E-commerce: First faltering steps into the electronic future

Dotcom cool has a lot to answer for.

It may allow the use of e as a verb - as in, "I'll e you later" - but that's the sort of behaviour that causes normal people to dismiss anything 'e' as just another annoying buzzward, a mere techno fad. E-commerce, e-business, even e-tail, for goodness sake.

The sudden overuse of 'e' in our language is all the more incongruous when you consider that many people have no idea what the 'e' stands for: Emergency? Energy? Envelope? Exempt? Er..., um.

Which begs the question. Does the Government know? In holding New Zealand's first e-commerce summit, it clearly understands just how important this 'e' thing is.

But electronic commerce and electronic business have vague meanings. The buying and selling of goods over the internet? Too narrow to justify a summit.

How about - as the Government sees it - "moving physical business processes to the networked electonic environment." Too dull.

If e-commerce is simply transactions over electronic networks, then we're already doing it with our eftpos (electronic funds transfer at point of sale) and atm (automatic teller machine) banking system. Indeed, the Government's draft strategy on e-commerce is quick to point out that New Zealand's uptake of eftpos and atm technology is the highest in the world - showing we have "a strong level of comfort with performing electronic transactions."

Possibly true, but the statement also indicates that we haven't actually embraced e-commerce yet. And while we're happy to poke and swipe cards in today's banking technology, the e-commerce infrastructure the summit is debating is something else.

So what is the 'e' in e-commerce? First and foremost it's a cost cutter - something every business wants. Computer companies Dell and Cisco were among the first to realise this in 1995 when they began moving portions of their sales and business processes to a new electronic form.

They used standardised - largely PC-based - computer technology connected by telephone wires and employing an invisible ingredient known as internet protocol (IP).

The way that ingenious system works - by breaking communications into data packets that can be sent via multiple pathways to be reassembled when they reach their destination - is not important. What matters is that the technology is relatively inexpensive, fairly standard so everyone can use it, and is deploying globally as we speak.

There are numerous studies to show the cost savings of going electronic.

A recent OECD report - The Economic and Social Impact of Electronic Commerce - highlights the impact on distribution costs. Using traditional systems, an airline ticket transaction costs $US8. Via the net it's $1. Banking is $1.08 versus 13c. Bill payment $2.22-$3.32 versus 65c-$1.10.

But the biggest shock comes with software. In a shrink-wrapped pack, software costs $US15 to distribute. Via the net it's 20c-50c. The slashing of distribution costs on any form of digital product - music, movies, TV, books, voice telephone calls - has implications which are only just beginning to dawn.

Digital packets of products and services now move across the globe, not just in a flash, but also very, very cheaply. In the new 'e-conomy', information of any kind tends towards being free.

To many businesses this is a terrible thought. How can anyone make money in an environment where the user doesn't pay?

Publishers watch in disbelief as their valuable content spreads worldwide for free. The music industry rages as users swap songs. Internet service providers scoff while competitors give away net access. Software manufacturers despair as 'open source' code gathers momentum. And broadcasters are bewildered as viewers watch TV programmes from all over the world - not on their TV, but on a PC.

"It's simply not sustainable," they bleat - watching with satisfaction as another dotcom bites the dust. But for every dotcom that falls, another rises.

This is the revolution the 1984 reforming Labour government and its Business Roundtable cronies never saw coming.

If they had, they would have hated it instinctively. To them, the net would seem like a global welfare state where 'user free' displaces 'user pays'.

But just as the Roger Douglas dictum of the time had a simple formula for prosperity, so does the 'e-conomy': companies can become more productive by adopting net-based electronic pathways for all their business processes - buying, selling, ordering, management, planning, etc.

But - just like eftpos and atms - there must also be massive uptake by consumers. They too want to enjoy the cost cutting benefits that mass electronic pathways provide.

Banking on the net should be cheaper, so too should paying bills, and content - as net users have already seen - tends towards being free.

No one quite knows what effect making government information such as land titles, court judgments, and education resources available free via the net will have. But it's a logical step in developing an information-rich society.

So too is fast, fat pipe (broadband) net access for all - the means to deliver the information society.

The Government has commissioned all sorts of research to show our embrace of e-commerce is not as far behind as we think - at least when we are compared with Australia.

But the Ministry of Economic Development's October survey - Electronic Commerce in New Zealand - also makes sad reading.

Only 11 per cent of small and medium businesses are "involved in e-commerce linked to their internal business systems." The survey disguises the sorry number by showing 66 per cent are engaged in the exchange of e-mail between business partners - lamely claiming that as evidence of e-commerce uptake.

Similarly, the September survey - The State of e-New Zealand - by the New Zealand Institute for the Study of Competition and Regulation shows we score above the OECD average for the number of net hosts (computers with permanent two-way access to other computers on the net) and the number of secure servers used for e-commerce transactions per million inhabitants.

But it also shows that the US is leagues ahead us and the rest of the world. In e-commerce, the only benchmark worth measuring against is American.

But the survey does make a useful observation about the value of unmetered local calling: "Extended internet connection time is identified as the primary stimulant for electronic commerce on the internet."

Which makes the Kiwi Share obligation on Telecom to maintain free local calling look visionary.

The recent Telecommunications Inquiry agrees, recommending that the Government enshrines the Kiwi Share in legislation.

The e-New Zealand survey has scant data on high speed internet, but warns that Telecom's metering charges on broadband access "may be potentially 'undoing' many of the advantages New Zealand has gained" by having unmetered local calls.

Which brings us back to the Government's role. At the summit the Government will take its first baby steps into the brave new e-world with the release of its draft e-commerce strategy.

It's tempting to ask why this has taken so long. And to criticise the lamentably slow progress in bringing forth e-legislation. Or to doubt that the Government will actually implement any of the recommendations of the Telecommunications Inquiry.

But to jeer when a baby is making that milestone move from crawling to walking would be to inflict damaging trauma. So we must clap and cheer - and quietly hope that the move from e-walking to e-running happens much faster.

Herald Online feature: e-commerce summit

Official e-commerce summit website