Committee Reports::Report - The Impact of Ecommerce on small and medium sized enterprises::10 May, 1999::Report

Tithe an Oireachtais

Tionchar na Tráchtála Leictreonaí ar Fhiontair Bheaga agus Mheánmhéide

The Impact Of Ecommerce On Small And Medium Sized Enterprises

An Comhchoiste um Fhiontraíocht agus Mionghnóthaí

Joint Committee on Enterprise and Small Business


“I see electronic commerce as nothing less than a revolution, which will change the basis of doing business”,

Kieran McGowan, former CEO, IDA.

Report prepared by Deputy John McGuinness on behalf of the Joint Committee on Enterprise and Small Business and adopted by the Joint Committee at its meeting on 5 May 1999.

Table of Contents





What is eCommerce?


Why is eCommerce making such an impact now?


Electronic Commerce - in practice.


Electronic Commerce Extends Market Reach around the Globe


Electronic Commerce Increases Consumer Convenience and Choice


Electronic Commerce Generates New Business Opportunities


Electronic Commerce Enhances Competition and Reduces Prices


Electronic Commerce Creates New Market Efficiencies


Electronic Commerce Streamlines Operations and Reduces Costs


The Irish Situation










Electronic Government




“SME’s have a vital role to play if Ireland is to become a serious player in the Global Information Society. ECommerce allows SME’s to access global markets, foster relationships from a business to business perspective and capture new customers and suppliers.”

- Vivienne Jupp, Chair of the Information Society Commission


1.1Electronic Commerce represents as Kieran McGowan rightly pointed out nothing less than a revolution in the way business is carried out. ECommerce fundamentally changes the business environment. It leads to different intermediaries, new products, new markets and new business consumer relationships as well as new channels for diffusing knowledge and for interaction in the workplace. The potential is huge as eCommerce business to business transactions are predicted to grow from $500million in 1996 to $62 billion by the year 2000 while business to consumer transactions are predicted to grow to between $3 to $10 billion over the same period. Recent research has shown that aggressive use of eCommerce has already enabled business’s to increase revenues by around 10 to 20 %, cut costs by 20 to 45 % and reduce working capital and physical infrastructure by up to 60%.

1.2The SME sector is vital to the economic success of the Irish nation, given the contribution of small business to economic growth and job creation. Business with under 50 employees account for 98% of the country’s businesses and more than 90% of Irish businesses employ fewer than 10 people. In 1996 total employment growth was 50,000 while the number of new jobs in small business amounted to 43,000. According to the National Competitiveness Council’s Annual Competitiveness Report 1998, SME’s are an essential element of -national- competitiveness. “A well developed and vibrant SME sector will be an important source of innovation. Most new firms begin in the SME sector and they can also be a breeding ground for new products and services.” Rapidly growing companies such as Iona Technologies, Trinitech, and BaltimoreTechnologies are good example of innovative firms which started out as SME’s.

1.3Given the huge opportunities and challenge to small business by the advent of eCommerce, it is vital that policymakers possess a good understanding of the impact of eCommerce and the role of Government in enabling the Irish SME sector to meet the challenges and seize the opportunities of eCommerce. It is the purpose of this report to start an informed debate within the Oireachtas on how government can enable the SME sector to meet the challenges of the rapidly emerging Digital Economy.

What is eCommerce?

2.1eCommerce has been defined as:

“An interchange of goods, services or property of any kind through an electronic medium.”

2.2The most useful thing about this definition is that it does confine itself simply to the Internet because even though the Internet is of huge importance it is not the only method of facilitating eCommerce. eCommerce can also be conducted over, Intranets, using interactive Kiosks or Telephone even Interactive TV. Nor is eCommerce confined to shopping for books or CD’s it also covers such activities as technical support, software distribution, package tracking, advertising and business to business collaboration.

2.3ECommerce is an integral part of a much broader social and economic change characterised by the globalisation of markets, the shift towards an economy based on knowledge and information and the growing prominence of all forms of technology in everyday life. This change has been called the Digital Economy, The Information Age or the eEconomy.

