Industry Committee on May 28th, 2013

[Dan Harris, NDP, Scarborough Southwest, ON]

Mr. Chair, very quickly, I'd like to make the standard reminder that because we have very little time with the witnesses, if there's anything they're not able to share, they provide it to the committee in writing. I think they have a lot to share, which they won't get to today.

[The Chair, Conservative, David Sweet]

Please provide it to the clerk and he'll make sure it's in both official languages.

Thank you, Mr. Harris.

Mr. McColeman, for seven minutes.

[Phil McColeman, Conservative, Brant, ON]

Thank you, Chair, and thank you to the witnesses for coming. I'm interested in pursuing with Mr. Waverman the idea of the business schools across Canada being an untapped resource.

I'll perhaps leave it to you to give us a sense of how an SME, a small business in particular.... Typically these are businesses with a small number of employees, and the owner-operators are consumed with a lot of priorities in their daytime. As we heard from the BDC, there's often just not enough time to go into these areas, but which may be fatal for them in the end because they didn't go into them. But they really are consumed with other priorities.

I'm interested in a larger conceptual picture of how you see this resource, the untapped resource you mentioned, of the business schools and how that would actually advance their uptake of digital technology.

[Dr. Leonard Waverman]

Sure. Thank you.

There was a study done by the U.K. Federation of Small Businesses in late 2011. They asked their members if they would use mobile broadband, and 33% said never, 25% asked what it was, 20% said they use it now, and the others said they'd think about it. They didn't have a good understanding of what it did.

So if you look at the business schools, in our case, the Ron Joyce Centre in Burlington, where there are just dozens of SMEs around us, you will realize that's true for campuses across Canada, for the business schools and the community colleges.

What we need is a program that is localized, because we all have different local conditions, but at the same time uniform, so that there is the same message, data, and understanding being given. I think we could organize ourselves. We're open 24/7. We can do this evenings and weekends, and be that source, that resource where these firms can come. We can work with the chambers of commerce and the business development agencies. They're everywhere. They've certainly been set up in Ontario, in Quebec, and elsewhere, and with them we could work out a program that would be national.

The technology is the same, so there is some sameness that has to be done, but at the same time, local businesses vary in what they're doing. So I think having something that is somewhat uniform on the technology side but slanted towards who is around your neighbourhood would be very useful. As I said, we're open 24/7 so we could be a very good medium for raising this awareness. The U.K. is a much smaller country with a much higher population density, and there you can see that they don't know what mobile broadband is.

[Phil McColeman, Conservative, Brant, ON]

Do peer-to-peer business organizations play a role in this, in terms of the networking you're talking about?

[Dr. Leonard Waverman]

They certainly do, but when I look at where our campuses are situated around the country, and when I think about what we do as business schools and as leaders, and how we're engaged with our communities, I think we can be another avenue, a trusted kind of avenue. These organizations are also trusted, but think of where all these campuses are. They are across the nation, and they're not just in large urban areas; they're also in rural areas.

So we can play a role in delivery, and we do. We are educators. That is our business and we're good at it and good at research. So I think if we could combine that and have a targeted approach that is uniform in some way, we can add a lot to the mix.

[Phil McColeman, Conservative, Brant, ON]

Having some experience, though, with my own alma mater as a governor, and also as part of our work here in Ottawa with the post-secondary caucus going around the country trying to get business schools and other academia oriented to such a program, I think it's safe to say that there would be some barriers to this, perhaps within the existing confines of the higher level of institutions.

Do you see that?

[Dr. Leonard Waverman]

Well, we have something called the Canadian Federation of Business School Deans; we all meet and have an organization in Montreal that we all deal with, and there is a secretariat. At that level, it's doable: we all have contact and have the secretariat, and we can plan these things—we meet.

It's an exciting idea. We all have executive education programs. We compete a lot, as well. I think one of the problems is that we do compete. But we can also deliver, simultaneously, similar programs that are targeted to the neighbourhoods we are engaged in.

