Download The role of ICT Investment in Solving Europe`s Economic Problems

SPEECH/03/433
Mr Erkki Liikanen
Member of the European Commission, responsible for Enterprise
and the Information Society
"The role of ICT Investment in Solving
Europe’s Economic Problems"
TeliaSonera Executive Customer Event 2003
Stockholm, 26 September 2003
1. Introduction
Can investment in information and communication technologies – or ICTs - solve
Europe’s current economic problems?
Speaking in Stockholm today to a group of the country’s prominent business
leaders and investors – just two weeks’ after the result of the Swedish referendum
of the euro - this theme is perhaps more pertinent than ever.
2. ICT and Productivity
My answer is that I do believe that there is a case. But that technology by itself is
not the panacea. Investment in ICT is not the final solution, but is the critical
enabler.
We should not focus on technology just for technology’s sake.
If we want to reap the productivity benefits of ICT, we need to invest, in parallel, in
the reorganisation of companies and administrations and skills.
Last week, the magazine Business Week reporting on the expected increase in
productivity of the United States for the first half of 2003 of above 4 percent and
attributed this as “Tech-driven productivity powering profits and stock prices”.
It is now becoming clear that ICT investment has proven even more potent for
improvement of the economy that many economists believed.
It takes time to time to fully incorporate investments made, to change organisations,
to implement new and innovative business processes and before investments in
skills pay off.
The figures coming out of the United States these days show that many companies
are only now reaping the full benefits of the ICT investments they made during the
tech-spending boom that ended in 2000 and the complementary re-organisations
and newly acquired skills are now bearing fruit.
In the Nordic countries we have seen the same phenomenon in the banking sector
a little earlier. Earlier investments in ICT yielded important productivity gains only
years later, when restructuring of the sector and modernisation of processes took
place.
What can we do in the EU on the government side to promote the adoption of ICT which is necessary to achieve higher productivity growth?
To achieve this we can and ought to do three things.
First, we need to get our legislation on electronic communications right.
Through a predictable legal environment, we can give certainty to investors,
increase competition, consumer choice, and stimulate innovation. We should also
make sure not to over-regulate new and innovative services and that legislation is
rolled back when no longer necessary.
Second, we need to promote the use of the Internet by stimulating the creation of
new content, applications and services. People do not buy technologies. They buy
services. Here government must concentrate on areas where it can make a real
difference: eHealth, eLearning and eGovernment.
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These two issues represent the well-known chicken and egg problem in connection
with what policy makers should focus on when promoting ICT investment: the
promotion of new and faster networks on the one hand or the demand for the
services that they can deliver on the other. My reply is a resounding “both”.
Finally, we need to maintain and strengthen our commitment on research and
development so that Europe’s competitiveness, innovative capabilities and
leadership are ensured.
3. Electronic Communications and Regulation
First on our new legislative framework for electronic communications.
A key objective of the EU's policies has been to encourage the provision of a wide
range of high quality services at competitive prices to European citizens.
We have used liberalisation and harmonisation to create the conditions for a
competitive and dynamic industry.
All players should be able to develop services with the perspective of an adequate
return on their investment, while competitive pressures should help to ensure
affordable prices and stimulate innovation. So how do we achieve that?
The new regulatory framework is more flexible than the previous one. This is
necessary as markets are more competitive, technologically dynamic and changing
quickly.
The new framework will create greater regulatory stability and much-needed
transparency, and will lead to increased competition and consumer choice.
We have created a entirely new community mechanism to avoid fragmented
regulatory approaches within Europe. It takes the form of a right by the Commission
to vet individual decisions by National Regulatory Authorities and, if necessary to
veto those that deviate from the new EU regulatory and Single Market rules. We
need to create a level-playing field, particularly for pan-European operators.
The new framework applies to all electronic networks in the same way. This
technological neutrality meets the requirements of the internet-driven convergence
between telecommunications, information systems and the media. It should
encourage investment in and the deployment of broadband technology, leading to
facilities-based competition, wherever possible.
One of the key objectives of the eEurope 2005 Action Plan is the promotion of a
multi-platform approach to broadband deployment. The main tool for meeting this
objective is to drive broadband roll-out by encouraging competition over competing
platforms, such as, DSL, cable, 3G, wireless LAN, digital television and satellite.
