Examination of Witnesses (Questions 780
WEDNESDAY 10 MAY 2000
780. Why should it be political? This is a marketing
job that you will do to try to convince people because you are
raising the user's faith in you. I cannot understand why this
(Mr Green) I totally accept that. That is something
that we obviously are putting significant effort into. We also
have other means of giving people access to e-commerce and to
the Internet and to e-mail, for example. We have Open which is
a digital broadcasting delivery mechanism for e-commerce. Open
now has (there was something in the paper about it today) more
consumers doing e-commerce transactions over digital TV than any
Internet service provider in the United Kingdom.
781. If this is such a problem, letting people
know how much they are spending, is there no technology which
will show them on their screen while they are working online how
much they are spending? That is comparatively simply, surely.
(Mr Green) We do not have in our network right the
way across the country the technology that can do that. There
are machines that you can buy which will record how much you are
782. But this is such an issue.
(Mr Green) But I do not think it is an issue because
we have solved it with Surftime.
783. But you have just said that it was.
(Mr Green) We have solved it by offering flat top
tariffs so that people do not have to worry about metering. We
have solved it in a consumer way rather than a technological way.
784. You talked about monthly bills. A lot of
your competitors do monthly bills. Why do you not do that?
(Mr Green) That is a very good question and one which
I keep asking myself. We have over 20 million customers. To change
from quarterly billing to monthly billing is a massive systems
change which we have not been able to do within the timescales
that I would like, but that is something we are going to have
to do eventually.
785. I want to conclude with this. The difference
between the States and here is that people do stay online dramatically
longer, significantly longer, than they do here and that is primarily
because of the flat rate unmetered access that they have. There
has been a great opportunity there for business to stay online
24 hours mid-week, not just at the weekends, and make progress.
What we are looking to see is an opportunity not just for people
at the weekend to be spending long times on the Net but for business
during the week to have relatively cheap unmetered access. Do
you feel that Surftime will meet the needs of business, particularly
(Mr Morfett) Yes.
786. Have you thought about producing any offerings
which will be focused particularly on them?
(Mr Andradi) If you look at what the small business
community needs, clearly Surftime is one element of our small
business offering. Surftime, in terms of access, will be extremely
important. The other area where we are doing some very good work
is looking at the whole area of how you transform small businesses,
how you empower them to use the Net and become e-businesses? To
that end we are doing a whole variety of things. We are getting
into what is called the "applications business". Most
small businesses today cannot afford to have payroll systems or
business administration systems, so we are running programs and
applications which they can download from the Net or buy-on-demand
to help them. Most of these applications generally have not been
made available to small businesses in the past, so we think there
is a revolution in terms of how small businesses use the Net,
not just in terms of access, but giving them applications and
tools. Let me just mention two things that BT has done. We have
a major deal with a company called Commerce One, which is a major
company that helps small businesses transact with large businesses
in the supply chain. Commerce One is the leader in this space
in the United States. We are going to bring them to the United
Kingdom and that is a major way in which small businesses can
really benefit from taking part in the whole supply chain with
large businesses. This is another huge opportunity to help small
businesses get online and transact online. We have a joint venture
with a company called VerticalNet. VerticalNet again is a major
leader in the United States in the whole area of creating what
is called industry portals. If you are a plumber or if you are
in a particular area of a small industry, you can now interact
787. Could you drop us a note on this too?
(Mr Andradi) I am happy to, Chairman. There are other
ways to do this. Access is about empowering them with other businesses
788. Up to now the complaint has been that at
4p a minute they could not spend a lot of time on the Net. We
are hoping that is changing. Could I just change the subject and
move on to a very topical one, the "I Love You" last
week, the virus. Would you care to commend on how it affected
you and whether steps have been taken to protect yourselves in
the future? When we were in the states we followed some denial
of service attacks there and there was great concern in a whole
range of areas within government and this has been followed up
with last week's incident and you were I think particularly affected
(Mr Green) Yes. Can I ask Ben to explain it?