[Phil McColeman, Conservative, Brant, ON]

I really like the direction that you've suggested here. I think it's a very good and creative use of resources.

You mention also in your comments that the opening up of data from Stats Canada has led to much better measures than you've previously had. Is that being now reflected in the white papers and other academic documents that are being produced and in studies that are being done, in terms of what that new, opened-up data is able to present?

[Dr. Leonard Waverman]

Not as yet; these are very large micro-data sets, at the individual firm level, and it's going to require some time for researchers to use those very large data sets to tease out what the results are.

But they do give us far better measures. We didn't have very good measures, especially at the firm level, of software and of other... what we call intangible assets—capitalized labour—in designing IT systems, which we now have from tax files. It has taken years to work out the protocols whereby researchers can access these files without any way of understanding who or what that firm is.

I think that over the next year you'll see these coming out. As I said, this new paper came out from Stats Can today looking at intangibles; it's by John Baldwin. He said that it does not solve the problem of why we have this productivity gap.

We have to look at the firm level. The national level simply doesn't work. We have to get into the underpinnings of what this dilemma is and the use of ICT in Canadian businesses, both small and large. The data suggest that the multinationals do a much better job of integrating ICT and getting productivity enhancements into domestic firms, and we don't know what the reasons are.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Waverman.

Thank you, Mr. McColeman.

Now we go on to Mr. Regan, for seven minutes.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you, Mr. Chair, and thank you to the witnesses for being here and for your patience today with us.

Professor Geist, you said that cheaper broadband would help to enable the digital economy. When you look at what is happening in the wireless sector, with Rogers looking to buy Shaw's broadband, with Telus looking to buy Mobilicity, and with Wind putting up its hands and saying “help”, what policies do you think would help provide cheaper broadband in Canada? And do you think that the spectrum auction set up for this fall will help or hinder?

[Dr. Michael Geist]

I think we have to be honest at this point in time. The efforts from several years ago have been a failure. It's quite clear that the new entrants upon whom a lot of hope for a greater competitive environment in the wireless sector rested are, by and large, indeed throwing up their hands. Notwithstanding some modest decline in pricing, we find ourselves, as the Minister himself said, at best middle-average. I don't think that's good enough.

In terms of the kinds of things that we can do going ahead, I think we ought to remove foreign investment regulations altogether. We've seen that for some of the companies in the sector, but not all. Frankly, I think we ought to remove it not just on the telecom side but on the broadcast side as well, because if you're going to allow a new entrant to truly compete aggressively, it has to be able to provide some of the same kinds of bundles that we see the existing incumbents able to provide, and that means opening the door on the broadcast side too.

I think we need to open the door to what are known as MVNOs—mobile virtual network operators—and create that as a regulated space so that they ride on the same network as the existing players, but do so in a regulated manner. We already have that with respect to broadband into the home, as I'm sure many here know. Some of the controversies over things like usage-based billing are part of that regulated environment.

I think we need to be looking at a regulated environment on the wireless side too, and frankly if the CRTC isn't aggressive enough with its consumer protection package, we need to recognize on a number of issues, whether roaming fees, length of contract and the like, that until we have a fully competitive environment, there needs to be some regulatory type of solutions. Lots of other countries that are open, free markets have done the same and recognize that you basically have two choices to ensure that you have a robust, competitive environment: either have competition or have some amount of regulation until you get there. We're not there, and we need to find some solutions to get there.

[Geoff Regan, Liberal, Halifax West, NS]

Previously and again today you compared the lack of a digital strategy to the infamous “Penske file”—and you don't look at all like George Costanza, by the way. You've also said, “If part of your economic strategy doesn't include a digital economy strategy, then I'd say you don't have an economic strategy”.

What in your view are the consequences for the Canadian economy from the fact we've fallen behind?

[Dr. Michael Geist]

We just talked about it in the wireless context, but we could talk about it from a regulatory uncertainty perspective on privacy and electronic marketing, as I mentioned with respect to spam. We could talk about it with respect to the innovation policy. Indeed, we had a report that came out just last week that found that there, Canada continues to fall further and further behind.

