Europe wakes up to the challenges posed by new industrial revolution

Date: 16/03/2000

By Peter Chapman

There is an old saying in the north of England that where there's muck, there's brass. Roughly translated, this means that where there are factories and smoke, there are money and jobs.

No one could have disputed this fact as the industrial revolution charted a filthy path from its English birthplace across Europe and America during the 18th and 19th centuries. But EU leaders will admit the world has moved on when they meet in Lisbon next week for what has been dubbed the Union's first ever 'dot com' summit.

The emergence of massive new multimedia, communications and electronic commerce giants such as AOL and Time Warner, Vodafone Airtouch and Amazon.com has finally convinced the doubters. The stark message is that call centres, Internet and e-commerce of the next industrial revolution are fast replacing the old cotton mills and foundries of the past.

The question which will be addressed in Lisbon is what, if anything, Europe's governments should do to adapt to the new industrial revolution.

Portuguese Prime Minister Antonio Guterres, who will host the summit, wants the meeting to set the goal of making Europe the world's most competitive region by 2010 by embracing the 'knowledge and innovation' economy and leaving low-cost production to the developing world.

Meanwhile, European Commission President Romano Prodi will elaborate on his vision for the information society - 'eEurope' - which includes a raft of well-intentioned targets aimed at achieving similar goals. These include boosting Internet in schools, cutting the cost of access to the Web, accelerating e-commerce, improving access to risk capital for small companies and maximising the use of online technology by hospitals and doctors.

Prodi is also leading the campaign for Europe to have an Internet 'domain name' of its own - .eu - to rival the US-run market-leading .com which is found at the end of most leading Website addresses.

In general, the political rhetoric and eEurope have been received politely by the IT, telecoms and media industries which are driving the new industrial revolution. However galling it may be to see the Commission president and premiers such as Guterres and the UK's Tony Blair talking about the Internet as though they invented it, they know it is better to have governments swimming with the tide than against it.

But, in private, many industry players claim there is little new to say in all these discussions, and that initiatives such as 'eEurope' are a triumph of packaging over content. What is the point, they ask, in setting deadlines for 2005 when, in the Internet age, even six months is an age?

US firms are also quick to point to failings in the EU's system in areas where prime ministers and Commissioners have yet to promise solutions.

They insist that there is no unique formula for creating future billion-euro companies which are currently only found in garages in California. But archaic bankruptcy rules which virtually criminalise their victims are blamed for stifling the risk-taking instincts of would-be EU entrepreneurs, and high social security and taxation costs are accused of holding back the e-economy, with stock options the most glaring example.

This tool is used widely in the US to lure the best young talent to work for small hi-tech companies whose market value is on the up. But in Europe, it is the tax collector who gains most when stock options are cashed in.

Some would argue that to see the real work which Europe's legislators are doing to boost the information society, you need to look beyond the surface of the Lisbon rhetoric. You can, they say, forget the long-term targets because much of the difficult work has already been done - or is about to be.

The Commission and EU member states have launched a raft of directives and other policies aimed at building the regulatory foundations of the information society. The linchpin of the Union's efforts was the first wave of its ground-breaking telecoms liberalisation package completed in 1998.

This opened up the entire telecoms sector to competition for the first time, giving the infomation society a huge boost by giving customers a choice of supplier for many services. It also paved the way for new competitors supplying the Internet's vital infrastructure to get a foothold in the market while ensuring, in theory at least, that former monopolies did not overcharge for access to their networks.

Enterprise Commissioner Erkki Liikanen now has the task of updating the 1998 package to take into account the increase in competition in telecoms markets, and to ensure the continuation of Europe's phenomenal success in the mobile-phone field.

His plans are not without their critics, but in general the industry has welcomed the new slim-line approach that he is proposing. Out will go many of the strict regulations which targeted the old monopolies. In will come a greater reliance on EU anti-trust rules to keep an eye on areas - such as local networks, international leased lines and mobile-phone roaming charges - where real competition has yet to emerge.

Efforts are also intensifying to finalise other key information society legislation which aims to set minimum EU-wide rules striking a balance between enabling companies to take full advantage of the opportunities on offer while protecting the rights of consumers.

Member states finally reached political agreement last year on a directive to govern e-commerce in the Union. This crucial piece of legislation, if approved by MEPs later this year, will instil single market principles into the online world - allowing companies to sell goods and services legally in any member state as long as they comply with the rules and regulations of the country in which they are based.

Linked to this directive is an ongoing debate over how to provide mechanisms for consumers and online traders to settle legal disputes without fighting costly court-room battles.

The Commission is also working on vital legislation which will establish the legal framework for selling financial services over the telephone, fax and, crucially, the Internet. In addition, the Union is hoping to put the finishing touches to a deal with the US later this month to ensure American firms respect the terms of strict new EU rules designed to protect the privacy of data about European citizens.

Meanwhile, a full-scale lobbying war is continuing as member states and MEPs debate draft proposals governing copyright in the digital age.

Artists want tough rules to ensure they are not ripped off by wholesale digital copying of their works, while telecoms companies are battling to prevent over-burdensome regulations being introduced, and consumers and special interest groups such as the disabled and libraries are fighting for exemptions to ensure they would still be allowed to make limited copies.

Similar battles are a feature of each and every piece of new legislation targeting the information society. But the effort should be worth it. If the EU gets these rules of the road right, it will do much to smooth passengers' journeys along the fast moving information superhighway.

Consumers would be given the basic rights they need to have confidence in using the Internet to shop online, European industry would have the chance to compete on a level footing with its rivals across the world, and the targets set by EU leaders would be that much easier to achieve.

Major feature. Article forms part of a survey on the Information Society.