Canada’s Digital Economy


Over the summer, I took some time to read many of the submissions to Industry Canada’s Digital Economy consultation. As you know, CIRA participated in the consultation; you can read our submission here. In it, we make 19 recommendations, ranging from developing a Community Emergency Response Team (DNS-CERT) to recommending that governments at all levels leverage their purchasing power to stimulate the adoption of technologies like IPv6 and DNSSEC in Canada. However, as we state in our submission, there are a couple of underlying factors that need to be addressed to build Canada’s digital economy: the cost of and access to broadband in Canada, and digital literacy.

One thing that was clear in the submissions to the Industry Canada consultation is that there is a diversity of opinion with regard to how to go about it. However, three themes were common among the majority of submissions: venture capital (or lack thereof), broadband cost and access, and digital literacy.

Why is this important? A few weeks ago Chris O’Neill, the new Canadian country director for Google, called on Canadian businesses to become more web savvy. It got me thinking about what the factors are that will enable businesses to do just that, and I think the answers are in the submissions to Industry Canada’s consultation.

The fact is, according to OECD reports, Canada has been falling behind its peers with regard to the digital economy (no doubt one of the reasons Industry Canada held their consultation earlier this year). The Economist Intelligence Unit (EIU), in co-operation with IBM, publishes a white paper that takes a look at nation’s e-readiness. They define e-readiness as “the ‘state of play’ of a country’s information and communications technology (ICT) infrastructure and the ability of its consumers, businesses and governments to use ICT to their benefit.” In short, how ready and strong is a country’s digital economy. Canada doesn’t fair too well in their report either, having fallen from ninth place in 2006 to 13th place in 2007. We made our way back up to ninth place in 2009, an encouraging sign.

However, when you look a little deeper into the OECD’s and EIU’s numbers, it starts to become clear that there’s more here than meets the eye. More importantly, it becomes clear the organizations that identified these three themes in their submission to the Industry Canada consultation – including Google – were on to something.

On which indicators is Canada falling behind? Connectivity and infrastructure (read broadband access), a cultural environment conducive to widespread participation in the digital economy (read digital literacy), research and development, and access to venture capital.

Despite the relatively widespread availability of broadband access networks in Canada, the cost per megabyte, and service gaps in rural and remote areas, are barriers to the digital economy. The OECD’s data shows that the average price for broadband service in Canada is twice the rate of that in the U.S, and there are huge swaths of Canada that simply do not have access to service. It’s pretty difficult to establish yourself as a digital leader when a good proportion of your population is on dial-up. That’s why we called on the government to address this situation, as did many other organizations, including Google.

The state of access to venture capital in Canada is alarming. VC investments in Canadian industries is falling, and the sheer number of companies receiving VC is now half what it was in 2003. Deloitte Canada said it best in their submission: “…no country has ever become a leader in creating a digital economy without a healthy domestic VC industry.”

Finally, the Certified Management Accountants of Canada (CMA) state that as many as 40 per cent of working Canadians lack the basic literacy skills needed to participate in the digital economy. Our work with the Media Awareness Network (MNet) on the issue of digital literacy has certainly convinced me that addressing it is of key importance. Digital literacy is a driver of productivity in the digital economy. Without it, we are not going to be competitive. How do we do this as a country? The CMA call on the federal government to work with the provinces and territories to make investments in building Canada’s digital literacy skills. I agree, as does MNet and countless others.

Where are we doing well? Canada has an exceptionally stable business environment, a legal and policy environment conducive to business development and a business and consumer population interested in adopting information and communications technology (ICT). What’s the common thread here? Trust in the systems that build a digital economy.

The safety and security of a nation’s systems – including the DNS – is a major factor in consumer and corporate trust. This is one of the reasons why CIRA called on Canadian governments and businesses to adopt IPv6 and DNSSEC in our Industry Canada submission. I would argue that the fact that the .CA top-level domain is considered one of the safest in the world bolsters consumer and business trust in the system. In fact, our own research (and MacAfee’s) proves it.

There’s good news, too, and lots of it.