(Mr Andradi) Security and the whole security infra
structure is of paramount importance to us. The problem of the
Internet is that it is a growing medium, it is rapidly exploding,
and we have certainly learned a lot from what went on last week.
Compared to a lot of institutions we were relatively well protected
by our fire walls and our gateways were actually able to stop
it. This is an area where it is very difficult to say it will
never happen again. You cannot say this is never going to happen
again. We feel we are at the leading edge in providing the right
levels of security. Unfortunately there is always someone who
devises an even more difficult and enigmatic approach to try to
breach these fire walls. It is something that we have certainly
looked at and we have learned the lessons from it to ensure that
this type of thing does not happen again. It is an area which
is extremely complex and is growing in complexity and it is impossible
to say that this sort of thing could never happen. We have certainly
learned lessons from it.
789. A few minutes ago you were talking about
business to business. My interest is in business to consumer.
I am a director of a small business with an even smaller web site.
The problem there is first of all the integrity of the system,
the entire e-mail system, and the virus last week is a case in
point. Secondly, there are the problems of security of one's credit
card, which is a subject we are going to go into in a few minutes
with Barclaycard. There is almost certainly a third one and that
is the cost of access of the consumer, which you have covered
fairly thoroughly, and I shall look very carefully at that particular
paper when you produce it in due course. As far as your original
evidence is concerned, however, you make two slightly interesting
claims. One was in your summary in paragraph one, that the growth
of e-commerce is unstoppable, which in fact was a summary, as
I understand it, of what you said in paragraph 1.2 of "rapid
growth is assured". Can you explain why you made those two
(Mr Green) The bottom line is that the economies that
all businesses will derive from using e-commerce are so enormous
that those that do not go into that area and use those mechanisms
will end up
790. Can I stop you right there? The important
thing is the customer getting to the business, not the business
getting to the customer.
(Mr Green) There are two ends to the unstoppability.
One is the extent to which business takes it up and the other
is the extent to which the consumer takes it up. The first thing
is that faced with a choice between a business that is doing it
using traditional methods, let us say £10, and one that is
offering you an e-commerce alternative at £2, assuming that
you have got the computer or some other means of access, eventually
the business is going to move to the one doing it at £2.
There is going to be a pull towards those businesses. Secondly,
there are consumers who, for certain types of economic activity,
will find e-commerce a more convenient way of doing things; not
everyone and not for everything. But as more and more people use
itand I think you will find this particularly in areas
like bankingmore and more people will use it. I think it
comes from both ends. I think there will be consumer pull and
(Mr Andradi) There are several ways to look at it.
Let me start with an abstract way of looking at it. We have economic
models of the Internet that suggest that what is really going
on here is that the supply curve is shifting to the right and
what we are essentially seeing is great output being produced
and so as a consequence more and more transactions are occurring
because more people are able to get online, more businesses are
going to get online. I can access a book store like Amazon.com
based in Seattle, which I could not do in the past. That whole
level of convenience is what the Internet brings you. That is
why we think that this is an area that is growing. It is not purely
from an economic abstract point of view but also from the supply
and demand curves interacting. Then you get into the empirical
evidence of issues like growth of consumer e-commerce today, just
the growth in things like we have a joint venture in Open which
is bringing e-commerce to the TV set, as Colin mentioned. The
growth of e-commerce is there; again, it is just unstoppable and
we are getting on Open nearly 50,000 e-mail sign-ups a week. Whole
families who cannot afford a PC are signing up on e-mail to send
messages to each other. There is a whole variety of empirical
evidence on the growth of the mobile Internet, again messaging,
e-mail and all that. There is a lot of empirical evidence to suggest,
not just in the UK but also in the US, that there is a huge bandwaggon
around this and this huge amount of advertising now which illustrates
the convenience of using the Net, home shopping, grocery shopping
is coming on the Net, major supermarkets now are getting online.
A whole variety of things are going to happen probably in the
broad economic sense to the very specific areas.
