Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 3 - Evidence, May 12, 2009
OTTAWA, Tuesday, May 12, 2009
The Standing Senate Committee on Transport and Communications met today at 9:33 a.m. to study emerging issues relating to its communications mandate and to report on the wireless sector, including issues such as access to high- speed Internet, the supply of bandwidth, the nation-building role of wireless, the pace of the adoption of innovations, the financial aspects associated with possible changes to the sector, and Canada's development of the sector in comparison to the performance in other countries.
Senator Lise Bacon (Chair) in the chair.
[Translation]
The Chair: Today, we are resuming our study on emerging issues related to our communications mandate, in order to report on the wireless sector, including issues such as access to high-speed Internet, the supply of bandwidth, the nation-building role of wireless, the pace of the adoption of innovations, the financial aspects associated with possible changes to the sector, and Canada's development of the sector in comparison to the performance in other countries.
[English]
Our witness this morning is from Industry Canada, Keith Parsonage, Director General, Information and Communications Technologies Branch. We welcome you to our committee, Mr. Parsonage. We are pleased you could come and answer our questions. I am sure the senators will have many questions to ask this morning. We will hear from you first.
Keith Parsonage, Director General, Information and Communications Technologies Branch, Industry Canada: Thank you for the opportunity to present. Honourable senators, I believe a copy of my presentation in English and French has been circulated. With your permission, I will talk about some of the highlights of Canada's wireless industry.
First, I should like to start by talking about the information and communication technology industry in Canada. It is an industry with over 30,000 companies throughout the land, from east to west, generating more than $150 billion in revenue today. Close to 600,000 workers are employed in this industry, and an amazing 43 per cent of them have university degrees. The average salary is generally much higher than others in the economy. The contribution to Canada's GDP is close to 5 per cent; however, more important, the industry has been contributing close to 9 per cent of that economic growth since 2002.
The other very significant fact about the information and communication technology industry is that it does close to 40 per cent of all the private-sector industrial research development that takes place in this country. Remember that number.
Of course, the industry is also very highly export oriented. In goods and services, the industry exports close to $31 billion a year. That is a very significant contributor.
Let me turn to a subset of that particular industry — the wireless industry. There are about 130 companies in the wireless industry — a small fraction of the total out there in the ITC sector, but nevertheless strong performers — and they are growing at a phenomenal rate, specifically, 33 per cent in the last two years, generating sales of over $4 billion. In 2007, the latest data we have for this sector, there were 15,000 workers in the wireless industry. The employment in this area has been growing substantially. Having an employment growth record in just over three years of close to 15 per cent a year is quite phenomenal. A lot of that is attributable to the maker of this little device here. Again, it is an R&D-intensive industry, doing about $1.6 billion a year in research and development.
Canada historically had an excellent wire telecommunications network for decades and decades. As a result, we were probably a little slow in the take-up of wireless, but now wireless today represents about 50 per cent of the telecommunications connections in Canada. As of 2008, about 21.5 million people are using wireless devices. Another interesting fact is that Canadians are sending over 77 million text messages per day. I read a number the other day that worldwide something in the order of 286 billion text messages are sent each day — a lot of sore fingers out there, I think.
Canada's mobile infrastructure since we have launched advanced wireless services and cellular services is now reaching over 98 per cent of the Canadian population. We have challenges here in Canada, as you can appreciate, being the second-largest country in the world, roughly 10 million square kilometres of land mass, with a population of only 33 million people. Those along the Canada-U.S. border are usually very easily served, but in the far and remote regions of the country, we have additional challenges.
Let me turn to slide 5 and talk a bit about the worldwide situation. Here you can see that the growth of mobile cellular exceeded fixed lines in 2002 worldwide. Many of the developing nations were bypassing the establishment of fixed line wired telecommunications systems in their country, moving immediately to the advantages of mobile communication. In fact, in some countries, the cellular penetration rate is in excess of 100 per cent because some people carry more than one device and do not subscribe to a fixed line. Increasingly, that trend is becoming prevalent in Canada. My son, for example, does not have a fixed line. He can only be reached on his mobile. A different world is evolving out there.
If you look further at the overall growth on slide 6, between 2008 and 2012, we talk about predicted future growth rates, and you can see that the growth is all in wireless services, whether it be data or voice. Wireline data and wireline voice are expected to balance each other out, meaning virtually a flat line. Most significant growth is now coming from wireless and increasingly wireline data, as we enter into the world of moving digital content on to mobile devices.
I shall now turn to slide 7. When I was growing up, the only way to watch TV was with a cable connection or a big antenna sitting on top of the roof. Radio shows could only be heard on the radio; they were not available on any other device. There was a clear segregation with what radio was doing. Books were available at the library or at a bookstore. Mail was delivered, rain or shine, by a postal carrier, five days a week — and that was to everywhere. There was only one phone provider — and that was Ma Bell.
We are moving into what we call an Internet protocol world, where everything is over Internet protocol, where we can get almost anything, any time, anywhere, at the time and place of our choosing, by a mobile device. I can read a book off a mobile device now. I can watch a television show off a mobile device. I talk to my kids around the world using a wonderful little gadget, a Skype phone, made by Linksys. Where I travel in the world, I can walk into a WiFi hot spot and log in, call my wife, wherever she happens to be in the world, and it costs me almost nothing, using a low WiFi phone such as this.
The world is changing very dramatically, but that changing world is opening up all sorts of solutions and opportunities for Canadian companies. Slide 8 is a glance at some of the world's leaders in the wireless space. We all remember Apple. I remember buying my first Apple computer, an Apple II with a very small memory and disk capacity — 48K, if I remember correctly.
Senator Fox: I thought you were going to say we all remember Nortel.
