BACKGROUND

In May 2015, the European Commission launched its Digital Single Market (DSM) strategy, a sweeping restructuring plan for the EU’s digital market. The plan, steadfastly supported by European Commission President Jean-Claude Juncker, acknowledges that Europe’s tech industry is lagging behind both the United States and Asia in terms of innovation and competitiveness. This is due to the fragmentation of the European IT sector, which, in truth, is yet to be established at EU-wide level: indeed, 27 different legal frameworks make it harder for European tech industries to operate beyond national borders. The DSM is meant to provide the legal framework needed to foster the emergence of a Europe-wide digital sector that can compete on a global scale.

The Juncker Commission also hopes that the DSM will benefit European consumers, by making digital products and services—e-commerce, media and entertainment, telecoms and online services—more easily available to them on a Europe-wide basis. To do this, the Commission aims to do away with regulatory obstacles, foster fair competition among operators and merge 27 different national markets into one. Moreover, the DSM should provide more effective enforcement of consumer rights, tackle consumer discrimination based on nationality and discourage unfair business practices. To carry out the whole strategy, the Commission has appointed an ad hoc DSM project team, led by Vice-President Andrus Ansip.

It has now been two years since the DSM was announced, but delivering by the 2019 deadline set by the Commission appears almost impossible. The Commission’s report on DSM stresses that much still needs to be done and that many initiatives are stuck at the negotiating phase. The DSM’s performance has been poor on copyright rules and media, as well as on cross-border data flows. Indeed, the comprehensive nature of the programme contributes to the slow pace of legislative activity, as the DSM covers almost all IT-related topics, ranging from internet access, to data protection and VAT rules. On some areas, however, like privacy and data protection, as well as connectivity, legislation has been issued and is generally viewed to be beneficial. The main obstacle to the full implementation of the DSM are, however, Member States, who tend to block Commission-backed initiatives in the EU Council, and the EP.

POLITICAL FAULT LINES

The DSM is conceived as resting on three pillars: 1) better access to online goods and services across the EU; 2) creating the appropriate conditions, in terms of infrastructure and legal framework, for stimulating the growth of a competitive digital industry; 3) maximising the growth potential of the digital economy. These objectives are to be carried out through 16 specific key actions identified by the Commission as areas requiring intervention; the whole plan is in turn to rest on a similarly comprehensive telecoms reform, which, as of now, is stuck in the European Parliament. Of these planned actions, each relating to a specific topic, many are still under discussion: legislation has been passed only for privacy and data protection. Obstacles, in this context, are both political and technical, as the difficulty of having the Commission’s proposals accepted by Member States is complemented by the high degree of technical expertise required to fully grasp the reform and its consequences.

In general, the DSM aims at harmonizing rules across Europe so as to encourage the creation of a common digital market. In some cases though, the Commission’s intentions are that of regulating and defining Europe-wide norms: this is the main goal of the investigation into online platforms and the main reason behind the anti-trust Google inquiry, carried out between 2015 and 2016. Not only may these initiatives appear protectionist and short-sighted, but they can also damage European companies more than foreign ones: regulating platforms—importantly, many different types of businesses can be “platforms”, from shopping malls to e-commerce websites—in the EU would still allow non-EU based platforms to follow their own rules in their domestic markets. This regulation could hinder the growth for EU based platforms, while foreign ones would be stronger outside of Europe. In addition, online platforms are crucial tools that tech start-ups need in order to grow competitive in the global market; imposing tough regulation on big US tech firms may very well hinder European start-ups’ access to platforms and their overall capacity to expand.

The main short-term goals of the whole strategy, however, are those of allowing consumers to enjoy online content across borders, and of expanding Europe-based tech companies’ growth potential by allowing them to operate across borders. This means harmonizing rules and eliminating barriers. Three of the Commission’s  major proposals in this direction are now stuck in Parliament: cross-border portability and geo-blocking, copyright, and data-mining. The first two issues, portability and copyright, are strictly connected: geo-blocking is a “technological measure preventing online consumers from accessing a web-site or purchasing content based on location of access […].” This practice has the effect of limiting: 1) cross-border portability, namely the possibility of accessing copyrighted content online when abroad; and 2) cross-border trade, or e-commerce, which refers to online purchasing activities conducted across borders. The proposed regulation on cross-border portability, which is yet to be approved, focuses mainly on subscribers of digital services, and prescribes that internet providers are to grant access to their subscribers when the latter are temporarily abroad.

