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CyberForum Archive

May 16, 2001
Internet/e-Commerce: Strategies for Success
Welcome to the USTTI's second monthly Cyber Forum on Internet/e-Commerce: Strategies for Success! Pose your questions to USTTI Chairman, Ambassador Michael Gardner; Jim Massa, Cisco Systems; Chris Israel, AOL Time Warner; Julie Hedlund, Nortel Networks; and Shanti Gupta, FCC.

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Jorge Ciccorossi, Argentina
What can we do to get internet access for those people who has not it yet ?

USTTI Board Representative
Shanti Gupta

The people should subscribe to an Internet Service provider for access(ISP)to Internet. The ISP should have peering arrangement with the Internet Backbone provider.

Katalin Popescu, Romania
What do you see as the key to overcoming the "digital divide" in developing countries?

Chris Israel, Deputy Director, International Public Policy, AOL Time Warner
Katalin - I think the key will be for developing countries to assess the market environment for the devlepment of the basic telcoms infrastructure and investment necessary to provide basic access to information and communications technologies to people. I say basic because in our experience things like community Internet centers provide a great way to expose people to the Internet.
This is a different approach from the US. At the end of the day bridging the digital divide will rely on an sufficient telecoms network and creating a domestic market environment which welcomes domestic and foreign investment.

Byambasuren (Mongolia, Asia)
e-commerce and e-payment businesses are just absolutely new in our country.
1. Where can I find the laws or regulations about e-commerce and e-payment
businesses? Especially I'm interested in tax related laws or regulations.
2. What are the opportunities to develop e-payment services (including credit card payments) like Internet Secure, Cyber Cash or etc. in this area?
Can you suggest steps in developing this business.
3. Could you suggest any Associations or foundations of e-commerce or e-payment fields that we can contact?

USTTI Board Representative
Julie Hedlund, Nortel Networks:

Thank you for your question. I will try to answer each part separately.
1. The United States has passed a law on e-commerce e-payment that gives legal standing to electronic signatures. This law can be found on www.loc.thomas.gov, which is a database of U.S. legislation. It was passed last year. On e-commerce tax, there is currently a U.S. law setting a moratorium on Internet taxes, but it will expire this year. There are many proposals in the U.S. Congress, some to continue the moratorium, and some to allow states to set Internet/e-Commerce taxes. The European Union also is considering these issues and information can be found on the EU web site.
2. E-payment services: There have been several services developed in the U.S., some of which have not been successful. In general, in the U.S. most people use credit cards to pay on the Internet, instead of cypercash. This method seems to be growing more popular. In Europe, however, there is some reluctance to using credit cards, and cybercash systems may be an alternative. Some people suggest that the best approach is to encourage the use an acceptance of credit cards because this system is well established in many countries throughout the world.
3. I do not know of a specific foundation for developing electronic payments, you might contact associations that represent financial institutions/banks.

As you are aware, Africa and other third world contries are sceptical in embracing ecommerce and this is due the banks being slow in introducing credit cards systems and the telecommunication insfrastructure is wanting, from your experince what is the best way to go about to rectify this situation, because i believe we are being left behind in this sector ?

Jim Massa, Director, Strategic Government Alliances, Cisco Systems
This is a hard to answer question, but let me at least validate your concern. Yes, a basic building block to e-commerce for individuals is the use of credit cards. Other countries have difficulties such as unstable currencies, which is a much worse problem.
I would suggest a focus on business to business transactions whereby wiring of funds is part of the process. This is typically cumbersome to most individual consumers, but standard practice for businesses of any size.

Regarding, the infrastructure, yes, a telecomm infrastructure is needed to support this. In particular, most applications need a high speed telecomm infrastructure for internet service providers. Kenya is wrestling with the concept of an IXP (internet exchange point). This function of connecting the ISPs at high speed is an important building block to the infrastructure. The issue is who is responsible for it.

Without both, e-commerce and other internet value to the economy will not be achievable by countries.

Usi, T . A , Tanzania
Many of the applicants to the USTTI courses fail to pursue the courses because of financial constraints their administrations face. I feel if tailor-made courses are arranged and delivered on line, on the INTERNET, a large number of interested people would benefit from the teachings.

Ambassador Michael R. Gardner, Chairman, USTTI
In fact, this year we have added two online training courses, sponsored by USTTI Board member corporation, Cable and Wireless. These courses will deal with Privatization and also Internet Policy. We feel that these courses will be great opportunities for those not able to attend USTTI training, but still believe that there are many additional benefits, beyond just training, in attending training in the United States, for it enables individuals to interact with communications leaders from throughout the developed world, who are attending USTTI training with you. In addition, coming to USTTI training allows our scholars to see first hand the consumer benefits of a competitive communications environment.

