Industry Committee on Oct. 19th, 2011

[The Chair, Conservative, David Sweet]

Ladies and gentlemen, welcome to the 8th meeting of the parliamentary Standing Committee on Industry, Science and Technology.

I want to do a little housekeeping before we introduce the witnesses and have them give their opening remarks. A request was made by Mr. Thibeault at the last meeting for data regarding the north, specifically Nunavut and the Northwest Territories. The data is unfortunately not available. We won't be able to share it with other members either. I only wanted to let the committee know that.

We'll now go to our witnesses. I'm going to introduce them in the order in which they will present. I think this will be the first time I've broken from the order on the agenda. It's simply because we have somebody by video conference. It always means they feel a bit detached as it is. So I will introduce the witnesses in the order in which they'll present.

First, it will be Michael Deturbide, professor and associate dean at the Schulich School of Law at Dalhousie University.

Next, from the Canadian Chamber of Commerce, we have the Honourable Perrin Beatty, president and chief executive officer; and Morgan Elliott, chair of the innovation committee.

From the Information Technology Association of Canada, we have Karna Gupta, president and chief executive officer.

From the Business Development Bank of Canada, we have Michel Bergeron, vice-president of corporate relations; and Pamela Darragh, assistant vice-president, information and communications technology solutions.

From the Greater Kitchener-Waterloo Chamber of Commerce, we have Ian McLean, president and chief executive officer.

For the organizations here that have multiple people, I assume that you've been informed that you'll have six minutes for opening remarks. If you're going to have both people give opening remarks, you'll need to share that six minutes.

Without any further ado, I'll go to Michael Deturbide, who is joining us by video conference, and let him begin with his opening remarks.

[Michael Deturbide, Professor and Associate Dean, Academic, Schulich School of Law, Dalhousie University, As an Individual]

Thank you.

My comments are going to focus on some legal aspects of e-commerce, in particular, privacy and security issues that have been, I think, impediments to both business and online consumers.

My message, in a nutshell, is that business needs to get its act together with respect to privacy and security of data. You don't have to look too far, I think, so see why I say that.

Now, some of what I'm about to say, I know, has already been heard to some extent by Industry Canada in earlier consultations, but I think the message merits reinforcement because the problem still exists and Bill C-12, of course, is not yet law.

Back in September of 2004, a report of the Canadian e-Business Initiative identified privacy and security practices as integral parts of a successful e-business adoption strategy. That report came out at a time when Canada implemented the Personal Information Protection and Electronic Documents Act, otherwise known as PIPEDA, which legislated a model code for the protection of personal information. An element of that code is that personal information must be protected by security safeguards appropriate to the sensitivity of the information gathered.

Seven years later, where are we? Well, we continue to hear about large-scale data breaches, and small and medium size businesses in particular are unsure about what they need to do to comply with the privacy legislation—and I'll briefly mention some studies in relation that—and consumers may be excused for wondering if their personal information is being protected at all, given some of the media reports we hear.

In almost every poll or study taken on the barriers to e-commerce—and I've looked at quite a few of these online over the past few days—the principal concerns raised have been privacy and security of personal information. Consumers want some assurance that their information is going to be protected. Businesses want that assurance as well, and they want to know whether they're meeting adequate standards to protect that information and to protect themselves against possible liability.

Unfortunately, there's not been a shortage of significant data breaches over the past few years. According the Privacy Commissioner of Canada, too many data breaches are occurring because companies have ignored some of the most basic steps to protect personal information, including a failure to implement the most basic security measures. Sometimes breaches are reported; sometimes they're not reported at all; sometimes they're reported only after the business gets an indication that the data may be being used for illegal or unscrupulous purposes. Despite the increased frequency of security breaches, a recent Environics Research Group study of small and medium size businesses indicates that most are complacent about their company's IT safeguards and underestimate the consequences of a security breach.

I just want to share very briefly some of those findings with you, if I may. The small and medium size businesses surveyed were divided about the reasons for their complacency. Most, however, acknowledged that they were not taking adequate security measures or that their existing software protection was not adequate. Many were ignorant of cloud computing. The limited number of SMEs that had adopted cloud computing was driven by their desire to spend less money on IT infrastructure, and they were not confident at all that the provider was ensuring any safety of the information they provided.

