Wageningen University Investigating the influence of European policy and legislation on Europe’s digital economy during the Juncker administration

Bachelor Thesis

L.R.G. Rijken 961108721040

BSc. Management and Consumer studies

Supervisor: Ms. Annosi

Examiner: Ms. Materia

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PREFACE

In front of you lies the thesis “Investigating the influence of European policy and legislation on

Europe’s digital economy during the Juncker administration”. In this thesis the effects of the policies

and legislation implemented by the Juncker Commission with regards to the digital economy have

been analyzed. It has been written to finalize my Bachelor at Wageningen University.

The choice to investigate this topic is based upon a confluence of the content of my Bachelor at

Wageningen University. During my Bachelor I have followed courses on European policy and

institutions, the coordination of economics and several business management courses. This unique

selection of courses has formed my decision to analyze the effects of European policy and legislation

regarding a specific topic. I have chosen the digital economy because of the upcoming nature of this

topic. It is a relatively new topic which is still developing and relative little research has been

conducted in this specific area. From the business management courses I have learnt the additional

value of analyzing a topic from different perspectives, therefore I have decided to analyse the digital

economy in Europe from different perspectives.

I would like to thank Ms. Annosi for the counseling during this process. Additionally I would like to

thank Mr. Candel for the specific advice on various EU related topics. Finally I would like to thank my

family and friends for their support.

I hope you enjoy your reading.

L.R.G. Rijken

Ede, February 2, 2020

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ABSTRACT

Digital devices and services have become indispensible in daily lives and business processes.

Technologies as the World Wide Web, the Internet of Things and Artificial intelligence have led to the

development of the digital economy. The Juncker Commission has stated in 2015 that it wanted to

maximize the potential economic growth which the digital economy offers for the European Union.

In order to achieve this goal the Digital Single Market strategy has been established. This was one of

the top ten priorities of the Commission. The Directorate General Connect was responsible for

executing this strategy. Twenty-eight legislative initiatives have been adopted by the EU institutions.

Additionally non-legislative initiatives have been implemented. In this thesis a selection of the most

powerful initiatives is analyzed. This selection is based upon the relation and the impact of the

initiatives to the digital economy. Eleven regulations, three directives and five non-legislative

initiatives have been analyzed.

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TABLE OF CONTENTS

PREFACE 2

ABSTRACT 3

TABLE OF CONTENTS 4

LIST OF FIGURES AND TABLES 6

LIST OF ABBREVIATIONS 7

1 INTRODUCTION 8

1.1 Research objective and research questions 8

1.2 Academic relevance 9

1.3 Societal relevance 9

1.4 Structure 9

2 THEORETICAL FRAMEWORK 10

2.1 The Balanced Scorecard 10

2.2 Key concepts used in the thesis 11

2.2.1 The digital economy 11

2.2.2 European legislation and policies 12

3 RESEARCH DESIGN AND METHODOLOGY 14

3.1 Data collection per sub research question 14

4 THE DIGITAL ECONOMY 15

4.1 The digital revolution 15

4.2 The development of the digital economy 17

4.3 Differences between member states of the EU 18

4.4 Negative aspects of the digital economy 18

5 IMPLEMENTED POLICIES AND LEGISLATION 20

5.1 Stakeholders within the EU institutions 20

5.1.1 DG CONNECT 20

5.1.2 Consultative bodies 21

5.2 Stakeholders outside of the EU institutions 21

5.2.1 National governments 21

5.2.2 Lobby groups 22

5.3 Implemented policies and legislation within the EU 22

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5.3.1 Directives 22

5.3.2 Regulations 23

5.3.3 Non-legislative initiatives 25

5.4 Initiatives outside of the EU 26

6 EFFECTS ANALYSIS 28

6.1 Financial perspective 28

6.1.1 Value added in the ICT sector as a share of the GDP 28

6.1.2 Employment related to the digital economy 28

6.1.3 Trade related to the digital economy 29

6.2 Internal process perspective 31

6.3 Citizen perspective 32

6.4 Innovation and learning perspective 33

7 CONCLUSION 34

8 DISCUSSION 36

8.1 How the digital economy in Europe will develop 36

8.2 Reliability and validity 36

8.3 Limitations to the research 37

8.4 Personal recommendation 38

APPENDIX I 39

REFERENCES 40

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LIST OF FIGURES AND TABLES

Figure 1: The Balanced Scorecard links performance measures

Figure 2: Individuals using the Internet, 2005-2019

Figure 3: The process of implementation of legislation

Figure 4: ICT sector as share of the GDP

Figure 5: Employment in the digital economy as a share of the total employment

Figure 6: E-commerce turnover as share of total turnover

Figure 7: E-commerce turnover Europe

Table 1: Comparison use of BSC between businesses and public policy analysis

Table 2: Overview of the data source per sub research question

Table 3: Indication of the size of the digital economy in Europe, the US and China

Table 4: Implemented directives to establish the DSM

Table 5: Implemented regulations to establish the DSM

Table 6: implemented Non-legislative initiatives to establish the DSM

Table 7: Annual benefits of various initiatives

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LIST OF ABBREVIATIONS

AI – Artificial Intelligence

BEREC - Body of European Regulators for Electronic Communications

BSC – Balanced Scorecard

CONNECT - Communications Networks, Content and Technology

CoR – Committee of the Regions

DAE - Digital Agenda for Europe

DE- Digital Europe

DG - Directorate General

DSM – Digital Single Market

EC – European Commission

ECB – European Central Bank

EECC - European Electronic Communications Code

EESC – European Economic and Social Committee

ENISA - European Union Agency for Cybersecurity

EP – European Parliament

EU – European Union

GDPR – General Data Protection Regulation

ICT –Information and communication technologies

IoT – Internet of Things

IT – Information technology

ITU – International Telecommunication Union

OECD – Organization for Economic Co-operation and Development

UN – United Nations

UNCTAD – United Nations Conference on Trade and Development

US – United States

VAT – Value added tax

WWW – The World Wide Web

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1 INTRODUCTION

The use of digital tools has become indispensable in our society. Not only in our private lives but also

in businesses the integration of digital technologies has become a key element in all sorts of

processes. Whether it regards the digitalization of an internal manufacturing process or operating a

web shop, the use of digital technology has affected almost every aspect of modern life. This

digitalization has led to the development of a digital economy (Buhkt & Heeks, 2017). This digital

economy can be defined as the worldwide network of economic activities enabled by ICT. It can also

be defined more simply as an economy based on digital technologies (Rouse, 2016).

In 2009 The EC of the EU has acknowledged the growth potential digitalization offers the European

community and economy. In 2010 the Digital Agenda for Europe (DAE) was established. This agenda

contains concrete goals regarding digitalization, or digital transformation as it is called within the EU.

An important aspect of this agenda is the improvement of the European digital economy. In the

agenda it is acknowledged that Europe is falling behind on countries such as the United States (US)

and China (European Commission, 2010). In 2012 the Directorate-General (DG) for Communications

Networks, Content and Technology (CONNECT) was founded. This DG has been made responsible for

the realization of the DAE. (European Commission, 2015) As a consequence of the DAE the Digital

Single Market (DSM) strategy has been implemented. This strategy was announced in 2015 by the

Juncker Commission. One of the main pillars of this strategy was to maximize the growth potential of

the digital economy in Europe (European Commission, 2019).

There are many concerns regarding whether the EU is capable of achieving this proposed goal. The

US and China are currently leading at important areas of the digital economy. These two countries

combined share 90% of the 70 largest digital platforms, whereas Europe hosts only 3.6% of the

market share of the 70 largest platforms (United Nations, 2019). Another example of an aspect of

the digital world and thus the digital economy where Europe is lagging behind is the percentage of

patents granted on Blockchain technology. This technology is considered to be the most important

invention since the World Wide Web (WWW). It is a technology which enables data to be managed

by clusters or blocks which are not owned by any entity. In other words, these data blocks are

directly shared between users without the intervention of a third party such as a webhost.

Blockchain technology is already applied to enable secure safe transactions in crypto currencies such

as the Bitcoin and it is also used in supply chain logistics for tracking purposes (Zhu, Gai, & Li, 2019).

Currently the US and China own 75% of patents on Blockchain technology, giving them an advantage

and leading position in the digital economy (United Nations 2019).

There appears to be a discrepancy between the stated goal of the Juncker Commission to maximize

the growth potential of the digital economy and the actual situation. This rises to the question: What

has been the influence of the Juncker Commission on the digital economy in Europe?

1.1 Research objective and research questions

Research objective: The main objective of this research is to investigate the influence of European

policy and legislation on Europe’s digital economy during the Juncker Commission (2014-2019) and

to examine whether the goal of the DSM related to the digital economy has been met. This research

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is conducted through a literature review. The detailed description of the research process is

described in chapter 3: Research design and methodology.

Main research question: How has European policy and legislation implemented during the Juncker

Commission influenced Europe’s digital economy?

Sub research questions:

- How has the worldwide digital economy developed? - Which policies and legislation has the Juncker Commission implemented regarding the

digital economy? - How is Europe’s digital economy affected by the implemented policies and regulations

during the Juncker Commission?

