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Digital economy

Telecoms operators call for 'fresh and progressive' ICT public policy to boost economy, jobs and social welfare in Europe

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dhv2At this week’s Digital Venice 2014, the GSMA and leading European telecoms operators presented a statement to Prime Minister of Italy and President of the Council of the European Union Matteo Renzi at a high-level round table organized with Neelie Kroes, vice president of the European Commission, and leading industry CEOs.

With the new Italian EU Presidency providing a sharpened focus on Europe’s digital opportunity, the statement called for a new ICT public policy that supports Europe in catching up with, and potentially overtaking, the other industrial regions in the ICT challenge, stimulating economic growth, job creation and improving social welfare throughout the region.

Below is the text of the joint statement, which is supported by the following CEOs of European telecoms operators:

  • Timotheus Höttges, CEO, Deutsche Telekom AG
  • Stéphane Richard, Chairman and CEO, Orange
  • Marco Patuano, CEO, Telecom Italia
  • César Alierta, Executive Chairman and CEO, Telefónica
  • Jon Fredrik Baksaas, President and CEO, Telenor Group and Chairman, GSMA Board
  • Vittorio Colao, CEO, Vodafone Group

Digital Venice 2014: Making the right connections between industry and policy to deliver a better Europe

Europe is facing an unprecedented economic crisis. Member states of the Union are struggling to boost employment by means of complex economic policies. Identifying a robust path to growth is undoubtedly the most important current policy goal. To this end European firms need to vigorously compete in both the domestic and foreign markets and technological innovation is key. The ICT industry represents an essential pillar and opportunity for growth. The majority of the most radical technological innovations are in fact delivered by the ICT industry.

By providing fast, reliable, secure and intelligent connectivity the Communications Industry is an essential part of how every company in Europe, small or large, does business. It can provide the foundations for a new wave of economic growth, job creation and improving social welfare in Europe.

Europe, historically a pioneer in the communications industry, is now lagging behind the US and Asia in the deployment of new communications infrastructure. This gap does not reflect a lack of willingness to invest. It reflects differences in policy frameworks and industry structures which in other regions have been, and continue to be, more conducive to the infrastructure investments needed to support the next wave of economic growth.

Europe needs a New Digital Agenda to catch up and possibly leapfrog the other industrial regions in the ICT challenge. The success of Europe in this technological competition will entail a powerful stimulus to economic growth and job creation.

To this end, a new ICT public policy is urgently required with the following main goals.
Promoting ICT infrastructures

  1. The EU should support the development of modern digital infrastructures by ensuring a simplified, digital-friendly, pro-investment regulatory framework ensuring a fair long-term return on investments in new infrastructure.A review of the European regulatory framework is the appropriate tool for addressing such an essential goal.
  1. Achievement of the 2020 Digital Agenda targets requires both private and public investment. Whilst operators are increasing investment levels across the EU there will inevitably be cases of market failure. These should be addressed by means of appropriate public funding to avoid the emergence of a new digital divide. But private investments should not be crowded out by competition from public projects.
  1. The EU should support and promote the on-going reallocation of radio spectrum to the communications industry so that operators can continue to meet consumer and business needs for faster connection speeds and greater capacity. This process needs to be co-ordinated at the European level. Policies recently supported by the Commission and the Parliament concerning spectrum licencing provide the right answers to these issues. There is also a need to ensure award processes are not structured to extract excessive payment for spectrum as this has a direct impact on the financial capacity to invest in infrastructure.
  1. The EU should support a new interpretation and application of merger regulation and guidelines to reflect the rapidly changing environment, characterised by strong growth in data consumption and new sources of Internet-based competition. Consolidation in the European telecoms market, along with reasonable safeguard measures, can provide a boost to investment, support job creation and deliver innovative services without any adverse impact on competition.
  1. The EU needs to support a level playing field of regulation between the Communications and Internet industries. The European Communications Industry needs greater freedom to compete on equal terms with the Internet industry. At the same time, internet players should be subject to the same rules.

