* Market fragmentation hampers expansion, access to finance
* European start-ups move to the United States
* Telecoms market reform still in the pipeline
By Julia Fioretti
BRUSSELS, May 27 (Reuters) - Europe needs to sort out its fragmented telecoms market and regulatory imbalances if it is to spur a new generation of technology start-ups and create its own version of America's Silicon Valley.
The European Union has set aside 80 billion euros ($109 billion) to fund cutting edge research and innovation over the next six years, underscoring its ambition in these fields.
And last week it launched the Startup Europe Partnership (SEP), a platform designed to match hot start-ups with funding from bigger companies, including telecoms giants such as Orange and Telefonica.
For Neelie Kroes, Europe's commissioner for telecoms and digital affairs, it is an essential step to boost competition and ensure Europe is not left behind in the global tech race.
"If Europe wants to challenge Silicon Valley as a place that generates digital business, our start-ups need to learn how to 'scale'," Kroes said as she launched the SEP website.
"They need to get better at growing: breaking through national and language barriers so they mature into global champions that last."
But Europe faces huge challenges to emulate the success of Silicon Valley, a region south of San Francisco set up in the 1960s that has produced some of the most iconic firms of the past four decades, including Apple, Cisco and Google.
Among these are the EU's fragmented telecoms sector, with competing providers in almost every country, and a technology infrastructure that is far from integrated.
What's more, the regulatory landscape varies from state to state and the rollout of new technology such as 4G has been slow, several tech entrepreneurs attending the SEP launch noted.
"The United States and South Korea in terms of data usage are far, far ahead of Europe, due to our technological infrastructure and also the non-existence of the single market in telecoms," said Kaya Taner, chief executive of Applift, a marketing platform for mobile games.
MORE CHALLENGES
Another area of concern is the EU's strict data protection laws, which are set to be beefed up even further. Because they are implemented by separate national authorities and personal data is often defined differently across countries, small businesses may struggle to comply with multiple regimes.
As Mark Silverstein, head of product, tech, intellectual property and policy at music streaming service Spotify, said: "consistency in regulation makes life a lot easier."