1.2 Academic relevance

The EU has published a lot of reports and factsheets about their contribution to Europe’s digital

economy. Additionally to the EU documents quantitative studies have been published regarding

Europe’s digital economy (Greve, 2019), however little qualitative research has been conducted

outside of the EU institutions regarding the influence of all policies and legislation implemented by

the Juncker Commission related to the digital economy. Before the implementation of legislation in

the EU, impact assessments are conducted to examine the impact of the proposed legislation

(European Commission, 2019). However there has not been a comprehensive study outside of the EU

institutions which assesses the influence of the multiple initiatives. A qualitative research could

provide new insights about how the EU has had influence on the digital economy between 2014 and

2019.

The academic relevance of this study is thus the addition of new insights and knowledge in the

literature about the influence of the Juncker Commission on the digital economy.

1.3 Societal relevance

The EU institutions such as the EC and their DG’s can learn from the results what the effects are of

their policies and legislation. This knowledge can be used to improve the policies and legislation in

order to enhance Europe’s digital economy and consequently the general economy and welfare

within the EU. Furthermore the results can be used as a benchmark for other public domains of the

EU. If this study highlights which EU policies and legislation are effective, similar types of legislation

and policies could be applied in those public domains.

1.4 Structure

In the second chapter the theoretical framework of this study is described. This framework forms the

academic foundation of this research. In chapter three the research design and methods are

addressed. This consists of the concrete approach used to answer the main research question. The

fourth, fifth and sixth chapter contain all the results, ergo the answers to the sub research questions

mentioned in section 1.1. The answers are the result of the literature study conducted. The

conclusion is stated in chapter seven. In chapter eight the results and the conclusion of the study are

discussed and recommendations are given. Additionally to the mentioned chapters, this report

contains an overview of the references used and one appendix.

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2 THEORETICAL FRAMEWORK

In this chapter the theoretical framework is described. The theoretical framework consists of the

underlying theory which is used in this study and the core definitions of important concepts used are

given. The most important scientific sources are discussed as well.

2.1 The Balanced Scorecard

To answer the main research question of this study, the balanced scorecard (BSC) is applied. The BSC

method was developed by Kaplan and Norton in 1992 to assess the economic performance of

businesses by using more than one mean of measurement (Hayes, 2014). The BSC can be used to

measure the performance and to improve processes within an organization. Alignment of the overall

vision and strategy is the transcending goal of using the BSC (Gautreau & Kleiner, 2001). Despite the

fact that this method was initially meant to analyse the performance of businesses, the BSC can be

used to analyse the performance of public bodies such as the EU as well (Zastempowski, 2015). One

of the major strengths of the BSC is that this method combines both internal as external factors in

measuring the effectiveness of the selected strategy or policy (Hoque & James, 2000). Another

significant strength of the BSC is that it does not limit to assessing the effectiveness by focusing

merely on the quantitative economic data but includes several different perspectives to obtain a

complete review of the performance (Johnson, 2017).

The choice to use the BSC in this study has been made because of the multidimensional approach of

the model. Instead of focusing primarily on the influence of the policies and legislation on the

financial performance of the EU economy, the BSC provides the opportunity to focus on other

perspectives which are influenced by the policies and legislation as well.

The BSC consists of four different perspectives which are used to review the performance on the

long-and short-term objectives (Hayes, 2014). In order to review the performance the following

perspectives connected to a specific question are subject to analysis:

- Financial perspective – How do we look to shareholders? - Customer perspective – How do customers see us? - Internal business perspective – What must we excel at? - Learning & Growth perspective – Can we continue to improve and create value?

These perspectives are placed in the Balanced

Scorecard model in which the relations between

the perspectives are visible. Figure 1 is the

original BSC created by Norton and Kaplan in

1992.

Each perspective has their own goals and

measures related to these goals. These goals and

measures are not predefined by the model, but

the user of the BSC has the liberty to use their

own goals and methods of measurement.

However, businesses often have the same goals

and measures related to those goals. For example

in the financial perspective many businesses have

Figure 1: The Balanced Scorecard links performance measures (Kaplan & Norton, 1992)

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the goal to survive, which can be measured by the cash flow. An example from the customer

perspective can be the goal to have a responsive supply which is measured by the on-time delivery

from business to consumer (Kaplan & Norton 1992).

In table 1 the comparison is made between the regular BSC used in the measurement of business

performance and the use of the BSC for public bodies, such as the EU (Niven, 2008).

Table 1: comparison use of BSC between businesses and public analysis

Perspectives Business Public

Financial What are our revenues and how do we use them?

What are the financial benefits of the policies and legislation?

Internal process At which processes must we excel if we want to achieve our goals?

Which processes need to be excellent in order to meet the citizen’s expectations?

Customer Who buys our products and how do we maintain them as our customers?

How does the public policy or legislation improve the situation of European citizens?

Innovation and learning Is the organization capable to continue to improve and to grow?

Is the organization capable to continue to improve and to grow?

2.2 Key concepts used in the thesis

This section is aimed to describe and explain the two most important concepts which have a central

role in this study, the digital economy and European legislation and policies. When these concepts

are mentioned in the thesis, the definition provided in this section applies.

2.2.1 The digital economy

As mentioned in the introduction of this thesis, the digital economy can be defined as the worldwide

network of economic activities enabled by ICT (Rouse, 2016). This section will elaborate on the

definition and essential elements of this economy. Firstly, the digital economy is based on three

indispensable main elements:

- Infrastructure - Electronic business processes - E-commerce transactions

The first element, infrastructure refers to all means that are necessary to use digital tools. This

includes material assets such as hardware, and satellites but intangible assets as software and

qualifications as well. Additional to the tangible and intangible assets, infrastructure refers also to

human capital required to establish the digital economy. The human capital exists of the specialists

whom make it possible to have access to the digital economy. The electronic business processes is

the second element of the digital economy. The element refers to all processes within businesses

which are conducted on a digital device. Lastly, the e-commerce transactions refer to any transaction

between multiple parties only. This is not limited to business to consumer transactions, but includes

consumer to consumer and business to business transactions as well (Mesenbourg, 2001). In 2012

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the OECD has formulated a comprehensive definition of the digital economy. This was formulated in

consultation with several key players in the digital economy such as the Vice President of Microsoft

and a senior economist from Google. The definition according to the OECD:

“The digital economy is comprised of markets based on digital technologies that facilitate the trade

of goods and services through e-commerce. The expansion of the digital sector has been a key

driver of economic growth in recent years, and the shift towards a digital world has had effects on

society that extend far beyond the digital technology context alone”

(OECD, 2012).

The definition formulated in 2012 by the OECD will be the definition used in this thesis when the

digital economy is mentioned. In the definition of the digital economy of the OECD, e-commerce is a

central concept. The definition of E-commerce used in this thesis is:

“The Business of buying and selling goods and services on the internet”

(Cambridge Dictionary, 2019)

E-commerce has been an indispensable factor in developing the digital economy (Albastroiu, 2007).

The development of the digital economy will be further discussed in the chapter four.

2.2.2 European legislation and policies

The European Union (EU) is a political and economic union in which twenty-eight member states are

collaborating in a supranational and intergovernmental environment. All references in this thesis to

Europe are a reference to the EU, and not the contingent Europe. The EU has judicial, legislative and

executive bodies. In this study the main focus will be on the role of the European Commission (EC).

This is the executive body of the EU which is primarily responsible for the following four tasks:

- Preparing and initiating policies and legislation - Implementing policies and legislation - External representation of the EU - Guardian of the European treaties

Every five years a new EC is formed. This process commences with the appointment of the president

of the EC by the European Parliament (EP) and the European Council. The president-elect is then

responsible for forming the EC. The EC exists of twenty-seven commissioners; one commissioner

from each member state. Each commissioner is then appointed to be (partly) responsible for a

specific Directorate-General (DG), a specific branch of administration responsible for one of the

themes in which the EU is involved in (Lelieveldt & Princen, 2015). In November 2014 Jean-Claude

Juncker has been appointed as the President of the EC. Each Commission is chosen for a period of 5

years, thus the Juncker Administration has been dissolved in November 2019 (Gruyter, 2014).

The successor of Jean Claude Juncker as president of the EC is Ursula Von der Leyen. She has been

elected by the EC and EP in July 2019 as president of the Commission (Europa Nu, 2019). The new

commission officially took office in December 2019. The Von der Leyen Commission and their actions

will be disregarded in this thesis.

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There are several types of legislation the EU can implement. The distinction can be made between

binding and non-binding legal acts. Regulations and directives have the most binding power.

Regulations are acts which are directly applicable in the EU and their member states. Regulations do

not have to be transposed into national legislation. Directives are a type of legislation which first

needs to be transposed into national law by the EU member states. In the process of transposing the

directives are tailored in each member state by national governments to make the directives as

suitable as possible. When a directive is adopted, member states have a defined time frame to

transpose the directive into national legislation. Directives are the most common type of legislation

applied within the EU (Dörrenbächer & Mastenbroek, 2017).

In addition to regulations and directives, the EU also has the power to make decisions. These

decisions only regard specific situations. The non-binding legal acts are opinions and

recommendations, these are primarily used by EU institutions to make statements and provide

guidelines for member states (European Commission, n.d.-b).

The Commission is able to execute non-legislative powers as well. In the Treaty on the Functioning of

the European Union it is included that the EU has the power to support, coordinate of supplement

member states. This is allowed in pre-specified sectors such as industry, culture and administrative

cooperation (European Union, 2012).

