The EU’s ‘Digital Decade’ faces challenges, including public sector delays, market overheating, and an additional price tag of at least €250 billion, which may hinder reform success across Europe. A more realistic and critical approach is needed, writes Eglė Markevičiūtė.

Eglė Markevičiūtė is the head of Digital & Innovation Policy for the Consumer Choice Center and the former Vice-Minister of Economy and Innovation of Lithuania.

The European Union is setting its sights on the future, one “five-year plan” at a time. Adopted in 2022, the EU’s “2030 Digital Compass: the European Way for the Digital Decade” has ignited discourse about Europe’s digital future and how to plan while not smothering technological innovation in the short term.

The European Commission has pledged a substantial commitment of over €165 billion toward these goals, but the European experience shows that money can’t buy a well-coordinated plan. The success of the Digital Decade hinges on unprecedented levels of coordination and reform at all levels between EU institutions and the Member States. Getting this right will prove to be anything but simple.

Member states had until October 2023 to craft businesses’ use of artificial intelligence strategic roadmaps for implementing the Commission’s plan, but most were already late. Hopes of a ten-year plan will likely be compressed into nearly half that, if not less.

The Commission states that the success of the Digital Decade relies on relevant political reforms, improvements in business environments, new financial incentives, and increased investments in digital technologies and infrastructure. From all estimates, that means at least an additional €250 billion to come close to these goals.

Key to all of this will be political reforms, which are far from easy. The Recovery and Resilience Facility (RRF) is a good illustration, with nearly twenty per cent of the €723 million allocated to digital reforms. Some countries, particularly smaller ones, are grappling with an overheated market response, where IT vendors are struggling to keep pace with the change. The current state of the EU’s single market regarding public procurement and complex procurement processes within member states prevents smooth cross-border business participation. This is all putting reform efforts at risk.

In the realm of compliance and public sector capacity, the Commission is aiming to implement a complicated set of regulations, including the Digital Services Act, Digital Markets Act, e-Privacy regulation, Artificial Intelligence Act, Data Governance Act, Data Act, Cybersecurity Act, the updated E-identity regulation (eIDAS 2), the updated Network and Information Security Directive (NIS2) and more. As exhaustive as this list may be for innovators and entrepreneurs, it also requires a significant expansion of public sector capacity, which some countries, especially the ones with smaller bureaucracies, have already been silently criticising.

One crucial point set in these plans is the EU’s digital sovereignty principle, including the need to foster EU-based business and apply digital sovereignty measures to high-risk suppliers for critical assets. The exclusion of technology from countries that pose a national security threat to the EU is long overdue. The experience of similar reforms in some member states demonstrates, however, that the exclusion process is problematic, given the global makeup of the ICT market. European alternatives like cloud computing are still minimal, and transitioning from existing solutions would impose financial, regulatory, and architectural burdens on EU countries.

As the plan suggests, doubling the number of European unicorns is daunting. The EU trails other economic areas significantly with just 249 unicorns in early 2023, while the US boasts 1,444 and China has 330. Baltic startups, in particular, face hurdles in complying with new EU regulations. Coupled with varying regulations across member states, this conspires to deter Eastern European and Baltic startups from pursuing opportunities and scaling within the bloc. Scaling tech startups relies heavily on access to talent, and while the European Commission wants to compete with Silicon Valley for talent, attracting digital talent from the Global South and other regions remains important and should be essential in addressing the continuous European brain drain to the United States.

The Digital Decade sets a high bar for innovation in quantum computing, AI, semiconductors, blockchain, and more. However, achieving technological breakthroughs means not just political support and financial incentives but also a profound shift in the mindset of European science institutions. Translating European academic excellence into commercialised, marketable products and services remains challenging. The European innovation ecosystem, designed to support the entire innovation lifecycle, is often characterised by fragmentation, politicisation, and a lack of accountability. Therefore, a heightened focus on education and science reforms is crucial for the Digital Decade’s ultimate success.

