GROWING THE INFRATECHNOLOGY

Ottawa. December 8, 1992

This subject is obviously of keen interest to me – not only in my role as Chairman and CEO of Rogers Cantel, but also because I will soon take the reins of the Information Technology Association of Canada (ITAC). Needless to say, the best wishes of both organizations are with you today.

I have been invited to describe some initiatives which will help “Strengthen The Infrastructure”. In order to do that, I’d like to step back for a moment and tell you why I think we need to do something completely different.

We must do something different, because “Strengthening the Infrastructure” is wrong on two counts. It sets the stage for some misconceptions. We’re not out to “Strengthen” something. “Strengthen” is too mechanical a description ~ something you do with concrete or steel. Instead, we’re out to “Grow” something ~ an organic process.

And most important, we’re not here to talk about “Infrastructure”. That’s yesterday’s economic paradigm. Today we’re talking today about an “Infratechnology”. By “Infratechnology”, I mean the underlying, enabling technologies of the Twenty-first Century – computers and telecommunications. If there is one thought I’d like to leave you with today, it is that we are going to have to GROW OUR INFRATECHNOLOGIES.

There’s a world of difference between initiatives to “Strengthen the Infrastructure” and those to “Grow the Infratechnology”. It’s the difference between our past and our future. And it has immense implications for our “planning” process.

The biggest implication is that you can plan an infrastructure, but you have to encourage an infratechnology. The recent federal government plan for roads and bridges, for example, is exactly what is required for that kind of economy. It is exact; it is precise. You can’t encourage a road to grow. But you can create a growth environment for infratechnologies.

Let me dwell for a few minutes on these ideas: organic growth, the role of government, and why our spending has to be so different. Five years ago, a prophet named Stuart Smith had a quiet “Blue Sky” dinner meeting with a group of ITAC executives. He was asked for his view on the meaning and impact of information technology. I was not there, but I am reliably informed of his response (it was reported in the ITAC newsletter!)

Stuart said that information technology – infotech –was empowering individuals. It was a process which was eroding the size of large organizations. His view on this is reinforced, by the way, by industry guru George Gilder, who calls this the “Law of the Microcosm”.

The microcosm is the computer chip, and Gilder says that you can cram computing power much more easily onto mass-produced chips than you can into a mainframe. So computing power enhances the low-end user’s power faster than it does the organization’s controlling ability.

The result, continued Mr. Smith, is that infotech is a tool which creates diversity. Individuals doing more things, in smaller and more networked organizations. Public policy has a hard time supporting diversification, since the voters are all occupied in existing industries. I recall one of Stuart’s favourite phrases: “The future has no vote”.

He predicted, in 1988, that centrally planned economies like those in Eastern Europe would fail. They were only possible when the means of production were huge industrial enterprises. They are impossible to operate in an era when information technology allows small units and even individuals to exercise power. This new information power, said Mr. Smith, must be cultivated.

ITAC finds Stuart’s view to be refreshing, and very organic. We would extend it even further. The new “public knowledge thoroughfares” are, by and large, not being built directly by government. They are being built by many different companies and organizations. Private data networks, for example, are springing up to serve universities, factories, companies and housing cooperatives. This new infratechnology has an living, mushrooming complexity. It has many different creative minds striving for optimum solutions to a diverse range of problems. Most of today’s best infrastructure networks are made up of these organic, patchwork structures. Internet, for example, is the world’s biggest computer network. The original heart of Internet was paid for by government — and that is a perfectly fitting role for governments to play. Around this seed, a network of some 900,000 host computers has mushroomed.

The lack of centralized management is so complete that nobody really knows how many host computers there are in the Internet!

Another organic example is United Parcel Service in the U.S. UPSNET is a patchwork system linking distribution warehouses in almost 50 countries. When complete, however, UPSNET will be America’s first national mobile data network.

An even looser arrangement is USENET. USENET is an international network linking millions of people without any central guidance at all!

The central lesson about these networks is that they grow from the bottom up. They are grass-roots answers to immediate consumer problems — and that is their strength. Cantel itself started because of a “grassroots” conversation I had with a the owner of a small Vancouver paging company.

Before my talk with King Margolese, my only exposure to the telephone was as a user. I confess that I couldn’t even use most of the features on my office phone!

But King Margolese had an idea. He thought that a cable company could use its cables to back-haul signals from the cell sites to the switch. He wanted to bid for the new cellular license for Vancouver. I thought that it could be applied nationally, and called Ted Rogers. The rest, as they say, is history. Government, in its role as adjudicator, awarded us a contract for the National Cellular Radio Licenses. Cantel is now Canada’s only nationally licensed cellular service provider.