Mr. Parsonage: We are not there yet. Apple is clearly in the telecommunications business as well with the iPhone. I threatened to disown my son when he traded in his BlackBerry for an iPhone.
This is a snapshot of some of the major players. I will not dwell on any specific one. Everyone is now playing in this place, where historically they were in other areas.
We are also seeing the emergence of some new, strong players such as ZTE and Huawei, both Chinese firms. Huawei has about 90,000 employees, half of whom are engineers. I was at the Huawei camp six weeks ago. They are a formidable challenger out there.
On slide 9, I am looking at the larger Canadian wireless players. We have companies such as Vecima Networks, located in Victoria with manufacturing in Saskatoon, Sierra Wireless in B.C., SiGe here in Ottawa, Redline, Com Dev, all well-known on the Canadian scene but major players in the international marketplace. Remember, the Canadian market is only about 3 per cent of the world's wireless market, so if Canadian companies want to grow and succeed they have to look at the international marketplace.
Slide 10 shows that we are now up to 25 million BlackBerrys. I know that number is wrong because another couple hundred thousand are probably being sold around the world this morning during this meeting. It is interesting that the shift has moved away from what I call the corporate or enterprise world to consumers, small business owners and consultants. It has moved into a totally different market space over the last couple of years. Now we say 45 per cent are non-enterprise users, which is non-corporate users, and with the opening of their application store this year, they are doing what iPhone has done, where you can go in and download applications onto the BlackBerry.
This is where some of the interesting opportunities come for Canadian software developers. A one-person shop can develop an application that is put in the BlackBerry store. The revenues are shared with BlackBerry, of course, with the carrier, and also with the developer. There are some interesting games where the people who have invented them are making lots of money. I would like to roll the clock back a bit and be part of that particular generation, but I am not.
On slide 11, there are the wireless solution companies. This is taken from a different source. It is called the Branham 300 — it came out in April or May of this year — and it is a survey of the top 250 to 300 ICT companies in Canada. We did an extract of their view of the wireless industry and it is even better than the Statistics Canada reported view. They are measuring slightly different things because this is a worldwide report rather than just a Canada report. There was an 82 per cent revenue increase in 2007 to 2009, a phenomenal growth for these companies. Nine companies are doing 25 per cent of it, but it is still exceptionally good, and generating close to $8 billion in revenue worldwide. Clearly, there are tremendous opportunities, but you will notice there has been a marked shift between the wire telecommunications and the wireless penetration.
Slide 12 will give you a quick snapshot of the Canadian wireless technology suppliers. It does not matter where an individual lives, he or she can participate in this marketplace. Solutions and applications that will meet the needs of wireless users no matter where they are in the world are available. Of course, the concentrations by relative population size are in Ontario and Quebec, but you have pockets of talent in Atlantic Canada, throughout the Prairies and British Columbia.
Let me talk about some of the strengths across the sector. There are different players in each of these areas. There is the mobile cellular infrastructure, the people that build the towers and the transmission equipment. There is the wireless network management, the people who provide the software tools to manage the networks. There is a new technology such as WiMAX broadband wireless and fixed wireless access, and such things as wireless LAN. Much of this gets very technical so I will not dwell on it. I am trying to portray to you the range of areas in which we service technologies, infrastructures or applications in Canada. We are very much across the board in terms of the things that our companies are capable of tackling internationally.
I will not go into detail in the next few slides where we talk about Canadian companies and some of their capabilities; rather, I will highlight that with cellular infrastructure we have companies such as Filtel, iBwave, Trylon and Nortel providing cellular infrastructure to countries and companies around the world. When you look at the enablers or the applications, there are companies such as Redknee doing customer billing. You cannot put in a cellular system without having a billing system to go with it. Canadian companies are providing those solutions to operators around the world.
Similarly with CounterPath technologies, they make a variety of a special soft phone that are similar to this phone I am carrying here, applications that add value to what the operators are offering to consumers. There are Canadian companies that have solutions being employed worldwide for banking. The solutions for offtrack betting in Hong Kong are being provided by a Canadian company. There are many innovative ways in which Canadian suppliers are providing unique and innovative solutions.
Slide 16 shows WiFi mesh networking technologies. This is the technology this phone uses. As an example, Argentina looked to Canada as a leader in wireless telecommunications, at how Canada was deploying its solutions and how Canada was using the Internet to connect Canadians. Argentina launched a significant program of ensuring that its citizens were connected. You can wander almost anywhere in Argentina, walk into any grocery store, any restaurant, any hotel, and have Internet connectivity as a result of following the lead of Canada.
Slide 17 shows some of the companies that are actually providing those solutions into the international marketplace. I apologize for some of the acronyms that appear in the slides. OFDM technology is optical frequency division multiplexing, I believe, which is a mouthful even for me to say. Everyone just says OFDM. This stresses that there are a lot of Canadian capabilities in that area. Similarly in WiMAX, which is broadband wireless technology in slide 18. This is an area in which the Canadian government's Communications Research Centre is doing a lot of leading-edge research to advance the field of WiMAX deployment. In fact, Canadians were the leaders in terms of some of the developing products that were first certified to the WiMAX standard to enable wireless broadband deployment.
Redline, Wavesat and Vecima not only are some of the firms conducting search and development in this area but they are involved in pilot deployments here in Canada and internationally. It is the way that you will get high-speed downloads using your wireless mobile devices.
Slide 19 is a compendium f the various players in Canada, and this by no mean is all of them. As I said, there are about 115, but this gives a snapshot of some of their capabilities. For example, Wavesat is a fabless semiconductor developer, meaning that they design the chips used in mobile devices. Canada does not have a semi-conductor fab facility, so they are usually made in Taiwan but according to Canadian design. Hence, the value-added is in the design of the circuitry and the characteristics of that, which are then fabricated into silicon and then placed in mobile devices around the world.