I think in a range of different areas where we see other countries that have identified this as a priority—and it's not to say it's a one-size-fits-all, that every solution for every country is precisely the same.... I don't think it is. But at the same time, with all candour, I don't think this is rocket science either. If we look at what many other countries have done in trying to prioritize these issues, they've talked about what kind of connectivity do you want to have, what sort of market framework do you have to get to that level of connectivity, what sort of messaging do you send to the business community so that if there is regulatory uncertainty, there is adequate consumer protection and the kinds of incentives that we need to get to the point that we're talking about.

I hear these concerns about main street businesses suffering at the hands of Amazon, and I have to say that a digital economy strategy looks at that and sees opportunity, not risk. It sees the opportunity for those same businesses to sell to a global market. Part of the problem is that we haven't established, I don't think, the kinds of policies and frameworks so that the main street looks at these issues and doesn't see threats from Amazon, but opportunities to take their products and services and sell to a market that extends well beyond their local community, which offers up some tremendous opportunities.

[Geoff Regan, Liberal, Halifax West, NS]

You referred to previous testimony before the committee, and I would just add that it's nice for all of us to know that somebody is paying attention, by the way. Somebody out there is watching, but as you look at that past testimony, do you see any trends that would help point us in the right direction in terms of drafting our report?

[Dr. Michael Geist]

You have heard some great things. When you look at companies like Shopify, which is a largely unknown success story here in Canada—and frankly here in Ottawa as well—you will see that they are doing some really great things.

I think you have heard some very interesting and encouraging things here today as well, but if there's one take-away—once again from my perspective—it's the extent to which the committee can again raise the alarm bells to say that you've looked at this now in a number of different ways, whether on broadband access or SMEs or e-commerce adoption, and that you've been hearing some of the same kinds of things. It's not just because you invite some of the same people on multiple occasions; it's people from a number of sectors who are raising the same kind of concerns.

The government needs to move forward on this. It's not a partisan issue. Clearly it's an issue that is of concern to people from across the country who are, at this stage, rather puzzled as to why we've been unable to get over the hump of just talking about the issues rather than performing.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

Dean Waverman, I would like to ask you about Canada's ranking in your connectivity reports. Several years ago we ranked as high as fourth; by 2011 we had fallen to eighth, and I believe you have said that “...Canada has substantial work to do before achieving an ideal score in connectivity.”

Can you expand on that comment for the committee and explain to us why connectivity is so important? If you have any recommendations, we would very much like to hear them—albeit in a very short time, unfortunately.

[Dr. Leonard Waverman]

Thank you. I'm glad somebody read it.

Canada was never as high as fourth on the connectivity scorecard. I think it's always ranged between sixth and eighth, which it was in 2011, out of 25 advanced economies.

It ranks very well in a number of areas such as business infrastructure and public sector usage and skills. It does lag somewhat on the consumer side, but I think we're looking at the business side, which is the driver of productivity and economic growth.

Where we're lagging, which I think has been picked up in other testimony before you, is in these applications. Shopify is a great example of a firm that builds an application in Canada. But the puzzling numbers for us arise when you look at modern or virtual private networks, for example, ethernet. There is simply less of that in Canada than in the U.S. or the Nordic countries. Compared to other countries such as the U.K., France, and Germany, we do very well in our extent and use of broadband.

The Nordic countries have one great advantage over us: they are small and we have these vast distances. So I think it's much more difficult for us to have that kind of advanced technology compared to Finland, for example.

Our gap with the U.S. is something that we will have to work on in the data. I think the ICT gap that has been identified to your committee is one of the puzzles and explanatory vehicles of the whole productivity gap. It could be something at the managerial level.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Waverman and Mr. Regan.

To the witnesses, we regret that you have such a short time here because of the votes. As Mr. Harris said, if you have anything else that you couldn't address in your opening remarks or by answering questions, please submit it to the clerk, and we'll make sure that it becomes part of our study.

The meeting is adjourned.