Only "stronger investment in information and communication technologies and effective cross-border competition" could stoke growth and close Europe's research spending gap with the US, the Commission, quoted by the report, said.
The report said the EU also pledged to stop governments from shielding national sector champions from foreign competitors, a phenomenon also seen in the energy sector in recent months.
This week, the German cabinet approved a bill that would promote investment in the country's broadband telecom network while shielding a high-speed network planned by Deutsche Telekom from foreign rivals, the report said.
EU spokesman Martin Selmayer said: "There can be no compromise on the policy of market opening in the telecom sector."
He called Germany's telecom bill "very worrying," according to the report.
He lauded Denmark, the Netherlands, Finland and Sweden for unreservedly embracing EU telecom rules, the report said.
But for the rest, the EU-wide outlook was not good, according to a report from Viviane Reding, the EU's Information Society commissioner.