On slide 20 I would draw your attention to Airborne Entertainment, a publisher of mobile content. This is where you do games on your iPhone or BlackBerry, but they are coming from Canadian sources, Canadian developers.
Slide 21 is also in the area of wireless email solutions. There are many interesting companies involved here, Research In Motion being the leader. There is an interesting little company out west called PureInbox that does all the synchronization of your various devices. For example, if you are running a desktop computer and several mobility devices and you change a calendar entry on one, it automatically updates it on all your mobile devices. It sounds as though I am giving free advertising for the company. There are some unique Canadian solutions there.
Amika Mobile is a company that is doing unique alerting systems for mobile devices. Of course, that is the handheld wireless.
Slide 22 shows that Canada has leading positions in satellite communications, broadband satellite access. When you look at rural and remote deployment, satellite is virtually the only way you can service a lot of the rural remote areas. You cannot run copper or fibre into many areas of Canada's Far North. Globally, the satellite communication revenues are growing at 16 per cent a year. Our average growth rate has been 11 per cent between 2002 and 2007. We continue to see strong growth in demand for advanced satellite communication services, particularly in rural and remote areas.
Slide 23 shows a relatively new phenomenon that is RFID, radio frequency identification. I imagine some of you may recall the advertisement sponsored by IBM a year or so ago where someone went shopping in a grocery store, filled up a cart and walked out the door without paying. It is because every little item in that cart contained an RFID tag that automatically read the signal as the individual passed through the door. It just sped up immensely the way of doing business. It is used a lot for inventory tracking. Many of the major department stores are now insisting that goods coming in are RFID tagged. It is used for drug control and drug tracing, for example. Many applications from both a safety and security perspective that are enabled by RFID are taking place. These are short-range wireless communication devices.
In 2009, it was predicted that more than 2.35 billion RFID tags would be sold. This is just the beginning. We are not at widespread deployment yet. We will see a lot more RFID, and again Canadian companies are developing solutions to do that.
On slide 24 I have highlighted some of the Canadian companies actively playing in the international marketplace in RFID technology.
Slide 25 talks about a relatively new technology called software defined radio, SDR. Traditionally, if you wanted to use a different frequency or a different type of communication device, you had to buy another piece of hardware. With software defined radio, you use the software to reconfigure the radio to meet your particular needs to service the particular frequencies. If you are part of an emergency response crew that is composed of firefighters, police and ambulance services, you want to be able to talk to each other. With radios equipped with software defined capability, they can all configure their radio. They can do that without having to buy another radio or carry three handsets in order to communicate.
Again, it is Canada's Communications Research Centre, which is part of Industry Canada, that has been the leader in the development of this particular technology, in setting standards for it and licensing the technology.
Senator Fox: Excuse me. I am having trouble following in the French text. I know that French is more concise than English, but the French text ends at page 22 and the English text goes to page 30.
Mr. Parsonage: I am horribly embarrassed by that.
Senator Fox: Do I have a wrong copy of the French text? Do you have 30 pages? We are more concise in French.
Mr. Parsonage: We are more concise in French. I will see that that is corrected — my apologies for that.
I am glad people were paying attention. I thank you for that, sir.
Again, I do not know how rapidly software defined radio will take off, but it has tremendous potential to totally redefine how radio communication is done and how easily it is done.
Companies on slide 26 in the English deck deal with spectrum signal processing. Zeligsoft is a company that is using this technology today for deployment. It is primarily being tested out in military applications, and then I cannot say any more.
The last technology I want to talk about is ultra wideband technology. This is a new technology just now under development, which is for very high bandwidth, high-capacity short-range radio communication. The standards are still evolving internationally, but Canada is at the table, helping define those standards to ensure that Canadian companies can participate in the development of devices that use this technology for deployment in markets. The big challenge is that there are always the battles over standards until the standards are wrapped up. This is a new technology that has the ability to revolutionize what is happening within the household, for example, in terms of communication and controlling devices.
Again, some of the companies are doing some deployments and testing now, as I indicate on slide 28.
Let me summarize on slide 29 by saying that our leadership in wireless continues despite some of the turmoil taking place in the marketplace. We are building in Canada the next generation of mobile cellular infrastructure. We are setting standards in some of the newer emerging, evolving technologies. We are the leader in mobile wireless devices, and we are exploring new technologies that will continue and will assure ourselves a leadership position in the future in this particular area.
The last slide gives the various industry associations and sources within the Canadian government for further information on the technology, the companies and the support available to Canadian companies. I am open for questions.
The Chair: Thank you so much, Mr. Parsonage. Your presentation was very interesting. We will take the information with us when we come back to our study because it is very important data for us. We need it. I hope we can get other copies that we can take with us next week when we go to London and Paris, so that we can answer properly the questions that we might have from them.
In a conference you gave in 2008, you said that information and communication technology is fundamental in enabling technologies, which in turn are enabling advances in health, security, transportation and so on.
You added that a tipping point was the invention of the Internet. Will the improvement to wireless access of Internet be the next thing to advance the way we live and the way we do business? Is this the next tipping point?
Mr. Parsonage: You are asking me to speculate again.
The Chair: You have done a good job so far.
Mr. Parsonage: I have witnessed the introduction and the explosion of the Internet throughout my career as Director General at Industry Canada. Being also responsible for Canada's Advanced Research Network, CANARIE, and CAnet, I have seen what some of the next generation of applications will be. Wireless is clearly the route things are going, and wireless access to the Internet will, I think, profoundly change how we do things.
Every time you walk into a hospital a sign tells you to turn off your cell phone; however, there are now doctors wandering through hospitals using their BlackBerrys with medical applications on them that allow them to do almost very rapid diagnosis or to receive inputs from patients they are monitoring that they could not do before. It will fundamentally transform and continue to transform how we live, how we work, how we play, how we do business — how we interact with each other.