There is an important distinction between policies and legislation. The definition of legislation is: “A

law or a set of laws suggested by a government and made official by a parliament” (Cambridge

Dictionary, 2019). In the specific setting of the EU and this study, the government is the Juncker

Commission and the parliament is the EP. The EP consists of Members of Parliament from the

twenty-seven member states of the EU which are directly chosen by the EU citizens (Lelieveldt &

Princen, 2015). The definition of policy is: “A set of ideas or a plan of what to do in particular

situations that has been agreed to officially by a group of people, a business organization, a

government or a political party”(Cambridge Dictionary, 2019). Policies and legislation are

interrelated. Generally it can be stated that policies describe what any form of government wants to

achieve and which measures are required to achieve that certain goal. The laws describe the norms

and procedures that are applicable to achieve the certain goal (Harris, 2015).

The focus of the study is upon the EU as a whole and not upon individual member states. In various

occasions examples are given from individual member states to compare differences, nevertheless

the EU is regarded as one economy and one entity.

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3 RESEARCH DESIGN AND METHODOLOGY

In order to answer the research questions, a literature review was conducted. This method

commences with developing the research questions, gathering sufficient studies and eventually

generating answers on the research questions based upon the found data (MacEachen et al., 2015).

The focus has been on empirical studies to ensure the reliability of the research. Primarily qualitative

data was used, however in several parts quantitative data was used as well to support the qualitative

findings.

The main sources have been found online with the aid of several academic search engines such as

Scopus and IDEAS. Key words such as “digital economy Europe”, “Europe AND digitalization” and “EU

legislation digitalization” were used in finding suitable academic papers. Additionally to the academic

sources, EU documents were an essential source of data. In order to ensure the reliability of the

research the sources used are primarily objective sources without any commercial or personal

interest. The opinions used are explicitly mentioned as opinions. The collected quantitative data is

primarily gathered from commonly trusted research institutes.

3.1 Data collection per sub research question

Each different sub research question required a different type of data in order to be answered. In

table 2 an overview displays the general sources of the data used per sub research question. Note

that this is a global overview. In order to achieve comprehensive and complete results the data from

sub research questions have been interchanged.

Table 2: Overview of the data source per sub research question

Sub research question Data How did the worldwide digital economy develop?

Research reports regarding the digital economy, publications from manufacturers,

Which policies and legislation has the EU implemented regarding the digital economy during the Juncker Commission?

EU legislation, policy documents, information from the DG CONNECT website, EUR-Lex, policy documents from the EC

How is Europe’s digital economy affected by the implemented policies and regulations during the Juncker Commission?

Economic reports, research reports regarding the digital economy, impact reports from the EU, EU legislation evaluation reports, Eurostat

The most important data used in the thesis comes from the following sources:

- Digital Economy and Society Index (DESI) - European Central Bank (ECB) - Eurostat, the statistical office of the EU - Policy documents from the EU - Research documents from the OECD - The world bank - United Nations Conference on Trade and Development (UNCTAD)

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“The emerge of communication networks such as the internet will affect all aspects of the

economic environment, the organization of firms, consumer behavior, the workings of government

and most spheres of household activity” (Johnston, 1997)

4 THE DIGITAL ECONOMY

In 1997 the OECD published an article in its quarterly magazine, the OECD Observer in which the

former Secretary-General of the OECD, Donald J. Johnston has stated the following prediction:

Section 4.1 will describe why this statement was a very accurate prediction about the digital

revolution and especially the digital economy. In section 4.1 a brief overview of the digital revolution

is provided. This section is added to gain a deeper understanding of the digital economy. In section

4.2 the rise of the digital economy is explained. Section 4.3 describes the differences within the EU.

Section 4.4 elaborates on several negative perceived aspects of the digital revolution and the digital

economy.

4.1 The digital revolution

In 1947 the transistor was invented in New Jersey, USA. The transistor is an electronic switch that can

transmit or block electricity. Transistors replaced the use of vacuum tubes as power source and made

it possible to create much smaller electronic devices compared to the vacuum tube powered devices

(Brinkman, Haggan, & Troutman, 1997). The invention of the transistor is globally regarded as the

starting point of the digital revolution. The digital revolution is the process in which the use of

analogue and mechanical tools is transitioning to digital tools (Clarke, 2012). In 1954 the first

transistorized computer was built for the US Air force. This paved the way of the development of

more computers (Naber, 2015). In 1962 the first communications satellite, called Telstar 1 was

launched into space. This was another invention, made possible by the invention of the transistor

which has had a large impact on the digital revolution. This communications satellite made it possible

to broadcast television shows across the Atlantic Ocean (Nasa, 2012). Before the launch of Telstar 1 it

was only possible to watch television through cable access, which was not able to cross the ocean. In

the following decades the process of further integration of digital devices in people’s daily life grew

and digital devices became indispensible within societies. People started to buy home computers,

game consoles were invented and in 1988 digital cameras became publicly available (Trenholm,

2007). Not only citizens noticed the benefits from digitalization, businesses started to integrate

digital processes as well after the invention of the transistorized computer (Naber, 2015).

Another important development which is widely regarded as a catalyst in the digital revolution took

place in 1989. In 1989 the British scientist Tim Berners-Lee invented the World Wide Web (WWW).

The purpose of this invention was to create a system in which computers, data networks and

hypertexts could integrate together in a global information system (CERN, 2019). The WWW has

developed into what nowadays is widely known as the internet. The concept of the internet

originates from the cold war era (1947-1997). The US military and other NATO countries used

computers in their defense systems. These computers however did not work together in a network,

but individually. Causing possible information gaps, or in the terms of the military: defense

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weaknesses. As a response to this weakness the ARPANET was built, a network which facilitated the

sharing of information between different mainframe computers. The ARPANET project was launched

in 1972 (Naughton, 2016). In the years after the invention of ARPANET, the network has been

adapted and improved. ARPANET was not the only system which was invented to share information

among computers; other systems such as the Ethernet and NSFNET have been developed with the

same purpose (Computer Science and Telecommunications Board, 1999). The main difference

between the invention of Berners-Lee and his precursors is the availability and accessibility for the

general public. Since the implementation of the WWW the worldwide percentage of users has only

been growing. In 1997 18% of the US households owned a computer with access to the internet; in

2000 this percentage had grown up to 41.5% (Newburger, 2000). Figure 2 displays the development

of the individual internet users between 2005 and 2019. In this period the amount of internet users

has roughly grown from 1 billion to 4.1 billion individuals (ITU, 2019). To put these numbers in a

European perspective: in 2007 55% of EU households had access to the internet, in 2018 this share

had risen up to 89% (Eurostat, 2019).

Figure 2: Individuals using the Internet, 2005-2019 (ITU, 2019)

In 2007 Steve Jobs, CEO of Apple introduced the iPhone to the general public. The iPhone marked

another important milestone in the digital revolution: The smartphone. In 1992 IBM already had

introduced the first smartphone, a phone with distinctive features compared to regular phones.

IBM’s phone, called SIMON had the ability to send emails, faxes and had a touch screen, whereas

regular mobile phones only had the ability to make calls and send text messages. IBM’s SIMON did

not reach the big public. Only 50.000 units were sold (Business services industry, 1993). It was only

after Apple’s introduction of the iPhone, that smartphones became popular with the big public. At

the introduction of the first iPhone, an estimated 270.000 units were sold within the first 30 hours

(Berkeley, 2015). In 2017 over 90% of the population in developed countries owned a smartphone

(Deloitte, 2017).

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The digital revolution continues. Due to developments such as the Internet of Things (IOT),

Blockchain technology and artificial intelligence (AI) digital tools are integrating indispensable in our

daily lives and jobs and there are no implications that this development will cease in the near future

(Dufva & Dufva, 2019).

4.2 The development of the digital economy

Since the 90’s not only the digital environment has evolved in a swift matter, due to the invention of

the WWW the digital economy has evolved rapidly as well. The introduction of the concept of the

digital economy was in 1994 in the book: Digital Economy, promise and Peril in the age of networked

intelligence by D. Tapscott. The purpose of his publication was to explain to managers how they

could use this new technology (the Internet) to excel in their business operations and to obtain a

competitive advantage on their competitors. D. Tapscott is globally regarded as the originator of the

digital economy (Babu, 1994). The developments in section 4.1 are all interconnected to the

development of the digital economy. With the founding of several online shopping platforms such as

Amazon and Ebay the world was getting familiar with the concept of e-commerce. These new

platforms allowed consumers and businesses to make online transactions and introduced a new form

of consuming. The digitalization of society has contributed to further the development of the digital

economy.

Due to the fact that there is no global consensus on the definition of the digital economy, there is no

uniform measurement of the entire economic impact of the digital economy (Buhkt & Heeks, 2017).

For example McKinsey calculates the size of the digital economy by measuring the value of the ICT

sector, the value of the e-commerce market and the value of offline consumer spending on digital

equipment ((Novak et al., 2018). In September 2019 the United Nations (UN) hosted the first

conference on trade and development in which the digital economy was the central theme. During

this conference the Digital Economy Report 2019 was presented. The UN measures the size of the

digital economy based on the following core items:

- Value added in the ICT sector as a share of the GDP - Employment in the digital economy as a share of the total employment - Trade related to the digital economy as a share of the total trade - Value added in e-commerce (United Nations , 2019)

Despite the fact that the UN has chosen the previous mentioned means of measurement of the

digital economy, comparable data is not yet available regarding the trade related to the digital and

the value added in e-commerce (IMF, 2018). Table 3 displays an indication of the size of the digital

economy of Europe, the US and China in selected years.

