Annex 2: Telephone terminal equipment

A Review of European Liberalization Measures

Introduction

The United Kingdom was one of the first European Community Member States to liberalize the marketing of telephone terminal equipment and the resulting wide consumer choice of such equipment has become an accepted norm. Subsequently, the Commission proposed a series of Directives with the objective of bringing this sector into the competitive internal market, as the restrictions on the marketing of telephone equipment still imposed in many Member States were deemed to be in breach of the Community's founding treaty. Once adopted, these Directives are binding upon all Member States with the result that even those whose liberalization pre-dated the Directives must now operate within the common European framework. Therefore, any action necessary to protect the interests of consumers whose needs may not be adequately met in a competitive market must be ratified at a European rather than a national level. People with disabilities are particularly vulnerable in a highly competitive market driven by rapidly advancing technology; for them the telephone network is a vital communication link but their ability to use it may be critically dependent upon the availability of telephone terminals with special features, and at affordable prices. Their needs, along with those of other groups in the community, must be taken into account as the Telecommunications networks expand and develop, not out of charity but in recognition of their status as informed and discerning members of the customer base.

The competitive telecommunications market

Telecommunications services have traditionally been provided by national monopolies, usually State-owned and often linked with postal services. In Europe, dismantling and de-regulation of these monopolies has progressed furthest in the United Kingdom, Finland and Sweden, but almost all Member States will be ready for full competition by the target date of 1 January 1998. Monopolistic Telecommunications services providers have been in a very strong position to influence the market in terminal equipment (such as telephones) either through monopoly control of equipment supply or by dictating the procedures for approving the equipment which may be connected to the networks. Such monopoly powers, especially when supported by Member State governments, are arguably at variance with the declared objectives of the Treaty of Rome but the nature of the Telecommunications infrastructure has tended to inhibit the introduction of free competition. Although full competition in service provision will not be possible in most European States until 1998, the introduction of liberalization and competition in terminal equipment supply presents fewer problems and it has already been achieved to a very large extent.

The result of this process is to separate Telecommunications service provision and terminal equipment supply, bringing about a number of consequences which may not all be immediately obvious:

1. The service provider is no longer responsible for the terminal equipment (unless it is a public payphone or it has been rented from that provider) and the service network is deemed to end at a termination point, ie the line socket.

2. Manufacturers of terminal equipment cease to be primarily contractors to the service providers, but are free to develop their products for normal commercial markets; product innovation is less constrained by the policies of the service providers.

3. Regulation of the terminal equipment sector will follow the pattern of the Single Market

for goods, diverging from the services market, and the regulatory regimes will differ significantly (even where the same regulatory body is responsible for both sectors).

4. Any concept of universal service which may be applied to Telecommunications services provision will not be binding upon terminal equipment manufacturers.

5. National governments and regulators are inhibited by other Directives relevant to the Single Market in goods from introducing measures which would constitute barriers to trade, other than for the purposes set out in the Terminal Equipment Directives (ie of ensuring the safety and integrity of the national networks).

In this competitive market, the availability of terminal equipment for purchase or rental is determined primarily by market forces, since no government or regulator can dictate what manufacturers shall produce. The production of terminal equipment with special features, for example to suit the needs of disabled users, may not always be commercially viable. Even so, Member States are not permitted to bring government influence to bear in a way that would distort the free market. Consequently, use of the mechanisms of government subsidy or public sector purchase to maintain availability of particular types of equipment is not a ready option.

The terminal equipment directives

In the United Kingdom, telephone terminal equipment supply was liberalized in the early 1980s, so the effects of that measure have been largely independent of the European Directives which were introduced subsequently with the objective of extending the liberalization process across the whole of the European Union. There have been several such Directives, commencing with a 1986 measure on the mutual recognition of test and approval procedures which has since been repealed. The general approach was established in 1988 by the Commission Directive 88/301/EEC, which essentially reminded Member States of their treaty obligations deriving from the Treaty of Rome and established a timetable for implementing more specific measures. This Directive required Member States to dismantle any arrangements which gave special or exclusive rights to any undertaking (such as the national Telecommunications service provider) in respect of the marketing, connection or maintenance of terminal equipment. It gave to users the right to have a termination point - a line socket - installed upon request and within a reasonable period. It recognised that there had to be some control over the apparatus which users might connect to the networks but required that this control should be independent of suppliers of services or equipment, and it determined the dates by which Member States had to submit their type-approval proposals for scrutiny under established Community procedures.

