1. Challenges for EU competitiveness
ICT for Europe:
Challenges for EU competitiveness
ITU Workshop
Geneva, 15 January 2007
Tapani Mikkeli
European Commission,
Directorate-General Enterprise and Industry
Unit D4: Technology for Innovation, ICT industries and e-Business

2. The Renewed Lisbon Strategy to increase Competitiveness
ICT UPTAKE
INNOVATION
Industrial Policy
BARRIERS
Better Regulation
3 ways of achieving the Lisbon targets.
CIP is a practical response to the Lisbon objectives.
One of the Commission’s flagships in the period EUR 4,2 bill. EUR.
CIP will complement the Commission’s initiatives regarding effective competition policy and better regulation.
CIP will also work in close co-operation with 7 FP RTD, Lifelong learning and Cohesion activities.

3. Innovation Competitiveness Lisbon Strategy
Review of Lisbon Strategy 2005;
Growth & Jobs
Industrial Policy Communication 2005
Broad-based Innovation Strategy and Action Plan
Lahti & European Summit:
Innovation-friendly, modern Europe
Lahti meeting on Friday 20 Oct is officially called “Informal meeting of Heads of States and Governments”.
Innovation has sometimes been defined / described as the source of a sustained competitive advantage, either for enterprises or for entities of public administration.
This leads us to competitiveness, which at the European level thus means our changes for success, when compared to other participants in the constantly on-going race.
The purpose of the renewed Lisbon Strategy is precisely to improve these changes of ours.
Review of Lisbon Strategy:
Action Programme “Working Together for Growth and Jobs:
A New Start for the Lisbon Strategy”, COM(2005)24
Communication “Common Actions for Growth and Employment: The Community Lisbon Programme”, COM(2005)330,
The EU’s priorities were declared:
Making Europe a more attractive place to invest and work
Putting knowledge and innovation at the heart of European growth
Shaping policies to allow businesses to create more and better jobs
Industrial Policy Communication
“Implementing the Community Lisbon Programme:
A policy framework to strengthen EU manufacturing –
Towards a more integrated approach for industrial policy”,
COM(2005)474,
In order to contribute to a strong industrial base, the Commission committed itself to the necessary actions to improve the framework conditions for manufacturing industry and to ensure the consistency of various policy areas. The Communication contained several horizontal and sectoral initiatives (incl ICT TF) to complement work at MS level.
A mid-term review is scheduled for 2007.
Innovation Strategy and Action Plan
Communication “Putting knowledge into practice: A broad-based innovation strategy for the EU”, COM(2006)502,
Based on the existing policy document, a broad strategy has been presented for EU’s future role in this field, in order to better “translate investments in knowledge into products and services” (Spring Council 2006). The areas dealt with range from education and internal market to the regulatory environment and the IPR framework, to financial measures and the role of governments. [The emergence of innovation-driven lead markets is to be facilitated.] The Communication also contains a list of 10 actions, most of which are already underway.
This brings us further to the most recent events in Lahti.

4. European Challenges / Paradoxes
Inventions not converted into products, jobs, patents, growth
Small innovative start-ups not growing into global scale
Uneven ICT uptake across sectors
Result: Europe not consistently able to bridge the innovation gap
Link to Lahti Communication, p. 3
Communication “An innovation-friendly, modern Europe”,
COM(2006)589,
Reference to both the Lisbon Strategy and the Hampton Court meeting
Global position of Europe: Many innovation assets, but also important “paradoxes”, maybe rather challenges for us:
Inventions not converted into products, jobs, patents, growth
At the level of inventions, Europe is generally considered very qualified. This goes especially for the field of ICT and some of its sub-components. However, something stops this inventiveness from being converted into new products in the corresponding scale: the same goes for services or f.ex. the number of European patents, All this is obviously reflected on the growth of the European economy and the number of jobs created and available to us.
Small innovative start-ups not growing into global scale
In Europe, there exist many small and often highly innovative start-up enterprises: the areas of ICT, especially software, and ICT uptake (e-business) are prime examples of such emerging new players. Again, some obstacles prevent many of these start-ups from turning up into globally successful companies of a much larger size. The same reflections come as results as presented above.
Uneven ICT uptake across sectors
In certain sectors, such as telecommunications, the adoption of ICT innovations has resulted in important productivity gains. However, in other fields, such as financial services and distributive trades, this has failed to happen. Also the ICT uptake across the different sectors of the European economy remains quite uneven, as the figures retrieved from show.
Innovation gap and handicaps for Europe
The Communication lists several areas, where we need to improve. On top of this list come high-quality education and skills, followed by R&D investments and the remaining obstacles for economic dynamism. ETPs and JTIs, better cooperation between universities, research and business, as well as improvements in the framework conditions are seen as the way forward. All of these features obviously have a straight link to ICT and ICT uptake.

