Italy: La Dolce Vita Goes Digital

Photo: Man uses phone Rome, Metropolitan City of Rome, Italy. Credit: Josè Maria Sava via Unsplash.
Photo: Man uses phone Rome, Metropolitan City of Rome, Italy. Credit: Josè Maria Sava via Unsplash.

July 12, 2022

EXECUTIVE SUMMARY

If Italian Prime Minister Mario Draghi cannot close Italy’s digital divide in the next five years, it will not be for a lack of effort — or money. Italians long resisted digital disruption, banning Uber after complaints from taxis, tying YouTube up in copyright disputes, and preferring traditional to online advertising. But when COVID-19 hit, this reticence vanished.

In Europe, Italy was the first and hardest hit by the pandemic, which forced many Italians to stay inside their homes for months. With most retail businesses and offices closed, technologies that other countries had previously embraced to increase efficiency — like intranets, e-commerce, and video conferencing — were no longer perceived as being just about saving time. They became vital.

Although the pandemic accelerated digital trends worldwide, it is hard to imagine a more dramatic shift than in Italy. Suddenly, 75-year-old CEOs who had previously refused to use a computer — and had denied employees the option to work a single day from home — were managing entire teams remotely via Zoom. Instead of shooing away IT managers who wanted to start conversations about cybersecurity, executives began drafting digital strategies and investing in improved network protections.

Despite this embrace of a digital revolution, Italy faces serious hurdles. The country’s infrastructure lags. The Draghi government has responded by identifying digitization as a top priority. More than a quarter of the country’s €195.1 billion in European Union (EU) recovery funds will go to digital investments.1 Italy received the lion’s share of EU payouts, more than a quarter of the total given out.1 The unanswered question is: After years of Internet apathy, will Italy be able to establish itself as a capable digital economy?

Italy’s digital policies need to be updated to reflect this digital opportunity. The country has long been obsessed with online privacy.2 It has led the European charge to impose special discriminatory taxes on digital businesses.3 And it has put up high regulatory hurdles to limit the gig economy, even shutting down Uber and waging war against Airbnb.4

DIGITAL PERFORMANCE

Italy consistently ranks below the European average in digital penetration. About 80% of Italians connected to the Internet in 2020, with 75.6% logging on daily, according to the European Commission. The country’s fixed-line broadband penetration rate stands at 29.9%, compared to an EU average of 44%.5

Urban-rural divides and regional differences between the north and south account for this poor showing. It does not help that Italy has one of the oldest populations in the world. Mobile broadband penetration is much higher at 93.6% than fixed connections, according to the European Commission.5 Still, the country ranks 24th out of 27 EU member states for 4G coverage, with 99.3% of households covered.2 Testing for 5G began in 2017, and the first networks debuted in 2019.

Affordability is not an issue; in 2021, the Economist Intelligence Unit ranked Italy the fourth cheapest for Internet and mobile phone access out of 120 countries surveyed.6 Most unlimited broadband plans range from about €20 to €30 per month, while mobile plans offering 30+ gigabytes (GB) of data monthly start at around €5.7

Of Italy’s 51 million Internet users, more than 43 million are active on social media.8 WhatsApp (90.8%), Facebook (78.6%), and Instagram (71.8%) are the most popular platforms, according to a 2022 report by the global agency We Are Social.9 TikTok use remains low at 28.9%, but the video-sharing app registered the most consistent growth from 2020 to 2021. Online gaming has also grown in popularity, with 82% of Internet users now gaming online — and paying 22% more on average for games than they did in 2021.

For years, Italy’s unreliable mail service plagued e-commerce. But thanks in part to the pandemic and in part to Amazon — which showed that cheap, reliable shipping is in fact possible in Italy — habits are shifting. Today, 46.7% of Italians shop online weekly, and almost another 10% have made at least one online purchase at some point.10 In 2020, Internet advertising edged out TV advertising to become the most-purchased ad medium, with a market of €1.9 billion annually, according to the Digital Media Observatory, a research institute at the Polytechnic University in Milan.11

Given these seismic shifts, it should come as no surprise that financing in Italian high-tech start-ups is rocketing. It doubled between 2020 and 2021 — from €669 million ($758 million) to €1.46 billion ($1.65 billion), the Digital Media Observatory reports.11

Cybersecurity is seeing serious growth, too. In 2020, 31% of larger organizations reported an increase in cyberattacks, and 60% vowed to increase their security budgets.12 Overall, cybersecurity spending increased by 13%, reaching a total market value of €1.55 billion ($1.76 billion).13 It was not just the private sector that faced a cyber reckoning; in June 2021, Italian Minister for Technological Innovation and the Digital Transition Vittorio Colao admitted that between 93% and 95% of the government’s servers were not fully secure.14 Italy was the last major European country to adopt a national cyber strategy in May, 2022.15

