Select Committee on European Union Minutes of Evidence

Memorandum by the Centre for European Reform (CER)


  The Centre for European Reform is a think tank on EU affairs based in London. It is a forum for people with ideas from Britain and across the continent to discuss the many social, political and economic challenges facing Europe.

  The CER is pro-European but not uncritical. It regards European integration as largely beneficial but recognises that in many respects the Union does not work well. The CER therefore aims to promote new ideas and policies for reforming the EU.

  The CER is currently working on: next steps in European defence; Commission reform; managing an enlarged EU; transatlantic relations and Europe's common foreign policy; the need for and obstacles to a single European stock exchange; and building a European information society.

  Other relevant experience of Felicity Ussher includes two years' reporting on information technology for Dennis Publishing and two years' broadcasting on business and technology for


  I am currently researching a European policy pamphlet into the role the EU has in building an information society. The research involves analysing the main commercial drivers and speaking to people right across industry, regulators, social and voluntary sectors—to get their ideas of whether we are heading in the right direction. The pamphlet will explore ways in which the EU might bridge the gap between the commercial trends and the ideals of what an information society might be.

  The research is at quite an early stage at present—we're aiming for publication this summer. But it has already shown that even definitions of "information society" as voiced by the European Union do not go far enough.

  Commissioner Erkki Liikanen's action plan for E-Europe is not over-ambitious, in my opinion. The advisory targets that he sets out for all the member states are already commonly accepted at a national level—with the possible exception of the transport section. It is useful to have his backing and enthusiasm for the rest—the education targets, the health targets and so on—but they have already been identified as priorities, certainly by the UK government.

  More importantly, there are gaps in Liikanen's vision for an E-Europe. He does not address socially excluded people—the people who slip through the net of established health and education services. He doesn't look at, say, the prison sector; he doesn't look at people who rely entirely on cash. For example, people living hand-to-mouth—after a day's or a week's work—without bank accounts. Or people whose livelihood is based on small, one-off cash transactions, such as those working in markets, or even buskers or beggars. I'm planning to propose, in the CER pamphlet, a much broader shake-up of financial regulation to help these people.

  At present, VISA and MasterCard have an effective monopoly on electronic commerce because it's only through their payment mechanisms that you can buy goods online. This is changing slowly—but not fast enough. Belgium, for example, is piloting a scheme called Proton, which means you don't actually have to have a bank account to pile cash onto your card from any public terminal, and use it online. But for the most part, online transactions rely on you having been deemed credit-worthy by private institutions which are looking for the lowest possible risk-category of people to lend money to. It doesn't seem quite fair, if your credit is unstable, that you are effectively prevented from taking part in electronic commerce.

  So, what needs to be done to create confidence and to stimulate e-commerce? There are some obvious and basic things here. We need cheaper and faster Web access. I think most people with office computers rely on them to do personal shopping and research online, because it is simply too expensive to set up at home. Even after 6 pm the charges are too high, and Web sites take too long to load.

  Things are improving, as Internet Service Providers toy with the idea of flat rate pricing for phone calls as well as Web access. In addition, Oftel has recently announced much faster progress on unbundling the local loop. This will help things a lot because it means that other telecom can start offering cheaper and faster services between the hub and people's homes.

  The EU has a role here to set targets and encourage new technologies. But unfortunately, across all the EC documents I've seen so far, there has not been sufficient mention of the mobile platform, which is Europe's golden ticket to information access for all. The next-generation of mobile phones—which are beginning to come onto the Scandinavian market now—will build in Internet access. Most experts agree that the mobile platform is not only Europe's main strength but that it is going to be the main way for people to access the Internet remotely.

  This is significant because mobile phones are much more socially diverse than personal computers. They are used by people working manually as much as people working in the City. And although the price of an Internet-connected mobile phone is currently prohibitive, prices will come down as they always do. It is linked to the development of a new technology called WAP—Wireless Application Protocol—which is a way of delivering data without all the cables.

  Erkki Liikanen does give a token mention of it. He recognises that the mobile phone, along with digital TV is Europe's main competitive strength against the US. But he does not actually say what difference it is going to make and how people can start preparing for it.

  I think the EU should be doing some proper research into Internet access, not just looking at PC figures but looking at the social overlap between users of mobiles, digital TV and home and office PC. Once they have worked out which platform is going to be the most accessible to all, they can focus on content initiatives for it.

  Stimulating electronic commerce is also a question of creating consumer confidence in new brands and new processes. Industry is doing a fairly good job of regulating itself on this, with a number of kitemark schemes. Which Online offers a very good one. The IMRG—Interactive Media in Retail Group—offers another. Both these are backed by the authority of organisations like Which, and then IMRG which is a massive consortium of corporations. They have a lot of respect in the industry, as does TrustE which is building an international data protection kitemark scheme that incorporates the latest EU regulations on the subject. All three groups play an important part in shaping online trading practices, whenever disputes arise.

