European Affairs

Summer 2001

 

Industry and Technology
EU Plans Concrete Steps to Technological Excellence
Rosalie Zobel
Director, New Methods of Work and Electronic Commerce,Information Society Directorate-General, European Commission;and Paul Timmers, Head of Sector for Electronic Commerce,Information Society DG, European Commission

 

The European Union's bid to become "the most competitive and dynamic knowledge-based economy in the world" by the end of this decade has been met with skepticism in some quarters. The goal, set by EU leaders at a historic summit meeting in Lisbon in March 2000, might easily sound over-ambitious.

It should be remembered, however, that only a few years ago so-called experts claimed that it would never be possible to realize one of those other great European ambitions, the single currency and the single monetary policy.

Despite their predictions, today the euro is used for financial transactions from the north of Finland to the south of Spain, and starting on January 1 it will become the everyday currency of most EU countries.

The eEurope 2002 action plan outlines some of the concrete steps needed to achieve the strategic goal of Lisbon over the next few years. The plan addresses three main areas, the first of which is making the Internet cheaper, faster and more secure.

The second is improving e-economy skills for everyone, but especially for young people and for Europeans at work, with special provisions for disadvantaged groups. The third priority is to stimulate use of the Internet for e-commerce and for government business, including health and transportation.

In all these areas, the plan provides for a mix of actions by the EU institutions, member states and industry. These actions include updating the legal and self-regulatory framework, promoting technology development and industrial collaboration, and supporting training and awareness projects.

At their Stockholm summit meeting this March, EU leaders took stock of the plan, and committed themselves to further European modernization. They agreed that economic reform, employment and social policies should mutually reinforce each other. They called for faster implementation of the plan and a new impetus in areas where progress had been lagging.

The Stockholm meeting concluded that the eEurope action plan had been successful in many ways. For example, a regulation on unbundling the local loop2 was adopted in record time. This will increase competition and soon reduce Internet access charges, which are still relatively high in some EU countries compared to the United States.

Another success is that after long discussions, ICANN, the worldwide organization for the management of Internet domain names, has accepted in principle to introduce the ".eu" domain name, with a registry to be set up in 2001. A number of specific initiatives have been launched, such as the Smart Card initiative and the eContent program, the latter supporting the development of European digital content.

Unfortunately, progress has been slower in some other areas. eGovernment has not yet really taken off throughout Europe, despite good intentions and action plans in all member states. There is still a need to improve network security and dependability.

And although Internet access has exploded over the last year, there is still a need to improve the trust and confidence of Europeans in on-line operations, in order to boost consumer shopping.

The Stockholm Summit put great emphasis on labor policy, setting up a high-level taskforce to address the skills and mobility required for economic growth. For example, the

European Information Technology Observatory (EITO) 2001 report forecasts a shortage of skills to fill 3.7 million jobs in 2003 in the information and communications technology sector, which could mean a loss of up to two percent of GDP.

The eEurope initiative consists of relatively short-term actions intended to underpin the longer term Lisbon strategy. An eEurope+ Action Plan was launched by and for the candidate countries for EU membership at the Gothenburg Summit in June 2001.

Some specific areas of the eEurope plan are of particular relevance to business. The Commission, for instance, recently launched two policy initiatives to support industrial cooperation on the security of networks.

One initiative sets out an EU policy to combat cybercrime and computer fraud, the other seeks to promote cooperation between the public and private sectors on the dependability of information infrastructures, including early warning systems and improved co-operation between national computer emergency response teams.

Projects may be co-funded by the EU's Information Society Technologies Program. We have held joint workshops with U.S. participants, and hope for continued collaboration.

Smart cards are a most promising technology for secure and private access to the information infrastructure. They are key to secure mobile communications, electronic financial services such as e-payments, and access to critical on-line services such as those using electronic signatures.

Smart cards are already widely used in mobile communications and electronic payments in Europe. So far, however, their full potential has not been realized, owing to lack of interoperability. For example, over 20 electronic purse systems based on smart cards are in use in different countries.

The eEurope Smart Card initiative seeks to promote co-operation throughout the European Union, both within and between industrial sectors, with the aim of moving smart cards from a "niche" technology to the mainstream. It is the largest smart-card initiative in the world, with the participation of more than 250 active organizations and companies from a wide range of sectors. It is open to all.

