E-commerce: how our neighbours fare

Tony Blair says he wants to make the UK the best environment in the world for e-commerce, but how does the UK compare to its...

Tony Blair says he wants to make the UK the best environment in the world for e-commerce, but how does the UK compare to its nearest neighbours? Ray Hearnlooks at the state of e-commerce in Europe

Last September, Tony Blair set out a vision that the UK would offer thebestenvironmentfor e-commerce. "[email protected]", the Government claimed.

Then along came the furore over the Regulation of Investigatory Powers Act, a piece of legislation which would actively discourage organisations from basing their e-commerce operations here, at risk of having the contents of their e-mails monitored by the security services.

To follow that, in May, computer services group CMG suggested that, far from being the leader in Europe of the new kind of commerce, the UK was actually falling behind, and it was now France that led the UK proportionately in the amount of business carried out online.

However, figures from the Government's latest reports into e-commerce tell a different story:

  • One third of the UK population is now online, more than any other European country

  • One third of UK employees engage in online financial transactions with customers or suppliers, a higher percentage than Sweden, Germany, France, the US or Canada

  • The UK is the largest e-commerce market in Europe

    So, the question needs to be asked: if some businesses are quietly moving their e-commerce processing operations out of the UK (though without making too much of a fuss about it), and if those e-commerce services are not to be offered from the UK, where should they be based in Europe and why?

    Telecommunications costs are a key factor to consider. According to a report for Oftel by Richmond-based company Teligen which examined all usage by residential and business customers, the UK had the lowest prices for most residential users of the Web. It was a point the Government was very keen to point out in the launch of its latest e-commerce report.

    Yet, on average, the UK, has the highest charges for businesses compared to the other countries surveyed.

    The extensive examination of a number of telecommunication services also included a look at what kind of Internet charges were demanded from UK businesses using the Web compared with a selection of European and American companies.

    "One possible reason for this discrepancy," says Richard Cadman, deputy managing director of Teligen, "is that the UK has a two-tier phone structure - one, the lower rate for residential use only, and the other for business. Business here does get a priority service if things go wrong, but you pay a higher price. Other countries in the survey, as far as we can make out, do not have this kind of difference."

    A similar picture emerged with ISDN services. For both residential and business use. UK residents pay, on average, relatively high prices compared to Germany and Sweden (both of which were about 33% cheaper) and close to those in France (where prices were 6% cheaper).

    For business use of ISDN, the UK is the most expensive of the four countries studied in the report, with Sweden almost 42% cheaper.

    So, how do other parts of Europe contrast with the UK in terms of their suitability as a base to offer e-commerce services? We have looked at countries from across Europe, taking into consideration e-commerce culture, the "e-friendliness" of legislation, and the economic background for business.

    Northern Europe

    Sweden: mobile commerce leader

    Sweden was the first country in Europe to fully deregulate its telecoms market. At present, there are 40 telecoms operators in Sweden, resulting in a fiercely competitive market and a wide range of sophisticated services. Scandinavia is already a leader in mobile commerce

    There is also a strong engineering and invention tradition. Sweden holds more patents in force per capita than any other country. In addition, according to 1998 figures, the Swedes invest 6% of their GDP in IT and telecoms, just behind the US, and well above the average for Europe.

    Svenska Kraftnat, the Swedish electric power network, together with the nation's three largest electric power companies, has joined a project to build a fibre optic broadband network. The first stage consists of a 1,700km fibre cable system that will cover about 80 towns and four million homes - nearly half the population.

    At the same time, other firms have combined to connect households with broadband. This will allow Internet access at up to 200 times the speed of traditional telephone wires. By the end of 2001, up to 20% of homes will be able to access the Internet using this high-speed method. In four years' time almost the entire population will be linked to broadband.

    Western Europe

    France: catching up

    France has demonstrated a typically Gallic stance regarding the Internet. Three years ago, French justice minister Jacques Toubon railed against the use of the English language throughout the Internet. In March this year, at the EU summit, French prime minister Lionel Jospin launched what was described as a "rearguard action" regarding European Internet progress. However, less than 5% of companies worldwide use the French language, and that includes French-based firms.

    In 1984, France launched the Ecole Pour L'Informatique et Les Techniques Avancees (Epita), a computer and telecommunications college, but it almost failed before the mobile and Internet revolutions finally took hold.

    Until recently, starting an e-business in France was a rarity, but many graduates of Epita have now formed e-businesses. Two of them, On-net Services and Planet StartUp, have come to be regarded as being among the fastest growing firms in France, providing technical, financial, legal and commercial help to newer Internet companies

    According to Jean-Michel Durocher, founder of French mobile content company Webraska, the tax laws in France do not help high-tech companies. Stock options are heavily taxed, and companies often have to take on more administrative staff to solve red-tape headaches.