2.4In Ireland we are already feeling the effects of the emerging Information Age. In the last ten years, Ireland has changed from being an economy dependant on agriculture to, as the Advisory Committee on Telecommunications termed it, a Knowledge Intensive Economy. In 1997 Ireland’s total agricultural food exports were worth £4.2 billion. Irish exports of software were worth £4.5 billion

Why is eCommerce making such an impact now?

3.1The last number of years has seen a sharp reduction in the cost of information technologies and telecommunications and a corresponding increase in the capability of the technology. Inb 1946 the worlds first programmable computer the Electronic Numerical Integrator and Computer (ENIAC) stood ten feet tall, was 150 feet wide, cost millions of dollars and could execute up to 5,000 operations per second. Twenty five years later Intel packed 12 times ENIAC’S computing power into a chip costing $200. As late as the 1980s the world’s telephone system was linked by copper wires which could only carry less than one page of information per second. Now a single strand of optical fibre as thin as human hair can transmit in a single second the equivalent of 90,000 volumes of an encyclopaedia. The Internet is the link which joins the power of these remarkable innovations creating a globaldigital network which allows people to communicate and transact business regardless of time or distance.

Electronic Commerce in Practice

4.1The material which follows in this section is reproduced with the kind permission of the Computer Systems Policy Project (CSSP) from their publication “Global Electronic Commerce”, CSSP, November 1997. The CSSP is an affiliation of chief executive officers of major US companies that develop, build, market, service and support information processing systems, software, networks and solutions. Since 1989 the members of the CSSP have worked together to develop and advocate public policy positions on technology and trade issues.

4.2Benefits of, and examples of electronic commerce in practice.

The CSSP Report on “Global Electronic Commerce” suggests that Global Electronic Commerce:

Extends market reach around the globe

Increases consumer convenience and choice

Generates new business opportunities

Enhances competition and reduces prices

Creates new market efficiencies and

Streamlines operations and cost

4.3An outline of the potential benefit to business under each of these headings together with examples of commercial enterprises which are exploiting the opportunities follows.

Electronic Commerce Extends Market Reach Around the Globe

5.1A company’s market is bounded by the customers it can reach effectively. Global electronic commerce erases geographic boundaries so even the smallest company can reach customers around the globe. At the same time, consumers can make purchases from anywhere in the world as easily as they can from a shop down the street.


Name:Vitamins Network

Description: Vendor of vitamins and nutritional information


Founded: 1996

Vitamins Network is a one stop shop for nutritional information and over 10,000 different types of vitamins at discount prices. Twenty per cent of US based vitamin orders come from overseas and total retail sales are growing at a rate of 30-50% per month.

Says CEO and founder Michael DeVivio, “The Internet allows us to send speciality vitamin orders directly to manufacturers and maintain only the most popular brands in stock. This allows us to save money on inventory and pass the savings directly to the customers.”

Through a recent service upgrade, the Vitamins Network gives customers the option of storing an order of up to ten products which speeds the ability to fill subsequent orders. In addition, the Vitamins Network Web site abounds with nutritional and and consumer information, allowing shoppers to find the nutritional information they need, when they need it.

5.3Name: Rent Net

Description: Online apartment rental advertising


Founded: 1996

Using the Internet to provide information on apartments for rent across the street, across the nation or across the border, Rent Net advertises over 2,000,000 apartments in all 50 states, the District of Columbia and Canada.

Rent Net enables apartment advertisers to show prospective renters photographs of the apartment and floor plans and even gives them the opportunity to use new technology to show their apartments in 3D manoeuvrable images so potential renters can virtually move around and view the apartment from different perspectives. While online the renters can also schedule an appointment to view the actual apartment.

Says Vice-President and founder Jed Katz, “The Internet allows renters to slash the time needed to find an apartment. It also allows apartment owners to target potential renters at a much lower cost-per-lease than their other forms of advertising.”

Rent Net is completely free to renters, though apartment owners pay a monthly fee to advertise.

