Guernsey: E-Commerce

Guernsey Introduction

Guernsey encourages information technology operations, in line with its general strategy of increasing the sophistication and capital intensity of business operations on a small island where resources are already very strained. The Information Services Department of the States of Guernsey is actively planning support measures for the development of e-commerce activity.

The government's vision statement includes the paragraph: "The possibilities offered by e-commerce have been recognised by the Island's government, which is putting all its energy into the development of e-Guernsey as a world class centre of excellence in this field."

In January, 2001, Guernsey's Board of Industry announced the appointment of Kevin Green as the island's e-Business Director. Mr Green previously undertook brand and business development client assignments for international companies through his consultancy company, Metasis International, and had recently been working on a series of successful e-commerce projects in the B2B, B2C and C2C arenas.

The legislative framework to support e-commerce was introduced in March 2001 with the enactment of the Electronic Transactions (Guernsey) Law 2000 and the establishment of an intellectual property law.

During March 2001, Ernst and Young in the Channel Islands asked 215 organisations in Jersey and Guernsey to complete a written questionnaire relating to information security in the electronic economy. The findings of the survey, entitled Channel Islands Information Security Survey 2001, revealed that security and privacy concerns were the biggest inhibitor to the expansion of e-commerce in the islands, closely followed by the lack of facilities.

Many of the organisations surveyed did not have an e-business strategy, although they did use the Internet. Whilst 22% of those surveyed were using electronic transaction capabilities, a further 38% said they were considering using them, so security issues are becoming an increasingly important concern for companies in the Channel Islands. Indeed 77% of the respondents to the survey cited security and privacy concerns as the major stumbling block, due to lack of employee awareness, lack of confidence in detecting hacking attacks, or previous experience of business systems failures.

However, a hefty 37% of the respondents said that they considered the lack of resources, skills and expertise within the Channel Islands as the second major barrier, the three principal areas identified as needing improvement being the cost of telecoms services, broadband services and infrastructure, particularly links to the UK and Europe.

Other concerns identified by the survey were lack of confidence in business partners or third parties and lack of confidence in IT infrastructure to support it. Many of the Channel Islands' e-commerce enterprises outsource a variety of IT functions - the main ones being ISP web-hosting and IT infrastructure - for reasons of expertise, cost efficiency and maximum service levels. However, a number of respondents indicated that they were unhappy with at least one key area of their outsourcing deal.

In September, 2001, the governments of Guernsey and Jersey announced a scheme under which e-commerce business needing to re-locate from island to island as part of a disaster recovery situation would be spared any change in their tax status.

The income tax authorities of both Islands agreed that, if in need of disaster recovery, 'any temporary relocation to the other Island will not cause any tax burdens due to that relocation,' which effectively means that a company which continues to make profit whilst based in the other Island will not be subject to taxation from that Island's tax authority.

Jersey's Comptroller of Income Tax, Malcolm Campbell explained: 'Facing a disaster causes any company a tremendous upheaval and we felt that we did not want to add to this administrative problem by placing a subsequent financial burden on businesses. Additionally, the agreement provides yet another string to our bow in attracting new e-commerce business to the Island.'

The agreement is detailed in each Island's Code of Practice entitled the 'Concession and Practice Booklet.' Although it extends to any type of business, it is particularly important in respect of e-commerce businesses due to the fact that if it becomes necessary to establish a business recovery location in the other Island, not only will they benefit from the no tax rule but they will also be able to make use of the bandwidth running through the inter-Island fibre optic cables.

In July, 2002, Guernsey' Board of Industry produced a case-study book, telling the stories of some of the Island's e-business successes. Deputy Kevin Prevel, vice president of the Board of Industry explained that:

'Contrary to what the sceptics will have us believe, e-business is most certainly not finished. Guernsey must continue to do everything it can to support its pioneering of e-business, and to attract further innovative hi-tech businesses to the island for the long-term prosperity of the Bailiwick.'

See below for specific information on e-commerce in Guernsey, or go to Offshore-e-com.com for an extensive analysis of the commercial possibilities and the legal background.