Believe it or not, people and organizations still care about privacy and security of information. One estimate is that over 35% of Internet users will not give their credit card information online because of security concerns. That's a large chunk of people who are just not engaging in e-commerce and who could be.

It's also interesting to note that a 2011 study indicated that online consumers, largely thought to be motivated primarily by savings, are often willing to pay a premium for purchases from online vendors who have clear protective privacy and security policies. I think this illustrates a couple of things. First, even in the Facebook era, when personal information is willingly disclosed and when some industry executives have declared privacy to be dead, privacy and security are still identified as major factors in a consumer's decision to do business online. And second, those businesses that do take privacy and security seriously can profit from it.

Our experience shows that sometimes legislative intervention is required to ensure adequate data protection mechanisms are in place, otherwise there may be little incentive to remedy the problem. The downside of that is that any attempt at legislative intervention is sometimes reflexively labelled as costly regulation by some in the business community.

For example, one of the issues to be examined is red tape, which creates barriers to growth. The question is whether regulation is red tape or whether it's actually doing something important.

In the current situation, it's been argued that mandatory disclosure of security breaches may cause unnecessary panic in situations where the chance of the fraudulent use of compromised data is minuscule. If you get too many notifications, that then leads to what one writer calls notification desensitization. What's missing from this rationale is that the aim is to encourage business to have adequate security measures in place so that the frequency of data breaches diminishes. If that happens, there can be no oversensitization, because the event is infrequent. In any case, whatever argument is raised against notification, the priority has to be the giving of notice by the custodian of the information to those affected, so that they can take preventative measures.

I want to turn briefly to Bill C-12, currently before the House of Commons. That bill will require an organization to report to the Privacy Commissioner any material breach of security safeguards involving personal information under its control. Factors related to materiality will include the sensitivity of the information and the number of individuals affected. The organization will also be required to notify an individual of the breach if it's reasonable to believe that the breach creates a real risk of significant harm.

I don't mean to go into any great detail on the mechanics of that legislation, but it seems to me that it at least strikes somewhat of a balance—

[The Chair, Conservative, David Sweet]

Mr. Deturbide, I'm going to have to cut you off there. I'm giving you some grace. We're way over time for your opening remarks.

[Michael Deturbide]

I'm sorry about that.

[The Chair, Conservative, David Sweet]

It's okay. You might be able to squeeze in a little more later.

Thank you for those remarks.

Now we'll go to the Honourable Perrin Beatty for his opening remarks.

[Perrin Beatty, President and Chief Executive Officer, Canadian Chamber of Commerce]

Thank you very much, Mr. Chair and members of the committee.

I am very pleased to be appearing before the committee today as you study the adoption of e-business solutions in Canada. Appearing with me today is Morgan Elliot from Research In Motion, who also serves as the chair of the Canadian Chamber's innovation committee. I am very pleased as well to be on the same panel with Ian McLean from the Kitchener-Waterloo Chamber of Commerce.

I will make brief comments. Morgan is here to answer more detailed questions you may have.

Mr. Chairman, for many years now, the Canadian Chamber of Commerce has been a proponent of having all businesses, but especially smaller businesses, adopt e-business solutions that will enable them to thrive not just domestically but globally as well. Just this year, we partnered with Google on the launch of “Get your business online”, a program that targets small and medium size businesses that lag in the adoption of e-commerce solutions. This initiative offered smaller businesses the opportunity of a free website and domain name for a year, with the intention of growing e-commerce adoption among Canadian businesses.

In 2010, the Canadian Chamber released a report entitled Powering up the Network. It was a report on small business use of e-business solutions in Canada. We surveyed our members, the majority of whom are small businesses, to gauge how they are using ICTs and what they could be doing better. We were pleased that almost 1,000 businesses from across the country participated. Of the respondents, 66% had between 1 and 10 employees. Some highlights of the report include, first, that 96% of companies have a website for business purposes; only 27% of respondents were able to accept online payments; only 31% of businesses provided the opportunity for online ordering and tracking of goods; only 51% are sending and receiving electronic invoices; only 45% send and receive data to and from governments, such as tax information. And regarding cyber-security matters, most had anti-virus protection, but 19% said they didn't have a secure server, and 42% did not back up their data off-site.

