As we start 2020, we look ahead to the key issues regulators and policymakers will grapple with over the coming 12 months. In Europe, the year will be of particular importance given the appointment of the new Commission. The new EC has already shown it has a clear set of objectives and priorities; it will continue the work of its predecessor on AI and on holding tech companies to account on harmful content. 2020 will also be the year when the world gets serious about 5G: this means more spectrum being awarded across both low and high-frequency bands, but also a consistent and certain approach to vendor security is also likely to emerge. Operators will need to know which vendors they can use for their 5G networks, and make sure they manage any risks in the most sensible way. Finally, it could be a big year for antitrust and competition policy: regulators will continue to explore how to limit the power of tech giants. In the EU, Margrethe Vestager’s broader role across competition and the digital sector could result in a significant overhaul of competition rules. While In the US there is much less of an appetite for radical change.
The new European Commission
The EC will set out a comprehensive framework on AI in cooperation with industry
As the evolution of artificial intelligence continues, regulation of its use and purpose is likely to be one of the priorities of the new Commission. The EC isn’t starting from scratch here; rather it will build on the foundations for a European approach to AI. From an ethical and legal standpoint, the GDPR was one of the building blocks of the framework, which was then complemented by the Ethics Guidelines on Trustworthy AI adopted by the High-Level Expert Group on AI in April 2019. In continuing the work, the new Commission will retain the open approach the previous Commission. The Expert Group, and the broader European AI Alliance (of which the group is part), are providing spaces of key importance for regulators and industry to communicate with one another to make sure they adopt the right approaches.
It is likely that the EC will propose specific rules on facial recognition early in 2020, since it promised to do so in the first 100 days of office. It will also seek to build a comprehensive framework for AI applications, to make sure they respect fundamental rights and are used in an ethical and trustworthy manner. Industry broadly accepts the need for regulatory steering in the field of AI. The effectiveness of the Experts Group and of the Alliance could lead to the adoption of legislation which has wide consensus among stakeholders.
The EC will champion a Digital Services Act, but will encounter obstacles along the way
In its political guidelines, the EC committed to propose a Digital Services Act. This aims to strengthen liability rules for digital platforms, services and products, and cover a broad range of digital activities. It will seek to address issues ranging from hate speech online, to opaque political advertising, and would apply to tech giants such as Google and Facebook, as well as ISPs and cloud services. The Act would update the e-Commerce Directive dating back to 2000, and build on the recently revised AVMSD and Copyright Directive, as well as recent proposals to tackle terrorist content online. In other words, the Act will finally introduce the ‘duty of care’ for digital platforms that policymakers have been talking about for some time.
While the EC will set out the proposal in detail during 2020, its broad objectives are already clear. The EC states the Act will remove the current “regulatory disincentive” in tackling illegal and harmful content. It will also create stronger safeguards compared to existing codes of conduct, thereby signalling that the EC no longer believes a self-regulatory, ‘hands-off’ approach is appropriate; and it will create clear rules for cooperation between tech companies and public authorities – something which has been missing until now. The Act will also look to provide a consistent approach to these issues across the EU, and to prevent a patchwork of rules which has emerged over the last two years, with France and Germany legislating by themselves on these matters. As always, the details of the legislation will be fundamental. It is expected that the Act will be subject to lengthy negotiations between Commission, Council and Parliament, and to heavy lobbying from industry. If GDPR, ePrivacy and Copyright are anything to go by, the road to the Digital Services Act will be long and encounter obstacles along the way.
Broadband policy and roll-out
The UK Government’s target for nationwide gigabit-capable connectivity will require changes to the regulatory landscape
The new UK Government has promised gigabit-capable broadband to every household and business “as soon as possible”. In 2019, the government had indicated its intention to achieve this by 2025, thereby moving it forward by eight years compared to the 2033 target for full-fibre in the Future Telecoms Infrastructure Review; however, the Government has now appeared to move away from that specific deadline. Industry has already signalled how difficult it will be to achieve this quickly, and that it will require regulators to consider the riskiness of investments and allow them to recover an appropriate return that recognises the length of the investment period.
In more rural areas, the Government has announced it will make available £5bn of public funding to create incentives for operators to invest and reach households the market would otherwise not connect. As well as moving away from a specific timeframe, the Government is now making reference to ‘gigabit-capable’ rather than ‘full-fibre’. This suggests a more flexible technological approach, whereby 5G mobile connectivity could be part of the mix adopted toward the achievement of the objective – sensible if a quick rollout is still favoured.
The presidential election in the US could also shake-up broadband policy
In the US, the looming presidential election scheduled for November 2020 will determine the course of action the FCC will adopt, since the Commission will be instrumental to the implementation of federal policies for connectivity. Ahead of his first mandate, Donald Trump did not have a clear and detailed policy for connectivity; however, the direction taken by the FCC over the last three years can provide an indication of what to expect if the White House stays Republican (with Trump likely to run for a second term). During this period, the FCC has made a strong push for 5G by allocating spectrum across both low and high-frequency bands, making sure local and regional players are also involved. It’s probably too early to say what a Democrat broadband policy would look like, although several Democrat candidates have promised stronger oversight on competition between carriers and on net neutrality, with the return of the rules the FCC abandoned in 2018. A Democrat administration would also likely be less likely to allow mergers, either vertical or horizontal, considering how Democrat commissioners in the FCC have opposed the recent T-Mobile/Sprint tie up. Bernie Sanders has pledged a $150bn infrastructure grant, and also stronger vertical separation in the industry, whereby carriers would not be able to provide content.