Guernsey Telecommunications Provider(s)

On 29 March 2001 the States of Guernsey approved a new model for the privatisation of Guernsey Telecoms. The licensing of the state owned company had been proposed in 2000 but no major Telecoms company made a serious approach. Now an equity partner with a controlling stake was being sought in order to expand the company and take it away from the limitations of public control. The States re-affirmed that the sale of a majority shareholding in GT was being done to attract a world class telecoms player, rather than a way to raise cash.

The equity partner turned out to be Cable & Wireless, and a deal was finalised in mid-2002, with Guernsey Telecom officially rebranded with a Cable and Wireless label in October 2002. Guernsey must have hoped that Cable and Wireless will be more forward-looking in the Bailiwick than it has been in many other offshore jurisdictions, where it has jealously protected its monopoly to the disbenefit of e-commerce development.

In August 2005, Cable & Wireless Guernsey announced that is was doubling the speed of its broadband packages for home and business users from 512kbps to 1 megabit per second at no extra cost. It meant that local broadband users could get a 1Mbs broadband connection for GBP26.99 per month, which was 40% cheaper than in Jersey and nearly half the price of Isle of Man. It also allows unlimited downloads, which compares favourably with similar packages from UK ISPs.

In October 2005, Cable & Wireless unveiled a plan to develop a state of the art telecommunications infrastructure that will ensure the island benefits from the latest technology and services in the future with a GBP6.5 million project to install two new fibre optic links connecting the island to Cable and Wireless's global network. In an address to local politicians and business leaders, Lord Robertson, deputy chairman of Cable & Wireless and a former UK cabinet minister and secretary general of NATO, said it would put the island on a par with major cities and leading international financial centres across the world.

"Guernsey will become a world-class telecommunications hub, with secure, high performance global connections that are capable of supporting the highest quality services. As well as providing for the future needs of islanders and businesses, it will attract new investment and much-needed diversification, as companies look to locate operations here and take advantage of the island's world-class links," he said.

The new connections will give the island's financial services and business sectors direct access to the global Cable & Wireless's telecommunications network, which already links many major cities and international financial centres across the world. These include London, Hong Kong, New York, Sydney, Tokyo and Paris.

Newtel Solutions is an alternative telecommunications carrier offering a range of voice, data and video services in Jersey and Guernsey. The Group has been in operation since 1988 and was awarded a Public Telecommunications Operators licence in Guernsey in November 2002 and in Jersey in January 2003.

Wave Telecom, a wholly owned subsidiary of the Jersey Telecom Group, has also been granted licences by the Office of Utility Regulation to operate fixed and mobile telecommunications services to, from and within the Bailiwick of Guernsey. By the end of 2006, the company claimed to have captured 20% of the Guernsey mobile market from its rival, Cable & Wireless Guernsey. Wave also competes in a number of business-to-business markets and has grown its offering in private circuits and IP services.

The company has continued its investment in future technology by connecting on-island networks to the world and in 2007 was due to deliver Project Liberty, a GBP6m high capacity fibre optic cable linking the JT Group network to the UK, via Guernsey.

As part of Project Liberty, Wave provides direct fibre cable access to key corporate customers with a view to supplying enhanced services. Wave said in 2007 that it was also investing in core infrastructure, as the company moved forward with its plans to install a Next Generation Network (NGN), which will give it a platform from which it can deliver ultra high speed broadband to the home, Super 3G mobile services and mobile TV.

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Guernsey ISP & Hosting Services; Connectivity

A list of Guernsey based ISPs is as follows:

Dixcart.net
Double Plus Software
Fort Trustees Limited
Internet (CI) Ltd
Lynx Financial Systems
Milvus Software
Newtel

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.'

In August, 2006, Newtel Solutions announced that it had increased the capacity of its core transmission network infrastructure between the Channel Islands and London.

The announcement, which came just six months after Newtel announced its last upgrade, saw the company's network between the Channel Islands and London quadrupling in capacity from STM-4 (622Mbit/s) to STM-16 (2,488.32Mbit/s).

"The customer requirement for high quality bandwidth and service convergence in the Islands is becoming increasingly sophisticated," noted Andy Elston, Director of Operations, Newtel Solutions.

"The network will be used as the bedrock platform on which to transport next generation network (NGN) services," he added.

Gary Whipp, Commercial Director, Newtel Solutions added: "Newtel is able to provide carrier-class connectivity to businesses in the Channel Islands, whatever the size and nature of the business.

