COMMISSION STAFF WORKING DOCUMENT A Digital Single Market Strategy for Europe - Analysis and Evidence Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions A Digital Single Market Strategy for Europe
Date: 2015-05-06
Institutions: European Commission
Subjects: EU investment, computer crime, consumer policy, consumer protection, copyright, digital literacy, digital technology, electronic commerce, electronic government, information society, single market, telecommunications

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 6.5.2015  SWD(2015) 100 final   COMMISSION STAFF WORKING DOCUMENT A Digital Single Market Strategy for Europe - Analysis and Evidence Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions A Digital Single Market Strategy for Europe {COM(2015) 192 final}  
 
 
Contents 

1.  COMPLETING THE DIGITAL SINGLE MARKET ................................................ 3 

2.  POLICY CONTEXT ................................................................................................... 4 

2.1.  Digital economy and digital society .................................................................. 4 
2.2.  Benefits of the Digital Single Market ............................................................... 5 

3.  ONLINE ACCESS TO GOODS AND SERVICES ACROSS EUROPE ................ 10 

3.1.   The online trader's perspective ........................................................................ 10 
3.2.   The consumer's perspective ............................................................................. 12 
3.3.  Cross-border parcel delivery services ............................................................. 17 
3.4.  Territorial restrictions and geo-blocking: goods and services......................... 21 
3.5.  Access to and use of copyright-protected content ........................................... 25 
3.6.  VAT procedures on cross-border online sales ................................................ 31 

4.  CONDITIONS FOR DIGITAL NETWORKS AND SERVICES TO DEVELOP .. 34 

4.1.  A single market in telecommunications .......................................................... 34 
4.2.  Audiovisual Media Services ............................................................................ 42 
4.3.   The protection of personal data ....................................................................... 45 
4.4.  Cybersecurity and the fight against cybercrime .............................................. 47 
4.5.  Online Platforms ............................................................................................. 52 
4.6.  Liability of Online Intermediaries ................................................................... 55 

5.   DIGITAL ECONOMY AND SOCIETY .................................................................. 57 

5.1.   Digital services in a data-based economy ....................................................... 57 
5.2.  Digitisation of research ................................................................................... 63 
Interoperability and standards ......................................................................... 64 
5.3. 
5.4.  Employment, digital skills and expertise ........................................................ 69 
5.5.  e-Government .................................................................................................. 74 
5.6.  Digitisation in basic sectors ............................................................................. 79 

6.  

INVESTING IN THE DIGITAL SINGLE MARKET ............................................. 85 

ANNEXES ........................................................................................................................ 91 

REFERENCES AND DATA SOURCES ......................................................................... 94 

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1. 

COMPLETING THE DIGITAL SINGLE MARKET  

The European Commission has identified the completion of the Digital Single Market (DSM) 
as one of its ten political priorities. The DSM is also a key priority for the European Council 
and the European Parliament and has been highlighted in the Annual Growth Survey 20151. 

A Digital Single Market is one in which the free movement of goods, persons, services and 
capital  is  ensured  and  where  citizens,  individuals  and  businesses  can  seamlessly  access  and 
exercise online activities under conditions of fair competition, and a high level of consumer 
and personal data protection, irrespective of their nationality or place of residence. Achieving 
a Digital Single Market will ensure that Europe maintains its position as a world leader in the 
digital economy helping European companies to grow globally. A fully functioning DSM will 
present European businesses, particularly small and medium-sized enterprises (SMEs), with a 
potential customer base of more than 500 million people, enabling companies to make full use 
of ICT to scale up for productivity gains, creating growth along the way. 

It  offers  opportunities  also  for  citizens,  beyond  their  economic  activity,  provided  they  are 
equipped  with  sufficient  digital  skills.  Enhanced  use  of  digital  technologies  can  improve 
citizens'  access  to  information  and  culture,  and  can  promote  open  government,  equality  and 
non-discrimination.  It  can  create  new  opportunities  for  citizens'  engagement  in  society  at 
large,  including  democratic  participation2,  and  for  better  public  services,  information 
exchange and national and cross-border cooperation.  

To  maximise  these  opportunities  the  Commission  is  launching  a  Strategy  which  sets  out 
ambitious steps towards a completed DSM and focusses on three strands3: 

  Better  access  for  consumers  and  businesses  to  digital  goods  and  services  across  Europe 
(making sure the Internal Market is ready for the digital age with rapid actions, and helping 
to  ensure  a  "single"  digital  market  by  removing  barriers  that  hold  back  cross-border  e-
commerce); 

  Creating the right conditions, level playing field and environment for digital networks and 
content  services  to  flourish  (actions  to  create  the  right  conditions  for  infrastructure 
investment,  ensuring  a  level  playing  field  between  market  players  and  improving  the 
European basis for the digital economy); 

  Maximising the growth potential of the digital economy (actions with far-reaching effects 
on European industrial competiveness, investment in ICT infrastructures and technologies 
such as Cloud computing and Big Data, research and innovation as well as inclusiveness 
and skills). 

The  purpose  of  this  document  is  to  provide  the  background  and  evidence  base  which 
underpins the DSM Strategy. The following chapter provides a horizontal economic analysis 
of the DSM, while chapters 3 to 5 provide a detailed analysis structured along the three main 
strands  of  the  DSM  Strategy.  Chapter  6  presents  the  EU  financial  means  in  support  of  the 
DSM. 

1   COM(2014) 902 final 
2  Anttiroiko, A.-V., 'Building Strong e-Democracy: The Role of Technology in Developing Democracy for 

the Information Age', Communications of the ACM, Volume 46, Issue 9, 2003  

3   COM(2015) 192 

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2. 

POLICY CONTEXT 

2.1.  Digital economy and digital society 

Digitalisation has been changing not just our economy but also our daily lives for at least the 
last twenty years, and it is expected that this process will continue. Where digital technology 
was  once  a  niche  market  for  specialists,  it  has  become  a  general  purpose  technology  which 
affects all sectors of the economy and society. 

This  digital  economy  has  the  potential  to  create  growth  and  employment  by  providing 
opportunities  for  investment  and  innovation,  which  leads  to  expanding  markets  and  more 
choice  in  goods  and  services  at  lower  prices.  Better  information  flows  can  improve 
everything,  from  health,  food  safety  and  food  security  and  resource  efficiency  to  energy, 
intelligent transport systems and smart cities. Digital technologies have already made a major 
contribution to economic growth. Between 2001 and 2011, digitalisation accounted for 30% 
of GDP growth in the EU4. 

The  key  variable  for  the  digital  economy  is  scale.  Digital  technologies,  which  know  no 
borders,  enable  businesses,  including  small  ones,  to  serve  large  numbers  of  customers 
cheaply. The positive effect of digitalisation on the economy is therefore correlated with the 
number  of  potential  customers.  The  larger  the  market  in  which  companies  operate,  the 
stronger the growth impulse. Put another way, the larger the market, the more consumers can 
benefit from the opportunities offered by wider choice and better prices. 

Therefore  the  DSM  is  very  much  intertwined  with  the  global  digital  market.  European 
companies face significant barriers in a wide variety of third countries (such as requirements 
to store data locally). Such barriers particularly affect European firms, because the EU is the 
biggest global exporter of digital services. Global digital openness could hence be a priority 
for European trade and investment policy. 

Innovation in all parts of society is the cornerstone of the development of a digital economy 
and  of  the  deepening  of  the  DSM.  Never  before  has  innovation  been  so  easy  with  the 
immediate  circulation  of  information  and  technologies.  New  business  models  are  emerging: 
scaling up or down, digital solutions have never been easier with marginal costs close to zero. 

Policy makers have to keep pace with rapid innovation, often of a disruptive nature (such as 
the  rise  of  the  "sharing  economy"),  and  balance  risks  with  intelligent  regulatory  and 
governance  models  preserving  the  values  of  our  societies.  Small  start-ups  or  web 
entrepreneurs  are  particularly  vulnerable  and  may  be  strongly  affected  by  ill-adapted 
regulatory  measures.  There  is  a  high  demand  from  policy  makers  for  reliable  evidence  to 
support  better  decision-making,  monitor  policy  implementation,  as  well  as  measure  new 
economic and social phenomena. The data revolution, which makes data cheaper, should also 
ensure that policy  makers  and citizens have  better  access to quality information.  Hence, the 
necessary  infrastructure  for  such  information,  especially  for  official  statistics,  must  be  an 
integral part of the policy measures5.  

4   Van Welsum, D. et al., Unlocking the ICT Growth Potential in Europe: Enabling People and Businesses, 

The Conference Board for the European Commission, 2013 

5   Regulation (EC) No 223/2009 of the European Parliament and of the Council on European statistics 

provides the basic legal framework for the production of statistics where necessary for the purposes of the 
performance of the activities of the Union (Article 338 TFEU) 

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2.2.  Benefits of the Digital Single Market 

Between 2001 and 2011, ICT accounted for 30% of GDP growth in the EU but for 55% in the 
US.  The  difference  is  partly  the  result  of  the  sectoral  composition  of  the  corresponding 
economies  but  also  the  result  of  disparities  in  the  perception  of  ICT,  investment  volume  in 
ICT  production  and  use.  For  the  period  2006-2011,  the  estimated  productivity  differential 
between the US and EU due to ICT was 0.2% growth annually 

The  DSM  is  an  opportunity  to  close  this  gap.  The  potential  contribution  to  European  GDP 
from  achieving  such  a  fully  functioning  DSM  has  been  estimated  at  EUR  415  billion6.  The 
long-run  impact  on  GDP  growth  of  the  already  observed  digital  reform  efforts  has  been 
estimated at above 1%, while further efforts in line with the Digital Agenda for Europe targets 
would lead to an additional 2.1% of growth7. Benefits from the current level of cross-border 
e-commerce are estimated at 0.27% of GDP8. On the other hand, without a completed, secure 
and trustworthy DSM, new digital services for consumers and businesses, as well as services 
underpinning them (the Internet of Things, big data and cloud computing), may happen later 
or to a lesser extent in Europe. 

e-Commerce is an important element of the DSM, providing increased choice and economies 
of scale. Cross-border e-commerce, allows citizens and business to enjoy a wider variety of 
goods  and  services  and  lower  prices  through  increased  price  competition9.  Some  of  these 
benefits  will  increase  GDP  (lower  prices  increase  purchasing  power  for  other  goods, 
increasing demand), while others, even though they do not show up in national accounts, will 
improve  quality  of  life  (the  so-called  consumer  surplus,  i.e.  the  option  to  buy  a  good  or 
service  which  better  corresponds  to  the  consumer's  desires)10.  There  are  also  beneficial 
impacts  in  economic  and  societal  terms.  Thus  for  instance,  a  completed  DSM  will  help 
consolidate Europe's leading position in the production of cultural goods and services11. 

Businesses  benefit  from  cross-border  e-commerce  by  exploiting  economies  of  scale  which 
reduce  costs,  increase  efficiency  and  promote  competitiveness,  improving  total  factor 
productivity12. In many cases, without these economies of scale an online business may not be 
viable, either because there is not enough demand in a single Member State or because lower 
production increases prices to unaffordable levels. This is especially important for SMEs that 
remain confined to  a small  home  market with high  production costs. If the DSM  can  lower 

6   European Parliament Research Service, Mapping the cost of Non-Europe, 2014-19, 2015 
7   Lorenzani, D. and Varga, J., 'The Economic Impact of Digital Structural Reforms', European Commission 

Economic Papers No 529, 2014 

8   Francois, J. et al., 'The Macro-economic Impact of Cross-border e-commerce in the EU', JRC/IPTS Digital 

Economy Working Paper No 2014-10, 2014 

9   Duch-Brown, N. and Martens, B., 'Consumer Benefits from the EU Digital Single Market: Evidence from 
Household Appliances Markets', JRC/IPTS Digital Economy Working Paper No 2014-03, 2014 – it is 
estimated that consumer surplus from e-commerce in household appliances could reach EUR 34 billion or 
0.3% of EU-27 GDP 

10   Pantea, S. and Martens, B., 'The Value of the Internet for Consumers', JRC/IPTS Digital Economy Working 
Paper No 2014-08, 2014 – using a conservative measure, this study estimates the consumer surplus value of 
the Internet at 1-2% of GDP 

11   Benzoni, L., The Economic Contribution of the Creative Industries to the EU in terms of GDP and Jobs, 
TERA Consultants, 2014 – according to this study, cultural and creative industries make a substantial 
contribution to Europe's economy in terms of GDP and EU workforce :4.4% and 3.8% or 8.5 million jobs 
respectively 

12   Aguiar, L. and Waldfogel, J., 'Quality Predictability and the Welfare Benefits from New Products: Evidence 
from Digitization of Recorded Music', JRC/IPTS Digital Economy Working Paper No 2014-12, 2014 – the 
authors estimate the consumer welfare benefits from increased online music choice and quality at 15 times 
the benefits of the long tail 

5 

 
                                                            
cross-border trade costs for SMEs, it could increase their production, lower production costs 
and make them more competitive13. 

Moreover, e-commerce also helps businesses to improve their sourcing strategies, by making 
available a wider variety of production inputs and enabling them to take advantage of lower 
prices through competitive forces. In fact, business-to-business (B2B) e-commerce  accounts 
for the lion's share of e-commerce (87% in revenue terms14).  

A  DSM  is  also  of  particular  importance  for  innovative  businesses  setting-up  online-only 
operations. Pure online retailers, online intermediaries or other web start-ups can scale up to 
the entire European market. 

For  EU  businesses  to  benefit  from  the  expanded  market  provided  by  cross-border  e-
commerce, the demand side must be fully unleashed. Consumer expenditure accounts for 57% 
of  the  EU's  GDP.  However,  there  is  consistent  evidence  to  show  that  consumers  have  less 
trust in cross-border e-commerce than in shopping online nationally15 and are more inclined to 
buy  from  domestic  sellers  than  cross-border16.  Whilst  this  "home  bias"  can  be  attributed  to 
some extent to cultural and proximity factors (language, brand recognition, etc.), a strong and 
harmonised regulatory framework  and consistent  enforcement of consumer rights across the 
EU will increase their willingness to engage with suppliers from other Member States. 

Such engagement will boost the volume of cross-border transactions and increase consumer 
surplus  through  increased  availability  of  a  wide  variety  of  products  and  better  prices. 
Moreover, it will exert competitive pressure on products and services supplied nationally and 
will result in more transparent and dynamic consumer markets. It is estimated that consumer 
welfare  gains  from  e-commerce  in  goods  in  an  integrated  DSM  could  reach  over  EUR  200 
billion, with two thirds of these gains coming from increased online choice17. 

Several  studies  have  stressed  the  growing  importance  of  the  demand  side  beyond  just  e-
commerce: today, consumers are key drivers of technology and change as new digital tools – 
such as comparison websites, social media, customisation of goods and services and mobile 
shopping – have empowered them. Their adoption of technologies and online engagement are 
crucial  in  creating  an  environment  in  which  ICT  innovation  (e.g.  big  data  analytics)  can 
flourish18. 

13   Francois, J. et al., 'The Macro-economic Impact of Cross-border e-Commerce in the EU', JRC/IPTS Digital 
Economy Working Paper No 2014-10, 2014 estimate the impact of reduced trade costs at up to 0.27% of 
GDP for e-commerce 

14   European Commission, Eurostat, ICT survey of Enterprises, 2014 
15   European Commission, Flash Eurobarometer 397, 'Consumer attitudes towards cross-border trade and 

consumer protection', 2014 (data to be published in the next Consumer Conditions Scoreboard, forthcoming 
2015) - while 61% of EU consumers feel confident about purchasing via the Internet from a retailer/provider 
located in their own country, only 38% feel confident about purchasing via the Internet from a vendor 
located in another EU country 

16   European Commission, Eurostat, ICT survey of Households and Individuals, 2014 – only 15% of consumers 
reported having bought online from other EU countries in 2014, while 44% did so domestically (for a total 
of 50% of Europeans shopping online 

17   Civic Consulting for the European Commission, Consumer market study on the functioning of e-commerce 
and Internet marketing and selling techniques in the retail of goods, 2011 – the consumer welfare gains 
from an integrated EU market for e-commerce in goods assuming 15% share of internet retailing was 
estimated at EUR 204.5 billion per year (EUR 70.4 billion from lower online prices and EUR 134.1 billion 
from increased choice) 

18   Van Welsum, D. et al., Unlocking the ICT Growth Potential in Europe: Enabling People and Businesses, 

The Conference Board for the European Commission, 2013 

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The  scale  provided  by  a  DSM  is  also  important  for  the  deployment  of  high-speed 
infrastructure to  enable advanced digital  services and the development and adoption of new 
technologies in Europe, such as the Internet of Things, big data analytics or cloud computing. 
Companies may refrain from investing in the deployment of these technologies if they have to 
use  different  costly  specifications  or  have  to  invest  in  new  infrastructure  (e.g.  cloud  based 
data  centres),  as  regards  the  transfer  of  data  or  cross-border  service  delivery,  making  it 
unprofitable  to  innovate.  In  the  long  run,  this  can  lead  to  a  further  weakening  of  Europe's 
industrial base, as competitors from abroad with more advanced technology backed up by a 
larger market with scale will take more market share. 

e-Commerce  is  growing  rapidly  in  the  EU  at  an  average  annual  growth  rate  of  22%, 
surpassing EUR 200 billion in 2014 and reaching a  share of 7% of total retail sales. Out of 
this,  40%  of  sales  are  by  pure  Internet  retailers  which  operate  only  online  and  around  14% 
corresponds  to  mobile  commerce.  Online  sales  are  concentrated  on  a  limited  number  of 
products  such  as  clothing  and  footwear,  consumer  electronics  and  appliances  and  media 
products, which represent nearly half of all online e-commerce transactions (49%)19. 

Chart 1. Evolution of total and online retail sales in goods in the EU, 2000-2014 (EUR billion) 

3050,0

3000,0

2950,0

2900,0

2850,0

2800,0

2750,0

2700,0

250,0

200,0

150,0

100,0

50,0

0,0

200020012002200320042005200620072008200920102011201220132014

Total

Online (right scale)

Source: Duch-Brown, N. and Martens, B., 2015 (a) 

Online  sales  represent  a  much  larger  proportion  of  services.  For  instance,  in  the  travel  and 
tourism sector  – one of the activities most affected by the Internet revolution  – online sales 
represent some 40% of total retail sales. In 2013 in the EU, online sales in this sector reached 
a volume close to EUR 70 billion20. For goods, online sales in this sector increased steadily 
during the period 2000-2013 despite the sharp fall in total retail sales registered after 200721. 

19   Duch-Brown, N. and Martens, B., 'The European Digital Single Market', JRC/IPTS Digital Economy 

Working Paper, forthcoming 2015 (a) 

20   Ibidem 
21   Ibidem 

7 

 
 
 
                                                            
Chart 2. Evolution of total and online retail sales in travel and tourism 
services, 2000-2014 (EUR billion) 

205,0

200,0

195,0

190,0

185,0

180,0

175,0

170,0

165,0

160,0

155,0

80,0

70,0

60,0

50,0

40,0

30,0

20,0

10,0

0,0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Total

Online (right scale)

Source: Duch-Brown, N. and Martens, B., 2015 (a) 

European firms have been slow in adapting to selling online. The proportion of firms selling 
online has been growing rather modestly over recent years, increasing only from 12% in 2009 
to 15% in 2014. Turnover from online sales has similarly increased from 12% to 15%22. The 
expansion in the volume of online sales has been driven by increasing sales by firms already 
present  in  online  markets.  The  top  100  online  retailers  represent  52%  of  total  online  retail 
turnover in 2013. Average turnover per firm increased significantly in the period 2010-2013, 
for the top 100 online retailers from EUR 674 to 924 million (+37%). For the top 500 online 
retailers,  online  turnover  increased  by  56%  in  the  same  period23.  For  the  vast  majority  of 
online sellers these  electronic  sales are not  their  major  distribution channel;  indeed, for two 
thirds  of  them,  online  sales  account  for  less  than  25%  of  sales.  At  the  other  end  of  the 
spectrum, for 11% of firms, more than 75% of their sales are online24. 

On  average,  80%  of  EU  online  expenditures  go  to  domestic  shops.  Consumers  in  smaller 
Member  States  have  a  stronger  tendency  to  shop  across  borders  because  local  supply  and 
variety is more limited and better price deals may be found across the border25. Regressions 
based on data from a 2015 consumer survey show that the probability of doing cross-border e-
commerce increases by 4% when cheaper prices, and by 7% when better quality, are cited as 
the  main  reasons  to  shop  online  for  the  average  European  online  shopper26.  Among  the  top 
100 online retailers, 52% only sell in their home country. While 17% of SMEs in the EU sell 
online27 (which is already very low), only 7%28 sell cross-border to other EU countries. 

Concentrating on retailers (companies selling goods and/or services to final consumers), the 
picture is  somewhat  more  favourable:  in  2014, 41%  of  these  businesses  sold  online  to  final 

22   European Commission, Eurostat, ICT survey of Enterprises 2009 and 2014; European Commission, Digital 

Agenda Scoreboard 

23   Duch-Brown, N. and Martens, B., 'The European Digital Single Market', JRC/IPTS Digital Economy 

Working Paper, forthcoming 2015 (a) 

24   European Commission, Flash Eurobarometer 413, 2015 
25   Gomez-Herrera, E., Martens, B., and Turlea, G. 'The drivers and impediments to cross-border e-commerce 

in the EU', JRC/IPTS Digital Economy Working Paper 2013-02, 2013 

26   Cardona, M., Duch-Brown, N., and Martens, B., 'Consumer perceptions of (cross-border) e-commerce in the 

EU Digital Single Market', JRC/IPTS Digital Economy Working Paper, forthcoming 2015 

27   European Commission, Eurostat, ICT survey of Enterprises, 2014 
28   European Commission, Eurostat, ICT survey of Enterprises, 2013 

8 

 
 
                                                            
consumers and 12% sold online cross-border within the EU29. Among the retailers who sell 
online  cross-border,  higher  risk  of  fraud  and  non-payments,  differences  in  national  contract 
laws, national tax regulations and national consumer protection rules are the most frequently 
quoted obstacles to the development of cross-border sales (indicated respectively by 42.7%, 
38.8%, 38.6% and 38.4% of businesses)30. 

For companies selling online cross-border, these international sales account for about 15% of 
their  revenues,  of  which  two-thirds  (i.e.  10%)  are  from  other  Member  States31.  For  firms 
which  have  experience  with  selling  online  cross-border  (either  currently  or  in  the  past),  the 
following are the most important barriers to cross-border selling identified: 

Chart 3. Barriers to online cross-border sales identified by firms which have experience 
with selling online cross-border 

Most important obstacles to online cross-
border sales in % 

Delivery costs are too high

Guarantees and returns are too expensive

Resolving complaints and disputes cross-border
is too expensive
Dealing with foreign taxation is too complicated
or too costly

You don't know the rules which have to be
followed

0

10

20

30

40

50

60

Source: Flash Eurobarometer 413, 2015 

Lowering  the  cost  of  resolving  complaints  and  disputes  could  increase  the  likelihood  of 
engaging in cross-border e-commerce by 9%. Similarly, limiting the suppliers’ restrictions to 
selling abroad would induce an increase in the propensity to sell online across the border by 
11%. Finally, reducing delivery prices could boost the probability of European firms engaging 
in  cross-border  e-commerce  by  7.5%.  Looking  on  a  sector  by  sector  basis,  for  retailers  the 
biggest  impact  would  come  from  lifting  restrictions  by  suppliers  to  selling  abroad  (20%), 
while  copyright  restrictions  are  the  most  important  for  information  and  communication 
providers (31%)32.  

In  terms  of  online  purchases  across  borders,  improving  security  of  payments  to  other 
countries would increase online purchases from another EU Member State by 5%, improving 
language skills for dealing with foreign countries would have a similar effect, and lowering 

29   European Commission, Flash Eurobarometer 396, 'Retailers’ attitudes towards cross-border trade and 

consumer protection', 2014 (data to be published in the next Consumer Conditions Scoreboard, forthcoming 
2015) 
30   Ibidem 
31   European Commission, Flash Eurobarometer 413, 2015 
32   Ibidem 

9 

 
 
                                                            
the costs of resolving complaints and disputes cross-border would increase the likelihood of 
firms purchasing online across borders by 12%33. 

There are big differences by firm size. SMEs are more exposed to barriers to cross-border e-
commerce than large firms, both in engaging in online trade with other Member States and in 
increasing  online  export  volumes.  Similar  results  are  found  when  looking  at  electronic 
purchases in terms of sector and size differences34. 

While information costs have declined very substantially in the online economy compared to 
offline  costs,  cross-border  trade  costs  are  not  zero.  The  fixed  costs  associated  with 
establishing an active presence in foreign markets remain significant, especially for SMEs that 
have  insufficient  market  size  prospects  to  amortize  these  fixed  costs  through  their  cross-
border  sales.  Thus,  in  cross-border  business-to-consumer  (B2C)  transactions,  the  costs  for 
businesses  of  adapting  to  the  laws  of  other  Member  States  are  roughly  EUR  9,000  per 
business and per country targeted. For a small enterprise (92% of all EU companies) which is 
exporting to only four other countries, this represents on average 17% of its average annual 
turnover. Therefore, it was estimated that the  cumulative contract law related costs incurred 
by  companies  active  in  cross-border  B2C  trade  (legal,  IT  and  translation  costs)  ranged 
between approximately EUR 4 and 8 billion35. 

3. 

ONLINE ACCESS TO GOODS AND SERVICES ACROSS EUROPE  

3.1.   The online trader's perspective 

In a DSM, the rights and obligations arising between e-commerce traders and their customers 
should be governed by a common set of rules and principles. EU law provides protection for 
EU consumers, irrespective of how goods are purchased. Harmonized EU legislation ensures 
safety  of  the  goods  being  placed  on  the  market.  Moreover,  the  Consumer  Rights  Directive 
(2011/83/EC) has fully harmonised certain aspects of consumer and contract law applicable to 
online  sales  to  consumers,  such  as  pre-contractual  information  the  customer  should  receive 
and  the  right  of  withdrawal  from  the  contract36.  However,  in  other  areas  there  are  only 
minimum  EU  rules,  which  Member  States  may  supplement  with  stricter  requirements.  For 
example,  the  Consumer  Sales  Directive  (1999/44/EC)  has  set  a  minimum  level  of 
harmonisation for the remedies available when tangible goods are not in conformity with the 
contract of sale. Member States can also go beyond the requirements of the Unfair Contract 
Terms  Directive  (93/13/EEC),  which  provides  protection  against  unfair  clauses  which  have 

33   Duch-Brown and Martens, 'Barriers to firms' cross-border e-commerce in the EU Digital Single Market', 

JRC/IPTS Digital Economy Working Paper, forthcoming 2015 (b) 

34   Ibidem 
35   European Commission, SME Panel Survey on the Impacts of European Contract Law, 2011; European 

Commission, European Business Test Panel European Contract Law, 2011; European Commission, Flash 
Eurobarometer 321, 'European contract law, consumer transactions', 2011 – the estimate of the cumulative 
contract-law related costs incurred by companies is based on these surveys. A detailed analysis could be 
found in Annex III to the Impact Assessment accompanying the 'Proposal for a Regulation of the European 
Parliament and the Council on a Common European Sales Law', 2011, p.13. 

36   There is also sector specific European legislation that protects consumers when buying specific products 
online. For instance, in the area of consumer credits, borrowers have the right to obtain standardised 
advertisements, pre-contractual and contractual information. If the medium does not enable full information, 
the creditors have to provide full information immediately after the conclusion of the contract. More 
generally, in all cases of distance marketing of financial services, consumers have the right to receive 
information about the identity of the trader and about the features of the product sold before the contract is 
concluded, and then have the right to withdraw from the contract during 14 days after its conclusion (or after 
reception of terms and conditions). 

10 

 
                                                            
not been individually negotiated in B2C contracts relating to both tangible goods and digital 
content products. 

When it comes to remedies for non-conformity with the contract for digital content products 
(such  as  cloud  services,  web-streamed  music  or  movies  or  sports  events  broadcast  over  the 
Internet), no specific EU rules exist. This means that in this area national laws apply, which 
differ from one Member State to another. This is not only because the national laws diverge, 
but  also  because  the  relevant  contracts  for  the  supply  (e.g.  download  or  streaming)  of  such 
digital products are qualified37 differently in the Member States. In some Member States the 
rules  on  services,  on  lease  or  on  sales  contracts  are  applied  while  others  may  apply  any  of 
those rules, depending on the content of the specific contract. 

There is also a risk of specific new, divergent national laws appearing. For instance, the UK 
has  recently  adopted  new  rules  on  the  conformity  with  the  contract  and  the  corresponding 
remedies  for  certain  digital  content  products.  The  Netherlands  has  also  proposed  rules  to 
clarify remedies available to the consumer depending on the type of digital content product. 

As  the  situation  now  stands,  while  online  traders  may  choose  the  contract  law  of  their  own 
Member  State  to  apply  in  B2C  transactions,  when  a  product  or  service  is  targeted  to  a 
consumer in another Member State, the mandatory protections afforded to that consumer by 
their  national  law  must  be  respected38.  Also,  in  case  of  conflict  in  such  situations,  the 
consumer may go to the courts of their country of domicile. In practice, traders appear to have 
difficulties in understanding how the existing rules apply in a digital environment. 

In addition, regulatory differences between Member States may not be limited to contract law: 
different  technical  specifications  or  rules  on  labelling  and  selling  arrangements  may  also 
apply in specific areas and, depending on where in the EU the consumer is located, they may 
require  the  trader  to  adapt  their  products  and  packaging  accordingly.  This  complex  legal 
situation means that online suppliers of goods and services who wish to serve a pan-European 
market  may  potentially  need  to  know  about,  and  comply  with,  28  differing  sets  of  national 
regulations. Finding out which regulation applies in which case may be difficult. 37% of firms 
in the EU that have experience with selling online to other Member States stated that lack of 
knowledge  on  the  rules  that  have  to  be  followed  presents  a  barrier  to  selling  online  cross-
border.  Moreover,  63%  of  firms  that  have  no  experience  with  selling  online  cross-border 
stated that they believe that lack of awareness of which rules have to be followed may present 
a barrier39. This shows that the perceived barriers are significantly higher than the real barriers 
and  that  there  is  space  for  better  communication  and  transparency.  This  situation  creates 
significant information and compliance costs for many online traders, especially for SMEs, in 
particular  when  the  value  of  the  transaction  remains  low.  Adding  up  only  costs  related  to 
contract law differences, the costs suffered by businesses when they sell to consumers in other 
EU Member States have been estimated at between EUR 4 and 8 billion40. These set-up costs 
are  of  course  more  difficult  to  amortize  for  smaller  businesses  interested  in  online  cross-
border sales. 

37   Loos, M. B. M. et al., Comparative analysis, Law & Economics analysis, assessment and development of 
recommendations for possible future rules on digital content contracts, study by the University of 
Amsterdam, Centre for the Study of European Contract Law (CSECL), Institute for Information Law (IViR) 
and Amsterdam Center for Law and Economics (ACLE), 2011 

38   Regulation (EC) No 593/2008 
39   European Commission, Flash Eurobarometer 413, 2015 
40   See footnote 37 – Impact Assessment accompanying the 'Proposal for a Regulation of the European 

Parliament and the Council on a Common European Sales Law', 2011 

11 

 
                                                            
Addressing the regulatory fragmentation described above by providing for more harmonised 
rules  for  online  cross-border  consumer  contracts,  and  by  allowing  traders  to  rely  on  their 
national laws by further harmonising the main rights and obligations of the parties, combined 
with  guidance  on  which  courts  have  jurisdiction  and  which  laws  apply  in  a  digital 
environment, would result in reduced transaction costs, greater legal certainty for businesses, 
increased  cross-border  competition  and  improved  incentives  for  SMEs  to  engage  in  cross-
border transactions. 

Chart 4. Believed impact of rules harmonisation on online cross-border sales 

If the same rules applied across the EU, would you increase your sales in 
other Member States? 

6% 

16% 

23% 

21% 

34% 

Yes, definitely

Yes, to some  extent

No, not really

No, definitely not

Don't know

Source: Flash Eurobarometer 413, 201541 

3.2.   The consumer's perspective 

Many people in Europe remain reticent about engaging in the range of online activities that 
are  now  offered  via  the  Internet  as  a  means  of  facilitating  their  daily lives.  72%  of  Internet 
users in Europe still worry that they are being asked for too much personal data online42. 80% 
of people express concerns about using the Internet for online banking or buying online, up 
from 75% in 2013. While three quarters of Europeans used the Internet on a regular basis in 
2014,  only  44%  engaged  in  e-banking,  47%  in  e-government  and  50%  in  e-commerce43. 
Travel services are among the most popular services bought on-line.  

When it comes to cross-border online activity, consumers' trust in the digital environment is 
even lower. In fact, while 61% of EU consumers in 2014 felt confident about purchasing via 
the  Internet  from  a  retailer/provider  located  in  their  own  country,  only  38%  felt  confident 

41   Base: Companies that sold their products and/or services online in another EU country in 2014 and those 

that used to do it, tried to do it, are trying to do it or are considering it (N=2423) 

42   European Commission, Special Eurobarometer 359, 'Attitudes on Data Protection and Electronic Identity in 

the European Union', 2011 

43   European Commission, Eurostat, ICT survey of Households and Individuals, 2014 – internet use and e-

banking in the last 3 months, e-government and e-commerce indicators have a 12-months reference period 

12 

 
 
                                                            
about purchasing via the Internet from a vendor located in another EU Member State44. When 
it comes to actual transactions, only 15% of consumers reported having bought online from 
other  EU  Member  States  in  2014, while  44%  did  so  domestically  (within  a  total  of  50%  of 
Europeans  shopping  online)45.  It  is  clear  that  the  economic  potential  of  the  DSM  for 
consumers and business is currently under-exploited. It was estimated that consumer welfare 
gains from e-commerce in goods in an integrated DSM could reach over EUR 200 billion per 
year, with two thirds of these gains coming from increased online choice46.  

Chart 5. Main reasons for buying products online  

Main reasons for buying online 
(up to 5 answers) 

I can order at any time of the day/week
I find cheaper products online
I save time by buying online
It's easier to compare prices online
There's more choice online
I can find certain products only online
Products are delivered to a convenient place
I can find product reviews by other consumers

It's easier to compare product information…

I can find more information online
I don't like going to shops
I can return products easily
I find better quality products online
Other

25% 
24% 

21% 
20% 

18% 

12% 

9% 

5% 
4% 

49% 
49% 

42% 

37% 
36% 

Source: European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and 
where they matter most, forthcoming 2015 

Results from the recent survey of online consumers on DSM obstacles indicate that the most 
frequently quoted reasons by online shoppers for purchasing online relate to convenience in 
terms  of  time  (49%  being  able  to  order  at  any  time  of  the  day/week,  42%  saving  time  by 
buying  online),  price  (49%  finding  cheaper  products  online,  37%  due  to  ease  of  comparing 
prices  online)  and  choice  (36%  more  choice  online,  25%  finding  certain  products  only 
online)47. 

The same survey showed that the main consumer concerns about purchasing products online 
domestically  are  linked,  inter  alia,  to:  data  protection  and  payment  security  (30%  of 
respondents were  concerned that personal data may  be  misused  and 25%  that payment card 

44   European Commission, Flash Eurobarometer 397, 'Consumer attitudes towards cross-border trade and 

consumer protection', 2014 (data to be published in the next Consumer Conditions Scoreboard, forthcoming 
2015) 

45   European Commission, Eurostat, ICT survey of Households and Individuals, 2014 
46   Civic Consulting for the European Commission, Consumer market study on the functioning of e-commerce 
and Internet marketing and selling techniques in the retail of goods, 2011 – the consumer welfare gains 
from an integrated EU market for e-commerce in goods assuming 15% share of internet retailing was 
estimated at EUR 204.5 billion per year (EUR 70.4 billion from lower online prices and EUR 134.1 billion 
from increased choice) 

47   European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and where 

they matter most, forthcoming 2015 

13 

 
 
                                                            
details  may  be  stolen)  and  consumer  rights  (fear  of  receiving  wrong  or  damaged  products 
(26%); 25% were concerned that it is not easy to replace or repair a faulty product; 22% were 
concerned that it is not easy to return a product they did not like and get reimbursement). 

