“Europe isn’t just a place. It’s many places. It’s a place to do business. And it’s a point of view, a political one.”, writes Timotheus Höttges, CEO Deutsche Telekom, in his essay to our series of articles “Europe can do better. How our continent finds new strength. A wake-up call from economy” which was initiated by Handelsblatt and United Europe. “National thinking is no good for financial crises or refugee crises. Nor is it any good for international competition, particularly with North America and Asia.”
“When you think of Europe, what do you think about? Where is your Europe? What is your Europe’s place?” The German newspaper Süddeutsche Zeitung asked these questions several years ago. And in light of the current situation, I also recently gave some thoughts to the question, “What is Europe’s place?” What this construct stands for symbolically, because it’s more than geography: It’s a community of values. A community of laws. An economic community. A symbiotic community.
I thought about the Parlamentarium in Brussels: the European Parliament’s exhibition and visitor center. It combines two things. First of all, the Parlamentarium is a prime example of how digitalization enriches us. Its exhibition guide is a modern smartphone that gives visitors information about the various exhibits through near field communication. There are audio and video files in which people talk about how they founded their companies and became global market leaders. As a visitor, you can use a terminal to send your requests to the members of parliament, which are distributed over the internet and appear on a large monitor in seconds.
Secondly, this exhibition doesn’t only show where we’re going with digitalization. It also shows us where we come from as Europe. Europe is a peace project. It is based on the theory that peace can be achieved most easily through community networks. Not by partitioning markets, but by having the people who do business enter into special relationships.
When we consider these two points of economic community and peace community together, it quickly becomes apparent that thinking in terms of nation-states can be very problematic. Europe isn’t just a place. It’s many places. It’s a place to do business. And it’s a point of view, a political one. National thinking is no good for financial crises or refugee crises. Nor is it any good for international competition, particularly with North America and Asia. So the Parlamentarium, my place for Europe, also stands for my vision of Europe: A digital, competitive economic community and community of values.
Europe can look back on great successes in both areas. But both are being challenged: our economy – and with it, our values. Of course, global competition is nothing new. Germany, for example, has the most connected economy on earth, ahead of even Hong Kong, the U.S., and Singapore. Europe has powerful economic clusters. They are mainly based on skilled craftsmanship and excellence in industrial manufacturing, along with outstanding basic research:
This industrial base is highly coveted. When we look at the various companies from Silicon Valley, for example – especially Google and Facebook – it becomes clear that their profits to date come primarily from advertising revenue. But the advertising pie that the internet giants gorge on is fairly finite. It comprises around a mere one percent of our gross domestic product. So it’s no wonder that these companies are increasingly using their data models to try to break into the industrial value chain worldwide. Examples include smart home solutions, healthcare, and self-driving cars. This is the real threat that we have to counter.
How can we succeed? A few thoughts:
Firstly, I am convinced that the value chains of the future will become less vertical, that is, they will not remain within individual industry sectors. Instead, they will become increasingly horizontal, cross-industry. This means we need more cooperation or, to use a trendy term, “co-opetition”. But to do this, we need to create incentives and facilitation for such cooperation. This also means promoting the creation of global champions within Europe instead of preventing their creation.
Secondly, we need a European cloud. It’s almost become a cliché that data is the raw material of digitalization. But we also know that value is truly created when the raw materials are processed. When it comes to data, this currently takes place almost entirely outside of Europe. European companies that want to use public cloud services can choose between just a few American (Amazon, Microsoft, and Google) and one or two Chinese (Alibaba, Tencent) providers. This may not pose a problem for the majority of applications from the public cloud, such as regular office communications, but what about more sensitive data? Doesn’t Europe suffer from a strategic disadvantage when business data and customer data lie outside of Europe? And what can we do about it? We could restrict the non-European providers and say they can only offer their services here if a European provider is completely responsible for delivering the software and, above all, responsible for the legal and technical control of the data. This is what China does.
The next step, however, would be a completely European cloud infrastructure, with data centers in different European countries, and, above all, the corresponding development of European software. To achieve this, we need policies that support this kind of infrastructure, among other factors, having public authorities and institutions become customers of such an infrastructure, to create the initial market.
In any case, forbidding the use of data in general, or making its use unreasonably difficult, is not an option. After all, our new prosperity also relies on data. In retrospect, we might consider the last 50 years to be the golden age of personal freedom. Before that, civil society was too underdeveloped. In the future, we might be too technologically advanced. But we have lots of opportunities to shape this advancement positively. And find our own way, far from the mass surveillance of the Anglo-American sphere and an IT dictatorship like China’s, with a social scoring system that completely monitors all behavior and gives out punishments and rewards accordingly. This way could mean that Europeans shift their ideas of what they currently consider to be “the individual”. Toward greater transparency. The younger generation is already doing this. And it isn’t necessarily all bad. For example, it could mean greater security and give people back some of their freedom.
Thirdly, we need more initiatives to identify the technologies of tomorrow. The extremely successful program by DARPA in the U.S. (Defense Advanced Research Projects Agency) could serve as a role model. Many things that were first researched for military purposes found their way into civilian use, where the technologies are – hopefully – used civilly. Examples include the internet, laser technology, predecessors to Google Maps, and voice assistants like Alexa and Siri. So far, Europe hasn’t had much of an equivalent.
Fourthly, Broadband networks also have strategic importance, of course. Deutsche Telekom is aware of its responsibility here. We invest 12 billion euros every year, around five billion in Germany alone; not only in major cities, but also where others don’t get involved. But a continent that needs investments also needs investment incentives.
