Reporter's Notebook: Microsoft Says EC Regs Will Affect Online Res

<I>London</I> - The online battle for Britain is shaping up as a place where competitors abound, platforms are not set and politics plays as important a role as technology.

Indeed, this month's Travel Tech '97 show in London turned out to be quite a rowdy affair. Microsoft charged the European Commission with trying to slip a fast one past the online community and said it is delaying its U.K. launch of Expedia, and Sabre begged the airlines not to kill the channel in its infancy with online caps. And on opening day, a global partnership announced the formation of the British Interactive Broadcasting Network, which will invest close to $1 billion to connect the populace to the Internet through televisions rather than computers.

That new joint venture, sponsored by Midland Bank, BSkyB, British Telecom and Matsushita Electric of Japan, is designed to foster two-way electronic commerce through the Teletext boxes already found atop 60 percent of the televisions in the United Kingdom. Like the rollout of computer access through hotel televisions in the United States market (BTN, May 5), the new technology offers an easy-to-use interface to which even non-computer-literate travelers easily can adapt.

Barrie Barnes, group leader of the advanced products group at Philips Sound and Vision, said Philips already is testing two-way television in the U.K. market with a product that allows consumers to bet on sports events or play interactive games. A full rollout of the interactive system is scheduled for the Christmas season, priced at a one-time charge of $329 and a $19 monthly access charge. Said British Interactive Broadcasting sales and marketing director Lawrence Lawson, "We have the experience, the vision and a powerful brand to provide companies with a new and powerful means of distribution."

But Timothy O'Neil-Dunne, Microsoft's travel business unit head and a keynote speaker at the show, chided the British for "not having the economic and political will to embrace electronic commerce," and cautioned that they are falling behind the rest of the world. Even as airlines take "the last-ditch stand of trying to impose restrictions on the free market" with online caps, the Internet offers suppliers the opportunity to get closer to their customers in a way Teletext does not, he said.

The U.S. government has adopted a laissez-faire attitude toward the Internet, obviously sharing Microsoft's view that "no government is good government," O'Neil Dunne said. But the EC this month tried to slip past a change that would make CRS regulations applicable both to travel agents and to Internet providers. "We're absolutely amazed at the lack of objection, because no one knew about it," he said. "They simply did not consider all the issues." Thanks to complaints by Microsoft and two travel agencies, the change will have to go through the entire regulatory process and will not be addressed again until November.

Although O'Neil-Dunne did not cite concerns over EC regulations as the reason for the delay of Expedia's European launch, he would not say when the product--originally scheduled for release here in late spring or early summer--will come to market. The British market's general lack of interest in the Internet--only 3 percent of the population is connected, compared with 10 percent in the United States--is "a cost issue and a cultural issue, and it's very distressing for us," he said.

He declined to say whether the United Kingdom in particular, or even Europe in general, will be the next market to see Expedia. "I'd like to say, 'forget everything you've heard,'" he said. "When we are ready, we will say, 'here's the product.'"

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Meanwhile, Sabre Interactive president Terrell Jones used his time at the podium to chide travel suppliers for the spate of online commission caps. "This is not yet a fully automated business; people call, and first-time users need a lot of hand holding," he said.

The nascent industry still is looking for investment funding, he noted. "Clearly, this is a channel that ought to produce lower costs, but some suppliers have gotten draconian in their cuts," he said. "Great Websites should pass along savings to the consumer, and we are not capable of doing that yet."

Despite the caps, Sabre is going ahead with its European launch of the Travelocity site this summer. In the States, Sabre this week is adding a Price Guide service to Travelocity, listing the lowest prices out of a customer's market to various destinations.

In the long run, Jones said, Sabre will continue to support both the direct and the agency channels. Like many online suppliers, Sabre has learned, Jones quipped, that "the way to make $1 million on the Net is to start with $10 million."

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British Airways has mixed feelings about its recent forays into the electronic era, distribution manager Gavin Halliday said at the conference. A recent test of a chip card checkin product--which allows travelers to check in at an airport kiosk, pick their seat from a map and get a boarding pass without human intervention--has found the average time required to complete the transaction to be only 50 seconds. And in the first seven weeks since launching an electronic ticketing option, the carrier has processed 17,000 e-tickets, with a disproportionate number of bookings coming from interactive booking systems. "But the future will be determined by the market," Halliday said, "and agency support will be critical to success, as will the legal and regulatory environments." BA's cost-benefit analysis of e-ticketing found that "until you get to 30 or 40 percent usage, there's no cost savings," he noted.