Microsoft Response to the Consultation Paper on a Digital Economy Strategy for Canada

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Submitted by Microsoft Canada 2010–07–09 13:26:36 EDT
Theme(s): Building Digital Skills, Canada's Digital Content, Digital Infrastructure, Growing the ICT Industry, Innovation Using Digital Technologies


Microsoft welcomes the opportunity to respond to the Government's Consultation on a Digital Economy Strategy. As a company that has made significant investments in the local market, we share the Government's view that the right innovation framework for ICT will lead to a more prosperous and successful Canada and a better quality of life for all Canadians.

Canada has important strengths that make it "innovation friendly" — among them a highly educated workforce, a stable regulatory regime, and top tier research institutions. But more is needed, including:

Enhancing Canada's capacity to innovate using digital technologies

Broad–based ICT deployment by enterprises has been demonstrated over and again to improve business productivity and drive economic growth. There is no better way for the Canadian Government to promote this ICT uptake than to lead by example — modernizing its current IT systems and being a vocal early adopter of next–generation technologies such as cloud computing and e–health and green IT solutions. To give users the confidence to embrace these new technologies, it is also essential that Canada have robust online privacy and security regimes.

Building a world class digital infrastructure

New online services and computing models require a pervasive and robust digital infrastructure to succeed. To that end, Canada's enterprises and citizens must have access to affordable, high–quality broadband service — including in remote and rural areas. Maximizing the use of spectrum will be essential to achieving this objective.

Growing Canada's ICT industry

Given the increasingly global nature of ICT development, the Strategy must focus not only on spurring Canadian innovation, but also on how best to make Canada a "destination of choice" for third country innovators. To achieve these complementary goals requires widespread, affordable Internet connectivity; strong support for R&D robust IPR protections; a coherent regulatory regime; and a skilled local workforce among other things. Government procurement policies that allow all ICT providers to compete on a level playing field are also critical.

Creating Canada's digital content advantage

Content drives the digital economy. To ensure that Canada's content industry remains vibrant, Canada must move quickly to modernize its copyright regime. Absent meaningful copyright protections for content creators, our best ideas are at risk of being stolen and our brightest minds will relocate to markets that respect their rights.

Building digital skills for tomorrow

As ICT becomes increasingly pervasive in our daily lives, Government and industry must collaborate closely to ensure that all Canadians have the requisite skills to participate in the broader e–economy. This includes measures to better integrate technology into classrooms and curricula, to prioritize lifelong learning, and to provide Canada's disadvantaged with access to technology and the training to use it.

We encourage the Government to maintain an open dialogue with stakeholders as it develops and implements its Digital Economy Strategy. Making Canada a global leader in the digital economy will require a strong public–private partnership. Microsoft stands ready to assist.


Microsoft appreciates the opportunity to respond to the Consultation Paper on a Digital Economy Strategy for Canada, "Improving Canada's Digital Advantage: Strategies for Sustainable Prosperity."

As the Consultation Paper recognizes, Canada has significant strengths — among them, a highly–educated workforce, a stable regulatory regime, and top–tier research institutions. Yet despite these advantages, Canada's Information and Communications Technology (ICT) sector is growing relatively slowly and Canadian industry invests less in ICT than industries in other major developed countries. At the same time, Canada's Government has not consistently been an early technology adopter. A comprehensive Digital Economy Strategy that seeks to address these and related challenges is essential if Canada is to remain competitive in the global Information Economy.

The Digital Economy Consultation is particularly timely given that the Information Technology (IT) sector has begun what is likely to be a significant transition. The traditional model of computing — centered on personal computers and local networks — is gradually being augmented by a model in which IT functionality, including data storage, software applications and other services, are available remotely, in the "cloud," and accessed over the Internet. This computing model enables users to benefit from powerful computing platforms and a diverse range of software whenever and wherever necessary — and without needing to make significant capital investments in their own hardware, software and IT support.

Cloud computing promises to drive economic opportunities both within and outside the IT sector. The IT industry already makes important contributions to Canada's economic success, employing over 860,000 Canadians and generating nearly $43 million in tax revenues in 2009. The market research firm IDC predicts that over the next four years, the IT market will drive the creation of a further 1,000 new businesses and 84,000 jobs. With the proper innovation framework in place, next–generation computing models — complemented by other innovative technologies such as ehealth, e–learning and green IT solutions — will create opportunities in software innovation, web–based services, infrastructure, IT support and related sectors, potentially driving these estimates even higher. The use of these technologies will also increase the productivity of Canadian enterprises and will help Canada to better achieve important social goals such as efficient delivery of healthcare services and mitigating climate change.

Achieving these objectives will require government investment and policy leadership. With this in mind, our 20 recommendations for Canada's Digital Economy Strategy are as follows:

1. Enhance Canada's capacity to innovate using digital technologies by:

  • Being an early and vocal adopter of ICT solutions.
  • Enhancing user confidence in the security and reliability of ICT technologies.
  • Providing enterprises, including SMEs, with access to and the ability to use a broad range of ICT.

