A Digital Single Market Strategy

A new strategy for a digital single market, presented by the Commission last week, proposes an EU-wide focus on developing better online access for citizens and businesses, strong digital networks to encourage the provision of new services and the creation of new jobs.

The Commission believes that the highly fragmented markets in the EU and a range of barriers that exist across EU Member States needs to be addressed at EU level. In breaking down these barriers the Commission hopes to make existing markets more competitive so that they expand and diversify, while at the same time offer better prices and services for consumers. The Commission also wants to foster new job opportunities and create the best possible business climate for start-ups and existing companies.

The new strategy presented in a Communication, aims to respond to the challenges and opportunities presented by the Internet and ICT, setting out a three pronged strategy, accompanied by legislative and non-legislative initiatives in order to implement the strategy in practice.
The Digital Single Market Strategy is based on three strategic imperatives:

  1. Providing better access for consumers and businesses to online goods and services across Europe;
  2. Creating the right conditions for digital networks and services to flourish
  3. Maximising the growth potential of the European Digital Economy.

Better Access to Online Goods and Services

The Commission wants to break down a number of barriers to cross-border online activity, including the fragmentation of national markets, copyright and taxation. The Commission then sets out a series of proposed actions in order to achieve this.

The Commission wants to ensure simple and effective cross-border contracts for both consumers and businesses. The Commission argues that currently cross-border e-commerce is too complex and based on unclear and diverse rules. The Commission therefore wants a common set of EU rules for online and digital cross-border purchases to encourage and give confidence to businesses and consumers.

The Commission wants to see consumer rules for online and digital purchases to be implemented in full to improve their effectiveness. The Commission also wants to empower enforcement authorities, and improve coordinated monitoring of market activities and enable faster infringements detection.

The Commission also wants to address the lack of transparency and excessive costs, as well as, the perceived lack of inter-operability in cross-border delivery, which it considers disadvantages consumers.

The Commission wants to end to geo-blocking practices which disables people from purchasing products or services, or results in different prices, products or services, based on the consumer’s geographic location. The Commission considers geo-blocking de facto results in territorial restrictions, and can be the result of unilateral decisions by market players, of competitor agreements or vertical agreements, such as territorial distribution rights.

The Commission stresses the importance of copyright, certainly in the rapidly growing digital content industry, as it underpins creativity. However, the Commission recognises that there are a lot of barriers to cross-border access to copyright-protected content services and their portability as the result of the territoriality of copyright, contractual restrictions or business decisions. This includes harmonising exceptions to provide a greater legal certainty for the cross-border use of copyrighted content, (e.g in research and education based on text and data-mining).

The Commission argues that different VAT regimes across Europe result in substantial administrative burdens on EU businesses, even though there is some recent progress. 2015 saw the introduction of new “place of supply” rules, which mean that VAT on telecommunications, broadcasting and electronic services is based on the customer’s locations. Costs and administrative burdens have also been reduced by an electronic registration and payment system. However, business still faces many burdens which the Commission intends to address.

The Commission also wants to address burdens in cross-border e-commerce arising from different national VAT regimes to this end, the Commission wants to introduce a level playing field for EU businesses and ensure that VAT revenues go to the consumer’s Member State. Finally the Commission wants to think about how the tax treatment of e-services, for example e-books and online publications, should be addressed.

Key Actions and Initiatives under this pillar:

  • An amended legislative proposal on sales law to allow sellers to rely on their national law and harmonise rights and obligations of parties to a contract. The new proposal will aim to ensure that differences in national consumer contract laws or product specific rules do not block cross-border e-commerce.
  • A review of the Regulation on Consumer Protection Cooperation in order to The Commission also intends set up an EU-wide online dispute resolution platform in 2016.
  • The Commission will assess action taken by industry and propose measures in 2016 to improve price transparency and enhance regulatory oversight of parcel delivery. The Commission will re-evaluate the situation after two years.
  • The Commission will present legislative proposals to tackle unjustified geo-blocking practices in 2016. The e-Commerce framework could also be changed, as well as the framework set out in the Services Directive.
  • A Competition Sector Inquiry, focusing on the application of competition law in e-commerce.
  • Proposals to harmonise the EU’s copyright regime in 2015 in order to ensure the portability of legally acquired content and the cross-border access to legally purchased online services, respecting the rights of the audio-visual sector. This includes clarifying the rules of intermediaries’ activities in relation to copyrighted content and modernising enforcement of intellectual property rights focusing on commercial-scale infringements and its cross-border applicability.
  • A review the Satellite and Cable Directive, to enhance cross-border access to services of broadcasters throughout Europe and possible enlargement of the scope of the Directive to online transmissions.
  • An Action Plan on corporate taxation in the Single Market, based on the principle that profits should be taxed where the value is generated, including in the digital economy accompanied by legislative proposals in 2016
  • Extend the single electronic registration and payment mechanism to online sales of tangible goods applicable to both intra-EU and third country suppliers, to ensure competiveness and avoid market distortions.
  • The introduction of an EU-wide VAT threshold to assist help small start-up businesses allowing for home country controls, including an audit of cross-border businesses for VAT purposes.