Table 3: Indication of the size of the digital economy in Europe, the US and China

Europe The US China Value added in the ICT sector as a share of the GDP (2016)

3.8% [1] 5.2% [2] 4.8% [2]

Employment in ICT sector as a share of the total employment (2015)

2,5% [3] 2.7% [2] 2% [2]

Sources: [1] (Eurostat, 2018), [2] (United Nations, 2019), [3] (Mas et al., 2018).

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According to the definition of the UN the US is currently the worldwide leader in the Digital Economy.

The value added in the ICT sector in the US is estimated at one trillion US dollars. The total e-

commerce sales in the US in 2017 amounted to 8883 billion US dollar and contributed to 46% of the

US’ total GDP. The US is followed in total size in e-commerce sales by Japan and China with

respectively 2975 and 1931 billion us dollars in e-commerce sales. In Europe the total e-commerce

sales in 2017 amounted to 543 billion US dollar (Ecommerce news Europe, 2019).

Another striking example of the leading role of the US in the digital economy is the relative spending

on the IoT. The US accounts for 26% of the spending on the IoT, followed again by China (24%) and

Japan (9%) (United Nations, 2019).

4.3 Differences between member states of the EU

Within the EU there are several differences between the member states regarding different aspects

of the digital economy. Firstly there is a difference between the developments of the percentage of

the ICT sector in the GDP’s between 2008 and 2017. For instance in Greece the share has decreased

from 2.61% to 1.91%, in Germany the share has grown from 3.98% to 4.21% and in Italy the share

has almost remained the same: 3.39% in 2008 and 3.33% in 2017 (Eurostat, 2019a). This is

exemplary for the development of the digital economy within Europe, there is an overall growth but

among the member states there are quite some significant differences. The individuals’ level of

digital skills is an example of this phenomenon. On average, the individuals’ level of skills has risen

from 55% in 2015 to 57% in 2017. However, there are significant differences between the member

states. In 2017 the percentage of individuals’ level of digital skills in Luxembourg was 85%, whereas

in Bulgaria and Romania the percentage was 29% (Eurostat, 2017). The total share of turnover from

e-commerce in the EU has grown from 14% in 2010 to 17% in 2018. In this year Ireland and Belgium

have had the highest shares of total turnover originating from e-commerce with respectively 35%

and 32%. Cyprus and Montenegro on the contrary lagged behind by respectively 4% and 2%

(Eurostat, 2018).

4.4 Negative aspects of the digital economy

The development of the digital economy is widely regarded as a positive trend with promising

benefits; however there are several negative perceived aspects of the digital economy which need to

be mentioned. As a result of the digital innovations, more jobs can be automated. As a result jobs will

disappear, in other words: people will lose their jobs due to the digital economy. This development is

partially countered by the rising demands of jobs in the ICT sector. However the growth of the ICT

sector is not expected to fully compensate the losses of jobs in other sectors (Greve, 2019).

The OECD has stated that the biggest challenge accompanied with the digital economy is the

question of taxation. As a result of the digital economy, many businesses have a digital presence

within a country but are not physical present in the country. International taxation legislation on the

other hand dictates that in order to pay taxes in a country, there must be physical presence in that

country (OECD, 2019). The result of this discrepancy is that major businesses in the digital economy

retain their revenues in countries with low taxes. The rise in the use of crypto currencies and

Blockchain technology adds a new dimension to the taxation challenge. With this technology money

can be transferred anonymously (Hadzhieva, 2019).

19

Another negative perceived element of the digital revolution and the attached digital economy is the

potential privacy intrusion. Besides the risks of being hacked or in any other way detrimental treated

online, people unconsciously share a lot of private information online through cookies and social

media (Tapscott, 2016). The IoT has brought convenient tools into people’s personal life, however

there are multiple cases known in which these tools have seriously invaded privacy. Alexa, a digital

assistant which through voice enabling assists the owner with for example ordering online goods,

reading the news or setting alarms, has been known for the fact that the devices record everything

that is said and the data is collected by Amazon (Lynskey, 2019). A similar example of a privacy

breach comes from Apple’s Siri. Siri, the voice assistant which runs on all modern Apple devices is

always listening and recording their users. In August 2019 a whistleblower from Apple confirmed that

their contractors had been listening to recordings of sexual intercourse without consent from the Siri

users (Hern, 2019).

From section 4.1 it can be concluded that the digital revolution has had an impact on modern days’

society. With developments such as e-commerce and the IoT our way of living and consuming has

incrementally changed and digital devices have become indispensable in Europe. The digital

revolution has led to a new economy, the digital economy. This is an economy which is of significant

relevance for the world economy and which is expected to continue to grow. As is stated in section

4.3, within the EU there are differences between the sizes of the digital economy in the member

states. Chapter five describes the policies and legislation which have been implemented by the

Juncker administration regarding the digital economy and will describe which measures have

implemented to reduce the differences between member states and to maximize Europe’s digital

economic potential and to counter the negative aspects of the digital economy.

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5 IMPLEMENTED POLICIES AND LEGISLATION

After being elected as the EC president in 2014, President Juncker held his first State of the Union

address speech in September 2015. In this speech he announced, among other topics the ten

priorities of the Juncker Commission. One of these ten priorities was the establishment of the Digital

Single Market (DSM) (European Commission, 2015). The aim of the DSM is to provide European

citizens and businesses with the best possible access to the online world and maintain a competitive

advantage in the online digital economy. The DSM is based upon three main pillars: Creating a

marketplace in which transactions across member states can be conducted seamlessly, facilitating

the right infrastructure to host all digital technologies and the last pillar is aimed to ensure that all

Europeans benefit from the digital economy (European Commission, 2019c). The DSM is the leading

strategy regarding Europe’s digital economy. This section of the results investigates the involved

actors and the policies and legislation implemented by the Juncker Commission regarding the digital

economy. Section 5.1 and 5.2 describe the relevant stakeholders regarding Europe’s digital economy.

Section 5.3 provides an overview of the current implemented policies and legislation within the EU.

Section 5.4 analyses several of the efforts of the Juncker Commission outside of the EU with regards

to the digital economy.

5.1 Stakeholders within the EU institutions

Within the EU Institutions there are various stakeholders involved in the implementation of policies

and legislation regarding the digital economy. This section will elaborate on the main stakeholders

from within the EU.

5.1.1 DG CONNECT

Within the EU the Directorate-General for Communications Networks, Content and Technology (DG

CONNECT) is primarily responsible for Europe’s digital economy. The DG CONNECT was established in

2012 by the Barroso II Commission, the predecessor of the Juncker Commission. DG CONNECT

originates from the former DG for Information Society and Media. This DG was reorganized in 2012

due to the changing technologies and the need for suiting policies and legislation regarding these

new technologies (Basanskyi, 2012). The following policy areas are under the responsibility of the DG

CONNECT:

- the digital economy and society, - Research and innovation, - Businesses and industry - Culture and media (European Commission, 2019).

President Juncker has made DG CONNECT responsible for the creation of the desired DSM. DG

CONNECT therefore initiates all policies and legislation regarding this topic (Marcus, Petrioiykis, &

Yueng, 2018). The European Commissioner for Digital Economy and Society is politically responsible

for the DG CONNECT. During the Juncker Commission three different commissioners have fulfilled

the position of commissioner for Digital Economy and Society. At the start of the Commission, G.

Oettinger was appointed in this function. He was in office between November 2014 and December

2016. Due to the departure of the commissioner for Budget and Human Resources, Oettinger was

reassigned to the Budget and Human Resources department. This left a vacant position at the Digital

Economy and Society department. The position was temporarily fulfilled by the Vice-President of the

EC, A. Ansip (Juncker, 2016). Ansip was in office as responsible commissioner between January 2017

21

and June 2017. In July 2017 M. Gabriel was appointed as commissioner for Digital Economy and

Society and was in office until the Juncker Commission was dissolved in December 2019 (European

Commission, 2017c). Whereas the commissioner is politically responsible for the concerning DG, the

Director-General is responsible for the executive actions of the DG (European Commission, n.d.-a).

Since 2015 R. Viola has been the Director-General of the DG CONNECT.

5.1.2 Consultative bodies

Within the EU there are two main consultative bodies, the Committee of the Regions (CoR) and the

European Economic and Social Committee (EESC). The prior body consists of representatives from

local and regional governmental bodies within the EU. When the EC has a proposal which affects

several policy areas such as the economy, education or youth the EC is obligated to consult the CoR.

The CoR provides an opinion on the proposal (Bux, 2019). The latter consultative body, the EESC

represents workers, employers and social interest groups within the EU. Similar to the CoR, the EESC

provides opinions on proposals. The EESC is specifically focused on guaranteeing economic and social

conditions, the integration of European values in legislation and involving workers, employers and

interest groups in the creation of policies and legislation. The opinions of the consultative bodies are

non-binding. Figure 3 displays the position of the COR and EESC in the legislative process (European

Economic and Social Committee, 2019).

Figure 3: The process of implementation of legislation (University of Portsmouth, 2013).

5.2 Stakeholders outside of the EU institutions

Besides the previous mentioned stakeholders from within the EU institutions, there are several other

stakeholders whom have an important stake in implementing the policies and legislation regarding

the digital economy in Europe.

5.2.1 National governments

Depending on the type of legislation, national governments have influence on the execution of the

legislation. This is especially the case when directives are adopted. Directives need to be transposed

into national legislation prior to the implementation within member states. If member states do not

comply with the requirements which are provided at the beginning of the transposing process or do

not transpose the directive altogether, the EC can chose to start an infringement procedure against

the concerning member state (Lelieveldt & Princen, 2015). This modus operandi facilitates a certain

22

amount of tailoring of the legislation by the national governments in order to implement it as

effective possible. Regulations on the other hand are directly effective without the process of

transposing; national governments cannot change the content of a regulation.

