Zuckerberg in Barcelona highlights widening U.S.-Europe tech gap
By Bloomberg
The globe’s biggest telecommunications trade show is held every year in Barcelona, intended to celebrate Europe’s pivotal role in the genesis of the mobile industry. This year, the top speakers are two Americans who symbolize pressing threats for the region’s carriers.
As more than 85,000 attendees gather for the four-day Mobile World Congress -- among them Facebook Inc. Chief Executive Mark Zuckerberg and U.S. Federal Communications Commission Chairman Tom Wheeler, who will be giving keynote addresses -- executives are fretting over the growing digital divide between Europe and the U.S.
The event is emblematic of the malaise that has descended on European telecoms since the halcyon days of GSM, the first global standard for mobile, which was developed in the region. Since then, European companies have fallen behind U.S. and Asian rivals such as Apple Inc., Google Inc., Samsung Electronics Co. and more recently, China’s Xiaomi Corp.
“It’s typically European to debate for ages while things are being decided elsewhere,” said Claudia Nemat, regional chief at Deutsche Telekom AG, Europe’s biggest phone company. “That’s not what I consider technology leadership. We’ve got to go for it, set the pace.”
Out of 50 countries assessed by the Digital Evolution Index, created by the Fletcher School at Tufts University, nine of the 10 that have registered the least improvement in technological innovation between 2008 and 2013 are in Europe.
Capitalization Divide
Investors agree with the Tufts scholars. Over the past year, Apple, Facebook, Microsoft Corp. and Amazon.com Inc. have added a total of $400 billion to their market capitalization, for a combined value of $1.5 trillion. Their increase alone is more than the entire value of Europe’s four largest carriers, which together have capitalizations of $260 billion, up about $60 billion from a year ago.
And erstwhile industry leaders from the region have been taken over by U.S. rivals. A year and a half ago, Microsoft bought Nokia Oyj’s handset business for $7 billion, a fraction of the $250 billion the Finnish company was worth at its peak in 2000. Qualcomm Inc. in October agreed to buy U.K. chipmaker CSR Plc for about $2.5 billion to gain technology that lets machines communicate with each other.
‘Not Grumpy’
As Europeans seek to restore the region to its place at the forefront of the industry, letting the Americans take an ever larger share of the profits isn’t an option, Orange SA CEO Stephane Richard said before the event.
“Europe isn’t a digital doormat to the U.S.,” Richard said. “We’re not grumpy Europeans opposing Google, Amazon, Facebook and Apple, but there’s too much at stake in the digital space, financially and otherwise, for Europe to stand by as the U.S. dominates.”
Europe is attempting to regain some of its faded luster with innovations that may help define the next generation of wireless networks. Network-equipment vendors from Ericsson AB to Alcatel-Lucent will this week showcase products for future networks, while Gemalto NV, the largest provider of high- security mobile-phone and bank-card chips, plans to demonstrate new security applications.
Yet much of the focus this year will be on the Americans. While there will be plenty of European speakers, including Deutsche Telekom CEO Timotheus Hoettges, Ericsson AB CEO Hans Vestberg and Vodafone Group Plc CEO Vittorio Colao, they will likely be overshadowed by Zuckerberg and Wheeler.
Net Neutrality
If last year’s show is any guide, Zuckerberg will be the top draw. Hundreds of people queued for hours last February to get seats for the entrepreneur’s speech, a welcome that no other executive got. This year, he’s due to discuss connecting developing countries to the Internet.
More important to the executives at the show will be the question of net neutrality, including whether carriers can offer consumers streaming music or video that doesn’t count against monthly data limits -- which could give their in-house services or those of partners an edge over rivals. The answer will interest providers of popular services such as Netflix Inc.’s video streaming and music downloads by Spotify Ltd.
Wheeler, the FCC chief, last week adopted stronger rules for Internet providers that could serve as a template for other countries. The measure prohibits companies such as AT&T Inc. and Comcast Corp. from blocking or slowing online traffic, or offering faster service to Web companies in return for payment. It also brings wireless Internet service fully under the rules.
Profits Threatened
That question will be on the minds of those who listen in on Wheeler’s keynote address Tuesday, as they ponder the future of European regulation. The region’s carriers have been requesting regulatory relief to help shore up profits, which have suffered as they invest to keep their networks from collapsing under rapidly growing traffic.
“We need clear legislation on data privacy, security and copyright issues, as well as a clear definition of net neutrality,” said Thorsten Dirks, head of Telefonica’s German unit. “If we had this, it would be much easier for the telecoms industry in Europe to win.”