Industry Committee on April 30th, 2013

[The Chair, Conservative, David Sweet]

Thank you very much, Ms. Pohlmann.

Mr. Temple, for six minutes, please.

[Paul Temple, Senior Vice-President, Regulatory and Strategic Affairs, Pelmorex Media Inc.]

Good afternoon. My name is Paul Temple and I'm the senior vice-president of regulatory and strategic affairs at Pelmorex Media Inc.

When I was first asked to appear here, it was more along the lines of a case study, so I'm going to just basically tell you our story.

Pelmorex is a multiplatform, multimedia leader in weather and weather-related products, best known to Canadians through our Weather Network and MétéoMédia brands. We're a privately owned Canadian company with offices and broadcast facilities in Montreal and Oakville. We currently employ just under 500 employees in Canada.

In addition to a creative and talented on-air broadcasting team, Pelmorex employs a variety of skilled professionals, including meteorologists, software developers, and geographic information systems and location-based specialists. All these jobs are focused on serving Canadians.

Within the last year we have expanded domestically and internationally. In Canada, we launched the Travelers Network, an Internet-based service dedicated to helping users get from point A to point B quickly and efficiently. Internationally, we purchased El Tiempo, Spain's leading multi-platform weather-related information service. In the U.S. we purchased Beat the Traffic, a service which provides local traffic and commuter information.

While our roots have been in the conventional medium of analog television, Pelmorex was very quick to adopt digital technology and our company's growth in the past few years reflects that.

In 1995, during the very early days of the Internet, we launched our websites, theweathernetwork.com and meteomedia.com, one of the first few Canadian companies to do so. Within 10 years, we had launched additional websites specifically designed to be accessed by mobile devices as well as desktop applications to allow for instant access to weather information on PCs and Apple computers.

We were one of the first to launch a smart phone application specifically for BlackBerry in 2006. After that a rapid succession of applications was developed and launched for iPhone, Android, and Microsoft smart phones. In the space of seven years, we have designed and launched over 40 different smart phone and tablet applications and upgrades.

Today we're working on multiple applications designed for Internet-connected TVs. Almost all of this work is done internally within Pelmorex. Every one of our products was designed to provide Canadian consumers our services in their choice of English or French.

In 2010, we built and launched the national alert aggregation and dissemination system, which acts as Canada's backbone system to collect and distribute public safety and threat to life messages from Environment Canada as well as provincial and territorial emergency management officials. In the past 10 months, we have received, authenticated, and distributed Canada-wide almost 31,000 public safety messages.

Because we were an early adapter and embraced digital technology, today we are a leader in Canada in expanding beyond our borders. We will serve 2.4 billion webpages to Canadians this year.

In 2012, our popular iPhone and iPad weather applications were consistently ranked among the top three applications, beating companies like Facebook, Skype, Twitter, Shazam, and Pinterest.

In the digital world there are no borders. Today, foreign-based weather companies in Atlanta or Stockholm can just as easily serve Canadians from their websites, smart phones, and tablets. For this reason, we need to be the best at what we do, attract skilled employees, and invest to take advantage of digital technology.

An example might help. On our website, we were able to leverage our meteorological and forecasting models, geographical information systems, and web development skills to generate and provide weather forecasts for over 20,000 Canadian communities, with an additional 50,000 locations outside of Canada, a tenfold increase from where we were 10 years ago. Then we went one step further and today we provide Canadians with customized weather forecasts, on demand, for any postal code in Canada. We plan to take these same skills to our new acquisitions in Spain and the United States.

Apart from the obvious challenge of competing with every other weather information company in the world, we face the ongoing challenges of heavy demands for continual re-investment in technology. We need to be on every platform with the latest and greatest features.

To do that, we also need to attract skilled professionals: meteorologists, web and application developers, IT and GIS specialists. Strengthening government programs, such as the scientific research and experimental development tax incentive, as well as targeted programs to assist small and medium-sized companies to attract skilled workers would be beneficial.

I hope these comments are helpful, and I'm happy to answer your questions.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Temple.

Now we'll move on to Mr. Smith for six minutes, please.

[Scott Smith, Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce]

Good afternoon and thank you for this opportunity to address this committee again.

My name is Scott Smith. I'm the director of intellectual property and innovation policy at the Canadian Chamber of Commerce, an organization I think you're all familiar with.

When I was here before you on March 7, talking about the Internet and broadband in Canada, I indicated that Canadian business is not online. While I think that's still true, I did use a statistic in response to a question about how many businesses have websites, and you've heard here today that this number was probably inaccurate. It's one I shouldn't have used as it was somewhat outdated, and I apologize for that. The most recent number I have corresponds with what the CFIB suggested, 70% of businesses in Canada now have websites, and we're talking specifically about SMEs, but I still find that a surprisingly low number.

