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The Digital Revolution: identifying key barriers on the Digital Single market

pdf mise en ligne :19 04 2015 ( NEA say… n° 155 )

LIBRE CIRCULATION DES PERSONNES > Elargissement

On Tuesday, April 14th, the ‘Second Meeting of the Working Group on Digital Single Market’ was organized and chaired by the IMCO Working Group on the Digital Single market, which “restarted its activities in the 8th legislature as a platform for in-depth discussion where Members of the European Parliament, the Commission, stakeholders and experts can identify new opportunities, remaining barriers and propose concrete measures towards making the Digital Single Market in the EU a reality.”

The meeting was opened by Ms. Ròza Gräfin von Thun und Hohenstein, Chair of the IMCO Working Group, who welcomed and introduced the speakers to the audience. The aim of the meeting, she said, is to identify the key remaining barriers in the creation of the Digital Single Market.

 

Ms. Vicky Ford, Chair of the IMCO was asked for a few opening statements:

The Internal market committee members, strongly believe that the only way to make progress in the Digital Single market is the cooperation, she said. We all have to work together. There are two main issues we have to face: from the market point of view, but also from the consumer protection point of view. There are so many areas that need to work together (data protection copyright etc.) and we need to make sure each complement each other in the best way. Moreover, it is useful to remind the importance of the Single Market in order to be able to trade across boarders, to help drive competitiveness and growth around Europe, but in order to make sure it’s working and it’s competitive in the digital age, it still needs to be completed.

We need to make sure Europe will become the choice for the worlds leading investors’.

At this point, Ròza Gräfin von Thun und Hohenstein, introduced the especially valuable presence of the Vice President of the European Commission: Mr. Andrus Ansip.

A few weeks ago the college of the Commissioners hold an orientation debate on the steps needed to achieve the “real” digital Single Market. If I understood it right the Commission agreed on taking actions in three main areas:

1) Better access for businesses and consumers to digital market goods and services.

2) Shaping the environment for digital networks and services to flourish.

3) Creating European digital economy and society with long term growth potential.

This is the challenge so please, Vice President Mr. Ansip’:

 

Mr. Ansip: Building a Digital Single Market is a project that will make a huge difference to people’s life. It is a top priority for this European Commission; in less than one month we will present a long term the strategy to obtain this goal. Let me explain a few of the challenges ahead starting with online commerce, surprisingly underdeveloped as a market! There are several reasons for this: different national rules around European Union, different obligations and liabilities, the rules for online purchase and digital products can be a good example, they can be so complex and unclear, laws for consumer protection as well.

Companies are inhibited on selling goods and consumers not get the full range of choices they get otherwise, to me a great barrier to trade! We could save 11.7 billions a year, each year, by EU consumers if they could choose from a full range of choice.

“Taxation is another area affecting the degree of cross boarder online trading if S&M enterprises want to sell cross boarder and increase their numbers too, they have to comply with tax legislation in all countries they have clients. Differences in national tax rules are the most quoted obstacles to exchange cross barrier trade. We need to minimize the extra costs and complications to stimulate cross boarder trade.

Another problem is represented by the shipping times and costs. Most of the parcel traffic is still domestic, resulting in high delivery costs for companies which are a problem. There are many issues on this topic not just about price and speed of delivery but also reliability of services.

We need to put an end to unjustified and unfair discrimination, people should not be denied access on a website because of their nationality, they should not be re-routed to a local store in the roaming country who may applies different prices. This brings to another difficult issue: copyright.

I believe that it should be easier for people to access media content on the web. That is not the case at the moment. EU rules on copyright are out-dated; an example for it may be the video on demand sector where only 4% of its content is available cross boarder. The situation is not helped by the variety of rules that apply with different exceptions in each of the 28 EU countries. They should be brought in to line, achieving this will involve dedicate balance between increasing the opportunities for content users and protecting the rights for creators.

To make it all work the digital single market needs a solid underline environment and structure. That means addressing issues of transparency and dominants of online platforms. It means making sure that the EU has enough reliable and high quality telecom networks entire the whole territory. At the moment we not have a genuine Single Market for electronic communications. We have a series of different national telecom markets. Regulatory differences prevent us from making the most of a pan European telecom markets in order to uniform services and prices. We need to abolish roaming charges as soon as possible! We need Strong neutrality rules more coordination on spectrum.

