Thank you for the opportunity to be here. With me is Monique Moreau, who will assist with the questions at the end.
CFIB is a not-for-profit, non-partisan organization that represents more than 109,000 small and medium-sized businesses across Canada. Our members represent all sectors of the economy and are found in every region of the country.
There's no doubt that digital technology is of growing importance to small businesses across Canada. One of the greatest benefits has been the explosion of the Internet, as it helps to showcase small businesses' products or services as effectively as those of their larger competitors and attract clients from around the world. But there are barriers to their ability to effectively adopt digital technologies that we'd like to raise today.
You should have a slide deck presentation in front of you, which I'd like to walk you through over the next few minutes.
I believe there are two aspects to adopting digital technology. The first is how easily small businesses are able to access the infrastructure needed to effectively use digital technology, and then once they have access, how easily they are able to use that technology in growing their business.
As you can see on slide 2, high-speed Internet is the most widely used form of telecommunication technology by small firms, and will be the focus of our presentation.
As you can see on slide 3, almost two-thirds of small businesses are using the Internet to make purchases online, and almost one-third use online directories or social media to market their business. In fact, all aspects of Internet use, in our 2012 survey, increased substantially since 2009.
But the most impressive growth has been in the number of small firms that have a website. In 2009 about half of small businesses had a website. By 2012 more than 70% did, a 40% increase in just three years. As you would expect, the larger the business, the more likely it is to have a website, as you can see on slide 4. So while virtually all firms with more than 100 employees now have a website, almost 60% of firms with fewer than five employees have one, which is 50% higher than it was in 2009.
As you can see on slide 5, besides using the website to provide information about their business, almost half are actively updating their website on a regular basis, and 21% are actually selling online, which is more than double the 8% that were selling online in 2009. But to many this growth is still not fast enough.
We believe that small businesses do want to embrace digital technology, but there are some significant barriers mostly related to cost.
First, smaller firms want to be able to access high-quality, high-speed Internet services, but just as important is that these services must be made available at a reasonable cost. The best way for these types of costs to remain reasonable is for there to be proper competition in the marketplace.
When they were asked from whom they purchase their Internet services, there seem to be a fairly healthy number of Internet service providers to small businesses across Canada, as you can see on slide 6.
However, when you look at the use of ISPs by region, you quickly realize that access to high-speed Internet for smaller firms is dominated by one or two players in each region, usually the incumbent telephone or cable supplier from that region. With the exception of Quebec and Ontario, other suppliers are not as prevalent, as you can see on slide 7.
In addition, many of these firms charge small business owners more than they charge residents for essentially the same high-speed Internet services, despite evidence that residents tend to be bigger consumers of high-speed Internet than small businesses are. In fact, almost half of those surveyed in 2012 were dissatisfied with the competitive options available in their area, as you can see on slide 8. Of even greater concern is that 55% of rural-based small businesses were dissatisfied with their competitive options in their area.
When we look at data based on whether small businesses are located in an urban or rural environment, 42% of those in the rural areas stated they had only one choice in their area, as you can see on slide 9. Clearly the competitive options for Internet service provider services in many rural parts of Canada remain extremely limited.
Another barrier relates to how they use digital technology to grow their business. Many have said that small businesses are slower in selling their products online. Part of this stems from the fact that to sell online, you may have to think differently about how you run your business, for example, how you manage your inventory, how you accept payments, and how you interact with your customers. However, we also believe that much of this has to do with the cost of accepting electronic payments.
In a study we did for the 2011 payments review, we found the most important obstacle to accepting electronic payments was that the cost of implementing the system did not justify the investment, as you can see on slide 10. In particular, it's the cost associated with processing electronic payments that discourages many from moving in this direction. With the recent introduction of mobile payments in Canada, which will add new players to the payments industry, there's even greater fear that these costs will go up even further.
Another factor for many is concerns with online security, as they feel there's a potential risk of losing customer or business data or having sensitive personal or financial information stolen, for which they become liable. This is especially worrisome for smaller firms that cannot always afford to protect their systems with more sophisticated software.
Finally, another cost factor that discourages many smaller firms from adopting digital technology is the cost of the hardware and software needed to properly take advantage of the latest advances. In 2009 and 2010, the federal government introduced a temporary accelerated capital cost allowance that allowed businesses to deduct 100% of the cost of computers and software in the year purchased. As you can see on slide 11, this was the most used form of government support aimed at encouraging innovation. We found in another survey that more than 60% felt that this measure was beneficial to their business. We believe that such a measure should be looked at again to encourage adoption of new technologies especially among smaller firms.
In conclusion, small businesses want to embrace digital technology to a greater degree but face certain cost barriers that combine to discourage them from adopting technology as quickly as we might like in Canada.
Some ideas to help overcome some of the cost barriers are on slide 12. It includes encouraging more competitive options for high-speed Internet services, updating the code of conduct for the credit card industry, encouraging the creation of more affordable and secure electronic payment methods, and reintroducing the 100% CCA for computers and software to encourage investment among smaller firms.
Thank you very much.
