Select Committee on European Union Minutes of Evidence

Supplementary memorandum by British Telecommunications

  BT promised additional information from the Ovum study on Internet access prices, on activity with SMEs, and on braking effects on e-commerce. These are addressed in Sections A-C below.


  BT recently commissioned Ovum, an independent research and consulting company, offering expert advice on IT and telecoms, to undertake an independent study of international Internet access pricing. Ovum used source data from BT, other international telecoms operators and ISPs, and organisations such as the FCC and OECD.

Consumer Comparison

  The Ovum survey shows that for 40 hours usage per month at evenings and weekends, the BT Surftime price gives cheaper access than in the USA, Canada, Italy, France, Germany and Japan.

  The choice of evening and weekend usage for consumer price comparison is based upon evidence of existing usage patterns. BT's own analysis suggests that over 80 per cent of residential customer time spent "on-line" is in the evenings or at weekends and this is endorsed by a recent NOP Business survey of Internet Pricing (February 2000). Furthermore, 70 per cent of users confirmed this pattern of usage was not related to "peak" or daytime call charges, but because they were not at home during the day.

  The BT price includes residential BT line rental (£9.25), BT SurfTime Evening and Weekend package (£5.99), plus an assumed additional ISP charge of £4 (a total of £19.24 or c.$29.16). The US price is based upon average cost of line rental plus unmetered local calls for 85 major US cities ($20.18). (this is the most recent date published by the FCC-Reference Book of Rates, Price Indices and Expenditures for Telephone Service, June 1999). The ISP charge is for AT&T WorldNet, which is a typical ISP offering available throughout the US. At $19.95 a month (exc. taxes) for 150 hrs of Internet access, this compares favourably with the AOL unlimited access price of $21.95 (exc. taxes). Total price (inc. tax) is $42.02.

Business Comparison

  The Ovum survey shows that for 40 or 60 hours daytime usage per month, the Surftime package is cheaper than equivalent access in New York and Chicago and comparable with costs in Seattle. Since the OECD study (which was pre Surftime) showed the USA as the cheapest OECD location for peak-time access then arguably the UK would have been the cheapest location in the OECD after Surftime introduction (if all other tariffs had remained unchanged). However, we have yet to receive more up to date information on OECD prices.

  This is based upon costs of businesses accessing the internet for 40 hours per month—during daytime working hours. The BT price includes business BT line rental (£14.96), BT SurfTime Anytime package (£19.99), plus an assumed additional ISP charge of £10 (a total of £44.95 or c.$68.10). The US price is the average charge to businesses made by three operators in three US cities—Nynex in New York—$80.51 (East Coast example), Ameritech in Chicago—$76.55 (Central America example) and US West in Seattle—$61.95 (West Coast example). All data was collected directly from US operator and was correct as of 1 March 2000.


Backing Strategic Aims of UK Government

  Since the publication in December 1998 of the White Paper on "Our Competitive Future: Building the Knowledge Driven Economy", the UK Government has been consistent in setting the aim for the UK to be the best trading environment in the world for e-commerce by 2002. There has always been a recognition that this objective could not be achieved without providing the e-commerce tools and capabilities for the mass market SME community. Indeed, one of the government's earliest targets was to ensure that "one million UK businesses get wired up to the digital market place by 2002".BT fully supports these objectives and is currently investing a huge amount of skilled resource and capital in targeting the specific needs of the SME market place for e-commerce solutions. This note outlines what some of these key initiatives are.

Getting On Line

  The entry level, or starting point, for most small businesses wishing to take advantage of e-commerce is simply becoming connected to the Internet through an Internet Service Provider (ISP) of their choice. Cost considerations will obviously be an important factor in making this choice. The ISP market for small business access is a large and thriving one, and BT ranks as one of the leading providers. In particular, BT ACCESS was the UK's first free Internet access service for small business users, and now has many thousands of such customers taking advantage of the resources of the Internet for the first time.

Creating Your Internet Presence and Doing Business Securely On Line

  Undoubtedly the aspiration of most businesses who have decided to connect to the Internet is to progress to the point where they can establish their own marketing presence on the "World Wide Web", and from there advance to the point where they can grow their businesses through buying and selling securely on line. BT has developed a range of "best of breed" solutions for small and medium sized businesses that are intended to help them implement their Internet plans in a flexible and cost effective manner. Amongst these services are BT Connect, a low cost service to create an initial presence on the Internet. BT Store Centre, enabling businesses to publish an electronic catalogue of their products on their Internet site, BT Buynet, a secure solution for consumer credit card payments, and BT Trustwise, a service to enable businesses to securely identify and authenticate themselves on line, as well as for setting up highly secure links between businesses and consumers for on line shopping purposes.

Increasing Business Productivity and Competitiveness

  One of the major benefits of the so called IT revolution is that businesses have been able to harness the power of computing and communications technologies to dramatically improve business efficiency and productivity, principally through automating and integrating functions like payroll, accounting, customer relationship and human resource management. Traditionally, though, these benefits have accrued mainly to larger enterprises who have been able to afford dedicated IT departments, and the expensive and time consuming effort necessary to implement the solutions across an organisation. However, the Internet has created a completely new business model, one which enables SMEs to rent such applications and services remotely and securely from the data centre run by an "Application Service Provider" (ASP) on a pay as you go basis, thus reducing the costs to an affordable level. BT plans to be one of the leading ASPs in the world, and will be investing substantial resources in building this capability into one which will have major attractions for the SME market place.

