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Rt. Hon. Peter Mandelson - Former Secretary of State for Trade and Industry (Jul 1998 - Dec 1998)5th Annual CEO Summit on Converging Technologies |
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Introduction Thank you for your kind words of introduction, although I am somewhat disappointed not to have been as effusively welcomed as Bill Gates. I understand the "entire human race" was grateful that he could be here! Obviously politicians don?t merit the same level of gratitude. I am delighted to be able to give my first keynote speech as Secretary of State for Trade and Industry to this important conference, especially as your theme - "Europe?s New Digital Economy" - brings together two of my passions: - the future of Europe, our home market; - and the economic and social opportunities offered by the convergence of information and communication technologies. Both subjects are central to the DTI?s mission to promote competition and competitiveness. The Euro and the new digital economy will cast a bright, unforgiving light on the uncompetitive. The twin convergence of currencies and technologies will lead to a step change in competition. They will highlight unjustified price differences. They will make it easier to compete across national boundaries. My theme today is how, together, we can turn these competitive challenges to the advantage of Britain. Turning to Europe: As you discussed yesterday, the Euro is a particular opportunity for the ICT industries. In the run up, companies are upgrading their IT systems for its launch, creating something of a boom. But this change is occurring at a time when the world faces increasingly difficult and serious economic challenges. In Asia, the downturn which began over a year ago is proving to be deeper and more prolonged than many expected. Japan?s difficulties continue, robbing much of Asia of the motor that drove its development for so long. The crisis in Russia, deeply worrying in itself, has disturbed the world?s financial markets, and difficulties are spreading to Latin America. Clearly, the more favourable the general economic climate the better for the introduction of the Euro. But the key to the success of the new currency is not these current difficulties, but twofold: - first, preparation. European businesses need to adapt to meet the challenges of the Euro, and indeed the Millennium Bug - in Britain as much as on the Continent. That is why the UK Government has launched national awareness campaigns on both issues. - second, economic reform. Greater price transparency will see a step change in competition in the single market and Member States will need supply side policies that actively contribute to output, employment and the competitiveness of their firms. Flexible product, capital and labour markets will be crucial to the success of the single currency, and to generating higher growth in EU economies and healthy job creation in the longer term. The EU must meet the challenge of growing competition from the developing markets of central and eastern Europe. Markets which I hope will be part of the European Union early in the next century, expanding our home market even further. The digital economy But if the Euro is the challenge from 1 January 1999, and the Millennium Bug up until the year 2000, the digital economy is the challenge - and the exciting opportunity - for the new millennium. From the fifties, automation and mainframe computers under-pinned nearly three decades of growth. In the eighties, personal computers revolutionised the way we all work. In the nineteen nineties, huge advances in computer power and its convergence with communications are continuing to spur growth. For individuals, this convergence is bringing new ways of learning and communicating, of performing everyday tasks such as shopping, and quite simply of having fun. For businesses it is changing working practices, opening up new markets, creating new products and new forms of distribution. You will have heard much over the last two days about the strides being taken throughout Europe in this area. My vision for the UK is quite simple: to be Europe?s digital laboratory. I want Britain to be the test bed for digital products and services in Europe, so that UK consumers have access to these first and so that British business can lead the world We start from a strong position. We have a top-quality skills base: world-class universities; a breadth and depth of intellectual capital which are the envy of our competitors. And we have a regulatory system that positively encourages innovation. To their credit, the previous Government took the lead globally in introducing competition to the telecoms market. We now have over 350 licensed operators and levels of competition are as developed as anywhere else in the world. We continue to be at the leading edge: We are one of the few countries to abandon the idea that the local loop is a natural monopoly. We are setting the pace in Europe on standards for the third generation of mobile telephones. As a result, UK consumers have felt the benefits of greater choice, higher quality and reduced prices. The way ahead So the UK is well placed to take advantage of the new digital age. But there can be no room for complacency. Our digital industries are not as productive as their US counterparts, nor growing as fast. And as you have heard at this conference, countries across Europe are pushing ahead. So if we are to be Europe?s digital laboratory, we need to stay on our toes. We need to in any case, if we are to succeed in markets which are driven by technological innovation and where the traditional business model can be turned on its head overnight. Look at the way mobile telephones transformed a previously unidentified demand into a mass market phenomenon. And look at the impact which telebanking and tele insurance is having in those sectors. These are markets where innovation and entrepreneurial drive can take a business from start-up to global player in a matter of months, not years, and where change is exponential. - Moore?s Law, which has seen computing power double every 18 months, looks set to hold true well into the next century. - Internet providers estimate that the volume of Internet traffic doubles every 100 days, which is also the pace at which Amazon, the first Internet book shop doubled its turnover throughout last year. Against this background, businesses need to be constantly innovating if they are to succeed. The same is true of nations. You might rightly ask how any Government can hope to make an effective impact in such a fast-moving, dynamic and unpredictable global market? Our starting-point has to be the market-place itself. Underlying all the change and the leaps in technological innovation, there remain the three constants of any market: demand, supply and a framework within which the two can interact.
