Examination of Witnesses (Questions 1280
THURSDAY 8 JUNE 2000
1280. So it breaks it down and then it comes
(Dr Paltridge) Exactly.
Lord Faulkner of Worcester
1281. What do you think of the main factors
inhibiting business and consumers from going more rapidly online?
You would presumably argue that it is the tradition of the telephone
tariff and telephone access.
(Dr Paltridge) Similarly on the infrastructure side.
1282. What other factors though?
(Dr Paltridge) I could duck this question by saying
that I only work on the infrastructure, but there are certainly
many other factors.
(Mr Dryden) We think basically that the problem is
access, not only access to the appropriate infrastructure but
the services available on the infra structure. That really comes
first. Secondly, there is the issue of trust. Trust has a lot
of different aspects to ittrust and confidence from the
sense of the security of the network, the availability of consumer
protections, privacy protection and so forth. The third general
area would be the regulatory framework on things like taxation,
trade issues and commercial law relating to electronic transactions
and authentication and so forth. The final area would be the approach
of public authorities to electronic commerce where the role of
government is very important. It is things like the human factor,
education, training, awareness, availability of skills, small
and medium enterprise involvement and the rules of the game under
which enterprises work in order to be able to go online with respect
to public institutions.
1283. Is it a combination of these factors which
causes Europe to be behind North America?
(Mr Dryden) Yes, probably all of them to some extent,
but not uniquely. In some cases the Europeans may be said to be
ahead of the United States. In privacy protection there are much
stronger privacy protections which exist in Europe than they do
in the United States. Is that a good thing or a bad thing for
electronic commerce? There are arguments on both sides. Excessive
privacy protections may inhibit enterprises from doing quite reasonable
things. They might say, "Oh well, I am not going to go into
business because there are all these privacy laws and they are
terribly onerous and we might get into trouble quite innocently
engaging in business". These four categories: trust, infrastructure,
regulatory framework and what I would call actions to maximise
and diffuse the benefits of electronic commerce, are the main
1284. How much has the French attachment to
the Minitel over the last 20 years deflected them from developing
(Mr Dryden) Quite a lot, we think. There are a lot
of positive elements about it because they did develop a kind
of Teletel technology similar to the technology which is still
used on British TV screens of Teletext. They gave away terminals
to millions of people. One of the objectives was to save paper
and have electronic phone books instead of paper phone books,
but it did familiarise large sections of the population with keyboards
and online services. There was a brief honeymoon period years
and years ago when something like 90 per cent of the users of
online services in the world were actually French and France was
streets ahead of anyone else.
1285. Because of the Minitel?
(Mr Dryden) Because of the Minitel. However, it was
a lock-in technology. It is a case study in government technological
choices which were quite reasonable at the time. History overtook
it and, partly because of the position of France Telecom and the
lack of competition to France Telecom, perfectly reasonable commercial
decisions by France Telecom actually were impeding uptake of the
Internet and all kinds of arguments were expressed. Okay, the
Minitel is French and the Internet is foreign, so let us go for
the Minitel. Even flag waving was brought into the game.
1286. They were not able to turn the Minitel
into the Internet?
(Mr Dryden) No.
1287. So the Minitel is a sort of cul-de-sac?
(Dr Paltridge) The Minitel was a proprietary closed
network, whereas the Internet is an open network. The patterns
of use for the Minitel developed very differently. As John said,
France Telecom developed the Minitel in a certain way so it would
not compete with other services. For example, you could not have
e-mail because e-mail would have competed with the postal system
and the telecom system, so it was never developed on Minitel.
If you have one provider developing a network they will develop
it in a way that suits themselves rather than the needs of users
and that is why the Minitel did not develop. Even today there
are vast differences between the way people use the Minitel and
the way they use the Internet. The best example is that the average
Minitel session is four and a half minutes and it is charged in
a way that a good deal of the revenues go back to France Telecom
rather than to the actual service provider. If the telecom network
operators of the world developed online services in every country
that is really the direction in which we would have gone and different
networks would not communicate with each other in the same way
as the Internet because they would have been closed proprietary
1288. I wanted to know how OECD would have developed
(Mr Dryden) They did succeed in building on to that
a payment system. When you paid for a service you paid through
your phone bill. When you paid for an information service like,
say, employment exchange or whatever, part of the fee would go
to the service provider and part of it would go to France Telecom
but the user would pay it as part of his phone bill.
1289. The Chairman and some of our colleagues
who went to the United States were impressed with the Global Business
Dialogue organisation which is leading the development of the
major global and cross-border regulatory issues. Should Europe
be encouraging more strongly the participation of its businesses
and EU end use, in other words discussing with them, and what
is OECD's relationship with that?
