Data and digital strategy for Europe: EU’s data regulation guide

Europe certainly seems to have a fairly measured distrust of data.

First, there was GDPR — the EU legislation that effectively gave individuals control (or at least, a certain degree of control) over their data. Now, Ursula von der Leyen — the new European Commission (EC) President — has outlined her plans to transform the way that businesses of all shapes and sizes use their European-sourced data.

The EU’s new digital strategy has been proposed in three whitepapers: 

• On Artificial Intelligence – A European approach to excellence and trust
• A European Strategy For Data
• Shaping Europe’s Digital Future

‘A European Strategy for Data’ is perhaps the most interesting read. This proposes a widespread shakeup on how tech firms perceive, and use, the data that they collect — going as far as suggesting that privately-acquired data needs to be publicly available.

Such a radical move is bound to antagonize tech titans like Google, Amazon, Facebook, and Apple (GAFA), and its proposal has made headlines since it was announced on the 19th of February.

So let’s have a look into what these plans specifically mean, why they’re an unwelcome revelation for the biggest tech firms out there, what’s going to change in both the short and the long term, and whether or not they’ll actually produce the desired impact. 

The context

This new strategic approach comes amidst the growing realization that European individuals and organizations are overly reliant on data from US- or Asian-based firms, who themselves occasionally end up using this data for less-than-scrupulous purposes.

In the data-led tech war, Europe is being left in the dust. This whitepaper signals a change of tune — Europe will no longer let tech giants dictate how they accumulate, store, and use data, but instead, they’ll have to fall in line like everyone else.

This isn’t the first time that the EC and tech giants have crossed paths. GDPR certainly threw the cat amongst the pigeons, and the EC seems to take a strong stance on these companies’ supralegal attitudes (and practices).

What do the whitepapers say?

It’s fair to say that the whitepapers aren’t necessarily easy reading.

Full of jargon, with idealistic goals that lack specifics, they’re very top-level explanations of what’s about to come. The precise plans are still fairly unclear. At this stage, the whitepapers are more statements of intents as opposed to being prescriptive policy outlines, though those will be formulated over the next few years.

The whitepapers are due to set the wheels in motion, with the ‘A European Strategy for Data’ in particular providing the impetus for a worldwide discussion on data ownership, monopolization, and competitive advantage. 

Given that this is the beginning of a two-way discussion, we know that this whitepaper’s contents (and the plan in general), will change somewhat — the European Commission (EC) is due to be receiving feedback on this initial plan until May the 19th, which it will then take into account when creating a more concrete strategy going forward.

The main point to note is that the EC believes data is a public commodity. As with the European Single Market, it wants to create a single, openly accessible data market that individuals and corporations can all tap into for their own use.

To quote the whitepaper (p.1):

“Citizens should be empowered to make better decisions based on insights gleaned from nonpersonal data. And that data should be available to all – whether public or private, big or small, start-up or giant. This will help society to get the most out of innovation and competition and ensure that everyone benefits from a digital dividend. This digital Europe should reflect the best of Europe – open, fair, diverse, democratic, and confident.”

The whitepaper goes on to stipulate that data can not only be acquired and replicated at very little cost, but that it can also be used simultaneously by multiple companies at once. The EC believes that if this becomes common practice, that would provide more value to both consumers and to the economy at large.

However, there’s a certain amount of dichotomy here. Despite clamoring for an open data market, it recognizes that there may well be instances where data needs to be kept private — as the EC puts it, data should be “as open as possible, as closed as necessary”.

Hmm.

To some observers, this might seem like a curious shift in mindset — and rightly so.

First, the EU introduced GDPR: fostering the concept that individual citizens have ultimate control over their data. When it comes to a business’s data, however, it seems to eschew this idea: preferring to make data a publicly available commodity when used for commercial purposes.

From the outset, it appears that the EC has decided to adopt a smash-and-grab mentality — and comments by Thierry Breton, the EU industry chief, only goes to support this perception:

“The battle for industrial data starts now and Europe will be the main battlefield. Europe has the largest industrial base. The winners of today will not be the winners of tomorrow.”

