EU-ASEAN Virtual Capacity Building Workshops

Identification of the key elements that comprise a robust and competitive digital economy and society (workshop A1)

Monday, 24 May 2021

Expert presenter: Domagoj Jurjevic, Chair: Paul Foley

1. Overview and objectivesThe digital economy is growing fast, taking shape, and undermining conventional notions about how businesses are structured; how firms interact; and how consumers obtain services, information, and goods, but still the meaning and metrics of the digital economy are both limited and divergent worldwide. The significant use of data is transforming business models, facilitating new products and services, and creating new processes. The main prerequisite, for all above mentioned, is developed backbone and access telecom network.

In this workshop we will: Try to identify key elements of the digital economy and its interconnectedness and Focus on the importance of developed backbone and access telecom network for the

development of the digital economy and society.

Both those topics will be analysed in the light of the current EU processes, strategies, and legal and regulatory framework.

2. Key elements of the digital economy and its interconnectednessDigital Economy affects almost all industries as well as sectors of the economy:

IT, technology and telecommunications, Entertainment, media and publishing, Retailing and consumer products, Transport and mobility Financial services - commercial banking,

capital markets, insurance, etc. Education, Healthcare services, Manufacturing, Government/public sector,

and benefits to number of them but moreover it benefits to the whole society in different forms which can be seen on the following picture.

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(source: https://businessjargons.com/digital-economy.html )

2.1. Definition of the Digital EconomyDefinitions of the digital economy vary from source to source and thus the economic activity covered by the digital economy varies as well. According to the OECD document „A Roadmap toward a Common Framework for Measuring the Digital Economy; Report for the G20 Digital Economy Task Force, 2020” (hereinafter: OECD document), that, among other sources, we used for the preparation of this webinar, as it suited most for our ideas to be presented, there are different basis of defining the digital economy which then affects measuring of it as well.

According to the OECD document, the Digital Economy has broader societal impacts of just an economic activity and therefore the definition could extend beyond the activity formally recorded in economic statistics. To cover all that, the following comprehensive policy definition could be used: “The Digital Economy incorporates all economic activity reliant on, or significantly enhanced by the use of digital inputs, including digital technologies, digital infrastructure, digital services and data. It refers to all producers and consumers, including government, that are utilising these digital inputs in their economic activities.”1

The basis of such a definition in OECD document comes from the various tiers underpinning it (see below on the following picture).

1 OECD - A ROADMAP TOWARD A COMMON FRAMEWORK FOR MEASURING THE DIGITAL ECONOMY; Report for the G20 Digital Economy Task Force, 2020

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As seen on the picture above, the tiers underpinning the proposed definition are the following: The Core measure of the Digital Economy which only includes economic activity from producers

of Digital content, ICT goods and services. The Narrow measure which is broader and includes the core sector as well as economic activity

derived from firms that are reliant on digital inputs. The Broad measure includes the first two measures as well as economic activity from firms

significantly enhanced by the use of digital inputs. The final measure, the Digital society extends further than the Digital Economy incorporating

digitalised interactions and activities excluded from the GDP production boundary, i.e. zero priced digital services.

An additional, an alternative measure covers all economic activity that is digitally ordered and/or digitally delivered. It should be considered as an alternative perspective of the Digital Economy, delineating economic activity based on the nature of transactions rather than the firms’ output or production methods as this measure focuses on ordering or delivery methods, regardless of the final product or how it is produced.

As regards the definition stated above, as the take up and application of digital technologies in each sector of the world’s economy grows, it can be assumed with high probability that the notion of the digital economy soon will become equal to the notion of the ordinary economy.