(Mr Dryden) I cannot really understand why the Global
Business Dialogue is a dialogue because it is a business organisation.
It is a business with a capital "B". It is a big business
organisation. It is global in the sense that it has its three
geographical regions. It is interesting that it was felt necessary
to create the Global Business Dialogue. What I think is lacking
in the Global Business Dialogue at the present time is dialogue
because it is very much a business closed shop at the present.
There is not much dialogue with governments and none with non-governmental
organisations that I can see, although it does regroup many of
the major players on the business side in the three major geographical
areas of the world and can thereby draw upon those resources of
analysis of thinking and is an extremely powerful lobby. We do
talk to the Global Business Dialogue, but we go to them. The OECD
does talk to business. We have a Business and Industry Advisory
Committee to the OECD. They have a committee on information and
communication technologies, electronic commerce. They sit at the
table in all of our meetings. When we develop our policy work
we do so with them. This advisory committee, the BIAC (Business
and Industry Advisory Committee) does regroup also what we call
the Alliance for Global Business. It is a loose consortium of
industrial organisations: the International Chamber of Commerce,
INTUG, that is the International Telecommunications Users Group,
the WITSA (the World Information Technology and Services Alliance),
and the Global Information Infrastructure Commission. These are
all industry groups. Global Business Dialogue is consulted and
provides input to that policy formulation process but it is outside
it. Interestingly, many of the enterprises in the Global Business
Dialogue are also members of these other business federations.
We do accept invitations when we are invited to go to Global Business
Dialogue conferences but I repeat: they have yet to prove that
they are a dialogue.
1290. So this will not come to fruition yet
because you are seeing what they can produce?
(Mr Dryden) I think the Europeans do participate in
it quite strongly. Many of these industrial federations in this
particular area of information communications technologies and
electronic commerce tend to be strongly dominated by the United
States, mega enterprises. It is not the case in the Global Business
Dialogue. There is a very strong European representation. Vivendi
is the company which has taken the lead this year on the European
perspective. Last year it was Bertelsmann. These are very big
influential enterprises which weigh very heavily on the overall
position of the Global Business Dialogue.
1291. On the copyright issues they were concerned
with notice and take-down. How much do you think ought to be put
into legislation rather than left to the carriers?
(Mr Dryden) That is a difficult question. To be honest,
I am not an IPR expert. I think that with these IPR issues it
is necessary to adopt a pragmatic solution and notice and take-down
has a lot of appealing characteristics in the same way as alternative
dispute resolution has in resolving the jurisdiction disputes
and facilitating turning the wheels of electronic commerce.
Lord Faulkner of Worcester
1292. What do you think about the eEurope Action
Plan, eEurope: An Information Society for All? Does this
cut across work you are doing?
(Mr Dryden) As I said earlier, the actions taken by
the Commission and within the European Union are possible because
of the commitment of the European Union member countries to the
single market and may not necessarily be applicable outside the
European Union. Also, the use of the European Union funds to push
forward on some of these actions is not possible on a global basis.
That kind of money is not there. Generally speaking many of the
non-European OECD countries think that actions such as the eEurope
Plan are a little bit too interventionist but generally speaking
I think there are a lot of very good ideas in there. The proof
of the pudding is in the application of it, whether it be positive
action or whether it be to promote such things as the liberalisation
of telecommunications which we think is an extremely good thing,
or some of the other action areas like access for disabilities,
research facilities and students. I can run through the 10 action
areas for you. The first one is European Youth into the Digital
Age. Clearly the human resources skills not only for IT workers
but IT users are extremely important. We go along with much of
that except that I believe personally that there is not enough
emphasis on lifelong learning and post-education system skills.
It is on the right track regarding the education system but what
happens after that? Until the education system radically changes
then there are still going to be some difficulties there. Cheaper
Internet accesswe go right along with those goals and that
should not be difficult to do. You simply have to keep the liberalisation
process and engendering competition and open markets. Accelerating
e-commercethere are various directives and it includes
the dispute resolution mechanisms. It is facilitating electronic
commerce and in so far as that is removing obstacles that is fine.
