The concept of ‘la rentrée’ is one that refers to going back to school after a well-earned summer break. It is a mixture of feelings that includes optimistic excitement, a sense of urgency and a realistic worry for the challenges ahead.
This is precisely how I feel about the digital ‘rentrée’ awaiting tech wonks in Brussels: in troubled times, Europe will need to count more and more on the leadership of Executive Vice-President Vestager, Commissioner Breton and of the Czech Presidency. The industry will continue to be called to do its part, too. Here is my bet on the three hot topics awaiting us this autumn.
War, energy and inflation as a digital issue
The continued aggression of Russia against Ukraine, as well as Europe’s scorching summer, are laying bare the Continent’s weaknesses on energy sources and inflation. Both are also matters of concern for the digital and connectivity sectors.
First of all, because ICT is a part of the solution on energy and climate: smart cities and digital transformation of industrial sectors are expected to reduce energy consumption and carbon emissions. Widespread 5G and fiber uptake is expected to reduce CO2 emissions up to 15 percent. More than that: the whole ICT sector has recently got together to empower the green transition across other sectors of society, with the European Green Digital Coalition.
Second, connectivity is emerging also as a humanitarian aid matter: EU telecoms companies are reducing the communication fees for Ukrainian refugees. As member countries work on allocating public funds to the humanitarian crisis, we believe that financial support for refugees seeking to stay connected should clearly be included in the picture.
Third, inflation is hitting hard also on the telecoms sector. While consumer prices remain extremely competitive by all measures, the cost of labor for 5G and fiber deployment, as well as other costs, are rising along with all the rest. This, over time, is likely to require a policy reflection on the financial sustainability of the sector.
Digital resilience and cybersecurity
Speedy and substantive investment in resilient European telecoms networks is today even more necessary, as cybersecurity threats ripple and new risks emerge in a complex digital ecosystem. Telecoms operators know the game well, traditionally putting a ‘security first’ approach at the core of their network operations.
Cyber threats are an historic challenge for our societies. While they will inevitably occur, it is essential that we take a fact-based and risk-based approach in mitigating them. This will be particularly the case for 5G. On the one hand, just like every new technology, it might create new vulnerabilities. On the other hand, we should not ignore that it also brings new opportunities to tame cyber vulnerabilities by adding extra security opportunities, namely network slicing, authentication and encryption. Let us be acutely aware of risks, without forgetting about the significant opportunities.
Sustainability of the EU internet ecosystem
Despite the many efforts to boost network rollout to the benefit of EU citizens, there are still major worries on the sustainability of the EU internet ecosystem. If we compare Europe to Europe, we have achieved amazing progress: in 2021, over 62 percent of Europeans were reached by 5G, compared to half the year before. If we compare Europe to South Korea or the U.S., we are lagging behind: 5G coverage of the population in those geographies is already above 90 percent. In order to fill the gap, we need a financially-healthy telecoms sector that delivers more investment.
However, EU telecoms operators have limited ability to sustain continued investment and rising network costs at the same time. Today, 55 percent of all internet traffic comes from only a few tech giants. While telecoms companies carry the burden of investing in networks, it is mostly tech giants who monetize such traffic increases. With expensive 5G and fiber investment cycles ahead, one might ask: is this sustainable?
In this context, EV-P Vestager recently announced that the European Commission would analyze if “there are players who generate a lot of traffic that then enables their business, but who have not been contributing actually to enable that traffic”. While Commissioner Breton announced that measures on the matter would be decided by the end of 2022.
This will bring solid socio-economic benefits for European citizens, for consumers and for end-users as a whole: a recent study showed that addressing the fair-contribution issue would allow Europe to get a yearly €72 billion GDP boost, an additional 840,000 jobs in 2025 and significant cuts to CO2 emissions.
Addressing the fair contribution issue, however, is one part of the story. Historically, Europe is still missing a real telecoms single market. With over 38 big mobile operators in Europe versus seven in the U.S., or four in Japan, we will need additional discussions on how to build real scale for European competition in global digital markets.
As in every ‘rentrée’, we are reminded of the problems that we left before holidays. I am confident that all the necessary levers are there to continue having a constructive policy discussion, while finally moving toward solutions.