"The increased capacity will allow for further development of broadband and voice services together with the core network infrastructure providing opportunities for businesses locally and internationally."

The enhanced infrastructure has been made possible through an agreement with COLT Telecom, a leading European provider of business communications.

Newtel has been providing telecommunications capacity via the high capacity CIEG telecommunications network since 2002.

Newtel is a fully licensed Public Telecommunication Operator (PTO) in both Jersey and Guernsey, providing a range of hosting, private circuit, Internet and voice services over its own infrastructure.

In 2005, Newtel acquired Guernsey.Net and its wholly owned subsidiary Localdial, making Newtel the largest independent Internet service provider and telecoms company in the Channel Islands.

In April 2010, it was announced that engineers for Sure had upgraded connections at seven exchanges serving the island, Alderney and Sark.

The work was the first stage of a major project to deliver a doubling of speeds for broadband across the Bailiwick at no extra cost to Sure customers.

Vicki Abraham, Consumer Product Manager, Fixed Services, said: “The broadband work has gone really well, more rapidly than we expected, and the feedback we’ve received from customers so far has been positive. We haven’t had any lasting problems reported so far. Our planning for the second phase of this project starts now and we will see further increases in internet speeds, while maintaining the quality of the network, later this year.”

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Guernsey Applications

In July, 2005, the UK's Forum of Private Business (FPB) revealed that it has lodged complaints against the music superstore HMV and the Guernsey government with the UK's Treasury, National Audit Office, and HM Revenue and Customs, after it emerged that the retail giant is setting up a website on the Island to sell CDs and DVDs VAT-free.

The FPB announced that HMV's move to Guernsey had "set alarm bells ringing" coming just weeks after the Jersey government announced that no more major retailers would be granted licenses to sell goods VAT-free from their island.

The loophole allows retailers to sell goods such as CDs, DVDs, computer games and contact lenses that are valued at under GBP18 VAT-free from Jersey and Guernsey back to the UK through websites. The Channel Islands are not part of the EU for VAT purposes and, therefore, goods under this value sent by mail order from the Islands are exempted from VAT.

Reports in the UK media in early 2006 suggested that this was no longer the case, as the Guernsey authorities had announced that they will not grant permission for distributors acting for online retailers located in the United Kingdom to establish warehouses in Guernsey. According to the Financial Times, the Guernsey government also revealed that it would not grant housing licences for the employees of such operations.

Speaking the BBC with regard to the move, Guernsey's Deputy Minister for Commerce and Employment, Carla McNulty-Bauer explained that:

"Our priority is to ensure that our local, home-grown businesses that are Guernsey-friendly are looked after and given the best advantage possible. We do not want those companies to be prejudiced against in any way."

The island of Alderney has developed a specific regime for Internet betting. In 1999 Alderney said it would issue four licences, but later increased the number to six, as well as introducing a regulatory structure for gaming.

In July 2001 legislation fixed the maximum number of betting licences at six and each licence holder is entitled to employ a maximum of ten staff based on the Island. Licences are issued for a three year period and are subject to an annual fee of GBP75,000.

The licences are specifically for betting and sports book business and the appropriate legislation is "The Gambling (Betting) (Alderney) Ordinance 1997" and "The Gambling (Betting) (Amendment) (Alderney) Ordinance, 1999", copies of which are available from the Alderney Gambling Control Commission.

In May 2000 the States of Alderney established an independent, non-political, commission, the Alderney Gambling Control Commission, to take over the regulation of the licensed businesses from the Island's Policy and Finance Committee. The Commission has built upon and developed the policy of ensuring its regulatory and supervisory approach meet the very highest international standards.

The Commission is also engaged in regular dialogue with other regulatory bodies at an international level. It participates in the Gaming Regulators European Forum (GREF) and the International Association of Gaming Regulators (IAGR). The Commission works closely with other agencies, particularly in the prevention of financial crime.

The Alderney Gambling Control Commission chairman, John Godfrey, says: 'We have tried to position Alderney so that it is attractive to the highest quality companies, and those seem to be the kind that we are getting. When you are dealing with the ones that we want in Alderney, regulation is not a substantial burden to them because it reflects the way they wish to run their business in any event. It is a matter of good corporate governance.'