My intention as Secretary of State for Trade and Industry is to ensure that the UK excels in all three. A world-class regulatory system Let me start where the role of Government is most direct and influential: the regulatory framework. The convergence of telecoms, broadcasting and the other IT industries poses real challenges to our current system. - how can we effectively regulate a converging industry through regulations and regulators designed for separate, distinct sectors? - how can we further develop the international framework of intellectual property rights so as adequately to protect the intangible assets which will be the key drivers of the digital age? - what are the implications of convergence for competition policy? - how can we protect consumers making purchases not in the high street but anywhere in the world and without necessarily knowing where? Meeting these challenges will not be simple. And we need to know more about the implications of convergence if we are to exploit it to the full, which is why my Department will shortly be publishing a comprehensive assessment of the impact of these new developments. But I believe I can already set out four key regulatory principles which we need to apply if we are to meet them head on. First, clarity. We need a regulatory framework which gives businesses the certainty they need in order to invest in new infrastructure and services; Second, flexibility. We need a framework which can evolve with technological and business change, and with new demands as they emerge in the market-place, not one which stifles innovation. As I have said, we are in the world of Moore?s law. Even a Government as quick off the mark as ours, has to accept that we may not always be able to keep pace with the market and, certainly, not be able to second-guess it. Third, coherence. We need to eliminate any gaps, overlaps and anomalies wherever possible. And finally, enforcement. We need regulation which is enforceable in a world where transactions take place instantaneously by their million, and where the person on the other end of line could be anywhere. I intend to work with our European and international partners, to ensure that these principles apply to all regulation affecting the digital economy. It has been said of some of our European partners that they prefer regulation to competition. In our view, this risks suffocating rather than stimulating innovation. I believe in competition wherever possible and regulation only where necessary. There will be times when no regulation at all is the most practical solution. In those cases, we should be looking to empower the individual consumer through technology itself. "Content filters", for example, may give parents the power to control what their children have access to on the Internet. Similarly, the ability of consumers to control who has access to information about their purchasing preferences, via their own "personal intelligent agents", may provide the key to some major, longer term data protection issues. Electronic commerce has the potential to become a huge driver of wealth creation. It was 38 years before radio users numbered 50 million. It has only taken four years to get the same number on the Internet. There are barriers to be overcome before its full potential can be realised. Some are technological, and I know that many businesses are investing heavily in finding ways to overcome them. But some are the responsibility of Government: such as intellectual property rights, the impact of Government procurement, the tax system, data protection, and the legitimacy of electronic agreements. The potential prize is enormous, but only if we get the regulatory framework right. By the end of this Parliament, I want the UK to be globally recognised as the best environment in which to trade electronically. And to help achieve this, we will be bringing forward legislation, to promote the safe and successful growth of electronic commerce. Strong and sophisticated demand While the regulatory environment is essential, it is demand from informed and motivated customers that is the key to a dynamic market. As Bill Gates argues in "The Road Ahead", which I read on a Long Island beach - it looks unlikely that a digital mass market will emerge on the back of a single "killer application". Instead, for some years now we have been seeing a steady increase in demand for a range of digital products and services. But at some point - in my view quite soon - these incremental increases in supply and demand will explode into sudden, dramatic change: the creation of a true mass market. Such a market will be created by consumers and businesses, not politicians. But Government can help to move the process along. Most crucial of all, are our responsibilities for education and skills. In the knowledge-driven digital economy of the 21st century, a nation?s sole sustainable source of competitive advantage will be its people. That is why the Government is committed to transforming the UK into the world?s foremost learning economy. That is why we are linking up all schools, libraries, colleges and universities through the National Grid for Learning. Only a fifth were connected when we took over - all will be by 2002. We have already met our pledge that schools will be connected for free at discounted rates. That is why we have launched a £230 million programme so that all teachers who want training can get it. Not just training in how to use IT, but how to use IT to teach. This is why we are creating a University for Industry capable of using IT to serve 2.5 million people and businesses with distance learning, and why this will focus on IT skills. We also need to make the best possible use of the Government?s own market power. To this end, we want 90% of central Government?s routine purchases of goods to be made electronically by 2001, and for 25% of Government services to be available electronically by 2002. And we must tackle the barriers and market failures which prevent take-up of digital products and services. In essence, the major barriers are cultural. Over a third of people in the UK say that they cannot see the benefits of digital technologies, more than twice as many as in the US. Too many UK businesses are also lagging behind. Only 49% of UK employees work for firms with Internet access - compared with 73% in Japan. And only 13% of UK businesses with a web site use it for on-line trading. 