2. Build a world class digital infrastructure by:

  • Promoting competitive broadband delivery.
  • Maximizing the availability of spectrum.
  • Increasing broadband access in underserved areas.

3. Grow Canada's ICT industry by:

  • Expanding incentives for R&D.
  • Providing robust intellectual property protections.
  • Developing a regulatory regime that fosters next–generation technologies.
  • Embracing technology neutral, market led innovation policies.
  • Preserving a barrier–free global market in ICT solutions and services.

4. Give Canada a "digital content advantage" through:

  • A modern copyright regime.
  • A coherent regulatory framework.
  • Measures to ensure that all Canadians can participate meaningfully in the Digital Economy.

5. Enhance Canadians' digital skills by:

  • Strengthening Canada's early education system.
  • Utilizing public–private partnerships.
  • Ensuring that every school, teacher and student has access to devices, tools and connectivity for digital learning.
  • Supporting collaborative, relevant and personalized learning.
  • Embracing the concept of lifelong learning.
  • Narrowing the digital divide.

We describe each of these recommendations in greater detail below.

I. Canada's Capacity to Innovate Using Digital Technologies

Canadian firms consistently invest less in ICT than their competitors in other developed markets. In fact, Canadian ICT investment severely lags that of the United States and other economies like Great Britain and Sweden, and is trending downward.

Broad–based ICT deployment and quick adoption of emerging technologies by enterprises have been demonstrated over and again to improve business efficiency and productivity and to drive job creation and economic growth. To reap these benefits and ensure that Canada can continue to compete in the global marketplace in coming decades, the Canadian Government must play a leadership role in both the policies it adopts and the technologies it deploys. Ultimately, the Government should seek to drive ICT adoption and adaptation across all enterprise sectors. Encouraging consumer uptake of existing and next–generation ICT technologies and promoting consumer willingness to engage in e–commerce likewise should be a priority.

To achieve these goals, we encourage the Government to:

  • Lead by example. With the value of the public sector market exceeding $7 billion in Canada, federal, provincial and territorial government authorities are in a strong position to serve as model users of ICT. By being an early and vocal adopter of emerging and next–generation ICT solutions, the Government can help to drive ICT uptake in the private sector. Early adoption will assist the Government to achieve other key objectives as well. The use of cloud–based computing solutions, for example, will allow Government to reduce IT costs while improving citizen access to government services and making the process of governance more transparent, efficient and inclusive; cloud–based technologies can also help Government to deliver more effective health care services, to expand the accessibility of education and to reduce IT energy consumption.

    The Government of Canada has taken important steps toward embracing new technology solutions, allocating $500 million to Canada Health Infoway, for example. As demonstrated by the recent Report of the Auditor General of Canada to the House of Commons on Aging Information Technology Systems, however, many challenges remain. For example, aging IT poses risks to the delivery of public services, the productivity of Government workers, and the security of Government networks and information.

    We strongly endorse the Auditor General's recommendation that, as a first step, CIOB should undertake a comprehensive agency–wide analysis of the current state of Government IT systems and of needed reforms, and we are pleased that CIOB itself has set an April 2011 deadline for finalizing this assessment. We also welcome CIOB's proposal to develop guidance to assist Government departments to address ever–greening for mission critical IT systems.

    In parallel, as the Government moves to address aging IT, we also encourage it to consider what emerging IT solutions it might adopt to advance key national priorities such as improving health care. Affordable, accessible, quality healthcare is a priority for Canadians, and a service that Canadians expect Government to consistently improve upon. As a result, healthcare spending in Canada now exceeds $100 billion annually and accounts for 10% of Canada's GDP. This leaves the Government facing the dual challenge of controlling costs while ensuring that services meet the needs and expectations of citizens. We believe that technology adoption by clinicians, administrators and consumers of health services is critical to helping achieve improved services while managing costs. Providing healthcare workers with the right technology can also help them work more quickly and efficiently, and help increase the rate of innovation and positive change.

    Energy efficiency is another area that is crucial to the health of Canada's economy. IT can help improve energy efficiency across a range of sectors and technologies — from cars that run more efficiently, to PCs and data centers that consume less electricity, to "smart meter" software programs that help consumers use energy more sensibly. For example, Microsoft's most recent PC operating system, Windows 7, has a range of features to reduce PC energy consumption. D–Link Canada became the first manufacturer to produce "green" home network Wi–Fi routers that reduce power usage by up to 40%. And Canadian companies and universities such as Bell Canada, RIM, McGill University, the University of Toronto and others are part of $50 million research consortium for carbon–neutral Next–generation Internet. Government investment in and uptake of these and other green IT solutions will help cement Canada's position as a leader in green technology, aligning closely with the objectives of the Advantage Canada initiative.

