The Rt. Hon. Patricia Hewitt

"The UK Online: The British Government's approach to e-business"

I am delighted to have the opportunity to speak to you today.

I would like to start by thanking Mr Kishi, Chairman of the Keidanren committee on ICT, and other Keidanren members for kindly organising this event today and agreeing to host it. I would also like to extend my thanks to each of you for attending today.

I would also like to extend my thanks to you for attending today.

It is a great honour for me to address this distinguished audience. It is a particular personal pleasure too to follow in the footsteps of my father, Sir Lenox Hewitt who spoke here in 1973, when he was the Permanent Secretary of Australia's Department of Minerals and Energy.

I would like to tell you something about how my Government sees the international development of IT and e-business. I would like to explain what the UK is doing to promote IT and e-business and show you how successful we are being. This will I hope demonstrate to you the role the UK can play as a partner in Europe and globally for Japan and Japanese companies.

I hope we can work together more closely as Governments, and I hope we can provide you in Japanese and UK industry with the best possible conditions for carrying out e-commerce globally. That is why I was pleased to agree today a joint announcement with the Government of Japan on closer policy co-co-operation to help stimulate the global market for e-commerce.

We are of course living through a technological, economic, and social revolution. But we are not just living through it - we are making it happen.

People talk of the 'new economy' replacing the 'old economy'. They imply that the future is only for the dot com businesses, that manufacturing is doomed to decline and death.

I think they are profoundly wrong. Electronic networks are transforming every product and every process in every sector of the economy. Transforming the supply chain, transforming the way products are bought and sold and traded. The scale of the transformation is indeed extraordinary. As a new visitor to Japan, I have been astounded - as every visitor must be - by seeing the success of mobile Internet such as I-mode and J-Sky.

These and other mobile Internet devices, are part of the next generation of the Internet. The first generation gave us the Internet through PCs. Internet for the few - with devices that are still expensive and often unfriendly. Here the USA led the world. It had first mover advantage. But the second generation of the internet is for the many. Internet through mobile devices, through digital TV, and through a host of Internet appliances. Cheaper, easy to use. Here it is Japan and Europe - and particularly the UK within Europe - that have the edge because it is in the 3G technologies and digital TV that we are ahead.

3. Where UK and Japan are in the international picture

Let me set out in a little more detail where I think the UK and Japan are now.

In mobile Internet and to m-commerce, it is Japan and the UK who are in the lead. Japan of course will see the first commercially available 3G service in the world later this year with a service in the UK about a year later. And of course we are delighted that DoCoMo is to be a partner in the development of one of the new UK 3G networks. I hope that other Japanese operators and manufacturers will similarly invest in the UK.

One of the main reasons for the USA's difficulties in the 2G network has been their failure to agree common standards for mobile networks. By contrast the common standard for 3G called W-CDMA that Japan and Europe have adopted is a huge milestone for international co-operation and reflects a strong partnership between Government and business. In the UK we fully recognise the importance of developing a global 3G standard. In early 1998 my department declared its support for the W-CDMA standard in a crucial standards vote. This key decision by Europe led directly to the setting up of the Third Generation Partnership Project and the emergence now of 3G standards which are leading the world.

By contrast, I think the development of incompatible standards for digital TV in Europe and Japan represents a wasted opportunity and we should work hard to ensure that later generations of multimedia broadcasting standards are developed collaboratively for the global market.

The UK is the first country in the world to employ digital TV over three different platforms: terrestrial, satellite and cable. Already 6½ million households - which is one in four - are subscribing to digital TV only 2 years after launch. And theThis is 1 in 2 for households with children. The new digital TV receivers enable access to the Internet ande- e-mails. Digital TV also facilitates access to a range of banking and shopping services so we now have t-commerce as well as e-commerce and m-commerce.

The UK and Japan are also amongst the world leaders in developing and exploiting creative content to use on this new media. One of the most innovative sectors is the computer games sector where again UK and Japan have something in common: on a per capita basis the UK is second only to Japan for purchasing games software. UK games developers are at the cutting edge of digital technology - a wonderful synthesis of technical skill and creative talent which employs over 5,600 people. One example is Eidos, created just 10 years ago and now with a turnover of nearly £200 million. The latest example of their work is showing now on the screen.