Clearly, there are many improvements that need to be made. I have brought copies of the report with me today for you to review. Many other countries around the world are outpacing Canada in ICT and e-commerce adoption, and we need to play catch-up or risk falling further behind. The United States, Australia, Denmark, and South Korea are a few of the nations that have invested very heavily in ICT, realizing the potential return for businesses and citizens.

The Canadian Chamber has pushed for government leadership in the area of e-commerce and ICT for a number of years, given that it is a proven drivers of productivity. We have been working with Industry Canada as they continue to develop the digital economy strategy. In these economic times, we need to put a greater focus on ICT innovation and the knowledge-based economy.

While the government has made some commitments for broadband infrastructure over the last couple of years, it is clear that more is needed because a connected country is a competitive country. The public and private sectors must continue to work cooperatively to create an environment of innovation and to establish a solid, viable strategy for the Internet economy.

Just last month, the Canadian Chamber released a report on engaging remote communities in Canada. As part of that report, the Chamber discussed the issue and challenges of broadband in the north. As we all saw recently when a satellite went out and knocked out vital communications to Nunavut, having a good, reliable connection to broadband in the north is a critical necessity.

Canada continues to be a world leader in many regards, including energy, natural resources, and the financial services sector. While the availability of broadband Internet access across Canada remains high, we've slipped internationally in ensuring that our digital infrastructure is world class. As a result, we put at risk our ability to attract and keep jobs in the global knowledge-based economy. ICT infrastructure is now a 21st century pillar. It must be given at least as high a priority as traditional infrastructure. We can't afford to be left behind.

Where do we go from here? Canada needs to create a true national ICT strategy in collaboration with business and academia. The federal government should accelerate investment in next-generation networks and take a more active role to encourage our youth to get engaged in ICT and entrepreneurship in innovative technologies. We also recommend that the federal government continues to work with the private sector to accelerate e-business adoption among SMEs and that the government create a more favourable investment climate that encourages foreign and domestic investment in Canadian e-business opportunities. Without proper investment and dedication to ICT adoption, innovation, and the protection of intellectual property rights, Canada's productivity will be limited and other nations will surpass us as a preferred destination for business investment.

Mr. Chairman, it's time for Canada to take back its proper place as a world leader in innovation and to invest in our future economic prosperity in the digital economy. I hope the hearings of this committee will help us to move in that direction.

Thank you, Mr. Chairman.

I hope that the hearings of this committee will help us to move in that direction.

Thank you, Mr. Chairman.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Beatty.

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

[Karna Gupta, President and Chief Executive Officer, Information Technology Association of Canada]

Thank you, Mr. Chairman, for having ITAC participate and comment on your study on e-commerce in Canada.

ITAC represents industries in Canada. Many of our members are large companies as well as multinationals, but the vast majority are small and medium size companies in Canada—well over a few hundred.

Canadians are already served with an impressive infrastructure in support of e-commerce activities. They are a digital elite in Internet adoption, broadband penetration, online banking, and social networking. Canada's growth in these areas can be attributed to both private and public sector initiatives, including development and support of digital and broadband networks to develop high-speed access throughout the country. However, with respect to e-commerce and ICT adoption, there are several issues that we need to be aware of.

Despite an increasingly solid infrastructure, Canadian businesses' use of e-commerce and the broad use of ICT remain very low. Canadian technology investment rates are still alarmingly low; we are spending about 60¢ to their dollar in reinvestment. ITAC believes that the effective use of e-commerce and of the entire ICT tool kit increases business productivity across the economy, particularly for small and medium size businesses.

It is important to note that in 2004, an old survey showed that when small companies used online business, the average gain measured over a year was 8% across all their operations, marketing, and online purchasing.