These are examples of successes. If you’re looking for ways to “Grow the Infratechnology”, I say that we base our policies on what works. The main policy-setting lessons here, it seems to me, are clear. Government’s role is two-fold. It can seed projects, like Internet. And it can act as the rule-setter, ensuring that we don’t have total chaos. In a sense, government should set the environment, and then let the flowers grow. Any attempt to do something more formal, or rigid, would run against the organic nature of this mushrooming growth called infratechnology.

This complements ITAC’s notion that our whole economy has changed, fundamentally. We are moving to a “post-mechanistic” world. ITAC asked Canadian economist Nuala Beck to help us define and describe today’s economic growth. She confirmed that we are in a rapid transition to an information economy. Our current “structure-oriented” measures of economic growth –housing starts, auto sales and so on – no longer reflect the true picture of our economic strength. Information technology, for example, contributes more to Canada’s GDP than pulp and paper and transportation combined. More Canadians work in infotech than in banking, mining, forestry or auto assembly.

Infotech accounts for more than one-third of Canada’s industrial R&D. In the U.S., more Americans make computers than make cars.

In fact, Nuala said, we are dealing with two economies. The older, mass-manufacturing structural economy ended in about 1981. The new “information economy” has an entirely different set of leading sectors. The infotech economy has four “engines of growth”: computer production; instrumentation sales; communications; and health care. They in turn are all based on ways to gather, store and analyze information. Information is the new currency of the new economy. And more than 97 per cent of all of the jobs being created in Canada today, are being created in this new information economy. So it has immense practical importance for working Canadians. In fact, when we talk about “Growing the Infratechnology”, we are talking about the number one national priority. And we’re not just doing this because the Canadian economy has changed. The entire world economy is driving into the information age.

Consider the evidence:

• world trade is growing two- to five-times faster in knowledge intensive goods and services than in resource intensive goods and services.

• the fastest-growing area of all is infotechnology. Twenty years ago, there were 50,000 computers installed world-wide. Now, we install 50,000 computers every day! In the U.S. alone, 50 million are in use. And the flow of information is now a flood.

• in the same 20-year period, the volume of phone traffic in North America has increased 30 times. Infotech is now a trillion dollar industry, and it will double again within ten years.

• this isn’t just something that is “nice to do”. This is an imperative if we are to grow. Some experts say that in the next ten to fifteen years, all employment growth will occur in knowledge economy areas.

• this matters to Canada, because there is no place to hide. Trade barriers are falling all over the world. the evidence so far indicates that Canada is not responding to this challenge very well Last year the World Competitiveness Report dropped us to 11th place, from 5th in 1990. The recent report by the Prosperity Steering Group says we are not investing enough in innovative processes and human resources.

Certainly, our outlays for research and development are inadequate — only 1.32 per cent of GDP, well behind the U.S., Japan and Germany.

Faced with these universal new trends, ITAC came up with a total economic vision for a new Canada. We wanted to alert Canadians to the depth of the change around them. We came together as an industry, to make our “Prosperity Initiative” recommendations. We call for nothing less than a “New National Dream”. We need a total new vision, because we are struggling to survive in a brand-new global economic climate.

We want a strategy that creates growth opportunities for Canadians. We believe that the key is the creation of a knowledge-based Canada. We want a country founded on the creation and movement of information and human knowledge. We want “megaprojects for the mind”. Our Prosperity Report says: ‘The investments once made in capital projects must now be turned towards human capital, in the form of lifelong learning. We must make every industry a knowledge-based industry.”

I will not attempt to detail all our recommendations. But it is important to know that we have a comprehensive framework for action. There are five basic Goals we have set out action agendas to achieve:

• We need to start by transforming the workplace. We can no longer think of employees as production workers or units of labour in the traditional sense. Businesses must empower their employees. Governments’ role here is as environment-setter: create a sound education and training system that ensures that students at all levels are receiving relevant skills. There is a complementary role for industry. Our industry-education linkage has to give students the strategic skills necessary for competing in the global economy.

We have to work with schools and provincial governments to encourage enrolment in science and engineering programs.

