Readiness Indicators for Electronic Commerce

Information Technology Industry Council (ITI)

This page is an integrated version from various articles at the
original APEC Server

0 Introduction - Readiness Indicators

In response to the Blueprint for Electronic Commerce and a discussion at a meeting of the Business Facilitation Steering Group of the APEC Telecommunications Working Group, the Information Technologies Industries Council has developed series of indicators of readiness for electronic commerce. The purpose of these indicators is to provide a basis for assessing an economy's readiness or capability to make maximum use of and benefit from electronic commerce.

There are six indicators:

1 Basic Infrastructure and Technology
2 Access to Necessary Services
3 Current Level and Type of Use of the Internet
4 Promotion and Facilitation Activities
5 Skills and Human Resources
6 Positioning for the Digital Economy (Environment for E-Commerce)

One page descriptions of each indicator are presented as a separate documents for comment on this website. These one-pagesr are drafts that require additional fleshing out and comments and suggestions from all sources are sought. Comments regarding the readiness indicators in general should be made at this location.

Comments may also be sent to <> who will forward them to ITI.

Based on comments received, revised versions of these indicators will be prepared and will be the basis of a public- private roundtable at June 27 and 28 meeting of the APEC Electronic Commerce Steering Group in Auckland, New Zealand. These readiness indicators would be available for use by APEC economies to make their own assessments. Informal commitments have been received from the private sector to provide assistance in carrying out these assessments..

There are six indicators:

1 Basic Infrastructure and Technology
2 Access to Necessary Services
3 Current Level and Type of Use of the Internet
4 Promotion and Facilitation Activities
5 Skills and Human Resources
6 Positioning for the Digital Economy (Environment for E-Commerce)

One page descriptions of each indicator are presented as a separate documents for comment on this website. These one-pagesr are drafts that require additional fleshing out and comments and suggestions from all sources are sought. Comments regarding the readiness indicators in general should be made at this location.

Comments may also be sent to <> who will forward them to ITI.

Based on comments received, revised versions of these indicators will be prepared and will be the basis of a public- private roundtable at June 27 and 28 meeting of the APEC Electronic Commerce Steering Group in Auckland, New Zealand. These readiness indicators would be available for use by APEC economies to make their own assessments. Informal commitments have been received from the private sector to provide assistance in carrying out these assessments.

Info Society Index

There do exist various assessments of "readiness" in the
area of E-Commerce. A strong presentation was made in our last
Asia-Pacific IT Summit by IDG Chairman Pat McGovern. It was a small sample
of a fairly broad and detailed proprietary "Information Society Index"
issued by IDG. They construct profiles for individual economies. Only a piece of it
can be seen in his presentation but it's enough to get the idea.
It can be found on our web site at

Andy Grove also made a presentation to the same meeting
in which he summarized a big part of the issue in much of Asia --
high local access costs -- but those costs are dropping in some
places already.

1 Basic Infrastructure and Technology
Issues of basic infrastructure and technology

Underlying all E-commerce is infrastructure ? the physical wires, switches, and devices that are necessary to provide all telecommunications. What we as users experience as E-commerce are applications that ride on top of the infrastructure, and depend on it to connect geographically separated participants in transactions.

Part of the E-commerce infrastructure are the end-user devices, the information appliances, the customer-premises equipment that we interact with when we engage in electronic commerce. Up until now, these devices have tended to be largely defined by the applications they support: telephones for voice service, computers and software for E-commerce. But with convergence, these appliances are changing. Today, one can use a computer or WebTV to retrieve email and to respond to voice calls. And, with text-to-speech software, E-mail messages can be read into your ear when you use your telephone or cell phone. Consumers increasingly are seeking choices in how they access and retrieve information, and how they interact with each other.

The primary underlying infrastructure for electronic commerce, however, is telecommunications networks and systems. Telecommunications is the common element in all examples of electronic commerce. Indeed, E-commerce would not exist without telecommunications infrastructure; telecommunications supports and enables E-commerce, not vice versa.

E-commerce users utilize telecommunications to connect to Internet Service Providers (ISPs). These ISPs provide the link which enables interaction between two or more parties to the electronic transaction. Consumers usually use dial-up access, although cable-TV providers are beginning to offer high-speed Internet connections. Small businesses may also rely on dial-up access, but larger businesses with greater volumes of E-commerce traffic generally use leased lines to connect directly to an ISP.