Electronic Commerce Increases Consumer Convenience and Choice

6.1Consumers using GlobalElectronic Commerce can make more informed buying decisions by consulting numerous online references and catalogues, shopping comparatively and even testing products, such as software, without ever leaving the house. Because technology enables electronic cataloguing of volumes of online product and service information, consumers can specify preferences leaving sellers to respond only to the particular criteria. In addition, Global Electronic Commerce increases consumer convenience because consumers can locate and purchase hard to find goods and services 24 hours a day, seven days a week.


Name: Peapod

Description: Online grocery ordering and delivery service


Founded: 1996

Peapod is an online grocery ordering and delivery service that allows busy people to shop smarter, order online and receive groceries at home. “Shopping for groceries the traditional way is a time consuming task for an increasingly busy society”, says Peapod CEO Thomas Parkinson. “With the Internet, shoppers can get the groceries they need with no hassle and without ever leaving the house.”

Founded in 1989 as a proprietary grocery ordering and delivery network serving the Chicago metropolitan area, Peapod introduced its online service in 1996. Since then it’s customer base has grown to over 55,000 members and its geographic base now includes San Francisco, San Jose, Atlanta, Boston, Dallas, Houston, Austin and Columbus. Peapod customers pay a monthly membership fee via credit card, a flat shopping and delivery fee and 5% of the total grocery bill. In 1997 Peapod received private equity financing, raising nearly $17 million.

6.2Name: Auto-by-Tel

Description: One-stop online car store

Founded:1989, Internet Service-1996.

6.3If the only thing the Internet allows is the elimination of haggling over car prices, it may be worth it. Auto-by-Tel provides car buyers with comprehensive information including dealer invoice pricing, rebates and incentives. The information-empowered customer can then submit a free purchase request for the vehicle of their choice at the Auto-by-Tel website. Purchase is routed to a local Auto-by-Tel Accredited Dealer who calls the consumer with a low, competitive, no haggle price.

6.4Joining Auto-by-Tel’s network of dealers costs $500-$1500 per month - a fraction of an auto dealer’s typical monthly budget. Dealers know that the customers who are attracted to Auto-by-Tel are more informed and ready to buy. Auto-by-Tel’s North American network has over 2,600 Accredited Dealer franchises. Auto-by-Tel also offers insurance, leasing and financing services.

6.5Says Peter Ellis, founder of Auto-by-Tel, “The Internet’s opportunities for efficient, rapid communication, comprehensive disbursement of information, and a cost efficient marketing model, have made it possible for Auto-by-Tel to grow at a phenomenal rate.”

Electronic Commerce Generates New Business Opportunities

7.1The explosive growth of information networks and increasing consumer confidence with technology opens the door for 21st century commercial pioneers to develop new businesses. To a large degree, these businesses capitalise on the array of information available through networks and the new levels of interaction that they promote. For example, there are a number of new companies whose core business is focused on organising, managing and presenting online information so it is easy for consumers to use. Other companies are focused on building virtual communities that unite people with common needs and interests by providing a forum for the exchange of information, experiences and ideas.


Name: Link Exchange

Description: Co-operative Web Based advertising network


Founded: 1996

The web gives small businesses access to global customers, but market access does not automatically mean sales. Even online, advertising is critical to gain broad exposure. LinkExchange is the Web’s largest advertising network with over 200,000 members participating in a co-operative advertising network.

Members of LinkExchange swap ad space on one another’s sites. For every two times a LinkExchange member’s advertising banner is displayed to a visitor on another member’s site, the second company is given one “hit” on another member site. This gives LinkExchange surplus advertising inventory, which is sold, to member companies as well as heavyweights such as ABC TV, Microsoft, Universal Studios and Yahoo.

The Wall Street Journal reports “LinkExchange is one of the few examples of an Internet company that has developed a business model based on how the Net works instead of imposing an old-line mode on cyber-space.”

