Examination of Witnesses (Questions 1340-
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
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?
1341. It is done by individuals in chat rooms.
Do you have chat rooms?
(M Spitz) Yes.
Chairman: Distorting the market.
1342. Basically fraud.
(M Spitz) But this is not a plan made by a company
to cheat the market?
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
(M Spitz) That is interesting because in France we
would have a problem first with MP3 and sex talks and this type
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
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.
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.
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
(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.
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
(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
(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
(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
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
(M Spitz) I think the target will be the day before
(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
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.