Select Committee on European Union Fourteenth Report


PART 2: RECOMMENDATIONS

Summary

21. This Report has ranged widely, and covered a large number of issues. The list of recommendations is therefore extensive. We highlight first some of the principal recommendations.

Access

22. A large number of witnesses have argued that the most important recommendation we could make to improve access would be to insist that the United Kingdom achieves Local Loop Unbundling by the end of this year, as was agreed at the Lisbon Special Economic Summit 23 and 24 March 2000 (see paragraph 36). We took evidence from BT, the incumbent, but were not persuaded that there was a justifiable case for staying with the present target date of July 2001. Six months in e-commerce is too long.

23. Similarly, we believe that OFTEL should insist that BT roll out its Asymmetric Digital Subscriber Loop (ADSL) technology by the earliest possible date (see paragraph 37). The combined effect of the implementation of these two recommendations would be to bring the technical aspects of access in the United Kingdom in line with the best, and therefore improve the prospects for the growth of e-commerce.

24. We were also concerned about that element of access which relates to the ability of all members of the population to benefit from the new technologies. This is why we have asked (see paragraph 40) specific questions which relate to digital television, widely regarded as the access tool for a large and important part of the population. With an eye to the future, and the importance of mobile telephony as an Internet platform, we have tried to ensure that all users of mobile telephony have the same privileges. (see paragraph 38)

Trust

25. Trust is an important element in the promotion of e-commerce. If customers feel insecure or have difficulties in transacting business over the Internet, then it follows that e-commerce will not flourish. Accordingly, we are concerned about the United Kingdom's record on the development and use of smart cards. In paragraph 44, we urge the Government to address this issue.

26. At the heart of e-commerce is the tension between industry, which prefers to see regulation based on the country of origin principle, and the consumer, who naturally prefers country of reception jurisdiction. We feel strongly that the Alternative Dispute Resolution system, which the European Commission is proposing, is an appropriate compromise between these two positions, and should lead to balance in the promotion of e-commerce. (see paragraph 48)

27. As an extension of this compromise, we recommend (see paragraph 49) that the Government consider appointing an e-ombudsman for the United Kingdom. We were much taken with the Swedish proposal that there should be an EU e-ombudsman to co-ordinate the activities of the national ombudsmen.

Resources

28. By resources, we mean the elements which underpin e-commerce. Foremost among these, we recognise the need to support the European Commission's competition policy in respect of telecommunications infrastructures. (see paragraph 55)

29. When members of the Sub-Committee visited Washington in April, we were struck by the role which venture capital played in supporting new start-up companies in e-commerce. Venture capital on a similar scale and with similar flexibility is not currently available in the EU and in our view should be. (see paragraph 56)

30. The other element which we noticed in the United States was the use of stock options as a means of paying for skilled personnel. There is a shortage of skilled people and the practice of paying by stock options helps new companies to deal with both the need to pay very high salaries at an early stage, as well as motivating such workers to remain within a particular company. In the United Kingdom, stock options have been treated as income, in the USA they are regarded as capital. We strongly urge the Government to adopt the American model. (see paragraph 58)

Government as exemplar

31. e-Commerce is already having a substantial effect on existing organisational structures. Witnesses have urged Government to give the lead in promoting e­commerce by using e-commerce in Government business, for example in delivering services and in procurement. We think it important that the Government make clear its priorities and how they are going to deal with changes in structure of the magnitude that will be required to accommodate the new technologies. (see paragraph 68).

32. We were also concerned about co-ordination at all levels. Witnesses drew our attention to the proliferation of sector Councils in the EU. Rationalisation has begun, but we would strongly advocate the creation of a Competitiveness Council comprising the present Industry, Information and Telecommunications Councils. (see paragraph 65)

Monitoring

33. We were disturbed by the inadequate measures for countering Internet-based illegal activity, and question whether the police forces are currently developing their capabilities as we believe they should. We also think that both the EU and the United Kingdom Government should consider how to collect and analyse statistics relating to the perpetration of Internet-based illegal activity. (see paragraph 70)

34. Finally, we reiterate our concern about social exclusion—the so-called digital divide. We recommend that both the EU and the United Kingdom Government should monitor on a continuous basis the impact of e-commerce in this area. (see paragraph 71)

List of Recommendations

Access

35. We recommend that the EU and United Kingdom Government give greater encouragement to schemes whereby employers allow employees to use or borrow corporately-owned computers to access the Internet. We recommend that the United Kingdom Government and the public services should give a strong lead as exemplars and that the CBI and the TUC should encourage more take-up of this non-taxable benefit through all the channels open to them. (see paragraph 242)