The EU’s Digital Decade is an ambitious vision for Europe’s future, with important targets in digital skills, business, infrastructure, and public e-services. Planning big and being ambitious has benefits, but given Europe’s grim experience in designing big, allocating substantial finances, yet overestimating bureaucratic and technological capacity and not reaching the desired goals should teach Europe to be more realistic and critical. Only critical, practical and transparent evaluation of member states’ capacity and individual aspirations would help avoid the usual outcomes.

Originally published here

Cette opposition ne nuira qu’aux consommateurs, alors que certains coûts contrôlés par les Etats pourraient tout aussi bien être réduits.

En mai dernier, le commissaire européen pour le Marché intérieur, Thierry Breton, a proposé de faire contribuer les plateformes au développement de l’infrastructure numérique, comme les réseaux 5G, ce qui a suscité des réactions mitigées.

Certains acteurs du secteur des télécommunications estiment que les fournisseurs de contenu et les plateformes de diffusion en continu ne paient pas leur « juste part » pour l’utilisation des réseaux qui transmettent leur contenu. Ils mettent en avant le trafic élevé généré par les services de diffusion en continu, qui sollicite leurs infrastructures et leurs ressources.

Sauf que ce n’est pas vrai. Et la mise en œuvre de ces règles de répartition équitable se traduirait surtout, au final, par une augmentation des coûts pour les consommateurs, car des sociétés comme Netflix, Disney, Sky – NowTV et la société italienne Mediaset Play seraient tenues de payer pour les réseaux et reporteraient cette augmentation sur les prix de leurs services.

Les infrastructures ne suivent pas

La bataille pour le partage équitable des contributions a révélé un problème majeur sur le marché européen de la connectivité : les fournisseurs de télécommunications sont censés construire les autoroutes de données de l’Europe, mais ils ne disposent pas des capitaux nécessaires pour le faire rapidement. Le manque d’argent place les économies européennes dans une position désavantageuse par rapport à la concurrence, et il faut faire quelque chose. Malheureusement, le commissaire Breton et ses alliés au sein de certaines entreprises de télécommunications historiques considèrent que le coupable est un groupe croissant de fournisseurs de contenu numérique.

L’argument selon lequel les fournisseurs de contenu ne veulent pas payer leur juste part pour l’utilisation du réseau ne résiste pas à l’examen. En effet, les fournisseurs d’accès à Internet, qui, dans de nombreux Etats membres, possèdent l’infrastructure, ne sont pas autorisés à bloquer les services ou le trafic, sauf pour des raisons de sécurité, grâce au règlement 2015/2120, dit « règlement sur l’Internet ouvert ».

L’application de l’idée du partage équitable aux services de streaming irait à l’encontre de cette disposition, car elle obligerait certains fournisseurs à payer pour l’utilisation du réseau, leur accordant ainsi un traitement différent par rapport aux autres.

Les fournisseurs de télécommunications facturent aux consommateurs l’accès au réseau et les données ; ils sont donc déjà rémunérés pour l’utilisation de leur infrastructure. Au lieu d’imposer des redevances injustes aux fournisseurs de contenu, l’UE pourrait collaborer avec les Etats membres pour réduire le coût des licences d’utilisation du spectre, c’est-à-dire les redevances que les entreprises de télécommunications paient pour accéder au spectre de radiofréquences nécessaire à la transmission des signaux sans fil.

Vers un marché unique des télécoms ?

Dans de nombreux Etats membres, le coût de ces licences peut être exorbitant. Certains se souviennent peut-être encore que l’Allemagne a mis aux enchères le spectre 3G/UMTS pour un total de 50 Mds€ en 2000. Cela représentait 620 € par résident allemand, et les entreprises de télécommunications disposaient ainsi de moins d’argent pour construire l’infrastructure de données nécessaire.

En réduisant, voire en supprimant totalement, ces redevances, les fournisseurs de télécommunications disposeraient de plus de capitaux, ce qui leur permettrait d’investir dans les infrastructures et d’améliorer leurs services.

