Europe’s Shortsighted Digital Future

The European Commission has unveiled the last major package of its Digital Single Market (DSM) initiative. The U.S. Chamber of Commerce is a long-standing supporter of the DSM’s aim to secure Europe’s future as a leader and contributor to the increasingly global digital economy. However, one is struck by the shortsightedness of digital economy regulations emerging from Brussels.

As part of the package, the Commission announced its proposal to replace current rules governing telecommunications operators with a new regulation expanding to all electronic communication services. The law aims to add further protections to consumer privacy without obstructing the ability of businesses to innovate.

The proposed e-Privacy regulation creates uncertainty that will raise unnecessary costs for business and create confusion for consumers. All the while, there is no demonstrable evidence that it will either increase privacy or encourage the movement of data or electronic communications.

The argument for special e-privacy rules has not been made. Nor does the regulation square with recently passed, but yet to fully be implemented measures like the General Data Privacy Regulation (GDPR). The proposal creates the possibility that divergent approaches to safeguarding consumer privacy will be used under GDPR and e-Privacy.

Expanding the scope of obligations to include emerging electronic communications services, for example over-the-top (OTT) services such as WhatsApp and Skype, is particularly worrisome. Overly prescriptive requirements will only stifle future innovation.

Further, the provisions affecting online advertising will have negative downstream effects, particularly on Internet third parties, such as publishers and those in the advertisement technology ecosystem.

The DSM was launched as an ambitious strategy aiming to streamline regulation resulting in a single market for digital goods and services. Increasingly, it is in jeopardy of becoming a disjointed series of policies. As the Chamber and EU industry groups have argued, the EU should make fostering the movement of data a top DSM priority.

While EU’s top leaders have frequently stated their commitment to data flows in the EU, the recent package fails to deliver on the Commission’s promise to propose either a legal mechanism to combat forced localization requirements or a process to work with Member States to eliminate unnecessary restrictions on data flows. Instead, it focuses on creating new measures that are potentially inconsistent with current regulation.

Sound regulation is never a concern, but layering of regulation with little regard to costs or efficiency is a formula for killing growth, jobs, and innovation.

The EU must act now to eliminate barriers to the movement of data within and outside of the Members States, or else it will take too long to realize the full benefits of the digital single market. With U.S. and EU firms already supporting thousands of jobs in each other’s markets, the Chamber is committed to helping the EU establish a single market that leverages cross-border data flows to enhance growth and job creation. Getting the DSM right is critical to Europe’s long-term growth and digital future.