Ensuring digital citizenship

  1. Digitalization of the Public Administration will be a critical catalyst for the spread of ICT in Europe. Telecom operators are ready to participate in ambitious projects for the timely digitalization of public administration, schools and health care.
  1. Fast broadband networks and the transition to full IP will allow an array of new and innovative services. In order to support the availability of customized services differentiated on the basis of quality and price a balanced approach to open internet regulation is required, based on general principles rather than detailed, prescriptive and restrictive rules.
  1. European citizens need to retain control of their 'digital life'.  The EU needs to address any bottlenecks that persist due to a lack of interoperability and/or portability of personal data, content and applications when switching between platforms or providers. An open and transparent framework, concerning both telecommunications operators and Internet companies must be put in place.
  1. A co-ordinated approach to data privacy and digital security is needed to help build trust and confidence in the uptake and use of new digital services by EU citizens and provide them with effective and consistent protection across the digital value chain. These high standards of data protection and security must be harmonised across Europe and made applicable to companies based outside the region. The Communications Industry can provide fit for purpose new digital identity services such as the GSMA Mobile Connect service, which offers broad interoperability across operators and service providers.
  1. The EU needs to address the systematic encryption of data traffic by internet players as this threatens to distort the level playing field for competition and compromise the co-ordinated fight against cybercrime.

Stimulating job creation

  1. Telecoms operators in Europe represent one of the driving forces of the European economy; they employ millions of people. The EU should support the creation of policy frameworks that encourage telecom operator investments in ICT that, in the order of tens of billions of euro each year, can represent a boost for the European economy in the next five years, supporting both direct and indirect employment.
  1. The EU should support welfare policies that promote the qualitative change in skills required in the labour market. This re-tooling of the European labour market is essential if the region is to regain a position of leadership in the Digital Economy and maximize the potential impact on growth and development.
  1. European institutions must ensure that a stronger innovation ecosystem can develop in Europe. Public policy should favour all mechanisms useful to amplify economic returns from ICT research investments: improving the business environment, encouraging entrepreneurial attitudes, supporting training in young and small enterprises, improving access to debt and equity finance when necessary, and promoting innovation and internationalization activities of new and small firms.
  1. Europe needs a reinvigorated stimulus to the European Digital Service Start-up Eco-systems. This programme should be rationalized and focused on a smaller number of excellence programmes, more specialized on internet economy and with a pan-European scope.

Europe must play a key role in shaping the future of global internet governance.  The internet needs to be governed by a coherent set of principles shared by all stakeholders. The current multi-stakeholder model, based on the balanced participation of different stakeholders such as governments, private sector and civil society, needs to be substantially strengthened.  Globalizing key decision-making (for example the co-ordination of domain names and IP addresses) is key to safeguarding the stability, security and resilience of the internet. This process should be achieved by establishing a clear timeline for the globalization of the Internet Corporation for Assigned Names and Numbers (ICANN) and of the Internet Assigned Numbers Authority (IANA) functions.

Austria

Commission approves €146.5 million Austrian support in favour of companies joining research and innovation project in microelectronics

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The European Commission has approved, under EU state aid rules, €146.5 million in Austrian support in favour of three companies joining the existing Important Project of Common European Interest (‘IPCEI') in microelectronics approved by the Commission in 2018. The public funding is expected to unlock an additional €530m of private investments, i.e. more than three and a half times the public support.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “To deliver on the digital and green transition, we will need highly innovative and sustainable microchips and sensors for many products in our economy, ranging from mobile phones to aircraft. The Important Project of Common European Interest in microelectronics that we approved in 2018 has been supporting the development of important cutting-edge technologies in this field. The IPCEI's integration is very important for its success – we have approved additional support by Austria to three projects because they meet the high bar of adding significant value to the existing IPCEI, with important collaborations with the existing participants.”