Competing network infrastructures will provide sustainable competition in networks
and services in the long term and to ensure that everyone has access to high-speed
Internet services through a multitude of different devices – via fixed line or wireless.
To properly ensure access to Information Society services, interoperability between
services and devices must be ensured, preferably through open standards. The
Commission has worked hard to address this issue and recently published a policy
document on open platforms following extensive consultation of the all players in
this area.
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As I mentioned, the new framework is flexible. It allows regulation to be rolled back,
ensuring that regulatory obligations on market players are lifted as soon as markets
become competitive. This will systematically reduce the regulatory burden and allow
normal market forces to determine market behaviours.
In the meantime however, those undertakings that installed infrastructure facilities
under special or exclusive rights continue to benefit from those earlier investments –
in particular those relating to long-lived facilities in the local access network. It is
therefore important to find a sustainable balance between granting others access to
these facilities in a way that levels the playing field whilst not removing incentives for
new infrastructure investment.
This is the objective of the new regulatory framework. The aim is to ensure that
users enjoy choice and competition during the transition to a fully competitive
market. Investment in new and competing infrastructure will bring forward the day
when such transitional access obligations can be relaxed.
Finally, the new framework drastically cuts away unnecessary red tape that
obstructs entry to markets by replacing individual licences by general authorisations
to provide services. This removes the possibility for regulators to insist on checking
compliance with licence conditions before allowing companies to start offering
services to consumers and businesses.
The deadline for implementation of the new framework across Europe was the end
of July and I am pleased to note that all Nordic Member States have complied with
this requirement. Now we need to ensure that the legislation is fully implemented in
a harmonised manner, that it remains stable and that the integrity of the internal
market and the principles of competition policy will be respected. This will provide
for the legal certainty that the industry needs. I trust that it will help restoring
confidence in the sector.
4. Content, Services and Applications
But legislation alone does not hold the keys to boosting ICT investment in Europe.
It is important to do our utmost to support demand through creation of new exiting
content, services and applications.
At a European level, we have been concentrating on eGovernance areas such as
eGovernment, eHealth, and eLearning as drivers of ICT investment. We have
chosen these three areas, because here government can make a difference, and
together they account probably for almost 40 % of national budgets.
Our strategy has been to diffuse the best practices of eHealth and eGovernment
solutions that work in practice and which have been accompanied by back-office
reform. The time for pure vision or pilot-projects is over. Now we need real action
and political commitment.
Suppliers are now focusing more and more on eGovernance applications as a
growth market. And the benefits are significant for everyone involved.
For the public sector ICT investment combined with organizational change of the
back-office and new skills contain great potential to improve public services and the
productivity of the public sector. It is a tool for public sector reform.
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For the citizens, eGovernance represents better value for money and an opportunity
to interact with their authorities on line, rather than standing in line. The scope for
future killer applications in this area is therefore significant.
The public sector should provide all-inclusive services. Governments cannot choose
their clients they have to serve all. Whether the citizens are IT-literate or not, living
in cities or in remote rural areas, having special needs due to disability or not.
Therefore public services should also be provided on all platforms PCs, digital
television, mobile terminals and on public access points.
And services and applications should also be interoperable so that different
administrations can communicate seamlessly amongst themselves and so that
citizens can communicate with different authorities – also in different Member
States.
As I have mentioned already, such a multi-platform approach is part of our policies.
These are embedded in the European legislation on electronic communications and
in our various eGovernment support and research programmes.
5. Broadband
One crucial element to ensure a successful eGovernance take-up is of course the
availability of broadband. And here things are looking promising.
We have some very recent, still preliminary, data on broadband. One figure to
mention here is that in just one year broadband connections in the EU almost
doubled: from 9 million in July 2002, to 17.5 Million in July 2003. This means growth
of 100%.
And we have four countries with a higher penetration rate than the United States.
But in addition to government driven applications, industry has a challenge to
develop new and popular content.
Last week I visited South Korea. It is well known that this country has an impressive
track record on broadband deployment having the highest broadband penetration in
the world.
