Select Committee on European Union Minutes of Evidence

Examination of Witnesses (Questions 780 - 799)



Lord Paul

  780. Why should it be political? This is a marketing job that you will do to try to convince people because you are raising the user's faith in you. I cannot understand why this is political.
  (Mr Green) I totally accept that. That is something that we obviously are putting significant effort into. We also have other means of giving people access to e-commerce and to the Internet and to e-mail, for example. We have Open which is a digital broadcasting delivery mechanism for e-commerce. Open now has (there was something in the paper about it today) more consumers doing e-commerce transactions over digital TV than any Internet service provider in the United Kingdom.

Viscount Brookeborough

  781. If this is such a problem, letting people know how much they are spending, is there no technology which will show them on their screen while they are working online how much they are spending? That is comparatively simply, surely.
  (Mr Green) We do not have in our network right the way across the country the technology that can do that. There are machines that you can buy which will record how much you are spending.

  782. But this is such an issue.
  (Mr Green) But I do not think it is an issue because we have solved it with Surftime.

  783. But you have just said that it was.
  (Mr Green) We have solved it by offering flat top tariffs so that people do not have to worry about metering. We have solved it in a consumer way rather than a technological way.

  784. You talked about monthly bills. A lot of your competitors do monthly bills. Why do you not do that?
  (Mr Green) That is a very good question and one which I keep asking myself. We have over 20 million customers. To change from quarterly billing to monthly billing is a massive systems change which we have not been able to do within the timescales that I would like, but that is something we are going to have to do eventually.[5]


  785. I want to conclude with this. The difference between the States and here is that people do stay online dramatically longer, significantly longer, than they do here and that is primarily because of the flat rate unmetered access that they have. There has been a great opportunity there for business to stay online 24 hours mid-week, not just at the weekends, and make progress. What we are looking to see is an opportunity not just for people at the weekend to be spending long times on the Net but for business during the week to have relatively cheap unmetered access. Do you feel that Surftime will meet the needs of business, particularly small businesses?
  (Mr Morfett) Yes.

  786. Have you thought about producing any offerings which will be focused particularly on them?
  (Mr Andradi) If you look at what the small business community needs, clearly Surftime is one element of our small business offering. Surftime, in terms of access, will be extremely important. The other area where we are doing some very good work is looking at the whole area of how you transform small businesses, how you empower them to use the Net and become e-businesses? To that end we are doing a whole variety of things. We are getting into what is called the "applications business". Most small businesses today cannot afford to have payroll systems or business administration systems, so we are running programs and applications which they can download from the Net or buy-on-demand to help them. Most of these applications generally have not been made available to small businesses in the past, so we think there is a revolution in terms of how small businesses use the Net, not just in terms of access, but giving them applications and tools. Let me just mention two things that BT has done. We have a major deal with a company called Commerce One, which is a major company that helps small businesses transact with large businesses in the supply chain. Commerce One is the leader in this space in the United States. We are going to bring them to the United Kingdom and that is a major way in which small businesses can really benefit from taking part in the whole supply chain with large businesses. This is another huge opportunity to help small businesses get online and transact online. We have a joint venture with a company called VerticalNet. VerticalNet again is a major leader in the United States in the whole area of creating what is called industry portals. If you are a plumber or if you are in a particular area of a small industry, you can now interact with industry.

  787. Could you drop us a note on this too?
  (Mr Andradi) I am happy to, Chairman. There are other ways to do this. Access is about empowering them with other businesses too.

