Select Committee on European Union Minutes of Evidence


Examination of Witnesses (Questions 1340- 1359)

THURSDAY 8 JUNE 2000

M BENOIT BATTISTELLI, M GILLES BREGANT, M BERNARD SPITZ, M HENRI BREUIL, M GILLES D'ANCHALD, M PHILIPPE LE QUEMENT, M EDOUARD GUILLERMOZ AND M LAURENT PERDIOLAT

  1340. It is promoting company information which encourages the public to buy shares.
  (M Spitz) But this is done by individuals on their site or by the company as a plan?

Chairman

  1341. It is done by individuals in chat rooms. Do you have chat rooms?
  (M Spitz) Yes.

  Chairman: Distorting the market.

Lord Paul

  1342. Basically fraud.
  (M Spitz) But this is not a plan made by a company to cheat the market?

Viscount Brookeborough

  1343. That would be controlled by the Stock Exchange. This is just information that you can log into which says, "Do you know this company is going to have brilliant news tomorrow?".
  (M Spitz) That is interesting because in France we would have a problem first with MP3 and sex talks and this type of issue.

Chairman

  1344. I think we are probably misleading you a little bit. We have a general question in number 4 and what Lord Faulkner has done is to give a particular example of a problem which has arisen in this area. There has been a phenomenal growth in people privately now investing, using the Internet. Instead of going through stockbrokers they are doing it themselves, and it is growing very quickly indeed and there are all sorts of manipulative manoeuvres taking place to push up prices and to make profits.
  (M Spitz) Manipulation of the market.
  (M Bre«gant) The question was more about our specific clause in France to keep a level framework on this. Of course this is a problem for us because for instance we have very precise rules to give some rates for mortgage. For instance when you just click on the web site that gives you a very attractive market rate but it does not include all the compulsory aspects of the French market, so that makes a bias. We would like to get the same rules for the French citizen so that he makes a sensible choice. This is a topic that we would tend to see.
  (M Perdiolat) For credit rates. There is a banking law in France which assigns the online financial services to respect some rules for the rates proposed which should follow guidelines.
  (M Bre«gant) Talking about the problems of distorting the Stock Exchange market by gossip or false information on the Internet, we do not have a specific position because probably we have not seen it growing too much.
  (M Battistelli) How can you try to counter attack rumours? In the same phenomenon, it is not on the Internet but you can meet somebody in the street and you say something false about a company. Of course it is not the same impact because it is not on the Internet, but I think you are in a very difficult position because it is not easy to find solutions.

  Lord Faulkner: I think our authority is attempting to trace the source of the rumour, which is on the Internet. It is a growing problem.

  Lord Paul: It is a growing problem, not easy of solution.

Chairman

  1345. What is the French position on competitive Internet access and on charging?
  (M Bre«gant) It is a difficult question. In fact I think that there is a very different situation in France and the UK on Internet access. For historical reasons your Internet access rates were based on the ITS formula, the international transaction services formula. In France Internet access was based on the price of the local calls, so there was an evolution of the tariff of the narrowband Internet access which was quite different. Now it is converging due to the efforts of the free ISPs. Today our position about Internet access is that France became aware in 1997 of the high prices of Internet access because Internet ISPs, we had to pay for them. Then the tariff for the local calls was rather high, so we decided to put pressure on the actors respecting the law of competition to get a better Internet access rate. The result today, which was market driven, is that we get free ISPs, so that is zero on the ISP side. Then we also have rather low rates for calls which are routed to the Internet for local calls. We have a special tariff which is rather low. The basis is five francs plus VAT per hour. It is lower than the normal rate. We even have some marketing measures from actors which actually package this with the service, like one company in the UK does. Today they are emerging for the first time and last month we had a fully free Internet access. Today we think that Internet access on narrowband is not a problem. The price has come down drastically. That is for business models for the actors but it is not for them to some extent. We think that we have a good run within the hit parade of the Internet access throughout Europe. It seems satisfactory. Our big target is the broadband access. We think that there could be significant problems if there is a high price on broadband access so we have several measures. We want to unbundle the local loop. There is a consensus about this except in Parliament but I think that we will manage to find a solution.

Chairman

  1346. Which particular political party is it?
  (M Bre«gant) There could be solutions to unbundle the local loop, and even the internal operator agrees with it to some extent, so we can find a solution to unbundling and therefore we could have good prices for ADSL access. The other point is that we will open the local radio loop, call for tenders and this is going to be implemented very soon. We are in the process of compiling the responses.

