Are Good Days  Expected for Dot-Com Again ?



Last year, the Internet Economy saw what was termed as a "Dot-Com Melt Down". During this time thousands of dot com ventures folded up. Venture Capitalists  who had been supportive of any "Knowledge Capital Owner" suffered heavy losses since "Ideas" could not be converted into "Viable Business Propositions".

Out of this muddle the "Brick and Click" theory emerged as the new mantra of success. However, even this new approach has not been able to make perceptible difference to the fortunes of the Internet economy.

Amongst the many reasons touted out for the slow development of E-Commerce in the past was the lack of "Cyber Laws". Accordingly, under the guidance of the UNCITRAL, countries like India enacted laws to protect and promote E-Commerce.

Now we are nearly 18 months after the passage of the ITA-2000 and are yet to see the revival of E-Commerce in India.  In fact, it was announced today that the "First Digital Contract" would become a reality now in India with ICICI Direct deciding to issue digitally signed Broker contracts for its share trading services with the assistance of Safescrypt, the first Certifying Authority to be licensed in India.

Coinciding with this good news, members of the Global Business Dialogue on Electronic Commerce (GBDe) meeting in Manila last week, mapped out the requirements for economies to realize the full potential of the Internet.

During the discussions, it was felt that the fundamentals of the Cyber Economy was strong and could sustain a growth of 30% to 40 % per annum over the next decade, nearly 10 times the traditional growth rates. 

The number of Internet users which is around 500 million at present is expected to grow to 700 millions by the end of the year.

Worldwide business-to-business e-commerce is expected to grow at a rate of 162% per year and is projected to exceed $2.5 trillion by 2004. Business-to-consumer e-commerce is expected to grow at an annual rate of 185% during the same period, and exceed $400 billion by 2004.

Certainly, these figures gladden the hearts of Internet economy watchers. But is this only a marketing dream? or Can it be closer to truth?.. is what is challenging the minds of Internet Economy watchers.

At this time when the "Feel Good" factor appears to be returning, it is necessary for us to spare a thought for the role of Cyber regulations in the revival of the Internet economy.

The moot question is, Has the increasing Cyber Regulations contributed or is likely to contribute significantly to the revival of Internet Economy?

While the growth of Cyber Crimes particularly of the Credit Card misuse variety is a threat to the growth of B2C E-Commerce, sufficient measures are yet to be taken up by the law enforcement authorities in any country to systematically track down such frauds. Laws enacted in India for this purpose are grossly inadequate and are unlikely to assist the E-Commerce industry.

One of the remedies that Netpreneurs can think of in this direction is the use of Digital Certificates for customer identification which is not taking off fast enough because of cost considerations and lack of facilities for issue of  individual digital certificates.  (In countries like India at least). If the efforts to increase the usage of Digital Certificates is stepped up, we can expect a good growth in B2C and C2C E-commerce.

Apart from these benefits which the "Regulations" have brought in to the growth of the I-economy, there are a few "Regulatory Issues" that have actually been responsible for  the retardation in the growth of Internet users from nearly 100 % per annum to the current levels of 30% to 40 %. This need to be addressed if the I-Economy has to grow instead of shrinking.

The onslaught of Trade Mark owners on "Domain Name space",  Copyright enthusiasts on the "File Sharing Community",  The "Lack of self regulation amongst Internet Advertisers" have cumulatively contributed to the slow down of the Internet economy. 2 years back around 50,000 new Domain names were being registered every day at around US $70 per year. Today, even at US $ 10 per year, the domain name bookings have reached a negative growth level. Internet advertising which was threatening to burst out of the 5 % market share of the total advertising, is languishing at only around 3 %. Content sites have seen the dwindling of the ad revenue, forcing many of them to opt for subscription model which has shrunk usage. These are some of the ill effects "Regulations" have left on the market. Service tax in India on some of the E-Commerce activities and E-Commerce taxation are the next wave of threats that are waiting on the wings to pounce on the I-Economy.

While a more detailed analysis may be out of place here, it appears at first glance that "Cyber Regulations" have not been an unbridled success in promoting Consumer confidence and better E-Commerce. Some of the problems is in the Enforcement which is weak and often mis directed. Some are due to the legislation itself being faulty or lacking in vision.

 There is therefore a need to take a review the impact of Cyber regulations on E-Commerce and identify areas where improvements are required.

Perhaps Nasscom has to undertake a new perception study to provide a guideline to the Indian regulators so that the anticipated growth in E-Commerce does not remain a mirage.

It is also necessary to point out that "E-Commerce Revival" also requires better "Financial Management" by Netpreneurs and a development of an appropriate "Financial Mechanism" that takes care of their needs. This in turn requires appropriate legal definitions to "Cyber Properties", financial models for "Valuation of Cyber Properties" and strategies of "Appropriate Marketing".

Once again, I call for Nasscom to take up the challenge to address this issue.


March 31, 2002

Related Article:

E-commerce to fuel growth, global business group says..Internet

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