November 2000

Prepared for Oftel by Research Works Ltd

Contents

1. Businesses’ experience of Internet/e-commerce
1.1 Overview
1.2 Businesses without IT experience
1.3 Businesses with IT experience

2. The process of connecting to the Internet
2.1 Overview
2.2 Businesses without IT experience
2.3 Businesses with IT experience

3. Business use of the Internet
3.1 Overview
3.2 Businesses without IT experience
3.3 Businesses with IT experience

4. The future: aspirations and expectations
4.1 Overview
4.2 Businesses without IT experience
4.3 Businesses with IT experience

5. Next Steps
5.1 Shortage of information/training
5.2 Infrastructure/services available
5.3 International comparison
5.4 Problems with providers
5.5 Switching domain names

Appendix A: topic guide

Oftel’s Small Business Task Force – comprising small business organisations, telecoms industry suppliers, and government agencies and departments – is working on a number of initiatives to improve the information and guidance on telecoms and the Internet to assist small businesses to make better use of telecoms to help them grow.

As part of the work of the Task Force, Oftel talks directly with small businesses about their experiences. As part of this ongoing liaison, the Task Force has undertaken qualitative research, in the form of focus groups and depth interviews, to discuss use of the Internet and e-commerce and its usefulness in terms of increased efficiency or profitability.

This research was intended to identify any barriers to use of the Internet/e-commerce facing small businesses and to establish good practice guides. Both businesses using the Internet/e-commerce extensively and businesses with relatively little experience took part in the research process.

The research was qualitative in nature and the original intention was to conduct four focus group discussions with owners/Directors from a mix of SMEs. The groups were to last approximately one and a half hours and were scheduled to run in two locations: Oftel’s offices in London and a hotel in central Glasgow. Recruitment was undertaken by the Forum of Private Business, the Special Projects Unit of the Computer Science Department at University College London) and the Communications for Business advisory committee.

Actual attendance at these sessions was poorer than expected – the fieldwork conducted eventually comprised:

London: One Triad (three respondents)
One Paired Depth Interview (two respondents)

Glasgow: One Paired Depth Interview (two respondents)
One Paired Depth Interview (two respondents)

The London and Glasgow sessions were augmented by:

Three Individual Depth Interviews: undertaken with the Managing Directors of three SMEs in St Albans, Hertfordshire and Rye, E.Sussex. Each interview lasted approximately one hour.

In total, the sample for this research comprised representatives from twelve businesses. Business types taking part varied considerably but included retail, tuition, professional services and manufacturing. Company sizes ranged from one hundred and fifty staff to five staff.

Overall, the data suggests that many SMEs have a poor understanding of the strategic importance of the Internet for their businesses. This means that many decisions are taken from a short-term perspective and reflect existing practices or assumptions.

Establishing a basic presence on the Internet did not seem to present many problems, but few respondents had any clear ideas regarding future use or value of the medium.

In a number of cases, the Internet was clearly seen to function alongside, and as a modern version of, paper brochures and advertising via directories.

For most businesses, the core motivation for maintaining Internet access was e-mail and this was agreed to be an essential component of modern business communication.

Training and advice regarding the Internet was limited both in terms of availability and quality. Few of the sample had received any worthwhile inputs in relation to their Internet activities. Sources for specifically SME-focussed Internet advice were thought to be rare and many of the respondents were keen to access a reliable information resource.

More specifically, the research indicates that a number of factors significantly affect views and experiences in relation to SMEs and the Internet:

• Existing IT/Internet experience and knowledge, prior to set-up
• Quality of available advice for businesses setting up on the Internet
• Quality of available Internet access infrastructure within the UK.

Those without IT/Internet experience had typically approached set-up from a domestic viewpoint and encountered difficulties as a result. Buying hardware and choosing ISPs had proven problematic for some – although those operating minimal Internet operations reported no real difficulties. Many were mainly using the Internet for e-mail and had simply transformed their company literature into a website.

Those with IT/Internet experience had few problems with set-up. Their main problems related to what they saw as the poor telephony infrastructure in the UK and the general inability of UK businesses to adequately assess Internet business potential.

