EU’s Digital Compass must point north for tech success
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EU’s Digital Compass must point north for tech success

Tuesday, 16 March 2021
This is an opinion article by an external contributor. The views belong to the writer.
On 9 March 2021, the Commission presented a vision for Europe’s digital transformation by 2030.

The EU has published its 2030 Digital Compass, unveiling a plan to transform the bloc into a tech powerhouse and igniting hopes for a revitalization of European R&D amid a Covid-induced slump. Among the ambitious goals identified in the proposals, Brussels is aiming to ramp up its semiconductor production, create the world’s first quantum computer and expand internet connectivity across the entire continent by the end of the decade.

These targets, while commendable, are tall orders given the sluggish state of affairs in European digital performance. High-speed internet access and the rollout of 5G could prove to be particular sticking points, with certain countries (such as Italy) ploughing a different furrow to the rest of the bloc and other major economies (like Germany) lagging woefully behind in their implementation of such digital key technologies as 5G networks.

Setting a high bar

After the pandemic exposed Europe’s low rate of digitalisation in an increasingly cybercentric world, the Digital Compass is intended to chart a roadmap for making the bloc competitive once more. Brussels hopes to boost its performance by producing one fifth of all semiconductors globally by the end of the decade and manufacturing the first quantum computer by 2025. Importantly, it’s also targeting the                                 construction of 10,000 climate-neutral facilities to build an independent cloud infrastructure by 2030, too.

The fact that the EU already looks set to miss previous targets on enabling all European homes to access minimum internet speeds of 100Mbps by 2025 is an indicator of the size of the challenge ahead. The majority of member states enjoy full fiber (FTTP) connectivity in less than half of their territory, while many rural parts of the continent still suffer from poor or non-existent broadband, despite considerable investment over the past 14 years. What’s more, two-thirds of EU countries have not yet allocated 5G spectrum to their operators, with more than half of them failing to launch any kind of 5G commercial services at all.

Italy’s interventionist approach at odds with bloc

Traditionally, Italy has served as a microcosm of that slow-moving shortfall, epitomizing the lethargy that has held the bloc behind its international competitors. The creation of Open Fiber in 2016 – a genuine contender to the incumbent and somewhat complacent telecoms giant Telecom Italia (TIM) – sparked competition in the country for the first time in decades, even serving as a model for other nations like the UK and Germany to follow. Since its inception, Open Fiber has brought ultra-fast broadband to 8.5 million Italian households and significantly improved national performance in the Digital Economy and Society Index (DESI).

Despite that, there are now plans in the pipeline to reintegrate Open Fiber with TIM, essentially returning to the quasi-monopoly that TIM held for so long and so ineffectually. Understandably, the potential merger – instigated by the Conte government – has raised concerns from various quarters. Not only have concerned consumer groups requested Brussels to conduct a thorough vetting of the deal, but Open Fiber stakeholders are considering the sale of their assets to foreign interests. Given that the EU’s €750 billion Recovery and Resilience Facility (RRF) explicitly states that the funds must not be used to distort competition or unfairly advantage dominant operators, there is a real danger that the merger would render Italy ineligible to receive that promised cash – undoubtedly a huge blow to PM Mario Draghi.

Other states straggling as well

Not that Italy is an outlier when it comes to subpar performance in the digital stakes. There are only 10 5G stations per one million citizens in the EU compared to 1,500 per million in South Korea. What’s more, while Europe has upgraded just 1% of its existing stations to handle 5G, South Korea has done so with 98% of its infrastructure. Europe’s listless uptake of 4G solutions meant that it fell far behind the US and Asia in terms of app development, with only 26 unicorns (billion-dollar businesses) in the EU in 2017, compared to 106 in the States and 59 in China. A repeat performance with 5G – upon which the success of crucial technologies like self-driving cars, smart factories and the Internet of Things hinges – could see similar results this time around, too.

Opportunity knocks

Still, it’s not all bad news. Investment has been an area in which Europe has underperformed in recent years, but European venture capital tripled in the years between 2016 and 2019, with the InvestEU program earmarking €38 billion for R&D in the tech sector and a significant chunk of the €750 coronavirus recovery fund going to the same purpose.

Of course, it doesn’t help when members like Italy are pulling in a different direction to the rest of the bloc, and ensuring the right funds go to the right projects is a complicated process that will take no little time, dedication or forward planning. However, the single market and the half-a-billion-populace it serves are unique advantages which could serve as the springboard to European tech success – if only the economic heft, political willpower and judicious preparations are put in place to support it.