Innovative apps are creating millions of new jobs in Europe and redefining traditional services. Companies such as Uber, AirBnB and Spotify are changing the way we shop and buy services, but as regulators, we have failed to keep up. All too often, our regulatory environment impedes innovation, pushing these services into the black market. It is time to adapt to the new app economy.
Ordering, tracking and paying for a taxi service with just a few clicks. A few years ago, this was hard to imagine, but digital innovations such as Uber have now become mainstream. As regulators, we are playing catch up. Our outdated laws provide barriers to these improved services. And the incumbents feel threatened, resulting, for example, in a number of physical assaults on Uber (pop) drivers by taxi drivers in Brussels and Amsterdam.
The controversy around Uber is a prequel to a more fundamental discussions on the next wave of digitization of our economy. In the next few years, it's likely we will see the development of hundreds of thousands of (service) apps, challenging existing business models and ignoring countless national and European rules. You could compare it with the 19th century struggle between the guilds and the mass producers who introduced the steam engine. We need to prepare for this struggle, not by slamming on the brakes, but rather by embracing change.
Europe is already missing the online boat: a streaming music provider like Spotify had a lot of trouble rolling out its service here, and its competitor Pandora is not active on the European market at all, because of royalty issues. In general, policy makers and politicians have been very reluctant to accept concepts like citizens producing their own energy, providing bed and breakfasts (Airbnb), sharing cars (Snappcar) or providing taxi services (Uberpop). We have seen witch-hunts against ordinary people trying to make an extra living by sharing their belongings.
In a time of continuing sluggish economic growth, and unacceptably high levels of unemployment – nearly 25 million Europeans are unable to find a job – the growth of the ‘app economy’ should be seen as part of the solution, rather than part of the problem. Already over one million Europeans are working in the app developer sector, by 2018 this could be almost three million people.
Governments should take a big leap forward to boost the ‘appization’ of the economy and society at large. We propose the following actions on the European level.
First of all, we need a quick adoption of the EU’s telecom package. It is a scandal that the member states are doing their best to water down any proposal for a more integrated and coherent digital market. That market is now completely fragmented which makes it impossible for the app economy to thrive. But it is EU Member States who are the blocking factor.
Take data protection laws - still blocked in Council. Roaming fees gone? Maybe in 2018, if it is up to the Council. Providing strict rules on net neutrality? Not our cup of tea, say the member states. Harmonizing the auctioning of radio spectrum for digital communication (4G, 5G)? Nation-states are against giving up this big cash cow. Bytes don’t know borders, but the member states do.
Secondly, the European Commission should propose a single European telecoms regulator like the Federal Communications Commission (FCC) in the United States. It is the task of the EU to create economies of scale and regulatory predictability. To do that, we need to get rid of the 28 national regulatory kingdoms. Without a single European telecoms regulator that ensures that European laws are coherently implemented in the entire EU, that creates a setting in which operators can compete on a European scale and that is responsible for the issuing of spectrum, there will never be a European digital market without borders and bureaucratic hurdles for innovative companies.
The third policy action for making Europe app-friendly, is to apply the “Cassis de Dijon” approach to the creation of the digital single market. As a result of this famous 1979 arrest by the European Court of Justice, products that were accepted in one EU member state, automatically gain access to the entire European market. Why not apply this same ruling to online products and services? Domestic markets are often too small, and we don’t need to produce more European rules – rather go back to the basic jurisdiction and tweak it for the digital age.
Of course we are not saying that governments should accept any kind of new service – we always have to consider consequences in terms of safety and health. However, real innovation also means real disruption and allowing sometimes creative destruction. Rejecting and blocking innovations ex ante gives a negative signal to entrepreneurs and startups. We need those innovators in Europe.
It is time that Europe opens its borders to innovation. There is no way back, the only way is app.
Guy Verhofstadt is the Leader of the European Liberals and Democrats in the European Parliament (ALDE).
Kaja Kallas is a Member of the European Parliament (ALDE).
Editor: S. Tambur