New technologies are steadily changing the way we work, travel, communicate and relate to each other. They also exert a major influence on the strategic autonomy of state actors – the ability to freely take decisions and actions in an interdependent world without foreign interference.
Europe has a great number of assets and a true potential in several strategic technologies: it has a very strong research and development activity in the quantum and green energy technological sectors, it is the home of 5G world industry leaders, the continent that is the most advanced in robotics and still a space world power. But despite these advantages, it remains dependent from the United States and increasingly from China for most of its critical digital infrastructures, be them data centers, cloud computing, information and communication platforms, or supercomputers, AI and autonomous systems, synthetic biology or submarine cables. There is an overall feeling that Europe is slower and less bold than its strategic competitors in this exponential, technological century.
To tap into its potential, protect its assets, and gain a true geopolitical influence, Europe needs a significant political push – and a revolution in mindset. 5G is a posterchild for this. Acknowledging the urgency of the situation, the new Commission made several steps in this direction. Despite these first good efforts, these efforts remain too little or too slow – in relative terms to the “warp speed” with which technology evolves.
5G – the critical infrastructure of the digital decade
5G — the new generation of standard for cellular networks — has kickstarted a new “smartphone cycle”. The shift of cellular communication networks from the 4th to the 5th and then 6th generation (5G and 6G) of cellular network standards will have a major impact on our societies. For 5G alone, the industry association GSMA forecasts that it will contribute to roughly 5% of gross world product growth over the next 15 years and experts from the World Economic Forum estimate it may reduce energy consumption across industrial sectors by 15%. 5G and 6G networks will be a game changer for the competitiveness of European industries, as it will be the fundament of the fully digital world in which the pandemic made us all suddenly enter in. It will be the backbone of healthcare, energy management, modern industry, supply chains, consumer & distribution businesses, and the military. The disruptive character of 5G makes it a strategic asset that Europe cannot afford to not control.
But Europe is late in the game—and was too late to enter it. The first cities covered by 5G in April 2019 were in the United States and in South Korea. Numbers from November 2020 are clear: China has already 175 million 5G subscribers, and Western Europe only 6. Europe has indeed taken much longer than China, the US or Korea to kickstart 5G deployment, therefore slowing down the understanding of new use cases or industrial applications.
Major lessons can be learned from 5G, and more generally from the growing dependance of Europe in critical technologies. Even if handhelds are just part of the 5G ecosystem that also includes equipment makers and chipmakers, the situation is easy to assess: 20 years ago, Nokia was a world leader, and the main character of Matrix used its 8110 model. Today Apple, Samsung and Chinese producers dominate the market. Even if the recent political pushback made it much harder for Huawei to sell its equipment in Europe, its global market share is now at par with those of Ericsson and Nokia, with a R&D budget that is estimated to be double than the one of its 2 rivals combined, making the outlook challenging for the Europeans. In the segment of chipsets, the third, often overlooked segment of 5G, the US dominance is massive, with Qualcomm and Broadcom the main player, only challenged by Samsung. Europe has almost disappeared from this part.
What lessons can be learned for Europe’s technological leadership
The first strategic lesson of 5G showed how urgent it is for European leaders to work on a coordinated digital agenda and to achieve the Digital Single Market. The fragmentation of the telecommunication market has led to countries banning the 5G from Huawei, while some were welcoming it. It also prevents European start-ups and researchers to properly innovate and scale-up their solutions. The European market is home to around 35 mobile operators (and even more than 120 if you count virtual operators). Only 4 operate in the US and 3 in China, therefore creating the scale and market potential needed for sustaining strong investments in the sector. The European fragmentation leads to lower margins and lower overall investment power therefore making equipment makers more prone to a price war, thus favoring equipment makers with an aggressive pricing policy like Huawei.