That was our Prime Minister Tony Blair speaking at the launch in September last year of the UK On-Line report. The Prime Minister set out the UK's aim which is to make the UK the best place for e-commerce in the world by 2002. I would now like to discuss our strategy for this in more detail.

In order to achieve our goals, we must do three things. We must have

modern markets - with the right market and regulatory framework.

We must have confident people - with the skills they need as citizens, consumers and workers in the knowledge economy and the knowledge society.

And we must have online government - making government itself a leading edge user of new technologies as we transform the way we create and deliver public services.

4.1 Modern markets

The UK was one of the first countries in the world to liberalise telecommunications. Our businesses and consumers have benefited from greater choice, better services and lower prices.

Now we are driving competition even further and faster into the telecommunications market place. We have competition between the different wired networks - BT, the cable companies, the new long-distance operators, the resellers. We have competition between the different wireless networks. We have growing competition between wired and wireless networks, with operators increasingly using both wired and wireless networks to offer the best package of services to their customers.

In allThere are now, in all, about 200 licensed telecom companies, over 400 ISPs and 4 mobile operators - rising to 5 with 3G

Effective competition depends upon effective regulation. And an effective regulator needs two things. First, sufficient resources to deal effectively with a powerful incumbent. We have about 170 expert staff in the office of our independent regulator OFTEL. This is financed not by taxpayers - money but by a licence fee paid for by the companies in the regulated sector.

Second, the regulator should be independent not just of all the companies being regulated but of day to day political pressure. The precise details of how a regulator is structured will of course vary between countries, depending on local circumstances. But Details of regulatory structure depend on local circumstances, but whatever the structure, the key is that the regulator shouldnot be exposed to day to day political or commercial pressure and should be seen to be acting in the interests of consumers, not the regulated industries.

There is no doubt that the policy of liberalisation and competition is working in the UK. When I was first appointed, the No 1 problem was the cost of Internet access - the result of local phone calls charged on a per-minute basis. Today, we have a variety of flat-rate, unmetered Internet access packages.

The latest OECD figures for the cost of Internet access show that the UK now has the lowest prices in Europe, and some of the lowest prices in the world, for [residential off-peak internet access]. And we are seeing how this affects Internet penetration. Now almost 8 million households have Internet access- nearly 3 times more than 2 years ago.

However, for metered business Internet access, the UK is the second most expensive of the countries considered. So we are not satisfied yet - and we will continue to look to effectivemore competition and tough regulation to drive business costs down.

Competition and regulation will also deliver the higher bandwidth that is vital to the new consumer and business services. BT has already rolled out ADSL in local exchanges covering 40% of the population, with high-speed Internet services now available not only from BT itself but from over 80 other service providers. Since last August, OFTEL has also required BT to open up its local loop, giving new entrants access to the local exchanges where they can install their own DSL capacity.

I have spoken at some length about telecommunications simply because that is so important to getting the market framework right. But of course it is not all that has to be done. We also have to remove legal barriers.

For instance, last year, we took a major step forward with the Electronic Communications Act which gives legal recognition to electronic signatures.

The UK Government is also aware of the importance to employers of recruiting the best staff and for companies to compete internationally for those workers. One way to help them compete is by ensuring that the UK tax treatment of share options is equivalent to or better than in other countries. We have also tax-advantaged particular types of share option schemes to encourage employees who own shares in their companies. We have also conferred tax advantages on particular types of share option schemes so that companies can reward and retain their bestskilled employees

Perhaps the most difficult challenge is to create a seamless and global framework of law and regulation for a marketlegal and regulatory framework for a world that is changing with unprecedented speed. We have grown up in a world where telecommunications, broadcasting and computing were separate and distinct domains - and with a regulatory structure to match. But telecommunications, broadcasting and computing are all converging.

So we have now published our new Communications White Paper setting out our plans for a new regulatory framework - with framework. OFCOM will take over the work of OFTEL, as well as In place of OFTEL and the three existing broadcasting the three existing broadcasting regulators.

regulators, we have a single, overarching regulator for all communications - OFCOM.

4.2 Confident People

We cannot create the knowledge economy without the knowledge society.

