iCanada: Budget 2014 and the Shape of a Digital Economy Strategy

While many Canadians were justifiably preoccupied with the athletic achievements and disappointments taking place at the Olympic Winter Games in Sochi, they may have overlooked the fact that Finance Minister Jim Flaherty released his 10th consecutive budget on February 11th, 2014. Budget 2014, entitled The Road to Balance: Creating Jobs and Opportunities, sets out the Government of Canada’s plans to bring the country’s balance sheet back to a surplus prior to 2015—and the next federal election. As a ‘road to balance’, it does not offer much in the way of new programs or strategies. However, as scholarslawyers, and analysts have argued, The Road to Balance may also be paving a path towards a long-awaited Digital Economy Strategy.

As I wrote at the time of the last Speech from the Throne, the Government of Canada has been working on a strategy to position the country to benefit from the so-called “digital future” since May 2010. Four years and three Industry Ministers later, this strategy has not yet been formally announced. Now, with the Honourable James Moore, at the helm of the Industry portfolio, the broad contours of this plan appear to be becoming clear. At the time of the original consultation, then-Industry Minister Tony Clement stated that ‘improving Canada’s digital advantage’ would foster “a more prosperous and successful Canada [that] will ensure a better quality of life for all Canadians.”

In order to do so, Canada’s Digital Economy Strategy – or an ‘iCanada’ framework – should address four intersecting areas: infrastructure, intellectual property, incentives, and interface. These policy areas contribute to economic growth and human development by affording individuals, communities, and companies to benefit from opportunities associated with digital innovations. 

Infrastructure

The greatest number of Canadians will only succeed in digital environments if they have access to necessary technological and human resources. In the evolving ‘digital age’, access to broadband and network communication technologies will be essential. An urban-rural divide persists, where Canadians living outside of city-centres or their suburbs are often unable to join the ‘information superhighway’ to the same extent—and with the same speeds—as those based in more urban areas.

Budget 2014 seeks to address this issue by offering a five-year, $305 million fund “to extend and enhance broadband Internet service for Canadians in rural and Northern communities” (p.8). Mark Goldberg (a technology analyst and consultant who co-organizes the annual Canadian Telecom Summit) states that this is an encouraging sign. However, the specifics of this fund will need to be clarified. Furthermore, the download speed target of 5mbps by 2019 is unambitious when compared to other jurisdictions and will not immediately address the situation. Professor Michael Geist (the Canada Research Chair in Internet and E-commerce Law) points out that European targets are 30mbps (by 2020) while Australia is working towards 100mpbs (by 2016). With the fast-changing nature of digital technologies, in five years’ time, this goal will be outdated. It is my opinion that the Government of Canada needs to reassess this goal to account for current needs and future realities.

Another barrier to technological adoption is cost. Canadians located in areas where high-speed broadband is available are faced with relatively high costs to access these services. A 2013 report from the Canadian Radio-television and Telecommunications Commission (CRTC) shows that while these costs are falling, they remain higher than prices in the United Kingdom, Australia, France, and Japan. For many lower-income Canadians, these prices are prohibitive. Budget 2014 renews the ‘Computers for Schools’ program with $36 million over four years (p. 77). This is a welcome step, which recognizes that “a vibrant economy requires that students have access to the equipment they need to acquire the skills that will prepare them to fully participate in the digital economy” (p. 77). Unfortunately, the Computers for Schools program does not address the issue of what happens once students leave the classroom. As Mr. Goldberg has argued in the past, “we should be looking at making PCs and computers part of our social safety net in Canada, re-targeting subsidies based on financial need, not based [solely] on geography”.

The technological infrastructure necessary for a Digital Economy Strategy should also enhance the human and social capacities required for leveraging digital technologies. Although a provincial responsibility, education will be key moving forward. Budget 2014 offers “more than $1.8 billion in new funding committed to the Canada Foundation for Innovation to support research infrastructure at universities, colleges, research hospitals and other not-for-profit research institutions across Canada” (p. 75). Part of this fund will go towards the country’s Granting Councils, which provide funding to researchers, scholars, and students in post-secondary institutions. For example, the Social Sciences and Humanities Research Council (SSHRC) has made the digital economy a ‘priority area’. These types of funding programs will allow scholars and graduate students to conduct necessary research for understanding and extending Canada’s place in the digital realm. (Disclosure: the author holds a Doctoral Fellowship with the SSHRC).