The good news is Canadians have access, as I alluded to at our last meeting, and are making use of that access. A Chamber of Commerce survey indicated that 96% of businesses surveyed used the Internet for business purposes and Canada already serves 98% of its population with broadband access. We have a study that estimates that by 2050, 86% of the Canadian population will live in urban centres, where the bulk of digital infrastructure investment is being made. It's clear that Canadian consumers are overwhelmingly digital adopters. A good demonstration of the digital adoption by consumers is the growth of social media. The Calgary Herald noted on April 29 that “One in three anglophone Canadians says not a single day goes by without [their] checking into their social media feeds”. Like the evolution of search engines on the Internet, social media has become a part of the way we live.

Where Canada continues to lag is in the adoption of e-commerce and mobile application technology by business. When it comes to looking at how businesses are using their websites, 27% accept online payments and 31% of businesses provided the ability for online ordering and tracking of goods. When it comes to the adoption of e-business solutions for business-to-business online transactions, the results were mixed: 42% of businesses surveyed said they did use an automated electronic data exchange system to send orders to suppliers, 51% are receiving and sending electronic invoices, 46% are able to receive orders from customers, 65% send or receive product information, 46% send payment instructions to financial institutions, and 45% send and receive data to and from governments, so, for example, they file their taxes online.

A recent study of G-20 countries by the Boston Consulting Group indicates that Canada is behind in the adoption of technology by business and in the size of our Internet economy. They conclude this gap will widen over the coming years and that Canada will further lag behind its global competitors. The study estimates that by 2016 the global Internet economy will reach $4.2 trillion, and that will largely pass Canada by. For example, online retail in Canada in 2010 was only 3.4% of total retail. That's only expected to reach 5.4%, or $33 billion, by 2016.

It's no secret that productivity is directly linked to innovation and the adoption of technology. Countries like the United States, Britain, Australia, and Denmark are pouring resources into the digital economy and in some cases creating federal ministries to oversee opportunities and challenges. Canada's productivity gap compared to the United States remains problematic. While the business community understands the government's current financial constraints, there are pioneering ways to work together to advance the digital economy strategy. More can be done to stimulate the adoption of information and communication technologies. Many countries have recognized that investments in e-commerce and ICT result in increased productivity and growth in the overall economy, and Canada needs to be a leader in this area. The recognition of the growing digital learning divide between large and small business is one example of how the Government of Canada can provide an essential service in connecting small business to online training through service portals.

For Canadians to continue to enjoy a high quality of life and standard of living, we must improve our productivity and competitiveness through innovation. The Conference Board of Canada has noted that “innovation is the ability to turn knowledge into new and improved goods and services” and that Canada's performance on innovation over the past three decades rates a consistent D. That's simply not good enough. According to the “Connectivity Scorecard” report, overseen by the then University of Calgary business school dean, Leonard Waverman, Canada ranks eighth in useful connectivity, reflecting both the world-class networks available to Canadians, but also deficiencies in the adoption and usage of broadband, and investment in ICTs generally across the economy.

Clearly, Canadian business needs the right incentives, such as continued improvements to the SR and ED program to keep investing in next-generation infrastructure, if Canada is to rise to the very top of the international rankings and most effectively lever broadband for competitive advantage. Further addressing the availability of broadband is not sufficient without a focus on the adoption and usage of ICT.

Across the economy, as a larger user of information technology, the government can play a larger role by mandating online interactions for its partners, for citizens, and for suppliers. Already, tax returns can be filed online, and like any large user, by undertaking a commitment to online commerce and the related technology, government can defray costs for suppliers and provide valuable incentive to adopt technology. To this end, the government should design initiatives to drive demand and adoption among key user groups, such as small and medium-size enterprises, and set milestones to measure success.

We think Canada can become a global innovation leader. With the right plan, Canada can dominate the digital economy. By building on our strengths and working together with the federal government, Canadian business will be in the right position to realize the benefits of the digital technologies and achieve a competitive advantage internationally.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Smith and all the witnesses, for your opening remarks.

Now we'll move to our rounds of questions, and it is seven minutes for the first round.

Mr. Braid, you have seven minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you very much, Mr. Chair.

Thank you to all of our witnesses for being here this afternoon and participating in this study.

I'll start with Ms. Pohlmann from the CFIB. We've heard the statistic from the chamber on the number of SMEs with own websites—70%, I believe, is the statistic. Is that statistic borne out by your own numbers? I'm looking at your page 4, and I see you've broken it down, but is that the bottom line, 70%?

[Corinne Pohlmann]

Yes, 70% of our members told us in our 2012 survey that they had a website. There, it is just broken out by size of firm, so you have a perspective on the smaller versus the larger firms.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay.

How has that increased over the last couple of years? Is there some progress being made there, at least?

[Corinne Pohlmann]

Yes, the last time we did this survey was in 2009, and at that point about 50% had a website, so it's gone up from 50% to 70% in three years. We see that as a fairly significant increase.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

It's certainly going in the right direction.

What's the reason for the continued gap, though? Over 90% of SMEs indicate they use the Internet, but only 70% of SMEs have their own website, so what's up with that?

[Corinne Pohlmann]

Again, it's going to be at the smaller end of the spectrum. It's when you look at those that are sole proprietors, with two to three employees. They may just be starting out as a business and they haven't really had the time to invest in a website yet. Or it could be that they simply don't feel that the website is a technology they're comfortable with.