At the highest level, the recommendations made by ITAC on behalf of our constituents concerning the digital economy strategy for Canada outline many items.

More specifically, concerning talent we need to ensure that our young are educated and attracted to ICT as a career choice. We need to get Canada into a broad leadership position within the next generation of broadband by 2017, and to avoid the digital divide of rural versus urban. Government programs can help identify these gaps and close them for greater e-commerce use. Finally, a national ICT strategy will have a direct positive impact on e-commerce.

We also believe that the clear and persistent communication from government and industry leaders that business needs to step up its use of technology is critical to achieving increased productivity and global competitiveness.

The opportunity for increased e-commerce is significant in Canada, and much of it needs to be fulfilled by small and medium size businesses. Canada has more than two million small and medium size businesses. They represent more than 40% of ICT spending and 45% of Canada's GDP. If SMEs go digital and adopt e-commerce technologies, there will be a huge impact on Canada's prosperity, with the ability to access new markets and increase sales and revenues. B2B companies can use the Internet for sales leads, to announce calls, to tender, and to offer products for sale. Effective B2B commerce includes lower costs for selecting suppliers, establishing prices, ordering, and finalizing transactions.

An international review of public initiatives related to the slowing down of e-commerce in several developing countries showed that in Australia, Korea, and the EU as a whole, they needed to acknowledge it and that they have started to take some actions in that direction. A lack of awareness at both the business and the consumer level contributes to lower usage. Government can be a catalyst in improving adoption, both by increased communication and via incentives.

As well, mobility is a critical component of effective e-commerce. We should not only think about buying music and apps on devices. Instead, we should think about doing all transactions on mobile devices; for example, the transfer of funds, the buying of groceries, engaging in everyday trade, and creating a digital wallet.

Finally, ITAC encourages all innovations that support further acceleration of e-commerce. Last year we created a national Ingenious Awards program in which two of the nineteen finalists were e-commerce-based. One was TinyEYE Therapy Services out of Saskatoon. The other one was specific to government, the website buyandsell.gc.ca.

In conclusion, I'd like to reinforce that ITAC wants to participate actively in providing assistance for the move toward increased use of e-commerce in Canada, as it will ultimately drive greater adoption of ICT across the economy and create a net benefit for the Canadian economy.

Thank you, Mr. Chairman.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Gupta.

We'll now move to Mr. Bergeron for six minutes.

[Michel Bergeron, Vice-President, Corporate Relations, Business Development Bank of Canada]

Good afternoon.

Thank you, members of the committee, for inviting us to your hearings on e-commerce. I'm pleased to share with you today what we see happening in the marketplace and then to describe what we are doing to help increase the use of e-commerce by SMEs.

For those of you who are meeting us for the first time, I'd like to explain briefly how BDC helps Canadian entrepreneurs. At BDC we know the market through our relationship with 29,000 SMEs. We offer financing, consulting services, and venture capital from more than 100 business centres across the country.

In 2009, we were asked by the Government of Canada to find ways to help increase the adoption of information and communications technology (ICT for short) by SMEs. As a result, we have some data and information that may be of interest to the committee.

I would like to begin with what I believe is helpful context for conversations about e-commerce. As you have no doubt heard, Canada's economy is less productive than those of its peers. There are many reasons for this, but when experts try to explain why this is so, most of them point to weak business innovation. The solution is for all businesses to become more innovative.

And when we say innovation, we don't limit ourselves to the usual definition of high-tech firms backed by venture capital who are developing new and radically different products like the PlayBook. All firms can be innovators.

We define innovation broadly and comprehensively. It starts with incremental improvements to existing products and services and takes a variety of forms, either new products, new services, new processes, new business models. The breadth of potential innovation is worth repeating, encompassing, again, improved products, services, processes, and business models. Investments in ICT, which includes e-commerce, are a kind of business innovation.

As a final note of context, when it comes to ICT, Canada has room to improve. Our businesses invest $2,400 less per employee per year in computers, software, and training than their American counterparts do. This is a gap that we need to close.

