CONNECTION COMMUNITY CONTENT: THE CHALLENGE OF THE INFORMATION HIGHWAY Final Report of the Information Highway Advisory Council September 1995 The Honourable John Manley, P.C., M.P. Minister of Industry House of Commons Ottawa, Ontario K1A 0A6 Dear Minister: I am pleased to present the final report of the Information Highway Advisory Council. Connection Community Content: The Challenge of the Information Highway reflects the work and views of Canadians engaged in building and using the Information Highway. After 15 months of careful deliberation and spirited debate, we offer it as our response to the challenge of creating a Canadian Information Highway that acts to both serve and renew this country. We appreciate the opportunity to serve on this Council. We are grateful to you for your leadership and for the interest shown by your colleagues, the Honourable Jon Gerrard, Secretary of State (Science, Research and Development) and the Honourable Michel Dupuy, Minister of Canadian Heritage. Sincerely yours, David Johnston Chair MEMBERS Neil Baker, André Bureau, André Chagnon, Bob David, Mary Dykstra, Bill Etherington, Francis Fox, John Gray, George Harvey, Brian Hewat, Elizabeth Hoffman, Douglas Holtby, David Johnston, Veronica Lacey, John MacDonald, Terry Matthews, John McLennan, Gerry Miller, Jean-Claude Parrot, Anna Porter, Derrick Rowe, Guy Savard, Irene Seiferling, Gerri Sinclair, Charles Sirois, David Sutherland, Gerry Turcotte, Mamoru Watanabe, Colin Watson CONTENTS Executive Summary Foreword CHAPTER 1 - The Information Highway: Transition to a Knowledge- based Society What is the Information Highway? How Do We Access the Highway? What's in it for Canada? Why Should the Government be Involved? Conclusion CHAPTER 2 - Competitiveness and Job Creation: The New Marketplace The Challenge: "Who Will Build It? Who Will Come?" Timing and Financing Issues Comments on the CRTC's Report on Convergence The Regulatory Transition to Sustainable Competition Foreign Ownership Limits Delivering Economy-Wide Benefits The Role of Government Conclusion CHAPTER 3 - Canadian Content and Culture: A Strong Canadian Presence Canadian Content and the Information Highway Making Canadian-Content Products Competitive on a World Stage, page 32 Copyright Conclusion CHAPTER 4 - Access and Social Impacts: The Human Dimension Access Illegal and Offensive Content Privacy Security Employment and Workplace Issues Conclusion CHAPTER 5 - Learning and Training: The Knowledge Society The Economic Imperative Learning and Cultural Development The Shift from Teaching to Learning Other Learning Issues A National Strategy for Learning and Training Conclusion CHAPTER 6 - Research and Development, Applications and Market Development: New Opportunities Market Linkage: The Key Condition for Success Wireless Technologies Partnerships R&D Tax Credits An Opportunity to Develop Effective Canadian Applications Conclusion CHAPTER 7 - Implementing Our Vision Themes of the Council's Recommendations and Report The Council's Message to Stakeholders Conclusion CHAPTER 8 - The Council's Recommendations Issue 1: Timing and Financing Issue 2: Competition and Regulation Issue 3: Canadian Ownership and Control Issue 4: Standards Issue 5: Government Coordination Issue 6: Copyright and Intellectual Property Issue 7: Culture and Content Issue 8: Information Controls Issue 9: Government Programs and Services Issue 10: Privacy and Security Issue 11: Research and Development Issue 12: Growth and Competitiveness Issue 13: Universal Access Issue 14: Consumer Awareness and Learning Issue 15: Government Operations APPENDICES I Glossary II Members of the Advisory Council, Working Groups, Task Forces and Copyright Subcommittee III Council Publications IV Employment and Workplace Issues EXECUTIVE SUMMARY The Challenge of the Information Highway Information technology is changing our world. It is reshaping our economy and affecting the life and work of almost every Canadian. As converging communications technologies bring digital content into the nation's businesses and homes in new ways, Canadians are beginning to sense what it means to travel the Information Highway. the Advisory Council In the 1994 Speech from the Throne, the Government of Canada made a commitment to develop a Canadian strategy for the Information Highway. To this end, the Minister of Industry, the Honourable John Manley, announced the creation of a 29-member Information Highway Advisory Council, chaired by David Johnston, former Principal and Vice Chancellor of McGill University, and now Professor of Law at McGill's Centre for Medicine, Ethics and Law. 15 issues The government set out 15 issues -- ranging from competition to culture, from access to learning and research and development -- on which it sought the Council's advice. The Council's deliberations were guided by three objectives: - creating jobs through innovation and investment in Canada - reinforcing Canadian sovereignty and cultural identity - ensuring universal access at reasonable cost and five principles: - an interconnected and interoperable network of networks - collaborative public and private sector development - competition in facilities, products and services - privacy protection and network security - lifelong learning as a key design element of Canada's Information Highway. 15 PUBLIC POLICY ISSUES 1 How fast should the advanced network infrastructure be built? How will network improvements be financed? 2 What is the proper balance between competition and regulation? 3 Should requirements for Canadian ownership and control of communications networks be reviewed? 4 How quickly can Canadian industries move toward universal standards, and how should these standards be determined? 5 How can the federal government coordinate its activities with other governments? 6 How should copyright and intellectual property issues be addressed? 