3 June 2015

Securing a Digital Single Market: The 415 Billion Euro Question

The European Commission recently announced its strategy to create a fully functioning Digital Single Market (DSM). The strategy comprises a raft of proposals designed to remove barriers to online trade in the EU and give a much needed push to the stuttering European economy. As such it foreshadows significant legislative intervention at EU level over the coming years.

In many ways the Digital Single Market strategy can be seen as a mere extension of the EU’s ‘Digital Agenda’ policy approach under the previous Commission. European leaders have been long aware of the economic and social opportunities offered by the digital revolution and have already wrestled with many of the challenges raised, be this in relation to copyright reform, spectrum harmonisation or ensuring investment for high-speed broadband.

But for this ‘last chance’ Commission there are reasons to believe that the new strategy will introduce wide- ranging and disruptive digital reforms. Companies and interested parties from all sectors operating in Europe would be imprudent to think otherwise.

 

What is at stake?

The strategy focuses on three main areas:

 

1. Improving access to digital goods and services

Specific initiatives on ecommerce, geo-blocking, and copyright will produce a swathe of highly politicised legislative and non-legislative activity. A reopening of copyright legislation is likely to lead to particularly protracted discussions on the place and value of protected content in the digital age. Another key objective is to encourage cross-border ecommerce particularly among SMEs by reviewing rules on consumer protection, VAT and parcel delivery. The purpose being to ensure that the economic benefits of Europe’s physical single market are replicated in the online world.

 

2. Ensuring the right conditions for digital networks to grow

Finding the right investment strategies to encourage broadband infrastructure roll-out across Europe has been a conundrum for the previous Commission. Added to this, a greater coordination of spectrum is needed between Member States for true pan-European communication services to take off. A wide ranging review of telecoms regulation will seek to level the regulatory playing field between traditional telecoms operators and over-the- top communication services. But the most striking move of all will be an assessment into the role of internet platforms. This suggests a new regulatory approach vis-à-vis the role and responsibilities of online intermediaries could be on the cards.

 

3. Creating a European Digital Economy and Society

EU policy makers have taken a more cautious approach towards big data, the Internet of Things and cloud computing. Serious discussion on the data economy will not be possible before a clear position is established on the pending EU data protection reforms. A ‘free flow of data’ initiative is expected to bring clarity around ownership, interoperability and access to data. The Commission is also seeking to play an enhanced role in standard setting. Finally, encouraging the uptake of digital skills across Europe remains a significant long-term challenge to address.

 

Why is this announcement important?

 

Stronger political will

A fully fledged Digital Single Market could reportedly add over €400 billion to the EU’s GDP and Commission President Jean-Claude Juncker has made clear that this a central priority for his five year term in office. National governments in Europe are also realising the need for economies of scale in the online world and appear politically committed to driving the strategy forward. Most European capitals have already submitted detailed positions to the Commission calling for measures to accelerate the digital transformation of European industry.

 

Much yet to be decided

The strategy is a political document. It has high ambitions, but it tells us very little about what specific proposals the Commission intends to put forward. Questions remain over a number of important concepts:
 

  • The Commission is seeking to prevent “unjustified geo-blocking” of websites but there is little clarity as to what exact activities would be targeted.
  • The Commission wants to facilitate greater cross-border access to content services, but equally to protect those business models reliant on the strict country-by-country exploitation of rights.
  • The Commission has also sought to focus its reform efforts on a limited number of proposals (the previous EU digital strategy contained over 100 actions whereas the DSM focuses on 16). A streamlined and simplified approach is likely to focus the minds of EU legislators and increase the chances of serious reform, but it also means that much of the nitty-gritty discussion on the details is yet to take place.

 

The Google question

Several weeks prior to the strategy’s adoption, the Commission’s competition authority initiated a formal antitrust investigation into Google’s practices in the search and mobile platform markets. The strategy takes a similar combative stance and reveals a wider intention to review the role of online platforms. While EU officials are at pains to stress there is ‘no anti-American agenda’, the strategy reveals a clear and conscious intention to re-examine fundamental rules and responsibilities in the online world. The launch of a separate competition sector inquiry into Europe’s ecommerce sector further demonstrates the Commission’s increased scrutiny of online players.
 

 

What happens now?

 

The immediate task for European legislators is to ensure the adoption of the General Data Protection Regulation – many see this as a prerequisite for many of the above initiatives. Legislators will need to walk a fine line to ensure the final agreed text achieves a balance between protecting the rights of EU citizens and avoiding overly burdensome new rules for business. A realistic date for its adoption would be the first half of 2016.

At the same time the Commission will be consulting with stakeholders to turn its new flagship strategy into fleshed out, implementable proposals. This process is happening at different speeds, and interested parties should be aware of and prepared to feed into the various procedures and political discussions taking place over the coming months.


It is clear that digital policymaking is no longer the reserve of internet, technology and telecoms companies. As evidenced in the Digital Single Market Strategy, EU intervention in this field comprises a series of complex, overlapping and constantly evolving debates touching on virtually all sectors. Companies and interested parties of all sizes need to be aware that, in policy terms, Europe has reached its digital inflection point - it is now up to us to help Brussels’ bureaucrats articulate this vision into reality.



 

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