Overall Conclusions

  (a)  It is important that, when considering how best the Government should respond to the growth of electronic commerce, potential advantages and disadvantages of the phenomenon are kept in perspective. Policy makers must be careful not to be carried away by the hyperbole and exaggeration which has, at times, come to characterise the debate on the future development of electronic commerce. Nor should their focus stray from those aspects of society which are unlikely to be touched by electronic commerce or which may be in some way damaged by it. Electronic commerce must not be regarded as a panacea for every difficult issue facing politicians today nor as the issue which most firms and individuals will believe to be most relevant to their daily lives. Nevertheless, DTI, perhaps more than any other Government department, must increasingly seek to promote the positive benefits of electronic commerce, particularly in terms of its potential impact on UK competitiveness, and at the same time seek to alleviate its drawbacks. In considering how best to respond to the new challenges posed by electronic commerce, the Government must pay particular attention to those areas from which it should hold back from intervening (paragraphs 9, 10 and 20).

(b)  Electronic commerce is eroding national, and regional, boundaries in many different policy areas. It has the potential to change relationships within Government and between Government and society at large as well as to alter many public policy perspectives (paragraphs 21 and 100).

Measuring Electronic Commerce

  (c)  We recommend that the Government consider how electronic commerce should be defined, in order to facilitate comparison between the growth of electronic commerce in the UK and abroad. We recommend that the Government Statistical Service consider how best to develop new statistical measures relating to electronic commerce and to adopt its existing measures to the phenomenon (paragraphs 11 and 13).

(d)  DTI are to be congratulated for the efforts they have made to ensure that the performance of UK businesses, in terms of information and communications technology usage, can be measured alongside that of other major economies. The results show that the UK is in a strong position to be at the forefront of the development of electronic commerce. There can be no room for complacency, however, and clear problems have been shown up. Very small businesses and some 'traditional' industrial sectors have not kept pace with their international competitors in this area and this may have a detrimental impact on the competitiveness of the UK economy in the years ahead. Government policy must focus on these firms and on those regions in which take-up of new information and communications technologies has been sluggish. The Regional Development Agencies and devolved bodies may have an important role to play in this regard. Numerical indicators, for instance of the number of firms on-line, are not necessarily the best or only measures of the quality of the UK's environment for electronic trading. We suggest that the UK's legislative and regulatory framework, which the Information Age Partnership highlighted as an area of relative strength, should be taken into account when measuring the merits of that environment. The conclusions and recommendations we make in this Report, and those from our previous Report on electronic commerce, are intended to strengthen that framework and to help the Government achieve its ambitious aim for the UK to become the best environment for electronic trading by 2002 (paragraphs 18 and 19).

Structure of Government

  (e)  We do not think that the creation of a new unit or division within Government exclusively concerned with electronic commerce would be a useful innovation, or something welcomed by industry. Nor do we believe that it would necessarily be helpful at this stage to tinker with the division of responsibilities for electronic commerce policy between departments and agencies or to create new cross-departmental structures. Getting the policies right is more important (paragraph 25).

(f)  We note the work commenced by OFTEL to tackle the electronic commerce policy agenda, including issues well beyond those relating to authentication and encryption for which the Director General of Telecommunications might soon have statutory responsibility. OFTEL's electronic commerce team must quickly establish a cooperative relationship with the e-Envoy, when appointed, in order to ensure that their respective remits are appropriately coordinated (paragraph 28).

(g)  We recommend that the Director General of Telecommunications be given a specific duty to facilitate electronic commerce, at the earliest opportunity. We would expect the Director General, in response, to publish a statement of how he intends to comply with his new duty (paragraph 31).

The e-Envoy

  (h)  We would welcome the appointment of an e-Envoy. The e-Envoy could be an effective ambassador for electronic commerce in the UK, an international ambassador for the UK as a centre of digital excellence and an advocate within Government for the policies and initiatives required for the UK to become the world's best environment for electronic trading. The appointment of a high-calibre, dynamic individual as e-Envoy could represent a high profile commitment by Government to electronic commerce, the like of which has so far been lacking. Perceptions of the independence from Government of the e-Envoy are likely to be enhanced if it is made clear that the post-holder is not a civil servant. In order to be effective, the e-Envoy must not be seen within Government as a DTI official, defending the department's line on issues which cut across departmental boundaries.

