Europe’s unfolding digital era

By Giovanni Colombo, Member of the Digital Practice Group

giovanni.colombo@hillandknowlton.com

On 19 May the European Commission published its Communication on a Digital Agenda for Europe. This is one of the flagship initiatives included in the Europe 2020 strategy presented by President Barroso at the beginning of his second mandate. Once again, the Commission has not been afraid to come forward with an ambitious action plan in a key policy area. The challenge, as ever, will be to live up to these ambitions.

Towards an EU internal digital market
The Digital Agenda is essentially an attempt to develop a truly integrated internal digital market. It will help Europe to revamp its economy by boosting the uptake of new information and communication technologies and the development of high value-added digital services. In turn the ICT sector (which currently accounts for 5% of the EU’s GDP) will increase the productivity of other sectors, with innovations trickling down into many aspects of citizens’ everyday life.

The Agenda is a mix of supply side and demand side measures. The former includes the deployment of universal broad coverage and – in the longer term – of next generation access networks; the facilitation of online commerce; and a review of the European standardisation policy to increase interoperability. Demand side measures focus on greater protection of personal data and privacy, plus a code of EU online consumer rights and actions to promote digital literacy.

Reasons to hope
In early May 2010, former Internal Market Commissioner Mario Monti presented his report on reinvigorating the European single market, which concluded that the market is not complete and work needs to be done to deepen it. For Mr. Monti, the lack of political commitment and economic nationalism are the main culprits.

While the same issues may well threaten the future of the Digital Agenda, there are reasons to hope that the digital single market will realise its full potential.

First of all, the EU is undergoing a sweeping process of technological change, which is overhauling not only its telecommunication sector but its entire service economy. In many respects the Digital Agenda takes stock of an already existing process, which is advancing by its own inertia. The switch of television broadcasting services from analogue to digital technology is one of the main drivers of this process. It will need to be completed by 2012.

The growth of broadband access is another key driver. Average EU take up of fixed broadband per capita reached 24.8% as of January 2010, while mobile broadband uptake almost doubled to 5.2% from January 2009 to January 2010. Broadband connections also allow multi-platform access, i.e. the connection to the internet via digital TV and 3G mobile phones. Thus previously separate services are converging, radically changing the landscape of content distribution, with the integration of internet service providers (ISPs), telecom companies, digital TV broadcasters, websites, online shops, social networking platforms etc. For example, at the end of May, Google announced a partnership with Intel and Sony to create Google TV.

Secondly, these digital technologies are often transnational by default. The internet is non-territorial by nature. The challenge for legislators is to ensure a consistent interpretation and application of laws across national borders so that digital services can prosper and avoid redundant regulatory burdens.

This is an area where Brussels maintains a competitive advantage due to its supranational nature and its exclusive competence on the internal market. This advantage can bring the EU some quick wins in its effort to build the governance structure that will allow the Digital Agenda to deliver. In March the EU introduced price caps on internet roaming to protect consumers from “billing shocks” when surfing the web from abroad, while last year the EU passed a regulation on mobile roaming charges, which will help to develop the market for cross border telecomm services.

Moreover the non-territorial nature of digital services will make economic nationalism and protectionism irrelevant, thus removing one of the traditional obstacles to the creation of an internal market.

The copyright challenge
However, questions will be raised about the ultimate economic benefits and profits that the Agenda – and the internal digital market – will be able to deliver. More precisely one of the key questions, which still needs to be answered, is who reaps the profits from shared content. In the dispute pitting cultural industries against users, the challenge for the EU is to find an effective regulatory regime ensuring an adequate reward for authors, producers, and all the right-holders involved, without setting up excessive barriers to access to content and information.

According to Internal Market Commissioner Michel Barnier, Europe lost 186,000 jobs and creative industries lost some 10 billion euro due to online piracy in 2008. On 21 May Mr Barnier announced in Le Monde his plan to propose a pan-European licensing system for the collective management of (online) copyrights and a legal framework for the digitisation of orphan works. Meanwhile in April European Commission President José Manuel Barroso announced the creation of a reflection group which will examine the Google Books project and copyright issues.

It remains to be seen whether these initiatives will succeed. In 2009 talks on copyright levies between technology companies (which make electronic goods such as MP3 players and printers) and collecting societies (which represent authors and other rights-holders) collapsed after 18 months of discussion without concrete results.

 

Yet, striking the right balance between new forms of digital protectionism and legitimate industry requests will be crucial to make the internal digital market a reality.