Look at the explosion of things such as YouTube, for example. By the way, I am on YouTube as well. You can find something on me there. These are ways of communicating. The only way I can communicate with my son is through his wireless device. I send him a series of pictures and he reads them all on his iPhone. I wish it were a BlackBerry.
The Chair: The April 2009 update of the Information and Communications Technologies Statistical Overview says that the wireless communication equipment in the industry continues to be the strongest performer, growing by 19 per cent in 2008, which represents a nominal increase of $289 million from 2007.
Who are the major players in the industry that we should meet for our study?
Mr. Parsonage: I listed the top 10 Canadian players in the wireless industry on page 11 of my presentation. Clearly, those are the people with whom you should be talking. I would be happy to provide introductions to any of those companies, if that is required.
The Chair: Thank you.
Next week, some members of the committee will travel to Paris and London to meet with officials and business representatives for this study. Can you tell us how our industry compares to the industries in the U.K. and France?
Mr. Parsonage: I do not have a statistical package in front of me here that does that type of benchmarking. However, my understanding, from the analysis that has been done by my economists — I can undertake to give you further information on this — is that we are doing very well, particularly relative to France. The U.K., I think, presents more competitive challenges for us, but let me come back to you with some more specific information very quickly on how we stack up.
The Chair: Please, and we will distribute that to the members of the committee. Thank you, Mr. Parsonage.
Senator Fox: First, I wish to say that Industry Canada has done an extraordinary job of leadership in this country over the years, and continues to do so. You probably have your detractors somewhere, some people are always unhappy, but on the whole I think Industry Canada has done a tremendous job in taking the appropriate leadership. It really is an example of how government and industry can work together to get some extraordinary results.
Before I get into my questions, I was quite astounded to see the figure of $6.2 billion in R&D. We had a presentation last week with the aerospace caucus, which is a non-partisan group of MPs and senators from the aerospace industry. If I recall their number, it was something like $2 billion a year, and here I see that the R&D in this industry is $6.2 billion, which is quite extraordinary. It says a lot about the success story of the communications industry in Canada.
Getting back to the role of the committee, when I look at the mandate of the committee, and I think you have a copy of it in front of you in the agenda, the issues that interest me more than others — obviously, there are other members who will take a greater interest in some of the other issues — are access to high-speed Internet, the financial aspects associated with possible changes to the sector and, finally, comparison to the performance in other countries. When you come back answering the chairman's request, maybe you could let us know the situation in a country like Australia with many remote communities.
Basically, my area of interest is high-speed Internet access in the more remote or rural parts of the country. We used to speak about the digital divide being mostly between developing and undeveloped countries, but it is my impression that there is, and correct me if I am wrong, still a digital divide even within this country in terms of access to high-speed Internet. I take you to your fourth slide, the last sentence at the bottom, which says —
[Translation]
Mobile infrastructure now reaches over 98 per cent of the Canadian population.
[English]
You indicated that we face a lot of challenges in this country. The statistic that is more important than the 98 per cent is the one that the CRTC gave us, that, although 98 per cent of Canadians have access to basic wireless, only 78 per cent have access to 3G wireless. Can you tell me what the challenges are in this country at the moment to extending wireless access to as many people as possible?
I will just give you an example. My office was speaking yesterday with Mr. André Jalbert of la Fédération des coopératives de développement régional du Quebec. I quote from the note that I have.
[Translation]
In Quebec, 250 municipalities do not have access to high-speed Internet, mainly in four regions: the Côte-Nord region, the Bas-Saint-Laurent region, the Chaudière-Appalaches region and, to my great surprise, the Eastern Townships. These regions account for 350,000 persons. I guess if we look at the whole of Canada, there might be a couple of million people who do not have access to what we call high-speed Internet.
Can you comment on that? You can start with what you consider to be the greatest challenges for the government. Could you also tell us whether the so-called $225 million "stimulus package", which was supposed to help extending these systems to remote areas, is still under consideration?
[English]
That is a lot of questions, I guess.
Mr. Parsonage: Thank you very much for your questions, sir. Yes, let me acknowledge that there is still a digital divide within the country. The biggest challenge that we have, by far, is the size of our country compared to many others in the world, where our populations are distributed, the cost of reaching out and servicing those particularly rural remote communities. We have made I think admirable progress with the announcement of the $225 million broadband program, which is about to roll out. I anticipate that there will be subsequent announcements on how that deployment will go. I am not personally involved in that; my colleagues are. I would be happy to bring back information to the committee as we prepare to release the rollout of that. Clearly, however, our biggest challenges are our geography and our population distribution and the cost of reaching those particular clients.
I hope that the additional stimulus package rollout of broadband to bring to the underserved communities, which is bringing them up to at least a certain minimum speed, will help incent private-sector operators to again do further work. We saw the same thing happen when we did the BRAND program, the Broadband for Rural and Northern Development pilot program we ran a number of years ago. Many communities found that, once the pilots had rolled out, other private-sector operators were moving in to develop and deploy broadband communication capabilities in those areas.
My assistant, who lives out on the east end of town, has broadband capability, which he did not have before. It is happening, but not necessarily at the pace we would like.
Senator Fox: Do you have any thoughts on how it could be financed in Canada or any knowledge of extension of broadband to rural or more remote areas? It is not necessarily rural areas, because sometimes the problem is a rather small distance from some of the bigger centres in Canada.
How has this been done in England or Australia as an example? Do you have any knowledge of how they have done it in terms of both technology and financing? I am always mindful of the CANCOM example in Canada, where basically CANCOM put a signal up on a satellite and in many cases it was brought down in remote areas by cooperatives that then, at the expense of that cooperative, redistributed in those remote areas. Is the CANCOM model one you think would be worth looking at?