Creating the right conditions for digital networks and services

The Commission wants to promote high-speed, secure and trustworthy infrastructure and content services by providing good regulatory conditions for innovation (in Cloud Computing, Big Data, Internet of Things), investment and fair competition.

The first issues that the Commission identifies is that the EU telecoms sector is suffering from isolated national markets, a lack of regulatory consistency and predictability and a lack of investments. The Commission argues that good telecoms rules are key to ensure competitiveness and these need to be adapted to new realities. The adoption of the Telecoms Single Market package, and proposals on net neutrality and the end of roaming charges, is only the first step.

The Commission will also address the radio spectrum and spectrum assignment to remove current barriers and promote competition and predictability for investors. This would still be managed by the Member States which would still receive the revenues.

According to the Commission, simpler and more proportionate regulation is key in the infrastructure competition. Very high capacity networks are needed in a climate of effective competition and with adequate returns the Commission will prepare initiatives to address this.

The Commission will also enhance bodies in which Member States are represented, such as the Body of European Regulators for Electronic Communications or the Radio Spectrum Policy Group to strengthen the institutional framework.

Ultimately, the Commission wants to create a level playing field so that telecoms operators can compete with services increasingly used by end-users as substitutes for traditional electronic communications services.

Noting the rapid pace of changes to the audiovisual landscape including new technological developments, new ways of content distribution and changing viewing patterns, the Commission wants the regulatory framework to keep up with the new reality fill in existing gaps, for example concerning on-demand services.

The Commission also believes that online platforms have potential for both consumers and businesses, but notes that fragmented markets make it hard for businesses to fully exploit this in the e-commerce. Not only do such platforms accumulate data and turn it into usable information, they innovate the digital economy, challenging traditional business models.

However, the Commission also sees new regulatory questions. Depending on their type and market power, online platforms can have significant influence. Some platforms are even able to de facto control the markets, without transparency, on their terms and prices and disadvantaging competitors, all of which the Commission wants to tackle.

The Commission also wants to tackle illegal content on the internet. The e-Commerce Directive obliges intermediary service providers to remove identified illegal action, however, this can be slow or complicated and is not free from errors. The Commission identifies differences in national practices and stakeholders complain about the ineffectiveness and lack of transparency. This makes combatting illegal content difficult.

Concerning data and privacy, the Commission believes that the Data Protection Regulation will increase trust and security in digital services. Once the general rules on data protection are agreed, the Commission intends to review the e-Privacy Directive as the privacy rules only apply to traditional companies.

Finally, the Commission highlights its efforts to tackle cybercrime through both national and EU-level cybersecurity strategies and a Regulation. The Commission considers these essential to combat cybercrime, which undermines trust, fundamental rights and the efficiency of services. In the European Agenda on Security, the Commission proposes to tackle more cybersecurity challenges, based on a joint approach with all relevant actors, from industry to authorities.

The next step will be implementing the Network and Information Security Directive, which is currently in the legislative process.

Key Actions and Initiatives under this pillar:

  • A review of all Telecoms legislation.Harmonisation of radio spectrum and spectrum assignment under an EU framework with common objectives and criteria.
  • Proposals regarding the coordinated release of the 700 MHz band, and more fundamental changes to ensure good connectivity, e.g with the 800 MHz band and the 4G mobile networks.
  • A review the Universal Service Directive, to ensure connectivity in inaccessible areas and places of public interest.
  • To this end, the Commission plans to review the Audiovisual Media Services Directive. It wants to focus on whether rules should be adapted for broadcast and on-demand services, also focussing on the protection of minors and advertising. It intends to consider broadening the scope of the rules to new services and players. Finally, it will try to promote European works in on-demand services.
  • Assessment of the role of online platforms in 2015, focusing on transparency in search results, platform’s information collection and usage, relations between platforms and suppliers and constraints to move from one platform to another.
  • Examine the need for new measures to tackle illegal content on the internet, with intermediaries exercising greater responsibility. The new measures will respect the fundamental right to freedom of expression.
  • Review the e-Privacy Directive and possibly extend rules to service providers using the internet.
  • Set up a Public-Private Partnership on cybersecurity in 2016.

