Is The New Generation Of EU Operators Ready To Overtake Dominant U.S. Players?

Fresh and interesting article posted on Re/code about the EU legislative agenda to regulate Internet companies and to prime European firms to better compete with U.S. tech heavyweights.

Happy reading!


"Tomorrow, when Silicon Valley wakes up, its newest fracas with Europe will be well under way.

On Wednesday, European Commission Vice President Andrus Ansip is expected to reveal the “Digital Single Market” strategy, a legislative agenda to regulate Internet companies and to prime European firms to better compete with U.S. tech heavyweights. Basically, they’re trying to give homegrown firms a fighting chance against established American companies.

This is different than the European Union antitrust probes into Google, which launched last month. For one, it’s not about slapping wrists when a company crosses a line. Instead — and this is what U.S. tech companies fear — it’s a bid to move the entire line back.

Also, it’s not just Google. The regulation is likely to strike dominators like Apple, Facebook and Amazon, as well as newcomers Uber and Airbnb.

Politico got its hands on (several) leaked documents of the strategy, its latest arriving today. Tomorrow’s inquiry will not create new laws. It’s more of an opening salvo — it begins a winding bureaucratic process that would, in theory, approve new regulations. According to the leaked docs, the framework for those regulations lack specifics. But they don’t lack chutzpah: They touch on nearly every aspect of digital platforms, from privacy and copyright to big data, e-commerce and the sharing economy.

Silicon Valley will find most of the expected proposals benign, or even welcome. There are moves to flatten taxes for e-commerce transactions and broadly ease the process of doing business across the EU’s 28 member countries.

Other parts, however, they will find very unwelcome indeed. Here are four issues in the proposal that tech companies are watching closely:

Telecoms vs. OTTs

The standoff between Europe’s telecom titans and U.S. tech platforms is a long festering one. Again, the latter will praise some of the strategy here. By 2016, the EU plans to develop a consistent spectrum policy and spur more broadband investment. Fairly innocuous.
It’s when the language veers into competition that tech players — particularly Facebook and Microsoft, the parents of WhatsApp and Skype — will perk up. The strategy mentions the telephony alternatives that have cropped up recently, which while unnamed, appears to be referring to the over-the-top mobile apps like WhatsApp and Skype that allow people to make calls through data instead of traditional voice plans.
The commission’s proposal, the document reads, will “[ensure] a level playing field for market players and consistent applications of the rules.” That’s a phrase popular with several European telecom executives, including Deutsche Telekom’s Timotheus Höttges, who has publicly called for Google and Facebook to face the same regulation as his company.

Cloud computing initiative

This one is also not new. For several years, the EU has touted plans for an investment in cloud computing to boost the continent’s economy. Tomorrow, Ansip is expected to announce the launch of the European Cloud initiative for research into cloud services and the Internet of Things. Details are thin. Günther Oettinger, the EU’s digital commissioner and Europe’s most outspoken critic of the Valley, has suggested investing $3.17 billion to incubate European Web companies to overtake rivals across the Atlantic.

Ex-ante rules

Google is not mentioned by name in the leaked strategy document. If you read it closely, though, Google is hard to miss. In a portion on the dominance of online platform in daily lives, the strategy dog-whispers the search giant, as well as its rival Amazon:

Some online platforms have evolved to become players competing in many sectors of the economy and the way they use their market power raises a number of issues that warrant further analysis beyond the application of competition law in specific cases.

That language is nearly identical to the charges the EU’s antitrust commission leveled against Google for wielding its search dominance in another market, shopping. (Timely that the new EU charges come a day after Google announced the expansion of its comparison services for auto insurance, hotels and, shortly, mortgages.) But this argument claims that antitrust law is inadequate to deal with evolving Internet firms, an idea that, reportedly, has taken a strong hold in the European Commission.
Libertarian-leaning watchdogs equate this idea with a European nanny state. “The idea is that Europe would subject all of these companies to a perennial regulator, setting ex-ante rules” said Geoffrey Manne, director of the International Center for Law and Economics. (David O’Sullivan, the EU’s ambassador to the U.S., took to Wired to make the counterargument.)

Sharing economy in the mix

Uber has had its share of troubles in Europe. But it hasn’t been in the EU’s cross-hairs. It could be soon. By the end of the year, the commission plans to submit, per the documents, “a comprehensive assessment of the role of platforms, including in the sharing economy” — putting massive startups like Uber on its radar.
That assessment will include regulating “transparency” in search, data collection, supplier relations and illegal content. The EU, from the looks of it, is also coming after the cherished walled gardens of tech platforms, noting how the regulation will probe the “constraints on the ability of individuals and businesses to move from one platform to another.”
So far, the platforms have stayed quiet, letting the trade associations speak for them. “[W]e would have concerns if this opportunity was turned into protectionism against innovative U.S. Internet platforms,” Michael Beckerman, president and CEO of the Internet Association, whose members include Google, Facebook, Amazon and Uber, said in a statement. “The Internet and EU Internet users do not need or want an EU firewall.”

Pretty diplomatic. Though that could change tomorrow."