The industrial internet needs broadband investment and the right regulation

The industrial internet is a huge opportunity for Europe, raising the prospect of self-driving cars, smart cities and new manufacturing techniques. But to work properly it needs new skills, smart regulation and investment in the telecoms infrastructure.

That was the message of POLITICO’s “Industrial Internet Era” conference, held on December 8, where experts and decision makers laid out how Europe should approach the new era. The market for the Internet of Things could be worth €330 billion, according to a report by Boston Consulting Group. However, meeting the EU’s Digital Agenda targets for broadband roll-out will need an additional €106 billion in investment between 2015 and 2020, the report says.

“It is about creating the conditions to support European citizens, small businesses and big companies who are turning to digital as ‘the’ way to go about in life and business,” said Steven Tas, Executive Chairman of ETNO, the European Telecommunications Network Operators’ Association.

The industrial internet is already being rolled out in a range of industries. Construction equipment now sends out error codes so that the maker of the equipment can predict an imminent failure and tell the user to stop using it. “The construction industry is renowned for inefficiencies, and these are cost breakthroughs that are up to 50%,” said Niels Haverkorn, Vice-President Vision 2020, Volvo Construction Equipment.

However, only about 1-2 percent of data collected worldwide is actually being utilized at present. Better use of such data needs devices to be interoperable. “If machines cannot speak to each other and work together, 40% of the potential benefits of the industrial internet will not be achieved,” said Pablo Pfost, director of corporate regulatory affairs at Telefónica.

A condition for interoperability is standardization, said Michał Boni, a Polish MEP. “In 2020 we will have over 50 billion electronic devices in Europe, and if you want them to communicate, we need standardization,” he said – “not only European, but global standardization.”

Many rules are still set at national level, however, making the process a tricky one. Member states have recently agreed a directive on network and information security. This will force companies to disclose cyber security breaches to national authorities, who must then share the information with other member countries. But the agreement needed countries to give ground on cyber security, as national security is a member state competence.

“The agreement is a good thing,” said Wojciech Wiewiórowski, assistant European Data Protection Supervisor (EDPS). “Interoperability is not only a technical thing. It is also a legal thing, a semantic thing, a political thing.”

The need for new frameworks raises the question of how far government in general should get involved. In principle, “it is best to leave it to the market, unless there are problems,” said Kamil Kiljański, Chief Economist for European Commission’s department for internal market, industry, entrepreneurship and SMEs. “Only if the market malfunctions should the regulator step in.”

That thinking dovetails with Commission First Vice-President Frans Timmermans’s push to limit the amount of new regulation. “Timmermans’ mantra is smart regulation,” said Zoran Stančič, Deputy Director-General of DG CNECT. “We have to produce a case for why we need to act, and we go through very elaborate scrutiny procedures.”

Another reason to hold back on rule setting is that products and needs are still evolving. “This is a market in the making,” said Stančič. “We should be quite frank that we don’t have all the answers.”

The industrial Internet has the potential radically to change trade and work patterns. Smarter manufacturing could reduce the cost advantages of imports from outside Europe, for example. “The model is not a company producing somewhere in China, but delivering something to your doorstep in two hours,” said Egbert-Jan Sol, Chief Technology Officer, TNO Industry. “Factories can be like coffee shops in cities – near to the customers. This will be a paradigm change, from an economy of scale to an economy of networking.”

However, new techniques could also eliminate many of the jobs that now support Europeans’ livelihoods. “The hollowing out of the middle level will be a huge challenge for workers and for states and welfare systems,” said Christina Colclough, Head of EU Affairs, UNI Europa, a trade union federation.

To equip people for the future, education will have to adapt. Despite high unemployment in Europe, there’s a shortage of some 180,000 IT specialists, according to Stančič. The adjustments being made in universities are patchy however. “Some member states have changed curricula,” said Eva Paunova, a Bulgarian MEP. “But this is not the situation all across Europe. It is very important to invest in teachers.”

By ETNO on Politico

The original version of this article was published on the Politico website at this link. 

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• Event photos can be found here
• Event videos can be found here