Access to advice – in relation to both e-business and business start-up in general – was plainly a problem. Most respondents felt that, while a few good sources had been found, the national picture is poor. Businesses were felt to have to do most of the preparatory work themselves. Many are using informal, personal, sources for Internet advice.

More IT-experienced businesses were outspoken regarding what they perceived to be slow progress in introducing new telephony technology in the UK.

They believed that the US and many European countries were much further forward than the UK – and that the reluctance of telephony companies to bring in new technologies, and thus open up the UK marketplace to real Internet access competition, was causing problems.

All the respondents had established some degree of function in terms of the Internet. What became clear was that a significant divide existed between two segments of the sample:

• Those with existing internal IT experience and knowledge
• Those without existing internal IT experience and knowledge.

The former group were typically undertaking more IT-specific business operations and had senior employees with substantial experience in most areas of IT including, in some cases, the Internet and e-commerce. They were very familiar with all aspects of the relevant technology and had encountered a distinct set of problems which are unique to 'expert' users.

The latter group, in many cases, were approaching the Internet and e-commerce from the perspective of an ordinary consumer.

They had little knowledge of any aspects of the technology and relied heavily on advice from external sources. These sources ranged from business enterprise centres, through formal consultancy to informal arrangements with friends or associates who were known to have some understanding of the medium. This group had not achieved all they expected and many seemed to have reached a plateau which was seen as 'far enough for the present'.

The experiences and concerns of these two groups were very different. For the purposes of this report, we shall consider their responses separately, except where some consistency of view was apparent.

Most of these respondents had been running traditional businesses, mainly comprising service-provision and retail.

'Many businesses know nothing about the Internet – they've heard of e-commerce, but most of those starting a business just want to start a business…' London

They had become increasingly aware of the impact of the Internet and most felt that they ought to have a presence on the Web. Some were conscious that competitors had established an Internet presence and felt pressurised into responding. Others had simply decided to 'take the plunge' in the unspecific hope that this might generate new business.

'I saw that our nearest competitors were there on the net and I felt that we had to be able to do the same…it wouldn’t have been my first priority but I wouldn’t want to think that we were losing business by not having a presence… Glasgow'

'I know little shops that think "We have to be on the Internet" but they have no idea why they are doing or what they will get… in many cases it has made very little impact on sales…' London

Few had any clear expectations for their Internet ventures – the most frequently expressed view was that modern businesses 'had to be on the Net'. Some had been pleasantly surprised at the interest generated by websites and most were proud that they were now 'in cyberspace'.

A minority were offering new customer services and facilities via their websites, but much of the activity simply involved brochure-style presentation on a website with opportunities to make further contact by e-mail. Most of the practical changes generated by an Internet presence concerned the use of e-mail and it seemed that many respondents were now conducting a significant amount of routine correspondence and communication by e-mail.

'It’s just happened really, whereas we used to get a certain number of letters everyday now we get e-mails as a matter of course – I think that we only really use paper for the legal stuff...' Glasgow

The lack of any in-house IT or Internet expertise meant that some respondents had bought consultancy services from independent providers and others had been advised by Enterprise centres. Some had bought Internet/website management services from local or national providers. Much of the detailed construction of websites had been undertaken by informal 'experts' (often students or young friends/family). Consequently, aspirations for the Internet and potential e-business were generally modest, with many prepared to 'take a chance and see how it goes'.

'We had a student in, working for the summer, and he seemed to know something about computers and the Internet so we discussed it and he said he’d have a go at sorting out a website for us…what he’s come up with is very good, I was surprised…we only wanted our details out there on the web and that’s what we’ve got…'Rye

Achieving this basic level of Internet service and presence had not been especially traumatic, although some were concerned regarding the costs involved. There was, however, a broad uncertainty concerning the future for their businesses and the Internet. Few had any formal strategy for development and none had formed anything other than optimistic, general, goals.

'We’ve decided to suck it and see – when our competitors went into the Yellow Pages then we had to do the same, so it’s the same with the Internet…we don’t want to be at a disadvantage…' Glasgow

These respondents were generally offering IT support services to other industries. All had senior staff with lengthy experience in IT and were dealing in products which required sophisticated systems in terms of both hardware and software design. Their current businesses were extensions of previous employment – often reflecting an opportunity to 'go it alone' and set up their own companies.