Daniel Omondi Kenya
Dear sir/madam,
my question is how insecure is the e-commerce in the developing vs
developed nations and what are the stratagies in enhancing the bridge for a
better global economy through this informationsuperhighway? My second quiz is what initiation are the world bank and IMF taking to catalys the e-commerce

USTTI Board Representative
Julie Hedlund, Nortel Networks:

Daniel, thank you for your excellent question, I will try to give my best answer. E-Commerce is quite secure in the U.S. and generally considered secure in other developing countries, such as in Europe. Strategies for enhancing a bridge for a better global economy may include engaging government officials, business representatives, and consumer groups from both developing and developed countries in international fora such as the Global Business Dialog on ECommerce (GBDe), the ITU, and other international groups to work together to help developing countries develop policies that encourage e-commerce and avoid regulations that could inhibit e-commerce. I do not know if the World Bank and IMF are taking specific steps to encourage e-commerce, although in many cases I believe disbursement of funds may be predicated on the government of a developing country adopting or initating policies that would encourage competition in the Internet/telecoms markets.

David Moisi, South Africa
Since South Africa is a fledgeling democracy very interesting debate are beginning to emerge regarding issues of policy and privitisation .The debates are largely between government and the trade union movement .In your experience what core issues were sticky?

Jim Massa, Director, Strategic Government Alliances, Cisco Systems
Your question touches on many sensitive issues. Let me try to respond if not address some of the items you raise.

E-commerce and the value of internet technologies have transcended all forms of government. EAch offers their unique challenges. Even the same forms of government have country unique challenges.

The key issue tends to be "control", but the common solutions tend to center around "value for all parties". Therefore, shifting the focus to bring value to the differing parties is essential to finding the country unique solution that fits at a given point in time. The solution for S. Africa today may be different that what S. Africa needs in 10 years as the government and economy and world economy evolves.

Tarek Mohamed, Egypt
For countries who have recently or plan to privatize their telecom industries, should newly created regulatory bodies be uniquely independent from the government or an arm of the government?

Ambassador Michael R. Gardner, Chairman, USTTI
While we do not want to dictate how countries go about setting up their regulator, we have found that establishing an independent regulator instills confidence in the marketplace and promotes investment. Ultimately this delivers a broader array of inexpensive and reliable communication technology to the citizens at large.

LaƩrcio Lucchesi - Brazil
How can national taxes barriers be avoid or minimized ?

Chris Israel, Deputy Director, International Public Policy, AOL Time Warner
Taxation of e-commerce is a major issue which we, are considering both in terms of goods sold in the US and internationally. In the US we have a variety of state tax systems which need to be reconciled in some way if taxes are to be collected. The complexity of this has prompted the US government to prohibit the taxation of goods sold online - however this prohibition will expire in October. So there will be a big debate in the US over the coming months.

I think avoiding the taxation of e-commerce is probably impossible. There is too much potential revenue at stake for states, countries etc. I think your point on minimization is important - simplification will be important too. For instance the EU has a complicated VAT system which would be very hard for those outside the EU to deal with. Organizations like the OECD are putting a lot of thought into this issue and companies like ours are helpig to evaluate this issue. We don't completely oppose taxation of e-commerce, but it must be simple, fair, equivalent to the offline world and predictable. We want e-commerce to grow and any tax systme must not hinder this growth.

laila ZOUAK , Morroco
As e-commerce is an important but also a special issue including many fields -technology,economics,
privacy, regulations...,in wich we can find a set of issues affecting or affected by e-commerce- it will be interesting to know how leading countries in e-com ( USA for instance) managed to deal with it and specially with the regulation aspect:what was regulated and what was not and even what should have been regulated .

Thank you.
it's a very interesting subject!

Jim Massa, Director, Strategic Government Alliances, Cisco Systems
Depending on who you refer to as "the supplier" the answer could be "yes". If you are interacting with a manufacturer who has a web site, they will have your credit card number. If you are purchasing something through an auction site where the supplier has put something on the site so that others can "bid" on it to buy it, the credit card information is retained by the auction site provider, but not the merchandise supplier.

Reindorf Manu, Ghana
what will happen if people who do not have electronic form of payments like credit card participate in e-commerce.

Jim Massa, Director, Strategic Government Alliances, Cisco Systems
The initial answer is that by themselves it will be very difficult to participate in e-commerce. However, one suggestion is to focus on business to business e-commerce which can rely on wire-transfers as part of the transaction.

Another similar step is to have an intermediary (ie, a bank) which does not provide a credit card, but will allow for some guarantee of bank balance that can be wire transferred.

There's been some use of "pre-paid accounts" used by countries who are faced with unstable currencies. However, this is again focused more towards the business sector rather than the individual.

Oyungerel, Mongolia
Is there any law about e-commerce, e-payment in the USA? If yes, where I can find it?