I would also like you to deal with the first part of the question, as to whether you have knowledge of how other countries have been able to extend into some of the more rural or outback areas.
Mr. Parsonage: Australia is the one that has announced a program, but I am not familiar with the details of its implementation. I would have to come back to you on that, sir.
Senator Fox: Fine.
Do you have any thoughts on extension into the remote areas? We are talking about the last 22 per cent. Obviously, it is more expensive than the first 78 per cent.
Mr. Parsonage: Yes.
Senator Fox: We did go for cross-subsidization in this country some time ago on long distance and local telephonies, as you know. It allowed provinces like Saskatchewan to develop a very good telephone system up into the most remote areas of that province. Do you have any thoughts on that, or is that not your area of expertise?
Mr. Parsonage: That is not my area of expertise.
Senator Fox: What about in terms of new technologies? Are there new technologies that would make this a lot easier, a lot less expensive? Is satellite technology the only technology we can really look at for the more remote areas?
Mr. Parsonage: No, and frankly we do not pick a particular technology in terms of encouraging its deployment as some governments might do. I have indicated to you that there are new satellite technologies coming out. There are technologies such as WiMAX that do not have widespread deployment. As new frequencies are opened up by the conversion to digital television, for example, that will open up frequencies that are much more suitable for the utilization of some of these technologies. I will have to leave it to the experts to talk about whether the fact that you free up the 700 megahertz band in some areas will allow a much broader coverage with cheaper technologies.
Vecima Networks, for example, I know is running some pilot licensing to run some pilots here in Canada. I know they are actually in some worldwide deployments of this. We are following very closely with how the technology is evolving and how the frequency allocations to support those technologies are making a difference.
Senator Cochrane: Thank you, Mr. Parsonage. I too, like Senator Fox, would like to commend Industry Canada for all this work they are doing within technology.
I am also concerned about the smaller regions of the country. I look at my own region — I am from Western Newfoundland.
Mr. Parsonage: Is that Gros Morne?
Senator Cochrane: No, but I am close. I am so glad you know Gros Morne.
Access to the Internet in my area is rather slow. I come here to Ottawa and I can get on the Internet rather quickly, but back home I have to wait 15, 20 minutes. Is this connection system because of private-sector operators?
Mr. Parsonage: Yes.
Senator Cochrane: It is? Okay. Is there any sort of competition here that may resolve this problem?
Mr. Parsonage: Competition is good. I am not familiar with the situation in Newfoundland, other than I know, through my experience with CANARIE, the advanced research organization, it was one of the most expensive provinces in which to put a high-speed research connection, until there was the announcement of the second crossing — I believe that it what it is called. I believe a second pipe is in the process of being laid over to Newfoundland, which should provide more competition, at least in the advanced research area, and I presume that will trickle down into private-sector deployments as well. I am sorry; I am just not currently up to speed on that particular situation.
Senator Cochrane: You say this is happening?
Mr. Parsonage: My understanding is that that is happening.
Senator Cochrane: How long do you think it will take?
Mr. Parsonage: I am sorry; I am not currently up to speed.
Senator Cochrane: Thank you. My next question is in regards to page 25 in your briefing and the new ideas that are coming out with software. In regards to the personnel that you have, who must be fantastic if they can do all these things — I am amazed, actually, probably because of my age — how is our education system providing the children that are coming out with incentives to get involved and do these things and upgrade themselves and be aware of all these new technologies?
Mr. Parsonage: Frankly, that is a major concern of the industry. For example, in the field of computer science over the last number of years, enrolment has actually plummeted. It was down close to 50 per cent, according to a study that was done by Dr. Jacob Slonim, who is recently the former dean of Dalhousie University's school of computer science.
We are, on the other hand, still outperforming many countries in terms of our per capita graduation of science, technicians, engineering and mathematical people, but we are very concerned with the demographics of the aging population that we have here in Canada, as well as the number of people that continue to move into these streams.
This is an industry that is built on people — there is no question. It is the grey matter that drives this industry, and so we are concerned that there may not be sufficient numbers continuing to feed into the system to sustain industry growth in the long term, and so we are watching that situation very closely.
Senator Cochrane: I am happy for that. Now, the long term, how long do you predict? Five years?
Mr. Parsonage: According to work done by the Conference Board of Canada and the Information Technology Industry Council, ITIC, they are looking at shortages anywhere from 60,000 to 80,000 people, or in that range, over the course of the next five to ten years.
Senator Cochrane: Will we have to bring in people to operate all these systems and how many?
Mr. Parsonage: We have yet to see real shortages across the board. We would have seen significant wage pressure if that had been the case. We have not seen that to date. With the current economic situation, it is not a major concern for a lot of people, but it may be something that will come back to bite us as we come out in a recovery mode. We have been approached, for example, by the CIO Executive Council of Canada who have expressed concerns about it, and these are people who employ technology workers but in the retail industry, in the financing industry, in the forest industry.
Senator Cochrane: I want for them to be involved in this new technology, especially our youth, because their minds are fabulous, you know.
I am looking at the downturn in the economy. Has this affected the access to capital for them? I am talking also about the larger companies, but I think, more important, smaller companies.
Mr. Parsonage: Did you hear the report on CBC news this morning?
Senator Cochrane: I did not.
Mr. Parsonage: They were citing the cases of very grave concern about the availability of venture capital in this country today and the number of countries, particularly in this industry, that rely on either angel financing or venture financing to start up their businesses and sustain their growth until they achieve profitability. There are many companies that, the report asserts, are in dire straits and not likely to survive in the future without further injections of venture capital and availability capital. It is a very serious concern today.
Senator Cochrane: That is too bad. Thank you, madam chair.
Senator Zimmer: Thank you, Mr. Parsonage, for your presentation. It is quite impressive.
