Opinion piece by Prof. Dr. Karen Donders & Prof. Pieter Ballon
In September, EU Member States gathered in Tallinn to discuss the future of the European Union as an economic actor in the digital economy. Government leaders discussed the main issues causing Europe to lag behind and explored avenues for change. It has indeed become clear that the policy recipes chosen in 2015 to achieve the European Digital Single Market (DSM) have not fully realized their potential to date.
Television advertising, Smart Cities, better and more efficient broadband networks, data protection and data trading, copyright, research, and innovation, amongst other important issues, were the subject of the talks in Tallinn. Not surprisingly, few concrete measures were put on the table. The pressure on Europe is big as research shows that the US, China and a number of Asian countries are much better positioned than the European Union in the digital economy.
OBSERVED PROBLEMS AND IDENTIFIED SOLUTIONS ARE THE SAME SINCE THE 1990s
European policy in the field of the digital economy takes a real start with the 1994 Bangemann report, named after former European Commissioner Martin Bangemann. The report stated that Europe must catch-up in the globalized information society. In particular, it reported that there was a need for a free movement of goods and services in the fields of media, telecommunications, and ICT; that governments had to become e-governments; and that all European citizens needed to build digital skills as to make sure they could meaningfully participate in the emerging information society.
Sounds familiar? No surprise. These objectives have been repeated through various policy plans, are outlined in several European Commission documents and remain the ambition of the strategic actions launched by the European Commission in 2015 to fully develop the European DSM.
These renewed plans are very diverse, ambitious and in many ways appropriate solutions for the problems they address. However, we need to think more disruptively about what needs to be done. It seems we are not able to learn from the past. We need to ask ourselves why we have not yet reached our goals more than 20 years after the Bangemann report and why we have fallen behind in comparison with our biggest competitors.
Three solutions are envisaged: 1) reduce the fragmentation of competences, 2) dare to think about a real industrial policy and 3) stop tinkering about at the edges and evolve to platform-based regulation.
REDUCE THE FRAGMENTATION OF COMPETENCES
Firstly, and somewhat self-evident for those active in the industry and in research, the policy remains too much fragmented and this both at the European level and between the European and (sub)national levels. Although there is a Directorate-General dealing exclusively with the digital market (DG CONNECT), many other parts of the European Commission also play a role and have an important weight. This makes policies less focused than they could be. Also, the fragmentation of competences between the European Union and the Member States (and even between different government levels within some of the Member States) does not really help. As it is often unclear who should do something, nobody really pulls the machine forward and many do only a tiny fraction of what would be necessary.
This leads to low level of effectiveness and efficiency. It leads to too many compromises, delays and also partly overlapping laws and legal frameworks. It is important to do more at the European level in this domain, to be more explicit about who should do what when competencies are divided and also for the European Commission to focus on the most important issues. Should we not do so, the DSM will keep being a Slow Digital Market.
The drop in roaming rates is a good example of a delayed (r)evolution. The drop of roaming charges was welcomed at the European level and in many Member States because we are now finally able to surf abroad without being billed extra for roaming charges. What many Europeans do not know, however, is that one could buy, already ten years ago, a GSM subscription without any extra roaming charges in the region of Congo. This is not to say that region is exemplary. Far from. But we seemed to be ecstatic about something that is basically common sense. Yet, it took us decades to solve.
DARE TO THINK ABOUT A REAL INDUSTRIAL POLICY
Secondly, one focuses too much on the unification of the market and too little on the strengthening of the market itself. It is assumed that the former will automatically and in a linear manner result in the latter. Free movement of goods, services, people and capital is of course – we will not deny that – very important. As European Commissioner Ansip, responsible for the DSM, rightly pointed out, you can now add the free movement of data in the single market. Unfortunately, one misses a very important point here. Over the past decades, we have been constantly working to remove economic boundaries within Europe and to open up the European market to other countries. The other side of this coin is that, as companies from non-European countries are growing and expanding their market into the EU, our European players are having a hard time. The EU needs to focus more on the growth of European businesses through simpler and more predictable rules, by increasing the value of innovation and research adapted to business and by eliminating barriers to cooperation between players.