With reference to above mentioned, we can conclude that the key elements of the digital economy that would cover most of the definitions are following:

Infrastructure and new technologies Innovation Technology adoption Security and trust Business digitalization

Data ICT skills and Internet usage Activities and transactions online e-applications and e-services e-commerce

2.2. Main differences between digital and traditional/ordinary economyIf the main differences between the digital and traditional/ordinary economy are to be highlighted, these could be one of most important:

Doing business differently (more efficiently and cost effectively) Enabling the emergence of new business models/new market structures Different use of data, relying on data (digital economy is fuelled by and generates

enormous amounts of data)

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(source: https://www.economicshelp.org/blog/164275/economics/the-digital-economy-pros-and-cons/ )

2.3. EU Digital Strategy

Although the connectivity is important (which will be presented in the section 3 and policymakers usually put the emphasis on enhancing connectivity, it should be noted that the connectivity, as seen above in previous sections, is just one part of the digital economy ecosystem, as the whole eco-system of the Digital Economy goes far beyond the connectivity. With reference to above mentioned, EU considers that it needs an overall set of rules and policies which will cover all/most of the elements mentioned above in order to get the full potential of the digital economy.

EU digital strategy is composed of four main pillars, which are:1. Technology that works for people2. A fair and competitive digital economy3. An open, democratic and sustainable digital society4. Europe as a global digital player

Each pillar covers different areas, while in each area there are set of different rules, regulations, policies, actions that should work together and complement each other in order to boost the growth of the digital economy in EU. It should be highlighted that each pillar that will be presented, as well the constituent areas of each pillar, represents the topic per se and it can be analysed and discussed in detail under any other workshop in future. In this workshop we will quickly go through it and in more detail, we will cover just some of it.

2.3.1. technology that works for peopleFirst pillar deals with the development, deployment and uptake of technology that makes a real difference to people’s daily lives and a strong and competitive economy that masters and shapes technology in a way that respects European values. Areas covered by this pillar are:

Digital skills and jobs Artificial intelligence Cloud computing Blockchain High-Performance Computing and Quantum Technologies

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Connectivity 5G and Internet of Things Cybersecurity Digital Inclusion Photonics and Electronics

2.3.2. A fair and competitive digital economySecond pillar covers frictionless single market, where companies of all sizes and in any sector can compete on equal terms, and can develop, market and use digital technologies, products and services at a scale that boosts their productivity and global competitiveness, and consumers can be confident that their rights are respected. Areas covered by this pillar are:

Data Online platforms and eCommerce

o The European Commission has recently proposed two legislative initiatives to upgrade rules governing digital services in the EU: the Digital Services Act (DSA) and the Digital Markets Act (DMA).

The DSA and DMA have two main goals: to create a safer digital space in which the fundamental rights of all users of digital

services are protected; to establish a level playing field to foster innovation, growth, and competitiveness,

both in the European Single Market and globally. Copyright Digitising European Industry Start-Up Europe The Digital Economy and Society Index (DESI)

2.3.3. An open, democratic and sustainable digital societyThird pillar represents a trustworthy environment in which citizens are empowered in how they act and interact, and of the data they provide both online and offline. It represents the European way to digital transformation which enhances European democratic values, respects fundamental rights, and contributes to a sustainable, climate-neutral and resource-efficient economy. Areas covered by this pillar are:

Disinformation Media and Digital Culture Trust and ePrivacy eHealth, eGovernment Smart Cities Safer Internet Women in ICT

2.3.4. Europe as a global digital playerAs the EU is committed to setting global standards for emerging technologies and try to remain the most open region for trade and investment in the world, provided that anyone who comes to do business in EU accepts and respects EU rules. So, the fourth pillar covers following areas:

Foreign Policy Standardisation Next Generation Internet

2.4. EU Digital Compass

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The digital compass is the newest initiative of the EU which sets out objectives to achieve the EU’s vision for the digital future. It uses the four points of the compass to identify the main goals to reach over the next decade:

1. a digitally skilled population and highly skilled digital professionals

2. secure and substantial digital infrastructures

3. digital transformation of businesses

4. digitisation of public sectors

Key policy areas to ensure these goals are met include cloud computing, artificial intelligence, digital identities, data, and connectivity. It can be seen that most of these strategies deal with the key elements of the digital economy and try to improve it in order to boost development of the digital economy and remove barriers for development. As already mentioned above, each of the areas from the digital strategy and digital compass represents topic per se which means that, in order to go in details, full separate analysis is needed.

After having presented all EU strategies and policies related to the Digital Economy, the reference should be made to the ASEAN Digital Masterplan 20252 document where it is firmly stated that “Governments and regulators could work towards removing unneeded regulatory barriers to these market processes; to fund social measures for digital inclusion and digital skills; to build trust in digital services; to harmonise regulation and standards across ASEAN; and to promote awareness’s of the value of digital services.”

