INDU Committee Report

SUPPLEMENTARY OPINION BY THE NEW DEMOCRATIC PARTY OF CANADA

Bridging the Digital Divide:

In the 21^st century digital economy, broadband internet has undeniably become critical infrastructure that forms the backbone of e-commerce and innovative technologies. Therefore, while being online is a prerequisite for e-commence, high speed networks are a necessity in order for Canadian businesses to compete in an increasingly global e-commerce market.

On March 14, 2012, the Minister of Industry unveiled the long awaited rules that would preside over the upcoming auction on the valuable 700 MHz spectrum, but it has yet to release its Digital Strategy though the rules for the auction are no doubt a cornerstone of any such strategy. As such, Canadian citizens, businesses, community groups and other stakeholders now know the rules that will shape the development of the telecommunications and internet markets and e-commerce, but not the strategy which this framework supports.

Large swaths of Canadian businesses and consumers that live outside urban centres continue to lack access to high-speed broadband capabilities, cutting them out of the digital economy. Access to high-speed broadband Internet would limit this problem by allowing business development, tele-commuting and access to important scientific tools for data sharing. Without equitable access to high-speed broadband many businesses in rural and remote regions will lose their ability to compete in an increasingly global economy, something which the Government has a major responsibility in preventing.

Similar to 20^th Century infrastructure projects like the deployment of electricity grids, the government has a clear role to play in bridging this digital divide which exists between urban and rural regions.

In light of these facts, the Official Opposition recommends that;

·         The government of Canada now publically release as soon as possible its long-awaited digital strategy so that all stakeholders, especially businesses, have the ability for long-term planning.[i]

·         The Government of Canada define an innovation and economic development policy, and make high-speed Internet access and e-commerce adoption one of its foundations.

·         The Government of Canada set aside proceeds from the upcoming 700mhz Spectrum auction for strategic reinvestment in the deployment of broadband infrastructure in Canada`s rural and remote regions.

·         The Government of Canada improve mobile internet and smart phone access for all Canadians by strengthening weak rural build out requirements for spectrum licensees and helping to establish market conditions that favour the provision of high quality high data mobile services to rural areas.

``Governments have stepped in before for similar reasons. In the case of electricity, government stepped in to support remote and underserved areas, because economically it didn’t work. If government decides that this is an area that`s so important that everyone needs to be covered, then this is an area where government should step in.”[ii]

-          Bernard Lord, Canadian Wireless Telecommunications Association.

“I would also offer that urban Canadians should be as concerned about the ability of rural Canadians to get access to broadband. Let’s remember that the significant portion of this country’s GDP actually originates in rural and remote regions of the country. [...]It’s an absolutely critical discussion to getting wireless broadband service into rural communities. We have everything we need as an industry or as a sector to get to 100% broadband reach”.[iii]

-          John Maduri, Xplorenet

Filling the Knowledge Gaps:

Canada`s data collection system in regards to e-commerce and ICT fails to accumulate key statistical information which would allow government and industry leaders to properly assess the state of e-commerce and ICT adoption in Canada. Moreover, many SME`s lack the key information related to the benefits to their business models which accompany e-commerce solutions and ICT adoption.

In light of these facts, the Official Opposition recommends that;

·         The Government of Canada provide funding for and request that Statistics Canada re-instate the Survey of Electronic Commerce and Technology, which was discontinued in 2007.

·         The Government of Canada should also direct Statistics Canada to produce disaggregated data on ICT use, adoption and payoffs by Canadian SMEs to reflect important differences between business sectors.

·         The Government of Canada, through the Business Development Bank of Canada, publish a guide for small and medium sized enterprises specifically devoted to e-commerce while allocating additional resources to promoting and communicating the availability of such services to the SME community.

·         That alongside its Digital Technology Adoption Pilot Program (DTAPP) the government direct the BDC to extend the delivery of the ITC Solutions Programs to provide additional guidance and counseling to Canadian SMEs in their adoption and use of ICTs. 

“It's critically important to disaggregate the data so that you have a really good picture of where the success stories are and where the failures are. I don't think we do that enough”.[iv]

-          Prof. Wendy Cukier, Ryerson University.

“There exist psychological obstacles preventing businesses from getting online, namely that they think it's costly and hard to do”.[v]

-          Jacob Glick, Google Inc.

The Government as a Leader in E-commerce Adoption:

The Government of Canada can and should be playing a leadership role in the adoption of e-commerce solutions. Demonstration of this leadership role should come in the form of Government of ICT adoption and the implementation of e-commerce solutions for Canadians seeking to communicate with the government or access government services.

In light of these facts, the Official Opposition recommends that;

·         The Government of Canada become a “model user” of e-commerce and online solutions in its procurement practices and delivery of services to its citizens.

·         The Government of Canada ensure that it`s Information Technology systems are secure from potential security threats to avoid lengthy shutdowns of Government of Canada online services.

``Make government a leader in using e-commerce strategies in providing services to the public, including online payment processes, vending auctions, etc. This isn't just about getting government to buy more e-widgets from a particular vendor. It's really about making the business of transacting with governments, as a citizen, as easy as business itself aspires to make commercial transactions.``[vi]

-          Jacob Glick, Google Inc.