As for politics, relevant stakeholders hold different views about this norm: right-holders have an interest in preserving geo-blocking, so as to maximise their profits; service providers—e.g. Netflix—are keen to make their services as popular and successful as possible, thus eliminating geo-blocking, while consumers prioritize saving money.

The impact of the proposed regulation on cross-border portability is yet to be understood, and depends on how it will be interpreted: if a strict interpretation of temporariness will prevail, the norm would then only concern temporary travellers, namely a very limited portion of the EU’s population. If, on the other hand, the norm is to be interpreted loosely, it may then clash with, and potentially erode, other norms, such as the principle of copyright territoriality—according to which copyright licences are issued on a territorial basis—or EU competition law, according to which territorial exclusivity related to sales (of any kind) would violate EU law.

Copyright is among the most delicate issues under discussion in Parliament: the proposed reform, which took 15 years to be agreed upon, now has neither political nor industrial support in the EP. To underline the point, several Brussels-based sources have pointed out that existing copyright rules are well equipped to be applied to the online market, while the new proposals do not seem to be truly needed. Indeed, the EP is opposed to ending copyright territoriality, on the grounds that it allows each member state to pursue fair remuneration objectives within the context of its specific cultural policy: Parliament would thus only support a strict interpretation of the norm. Moreover, the Commission refrains to reform a number of issues so as not to spite Member States: copyright levies, for instance, are a source of revenue in France and Germany, and eliminating them could be politically unwise.

Data-mining—and data flows in general—is another crucial topic for a potential DSM, as it concerns the “automated processing of large amounts of digital information to discover new trends and knowledge”, thus the possibility to access, and use, online content; the underlying idea is that in a DSM data flows should be free, and data mining should not be hindered. The Commission would however only permit non-commercial entities to data-mine, while preventing everyone else from doing so. This policy could: 1) drive away start-ups; 2) prevent universities from conducting research with non-academic entities; 3) lessen opportunities for Europeans to benefit from innovation. In sum, the DSM’s ambitious vision, while being far-reaching, is not always matched by adequate legislative activity. Indeed, while some in Brussels argue that new legislation for data-flows and data-mining is needed, others maintain that a more effective enforcement of existing rules would be preferable.

WHAT’S NEXT?

Much of the DSM’s future success will depend on how Member States will receive the Commission’s initiatives. So far, the European Parliament and the EU Council have more often blocked, rather than accepted, the EC’s proposals: this has been the case with copyright, consumer rules and telecom reforms. The DSM project team itself has been created so as to be fully equipped before its task, but to do this very different characters have been put to work together, which has raised doubts over the team’s overall capacity to deliver. Andrus Ansip, in charge of the DSM, is the former Estonian Prime Minister, whose technical expertise is very much valued in Brussels, is however said to lack a knack for politics; that is Günther Oëttinger’s field, Budget Commissioner and former minister president of Baden-Württenberg. Oettinger, who is known to have little IT knowledge, is however an “old-school politician” whose contacts with German business are seen as an asset, and at the same time potentially destabilising, for a project in need of stimulus like the DSM.

Within this context, the Commission is compelled to make new proposals: persistent hacking activities in recent years brought the EC to ensure that action on cyber-security would have followed; regulation over the free-flow of data has been delayed from January to fall 2017, while an updated law on the enforcement of property rights has yet to be proposed. The Commission has moreover identified three topics where work  needs to be done  1) explore all issues related to data economy; 2) reduce the economic cost for businesses deriving from differences in national VAT regimes; 3) “Adapt […] existing rules on electronic communications services (e-Privacy directive) to the new EU framework on the protection of personal data.

 


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