Mr Godfrey also said that there is 'continuing, widespread interest' in the Island from internet betting providers, announcing: 'It is encouraging. We are quietly and cautiously confident. It is going as well as we could reasonably expect.'

In January, 2004, the Gambling Control Commission confirmed that Harrah’s Online Limited, the world’s biggest casino company, had been awarded an interactive gaming licence. Founded 66 years ago, Harrahs’ Entertainment Inc. operates 25 casinos in the United States, primarily under the Harrah’s brand name. The licence has been issued for Harrah’s new online-gambling site “Lucky Me”, which went live in the UK at the end of January. A spokesman for Harrah’s Entertainment claims “the new site will offer innovative forms of gaming, is modelled on popular games-for-prizes Internet sites and will also appeal to women."

In June, 2004, the Gambling Control Commission announced that it had 12 licensees, and its annual report for 2003 revealed a healthy surplus of GBP535,502 over expenditure, generated from interactive gaming and gambling licensing fees, compared with the previous year's results which produced a small surplus of GBP62,165.

In April, 2005, the Commission reported on another successful year in 2004, which had seen the number of licences issued by the Commission increased from ten to fourteen during the year. At December 31, 2004, the net assets of the Commission stood at GBP1,345,925 after a total surplus of income over expenditure of GBP767,794 compared with GBP535,502 in 2003.

By December 31, 2004, the list of Interactive Gaming Licence Holders was as follows:

• Littlewoods (Alderney Ltd), a subsidiary of Littlewoods Promotions Ltd. based in the UK and which is known for its sport pools and internet gaming businesses.
• Ritz Interactive Ltd - a subsidiary of The Ritz Club, London
• WagerWorks Alderney Ltd , supplier of complete Internet gaming solutions
• Bonne Terre Ltd, a wholly-owned subsidiary of BSkyB
• VI Limited - a wholly-owned subsidiary of Las Vegas Sands Inc., Las Vegas
• Cryptologic - Software supplier, wholly-owned subsidiary of Toronto-based Cryptologic Inc.
• Rank Interactive Gaming Ltd, a wholly owned subsidiary of the Rank Group Plc
• Harrah's Online Ltd, a wholly owned subsidiary of Harrah's Entertainment Inc., Las Vegas
• Blue Square Gaming Alderney Ltd, part of the Rank Group Plc
• Cantor Casino (Alderney Ltd), part of Cantor Fitzgerald, the London-based spreadbetting firm
• Samvo International Ltd (Electronic Betting), owned by Samvo Entertainment Ltd

In July, 2006, the Commission announced that it had conducted a major review and revision of the legislative framework under which it regulates the eGambling industry.

Robin Le Prevost explained: ‘We have over the years, like many other jurisdictions, modified our laws to cater for the very fast changing eGambling industry. But we realised that as those changes began to add layer upon layer there was a danger that the fundamentals could become submerged. The States of Alderney, advised by the Alderney Gambling Control Commission, decided to take a radical review of the structure of its entire legislative framework and concluded that a root and branch rewrite was the best way to go forward.’

He continued: ’Whilst we have retained most of the previous provisions in the revised structure and provided for a grandfathering element to cater for our existing licensees and certificate holders, we have made many changes which we expect will find great favour with the industry. Firstly and importantly, we have created a single eGambling licence which caters for all activities and is transparent from a technological perspective. Whether you are a casino, poker room, lottery or a Sportsbook, and increasingly operators provide their customers with one or more of the above and no matter how you operate whether solely on the Internet, mobile or any other medium it can now all be done under a single licence for one single licence fee for an all inclusive fee of GBP70,000 per annum.

'Secondly, all provisions related to ongoing operations of licensees, which were previously contained in the Ordinances and which required government approval to be amended, have been dropped down into Regulations, which is administered by the Commission. This implies that, any changes required because of market and technical forces can be affected quickly and pragmatically. In doing so, we also took a good hard look at all the checks, balances and processes we have currently and many have been simplified and modified to make them less burdensome.

