Letta’s report: everything tech-related you need to know

Two reports are considered the most influential in shaping the next European Commission’s agenda. One is yet to be published—Mario Draghi’s report—and the other—“Much more than a Single Market: speed, security, solidarity” by former Italian PM Enrico Letta—has already been making waves across the EU since April 2024.   

Letta’s report is an extensive 147-page analysis divided into six main chapters, each offering something that tech and telecommunications enthusiasts could be interested in. 

Some ideas are very ambitious and need further discussion and an honest evaluation of both European and national-level capacity to implement because ‘shooting at the moon and hoping to land somewhere along the stars’ is not a responsible way for policymakers to operate. This type of modus operandi is not foreign to many, but it results in delayed and half-results, adding to distrust in European institutions, fueling populist agendas, frustrating those who have to implement these ideas, and keeping businesses’ blood pressure unnecessarily high.

In this article, I’ll reflect on Enrico Letta’s ideas specifically relevant to European digital and electronic communications transformation.

‘Fifth Freedom’

The report starts off strong, asserting that the 21st century requires 21st-century solutions, and the usual four freedoms of the Single market—free movement of goods, services, capital, and people—are insufficient to keep the EU globally competitive. Letta revisits the idea of the fifth freedom, aimed at enhancing European research, innovation, and education. 

Letta provides a mix of ideas to operationalize it: from establishing a strong European technological infrastructure with significant European technological corporations to launching European Knowledge Commons to establishing a European Education Area, the European degree, and much more. He sees it as a priority and urges the European Commission and related stakeholders to develop “a comprehensive and ambitious plan to flesh out and implement the fifth freedom” as soon as the new term starts. 

The ongoing debate on ‘European digital sovereignty’ is, of course, addressed, emphasizing the need for scaling large European technology companies, without whom, in Mr. Letta’s opinion, “Europe will continue to be susceptible to cybersecurity threats, misinformation campaigns, and potential military confrontations.” 

While certain countries’ technology and political views threaten the EU, we should not throw all foreign technological companies in one pot. With the rules-based international order  crumbling, the EU (and the US) cannot afford to be at each other’s throats ‘as usual.’ Luckily, at the end of the report, Letta reminds Europeans of the need to strengthen transatlantic cooperation, aiming to develop a Transatlantic Single Market eventually. Systematic and mutual reduction of market barriers, deeper trade and investment ties, regulatory alignment, and common standards are outlined as key work areas.

 Enrico Letta has also addressed the pink elephant in the room -  that fifth freedom won’t take off if tangible monitoring mechanisms for innovation output, research impact, and economic benefits are not established. However, he later also talks about the need to ensure the “autonomy of researchers, protecting their right to pursue curiosity-driven inquiries free from undue political or commercial pressures.” – these two ideas need to be specified to avoid excuses or justifications for a potential lack of results - a situation prevalent in many European research institutions. 

More money needed

There is money in Europe - over 33 trillion euros in private savings, a third of which is held in current accounts. Yet, Europeans lean towards investing in the US economy and US asset management. The EU has been printing money right and left, yet the public funds are still insufficient to meet all the needs of the EU economy, especially in the case of the development of new technologies. 

Letta proposes developing a Savings and Investments Union, including an EU long-term savings product with auto-enrollment into an EU-level pension fund system, amplifying the role of European insurers, and revamping the European PPP market. 

Two of Letta’s ideas would be especially helpful for European startups – be they deep tech or not.

First, a Single IPO gateway for SMEs. Small and mid-sized companies need simpler listing requirements that match their size and age to help them move to the main market. The EU should encourage key stock exchanges to combine their small and mid-size segments, creating a single entry point for these companies to access EU public markets.

Second, the EU stock exchange for deep tech, with pension funds and large asset management firms at the core of it. Deep techs are high-risk, the ROI is long-term, and they have to burn through a lot of money until they acquire a big enough database to help them enter the market and scale – fast and big. Since the European deep techs have nowhere to go in Europe at the moment – there are no national stock exchanges in the EU that would be comparable to the US in the ability to raise capital fast and cheaply - the EU stock exchange could solve the issue at least partially. 

Of course, there are additional things that hamper deep tech development in the EU, among which access to data is at the core. European data privacy regulations, among other regulatory regimes, make developing innovative products in Europe super complicated.  

Public procurement

Letta’s report also highlighted problems with public procurement and the EU's administrative capacity. We need quick action on these issues. If the next Commission and Parliament only solved these two problems, future European generations would be very grateful.