The research one, fast Internet access for researchers and students:
that builds on existing IT programme initiatives in the European
Union. Smart cardswhy focus on Smart cards? Europe has
a lead but promoting Smart card solutions seems to be prejudging
technology a little bit. If tomorrow other solutions come along
then that might prove to be incorrect. Improving capital markets,
particularly for hi-tech SMEs, clearly in the US and in some other
countries has been very successful in risk capital and it is normal
for the European Union to look at why this is not happening over
here. There are some positive actions which are justified on the
grounds of inclusiveness, so e-participation for the disabled
is obviously one socially valuable area which will also promote
technological development which could have applications outside
that area. We think that is pretty good. Health care online is
an important application area too. This is going to be a major
area where efficiencies have to be obtained in the future. Health
care is already a great black hole for funds. People's demands
for health care are going to increase. Society is ageing. Electronic
technologies for health care clearly are going to be extremely
important and it is worth investing in this. It makes sense for
governments to go into this because the demographic and health
time bomb is already ticking. All the sick people who are going
to need these services are already born, so that is definitely
a good thing. Intelligent transportagain there are some
good ideas in that. Government online is another area. Basically
we think all these areas are very useful. We have concerns or
questions about Smart cards and the educational one seems to be
a little bit incomplete. Whether this duplicates or not the OECD
actions the answer is generally no because of the complementary
nature of the work of the OECD with that of the European Union.
Generally speaking the eEurope concept is a very good effort at
bringing together, taking a global policy view on, quite a disparate
set of actions which have something in common into quite a thoughtful
1293. Are you worried (almost yes or no) about
the social issues vis-à-vis European youth and the digital
age and you talked about post-schooling? There is the idea that
every pupil will have a computer and no doubt they will give them
to them when they leave school because they will be out of date
anyway after a couple of years of use. What are going to be the
practical problems between the parts of society which are able
to use the computer to either retain or improve its wealth and
the parts of society which are not? I am not only talking about
the linking in to telecommunications for free. It is not quite
that and it is not even the fact that they can go to the library
to get it. There is a part of society which does not go to the
library anyway, let alone to link up with a computer. Are you
as the OECD concerned about the social issues that may follow
(Mr Dryden) Absolutely. This is particularly important
for government people, government use and government adoption
of electronic commerce and information technologies as a way of
communicating with citizens. The digital divide has many aspects
between social groupings of different kinds and between countries
and so forth. Digital divides are a phase in the technological
development of nations. We are assuming that access to the Internet
and networking equate in some way with information communications
technology skills and so forth. We are going through a phase where
that is the case. We are heading for a phase, and Sam can perhaps
confirm this, where that need not necessarily be the case because
at the moment the way to access these services and these networks
is through a one thousand dollar PC and that is the way that people
do it and they are attaching it to a phone line. It requires a
certain amount of skill and a certain amount of wealth and, like
all technologies since history started, technologies have increased
divides. The first cars were the preserve of the wealthy and the
privileged. The first TVs, it was the wealthy and the privileged
who lived in the technologically most developed countries that
had them and everyone else followed along.
1294. But when it becomes digital TV it will
be more available but you are still going to get a part of society
which does not have access to it.
(Mr Dryden) But when the connection device to these
services becomes the mobile phone, becomes the television set,
then you will find that universality of access will happen. It
is a question of accelerating this process by allowing the technology
to develop and the services to be provided. The way to do that
is to create the conditions in which the private sector is going
to deliver these services. There will be a lot of failures. There
will be a lot of technological choices which will go the way of
the dinosaur but ultimately many digital divides will be no more
than a temporary problem. Having said that, clearly there are
some areas right now where social divides exist and we can take
the opportunities provided by the existence of these technologies
to try to even them out. If we do not do that there is a chance
that these divides will increase because in the early stage of
the digital revolution it looked at one point as if it was going
to increase all of the divides that already exist in society.
The users were in wealthy countries, they were educated, they
were white, they were people with jobs, they were people without
physical disabilities, they were people who spoke English. The
people who were privileged anyway were moving further ahead. It
is at a later phase of the uptake of the technology that this
balance can be redressed. In the eEurope Action Plan we have got
something on disabled people, but it could be schools. To be honest,
looking at targets, we are going to connect every school to the
Internet by 2001. What does that mean? One computer for 500 pupils?
What then? Is it going to be a 10-year old 286? What does it mean?
That is not going to make any difference.
1295. It might make more difference if you found
more means of accelerating the take-up on digital TV so that every
home had one.
(Mr Dryden) Because every home is going to do that.
1296. Almost every home has got a TV.
(Mr Dryden) Yes. As for IT skills, we are not all
going to be programmers. We are going to be users in some sense.
You just have to look at your own kids and how they can programme
their mobile phones without even looking at the things and how
they can handle technology because they grew up with it. Basically
the next generation may need some help but I have a lot of faith
that the next generation is going to be able to handle this.
1297. I wanted to place on record that when
we were starting our inquiry we used A Borderless World
as one of the base documents to enable us to launch and we found
it very helpful indeed. I would like to congratulate you on it.