By happy coincidence, I have new data, freshly released this morning, on the use of ICT by Canadian SMEs. The news is not all bad from a survey of 2,000 Canadian entrepreneurs conducted by Montreal's CEFRIO organization, a think tank group on IT adoption.

Allow me to share three broad findings. One, the general trend line is high: almost all Canadian entrepreneurs are using the Internet. Two, when we talk about using ICT, it appears that size helps. So size does matter in terms of adoption. Three, entrepreneurs are clear about what the barriers are.

First is the trend, and here a striking 93% of Canadian SMEs are connected to the Internet. They do not use it for everything, though. Most of the use they make of it, about 70% to 75%, is for banking and buying provisions. Far fewer use it to sell their goods and services online; in fact, only 18% of those surveyed did so. Even fewer, 15%, use it for marketing purposes.

Regarding scale, there are discernible differences between small firms and medium size firms. Of firms with between 5 and 99 employees, 17% use ICT to sell goods and services online. But if we look at firms that have between 100 and 500 employees—what experts categorize as medium size firms—this rate jumps to 30%.

Regarding the challenge, entrepreneurs point to lots of obstacles to investing in ICT for their firms, but two dominate. The most-often cited is insufficient access to financing. Nearly a quarter of all entrepreneurs point to this. The second most-often cited barrier is the shortage of qualified or specialized people. One in five cites this.

To recap, then, most firms are online, but more could use it for selling and marketing. Two, size helps, as medium size firms are more likely to use ICT than smaller ones. Finally, the most important barrier is insufficient access to financing.

I would now like to turn away from statistics to tell you the story of one of our clients. His name is Larry Cox, and he is from Mississauga. I think his story is quite instructive.

Larry's firm is the Polaris Transportation Group. It's a traditional trucking company. The problem was that Polaris had outgrown its computer systems. Also, customers had begun to demand things such as real-time tracking of goods, which Polaris was not able to do. The choice was clear: either stick to trucking or become a logistics company. So Larry made a decision. He got advice from an IT expert referred to him by BDC and bought a new computer system tailored to Polaris's needs. The result was greater efficiency and a very substantial increase in sales.

As you can imagine, Larry is smiling these days. He says: "I have gone from fear and trepidation about technology to embracing it, and I'm very glad I did." It was difficult, but the right thing to do. It transformed his business and made a small part of Canada a little more productive.

It is with entrepreneurs like Larry in mind that BDC announced two days ago that we have earmarked $200 million for loans to help entrepreneurs invest in ICT. We have also launched a series of new consulting services aimed at helping entrepreneurs identify, plan, and implement their technology investments. Many of our tools and consulting services are available online at bdc.ca. These include free assessment tools to help entrepreneurs take stock as to where they are in their use of lCT in general, and the Internet in particular.

We can't solve the problem alone, but we can offer funds and expert advice to help entrepreneurs buy and use the hardware and software their firms need. For ICT financing, we'll speed up and simplify the processing of applications. And because using short-term financing can reduce a firm's working capital, we'll allow entrepreneurs to pay back the loans over four years.

BDC sees a world of opportunity in defining innovation broadly and comprehensively. We see investments in ICT as an important kind of innovation.

Canadian entrepreneurs are using the Internet but not to its full advantage. Given the fact that most SMEs have fewer than 20 employees, they are the firms that need help investing in ICT. By the way, these businesses account for 80% of firms in Canada.

Finally and fundamentally, we believe that ambitious, innovative entrepreneurs like Larry Cox are critical to building a more productive, competitive, and prosperous economy. Simply put, Canada needs more Larrys. In fact, we need tens of thousands more. Our aim is to find them, support them with financing and advice, and hold them up as examples for others to follow.

Thank you very much for the invitation.

My colleague, Pam, and I would be delighted to take questions.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Bergeron.

Mr. McLean, you have six minutes.

[Ian McLean, President and Chief Executive Officer, Greater Kitchener Waterloo Chamber of Commerce]

Thank you.