Our second major Goal is to create a commitment to innovation in Research and Development. We need an R&D infrastructure. Within ten years, Canada must be the leading country for the performance of R&D in all sectors, but particularly in software. In the goods-producing IT sectors, R&D intensity currently runs at more than ten times the industry average. Software development alone makes up one-quarter of all Canadian industrial R&D. We have to encourage the expansion of strong points like software development. Government should also enhance current levels of research funding, and compare personal tax burdens to with those of our competitors to see if Canada is an attractive place for knowledge work.

Our third major Goal concentrates on translating this new innovative talent into concrete commercial products. Aimed at the venture capital sector, we say that within five years, Canada must have a critical mass of investors knowledgeable in information technology, and it must have an adequate pool of capital available for technology investments.

We are facing an uphill battle. The amount of private sector investment in Canadian technology firms has declined between 1986 and 1990. These firms are investing only $50-million per year in Canadian technology companies, compared with the $2-billion or so a year being invested by their U.S. counterparts. ITAC proposes ways to improve the financial climate for higher-risk ventures. And we outline ways to make the Scientific Research and Experimental Development Investment Tax Credit more effective.

Our fourth Goal concerns a competitive domestic environment in which these newly-born and well-capitalized companies will grow. We want a hot-house for development. We say that within five years, Canada must have a national policy and business environment that encourages open competition, and is free of trade barriers. There are obvious roles for the provincial governments to play in clearing the decks for a united Canadian economy. The government can also help by giving Canadian institutions a realistic picture of how the economy is behaving. Right now we’re relying on economic indicators that are measuring the buggy-whip industry! We need Government to adopt a new set of economic indicators that reveal the importance on knowledge and information. The old division of economic activity into goods and services obscures the world that has emerged.

Our final Goal concerns our migration to the international stage, through a global outlook.

We say that within ten years, all Canadian businesses producing goods and services that can be traded must compete and win globally, free of protectionist barriers. They must take advantage of the relative ease of exporting knowledge instead of goods, and sharing a commitment to continuous quality improvement. Governments should eliminate all barriers to trade. The only protection for Canada is a competitive economy.

Through these five Goals we want to create our Knowledge-Based Canada: The New National Dream. We know that it is an ambitious proposal.

But this kind of comprehensive framework is absolutely necessary if we are grow our infratechnology.

Let me isolate some of the specific growth steps we would like to see taken.

As I’ve indicated, I think we have to bear some basic roles in mind. Government should establish the “growing conditions” for our infratechnology, by setting rules and seeding selected projects. Industry should continue to be free to expand wherever grass-roots opportunities call out. And our educational system and other stakeholders should be encouraged and stimulated to participate in the new information economy.

We recognize, for example, that for our industry to stand up to the best in the world, we need a competitive environment here at home. In terms of infratechnology, we have to make the telecom regulatory framework uniform across the provinces. We need a consistent set of standards and regulations. These regulations have to encourage full and open competition in telecom services. Further, the recently tabled Telecommunications Act should be amended to establish a presumption that the CRTC will not regulate rates in the competitive sectors of the telecom market.

Government also has tremendous “inherent capacity” to create a growth climate, by setting the example for infotech acquisition. Its own procurement policies are a good place to start. A procurement policy that includes more “solution buying” could strengthen the infotech industry in Canada. It could also foster the use of infotech by helping to publicize infotech’s benefits as a strategic lever to improve competitiveness.

There are steps we can take to focus our efforts. In A Knowledge-Based Canada, we ask that government, industry and the academic community get together. We advocate that Canada undertake an infratechnology challenge: find and achieve one or more major, national projects of sufficient magnitude to stretch Canada’s infotech capabilities. Our objective: end up with a pool of talented companies and highly-trained individuals.

Here government can play a special role through its capacity to “seed” projects ~ projects that will spur other users. The federal government’s CANARIE project could be the modern-day answer to ITAC’s call for a “New National Dream”. I’m sure you’ve heard by now that CANARIE stands for Canadian Network for the Advancement of Research, Industry and Education. It has a number of laudable aims:

• develop and diffuse key technologies through collaborative R&D;

• encourage national science databases; and

• promote infotech products and services.

CANARIE calls for the establishment of gigabit-speed test networks in the next year. It could be impressive. We’ll see what the final budget numbers come in at.

The Ontario Government is also in the process of addressing infratechnologies. It recently heard from a task force of business, labour and other groups. It was chaired by Don Tapscott, of DMR Group, and its mandate was to devise a communications strategy for Ontario. Its report, “Telecommunications: Enabling Ontario’s Future”, wants to make the province a leader in the information economy.

