title: Special Report No 9/2000 concerning trans-European-networks (TEN) - telecommunications, accompanied by the Commission's replies

eurovoc_concepts:
EU initiative
development policy
information policy
telecommunications
trans-European network

text: 15. 6. 2000 EN Official Journal of the European Communities C 166/1 I (Information) COURT OF AUDITORS SPECIAL REPORT No 9/2000 concerning trans-European-networks (TEN) (cid:151) telecommunications, accompanied by the Commission(cid:146)s replies (pursuant to Article 248(4), second subparagraph, EC) (2000/C 166/01) CONTENTS Paragraph Page INTRODUCTION. SUMMARY OF PRINCIPAL OBSERVATIONS. THE COURT(cid:146)S AUDIT. BUDGET SIGNIFICANCE FOR TEN-TELECOM AND RELATED MEASURES. TRANS-EUROPEAN TELECOMMUNICATIONS NETWORKS (TEN-TELECOM). The TEN policy. The TEN general rules. Use of resources and summary of results. Euro-ISDN guidelines of 1995. Euro-ISDN preparatory measures 1993 to 1995. Euro-ISDN projects. New guidelines of 1997. Preparatory actions for the new guidelines. Projects under the new guidelines of 1997. Joint measures with other programmes. Evaluation of performance. COORDINATION WITH RELATED MEASURES. Telecommunication in the research policy. The importance of the Structural Funds. The significance of the EIB and the EIF. Coordinating instruments. The schematic plans. 1 2-11 12 13 14-45 14-15 16-17 18-20 21-31 23-25 26-31 32-37 34-36 37 38-39 40-45 46-67 47-48 49-51 52-53 54-67 55-56 3 3 3 4 4 4 4 5 7 7 7 8 8 9 10 10 11 11 11 13 14 14 C 166/2 EN Official Journal of the European Communities 15. 6. 2000 Paragraph Page Committees and coordination by the Commission. 57-61 The consultation procedure for projects. 62-66 Special interdepartmental working party. 67 CONCLUSION AND RECOMMENDATIONS. 68-71 GLOSSARY OF TECHNICAL TERMS. The Commission(cid:146)s replies. 14 15 16 16 18 19 15. 6. 2000 EN Official Journal of the European Communities C 166/3 INTRODUCTION 1. Telecommunication is a fast-developing and fast-changing sector, with the Internet and the World Wide Web creating an information and communication highway for industry and the citizen. This report examines the development and implementa- tion of EU policy concerning the trans-European-network- telecommunications programme (hereafter referred to as TEN- telecom) and the related measures. SUMMARY OF PRINCIPAL OBSERVATIONS 2. The TEN general rules which are directed towards larger-scale infrastructure measures are less appropriate to TEN-telecom which promotes near-market projects for telematic applications and ser- vices (paragraphs 16 and 17). 3. The assessment and reporting of results of the TEN-telecom programme by the Commission were not comprehensive (para- graphs 18, 36, 38 and 56). 4. The Commission(cid:146)s description of the TEN-telecom support measures in its various reports as co-financing feasibility studies is misleading as it contracted projects which included multiannual activities rather than pure studies (paragraphs 20 and 25). 5. There are similarities with the research programme on telemat- ics applications of common interest, which may also finance near- market feasibility studies, validation tests and pilot projects but at lower rates of aid (paragraphs 20 and 48). 6. The EU(cid:146)s consultative and decision-making procedure for set- ting out the guidelines, on two occasions took two years. This did not suit the requirements of an innovative and highly-dynamic sector. The first guidelines were out of date almost before they came into force, because they concentrated on a particular tech- nology; projects under the new guidelines started late (para- graphs 21, 28(b) and 32). 7. The Commission made only one check of a contract on the spot. This revealed substantial irregularities. The Court(cid:146)s audit of a large contractor found that not all of the contract obligations were fulfilled (paragraphs 29 to 31). 8. Evaluation of TEN-telecom revealed weaknesses; an external mid-term evaluation was too late to have an impact for the selec- tion of the projects which started in 1999 under the new guide- lines; the Commission has not carried out a full examination of the continuing need for support for near-market projects under TEN-telecom (paragraphs 40 to 45). 9. The improvements made to national telecommunications infrastructures using Structural Funds had little emphasis on the trans-European dimension, e. g. by promoting the investments necessary for the interconnection and interoperability of national networks (paragraphs 49 to 51). 10. The Commission(cid:146)s coordination of TEN-telecom with other related EU activities was not sufficiently developed to facilitate synergy and avoid the possibility of duplication. In each case where aid is granted for near-market feasibility studies and pilot projects, it needs to be clearly shown that the specific objectives of these types of action are well-justified and that they are unlikely to be achieved without EU subsidy. The Court notes that the tele- communications sector is currently very competitive and expand- ing rapidly without substantial public subsidies from any source, in response to the liberalisation of the sector and the development of mobile communications (paragraphs 55 and 56 and 62 to 68). 11. The Commission has not developed a clear strategy in the Structural Funds vis-(cid:224)-vis market liberalisation and privatisation of telecommunications. It made Structural Fund payments for telecommunications despite ongoing infringement procedures against the Member State concerned, for failing to transpose market-liberalisation directives (paragraphs 57 to 61). THE COURT(cid:146)S AUDIT 12. The EU TEN-telecom policy, inter alia, aims at establishing and developing trans-European networks and promoting access to them (see paragraph 14). The audit examined how far the Com- mission has succeeded in implementing this policy and its co- ordination with related measures in the research programme and in the Structural Funds. Information on support granted to tele- communications projects was also provided by the European Investment Bank (EIB) and the European Investment Fund (EIF). An audit was undertaken of the payments to the largest benefi- ciary of TEN-telecom to examine management on-the-spot. C 166/4 EN Official Journal of the European Communities 15. 6. 2000 BUDGET SIGNIFICANCE FOR TEN-TELECOM AND RELATED MEASURES which are identified in the framework of the guidelines, (cid:145). particularly through feasibility studies, loan guarantees or interest-rate subsidies. (cid:146). 13. In this report the term (cid:145)TEN-telecom(cid:146) refers to budget article B5-7 2 0 (cid:145)Trans-European telecommunications networks(cid:146) (ECU 115 million in financial commitments from 1993 to 1998). The term (cid:145)TEN-telecom-related expenditure(cid:146) refers to all telecommu- nications expenditure, other than that financed via Article B5-7 2 0 of the budget. This comprises the research measures (ECU 3 668 million, including ECU 2 084 million for informa- tion technologies), the interventions by the Structural Funds (planned spending for the period 1994 to 1999 is approximately ECU 2 000 million), the loans from the EIB (ECU 10 860 million for 1993 to 1998) and the amounts supported by loan guarantees from the EIF (ECU 697 million for 1993 to 1998). TRANS-EUROPEAN TELECOMMUNICATIONS NETWORKS (TEN-TELECOM) The TEN policy 14. With the entry into force in 1993 of the Treaty on European Union ((cid:145)the Maastricht Treaty(cid:146)) a new Title XII, comprising Articles 129b, c and d, was added to the EC Treaty under the heading (cid:145)Trans-European networks(cid:146) (1). As a result the EU is required to: The TEN general rules 16. Council Regulation (EC) No 2236/95 lays down general rules for the granting of Community financial aid in the field of trans- European networks for transport, telecommunications and energy infrastructures (2). Article 4 sets out the types of aid: (a) co-financing of studies related to projects, including prepara- tory, feasibility and evaluation studies, and other technical support measures for these studies; EU funding should not exceed 50 % of the total cost of a study; (b) interest subsidies for loans granted by the EIB or other finan- cial bodies; (c) contributions towards fees for guarantees for loans from the EIF or other financial bodies; (d) direct grants to investments in duly justified cases; (a) contribute to the establishment and development of trans- European networks in the areas of transport, telecommunica- tions and energy infrastructures (Article 129b(1)); (e) a combination of the possibilities available under (a) to (d) up to a maximum of 10 % of the total investment cost of a project. (b) promote the interconnection and interoperability of national networks (Article 129b(2)); (c) promote access to such networks (Article 129b(2)); (d) take into account the need to link island, landlocked and peripheral regions with the central regions of the Community (Article 129b(2)). 15. Article 129c stipulates how the EU is to proceed when car- rying out these responsibilities. It: (a) shall establish a series of guidelines covering the objectives, priorities and broad lines of the measures envisaged in the sphere of trans-European networks; these guidelines are to identify projects of common interest; (b) shall implement any measures that may prove necessary to ensure the interoperability of the networks, in particular in the field of technical standardisation; (c) may support the financial efforts made by the Member States for projects of common interest financed by Member States, (1) Now set out in Title XV Articles 154 to 156 of the Treaty on Euro- pean Union. According to the Commission only instrument (a) has been used for TEN-telecom. 17. These TEN general rules are directed towards larger-scale infrastructure measures, for which the Community seeks to pro- vide incentives, chiefly by co-financing feasibility studies and pro- viding assistance with the search for suitable sources of finance. However, the TEN general rules are less appropriate to TEN- telecom (3) as TEN-telecom does not provide aid for infrastructure projects. The TEN-telecom projects financed by the Commission under the relevant guidelines (see paragraphs 21 and 32) mainly concern the development of applications and services in areas such as education, health, transport, culture, tourism and elec- tronic commerce. (2) Council Regulation (EC) No 2236/95 of 18 September 1995 laying down general rules for the granting of Community financial aid in the field of trans-European networks (OJ L 228, 23. 9. 1995, p. 1). (3) The recent amendments of the TEN general rules do not change this. Council Regulation (EC) No 2236/95 was amended by Parliament and Council Regulation No 1655/1999 of 19 July 1999 (OJ L 197, 29. 7. 1999, p. 1). The amendments aim at improving the application of the existing regulation mainly for large infrastructure projects, for example by the introduction of a multiannual indicative programme indicating the overall level of TEN support for these large infrastruc- ture projects or by the use of a modest share of the TEN budget for participation in risk-capital funding of TEN infrastructure. 15. 6. 2000 EN Official Journal of the European Communities C 166/5 Use of resources and summary of results 18. The commitments and payments for TEN-telecom over the period 1993 to 1998 are shown in Table 1. The Court has analy- sed the measures financed. The Commission itself has not pro- duced a detailed survey of all the studies and projects financed for TEN-telecom. Table 1 Commitments and payments under Article B5-7 2 0 (cid:145)Trans-European telecommunications networks(cid:146) 1993 to 1998 Commitments Payments (in million ecus) 1993 1994 1995 1996 1997 1998 4,1 17,8 22,6 16,1 26,6 27,4 Total 114,6 Source: Commission, Sincom. 0,9 8,6 11,1 14,2 17,6 13,5 65,9 19. Table 2 shows that in the period 1993 to 1998 a total of 143 studies and projects were assisted for a total amount of ECU 103,2 million. This amounts to an average contribution of ECU 722 000 per project. The 143 projects were selected in response to the publication of 16 calls for proposals or tenders. The three catego- ries of support (Euro-ISDN guidelines 1995, new guidelines 1997 and joint measures) are shown in Table 2 and are examined in more detail in the following paragraphs. ECU 11,4 million (10 % of the overall resources) was used for administrative and associ- ated measures (meetings of experts, conferences and congresses, information measures and publications, and studies), an average of ECU 1,9 million per year. In 1997, for the first time, a limit of ECU 1 million was laid down in the budget for such support mea- sures. In 1998 it was increased to ECU 1,2 million. 20. Although the Commission only carried out (cid:145)feasibility stud- ies(cid:146) for TEN-telecom it interpreted the term in a wide sense as many of the feasibility studies include multiannual activities such as pilot deployment and field trials. Such projects are classed as project financing in the research area. The research programme on telematics applications of common interest (1) may also finance feasibility studies, validation tests and pilot projects, but such projects are not as close to the market as those of TEN-telecom (see paragraph 48). For both research projects and for TEN- telecom (cid:145)studies(cid:146) the Commission uses a standard research con- tract. The allowable costs may include all or any of the following categories of costs: personnel, equipment, third-party assistance, travel and subsistence, consumables, computing and overheads. (1) Council Decision 94/801/EC of 23 November 1994 adopting a spe- cific programme for research and technological development, includ- ing demonstration in the field of telematics applications of common interest (1994 to 1998) (OJ L 334, 22. 