E-commerce problems require speedy resolutions

Section three of the E-Commerce Green Paper (GP) revolves around the themes of infrastructure, access and enabling technologies, under which fall the issues of domain naming and electronic payment systems.

Any policy made on these issues could impact business quite dramatically, say industry commentators, which is why most advocate that government adopt a "light touch" legislative approach. Action to the contrary could seriously marginalise business opportunities going forward.

Kobus Liebenberg, a PricewaterhouseCoopers partner, believes government has already displayed its intention.

`"The position of the Department of Communications is clear - they are divorcing the infrastructure from the post-legislation process of e-commerce discussion, although they recognise that there are interdependencies. The way in which infrastructure will be developed will facilitate e-commerce application and services."

But in some industry quarters, sentiment is strongly focused not so much on the development of existing infrastructure, but rather on the initiating of new infrastructures that make use of the radio frequency spectrum.

The reasons are numerous, but predictably, Telkom`s exclusivity of operations in the telecommunications industry is at the top of the list.

BCSnet, an e-services provider, operates as an Internet service provider (ISP) focusing on the value-added network services (VANS) industry. The company is headed by Nazir Moosa, who believes Telkom`s exclusivity is seriously hampering industry development.

"Regulation has already created a stagnation in the VANS industry - that is very obvious. And in terms of the future, where people require more bandwidth for video conferencing and video streaming, that`s the way business has got to go in the future. How are we going to [achieve borderless economies] if we can`t supply services to our potential customers?"

[VIDEO]Moosa is quick to point out that those potential customers do not necessarily lie in the corporate sector. His company displays a keen interest in the education sector.

"We`ve done a project in Pilanesburg, where we`ve put 60 schools in a 25km radius online with a private wireless network, and that`s the way we should be able to go. If we are happy to invest in these kinds of infrastructure, we should be given the opportunity, we should be given the spectrum; they should set us free to do whatever we need to."

Regulation has already created a stagnation in the VANS industry - that is very obvious.

Nazir Moosa, head, BCSnet

Although Moosa believes in the necessity of operating standards and some sort of regulatory framework, he and many other players in the field are feeling the pinch.

"[Bandwidth] is only that expensive because of where we have to buy it through. We`re saying, free those shackles, let free market forces work, and we`re happy to put the infrastructure down."

[VIDEO]Like many of its competitors, BCSnet has prepared a response to the GP. As Moosa explains: "We`re not only looking at it from the commercial perspective in the mainstream. We believe that there is some social responsibility that is also necessary. It is very evident from what the Green Paper discusses, that there have to be ways in which government and private sector can assist in the delivery of [affordable services]. It`s easy to talk, it`s easy to list, but in the delivery of it, we need to work in some form of partnership."

A key factor ascribed to the delay in the launch of the GP was public awareness of the issues surrounding e-commerce. The Department of Communications kicked off its education roadshow towards the end of last year, with the aim of raising e-commerce awareness throughout the country.

Liebenberg explains: "The thing that makes SA unique is the significant social backlog. We need to balance the economic drivers rather than the social drivers."

He suggests a balanced approach: "Without economic imperatives being attended to, we will not be able afford the social issues. It`s no use just blindly following the economic interests when you don`t have the environment in which people can make a contribution in a free market economy."

[VIDEO]Mike Lamb, director of the E-Commerce Association of SA, is of a similar opinion.

"I`m not sure that it`s the responsibility of the private sector to put infrastructure in place. By the same token, I don`t believe that the Green Paper or legislation is going to address some of the socio-economic implications. It doesn`t follow that by putting electronic law in place, everybody will have an equal chance, or that everybody will get an equal share. The reality of business is simply not like that.

[VIDEO]"One would hope, certainly, that there would be significant spin-offs, into incorporating small and medium enterprises into the process, and it needs private sector/public sector joint initiatives, but it`s not going to happen miraculously overnight - we won`t all be able to walk across the water to the Promised Land."

Ironically, educating the masses may lead to the call for the end of Telkom`s exclusivity.

Liebenberg explains: "In the US, the general consumer has a greater capacity to influence the way in which the service provider or operators are delivering the services. In our country it`s the case of them deciding what is necessary for the consumer."

I don`t believe that the Green Paper or legislation is going to address some of the socio-economic implications.

Mike Lamb, director, E-Commerce Association of SA

What`s clear, says Liebenberg, is that for the purpose of choice, and to avoid a duopoly, SA needs at least two more fixed-line operators. It`s important to understand the nature of the licence and how it would be managed to understand what new opportunities would open to business, such as ISPs and VANS.

A strong industry concern lies in the aspects of information security and domain naming. Lamb comments: "We saw in the November 2000 feedback meeting of the working groups, government has quite extensive plans with regard to domain naming authorities and security authorities.

"Those two components are an anathema to industry and many people believe that they should be private sector initiatives and not under the control of government. But I do believe that government is actively moving backstage, and they`re not just restricting themselves to what is happening in SA. They`re looking at what is happening in Europe and America, in the law processes there, and certainly the business contribution [here] is only one factor of it."

A primary concern is that relating to the relationship between trademark and domain name. While trademarks may only be used in the specific situation for which they have been licensed, domain names have a global reach. And while there can be many versions of the same trademark licensed for use under various differing criteria, there can be only one domain name representing any given trademark.

Marco van der Merwe, partner specialising in IT laws, trademarks and copyright law at legal firm Spoor and Fisher, believes the GP is quite well structured, and recognises the main issues of intellectual property-related issues on the Internet and other telecommunications media.