The Internet and e-commerce were seen as natural core aspects of their business offering. Much of these companies’ product delivery was achieved via the Internet.

In terms of experiences with setting up Internet presence and e-commerce capabilities, there were no reported difficulties with choosing hardware, connection methods or suitable software. The 'building blocks' for e-business were well known to the respondents and they were confident that sound choices had been made.

'I had no problems with the set-up…my background’s in IT and I know how to set everything up…'Glasgow

Most concern was voiced regarding two issues:

1. The quality of the telephony data infrastructure available in the UK
2. The attitudes and approach of other businesses in relation to the Internet and e-business

1. The quality of the telephony data infrastructure available in the UK: the role of telephony companies was seen as especially problematic. Essentially, these more 'expert' respondents complained that telephony companies were not forward-looking enough and that even ADSL only represented a compromise position in terms of a modern data transmission product.

'They just will not take any chances with the infrastructure and it seems to me that they are deliberately keeping things slow, so as to make it harder for the competition…they are taking their time in opening the network up and I think that’s reprehensible…'St Albans

They felt that opportunities for more advanced e-business providers were being significantly limited by an outdated infrastructure which seemed unlikely to progress adequately in the near future. Some were worried about committing to a service based on current systems (even ADSL), since they felt that these could be quickly become obsolete.

'ADSL is old technology, so I couldn’t get too excited about that…I’m concerned that I would be buying into something that will be inadequate from the moment it’s installed…' London

'We don’t have any competition…the telephone companies still basically own the route into your home or business and unless you’ve got a lot of money you’re locked into them…there should be free access to the net but they stand in the way of that…' London

2. The attitudes and approach of other businesses in relation to the Internet and e-business: most respondents believed that a majority of UK companies paid lip-service to the notion of e-business, providing e-mail facilities, but not much else. There were complaints that most companies do not have 'always-on' e-mail facilities, meaning that mail retrieval will always be constrained by the recipient’s inclination to check for new mail.

'I still have clients who have all the e-mail facilities and apparently a quality system – but it can still take days to get an answer to a simple e-mail enquiry…what’s the point of that? It means that people still think of a phone call as the best way to get a message across and that’s what e-mail is really for…' Glasgow

Websites were dismissed as mainly 'company brochures on the web' – static and uninvolving for the potential user. Equally, commitment to web-based application service provision was seen as minimal, with most companies continuing to operate a locally-based IT system.

'There is very little thinking out of the box – most companies have done their bit on the web and left it at that. I know a couple of websites that have stayed the same for three years – big companies too – and what use is that…it’s the same thinking that was used for brochure re-design but the web should be more flexible than that…' St Albans

In-house IT experts were seen as focussed on the minutiae of system operation, with little evidence of strategic planning in relation to the Internet or e-business.

'A lot of the activity is essentially knee-jerk – they’ve suddenly spotted the Internet and have to be on it…'London

Overall, the respondents were rather exasperated with the state of readiness for e-business in the UK and tended to blame a combination of government inaction with the intransigence of the telephone companies.

'There isn’t a real commitment to e-business – after all, we’ve got a Prime Minister who is a self-confessed novice with computers…it’s easy to make grand speeches about the business methods of the future but if you don’t force some level of change then the mass of businesses are just going to carry on with their old ways. I know that we do have some competition in the telecoms sector now, but it’s all very slow…they are still being allowed to get away with dragging their heels…we’re a first world country with a second-rate phone system…'Rye

The current status of these respondents can be expressed as 'ready too soon'. They were concerned that inertia within the broader business community will have a negative effect on their own operations and the speed of innovation in terms of the Internet or e-commerce.

'We’re trying to get across a message that this technology can be at the centre of a business – companies can do so much more and so much more easily, that I’m amazed about the lack of real progress. A lot of companies are just carrying on the same way…they don’t seem to have the time to spend on new methods…frustrating…'Glasgow

These problems were identified as originating from the highest levels within UK industry. Many senior managers were felt to be poorly informed regarding the opportunities offered by the Internet and e-business in general.