In your opinion, are Canadian firms prepared to take advantage of the opportunities within emerging markets such as China, Russia and India, and what do you propose to be the greatest impediments to entering these markets?
Mr. Parsonage: I do not particularly see a lot of impediments to doing business in these particular markets.
I was in Hong Kong several weeks ago as head of delegation for a group of Canadian companies seeking to do business in that particular marketplace — not just Hong Kong but the whole region there — along with existing players in there, trying to reinforce their connections.
We have organizations such as International Science and Technology Partnerships Canada, ISTPCanada, which is fostering bilateral research and development collaborations between Canadian companies and Chinese companies, Canadian companies and Indian companies, and shortly between Canada and Brazil.
When I look at the number of collaborations that have developed as a result of the initial deal flow that is going there, there is a lot of interest between Canadian companies in those particular market areas.
Senator Zimmer: Why is the availability of some wireless devices so delayed in Canada, such as the iPhone? We had to wait approximately a year after seeing and hearing about it in the United States. What is being done to combat this disadvantage to Canadian consumers and high-tech firms?
Mr. Parsonage: I really cannot speak to that; that is a matter of the operators and their negotiations with the suppliers of these particular devices. I cannot comment on that.
Senator Zimmer: As an observer on the board of directors of CANARIE, Canada's advanced network organization, can you tell me the selection process or criteria requirement for an organization interested in becoming connected to the CANARIE network?
Mr. Parsonage: There is what is called an acceptable use policy that has been established by the board. According to that policy, you have to be doing research or you are a public educational institution, such as a primary school or a secondary school that can get access to it, and then you can use their services as well. It is not to compete with the commercial Internet, and all efforts are made to ensure that that does not take place.
Senator Zimmer: Canada is home to many foreign multinational research and development facilities and our nation is a platform around breaking innovation. However, when it comes to commercialization and commercializing our products to the local market, we are lacking. Why is this the case and what can be done to combat it in the future?
Mr. Parsonage: We are all seeking the answer to that particular dilemma, sir. If you look at the recent report that was done by the Science, Technology and Innovation Council, STIC, it points to that very particular challenge that we have here in Canada. It was a challenge that was also enumerated in the Rockman report on commercialization a number of years ago. We have not found the solution yet.
Senator Mercer: Mr. Parsonage, thank you very much for coming. Your presentation has been very informative. I agree with the chair that this is something we should keep with us as we move through the study.
I want to take you back to page 11 for a moment. I think I know the answer to the question, but I think it should be asked. You have your ranking from one to ten and then you have your ranking from one to ten in 2007. Number four did not make the list this year. Is that Nortel?
Mr. Parsonage: No. This is a compilation that is done by the Branham Group. Some companies do not respond one year to another.
Senator Mercer: So we cannot read anything into that.
Mr. Parsonage: I cannot make any comparison there.
Senator Mercer: I was curious to go to Senator Fox's comment, a sidebar on Nortel, which we have all owned parts of over the years.
You did say at the beginning that there are 21.5 million wireless phone subscribers in Canada with a penetration rate of 61 per cent, which is phenomenal. I, too, can only communicate with my son and daughter-in-law by their cell phones. They do not have a landline and may never have a landline.
One of the difficulties with this phenomenon is the fact that there is no way that it can be used in another means, not necessarily that it should be, I guess. However, as someone who has often used polling in his career and wants to reach Canadians to ask them their opinion on different things, we do not have a central registry, as a telephone book, as we do when we have a landline. I have a landline in my home in Nova Scotia. My name appears in the phone book, but I also have a cell phone number and that does not appear anywhere, other than on the list of people to whom I give my cell phone number.
In the democratic nomination campaign, Mrs. Clinton appeared to be closer to Mr. Obama than the outcome would show. An explanation for that is that many of Mr. Obama's supporters were younger Americans who only had cell phones and, of course, were not polled. They could not be polled because nobody had access to their numbers.
It is not just politicians, of course, that listen to polls. Businesses rely very heavily on polls to help them identify whether they are doing well, not doing well, what products should be developed, which ones should be dropped.
How will we manage this if we move to a society with 50 per cent of total connections as wireless? How do we get at that 50 per cent to find out what they are thinking to help the rest of us do what we do?
Mr. Parsonage: You pose a very good question, sir, for which I really do not have an answer. I look at how I am invited to participate in various surveys — on the Internet, click here, answer here, yes, no, back on my emails. You pose an interesting challenge. I would have to raise the issue with my colleagues in our telecommunications policy group.
Senator Mercer: I would appreciate it if you would. It is an interesting challenge there.
On page 18, you introduced us to the Canadian government's Communications Research Centre. You talk about conducting world-class public-sector research into WiMAX, which is very good news.
Two quick questions about the Communications Research Centre: One, where is it located? Two, are we keeping up with the rest of the world? Is government providing enough money to Industry Canada to do the good work that they are doing at the CRC?
Mr. Parsonage: The Communications Research Centre is located in the west end of Ottawa at a place called Shirley's Bay near Kanata. I am sure the president of the research centre, Dr. Veena Rawat, would be more than happy to host a delegation of a tour of its facilities. I am sure I can make that commitment on her behalf.
Are we keeping up? That is a question that remains unanswered. The Communications Research Centre is being reviewed at the moment in terms of its mission mandate and funding. I would have to defer until the results of those reviews are done before I could answer that question.
Senator Mercer: My final question: You showed us a list of a number of global wireless leaders and then of course you showed us a list of Canadian companies who are leaders in that group, RIM being the darling of them all because of the penetration of BlackBerry. You will notice that almost all of us around here, other than the chair, has one.