(i)   It is vital that the Government, in consultation with the post-holder, devises and publishes the objectives of the e-Envoy and the resources which will be available to the e-Envoy to achieve those objectives. Progress made by the e-Envoy towards the achievement of his or her objectives should be assessed by means of measurable targets, drawn up by the Government. We would expect the e-Envoy to publish regular reports to Parliament detailing progress made towards the achievement of his or her objectives, difficulties and obstacles met, and future targets set (paragraphs 32, 33, 34 and 36).

(j)  Ministers must not seek to burden the e-Envoy with a host of unduly ambitious and unrealistic objectives and responsibilities. The role of e-Envoy will be discredited if it is seen to combine responsibility without power. Ministers must define the policy framework within which the e-Envoy will work, rather than deflect difficult decisions and thorny issues towards a prominent but unempowered official (paragraph 35).

(k)  We see merit in the appointment of the proposed Government/industry forum on encryption and believe that it is essential that the e-Envoy participate in it. (Paragraph 37).

(l)  The delay in appointing the e-Envoy, as yet unexplained, has not served to demonstrate the strength of the Government's commitment to the role or to the need for urgent policy initiatives on electronic commerce. It would seem to suggest, instead, that electronic commerce was not a priority of Government. We recommend that this impression be dispelled by an appointment at the earliest opportunity, so that the successful candidate can start making up for lost time. (Paragraph 38).

Using the Internet: Infrastructure

  (m)  We agree with OFTEL that BT's monopoly ownership and control of the local loop could restrict the roll-out of vital new high-bandwidth services. Although OFTEL has no role to play in championing the development of particular technologies — such as DSL — we believe that it must be proactive in ensuring that competitive forces exert their influence throughout the UK's telecommunications infrastructure so that residential consumers and small and medium sized enterprises can benefit from a choice of high-bandwidth technologies from different operators (paragraph 46).

(n)  Electronic commerce offers the opportunity to unlock the potential of the rural economy. The Government must ensure that this opportunity is exploited, not wasted due to deficiencies in the nation's telecommunications infrastructure, by ensuring that there exists effective competition in the supply of high-bandwidth services to all users, not just those in urban or suburban areas (paragraph 47).

Using the Internet: Cost

  (o)  For most residential customers and SMEs using the internet local telephone charges are the marginal cost of going on-line and, as such, are a key influence over the extent to which such consumers and enterprises engage in electronic commerce. The possibility of receiving a substantial telephone bill as a result of regular use of the internet, and the widespread perception of this occurring, seem to us to be obvious disincentives to greater use of the internet and, therefore, participation in electronic commerce (paragraphs 51 and 58).

(p)  The more widespread availability to residential customers of unmetered local telephone calls would give electronic commerce in the UK a substantial boost. We judge that OFTEL has been unduly cautious in emphasising the possible disadvantages of unmetered local calls, at the expense of the potential benefits. In line with our recommendation that the Director General of Telecommunication be given a duty to facilitate electronic commerce, we recommend that OFTEL investigates what, if any, regulatory actions are required to encourage innovative tariff packages being offered to internet users throughout the UK; and devote resources to studying and publicising the comparative costs of internet access packages, in order to dispel the seemingly widespread perception that anything more than a cursory use of the internet would prove prohibitively expensive (paragraph 59).

(q)   We welcome OFTEL's recognition that consumers need full and clear information about the tariffs charged by different telephone operators in order for them to take full advantage of the opportunities offered by competition in the telecommunications market. Urgent progress in this area is now required (paragraph 53).

(r)  Without high-bandwidth services, in particular leased lines, UK businesses will be unable to offer effective and innovative electronic services, resulting in their competitive advantages being ceded to foreign rivals. Ensuring that UK firms have a choice of competitively-priced high-quality high-bandwidth services must be an urgent priority for OFTEL. We support the Government in its efforts to focus the attention of the European Commission on the need to ensure that European leased lines prices are competitive with those offered in the US (paragraphs 64 and 65).

(s)  We welcome the work being undertaken by DTI to compare the prices of consumer goods in the UK and elsewhere and hope that it will be followed by swift action to ensure that British consumers fully benefit from competition in the computer hardware market (paragraph 66).