'The rot starts at the top – all these companies pay lip-service to the idea of the Internet and cyberspace and all that stuff…they know all the jargon, which they’ve heard at every conference, but they don’t really know what any of it means…they just leave all that up to the 'IT boys', which means that there is no planning about how their business will actually make use of the Internet…they talk the talk, but they don’t really have a clue…that’s why things are moving so slowly here in the UK 'St Albans

There were also concerns that the regions were not seizing opportunities in relation to the Internet and taking a back seat in terms of innovation.

'I don’t think that Scottish people are naturally designed to deal with technology…the M4 corridor, that’s where the Internet revolution is taking place but not up here…'Glasgow

There was consensus that the basic process of connecting to the Internet could be very straightforward – for the less IT-literate respondents, the domestic marketplace offers countless deals on both hardware and internet service provision, while the more expert respondents had few problems in identifying suitable infrastructure products. Advice, however, regarding specific suitability of hardware and software for business was felt to be very hard to obtain. Many simply take a chance.

Most respondents reported problems concerning connection quality, reliability and speed of operation. Equally, many had tried a number of hardware configurations and Internet providers before finding the best solutions.

'It’s pretty hit and miss…'St Albans

There was general agreement that external support for new small businesses was poor, both in terms of supply and quality. Some respondents were aware that other European countries provided much better services to their small and medium businesses.

'If I was starting a business I would prefer to do it in Belgium – the support system there is so much better…'London

In fact, issues regarding training and advice were relatively low-key, since one segment of the sample did not require this type of help, while the other was operating at a basic level which generally did not necessitate specific training or advice. There were few respondents actively trying to expand their Internet presence without relevant knowledge.

Many of the respondents had chosen Internet access via independent companies which also designed and managed their websites. Some had begun their Internet ventures using consumer ISPs such as Freeserve, AOL, Demon etc. Many of these were pre-loaded on domestic PCs, purchased for business use. Most had, however, abandoned these ISPs when problems occurred.

The more expert respondents had chosen very sophisticated arrangements, with one even contemplating the development of their own Internet server.

Many of the less experienced respondents were tied into Internet access contract arrangements with their website management providers. There were some reports of inexperienced businesses being 'ripped off' in terms of costs for website design and Internet provider packages

'There’s one round the corner from here in Clerkenwell – Lone Ranger and Son…'London

More experienced respondents had chosen dedicated facilities such as leased lines or ISDN. Satisfaction with these was, however, only partial and respondents wanted options for greater capacity and speed of data transmission.

Broadly, most of these respondents claimed to have experienced few real problems in setting themselves up on the Internet – although there was a general recognition that the process could be very risky.

These businesses had approached Internet access from a simple, domestic perspective – many had purchased PCs and equipment from mainstream retailers like PC World and chosen machines with a basic domestic configuration and specification. They had typically been advised by staff in the store and purchased apparently 'high spec' equipment – feeling quite confident that this would be sufficient for all their needs (which, in some cases, it was). Few had taken any formal business-focussed advice before purchasing.

'If you read PC World and listen to what the media says about computers then you think it’s just plug it in and it will work and for the ordinary users that may be the case…but if you want to know how to I back this up and what real capacity do I need for my business then that’s another matter entirely…people are conned into thinking that it’s easy but it’s not 'London

'I was told that I had to go with BT, because the size of my business meant that there was nothing really good for small businesses except BT – I obviously wanted something very reliable and at that level, BT seemed the only option…' London

When encountering hardware problems, most were using the service hotlines provided by the equipment retailers, which had caused some problems, since response times could be very slow and equipment had been removed for servicing. What is adequate for the domestic user was clearly not necessarily suitable for business users, although few were able to generate ideas about alternative sources for service, without a risk of incurring considerable cost.

'I spent hours hanging on the phone…pressing different buttons and listening to music, all at a premium rate…it drove me mad…'London

In terms of connection method, most were using standard 56k modems operating via an additional telephone line, often shared with the office fax machine. Some were using a single domestic telephone line for all operations: voice calls in/out; fax and PC.

There were clear problems for those using the same lines for multiple functions – there were blockages and some were confining e-mail checks to twice daily. By not choosing a dedicated telephone line, they were clearly constraining the value of their Internet operations.

'We do have traffic problems and, at the moment, the Internet has to come second…we start it up a couple of times a day…'Glasgow

Typically using recommendations from friends and business colleagues, these respondents had found a local website design/management supplier and some had taken ISP services from this source, with varying degrees of success – although service was still seen as superior to consumer ISPs.

