So get inputting, everyone. Industry Minister Tony Clement announced at the Canada 3.0 conference on May 10 that the feds want to hear what we – all Canadians – think our country should do to drive our digital economy strategy.
It’s an absolutely critical issue. Canada was once a world leader in broadband deployment and general tech sophistication, but that is no longer the case. A recent Harvard study concluded Canada has some of the slowest and most expensive Internet access in the world, a finding cited by Industry Canada: “Canada ranked at the top of the leader board when the OECD began compiling statistics on residential broadband penetration a decade ago. Since then there has been a steady slippage. As of December 2008, we ranked 10th among OECD countries in terms of broadband subscribers per 100 inhabitants.”

Many industry watchers and tech companies have criticized the OECD study, faulting its methods and claiming Canada is performing better than reported. Maybe, but wherever you place our specific ranking no one is arguing that we haven’t slipped.

And the government actually seems to want to do something about that. It plans to create a digital strategy for the country, hence the public consultation. (It is at this point that one could make an “It’s about time” comment, especially considering that in 2008 New Zealand released the second version of its digital economy strategy, but I am so pleased to see government action that I will refrain from doing so.) 

Industry Canada’s call to action is accompanied by a long document outlining the various issues and questions. I urge you to read the paper, but if you prefer a condensed version I have included a summary below.

Even my summary is quite a read, but it is shorter.

Backbone encourages all Canadians to take part in this process. Let the feds know what action you would like to see.

And we are doing our part. We have formed an editorial advisory board comprised of 20 senior Canadian industry executives. We are holding discussions to reach a consensus on our national priorities and we will present our findings to Industry Canada and publish them here and in the magazine.

Make your voice heard as well, to the government and also below, in the comment section.

Within the world of business technology, there is no more serious issue today.

---

Summary: Improving Canada’s Digital Advantage

Capacity to innovate
Digital technologies are tools, capacities or knowledge assets that can be embedded in business processes, products and services to help firms and individuals in all sectors of the economy become more productive, innovative and competitive.

In 2007, Canada ranked 11th among 21 Organisation for Economic Co-operation and Development (OECD) countries in total economic investment in ICT, down from 10th in 2005 and 9th in 2004.

The Government of Canada allocated $500 million to Canada Health Infoway to support the goal of having 50 percent of Canadians with an electronic health record by 2010.

ICT industry studies have estimated that the application of ICTs to create smart electricity grids, buildings, logistics and production processes could result in a 15 percent reduction in greenhouse gas emissions by 2020.

On average, Canadian firms consistently invest less in ICT than their competitors in the United States and other advanced economies.

Recent work done by the Council of Canadian Academies (CCA) suggests that Canada lacks a culture of innovation with respect to ICT adoption. “Canadian businesses on the whole — but always with notable exceptions — are technology followers, not leaders, and are reluctant to adopt new practices until they have been well proven south of the border.” The Centre for the Study of Living Standards (CSLS), has conducted several studies on Canada’s underinvestment in ICT, especially in comparison to the United States, and estimated that the average ICT investment per worker in Canada is only 60 percent of that in the United States. This underinvestment in ICT has been linked to Canada’s weak productivity growth over the last several years. From 1996 to 2006, labour productivity grew at an average annual rate of 1.8 percent in Canada, as opposed to 2.9 percent in the United States.

In addition, the CSLS also looked at investment by industry. Overall, the business sector increased its investment in ICT, but there are some sectors that showed large declines, including mining, oil and gas extraction (-16.7 percent) and health care and social assistance (-10.3 percent).

There is also evidence that smaller firms are adopting less rapidly than larger ones when it comes to more advanced ICT applications.

Governments are large buyers and users of digital technologies. Public procurement decisions can help drive smart ICT adoption in the private sector.

Copyright laws that give creators and consumers the tools they need to engage with trust and confidence in the digital marketplace are critical to a successful digital economy.

Discussion questions
1. Which conditions best incent and promote adoption of ICT by Canadian businesses and public sectors?
2. What would a successful digital strategy look like for your firm or sector? What are the barriers to implementation?
3. How can Canada use its regulatory and policy regime to promote Canada as a favourable environment for e-commerce?

