Select Committee on European Union Minutes of Evidence

Examination of Witness (Questions 474 - 479)




  474. It is very kind of you to come.
  (Mr Casey) Thank you for the invitation.

  475. I hope you will not only illuminate the issue for us but you will find it enjoyable too.

  A. I am looking forward to the experience and I have been since I was invited, my Lord. I believe you would like me to introduce myself.

  476. Please.

  A. My name is David Casey and I have been the editor and writer of a number of magazines over a number of years focusing particularly on trends and developments in the IT arena and more recently in the field of electronic commerce, and business generally. As an analyst I have the opportunity to meet and explore organisations at Government, and regional and corporate level, so perhaps I come to this Committee today with that kind of breadth, which is breadth rather than depth. The issues which I felt I would like to bring to the Committee's attention look at the ways that trends in technology have predicated the ability of industry to pick up on e-business and e-commerce. May I draw a distinction first, my Lords, between the words "e-commerce" and "e-business". Much is written and read about this but e-business is the whole process of enabling companies to trade electronically and to integrate those processes into their commercial operation; e-commerce is more specifically referring to the financial transaction process. So, for example, if I were to go on to the web site today and order a shirt from a shirt maker whose services are advertised there, that transaction would be an e-commerce transaction. When that order is received by the other party and then integrated into their back office systems—their accounting systems—totally seamlessly, that forms part of the e-business function. For an organisation to translate from a simple process of e-commerce into e-business requires business process re-engineering, the whole rethinking of the way business operates and involves a number of parameters, particularly including integration. May I come back to that point in a moment. Let us look at the factors, my Lord, which do affect the ability of Europe in particular and the rest of the world in general to adopt e-business strategies. We are very much affected by communication technologies. Technology has given us very cheap communications in so many ways. What we have seen in the last couple of years has been a thorough integration of voice, data, video and practically any other kind of information that we wish to throw at the rest of society. Because this information has been potted into a digital format, it makes it very convenient to `spray' all the information in an integrated form down a communications network. Because of that, the Internet Protocol (IP is the phrase we use) has been the preferred method by which this digital integration process has been brought about most effectively. That means that all the information is put together into small packets of information which, when they get to the other end, are re-assembled to form an intelligent piece of communication. Because of that move towards IP, or Internet Protocol networks, it means that a massive investment is now afoot to provide both countries and regions with the ability to handle integrated communications. It means that we have seen major investments particularly from American companies who come into Europe. There are many joint projects which have seen `dark fibre' laid. That means holes in the ground carrying fibre which people rent space upon and run applications over it later. Also, we have seen the ability to deliver this high band width capability; this quality communications channel right the way down to the desk top and, in fact, to the PC you have on your own desk. We have the framework within which it is possible to conduct not just simple messaging but real business processes, and integrated business processes which include voice, video particularly, and now this magic concept called `e-commerce transactions'. I put it to you, my Lords, that this is nothing new. Four years ago, the Nokia organisation—I have no vested interest in the organisation—introduced a small telephone device which in one handset contains Internet access, fax, Short Messaging Service, etc. [The witness displayed the device.] You might well question why has this kind of device, and many devices like it, not already been the stimulus for raising interest in mobile communications and mobile commerce? The answer is that up until right now we have been very limited in our ability to communicate at anything like a sufficient band width—that means the data rate down the line. What we are now seeing, you must be aware, is that the third generation of mobile licence is being awarded. When we have `3G' we will be able to communicate not just at the 9.6 kilobits per second of the Nokia device, which is very low data rate, or the 56 kilobits per second you have on your modem at home, but anywhere up to two megabits per second, that is two million bits of information a second. Once you are able to communicate effectively at those speeds, both to domestic PCs and to devices just like this, then the opportunities arise immediately for business processes which were not previously possible. For example, while I say I can read the Internet on this device, it is painfully slow and painfully limited, and certainly it does not have the kind of browser that you may see on your home PC. When we have higher speed alternatives, and there is a critical mass of demand for such devices, then there will be a major investment into making this kind of device commerce enabled. So we have the dawning of the technical infrastructure which is going to make possible the movement of traditional business processes, first to the mobile communications medium, secondly to devices like interactive television. The fact that an interactive television adds another dimension of communication, and is widely available in the home or will be available in the home, means that it is possible to investigate propositions on the television, you can look at clothes in greater detail, you can make a considered purchase. You have got the telecommunications medium to go back to the purchaser and relate fully with them. Now, clearly the countries which are able to provide those quality technical resources will be, and are becoming, the first countries to forge ahead with the e-commerce revolution.

  477. Could I interject there for a minute and ask you, particularly in the light of what the Chancellor said yesterday when he devoted quite a bit of his Budget speech to e-commerce and e-business: "I want to make Britain the best environment for e-commerce and catch up with America as swiftly as possible", there is an assumption that we are leading in Europe, would you care to comment on that? Is that true? Secondly, how far do you think we are behind the States and do you think we can overhaul the States?

  A. In purely statistical terms Europe has in value terms something of the order of 25 per cent only of the value of e-commerce transactions relative to the US. In fact, in 1999 the closest estimate that we have for that is 11.7 billion euros inside Europe. That figure is expected to have grown by a factor of at least 20 fold to a figure something in excess of 340 billion euros by the end of the year 2004, and those are statistics we always have to take with a little bit of caution. Whenever we have a new development or a new piece of technology hitting the marketplace, the estimates revive upwards almost logarithmically. It is a self-fulfilling prophecy that figures go up when you think that they are going to be! We are currently about 18 months ahead of the US in specific fields such as mobile technology and mobile implementations. The reason for that is that the United States have got a very disparate and very widely dispersed approach to mobile communications. They do not have a single standard, in fact there are at least four standards currently in play across the US. Mobile technologies do not have the coherency that Europe has. Europe is the foundation of GSM—Global System for Mobiles -and the G3 or the third generation licences now going around are the means by which North America, Japan, the other regions which are not GSM specifically, will converge to a consistent standard. I was peripherally involved in the negotiations 2 years ago when the final standards for 3G were arrived at. The objective of that exercise was to bring together the best of all the standards. With that standard in place and licences forthcoming, both here and in other parts of the world, I suspect that we will find other countries starting to accelerate. Much of the interest in mobile has come about in Europe, there is a very high density of mobiles in Europe, and a long history of mobile communications. For example, Finland has got more lines than it has people. It has in excess of 1.7 mobile lines per head of population. They have one in their car; they have a different line in their home.

  478. We understand out of five million population, four million use them.

  A. When I count my figures I mean the qualifying population out of the five million. Yes, it would indeed be about three and a half million.

Baroness O'Cathain

  479. Under the age of five.

  A. Indeed!

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