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Australia's big Internet opportunities: are government and business ready? Speakers' notes.



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NATIONAL SCIENCE BRIEFING

Thursday 18 February 1999

 

Speakers' notes

 

Australia's Big Internet Opportunities - are government and business ready?

  • Dr Phil McCrea, CSIRO
  • Ms Judith King, Australian Coalition of Service Industries
  • Mr Justin Milne, Vice President, OzEmail

The Information Economy 

Dr Phil McCrea

We now live in an Information Era  

Up until the mid 19th century, we lived in an agrarian era, where agricultural produce was the most valued commodity. The position of a person, family, or country was often measured in agricultural terms. As a result of the industrial revolution we moved into a manufacturing era, where economic strength was determined by manufactured goods, or the ability to manufacture goods. 

 

We are now living in what is generally described as an Information Era, in which the economic strength of an organisation or country is characterised by how much information it owns, controls, or has access to. The information era began with the widespread introduction of networked computers in 1970s.  

 

The Economy is now Services-based
 

The Information era has given rise to a services-based economy, and the service sector is now over 80% of the Australian economy. Agriculture now accounts for only 4% of GDP and manufacturing 11%. For services based organisations (tourism, financial services, education, health, wholesale & retail trade, etc) to be competitive, they need access to timely information, which implies access to high bandwidth digital infrastructure, now generically referred to as the Internet. 

 

Technologies are converging  

The Information era is characterised by the fact that the once distinct industry sectors of telecommunications, computing and media are converging on each other: everything is becoming 'digital'. For instance:

  • A telephone exchange is effectively a computer that switches telephone calls.
  • You can watch TV on a computer, make a telephone call, or play a CD.
  • A telephone handset can be used as a computer keyboard to make financial payments.
  • Pictures and videos are digital 'documents' which can be manipulated in almost the same way as a text document.

In effect, a computer has become nothing more than a digital appliance. 

 

The new industry Infrastructure  

Very little infrastructure was required for the agrarian era, other than a market place for the exchange of goods, and adequate transport to get to market. The manufacturing era ushered in new kinds of infrastructure: railways, highways, ships, air travel, and ports. These were required to obtain raw materials and to get manufactured goods to their destinations. 

 

The Information Economy requires a new digital infrastructure to support it. Workers in the Information Economy use computers to access and/or create information and to make transactions. High bandwidth, low cost 'pipes' are required to connect participants in a global trading environment.  

 

Digital Goods and Services  

The Information economy has changed the nature of some traditional ways of doing business, and has blurred the lines between goods and services to some degree, as indicated in the following table.

 

OLD METHOD

INTERNET METHOD

Banking

over the counter, ATM in High St

home banking via PC with Smart Card loading facility

Books/Reports

purchase at bookstore

load from Net and print locally

Encyclope dias

hard copy volumes

Web publishing; CD ROM with on-line updates

Facsimile

Telstra

Internet fax

Gambling

TAB outlets

Gambling sites on the Net

|Games

special Games computer

down-loaded over the Net; competing against Net players

Inforamtion databases

hard copy reports; proprietary networks

available over the World Wide Web

Mail services

Australia Post

e-mail

Music (audio)

CD, cassette tape

Aduio over the Internet; burn CD locally

Newspapers

hard-copy

Web publishing

Photographs

transfer by post/cou rier

transfer by the internet

Sheet music

print; purchased from music store

Web publishing; print locally

Software

purchase discs in a box

down-load software over the Net into computer

Stock trading

proprietary network for brokers

use of the Internet by public

Telephone

Telstra

Internet telephone

Television

analogue transmission

Web-enabled; available on demand, or near-demand

Tickets (entertainment)

Over the counter; phone ordering; mail order

on-line ordering; printed on smart card on buyer's card

Travel bookings

Travel agent in High St

booking over the Net; Smart Card becomes ticket

Video

Video tape; celluloid

video delivery over the internet

 

Table 1 Examples of Goods/Services that will be delivered digitally

 

The IT&T Sector provides the infrastructure for the Information Economy  

US Federal Reserve chairman, Alan Greenspan, has stated that the IT&T Sector (which provides the infrastructure fort the information economy) accounts for 1/3 of all recent US growth, and is growing at 2X the rate of the overall economy. 

