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'Accelerating growth through a connected Europe': Speech by Vice President Andrus Ansip at GSMA Mobile 360 conference in Brussels

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ansip_ehamaesalu"Ladies and gentlemen, It's a pleasure to be with you today. Thank you for inviting me.

"I would think that everyone here today is already aware of the advantages and benefits that digital transformation can bring to an economy and society.

"When we look at Europe as a whole, however - not just individual countries - we are still a long way from a truly connected digital single market.

"It means that we are losing out on unexploited potential.

"You know the numbers: only 14% of small and medium-sized businesses use the internet to sell online. Only 12% of European consumers shop across borders.

"I have no illusions about the scale of the challenge ahead. It spans many areas that are technically and politically difficult, operationally demanding. And it's certainly not going to be a quick fix.

"The world is going digital. From commerce to communication, entertainment to education and energy.

"Online tools offer a fast, flexible alternative for almost every kind of business.

"Europe needs to keep up with the digital revolution, preferably at the forefront.

"Our single market needs to adapt.

"Not just because of the technologies we know today, but also because of those we know are on the horizon and will be here tomorrow.

"The next generation of tools is already there and coming online. Cloud computing, 5G networks, the internet of things, big data.

"Internet innovation is about speed and scale. If a company can't get that, it won't survive. But you can't really get that scale yet in Europe, because it is still divided by national borders when it comes to digital.

"As everyone here knows, there are a lot of barriers to remove before we will see light at the end of the tunnel.

"What Europe needs now is a clear long-term strategy: to stimulate the digital environment, to minimize legal uncertainty and create fair conditions for all.

"We have already started work on this. The work is divided into six main thematic areas, with Commissioners whose areas of responsibility touch on digital issues all working closely together.

"One area, for example, is building trust and confidence in the online world.

"I will make sure that Europe moves further on consumer rights and that the consumer rights directive is fully implemented. We will need to simplify and modernise rules for online purchases and digital products. And we will need to conclude negotiations on data protection rules and cyber-security.

"Another work area is about removing restrictions and preventing new ones from appearing. Nobody should be discriminated against in their online activities in the EU. This will be about reforming and modernizing copyright rules and getting rid of unjustified curbs on transfer and access to digital assets.

"I want to see an end to geo-blocking – there's no place for it. Achieving this will benefit everyone, and so will getting rid of undue price discriminations.

"Consumers need to be able to buy the best products at the best prices, wherever they are in Europe. Companies, especially small and medium-sized ones, need to have instant access to a market of 500 million consumers.

"We will work to build the digital economy, looking closely at cloud computing and the data economy as a future focus for revitalising European industry.

"We'll be promoting e-society so that Europeans have the skills needed to get ahead in the digital age.

"None of these objectives can be achieved without a properly functioning single market in telecoms.

"By that, I mean world-class networks and communication services to underpin the delivery of digital services across all of Europe.

"Seamless communications and online access.

"Fast, reliable, secure connectivity – everywhere. We need it for Europe's competitiveness and to improve the provision of public services.

"This is why the Telecoms Single Market package is so important. It is designed to stimulate and attract the investment that Europe's telecoms sector needs.

I know we are in a critical phase. But we should remember where we started and why we need it.

"Not only did the European Council already ask for this in October 2013, consumers and businesses have also been waiting a long time to see progress towards a single European telecoms market.

"Despite the work of three successive EU Presidencies - and especially given the efforts of the last one - we are all waiting for Council to start negotiations with the European Parliament.

"I encourage EU ministers to intensify and complete the technical discussions so that these negotiations can start as soon as possible.

"I really hope that an agreement can be reached over the coming months. Otherwise, I fear that we may lose momentum.

"That said, I still believe that there needs to be more ambition to make the package worthwhile. Without it, we won't move forward in any meaningful way, which won't help either people or business.

"And the whole objective is to make everybody's lives easier.

"What does 'more ambition' mean?

"Let me say first what it does not mean.

"It does not mean looking backwards to yesterday’s services. I will continue to push for an end to roaming surcharges in Europe.

"The reason is simple. They have no place in the telecoms and digital single markets that Europe so badly needs.

"They remain an irritant and an anomaly – and frankly, they give telecoms companies a bad name with their own customers.

"'More ambition' means, primarily, that we urgently need to break down barriers between national telecoms markets. That will not happen by having weak rules that appear to bring minimum standards into line with each other, but in fact allow each country to go its own way.

"The agreement should clarify spectrum, net neutrality rules and roaming.