    Germany: heading for leadership

    Germany once struggled to get to grips with e-business, but now looks likely to take over as Europe's e-business juggernaut. Four years ago, German exporters complained that they were losing trade because the Internet made it easier to compare prices and was consequently increasing competition.

    German business laws, traditionally inflexible and designed to protect employees and consumers, also held up progress towards a new German economy. But this year saw major Web-related changes. In February, Gerhard Schroder, the German chancellor, invited 30,000 foreign computer specialists to work in the country to boost its Internet competitiveness.

    The move was made in response to a chronic lack of skills, with at least 75,000 experts needed in research and development. The country was prepared to go to Eastern Europe and as far afield as India to find the right kind of specialists. However, there have been complaints from some foreign workers over their rights to set up businesses or bring family members into the country.

    A new cyber-crusade was launched to increase Internet usage in the home and among businesses by forcing price cuts. The Internet Without Metered Charges Group wants to see the number of German homes online, currently estimated at 7.1%, increase dramatically.

    T-Online, run by Deutsche Telekom, has a 62.3% share of the German Internet market, followed by AOL with 18.9% and Compuserve with just over 4%.

    In April, in another significant move, two 70-year-old German shopping laws were marked down for termination. This promised a significant relaxation in the country's notoriously restrictive retailing sector, which restricted both discounting and special offers.

    Despite these moves, Germany had one of the slowest ITdevelopment growth rates among major European countries in 1999. But thanks to companies such as GoIndustry, a Munich-based surplus equipment online marketplace set up by a British entrepreneur, that slow growth is now likely to be a thing of the past.

    Southern Europe

    Italy: driving a new hot economy

    Like Germany, Italy has slow IT growth, but its telephone sector is buoyant. According to the country's National Association for the Production of Technology and Communication Information Services (Assinform), in 1999 the telephone sector was worth a total of 63,290bn lire - up 14.6% compared with the previous year.

    The direct market impact of the Internet and related components was not greatly significant, but, according to Assinform, the Web has "forced" many market players - both buyers and producers - to acknowledge the presence of an important process of technological innovation. This led to a need to keep up with the times, which had tangible results on both upgrades and equipment renewals.

    Many newly-formed companies in Italy cited the existence of the Internet as their sole reason for starting a business. In the fourth quarter of 1999, free Internet access was introduced by many operators, and had a much greater success than was expected. This, plus PC and software demand, helped to fuel growth.

    The largest IT growth area is in the south of the country (including the Italian islands), estimated at 12.3%. Factors behind this growth include technology and application acquisitions by companies competing on the international markets, and the start-up of countless new enterprises in response to incentives encouraging young people to take up the opportunities offered by the Internet economy. This area - often regarded as the poorer part of the country - is expected to attract a growing number of advanced software and technology production operations.

    Spain: overcoming the manana effect

    In Spain, the manana attitude of southern Europe is fast disappearing as the country wakes up to the Internet.

    In March, the Spanish Association of Internet Users (AUI) reported that there were four million Internet users in Spain, accounting for 12.4% of the population, and a large proportion of these were business users. This compares with just 1.3 million people four years ago, and represents a 218% rise in Internet use.

    Of the four million users today, nearly 40% are business users, and this includes a significant number of small, home-based enterprises. Forecasts suggest incredible growth. By 2005 there could be 13 million Spanish people using the Web in one form or another.

    Meanwhile, the authorities have set up a special group, Info 21, to push Spain into the electronic revolution. There are plans to give aid - possibly through some form of tax relief - to boost e-commerce. So far, there is no "free" Internet connection, but there are plans for expansion of broadband and ISDN.

    Although known for its agricultural produce, nearly 80% of Spain's output is in industrial products, and this is where it is hoped the Web will produce greater opportunities.

    About 99% of Spanish companies are small businesses, and it is possible - as in the UK - that they will be among the greatest beneficiaries of Web expansion. Dotcom businesses are also beginning to emerge.

    Eastern Europe

    Czech Republic: infrastructure burden

    Internet business growth in the Czech Republic has been limited, not because of enthusiasm or realisation of the possibilities, but simply due to factors such as credit card systems for use on the Web not being as developed as they are in western Europe.

    However, the picture here is about to change. In 1999, 7.8% of the population were Internet users, representing only 800,000 out of a total of nearly 10 million people. But, by 2005, Web use is predicted to rise to 36% of the population, and volume of business could be as much as $3bn (£1.9bn).

    Next year alone there is expected to be a tenfold increase in Web use, and another tenfold increase by 2002.

    The Czech Republic has three major ISPs: Czech On Line, Internet On Line (owned by Czech Telecom) and Contactel (owned by a partnership of a Czech radio company and the Danish company TeleDenmark). In addition, there are 300 smaller ISPs scattered across the country. But businesses get no special help from officialdom to either get on the Web or purchase the right kind of computers and software. Also, by Czech standards, local phone calls are expensive.

    However, companies appear to be eager to get online and make use of the opportunities to sell to the world for relatively low cost.

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