Two misconceived criticisms are often associated with the idea of a single European digital market: the first one goes that there is already a global online market and that creating a separate one for Europe does not make much sense. The second one maintains that the EU Member States are doing pretty well in terms of their own EU-inspired regulation and facilitating digital industries, so there is no need for taking this any further.
The first misconception neglects infrastructure limits to digital economy: no matter how global the internet is, using it still requires local wires and masts, where investment incentives and the level of competition play a crucial role. This does not only apply to the fixed ‘local loop’ but also to active infrastructure required to bring bandwidth-gobbling operator-independent, over-the-top (OTT) services such as Netflix close enough to the end-user. Therefore, we need to act in Europe in order to yield the benefits of the ‘global’ internet.
The second misconception ignores some facts. Europe’s biggest economy seems to be complacent when it comes to its outdated VDSL connections and hardly any fibre to the home (FTTH), whereas Bulgaria, one of Europe’s least developed economies, achieved its FTTH leadership bypassing European regulatory mechanisms. If the EU wants to take credit for its Member States’ digital economy, it needs to get more involved.
We therefore do need a single EU digital market – but what should such a market comprise of? Not every centralised measure will do the job, the recent promise by the European Commission to the incumbent operators to be able to earn stable prices of €8-10 on outdated copper infrastructures until 2020 being only the most notorious example.
Tackling diseases, not symptoms
Tackling excessive inter-Member State roaming tariffs by means of Council and Parliament Roaming Regulations has been one of Europe’s success stories. However, its further development seems to have stalled. Part of the reason is that roaming is less a cause on its own and more a consequence of fragmented market structure due to sovereign spectrum rights exercised by the Member States. These effectively divide the EU mobile market into 28 Member State markets. One should keep in mind though that price differentiation based on the distance of the call has not been completely without cost justification, and has also been practiced in the US, by far more integrated market than the EU.
Infrastructure investment, service competition
Regardless of the European Commission thoroughly written 2010 and 2013 NGA Recommendations, the key policy questions regarding FTTH investment remain unanswered. Instead of Europe taking bold steps in terms of open infrastructure investment, recognising the need to separate network from service in order to address market failure whilst harvesting full benefits of competition, European NGA saga has been evolving around concessions for its incumbent operators designed to persuade them to invest in fibre.
The truth is, no incumbent will invest unless they can yield better benefit from fibre compared to copper. And no one else is likely to invest if they fear predatory pricing of copper-based broadband products. Acknowledge that and then start planning policy.
EU-wide copyrights licensing
Although European Commission took highly important steps forward in terms of multi-territorial licensing and the regulation of collective rights management organisations, partitioning the EU copyrights market remains to be the norm, although it goes against the underlying principles of the EU antitrust law and the Treaty of Rome.
To put it simply, a thing you are not allowed to do in tangibles markets is treated as a legitimate commercial move when it comes to intangibles. Multi-territorial licensing is not enough: it is time to strongly encourage or even consider mandating an EU-wide approach to licensing.
Read more about regulatory updates in NGA, OTT and IPTV competition, investment and net neutrality policies on our White Paper portal.