An Interim Report on the Digital Economy and Telecom Strategies—International Institute of Communications Canada Conference 2010

Speaking Points

The Honourable Tony Clement, PC, MP
Minister of Industry

Ottawa, Ontario
November 22, 2010

Check Against Delivery

Thank you, Bernard.

And good morning, everyone.

Let me begin by congratulating you, Bernard, not only on becoming President and CEO of the Canadian Wireless Telecommunications Association, but also on becoming President of the International Institute of Communications Canada. It is always reassuring to see that there is life after politics!

Let me also say what a pleasure it is to be here today to help kick off this conference. It's a first-rate program, so my congratulations to all of the organizers.

We meet at an important moment. The last two years have seen unprecedented economic turmoil, with the world's most severe global recession since the 1940s. Canada has come through the hard times better than most, thanks to our strong and stable financial institutions and prudent public policy—paying down debt when times were good and providing timely stimulus through Canada's Economic Action Plan.

That said, we're not out of the woods yet. So it is an appropriate time to take stock of where we are and where we must go.

As I look ahead, I do so with confidence, even optimism. Not because I am insensitive to the challenges, but because, like you, I see the possibilities. And few areas offer greater reason for optimism than the digital economy.

That's because the effective adoption of information and communications technologies (ICTs) dramatically increases an economy's ability to innovate:

• It transforms products, processes and business models;
• It accelerates discovery;
• It extends the reach and expands the markets of businesses; and
• It connects individuals and ideas in ways that we could not have imagined a few short years ago.

The question for all of us is: How do we reap the benefits of a digital economy? What do we continue to do well and what do we need to do better? And how can each of us—as individuals and as a society—contribute?

Our government has a clear vision of what Canada can achieve. By 2020, the Harper government sees a Canada that boasts a globally competitive digital economy, characterized by innovation, enhanced productivity and enduring prosperity. A nation where businesses, communities and individuals have the skills they need to use digital technologies to their advantage. And where a globally competitive ICT sector supplies more markets with more innovative products and more new services.

All of this is achievable if—if—we set clear goals and make key decisions. And that's just what our government is doing.

But let me be clear. Success in the digital economy will most certainly not come from what government does alone. It will come from what all of us do together—governments at the national, provincial/territorial and municipal levels; the private sector; and academia.

That said, let us recognize the government's important role in setting the conditions necessary for achieving that larger vision.

 That's why, since coming to office, our government has worked hard to build the right foundations, including making ICT one of the priorities in the Science and Technology Strategy—a bold new framework we launched in 2007 to guide Canada's technology policy into the future.

This coming spring, we will formally launch our digital economy strategy. It will be a living document, one that will continue to evolve to meet the changing needs of changing times. But it will be an important milestone in Canada's path to greater competitiveness and innovation.

Today, I'd like to give you an update on our progress to date.

When I announced consultations on the digital economy strategy in May, I outlined five areas that are critical to creating a digital Canada:

First, building a world-class infrastructure that connects ideas, individuals and opportunities.

Second, encouraging businesses to adopt digital technologies to boost their productivity and drive innovation.

Third, developing a digitally skilled workforce to take advantage of the opportunities these technologies provide.

Fourth, growing successful Canadian companies—to supply digital technologies to global markets.

And fifth, creating made-in-Canada content across all platforms to bring Canada to the world.

I am greatly encouraged by the level of interest that was shown in these consultations, as are my colleagues, the Minister of Canadian Heritage and Official Languages and the Minister of Human Resources and Skills Development. I know many in this room prepared submissions, and I thank you for contributing to this important work.

Let me now update you on my thinking on each of these areas, after having consulted with Canadians over the past several months.

First, as I've said, a digital economy requires world-class infrastructure. While governments have a role to play in funding broadband, particularly in rural and remote communities, the reality is that much will be and should be built by private actors in response to the demands of their customers.

That requires having a predictable regulatory framework that both supports competition and promotes the growth of successful telecom companies that will build the bulk of the infrastructure.

Our regulatory framework has done that. We've opened the door to greater competition by setting aside advanced wireless spectrum. The result? New entrants are offering lower-priced services and providing greater choice for consumers.

Our reliance on market forces has paid dividends. Thanks to investment by telecom carriers, as of last December, 80 percent of households had access to speeds of 5 megabits per second or faster and 30 percent had access to speeds above 50 megabits per second—an impressive achievement.

So, the private sector has made great strides in building a modern infrastructure. But more needs to be done, and our government should continue to do its part.

We've focused on increasing the availability of spectrum—what some have called the oxygen of a mobile society. In particular, we've acted on mobile spectrum, and today, I am pleased to say that we are doing more.