  1347. We saw this yesterday.
  (M Bre«gant) For UMTS. That is another one. I was talking about opening the radio local loop. This is UMTS and that is for 2002. That is also an attempt to put prices down because France has a very different business model. We also have some solutions for rural areas based on satellite which are being proposed by France Telecom. In all urban areas we have cable TV systems which can provide Internet. Our credo is to use the competition of technologies to bring down the price for urban access. Of course there is an issue which is the price for schools and maybe for other parts of the public service. Our official position is to promote a universal service extension to our schools. I know that this is not an easy question to defend but we will try to promote universal service for schools.

Lord Paul

  1348. You have mentioned Parliament twice. This industry is changing very fast. On the other hand Parliament is a democratic process. Have you given any thought to how you are going to maintain that relationship?
  (M Battistelli) I think it is necessary to inform MPs as much as possible in order to help them to make the necessary changes.
  (M Spitz) Another answer is the difference between the treaty explanation in English because the words are tricky between what we call in France the regulation and reglementation. What we call in France reglementation is regulation in English. I should say the difference is between the English "regulation" and French "regulation". The idea is as you mentioned, that it is impossible for Parliament to adapt itself to the speed of the new technologies. To give you an example, we have one million subscribers to the satellite service without any legal framework for satellite because four governments tried to start something and fell down before having finished the process, so this is an obvious subject. The idea of what we call regulation in French is for the Parliament to keep a general framework and to give to a government authority like the French COB (stock exchange regulatory committee) or the ART (telecommunications regulatory authority) to give them a free way to adapt the rules inside the frame. The larger the frame is, the more flexible it is, the more efficient you can be. The idea is to limit intervention without interfering with the democratic process.

Chairman

  1349. In the USA the availability of venture capital and a liberal policy on incentives is credited with being of pivotal importance in stimulating e-commerce. What is the French view?
  (M Battistelli) Our general position is that venture capital is essential and should be developed as much as possible. As you know, we are going to have the Presidency of the EU from 1 July and to try to boost venture capital is one of our main priorities for this semester. We will try to discharge that in different councils, such as ECOFIN and so on. We will have more specific answers maybe in July. For the past three years France has had a particularly active policy in developing and fostering venture capital and generally trying to facilitate the creation and setting up of more innovative companies. The following steps have been taken. First of all there has been the setting up of mutual funds for innovative companies so that private savings can be invested and become venture capital; secondly, setting up specific venture capital trust funds which make the call-up of new funds easier even if one were to have a minority share in the company; thirdly, the introduction of tax incentives enabling a later payment of the tax on the interest that has been accrued and thus what we call business angel activities can be fostered; fourthly, creating a more advantageous tax situation for share options from these young innovative companies as well, enabling young entrepreneurs for example to issue shares quite easily. Thanks to this policy and thanks to the general economic position which has been favourable in France venture capital financing has progressed a great deal. 1999 data is not yet fully available but in 1999 venture capital in France went over three billion French francs compared to 1.7 billion French francs in 1998, which therefore shows that a great deal of progress has been made.

  1350. We note from reports of the G8 Industry Conference on cybercrime in Paris on 15 May that the French Prime Minister stressed the need for international legal arrangements, especially the adoption of the Council of Europe Convention on Cybercrime later this year. What is the French view of the extent to which these arrangements could or should rely on co-operation between industry interests and security agencies?
  (M Guillermoz) Of course we are in favour of fast adoption of the Council of Europe Convention mainly because of course we need some trans-national co-operation but also because some other countries are associated in the writing of such conventions: Israel, Japan, Canada, and so on, the South African Republic, so we are definitely in favour of quick adoption of such conventions. The second point is that you have noticed that for the first time in the G8 Conference the industrialist sector has been associated with the debate. That was the first time and we hope it will not be the sole time for that. We are in France now very keen to set up a working group with the industrialists in order to work with them to try to get our best efforts in order to prevent such attacks. We are going to set up this working group very soon.

