As the plans for the Digital Single Market were unveiled on Wednesday, it is clear that Commission has accepted some of the criticism from the creative sector. The word “unjustified” has been introduced, which allows some wiggle-room going forward – or a “loophole” for “Ansip’s crusade” to disappear through as The Register comments. We’ll see if this is good enough for the creators, though. The Vice President himself thinks so, at the press conference I asked:

You have often talked of a win-win situation in the digital single market. Why then is the creative sector so critical of this proposal?

Ansip answered: We don’t want to destroy the system based on territoriality…(but) I am not supporting absolute territorial exclusivity

 (See the video here)

This answer may seem cryptic to say the least, but in the technical session that followed, the DG Connect deputy director general Roberto Viola mused: “Territoriality is like cholesterol, there is good and bad”.

Viola elaborated that there are three kinds of bad: One. Portability of services must happen. Two. If you are in a member state where the content is not available, it must be possible to access it. The third bad is re-directing customers based on nationality, which is discrimination. The good cholesterol is financing pre-production cinema.

That nicely sums up the policy-makers dilemma, all jokes of having cakes and eating them aside. It also answers why the examples in the Commission documents are now rental cars rather than football games.

The question is if VP Ansip can be as passionate about this compromise as he used to be, the line “Deep in My Heart I Hate [Unjustified] Geo-Blocking” is just not as convincing as the original.

As the European Commission sends its most convincing member—Vice President Andrus Ansip—to impress on us everyday Europeans the importance of making the digital single market real, Netopia looks at some of the numbers in play. Today: jobs.

VP Ansip says he expects 3.8 million jobs to be added by the digital single market. Not bad, even by international standards. In fact, that would be outperforming the US with a 100% or more. According to Ansip’s colleague, the Commissioner for Internal Market, Elżbieta Bieńkowska “If all Member States matched the digital performance of the US, 1.5 million additional jobs could be created in the EU.” So for 3,8 million jobs, Europe must not only match the US but more than double its performance. Of course, without access to Silicon Valley-style venture capital, bottomless military R&D-funds, an integrated market with one dominant language and all the other cool stuff the US has to offer (drive-in banks, anyone?), it’s a tall order—far beyond cross-border access to Baltic football.

Where does the figure of 3.8 million jobs come from, anyway? I did some digging and found a 2013 report on the promise of cloud computing that talks about 3.8 million jobs. Except 1,3 million of those would have come anyway, in the “no intervention scenario,” so it’s really 2.5 million jobs. And that, of course, “does not take into account the jobs that would be lost or the workers displaced by cloud-related reorganisation of business processes and productivity increases.”. Right. So, there may be new jobs, just not very many, and the net effect is unclear. I see how 3,8 is a much better pitch for Ansip.

Now, let’s be fair. It’s not like the vice president is the only commissioner who talks about millions of jobs that could come. Ansip’s predecessor, Neelie Kroes, expected 4.8 million jobs to be generated by the “app industry” by 2018. Granted, that may have been optimistic (and will we really talk about “apps” in the future?), but the main difference is that apps have to be developed by people—it’s a form of content on the digital networks. That’s where the jobs are, in content. In other sectors, digitalisation for sure drives productivity increases, but that is most often realised in efficiency gains rather than jobs created. If the Commission wants the digital single market (or multiple markets, whatever) to be job creators, it should look to content rather than infrastructure. Odd enough, the content creators don’t seem too excited about the idea of compulsory pan-European licensing. They even say it would kill jobs.

A market that grows from €17 Billion to €415 Bn in nine months? That’s where I would put my money! Except of course this growth only exists in EU Commission documents, the digital single market is an abstract concept. When the Juncker Commission took office last autumn, its expected this abstract concept to contribute “€250 billion of additional growth over the next five years”*. First look, this may look like €250 billion per year, but it’s over five years. Now, that does not mean €50 billion added per year, but only just short of €17 billion! (17+34+51+68+85=255).

Now, only nine months later DSM VP Andrus Ansip talks about a contribution of €340 billion, but when I asked his office for details, I was informed the number has been adjusted to €415 billion. That is a 2441% growth in nine months! Where will this end? The sky is surely the limit in digital economic forecasts.

What’s the substance here? The number €415 billion refers to the report The Cost of Non-Europe from European Parliament, but this is the efficiency gain expected from the digital single market – not the GDP contribution. Of course efficiency gains can allow different economic activity that contributes to GDP, but in itself it’s a saving – less economic activity, not more. That is a familiar pattern – digital economies of scale can give lots of efficiency gains – not least because users themselves do some of the work that bank clerks, travel agents and encyclopedia editors used to do. But that does not automatically equate to more jobs and growth. So far, the conclusion is rather that it gives limited growth and no net increase in wages, but great profits for the owners of the “free” services. Those who think that’s a great recipe for Europe, please stand up.