    As we describe in more detail in our response to Section III of the Consultation ("Growing Canada's ICT Industry"), it is imperative that in moving forward to update its IT infrastructure and embrace emerging technologies, the Government take a neutral, market–driven approach to IT products and services procurement. Procurement decisions and policies based on objective criteria encourage vigorous competition among solutions providers vying for government spending and ensure that the Government gets best value for money. In contrast, policies and purchases that favor particular vendors, technologies or business models — including preferences for products developed domestically — tend to stifle competition and chill innovation. Domestic preferences in particular are often difficult to implement given the global nature of today's ICT innovation, and also ignore the many critical contributions that multinational and foreign ICT firms make to Canada's economic success.
  • Enhance user confidence in the security and reliability of ICT technologies. In addition to serving as a role model for the private sector, to promote ICT uptake Governments must also tackle those issues that currently serve as barriers to ICT deployment — including a lack of consumer confidence in the security and privacy of ICT networks and solutions. Enterprises and individuals will use current and emerging cloud services only if they believe that those services can adequately protect their business and personal information. These concerns will only become more prominent as cloud–based service models become more ubiquitous, with data and applications increasingly moving to equipment and networks controlled by third–party providers across the world.

Addressing these challenges requires:

  • Protecting user privacy online: Canada has a robust privacy regime at both federal and provincial level. However, nearly a decade has lapsed since PIPEDA's adoption and — as the Government has recognized — adjustments are necessary to ensure that the law adequately protects personal data in the Information Age. Among other improvements, we welcome Bill C–29's proposed amendment of PIPEDA to implement a breach notice regime — mandating that subscribers be notified of data breaches so that they can take steps to mitigate potential harm. (The European Union has recently adopted such a requirement with respect to certain service providers and appears set to expand it further; many U.S. states also have breach notice regimes in place. We strongly encourage governments around the world to harmonize these provisions to avoid the creation of regulatory gaps and streamline the efficient delivery of these trans–border services.) Of course, the Government must also ensure that its privacy policies allow those data uses that are critical to innovation; for example, to facilitate the increased cross–border data flows driven by new computing models and other online services, Canada's privacy regime should include efficient mechanisms that enable international data transfers while at the same time providing a high degree of privacy protection. To ensure that Canadian businesses and consumers do not lag those in other countries in adopting cloud technologies, Canada should also make certain that users do not lose privacy protections when they move data from their own premises to the cloud.
  • Prioritizing online security: Microsoft has a long history of supporting law enforcement to help fight digital crime. In our experience, three elements are critical to combating digital crime successfully: (1) strong deterrence through criminal and civil enforcement with meaningful penalties and remedies; (2) well–resourced and adequately trained law enforcement authorities; and (3) cooperation and information–sharing(especially the sharing of technical expertise) between the public and private sectors and among law enforcement authorities in different jurisdictions. The recent amendment of the Criminal Code to incorporate new cybercrime offences is a step in the right direction, but more remains to be done to achieve a robust cybersecurity framework. Moving forward, the Government should prioritize rapid adoption of anti–spam legislation in the wake of the Electronic Commerce Protection Act (ECPA); ensure that law enforcement is adequately trained and equipped to enforce these new laws; and seek to promote private–public partnerships and global law enforcement dialogues aimed at making cross–border enforcement better coordinated and more effective.
  • Promoting consumer awareness: Users are often best placed to protect their security online. Accordingly, Canada's Digital Economy Strategy should include proposals to equip users to recognize risks and take steps to protect their data and networks. At the same time, greater transparency from industry on their own security practices makes sense. Providers of cloud services should be required to be maintain a comprehensive written information security program, one that provides safeguards appropriate for the use of the services, the types of data that may be stored through the services, the customers of the services, and the costs of the information security program. Microsoft has also supported the creation of a new self–regulatory code on a set of agreed "Transparency in Cloud Computing" principles — principles designed to ensure that users are able to make informed decisions when selecting their service provider.
  • Provide enterprises — particularly small and medium–sized enterprises (SMEs) — with access to and education about ICT. Canada has already taken important steps in this regard, including via the IRAP and CME SMART Programs, as well as through the provision of a capital cost allowance to help companies fund the acquisition of computers and software. In addition to funding, educating SMEs about the opportunities offered by ICTs and training them to deploy and use these technologies are also essential. Emphasis should be placed on next–generation technologies, which can be particularly beneficial for SMEs — emerging cloud models, for example, will allow SMEs to scale their IT capacity up or down, to save on infrastructure and IT support costs, and to have readier access to new IT solutions without having to make significant up–front software or hardware investments. This will leave them with more resources to hire workers and to focus their energies on their core competencies.

    Public policies that encourage enterprises to take advantage of Internet–facilitated remote work solutions, such as IP–VPN, telework and video conferencing, may similarly benefit SMEs. These technologies — which, among other things, can help to increase productivity, improve employee communication and accountability, recruit talent and reduce turnover — can often be particularly helpful to start–ups and small businesses. They also promote "green" savings by encouraging telework and facilitating other low–carbon alternatives to physical travel and commuting.

