Memorandum by BT plc
SUMMARY OF BT RESPONSE
Use and acceptance of e-Commerce are increasing
rapidly and inexorably. Growth is controlled by a complex mix
of "environmental" factors and is not simply dependent
on the costs of telecommunications links and access to Internet
Service Providers. The UK has now reached the point where the
momentum for deployment of e-commerce, business to business and
business to consumer, is unstoppable.
Little action is needed from government at EU
or national level once basic enabling legislation covering electronic
signatures, e-money, and liability is in place. These provisions
should be consistent with global developments. E-commerce intermediaries
must not be held liable for material passing through their systems
and must not have burdensome monitoring/control obligations placed
on them. Maximum use should be made of the internal market principle
of "country of origin" regulation coupled with mutual
recognition of licensing/controls. The pace of change is so rapid
that any more prescriptive interventions risk being counter-productive.
Effective use of e-commerce by the EU and national
governments has great potential to stimulate use and acceptance.
E-commerce is, however, incapable of providing quick and easy
solutions to longstanding issues of social exclusion. The attainment
of a "Knowledge Economy" is not dependent simply on
access to communication tools but also depends on heavy investment
in basic education and training.
Inconsistent, or unduly prescriptive, policies
at national or EU level will create uncertainties and costs, deterring
expansion of e-commerce outside national or EU boundaries. E-commerce
suppliers and consumers must be able to make binding choices of
law and forum, other than that of a consumer's domicile.
There is an ongoing need for close policy co-ordination
within the EU institutions and at member state level as e-commerce
embraces an ever widening set of traditional responsibilities
from teaching to transport to health-care.
This memorandum responds to the questions set
out in the Committee's letter to the company. The questions are
considered in the order asked. A background paper is also attached.
What needs to be done to create confidence and
1.1 Demand for e-commerce services is rapidly
expanding in the UK, particularly in the business-to-business
sector, which represents over 80 per cent of e-commerce revenues.
The 1999 Goldman Sachs report "B2B: 2B or not 2B", notes
that a key determinant in the take-up of business to business
(B2B) strategies is the position in the adoption lifecycle.
1.2 For businesses and consumers the life-cycle
has now reached the stage of the "early majority" and
rapid growth is assured as market forces operate. Detailed prescriptive
intervention by government, at EU or Member State level, at this
stage, risks slowing growth by increasing regulatory risk, removing
investment incentives, and distorting competition.
1.3 This factor is highly significant and
account should be taken of the lessons of the FCC in the US. A
July 1999 paper entitled "The FCC and the unregulation of
provides the following insights which are applicable to e-commerce:
"Fundamental lessons learned from the Commission's thirty
year deregulatory approach towards data networks include:
Do not automatically impose legacy
regulations on new technologies,
When Internet-based services replace
traditional legacy services, begin to deregulate the old instead
of regulate the new; and
Maintain a watchful eye to ensure
that anti-competitive behaviour does not develop, do not regulate
based on the perception of potential future bottlenecks, and be
careful that any regulatory responses are the minimum necessary
and outweigh the costs of regulation."
1.4 Factors that may have had a braking
effect on the take-up by businesses and consumers of e-commerce
in the UK include:
lack of skills and knowledge about
lack of a common understanding about
the opportunities and (for businesses) the threats presented by
concerns about privacy and governmental
concerns about an effective legal
framework to deal with issues such as electronic money, intellectual
property rights, security, digital signatures, consumer protection,
and taxation; and
PC costs (the report, entitled "Moving
into the Information Age: An International Benchmarking Study",
noted the cost of a PC as a major barrier to take-up in the UK).
perceptions of Internet access prices
higher than they actually are.
1.5 A range of solutions already exist which
could help address some of the issues around security, authentication
and verification which appear to be contributing to the slower
take-up of e-commerce in the UK. Organisations such as the Alliance
for Electronic Business (AEB) provide fora for discussion between
government and the private sector.