ISPs rely on telecommunications infrastructure, specifically leased lines, to interconnect with other ISPs or Internet backbone providers. Depending upon where the interconnection point is, the leased lines could be domestic or international. Larger ISPs may actually own some transmission facilities. (Most Internet backbone providers are primarily facilities-based.)

Different E-commerce users and different E-commerce applications have different infrastructure and technology requirements. A dynamic E-commerce environment requires that users and providers not be restricted in the options available to them.

On the equipment side, the information technology tools used to access the Internet ? PCs, servers, digital wireless phones, etc., along with the software that make them work ? need to be widely available at internationally competitive prices. As new information appliances are developed, they, too, should be easily attainable.

For telecommunications infrastructure, a choice of alternative networks (fixed-line, wireless, satellite, cable TV, etc.) means that the technology most appropriate for a given application can be used. Furthermore, E-commerce is experiencing exponential growth, requiring ever-increasing capacity and transmission speeds. Investors must be free to respond by deploying more and faster transmission facilities and implementing new technologies wherever demand is occurring, including in outlying regions away from urban centers.

The value of a telecommunications network for users is increased when it is interconnected with other networks. Interconnecting with a dominant supplier of transmission facilities can be extremely difficult, however. In economies with a dominant supplier, the legal and regulatory environment must be capable of ensuring that appropriate competitive safeguards are in place so that market power is not leveraged to the detriment of other suppliers and, ultimately, end-users themselves.

2 Access to Necessary Services

A key issue for electronic commerce readiness is the breadth, depth and scope of access to electronic commerce services, since access will have an enormous impact on the benefits that will accrue to an economy, its people and institutions. The degree of access provided by government and private sector policies and will also affect the rapidity with which these benefits accrue.

What do we mean by "access"?

Access here really has two main components, on the supply side, competitive access by infrastructure technology/equipment and electronic commerce service providers; and on the demand side, affordable and reliable access by all users, whether individuals, schools, government organizations, libraries, businesses and so on. The more access that government policies enable on both the supply and demand side, the greater and faster that the benefits will accrue and lift an economy's competitiveness.

Access to supply of technology and services for electronic commerce

Governmental policies on competition in the telecommunications infrastructure and services areas can make a major impact in the growth and value of electronic commerce for national economies. In many economies, the transmission services and related facilities that individuals and businesses need to connect to he Internet are not available from local providers. Policies that would enable greater deployment of faster transmission services to schools, government agencies, homes and businesses of high speed transmission would be required to increase the use and effectiveness of electronic commerce. In many economies today only the incumbent telecommunications company providers provides limited access to alternative services or technologies. Policies to provide transmission alternatives to businesses, institutional and individual users, in the form of cable, satellite or wireless solutions should be developed and implemented.

In many economies, also, regulatory barriers that prevent or reduce access to the telecommunications backbone infrastructure by Internet Service Providers (ISPs) and other electronic commerce service providers can retard the introduction and wider use of electronic commerce by nations' citizens. Policies that help ensure full access and competition among ISPs and other value added electronic commerce service providers would ensure that users, on an ongoing basis, would achieve the best possible technology and cost competitive use of electronic commerce. Policies that are desirable would include those that will encourage ISP competition such that they can take an economy form only one or a few ISPs providing local access to services to a point where many ISPs are offering a full range of services to residential and business users. These services would include locally relevant content, visible and effective local website support and locally customer customizable services.

Access by all competitors to invest in infrastructure technologies and provision of services provides a strong basis to ensure a number of necessary requisites for a robust use of electronic commerce throughout an economy. Citizens and institutions require effective, affordable and reliable access to Internet and electronic commerce services that match their needs, whether they be a school, library, government agency, business or individual. Today, in moist economies only a small percentage of online adults are online regularly, and only a small percentage of business is done through or with the help of electronic commerce. Policies that are needed would be aimed at rapid deployment of technology, equipment and services to the community such that virtually all students would have access to the internet through the schools; almost all citizens would have access to modem-equipped computers through the use of public kiosks and libraries, (with some of this at no cost to the user); and local community librarie
s support strategies for widespread public access to online information and commerce.

