial and other concerned interests were included in the policy preparations through the `Telecommunications Council' [14] giving corporate interests influence on the liberalization process, but also involvement in common compromises. Among the outcomes of this process were, first, the liberalization of telecommunications one and a half year before the EU timetable, and, second, the acceptance of ISDN as a universal service by the industry, either reluctantly as the Danish organization for IT-users, [15] or more positively as the Danish Confederation of Industry. The obligation to provide ISDN universally was imposed on Tele Denmark without compensation, and Tele Denmark, and the other PTOs, consequently opposed an extended concept of universal service that did not ensure the PTOs compensation for unprofitable customers.

Trade unions, the consumers' organizations and the organizations for people with disabilities, adopted a strategic scenario and were concerned that the market would not cater to social needs. Representatives of trade unions indicated that they preferred an extensive universal service concept both to ensure a just and fair distribution of new services, and because a rise in demand would secure employment and profits for their companies. However, they did not emphasize this view very strongly as they were constrained by several factors making their positions difficult. The organizations were squeezed between loyalty to the former publicly owned operators, and constant threats of major reductions of the work force resulting from the transformation of these institutions into companies operating in a competitive international environment. Further, the Norwegian and Danish unions had close ties to the Social Democratic Parties, formerly firm defenders of state monopolies and public ownership as political instruments for the provision of universal services. As the parties changed their views, the trade unions were forced into defensive positions. Their position on universal service regulations were coloured by these problems: although being in favour of an extended concept, they were not actively arguing their views in order not to estrange themselves from their employers and traditional alliances. In spite of the fact that the trade unions have their own transnational organisations, [16] they reported relatively weak international networks; both the Dutch and the Danish trade unions stated that they had problems cooperating with sister unions organizing workers in competing companies, and, accordingly, they had not coordinated their views across borders.

Consumers' organizations were concerned that competition should be free and fair and that universal service obligations should be dynamic, i.e. defined and changed with the growing social importance of new services. As long as a majority of the population did not have access to more advanced services than the basic telephone connection, advanced services should not be part of the obligations. Including advanced services could, the Danish Consumers' Council argued, contribute to raise prices without there being a demand for these services among the average users. However, if markets were established and inequalities developed, an extension of the service level might be needed. The national organizations varied concerning their level of activity but not concerning views. They were well networked, and the European organization (BEUC) was a source of information as well as their most important lobbyist in the EU.

Communication services for people with disabilities have traditionally been financed and provided by the PTOs, and EU regulations still allow that some of these services can be financed through burden-sharing among operators. The organizations for people with disabilities find a maintenance of such measures crucial, whereas some industrial actors and the PTOs argued that these services should be financed through taxes and not imposed on the providers. The Danish umbrella organization for people with disabilities, along with one of the two Norwegian organizations, were concerned that USO must secure that communication services for people with disabilities should be developed at the same pace as other services. Other organizations for people with disabilities in Norway and the Netherlands trusted that needs would be taken care of by the PTOs as before, or did not have a policy on this issue.


Conclusions

Our analysis of the debate on universal service regulation has yielded several insights: we argued initially that national differences to some extent would prevail in spite of influences predicting convergence, such as technological change and Europeanization of the regulatory framework, and this is also the case. However, the differences between the countries seem to be more dependent on their relationship to the European Union than on the traditional political cleavage structures. Further, we found that the political parties seem to have worked out national compromises, as they are more in line with their governments than with their sister parties in other countries. The most Europeanized actors are the industrial interests which are well networked both horizontally and vertically within and across states, and they are closely integrated into the European governance system. These organizations provided an image of networks that had open communication channels between and across states as well as to policy-makers on the national as well as the European level. None of the other organized interests indicated that they had networks of the same extent and on the same levels, although all of them had contacts across borders and to European umbrella organizations.

The positions of the actors in the market place influenced the views on universal service regulations: the more concerned actors were with competitive fairness, the more reluctant they were to impose specific regulations and extend the concept to advanced services; the more concerned with social needs, the more positive to regulations and to extension of the service level. The best networked interests, the industry and the PTOs, adopted an idealistic model of the market, and pressed for a minimal definition whereas those with less resources and weaker networks, i.e. the trade unions, consumers' organizations and organizations for disabled people, employed a strategic perspective and argued that the definition of universal services should be dynamic. Thus, we can conclude that there are weak incentives for including advanced services in universal service obligations in Norway and the Netherlands, or to extend it beyond ISDN in Denmark. Unless the EU and the national governments break the alliances with the industry and the PTOs, the current legislation and the current concepts of universal service will prevail.

So what does this analysis add to the debate on universal services?

There is broad consensus that the present service level should be maintained. In other words, there are no indications that either governments or the European Union will abolish the obligations to provide basic services altogether. Yet, transference of the responsibility for universal service provision from the public to the private sphere and the change from goods provided on equal terms to services for which there has to be a proven need, indicate that the transition of telecommunications regimes has to be studied in the context of the general transformation processes in European welfare states.

