Europe needs concrete action on connectivity policy

This is a crucial time for Europe to ensure that it can compete and thrive in the digital economy. 

We welcome the vow of the European Commission’s president, Ursula von der Leyen, to put research and innovation at the heart of our economy and boost investments in the next wave of frontier technologies, as well as the need for new approaches to competition policy and mergers to enable European companies to scale up.

There’s growing momentum from policymakers and political leaders across Europe for the European Union’s (EU) next term to focus on competitiveness, and a more ambitious industrial policy enabling the growth of technologies like artificial intelligence (AI), quantum, 5G and very high-capacity networks.

Europe now needs to see these statements evolving into clear-cut plans and concrete action that fosters innovation, attracts investment and delivers a true digital single market.

A tale of two futures

Five years from now, Europe could be experiencing a new industrial internet age. It could be benefitting from businesses driven by digitally skilled teams, exploiting a rich mix of 5G and fibre-enabled technologies. Gigafactories operating with newfound scale and agility, powered by automation and the Internet of Things. AI delivering a productivity boost across sectors.

Deloitte estimates that this digitalization opportunity – meaning the use of digital technologies to transform business models – could boost overall GDP by €1 trillion. Research shows that connectivity can help reduce EU emissions by 2030 by 15%, and the transformational role of 5G by a further 5%.

But it is equally possible to paint a different picture of Europe in 2030. One where 5G standalone deployment on mid-band spectrum – a critical enabler for industrial digitalization and the speed of its adoption – continues to lag China and the US, stifling Europe’s ability to compete on the global stage.

The Commission’s latest assessment showed just how far away Europe is from meeting its Digital Decade targets for 2030 – with high-quality 5G networks only reaching half of EU territory, and their performance still insufficient to deliver advanced 5G services. With fiber coverage at only 64 percent, we are still far from the goal of “fixed gigabit connectivity for everyone”.

Which path Europe takes ultimately depends on policymakers, their appetite to reboot regulation and whether they can create a more attractive investment climate for the companies responsible for digital infrastructure.  

Learning from past mistakes

Meeting Europe’s ambitious connectivity targets for 2030 – all households covered by a fixed gigabit network and all populated areas covered by 5G – depends on continuous investment from telecoms operators. That investment gap is estimated at €200 billion, according to the Commission.

Meanwhile, operators have been subject to extractive spectrum auctions sometimes reaching costs in the hundreds of millions, often made worse by short license durations. Where operators have sought to gain scale through consolidation to facilitate greater investment in infrastructure, they have sometimes faced distortive remedies.

Moreover, the entire digital ecosystem would benefit if “regulatory modernisation” could be introduced. Reducing the administrative burden and focusing on fewer, more flexible and simpler rules seems to be the right ingredients if Europe would like to be ready for the next cycle of innovation.

These factors – combined with soaring costs, inflation, interest-rate hikes and pressure to maintain low prices – have created a perfect storm threatening the telecoms sector’s long-term viability, putting Europe’s own digital ambitions at risk. Something needs to change.  

Governments doing the right thing

Signs are starting to emerge of policymakers moving in the right direction. Over the past year, there has been growing acceptance of the need to address the challenges facing the sector.

Enrico Letta, former Italian prime minister, has called for the completion of the single market for telecoms, and asked policymakers to consider the necessity of some level of consolidation within national markets. France and Germany have called for more investment, and a true single market to ensure that Europe can live up to its ambitions. These messages are reflected in the mood music coming from recent telecoms ministerial meetings. Issues like improving cybersecurity and doing more to protect children online, are also – rightly – demanding attention.  

Policymakers are clearly recognizing the need for a new approach – and that it has become unavoidable. The job now is getting it done.

For this, the Digital Networks Act is key. Telecoms ministers will play a vital role in getting this over the line in Brussels, and ensuring the subsequent necessary action is taken in member states. It must not be allowed to drop down the priority list in the next EU mandate.

Some have already demonstrated their willingness to evolve. Germany’s telecoms regulator is consulting on proposals to extend spectrum licenses for another five years. In return, operators must commit to reaching certain coverage obligations, such as covering 99 percent of rural households with fast connectivity by 2030.

These proposals will bring far more benefits to German citizens than the alternative – an auction taking significant capital from telecoms operators that could have otherwise been spent on infrastructure improvements. Spain, France and Portugal have also made similar decisions in recent years.

Ultimately, this is an argument for the future of European competitiveness, and what it means to be European. It’s an argument for European citizens and their right to a digital future, with the same opportunities as peers abroad. Thankfully, the shoots of change are starting to emerge. Policymakers must now allow them to flourish.