Bringing Buyers and Sellers Together (Partnership With Commerce One)


  BT places the first five factors listed in Paragraph 1.4 of its Memorandum in the order of importance shown below and offers some initial thoughts on the solutions. BT believes that Surftime has now addressed concerns previously expressed on access costs. Looking ahead, marketing of new unmetered packages by BT and other operators will meet consumers needs.

  The first five factors BT listed are:

1.  Lack of Skills and Knowledge about e-commerce

  According to the FT dated 9 June 2000 an Andersen Consulting report said there would be 80,000 unfilled jobs in the e-commerce area in the UK in the near future.

  Solutions: Training initiatives etc as identified at the Lisbon Summit.

2.  Lack of a common understanding about the opportunities and (for businesses) the threats presented by e-commerce

  Solutions: Self-correcting as companies without such understanding are displaced by more successful competitors, and more and more innovative offerings (with better marketing) are produced for consumers. See also initiatives by BT and its partners referred to above.

3.  PC costs

  Solutions: (The PC may not be the principal access method in the future)—Greater competition and larger volumes as the PC market develops. Alternative access methods via TV set-top boxes, games consoles, specialist terminals, public consoles, mobile handsets, etc.

4.  Concerns about privacy and governmental monitoring

  Solutions: Reasonable safeguards in Regulation of Investigatory Powers Bill, greater public awareness of data protection directives, greater awareness of data protection rules by SMEs, and voluntary privacy policies by web traders.

5.  Concerns about an effective legal framework to deal with issues such as electronic money, intellectual property rights, security, digital signatures, consumer protection, and taxation

  Solutions: Complete the EU E-Commerce framework this year and commence monitoring/revision of the E-Commerce Directive in the near future.

  BT Market Site (in partnership with Commerce One) is based on the simple idea of linking buyers and sellers of indirect goods and services so that both sides enjoy reduced costs, increased efficiency, and improved trading relationships.

  Indirect products and services, such as stationery, computers, travel etc can make up 30-60 per cent of total business expenditure, with administrative costs often exceeding £70 per item. Reducing this cost base will therefore often bring substantial improvements in profitability, and this is the aim of the BT Market Site service, one which we have brought to market in partnership with the leading US based technology company Commerce One Inc.

  BT Market Site is an Internet based e-commerce service that allows numerous buyers and sellers to interact electronically and in real time to purchase and sell from a multi-supplier catalogue which is managed and maintained by BT. For buyers, there is the increased convenience of not needing to visit numerous web sites or store paper catalogues, because one electronic point of contact offers a multi-supplier catalogue from approved sources. For suppliers increased revenue and reduced costs come from having to make only one electronic connection to get access to a major new sales channel—this means that the traditional time consuming and expensive need to up-date and distribute paper catalogues to numerous suppliers is no longer necessary.

  For SME's the potential long term benefits of using such a service will be substantial. The BT Hosted Buy Site service allows SMEs to gain access to the BT Market site service (both as buyers and sellers) via remote access using a standard Internet browser which most SMEs will have access to. Additionally, the BT Hosted Buy Site service allows the formation of "buying clubs", where the requirements of a collection of smaller businesses can be aggregated in order to take advantage of volume purchase discounts that would only normally be available to larger purchases.

Building On Line Communities (VerticalNet)

  The Internet as a medium for communications and business is an ideal vehicle for the creation of common "communities of interest". A large number of organisations are now positioning themselves as managers of "Vertical Trading Communities", Internet sites which focus on specific industries encompassing content, community interaction, and the ability to execute business transactions on line. VerticalNet is the US market leader in this area and BT have formed a European wide Joint Venture company with VerticalNet so that we can quickly bring the benefits of that business model to our European customers. As part of this arrangement the JV partners will create VerticalNet UK, a 50-50 JV aimed at addressing the UK market place.

  VerticalNet will be focussed very tightly on creating industry specific on line trading communities where companies in a specific industry sector (e.g. aerospace, pharmaceuticals, construction etc) can obtain news and information about their sector, communicate with other companies in the sector, and engage in e-commerce activities generally. The aim is to create sites on the service which are a "Must Visit" for industry professionals, an objective that can only be met by employing the very best industry professions to edit content, product information and job news on the site.

  Of specific benefit to SMEs will be access to a service that will be a far cheaper and effective marketing and leads targeting vehicle than the traditional paper based trade magazine that most SMEs will be familiar with. As VerticalNet will be offering to set up "Store Fronts" for its customers, there will also be more focussed exposure, branding and awareness created, leading in turn to greater sales opportunities for SMEs.

Wider Support and Sponsorship Activities

  The House of Lords Committee may also be interested to know of some wider initiatives where BT is proactively engaged in promoting e-commerce to the SME community.

DTI/ISI E Commerce Awards

  Under the auspices of the DTI's "Information Society Initiative" BT is a co-sponsor of these major annual awards for SMEs.

Technology Means Business

  Again, BT is a major sponsor of this important programme, the aim of which is to provide an accreditation scheme for individuals who will act as e-commerce advisors or consultants for small businesses.

Greenwich Electronic Time

  BT is one of the founding sponsors of this initiative which has the backing of the Prime Minister and the e Envoy. A programme to position the UK as the custodian of trusted time on the Internet, but also intended to provide a free resource of time tools for business and education to the Internet community at large.

BT SME Road Shows For E Business

  Regular BT sponsored events to help explain to small businesses issues like "Implementing an e Business strategy". How to use e Business to gain competitive advantage", "Opening your Own Internet Shop", and "Creative Marketing on the Internet".

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