7 What measures are needed to support Canadian cultural and other content-based products and services? 8 What controls, if any, should be placed on the information that is put on the network? 9 How can the Information Highway be used to improve government services to the public? 10 How can personal privacy and security of information be protected? 11 How can we ensure that Canadian information industries take full advantage of the R&D and technological development opportunities presented by the Information Highway? 12 How can the Information Highway best be used to improve the growth and competitiveness of all Canadian businesses, especially small- and medium-sized enterprises, throughout Canada? 13 How can Canadians be assured of universal access to essential services at reasonable cost? 14 What consumer awareness and learning opportunities should be provided to enable Canadians to be effective users of the Information Highway? 15 What opportunities does the Information Highway present to improve government operations? In debating issues, members came away with a deeper appreciation of the challenges facing Canada. All share the belief that if Canadians are to compete effectively on the global Information Highway, they need to embrace learning and be more competitive, innovative and creative. The Canadian cultural dialogue must be strengthened in order to reaffirm fundamental values that unite and define us as citizens. five working groups The Council represented a diverse range of interests. Members came from telecommunications, broadcasting and information technology industries and institutions, from artistic, creative and educational communities, and from consumer and labour organizations. They came together in five working groups to which 26 ex officio experts and members were added. Remarkable consensus was reached on difficult questions of public policy. Inevitably, there were areas of disagreement. Nevertheless, members came to share an increased respect for differing perspectives and a willingness to transcend the interests of a particular community in order to address the broader interests of Canada. As Canadians, we are in the midst of a technological revolution that will transform our individual lives and our entire society. If we are to seize opportunity, we must anticipate change and exploit both the economic and cultural potential of new information technologies. Canada has tremendous advantages in this regard -- our expertise, resources, talent and technology. In building on these, we must preserve our values as a society. The following summarizes the Council's report, major themes and messages drawn from the more than 300 recommendations made by the Council to the government. No summary, however, can do justice to the breadth of issues debated or to the depth of feeling members had about matters so central to Canada's future. The New Marketplace Canada's success on the Information Highway depends on whether we can establish a competitive framework that unleashes creativity, innovation and growth. the private sector In the new information economy, success will be determined by the marketplace, not by the government. Hence, the primary role of the government should be to set the ground rules and to act as model user to inspire Canadians. The private sector should build and operate the Information Highway. Those who make the investments should bear the risks and reap a fair reward. competition Canadians possess an increasingly wide range of communications options, including cable, telephone, satellite, off-air broadcasting and cellular. The Council believes that fair and sustainable competition is the best way to stimulate innovation and serve the interests of consumers. Fair and sustainable competition supports the public policy goals of choice and affordability. convergence The Council reviewed a recent report by the Canadian Radio-television and Telecommunications Commission (CRTC), Competition and Culture on Canada's Information Highway. The Council supports the move toward greater competition. Although Council members held differing views on some broadcasting issues, all agreed that in this area greater clarity in policy and regulation is essential. Canadian ownership The Council considered the issue of Canadian control over the Information Highway and limits on foreign ownership. National ownership of globally dispersed operations is becoming more difficult to determine and less relevant in a global economy. The behaviour of capital becomes more critical a policy issue than its source. The Council recommends that foreign investment policies be reviewed. Any liberalization of the regime should ensure that firms, regardless of their origins, operate in a manner consistent with Canada's economic, social and cultural objectives. regulatory and policy framework The government's role is vital. The Council believes it should establish a clear regulatory and policy framework to encourage investment, economic growth and the creation of jobs for Canadians. Removing outdated and unnecessary regulatory barriers will help promote fair and sustainable competition, which in turn will stimulate use of the Highway and encourage network development and upgrades. Government as model user The government should act as a persuasive model user of new communications technologies and should build partnerships in technology and service delivery with the private sector and with other levels of government. Governments at all levels should "re-engineer" themselves using integrated, government-wide information and communications systems. Canadians should have access to responsive, efficient and cost-effective public services. A Strong Canadian Presence New information technologies are changing the relationships between producers and consumers, and between governments and citizens. For Canada's