Level of digitalisation in the EU

The development of digital infrastructure is a key precondition to a deeper integration of digital technologies in business and public services. Digital infrastructure refers to the development of virtual networks entailing the upgrade of existing network infrastructures into a fully-fledged collaborative data infrastructure. Primarily relying on the combination of ICT innovations, such an infrastructure requires supercomputing capabilities, high data storage capacity, high-speed connectivity and cutting- edge software-based services for science, industry and the public sector. In this context, the role of 19_{The European Parliament has initiated a debate and plan to adopt recommendations on how to best address the challenging}

ethical, economic, legal and social issues related to the developments in the area of robotics and AI for civil use, as identified in the report with recommendations to the Commission on Civil Law Rules on Robotics (Delvaux, 2017), adopted in Plenary in February 2017. The report calls for a series of actions to develop a European legal framework on robotics and AI so as to, among other things, enforce ethical standards, establish liability for accidents involving automated systems, and to set up a European agency responsible for overseeing this quickly growing field and ensuring an integrated approach throughout the EU.

data takes a central dimension. Upgrading network capacity to support the deployment of high- performing, sustainable and efficient interconnected trans-European networks would find applications in the fields of transport, energy distribution and digital services.

As part of itsDigital Single Market (DSM)strategy, the European Commission has proposed a new ‘connectivity package’ setting strategic (non-binding) objectives for the deployment of so-called ‘Very High Connectivity’ (VHC) capacity networks.20In particular, it envisages a universal coverage of 100 Mbps-connections by 2025 and all urban areas and all major terrestrial transport paths having uninterrupted 5G coverage (European Commission (2016c). The focus on Internet access has been progressively complemented by a series of fine-grained statistical indicators on Internet usage, the development of new digital services, and the digitalisation of the industry, as gathered in the Digital Agenda Scoreboard21 and the Digital Economy and Society Index (DESI). The latter summarises some 30 indicators on the EU’s digital developments in five key fields over time: i) connectivity, ii) human capital, iii) Internet use, iv) integration of digital technology, and v) digital public services. In terms of performance, Finland, the Netherlands, Estonia and the UK rank among the digital frontrunners in the EU, while Germany and France are close to the EU average, and Poland and Italy lag behind based on their DESI score (seeFigure 3.2).

Figure 3.2. Digital Economy and Society Index (2016)

Source: European Commission and Eurostat

Fixed broadband penetration in the EU was 30.9% in 2014, more or less equivalent to Japan and the US, but below that of Canada (32.8%) (Rubio et al., 2016). Based on the Digital Progress Report 20_{VHC networks refer to electronic communication networks capable of maintaining network performance at peak hours in}

down- and uplink bandwidth, resilience, error-related parameters, latency and its variation. It usually also refers to a range of technologies connecting homes and businesses to ultra-fast broadband, including G.Fast close to the end user, fibre-to-the- building or premise (FTTP), DOCSIS and 5G networks.

21_{The Digital Agenda Scoreboard includes more than 100 indicators, divided into thematic groups, which illustrate some}

key dimensions of the European information society (telecom sector, broadband, mobile, Internet usage, Internet services, e- government, e-commerce, e-business, ICT skills, research and development).

0 10 20 30 40 50 60 70 80 FI NL EE UK DE EU28 FR PL IT Connectivity Human Capital Use of Internet Integration of Digital Technology

(2016), the share of EU households enjoying a fixed broadband subscription rose up to 72% in 2015. Although basicconnectivityhas been progressing quickly in recent years, the broadband penetration rate for high-speed connectivity remains limited with only 22 % of EU households actually benefiting from fast connections of at least 30 Mbps (Digital Progress Report, 2016). The picture remains, however, highly heterogeneous across Europe, revealing major disparities among member states as well as between rural and urban areas. In 2015, the Netherlands was leading on connectivity indicators, followed by the United Kingdom, Germany and Finland. France ranked below the EU average while Poland and Italy fell further behind.

Regardingmobile broadbandscoring, the 4G coverage soared up to 86% of EU households in 2015, with Sweden, Finland and the Netherlands leading the way in covering widely both urban and rural areas, as indicated in the DESI index (2016). According to the OECD (2017), Canada has been lagging behind France and Germany in terms of mobile broadband subscriptions in 2015 (OECD, 2017). However, it has been reported that Internet traffic per user via mobile broadband (downloads and uploads) was still much higher in the United States than in Western Europe on both mobile (1.8 GB vs. 0.8 GB per month on smartphones) and fixed networks (75 GB vs. 39 GB per month) (European Commission, 2016c).

In terms ofInternet usage, most of the Digital Agenda targets have been reached, with 75% of the EU population using the Internet at least once a week and 65% on a daily basis. However, there is still 18% of the EU population who have never used the Internet. There is a clear divide between the northern member states where, on average, a larger share of the population uses the Internet than in the southern member states. France, Poland and Italy have the lowest scores in these indicators. Interestingly, the main reasons reported by respondents for not subscribing to fixed broadband were a lack of interest (45%), lack of skills (41%), and cost factors for equipment (27%) and access (24%). Digital literacy is an important factor. The digital divide is largely driven by age and education levels, with 52% non-users being low educated and 50% aged between 55 and 74.

Turning to the traditional businesses and industries, most businesses do not fully leverage the opportunities that the increasing connectivity of the EU population offers, e.g. e-commerce platforms, cloud and online solutions. It is particularly interesting to see that only 16.8% of European businesses sell online, whereas an increasing proportion of Internet users shop online (63%) or rely on online banking (57%). Large companies are more often selling online (38%) than SMEs (17%). This gap in online activity has widened in recent years (DESI 2016).

Another key trend in digitisation of traditional businesses is the progressivedematerialisationof key business assets and processes. A growing share of EU companies use software for internal Electronic Resource Planning (ERP), CRM, electronic information sharing, or for sending electronic invoices. They also increasingly rely on radio-frequency identification (RFID) technologies, social media to engage with customers and partners (DESI, 2016), and cloud computing services (European Commission, 2016d).

Regarding e-government, only 26% of the population used online public servicesin 2014 to submit forms to public authorities online (Digital Agenda Scoreboard, 2015). While the initial Digital Agenda target of 25% has been reached, a series of barriers such as the lack of trust, transparency or user-friendly interfaces still must be overcome in order to increase the use of online public services. Among core countries, Estonia is reporting the highest use of online services, with a deep transformation of public administration and the development of trusted digital services (e-residency). In particular, Germany and Italy remain behind, with lower scores for e-government indicators.