Let’s dig into this in a little more detail.

There are three main insinuations that are lurking behind this statement and the proposition more generally:

1. Non-EU companies are benefiting from European data 
2. They’re benefiting to such an extent that EU companies are finding it tough to compete
3. The only way that EU companies can possibly compete is to have access to the same data

What does this mean for tech behemoths?

Needless to say, this is bad news for big tech giants such as Facebook, Amazon, Google, and Apple.

Data has been their main competitive advantage for years. Sure, they’ve introduced innovative platforms, but the data they’ve been able to accrue has not only been profitable in its own right — with conservative estimates suggesting that internet companies make $202 per year per US citizen from selling their data — but it’s also personalized individual user experiences so that we keep coming back day after day, month after month, year after year.

It’s clear that the EC isn’t too keen on this approach (p.8):

“A case in point comes from large online platforms, where a small number of players may accumulate large amounts of data, gathering important insights and competitive advantages from the richness and variety of the data they hold..”

It argues that, as a result of this data, these giants have essentially turned certain markets into no-contest monopolies. No other companies have these levels of insights — therefore, they can’t begin to offer services that come close anywhere to those of these tech giants. 

This might be true, but the issue remains: is this necessarily unfair, or is it just unfortunate?

If the EU does indeed enact these radical data-sharing policies, we can probably expect a hefty legal challenge from GAFA. GDPR hit these four companies hard; for instance, Facebook and Google alone were hit with lawsuits worth a whopping $8.8 billion… on the first day that the legislation was introduced.

Needless to say, it doesn’t seem like these companies are going to willingly jump on board with the EU’s new plans to take control of their data — they’ll likely fight tooth and nail to preserve what is effectively their primary competitive advantage.

It’s not just data that the EC is going after, either. The EC’s plans also include more stringent controls on content — going as far as suggesting that these tech giants will become legally responsible for all content published on their platforms. 

And that’s not all. There’s also the T-bomb: tax.

‘Shaping Europe’s Digital Future’, one of the three whitepapers recently released, states (p.9):

“In the border-less digital world, a handful of companies with the largest market share get the bulk of the profits on the value that is created in a data-based economy… Those profits are often not taxed where they are generated as a result of outdated corporate tax rules, distorting competition. This is why the Commission will look to address the tax challenges arising from the digitization of the economy.”

Ooft. 

It’s going to be a war of colossal proportions: a supranational governmental body versus an array of revolutionary, world-changing multinational corporations.

And how about smaller competitors?

However, it’s worth also looking into what this could mean for smaller businesses. If the plan works as intended, then Europe could potentially see a sudden spike in disruptive, innovative startups — all piggybacking off the tech behemoths’ data to fulfill their own commercial ambitions.

Is this likely? Perhaps, though the thought that data alone will provide the impetus needed to challenge these tech titans is a tad fanciful. 

Sure, these companies use data to their advantage, but they’ve also introduced novel services that are loved by consumers the world over, they’ve generated multiple different streams of revenue (not just for them but also for advertisers), and they also provide industry-leading infrastructure.

To truly compete with these giants, innovative startups will have to compete on all these fronts: offering value far above and beyond what’s already out there in the market. 

However, the game is currently rigged: how can smaller companies compete when tech giants currently provide the very infrastructure which allows them to exist?

For example, think about Amazon Web Services (AWS) — Amazon’s market-leading cloud services provider. Given the sheer volume of companies that rely on AWS to conduct their day-to-day operations, Amazon is always going to be a dominant force in the tech world. 

But this doesn’t fit with the EC’s new narrative, and is directly opposed to its overarching goal of loosening the grip that tech titans have on Europe.

So what’s the solution? Simple.

The EC has proposed introducing a new Pan-European, federated cloud infrastructure, which would allow companies to break free from their reliance on Amazon (and the like). If this takes off, it would be a major step in loosening Amazon’s control over European businesses of all shapes and sizes.