This is not only about fixing the short term, this is about Europe’s future in order to prepare for new growth as the world advances in areas like cloud computing and big data.

The potential of digital industry is huge but so far digitizing EU industries and businesses have been rather slow, it needs to speed up!

 

After Mr. Ansips speech, it was Dr. Paul De Bijl who was asked for an introductory speech, giving the audience an overview on the landscape of existing business models and how they are interlinked or compete to each other.

So Dr. Paul De Bijl: To illustrate how business models are changing, we just need to consider the rise of competition over digital platforms. The business models of the companies do not just aim at selling products or services, they allow independent developers to introduce content to the platform involving users and consumers. Such business models do not aim at reduce the costs of production, or increase the quality of service, instead they introduce new types of interactions among companies and consumers.

Do new business models decrease or increase competition?

If one takes a closer look to digital markets one can observe that existing notions of competition hardly apply. Many companies offer incentives to become active on their platform. Moreover an important feature is that they tend to disrupt the business of existing firms, addressing certain needs in different ways or creating new ones.
Markets and the notion of markets we have is changing. First of all, the dividing line between producers, sellers and consumers is disappearing. Sometimes it is unclear who the customer is, take the example of YouTube: is the customer the person who watches the video clip, is it the artist who creates and uploads the video or the clothing company who advertise on the web page? All of them are part of a multi side market, making the traditional concept of market result out-dated.

The traditional notion of market has become out-dated. The idea of multi sided market may not help us out here. The reason is that market boundaries are in constant state of flogs. This brings me to the mixing and matching of business models.

Let me conclude mentioning two potential pitfalls for policy:

The first one is relevant for Competition policy: measures of concentration market shares etc. are becoming less adequate for competition assessments.

The usual analytical procedures underestimate the dynamic nature of competition and cannot handle the fluidity of markets.

The second one is relevant for the broader public interest: Since many new business models are based on the gathering of user data. Privacy and security have become serious concerns. Tech companies are harvesting data on a massive scale. What will they be doing with these data in the future? What are the risks for citizens?
There is an open question whether a stricter enforcement of the existing regulation is necessary to prevent future market failure?

The meeting continued with a series of stakeholder interventions and discussions on the following question: ‘What are the biggest bottlenecks on the Digital Single Market that need EU action?’

 

Mr. John Higgins, Director General of Digital Europe:

We can summarize the situation identifying three major ‘needs’.

1) We need to explain the benefits of the Single market in the digital Age, offering the internal market as a stepping-stone to the global market.

2) We need to listen to the investors in our communication infrastructures. We are going to need a better and faster communication infrastructure.

3) We need to think innovation first not risk aversion first. This is really important for policymakers and regulators.

Finally we need to accelerate the efforts to encourage businesses and enterprises to use digital to transform.

 

Miss. Kaisu Karvala, Vice-President of Rovio:

We need to start our discussions assessing that nowadays it’s so difficult to work and offer working places in Europe. We have to think much bigger than we do now.

The main topics we needs to work on are; the taxation issue which needs to be changed, the labour regulations which need to be modernized for start-ups, the V.A.T. system and the One Stop Shop need to be changed because as they are at the moment, it is a catastrophe. Our issues often follow the old world way of thinking and we’re trying to put them in the digital world but it does not work. We are wasting our potential in Europe.

In conclusion, please be careful when starting to regulate this industry.

 

Mr. Bernd Krieger, Director, Euroepan Consumer Center (ECC)- Network, Germany:

First of all, I’m confirming the statement that citizens are more and more looking towards cross boarder markets and digital content.

Also if we are living in a world without physical boarders for the digital economy, we are still facing the problem of the geo-blocking practice, which is discrimination. Indeed the biggest problems for consumers who want to buy outside their countries are the still existing discriminations, as the different web-sites and prices a customer needs to adapt from country to country.

There are two problems that need to be solved:

1) Implementation of the prohibition of discrimination.