II. Building a World Class Digital Infrastructure

The Consultation Paper recognizes that an effective Digital Economy Strategy must include concrete steps to develop a more pervasive and robust digital infrastructure. Infrastructure needs have become particularly pressing in light of the advent of next–generation computing models, which require pervasive and reliable connectivity in order to succeed.

Specifically, Microsoft recommends:

  • Promoting competitive broadband delivery. Canada faces a balancing exercise in determining how best to ensure that its citizens and industry have access to high–quality broadband service — finding a future–sensitive approach that provides incentives and flexibility but is not so prescriptive that it stifles investment and innovation or compels excessive regulation. In this context, Canada might consider the suitability of a framework that allows for relatively regular review and assessment of the fitness for purpose of current requirements, without requiring legislative amendment. However, it is also important to ensure that the broader regulatory environment, including access and related obligations, remains consistent and predictable and preserves investment incentives.

    Most jurisdictions that have considered these issues have found it unnecessary to define minimum standards for business and public sector users. Market forces — driven by demand from and competition to supply such customers — have in general fostered broadband access and service supply. To the extent that business and public sector customers in remote and rural Canada are underserved, however, the strategies described below are appropriate to ensure that the market itself addresses these problems. Going further, by prescribing a minimum set of services in this sector, could risk turning an innovative and largely competitive sector into one driven by a "lowest common denominator" approach.

    Competitive dynamics vary in relation to consumers, particularly in markets such as Canada where consumer broadband markets are dominated by an incumbent fixed network and cable network operators. In response to these market structures, other jurisdictions have all reached the same conclusion — intervention may be necessary to ensure that certain categories of citizens are not excluded from participating in the broadband world, while at the same time preserving robust incentives for private–sector investment in broadband networks. Recent assessments of minimum broadband speeds required to use and enjoy many online applications and services (including e–government, e–business, e–health and e–learning applications and services) suggest a need for minimum speeds of approximately 1.5 to 2 Mbps. Such speeds are squarely within the capability of current fixed wired and wireless, cable and satellite networks, and are achievable by next–generation (or "4G") mobile networks.
  • Maximizing the availability of spectrum. There are a number of steps that are being considered and, in some cases, taken by regulators around the world in an effort to maximize the availability of spectrum for, and efficient use of, advanced infrastructure. These include:

    • Spectrum refarming. As the Consultation Paper itself notes, the analogue to broadcasting switchover is being seized as an opportunity to refarm spectrum for use in broadband infrastructure provision.
    • More efficient use of spectrum that have flowed with device and equipment innovation and development.
    • Technology neutrality. Frequency plans have historically identified the particular uses of or, in many cases, technologies for which spectrum bands can be used. Subject, of course, to interference and other safety–driven considerations, this approach is being reconsidered in a number of jurisdictions, with a view to allowing and even encouraging innovative use of spectrum.
    • Generational migration or use variation. A number of jurisdictions are currently considering how to manage "generational" migration in key bands. For example, the current use of 2G mobile spectrum is being reviewed, with a view to maximizing the redeployment of the 1800 MHz band for broadband use.
    • Shifting to "market mechanism" spectrum management. Shifting away from the traditional "command and control" model of spectrum management, a number of jurisdictions are introducing new models that allow for "market driven" and license exempt management of appropriate bands. Greater availability and use of spectrum on a license exempt or unlicensed basis allow the market to determine the most efficient use of those bands (within the scope of the relevant licenses or licenses in neighboring bands) and create significant opportunities for wireless networking at the personal, local and wide–area levels; currently, however, open spectrum is only a tiny fraction of available spectrum in Canada.

The Consultation Paper makes it clear that Canada is already considering some refarming of spectrum. This is an important step towards maximizing the efficient use of spectrum to drive broadband development. However, as noted, there are a number of other changes to spectrum management policy that could be adopted by telecommunications regulators in Canada to further accelerate the deployment of spectrum in broadband roll–out.

  • Increasing rural and remote broadband access. Remote and rural areas face significant challenges, particularly relating to broadband coverage, that differ materially from those facing metropolitan areas. Concerns over delays in rural and remote roll–out of broadband services, lack of scale to warrant upgrades in switches and technology, and price differentials are very real.

    A number of approaches are being considered in other countries with similar "digital divide" concerns. For example, policy makers have considered a variety of public investments, including for example publicly–funded and — owned infrastructure projects, government run project procurement, mobilization of governmental entities as users to drive demand and create scale, and the deployment of e–government and similar services to drive demand. Other options include the allocation of public funds to support private investment (including from universal service funds, specific rural investment schemes and tax or other similar incentives), and subsidization of rural and remote subscribers (whether through direct payment, voucher or subsidy schemes, tax credits or other mechanisms) that allow service providers to recover the costs of their investments over time.

    These strategies collectively should provide Canada with a broad toolkit to address the digital divide. The targeted deployment of one or more of them in particular areas, to address particular shortfalls, should provide a cost–effective, efficient and effective mechanism to achieve full Canadian broadband coverage.

