German industries have urged caution when the European Commission presents its free flow of data initiative next month, warning that excessive open data requirements risk exposing trade secrets and chilling investments in the digital economy.
With the rapid growth of digital services, many restrictions to the free flow of data have been introduced at national level, hindering the EU’s Digital Single Market, one of the European Commission’s flagship policies.
“We want to ensure that all market players have – as much as possible – access to data” said Dirk Staudenmayer, head of unit for contract law at the Commission’s justice department (DG Justice).
The Commission’s first objective with the free flow of data initiative is to allow “new market entrants, new business models to be created,” he told a EURACTIV event on 28 September.
Tearing down digital walls between EU nations could contribute €415 billion per year to the EU economy and create hundreds of thousands of new jobs, according to Commission estimates.
Major obstacles include “diverging data location restrictions” between member states, some of which may be “unjustified” or “disproportionate”, the EU executive said in a policy roadmap outlining its free flow of data initiative to be presented in November.
Citing connected cars as an example, Staudenmayer said the data transmitted by vehicles on the road should be made available for mobile app developers to alert drivers about traffic jams on their way to work.
“We would like such innovative business models to develop,” Staudenmayer told participants at the EURACTIV event, adding the Commission also wants “a fair return on investment” for those who enabled the data collection in the first place – in this case the car manufacturer.
European car manufacturers have grown increasingly nervous about the Commission’s plans on data sharing, fearing a move that would impose sharing that data with rivals.
Competition and price
Indeed, one of the Commission’s key objectives is to prevent data holders from building a monopolistic position allowing them to dictate their terms to smaller market players.
“If data can help you compete, by improving your services and cutting costs, then having the right set of data could make it almost impossible for anyone else to keep up. So we need to be sure that companies which control that sort of data don’t use it to stop others from competing,” said Margrethe Vestager, the EU’s Competition Commissioner, in a speech made on 9 September.
“We want to avoid lock-in situations,” whereby data holders can “increase their prices massively” and prevent start-ups from changing contractor, Staudenmayer explained. If access to data is given at prohibitive prices, and there are negative competitive effects – then, “that would be a problem and there, we would probably need some kind of framework”.
Holger Kunze, director of the European office of VDMA, the German mechanical engineering association, said the Commission should define a European framework for industrial data exchanges to ensure “we do not end up with 28 different systems, like we had before in personal data protection.”
But he also urged the Commission to tread carefully. “The good news is that Europe is leading the game” over the US, Japan and China, Kunze said, calling on the EU executive to avoid overregulating an area with high growth potential for European industries.
“Our companies are very sensitive towards their data. And I think is too early to come with far-reaching regulatory decisions,” he said inviting regulators to “observe economic and technological developments” and draw their conclusions at a later stage.
Staudenmayer appeared equally cautious, saying the Commission was unlikely to submit legislative proposals at this stage. However, he said the EU executive will launch “a process” in November to reflect on industrial data exchanges, saying there was “a sense of urgency” to avoid Europe “being sidelined by other major trading partners”.
Industry fears – and expectations – have tended to crystalise around “predictive maintenance” where open access to data allows planning repair work on machinery. An airline like Lufthansa, for instance, will want access to data from sensors planted in Rolls-Royce jet engines equipping its fleet of Airbus aircrafts.
“So who is allowed to exploit this data to sell the predictive maintenance services?,” Staudenmayer wondered. “Is it the producer – in this case Rolls Royce – is it the company which assembled the plane – in this case Airbus – or is it the company which runs the plane – in my example Lufthansa? Or is it a third player not connected to any of these parties which offers independent maintenance services?”
Again, he said the Commission’s goal was to allow new business models to flourish while ensuring market players who have invested in collecting the data have a fair return on their investment.
Erik-Jan van der Linden, CEO of Processgold International, a software supplier, urged policymakers not to regulate data exchanges between businesses, saying this is already taken care of in normal contract law.
“Most data is shared in chains,” van der Linden remarked, so it shouldn’t be mandatory to share it with everyone. “Do trade secrets actually occur in data? Maybe, but in these chains, most of the time, there is no conveying of trade secrets,” he pointed out, saying this is usually covered by confidentiality agreements and existing intellectual property rules.
Data as a patent
Laurent Zibell, policy advisor at the IndustriAll European trade union, agreed, saying data can be regarded as “something to licence” and for which specific rights can be defined, including the right to collect, copy, transmit, aggregate, etc. – “just like in a patent”.
Referring to the predictive maintenance example in aviation, Zibell said non-exclusivity clauses can be negotiated whereby Rolls Royce enables Airbus to exploit its data for engine maintenance purposes but specifically prohibits transferring that data to General Electric, which is a competitor on the jet engine market. Similarly, Lufthansa would enable its data to be transferred to Airbus but would not allow transferring it to rival Air France.
Zibell said regulators can however play a role in the standardisation of “data protocols, data semantics and data formats” in order to facilitate exchanges of information.
Data licences “don’t have to be for free” and can be negotiated, Zibell continued. “Now, whether the price is prohibitive or not is another level of debate,” he said, agreeing with Staudenmayer that regulators may have to intervene to address this.
Surveillance in the workplace
Zibell did warn, however, that the emergence of big data in industrial processes allows “unprecedented levels of surveillance” of workers, which should be strictly regulated.
“We’re not talking about personal data here because there is legitimacy from the employer to check that the work is actually being performed for which the employee is being paid. And also there are some health and safety regulations that need to be enforced,” where he said “some form of monitoring is legitimate”.
“On the other hand, people are not machines,” he warned, saying technology allows surveillance in the workplace at levels “that George Orwell would have never dreamed of”.
“So finding a specific regime for worker-related data is something that deserves being considered and discussed in social dialogue, in collective bargaining and the workplace in general,” Zibell said.
The European Commission unveiled a strategy to support the digitalisation of industry on 19 April, aiming to mobilise around €50 billion by 2021 to help manufacturers catch up in the global race for the fourth industrial revolution.
The conjunction of cutting edge technologies such as artificial intelligence, combined with the spread of cheap sensors and advanced robotics are all pointing to the arrival of a new industrial era.
But compared to the United States or Japan, the traditional industrial base in Europe is slow to adopt these technologies and reap the benefits of digitalisation.
“It will be complex, it will take time but it is very necessary,” said Andrus Ansip, the Commission Vice-President for the Digital Single Market. “The Industry has asked us to build the foundations of our industrial future and there is no time to lose,” he told reporters in Brussels as he presented the new strategy.
A European Parliament study estimates that €40 billion in investments will be needed every year in Germany alone to digitalise the industry. In Europe, the figure could reach as much as €140 billion.
The figure looks impressive but the promises are equally high. Across Europe, PwC and Boston Consulting Group estimate that the digitalisation of industry could create an additional €110 billion per year over the next five years.
- Early November: Commission expected to table free flow of data initiative.
- European Commission: Roadmap - European free flow of data initiative within the Digital Single Market (3 Oct. 2016)