On behalf of the Greater Kitchener Waterloo Chamber of Commerce, I'd like to thank the committee for the opportunity to speak this afternoon about this important topic. I'm honoured to join the Honourable Perrin Beatty from the Canadian Chamber of Commerce and Morgan Elliott from Research In Motion, a great chamber supporter of ours.

The Greater Kitchener Waterloo Chamber of Commerce has a long and storied history going back 125 years to the creation of the Berlin Board of Trade. Over the years, we have grown, particularly after merging with the Waterloo chamber in 1992 and the Woolwich chamber in 2001. The Greater KW Chamber of Commerce is among the largest chambers in the country.

In preparing for this presentation I have consulted extensively with my colleague Greg Durocher from the Cambridge Chamber of Commerce. He's president and CEO of that chamber. Together our two chambers represent nearly 4,000 member companies and organizations that hold an employee footprint of over 100,000 individuals within the Waterloo region.

One of the hallmarks of our chamber has been the ability of our business community to adapt from its origins as an agricultural-based economy in the 19th century and to evolve over the years into a manufacturing capital, then an insurance capital, and now an education centre with two world-class universities and a community college, and also a technology hub. The entrepreneurial spirit and sense of collaboration in our business community has been integral to our success in business and as a community.

While our membership in the chamber ranges from sole proprietors to worldwide corporate leaders like Research in Motion that employ thousands, our membership base is primarily small business. When I say small business, I'm talking about companies with 20 or fewer employees, as we've just heard. They are the backbone of our chamber.

Today I'll be focusing on several areas of interest that our local businesses shared with me and the difficulties they face on a daily basis. Our members understand that they need to innovate not only to stay competitive locally but also to expand their reach in the global marketplace.

There are four main issues I would like to focus on today: one, more competitive options and pricing in telecommunications and banking; two, cost-effective data transfer; three, improved safeguards to retain valuable intellectual property; and four, minimizing red tape and bureaucracy. We believe these four key factors need to be addressed in order to increase the adoption of e-commerce more broadly not only among our members that do business in the heart of Canada's technology triangle of Kitchener-Waterloo-Cambridge, but also right across the country.

Our financial institutions and communications leaders have strong partnerships with both our local chamber and the Canadian Chamber of Commerce. They play a strong role as partners, but changes to increase competition in banking and communication sectors are essential to reduce pricing structures for these sectors, which are critical to small business investment.

New technologies being developed within the e-commerce sector around the world and within Canada can offer choice to businesses and consumers, and increase the usage of e-commerce offerings. Growing mobile payment systems are examples of these. These technologies can make it easier for small retail businesses to become technologically nimble in serving their customers and to focus on growth by lowering traditionally high financial costs. These emerging e-commerce options should be encouraged and nurtured in order to help small businesses find better ways of being productive, innovative, and successful.

Recent reductions in corporate tax rates have been a welcome development for business. But small businesses face other challenges related to the costs of e-commerce, including the high cost of data transfer. Canada is one of the world's most expensive countries with respect to data transfer costs. These high costs have potentially been stifling the number of start-ups and up-and-coming business and media technology companies in Canada.

A very well-known start-up of the past three years that has a purely media focus is the Swedish-based Spotify, an emerging global player in paid music streaming, with over 10 million paying users in just two years. After they were founded, they moved to the U.K., the U.S., France, Spain, the Netherlands, and a range of other nations, but not Canada. Their services are not even available in Canada due to current laws—but most of all because our data uploading speeds and costs just aren't effective for potential consumers. The cost is too high; the service is too weak; and the regulatory hoops are too numerous. This is a real problem to our seeing growth from a key e-commerce industry that's growing in other parts of the world. As a nation, Canadians consumes more online content per capita than any nation in the world, yet we risk being left behind in e-commerce media development, which is becoming an emerging sector for new technology start-ups around the world.

In this ever-changing business environment, legal and regulatory frameworks also need be agile and be refreshed frequently to keep up with the pace of innovation and change that businesses deal with on a day-to-day basis. As the committee looks at this issue, it would be wise to be cautious when it hears calls for new regulations of these technologies and to consider the reason. Any progress in technology, from the printing press to Kodak cameras, has been a subject of concern, ultimately because it represented change.

