The Virtuous Circle: New Regulations, Innovation and Investment - How to bring Europe back to the Top

The Virtuous Circle – Management Summary

This book describes how new policies in three areas – sector-specific regulation, innovation and investment – can boost the European ICT sector. They form a virtuous circle, in which regulation creates the framework for an innovative and investment-friendly environment. It can also help to reach the Digital Agenda targets.

In particular, we see the need to:

Create freedom for innovators and investors -- make regulation more flexible! Regulatory policies have an impact on both, innovation and investment. Clear net neutrality rules should save the innovative structure of the Internet. A shift of the focus from the ‘ladder of investment’ and intramodal competition (such as un-proportionately strict non-discrimination rules) to dynamic efficiency and platform competition can help to get a more long-term perspective, which should ultimately incorporate policies to (re-) establish investment incentives. In line with this, investors in NGA should have more pricing flexibility on the wholesale layer, especially, where different infrastructures compete. Overall, detailed regulation should be reduced and, rather, a more holistic approach, with strong comprehension of general competition law should be pursued.

Let ‘creative destruction’ simmer -- remove hurdles to innovative services! Diverse copyright and data protection laws across Europe are currently prohibiting innovative services and securing out-dated business models. We need to grasp the future and hence we need to create more uniform policies across Europe, thus fostering the internal market. A modern copyright framework should at the same time offer incentives for content creators and ease service providers’ and end users’ access to content.

Revive entrepreneurial spirit -- ease founding and financing! There are needless obstacles for new ventures, such as too bureaucratic foundation. The formation of new businesses should be eased and modern forms of financing such as crowd investment should be fostered.

Make infrastructure investment happen -- create new incentives for institutional investors! Pension funds have investment cycles that are similar to telecommunications infrastructure’s needs. However, only a tiny share of pension funds’ assets is invested there. We need to create incentives for pension funds to invest in telecommunications infrastructure and ease such investment by promoting pension funds partnerships.

Start the Virtuous Circle! In an innovation-friendly environment void of hurdles for new businesses, new services can emerge and lead to increased demand and willingness to pay for broadband access and higher bandwidth. Together with sound regulatory policies, this should create the right incentives for efficient investment in higher bandwidth, which, in turn, is a precondition for new services that remain to be developed. Therefore, this “Virtuous Circle” of regulation, innovation, and investment policies reinforces itself, having a significant and long-lasting impact on Europe’s ICT industry.

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