29% do so in US. This is a real threat to UK competitiveness. One which we are already addressing. The DTI already has 3,000 IT for All access sites where members of the public new to IT can get hands on experience in public places such as libraries. And under the Government?s Information Society Initiative?s Programme for Business, we are rolling out a national network of local support centres aimed at giving SMEs impartial, expert advice. But there is still much more to be done. We must do more to market these initiatives. We must also develop new and innovative ways to reach businesses, in particular SMEs. Our research shows that that the single greatest influence on businesses taking up ICTs is the supply chain. I believe the supply chain can be used to lever in even more change to even more SMEs, and want to work with trade associations and major companies to this end. In this area, my goal is simple. To ensure that, by the end of this Parliament, the UK is leading demand for digital technologies by both businesses and individuals. Dynamic supply industries But if we are to stimulate this demand, you, the IT, Electronics and Communications supply industries need to anticipate and meet it, as well as playing a key part in generating it. Already, your importance to the UK is enormous, with output of £90 billion, accounting for over 6% of our GDP and directly employing nearly 1 million people. And what?s more, this is an industry which has frequently posted growth rates in excess of 10% per annum in recent years. My goal is to ensure that this growth rate is maintained and improved - the UK needs to out-perform all its competitors. The old left would have tried to deliver this through big, probably nationalised industries. The new right would leave it all to the market. This is a false choice and it fails to address the agenda on which joint Government - business can work together. What is this agenda? First, skills. Yours is a truly knowledge-based sector. It is dependent on advances in science and technology, both in academia and industry. This requires a strong skills base - in R&D, in design, in manufacture, in customer services and a host of other areas. I will ensure that the Government's new initiatives on skills - the University for Industry and the Skills Task Force, to take but two examples - deliver results of real benefit to your vital sector. In particular, we need to turn around the UK?s poor track record on electronics engineering, where the number of graduates has fallen in recent years. The total output of 2500 new graduates a year is simply not enough for an industry which employs over 260,000. Second, the development of networks to support knowledge-based industries. The Silicon Valley experience demonstrates that a healthy IT, Electronics and Communications sector thrives best when there are close links, formal and informal, between innovative companies, the science base, financial and other institutions. In the UK, we have the beginning of such networks - in Cambridge, on the M4 Corridor, in Central Scotland - but we need to enhance them. In particular business and Government must work together to ensure that innovative SMEs have easy access to the mentoring, the finance and any other form of practical assistance that they need. I will be going to the US next month - and more specifically to Silicon Valley - and intend to use that opportunity to learn from their success. The third essential element is the effective transfer of knowledge. UK universities and companies do excellent research, but all too often it is either exploited overseas or not at all. The Government?s Comprehensive Spending Review has freed up welcome resource to invest in the UK?s much neglected science base. We must ensure that this investment is exploited to the benefit of UK industry: - by giving universities greater incentives to collaborate with businesses; - by ensuring that businesses have the skills and complementary assets needed to transform scientific knowledge into successful innovations; -and by enhancing the networks within which universities and businesses can come together. Conclusion It has been my pleasure to be the closing speaker at this conference. This Government has a clear vision of the future in which the UK is the leading digital economy in Europe and a leading player world-wide. I want to work with you to realise that vision. In particular, I want to work with the Information Age Partnership - in which many of you here today are engaged - to drive through the programme of change needed if we are to succeed. And I have set out targets by which our joint success can be assessed:
I cannot guarantee that we will meet these targets. I can give my personal guarantee that the Government side of the partnership - not just DTI, but Government as a whole - does its utmost to ensure that we will. |
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Other speeches by Rt. Hon. Peter Mandelson - Former Secretary of State for Trade and Industry (Jul 1998 - Dec 1998)
(the following are available from the archive) |
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