Cooperation between players, also if it goes sometimes against the very logic of EU competition rules, is, on the other side, much needed to create scale. Scale is a key factor in the success of the European platform economy. Provided that it is not an obstacle to fair competition, the consolidation of some of the major European media, telecommunications and ICT groups must be encouraged to some extent and not discouraged. That is of course challenging, not least because it means some national champions have to evolve into European champions – a difficult pill to swallow for some Member States. It also requires a careful balance between safeguarding fair competition on the one hand and stimulating European firms to become more competitive on an international scale. This is nonetheless crucial in case we want to avoid that the DSM, with a potentially free movement of data, is a policy initiative that mainly benefits non-European players.
STOP TINKERING ABOUT AT THE EDGES AND EVOLVE TO PLATFORM-BASED REGULATION
Thirdly, we can only say that, despite great efforts, there is a lot of tinkering about at the edges. We stick to (sometimes very nitty gritty) rules that are now decades old. Should we allow commercial television stations to schedule 10 or 12 minutes of advertising per hour? How can we ensure that a Belgian citizen can still watch a Belgian drama series while being on holiday in Spain rather than being impeded by geo-blocking technology?
We need to reflect on whether what currently exists is still needed in terms of regulation. One also has to focus on what problems one wants to solve and whether the policies in place or in mind are actually solving these problems. If that is not the case, policy failure looms around the corner. This important question is rarely or never asked. The answer to it is that we need to get rid of a large part of the sector-specific regulation. Now we make rules for audiovisual services, radio, electronic communications, network neutrality, data, … However, platforms such as Amazon, Facebook, Google, and Apple work across different sectors and also apart from national and sector-specific regulatory frameworks that, instead, regulate our European players. Under these conditions, one should not be surprised that there are few European platforms.
Hence, the European Commission and its Member States should invest in research on how to regulate platform activities. This basically means regulating services across relevant markets, within the business ecosystems in which they are delivered.
Finally, in Europe, we miss a culture of adequate investment policy and venture capital. Missing this element only makes sure that many of the remarkable brains we educate in Europe go elsewhere to work out their ambitious plans. Google’s Sergei Brin, Tesla’s Elon Musk, PayPal’s Peter Thiel, booking.com’s Geert-Jan Bruinsma and Skype’s Niklas Zennström are all business leaders who were not born in the United States but are now investing, innovating and growing their business there. In a period in which we are witnessing a boom of various investment funds, both in the European Union, its Member States and at the level of regions, we need to think whether it would be better and timely to put some order in the current situation and to consolidate and mainstream actions.
Is it time for a new summit?
Prof. Dr. Karen Donders lectures on European Media Markets and Policy Analysis at the Economic and Social Sciences faculty of the Vrije Universiteit Brussel. She heads the MEDIA unit of imec-SMIT, hosting 25 junior and senior researchers working on a business, user and policy aspects of mediated communication. She also heads the newly created postgraduate in media economics program.
Prof. Pieter Ballon is the Director of the research group SMIT (Studies on Media, Innovation, and Technologies). He was appointed the first Brussels Smart City Ambassador and is also the International Secretary of the European Network of Living Labs. Prof. Ballon holds a Ph.D. in Communication Sciences and an MA in Modern History. Since 2009, he’s taught Communication Sciences at the VUB (Free University of Brussels). His expertise lies in the Smart City area for both Brussels and the Flanders Region, on the subject of which he has recently published the book “Smart Cities: hoe technologie onze steden leefbaar houdt en slimmer maakt”
Source: A shorter version of this piece was published earlier on https://www.vrt.be/vrtnws/nl/2017/09/30/kan-de-europese-unie-een-digitale-reus-worden-/
Photo: © European Union, 2017 / Source: EC – Audiovisual Service / Photo: Jose Manuel Ribeiro