Examination of Witnesses (Questions 1260
THURSDAY 8 JUNE 2000
1260. If there are disputes are they in the
(Mr Dryden) No. We are an intergovernmental organisation
and much of our core work takes place in committees which use
documentation with a restricted circulation.
Lord Faulkner of Worcester
1261. The committees are all private, are they?
(Mr Dryden) Yes. They are delegates from the administrations
of the member countries. In this particular field, the information
society, electronic commerce, we invariably have private sector
people at the table and sometimes even NGO people. They are not
sworn to secrecy exactly but they agree to play by the rules of
the game. Governments come and discuss things here sometimes because
it is a little bit behind closed doors, and they talk about things
among themselves without it being in the public domain. If we
do not provide them with that facility they will go somewhere
else to have that discussion. On the other hand, the other half
of our events are public. Our documentation is unclassified, it
goes on the Web for everyone to read and we have a very broad
participation in the meetings. We are very careful to distinguish
which are which, which are formal OECD events and which are conferences,
workshops, fora and so on.
1262. So we go back to The Hague Conference
and agenda problems. Who were the principal players who delayed
your progress on setting up the conference. Is that public or
(Mr Dryden) You will have to ask the UK delegation
about that. I will say that it is not only countries. Let us just
take a random country, for example the United States. There could
be different agencies within those countries, for instance the
Federal Trade Commission on the one hand and the Department of
Commerce on the other, who have different views within the US,
so there is if you like a friendly, brotherly struggle between
them as to which line they want to push as the US Government in
the OECD ambit before moving forward on something. This is the
kind of thing which can arise which may delay things a little
bit. It can happen in other countries where complex issues which
have a trans-ministerial implication prevent a national position
1263. But there could equally be in this topic,
for example, a differing state position adopted between those
who are in favour of directives and regulations as distinct from
(Mr Dryden) Oh yes, absolutely. We try to work to
resolve those kinds of issues and move the agenda forward. This
does not necessarily mean that we are in favour of action in the
sense of regulation.
1264. No. I am not asking you to express a policy
position in that sense. I am just trying to get to the process
and how open it is.
(Mr Dryden) It is getting more and more open.
1265. It should do given the kind of topic that
you are dealing with.
(Mr Dryden) Yes, but on the other hand we stray into
topics sometimes which are extremely sensitive and countries just
may profess their willingness to be open but in practice they
do not really want to be open but they want to have a discussion.
We provide a forum for governments to talk to each other and it
would be very sad for the OECD if those countries were to go away
and talk somewhere else because we did not know how to keep our
mouths shut, we did not know how to be discreet.
1266. I can understand that. The purpose of
our inquiry is to facilitate the promotion of e-commerce and part
of it is within our terms of reference anyway. If there are delays
in important areas which affect confidence we have an interest
in trying to establish why those delays arise and who is responsible.
(Mr Dryden) Just to react very quickly, one example
that we are struggling with at the moment is the issue of security
of networks, very widely publicised hacks of electronic commerce
websites, of viruses bringing down networks. There is on the one
hand, "Oh, my goodness, this is national security, this is
military, this is law enforcement" and so on, "This
is not the OECD's job", and on the other hand people saying,
"Well, this is extremely damaging for the economy. There
is nothing worse for confidence than a widely publicised hack
whether or not this fear is justified or not by the technological
facts of the situation. This cannot be a good thing. This is economic
and this is doing not only millions of dollars' damage in actually
putting it to rights but also millions of dollars of economic
growth and incomes foregone by the lack of confidence that it
engenders. This is definitely something the OECD should be getting
into". Resolving that one and getting an agenda that is something
people can discuss round the table is not that easy with 29 member
countries who are just feeling their way even within their own
1267. The lowest common denominator can hold
you back sometimes.
(Mr Dryden) Yes. It is both a strength and a weakness,
this kind of consensus that we need to obtain.
1268. So in effect prior to any conference like
that the governments may well have met here, and indeed, if you
are talking about security, their security services may well have
had a chat between them to see how far each of them could go on
a particular field, and then they go to the conference and have
an open conference up to agreed limits of progress if you like
where they will all be at least in a united forum?
(Mr Dryden) Yes. At this conference we are going to
have in December one of the rules of the game is that it will
not result in commitments to action. It will be discussion, dialogue,
clarifying the issues and clarifying the options, but then as
regards action there are other fora.
1269. Away from that?
(Mr Dryden) Yes. They will then take the results and
there will be appropriate fora for action. We do this the whole
time. Telecom liberalisation we have been doing for years, and
no telecom liberalisation deals were ever cut here in the OECD.
A lot of the discussion, the economic analysis, the arguments,
were clarified, the data was collected, and then the member countries
took those ideas away into other fora, into the European Union
institutions, into the WTO. They then cut deals on telecom liberalisation
internationally and also domestically. They liberalised one by
one. We think we pushed that process along by decades in some
cases but it was very much unsung because we are seldom seen to
1270. My question is really tailor-made for
an international civil service. Which of the main European countries
do you rate most highly for its e-commerce policies?
(Mr Dryden) I think the Nordic countries are extremely
successful. The UK has not done a bad job but I certainly think
there are lots of lessons to be drawn from the Nordics who have
done a lot of very good work. I think it largely stems from their
success in enabling their users to have access to networks and
services. They have done that better than anyone else but other
countries are coming along. The UK is probably the leading large
country in Europe, just, but they are pretty much of a muchness.
Can I introduce Sam Paltridge who is our telecommunications analyst.
He has developed some very innovative Internet indicators and
he can explain who is out in front. To me the question starts
1271. Are there any other important indicators
which prompt you to make that judgment?