The major piece of Community legislation followed in 1991, with the Council Directive 91/263/EEC. This was an example of the "New Approach Directive" procedure specifically introduced to facilitate the introduction of the Single Market. A more complete explanation is given in Annex 3. It follows the pattern of the Single Market Directives quite closely, but with an important exception. Normally, these Directives require compliance with a single set of Essential Requirements and, once conformity has been demonstrated anywhere within the Community, the product may be legally marketed everywhere in the Community. It has not yet been possible to reach this degree of deregulation in the case of telephone terminals however. The differing operational protocols historically adopted by the voice Telephony networks across Europe prevent full interchange of terminals and, as proper inter-working with the apparatus of the national network is legitimately seen as an essential requirement, Directive 91/263/EEC has to permit the continued use of mandatory national technical specifications which would in other circumstances be outlawed in the Single Market.

Member States are restricted as to what they may include in their national technical specifications in furtherance of the essential requirements. The defined scope of these is limited to matters of personal safety, network safety and integrity, electromagnetic interference, radio spectrum usage and inter-working with other apparatus. There will be a presumption of compliance with the personal safety requirements if the equipment conforms to appropriate European Standards, as is the case with most Single Market Directives. There is also scope for the Commission to introduce "common technical regulations", again based upon European Standards, in order to harmonize other aspects of the essential requirements. As these are to be used only in cases where a unique technical solution is demanded, they will be given mandatory force.

Directive 91/263/EEC became effective in November 1992 and from that date Member States were inhibited from adding further technical requirements and from restricting the open marketing of any terminal equipment which conformed to the Directive. They also acquired a duty to ensure that equipment which does not comply with the appropriate requirements is not placed on the market in their territories, or connected to their public networks.

The information society

For the majority of users of the Telecommunications services, liberalization of terminal equipment has delivered the promised benefits of extensive freedom of choice coupled with competitive pricing. A wide range of added-value facilities has become available in telephones, answering devices, Fax: terminals and modems. Commercial users have been able to select from state-of-the-art technology in switchboards and internal networks. Concurrent major innovations in network facilities have matched technological developments in terminal equipment, to create a situation where each supply sector in turn puts pressure upon the other to offer further facilities. A new culture in the use of computers is emerging which is creating its own rules and practices, and changing very dramatically the way in which we utilise national and international transmission networks. Technological change is proceeding at such a fast rate that it is difficult to oppose the view that deregulation is no longer a choice but a necessity.

The old telephones and Telegraphs services are evolving into the Information Society with important consequences for all users. To quote the European Commission:

"To be able to communicate and interact whether by telephone, Fax, Email or electronic media is a crucial and decisive factor for every citizen and business. The policy of the European Commission towards the information society has from the beginning taken into account the need to avoid a "two-tier society", divided between those who have access to the new possibilities and are comfortable using them and those who are excluded from fully enjoying their benefits".

These new possibilities are very exciting for disabled people but there is a need to guard against the inadvertent creation of barriers which exclude them not only from the new opportunities but also from the traditional services.

Disability and exclusion

Exclusion from full enjoyment of the benefits of the information society may arise from several causes: lack of technical access, inability to afford the costs, prevailing cultural barriers and the effects of disability are all potential factors. The Commission's proposals will directly address the issues of service penetration and affordability and will go some way to encourage a culture of wider acceptance of technology. Disability is a more difficult cause of exclusion, especially because it is not a single issue. There are, for example, many disabled people with very severe impairments of speech and movement, who could not expect to use any voice or text telephone but who can communicate very effectively through Email or the Internet. They are comfortable with electronic media because they are not handicapped in using these. But there are far greater numbers of people with impairments of hearing who would expect to be able to make full use of the voice Telephony services, given the availability of terminal equipment of appropriate specification. They would not view the voiceless services of Fax, Email or electronic media as acceptable alternatives, although they might wish to make use of them whenever appropriate and convenient. Even those people with very severe hearing impairments who can obtain little or no auditory information are nevertheless able to conduct real-time face-to-face conversations through other modalities, and have the reasonable expectation to perform the Telephony equivalent, using text terminals for example.

For all of these people, and for those with impaired vision, real-time conversations conducted across the voice Telephony networks and with access to all other subscribers to those networks will be the expected norm. Only those whose disabilities are so severe that face-to face real-time communication is exceptionally difficult are likely to adopt other Telecommunications services as the option of first choice. For the majority who expect to have access to the voice Telephony service, the availability of suitable terminal equipment is crucial and without it they will be excluded from full use of Telecommunications systems which increasingly rely upon acuity of both hearing and vision.

