Telecom will open centre for global e-commerce

Telecom Eireann is creating a major electronic commerce transaction centre that will be capable of handling large-scale global online shopping projects, The Irish Times has learned.

The multi-million-pound plan marks the first attempt by a company within Ireland to create the combined infrastructure and support services necessary to attract large corporate e-commerce projects. If successful, the centre could help establish Ireland as a European e-commerce `hub'. It is understood that significant resources are being put into the project, which will also entail creating a large new division within Telecom, entirely focussed on ecommerce. It will be based in Ireland with some facilities in the Netherlands.

Dutch national telecommunications company KPN, a 12 per cent shareholder in Telecom Eireann, is understood to be a partner in the project. WorldPay, a leading company providing software and services for online transactions, would provide the technical back-up for processing transactions. The actual financial processing could be handled by NatWest Bank, which already works with KPN. Website hosting and design would be channelled through Telecom's Internet service providers, TINet and Indigo.

The project is highly ambitious, not just within an Irish context but also within the emerging international e-commerce marketplace. Because of the scope of the undertaking, according to industry sources, such a scheme would be unlikely to be matched by a significant Irish competitor for some time. "Telecom is clearly positioning itself to be first into the market in this area," said Mr Colm Grealy, an Internet businessman formerly with ISP Ireland Online, which he cofounded. Effectively, Telecom could offer a "one-stop shop" for very high-end e-commerce services in a market where merchant companies typically obtain such services piecemeal before finding someone capable of integrating all the elements. Alternatively, vendors tend to go with very large online shopping sites like those provided by the dominant Internet "portals" (large gateway sites on the net) such as Yahoo or Excite. A move by two European telecommunications companies into this arena would be highly unusual.

As well as pursuing the large corporate market, it is thought that Telecom plans to offer smaller-scale services to small to medium enterprises. Large corporate clients would probably be handled by Telecom's Internet service provider division, TINet, while smaller companies would go through Indigo, which Telecom purchased some time ago.

Partnership with a British, rather than Irish, bank on such a large Irish project would raise eyebrows. However, industry sources say that Irish banks would be unable to provide the processing facilities needed for such a large-scale venture.

Irish banks have remained hesitant about moving into the online transaction arena, and are using security software based on an unpopular standard that has been rejected by most merchants, according to sources.

Despite criticism from Irish vendors and pressure from the Government, both AIB and Bank of Ireland have remained committed to a security standard for online credit card transactions called SET (secure electronic transaction). Globally, the e-commerce industry has settled on an alternative standard called SSL (secure socket layer). Industry sources say that the unwillingness of Irish banks to shift to the alternative standard has created one of the major stumbling-blocks to the growth of online shopping in Ireland. Mr Grealy noted that companies get special price breaks on bank charges for credit card transactions, dependent on the volume of transactions. Irish companies could be tempted to switch to NatWest for additional services to reap volume benefits.

"If, when a merchant [company] decides to go online, that (merchant and bank) relationship changes to the UK banks, that's quite serious for Irish banks," he said. "NatWest getting involved is an indication of where the banks are here."

However, he said that Telecom might have trouble luring Irish business for the same reason: to maintain volume discounts, Irish companies may wish to remain with Irish banks which, presumably, will be forced sooner or later to roll out SSL instead of, or in addition to, SET. Presumably, the most attractive market for Telecom's services - from Telecom's viewpoint - would be large multinationals where bank loyalty would be less of an issue.

The development of an e-commerce centre by Telecom would effectively signal a move into the banking services sector where the company could become a significant competitor.

Internationally, few telecommunications companies have attempted to offer the range of services which the proposed e-commerce centre would encompass. In part, this may be due to a general Internet industry perception that large telecommunications companies - particularly those from the state-owned sector - are not typically focussed on service or innovation.