A “missed economic opportunity”: the European Commission publishes its Digital Infrastructure White Paper

On 21^st February, the European Commission (EC) published a White Paper titled “How to master Europe’s digital infrastructure needs?”.  The paper’s findings and proposals follow years of feedback from industry players that the EU’s regulatory landscape makes it difficult to deliver the profits required to keep investing in networks.  Presenting the paper to journalists, Margarethe Vestager described the EU’s fragmentation across the industry as a “missed economic opportunity”.  

The White Paper is one of a number of developments relating to digital infrastructure that we expect to see this year - for more information see our recent publication - Digital Infrastructure – Looking Back, Looking Ahead. 

Overview of the White Paper

The White Paper acknowledges the importance of investment in the industry – in particular, the EC has identified advanced digital network infrastructures as being crucial to enabling transformative digital technologies, and broadband deployment (including a secure submarine cable backbone infrastructure) as being key to stimulating economic growth across the union.  Echoing the UK government’s recent consultation (more on that here), the EC also notes that a rapidly-changing global security landscape requires a strategic and harmonised union-wide approach to ensuring the security and resilience of key digital infrastructure.

The White Paper outlines various challenges currently faced by the sector, including: 

• critical demand for investment, in particular to plug the estimated €200bn required to fund the EU’s connectivity needs;
• the lack of a single market for electronic communications networks and services and resulting fragmentation for both suppliers and end-users; 
• sustainability challenges, particularly as a result of key infrastructure’s high energy needs; 
• a lack of regulation of cloud providers under the existing electronic communications regulatory framework; and
• security challenges, including the risk posed to key encryption systems by increasingly powerful computing brute force and the need to make critical submarine cable infrastructures more secure and resilient.

The EC stops short of proposing specific legislative action, but instead identifies three “pillars” of opportunity, each aimed at addressing the challenges identified.

1. Pillar I outlines the creation of a new “3C Network” (Connected Collaborative Computing), an “ecosystem that spans semiconductors, computational capacity in all kinds of edge and cloud environments, radio technologies, to connectivity infrastructure, data management, and applications”.  The network could facilitate large-scale pilots to set up end-to-end integrated infrastructures and platforms for telco cloud and edge, bringing together players from across the value chain and potentially orchestrating the development of new technologies and AI applications.  The proposals also include a new infrastructure-focused IPCEI (Important Project of Common European Interest), which could unlock key funding for the sector, and the creation of a simplified and coordinated support framework for European, national, public and private investments in connectivity and computing (potentially including increased coordination with key stakeholders such as the European Alliance for Industrial Data, Edge and Cloud). 
    
2. Pillar II sets out a vision for a Digital Single Market, including a rethink of the scope of application of the EU’s current electronic communications regulatory framework.  The EC acknowledges the need to reduce the regulatory burden on companies and promote efficient service delivery, and suggests potential measures to support and accelerate the switch-off of copper networks and the move to a full fibre environment.  On the spectrum side, the EC suggests a more harmonised approach across the EU, which it sees as critical to increasing capacity and in turn ensuring the EU’s digital sovereignty and defending its interests globally.  The paper moots a single set of rules based on a “country of origin” principle for core networks and core network services, which could protect end-users by reflecting local market specificities whilst allowing operators to benefit from economies of scale.
    
3. Pillar III describes potential steps to protect the value of Europe’s investments in its critical infrastructure, with a particular focus on backbone infrastructure and the transmission of data across networks.  The suggestions include the reinforcement of advanced R&I activities in support of new fibre and cable technologies (including through leveraging existing funding initiatives).  Also on the table is a joint EU governance system on submarine cable infrastructures, and a dedicated EU certification system to harmonise security requirements in international fora. 

The EC is consulting on the suggestions set out in the White Paper until 30^th June 2024.  With European Parliament elections scheduled for early June this year and a new EC to be appointed thereafter, we’ll be interested to see whether the new commissioners get to work implementing the proposals outlined, or have their own visions and plans for the sector.

Slaughter and May’s Tech, Digital and Data practice advises the full spectrum of digital infrastructure companies.  Take a look at our recent publication - Digital Infrastructure – Looking Back, Looking Ahead - where we looked back at some of the key themes and trends that we saw shaping the sector from our work in 2023 and shared our thoughts on what this year might bring.