For a long time, European regulation focused primarily on generating competition in the (old) networks instead of competition toward the (new) networks. This had consequences. Total profits by European telecommunications companies have dropped by half since 2006, weakening the ability of these companies to invest, to build their own new infrastructure and continually adapt it to increasing demands. What’s more: The German telecommunications industry alone has spent some 60 billion euros on mobile communications spectrum since the year 2000. Money that could have gone to building antennas and transmission towers. While China (with its 1.3 billion residents) considers reducing the number of mobile network providers from three to two, Europe was long governed by a rule that every country should have four providers. As such, we are nowhere close to a single digital market. And as a consequence, we also lack a European champion that can measure up internationally to giants like AT&T (market capitalization: 192 billion euros), Verizon (198 billion euros), or China Mobile (190 billion euros). In turn, this means we also have less influence, for example, when it comes to defining industry standards.
This brings me to my fifth point: How can Europe organize things differently? There is no shortage of proposals for doing so. And I am aware that this field is both broad and incredibly complex. As the CEO of a European corporation, I’m no stranger to that. We do business in countries like Poland, Hungary, Greece, the Netherlands, the Czech Republic, and Austria. National companies and companies with their own histories. And their own cultures. And their own interests, which don’t always align with those of the Group. So I can say that in many aspects, Deutsche Telekom is Europe.
How do we deal with this diversity as a company? The important thing: Even in a corporate group, the result must always be greater than the sum of the individual parts. In short, wherever the benefits of size are especially relevant, so is a harmonized approach. At the same time, however, we also accept different speeds. This is based on the recognition that each national company still faces challenges that can be much more acute than the major lines. In such cases, providing support and, if necessary, putting central targets on hold, is the right thing to do. However, this does not mean that every national company can simply do what is convenient. Commitment is one of the key prerequisites for successful projects within large organizations.
But diversity is also an advantage. For nearly every challenge we face in the Group, one company or another has developed a best practice that we can adapt and test in other countries as well. Smaller markets can be particularly helpful here, because we can react and conduct tests with much greater speed and agility.
In this regard, when it comes to EU reforms, the proposals that are based on differentiation are the ones that impress me most. In other words, approaches that build on a Europe in which some countries and regions can take the lead, therefore allowing different depths of integration such as the Schengen Agreement for instance. But also a Europe that promotes unity and acts consistently in areas where size is beneficial. This is especially important when it comes to economic and industrial policy: Artificial intelligence, cloud computing, electromobility, and the energy transformation are just a few examples.
The bottom line: Europe is strong. And Europe is worth fighting for. Just think of the things the continent has achieved together: Peace. Prosperity. Free movement of workers. A social charter. A general data privacy regulation that respects our personal sphere, despite all the problems in the details. I don’t think there’s another region on the planet where peace, democracy, social security, freedom, respect for civil rights, the humanization of work, and so much more form such a strong, cohesive unit. And even though our own prosperity gap is increasing, Europe is rich on the whole. This makes it all the more important for us to safeguard the prosperity of future generations and, above all, take steps to ensure that they participate in it.
Which brings me back to my initial point: What is Europe’s place? Maybe the thing that characterizes Europe the most is that it doesn’t just have one place. Not just the Parlamentarium. Not Brussels or Strasbourg. Not just the cafés that Emmanuel Macron talked about in his speech at the Sorbonne. Europe is successful when it is well served and at home everywhere.
As a young man, I repeatedly traveled all over Europe by InterRail. A period that shaped and enriched me. Not just because I made new friends. But also because it allowed me access to new, different cultures. And for me it was a positive thing to be able to identify with an idea that includes my native country, but also reaches beyond it. An idea that is bigger than a single nation and is therefore the glue that binds our unique diversity. An idea that is timeless. An idea of home, apart from the geography. This European awareness is what our continent bears. And that’s why it’s our responsibility as a company, as politicians, as citizens, neighbors, friends, mothers, and fathers to keep this awareness alive.
Let’s fight together to ensure that Europe’s diversity can continue to be reflected in the relationships between real and virtual networks. To enable communication and understanding. And to help prosperity and peace to grow and flourish.
The article series “Europe can do better” appears in Handelsblatt in German and in German and Englisch on Handelsblatt Online and the website of United Europe until the European Elections. They are also collected in a book which was published on 15 April, 2019 by Herder-Verlag. Please find more information about the book in German here.
About Timotheus Höttges:
Timotheus Höttges, born 1962 in Solingen, Germany, has been Chairman of the Board of Management of Deutsche Telekom AG since January 2014. He lives in Bonn, is married and has two sons. He discovered his enthusiasm for entrepreneurship when he working as pupil on the Solingen market. His passion for Europe was awakened as a teenager when he explored the continent via Interrail.
From 2009 until his appointment as Chairman of the Board of Management, he was Head of Finance and Controlling on the Board of Management of Deutsche Telekom. From December 2006 to 2009, he was responsible for the T-Home division, which included the fixed-network and broadband business. From 2005 until his appointment to the Group Management Board, Höttges was responsible for European business on the Management Board of T-Mobile International. From 2000 to the end of 2004, he was Managing Director of Finance and Controlling and later Chairman of the Management Board of T-Mobile Deutschland.
After studying business administration at the University of Cologne, Höttges worked for three years in a management consultancy, most recently as a project manager. At the end of 1992, he moved to the VIAG Group in Munich, where he had been responsible for controlling, corporate planning, mergers and acquisitions since 1997 as division manager and later as general representative.
Höttges is Chairman of the Board of Trustees of the Telekom Foundation, which is active in the field of science and engineering education. In addition, he is co-founder of the Bürgerstiftung Rheinviertel, a foundation dedicated to social and charitable activities in Bonn’s Rheinviertel district.