(Mr Dryden) Most of the grey hairs I have were connected
in some way with the OECD Ministerial Conference in Ottawa in
1998. One of the things we do in the OECD is take a broad overview
of these kinds of developments. As you have heard today, one of
the things we can do in the OECD is talk. We organise these fora
and we started off in Turku in Finland in 1997 and moved on to
the Ministerial Conference which was the landmark in 1998. We
had a follow-up conference in Paris to take stock of the first
year's progress in October 1999. I have the documentation for
that which has the report of the forum and the main papers that
were produced for it, which include a progress report for the
first year's action at the Ottawa Ministerial Conference. One
of the things that we do each year (I will just put in a little
publicity for this) is that there is a whole alphabet soup of
international organisations involved in electronic commerce. You
name it, it is doing electronic commerce. Every year we survey
them for their work programmes on electronic commerce. We do a
synthesis every yeara document which gives a bird's-eye
view of the actions of international organisations on electronic
commerce. This is the 1999 version and we will update this for
the year 2000. We work of course with business people who do it.
I will leave this set of documentation for you for 1999. On the
main achievements since the Ministerial Conference in 1998, as
I understand that you are very pressed, I will leave you with
a bullet-point list of major achievements with the websites where
these things can be found and we can supply any or all of this
documentation should you wish it. The main subject areas where
we have done work are in consumer protection, privacy protection,
authentication and security, enhancement of infrastructure and
access to it, taxation. Economic analysis, because the so-called
new economy and digital economy is now a significant part of the
economy and yet the economic analysts and analytical tools that
we use in this house to do our economic analysis are rather traditional
ones and so these need to be updated. We have done work in the
unspectacular but essential areas, like measurement, statistics,
data, definitions and so forth, in trade. Following the failed
Seattle Ministerial Conference there are still trade issues which
have not gone away despite that unfortunate event and that need
to be tackled, where we are doing background work but actually
the negotiation will be somewhere else.
1298. That is for the WTO?
(Mr Dryden) Mainly the WTO, to some extent WIPO. We
are doing work increasingly in development co-operation and in
the two different sets of problems dealing with what we call the
emerging market economiescountries who already have functioning
market economies that are just starting to spring forward into
the digital economy, and then an entirely different set of solutions
for the least developed countries and what are the opportunities
afforded by these new technologies for major improvements in that
situation. Of course there is our provision of dialogue. This
is a draft document called The e-Commerce Policy Brief
and it has an annex to it with these points which I will leave
with you. I would like to complement that by saying that there
has been the Turku meeting in 1997, the Ottawa Ministerial in
1998, and a one-year stocktaking meeting in Paris in October 1999.
In January 2001 we are organising our two-years-on meeting in
Dubai, which is actually in itself quite an exciting little case
study in the digital economy. Dubai resembles Singapore and it
is moving very fast. For the Dubai meeting we will be revising
much of this documentation, producing updated reviews and also
looking at some of the new issues that are coming along which
were not treated in such great detail in Ottawa. These range from
the Internet security of the network, digital divide issues, public
management and outreach to non-member economies in the OECD. One
of the major purposes of the meeting is to build dialogue between
the OECD, which is 29 countries, and the next group of 30 or so
emerging market economies. That is just a little add-on for our
next big event.
Lord Faulkner of Worcester
1299. How much are you involved in the new WTO
round, further to eliminate tariffs on technology products and
to ensure the application and extension of commitments to facilitate
the growth of the broadband environment world-wide?
(Mr Dryden) We see four main issues on the trade agenda
here. They are the continuing of the market liberalisation on
an international basis in telecom which you referred to; ITA2,
that is the elimination of tariffs on information technology products;
the moratorium on tariffs of digitally delivered products and
intellectual property rights related issues with TRIPs. The OECD
is mainly concerned with the first three of these in the sense
that, luckily for me, these three issues are dealt with by other
departments in the OECD so what I can say in general is that we
do a lot of the analysis here. We point out the areas in which
liberalisation is appropriate and that it makes sense and the
reference paper and GATS 2000 is the basis for some of the work
done in our division on Sam's side. The Trade Directorate is dealing
with the physical products which will come under ITA2. The Fiscal
Affairs Division is keeping an eye on the progress of the moratorium
on customs tariffs on digitally delivered products where, as you
know, the main issue is non-discrimination between the physical
manifestation of the good and the digital manifestation of it,
like a CD for instance. As I say, the negotiation on this will
take place in other fora. We do a lot of the groundwork in the
OECD precisely because we are not the place where the negotiation
will take place. Our member countries will allow us to do some
work on liberalisation issues where they would be unwilling to
take that to the WTO because they are not ready yet. They want
the situation clarified before they go into the negotiation.