The situation is gloomy today - according to Letta’s report, public procurement accounts for 14% of the EU’s GDP, yet a recent European Court of Auditors (ECA) report showed that competition for public contracts has diminished in the EU Single Market over the last decade (2011-2021). The length of a public procurement process has increased, too – the period from the start of the decision-making process to the contracting award has risen from 62 days in 2011 to 96 days in 2021.

Letta proposes several specific measures: to move away from reliance on lowest-bid criteria, to clarify public procurement goals with a smaller set of objectives, create a common Public Procurement Data Space, ensure stricter verification of economic operators, create an Online matchmaking platform for possible joint procurements of the 27 EU Member States or even transform the EU procurement framework into a regulation, making digital tendering applied by default. 

These measures are necessary, especially in the digital sector, where multiple digital transformation projects lag behind schedules, and administrations have virtually no leverage over vendors to speed up the implementation. Greater transparency and cross-border public procurement participation can potentially increase competition. It’s politically difficult to implement these reforms for Member States alone - in the face of rising populism, it’s hard to argue for a focus on quality rather than price, for example. The EU’s help in issuing a common regulation would take the burden away from local administrations. 

Scaling the ‘European Champions'

With discussions on European global competitiveness taking pace, Enrico Letta explores a new angle on how scaling European companies can help Europe compete with the US, China, or India: via scaling European companies in the financial services, energy, and electronic communications sectors.

Enrico Letta believes that if EU companies are supported in becoming bigger in size, they could potentially prevail in innovation, productivity, job creation, and even “the security of the EU itself.” 

It would be unwise to disagree that having bigger European companies could help negotiate better trade agreements—that’s how power works. Yet the question of competitiveness between companies of differing EU Member State origins remains, as does the question of how the EU-aided' augmentation‘ will affect consumer choice and competition. 

Enrico Letta knows these questions are going to be raised and, therefore, puts all competition-policy related questions aside, claiming that the EU can ensure competition policies are still in place, yet ‘strategic sectors’ need scale and national markets are an obstacle: “national markets, once designed to protect domestic industries, now act as a ceiling, hindering their growth potential.”

The future European electronic communications and 6GHz

One of the areas that Enrico Letta proposes to scale is within the electronic communications sector. 

 Letta recognizes the impact of liberalization and pro-competition policies in the EU, where new entrants challenged former incumbents, resulting in lowered prices and other benefits to consumers, especially compared to the US. 

However, he believes that market liberalization and pro-competition policies fostered ‘excessive entry by small-scale, territorially focused operators,’ which worked in the past but currently slows down the process of innovation and large-scale investment needed. Currently, there are over 100 operators in the EU; on average, the European operator serves 5 million subscribers, whereas the average US operator serves 107 million, and the average Chinese operator serves 466 million.  

Letta, therefore, proposes establishing a two-layer reform with subsequent growth of European operators. The first layer—local issues, domestic services, local networks, and consumer protection—would still be within the competence of national regulators. The second layer—core network services, business networks, and ground and submarine cables connecting countries—would be within the competence of an EU-level authority. 

Lastly, Letta unambiguously chooses sides in the 6GHz debate, stating that Europe’s strategic interest lies in securing the upper band of 6GHz for International Mobile Telecommunication (IMT) services, and he wants to see it allocated to IMT by 2029. 

The WiFi Alliance recently wrote an open letter to Mario Draghi, questioning Letta’s approach and asking for a ‘balanced spectrum policy.’ 

It is, of course, up for debate if allocating the upper band of 6GHz  by 2029 will help Europe surpass China, which has already done the same back in 2023, and how will that affect European consumers who are usually technologically-neutral and use both WiFi and 5G simultaneously. 

IBAN discrimination / Geo-blocking

Another commendable approach, although lacking in clarity in comparison to other parts of the report, is geo-blocking or so-called IBAN discrimination. In this situation, consumers cannot purchase goods or services because their bank account is not recognized as ‘local’ by both private and public vendors.  

Real-life example: Many Western European companies refused to deal with people with Revolut accounts—a fintech with a Lithuanian central bank's license and 'LT' letters at the front of their account numbers in the past.

Letta mentions the ‘2018 Geo-blocking regulation and its 2020 review’ and sees remaining issues with geo-blocking as ‘a matter of urgency’ that must be tackled as soon as possible. Let’s hope for it.