  I do not think the EU needs to add its own code of practice to the throng, especially as it lacks the commercial experience of existing consortiums. The only weakness of industry self-regulation schemes is that they do not have the authority of law. But IMRG says it can solve most disputes just by recommending to traders what should be done. It is such a new area that often it is just a case of advising retailers that they should have all their terms and conditions and payment mechanisms up front, and not try to conceal distribution costs. However, I think it might help if there were an open door between these kitemark schemes and national regulators such as the Office of Fair Trading.

  The weakest area of electronic commerce at the moment is the distribution networks. When you buy something online, you are looking for convenience. But a few days later, a note appears on your door saying the parcel is waiting for you at the Post Office depot—often a couple of miles away and only open at specific times. It defeats the point of buying online in the first place. What we need is a 24 hour network of local pick-up points. It would make sense to use existing distribution networks for this. People joke that Perfect Fried Chicken would be the ideal parcel post depot, because their fast food outlets have appeared on practically every high street in the past two years.

  Corner newsagents might be a more viable alternative. They are often open late evenings and early mornings, and they already act as delivery points for London Underground travel cards. They do this on the basis that people will buy a newspaper or a snack while they're renewing their card. It might be that there's a body representing these newsagents that would welcome an invitation to act as e-commerce depots.

  But of course that sort of thing can be sorted in the commercial market place. There's not necessarily a role for the EU. If a delivery service like DHL decides to team up with some sort of federation of newsagents to offer a service that's attractive to online buyers, they will sign up to it; and it it will up the ante for other services.

  I can't talk much about what sort of structural changes the EU needs to go through to promote e-commerce. I'm not familiar enough with their internal workings. I do think there's a case for saying that e-commerce spreads so far across the different director-generals that there should be a specific e-commerce team. At the moment, it's difficult to find out who to ask for specific information. But it looks like Erkki Liikanen, Commissioner for Enterprise and Information Society has stepped forward as spear-leader of electronic commerce. In a long interview last year, I found him very clued up, and he promises to answer every email he is sent. We'll find out if he's got what it takes at the end of March when he gives some more detail on E-Europe.

  One of the main proposals I'm going to make in the pamphlet is that the EU should harness itself to the open source movement, whereby software developers post computer code they have written online, free of charge, so that other developers can use it for their own purposes. Historically, open source predates commercial activity online, and technical experts are still very keen on it, because it enables the sharing of expertise. Open source has also had some success in the commercial arena, mainly thanks to Linus Torvalds—a Finnish compatriot of Erkki Liikanen—who developed an open source operating system called Linux which rivals Microsoft Windows. Linux is distributed by commercial organisations such as Red Hat, which offer installation and technical support. Red Hat persuaded a series of large corporations to migrate from Windows to Linux last year.

  It seems to me that open source would be a very appropriate technical partner for the European Union in its efforts to build an information society, because they share a similar relationship with the commercial market. Both aim to stimulate growth through the sharing of information, and at the same offer a basic standard which everybody can access. If the EU backed open source, it would also, I think, push commercial ventures into being more competitive, because they would have to offer something above this basic minimum.

  The partnership could take a number of forms. First, the EU should put a whole range of software on its Web site for small businesses and charities to download free of charge. This is what small organisations have been crying out for.

  I've spoken to a lot of charities who really need some very basic tools. For example, Prison Community Links, which is trying to get a database together of all the voluntary organisations in the prison sector. They want to set up an online database where community groups and charities can post their details and have them put into searchable format for other people to access. All they need is a simple template and a scripting program that will publish them—but they don't know how to get it. These non-profit making organisations can't afford IT directors to work out all their various needs.

  Second, the EU should promote the need for free content online. One of my concerns about the way the market is moving now is that new payment mechanisms are turning up which enable consumers to pay for online content in fractions of a pence, via their credit cards. It is thought this business model will start being used for a lot of online media—charging consumers by the word to read specific articles. I think the risk here is that certain materials of educational value will stop being freely available online. The EU could rectify this by sorting out some of the copyright issues itself and building up an entire archive full of useful material on their servers for schools and for citizens to educate themselves, for free.

  I know that Erkki Liikanen backs open source. I've spoken to him about it. Although he would not go so far as to say the EU would start regulating in favour of it, he did say that when it came to best practice and its own internal systems, the EU was extremely keen to promote open sources as the way forward. I think a bit more leveraging might persuade him to commit himself further.

  In summary, my opinion is that the EU's scope for regulation lies in encouraging suitable development of the mobile platform, and promoting open source as the key to information for all. It should also re-evaluate the regulation of financial institutions in the light of their growing power online; and boost research into social exclusions.

19 February 2000

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