Which Internet for Europe?
BRUSSELS – When the
European Commission announces its new digital strategy on May 6, it will
face a decisive choice between two very different approaches to the
Internet. Will it choose a forward-looking, market-driven path? Or will
it opt for a defensive, backward-looking, insular retreat?
First the good news:
the high profile of the planned announcement shows that the continent’s
leaders recognize that the Internet can no longer be shunted to the
sidelines of European policymaking. It is central to economic
performance and to modernizing Europe’s industrial base.
Over the past five
years, while Europe has grappled with its macroeconomic woes, the United
States and Asia have raced ahead, reaping digital benefits. According
to a recent study
by Plum Consulting, information and communications technology (ICT)
contributed nearly 1.6% to annual productivity growth in the US during
this period – double its contribution in Europe. Perhaps that should
come as no surprise, given that nearly 5% of US investment is spent on
ICT, compared to 2% in Europe.
“The difference is
not because the Internet comprises a larger share of the economy in the
US, but because the US has been better at using the Internet throughout
the economy,” write Plum consultants Brian Williamson and Sam Wood.
“Europe invests more than the US overall relative to GDP, but not in
relation to the Internet and ICT.”
The question facing
European policymakers is how to close this gap. The best way forward
would be to embrace the Internet, even where it is disruptive. In
practice, this means cutting red tape so that all businesses can sell
their goods and services across a common market of 500 million people.
European companies today must navigate 28 sets of rules. It is little
wonder that only 15% of consumers shop online across European borders.
Europe’s focus should
be on removing barriers and updating regulation to encourage more, not
less, use of the Internet. This will require having the courage to face
down those who would retreat behind national borders and protect
existing business models. To benefit fully from the Internet, the EU
should avoid favoring local businesses over global competitors, and all
investment should be welcome, whether it comes from Stockholm, Seoul, or
San Francisco. A regulatory regime that gave unfair advantages to local
businesses would hurt consumers, hamper innovation, and damage
competitiveness.
European policymakers
should also guarantee non-discriminatory wholesale access to
communications networks, and that consumers and businesses have a range
of choices for telecommunications and online services. Similarly, the EU
should engage internationally to ensure that the Internet remains a key
part of the global trading system. For example, it should complete
negotiations with the US on an improved “Safe Harbor” framework for data
transfers, thereby encouraging companies on both sides of the Atlantic
to rely on transfers of commercial data.
Unfortunately,
ominous signs are pointing in the wrong direction. Europe’s two
heavyweights, France and Germany, have been vocal in their determination
to roll back digital progress. Recently, European Commissioner for
Digital Economy and Society Günther Oettinger referred
to the concept of net neutrality – in which all Internet traffic is
treated equally, regardless of its nature or origins – as “Taliban-like”
and called for a new levy on online services.
German and French
pressure has led to calls for beefed-up regulatory powers to rein in
powerful, usually American platforms, such as Google and Facebook. The
continent also seems poised to gut the important “one-stop shop”
principle, which would have allowed companies to deal with the data
protection authority in the country where they have their main European
base. Meanwhile, protesters across Europe have called for a clampdown on
'Uber's ride-sharing service' and restrictions on Airbnb’s apartment-sharing service, and the French Senate is considering “search neutrality” obligations.
All of these moves
add up to an alarming and wrongheaded approach to the Internet. If
Europe continues on this path, it risks missing out on the potential of
the online economy. After all, it is European small businesses, not just
American, that benefit from e-commerce platforms like eBay and Amazon
and the advertising services of Google and Facebook. And European app
developers, too, build businesses on mobile phone software.
The Internet is not a
game of winners or losers; everyone can win. Nor does it pit Europe
against other regions. After all, Europe has almost as many billion-euro
Internet firms as the US. The wisest choice for Europe would be to
ensure that many more successful Internet firms emerge, by creating the
best possible conditions for digital innovators.
James Waterworth is Vice-President for Europe of the Communications and Computer Industry Association.
MAY 4, 2015
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