12. 1994). The measures are continuing under the fifth research framework programme for the period 1998 to 2002 as part of a new overall structure. Systematic overview of TEN-telecom studies and projects 1993 to 1998 Table 2 Date and Official Journal of call Subject of the call or tender Number of selected studies/projects Closed Open Total EU contribu- tion (ECU) Average costs of study/ projects (ECU) I. (cid:151) Euro-ISDN guidelines A. Euro-ISDN preparatory measures 1993 to 1995 27. 3. 1993, C 205 26. 3. 1994, C 89 27. 7. 1994, C 207 6. 5. 1995, C 114 2. 8. 1995, C 198 1. 9. 1995, C 227 Feasibility studies Euro-ISDN Feasibility studies Euro-ISDN Feasibility studies Euro-ISDN Feasibility studies Euro-ISDN Feasibility studies Euro-ISDN (TEN) Preparatory actions Euro-ISDN Subtotal I(A) B. Euro-ISDN projects 13. 4. 1996, C 107 3. 8. 1996, C 226 15. 3. 1997, C 84 7. 8. 1997, C 152 Euro-ISDN projects as TEN-telecom Studies concerning telecommunications infrastructures Euro-ISDN projects as TEN-telecom Study: Status of Euro-ISDN II. (cid:151) New guidelines of 1997 A. Preparatory actions 24. 7. 1993, C 200 Preparatory actions TEN-IBC Subtotal I(B) B. Projects under the new guidelines 15. 1. 1998, C 10 14. 3. 1998, C 79 14. 3. 1998, C 79 Projects of common interest: networks Projects for support and coordination Projects of common interest: generic services and applications Subtotal II(B) III. (cid:151) Joint measures with other programmes 6. 6. 1996, C 162 17. 12. 1996, C 381 Promotion via Internet of SME tourism publicity and commerce Projects for educational multimedia Subtotal III Total 11 5 10 1 4 11 42 3 1 4 14 60 11 5 10 (1) 1 (2) 4 14 45 (3) 10 2 (4) 12 1 25 14 9 2 20 31 15 13 28 1 689 600 2 487 100 4 886 400 97 800 1 759 900 9 486 300 153 600 497 420 488 640 97 800 439 975 677 593 20 407 100 453 491 16 384 300 753 900 9 165 300 147 000 1 638 430 376 950 763 775 147 000 26 450 500 1 058 020 18 012 500 1 286 607 8 320 800 1 123 300 17 027 800 924 533 561 650 851 390 26 471 900 853 932 2 865 000 9 021 600 191 000 693 969 11 886 600 424 521 143 103 228 600 721 878 3 3 7 2 12 21 9 2 20 31 15 13 28 83 (1) In addition three studies were financed using budget article B5-4 0 1 (definition and implementation of Community policy in the field of telecommunications and postal services). (2) In addition two studies were financed using budget article B5-4 0 1. (3) Two projects were abandoned. (4) In addition three studies were financed using budget article B5-4 0 1. Source: European Court of Auditors on the basis of TEN-telecom legislation and project listings by the Commission. C 1 6 6 / 6 E N O f f i c i a l J o u r n a l o f t h e E u r o p e a n C o m m u n i t i e s. 1 5 6 2 0 0 0 15. 6. 2000 EN Official Journal of the European Communities C 166/7 Euro-ISDN guidelines of 1995 21. ISDN has been a central theme of Community telecommu- nications policy since 1984. In December 1986 the Council pub- lished a recommendation on the coordinated introduction of ISDN in the European Community (1). Despite this longstanding commitment the guidelines (2) envisaged by Article 129c of the EC Treaty were not adopted until 9 November 1995, more than two years after the Commission(cid:146)s proposal (1 September 1993). The time taken for the decision-making process did not suit a highly dynamic field like telecommunications, as a consequence the Commission commenced the programme on an ad hoc basis. 22. The projects of common interest detailed in Annex II to the guidelines are not actual projects, but general areas of interest (e. g. Euro-ISDN for education, training and research or health care). Euro-ISDN preparatory measures 1993 to 1995 23. In the first three years of TEN-telecom (1993 to 1995) EU subsidies were granted for 45 projects (31 feasibility studies and 14 preparatory actions, see Table 2) for a total amount of ECU 20,4 million, before the objectives and priorities for identifying projects of common interest had been put on a legal basis. Thus, 45 projects were selected and subsidised before the necessary guidelines were laid down in compliance with Article 129c of the Treaty. 24. Under the first five calls for tender the Commission placed contracts for feasibility studies on a large number of topics, including a series of Euro-ISDN market surveys (3). The Commis- sion could not document the use that it had made of these stud- ies. In addition, under two of the calls for tender (those of July 1994 and May 1995), a total of five studies were financed under budget Article B5-4 0 1 (4). This indicates that although the pro- moters of the projects concerned had responded with tenders under Euro-ISDN, the Commission had adopted a (cid:145)flexible(cid:146) approach and decided to fund some projects from another budget heading. 25. The Commission(cid:146)s last call for proposals before the guide- lines came into operation was no longer designated (cid:145)feasibility (1) Council Recommendation of 22 December 1986 on the coordinated introduction of the integrated services digital network (ISDN) in the European Community, (OJ L 382, 31. 12. 1986, p. 36). (2) Decision No 2717/95/EC of the European Parliament and of the Council of 9 November 1995 on a set of guidelines for the develop- ment of the Euro-ISDN as a trans-European network (OJ L 282, 24. 11. 1995, p. 16). Including file transfer, electronic mail, terminals, network manage- ment, telesurveillance and remote protection. Studies of potential applications and investigations of the impact of Euro-ISDN were also carried out for the Commission. (4) Budget Article B5-4 0 1 (cid:145)Definition and implementation of Commu- (3) nity policy in the field of telecommunications(cid:146). studies(cid:146) but was, for the first time, entitled (cid:145)preparatory actions(cid:146) (5) and provided for up to 50 % funding of the cost of pilot deploy- ment and field trials. The projects in question concerned the use of Euro-ISDN for a wide range of applications (6). Thus, TEN- telecom was no longer only financing pure studies, but also the execution of pilot projects. Euro-ISDN projects 26. Under Article 3 of the Euro-ISDN guidelines laid down in November 1995, the ISDN was to be developed as a first trans- European network and an element of the (cid:145)universal service(cid:146). Devel- opment was to be carried out in the form of (cid:145)projects of common interest(cid:146) (i. e. covering areas of common interest). 27. Between 13 April 1996 and 7 August 1997 two calls for pro- posals and two calls for tender for Euro-ISDN as a trans-European telecommunications network were published. A total of 25 projects were selected for assistance under TEN-telecom (total amount ECU 26,5 million) (see Table 2). Two studies (ECU 753 900) received 100 % funding, contrary to the TEN general rules. A fur- ther three studies were also funded 100 % under Article B5-4 0 1 of the 1996 budget, rather than under TEN-telecom (B5-7 2 0) although presented by the Commission in its project lists as TEN- telecom projects. 28. The projects are subject to annual review by the Commis- sion. As a rule the study phase of projects usually runs for a period of two years, so that by 31 December 1998 the financial and technical aspects of one study (Euro-ISDN status study) and only three Euro-ISDN projects (GTS, No problems and Medsalus) had been completed. A review of their final reports gives rise to a number of comments: (a) The two-year (cid:145)Global telecommunications services(cid:146) (GTS) project involved a total Community expenditure on the project of ECU 0,4 million, for the promotion of new IT telecommu- nications applications for undertakings in Greece; the project included extensive market surveys in the enterprise sector, a feasibility study and the subsequent installation and pilot operation of eight telecommunications nodes. The project contractors included a Greek private telecommunications company which regarded the project as a very successful investment because the rate of return was high and the project helped to (cid:145)retain a leading position amongst Greek companies becoming active in the liberalised market of value-added net- work services(cid:146). In such circumstances, it is questionable if Community aid was necessary. (b) The (cid:145)No problems(cid:146) project (non-proprietary reliable electronic mail system), which received a Community contribution of (5) Call for proposals for preparatory actions in the domain of Euro- ISDN (OJ C 227, 1. 9. 1995, p. 14). (6) Use of Euro-ISDN within the health sector, interconnection of traffic information centres, tertiary distance learning, as a platform for tele- working or electronic trading for small and medium-sized enterprises (SMEs). C 166/8 EN Official Journal of the European Communities 15. 6. 2000 ECU 1,5 million was carried out in Austria, with the object of developing new electronic services for electronic commerce and the e-mail sector. One of the initial aims of the project was to contribute to the promotion of ISDN as a trans- European telecommunications network; once the project started, however, it became apparent that the Internet was the dominant technology and, in order to keep up-to-date, the technical Annex to the contract was amended and an Internet- oriented strategy developed. While ISDN proved to be a worth- while vehicle for Internet access the project is evidence that the Euro-ISDN guidelines had led to an over-concentration on a particular technology; in addition, the project leader found that other companies had reached the commercial exploita- tion of one of the applications aimed at before the Euro-ISDN feasibility study had been completed. (c) The aim of the (cid:145)Medsalus(cid:146) project in Spain was to establish an Euro-ISDN-based health-care network in the Mediterranean basin. There is provision for three kinds of long-distance cooperation between health specialists and centres: remote diagnosis, distance learning and teleinformation. It was not clear whether this service has become operational. 29. The only checks that the Commission carried out on-the- spot were at two of the four contractors for the project (cid:145)Digital content for culture(cid:146) (amount disbursed: ECU 0,5 million) which was part of Europe(cid:146)s cultural heritage (a museum inventory on the Internet). It found that the work had not progressed satisfac- torily. Almost all of the project had been subcontracted by the main contractor without the Commission(cid:146)s knowledge and in breach of the contract terms. In any case, standard software appeared on the market so that parts of the project became redundant. The main subcontractor, a firm in the Republic of South Africa, was unable to provide evidence of work on the project (apart from producing invoices). In August 1998, the Commission issued a recovery order for most of the amounts dis- bursed (1). In October 1998 the main contractor paid the amount to be recovered, including the amounts due in respect of the asso- ciated contractors (total ECU 301 292); The second contractor has not paid (ECU 148 382), and legal action by the Commission is under way to enforce the payment. 30. In order to obtain additional information about the perfor- mance of contracts, the Court carried out an on-the-spot audit of the most important contractor in the field of TEN-telecom (2). The contractor did not execute the work with its own staff, but used staff from associated companies. As all salaries were paid by the related companies and were unknown to the contractor, the budgeted rates were declared to the Commission instead of the amounts incurred. This should not have been accepted by the Commission. In addition, the contractor frequently subcontracted part of its work to external consultants without the Commission(cid:146)s prior written approval. This was not in line with the contractor(cid:146)s obligations. (1) The claim also covers another project within the Info 2000 pro- gramme with the same contractors, where false cost claims were established. (2) France Telecom Expertel participating in 11 contracts with a total Community contribution of ECU 7,9 million. 31. The errors found by the Court(cid:146)s audit and that of the Com- mission in projects in Member States indicate that significant errors and irregularities may occur which will remain undetected without on-the-spot checks. New guidelines of 1997 32. On 17 June 1997, new TEN-telecom guidelines entered into force in parallel with the Euro-ISDN guidelines. The adoption of the new guidelines again took two years, the Commission having made a first proposal on 7 June 1995 (3). The new guidelines (4) state that (cid:145)ISDN is only a first step(cid:146). In addition to supporting Euro-ISDN, they provide for assistance for integrated broadband communication (IBC) networks, mobile and satellite services. They continue to specify general areas or themes for the projects of common interest. 33. The guidelines also define a new plan for trans-European telecommunications networks. This is a three-layer model com- prising basic networks, generic services and applications (5). A further innovation was an annual work programme produced by the Commission which specifies in more detail the projects of common interest and which also aims at ensuring that the priori- ties of the projects of common interest keep pace with techno- logical developments. Preparatory actions for the new guidelines 34. In its communication of 22 July 1993 to the Council and the European Parliament (6) the Commission identified the need for preparatory measures in the field of IBC. Following a call for ten- ders in July 1993 contracts were signed for 14 projects. The basic conditions and specifications for ATM pilot networks were exam- ined in particular. In mid-1994 11 of these projects were extended and broadband trials were carried out in close conjunction with the JAMES research project (7). In September 1995 a second extension was granted to nine projects and these trials were even- tually concluded between December 1996 and April 1997 (8). 