E-business is often described as the gateway for small and medium-sized enterprises to both local and global markets. Although many successful examples in Europe have shown this to be true, the opportunities are sometimes hard for smaller companies to exploit.

There are now more than 19 Million SMEs in Europe, representing over 99 percent of enterprises in most EU countries. They generate a substantial share of GDP, are a key source of jobs, and catalyze entrepreneurship and new business ideas.

The success of eEurope is critically dependent on SMEs' full participation in e-business. On average, across Europe, 70 percent of these enterprises have access to the Internet, but only a quarter of them use the Internet for buying and selling. Most use it for information only, even in the most advanced Member States, and risk missing business opportunities.

The GoDigital initiative, a joint project by EU member states, industry and the European Commission, helps SMEs to use more advanced applications of the Internet for e-business. It includes actions to help them overcome barriers such as lack of skills, difficulties in getting started, concerns about the trustworthiness of the Internet, and the complexity of laws and regulations, especially across borders.

A broad debate is now under way in Europe about the future of mobile communications and mobile commerce. Second generation mobile telephony, based on the Global System for Mobile Communications (GSM), is a huge success, with over 63 percent of all Europeans having a GSM-based cellular phone.

Industry and governments are preoccupied, however, by the enormous costs of licenses for the third generation mobile networks, totaling over a130 billion in the EU, and by the continued uncertainty over which new mobile services will appeal to consumers.

The European Commission is confident in the future 3G market. Mobile Internet is one of the major routes towards the Lisbon policy objectives, with a great potential for creating jobs. The success of GSM means that most Europeans are comfortable with mobile communications, and will easily make the transition to new business and entertainment services.

The Commission would like to support the transition from the second to third generation of mobile networks. The EU Information Society Technologies R&D program will research technical issues and experiment with innovative wireless applications. We will also assist in getting the regulatory framework right.

The Commission has also called for accelerated introduction of the next-generation Internet protocol, IPv6. The main advantage of this is that it permits the connection of many more devices to the Internet, including cell phones. The introduction of IPv6 will also strengthen security and privacy in the networks.

Electronic commerce policy has evolved rapidly over the past few years and much progress has been made. Yet many new challenges lie ahead as the development of new technologies continues to accelerate.

An example of an emerging technology is nano-technology, which can be used to tag individual products, for example clothing, medicine or packages. These tags, combined with ubiquitous Internet access supported by IPv6, will allow a much more fine-grained interaction between businesses and consumers, and much better tracking and tracing throughout the supply chain.

Obviously new developments in technology hold great potential for new services and job creation. A consequence might also be that our concept of what constitutes a personal "sphere of privacy" will change. This may lead to a stronger call from consumers for further privacy enhancing technology, together with the strengthening of codes of conduct for marketing organizations.

A second example is the emerging technology for dynamic business networking, involving partnerships that design, produce and deliver individually personalized products or services on demand.

Such dynamic virtual enterprises might be shorter-lived than the products they deliver. But the products will still require after-sales service, maintenance, repair, and recycling after the virtual enterprise has ceased to exist.

The legal framework for such dynamic virtual enterprises is not yet clear. Questions arise for example, about sharing liability, ownership of customer data and intellectual property.

The longer-term structural economic impact of e-commerce also presents policy challenges. What will be the impact, for example, of e-markets or shared trading across a whole industry sector? This is of great interest to economists, particularly those responsible for competition law.

Finally, the Internet challenges the very process of policy-making and governance, especially in the global context. Business and consumer organizations, as well as public policy makers, are struggling to decide the right mix of policy instruments.

They ask themselves, which are more important: law, self-regulation, co-regulation, or purely market-driven rules, such as de facto Internet technical standards? As policy making becomes global, which parties should be involved, who are the legitimate decision makers, how should new rules be implemented and enforced? These are difficult questions.

In recent years the European Union has articulated a comprehensive eEurope policy. One of the key challenges is creating a high level of trust and confidence in the emerging information economy and society. It is now time to test these policies in the real worlds of business and work.

At the same time we must continue thinking longer-term. We can already see new challenges on the horizon. These may still seem insignificant. But we have all learned one thing from the Internet and its effect on the economy and society: even small waves can become tsunamis.