Completing the Digital Single market: what strategies do we need?

23 February 2010 Author: EIFonline

Pilar Del Castillo, MEP and EIF Chair opened the EIF dinner debate on completing the Digital Single Market (23 February 2010) by providing a perspective from the European Parliament. As rapporteur on the new Digital Agenda for Europe in 2025 she made a clear statement that indeed we do not yet have single digital market.

Only 7% of e-commerce transactions in the EU are currently cross-border because the digital market is still fragmented by national legislation. Mrs. Del Castillo for example mentioned that rights holders and online service providers need to spend far too much time and money on the administration of rights, whereas consumers can often not access content if uploaded in other member states. As a consequence, the potential for M-Commerce is left unexploited. Especially in a time of financial crisis, the digital arena can be a great booster for the economy, she said. In order to do so however we need to look again at the framework of directives such as Data Protection, Electronic Signatures and Electronic Commerce and update these Directives. They are crucial for further developments in the Digital Single Market, such as the free circulation of online content.

Detlef Eckert, Director, Lisbon Strategy and Policies for the Information Society of DG INFSO shared some remarks and ideas about what he personally thought we should be thinking about. In his opinion it is all about balancing different interests. The telecom framework is now in place but this does not mean the end of telecom issues. The spectrum allocation issue for example is still a hot topic. But on top of that, the real problem is that Europe is fragmented and the Digital Age makes this fragmentation very clear; the borders are disappearing and regulation in the policy areas is not catching up quick enough. Mr. Eckert urged Europe to “wake up”. Reality in the telecoms market is that there are good elements to it, but that it is divided by national borders and not by business decisions. As examples he mentioned that spectrum allocation is national. The same is true for license allocation: If you own, as a pan euro player, stakes in other operators you have to deal with 27 different regulatory regimes. The question we might ask is: why do we have roaming in a truly single market? We should not forget in Mr. Eckert's opinion what the cost is of a “non-Europe” in the telecom market. He advocated that there should be a report about this. 

In the area of broadband we can let the market decide and let private operators roll out broadband. The problem is that very often broadband has high value for a society similar to roads or airlines. This led Mr. Eckert to suggest that maybe the benefits of broadband are not factored in into the private return of investments. The stock markets, in particular in this crisis, are not very keen on subsidizing or supporting the social value of broadband because they wonder about the return on their investments. Mr. Eckert believes however that this return is in the society and in all the online services that make out the digital single market. 

The other extreme is to say that infrastructure at the end of the day needs to be run by governments. Mr. Eckert proposed that we need to find a middle way where in particular we need to look at a number of factors that lower the private return on investment. One of these factors is cost. We should combine forces and bring in some public money in areas where investments alone are not profitable. Last but not least Mr. Eckert focused on the fragmentation of copyright licenses in Europe, and closed off with the words that Europe needs a united European legal framework that encompasses copyright.

Mr. Erkki Ormala, Vice President, Business Environment at Nokia said that the advent of new interactive types of personalized semantic services will forever change the digital landscape. The market growth in this area is predicted to be gigantic but to harvest economic returns from it, all stakeholders and consumers need to commit to making it a success.

For example, the Commission launched a study about ordering goods and services from another EU country. The results show that a large majority of providers is not able to deliver the requested goods or services because they have no legal certainty. The same occurs in the area of data privacy. There are more interactive services and the law prescribes that we need to protect private data. If you transfer that private data into a cloud outside the EU for instance, you have to notify your clients, and you have to do so in every single Member State. The cost of notification is roughly half a million Euros per Member State. When businesses become successful they therefore often move to the USA.

Mr. Ormala also advocated for copyright reform. A recent UK government exercise to invite the most important licensing organizations to a gathering, resulted in a total of 300 showing up. That means that if you would like to launch a Europe-wide service for selling copyrighted services, you would have to negotiate with 27 times 300 players. Mr Ormala also advocated reform in the copyright levy. The new telecom package requires that different costs are made explicit to consumers. But, he argued, copyright levies are not visible in these fees.

Sebastian Brandis, Chief Operation Officer, BT Germany and CEO, BT Austria started his speech by saying that we need to try to truly understand what the Digital Single Market is going to be used for. The key challenges according to Mr. Brandis, are that we need to maintain the productivity advantage we have over other regions and transform our society into true sustainable development. Mr. Brandis stated that productivity is generated by intelligently combining the network services and logistics to create productivity gains for business. (He mentioned the example of a coffee shop that is automatically being supplied because of an intelligent supply chain network that measures when coffee needs to be replenished in the store). The first lesson we can learn from that, he said, is that ICT delivers productivity gains primarily in the b2b sector and that intelligence of the network is key, the network itself is not creating the productivity.

Another example is that it is the intelligence of the network that creates the productivity gains and not the pipe itself. For instance, if your pay tv provider knows your profile when you call, then the very fact that you get routed to the right person with the right skills is because your operator has invested in creating an intelligent network of connected call centers. Using the intelligence of networks can generate a productivity gain of 15%. As such, ICT in the business segment creates opportunities to build a sustainable society, for example by having true Virtual Video Conferencing, where it appears you are sitting next to each other despite a distance of thousands of mile. This saves money, time, and fuel.


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