Tomorrow, we take a closer look at the projections for jobs in the Digital Single Market.

The Juncker Commission puts a lot of faith in the so-called Digital Single Market to fix jobs and growth in Europe. So much faith, in fact, that one of its vice presidents is dedicated to this mission: Andrus Ansip. Netopia’s coverage of the DSM starts today with an interview with Ansip, where he says that the DSM “could contribute up to €340 billion to Europe’s growth per year” and 3,8 million jobs. What’s not to like? Netopia looks behind these numbers for substance.

The Commission will announce its strategy on May 6^th, but today documents were leaked: the strategy communication and the evidence paper. A lot of the DSM conversation is about access to entertainment and culture content online, how copyright rules and licensing needs to be reformed in order to provide for cross-border access (Ansip is famous for talking about Estonian football). Is this a priority for anyone besides homesick Brussels expatriates? Sure, when you travel it would be nice to be able to access the same services you’re used to (and eat the same food, but of course that’s already been sorted out in the old analogue single market). At the same time, territorial licensing, cultural diversity and contractual freedom are some of the mechanisms that make those services and that content possible in the first place, so the risk is that the DSM throws out the proverbial baby with the bathwater. It seems from the leaked docs that the Commission hopes to convince the culture and media industries with tougher enforcement measures, but having a market in the first place is likely even more close to home for the creative businesses. Will the DSM spawn European digital challengers to rival Silicon Valley? Or will it remove remaining obstacles for the internet skyscrapers’ ever-expanding domains? VP Ansip says to Netopia that big players can deal with fragmentation but small players can’t. On the other hand, as one video game developer told this writer the other day “There is safety in fragmentation. Consolidation is death.”

Of course, the classic analogue single market did not spell the end of small business, but real-world services and products are different from digital ones. They don’t move as fast. Exclusivity and scarcity is built-in. Payment is more closely linked to delivery. Instant unlimited replication with perfect copies does not exist in the physical world, but in the digital world it’s standard. The rules are different. Anyone who has ever tried to charge for a digital service knows how hard it is: endless supply (or “long tail”) pushes prices toward zero. Scarcities can only be artificially upheld, but will be challenged by hackers and tech workarounds. The niche monopolies decide the terms of business for all players in the market, naturally with their own interests closest to heart. Online theft is borderless but enforcement is not. All of these are examples of what makes the internet great, but the flipside is that it is notoriously difficult to do business. The only really successful business model is advertising, but that is being eaten by spam and fake ad networks, the dominant players’ upper hand and the fact that the demand of advertisers is not endless. So this is where policy can make a difference. If the Commission really wants to create a digital single market, it should look at the fundamentals: money, ownership, scarcity. The solution may be more in the technology than in the policy. The way the internet fundamentally is designed, every data packet has a destination and content and nothing else. That beautiful simplicity is the greatest success factor. But that also means that anything besides destination and content, such as a price tag, must be added as an afterthought. It means swimming against the tide of the digital ocean (if the reader will forgive the cheesy metaphor). It also means a lot of influence for those who control the technology and infrastructure (cue the net neutrality debates). If the Digital Single Market is to create millions of jobs and billions of Euros, the real question is:

How can we create a digital market where the seller decides the price and the buyer decides whether to take it or leave it?

(Oh, and should you happen to meet Andrus Ansip sometime, don’t mention the geo-blocking. Deep in his heart, he hates geo-blocking.)