III. Growing the Information and Communications Technology Industry

Canada's ICT sector makes significant contributions to the nation's economy, representing nearly 5% of Canadian GDP and providing hundreds of thousands of high–skill, high–wage jobs. As the Consultation Paper notes, however, Canada's ICT sector is not as robust as it could and should be. Efforts must be directed at growing existing domestic ICT firms and enabling ICT start–ups to prosper in Canada.

At the same time, the Digital Economy Strategy must also recognize that ICT innovation is increasingly taking place at a global level. To reflect this market reality, the Strategy must look not only at measures to grow domestic industry, but must also consider how best to encourage multinational and third country ICT providers to invest in or relocate to Canada. Indeed, Canada's competitors are undertaking just these sorts of analyses. Singapore, for example, is currently looking to strengthen its privacy regime with the specific objective of making the market an attractive base of operations for data hosting service providers.

Multinational firms already make significant contributions to the Canadian economy. IDC has estimated, for example, that Canadian companies in the Microsoft ecosystem alone generated more than $13.5 billion in revenues for themselves in 2009; for every CAD Microsoft made in Canada, companies in the local ecosystem made 8.43 CAD. Companies in the Microsoft ecosystem also employed 116,000 people; IT –using organizations employed another 216,000 IT professionals who work with Microsoft software or the products and services based on it. Together, these employees accounted for 39% of IT–related employment in 2009 and 42% of IT–related taxes in the country. Encouraging this sort of investment by global firms in Canada will contribute to economic prosperity and create a healthy and diverse local ICT marketplace; it will also provide much–needed training opportunities for local innovators.

Significantly, many of the same measures that encourage the growth of local industry will also help to make Canada a "destination of choice" for foreign ICT firms. These include a modern network infrastructure and widespread, affordable Internet connectivity; strong support for R&D; robust IPR protections; a coherent regulatory regime; and a skilled local workforce. Technology neutral policies that allow all ICT providers to compete on a level playing field are also critical.

Importantly, the mechanisms Government ultimately chooses to implement must be sustainable. Short–term fiscal incentives designed to encourage local investment, such as tax incentives and tax breaks, often prove to be temporary fixes, with firms moving on to other markets when those incentives are removed. In contrast, policies such as Canada's comparatively open approach to immigration often give it a competitive edge over other markets, including the U.S. Indeed, these policies enabled Microsoft to establish the Microsoft Canadian Development Center (MCDC) — home to a global team of software developers from over 45 nations — in British Columbia. The MCDC has quickly moved to the core of Microsoft's business; collectively, MCDC employees work on more than 50% of all the products and services offered by Microsoft and have a direct impact on the millions of Microsoft customers worldwide.

More specifically, in order to achieve the Government's dual and complementary ends – growing domestic industry and attracting foreign investment — Canada's Digital Economy Strategy should focus on the following:

  • Expanding support for R&D investment. R&D is a core building block for innovation. Markets that encourage individuals and firms to invest in inventing new technologies and developing them into commercially useful products are most likely to experience innovation–driven economic growth. Currently, Canada ranks 10th among 21 OECD countries in ICT manufacturing R&D as a percentage of GDP and 7th in ICT services R&D. An ambitious R&D strategy is thus critical to strengthen national competitiveness.

    Part of this strategy must focus on Government stimulus for basic research. Publicly funded research at universities and government labs stimulates innovation and trains the next–generation of scientists and engineers, leading to the advances that will underlie tomorrow's entrepreneurial ventures and creating new jobs and even new industries in the process. Private sector research also plays an important role and can be further stimulated through R&D tax credits and similar incentives. Regrettably, several leading Canadian research and innovation programs impose restrictions that can prevent non–domestic companies from sponsoring R&D. As the Consultation Paper indicates, these restrictions should be addressed so that third–country firms also have an opportunity to contribute to R&D and innovation in Canada.

    We also endorse the suggestion that the Government undertake an analysis aimed at identifying the conditions that would help to foster "communities of innovation" within Canada. The Berkeley/Stanford/Silicon Valley community and the Raleigh Durham research triangle in the United States are useful models in this regard; the innovation policies they deployed to attract the businesses and talent necessary to drive innovative R&D and promote economic growth may be of interest to Canada.
  • Providing robust, balanced protection for intellectual property rights. Historically, intellectual property rights (IPRs) — including patents, copyrights and trade secrets — have been the single–most important driver of innovation in the ICT sector. IPRs provide the legal framework necessary to reward ICT developers for their R&D investment and risk. At the same time, by providing incentives to develop new ideas and bring them to market, IP also encourages innovation and economic growth.

    Robust IP protections will also help to attract investment into Canada by innovative foreign firms, which leads to technology transfer and strategic business alliances with domestic firms. This will help ensure that Canadian industries have greater access to the technologies that enable them to compete globally, and also creates spill–over effects that help increase Canada's store of technical knowledge and the number of local highly skilled professionals.
  • Developing a regulatory regime that fosters next–generation technologies. Next–generation ICT technologies — among them cloud computing — present a number of challenges to existing regulatory regimes, particularly those governing the protection of user data. Because cloud services often involve the creation of data in one market, and the storage of that data in another, cloud providers can be subject to laws in multiple jurisdictions. Sometimes, these obligations can conflict, creating compliance burdens for cloud providers and making it challenging for users to understand what laws apply to protect their data. Yet users continue — rightfully — to expect that they data they create, share and store in the cloud will be private and secure.