'Thirdly we have introduced a new type of licence, termed a Restricted Use eGambling Licence. Rather than go down the prescriptive and narrow route of Disaster Recovery legislation we have brought in the ability to grant Restricted Use licences for those operators who want to operate a mirrored site from within the jurisdiction, while primarily operating elsewhere in the world. The terms for this licence are identical to that required for the Full eGambling licence so as to ensure that we do not compromise our standards and quality of licensees but there are major concessions on the fee and the need to incorporate an Alderney Company. The effect of this licence is that the operator can utilise his equipment hosted in the jurisdiction whenever required and for whatever purpose in exchange for a daily fee. Should the operator decide to operate from the jurisdiction for an extended period of time, they can simply and swiftly turn the Restricted Use eGambling Licence into a Full eGambling Licence and of course switch to the annual licences fee basis.

'We are absolutely confident that without compromising the global respect the jurisdiction has justifiably earned over the last 5 years, these steps create a business friendly environment second to none and when seen in conjunction with the absence of all gambling and gaming taxes and duties and extremely low corporate taxes and no sales taxes we shall extend our advantage even further.’

In September, 2006, the Alderney Gambling Control Commission announced that Gala Coral had been successful in its application for the first of Alderney’s new eGambling Licences.

The new eGambling Licence allows operators a great deal of flexibility as it doesn’t restrict the type and number of gambling activities an operator can run under a single licence, for instance poker, casino games and sports betting and bingo could all be conducted under the single licence. This reflects the growing trend for operators to offer multiple games to their customers.

Following the decision to license Gala Coral, the Commission has a total of 20 Full eGambling licences and 5 Associate Certificates in issue.

Robin Le Prevost, Head of E-Commerce Development for the States of Alderney said that they were delighted with the news and commented “Gala Coral are one of the most respected names in the eGambling industry and we take it as a compliment that they have chosen to acquire a licence from Alderney.”

Robin added “We are currently seeing an unprecedented interest in Alderney with a great many companies at various stages of applying for licences. The recent legislative changes have been well received by the industry and combined with the fiscal benefits and technical infrastructure on offer in the Bailiwick of Guernsey, have cemented Alderney’s position as a leading jurisdiction.”

At its October 2006 meeting, the Alderney Gambling Control Commission resolved to grant a further four full eGambling Licenses. These licenses were granted to WagerWorks (Alderney) 6 Ltd, Asia Pacific Gaming Ltd, World Poker Tour Alderney Ltd and ElectraWorks (Alderney) Ltd. The granting of these licences followed the decision of the Commission in the previous month to issue full eGambling Licenses to the Alderney subsidiaries of William Hill plc and Sportingbet plc.

A new licensing framework which will enable Alderney to offer a wider range of options to prospective e-gambling businesses that are looking to become licensed in Alderney, came into force on January 1, 2010, increasing the territory’s reputation as a leading e-gambling jurisdiction.

In a statement on January 18, the Alderney Gambling Control Commission said: “The … introduction of Alderney’s revolutionary new licensing framework … is already proving to be a great success and marks the start of a new era in the world of online gambling regulation.”

“Building on its reputation as the leading e-gambling jurisdiction, Alderney has stolen a march on its rivals by revamping its licensing framework to reflect not only the changing dynamics of the eGambling industry but also the new regulatory environment unfolding in Europe and further afield. Based on a modular system, where operators need only choose the parts they require to fit their business model, the new scheme has reduced costs for many and cemented Alderney’s reputation as the lowest cost jurisdiction in Europe.”

According to the Commission, the new Category 1 license was introduced to cater for the increasing number of operators outsourcing gaming and gambling activities. The license authorizes the organization of gambling operations, namely the registration and verification of players, the contractual relationship with them, and the management of player funds. Under the new system, a Category 1 license can be granted in as little as four to six weeks. The Category 2 license was created to satisfy growth in business-to-business services, and authorizes the operational management of a gambling platform located within an approved hosting center.

A third major change has been the introduction of a system which can recognize and license equipment located outside of the jurisdiction – a move which meets technical requirements such as resilience and performance issues, in game betting products, live feeds, the rise in globally based gaming platforms, and the advent of cloud computing.

Le Prevost said: “However well thought through, a significant revision of the licensing legislation fills you with some trepidation as to how it will be received. But I think we can say, even though it is early days, the new scheme seems to have hit exactly the right note and enquiries and applications have shown a significant increase.”

“2009 continued a pattern of growth for Alderney as a jurisdiction but was a difficult year for some, especially the new start-ups, but one can sense a new energy and we are very much looking forward to 2010.”

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