Competition and other public policies should ensure affordable access for all users, including the provision of free access, as appropriate for certain users. Today, in most economies few options for pricing and services are available and therefore users are simply opting not to make use of such services, since they are not affordable or are more expensive that other forms of communications or conducting business. Policies to enable the expansion of capacity, bandwidth, growth in volume usage and economic pricing (transmission and service charges reflect actual use of capacity) will provide tremendous value to the user and the broader economy.

Competition and relevant government policies should encourage and enable high quality and reliability in the electronic commerce system. Today, in most economies, Internet connectivity, service problems and connection reliability are not at great levels. Service is disrupted frequently, while it can take longer than a week typically to solve connectivity or other problems. Policies to move the system toward very rapid provision of services, ISPs providing online help and online software upgrades, and very rapid resolution of connectivity and other service problems will ensure that the benefits of electronic commerce accrue to the community.

3 Current Level and Type of Use of the Internet

From a small community of academic and government users before the World Wide Web was created in 1995, the number of Internet users has grown explosively. In just four years, users passed 50 million. Today, users have doubled to over 100 million. Huge growth lies just ahead: in Canada and the U.S., 29% of the population is online; in Europe, 4.5%; and in the rest of the world, less than 1%. Although available demographic information focuses only on the American public, it shows trends that are likely to be widely replicated. Most significant, while early users tended to be educationally and economically privileged, the demographics of newcomers to the Web ? the 25% that joined last year ? are closely aligned with the demographics of the general population. In short, the Internet has become a mass movement.

Although individual users capture the public imagination, the real story of the Internet and e-commerce lies in business usage. While hobbyists experimented, businesses were engaged worldwide in a massive process of automation and streamlining, using information and communication technologies in pursuit of bottomline business objectives. Businesses were quick to use these technologies to establish internal networks that first connected the employee population, but even more important connected business processes ranging from rolling up purchasing requirements to aligning the totality of internal processes toward the point of customer engagement. Before the Web, businesses used electronic data interchange (EDI), which involved pre-defined formats to exchange standardized business forms without the need to print, copy, manually file or re-type information into inventory records, shipping logs, or accounting systems. With the development of the World Wide Web, companies have been able to abandon these special

ized formats in favor of much more flexible forms of interaction and exchange available and the web. Businesses have leaped to take advantage, and, according to Forrester Research, business to business revenues will grow from $43 billion in 1998 to $1.2 trillion in 2003. (Compare business to consumer revenue growth from $8 billion in 1998 to just $140 billion in 2003.)

Educational use of the Internet and related technology is increasing in the U.S., but the quality and effectiveness is mixed. According to a February 1999 study, only 24% of schools effectively integrate technology while more than 50% remain in a "Low Tech" category in which most teachers do not have access to appropriate technology in their work areas and only a few teachers use technology to enhance personal productivity.

Governments worldwide are integrating the Internet and information technology into their operations to streamline, transform, and improve both internal operations and interactions with citizens. Integration of these technologies generally involves the elaboration of government systems architectures specifying hardware and software standards, common IT facilities, compatible data communications networks, a structured set of IT standards and methodologies, quality management and a skilled professional workforce.

4 Promotion and Facilitation Activities
The Internet provides much of the platform for e-commerce, and with 50 million users connected in 5 years, it is undergoing the fastest adoption rate of any new medium in history. In this environment, there seems little need for promotion and facilitation to encourage e-commerce.

However, electronic commerce is more than the Internet, and the explosion of a select demographic group of web surfers will in itself not automatically create the economic benefits electronic commerce could provide. Whatever the infrastructure, technologies or applications, electronic commerce is fundamentally about people. Before Ms. Kim sells her Korean ginseng on-line, and before Noda-san uses the Internet to look for a supply of bluefin tuna in Australia, they will all need to be aware of the opportunities offered by electronic commerce and feel comfortable with new technologies and applications at hand. To achieve this awareness, individuals, businesses and the broader community alike can benefit from assistance in overcoming the variety of institutional, individual and technological barriers that lie along the way.