    To address these challenges, the Government must look closely at the coherence and effectiveness of Canada's data protection framework. PIPEDA's current "substantial similarity" regime allows provinces to maintain regimes separate and apart from federal law, which can lead to the compliance burdens and consumer confusion described above. While the proposed amendments to PIPEDA draw upon approaches taken by provincial privacy laws and will increase the alignment of the federal and provincial regimes, it is unclear whether this approach will achieve an adequate level of harmonization.

    Of course, the need to establish coherent data protection regimes is not an issue only for Canada. This challenge is compounded at international level; because multiple jurisdictions with divergent laws may seek to assert jurisdiction over a single cloud service or set of cloud data, cloud service providers and users may find themselves subject to conflicting rules and inconsistent obligations in the various markets in which they operate. We urge Canada to work with third countries and multilateral organizations to agree harmonized policies and practices that govern data privacy, data storage and data access in the cloud.
  • Embracing technology neutral policies and market–led innovation. Among the best ways to stimulate domestic ICT sector innovation is through a competitive marketplace that allows — and indeed encourages — ICT providers to offer a broad choice of innovative products designed to respond to consumer needs. To foster this competition, Canada's innovation policies should be neutral as to solution, supplier and business model, so that all ICT innovators can compete on equal ground.

    The level playing field should extend to government procurement. Government is such a significant purchaser of ICT products and services that its purchasing decisions can have a substantial impact on Canada's overall ICT marketplace. Some have suggested that Government use its influence to procure primarily from domestic suppliers — thereby guaranteeing the growth of the domestic sector. It has been our experience that such decision–making only stifles competition and inhibits innovation. Instead, in procuring ICT products and services, the Governments' goal should be to acquire the best tools for the job, based on objective criteria such as performance, security, interoperability, and total cost to users. Employing a merit–based approach to procurement will also ensure that the Government and its constituents receive the most appropriate and effective solutions, at the lowest cost to taxpayers.
  • Preserving barrier–free trade in ICT. Growing Canada's ICT sector will require not only a robust domestic market for Canadian goods, but also that Canadian ICT firms are able to export their services and solutions worldwide. To provide Canadian firms unfettered access to the global market, Canada must remain vigilant to ensure that third countries do not impose barriers to free trade in ICT goods and services through, for example, policies that favor domestic industries or technologies over foreign ones.

    China poses a particular challenge in this regard. Over the past several years, China has adopted a series of "indigenous innovation" policies that effectively exclude foreign software and other technology products from the Chinese market. While these policies assume various forms, they share similar ends: to favor domestic innovators and discriminate against Canadian and other foreign firms. These practices — combined with China's high counterfeiting rates and the Government's reluctance to take robust action to protect IPRs — directly undermine Canadian export and investment opportunities in China.

IV. Creating Canada's Digital Content Advantage

As the Consultation Paper recognizes, content — including information, entertainment, services and applications — drives the Information Society. Indeed, the vast majority of the ICT sector is engaged in the creation of content, the enabling of content creation and distribution, and/or the aggregation of content.

Content–based industries already make substantial contributions to Canada's prosperity. Preserving the vibrancy of these industries, and encouraging continued investment in the development and distribution of new digital content, require:

  • First and foremost, the adoption of a modern copyright regime that fuels content creation and distribution. Copyright protection drives the creation of content by enabling creators to capture the value of their efforts. Copyright also gives content creators the confidence to distribute their works over the Internet by providing a legal framework through which these works can be shared and their owners compensated for unauthorized uses.

    Unfortunately, Canada's copyright regime is significantly flawed. Although Canada signed the WIPO "Internet" Treaties over a decade ago, it still has not implemented their provisions into national law; in this regard, Canada remains far behind its peers, including the U.S. and all 27 member states of the European Union. As a result, key rules and protections that are essential to protect content creators and technology providers have yet to be adopted into Canadian law — including rules prohibiting the circumvention of technical protection measures ("TPMs") used by copyright owners to control access to and use of their works, and rules establishing a safe harbor from liability for Internet Service providers who cooperate with copyright owners to stop online infringements.

    Bill C–32 — the June 2010 "Copyright Modernization Act" — is an important step toward strengthening Canada's copyright regime. Bill C–32 proposes important improvements — including revisions to prohibit the circumvention of TPMs and to establish limits on liability for ISPs. The provisions on statutory damages also reflect improvement over earlier iterations of the legislation (Bill C–61 capped statutory damages for private purposes to $500, effectively eliminating the deterrent effect of statutory damages with respect to works whose value exceeds $500, such as many software programs). While we continue to analyze the Bill, and we anticipate that certain refinements will be necessary during the legislative process, Bill C–32 is long–overdue and we encourage the Government to consult and move quickly to adopt it.