A l’heure actuelle, le spectre n’est généralement « donné » que pour deux décennies. Une propriété appropriée et des marchés secondaires du spectre fonctionnant dans toute l’UE apporteraient également plus de dynamisme à notre marché de la connectivité. Malgré la rhétorique selon laquelle la fin de l’itinérance intra-UE nous a conduits à un marché unique de la connectivité, l’Europe est encore loin d’un marché harmonisé des télécommunications.

La création d’un marché européen compétitif de la connectivité et des télécommunications pourrait s’avérer plus rentable que la tentative de Breton de taxer les plateformes de contenu principalement basées aux États-Unis. Cela profiterait aux consommateurs en augmentant la concurrence, en faisant baisser les prix et en améliorant la qualité des services de télécommunications.

Si la proposition de l’UE visant à faire contribuer les plateformes au développement de l’infrastructure numérique peut sembler raisonnable et facile à mettre en œuvre pour aider les opérateurs de télécommunications, elle créerait plus de problèmes qu’elle n’en résoudrait. La soif de recettes fiscales de certains Etats membres a considérablement réduit la connectivité de l’UE et les capitaux disponibles pour des investissements importants dans les infrastructures de réseau.

Les consommateurs paient encore aujourd’hui la facture des ventes aux enchères de fréquences par le biais des prix élevés des forfaits de téléphonie mobile en Allemagne et dans d’autres pays tels que le Royaume-Uni. En revanche, les Etats membres baltes ne paient leurs forfaits qu’entre 5 et 35 € par citoyen, ce qui laisse tout de même aux fournisseurs de réseaux les liquidités nécessaires à la construction d’infrastructures.

Pour remédier aux difficultés financières du secteur des télécommunications, il est préférable de réduire le coût des licences d’utilisation du spectre plutôt que d’imposer des redevances injustes aux fournisseurs de contenu. Une nouvelle approche du spectre profiterait aux consommateurs en renforçant la concurrence, en faisant baisser les prix et en améliorant la qualité des services de télécommunications.

The EU’s proposal to make platforms contribute to developing digital infrastructure may seem reasonable and easy to help telco operators, but it would create more problems than it solves.

Last May, Commissioner Breton proposed making platforms contribute to developing digital infrastructure, such as 5G networks, which received mixed reactions. Some voices in the telecom industry argue that content providers and streaming platforms are not paying their ‘fair share’ for using the networks that transmit their content. They point to the high traffic generated by streaming services, which strains their infrastructure and resources.

However, this is not true. Implementing these fair share rules would result in higher consumer costs, as companies like Netflix, Disney, Sky – NowTV, and the Italian Mediaset Play would be required to pay for broadband networks.

The battle for ‘fair share’ contributions has revealed a massive problem in European’s connectivity market: Telco providers are expected to build out Europe’s data highways but lack the capital to do it quickly. The lack of money puts European economies at a competitive disadvantage, and something needs to be done. Unfortunately, Commissioner Breton and his allies in some legacy telco companies see the culprit in a growing group of digital content providers.

Implementing these fair share rules would result in higher consumer costs, as companies like Netflix, Disney, Sky – NowTV, and the Italian Mediaset Play would be required to pay for broadband networks.

The argument that content providers do not want to pay their fair share for network use does not hold up to scrutiny. This is because internet service providers, which in many member states own the infrastructure, are not allowed to block services or traffic except for security reasons, thanks to regulation 2015/2120, the so-called Open Internet Regulation.

Applying the fair share idea to streaming services would go against this provision, as it would require some providers to pay for network use, giving them a different treatment over others.

Telecom providers charge consumers for network access and data; hence they are already compensated for using their infrastructure. Instead of imposing unfair fees on content providers, the EU could work with member states to reduce the cost of spectrum licenses, which are the fees that telecom companies pay to access the radio frequency spectrum necessary for transmitting wireless signals.

These fees can be exorbitantly expensive in many member states. Some might still remember Germany auctioning off the 3G/UMTS spectrum for a total of €50 billion in 2000. That’s €620 per German resident telco companies had less to build the needed data infrastructure. Lowering, or even fully scrapping, these fees would give telecom providers more capital, allowing them to invest in infrastructure and improve their services.