 

A measure of the size of the IT&T sector globally may be gained from the fact that, in 1995, global spend on IT&T was US$1.1trillion - and more money was spent on telecommunications that on oil! This statistic, if no other, is an indicator that we have moved from a manufacturing to a services based economy. 

 

Business-to-business Internet Commerce  

Much of the hype associated with the Internet has been to do with consumers - purchasing CDs and the like. However, most analysts agree that the Internet will have a much bigger effect in the business-to-business area, principally because businesses trade with an established set of partners with whom trust has already been established. Payment is generally by account, and does not have to be by the Internet in the first instance.  

Forrester Research have indicated: "The total value of goods and services traded between companies over the Internet will reach $8 billion this year (1997) and $327 billion in the year 2002." 

 

Australia may be missing a glorious opportunity…  

According to many industry analysts, Australian organisations do not yet realise the potential of the Information Economy: 

 

Australian companies must move now to take advantage of opportunities in electronic commerce or they risk being left behind.  

- Gartner Group 

 

Australia is a "straggler" when it comes to electronic commerce.  

- Forrester Research 

 

Dr Ohmae, an internationally respected Japanese consultant recognises Australia's potential in the Information economy: 

 

Australia has a brilliant future in Information Technology. Australians think their country's strongest comparative advantage is in minerals and agriculture. But you are wrong. 

 

Whilst some Australian banks have introduced Internet based home banking services, they appear to be lagging their US counterparts in recognising hat they form an integral part of the global information economy. Unlike their US counterparts, most Australian banks are slow to accept credit card payments over the Internet, particularly for SMEs. Furthermore, as proof of the globalisation of the economy, at least one US bank has made inroads into corporate Australia: Chase Manhattan bank is handling the accounts payables of a major Australian retailer - over the Internet. 

 

The Lucky Country still?  

In previous industrial eras, Australia has been lucky - we are blessed by natural resources and have been an efficient producer of both agricultural goods and minerals. 

 

Despite the slowness of corporate Australia to recognise the potential of Internet commerce, Australia is indeed well placed to be successful in the Information economy: 

  • High penetration of PCs per head in both business and home
  • High Internet usage rates
  • Well educated population
  • Technologically advanced telecommunications infrastructure
  • A history of adopting new technology quickly.

Hopefully a change of corporate mindset will occur in time to enable Australia to become lucky once again, and to ride the crest of the global Information economy wave. 

 

A concluding thought 

The age of the keyboard-illiterate executive is over..

 

Ms Judith King, Australian Coalition of Service Industries 

Knowledge.com.au: Australia's Service Sector Online

The Australian Coalition of Service Industries (ACSI)

Vision  

That Australia will be one of the World's leading service economies by 2010.

ACSI is a network of CEOs of private sector service companies that are pre-eminent in their fields. It includes Australia's largest service companies and professional firms.

ACSI was established in 1988 to raise the profile of service industries and bring them into the mainstream of policy and economic debate. It is actively engaged in promoting the understanding and importance of service industries within government and the broader business community, particularly their potential to create wealth and make a positive contribution to Australia's balance of payments.

ACSI has a strong focus on financial, communications, business and professional services, because of the important role these services play in the international economy.

australia.com: Australia's Future Online

'australia.com: Australia's Future Online' represents the collective input of 58 executives from Australia's most important service sector organisations on the opportunities and issues facing Australia from the online revolution.

It is the result of extensive research, group discussion and problem solving, and individual contributions that took place over a period of more than six months.