Maximising the growth potential of the European Digital Economy

The Commission wants to focus on research, innovation and investments in ICT infrastructures and technologies, such as Cloud Computing and Big Data, and boost competiveness, public services, social inclusiveness and skills. The Commission wants to see the digitisation of all sectors.

The Commission believes that technical and legislative barriers in a fragmented market must be removed to enable cloud computing, big data, data-driven science and the Internet of Things to reach their full potential in the EU. Barriers include data location restrictions, a fragmented implementation of copyright rules, lack of transparency, lack of open and interoperable systems and services and restrictions on data portability.

The Commission also believes that the adoption of the data protection reform package should ensure trust of Businesses and consumers in cross-border cloud services by providing uniform, up-to-date rules in the EU. However, data portability or the free flow of data is not yet ensured. Issues such as ownership, interoperability, usability and access to business-to-business, business to consumer, machine generated and machine-to-machine data need to be addressed so that access to data enables innovation.

According to the Commission, interoperability in the digital economy is very important but to achieve this, effective communication and connection will be key. While Member States agree on the basic requirements of interoperability, based on the 2010 European Interoperability Framework, the Commission wants this framework to be updated and extended.

Standardisation, as put forward in the EU Rolling Plan for ICT Standardisation instrument, is very important. However, the Commission is worried that standardisation is not keeping up with changes in technologies. The result is that industry is introducing standards in a bottom-up fashion, often outside the EU, which undermines the EU’s competitiveness.

The Commission therefore stresses that currently missing technological standards must be defined and standardisation bodies be mandated to support the digitisation of industrial and service sectors. In this regard, the Commission refers to the Internet of Things, cybersecurity, Big Data and Cloud computing.

The Commission also wants a framework for standard essential patent implementers and proprietary right holders to engage in negotiations to ensure fair licensing conditions. Finally, the Commission wants to integrate national catalogues of ICT-standards and interoperability specifications into European catalogues.

This should guide public procurers, enable swift standards adoption and avoid market fragmentation. Focus should be on standards in health (telemedicine, m-health), transport (travel planning, e-freight), environment and energy.

Finally, to make the Digital Single Market more inclusive, the Commission wants employees’ digital skills and expertise to be improved in all economic sectors and calls for change in education and training. The Commission highlights EU initiatives, such as the “Grand Coalition for Digital Jobs”, “EU Code Week” and “Opening up Education” as initiatives that could be drawn upon. The Commission will support Member States in this regard.

The Commission also wants E-Government to be focused on, based on the “Once Only principle” that public administrations reuse information about citizens or companies that is already in their possession, without asking for it again.

The Commission also wants to complete cross-border contact points between public authorities and citizens/businesses. This could be based on the Digital Services Infrastructures of the Connecting Europe Facility.

Existing European portals, networks, services and systems (e.g. Your Europe, Single Points of Contact, Product Contact Points, Contact Points for Construction Products) should be extended, integrated and linked to the “Single Digital Gateway.”

The Commission also wants to see the interconnection of business registers by 2017 and for Member States’ to accelerate their transition towards full e-procurement and interoperable e-signatures.

Key Actions and Initiatives under this pillar:

  • A new European Free Flow of Data initiative in 2016 to tackle restrictions on the free movement of data for reasons other than protecting data privacy. 
  • Launch a European Cloud initiative covering certification of cloud services, contracts, switching of cloud service providers and a “research open science cloud.”
  • New e-Government Action Plan 2016-2020
  • Launch a pilot project, together with Member States, to promote the “Once Only principle” across borders in 2016.

Next Steps

The Communication have been sent to the Council and the European Parliament. Either or both of these institutions can decide to formally respond to it.

The Commission will come forward with legislative proposals aimed at removing barriers to the creation of the Digital Single Market and engagements with stakeholders. Digital trade policy should also be included in EU Free Trade agreements.

The Commission wants to work together with the EIB, private investors and entrepreneurs, project promoters and Member states to ensure good usage of funding and technical assistance. Funding for the implementation of the strategy will be provided through European Structural and Investment Funds (€21.4 billion), the European Investment Bank (EIB) and the European Investment Fund.