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. THE OVUM SURVEY
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.
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
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.
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 monthduring 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 citiesNynex 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
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)
C. FACTORS IN
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
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
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 channelthis
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
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
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".