IT’S NOT OFTEN that a government decides to help kick-start a market by throwing cash at it. But that’s roughly the effect of the U.K. Online initiative unveiled in September by the British Labor Party.
As part of a total package worth approximately $1.46 billion, 600 public access Internet kiosks will be introduced into poorer areas, subsidized training will be offered to consumers and all government services will be online by 2005. In addition, some $22 million has been set aside to help smaller businesses develop Web sites.
A notable feature of the launch was Prime Minister Tony Blair’s declaration that “There is no new economy. There is one economy, all of it being transformed by information technology. What is happening is no dot-com fad that will come and go – it is a profound economic revolution.”
So is an “old economy” technique like government intervention the way to get e-commerce going in the United Kingdom? Some success came with an earlier effort, the information society initiative. Against a target of 1.5 million small and medium-sized U.K. businesses online this year, it has gotten 1.7 million onto the Web. However, only 450,000 are trading online so far, against a target of 1 million by 2002.
At Virgin Biznet, which specializes in developing and hosting Web sites for businesses with fewer than 20 staff members, marketing manager Afam Edozie says: “[The initiative] will make a tremendously strong impact on small businesses and will be beneficial for the U.K. economy.”
He adds that it “will make our life easier.” One of the biggest obstacles his company faces in selling its services to e-businesses is what he calls “the fear factor – they are aware of the technology, but are scared of making mistakes, are unfamiliar with how to use it, or are technophobes.” The presence of government-funded advisers in help centers across the United Kingdom, as well as online support and telephone-based advice, should remove this initial hurdle.
At Brann Digital, the division of the DM company that deals with the Web and interactive TV, strategy director Brent Skinnon agrees that “the message [the plan] sends out is strong, but I’m not sure about its effectiveness.” He believes that to push e-commerce into the mass market, the government needs to announce when it will switch off analog television broadcasting.
“Because PC penetration is tailing off, interactive digital TV will open up a true mass market,” Skinnon says. To date, the government has hesitated on this issue and mentioned various possible horizons for when existing TVs would no longer be usable – between 2006 and 2010. Such a move would drive up ownership of digital TVs or set-top boxes, but might also spark a political backlash.
Another inhibiting factor on U.K. e-commerce is the monopoly held by telecommunications giant BT over the “local loop” – the final link in phone connections into households. Calls for liberalization, and also for an end to the metering of local calls, were not reflected in U.K. Online.
At Internet consultancy Strategies, director Neil Colling is less convinced that the government should intervene in this way. “My view is that it should stay out of it because [the government doesn’t] understand the market,” he says.
Blair stated that he wants the United Kingdom to become the leading world center for e-commerce. But this vision didn’t include encouraging growth by cutting taxes on Internet sales or on dot-com profits. If this step isn’t taken, both U.K. consumers and companies may hang back from adopting the Internet because of higher costs compared with the United States, especially due to call charges.
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