  788. Up to now the complaint has been that at 4p a minute they could not spend a lot of time on the Net. We are hoping that is changing. Could I just change the subject and move on to a very topical one, the "I Love You" last week, the virus. Would you care to commend on how it affected you and whether steps have been taken to protect yourselves in the future? When we were in the states we followed some denial of service attacks there and there was great concern in a whole range of areas within government and this has been followed up with last week's incident and you were I think particularly affected by it.
  (Mr Green) Yes. Can I ask Ben to explain it?
  (Mr Andradi) Security and the whole security infra structure is of paramount importance to us. The problem of the Internet is that it is a growing medium, it is rapidly exploding, and we have certainly learned a lot from what went on last week. Compared to a lot of institutions we were relatively well protected by our fire walls and our gateways were actually able to stop it. This is an area where it is very difficult to say it will never happen again. You cannot say this is never going to happen again. We feel we are at the leading edge in providing the right levels of security. Unfortunately there is always someone who devises an even more difficult and enigmatic approach to try to breach these fire walls. It is something that we have certainly looked at and we have learned the lessons from it to ensure that this type of thing does not happen again. It is an area which is extremely complex and is growing in complexity and it is impossible to say that this sort of thing could never happen. We have certainly learned lessons from it.

Lord Skelmersdale

  789. A few minutes ago you were talking about business to business. My interest is in business to consumer. I am a director of a small business with an even smaller web site. The problem there is first of all the integrity of the system, the entire e-mail system, and the virus last week is a case in point. Secondly, there are the problems of security of one's credit card, which is a subject we are going to go into in a few minutes with Barclaycard. There is almost certainly a third one and that is the cost of access of the consumer, which you have covered fairly thoroughly, and I shall look very carefully at that particular paper when you produce it in due course. As far as your original evidence is concerned, however, you make two slightly interesting claims. One was in your summary in paragraph one, that the growth of e-commerce is unstoppable, which in fact was a summary, as I understand it, of what you said in paragraph 1.2 of "rapid growth is assured". Can you explain why you made those two statements?
  (Mr Green) The bottom line is that the economies that all businesses will derive from using e-commerce are so enormous that those that do not go into that area and use those mechanisms will end up—

  790. Can I stop you right there? The important thing is the customer getting to the business, not the business getting to the customer.
  (Mr Green) There are two ends to the unstoppability. One is the extent to which business takes it up and the other is the extent to which the consumer takes it up. The first thing is that faced with a choice between a business that is doing it using traditional methods, let us say £10, and one that is offering you an e-commerce alternative at £2, assuming that you have got the computer or some other means of access, eventually the business is going to move to the one doing it at £2. There is going to be a pull towards those businesses. Secondly, there are consumers who, for certain types of economic activity, will find e-commerce a more convenient way of doing things; not everyone and not for everything. But as more and more people use it—and I think you will find this particularly in areas like banking—more and more people will use it. I think it comes from both ends. I think there will be consumer pull and business push.
  (Mr Andradi) There are several ways to look at it. Let me start with an abstract way of looking at it. We have economic models of the Internet that suggest that what is really going on here is that the supply curve is shifting to the right and what we are essentially seeing is great output being produced and so as a consequence more and more transactions are occurring because more people are able to get online, more businesses are going to get online. I can access a book store like based in Seattle, which I could not do in the past. That whole level of convenience is what the Internet brings you. That is why we think that this is an area that is growing. It is not purely from an economic abstract point of view but also from the supply and demand curves interacting. Then you get into the empirical evidence of issues like growth of consumer e-commerce today, just the growth in things like we have a joint venture in Open which is bringing e-commerce to the TV set, as Colin mentioned. The growth of e-commerce is there; again, it is just unstoppable and we are getting on Open nearly 50,000 e-mail sign-ups a week. Whole families who cannot afford a PC are signing up on e-mail to send messages to each other. There is a whole variety of empirical evidence on the growth of the mobile Internet, again messaging, e-mail and all that. There is a lot of empirical evidence to suggest, not just in the UK but also in the US, that there is a huge bandwaggon around this and this huge amount of advertising now which illustrates the convenience of using the Net, home shopping, grocery shopping is coming on the Net, major supermarkets now are getting online. A whole variety of things are going to happen probably in the broad economic sense to the very specific areas.

