Facilitating a competitive environment for SMEs to develop future Internet business models

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1 SPEECH/10/388 Neelie Kroes European Commission Vice-President for the Digital Agenda Facilitating a competitive environment for SMEs to develop future Internet business models Telecom Conference of the SME Union Brussels, 14 July 2010

2 Mr Bendtsen distinguished members of the panel, ladies and gentlemen, I am honored to accept your invitation. I've been involved in small businesses my entire life: working in them, teaching entrepreneurs, and regulating them too! That background makes me very aware of the importance of SME's to the competitiveness of our economy. SMEs are the best generators of the innovations and competition that lead to strong economic growth. If Europe is to achieve sustainable long-term growth we clearly need to pursue structural reforms that benefit SMEs. By sustainable, I don't just mean environmentally sustainable changes. In fact, I mean everything from labour issues to red tape to new business processes that capture the full potential of ICTs. I see ICTs as having a central role in these overall changes. In today's economic environment growing smartly means growing digitally. We recognize that by making the Digital Agenda an SME Agenda. Just as I want Every European Digital, I want every business to go digital too. Let me focus now on the Digital Single Market and innovation in the context of SMEs. I want to look at these issues from two angles. 1) Looking at what ICT SMEs can contribute to the development of a Digital Single Market and 2) Looking at what the Commission will do to help create this single market and ensure SMEs have fair access to it. Why am I referring to "ICT SMEs"?, It is because I don't want to make false distinctions between telecoms companies and IT companies and software companies and so on. Our Digital Agenda is a comprehensive action plan that deals with a converging sets of technologies. So I think it makes sense to address all the stakeholders equally around their interest in ICT, no matter which market they serve. ICT SMEs and the creation of the Single Telecom Market During the last two decades Europe has succeeded in introducing competition on the national telecom markets. Prices went down. Quality of services went up. Consumers have more choice. SMEs played a crucial role in this transformation. They challenged the incumbents with new services, lower prices and new business models. In response the incumbents were pushed to invest in upgrading their networks. But even with a rapid implementation of the new regulatory framework, the job will be far from over. We don't just need competitive national markets we need a real single market and that must also be competitive. We are all paying a price every day we lack this single market. Not just in higher prices but in the innovations that we are missing out on. This hurts innovative export-oriented SMEs more than anyone else. A consumer might lose a few euros but the SME loses their chance at major and even global success. More generally Europe loses jobs and continues to lack global players. 2

3 Even at the practical day-to-day level the lack of the telecoms single market is a nightmare for many SMEs. Why should they have to travel around Europe juggling SIM cards and paying a fortune to communicate? A modern entrepreneur wants to have continuous access to all his or her business information travelling around the world with a smart-phone and laptop. As you know I am working on that issue very seriously and am confident that a structural solution will be presented next year. I will mention more of what else the Commission can do later. Before that I want to say that SMEs need to be active in the Digital Agenda. It is not something the Commission will do to you, or for you it is something we all have to implement together. So 1) Please try new business models. I am in full support of companies who make new uses of technology platforms to reach consumers. Let me be clear, the Commission whether via my advice or my colleague Joaquin Almunia will not allow small players to be trampled because of their disruptive ideas. We need innovations like Voice Over the Internet services and ISPs who buy wholesale from the incumbents and gain their advantage from different offers and customer service. These innovations benefit consumers, but there effects are much deeper. This sort of SME competition prompts larger companies to make bigger investments in networks and the services offered on them. This drives demand which spurs further investment in content and services, which SMEs are well placed to meet. When one SME breaks through because of its innovation, it ultimately drags many other SMEs along with it. This is what I mean when I speak of a virtuous circle of digital activity in the Digital Agenda action plan. 2) Get out there and develop applications. Applications will drive the future Internet generally, and are already driving a range of successful companies. For example in urban mobility systems like GPS and those on the Apple devices. Getting into applications is something that any SME can do. And any SME can succeed at so long as they have a good idea and are prepared to work hard. Ask yourself what possible applications could I develop or get involved in? You might be surprised where that question leads you. It is certainly leading the Commission to proving the value of applications to public service delivery. In fact, we will be using the new Future internet PPP to test and scale-up the role of applications in public service delivery at all levels of government. And we will be leaning on SMEs to make it happen. 3

