Select Committee on European Union Fourteenth Report



152. Although Italian academics have been linked to a university network for well over a decade, commercial use of the Internet began to take off only in the mid 1990s. Italians took quickly to mobile telephony. Well over half the population now owns a mobile phone, but Internet take-up has been slower. Before 1999, Italy had one of the lowest Internet penetration levels in the European Union. Take-up over the past year has been dramatic, and is attributed to the availability of free access to the Internet. In 1998, 2.5 million Italians used the Internet, by the end of 1999 this had jumped to 9.3 million. Predictions for the current year are that the numbers of Italians using the Internet will rise to 13.8 million.

153. The Ministry of Industry plays the main co-ordinating role in the management of electronic commerce policies in Italy. Its main objective is to enhance the global competitiveness of business, particularly the SMEs. Reporting to the Ministry is an advisory board, currently developing "a scheme of interventions for electronic commerce"[45] which sets out the initiatives designed to promote the use of IT in business. The advisory board, known in translation as the Permanent Observatory for Electronic Commerce, analyses policy and issues related to e-commerce in the Information Society. It also monitors the progress of various initiatives and identifies opportunities for the transfer of skills. It is supported by a committee of experts and with the technical and organisational assistance of ENEA (Ente per le Nuove tecnologie, l'Energia e l'Ambiente).

154. The Prime Minister has also set up an Information Society Forum to sustain the momentum of government action and to co-ordinate the actions of different departments in the development of the Information Society. It is described as a working forum open to other public authorities, including regions, provinces and municipalities, social partners, universities, research institutes and private citizens. The rules for participation are defined by a committee of Ministers. The forum is inherently flexible, and it is expected that it will sponsor various ad hoc groupings.

155. The same expectations about the future growth of the e-commerce market exists in Italy as in other Member States. The Italian opinion poll, MATE 99, has produced the following table:

Table 1: Value of transactions in Italy 1998-2001 in millions of euros


In terms of retail electronic commerce, Italy ranks in fifth position after Germany, United Kingdom, France and Sweden.

156. At international level, Italy strongly supports the eEurope Action Plan, but comments too that its (ie Italy's) policy will be developed "coherently and in co-ordination with EU, OECD, G8 and WTO trends".[46]


157. The value of online business in 1999 was estimated at DM 2.4 billion. It is expected to grow this year to DM 7 billion and the Economics Ministry predicts it will reach DM 20 billion in 2002. PC penetration in Germany is 30 per 100 people (just behind Britain (31 per cent) and well behind the US (57 per cent). Apparently 15 million Germans currently have access to the Internet (German population is approximately 80 million). That includes half of those aged 14-69. The number of people employed in multimedia and Internet companies was estimated by the Economics Ministry in September 1999 to be 706,000. They predicted this number would rise to 1.1 million by 2002. In 1997 only 5 per cent of Germany's population was online at home. This doubled to 8.4 million Germans by the beginning of 1999. The government's objective is to have 40 per cent of its population online by 2005.

158. The most significant government e-commerce initiative is called "D21". The main purpose of the initiative is to consider the general conditions which would best promote growth of e-commerce. A group of business and political experts was set up to discuss this issue. One of the things that the German government is keen to avoid is the need for extensive regulation of e-business. Its hope is that the group can agree a code of standards for Internet companies which will allow them effectively to regulate their own activities. The code is supposed to set clear guidelines on the sort of information such companies should provide, eg on the terms and conditions of their offers. It should also establish clearly the rights of customers to protection of their personal data and to get their money back for damaged goods and/or unsatisfactory services.

159. The government (principally the Economics Ministry, but also others, especially the Justice Ministry) is reviewing legislation which is affected by the growth of business via the Internet, such as copyright law, data protection and legal rights/responsibilities of shareholders. The implementation of the EC e-Commerce Directive has also sparked a debate about German retail law. The latter is highly restrictive on the extent of price discounts and/or free gifts/services that German retailers can offer to entice custom. The opening up of the German retail market via the Web to other Member States' suppliers, who operate to less rigid rules, would have a ruinous effect on domestic companies' business if they are not allowed to compete on more equal terms.

160. In their evidence to us, the Ministry of Economic Affairs speaks warmly of the Global Business Dialogue (GBDe).[47] Since the GBDe emerged from discussions between the German firm Bertelsmann and AOL, it is natural that it should figure large in the Ministry's estimation.