Photo: European Executive Vice-President Margrethe Vestager and European Commissioner for Internal Market and Services Thierry Breton (not seen) give a news conference on the Data Governance Act at the European Commission in Brussels, Belgium November 25, 2020. Credit: Stephanie Lecocq/Pool via REUTERS

Photo: European Executive Vice-President Margrethe Vestager and European Commissioner for Internal Market and Services Thierry Breton (not seen) give a news conference on the Data Governance Act at the European Commission in Brussels, Belgium November 25, 2020. Credit: Stephanie Lecocq/Pool via REUTERS

VIEWS ON EU DIGITAL POLICY

Italy is simultaneously one of the EU’s most enthusiastic members and one of its least compliant. While the country aligns with EU policy, including with digital policy, its revolving-door governments and excessive bureaucracy often make it difficult to implement EU regulations.

Like the EU, Italy defines digital sovereignty in a French style, with the goal of reducing dependency on foreign technology. In practice, that means doing a better job competing with the United States and China in areas such as cloud computing, artificial intelligence (AI), blockchain, and chip technology.  “We need to aim for scientific and technological excellence, as well as strong regulatory policies and allocation of resources that will allow Italy and Europe to be the third great sovereign in innovation and research,” Italian Technological Innovation and Digital Transition Minister Vittorio Colao said during a digital sovereignty event in March. “Europe is a gentle giant, but it’s also been a bit of a sleeping giant. We need to catch up.”16

Italy has expressed its “full support” for the Digital Services Act (DSA), designed to force Internet players to take more responsibility for tackling illegal content. “This is an important moment of change to increase trust and responsibility on the part of new technologies, assign responsibility to new intermediaries, and protect products and content produced in Spain, Italy, France and throughout the EU,” Colao said in February.17 It is important to strengthen the European Commission’s powers of supervision, investigation, and enforcement, he said.

Rather than going it alone, Italy wants to establish itself as a major player in Europe’s quest for digital sovereignty. On the one hand, those ambitions make sense since Italy is the third-largest economy in the eurozone. On the other hand, Colao acknowledged that the country must undergo a serious cultural shift.

About 58% of Italians ages 16 to 74, or 26 million people, now lack basic digital skills — much higher than the European average of 42%, according to the European Commission’s Digital Economy and Society Index (DESI).18 Italians also tend to avoid risk, with the country ranking second to last in Europe in the 2019 Global Entrepreneurship Index.19 Even people who are temperamentally inclined to try something new are turned off by the high cost of doing business, including labor laws that make it overly difficult to fire underperforming employees.

In some key policy areas, Italy has broken from other Southern Europeans. When France (as well as Denmark) pushed for marketplaces to be obliged to take down dangerous products from sale within 24 hours after specific notification, Italy said that these obligations were too burdensome and went beyond the rules for brick-and-mortar shops. The government suggested mandating the takedowns of dangerous products “without delay” instead. Rome also supported a risk-based approach to avoid “being excessively burdensome and unfair” to companies selling products like books.

Photo: Italian Prime Minister Mario Draghi visits Antonio Cuccovillo higher technical institute in Bari, Italy. Credit: Presidency of the Council of Ministers, Government of Italy.

DIGITAL POLICY

Although Italy may be most focused on closing the digital gap, it is active in several other key digital policies as well. These include prioritizing online privacy, adopting one of Europe’s first digital taxation laws, and regulating the gig economy and other global tech giants.

Digital Spending: Italy received the largest share of the EU’s coronavirus pandemic recovery funds — €195.1 billion — and has earmarked another €30.6 billion ($34.67 billion) in national funds to bolster its planned reforms. Under the National Recovery and Resilience Plan approved last year, 25.1% of the money will go to “digitalization and innovation.” The main initiatives include expanding 5G broadband access; strengthening digital capacity at government agencies; helping manufacturing businesses digitize their production processes; and enhancing digital skills to boost the tourism and creative fields.20

In January, Colao said €9.5 billion had already been allocated, including €1.9 billion ($2.51 billion) earmarked for a “national strategic data center.” The project would consolidate national and local government data, which are currently stored at 11,000 separate data centers, into one Italian cloud computing center. Originally, the goal was for the data center to be “located in Italy and controlled by Italians,” but it proved impossible to rely solely on Italian technological know-how. The bid ultimately went to an Italian company that will partner with either Google or Microsoft.21

Online Privacy: Italy’s Data Protection Authority, the Garante per la Protezione dei Dati Personali, is aggressive in its enforcement of the continent’s strict General Data Protection Regulation (GDPR) rules. The Garante fines companies for marketing strategies that misuse customer data, privacy violations such as publishing contact information in online articles, and discriminatory algorithms. Targets extend beyond traditional tech companies. In January, the Garante levelled a €26.5 million ($30 million) fine against Enel Energia for what it called “overly aggressive” marketing that used customer data without permission.22

During the COVID-19 crisis, the authority proved pragmatic. It oversaw the rollout of the country’s Green Pass system. In Italy, proof of COVID-19 vaccination was required for close to a year to enter almost all public places, with compliance monitored through the digital Green Pass that takes the form of a QR code. Italy also required all citizens over the age of 50 to get vaccinated or face fines, with the Garante monitoring data sharing between government agencies.

