This article is part of our special report Digital Summit for Growth.
At today’s summit of heads of EU state and government, attempts to use the Prism scandal to reinforce the data protection debate are unlikely to be successful, according to Hosuk Lee-Makiyama. The political expert believes the data protection package will take a back seat to the telecoms single market proposal.
Hosuk Lee-Makiyama is a director of the Brussels based European Centre for International Political Economy (ECIPE), a think-tank. He spoke to EURACTIV's Jeremy Fleming.
What do you see emerging from this summit, which has placed digital agenda issues at the top of the agenda?
This summit is the first of its kind. It becomes an issue of priority for the Commission and Council. The cloud and data privacy issues are being seen in the light of the follow the Prism scandal. My take is that the telecoms single market is the easier issue to go for. It has broad political appeal, it has immediate consumer value, and less than 3% of turnover in the telecoms sector is in intra-European trade meaning there is no single market. There is outright collusion between some of the telecoms operators where they have agreed not to intrude on each others’ markets. If roaming is removed, operators will be forced to form airline-style alliances, which will create an incentive for them to merge and work together.
How will operators be able to replace profits from roaming?
Roaming represents a cost. If many foreign mobiles are operating in your market you need to settle that cost between the operators. If the settlements are then blocked, you have to control revenue streams at both ends. So, for example, a Croatian mobile operator in Germany represents a cost for itself and a German operator. If they are not allowed to settle the balance you create an incentive to merge, because that way the cost and the revenue are in the same firm. This would create larger market concentration, but only across borders, which would not affect competition.
Do some member states want to protect their telecoms operators?
The big telcos have access to the regulatory bodies of the member states which goes back decades, so the proposal of creating a European network regulator that can be governed by Brussels would be pointless.
Are there any other controversial issues on the telecoms package you would highlight?
Peripheral questions about net neutrality may be controversial, with some countries claiming the Commission is going too far or not far enough. The central question here is whether if you see bad market practice it should be a matter of consumer choice or an issue of law.
And as for data protection, how do you see the discussion going there?
Data privacy is extremely controversial. There is, I believe, a choice for the Council between moving forward on telecoms or data protection, and I think they should move forward on the telecoms package. Both from a timing perspective and also, as I see it, the data privacy issue is an extremely uninformed debate. If we start demanding data localisation in Europe [by foreign internet companies] people have not started thinking about the consequences. I did a study based on the Commission’s own figures complemented by some numbers from the UK to see what this would entail, and found that the result would be a GDP drop by at least 0.3%, because if you cut off data you increase the cost to the EU manufacturing and services industry.
Do you think that the proposals to increase Europe’s cloud capabilities will be successful?
Europe does not have the entrepreneurship or the business friendly environment for the cloud. Ten years ago the European economy had the chance to become an efficient provider of internet network or over-the-top services, or to focus on infrastructure, and we chose infrastructure, and there are many reasons, to do with culture and the business climate why we chose not to be good at the internet.
So you are not optimistic about the chances of the data protection regulation?
The impression I have is that the Council could ask for a new draft from Viviane Reding, whilst the Parliament position moves further and further from the mainstream. Can these positions be reconciled? Let’s say France and likeminded countries roll over the free traders like the UK and Sweden, there would still be outstanding issues with the Parliament. And unlike the Tobin tax, the impact has not been researched properly, and that makes me extremely concerned.
Is there not popular appeal in taking action to counteract the effects of the Prism scandal though?
This exclamation against the Prism scandal primarily came from people who do not have intelligence services. Even France refused the Bolivian president [Evo Morales] permission to fly through its airspace [when there were suspicions that former US espionage contractor Edward Snowden was being smuggled out of Russia]. Even though they were publicly outraged, there is a cooperation between the US and European countries under the public layer. Intelligence is like underwear, everyone has it but you are not supposed to show it off, and there are channels between governments and the US National Security Agency and that’s the way it should be. The problem is that the Parliament does not have an intelligence agency and they are furious. It is like those countries without access to trade are upset by international trade. It’s just the way it is.