What does the future hold for Europe’s tech scene?

All things considered, it does appear that this new policy/direction could greatly help European tech challengers at the expense of their larger competitors. The EC believes that having a unified source of industrial data will make Europe an attractive proposition for innovators of all types, and will lead to drastic progress on multiple fronts. 

Armed with all the data that’s ‘out there’, disruptors will have everything they need to produce the next big thing: whether that’s an AI application, a medical device, or a social media platform. 

This all sounds great, sure — but only so long as this new data-sharing strategy does indeed promote innovation, rather than putting innovators off.

And even if it does help European tech companies, it remains to be seen whether or not they will end up reaching such lofty heights as GAFA. 

What’s going to change in the short, medium, and long term?

Finding this timeline a little difficult to follow? Don’t worry — you’re not alone. While this is big news, and it promises to provide a raft of changes, it’s hard to know exactly what’s going to happen (and when). 

However, let’s try and make sense of what’s on the agenda going forward:

The short term

Over the next three months or so (until May 19th), the EC will be receiving feedback on its initial plan — which it’ll then synthesize and use to guide any changes it’ll be making to the initial proposition. The finalized whitepapers are due to be released by the end of this year.

The EC also aims to have a solid framework for communal data spaces (where companies will come together to share data) by the end of 2020. Providing that all goes ahead as planned, this project could be introduced as early as 2022.

The medium term

At some stage in 2021, there will be a Data Act outlining data use between businesses (B2B) and between businesses and governments (B2G). This will be followed up by the Digital Services Act (released at the end of 2021), which will provide a clear framework on platform regulation.

The EC is also committed to developing its “High Impact Project on European data spaces and federated cloud infrastructures” from 2021-2027, pouring a purported €6bn into the project. It’s hoped that this will all be finished by 2030, when a truly federated cloud infrastructure will service all European businesses.

The long term

Now this one’s a little tricky to work out. On the one hand, the EU’s new approach could see Europe challenge US and Chinese tech dominance. With open access to data, the best minds in tech could flock to the continent and produce some world-changing products.

Alternatively, it might actually end up doing the opposite. Imagine you want to create a company that convinces users to voluntarily give up their most private — and valuable — data. 

This will obviously give your company a big boost, a competitive advantage that you can use to grow your market share. But why would you want to start this company in Europe? If you did, then your competitors would immediately have access to all your hard-earned data, and your competitive advantage would disappear just like that.

Leveling the playing field isn’t necessarily always good for innovation: think back to various 20th-century governments. The general principle of repossessing goods owned by the ‘strong’ and offering them up to the masses has never before encouraged long-term progress. 

This time, perhaps it might — but it also might not.

Concluding commentary

The Wild West style of the US (where tech innovators have essentially done what they want until they cross a legal or perceived moral line) certainly has its negatives. In the absence of regulation and control, they’ve committed some big blunders: often stemming from their handling of individual users’ data.

However, it’s no coincidence that GAFA are all US companies. True innovation requires freedom, not overbearing regulation — even if this regulation is apparently introduced to spark widespread innovation.

This new data approach will see Europe fall into a hybrid-style system, somewhere between the laissez-faire American approach and the Chinese method (which unsurprisingly is directly opposed to this style).

The Chinese way has been for the CCP (the ruling party) to promote certain tech companies and give them all they need to succeed. In return, the government has unfettered access to these companies’ data, and they can also impose a certain amount of control over how (and where) these companies operate.

Such tightly-controlled innovation has seen the rise of giants like Huawei, TikTok, and WeChat (or Weixin), but this has come at the cost of privacy — so much so that these companies can only truly be considered half-private sector and half-public sector (at best).

So what does the future hold in store for Europe? 

That remains to be seen. If things go as planned, we could be in for a more competitive tech marketplace, and GAFA will slowly begin to reduce in power and status. On the other hand, if things go south, Europe could become a barren pariah in the tech world: with innovators scared of ceding total control to a supranational entity destined to make data-led competitive advantage a thing of the past.