    Modern copyright rules that are effectively enforced will go a long way to promoting software sector growth in Canada. Although the estimated piracy rate for business software in Canada decreased from 32% to 29% between 2008 and 2009, the rate remains above that of the U.S., Japan, Australia and several Western European countries. According to IDC estimates, a reduction in Canada's software piracy rate by 10 points over the next four years could create over 5000 new Canadian jobs and add USD 2.7 billion in local industry revenues and USD 875 million in additional tax revenues for federal, regional, and local governments in Canada.
  • Second, a coherent regulatory framework. In today's ICT marketplace, users are increasingly demanding that technology enable them to enjoy digital media across a range of devices and channels (broadcast, wireless, Internet). As a result, at Microsoft we are increasingly focused on "integrated innovation" — developing technologies that allow customers to have similar experiences whether consuming digital media on a PC, a Windows Mobile smartphone, an XBOX or a Zune. And we are bringing this approach to the cloud.

    In this context, it is important that the regulatory structure facilitate the ability of digital media and services to operate seamlessly across different types of networks. To achieve this, the Government should conduct an inventory of the current piecemeal regimes and identify competing or unnecessary obligations that create barriers to the seamless usage of digital services. This is a particular concern in the area of cloud computing, where the convergence of computing and telecommunications technologies — such as Voice–over–IP services — can raise challenging questions about the application of traditional telecommunications rules to online services. Whether Government treats cloud–based services as "information" services, "telecommunications" services or something entirely new could have a substantial impact on the development of next–generation computing.
  • Third, measures to ensure that all Canadians can participate meaningfully in the Digital Economy. As the Consultation Paper recognizes, ICT solutions create new opportunities for Canadians to participate in Canada's political, economic and cultural life. It is imperative that all Canadians — regardless of socio–economic status, ethnic origin, gender, age or ability — be in a position to benefit from these opportunities. To that end, initiatives designed to ensure broad "e–participation" must be a centerpiece of Canada's Digital Economy Strategy.

    Among other measures, the Government should support industry efforts to create technologies that are accessible to all, including those individuals with significant vision, hearing, dexterity, language or learning needs. More specifically, industry should be incentivized both to integrate accessibility into product planning and R&D, and to collaborate with other ICT providers as well as with academic institutions, standards bodies, interest groups and policymakers to identify and solve challenges associated with developing accessible technologies. We at Microsoft would welcome the opportunity to provide policy and technical expertise to the Government on this issue — perhaps through the creation of a public–private "ICT accessibility roundtable." (Among other initiatives, for example, we have partnered with the Canadian National Institute of for the Blind to digitize CNIB's library; visually impaired Canadians can now download electronic Braille books and audio books, as well as daily newspapers.)

    At the same time, it is also imperative that language does not serve as a barrier to the ability of all Canadians to participate in the Digital Economy — and indeed, that ICT solutions help to preserve and promote local languages and cultures. Microsoft is deeply committed to this effort. In 2004, for example, we teamed up with the Pirurvik Centre for Inuit Culture, Language and Wellbeing in Iqaluit, Nunavut; together, we translated Microsoft Windows and Office into Inuktitut, enabling the local Government and schools to use their native tongue online. Government support for similar efforts is essential to ensure that technology providers, universities, community groups and local language experts can continue to develop customized ICT solutions that safeguard and respect local languages and traditions.

V. Building Digital Skills for Tomorrow

The economic changes of the last two decades amount to a "digital revolution" — an expansion of productivity and innovation that has transformed all economic sectors. Today, nearly every business operation, product innovation or managerial task in almost every sector demands digital skills. As a result, widespread digital literacy is essential for Canada's long–term competitiveness both in and outside the ICT sector.

We thus strongly agree with the Consultation Paper that for Canada to lead in the digital era, ICT skills must be widely disseminated across Canadian society. Some workers require only a basic level of digital literacy to function effectively. Others must become fluent with the features and capabilities of various technologies in order to keep themselves and their businesses competitive. At the highest skill levels, there is a need for scientists, mathematicians, and engineers to design new products and develop new innovations.

At the same time, as an increasing number of Government services move online, e–skills have become essential not only for employment, but also in order to receive key social services and participate fully in public life. Ultimately, as the Consultation Paper points out, technology is pervasive and those who are unable to use it face disenfranchisement through lack of access to information, public services, health care and education.

Concerningly, however, there is evidence of a shortage of Canadian workers with appropriate levels of digital skills. There is also evidence of a "digital skills divide" in Canadian society. Government and business must collaborate closely to address these issues, and ensure that Canadians have the requisite ICT knowledge needed to effectively perform their jobs as well as to participate in the broader e–economy.

