At a time when the entire architecture of global trade is under review following the US tariff initiative, the Madrid Bar Association held an event on 2 April entitled “Towards a Stronger Europe: Competitiveness and Defence”. During the event, Enrico Letta presented the report “Much More Than a Market”, along with the Spanish edition of his recently published book “Europe: Last Chance”. Pablo de Carvajal, General Counsel of Telefónica, also took part, focusing his remarks on how to close the innovation and competitiveness gap in Europe, and the role of the telecommunications sector in achieving this.
Letta’s call to action beyond the Single Market
Letta described his book as “a hymn to Europe and a call to action to be worthy of its greatness”. In his speech, he highlighted some of the most relevant areas for strengthening the European Single Market, emphasising the need to advance in the development of integrated markets in energy, telecommunications, finance, and defence. He also pointed to paradoxes in the European financial system — particularly how citizens’ savings are often used to fund US companies, which in turn grow and acquire European firms.
Letta reiterated the importance of scale in competing globally. Today, only one major company — Airbus — is broadly perceived as European, while most others are still seen through a national lens (Spanish, French, or any other Member State). This contrasts with the US, where companies are viewed as American, not state specific. He went on to present the key proposals from his book to strengthen the Single Market, including regulatory harmonisation and simplification, competition policy reform, and the development of truly integrated European markets in energy and capital.
The event also featured contributions from a range of experts, including Pablo de Carvajal González, Carlota García Encina, José Manuel Gutiérrez Delgado, and Hermenegildo Altozano, who explored proposals related to the telecommunications and energy sectors, European strategic autonomy, and defence and security. In his speech, Pablo de Carvajal addressed the innovation gap in Europe and the crucial role of telecommunications in enhancing the continent’s competitiveness.
The digital sector, key to closing the innovation gap
Pablo de Carvajal highlighted the key role of the digital sector, valued at €1 trillion and contributing 4.7% to the European GDP. He stressed that the upcoming digital revolution, driven by high-capacity networks such as fibre or 5G, and emerging technologies such as Artificial Intelligence, is an opportunity to improve productivity, regain industrial strength and close the innovation gap in Europe.
He pointed out that the EU Competitiveness Compass rightly identifies digital innovation as a key area for action. Europe, however, faces a significant disadvantage in this domain, as evidenced by a decline in its share of global technology revenues — from 22% to 18% over the past decade. Only four of the world’s top 50 technology companies are European, and 80% of digital technologies used in Europe are imported. In the cloud computing sector, Amazon, Microsoft and Google collectively account for nearly 70% of the European market, while the leading European provider for just 2%. The disparity is equally striking in Artificial Intelligence, with the United States having developed 70% of foundational AI models since 2017, and China 15%, while Europe continues to face significant challenges in catching up.
Closing the digital innovation gap: a tough challenge without sustained investment over time
A significant part of Europe’s innovation challenge lies in the telecommunications sector, which plays a central role in driving investment in ultra-broadband networks. These networks are essential for the development and scaling of key technologies such as 5G, AI and the Internet of Things, and are fundamental to achieving meaningful digital transformation and strengthening economic resilience.
However, despite European telecom operators investing €58 billion in 2023, Europe’s per capita telecom investment (€117.9) is still almost half that of the United States (€226.4). This disparity slows down the rollout of high-capacity, high-quality networks, ultimately limiting opportunities for businesses and citizens in Europe.
A clear example is 5G Standalone, a next-generation technology that represents a paradigm shift in connectivity and industrial competitiveness. With ultra-low latency, it enables the deployment of private networks tailored to the specific needs of different industries through network slicing. Yet, while this technology reached 91% population coverage in North America in 2024, it only reached 40% in Europe, revealing a stark gap with significant implications for future innovation and competitiveness across the continent.
The challenge of digital innovation: the mismatch between ecosystem evolution and frameworks
According to Pablo de Carvajal, accelerating investment in Europe’s digital infrastructure requires a regulatory environment that reflects today’s evolving connectivity ecosystem. The current framework is no longer aligned with market realities, creating a mismatch that hinders innovation.
It is essential to understand the implications of the accelerating transformation of the connectivity ecosystem. Telecommunications operators now coexist with cloud providers, technology companies, infrastructure companies and others in an increasingly complex digital ecosystem.
Virtualisation is blurring the boundary between cloud and physical networks. For example, telecoms are embracing cloud-based technologies such as Network as a Service (NaaS), with initiatives such as Open Gateway. Overall, the connectivity ecosystem is becoming more intelligent, interconnected and flexible, which is redefining the role of technologies and the role and interactions between different players in the sector.
Policy reforms to close the digital innovation gap
The telecoms sector is key to the digital economy, driving investments in high-capacity networks that integrate cloud, satellite and terrestrial infrastructure. The EU’s Digital Networks Act (DNA) 2025 aims to reduce the innovation gap, but to be effective, it is crucial to review regulations that limit investment, promote spectrum policies that unlock the potential of 5G and ensure balance in the digital value chain. Similarly, simplifying regulations and adjusting competition policy would facilitate a more innovative environment and help operators gain scale through in-market consolidation
In line with Letta’s vision, Europe’s economic future undoubtedly depends on removing barriers to investment and promoting a regulatory environment that enables telecoms-driven innovation for the benefit of European competitiveness and economic resilience.