Baroness O'Cathain

  791. What you have just said indicates that everything is fine and everything is getting on and the growth is unstoppable, but in your memorandum at 1.4, you said there are six factors that have a braking effect on the take-up of e-commerce by businesses and consumers in the UK, and you list them, including the price of access. I wonder if you could, when you are writing to us again, write these in order of importance because it seems to be a catch-all. Also, it is fine to list the six but you do not give any idea what the solutions are. For example, you identify the PC costs as one factor. I suppose the solution is to bring down PC costs. But all things are relative and the PC costs have certainly come down quite a lot. Have you got any idea at which point the PC costs would be which would stop them being a braking effect on the development of e-commerce both for businesses and for consumers generally? We have spent so much time on cost of access perhaps you could just give us that additional information.
  (Mr Green) I do not know about the cost but I will ask Ben to deal with that. I can talk to you about the solution to that particular barrier and that is not just PCs. It is other means of access to the Internet. We have kiosks and other points in libraries and places like that where people can access the Net.

  792. Or EasyJet shops?
  (Mr Green) Whatever the price comes down to there will always be people who cannot afford it. It will just increase the number of people who can afford it. There is the TV. We have a telephone which is an e-mail telephone, so you just plug it in and you can use it to send and receive e-mails. There are other devices which people will use which will be different mechanisms apart from the PC, and including mobile devices, not just mobile phones but possibly simpler mobile devices. It is the vast number of different means of access to the Internet which is going to help some people who are afraid of PCs and who do not want to use them. I do not know what our assessment is of cost.
  (Mr Andradi) If you look at the normal consumer electronics items which are priced in the £200, £300, £400 range, potentially if PC prices came down to that level you would see a real upsurge of PC use. Certainly if we look at the recent survey that we have done and we can provide you with more detail on that. It is also very important to realise that there is this huge explosion of what we call pervasive computing. It is not just the PC. There is a whole multiplicity of devices that are getting intelligence put into it, mobile phones and so on.

  793. Yes, we do know.
  (Mr Andradi) A whole variety of things, so those become also access mechanisms. Mobile phones are becoming another platform.

  794. Your time with us is very valuable so I do not want to pursue it. One point which is tangential to what you are saying is this. It is said in the United States that the political ambition is that everybody should have access to the Internet and I think that that is more or less the political ambition here. I do not think it has been stated in such broad terms, that by the year 2003 everybody here should have access to the Internet. Therefore, that factor, putting a brake on the building up of e-commerce should be removed. Perhaps you can just list the six points in order of importance and say what the solutions are.
  (Mr Andradi) I would be delighted to do so. Let me just add that we are talking about narrow band access, which is very important. Again, let me say that we are on the brink of the second Internet revolution, which is about to occur and is probably going to supersede the narrow band. The second Internet revolution is around mobile Internet access, what people call broadband. When you talk about access, the narrow band in the next two to three years is going to recede and a new order of things is going to be abroad. That is also an area of great interest.


  795. Just a quick question on mobile telephony. Will people be allowed to have portable phone numbers if they are on the pay-as-you-go system?
  (Mr Green) I cannot think why they should not but that is a question you probably need to address to the regulator.

  796. I am not sure if it needs to go to the regulator. You can take the initiative yourselves. You had to be pushed by the regulator previously to provide the facility for people to transfer their personal phone numbers from one company to another, did you not?
  (Mr Green) If you are just talking about mobile portability, it was not just us. You need the industry to have number portability and that is what the regulator did push. On fixed number portability we agreed number portability. The issue we had with the regulator was the price.

  797. Why I am asking you is whether consideration is being given to the point where we get mobile telephony being used extensively for Internet access for the holders of a telephone number on the pay-as-you-go system who will be able to transfer from one company to another.
  (Mr Green) I will have to find out.

  798. It would be nice if the industry itself decided to start taking initiatives there rather than having to wait for the regulator, would it not?
  (Mr Green) Fair comment.

Lord Faulkner of Worcester

  799. My question is about regulation. I think I would be summarising your position reasonably if I said that you would like the Government to adopt a fairly light regulatory touch.
  (Mr Green) Yes.

5   The witness subsequently added that monthly billing was available on request. Back

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