We share the view that the Internet and digital economy are key drivers of growth and productivity in Canada's economy. Some argue that the success in this area may largely be a result of fewer regulations in this area, as opposed to our creating more regulation. While regulation may be necessary, it should be clear, understandable, and fair, especially for small businesses.

We also applaud the government's initiative to streamline and reduce red tape, and we look forward to Minister Bernier's report and recommendations. The Jenkins panel report made some interesting recommendations. I look forward to better understanding all of them. One of the key points was the need to simplify the SR and ED program for small and medium size business by narrowing the base for tax credits. We hope that report will be thoroughly reviewed and considered.

For many businesses the SR and ED tax credit has been important and has encouraged research and development within new online industries in Canada, and more broadly as well. However, the administration of this SR and ED tax credit can be difficult for small business owners. These types of programs are important but need to be made easier to understand and more transparent, so that a small or medium size business can apply and receive tax credits and the company can focus on developing its cutting-edge product and spend less time on filling out complicated paperwork and forms.

Thank you for the opportunity to appear today. We represent almost 4,000 employers who are truly small business. The Greater KW Chamber and the Cambridge Chamber of Commerce believe that in these challenging economic times, every level of government needs to find ways to support the small business sector, because it is the foundation and engine of our economy. Because e-commerce is such an important factor in today's economy and for our future economic growth, this review is both timely and welcome.

Thank you.

[The Chair, Conservative, David Sweet]

Thank you, Mr. McLean.

Now we're going to move to our first round of questions. I would remind members that we have a witness who is with us by teleconference. Sometimes when they're not present with us physically, we overlook them. I wanted to remind you of that.

I notice that our first questioner is armed with his BlackBerry Playbook. So we'll go to Mr. Braid.

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

Yes, indeed, and it's no coincidence either.

Thank you, Mr. Chair, and my thanks to all of our panellists for being here today. We have a strong panel, a star-studded, I would say.

Mr. Beatty, welcome back to our committee. In your opening remarks, you mentioned that in some other countries, like Denmark, the U.K., and Australia, there are some best practices with respect to ICT investment. Could you cite any examples of other international best practices that Canada should seriously consider?

[Perrin Beatty]

Especially as you have your BlackBerry Playbook here, let me defer to Mr. Elliott from Research in Motion. They have activities all over the world and have been the beneficiaries of actions that have been taken by other countries to put in place an infrastructure that's more effective.

[Morgan Elliott, Chair, Innovation Committee, Canadian Chamber of Commerce]

I think one of the greatest examples you referenced was Australia. Its government made a clear decision to do a country-wide rollout of broadband and to support it financially. That was done to provide the critical infrastructure that forms the background of e-commerce and innovative technologies.

Australia has the same challenges as Canada, with its geography and its widely spread population. Broadband is not an inexpensive proposition, but there are a number of people throughout the globe who feel it's just as important as electricity, just as important as roads for transportation. They believe these broadband networks are becoming the transportation of the future.

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

Thank you.

Mr. Beatty, in your remarks you spoke about the importance of Canada's enhancing our protection of IP. Could you explain to the committee, one, why that is important; and two, what initiatives the federal government could take to help with that objective?

[Perrin Beatty]

Mr. Chairman, if we want to be an innovative country and to attract investment from around the world and encourage investment from Canada itself, we have to recognize that, to a very great extent, the currency in the global economy today is in fact intellectual property. It is every bit as valuable as any tangible property that businesses might have. We have allowed ourselves to fall legislatively behind other countries in the rest of the world. We have fallen behind in the international obligations that we've taken on, and we've become less attractive than other jurisdictions as a place to invest.

The government is undertaking an important initiative now with regard to copyright reform. This will be very helpful. For example, if you look at the production of video games in Canada, it's an industry that has tremendous potential and in which a good deal of work is being done with young Canadians to train them to operate in the field, including at the university I am chancellor of, the University of Ontario Institute of Technology. There's tremendous potential there, but you want to make sure that when people develop intellectual property, they have protection and it isn't simply taken from them.