All reported problems with gaining access to the Internet, as well as reliability and speed of connection. Most had experienced inoperative access numbers, very slow download times and problematically slow server responses. They received varying levels of service from their service providers, with some reporting positive experiences while others had spent lengthy periods waiting for service advice, at premium phone rates. All felt completely at the mercy of their providers and unsure about alternatives.

'Everything was fine when we started off…but once the site was up and running, I felt that we became less important, so it was hard to get anyone to respond when problems arose – and you’ve signed a contract, so you can’t even go elsewhere…'Rye

Those using consumer ISPs reported even worse problems, including a complete withdrawal of service in one instance. Clearly, the demands of domestic users had led to a level of unreliability that is problematic for business users.

'I rang up one day and couldn’t get a connection and when I rang them up, there was a recorded message telling me that the service had finished…that was that…' Rye

Some also reported problems with domain names and gaining access to the major search engines. Switching an established domain name between ISPs had caused real problems for some respondents – leading, in one case, to the abandonment of a very useful and specific domain name. ISPs were felt to be very obstructive in relation to this matter.

Equally, registering for the major search engines had also caused problems – mainly in terms of cost, which was seen as extremely high in view of the uncertain returns involved. Equally, once apparently registered, some respondents were disappointed to find that they failed to come up in response to a search. The difficulties with search engines were seen as similar to the inconsistent performance of directory services such as SCOOT and Talking Pages.

In terms of telecoms supply, the respondents had, again, made essentially domestic decisions and therefore were using a mixture of BT and cable suppliers. There was a general perception of improved value, although it was clear that this had never been properly or rationally assessed.

The respondents had very few problems in getting set up on the Internet – the initial phase of development had generally been trouble-free. These businesses were run by individuals who seemed to have considerable experience with IT and were able to choose both hardware and software based on this expertise. None reported any problems with their equipment choices.

'I’ve worked with Pipex for some time…I like Pipex, they know what they’re doing and they’ve got nice big pipes…plenty of capacity…'London

Most had established service agreements with equipment maintenance providers which ensured a round-the-clock service. They were confident that, if service providers did not deliver, then alternatives could be easily found.

'That’s a cut-throat business…if one guy can’t come out within a decent time then you just call someone else and they all know that…'St Albans

All were connecting via the fastest methods currently available and were very interested in faster alternatives such as ADSL. Most were dissatisfied with the quality of connection currently on offer and felt that the UK was significantly inferior to other parts of the world in terms of the technology available.

There was no requirement for external training inputs – Internet training for staff was undertaken internally. Some had taught themselves about specific IT/Internet issues, but then employed in-house programmers to develop software as necessary.

Choice of ISP and package were made as part of the 'expert' judgements undertaken during set-up. Some had still initially used 'crossover' domestic/business ISPs, which had caused problems. Some domestic ISPs were repeatedly mentioned as disappointing performers from a business perspective. Larger, more expert, companies had eventually decided to work with what were perceived as 'true' business ISPs and invest in a leased line. The service received was felt to be positively proactive:

'They tell us about problems before we’ve even noticed them…'Glasgow

These professional arrangements were clearly viewed as expensive, but ultimately worth the money – particularly for those delivering IT services to third parties.

'If you want to run a real business on the net, then you have to have the best infrastructure that is available – now that may not be very good in the UK, but you can only do what is available…I will always go for the best…'St Albans

Interestingly, many of these more sophisticated users were still choosing BT as their telecoms supplier – although, for some, this resulted from a perception that BT remained the gatekeeper for all telecoms service and it was better to be with the leader in the field, even if that leader was determined to maintain a snail’s pace in terms of technological advancement and growth.

'The competitive telephony market for business hasn’t really started yet….you can’t expect miracles when BT are still pulling the strings…even the big boys are still at their mercy…'Glasgow

As in other areas, there was a clear divide between the Internet usage of more and less IT-experienced businesses.

The less experienced businesses were essentially using the Internet for e-mail and not much else. E-mail was seen as the business contact medium of the future and most respondents felt that an increasing amount of client contact was occurring via e-mail.