5.2.2 Lobby groups

Additionally to the national governments, Lobby groups are involved as relevant stakeholders in the

implementation of legislation and policies. In the official transparency register of the EU twenty-one

lobby organizations are registered as active lobby groups for topics regarding the digital economy

(European Commission, 2019e). These lobby groups vary between non-governmental organizations,

In-house lobbyists, business associations, professional consultancies and academic think tanks.

Digital Europe (DE) is the largest lobby group representing the interests of over 35.000 businesses in

Europe. Between 2014 and 2019, DE has had 132 meetings with the EC to discuss policies and

legislation (LobbyFacts, 2019).

5.3 Implemented policies and legislation within the EU

Following the promise of president Juncker in his first state of the union, in May 2015 the Digital

Single Market Strategy (DSM) for Europe was adopted by the Juncker commission. After this

adoption the strategy was distributed among the Parliament and the Council of the European Union.

The Council of the European Union represents the executive governments of the member states of

the EU. Together with the Parliament, the Council possesses the legislative powers of the EU

(European Council, n.d.).

The DSM strategy is the framework upon which all the policy and legislation regarding the Digital

Economy in the EU is based. During the Juncker Commission thirty legislative initiatives have been

proposed by the DG Connect in the spirit of the DSM. Out of these thirty initiatives, twenty-eight

have been approved by the European Council and Parliament. When both of these bodies of the EU

formally approve the initiative, the initiative is adopted. At the moment of writing this research, the

two remaining initiatives are still under review by the Parliament and Council. In this section the

implemented policies and legislation will be investigated. This review does not contain all twenty-

eight initiatives. To improve the readability it is restricted to the initiatives which primarily affect the

digital economy. For instance initiatives such as Europeana, a project to make European culture

easier digital accessible are not included in the review.

The two remaining initiatives are both proposals for regulations which already have been approved

by the EP and still need to be approved by the Council. It concerns one regulation about ePrivacy and

one regulation to establish a European cybersecurity competence network (European Commission,

2019a)

5.3.1 Directives Table 4: Adopted directives to establish the DSM

Name of directive and legal code

General implications of the directive

Directive on the certain value added tax (VAT) obligations for supplies of services and distance sales

In December 2017 the directive for modernizing VAT for cross-border e-commerce was adopted. Member states need to have the directive transposed by January 2021.The aim of this directive is to ease the process of e-commerce for both businesses as consumers and to

23

of goods

- 2017/2455

generate a fair distribution of tax income for the EU member states. In general the directive is aimed to establish the following:

- Online marketplaces are made responsible for collecting the VAT on sales instead of the merchants on the marketplace

- Fraud through misleading packages from outside the EU will be addressed

- E-commerce businesses which sell goods in multiple EU countries can process their EU VAT obligations through one online portal in their language of preference instead of in the multiple EU countries

e-commerce business with cross-border sales below €10,000 are exempt of the EU VAT obligations but will have to follow their domestic VAT obligations (Papis-Almansa, 2019).

Directive on the combatting of fraud and counterfeiting of non-cash means of payment

- 2019/713

Non-cash means of payment are becoming widely available within the EU. Examples are payments made through electronic wallets and crypto currencies. The directive is aimed to provide member states with harmonized definitions of digital fraud and counterfeiting. Additionally the directive contains minimal rules, enabling member states to implement more rules if this is desired (European Council. 2019). The directive has to be transposed by member states by May 2021 (European Commission, 2019a).

Directive on the European Electronic Communications Code (EECC).

- 2018/1972

In December 2018 the EECC has entered into force. Member states are obliged to have the directive transposed by December 2020. This directive is intended to stimulate investments in high capacity telecommunication networks. It contains new rules for mobile connectivity and is purposed to prepare the EU for the rise of 5G, a new broadband network which is expected to become to new standard broadband network worldwide (European Commission, 2018f) .

5.3.2 Regulations

The largest part of the initiatives implemented by the EC consists of regulations. The relevant

regulations to establish the DSM and therefore enhance Europe’s digital economy are described in

Table 5.

Table 5: Adopted regulations to establish the DSM

Name of regulation and legal code

General implications of the regulation

Body of European Regulators for Electronic Communications (BEREC) Regulation

- 2018/1971

BEREC is an advisory body with the purpose to enhance Europe’s internal telecom market. BEREC issues guidelines, opinions and directions regarding all topics related to the telecom market. The organization is also responsible for reporting on technological matters. As an example, BEREC monitors the data use within the EU. The objectives of the regulation is to promote competition in the European telecom market, protect the EU citizens on the market and enabling new technologies such as 5G (BEREC, 2018a).

Cross border parcel delivery Regulation

- 2018/644

The purpose of this regulation is to force delivery services to use transparent pricing in cross border deliveries. Transporters are required to share the prices for delivery in the domestic country and in other EU member states. These prices need to be available on the website of the

24

company providing the delivery service (European Commission, 2018b).

Geo-blocking Regulation

- 2018/302

Geo-Blocking is the practice of restricting access to online interfaces based on the geographical location of consumers. In several cases this is unjustified according to EU standards of a single market. The Geo-blocking regulation prohibits geo-blocking in the following situations:

- The sale of goods without physical delivery. For example an Italian consumer wants to buy a television from a Croatian website without home delivery. The Italian consumer should be possible to do so, without additional charges. The consumer is responsible for the costs of the delivery in this case

- The sale of digital services which are not bound to a physical location, such as webhosting services or cybersecurity measures

- The sale of services provided in a specific physical location. For instance, a Danish tourist whom is visiting France has to pay the same price for an online hotel booking in France as a French citizen would have to pay

(European Commission, 2018c)

Platform to Business Regulation

- 2019/1150

In order to improve the fair trading relations between businesses, online trading platforms and consumers in online marketplaces the platform to business regulation has been put into practice. The regulation contains rules to ban unjustified practices such as unexplained deleting of trade accounts and changing the terms and conditions without prior warning. Furthermore the regulation is aimed to enhance the transparency in online platforms. Platforms need to disclose how certain rankings are created and their business practices need to be explained. This obliged transparency regarding rankings applies to search engines as well. All platforms are obliged to arrange a complaint-managing system to solve disputes between sellers, platforms and consumers. The regulation entered into force in July 2019. (European Commission, 2019b)

Roaming implementation regulation

- 2016/2286

Since June 2017 roaming charges are eliminated within the EU. Roaming charges are additional telephone costs which providers charge when mobile phones are used for texting, internet and calling when one is travelling abroad. In the EU however, these costs are no longer applicable. As a result of removing the roaming cost in each member state, the telephone costs are the same as in the country of origin of the user. (European Commission, 2016c).

The Regulation on cross-border portability of online content services in the internal market

- 2017/1128

The general objective of this regulation is to ensure that EU citizens have access to online content services in any member state of the EU. Thus for example a Dutch citizen who is travelling for to Greece should be able to use his video-streaming service while he is abroad. This regulation has come into force since June 2017 (European Commission, 2017b).

The regulation on ENISA

- 2019/881

In April 2019 the regulation on ENISA came into force. The regulation is more commonly known as the cybersecurity act. The act enlarges the mandate of the European Union Agency for Cybersecurity (ENISA) and a framework is established to counter cybersecurity threats within the union. The act also introduces an EU-wide certification for ICT products. The purpose of this certification is to develop a high standard regarding the cybersecurity of ICT products, processes and IT services (European

25

Commission, 2019a).

The Regulation on the free flow of non-personal data in the EU

- 2018/1807

The regulation is aimed to allow businesses and governmental bodies to use non-personal data whenever and wherever they require it within the EU. The main outlines of the regulation are:

- All non-personal data should be able to move freely within businesses and organization in the EU

- Domestic governmental organizations will always have access to the data, regardless of the country where the data is stored or processed.

- All non-personal data is secured according to the standards set in the Cybersecurity package.

This regulation is applicable since May 2018. (European Commission, 2018d)

General Data Protection Regulation (GDPR)

- 2016/679

The GDPR entered into force in May 2018. In general the regulation arranges how personal data in organizations has to be treated. As a consequence of the GDPR organizations are obliged to:

- Ask permission to process data from the concerning persons - Provide an grounded reason to store data - Provide access to the data stored to the persons regarding the

data - Protect the data against leaks and abuse - Delete data if this is requested

The aim of the GDPR is partly to counter the privacy issues mentioned in section 4.3. Violation of the GDPR has severe consequences for the offender. The maximum fine is 20 million euro or 4% of the turnover of an organization, based on which of the two is the largest.

(Goddard, 2017)

The regulation on the promotion of internet connectivity in local communities

- 2017/1953

This regulation is informally known as the WIFI4EU initiative. The initiative is a project aimed to provide free access to Wi-Fi in public spaces across Europe. Municipalities can apply for the program in order to obtain a voucher worth of €15.000 which need to be used to install all the hardware needed for the free Wi-Fi. In December 2018 the first municipalities to receive the grant were selected. (European Commission, 2018d).

The single Digital Gateway regulation

- 2018/1724

The single digital gateway is an online portal in which EU citizens and businesses can get access to information, procedures and assistance services regarding all local, national and EU level legislation. The gateway is accessible through the internet for everyone who wants to use it. The website was published in October 2018. The purpose of this gateway is to support the mobility of EU citizens and businesses (European Commission, 2018e).

