Börje Ekholm: Europe’s policy makers must prioritize innovation over regulation

Addressing a seminar at the Nordic Investment Bank’s Board of Governors meeting in Tallinn, Estonia, Ekholm said ongoing prioritization of telecoms regulation over innovation – coupled with the fragmented nature of the European communications service provider (CSP) market –  is inhibiting the region’s ability to embrace new digital technology and economies at the same rate as regions such as China, the U.S. and India.

With the majority of European CSPs not currently making returns to cover their cost of capital, Ekholm warned that the ultimate outcome of this continued approach could see Europe relegated to a museum with great art but no leading industries, lacking in digital technology, innovation and industrial leadership on the global stage.

Citing artificial intelligence (AI) innovation as an example, he said the EU has attracted just four percent of AI funding to date, compared to more than 80 percent for the U.S. and China.

He said that same open attitude to embracing digitalization was what enabled the U.S. and China to capitalize of the digital network infrastructure capabilities of 4G. In turn, he said this created many new companies that are now in the Fortune 500 – the global list of the top 500 companies in the world by revenue – while European representation on the list has diminished.

Ekholm said average investment in digital infrastructure in Europe is currently less than half of that in the USA.

“We need to take this seriously,” he said. “Technology disruption creates new market realities and changes competition. It is the ability to reinvent and innovate that is critical.”

Ekholm also addressed fragmentation in the European telecoms market, saying CSPs are disadvantaged in competitive scale when compared to markets such as the U.S., China and India.

“For an operator, scale matters, and European operators are subcritical in scale,” he said. “The average number of subscribers per operator in Europe is 4.4 million – compared to 95 million in the US, 300 million in India and 400 million in China. Europe simply needs in-market consolidation.”

To compete on technology leadership, Ekholm said Europe must prioritize innovation over regulation.

“This is about Europe’s ability to create jobs and achieve economic prosperity,” he said. “Digitalization is only going to accelerate. Building out ubiquitous, high performance, digital infrastructure is the key to Europe´s future competitiveness, technology leadership and decarbonization ambitions. European policy makers have an essential role in making this possible.”

Ekholm pointed to Ericsson’s investment to build a next-generation smart factory in Tallinn, and the support of investment bodies such as the Nordic Investment Bank, as examples of actions that can drive European digital competitiveness.

”The funding agreement with the Nordic Investment Bank is an important vehicle for enhancing our resilience,” he said. ”We appreciate our partnership. It is good for Ericsson, but also for the Nordic-Baltic region.”

Estonian President Alar Karis, and Karen Ellemann, the Secretary General of the Nordic Council of Ministers, were among the audience during Ekholm’s adress to the ’Stronger together – the new geopolitical reality and its impact on the Nordic-Baltic region’ seminar.