Select Committee on European Union Written Evidence

Memorandum by the European Information and Communications Technology Industry Association (EICTA)

  EICTA is the European Information and Communications Technology Industry Association—bringing together 22 national ICT associations from 16 European countries and 26 large ICT corporations with major operations in Europe. EICTA has been operational since 1 January 2000, combining those activities that were previously vested in ECTEL and EUROBIT. It represents more than 3,000 European ICT companies generating an annual turnover of over 200 billion Euro. More about EICTA can be found at:


  "eEurope—An Information Society for All" announced by Mr Prodi last December is a welcome demonstration of the Commission's willingness to put political weight behind the vision of an Information Society and thus the modernisation of the European economy as well as strengthening social and regional cohesion. We strongly share the President's wish to modernise the European economy and our comments are intended to support this objective.

  Each of the 10 priority action points is worthwhile in itself. Taken together and effectively implemented, these 10 priority actions could initiate a positive process of change in the European Union; however even these actions are not sufficient to tip the balance decisively in favour of the creation of an Information Society—a modern society—in Europe.

  In addition to the 10 priorities, we would like to emphasize the importance of R&D as a key driver of industry competitiveness worldwide. In terms of R&D investments, Europe is lagging behind both the US and Japan; and is generally less focused on ICT related fields thereby hindering the competitiveness of European ICT industries. EICTA suggests that the eEurope initiative lead to a joint action with industry to improve European R&D in ICT relevant fields. These actions could focus on basic technologies, software and various applications, which could benefit both manufacturing and service industries.

  In our opinion however, the main obstacle to building "an entrepreneurial culture ready to finance and develop new ideas", is the fact that Europe's economic progress in the digital age is being hampered by the maintenance (by European governments) of a regulatory environment that is in some cases more relevant to the steam age. European entrepreneurs are already voting with their feet. Some emigrate from one Member State to another, in order to gain access to venture capital, skills and a more "business-friendly" tax and regulatory environment; this, at least, keeps European entrepreneurs within Europe. The implementation of the raft of EU social legislation across the Union—in the name of a level playing field, creates an excessively high level of regulation in all Member States which has already resulted in driving some of our best entrepreneurs offshore. As it is, the existing cost of compliance to social and other regulation in Europe has long been recognised as one of the main inhibitors to high tech start-ups and their success.

  Unless the Union has the political will and drive to confront the negative effect of increasingly costly regulatory compliance, there is little chance of building an entrepreneurial culture which could be expected to compete successfully with our main global trading partners, particularly the US.

  We perceive eEurope to be a step in the right direction; a broad initiative which aims at achieving specific objectives in order to facilitate the overall development of the Information Society. However, we hope that these action areas will encourage a general shift to modernise and streamline the European regulatory infrastructure, making it more flexible and responsive to today's needs. Achieving this broader goal will be the key to success and increased competitiveness in the digital age.

  The purpose of this paper is therefore to provide preliminary remarks on what we believe are the key issues for several of the priority areas identified in eEurope, to be used as a basis for further initiatives and discussions aimed at achieving our commonly held goals. In doing so, however, we would like to emphasise that we have reservations about certain time-lines suggested in the proposal and encourage the Commission to further discuss these with the relevant stakeholders. EICTA is interested in actively contributing to these discussions.


  The Commission recognises, education will be the cornerstone of social and economic progress in the knowledge based Information Society. We would like to emphasise that through our members' experience in partnerships with governments and educational institutions, we have found that while ensuring access to information technologies and the Internet is indispensable, teacher training and culturally relevant quality educational content are crucial to the success and use of such initiatives. Training teachers from the beginning can help "buy in" to these new programs. Although it is important that access and intelligent use of the Web be taught, by fostering the development of European interactive (or immersive) educational software for use in the classroom the Commission would ensure the success of its initiative.

  Additionally, the demand for people having information and communication technology (ICT) related skills has increased rapidly around the world, resulting in a skills shortage, which is creating major barriers both to economic growth and job creation in most industrialised countries. In Europe alone the current estimates indicate that there are half a million unfilled vacancies in the ICT field. Without rapid and determined measures to develop the education in these fields the shortage in Europe is expected to increase to 1.6 million by 2002. EICTA believes that the eEurope initiative should lead to concrete actions to address this issue.


  Deployment of broadband and rapid access to competing services and infrastructures in Europe is currently stifled. While former incumbents continue to control local loop access to telecommunications infrastructure, competing telecommunications and other broadband services or infrastructures will not develop. We support and are encouraged by the Commission's latest Recommendation on Leased Lines and Interconnections which finally addresses this issue. However we stress that without quick and cost effective access to both essential facilities (the central office and the Local Loop), neither competition nor broadband deployment will occur. We believe that urgent action must be taken in order to mandate full local loop Unbundling in all Member States by mid2000 and not by the end of 2000; there are no reasons for further delay.

  Additionally, we encourage the Commission to consider possible actions to support and encourage the development of commercially viable flat rate (non-metered) Internet and broadband access. We are moving towards a 24 hour a day, seven day a week connected economy which necessitates cheap, non-metered Internet access. Although both broadband and dial-up Internet access costs may be reduced by supporting the development of competing infrastructures and services, as long as time spent online is metered, the growth of Internet use in Europe will be restrained.


