Digitalisation needs profound reforms, Draghi’s report claims

Digitalization is outlined in Mario Draghi’s report as being a tool to mitigate demographic weakness and contribute to enhancing socioeconomic resilience. It is also considered crucial for delivering essential health and education services and preserving living standards. As part of the first of three main areas identified by the former President of the European Central Bank and Italian prime minister for his recommendations to boost competitiveness in Europe, the chapter is based on three main priorities.

A more integrated market

According to the report, developing high-speed capacity broadband networks is vital. Draghi hopes for a reform of the EU’s regulation and competition stance. Regulation and competition policy in the telecom sector “has disincentivized consolidation, favoring a multiplicity of smaller players in each market” despite preventing undesirable price effects and leading to a low-consumer-prices market. The report aimed to define Telecom markets at the EU level (as opposed to the Member State level), mainly when this facilitates cross-border integration and the creation of EU-wide players. The definition of commercial contractual agreements between internet service providers and very large online platforms is encouraged.

Draghi also calls for an EU-wide harmonization of spectrum licensing rules and processes, including for satellite uses, and invites European policymakers to “orchestrate EU-wide auction design features.” The release of new frequency bands should be “immediately harmonized,” starting with 6G frequencies. This process is conceived to be expanded to all other frequency bands by 2035. The report also designs a European Commission entitled to use a veto on auctions that do not follow harmonized guidelines.

Cut-off dates are proposed to replace older technologies such as copper networks. Draghi also suggests a ‘passporting’ system of business-to-business services “to enable operators in one country to offer services EU-wide.

A call to catch-up on computing and AI

According to Draghi’s in-depth analysis, the EU “is losing ground in research and development” and the “creation of innovative tech companies with global reach,” especially when it comes to facing AI global competition. The focal point is the trade-off between “stronger ex-ante regulatory safeguards for fundamental rights and product safety, and more regulatory light-handed rules to promote EU investment and innovation without lowering consumer standards.” It places a need for “developing simplified rules and enforcing harmonized implementation of the GDPR in the Member States,” the document reads.

The report’s author recommends the adoption of a new “EU Cloud and AI Development Act” to enhance European high-performance computer, artificial intelligence, and quantum capabilities and infrastructure.

The report urgently calls for funding a strategy to enhance computing infrastructure and AI capabilities. It highlights that the returns of the “public ‘computing capital'” should be reinvested in new capacity. Draghi also recommends creating an EU-wide framework “allowing the ‘computing capital’ of public institutions to be provided to innovative SMEs in the EU in exchange for financial returns.”
As for the chapter focusing on broadband infrastructure, the part of the document proposing new policies for computing and AI results in recommendations on simplified rules to remove regulatory overlaps with the AI Act and harmonize the implementation of the existing legislation. “It is recommended to introduce regular and fast review process of the main AI-related regulations,” the report reads, suggesting three years as a period. “Technological developments can make regulations rapidly obsolete in this sector,” Draghi remarks.

The cooperation between the EU and the US to ensure access to cloud and data markets should be stepped up.

Strategic autonomy through semiconductor development capabilities

Semiconductors take up the space of the third priority to boost digitalization in the EU. Despite developing a strong presence and capabilities in specific chip segments, including sensors, power controls, and mature chips for car microcontrollers and peripherals, “the EU lacks memory and advanced processors for high-performance computing and graphics processing units.”
Increasing funding, coordination, and speed of public-private cooperation at the EU level is key.

Proposals in this field include a dedicated centralized budget, better coordination of demand requirements, and the introduction of preferences in procurement for EU-based companies. A long-term strategy is suggested as the base for shaping strategic autonomy in this field. According to the report, that approach needs to be combined with efforts in negotiation with third countries involved in the value chain.