On 6 May, the European Commission published a far-reaching digital single market (DSM) strategy intended to boost European jobs and growth, open up digital services to all European citizens and enable European companies to better compete in the global digital economy. The proposals are designed to remove regulatory obstacles and foster trust in the online environment, but they will have implications far beyond the digital ecosystem. The potential economic benefits awaiting Europe make action in these areas a no-brainer: an estimated €415 billion in additional annual European GDP, of which €250 billion could be delivered within the Commission’s current mandate ending in 2019. For more information contact our office in Brussels: www.brunswickgroup.com/contact-us/brussels/

1. Let’s get digital physical
TheCommission’sDigitalSingleMarketstrategyisaboutmuchmorethantheInternet
May 2015

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Executive Summary
With the digitization of every
industry on the rise, the implications
of completing the DSM extend deep
into the traditional, often physical
and still offline world. Industries as
diverse as transport, health, retail,
shipping, energy, financial services
and agriculture are affected by the
digital revolution. We’re already
seeing some of the economic impact
with the rise of new sub-sectors such
as FinTech and MedTech.
The reaction to the plan so far has
focused on the impact on Internet
platforms like Google and Facebook,
the equipment and infrastructure
supporting them, the content flowing
through their networks and the many
creators, distributors and users with
an obvious stake online. A popular
refrain is that Europe is taking aim at
the US tech industry.
This response is not surprising. The
strategy appears squarely aimed at the
digital ecosystem. It seeks to harmonize
disparatelawsacrossEuropeinareassuch
as copyright, data protection and cyber
securityandtosupportbetterfunctioning
telecoms markets and other digital
infrastructure. It also rightly starts to
move the debate on data beyond personal
privacy to innovation and research, in
recognition of the many benefits its
collectionandanalysiscanbring.
Yet upon closer inspection, large
portions of the strategy aren’t directed
at boosting Europe’s digital economy
at all, but instead at helping traditional
industriessurvivethedigitalrevolution
- and forcing purely digital players to
abide by the same rules.
With stakes so high, the focus on
the struggle between the EU and
large US Internet players presents a
real distraction. It’s critical to move
beyond this oft-repeated narrative
so that the wider industrial impact
– both the risks and opportunities
– are appreciated by policymakers,
politicians and industry itself. Here
we outline the possible implications.
On 6 May, the European Commission published a
far-reaching digital single market (DSM) strategy
intended to boost European jobs and growth, open up
digital services to all European citizens and enable
European companies to better compete in the global
digital economy. The proposals are designed to remove
regulatory obstacles and foster trust in the online
environment, but they will have implications far
beyond the digital ecosystem.
The potential economic benefits awaiting Europe
make action in these areas a no-brainer: an estimated
€415 billion in additional annual European GDP,
of which €250 billion could be delivered within the
Commission’s current mandate ending in 2019.

3. © BRUNSWICK | 2015 | 3
RETAIL
The Commission wants to make it
easier for traditional retailers to
compete online. Allowing European
retailers to sell cross-border is
beneficial for some but will have
consequences for those market
players who benefit from territorial
restrictions. The inquiry into the
e-commerce sector is also bound to
reignite the discussion on contractual
arrangements between suppliers
and distributors, such as selective
distribution agreements.
HEALTHCARE
The healthcare sector has much to gain
from a comprehensive DSM. Improved
ICT standardization combined with the
free flow of data and the applications
of big data would benefit consumers,
doctorsandpharmaceuticalandmedical
device companies alike. Accessible
and interoperable data could allow
hospitals to share patient data more
easily and allow companies to track
the effectiveness and use of their drugs
in real time. Given that big pharma
usually works with many research
centres at the clinical stage, more ICT
standardizationwouldsimplifytheirjob
and promote better outcomes.
TRANSPORT
Transport profitability relies heavily
on the optimization of space, time
and assets. A true DSM encompassing
fully interoperable and connected
traffic management systems and
improvement of administrative
processes across the EU would
support the transport industry by
allowing it to further optimize and
reduce administrative overhead.
LOGISTICS
For logistics players, the benefits
of new technologies are clear:
they range from intelligent stock
management systems to real-time
shipment tracking and simplified
administrative processes. However,
the EU delivery market is still
fragmented along national borders,
partly due to legacy IT and electronic
communication systems developed
separately across European countries.
ICT standardization combined with
enhanced regulatory oversight and
price transparency for cross-border
parcel delivery will have a definite
impact on logistics players and could
create a true and open single market
for delivery operators.
FINANCIAL SERVICES
In finance, the DSM’s potential
impact cannot be understated.
The Commission has renewed its
interest in improving cybersecurity
by announcing a Public-Private
Partnership. Additionally, the new
and more positive approach of the
Commission to data as a source of
growth, away from a pure focus on
data protection, could benefit the
sector by allowing it to make use of the
enormous amount of data it produces.
ENERGY AND ENVIRONMENT
Theenergyindustryisrollingoutsmart
grid and smart metering systems,
enabling an optimized European
energy network and a reduction in
cost and waste, ultimately benefiting
the environment. But these smart
systems will also create vast amounts
of data. Ensuring interoperability
and availability to other sectors could
provide invaluable information to
other sectors. Imagine what household
consumption patterns can tell the
advertising industry, for instance.