35. The preparatory actions for TEN-telecom IBC thus extended over three years. The total Community contribution for the 14 projects as shown in Table 2 amounted to ECU 18,0 million, of which ECU 1,9 million was for Phase I, ECU 7,8 million for Phase (3) Proposal for a decision of the European Parliament and of the Council on a series of guidelines for trans-European telecommunications net- works (OJ C 302, 14. 11. 1995, p. 23). (4) Decision No 1336/97/EC of the European Parliament and of the Council of 17 June 1997 on a series of guidelines for trans-European telecommunications networks (OJ L 183, 11. 7. 1997, p. 12). (5) The three-layer model is explained in Annex I to the guidelines. (6) COM(93) 372 final. (7) Within the framework of the specific research programmes ACTS, Telematik and Esprit 18 European network operators participated in this project and developed and implemented ATM interconnections. (8) Final report concerning preparatory actions in the field of trans- European networks: integrated broadband communications, COM(98) 45 final. 15. 6. 2000 EN Official Journal of the European Communities C 166/9 II and ECU 8,3 million for Phase III. These actions were EU financed for 100 % of the costs of studies and 50 % of the costs for trials. However, the TEN general rules which entered into force in September 1995 and which set a limit of 50 % of the total costs of a study and a maximum of 10 % of the total investment cost of a project should have been applied to the Phase III projects, indi- cating an estimated overpayment of over ECU 3 million. 36. Although the IBC preparatory actions were funded by TEN- telecom, they were not included in the annual reports on the trans-European networks (1) whereas all other preparatory actions were. Thus, the information provided by the Commission in the TEN-telecom report was incomplete. Projects under the new guidelines of 1997 37. A call for proposals under the new guidelines was published on 15 January 1998 and two further calls on 14 March 1998 (2). Table 3 shows the results of the selection procedure. A total of 160 proposals were received, from which 31 projects were selected with an EU contribution of ECU 26,4 million. The relatively large number of proposals received is partly attributable to the fact that no more funds were available for 1998 for the specific telematics research programme, so that alternative sources of finance were being sought. The first actions started at the beginning of 1999 and will not be completed until 2000 or 2001. Result of the project selection in 1998 using the new TEN-telecom guidelines Table 3 No of proposals No of selected projects Commitments Million ECU % Generic services: (E. g. Internet-telephony, mobile satellite services, trust services) Applications: Education and training Cultural heritage Applications and services for SMEs Transport and mobility Environment and emergency management Health City and regional information Networks: Satellite networks (e. g. in the fields of health and cin- ematic archives) Mobile networks (in the fields of transport and multime- dia) Global network development and interoperation 31 16 11 26 14 7 16 11 10 4 4 Support and coordination Source: Commission. 10 160 Total 5 1 2 6 3 1 2 (cid:151) 7 2 (cid:151) 2 31 5,2 19,7 1,0 0,7 4,5 1,6 0,5 3,5 (cid:151) 6,6 1,7 (cid:151) 1,1 3,8 2,6 17,0 6,1 1,9 13,3 (cid:151) 25,0 6,4 (cid:151) 4,2 26,4 100 (1) Under Article 16 of the TEN general rules, the Commission must make an annual activity report to the European Parliament, the Coun- cil, the Economic and Social Committee and the Committee of the Regions. (2) OJ C 10, 15. 1. 1998, p. 16 (basic networks); OJ C 79, 14. 3. 1998, p. 15 (generic services and applications); idem, p. 14 (support and coordi- nation actions). C 166/10 EN Official Journal of the European Communities 15. 6. 2000 Joint measures with other programmes 38. Article 5 of the TEN general rules state: (cid:145)The financial resources provided for under this Regulation shall not in prin- ciple, be assigned to projects or stages of projects which benefit from other sources of Community funding(cid:146). Notwithstanding this, the TEN-telecom programme contributes to 28 projects, for a total amount of ECU 11,9 million, under two measures, which are carried out jointly with other programmes. None of the projects had been completed by 31 December 1998. The first joint mea- sure concerned the promotion via the Internet of small and medium-sized enterprises (SMEs), tourism publicity and com- merce. The call for proposals (1) did not make it clear that TEN- telecom was participating in the measures for SMEs in the tour- ism sector. It only stated that the measures were being funded by the information society initiatives and the SME Community initia- tive reserve of technical assistance. 39. The second measure concerns educational multimedia activi- ties. In 1995 the Commission had set up a multimedia educa- tional programmes task force, which proposed more dovetailing of the various Community programmes (2). Four directorates- general and six programmes (including TEN-telecom) are involved (3). The Commission improved procedures by introduc- ing a standard contract for these projects which removed the dif- ference in the contract conditions that had previously existed (4). Having made this consolidation, the Commission has not exam- ined whether there is a need for so many different sources of EU finance for similar purposes, with a view to simplifying manage- ment and improving efficiency. Evaluation of performance 40. The Commission had planned to evaluate all of the TEN- telecom preparatory activities for the period 1993 to 1995 in order to be able to draw final conclusions for follow-up activities, under a study entitled (cid:145)Lessons to be learnt from the preparatory actions(cid:146). However, the evaluation, for which an invitation to ten- der was issued in 1996, was not carried out because of a negative opinion from the Advisory Committee on Procurements and (1) OJ C 162, 6. 6. 1996, p. 21. (2) Report of the (cid:145)Educational software and multimedia(cid:146) Task Force, Euro- pean Commission Working Paper, SEC(96) 1426. (3) DG III with the information-technology research programme (OJ L 334, 22. 12. 1994, p. 24); DG XII with the targeted socioeconomic research programme (OJ L 361, 31. 12. 1994, p. 77); DG XIII with the telematics applications of common interest research programme (OJ L 334, 22. 12. 1994, p. 1); DG XXII with the Socrates (OJ L 87, 20. 4. 1995, p. 10) and Leonardo da Vinci (OJ L 340, 29. 12. 1994, p. 8) education programmes. (4) DG XVI, for example, drew attention to the problem of differing con- tractual provisions in connection with the implementation of innova- tive measures (Article 10 of the ERDF Regulation): it was, for example, unacceptable for a subsidy recipient to be required by DG XVI to sub- mit a bank guarantee when it was not required to do so by another directorate-general. Another example is provided by the daily rates for travel expenses: sometimes maximum rates are specified, sometimes not. Contracts (ACPC) that it was too expensive (5). The Commission did not seek further satisfactory tenders. The Court considers that this has had the result that successful and worthwhile studies were not identified and used as the basis for future measures. 41. Although the original objective of developing Euro-ISDN as part of the universal service was not achieved, a Commission study (6) found that Euro-ISDN is an example of successful Euro- pean cooperation on the grounds that: (a) the market penetration in eight Member States was more than 5 % (at the end of 1997) and further growth could be expected; (b) Euro-ISDN played an important part as an Internet-access technology; (c) prices of ISDN services and equipment had fallen consider- ably and were continuing to fall; (d) the European industry had become a leader in ISDN equip- ment. 42. The study also pointed out that new technical developments such as ADSL would play an increasing role but that (cid:145)Euro-ISDN would remain the only stable digital communication interface for the next few years(cid:146). It did, however, qualify this overall positive assessment. There was still a shortage of simple applications con- nections ((cid:145)plug-in and play(cid:146)) and there were continuing problems with the interoperability of equipment and networks. Some Mem- ber States did not have full geographical access to ISDN and both SMEs and private individuals were not fully aware of the advan- tages of ISDN. In May 1997 the Commission charged external experts to 43. carry out an intermediate evaluation of the TEN-telecom action (1993 to 1997). The final results were only available in February 1999. According to this intermediate evaluation (cid:145)all the projects undertaken contributed materially to the achievement of the guidelines objectives and met the requirements of the TEN Finan- cial Regulations, and the choice of activities for support was con- ducted in a fair and transparent way(cid:146) (7). However, (cid:145)the evaluators found that the TEN-ISDN action does not yet have any systematic monitoring indicators or success criteria for the direct assessment of the achievement of the strategic and operational objectives(cid:146). It was also stated that (cid:145)one of the main real risks to the programme (5) Meeting No 872 of 25 November 1996. ((cid:145)The stated reason for the negative opinion was that the expenditure would be disproportion- ate in comparison to the aim and contrary to sound financial man- agement(cid:146)) (page 24 of the Vademecum of the ACPC). (6) According to Article 10 of the Euro-ISDN guidelines the Commission was to undertake a general evaluation of the guidelines in 1997. The Commission put the evaluation out to tender in August 1997, placed the contract at the end of 1997 and the evaluation was completed in mid-1998 (cost: ECU 147 000). (7) TEN-telecommunications, TEN-ISDN, Intermediate evaluation 1993 to 1997, p. 4. 15. 6. 2000 EN Official Journal of the European Communities C 166/11 is that of failing completely to see the importance of some new as yet unimplemented technological chance which might then render much existing work irrelevant, as happened to some extent to research programmes for the Internet and World Wide Web(cid:146). (cid:145)Information technologies(cid:146) programme (Esprit) with a budget of ECU 2 084 million (4). 44. Although most Euro-ISDN projects had not been completed by 31 December 1998, initial conclusions may be drawn. The EU(cid:146)s lengthy consultative and decision-making procedure for set- ting out the guidelines did not suit the requirements of an innova- tive and highly dynamic sector where market forces gained accep- tance for the Internet as a World Wide Web. There is a risk that assisted projects will not reflect current market trends. 45. In addition, the delay in producing the intermediate evalua- tion meant that it could not be used for the orientation of the actions under the new guidelines. It recommended strengthening the impact on peripheral areas, where access was less well met. This was not one of the selection criteria used for the 1998 projects. Equally importantly it concluded that projects with sub- stantial technology and commercial elements should not exceed 18 months, in order to keep pace with rapid change. However, about half of the projects selected under the new guidelines will last two years even without any extensions, which have occurred in the past. It is still necessary to carry out a full evaluation of the continuing need of support for near-market projects under TEN- telecom. COORDINATION WITH RELATED MEASURES 46. The TEN general rules stipulate that the Commission must ensure coordination of all Community activities that affect trans- European networks. They specifically mention coordination between financing under TEN and financing from the Structural Funds, Cohesion Fund (1), EIF and EIB. The TEN measures must also be compatible with other Community policies. Telecommunication in the research policy 48. The Commission stated in its 1998 annual report on research and technological development activities (5) that the Union(cid:146)s major weakness lies not in its research potential but rather in translat- ing the results of this research in economic and commercial terms and that therefore one of the objectives of the framework pro- gramme is to improve this state of affairs. The Telematics applica- tions programme in particular is a user-driven research pro- gramme, having the objective of bridging the gap between results and their economic use in common with TEN-telecom. Both pro- grammes may finance feasibility studies, validation tests and pilot projects in areas of common interest. The difference is that, by comparison with the research measures, the projects assisted under TEN-telecom are more mature and closer to the market (as shown by the examples detailed in paragraph 28). Near-market projects funded under the research programme would have a lower rate of subsidy as, in the research sector, the community financing is usually not more than 50 % of the project cost, and the contribution diminishes gradually with the project(cid:146)s proxim- ity to the market. It is therefore necessary to define clear rules to avoid overlap between the two actions. The importance of the Structural Funds 49. In the communication on cohesion and the information society (6) the Commission provided an overview of the impor- tance of the Structural Funds for the telecommunications sector. According to this, the Structural Fund(cid:146)s programmes envisage total expenditure of around ECU 1 769 million for Objectives 1, 2, 3, 4, 5(b) and 6 in the telecommunications sector, plus ECU 207 million from Community initiatives (CI) for the 1994 to 1999 programming period. In that communication the Commission states that (cid:145)only a surprisingly small part (about 2 %)(cid:146) of total Structural Funds(cid:146) expenditure has been earmarked for the tele- communications sector. 