It’s time for a two-year report card. In May 2015, the European Commission launched an ambitious program to create what it called a Digital Single Market. Through 16 initiatives - including an end to unjustified blocking of content at national borders, a revamp of copyright, and an overhaul of telecom rules - the Commission aimed to unite Europe’s fragmented digital economies into a unified market encompassing more than 500 million consumers.
In its own mid-term review, the Commission awards itself a top grade. Unfortunately, panelists in a recent session on the Digital Single Market organised by CEPS, a prominent think tank in Brussels, gave it close to an F for failure.
Although far-reaching proposals have been put forward, the panelists believed many move backward. Instead of creating a giant pan-European market, some Commission proposals risk fragmenting it. Until now, for example, the Finns and the French enjoyed access to the same WhatsApp or Skype, but new telco rules will oblige these messaging apps to register in each of the 28 different European Union member states. A European-wide service will be chopped up and sliced into a narrow, national service.
Many content reforms also seem to reinforce fragmentation. Instead of operating from a single “home” country to serve the entire European Union, as is now possible, the new audiovisual rules will force streaming video providers such as Netflix to comply with national content quotas of at least 20% (and probably 30%) subsidized local national production in each country where they operate.
To be fair, significant Commission actions received widespread praise. Consumers soon will benefit from new “portability rules” that will allow them to continue watching their Netflix favorites as they travel around the continent. Consumers also will win bigtime on June 15th when telcos are forced to stop gouging them with expensive data roaming charges. From that date, voice, text and data allowances bought as part of a deal or monthly contract at home will be usable anywhere in the Europe at no extra charge. Reading this op-ed will cost the same from my home in Brussels – as it would from Bratislava or Helsinki. Kudos! I’m hoping my readers will appreciate.
Many new regulations, however, either threaten to be ineffectual or, worse, to throttle business and innovation. Consider e-commerce. More than half of Europeans now turn to the Internet for shopping, and in theory, the Web should allow consumers to compare products and services anywhere in the world. In reality, however, the vast majority of purchases are made from within the buyer’s own country, with only 10 percent coming from another European Union member state and a mere four percent from outside Europe.
The Commission set out to break down the barriers blocking cross-border e-commerce with a new law obliging e-commerce merchants to sell goods to foreigners. Yet the same law does not oblige the merchant to deliver the goods outside its home country. A Finn buying from a French online wine merchant, for example, will need to pick up the purchase inside France. And since it costs two to six times more to ship across borders in Europe than within a single country, the vast majority of consumers will continue to abandon online purchases because of concerns about delivery.
Digital content skips over this shipping cost problem - and digital books, film and other content account for a third in overall online trade, making it the single biggest online sector. Yet more than 90 percent of European consumers report they often receive the note on their computer screens: “Sorry, this content is unavailable in your country.”
It will be difficult to break down these barriers. Sports leagues and film producers earn much more by selling national rights to 28 different national markets than by selling single pan-European rights. Today, the UK’s Premiere League is available across the continent, country by country. If an English viewer could buy a cheap Estonian subscription, the sport’s financial structure might crumble. Since the Premier League makes most of its money inside the UK, it might just stop selling rights in Estonia and elsewhere in Europe.
This example goes against the entire premise of the Digital Single Market. Some cultural content such as sports broadcasting should not be treated as a commodity. At the same time, we should at least allow Estonians to buy UK-priced subscriptions and avoid the annoying “this content is unavailable in your country.” We also should improve the possibility of selling pan-European licenses, where appropriate. In other newly emerging communications tools such as messaging apps, the best approach would be to wait and allow this innovation to reach its true potential before regulating it.
A light touch does not mean a free-for-all. On the contrary, Europe’s competition authorities should crack down on abuses of market power. Internet giants should be forced to live up to new responsibilities such as fighting hate speech and fake news. A true Digital Single Market remains a laudatory goal – and one requiring vigilance to prevent its being hijacked to impose rules that hurt startups and fail to help consumers.