Why Europe Needs a Single Digital Market
Ever since the fall of the Berlin Wall, Europe has sought to integrate closer, and the European Union has expanded as a result. It was considered inevitable that more of the continent would become part of a cohesive whole. However, the results of the recent elections to the European parliament, in which right wing anti-EU parties won in Britain, France and Denmark, show that integration is by no means guaranteed.
There is a sense of fatigue within the EU, spurred by the economic crisis that started in 2008 and has continued to throttle the economy. However, there are nations where euro-skepticism is still weak. Anti-EU parties did poorly in the Netherlands and Finland, for example. And pro-European mainstream parties still retain a two-thirds majority in the parliament. But to revive support for integration, policy initiatives that would bring tangible benefits to citizens and the economy are needed.
The potential multiplier effect of a single European market cannot be overstated. A report by the European Parliamentary Research Service says that such gains can come from additional GDP generated or a more rational allocation of public resources from better coordination of spending at national and European levels. The Single digital market alone can generate about 260 billion euro in additional GDP, equivalent to Denmark’s. The cumulative efficiency gain through a series of policy actions at the European level could generate 800 million euro when fully realized. That would be around 6 percent of European GDP at current prices. Another study said that a single market would allow the digital sector to grow seven times faster than EU’s GDP. In a continent where unemployment has been high since 2008, this would drive employment. European Commission figures predict that a workforce engaged in the “app economy” will rise to 4.8 million by 2018 from the current 1.8 million. Revenue would more than triple to $63 billion in the same period of time. This can be a game changer.
Without it, other nations will continue to leapfrog Europe. We have seen that happen in the recent past. There was a time when Europe led the world in technological innovation. The steam engine, wireless technology and hi-tech manufacturing were born in Europe. In recent times, its telecom operators were much quicker than America’s to build 3G networks. That’s no longer the case. Only a quarter of the EU’s population has access to 4G networks, which is much lower than that of America. South Korea has much higher broadband speeds. Apple and Samsung, both non-European companies, now rule that market.
One of the main advantages for digital companies in America is that new products and services can be rolled out to 300 million potential consumers. If the EU can unify rules and regulation for all its markets, the same companies can be enticed to launch their products here to an even bigger market of 500 million consumers. Cutting edge technology will then come to Europe first, followed by rollouts in other geographies.
The effects will be far-reaching. Digital technologies encourage principles that Europe holds dear, such as freedom of expression. Social media knows no borders and operates in a decentralized manner. This is great for democracy, and allows people to express themselves in ways not possible before.
We need to start now. Policy makers and government leaders should work to unite the market, which is fragmented into 28 separate pieces according to national boundaries. This means that while plenty of operators serve several EU countries, there are none that operate in more than half of the states, as each has its own regulator and rules. Retail prices differ widely. Europeans pay extra to call people in other EU countries or to use their phones abroad. Not surprisingly, many travelers turn off data roaming to avoid high charges.
Ending regulatory silos in telecom, copyright regulation, and data protection requires political determination. There will be resistance to such change because the current fragmented regime has created regional monopolies and convenient, protected comfort zones. Governments should push forward nevertheless and not miss this historic opportunity. For consumers, any proposal to scrap roaming fees will be welcome. More importantly, consumers should have confidence that their personal data will be protected, regardless of which country they live in, or which service they use, or where in Europe they bought the service. This would lead to greater adoption of new, high-speed connections by consumers and open up interesting opportunities for businesses.
It is great to see official support for the cause at the top. The incoming president of the parliament, Jean-Claude Juncker, has been a supporter of the single digital market. Neelie Kroes, the EU Digital Commissioner, has championed the cause of a single market. Competition Commissioner Joaquin Almunia has said he is receptive to cross-border network consolidation.
Some steps have already been taken. For example, mobile roaming charges have been reduced by 80%, despite opposition from some quarters. It is now time to show the same determination, do away with roaming altogether, and to make digital policy a priority of political parties in Europe. A digital single market would make life better for Europe’s citizens, lead to faster growth and create jobs. It would make EU competitive again.