47. The fourth framework programme of the European Com- munity for research, technological development and demonstra- tion activities (1994 to 1998) includes three specific research pro- grammes in support of the information and communication technologies: the (cid:145)Telematics applications(cid:146) programme (2) with a budget of ECU 913 million, the (cid:145)Communications technologies(cid:146) programme (ACTS) (3) with a budget of ECU 671 million and the 50. Although the Commission communication does not analyse this total by Member State, an internal study by DG XIII produced a country-by-country breakdown and examined the priorities, measures and actions of all of the operational programmes (OPs) and CIs concerning telecommunications. The results are (1) The Cohesion Fund supports TEN-transport but not TEN-telecom. However, telematics applications also receive funding in the TEN- transport area, so that there can be some overlap (e. g. satellite naviga- tion systems). (2) See footnote 1, page 5. (3) Advanced communications technologies and services, Council Deci- sion 94/572/EC of 27 July 1994 adopting a specific programme for research and technological development, including demonstration, in the field of advanced communication technologies and services (1994 to 1998) (OJ L 222, 26. 8. 1997, p. 35). (4) European strategic programme for research and development in infor- mation technologies. Council Decision 94/802/EC of 23 November 1994 adopting a specific programme for research and technological development, including demonstration, in the field of information technologies (1994 to 1998) (OJ L 334, 22. 12. 1994, p. 24). (5) COM(1998) 439 final, 15. 7. 1998, p. 14. (6) Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions (cid:151) Cohesion and the information society, COM(97) 7 final. C 166/12 EN Official Journal of the European Communities 15. 6. 2000 summarised in Table 4. Italy (ECU 542 million), Spain (ECU 516 million), Greece (ECU 380 million) and Portugal (ECU 282 mil- lion) were identified by the Commission as the largest recipients of Structural Funds(cid:146) support for the telecommunications sector in the period 1994 to 1999 (1). Telecommunication expenditure as part of structural intervention plans for 1994 to 1999 (all objectives) Table 4 (in million ecus) Structural Funds ERDF ESF Other Belgium Community support framework (CSF) Community initiatives (CI) Denmark CSF CI (not collected) France CSF CI Germany CSF CI (not collected) Greece CSF CI Ireland CSF CI Italy CSF CI Netherlands CSF CI Portugal CSF CI Spain CSF CI United Kingdom CSF CI Total (1) CSF CI 12,0 1,5 (cid:151) 30,7 27,0 1,0 2,1 (cid:151) 40,2 26,9 0,4 (cid:151) 311,7 10,7 32,0 10,7 488,1 24,2 4,1 1,6 259,0 15,2 443,0 44,9 54,5 4,6 57,5 (cid:151) (cid:151) 2,0 12,2 11,7 (cid:151) 1,9 (cid:151) 5,5 14,5 9,8 1,5 0,3 1 635,5 140,4 126,9 60,2 (cid:151) (cid:151) (cid:151) (cid:151) 0,3 (cid:151) (cid:151) (cid:151) (cid:151) 0,2 2,5 3,0 (cid:151) (cid:151) (cid:151) 2,5 3,8 (cid:151) (cid:151) 0,3 6,3 6,3 1 768,7 206,9 (1) No data were collected for Austria, Sweden, Finland and Luxembourg. Source: Commission. (1) The Commission(cid:146)s calculations are partly based on estimates as the telecommunications expenditure was not always differentiated clearly. Only Italy and Greece have their own OPs for telecommunications. 15. 6. 2000 EN Official Journal of the European Communities C 166/13 51. Although the Interreg CI has a trans-European aspect, for example by providing aid for a fibre-optic link between Portugal and Spain, Structural Funds finance is primarily directed towards measures for extending, modernising or improving national tele- communications infrastructures. The corresponding OP(cid:146)s or sub- programmes were, in general, the subject of a mid-term review under the Commission(cid:146)s evaluation policy, although the evalua- tion for Italy was delayed due to national management problems. While the evaluations for the different countries identified progress concerning extending, modernising or improving the national infrastructure, the question of interconnection and interoperabil- ity of the national networks was not analysed and the benefit to the trans-European aspects was not established. However, inter- connection and cross-border links have a particularly important role to play under the TEN policy, especially with regard to the future, where new links with central and east European candidate countries will have to be created (1). The significance of the EIB and the EIF 52. The TEN general rules provide that the Community may grant interest subsidies for EIB loans and contributions towards the cost of guarantees for loans from the EIF. The Commission has not made any use of this possibility for TEN-telecom choos- ing instead to concentrate funding on near-market projects. EIB loans and EIF guarantees for projects are not covered by the TEN- telecom guidelines (2). The EIB loan agreements concluded for telecommunications networks 1993 to 1998 which have a total value of ECU 12 022 million comprise ECU 10 860 million for projects in the EU and ECU 1 162 million for projects with neigh- bouring countries (see Table 5). The EIB is thus a most significant provider of finance in the area of TEN policy. It primarily responds to proposals from the Member States under its own policy direc- tives. 53. The EIF loan guarantees for telecommunications are less financially significant (ECU 697 million for 1993 to 1998, see Table 6). Decisions relating to guarantee operations must be adopted unanimously by the Financial Committee consisting of a representative of the EIB, a representative of the Commission and a representative of the national financial institutions being mem- bers of the EIF. The EIF guarantees may cover large infrastructure projects (including optical-fibre networks, GSM, satellites) and thereby provide funding for projects not covered by TEN-telecom. Table 5 EIB lending telecommunications 1993 to 1998 Loans approved Finance contracts signed 1993 1994 1995 1996 1997 1998 1. Projects in the European Union 12 472 1 005 1. 1. Networks and trunk exchanges 1. 2. Mobile telephony 1. 3. Satellites and stations 7 987 3 812 673 2. Projects with neighbouring countries 1 762 2. 1. Networks and trunk exchanges 2. 2. Mobile telephony 2. 3. Satellites and stations 1 180 582 954 51 110 110 2 100 2 006 72 22 300 300 839 786 53 130 130 1 602 1 880 881 421 300 115 100 15 486 1 394 357 240 117 3 434 1 689 1 427 318 150 150 (in million ecus) Total 10 860 6 802 3 418 640 1 162 880 282 Source: The European Investment Bank. Total 14 234 1 115 2 400 969 1 717 2 237 3 584 12 022 (1) See Agenda 2000, For a stronger and wider Union, Part 1, Section I, (2) See trans-European networks 1997 annual report, COM(98) 391 final, subsection 1, p. 18. 2. 10. 1998, Sections 4. 5 and 4. 6. C 166/14 EN Official Journal of the European Communities 15. 6. 2000 EIF loan guarantees for telecommunications 1993 to 1998 Table 6 1993 to 1994 1995 1996 Guarantees issued 156 19 9 Source: The European Investment Fund. 1997 278 1998 235 (in million ecus) Total 1993 to 1998 697 Coordinating instruments Committees and coordination by the Commission 54. The eighth annual report on the Structural Funds (1996) (1) stated that TEN financing, the Structural Funds, EIB loans and EIF guarantees are coordinated using three instruments: schematic plans for monitoring funding, advisory committees of Member State representatives and internal consultations. Furthermore, in 1997 a special interdepartmental working party was formed by the Commission as a fourth instrument of coordination. The schematic plans In 1994 the Commission instructed its Secretariat-General to 55. set up and maintain a schematic plan of TEN finance. The pur- pose of this internal working document was to provide a general overview of TEN financial support for all the services of the Com- mission, the EIB and the EIF, in order to facilitate synergy and avoid duplication. The schematic plan also aimed at enabling the Commission to provide the Member States with comprehensive, up-to-date information on all TEN financing. 56. The schematic plans include a table which shows the EIB loans, EIF guarantees, ERDF subsidies and the assistance supplied through the TEN budget headings. Analysis of the (cid:145)TEN-telecom- related expenditure(cid:146) reveals, however, that the commitments men- tioned against ERDF (ECU 467,7 million for the period 1993 to 1997) only concern telecommunications expenditure in Ireland and Greece. The telecommunications expenditure for other coun- tries is not recorded. This incomplete picture was also published in the TEN 1997 and 1998 annual reports (2) and in a 1999 report from the Commission to the Council (3). The Commission had envisaged developing a database with query possibilities but this was not done. The last version of the schematic plan was pro- duced on 10 October 1997. The data was not revised nor updated and no supplementary planning measures made. In its present form the schematic plan is not a suitable coordination tool for the telecommunications sector as it is not only out of date and incomplete but is also not in a user-friendly format. (1) COM(97) 526 final, Chapter II (D)(9). (2) See trans-European networks 1998 annual report COM(1999) 410 final, 15. 9. 1999. (3) Report on (cid:145)Investment in infrastructure in the European Union(cid:146) by the European Commission to the Council, Brussels, 18. 5. 1999. 57. The consultation that takes place in the various committees should also bring about coordination of telecommunications measures including finance. The monitoring committees, com- prising national and Commission representatives, which monitor the Structural Funds play an important role (4). During the period under review, the Commission department responsible for the telecommunications sector was represented on several of them. Two examples of the positive work undertaken by the Commis- sion illustrate the importance of coordinating EU measures: (a) The Commission examined the implementation of the 1994 to 1999 telecommunications OP in Greece. Greece had made relatively little progress in transposing the various market lib- eralisation regulations, and the Commission introduced infringement procedures (5) under Article 169 of the EC Treaty. The State monopoly, OTE, benefits from the transposition delays because it is still able to make profits from its monopoly in non-liberalised areas. It is also the main recipient of Struc- tural Funds(cid:146) finance from the telecommunications OP, which is at odds with the Commission(cid:146)s policy towards the treaty- infringement proceedings. Following an on-the-spot enquiry in 1997 the responsible department of the Commission rec- ommended that further funding should cease until the Mem- ber State had complied with EU obligations on liberalisation and harmonisation. The Commission eventually froze pay- ments in August 1998, but by then Greece had received 75,8 % (ECU 131,4 million) of the EU funds provided for in the OP; (b) The directorate-general responsible for the regional policy ini- tially proposed co-financing the setting up of mobile radio networks in Objective 1 areas in Italy. Following objections from two other directorates-general, the co-financing was finally dropped. There were three grounds for the objections: (4) The special TEN-telecom committees (finance and guidelines commit- tees) are less important for coordination questions, because they are primarily concerned with the definition of projects of common inter- est and with project selection. (5) Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions (cid:151) Fourth report on the implementation of the tele- communications regulatory package, COM(98) 594 final and XXVIIth report on competition policy 1997. 15. 6. 2000 EN Official Journal of the European Communities C 166/15 (i) distortions of competition as a result of the strengthening of what were already market-dominant positions; (ii) failure to transpose the relevant Directives and the conse- quent treaty-infringement procedure; (iii) EU financing was unnecessary on the grounds that the profitability forecasts were favourable. designed, they could be used to orient this examination. For example, they permit direct subsidies only in duly justified cases and instead concentrate on loans with interest subsidies and guar- antees. Such means of funding merit further examination given the usually profitable nature of investments in the telecommuni- cations sector and the possible distortion of competition that may be caused by subsidies. 58. These examples show how contradictions in the Community measures were uncovered by means of coordinated approach. However, it is clear that the Commission(cid:146)s strategy for, and moni- toring of, market liberalisation and privatisation following Struc- tural Fund aid needs to be strengthened. 59. In 1993, when the 1994 to 1999 programming period was being planned, the fact that the main beneficiaries of the assis- tance would be State monopolies did not appear to pose a major problem. However, the market liberalisation and privatisations which subsequently took place call into question whether capital investment that had been co-financed by the Structural Funds may be transferred to the private sector without some form of recovery. A general approach was not laid down and the Com- mission has decided, on a case-by-case basis, the extent to which the post-privatisation companies continue to pursue the regional- policy objectives agreed earlier. 