USTTI Board Representative
Julie Hedlund, Nortel Networks:

Oyungerel, thank you for your question. There is a law about e-commerce/e-payment in the U.S. Last year a law giving legal authority to e-signatures was passed in the U.S. This has made it easier to conduct transactions on the Internet. The law can be found at the Library of Congress at www.loc.thomas.gov. There is no law governing e-payments, but most payments on the Internet in the U.S. are made via credit card, and the laws that govern these transactions are the same as those for non-e-payments.

The Internet allows anyone with Net access to make purchases from anywhere in the world. How do you tax goods purchased online from consumers who do not reside in the state or country where the vendor has set up shop?

Jim Massa, Director, Strategic Government Alliances, Cisco Systems
This is a national as well as international issue. For example, within the US the law for inter-state commerce specifies which company in which state is responsible for collecting sales tax. However, when the buyer and the seller reside in different states, the tax is generally not collected. This has been a non-issue until recently due to the way in which the internet allows for cross-state transactions.

There is no universal answer for this. However, there are some practical indicators which show how increased transactions overall benefit the state or country regardless of sales tax.

In short, the experience to date is that the increased inflow of funds into a local economy due to inter-state commerce far offsets the sales taxes that would have been collected. So, from a practical matter, to restrict the trade by wresting with the sales taxes does not benefit the state nor the consumer. Due to this most countries and states with high experience with e-commerce and the internet have opted to not tax transactions conducted via e-commerce.

It may seem that tax revenues are lost, but experience shows that the net effect is not a loss overall but a gain.

In my country, Kenya, we have a great need for information on policy issues on electronic commerce. What are some of the right organizational provisions for us to put in place to promote the growth of e-commerce in my country?

Chris Israel, Deputy Director, International Public Policy, AOL Time Warner
Great question, and although there are big differences between countries and their political and economic environments, I think there are some very essential policy points which all countries can learn from. We see the policy framework of e-commerce as a chain. It starts with the development and liberalization of the telecommunications sector. In developing countries the emphasis will have to be on development - this means investment to provide the infrastructure necessary to connect people. This can come from outside your borders which requires an environment where international companies are confident that their investments will be profitable and safe - this means a stable market environment for international and Kenyan companies.

Further down the chain are things like protection of intellectual property and basic services like mail delivery.

Past this, I think the real catalyst for growth in developing coutnries is when they start to see the huge productivity gains it can bring which will directly impact the lives of citizens. This will have an impact with policymakers.

Lorenzo Hotsia, Papua New Guinea
This question is about security of Credit Card Numbers on the Internet when buying goods via
the Internet:

When I have entered and sent my Credit Card Number to the supplier of the good(s) that I am buying, will the supplier get to know my Credit Card Number?.

Jim Massa, Director, Strategic Government Alliances, Cisco Systems
The answer can be yes and can be no.

If you are working directly with the supplier, they will indeed have your credit card information.

If you are purchasing equipment from an auction site (e-bay, for example) you provide the credit card information to them. The supplier of merchandise does not receive your credit card information, but the auction site intermediary does.

Reindorf Manu, Ghana
With the gradual increase in the use of IP telephony, what advice do you have for the good old telcos

USTTI Board Representative
Julie Hedlund, Nortel Networks:

Hellow Reindorf, it's good to hear from you! You've asked an excellent question (as usual). I hope I can give a good answer. I personally think there is still a very important role for the "good old telcos," both in developing as well as developed countries. First, because in most countries a basic telephone (copper wire/fixed) connection is still the way most people make telephone calls as well as access the Internet. In fact, in the U.S., the revenues from voice telephony (both residential and business access) are still the primary source of income for incumbent telecom operators. IP telephony is being implemented, but it has not come close to replacing traditional telephony. So, while I think that IP telephony has been used in a limited way by some users for long distance calls that are less expensive, I do not believe it will replace traditional telephony soon, and instead, it may enable the "old telcos" to enhance their service and realize cost savings that could be passed on to consumers.

The access to IP telephony is through copper wire or wireless but they all have to connect to Internet at a gateway or switch. The gateways will replce classical class 5 switches. Softswitch will provide gateway function. Softswitch can seperate voice and data to overcome congestion which is present in todays class 5 switches. It will take long time to replace classical class 5 switch due to ammortize installed cost and traffic development.

Jovanny Ramos, Honduras
How can develop an connection between e-commerce and our economic environment regulations?

USTTI Board Representative
Julie Hedlund, Nortel Networks:

Mr. Ramos, thank you for your question. This is an interesting question and one that may not have one answer. The answer may depend on the regulations that are already in place in your country with respect to the economic environment. Also, it depends on what you mean by economic environment--if you mean the regulations governing economic transactions, in the U.S. many of these laws are being applied to e-commerce. We have, however, developed a law giving legality to e-signatures that is specific to e-commerce. So, the connection is made by looking at existing regulations and seeing which ones can apply to e-commerce without being changed (such as laws against fraud, for example), and where is there a need for new laws (such as e-signatures).

