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  • Ian Ritchie : Business AM

Competition needed for e-commerce @ its best

The Scottish Parliament's report on the new economy reveals the gaps it needs to fill

THIS week, the enterprise and lifelong learning committee of the Scottish parliament publishes its report on the new economy. This study has been quite some time in the making it was started last summer when John Swinney was the committee chairman, just before he became SNP leader.

The committee was then diverted to other more pressing matters investigating the failures of the SQA and by the time it returned to the subject of the new economy, several of the members had changed and Alex Neil had taken over as chairman.

If a week is a long time in politics, ten months is an eternity in the new economy, and the whole economic structure of the telecommunications and IT industries has changed almost out of recognition during the investigation.

The underlying issues, however, remain valid: Scotland must ensure it is one of the most competitive countries to conduct modern e-enabled business, or it will lose out economically to others.

The committee took evidence from a variety of sources, such as early-stage technology and e-commerce companies, trade associations, Scottish Enterprise and BT. As with all Scottish parliamentary committees, the records of the meetings can be viewed on the parliament website.

Jim Norton of the Institute of Directors was a particularly valuable witness. Since writing the report,, for the UK cabinet office in 1999, he has advised the Dublin government, and is advising Wendy Alexander, our enterprise minister. Ms Alexander promised the committee that public sector investment would be coordinated to ensure that telecommunications infrastructure would be provided throughout Scotland.

This seems sensible, as studies have shown that the combined telecommunications requirements of schools, hospitals, police, local authorities, and other public sector bodies can often comprise 80% of the infrastructure demand of a town such as Galashiels or Dunblane. By consolidating these demands, and negotiating with the telecoms providers, the Scottish executive hopes to make available better and more economic provision of bandwidth than would otherwise be the case.

The committee also held one session at the IBM plant at Greenock and took evidence from a Scottish IBM executive over a video conference link from his base in North Carolina. He reported vividly on how he was able to easily get a fast, low-cost, always-on internet connection to his US home, allowing him to tele-work more effectively. On the other hand, he reported, US banks were well behind Scottish ones in the provision of online services.

One recurring theme was the cost of leased lines the always-on high bandwidth connections that modern business requires. Because such lines are charged by distance, and the UKs connection to the rest of the internet is via London's docklands, Scottish companies often find themselves paying two to three times more than a similar English company.

Most European economies similar to Scotland have their own international connections. The Irish government invested in such provision a couple of years ago and even made a profit on it.

In one surprising piece of evidence, the committee was told that transatlantic cables do come to Scotland, passing Stranraer, before travelling on to other northern European countries. It would be possible to take a spur from such cables, allowing a direct international hub in Scotland, but it would require substantial investment at a time that most of the international telecommunications companies have been laid low by over-expansion and massive debt.

But the biggest factor that emerged in evidence was the lack of competitive pressure. Whereas seven or eight telecoms companies operate in Scotland, the equivalent number in Liverpool or Dublin is about 30, and in cities such as London or Amsterdam, more than 100 companies are vying for business. This competitive pressure reduces costs and improves service, and the committee supports recent efforts by Scottish Enterprise to encourage new telecoms wholesalers into the market to increase competition.

Finally, the enterprise committee recommended that Ms Alexander appoints a Scottish electronic business enforcer, an e-czar, to ensure that good progress is made and delays are minimised.

The committee didn't like the foreign term czar, but somehow or other a home-grown equivalent, such as e-ballie, didn't have quite the right smack of authority.

In any case, Ms Alexander should have little trouble coordinating all this with Westminster. In last weeks reshuffle, Tony Blair made her younger brother Douglas the UK's new e-minister. So it can all get sorted out around the kitchen table.

Ian Ritchie was a special adviser to the enterprise and lifelong learning committees new economy investigation.

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