(Topics presented in the order of intervention during the meeting of 27 June 2017)

1 – Circular Economy could be a pilot application field of Internet of Things in non-food industrial value chains

The debates in the Work Group 2 on "digital industrial platforms", and specifically under the topic of Internet of Things in an industrial context, all revolved around the issue of achieving interoperable end-to-end communication along industrial value chains, i.e. between firms and within firms (design, procurement, production, logistics, sales, maintenance, recycling), in a context of immense fragmentation (a "zoo" of more than 360 standardisation initiatives in IoT), and of growing competition between proprietary solutions with no guarantee whatsoever about the fairness of economic conditions for use once vendor lock-in has been achieved (MindSphere by Siemens, Predix by GE, Bosch IoT Suite, ABB Ability, EcoStruxture by Schneider Electric, 3DExperience by Dassault Systèmes… ).

As I mentioned earlier, it is highly doubtful that, in the absence of any public intervention, a convergence will spontaneously take place towards an inter-operable solution ensuring fair, reasonable and Non-Discriminatory (FRAND) economic and legal conditions for use. What we see is rather the opposite of a fierce fight between proprietary technologies all aiming at locking in their customers (whatever their current claims may be), and extracting a permanent, massive, world-wide rent from this.

Simultaneously, the Circular Economy requires end-to-end communication across non-food value chains. The first element of information to be thus transmitted is the material content of each industrial item, which originates at the mine and in the design boards of manufacturers, and is being used much later in repair and recycling facilities. Based on this communication channel, any further message could be added at a later stage, for the purpose of Circular Economy (e.g. instructions for dismantling), or for any purpose needed to implement Industry 4.0 concepts (e.g. customer order). An analogy is the eCall infrastructure for emergency calls by cars, being mandated by EU regulation for a public policy purpose (fast intervention in case of road accidents). Based on this infrastructure, any additional automated messaging from the vehicle to the network can be built.

The standardisation would bear upon minimal features:

• the addressing space, large enough to meet the needs estimated at 25 to 50 billion items being connected to the same network by 2025
• an end-to-end communication protocol, ensuring that each message sent is indeed received with no error
• the semantics, so that each element of information in the message be machine-readable by any device along the value chain. This last point may be critical, considering that technical solutions already seem to exist or to be under development for the first two items.

It would bear on the plane of "Communication" in the RAMI 4.0 concept, along the whole range of axes 1 (factory hierarchy) and 3 (product life-cycle).

By mandating the design and the uptake of such a standard for the purpose of the Circular Economy, the Commission would serve two goals:

• provide an essential infrastructure for the industrialisation – and thus the competitiveness and economic uptake – of the Circular Economy
• give a synchronisation signal to all players in the non-food industrial value chains (thereby avoiding the "penguin effect") to implement a common, interoperable, open communication infrastructure for the reliable transmission of messages along the whole non-food industrial value chain, while assuring FRAND economic conditions for all players to use it. This would provide EU-based industrial companies with a first-mover advantage, by being the first to enjoy the benefits of such a comprehensive communication infrastructure.

2 – Collective bargaining-type institutions could be used to ensure fairness between creators and users of digital technologies

In the discussion regarding Fair, Reasonable and Non-Discriminatory (FRAND) economic & legal conditions for using digital technologies, and specifically the patents embedded in digital standards, also known as Standard-Essential Patents, we are confronted with a difficulty to define fairness.

In this debate, we are confronted with two communities:

1. the creators of the technology, who want to be remunerated for their investment; and
2. the users of the technology, who remunerate the former by deploying operationally their innovations.

At times when all belonged to the same industry (telecommunications equipment manufacturers), a given company usually belonged to both communities, so that the interests of both sides could be aligned, e.g. by using "patent pools" in which all were more or less involved. At the times of the Internet of Things in industry, the two communities become separated, with the creators of the technology belonging to the ICT and digital sectors, while the users belong to the sectors of Mechanical Engineering, Electrical Engineering, Automotive, Aeronautics, etc.

The debates between these two communities boil down to a discussion on:

• a price (the royalty rate – and the royalty base), which entails how the value added generated by digital technologies will be shared between the two communities
• legal conditions attached to the use of the technology.

The interests of the two communities are structurally opposed on these topics of discussion:

• creators of technology want high prices and strict legal conditions for use
• users of technology want low prices and loose legal conditions for use.

However, despite this structural opposition, both communities need each other:

• creators of technology need the users to create economic value from their innovations
• users need the technology to provide their own customers with the digitally-based services that they expect.