161. Some non-UK observers expect Germany, not the United Kingdom, to be the powerhouse of EU e-commerce.[48] (But see paragraphs 193 and 194). They have an implied criticism that the UK is too concerned with the American model, which many in Europe find alien to European traditions. One element is the growing German trend towards using Linux, rather than Windows, as the operating system to link the websites to the supply chain, to provide reliable and cost-effective service.

United Kingdom

162. The Government led the field in Europe in 1996 with the publication of its Open Government website, but then the impetus flagged, to be revived in 1998 and 1999 with various White Papers and Reports. The most notable of these were the White Papers on Competitiveness and the Government's Response to the House of Commons Trade and Industry Committee Reports.

163. In March 1999, the Government published its White Paper on Modernising Government.[49] This paper proposed radical change in the way Government delivers its services and recommended that Government agencies embrace IT to effect change.

164. There was extensive consultation with industry on the Government's proposals for an Electronic Communications Bill. The Cabinet Office Performance and Innovation Unit (PIU) published a report on encryption, e-commerce and law enforcement on 26 May 1999.[50] This report persuaded the Government not to insist on the registration and depositing with Government enforcement agencies of encryption keys used by companies—the so-called "Key escrow". The rules governing access by law enforcement bodies to protected (encrypted) data form part of the Regulation of Investigatory Powers Bill currently before Parliament. (see paragraph 263)

165. In September 1999, the PIU published a second report entitled e­ This listed sixty targets designed to achieve the aim which the Government had set out in the 1998 Competitiveness White Paper "to make the UK the best environment in the world for e-commerce".[51]

166. On 15 December 1999, the National Audit Office published a report entitled Government on the Web[52] on the progress made towards meeting the Prime Minister's pledge that by 2002, a quarter of all transactions between citizens and Government should be capable of being conducted electronically, rising to 50 per cent by 2005 and 100 per cent by 2008.

167. At the end of November 1999, the Inland Revenue and HM Customs and Excise published Electronic Commerce: The UK's Taxation Agenda.[53] This set out the Government's policies and how the Departments were meeting them.

168. On 16 February 2000, the Chancellor announced details of one-off tax discounts for small businesses and individual taxpayers who file self-assessment VAT or PAYE returns over the Internet and pay any tax due electronically. In his budget speech on 21 March 2000, the Chancellor announced a number of measures designed to encourage companies, particularly SMEs, to move online.

169. On 30 March 2000, the Prime Minister advanced the target date from 2008 to 2005 for complete electronic delivery of all Government services.

170. On 3 April 2000, the Government published its plans for achieving "joined-up government" in its paper e-government.[54] This was followed by the publication of the Central IT Unit (CITU) report Successful IT: Modernising Government in Action.[55] the UK's national action plan

171. In the PIU report, recommendations included the identification of a Minister with responsibility for e-commerce and the establishment of a post of E-Envoy, whose job it would be to stimulate the spread of e-commerce in industry and Government. The Government acted on these recommendations and appointed Mrs Patricia Hewitt MP to be Minister for E-Commerce at the Department of Trade and Industry (DTI), and the Rt. Hon. Ian McCartney MP, Minister of State at the Cabinet Office, to be the Minister responsible for e-government—the application of IT to the Government service. Mr Alex Allan, formerly British High Commissioner to Australia, was appointed E-Envoy.

172. The E-Envoy operates in conjunction with the Central IT Unit in the Cabinet Office, chairs the Information Age Government Champions Group, and is the "Senior Responsible Owner" (SRO) of the Government's IT programme. He reports to the Prime Minister as well as to the Ministers for e-commerce and e-government. He liaises with Departments and Agencies through a network of e-commerce co-ordinators ("e-czars"). The Information Age Partnership provides a forum for collaboration between the Government and 36 leading figures from the UK's IT, communications, electronics and creative content industries.

173. The Minister for e-commerce and the E-Envoy write a monthly joint report to the Prime Minister. The sixth report is currently available on the Cabinet Office website.[56]

174. Also available on the same site is the progress on implementing the commitments set out in[57]

Devolved responsibilities

175. The devolved administrations for Scotland, Northern Ireland and Wales are also taking part in the Information Age programme:

176. Digital Scotland aims to ensure that Scotland obtains and retains maximum economic and social benefit from information and communication technologies. Scottish Enterprise e-commerce team is responsible for a number of programmes and projects.

