Digital transformation is a major project with the highest priority for governments worldwide, but arguably even more so in the EU and UK.
When you look at the global technology arms race, the past 10 years of digital transformation has, predictably, been led by the US. This has meant the digital tone and policies for the world have largely been determined by the US technology conglomerates, in particular the GAFA companies of Google, Apple, Facebook and Amazon.
The fact that these companies who dominate the landscape have been very successful at evading attempts at regulation is no coincidence. While the principle of neutrality is already recognised as imperative for physical network infrastructure, the same cannot be said for the broader digital ecosystem, consisting of operating systems, browsers, app stores and user IDs. Every internet user needs these components just as much as physical data networks.
The lack of neutrality in the marketplace means this part of the digital ecosystem is not available to all market participants on an equal footing, leaving the door open for the few large US corporations to dictate the rules of the game to users and companies as they see fit, through practices such as the pre-installation of software and default settings.
There is also no equal treatment for processing the most important raw material of digitalisation: the data itself. While the UK and EU have taken steps to shore up regulations on data processing, ironically the GAFA companies have led a largely unchallenged life in Europe when it comes to data protection enforcement. This imbalance is all the more critical because each of the GAFA companies processes more user data than the entire European digital industry combined.
So, it is no wonder that digital investment in the EU and UK is lagging behind the US, and by a significant margin. After all, for all their open-mindedness towards progress, any investor would lose interest in betting money on companies that are at a disadvantage when it comes to data use and, moreover, have to play by more stringent rules than their US competitors.
In order to catch up in the global digital competition, we urgently need a new digital policy which is based on three principles.
1. Neutrality of the digital ecosystem and a unified legal space. With their potential for value creation and innovation, the US digital giants dominate not only the internet but increasingly the global economy. They bring together supply and demand and control companies’ access to customers and markets through operating systems, app store rules, browser functions as well as standards for digital identities.
To counteract this oligopolistic gatekeeper structures, we need a commitment to neutrality of the digital ecosystem. This principle is the crucial foundation for a new digital policy. It must be ensured that access to operating systems, browsers and app stores is available to all users on an equal footing from the outset.
Providers of these infrastructures must not favour their own services and products over those of competitors. It cannot be right that the rules of a few app stores are the nearest equivalents to genuine internet legislation. It is almost impossible for alternative providers from the UK or any other European country to have a chance against the US giants in the medium term under this scenario.
2. Open standards and ecosystems. At breath-taking speed, GAFA companies are systematically transforming the once open and neutral internet into closed ecosystems with their own economic and legal spaces. Regulation alone will not close the gap between US companies and other players.
Therefore, the UK must invest in its own digital industry and, unlike the US platforms, should focus on open standards. Only open standards can enable freedom of choice through interoperability. Users of different platforms should have the possibility to communicate with each other without having to change providers depending on their circle of friends.
This would also enable users to freely transfer their data from one service to another. In addition, open standards promote competitiveness by facilitating market access for small and medium-sized enterprises and start-ups, thus further encouraging innovation. In addition, companies can enter into partnerships to increase their clout. This is the only chance to catch up technically in competition with GAFA companies.
3. Radical implementation of digitalisation. It is no longer about well-intentioned small projects, but about digitalisation in all its glory. For this, radical thinking is just as essential as the courage to be pragmatic. Old habits must be abandoned.
The Covid-19 pandemic has shown what is possible when a specific change becomes necessary: without the pandemic forcing companies to adopt and embrace work-from-home policies, the debate on home working would probably have taken us at least half a decade, if only because of the disputes over data protection, security and labour laws. But when you have no choice, it’s amazing what can be achieved in just a few weeks. That alone should give us courage. Because the risk of not consistently digitising the UK economy is far higher than the risk of making one or two mistakes along the way.
The UK is undoubtedly at a crossroads since Brexit. It has the opportunity to take a broader look at how it approaches the technology landscape as a whole. Creating a more neutral digital ecosystem to counteract the oligopolistic gatekeeper function of the GAFA companies, ideally in alignment with its EU counterparts, would be a good place to start to position the UK for growth on the world stage.