Are we ready for e-shopping?

Britain lags behind Japan and the US in terms of companies online

By Internet Correspondent Chris Nuttal

If you believe the politicians, the consultants and the sellers of hardware and software that power the World Wide Web, the age of electronic commerce has already arrived.

Britain's Labour government says the UK can be in the vanguard of a new industrial revolution with an information-based economy. According to one of many predictions, online transactions, will be worth more than $100bn in 2003. Companies that fail to make the most of e-commerce will be toast, says the Intel corporation.

But, in the UK at least, there is good cause to be concerned about the ability to compete with the United States, the rate of growth predicted, the need for government to legislate and the dangers posed to civil liberties.

Year of the portal

1998 saw a bewildering number of mergers between media companies, search engines, online services and major software and hardware companies in the search for a money-making formula.

They were topped by America Online's acquisition of Netscape for $4.2bn and Sun getting in on the deal. This year has already seen Disney enter the portal fray, launching its one-stop shop of Internet services with Infoseek.

Britain has been a virtual bystander as far as the pursuit of this business model is concerned, the major highlight of the year was British Telecom's paltry $10m bid for a 50 % stake in Excite's UK portal.

The portals are seen as a means of grabbing and retaining visitors to attract advertising and sell goods online - if it catches on, American not British companies will be cashing in.

Government's wake-up call

The success of individual UK companies extending their businesses online often pale next to Internet retail giants such as Amazon, which has reported a 400 % increase in sales on a year ago (but does not expect to announce a profit until 2001).

Consumers may look across the Atlantic for cheaper prices and American companies are over here as well, threatening to dominate online sectors such as books and CDs (Amazon and CDNow), financial services (Charles Schwab and Citibank) and travel (Microsoft's Expedia and Travelocity).

The government's raft of announcements on e-commerce amounts to a wake-up call to British industry about the onset of a business revolution it ignores at its peril.

The UK's first Internet czar is about to be appointed with the stated purpose of promoting e-commerce at home and abroad and co-ordinating policy across the numerous government departments tackling Internet issues.

The then Department of Trade and Insdustry minister, Peter Mandelson said last year that the Electronic Commerce Bill, promised in the Queen's Speech in November, would give Britain the best environment worldwide to trade electronically.

Last December's Competitiveness White Paper set a target date of 2002 to achieve this.

Encryption worries

The government's action should be welcome given the lack of a concerted effort by British industry to respond to the online challenge presented by the United States. But the reception so far has been lukewarm. Business wants to imitate the US only because it wants self-regulation and market forces to hold sway rather than suffer any excessive intervention by government.

The Confederation of British Industry has said it is concerned about the licensing scheme being proposed, where Trusted Third Parties will handle digital signatures and hold the public keys that can unlock encrypted communications.

The government is in fact facing strong opposition from business, other political parties, academics and the Internet community to its plans. Conservative opposition has said the wish to legislate is "a back-door way for the government to damage our freedom."

Civil liberties groups such as the Campaign Against Censorship of the Internet in Britain, the Foundation for Information Policy Research and the newly-formed Stand.org.uk, have also expressed concerns.

Their main fear is the ease with which police would be able to gain access to the public keys lodged with Trusted Third Parties, posing a threat to privacy and individual liberties.

Are we connected?

Around 20% of the UK population admits to having been online in the past 12 months and the proportion appears to be increasing by a third to a half every year.

But home users generally cannot afford to stay online for long, with the UK still without the free local calls enjoyed in the US.

This will inhibit the growth of e-commerce until cheap or free always-on options such as interactive television and the new DSL technology, expanding the capacity of standard copper wires, come into play.