Radu Luca, Romania
What is your opinion on the role played by high-tech super corridors, "Smart Villages," or IT industrial parks to foster IT growth in developing countries?

Jim Massa, Director, Strategic Government Alliances, Cisco Systems
They are valuable tools and have been used successfully in many countries. They have also taken on a variety of forms. Some are government sponsored with heavy involvement from the education sector. Some are industry sponsored with heavy involvement from industry.

Their role needs to include education of people, display and sharing of best practices, and the provision of "critical mass". This means that there must be enough participants to create a stimulating environment for innovation and interaction. This can be supply chain related or skill set related.

Jovanny Ramos, Honduras
what are the steps to develop the e-commerce in a small economic market like our countries?

USTTI Board Representative
Julie Hedlund, Nortel Networks:

Mr. Ramos, thank you for your question. I would suggest several steps. First, your country should have laws/regulations that provide consumer confidence in e-commerce. There should be in place laws against fraud, laws governing contracts and commercial transactions, and other regulations that protect consumers in their economic actions. These laws can be applied to e-commerce in many cases, because the transactions are largely the same, whether they are conducted on the Internet, or via traditional commercial interactions. Second, there should be a way that consumers can make payments on the Internet. Credit cards are generally the preferred method in the U.S., so financial institutions should be encouraged to promote credit cards, or other forms of electronic payment, so that people become comfortable using these methods and confident in using them for e-commerce. Prepaid accounts could be used for people who may have difficulty getting credit. Third, the government--both federal and local--should take the initiative to use the Internet to provide basic services, such as giving people access to information and perhaps standard forms, to help people become used to using the Internet. Finally, e-commerce can only flourish where people have access to the Internet. Thus, the basic infrastructure must be in place to give people access to the Internet. The government, perhaps through Universal Service programs that could be subsidized by the telecoms companies, should increase access to basic telephony. In hard-to-reach rural areas this can be done first by providing telephony and Internet access to schools and libraries, as is being done in the U.S. Later, access can be expanded to each home. Wireless access or satellites also could be a method used in areas where putting in fixed lines is very expensive or difficult. This is a technology being used in some remote villages in India.

When will the next Cyber Forum take place?

Ambassador Michael R. Gardner, Chairman, USTTI
Thank you for participating in our second USTTI cyberspace policy forum and please note your calendars for June 20th at 10 a.m. Eastern Standard Time
when we will focus on another exciting communications technology - satellite
technology. Until then, stay well and keep working to bring modern
communications as quickly as possible to all of your countrymen.

Nasser Al-Nasser Saudi Arabia
In some reports, there are some statistics about the high percentage of the cyber crime...
how this would effect the e-commerce and are there measures or rules to limit it?

Jim Massa, Director, Strategic Government Alliances, Cisco Systems
There are 2 aspects to cyber crime. The first is crime that is part of the commerce transaction, such as false information or non-payment after goods are received. The challenge here is to determine the "governing law". If the seller is in one city or country and the buyer is in another province or country, who's law applies to the transaction?

The second aspect is cyber crime such as stealing of information (personal, credit card, etc.) or destruction or inhibiting access to the site (denial of service). These are new areas of concern in the legal sense, but most are taken care of via secure site technologies. (Firewalls, secure transaction via encryption, etc.)

In short, cyber crime is not a barrier but a cost to the transactions

Romulus Cheveresan
1. Key success factors in E-commerce
2. Decisive factors in success of E-commerce
3. Security subject for successful e-commerce?

Chris Israel, Deputy Director, International Public Policy, AOL Time Warner
Romulus, sorry for truncating your questions somewhat.

On the first issue, success in e-commerce is an elusive issue and many companies have lost a lot of money and gone out of business trying to figure this out. E-commerce is brand new and we're really just figuring it out. However, things that meant success in the offline world, a recognizable brand, ease for consumers, good selection and other elements are of huge importance. What e-commerce brings is a new set of considerations which relate to dealing with consumers in a brand new way. This means issues like privacy and security - what is now called online consumer confidence. This will be a huge differentiator for successful e-commerce companies. Those that serve consumers best will do the best.

I guess you mean how are successful e-commerce companies structured. The successful US e-commerce companies have seemed to get really big, really fast. This allows them to take advantage of scale effeciencies and the advantages that technology can bring. Thus they need an organization and business plan that is very scalable and allows for rapid growth and re-investment.

Finally, security gets back into my point about consumer confidence. I think technology will lead here. There will always be people out there trying break through security measures and take advantage of online consumers, but technology can help as can education for consumers. There are simple things people can do to help protect themselves. Government can also help through prosecution, and laws that make it easier for companies to put strong security in place and share what they know with other companies and law enforcement.


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