In December 2018, the Commission approved, under EU state aid rules, an IPCEI to support research and innovation in the field of microelectronics (the ‘2018 IPCEI Microelectronics'). The project was jointly set-up and notified by France, Germany, Italy and the United Kingdom. The approved public support amounted to €1.75 billion. The 2018 IPCEI Microelectronics, which aims at developing innovative microelectronics technologies and components for automotive, Internet of Things (IoT) and other key applications (such as space, avionics, and security) and their first industrial deployment, originally involved 27 companies and two research organisations.

In December 2020, Austria notified to the Commission its plans to join the 2018 IPCEI Microelectronics, by providing €146.5m of public support to three companies (Infineon Austria, AT&S Austria and NXP Semiconductors Austria) that will carry out additional research and innovation falling within the scope and contributing to the objectives of the existing IPCEI. The companies will focus in particular on the areas of security, energy efficiency, and integration of packaging technologies for microelectronics.

The joining of an already established and ongoing IPCEI by an additional member state and projects is an exceptional circumstance. It requires a complex assessment by the Commission, to verify that the new individual projects are properly integrated in the existing roadmap and structure of the IPCEI, for example by means of establishing sufficient and valuable collaborations with the initial participants, and are genuinely adding significant value to the IPCEI in order to reach its objectives.

The Commission takes note of and welcomes the increasingly transparent, open and inclusive practice that member states have now established in designing IPCEIs to ensure that all interested member states join from the start, so that these important European projects generate even more benefits to the entire EU without unduly distorting competition.

The Commission's assessment

The Commission assessed Austria's plans under EU state aid rules, more specifically its Communication on Important Projects of Common European Interest (IPCEI). Where private initiatives supporting breakthrough innovation fail to materialise because of the significant risks such projects entail, the IPCEI state aid Communication enables member states to jointly fill the gap to overcome these market failures, while ensuring that the EU economy at large benefits and limiting potential distortions to competition.

The projects that Infineon Austria, AT&S Austria and NXP Semiconductors Austria will carry out aim at delivering additional technological innovations in energy efficient power semiconductors, on advanced security and interconnections, as well as on organic packaging technology aspects.

In this respect, the Commission found that the projects will add significant value to the 2018 IPCEI Microelectronics and will contribute to and enhance the integration of existing IPCEI. In particular:

  • They will significantly contribute to the achievement of common objective pursued by the existing IPCEI in supporting a strategic value chain, in particular through the development innovative microelectronics, technologies and components for automotive, IoT and other key applications (such as space, avionics, and security), by aiming at technology solutions that were not (sufficiently) addressed.
  • They will add significant value to the existing IPCEI by bringing important contributions to its objectives, integration, collaborations, scope, and research and development content.
  • They are highly ambitious, aiming at developing technologies and processes that go beyond current technology.
  • The companies will establish significant and valuable additional collaborative research with the existing direct partners and support the development and objectives of the relevant technology fields.
  • The projects involve significant technological and financial risks, and public support is therefore necessary to provide incentives to companies to carry out the investment.
  • The aid to each of the three companies is limited to what is necessary, proportionate and does not unduly distort competition.
  • Additional important positive spill-over effects will be generated throughout Europe.

On this basis, the Commission concluded that the Austrian plans to join the 2018 IPCEI Microelectronics are in line with EU State aid rules.

Background

In June 2014 the Commission adopted a Communication on important projects of common European interest (IPCEI), setting out criteria under which Member States can support transnational projects of strategic significance for the EU under Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU). This framework aims to encourage Member States to support projects that make a clear contribution to the EU strategic objectives.

The IPCEI Communication complements other State aid rules such as the General Block Exemption Regulation and the Research, Development and Innovation Framework, which allows supporting innovative projects with generous conditions.