5. ICT as driver and enabler
Development of new (online) business models
EU ICT sector: Responsible for
4 % of value added to GDP,
40 % of productivity growth
EU strengths:
Sophisticated and high-quality products
Chip design, software and services
Human capital
EU challenges:
Danger for an outflow (off-shoring) of R&D
Manufacturing trade deficit
Lower investment growth compared to emerging economies
Two important distinctions would have to be made:
Firstly, between technological and non-technological innovation,
And secondly, between innovation taking place within the ICT sector,
and innovative features applied within ICT uptake horizontally across all the sectors.
On the first matter, it should be emphasised that a large part of ICT-related innovations actually has to do with the non-technological side, notably the development of new business models. The view about innovation always being linked with new flashing or groundbreaking technology had better be swiftly abandoned: a thorough re-figuration of the business approaches could usually do much more to a company than any individual invention when applied in practice.
The second distinction may seem similar to the first one. However, the sectoral and the horizontal innovations can both be either technological or non-technological ones: besides, they can come to be applied in different manners, owing to their sector-specific or overarching nature.
Numbers: (the 40 % figure is from i2010 Communication)
In 2003, the ICT sector represented 3% of total EU25 employment and its value added 4% of GDP.
In 2003, ICT services accounted for 70% of total EU25 ICT sector employment, 80% of value added and for about 90% of its enterprises.
In 2003, the ICT sector in EU25 comprised 600K enterprises, 5M employees and 400B€ value added
ICT impacts on the rest of the economy through ICT investment, ICT production and ICT usage.
In 2003, the EU15 ICT sector contributed to 45% of total EU15 market economy labour productivity growth.
ICT capital contribution in EU15 amounted to 23% of total EU15 GDP growth between 1995 and 2004.
Strengths and challenges
The EU ICT sector is successful in producing sophisticated and high-quality ICT products (scientific instruments, electronic components and telecommunication equipment).
The EU ICT sector is particularly strong in chip design, software development and ICT services.
One of the key strengths of the EU ICT sector is its human capital.
Strategic R&D is performed in the EU while less knowledge-intensive market oriented R&D is located in South-East Asia.
The ICT manufacturing trade deficit was 55 billion euros in 2004.
Large parts of ICT hardware production software coding have been relocated to South-East Asia.
The ICT uptake in other parts of the economy is slower than in USA and Japan.
Lower investment growth than in emerging economies threaten lower value added activities in the EU.
Conclusive remarks
The answer to the challenge from low-cost producers lies in further climbing up the quality ladder.
Raising R&D investments of the EU ICT sector and ensuring the availability of skilled labour will be crucial for the EU ICT sector’s future competitiveness.
Policies that matter most for the EU ICT sector’s competitiveness include those fostering R&D and innovation, entrepreneurship, IPR, e-skills, ICT uptake and completing the Single Market.

6. ICT Task Force ICT Markets ICT Services, Production and Manufacturing
Identify key obstacles to competitiveness and ICT uptake.
Recommend policy responses.
Final Report 27 November 2006
Six Working Groups
Selected headings from the final report
ICT uptake
ICT Markets
ICT Services, Production and Manufacturing
IPR for competitiveness and
innovation
ICT Uptake
Innovation in R&D, manufacturing and services
Innovation
SMEs and entrepreneurship
Investment and finance
Skills and employability
Legislation
Standards
Achieving a single market

7. Digital Convergence / Relevance of Voice
Increasing demand for high bandwidth
IT, telecommunications and media
Global market for digital content
Pricing shift from minute based to flat rates
Growth of network infrastructure and access platforms
Technology shift from small- to broadband
Substitution of PSTN-Voice through IP-Voice
Technological development leading to new devices and functionalities
Fixed Mobile Substitution
Role of emerging technologies
such as NGN, Triple Play, Convergence?

8. Incentives for innovation
New markets are characterised by
innovation,
rapid market growth and
volatile market shares.
Market dynamics to bring up
new service opportunities for end-users
new business models.
Lead markets?
Pre-commercial procurement?

9. The principles of Better Regulation
A detailed impact assessment of the proposed measures remains essential
Explore self-regulatory options in order to reduce
disproportionate and
restrictive regulation
Create a level playing field
No extensive application of rules to innovative services.

10. For more information