THE BLOG

Canada Has an Internet Problem

05/29/2013 12:22 EDT | Updated 11/13/2013 08:45 EST

I appeared yesterday before the House of Commons Standing Committee on Industry, Science, and Technology for a hearing on the adoption of digital technologies by small and medium sized businesses. While the hearing was shortened by a vote in the House of Commons, it still provided an opportunity to raise ongoing concerns with Canada's digital economy strategy failure. My prepared remarks are posted below:

Appearance before the House of Commons Standing Committee on Industry, Science and Technology, May 28, 2013

Good afternoon. My name is Michael Geist. I am a law professor at the University of Ottawa, where I hold the Canada Research Chair in Internet and E-commerce Law. I am also a syndicated weekly columnist on law and technology issues for the Toronto Star and the Ottawa Citizen. I appear before this committee today in a personal capacity representing only my own views.

I appreciate the invitation to appear today and I'm certainly supportive of the committee's study on the issue of SME adoption of digital technologies. As the committee has already heard, Canada fares relatively poorly when compared with peer countries. For example, you heard from Shopify's Harley Finkelstein on the lower e-commerce adoption rates by Canadian firms when compared to those in the U.S.

There are many other studies that point to the same concerns. A 2011 Cefrio study on Canadian SME ICT adoption found that mobile device usage was relatively low and only one out of every four SMEs is equipped with enterprise resource planning software or customer relationship management software. Moreover, the use of many online tools - collaborative tools, application sharing, web sharing, or video conferencing - are only used by a small minority of Canadian SMEs.

Not only are SMEs slower to adopt ICTs, but their e-commerce profile is relatively weak as well. While the majority of firms said their product mix was not suited to online sales, some SMEs cited lack of technical expertise, lack of resources, or uncertainty of the benefits as the reason for not embracing the online opportunities.

The Canadian Chamber of Commerce's 2010 study on SME use of E-business solutions arrived at similar conclusions. Moreover, it pointed to Canada's declining global rank - whether the World Economic Forum's Global Competitiveness Index, the OECD Broadband Ranking, or the Economist's E-Readiness Ranking.

Of course, this committee is well aware of these shortcomings as your May 2012 report on E-commerce in Canada cited similar statistics and studies and took note of the particularly poor Canadian SME performance.

So we have a problem. But you will forgive me if there is a sense of déjà vu about this discussion. This committee is currently studying Broadband and Internet Access across Canada. It recently completed a study on the Intellectual Property Regime in Canada and, as noted, before that, it completed a study on e-commerce.

Moreover, you are not alone. The Canadian Heritage Committee has completed a study on the Entertainment Software Industry in Canada. The Access to Information, Privacy and Ethics recently completed a study on Privacy and Social Media. The Justice and Human Rights committee has studied cyber-bullying. The Senate Committee on Transport and Communications released a study in 2010 on the wireless sector.

My point is that our problems with the digital economy - including SME ICT adoption - are not the result of a lack of study. These issues have been studied intensively for years.

At least part of the problem lies in Canada's lack of a cohesive, forward-looking digital economy strategy. This failure is plainly hurting all aspects of the digital economy. It creates business uncertainty, undermines consumer adoption of e-commerce, harms innovation, and sends an unmistakable signal that this is simply not a governmental priority.

For an SME, the effects of the Canadian digital economy strategy failure - what I've often termed Canada's Penske File - can be found everywhere.

The failure craft a coherent strategy to ensure a competitive broadband and wireless market means higher costs and less choice for business and consumers. High data rates have often meant that the adoption of mobile solutions have been costlier in Canada than elsewhere which hurts the business case for ICT investment. Further, when Canadian businesses travel to other countries to explore new opportunities, they face some of the highest roaming fees in the world.

On the regulatory front, the digital economy strategy failure has meant that important legislation has stalled, creating unnecessary legal uncertainty. For example, an SME considering electronic marketing campaigns will want to know what is permitted under Canadian law. Canada passed anti-spam legislation in 2010, but the regulation making process has dragged on for years, meaning the law has still not taken effect. As a result, there is uncertainty about what is permitted, what will be permitted, and tailoring a e-marketing strategy is difficult.

Similarly, Canadians want all businesses, including SMEs, to take security and privacy seriously. Yet with Bill C-12, the privacy reform bill languishing in the House of Commons, and, with respect, inaccurate criticisms of an NDP private members bill on security breach disclosure requirements, the message to SMEs is that the Privacy Commissioner of Canada may be concerned with the state of Canadian privacy law, but it is not a priority.

We could talk about what a Canadian digital economy strategy that incorporates SME digital technology adoption would look like, including legislative reforms, educational initiatives, skills training, and commitments to increase competition and ensure access for all, but the starting point is simply to say without a digital economy strategy that weaves together these various issues, we should not be surprised by the lagging performance by Canadian SMEs. Indeed, we practically scripted it.