4 What can the Commission do to help the Digital Single Market? No one should be in any doubt about the value of delivering a Digital Single Market. I would say that a DSM would have as big or bigger impact as the 1992 single market programme. We are talking about hundreds of billions of growth each year most of it passing through SME hands. And it would be a legal, monetized single market; unlike the current pirate market for audiovisual material. I want us to move beyond this crazy situation where illegal file-sharing is the biggest digital single market. This is only the case because of our policy and enforcement failures and it has to end. We need to get this legal Digital Single Market fully functioning by To do that let us all keep a few things in mind: First we will continue to ensure the implementation of the new telecoms framework. This provides some help to the problems we face. Second we need a structural solution for roaming problems. I am open-minded about what the solution is, but it has to be a permanent solution. Over the medium to long term the whole concept of roaming is simply ridiculous in a single market. Next year I will present a study on the cost on non-europe in the Telecom market. Based on that study, the 16 th implementation report and the ICT-competitiveness report I will consider whether and what new measures are necessary to create this single European Telecoms market. Third we need to make it possible for SMEs to deal with all the copyright and licensing issues that currently discourage EU-wide business operations. It is no wonder the US online music business is five times bigger than Europe's! Or look at the example of Vente Privée... This French fashion start-up has been the talk of Silicon Valley for months. Hundreds of businesses will try to copy its business model or apply it in other sectors in the coming months. And yet it is only available in 5 EU Member States. Why? How can governments effectively force companies like Vente Privée to shoot themselves in the foot like that? Let's make a deal to move on from such scenarios! The Internet is the best news for SMEs since the beginning of capitalism. In this I am serious. For most SMEs the current internet can shatter virtually every entry barrier, distance barrier and information barrier that exists to global success. As the Internet of Things develops in the future even more options will open up. My overall objective therefore is simple: to enable SMEs to fully exploit the potential of the Internet. This brings me finally to other Digital Agenda actions relevant to you. For example, spreading broadband access be it through new networks of better use of spectrum. How far are we from universal coverage today? In some member state only 50% of the rural population has access to broadband (the average is 80%) Wireless broadband will fill some of the gaps but we cannot forget that only around 50% European territory is currently covered by third generation mobile networks. So we clearly need a mixes of technologies to reach our goal, and we can't assume that anything but very active and creative policy will get us there. 4

5 This is especially true for the business case for private investment in Next Generation Access. We will provide certainty and improved incentives in our upcoming NGA Recommendation after the summer. Radio spectrum must contribute to our goal of broadband for all. I mention this because I know access to spectrum is a critical issue for many of you. It is my view that we must enable appropriate access for mobile and satellite based broadband. Europe can't have a level playing field if certain technologies are effectively locked out of spectrum access because they were invented recently. Nor for that matter if SMEs are locked out because scarcity of spectrum pushes the access prices beyond reach. We need a fairer and more sustainable spectrum policy which includes making more efficient use of the spectrum that is available. That is exactly what our Radio Spectrum Policy Programme will deliver after the summer. What will the situation be like for SMEs when we achieve universal broadband coverage? Let's take the unlikely example of farming communities for example. It is typically assumed they have greater concerns than ICT issues. And it is thought that you can't use various social and structural funds aimed at agriculture for something like ICT. Both ideas are wrong! The internet and new software offers farmers ways to sell niche products to new and lucrative markets around the world. Precision farming technology an exciting new part of the Internet of Things - relies on the new technologies such as GPS, sensors, satellites. Farms and ICT and Europe's economy are now forever linked. Other SMEs may benefit to an even greater extent like the 75% of small enterprises that do not yet buy and sell online (even though two-thirds have a website). I am aware that up-front investment costs can be discouraging for example with RFID tags.. Or there is a language barrier. Or you can't get finance These problems are very real; but so is the potential of taking the risk. Think about it We are working to ensure 50% of the population is buying online by In other words we want to increase the ecommerce market by 35% from today's size, during a period when the overall economy will probably grow only around 10%. My advice to SMEs is: "think big and be part of that action. Follow the money." There will be a range of other supporting action on einvoicing, esignatures and data protection that we will undertake. Interoperability and better standards are another issues close to my heart and policy action there will lower costs and increase the choices available for SMEs going digital. Conclusions In conclusion all my efforts over the next five years will be towards maximising the benefit of Information and Communications technologies for all citizens and businesses. The Digital Agenda pushes us towards the smarter and more sustainable economy we need in the future. It is open to SMEs and indeed can only be achieved with the active involvement of SMEs. With me you have a friend in the Commission looking to give a voice to SME needs every step of the way. 5

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