When  it  comes  to  cross-border  purchases  from  other  EU  Member  States,  delivery  costs 
(27%),  high  return  shipping  costs  (24%)  and  long  delivery  times  (23%)  appear  among  the 
main consumer concerns. A large number of perceived obstacles are related to key consumer 
rights,  such  as  return  and  replacement  (getting  a  faulty  product  replaced  or  repaired,  20%; 
returning a product consumers did not like and getting reimbursed, 20%). Concerns related to 
redress  are  also  frequently  quoted,  i.e.  the  difficulty  of  solving  problems  if  something  goes 
wrong  (23%  of  respondents).  These  problems  are  very  similar  to  the  concerns  identified  by 
enterprises48. 

A  significant  proportion  of  consumers  are  also  concerned  about  conformity-related  issues, 
such  as  non-delivery  (15%)  or  delivery  of  a  wrong  or  damaged  product  (15%).  These 
concerns  are  mirrored  in  the  actual  problems  encountered by  consumers  who  bought  online 
over the past 12 months: of those consumers reporting problems (a third of all respondents), 
15%  quoted  low  product  quality,  14%  defective  products,  13%  delivery  of  wrong  products 
and 13% non-delivery. Moreover, 7% of those facing problems in the past year reported that 
they  could  not  return  products  and  get  reimbursement,  while  6%  said  the  seller  refused  to 
replace or repair a faulty product49. 

Furthermore,  difficulty  in  assimilating  and  understanding  the  implications  of  the  terms  and 
conditions  established  by  the  online  trader  can  discourage  customers  from  making  online 
purchases. Results from the recent survey of online consumers on DSM obstacles indicate that 
trust  in  and  understanding  of  the  terms  and  conditions  are  of  concern  to  8%  and  6% 
respectively of those online users who think about purchasing online from other EU Member 
States (6% and 3% respectively for domestic purchases). In fact, the average online consumer 
shopping cross-border is 8% less likely to buy online cross-border when concerned about lack 
of knowledge of their rights50. 

There  is  also  evidence  showing  that  when  buying  products  and  services  online,  the  vast 
majority  of  consumers  who  accept terms  and  conditions  do  not  read them51.  21%  of  people 
surveyed in the UK said that they had suffered as a result of blindly accepting online terms 
and conditions52. In particular, consumers are often bound by contracts unbalanced in favour 
of the trader; for example, they are left without appropriate protection or remedies when the 
quality of the digital content they acquire is too low53. Approximately 5% of respondents who 
experienced  problems  with  purchases  that  took  place  or  were  attempted  during  the  last  12 

48   See Chart 3 
49   European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and where 

they matter most, forthcoming 2015 

50   Cardona, M., Duch-Brown, N., and Martens, B., 'Consumer perceptions of (cross-border) e-commerce in the 

EU Digital Single Market', JRC/IPTS Digital Economy Working Paper, forthcoming 2015 

51   Europe Economics, Digital Content Services for Consumers: Assessment of Problems Experienced by 

Consumers (Lot 1), Report 4: Final Report, 2011, p. 52-53; Bakos, Y. et al., 'Does Anyone Read the Fine 
Print? Consumer Attention to Standard Form Contracts', New York University Law and Economics Working 
Papers, Paper 195, 2009 

52   The Guardian, Terms and conditions: not reading small print can mean big problems, 11 May 2011 
53   The Commission is investigating the issues involved in "blind" acceptance of terms and conditions and what 
the most appropriate levers are in this field by means of a behavioural study on Terms and Conditions which 
is due to be finalised in February 2016 

14 

 
                                                            
months  attributed  their  most  recent  problem  to  sellers  not  respecting  the  terms  and 
conditions54. 

Finally,  the  lack  of  knowledge  of  consumer  rights  when  buying  online  from  another  EU 
Member State and the fear of being exposed to a lower level of consumer protection in other 
EU Member States are of concern to approximately 11% and 8% of online users respectively 
with regard to buying online from another EU Member State55. More guidance on consumer 
rights in this respect, in particular with respect to applicable law and competent courts in case 
of dispute, would contribute to fostering trust in engaging in online transactions. Concerning 
the purchase of combined travel services on-line, the on-going revision of the Package Travel 
Directive will inject further transparency as to the nature of the contract at stake and related 
levels of protection.  

Enforcement of consumer rights legislation 

The  borderless  nature  of  digital  technologies  poses  challenges  for  the  enforcement  of 
consumer  rights  by  public  authorities  whose  action  is  constrained  by  their  jurisdictional 
boundaries. On the other side, big online players implement their business models at the EU 
level, if not at the global level, directly. To ensure consistent enforcement of consumer rights 
across the EU and to tackle efficiently infringements of consumer rights legislation spanning 
over several Member States, it is necessary to coordinate public enforcement activities. 

The  Regulation  on  Consumer  Protection  Cooperation56  provides  the  framework  for  such 
cooperation.  Every  year,  the  network  of  competent  authorities  under  this  Regulation  carries 
out  a  screening  of  e-commerce  websites  in  a  given  sector  ("sweeps")  to  check  their 
compliance  with  consumer  rights  legislation  and  to  ensure  they  are  put  in  conformity  when 
necessary (more than 3,000 websites have been corrected since 2007). 

This network has identified a number of online malpractices spreading across the EU and is 
carrying  out  joint  actions,  facilitated  by  the  Commission,  directly  to  require  the  operators 
concerned to change these practices. In 2014 for example, it tackled the misleading marketing 
of online games as "free" when in fact they included in-app offers and the control of payment 
settings was insufficient to ensure explicit consent for each purchase. This action resulted in a 
significant change of practices by major Internet platforms and was considered as an efficient 
and pragmatic model by the business sector and national authorities. 

The  results  of  yearly  sweeps  point  to  persistent  compliance  gaps  in  consumer  markets, 
including for online practices. On average 60-80% of websites checked are found to be non-
compliant with the most basic pre-contractual information requirements of the EU consumer 
and  e-commerce  legislation.  This  shows  that  there  is  a  need  to  strengthen  enforcement  to 
make sure consumers are adequately protected in the DSM. 

There is also scope for stepping up enforcement beyond the coordinated actions by national 
enforcement authorities and beyond traditional infringement proceedings, notably by working 
proactively  with  stakeholders  and  through  a  much  closer  cooperation  among  market 
surveillance authorities.57 This is the aim pursued by the Commission for example in its work 

54   European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and where 

they matter most, forthcoming 2015 

55   Ibidem 
56   Regulation (EC) No 2006/2004 
57   Market surveillance is the activities carried out and measures taken by public authorities to ensure that 

products comply with the requirements set out in the relevant Union harmonisation legislation and do not 

15 

 
                                                            
 
on comparison tools, where it is sensitising stakeholders on the mandatory requirements of the 
Unfair  Commercial  Practices  Directive  and  fostering  adherence  to  a  series  of  principles  to 
improve the compliance of comparison tools with the Directive as well as their transparency 
and user friendliness. 

Existing legal instruments should also be adapted so that they can meet the twin challenges of 
globalisation  and  digitisation.  As  part  of  the  scheduled  review  of  the  Consumer  Protection 
Cooperation Regulation, a public consultation carried out over the winter of 2013-2014 called 
for strengthened enforcement capacity at the EU level58. 

Enforcement  needs  therefore  to  be  faster,  more  agile,  consistent  and  efficient,  and  this 
requires increased cooperation among national authorities. With more effective enforcement 
and market surveillance, legal certainty for traders and consumers will increase, compliance 
costs  will  decrease,  administrations  will  save  time  and  resources  and  rogue  traders  will  be 
deterred  from  playing  on  enforcement  gaps  in  the  Single  Market.  Such  progress  in 
enforcement  and  market  surveillance  must  be  obtained  both  for  the  economic  rights  of 
consumers  and  for  the  safety  of  products  sold  online  so  as  to  ensure  the  effectiveness  of 
consumer rights legislation for online and digital purchases59. 

Consumer advice and redress 

When  consumers  encounter  problems  when  buying  goods  or  services  in  the  Single  Market 
(the resulting financial losses of which have been estimated at 0.4% of the EU’s GDP60), it is 
important that they should be able to seek and obtain redress. Amongst those DSM consumer 
survey  respondents  that  reported  their  most  recent  problem  with  purchases  that  took  place 
within  the  last  12  months,  16%  indicated  that  they  didn’t  take  any  action  whatsoever  to 
remedy  the  situation.  Out  of  these,  23%  reported  that  it  was  unlikely  that  they  would  get  a 
satisfactory solution to their problem, 19% thought it would take too long and a further 12% 
did  not  know  how  or  where  to  complain.  Of  those  respondents  who  did  complain,  between 
29%  and  38%  were  dissatisfied  with  the  way  their  complaints  were  dealt  with  (lowest 
proportion  of  dissatisfied  respondents  among  those  dealing  with  an  out-of-court  dispute 
resolution entity, and highest proportion of dissatisfied respondents among those who went to 
court)61.  Indeed,  when  disputes  arise  with  traders,  cross-border  proceedings  can  be 
disproportionately  costly  and  lengthy  for  the  average  online  transaction,  even  if  swift  and 
low-cost uniform European procedures already exist (e.g. European Small Claims, European 
Order for Payment). Even when the consumer obtains a judgment in their favour, it requires 
costs and effort to enforce it effectively against the trader. At the same time, the possibility of 
litigation in foreign courts and, even more importantly, differences in the laws applicable to 
the  contract  also  lead  certain  businesses  to  refrain  from  engaging  in  cross-border  online 
activities. 

Resolving complaints and disputes across borders is expensive for firms as well. Around 21% 
of  firms  engaged  in  cross-border  e-commerce  declare  this  issue  to  be  a  major  problem, 
affecting  particularly  micro  firms  (1-9  employees).  Offering  easily  accessible,  efficient  and 

endanger health, safety or any other aspect of public interest protection, as set out in Regulation (EC) No 
765/2008 

58   European Commission, Public consultation on reviewing the Consumer Protection Cooperation (CPC) 

Regulation (2006/2004/EC) 

59   See the European Commission, Multiannual plan for Market Surveillance 2013-2015 
60   European Commission, Special Eurobarometer 342, 'Consumer Empowerment', 2011 
61   European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and where 

they matter most, forthcoming 2015 

16 

 
                                                                                                                                                                                          
cost-effective mechanisms to resolve disputes between consumers and businesses engaged in 
cross-border e-commerce is therefore an important element in creating a DSM. 

The European Consumer programme, together with national consumer authorities, funds the Network 
of  European  Consumer  Centres  so  that  individual  consumers  can  get  information  and  assistance  for 
their cross-border purchases. This network, active since 2005 and now counting an office in all 28 EU 
Member States, Norway and Iceland, helps solve in an amicable manner more than 35,000 complaints 
per year. 

The  Directive  on  consumer  alternative  dispute  resolution  (ADR)62,  which  is  to  be  transposed  into 
national  law  by  July  2015,  will  ensure  that  quality  ADR  entities  are  available  in  virtually  every 
business  sector.  The  Regulation  on  consumer  online  dispute  resolution  (ODR)63  provides  for  the 
establishment  of  an  EU-wide  ODR  platform  to  facilitate  the  online  resolution  of  disputes  between 
consumers and traders over online transactions. The implementation of this legislation and the planned 
launch  in  January  2016  of  the  ODR  platform  will  benefit  traders  by  saving  on  costly  court 
proceedings, maintaining their business reputation and good customer relations. The new legislation is 
also  expected  to  encourage  traders  to  open  up  their  business  to  consumers  from  other  EU  Member 
States. 

The  European  Small  Claims  Procedure  gives  parties  easy  access  to  cross-border  simplified  court 
procedures. This procedure is currently being revised in order to make it available also for SMEs (by 
raising the threshold of the claims which fall within the scope of this procedure from EUR 2,000 to 
EUR  10,000)  and  to  modernise  the  procedure,  bringing  it  in  line  with  21st  century  justice  by 
improving  the  use  of  electronic  means  (e.g.  videoconferencing  for  carrying  out  oral  hearings, 
electronic  service  of  documents,  distance  means  of  payment  of  court  fees).  This  should  reduce  the 
costs and length of cross-border proceedings. 

The European e-Justice Portal provides easy to understand access to information on legal systems in 
other Member States, including consumer rights, as well as on possibilities for redress. The Portal is 
being  adapted  to  make  it  easier  for  consumers  to  make  use  of  this  facility,  through  electronic 
assistance  in  filing  the  required  form,  as  well  as  through  making  it  possible  to  address  the  form 
directly to the competent court in another Member State. 

3.3.  Cross-border parcel delivery services 

Problem and problem drivers  

e-Commerce  deliveries  to  consumers  continue  to  drive  growth  in  the  European  parcels 
market,  which  is  estimated  at  EUR  42.8  billion  (including  B2C  and  B2B)64.  Most  parcel 
traffic is still domestic, representing 85% of total EU shipments65. The market has increased 
by 5.7% in value terms compared with 2011, yet it is a very concentrated market, with five 
Member States66, where e-commerce markets are already well developed, accounting for 70% 
of the total EU parcel market. 

Consumers  and  e-retailers  are  increasingly  demanding  in  terms  of  delivery  services  when 
buying online. In the recent survey of online consumers about DSM obstacles67, low delivery 

62   Directive 2013/11/EU 
63   Regulation (EU) No 524/2013 
64   Le Groupe La Poste, Annual Report 2013, p. 35 – B2B accounts for EUR 28.7 billion compared with EUR 

14.1 billion for B2C 

65   Okholm, H. B. et al., e-Commerce and delivery - A study of the state of play of EU parcel markets with 
particular emphasis on e-commerce, Copenhagen Economics for the European Commission, 2013 

66   Germany, the UK, France, Italy and Spain 
67   European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and where 

they matter most, forthcoming 2015 

17 

 
                                                            
costs (33%), convenient delivery options (e.g. time, place - 22%) and the possibility to deliver 
to  the  country  of  the  consumer  (20%)  were  amongst  the  seven  most  frequently  reported 
reasons for consumers choosing the website where they conducted their latest online purchase 
of a tangible good. In addition, those respondents who last purchased a tangible good online 
reported  most  often  that  it  was  delivered  to  their  home/work  address  (83%).  Other  delivery 
options chosen included picking it up in person from a shop (8%), from a collection point/safe 
box in a public location (5%) or from a local post office (4%)68. 

Various  surveys  in  recent  years  show  that  the  growth  of  cross-border  e-commerce  is 
hampered by a lack of affordable, high-quality delivery services. These are consistently cited 
amongst  the  top  reasons  mentioned  by  both  e-retailers  and  consumers  for  not  engaging  in 
cross-border e-commerce. Stakeholders complain about a lack of transparency, the high prices 
of  delivery  for  small  shipments,  the  lack  of  interoperability  between  the  different  operators 
typically involved in a delivery of a cross-border shipment and the lack of convenience for the 
final  consumer.  Over  60%  of  manufacturing  and  retail  (including  wholesale)  companies 
selling online across borders declared the high prices of cross-border delivery to be a problem 
for  them.  This  is  the  most  prevalent  barrier  to  cross-border  e-commerce  for  firms  selling 
online69. 

The recent survey of online consumers on DSM obstacles indicates that indeed concerns with 
respect  to  various  delivery  aspects  were  amongst  the  top  consumer  concerns  in  relation  to 
purchasing  online  cross-border  (27%  high  delivery  costs,  24%  high  return  shipping  costs, 
23% long delivery times, 15% non-delivery). Amongst online buyers who reported their most 
recent problem(s) when purchasing a tangible good in the last 12 months, long delivery times 
was reported by 17% of respondents (and was the highest ranked consumer problem), while 
non-delivery and delivery of the wrong product were both reported by 14% of respondents70. 

Likewise,  e-retailers  are  also  concerned  about  the  availability,  quality  and  price  of  delivery 
options.  Between  85  and  100%  of  e-retailers  consider  delivery  within  two  to  four  days, 
delivery  at  an  agreed  time  slot,  and  next  day  delivery  to  be  the  top  three  most  important 
delivery  features71.  E-retailers  want  to  reflect  consumer  needs  and  expectations  by  offering 
simple,  transparent  and  reliable  shipping  services  (e.g.  track-and-trace,  on  time  delivery). 
They also want low delivery and return prices to attract (and retain) consumers. Notably, due 
to  their  lack  of  bargaining  power,  SMEs  are  the  most  affected  as  they  face  high  delivery 
prices72  for  low  volume  cross-border  shipments.  This  limits  SMEs'  competiveness  in  cross-
border  e-commerce  given  that  their  growth  opportunities  are  dependent  on  a  seamless  EU 
delivery market. 

However,  the  single  delivery  market  is  not  yet  a  reality  across  the  EU.  The  EU  delivery 
market  is  fragmented,  with  28  national  delivery  markets  consisting  of  national  postal 
operators,  alternative  parcel  delivery  operators,  express  operators  or  global  integrators73, 

68   Ibidem 
69   European Commission, Flash Eurobarometer 413, 2015 
70   European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and where 

they matter most, forthcoming 2015 

71   Okholm, H. B. et al., e-Commerce and delivery - A study of the state of play of EU parcel markets with 
particular emphasis on e-commerce, Copenhagen Economics for the European Commission, 2013 
72   Meschi, M. et al., Intra-Community cross-border parcel delivery, FTI Consulting for the European 
Commission, 2011; Civic Consulting for the European Commission, Consumer market study on the 
functioning of e-commerce and Internet marketing and selling techniques in the retail of goods, 2011; 
YouGov Psychonomics for the European Commission, Mystery Shopping Evaluation of Cross-Border e-
commerce in the EU, 2009 

73   Multinational operators with worldwide presence, such as DHL, Fedex, TNT Express and UPS  

18 

 
                                                            
logistics players74 and in-house operators75. Global integrators have developed an integrated 
network  traditionally  focused  on  B2B  deliveries  but  in  recent  years  have  been  increasingly 
moving into B2C deliveries. Except for integrators, cross-border delivery usually requires the 
combination  of  two  or  more  national  delivery networks,  which  can  be  delivery  networks  of 
national  postal  operators,  but  also  alternative  delivery  operators.  Furthermore,  domestic 
(public) postal networks are traditionally set-up to deal with historically high letter volumes, 
rather than parcels.  Thus,  existing  postal  networks  were  not  designed  to  address  the  current 
rapidly changing needs stemming from growing e-commerce, and especially not cross-border 
delivery  requirements.  Postal  delivery  operators'  IT  and  electronic  communication  systems 
were developed independently and primarily for domestic services and are not integrated with 
each  other,  resulting  in  heterogeneous  (i)  ad-on  services  (e.g.  different  track  and  trace 
solutions), (ii) labelling practices and (iii) quality measurement across the EU Member States. 
The  lack  of  compatibility  of  different  logistical  solutions  affects  the  quality  of  the  service 
offered  (e.g.  relabeling  items  increases  the  cost  and  time  of  a  cross-border  delivery),  the 
convenience of the service (alternative delivery options may not be available) and the price. 
Insufficient  interoperability  between  operators  and  low  consumer  volumes  result  in  weak 
competitive pressure in the cross-border delivery markets. More interoperability can provide 
for more growth opportunities for both delivery operators and e-retailers.  

Concerning  price,  several  research  studies  estimate  that  list  tariffs  for  cross-border  parcel 
delivery  (for  non-account  customers)  charged  by  national  postal  operators  are  often  two  to 
five times higher than comparable domestic prices76. High prices are commonly attributed to 
low  volumes  and  lack  of  bargaining  power  by  low  volume  senders,  typically  SMEs  and 
consumers. Low volumes generate a higher cost per item and may partly explain the narrower 
range  of  services  available  for  cross-border  deliveries  compared  to  domestic  deliveries.  On 
the  other  hand,  high  prices  may  also  reflect  weak  competitive  pressure  in  the  cross-border 
delivery market.  

Although in most Member States there are typically more than three delivery operators77, this 
does not mean that they all provide the delivery service e-retailers need (e.g. a simple, cheap, 
traceable  and  reliable  delivery).  High  prices  may  also  be  attributed  to  complex  and  opaque 
interconnection costs. As members of the Universal Postal Union78, national postal operators 
comply with a set of rules on tariffs, which, as some studies suggest, may not reflect the real 
costs  incurred79.  Furthermore,  delivery  operators  can  engage  in  bilateral  agreements  or 

74   Such as consolidators, brokers, fulfilment services, third party logistics providers. The latter provide 
assistance to customers for outsourced services for part or all of their logistics, such as pick and pack, 
warehousing, documentation, labelling procedures and distribution. Online brokers and parcel consolidators 
offer discounts on single shipments by integrators, or national operators. 

75   Operators set up by an e-retailer itself 
76   Meschi, M. et al., Intra-Community cross-border parcel delivery, FTI Consulting for the European 

Commission, 2011; Okholm, H. B. et al., e-Commerce and delivery - A study of the state of play of EU 
parcel markets with particular emphasis on e-commerce, Copenhagen Economics for the European 
Commission, 2013; Civic Consulting for the European Commission, Consumer market study on the 
functioning of e-commerce and Internet marketing and selling techniques in the retail of goods, 2011; 
YouGov Psychonomics for the European Commission, Mystery Shopping Evaluation of Cross-Border e-
commerce in the EU, 2009 

77   Okholm, H. B. et al., e-Commerce and delivery - A study of the state of play of EU parcel markets with 
particular emphasis on e-commerce, Copenhagen Economics for the European Commission, 2013 

78   The United Nations' specialised agency for the postal sector 
79   Campbell, J. I. Jr et al., Study on the External Dimension of the EU Postal Acquis, WIK-Consult for the 

European Commission, 2010; Copenhagen Economics, The Economics of Terminal Dues, 2014 

19 

 
                                                            
multilateral agreements such as REIMS80, Express Mail Service (EMS)81 or E-Parcel Group 
(EPG)82.  Some  of  these  agreements  may  be  out  of  line  with  the  spirit  of  Article  13  of  the 
Postal Service Directive83 (PSD) which encourages the cost orientation of cross-border tariffs. 
Lack of enforceability of the PSD principles on tariffs is also one of the possible reasons for 
high  prices.  Only  very  few  postal  national  regulatory  authorities  (NRAs)  focus  their 
responsibilities also on cross-border delivery markets, as many NRAs have a limited mandate 
on this segment84. 

A lack of easy availability and transparency of information in this market is also a problem 
for  e-retailers  and  consumers  on  a  micro-level  and  for  NRAs  on  a  macro-level.  Despite  the 
existence  of  more  than  three  operators  in  the  cross-border  parcel  delivery  segment  in  most 
Member States, one in five e-retailers say that they are aware of only one delivery operator85. 
This lack of information extends to the choice of services available. Although most services 
are offered by delivery operators, e-retailers need sometimes to combine several offers from 
different  delivery  operators  to  be  able  to  offer  a  wider  choice  of  delivery  services  to  their 
customers. Consequently integrating these different services increases costs to e-retailers.   

From a regulatory perspective, on a macro level adequate information on the parcel market is 
lacking,  making  it  more  difficult  to  assess  the  extent  of  and  address  effectively  any  market 
failures. Currently, information on the delivery market is fragmented and only partly available 
to  national  postal  regulatory  authorities.  At  present,  the  latter  have  a  limited  mandate  to 
monitor and regulate cross-border delivery, often restricted to  parcel markets that fall under 
the universal service obligations of postal services and represent a small share of the delivery 
market86. 

Policy steps taken so far and need for the issue to be addressed at European level 

As shown above, delivery related barriers are considered an obstacle for both e-retailers and 
consumers,  hindering  their  further  participation  in  e-commerce  growth,  particularly  cross-
border. These barriers have already been acknowledged by the Commission both in the Green 
Paper87  and  in  the  Roadmap88  on  cross-border  parcel  delivery.  In  these  documents  the 
Commission  identifies  the  following  challenges  as  action  points:  lack  of  transparency  of 
information, excessive costs for low volume shipping, lack of convenient services for the final 
consumer  and  lack  of  interoperability  between  the  different  operators  typically  involved  in 
cross-border  delivery.  The  Roadmap  set  out  a  number  of  actions  which  aim  to  improve  the 
quality,  availability  and  affordability  of  cross-border  parcel  delivery  services  (including  a 

80   The Remuneration of Mandatory Deliveries of Cross-Border Mails is a voluntary multilateral agreement 

between postal operators setting out rules for calculation of terminal dues, i.e. the remuneration that postal 
operators pay each other for the delivery of incoming cross-border mail (applicable to mail up to 2 kg) 
81   EMS is an international postal Express Mail Service for documents and merchandise, offered by postal 

operators of the Universal Postal Union (UPU) 

82   The EPG is made up of 31 postal parcel operators committed to deliver their priority parcel products 
through an integrated delivery network. The network uses a track-and-trace system and an automated 
customer service system linking each postal operator’s call centres to ensure stable and reliable quality of 
service for their customers. 

83   Directive 97/67/EC, as amended by Directives 2002/39/EC and 2008/6/EC 
84   The European Regulators Group for Postal Services (ERGP), Opinion to the European Commission 

European cross-border e-commerce parcels delivery - On a better understanding of European cross-border 
e- commerce parcels delivery markets and the functioning of competition on these markets, 2014 
85   Okholm, H. B. et al., e-Commerce and delivery - A study of the state of play of EU parcel markets with 
particular emphasis on e-commerce, Copenhagen Economics for the European Commission, 2013 

86   Ibidem, p 103 – estimated at around 17% of total EU shipments 
87   COM(2012) 698 final 
88   COM(2013) 886 final 

20 

 
                                                            
complaints  handling  procedure),  and  the  transparency  of  information  about  the  services  on 
offer. 

The Commission's Roadmap defined an eighteen month period for the assessment of industry-
led initiatives taken to address the issues identified on cross-border delivery. This period ends 
in  June  2015.  The  industry  (postal/logistics  operators  and  e-retailers)  is  addressing  some  of 
the  areas  of  concern  identified  in  the  Roadmap.  For  example,  the  postal  incumbents  have 
committed  themselves  to  introducing  a  number  of  improvements  in  the  area  of  quality  of 
service  and  logistics  operators  are  developing  tools  for  better  tracing  of  shipments  and  for 
increased  interoperability.  The  Commission's  role  is  to  monitor  the  implementation  by  the 
industry  of  their  commitments  and  ensure  that  they  are  fulfilled.  Other  areas  where  the 
industry has not yet proposed any solutions might, however, need complementary measures. 

Expected Impact – what changes/opportunities do we expect from solving the issue? 

Improving  the  availability  and  affordability  of  cross-border  delivery  services  will  make  it 
easier for e-retailers to sell across borders, especially for SMEs. This would enhance SMEs' 
growth  potential  and  contribute  to  more  jobs.  Consumers  would  also  benefit  from  cross-
border parcel delivery services that are more convenient, as well as from a wider choice and 
lower  prices.  Improved  cross-border  delivery  options  would  be  especially  beneficial  for  e-
retailers and consumers located in rural or peripheral areas. Moreover, any improvements in 
the cross-border delivery market might also have further positive spill-overs on the domestic 
delivery market. 

3.4.  Territorial restrictions and geo-blocking: goods and services 

Problem and problem drivers 

In a single market, consumers expect to be able fully to enjoy the benefits of e-commerce, by 
comparing  and  taking  advantage  of  wider  choice  and  better  prices.  Instead,  EU  consumers 
often find that online shops based in a different Member State will not sell certain goods or 
services  or  digital  content  to  them  or  only  sell  them  via  a  different  website  specifically 
targeting their country of residence, frequently under different conditions.  

There  are  two  common  types  of  market  practices  and  territorial  restrictions  which 
differentiate between consumers within the Internal Market: geo-blocking, i.e. simple refusal 
to  sell  or  automatic  re-routing  and  geo-filtering,  i.e.  unjustified  diversifying  of  sale 
conditions89. These practices are commonly based on the location of the consumer, which is 
for instance determined by means of the IP address used by the consumer, the country which 
is registered for the customer's means of payment or the postal or delivery address indicated 
by the consumer. 

While  97%  of  domestic  online  orders  lead  to  a  successful  shipment,  in  only  48%  of  all 
attempts  at  cross-border  orders  does  the  seller  actually  deliver  to  the  country  of  the 
consumer90.  Refusal  to  deliver  is  most  prominent  for  electronic  goods.  10%  of  consumers 
with experience of cross-border online shopping report that on at least one occasion over the 
past  12  months  the  foreign  seller  refused  to  deliver  to  their  country;  8%  were  at  least  once 

89   European Parliament study, Discrimination of Consumers in the Digital Single Market, 2013 
90   Cardona, M. and Martens, B., 'Supply side barriers to cross-border e-commerce in the EU', JRC/IPTS 

Digital Economy Working Paper No 2014-13, 2014 

21 

 
                                                            
redirected to a website in their own country where prices were different, while 5% report that 
the retailer did not accept payment from their country91. 

In  the  recent  survey  of  online  consumers  on  DSM  obstacles92,  of  those  respondents  who 
reported on their most recent problem(s) when making or attempting to make a cross-border 
purchase93 from another EU Member State, 5% indicated that they were not able to access the 
seller’s website because they were redirected to the seller’s website in their own country94 and 
a further 6% indicated that foreign sellers refused to sell to them because of their country of 
residence95.  Similarly,  7%  of  respondents  attempting  to  purchase  from  another  EU  Member 
State reported that they could not access the foreign seller’s website (or only limited content 
was  displayed  to  them),  whereas  another  4%  reported  that  their  means  of  payment  was 
refused by the foreign seller. 

In addition, 74% of the complaints concerning services which were received by the European 
Consumer Centres Network related to consumers facing differences in price or service when 
buying  online  cross-border96.  Cross-border  complaints  alleging  discrimination  in  online 
shopping identified refusal to deliver as the main cause, followed by price discrimination and 
technical requirements such as country of credit card. Only half of the traders contacted could 
explain  the  reason  for  the  discrimination  and  in  only  1  in  6  cases  did  they  agree  to  change 
their practice. 

Automatic  rerouting  to  national  websites  of  a  company  when  booking  a  service  online  has 
been frequently observed in certain sectors. Moreover, price differences based on the country 
where  consumers  are resident  can be significant  even though the prices  are often applied to 
the same service provision taking place at the same location97. To analyse the extent of price 
discrimination the Commission initiated a web-scraping study in 2013. The study showed that 
a leading car rental company consistently used to set different prices based on the consumer's 
place  of  residence  (the  situation  has  improved  since  then).  For  an  identical  car  rental  in  a 
given country, a car could at the time be up to 53% more expensive if the consumer resided in 
the UK compared to Romania, Slovenia and Poland.  

Consumers'  behaviour  on  the  market  is  greatly  influenced  by  their  perception  of  fairness 
regarding  market  conditions  and  prices.  In  the  Internal  Market,  prices  charged  by  service 
providers  in  one  Member  State,  are  often  used  as  "reference  prices"  by  consumers  in  other 
Member  States,  which  determines  their  perception  of  price  fairness.  This  practice  has 
intensified as a result inter alia of the increased use of price comparison tools. For that reason, 

91   European Commission, Flash Eurobarometer 397, 'Consumer attitudes towards cross-border trade and 

consumer protection', 2014 (data to be published in the next Consumer Conditions Scoreboard, forthcoming 
2015) 

92   European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and where 

they matter most, forthcoming 2015 

93   Of tangible goods or services ordered online but used offline (e.g. hotel, transport, etc.) 
94   59%  experienced  this  after  choosing  the  delivery  address,  a  further  34%  automatically  when  visiting  the 
foreign  seller’s  website,  and  7%  after  entering  their  payment  card  details.  It  should  be  noted  that  such 
practices, which are not always easy for consumers to notice, may be under-reported. 

95   54% experienced this after choosing the delivery address, a further 39% realised that they could not buy the 
product when visiting the foreign seller’s website, and 7% after entering their payment card details. It should 
be noted that such practices, which are not always easy for consumers to notice, may be under-reported. 
96   European  Commission,  ECC-Net  report,  Enhanced  Consumer  Protection  –  the  Services  Directive 
2006/123/EC  Analysis  of  Article  20.2  and  Article  21  related  consumer  complaints  reported  to  ECC-Net 
between 2010 and 2012, 2013 

97   Duch-Brown, N. and Martens, B., 'Consumer Benefits from the EU Digital Single Market: Evidence from 
Household  Appliances  Markets',  JRC/IPTS  Digital  Economy  Working  Paper  No  2014-03,  2014  –  see  for 
evidence on price differentiation in the household appliances market in the EU 

22 

 
                                                            
consumers'  perception  of  fairness  and  their  sensitivity  to  price  discrimination  may  be 
amplified  in  the  context  of  the  Internal  Market98.  At  the  same  time,  there  are  a  number  of 
economic  realities  that  can  either  make  a  single  price  impossible  or  that  provide  justified 
reasons for applying price differentiation.  

Consumers  are  also  confronted  with  lack  of  access  to  support  services  from  sellers  when 
orders  are  made  from  other  Member  States  (e.g.  customer  service  offered  only  via  non-
geographic numbers not accessible from other Member States). In the recent survey of online 
consumers about DSM obstacles, poor customer service was quoted by approximately 13% of 
those  respondents  who  reported  their  most  recent  problem(s)  with  purchases  in  the  last  12 
months from other EU countries99. 

There  are  a  number  of  reasons  why  companies  limit  the  geographical  scope  of  their  online 
activity and use geo-blocking practices to apply it in practice. In certain cases, geo-blocking is 
necessary  to  comply  with  legislation.  For  instance,  online  companies  might  need  to  restrict 
access of consumers to betting websites when they come from a Member State where online 
betting  is  prohibited,  or  access  to  certain  content  might  be  limited  in  order  to  comply  with 
specific legislation (e.g. legislation on advertising, protection of minors, etc.). 

In  other  cases,  restrictions  on  cross-border  sales  are  imposed  on  the  online  shops  by  the 
manufacturers  of  the  products  through  contractual  agreements.  Recent  evidence  shows  that 
the  likelihood  of  engaging  in  cross-border  e-commerce  would  increase  by  10%  should  the 
suppliers'  restrictions  be  removed  and  the  volume  of  sales  would  also  increase  by  6%  on 
average100. 

A company may also decide, as an individual business choice and on the basis of a variety of 
considerations,  not  to  sell  to  a  customer  from  another  Member  State.  One  of  the  main 
underlying  causes  of  the  refusal  to  engage  in  cross-border  sales  is  found  in  costs  stemming 
from  the  current  legal  fragmentation  of  contract  and  consumer  law  and  other  regulatory 
barriers,  which  discourage  companies  from  selling  to  foreign  consumers  (as  described  in 
previous  sections).  In  addition,  in  many  cases,  companies  do  not  sell  abroad  because  the 
delivery and overhead costs stemming from occasional online transactions are considered too 
high (see section 3.3 on parcel delivery). 

Policy steps taken so far and need for the issue to be addressed at European level 

The  e-Commerce  Directive101  lays  down  the  country  of  origin  principle  for  information 
society services with the aim of dismantling barriers to online activities in the Single Market. 
The e-Commerce Directive, however, does not contain any particular provision related to geo-
blocking. Nevertheless, other tools and instruments applicable to territorial restrictions are in 
place at EU level. 

