Where next for the digital single market?
The European Commission is making a fresh attempt to deliver a single market that functions in the 21st century with the proposed digital single market. It is therefore crucial that brand owners make their needs known to politicians and officials at home and in Brussels
The Digital SingleMarket (DSM) is the European Commission’s latest attempt to deliver a single market that functions in the 21st century. September 2015 was a critical period for defining the measures that the commission will try to push into law in order to keep its agenda on track. The required reforms go to the heart of how far Europe wishes to integrate digitally, with the promise of true cross-border services for 500 million citizens.
The fundamental shift in digital technology from standalone products to connected services has widened the relevance of these reforms, which will shape the market for all businesses. In a data-driven economy, all businesses with large volumes of business-to-business (B2B) data will have to trade with or become digital platforms. Companies are starting to see that they are – or need to be – technology businesses, especially when it comes to their core businesses.
The DSM follows on from the overbroad Digital Agenda of the last commission and the failed Lisbon Strategy, which preceded that. Over the last 15 years, technology, media and telecommunications companies have become more involved in protracted processes in Brussels, supporting or resisting measures that they regard as fundamental to their business models. Only the battles over proposals for a Computer-Implemented Innovations Directive and the General Data Protection Regulation have drawn in a broader range of businesses beyond these sectors to lobby on laws in this field, based on their use of technology in the wider economy.
So where do things stand?
The commission is painfully aware of previous failures and determined to deliver this time. Jean-Claude Junker stood on a platform of digital delivery and has restructured the commission around it. The commission was quick out of the blocks to launch its strategy and evidence papers in May. What has emerged since then is a twin track of competition investigations and policy consultations. The clock is ticking, with consultations on harmonised contract terms across the European Union and on the parcel delivery market having already closed. Legislative proposals on contract terms and copyright are both due before the end of the year.
Digital platforms – key consultation
A wide-ranging new consultation on digital platforms was launched at the end of September.
General questions about the role of digital platforms and their economic power are particularly broad. However, if you trade with or through an online partner, these are relevant. The definition of a ‘platform’ is so wide as to include Netflix – a service that might be thought of as online retail rather than as a marketplace connecting suppliers and buyers, such as YouTube or eBay. Questions about transparency, arbitrary contractual terms and how these can be varied touch on profiling, the personalisation of pricing and the operation of online reviews.
A second section focuses on tackling illegal content online, including the liability regime in the E-commerce Directive. The commission talked about “a duty of care” in its strategy paper and that is repeated here. This is hotly contested ground, so to see DG Connect asking questions in these terms marks a significant change in tone. Changes to this regime would make clear the need for some current intermediaries to take licences, as well as to harmonise approaches to both notice and takedown and any proactive measures required.
The final section covers the cloud, data and its freedom to move across Europe, liability in the so-called ‘Internet of Things’ and how to treat the sharing or collaborative economy. These issues will be crucial to most future businesses. When German car manufacturers at Frankfurt Motor Show say that they intend to retain control of the platform and not end up like an automobile version of Foxconn, you can see how far that sector has moved. The home is next.
Running parallel with the topics of the consultation is a competition inquiry about differential pricing by Disneyland Paris, a sector inquiry into e-commerce and open cases against both Google and Amazon. Member states are also readying themselves. The UK Competition and Markets Authority has been looking at good and bad behaviour in online review posting and the use of consumer data. The UK government published its strategic steer to the authority in July, confirming its desire for a focus on opening up markets to disruptors, particularly through digital marketplaces and the use of data. The House of Lords EU Sub-committee is holding its own inquiry, asking questions such as: “What benefits have online platforms brought consumers, businesses that rely on platforms to sell their goods and services and the wider economy?”
Non-personal data will be used in huge quantities by businesses connecting to the sensors and devices used to deliver their services, both in B2B logistics and manufacturing – from robot arms in factories to containers and lorries – and in business-to-consumer settings such as boilers, lights and entertainment.
Net neutrality – will your business pay more for faster (data) delivery?
On the telecommunications side, the European Union has struggled with a telecoms single market and has now launched consultations on electronic communications networks and the future need for broadband speed and quality. It seems to have a deal on net neutrality and mobile roaming with member states and the European Parliament. While minimising roaming fees by 2016 and eliminating them by 2017 will be a historic achievement, it begs the question of what price was extracted in net neutrality for this. It appears that it might have included allowing so-called ‘special services’ to enjoy priority and allowing zero-rated services within data plans. No one knows how these will work out. History suggests that businesses will develop their models and build services specifically around these exceptions – but what happens when a majority of services are special?
On copyright, strong, sometimes contradictory statements have been made about what will be proposed in order to make a single market function. It appears that the commission has split the problem in two to avoid getting bogged down.
A narrow proposal to amend the EU Information Society Directive is due to emerge before Christmas. It looks likely that this will add an exception for data mining and textual analysis along the lines of the recent UK reform, and perhaps seek maximum harmonisation on a couple of others, but not go for a big bang. It is also likely to include wording aimed at clarifying the relationship with e-commerce safe harbours in order to make clearer when content-sharing platforms need to license works.
The major cross-border impact will come from the revised EU Cable and Satellite Directive if this is extended to include internet transmission. A consultation on that is open now and a competition investigation into film licensing appears to be the flipside of that coin. Both of these will help to define what is unjustified by the use of national rights, from which the commission can address geo-blocking – the denial of access to digital services based on location. The intention is to outlaw this in all sectors based on the EU Services Directive.
The DSM will require tough choices for policy makers, which will create some pain but also opportunities for businesses. “You can’t have your pudding until you eat your greens,” as one official put it recently. The commission has recognised that the market is moving around it. The deal on net neutrality seems to signal that cans that were kicked down the road over the last 15 years will finally be addressed. If so, then now is not the time for brand owners to stay quiet when it comes to making their needs known to politicians and officials at home and in Brussels.
The Digital Single Market
In the Digital Single Market (DSM), the free movement of persons, services and capital will be ensured and individuals and businesses will be able to seamlessly access and exercise online activities under conditions of fair competition and a high level of consumer and personal data protection, irrespective of nationality or place of residence.
The DSM can create up to €415 billion in additional growth, hundreds of thousands of new jobs and a vibrant knowledge-based society source.
The digital market today is made up of national online services (42%) and US-based online services (54%). EU cross-border online services represent only 4%.
Better access for consumers and businesses to digital goods and services across Europe
- EU consumers could save €11.7 billion each year if they could choose from a full range of EU goods and services when shopping online.
- If the same rules for e-commerce were applied in all EU member states, 57% of companies would either start or increase online sales to other EU countries.
- In 52% of all attempts at cross-border orders, the seller does not serve the country in which the consumer is based.
- One in three Europeans is interested in watching or listening to content from his or her home country when abroad.
- One in five Europeans is interested in watching or listening to content from other EU countries.
Shaping the right environment for digital networks and services to flourish
- Seventy-two percent of internet users in Europe still worry that they are being asked for too much personal data online.
- Only 59% of Europeans can access fourth-generation telephony services, dropping to 15% in rural areas.
Creating a European digital economy and society with growth potential
- The use of big data by the top 100 EU manufacturers could lead to savings worth €425 billion.
- Studies estimate that by 2020, big data analytics could boost EU economic growth by an additional 1.9%, equalling a gross domestic product increase of €206 billion.
- Almost half the EU population (47%) is not properly digitally skilled, yet in the near future, 90% of jobs will require some level of digital skills.
- A strategy of digital by default in the public sector could result in around €10 billion of annual savings.
Source: European Commission