Examination of Witness (Questions 720
THURSDAY 20 APRIL 2000
720. The other one first but run into mine please.
A. Yes, if you could remind me what the question
Lord Woolmer of Leeds
721. This is almost the horizontal integration
of purchasing consortia.
A. The e-markets, yes. What has happened is
that there are a number of consortia that are not happy with the
prospect of Ariba being in centralised control of procurement
so what they have done is create market bases of their own. In
the electrical power industry in the United Statesand this
was announced within the past ten daysseveral of the largest
producers of power have gotten together to create a power exchange
so they can sell off excess power to each other and exchange and
control through an electronic market place. They will not go through
any other channel. In the United States we constantly have to
be worried about anti-trust arrangements so the smart ones creating
these new markets are very careful and scrupulously fair in allowing
all companies of all sizes to opt in and participate on an equal
basis. They can even subsidise the costs to smaller companies
to ensure they have their participation in these exchanges. What
is going to happen, I believe, in each industry is that various
groups will be scrambling to create a critical mass. Once they
have a critical mass it will act as such a powerful gravitational
attracter that it will be impractical for anyone to compete with
them. To keep it anti-monopolistic they have to have fair practices
that will pass muster with the Justice Department. The industries
are falling one by one. The chemical industry has not yet fallen.
One can purchase chemicals on a vertical market basis. It looks
as though the electrical power market has fallen. When I say "fallen",
not in a bad way but such that it is impractical for anyone else
to set up a power exchange because the five largest producers
of power in the country will not participate in it. This is without
conspiracy. They have no contractual obligation not to trade on
another exchange, they just will not do it. Bandwidths and exchange
arrangements. This is not a dominant player in that right now
but there are six or seven bandwidth exchanges I know of. They
are very rapidly moving things. I am aware of efforts by some
companies to at least dream of having an exchange which they do
not want to control for the purpose of stifling competition. It
is just that they do not want someone else outside the industry
benefiting from what they ought to be benefiting from. If some
outsider shows up and creates a telecommunications exchange, why
is the profit going to him and why are the transaction fees going
to him? Why are they not going to us? They have the power to do
that. I have not seen any ill-effects from that yet.
722. Is there anything we can do about monster
A. If we can delineate the evils maybe we can
deal with the evils one by one. The chief evil of course is monopoly
and the way the United States deals with that, as you can see
from Mr Gates' present difficulty (and many people will write
books on what he did wrong there to allow that to happen) is that
as long as the enterprise is perceived as a benefit and is not
preventing others from either being initiated or getting their
fair share of business. I am not sure we need to do anything about
these huge global companies. If visible difficulties appear then
we will do something about it.
Chairman: We rather sense that there may not
be that much done about Microsoft in the States. A little bit
maybe but not too much because the harm is not so great at the
723. Also by the time we get round to doing
it the whole target will have passed on.
A. It is difficult for me to speculate. It was
an issue of great interest to see how the anti-trust suit had
gone. The judge made it clear early on that he was going to rule
against Microsoft and from the strident words of his early opinions
I believe when it is left up to him there will be some very severe
provisions that Microsoft would rather have avoided. I do not
believe he will order the break up of Microsoft. However, he will
cause it to refrain from engaging in all kinds of practices that
the industry has been complaining about for a long time which
likely are monopolist.
724. Dr Shamos, it has been a fascinating exchange
for us. I hope you have enjoyed it as well.
A. I certainly have.
725. Are there any final points you want to
leave with us?
A. There is one point while we are still on
the record. I said before that the Internet is a great medium
for exchange of information so in order to promote e-commerce
and other objectives and e-Europe, including use by students and
educators, we need to be able to move information not available
on to the Internet freely on to the Internet. One area that causes
great difficulty is the area of copyright. We have a project at
Carnegie Mellon University called the Universal Library where
we take all the published works of man, put them on the Internet
and make them freely available to the public. Whether this requires
the payment of royalties to copyright owners is a separate question.
It needs to be free to the public. How it is paid for needs to
be something else. In many cases we are stymied because even though
we have a sincere desire to pay royalties to the copyright holder,
in most countries the copyright holder is free to refuse to allow
it to be digitised and put on the Internet. He controls his work.
In Japan they have an extensive scheme of compulsory licences,
which is absent in the United States and most western countries,
in which if I have an educational purpose for a particular author's
material the author cannot prevent me from using it and putting
it on the Internet but the office of the Japanese Government will
set a fair royalty I am required to pay to the author for that
usage whether the author wants it or not. He does not have to
take the money but he cannot refuse the licence. The only way
we are going to have the world make effective use of digitised
information is through compulsory licences which means those who
want to digitise them and make them available are able to do so,
especially with the lengthening of the term of copyright. In the
United States the maximum copyright term is 120 years. That is
a precious long time when you consider the timescale of e-commerce.
726. That is an interesting point and we will
have a look at that in our considerations. It is interesting that
whilst you have been talking to us, down below in the Chamber
(to which I will be taking you) we have a debate taking place
on the Freedom of Information Bill to extend individuals' rights
to access to governmental documents. There is a big debate taking
place about the extent to which that freedom should be given to
A. That will be interesting, thank you.
727. In some quarters it is known as the Freedom
of Secrecy Bill!
A. Another issue we did not have a chance to
touch on but there is a lot there too.
Chairman: Thank you very much indeed.