What is it and why is it significant?

The Digital Single Market is the overall strategy for EU policy and legislation that affects digital commerce and communication in Europe. It has been proposed by the European Commission in an attempt to further integrate standard pricing structures and competition across EU member states – a key pillar of the single market.

Had the UK remained a member of the European Union, several aspects of digital legislation would have been adopted:

  • On-demand video streaming services, such as Netflix or Amazon Prime, would need to ensure that at least 20% of content is produced within an EU member state.
  • Television channels would not be able to show more than twelve minutes of adverts per hour over a twenty-four hour period. Provided that adverts do not constitute more than twenty per cent of airtime between 07.00hrs and 23.00hrs, broadcasters would be able to show more adverts at peak times and fewer in the middle of the day for instance.
  • Universal postage pricing guidelines would set a non-legislative benchmark for companies to adhere to when offering services within EU member states. This intends to balance the pricing structure so that a package being sent to an address in an EU member state would cost no more than standard domestic delivery.
  • EU Data Protection Framework – this would require any company in an EU member state who is working for a non-EU client to have the ability to provide personal data held by the company on request. Companies would also be required to delete this data on request. Should a company within the EU experience a data security breach, they would be required to notify the relevant EU authority within 24 hours.

What will it affect and when will it be introduced?

Any on-demand video service that covers more than one member state - such as Netflix and Amazon Prime - will be required to comply with the new legislation. They will be required to ensure that 20% of their content has been produced within the EU. The Commission has yet to clarify what constitutes being produced within the EU: written, filmed or edited, or all three.

All television channels that broadcast within the EU will also be subject to the new legislation. However, there are no guidelines for channels broadcasting from outside the EU and, as a consequence, no indication of whether these channels will be required to comply with the law.

All companies that offer an inter-EU member state parcel delivery will be expected to revise their pricing structures to reflect the concept of a borderless European postal zone. However, this will not initially be enforced by law and will rely on delivery companies adopting new prices of their own accord; and reporting the changes to the European Commission.

There is no set date for implementation and the legislation has yet to be passed by the European Parliament. Implementation in European member states is expected to be towards the end of 2016 and the data protection framework is expected to be implemented within two years.

What about ‘Brexit’?

As far as the EU is concerned, the UK is still one of the 28 member states and, until the negotiation for withdrawal has been completed and signed, the UK is still obliged to be compliant with EU legislation and regulations; including any new legislation that is introduced between now and withdrawal, such as the Digital Single Market.

So the question is: will these regulations be thrown on the ‘bonfire of EU regulations’ that some wish to follow Brexit, or are they good-for-business decisions that any economy would want to see adopted to enable cross-border trade?

Implications for business

Depending on the negotiated terms for withdrawal, the British Government may wish to hold onto existing European legislation such as trade agreements including the Digital Single Market or, at least, aspects of it.

UK businesses will find it more challenging to sell to EU consumers unless they adopt most of the changes that support e-commerce, including universal postage pricing. Like the proposed abolition of mobile data roaming charges within the EU, universal postage prices would enable businesses in the UK to reduce their spending and increase their B2C business with the rest of Europe. We assume this would come with an obligation for UK businesses to notify the EU of any data security breaches within their organisation but, in our view, this would reassure consumers that their personal details are being kept securely.

A big risk is that, as UK video products will no longer count towards the 20%, access to streaming platforms that cross Europe could be reduced. This may see more UK ‘films’ and ‘programmes’ being made in the EU to ensure investors can see returns from wider access streaming.

What the commentators are saying

  • Following Brexit, the UK will be set to lose both significant investment from the EU to tackle cyber crime and the information sharing service that Europol provides to member states.
  • Businesses in the United States are supportive of the initiative, although US providers dominate the European technology market.
  • Despite being above the EU digital economy average, greater investment from its own Government is required for the UK to become the world leader that was mentioned in the Queen’s speech earlier this year.
  • Whether the UK adopts the Digital Single Market or not, the Government will be responsible for ensuring the UK’s future as a leader in technology and digital and cannot rely on the EU to drive initiatives forward.
  • There are concerns within the film industry across the world that any change to legislation will be detrimental to an already US-dominated sector.
  • Many businesses were vocal before the vote which led to Brexit, stating that eliminating digital boarders can only be a good thing for commerce and the UK would be better shaping legislation from within the EU, not reacting to it from the outside.
  • Press in the Irish Republic have even announced that Ireland could benefit from thousands of new jobs from the Digital Single Market and up to €27 billion for their economy.

What should happen?

It is our view that, like remaining a member of the trade bloc and the tariff-free benefits that this can bring, it is in the UK’s interest to retain the Digital Single Market structure and ensure that we adapt to changes in technology, eCommerce and cyber security issues. Anything that facilitates free trade on an even basis is good for our economy.

James Hammersley is the co-author of ‘Leading Digital Strategy’, a guide to eCommerce strategy published by Kogan Page. He is a founding partner and director of Good Growth, a digital change consultancy that has worked with organisations such as The Economist, The Co-operative, O2 and Manchester United.