One of my strongest impressions when I visited the Internet Governance Forum in Istanbul last August, was the firm belief in the market forces. There was hardly an issue in the online world that would not be fixed by free competition. That belief, of course, rests on such things as transparency, informed customers, absence of information assymetries and not least pluralism of offers. In theory, there may be markets that actually work like this, but most, if not all, economists will agree that most real world markets display none of these traits, in fact the case is often the opposite (sellers may seek information advantages for example). If there was ever a time when the internet was a perfect market like in theory, that is long gone. The network effects that give users little choice but to join the dominant service in a particular niche (think online auctions, social networks, ad listings etc), have created very strong gatekeepers. When those niche dominants and gatekeepers are global almost-monopolies, the free market forces look like a distant hope at best. Yes, not all big services have survived. MySpace got beat by newer and better social media services, but today’s challengers are acquired by the global players, not beating them. Never is this more obvious than in the case of Google, with its near absolute dominance on search in many markets and its appetite for data from a multitude of sources giving the company an information upper hand to pretty much anyone it does business with. (If you want to do business with Google, you don’t negotiate, you tick a box to accept their terms – granted this is also true for the other internet skyscrapers.) Some have suggested that Google separate offers should be broken up in several companies, as has often been the method in anti-trust cases historically. That would be a disaster for Google, whose success relies on the method of taking data generated from one service (such as free e-mail) and monetising it through advert sales on another (such as search). Another view would be that internet search is a natural monopoly, like a gas network, water pipes or the city port – in that view it should be treated as a public utility, where competition is irrelevant and completely different checks and balances apply. The European Commission seems to be committed to protect the classic market economics, the legislator stepping in at the point of market failure, but basically supporting the idea of free competition. It is similar to the view I took away from the Internet Governance Forum, but with the addition of active regulation. This view is perfectly normal, we have health inspectors checking restaurants for food safety, there are tight rules on what sort of cosmetics can be put onto the market, building codes decide the terms for the construction sector etc. The question remains if the internet works as a normal market. Some argue that it is a brave new world, a completely new paradigm where the old rules don’t apply. Perhaps there is a need for a completely different form of regulation than for traditional offline markets? As of yesterday, it is clear that The European Commission is about to find out and Netopia can only wish it good luck.

COMM vs Google – will anti-trust law work online?

One of my strongest impressions when I visited the Internet Governance Forum in Istanbul last August, was the firm belief in the market forces. There was hardly an issue in the online world that would not be fixed by free competition. That belief, of course, rests on such things as transparency, informed customers, absence of information assymetries and not least pluralism of offers. In theory, there may be markets that actually work like this, but most, if not all, economists will agree that most real world markets display none of these traits, in fact the case is often the opposite (sellers may seek information advantages for example). If there was ever a time when the internet was a perfect market like in theory, that is long gone. The network effects that give users little choice but to join the dominant service in a particular niche (think online auctions, social networks, ad listings etc), have created very strong gatekeepers. When those niche dominants and gatekeepers are global almost-monopolies, the free market forces look like a distant hope at best. Yes, not all big services have survived. MySpace got beat by newer and better social media services, but today’s challengers are acquired by the global players, not beating them. Never is this more obvious than in the case of Google, with its near absolute dominance on search in many markets and its appetite for data from a multitude of sources giving the company an information upper hand to pretty much anyone it does business with. (If you want to do business with Google, you don’t negotiate, you tick a box to accept their terms – granted this is also true for the other internet skyscrapers.) Some have suggested that Google separate offers should be broken up in several companies, as has often been the method in anti-trust cases historically. That would be a disaster for Google, whose success relies on the method of taking data generated from one service (such as free e-mail) and monetising it through advert sales on another (such as search). Another view would be that internet search is a natural monopoly, like a gas network, water pipes or the city port – in that view it should be treated as a public utility, where competition is irrelevant and completely different checks and balances apply. The European Commission seems to be committed to protect the classic market economics, the legislator stepping in at the point of market failure, but basically supporting the idea of free competition. It is similar to the view I took away from the Internet Governance Forum, but with the addition of active regulation. This view is perfectly normal, we have health inspectors checking restaurants for food safety, there are tight rules on what sort of cosmetics can be put onto the market, building codes decide the terms for the construction sector etc. The question remains if the internet works as a normal market. Some argue that it is a brave new world, a completely new paradigm where the old rules don’t apply. Perhaps there is a need for a completely different form of regulation than for traditional offline markets. As of yesterday, it is clear that The European Commission is about to find out and Netopia can only wish it good luck.

Netopia’s new report Citizens Internet is out. Netopia contributor Ralf Grötker takes a broad view on the issues of freedom of expression, pluralism of opinions and non-discrimination in what he calls the “networked public sphere”. In the internet age, freedom of expression is often regarded as the same as no restriction to data traffic,  but of course that is far too simple: not all data can be understood as speech (a lot or most of it is machine-generated), there are numerous limitations for things like spam, harmful code, illegal content etc, Also, there is no democratic country where freedom of expression is without limits – hate speech, defamation, threats etc is restricted either through law or self-regulation such as press ethics systems. So that negative definition of free expression is not very helpful online. But what should we have instead? This is what Ralf Grötker discusses in his report, taking examples from other media as well as completely different fields such as gardening. Before you click to download the report, one final take-away: information is not the same as data, Grötker finds. Information can travel as data, but real information has other traits. It can be true or false for example. Relevant or irrelevant. New or well-known. If the Citizens Internet can help us think about data and information as two different things, that would be a great accomplishment.