The task force wants to do this by having Ontario organize a “network of networks”, linking communities, schools, businesses and other groups across the province. The Ontario Research and Education Network, for example, would be pushed ahead to link Ottawa, Toronto and Waterloo in a high-speed network. Databases would be coordinated and promoted. Ontario Online is a huge proposal, which would deliver information on government programs and services.

Equally important, the software industry would receive a boost from the creation of a software knowledge repository. Finally, a permanent Council for an Ontario Information Infrastructure would be set up. I’ll forgive them their use of the word “infrastructure”, because their hearts are in the right place!

This is the right mind-set. And I’m sure it also exists in the federal departments responsible for information policy. The CANARIE project, combined with the Ontario plan, could really give us a hot-house for infratech growth.

I would also like to extend some kudos for the SPIRIT proposal. This is a plan to jump-start the “electronic information industry”. SPIRIT stands for “Support and Promotion for Information Retrieval through Information Technology”. It is a joint industry-government initiative, combining the best elements of environment-setting and direct seeding.

SPIRIT seeks to promote the awareness of Canadian electronic databases and the value of successful applications by business. The Canadian electronic information industry is clearly underdeveloped in comparison with that of other industrialized nations.

SPIRIT is a new approach to solving this problem. For the first time, the industry players are pulling together to enter into an action partnership with government.

Based on an ITAC survey released last spring, the Canadian information industry was found to comprise 89 organizations, involved in the creation, organization, processing, or distributing of information using electronic means. They generated total 1991 revenues of some $250-million. This represents only 2.5 per cent of the $10-billion of revenue generated in the U.S. If the normal ‘ten per cent rule’ is used to adjust for the relative sizes of our populations, then our industry is less than half the size that it needs to be to provide strategic support to the rest of the Canadian economy.

In a global economy, Canadian business is lagging in the rise of electronic information services.

This is a serious problem. The information industry gains its strategic importance from the fact that electronic information is the largest single source of business information in North America. Both the volume and speed of information exchange compel industries to track information electronically as an effective and important way to stay competitive. This is recognized in other countries: Japan, Britain and the European Community have undertaken multi-million dollar long-term initiatives to stimulate the market for electronic information services.

The SPIRIT initiative would parallel those efforts. It would increase awareness of the benefits of electronic information on the part of end-users, and expand the market on behalf of the information organizations.

It would also have a huge indirect impact in boosting the decision-making skills and competitiveness of the Canadian information user community.

I have outlined the general climate we need for infrastructure growth, and some of the direct actions the industry feels are necessary. Let me conclude by looking ahead a bit — to speculate on the kind of future this growing infratechnology could give us.

I’m going to recognize right away that the most significant changes are probably hidden from our view. That’s the nature of invention ~ it is also an organic, “non-linear” process. The history of invention is a story of unexpected endings. Radio broadcasting was first thought of as a means of communicating with ships at sea. Individuals who wanted to talk to each other on land, it was argued, could use the telephone.

It was several years before radio took on its present ****** role: that of broadcasting information to thousands of people at once.

In future, we will see two main trends changing our communications infratechnology. The first is ever-increasing individual control over information. As organization extends to the broadcasting industry, for example, television and radio will also become amenable ******** “tailoring”. They will reflect individual tastes, consumers will have more control over all their immediate choices, through smart terminals.

The second major trend is the increase in mobility: and ****** personal freedom. We are evolving to a situation where a person is reachable anywhere in the world by phone number, not by geographic location. Some people wonder whether this constant contact is a good thing. We have no such concerns.

Remember that back in 1927 sociologists were fretting that telephone calls were ending personal isolation. At that time, calls were flooding in at an average of 1.5 per day! The real issue is not constant contact, but control over the contact. And the new smart technologies give you more information control, as well as more freedom.

Consider one example – the freedom to telecommute. With a growing infratechnology, more people will have access to this option. The benefits to the worker are obvious: less time on the road, more at work. The benefits to our businesses are also real. An A.D. Little study estimates that the U.S. economy could save close to $23-billion by substituting telecommuting for certain transportation activities. Other studies have shown that the turnover rate of telecommuters is lower than that of office workers, resulting in lower training costs. Further studies point to higher productivity and quality of telecommuters over office workers.

This could be an increasingly popular option for both employers and employees.

So there are big changes possible over the next decade, in our work, our living conditions, and our life-styles. Everything, including the expanding of our economic options through prosperity, depends on a vibrant infratechnology. Let’s do everything possible to help it grow.

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