Intellectual Property

The ‘basic’ research carried out in public institutions, and funded by the public purse, should contribute to the public good. Intellectual property (IP) created in public institutions can be used to link this research and spur research & development (R&D). Budget 2014 proposes $3 million in funding (over three years) to fund an ‘Open Data Institute’ (p. 122). This Open Data Institute “will play a role in aggregating large datasets, informing the development of interoperability standards, and catalyzing the development and commercialization of new data-driven apps” (p. 123). This project will help provide opportunities to make creative applications out of valuable information and knowledge.

These goods and services are valuable in domestic and global contexts. As Nobel Laureate Joseph E. Stiglitz argues, “intellectual property regimes are a key component of innovation policy frameworks and the ongoing evolution of a globalized knowledge-based economy” (pp. 1696-1699). This globalized framework necessitates ensuring that Canada’s IP regime adheres to international standards while maintaining policy spaces for meeting domestic objectives.

In this post, Barry Sookman (a senior partner at McCarthy Tétrault and an adjunct faculty member of IPOsgoode) points out where Budget 2014 proposes to align Canadian IP law with international treaties and trade agreements. In particular, the Budget “proposes to modernize Canada’s intellectual property framework by ratifying or acceding to the following widely recognized international treaties: the Madrid Protocol, the Singapore Treaty, the Nice Agreement, the Patent Law Treaty and the Hague Agreement” (p. 108). Coupled with the recent Copyright Modernization Act, Budget 2014 demonstrates that Government IP policy has largely been set.

Incentives

Intellectual property protections are but one way of incentivizing entrepreneurship, growth, and development. Historically, Canada has had trouble incentivizing innovation. In Innovation Economics: The Race for Global Advantage, Robert D. Atkinson and Stephen J. Ezell, from the Information Technology and Innovation Foundation in Washington, D.C., outline a number of other incentives that governments are using to encourage existing companies to become more innovative as well as to attract foreign investment, and to encourage foreign companies to operate within their jurisdictions (p. 171). These measures include stable R&D tax credits designed to spur creative activities and inventive research and development. For example, so-called ‘patent boxes’ allow income derived from the sale of patented products and technologies to be taxed at a lower rate than other income (p. 172). As well, preferential tax treatment can be given to ‘young’ or ‘start-up’ companies (p. 173) and governments can remove complex bureaucratic processes for starting new companies (p. 176), which may otherwise deter creative endeavours. So-called government red-tape is especially problematic for companies attempting to work across a number of provinces. The Government of Canada should review tax policies with these objectives in mind while also ensuring that such reforms contribute to general, ‘middle class’ economic opportunities by maintaining social and political objectives.

Interface

A Canadian Digital Economy Strategy should recognize that the federal government cannot be the sole driver of the country’s digital future. Instead, a proper combination of infrastructure, IP, and incentives can empower Canadians to capitalize upon emerging opportunities. Interface and interaction between the provinces, municipalities, communities, industry, and academia are essential for this to occur. This type of knowledge mobilization helps bring theory into practice in order to capitalize on Canada’s research strengths.  A recent report from the University of Toronto’s Munk School of Global Affairs highlights how linkages between industry and universities help create ‘regional innovation systems’ or ‘clusters’, which contribute to regional economic growth through knowledge transfer (p. 5). These ‘clusters’ capitalize upon the intersecting interests and expertise of researchers, practitioners, and entrepreneurs to generate creative and innovative outcomes. Ryerson University’s Digital Media Zone, the MaRS Discovery District, and the I-CANADA network are examples of this type of interface across sectors that often work in isolation. The federal Networks of Centres of Excellence of Canada should continue to be supported in order to promote cross-country linkages and opportunities.

The fact that it has taken some four years for the Government of Canada to craft a Digital Economy Strategy demonstrates the complexity of the task at hand. However, a close reading of Budget 2014 shows that the release of such a strategy might be drawing nearer. In order to capitalize on current conditions and emerging opportunities, an ‘iCanada’ strategy that address infrastructure, intellectual property, incentives, and interface issues will help position the country and Canadians to benefit and thrive in the coming years.

Joseph F. Turcotte is an IPilogue Editor, a PhD Candidate and SSHRC Doctoral Fellow in the Communication & Culture Program (Politics & Policy) at York University, and a Nathanson Graduate Fellow at the Jack & Mae Nathanson Centre on Transnational Human Rights, Crime and Security at Osgoode Hall Law School.

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