98   Kahneman, D. et al., 'Fairness and the Assumptions of Economics', The Journal of Business Vol. 59 (4), 
1986 or Kahneman, D. et al., 'Fairness as a Constraint on Profit Seeking: Entitlements in the Market', 
American Economic Review Vol. 74 (4), 1986. Other relevant research includes Anderson, E. T. and 
Simester, D. I., 'Does Demand Fall When Customers Perceive That Prices Are Unfair? The Case of 
Premium Pricing for Large Sizes', Marketing Science Vol. 27 (3), 2008. 

99   European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and where 

they matter most, forthcoming 2015 

100   Duch-Brown and Martens, 'Barriers to firms' cross-border e-commerce in the EU Digital Single Market', 

JRC/IPTS Digital Economy Working Paper, forthcoming 2015 (b) 

101  Directive 2000/31/EC 

23 

 
                                                            
Article  101  of  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  prohibits 
agreements  between  undertakings  that  have  as  their  object  or  effect  the  restriction  of 
competition. EU competition law can therefore tackle anti-competitive agreements for the sale 
and purchase of goods or services which are entered into between undertakings operating at 
the  same  (horizontal  agreements)  or  different  levels  of  the  production  or  distribution  chain 
(vertical  agreements)  that  create  barriers  to  cross-border  e-commerce.  Moreover,  under  EU 
competition  law  (Article  102  TFEU)  undertakings  with  a  dominant  position  are  prohibited 
from abusing their dominant position. Competition law cannot, however, address restrictions 
that are imposed through unilateral business decisions by non-dominant companies. In order 
to  systematically  analyse  restrictions  that  create  barriers  to  cross-border  e-commerce,  the 
Commission  will  launch  a  sector  inquiry  into  the  e-commerce  sector  in  all  Member  States. 
The results of this inquiry will  help to target competition law enforcement  better to remove 
such restrictions. 

The Services Directive prohibits discrimination based on nationality or place of residence in 
the  provision  of  services,  including  online  services,  unless  there  are  objective  justifications 
(Article 20). Specifically, Article 20(2) covers instances where different treatment is applied 
by service providers – that is, firms or professionals offering services in a market. It obliges 
Member States to  ensure that  the general  conditions of access to  a service,  which are made 
available  to  the  public  at  large  by  the  provider,  do  not  contain  discriminatory  provisions 
relating  to  the  nationality  or  place  of  residence  of  the  recipient,  but  without  precluding  the 
possibility of providing for differences in the conditions of access where those differences are 
directly justified by objective criteria. This provision has at times proven difficult to enforce 
effectively because of the broad range of potential objective justifications.  

Moreover, EU law imposes transparency requirements on sellers vis-à-vis the consumer that 
also  apply  to  geo-blocking  practices.  The  Consumer  Rights  Directive  requires  traders  to 
inform  about  delivery  restrictions  clearly  and  legibly  at  the  latest  at  the  beginning  of  the 
ordering process (Article 8(3)).  

As far as payment services are concerned, the EU has also taken initiatives that will affect the 
use of innovative payment services. The draft Interchange Fee Regulation102, which has been 
recently adopted by the European Parliament, will enhance transparency for card transactions, 
pave  the  way  for  innovative  payment  technologies  to  be  rolled  out,  improve  competition  in 
card payments and give more freedom of choice to retailers. It also foresees the possibility for 
EU  citizens  to  obtain  a  credit  card  from  any  banking  institution,  regardless  of  its  place  of 
residence. 

Expected Impact – what changes/opportunities do we expect from solving the issue? 

Addressing  the  problem  of  territorial  restrictions  in  e-commerce  within  the  EU  could  bring 
increased  price  transparency,  more  competition  in  cross-border  e-commerce  and  greater 
availability  and  choice  of  products  for  consumers.  Several  actions  could  be  considered  to 
reduce  the  prevalence  of  these  restrictions  by  eliminating  unjustified  geo-blocking  and 
addressing  the  underlying  real  and  perceived  obstacles  that  currently  discourage  certain 
companies from extending the scope of their activities to the whole EU.  

102   COM(2013) 550 final – this proposal was adopted by the European Parliament on 10 March 2015 and still 

need to be formally approved by the Council 

24 

 
                                                            
Geo-blocking  may  be  examined  from  a  competition  law  perspective,  as  well  as  from  other 
legal  perspectives  (e.g.  non-discrimination  and  freedom  to  provide  services,  enforcement  of 
consumer rights, commercial practices and contract law).  

3.5.  Access to and use of copyright-protected content  

The  EU  copyright  system  is  a  key  element  of  the  EU's  cultural,  social  and  technological 
environment  and  of  the  digital  economy,  with  copyright-intensive  industries  (e.g.  audio-
visual, music, books) generating 7 million jobs and  contributing around EUR 509 billion to 
EU  GDP103.  These  industries  are  one  of  Europe's  most  dynamic  economic  sectors  and  are 
dominated by micro firms, 95% of which have fewer than 10 employees. 

Copyright and related rights provide an incentive for the creation of, and investment in, new 
works  and  other  protected  matter  (music,  films,  print  media,  software,  performances, 
broadcasts,  etc.)  and  their  exploitation,  thereby  contributing  to  improved  competitiveness, 
employment  and  innovation.  The  EU  is  a  world  leader  in  certain  important  copyright-
intensive  sectors  (e.g.  publishing,  music,  video-games  or  scientific,  technical  and  medical 
journals)  and  relies  on  creation  and  on  knowledge-intensive  goods  and  services  to  compete 
globally. Digitisation has deeply impacted the ways in which copyrighted works and services 
are both created and consumed. Consumers expect to be able to access content anywhere and 
from everywhere and innovation in the knowledge and research sector strongly relies on the 
availability  and  ease  of  access  and  exchange  of  copyright-protected  material.  At  the  same 
time, creators expect fair remuneration.  

Key  copyright-intensive  industries  are  expected  to  grow  in  upcoming  years  and  mostly  the 
growth will be driven by digital content104. Global consumer books revenue will increase at a 
Compound Annual Growth Rate (CAGR) of 0.9% to 64.9 billion USD in 2018. While growth 
in consumer e-books is strong, at a 17.6% CAGR over the next five years, growth is slowing 
as  the  market  matures,  with  year-on-year  growth  down  to  10.3%  in  2018.  In  magazine 
publishing,  similarly  to  books,  digital  consumer  magazine  circulation  will  drive  growth. 
Filmed  entertainment  revenue  is  expected  to  rise  globally  at  a  CAGR  of  4.5%  from  88.3 
billion USD in 2013 to 110.1 billion USD in 2018. 'Over the Top' (OTT)/streaming services 
will see the fastest rates of growth (28.1% CAGR). At the same time, subscription TV should 
not be daunted by the rise of OTT, as it grows across global markets105.  

Territorial restrictions in access to digital media content 

Accessing  digital  (copyright-protected)  content  is  one  of  the  most  popular  online  activities. 
35%  of  Internet  users  engage  in  playing  /downloading  of  games,  images,  films  or  music106, 
making it the most popular online activity. During the next five years global digital spending 
on entertainment and media is expected to increase at a rate of 12.1%. In addition, behaviour 
is  changing  and  smartphone  viewers  in  Europe  consume  more  than  four  hours  of  video 
content on a weekly basis, almost half of which they view on-the-go. In parallel, over recent 
years the availability of legal online offers of digital content has developed significantly. For 

103   European Patent Office and the Office for Harmonization in the Internal Market, Intellectual property rights 

intensive industries: contribution to economic performance and employment in the European Union, 
Industry-Level Analysis Report, 2013 

104   PwC, Global entertainment and Media Outlook 2014-2018 
105   Ibidem 
106   European Audiovisual Observatory, Mavise database, 2014 

25 

 
                                                            
instance, there were over 2,500 on-demand audiovisual services available in Europe at the end 
of 2014107. 

However, there are concerns related to accessibility of digital media content in cross-border 
situations, both when it comes to the portability of content available in the home country and 
as  regards  cross-border  access  to  content  from  another  Member  State.  First  of  all,  27%  of 
citizens said they would be interested in watching or listening to audiovisual content or music 
transmitted  from  their  home  country  when  moving  temporarily  abroad,  for  example  for 
holidays or for business108. However, when crossing an EU border, consumers are frequently 
prevented from using the content services (music or video services) for which they have paid 
in their home country and which they expect to be able to carry with them. Indeed, a recent 
survey showed that of the 31% of respondents who streamed films and TV series in the last 12 
months and tried to access streaming services of their own country while being abroad, 43% 
reported  not  being  able  to  access  the  content  when  abroad109.  Equally,  of  the  38%  of 
respondents who streamed live events (e.g. sports matches) in the last 12 months and tried to 
access streaming services of their own country while abroad, 51% reported not being able to 
access110. 

Furthermore,  there  is  curiosity  in  the  population  for  foreign  media  content,  and  more 
generally  interest  for  accessing  content  across  borders.  19%  of  citizens  are  interested  in 
watching or listening to content from other EU countries111. However, when trying to access 
or  purchase  digital  media  content  from  another  Member  State,  citizens  are  in  many  cases 
confronted  with  the  message  that  it  is  unavailable  or  cannot  be  accessed  from  their  own 
country,  or  may  be  automatically  redirected  to  the  website  of  their  country  of  residence, 
which may offer a different catalogue of content.  

Cross-border  accessibility  of  online  content  services  varies,  with  many  services  available  at 
national level only. For example, in May 2011, about 35% of broadcasters offering long-form 
video content on their websites (e.g. through catch-up TV services) used geo-localisation to 
restrict  access  to  certain  types  of  content,  especially  US  content,  international  sports  and 
music events112, which suggests that national content is more broadly available. In addition, 
the  cross-border  availability  of  content  is  still  limited,  in  particular  for  audiovisual  content: 
only 40% of all films on offer on a major online distribution platform are available in the 27 
national country stores of this platform (for music the share is closer to 80%), and the share is 
lower for EU-produced films (about 28%)113. More evidence on cross-border accessibility of 

107   Ibidem 
108   European Commission, Special Eurobarometer 366, 'Building the Digital Single Market – Cross-border 

Demand for Content Services, 2011 

109   European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and where 
they matter most, forthcoming 2015 – 48% reported that they were not allowed by the content provider, 
28% that they were not allowed by the Internet service provider and a further 24% that it didn’t work for 
'another reason' 

110   Ibidem – 39% reported that they were not allowed by the content provider, 35% that they were not allowed 

by the Internet service provider and a further 26% that it didn’t work for 'another reason' 

111   European Commission, Special Eurobarometer 366, 'Building the Digital Single Market – Cross-border 

Demand for Content Services, 2011 

112   Plum Consulting for the European Commission, The economic potential of cross-border pay-to-view and 

listen audiovisual services, 2012 

113   'Language, copyright and geographic segmentation in the EU Digital Single Market for music and film', 

JRC/IPTS Digital Economy Working Paper, forthcoming 2015 – analysis on the basis of the top 300 titles in 
each country store 

26 

 
                                                            
Video-on-Demand (VOD) film services114 shows that variations in overall VOD accessibility 
in the EU range between 3.6% and 9%. Cross-border accessibility of VOD in the EU varies 
between 0.4% and 3.8%, with a mid-range value of 1.9%. 

Geo-blocking is also applied in the case of political reporting and news broadcasts. This was 
made apparent, for instance, during the European election campaign, where a number of the 
debates involving candidates were not visible in some Member States because of systematic 
geo-blocking by the producers of these debates.  

In  addition,  there  is  also  evidence  of  a  lack  of  information  for  consumers  about  territorial 
restrictions. In a study carried out by the Commission in 2012 about 1,000 websites proposing 
digital  content  downloads  were  screened;  73%  of  them  remained  silent  on  geographical 
restrictions and when information was given, it was often presented only in the general terms 
and conditions and difficult to find115. 

The  limited  cross-border  availability  of  online  content  services  is  largely  influenced  by  the 
territorial dimension of copyright, by territorial restrictions in licensing agreements between 
right holders and distributors and by the commercial practices of online service providers.  

Rights under copyright are granted by national law and the geographical scope of copyright 
protection under each national law is limited to the territory of the relevant Member State. A 
service provider  willing to  offer content  online in several EU Member States may therefore 
have to acquire a licence for all the different territories in which the content is made available. 
However,  the  current  copyright  regime  does  not  prevent  multi-territorial  or  pan-European 
licences being granted.  

Restrictions  to  cross-border  use  often  originate  from  practices  aimed  at  exclusive  territorial 
protection  (based  on  absolute  exclusivity  in  one  territory)  and  are  more  prevalent  for  films, 
TV  series  and  sports  programmes.  Indeed,  producers  of  audiovisual  programmes  typically 
grant an exclusive licence to a single distributor within a given territory. For European films 
and TV programmes, such an exclusive licence is commonly granted to distributors in order 
to  obtain  upfront  investments  that  contribute  to  the  financing  of  production.  For  sports 
programmes, there is an important difference between the value of media rights on the main 
market,  where  the  level  of  interest  and  demand  is  highest,  and  the  value  of  those  rights  in 
other markets. This variation is often very substantial116. 

In  the  music  sector,  multi-territorial  selling  of  rights  is  more  widespread,  especially  with 
regard  to  Anglo-Saxon  music  and  less  so  for  other  national  music  repertoires,  which 
distributors chose to acquire only for certain territories for cultural and linguistic reasons. As 
regards the book sector, publishers generally acquire rights for a book in a given language on 
a  global  or  pan-European  basis  and  are  therefore  able  to  grant  a  licence  to  a  distributor  for 
multiple territories. However, there are still some access restrictions to e-books, which may be 

114   Gomez, E. and Martens, B., 'Cross-border access to Video-on-Demand services in the EU28', JRC/IPTS 

Digital Economy Working Paper, forthcoming 

115   Stenzel, U. et al., Study on Digital Content Products in the EU, IBF International Consulting for the 

European Commission, 2012 

116   Taking the example of professional football, the English Premier League currently sells its media rights 

annually for EUR 1.3 billion in the UK, and a total of around EUR 200 million in the other 27 EU national 
territories combined. This reflects the product's primarily national audience, with a value that is much higher 
in the UK than anywhere else. In France, the rights for Ligue-1 are sold for EUR 700 million, while the 
income for Ligue-1 from sales in the rest of the Europe amount to EUR 70 million. The situation is similar 
for other national sports competitions. 

27 

 
                                                            
linked to business decisions made by the online distributors. This applies to other sectors as 
well,  where  service  providers  may  prefer  to  organise the  distribution  of  online  content  on a 
territorial basis, even when they have a multi-territorial licence.  

Finally,  the  cross-border  accessibility  of  digital  content  is  also  affected  by  a  range  of  other 
factors.  Some  of  these  hindering  factors  are  common  to  all  online  commercial  activities, 
regardless  of  the  type  of  good  or  service  offered  (e.g.  VAT  regime,  varying  national  rules 
regarding  protection  of  minors  and  consumer  policy,  lack  of  a  convincing  business  case  or 
unilateral business decisions of content-delivery platforms not to operate in certain countries 
or  to  allocate  customers  to  a  specific  national  store)117.  Others  are  more  specific  to  the 
distribution  of  online  content  and  may  possibly  include  divergences  in  national  rules  or 
practices  on  release  windows  (i.e.  media  chronology)118  or  the  lack  of  incentives  for  right 
holders to make their content available online due to fear of illegal exploitation (e.g. piracy).  

Directive 2001/29/EC was designed to update copyright to the Information Society and to implement 
the  two  1996  World  Intellectual  Property  Organization  (WIPO)  Internet  Treaties  -  the  WIPO 
Copyright  Treaty  and  the  WIPO  Performances  and  Phonograms  Treaty.  It  harmonises  several 
exclusive  rights  of  authors  and  neighbouring  right  holders  which  are  essential  for  the  digital 
transmission  of  works  online:  reproduction  right,  right  of  communication  to  the  public  and  making 
available right.  

As explained above,  right holders may nevertheless  prefer to issue exclusive licences  with a limited 
territorial scope (e.g. matching the territory of a Member State or based on linguistic criteria). In  the 
Premier League cases (joined cases C-403/08 and C-429/08) which addressed issues related to cross-
border  access  to  satellite  broadcasting  services,  the  Court  of  Justice  of  the  European  Union  (CJEU) 
concluded  that  right  holders  and  service  providers  may  conclude  licencing  agreements  based  on 
territorial  exclusivity  but  cannot  include  in  such  licensing  agreements  clauses  aiming  at  achieving 
absolute  territorial  exclusivity  in  breach  of  competition  law  and  the  Internal  Market  freedom  to 
provide services. 

In  the  music  sector,  the  Collective  Rights  Management  Directive119  –  which  is  to  be  transposed  by 
April  2016  -  should  make  it  significantly  easier  for  online  service  providers  to  get  multi-territorial 
licences for the use of authors’ online rights in music. 

In addition, a stakeholder dialogue on 'Licences for Europe' was launched on 4 February 2013, which 
led to the adoption of 'Ten pledges to bring more content online', presented at a plenary session on 13 
November  2013.  One  of  the  pledges  took  the  form  of  a  statement  by  representatives  of  the  audio-
visual sector affirming their willingness to continue to work towards the further development of cross-
border  portability  of  films,  TV  programmes  and  other  audio-visual  content  for  which  users  have 
subscribed at home, when travelling in the EU on business or on holidays.  

Cross-border aspects of activities related to access to knowledge, research and heritage 

The  copyright  legal  framework  plays  an  essential  role  in  providing  incentives  for  creativity 
and for investing in creativity also in the digital environment. Well-defined property rights are 
a pre-condition for markets to work efficiently. At the same time, copyright rules need to take 
into  account  the  pursuit  of  other  public  policy  goals.  Moreover,  several  aspects  of  the 

117   See other sections on contractual aspects, VAT and territorial restrictions for the sale of tangible goods and 

services 

118   The length and chronology of release windows (cinema, DVD, VOD, pay TV, etc.) is usually negotiated 
between right holders and distributors and this often takes place within public funding conditions or 
sometimes applicable national regulations 

119   Directive 2014/26/EU 

28 

 
                                                            
copyright framework in Europe (copyright as exclusive rights, the three-step test120, etc.) are 
subject  to  multilateral  and  bilateral  international  agreements  to  which  the  EU  and  their 
Member States are parties and which may have an impact on the scope of exceptions. 

Across the EU, as in most world jurisdictions, certain uses of copyright protected works take 
place on the basis of exceptions and limitations to copyright, which are contemplated in law 
in  response  to  the  inability  of the licencing  markets to  deliver  contractual  solutions  (market 
failure) or to support public policy objectives. In these cases, a defined group of users does 
not  have  to  ask  for  the authorisation  of  right  holders and  enter  into licensing  agreements  to 
carry  out  certain  activities  (for  example,  cultural  heritage  institutions  making  copies  for 
preservation  purposes).  In  some  cases,  exceptions  are  linked  to  the  existence  of  licensing 
schemes,  in  the  sense  that  if  a  license  agreement  is  in  place,  certain  exceptions  might  not 
apply. 

Most exceptions to copyright foreseen in European law remain optional for Member States to 
implement,  resulting  in  a  fragmented  landscape  across  the  EU.  Exceptions  identified  as 
optional in EU law may or may not have been transposed in national law, and their wording 
and scope can vary considerably. This means that certain activities that are allowed under an 
exception  in  one  Member  State  might  be  illegal  in  another  unless  they  are  covered  by  a 
licence.  

The most recent development in this area is the Orphan Works Directive, which introduced an 
exception for the use of orphan works121 by institutions like libraries, museums and archives. 
This is one of the very few exceptions in EU law that are harmonised and mandatory for all 
Member States. In general however, the existence and scope of exceptions to copyright varies 
in different Member States. 

Growing mobility within the EU, as well as increased investment and interest in cross-border 
activities, make specific exceptions in certain areas like education (including for persons with 
a disability), research and cultural heritage particularly relevant to the DSM. For example, a 
recent study identified 253 cross-border higher education programmes operating in the EU122. 
International mobility amongst researchers is quite high with 56% of EU researchers having 
worked  (or  currently  working)  in  a  country  other  than  the  one  where  they  graduated123. 
Exploitation of big data, thanks notably to text and data mining techniques124, could generate 
significant benefits in terms of productivity and competitiveness in the field of research125.  

Differences in the way Member States implement exceptions can therefore be problematic for 
activities where the cross-border aspects or the European significance of a certain activity is 

120   The three-step test is a clause included in several treaties on IP (WTO TRIPS Agreement, WPPT, Berne 

Convention, the Beijing and Marrakesh Treaties) which provides that exceptions and limitaions may only be 
applied "in certain special cases which do not conflict with a normal exploitation of the work or other 
subject-matter and do not unreasonably prejudice the legitimate interests of the right holder" 

121   Orphan works are copyright-protected works whose right holders cannot be identified or located after a 

diligent search 

122   Brandenburg, U. et al. Andrew McCoshan, Lukas Bischof, Anne Kreft, Ulrike Storost, Hannah 

Leichsenring, Frederic Neuss, Britta Morzick, Sabine Noe, Delivering education across Borders in the 
European Union, CHE Consult for the European Commission, 2013 

123   Lykogianni, E. and van Den Broeck, K., Study on mobility patterns and career paths of EU researchers, 

MORE for the European Commission, 2010 

124   A set of techniques for the automated processing and analysis of large amounts of data in order to obtain 

new knowledge, insights, patterns or trends 

125   European Commission, Report from the Expert Group on Standardisation in the area of innovation and 

technological development, notably in the field of Text and Data Mining, 2014 

29 

 
                                                            
relevant  and  growing  in  importance,  notably  in  the  area  of  education,  access  to  knowledge 
and research. Persons with a disability cannot access books in special formats made under a 
copyright  exception in other  Member States, which limits the number  of works available to 
them. In the area of research, text and data mining has also emerged as an area where legal 
uncertainty  as  regards  EU  copyright  law  and  divergent  approaches  at  national  level  could 
hamper European research, including cross-border research collaboration.  

Adequate  and  well-balanced  changes  to  certain  of  the  existing  exceptions  would  enable  the 
relevant  actors  to  fully  grasp  the  opportunities  of  the  digital  age  whilst  meeting  the 
requirement  of  an  efficient  protection  of  rights.  The  work  of  the  institutions  in  charge  of 
promoting  access  to  knowledge  should  be  facilitated,  by  providing  them  with  a  clearer 
framework and a level playing field regardless of the Member State in which they are based. 
Research  would  more  fully  benefit  from  the  potentialities  of  text  and  data  mining,  thus 
contributing to innovation and competitiveness.  

Copyright enforcement 

The  enforcement  of  copyright  online  continues  to  raise  increasingly  difficult  challenges  for 
right  holders,  impacting  the  functioning  of  the  DSM.  Improving  enforcement  against 
commercial-scale infringements while protecting fundamental rights is an essential feature in 
promoting  an  efficient  marketplace  for  copyright  works  in  the  DSM.  The  most  recent  data 
available confirm a correlation between the growth of cultural and creative industries and IP 
protection 
losses  where 
measures/policy changes are not taken to address piracy126. The fragmentation of rules in this 
area makes it cumbersome for the right holders to enforce their rights across the EU. As an 
example,  where  local  legislation  implementing  Article  8(3)  of  the  Directive  2001/29/EC 
provides instruments for obtaining injunctive measures against intermediaries whose services 
are  used  by  a  third  party  to  infringe  a  copyright  or  related  right,  certain  aspects  of  the 
conditions and procedures relating to these injunctions remain fragmented. 

legislation,  showing  value  destruction  and  employment 

Furthermore,  any  improvement  to  the  mechanisms  for  enforcement  of  IP  rights  in  the  EU 
would be useful to support the efforts to seek a balanced and effective enforcement of such 
rights  in  third  countries  where  they  are  sometimes  infringed  on  a  systemic  and  wide-spread 
scale. 

Digital value transfer related to copyright protected content and remuneration of authors 

With  the  development  of  new  online  services,  a  sense  of  unfairness  is  perceived  in  the 
relations between Internet platforms and right holders: there is a growing concern from certain 
stakeholders  from  the  creative  sector  regarding  the  lack  of  level  playing  field  on  the  online 
content market, due to uncertainties in the current legal framework which was designed at a 
time  when  technology  limited  the  ways  content  could  be  distributed  and  made  it  easier  to 
define  the  roles  of  different  market  players.  Today,  the  lines  between  hosting  service 
providers and content service providers engaging in the act of communication to the public of 
protected works under copyright  rules have  become more difficult to  distinguish. This legal 
uncertainty could create distortions on the online content market where platforms that make 
content available to the public without a licence compete with licensed services for similar or 

126   Benzoni, L., The Economic Contribution of the Creative Industries to the EU in terms of GDP and Jobs, 
TERA Consultants, 2014 – this study has estimated value losses due to piracy in the creative and cultural 
industires as follows: cumulative value loss in the range of about EUR 35 to almost EUR 50 billion, 
cumulative job loss between 200,000 and 1 million jobs over the 2008-2011 period 

30 

 
                                                            
equivalent services to the consumer. The unclear legal situation can also make it hard for right 
holders  to  licence  their  content  with  the  platforms  or  obliges  them  to  accept  licensing 
conditions that are below the potential value of the content. 

Beside the issue of transfer of value, content creators are also generally concerned about the 
fairness  of  remuneration  conditions.  The  fragmentation  of  national  legislation  in  that  area 
could create difficulties for the providers of multi-territorial services in the internal market as 
they  have  to  comply  with  a  variety  of  different  legal  requirements  for  the  remuneration  of 
authors and performers for online exploitation within the EU. Two studies investigating these 
issues are currently underway and should become available in the course of 2015. 

3.6.  VAT procedures on cross-border online sales 

In the EU, in principle, every supply of goods or services for consideration by a business is 
subject to VAT, which is typically levied at the standard rate of between 17% and 27% of the 
sales price depending on the Member State127. This VAT is – like a general sales tax – a tax 
on consumption, and by now there is a consensus amongst Member States that VAT revenues 
should, in principle, accrue to the Member State in which the consumption takes place. This 
makes  sense  because  it  ensures  fair  competition  between  domestic  and  non-domestic 
businesses selling the same goods and services. It also creates a level playing field for SMEs 
and  other  companies  that  cannot  relocate  to  a  lower-tax  Member  State  and  who  may 
otherwise  lose  out  to  more  mobile  competitors.  Finally,  it  ensures  fair  distribution  of  tax 
revenues between Member States, as they receive the tax on the goods and services consumed 
by their own residents. 

However, unlike a sales tax that is charged only at the level of final consumption (typically 
the retail level), VAT is generally levied on the value added (the difference between the sales 
price and the cost for all purchases) generated by the suppliers involved in the supply chain. 
This approach minimises the risk of unreported turnover as each supplier has an incentive to 
report their sales, as otherwise they would not be entitled to claim back the VAT they have 
paid on their input. Nevertheless, since it cannot be assumed that all suppliers will voluntarily 
comply  with  existing  VAT  obligations,  a  set  of  registration  and  reporting  obligations  have 
been put in place as well, which involve an administrative burden for businesses, likely to be 
felt in particular by SMEs. 

In  addition,  compliance  with  the  VAT  rules  inevitably  becomes  more  complicated  and 
burdensome  when  a  business  engages  in  online  cross-border  transactions  with  customers 
located  in  other  Member  States  or  third  countries.  Since  VAT  (as  a  tax  on  consumption)  is 
levied  in  the  country  of  the  customer  and  in  accordance  with  that  country's  laws,  different 
national VAT rules will apply and different tax authorities will be involved.  

At the same time, digitalisation and the Internet have made industrial and commercial activity 
more  international,  while  offering  opportunities  to  businesses  to  shortcut  traditional  supply 
chains  and  interact  directly  with  their  customers,  wherever  they  may  be,  without  having  to 
rely on wholesale and retail trading intermediaries. Even SMEs are therefore being given the 
chance to be international players, something they would not have dreamt of in the traditional 
“brick and mortar” world. 

127   European Commission, VAT Rates Applied in the Member States of the European Union, 2015 – 

Luxembourg applies a rate of 17% and Hungary 27% with the majority of Member States applying rates 
between 20 and 25% 

31 

 
                                                            
Indeed, as the online ordering of goods and services and the online supply of services turns 
from being the exception to being the rule, more and more SMEs would like to conduct cross-
border  e-business  but  are  confronted  with  having  to  comply  with  tax  legislation  in  all  the 
countries in which they have clients, as well as the need to communicate  – often in another 
language – with foreign tax administrations. 38% of traders with experience of selling online 
cross-border  and  54%  of  potential  online  cross-border  sellers  mention  dealing  with  foreign 
taxation as a problem128. 

In general, a vendor making supplies of tangible goods to consumers in other Member States 
is required to register and account for VAT in each of those Member States. The situation is 
somewhat different for vendors of electronic services supplied to consumers in other Member 
States.  Until  the  end  of  2014,  VAT  on  all  telecommunications,  broadcasting  and  electronic 
services was levied in  the country  where  the supplier was located but  now, since 1 January 
2015,  with  the  coming  into  effect  of  new  rules,  VAT  on  those  electronic  services  is  levied 
instead  where  the  consumer  is  located  (in  accordance  with  the  country  of  consumption 
principle). 

However, in parallel with this change and in order to simplify compliance with the new rules, 
a  mini  "One  Stop  Shop"  has  been  implemented,  which  will  reduce  the  costs  and 
administrative burdens for businesses concerned. Instead of having to declare and pay VAT 
directly to each individual Member State where their customers are based, businesses will be 
able to make a single declaration and payment in their own Member State. Suppliers will use 
a web portal in their Member State of establishment to account for the VAT due on sales in 
other  Member States. In this way a vendor of electronically supplied services has to charge 
the VAT of the country in which the consumer is located, but is only required to register and 
account for VAT in their home country. 

In  contrast  to  this,  for  goods  ordered  online  from  a  third  country,  the  non-EU  supplier 
generally  benefits  from  a  'small  consignment'  import  exemption  (usually  up  to  EUR  22)  to 
ship its goods VAT free to EU private customers. This puts them at a competitive advantage 
over  EU  suppliers  and  market  distortions  have  already  been  signalled  in  various  Member 
States, notably in respect of close territories such as the Aland Islands and the Channel Islands 
which are not in the EU VAT area. Since 1999, the number of small consignments benefitting 
from  the  import  exemption  has  increased  from  approximately  30  million  parcels  to  115 
million in 2013129. That represents an increase of approximately 300%. If this trend were to 
continue in line with the growth in e-commerce, it is not inconceivable that it could reach 300 
million parcels by 2020. In terms of VAT foregone at the level of the EU, it is estimated that 
there was a loss of between EUR 550 million and EUR 850 million to EU Member States in 
2013. Before the exemption was removed by the UK for small consignments coming from the 
Channel Islands, the VAT foregone was estimated between EUR 650 million and EUR 900 
million in 2011. Such a loss in VAT could translate into a reduction of nearly EUR 4.5 billion 
in turnover for EU business due to the un-level playing field. If this trend were to continue in 
line  with  the  growth  in  e-commerce,  it  is  not  inconceivable  that  the  VAT  foregone  could 
reach  up  to  EUR  2.2  billion  by  2020.  Thus,  a  provision  aimed  at  reducing  administrative 
burdens  for  both  tax  administrations  and  business  in  respect  of  small-value  supplies  has 
turned into an expensive tax subsidy for big global players located outside the EU. 

128   European Commission, Flash Eurobarometer 413, 2015 
129   Ernst & Young study for the Commission, Assessment of the application and impact of the VAT exemption 

for importation of small consignments, forthcoming 2015 

32 

 
                                                            
The Commission Expert Group on Taxation of the Digital Economy, in its final report of May 
2014130, proposed that the EU should pursue the destination principle for all supplies of goods 
and services, and specifically recommended that a single electronic registration and payment 
system  for  VAT,  hosted  and  managed  by  the  Member  State  of  the  supplier,  should  be 
extended as a priority to cross-border B2C supplies of goods, and that the VAT exemption for 
the importation of small consignments from third countries should be removed with suitable 
simplification arrangements for the businesses affected. 

While  the  single  electronic  registration  and  payment  system  is  itself  a  substantial 
simplification, two issues need to be considered. The first relates to small start-up businesses 
which supply goods and services cross-border but which are covered by the current Member 
State  level  exemption  thresholds  for  small  business,  which  range  from  EUR  0  to  EUR 
110,000  depending  on  the  Member  State.  Under  the  2015  place  of  supply  rules,  such 
businesses are now required to charge and account for the VAT of the Member State of the 
consumer. There is a perception that this requirement may act as a barrier to trade within the 
Single  Market  and  therefore  some  mitigating  measures  may  be  needed,  such  as  a  common 
cross-border  exemption  threshold.  As  regards  the  second  issue,  EU  legislation  on  the  mini 
One Stop Shop provides that controls and audits are to be carried out by the Member State of 
consumption.  For  both  EU  and  non-EU  companies,  this  may  involve  up  to  28  different  tax 
administrations  auditing  the  same  companies  without  any  coordination  and  leading  to 
information  requests  in  multiple  languages.  Not  only  could  this  create  disproportionate 
administrative burdens on business  but it could also put at stake the efficiency of the audits 
themselves as well as the level of voluntary compliance (which is particularly sensitive where 
non-EU  companies  are  involved).  Some  Member  States  have  agreed audit  guidelines  which 
attempt  through  coordination  to  alleviate  any  unnecessary  burdens  on  business.  The 
Commission  Expert  Group  has  recommended  that  "home  country  control"  should  be 
considered, i.e. the supplier will only have to comply with the rules applicable in the Member 
State where they are established. 

If all businesses selling goods and services cross-border could account and remit the tax due 
in the Member State in which they are established, rather than having to register and remit the 
tax in every Member State in  which they do business, this would significantly simplify and 
reduce  the  burden  of  compliance  for  many  businesses.  The  following  costs  have  been 
reported131:  for  hiring  accountants,  a  merchant  needs  to  budget  EUR  5,000  per  year  per 
country, many of which require the merchant to register for VAT when sales hit a paltry EUR 
35,000 a year. 

As regards direct taxation, the Commission has already delivered significant progress in the 
fight against tax avoidance and tax fraud through the implementation of its 2012 Action Plan 
to Strengthen the Fight against Tax Fraud and Tax Evasion. However the political debate has 
moved on and the earlier focus on improving tax compliance and administrative cooperation 
has now expanded to encompass those features of tax systems which contribute to aggressive 
tax planning. This is why the Commission will shortly present an Action Plan on a renewed 
approach for corporate taxation in the Single Market, under which profits are taxed where the 
value is generated, including in the digital economy. Further information on the challenge of 
the digital economy for direct tax systems is provided in Annex II. 

130   European Commission, Report from the Commission Expert Group on Taxation of the Digital Economy, 

2014  

131   e-Commerce Europe communication to the Commission, 2015 

33 

 
 
 
                                                            
4. 

CONDITIONS FOR DIGITAL NETWORKS AND SERVICES TO DEVELOP 

4.1.  A single market in telecommunications  

All  activities  in  the  digital  economy  depend  on  electronic  communication  (broadband) 
networks. The DSM can only be realised when all European citizens, businesses and public 
administrations are connected to reliable, high-speed and affordable networks. 

Current situation in Europe 

Telecommunications  markets  in  Europe  predominantly  remain  either  national,  regional  or 
local  in  scope,  with  different  supply  and  demand  conditions.  Telecoms  operators  have 
national  strategies  even  when  they  form  part  of  larger  multinational  groups.  Important 
differences exist within the EU as regards telecoms regulation and spectrum policies132, which 
cannot  be  justified  by  national  circumstances  and  which  hinder  the  potential  for  further 
investment and the emergence of innovative businesses at an EU level. This prevents the EU 
from  reaping  the  full  potential  of  an  EU-wide  telecoms  market  in  which  players  active  at  a 
multi-territorial or pan-European scale would compete with innovative local providers relying 
largely on their own infrastructure. 