791. What you have just said indicates that
everything is fine and everything is getting on and the growth
is unstoppable, but in your memorandum at 1.4, you said there
are six factors that have a braking effect on the take-up of e-commerce
by businesses and consumers in the UK, and you list them, including
the price of access. I wonder if you could, when you are writing
to us again, write these in order of importance because it seems
to be a catch-all. Also, it is fine to list the six but you do
not give any idea what the solutions are. For example, you identify
the PC costs as one factor. I suppose the solution is to bring
down PC costs. But all things are relative and the PC costs have
certainly come down quite a lot. Have you got any idea at which
point the PC costs would be which would stop them being a braking
effect on the development of e-commerce both for businesses and
for consumers generally? We have spent so much time on cost of
access perhaps you could just give us that additional information.
(Mr Green) I do not know about the cost but I will
ask Ben to deal with that. I can talk to you about the solution
to that particular barrier and that is not just PCs. It is other
means of access to the Internet. We have kiosks and other points
in libraries and places like that where people can access the
792. Or EasyJet shops?
(Mr Green) Whatever the price comes down to there
will always be people who cannot afford it. It will just increase
the number of people who can afford it. There is the TV. We have
a telephone which is an e-mail telephone, so you just plug it
in and you can use it to send and receive e-mails. There are other
devices which people will use which will be different mechanisms
apart from the PC, and including mobile devices, not just mobile
phones but possibly simpler mobile devices. It is the vast number
of different means of access to the Internet which is going to
help some people who are afraid of PCs and who do not want to
use them. I do not know what our assessment is of cost.
(Mr Andradi) If you look at the normal consumer electronics
items which are priced in the £200, £300, £400
range, potentially if PC prices came down to that level you would
see a real upsurge of PC use. Certainly if we look at the recent
survey that we have done and we can provide you with more detail
on that. It is also very important to realise that there is this
huge explosion of what we call pervasive computing. It is not
just the PC. There is a whole multiplicity of devices that are
getting intelligence put into it, mobile phones and so on.
793. Yes, we do know.
(Mr Andradi) A whole variety of things, so those become
also access mechanisms. Mobile phones are becoming another platform.
794. Your time with us is very valuable so I
do not want to pursue it. One point which is tangential to what
you are saying is this. It is said in the United States that the
political ambition is that everybody should have access to the
Internet and I think that that is more or less the political ambition
here. I do not think it has been stated in such broad terms, that
by the year 2003 everybody here should have access to the Internet.
Therefore, that factor, putting a brake on the building up of
e-commerce should be removed. Perhaps you can just list the six
points in order of importance and say what the solutions are.
(Mr Andradi) I would be delighted to do so. Let me
just add that we are talking about narrow band access, which is
very important. Again, let me say that we are on the brink of
the second Internet revolution, which is about to occur and is
probably going to supersede the narrow band. The second Internet
revolution is around mobile Internet access, what people call
broadband. When you talk about access, the narrow band in the
next two to three years is going to recede and a new order of
things is going to be abroad. That is also an area of great interest.
795. Just a quick question on mobile telephony.
Will people be allowed to have portable phone numbers if they
are on the pay-as-you-go system?
(Mr Green) I cannot think why they should not but
that is a question you probably need to address to the regulator.
796. I am not sure if it needs to go to the
regulator. You can take the initiative yourselves. You had to
be pushed by the regulator previously to provide the facility
for people to transfer their personal phone numbers from one company
to another, did you not?
(Mr Green) If you are just talking about mobile portability,
it was not just us. You need the industry to have number portability
and that is what the regulator did push. On fixed number portability
we agreed number portability. The issue we had with the regulator
was the price.
797. Why I am asking you is whether consideration
is being given to the point where we get mobile telephony being
used extensively for Internet access for the holders of a telephone
number on the pay-as-you-go system who will be able to transfer
from one company to another.
(Mr Green) I will have to find out.
798. It would be nice if the industry itself
decided to start taking initiatives there rather than having to
wait for the regulator, would it not?
(Mr Green) Fair comment.
Lord Faulkner of Worcester
799. My question is about regulation. I think
I would be summarising your position reasonably if I said that
you would like the Government to adopt a fairly light regulatory
(Mr Green) Yes.
5 The witness subsequently added that monthly billing
was available on request. Back