Internet Business Models for Government Agencies

Abstract

The Internet offers enormous potential as a means of communication, doing business and providing channels for service delivery. The most striking feature about the Internet as a technology has been its very high rate of growth compared with other modern communication technologies such as the telephone, television and facsimile. The trend over the last few years of increasing uptake of the Internet is evidenced by host counts doubling approximately every two years (http://www.nw.com/zone/WWW/top.html), the number of people connected, and to a lesser extent the dollar amount of trade activity generated. In addition to the sheer number of hosts and people is the amount of traffic that is being generated. The traffic level on the Internet is doubling every 100 days (International Telecommunications Union [ITU], 1999). Forecasts of the on-line trade of goods in the U.S. are in the order of $1 trillion, and revenue generated by Internet electronic services alone is of the order of $220 billion by the year 2003 (http://www.forrester.com/ER/Research/Report/0,1338,5417,FF.html). These measures of the growth of Internet participation and predictors of future uptake suggest that the Internet “revolution” is more than journalistic hype. This is underlined in a provocatively titled article “Use Net or Die, Travel Agents Told,” reporting advice from the Australian Tourism Commission (ATC) to travel agents that Internet travel sales are doubling every six months (Southgate, 1999). The ATC is predicting A$13 billion in net-based business in the Year 2000. Ansett Airlines expects 50% of its sales to be online by 2005, up from 1% today. Travel agents, like other ‘middlemen’ face significant threats from disintermediation as hotels and others who sell their wares through intermediaries work out effective strategies to use the Internet to sell direct to end consumers. Some hotels, for example, are using the commission (typically 10%) they pay to an agent to deliver lower room costs to consumers who transact directly with them over the Net. Businesses, and to some extent, governments that choose to ignore the Internet as a medium for doing business may be doing so to their detriment.