As we saw earlier, in September the Prime Minister launched UK online, designed to get everyone online. We have already announced funding for 600 UK online centres, most of them in disadvantaged communities ,low-income communities and remote rural areas. By the end of 2002, we will have 6000, including every public library. Some are in community centres, football clubs and pubs. One is even in a caravan that tours around with a mobile funfair. Our goal is nothing less than universal Internet access.

In our schools, we have almost achieved that goal already. 98% of our secondary schools and 86% of our primary schools are now equipped with computers and Internet access.

I recently visited a secondary school in a rural village in North England, which works in partnership with a leading university and a local high-tech manufacturer to use interactive whiteboards for teaching maths, science, English and foreign languages. There's no doubt at all that by using technology in ways that excite and interest the pupils, the school has raised its standards of achievement throughout the curriculum.

We also have to upgrade the skills of today's workers and so we have created learndirect.This is a new national on-line learning network which uses the Internet to deliver learning products and services to people's homes, workplace or to learning centres nation-wide.

4.3 Getting Government online

Perhaps our biggest challenge is getting Government itself online. The technology is only a small part. Like every other large established organisation, we are wrestling with vertical silos; with legacy systems that do not talk to each other and with multiple centres of leadership.

Our 'e-Government strategy'is the road map for this journey. Our goal is all government services online by 2005. Already, we have achieved 33%. We have charged each government department and agency with formulating its own e-government strategy. And we are creating partnerships with innovators in the private sector who can help us find new ways of delivering services.

For example, we are modernising our health service with NHSthe National Health Services Direct - an innovation that allows people to get health advice 24 hours a day, 7 day a week through the website and telephone helpline.

And this morning I launched the UK Government's first mobile website in the world. will now be available on J-Sky and I-node -the first substantial foreign government site for Japanese mobile users.

We are creating new services with the private sector - for instance a web-site with the interesting name "Ask Giraffe". This web-site allows people to search both public and private sector databases for geographical information.

Now we have launched the UK Online citizens- portal. Instead of being structured around government departments, it is structured around episodes in people's lives: having a baby, moving house and so on.

Finally, this month we launch the Government Gateway which securely connects the Citizen Portal and other Commercial and Departmental portals to government back-office systems, 24hours a day, 365 days a year. Initially this will allow businesses to file their tax returns on line, and will quickly expand to support transactions between citizens and central and local government such as passport applications and vehicle registrations.

Measuring our success - how are we doing?

Wise companies benchmark themselves against the best in the world. Wise governments must do the same. So I'd like to share with you the results of our own international benchmarking surveys.

Firstly, the results show we are amongst the world's leading industrialised nations in the world in the general use of ICT and e-commerce.

60% of businesses use a web-site as a marketing tool. 90% of businesses have Internet access, that's up 55% in the last three years.

Secondly the charts show that UK firms are increasingly using ICT and the Internet throughout their business processes, and are not just using web-sites to promote themselves.

27% of businesses are actually trading on-line and 51% of businesses allow customers to check availability of stock on-line. At the other end of the supply chain, 28% pay their suppliers on-line and 45% of businesses order from their suppliers on-line.

However our benchmarking also shows that we are no more than average in the EU for use of e-commerce by small firms and in particular very small firms with less than 10 employees. Therefore we are concentrating our efforts on increasing the use of e-commerce in small firms.

18 months ago, the situation was even worse. Our smallest businesses were at the bottom of the G8 league table for Internet use. We set a target of getting 1.5 million of our smaller and medium sized enterprises online by 2002. Today, we already have 1.7 million online - and that number is growing rapidly. But only half a million of them are using the Internet to trade, with customers, suppliers, or both. We plan to double that by next year.

The UK only succeeds as a part of Europe. You may have noticed that our e-commerce strategy - UK Online - and the EU equivalent - e-Europe Action Plan- are very similar. That is no coincidence and reflects our hard work with our European partners to ensure that Europe adopts an outward looking, pro-competitive and light-handed approach to regulating e-businesses.

