How has European influence evolved globally in recent decades?
The Second World War ended with a bleak outlook for Europe: millions of lives lost, cities in ruins and a severely weakened economy. Based on this experience, and with a view to preventing a repeat in the future, six European countries took the initiative to create the European Coal and Steel Community to promote cooperation and generate economic synergies that would discourage the emergence of new conflicts.
The positive results of this initiative led to further cooperation between these countries, giving rise to the European Atomic Energy Community and the European Economic Community.
The economic boost that these three Communities gave to European countries repositioned Europe as a major player on the international stage. This importance grew as more countries joined, culminating in the establishment of the European Union (EU). The free movement of people, goods, services and capital resulted in a boost to trade, greater integration of financial markets, new investment opportunities and greater prosperity for citizens.
Another highlight of the European project is its values of democracy, human rights, action against climate change and inclusion. These values have made Europe a global leader in environmental and social sustainability, acting as a guarantor of international initiatives such as the Paris Agreement and the UN Sustainable Development Goals.
Finally, the European Union has proven to be highly influential through regulation. The European market has a consumer base that is very attractive to foreign companies. Therefore, if they want to continue operating in these countries, they must comply with current regulations. This has led foreign companies to adopt requirements and standards set by the EU, thus extending European regulations to other markets.
Despite the influence it exerted for decades based on its economic growth, values and regulation, Europe has seen its relevance diminish in recent years. Its limited competitiveness has made it a secondary player in the new (digital) world order, which is dominated by the United States and China.
In the world of telecommunications, where does Europe stand in relation to other players?
The European telecommunications market is highly fragmented. Europe has 41 mobile network operators with more than 500,000 connections in Europe, while the United States and China (two countries with a large consumer base) have five and four operators respectively.
This fragmentation affects the investment muscle of European telecommunications operators, impacting the quality or availability of services compared to other regions.
As an example, in 2023, per capita investment in telecommunications in Europe was almost half that of the United States (€117.9 vs €226.4). At the same time, download speeds for both fixed and mobile networks in Europe are lower than in the United States (fixed networks: 137 Mbit/s vs 246 Mbit/s; mobile networks: 71 Mbit/s vs 107.9 Mbit/s).
Europe is currently at risk of falling behind in 5G Stand Alone, an ultra-low latency technology with greater reliability and efficiency that enables innovations such as network slicing. For example, 5G SA coverage in Europe is 40%, significantly below North America, which stands at 91%.
Where does Europe stand in the global landscape of new technology development?
We are currently in a period of continuous innovation driven by the development of connectivity and digitalisation. Among the wide range of new technologies, the most notable are artificial intelligence (AI), cloud computing and quantum computing.
Firstly, the cross-cutting nature of AI in generating efficiencies and developing various digital solutions (such as prediction using Big Data, early detection with IoT, and automation together with robotics) makes it a strategic technology.
In addition, the democratisation of generative AI, driven and popularised by Chat GPT, has resulted in it becoming a common tool in our daily lives and work. The importance of this technology has led countries to step up their investment in AI, with the United States leading the way. Taking the Forbes list of the top 50 AI companies as a reference, 84% are American, while 12% are European (EU countries 6% and the United Kingdom 6%).
Secondly, the cloud ecosystem allows digital services to be scaled on demand thanks to the elasticity it offers in data storage, management and processing. This has led several companies to decide to move part of their activity to the cloud, creating an emerging market for technology companies.
As with AI, the United States leads the way in this technology. 72% of the European cloud market share is held by US companies, with 65% of this share belonging to Amazon Web Services, Microsoft Azure and Google Cloud. Focusing on European companies, OVHcloud, the largest European provider, accounts for less than 2% of the total market share.
Finally, the technology that is currently gaining the most traction is quantum computing. Based on quantum mechanics theory, this technology would make it possible to solve complex problems that classical computers cannot solve, expanding the limits of knowledge while opening the door to new possibilities.
Unlike the previous two cases, Europe is well positioned to be a leader in this technology. Based on the top 50 quantum companies in the Analytics Insights ranking, Europe leads the way with 38% of companies (EU countries 28% and the United Kingdom 10%), followed by US companies representing 36%.
What can Europe do to regain its competitiveness? Is it possible to balance the situation of other regions with respect to Europe?
To regain its competitiveness, Europe must boost innovation. In this regard, European digital companies are the EU’s greatest assets in becoming a strong competitor in the current global technology race.
Telecommunications, as a fundamental pillar of the digital ecosystem, is a strategic sector for European competitiveness. Next-generation connectivity enables the advancement of cutting-edge digital services and emerging technologies such as AI, IoT and the cloud, resulting in greater innovation.
Despite the importance of European digital companies, including telecommunications companies, Europe has not managed to create an environment that is sufficiently conducive to innovation for them to be competitive at an international level. Among the challenges are market fragmentation, lack of scale and excessive regulation.
Firstly, fragmentation due to the multiplicity of regulations and bureaucratic processes in each country discourages companies from scaling up at European level.
Secondly, the lack of scalability of European companies results in lower revenue generation compared to their international peers, affecting the investment muscle of these companies and, therefore, innovation.
Finally, excessive regulation creates new obstacles associated with greater uncertainty for the creation of new innovative products and services and higher costs to meet reporting obligations.
The future Digital Networks Act is an opportunity for the EU to create a simplified regulatory environment conducive to investment, thereby increasing its competitiveness to regain its position as a relevant and global player.