Digital Tax: Italy was quietly an early supporter of digital taxation. In December 2019, Parliament approved a digital services tax that was worded almost identically to an EU proposal that had stalled in late 2018. The 3% tax applied to gross revenue of online advertising, online sales, and data processing for companies with global annual revenue of at least €750 million, of which at least €5.5 million must come from digital services in Italy.3

The tax originally required separate implementation legislation, which the Italian government held off on issuing while it waited to see if Europe or the Organisation for Economic Co-operation and Development (OECD) would reach an international agreement. But faced with serious budget shortfalls and a spending battle brewing with Brussels, in December 2020, Parliament went ahead and approved a new tax that took effect directly in 2021, without additional legislation.23 Under a sunset provision, the tax will automatically be repealed if an international tax agreement enters into force.

Gig Economy: Although food delivery app use was virtually nonexistent in Italy prior to the COVID-19 crisis, Italians have since embraced deliveries — and Italy became an unexpected champion for gig economy workers. In February 2021, the Milan prosecutor’s office fined four food delivery services a combined €733 million ($830 million) for violating Italian labor law by classifying their 60,000 delivery riders as independent contractors.24 Soon after, Just Eat agreed to hire its 4,000 riders as regular employees with a minimum wage, benefits, travel reimbursements, and safety equipment. In December, the remaining food delivery services — Uber Eats, Glovo, and Deliveroo — reached a deal to improve worker conditions, though the prosecutor did not say if the agreement included hiring the workers as employees.25

Antitrust: Italy’s antitrust authority has emerged as one of the most aggressive in Europe when it comes to cracking down on international tech companies. In December, the Autorità Garante della Concorrenza e del Mercato fined Amazon €1.13 billion ($1.28 billion) for privileging sellers who use the company’s logistics services.26 Not long before, the Italian regulators leveled a series of multimillion-euro fines last year against Apple, Google, and Facebook. The fine came as the European Commission was investigating Amazon for similar practices in other countries.27

Whether Italy succeeds in implementing its digital agenda will be a question of timing and red tape. Parliamentary elections will be held in summer 2023. That means Draghi, the prime minister, could have just 16 more months left in office. Italy is famous for political gridlock and theatrics, but since taking over as prime minister in February 2021, “Super Mario,” as Draghi is popularly known, has been credited with bringing the necessary clout to cut through the noise and pass legislation in record time. But the clock is ticking, and the political infighting is as fierce as ever.

READ MORE

Proud Poland: A Pro-Digital Power Haunted by Nationalist Nightmares

By Annabelle Chapman

Often at odds with Brussels, Poland is uncomfortable with the European Union’s (EU’s) regulatory push to clamp down on the digital economy.