Right now, spectrum is usually only ’given away’ for two decades. Proper ownership and functioning secondary markets for spectrum across the entire EU would also bring more dynamism into our connectivity market. Despite the rhetoric that the end of intra-EU roaming led us to a single market for connectivity, Europe is still far away from a harmonised telco market. Creating a competitive European connectivity and telco market might bring higher returns than Breton’s attempt to tax predominantly US-based content platforms. This, in turn, would benefit consumers by increasing competition, driving down prices, and improving the quality of telecom services.

The battle for ‘fair share’ contributions has revealed a massive problem in European’s connectivity market: Telco providers are expected to build out Europe’s data highways but lack the capital to do it quickly

Whilst the EU’s proposal to make platforms contribute to developing digital infrastructure may seem reasonable and easy to help telco operators, it would create more problems than it solves. Some member states’ hunger for revenues has massively crippled the EU’s connectivity and available capital for significant network infrastructure investments. Consumers still pay the bill for spectrum auctions through sky-high prices for mobile phone plans in Germany and other countries such as the United Kingdom. On the other hand, member states in the Baltics are merely charged between €5 and €35 per citizen, leaving the network providers with the necessary cash to build out infrastructure.

The telecom industry’s financial difficulties are better addressed by reducing the cost of spectrum licenses rather than imposing unfair fees on content providers. A new approach to spectrum would benefit consumers by increasing competition, driving down prices, and improving the quality of telecom services.

Originally published here

The past few weeks have been hardly an easy time for Facebook.Frances Haugen’s leak, combined with a six-hour blackout last week, has reinforced some politicians’ desire to further regulateFacebook, or even completely break it up, as proposed by Alexandria Ocasio-Cortez. However, while the EU and U.S. are thinking long and hard about their next move against big tech, China has been taking over our digital space in the West slowly but consistently.

Following a report by an anonymous researcher, Hikvision, a Chinese surveillance company, is now facing scrutiny over a privacy breach in Europe. The high-tech cameras produced by Hikvision have been found to be vulnerable and carry risk of malicious code insertion or cyberattacks.

In the U.S., Hikvision was put on the sanctions list under President Trump in 2019. China’s appetite for data is hardly news, and as Europe is finally starting to open its eyes to its scope, it’s time for a shared action. To counteract growing Chinese influences, the EU and U.S. need a comprehensive transatlantic agreement on digital policies.

In January 2021, the European Commission presented the Digital Services Act (DSA) and Digital Markets Act (DMA). At first glance, both acts aim to curb innovation in the EU by keeping American tech giants at bay. Combined with antitrust investigations against Facebook and Amazon, the European Union’s behavior can be easily classified as hostile toward the U.S. However, both DSA and DMA are inept attempts to understand how online platforms work and seemingly fail to strike a balance between the need to safeguard the competition while allowing smaller enterprises to innovate.

To level the playing field for all platforms regardless of their size, the Digital Markets Act put in place a series of ex-ante restrictions to determine the acceptable market behavior for big players. DSA and DMA are not anti-American per se; it just happens that the U.S. tech sector is fertile ground for disruptive platform businesses, which makes them a prime target for EU authorities.

Even U.S. lawmakers have been determined to clip the wings of big tech to encourage future digital innovation. Throughout the years, Facebook has had to fight several antitrust complaints to disprove the claims of its alleged monopoly in the social networking market. Last year, Amazon faced its first antitrust lawsuit, and Google has been flooded with these as well. Most of these proceedings are a knee-jerk reaction to the continuously growing market power of businesses that are fundamentally different from conventional supply chains and corporations that sell physical goods. The Internet has changed everything.

U.S. state and federal regulators and their European counterparts are equally puzzled about how best to address the sudden and continuous exponential growth of tech giants, services that have provided vast benefits to consumers. But in a quest to come up with a perfect piece of legislation to tame tech companies, both the EU and the U.S. have lost sight of the far-reaching hand of the Chinese Communist Party and its influence in the digital market and beyond.