We would welcome the development of a National ICT Skills Strategy, as called for last year by ITAC/ACTI. Such a Strategy, and related initiatives, should focus on:

  • Strengthening Canada's early education system. Students today need strong digital literacy, communication, and analytic skills in order to succeed in an economy in which ICT is ubiquitous. To that end, policymakers should invest in early education in math and science and provide opportunities at the secondary level for advanced education in computer science, mathematics, engineering, and related fields. Performance metrics and data collection systems must be transparent and accurate in order to track which methods work best.
  • Utilizing public–private partnerships to better equip teachers and students with a broad range of e–skills. Microsoft partners with governments, universities, the business community, non–profits, and other institutions to support and expand educational opportunities worldwide. For example, through our Partners in Learning program, Microsoft works closely with governments and non–governmental organizations throughout the world to offer a wide variety of educational resources to teachers and schools, including teacher–training programs, software tools, and best practices. Replicating these and similar industry initiatives will help to ensure that every student graduates from secondary school with the skills necessary to succeed in the information economy.
  • Ensuring that every school, teacher and student has access to devices, tools and connectivity for digital learning. Access to technology is a prerequisite for any of the improvements described here. To facilitate access, the Government must focus broadband deployment efforts on Canada's schools, hospitals and libraries and ensure a minimum of 100 Mbps of upgradable connectivity — the minimum needed to deliver sophisticated e–learning solutions. Second, the Government should also consider the viability of a voucher program, tax incentive, or similar support mechanism in order to ensure that every student and teacher, particularly in underserved populations, has an affordable device that contains core digital education tools.
  • Supporting collaborative, relevant and personalized learning. Given our increasingly digital lifestyle, the use of technology is essential to engage students in the acquisition, creation and synthesis of knowledge. All students can benefit from a more dynamic, personalized learning environment that takes their individual characteristics and needs into account, and technology has an important role in enabling these environments. This can be as simple as providing students with access to real–time feedback on their learning progress and allowing them to track their progress against the rest of the class or against personal goals. Or it might involve, for example, the use of e–learning technologies to facilitate long distance learning. Technology can also help administrators to connect with peers and identify best practices in their own school system or other systems. Microsoft envisions an education system that empowers educators by facilitating connections and collaboration, that is more efficient and that delivers data and insight to teachers, students, parents, administrators and education policy makers.
  • Embracing the concept of lifelong learning. ICT education must not end when a student enters the workforce. Instead, Government and business must work together to help ensure that every job seeker and individual in the work force — regardless of vocation — remains proficient in digital technologies throughout his or her lifetime. Microsoft is committed to doing its part in providing people with the skills they need to succeed in today's ICT–focused economy. Our Community Technology Skills program has partnered with thousands of governments and non–governmental organizations across the world to train millions of people each year in the basics of digital literacy at more than 17,500 centers and in more than 100 countries and regions.
  • Narrowing the digital divide. The past decade has made clear that those who have access to computers, the Internet, and digital literacy training are more likely to be prosperous than those who do not. Developing an effective "digital inclusion" component of the Digital Economy Strategy will be critical to the overall success of the plan. Establishing the elements of such an initiative is a significant undertaking, and one that must begin with efforts to analyze and understand the many varied factors that create barriers to effective access and use of ICT.

    Part of Canada's digital inclusion plan must address issues of accessibility — i.e. ensuring that underserved communities, the elderly, the disabled and the economically disadvantaged have access to ICT technology and the Internet either at home or through public facilities such as libraries and senior centers. There are a number of ways to achieve this. For example, funds could be made available so that those in poorer communities can subscribe to broadband at a needs–based discount from the market price. And unused spectrum could be redeployed for society–enhancing purposes such as extending Internet access wirelessly.

    Enabling connectivity alone is not enough, however. Just as providing books to people who cannot read will not remedy illiteracy, simply offering access to technology will not close the digital divide. Community technology centers, tutoring, and other educational initiatives are also a critical part of an effective digital inclusion initiative, as are campaigns designed to educate individuals about the many important benefits of digital literacy.

    Finally, the creation of multi–disciplinary task forces — bringing together industry, public sector organizations, philanthropies, public schools, representatives of the federal and provincial governments, and citizen advocate groups, among others — to agree long–term, sustainable objectives, identify funding priorities, and establish metrics by which to gauge progress is also critical.

VI. Conclusion

We at Microsoft appreciate the opportunity to provide comment on the Consultation Paper. We hope that our contribution is useful, and we would be pleased to discuss our recommendations in further detail if that would be helpful.

More broadly, we encourage the Government to engage in an ongoing dialogue on these important issues. The 60–day consultation window may not be adequate for all interested stakeholders to provide their input. Moreover, many of these issues will require further debate and refinement as the Government moves forward in determining how best to convert recommendations into a concrete plan of action.

Developing and implementing a comprehensive, multifaceted Digital Economy Strategy — which will require synthesizing stakeholder input, analyzing regulatory regimes and amending legislation where needed, improving Canada's ICT infrastructure, modernizing Government's use of ICT, adopting measures to narrow the Digital Divide and revisiting educational policies among many other efforts — will take years. However, we would hope that it would be possible for the Government to publish an initial draft of its proposed Digital Economy Strategy for public comment by early 2011.


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