Apart from that it is stated that “There is a need to embed good regulatory practice (GRP) in the preparation, adoption, and implementation of rules, regulations, and procedures in the region. The aim of this strategy is to support implementation of key policies critical for the ASEAN Connectivity agenda, particularly focusing on standards harmonisation, mutual recognition and technical regulations, as well as addressing trade- distorting non-tariff measures.”

In our view, this webinar fully meets ideas and expectations from the ASEAN Digital Masterplan 2025 in terms of sharing best regulatory practices and experiences regarding harmonisation, policies and regulation, between the EU and ASEAN.

3. Importance of developed backbone and access telecom network for the development of the digital economy and society.

3.1. ConnectivityAlthough being just a one part of the digital economy ecosystem, connectivity is a vital enabler of the development of the Digital economy for both, end-users/households and businesses. At the same time, connectivity is one of the constituent areas of the pillar “Technology that works for people”.

Because of its importance, connectivity and infrastructure developments justify detailed monitoring and regulation to enable the development of the digital market and to ensure that there will be the optimal environment for investment. As connectivity represents the backbone for the functioning of the digital society and economy, in this part of the document we will deal with this topic in more detail.

When analysing connectivity we will focus more on the EU strategies and the way how political and economic union of sovereign countries could incentivize and develop the state-of-the-art digital infrastructure and at the same time decreasing the digital divide between its regions.

We will emphasize some of the EU policies that leads to better connectivity or promotes the increasing connectivity. The European Commission is working closely with EU countries, administrations, and businesses to bring reliable Internet and innovative connections to everyone across the EU. There are/were number of policies, initiatives, regulations that influence/influenced the development of the connectivity and here will be mentioned just some of them:

WiFi4EU 2 https://asean.org/storage/ASEAN-Digital-Masterplan-2025.pdf

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EU radio spectrum policy for wireless connections across borders 5G Connectivity Toolbox Abolishment of the Roaming charges in EU Intra-EU calls: lower and limited charges for calling other EU countries 112: EU Emergency number Support for Broadband rollout

With all these measures in place EU tries to close digital gaps in the Union and have the mutual policy which should result with the system of the ICT networks which will serve the development of the digital economy in the EU

(Source: DESI)

(Source: DESI)

The importance of the connectivity could be seen comparing pictures 5 and 6 where it is clear that most of the countries (10 out of 16) that scores better than EU average in connectivity scores better than EU average in DESI overall, although connectivity has just 25% of the value in DESI composite index.

3.2. EU Regulatory framework dealing with connectivityThe EU's electronic communications policy improves competition, drives innovation, and boosts consumer rights within the European single market. EU actions in the electronic communications field has led to greater consumer choice, falling bills and higher standards of service. The main regulations and actions related to electronic communications are:

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a sound regulatory framework for electronic communications, promoting competition and consumer rights

o directives (e.g. European Electronic Communications Code (EECC), BB Cost Reduction Directive)

o regulations (e.g. Roaming or Net Neutrality regulation; BEREC regulation)o recommendations (e.g. Recommendation on relevant markets susceptible to ex-ante

regulation)o guidelines (e.g. Guidelines on market analysis and SMP designation)o regulatory framework is ex-ante regime based on the competition law principles

(asymmetrical regulation). o symmetrical regulationo general ex-post competition policyo the main meaning of all the tools that regulatory framework is made of is the

harmonization of the regulation across the EU with the idea of forming a real digital single market

promoting investment in broadband networks to turn Europe into a gigabit society the Connectivity Toolbox supporting wireless technologies, such as 5G and LTE, through the radio spectrum policy

programme taking a leading role in international discussions on Internet development and governance

At the same time the Commission has the power to launch infringement proceedings against any Member State that fails to comply with EU telecoms laws and regulations. If necessary, the Commission may refer the case to the Court of Justice of the European Union. In the majority of infringement cases, Member States comply with their obligations under EU law before they are referred to the Court.