READ NOW
  1. “EU approves 191.5 billion euros in recovery funds for Italy” AP News. June 22, 2021. https://apnews.com/article/italy-europe-health-coronavirus-pandemic-business-ed931b3c5d304b22a4e7f2df8cf3be15. [] []
  2. ”Freedom on the Net 2021: Italy” Freedom House. 2021. https://freedomhouse.org/country/italy/freedom-net/2021. [] []
  3. ”Report on Italy’s Digital Services Tax” Office of the United States Representative Executive Office of the President. January 6, 2021. https://ustr.gov/sites/default/files/enforcement/301Investigations/Report%20on%20Italy%E2%80%99s%20Digital%20Services%20Tax.pdf. [] []
  4. Borrelli, Silvia and Ghiglione, Davide. ” Italy emerges as next front in gig economy labour battle” Financial Times. April 4, 2021. https://www.ft.com/content/6bf8ea68-d035-4cc0-a367-a545c2814355. []
  5. ”Country profiles, the relative position against all other European countries” European Commission. https://digital-agenda-data.eu/charts/country-profiles-the-relative-position-against-all-other-european-countries#chart={%22indicator-group%22:%22bbquality%22,%22ref-area%22:%22LT%22,%22time-period%22:%222019%22}. [] []
  6. ”The Inclusive Internet Index” Economist Intelligence Unit. https://impact.economist.com/projects/inclusive-internet-index/. []
  7. “How Do U.S. Internet Costs Compare To The Rest Of The World?” BroadbandSearch. https://www.broadbandsearch.net/blog/internet-costs-compared-worldwide. []
  8. ”Internet usage in Italy - statistics & facts” Statista. September 8, 2021. https://www.statista.com/topics/4217/internet-usage-in-italy/#topicHeader__wrapper. []
  9. “Digital 2021 – Italy” We Are Social. February, 2021. https://www.premius.it/wp-content/uploads/2021/02/Digital-2021-Italy-We-Are-Social.pdf. []
  10. Coppola, Daniella. ”Online shopping in Italy - statistics & facts” December 17, 2021. https://www.statista.com/topics/8839/online-shopping-in-italy/#topicHeader__wrapper. []
  11. “INTERNET ADVERTISING EXCEEDS TV ADV REVENUES AND DRIVES THE RECOVERY” Osservatoria.net digital innovation. September 9th, 2021. https://www.osservatori.net/en/products/formats/report/internet-advertising-exceeds-tv-adv-revenues-drives-recovery-report. [] []
  12. ”The State of Ransomware 2021” Sophos. April 2021. https://secure2.sophos.com/en-us/medialibrary/pdfs/whitepaper/sophos-state-of-ransomware-2021-wp.pdf. []
  13. Laricchia, Federica. ”Investments in the cybersecurity market in Italy from 2021 to 2024” Statisa. June 2, 2022. https://www.statista.com/statistics/1311084/cybersecurity-market-investments-italy/. []
  14. Kogosowski, Mandi. ”Italy establishes national cyber agency” Israel Defense. June 14, 2021. https://www.israeldefense.co.il/en/node/50385. []
  15. Hathaway, Melissa et al. ”Italy: Cyber Readiness at a Glance” Potomac Institute for Policy Studies. https://www.potomacinstitute.org/images/CRI/PIPS_CRI_Italy.pdf. 2016. https://www.potomacinstitute.org/images/CRI/PIPS_CRI_Italy.pdf. []
  16. Albanese, Chiara and Lepido, Daniele. ”Europe Must Close Gap on Semiconductors, Italy’s Colao Warns” Bloomberg. September 4, 2021. https://www.bloomberg.com/news/articles/2021-09-04/europe-must-close-gap-on-semi-conductors-italy-s-colao-warns. []
  17. Fiordalisi, Mila. “Digital Services Act, l’Europa alla svolta: ecco cosa cambia per le big tech” Network Digital 360. April 25, 2022. https://www.corrierecomunicazioni.it/digital-economy/digital-services-act-leuropa-alla-svolta-ecco-cosa-cambia-per-le-big-tech/. []
  18. ”Digital Economy and Society Index 2021: overall progress in digital transition but need for new EU-wide efforts” European Commission. November 12, 2021. https://ec.europa.eu/commission/presscorner/detail/en/ip_21_5481. []
  19. ”2019 Global Entrepreneurship Index” The Global Entrepreneurship and Development Institute. April 26, 2020. https://thegedi.org/2019-global-entrepreneurship-index/. []
  20. ”The National Recovery and Resilience Plan (NRRP)” Ministero dell'Economia e delle Finanze. May 26, 2021. https://www.mef.gov.it/en/focus/The-National-Recovery-and-Resilience-Plan-NRRP/. []
  21. ”Italy to use TIM-led project as blueprint in national cloud tender” Reuters. December 27, 2021. https://www.reuters.com/world/europe/italy-use-tim-led-project-blueprint-national-cloud-tender-2021-12-27/. []
  22. “Garante issues 26.5M euro GDPR fine” IAPP. January 21, 2022. https://iapp.org/news/a/garante-issues-26-5m-euro-gdpr-fine//. []
  23. ”Italy: Draft decree to implement digital services tax, consultation open through 31 December” KPMG. December 17, 2020. https://home.kpmg/us/en/home/insights/2020/12/tnf-italy-draft-decree-to-implement-digital-services-tax-consultation-open-through-31-december.html. []
  24. Parido, Emilio. ”Milan prosecutors order food delivery groups to hire riders, pay 733 mln euros in fines” Reuters. February 24, 2021. https://www.reuters.com/business/milan-prosecutors-order-food-delivery-groups-hire-riders-pay-733-mln-euros-fines-2021-02-24/. []
  25. Jenkins, Cameron. ”Italian prosecutors fine food delivery firms, order hiring of 60,000 workers” The Hill. Fefbruary 24, 2021. https://thehill.com/homenews/news/540338-italian-prosecutors-fine-food-delivery-firms-order-hiring-of-60000-workers/. []
  26. Shead, Sam. ”Amazon fined $1.28 billion by Italy's antitrust regulators” CNBC. December 9, 2021. https://www.cnbc.com/2021/12/09/amazon-fined-1point28-billion-by-italys-antitrust-regulators.html. []
  27. Brancolini, Janna. ”How do you say Amazon in Italian? Monopolista” Center for European Policy Analysis. February 2, 2022. https://cepa.org/how-do-you-say-amazon-in-italian-monopolista/. []