General awareness raising projects are needed to build interest with potential user groups or communities of interest, even those most isolated from new developments. At the most basic level, this can involve the provision of accessible and user-friendly information about electronic commerce, and initiatives to demystify new technology.

One of most important contributors to the development of widespread Internet and e-commerce literacy is the extension of information networks to public facilities such as libraries, community centres and other public places. To increase users' trust, business should be encouraged to undertake trust-building activities, such as self-regulatory quality labels and accreditation schemes. Ideally, labelling and industry codes would need to be developed at the global level to avoid the creation of national barriers.

Small and medium sized businesses will often need additional support to transform their businesses with e-commerce. In particular, awareness-raising actions can convince companies of the cost-saving and market-widening potential of electronic commerce. With the help of trade associations, the adoption of best-practices can be encouraged through the dissemination of case studies and the organisation of workshops, as practical information on the successful implementation of electronic commerce is often what SMEs need most. Cconcessional funding measures for e-commerce adoption by SMEs would also greatly facilitate its uptake.

One of the challenges faced by many in the business community is a real lack of awareness of the implications of e-commerce to their competitive position, and therefore to their business survival. Governments can work with e-commerce vendors to ensure that the wider business community fully understands both the competitive threat and the competitive opportunities created by e-commerce.

Governments have a particularly important role to play in the promotion and facilitation of e-commerce as a model user of e-commerce. Most governments are already disseminating public information on the Web. In addition to promoting the use of the Internet, these public Web sites improve governments' transparency and bring them closer to their constituencies.

However, to really set a credible example to their citizens and businesses, governments should adopt e-commerce to increase the efficiency of their own internal operations. In addition, e-commerce should be applied to the governments' external data handling and business dealings, e.g. the handling of customs and taxes, social security, employment services, public registries. In particular, governments should use e-commerce in their public procurement. This would involve major savings in public funds while giving companies the best example of how business can be facilitated using electronic commerce.

As the Internet develops, there will be a need to ensure widespread interoperability between different applications and technologies and avoid the creation of barriers between different groups of users. Industry should be encouraged to ensure interoperability of their technologies and applications.

Interoperability is based on adherence to standards. The development of standards needs to be a global, open process led by industry, as only industry-led voluntary standards will be flexible enough to encourage innovation.

Along with official standards, which are developed in the framework of international standards bodies, de facto industry standard should also be encouraged. Standards work should focus on open interfaces, which are necessary so that systems from different providers can interoperate, thereby encouraging competition.

Regulation which attempt to impose standards, and which are dependent on a particular technology, risk stifling innovation, and creating trade barriers. This is contradictory to the requirements of an attractive environment for e-commerce. Mandated technologies will often prevent users from choosing from the best-value alternative from the wide variety of advanced technologies.

5 Skills and Human Resources

Importance to Electronic Commerce

A relevant and adaptable skills infrastructure, and capable human resources are essential for the successful functioning of any modern and competitive economy. The rapid growth in investment in e-commerce, will cause this transformational technology to play an ever more important role in total economic activity.

E-commerce can be applied with competitive effect in all sectors of the economy. Therefore, the requisite skills for the successful deployment of electronic commerce, and realization of its benefits, depends on the availability of necessary skills in all sectors.

Although e-commerce is founded on information technology and telecommunications, the skills to support its deployment are not restricted to disciplines in those fields. E-commerce is an application of these technologies, and sector-specific business and process skills are required to complement technology and systems skills.

Readiness of Skills and Human Resources

Basic skills and human resources development, which is beneficial to e-commerce readiness, starts during school years. The extent to which students have the opportunity to use and understand information and communications technologies can contribute to their ability to deal effectively with e-commerce in later life. There is also a beneficial effect from better educating future generations of consumers, to help develop informed usage of e-commerce.

A greater level of accessibility to IT and to the Internet in schools, and in the home, can contribute to a higher level of community e-commerce readiness.

As e-commerce and its underpinning technologies are developing rapidly, there is a challenge for educational institutions to keep IT related curricula and systems at contemporary levels. For both course content and technology, business can make a valuable contribution to the ability of tertiary institutions in particular to remain relevant and to achieve excellence.