60. Two examples illustrate the solutions found by the Commis- sion: (a) As regards the privatisation of the company Telef(cid:243)nica, in Spain, the Commission decided at the end of 1998 that it would not seek to recover any funds; an external assessment carried out by a Spanish consultant concluded that the regional policy objectives had been met (1); the Commission neverthe- less attached a number of recommendations to its decision that no reimbursement of ERDF funding was necessary, includ- ing one which stated that Telef(cid:243)nica should concentrate the implementation of projects co-financed by the ERDF outside highly profitable zones and facilitate access to the market for new operators; (b) In the case of Telecom-Italia an assessment stated that the company had not invested sufficiently in disadvantaged Objec- tive 1 areas; the 1994 to 1999 telecommunications OP was amended to the effect that the ERDF assistance would remain the same, but Telecom-Italia must invest an additional ECU 78,5 million in Objective 1 areas. 61. Even if solutions were found in these cases and implementa- tion of the recommendations is confirmed by evaluation of the relevant OPs, the Structural Funds(cid:146) aid policy for telecommunica- tion infrastructure should be re-examined in the light of liberalisa- tion and privatisation. Although the TEN general rules do not apply to the Structural Funds and thus are not applied to the larger-scale telecommunications measures for which they were (1) However, the methodical approach followed in the assessment was not undisputed. The consultation procedure for projects 62. The financing decisions on TEN-telecom projects are pre- ceded by a internal written consultation procedure which aims at ensuring that there is coordination within the Commission. The Court analysed the results of this internal consultation procedure for the 1998 TEN-telecom project selection using the new TEN- telecom guidelines. 63. The TEN-telecom project proposals concerning the calls of 1998 were evaluated by the services of the Commission with the help of external experts. After the project selection was done, the directorate-general responsible sent letters to 13 other DGs with a request for an opinion on the selected proposals within 10 working days. Most DGs sent brief notes saying that they had no comments and agreed with the projects selected. In one case there was a criticism that the deadline was very short and thus it was very difficult to provide a reasoned reply. Four DGs pointed out that similar projects were in progress in their own areas of respon- sibility. One DG stated that, for one project, there was a high risk of duplication with a research project of the Esprit programme being carried out by the same consortium and that there were possible overlaps with two other research projects. Another DG stated that one project had a possible conflict with a study launched by its own services. Two further DGs warned of pos- sible duplication of work. 64. The overall picture this provides is that during the selection procedure and project evaluation stage there was a lack of coor- dinated information between Commission departments. Coordi- nation should take place much earlier. While the internal consul- tation procedure facilitates cooperation at particular points, it does not at present provide coordination of ideas and strategies between DGs. Internal procedures and equipment have not been developed to meet this need; for example, a DG is unable to call up on-screen details of contracts planned and undertaken by another DG. The written internal consultation procedure appears to be a routine in which approval may be given or no reply made at all, under pressure of time, without detailed consideration. 65. As regards EIB and EIF funding, there was very little evidence that the Commission is systematically taking into account EIB loans and EIF guarantees at both the planning and implementa- tion stages. For example, the financial summaries of the two C 166/16 EN Official Journal of the European Communities 15. 6. 2000 specific OPs in the telecommunications sector (Greece and Italy) do not contain any planning data for EIB and EIF intervention. A comment made by the Court in respect of financial year 1995 (1) is also applicable to the telecommunications sector: subsidies and loans and to facilitate public/private partner- ships. (cid:145)At the programming stage, there is still very little complemen- tarity between the two types of instrument, loans and grants, because of the difficulty of reconciling the project-based approach peculiar to the EIB with the programme-based one used by the Structural Funds(cid:146). 66. The Commission does however have a written consultation procedure with the EIB concerning projects which are, in prin- ciple, to be financed by the bank (a similar system does not exist for EIF guarantees). The EIB submits the selected Member States(cid:146) financing applications to the Commission which must deliver its opinion within two months in accordance with Article 21(2) of the Protocol on the Statute of the EIB. Since 1975 there has been an inter-departmental group of representatives from various DGs which is responsible for delivering opinions to the EIB. The group allows the individual departments of the Commission 10 work- ing days in which to give their opinions. If no answer is received this is construed as tacit approval. The Commission(cid:146)s opinion is almost always affirmative. In 1998, for example, the decisions on all the 334 EIB requests (including 12 for the telecommunications sector) were positive. While this procedure may provide a two- way flow of information it does not ensure strategic coordination, for example, between EU aid managed by the Commission and the EIB loans. Special interdepartmental working party 67. In April 1997 the Commission decided to improve coordina- tion of the use of the TEN Instruments. A special interdepartmen- tal working party was set up to prepare recommendations. The working party delivered three main recommendations in Septem- ber 1997: (a) a group of directors was to meet regularly with the EIB and the EIF to ensure consistency in the setting of priorities; (b) seminars should be organised with EU, national and regional representatives to ensure that TEN policies are taken into account during the ERDF planning process; (c) special project teams for large-scale multifund projects should be set up to ensure that the financing has the right mix of No progress towards implementing these recommendations was made in the telecommunications sector. CONCLUSION AND RECOMMENDATIONS 68. The Commission should provide the Council and the Parlia- ment with details of the TEN-telecom actions and its assessment of the extent to which their objectives have been achieved. In each case where aid is granted for near-market feasibility studies and pilot projects, it needs to be clearly shown that the specific objec- tives of these types of action are well justified, and that they are unlikely to be achieved without EU subsidy. At the same time consideration should be given to a closer linking between the telematic research, development and demonstration activities (RTD) co-financed through the research programme and the near- market projects supported through TEN-telecom, including an assessment of the scope for further improvements in efficiencies if the RTD-telematic projects and the related market-validation activities were managed together. The Court notes that the tele- communications sector is currently very competitive and expand- ing rapidly without substantial public subsidies from any source, in response to the liberalisation of the sector and the development of mobile communications. Furthermore, in commercial terms, telecommunications companies are amongst the largest compa- nies in Europe, with ready access through the markets to invest- ment funds of all types. The Commission should ensure that it closely monitors the technical developments in this fast-moving field to better focus its expenditure in order to maximise its impact. 69. The Commission should develop new guidance for the Struc- tural Fund interventions in the field of telecommunication, where liberalisation, privatisation and increased competition are key developments. The TEN general rules, which were conceived to promote infrastructure projects, though not applicable to the Structural Funds, can provide a basis for this reorientation, by allowing direct grants to investment only in duly justified cases and by favouring Community aid in the form of interest subsidies and loan guarantees. In addition, the coordination between financ- ing under TEN-telecom and financing from the Structural Funds, EIB and EIF should be intensified, so that the necessary comple- mentarity and synergy between the different types of instrument may be achieved. In its 1999 report to the Council the Commis- sion itself stressed this necessity (2) (paragraphs 54 to 67). (1) European Court of Auditors, Annual Report concerning the financial year 1995 together with the institutions(cid:146) replies (OJ C 340, 12. 11. 1996, paragraph 5. 61). (2) See footnote 3, page 14. 15. 6. 2000 EN Official Journal of the European Communities C 166/17 70. The issue of interconnection and interoperability will have an increasingly important role to play especially with regard to the development of new links with the central and east European candidate countries (paragraphs 49 to 51). The trans-European aspect of the TEN policy will need to be evaluated in this light. 71. The Commission should carry out more on-the-spot checks to ensure that the execution of TEN-telecom projects and the results achieved are in accordance with the rules and objectives identified in the contracts (paragraphs 29 to 31). This report was adopted by the Court of Auditors in Luxembourg at its meeting of 22 and 23 March 2000. For the Court of Auditors Jan O. KARLSSON President C 166/18 EN Official Journal of the European Communities 15. 6. 2000 GLOSSARY OF TECHNICAL TERMS ISDN: Integrated Services Digital Network Universal Service: A defined minimum set of services of specified quality which is available to all users independent of their geographical location and, in the light of specific national conditions, at an affordable price, See first monitor- ing report on universal service in telecommunications in the European Union, COM(1998) 101 final, p. 8. Integrated broadband communications (IBC) (cid:145)Integrated(cid:146) points to integrity of the whole network, and therefore to the proper interworking of all its essential constituent parts, including the existing and emerging ones, voice telephony, packer, ISDN, broadband, satel- lite and mobile. It also signifies the integration of services (at the user and the appropriate network levels). (cid:145)Broadband(cid:146) designates the total mix of services, to be considered, starting from ISDN, up to what will be required by a realistic introduction of video (interactive and distributive services) (i. e. 140 Mbit/second and more at the user interface). (cid:145)Communication(cid:146) includes the conventional switching/transmission, consumer private network functions, but also advanced features to make service provision user-friendly, performing and economically sound (COM(93) 372 final p. 6). ATM: Asynchronous transfer mode, whereby the transfer rate can be increased to a theoretical 155 Mbit/second. ADSL: Asynchronous digital subscriber line. ADSL does not require an ISDN connection. This technical improve- ment uses an analogue connection to provide benefits that were previously available only with ISDN (e. g. diverting calls, recording caller numbers). Satellite and cable TV network operators are also experimenting with their own mass-market rapid Internet access techniques. 15. 6. 2000 EN Official Journal of the European Communities C 166/19 THE COMMISSION(cid:146)S REPLIES SUMMARY OF PRINCIPAL OBSERVATIONS 3. All TEN-ISDN preparatory studies (1993 to 1995) have been filed by the Commission, and were well identified on the occa- sion of the TEN-ISDN intermediate evaluation report, which was communicated to the Court in February 1999 (1). Further TEN- telecom projects from 1996 onwards were included in a database which is accessible online by every project officer and provides updated information on the status and deliverables of a project from its initial appraisal, up to monitoring and evaluation. The difficulties encountered in achieving a comprehensive descrip- tion of the TEN-telecom activity lay in the complex structure of the projects: (cid:151) on the one hand, the TEN-telecom (cid:145)projects of common inter- est(cid:146) appeared in the guidelines adopted in June 1997, three years after the adoption of the Structural Funds programmes, (cid:151) on the other hand, by their very nature, the regional plans are organised around themes reflecting the priorities of each Member State (improving the business environment, moder- identify nising public telecommunication-related investments as such. administration), and do not 4. The Financial Regulation stipulates that (cid:145)studies(cid:146) can always be accompanied by (cid:145)technical support measures(cid:146), which is reflected in the glossary of terms approved by the TEN Financial Commit- tee and confirms a larger acceptance in the meaning of (cid:145)studies(cid:146). In addition, Article 3 of the guidelines clearly states as a priority (cid:145)study and validation of the technical and commercial feasibility, followed by the deployment of applications supporting the devel- opment of a European information society, in particular applica- tions of collective interest(cid:146). Studies have been carefully defined fol- lowing this model, with a greater emphasis put on market feasibility and validation so that the action could be best differentiated from what is supported in the research. 