The  current  regulatory  framework  for  electronic  communications  (in  force  since  2002  and 
updated  in  2009)  has  successfully  liberalised  previously  monopolistic  national  markets  and 
reduced barriers to entry, promoting effective competition and creating common principles for 
electronic communications markets across the EU. The main economic regulation provisions 
of  the  framework  are  based  on  market  analysis  by  national  regulatory  authorities  (NRAs) 
which impose ex-ante remedies to ensure effective competition in the presence of significant 
market power (or dominance) of one or more operators. The current framework is therefore 
premised on the implementation of rules by national authorities in 28 Member States.  

Whilst there appears to be a general consensus with regard to the need to regulate access to 
broadband networks in certain circumstances, the regulatory remedies chosen by the NRAs to 
redress  specific  market  failures  and  competition  problems  identified  tend  to  vary 
considerably. 

This situation increases the burden on operators to invest in networks and related services on a 
cross-border  basis  or  to  enter  new  markets  on  the  basis  of  a  mere  extension  of  existing 
commercial and  technical  models.  As  a  result,  consumers  and  businesses  in  all  sectors  may 
have  access  to  electronic  communication  services  of  varying  quality  across  countries;  low 
quality  access  networks  hinder  the  performance  of  certain  economic  sectors  and  reduce 
citizens' interest in engaging in online activities. 

The current regulatory framework has been broadly successful in creating  the conditions for 
effective  competition  in  the  distinct  national  markets.  Traditional  providers  of  vertically 
integrated telecoms services ("incumbents") compete against access seekers ("entrants") and 
with  providers  of  cable  networks  (historically  delivering  television  services).  Innovation  in 
mobile broadband networks has delivered a new service platform.  

The  regulatory  framework  was  crucial  in  driving  take-up  of  broadband:  currently  78%  of 
homes subscribe to broadband compared to only 15% in 2004. 

132   European Commission, Spectrum policy: Analysis of technology trends, future needs and demand for 

spectrum in line with Art.9 of the RSPP, 2013 

34 

 
 
                                                            
Chart 6. Households having a broadband connection 

Source: European Commission, Eurostat, ICT survey of Households and Individuals 

At the same time, broadband has become more affordable, as retail prices decreased by over 
20% between 2009 and 2014. Moreover, there is very little in the way of price premium on 
high-speed broadband offers, which supports migration of consumers. Nevertheless, 26% of 
those households without Internet access still consider broadband access prices to be a barrier 
to take-up, while for 30% the required equipment is not affordable. 

Chart 7. Broadband retail prices 

Source: Broadband Internet Access Cost (BIAC), annual studies for the EC realised by Van Dijk 

However, the beneficial effects of liberalisation have only been felt so far at national level and 
have  not  resulted  in  real  market  integration  at  EU  level,  arguably  to  a  significant  extent 
because of inconsistent regulation across Member States. For example, the chart below shows 
that in 2013 there were significant differences in the monthly rental prices of full and shared 
local loop  unbundling  (LLU)  in  different  Member  States. These  large  differences  cannot  be 
explained by differing underlying competitive or economic conditions. 

35 

 
 
 
 
Chart 8. Local Loop Unbundling monthly average cost 

Source: Communications Committee 

Also,  the  framework  is  less  well  equipped  to  steer  national  authorities  towards  providing 
favourable  conditions for widespread investment in  capital-intensive broadband  networks of 
the  type  likely  to  be  increasingly  needed  in  the  future  (e.g.  with  high  upload  as  well  as 
download capacity, and demanding quality of service parameters), especially in less densely 
populated areas. 

Rules  in  the  current  framework  were  initially  designed  to  spur  competition  in  existing 
networks  and  have  also  generated  some  competitive  pressure  for  incremental  upgrades  of 
such networks. However, the social return from investment in higher quality networks tends 
to  be  greater  than  for  the  individual  operator.  The  framework  was  not  conceived  to  lead  to 
generalised roll-out of new networks in accordance with public-policy objectives. 

Problem and problem drivers 

Recent technological developments are crucial to understanding the changing environment of 
electronic communications and the speed of change. Important steps have inter alia been: (i) 
technological  convergence  of  broadband  connections  of  traditional  telecoms  (copper)  and 
broadcasting (cable) networks; (ii) development and greater political emphasis placed on new 
generation access networks based on fibre optic technology; (iii) important developments in 
wireless communications thanks to the quality ensured for mobile broadband by 3G and 4G 
network standards, the significant provision of wireless connectivity through WiFi offloading 
to fixed networks, together with the advent of the smartphone and other portable devices; (iv) 
the introduction of flat-rate offers followed by a trend in bundling telephone, TV, Internet and 
mobile  services;  (v)  the  rise  of  Internet  platforms  and  of  the  app  ecosystem,  including  the 
polarisation of the operating systems. 

Competition is a key driver for investment in telecoms. The migration from copper-based to 
high-capacity fibre-based networks has however been slow. Former incumbents appear often 
to lack incentives to overbuild their own largely depreciated copper network assets; they react 
to  competition  from  cable  operators  by  upgrading  incrementally  existing  access  networks. 
Alternative  operators,  however,  may  not  always  have  the  financial  capacity  to  deploy  new 
networks  on  a  large  scale  (although  they  have  been  behind  major  network  upgrades133). 
Finally,  their  investment  incentives  may  be  reduced  if  regulated  wholesale  access  is  made 

133   European Commission, Trends in European broadband markets, presentation for the Digital Agenda 

Scoreboard, 2014 – alternative operators have proportionately more NGA connections than incumbents; 
today, incumbents only own 25% of NGA fixed broadband connections although they have, on average, 
42% of all fixed broadband connections in the EU 

36 

 
 
                                                            
disproportionately  attractive, 
economically inefficient. 

i.e.  access 

seekers'  build-or-buy  decisions 

rendered 

As  traditional  incumbent  fixed-line networks  increasingly  face  retail  competition,  at  least  at 
regional  level,  from  cable  and  sometimes  other  alternative infrastructure  developers such  as 
utilities (often now allied with mobile assets to make bundled offers), proportionate regulation 
in the face of "infrastructure competition" raises difficult questions. Moreover, the framework 
is  less  well  adapted  to  promote  to  any  significant  extent  a  "first-mover  advantage",  i.e. 
incentives  to  be  the  first  to  provide  qualitatively  superior  networks  to  those  currently  in 
existence that could override higher investment risk. 

In  the  Digital  Agenda  for  Europe  in  2010,  the  Commission  announced  a  vision  for  more 
ambitious  connectivity  with  specific  broadband  targets.  The  target  of  universal  access  to 
connectivity at 30 Mbps indicated the ambition to ensure territorial cohesion in Europe. While 
most  connectivity  technologies  were  expected  to  be  able  to  provide  30  Mbps  access,  and 
wireless was assumed from the outset to be part of the mix, the underlying assumption was 
that such universal access would be provided at a fixed location (e.g. homes and workplaces). 
The  penetration  target  of  100  Mbps  (50%  of  subscriptions  in  Europe  by  2020)  sought  to 
anticipate future competitiveness needs in line with the most likely global developments134. 

According  to  the  Digital  Agenda  for  Europe  scoreboard,  Next  Generation  Access  (NGA) 
fixed-line  technologies  capable  of  providing  at  least  30  Mbps  are  available  to  62%  of  EU 
households (at the end of 2013). The closer one gets to 100%, the more expensive it becomes 
to deploy fixed solutions; progress in technology should allow wireless solutions (terrestrial, 
mobile and/or satellite) to deliver at least 30 Mbps by 2020 and to contribute to covering the 
last percentages of the population located in the most geographically isolated areas. 

Regarding the  take-up objective  (50%  of  the  population  subscribing  to  ultrafast >100  Mbps 
services), this currently remains marginal at 1.6 subscriptions per 100 people, corresponding 
to 3% of homes. The Commission estimates that on currently discernible trends, at least 75-
80%  of  the  population  would  have  to  be  covered  with  100  Mbps  technologies  in  order  to 
reach  this  50%  take-up  target,  which  would  currently  represent  an  investment  gap  of 
approximately EUR 90 billion135 (see section 6). Furthermore, availability of infrastructure is 
a  necessary  condition  for  take-up,  but  is  far  from  being  sufficient.  Progress  in  mobile 
technologies and achievements of the DSM are likely to drive demand and supply for high-
speed fixed connectivity indirectly. However, the uncertainty of adoption dynamics remains a 
key constraint to investment. 

Despite  the  current  array  of  interventions,  and  without  it  yet  being  possible  to  quantify  the 
likely contribution of the European Fund for Strategic Investment (EFSI), it is apparent that 
the investment gap identified above in order to meet the 100 Mbps take-up target for 2020 is 
unlikely  to  be  entirely  filled  from  EU  and  national  public  sources  –  nor  was  that  ever  the 
Commission's  intention.  The  incentives  for  private  operators  to  do  more  must  therefore  be 
examined afresh. 

134   Lorenzani, D. and Varga, J., 'The Economic Impact of Digital Structural Reforms', European Commission 
Economic Papers No 529, 2014, p. 53 – increased take-up of high-speed fixed broadband is found to affect 
TFP by increased efficiency in the production process due to actual firms’ use of these technologies. 
Simulating the effects of further reform efforts in this regard revealed rather similar GDP impacts across the 
EU, mainly differing in terms of their speed (between 0.18% and 0.32% of GDP relative to the baseline over 
a period of 10 years, and some 0.43% in the long-run). 

135   European Commission on the basis of the study by Analysis Mason, The socioeconomic impact of 

broadband, 2013 

37 

 
                                                            
Nowadays  fixed  broadband  is  available  to  97%  of  EU  homes.  Specifically,  full  broadband 
coverage  has  been  achieved  in  Cyprus,  Denmark,  Luxembourg,  Malta,  the  Netherlands  and 
the UK. Progress can be traced also in  terms of  fast networks (at least  30 Mbps), increased 
from 48% of homes in 2011 to 61.8% today. Nevertheless, these improvements, mostly driven 
by  cable  upgrade,  are  fragmented  across  and  within  Member  States  –  concentrated  in  some 
Member  States  and  in  urban  areas  while  the  actual  take-up  of  fast  broadband  remains 
relatively low, with around 22.5% of all subscriptions being above 30 Mbps as of July 2014. 

Chart 9. NGA broadband coverage/availability (as a % of households) 

Source: Broadband coverage in Europe, studies for the Commission by IHS and Valdani, Vicari & Associati 

Chart 10. Next Generation Access broadband coverage 

Source: Broadband coverage in Europe, studies for the Commission by Point Topic (2011-2012 figures, SMART 
2011/0027 and 2012/0035) and IHS and Valdani, Vicari & Associati 

A  particular  problem  is  identified  in  the  rural  areas  of  the  large  majority  of  Member  States 
(the  so-called  "digital  divide"),  where  broadband  high-speed  access  is  available  only  in  less 
than 20% of those areas, compared to 62% on a nationwide basis. This is explained by the fact 
that the market often does not deliver high-speed broadband in rural areas, as demand may be 

38 

 
 
 
too  small  to  ensure  profitability  and  deployment  costs  are  in  some  respects  higher  than  in 
urban centres. In this regard, attention should be given to examining how schemes – including 
community based – can encourage Fibre to the Home solutions in rural areas. In this regard, 
wireless  networks  provide  an  important  complement  for  deployment  alongside  fast  fixed 
networks  as  they  could  deliver  broadband  to  a  small  number  of  users  in  remote  areas,  with 
lower investment costs. 

As for the take-up of NGA, the growth rate in fast broadband (at least 30Mbps) over the last 
four years was higher than in overall fixed broadband. 

Chart 11. Fast (at least 30Mbps) and ultrafast (at least 100Mbps) broadband subscriptions 

Source: Communications Committee 

At the same time, as regards wireless connectivity, Europe has witnessed significant time lags 
and differences between Member States in the roll-out of the latest 4G technology, due in part 
at  least  to  the  non-availability  of  suitable  spectrum  such  as  the  800  MHz  band.  This  is 
accompanied by often wide variations in national spectrum assignment conditions regarding 
factors  of  relevance  to  investment  returns  and  decision-making,  such  as  pricing,  licence 
durations,  territorial  coverage,  spectrum  tradability,  spectrum  caps  and  reservations  and 
regulated wholesale access to mobile networks. 

Spectrum  reforms  are  found  to  decrease  the  retail  prices  of  mobile  services,  including 
indirectly  through  decreased  sectoral  market  concentration.  Simulations  based  on  the  Quest 
III model suggest gradually increasing productivity enhancing effects over time with an EU-
wide GDP increase relative to the baseline estimated to be between 0.11% and 0.16% (after 5 
years)  and  between  0.23%  and  0.34%  in  the  long-run,  which  could  be  added  to  the  further 
potential GDP growth over the baseline from the competition channel amounting to 0.04%136. 

In  addition  to  evolving  market  trends  and  changing  business  models,  data  gathered  through 
market monitoring indicate the lack of harmonisation and consistency in the implementation 
of regulatory approaches across Member States. Results from the EU consultation mechanism 
on  market  regulatory  measures  have  also  highlighted  inconsistent  practices  by  NRAs  when 

136   Lorenzani, D. and Varga, J., 'The Economic Impact of Digital Structural Reforms', European Commission 

Economic Papers No 529, 2014, p. 28 

39 

 
 
                                                            
regulating relevant electronic communications markets, which are not explicable solely by the 
acknowledged  objective  differences  in  market  circumstances  (e.g.  presence  or  absence  of 
cable, different levels of consumer demand) which are often as great within Member States as 
between  them.  In  reaction,  the  Commission  adopted  in  2009,  2010  and  2013  three  specific 
to  address  such 
recommendations  under  Article  19  of 
inconsistencies;  the  recommendations  are,  however,  not  binding  and  have  not  been 
systematically  followed  by  NRAs.  The  follow-up  of  the  implementation  of  the  Radio 
Spectrum  Policy  Programme  has  revealed  considerable  lack  of  coherence  across  Member 
States with regard to the authorisation/assignment regimes as well as the availability and the 
opening and use of spectrum bands on a technology-neutral basis for the provision of wireless 
broadband connectivity137. 

the  Framework  Directive, 

Chart 12. Spectrum assigned for wireless broadband in EU harmonised bands 

4G mobile broadband availability increased from 27% of homes in 2012 to 59% by the end of 
2013, but 4G coverage is still substantially below that of the US (over 90% ). Similarly to 
NGA, 4G deployments so far have also mainly concentrated on urban areas, with the 
exception of Sweden, Estonia, Germany, Luxembourg and Slovenia, where rural coverage is 
already higher than 50%. 

137   Under the Radio Spectrum Policy Programme established by Decision 243/2012/EU of 14 March 2012 in 
support of the Digital Agenda, the Commission is implementing an EU Radio Spectrum Inventory. Its 
objective is to allow identification of spectrum bands where efficiency of spectrum use could be improved to 
accommodate future demands of wireless services to promote innovation and growth. The spectrum 
inventory will provide harmonised mapping of diverse spectrum data on a geographical basis across the EU. 

40 

 
 
 
 
                                                            
Chart 13. 4G mobile broadband coverage 

Source: Broadband coverage in Europe, studies for the Commission by Point Topic (2011-2012 figures, SMART 
2011/0027 and 2012/0035) and IHS and Valdani, Vicari & Associati 

Mobile broadband represents the fastest growing segment of the broadband market, although 
the growth somewhat slowed down in the last twelve months in terms of active subscriptions. 
As of July 2014, there were 67 mobile broadband subscriptions per 100 inhabitants in the EU. 

Chart 14. Mobile broadband penetration 

.

Source: Communications Committee 

Finally,  Member  States  have  stepped  up  their  efforts  to  make  broadband  a  political  priority 
through national plans, but the level of ambition varies greatly. This is particularly evident in 
the variation amongst Member States on new regulatory initiatives to help increase broadband 
infrastructure capacity by promoting efficient use of spectrum such as spectrum sharing on an 
unlicensed or licence-shared basis. 

The  combined  impact  of  technological  developments  and  a  more  coherent  regulatory 
framework will also  have beneficial  spill-overs to  other sectors, improving productivity and 
ultimately  the  sustainability  of  their  growth  models.  The  same  impact  can  be  recognised  in 
other relevant scenarios such as the developing Smart-House and Smart-City paradigms and 
the  transportation  sector  (car-to-car  and  car-to-infrastructure  services  will  strongly  benefit 
from the development of broadband telecoms systems). For example, broadband can serve as 
a  complementary investment  to  other  infrastructures  (buildings,  roads, health  and  electricity 

41 

 
 
 
grids,  transportation  systems),  allowing  them  to  be  'smart'  and,  for  instance,  save  energy  or 
improve safety. 

Expected Impact 

When  the  Digital  Agenda  for  Europe  targets  were  set  in  2010,  they  appeared  extremely 
ambitious to many observers. Now mid-way to the targets, they are already insufficient and 
out  of  date  in  an  increasing  number  of  usage  cases,  in  particular  for  industrial  use  by  other 
sectors  (for  example,  for  connected  cars)  but  also  in  telemedicine,  cultural  and  creative 
industries, etc. The capacity of a 30 Mbps service is stretched by increasing levels of multiple 
device use at home or at work. Increasing emphasis is not only put on the need for download 
speed but also on other technical parameters which are key to the quality of experience (e.g. 
upload for cloud-based services, latency for financial transactions and gaming). Today, while 
it  is  difficult  to  anticipate  our  connectivity  needs  in  the  future,  we  do  know  from  current 
trends  (e.g.  video  in  all  its  professional  and  private  uses,  multiple  uses  and  connections, 
wireless  and  mobile  uses  by  people  and  connected  objects)  that  those  needs  will  increase 
significantly.  The  Internet  of  Things,  the  data  economy,  the  abundance  of  content  and 
increasingly  cheaper  mobile  devices  are  expected  to  accelerate  this  trend,  and  render  the 
availability  of  bandwidth  and  the  ease  of  upgrading  networks  a  key  enabler  for  the  vibrant 
digital economy and society. 

4.2.  Audiovisual Media Services  

Problem and problem drivers 

The audiovisual media landscape is changing at a rapid pace. Viewers can increasingly access 
on-demand content. Various portable devices change viewing patterns. New business models 
are  emerging.  The  Internet  opens  the  doors  to  new  services  and  players.  Sometimes  new 
players  fall  outside  of  European  jurisdiction  or  new  services  fall  outside  the  definition  of 
audiovisual media services. All these new developments lead to questions about the protection 
of viewers, in particular minors, and about the level of regulatory burden for traditional and 
new services. 

'Convergence'  is  the  progressive  merging  of  traditional  broadcast  services  and  the  Internet. 
This results in viewing possibilities extending from TV sets with added Internet connectivity, 
through set-top boxes delivering video content OTT, to audiovisual media services provided 
via PCs, laptops or tablets and other mobile devices.  

There are a number of clear indications about the reality of this convergence. Connected smart 
TVs  in  21  EU  markets138  have  moved  from  about  5  million  installed  devices  at  the  end  of 
2011 to more than 39 million in 2014 and are foreseen to reach the level of almost 118 million 
in 2018139.In the same markets, the overall number of connected devices increased from 590 
million in 2011 to 935 million in 2014 and is expected to reach almost 1.3 billion in 2018140. 
Mobile  video  traffic  grew  to  55%  by  the  end  of  2014141.  It  is  estimated  that  nearly  three-
fourths  of  the  world’s  mobile  data  traffic  will  be  video  by  2019142.  Presently,  300  hours  of 

138   AT, BE, HR, CZ, DK, FI, FR, DE, EL, HU, IE, IT, LU, NL, PL, PT, SK, SI, ES, SE, and UK 
139   IHS technology database – data covering 21 Member States 
140   Ibidem 
141   Cisco, Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2014–2019, 2015 
142   Idibem 

42 

 
                                                            
video  are  uploaded  to  YouTube  every  minute  and  half  of  YouTube  views  are  on  mobile 
devices143. 

While the main TV screen in the living room remains an important venue to share audiovisual 
experiences, many viewers move to tablets or even smartphones to watch audiovisual content. 
Traditional  TV  content  still  accounts  for  a  major  share  of  the  average  daily  viewing  time. 
However, VOD and other Internet-based services increasingly gain importance. This indicates 
a  shift  from  ‘lean-back’  consumption  to  active  participation.  Convergence  has  an  important 
impact on viewing habits (including children), on advertising practices and revenues and on 
content offerings and financing. 

Viewing  habits  vary  from  Member  State  to  Member  State  but  it  is  a  common  feature  that 
younger viewers watch on average less traditional TV. Their average TV viewing in 2013 was 
133 minutes per day, compared to 223 minutes per day for the whole population144. 

As regards the impact of convergence on advertising, in 2013, TV advertising in the EU lost 
more than EUR 300 million out of EUR 27,748 million overall investments (-1.1% vs. 2012) 
It  remained  the  preferred  media  for  advertising  (32%  of  the  market).  However,  Internet 
advertising is likely to become the main advertising platform within the next two years, given 
its  rapid  development  (+8.4%  vs.  2012)  and  the  market  share  already  captured  in  2013 
(27.4%)145. 

As  regards  content  financing,  in  2009  EU  broadcasters  invested  around  one  third  of  their 
revenues  in  content.  Out  of  the  EUR  34.5  billion  spent  in  the  EU  by  broadcasters, 
approximately  EUR  15.6  billion  was  spent  on  acquiring  rights,  EUR  5.8  billion  on  sports 
rights and EUR 9.8 billion on film and TV acquisitions. At the same time, VOD providers – 
in  particular  streaming  services  –  are  also  becoming  involved  in  content  creation  and 
financing. 

Policy steps taken so far 

The Audiovisual Media Services Directive (AVMSD) provides for a minimum harmonisation 
of certain aspects of national legislation related to audiovisual media services, with a view to 
facilitate  the  circulation  of  audiovisual  services  in  the  Internal  Market  on  the  basis  of  the 
country of origin principle. The Directive establishes a set of minimum standards to be met by 
Member States, covering aspects such as advertising, protection of minors and promotion of 
European audiovisual works. According to the country of origin principle, audiovisual media 
service providers have to abide only by the rules of the Member State with jurisdiction over 
them,  but  can  operate  in  all  Member  States.  This  does  not  prevent  Member  States  from 
establishing  higher  standards  at  national  level.  However,  the  receiving  State  with  a  higher 
level  of  standards  cannot  restrict  the  reception  of  services  from  another  State  with  lower 
standards. There are exceptions in specific circumstances defined by the AVMSD. 

The  AVMSD  thus  allows  media  service  providers  to  decide  whether  they  want  to  transmit 
their content  to  other Member States,  while only having to respect the rules of the Member 
State  where  they  are  established.  On  that  basis,  the  geographical  scope  of  transmission  of 

143   http://www.youtube.com/yt/press/statistics.html in February 2015 
144   Eurodata TV worldwide report, The development of the European market for on-demand audiovisual 

services, p. 319 – the young age group is set at various levels between 13 years and 34 years depending on 
the country 

145   European Audiovisual Observatory/WARC 

43 

 
                                                            
media  service  providers  is  often  determined  by  contractual  arrangements  with  content 
producers or advertisers or by other considerations, such as the remit of public service media. 

The AVMSD has already envisaged the advent of on-demand audiovisual media services such 
as  VOD  and  catch-up  TV.  Indeed,  it  covers  both  television  broadcasts  and  on-demand 
audiovisual  media  services.  All  services  have  to  comply  with  a  set  of  minimum  rules.  For 
some  aspects,  it  provides  for  a  two-tier  approach,  with  on  the  one  hand,  lighter  touch 
regulation concerning on-demand services where the users have a higher degree of choice and 
control  over  the  content  and  the  time  of  viewing  and  on  the  other  hand,  stricter  and  more 
detailed rules on traditional (linear) broadcasting. However, since its adoption, the audiovisual 
sector has continued to undergo rapid change in technology and business practices. 

This  regulatory  framework  has  facilitated  the  emergence  of  a  vibrant  market.  Almost  9,000 
TV  channels  were  established  in  the  EU  at  end  2013  and  about  2,000  of  them  had  a  cross-
border  dimension146.  In  addition,  there  were  over  2,500  VOD  services  in  the  EU  at  end  of 
2014,  195  of  them  being  established  in  one  Member  State  and  targeting  another  Member 
State147.  Between  2009  and  2013,  EU  broadcasters'  net  revenues  grew  by  2.9%  (from  69.6 
billion to 71.6 billion euros) whereas VOD online revenues (including taxes) grew from 248 
million in 2009 to 1,526 million (up 515%)148. 

Way forward 

The AVMSD will be subject to a regulatory fitness evaluation to assess whether it provides an 
adequate regulatory framework taking account of developments in the audiovisual sector and 
whether  it  is  efficient  in  achieving  its  purposes.  Indeed,  there  is  a  need  to  ensure  that  the 
regulatory framework still supports a competitive and open market in audiovisual content in 
this new and fast-evolving environment.  

The evaluation exercise will focus on a number of key areas. It will assess the current material 
and geographical scope of the Directive as well as the system of graduated regulation, i.e. the 
difference in regulatory treatment between broadcast and on-demand services. It will examine 
whether changes to the current system of rules concerning traditional and on-demand services 
should  be  adapted  (either  towards  a  liberalisation  of  rules  for  traditional  services  or  stricter 
rules  for  non-linear  services).  It  will  also  consider  whether  its  current  scope  should  be 
broadened  to  encompass  services  that  are  outside  of  the  definition  of  audiovisual  media 
services given by the Directive and/or providers that fall outside its geographical scope.  

In  view  of  the  new  market  realities,  rules  on  protection  of  minors  and  on  commercial 
communications will also be re-assessed to determine whether the current regulatory approach 
remains appropriate. 

146   European Audiovisual Observatory, Mavise database, 2014 – TV channels available (established in the EU) 
= 8,828 (12/2013); TV channels cross-border (established in the EU and targeting foreign markets) = 1,989 
(12/2013) 

147   Ibidem – VOD services established in the EU (on-demand audiovisual services including 408 branded 
channels on open platforms, 932 catch-up services, 97 video portals, 100 generalist services, 62 music 
services, 385 film services, 84 films and TV fiction services, 123 TV fiction services, 34 documentary 
services, 83 children/animation services, 25 TV archives services, 45 film trailers services, 50 sport services, 
22 life-style services, 45 adult, 3 services of general interest and 65 classified as various) = 2,563 (12/2014); 
VOD services available cross-border (established in a Member State and targeting another Member State) = 
195 (12/2014) 

148   Ibidem 

44 

 
                                                            
The  country  of  origin  principle  is  the  cornerstone  of  the  current  legal  framework.  It  creates 
legal certainty, saves costs and increases the number of potential viewers. It has facilitated the 
development of new trans-border business models. The AVMSD provides for derogation and 
cooperation  mechanisms  for  cases  of  concern  over  incitement  to  hatred  and  protection  of 
minors,  and  for  situations  where  there  might  be  circumvention  of  some  Member  States’ 
stricter rules. The application of these procedures has sometimes given rise to concerns.  

Moreover,  several  rules  of  the  AVMSD  are  linked  to  freedom  of  information.  Their 
functioning in a converging media landscape should also be assessed with a view to ensuring 
full respect for media freedom and pluralism. In this context, the evaluation will examine the 
question  of  regulatory  independence.  It  will  also  cover  the  issue  of  accessibility  to 
information of public interest, in particular in the context of convergence. 

4.3.   The protection of personal data 

Trust in the digital environment is undermined by concerns about whether fundamental rights, 
in particular the protection of personal data, are being respected. These difficulties stem from 
the  sheer  volume  of  data  collected  every  day,  and  the  fact  that  individuals  are  often  not 
adequately informed that their data are collected, what happens to their personal data, what it 
is used for and/or whether previously collected data is reused with a different aim, potentially 
by new users. Although many people consider that disclosure of personal data is increasingly 
a part of modern life149, they feel they are not in control of their data. A large majority (74%) 
would  like  to  give  their  specific  approval  before  their  personal  data  is  collected  and 
processed150. Moreover, trust in Internet companies is low: only 22% of individuals have full 
trust  in  service  providers  such  as  search  engines,  social  networking  sites  and  e-mail 
services151.  This  feeling  is  exacerbated  by  the  large  number  of  personal  data  breaches  and 
frequent  identity  theft  and  usurpation  incidents  reported,  but  also  by  fear  of  discriminatory 
treatment of individuals following profiling based on collected personal data.  

Results from the recent survey of online consumers about DSM obstacles show that concerns 
about personal data being misused and payment card details being stolen ranked amongst the 
most  frequently  reported  by  online  users  when  it  comes  to  purchasing  products  online 
domestically  (30%  and  25%  respectively152).  These  concerns were  relatively  less  prominent 
when  it  comes  to  purchasing  cross-border  in  other  EU  Member  States  (where  consumer 
concerns about various aspects of delivery predominate). Still the probability that the online 
consumer has shopped online cross-border within the last 12 months decreases by 8.5% when 
they are worried about personal data being misused153. Amongst respondents who reported on 
their  most  recent  problem(s)  experienced  in  purchases  during  the  last  12  months,  personal 
data  misuse  (3%),  payment  card  details  stolen  (3%)  and  not  getting  data  back  after  closing 
their  accounts  (6%,  amongst  those  who  purchased  digital  content  and  online  services)  were 
among the problems encountered 154. 

149   European Commission, Special Eurobarometer 359, 'Attitudes on Data Protection and Electronic Identity in 

the European Union', 2011, p. 23 

150   Ibidem, p. 148 
151   Ibidem, p. 2 
152   European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and where 
they matter most, forthcoming 2015 – the percentage of respondents who listed these items amongst up to 5 
reasons from a list of 18 for domestic purchases and 23 for cross-border purchases 

153   Cardona, M., Duch-Brown, N., and Martens, B, 'Consumer perceptions of (cross-border) e-commerce in the 

EU Digital Single Market', JRC/IPTS Digital Economy Working Paper, forthcoming 2015 

154   European Commission, Consumer survey identifying the main cross-border obstacles to the DSM and where 

they matter most, forthcoming 2015 

45 

 
                                                            
Data protection worries are also relevant for firms. 30% of firms who are considering whether 
to  make  online  purchases  across  borders  see  data  protection  concerns  as  a  major  problem. 
These  data  protection  issues  are  more  likely  to  be  a  problem  when  firms  are  dealing  with 
other firms than when they deal with consumers. 

The  existing  Data  Protection  Directive  (95/46/EC)  was  adopted  in  1995  and,  even  if  it 
remains sound as far as its objectives and principles are concerned, it has not kept pace with 
rapid  technological  and  social  developments  in  the  digital  world  which  have  brought  new 
challenges for the protection of personal data. The interpretation, application and enforcement 
of  data  protection  rules  across  the  EU  have  not  always  been  consistent.  Moreover,  it  is  not 
clear  how  an  individual  is  protected  when  their  personal  data  are  being  processed  by  a 
company  or  public  authority  which  is  not  established  in  the  EU.  Businesses  are  also  faced 
with varied and sometimes inconsistent data protection requirements, due to different national 
laws. The same applies in research and innovation where the current fragmentation and legal 
uncertainty  risks  hindering  cross-border  collaboration  and  data  flows  and  reducing  the 
effectiveness of the large research infrastructures funded by the EU and Member States. 

Once  adopted,  the  General  Data  Protection  Regulation155,  currently  going  through  the 
legislative  process  in  European  Parliament  and  Council,  will  put  an  end  to  the  fragmented 
implementation of data protection rules across Member States and will provide a simplified, 
streamlined and directly applicable regulatory framework. It should equip individuals with a 
new set of rights  fit  for the digital  age, such  as the "right to be forgotten",  the right to  data 
portability  and  the  right  to  be  notified  when  the  security  of  personal  data  is  breached.  New 
concepts  should  be  introduced  such  as  ‘data  protection  by  design’  and  ‘by  default’,  which 
means  that  the  default  settings  should  implement  the  principle  of  data  minimisation  so  that 
only  personal  data  which  are  necessary  for  the  specific  purpose  would  be  processed. 
Furthermore,  the  future  Regulation  should  in  particular  increase  individuals'  trust  in  digital 
services. It should protect individuals in respect of all companies that offer their services on 
the  European  market.  Data  controllers  should  also  have  an  obligation  to  carry  out  data 
protection impact assessments for high risk processing. 

The proposed Regulation also introduces a One Stop Shop mechanism for data protection in 
the EU, meaning that only one supervisory authority would enforce compliance by a business 
in  cross-border  cases,  regardless  of  how  many  countries  the  business  may  be  active  in.  In 
addition, through the risk based approach, it should pair flexibility with effective protection so 
that obligations of data controllers/processors would need to take into account in particular the 
likelihood and severity of risks for the rights and freedoms of individuals posed by specific 
processing.  Furthermore,  it  should  improve  cooperation  between  the  supervisory  authorities 
across  the  EU  and  provide  strengthened  and  harmonised  powers  for  national  supervisory 
authorities. Finally, the future Regulation should clarify and streamline rules on international 
transfers of personal data. 

When  the  processing  of  personal  data  is  necessary  for  achieving  certain  purposes  of  public 
interest  such  as  scientific  research,  the  future  Regulation  should  allow  exemptions  from  a 
number of provisions, subject to appropriate safeguards for the rights and freedoms of the data 
subjects.  By  establishing  clear  and  uniform  rules  for  the  processing  of  personal  data,  the 
Regulation should allow the EU to stay in the race for scientific breakthroughs that can bring 
large  economic  returns,  in  particular  in  health  research.  One  study156  found  that  in  the  US 

155   COM(2012) 11 final 
156   Batelle Memorial Institute, $3.8B Investment in Human Genome Project Drove $796B in Economic Impact 

Creating 310,000 Jobs and Launching the Genomic Revolution, 2011 

46 

 
                                                            
alone,  for  every  dollar  spent  by  the  US  federal  government  in  the  highly  data-intensive 
Human Genome Project, USD 141 were generated in the economy as a result. 

The  adoption  of  the  Data  Protection  Regulation  by  the  co-legislator  is  therefore  an  urgent 
priority for the Commission. 

The e-Privacy Directive157 has long been a special case in the EU data protection legislative 
landscape, as it is the only legal instrument laying down specific data protection rules for the 
electronic  communications  sector.  The  main  objective  of  the  e-Privacy  Directive  was  to 
complement  Directive  95/46/EC  by  specifying  the  rules  required  to  ensure  protection  of 
privacy  and  personal  data  when  that  data  is  processed  through  the  use  of  publicly available 
communications  networks.  The  adoption  of  the  Data  Protection  Regulation,  which  will 
replace Directive 95/46/EC, will therefore have consequences also for the e-Privacy Directive. 
Once the Data Protection Regulation has been adopted, the e-Privacy Directive, which is lex 
specialis for the electronic communications sector, will need to be reviewed in order to ensure 
its coherence with the Regulation. 

information  society  service  providers  using 

As well as addressing the coherence of the two instruments, the review could consider other 
issues of substance and scope. Because most of the articles of the current e-Privacy Directive 
apply  only  to  providers  of  electronic  communications  services  (i.e.  traditional  telecoms 
companies), 
to  provide 
communication services which may compete with those of telecoms operators, are outside the 
main  part  of  its  scope.  According  to  some  stakeholders,  the  e-Privacy  Directive  has  thus 
generated  regulatory  asymmetries  between  telecoms  providers  and  service  providers  using 
other competing technologies. As a result of this restricted scope of application, it is claimed 
that the Directive does not ensure a level playing field and therefore acts as a constraint on the 
competitivess  of  the  electronic  communications  sector.  The  review  may  therefore  consider 
inter alia the level playing field concerns and whether the e-Privacy Directive has achieved its 
harmonisation  objectives.  Moreover,  some  of  its  provisions,  such  as  those  regarding  online 
tracking  and  geo-location,  may  need  to  be  evaluated  in  light  of  the  constant  evolution  of 
technology. 

