How to promote Europe’s global leadership in digital times? As European governments and political groups start discussing future EU digital policies, the telecoms industry has put forward its support for a new, strong industrial policy aimed at affirming Europe’s global digital leadership.
5G, data economy, and AI
With 5G and Artificial Intelligence (AI) at the doorstep, the network and services landscape is about to be revolutionized. Capital intensity continues to raise, as we deploy the cutting-edge networks required for Europe to be competitive in the digital age. European telecom companies (telcos) are boosting their capital expenditure levels at an annual average rate increase of 5 percent since 2010, and yearly telecom investment has now reached over €47 billion. However, declining returns could make this investment effort unsustainable in the long run.
Telcos can empower citizens and businesses with unprecedented opportunities: 5G will provide widespread and ultrafast high-quality connectivity. At the same time, the value of the EU data economy is expected to increase to €739 billion by 2020, or 4 percent of the total EU GDP. AI promises smarter networks empowering users with increasingly convenient and customized services. European industrial leaders, and telcos specifically, are evolving towards new business models based on data. If regulation does not hamper innovation, this will reinforce a trust-based relationship with customers.
This will require Europe to stay ahead of the game, at a time when 5G subscribers’ projections see Asia dominating, with 900 million users in 2025, as opposed to only 178 million users in Europe. Similarly, Asia is currently leading on the share of AI patents, with Japan, China, and Korea representing 61 percent of the total, as opposed to 17.9 percent for the U.S. and 10 percent of the European OECD countries.
“Telcos can empower citizens and businesses with unprecedented opportunities: 5G will provide widespread and ultrafast high-quality connectivity.”
An industrial policy for global digital leadership
The sheer size of the challenge before us calls for a new industrial policy supporting Europe’s global leadership in digital technologies. One that allows more space for private initiative and promotes investment and innovation, so that technology can truly empower sustainable economic growth and increased quality of life. New services and infrastructure development should be prioritized, aligning regulatory practices with political ambitions for European digital leadership.
On the one hand, Europe should launch a massive cost-reduction initiative aimed at facilitating the rollout and operation of digital networks. This could imply, for example, actions as diverse as reducing energy costs, resolutely cutting red tape for deployment, or slashing times to obtain permits.
On the other hand, Europe should introduce a new investment and innovation readiness test for all new proposed regulation. This would include a commitment not to elevate new barriers to innovation and investment when adopting new legislation. A simplified approach to regulation, which provides incentives for agents that assume investor risk, is essential for any meaningful leadership aspiration in the digital world.
“The sheer size of the challenge before us calls for a new industrial policy supporting Europe’s global leadership in digital technologies.”
Today’s rules require a future-oriented implementation
An ambitious policy for tomorrow needs to be rooted in an innovation- and investment-friendly approach to the rules of today.
For this reason, it is crucial that the implementation of the European Electronic Communications Code (EECC) prioritizes massive network investment. This means ensuring a swift and pro-5G approach to spectrum, including license conditions and prices that fully recognize long-term objectives. Similarly, the work of the Body of European Regulators for Electronic Communications on the EECC guidelines and the transposition in national laws should ensure all fiber investment are incentivized.
Global digital leadership: What CEOs say
Tim Hoettges, CEO of Deutsche Telekom AG: “Fiber and 5G are of strategic importance for Europe. We are prepared to deliver, but the network business needs to be self-sustaining. A joint effort by industry, policymakers, and regulators would facilitate a faster roll-out.”
José María Álvarez Pallete, CEO of Telefónica: “The telecom sector is at the epicenter of the current technology revolution. Yet, European operators risk losing global relevance. To preserve European competitiveness in a global digital world, European policymakers must radically change the regulatory paradigm to encourage investment and innovation.”
Stéphane Richard, CEO of Orange, said: “We have a strategic role to play in supporting Europe’s digital transformation to overcome technological and ethical challenges on such critical topics as 5G, Internet of Things, or AI. A new industrial policy, favoring a regulatory shift on network deployment and a level playing field on digital services, is key to keep Europe in the race with the U.S. and China.”
Johan Dennelind, CEO of Telia Company, said: “As we are about to embark on a new policy agenda for Europe, policymakers must take their responsibility in delivering a new industrial policy which supports EU digital leadership. This is absolutely critical for Europe’s economic competitiveness and sustainable development. We are ready to do our part.”
“The telecom sector is at the epicenter of the current technology revolution.” — José María Álvarez Pallete, CEO of Telefónica
Alexandre Fonseca, CEO of Altice Portugal, said: “Our experience confirms that a less intrusive regulatory framework, focused on real bottlenecks, investment, and commercial agreements, leads to the gigabit society. Regulation should feed into an ambitious European industry policy for global leadership and growth.”
Amos Genish, CEO of TIM, said: “We are strongly involved in Italy’s process towards the gigabit society, already providing 80 percent of the country’s fixed and 98 percent of the mobile Ultra-Broadband connections. The recent frequencies auction is a step further in the country’s digitization: 5G is going to be a revolution both for consumers and for businesses. Regulators have the great opportunity to stimulate this course by simplifying the processes ruling network development and incentivizing the demand for innovative services.”
Dominique Leroy, CEO of Proximus, said: “European telecom operators are the new trust hub for digital services. From smart homes to manufacturing, citizens and businesses will be able to rely on cutting-edge networks and services offered by their trusted operator. European governments should encourage and support this trend.”