Select Committee on European Union Written Evidence

Memorandum by the UK Operator's Group

1.  What needs to be done to create confidence and stimulate e-commerce?

1.  The Operator's group does not believe that the Government needs to take further action to stimulate e-commerce, rather we are of the view that growth within this environment will be delivered by the market. New means of providing access to e-commerce services through inter alia mobile telephony and interactive digital television services will enable more consumers to access e-commerce services without the expense of purchasing a computer. Accordingly take up and growth of services will increase as a natural development of the market. We are therefore of the view that the Government should take a non-interventionist approach to stimulating development of e-commerce, and a corresponding light touch approach to regulation.

  2.  While we support the Government's vision of Britain as a country at the forefront of e-commerce, we believe that it is essential that the Government does not steer too far ahead of the rest of Europe in implementing legislation. This is of particular importance given the cross border nature of e-commerce transactions. Rather we would support the Governments' role in influencing and steering the development of legislation within Europe to ensure that both suppliers and consumers have the confidence to perform transactions by electronic means.

  3.  Consumer confidence is undoubtedly important, however we do not believe that this will be addressed by changes to the country of origin principle. There appears to be little evidence to support the view that consumer confidence will be increased by providing a right to sue in the consumer's jurisdiction, as in practice it is unlikely that many consumers will seek redress for disputes with suppliers through the courts. Rather, measures such as an appropriate implementation of the Distance Selling Directive will do much to provide confidence by providing consumers with clear guidance regarding their rights when transacting at a distance. However in implementing this Directive it is of vital importance that consideration is given to the different means that consumers will use to perform e-commerce transactions to ensure that providers of services can comply with the Regulations and that consumers feel equally protected irrespective of the medium in which they transact.

  4.  Of equal importance to consumer confidence is the confidence of SME's to make goods and services available in an e-commerce environment without fear that they must comply with the consumer laws of fifteen Member States. A lack of confidence in this respect will undoubtedly provide a stumbling block to the development of e-commerce for many SME's who would otherwise seek to expand their customer base by this means. There has been strong support in some Member States to changing the country of origin principle to the country of consumption. The Operator group would strongly urge the Government to resist such moves if confidence is to be created within this environment.

2.  Does the European Commission's draft Action Plan "eEurope: An Information Society for All" offer a realistic means of promoting e-commerce in the EU?

  5.  eEurope is a political initiative and as such the scope of the action plan is significantly greater thane-commerce. It encompasses a whole host of issues in the information society ranging from education in a digital environment to intelligent transport.

  6.  The eEurope initiative is an ambitious project with ambitious target deadlines. However, it is vague and in particular, it fails to address the issues of financial engagements (eg Government funding). Given that it is a political initiative, it is understandable that the paper discusses these social policy issues. It would, however, be wrong to consider that they should be funded as a universal service. In order to promotee-commerce in EU, it is important to segregate social policy issues from competitive market issues. It should not be a foregone conclusion that social policy issues should be funded by the enabling parties. Otherwise it will have a negative impact on the development of e-commerce. The development of e-commerce needs to be market driven.

  7.  Section two (cheaper Internet access), section three (acceleration of e-commerce) and section six (risk capital for high tech SME's), are realistic means of promoting e-commerce in the EU. In particular, the unbundling of the local loop and the significant reduction in short distance leased lines tariffs are imperative, should we want to have a competitive environment for electronic trading. A prerequisite to any of these initiatives is a harmonisation of full implementation across all Member States of the 1998 liberalisation package.

3.  Will codes of conduct and co-regulation provide sufficient protection? Is there a case for intervention by national governments and the EU?

  8.  The Group believes that regulation of e-commerce should be kept to a minimum. There is a real danger that over-regulation will stifle the development of e-commerce, widening the gap between the EU and America. Within this context there is a potentially useful role for codes of conduct, together with self and co-regulation (often referred to together as soft regulation or soft law).

  9.  The Group's position is that soft law can be a useful tool to protect consumer interests and promote consumer confidence while not placing undue burdens on e-businesses.

  10.  Two particular qualities of the soft law make it particularly suitable for application to thee-commerce world:

    (i)  It is a useful halfway house to full regulation. We believe that a stepped approach to regulation is necessary if over-regulation is to be avoided—so a soft-regulatory approach should be tried before hard, legal regulation.[93] In this context we commend the approach taken in the UK'se-communications bill.

    (ii)  It is well suited to a "hard-to-regulate" world like the Internet. Detailed proscriptive rules are, in practice, impossible to apply given the trans-jurisdictional nature of the e-commerce world. We believe that, for example, a system using recognised and respected self-administered quality marks is more appropriate.

  11.  We believe that (either now or in the future) soft regulation could potentially be applied usefully in the following contexts:

    —  Conclusion of online contracts.

    —  Information to be supplied to customers and refunds policies.

    —  Inter-jurisdictional practices.

    —  Control of online content.

