The EU Should Not Be Late With Digitalization

Last year in the middle of October the European Commission has presented the plan to improve the European infrastructure. The so called Connecting Europe Facility (CEF) will fund projects, which will close the gaps in the European energy, transport and telecommunications networks. The proposed instrument will become one of the most important novelties in the next multiannual financial framework (2014-2020). More specifically, the facility should promote the development of roads, railways, electricity grids, oil and gas pipelines and broadband infrastructure, which are crucial for the European citizens and companies.

There are almost 9.2 billion Euros earmarked for the support of investments in the fast and ultra-fast broadband infrastructure and pan-European digital services. The programme should also stimulate other investments from private and public sources. The European Commission predicts that the financing of investments in infrastructure from this facility will stimulate more than 50 billion Euros of other investments.

In the Industry, Research and Energy committee I became the rapporteur for the regulation on guidelines for trans-European telecommunications networks, which is also know as e-TEN and is an integral part of the facility. I would like to inform the readers how important this initiative is and what possible obstacles we can come across. I generally agree with the Commission’s proposal. The proposed instrument should mainly concentrate on the areas of infrastructure, where there are weaknesses, which can be mitigated or removed and which cannot be solved through other instruments or by pure commercial entity. Here I would like to stress that the financial support from this instrument should not lead to economic competition distortion. This means that regarding the broadband infrastructure, the financial support should mainly be directed into low and medium density areas, where private investors are not willing to invest due to low rentability of their investment.

This regulation together with the regulation on CEF should mainly create a business-friendly environment for the development of telecommunications infrastructure. This can be done through financial instruments such as guarantees and the project bonds. Grants should be used only in exceptional cases and as a complementary financial instrument. It will therefore depend on how the Member States will continue to stimulate the development of the telecommunications market; they should be removing obstacles that prevent faster development and they should promote competition in this market. Centrally planned and managed projects for the further development of the ICT sector are not recommended, due to the close links of this sector with the market and due to rapid changes in the orientation of its development. Broadband and digital services function in a fully market-based environment, this regulation should not intervene with non-market measures and influences, but it should responsibly mitigate the deficits in this sector. The principal deficit is connected with the digital divide between the rural and urban areas in the possibilities to connect to fast internet and the use of digital services linked to it. Overcoming this divide is one of my key priorities. It is one of the areas where public money can effectively promote the development of this market.

It is important to mention that the projects of common interest focused on the achievement of Digital Agenda for Europe goals, that is ensure by 2020 that all Europeans have access to internet speeds of above 30 Mbps and 50% or more of European households should be subscribed to internet connections above 100 Mbps, need to be based on realistic predictions of demand for services using fast internet.

Regarding the areas for projects of common interest in the field of digital services infrastructure, these areas can be generally also accepted. Nevertheless I would like to find out from the Commission based on which criteria they have chosen these priority areas. From my personal and professional point of view I would like suggest to add to the projects of common interest the area of crisis management, civil protection or programmes related to search and rescue. This area seems to me as a necessary part of the public cross-border services, where there is a common interest among the Member States. The chosen areas are mainly public digital services and therefore we cannot expect that the private investors will enter these projects in their initial phases. Grants in this case seem to be the effective mechanism in supporting these kind of services.

The Commission based on this proposal has large power in modifying, removing and adding new projects of common interest, which are essential to this regulation. That is why it is necessary to ensure particular control mechanisms that will scrutinize the actions of the Commission. ICT is a dynamic and rapidly developing sector, therefore on the one hand it is necessary that the regulation is flexible and takes into account development changes, however on the other hand it should not threaten the legal and investment certainty in this market, by changing and removing projects in the short-term.

The whole legislative process of the proposal will stretch over the course of one year, therefore it will be interesting to observe how it will develop. I look forward sharing with you the outcomes of the final version of the proposal.

By Evžen Tošenovský

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Category: CONTRIBUTORS, Evžen Tošenovský, SCIENCE