This fragmentation is not only the consequence of national strategies in telecom, but also of EU competition policies that can be seen as increasingly unfit for the 21st century: the concept of relevant markets needs to include global competition and not anymore national markets, and the view that harsh competition is benefitting the consumer could also be erroneous as investment capabilities of European Telco’s will be lower on the long term, thus harming the capacity to invest in new technologies. This fragmentation creates short-term gain for the consumers, but a long-term major loss for society with fewer jobs, less coverage, less ROI in capex, less digitalization for future looking industries and supply chains.
The third consequence is the naivety with which 5G has been considered in terms of data privacy: it is only after a strong political push in particular from the US that European governments woke up to the strategic importance of 5G, both in terms of foundational infrastructure of our digital societies, and as a gamechanger in the digitalization of industry – and in both cases, to the criticality of networks to preserve the privacy – for consumers – and confidentiality – when it comes to government or industrial data. Owning a network, in particular a 5G network, where data and computing capabilities are distributed at the core and at the edge, can be a powerful tool to gather intelligence on citizen behaviors, organizations and industrial secrets.
Fourth, playing the long game and having a public hand that thinks strategically is essential: most EU Member States have a system of auctions by which operators pay billions to buy 5G frequencies, which in the case of 3G and 4G became a cash machine for national budgets, but crippled operator’s investment capabilities. Learning from these lessons, Europeans didn’t fall so much into that trap for 5G even if Germany had more than 400 rounds of auctions for a whopping 6 billion into the state coffers – coffers that didn’t really needed that additional cash, but that will squeeze Telco’s ability to invest and make technological leaps. Moreover, money should be focused on technological breakthroughs, not just on standardization. In hindsight, the 5G Action Plan from the Commission in 2016 focused too much on standards and too little on tech. 10 years ago, it would have been impossible to set a detailed plans encompassing the many technologies used today in 5G (Beamforming, Network Functional Virtualization, Multiple-Input Multiple-Output); however, what could have been done was pushing the limits and aiming for reduction of interferences by half, doubling the network coverage of a single cell, developing European standards for computing or cloud on the edge, or even working on linking 5G with space connections in less dense regions. We will launch some of these at the Joint European Disruptive Initiative (JEDI), with the goal to achieve breakthrough and therefore potential major competitive advantages for Europe.
Money matters. But even more, foresight and the capacity to nurture disruptive technologies
When political leaders speak of the sovereignty imperative, let us not forget that the latter is above all political and not simply a budgetary issue. Too often when it comes to technology matters, announcements of Member States and of the EU reflect an obsession with money and spending, where instead we need a clear strategy and impactful results. Since 1984, a colossal amount of 200 billion euros was spent through eight consecutive European research programs: did Europe manage in these 35 years to become a technological leader with similar breakthroughs as the American Darpa did with only 50 billion euros over 60 years? Have these huge spending created world leaders in Artificial Intelligence, energy storage, biotechnology or even IT? Horizon Europe, the 9th European R&D program is set at 76 billion euros for 2021-2028 but still lacks clear priorities, agility and precise measures of success. It needs clear KPIs, agility, priorities and a focus on tangible impact. And above all, it requires boldness: 5G hadn’t been clearly deployed properly in the United States in February 2019, but its administration claimed that it wanted “5G, and even 6G, technology in the United States as soon as possible”. Today, we Europeans need to be just as adventurous and audacious to build the Next Big Thing.
We fondly believe in Europe’s capabilities: in this century where innovation shapes our societies, the continent can become the power that puts science and technology at the service of the people, of the planet, and of economic prosperity. But this requires that politicians and citizens regain control of their administrations which have bureaucratized research and be highly strategic in shaping the world of tomorrow – like for 5G – instead of fighting the battles of yesterday. Only then can Europe truly become the Europe of concrete and impactful projects envisioned by Jean Monnet, and not that of empty speeches. In the 1950s, common policies on coal and steel were able to consolidate economic prosperity, between six European countries including Italy; today, the digital infrastructure and services like 5G and cloud can be one of the new common grounds between European economies, democracies, and societies.