What should be the two priorities of the European strategy?

BenoĂźt THIEULIN

Former President and Member of the French Digital Council

Six months of online and cross-country consultations culminated in the seventy proposals set out in the Digital Ambition report. The French Digital Council released the report to the government in June 2015. It outlines the main thrust of a French and European digital transition policy. In the short term, there appear to be two priorities: review the way in which the innovation economy is financed and ensure the loyalty of online platforms to their users.

Lack of expertise in new business models
Why is it so important to look at how the digital economy is financed? Because this type of economy requires entrepreneurs to innovate constantly, grow fast and operate in the international arena right from the start. All of which requires capital. European businesses are funded primarily by bank loans, unlike American SMEs which rely on capital market financing to the tune of 80%. Traditional sources of finance need to be adapted to new business models. This can be done in numerous ways; the banks, which are major sources of funding, must develop more appropriate products and services. The public authorities could also amend the rules on the taxation of savings, in order to channel the latter into long-term investment and further guarantee the supply of available funds. Furthermore, financial analysts and national stock exchanges do not have the necessary expertise in the digital and innovation field so, too often, scale-up companies go to the United States or Asia to make their initial public offering or to sell their business to an industrial giant. What happened with digital advertising company Criteo, which is now listed on Wall Street, is likely to happen again if Europe does not improve its expertise in analysing new business models.
Create a European network of rating agencies
The French Digital Council has proposed setting up market places dedicated to financing innovation and targeting sectors in which Europe already has a pool of scale-up companies, for example Internet of Things, eHealth and data management. These proposals are directly relevant to Europe’s Capital Markets Union project, which aims to make Europe an attractive market place for businesses worldwide.
Another key objective is the development of a reliable regulation system. It is vital that we improve our understanding of this development model, which is shaking up traditional methods of economic regulation and challenging the protection of individual rights, and will make its way into banking, transport, etc. in the future. We have recommended taking steps to ensure the loyalty of platforms, and setting up a European network of rating agencies for this purpose. We firmly believe that, in an audience economy, regulation should be more social and driven by the market. Producing facts and evidence on the practices (both good and bad) of online platforms requires a broad spectrum of expertise – interface design, technical skills, etc. – which cannot be provided by lawyers alone. Our cooperation with French businesses concerned by the Google Search case revealed the need to objectify the difficulties encountered by professional and private users of platforms. The Commission has a substantial pool of technical expertise but it is for internal use only. It would be helpful if any useful information were shared with civil society, the market and investors. Platform users themselves could play a valuable role in these endeavours, alongside the large communities of engineers, scientists and associations that already do some of the work by popularising, for example, the General Terms of Use (GTU) of online platforms. We hope these proposals will be examined after the European Commission’s consultation on platforms. Lastly, while the Juncker Commission’s positive action in favour of the Single Digital Market is commendable, Europe is soon going to have to do more by laying out the options for a development model able to withstand major digital and environmental transitions going forward. (July 2015)

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