5. TEN-telecom starts from results of technological develop- ments whose marketability is not yet clear. TEN-telecom was pre- sented to the research audience as a follow-on action. Indeed there exist similarities with the research programme on telematics appli- cations in (cid:145)areas of collective interest(cid:146) (such as education, environ- ment, transport), since the guidelines were conceived originally as a follow-on action to research assessing the marketability and the business case for products which present sufficient technological maturity but require clarification for future market deployment and for establishing a convincing business plan to secure internal or external project financing by well-committed partners. These issues are marginally addressed by RTD projects in their exploita- tion plans, where the core of the action addresses the conditions of adoption of advanced technologies or methodologies in coop- eration between users and suppliers, and not market or financial package assessment. (See also the Commission(cid:146)s reply to para- graph 48). 6. The decision-making process is outside the control of the Commission. When the guidelines are adopted, the regular updat- ing of the work programme and the definition of the calls intro- duce the necessary element of flexibility in the design process of the action. 7. Following close monitoring actions, on-the-spot checks were carried out of both contractors and the two associated contrac- tors. A legal action by the Commission is pending on one con- tractor. Concerning the audit carried out by the Court of a large contrac- tor, the Commission has implemented an on-the-spot audit. Projects(cid:146) monitoring, reviews and controls on the basis of con- tractual specifications enable the Commission to ensure proper execution of the contract, and, possibly, to detect irregularities. More on-the-spot checks could be carried out with appropriate resources devoted to them. 8. The mid-term evaluation report indicates that the objectives of the ISDN guidelines for developing a range of services based on ISDN were well met. (1) TEN-ISDN (cid:151) Final report of the intermediate evaluation (1993 to 1997). The intermediate evaluation of the TEN-telecom action (1993 to 1997) also raised additional recommendations which have been taken into consideration in the continuation of the action (see reply to paragraph 43). C 166/20 EN Official Journal of the European Communities 15. 6. 2000 9. The telecommunication gap in the majority of the regions eli- gible under the Structural Funds (SFs) is concentrated in the national and regional/local networks rather than in the interna- tional links. In addition, the operations of the SFs are based on the principle of subsidiarity and partnership with Member States. It is the responsibility of Member States to define the development plans, which will receive SFs funding. Interventions have therefore a strong national/regional character. 10. An in-depth evaluation of the action, will take place from May to September 2000, where the specific issues to be evaluated are the following: relevance of the action(cid:146)s objectives, priorities and implementing measures; the effectiveness and impact of the action; its efficiency and cost-effectiveness; its utility and sustain- ability; causal links from resources used through to activities and presumed impacts (the intervention logic); lessons to be learnt in terms of legal base, resources and delivery mechanisms for pos- sible future interventions of similar type. The Commission shall then submit proposals for revision of the guidelines on the basis of such an evaluation and technical developments. Without pre- empting political decisions, critical points for revision could be the following: (cid:151) the action would be clearly differentiated from what is cov- ered by the research. A segmentation into three distinct domains would be proposed, where the nature of actors involved, the market potential and business definition, the investment perspectives and financial packages are different: the public-service domain, the global service domain, and the growth-enhancing service domain addressing the risk-capital market, (cid:151) the action would be more focused. Annex 1 to the present guidelines provides for both too large and too complex area coverage. A simplified scheme would be proposed, building on priority actions of the Europe initiative, (cid:151) the work programme would remain sufficiently general to reflect technology changes and new market trends in the defi- nition of calls for proposals, (cid:151) the structuring of projects and related Community support would also be made clearer, (cid:151) greater emphasis would need to be placed on the trans- European dimension of the action, The TEN-telecom action will build on the political support pro- vided by the e-Europe initiative which concentrates on priority actions for overcoming the handicaps that are holding back the rapid development of an information society in Europe, in par- ticular (cid:145)a public sector which is not playing a sufficiently active role in enabling the development of new applications and ser- vices(cid:146) and (cid:145)a lack of sufficiently dynamic, entrepreneurial, service- oriented culture(cid:146). TEN-telecom is a relevant Community Instru- ment to focus on the defined targets in the following areas: access to multimedia educational and training resources, SMEs(cid:146) support services for trans-European e-commerce and secured-access, risk- capital participation in investment funds for high-growth innova- tive projects, healthcare networked-management services, enhanced transport services such as innovative security emer- gency and maintenance support services or dynamic and location- based travel and traffic information, emergency management and public safety systems, online access to public-sector information. 11. The 1994 to 1999 Structural Funds(cid:146) programming period constituted a transition period from a monopolistic to an open market. The Commission opted for a case-by-case approach, which helped to solve many problems in compliance with the new regu- latory framework, and in respect of regional-development objec- tives, and to accelerate the liberalisation process in Cohesion countries. For the new period 2000 to 2006, rules for ensuring transparency and compliance with competition rules have been established in the framework of the operations of the Funds. TRANS-EUROPEAN TELECOMMUNICATIONS NETWORKS (TEN-TELECOM) Use of resources and summary of results 18. All TEN-ISDN preparatory studies (1993 to 1995) have been filed by the Commission, and were well identified on the occa- sion of the TEN-ISDN intermediate evaluation report, which was communicated to the Court in February 1999 (1). Further TEN- telecom projects from 1996 onwards were included in a database which is accessible online by every project officer and provides updated information on the status and deliverables of a project from its initial appraisal, up to monitoring and evaluation. 19. Table 2 gives an overview of the type of actions financed from 1993 to 1998: preparatory actions from 1993 to 1995 (TEN-ISDN and TEN-IBC), projects under the TEN-ISDN guide- lines of 1995, projects under the TEN-telecom guidelines of 1997, and joint measures with other programmes in 1996. In 1998, administrative and associated measures accounted for ECU 1 mil- lion (3,6 % of total commitments). (cid:151) the external dimension would also have to be considered, allowing primarily for participation of associated countries within the framework of their agreements with the European Community, and of countries from the EEA. (1) TEN-ISDN (cid:151) Final report of the intermediate evaluation (1993 to 1997). 15. 6. 2000 EN Official Journal of the European Communities C 166/21 20. The Financial Regulation stipulates that (cid:145)studies(cid:146) can always be accompanied by (cid:145)technical support measures(cid:146), which is reflected in the glossary of terms adopted by the TEN Financial Committee and confirms a wider acceptance of the meaning of (cid:145)studies(cid:146). (cid:151) the preparatory actions were contributing to the identification of the projects of common interest in the ISDN guidelines; they addressed hurdles to the development of ISDN, poten- tially fruitful fields for expansion of ISDN and necessary back- ground information for the development of ISDN policy, In addition, Article 3 of the guidelines clearly states as a priority (cid:145)study and validation of the technical and commercial feasibility, followed by the deployment of applications supporting the devel- opment of a European information society, in particular applica- tions of collective interest(cid:146). Studies have been carefully defined fol- lowing this model, with a greater emphasis put on market feasibility and validation so that the action could be best differentiated from what is supported in the research: the study phase covers the preparation of a business plan, identifying, in a convincing man- ner, the market viability of the proposed venture, followed by the validation and demonstration of the project in a real on-site com- mercial trans-European context. At this stage, the business plan would have been finalised and the total investment cost of the overall commercial exploitation of the project would have been well evaluated. A further initial market deployment phase could also be aided, in duly justified cases, by up to 10 % of the total investment cost, in order to complete the investment-financing scheme. Euro-ISDN guidelines of 1995 21. The delay in the decision-making process on the Euro-ISDN guidelines is outside the control of the Commission. 22. Proposals must refer to these (cid:145)projects of common interest(cid:146) when calls are published. Euro-ISDN preparatory measures (1993 to 1995) 23. Forty-five projects were indeed selected and subsidised between 1993 and 1995, as preparatory measures, before the Euro-ISDN guidelines were adopted. The Commission started ini- tiatives concerning the implementation of ISDN, taking into account the general framework of trans-European networks, fol- lowing the Council resolution of 25 May 1992 (1). 24. Although the use that the Commission has made of these studies has not been fully documented, the impact of the sup- ported activities in this first implementation period of prepara- tory actions was significant: (cid:151) the outcome of these studies was used internally and exter- nally for discussions and consensus building in external bod- ies concerned with standards for Euro-ISDN (IMIMG (2) body) and in the promotion of ISDN use through external events such as EIUF (3) plenaries and workshops. 25. The last call of September 1995 anticipated the future Euro- ISDN guidelines and TEN Financial Regulation adoption and, as a consequence, applies the rules of cost-sharing contract for stud- ies, which may include market-validation pilot projects. Euro-ISDN projects 27. The five mentioned studies, which cover migration strategies from Euro-ISDN onwards, related to policy aspects of the devel- opment of telecommunications infrastructures, and, as a conse- quence received 100 % funding after an open call for tenders. They were studies which prepared the next steps of the Euro- ISDN action. 28. (a) The (cid:145)GTS(cid:146) market research and analysis provided insight into the telecommunication infrastructure and the requirements of customers from selected market segments for ISDN services in Greece. It provided an additional impulse for ISDN access in a country where it was notably lagging behind. The funds acceler- ated the implementation of the necessary equipment supporting multi-site and multinational interoperable telecommunication ser- vices. The Commission considers such an aid useful to enable SMEs in a peripheral region of the Union to gain access to advanced generic services and hence better links to other Euro- pean companies and international operability. In addition, it estab- lished an operational alternative position to the incumbent in the value-added telematic services sector. (b) The (cid:145)No problems(cid:146) project (NP) can also be considered a suc- cess story. It shaped the provision of Internet services in Austria, integrating traditional generic services such as security services into the Internet platform. The NP service was defined for 300 000 customers. Today, it gives 70 application providers access to the platform for generic services such as directories, micropayments, secure e-mails and light EDI (4). (1) Council resolution of 25 May 1992 on the development of the ISDN in the Community as a European-wide telecommunications infra- structure for 1993 and beyond. ISDN MOU Implementation and Management Group. (2) (3) European ISDN Users Forum. (4) Electronic data interchange. C 166/22 EN Official Journal of the European Communities 15. 6. 2000 (cid:145)Medsalus(cid:146) considered the establishment of an ISDN value- (c) added network of tele-collaboration among healthcare profes- sionals including teleconsultation, training, research, directories and news. The project has allowed the partners to define pricing and marketing strategy for such services and to determine the most appropriate organisational structure. According to an inde- pendent final review, the current situation is the following: (cid:151) for the exploitation of the results from the market feasibility phase, the project was reshaped in some respects. In addition to the main industrial partner (a telecommunication operator and service provider), new major actors were taken on board from the healthcare area. The Medsalus services have been taken up under the umbrella of these organisations with new labels, (cid:151) on the clinical side of the project, partners from the feasibil- ity phase (hospitals, research institutes) have also maintained contacts and cooperation at trans-European level. 