(Mr Dryden) The kinds of indicators would be the share
of electronic transactions in total transactions, so for example
it would be the share of electronic commerce retail sales in total
retail sales, the share of electronic business to business transactions
in total intermediate transactions between enterprises. Other
indicators would refer to the use of electronic commerce techniques
by government administration. To us it all stems from access,
who has access to it from the perspective of users, whether the
user is a vendor or information provider or whether the user is
a purchaser or information seeker. If there is access at the right
price to the right kind of enhanced services, then electronic
commerce will take care of itself to a great extent, provided
of course the regulatory and legal framework to support it exists.
Would you like to add something to that, Sam?
(Dr Paltridge) Perhaps I could pass round a couple
of charts with some of the indicators that we use to look at the
infra structure side of electronic commerce and how we try and
compare developments across countries. I can certainly make more
information available on the indicators we use to compare different
countries' performance with electronic commerce. As John says,
the UK is probably the leading large country in Europe but, having
said that, it is well behind a number of smaller European countries.
Generally with most of the indicators you tend to find the UK
around the OECD average. That is about the position of the UK
at the moment. John mentioned pricing. We think that pricing is
a key element in the development of electronic commerce. I am
sure you are well aware that in the UK there is a tremendous revolution
happening with telecommunication pricing. Unmetered telecommunication
pricing becoming available which will allow people to stay on
the Internet longer. We think that this is a very important development
in terms of developing electronic commerce. The UK has been one
of the earliest countries to recognise that local telecommunication
pricing is very important in Internet development. Some countries
inherited unmetered local pricing from the telephony pricing on
their telecoms system. Other countries, that had metered local
pricing are now having to make that transition. It is not an easy
one for the telecommunications network operators. In the longer
term we think that people will want to have an always-on connection
so that they do not have to log on to the Internet and the Internet
becomes as easy to use as television or radio. In other words
that you do not have to log on and you are not thinking with the
clock ticking in your mind, "I must log on, make my purchase
or look up my bank account" and then log off. That is really
the direction that most people think communications networks are
1272. So it will be live connection permanently?
(Dr Paltridge) It should be a permanent connection
and a high speed connection. In the interim most people will continue
to use the Internet via the public switched telecommunications
network and dial up their Internet Service Provider using a modem.
For the next several years that will be the way by which most
people will connect to the Internet. In the longer term what we
are all trying to work towards is a permanent connection that
is always on and has pricing appropriate to new ways of usage.
Traditionally we made three-minute telephone calls and the pricing
was geared around making those three-minute telephone calls. That
pricing is not appropriate for somebody who wants to stay online
for an hour or even someone who wants to have a permanent connection.
1273. Which is the leading country in this technology
that will enable this to happen?
(Dr Paltridge) In terms of broadband connections?
1274. And permanent live.
(Dr Paltridge) We are still very much at the early
stage. There are about five OECD countries that were fortunate
in inheriting unmetered telecommunication calls. They are the
US, Canada, Australia, New Zealand, and Mexico to a lesser extent.
There the problem is that the telecommunication network is very
underdeveloped so it really has not had the impact it should have.
Lord Faulkner of Worcester
1275. The calls are free. You just cannot get
(Dr Paltridge) In terms of other countries in Europe
there has been a strong swing, in the growing number of countries,
this year towards having unmetered local access offers but still
there are limitations with the public switched network. What we
are trying to work towards is DSL technologies which mean that
you can continue to use the copper wire that runs into your home
but at a much higher speed.
1276. And DSL stands for?
(Dr Paltridge) Digital subscriber line. With both
DSL and cable networks, using a cable modem, you can get much
higher speeds and they are permanent connections. The barrier
here is still that the technology is very new. It is only in the
last two or three years that people have been building and upgrading
these networks and it simply takes time to roll out the networks
and to make them available. There is more competition in this
areabetween cable networks and telecom providersthan
we have ever had before in communications because traditionally
we have monopoly networks. We think that prices will fall as the
networks roll out and, as we evolve in that direction, we will
have permanent connections and much higher speeds.
1277. This morning when I was getting up there
was a programme on BBC World and it was about the new telephone
system that Microsoft wants World Telecoms to use. They are in
competition to Nortel and people like that. They say this is revolutionary.
Are we about to see a complete change? Is there something very
new coming out?
(Dr Paltridge) This is an industry in which there
is always something new coming out. The main things that will
happen in the near future is first of all we are moving in the
next two or three years to what we call the third generation mobile
networks. I am sure you are very familiar with that. The simple
way to understand it is having wireless connections with much
higher speeds. Today if you use a mobile phone to connect to the
Internet in most countries you will have a speed of around 9.6
kilobits. This is the speed at which a user on the fixed network
was connected to the Internet circa 1990-91. In two or three years,
if you are stationary with your wireless connection, you will
access the Internet at around two megabits per second which is
a huge increase. With a wireless terminal you will be able to
get a performance that is better than the fixed network today,
but of course the fixed network will continue to evolve. So by
then the performance of the fixed network will be ahead of that
capability. In terms of the connection speed via wireless networks
it is going to be faster and it is going to be mobile. I suspect
what you are talking about with Microsoft is that it may be software
or some other application. In that realm what we are seeing over
the longer term is a general switch from circuit switched networks
to packet switched networks.
1278. Yes, excuse me, I did mean Cisco when
talking about Microsoft.
(Dr Paltridge) In that case it would be something
to do with the backbone of the Internet because Cisco provide
most of the equipment that runs Internet backbones, so it will
probably be faster equipment or something in that area.
1279. Can you tell me what packet switches are?
(Dr Paltridge) With the traditional telephone network
you had circuit switched connections such that if I made a telephone
call to you we would have a circuit open between us all the time.
With a packet switched network we do not have a continuous circuit.
The data simply is put in the packets and it can travel over many
different paths and then when it reaches you it is re-assembled.