Technology & Innovation

Positive Developments

Development of the start-ups ecosystem

With a sound number of highly rated universities in cities such as Bucharest, Timisoara, Cluj, Iasi, and Constanta that provide a regular source of talented people and with some of the biggest IT&C multinationals present in Romania, it was inevitable that innovation incubators dedicated events should become very fashionable during 2013-2014.

The flagship centre is that created in 2012 in Cluj. Cluj IT is a cluster based organization formed of various actors in the ITC field: providers of software services and solutions, universities and research institutes, public bodies and other catalyst organisations. By 2017, Cluj IT&C Cluster aims to become one of the leading suppliers from CEE for innovative IT services and products, as well as of organisational support systems, with the majority of its members able to compete on national and international markets.

In 2014, according to the Innovation Union Scoreboard, Romania was still positioned among the last in the EU-27 countries. But this is very likely to change as the Romanian IT hubs become serious competitors to London’s Silicon Roundabout, Berlin or even Silicon Valley.

National Strategy on the Digital Agenda for Romania

In November 2014, the Ministry of Information Society (MIS) launched the National Strategy on the Digital Agenda for Romania. The strategy, developed in cooperation with industry, aims to contribute to economic growth and increase competitiveness in Romania. The national strategy is aligned with the Digital Agenda for Europe 2020, with the primary objective of developing the Digital Single Market.

Some of the objectives set by the European Digital Agenda have been assumed and adapted to the current context of Romania, aligned with the strategic vision of the Romanian IT&C for 2014-2020.

For the full implementation of the digital objectives in Romania needs an investment of about EUR 3.9 billion by 2020. Once implemented, the impact on GDP (direct and indirect) is expected to be 13%.

Romania’s objectives include:

  • Reducing the percentage of the population who have never used the Internet from 42% in 2013 to 30% in 2020, by building infrastructure in the white areas and, thus, considerably reducing the digital divide and economic gap between regions. 
  • Increasing the percentage of SMEs which sell online from around 9% in 2013 to at least 20% by 2020.
  • Increasing the use of e-governance tools by the population to 35% compared to around 5% at present.

Significant contribution to national growth

According to the National Institute for Statistics (INS), the communications sector accounted for 6% of GDP in 2014 and registered an 11% increase in volume compared to 2013. Moreover, it contributed 0.6% to the total GDP growth of 2.9%, the largest contribution to growth after industry (0.9%).

The IT&C sector has doubled its contribution to Romania’s GDP in the last 4 years, surpassing agriculture and almost matching construction. IT&C had a growth rate of 110% in 2011-2014, over 5 times faster than GDP growth for the same period.

Areas for Improvements

Broadband connectivity

Broadband infrastructure and services development, particularly in remote rural areas, remains one of the key challenges in Romania. Considerable progress has nevertheless been achieved in the past two years.

RONET status: There are 783 white zones where private investment in backhaul broadband infrastructure is unlikely. The contract was won by Telekom in August 2014, which received a grant of 65m€. While remaining under public ownership, the infrastructure will be operated and maintained by Telekom and will be accessible to other operators through wholesale agreements.

Following years of continuous investment in FTTx, the household penetration rate of fixed broadband connections grew to 47% in 2014.

FIC Recommendations

With LTE currently covers more than 60% of the population, the percentage of mobile broadband connections per 100 inhabitants has grown by more than 18% in the past two years.

With advertised download speeds of 1Gbps for fixed broadband and 300Mbps for mobile broadband, Romania has the highest download speed in the EU, ahead of Sweden.

FIC Recommendations

FIC Recommendations

With the introduction of the internet into mobile devices, and the combination of these two, ubiquitous connectivity has become a reality. The advance of IT&C explains why new mobile Government applications are emerging and why GOR has many opportunities to use wireless channels. To support the increase of mobile broadband connectivity and nationwide coverage, operators require heavy investment in infrastructure. In this context and considering the Government’s active support for the development of fixed broadband connectivity behind the successful RONET initiative, the FIC recommends proactive support from Government for the development of mobile broadband connectivity.