5G
Nearly 3600MHz of spectrum will be awarded across 10 EU countries alone
Having been made commercially available in a number of countries during 2019, 5G will become more widespread around the world during 2020. The European Commission’s 5G Action Plan for Europe aims to ensure every member state has some commercial availability of 5G services, with a view to achieve ‘uninterrupted coverage’ in urban areas and main transport paths by 2025. To this end, it is expected that spectrum allocation will pick up pace accordingly, to equip mobile operators with the necessary airwaves for fast and effective deployment of 5G. Our 5G tracker shows that regulators in at least 10 EU countries (Austria, Belgium, Czech Republic, France, Hungary, Netherlands, Poland, Portugal, Sweden, UK) have planned to award a total 3580MHz of spectrum across seven spectrum bands, ranging from the 700MHz band to the 3.6–3.8GHz band, not including the airwaves to be allocated on a regional basis.
For 5G to develop and flourish, European countries will also have to go beyond spectrum allocation. Stakeholders in the industry are calling for a proper European industrial policy centered around 5G, to facilitate the development of use cases to make the most of 5G connectivity; this is an aspect on which the new European Commission will have to work as soon as possible.
Policymakers will make risk-based assessments of 5G security
Another important factor in 5G development will be to establish a certain, credible, risk-based security framework, to make sure vendors adhere to the necessary standards and that operators continue to have the widest choice possible. The ‘toolbox’ adopted by the European Commission on 29 January 2020, following the Recommendation of March 2019, forms the basis for a common European approach; however, it still leaves plenty of room for individual states to decide independently. With this approach, the EC shows it considers 5G deployment as a priority, since it will not disrupt operators’ supply chains and will not rule outright bans for any network vendor. In October 2020, the EC will review the Recommendation and assess any need for further measures.
Despite efforts to reach a coordinated approach, several countries are still considering imposing specific bans on vendors, Huawei in particular. Our Cybersecurity tracker shows that no EU country has banned Huawei entirely from 5G network roll out so far (Estonia and the UK have excluded it from core networks), although final decisions are still pending in some key markets such as Germany. Those countries on the fence are likely to follow what happened in the UK, taking into account the EC’s toolbox.
Platforms and big tech
An international approach to taxing digital services is not as close as it may seem
2020 is set to see an even more lively debate around taxing digital services. In 2018, the European Commission tried to get EU countries to agree on a common framework, but failed. In the meantime, some progress has been achieved within the OECD, although things are moving very slowly and disagreements remain, with the US seemingly trying to water down the proposals and make them non-binding. Our Platforms and Big Tech Tracker has shown that, between 2018 and 2019, seven EU countries have either introduced or proposed a digital tax, as they sought to overcome the difficulties in achieving a common approach internationally.
Over the next twelve months, it is therefore likely that the US will continue to lobby against national and international efforts to modernise the taxation system and reflect the impact of online international transactions. The US department of trade recently concluded that France’s Digital Tax is discriminatory against US firms, and threatened to retaliate against French products in 2020. This resulted in France suspending the collection of the tax for this year (although the French Government maintains it will be collected as of 2021). This could mean the US could do the same against other countries planning to adopt a digital tax (Italy, Austria, Czech Republic, UK); however, the EU as a trade bloc could counter-retaliate against any tariffs or restrictions ruled by the US.
Antitrust authorities will up the ante when it comes to tech giants
Antitrust authorities have put tech giants under increasing scrutiny over the last few years. In particular, the European Commission has fined companies such as Google, Facebook and Microsoft billions of euros, having identified instances in which they abused their dominant positions. However, these fines generally only amount to a small percentage of revenues, and do little to address the market problem i.e. that tech giants face limited competition, which means they have little incentive to change their behaviour in response to market pressure. As a result, a lively debate has kicked off on how to adjust competition rules to the digital age, both within regulators and across the industry at large.
In some countries, such as the Netherlands, legislators are proposing to consider data as a barrier to entry, and to give antitrust authorities power to mandate data sharing remedies if necessary. In the EU, the Commission will undoubtedly continue to keep big tech under a watchful eye, and could also review competition rules to impose more effective remedies. Margrethe Vestager has already suggested the EC could reverse the burden of proof on tech companies and force them to demonstrate they are not engaging in anti-competitive behaviour; it will also adopt a new approach at defining markets, taking into account the role of globalisation and digitisation. In 2020, this should translate into a review of the notice of market definition.
In the US, the future of antitrust policy and its application to big tech will largely depend on who wins the next presidential election. Since 2018, the Federal Trade Commission has carried out extensive hearings on Competition and Consumer Protection in the 21st Century, to make sure the regulator is up to speed with the new challenges posed by the rise of online platforms; however, there is much less of an appetite for breaking up tech companies, with the exception of presidential candidates such as Elizabeth Warren and Bernie Sanders. The success of big US tech companies is still seen to be in their national interest; therefore it is expected the next administration will not adopt an approach that would significantly disrupt businesses.
