Introduction

There are more than 100 offshore jurisdictions (many of them, perplexingly, firmly onshore) which provide low-tax regimes to their inhabitants and/or to non-resident companies or individuals, and almost without exception they have nailed their colours firmly to the mast of e-commerce, understanding that the Internet will allow many types of commercial activity to be carried out offshore which were previously anchored physically in their destination (high-tax) market-places.

Broadly speaking, e-commerce development offshore has so far been limited to existing offshore specialities such as banking, with so far perhaps only the betting and gaming sector having given a demonstration of how easy it is for an entire industry to up sticks and leave if domestic legal and tax regimes are too restrictive.

There is widespread acknowledgement that, sooner or later, there will be a mass exodus from high-tax jurisdictions of many other types of company which no longer need sales-forces, manufacturing plants or distribution systems on the ground, but some surprise that it hasn't happened yet to any large extent. This is reasonably understandable given that e-commerce still represents only a tiny fraction of sales in most sectors, and that customers are still reluctant (rightly or wrongly) to trust the new medium for transactions involving money. Firms therefore don't feel that they can risk burning their bridges by giving up their legacy systems and installations - and the move offshore is not one that can be carried out on a trial basis. In order to get the tax benefits, there has to be a clear split with the old existence.

For an offshore jurisdiction hoping to develop into the location of choice when the flood does begin, there can't be any waiting around though: it's necessary to demonstrate now that one is bulging with connectivity, support staff and server space, because there are a dozen or more competing jurisdictions doing the same thing. It can also be argued that the lack of established, proven facilities offshore is one of the contributory factors to the slowness with which mainstream businesses are making the move. Other factors, apart from buyer reluctance, include the uncertain corporation tax environment pending a final report from the OECD's Technical Action Group on permanent establishments, and the emerging split on sales tax practice between the US with its moratorium on e-commerce taxation and the EU's keenness to extend VAT as quickly as possible to digital downloads.

In this survey we are going to take a look at the degree of e-readiness of the main competing offshore jurisdictions from the perspective of physical facilities and the availability of technical support. Without specifically aiming to describe the regulatory background, we will need to mention the telecommunications regime in particular - it is more difficult for a jurisdiction to offer competitive facilities if it is still operating under a telecoms monopoly, although our first jurisdiction, Dubai, surveyed last month, offers some limited reassurance in this direction.

The Jurisdictions: Part II

Ireland

Guernsey

Ireland

Government support programmes and legislation

In May 2001 the Public Enterprise Minister Mary O'Rourke announced a 10 point strategy to underpin and expand public policy in relation to communications and e-commerce. The plan, detailing a series of initiatives over the next 18 months, is designed to boost the country’s aspirations within the digital economy, where there is little room for complacency, said the Minister.

The plan is a mix of infrastructural and regulatory policy initiatives, which aims to build on the E-Commerce Act passed in 2000, the international fibre optic capacity deals with Global Crossing and the regional digital infrastructural initiatives.

The Minister stated: 'I do not want to run the risk of Ireland resting on past achievements. I want to set challenging policy objectives in the short term. There is a need to instigate an urgent search for excellence and opportunity and to project a dynamic presence for Ireland at a time of significant change in the global digital marketplace.'

The first two parts of the plan address telecommunications infrastructure, aiming substantial investment both at international connectivity and also at the development of broadband facilities internally.

The third part of the plan is benchmarking e-commerce legislation against the best regulatory and legislative models, and a report is about to be published on this. The Minister will follow up that report with the necessary initiatives before the end of September 2001. The Minister is also publishing a users’ guide to the Electronic Commerce Act 2000.

The Department for Public Enterprise will also:

• seek the early enactment of the Communications Regulations Bill, which the department says 'will substantially strengthen the structure and powers of the Irish regulatory system to ensure continued sustained regulatory capability in the future';
  
  
• seek the early enactment of a Bill providing for the complete modernisation of Irish legislation relating to wireless communications, and it will take a 21st century approach;
  
  
• expand the Community Application of Information Technology (CAIT) initiative, announced late last year - the Minister will seek further funding in 2002, 2003 and 2004 for voluntary and community projects which address the issue of digital inclusiveness in Irish society;
  
  
• carry out an e-commerce audit of government services as the government is deemed to have a critical role in the development of e-commerce.

Telecommunications infrastructure

In 1999 the Irish Government entered an agreement with Bermuda-based international communications company Global Crossing for the provision of high speed, competitively priced communications links to 26 European cities and to New York. In May 2001, under an extension to that agreement, the government secured links to 40 European centres and to Los Angeles, San Francisco, Dallas, Washington, Chicago and Boston. In addition, it has also secured high-speed links to Tokyo and Hong Kong and agreed in principle on links to Singapore.