5.3.3 Non-legislative initiatives

Regarding the digital economy the Juncker Commission has implemented several initiatives which

are non-legislative. These initiatives are described in table 6.

26

Table 6: Non-legislative initiatives implemented to establish the DSM

Name of Initiative General implications of the initiative

Coordinated plan for Artificial intelligence (AI) “made in Europe”

The ambition of the EU is to become the world-leading region regarding human-centric AI. The coordinated plan for AI in Europe is an initiative of the EC to encourage member states to create an AI strategy on national level and share this within the EU. This should lead to synergy between member states and the EU and maximize the effect of investments in AI. The vision of the EC is that member states can learn from best practices within the EU. Specific attention in the plan is paid to the ethical aspect of AI. This is ought to be achieved by stimulating member states to apply the European core values such as respect for human dignity and human rights in the AI plans (European Commission, 2018a).

EU Blockchain Observatory and Forum

The EU Blockchain Observatory and Forum was founded by the EC with the ambition to prepare member states of the EU on the upcoming trend of Blockchain. The observatory maps existing initiatives regarding Blockchain worldwide and strives to inspire businesses in the EU to embrace the technology and use it in their advantage. The Blockchain Observatory and Forum was launched in February 2018. (EU Blockchain Observatory and Forum, 2019)

European Agenda for Collaborative Economy

The collaborative economy refers to an economy in which products and services are exchanged through online platforms. It is also known as the sharing economy. In Europe more than 50% of the population is familiar with the collaborative economy and one in six EU citizens consumes through online platforms on a regular base. The European Agenda for Collaborative Economy is aimed to make the existing legislation applicable to businesses in the collaborative economy easily accessible. As result of this easy access to the legislation, consumers, businesses and government institutions should be encouraged to participate in the collaborative economy (European Commission, 2016a).

The European Open Science Cloud

This initiative is the leading initiative to encourage the open access to scientific data within the EU. The Open Science Cloud is a virtual space in which European researchers can share information and create knowledge together. Within the EU there are 1.7 million researchers whom can use the platform. The initiative is not only developed to enhance science within the EU but also to stimulate the knowledge economy of the EU, which is thought to provide a competitive advantage for the EU (European Commission, 2016b)

European 5G Observatory

The 5G Observatory has the objective to prepare the EU for the enrolment of 5G. The main activity of the observatory is to monitor all developments in relation to 5G. The developments vary from national strategies from member states to main 5G market developments worldwide (European 5G Observatory, N.D.).

5.4 Initiatives outside of the EU

The initiatives mentioned in section 5.3 are initiatives which are all EU-centered and implemented

within the EU. Outside of the EU efforts have been made by the Juncker Commission as well to

enhance the position of Europe’s digital economy and the digital economy in general. As the second

largest Economy in the world (The World Bank, 2018) the EU is an important stakeholder at global

organizations such as the United Nations and G20. In September 2019 at the UNCTAD it was

27

concluded that there is growing gap between nations with a growing digital economy and nations

which are lagging behind in benefiting from the digital economy. As a result of this conclusion the

recommendation was given to enhance the global policy on the digital economy in order to ensure

that the global population can benefit from the digital economy (United Nations, 2019).

In 2016 the G20 adopted the Digital Economy Development and Cooperation Initiative. The purpose

of this initiative is to boost the economic growth which is offered by the digital economy. This should

be achieved by expanding ICT infrastructure and supporting innovative entrepreneurship in the

digital sector (G20, 2016).

In December 2015 the World Trade Organization (WTO) expanded the Information Technology

Agreement (ITA). In the initial 1996 ITA members of the WTO agreed on the elimination of additional

tariffs on IT related technologies such as computers, software and telecommunications equipment.

As a result of the expansion in 2015, 201 new product types have been excluded from additional

trade tariffs. Among the new products are for instance GPS navigation systems, touch screens and

video game consoles. The EU has agreed upon the expanded ITA, on behalf of the member states

(Lascari, Tang, & WTO, 2017).

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6 EFFECTS ANALYSIS

Chapter 5 described the implemented policies and legislation by the Juncker Commission. This

chapter will set out the effects of the policies and legislation. This evaluation will be performed

according to the principles of the BSC. In this section the four perspectives will be analyzed

according to the measures described in table 1. The data/results concerns the timeframe from 2014-

2019, the years in which the Juncker Commission was in office.

6.1 Financial perspective

In order to analyse the effect of the measures taken by the Juncker Commission from the financial

perspective, economic data needs to be analyzed. An answer is provided to the question “What are

the financial benefits of the initiatives”?. The answer to this question is given according to standards

the UN maintains, except the value added by e-commerce. There is no reliable comprehensive data

available regarding this item. Additionally the annual economic benefits of various initiatives are

described.

6.1.1 Value added in the ICT sector as a share of the GDP

Figure 4 displays the ICT sector as share of Europe’s GDP. The share has been increasing between

2014 and 2016. There is no reliable data available for the remaining years the Juncker Commission

was in office.

Figure 4: ICT sector as share of the GDP (European Commission, 2019d)

6.1.2 Employment related to the digital economy

Figure 5 displays the development of the percentage of employment in the digital economy as a

share of the total employment within the EU. As frame of reference for the employment the jobs for

ICT specialists are used. Data from 2019 is not available, thus not included. From the figure it can be

concluded that there is an increase of 0.5% between 2014 and 2018. In absolute terms this is an

increase of 1389500 ICT specialists in the European workforce. This increase cannot solely be

3,5

3,6

3,7

3,8

3,9

4

4,1

4,2

4,3

4,4

2014 2015 2016

ICT sector share of GDP (%)

29

ascribed to one specific initiative of the Commission, but it is rather accountable for the spill-over

effects of the initiatives and a general increase in the need for ICT services.

Figure 5: Employment in the digital economy as a share of the total employment (Eurostat, 2019c)

6.1.3 Trade related to the digital economy

Figure 6 and 7 provide an indication of the trade related to the digital economy. During the Juncker

Commission the share of e-commerce has grown within the EU. In 2019 the global value of e-

commerce turnover amounted to an estimated €3.49 trillion, the EU accounted for an estimated 18%

of e-commerce turnover worldwide (S. Lone, 2019). UNCTAD has published a global e-commerce

ranking, based upon the readiness of nations for online shopping. Seven of the top ten nations are

member states from the EU. The Netherlands was the leading nation. 80% of the Dutch population

has frequently used the internet for shopping purposes (UNCTAD, 2019). There has been an increase

in cross-border e-commerce. In 2013, 26% of e-commerce sales were made in other member states,

in 2018 this percentage has risen up to 36%. This could partially be an effect of the Cross border

parcel delivery Regulation which regulates that delivery services need to use transparent pricing.

Another regulation which possibly contributed to the increase of trade related to the digital economy

is the platform to business regulation. However this regulation entered force in July 2019, which is

too prematurely to measure the effects of the regulation.

The Geo-blocking Regulation has the objective to increase the cross-border e-commerce; however

critics are suspicious of the effectiveness of this regulation. The regulation does not consider the

trade of audiovisual services and electronic communication services. These services are ought to be

important and desired by consumers but are still not equally available in member states (Mazur,

Śledziewska, & Zięba, 2018). There has not been an official evaluation of the effectiveness of this

regulation yet, thus no conclusion about the actual impact of this regulation can be drawn.

3,1

3,2

3,3

3,4

3,5

3,6

3,7

3,8

3,9

4

2014 2015 2016 2017 2018

Employment in the digital economy as a share of the total employment

30

Figure 6: E-commerce turnover as share of total turnover(Eurostat, 2019b)

Figure 7: E-commerce turnover Europe (Ecommerce news Europe, 2019)

The rise of the digital economy has not only provided economic growth for e-retailers but has

significant side effects as well. The increased demand for e-commerce has led to an increase in

revenues for delivery services. Between 2014 and 2017 the revenues in the European parcel market

have risen from €56.7 billion to €64.5 billion. Whereas the demand for traditional postal delivery

services is decreasing, the demand related to e-commerce is increasing (Dieke & WIK, 2019).

13,5

14,5

15,5

16,5

17,5

18,5

19,5

2014 2015 2016 2017 2018

E-commerce turnover as share of total turnover (%)

0

100

200

300

400

500

600

700

2014 2015 2016 2017 2018 2019

E-commerce turnover (millions)

31

Table 7 displays the estimated annual benefits for the EU originating from the initiatives discussed in

chapter 5. Not all initiatives have been analyzed. The acts with minor economic benefits are left out

of the analysis by Marcus et al. As can be seen in the directive on EECC is estimated to contribute the

most to the annual benefits. This can mainly be attributed to the spill-over effect of the directive on

the overall digitalization of the EU. The benefits from the Single Digital Gateway regulation can be

attributed to the spill-over effects of the regulation as well (Marcus et al, 2019).

Table 7: Annual benefits of various initiatives. (Marcus et al., 2019)

Name of the initiative Annual economic benefits (€ billions)

Cross border parcel delivery Regulation 1.0

Directive on EECC 81.1

Geo-blocking Regulation 10.3

Regulation and Directive on the certain value added tax (VAT) obligations for supplies of services and distance sales of goods

2.3

Roaming implementation regulation 5.0

The Regulation on cross-border portability of online content services in the internal market

1.0

The regulation on ENISA 4.0

The Regulation on the free flow of non-personal data in the EU 4.3

The single Digital Gateway regulation 20.0

Total: 129

6.2 Internal process perspective

The internal process perspective concerns the processes of the governmental body that develops and

delivers the utility and services to her citizens. In this section an answer will be given to question:

“Which processes are put in order to meet the EU citizen’s expectations?”