  The Commission's proposals could accelerate the development of e-commerce, particularly by providing a stable legislative environment which the successful development of any new economic phenomenon necessitates. More specifically, however, issues such as legal jurisdiction and taxation will need to be addressed in co-operation with relevant stakeholders. Throughout these discussions, we urge the Commission to bear in mind the global nature of these issues and ensure co-ordination with similar international deliberations to avoid isolation. Finally, we agree that overall regulation should be minimised. The competitiveness of the industry and the economy necessitate flexible approaches to resolving issues. Use of existing legislation, self-regulation and co-operation between governments and industry should be considered as an important alternative approach to traditional legislation.


  We appreciate and encourage the Commission's interest to increase consumer confidence in electronic transactions. Without security and trust, commercial and financial transactions, or even accessing Government services on the Internet will not develop. Therefore, we fully support this Commission's enthusiasm for smart cards in so far as it does not aim at blocking the development of future competing technologies. Government focus on specific technologies (or their applications) can discourage innovation, thereby distorting the market and potentially harming consumers through lack of choice, poorer quality and higher prices. Instead, the Commission's efforts should be focused on ensuring and promoting interoperability and openness among market driven offers, while supporting the development of industry-led pan-European security/authentication initiatives.

  We fully support the Commission's recognition of the importance of an industry-led "trust" infrastructure, which relies on a network of interoperating PKIs. Our companies are already involved in the definition of the necessary conditions for such a framework. The goal is to achieve global solutions by focusing on the development of industry standards which aim to provide interoperability and compliance to regulation.

  However, certain conditions are necessary to achieve a competitive European TSP (Trust Service Providers) industry. Member States should co-ordinate and keep national trust regulation to a minimum while ensuring the free circulation of encryption products and solutions within the EU.


  The proposal to address the lack of risk capital for high-tech SMEs illustrate the Commission's intention to tackle this issue which is currently stifling the growth of the European IT industry. We would like to stress, however, that barriers to the development of SMEs are not limited to entrepreneur's access to capital. Taxation of stock options and lack of tax incentives for private investors also contribute to the slow growth of these new companies. Although taxation is not within the scope of the Commission's mandate, benchmarking different Member States' practices could potentially facilitate and encourage change.

  Although there have been improvements (notably in France), stock options in Europe are generally taxed excessively. Due largely to the tax penalty on stock options, experienced leaders are difficult to attract to new start-ups as they are not able to reap the benefits of the risk they take in joining a new venture. As a result, start-ups find it harder to attract venture capital, which often depends on the start-up's ability to recruit an experienced leader and staff. Legislation should allow and encourage entrepreneurs to benefit from the risks and investments they make in starting new companies. Certain Member State regimes do not allow employees in start-ups to take advantage of stock options. In some cases where options are allowed, they are taxable at grant, leading to a tax bill before any gain has been made.

  Additionally, very few tax incentives are available to encourage potential private investors (the few tax incentives which exist generally do not allow private contributors to invest significant amounts). Fiscal policies to encourage the investment of sums necessary to support start-ups need to be developed.

  In many countries the high cost of social security which must be paid to government even in start-up phase is another deterrent to entrepreneurs unless they have access to a relatively large pool of capital. Governments should consider possibilities to develop an incremental program to support start-ups. Finally, balanced tax incentives should also become part of government priorities to stimulate the consolidation of an entrepreneurial culture.


  The Commission's proposal to use digital technologies for overcoming barriers for people with disabilities illustrate the promising potential that Internet can bring to all, thus creating a true e-Society. However, we would like to stress that although standards will be important in ensuring products to be "disabled friendly", this should not lead to the creation of unnecessary standards or procedures which may stifle the prime benefit of such digital technologies thus discouraging future investments. Rather, existing market-driven "disabled-friendly" standards already available in Member States and/or other regions should be used in order to avoid any duplication and/or conflicting standards.

  All initiatives whereby governments can increase their use of the Internet, in our view, will encourage wider use by all its citizens. We encourage the Commission to continue working with Member States to fully develop this potential.

  We would like to point out that some Member States have already been leading the way in areas like paying taxes online (such as Italy, Spain and Austria). Likewise some Member States have already set up information systems on legislation and other initiatives. Applications and solutions like these are only one part of the government online challenge. Reforming and reorganising the administrative processes as such, is an important task for both the EU as well as each Member State government, one which will help ensure government's ability to cope with the challenges of increasing citizens, demands and fewer resources. There are several examples of processes, such as public procurement, building permissions, or applying for funds and/or assistance, which need to be redesigned for online access. Large corporations have already proven the benefits of such reorganisations: by restructuring procurement processes, reducing purchase-order processing time, decreasing the size of the average contracts and increasing customer satisfaction with procurement.

  To achieve these goals, the Commission and Member States will need to develop clear action guidelines for their government online program and their own internal reorganisation processes etc. The Commission can help streamline and integrate services for Member States and citizens and save costs at the same time, as has been shown in the evaluation of the Commission's SIMAP (Système d'Information pour le Marché Public) pilot project ( The Commission can also give guidance and set the right priorities for R&D funds by investing in state-of-the-art projects in this area. Governments can also try to speed up the government online process, by finding new ways of entering into public/private partnerships, through R&D or for example by outsourcing projects. Finally, the Commission, Member States and industry should join forces to create knowledge pools on industry and government best practices.


  eEurope is a step in the right direction. We propose to use this as a basis from which to engage in a dialogue with the Commission and work together to develop a more practical approach towards making these priorities a reality. We are ready to commit energy and resources to help achieve this objective.

1 February 2000

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