36. We recommend that the EU and the United Kingdom Government insist on Local Loop Unbundling throughout the EU by the end of 2000, in line with the eEurope Action Plan. (see paragraph 244)

37. We recommend that OFTEL insist that BT roll out Asymmetric Digital Subscriber Loop (ADSL) technology across the country by the earliest possible date. (see paragraph 246)

38. We recommend that the EU and the United Kingdom Government work to reduce Internet access costs to the levels of the lowest, and to reduce mobile telephony charges in preparation for Internet access by this means. (see paragraph 249)

39. We recommend that OFTEL conduct a critical and continuing review of its current methods for monitoring true access costs. (see paragraph 250)

40. We recommend that the EU and the United Kingdom Government should consider how universal access can be met and by which technologies. In particular we recommend that they consider the following questions with regard to Internet access via digital television:

  • Why is it taking so long to become available?
  • Why is it so difficult for a consumer to gain this access?
  • Why is it so costly?
  • How can it be rolled out as quickly as possible?
  • How can it be extended to those who are, at present, excluded? (see paragraph 273)

41. We recommend that the United Kingdom Government should ensure that privileges associated with Internet usage apply equally to all sections of society. For example, the right to transfer mobile telephone numbers should extend to pay-as-you-go subscribers. (see paragraph 275)

42. We recommend that the United Kingdom Government consider working with women's groups, such as the National Women's Commission, to achieve balanced usage of the Internet. (see paragraph 281)

43. We recommend that both the EU and the United Kingdom Government encourage the adoption of and adherence to the principles of good design practice for disabled people by the manufacturers of Internet equipment. (see paragraph 277)

Trust

44. We recommend that the United Kingdom Government encourage the development and wider use of smart cards. Given the unhappy record of smart card projects in the United Kingdom, we recommend that the Government address the following questions:

    (i)  Why is the United Kingdom less advanced in the use of smart cards than some other Member States?

    (ii)  Is the Government looking at best practice elsewhere?

    (iii)  Is the Government reviewing the future of United Kingdom smart card projects? (see paragraph 209)

45. We recommend that the EU and the United Kingdom Government continue to encourage the development of cross-Europe e-money and e-wallet arrangements. (see paragraph 214)

46. We commend the work currently being carried out by the Directorate-General for Health and Consumer Protection (SANCO) with credit card companies to afford European customers better levels of protection similar to those enjoyed by customers under voluntary arrangements in the USA. We recommend that SANCO engage in a similar dialogue with the ISPs and urge the United Kingdom Government to do the same. (see paragraph 233)

47. We recommend that the United Kingdom Government work to clarify and develop the responsibilities of credit card companies in Internet trading, and where appropriate, collaborate with e-commerce traders who are seeking to improve consumer confidence. (see paragraph 234)

48. We believe that the approach adopted in the e-commerce Directive is the right one. It gives primacy to the Country of Origin principle while preserving the existing right for consumers to sue in their own courts where necessary. Out of court settlement of disputes should be encouraged. We recommend that the EU continue to establish its Alternative Dispute Resolution (ADR) scheme as a matter of urgency and endeavour to adhere to its target date of October 2000 for implementation. (see paragraph 255)

49. We recommend that the Government consider appointing an e-ombudsman for the United Kingdom. We recommend that the EU consider the Swedish proposal for an EU e-ombudsman. (see paragraph 256)

50. We recommend that the EU promote the establishment of a voluntary international standard in website security, a standard which carries the same weight as other similar international standards such as ISO9000. (see paragraph 258)

51. We recommend that the United Kingdom Government take advantage of the expertise which exists in certain independent monitoring organisations to address the issue of harmful content. However, we also recommend that the Government takes steps to ensure that such organisations conform to the principles of good regulation as laid down by the Cabinet Office's Better Regulation Task Force. (see paragraph 259)

52. We recommend that the United Kingdom Government lead co-ordinated action, similar to that undertaken by the US Administration, involving close liaison with industry, against hacking and "denial of service" attacks. (see paragraph 259)

53. We recommend that the United Kingdom Government conduct an investigation into the merits and demerits of an electronic identity system. (see paragraph 307)

Resources

54. We recommend that the United Kingdom Government consider combining the existing separate regulatory roles of OFTEL, ITC and the Radiocommunications Agency into a single authority. (see paragraph 316)

55. We recommend that the EU take steps to enforce its competition policy in respect of telecommunications infrastructures by ensuring that the Telecommunications Directive is fully implemented across the EU. (see paragraph 219)