As is described in section 5.1 DG CONNECT is the prime actor in the execution of the DSM strategy.

Besides from a shift of the Director-General in 2015 and the shift of several responsible

commissioners, the Media Policy portfolio which was part of DG CONNECT has been transferred to a

new directorate fully dedicated to Media Policy. The purpose of this restructuration was to enable

DG CONNECT to fully focus on the DSM. In 2018, DG CONNECT reinforced the entity dealing with

Cybersecurity, as a response to the increased role of DG CONNECT resulting from the new package of

initiatives for increasing cybersecurity. This new package was announced by President Juncker in his

2017 State of the Union speech. In this speech president Juncker promised to step up the fight

against cybercrime.

Within the EU it is conventional to exchange expertise among different Commission services to

achieve policy priorities such as the DSM. This occurred within the DG CONNECT as well to execute

the DSM (Appendix I).

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6.3 Citizen perspective

In addition to the economic effects of the digital economy, European citizens have experienced other

effects of the implemented policies and legislation mentioned in section 5.3 and section 5.4. In this

section an answer is given to the question: “How do the initiatives affect the lives of EU citizens?”.

Several initiatives have had a noticeable effect on the lives of EU citizens. The Roaming

implementation Regulation which entered force in June 2017 is a striking example of a noticeable

effect. In the summer of 2017, right after the abolition of roaming charges in the EU, the use of

mobile data while traveling abroad has been risen with 435% compared to the summer of 2016

(BEREC, 2018b). Another example is the effect of the regulation on the promotion of internet

connectivity in local communities (Wifi4EU initiative). Through the Wifi4EU initiative 7980

municipalities in member states have received a grant to provide free internet access in public

spaces. The grant is highly desired by municipalities, over 25000 grant applications are received by

the EC. Critics however have stated that this initiative is a marketing effort of the commission to gain

a positive public image. The grant can be used to obtain hardware for the free Wi-Fi, however it is

not allowed to use the grant for maintenance and backhaul, the main cost items regarding Wi-Fi

(White, 2018). Furthermore the quality of the provided internet access is debatable. The internet is

often of insufficient speed to visit websites or downloading social media content (Faultine, 2016).

Despite the discussion of the costs and quality of this initiative, the initiative has provided EU citizens

with Wi-Fi spots and is one of the initiatives which EU citizens living in the selected municipalities can

benefit from.

In the field of cybersecurity and trust EU citizens can or will notice effects in the future. The

regulation on ENISA has made ICT products and services which are recognized as secure identifiable

by the EU citizens and businesses. The objective of this certification is to establish trust between

consumers and companies and to keep the European market safe from cyber threats caused by

insecure ICT products and services. At the moment of writing this thesis the certification is not yet

implemented, thus the effects of this regulation are not measurable yet (European Commission,

2019a). The Platform to Business Regulation obliges e-commerce businesses and platforms to

provide information about consumer rights regarding online contracts, search rankings must be

transparent and consumers must be able to fill in a complaint against the e-commerce business or

platform used (European Commission, 2019b).

The GDPR is widely promoted by the EU to prepare organizations for this new regulation. As a

consequence of this regulation, organizations which stored personal data had to update their privacy

policy and request the users for their permission. From the citizen perspective this implies that EU

citizens now have more control over their personal data. Additionally to the previous mentioned

consequences of the GDPR Individuals now have the right to look into personal data concerning the

individual and the right to be “forgotten” i.e. if an individual desires that organizations erase all

personal data concerning an individual, the organization is obliged to do so (Tankard, 2016).

The digital Gateway and the European Agenda for Collaborative Economy are intended to make it

more convenient for European citizens (and companies) to find information regarding the existing

policies and legislation in member states. The first will serve as a central platform for general

33

information and the latter is specifically aimed at providing information about the policies and

legislation concerning the collaborative economy. The objective is to stimulate cross-border

participation in the collaborative economy and by doing so, creating a closer DSM (Cauffman, 2016).

6.4 Innovation and learning perspective

The fourth and last perspective answers the following question: “Is the organization capable to

continue to improve and to grow?”.

Striking examples of actions undertaken by the EC to continue to create value in the digital economy

are the establishments of the EU Blockchain Observatory and Forum and the European 5G

Observatory. Both initiates are intended to prepare the EU for future developments on technologies

which are ought to be crucial. Another aspect of these initiatives which is striking for the learning

perspective is that both initiatives are conducted in close cooperation with the European private

sector and research centers. The purpose of these collaborations is to ease the transition to the

adaption of these new technologies.

DG CONNECT Published the Mid-Term review in May 2017. Mid-Term reviews are standard operating

procedures for the EC to assess the execution of the strategy implemented. DG CONNECT concluded

that cybersecurity, open data and the collaborative economy required additional measures in order

to achieve the DSM strategy. Subsequently to this review the Regulation on ENISA, the Regulation on

the free flow of non-personal data in the EU and Platform to Business Regulation have been adopted

(European Commission, 2017a).

A form of measurement of the capability of the DG to execute the strategy is by assessing the how

member states have transposed the directives. However, the deadlines for the member states to

transpose these directives have not yet passed. This makes it impossible to measure. Another area in

which the contribution of the member states can be assessed regards the non-legislative initiatives.

A consequence of the non-legislative initiatives implemented is the fact that member states are not

legally obliged to meet deadlines or participate in the initiatives. The Coordinated plan for Artificial

intelligence is exemplary of this phenomenon. Eleven member states have missed the deadline which

was set in mid-2019 to hand in a national plan for AI (Moltzau, 2020). The remaining non-legislative

initiatives do not require active involvement from the member states. Moreover these initiatives do

not maintain deadlines for the member states.

At the start of the Juncker Commission it was foreseen that the DSM would require 49 proposals to

execute the strategy successfully. In the end-of-term assessment, the assessment which the EP

conducted in May 2019 to assess the Juncker Commissions ten priorities, it was concluded that 32

proposals have been successfully adopted by the DG CONNECT in total. 65% of the predicted

proposals have been adopted, which is higher than the average adoption rate of the ten priorities.

On average 62.9% of the foreseen proposals related to the ten priorities have been adopted (Bassot

& Hiller, 2019).

34

7 CONCLUSION

As is stated in the introduction of this thesis, former president Juncker has stated the ambition to

maximize the growth potential of the EU regarding the digital economy. The purpose of this study

was to answer the question “How has European policy and legislation implemented during the

Juncker Commission influenced Europe’s digital economy?”. The answer to this question is given in

this section.

Worldwide the digital economy has been growing during the past years, and it is not expected that

this growth will slow down or stop in the near future. The ambition of the Juncker Commission to

maximize the potential economy growth of the digital economy is mainly executed through the DSM.

DG CONNECT is the prominent actor, supported by the consultative bodies of the EU and external

lobby organizations. Three directives, eleven regulations and five non-legislative initiatives have been

analyzed in this study. The initiatives have several different objectives but are all intended to

contribute to goals of the DSM. A portion of the initiatives is aimed to prepare the EU for the future

developments of the digital economy. Initiatives with such a purpose are the 5G observatory,

Blockchain observatory and Forum, the establishment of BEREC and the directive on EECC. Several

initiatives have been implemented to regulate e-commerce. The Geo-Blocking regulation provides

easier access to goods offered in member states. The Cross border parcel delivery regulation is

intended to stimulate the purchasing of goods in different member states by obliging delivery

companies to use transparent pricing. The platform to business regulation has the purpose to protect

consumers in e-commerce practices by setting clear requirements for the businesses on platforms.

Initiatives have been implemented to ease the access to the digital economy for EU citizens. The

WiFi4EU initiative and the Roaming implementation Regulation are the most striking examples in this

area. Through these initiatives respectively free Wi-Fi has become available in multiple municipalities

across Europe and Roaming charges are not applicable anymore for EU citizens traveling within the

EU.

Several initiatives have the objective to protect EU citizens and to establish trust in the digital

economy. The objective of the regulation on ENISA for instance is to ensure the cybersecurity of the

EU and to provide clarity of trusted ICT products in the EU. Another initiative designed to keep the

digital economy safe and to guarantee the trust of EU citizens is the Directive on the combatting of

fraud and counterfeiting of non-cash means of payment. By means of this directive the trust in online

payments must be strengthened. An important negative perceived aspect of the digital economy is

the intrusion of privacy. Through the GDPR personal data from EU citizens in the possession of

organizations is more secure. The strict rules of the GDPR are meant to ensure the trust of EU citizens

in online environments by protecting their personal data. By countering this negative aspect, the

trust should be restored.

The majority of the financial effects of the initiatives are a result of spill-over effects. The initiatives

cause a series of events that will affect other factors. For example the directive on EECC ensures the

possibility for telecom providers to develop and invest in new telecom infrastructures. Subsequently

these new infrastructures cause access to digital networks, which consequently leads to a growth of

the digital economy. Additionally the Regulation and Directive on the certain value added tax (VAT)

35

obligations for supplies of services and distance sales of goods adds tax revenues from the digital

economy. The initiatives which are partially intended to ensure the trust in the digital economy

contribute to financial benefits as well. If the trust in the (digital) economy grows, people are more

likely to engage in the (digital) economy which results in a growth of the digital economy.

