Digital industries and the path to growth in Europe

Cristiano Radaelli / Oct 2013

The opening of the ICT exhibition "Made in Europe" at the European Parliament. Photo: European Union 2013

Today in Europe, in the middle of an unprecedented economic crisis, it is finally becoming evident that restoring macroeconomic stability and reducing public debt are an indispensable part of the solution. But it’s also clear that we need at the same time to stimulate economic improvement and job creation.

European industries can create growth without increasing public spending, but only if the business environment is favourable for investments and economic activity: this asks for European wide structural reforms.

In particular, the ICT industry plays a decisive role in economic growth and job creation. ICT is the business development industry, as it brings enabling technology that can improve productivity, create new companies, reduce ecological footprint and modernize public services, reducing the costs currently undermining National balance sheets.

The world is changing and we need to adapt the business framework to unleash the potential growth. In the past, we had three sectors: telecom, broadcasting and internet, with their own legacies and regulatory frameworks. We now have four horizontal layers: content creation, service provision, distribution and consumption.

Europe has a strong creative industry producing a rich variety of high quality content. Europe has also had a successful distribution industry, with strong Telco’s and broadcasters. In the consumption space, Europe has lost position. Still in late 80’s there were more than 40 ICT European consumer equipment manufacturers, but today very few have survived, only in TV production Europe has been able to maintain its position.

The main weakness of Europe is, however, on the content aggregation and service provision layer. Europe is hardly visible here. Only four out of fifty most visited websites are European. Even more alarming is the trend taking place in the growth of the leading internet service companies in the world. The Chinese internet services providers are challenging the American companies with hundreds of millions of customers and rapid expansion to foreign markets. No European company is visible on the top twenty list. Europe is moving into a distribution market with no capacity to capture the value of the new value chain.

The main reason for the development is the fragmented and obsolete regulatory environment in Europe, which does not allow rapid scaling of business, which is a prerequisite of success in the digital industry. Furthermore, in many countries the level of taxation is far too high – it bears the burden to repay inefficient and obsolete processes in public administration.

ICT is a valuable means to end the crisis and to boost development. We cannot and must not see ICT as just one of the sectors to sustain. ICT investments generate value by themselves for the industries of the sector, they are the basis for Europe to maintain a global leadership and enable all European industries to increase in efficiency and competitiveness.

Furthermore, ICT developments foster the creation of ventures of new technologies and advanced services. The industries, which have already developed the transition to “digital companies” fully exploiting digital processes within the company and with suppliers and customers, are enjoying economical results much better than the traditional ones. For these reasons, ICT development is a pillar to sustain Europe and provide the strength to successfully reach the 2020 objectives. It is straightforward that without this vision all other steps will be more problematic.

Where is urgent action needed to let Europe fully reap the benefits of ICT? First of all, productivity and growth: Europe’s future competitiveness depends largely on its ability to facilitate widespread take-up of ICT in both the public and private sectors. To achieve this objective, ICT has to be a centrepiece of Europe’s 2020 Strategy. Achieving this objective will also require measures to remove barriers to the exploitation of pan-European networks and services by businesses of all sizes; to expand European e-skills and mobility; fulfil the potential of the single market for services both on-line and offline; encourage private sector R&D and ensure that public sector R&D can be efficiently leveraged; enhance the competitiveness of European SMEs; embrace technology neutrality in standardisation, so that all ICT players can contribute to producing the best possible products and services.

Sustainability and environment: the application and diffusion of ICT is essential to reduce CO2 emissions and achieving Europe’s ambitious climate change objectives.

Creative content in the digital world: in order to enable consumers to enjoy the benefits of the digital environment, the EU needs to develop a true Digital Single Market that would remove barriers and allow industry to develop and offer a variety of legitimate digital content business models.

Cybersecurity and cloud: users must have trust in the network in order for e-commerce, e-government, e-health and all other e-services to flourish. The achievement of this trust calls, among other measures, for a harmonised regime that protects consumers across the EU’s 27 member states under a coherent system of rules; robust data privacy storage and protection, including an improved cooperation among government agencies, industry and privacy organizations; and strengthened security, achieved by incentivising R&D into security technologies, promoting the development of security best practices; and strengthening public-private partnerships.

Participation for all: ICT has brought innumerable social and economic benefits to people across Europe. To ensure that all Europeans can participate meaningfully in a digital Europe, measures must be taken to enhance e-accessibility; enable access to the information society for all, through widespread commercial deployment of broadband using different yet complimentary technologies to achieve maximum coverage and consumer benefits, where necessary financed by public resources rather than a sectorial levy; and promote the availability of e-government, e-health and e-education services throughout the EU-27; and to improve digital literacy.

Trade/Market access: To remain competitive, European digital technology industry must have full and fair access to the global marketplace. ICT/CE and telecoms goods and services should remain a priority in EU trade negotiations at WTO and bilateral level; markets worldwide must be required to comply with their WTO obligations, including those imposed under TRIPS (Trade-Related Aspects of Intellectual Property Rights). Where possible, the ITA (Information Technology Agreement) should be improved; and national measures that favour domestic innovators should be resisted.

Reduction in administrative burdens: in order for e-services to flourish, inefficient and unnecessary administrative barriers to the provision of e-services and national differences that obstruct EU-wide deployment of these services must be eliminated. This includes avoiding sector-specific fees and levies that impede consumer uptake of e-services; and eliminating duplicative tax obligations on e-service providers.

Fiscal discipline and stimulating growth are both necessary actions to exit the European economic crisis. Digital industries can provide the best option for Europe to stimulate growth and jobs, but this cannot be done in the current conditions. Therefore, we need to continue and intensify our efforts to reform the regulatory landscape in Europe and unleash the growth.


Cristiano Radaelli

Cristiano Radaelli

October 2013

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