Shortly, I will be launching consultations on the 700 MHz spectrum, with a view to auctioning this spectrum by late 2012. And another round of consultations on the 2500 MHz spectrum will begin in early 2011.

With respect to foreign ownership, I have been consulting throughout the summer on whether the current restrictions constitute an impediment to growth in the wireless sector. Those consultations will continue as we proceed with our discussions on the 700 MHz spectrum.

And this just makes sense. After all, how spectrum is allocated and who is eligible to compete for it—and pay for it—are interrelated issues. And so we will consider foreign investment rules and decisions around the 700 MHz auction together, as part of an integrated regulatory approach.

While I was consulting, it became clear another important element of the regulatory framework is the issue of tower sharing and roaming. We introduced these policies to encourage competitive entry and reduce tower proliferation.

To assess whether these policies are working as intended, I have instructed my department to conduct a review, starting immediately. By spring of next year, I will be in a position to assess how all these elements fit together and decide on the best way forward.

Another important issue for many of you is the personal communications services and cellular spectrum fees that are coming up for renewal next year. I am pleased to announce that, for the moment, I have frozen these fee rates at current levels.

I also know that the length of spectrum licence is important for investment planning purposes. I will, therefore, be extending the length of licence for mobile broadband spectrum to 20 years for all future auctions and licence renewals.

Of course, a world-class infrastructure isn't only about regulation, it's also about accessibility. Increasingly, the availability of high-quality digital networks is determining how Canadians live, work and play. That's why access in rural and remote areas is critical.

As you know, a rural–urban gap continues to exist in this country, and all of us—governments as well as the private sector—will need to work together to close it.

For our part, we are building on what the private sector and provinces and territories have done to deliver broadband services to as many Canadians as possible. In year one of Canada's Economic Action Plan, we announced $225 million in funding to develop and implement a strategy to extend broadband coverage.

By far, the biggest component of the strategy is Broadband Canada: Connecting Rural Canadians, an initiative that targets Canadians living in unserved and underserved areas. Since May 2010, we have launched 98 projects to bring high-speed broadband Internet connectivity to more than 250 000 households across Canada. By the time the program is completed, we anticipate that more than 98 percent of Canadians will have access to speeds of at least 1.5 megabits per second.

Of course I am aware that, as technology progresses, higher speeds will be needed and, together with our partners, our government will explore ways to provide them.

So that's the first big cornerstone we are working on—creating the right regulatory environment to encourage competition and investment in infrastructure, including bridging the urban–rural divide.

Second, I know that the best infrastructure, with the highest speeds, is of little use if businesses are not exploiting it. Canadian businesses, large and small, have to adopt technology in order to become more productive, innovative and competitive.

And on this front, we still have work to do. According to the Organisation for Economic Co-operation and Development, Canada has a middling rank in terms of the size of our ICT industry and how rapidly our businesses adopt digital technologies.

For the past three decades, Canada has lagged in investments in digital technologies. And today, the average ICT investment per worker is only about 62 percent of that in the United States.

These numbers don't exist in isolation—they are contributing to a larger problem: lower productivity by Canadian businesses compared to our competitors. And that means a lower standard of living for Canadian families.

As many studies have pointed out, including those prepared for the 2008 Competition Policy Review Panel, adopting ICTs has been a particular challenge for small and medium-sized enterprises, which often lack the expertise or resources to make full use of new technologies. I believe that more must be done to help these smaller companies realize the benefits of ICT adoption.

As a first step, I have asked the Business Development Bank of Canada—the BDC—to make ICT adoption among its clients a strategic focus.

Specifically, BDC will help companies evaluate their level of ICT integration and will offer new consulting services to enhance their capacity to use these technologies. BDC will also increase efforts to market its financial products that provide companies with the capital they need to purchase new equipment. The objective, therefore, is to have BDC loan proposals looked at from an ICT perspective—does the client's business plan include sufficient ICT investment? And if not, how can the BDC assist in developing an ICT plan?

To further encourage adoption, our government is working to ensure a well-functioning digital marketplace by introducing important new laws and amendments—including copyright, anti-spam and privacy legislation.

Together, these bills increase confidence in online transactions and strengthen protection for consumers. They modernize Canada's copyright laws for the digital age, protect jobs, promote innovation and will attract new investment to Canada. It is in everyone's interests to see them passed, and I hope to receive the cooperation of the House of Commons in doing so.

Third, we need to develop a digitally skilled workforce, ensuring that our people are prepared not only to employ new technologies but also to develop them, making Canada a model user and a leading innovator.

Here again, we have work to do. More than 40 percent of workers have low "essential skills," which includes digital skills. This translates into a workforce less adaptable to new technology.