Due to the particular social pattern in this country one of the key drivers of this
development has been the availability of popular on-line games and personal
interaction applications.
People in South Korea are now choosing their apartment and the configuration of
their device hardware according to the speed of the broadband connection available
and compatibility of the hardware with the requirements of the most popular games.
You cannot copy these practices. But better watch out!
6. Security
Always on broadband connections do give better services, but also increased
vulnerability.
This is why the e-Europe Action Plan highlights the importance of network security
and the achievement of trust amongst businesses and consumers.
Viruses, hacker attacks and spam are increasing and are attracting more and more
attention. The potential for users’ confidence being undermined as a result of these
phenomena is of course there. This is why we are addressing them rigorously
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The European Commission has proposed the setting up of a European Network and
Information Security Agency to enable Europe to better prevent and counter such
problems. This should be up and running next year.
Regarding spam, the new European legislation on electronic communication bans
commercial emails and similar messages like SMS unless the receiver has given his
or her prior consent. Here Europe is a first mover and legislation is indeed an
important element in the strategy to counter spam. But it is just one amongst many other elements being increased enforcement by Member States, awareness raising
and education, industry counter measures such as filtering and international cooperation.
The economic effects of spam are significant. Recent figures estimate e cost of
spam for European companies in 2002 at 2.5 billion Euro, just in terms of lost
productivity.
With an estimated 50% of global e-mail traffic being spam, we are taking the fight
against spam very seriously.
7. Research and Development
The third main pillar in our policies to boost ICT investment in Europe is the
continued and strengthened emphasis that Europe needs to put on research and
development.
This is a strategic activity to ensure that innovation continues and that Europe can
seize the huge opportunities that lie ahead.
The efforts at European level are well underway with the implementation of the Sixth
Framework Programme for Research and Development. This Programme, which
has a budget of more than 4 billion euro, is aimed at strengthening European
leadership in areas where it has demonstrated strength.
This is mainly the case of wireless and mobile, in broadband, in microelectronics
and micro-systems. These are main pillars that will continue shaping the ICT scene.
For example, we have just launched a significant research project concerning
wireless beyond 3G. We are convinced that the results of this – and similar –
projects will be crucial to ensure Europe’s continued competitiveness and innovative
capability.
But Member States and in particular industry also has a responsibility here. We
have been pushing for Member States spending more than 3 percent of their GDP
on research.
The positive result that such policy may generate is obvious from the situation here
in Sweden. Sweden and Finland are the only two countries whose public research
spending is above three percent. The innovation and competitiveness of the
industries of these countries bear witness to the importance of giving sufficient
priority to research. And this also applies to industry. Industry should not loose sight
of the importance of research and development to maintain the competitive edge.
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8. Conclusion
Ladies and Gentlemen,
To conclude, I believe that there is a strong case that ICT investments have a real
and powerful impact on the growth and productivity development in Europe and that
the potential for improvements are important.
But they need to be matched with investment in reform of organisations and in
skills.
We have taken targeted action at European level to pave the way for such
investments. These are focused at creating the right legal environment to allow the
sector to grow.
But we also need to have convincing content that make a real difference for
businesses, the public sector and private users. Content is a powerful driver of new
investments. And secure broadband – via a multitude of different technologies and
devices are imperative to make all of this happen.
Finally, we need to strengthen our efforts on research and development. This is
imperative to maintain our competitive edge in this field.
I believe that our efforts are bearing fruit. Broadband connections are soaring in
Europe increasing by 100 percent during just one year.
So there is a certain sense of cautious and prudent optimism in the air in the sector.
You know better that I that this is truly needed since the tough times which the
sector has gone through over the last two years.
There is a new group of CEOs in place in most of the main players. And they are
addressing the issues facing the industry. Debts are being reduced and results are
slowly improving. In addition broadband is being deployed and 3G is about to be
launched at a large scale on the world stage. I believe that this with underpin the
global leadership that Europe has held in mobile communications since the
introduction of the now global standard of GSM.
The sector is coming back and will be ready to resume and maintain is global
leadership. Our policy measures to boost ICT investment will stimulate and
strengthen this development so that we all can give the European economy the
kick-start it needs.
Thank you.
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