Currently, there are a variety of administrative barriers which significantly diminish the predictability and flexibility of infrastructure investments. We believe that the investment environment could be significantly improved by the rapid transposition into national legislation of Directive 2014/61/EU on measures to reduce the cost of deploying high-speed electronic communications networks, as well as modification of Law no. 154/2012 on the electronic communications infrastructure.

Cyber security & pre-paid registration

Law no. 580/2014 on cyber-security which passed in December 2014 included unclear provisions which may have subjected companies, including network operators and electronic communications providers, to unreasonable requests for access to information, unclear notification obligations or obligations which double already existing reporting requirements in the telecommunications sector. This law was declared unconstitutional by Decision no. 17/2015 issued by the Romanian Constitutional Court (CCR) in January 2015. The constitutional judges established that several articles of the law were in violation of the Constitution.

In 2014, the CCR had also declared as unconstitutional legislation related to the personalisation of SIMs belonging to prepaid customers. The Court ruled that the legislation merely made additions to the previous Law no. 82/2012 on the retention of data generated or processed by providers of electronic communications services or networks addressed to the public, which had already been declared unconstitutional by the CCR, (This was the second ruling that legislation with respect to data retention norms was unconstitutional).

FIC Recommendations

The use of personal data collected by different kinds of operators and especially electronic communication providers to fight against criminality has been hotly debated. Public authorities continue to stress the increased need to ensure cyber-security, considering Romania's geographical location and strategic position in an area with increased geo-political tensions. Consequently, new legislation is expected, and it is imperative that this should be in compliance with the rulings made by the CCR and the European Court of Justice, as well as with European directives to ensure effective protection of fundamental human rights.

Following an initiative by Romania’s President, discussions on SIM personalisation for prepaid customers will be resumed. The technology industry believes that before legislation is passed, a comprehensive debate should take place, involving all interested parties, so that an effective operational framework can be found which strikes a fair balance between the different interests. An appropriate forum should be created, in which this debate can take place.

FIC Recommendations

FIC Recommendations

Faced with the rapid development of digital uses and growing threats (viruses, spam, etc.), simple tools need to be put in place to help users to cope with, manage and control their personal data and how it is used.

Any legislative initiative on cyber security and prepaid registration should be preceded by a comprehensive process of consultation with the industry so that the final draft ensures an adequate balance between the public authorities' need to ensure national security and the fundamental rights and obligations recognised by the Romanian Constitution and international conventions.

The FIC considers it essential for the following points to be taken into account when new norms on prepaid registration are drafted:

  • There should be an implementation period for the new norms of at least 18 months.
  • Rules should be adopted to maximise the use of electronic instruments in the registration process. 
  • The support of the public authorities, in terms of budget and logistics, should be ensured, throughout the implementation process.

Transparency on data analytics and on implementing data protection rules

The digital society is undergoing major changes. As more and more of our day-to-day activities go electronic and digital, very large volumes of data about us become available. This phenomenon is being compounded by both technological and behavioural factors (e.g. increased use of online services such as e-commerce, e-government, social media, etc.).

Today, many firms are building their business models around their use of this data, especially for advertising, personalised offers and real time customer interactions. This use can also generate services that will benefit both individuals and society in general. According to an Internet of Things (IoT) survey conducted by Acquity Group in 2014, consumers would be prepared to share their personal data in order to make their device (e.g. watch, car) smarter, thus bringing a tangible benefit to the customer experience.

In this context, a user centric privacy framework must be based on a proper understanding of the user’s privacy interests.

There is a need to provide a consistent user privacy experience that will establish familiarity with the privacy implications of applications and services, empowering the user and leading to better privacy management.

FIC Recommendations

When human activity is outsourced to technology based on algorithms, there will always be a fear of loss of autonomy.

After transposing the Data Protection Directive 95/46/EC in 2001, the Romanian authorities have gradually increased the enforcement of data protection norms, which have an impact on all companies carrying out activities in Romania, including in the IT&C sector. Companies have needed to gradually adapt their products and services, as well as their internal processes, to ensure compliance with data protection requirements. The authorities have provided only limited support for these efforts, while the amount of information and data available on how authorities apply the existing norms is limited.