Social Exclusion Issues

  (t)  Personal computers, the internet and electronic commerce should not be seen as exclusively playthings of the middle classes. We want to see everyone in society — rich or poor, young or old — able to take part in and benefit from electronic commerce. It will be a measure of the Government's success if, in five years time, the profile of the average internet user more closely resembles the population as a whole rather than being skewed towards young, university-educated men. Aside from considerations of social justice and equity, widespread take-up of electronic commerce could provide immense benefits to British industry as well as cost savings for Government. We are of the impression that the Government shares our objective, but we think some more vocal advocacy and more dynamic policies, particularly in relation to socially disadvantaged groups, are called for. We recommend that Ministers, and the e-Envoy once appointed, give a lead in democratising and demystifying electronic commerce (paragraph 75).

(u)  The Government should examine how consumers without bank accounts can be encouraged to participate in electronic commerce (paragraph 69).

(v)  One of the burgeoning number of units within DTI might be well placed to research the implications for UK employment of the growth of electronic commerce, and we recommend that such research is carried out (paragraph 76).

(w)  We recommend that the Government begin a national debate about how the universal service concept can be applied to electronic commerce (paragraph 80).

Business Support

  (x)  There will need to be a step change in the attitude of very small firms to the use of external communications technologies in order for the UK to catch up with the best of the G7 in this area. Although it is not easy to tell how many firms are currently buying and selling on-line, the target of having 1 million small and medium sized enterprises buying and selling on-line by 2002 will be significantly more difficult to achieve than that of having 1 million such firms regularly using information and communications technology by that date (paragraph 82).

(y)  There is a danger that the projects outlined in the Competitiveness White Paper are not capable of making a significant contribution towards the achievement of the ambitious goals set out by the Government in relation to the participation of small and medium sized enterprises in electronic commerce. Too many of the initiatives seem ill-thought out and lacking in detail — promising on paper, but, so far, short of substance. There is a worrying lack of attention to the coordination of these projects with existing initiatives, the proposed Small Business Service, new regional organisations and the devolved Assemblies. We recommend that DTI publish details of progress made in implementing those initiatives relating to electronic commerce launched in the Competitiveness White Paper, how those initiatives are to be coordinated with regional and national bodies including the proposed Small Business Service, and how they will be evaluated in further Implementation Plans (paragraph 86).

(z)  Small businesses remain unpersuaded of the usefulness of Business Link services, including Local Support Centres, as providers of advice on electronic commerce. We are not convinced that it is desirable for the Government to sponsor the provision of advice on information and communications technology to firms through a hotch-potch of seemingly unrelated organisations. A greater degree of national consistency is required. We recommend that steps are taken to improve the consistency and coordination of the electronic commerce support services offered to small and medium sized enterprises, including clarification of the relationship between Local Support Centres and the proposed Small Business Service (paragraphs 89 and 90).

(aa)  We welcome the increasing use made of the internet to provide business support services. DTI should ensure that its on-line services are coordinated with the business support services it sponsors off-line. Particularly given the frequency with which new laws refers back to older pieces of legislation, we recommend that the Government consider placing all primary and secondary legislation currently in force on-line (paragraphs 91 and 92).

Eectronic Government

  (bb)  CITU's analysis shows that most Departments already provide more than 25% of their services by volume electronically. The 2002 target is therefore not particularly challenging, although the 2008 target might prove a challenge to some departments. However, making a service available electronically is no guarantee that anyone will wish to use it in that way; it is essential that the electronic Government agenda is driven by the needs and requirements of users, not by what Government officials assume these to be; and high-profile failures to implement electronic Government projects send out the wrong signals to the private sector about the potential attractions and benefits of electronic commerce (paragraph 95).

(cc)  We are concerned that the electronic Government agenda is characterised by hyperbole, over-optimism about the capabilities of management to implement novel technological systems on a large scale, and repeated failures to learn from past mistakes. There is an urgent need for a hard-headed assessment, across Government, of what electronic services are required by users and how these best can be delivered and financed. However desirable and convenient they may be in theory, ambitious cross-departmental projects and "one-stop-shops" are of no use to man nor beast unless they can be delivered on time, in budget, and in full working order. The current plague of costly, late and untested electronic Government projects must be tackled before the situation worsens (paragraph 96).

(dd)  Care must be taken to ensure that those who cannot use new technologies, or those who, for whatever reasons, choose not to do so, are not discriminated against because of the rush to embrace electronic commerce (paragraph 97).

(ee)  DTI should seek to ensure that its websites remain up-to-date, well organised and operative in order so that they become an increasingly important means of disseminating information and facilitating contact with the public. (Paragraph 99).