7.3Name: iVillage

Description:Company that creates themed virtual communities


Founded: 1995

iVillage provides current, useful and free information in addition to online discussion groups about parenting, work and health. iVillage websites include Parentsoup, Better Health and Medical Network and the Women’s Network.

iVillage generates the majority of its income from advertising revenues. Over the past year and a half, iVillage has worked with over forty blue-chip sponsors such as Toyota, American Express, Polaroid and Novartis to create specialised advertising campaigns that meet their exact needs. “iVillage helped us to find a new way to bring Triaminic into new families’ lives and forge relationships with parents when they first learn to care for their children” said Novartis Marketing Director Barry Cohen.

According to iVillage, “Through the Internet, we are able to bring diverse people to our communities and facilitate the exchange of information, advice and support on the subjects in life that matter most: parenting, work and health.”

Electronic Commerce Enhances Competition and Reduces Prices

8.1Global Electronic Commerce is a great leveller. It allows diverse companies to compete on the same playing field. And because information networks and technology conveniently make information available to customers, the result is more competition, better quality products and services as well as reduced prices. For example, many companies have begun to post free information on the Web, encouraging consumers to learn more about their products and services. Others offer online customer service centres that field customer questions 24 hours a day. These changes signal not only a shift in the commercial market, but also shifts in the way consumers define market value.


Name: Teleworth

Description: Service that matches consumer calling patterns to the best long distance calling plan.


Founded: 1997

Dozens of long distance companies flood the market with hundreds of options for long distance service plans creating confusion for the consumer, enter Teleworth. Teleworth compiles information on most long-distance companies and their rate plans. By using the Internet, Teleworth enables customers nation-wide to have their calling patterns analysed and matched to the plan that best fits their needs. To comply with government regulations, Teleworth calls the customer, takes billing information and patches in a third party verification service to ensure that Teleworth is acting as an honest broker. Teleworth then transmits the customers change request to the new company.

Because the long distance market is highly competitive, long distance companies view Teleworth as a valuable marketing tool. For each customer referred, Teleworth receives a commission from the long distance company for as long as the customer uses that company. Says Teleworth CEO, Rick Ratchford, “most long distance service providers over look the less lucrative small and home office market. Teleworth gives these companies access to the same kind of information offered to big companies.

Electronic Commerce Creates New Market Efficiencies

9.1Global electronic commerce enables businesses to benefit from every market opportunity. For example, airlines use networks and information technology to electronically issue special, last minute fares at a very low cost to fill open seats on selected flights. The low fares are publicised via e-mail to travel agents and frequent fliers or posted on the Web.

9.2The reduced prices enable airlines to fill their planes to capacity, thereby maximising revenue and enabling customers to fly at a fraction of the usual cost.


Name: ONSALE, Inc.

Description: Online auction house


Founded: 1995

ONSALE is an online global auction house for computers and online equipment. The 24-hour, competitive bidding format allows customers to receive between 15 and 20% discount on most items. ONSALE’s site draws approximately 50,000 visitors a day and reports sales of around $8 million per month.

After viewing an item, a customer places a bid by entering their bid amount and valid credit card number. Winning bids are displayed as the item is auctioned. If the customer is outbid, ONSALE send an e-mail providing the customer with an opportunity to resubmit a higher bid. Merchandise is shipped to the winning customer’s address. In July 1997 Newsweek reported that, like conventional auctions, some items sold at nearly 33% discounts, while others sold for above retail value.

ONSALE provides a reliable method for suppliers to quickly and completely liquidate excess goods at excellent prices. ONSALE maintains popular sale items in inventory and sells them directly to consumers.

In addition, ONSALE will act as a broker for vendors wishing to sell excess inventory. ONSALE receives revenue from a percentage mark-up on each transaction and receives supplemental income from advertising.

ONSALE went public in April of 1997. Two thirds of all sales are generated by repeat customers and about 1,000 new customer registers per day. Sales are growing at over 40% per quarter.