Their websites were new and few expected much real business activity in the immediate future. Some were unable to achieve the stated goals for their websites because of third-party problems – in one case the website was in limbo, waiting for approval of credit card facilities from the bank. Obtaining merchant status was, in fact, problematic for a number of respondents, with banks apparently unwilling to accept the risks involved in e-commerce. Some respondents took a jaundiced view of the situation and had decided to take practical steps to surmount these difficulties:

'What’s the point of messing about, processing credit cards on-line – just set up a secure connection, get the card details and then run it through your machine by hand…really easy and no need to get the banks worried…'Glasgow

In a number of cases, the Internet allowed relatively small businesses to operate outside their own geographical areas and gain clients in other parts of the country or overseas.

Most of the less experienced respondents were quite satisfied with their website and Internet experiences so far – although most had no firm expectations of the medium and were happy to wait and see what would happen in the future.

The more experienced businesses were mainly using the Internet for delivery of their main business products. Thus, it was vital that the medium operated effectively. They were also making heavy use of e-mail and saw the Internet as a valuable source of business information and reference material.

'We do a lot of our competitor analysis using the Internet…I can’t really see how you can do it any other way, unless you pay someone else… 'St Albans

More experienced businesses were exasperated by the apparently amateur attitudes towards e-mail systems which were seen as typical of even large companies. These respondents expected to be able to substitute e-mail for telephone conversations in terms of speed and immediacy of response.

Equally, there were concerns that many businesses, both large and small, regard the Internet as an operational matter and fail to take any strategic view of e-business opportunities.

'The guys sitting in the board room all think that the Internet is something that the IT department look after…they never look at it strategically, all they care about is that the e-mail system is working…'Glasgow

Most of the more IT-experienced businesses were very happy with the Internet, but less happy with their own ability to use it to maximum effect. They felt that the current telephony infrastructure significantly constrained their aspirations for the Internet and e-commerce – mainly in terms of speed, capacity and reliability.

These respondents were gradually increasing their use of e-mail and had found that their clients were operating in the same way. Most believed that it would be very difficult to operate without some level of e-mail facility.

In terms of websites, most had established a basic presence on the Internet and were happy to base this around existing promotional brochures and leaflets. They were all impressed by the 'look' of their websites, although most recognised that these were essentially static – offering little opportunity for supplier/customer interaction.

'I’m not really that interested in moving too much of my business to the Internet, it isn’t personal enough….people can’t see the goods as they should…the medium isn’t really suitable…'London

In relation to e-commerce, few of the respondents were actively seeking to create an e-commerce facility for their business – although one that was, had encountered real difficulties in persuading their bank to grant them payment facilities. A few had received advice from enterprise centres regarding e-commerce, but there were concerns about security and whether the risks involved were justified by actual business utility.

Currently it was too early to say whether this segment felt that their Internet business objectives had been achieved. They were happy with progress so far, but awaited future developments with interest. Few had planned any specific e-commerce activity – although the minority that had were frustrated by the difficulties in dealing with apparently backward-looking banks.

There was general agreement, however, that the Internet could be an important component in their business operations in the future. In some cases this assertion seemed based on media hyperbole and the views of business advisors, rather than the perceptions of the respondents themselves. In general, though, there was optimism about the Internet and it application to business.

'I can’t see us becoming a cyberbusiness, because our product can’t work that way, so it will only ever be a communication or marketing medium and I don’t underestimate the importance of that….but it is inherently secondary…'Rye

These respondents were heavy daily users of the Internet and regarded the medium as a core delivery component for their businesses. There were using the Internet to communicate with clients by e-mail – often on a moment-by-moment basis.

They also used the Internet to deliver their own IT products to clients and to effect service where necessary. Most used the web for marketing and demonstration of products. Some also conducted research and customer evaluation via the Internet.

'Our website went online and comes up on the search engines in the first three…we’ve got so much business from it and everyone wants to know – "Can I get it digitally?"…' London

Ultimately, the Internet was the working environment for many of these companies and, therefore, absolutely critical for success. In effect, many respondents were e-commerce businesses in the fullest sense of the term, since they undertook far wider activities than display, ordering and payment online.