The quality of the relationship between business and education institutions can be a key determinant of success in meeting the specific requirements of information age employment, including e-commerce needs. New technical, organizational and managerial skills are needed for success in an environment of rapid technological change and global competition.

Close co-operation and substantial partnerships between business and educational institutions, will contribute to skills formation which is more relevant to business, and to e-commerce readiness of employees.

Another effect of rapid technological change, and the application of e-commerce technologies which drive process re-engineering, is the potential for more rapid obsolescence of skills. In this environment, employers need to maintain the currency of employee skills, either through workplace programs or using external programs and resources. Maintaining the currency of employee skills becomes an element of a lifelong learning cycle, which can increase the ability of employees to effectively deal with change.

Many e-commerce benefits derive from the successful implementation of change to existing processes, or from applying the technology to create new businesses and processes. New skills are necessary to achieve these goals and optimize existing investments in human resources. A greater commitment to renewing skills and to new skills development will create a more positive environment for the successful adoption of e-commerce.

The penetration of e-commerce to all economic sectors means that all groups in society will be touched by the technology. Not only people in employment and younger people will need to interact with e-commerce systems. Older people and the unemployed will also increasingly conduct transactions with e-commerce systems and services.

Maximizing e-commerce readiness will mean providing re-education programs and technology familiarization programs for the unemployed and for older generations.

Information and communication technologies provide the means to address many of the education and training challenges mentioned in this paper. In particular they provide the opportunity to implement distance education and telelearning. The benefits of linking remote communities and individuals, with educational institutions extend across all educational curricula. However the benefits of the e-commerce ability to extend market reach will be lost to these classes of people unless they have the skills to engage.

A related attribute of an e-commerce ready economy is one which enables work from home and teleworking for employees. E-commerce supports new business processes, and also reduces the dependency that employees are located at a particular location. These remote work styles can help to unlock an untapped resource of skills, which may otherwise be lost to the economy and to the firm.

For work from home and teleworking to be, labor laws and communications infrastructure need to be supportive.

Most of the e-commerce readiness factors in skills and human resources are aligned with more general positive indicators, which benefit all parts of the economy. This partly reflects the pervasive nature of e-commerce, but also the general characteristics of a sound human resources strategy.

6 Positioning for the Digital Economy


There are significant policy challenges for government policymakers to optimally position their economies to compete in the global digital economy. Policy makers are best served to work with the private sector to craft a policy environment that will encourage, rather than stifle, the growth and expansion of Global Electronic Commerce. There are a number of relevant issues to address in optimizing readiness:


It remains unclear as to what will be the most appropriate tax policy for electronic commerce. However, in general terms governments should apply existing taxation principles, rather than seeking to implement major revisions to tax codes and legislation.

The likelihood that an electronic commerce transaction will cross multiple geographic boundaries and tax jurisdictions presents some unique problems. First, a lack of coordination among various jurisdictions could result in multiple taxation as multiple authorities try to exert jurisdiction over a single transaction. Second, some tax authorities may decide to target Global Electronic Commerce for special, new taxes. These types of taxes effectively penalize the company or consumer that chooses to use networks and information technology to conduct business.

To help Global Electronic Commerce grow, governments worldwide should coordinate their policies, refrain from imposing new or discriminatory taxes and strive for "tax neutrality" ? an assurance that electronic transactions are treated no differently than paper-based transactions.

Confidence to invest in e-commerce can also be encouraged by governments clearly stating their intention to follow these principles. The absence of any statement of direction can create uncertainty and channel investment to other locations.

Legal Framework

A successful commercial transaction requires that the people involved know that a contract exists, have certainty of what to expect from one another and understand what they can do to enforce the contract. In addition, all parties to a transaction must trust that the origin and content of online information is authentic and that the credentials and identity of the involved parties can be verified.