29. Following close monitoring actions, financial audits were carried out in respect of both contractors and the two associated contractors. This means that all organisations involved were audited. As a result of the audit, substantial subcontractor costs were rejected because the contractor concerned had failed to request the Commission(cid:146)s written approval before entering into the sub- contracts. Apart from that, the contractor was not able to provide evidence of the work done. 30. Following the audit carried out by the Court, a letter was sent on 15 April 1999 asking for the necessary information and documentation that would allow completion of the audit. In response to the above letter, the company provided the requested documentation and a full set of revised cost statements in Octo- ber 1999. After verification of these documents, it was decided to carry out a further audit (29 and 30 November 1999) at the con- tractor(cid:146)s premises in order to verify the original supporting docu- ments. The Commission draft report is due in early 2000. From an initial calculation, significant amounts could be recovered. 31. The Commission agrees that, in view of the present contrac- tual provisions in respect of allowable costs, there is a risk of not detecting overcharging costs. The Commission is in a process of reviewing the research contracts. The Commission has increased its ex ante verifications and the reviewing of contracts in research and TEN-telecom. More on-the-spot checks could be carried out with appropriate resources devoted to it. These checks could replace some of the annual reviews which take place in Brussels. New guidelines of 1997 32. The delay in political agreement on the new TEN-telecom guidelines is outside the control of the Commission. The techno- logical changes prompted legal adaptations that finally resulted in the 1997 TEN-telecom guidelines, which adopted a user(cid:146)s point of view and hence a multi-network approach, and neutrality towards the technical platform over which services are delivered. Preparatory actions for the new guidelines 35. The IBC preparatory actions were carried out before the entry into force of the TEN Financial Regulation, as a follow-up to the communication to the European Parliament and the Coun- cil on the preparatory actions in the field of trans-European net- works (integrated broadband communications (TEN-IBC) (1) and were intended to help develop a framework of actions, with a strong technology focus, in broadband communications. These actions were 100 % funded studies (specifications for IBC), or 50 % funded trials, and did not address implementation of projects on which the 10 % co-investment rule would apply. 36. Indeed such actions were not included in the annual report on the trans-European networks. However, they were the subject of a specific final report to the European Parliament and the Council (2). Joint measures with other programmes 38. For the SME initiative, the projects were eligible under the TEN-ISDN guidelines, and adopted under the procedures of the TEN Financial Regulation. The specific circumstances of the initia- tive: (cid:145)establishment of a network of regional platforms for the development of electronic commerce among SMEs operating in the tourism sector in the less-favoured regions of the Union(cid:146), have been documented, and received a favourable opinion of the Mem- ber States(cid:146) TEN-telecom Committee. 39. The efficient cooperation of six programmes in the area of educational multimedia activities is a response to industry requests and should be put to the credit of the Commission. Evaluation of performance 40. Despite the negative opinion of the ACPC in late 1996, a new open call for tenders was prepared in 1997 which led to an intermediate evaluation of the TEN-ISDN action over the period 1993 to 1997 by external experts. (1) COM(93) 372 final of 22 July 1993. (2) COM(98) 45 final of 2 February 1998. 15. 6. 2000 EN Official Journal of the European Communities C 166/23 43. The report became available in February 1999 (1) and was communicated to the Court. This report indicated that the objec- tive of the ISDN guidelines(cid:146) objectives for developing a range of services based on ISDN was well met. Most of the projects of common interest identified in the ISDN guidelines, were addressed during this period. Although the TEN-ISDN action did not have success criteria for the direct assessment of the achievement of objectives, it had con- tractual monitoring indicators at project level, as a result of con- tract negotiations. The intermediate evaluation of the TEN-telecom action (1993 to 1997) also raised additional recommendations which have been taken into consideration in the continuation of the action: (cid:151) a work programme has been defined and updated with com- ments from the industry, (cid:151) assessment of the guidelines objectives was carried out for the first time in the 1999 reviews of projects, (cid:151) significant improvements have also been made in the course of the action in call for proposals(cid:146) preparation and appraisal of bids, in the projects(cid:146) monitoring and review, and in the dis- semination and support measures of the action. COORDINATION WITH RELATED MEASURES Telecommunication in the research policy 48. TEN-telecom starts from results of technological develop- ments whose marketability is not yet clear. TEN-telecom was pre- sented to the research audience as a follow-on action, each project being defined in the wider context of a specific investment which is being prepared. Indeed there exist similarities with the research programme on telematics applications in (cid:145)areas of collective inter- est(cid:146) (such as education, environment, transport), since the guide- lines were conceived originally as a follow-on action to research assessing the marketability and the business case for products which present sufficient technological maturity but require clari- fication for future market deployment and for establishing a con- vincing business plan to secure internal or external project financ- ing by well-committed partners. These issues are marginally addressed by RTD projects in their exploitation plans, where the core of the action addresses the conditions of adoption of advanced technologies or methodologies in cooperation between users and suppliers, and not market or financial package assessment. 44. The delay in political agreement on the guidelines is outside the control of the Commission. When the guidelines are adopted, the regular updating of the work programme and the definition of the calls will enable reflection of market trends. In order to maximise the synergies between the TEN and the research instruments, TEN-telecom has been fully integrated into the Directorate in charge of the horizontal aspects of IST research and development working in the context of the information soci- ety but with clear, distinct orientations. 45. Several recommendations have been used for the orientation of the actions under the new guidelines, as mentioned in para- graph 43. Impact on peripheral areas is not an explicit selection criterion in Article 6(3) of the TEN Financial Regulation. However several 1998 proposals included partners originating in periph- eral regions of the Union. In addition, an important modification in the updated work programme has been to put emphasis and bring support to the business plan preparation in the study phase, which should not last more than 18 months. Finally, in accordance with the specifications of the guidelines, a full evaluation of the TEN-telecom action will take place in the second quarter of 2000. The report will assess the relevance of the objectives, priorities and implementing measures of the action, as well as its effectiveness and impact. It will comprise several parts: one core study of the mid-term evaluation of the action (1998 and 1999), one study on the status and validity of the present TEN-telecom guidelines, and several reviews of running projects bringing an overview of their contributions to the gen- eral objectives of the action. (1) TEN-ISDN (cid:151) Final report of the intermediate evaluation (1993 to 1997). The justification of the TEN-telecom action appears to be twofold: (cid:151) firstly, there is wide scope for supporting products which have achieved their technological phase, in their preparation for successful market deployment (business/market plan prepara- tion and consolidation of consortia which can be a long and risky process), and this is not normally the focus for research actions, (cid:151) secondly, Community aid lies in areas of general interest where uncertainty of short-term viability and difficult organisational requirements at trans-European level discourage purely pri- vate initiative, and thus impair the development of the infor- mation society for all in the Union. Examples can be found in the environment transport (risk-management (mobile emergency road services), health (continuity of care and healthcare management systems), education (telematic- based learning and vocational training services), or in growth areas generating new activities, such as generic Internet-based support services for trading and management of SMEs. These examples form part of the priority actions of the Commis- sion(cid:146)s e-Europe initiative. systems), C 166/24 EN Official Journal of the European Communities 15. 6. 2000 The importance of the Structural Funds Financial Instruments. 51. The main objective of the Structural Funds (SFs) is to reduce the socioeconomic disparities among the regions of the EU. Inter- ventions are therefore a function of regional needs and character- istics. The telecommunication infrastructure gap in the majority of regions eligible under the SFs is concentrated in the national and regional/local networks rather than in the international links. Accordingly, SF interventions during 1994 to 1999 (cid:151) and those of the ERDF in particular (cid:151) have been, by and large, limited to investments aimed at upgrading and completing the (basic) tele- communications infrastructures. In addition, the operations of the SFs are based on the principle of subsidiarity and partnership with Member States. It is the responsibility of Member States to define the development plans, which will receive SF funding. Interventions have therefore a strong national/regional character. Yet, such investments, together with those aided by the EIB or the EIF (networks and trunk exchanges, mobile telephony networks, satellites networks, wireless local loops) contribute globally to the trans-European interconnection of countries, and will enable fur- ther interoperability of services and applications which are the subject of the TEN-telecom aid. The significance of the EIB and the EIF 52. The liberalisation and privatisation process of the telecom- munications industry has led to important changes in the regula- tory and policy framework for telecommunications. The Com- munity promotion and support activities have to be adapted to this new environment in a consistent way. To meet this new chal- lenge, coordination between Commission services has been set up with the aim of clarifying the impact of the new regulatory frame- work more particularly on the grants for physical infrastructure provided by the EIB and under the Structural Funds. Adaptation measures have been negotiated with the Member States who had selected the telecommunications sector as a priority for invest- ments. In this new regulatory context, it would have been difficult to direct the TEN-telecom aid towards subsidies of the interest on loans from the EIB, or on contributions towards guarantees from the EIF. 53. To date the EIF has not guaranteed any satellite project, nor any optical network as such. Coordinating Instruments The schematic plans In the field of telecommunications, the nature of these two groups of projects differs substantially in nature. The projects funded under the TEN Regulation are user-oriented application projects which make use of the underlying physical infrastructure, whereas the infrastructure attracts most of the funds and loans available from the ERDF, EIB and EIF. These differences explain the limited potential for cooperation between these Instruments, which may include, on the one hand, a grant for a feasibility study for a schools network under the TEN Regulation (in the region of ECU 600 000) and, on the other, a major EIB loan to a telecommunications operator (in the region of ECU 200 million). 