The Mobile Internet Economy in Europe

The Mobile Internet Economy in Europe

          
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The Mobile Internet Economy in Europe

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    Keeping the Mobile Internet Moving

    The economic benefits of the mobile Internet are big, clear, and undeniable. As we have seen, competition has driven innovation and experimentation that have generated billions of dollars in new economic activity, millions of jobs, and a large and growing consumer surplus. It should be a goal of European policy makers to keep the mobile Internet moving forward.

    To be sure, the disruption that game-changing technologies such as mobile often cause creates issues for consumers and others that require full debate and fair resolution. One of the most important of these is data privacy, data security, and the ways in which data is used by those that collect it. We have discussed previously the need to balance the potential value that personal data can unlock with the rights of individuals and societies to determine what are, and are not, legitimate uses of data. (See “Rethinking Personal Data: Strengthening Trust,” BCG article, May 2012.) There are also concerns about new business models, such as those at work in the “sharing economy” that create considerable consumer value but disadvantage legacy companies that often have to adhere to different sets of rules. Some consumer advocates and others point to the potential for overcharging consumers through in-app purchases and other subscription models, the cost ramifications of which some consumers may not fully understand. (Earlier this year, after discussions with industry players, the European Commission and the EU member states launched a coordinated action with respect to in-app purchases associated with online and mobile games, asking Apple, Google, and relevant trade associations to provide concrete solutions across the EU.)

    These are all legitimate concerns. In Europe as elsewhere, policy makers can help keep the mobile Internet economy moving by pursuing proven policy goals that can mitigate risks to growth and encourage innovation, value creation, and consumer welfare and choice. The European Digital Single Market initiative, for example, should help app developers and others reach multiple markets much more quickly with new products and services. Other policy goals should include the following:

    • Promoting investment in expanded coverage, high-speed infrastructure, and affordable mobile Internet access

    • Putting a priority on education and skills building

    • Encouraging innovation and entrepreneurial activity

    • Adapting existing legislation or policies to allow for the growth of new business models that create consumer value

    • Encouraging organizations to be clear about the collection and use of customers’ data and to follow sound practices when charging for in-app purchases and subscriptions

    In addition, policy makers need to take into account how quickly technologies and the innovations they enable are evolving and, where necessary, modernize regulatory regimes and regulations in ways that support innovation and investment across the entire mobile Internet value chain. Simple, transparent, ex ante policies work best in fast-changing environments. Existing regulations should be reviewed for the possibility of reducing or eliminating rules that impede technological innovation and business model experimentation. And taxation of digital activities should not become an undue burden for the sector, as it may undercut innovation and stunt the growth of independent developers. Governments should avoid, or look for alternative approaches to, adding new regulations or expanding existing regulations to new sectors. In some instances, self-regulation can be a viable option in competitive markets.

    Policy makers also need to recognize that, like individual countries and markets, companies and organizations operating at each layer of the stack face different kinds of challenges. (See “The Mobile Internet Stack,” above.) As we argued in “Reforming Europe’s Telecom Regulation,” for example, there is a need for reform at the network and infrastructure layer of the stack on the specific issues facing Europe’s telcos. In other parts of the stack—the operating system; device; and apps, content, and services layers being three examples—the market economy is doing its job quite handily. Competition reigns, prices are falling, innovation is bringing new technologies, products, services, and apps to market at a near breakneck pace. And consumers are realizing a huge and growing benefit. The mobile Internet economy is creating jobs and making a material contribution to GDP.

    We are still only starting to realize the benefits of the mobile Internet for consumers, businesses, and society. These benefits are built, fundamentally, on competition-driven consumer choice and access. In an age of globally mobile capital and talent, the economies that develop and maintain such markets will see the greatest payback.