"I also believe that advancing with the package is in the interests of telecoms companies. Cross-border consolidation in a more dynamic EU market should increase choice, because operators will be able to provide their services on a pan-European basis.

"I want to allow innovation to thrive and for industry to seize the most promising business opportunities.

"At the same time, we need investment in networks and more competition in telecoms markets so that all online users get the maximum benefits.

"To achieve this balance, the best stimulus is effective competition, which is linked directly with consumers being able to switch service provider and to have proper choice in a vibrant open market.

"It's about giving people and businesses the freedom and a fair chance to take advantage of the great opportunities offered by the internet.

"This brings me onto the subject of spectrum, which is not just a technical issue.

"Spectrum is the key raw material for the Digital Single Market.

"It can't work properly without connectivity that is high quality, high speed and decently priced.

"Open spectrum is the basis for a digitally-enabled society and digital demand.

"But the more this natural resource is divided, the less efficient it is. Ideally, EU countries should be working together much more on allocating spectrum.

"After all, radio waves know no borders. Why should the internet? We don't need national fragmentation of internet traffic.

"On net neutrality, as I have said before, this concept has to be solid and clearly defined. Everyone should be able to access services and applications, and to distribute online content, without being blocked or throttled - regardless of the country they are in.

"The internet is universal. We want to keep it like that.

"But if 28 countries have 28 different approaches, it makes the market even more fragmented. To avoid that happening, the principle of net neutrality needs to be enshrined into EU law – also to provide clarity and certainty for investors.

"Ladies and gentlemen,

"To continue the theme of investment: as telecoms companies, you know that Europe really needs more investment in digital. There is still a significant funding gap, especially in rural high-speed broadband. More than four homes in every five in rural areas across the EU do not have fast coverage.

"For me, everyone should have the right of access to quality online services.

"It's a basic requirement in the 21st century.

"But that isn't cheap or easy to achieve. It needs a good deal of investment.

"First and foremost, it is up to those in the market to invest in the necessary infrastructure. However, the market cannot always provide all that is needed.

"That's where public authorities have a role to play.

"Firstly, by providing the right and adequate regulatory environment, which we plan to achieve through the Digital Single Market strategy. And secondly, by incentivising and leveraging more private investment.

"The EU does a good deal towards this, in terms of actual funding, programmes aiming at cost reductions, innovative instruments for smart investment.

"I'm sure you're aware of the investment plan announced recently by President Jean-Claude Juncker.

"It is a package of measures designed to unlock public and private investments in the real economy of more than €300 billion over the next three years.

"This is good news for broadband and digital projects. Of course, we are still in the early days and the pipeline of projects to receive funding has yet to be defined. But I have no doubt that digital will play a significant role – with communication networks as well as infrastructure.

"Ladies and gentlemen,

"The Juncker investment plan is a new opportunity to kick-start investment and growth in Europe. But it will only work if European firms take the opportunity to invest in their own and Europe's future, and the EU's Member States also commit to regulatory reform.

"That is how we can bring digital opportunities for growth and employment to enterprises, entrepreneurs and citizens, by making sure that high-quality connectivity becomes more widely available in all corners of Europe.

"It is the foundation for the Digital Single Market. The future for Europe. Thank you for your attention."

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In Italy, a monopoly to rule the telecommunications market is in the works

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The Italian telecom market might become much less competitive in the near future with the creation of a new monopoly, if a controversial plan to create a national broadband operator goes through, one that would see Telecom Italia (TIM) merging with Open Fiber, one of its only rivals on the broadband market. For his part, TIM CEO Luigi Gubitosi is extraordinarily upbeat about the prospects and is expecting the project to come to pass soon. Even so, these expectations could be immature, given that resistance against the merger is growing, writes Colin Stevens.

On the surface, however, Gubitosi has good reason to be optimistic at the moment. The Italian government is more than enthusiastic about the deal, having been the driving force behind it since 2018. Then, in August this year, Rome approved the proposed ownership plan for the post-merger company that was drawn up by state-owned investment bank Cassa Depositi e Prestiti (CDP). According to press reports, CDP is the main proponent and guarantor of the plan that would see the emergence of AccessCo, a unified national broadband network to dominate the market.

The details are still being negotiated behind closed doors by the would-be partners, a group that also includes the Italian energy giant Enel, which controls around 50% of the Open Fiber stock, with the other half in the hands of CDP. In this scenario, TIM would eventually take majority ownership of the unified network, which the government hopes will accelerate Italy’s sluggish development of Internet infrastructure – an issue that has plagued the country for years.

