Conference on The Digital Single Market – What's in it for us? Copenhagen, 8 December

 

"Check against delivery"

Introduction

 

Ladies and gentlemen

In their book "The Second Machine Age", Erik Brynolfsson and Andrew McAfee tell the story of two computers.

 

The first was built in 1996. It was American. When it came into service, it was the fastest computer in the world. It filled a space four-fifths the size of a tennis court. It cost 55 million dollars to develop.

The second computer was built ten years later. This one was Japanese. It was just as fast, but it could fit on a tabletop, and it cost 500 dollars to buy. It was called a PlayStation 3.

That's how fast digital technology is changing. And it's not just about computing power.

Ten years ago, the biggest hard drive you could buy held 500 gigabytes. Now, we can take that much data everywhere we go with a USB stick or in the cloud.

In 2005, less than a quarter of Europeans had broadband at home. Now, it's nearly 80%. And two-thirds of us can sign up for next-generation access, which can be hundreds of times faster than basic broadband.

These are huge changes. They mean our world will be a very different place in ten years' time.

But the challenge, when we come to set out a vision for a digital Europe, is that we don't know how it will be different.

Because what changes our lives is not technology itself.  It's how we apply it.

And that is something we can't predict. We don't know what new applications will emerge, or how people will respond.

Ten years ago, no one would have guessed that music fans would give up owning their favourite songs. Now, twenty million people pay Spotify to access music, not to own it.

 

Turning technology into applications

 

To create a digital Europe, we need a partnership. I'm glad to see the programme today involves both business and government. Because we need both.

It's the entrepreneurs who will make digital Europe a reality, by developing new applications.

My job, as competition commissioner, is to create the right conditions for them to do it.

That means, for example, making it easier to raise money. Money to create new companies, but also to help them grow. Because applications like Skype or even Spotify work best when they have a lot of users - and that network of users can be expensive to build.

That's why the state aid rules for risk finance make it easy to support new and growing companies. Just last month, the Commission approved two French schemes that encourage investment in innovative SMEs.

But funding is no use if there isn't a market for your service. So it's also important that consumers have access to modern equipment and infrastructure, at affordable prices.

That's one reason why I spend a lot of my time on markets like mobile networks and smartphone components. If those markets aren't competitive, there won't be any pressure to improve services and keep prices down.

So when we find that a mobile network merger is likely to significantly reduce competition, we will insist on remedies that maintain a real choice for consumers. That's what happened with the proposed joint venture between Telenor and TeliaSonera here in Denmark.

And when there are concerns that a supplier of mobile device components might be unfairly excluding rivals, we take a look. I'm talking here about crucial components: the baseband chipsets which mobile devices use to talk to the network. That's why the Commission is investigating whether Qualcomm is unfairly keeping its rivals out of the market to supply those chipsets.

Because if we keep these markets open and competitive, entrepreneurs will have a great chance to design the future and Europeans will benefit.

After all, when it comes to offering new digital services what could be better than to launch your product in a single market of more than 500 million people?

 

E-commerce

 

But there's a cloud on the horizon. Because in the digital world, the single market doesn't work as well as it should.

Take e-commerce.

In principle, it doesn't matter any more that there's only one shoe store in your town, and it doesn't stock the shoes you want. Now you can find them on the far side of Europe, without leaving your home.

The same goes for businesses. In the past, SMEs had to make big investments to sell abroad. Acquiring premises, or setting up distribution arrangements. Now, they should be able to make cross-border sales directly, with the same systems they use for domestic customers.

But when we look at what's actually happening, we see that something isn't working. Even though half of Europeans shop online, less than one in six buy from sellers in other countries. Less than a tenth of SMEs do cross-border e-commerce.

In fact, it's likely that there are many reasons for this. From VAT rules, to contract law.

But at least part of the problem is caused by companies themselves, signing agreements that stop retailers selling cross-border.

That type of agreement seems to go against everything we're trying to achieve in the EU. It turns the single market that we've worked so hard to build back into a series of national markets. So we have to understand what's going on. How many companies are using these contracts? And why?

This is where the Commission's sector inquiry comes in. It should help us understand whether competition enforcement can help break down these barriers.

I don’t yet have the answers to those questions. But we're working hard to analyse the data we've received. And I plan to publish a preliminary report for consultation in mid-2016.

Online retail is far too big a sector for me to deal with on my own. So a strong partnership with national competition authorities is crucial. In the online hotel booking market, for example, instead of taking decisions myself, I've focused on coordinating the work of the national authorities.

And I think that coordination has helped. We now have a common understanding of the problems we're trying to fix. Several authorities have already taken decisions, and more national cases are in the pipeline. And the two main booking sites have now made their contracts with hotels less restrictive  – throughout the EU.

But in these rapidly evolving markets, we need to be sure that those decisions are producing the right effects.  So I'm glad that the national competition authorities have agreed to set up a working group, together with the Commission, to monitor the effects of the different remedies in these cases.

That will help us to decide whether those remedies are working, or whether we need to look at the sector again. And until we know that, the national authorities have agreed not to open new cases pro-actively.

 

Market power                                      

 

In all these ways, we can help create the right conditions for new services to appear.

But we're not starting from scratch.

The digital world already has success stories. Companies that play key roles in the economy.

A lot of those companies are American. And I'm often asked what Europe should do about that.

So let me make one thing very clear.

It doesn't matter where you come from. The nationality of a company plays no role in competition enforcement.  What matters is that to do business in the EU, you have to comply with EU rules .

Because I don’t think that customers care where companies have their head office. They care about getting the best services, at the right price.

Of course, we have to make sure powerful companies don't abuse their power and stifle competition.

That's why we have rules against abusing a dominant position. And those rules seem well able to adapt to new markets and business models.

Take our cases on standard essential patents. Motorola and Samsung owned technology that was needed to make mobile phones that complied with a standard. They'd committed to make that technology available on fair, reasonable, non-discriminatory terms, so other phone makers wouldn’t be shut out of the market. Instead, they tried to get better terms out of those companies, by going to court to stop them selling phones that used their technology.

Was that a difficult case for competition rules to deal with? In a way, yes. The situation was very new, and very complex – much more complex than how I just described it.

But looking at the basic principles of competition law made it clear what the key issues were. This was about whether companies were misusing their power to keep competitors out of the market. The Commission clarified where to draw the line between reaping the benefits of innovation and abusing market power. And the European Court recently agreed with us, in the Huawei/ZTE case.

So competition law is ready to deal with new situations.

 

Conclusion

 

I find that very reassuring.  We need markets that are open and flexible, with room for innovation.  And our rules establish principles that also hold for the future.

So that even though we don't know what the next changes will be, we can be confident that we're ready for them.

Thank you