The extension of this deal to South America and beyond has also been agreed in principle with Global Crossing Inc. Moreover, annual operation and maintenance charges on existing European routes have been reduced by over 40 per cent.

Said Mary O'Rourke: 'This is a 1,000 fold enhancement in the reach of the Government’s deal and puts us squarely on to high-speed telecoms motorways to those global markets. The prices secured in the deal are extremely competitive by global standards and the connectivity is available immediately.'

The Government's May 2001 package of e-commerce measures includes extensions to international connectivity, but also provides for improvements to regional broadband infrastructure. As a result of the first call for proposals under the E-Commerce Infrastructure Measure of the National Development Plan, approximately IR£200m worth of infrastructural investment is underway. This investment should be completed by the end of 2002. In addition, a feasibility study is underway on the establishment of a public/private partnership to build and operate an Atlantic infrastructure corridor in Ireland from North West to South West. The feasibility study will also examine the extension of networks under the National Development Plan, investment in regional points of presence and support to local authorities and regional development agencies for the rollout of infrastructure. Proposals on this were put before the government in June 2001.

The e-commerce infrastructure measure of the National Development Plan (approximately IR£100m remains in the fund) has been opened up on an ongoing basis from end June 2001, and the aim of achieving a total investment of up to IR£1bn in regional broadband infrastructure up to 2006 remains in place.

Connectivity/Bandwidth Availability

In March 2001 the Minister for Public Enterprise, Mary O'Rourke, announced that the government will provide funding to the tune of euro 75 million with the aim of developing broadband networks around the country to give faster Internet access to all areas of Ireland.

On 30th July 2001, the Minister launched a new national £1.5 million pilot satellite Internet project to provide high speed Internet access by way of a satellite dish without the need for a phone line which is particularly aimed at the remoter, rural areas of Ireland. It is expected to be utilised by schools, libraries, community centres and to encourage and promote e-commerce among small businesses.

In a statement released by the government, the Minister stated: The Government is committed to rolling out quality Internet access throughout the country. No area should be at a disadvantage. This technology, allied to the rollout of broadband fibre optic cable, the CAIT community access initiative and expanded global connectivity, will mean that everyone, no matter where they live, has access to the world wide web.'

The V SAT system can be easily installed and provides a capacity which is over 35 times faster that a dial-up modem. As a wireless broadband technology it is ideally suited to bringing quality, fast Internet access to remote areas.

'This is a very exciting development,' continued Ms O'Rourke, 'Its launch on Clare Island illustrates how satellite Internet access ignores natural boundaries. This wireless system is ideally suited for communities such as that on Clare Island. Schoolchildren will be able to surf the web in their classroom while business people will have fast access to customers around the world.'

She added: 'V SAT is not confined to island communities, although it clearly offers great benefits to such locations. It is also being rolled out in Meath, the Mayo mainland and County Offaly. I know that in all of these locations there is great excitement at the opportunities that the technology offers. The Internet knows no boundaries – wireless technology such as V SAT ignores geographic and natural obstacles. The technology does not differentiate between urban or rural consumers. Once made available, it is available throughout its entire area.

Despite the strong activity of Government and telecommunications firms, the reality of Internet usage in Ireland for individuals who want to use it for professional purposes (equity traders, webmasters, journalists etc) remains that they don't have access to reasonably-priced ISDN or ADSL lines. Therefore they have to use 56K modems and ordinary phone lines and are often forced to work at night in order to get faster access to the Net.

Recent rumours that Eircom has postponed its DSL rollout were denied by the company. Eircom's Pauline Madigan says: "In the first half of financial year 2001/02 the company will launch a commercial product offering, including telephony, high-speed Internet and entertainment services. Eircom has chosen Alcatel as technology partners for its DSL services.

"Eircom cannot launch a retail product until it has a wholesale product defined and agreed, which is still not the case. We are now at a very advanced stage, but this is a complex agreement."

Ntl has only managed to upgrade its network and offer cable Internet service in parts of Tallaght. "I share (customers') frustration in relation to what appears to be a slow movement to roll out high-speed Internet to customers," says ntl's Sandra Eaton. "However, if you look at what is available to the market-place at the moment, you will begin to see that it has only really lifted off the ground to supply high-speed Internet access to the residential market."