Many aspects of building trust involve the overlap of legal and technological issues. This is especially the case with the transformation of contractual relations between businesses. Most contract law has been designed to govern traditional economic relations, consummated using traditional media: i.e., paper documents. The nature of electronic deals adds a degree of complexity to these relations, by raising questions about how precisely electronic, "virtual" documents are covered by these laws.
The United Nations Commission on International Trade Law (UNCITRAL) has attempted to tackle the many questions that arise in the context of electronic contracts and electronic signatures, by drafting a Model Law on Electronic Commerce. UNCITRAL has offered this Model Law to the world's governments as a proposed legal framework for considering these issues, and for helping to harmonize their legal treatment worldwide. The objective[s] of the Model Law is to enable the commercial use of electronic media and techniques such as the Internet and Electronic Data Interchange (EDI). In particular, Articles 5 through 11 of the Model Law have the potential to facilitate electronic commerce by providing equal treatment to users of paper-based documentation and users of computer-based information, which is essential for fostering economy and efficiency in international trade.

Electronic Signatures

For centuries, handwritten signatures have been universally accepted as binding evidence of commitments ? an essential pillar of business dealings. The notion of "electronic signatures", in which a commitment is sealed via an imprint of electronic bits rather than pen and ink, involves more than just a shift in habits. It requires private sector-developed and commonly recognized protocols, means for detecting digital forgery, and techniques for verifying the timing of correspondence and the integrity of data files that can be readily manipulated, changed, and deleted, without leaving a "paper trail".

The private sector is already using several different technologies and authentication methods to achieve these goals. Governments should ensure that any method for authenticating a transaction, which is agreed to by the parties, is acceptable for legal and evidentiary purposes. Governments should also ensure that any law or rules on electronic authentication do not discriminate against authentication service providers from foreign countries.

Security and Encryption

Highly publicized accounts of criminals stealing credit card numbers and trade secrets from the networks that support e-commerce create confusion and curtail the use of digital networks for every-day transactions. In fact, technology products that can meet almost every security demand are available on the market, and can actually make it safer to provide your credit card number online than it is to provide it over the phone or to a waiter in a restaurant.

Nevertheless, to realize the opportunities made possible through e-commerce, consumers, businesses and governments must be confident that the financial and other sensitive information they exchange during an electronic transaction is protected and safe from theft, alteration or misuse. Countries around the world must embrace market-driven solutions to electronic data security needs that allow consumers and businesses to choose and deploy the type and strength of security solutions they require.


Digital technology presents unique challenges in terms of how creators of that information are protected. The growth of e-commerce requires development of a globally accepted, effective copyright regime that strikes the proper balance between strong protection for creative works on the one hand, and the preservation of access to information on the other.

Recent international agreements, such as the Protocol to the Berne Convention in Geneva (12/96), confirm the need to advance both the rights and exceptions under copyright law into the digital age. Issues such as the scope of copyright, the proper treatment of copies automatically created through digital exchange, the principle of fair use in the digital environment and the appropriate level of protection for databases must be addressed by individual nations and by the global community.

To encourage e-commerce, economies need to initiate the policy processes which will lead to the enactment of legislation to most effectively protect digital works. They will be well served to draw on the experience of other economies in creating this new regime. Many debates over controversial aspects of digital copyright have already been settled, to the general satisfaction of all participants. Wholesale reopening of these debates will create significant uncertainty for e-commerce.


As the Internet has become more pervasive, there are questions about the balance between a completely unregulated flow of information, and restrictions in the interest of other societal objectives. For e-commerce to flourish, there must be some global understanding of which jurisdiction's laws apply to a given transaction.

Governments should encourage technology solutions that offer consumers a choice of tools to establish the critical balance between the flow of information and protection of other interests. Regulation of Internet content should be no more restrictive than for other media, and the regulations should reflect the Internet's unique characteristics.


Individuals should have the right to exercise reasonable control over the collection and use of their personal data - online or otherwise. This includes the right to know how information is used, the right to opt out and to seek redress. Without the right to choose the nature and scope of personal data protection in online transactions, individuals will be reluctant to take full advantage of e-commerce. Industry is therefore developing appropriate technological solutions and codes of conduct to protect personal data on the Internet and other private and public networks.

These market-led initiatives are the best means for empowering individuals to enforce their personal privacy choices. Government regulation, if not carefully focused, can lead to unneeded and unhelpful restrictions on beneficial exchanges of information.

Governments should recognize and allow different approaches to privacy protection which meet the needs of different circumstances and transactions. Governments should coordinate their efforts internationally to ensure privacy regimes do not become an unnecessary barrier to electronic commerce.