Should we be concerned that a number of these Canadian companies come so far with development and then are being absorbed, swallowed, purchased by multinationals elsewhere? RIM's two major operations are in the Kitchener- Waterloo area and in my hometown of Halifax, but their product is not made in the country. The product is assembled and made elsewhere. Should we be concerned about that as well?
It is great to have the intellectual ideas and to have the backroom shop stuff, but there is really a lot of money and a lot of jobs on the manufacturing side, too.
Mr. Parsonage: The real value is in the intellectual property and design that goes into it. I have an example. When you look at the global value chains, there is a company here in town that actually designs a chip. The chip is fabricated in Taiwan, packaged in Japan, tested in the United Kingdom and then shipped to China to be assembled into a box that gets shipped back here to the Library of Parliament. It is a very global world out there, and you want to ensure that you maintain your competition and that you are competitive at all phases of those operations. That will shift from time to time.
The manufacturing, typically, is done in massive assembly plants that are, for example, owned by Canadian companies, such as Celestica in Suzhou, China, and so benefits accrue there. But the real value-added is done back here in Toronto. How to manufacture that is where the real value-added is. In some cases, we would lose our competitive performance and therefore our access to the global marketplace where we will be succeeding. I would not want to restrain Canadian companies from making the logical decisions they need to make to be cost competitive on a world scale.
Senator Dawson: Like Senators Cochrane and Fox, I am fascinated by the success of Industry Canada. However, I do remember some failures, although they are not necessarily related to your department. When Mr. Fox was a young minister of communications, the Canadian government tried to support a project on texting, somewhat similar to Minitel in France. I think it was called Teledon. It was a good project, but everyone else was going faster and they were not getting as much support as they would have liked.
Ten or 15 years later, Videoway in Chicoutimi had a test project between Banque Nationale and Canada Post trying to develop what became an Internet service. For a year and a half they asked the government for financial support. The government said the companies were all lucrative and could afford to do it themselves. Videoway agreed that they could afford to do it, but said they could do it faster with government support.
Everyone who listens to television these days hears that the Americans are going from analogue to digital television and are freeing a lot of wave frequency. We decided to do it later. What are the consequences, in Industry Canada's opinion, of delaying access to these frequencies?
Mr. Parsonage: You are asking me to speculate more than I would be comfortable doing. I would say that there are some consequences, but I would not want to predict what they are.
Senator Dawson: Mr. Chair, I do not remember when the decision was taken that we would wait two years more than the Americans to do it, but I would like to find the answer to that, because I think there might be consequences because of the speed at which things are moving. I have said a few times that there are consequences to this great progress. I fear for Canadian content and, as a Quebecer, for French content on these systems, which will become practically uncontrollable.
I would like to know why it happened and if anything can be done to speed it up. I do not remember when or who decided that we will not put cell phone numbers in telephone books, but I would also like to know who decided that, when, and why. We may be remiss if we do not revisit decisions that have been taken.
[Translation]
The Chair: We will enquire about it, senator Dawson, and let you know.
[English]
Senator Fox: Of the $6.2 billion for R&D, how much comes from the government? What government programs apply to R&D in this area?
Mr. Parsonage: That $6.2 billion is the expenditure by private-sector participants. The greatest government contribution to overall R&D spending is through the Scientific Research and Experimental Development Tax Incentive Program, SR&ED.
Senator Fox: My next question relates back to the digital divide and the 350,000 people in those four areas of Quebec who do not have access to high-speed Internet. Is it possible to have a map drawn by Industry Canada showing the digital divide and the areas where these people do not have access to high-speed Internet? If there are 350,000 in these areas of Quebec, there may be other areas of Quebec where this is the case. I am sure it exists in every province.
It would be interesting to see where that digital divide is and what distance they are from major centres. We all know this is the case in the Far North and other remote areas, but I think such a map would show that there are many areas fairly close to larger cities that do not have access. We are interested in illuminating the digital divide in Canada because it has real consequences from a social, economic and health point of view, because people will not have access to the same kinds of services.
Mr. Parsonage: I believe that information could be made available. I will undertake to check that out when I get back to you.
Senator Eyton: Thank you for being here and for your presentation. I missed a bit of it, but you referred to 50 companies, probably 20 different technologies, and a variety of applications. I expect that we all have the sense that this area is rapidly changing, but you did not use the word "convergence." I have my own uninformed sense that we will end up with something the size of my BlackBerry that does everything you referred to here, with probably four or five suppliers of the service rather than the range of companies and technologies that you have mentioned here.
Can you comment on that, please?
Mr. Parsonage: There is no doubt that the market will develop in ways that we cannot foresee, but it is not only the physical hardware devices that we use, it is the applications on those devices, applications that are infinite in terms of what is likely to be available to us. That is an area that is high value-added and demands extreme use of our intellectual capabilities, for which Canada is noted. I am certain we will continue to do very well in that area, regardless of what physical device we end up carrying.
Senator Eyton: As John D. Rockefeller found out, if you are in control of the ultimate supply of the goods to the customer, the business is yours.
Mr. Parsonage: That is what Research In Motion is doing.
Senator Eyton: That is right. You have not referred at all to convergence, but you think there will be massive impacts on the numbers, the technologies and the companies you have identified here today?
Mr. Parsonage: Yes.
Senator Eyton: We have embarked on an ambitious study. I am sure you have seen the mandate of the committee. It will try to understand the mix of companies, technologies and applications to which you referred.
I want to cheat a little bit, and perhaps abbreviate our work a little, by asking for your view on a few fundamental questions for this committee.
First, in this descriptor, in what area are Canadians most lacking? Second, who can we learn from? Here the premise is that there is always someone who does things better than you. There is always a stalking horse from which you can learn. If there is an area where we are lacking, as I assume there is, where can we learn to address that lack? Third, if this committee were to make one recommendation as a result of this study, what should that recommendation be?
If you are accurate in all of those, we can all go home.