Canadians are heavy users of the Internet. In 2009, half of Canadians surveyed in Statistics Canada’s Canadian Internet Use Survey reported using the Internet for shopping, up from 45 per cent in 2007. Two thirds (67 per cent) of Canadians use the Internet for banking, up from 63 per cent in 2007, a clear indicator of trust in the system. It’s interesting to note that in a 2008 survey of Canadian Internet users, 78 per cent of respondents stated that they prefer .CA domain names for online shopping. This is important for Canadian business; in 2007 Canadians placed almost $13 billion worth of orders online (more than half of which went to Canadian companies!).

We’re quickly approaching 1.5 million domain names registered, an incredible number when you realize that the Canadian market is relatively small and that we live next to the largest economic powerhouse in the world.  Canadians are demonstrating their trust in the system by registering .CA domain names. In fact, we’re growing at a rate that the big guys, like .COM, can’t match.  In spite of the recent economic downturn, the .CA TLD has experienced double digit growth – 16 per cent – whereas the generic top-level domains are experiencing a growth rate of a mere six per cent.

I don’t see Canada as falling behind. In fact, I think we’re on the cusp of great opportunity. As a nation, we’ve reached a fork in the road, so to speak. We just need to choose which road we’re going to take. Fortunately, we have two things working in our favour. First, we have a bit of a roadmap – we know what we have to do to get to the place we need to go – the Digital Economy consultation responses have done that for us. Second, we have some experience in these matters. In the early 1990s, we were faced with some pretty difficult choices. We made the right choices with regard to the traditional economy, and results were telling. Canada made it through one of the worst economic downturns in the history of the modern economy relatively unscathed and has become the financial envy of the world.

Moving down the right path this time will involve making the right decisions for the digital economy, and I think we’re well positioned to do just that. In fact, I see Canada as building the foundation on which we can build a strong and sustainable future. We may be doing it slower than some other nations, but I think we’re well positioned to take the right path.

Just a final note: Chris O’Neill, Google Canada’s Country Director will be speaking at CIRA’s AGM as part of a panel on September 21. Perhaps we can continue this discussion there!

What do you think? What are the factors that will enable Canada to become a digital leader?

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  • Zak Muscovitch

    This is an absolutely great article Byron!

    Many thanks.

  • Robin L. M. Cheung

    With Statistics Canada having been criticized in the news recently, it’s good to see some of the real applications that impact Canadian businesses and lives, such as the Canadian Internet Use Survey.

    With the importance that CIRA and other organizations place on Canadians’ concerns about Privacy and Security, however, I think the Stats Can survey is doing a disservice to this concern, almost to the point of being misleading.

    For example, if people take the time to examine the actual survey questions pertaining to Privacy and Security they will note that there are a total of five questions. Those who have taken statistics will recognize that the meaningful options of “Not at all concerned,” “Concerned,” and “Very concerned” imply ordinal data (there is a consistent directionality in the variables).

    Those of you who have taken some survey and research design might be concerned, however, that the “centre” choice (sometimes questionnaire-designers purposely give an even number of choices to avoid a dead centre choice) does not at all imply middle of the road. In fact, if a respondent is not absolutely free of concern about privacy (ie. reckless), then any other choice will enumerate them amongst the concerned. There are many of us who have “appropriate” caution when we conduct business online (ie. would not describe ourselves as either apathetic or reckless) but are also would not consciously be concerned about privacy and security under normal conditions (ie. would not describe ourselves as neurotic or paranoid).

    The 2008-2009 CIRA Annual Report demonstrates how significantly these data have impacted CIRA’s initiatives, ranging from DNSSEC to BIND10 to WHOIS privacy. But the primary survey to be cited employs only five questions that will inherently bias responses towards overestimating the amount and degree of concern Canadians have because of its pecular scale.

    Highly-qualified statisticians and researchers at Statistics Canada go to a lot of trouble trying fastidiously to apply accepted theory in questionnaire, survey, and sampling design according to traditional principles of maximizing face validity, content validity, criterion validity, Likert scale best practices, stratified random sampling, and making sure that the report reflects accurate interpretation under the correct circumstances in the proper contexts.

    But used out of context or with varying lower degrees of external validity (generalizability), all that effort can be wasted–or worse, reinforce the popular notion that statistics are somehow worse than both lies and d*mn lies

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