About three years ago, the idea began to be bandied about that data is the liquid gold of the 21st century. The concept is still with us today, although other issues have sidetracked us, like how we humans will be replaced by artificial intelligence, our move into the multiverse, and most recently how generative AI will supply us with unlimited, authorless books, music, and audiovisuals.
While these ideas and stories ran like wildfire, inundating the news and scaring the wits out of humankind, something less spectacular but much more useful continued to take shape: the data economy. In its report “The data driven enterprise of 2025,” McKinsey indicates that by 2025, “smart workflows and seamless interactions among humans and machines will likely be as standard as the corporate balance sheet, and most employees will use data to optimize nearly every aspect of their work.”
The data economy has had an impact on regions around the world, most particularly the United States, countries in Europe, and in Asia. Unsurprisingly, it’s those countries with high data accessibility and broadband consumption that are most likely to benefit from the data economy.
A recent and interesting study “Valuing the U.S. Data Economy Using Machine Learning and Online Job Postings,” conducted by Jose Bayoan Santiago Calderón and Dylan G. Rassier of the US Bureau of Economic Analysis, indicates that “annual current-dollar investment in own-account data assets for the U.S. business sector grew from $84 billion in 2002 to $186 billion in 2021, with an average annual growth rate of 4.2 percent” and that “cumulative current-dollar investment for the period 2002–2021 was $2.6 trillion.” Meanwhile, in China, “the size of the country’s digital economy more than doubled between 2016 and 2021, growing from RMB22.6 trillion to RMB45.5 trillion and accounting for 39.8% of GDP by the end of the five year period,” according to the Hong Kong Trade Development Council with data from the China Academy of Information Technology and Communications.
And, in the European Union (EU27), the data economy was nearly €500 billion and is expected to grow to €640 billion by 2025, with a share of GDP of 4.8%. For a united Europe, the data economy does not solely represent economic growth but also sovereignty and competitiveness, continued innovation, and even improved public services. This doesn’t simply happen overnight, of course. No, it takes time, planning, and united regulation.
For this reason, in 2015, the European Union launched its Digital Single Market project to create a data economy in line with the EU’s principles of maintaining competition through the regulation of companies and prevention of the growth of monopolies. The future digital market regulations had to address a series of issues, including:
- There is a large volume of non-personal data, generated by machines or by nature (meteorology, soil types, etc.) that can be utilized, though some rules must be established on how it can be harnessed.
- Personal data must be anonymized for aggregate use.
- Ownership and access rights of data produced by machines and by users will require regulation.
The following year, in 2016 Josef Drexl, Director of the Max Planck Institute for Innovation & Competition, published an ongoing research paper to assist the European Commission. The article analyzed the potential of a model that respects data ownership while providing mechanisms for data sharing. The Database Directive, the Trade Secrets Directive, and the EU Competition law would fit into the Data Economy. Drexl indicates that there is no need to create a property regulation about data, because of the difficulties of definition of some essential aspects and the existence of sufficient incentives for commercialization and means of protection. The question is how to guarantee that access is not banned or in other ways reduced to unavailability. Drexl suggests various methods: Competition Law (although considering considerable shortcomings), but also pro-active and pro-competitive ways such as rights to enforce access, promoting access as part of the public funding, establishing sector-specific access regimes in the public interest (public health, environmental, etc.), support of standardization initiatives, guidelines on horizontal cooperation agreements, and so on.
These ideas made it into the European legislation, which has been laying down the various aspects and facets of this new economy through recommendations, directives, and regulations since 2017, such as:
- COM 217/09 January 2017 “Building a European Data Economy”
- COM (218) 232 April 2018 “Towards a common European data space”
- From the Public Sector Information Directive to the Open Data Directive
- Recommendation 2018/790 on “Access and preservation of scientific information”
- European Open Science Cloud
- Staff working document 2018 final, “Guidance on sharing private sector data in the European Data Economy”
- Regulation 2018/1807 November 2018 “Framework for the free Flow of non personal data in the EU”
- February 19, 2020 “White Paper on Artificial Intelligence”
- Communication 2020/66 February 2020 “A European strategy for Data”
- Proposal for a European Data Governance Act of November 2020
- Proposal for a Data Act of February 2022
And now, after a long legislative journey, the European Data Act has arrived. On June 28, a political agreement was reached between the European Parliament and the Council, and this regulation on harmonized rules for fair access and use of data is now in the final stages of formal approval and publication. The law will be brought into force in 20 months’ time.
The Act focuses on data sharing, protection, and governance and proposes five types of measures. In the words of the Commission:
- “Measures that enable users of connected devices to access the data generated by these devices and by services related to these devices. Users will be able to share such data with third parties, boosting aftermarket services and innovation. Simultaneously, manufacturers remain incentivised to invest in high-quality data generation while their trade secrets remain protected.
- Measures to provide protection from unfair contractual terms that are unilaterally imposed. These aim to safeguard EU companies from unjust agreements, fostering fair negotiations and enabling SMEs to participate more confidently in the digital marketplace.
- Mechanisms for public sector bodies to access and use data held by the private sector in cases of public emergencies such as floods and wildfires, or when implementing a legal mandate where the required data is not readily available through other means.
- New rules that grant customers the freedom to switch between various cloud data-processing service providers. These rules aim to promote competition and choice in the market while preventing vendor lock-in. Additionally, the Data Act includes safeguards against unlawful data transfers, ensuring a more reliable and secure data-processing environment.
- Measures to promote the development of interoperability standards for data-sharing and data processing, in line with the EU Standardisation Strategy.”
The European model is based on sharing data while respecting ownership rights, and avoiding situations of abuse. This will thus enable start-ups, scale-ups, and small and medium-sized enterprises throughout Europe to not only compete successfully with one another but also increase their range of services on offer to users.
What’s more, this model joins an already solid body of European legislation that allows the development of the data economy while providing infrastructure and financial support. For example, the European Union’s GAIA X project that enables providers to offer cloud computing services is already a reality, and companies such as Siemens, SAP, Atos, Bosch, and Orange – as well as other small and medium-sized enterprises – are part of the initiative. Horizon Europe is another example and is the EU’s largest research and development initiative. It funds projects for the development of an agile data economy, and facilitates the adoption of next-generation data technologies and infrastructures, including the creation of platforms for data exchange and interoperability and for automatic data analysis.
Furthermore, the legislation is also taking effect at the country level. For example, in Spain the Ricardo Valle Institute of Innovation Foundation (INNOVA IRV) enables public-private collaboration to promote technological innovation specialized in microelectronics, digital technologies, and the circular economy. The 1070Km Hub is also a collaborative initiative, one that brings together companies, universities, and organizations in the Spanish Mediterranean area to help the region’s tech companies make the leap into the international arena.
In conclusion: Economic growth will be increasingly influenced by the Data Economy. Whether this growth is harmonious and benefits everyone (not only the largest players) depends on regulation. Europe is trying to combine the interests of the different stakeholders and will continue on this path, as it has done in other areas. In fact, some influences or adaptations can be seen in Chinese and (with limitations) US regulation. Undoubtedly other parts of the world will also be influenced by this European regulatory framework. Let’s hope that we will finally reach a global regulation that considers all the necessary aspects for collaboration between companies from different regions of the world.
© IE Insights.