Chorus said last December that it offers its PowerNet two-way wireless high-speed Internet service in the Limerick region, and promised that within the next two years customers throughout the country would have access to PowerNet, "no matter what their location". It says it will give access speeds of up to 512Kb for a standard monthly fee.

Internet Service Providers

There is a well-developed ISP sector in Ireland, with some of the better-known providers being:

ANU Internet Services
Club Internet
DNA Internet
e-live
Eircom
Esat Clear
Gateway
Indigo
IOL
Irish Trade Web
Ocean Free
UUNet

The cost of a basic package per annum varies from £100-£150 for a standard line to about £300 for an ISDN line, where that's available. Some bottom-end ISP services are available free.

Hosting Services and Facilities

As with ISP services, there is a wide range of hosting possibilities. In the following list of hosting service providers, many of the providers offer more advanced services such as co-location and technical support at various levels.

ANU Internet Services
Digiweb-BaseStation
DNA Internet
Eircom
e-live
Esat
Indigo
Irish Trade Web
Sixnet Limited
Via-Net-works Expresso Web
Web World

A basic hosting package can be had for as little as £150 per annum, while an NT server might cost £300 or over; set up charges would typically be £50 or £100.

Given the rapid growth and substantial size of the Internet sector in Ireland, there have been a number of initiatives to create 'server hotels' in Dublin.

For instance, Servervault, a US-based data hosting and management company, is investing up to $150 million in a fully managed Internet hosting centre in Dublin.

Presence of International Providers (eg Sun, IBM, Cisco etc)

More than any other European country, Ireland has acted as a magnet for high-tech companies over the last ten years, due to a combination of its highly favourable tax regime, use of the English language and availability of a well-educated young population among other factors. Although the country's very success has led to pressure on resources, the size of the technology community is such that it now acts as a draw in its own right, and it is hard to see how significant competition will arise. American companies in particular find Ireland attractive as a jumping-off point for their EU operations.

Many large international telecommunications companies and Internet facilities providers have set up operations in Ireland. For instance:

• Irish mobile operator Esat Digifone (a subsidiary of BT, which bought East from Eircom) is investing I£50m ($60m) in Digifone-On-Line (DOL), claimed to be the Republic's only combined fixed and mobile internet service provider and portal; the investment also includes a £32m contract with Nortel Networks to supply the company with the first General Packet Radio Service (GPRS) network in Ireland which is the next step for the enhancement of bandwidth of existing GSM networks. Barry Maloney, chief executive officer of Esat Digifone said 'With mobile penetration in Ireland now hitting fifty per cent, research predicts that the next growth explosion will be in the area of mobile Internet access. Our announcement will make this a reality for the mass market.'
  
  

• AboveNet, a US Internet co-locator company owned by Nasdaq-listed Internet infrastructure and optical network company Metromedia Fibre Network, is investing US$75 million in an Internet services exchange in Dublin. Currently under construction at the Citywest Business Park, the exchange will provide companies in the Irish Republic with Internet hosting facilities and access to unlimited e-commerce bandwidth. Bandwidth capacity is being bought from the Government's transatlantic fibre-optic cable joint venture with Global Crossing and the centre opened for business in the spring of 2001. It is believed that Microsoft, one of its major customers in the US, has agreed to use the AboveNet service centre in Dublin to service its European headquarters there which serve the European, Middle East and African regions. According to Charles Briggs, AboveNet's vice president of business development, Ireland was chosen as a base for a number of e-commerce-friendly reasons. Mr Briggs said the the Republic had a very significant chance of becoming the centre for European e-commerce because of the access to fibre, the passage of the E-commerce Act and the nongeographic nature of e-commerce: 'Apart from the recently signed e-commerce bill there is also the IT literate workforce and the tax implications.'
  

• Genuity Inc, a US-based Internet infrastructure provider, announced in May 2001 an agreement to provide high-speed Internet access and managed connectivity to its global Internet network to Internet Ireland, a leading internet service provider, Web enabler and network consultancy company. As a result, Internet Ireland is now connected to Genuity's global network infrastructure through Genuity's Point of Presence (PoP) at City West Business Park in Dublin; Internet Ireland is jointly owned by Independent News & Media PLC and PHL (now trading as Chorus). Its managing director, Barry Breslin, commented: 'Genuity proved itself to be the most attractive global transit provider in the Irish marketplace because of the diversity of its network, an economical pricing structure and its speed to install. Our connection went live a month ahead of schedule.'
  
  

• IBM has invested a total of IR£100m in its Technology Campus in Mulhuddart, County Dublin, and employs more than 2,000 staff in Ireland. The latest addition is a data centre to support e-business applications and a supplier portal for Europe, the Middle East and Africa which would enable companies to trade with IBM and other companies securely.