3.2.1. DESI Report dealing with connectivityIn the DESI report, there are individual Telecom Chapters of the DESI. Based on the main connectivity indicators of the report, such as network coverage, broadband take-up, and prices, the Telecom chapters report on the progress made by Member States towards a gigabit society, including the transition to 5G networks, and on main market and regulatory developments, including spectrum assignment and regulated access. Far from being exhaustive, they cover most areas of the market and end-user interest, i.e. consumer protection, net neutrality, roaming, emergency communications, and universal service.

The Telecoms chapters of the Digital Economy and Society Index (DESI) provide a snapshot of the electronic communications markets in each Member State, from an investment, regulatory and market perspective. They combine the quantitative evidence from Digital Economy and Society Index (DESI) with country-specific regulatory developments (spectrum assignment, regulated services, end user matters, etc.) track the development of the telecoms markets of each Member State and provide an important feedback loop.

Under that DESI report indicator, EU publishes different studies that benchmark EU member states: Study on Mobile and fixed broadband prices in Europe at the end of 2019 Study on Broadband Coverage in Europe 2019 (SMART 2019/0020)

All of it enables the comparison between the countries that goes beyond statistical indicators but relates to the market and regulatory developments and its impact on the market trends.

As the foundation of the EU regulatory framework is the harmonization of the regulation across the EU with the idea of forming a real digital single market, Telecom chapters together with statistical indicators give real insight in market trends that go/do not go in the direction of the digital single market.

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3.3. Other infrastructure – cloud computing and data centersWhen focusing on the infrastructure it is not just about the access and backbone network but about the data centres infrastructure as well.

The global data volume is growing very fast. Whereas cloud computing happens mostly in large data-centres today, by 2025 this trend will reverse: 80% of all data is expected to be processed in smart devices closer to the user, known as edge computing. The availability of both edge and cloud computing is essential in a computing continuum to ensure that data is processed in the most efficient manner. Energy-efficient and trustworthy edge and cloud infrastructures will be fundamental for the sustainable use of edge and cloud computing technologies.

Data centers are dedicated facilities that house computer systems and associated components. They are categorized by different Tiers (1–4): the higher the number the more reliable the setup and data redundancy. Due to the data boom currently being experienced on a global scale, data centers are increasingly important for the future, with a recent trend to move to hyperscale data centers supported by industry giants like Microsoft, Facebook, Amazon, and Google. Cloud services are usually connected to the data centers and offer an alternative model of data storage and processing on demand. Users can access their data and applications on the device of their choice over the internet.

3.3.1. EU cloud initiativesAs both, data centers and cloud computing, have been a developing trend for a number of years, there are numerous EU initiatives and research on the subject.

The Commission aims to enable access to secure, sustainable, and interoperable cloud infrastructures and services for European businesses. Cloud computing is a key objective to increase Europe's data sovereignty as outlined in the European Commission’s Data Strategy, Digital Strategy, Industrial Strategy and the EU recovery plan.

Currently, the European Commission is working on the establishment of a European Alliance on Industrial Data, Edge and Cloud, which will enable the development of several work streams:

Joint Investment in cross-border cloud infrastructures and services to build the next generation cloud supply

European marketplaces for cloud services, where users will have a single portal to cloud offerings meeting key EU standards and rules

EU Cloud Rulebook for cloud services, which will provide a single European framework of rules, transparency on their compliance and best practices for cloud use in Europe

Member States have signed a joint declaration on cloud where they expressed their will to collaborate towards the creation of a European cloud.

Other initiatives related to cloud computing are: The Regulation on the free flow of non-personal data, together with the General Data Protection

Regulation, raises legal certainty for cloud users by ensuring the free movement of all data in the EU. These two were one of the most important enablers of cloud computing in EU, which established the unrestricted movement of all data across Europe. By May 30, 2021, all existing unjustified data localization restrictions must be removed. Thanks to this stipulation, companies will now be able to store and process their data anywhere on EU territory.

Data portability: the free flow of non-personal data Regulation also builds trust through facilitating a self-regulatory work on cloud switching and cloud security. This self-regulatory work was addressed by the DSM (‘Digital Single Market’) Cloud Stakeholder Groups. It has resulted in the recently finalised SWIPO data portability Codes of Conduct and the CSPCERT Recommendations for a candidate European cloud security certification scheme.