"It`s got a specific listed number of points that it should look at; the first one is broadening the application of the Trademarks Act to clearly apply to e-commerce. It specifically looks at amending the definition of trademark to incorporate digitised trademarks.`

"But the amendment of the definition of trademark is not really important. A trademark as used, whether in digitised format or any other format, to me comes down to use of a trademark. One point they specifically want to look at is the protection afforded by well-known trademarks. Now our Act is pretty clear on that, and the McDonald`s case of about two or three years ago which our firm dealt with on behalf of McDonald`s really deals in quite some detail with well-known trademarks and lays down the rules of what qualifies as well-known and what doesn`t."

The nature of e-commerce is fast to market, and we`re doing things in business that happen much faster than the traditional cycle.

Mike Lamb, director, E-Commerce Association of SA

The biggest problem, says Van der Merwe, is the international nature of the issue. If a body were to use a South African trademark on a Web site that`s hosted somewhere in America, the question would be, does the use of the trademark in that capacity constitute trademark infringement?

[AUDIO]"Those are tricky issues, because if one looks at normal case law and the normal definition of use, it would be use in SA, and if that company had assets in SA, you could actually sue in SA for the misuse of the South African trademark."

There are a number of groundbreaking organisations working in this field, such as the global Internet Corporation for Assigned Names and Numbers; and its continental chapter, the private sector initiative AfriNIC. The question posed by the GP is whether SA should get involved.

"It`s difficult for me to understand why they are scared of approaching or involving themselves with those organisations. I think the reason is not `legal` - it tends to be more political. That`s how I read it, and I don`t really see what political gain there is in distancing oneself from that. It`s contrary to SA`s intentions, as they`ve shown through agreeing to certain treaties and World Trade Organisation membership, involvement in the World Intellectual Property Organisation, and so forth. It just doesn`t seem to make sense; perhaps they don`t understand what those organisations are about," Van der Merwe comments.

The government`s decision to become involved in the domain naming space is another hotly contested issue.

"There are already vested rights, and I think it would be unconstitutional to take away some of those rights. It could seem a bit unfair to companies that started things on a non-profit basis six years ago. The very nature of the Internet means that Internet and government don`t always gel too well. What I would recommend is involvement with the various international bodies which arbitrate on domain name disputes at the dot-com level.

"This could certainly play a role in helping to avoid conflict, and setting down rules to be followed and so forth, but it`s usually [done] by computer-related people who form these bodies, and who know what the Internet`s all about. I think it would be wrong for government to get involved. Some government involvement would not be out of place, but for government to take over the registration process would be chaotic."

[AUDIO]Another matter addressed by the GP is that of levelling the playing field to invite the involvement of SMEs. But, as Van der Merwe notes, as long as SMEs can reasonably cheaply obtain a domain name address within a day - what more is there to ask?

"We wait three years to get a trademark registration in this country with government involved; you can get a domain name in a day, and it`s replicated throughout the world in 36 hours. Why involve government?"

A defining theme across the GP is that any resolution reached must be completely technology-neutral. The need for neutrality as it relates to electronic payments is even direr, as the concept of e-commerce hinges quite firmly on the issue of an acceptable payment standard through the banks, credit card authorities and other financial institutions through which payment is facilitated.

The various technologies enabling this at the moment include smart cards, Wireless Application Protocol-enabled transactions via mobile telephony, and transacting digitally through set-top boxes providing access to interactive TV.

While each of these solutions has experienced limited success in various pilot projects, the focus has shifted to include the use of electronic cash as an alternative payment method.

Drawing heavily on the SA Reserve Bank`s Position Paper on Electronic Money, the GP poses questions on the course of action that would facilitate e-commerce across the nation`s financial services infrastructure, which is recognised as well advanced; and aims to extend basic banking services to the broader population. Without going into much detail, it also questions whether non-banking institutions should be allowed to issue e-cash.

Angus Brown, senior team member with FirstRand`s electronic financial services division eBucks.com, believes that while the GP is based on sound principles, its non-specific approach is a good thing.

"Technology will change; and standards are so fluid that it would be difficult to legislate fast enough in any case."

Brown says the current convergence between financial and non-financial companies on the customer segment means there are now a number of non-traditional financial service company start-ups, creating alternatives to traditional forms and methods of banking.

But where eBucks.com had established trusted relationships and an existing infrastructure off which it piggybacked its offering, a new entrant would have to work around these advantages.

"People always look at the technology, but success actually boils down to the level of trust one has with consumers," says Brown.

While most industry observers agree that the GP covers much of what is relevant to the industry, government has yet again been criticised for its directionless approach to legislating e-commerce.

Liebenberg comments: "Government, in principle, has the correct framework, but the current process seems to be unknown to most people. The communications have not been clear in which way people should or can interact with the Green Paper.

"The indication is that by the third quarter there`ll be a framework on the table regarding e-commerce, and they`re hoping to finalise by the end of the year. That will depend on the outcome of the Green Paper process and to what extent business will be commenting on the policy guidelines in the White Paper process."

[VIDEO]The issue of speed is close to Lamb`s heart.

"The nature of e-commerce is fast to market, and we`re doing things in business that happen much faster than the traditional cycle. I think we feel a degree of frustration in that the legal supporting progress and the movement to EC [European Community] law in SA isn`t moving at the same velocity.

"People bringing e-commerce products to market need to see a velocity in the legislation - otherwise they just have to factor risk. We know law doesn`t come in before business - business leads the way and law should be a rapid follower."

Moosa is a firm believer in that edict. "President Thabo Mbeki`s recent State of the Nation address, which called for an open telecommunications regulatory framework, means more competition will be allowed, and that`s certainly a marketplace for growth. That makes me excited, but I just want to see it delivered.

"Hopefully, the Green Paper and the new regulatory environment will allow us, as deployers of infrastructure, to pave the way for growth not only for our business. We are the architects for the growth of other business, and small business can compete effectively against big business if the infrastructure is available to do so."