• Cisco, the US Internet networking group, is creating a large-scale facility in Dublin which will eventually employ up to 3,000 people. Tanaiste Mary Harney visited Silicon Valley and held discusions with Cisco in order to attract the company. In addition to software development, the facility in Ireland provides large-scale, end-to-end system testing capabilities for advanced network solutions.

Human Skill-set Availability; Training Programmes

The availability of a young, well-educated, English-speaking labour force has been crucial to Ireland technology boom, and the Government has correctly understood the need to reinforce its early success with extensive programmes of technology aducation at all levels of society.

Enterprise Ireland is the government organisation charged with assisting the development of Irish enterprise, and plays a key role in the technology sector.

The organisation says its core mission is: “to work in partnership with client companies to develop a sustainable competitive advantage, leading to a significant increase in profitable sales, exports and employment”.

Enterprise Ireland administers national and EU supports for building technological innovation capability and co-operation between industry and higher educational institutions . With a network of 13 offices in Ireland it gives substantial support to education and training through a variety of initiatives, including 13 matching Institutes of Technology which are an important regional resource for education, specialist skills development and technology capability.

They are committed to providing R&D, technology transfer and innovation support services to business and industry in their regions. Each college has developed a range of programmes to encourage and facilitate co-operation with industry.

Enterprise Ireland also administers and promotes a range of support measures for enhancing research skills within the higher education sector and for helping to apply these skills to the benefit of Irish enterprise. Its Graduate Enterprise Programme provides training and business development for graduates with industrial experience to assist them in establishing new enterprises. Part of the campus companies programme, it consists of a one year course involving a third level college and a business development organisation.

Government efforts to strengthen the skills base are matched by a thriving private training and education sector. Large incoming companies such as IBM and Cisco also contribute materially to the growth of a skilled labour pool.

Technical Support Facilities (Hardware & Software)

As would be clear from the presence of many large international high-technology companies, there is an extensive network of service and support firms in Ireland for Internet operations, covering consultancy, software and hardware. The Irish Internet Association has more than 800 members, of whom a good proportion could be classified as Internet support. The Association's site at http://www.iia.ie/ has a list of member in alphabetical order.

Recent job losses in the Irish high-tech sector, including the closure of Gateway's Dublin factory (900 jobs), General Semiconductor's plant in Macroom (670 jobs) and a further 250 dismissals at Baltimore Technologies in Dublin total about 5,000 jobs out of an estimated 50,000 in the sector. But the silver lining to this cloud is that incoming firms (yes, there are some) will find it much easier to recruit the skilled, and now experienced staff they have had difficulty in finding during boom times.

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Guernsey

Government support programmes and legislation

The States of Guernsey and Guernsey Telecoms jointly commissioned a report from Analysys in 1999, which emphasised the need for outside participation in a liberalised telecommunications sector. Key recommendations included:

'The Bailiwick of Guernsey must open its telecoms market to the expertise and buying power of private telecoms operators, because only they can deliver the services necessary for ecommerce to flourish. Rapid progress to reach this goal creates the opportunity for the Bailiwick to thrive on ecommerce. Slow progress or compromise almost certainly sets the course for economic decline.

'Within three years, the Bailiwicks physical network infrastructure needs to be run by a single licensed operator, whose owners and partners bring the necessary skills and buying power to offer a world-class service. This operator must be free from state ownership to ensure its long-term commitment, and yet controlled by independent regulation to guarantee sensitivity to local needs. The regulator will control the development of service competition delivered over the physical network, so that the Bailiwicks community gains access to the full range of future telecoms, IT and media offerings. This will be achieved by licensing a range of high-quality service and application providers.'

'Within one year, Guernsey Telecoms needs to answer the immediate needs of its customers by placing major contracts with international telecoms operators to bring broadband services, Internet hosting, and application service provision to the Bailiwick. Swift progress will rely on close cohesion between all of the public and private sector interest groups. All of the influential players need to be united behind an ecommerce strategy which drives the need for telecoms reform.'

The Government largely accepted the Analysys recommendations and a modernised regulatory structure was put in place in 2000 along with an e-commerce law. Guernsey Telecoms now sees itself becoming a major force in offshore telecommunications as it prepares for the biggest transformation in its 105-year history.