One likely consequence is increased differences. None of the universal service measures discussed above have implemented precautions that prevent increasing inequalities concerning prices. [17] Overall, the prices of telephone calls have been reduced in the three countries that we have studied but this does not necessarily mean that the total costs for communications have been reduced either for the average user or for separate groups. Studies from the USA after the break-up of the Bell system showed that the lowest income groups had least to gain from the price reductions (Temin 1987). There may, however, be small possibilities for adjusting such biases, as they arise from differences in consumption; the less well-off tend to use services least, and are least favoured by discounts [18]. There will also be differences in supply and demand in different parts of the countries owing to size of the markets. Such differences are nevertheless a product of the market and are not likely to be amended by political regulation. There are few indications in our empirical material that suggest that regulations of this kind would be supported.

For some groups of customers or users, we may also expect a reduction in quality that is neither intended nor planned but which may follow from lower profit margins. Drawing a parallel to the liberalization of energy market, where there are also universal service obligations, in Norway we have observed that a small number of customers have had their quality of service reduced as it is unprofitable to replace damaged infrastructure. Where infrastructure still commands major investments, we expect to see similar developments in the telecommunications area. One example may be fixed lines being replaced with mobile phones which are more expensive to use and have a poorer quality.

These observations lead to a question concerning future regulations directed at securing a relatively equal and fair supply of communications for citizens within and across countries: why should they focus on one specific service (i.e. telephony) and not on the quality and capacity of infrastructures? By changing the perspective from services to infrastructures, the focus would also be transferred from the needs of individuals to those of collectives, or communities. In turn, these considerations open for a totally different set of regulations and policy measures.


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Footnotes

* The authors wish to thank the Norwegian Research Council that has supported the project through the ARENA programme. Dag Harald Claes at ARENA has given valuable comments to an earlier version. We also want to thank representatives for a number of institutions, companies, political parties and interest organizations in Denmark, The Netherlands and Norway who agreed to being interviewed and generously shared their time and views.

** Dr. Polit and Senior Researcher, ARENA and University of Oslo, Department of Media and Communication, P.O. Box 1093 Blindern, N-0317 Oslo, Norway.

*** Researcher, University of Oslo, Department of Media and Communication, P.O. Box 1093 Blindern, N-0317 Oslo, Norway.

[1] These interests are: public telecommunications operators (PTOs), interest organizations representing telecommunications operators; hardware and software industry; cable television operators; users organizations; equipment suppliers; trade unions; consumer organizations; associations of municipalities; and organizations for people with disabilities.

[2] Andrew Davies has used similar data from these countries (and several others) to argue that the 'natural monopoly'-thesis fails to explain the establishment of national telecommunications monopolies in most European countries from the end of last century. He maintains that market failure and political demands were the actual reasons for the abolishment of competition (Davies 1994).

[3] The state also operated one regional company on Southern Jutland.

[4] In 1895, Norway had one of the highest figures for telephone coverage in Europe with one telephone set per 140 inhabitant. In comparison, Denmark had one set per 190 inhabitant, Britain one per 400 inh and France one per 1600 inhabitants (Lenæs 1966: 47).

[5] The last private telephone company was taken over by the state in 1974 (Dahl et. al 1993).

[6] The conceptual framework is borrowed from Syvertsen (1992) who developed it in her work on public service broadcasting.

[7] These issues were, among others, monopoly versus competition, centralized versus decentralized institutions and administration, private versus public ownership.

[8] An Internet host is a domain name that has an IP record associated with it, i.e. a computer system connected to the Internet (OECD 1997:56).

[9] We have not been able to find reliable and comparable data concerning use of the Internet by individuals. The figures that exist suffer from a number of methodological weaknesses and are incomparable. We have therefore excluded them from the analysis.

[10] A few member states was for different reasons given additional transitional periods of up to 5 years: Greece, Ireland, Portugal, Spain and Luxembourg (2 years) (CEC 1996).

[11] See e.g. Christensen, D.A (1997) on the work in the EEA-committee in the Norwegian parliament.

[12] The procedure leaves little room for public debate in Norway as the consequences of a veto are not clear. It could be met with economic or political sanctions or jeopardize the EEA Agreement entirely.

[13] Some of these parties have in the recent debate (winter 1998) expressed concern for ISDN being left out of the universal service obligations.

[14] Telerådet

[15] Dansk Dataforening

[16] Former PTTI, now Communications Workers' International.

[17] Price cap regulation is an optional measure but inequal pricing is still an expected outcome.

[18] Tele Danmark's price restructurings in 1998 indicates that when subscribtion charges increases when calling prices decreases, telephony will become cheaper for must customers, but will get more expencive for the customers who use their telephone the least (Tele Danmark 1997).







[Date of publication in the ARENA Working Paper series: 15.06.1998]