Internally the main stakeholder in the DSM, DG CONNECT has changed in order to execute the DSM.

The organizational structure was adapted to fully focus on the DSM. The DG CONNECT initiated

innovative programs to prepare for the upcoming technologies in the digital economy. By means of

collaboration with the private sector and through the observation of technological trends the DG

strives to be prepared and maximize the growth potential of the digital economy in the future. On a

global level the Juncker commission has been involved in establishing several guidelines and

frameworks with the intention to maximize the growth of the digital economy globally. These global

efforts were especially intended to ensure the benefits of the digital economy in countries which are

lagging behind in this area.

Ultimately it can be stated that the Juncker Commission has had a positive influence on the digital

economy of Europe. The several initiatives implemented facilitate guidelines and frameworks for the

member states to benefit from the opportunities the digital economy offers. Different aspects of the

digital economy are covered in these initiatives with the purpose to maximize the growth potential

offered. These areas range from e-commerce, citizens trust and facilitating upcoming technologies.

36

8 DISCUSSION

8.1 How the digital economy in Europe will develop

With the installment of The von der Leyen Commission the EU is prone to a shift of policy focus. The

new EC has communicated that the focus for upcoming years will be on sustainability and climate

change (Khan 2019). However, the digital economy will still be relevant for Europe’s economy and is

given the trend expected to grow. The EU has stated that it has the ambition to provide the

infrastructure needed to facilitate 5G networks. 5G is a promising next step in the digitalization, e.g.

in the digital economy. This technology is expected to further integrate AI and the IoT in the daily

lives of EU citizens. In 2016 the Juncker Commission already established an action plan to prepare the

EU for the rise of 5G. The expectation is that 5G will enroll in Europe after 2020 and the Von der

Leyen Commission will further adapt to it. Through experience with this new technology, it is likely

that new policies and legislation will be adopted. The prediction of the process of the 5G

implementation is comparable to the rise of other digital technologies such as AI and Blockchain.

Nevertheless the developing criticism within the member states should not be neglected. Within the

member states there has been a rise in criticism regarding the matter in which the EU affects

national sovereignty. If this trend continues fewer policies and legislation might be adopted. This is

however uncertain and difficult to predict.

The issue regarding the taxation of digital platforms is expected to appear on the EU policy agenda.

In July 2019 EU member state France has announced that it will tax digital platforms that earn money

from French residents. This has led to a dispute between France and the US (Lecher, 2019). The US is

involved because a significant part of the concerning platforms originate from the US. It is possible

that this dispute escalates to the European level.

8.2 Reliability and validity

A significant part of the sources used in the research originated from EU institutions such as Eurostat

and the EC. This might have caused a biased view because the sources are not entirely independent.

Nevertheless the results should be regarded as trustworthy because the EU institutions are ought to

be reliable and the EC is held account by the EP and the Council.

From the results it can be concluded that the digital economy in Europe has developed during the

Juncker Commission. Partially this development can be attributed to the efforts of the EC, however a

significant part of the development can be attributed to trends outside of the power of the EC, or any

governmental body. The actions of the EC should be more regarded as supporting, facilitating and

guiding. But not leading. The main developments in the digital economy have occurred in the private

sector. Companies and platforms such as Apple, Facebook and Google have had a leading role in the

developments of the digital economy in the recent years. They have induced a global need for the

further digitalization. Market forces have further adapted to this developments for example by

integrating e-commerce in traditional services. Nevertheless the EC has undoubtedly attributed to

the development of the digital economy in the union.

As is mentioned, twenty-eight initiatives have been adopted. However in this research not all twenty-

eight initiatives and their effects are analyzed. This decision has been made to select the initiatives

which are ought to have the most impact on Europe’s digital economy. This has affected the validity

37

of the research in a negative matter. Not all policies and legislation of the Juncker Commission

regarding the digital economy have been analyzed, thus information is missing. The research did not

completely measure what it should measure.

8.3 Limitations to the research

There are several limitations to the research. One of the main limitations is the issue of measurability

of the concepts used. As is mentioned in chapter 4, the definition of the digital economy is debated.

Different institutions use different definitions. Consequently a variety of data is available, but it is not

always coherent. Eurostat, the statistical bureau of the EC does collect data from member states

regarding the digital economy, but not every member state has the same standards or measures a

certain topic at all. As an example the value added by e-commerce is measured by several individual

member states, but not for the EU as a whole, resulting in a partial image of the actual situation. A

comparable issue regarding the insufficient data arises with the use data from the OECD. Currently

twenty-one member states of the EU are a member of the OECD. Data from the remaining seven

member states which are not a member of the OECD is not included on a regular base. This affects

the validity of the research to a certain degree. Due to the lack of complete datasets it is not possible

to assess the data as a whole. The variety of definitions for the digital economy makes it difficult to

assess the results to other measures of the digital economy.

Moreover, not all effects of the initiatives are directly measureable due to the nature of the adopted

initiatives. Measurability is highly dependent on the nature of the initiatives. The abolishing of

roaming costs and the successive significant increase of roaming in the EU is an evident example of

the direct effect of an initiative. On the other hand, an initiative such as the EU Blockchain

Observatory and Forum does not have a similar clear effect. This type of initiative is preparatory in

nature. It is intended to prepare the EU for the rise of Blockchain technology and does not directly

have a visible impact on the digital economy in the short term. This latent effect of initiatives can be

partially explained by the novelty of the initiatives. The discussed policies and legislation are

relatively new and therefore are not always evaluated by the EC or other institutes. Some of the

discussed initiatives are not implemented yet at the moment of writing this thesis, making it

impossible to measure the actual effect of the initiatives. The timing of writing thesis also has the

consequence that data from time period of the Juncker Commission is not always available.

Initially this research focused upon the EU as a whole; however the EU consists of twenty-seven

member states which all have different cultures, infrastructures, economies etcetera. The decision to

focus upon the entire EU economy has been made due to the fact that the ambition of the Juncker

Commission was to establish a single digital market to benefit the entire union and to become a

serious competitor for China and the VS in the digital economy. However in several cases there are

significant differences between member states regarding (digital) economic benefits from the

initiatives. This has been one the main critics on the DSM (Bassot & Hiller, 2019). In a follow-up study

the cause of the different effects of the initiatives within and between the member states could be

further analyzed. This would develop knowledge which could be used to optimize the potential

economic growth the digital economy offers.

Another limitation caused by the focus on the EU is the absence of comparison to other key players

in the global digital economy. This is left out in this research partially because the absence of

38

consensus on the definition of the digital economy and partially because of the limited time-frame

available to conduct this research. In a follow-up study the emphasis could shift upon the global role

of the EU in the digital economy compared to other key players.

The last limitation to the research is the limited available access to information from DG CONNECT.

There has been email contact regarding some specific details of the DG CONNECT, however an

interview would have provided more information which could be used to analyse the internal

processes.

8.4 Personal recommendation

In my personal opinion the appropriate solution to establish an efficient DSM would be profound

standardization of conditions between member states. In order to foster the European digital

economy EU citizens and the private sector should not experience barriers when using digital

services or in e-commerce related practices. The Juncker Commission has provided a solid base for

this standardization with initiatives such as the Regulation on the free flow of non-personal data in

the EU and Geo-blocking regulation but further standardization in for example the field of

audiovisual services and electronic communication services could be beneficial for the single market.

These services are due to their online character not bounded to one geographical location and

should therefore be equally available for all EU citizens, which is currently not the case.

Some of the non-legislative initiatives can serve as an exploration for legislative initiatives. With the

introduction of the coordinated plan for AI it was already stated that Europe strives to become the

world-leader on ethical matters regarding AI. In order to achieve this goal, European legislation is

likely to be necessary. Blockchain and 5G will need suitable legislation as well. If the current trend of

non-cash means of payment continues to grow, a recast of the Directive on the combatting of fraud

and counterfeiting of non-cash means of payment is not unlikely to occur. The recasting of the other

initiatives is not unlikely to occur as well, due to the changing nature of the digital economy.

39

APPENDIX I

Additional information internal process DG CONNECT

In order to obtain additional insight to the internal process of the DG CONNECT there has been

contact via email to request more detailed information:

JAKUBOVÁ Jana <jana.jakubova@ec.europa.eu> Mon 03/02/2020 09:37 Dear Mr Rijken, Mr Fjalland asked me to reply on his behalf. The organisation chart changes of 2016 indeed primarily aimed to achieve a better alignment of DG CONNECT's organisational structure with the Commission priorities set out by President Juncker. Indeed, DG CONNECT was directly involved in one of the 10 Juncker Commission priorities, namely the Digital Single Market, adopted on 6 May 2015 and based on 16 initiatives split under 3 pillars. Within that context, the full Media Policy portfolio was, amongst others, allocated to DG CONNECT during the reorganisation of Commission services in the framework of the President Juncker Commission. In order to enable us to better deliver on this new political priority, a new Directorate fully dedicated to Media Policy was created. In the course of 2018, DG CONNECT reinforced its entities dealing with Cybersecurity, in light of the increased role of DG CONNECT resulting from the new package of policy measures for increasing cybersecurity in Europe and stepping up the fight against cybercrime, as announced by President Juncker in his State of the Union speech on 13/09/2017. No formal task forces were created in the DG but the DG is used to pool required expertise to move forward with its policy priorities by cooperating with other Commission services. I hope that you find the above information useful. Kind regards, Jana Jakubová

40

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