The usual solution, leaving the problem to individual contracts between parties each belonging to the opposing communities, has very significant economic and social drawbacks:

• it is economically inefficient, because it brings a repetition in each individual case of discussions that have already taken place elsewhere, along lines that are absolutely identical, thereby "re-inventing the wheel" and multiplying what is known in economics as "transaction costs", and because it introduces a perverse form of competition between players, who compete on the price of this essential asset, based on power relationships, instead of competing on the performance of products or processes
• it is socially unfair, because it leaves the weaker party in the transaction victim to uneven power relationships that deprive it from legitimate economic benefits – and this is particularly true for the highly fragmented but globally dominant European sector of Mechanical Engineering.

This structure is identical to that encountered around labour:

• the two communities are the workers and the employers: they have structurally opposing interests, but need each other
• direct individual contracts would entail large power imbalances
• the terms of the discussion are a price – the wages, which translates into how the value added generated by the firm is shared between labour and capital – and the legally-binding regulation of working conditions.

The solution developed by the social partners (trade unions and employers' organisations) to solve the question of fairness is collective bargaining. The concept is that:

• one cannot define ex ante what a fair outcome will be, but that the effort must go in the definition of fair procedures
• the parties negotiate collectively, and the outcomes are legally binding for all parties represented.

Transposing this model to the interactions between creators and users of digital technologies in industry would mean that creators of technology on the one hand and users of technology on the other hand would simultaneously create collective representations of their interests. A first move in this direction can be identified as the Avanci platform pooling a large number of patent holders in the field of the Internet of Things (incl. Ericsson, Qualcomm, ZTE, KPN, and InterDigital) and providing collective and somewhat transparent terms and conditions for use. Collective representation of digital technology users could be built based upon existing sector-specific industry associations. The fairness of procedures would entail transparency on the terms of the discussion and on their content, and on the legal enforceability of the collective agreements thus reached. This may imply a revision of competition law regarding cartels.

3 – Capture of access to industrial data: a risk to production and maintenance know-how of continuous process industries

In a possible scenario in which one company would exert a monopolistic control over industrial, sensor-generated data, this company would be in a position, by exploiting Artificial Intelligence algorithms, to capture the know-how of industrial players using continuous processes (chemicals, basic materials and metals). These sectors are regrouped under the SPIRE PPP. This know-how refers to the operation of the plant in production, and on the maintenance of its equipment. Thereby, the company monopolising access to industrial data would be the one controlling the differentiating asset of the industrial plant, leaving to the current industrial player the low value-added function of owning the material productive assets, and of managing the workforce. As illustrated by the case of Russian steelmaker NLMK in the Internal Market Advisory Committee meeting of 16 March 2017 organised by DG GROW on industrial skills, know-how in operating the production equipment changes the defect rate from 16% to 3% - so that it is of determinant economic importance.

If we want to avoid that the production and maintenance know-how is transferred from the existing European industrial players in continuous process industries towards the Artificial Intelligence companies holding a monopolistic access to their industrial data, the legal and economic conditions for accessing and processing industrial data must also be Fair, Reasonable and Non-Discriminatory (FRAND). Procedures such as those outlined above for Standard-Essential Patents could apply.

4 - National platforms on digatalising industry must integrate trade unions

At the meeting on 27 June 2017, the consultants of PwC exposed the variety of governance models between the 15+ existing national initiatives to digitalise European industry, and emphasised that some of them are entirely led by the State, while the others included "industry" in their governance scheme.

Ever since the Roundtables on "Digitalising European Industry" started, industriAll European trade union has insisted on the importance of having trade unions present in the governance boards of these national initiatives to digitalise industry. Indeed, we as trade unions represent the voice of an essential component of "industry", namely the workers, whose skills and motivation are absolutely necessary for the digital transformation of industry to be a success. So far, only five Member States (DE, AT, SE, DK, IT) have explicitly included trade unions in their discussion platforms. This is clearly not enough. Our goal is that all national discussion platforms on the digitalisation of industry include trade unions.

5 – National platforms on digitalisation of industry should address all social impacts of digitalisation

As our General Secretary Luc Triangle proposed at the EU Industry Day on 28 February 2017, the national platforms on digitalisation should include platforms for social dialogue on digitalisation.

This social dialogue on digitalisation should not be limited to skills issues only. Skills are important, and a pre-condition for success. However, they do not exhaust the reflection. We strongly advocate that national platforms on digitalisation address more broadly all social impacts of digitalisation on:

• employment levels (number of hours worked), and on the ensuing anticipation of change
• contractual employment relationships between workers and companies
• working conditions.

This agenda would follow the welcome example of the "Arbeit 4.0" initiative in DE.