Like other Southern-European countries, Italy is on the wrong side of the digital divide that cuts across Europe, lagging well behind Northern and even Eastern Europe in terms of both access and speed. The government’s reasoning is that the sheer scale of the new national provider will permit it to make massive investments in FTTx technology that the sector desperately needs. While Telecom Italia will be in charge of the proposed company, the authorities promise to put in place a system of regulations and multiple shareholders to keep them in check. 

The case against monopolies

But while the Italian government might see the merger as the silver bullet to improve the country’s Internet access, others are not so convinced. Angelo Cardani, at the time president of AGCOM, the regulator for the Italian communication market, in 2019 slammed the merger as a “backward step” for the industry, warning that the lack of competition will do more to stifle innovation and progress than promote it.

Cardani made his standpoint clear, but only weeks later his mandate as the head of AGCOM ended and the new president, Giacomo Lasorella, has been conspicuously silent on the matter. Lasorella is seen as an associate of Luigi Di Maio, a popular politician who previously served as leader of the anti-establishment Five Star Movement which currently forms half of Italy’s coalition government. 

Nevertheless, Cardani’s warning that the merger would create the opposite outcome of what Rome hopes to achieve is nothing to sneeze at. Over the last two decades, few industries have proven the beneficial effects of competition more than telecommunications. The countries routinely ranked among the best in terms of Internet access and quality are almost without exception countries with robust competition in their telecom markets. 

In the US, the geographical divisions between companies have created a pseudo-monopoly in which less than a third of the population has a choice of Internet provider. This has caused the US to drop out of the top 10 in recent years and is now trailing Hungary and Thailand thanks to broadband speeds that were unimpressive even 15 years ago. While Italy’s size and geography aren’t quite comparable to those of the USA, a monopoly would still create second class netizens in the country’s remote and mountainous regions, where improving the infrastructure of users who have no other choice is hardly a priority. 

Match point antitrust rules?

However, the biggest hurdle in AccessCo’s creation is undoubtedly antirust watchdogs. The European Union’s antitrust arm is known for routinely opposing such disruptive mergers, particularly in the tech and telecom industry. And despite current deliberations being held in private, the message conveyed through unofficial channels strongly indicates that it will do so again in this case. According to unnamed officials, the Commission’s view on the matter is that the merger would evidently create a monopoly and reverse two decades of deregulation. Since Italian antitrust rules closely mirror EU ones, there is little reason to expect a different outcome should the case come before the national authority.

The confidential revelations wiped 7.4% off Telecom Italia’s shares, and despite Italian Finance Minister Roberto Gualtieri’s hasty assurances that he has “no awareness of a potential EU veto”, Brussels’ decision seems already predetermined. In its 'Connectivity for a European Gigabit Society' policy, the Commission has previously recommended the exact opposite of what the AccessCo merger proposes, encouraging the strategy of “unbundling” to be extended in the broadband industry and proposing measures to foster the development of genuinely competitive wholesale broadband markets. It stands to reason that the Commission is highly unlikely to renege on these principles, or grant an exception to Telecom Italia. 

Right reasons, wrong execution

The following months will prove crucial for the future of Italy’s telecoms market – and digital future. The country is right to make better internet a priority, and yet is taking the wrong approach. Even if an agreement is met by all the partners in the merger and even if the new AGCOM council gives its blessing, the European Union is still more likely than not to oppose AccessCo’s creation. The Italian competition authority would be wise to join the EU as well. As it stands now, the most important people in Italy’ telecom industry are working hard on a bad plan the only redeeming factor of which is that it’s probably doomed to failure from the start.

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Despite talk of digital sovereignty, Europe sleepwalks into Chinese dominance on drones

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In her State of the European Union speech, European Commission President Ursula von der Leyen delivered a clear-eyed assessment of the European Union’s position within the global digital economy. Alongside predictions of a European “digital decade” shaped by initiatives such as GaiaX, von der Leyen admitted Europe had lost the race on defining the parameters of personalized data, leaving Europeans “dependent on others”, writes Louis Auge.

Despite that straightforward admission, the question remains whether European leaders are willing to mount a consistent defence of their citizens’ data privacy, even as they accept reliance on American and Chinese firms. When it comes to challenging American social media or e-commerce giants like Google, Facebook, and Amazon, Europe has no problem seeing itself as the global regulator.

In facing China, however, the European position often seems weaker, with governments only acting to curb the influence of Chinese technology suppliers such as Huawei under intense US pressure. Indeed, in one key area with serious implications for several economic sectors Commission President von der Leyen cited in her speech – unmanned aerial vehicles, otherwise known as drones – Europe is allowing a single Chinese firm, DJI, to corner the market practically unopposed.