56. We recommend that the EU and the United Kingdom Government promote the lessons of US venture capitalism in Europe. We note that EU heads of government endorsed the Risk Capital Action Plan at the Special Economic Summit at Lisbon (23 and 24 March 2000) but we find the deadline for implementation—2003—unambitious. We feel strongly that the United Kingdom Government should move faster to produce a comprehensive restatement of policy with the objective of creating conditions for venture capital similar to those which exist in the USA. (see paragraph 221)

57. We recommend that the United Kingdom Government identify the needs for continued training and personal e-commerce development after school, especially for those who do not immediately secure a job or take a job which does not involve e-commerce. They should then work with other groups, such as the private sector, schools and voluntary groups, to ensure that appropriate training is made available. (see paragraph 279)

58. We recommend that the United Kingdom Government treat stock options as capital and not income, and that it should also respond to the concerns about National Insurance Contributions currently levied on stock options. (see paragraph 223)

59. We recommend that the Government reflect carefully on the implications of the Communication from the Commission to the Council and European Parliament for a "Strategy to improve the operation of the VAT system within the context of the Internal Market"(see paragraph 283)

60. We recommend that the United Kingdom Government should press OECD to achieve an internationally agreed implementation of the framework for taxation of e-commerce as agreed at the 1998 Ottawa Ministerial Conference. (see paragraph 285)

61. We recommend that the Government keep under review the operation of IR35 so as not to impede the development of new e-commerce companies. (see paragraph 289)

Government as exemplar

62. We recommend that the United Kingdom Government should lead by example and that the Government should make the achievement of its e-government targets a priority. We recommend that it consider, with renewed urgency, the restructuring that will be necessary to implement its strategies and achieve its targets. We believe that greater evidence of progress is required. (see paragraph 301)

63. We recommend that the EU and the United Kingdom Government put in place mechanisms for cross-agency project funding and seek advice from HM Treasury on how to minimise obstructions. (see paragraph 303)

64. We recommend that the United Kingdom Government ensure that ministerial structures provide sufficient focus and oversight of Internet activities at Cabinet level. (see paragraph 315)

65. We recommend that the Government propose to the Council of Ministers the rationalisation of the Industry, Information and Telecommunications Councils by creating a Competitiveness Council. (see paragraph 318)

66. We recommend the European Commission promote an awareness of the importance of, and improve the mechanisms for, consulting industry, particularly SMEs and "new economy" entrepreneurs, and consumers whenever legislation is to be drafted which bears on e-commerce. We recommend the Government ensure that all United Kingdom Departments accept the need for extensive consultation with industry when legislation which could affect e-commerce is being considered. (see paragraph 341)

67. We recommend that the EU provide improved support for SMEs in respect of e-commerce cross-border trading, by providing clear and easily accessible information especially on the Internet on trading conditions and consumer protection regulations throughout the Union. (see paragraph 229)

68. We recommend that the United Kingdom Government and the EU take steps to change organisational culture and attitudes within governmental departments and within the institutions of the EU. Options considered should include the following: making Internet use part of everyday routine, incorporating Internet literacy in reward and review systems—possibly adopting a system similar to the French "ideas' portal"—targeting Internet literacy in management development programmes. (see paragraph 346)

Monitoring

69. We recommend that the United Kingdom Government monitor the effectiveness of the DTI's support provisions for SMEs. (see paragraph 230)

70. We recommend that all police forces develop their capabilities for countering Internet-based crime and develop a close association with industry in order to take advantage of emerging technology. We recommend that the EU and the United Kingdom Government consider how to collect and analyse statistics relating to the perpetration of Internet-based crime. (see paragraph 262)

71. We recommend that both the EU and the United Kingdom Government should monitor, on a continuous basis, the impact of e-commerce on the digital divide in order to be able to respond quickly and flexibly to the needs for policy adjustments if and when they arise. (see paragraph 274)

72. We recommend that the EU and the United Kingdom Government consider whether the official statistics they collect provide a satisfactory means to measure the impact of e-commerce. They should consider whether current statistical definitions adequately reflect the true dimensions of the e-economy. (see paragraph 328)

73. We recommend that the EU and the United Kingdom Government establish medium—and long-term planning processes to assess the impact of the radical changes expected as a result of the "Information Society"—to cover economic variables, jobs, skills and education. (see paragraph 330)

74. We recommend that the EU perform a valuable role in collecting and disseminating e-commerce development and practice internationally, especially in relation to other large trading groups, such as the US and the Far East. One way to do this would be by promoting e-commerce twinning arrangements between local communities. We further recommend that the Government should provide a service to United Kingdom industry by benchmarking e-commerce practice in other nation states across the world. (see paragraph 334)


 
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