Internet 

the 

Reinforcing trust in digital services is not only a matter of effective data protection and privacy laws. 
It also requires citizens and businesses to have confidence that their identity is secure when entering 
into transactions with third parties. The adoption of a Regulation on electronic identification and trust 
services  for  electronic  transactions  in  the  Internal  Market158  was  a  significant  step  in  this  direction. 
This Regulation seeks to enhance trust in electronic transactions in the Internal Market by providing a 
common  foundation  for  secure  electronic  interaction  between  citizens,  businesses  and  public 
authorities,  thereby  increasing  the  effectiveness  of  public  and  private  online  services,  electronic 
business, data-driven science and electronic commerce in the EU. In particular, the regulation aims at 
ensuring the use of national electronic identification schemes (eIDs) to access public services in other 
EU Member States where eIDs are available. 

4.4.  Cybersecurity and the fight against cybercrime 

Problem and problem drivers  

While  the  digital  world  brings  significant  benefits,  it  is  also  vulnerable.  A  high  level  of 
network  and  information  security  and  of  public  safety  online  across  the  EU  is  essential  to 

157   Directive 2002/58/EC 
158   Regulation (EU) No 910/2014 

47 

 
                                                            
ensure  consumer  confidence  and  to  keep  the  online  economy  running.  This  will,  in  turn, 
preserve the functioning of the Internal Market and will boost growth and jobs. 

Cybersecurity incidents, be they intentional or accidental, are increasing at an alarming pace 
and  could  disrupt  the  supply  of  essential  services  we  take  for  granted  such  as  water, 
healthcare,  electricity,  transport  or  mobile  services.  Threats  can  have  different  origins  – 
including criminal, politically motivated, terrorist or state-sponsored attacks as well as natural 
disasters  and  unintentional  mistakes.  As  far  as  cybercrime  is  concerned,  trends  suggest 
considerable  increases  in  scope,  sophistication,  number  and  types  of  attacks,  number  of 
victims and economic damage159.  

Overall,  financial  damage  resulting  from  all  types  of  cyber-attacks  is  estimated  to  be 
considerable, with figures cited varying from hundreds to thousands of billions of dollars on a 
global  scale160.  In  particular,  a  recent  study161  highlights  how  cyber-attacks  cause  economic 
and  productivity  losses  and  generate  unpredictable  additional  costs  related,  for  instance,  to 
malware clean-up, investigation and post-incident management. Furthermore, companies may 
not recover from cyber-attacks: data loss or theft of trade secrets can prove fatal for industries 
that  rely  heavily  on  the  quality  and  secrecy  of  their  manufacturing  processes.  Indeed, 
intellectual  property  (IP)  theft  is  nowadays  a  very  salient  concern  in  the  online 
environment162. Many companies will also have to address their loss of credibility and market 
positioning. 

From the consumer perspective, the fear of cybercrime is still holding many people from fully 
engaging  in  online  activities,  for  example  online  payments  and  online  banking.  A 
Eurobarometer  survey163  on  cybersecurity  published  in  February  2015  shows  that  Internet 
users in the EU remain very concerned about cybercrime. Specifically, 85% of Internet users 
across  the  EU  agree  that  the  risk  of  becoming  a  victim  of  cybercrime  is  increasing  (a  9% 
increase from a similar survey in 2013164). This can result in significant lost potential for the 
DSM and cybercrime has been identified as one of the priorities of the European Agenda on 
Security165. 

Cybercrime  is  also  a  threat  to  citizens'  fundamental  rights.  Offences  (for  example  data 
interception,  child  pornography,  hate  speech,  online  payment  fraud,  identity  theft,  trade 
secrets theft) involve unlawful processing of personal data and gross privacy violations. The 
importance of cybersecurity is also supported by the evidence of leading CEOs. According to 
a recent survey among CEOs166, 61% say that cyber-threats, including lack of data security, 
has become a possible threat to the organisation’s growth potential (up from 48% stating the 
same  in  2014).  Therefore  increased  cybersecurity  may  also  be  required  as  means  to  protect 
data security and safeguard privacy167.  

159   Europol, The Internet Organised Crime Threat Assessment (iOCTA), 2014 
160   According to a recent survey by the World Economic Forum, if businesses and governments do not develop 
adequate defence policies, and if they do not do so quickly, economic losses caused by cyber-attacks could 
reach USD 3,000 billion by 2020 

161   Zappa, F., Cybercrime and the risks for the economy and enterprises at the European Union and Italian 

levels, United Nations Inter-regional Crime and Justice Research Institute (UNICRI), 2014 

162   PwC, Global Economic Crime Survey, 2014 
163   European Commission, Special Eurobarometer 423, 'Cybersecurity', 2015 
164   European Commission, Special Eurobarometer 404, 'Cybersecurity', 2013 
165   COM(2015) 185 
166   PwC, 18th Annual Global CEO Survey, 2015 
167   European Court of Human Rights, case K.U. v. Finland (Application no. 2872/02), of 02/03/2009 

48 

 
                                                            
IP  infringements  on  a  commercial  scale  have  progressively  increased  in  recent  years  and 
discourage investments in innovation and creativity168. The OECD estimated the global cost 
of counterfeiting and piracy to be up to USD 250 billion in 2007169. Another study suggests 
the annual figure varies from USD 200 to 600 billion globally170. In addition EU businesses 
and  consumers  suffer  from  growing  infiltration  of  illicit  and  IP-infringing  products  and 
services into legitimate supply chains and consumer markets. Innovators, in particular SMEs, 
are often dissuaded from defending their IP due to high costs (e.g. ranging from EUR 200,000 
in Spain or France to EUR 1.5 million in the UK171 per action) and complex/lengthy litigation 
proceedings.  Despite  acknowledging  the  general  increase  in  cross-border  IP  rights 
infringements,  the  majority  of  stakeholders  do  not  launch  proceedings  against  such 
infringements  when  they  occur  in  another  Member  State  or  in  several  Member  States  (only 
6% of the respondents to the Commission's 2013 online consultation did so). 

Policy steps taken so far and need for the issue to be addressed at European level 

Given  the  development  of  threats  to  cybersecurity  and  cybercrime  in  recent  years,  the 
Commission has designed a coordinated policy in close cooperation with Member States and 
the other EU institutions, as well as with the industry and relevant stakeholders. 

Adopted  in  2013,  the  EU  Cybersecurity  Strategy172  sets  out  five  strategic  priorities,  which 
cover  challenges  that  have  both  an  EU-internal  and  an  international  dimension.  Of  direct 
relevance to the DSM are the priorities aiming to raise the level of protection and resilience of 
European networks, to step up the response to online criminal threats and to develop industrial 
and technological resources for cybersecurity. 

On network and information security, the Commission proposed a Directive on Network and 
Information Security173, which aims at strengthening preparedness, cross-border cooperation 
and information exchange amongst EU actors in important segments of the public and private 
sector, in order to better address and respond to cybersecurity incidents. Moreover, a public-
private forum on network and information security ('NIS Platform') was set up under the EU 
Cybersecurity  Strategy  with  the  aim  of  identifying  good  practices  that  organisations,  across 
the  value  chain,  can  follow  in  order  to  tackle  cybersecurity  risks.  A  special  focus  of  the 
Platform is to help SMEs tackle such risks. Activities on network and information security are 
supported by the European Network and Information Security Agency (ENISA), as well as by 
the Computer Emergency Response Team for the EU institutions (CERT-EU). 

From  an  industrial  perspective,  the  supply  of  trustworthy  ICT  solutions  in  Europe  remains 
fragmented  and  heterogeneous  (global  technology  vendors,  systems  integrators,  defence 
contractors, domestic technology vendors, etc.). Fragmentation tends to lead to duplication in 
research  and  innovation  efforts  and  difficulties  to  find  demand  outside  the  country  where 
solutions are developed. This is aggravated by the increase in the costs of developing reliable 
cybersecurity products and services. Furthermore only a few actors in the EU have significant 
industrial capacity in cybersecurity to compete and win in European and global markets.  

168   PwC, Global Economic Crime Survey, 2014 
169   OECD, Magnitude of counterfeiting and piracy of tangible products, 2009 
170   RAND Europe, Measuring IPR infringements in the Internal Market – Development of a new approach to 

estimating the impact of infringements on sales, 2012 

171   WIPO Magazine, 2010 
172   JOIN(2013) 1 final  
173   COM(2013) 48 – this proposal was being examined by the European Parliament and the Council at the time 

of writing 

49 

 
                                                            
In  addition,  in  order  to  better  address  criminal  threats  online,  a  number  of  initiatives  were 
taken with a view to strengthen the judicial response to cyber-attacks. First of all, a legislative 
framework  was  set  up  with  the  adoption  of  the  Directive  on  Attacks  against  Information 
Systems174  in  2013  (due  to  be  transposed  by  Member  States  by  4  September  2015).  It 
provides for common definitions and sanctions for illegal access, system interference and data 
interference,  introduces  new  offences  and  improves  cooperation  among  law  enforcement 
agencies  at  EU  level.  To  complement  these  measures,  under  the  European  Agenda  on 
Security,  the  Commission  will  assess  the  level  of  implementation  of  the  2001  Framework 
Decision  on  combating  fraud  and  counterfeiting  of  non-cash  means  of  payment175,  consult 
relevant  stakeholders,  assess  the  impact  of  possible  measures  and,  if  required,  table  a 
proposal.  In  this  context,  due  consideration  will  be  given  to  the  phenomenon  of  virtual 
currencies. 

To boost law enforcement cooperation at operational level, the European Cybercrime Centre 
(EC3) was launched in 2013 within Europol. The Centre serves as the European cybercrime 
information focal point, pools European cybercrime expertise to support Member States and 
provides support to Member States' cybercrime investigations. Further functions of the Centre 
will  include  the  strengthening  of  forensic  law  enforcement  capabilities  for  cybercrime 
investigations and better cooperation between relevant agencies, including Europol, Eurojust, 
CEPOL and ENISA.  

As  far  as  IP  infringements  are  concerned,  the  Directive  on  the  enforcement  of  intellectual 
property  rights  (IPRED176)  requires  all  Member  States  to  apply  effective,  dissuasive  and 
proportionate  civil  remedies  against  those  engaged  in  IP  rights  infringing  behaviour177.  It 
seeks  to  ensure  that  all  Member  States  have  a  similar  set  of  civil  measures,  procedures  and 
remedies available for right holders to defend their IP rights. This includes the possibility for 
injunctive relief by intermediaries whose services are being used by a third party to infringe 
the  right  holder's  IP  rights.  However,  and  according  to  a  2010  report  on  the  application  of 
IPRED178, fragmentation remains as regards certain aspects of the conditions and procedures 
relating to injunctions. 

The proposed Directive on the protection of undisclosed know-how and business information 
(trade secrets) against their unlawful acquisition, use and disclosure179 seeks to ensure more 
effective civil redress against misappropriation of trade secrets. Since for a trade secret to be 
recognised its owner must have taken steps to keep it confidential, the implementation of this 
proposed Directive should also encourage companies to put in place internal security systems, 
including  cybersecurity  systems,  which  should  again  reduce  the  possibilities  for  economic 
cybercrime. 

Current negotiations on a revised Payment Services Directive180 should also increase security 
requirements for payments and enhance protection of consumers. Together with the inclusion 

174   Directive 2013/40/EU 
175   Council Framework Decision 2001/413/JHA 
176   Directive 2004/48/EC 
177   As regards the enforcement of injunctions, in case an injunction covering multiple territories is issued, such 
an injunction is automatically enforceable in all Member States based on Regulation 1215/2012 which has 
removed all intermediary measures for cross-border enforcement of judicial decisions, including injunctions, 
and which entered into application on 10 January 2015 

178   COM(2010) 779 final, mandated by Article 18(1) of Directive 2004/48/EC 
179   COM(2013) 813 final – this proposal was being examined by the European Parliament and the Council at 

the time of writing 

180   COM(2013) 547 final – this proposal was being examined by the European Parliament and the Council at 

the time of writing 

50 

 
                                                            
of new providers such as payment initiation and account information service providers under 
the  scope  of  EU  legislation  which  are  major  players  in  e-commerce,  it  should  bring  more 
confidence in online transactions. 

Expected Impact – what changes/opportunities do we expect from solving the issue? 

The  DSM  should  offer  EU  citizens  the  same  level  of  safety  and  the  same  expectations  in 
online dealings that they have in their day-to-day offline life.  

To achieve this goal, the EU has already adopted or proposed a number of legislative actions 
and attention is required to ensure that this framework is properly implemented and enforced, 
and  that  it  remains  sufficient  and  adapted  to  the  evolution  of  the  threat.  This  should  be 
complemented  by  sufficient  (human  and  financial)  resources  invested  in  enhancing 
cybersecurity and fighting cybercrime both at national and EU level. In particular, cybercrime 
investigations  require  very  efficient  cross-border  cooperation  and  highly-skilled  law 
enforcement  staff.  Future  actions  will  also  be  determined  on  the  basis  of  the  priorities 
identified under the European Agenda on Security. A clear and consistent approach should be 
pursued  in  all  initiatives  related to  data  stored  and  accessed  over  the  Internet,  be it for  data 
protection  purposes  or  for  accessing  evidence, 
thereby  enabling  effective  criminal 
investigations and prosecutions.  

More  coordinated  action  aimed  at  supporting  the  development  of  an  industrial  strategy  for 
cybersecurity is still missing. Such action could stimulate the take-up and the supply of secure 
ICT solutions in Europe. Overall objectives would be to increase trust of citizens/consumers, 
enterprises and governments, foster the EU digital economy, boost Europe's competitiveness 
in a high-added value industrial sector and position Europe as a highly trustworthy area in the 
digital space. 

A  common  EU  approach  to  IT  security  certification,  taking  into  account  experience  from 
existing  national  and  voluntary  schemes,  would  contribute  to  a  high  level  of  security  and 
provide  much  needed  scale  to  the  market  for  secure  digital  products  and  services181.  This 
common  approach  would  ultimately  help  the  EU  lead  in  establishing  global  IT  security 
certification  policies  and  boost  the  competitiveness  of  EU  industry  in  European  and  global 
markets. 

With respect to commercial scale IP infringements, the Commission highlighted in its recently 
adopted Action Plan that it would seek with the Member States to re-orientate its policy for IP 
enforcement towards a better compliance with IP rights by all economic actors. Rather than 
penalising  the  citizen  for  infringing  IP  rights  –  often  unknowingly  –,  the  non-legislative 
actions  set  out  in  this  Action  Plan  pave  the  way  towards  a  “follow  the  money  approach”, 
seeking to deprive commercial scale infringers of the revenue flows that draw them into such 
activities.  In  its  Conclusions  adopted  on  4  December  2014,  the  Competitiveness  Council 
welcomed this approach, while also encouraging the Commission to address, and "consider all 
possible  options", related  to  other  aspects  of  IP  rights  enforcement,  namely  the  use  of  tools 
available to identify IP rights infringers, the role of intermediaries in assisting the fight against 
IP rights infringement, and the allocation of damages in IP rights disputes. 

181   The World Semiconductor Council (WSC) has identified smart cars, energy efficiency and health care as 

areas for potential growth and innovation for the semiconductor industry; a large number of applications in 
these areas will need a security certification (Joint Statement of the 18th Meeting of the WSC 22 May 2014, 
Taipei) 

51 

 
                                                            
4.5.  Online Platforms 

Problem and problem drivers 

Online  platforms  can  be  described  as  software-based  facilities  offering  two-or  even  multi-
sided  markets  where  providers  and users  of  content,  goods and  services  can  meet. As  such, 
the  term  can  cover  a  wide  range  of  different  types  of  platform,  whose  functions  and 
characteristics  can  differ  considerably.  Examples  of 
include: 
communications  and  social  media  platforms;  operating  systems  and  app  stores;  audiovisual 
and  music  platforms;  e-commerce  platforms;  content  platforms,  which  may  include  content 
aggregators as well as software/hardware solutions; and search engines. Besides the taxonomy 
outlined above there are other types of platforms, such as payment systems or those related to 
the sharing economy. 

types  of  platforms 

The  relationship  between  the  different  sides  of  the  market  meeting  through  the  platform  is 
organised by the platform provider, which in this way may accumulate large amounts of data. 
Since  the  value  of  these  platforms  to  consumers  increases  with  their  size  (network  effects), 
they  may  in  some  cases  become  very  large  and  act  as  key  players  for  the  wider  Internet. 
Nearly half of Internet traffic goes to the only 1% of websites that are actively trading in all 
Member States182. 

Chart 15. Internet traffic by origin, in number of Member States 

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

60%

50%

40%

30%

20%

10%

0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

%sites

%pageviews

Note: The blue line shows that nearly 45% of websites are active in just one country and that they represent 
around 10% of traffic (left hand side). On the other hand, less than 1% of websites are present in all Member 
States, but these represent nearly half of the traffic (right hand side).Source: JRC-IPTS based on Amazon Alexa 

182  Alaveras and Martens, 'Online services trade in the EU Digital Single Market', JRC/IPTS Digital Economy 

Working Paper, forthcoming 2015 

52 

 
 
                                                            
Platforms play a central role in the digital ecosystem.  With more than one trillion webpages 
on  the  Internet  and  more  appearing  every  day,  platforms  are  an  important  means  by  which 
consumers  find  online  information  and  online  information  finds  consumers.  Platforms  can 
therefore be among the most influential of digital actors in helping to determine the structure 
of online activity. This intermediary role gives platforms economic power but also, in some 
cases,  power  to  shape  the  online  experience  of  its  customers  on  a  personalised  basis  and  to 
filter what the customer sees, mostly through the application of data-driven algorithms.  

Platforms  provide  a  basis  for  SMEs  in  all  sectors  of  the  economy,  from  manufacturing  to 
services, to innovate and to exploit the advantages of e-commerce. This is hugely beneficial to 
a great number of companies (in particular SMEs) and to the economy as a whole. Moreover, 
platforms  have  proven  to  be  innovators  in  the  digital  economy  and  can  be  expected  to  be 
important drivers towards the further development of the sharing economy. New platforms in 
the  fields  of  car  transportation,  music,  finance,  accommodation  and  online  staffing  have 
rapidly  and  profoundly  changed  the  conditions  for  such  activities  and  have  grown 
exponentially (some sharing economy platforms are valued at over EUR 25 billion).  In  less 
than five years, these key sharing sectors have reached a global revenue level of around EUR 
14 billion (5% of the total revenue generated by the five sectors), and could potentially reach 
EUR 300 billion by 2025 (or 50% of the total revenue of the five sectors). In the UK alone, 
the  sharing  economy  is  forecasted  to  reach  EUR  12  billion  by  2025183.  Finally,  the  global 
nature  of  the  Internet  means  that  these  opportunities  are  no  longer  limited  to  domestic 
markets, but extend far beyond.  

For suppliers wishing to access potential customers via a platform, the key aim is to achieve 
the maximum possible visibility for its offering, which in turn depends on how the platform 
classifies and filters the available offerings. A simple change of the ranking mechanism can 
impact on the sales and business of the provider. 

Furthermore, the ability to exercise strategic control over the presentation of information may 
assist some platforms to develop commercial interests in a downstream market served by the 
platform. If they do so, the platforms then enter into competition with their own customers184. 
The manner in which they may take advantage of this opportunity through the processes and 
practices used by platforms in delivering their service is not always apparent (the algorithms 
and strategies of platforms are a closely guarded commercial secret).  

The  accumulation  and  use  of  data  by  certain  market  players  can  contribute  to  their  market 
power, in particular in their relationship with the data suppliers. 

Some  of  the  more  specific  issues  that  have  been  identified  by  stakeholders  in  relation  to 
certain categories of platforms can be summarised as follows. 

Issues for consumers and SMEs 

Platforms  aggregate  large  amounts  of  data.  They  filter,  classify  and  present  information  to 
their users.  

183   Vaughan, R., The Sharing economy:how will it disrupt your business?, presentation by PwC, 2014 
184   Where a platform is dominant in a given market, the favouring of its own services over those of its 

competitors in a downstream market may constitute an abuse of its dominant position – see, for example, 
Commission Press Release IP/15/4780, 2015, in which the Commission announced it had sent a Statement 
of Objections to Google alleging the company had abused its dominant position in the markets for general 
internet search services in the European Economic Area by systematically favouring its own comparison 
shopping product in its general search results pages 

53 

 
                                                            
  Lack  of  clarity  on  information  inputs  and  outputs:  it  is  unclear  for  users  how  platforms 
collect and process data and present information. When using search engines, for example, 
consumers  may not  be  able to  distinguish between organic and paid-for search results or 
understand the approach taken to “rank” (order) results or to select pricing information, or 
how  these  relate  to  the  underlying  business  model  of  the  service  provider.  One  study185 
concluded  that  12%  of  the  search  results  were  personalised,  mainly  due  to  geo-location, 
prior search history or whether the user was logged in or out of the search engine. 

In addition, a study on comparison tools and third party verification schemes186 shows that 
less  than  40%  of  comparison  websites  describe  their  business  model  or  explain  their 
relationship  with  the  suppliers/manufacturers  whose  offers  they  display.  Only  18% 
indicate the frequency at which data on their website is updated, 17% indicate what their 
source of revenue is and 11% give an indication of the market they cover. Information on 
those aspects is almost never provided by apps.  

The  algorithms  and  other  tools  used  by  online  platforms  are  of  course  central  to  their 
competitiveness  and  ability  to  respond  to  market  demands  and  are  understandably 
considered  to  be  business  secrets.  The  issue  is  how  to  balance  their  need  for 
confidentiality  and  commercial  freedom  against  the  need  to  enable  their  users  to  make 
informed decisions. 

  Lack of awareness of consumers about the value and use of their data: consumers do not 
know  what  data  about  their  online  activities  are  being  collected  and  how  they  are  being 
used, which results in an asymmetry of information between the actors. This may interfere 
with their fundamental rights to privacy and protection of personal data (Articles 7 and 8 of 
the Charter of Fundamental Rights of the European Union) and may result in a violation of 
the right to non-discrimination (Article 21 of the Charter). 

  Lack  of  awareness  of  the  other  contracting  party;  loss  of  consumer  law  rights:  the  only 
direct  interface  for  users  of  e-commerce  platforms  is  often  in  practice  the  platform  itself 
and a user may consequently be under the false impression that the platform is the supplier, 
whereas in fact the user's real counterparty is a private individual. In such cases users will 
not  have  the  benefit  of  protection  under  the  EU  consumer  rules,  as  this  legislation  only 
applies  to  contracts  between  businesses  and  consumers,  not  to  consumer-to-consumer 
relations. 

  Difficulties  in  establishing  liability:  when  buying  from  a  business  via  online  platforms, 
consumers  may face difficulties in identifying who is responsible and in seeking redress. 
National consumer authorities also may face difficulties in determining who is responsible 
for practices occurring on online platforms which infringe consumer legislation. Under EU 
consumer  acquis,  both  the  platform  and  the  supplier  may  be  liable  for  breaches  of 
consumer  rights,  such  as  misleading  commercial  practices.  The  Commission  has  already 
taken successful enforcement actions against major Internet platforms in the case of in-app 
purchases.  The  Commission  will  further  address  issues  related  to  online  platforms  in  the 
guidance and will continue to promote the effective and uniform application of the Unfair 
Commercial Practices Directive in this area. 

185   Hannak, Aniko, et al., 'Measuring personalization of web search', Proceedings of the 22nd international 
conference on World Wide Web, International World Wide Web Conferences Steering Committee, 2013 
186   ECME Consortium and Deloitte, Study on the coverage, functioning and consumer use of comparison tools 

and third-party verification schemes for such tools, 2014 

54 

 
                                                            
  Terms and conditions of access to platforms: there might be an asymmetry in bargaining 
power between big platforms and SMEs, also due to accumulation of data, which might be 
reflected in contractual clauses (determining price, quality, duration, delivery). SMEs may 
not be aware of their rights and find complaints too cumbersome. 

Issues also for larger businesses 

Issues falling under this category include: 

  Possible vertical integration/leverage: Some platforms act as a marketplace and a retailer 
at the same  time.  These  platforms  may use  the transactional data acquired from business 
users of the marketplace segment to enhance the performance of the platform's retail arm. 
This can lead to discrimination in listing between platforms' own services and third party 
services.  Companies  may  also  complain  that  they  do  not  get  access  to  the  data  collected 
through transactions linked to their "products". 

  High fees/non transparent pricing: virtually all online platforms have a fee model based on 
a  listing  fee  (applicable  when  a  product  is  listed  on  the  website)  and  a  referral  fee  (a 
percentage of the final selling price for each product). Such referral fees can vary from 5% 
to 20% of the final selling price. 

  Restrictions  on  pricing:  some  platforms  simply  forbid  companies  from  selling  more 
cheaply  elsewhere  (including  the  seller's  own  website,  other  platforms  and  all  offline 
distribution  channels).  The  issue  has  already  been  examined  by  various  competition 
authorities. 

Given the dynamics of the markets created and served by platforms, and the relatively short 
time  that  they  have  been  in  existence,  more  work  is  needed  to  gather  comprehensive  and 
reliable evidence on how different types of platform work and their effects on their customers 
and  the  economy  as  a  whole.  On  the  basis  of  such  an  evidence  base,  an  assessment  can  be 
made  of  the  nature  of  the  problems  that  may  arise  from  their  pivotal  role  in  the  digital 
economy and whether existing regulatory tools are sufficient to tackle them, or whether new 
tools need to be developed. 

4.6.  Liability of Online Intermediaries  

One  of  the  key  elements  of  the  e-Commerce  Directive,  and  one  that  has  underpinned  the 
development  of  the  Internet  in  Europe,  is  the  principle  that  intermediary  service  providers 
(ISPs) are not liable for the content of "illegal" information that they transmit, cache or host, 
subject  to  certain  conditions.  In  cases  of  "caching"  (automatic,  intermediate  and  temporary 
storage of information) those conditions include that the service providers do not modify the 
information, whereas in cases of "hosting" (storage of information) the providers should not 
have  actual  knowledge  of  the  illegality  and  should  act  expeditiously  to  remove  or  disable 
access on becoming aware of it. 

These  conditional  exemptions  from  liability  under  the  e-Commerce  Directive  are  generally 
seen  to  have  remained  relevant  despite  technological  and  market  developments  since  its 
adoption and as having provided the legal certainty needed to allow Internet-based services to 
evolve. However, conflicting jurisprudence at national level and the fragmentation of rules on 
notice-and-action  procedures  across  the  EU  has  a  negative  impact  on  legal  certainty  and 

55 

 
predictability,  which  can  hamper  innovation  and  growth187.  Furthermore,  the  removal  of 
illegal  content  can  in  some  cases  be  slow  and  complicated,  rendering  the  protection  sought 
less effective. At the same time it is important to avoid unjustified take-downs, as this could 
adversely affect freedom of expression and the freedom to conduct a business online. There 
also  appears  to  be  a  lack  of  transparency  on  individual  intermediaries'  procedures  and 
practices when taking down content188. 

The  EU  legal  framework  on  the  liability  of  online  intermediaries  is  complemented  by  the 
legislative  framework  for  civil  IP  rights  enforcement  (IPR  Enforcement  Directive  2004/48 
(IPRED)), which covers in principle all online and off-line intermediaries including ISPs, as 
well  as  the  injunctive  relief  provisions  provided  in  the  Copyright  Directive  (Directive 
2001/29)  solely  for  online  service  providers.  The  differences  in  implementation  of  these 
provisions  in  Member  States,  with  their  differing  national  jurisprudence  on  tort  and  unfair 
commercial practices, do not always allow for effective enforcement of IP  rights in cases of 
infringements  committed  on  the  Internet  across  the  borders  of  the  Internal  Market.  In  the 
results of the public consultation on IPRED undertaken in July 2013189, the lack of clarity of 
the role of intermediaries in assisting in enforcement of IP rights and the difficulties in getting 
injunctive relief from intermediaries across the EU against online commercial scale infringers 
were highlighted.  

In  particular, some  stakeholders have expressed the view that the current fragmentation and 
legal uncertainty have rendered the protection of property rights inefficient and are having a 
detrimental effect on the fight against online crime, including in areas such as the fight against 
hate-speech and  child  pornography.  Others  have  expressed concern  that  not  only  illegal  but 
also legal content is often taken down since the ISPs, in cases of doubt as to the validity of a 
notice, tend to take down the information in order to ensure that they are not held liable for 
the content. Some also contend that it is increasingly difficult to identify clear parameters for 
the liability exemptions set out in the e-Commerce Directive, as the technical capabilities of 
online  intermediaries  develop  and  the  commercial  uses  of  the  content  they  present  become 
ever more sophisticated190. 

There  are  also  calls  from  some  public  and  law  enforcement  authorities  and  the  IP 
rights/copyright community to re-balance the rights  and obligations of online intermediaries 
and other actors as regards illegal or harmful content. One question is whether to enhance the 
overall  level  of  protection  from  harmful  material  through  harmonised  implementation  and 
enforcement of the conditions which allow online intermediaries to benefit from the liability 
exemption. Another is whether to ask intermediaries to exercise greater responsibility and due 

187   While the European Court of Justice has pronounced five times on Article 14 of the e-Commerce Directive, 
up to seven Member States have legislated notice-and-action procedures; colliding national case law on the 
interpretation of the relevant provision has developed, as regards the inclusion of different services (search 
engines, hyperlinks, online selling platforms, file sharing) under the "hosting" category or as regards the 
interpretation of terms like "actual awareness" or "acting expeditiously". See also Gasser, U. and Schulz,W., 
'Governance of Online Intermediaries: Observations From a Series of National Case Studies', Berkman 
Center Research Publication No. 2015-5, 2015. 

188   European Commission, Public consultation on e-commerce, 2010, and Public consultation on notice-and-
action procedures, 2012 – respondents indicated that legal content is taken down on a regular basis; in the 
latter consultation, 77% of individuals, 57% of hosting service providers, 62% of right holders, 68% of civil 
society associations, 50% of public authorities and law enforcement bodies and 7% of hotlines agreed to the 
statement that hosting service providers "often take action against legal content". See also Nas, Sjoera and 
Bits of Freedom, The Multatuli project, SANE lecture on 1 October 2014. 

189   European Commission, Civil enforcement of intellectual property rights: Public consultation on the 

efficiency of proceedings and accessibility of measures, 2013 

190   See for example OECD, The role of internet intermediaries in advancing public policy objectives, 2011 

56 

 
                                                            
diligence191 in the way they manage their networks and systems, in a context of due process 
and  legal  oversight  and  in  accordance  with  current  best  practice192,  so  as  to  improve  their 
resistance to the propagation of illegal content, increase transparency and thereby confidence 
in the online environment193. 

The  European  Agenda  on  Security  also  envisages  concrete  actions  to  help  Member  States 
identify and remove violent extremist content online, in cooperation with industry partners. 

5.  

DIGITAL ECONOMY AND SOCIETY 

5.1.   Digital services in a data-based economy 

Current situation 

Industry is one of the pillars of the European economy – e.g. the manufacturing sector in the 
EU accounts  for 2 million enterprises,  33 million jobs,  a quarter of all EU added  value and 
60% of productivity growth. To serve the markets of the future, European industry needs to be 
at  the  forefront  of  developing  and  fully  using  the  potential  of  ICT,  automation,  sustainable 
and  clean  as  well  as  human-centred  manufacturing  and  processing  technologies.  The 
digitisation of all industrial sectors will be key to keeping a strong European industrial base 
and  will enable Europe  to  manage the transition  to  a smart  industrial system (Industry  4.0). 
For example, digitalisation and the use of big data is essential to the development of precision 
farming, the development of new products in the agro-food sector or even the development of 
new services in  general in  the rural areas. This transformation  process offers huge  potential 
for  increasing  flexibility,  efficiency  and  resource  productivity  in  the  production  and  service 
sectors, but also in our everyday lives. 

The further development of connected physical things will lead the way to a steady growth of 
the  European  semiconductor  industry.  With  the  widespread  adoption  of  smartphones  and 
tablets,  which  created  demand  for  mobile  and  wireless  applications,  this  sector  managed  to 
retain  an  average  annual  growth  rate  of  about  5%  between  2010  and  2013194.  The  sales  in 
May  2014  in  the  European  semiconductor  industry  amounted  to  USD  3.125  billion,  an 
increase  of  10.1%  compared  to  the  same  month  one  year  ago,  according  to  the  World 
Semiconductor Trade Statistics (WSTS). 

Demand for the first generation of Internet of Things products (fitness bands, smart watches, 
and smart thermostats, for instance) will increase as component technologies evolve and their 
costs  decline.  A  similar  dynamic  occurred  with  the  rise  of  smartphone  usage.  Consumer 

191   Article 15 of the e-Commerce Directive bans the imposition by Member States of a general obligation to 

monitor content. On the other hand, following its Recital 48, the e-Commerce Directive does not affect the 
possibility for Member States to require hosting service providers to apply duties of care, which can 
reasonably be expected from them and which are specified by national law, in order to detect and prevent 
certain types of illegal activities. Finally, Article 16 encourages the drawing up of codes of conduct at 
Community level (involving associations or organisations representing consumers) to contribute to the 
proper implementation of the Directive. At national level, some self-regulatory initiatives have taken place 
with diverging results, especially as regards protection of minors (hotlines), in the framework of Directive 
2011/92/EU. 

192   Internet Watch Foundation, Annual Report 2014 – since 1996, 141,000 URLs were removed globally and 
over 500,000 reports of child sexual abuse were assessed; 41% of the traced content was hosted in Europe 
(including Eurasia) and 56% in North America 

193   Hugenholtz, P. Bernt, 'Codes of Conduct and Copyright Enforcement in Cyberspace', in Copyright 

Enforcement and the Internet, ed. Irina A. Stamatoudi, 2010 

194   Bauer, Harald et al., The Internet of Things: Sizing up the opportunity, 2014 

57 

 
                                                            
demand  for  smartphones  jumped  from  about  170  million  devices  sold  annually  just  four  or 
five years ago to more than a billion devices in 2014195. Only about 10% of the financial value 
to be captured from the Internet of Things trend is likely to be come from the “things”; the 
rest is likely to be in how these things are connected to the Internet196. 

Driving  this  transformation  process  are  digital  services  such  as  cloud  computing,  big  data 
(including  data-driven  science  and  geo-spatial  data)  and  the  Internet  of  Things.  They  have 
become  a  central  element  of  the  EU’s  competitiveness,  an  enabler  for  innovation  and  a 
catalyst for economic growth and jobs. According to a recent study among CEOs197, 80% of 
CEOs think that data mining and analyses are strategically important to their company, 65% 
say  that  the  Internet  of  Things  is  strategically  important,  while  60%  mention  the  strategic 
importance of cloud computing. 

When  it  comes  to  what  technology  companies  are  betting  on  currently,  a  recent  survey  by 
PwC198 shows that all companies agreed that mobile customer technology, private cloud, data 
mining  and  analysis,  externally-focused  social  media,  and  cybersecurity  will  be  the  most 
strategic important issues in three to five years. 

Chart 16. Top 5 strategic technologies 

   Patel, Mark and Veira, Jan, Making connections: An industry perspective on the Internet of Things, 2014 

195   Ibidem 
196
197   PwC, 18th Annual Global CEO Survey, 2015 
198   PwC, 6th Annual Digital IQ Survey, 2014 

58 

 
 
 
 
                                                            
The collection, storage and processing of data are central to the development and adoption of 
these digital services. The increase in volumes of data is exponential – 90% of data circulating 
worldwide did not exist two years ago. It is expected that by 2020 more than 16 zettabytes of 
useful data will exist199, which implies an equivalent growth of 236% per year from 2013 to 
2020. Data has become a new factor of production, an asset and in some transactions a new 
currency.  

