The mass roll-out of fibre networks is seen as the key to the expansion of digital services across major economies, but research from Kearney is warning that a €174bn funding shortfall facing Europe’s telecoms sector is putting 2030 gigabit and 5G connectivity targets at risk, meaning around 45 million Europeans could remain without adequate high-speed connectivity by the end of the decade.

In the European telecom health index, Kearney surveyed 20,000 consumers across 21 European countries using consumer research and commercial performance data.

Topline findings showed customer behaviour was a major barrier to monetisation, with weaker markets seeing higher switching, lower satisfaction and weaker bundling. Looking at successful territories, the survey showed that the leading countries are achieving take-up of up to 84% while fibre investments struggle in slow-adopter markets.

Kearney’s research shows Europe’s healthiest telecom markets are concentrated in the north, with Norway (82), Sweden (81) and Switzerland (76) leading the rankings. These countries typically combined strong fibre adoption, higher customer satisfaction and stronger commercial outcomes.

Specifically, in slow-adopter markets – Italy, the Netherlands, Poland, Ireland and Denmark – returns on capital employed have dropped to 6%, with fibre take-up closer to 45%. By contrast, high-performing markets such as Sweden, Norway, France, Spain and Portugal are achieving fibre take-up of up to 84%, supporting significantly stronger returns of 11%.

Assessing the reasons for lack of uptake in the laggard countries, Kearney’s report found that demand-side behaviour was the main barrier to fibre monetisation. In the bottom-five markets, including the UK, customers were 7% more likely to switch providers, 10% more likely to demand faster speeds, and 6% more likely to demand better customer service compared with those in stronger markets.

By contrast, the top-five countries – Sweden, Norway, France, Spain and Portugal – record significantly higher sentiment. Customers are 11% more satisfied with their mobile provider, 13% more satisfied with fixed broadband, and 13% more likely to hold multiple mobile subscriptions with the same provider. Stronger customer relationships also deliver better financial outcomes. In top-performing markets, operators typically saw average revenue per user rise by up to 15%, while customer turnover drops by 10-15%.

The UK ranked 18th out of 20 European markets, despite fibre reaching nearly 80% of homes across the nation. The report stressed that the UK still struggles with slow adoption and weaker customer sentiment, reflected in lower bundling levels of just 28%. The UK joins Belgium and Italy in the lowest-performing group – markets where fibre availability was growing, but commercial performance is failing to keep pace.

Kearney partner Christophe Firth noted that while there was no shortage of fibre in the ground, the returns for providers weren’t adding up, and that the challenge now would be to convert homes passed into paying customers, improving service experiences and rethinking how operators go to market.

“In some countries, operators have passed 90% of homes but connected fewer than 40% – that’s a massive commercial gap that needs to be addressed,” he said.

“Instead of chasing roll-out targets, operators need to focus on actually getting more consumers to sign up to the service. That means improving how they cross-sell fixed and mobile, creating bundles that genuinely appeal to households, making digital sign-up simpler, and targeting the right customers with the right offers. The infrastructure is already there – now, it’s about turning it into a consistent revenue stream.”

Against that backdrop, Europe’s reliance on American-made AI begins to look more and more like a liability. In a worst case scenario, though experts consider the possibility remote, the US could choose to withhold access to AI services and crucial digital infrastructure. More plausibly, the Trump administration could use Europe’s dependence as leverage as the two sides continue to iron out a trade deal. “That dependency is a liability in any negotiation—and we are going to be negotiating increasingly with the US,” says Taddeo.

The European Commission, White House, and UK Department for Science, Innovation and Technology did not respond to requests for comment.

To hedge against those risks, European nations have attempted to bring the production of AI onshore, through funding programs, targeted deregulation, and partnerships with academic institutions. Some efforts have focused on building competitive large language models for native European languages, like Apertus and GPT-NL.

For as long as ChatGPT or Claude continues to outperform Europe-made chatbots, though, America’s lead in AI will only grow. “These domains are very often winner-takes-all. When you have a very good platform, everybody goes there,” says Nejdl. “Not being able to produce state-of-the-art technology in this field means you will not catch up. You will always just feed the bigger players with your input, so they will get even better and you will be more behind.”