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Old issues
tackled anew
The Commission’s proposals also aim
to tackle old issues in new ways.
SHARING IS CARING
In this strategy the Commission
proposes solutions to what it sees as
the biggest challenges to the creation
of a digital single market. Here we
comment on those we believe to be
the most game changing.
The rise of the sharing economy
has spurred the creation of many
new players. In some cases, these
companies have escaped rules
formulated for their traditional
competitors. The Commission is
determined to put an end to that
situation and its effort goes beyond
attacking the infamous GAFA (Google,
Apple, Facebook and Amazon) – smaller
players will be brought into play
as well. The EU wants to ensure
that all participants in the economy
contribute to the value chain and
take on responsibility when things go
wrong. European manufacturers and
traditional distributors can rejoice at
seeing intermediaries being asked to
apply a ‘duty of care’ when it comes
to their products and content.
COPYRIGHT: CAN A
COMPROMISE FINALLY BE
FOUND BETWEEN CREATORS
AND DISTRIBUTORS?
After years of debate, a review of
copyright law this autumn will
be one of the first proposals to be
published. The Commission intends
to harmonize incentives to create and
invest while allowing transmission
and consumption of content across
borders. We expect the proposal to
allow the full portability of content,
facilitate cross-border access, clarify
rules for copyrighted material
and modernize enforcement. This
should create an easier-to-navigate
regulatory framework for cross-
border digital content providers, but
it will be resisted by publishers and
the film and TV industry. Finding
agreement on copyright rules
adapted to the digital economy rests
on achieving compromise between
creators and distributors, and may
require revision of existing business
models, but it is essential to fully
realizing the Commission’s vision.
WILL A NEW, MORE POSITIVE
APPROACH TO DATA
EMERGE?
Europe has built a reputation for being
tough – and sometimes restrictive
– on the use of personal data. The
strategy acknowledges the importance
of modernized data protection
regulation to support trust online, but
also argues for the EU to pay more
attention to data as a resource, looking
at data flows, data ownership and data
portability. It is a positive sign that
parts of the EU are moving away from
the negative narrative fostered by the
surveillance revelations and towards
data as a source of opportunity. To that
effect, the Commission will propose
initiatives promoting interoperability
and common standards for cloud
computing and big data and a
European free flow of data initiative.
TELECOMS: TOWARDS A
LEVEL PLAYING FIELD
Yet another overhaul of the European
Telecoms regulatory framework will
be presented in 2016. This will be the
second such package in just three years,
as the previous proposal was opposed
by EU member states and pared back
to deal only with roaming and net
neutrality. The new proposal contains
elements that were rejected in the
previous package, such as a common
spectrum management policy. It also
emphasizes the need for investment
in high-speed broadband and a level-
playing field for legacy telecom players
and new digital service providers.
Three Pillars of the Strategy
1. Better access for consumers and businesses to
online goods and services across Europe. A key
focus is tackling obstacles to cross-border online activities,
in order to create a seamless market for businesses and
consumers alike.
2. Creating the right conditions and a level
playing field for advanced digital networks and
innovative services to flourish. The aim is to ensure
that citizens, businesses and public administrations have
access to reliable trustworthy, high-speed, and affordable
networks and services.
3. Maximizing the growth potential of the digital
economy. Measures aim to boost the overall digital
economy and maximize the benefit of digital for all sectors
and the broader European economy.