All were, consequently, seeking to extend the scope of their Internet business and planning for future innovation on the basis of an efficient and reliable Internet infrastructure. Their main concerns related to the available telephony technology, which they saw as old-fashioned and advancing far too slowly. Some were, therefore, being frustrated in terms of new technology decisions in view of the uncertainties surrounding connection developments. Many believed that even ADSL was 'old technology' and would quickly become obsolete. There was a desire for increased speeds of data transfer, line capacity and reliability – but no short-term solutions seemed to be available.

For this group, there is no question about the utility of the Internet and its importance for business. All questions related to the UK’s ability to support the new generation of e-businesses.

Specific expectations regarding the Internet were more easily obtained from the experienced IT respondents.

The less IT-experienced respondents simply expected that the Internet would continue to grow as a medium, with more of the prospective consumer marketplace gaining access and thereby extending the potential for business. Given this growing opportunity, most respondents felt confident that they would be focussing more directly on their Internet facility in the future – although there were doubts that the Internet would completely replace traditional retail and service outlets.

'I know that my customers come to me because of who I am and they buy the service as much as the product – trying to do business purely or mainly through the Internet would be disastrous, since I would be directly competing against all the big retailers…'St Albans

There was a recognition that the Internet could benefit from the growth of interactive television, allowing the medium to more comfortably reach a wider consumer audience.

More IT-experienced respondents wanted an Internet medium which would able to cope with any business use to which it might be put. They wanted an always-on service with high capacity which would gradually cease to be an issue in itself.

Limitations for future Internet business were felt to centre on telephony infrastructure and the commitment of UK telecoms providers to provision of a world class system. The more knowledgeable respondents were aware that the US was far in advance of the UK in terms of available quality of connection. Naturally, Japan and Asia were mentioned as cutting-edge in terms of systems and delivery. Equally, there was a recognition that even Europe, and Scandinavian countries in particular, also offered more quality and reliability for businesses users.

These respondents reflected a typical consumer perception of the Internet and many had accepted the idea that the Internet represents the future for all kinds of business transactions. This perception had been reinforced by the evidently increasing use of e-mail for everyday business communication.

Few had any real or specific goals for their websites – with most interest focussed on possible marketing and advertising benefits. They all hoped that, eventually, the Internet would replace Yellow Pages and other directory services. In order to generate broader thinking and planning, most would require external inputs in the form of training or consultancy. There was a desire for Internet training or workshops for the smaller business-person. Currently this type of support was felt to be lacking – most of the available training was too specific, concentrating upon the technical aspects of website design or PC handling, rather than the broader strategic opportunities for businesses on the Internet.

There is evidently a need for information, aimed at SMEs (especially the truly small businesses), which will help such businesses to effectively develop an Internet strategy for the future. Given the respondents obvious enthusiasm, the only factor which currently limits progress is a lack of understanding of the medium’s true potential for business.

As stated previously, this group wants to see the UK telephony infrastructure improve very rapidly, with government intervention if necessary (and many felt that it would be necessary, given telephony companies' apparent unwillingness to meet the business community’s needs).

These respondents did have specific plans for their businesses and the Internet – affected only by the possible limitations of the current telephony network. They certainly wanted always-on services and flat fees (although they were prepared to pay for an efficient service). This matched their view of the Internet as the core medium for their businesses and as a medium which should almost be invisible in terms of its reliability and performance.

This group were very conscious of the differences between the UK and other countries in terms of investment in high quality telephony structures – many had regular contact with similar businesses in other countries and were aware of the benefits available to others:

'I have a business contact in Ireland of all places and they have a very fine high spec telephone network, which is why they have the presence in relation to e-business and IT. When I was there in the early 1980s they still had button A and button B and you had to wind up country phones…but then they made a sudden step change and invested in a completely new top-of–the-range digital network – from the ridiculous to the sublime. But here in the UK we just jog along, one step at a time, not taking any risks and getting further and further behind…'Rye, Kent

Overall, this group is heavily committed to the Internet and seemed naturally anxious to achieve all they hoped to achieve.

'My business is now almost 100% an Internet business and therefore I am now wholly reliant on the infrastructure that we have – but sometimes I feel like a haulage operator in some African country…I can actually plan a very successful business but I simply can’t deliver because the roads are so bad. The problems occur when I have to deal with US clients and they are looking for something double quick and I’m on the phone explaining that the server's down or that transmission time is going to double what is should be…it makes me look like am amateur and I’m not – it’s the people providing my telephony and Internet service that are amateurs…'St Albans

The main issues to emerge from the research are listed below with details of work currently being undertaken to address these problems.