A trend accelerated by the pandemic

Shenzhen Dajiang Innovation Technologies Co. (DJI) is the unquestioned leader of a global drone market predicted to skyrocket to $42.8 billion in 2025; by 2018, DJI already controlled 70% of the market in consumer drones. In Europe, DJI has long been the unmanned aerial vehicle (UAV) supplier of choice for military and civilian government clients. The French military uses “commercial off-the-shelf DJI drones” in combat zones like the Sahel, while British police forces uses DJI drones to search for missing persons and manage major events.

The pandemic kicked that trend into high gear. In European cities including Nice and Brussels, DJI drones equipped with loudspeakers admonished citizens about confinement measures and monitored social distancing. DJI representatives have even tried to convince European governments to use their drones to take body temperatures or transport COVID-19 test samples.

This rapid expansion in the use of DJI drones runs counter to decisions being taken by key allies. In the United States, the Departments of Defense (the Pentagon) and the Interior have banned the use of DJI’s drones in their operations, driven by concerns over data security first uncovered by the US Navy in 2017. In the time since, multiple analyses have identified similar flaws in DJI systems.

In May, River Loop Security analyzed DJI’s Mimo app and found the software not only failed to adhere to basic data security protocols, but also that it sent sensitive data “to servers behind the Great Firewall of China.” Another cybersecurity firm, Synacktiv, released an analysis of DJI’s mobile DJI GO 4 application in July, finding the company’s Android software “makes use of the similar anti-analysis techniques as malware,” in addition to forcibly installing updates or software while circumventing Google’s safeguards. Synacktiv’s results were confirmed by GRIMM, which concluded DJI or Weibo (whose software development kit transmitted user data to servers in China) had “created an effective targeting system” for attackers – or the Chinese government, as US officials fear – to exploit.

To address the potential threat, the Pentagon’s Defense Innovation Unit (DIU) has introduced a small Unmanned Aircraft Systems (sUAS) initiative to procure drones from trusted American and allied manufacturers; France’s Parrot is the only European (and, indeed, non-American) firm currently included. Last week, the Department of the Interior announced it would resume purchasing drones through the DIU sUAS program.

DJI’s security flaws have also sparked concern in Australia. In a consultation paper released last month, the Australian transport and infrastructure department flagged weaknesses in Australia’s defenses against “the malicious use of drones,” finding UAVs could potentially be used to attack the country’s infrastructure or other sensitive targets, or otherwise for purposes of “image and signals gathering” and other types of reconnaissance by hostile actors.

In Europe, on the other hand, neither the European Data Protection Board (EDPB), the German Federal Commissioner for Data Protection and Freedom of Information (BfDI), nor the French National Commission on Informatics and Liberty (CNIL) have taken public action on the potential dangers represented by DJI, even after the company’s products were found forcibly installing software and transferring European user data to Chinese servers without allowing consumers to control or object to those actions. Instead, the use of DJI drones by European military and police forces may appear to offer consumers a tacit endorsement of their security.

Despite an opaque ownership structure, links to Chinese state abound

Suspicions of DJI’s motives are not helped by the opacity of its ownership structure. DJI Company Limited, the holding company for the firm via the Hong Kong-based iFlight Technology Co., is based in the British Virgin Islands, which does not disclose shareholders. DJI’s fundraising rounds nonetheless point to a preponderance of Chinese capital, as well as linkages with China’s most prominent administrative bodies.

In September 2015, for example, New Horizon Capital – cofounded by Wen Yunsong, son of former premier Wen Jiabao – invested $300 million in DJI. That same month, New China Life Insurance, partly owned by China’s State Council, also invested in the firm. In 2018, DJI may have raised up to $1 billion ahead of a supposed public listing, although the identify of those investors remains a mystery.

DJI’s leadership structure also points to links with China’s military establishment. Co-founder Li Zexiang has studied or taught at a number of universities linked to the military, including the Harbin Institute of Technology – one of the 'Seven Sons of National Defence' controlled by China’s Ministry of Industry and Information Technology – as well as the National University of Defense Technology (NUDT), directly supervised by the Central Military Commission (CMC). Another executive, Zhu Xiaorui, served as DJI’s head of research and development up until 2013 – and now teaches at the Harbin University of Technology.