The practice of the National Authority for the Supervision of Personal Data Processing is not transparent and repeated changes in approach (e.g. on how to interpret notification related rules) are not publicised.
This may lead to practical roadblocks in the promotion of new types of services, such as cloud computing, as companies are unsure on how to ensure compliance with the data protection requirements.

FIC Recommendations

FIC Recommendations

Rather than focusing on consent at the expense of other opportunities to enhance a user’s privacy, we believe that a key objective for data controllers should be to develop the mechanisms by which users can easily make informed choices depending on the context of specific uses of data.

The National Authority for the Supervision of Personal Data Processing and the MIS should ensure transparent and predictable implementation of the legislation on data protection.

Adoption of guidelines, such as that on data protection in cloud computing proposed at the beginning of 2015 by the FIC together with AmCham Romania, should lead to the required increase in transparency.

Government and IT&C players should also commit on the following four areas:

  • Security of customers’ personal data through its reliable processing and secure storage.
  • Control for customers over their own personal data and how it is used (e.g. “opt-in”,”opt-out”). 
  • Transparency in terms of the handling of the data at any time and informed consent. 
  • Support for all customers and users to help them protect their privacy and manage their personal data better. 

Finally, the GOR should actively participate in the discussions related to the adoption of the proposed Regulation of the European Parliament and of the Council on the protection of individuals with regard to the processing of personal data and on the free movement of this data, as this legislation will represent a significant change of focus to the rules governing companies' use of personal data and the provision of services involving the processing of personal data, including outsourcing and cloud services. To define the priorities for its participation, the GOR should hold thorough consultations with the industry and other relevant actors.

NET NEUTRALITY

The Net Neutrality debate began in the US a few years ago. In late 2010, the Federal Communications Commission (FCC) of the United States issued a new set of regulatory provisions on Net Neutrality, which entered into force in November 2011.
Less than a year after the European Parliament voted to enshrine net neutrality into law, the principle has come under attack by the EC.

The majority of the 28 EU member states in the European council have voted in favour of changing the rules to block discrimination in internet access but allow the prioritisation of some "specialised" services that required high quality internet access to function (e.g. connected cars).

In Romania, ANCOM published a new decision in February 2015 setting out a number of mandatory measures to be taken by all internet service providers. Under the new rules, operators must clearly state information about possible access, traffic, services and applications limitations and their compliance with Romanian legislation on their websites. They must also state the minimum/maximum guaranteed speed or the absence of such guarantees must be also visible for each offer.

FIC RECOMMENDATIONS

FIC Recommendations

Along with the development of the IoT and various vertical businesses in the near future, guaranteed quality will be the vital prerequisite for all these specialised services for the benefit of end consumers, under a framework that will further encourage innovation, startups and fair competition along the entire Internet value chain.

Although discussions are still ongoing at EC level, Romania already has the legislative framework and authorities (eg: ANCOM, CC) which can assure the proper functioning of the IT&C market.

Research & Development (R&D)

The R&D incentive has been the subject of intense discussion during the past 18 months and specific positive measures have been implemented, such as an increase in the supplementary deduction of R&D related expenses, from 20% to 50%.

However in order for this tax incentive to reach its full potential and to represent a real opportunity and attraction for companies performing activities connected to this area, the FIC considers that changes should be made.

FIC Recommendations

FIC Recommendations

The FIC encourages the elimination of restrictions caused by the use of ambiguous terms (e.g. rezultat valorificabil) and the clarification of the norms for the application of this facility.

In addition, the FIC considers that strong inter-institutional cooperation between the MF and the Ministry of Education and Scientific Research (Ministry of Education) would bring benefits to the general legislative framework dealing with R&D facilities by bringing clarity and by tailoring it to the business environment’s needs.

For example, an increase in the supplementary deduction of R&D related expenses for scientific and technological projects and programs directly serving key national socio-economic programs and with potential to increase Romanian Intellectual Property assets could be made a priority. This would support the Government’s strategy for R&D and Innovation to boost Romania IP assets that are currently well above the EU average. R&D initiatives could also be encouraged and financially supported by consortiums formed between technical universities and industry partners.

To facilitate this process, an analysis of best practices applicable in other states in relation to the implementation of R&D incentives would be particularly useful.