Similarly, we need to step up our activities in term of patent protection to ensure that entrepreneurs who invest very heavily in developing new technologies have better opportunities to get the return to pay back the investment they've made.

There's the whole area of counterfeit as well. We need to do a much better job in terms of manning the borders to stop people from bringing counterfeit products into Canada. Examples include everything from counterfeit heart medicine, which can literally put people's lives in jeopardy, to the brakes on your car, to jet aircraft parts. We need to be more vigilant and to arm and equip our border authorities with the authority they need to be able to make seizures of counterfeit and contraband coming into Canada.

So there's a range of areas where we can act. We have also had recommendations in Canada—and I know Mr. Morgan would be glad to elaborate on that as well, because it's very important to Research In Motion—to operate in the area of rights and rents and how we can make improvements in protecting innovative companies like Research In Motion.

[Morgan Elliott]

Yes, certainly the area of patents is definitely the next step after copyright. Copyright was very important for a number of industries. A lot of people don't realize that software is protected by copyright too, but patents are absolutely essential. I think people are starting to realize this with the recent sale of Nortel's patents for $4.5 billion and the purchase of Motorola Mobility's patent portfolio for $12.5 billion.

A lot of countries and areas are using patent protection as non-tariff trade barriers, to be quite frank, and you're seeing a lot of this in the smart phone industry, which, despite its pervasiveness in North America, is really an industry in its infancy. You're seeing a lot of these court battles in international places where competitors try to shut each other out of different markets, based solely on patent protection. So it's definitely the next frontier, so to speak, in terms of international trade.

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

Mr. McLean, thank you for being here and for representing the Greater Kitchener Waterloo Chamber of Commerce. In your remarks you mentioned the Jenkins report, which was, of course, tabled on Monday. Could you elaborate on what you see in that report that you like, and what you think will be important to supporting the innovation economy?

[Ian McLean]

Thank you for the question.

I haven't read it in tremendous detail, but here I would refer to the whole notion of simplifying the process and allowing more companies that want to take the opportunity to invest, that want to reach out into global markets, and that want to use all the technology and ICT to create new markets and be innovative. It's widely used, and there are those who understand it—and Morgan is more familiar with many of the companies using that—but there are also small companies who are not familiar with how to do it.

In my world, many small businesses have four, five, or six employees—those with 20 employees are large companies—and don't have the capacity to understand the regulations, the paperwork, or the framework. They get sidetracked and don't take advantage of this program. So to simplify it, I'm creating clearly understood rules and guidelines and then promoting the program as something they should be taking advantage of so they can invest in their own business and can become more competitive locally, nationally, and internationally.

A common theme we hear is that people don't understand government regulation and red tape.

[The Chair, Conservative, David Sweet]

That's all the time we have.

Thank you very much, Mr. McLean.

Mr. Julian, you have seven minutes.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thanks, Mr. Chair.

Thanks to our witnesses. This is important testimony.

I'd like to start with Mr. Deturbide and Mr. McLean. We had testimony on Monday from Dr. Jacques St-Amant, who talked about the legislation in place in other countries that are ahead of Canada in e-commerce. Mr. St-Amant cited Australia, for example, and the United States.

Two aspects of that are the administrative charges and the credit card charges that many businesses are facing through e-commerce. I'd ask Mr. McLean whether he would favour the type of legislative initiative that would cap, as they have in Australia, the charges that go to businesses.

Mr. Deturbide has raised concerns about security and data security. Does he see legislative frameworks around the world that would be useful for Canada to adopt?

I'd ask you both to be fairly brief, if you could.

[Ian McLean]

I'll start off.

We hear in our community about new options for online commerce, such as Google Wallet. The word on the street, according to some of the rumours, is that they'd like to provide free or low-cost services in that regard.

I guess our hope is that in exploring this, there wouldn't be anything in the regulatory or legislative framework that would prevent that. That would encourage more choice in the marketplace for small business in particular, because one of the barriers for small business can be the cost of banking fees and so on.

So we are open to seeing, and would look to, anything that would create more competition and choice for consumers and business.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Deturbide.