Nearly 1 in 3 of all enterprises in the EU200 internally shares electronic information between 
different  functional  areas  (e.g.  accounting,  planning,  production,  marketing)  using  an 
enterprise  resource  planning  software  package.  The  percentage  of  enterprises  internally 
sharing  electronic  information  is  the  highest  in  Belgium  (47%),  Austria  (45%)  and  Sweden 
(43%). The lowest percentage of enterprises internally sharing electronic information can be 
found in Hungary (16%), the UK (12%) and Latvia (10%). 

Big data use is low in the EU, with only 6.9% usage amongst companies with more than 10 
employees  and  only  29%  of  European  companies  considering  themselves  ready  for  big 
data201. Only one in the top 20 big data companies worldwide is European. This is due to the 
absence of a functional European data ecosystem, the lack of venture capital and a solid skills 
base as well as the high compliance costs that businesses in Europe face. Moreover, neither 
the scientific community nor industry can systematically access and re-use the research data 
that is generated by public budgets, despite strong demand202. Only in a few (albeit important) 
manufacturing sub-sectors, such as computers and electronics, and automotive and aerospace, 
is there a relatively large share of early adopters of big data technologies, particularly among 
larger businesses. Only 1 in 5 companies use paid cloud services in the EU. This figure rises 
to 35% if SMEs are excluded203. 32% of EU companies that do not use cloud services at all 
reported  that  it  is  due  to  uncertainty  about  applicable  law;  33%  reported  that  it  is  due  to 
uncertainty about the location of data; and 37% due to security-related risks204. According to 
the Digital Agenda Scoreboard, within the EU only 11% of enterprises employing 10 persons 
or more, excluding the financial sector, are purchasing cloud computing services of medium-
high sophistication205. 

199   Turner, V. et al., The Digital Universe of Opportunities: Rich Data and the Increasing Value of the Internet 

of Things, IDC for EMC, 2014 

200   European Commission, Eurostat, ICT survey of Enterprises, 2014; European Commission, Digital Agenda 

Scoreboard 

201   IDC, Business opportunities: Big Data, 2013 
202   IDC and TRUST-IT, 2013 – EU Member States spend EUR 10 billion a year running capital-intensive, 
shared big science research facilities in the domains of bio/health, environment, physics (genome 
sequencers, synchrotrons, big telescopes); the Commission has invested over EUR 100 million in FP7 and 
EUR 48 million in Horizon 2020 to set up and coordinate Cloud for science and public authorities 

203   European Commission, Eurostat, Cloud computing - statistics on the use by enterprises, 2014 
204   European Commission, Eurostat, ICT survey of Enterprises, 2014 
205   Cloud Computing services of medium-high sophistication refer to at least one of the following cloud 

computing services: hosting of the enterprise's database, accounting software applications, CRM software, 
computing power 

59 

 
 
 
                                                            
Chart 17. Enterprises buying cloud computing services 

Over a quarter  of the population using the Internet is  unaware of cloud services206. In  2014 
only  21%  of the EU population aged 16-74 used  cloud-based internet storage  space to  save 
documents, pictures, music, videos or other files. Only 15% of individuals used cloud-based 
internet storage space for sharing files. Only 12% of the EU population used cloud services 
for  editing  text,  spreadsheets  or  presentations207.  Among  individuals  using  the  Internet  and 
aware of cloud services, but not using them, security or privacy are the main reasons for not 
using  them  (44%),  followed  by  the  reliability  of  service  providers  (28%)  and  lack  of  skills 
(22%)208. 

As  regards  the  use  of  public  cloud  services,  public  sector  organisations  were  found  to  be 
lagging behind the private sector, with 10% difference in 2013, which is expected to grow to 
around 12% in 2015209. 

Business  sensors  are  a  key  to  ubiquitous,  low-cost  data  collection  and  could  provide  a 
relatively  low-cost  way  for  companies  to  learn  about  their  customers,  employees,  and 
operations – and then use that data to improve engagement, sales, productivity, safety, etc. 

A  recent  survey210  revealed  that  only  23%  of  companies  are  currently  investing  in  business 
sensors.  The  top  five  industries  to  do  so  are  retail  and  consumer  (52%);  industrial  products 
(33%);  hospitality  and  leisure  (30%);  energy,  utilities  and  mining  (27%);  and  automotive 
(25%). 

One way to transmit data is to use radio-frequency identification (RFID) tags or transponders. 
RFID tags or transponders are devices that can be applied to or incorporated into a product or 
object and transmit data via radiowaves. According to the Digital Agenda Scoreboard 2014211, 

206   European Commission, Eurostat, 'Internet and cloud services - statistics on the use by individuals', 2014 
207   Ibidem 
208   Ibidem 
209   IDC, Uptake of Cloud in Europe: Follow-up of IDC Study on Quantitative estimates of the demand for 

Cloud Computing in Europe and the likely barriers to take-up, 2015 

210   PwC, 6th Annual Digital IQ Survey, 2014 
211   European Commission, Eurostat, ICT survey of Enterprises, 2014; European Commission, Digital Agenda 

Scoreboard 

60 

 
 
                                                            
the uptake of RFID tags or transponders used for tracking of supply chains and inventory, or 
for  after-sales  product  identification,  remains  low.  In  the  EU,  4%  of  enterprises  with  10  or 
more persons employed, excluding in the financial sector, do so. The uptake is highest among 
companies in Bulgaria (10%), Portugal (8%) and Spain (7%). While the uptake by companies 
in Greece (3%), the UK (2%) and Czech Republic (1%) remain the lowest. 

Chart 18. Enterprises using RFID for product identification 

Problem drivers 

Currently,  collecting,  processing,  accessing  and  protecting  data  is  a  major  challenge.  This 
includes  issues  such  as  ownership  of  data,  treatment  of  personal  and  industrial  data, 
availability, access and re-use, contractual terms and conditions, data security, quality of data 
(e.g. timely updates), authentication of users, cybercrime, acceptance of electronic documents, 
liability for incorrect information, standardisation of languages and formats. 

Market  fragmentation  is  notably  linked  to  restrictions  on  storage  and  processing  of  data 
outside of national territories of Member States, lack of trust (security, localisation of data), 
uncertainty  about  applicable  law,  unbalanced  off-the-shelf  contracts,  insufficient  knowledge 
of cloud computing, lack of interoperability or portability (difficulties in changing provider or 
problems with access to data). 

Data localisation requirements212 can in fact limit the benefits offered by digital services such 
as  cloud  computing  as  they  create  barriers  to  EU  cross-border  data  transfers,  limiting  the 
competitive  choice  between  providers  and  raising  costs  by  forcing  organisations  and 
companies to store data on servers physically located inside a particular Member State. 

Moreover,  user  lock-in  with  cloud  service  providers  affects  the  fluidity  of  data  flows. 
According  to  Eurostat,  almost  30%  of  European  SMEs  using  cloud  services  find  that 

212   European Cloud Partnership, Establishing a Trusted Cloud Europe: A policy vision document by the 

Steering Board of the European Cloud Partnership, 2014 – the European Cloud Partnership's Steering 
Board noted that "Member States' practices and in some instances national laws restrict the possibility of 
storage and processing of certain data (especially public sector data) outside their territory". Subsequently 
the issue of data location requirements was further explored in a Feburary 2015 workshop organised by the 
Commission – European Commission, Outcome of the workshop: Facilitating cross border data flow in 
Europe – on data location restrictions, 2015. 

61 

 
 
 
                                                            
difficulties in unsubscribing or changing cloud service provider are a major limiting factor for 
the use of cloud services213. 

Unbalanced contractual conditions are an issue for consumers and SMEs in relation to cloud 
contracts.  Although  EU  law  already  lays  down  uniform  B2C  information  requirements  and 
marketing  rules,  and  consumer  legislation  on  unfair  contract  terms  (i.e.  the  Unfair  Contract 
Terms Directive) provides some protection, no EU wide rules exist to cover conformity with 
the contract and remedies for defective digital products. Moreover, cloud computing contracts 
often  lack  clarity  and  transparency.  SMEs  as  cloud  users  also  face  the  issue  of  unbalanced 
contracts and liability. 

Traditional businesses may also fear losing control of their own business analytics in favour 
of  third  party  data  service  providers.  The  latter  have  the  most  advanced  technologies,  tools 
and  capacity  for  analysing  data  and  deriving  information  from  it  on  market  conditions, 
customer  preferences,  product  errors  and  other  business  deficiencies.  Building  trust  is 
therefore a key condition for ensuring the effective development of new digital businesses in 
this area. 

Expected Impact – what changes/opportunities do we expect from solving the issue? 

Optimistic  estimates  predict  that  big  data  could  unleash  EUR  12  trillion  in  market  value. 
According to IDC, the Western European big data market will grow annually by 24.6%, and 
the use of big  data by the top  100 EU  manufacturers could lead to savings worth EUR 425 
billion. The Warsaw Institute of Economic Studies estimated that by 2020, big data analytics 
could  boost  EU  economic  growth  by  an  additional  1.9%  i.e.  a  GDP  increase  of  EUR  206 
billion. 

A recent study shows that the impact of restrictions in data localisation on economic activity 
is considerable and can lead to productivity losses, creation of additional trade barriers against 
data processing and cloud services and a lowering of the competitiveness of the economy due 
to the negative impact on investments214. 

On the opportunity to reduce manufacturing costs, it is estimated that if the top 100 European 
manufacturers could start from scratch by incorporating systematically the results of their big 
data  analytics  in  their  business  processes,  they  would  save  EUR  160  billion215.  By  using 
advanced analytics to replace preventive maintenance systems with predictive ones, the IDC 
estimates that, on average, each manufacturing company could cut total equipment downtime 
by 50% and increase production by 20%. In terms of productivity, IDC considers that if just 
the top 100 European manufacturers could improve production efficiency by 10%, the whole 
industry would theoretically gain EUR 265 billion.  

Cloud  computing  can  potentially  contribute  a  total  of  EUR  450  billion  to  the  EU's  GDP 
between  2015  and  2020,  as  well  as  lead  to  the  creation  of  an  additional  1  million  jobs  and 
300,000  companies  in  the  EU,  throughout  all  sectors  of  the  economy,  according  to  IDC. 

213   European Commission, Eurostat, Cloud computing - statistics on the use by enterprises, 2014 
214   European Centre for International Political Economy, The costs of data localisation: friendly fire on 

economic recovery, 2014 

215   IDC, Manufacturing Insights, 2014 

62 

 
                                                            
Expenditure in Europe on cloud services is expected to reach between EUR 24.4 billion and 
EUR 59.6 billion in 2020, as part of EUR 439 billion of total IT spending216.  

The  current  structure  of  the  European  cloud  computing  market  shows  that  the  majority  of 
public  cloud  providers  are  actually  based  in  third  countries,  with  only  1  out  of  the  top  10 
service providers being based in Europe.217 A connected Digital Single Market that provides 
scale  and  the  right  framework  conditions  for  digital  technologies  such  as  cloud  services  is 
likely  to  create  a  better  environment  for  the  development  and  growth  of  European  based 
service providers. 

Estimates  of  the  cost  of  an  incomplete  DSM  for  cloud  computing  are  between  EUR  31.5 
billion and EUR 63 billion per year218. 

5.2.  Digitisation of research  

Problem and problem drivers 

Modern  science  is  data-driven,  as  it  generates  and  relies  on  unprecedented  data  in  terms  of 
sheer  size,  complexity  and  variety  (e.g.  relating  to  the  genome,  earth  observation  or  global 
epidemics). Research data needs to be managed, shared and preserved in a way that optimises 
scientific discovery, innovation, trust and societal benefit. 

Digital technologies and the exponential growth of data are key drivers to move research and 
science towards Open Science, which describes the ongoing transitions in the way research is 
performed,  researchers  collaborate,  knowledge  is  shared  and  science  is  organised.  Open 
Science  is  enabled  by  digital  technologies  and  driven  by  the  globalisation  of  the  scientific 
community  and  the  need  to  address  the  grand  challenges  of  our  time.  It  impacts  the  entire 
research cycle, from inception to the dissemination of results and evaluation of impact.  

Stakeholders  have  expressed  the  wish  to  foster  Open  Science  inter  alia  by  establishing  a 
Research  Open  Science  Cloud  which  would  unite  existing  and  future  data  infrastructures, 
offering easy access to European researchers for storing, managing and processing data from 
different  sources  in  a  secure  and  seamless  way,  helping  the  development  of  (data-driven) 
science219. 

Policy steps taken so far and need for the issue to be addressed at European level 

The policies currently in place concern mainly open access to publications and research data, 
which  is  narrower  than  Open  Science.  Almost  all  Member  States  have  set  up  legal  and 
administrative conditions in support of open access to publications, and some of them are also 
promoting  open  access  to  data220.  A  comprehensive  policy  package  containing  a  series  of 
measures  and  recommendations  to  improve  access  to  scientific  information  produced  in 
Europe was adopted at the end of 2012221. Furthermore, under the EU research and innovation 
funding programme Horizon 2020, open access to publications is now mandatory and a Pilot 
on Open Research Data has been launched. 

216   IDC, Uptake of Cloud in Europe: Follow-up of IDC Study on Quantitative estimates of the demand for 

Cloud Computing in Europe and the likely barriers to take-up, 2015 

217   Ibidem 
218   European Parliament Research Service, Mapping the cost of Non-Europe, 2014-19, 2015 
219   European Commission, Public consultation on Open Science (Science 2.0): "Science in Transition", 2014 
220   European Commission, ERA Facts and Figures 2013, p. 28 
221   COM(2012) 392, COM(2012) 401, C(2012) 4890 

63 

 
                                                            
Expected Impact – what changes/opportunities do we expect from solving the issue? 

Open  Science  has  the  potential  to  make  science  more  efficient,  reliable  and  responsive  to 
societal challenges. Storing, sharing and re-use of scientific data on a massive scale, with the 
objective  of  making  research  data  discoverable,  accessible,  useable  and,  wherever  possible, 
interoperable  in  line  with  the  G8  principles  on  research  data222,  will  indeed  improve  the 
reliability  and  efficiency  of  science.  It  will  also  stimulate  new  sources  of  wealth  with  new 
products  and  services,  new  companies  and  jobs.  Producers  and  users  of  research  data  will 
benefit  from  more  systematically  opening  them  to  broad  access,  depositing  and  accessing 
their data in reliable repositories. Possible EU action could include  inter alia improving the 
framework  conditions  for  data-driven  science  in  terms  of  removing  institutional  and  legal 
barriers;  stepping-up  existing  Open  Access  policies  across  Europe;  developing  solutions  to 
ensure  that  research  data  is  findable,  accessible,  interoperable  and  re-usable  ('FAIR'); 
developing  a  common  framework  for  research  data,  including  a  dedicated  Research  Open 
Science  Cloud  (infrastructure  and  governance)  and  services  that  adhere  to  quality  standards 
and are trustworthy and compliant with EU law on copyright and fundamental rights. 

5.3. 

Interoperability and standards 

Problem and problem drivers 

The  interoperability  of  new  technologies  implies  effective  interconnection  between  digital 
components  like  devices,  networks  or  data  repositories,  in  a  mutually  understood  language. 
ICT  standardisation  has  an  essential  role  to  play  in  increasing  the  interoperability  of  new 
technologies within the DSM. It can help steer the development of new technologies such as 
5G  wireless  communications,  digitalisation  of  manufacturing  and  construction  processes, 
data-driven  services,  applications,  cloud  services,  cybersecurity,  e-business,  e-health, 
Intelligent Transport Systems and the Internet of Things,  to  name but  a  few. By facilitating 
access  to  data  and  services  in  a  secure  and  interoperable  manner,  it  encourages  fair 
competition and ensures respect for data protection. 

In  the  industrial  sector,  the  lack  of  standards  across  the  spectrum  of  communication  needs 
(from  design,  prototyping  and  testing  to  the  production  process  and  aftersales  service) 
seriously undermines interoperability and so reduces the efficiency of the economic activity 
concerned. Interoperability is important for most of the technologies being rolled out as part 
of the digitisation of industry (see also section 5.1). 

- Smart manufacturing 

Manufacturing  accounts  for  80%  of  EU  exports  and  has  significant  potential  for  increased 
competitiveness in the context of an industrial renewal. Such potential will only be fully leveraged if 
the use of available technologies is coordinated with other aspects such as smart and clean industry or 
e-skills  and  takes  into  account  relevant  initiatives  launched  by  Member  States  (Industry  4.0,  Smart 
Industry and others). 

- 5G mobile telecommunications 

The emergence of a single 5G wireless communications standard would support interoperability on a 
global level as well as the development of pan-European networks with competitive end-to-end service 
offerings. 

222   G8 Science Ministers Statement of 12 June 2013 

64 

 
                                                            
- The Internet of Things  

The Internet of Things has the potential to connect over 26 billion “things” by 2020223 and to allow the 
development of new services providing higher levels of automation and intelligence. A large number 
of  proprietary  or  semi-closed  solutions  have  emerged,  leading  to  non-interoperable  concepts, 
architectures  and  protocols.  Interoperability  will  offer  significant  opportunities  in  terms  of  solving 
global societal challenges like industrial renaissance, reducing pollution, resource shortage, and aging 
societies. 

- Data-driven services 

With the continuously growing volumes of data being created (including both Big and Open Data) and 
their increasing complexity, interoperability has become a key condition for leveraging data’s potential 
value.  To  take  full  advantage  of  the  growing  opportunities  of  the  data-driven  economy, 
interoperability needs to be addressed at different levels, e.g. syntactic, semantic and linguistic, both 
within and across different sectors (economic sectors and public and private sectors). 

- Cloud services 

The  portability  of  data  between  different  cloud  services  and  cloud  service  providers  is  important  in 
order to avoid users and their data being locked into a particular provider. It is a prerequisite for trust 
in and adoption of cloud services as part of a viable and user-friendly DSM. 

Interoperability  is  also  needed  to  enable  public  services  to  work  across  borders.  1,500,000 
citizens  and  300,000  businesses  are  likely  to  use  cross-border  online  services  each  year  by 
2020224.  Digitisation  of  administrative  formalities  offers  an  opportunity  to  standardise  the 
documents that businesses have to present to national authorities in different Member States, 
yielding additional cost savings.  

The  amount  of  data  that  is  pre-filled  in  Public  Services'  online  forms  varies  to  a  great  deal 
within  the  EU225.  The  following  life  events  are  included  in  the  scope  of  measurement: 
Business  Start  Up;  Losing  and  Finding  a  Job;  Studying;  Regular  Business  Operations; 
Moving  (General  Administration);  Owning  and  Driving  a  Car;  Starting  a  Small  Claims 
Procedure. While in Estonia 92.7% of forms were pre-filled, in Malta 87.4 % and in Finland 
81%  in  2014,  there  were  countries  where  pre-filled  forms  counted  for  less  than  10% 
(including the UK, Greece, Romania and Croatia). 

223  Gartner Inc., Forecast: The Internet of Things, Worldwide, 2013 
224  Tinholt, D., et al., Study on Analysis of the Needs for Cross-Border Services and Assessment of the 

Organisational, Legal, Technical and Semantic Barriers, Capgemini et al. for the European Commission, 
2012 

225  Tinholt, D. et al., eGovernment Benchmark Framework 2012-2015, Capgemini et al. for the European 

Commission, 2012 

65 

 
                                                            
Chart 19. Pre-filled forms

The  percentage  of  individuals  who  used  the  Internet  to  submit  completed  forms  to  public 
authorities was on average 33% within the EU226. 

Chart 20. Individuals submitting completed forms to public authorities 

More  generally,  the  lack  of  interoperability  among  public  entities  and  private  operators 
restricts the potential for digital end-to-end services, One Stop Shops, the once-only principle, 
the single data entry principle, the transparency of public services and the full exploitation of 
public open data. 

There  is  a  need  also  of  a  horizontal  action  at  EU  level,  across  sectors,  to  prevent  Member 
States  from  opting  for  mutually  incompatible  solutions  that  will  build  new  barriers  to  the 
delivery of European public services. Availability of standards is often not sufficient to ensure 
interoperability, if existing standards are not integrated by suppliers in their solution. Public 
procurement plays an important leverage factor for the diffusion of interoperability standards 
and  Member  States  have  created  national  catalogues  of  ICT-standards  and  interoperability 
specifications  to  guide  public  procurers  and  accelerate  standards  adoption  on  national 

226  European Commission, Eurostat, ICT survey of Households and Individuals, 2014; European Commission, 
Digital Agenda Scoreboard – the indicator has a 12-month reference period and concerns the use of web 
applications for uploading completed forms or transmitting web forms with details filled in directly 

66 

 
 
 
                                                            
markets.  Federating  those  catalogues  into  European  catalogues  would  avoid  market 
fragmentation  at  EU  level.  Public  procurers  would  therefore  be  guided  towards  those 
technical specifications and standards that contribute to interoperability, in particular because 
of  their  wide  market  acceptance.  Incentive  schemes,  i.e.  through  Horizon  2020  (Public 
Procurement for Innovation) and the structural funds, could be launched, per domain, to push 
for the adoption of the European catalogue and drive interoperability. 

Moreover,  further  progress  is  needed  to  improve  the  interoperability  of  systems  for  cross-
border delivery of goods and services, as well as the mobility of people and businesses and 
cooperation between public authorities, at national and EU level. 25% of firms in the EU state 
that interoperability issues are a problem for cross-border online sales, with 10% declaring it 
to  be  a  major  problem.  Important  differences  exist  between  sectors  in  this  respect,  with 
interoperability concerns being most prevalent in the information and communication sector 
(30% of firms). 

Standards are often closely linked to patents, and both patent holders and patent users have an 
interest  in  making  sure  these  patents  can  be  licensed  with  legal  certainty  and  under  fair 
conditions. Licensing is an important way for some EU industries to realise their investment 
in R&I. There is therefore a need for legal certainty as regards licence commitments made to 
standard  setting  organisations  and  for  a  fair  balance  as  regards  remuneration  for  R&I  made 
available  for  standard-setting  and  access  to  standardised  technology  on  fair  terms.  The 
development of a transparent standard setting framework in ETSI and ITU that will allow for 
reliable and fair licensing conditions is therefore important. 

Achieving  full  interoperability  in  a  connected  DSM  will  provide  consumers  with  a  choice 
between  different  digital  offers,  businesses  to  expand  their  offers  beyond  national  borders, 
industry  to  optimise  its  production  systems  by  interconnecting  equipment  and  exploiting 
diverse data sources, and public services to offer one-stop-shops and cross-border services to 
citizens. 

Policy steps taken so far and need for the issue to be addressed at European level 

The EU has recognised the critical role of standards over a number of years. In 2013, the EU 
put  in  place  a  reform  of  the  EU  Standardisation  framework  aimed  at  achieving  better 
efficiency  in  the standardisation  process  and  improving  synergies  and  coordination  between 
European stakeholders, namely the Commission, the European Standardisation Organisations 
(ESOs), Member States, European industry and businesses.  

The  Commission  has  also  recognised  the  specific  needs  of  the  ICT  sector  by  allowing  for 
specific standardisation measures to be put in place. In particular, the EU Rolling Plan for ICT 
Standardisation227  is  today  an  essential  planning  instrument,  which  plays  a  key  role  in 
structuring  governance  of  standardisation  and  pulling  market  forces  towards  convergent 
objectives. A European Multi-Stakeholder Platform on ICT Standardisation was also set up228, 
which  brings  together  the  ESOs,  the  main  international  ICT  fora  and  consortia,  various 
standard setting organisations (SSOs), as well as industry, consumers and Member States in 
order to achieve more coordinated action. 

227  European Commission, Rolling Plan for ICT standardisation, 2015 
228  2011/C 349/04 

67 

 
 
                                                            
In the area of public services, the European Interoperability Framework, adopted by the Commission 
in 2010229, promotes and supports the delivery of European public services by fostering cross-border 
and  cross-sectoral  interoperability.  The  great  majority  of  the  Member  States  have  transposed  this 
Framework  nationally,  which  has  brought  a  common  understanding  of  the  basic  requirements  for 
interoperability  between  public  services.  This  common  understanding  should  now  be  updated  and 
extended with other concrete and practical instruments to be shared by national administrations such 
as  the  European  Interoperability  Reference  Architecture  (EIRA)  and  the  European  Interoperability 
Cartography (EUCart)230. 

On e-transport, a harmonisation effort is already under way in all transport modes in order to provide 
interoperability  and  continuity  throughout  the  EU.  In  addition  to  seamless  transport  operations,  this 
will  also  provide  further  economic  and  societal  benefits.  For  instance,  the  cost  for  society  of  road 
accidents  is  approximately  EUR  130  billion  per  year.  90%  of  these  accidents  involve  human  error. 
Much of these errors could be avoided with connected cars and communication between vehicles and 
infrastructure  (so  called  cooperative  ITS),  and  ultimately  with  automated  driving.  In  addition  to  the 
harmonisation already going on in several transport modes, there is a need to address interoperability 
across transport modes. 

The  ongoing  efforts  to  improve  cross-sectoral  and  cross-border  interoperability  between  maritime 
surveillance  systems,  by  enhancing  standardisation  of  data  exchange,  (i.e.  CISE  -  Common 
Information Sharing Environment231) will help reducing monitoring costs and efficiency of response to 
incidents/ accidents at sea, as well as triggering new industry opportunities. 

The  recent  standardisation  efforts  at  CEN/CENELEC/ETSI  level  show  the  potential  of  more 
converged  digital  solutions  in  the  energy  sector.  The  interoperability  of  solutions  will  be  key  to 
motivating  infrastructure  upgrades  in  a  traditionally  prudent  sector.  The  deployment  of  digital 
monitoring and control technologies will also help to mitigate the infrastructure investments required 
to achieve the EU's energy/climate objectives for 2030 and 2050.  

The on-going deployment of smart metering systems in many EU countries can be seen as a necessary 
first  step.  However,  the  smart  metering  systems  need  to  be  fully  interoperable  and  provide  all  data 
necessary for adjusting demand, either directly to the consumer or to a service provider who manages 
consumption for the consumer. In order to allow businesses to succeed on the new market, standards 
could  be  developed  that  help  to  realise  the  full  benefits  of  home  automation  by  enabling 
communication  between  smart  metering  systems  and  household  appliances  and  between  appliances. 
Given  competing  developments  in  countries  such  as  the  US,  Japan  and  South  Korea,  the  strong 
European  energy  technology  manufacturers  need  to  embrace  these  innovations  and  validate  them  in 
Europe to nurture their worldwide competitiveness.  

Mobile payments and instant payments are also gaining attention with initiatives flourishing all across 
Member States that will need support at EU level in order for them to be completely interoperable. 

With  the  instruments  described  above  in  place,  Europe  today  is  better  organised  to  tackle 
global ICT challenges. However, an increased effort is needed to ensure that standardisation 
output keeps pace with changes in technologies. A strategic approach to ICT standardisation 
needs to be taken at EU level in order to better align it with EU policy interests and ensure 
that key European priorities for ICT standardisation are identified. 

Standardisation  governance  should  also  be  strengthened,  notably  by  setting  up  a  strategic 
group  for  Member  States  and  ESOs  to  jointly  discuss  common  priorities  under  the 

229  COM(2010) 744 final 
230  The Interoperability Solutions for European Public Administrations (ISA) programme (2010-2015) monitors 

and supports the EIF implementation in Europe; it will be followed by the ISA² programme (in 
interinstitutional procedure at the time of writing) 

231  COM(2014)451 final 

68 

 
                                                            
Commission’s  political  guidance.  This  process  will  complement  and  enrich  the  technical 
discussions  currently  being  held  under  the  European  multi-stakeholders  platform  on  ICT 
standardisation. 

5.4.  Employment, digital skills and expertise 

Problem and problem drivers 

A  digitally  skilled  workforce  and  digitally  competent  consumers  will  be  a  driving  force  for 
the achievement of a truly connected DSM and a precondition for Europeans' participation in 
the  digital  world  of  e-commerce,  services,  communication  and  other  forms  of  interaction. 
However,  we  are  witnessing  digital  skills  mismatches  and  shortages  in  Europe  which  will 
significantly affect the functioning and performance of European labour markets in the near 
future. 

To  make  sure  that  we  have  the  necessary  pool  of  digital  skills  in  Europe,  at  basic, 
intermediate and advance levels, education and training opportunities, also within companies, 
need  to  be  improved.  Currently  39%  of  EU  citizens  have  only  low  or  no  digital  skills232. 
About one fifth (18%) of the EU population has never used the Internet, mainly older people, 
those with lower educational attainments and the inactive or retired. Learning and acquiring 
digital competences goes beyond pure ICT skills and involves the creative and collaborative 
and safe use of ICT233. Consumers need also to be educated and protected in relation to new 
disguised  forms  of  marketing  in  social  media,  e-privacy  and  behavioural  targeting  of 
marketing through online tracking. Consumers should be aware of their online rights and have 
the  means  to  enforce  them.  All  citizens  need  to  be  sufficiently  digitally  competent  to 
participate  actively  in  society  and  the  economy  and  to  benefit  from  digital  services  such  as 
online learning, e-health and e-government and e-commerce. 

It  is  therefore  essential  to  increase  digital  competences  among  the  general  population  at  all 
stages  of  life.  Effective  initial  education  and  training  requires  well  trained  educators  and 
modern  and  well-equipped  educational  institutions  making  best  use  of  digital  and  other 
innovative  tools234.  While  infrastructure  provision  in  schools  in  Europe  varies  considerably 
between countries, highly digitally equipped schools are on average a reality for only 37% of 
grade  4  students,  24%  of  grade  8  students,  55%  of  grade  11  students  and  50%  of  grade  11 
vocational  students.  Between  20-25%  of  students  are  taught  by  digitally  confident  and 
supportive  teachers  having  access  to  ICT  and  facing  low  obstacles  to  their  use  at  school235. 
Only one in three teachers in the EU reports frequent use of practices involving ICT236. Only 
one in three students at all grades in the EU are taught by teachers who participate in online 
communities of practice237. The use of open educational resources is fragmented and general 
digital technologies are still used only sparsely in most EU countries' primary and secondary 

232  European Commission, Digital Agenda Scoreboard; European Commission, Eurostat, ICT survey of 

Households and Individuals, 2014 

233  Ferrari, A., 'DIGCOMP: A Framework for Developing and Understanding Digital Competence in Europe', 

JRC/IPTS Report, 2013 

234  Brečko, B. et al., 'Mainstreaming ICT-enabled Innovation in Education and Training in Europe: Policy 

actions for sustainability, scalability and impact at system level', JRC-IPTS Study, 2013 

235  European Schoolnet and University of Liege for the European Commission, Survey of schools: ICT in 

education, Benchmarking Access, Use and Attitudes to Technology in Europe’s Schools, 2013 

236  Vuorikari, R. and Brecko, B, How could teachers' professional collaboration in networks be better studied 

as part of digital competence?, in proceedings of World Conference on Educational Multimedia, 
Hypermedia and Telecommunications 2014 (p. 1821-1826), Association for the Advancement of Computing 
in Education (AACE) 

237  Ibidem 

69 

 
                                                            
education systems. Europe also lags behind in adopting new ways of learning, most visibly as 
regards  Massive  Open  Online  Course  (MOOC)  provision  and  uptake.  Digital  skills  or  ICT 
competences are sometimes a separate subject and sometimes taught across subjects; however 
they are so far not part of all educational curricula and learning outcomes.  

Digital skills are currently mostly learned outside formal education, through personal internet 
and  computer  use,  in  the  workplace,  in  experiential  learning  or  in  other  informal  settings. 
Mechanisms  to  identify,  assess,  recognise  and  validate  these  skills  are  rare  and  fragmented 
across Europe and often not recognised across borders. This impairs the further acquisition of 
digital skills as well as the matching of job seekers' and employers' needs. 

The  digitisation  of  the  economy  is  transforming  the  European  labour  markets,  changing  the 
working conditions and boosting the demand for digital skills. The use of technologies in the 
workplace  alters  significantly  the  patterns  and  modes  of  work  as  well  as  the  relationships 
between employers and employees. 

Regarding the demand of digital skills, a recent study among CEOs238 showed that concerns 
regarding the availability of key skills have grown significantly, reaching 73% of respondents 
claiming this in 2015, up from 63% in 2014. The number of workers in high-tech industries 
and services grew by 20% between 2000 and 2011 to reach around 22 million in Europe (10% 
of  the  EU  workforce),  and  ICT  professionals  proved  the  strongest  growing  occupation  over 
2011-2013.  While  digital  innovation  has  contributed  to  the  growth  of  high-skill  high-pay 
occupations  across  Europe  during  the  crisis,  it  has  also  accentuated  the  polarisation  of 
European  job  markets:  mid-  and  low-skilled  jobs  declined  by  2.5-3%  between  2008  and 
2011239.  In  the  coming  years,  90%  of  jobs  will  require  some  level  of  digital  skills240. 
However,  so  far  a  third  of  the  EU  workforce  has  insufficient  digital  skills  while  19%  has  a 
low level and 14% has no digital skills at all241. 

Over  the  period  2000-2012,  employment  of  ICT  specialists  in  the  EU  grew  significantly. 
Based on a narrow definition242, ICT skilled employment grew by 2 million over this period 
from 3.1 million in 2000 to 5.2 million in 2012243. Based on a broad definition244, ICT skilled 
employment increased to 6.1 million, or 2.8% of total employment in 2012, up from 1.9% in 
2004245. On average, ICT employment growth was 4.3% per year (narrow definition) over the 
period  2000-2012,  more  than  7  times  higher  than  the  total  employment  growth  over  this 
period. Under a broad definition, the rate of growth appears to be higher. Most EU countries 
have  seen  an  increase  in  the  level  of  ICT  specialist  employment.  In  2012,  the  highest  ICT 

238  PwC, 18th Annual Global CEO Survey, 2015 
239  Goos, M. et al. Ian Hathaway, Jozef Konings, Marieke Vandeweyer, 'High-Technology Employment in the 

European Union', Vives Discussion Paper 41, 2013 

240  Kolding, M. et al., Post Crisis - e-Skills are Needed to drive Europe's Innovation Society, White Paper, IDC 

for Microsoft, 2009 

241  European Commission, Digital Agenda Scoreboard; European Commission, Eurostat, ICT survey of 

Households and Individuals, 2014 

242  ISCO-88 codes 213, 312 and 313 for 2000-2010 and ISCO-08 codes 25 and 35 for 2011-2012 
243  Sabadash, A., Employment of ICT specialists in the EU (2004-2012), JRC/IPTS Digital Economy Working 

Paper No 2014-01, 2014 

244  ISCO-88 codes 213, 312, 313, 7243, 1236, 2144, 2359, 3114, 7242 and 8283 for 2004 and ISCO-08 codes 

133, 2152, 2153, 2166, 2356, 2434, 25, 3114, 35, 7421, 7422 and 8212 for 2012 

245  Sabadash, A., Employment of ICT specialists in the EU (2004-2012), JRC/IPTS Digital Economy Working 

Paper No 2014-01, 2014 

70 

 
                                                            
shares  were  recorded  in  Sweden  (4.8%),  Finland  (4.7%)  and  the  UK  (4.2%),  the  lowest  in 
Romania (1.3%) and Greece (1.4%)246. 

Chart 21. Persons employed with ICT specialist skills (broad measure) 

Sabadash, A., Employment of ICT specialists in the EU (2004-2012), JRC/IPTS Digital Economy Working Paper 
No 2014-01, 2014 

Demand  for  digitally  competent  professionals  across  all  economic  sectors  continues  to 
grow247 and is outstripping supply. Even though the number of ICT professionals is growing 
by  more  than  100,000  every  year,  almost  40%  of  enterprises  trying  to  recruit  ICT 
professionals have difficulty doing so248. 