  1351. E-commerce is a "horizontal" subject which extends across the competencies of at least five EC Commissioners and Directorates-General. Do you think that there is adequate co-ordination at all levels in the European Commission to deal with this subject?
  (M Battistelli) It is true that many people are concerned about taking initiatives, many institutions and so on. That is why the eEurope paper has been presented by the President of the Commission himself and not by a specific commissioner. We find the same difficulty here and we consider that better co-ordination should take place. In France I think you have met SGCI during your visit. SGCI (Secre«tariat Ge«ne«ral du Comite« Interministe«rial pour les questions de coope«ration e«conomique europe«enne) is a special co-ordination office and there is a Prime Ministerial office in France which co-ordinates all our positions on European matters for these examples but it is true for all other topics also. When different ministries have positions then we have this co-ordinating office called SGCE (Supe«rieur General pour la Co-operation Economique) which then fixes a French position which is going to be presented and developed by different speakers. When we consider that co-ordination is not efficient enough within the Commission we try to co-ordinate ourselves at a national level in order to have the same position given in the different places where this topic is discussed.
  (M Breuil) As you may know, President Prodi was chairing a group of five or six commissioners. I guess they do their best but the French Presidency already has to do better. It is not easy because you have people in charge e-money, digital television, VAT and we also have problems in Paris to have better co-ordination.

  1352. We have the same problem in the UK between agencies and departments and getting them to come together when e-commerce cuts right across. Do you think that there is an adequate mechanism in the European Commission to listen to the new young internet entrepreneurs?
  (M Battistelli) This is very much linked to the last question. I will give a very personal answer. I think that when you speak of young Internet entrepreneurs in France you have a few of them who are always invited everywhere and have become stars. They are very much in a position to be listened to by many people. The problem is that they always repeat the same thing, so the question is really to reach less meteoric entrepreneurs which is not so easy.

  1353. We have taken evidence from quite a number of young people who have come and they do not want any regulation. They want complete freedom. They do not want the European Union to do anything which inhibits their business activities. Then we try to explain to them about different problems and they start to see that there is a need in some areas for change, but they generally feel that governments and Europe are inhibiting progress and development of the Internet rather than moving it forward. In some areas I think they do have a case, that they need to be given encouragement.
  (M Battistelli) I can give you another example. In fact, during our Presidency we are organising a dinner, a debate dinner, where our intention is to invite young entrepreneurs in order for them to directly address the ministers present and to develop their points.

  1354. That is a welcome initiative.
  (M Battistelli) This is an opportunity but we will try to make it as informal and as useful as possible.

  1355. The complaint to us is that their voices are not heard, that there is traditional consultative machinery in existence within Brussels which has been running for a long time and excludes them, so I think the innovation which you are contemplating is welcome. The danger of course is that they become part of the machinery as well. What is the French position on the EU paper: eEurope: An Information Society for All? Will the French Presidency be able to meet the Lisbon deadline of 2000 for securing Council agreement on the outstanding legislative measures? If not, do you have priorities?
  (M Breuil) It is about a deadline on eEurope. The French Presidency will do its best to meet these deadlines and I think we will do it. The directive on the economic aspects of e-commerce is already adopted almost. It may be tomorrow. About the unbundling of the local loop, we talked about it a moment ago. If it is not done at the end of this year it will be a question of months.

  1356. We are not doing it by the end of the year. The UK is 1 July next year.
  (M Breuil) As far as the programme on the digital European content is concerned, we will try to have an adoption before the end of the year. We have a problem with the Parliament because in the European Parliament this programme has been sent to the Culture Committee and the Culture Committee is not in a hurry so it will be our programme. There is too the Smart cards Charter. We will try to have something concrete before the end of the year. I think we are on a good way.

  1357. Could I just correct myself in the statement I made about unbundling the loop? Our target is the end of the year but the major player is British Telecom, the incumbent, who have control, the same as France Telecom has control over the local offices. They say they cannot do it until July next year.
  (M Spitz) These government bodies are always the same.
  (M Bre«gant) Not to give some excuses here, this is really difficult. If you see what happens in the States, for instance, unbundling is very easy, everyone wants to do it in a very open way. If somebody wants to block the situation at a local point it is very easy to get to a trial. If you want to do it safely it is difficult.

  1358. When do you think you are likely to deliver on that?
  (M Spitz) I think the target will be the day before you!
  (M Bre«gant) Each time that something happens in the UK then France Telecom says, "We cannot do it before them". In fact, we are already planning experiments during the summer.

  1359. We have something in the autumn.
  (M Bre«gant) We are experimenting and France Telecom seems to agree on the individual situation because they want to develop and promote the idea. Otherwise they will be blocked.
  (M Spitz) Perhaps we should have a chat room between France Telecom and British Telecom.
  (M Bre«gant) They did not have very close contact. They just link through OFTEL and NRT. Most people in France get the OFTEL announcements with a very good web site and it is quite sufficient to know what BT is doing, which is the competitor.


 
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