Cybersecurity: at the request of the Commission, the European cybersecurity agency ENISA is working on a single European cybersecurity certification scheme for cloud services. The scheme will provide increased assurance to businesses, public administrations and citizens that their data is secure wherever they are stored or processed.

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Data protection in the cloud: the Commission has facilitated a platform for industry to develop Codes of Conduct for data protection in the cloud. This has resulted in two Codes of Conduct that are currently reviewed by the European Data Protection Board. More information about the processing of personal and non-personal data in the cloud can be found in the Commission’s Guidance on mixed datasets.

Standardised Cloud Service Level Agreements (SLA) that guarantee the quality of cloud services in the European market.

Cloud use by the financial sector: financial service providers increasingly use cloud services to remain competitive. There must be clear requirements in place for outsourcing agreements between financial entities and cloud service providers. As announced in the Fintech Action Plan, the European Commission is currently working together with stakeholders, supervisors and regulators to define standard contractual clauses for such outsourcing agreements.

A European mapping of data flows that will allow to assess the value of data flows to the European digital economy.

3.3.2. Cloud infrastructure EU vs ASEANThe top data center markets in Europe can be found where the largest internet exchanges reside— what are called the “FLAP markets,” referring to Frankfurt, London, Amsterdam, and Paris. The London Internet Exchange, or LINX, DE-CIX in Germany, and AMS-IX in the Netherlands are all world-class peering exchanges with hundreds of the largest networks exchanging huge volumes of traffic.

The graphics below present information about the backhaul networks and infrastructure in Europe and ASEAN Member States.

The graphic for cloud data servers, below on the left, has been generated by Tech4i2 after reviewing a large number of cloud service provider web sites and data centres web sites (such as www.cloudscene.com). The large dots in the graphic are main cloud data centres, the smaller dots are edge servers.

The graphic on the right provides the locations of Internet Exchange Point servers (IXPs). These are large super-computers that route internet traffic for all internet users. The data is derived from www.internetexchangemap.com. Several other sources exist which provide similar information. For cloud servers and IXPs there are sometimes considerable differences between sources about where internet infrastructure is located.

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Prof Foley will provide further insights to the backhaul infrastructure and the impact of backhaul infrastructure on connectivity quality and speed in the ‘Connectivity workshop” on Thursday 27 th May (workshop C1).

4. Key questions raised in the workshop Participants raised a large number of excellent questions. Key questions and an overview of responses are provided below. Thanks to all those that asked the questions.

4.1. Question 1. The role of national and international organisations in enhancing digital benefits and reducing problems

National Regualtory Authorities covering telecom sector as well as the ones dealing with competition in general (Competition Authorities) together with BEREC (EU Regulatory Authority) and European Commission deal with harmoniostation of regulatory practices in order to obtain the single market in line with the legal and regulatory framework of the EU. It is important for policymakers to understand that best practices from one region of the world can be used in the other.

The following link explains how EU plans to deal with this topic. Link: https://digital-strategy.ec.europa.eu/en/policies/foreign-policy

4.2. Question 2. What is the major elements or priorities of standardization for the development of the EU's single digital economy?

The Commission adopted a Communication setting up ICT standardisation priorities for the Digital Single Market as part of the package on "Digitising European Industry".

The Communication proposes a plan with two strands to prioritise and deliver an efficient and sustainable ICT standard-setting. This standardisation will address the challenges of the digitisation of the economy. The two strands are:

To identify a list of priority building blocks where improved ICT standardisation is most urgent, proposing actions with concrete deliverables and a timeline in those domains (5G, Internet of Things, Cybersecurity, Cloud and Big Data).

To propose proposes a high-level political process, to deliver and ensure leadership through standards, fostering a high-level commitment from a broad stakeholder base, including from industry, standard-setting organisations, and the research community, as well as from EU institutions and national administrations.

Link: https://digital-strategy.ec.europa.eu/en/policies/ict-and-standardisation

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4.3. Question 3. Sharing the DESI and ADIX variables. The ADIX variables, that comprise the ASEAN Digital Index (ADIX), will be presented in the session on Thursday 27th May.

