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With right policies, Portugal could spearhead Europe’s digital innovation

On March 19th, the European Commission and the Portuguese presidency of the EU collaborated to host Digital Day, an online event devoted to addressing some of the biggest challenges affecting the bloc’s digital transition. The 27 Member States capped off the virtual event by signing a number of declarations aimed at boosting Europe’s digital green agenda. Arguably the most noteworthy part of Digital Day 2021, however, was the creation of a permanent European entrepreneurship structure. This “startup alliance”, established on the initiative of the Portuguese government, is intended to help Europe compete with tech hubs like the US, Israel and Singapore, and will be based in Lisbon.

It’s not surprising that Lisbon is backing such an initiative—Portugal has made no secret of its aim to put the digital transition at the heart of its economy and turn Lisbon into one of the world’s premier tech hubs. Portugal is off to a fairly good start, attracting increasing amounts of investment and scooping up talented digital nomads, even in the middle of the coronavirus pandemic. To become a top-tier tech hub, however, Lisbon must kick its own digital transformation into a higher gear.

Tech forward

In many ways, Portugal is well placed to play a central role in the “Digital Decade” which the EU recently kicked off. Portugal earns high marks in some sections of the EU’s Digital Economy and Society Index (DESI). In particular, Portugal’s widespread deployment of ultrafast broadband, driven by significant investment and high levels of competition between private operators, has proven instrumental in attracting overseas talent to projects such as Europe’s first tech nomad village, located in Ponta do Sol, Madeira.

Indeed, Portugal’s readily available broadband and startup-friendly taxes have attracted many of the Brits fleeing Brexit for mainland Europe, while non-EU residents have been drawn in by the chance to secure one of Portugal’s golden visas or ‘techpreneur’ start-up visas. What’s more, homegrown Portuguese startups are increasingly attracting international investment funds: in 2020, international investors accounted for almost a third of seed and pre-seed rounds.

All in all, Portugal is gaining a global reputation as a fast-moving ecosystem with the benefit of EU membership and an agile international outlook that offers a warm welcome for investors and digital nomads alike.

5G a sticking point?

To take full advantage of this potential, however, Portugal must address some lingering connectivity issues. Despite punching above its weight when it comes to ultra-fast fibreoptic broadband coverage, something which has been instrumental in driving the country’s tech startup success, Portugal’s mobile broadband services are lagging behind its EU counterparts.

While member states such as Denmark and the Netherlands are leaping ahead on 5G, Lisbon’s 5G spectrum allocation has been fraught with problems. More specifically, the 5G auction rules established by national communications regulator Anacom have come under sharp criticism from both established telecoms operators and European policymakers. The competitive fairness of Portugal’s telecom market has been a key factor in making it economically sustainable, encouraging investment and allowing Portugal’s telecom sector to compare favourably to its peers.

The 5G auction, however, has threatened to shake up this delicate balance. The terms outlined by Anacom have been accused of disproportionately favouring new entrants to the market, requiring low investment commitments from these new players, only committing them to cover a narrow geographical segment of the Portuguese population, and allowing them to provide service at slower speeds than established operators.

This distortion of competition risks restricting investment into Portugal’s 5G sector--something which is particularly troubling given that, despite European telcos spending extensively on infrastructure investment, there is still a noteworthy funding gap. Portugal’s chunk of the €750 billion EU package of coronavirus recovery funds could be a golden opportunity to address this shortfall. Unfortunately, unlike most other member states, Portugal’s draft plan of how to spend its share of the recovery cash does not earmark any specific support or incentives to expand mobile network coverage.

Unless Lisbon allocates greater funding for mobile connectivity and Anacom revises the 5G auction framework to create a fairer system, Portugal could fail to consolidate its position as a bona fide EU tech hub hotspot.

Playing 5G catchup across the bloc

Anacom’s auction rules may have put Portugal in a particularly tricky position regarding the rollout of 5G, but it’s not the only member state in which funding gaps and inadequate regulatory frameworks are hampering the move to the next-generation mobile network. As of September last year, less than a quarter of Europeans were able to connect to a 5G network – an achievement that pales in comparison to US mobile connectivity (76%) or to that available in some parts of Asia (93% in South Korea), according to a report by telecoms trade association ETNO and research consultancy Analysys Mason.

The European Commission (EC) had planned for 5G to be commercially available in at least one city per member state by the end of 2020. Currently, only 17 EU countries have hit this target – Portugal not included. The need to narrow this connectivity gap is urgent: Europe cannot afford to lag behind on the matter of 5G networks which are critical to modernising everything from manufacturing to transport to healthcare services.

For Europe to gain ground on better-connected regions of the world, it will need to match its ambition to move into the digital age with determination to act – to create a context in which investment and infrastructure are seen as two halves of the same coin. There are some signs of progress: European policymakers have set aside 20% of the bloc’s coronavirus recovery funds for digital transformation, with particular emphasis on the need to accelerate the rollout of 5G and ultrafast broadband networks.

As the holder of the rotating EU presidency and a country which has repeatedly touted the benefits of the digital transition, Portugal should not only be at the vanguard of events like Digital Day but should take the lead on building the connectivity that will be essential for Europe’s Digital Decade.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes

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