Since 2014, the IPCEI Communication has been applied in the field of infrastructure as well as for integrated projects in the area of research and innovation, for microelectronics (in December 2018) and for the battery value chain (in December 2019 and in January 2021).

The IPCEI Communication is currently being reviewed to ensure it fully contributes to the Commission's green and digital objectives, following an evaluation or ‘Fitness Check' completed in October 2020. On 23 February 2021, the Commission launched a public consultation inviting all interested parties to comment on the draft revised IPCEI Communication. In this context, the Commission is proposing, among others, to further enhance the open character of IPCEIs (by, for example, providing that all Member States must be given a genuine opportunity to participate in an emerging project).

Stakeholders can respond to the consultation for eight weeks, until 20 April 2021.

The non-confidential version of the decision will be made available under the case number SA.56606 in the State Aid Register on the competition website once any confidentiality issues have been resolved.

New publications of state aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

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Corporate tax rules

'Let's strike a deal on digital tax with the US now' says EPP

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"We have to get the United States on board and strike an international tax deal with them as soon as possible. It is important, however, that the US Administration accepts that a common system is needed, where big US companies cannot opt out of whatever has been agreed internationally," said Andreas Schwab MEP, EPP Group negotiator on digital taxation, ahead of the adoption of the recommendations on digital taxation by the European Parliament’s Economic and Monetary Affairs Committee.

The United States has recently indicated that it is willing to drop the so-called ‘safe harbour’ rules, which - according to tax experts - would allow big US tech companies like Amazon, Alphabet’s Google and Facebook to opt-out. "The good news is, of course, that the US recently confirmed that we are again united across the Atlantic. We will fight for a solution at G20/OECD level, but if it doesn't seem possible to get a global solution, the EU should make a move on its own digital tax now. We need a minimum EU taxation without special national tax arrangements for digital companies that will profit from harmonised and fair digital taxation," Schwab added.

The EPP Group spokesman on Economic Affairs, Markus Ferber MEP, underlined that the European Parliament is ready to transpose an international solution as soon as possible into EU law. “The effective taxation of the digital economy is not only a question of fairness, but also a litmus test for multilateralism. A credible international solution is vastly superior to Europe going it alone. I call on the European Commission and member states to focus all their energy on finding an international solution to taxing the digital economy”, Ferber stated.

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Digital economy

Digital Day 2021: EU countries commit to key digital initiatives for Europe's Digital Decade

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At the online Digital Day 2021 (19 March) Ministers representing EU member states signed three Declarations to pool efforts and resources to promote international connectivity, incentivise the rollout of clean digital technologies and improve the regulatory environment for start-ups and scale-ups. These tangible commitments will help accelerate Europe's green and digital transformation and will contribute to the vision and goals of Europe's Digital Decade. In particular, 27 European countries signed the Declaration on European Data Gateways as a key element of the EU's Digital Decade, in which they committed to reinforce connectivity between Europe and its partners in Africa, Asia, the European Neighbourhood and Latin America. 25 European countries signed the Declaration on EU Startup Nations Standard, which aims to ensure that all European start-ups and scale-ups benefit from the best practices adopted by successful start-up ecosystems.

Finally, 26 European countries signed the Declaration on A Green and Digital Transformation of the EU to accelerate the use of green digital technologies for the benefit of the environment. At the same time, 26 Chief Executive Officers from the ICT sector joined the European Green Digital Coalition, committing on behalf of their companies to significantly reduce their carbon footprint by 2030, and to become climate neutral by 2040. Hosted by the Commission and the Portuguese Presidency of the Council, the fourth edition of the Digital Day is bringing together Members of the European Parliament, Ministers from Member States, industry executives and several other stakeholders. The last edition in 2019 focused on smart and sustainable agriculture, digitizing cultural heritage, as well as encouraging women's participation in the digital and technology sectors. Since then these initiatives have progressed significantly. More information is available in this joint press release by the Commission and the Portuguese Presidency of the Council of the EU.

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