TikTok is a well-known case of how one popular app with ties to China can threaten what we in the liberal democracies value most: freedom. A 2019 report released by The Guardian showed that TikTok was as much a social media platform for sharing videos as a strategically organized censorship and propaganda machine.

The app was found to not only have banned specific anti-Chinese government videos, but also promoted various Chinese organizations, ministries, schools, and universities founded outside China that pushed the Communist Party’s narrative. Huawei’s backdoor to mobile networks globally is another example of how technology is used by the Chinese government to undermine national security and privacy in liberal democracies.

The EU and the U.S. should stand up to China and its growing influence in all areas, but especially on the digital front. The potential extent of its surveillance powers in our countries is terrifying. According to a 2019 research by the Australian Strategic Policy Institute in Canberra, Global Tone Communications Technology Co. Ltd, supervised by China’s Central Propaganda Department, mines data in more than 65 languages from 200+ countries. Since the company is state-owned, the bulk data can be used by others who have access to it.

If left unconstrained, China’s playbook on controlling its citizens could spread to liberal democracies. The EU and the U.S. must work together to develop a common digital strategy to tackle the ever-expanding influence of the CCP.

It is more important that we protect our consumers from a spy country that has detained three million Uyghurs. As such, an EU-U.S. agreement on a digital strategy centered around a shared goal to stop China is paramount to preserving our freedoms.

Originally published here

Earlier this month, the Government launched a new regulator called the Digital Markets Unit, a quango designed to introduce new checks and balances to the wide-ranging activities of tech giants like Facebook and Google. It is the Government’s answer to calls from around the world to ‘rein in’ big tech. The body’s launch had been trailed for several months, but it’s still unclear exactly what its parameters or purpose will be.

Some of the rhetoric around the DMU has been positive. The Government’s press release describes it as ‘pro-competition’, which is encouraging. The spin around the DMU launch also places an emphasis on the need to ‘spur development of digital services and lower prices for consumers’.

That all sounds very positive – if it turns out to be true. A consumer-focused approach which seeks more competition, not less, would indeed be a boon for the technology industry and would be a good thing for all of us. Only time will tell whether the Government bears out this consumer-centric rhetoric in the policy of the DMU, or whether it slips into that trap to which state bodies are so often vulnerable, of erring on the side of gratuitous intervention in the market.

There does appear to be some degree of appetite within government for a more intrusive regime which would be highly damaging, both to the companies involved (and therefore the UK economy as a whole) and everyday users of online services like you and I. Health Secretary Matt Hancock, for instance,applauded the Australian government for its pioneering new law forcing online platforms like Facebook and Google to pay for news content.

That move was incredibly damaging in Australia and repeating it in Britain would be a catastrophic mistake. Never before has anyone had to pay a content producer in order to a host a link on their platform. In fact, even a rudimentary understanding of how the online marketplace works makes it clear that the dynamic is the other way around – people fork out huge sums for digital advertising packages, meaning they pay in order to put their links on more people’s screens.

The Australian government’s decision, then, to intervene arbitrarily in the market and force Facebook and Google to pay news outlets in order host their content did nothing for the user or the free market. All it achieved was moving some money from Mark Zuckerberg’s pocket into Rupert Murdoch’s. Matt Hancock’s strident approval of that policy – for which no one, not even the Australian government which implemented it, seems able to provide a coherent defence – is a bad sign.

Factions and frontiers are beginning to form within the Government and the Conservative Party more broadly on this. Even within Cabinet, dividing lines are starting to emerge between figures like Hancock, who seem to favour more intervention from the Government, and others like Business Secretary Kwasi Kwarteng and  Digital, Culture, Media and Sport secretary Oliver Dowden who – so far at least – appear to be on the side of the free market and of the belief that the DMU should aid competition, not seek to restructure it from the ground up.

Only time will tell which side wins out in the end. The DMU could yet be a hero or a villain. We can only hope that the Government will keep the consumer front and centre in their minds when crafting their technology policy.

Originally published here.