If you prefer the report in German, click here.

Time for a new word: “re-intermediation”. The internet promised to get rid of intermediaries and put people and businesses in direct contact. Intermediaries such as travel agents, publishers or banks looked like gatekeepers providing little or no value, but in a position to charge undue prices. With the internet, they could be by-passed and the world would be free and open. “Disintermediation” was all the rage. Except a few decades into the digital society, the irony is that new gatekeepers came instead, this time global and more powerful: internet platforms or cloud giants. Network effects and the “winner-takes-all”-dynamics of digital markets have brought niche monopolies that replicate the familiar pattern of making the rules with little or no influence for businesses, creators or citizens. Time to talk about “re-intermediation”.

Network neutrality, Digital Single Market and labour automation are three hot topics in European policy at the moment and very much at the heart of Netopia’s question on the digital society. All three are in the focus of Netopia’s coverage within the next weeks.

Netopia’s report The Citizens Internet by Ralf Grötker brings a fresh angle to the conversation on network neutrality. What if we look at the citizens rather than the technology as we approach this subject? Launch in Berlin last week and Brussels Tuesday. Please join us!

This is a slightly edited version of Netopia’s newsletter from March 25th 2015.

“Fallacy” is a popular concept in debates about digital topics. Or maybe weapon more the concept, to be honest. By accusing your opponent of a fallacy, not only do you say he is wrong, but that he is thinking wrong. That his opinion is not only wrong, but will always be wrong under all circumstances. That is the result of a flawed thought-process.

One popular fallacy is the “Luddite fallacy”, the idea that technology can take away jobs, or better put, take away more jobs than it creates. Obviously, replacing human muscle power with horse power and later combustion engines in farming has removed a lot of farming jobs. But people now work in other fields, many unknown in the days of horse-powered farming: social media editors, database programmers, viral marketing experts (and then some). So because the problem of job loss to machines was solved in an earlier era, it must be the same today and anyone who complains about it is guilty of the Luddite fallacy. Except, perhaps it’s not the same this time around, so maybe a closer analysis is needed. Fallacy may be just a tad too strong a label for this line of argument.

Another example of a fallacy is the “Narrative fallacy” – the idea that an author is biased in finding a working narrative and disregards the complexity involved, perhaps ignoring contrary evidence. In his 2013 book The Everything Store, Brad Stone describes how Amazon-founder Jeff Bezos warns him of the narrative fallacy when Keen wants to write about the company’s development. But there can of course be a pattern in complexity, as Andrew Keen points out in his new book The Internet Is Not the Answer (in which I found the Stone-story). Sometimes it can be reduced even to one word. Keen suggests “money” to describe the change in the internet evolution from the early days of enthusiasts and public-funded research and today’s big data companies.

The story of the internet is often told something like this “the internet came and the changed the world”. I’m sure Jeff Bezos and many others would generally agree to that description. But as Keen described, actually the internet was built by researchers with tax money, so the techno-centric view is itself an example of the “narrative fallacy”.

That’s not to say this talk about fallacies makes any sense. I argue the opposite. These are not real fallacies. A real fallacy is something like “1+1=3”, something that goes against logic and is wrong in all situations. The Luddite- and narrative fallacies are only labels to try to stick to debate opponents. Nothing but rhetoric, no more or less convincing than other rhetoric plays. You could call it the fallacy fallacy. But that would be a fallacy.

The future of E-commerce is bricks-and-mortar. Speaking at the Digital Life Design-conference in Munich, NYU Stern professor Scott Galloway gave an analysis of what he calls the four horsemen: Google, Amazon, Facebook, Apple (a k a GAFA). Breakneck speed, 90 slides in 900 seconds. The main take-away is that so-called Pureplay e-commerce (online only) is not sustainable. Shipping costs are eating away on Amazon’s margins and retail chain competitors like Best Buy and Macy’s (yes, it’s a US-centric outlook) are catching. The top dog is Apple, which manages not only to do successful retail business but also increase the margin on their product over time, which is unheard of in tech (actually in most, if not all, businesses). Galloway’s conclusion is that Amazon will buy a chain of retail outlets within the next 12 months and his favourite candidate is a gas station network. Think about it, gas stations are well distributed across territories and strategically located for car travellers (you need a car to pick up big packages anyway), but need to diversify the offer in order to be profitable. Perfect match? Forget the drone hype and anticipatory shipping algorithms, Amazon’s future may be a lot more low-tech. Watch the whole talk here.