It provides a unique understanding of the issues the online economy raises for Australia, the benefits we stand to gain if we succeed in embracing the change, the risks we run if we do not. It also provides a clear way forward. The work focuses on the future and highlights the urgent need for Australian businesses, governments and consumers to act.

The Online Economy is Changing the Rules

Traditionally services have been developed and provided locally. This is either because the service had to be delivered physically or because artificial barriers existed, such as local legislation or tarriffs, that reduced the ability of organisations to interact with their customers across borders.

Along with the greater flow of goods, capital, people and cultures, the online economy is breaking down many of these barriers.

These changes are raising some fundamental questions that challenge the way both business and government operate. As many of the constraints in today's physical environment are being removed, the old rules about markets, cost structures, the nature of competition and the basis for making investments and evaluating opportunities are being rewritten.

During every major discontinuity brought about by technological change in the past century, most industry leaders in the old game failed to make the transition to the new game. As with these earlier discontinuities, the changeover to the online economy will provide ample opportunities for new entrants to leapfrog existing leaders who are complacent, creating a new set of winners and a new set of losers.

The winners can expect the change to create a 'virtuous cycle' in which their country's businesses, governments and consumers all win.

For winning nations the online economy is likely to deliver high growth in traded services, lower the cost of government and commercial services, and increase value added, leading to employment growth and wealth creation. In countries that move quickly to embrace the online economy, the new rules can create new technology, new applications, new industries and new services. The vibrant service sector and highly skilled online consumers that result will enable value creation in other sectors.

The Online Agenda

An Agenda for Business

  • Individual businesses should ask challenging questions about how the online economy could change their business, act on the answers and make the commitment to get online.
  • Australian businesses must work cooperatively to create a favourable online environment and build on this environment with action. This action should include the creation of industry sector and national visions, to provide leadership and set ambitious aspirations.

An Agenda for Government

Australian Governments - Federal, State and Local - must actively support the national vision for the online economy, and create regulatory and taxation environments that encourage the development of a thriving online economy.

Australia, more than any other nation, has much to gain from taking the lead in the online economy. It is a major opportunity to overcome the limitations of our geographic isolation and small local market.

Business, Governments and consumers should have online economy issues at the top of their agendas.

 

Mr Justin Milne, Vice President, OzEmail 

Datacasting

 

Datacasting is a process of providing data, often web pages, to computers and computer like devices - wirelessly. 

 

Amendments to the Broadcasting Services Act envisage some of the Broadcast Spectrum (TV frequencies) being used for datacasting as Australia moves to digital TV. 

 

This represents a great opportunity for Australia to leverage its existing broadcast infrastructure, which reaches effectively 100% of the people, to deliver very large amounts of information very quickly. A datacaster in the Digital TV world may deliver data up to 384 times faster than an average (56K) modem. 

 

Australia has a long history of using the economies of broadcasting to reach its population - starting with the pedal radio School Of The Air. Today the infrastructure already exists and the new customer equipment (a computer which uses the TV for a monitor) will cost less than $500. 

 

Datacasting will bring the information age to every Australian. 

 

The change-over to Digital TV has to date been thought to be all about TV, but Digital TV will simply bring more TV of slightly better quality to Australians. However it will bring with it a requirement for all Australians to buy a Set Top Box and that Set Top Box will also provide the platform for Datacasting. 

 

Digital TV via Datacasting will provide huge advances for Australia, not just by providing all Australians with connectivity and email but also by enabling e-commerce on a scale never before contemplated and other applications that the Internet has so far failed to deliver such as distance learning and distance medicine. 

 

Our real problem however is to ensure that as the broadcast spectrum is re-planned, sufficient bandwidth is made available to ensure that there are at least three full 7 MHz channels made available for datacasters to create a vibrant, valuable and essential marketplace in the new Australian media. 

 

Doing nothing will ensure that Australia's future will be dominated foreign mega companies and that many opportunities will be lost. 

 

 

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