1.6 It should not be assumed, therefore,
that looking ahead there will be a high level of distrust or lack
of interest in the utilisation of e-commerce in the UK. Neither
should the UK and Europe's later take-up, by comparison with the
USA, of some aspects of e-commerce be seen as an indication of
such a situation.
1.7 BT supports the various initiatives
which have been introduced or announced by the UK's Office of
the E-Envoy under Alex Allan. These link well with PIU reports
such as "Wiring It Up" and "Adding It Up",
published January 2000, which address cross-government issues
in order to modernise the delivery of government services to UK
citizens and businesses. The pro-active thrust of the NAO's report
"Government on the Web" (12/99) is also relevant.
1.8 A more detailed paper considering issues
relevant to the adoption of e-commerce is attached.
Does the European Commission's draft Action Plan
"e-Europe: An Information Society for All" offer a realistic
means of promoting e-commerce in the UK?
2.1 The Commission's draft Action Plan is
a valuable top-level summary of the issues, which articulates
a clear vision for the future, in particular where it highlights
a number of "enabling" areas that are appropriate for
government actionsuch as teacher training, spectrum allocation,
and Internet access to government processes.
2.2 BT supports the majority of initiatives
outlined in the Commission's "e-Europe" document and
has, for example, already taken steps to facilitate Internet access
for schools, and develop services for the disabled. BT is also
working to support the NHS in achieving the strategic goals expressed
in its seven year strategy document, which reflect the thinking
evident in the "Healthcare online" section of the "e-Europe"
document. Examples of healthcare initiatives with which BT is
involved, include Clinical Governance, Electronic Prescribing,
and the National Electronic Library for Health.
2.3 One of the objectives of the "eEurope"
Communication is that the Council and the European Parliament
should make every effort to ensure that the remaining e-commerce
related directives are in place by the end of 2000. BT has a number
of concerns about these proposed directives:
2.3.1 The proposed Copyright Directive and
the proposed e-Commerce Directive are amongst the most critical
measures currently under consideration in creating the right framework
for e-Commerce and the growth of the knowledge based society,
with all of its potential benefits for job creation in the European
Union. The protection of copyright on-line is essential so that
wide dissemination of content is possible without compromising
the rights of suppliers or imposing undue policing burdens on
service providers. The issue of liability for infringing material
disseminated over the Internet has to be addressed in a pragmatic
and efficient way, which stimulates industry co-operation and
the development of codes of conduct where possible.
2.3.2 Realising the full potential of e-commerce
in the EU is crucially dependent on SMEs entering the market on
a widespread basis. The present proposals for amendment of the
Brussels and Rome Conventions are confusing and could hamper the
development of e-commerce in Europe. If the proposed text were
to enter into force, the overwhelming majority of all e-commerce
disputes between a supplier and consumer would take place in the
consumers' home courts and apply the consumers' home laws. It
is extremely important that government at EU or national level
does not limit consumers' freedom to agree contractual jurisdiction
and applicable law at the time of making a transaction. The widest
choice of goods and prices may only be available to consumers
willing to accept "country of origin" jurisdiction and
applicable lawbut the choice should be allowed them and
they may if they wish choose to patronise only merchants offering
"country of destination" rules. BT supports the attempts
being made, in the European Parliament to allow e-merchants to
include legally valid statements that "country of origin"
rules apply to transactions on their sites.
2.4 Policy makers need to consider the impact
of all such proposals on the prospects for an entrepreneurial
economy. The EU legal framework for e-commerce should be adopted
as soon as possible in order to give certainty to businesses and
consumers. Naturally the emphasis should be on self regulation
and the encouragement of best business practice, rather than prescriptive
models which anticipate particular technical solutions and would
inhibit the development of e-commerce. Detailed recommendations,
in such a fast changing area, could risk distorting the competitive
2.5 Excessive prescriptive intervention
is a particular risk in the telecommunications arena where markets
are, or are rapidly becoming, competitive.
2.6 BT has been working to develop proposals
for cheaper Internet access in the UK based on the "Surftime"
approach and has announced a new package which will make the UK
a very competitive location for Internet access.