In early 2001 the States of Guernsey gave its backing to the sale of equity in the company to a major international 'player' - whose identity as yet is unknown. The move to sell equity in the company follows on directly from the Analysys report, which came to the conclusion that Guernsey Telecoms was too small in its own right to achieve the scale of operation needed to bring Guernsey to the forefront of offshore e-commerce. The decision to choose an equity route rather than controlled licensing for a limited period came as a result of a strategic review of the telecommunications environment coupled with the desire of potential major partners to seek a long term involvement, rather than a fifteen year licence as originally envisaged.

Head of e-Business Development for Guernsey Telecoms, Peter Crabb, commenting on the future objectives said:

"We're entering a challenging and exciting future, and I am convinced that Guernsey Telecoms will have a significant role to play in the future of offshore e-business and communications. We have a great team here, and can supply the expertise and facilities to ensure those seeking an offshore electronic environment will have everything they need."

The process to choose an equity partner is already underway, and in the hands of a Project Team set up by Guernsey's senior political committee, Advisory & Finance. The expectation is for a recommendation naming the most suitable 'equity partner' to be made known by the beginning of 2002, which will then have to be ratified by the full States of Guernsey - the island's government.

Later this year, Guernsey's Office of Utility Regulation will come into force officially, with a remit to regulate telecoms licensing and practice, as well as electricity and postal services.

Telecommunications infrastructure

While the Government seeks a suitable partner for it, Guernsey Telecoms continues to invest heavily in improving its network infrastructure with the introduction of broadband using ADSL later this year, upgrades on the System X digital exchanges, a second GSM exchange, and the development of an SDH loop ensuring all the islands in the Guernsey Bailiwick have secure and resilient communications. Guernsey Telecoms has also built a high security Data Centre as a key attraction to the development of the offshore data hosting industry.

Guernsey's connectivity as such was improved in a number of ways in 2000. With the completion of a new submarine cable, Guernsey now has fibre optic connections to the UK that equate to one third of the total capacity of the rest of the UK. The new connection will be up and running within a year and will give e-Guernsey complete safety of routing with the benefits of competition between London and Paris for the most advantageous international prices.

The fibre-optic cable link between Jersey and Guernsey has been upgraded at a cost of several hundered thousand pounds, doubling the amount of information it can carry. The move is the first stage of a project which will grow the available capacity on the existing cable links to meet the forecast growth demands for e-commerce and Internet activities in the Channel Islands. The cost has been split between joint owners Guernsey Telecoms and Jersey Telecoms.

Jersey Telecoms executive director, Bob Lawrence, commented: 'This type of network upgrade work is all about ensuring the Island has sufficient capacity in place to meet the growing demands for Internet connections and electronic commerce.'

The submarine cable network is provided over diversely routed fibre optic systems which are protected by a system known as Synchronous Digital Hierarchy. This means that should one cable fail for any reason, the other automatically takes over the provision of all connections without service loss or any degradation in performance. In addition to this bandwidth capability, Jersey Telecoms also has its own independent links to France, which provide direct capacity to Europe and further back-up links to the UK.

Mr Lawrence said: 'Our fibre optic submarine network cables are capable of being upgraded on a continual basis in order to meet such demand and we can provide for almost unlimited capacity over these links. At present, we're currently using only a fraction of the existing potential capacity and the upgrade is being done at this time to meet projected forecasts for next year. As a company we're strongly committed to providing high quality, value for money telecommunication services for the Island and I hope that this increase in capacity will demonstrate this and also help to dispel a current misconception that the telecoms connections to the Island are in someway inadequate or limited.'

Internet Service Providers

A list of Guernsey based ISPs includes:

Dixcart.net
Double Plus Software
Guernsey.net
Internet (CI) Ltd
Lynx Financial Systems
Milvus Software

In a bid to lure more local on-line customers, Guernsey.Net signed up Freeserve in August 2000, as a new Internet Service Provider (ISP), and the alliance took effect in September. The move was made possible by a successful appeal earlier this year to regulators over the pricing structure imposed on Guernsey.Net by Guernsey Telecoms (GT Online).

Also in 2000, Channel Islands company Newtel Solutions joined up with Internet Service Provider (ISP) UUNet, to develop a new Internet service in Guernsey. The company, which is part of the Jersey-based Newtel Group, is dedicated to providing the service in Guernsey in the belief that there is a massive demand on the island that Newtel is able to satisfy.

But the company claimed that its ability to provide a cost-efficient service was being hindered due to the delayed liberalisation of the telecoms market on the island. Peter Funk said: 'I think it will get sorted out but it's primarily dependent on the pace of liberalisation in the telecoms market ... it's going to take some time, we need a clear legislative structure in place and new legislation takes time.'

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