4.  Do the institutions of national governments, on the one hand, and the European Commission, the Council of Ministers and the European Parliament, on the other, function with sufficient flexibility and coherence to promote the EU's objectives in the field of e-commerce?

  12.  National and European institutions, can by their very nature, act with only limited speed. In an increasingly complex and ever more rapidly changing world of communications these institutions will be less able both to intervene quickly enough, and in a way which does not harm the market. This is doubly true in e-commerce which is an aspect of the communications industry which is moving at even greater speed than communications as a whole. We believe, therefore, that there is limited scope to make helpful changes to the way in which existing institutions function, although it should be possible to make the UK institutional framework more rationally reflect the nature of a converged communications market place.

  13.  Changing the way in which European institutions function would result in increased uncertainty which could hamper the growth of e-commerce. In order to foster e-commerce there needs to be more regulatory certainty and minimal risk. This will give confidence to potential investors in the Internet's underlying infrastructures and to those who will sell services and products over it.

  14.  We believe, consequently, that beyond establishing some higher level principles and guidelines in conjunction with consumers and the industry, and facilitating non-regulatory means to build consumers' trust in the use of the Internet, existing government and European institutions should forbear as much as possible from intervention in the communications market. e-Commerce is developing at an incredible pace, and competition is spreading at the same speed. Intervention could harm these developments. The only regulatory tool to be used at this stage should be competition rules. Only in the case of market failure would other forms of regulatory intervention be justifiable. In short, if there is any doubt about what to do, the best solution is to let the market deliver what is needed. Bad intervention, or the prospect of it, will hamper or even stop innovation and investment, and harm consumers' interests. It will also make Europe second best in e-commerce.

  15.  The success of the mobile market, which has expanded dramatically over a short period, can be attributed in part to a "light touch" regulatory regime. For e-commerce to develop along the same successful lines, the same light touch regime should continue. The current institutional set-up has functioned well for the take-off and establishment of competition in the mobile sector, it should continue to do so for e-commerce.

  16.  Any sector specific regulatory reform, especially for an industry as fast changing as telecommunications, should be done within the context of forward-looking vehicles. These exist already. The Government has recently announced the start of discussions resulting in a White Paper later this year on the regulation of the converging communications and broadcasting sectors. The European Commission is moving towards its conclusions following the 1999 Review of Communications which will lead to new UK legislation.

  17.  In addition, telecommunications providers are committed to the development of new forms of regulation including self-regulation and co-regulation. This would, if given a chance to develop, reduce the need for formal regulation. It would also be in keeping with industry and government objectives to minimise sectorial regulation.

5.  Should existing EU institutional structures be changed or new ones created, to improve policy development and co-ordination?

  18.  In the short-term, no. Rapid market and technological developments in the field of e-commerce are already to some extent providing governments and intra-government organisations with difficulties in ensuring legislative and regulatory frameworks are sufficiently flexible to deliver the objective of promoting fair competition and stimulating innovation. The European Union should not be distracted at this stage by institutional reform, but instead focus on ensuring its current decision-making procedures deliver quickly the necessary legal framework to promote e-commerce.

  19.  In the longer term, there is a case for institutional reform, in particular increasing the authority of the Commission with respect to National Regulatory Authorities (NRAs) overseeing EU Member State telecommunications markets. This will be important in ensuring full competition takes place, a prerequisite for growth in e-commerce. Initial analysis of this subject is already well underway as part of the EU Telecommunications Review. Operators believe that the Commission needs to address the procedural and institutional issues generated by the significant transformation in NRAs responsibilities and principles implied in the Review reforms. In particular, operators are seeking from the Commission assertion of strong EU level direction and guidance vis a" vis NRAs with respect to their performance in delivering fair and effective competition. In addition, operators support the Commission's proposal for establishing and chairing a new Communications Committee that could, inter alia, function as a forum for discussion and exchanges between NRAs and the Commission.

6.  How can structural change be brought about fast enough to accommodate to the growth of e-commerce?

  20.  It follows from the above that the Group does not believe that one should concentrate at present on quickly changing institutional structures with a view to trying to stimulate the growth of e-commerce. Structural changes should only be made when they are coherent with, and promote the objectives of, the regulatory regime as a whole, in particular that foreseen in the European Commission's 1999 Communications Review. By promoting fast structural change only to try to accommodate the growth ofe-commerce, there is a risk that one overlooks any regulatory objectives and principles subsequently adopted in the context of the 1999 Communications Review. This could have a counterproductive effect by actually hindering the development of e-commerce.

  21.  It is more important for the moment to avoid as much as possible to apply heavily interventionist regulatory measures to e-commerce activities. These activities will develop most rapidly if they are left to be dictated by market forces. As pointed out above, any intervention in the market should be made on the basis of application of competition rules.

March 2000

93   Soft-regulation is, we believe, equally valuable as a step-down from full regulation to total deregulation. Back

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