2.7 BT has given an undertaking to work
with Oftel and industry to introduce LLU by 1 July 2001. In view
of the agreement of the European Council at the Lisbon Summit
to work towards introducing greater competition in local access
networks before the end of 2000, BT is currently working with
Oftel on the relevant provisioning, support, and maintenance issues,
and implementing technical and customer trials.
2.8 The price for unbundled local loops
will need to give a fair return to the owner and must avoid deterring
investment in new local infrastructureeither radio or cableand
should discourage undue focus on high value customers.
2.9 Broadband access is only now beginning
to assume a high profile in the minds of consumers and businesses,
and BT's own plans for ADSL roll out will provide the kind of
quality service that its customers will be expecting from a broadband
2.10 BT recognises the strong desire of
UK policy-makers to implement cheaper, broadband access ever more
quickly and believes that this can be best achieved through vigorously
competitive infrastructure markets. It is relevant to note that
over 50 per cent of the country's homes already have three potential
broadband service channels; namely broadband service over BT's
copper wires, the CATV company's copper wires; and the CATV company's
coaxial cable. This figure will rise to approximately 70 per cent
when franchise areas are fully built.
2.11 Local access is, of course, only part
of the Internet picture and BT is investing in a high capacity
Internet backbone network which will ensure that the core is able
to transport information at the speed of the fastest new local
2.12 Leased line tariffs are one of a number
of important issues. The UK leased line market is highly competitive;
many prices are at similar levels to the US and are continuing
to fall further. In Europe, prices have to be cost-oriented and
the UK is one of the few countries where the incumbent can clearly
demonstrate that its tariffs meet this requirement. A recent report
prepared by Fischer & Lorenz for the European Commission shows
that UK charges for international leased circuits are equal to
or significantly lower than those in the USA and are around 80
per cent of the OECD average.
2.13 The idea of an eu top level domain
has been conceived as encouraging European businesses and consumers
to go on-line. It remains to be seen how effective this will be
in the development of European e-commerce through its addition
of an extra option beyond existing national and global domain
2.14 Perhaps the most important requirement
for European policy is that it not foreclose any commercial options.
The overall understanding of e-commerce futures is still very
weak and there is no clear idea of where or how wealth creation
will take place. Companies are seeking to develop their strategies
and need maximum freedom to do so.
2.15 Smart card development will benefit
from the priority suggested in the "e-Europe" document
but work must be based on international standards and burdensome
infrastructure obligations should not be placed on industry.
2.16 The EU should not be unduly concerned
at this stage about differences from the USA as long as the environment
is sufficiently nurturing. Although there may be "first mover"
advantages, these will last less long in the Internet world and
may be compensated by "next generation" effects where
later entrants gain the benefits of lower cost higher performance
Will codes of conduct and co-regulation provide
sufficient protection? Is there a case for intervention by national
governments and the EU?
3.1 There is now a common appreciation in
industry and consumer bodies that the way to achieve effective
and timely protection is through codes of conduct and co-regulation.
Broad introduction and take-up of e-commerce is entirely dependent
on the mutual confidence of consumers and providers. Codes of
conduct and co-regulation constitute the practical means to deliver
protection because they are created as a result of direct, first-hand
practical experience of those involved in e-commerce (in any capacity)
and are inherently amenable to adaptation and updating in time-scales
that can keep pace with the rapid rate of developments.
3.2 BT, therefore, believes that codes of
conduct and co-regulation will indeed provide sufficient protection.
It is strongly in industry's interest to build consumer confidence
(consumers now appreciate this too) and evidence in other areas
(eg travel, banking, etc) suggests it will find means to do so.
On-line dispute resolution processes are being developed to meet
the undoubted challenges created by an explosion in cross-border
and paperless trade (at all levels of trade) and there are numerous
issues to be solvedincluding affordable document translation
procedures, and availability of trained e-arbitrators.