177. Welsh Information Society (WIS) Initiative Strategic Framework sets out visions for leading Wales forward into the Information Age. It is supported by a series of Action Plans. WIS is promoted by the National Assembly for Wales and the Welsh Development Agency supported by the European Commission.

178. Northern Ireland Information Age Initiative is developing a strategy framework and comprehensive action (Strategy 2010) aimed at ensuring that Northern Ireland takes maximum advantage of opportunities for e-business.

Organisation for Economic Co-operation and Development (OECD)

179. OECD held an international meeting on electronic commerce in Turku, Finland, in November 1997. This was followed up in Ottawa on 7-9 October 1998 at a Ministerial Conference on electronic commerce, organised jointly by OECD and the government of Canada. It was attended by 25 Member States, 11 non-member economies, the heads of major international organisations, industry leaders and representatives of consumer, labour and social interests.

180. The Ottawa Conference discussed four major themes:

  • building trust for users and consumers;
  • establishing ground rules for the digital marketplace;
  • enhancing the information infrastructure for electronic commerce; and
  • maximising the benefits.

Ministerial declarations which established the principles and goals for further work were adopted in the following areas:

  • protection of data privacy on global networks;
  • consumer protection in the context of electronic commerce;
  • authentication for electronic commerce; and
  • electronic commerce: taxation framework conditions.

Ministers endorsed the OECD Action Plan for Electronic Commerce.

181. In addition, 12 international and regional bodies including the WTO, WIPO, World Customs Organisation (WCO), United Nations Commission on International Trade Law (UNCITRAL), International Telecommunications Union (ITU), Bank for International Settlements (BIS), European Free Trade Area (EFTA), Universal Postal Union (UPU), and UN Conference on Trade and Development (UNCTAD) contributed to a compilation of international work related to electronic commerce in the Report on International and Regional Bodies: Activities and Initiatives in Electronic Commerce.

182. The following programme emerged from the conference:

  • work to draft guidelines for consumer protection;
  • work on the practical implementation of global networks of the 1980 OECD privacy guidelines;
  • emerging technologies and business models for authentication and certification;
  • work on defining and measuring electronic commerce;
  • extending the analytical work at OECD, examining the economic and social impact of electronic commerce;
  • continuing work on examining the policy implications of changing information and communications networks; and
  • setting up specific technical advisory groups with business to address taxation issues.

183. In order to maintain the momentum for global co-operation launched in Ottawa, the Deputy General of the OECD agreed to convene a working level meeting one year after. This meeting took place in Paris 12 and 13 October 1999, in the form of the OECD Forum on Electronic Commerce. The Forum took stock of the work at international level since Ottawa, and upheld the original themes of that conference.

184. The next Ministerial OECD Conference is to be held in November this year, in Dubai.


185. The Internet remains a US-dominated sector. The US is the site of almost 70 per cent of the total world-wide Internet hosts. Europe is home to 15 per cent, the Asia Pacific region 8 per cent, Latin America and the Caribbean slightly over 1 per cent.

186. The overwhelming majority of international Internet bandwidth capacity is into and out of the United States.

187. Six of the top 15 international "backbone routes" in Europe have a US end point, constituting 43 per cent of the top 15 route capacity.

188. Artificially high bandwidth prices outside the US reinforce the US as the world's central "hub" for Internet traffic.

189. 73 per cent of secure Internet servers are located in the US. This serves to reinforce the dominant US position.

190. English dominates the Web, (though recently published sources suggest that Spanish may soon overtake English).

191. This US dominance is beginning to produce a backlash. The International Telecommunications Union (ITU) is being pushed by a formidable alliance of developing and developed countries to assert jurisdiction over governance of the Internet. There is an unquantifiable but nevertheless real element of resentment against the perceived "cultural imperialism" of the US, represented by the rapid dissemination, fostered by the Internet, of US-centred content. Towards the end of 1999, the European Technical Standards Institute (ETSI) made an attempt to wrest control of the governance and development of the Internet protocol.