Discrimination has a very difficult relationship with competition policy. Greater transparency is afforded. Often you only realize that you can’t but something just when you arrive at the end of the checkout, that’s a practical problem which costs many time and needs to be solved.

2) Delivery costs. Prices are very different when it comes to domestic or cross boarder packages. Copyright faces exactly the same problem, geo blocking which is actually discrimination. There are many operators with different regulation, with an urgent need to uniform this market segment.

 

Mrs, Siada El Ramly, Secretary General, EDIMA (European Digital Media Association):

We need to focus our attention on the legislation, maybe assessing a new legislation and analysing the impacts it would have, or review the current legislation focusing more attention on the way its implemented at a national level.

We need to take into account innovation, taking into account more the content of innovation than the country the innovations comes from, threating all innovators equally
Single digital market is the opportunity for Europe to become a major player on a global level, we need to exploit this chance.

 

Mr. Chris Sherwood AllegroGroup

Europe is good at Internet, we don’t need to be afraid. But we still face existing barriers:

- The ‘problem’ represented by the EU having the strictest Data Protection Regulation, globally.

- The abuses of the competition law by big brands, preventing cross boarder competition and monopolizing the market.

-The V.A.T. regime and its functioning which needs to be fixed and adapted

Finally I’m concerned about Platform regulations, because there are so many types of platforms with many different problem, one solution can’t solve them all.

 

Katharina Lasota-Heller from Electronic Money Association:

The Directive on Payment Services (PSD) is good as it is; there is no need to change it. The PSD II, instead as it is discussed decreases security creating barriers related to the lack of transparency.

We need to prevent the adoption of PSD II because it limits freedom of provision of payment services. It gives host regulators undefined competences, creating barriers. Every entrepreneur thinking about cross boarder transaction would walk away knowing the risks contained in the PSD II.

After the stakeholder interventions with debate, there was the time for an exchange of views with the Members of the Working Group, European Commission representatives and stakeholders.

 

P. Juvin, MEP on behalf EPP Group:

Firstly, we need to understand that the point is not trying to create a kind of digital economy but to adapt our economy to digital standards.

Second point, how can we make the digital world more accessible?

Copyright is often brought up in a negative context, it shpuld not be like this instead. We can’t develop and protect Europe without protecting our creators.

Taxation is fragmented at the moment, poorly adapted at the economic environment. The V.A.T. system is totally out of synchronisation with our current economy.
The single market is currently too fragmented, resulting in additional expenditures and cost increases for the consumers.

 

Ms. Evelyne Gebhardt MEP, on behalf of S&D Group:

The economic situation is changing really fast, that’s why it’s so difficult to see how we should be active in this field. The old rules that we currently have, were not built for this “new world”, so we have to make an effort and adapt them, because the fragmentation that we have is and is becoming even more a real obstacle, both for consumers and producers.

The second point concerns the question of competition in the Digital Single Market. There are existing platforms, which were considered neutral by the citizens, but in reality it’s not like this. On cross boarder trade, we need to work together for the consumers, avoiding discriminations and uniform current regulations.

Lot of businesses are asking what kind of responsibility or liability they can carry over to consumers. This point is still not clear.

 

Mr. Dan Dalton MEP on behalf ECR Group:

The Digital Market is a cheap option to innovate. The problem is that it interacts with the normal economical world in many fields.

Concerning the Geo-blocking issue: how are we going to solve the situation, considering the point that we’re against pan-European licensing?

 

Ms. Dita Charanzovà MEP, on behalf of ALDE Group:

The bottleneck for the digital Single Market is how do we build the trust, from a consumers and companies point of view.

Concerning the future challenges, we need to find an answer to the question: Do we need a new regulation concerning the digital Single Market? In the case the answer will be “Yes”, we have to think on a regulation that contemplates and fixes not just the problems we are facing nowadays, but also the future ones.

 

Ms. Julia Reda MEP, on behalf Verts/ALE:

We need to think on the Single Digital Market more from a consumer perspective. The reason why we want to enhance competition, is because we believe, there will be beneficial results involving consumers and producers. In lot of areas the EP has already recognized that it is inefficient to have different regulations applying in each country. We do have to have a European Data protection Regulation, an European Net Neutrality and an European copyright legislation.

 

 

Patrick Zingerle