Mr. Parsonage: Yes, and I will quit my job and invest strategically, because I will have the right answer.
I may not be able to deal with all of your questions, but I will deal with the first one about where we are lacking.
It has been demonstrated repeatedly that we as Canadians are absolutely great at inventing. We are extremely innovative. The biggest challenge is in deriving economic value from those inventions through the process of commercialization. This is pointed out in the various studies commissioned by governments and other groups throughout Canada, the most recent one being the STIC report from Howard Alper's committee. We are good at the innovation process. We are not the good at the commercialization process and making a lot of money in the marketplace. That is what it is all about. It is translating those ideas into the creation of wealth here in Canada. That is where I would say our biggest challenge is.
Where can we learn? We can learn from any countries that are out there. We are actually benchmarking ourselves against them in the process of those studies — for example, Finland, with Nokia, and other companies associated with it, with Ericsson in Sweden, and with the United States, which is probably the pre-eminent innovator and commercializer in the world, looking at the types of things they are doing.
I have tackled your first two questions. With regard to your last question, in terms of what one recommendation I would make, I will leave you on the look for that one.
Senator Eyton: That is a vast disappointment. Thank you very much.
Senator Housakos: Madam Chair, I suspect the fact that you do not carry a BlackBerry is probably the reason you are always so calm, cool and collected.
The Chair: It is experience.
Mr. Parsonage: Let me share something with you. When my computer blew up a number of weeks ago, the techies put a password on it — "calm."
Senator Housakos: I have only one question for our witness. I would like to have your view in regard to how the government is using all this vast technology it has at its disposal in terms of the Internet and wireless. What is your view from one department to another in terms of whether we are really maximizing all this technology at our disposal to become as efficient as we can within the civil service? Are we using this technology to maximize the results that we are giving back to our end users, which are citizens, Immigration Canada, Public Works and the various departments?
Mr. Parsonage: I am not qualified to comment on that. You would have to talk to the chief information office. Treasury Board is probably best to give you the situation and viewpoint as to how the government is deploying its information technology assets.
I know we have made some significant strides. Canada was a leader in the world in putting government online. We were known for what Canada had done and we were emulated by many other countries in the world as a result of the initial work that we did and the government's initiative to put the government online.
Senator Housakos: Do you feel that Industry Canada, being your department, from your personal point of view, is maximizing technology? You know the technology that is out there probably better than most. Do you feel that your ministry is maximizing it?
Mr. Parsonage: I have it in my hot little hand.
Senator Adams: I come a long way from Ottawa. We still have problems similar to those Senator Cochrane mentioned. We have slow Internet technology, slow emails and things like that. Maybe you have more information as to whether there will be an upgrade or not. Nunavut has been asking for the last couple of years. Broadband would work up there, especially in the schools. We have three official languages — English, French and Inuktitut. Everything should be upgraded in the schools. We have a lot of dropouts. If we had more high-speed Internet, it might help teaching in the schools and the communities.
We have 25 communities. Many times the teachers come from South; they do not speak our language, and often they do not speak French. Can you look into the situation in Nunavut?
I do not know whether you are familiar with Nunavut. It is a long way from Ottawa.
Mr. Parsonage: To be honest, sir, I am not personally familiar. It is on my list of things to do in Canada. However, my department has been active through its previous program, its Community Access Program, in providing services there. I can remember very clearly some videos that were taken, and I believe shot in Nunavut, of children using the Internet and communicating with kids in Florida. One was showing pictures of the polar bears in the zoo and the other was showing pictures of polar bears on the ice.
I also recall one other situation when we provided the Internet connection with the teacher saying to the children in this very rural, remote area, "What will this do for you?" The little child piped up and said, "It will take us wherever we want to go."
That philosophy sank in and resonated with me. I am a firm supporter of doing what I as a Canadian can do to make sure everyone is connected.
Senator Adams: One small community, Arctic Bay, tried to put together on the Internet something to do with climate change and how much effect it has had on people in the community, telling the world we understand too about climate change, how much has changed with the mammals. That is a good thing.
The Minister of Indian Affairs was there over a month ago. He picked out the three best locations to monitor climate change in the future, among Pond Inlet, Cambridge Bay and Resolute Bay. Your department right now is looking into it and will set up equipment this year that will cost about $2 million. If you find out where the best place is to put the equipment, you will spend over $80 million. Are you aware of that?
Mr. Parsonage: I was not aware of it personally, sir.
Senator Cochrane: I had an experience last week on a webcam with a classroom from Nunavik, Northern Quebec. I was talking to them and they were talking to me. It is a fabulous way of communication. I was educating them about the Senate, of course. It is wonderful. This morning I got some pictures from them. The whole event was beautiful.
How is our tax system structured to promote research and development? Is it adequate or are there some elements that we could strengthen?
Mr. Parsonage: The primary vehicle that is being used in the tax system to support research and development is SR&ED, which is applicable to all companies performing research and development here in Canada. The ICT industry is the biggest user of it because of its very strong R&D contribution to the economy. There have been submissions made by the industry associations in the various budget proceedings for proposed changes to help strengthen the application of the tax credit so that it would be, in their view, more effective for supporting their research and development efforts. I would commend those to your reading. I would be happy to pull those submissions and provide them to you.
Senator Cochrane: Do we need to do something to strengthen it further?
Mr. Parsonage: Yes, in the view of the industry associations.
Senator Cochrane: Are we going to do that? Are we in the process of doing that?
Mr. Parsonage: Some of them are under active consideration, yes.
The Chair: Thank you so much, Mr. Parsonage. It has been a most interesting morning for us. We learned much more than we already knew on the matter. We will be waiting for further information from you. We do appreciate your presence here with us today.
Mr. Parsonage: Thank you for the privilege.
(The committee adjourned.)