192. An examination of the "building blocks" for growth in the "new economy" published this year,[58] identified 25 separate actions which countries have to take in order to be recognised as hospitable to inward investment in communications. (Investment in this area is a good indication of where e-commerce will blossom.) These "building blocks" are divided into three areas: telecommunications, Internet, and electronic commerce; they proceed sequentially and in the order listed. The analysis reviewed 30 countries to determine how hospitable they were to the growth of IT investment.[59] The report identifies:

  • those countries with high-growth prospects and a ** rating—United States, United Kingdom, Canada, and Ireland;
  • good growth prospects with * rating—the Netherlands, Hong Kong, Sweden, Denmark, Finland, Singapore, and Chile;
  • uncertain growth prospects with 0 rating—Japan, Brazil, Australia, Spain, Argentina, Austria, Luxembourg;
  • growth impediments, minus rating—Italy, Mexico, South Africa, Belgium, Portugal;
  • serious growth impediments, double minus rating—Germany, France, South Korea, India and Greece; and
  • two key countries which are regarded as beyond consideration for investment in communications: China and Russia. China has made no move towards liberalising the economy in the telecommunications sector, which the report sees as the essential precursor for growth. Russia has a complex, formal and informal regulatory system that is all but impenetrable to the outsider.


193. The report describes Europe as "a mixed bag". Implementation of EU Directives is variable and inconsistent. The report recognises that one European advantage is the uptake of advanced wireless technologies, which is higher and faster than is the case in the United States.

194. The countries of the EU range across all levels described above. The reason for the relatively poor showing of Germany, France and Greece is that "they are systemically inhospitable to foreign investment in communications and promote strong national champions in their incumbents".[60] Germany maintains barriers to entry with substantial licensing fees. France consistently raises cultural issues to impose new obligations that hinder growth. Moreover, France's universal service obligations are among the world's most onerous. Greece has the poorest record of implementing EU Directives. The regulatory system there is virtually uncharted territory.

Latin America

195. The report concludes that Latin America has fewer regulatory impediments than either Europe or Asia / Pacific, and consequently there is greater potential for higher relative growth. Common language and cultural growth unify the region too. Against this, however, Latin America generally has limited experience with entrepreneurship in the communications sector.

Asia / Pacific

196. Growth prospects in Asia / Pacific have to be evaluated carefully on a country-by-country basis, because it is the most culturally and linguistically diverse region. Nevertheless, a common business culture of deference to central guidance by the government is characteristic of the region. Such guidance militates against innovation and flexibility, the hallmarks of Internet growth. Nevertheless, it would be unwise to lump the Japanese experience among the "also rans"! Japan has the world's second largest economy and the JASDAQ (the Japanese NASDAQ) is still buoyant in spite of the "market correction" in Spring 2000. There are 3000 ISPs in Japan. In 1999, Japan had 24 million Internet users; in 2003, the figure is expected to be 63 million. A fifth of the population has mobile telephones with net capability. A new generation of computers and software entering the market will be better able to handle the very considerable demands placed on storage capacity and speed by the data needed for Japanese or Chinese characters (ideograms).[61]

45   Italy Country Report, Research Centre on Information Systems, LUISS "Guido Carlo" University, 20 March 2000. Back

46   Italy Country Report, Research Centre on Information Systems, LUISS "Guido Carlo" University, 20 March 2000, p 20. Back

47   German Federal Economics Ministry, p 449. Back

48   European Informatics Market (EURIM), p 82. Back

49   Modernising Government White Paper, Cabinet Office, March 1999, Cm4310 Back

50   Encryption and Law Enforcement, Performance and Innovation Unit, Cabinet Office, 26 May 1999. Back

51   Our Competitive Future: Building the Knowledge Driven Economy, Department of Trade and Industry, December 1998, Cm 4176, quoted in the PIU report

52   Government on the Web, National Audit Office (NAO), 15 December 1999, available on the NAO website at Back

53   Electronic Commerce: The UK's Taxation Agenda, Inland Revenue and HM Customs and Excise, November 1999. Back

54   e-government: A strategic framework for public services in the Information Age, Central IT Unit, Cabinet Office, April 2000. Back

55   Successful IT: Modernising Government in Action, Review of Major Government IT Projects, Central IT Unit, Cabinet Office. (, at time of publication) Back

56, at time of publication Back

57 progress.htm, at time of publication Back

58   The Building Blocks of Growth in the "New Economy": Guide to Global Investment Precursors in Telecom, Internet, and E-Commerce, Legg Mason Precursor Group, Spring 2000. Back

59   ibid Exhibit 6, p 7. Back

60   ibid p 10 and 11. Back

61   Japan's high-tech party shows no sign of ending, The Sunday Times, 2 July 2000 Back

previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2000