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European Commission Creates Plan for Europe to Challenge US Tech Dominance

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The European Commission will unveil its plans for a European “Digital Single Market” on May 6, The Wall Street Journal reports. The goal of bringing together member countries into a common market for digital goods, capital, content, and services is to bring Europe’s main industries into the digital age to help drive a continent-wide economic recovery, according to a commission strategy paper.

According to the paper, 41 percent of the two million European enterprises which employ 33 million people in networking infrastructure, automotive, and manufacturing don’t make any use of digital technology. By creating a single digital market, the commission plans to grow European GDP by €340 billion, create 3.8 million jobs, reduce public administration costs by 15 to 20 percent, and “restore Europe as a world leader in information and communications technology.”

The latter line provides a clue about concerns other than the sluggish economic recovery weighing on the commission strategy. US companies, most notably Google and Facebook, are perceived by some to have been eating European tech companies’ lunch, even in the wake of surveillance program scandals that once threatened to severely damage US companies’ prospects in Europe, while boosting regional players. The expected shift in revenues across the Atlantic has not happened, as shown by a recent Forrester study.

Enabling cross-border online shopping throughout the Europe Union is the first element of the plan. Only 14 percent of Europeans made an online purchase from another country in 2014, compared to 44 percent domestically. Only seven percent of European SMEs sell outside of their own country. Changing this means making changes to a variety of tax, copyright, consumer protection and other laws which can provide a disincentive to online growth for European businesses. The commission believes a single audit system for VAT purposes can be implemented, and that ultimately European businesses can be able to sell EU wide with only a month of set-up through electronic signatures.

The head of the project is EC Vice President for the digital single market Andrus Ansip. He told a technology conference in Sofia, Bulgaria, that “(t)he message Europe is sending its entrepreneurs now is: stay at home,” and pointed out that the 150 million more people in Europe than in the US provide a huge potential market, once that market is unified in law. Ansip also told the Journal that the strategy does not aim to limit US tech companies, and the EC itself has previously warned against a “fortress Europe” approach to cloud.

Geo-fencing is also targeted by the plan. Less than four percent of all video-on-demand content is currently available across borders in the EU. The plan also calls for removal of restrictions on data storage, location, and processing. Several such restrictions, particularly in Germany, have created controversy recently. Any changes to these conditions could have enormous impact on the data center industry.

Addressing Europe’s telecom environment, including radio spectrum allocation auctions, is also included. The telecom issue has been on or near the front burner since a European Parliament vote early last year. Under the plan, rules for over-the-top communications services will be reviewed, which could result in new restrictions for services like WhatsApp and Skype.

Similar effects could come from a proposal to regulate common market conditions for like services in the same market. Terms of service and pricing policies of internet platforms like search engines and app stores could be subject to new regulations, and communications services may be included in the EU ePrivacy Directive.

Other proposed changes include corporate tax being applied where value is generated, which could greatly increase the tax burden of companies like Apple.

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