56. The difficulties encountered in completing the schematic plans on telecommunications are manifold. The first concerns the notion of TEN-telecom (cid:145)projects of com- mon interests(cid:146) whose definition (except for the ISDN projects) only appeared in the guidelines adopted in June 1997, three years after the adoption of the Structural Funds programmes. It is clear therefore that it was not possible to propose a clear taxonomy to Member States for organising their plans in accordance with TENs(cid:146) priorities. The second difficulty has to do with the very nature of the regional plans which are organised around themes reflecting the priorities of each Member State. Only two countries (Italy and Greece) had explicitly mentioned telecommunications as a separate area of intervention, as can be seen from the Community support frame- works (CSFs) and Single Programming Documents (SPDs) which were published in 1995 and have been available on the Internet since 1997. This means that, in most cases, it was not possible to isolate telecom-related investments which are often hidden under different headings (e. g. (cid:145)improving the business environment(cid:146) or (cid:145)modernising public administration(cid:146)). Besides these difficulties specific to the telecommunications sec- tor, the schematic plan is considered more generally to have lost some of its usefulness and priority, as the coordination between the services was gradually strengthened and allowed an efficient development of TENs, in particular in sectors where the projects supported by different instruments are of a similar nature. In par- ticular, the plan to upgrade the schematic plan into a fully auto- mated database was not considered to be a priority or a core activity of the services concerned and has not been pursued fur- ther. 55. The coordination required by the TEN Financial Regula- tion (1) aims at the coordination and coherence between projects of common interest supported under the TEN Regulation and projects undertaken with the help of contributions from the Community budget, the European Investment Bank and other (1) Council Regulation (EC) No 2236/95, of 18 September 1995, Article 14. Committees and coordination by the Commission 57. The Monitoring Committees of the SFs are the lowest level of coordination of the SFs(cid:146) interventions where the Commission participates. It is here that the coordination among the different Community policies is best accomplished: representatives of Com- munity sectoral policies are invited to attend the Monitoring Committees together with the representative of regional policy 15. 6. 2000 EN Official Journal of the European Communities C 166/25 whenever decisions have to be taken on a specific sector. It is this close collaboration that has allowed the identification of a bal- anced Commission position in relation to complex and very dif- ferent situations. inter alia, that the nature and the characteristics (public use) of an infrastructure scheme do not change after privatisation (cid:151) no claw-back of Community finance should be envisaged. During the negotiation of the operational programme (OP), the transposition of the Community legislation into Greek law was examined. This resulted in the introduction of an Article in the Commission(cid:146)s decision for granting SF aid stipulating that the payment flow had to be conditioned by advancements in trans- position of the relevant Community legislation. In August 1998, the payments were frozen. In the Italian case, the request, which was based on the 1994 to 1999 CSF and which took the form of two operational pro- gramme proposals by the Italian authorities, was treated in the same way as any other application for assistance. Following the evaluation of the proposal by the Commission, it was decided to reallocate the resources concerned in the CSF mid-term review decision of April 1998. 58-59. The content of the plans to be financed in the current programming period (1994 to 1999) were discussed and negoti- ated with Member States when the telecom markets were not yet liberalised and the debate on the information society had just started. The Commission opted for a case-by-case approach. In such a way many problems were successfully solved in compliance with the new regulatory framework and with respect to regional devel- opment objectives. For example, the telecom-related programmes supported by the ERDF were used to accelerate the liberalisation process in Greece (where the derogation period has been reduced by two years from 2003 to 2001). In its communication on (cid:145)Cohesion and the information soci- ety(cid:146) (1), the Commission recognised that the majority of telecom investments are profitable, though there may be a few cases where public support is needed. In any case, the focus of SFs interven- tions had to shift from infrastructure upgrading towards demand stimulation, awareness raising, development of applications and local content. This new approach has been further developed in the draft guid- ance for programmes for 2000 to 2006 setting the Commission priorities for the interventions of the Funds. Concerning privatisation, the general approach adopted by the Commission (and this since before the 1998 reform) reflects the fact that within the context of multiannual co-financed pro- grammes, the current ERDF Regulations have, at project level, been indifferent as to whether matching finance for ERDF resources is from public or private sources. This means that (cid:151) provided, The Commission has adapted its approach for the next round of structural interventions. Under the new general regulations, Mem- ber States will be obliged to inform the Commission of any sub- stantial modification (such as privatisation) to a co-financed infra- structure scheme which affects its nature or its implementation conditions. Financial corrections may be applied following such a modification. 61. Commission services will examine the suggestions of the Court. The consultation procedure for projects 64. The interservice consultation is a standard procedure in the Commission which applies to all decisions which will be pre- sented to the Commission. It is based on the principle of the unity of the Commission administration. The purpose of this consulta- tion is to inform and obtain advice from the other Commission services and to achieve consistency and transparency. The TEN- telecom consultation routinely involves 15 different services, each in their own area of responsibility. The Commission selection decision is not a (cid:145)fait accompli(cid:146) in the sense that input from other DGs is most welcome and can be taken into account in the negotiation of contracts. A consultation on a Commission decision on the selection of projects is an implementation decision (2). It takes place in the strategic context established by the founding act. The coordina- tion of ideas and strategies takes place when new Commission proposals are put forward and are subject to the same interservice consultation procedures. They are also preceded by ad hoc pre- paratory work and meetings at services level. 65. Since EIB loans on individual projects are, in most cases, generated by an explicit request from regional or national opera- tors, the EIB provided a global estimate of its activity within a multiannual programme. For the period 2000 to 2006 the Bank has declared its willingness to develop a closer operational coop- eration between its services and those of the Commission so as to ensure the EIB(cid:146)s participation in SFs(cid:146) plans and programmes at the earliest possible stage of their preparation. 66. The written consultation procedure does improve strategic coordination as: (cid:151) it functions as a filter adding discipline to the EIB(cid:146)s selection and structuring of proposals brought forward for Commis- sion opinion, (1) COM(97) 7 of 23 January 1997. (2) Council Regulation (EC) No 2236/95 of 18 September 1995, Article 17(1). C 166/26 EN Official Journal of the European Communities 15. 6. 2000 (cid:151) it allows individual Commission services to review proposals against their policy area and potentially propose changes. Commission opinions are frequently preceded by requests for further information from the EIB and discussions between Commission services. involved, the market potential and business definition, the investment perspectives and financial packages are different: the public-service domain, the global-service domain, and the growth-enhancing service domain addressing the risk capital market, Special interdepartmental working party 67. While the specific recommendations have not been applied, the Commission has adopted other coordinating measures. A spe- cific coordination of the three TEN sectors was established. The group of Commissioners responsible for TENs (1) met several times between 1995 and 1999. The group of Commissioners rec- ommended in October 1997 specific coordination measures (2), while taking into account the specificity of each instrument. Although this coordination primarily concerns sectors where the nature of the projects supported by the different instruments is similar, the future of coordination in the field of telecommunica- tions has been kept under review. There has been inter-service cooperation concerning the guidelines for the next programming period (2000 to 2006) of Structural Funds interventions. An EIB representative takes part in TEN-telecom workshops and Member States(cid:146) TEN-telecom committees. Contact is also established with the EIF about the financing of telecommunications infrastructure. CONCLUSION AND RECOMMENDATIONS 68. An in-depth evaluation of the action will take place from May to September 2000, where the specific issues to be evaluated are the following: relevance of the action(cid:146)s objectives, priorities and implementing measures; the effectiveness and impact of the action; its efficiency and cost-effectiveness; its utility and sustain- ability; causal links from resources used through to activities and presumed impacts (the intervention logic); lessons to be learnt in terms of legal base, resources and delivery mechanisms for pos- sible future interventions of similar type. The Commission will then submit proposals for revision of the guidelines on the basis of such an evaluation and technical developments. Without pre- empting political decisions, critical points for revision could be the following: (cid:151) the action would be clearly differentiated from what is cov- ered by the research. A segmentation into three distinct domains would be proposed, where the nature of actors (1) In addition to the Commissioners responsible for telecommunica- tions, energy and transport, the group also includes those in charge of budget, environment, regional policy, internal market, economic and financial affairs, and, on an ad hoc basis, external relations and competition. (2) These recommendations were the fruit of seven interservice meetings, including in some cases the EIB and the EIF. (cid:151) the action would be more focused. Annex 1 to the present guidelines provides for both too large and too complex area coverage. A simplified scheme would be proposed, building on priority actions of the eEurope initiative, (cid:151) the work programme would remain sufficiently general to reflect technology changes and new market trends in the defi- nition of calls for proposals, (cid:151) the structuring of projects and related Community support would also be made clearer, (cid:151) greater emphasis would need to be placed on the trans- European dimension of the action, (cid:151) the external dimension would also have to be considered, allowing primarily for participation of associated countries within the framework of their agreements with the European Community, and of countries from the EEA. The TEN-telecom action will build on the political support pro- vided by the e-Europe initiative which concentrates on priority actions for overcoming the handicaps that are holding back the rapid development of an information society in Europe, in par- ticular (cid:145)a public sector which is not playing a sufficiently active role in enabling the development of new applications and ser- vices(cid:146) and (cid:145)a lack of sufficiently dynamic, entrepreneurial, service- oriented culture(cid:146). TEN-telecom is a relevant Community Instru- ment to focus on the defined targets in the following areas: access to multimedia educational and training resources, SMEs support services for trans-European e-commerce and secured access, risk capital participation in investment funds for high growth innova- tive projects, healthcare networked management services, enhanced transport services such as innovative security emer- gency and maintenance support services or dynamic and location based travel and traffic information, emergency management and public safety systems, online access to public sector information. 69. The Commission has developed new guidelines for the Struc- tural Funds interventions in the field of telecommunications in the framework of the new 2000 to 2006 programming period. Such guidelines have already been submitted to the attention of Member States in the context of the works of the Committee for the Development and Reconversion of Regions. 15. 6. 2000 EN Official Journal of the European Communities C 166/27 In the telecommunication sector which is global and made 70. up of several layers (basic infrastructure, generic services/service (cid:145)middleware(cid:146) and applications), the coordination between the various financing instruments will be intensified, taking into con- sideration the different nature of projects, infrastructure projects on the one side, generic services and applications of general inter- est on the other, making use of the underlying infrastructure. This applies in particular to adhesion countries where synergy is criti- cal between investment in infrastructure supported by the inter- national financial institutions (IFIs), such as the EIB or the EBRD, and Community interventions from the Structural Funds or TEN- telecom on the development of applications. In any case the prin- ciples of promoting liberalisation and establishing a stable and competitive regulatory framework in the sector should be adhered to and implemented by these countries, in order to secure com- mercial financing sources on the infrastructures. The issue of developing new links with central and east European candidate countries appears more complex than simply interconnecting cross-border infrastructures. 71. Beyond project monitoring, reviews and controls which are made on the basis of contractual specifications, more on-the-spot checks could be made with appropriate resources devoted to them. These checks could replace some of the annual reviews which take place in Brussels