Electronic Commerce Streamlines Operations and Reduces Costs

10.1Business, Government agencies and other organisations around the world already use networks and information technology to connect their operating systems directly to their core constituencies including citizens, customers, employees, suppliers, contractors and distributors. The result is streamlined operations and reduced costs. For example, customers place orders electronically and check their account status or tract package delivery online. Using new distribution models, companies centralise inventory and distribution functions. Finally, Global Electronic Commerce fosters more robust information exchanges allowing governments to be more responsive to citizens’ needs and enabling businesses to more precisely schedule the order and delivery of parts and suppliers reducing on hand inventory while still meeting customer demands.


Name: Access Maryland

Description: Full self-service processing of government services

URL: N/A Public Kiosk Access

Founded: Electronic Services, 1997

Renewing a car license registration often means a harried clerk at the end of a long line. But not in Maryland. Under the access Maryland programme, citizens can handle the entire transaction at the shopping mall using a self-service kiosk that resembles an automated tell machine (ATM). These online kiosks permit the state to cut costs and improve services at half the cost of improving service the old fashioned way - by adding staff. The kiosks also improve convenience. As the State’s Secretary of Transportation has stated, “People do not have time to conduct their business when it is convenient for the government.

The kiosks provide convenient public access allowing users to avoid going to a regional or a central motor vehicle office. Regardless of the time of day or night, citizens can get online and register their vehicles - on the spot and in real time.

The Governor sees Access Maryland as an outstanding example of how advances in technology in government provide convenient, efficient access to services. He says “This technological advance sets Maryland apart as a front-runner in electronic government, while continuing the MVA’s focus on customer friendly service.”

10.3Irish companies are already active on the Internet. The Irish Times website is one of the most visited websites in the UK and Ireland. Its online archive is particularly useful. The Irish Emigrant, an e-mail newsletter read by over 12,000 Irish people in over 100 countries is one of the oldest online news services having been started in 1987. Companies as diverse as “The Bubble Brothers”, an online vendor of Champagne, to Bank of Ireland and AIB are all doing business on the Web. Dis-Net Ireland is hoping to use computer technology and Internet access to create employment opportunities for people with disabilities. Below are links to just a few of the Irish companies now doing business on the Web.

10.4The Bubble Brothers: The perfect site if you have something to celebrate, this is a Cork based retailer of Champagne.

10.5Tayto: If you have a relative or friend anywhere in the world you can put a box of Tayto and have it delivered from this site. Deserves mention also because Tayto ran an innovative web design competition for schools in 1995 which proved very popular.

10.6Fred Hannas: Fred Hannas was one of the first Irish bookstores on the Internet and now does between £5,000 to £12,000 worth of business a month mainly to the US and Scandinavia.

10.7The Irish Emigrant: The Irish Emigrant is one of the oldest online news services in the world having being started in 1987. It is an e-mail newsletter read by over 12,000 Irish people in over 100 countries. Last year the company had a turnover of£250,000 mainly from advertising and employed five people.

10.8Hobo Corp Clothes: For the stylish among you, this site belongs to an Irish clothing company.

The Irish Situation

11.1Given the above examples that eCommerce offers numerous opportunities to business, but are Irish SME’s taking advantage of the opportunities afforded to them by eCommerce.

11.2The Annual Competitiveness Report 1998 points out that in general IT applications are used less by SMEs than by larger businesses. The main reasons for this are the high costs associated with the applications, their poor suitability to the needs of the small business and the SMEs own lack of IT knowledge. The report also points out that SMEs also at a disadvantage with regard to telecommunication costs. Unlike larger enterprises they are not they are not in a position to negotiate bulk discounts. Given these barriers it is unlikely that Irish SMEs are seizing the opportunities offered by e Commerce.

11.3The recent report by the Information Society Commission also had some worrying statistics regarding the use of information technology by SMEs. While 62% of large companies in Ireland see new technologies as essential, only 22% of small companies do. A worrying 25% of SMEs feel that new technologies will have little or no impact on their competitiveness.

11.4An insight into Irish SMEs on the web can be gained from a pioneering new study conducted by Dr. William Golden and Mr. Michael Griffen of the National University of Ireland, Galway.