We are now working hard with the European Commission and Member States to overhaul the legislative framework for e-business. The e-Europe Action plan and the Electronic Commerce Directive adopted last year are examples of this. examples of some ofthis, and reflect the hard work done by the UK at the heart of EU policy making. And our efforts appear to be working: Therethere are now more Internet users in Europe than in the USA and 55% of Europeans use a mobile phone - against 40% in the US - a 12-18 months lead

7. Global issues

Japan and the UK both have a common interest in securing a more coherent global framework for e-business. We will only realise the full benefits that e-commerce can bring our industries if we create a more global framework.

I believe Japan and UK - as two outward looking trading nations which are influential both globally and regionally -are ideally suited to co-operating together to help develop this global framework.

Our successful collaboration on 3G standards is just one example of what we can achieve together.

There are many other areas where greater co-operation will also yield results.

One area where we can work more closely together is in promoting consumer confidence. We know that fear of e-commerce is one of the barriers that stops people using the Internet to its full extent.

ConsumersPeople need to have the same confidence when ordering something from either London or from Tokyo.

Both our countries are developing codes of conduct for e-commerce or trustmark schemes but there is little international recognition or coherence in the multitude of these national schemes. An OECD survey in 1999 showed there were over 100 schemes internationally. Government has a role to play here by facilitating greater coherence and recognition between all these different schemes.

Similarly in other areas such as tax, privacy, data protection or IPR, there is huge benefit to be gained from us working together to create a more coherent approach. And of course, we both must tackle the international digital divide. I believe the Digital Opportunity Task Force which was established following the G8 Summit in Okinawa in July will make a major contribution here.

This need for greater co-operation is why I am pleased that earlier today I agreed with the Japanese government a joint statement which sets out clearly a framework for us to co-operate together on a range of e-commerce issues. We have agreed that the UK and Japan will work closely together, not only on bilateral issues but also in the international fora looking at e-commerce.

8. Inward investment

In this global economy, we are all in an increasingly fierce fight for capital, skills and investment. The UK is second only to the United States in attracting inward investment.

We are second to none NONE in Europe in attracting world class companies. We continue to attract around 40% of all Japanese and US investment into Europe and remain the No 1 destination for foreign direct investment into Europe.

Over one thousand Japanese companies are located in the UK. There are 278 Japanese manufacturing operations and some 160 Japanese companies with R&D activity. Fujitsu, Sony, Toshiba, NEC and Hitachi are just some of the world class Japanese companies with significant manufacturing and R&D operations. They are contributing to the UK's success - and the UK is contributing to theirs. For us, these companies are part of the British business environment. We regard them as British Companies -just as companies like BT, C&W and Vodaphone regard themselves here as Japanese companies.

A marked feature of recent investment in the UK has been the large number of software, internet, telecoms and e-business companies which have chosen the UK for their expansion. Last year we recordedsaw a record 757 new investments into the UK - of which 205 projects were in these sectors. This underlines our success in attracting businesses linked to the knowledge driven economy.

Most of these investments were from the US but investment from Japan and elsewhere are equally welcome.

There are many examples - Microsoft in Cambridge or Eisai at University College London,London. AT&T is another. In 1999 they set up a £30m research institute in Cambridge to research cutting edge communication, multimedia and mobile technologies in partnership with Cambridge University.

I have already mentioned some of the reasons why these companies chose to locate in the UK: the regulatory environment, the IT infrastructure, low access costs, government commitment to embracing e-business culture. Other factors are also important like: our stable economic environment, low taxes, the English language and the creativity, inventiveness and skills of our people.

All this makes us a natural launch-pad for high-tech companies seeking a European base.

9. Conclusions

We inIn the United Kingdom we are working to ensure that we are meetingmeet the challenge of change. We have a unique position in the global economy, with our leading role in Europe, our strong ties across the Atlantic, our historical trading links with the Asia Pacific region, and our global language.

Above all we share with Japan a commitment to growth and prosperity through competition; a commitment to an open, rule based and globally inclusive system for international trade and a commitment to working closely together with others through trade, investment and policy co-operation.

As our companies encounter the same challenges, they will benefit from mutual investment and joint ventures.

As our governments face the same challenges, we will benefit from closer collaboration in tackling both national and global problems.

And to the many Japanese companies who are making rapid advances in e-commerce, I would say:see their future as globally competitive companies, I would say: to have a global presence you need to be in Europe and the UK is the preferred European location among global companies for e-commerce. We have achieved this by being open and competitive. We hope to build the global infrastructure with Japan andwork with Japan to build a seamless global market for e-business. We hope and expect that more Japanese companies will chose the UK as the launching pad for expansion and success in Europe. You will always be welcome.