Since 2001, we have also seen a downward trend in undergraduate enrolment in ICT studies.

Collectively, we need to do more to foster and grow a culture of science in this country. And while education is a provincial and territorial responsibility, our government has acted where we can.

We have:

• invested in Canada Research Chairs to strengthen our position as a world leader and attract the best students;
• delivered more than 1 million computers to schools; and
• expanded the Prime Minister's Awards to raise the profile—and heighten the importance—of science, technology and mathematics among young people.

And today, I am pleased to announce the awarding of 25 Knowledge Synthesis Grants on the Digital Economy. The research proposed by the recipients reflects both the diversity of Canada's intellectual capital and the diversity of the digital economy itself.

There is more to say on this subject—and my colleague Diane Finley, Minister of Human Resources and Skills Development, will be here tomorrow to talk some more about digital skills development.

Fourth, our aim should be to see firms established in Canada as successful global providers of digital technologies. At the moment, the ICT sector makes up only about 5 percent of gross domestic product, but it is the largest performer of private sector research and development (R&D).

We need to increase the size of the ICT sector because we need to expand the impact it can have—propelling economic growth, driving competitiveness and enhancing our quality of life.

Simply put, we need more Canadian success stories like RIM and its world-famous—and now ubiquitous—BlackBerry. There are, of course, other leading firms in Canada—the point is, we want more of them.

The Harper government has taken many actions to spur the success of Canadian companies in ICTs. Let me outline a few.

We have introduced initiatives—including increasing investments in venture capital and making changes to the Income Tax Act—to encourage more foreign venture capital to make its way to Canadian companies. We recognize the importance of capital to growing established companies and launching new ones.

In recognition of the impact ICTs can have on other sectors, the Natural Sciences and Engineering Research Council of Canada and other federal science and technology organizations have provided funding to enable the automotive sector to accelerate the development of innovative digital technologies.

Furthermore, Export Development Canada is examining ways to grow—and attract—more companies to Canada through financial assistance for R&D and the commercialization of ICT firms.

More broadly, the Prime Minister launched a comprehensive review of all federal support for business R&D—including the scientific research and experimental development tax credits—to ensure that they are working to propel innovation. As you know, this effort is being led by Open Text's Tom Jenkins—a leading thinker and one of the prime movers behind Canada 3.0.

So, significant efforts are already being made across government to grow an important sector and expand the benefits of ICT throughout the economy.

Fifth, and finally, our national digital strategy needs a strong content component. The goal is to ensure that consumers can access Canadian digital content on all platforms.

Canadians use these technologies to create and access content that will inform and entertain them; Canadian choices need to be available in the crowded digital marketplace.

Content drives demand for devices and bandwidth and will attract continued investment and talent.

Clearly, content is key in a multi-platform media world strategy, including some big players at home. Our government recognizes the competitive edge that Canadian content creates and has already taken some important steps to ensure Canadian content is available on all platforms.

The Minister of Canadian Heritage and Official Languages has revamped a suite of digital media and content programs including those for music, television, books and periodicals. The Canada Media Fund (CMF) is a prime example of the changes made to the programs. It has been praised by stakeholders, including many of you in this room, and it is seen as a model internationally. Our investment in the CMF, along with that of the private sector, is spurring innovation and increasing Canadian content on all platforms.

Thank you for listening to my interim report on the digital economy strategy and telecom reforms. As you can see, a lot of work has already taken place. And my officials and I will continue to work hard and engage with others who have a stake in this effort.

There is also genuine interest on the part of all provinces and territories in exploring ways we can work together to drive important digital issues forward, including skills development and the availability of broadband in rural and remote areas. I will be joining with Clément Gignac, Quebec's Minister of Economic Development, Innovation and Export Trade, in co-hosting a federal, provincial and territorial meeting of economic development ministers early in the new year.

I believe this kind of intergovernmental collaboration will help our country be a world leader in the digital economy.

Let me close as I began, by stressing the need for cooperative action. Our vision—of a world-leading digital economy—cannot be achieved by the federal government acting alone. What's required is a comprehensive and cohesive set of actions to create the right conditions for growth and innovation.

And while we have made important progress together, none of us can rest on our laurels.

Not when other nations are making important decisions too.

Not when success in a global economy requires us to be at the forefront of digital technologies.

Not when there is so much at stake.

The competition is simply too keen, the potential too vast and the opportunities too great to stall in our progress now.

So let's each play our part.

Each assume our responsibilities.

And each continue to pull the levers within our own grasp.

If we do this—resolutely, creatively and collaboratively—we can, together, build a digital economy that will be the envy of the world.

Thank you very much.