Employment  of  ICT  professionals  is  resistant  to  economic  downturns249  and  ICT 
professionals contribute to increased productivity in firms. It has been estimated that by 2020 
the  shortage  of  ICT  professionals  will  amount  to  up  to  825,000  if  no  decisive  action  is 
taken250.  This  shortage  particularly  affects  SMEs  who  have  lesser  means  to  attract  ICT 
professionals  than  large  companies.  In  the  EU  app  industry  alone,  the  app  developer 
workforce will grow from 1 million in 2013 to 2.7 million in 2018251. A significant amount of 
additional associated jobs are generated by the EU app economy. Consequently, the total EU 
app  market  workforce  was  1.8  million,  including  0.8  million  support  jobs  in  addition  to 
developer jobs. By 2018 the additional job figure will rise to 2.1 million, resulting in a total 
European app economy workforce of 4.8 million252. 

246  Ibidem 
247  Pellizzari M. et al., 'E-skills mismatch: evidence from PIAAC', JRC-IPTS Digital Economy Working Paper, 

forthcoming 2015 

248  European Commission, Eurostat, ICT survey of Enterprises, 2014 
249  Ibidem 
250  Hüsing, T. et al., E-skills and e-leadership skills 2020: Trends and forecasts for the European ICT 

professional and digital leadership labour market, empirica Working Paper, 2015 
251  Mulligan, M. and Card, D., Sizing the EU app economy, GIGAOM Research, 2014 
252  Ibidem 

71 

 
 
 
 
                                                            
Chart 22. EU app economy jobs, 2013-2018 

There is also a significant shortage of employees who combine specialised and soft skills such 
as  entrepreneurship,  business  and  management  skills.  It  is  estimated  that  about  215,000 
additional  e-leaders  (managers  or  chief  digital  officers  who  can  develop  and  roll  out  an 
integrated  digital  strategy  for  their  entire  business)  will  be  needed  in  Europe  by  2020,  of 
which 70% will be for SMEs253. 

In  the  UK  alone,  the  demand  for  big  data  specialists  is  expected  to  rise  by  160%  over  the 
period  from  2013  to  2020,  whilst  overall  employment  is  forecast  to  increase  only  by  6% 
during same period254. 

Despite  this  shortage,  the  number  of  ICT  graduates  is  not  increasing.  In  2012,  the  highest 
number  of  science  and  technology  graduates  was  recorded  in  Lithuania  (23  per  1,000 
inhabitants), Ireland (22.5 per 1,000 inhabitants) and France (22.1 per 1,000 inhabitants), the 
lowest in Cyprus (9 per 1,000 inhabitants) and Luxembourg (2.8 per 1,000 inhabitants)255. 

Chart 23. Science and technology graduates 

253   Hüsing, T. et al., E-skills and e-leadership skills 2020: Trends and forecasts for the European ICT 

professional and digital leadership labour market, empirica Working Paper, 2015 

254   SAS, Tech Partnership, Big Data Analytics. Assessment of Demand for Labour and Skills 2013–2020, 2014 
255   Ibidem 

72 

 
 
 
                                                            
Policy steps taken so far and need for the issue to be addressed at European level 

Education  and  employment  are  mainly  Member  State  and  regional  competences. 
Nevertheless,  with  the  recognition  of  a  digital  skills  shortage  and  mismatches  affecting 
Europe, EU intervention and support have a clear role to play. The joint labour market and the 
cross-border  nature  of  digital  and  online  offers  imply  that  shortages  in  some  countries  or 
regions affect all others. At the same time, European focus and support are needed to assure 
that  no  regions  are  either  left  behind  or  'brain-drained'  as  regards  the  provision  of  digital 
infrastructure,  devices,  skills  in  education  or  the  skills  and  competences  of  the  general 
population256.  

European Structural and Investment Funds already support the connectivity of schools as well 
as  digital  skills  and  competence  training;  this  support  might  need  to  be  widened  to  include 
provision of devices to educational organisations, skills training aimed at educators, as well as 
to increase support for digital skills and competence training of the general population and job 
seekers. 

Several private and public initiatives have been implemented at national and European level. 
Noteworthy initiatives include “Opening up Education: Innovative teaching and learning for 
all through new Technologies and Open Educational Resources”257, the eSkills Campaign258, 
the  European  e-competence  Framework  (version  3.0)  that  provides  a  reference  of  40 
competences  as  required  and  applied  in  the  ICT  workplace,  using  a  common  language  for 
competences, skills and capability levels, the European Coding Initiative259, and the EU Code 
Week260. Multi-stakeholder initiatives such as the Grand Coalition for Digital Jobs261 and the 
European Alliance for Apprenticeships have shown their potential to increase the number of 
training courses and skills development opportunities, in particular work-based learning. It is 
however  necessary  to  widen  their  membership  to  additional  ICT-using  companies  and 
underrepresented stakeholders such as vocational education and training (VET) providers and 
social partners and to strengthen existing national skills alliances as well as develop new ones 
where they do not exist. 

The  EU  is  developing  a  framework  and  self-assessment  tool  for  citizens'  and  consumers' 
digital competences to facilitate the recognition of digital skills and qualifications in an EU-
wide  online  skills  portfolio.  Additionally,  "Sector  Skills  Alliances"  involving  stakeholders 

256   The Commission has launched several studies to better understand the nature and scope of the problem and 
its implications for education as well as several projects and initiatives that aim to mitigate the identified 
digital skills problem and raise civil and political awareness of the topic, e.g. ICT for Work – Digital Skills 
in the Workplace, launched in 2014, and ICT in Schools study, 2012, of which an update will be launched in 
2015 

257   I.e. an action plan to facilitate schools and universities to deliver high quality education through ICT and 
digital content, as well as the digital skills which 90% of jobs will require by 2020. The initiative focuses, 
inter alia, on the uptake of ICT-based innovation in learning and teaching (in particular open learning 
environments, open educational resources and improvements in educational infrastructure), underpinning 
the delivering of skills for the 21st century, including digital skills. It calls for better ICT infrastructure and 
connectivity in schools, including actions to connect every school, every classroom to high speed broadband 
services by 2020. 

258   Initiative based on COM(2007) 496 final 
259   Initiative led by ICT-companies and European Schoolnet to bring coding skills to teachers, kids and adults 
260   Other projects are e.g. the Open Knowledge Technologies - Mapping and validating knowledge; EP Pilot I 

and II; the Platform for Learning and Inclusion; the Safer Internet Programme; the Platform for ICT training 
& learning 

261   I.e. a multi-stakeholder partnership that endeavours to facilitate collaboration among business and education 
providers, public and private actors to take action attracting young people into ICT education, and to retrain 
unemployed people 

73 

 
                                                            
from  different  economic  sectors  will  design  curricula  taking  into  account  the  digital  skills 
needed  in  the  respective  economic  sectors.  The  Commission  will  address  these  issues  in 
future initiatives on skills and training.  

Expected Impact – what changes/opportunities do we expect from solving the issue? 

The  DSM  will  not  succeed  unless  European  citizens  have  the  highest  possible  level  of 
competences and skills, in particular in the digital field; this is only possible through access to 
the best possible education and training systems and ongoing learning opportunities. Strong, 
modernised and innovative education systems will be able to provide the digitally skilled and 
competent  workforce  capable  of  continuously  adapting  to  new  needs  and  changes  in  the 
labour market. More opportunities to validate and recognise digital skills acquired outside the 
formal education systems will also raise the employability of European citizens in a DSM.  

5.5. 

e-Government 

Problem and problem drivers  

Citizens  and  companies  have  a  legitimate  expectation  that  digital  access  to  public  services 
should be as simple and efficient as e-commerce. In many EU countries the public sector is 
slow  in  implementing  digital  end-to-end  services,  let  alone  in  achieving  cross-border 
interoperability. Online public services are crucial to reducing business costs and increasing 
the efficiency and the quality of the services provided to citizens and companies. According to 
a recent study, if interactions with public authorities can be made as transparent, as fast and as 
cost-efficient as in the private sector, then the potential benefits will materialise262.  

One example of increased efficiency is the "Once Only" principle: only in 48% of cases do 
public administrations reuse information  about the citizen that is already in  their  possession 
without  asking  for  it  again263.  The  extension  of  this  principle,  in  compliance  with  data 
protection legislation, would  likely generate an annual net saving at  the EU level of around 
EUR  5  billion  per  year  by  2017264.  Implementing  the  Once  Only  principle  across  borders 
would further contribute towards the efficiency of the DSM. However, the proportion of the 
steps in a Public Service life event that can be completed online vary greatly between Member 
States  (the  following  life  events  are  included  in  the  scope:  Business  Start  Up;  Losing  and 
Finding  a  Job;  Studying;  Regular  Business  Operations;  Moving  (General  Administration); 
Owning and Driving a Car; Starting a Small Claims Procedure), ranking the highest in Malta, 
Portugal and Estonia, and the lowest in Greece, Slovakia and Hungary265. 

262   European Commission, Study on eGovernment and the Reduction of Administrative Burden, 2014 
263   European Commission, Delivering the European Advantage? 'How European governments can and should 

benefit from innovative public services', 2014 

264   European Commission, Study on eGovernment and the Reduction of Administrative Burden, 2014 
265   Ibidem 

74 

 
 
 
                                                            
Chart 24. Online Service Completion, All Life Events 

Moreover,  a  "digital-by-default"  strategy  in  the  public  sector  (all  services  being  provided 
digitally  only)  at  EU  level  could  result  in  annual  saving  of  around  EUR  10  billion266.  The 
adoption of e-invoicing in public procurement across the EU could generate savings of up to 
EUR 2.3 billion267. The full exploitation of public sector data could also reduce government 
administrative costs; for Europe’s 23 largest governments, some estimate potential savings of 
15% to 20%268, with a market value estimated at EUR 40 billion a year in the EU269. 

In  general,  existing  rules  under  company  law  do  not  sufficiently  integrate  the  benefits  of 
digital  technologies.  Companies  are  still  faced  with  paper-based  formalities,  whether  for 
registration  purposes  or  for  filing  and  reporting.  For  example,  online  registration  of 
companies  is  only  possible  in  16  Member  States270.  It  is  estimated  that  introducing  online 
registration  for  setting-up  a  proposed  new  company  form271,  the  so-called  SUP  (Societas 
Unius Personae)272, would generate potential savings for businesses between EUR 21 million 
and EUR 58 million per year273.  

Information  gaps  increase  costs  for  business,  in  particular  for  SMEs274.  According  to  the 
Citizenship Report 2013, only one in three citizens (36%) say they are well informed about 
their EU rights  and just under a quarter (24%) feel  fairly or very well  informed about what 
they  can  do  when  their  EU  rights  are  not  respected275.  Contact  points  between  public 
authorities and citizens/businesses are currently fragmented across Europe (thus less visible), 
often  outdated  and  incomplete.  The  needs  of  businesses  and  citizens  in  their  cross-border 

266   Ibidem 
267   COM(2013) 453 final 
268   OECD Digital Economy Papers, Exploring Data-Driven Innovation as a New Source of Growth: Mapping 

the Policy Issues Raised by "Big Data", 2013 

269   COM(2011) 882 final 
270   SWD(2014) 124 final, p. 27 
271   COM(2014) 212 final 
272   The SUP proposal is aimed making it easier and less costly to set up companies with one shareholder across 

the EU, through providing simple EU-wide rules for establishing companies in the form of a SUP 

273   SWD(2014) 124 final, p. 45 et seq. (Annex) – taking account of the experience with national reforms, in a 

low scenario it is assumed that 22% of founders use the new form; in a high scenario, it is assumed that 60% 
of founders use the new form 

274   European Parliament study, A European Single Point of Contact, 2013; European Commission, High Level 

Group on Business Services - Final Report, 2014 

275   European Commission, Flash Eurobarometer 365, 'European Union citizenship', 2013 

75 

 
 
                                                            
activities  could  be  better  met  by  streamlining  and  integrating  existing  portals,  networks, 
services and systems (such as Your Europe, Points of Single Contact, Product Contact Points, 
Contact Points for Construction Products) under the "Single Digital Gateway"276. 

Recent  policy  evaluations  of  the  PSI  Directive277  and  the  Infrastructure  for  Spatial 
Information  in  the  EU  (INSPIRE)  Directive  demonstrate  the  need  for  public  authorities  to 
improve the sharing and re-use of their data. The market size and growth of the geographic 
information sector, covered both by the PSI and INSPIRE Directives, shows the potential of 
public  data  as  an  engine  for  job  creation.  The  German  market  for  geo-information  in  2007 
was estimated at EUR 1.4 billion, a 50 % increase since 2000.278 In the Netherlands, the geo-
sector  accounted  for  15,000  full  time  employees  in  2008.  Other  areas  such  as  cadastres, 
meteorological  data,  legal  information  and  business  information  also  form  the  basis  of 
steadily growing markets. 

Public  expenditure  accounts  for  almost  50%  of  GDP  and  the  public  sector  represents  about 
17%  of  total  employment279.  Furthermore,  public  administrations  have  the  power  to  pull 
innovation; in the EU, the overall market for purchases of goods, services and works by the 
public sector accounts for almost 20% of GDP. Whilst e-procurement has a great potential to 
facilitate access to markets and stimulate competition across the Single Market, it also carries 
the  risk  of  further  Single  Market  fragmentation  where  there  is  a  lack  of  interoperability 
between the various systems. This needs to be addressed with appropriate tools and measures. 
Contracting  authorities  that  have  already  switched  to  e-procurement  save  between  5%  and 
20%280. Nevertheless, the public procurement market is far less integrated at European level. 
Whilst the average import penetration in the private sector is estimated at 19.1%, in the public 
sector it accounts for merely 7.5%281. The continued existence of barriers in the Single Market 
prevents  European  enterprises  from  taking  full  advantage  of  business  opportunities  in  other 
Member  States.  Another  example  is  the  case  of  the  medical  technology  industry  for  which 
70% of outputs result from hospital procurers282. 

Translating One Stop Shop and Once Only concepts into reality, implementing transparency 
and  open  public  data,  all  necessary  ingredients  of  public  sector  modernisation,  require 
underlying interoperability between public sector entities (see section 5.3 on interoperability 
and standards). 

Policy steps taken so far and need for the issue to be addressed at European level 

The  Annual  Growth  Survey  for  2015283  indicates  that  'improving  efficiency  in  public 
administration'  is  an  area  for  reform.  The  European  Council  Conclusions  of  October  2013 
state that "EU legislation should be designed to facilitate digital interaction between citizens 

276   The Gateway is part of the European Commission's new web presence that is being developed and will 
provide relevant, coherent and cost-effective online information and services focused on user needs 
277   Vickery, G., Review of recent studies on PSI re-use and related market developments, Information 

Economics for the European Commission, 2011 

278   Fornefeld, M. et al., Assessment of the Re-use of Public Sector Information (PSI) in the Geographical 

information, Meteorological Information and Legal Information Sectors, MICUS Management Consulting 
GmbH for the European Commission, 2008 

279   COM(2012) 750 final 
280   COM(2012) 179 final 
281   European Commission, EU Public Procurement Legislation: Delivering Results - Summary of Evaluation 

Report, 2011 

282   The European market size of the medical technology industry was estimated at roughly EUR 100 billion in 

2011 (representing 30% of the world medical technology market) 

283   COM(2014) 902 final 

76 

 
                                                            
and businesses and the public authorities. Efforts should be made to apply the principle that 
information is collected from citizens only once, in due respect of data protection rules." 

There are a number of legislative initiatives with direct relevance for e-government, such as 
the Regulation on electronic identification and trust services for electronic transactions in the 
internal market (eIDAS); the Directive on Public Sector Information to maximise the impact 
and  benefits  of  Open  Data;  the  Infrastructure  for  Spatial  Information  in  the  EU  (INSPIRE) 
Directive establishing the location framework for governmental and commercial services and 
data, the  Services  Directive and  its requirement  that  any requests to  establish  a  company  in 
another  Member  State  shall  be  done  electronically  via  the  Points  of  Single  Contact;  the 
Directive  on  interconnection  of  EU  business  registers;  the  SUP  proposal  which  for  the  first 
time  introduces  EU  wide  online  registration  for  companies,  the  revised  Public  Procurement 
Directives, the proposed Regulation on the circulation of public documents, etc. 

European  e-Justice284  facilitates  access  to  justice  and  cross-border  judicial  proceedings  and 
makes it easier for citizens to find a lawyer/notary in the EU and for businesses to search for 
insolvent entities through interconnected insolvency registers. As of 2017, the e-Justice portal 
will also facilitate access to information on companies registered throughout the EU285. 

The  current  EU  e-Government  Action  Plan  2011-2015286  is  the  key  policy  instrument, 
steering Member State and Commission actions in four political priority areas: Strengthening 
the  Single  Market,  enhancing  efficiency  and  effectiveness  of  public  administrations, 
empowering citizens and businesses, and developing the necessary preconditions. 

The  European  Interoperability  Framework  promotes  and  supports  the  delivery  of  European 
public services by fostering cross-border and cross-sectoral interoperability. 

The assessment of the Points of Single Contact carried out by the Commission287 as well as 
business organisations288 shows that the Points of Single Contact do not yet fulfil businesses' 
needs in terms of the scope of information that the Member States are required to provide, the 
availability  of  information  in  foreign  languages  or  the  possibility  for  interacting  with  the 
public authorities fully online, including for foreign businesses. The Point of Single Contact 
Charter289 proposed by the Commission in 2012 encouraged Member States to work towards 
more  ambitious  Points  of  Single  Contact  to  make  life  easier  for  businesses.  This  approach 
remains to  a large extent  voluntary and does  not  resolve the issues  of the  differences in  the 
scope and quality of e-services offered to businesses. 

Adapting the company law acquis to digital tools is another issue that should be addressed at 
EU  level.  Though  a  number  of  measures  have  been  taken  at  national  level,  a  national 

284   The European e-Justice Portal is available at: https://e-justice.europa.eu/home.do 
285   In line with Directive 2012/17/EU 
286   COM(2010) 743 
287   Deloitte for the European Commission, The functioning and usability of the Points of Single Contact under 
the Services Directive – State of Play and Way Forward – Final Report, 2012, ongoing assessment by 
Capgemini 

288   Eurochambres, Services Directive implementation survey, The Chambers' Perspective on the Points of 

Single Contact, 2011; BusinessEurope, Are the Points of Single Contact Truly Making Things Easier for 
European Companies?, Services Directive Implementation Report, 2011; European Commission, High 
Level Group on Business Services - Final Report, 2014 

289   European Commission, Charter for the Electronic Points of Single Contact under the Services Directive 

77 

 
                                                            
approach  does  not  remove  the  obstacles  that  companies  face  if  they  consider  setting  up  or 
operating a company across borders290. 

In  addition  to  the  legislative  and  policy  instruments,  e-government  is  supported  through  a 
number  of  funding  programmes:  (i)  Under  the  Connecting  Europe  Facility,  Digital  Services 
Infrastructures (CEF DSI) deploy digital public services that work across borders, an essential 
precondition for the DSM, (ii) The ISA programme (Interoperability solutions for European 
Public Administrations) provides a framework that allows Member States to work together to 
create efficient and effective electronic cross-border public services for the benefit of citizens 
and  businesses,  (iii)  Horizon  2020's  Societal  Challenge  6  finances  projects  aimed  at  ICT-
enabled  open  government,  (iv)  the Justice  Programme  provides  dedicated  calls  for e-Justice 
projects  and  (v)  finally,  the  European  Structural  and  Investment  Funds  also  provide 
investments in the field of e-government in less favoured regions, as this is seen as a strategic 
component of their economic and social development. 

Expected Impact – what changes/opportunities do we expect from solving the issue? 

Digitalisation  of  administrations  should  be  designed  in  a  cost-effective  way.  Digitalisation 
implies certain costs for the administration: initial costs (e.g. equipment, software, skills, etc.), 
maintenance  costs,  life-cycle  of  products.  Reusing  digital  government  solutions  across 
countries and enabling reliable data exchange between systems are particularly important for 
cost-savings.  The  revised  Better  Regulation  Commission  Guidelines  will  include  a 
strengthened assessment of the digital dimension to help deliver initiatives which are internet 
ready and fit for the digital world so that virtual or physical goods and processes are treated in 
the same way. 

Economic assessment of the implementation of the Services Directive291 estimated that further 
procedural streamlining via Points of Single Contact in Member States could generate up to 
0.15% of GDP in the medium term (5-year horizon) and up to 0.21% of GDP in the long run. 
Extending the scope of the Points of Single Contact and making them comprehensive business 
portals integrated into the "Single Digital Gateway" could further contribute to simplification, 
savings for public administration and a more coherent approach in providing information and 
e-services  to  businesses.  The  'Single  Digital  Gateway'  could  join  up  the  numerous  existing 
information  services,  portals  and  contact  points,  expand  them  and  provide  a  seamless,  user 
friendly system enabling citizens and businesses to better benefit from the Single Market. 

A  revised  version  of  the  European  Interoperability  Framework  extended  with  concrete  and 
practical tools for the implementation of interoperability by public administrations in Europe 
could contribute to full implementation of One Stop Shop and Once Only principles ("end-to-
end services"), in a coherent manner, at European and national levels of public administration. 
It  would  facilitate  public  processes  and  data  transparency  and  contribute  to  achieving  a 
coherent  means  for  different  public  entities  to  publish  data,  so  that  open  public  data  across 
Europe can deliver its full potential contribution to the EU digital economy. 

As  regards  online  registration  of  companies,  given  that  the  SUP  proposal  only  provides  for 
this  option  for  one  type  of  company292,  savings  could  be  considerably  enlarged  if  online 

290   See examples of differing national reforms in company law in SWD(2014) 124 final, p. 21 et seq. 
291   Monteagudo, J. et al., 'The economic impact of the Services Directive: A first assessment following 

implementation', European Commission Economic Papers No 546, 2012 

292   Single-member companies which amount to 44 % of all private limited liability companies 

78 

 
                                                            
registration was offered more broadly293. Overall, digitalisation of company law requirements 
would  considerably  facilitate  interaction  between  companies  and  public  authorities,  in 
particular  in  a  cross-border  context,  reduce  costs,  facilitate  compliance  for  companies,  and 
enhance transparency.  

5.6.  Digitisation in basic sectors 

e-Health and e-Care 

Digital  technologies  for  health  and  care  offer  opportunities  for  citizens,  health  and  care 
providers and industry. Digital solutions can empower citizens to manage their health, while 
health  and  care  systems  can  improve  their  efficiency  and  cope  with  the  increasing  demand 
from  an  ageing  population294.  For  European  industry,  they  constitute  a  promising  market, 
serving the public sector and citizens, and creating high quality jobs and growth by combining 
the  high-tech,  ICT,  smart  homes,  medical  devices,  pharmaceuticals,  biotechnology  and 
healthcare sectors. A strong European industry will have a global reach.  

Most e-health and e-care solutions do not benefit from the large potential of the internal EU 
market.  The  deployment  of  digital  health  and  care  is  hampered  by  barriers  and  borders295. 
Implementation is small scale, with proprietary designs due to the lack of interoperable ICT 
solutions and European standards. The percentage of hospitals296 that exchange clinical care 
information about patients electronically is low, particularly across borders: 

Chart 25. The percentage of hospitals that exchange clinical care information about patients electronically 

The percentage of general practitioners (GPs) using electronic networks to exchange medical 
patient data with other healthcare providers and professionals varies greatly between Member 
States297.  Denmark  (91.8%  of  GPs),  the  Netherlands  (76.2%)  and  Estonia  (72%)  are  the 
countries ranking the highest, while in Slovenia only 5.4%, in Slovakia 7.45% and in Bulgaria 
8.67% of GPs do so. 

293   The 2-3 March 2015 Competitiveness Council included "online registration of companies" in its conclusions 
on Single Market Policy as one of the issues to be addressed by the Commission in the DSM Package 
294   Dobrev, A. et al., Report on The socio-economic impact of interoperable electronic health record (EHR) 
and ePrescribing systems in Europe and beyond, EHR IMPACT for the European Commission, 2009 
295   TimeLex for the European Commission, Study on the Legal Framework for Interoperable eHealth in 

Europe - Final Report, 2009 

296   PwC for the European Commission, European Hospital Survey: Benchmarking Deployment of eHealth 

Services (2012–2013), JRC Scientific and Policy Reports, 2014 

297   European Commission, Digital Agenda Scoreboard, 2014 

79 

 
 
                                                            
Chart 26. GPs exchanging medical patient data with other healthcare providers and professionals 

Similarly,  the  number  of  GPs  using  electronic  networks  to  transfer  prescriptions  to 
pharmacists is non-existent in some countries298. However, in Estonia, all GPs do so. 

Chart 27. GPs using electronic networks to transfer prescriptions to pharmacists 

The market is fragmented, resulting in increased costs and slow uptake by public authorities 
and citizens299. The uncertain market makes industry risk-averse, while also public authorities 
are  hesitant  to  invest  and  procure  these  solutions.  As  a  consequence  many  citizens  do  not 
benefit from innovation in the field of digitally enabled health and care products and services. 

298   Ibidem 
299   European Commission, Accelerating the Development of the eHealth Market in Europe, e-Health Taskforce 
report 2007; European Commission, Synthesis report on the Public consultation on the European Innovation 
Partnership on Active and Healthy Ageing, 2011 

80 

 
 
 
                                                            
Cross-border  healthcare  in  the  EU  is  growing.  However,  lack  of  technical  and  legal 
interoperability  of  information  systems  means  that  patient  data  cannot  be  easily  transferred 
across borders. This acts as an obstacle to the free movement of patients for planned care and 
makes situations involving emergency care more difficult than they should be. The lack of an 
EU-wide legal framework for recognition of telemedicine services and providers means that 
cross-border market access for such providers is difficult: clarifying the rules would facilitate 
the provision of innovative and cost-effective health and care services. 

Policy steps taken so far and need for the issue to be addressed at European level 

The e-Health Action Plan 2012-2020300 is guiding the current efforts in e-health.  

Horizontal  EU  legislation  in  place  or  under  review  applicable  to  e-health  includes  Data  Protection 
Directive,  Regulation  on  electronic  identification  and  trust  services  for  electronic  transactions  in  the 
Internal  Market,  Medical  Devices  Directives,  General  Product  Safety  Directive,  the  e-Commerce 
Directive and the Cybersecurity Strategy of the European Union.  

Directive 2011/24/EU on the application of patients’ rights clarified the legal framework for patients 
to  be  reimbursed  for  cross-border  healthcare.  Firstly,  it  established  the  principle  that  a  telemedicine 
service  is  considered  to  be  provided  in  the  Member  State  where  the  service  provider  is  established. 
Secondly, the e-Health Network established cooperation between Member State health systems. The 
Network301  has  adopted  guidelines  on  patient  summaries  and  e-prescriptions,  and  is  working  on  the 
use  of  health  data  for  public  health  and  research.  The  IT  system  supporting  the  exchange  of  patient 
summaries and e-prescriptions is being built with funding from the Connecting Europe Facility.  

Under Horizon 2020 (and previously in FP7) many research, innovation and development actions have 
been implemented to test solutions (e.g. ICT-based solutions for management of chronic diseases and 
independent living) for the European market.  

The  European  Innovation  Partnership  on  Active  and  Healthy  Ageing  (EIP  AHA)  has  formed  a 
community  across  many  EU  regions  of  over  3,000  stakeholders  with  considerable  expertise  in 
innovative solutions for ageing well, such as m-health, telehealth and integrated care. By sharing and 
replication  of  good  practices,  common  interoperability  specifications  and  joined-up  procurement  of 
digital solutions, the EIP AHA promotes stronger collaboration of national and regional authorities on 
the implementation of innovative products and services for health and social care under its Scaling-up 
Strategy302. 

Expected Impact – what changes/opportunities do we expect from solving the issue? 

Improvements in interoperable ICT solutions and European standards should lead to increased 
digital  competences,  both  for  health  and  care  professionals  and  patients,  increased  patient 
safety through use of common standards and terminology in cross-border transfer of medical 
data, increased data security and integrity to underpin citizens’ confidence and trust in using 
e-health  and  m-health  solutions,  more  effective,  resilient  and  sustainable  health  and  care 
systems303  and  substantial  acceleration  in  the  availability  of  trusted,  digitally  enabled 

300   COM(2012) 736 final 
301   European Commission, eHealth Network Multi-Annual Work Plan 2015-2018, 2014 
302   European Commission, European Scaling-up Strategy in Active and Healthy Ageing, 2014 
303   Quotes from the evidence base:  

- Inglis, S. C. et al., 'Structured telephone support or telemonitoring programmes for patients with chronic 
heart failure', The Cochrane Database of Systematic Reviews (CDSR) Issue 8, 2010 – results of this review 
indicate 34% reduction in all-cause mortality and 21% reduction in heart failure related hospitalisations; 
- Steventon, A. et al. for the Whole System Demonstrator Evaluation Team, 'Effect of telehealth on use of 
secondary care and mortality: findings from the Whole System Demonstrator cluster randomised trial', BMJ, 

81 

 
                                                            
 
healthcare and e-care products and services across Europe. This will contribute to the creation 
of  a  scalable  Internal  Market  with  new  companies  and  more  jobs  in  other  health  and  care 
related  industries304.  More  sustainable  health  and  care  systems  mean  that  millions  of  EU 
citizens will benefit from improved health status and quality of life. 

e-Transport 

Problem and problem drivers  

Transport  is  characterised  by  a  broad  range  of  actors  and  a  mosaic  of  approaches  to 
digitalisation, hindering the reuse of data from one mode to another and across countries, and 
hampering the development of new and reliable multimodal digital applications and services. 

Traffic  management  systems  provide  information  on  traffic  conditions  in  each  transport 
mode; Internet of Things applications, particularly tracking and tracing, provide data on goods 
location  and  conditions;  available  transport  services  are  listed  in  transport  operators' 
proprietary  systems;  and  shippers  know  what  is  inside  the  container.  However,  while  these 
systems have brought many advantages on their respective terrains, they are at different stages 
of development and implementation. 

Transport still suffers from non-interoperable legacy information systems, non-harmonised messages, 
missing  technical  standards  and  a  limited  legal  framework  for  sharing  information.  Individual 
operators and administrations are collecting data on transport vehicles and cargo and their movements, 
without  having  the  means  to  share  it  or  to  develop  value  added  services.  Even  when  initiatives  on 
information  exchange  are  being  developed,  these  are  taken  at  sectorial  level  and  by  different 
communities of stakeholders, without extended communication between them. As a result, standards 
and information systems are only usable for specific purposes, on a specific part of the transport chain, 
and  in  specific  regions.  This  lack  of  data  sharing  between  transport  sectors  and  modes  leads  to 
inefficiencies in the overall transport system, particularly in areas such as cargo transport. It hampers 
future opportunities for Europe to lead in rapidly developing technologies such as connected cars and 
automation. 

2012 – results from the Whole Systems Demonstration in the UK in 2012 indicate 18% reduction in hospital 
admissions and 46% reduction in mortality from the use of telehealth; 
- Joint Improvement Team for the Scottish Government, An Assessment of the Development of Telecare in 
Scotland 2006-2010, 2010 and European Commission, European Innovation Partnership on Active and 
Healthy Ageing Reference Sites: Excellent innovation for ageing - A European Guide, 2013 – the Telecare 
Development Programme in Scotland brought cost efficiency gains of approximately EUR 92 million over a 
5-year period (2006-2011) thanks to expedited hospital discharges, avoided hospital and care home 
admissions and bed days, and reduced home check visits; 
- Darkins, A. for the US Department of Veterans Affairs, Telehealth Services in the United States, 2014 – 
the telehealth services of the Veterans Health Administration in the USA show 59% reduction of bed days 
of care, 35% reduction in hospital admissions, and savings of USD 1.999 per annum per patient. 

304   Quotes from market forecasts studies: 

- BCC Research, Global Markets for Telemedicine Technologies, 2014 – the global telemedicine tools 
market will likely reach USD 43.4 billion within five years; the market segment for telehome (telehealth) 
technologies is predicted to grow from USD 6.5 billion in 2013 to USD 24 billion by 2019; 
- PwC, Touching lives through mobile health: Assessment of the global market opportunity, 2012 – this 
report forecasts that the global mobile health market will reach a value of EUR 17.5 billion in 2017, with 
Europe being the largest market segment (EUR 5.2 billion); 
- Manyika, J. et al., Disruptive technologies: Advances that will transform life, business, and the global 
economy, McKinsey Global Institute, 2013 – estimates the potential economic impact of the Internet of 
Things across healthcare applications to be USD 1.1 trillion to USD 2.5 trillion per year by 2025. 

82 

 
                                                                                                                                                                                          
As  regards  the  potential  for  administrative  simplification,  electronic  documents  are  not 
recognised  by  all  stakeholders  and  authorities  across  the  EU,  which  hinders  actual  use  of 
electronic instead of paper documents by companies. 

Different technical standards add to the complexity of the reuse of data: some of the existing 
standards  hinder  services  integration,  and  the  repeated  submission  of  the  same  data  creates 
unnecessary administrative burden for both administrations and the industry. 

Therefore stakeholders call for One Stop Shops or “data exchange platforms” where shippers, 
transport  operators,  service  providers  and  public  authorities  can  easily  share  and  access  the 
information they need to optimise their operations while potentially creating new services. 

Policy steps taken so far and need for the issue to be addressed at European level 

EU legislation has supported the development of tools by public authorities and public-private 
partnerships  to  facilitate  access  to  traffic  and  transport  data  within  specific  modes: 
SafeSeaNet305  for  maritime  transport,  River  Information  Services  (RIS)306  for  inland 
waterways,  TAP-TSI,  TAF-TSI307  and  ERTMS308  for  rail  transport,  ITS  specifications  for 
road transport309 and SESAR310 in the air transport sector. Further legal instruments include a 
Directive  on  ships  reporting  formalities311,  Blue  Belt312,  the  ITS  Directive  and  its  delegated 
Regulations313. This legislation would need to keep pace with the current developments of the 
respective sectors and hence be adapted accordingly and further developed when needed (e.g. 
Master plan for the deployment of cooperative systems, Digital Single Railway Area Strategy, 
Digital  Inland  Waterway  Area  Strategy,  Corridor  Information  Pipelines).  Specific  measures 
on access to transport data and recognition of electronic documents will also stimulate better 
mobility services and new business models. 

Expected Impact – what changes/opportunities do we expect from solving the issue? 

In  transport,  digitalisation  and  better  integration  of  existing  tools  can  significantly  improve 
transport and traffic management and open up a wide range of opportunities. New generations 
of  intelligent  transport  systems  (i.e.  cooperative  systems)  in  all  modes  would  bring  more 
accurate  information  on  traffic  and  infrastructure  conditions  and  on  the  location  of  vehicles 
and/or  goods.  Better  access to  and sharing  of  digital transport (traffic, travel,  vehicle,  cargo 
etc.) data for both public and private stakeholders along the value chain can foster seamless 
information flows, with multiple benefits: 

  Travellers  would  enjoy  new  types  of  mobility  services,  such  as  personalised  journey 
planners,  car  sharing,  park  &  ride,  charging  stations,  improved  maintenance  services, 
personalised insurance schemes. 

