" ITREALMS: How GDPR impacts negatively on ventures, creates headache for telcos - ITREALMS

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Wednesday, November 28, 2018

How GDPR impacts negatively on ventures, creates headache for telcos - ITREALMS

The latest research note from the Strand Consult has lamented how the General Data Protection Regulation (GDPR) has impacted negatively on venture investments in Europe and will be headache for telecommunications industry, reports ITREALMS.

Many European politicians, Strand Consult said, have touted the General Data Protection Regulation (GDPR), as “leveling the playing field” against the American internet companies and empower European consumers.

Strand Consult was skeptical of these claims, having seen similar un-evidenced policymaking before on net neutrality. Indeed Strand Consult has documented how this policy has had the opposite of its intended effect. Net neutrality rules were supposed to create the next Google or Facebook from an EU country. Instead the only countries which have platforms that rival Google or Facebook are Russia and China, countries with no net neutrality rules.

As for GDPR, Strand Consult predicted in its report Understanding the GDPR and Its Unintended Consequences that the largest firms would benefit at the expense of small players and that consumers would experience either no improvement or a decline in utility. The report also describes how pseudo pro-consumer policies are a front to increased government power at the expense of consumer freedom. Strand Consult's predictions have proven true according to a variety of sources, as noted below.

The unintended consequences of GDPR are bad news for the telecom industry. They will have a negative impact on the value chain of companies that will develop and deliver services on top of the upcoming 5G networks in Europe. Strand Consult observes how the EU is already behind on pre-5G products and services, and that GDPR only makes it worse. The US and China are racing ahead on 5G and Europe continues to fall behind on network investment and 5G product and service development. Moreover Europeans are missing out on the social and technological transformations already afoot in the US and China where consumers have adopted pre-5G products and services.

Just as hard net neutrality regulation has been shown to have a negative impact on mobile app innovation, GDPR has shown a negative impact on venture capital investment. The National Bureau of Economic Research, the leading economic institute in the USA, has published research by the former chief economist of the Federal Trade Commission (FTC) and two academics at the Illinois Institute of Technology.

Using Crunchbase data from VC deals in the US and EU from July 2017-Septeber 2018, it analyzes the post-GDPR effects on EU ventures, relative to their US counterparts. The negative effects manifest in the overall dollar amounts raised across funding deals, the number of deals, and the dollar amount raised per individual deal.

Specifically this has translated into a $3.38 million decrease in the aggregate dollars raised by EU ventures per state per catetory per week, a 17.6% reduction in the number of weekly venture deals, and a 39.6% decrease in the amount raised in an average deal following the rollout of GDPR. These declines are associated with losses projected between 3,000-30,000 jobs.

The paper was featured at a public hearing by the American competition authorities FTC which is conducting a process over many months to determine the actual impact of data regulation. The open and transparent policy process in the US makes a stark contrast to the EU where policy influencers can mask their identities. Unlike the US where filings to the policymaking process are collected online and made freedly available, no such database is available for the GDPR in the EU. As such, it is difficult, if not impossible, to know how and who influences policy in the EU.

Chuks Egbune/GEE

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