Taxation

  (ff)  We welcome the Government's indication that it will play an active role in the international efforts to safeguard national taxation revenues from a proliferation of low-tax or tax-free internet gambling facilities (paragraph 104).

(gg)  The world's major economies broadly agree on the principles which should underpin the taxation of electronic commerce. Rapid progress in reaching agreement on how the international tax system should be adjusted to take account of electronic commerce is unlikely, however. The issues are not only complicated but, especially in relation to sales taxes, solutions are hoped for rather than expected to be found. There is also a danger that the broad principles which it is agreed should underpin the taxation of electronic commerce might be undermined by compromises and agreements reached on issues which, although minor in themselves, have unintended and unwelcome cumulative effects. The slow pace of policy development might prove advantageous, in that it could ensure any agreement reached is not overtaken by technological developments or unforeseen consumer trends. We would welcome frequent updates from the UK tax authorities on progress made on reaching international agreements in this area. (Paragraph 106).

Intellectual Property Rights

  (hh)  We welcome the Government's commitment to ensuring that a "fair balance is achieved between rights holders and users": once that has been achieved at European level it must be swiftly transposed into UK law in order to clarify the present legal position in several vital areas. We welcome the swift progress made in resolving tensions between the EU and US concerning the allocation of domain names (paragraphs 110 and 114).

Consumer Protection

  (ii)  In many respects, transactions which make use of a computer are no different from mail-order or telephone transactions. Electronic commerce transactions, although often carried out in a consumer's home or work place, might have the same legal status as transactions made abroad, for instance when a consumer is on holiday, as a result of the implementation of the draft EU Legal Aspects of Electronic Commerce Directive. It is vital that, when buying on the internet, consumers are made fully aware of the jurisdiction under which the transaction is taking place. The development of a single EU electronic commerce market is likely to increase pressure for the harmonisation of consumer protection legislation. Such harmonisation must not involve any reduction in the level of protection currently offered to consumers by UK legislation (paragraph 119).

(jj)  We recommend that, if any court was to decide that section 75 of the Consumer Credit Act 1974 did not apply to overseas transactions, then DTI speedily bring forward legislation to fill the gap (paragraph 123).

(kk)  International agreement is essential to deal both with sharp practices and the legal questions of consumer protection and redress arising from electronic commerce. Even at EU level, agreement on how to deal with these question has not been reached and the situation is confused. This may not yet have hindered the development of electronic commerce, which has, so far, been focused mostly on relatively simple goods, such as books and CDs, which might rarely give rise to disputes between buyer and vendor. Electronic trade in more complex products is more likely to be deterred by uncertainties as to what protection exists for consumers when things go wrong. At the very least, consumers need to know what rights they have when they engage in on-line trade, and how those rights can be exercised. We would expect DTI's forthcoming consumer White Paper to deal with these issues (paragraph 124).

Trade Issues

  (ll)  Neutrality between trade carried out on-line and off-line should be the key principle underpinning any future consideration of the relationship between electronic commerce and international trade rules (paragraph 126).

(mm)  The potential benefits to consumers of buying cheaper goods from overseas using the internet might be lost if the duties levied and procedures followed by customs authorities fail to facilitate small cross-border transactions. We would support the inclusion of trade facilitation procedures on the agenda of the next round of multilateral trade negotiations (paragraph 129).

Development

  (nn)  We recommend that the Department for International Development consider the contribution the UK can make to ensuring that developing countries benefit from the opportunities offered by electronic commerce. (Paragraph 130).

Privacy

  (oo)  Protection of consumers' data, like the protection of their health and legal rights, must be vigorously defended by Government. Infringements of data protection standards cannot be excused by doubtful arguments that such standards are too expensive or complicated to defend (paragraph 137).

(pp)  We believe that the Data Protection Registrar has a vital role to play in ensuring that consumers understand what their rights are in relation to data protection, and in monitoring market, policy and technological developments to warn and advise of changes which might encourage data protection infringements. We recommend that the Registrar make use of her powers to report to Parliament where necessary to draw attention to such developments. The Registrar's expertise on data protection issues should be exploited to the full by the Government while it is considering its policy proposals. As information increasingly becomes a key generator of economic growth and prosperity, the Data Protection Registrar's role will become ever more important. The Government must ensure that the Registrar has all the resources she requires to deal with the challenges she faces. The Government has a duty to set the highest standards of data protection in its own electronic commerce projects (paragraphs 98 and 134).