Building a world-class digital infrastructure
The telecommunications industry is in the midst of a major shift towards next generation networks (NGN), which provide dramatic improvements in speed, functionality and integration of services using the flexible Internet Protocol (IP).

However, telecommunications service provision is still subject to strong economies of scope and scale and the large up-front sunk costs can act as barriers to entry.

The industry is often characterized by competition between a relatively small number of large firms that are capable of absorbing these significant fixed costs.

In 2008, the private sector devoted over $12 billion to capital expenditures.

Canada ranks in the middle of the pack in average or median real-world download speeds according to sources such as Akamai and Speedtest.

Policy-makers and regulators must ensure that there is a sufficient level of competition and consumer choice amongst a variety of services, while at the same time facilitating an environment that is conducive to continued network investment. Next generation networks require very large up-front capital investments. Ensuring that sufficient competition is in place to drive innovative service delivery at reasonable prices is a key concern.

The 2006 Policy Direction requires the telecommunications regulator, the Canadian Radio-television and Telecommunications Commission (CRTC) to rely on market forces to the maximum extent feasible and to regulate only where necessary in achieving Canada’s telecommunications objectives.

The basic question is whether domestic progress is fast enough for Canadians to be at the forefront of developments in the global digital economy.

Industry Canada intends to provide access to additional spectrum through re-purposing the2500 MHz band to allow flexible use, including mobile broadband services, and making available the 700 MHz band for next generation wireless as the analogue broadcast services are transitioned to digital television in 2011. Consultations are also planned for the 70, 80, 90 GHz bands and the 1.4 GHz band for broadband use.

Meeting the needs of consumers and businesses in rural and remote areas presents unique challenges. Advanced service deployment tends to trail that of urban areas, as the business case for deploying networks in these sparsely populated regions is far more difficult. Governments internationally have taken a variety of approaches to address this issue including direct funding, regulatory mandates and promoting market forces. The approach of the Government of Canada has been to fund broadband directly through funding initiatives.

Discussion questions
Ensuring a state-of-the-art network infrastructure to promote innovation, attract investments and support world-class health care, research and education will be key to making Canada a leader in the global digital economy. All Canadians should have access to high-speed networks as digitally savvy citizens, consumers, workers, entrepreneurs and artists — to connect them to the potential that the digital economy offers.

1. What speeds and other service characteristics are needed by users (e.g., consumers, businesses, public sector bodies and communities) and how should Canada set goals for next generation networks?
2. What steps must be taken to meet these goals? Are the current regulatory and legislative frameworks conducive to incenting investment and competition? What are the appropriate roles of stakeholders in the public and private sectors?
3. What steps should be taken to ensure there is sufficient radio spectrum available to support advanced infrastructure development?
4. How best can we ensure that rural and remote communities are not left behind in terms of access to advanced networks and what are the priority areas for attention in these regions?

Growing the ICT industry
The ICT sector currently represents 5 percent of Canada’s gross domestic product (GDP) and accounted for 11.5 percent of all real GDP growth since 2002. Employees in the ICT sector are well educated and earn on average $62 000 or 47 percent more than the national average.

The size of the Canadian industry sector falls below the OECD average, ranking 14th out of 23 countries measured as a share of total business sector GDP, well behind a number of our key competitors.

The ICT sector is the largest performer of private sector R&D in Canada, accounting for 39 percent of the total in 2009.

Internationally, Canada is a middling performer, ranking 10th among 21 OECD countries in ICT manufacturing R&D as a percentage of GDP and 7th in ICT services R&D.
There is wide recognition that Canada’s small domestic market itself will not sustain the growth of Canada’s ICT sector that is required to remain competitive, and that primary growth comes by increasing exports of goods and services. Some stakeholders would like to see more efforts directed at growing domestic ICT firms and are keen for new government innovation frameworks, including market-led innovation policies, public-private sector partnerships and robust IP protection, particularly to support new emerging technology products and services that could provide opportunities for Canada. It has also been suggested that the government should consider undertaking analysis to identify the conditions that would help foster “communities of innovation” in Canada.
Others suggest that existing measures preventing foreign companies from sponsoring R&D should be removed to increase their R&D activities in Canada.

