01 Oct 2004

We want government-guaranteed national e-markets

Government should have a policy for open e-markets. Not e-government services, online procurement or bridging the digital divide but a policy to drive online marketplaces open to any seller. This specific technology has potential that only government action can release.

eBay is an open e-market but it operates in a very simple and tight niche, basically an online version of car boot sales. It has however unleashed millions of micro-sellers and created £billions in new economic activity.

But the other 99% of the economy is made up of much more complex markets. Could an eBay style flood of micro-sellers be unleashed across virtually all sectors of the economy? Yes. But that will only happen if policymakers allow it.

eBay allows you to sell things. What most of us have to sell, day-in-day-out, is time. It’s either hours when we are willing to work for an employer, or sell our services to a customer (as a housecleaner, minicab provider or tutor for instance), or the time of a facility we own, perhaps hiring out a bike, letting a room overnight or even renting out our DVD collection to neighbours.

The private sector tries hard to serve time-based markets. Listings sites such as job boards are useful for certain types of transaction. But these markets are far more demanding than item sales and no private firm can provide the underpinning authority to overcome all the issues involved. Nor does any private firm have the incentive to renounce user lock-in, fix pricing or operate with total transparency. All these facilities are required for a truly valuable market for the smallest sellers once you get beyond item sales.

It is against the grain of thinking about Internet development but government could solve all those problems and enable a marketplace that gave any seller of any size currently unimaginable levels of market access, control over transactions, safety and information about opportunities. The markets would be designed, built, funded and run by the private sector but have a unique relationship with the highest authorities in the land.

Imagine a system of e-markets as a public utility. Let’s call it “National E-Markets” (NEMs). Like the water supply, roads network, electricity or money supply these markets would operate within a unique legal framework. They would be available to any individual or legal entity in the country as a means to buy or sell as they wished.

A policy to create interlocking e-markets underpinned by the highest authorities in the land could dramatically broaden economic activity while raising quality of life for so many people. All of it at no cost to taxpayers. Sounds too good to be true? See extended text below and read the details at: www.nationalmarkets.com

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• These markets probably wouldn’t be based on auctions or catalogues. They would need new mechanisms based on the specific needs of the project. How do they come into being?

• The model that gave us both the National Lottery and the Channel Tunnel is probably the simplest way to launch such a service. Government creates a list of benefits it will offer the operators of NEMs (for example: an automated relationship with licensing authorities and courts, use of public sector buying to pump prime markets). But it also produces a list of broad obligations with which operators will have to comply (based around transparency, neutrality and funding of universal access for example). This package of benefits is on offer for perhaps 15 years with the obligations covering the same period.

• Assume these markets are to be funded by a flat rate percentage mark-up on each transaction for the operators. Any qualifying consortium can bid to run the service, the one that commits to the lowest percentage charge on users wins the concession.

• As with other forms of national infrastructure, the operating consortium must have its potential power limited. It might be that the consortium itself runs the back-end servers but is not allowed to operate the front-end marketplaces. Instead, it has to revenue share with an individual franchisee in each sector. Anyone must be free to build any value added services they wish on top of the basic marketplace. Obviously there will not be any constraints on any alternative trading forums.

• Once the concession is awarded government’s role is just to get out of the way. The consortium can launch in whatever sectors it wishes, probably starting with already very fragmented markets such as facilities for tourists, household services and journey provision then expand into adjoining sectors as new franchisees are found.

• In each sector in which it operated NEMs would offer (a) immediate market access for any seller on their own terms (b) the lowest transaction costs (c) the widest possible range of sellers and therefore greatest competition (d) immediate, underwritten, purchasing for any buyer (e) all the information on localised supply/demand/pricing in any sector to enable anyone to make decisions about market entry.

• As the system expanded it could add functions which have no parallel today. Extraordinarily efficient investment in the development of individual sellers, linked transactions bundling and underwriting requirements from multiple sectors into one personalised transaction, micro-finance, community banking and so on.

• Why isn’t this happening? It’s partly a mindset problem. Many policymakers are in awe of eBay and assume that if “the market” has failed to provide something similar for a wider range of transactions it’s because it is impossible to achieve. Additionally, parliament is spending millions on e-government initiatives, e-procurement through closed markets and bridging the digital divide. Enthusiasm for yet another area of the online world requiring a policy can be muted. That’s unfortunate because open markets are probably the most potent facility online technology has to offer. They could easily be made to provide most of the planned e-government, online access and public sector procurement facilities as part of the operators’ up-front funding commitments.

Wrap up...

Posted by Wingham Rowan on 01/10/04 at 9:16am
Categories · Across the Board

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01 Oct 2004

We want government-guaranteed national e-markets

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01 Oct 2004

We want government-guaranteed national e-markets

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