11.5One of the more alarming aspects of the study is that the authors identified a mere 1245 SMEs as having a website, given that there were an estimated 190,795 small businesses in the country.

11.6The survey highlights are as follows:

46% of SMEs believe that their Internet site is providing value for money, while 24% believe it is not.

12% of firms are generating over 1,000 hits per week to their website while 34% are receiving less than 50 hits per week. Firms with higher number of hits are generating higher turnovers from their website.

26% spend more than £2,000 on the initial design of their web pages while 22% of firms spend less than £250. Those organisations that do spend more initially on the design of their web pages have a larger number of hits to the site. However, increased spending and the resultant number of hits do not result in a higher turnover directly attributable to the web.

46% of firms with websites believe they are getting value for money.

28% regard the provision of electronic commerce support by ISPs as important. This shows that the majority of SMEs are not interested in selling directly online. Rather the key reason for developing a website is to advertise the firm to a wider set of potential customers.

11.7Perhaps the most worrying aspect of the study is that clearly a majority of the respondents regard the Internet simply as an advertising and research medium, and as something which is not strategic to their business.

11.8However, it must be acknowledged that SMEs face particular problems in adopting eCommerce. They have limited access to both information and expertise in the area of eCommerce. The initial costs of the technology may also be a problem. SMEs also have fewer resources to deal with security and liability problems.

11.9A recent survey by the OECD found that the most significant barriers to eCommerce among SMEs appeared to be a lack of awareness of eCommerce and uncertainty about its benefits.

11.10According to the report the most significant barriers for SMEs in OECD countries were:

A lack of awareness of electronic commerce (ranked as a major barrier by France, Ireland, Korea,the Netherlands, Turkey and the Czech Republic).

Uncertainty about its benefits for their business (ranked highly by Austria, Canada and Finland).

Security (ranked by Germany, Mexico and the UK).

A lack of suitable products and integrated systems for using the Internet,

The complexity and cost of electronic commerce with regard to the banking system.

The early stage of development of doing business over the Internet and set up costs.

The lack of a sound legal framework.

11.11It is clear that the government has a major role to play in enabling SMEs to grasp the opportunities offered by eCommerce.

11.12Given the revolutionary nature of the change to the economy brought about by the advent of eCommerce, the strategic importance of the SME sector to growth, job creation and innovation and the barriers that exist to SME’s adopting eCommerce, it is critical that government take action to facilitate the adoption of eCommerce by the SME sector. One of the major issues highlighted by the Annual Competitiveness Report was the low number of SMEs who export, only 45% of Irish SMEs export their goods and services. Ireland was ranked 12th out of the 15 EU countries in this regard. One of the major benefits of eCommer ce is that it gives access to global markets, it is therefore all the more important that SMEs be encouraged to adopt eCommerce.


12.1Given the importance of the SME sector to the Irish economy and the scale of the potential opportunities and corresponding threats posed by eCommerce, it is vital that the Oireachtas Committee on Enterprise and Small Business focus on eCommerce in 1999 as its major priority issue. This draft report is no more than a discussion document designed to start the debate on the role of Government in assisting SMEs to size the opportunities offered by eCommerce and assist them in competing in the digital economy. It is essential that the committee work to create a final comprehensive report which could act as a road map for Government in enabling Irish SMEs to compete in the digital economy. To do so the committee should hold a series of public hearings on the topic of eCommerce and the SME sector and request experts in the field to give their views. Ireland is fortunate to have a large number of multi-national high-tech companies operating in Ireland who are working at the cutting edge of eCommerce such as Dell, Microsoft and Anderson Consulting, not to mention indigenous companies like Baltimore Technologies, Trinitech and Nua who have built formidable expertise in this area. The Committee should endeavour to tap into this pool of expertise in order to produce a final report with actionable recommendations for Government.