305   Created by Directive 2002/59/EC 
306   Created by Directive 2005/44/EC 
307   Technical Specifications for Interoperability for the Telematics Application for Passengers/Freight – 

Commission Regulation 454/2011, Commission Regulation 62/2006 and Commission Regulation 328/2012 

308   European Rail Traffic Management System – information available at: 

http://ec.europa.eu/transport/modes/rail/interoperability/ertms 

309   Directive 2010/40/EU 
310   Single European Sky Air Traffic Management Research – information available at: 

http://ec.europa.eu/transport/modes/air/sesar/index_en.htm 

311   Directive 2010/65/EU 
312   Information available at: http://ec.europa.eu/transport/modes/maritime/news/bluebelt_en.htm 
313   Information available at: http://ec.europa.eu/transport/themes/its/road/action_plan/index_en.htm 

83 

 
                                                            
  Shippers would benefit from more information on available transport services and possible 

cargo optimisation. 

  Factories  would  rely  on  information  on  goods  arrival  time  to  optimise  their  inventory 

management and production. 

  Transport operators would be able to optimise transport operations in real-time, making the 
entire  logistics  system  more  efficient,  and  could  collaborate  to  develop  pan-European 
multimodal information and planning systems supporting seamless door to door services. 

  Public authorities could benefit from more accurate and reliable information on transport 
volumes  and  infrastructure  use,  thereby  contributing  to  better  efficiency  and  operational 
safety of networks. Moreover, they would be able to better link transport with other sectors 
(e.g. energy, security). 

The development of information pipelines along the TEN-T Corridors (including their nodes) 
as  supported  through  EU  funding  (i.e.  the  Connecting  Europe  Facility)  would  enable 
synchronisation  of  investments,  and  continuity  and  integration  of  services.  They  would 
provide  shippers,  transport  operators  and  authorities  active  along  a  corridor  with  One  Stop 
Shops where they could easily share and access the data they need. 

e-Energy 

Problem and problem drivers  

The  energy  sector  and  the  related  infrastructure  have  started  a  radical  change.  In  the  new 
system, citizens, industries and commerce will engage in active management of their energy, 
first  as  consumers  who  adjust  their  consumption  to  the  supply  but  also  as  producers  of 
electricity  from  residential,  industrial  or  community-based  renewable  sources.  They  will 
exploit  the  flexibility  of  their  new  electricity  uses  for  transport,  heating  and  cooling.  Users 
and  companies  will  be  able  to  optimise  their  demand  or  supply  of  energy  through  different 
vectors  and  local  storage,  under  a  new  energy  market  design  as  addressed  in  the  Energy 
Union.  

Widespread  adoption  of  digital  technologies  including  the  ongoing  deployment  of  smart 
meters and other elements of smart grids will generate massive amounts of data that will raise 
important  questions  in  terms  of  the  roles  of  incumbent  and  new  players,  particularly  in  the 
management of the e-energy data streams, and responsibilities in terms of access rights, data 
privacy and cybersecurity. It will raise issues in terms of domains, IP addresses, and big data 
handling,  and  in  terms  of  compatibility  between  regulations  and  standards  for  energy, 
electronic  communications  and  transport.  Therefore,  due  attention  needs  to  be  paid  to  the 
successful completion of the two years test phase in the Commission Recommendation for the 
Data  Protection  Impact  Assessment  template314  which  aims  to  create  a  framework  which 
guarantees data protection in the smart grid and smart  metering systems. The digital energy 
system will also open up opportunities for new services and new actors, such as aggregators 
for renewable electricity sales and new energy services companies. 

314 Commission Recommendation 2014/724/EU 

84 

 
 
 
                                                            
Policy steps taken so far and need for the issue to be addressed at European level 

In October 2014, the Commission adopted a Recommendation on the Data Protection Impact 
Assessment Template (DPIA Template), which is in line with the forthcoming General Data 
Protection Regulation, anticipating the legal obligations arising therein. A two year test phase 
for the application of the template started at the beginning of March 2015 and the Template 
could be further fine-tuned to enhance its efficiency and user-friendliness at the end of 2016. 
The  template  is  complemented  by  identification  of  Best  Available  Techniques  (BAT)  to 
mitigate  security  and  privacy  risks  inherent  to  each  of  the  smart  meter  functionalities  in 
Recommendation 2012/148 on the roll-out of smart meters. This work is expected to generate 
a fully-fledged authoritative BAT Reference document by 2016 identifying the most suitable 
techniques for security in smart grids metering. 

6.  

INVESTING IN THE DIGITAL SINGLE MARKET 

The fully functioning DSM needs to rely on efficient ICT, including broadband infrastructure, 
to support digital growth and uptake in SMEs, e-society and the development and roll-out of 
ICT-based innovation. Given the large investments needed to roll out and upgrade the current 
connections  to  the  next  generation  of  digital  networks  –  often  based  on  fibre  technology  – 
there  is  a  serious  risk  that  market  failure  will  rapidly  increase  the  so-called  digital  divide 
across  Europe.  A  gap  analysis  on  the  funding  needed  to  meet  the  EU  broadband  targets  by 
2020 estimates that, in the most optimistic scenario, the coverage target (30 Mbps for all) will 
be  reached  if  EUR  34  billion  is  invested,  of  which  EUR  21  billion  comes  from  public 
sources315. The estimate to reach the take-up target (half of the European households with 100 
Mbps  subscription)  is  EUR  92.4  billion316.  Without  an  efficient  ICT  and  broadband 
infrastructure the DSM project will fail and Europe will not achieve the digital transformation 
needed to ensure growth. 

Europe lags behind its main competitors in ICT research and in digital innovation: according 
to  the latest available data, it invests only  0.21%  of its GDP in  ICT, compared to  0.57%  in 
Japan, 0.58% in the US and 1.47% in South Korea. The EU only represents 6% of the total 
number  of  patents  related  to  "connected-everything" technologies,  far  behind the  US,  South 
Korea or Japan. The EU is thus at risk of losing competitiveness vis-à-vis the rest of the world 
if the development and uptake of digital technologies is not accelerated. There is a need for 
better transformation of research into innovation, increasing research and innovation funding 
by businesses and by governments and increased efficiency of public research and innovation 
support. Attracting more private investments and better financing instruments is also needed 
for starting and growing innovative companies. 

The data below provides an overview of EU funding for investment in ICT and Broadband. 

European Structural and Investment Funds 

To support the public authorities in defining their strategy and to plan their administrative and 
investment  effort,  the  2014-2020  Common  Provisions  Regulation  for  all  ESI  Funds 
establishes  that  access  to  EU  funds  to  support  the  investments  in  ICT  requires  a  prior 

315   European Commission on the basis of the study by Analysis Mason, The socioeconomic impact of 

broadband, 2013 – this estimate is based on Fibre-to-the-Cabinet (FTTC) coverage as a proxy for the 
achievement of universal coverage by 2020 in the EU28 (on top of FTTC already in place) 

316   Ibidem – this calculation is performed for urban coverage of DOCSIS 3.1 and FTTH/B as a proxy for 

reaching the target of 50% take-up of 100 Mbps; this scenario reaches 85.1% population coverage with 100 
Mbps technologies 

85 

 
                                                            
fulfilment  of  two  ex-ante  conditionalities.  The  first  requires  the  formulation  of  a  digital 
growth  strategy  to  stimulate  affordable,  good  quality  and  interoperable  ICT-enabled  private 
and  public  services  and  increase  uptake  by  citizens,  businesses  and  public  administrations.  
The  second  requires  the  development  of  a  Next  Generation  Network  (NGN)  Plan  for 
measures  to support broadband  networks. Cohesion  policy will support the DSM legislative 
initiatives by stimulating their enforcement also in medium term. 

Compared  with  the previous programming period  (2007-2013),  the European  Structural  and 
Investment  Funds  (ESI  Funds)  have  stepped  up  efforts  in  the  areas  of  ICT  and  digital 
networks  roll-out.  Overall,  the  ESI  Funds  are  expected  to  programme  around  EUR  14.5 
billion  to  "Enhancing  access  to  and  use  and  quality  of  ICT"317.  This  is  in  line  with  the 
previous  programming  period.  However,  ICT-related  categories  of  expenditure  are  also 
present  in  all  other  thematic  objectives,  resulting  in  an  estimated  investment  of  EUR  21.4 
billion,  of  which  EUR  17.8  billion  from  ERDF,  EUR  2.1  billion  from  ESF  and  EUR  1.5 
billion from EAFRD318. 

Around 70% of this is expected to support digital growth in SMEs, e-government, e-inclusion, 
e-culture, e-health, e-justice and the development and roll-out of ICT-based innovations. The 
investments will bring concrete and visible benefits of the DSM to citizens and businesses, in 
particular SMEs. These investments will be instrumental for enabling all regions to seize the 
new DSM opportunities for growth and jobs, as they are tailored to the needs of each Member 
State/region and its needs and potentials. 

The allocation of ESI funds for high speed broadband networks experienced a sharp increase 
from EUR 2.7 billion in 2007-2013 to around EUR 6.4 billion for 2014-2020 (about EUR 5 
billion  ERDF  and  an  estimated  EUR  1.5  billion  EAFRD)319.  However,  most  of  this 
investment is expected to be made in the form of grants rather than financial instruments so 
the leverage effect on public (national and/or regional co-funding) and private co-funding will 
not  reach  more  than  EUR  9-10  billion  –  falling  far  short  from  the  needs  to  reach  the  EU 
targets for broadband coverage and take-up.  

The objective of the ESF is to improve employment and job opportunities, encourage a high 
level  of  employment  and  more  and  better  jobs.  The  ESF  may  support  projects  for  the 
development  of  digital  skills  if  they  are  in  line  with  the  ESF  thematic  objectives  and  the 
investment priorities selected by the Member States. In their operational programmes Member 
States  have  declared  that  EUR  2.1  billion  should  be  dedicated  to  these  projects  during  the 
2014-2020 programming period. 

Beyond  funding  per  se,  the  ESI  Funds  can  make  an  important  contribution  to  the  DSM 
through the following mechanisms: 

 

Implementation policies, including ex-ante conditionalities, to increase the incentive of a 
speedy and complete implementation of EU Directives and policy guidelines. 

317   Thematic Objective 2 allocation on the basis of the indicative financial tables of Partnership Agreements 
318   Based on draft and approved Operational Programmes as of 11 March 2015; final numbers available on the 

Cohesion Policy Data platform at: https://cohesiondata.ec.europa.eu 

319   An estimate as the Commission cannot differentiate between allocations foreseen in EAFRD for ICT and 

Broadband as this type of information is not requested by the regulation. However, additional information is 
requested and will be provided in the context of monitoring activities (in particular, monitoring will be done 
for ''N° of operations", "Population benefiting from new or improved IT infrastructure" differentiating here 
between "Broadband" and "Other than broadband"). 

86 

 
                                                            
  Know-how  to  facilitate  and  improve  the  implementation  of  the  new  financial  support 

opportunities and overcome the gaps in administrative capacities.  

  Local  intelligence  in  terms  of  having  grass-roots  level  contacts  with  regional  and  local 
authorities  to  channel  through  EU  level  priorities,  create  synergies  and  links  of  EU 
initiatives with national and regional policies, and to provide a bottom-up reality check in 
terms of the feasibility and challenges on the ground. 

Connecting Europe Facility 

The Connecting Europe Facility (CEF) in the digital area is endowed with a limited budget of 
EUR  1  billion  for  the  period  2014-2020  after  the  severe  cuts  it  suffered  in  the  Multiannual 
Financial Framework (MFF) negotiations from a proposed EUR 9.2 billion. The bulk of the 
budget  will  be  disbursed  (EUR  850  million)  through  grants  in  the  area  of  Digital  Service 
Infrastructure  and  will  advance  pan-European  projects  in  areas  such  as  e-government,  e-
procurement, e-health. 

The remaining  EUR 150  million will be allocated to  broadband infrastructure, based on the 
provision  of  financial  instruments  via  the  European  Investment  Bank  (EIB).  Under  this 
structure,  the  Commission  and  the  EIB  can  finance  loans,  project  bonds  and  guarantees  for 
project  financing  in  the  area  of  telecoms.  CEF  debt  instrument,  which  will  also  enable  new 
project bond transactions, will be operational as of Q2 2015. The broadband part of CEF is 
expected to mobilise around EUR 1 billion320. 

The CEF will contribute to the DSM Strategy: EUR 150 million is earmarked for broadband 
and EUR 850 million is earmarked for Digital Services Infrastructure. 

Horizon 2020, COSME and Erasmus+ 

Actions  to  be  financed  under  Horizon  2020,  the  COSME  programme  and  Erasmus+  are 
expected  to  contribute  to  the  DSM  Strategy.  In  the  new  programming  period  Horizon  2020 
will devote approximately EUR 12.5 billion to ICT research. However, an important share of 
non-ICT  industry  investment  in  research  and  innovation  is  in  fact  in  ICT  research  and 
innovation. A recent study by Roland Burger based on interviews and analysis done in major 
industrial  sectors  shows  the  share  of  ICT  in  research  and  innovation  investments  done  by 
major industrial sectors worldwide. 

EU  investment  will  support  the  ICT  research  and  innovation  that  can  best  deliver  new 
business  breakthroughs,  often  on  the  basis  of  emerging  technologies.  In  particular,  ICT  in 
Horizon  2020  will  support  the  development  of  ICT  in  Science,  ICT  in  industrial  leadership 
and ICT in societal challenges. 

European Public Private Partnerships (PPPs) are central parts of EU innovation strategies and 
have  a  strong  presence  in  Horizon  2020.  PPPs  enable  to  establish  an  open  and  transparent 
dialogue  with  a  wide  range  of  stakeholders  (users,  suppliers,  SMEs  and  mid-caps321,  large 
companies  and  academia)  in  various  sectors  and  develop  a  strategic  research  agenda.  PPPs 
also help to ensure continuity and monitoring through KPIs (Key Performance Indicators) of 

320   Under the pilot phase of the Europe 2020 Project Bond Initiative, the EIB and the Commission closed in 
July 2014 the first deal on a broadband project bond (in France – Axione is the beneficiary). The leverage 
factor foreseen for the broadband part of CEF is around 7x, so it is expected to mobilise around EUR 1 
billion. This leverage was exceeded by the Axione deal which had a leverage factor of 14x. 

321   Mid-caps referring to companies with between 250 and 3,000 employees 

87 

 
                                                            
the  strategy  while  allowing  partners  to  anticipate  and  react  swiftly  to  opportunities  and 
challenges. 

Within the Horizon 2020 framework there are the following PPPs in the digital sector: 

Five  "Contractual  PPPs"  (cPPP)322  exist  today  in  the  areas  of:  (i)  Robotics323,  (ii)  Photonics324,  (iii) 
High  Performance  Computing,  (iv)  Advanced  5G  Networks325  and  (v)  Big  Data326.  A  new  one  on 
Cybersecurity  is  in  preparation.  They  focus  on  ICT  supply  and  are  strongly  driven  by  Europe's  ICT 
industries. 

The "Institutional PPP" Electronic Components and Systems for European Leadership (ECSEL) with 
Member States and industry is a Joint Technology Initiative (JTI)327 covering an important part of the 
electronics value chain from semiconductor components to embedded software. 

The  total  EU  funding  planned  for  these  cPPPs  and  JTI  is  around  EUR  5  billion  in  2014-2020.  This 
should  leverage  at  least  an  additional  EUR  20  billion  of  private  investment  and  EUR  1.2  billion  of 
Member States' investment (ECSEL).  

Horizon 2020 will also help companies and other types of organisation gain access to loans, 
guarantees and equity finance via two facilities.  

  The debt facility that will provide loans to single beneficiaries for investment in research 
and  innovation;  guarantees  to  financial  intermediaries  making  loans  to  beneficiaries; 
combinations of loans and guarantees,  and guarantees or  counter-guarantees  for national, 
regional  and  local  debt-financing  schemes.  It  will  include  an  SME  window  targeting 
research  and  innovation-driven  SMEs  with  loan  amounts  that  complement  finance  to 
SMEs  by  the  Loan  Guarantee  Facility  under  the  Programme  for  the  Competitiveness  of 
Enterprises  and  SMEs  (COSME).  Corresponding  estimations  arrive  to  a  total  volume  of 
EUR 534 million loans for SMEs in information and communication sector.  

  The  equity  facility  that  will  provide  venture  and/or  mezzanine  capital  to  individual 
enterprises in the early stage (start-up window). The facility will also have the possibility 
to  make  expansion  and  growth-stage  investments  in  conjunction  with  the  Equity  Facility 
for  Growth  under  COSME,  including  in  funds-of-funds.  The  total  volume  of  equity 
funding  to  SMEs  in  the  information  and  communication  sector  is  estimated  to  be  about 
EUR 600 million, thereof EUR 360 million under COSME and EUR 240 million under the 
Horizon 2020 InnoFin facility328. 

According  to  the  legal  base,  the  overall  indicative  budget  for  the  seven-year  period  of 
COSME  (2014-2020)  is  EUR  2.3  billion.  It  will  start  at  EUR  275  million  in  2014  and  rise 
progressively to EUR 430 million in 2020. A large share of the budget, 60% minimum over 
the period, will be allocated to the financial instruments.  

322   Information available at: http://ec.europa.eu/research/industrial_technologies/ppp-in-research_en.html 
323   Information available at: http://www.eu-robotics.net/ppp/robotics-ppp 
324   Information available at: http://www.photonics21.org/index.php 
325   Information available at: http://www.networks-

etp.eu/fileadmin/user_upload/Publications/SuccessStories/2013-EurTelecomInfrastructures.pdf 
326   Information available at: http://ec.europa.eu/digital-agenda/en/data-public-private-partnership 
327   Information available at: http://ec.europa.eu/research/jti/index_en.cfm?pg=home 
328   Note that there is no predefined sectorial assignment of the total budget. The estimations of the volume of 
financial instruments as presented above are based on the sectorial shares of the total allocated budget in 
predecessor programmes. Note that these refer partly to different sector classifications/sectorial split. 

88 

 
                                                            
Erasmus+,  the  EU  funding  programme  for  Education,  Training,  Youth  and  Sport,  aims  to 
support skills and employability as well as to modernise education, training and youth work. 
The  EUR  14.7  billion  funding  programme  is  expected  to  reach  hundreds  of  thousands  of 
educators  and  trainers  and  around  125,000  educational  institutions.  As  the  programme 
considers  digital  technology  uptake  as  a  horizontal  priority  many  of  the  supported  projects 
aim  to  increase  the  uptake  of  digital  technologies  in  education  and  training  or  to  increase 
digital pedagogies, skills and competences. 

The investment plan for Europe 

The European Fund for Strategic Investment (EFSI) is currently being negotiated. It will have 
an  infrastructure  window  (operating  through  debt  and  equity)  as  well  as  an  SME  window. 
Overall,  the  Investment  Plan  for  Europe  will  be  a  package  of  measures  aiming  to  unlock 
public  and  private  investments  in  the  real  economy  of  at  least  EUR  315  billion  -  including 
EUR 75 billion for SMEs and mid-caps - over the next three years (2015-2017)329. 

There is no sectorial earmarking in EFSI, i.e. it is difficult to anticipate how much budget will 
be  allocated  to  ICT,  broadband  or  other  initiatives  in  line  with  the  DSM  Strategy  and  its 
pillars.  However,  given  the  initial  project-pipeline330,  the  share  of  proposed  projects  which 
were classified as coming from "Knowledge, Innovation and the Digital Economy", and the 
anticipated  pass  rate  of  presented  projects  the  order  of  magnitude  of  investments  in  the 
corresponding thematic areas can be assumed.  

In  the  final  report  of  the  special  task  force  and  in  the  project  pipeline  submitted  by  the 
Member State, the EC and the EIB digital projects are well represented. Out of the EUR 447 
billion in projects identified by the Task Force, EUR 81 billion are for the section related to 
knowledge creation and the digital economy, which is the third largest area after energy (EUR 
136 billion in projects identified) and transport (EUR 123 billion). A significant part of EFSI 
support provided for SME and mid cap should concern innovative digital firms. Although the 
presence in the project list does not entail financing, this gives a good flavour of the role that 
knowledge and digital economy will play. More in detail, the EUR 81 billion pipeline for the 
knowledge  and  digital  economy  is  divided  as  follows:  broadband  (EUR  26  billion),  private 
research  and  innovation  (EUR  40  billion),  and  public  research  and  innovation  (EUR  15 
billion). 

Other EIB and EIF funding 

The  EIB  stated  in  its  Annual  Report  2013  (most  recent  available),  that  it  has  provided 
financing  for  the  "Knowledge  Economy"  within  the  EU  totalling  EUR  15.1  billion.  For  the 
subsector  "PSTN"  [transmission  and  broadcasting  networks],  overall  EUR  4  billion  of 
funding have been allocated during the period 2009 - 2013 (EUR 0.8 billion in 2013). In fact, 
the  EIB  is  providing  financing  to  telecoms  operators  as  part  of  its  core  business.  This  is 
typically  channelled  as  corporate  financing,  with  limited  project  financing.  Large  European 
operators  are  the  main  recipients  of  EIB  funding,  with  PPP  becoming  more  and  more 
common.  In  2014,  the  EIB  disbursed  loans  for  EUR  2.27  billion  in  the  area  of  telecoms, 
showing however a downward trend from 2013 when EUR 3.02 billion had been disbursed. 

329   The EU guarantee will be backed up by existing margins of the EU budget (EUR 2 billion), the CEF (EUR 
3.3 billion) and the Horizon 2020 programme (EUR 2.7 billion) to a total amount of EUR 8 billion; in 
general, digital plays a prominent role in the announcement of the package, which includes several digital 
references and examples 

330   For the project-pipeline, potential projects for EFSI support have been reported by the Member States and as 

a result, projects that could be realised in the next 3 years were identified 

89 

 
                                                            
The amount disbursed also represents a small fraction of the EUR 76.9 billion disbursed by 
the EIB in 2014. In 2014, the largest deal signed by the EIB was a loan to TDC in Denmark 
for EUR 500 million. 

The European Investment Fund (EIF) is the leading European investor in venture and growth 
capital  funds,  and  a  critical  provider  of  capital  for  start-ups  and  SMEs,  stimulating 
entrepreneurship and innovation. In 2013, the EIF committed EUR 1.47 billion (up from EUR 
1.35  billion  in  2012  and  EUR  1.12  billion  in  2011)  to  68  seed,  venture  and  growth  capital 
funds, helping them to  reach a critical mass and achieve closing. Throughout 2013, the EIF 
catalysed EUR 7.15 billion of capital for the benefit of SMEs. It is estimated that more than 
40% of these concern ICT. The EIF also manages resources (own resources and on behalf of 
the  Commission  or  Member  States),  facilitating  the  granting  of  loans  and  leases  to  SMEs 
through  financial  intermediaries.  In  2013,  new  transactions  amounting  to  EUR  1.84  billion 
were signed across a large number of European countries, catalysing EUR 8.61 billion. 

Chart 28. Overview of funding presented above 

Total Digital Funding 

Of which broadband 

ESIF 

CEF 
Horizon  2020  and 
COSME 
EFSI 
Other EIB and EIF 

Total (2014-2020) 

EUR 17.8 bn 
EUR 2.1 bn 
EUR 1.5 bn 
EUR 1.0 bn 
EUR 12.7 bn331 
EUR 0.894 bn332 

ERDF   
ESF 
EAFRD 
CEF 
H2020  
COSME 
No sector allocation 
EUR 16.1 bn333 
EIB 
EUR 9.2 bn334 
EIF 
Digital/ICT   EUR 61.3 bn 

ERDF   

EUR  5.0  bn 

EAFRD 
CEF/BB 

EUR 1.4 bn 
EUR 0.15 bn 

No sector allocation 
EIB 

 EUR 16.1 bn 

Broadband EUR 22.65 bn 

All these instruments and funding possibilities have a high potential to stimulate investments 
towards the achievement of the EU 2020 objectives to fully cover the EU territory by ultra-
fast  broadband,  including  the  rural  and  most  remote  EU  areas.  More  generally,  they  will 
contribute to growth and job creation. This potential should be fully exploited by enhancing 
synergies and complementarities between the instruments and the Funds, including also in the 
programming  of  the  regional,  cohesion  and  rural  development  funds.  A  One  Stop  Shop  for 
broadband should help to reach ESIF beneficiaries most effectively. 

331   Including InnoFin 
332   Debt + Equity platform, excluding InnoFin 
333   Estimated by multiplying the average lending of the last 3 years (EUR 2.3 billion) in telecoms for 7 years 
334   Estimated by multiplying the average lending to SMEs for the last 3 years (EUR 1.3 billion) for 7 years 

90 

 
 
 
 
 
 
 
 
 
 
 
 
                                                            
ANNEXES 

I. Access to finance for digital entrepreneurs  

For many firms, especially newly created companies, the lack of risk capital and innovative 
financing  schemes  in  Europe  remains  a  major  problem.  For  example,  41%  of  innovators 
participating in ICT FP7 projects consider the lack of financing as a major external bottleneck 
that  could  compromise  the  exploitation  of  innovations335.  European  SMEs  are  largely 
dependent on traditional bank financing. Data collected between April and September 2014, 
shows  that  for  62%  of  European  SMEs  bank  loans  remain  the  favourite  form  of  external 
financing to realise their growth ambitions. However, access to bank financing is not adequate 
for the financial needs of digital entrepreneurs.  

Non-bank  forms  of  finance  may  constitute  an  alternative,  complementary  source  of  finance 
for SMEs, although some of them are not fully accessible for SMEs, as compared to bigger 
enterprises.  For  instance,  only  few  SMEs  are  accessing  corporate  bonds,  private  placement, 
IPOs for various reasons, including high administrative costs. Alternative sources of finance, 
such  as crowdfunding,  are emerging,  although their availability is  still at an early stage and 
not fully developed in all Member States. 

The  problem  of  access  to  finance  is  most  acute  for  Start-up  companies.  These  high-risk 
enterprises need access to a capital source which is willing to take high risks in exchange for 
potentially  high  rewards,  i.e.  venture  capital.  However,  the  supply  of  venture  capital  in 
Europe is very limited. In 2013, VC investments in Europe amounted to just 0.024% of GDP, 
compared to 0.175% in US336, lagging by a factor of seven. Ability of investors to withdraw 
their  investment  from  a  given  company  in  order  to  release  the  associated  profits  remains 
problematic in Europe337. 

Moreover, different regulatory regimes across Member States make the cross-border flow of 
investment capital difficult. The amount of European cross-border venture capital investments 
is  estimated  to  be  less  than  17%338.  Partly  as  a  result  of  this  fragmentation  many  EU 
companies  which  are  successful  on  the  Internet  find  it  difficult  to  reach  critical  mass  for 
creating digital businesses across Europe. Some of the most successful ones are bought by US 
or Asian companies or settle in the US. 

The  European  Venture  Capital  Regulation  introduced  in  2013  makes  it  easier  for  venture 
capitalists to raise funds across Europe for the benefit of start-ups, through the introduction of 
a  single  rulebook.  The  2014  Communications  on  long-term  financing  and  on  crowdfunding 
provided  a  frame  for  the  Commission's  work  to  support  the  development  of  alternative 
sources of finance for SMEs. 

335   'Innovation Radar: Identifying high potential innovations and innovators in FP7 projects', JRC/IPTS 

Working Paper, forthcoming 2015 

336   European Private Equity and Venture Capital Association (EVCA), 2013 European Private Equity Activity: 

Statistics on Fundraising, Investments & Divestments, 2014, p. 45 

337   There is a clear link to the Capital Markets Union in both entrepreneurship and the digitalisation of financial 

services 

338   European Private Equity and Venture Capital Association (EVCA), 2013 European Private Equity Activity: 

Statistics on Fundraising, Investments & Divestments, 2014, p. 39 

91 

 
 
 
                                                            
II. The challenge for direct tax systems 

Problem and Problem drivers 

There is broad and rising public and political concern over the fact that some multinationals 
currently  succeed  in  paying  very  little  corporate  income  tax  in  the  EU.  Several  of  the  high 
profile  public  examples  concern  digital  companies  such  as  Apple,  Google  or  Amazon. 
Aggressive  tax  planning  strategies  concern  all  industries.  Increased  mobility  through 
digitalisation merely exacerbates the scale of it for purely digital companies. 

Beyond the general issue of aggressive tax planning which is being addressed by both EU and 
OECD initiatives, there is a second issue regarding the fact that enterprises which mainly or 
exclusively operate on the web, by their nature have no or limited need for physical presence 
in  the  countries  of  their  users.  The  growing  importance  of  the  service  component  of  the 
economy,  and  of  digital  products  that  often  can  be  delivered  over  the  Internet,  has  made  it 
possible for businesses to locate many productive activities in locations that are distant from 
the physical location of their customers.  

As  a  result,  such  enterprises  often  have  no  taxable  presence  in  the  EU  to  which  any  profit 
could theoretically be allocated. This is referred to as "the broader issue" of taxation of digital 
enterprises.  

Both issues were identified in the May 2014 Commission Expert Group Report on Taxation 
of the Digital Economy339. They were also identified in the September 2014 OECD report on 
Taxation  of 
first  package  of 
measures/recommendations  to  tackle  international  corporate  tax  avoidance  in  the  context  of 
the OECD's Action Plan on Base Erosion and Profit Shifting (BEPS). 

the  Digital  Economy340,  which  was  part  of 

the 

Such issues challenge direct tax systems as well as Member States' tax revenues. They may 
also  lead  to  unfair  tax  competition  and  a  lack  of  level  playing  field  between  economic 
operators (EU v. non-EU, and within the EU). In addition, they may entail the risk of Member 
States  taking  unilateral  action  by  introducing  special  taxes  on  digital  activities  or  requiring 
fiscal representatives which can act as a barrier to the development of the DSM.  

Need for the broader issue to be addressed at European level 

With  respect  to  direct  taxation,  the  Commission  Expert  Group  Report  on  Taxation  of  the 
Digital  Economy  recognises  that  the  increased  mobility  associated  with  digital  technologies 
exacerbates challenges faced by current direct tax systems. However, it  concludes that there 
should not be a special tax regime for digital companies. At the same time, it finds that it is 
also important to investigate more profound changes in international corporation tax. 

In particular, for the medium and long term, the group also commends the CCCTB (Common 
Consolidated Corporate Tax Base – see hereinafter) as a more fundamental solution to many 
of  the  corporate  tax  avoidance  issues  while  also  ensuring  simplification  and  reduce 
administrative burden.  

339   European Commission, Report from the Commission Expert Group on Taxation of the Digital Economy, 

2014 

340   OECD, Addressing the Tax Challenges of the Digital Economy, OECD/G20 Base Erosion and Profit 

Shifting Project, 2014 

92 

 
                                                            
Finally,  the  Expert  Group  report  underlines  that  tax  incentives  should  be  approached  with 
caution and be carefully assessed both ex ante and ex post. At the same time, it concludes that 
expenditure based research and innovation tax incentives, provided they are designed well and 
are evaluated regularly, could address some constraints faced by young innovative companies, 
including digital.  

Although  the Commission  has  already delivered significant progress in the fight against tax 
avoidance and tax fraud through the implementation of its 2012 Action Plan to Strengthen the 
Fight  against  Tax  Fraud  and  Tax  Evasion341,  the  political  context  has  moved  on  since  its 
publication.  The  earlier  focus  on  improving  tax  compliance  and  administrative  cooperation 
has now expanded to encompass an analysis of those features of tax systems which contribute 
to aggressive tax planning. 

This  is  why  the  Commission  Work  Programme  for  2015  stated  that,  in  the  light  of  global 
developments  the  Commission  will  present  an  Action  Plan  on  a  renewed  approach  for 
corporate taxation in the Single Market, where profits are taxed where the value is generated, 
including in the digital economy.  

The  Action  Plan  will  also  reinvigorate  discussions  on  the  CCCTB,  as  a  tool  to  make  the 
Internal Market more competitive and to limit the opportunities for companies to manipulate 
their  tax  position.  It  is  expected  that  the  Commission  will  adopt  this  Action  Plan  in  the 
summer. 

Expected Impact 

The  objective  of  the  EU  initiative  is  to  ensure  that  profits  are  taxed  where  the  economic 
activities  are  taking  place  and  value  is  created.  The  implementation  of  this  principle  will 
significantly  reduce  opportunities  for  tax  planning.  It  will  also  help  create  a  fairer,  less 
complex and less distortive corporation tax environment in Europe and improve the operation 
of the Single Market, including the digital economy. 

341   COM(2012) 722 final 

93 

 
                                                            
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telematic applications for freight subsystem of the trans-European conventional rail system 

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–  Directive  2000/31/EC  of  the  European  Parliament  and  of  the  Council  of  8  June  2000  on 
certain legal aspects of information society services, in particular electronic commerce, in 
the Internal Market ('Directive on electronic commerce') 

–  Directive  2002/58/EC  of  the  European  Parliament  and  of  the  Council  of  12  July  2002 
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communications sector (Directive on privacy and electronic communications) 

107 

 
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establishing a Community vessel traffic monitoring and information system and repealing 
Council Directive 93/75/EEC 

–  Directive 2005/44/EC of the European Parliament and of the Council of 7 September 2005 
on harmonised river information services (RIS) on inland waterways in the Community 

–  Directive 2010/40/EU of the European Parliament and of the Council of 7 July 2010 on the 
framework  for  the  deployment  of  Intelligent  Transport  Systems  in  the  field  of  road 
transport and for interfaces with other modes of transport 

–  Directive 2010/65/EU of the European Parliament and of the Council of 20 October 2010 
on  reporting  formalities  for  ships  arriving  in  and/or  departing  from  ports  of  the  Member 
States and repealing Directive 2002/6/EC 

–  Directive  2011/92/EU  of  the  European  Parliament  and  of  the  Council  of  13  December 
2011  on  the  assessment  of  the  effects  of  certain  public  and  private  projects  on  the 
environment 

–  Directive  2012/17/EU  of  the  European  Parliament  and  of  the  Council  of  13  June  2012 
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the  European  Parliament  and  of  the  Council  as  regards  the  interconnection  of  central, 
commercial and companies registers 

–  Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on 
alternative  dispute  resolution  for  consumer  disputes  and  amending  Regulation  (EC)  No 
2006/2004 and Directive 2009/22/EC 

–  Directive 2013/40/EU of the European Parliament and of the Council of 12 August 2013 
on  attacks  against  information  systems  and  replacing  Council  Framework  Decision 
2005/222/JHA 

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rights in musical works for online use in the internal market 

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stakeholder platform on ICT standardisation [2011/C 349/04] 

–  Regulation (EC) No 223/2009 of the European Parliament and of the Council of 11 March 
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European  Parliament  and  of  the  Council  on  the  transmission  of  data  subject to  statistical 
confidentiality to the Statistical Office of the European Communities, Council Regulation 
(EC)  No  322/97  on  Community  Statistics,  and  Council  Decision  89/382/EEC,  Euratom 
establishing a Committee on the Statistical Programmes of the European Communities 

–  Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 

2008 on the law applicable to contractual obligations (Rome I) 

–  Regulation  (EC)  No  2006/2004  of  the  European  Parliament  and  of  the  Council  of  27 
October 2004 on cooperation between national authorities responsible for the enforcement 
of consumer protection laws (the Regulation on consumer protection cooperation) 

108 

 
–  Regulation  (EC)  No  765/2008  of  the  European  Parliament  and  of  the  Council  of  9  July 
2008 setting out the requirements for accreditation and market surveillance relating to the 
marketing of products and repealing Regulation (EEC) No 339/93 

–  Regulation (EU) No 524/2013 of the European Parliament and of the Council of 21 May 
2013  on  online  dispute  resolution  for  consumer  disputes  and  amending  Regulation  (EC) 
No 2006/2004 and Directive 2009/22/EC (Regulation on consumer ODR) 

–  Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 
2014  on  electronic  identification  and  trust  services  for  electronic  transactions  in  the 
internal market and repealing Directive 1999/93/EC 

–  Regulation  (EU)  No  1215/2012  of  the  European  Parliament  and  of  the  Council  of  12 
December 2012 on jurisdiction and the recognition and enforcement of judgments in civil 
and commercial matters 

109