Digital Single Market Strategy: Lessons from the Czech Republic

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After years of being ignorant to the ICT and the digital economy in general, the Czech Republic has now changed its position and declares its full support to the digital agenda as well as the EU Digital Single Market Strategy. The problem, however, is that in reality the actual implementation of these promises has been lagging behind for a long time. So how should the Czech Republic approach the planned regulation without making the same mistakes again?

Long Journey Towards Digital Agenda

For a very long time the Czech Republic had ignored the digital agenda, but this has changed recently with a new government in place and its higher emphasis on the digital area in Brussels. Moreover, the digital agenda has caught interest of several Czech politicians and ministries who also helped to stir up a public debate.

However, the journey towards the support of the digital agenda has been painful and is still far from being completed. As a valuable lesson to the European Union, the Czech strategy for digital development called Digital Czech 2.0 demonstrates that creating strategies is only the first step. Recently, the Ministry of Industry and Trade has concluded that 14 out of the 17 objectives of the Strategy have been or are being completed. Most of them, however, were completed only on paper (i.e. by designing new strategies), and have not translated into reality (i.e. by fulfilling the goals of those additional strategies). One of the most striking examples of the State’s failure in implementing the digital agenda was the establishment of the National Council for Information Society which was supposed to reflect the actual needs of the State and private stakeholders. Once the Council has been established and vested with powers to set the agenda and control the implementation of the ICT (meaning centralized coordination), it has only met twice a year without producing any results.

The late catch up of the Czech Republic is also reflected in the latest issue of the Digital Evolution Index1 that evaluates 50 countries on their way to the digital economy. The index considers the evolution of four factors (supply, demand, innovation, and institutions) over the period from 2008 to 2013. Ranked 49th, the Czech Republic is penultimate. However, although it has not been developing its digital economy rapidly, the Czech Republic is ranked 36th in the absolute state of art of the digital economy. The country is lagging behind in terms of innovation and institutional quality, but is doing fine in terms of digital infrastructure.

As acknowledged in the same documents (i.e. the Digital Czech 2.0 Interim Report), implementation problems of various strategies stem partly from a lack of coordination of the digital agenda. The Council for Information Society and the Government Office in its Action Plan for the Development of Digital Economy in the Czech Republic are addressing this issue. However, no one is actually responsible for the digital agenda as such, and this results in inefficiencies and a subsequent overlapping struggle for influence and resources. For example, no one has been tasked with bridging the digital gap between big cities covered with 3G and LTE networks (up to 30 Mb/s) and rural areas where operators can hardly guarantee GPRS (up to 20 Kb/s). The 2013 Digital Czech Strategy sets a 30 Mb/s standard for the whole country in 2020 and 100 Mb/s for at least half of the households. It is already clear that given the current pace of development, those goals are far from realistic.

These problems confirm that despite the fact that the country is doing not that bad at the present moment, especially thanks to internet and e-commerce businesses, institutional factors hinder its further development. This is mainly the result of the ignorance that the previous governments demonstrated, the absence of coordination in the present digital agenda, and the ongoing disagreement between the most relevant ministries, the Ministry of the Interior and the Ministry of Industry and Trade.

Shift Towards DSM

Although the domestic situation is not ideal, the Czech Republic has shown interest in deeper integration of the Digital Single Market (DSM). It is the result of three factors: a) a new pro-European national government; b) Juncker’s Commission and its growth-oriented priorities; c) the need for an opinion on the EU’s Digital Single Market Strategy. Bearing these three factors in mind, the Czech government has finally started to take some action. As a result, public discussions and high level negotiations are taking place more often.

A good example is a letter that eight EU leaders, including the Czech Prime Minister, sent to President of the European Council Donald Tusk in advance to the June meeting of the European Council in which they called for a strong political endorsement of the Digital Single Market Strategy.

A second demonstration of this new priority materialized when the EU digital agenda became one of the priorities of the Czech Visegrad Group´s presidency. Within the scope of the digital agenda, the priorities of the Czech V4 presidency will be startup support, digital literacy, reduced administrative burden for entrepreneurs, and the removal of barriers to cross-border e-commerce.

The newly established National Convention for the EU, a meeting of stakeholders across different fields and interests, focused on the digital agenda under the auspices of State Secretary for EU Affairs Tomáš Prouza, probably the most vocal proponent of the DSM. The stakeholders agreed that the Czech Republic needs a single authority responsible for the coordination and development of the digital agenda, including the coordination of the implementation and impact assessment of ministerial strategies. This way, the agenda could be implemented as a wide and cohesive framework, rather than a set of non-aligned pieces of regulation that pose unnecessary administrative burden on SMEs, which are usually the drivers of growth.

How to Approach DSM Without Repeating Previous Mistakes?

All of the above shows that a lack of uniform regulation and a proper implementation (i.e. when the Ministry of Industry sets goals for broadband coverage and the Ministry of Interior should obtain resources for the implementation of those goals) do not support any actual innovation and may have the opposite effect. In accordance with National Convention’s findings, we believe that in order to prevent the repetition of previous mistakes, a different approach should be taken when implementing the Digital Single Market. Based on the Czech experience and unsuccessful attempts to implement a number of digital strategies, the DSM should serve as a framework that would unite the EU internal market while enabling greater technological development that is driven by industry instead of the government.

The Czech experience shows that even relatively low level of regulation could lead to many complicated situations and a lack of clarity for businesses and citizens (i.e. which governmental service is available online and which is not – according to the national Digital Czech strategy, by 2020 all state services should become digital by default). If the European Commission enables free and easy digital transformation, it will facilitate trade across the continent, help SMEs to scale easier, ensure greater competition, and provide easier access to goods and services throughout the EU for both consumers and companies. The Commission has already proposed a number of measures that will help to achieve these ambitious goals. These are the following: support to digitalizing the industry and traditional SMEs, boosting user friendly e-government based on “digital by default principle”, advancing digital skills, endorsing free flow of data, simplifying VAT rules, and ensuring affordable cross border delivery throughout the EU to enable cross-border e-commerce. However, it is of primary importance that these measures are implemented without placing any more administrative burden on small businesses or consumers.

On the other hand, the Strategy poses some risks that could outweigh the benefits if not addressed properly by the Commission. The most questionable proposals include the pressure to regulate platforms, imposing “duty of care”, a widespread use of the “level playing field” language, and the fact that the Strategy fails to mention the exact measures to help startups scale to new markets. No legislation should be adopted in respect to these risks without prior explanations of the meaning of these expressions and without conducting a thorough impact analysis of such regulation.

Before rushing into a regulation that is driven by the fear of the unknown, it is critical that policymakers are fully aware of the implications of their actions. This is especially true now, since the world has entered the age of big data that brings a number of opportunities which demand a new set of skills and create even greater need for the right handling and protection of personal information. It is important that personal information of sensitive nature could be depersonalized and present no threat, but an opportunity for the analysis. This is a great example of how to protect data without jeopardizing its potential.

The EU Digital Single Market Strategy is certainly a step towards the right direction, and the Czech Republic should certainly follow its lead when implementing its own regulation of the digital age. At the same time, as the EU is developed the DSM, the Czech Republic should keep in mind the dynamics and the fast pace of development within the segment of new technologies. Such progress may only be regulated by a set of guidelines that will allow the entire society to benefit from it. Thus, the European Commission should create favorable market conditions for new market entrants and a dynamic market. Before any new regulatory measures are considered, a careful assessment should be conducted to ensure that they do not hamper innovation, SMEs or investment in the EU. It is only then that the immense opportunities that the digital age presents to the economy and the society can be fully realized.

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