Availability of terminal equipment

According to the principles of the Single Market, manufacturers and importers of terminal equipment would be guided solely by market forces when determining which market sectors to enter and with which products. The design and specification of those products would be determined by them in response to their evaluation of the commercial prospects in a highly competitive arena, subject only to the basic level of technical regulation set out in the essential requirements of any relevant Directives.

For most products - the exception in the case of telephone terminals has been noted - compliance with those essential requirements needs to be demonstrated only once in order to gain access to the entire European Union market-place. Although Member States can impose specific national technical requirements in the case of telephone terminals, the scope of these national regulations is restricted to protecting the proper functioning of the national network. There is however nothing to prevent organisations which are distant from government from laying down additional specifications for telephone terminal equipment which they, as quantity purchasers, wish to obtain. British Telecom, for example, has maintained the supply of telephones with special features for disabled users by bulk-purchasing these and offering them for sale or rental through its retail shops.

Largely because of this service from British Telecom, availability in the UK of telephones having necessary features for disabled users has continued after liberalization. Nevertheless, some adverse effects of the 1991 Directive have been observed. A particular instance affects blind people who have trained for employment as switchboard operators, since suppliers of Private Branch Exchange equipment can no longer be obliged by national regulations to make provision for use by people without sight.

Next steps

Because the availability of suitable terminal equipment is crucial to the utilisation of the Telephony network by disabled people, any process which might diminish that availability is a cause of the utmost concern. Terminal equipment which is provided in public places, or for use in employment, will be subject in some measure to the access requirements of the Disability Discrimination Act in the UK, for the managers of such premises will have an obligation to avoid discrimination against disabled people. This ought to create a viable market for terminal equipment having the more commonly needed facilities, and it should resolve the problem faced by the blind switchboard operators, but it will not primarily address the needs of the domestic telephone user. The continuing involvement of major service providers in the retail equipment supply business seems to offer the best form of safeguard, backed up by national regulators using powers conferred upon them by other Telecommunications Directives.

An alternative would be to introduce some form of regulation in a revised Terminals Directive. Some revision of that Directive will be necessary to achieve the desirable extension of harmonization across Europe and the removal of non-harmonized national requirements. However, it is difficult to see what could usefully be added to a Single Market Directive to ensure the availability of performance features which are not universally required and are at risk of technological obsolescence. The structure and permanence of a major Directive does not readily allow of the inclusion of such requirements except in the form of general statements.

Broad statements of the need to consider the requirements of disabled users are helpful in as much as they provide a link to more specific indications contained in standards or guidance notes, but they have to recognise that some equipment will legitimately be designed and marketed for specialised purposes which exclude people with certain disabilities. Even in the general sector of terminals intended for domestic use, mandatory inclusion of specific technical requirements could prove to be counter-productive in the longer term, as the time-scales for framing and revising such legislation tend to be out of synchronism with the pace of technological development. More crucially, such requirements as might be accepted as mandatory would inevitably be those of benefit to large numbers of disabled people and also capable of implementation at modest additional cost. No-one could seriously contemplate, for example, the mandatory inclusion of text sending and receiving facilities in every domestic telephone instrument. Therefore the facilities which might be acceptable as mandatory provisions would be the very ones that are most likely to present a commercially viable level of demand. If legislators were to address the needs of disabled users in this superficial way, the plight of those with less common needs would be serious indeed.

Summary

The liberalization of telephone terminal equipment supply has brought significant advantage to industry and to the majority of the people of Europe, through unfettered technological advance and through the freedom of choice and competitive prices brought about by a free market. For many users with disabilities, for whom the availability of telephone terminals with specific features is crucial to their ability to use the telephone networks, the advantages are less obvious. Choice of equipment and competitive pricing are linked to consumer power, such that consumers whose needs are out of the ordinary are not only denied these advantages but they may even find that the equipment upon which they are critically dependent ceases to be available. The Treaty obligations of the European Member States to abide by the principles of the Single Market hinder national measures to correct this imbalance, so the provisions which are necessary to prevent these disabled users from experiencing further disadvantage must be agreed - in principle, if not necessarily in detail - at a European level. In so doing, care has to be exercised that the needs of one sector of the disability spectrum are not addressed at the expense of others.

Key points for discussion with negotiators

Ensure that there is awareness of the range of facilities that are required in domestic telephone terminals to satisfy the needs of people with various forms of disability.

Develop a means of maintaining availability of appropriate types of terminal equipment (at acceptable prices) to suit the widest possible spectrum of disability.

Provide for the evolution of any regulatory controls to take account of technological developments which create new opportunities and render other solutions obsolete.

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