Emilio García García
Digital Policy Analyst, former Director of Cabinet of the Secretary of State for Telecommunications and analyst for Fundación Alternativas
The low turnout of Spanish citizens in the last elections to the European Union Parliament, 49.21% according to official data, is a reflection of their limited interest in the public policies and regulations emanating from Brussels. Nor does it seem to be particularly concerned about how digital transformation is transforming our society and economy, if we judge by what is reflected in the latest CIS barometer of May 2024.
The apathy towards both issues is incomprehensible, if we consider that a very relevant part of our legal system comes from EU Directives and Regulations and that the digital economy accounted directly, indirectly and induced for 24.2% of the Spanish gross domestic product (GDP) in 2023.
For these reasons alone, it is necessary to open the debate on European Open Strategic Autonomy in the framework of the 2024 electoral cycle, as Fundación Alternativas has done. In particular, devote ample space to talk about the technological field, and how Europe can ensure in this area its “capacity to act autonomously when and where necessary and, as far as possible, with partner countries”. And let’s start with an inconvenient truth: the EU is almost entirely dependent on the US digital ecosystem for technology. In March 2024, eight of the top ten companies with the largest market capitalisation in the world were US-based technology companies, while none of the top twenty companies in this sector were based in the EU. We will have to wait and see how effective the oversight mechanisms introduced in the EU’s Digital Markets and Artificial Intelligence laws will be in levelling the market geographically with balanced and fair competition.
Only in one area of the digital sector does the EU maintain a certain degree of autonomy and digital sovereignty: telecommunications. However, in this segment too, Europe is facing difficulties. European telecoms companies are in an extremely weak financial situation with low ARPU, declining ROCE and a dramatic reduction in stock market value over the last two decades. A situation in which operators have to face investments of more than 200 billion euros, required for fibre and 5G network deployments to meet European needs. Digital infrastructures in which the convergence of the network with the cloud facilitates the entry of large US technology companies (Amazon, Google and Microsoft dominate more than 75% of this market) represent a new challenge.
It is therefore urgent, first and foremost, for the new European Commission to address the reform of the telecommunications sector, as Enrico Letta’s report also deemed necessary. The regulatory update of the telecommunications market in Europe will have to move away, at least in part, from the approaches of the outgoing European Commission’s White Paper. Firstly, if it is to be carried out in an agile manner, it must not fall into excessively and unjustifiably centralising options that have already been rejected in the past (strengthening the Commission’s role in spectrum management, EU-wide operating authorisations, single wholesale products, etc.). Secondly, it must be self-critical and renew the criteria used to analyse sectoral mergers and acquisitions, for example, giving priority to subsidiarity, incorporating conditionalities regarding the maintenance of investments and employment or regarding the entry of third country public authorities as shareholders. Finally, including measures on the cloud infrastructure segment in the reform.
But the future of Europe’s strategic digital autonomy is also at stake in the area of critical digital technologies. The Commission has identified semiconductors, artificial intelligence (AI) and quantum computing as presenting the most sensitive and immediate risks to the EU’s economic and technological security. In none of these areas can Europe act alone in the face of China’s rise. The US and the EU have adopted a strategy of competitive collaboration within the Trade and Technology Council, with working groups for scientific cooperation, collaborating on standardisation, exchanging best practices in aid programmes and sponsoring other assistance instruments. It seems necessary and mutually beneficial for both sides to pursue this line. However, the EU should not limit itself to an uncritical alignment with US semiconductor trade restrictions on China, strive to balance the relationship in quantum technologies by strengthening investment and not rely solely (once again) on regulation for its role in AI. The EU must also strengthen its cooperation with other allies such as Japan or Korea in these fields, allowing it to eliminate risks of over-dependence on the US.
Sufficient investment is the key to the successful implementation of policies on critical digital infrastructure and technologies. People as ideologically far apart as Varoufakis and Draghi agree on the need to strengthen technological investment in Europe. The Recovery and Resilience Mechanism (RRM) has made it possible to alleviate this shortfall in a timely manner, enabling member states to invest more than $129 billion in the digital transition between 2021 and 2027. But the public investment effort must be continued, reinforcing with an effective economic allocation of common funds the platform of strategic technologies for Europe planned for the next legislature, which has been left as a substitute for a sovereign fund without a budget, for which the recovery funds that are not executed before 2026 will be available. It is also necessary to facilitate the development of private investment, for example by removing restrictions to have a truly single technology investment market, as proposed by Enrico Letta.
This is what some, including myself, believe Europe needs. However, the strengthening of extreme right-wing forces could also have consequences. Firstly, Parliament could increase resistance to devoting resources to programmes to boost digital transformation and to the new oversight functions to be exercised by the Commission as a result of new regulations (Digital Service Act, Digital Market Act, Artificial Intelligence Act). Secondly, the Commission’s insistence on monitoring digital disinformation (mainly in relation to the Kremlin) has also been criticised by identity and nationalist forces. Finally, the proposals in Enrico Letta’s report for a more integrated digital market are likely to be sidelined. The risk of a slowdown in the momentum of EU technology policy could be at its greatest if, in addition, appointments to the commissions for digitalisation or competition were to fall to identity-based forces.
In short, Europe faces complex challenges in the coming years, and citizens need to be aware of the risks and opportunities. In the new European legislature, the EU will have to make its strategic digital autonomy a reality, which can be facilitated by the effective application of rules such as the Digital Markets Act and the reform of the digital infrastructure sector. Cooperation with the US in critical technologies is necessary, but it should be pursued from a more balanced position, open to other allies and eliminating the risks of high dependence in the transatlantic relationship in which the partner could be less reliable than it has been so far. To this end, the EU must also equip itself with funding mechanisms to facilitate the development of its digital infrastructures and critical technologies.