Other speeches by The Rt. Hon. Patricia Hewitt

• Chemicals Industry Association (23/01/03)
• Women in IT Conference (22/01/03)
• Awards for Responsible Capitalism (27/11/02)
• E - Summit (19/11/02)
• Daycare Trust Conference (13/11/02)
• Asian Trader Awards Event (12/11/02)
• T&G Manufacturing Conference (11/11/02)
• LGA Economic Regeneration Conference (05/11/02)
• Quoted Companies Alliance Dinner (30/10/02)
• The British Retail Consortium Annual Dinner (29/10/02)
• Leading Edge ICT Seminar (22/10/02)
• European Union - Challenges and Opportunities (16/10/02)
• The Government view on Business and the Environment (10/10/02)
• 100 Group Speech (08/10/02)
• Institute of Public Policy & Research Manufacturing Project Speech (23/09/02)
• The Royal Television Society (10/09/02)
• Science Strategy Document Launch (23/07/02)
• Full and Fulfilling Employment (11/07/02)
• Invest UK Annual Review of Operations 2002 (10/07/02)
• Company Law Speech (05/07/02)
• Celebrating Excellence in the Knowledge Economy (03/07/02)
• Royal Society of Chemistry Parliamentary Links Day (25/06/02)
• Labour Market Speech to MEPs (19/06/02)
• UK Labour Market (29/05/02)
• National Federation of sub-Postmasters Conference (21/05/02)
• Intellect Launch (16/05/02)
• Council for Excellence in Management and Leadership Report (13/05/02)
• Research Councils UK Launch (01/05/02)
• British Chambers of Commerce Annual Conference (22/04/02)
• Russian Economic Forum (18/04/02)
• Housebuilder of the Year Awards (28/03/02)
• Statement to the House of Commons (06/03/02)
• Reforming Europe's Economy: Obstacles and Practicalities (04/03/02)
• Trade & Industry Dinner (27/02/02)
• Social Enterprise & Co-operatives: 21st Century Businesses (26/02/02)
• Keele University (21/02/02)
• Women in Rural Enterprise Conference (07/02/02)
• The Lisbon Agenda - Delivering Jobs and Prosperity for all (06/02/02)
• NCVO Annual Conference (06/02/02)
• TUC Flexibility for All Conference (05/02/02)
• QED Annual Review (24/01/02)
• The Future for Manufacturing Industry (23/01/02)
• Women in Science - the 10th Anniversary of the Daphne Jackson Trust (21/01/02)
• The Annual Dinner of The British Israel Chamber of Commerce (16/01/02)

(the following are available from the archive)
• Free Trade For a Fair, Prosperous World (24/07/01)
• Business in the Community Awards for Excellence (11/07/01)
• Business And Society - Roles and Responsibilities (09/07/01)
• Statement at the Press Launch of Enterprise for all (18/06/01)
• Business Unlimited : Investing in South Africa Conference (14/06/01)
• AEEU Conference (13/06/01)
• Regulating UK Communications (22/03/01)
• Creating Competitive Advantage in the Knowledge Economy (21/11/00)
• European Telework 2000 'New Ways of Working' Conference (13/09/00)
• World Congress on Information Technology: "Better Government: The Vision and the Challenges" (14/06/00)
• Microsoft Government Leaders Conference (07/04/00)
• e-Commerce Strategy Presentation by the Minister for e-Commerce, Harvard Information Infrastructure Project (14/03/00)
• Business Link National Conference (19/10/99)
• The CBI & Real Business Magazine 9th Growing Business Awards (06/12/01)
• Proshare Awards Speech (04/12/01)
• Building a high productivity, low carbon economy (04/12/01)
• Yorkshire Forward Business Lunch (30/11/01)
• "Made in Sheffield" Dinner (29/11/01)
• Free and Fair Trade for Peace and Prosperity (06/11/01)
• "Building a Stronger World Community Through Trade" (25/10/01)
• "Economic Reform in Europe : more important than ever." (24/10/01)
• TUC Congress (10/09/01)