A general issue emerging from the interviews was an apparent shortage of information and training for small businesses on the use of the Internet in terms of the equipment needed, services available and the benefits of getting connected and working online. Initiatives already exist aimed at improving businesses’ awareness and understanding of the Internet and e-commerce and the benefits of incorporating these into their business. These include UK online for business (http://www.ukonlineforbusiness.gov.uk) - an industry/Government partnership geared to help British business, particularly SMEs, to get the full benefit of new technologies, and TelecomsAdvice (www.telecomsadvice.org.uk) - an industry-sponsored, independent advice site for small businesses.

In particular, several of the small businesses interviewed were using advice and equipment aimed at residential consumers. This may not be a problem provided that businesses are aware of any limitations of using residential advice/packages/equipment for business use, where it is not appropriate and the problems that may arise through its use. It is also necessary to ensure that small businesses are aware of the existing range of information and advice targeted at themselves in the press, from telecoms/Internet providers and retailers and through initiatives such as UK online for business and TelecomsAdvice.

Inadequate infrastructure was a complaint of some of the more experienced Internet users who felt that their use of the Internet and e-commerce was being held back by the technology available to them.

Oftel is committed to ensuring the availability of high-speed Internet access methods and is involved in monitoring trials and the launch of enhancements to existing ADSL products as well as new DSL product such as SDSL. In November 1999, Oftel took the decision to require BT to unbundle its local loops, enabling other operators to upgrade the local loop and so offer direct competition to BT’s ADSL products. BT’s wholesale ADSL products are already available to all service providers, including BT’s own service provider business, on the same terms and conditions. A list of some of the fifty or more providers offering service using BT’s products can be found at www.bt.com/broadband under ‘common questions’.

In addition to current high-speed access mediums such as ADSL and cable modems, technological developments mean that, in future, there will be several competing routes whereby consumers can access broadband services. Other means of Internet access – such as broadband fixed wireless access, satellite access and 3G mobile phones – will give consumers a wide variety of services/packages to choose from to meet their individual needs.

Leased lines, another means of high-speed Internet access, have recently been the subject of an Oftel review following which a draft direction was issued in December 2000 requiring BT to offer wholesale leased line services to other operators, to allow these operators to compete more effectively. This should lead to reduced prices for leased lines.

Several of the businesses interviewed felt that the UK was falling behind other countries in terms of telecoms infrastructure and services available and also the support it offers small businesses in general.

Oftel benchmarks broadband access in the US and Europe on a six-monthly basis. The latest report is due to be published on the Oftel website later this month (www.oftel.gov.uk). Oftel also conducts benchmarking of the Internet and mobile markets six-monthly, and of PSTN service annually.

As to generally lower support for small businesses in the UK as opposed to other countries, this may be an area for further investigation of what services are available in Europe and how that experience can be transferred to the UK.

In regard to problems with Internet and telecoms service providers, Oftel is aware that ISPA, the Internet Service Providers Association, is currently looking at its code of practice. It plans, among other things, to update its current complaints procedure to improve efficiency and clarify confidentiality constraints. Also, Oftel announced plans last September for an independent Telecoms Ombudsman to resolve disputes between users and the industry. Consumer groups have argued that the systems currently in place for dealing with service complaints are not adequate and the huge growth in Internet users in the UK and number of packages and tariffs available highlights the need for greater consumer protection. An Oftel-chaired working group, representing industry and consumer groups, will shortly be publishing an initial report looking at the practicalities of setting up such a scheme.

The Policy Advisory Board of Nominet UK, the register for .uk domain names, has recently prepared a discussion document with the aim of setting up a code of practice for the voluntary self-regulation of domain name registration practices amongst UK ISPs. The purpose of the Code, to be implemented by an independent body, will be to enable consumers to make clear, informed choices over the provision of domain name registration services. The new body would be separate from Nominet and would set quality standards for organisations for their domain name registration services. Nominet’s guide to registering a domain name can be found at www.nominet.org.uk/guide.html .