Information about DESI - variables and methods from the 2021 study can be found at https://digital-strategy.ec.europa.eu/en/policies/desi

The International Digital Economy and Society Index (I-DESI) 2020, undertaken by Tech4i2, was published earlier this year. It can be found at https://digital-strategy.ec.europa.eu/en/library/i-desi-2020-how-digital-europe-compared-other-major-world-economies

4.4. Question 4. How is the policy stand with regards to closing the gap in terms of digitalisation or Digital Transformation in the individual nation within EU and harmonising them at levelled playing field (balancing competitiveness) across EU

The idea of the EU single market and harmonisation is that EU sets the framework with directives, regulations, recommendations and guidelines, that will be followed by all Member States in order to obtain the same level playing field across all the Union which should result with closing the gaps and differences between the Member States.

If it is about closing the broadband infrastructure gaps, it is dealt with by state-aid schemes of funding the network development. If it is done by public funding, according the Stated aid rules, those networks should be opened to all market participants (operators) under the same terms and conditions to reduce the impact of public funding on the competition.

4.5. Question 5. How can good relationships with MNOs be created to ensure mobile phone data can be shared?

Usually under the national legislation operators are obliged to send all the data needed to the regulators or national statistical offices. Just to emphasize that dividing the end user by technology (3G and 4G) would be not the same as dividing it by cable and FttH for instance as we have to bear in mind that mobile broadband user is the one that uses the data package of the mobile operator. Depending on the network coverage, even the phone settings, end user can use 3G as well as 4G, but at the end of the day it is not the 3G or 4G subscriber, but mobile broadband subscriber.

4.6. Question 6. what is the EU plan to strengthen digital identities regime as part of the development of the EU's digital economy

As the answer needs to be quite comprehensive, in order not to miss any detail, we forwarded you the following links. So, please explore the following links to find out the recent developments related to question.

Link: https://digital-strategy.ec.europa.eu/en/policies/trust

Link: https://digital-strategy.ec.europa.eu/en/library/building-trusted-and-secure-european-digital-identity-brochure

Link: https://digital-strategy.ec.europa.eu/en/library/eidas-compliant-eid-solutions-report-enisa

4.7. Question 7. Are there any plans in the EU to build the digital infrastructure indicators?

On the web portal of the European broadband mapping project, you can find the interactive mapping platform showing the quality of internet delivered by broadband networks across Europe. Until 2025, all European households shall have access to connectivity offering at least 100 Mbit/s (50% of households already until 2020). The European broadband map gives political decision makers as well as private

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investors the chance to monitor the progress made in the deployment of high capacity networks and the quality of broadband services in Europe.

Link: https://www.broadband-mapping.eu

Link: https://digital-strategy.ec.europa.eu/en/policies/connectivity-toolbox

5. Workshop overview and conclusions78 people attended the workshop and many have been kind enough to say how useful and topical it was. Key elements from feedback are provided below.

5.1. Most interesting things learntParticipants were asked about the most interesting thing they learnt from the workshop. The most popular areas were:

A useful overview of the key components and inter-relationship between elements of the digital economy;

Learning about the new EU policies and regulations, particularly the EU Digital Strategy and the EU Digital Compass;

Insights to cloud data centres and Internet Exchange Points in Europe and ASEAN Member States.

5.2. Thing learnt that will be most useful for participants in their jobsParticipants were asked which parts of the workshop will be most useful in their jobs. The most popular areas were:

The overview of EU27 policies provides a lot of ideas for what should be included in digital development in my country and how ASEAN Member States might enhance their work together;

The overview of the digital strategy was interesting, particularly the focus on "technology that works for people";

We had not previously paid much attention to digital backhaul infrastructure, it is an interesting area that we will examine further in my country.

5.3. Topics for further investigation Additional capacity building on cloud-related standardization of conduct and certification

would be very useful; Regulations and regulatory development is a complex and wide ranging area that could

usefully be investigated further; I look forward to learning more about digital connectivity and backhaul infrastructure in

Thursday’s workshop.

Domagoj Jurjevic and Paul Foley19.07, 24th May 2021

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