Mind the Gap

It is unclear precisely how far the UK or EU intends to take the push for “digital sovereignty,” lobbyists claim. Does sovereignty require total self-sufficiency across the sprawling AI supply chain, or only an improved capability in a narrow set of disciplines? Does it demand the exclusion of US-based providers, or only the availability of domestic alternatives? “It’s quite vague,” says Boniface de Champris, senior policy manager at the Computer & Communications Industry Association, a membership organization for technology companies. “It seems to be more of a narrative at this stage.”

Neither is there broad agreement as to which policy levers to pull to create the conditions for Europe to become self-sufficient. Some European suppliers advocate for a strategy whereby European businesses would be required, or at least incentivized, to buy from homegrown AI firms—similar to China’s reported approach to its domestic processor market. Unlike grants and subsidies, such an approach would help to seed demand, argues Ying Cao, CTO at Magics Technologies, a Belgium-based outfit developing AI-specific processors for use in space. “That’s more important than simply access to capital,” says Cao. “The most important thing is that you can sell your products.” But those who advocate for open markets and deregulation claim that trying to cut out US-based AI companies risks putting domestic businesses at a disadvantage to global peers, left to choose whichever AI products suit them best. “From our perspective, sovereignty means having choice,” says de Champris.

But for all the disagreement over policy minutiae, there is a broad belief that bridging the performance gap to the American leaders remains eminently possible for even budget- and resource-constrained labs, as DeepSeek illustrated. “If I would already think we will not catch up, I would not [try],” says Nejdl. SOOFI, the open source model development project in which Nejdl is involved, intends to put out a competitive general purpose language model with roughly 100 billion parameters within the next year.

“Progress in this field will not to the larger part depend anymore on the biggest GPU clusters,” claims Nejdl. “We will be the European DeepSeek.”

In an attempt to address the complexity people often experience in dealing with government services, the UK government has unveiled CustomerFirst.

This is a new unit within the Department for Science, Innovation and Technology (DSIT), led by Tristan Thomas, formerly of Monzo, and Greg Jackson, CEO of Octopus Energy. It aims to bring together the best civil service operators alongside leading private sector disruptors and transformation specialists. The plan is to use CustomerFirst expertise to rewire government services, making use of AI and best practices from the private sector.

The Blueprint for modern digital government report, published last year, set out six steps to achieve a digital state. At the time, the government also recognised major challenges that were preventing digital government from progressing.

Although the government spends over £26bn annually on digital technology and employs a workforce of nearly 100,000 digital and data professionals, institutionalised fragmentation is holding back digital government services. Problem areas include persistent legacy, cyber and resilience risk; siloed data; under-digitisation; inconsistent leadership; a skills shortfall; diffused buying power; and outdated funding models.

A year later, the government has published its Roadmap for a modern digital government. The roadmap states that public services are being redesigned to be quicker, more accessible and easier to use, while also being cheaper to run and costing less to the taxpayer. The roadmap includes digitisation of the planning system to accelerate house building and a goal to simplify how people manage their benefits and taxes online.

CustomerFirst is being positioned as one of the initiatives the government will use to deliver savings for taxpayers through end‑to‑end reform and smarter use of technology by departments. There is a potential £4bn saving from moving service processing online, rather than by phone, post or in-person. 

Discussing the need to streamline how people interact with government departments, the minister for digital government, Ian Murray, said: “Too often, people are put off from interacting with the services they need by the frustration that comes with waiting on hold, filling in endless forms, and jumping through hoop after hoop.”

He said the government would redesign services so they meet the demands of modern life.

Technology such as artificial intelligence (AI) will be deployed to achieve this objective. Greg Jackson, founder and CEO of Octopus Energy, said: “With modern technology, including AI, and even more importantly empowered teams whose job it is to help citizens, we can improve service without increasing costs.” 

The Driver and Vehicle Licensing Agency (DVLA) is the first government department to work with CustomerFirst. It aims to improve how the DVLA handles millions of customer interactions each year related to driving licences, vehicle registration and other motoring services.

DSIT said the DVLA will become a blueprint for improving services across government departments. DVLA CEO Tim Moss said: “DVLA has a track record of delivering great digital services, and we are keen to build on this and further develop the next generation of high-quality services that citizens should expect.” 

As part of its roadmap for modern digital government, DSIT said it was looking for senior and experienced talent with expertise in service design, solutions architecture and product management.