Venture capital (VC) is crucial to the ability of promising ICT companies to innovate, commercialize technologies and fulfill their growth potential. In 2009, VC investments in ICTwere 25 percent less than in 2008, and 50 percent less than in 2007. Since 2003, the number of ICT companies receiving VC funding has also decreased by half.
There are some indications of a shrinking talent base due to decreasing university enrolment in the areas of computer and information sciences, applied mathematics and computer software engineering. Between 2001 and 2007, information technology undergraduate enrolment in Canadian universities dropped by 45 percent, resulting in a 35-percent decline in graduates by 2007. Similarly, enrolment in graduate programs has declined by 21 percent since 2003.

Governments can promote private sector innovation by being a smart and demanding purchaser and a model user of advanced technologies and services. The Government of Canada purchases approximately $2.5 billion per year of ICT goods and services.

Discussion questions
Governments have a role to play in putting in place the policies and programs that encourage businesses to innovate and compete. As well, governments must ensure that Canada has an investment climate that attracts and retains strategic investments. At the same time, the private sector has the primary role in growing the ICT sector.

1. Do our current investments in R&D effectively lead to innovation, and the creation of new businesses, products and services? Would changes to existing programs better expand our innovation capacity?
2. What is needed to innovate and grow the size of the ICT industry including the number of large ICT firms headquartered in Canada?
3. What would best position Canada as a destination of choice for venture capital and investments in global R&D and product mandates?
4. What efforts are needed to address the talent needs in the coming years?

Digital media
As more and more everyday activities (entertainment, communications, work, learning etc.) are done on digital platforms like TV, computers, cell phones and other portable devices, the Canadian economy needs a strong and competitive digital media industry (creators, enablers and aggregators) to be well positioned and take a leading role in shaping the global digital economy.

The Canadian arts and culture sector generates about $46 billion to Canada’s GDP or 3.8 percent of Canada’s real GDP and directly employs approximately 662 000 people, or 3.9 percent of national employment.

The private sector will bear the risks and reap the rewards. The Government of Canada’s role is to put in place a marketplace framework in which our creators, inventors and entrepreneurs have the incentives to innovate, the confidence to take risks and the tools to succeed.

The federal government is interested in exploring with the private sector and the provinces and territories, the emergence of both physical and virtual digital media clusters, such as the Stratford Institute of the Canadian Digital Media Network.

The Government of Canada expects the CBC/Radio-Canada and the NFB to maximize their presence on all digital platforms.

Some have argued for legislative change, making the case that the Broadcasting Act, the Telecommunications Act and the Copyright Act do not line up with the digital media reality and changing market dynamics.

Discussion questions
The digital media sector is shifting away from linear production chains with distinct players and discrete products into three main areas of activity: 1) the creation of content; 2) enabling content creation and distribution; and 3) the aggregation of content.

1. What are the core elements in Canada’s marketplace framework for digital media and content? What elements do you believe are necessary to encourage the creation of digital media and content in both official languages and to reflect our Aboriginal and ethnocultural communities?
2. How do you see digital content contributing to Canada’s prosperity in the digital economy?
3. How can stakeholders encourage investment, particularly early stage investment, in the development of innovative digital media and content?

Digital skills
Arguably the backbone of the digital economy is a strong, globally competitive information and communications technology sector.

Over the past several years, employers have reported difficulty in recruiting skilled ICT workers.

A longer-term solution to ICT skills gaps will require a focused and sophisticated strategy that could combine at least three components:

1. Expand post-secondary programs that combine ICT with other fields, and increase the role of co-op and internship placements;
2. Expand programs to integrate under-represented groups and internationally educated professionals; and
3. Strengthen opportunities for continuing professional development of ICT workers currently in the workforce.

Discussion questions
The Government of Canada has overarching responsibility to ensure Canada’s economic security and prosperity by: growing the labour force by reducing barriers; improving the quality of the labour force by supporting skills development; and enhancing labour market efficiency through facilitating labour mobility and adjustment.

1. What do you see as the most critical challenges in skills development for a digital economy?
2. What is the best way to address these challenges?
3. What can we do to ensure that labour market entrants have digital skills?
4. What is the best way to ensure the current workforce gets the continuous up-skilling required to remain competitive in the digital economy? Are different tactics required for SMEs versus large enterprises?