These links between DJI’s leadership and China’s military would seem to explain DJI’s prominent role in Beijing’s repression of ethnic minority groups. In December 2017, DJI signed a strategic partnership agreement with the Bureau of Public Security of the Autonomous Region of Xinjiang, outfitting Chinese police units in Xinjiang with drones but also developing specialized software to facilitate missions for the “preservation of social stability.” DJI’s complicity in the campaign of “cultural genocide” against the Uighur population of Xinjiang burst into the headlines last year, when a leaked video – shot by a police-controlled DJI drone – documented a mass transfer of interned Uighurs. The company has also signed agreements with authorities in Tibet.

An inevitable crisis?

While DJI has gone to considerable efforts to counteract the findings of Western governments and researchers, even commissioning a study from consultancy FTI that promotes the security of its new “Local Data Mode” while sidestepping existing flaws, the monopolistic control of this emerging sector by a single firm with links to China’s security establishment and direct involvement in systemic human rights abuses could quickly become a problem for regulators in Brussels and the European capitals.

Given how prevalent drones have become across the wider economy, the security of the data they capture and transmit is a question European leaders will have to address – even if they prefer to ignore it.

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Aviation Strategy for Europe

Boeing subsidy case: World Trade Organization confirms EU right to retaliate against $4 billion of US imports

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The World Trade Organization (WTO) has allowed the EU to raise tariffs up to $4 billion worth of imports from the US as a countermeasure for illegal subsides to the American aircraft maker, Boeing. The decision builds upon the WTO's earlier findings recognizing the US subsidies to Boeing as illegal under the WTO law.

An Economy that Works for People Executive Vice President and Trade Commissioner Valdis Dombrovskis (pictured) said: “This long-awaited decision allows the European Union to impose tariffs on American products entering Europe. I would much prefer not to do so - additional duties are not in the economic interest of either side, particularly as we strive to recover from the COVID-19 recession. I have been engaging with my American counterpart, Ambassador Lighthizer, and it is my hope that the US will now drop the tariffs imposed on EU exports last year. This would generate positive momentum both economically and politically, and help us to find common ground in other key areas. The EU will continue to vigorously pursue this outcome. If it does not happen, we will be forced to exercise our rights and impose similar tariffs. While we are fully prepared for this possibility, we will do so reluctantly.”

In October last year, following a similar WTO decision in a parallel case on Airbus subsidies, the US imposed retaliatory duties that affect EU exports worth $7.5bn. These duties are still in place today, despite the decisive steps taken by France and Spain in July this year to follow suit Germany and the UK in ensuring that they fully comply with an earlier WTO decision on subsidies to Airbus.

Under the current economic circumstances, it is in the mutual interest of the EU and the US to discontinue damaging tariffs that unnecessarily burden our industrial and agricultural sectors.

The EU has made specific proposals to reach a negotiated outcome to the long running transatlantic civil aircraft disputes, the longest in the history of the WTO. It remains open to work with the US to agree a fair and balanced settlement, as well as on future disciplines for subsidies in the civil aircraft sector.

While engaging with the US, the European Commission is also taking appropriate steps and involving EU member states so that it can use its retaliation rights in case there is no prospect of bringing the dispute to a mutually beneficial solution. This contingency planning includes finalizing the list of products that would become subject to EU additional tariffs.

Background

In March 2019, the Appellate Body, the highest WTO instance, confirmed that the U.S. had not taken appropriate action to comply with WTO rules on subsidies, despite the previous rulings. Instead, it continued its illegal support of its aircraft manufacturer Boeing to the detriment of Airbus, the European aerospace industry and its many workers. In its ruling, the Appellate Body:

  • Confirmed the Washington State tax programme continues to be a central part of the S. unlawful subsidization of Boeing;
  • found that a number of ongoing instruments, including certain NASA and U.S. Department of Defence procurement contracts constitute subsidies that may cause economic harm to Airbus, and;
  • confirmed that Boeing continues to benefit from an illegal U.S. tax concession that supports exports (the Foreign Sales Corporation and Extraterritorial Income Exclusion).

The decision confirming the EU right to retaliate stems directly from that previous decision.

In a parallel case on Airbus, the WTO allowed the United States in October 2019 to take countermeasures against European exports worth up to $7.5bn. This award was based on an Appellate Body decision of 2018 that had found that the EU and its Member States had not fully complied with the previous WTO rulings with regard to Repayable Launch Investment for the A350 and A380 programmes. The US imposed these additional tariffs on 18 October 2019. The EU member states concerned have taken in the meantime all necessary steps to ensure full compliance.

More information

WTO Appellate Body ruling on US subsidies to Boeing

Public consultation on preliminary list of products in the Boeing case

Preliminary list of products

History of Boeing case

History of Airbus case

 

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