Regulating Electronic and Mobile Payments:

The rapid emergence of mobile payments technology is dramatically altering the landscape of the electronic payments system in Canada. According to leading industry analysts, academics, and other observers, mainstream adoption of mobile payment technologies is expected within two years and will lead to a complete reworking of the payments value chain.

In light of these facts, the Official Opposition recommends that;

·         The Government of Canada develop robust regulations for electronic and mobile payments in order to establish standards and to make the rules transparent and fair for all stakeholders, particularly small and medium sized businesses, entrepreneurs, and consumers.

·         The Official Opposition recommends that the Government of Canada immediately begin modernizing Canada’s payment systems by implementing the recommendations of the Taskforce for the Payments System Review which would ensure that Canada remains competitive in an increasingly electronic global market, while taking advantage of significant productivity gains.

``There must be clear rules of the road which everybody complies with to reduce risk, sustain trust and facilitate involvement and participation.``[vii]

-          Prof. Jacques St-Amant, UQAM

``Canada has failed to build the competitive legal and policy e-commerce framework, and we now live with the consequences.”[viii]

-          Prof. Michael Geist, University of Ottawa

``My members are regulated to the point that if they offer a cup of coffee to their customers they have to pass through a whole bunch of government inspectors – and yet there`s this huge section of the economy in the payments industry that has had virtually no regulation. It`s effectively the wild west.``[ix]

-          Dan Kelly, Canadian Federation of Independent Business

The Cost of Processing Electronic, Online, and Mobile Payments

The cost associated with processing electronic payments continues to hamper the competitiveness of Canadian business in the global market. From the cost of processing traditional point of sale electronic payments made via consumers` smart phones to the cost of processing online transactions, Canadian business is struggling to keep pace with their international competitors due to prohibitive cost structures which drive up the price of accepting electronic payments in Canada, ultimately resulting in reduced profit margins for merchants and higher retail costs for consumers.

 In light of these facts, the Official Opposition recommends that;

·         Debit Card co-badging restrictions currently included in the Voluntary Code of Conduct should be extended to online and mobile tap-and-go transactions., while simultaneously ensuring that any technical issues relating to the drafting of the VCC are clear to make certain that consumers` payment information can be stored on a single mobile device.

·         The Government of Canada continues its support of the Interac payment system, which provides business and consumers with a safe, secure, and cost effective means of processing electronic payments in Canada.

·         The Government of Canada mandate the full public disclosure of the per transaction cost of merchant discount rates charged by Credit Card companies and other payment processors to business in Canada in order to facilitate a heightened understanding amongst business and consumers as to how a chosen payment method affects the competitiveness of business and the end cost to consumers.

·         The Government of Canada undertake further study into the means of allowing Canadian merchants the ability to choose the option of surcharging, based on the method of payment at the point of sale as a method of reducing the cost of processing electronic payments in Canada.

``In many cases merchants pay significantly lower fees for accepting debit card transactions than for accepting credit cards. A credit card fee for a merchant may be up to 3% of the total purchase price, whereas for debit in this country, it's usually fixed at about 12¢, regardless of the size of the purchase. However, in many cases consumers aren't aware of that, and consumers aren't aware that merchants may be paying higher fees.”[x]

-          Matthew Kellison, Competition Bureau

``It`s very hard for small or medium sized merchants to actually set up in Canada, and once they do, their cost for a credit card transaction is 3.5%, which is quite high ... it`s 3.5% in Canada and 1.9% in the U.S.``[xi]

-          Samer Forzley, Market Drum, Ottawa Centre for Regional Innovation

``The code does not protect the online world and the mobile world.``[xii]

-          Diane Brisebois, Retail Council of Canada

Online-Security and Digital Literacy

Increasing online security, digital literacy, and overall consumer confidence in the online marketplace amongst both Canadian consumers and business is necessary to encourage widespread adoption of e-commerce activities in Canada.

Therefore, the Official Opposition recommends that;

·         The Government of Canada set up a digital literacy task force which includes industry leaders, consumer groups, and other relevant stakeholders, to increase consumer, retailer, and SME confidence, trust, and a more thorough understanding of their rights and obligations in the online marketplace.

·         The Government of Canada address digital literacy by simplifying the terms and conditions for e-commerce transactions, including making the language of these service agreements more clear for consumers to understand.

·         The Government of Canada begin viewing financial literacy and digital literacy as being increasing intertwined due to the anticipated widespread adoption of electronic and mobile commerce payment systems. 

·         Ensure that consumers and small businesses have a single source regulatory framework in order to address complaints and offer an independent method of recourse for remediating these complaints, based on the model already in place for the Ombudsmen for Banking Services and Investments.

``We need really solid education for businesses, consumers, and citizens in Canada to ensure they understand what they're doing when they're using these types of capabilities, as well as to really drive adoption.``[xiii]

-          Ken Cochrane, KPMG Canada

``View digital literacy as a core skill for all Canadians.``[xiv]

-          Jacob Glick, Google Inc.