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E-commerce Wednesday, 16 December, 1998, 17:37 GMT
Are we ready to shop?
Britain lags behind Japan and the US in terms of companies online
Britain lags behind Japan and the US in terms of companies online
By Internet Correspondent Chris Nuttall

Like Christmas, the original meaning of the Internet may soon be obscured by rampant commercialism. A gift for the good of mankind - the free exchange of ideas - will turn into a gaudy trade in goods for money.

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

The UK can be in the vanguard of a new industrial revolution with an information-based economy, says Britain's Labour government. Online transactions, according to one of many predictions, 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 has seen 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. In the New Year, Disney enters 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. The concept could prove as unsuccessful as last year's Internet trend of pushing information at Net users. But if it catches on, American not British companies will be cashing in.

There are individual success stories being created by UK companies extending their businesses online and British firms know how to address their home market better than any foreign competitors.

But the government's oft-quoted example of the Yorkshire family butcher Jack Scaife selling black puddings and traditional bacon throughout the world via the Net pales 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).

Government's wake-up call

Peter Mandelson
Mandelson wants to make all policies e-friendly
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.

Government has been pushing e-commerce up the political agenda and there are signs that it is viewed as more than a New Labour buzzword. The job of the UK's first Internet czar has been advertised 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 Trade and Industry Secretary Peter Mandelson is pushing the concept of a knowledge-based economy with the same zeal that he has proclaimed the Millennium Dome as a symbol of Britain's future.

The Electronic Commerce Bill, promised in the Queen's Speech in November, will give Britain the best environment worldwide to trade electronically, he says.

December's Competitiveness White Paper set a target date of 2002 to achieve this, with a report, Benchmarking the Digital Economy, giving a hard-headed assessment of where Britain stands now.

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 CBI says it wants nothing done that will undermine existing laws and regulations on e-commerce.

The government is in fact facing strong opposition from business, other political parties, academics and the Internet community to its plans. Mr Mandelson's opposite number in the Conservative party, John Redwood, has described his wish to legislate as "a back-door way for the government to damage our freedom."

He is echoing concerns about civil liberties expressed by groups such as the Campaign Against Censorship of the Internet in Britain, the Foundation for Information Policy Research and the newly-formed, whose Website encourages visitors to adopt an MP and educate them on the dangers of encryption legislation.

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?

The campaigners are fighting a battle on behalf of current and future users of the Internet. Around 20 per cent of the UK population will now admit to having been online in the past twelve months and the proportion appears to be increasing by a third to a half every year.

Some three million households were expected to do part of their Christmas shopping online this year. More than 500,000 people signed up for Dixons' free Internet connection service within two months of its launch

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.

Britain does have a lead in the development of digital television. But the opportunity it presents for e-commerce could mean users of the future will settle for a dumbed-down version of the Internet, degraded to fit the tv screen.

Millions of new e-shoppers may start here and never notice the difference. Those who remember the Internet as it was and is today, may come to view e-commerce as the grinch that stole Christmas.

Chris Nuttall examines how legislation will affect e-commerce and internet security
See also:

19 Jun 98 | The Company File
24 Nov 98 | Queen Speech
22 Aug 98 | Science/Nature
04 Dec 98 | Science/Nature
23 Nov 98 | Science/Nature
25 Nov 98 | The Company File
14 Dec 98 | Science/Nature
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