It really can vary, and we're certainly encouraging more to try to get online and to do more e-commerce as well. I do think the trend line is going up. The bigger and more important statistic is that, for those businesses that have fewer than five employees, the number of firms that created a website over the last three years went up by 50%. That's where the biggest growth is, among those really small firms, and that's what we want to see. So I think the trend is going in the right direction.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Great.

I know your presentation included some recommendations generally, but specific to this issue of encouraging more SMEs to have their own website, to embrace digital technology themselves, and to potentially move beyond that to e-commerce, do you have any thoughts or recommendations on how all of us could encourage those outcomes?

[Corinne Pohlmann]

Yes, we believe a lot of the barriers in Canada have to do with cost. The cost of doing business is a reality, and to move to an online environment, sometimes there are some costs that you have to undertake, and that can include the cost of the technology itself and the cost of the software associated with it. It could include the cost of accessing high-speed or dependable networks. It can also be the cost of accepting electronic payments from customers, which is pretty high in Canada as well.

Those are all things that we think help discourage businesses, especially those businesses just starting out, from moving too quickly into this environment. So the first stage is getting them a presence on the web and using social media, and then as they grow they will hopefully expand and get more active in many of these digital environments.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

On page 11 of your presentation, you very clearly indicate the success of the government's initiative to implement the accelerated capital cost allowance for computers and software. It's had a particular impact. Your recommendation at the back suggests the continuation of that.

Here's your opportunity to make the case. Why was this initiative so important, so beneficial, and what would you suggest we do, moving forward?

[Corinne Pohlmann]

Sure.

Of course, this was a stimulus measure during 2009 and 2010. We've done a lot of surveying on what was and wasn't effective for our members throughout that period. Aside from the freeze on EI premiums, which was by far the most well liked, this was one of the most well accepted by small businesses because it did lower the cost of that investment.

In fact, we do a monthly economic indicator called the business barometer. In that business barometer, through that period, especially in late 2010, we saw quite an uptick in investment in computers and technology. We think this had a direct impact on encouraging some of them to make these investments. It is a significant hit for a small firm to take on all at once.

We believe it should be expanded and should perhaps be reintroduced. I know it's not a cheap measure; I think it was about $350 million in the budget. Perhaps it can be targeted more towards smaller firms, because I believe that measure was available to all firms, if we really wanted to target their investing more in these types of equipment.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Mr. Temple, congratulations on the success of your company. It's great to have the opportunity to learn more about that today.

You're a company that has clearly embraced digital technology. You have your own in-house web and application developers. What advice would you have for Canadian small business in terms of why and how they should be embracing this, as you clearly have?

[Paul Temple]

I want to make one point. I know it will probably sound like a five-minute commercial for The Weather Network and MétéoMédia, but the point is that getting a website is just the beginning. It's a constant process of change and investment after that. Yesterday's site has to be revised, it has to be updated. There are different tools you can use to provide information to consumers. smart phones are changing continually, and there are different sizes. You think you have it nailed and then Apple comes out with something and the dimensions of the screen are different. You have to go back and change the whole thing.

It's not just a process of my having a website and now I'm good to go. There's just a constant need to invest. I think that's an important point I wanted to get across.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Braid and Mr. Temple.

When riding a motorcycle, I access your site a lot. I just want to commend you as well.

I thought it was quite innovative that you redesigned your whole site, but then said that if users were comfortable with your old site, you left a button on there so that they could still go to the old site. That's pretty good.

I'm certain Mr. Thibeault as well enjoys the ability—

[Glenn Thibeault, NDP, Sudbury, ON]

I'm looking on there all the time.

[The Chair, Conservative, David Sweet]

—to access that weather and keep dry as well.

Ms. Leblanc, you have seven minutes.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you very much, Mr. Chair.

My thanks to our witnesses because their presentations were very interesting.

My first question goes to Ms. Pohlmann.

Could you please remind me how many members the Canadian Federation of Independent Business has?

[Corinne Pohlmann]

We have 109,000 members.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

So you cover a broad spectrum of Canadian small and medium-sized businesses.

My congratulations also for the surveys you conduct.

Statistics Canada also did some surveys in quite some depth in 2007. They produced a picture of the adoption of technologies by small and medium-sized businesses in 2007. It is now 2013. It seems that we are expecting something on this issue. Would you like Statistics Canada, a government agency, to help to paint some in-depth pictures of small and medium-sized businesses in terms of the adoption of technologies? Do you think that would be something really useful?

[Corinne Pohlmann]

The problem with Statistics Canada is that their data usually takes years to come out. The data they produce is excellent—we use it ourselves in many instances—but often it's two or three years before you finally see the information. I think when it comes to this particular type of information, that's almost too late.

We pride ourselves in the work that we do. We try to be very credible and to make sure that information is out more quickly. It's not to say that Statistics Canada shouldn't be doing this type of work themselves, but I'm just suggesting that's one of the limitations of depending on Statistics Canada.