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Telcos have been lobbying for EU
legislation to rebalance the relationship
with OTT service providers and it
appears they may be seeing some
success. Many of the measures reflect
this perspective, as they attempt to
force innovative digital services to ‘pay
their fair share’ instead of free-riding
on existing structures and according to
different rules.
MORE REGULATION FOR
PLATFORMS?
The Commission’s focus on online
platforms stems from concerns
that some may be too dominant. It
will therefore conduct an in-depth
assessment of their role, following
inquiries at both European and
national levels. Issues to be considered
includealackoftransparencyinsearch
results, the use of personal data,
interoperability and remuneration
of rights holders. The Commission
will investigate how to include rights
holders in the online value chain and
facilitate the swift removal of illegal
content, which could mean a review
of intermediary liability rules, or even
new rules regulating platforms. Top-
down legislation will be unwelcome
for platform operators, but the
Commission’s first task here will be
to define platforms and establish the
remit of the inquiry.
THE END OF GEO
BLOCKING?
Several Commissioners have criticized
unjustified geo-blocking, the practice
of discrimination of EU consumers
based on national location. The strategy
calls for a legislative proposal to end this
practice in 2016. Companies would be
prevented from segmenting national
markets, forcing sectors as diverse
as videogame publishers, streaming
content sites and online auto dealers to
change their practices.
E-COMMERCE UNDER
SCRUTINY
The Commission’s competition
arm has launched a review of
the e-commerce sector to better
understand how online markets work
and identify obstacles to cross-border
trade and competition. The focus
will be on the barriers, such as geo-
blocking or forced re-routing, created
by private companies. In coming
weeks, stakeholders in every member
state will be contacted for comment
and input, including rights holders,
broadcasters, online merchants,
manufacturers and price-comparison
and marketplace websites. Should
the review reveal restrictions or
distortions to competition, further
action, and legislation, could follow.
Clash of Mentalities
The strategy reflects both the new structure of the Commission, with
Vice Presidents giving the general orientation and Commissioners
implementing, and different approaches to the digital economy.
On one side, Vice President Andrus Ansip comes from ultra-
connected Estonia, which is known for its ‘everything digital’
attitude. He is a strong proponent of a true online DSM.
In contrast, Digital Commissioner Günther Oettinger is more
traditionalist. He appears to see the DSM more as a means to
support Europe’s ‘real world’ industries. The German has not
changed approach since his last job as Commissioner for energy,
when his focus was on physical infrastructure development, and sees
supporting European telcos and content owners as his primary role.
The strategy is therefore a chance for Ansip, whose team wrote the
DSM strategy, to give a framework for Oettinger to work within
and to ensure that a more progressive vision of digital reform
gets implemented. All of Oettinger’s proposals will need Ansip’s
approval to be formally adopted, and the relationship between the
two will undoubtedly come under strain over the coming years.

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Next steps
Credit the Commission for
delivering such an ambitious vision.
Months ago it seemed that Europe’s
executive branch would side-step a
comprehensive legislative overhaul
in order to focus on a few achievable
changes, such as the end of geo-
blocking. Ultimately the Commission
swung farther than expected,
with 16 different initiatives,
ranging from concrete legislation
and standardization measures to
antitrust inquiries and wide-ranging
consultations and reviews.
Still, it isn’t clear that this grand
plan is achievable - or what the
concrete outcomes might be. The
Commission can set a direction
and propose changes, but it will be
up to the European Parliament and
member state governments to decide
the extent to which the digital
single market will become a reality.
National governments, influenced
by local industry – both traditional
and online – may be influenced
to safeguard the status quo. The
fate of consumers and businesses,
largely SMEs, hangs in the balance.
Realistically, the digital single
market can only function as far as the
offline single market does today, and
that is not without its own issues.
As Vice President Ansip said when
presentingthestrategy,thisisjustthe
beginning. The DSM strategy can be
seen as an umbrella for much of the
Commission’s legislative agenda for
its five-year term, and is likely to be
the defining theme for Commission
President Juncker’s time in office.
Companies that will be affected –
and most will be in some way – will
need to engage constructively with
the EU before and after individual
legislative proposals are published.
A properly functioning DSM is an
opportunity for all businesses, but
there are risks. Clear input from
the industry, consumers and other
relevantgroupsisrequiredsothatthe
EU takes a balanced and competitive
approach, in a way that is future-
proof and innovation-friendly. The
data work stream in itself will affect
all sectors and it will be particularly
important for the financial services,
transport and healthcare sectors to
fully participate and demonstrate the
positive impact data flows or big data
have in their fields.
Document links:
• Commission
Communication: A Digital
Single Market Strategy for
Europe
• Press release of the European
Commission: Antitrust:
Commission launches
e-commerce sector inquiry
• Roadmap for
completing the Digital
Single Market Strategy
• Commission Staff Working
Document a Digital Single
Market Strategy For Europe
- Analysis and Evidence
• Brunswick Review:
The Data Issue
US Tech Under Attack?
It’s true that a number of the measures proposed are perceived as
supporting European operators at the expense of US internet giants. This
is not surprising, given Europe’s tax investigations of digital companies at
both the EU and national level. Certain aspects of the strategy, such as
the e-commerce sector inquiry and the investigation into platforms, may
create more risk for large multinational players. While the Commission
has dismissed the idea that its plan targets US industry, it is clear that
the EU supports the rise of European digital champions as part of its aim
to bring Europe to the forefront of the global economy.

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For more information
Philippe Blanchard
Managing Partner
+32 (0) 2 235 6513
pblanchard@brunswickgroup.com
Brunswick is the global
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