3.3 Government's valuable role is as a "backstop"
and should be particularly directed to intervention where primary
legislation is necessary, eg to enable electronic transactions
to be legally valid; to address taxation and customs and excise
issues, which are exclusively within government's purview; to
active participation in trans-national harmonisation initiatives
(in particular to counter protectionism); to ensure initiatives
such as broader availability of joint liability protection from
credit card companies; and easy access for consumers to the information
and means to obtain cross border redress in national bodies such
as the OFT and its equivalents abroad and through the formal legal
Do the institutions of national governments, on
the one hand, and the European Commission, the Council of Ministers
and the European Parliament, on the other, function with sufficient
flexibility and coherence to promote the EU's objectives in the
field of e-commerce?
4.1 Co-ordination is of course important
as e-commerce initiatives promulgated by the Single Market directorate
also affect the work of the Consumer Protection, Industry/Enterprise,
Justice and Home Affairs, and Information Society Directorates
General. Drivers for many initiatives impacting on e-commerce
have arisen outside the e-commerce field making co-ordination
4.2 There is an increasing number of new
co-ordination challenges as, for example, the e-Europe initiative
seeks to embrace transport and health issues, and the question
of Internet taxes is being re-examined globally.
4.3 The level of generality required in
an EU Directive (for reasons of subsidiarity, compromise wording,
and the need to cater for different legal frameworks) may prevent
the best solution emerging for enabling legislation and may result
in differing interpretations and transpositions at Member State
level. An example is the issue of liability of intermediaries
for copyright infringementwhere the US Digital Millennium
Copyright Act has additional liability "safe harbours"
for telcos and ISPs and specifies detailed procedures which in
the EU are to be left to evolve through codes of practice and
ongoing court actions. This evolution will leave the e-commerce
industry with a level of uncertainty for some time to come.
4.4 The Commission is right to recognise
that the traditional legislative process is too lengthy and inflexible
to produce timely legislation for Internet and e-commercean
environment where change occurs at least four times faster than
has been the norm in the past. This argues for a hands-off approach
once basic enabling legislation is in place.
4.5 Member State governments have also faced
challenges of internal communication and co-ordination. BT welcomes
moves towards greater openness such as the current DTI consultation
on the Brussels Regulation.
Should existing EU institutional structures be
changed, or new ones created, to improve policy development and
5.1 It is very welcome that President Prodi
has given a political lead, through the eEurope initiative, to
completing the EU e-commerce legislative framework by the end
of this year. The challenge will be to ensure that the strength
of the top level commitment to creating an e-commerce friendly
legislative environment is sufficient to ensure that legitimate
sectoral interests are accommodated without losing sight of overall
5.2 E-commerce and use of the Internet are
inherently global/borderless activities. The EU needs to ensure
that its policies are fit for a global framework and must thus
avoid actions which will place e-merchants within the EU at a
disadvantage to their competitors elsewhere in the world.
5.3 BT agrees with proposals for EU level
co-ordination to ensure consistent application of rules across
Member States, and to prevent fragmentation of the single market.
So far as the Competition Directorate's proposals for Modernisation
of the system for implementation of competition rules is concerned
BT welcomes the Commission's assurances that such a change should
not result in greater legal uncertainty for companies or dissimilar
treatments across the EU of fundamentally identical agreements.
How can structural change be brought about fast
enough to accommodate to the growth of e-commerce?
6.1 It seems unlikely that EU institutional
structural change will be driven primarily with e-commerce considerations
in mind. This makes it all the more important that there is close
co-ordination and co-operation between all those areas of the
Commission and also the Council and Parliament which are concerned
with initiatives in this area. In an era of rapid change, institutions
at every level are challenged by the rapid pace of technological
development and the difficulty of ensuring that decision making
is based upon up to date information about what is happening in
the market place. This is another reason for proceeding cautiously
when it comes to new legislation or regulation and for ensuring
that it is technology neutral.
1 Working paper issued by, but not necessarily on
behalf of, the FCC. Back
Spectrum Strategy Consultants report (1998), commissioned by
the DTI. Back