12.2However even at this stage it is clear that there are a number of recommendations, which can usefully be suggested to Government under the following headings:

Electronic Government





13.1If business is to flourish on the Net then it is important that there is a legal framework to govern eCommerce. Businesses need to know who they are dealing with, that the person is who they say they are, that the communication is authorised and confidential, that the message has not been altered and that the individual cannot deny that a transaction has been made. In other words there must be a legal framework to cover the issues of:







13.2The most effective way to do this is to pass legislation governing the area of digital signatures and encryption on the model of the European Union’s draft directive on Electronic Signatures and which would enable the creation of a Certification Authority or Authorities in Ireland. There is also a need for and Electronic Commerce Law which would place electronic contracts on the same level as paper contracts and to govern areas such as spamming (junk e-mail).


14.1Education is one of the key issues not only in eCommerce but also in the Information society as a whole. There are particular problems for SMEs in recruiting people with IT skills, as they may not have the resources to match the remuneration offered by larger companies or the multi-national sector. They may also not have the resources necessary to train their own staff with these skills.

14.2Retraining is an obvious solution to this problem. There are many people currently unemployed who with the right skills would be able to find productive rewarding work if properly trained.

14.3Training courses offering recognised qualifications such as Microsoft Certified Professional could be invaluable both in dealing with the skills shortage and giving unemployed people real access to the information age. The Government should investigate the possibility of creating a national training scheme in conjunction perhaps with Microsoft or CBT offering training to the unemployed or second chance education especially in areas of social deprivation.

14.4In the field of conventional education a Government priority must be the encouragement of women to seek careers in Information Technology. At the moment just 25% of computer graduates are women. Encouraging more women into careers in IT would not only benefit SMEs but the economy as a whole by reducing the current skill shortage.


15.1The Government’s plan to establish by means of a Public Private Partnership a major broadband connection from the US and terminating in Ireland is fundamental to Ireland’s ambition to becoming an eCommerce hub. It is an ambitious plan, which deserves the full support of the Dáil, as does the Government’s plans to use EU funds to extend broadband connectivity to selected rural areas.

15.2However, there are other infrastructure questions which need to be addressed:

The cost of information technology equipment

The cost of internet access

15.3Computers in Ireland are typically between 10 and 30% more expensive than the US. There is a need to ascertain why this is so, and to see if there is any action the which government might take to reduce the cost of equipment both for business and the ordinary citizens.

15.4It would also be desirable to encourage both business and ordinary citizens to purchase computers. Tax relief per household of £1,000 would encourage the purchase of PCs by both citizens and small businesses. In the case of the unemployed this grant could take the form of a low interest loan perhaps administered by the credit unions.

15.5While the cost of Internet Access has been reduced significantly, we are still some way from Flat Rate Access. The provision of Flat Rate Access should be a priority in order to encourage use of the web by both business and the consumer.

Electronic Government

16.1Both the recent report of the Telecommunications Advisory Committee and the OECD had pointed to the importance of electronic government as a means of encouraging business to go online. Put simply, Electronic Government is the application of the tools and techniques of eCommerce to providing government services.

16.2Numerous countries throughout the world are allowing citizens to interact with government using electronic means. In Canada for example, it is possible both to file and pay your taxes over the Internet. In Spain citizens can access information about their social welfare records and even change their doctor using kiosks and smart cards. In the UK, Tony Blair plans to have 25% of all government transactions electronic by the end of this parliament. Electronic Government both reduces the cost of providing services and increases the convenience for the ordinary citizen. There we have two driving forces behind the adoption of Electronic Government, public demand for increased levels of service from Government and cost savings to Government. The ability to significantly reduce transaction cost is one of the principle benefits of eCommerce. Recent research in the banking industry has shown that a bank transaction via the telephone costs half as much and a bank transaction over the Internet costs only one per cent as much.

16.3In the case of SMEs it can provide a powerful and practical example of the benefits of transacting business online. Irish SMEs should be able to file and pay their tax returns, register with theCompanies Office, apply for licenses and or permits and receive them electronically. A national strategy for eGovernment is urgently required and is something the committees should press for.

Ivor Callely T.D.


5 May 1999



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