cultural industries, the Information Highway offers new opportunities to reach consumers all over the world, while at the same time presenting familiar challenges when it comes to connecting with Canadians. choice While in the past the Government of Canada found it advisable to regulate cultural and intellectual content, neither the intent nor the effect of such regulation was to limit consumer choice. On the contrary, government policies have ensured a wide range of choices, balancing our needs as consumers with our priorities as citizens. In fact, Canada is one of the most open markets for foreign cultural products in the industrialized world. promoting Canadian culture Culture is more than simply a product on the global market. It is also a fundamental national process: the ongoing dialogue focussing a diverse spectrum of perspectives into a shared vision of Canada. In endorsing the energetic promotion of Canadian culture, the Council calls for Canadian cultural policy to be reaffirmed and strengthened in relation to the new information infrastructure. Canadians must be able to provide and access their own content on the Information Highway. french language To reflect Canada's linguistic duality, the French language must have a prominent presence on the Information Highway. Government policies should stimulate, through appropriate incentives, the creation and production of new content and navigational tools to meet the needs of Canada's French-language market. role of the CRTC Without the support of broadcasting and cultural policies and programs, Canadians would not have the range of choices currently available. The challenge now is to ensure that these policies are sufficiently flexible to accommodate change, yet reinforce Canada's stability in an unstable world. To this end, the Council recommends that the government confirm the important role of the CRTC in ensuring the implementation of long-standing cultural policy objectives for the Information Highway. support for Canadian content The Council believes that the contribution of new entrants should be equal to that of existing participants engaged in similar activities in the creation and distribution of Canadian productions. Creators of content must have equitable access to production funds, distribution opportunities and fiscal incentives. The Council recommends funding or tax incentives to encourage Canadian multimedia products, continued support for Canadian publishers and other cultural industries, and a strong role for the government in promoting export opportunities for Canadian content. digitizing Canada's heritage There is a need to "digitize" the important artifacts of Canada's history and heritage so that holdings in public galleries and museums are accessible to Canadians through new media. Digitization will benefit both the institutions and the public. It will make our cultural products more accessible to our children. copyright Since the Copyright Act came into force in 1924, copyright has been an essential economic lever for Canadian creators. Mindful of that, the Council made recommendations relating to multimedia works, browsing, fair dealing, Crown copyright and public education. value for Canada How people use the content on the Information Highway, and the value that content adds to their lives, are what matter. Canadians must be producers and consumers on the Information Highway. The more that content is provided by Canadians, the greater value it has for Canada. The Council made several recommendations to ensure that Canadians contribute to the global dialogue, that our cultural industries build on past success, and that Canadians continue to communicate and to prosper. The Human Dimension Access is a critical dimension of the public policy debate on the Information Highway. Basic access to the Highway should be as universal and relevant to Canadians as telephone and television services are today. principles Canadians rank accessibility of services and content as one of their main concerns about the emerging Information Highway. The Council recommends that the government develop a national access strategy based on four policy principles: - universal, affordable and equitable access - consumer choice and diversity of information - competency and citizens' participation - open and interactive networks ensuring universal access at reasonable cost In an ideal competitive environment, prices should be market-based and services should pay for themselves. However, market forces occasionally fail to provide universal access at affordable prices. This may be the case in high-cost-of-service areas such as rural and remote communities or in the provision of services for Canadians with special needs, such as the disabled. Non-market mechanisms are needed to ensure universal access to essential Highway services at affordable prices. The Council stresses the importance of developing easy-to-use methods of accessing programs and services that reflect Canada's linguistic and cultural diversities. offensive content Offensive content on the Information Highway presents complex issues for Canadians and their governments. Pornographic and hate materials are readily available on electronic bulletin boards and other services on the Highway. A balance must be struck between ensuring freedom of expression and imposing controls to deter harm, particularly to children. However, the difficulty is that no government exercises complete control over global networks. The Council believes the government must inform the public that the rule of law applies equally to the Information Highway. It must bring stakeholders together to develop appropriate technology and codes of behaviour that address moral concerns. privacy The Council believes that Information Highway services should extend at least the same level of security and privacy to Canadians as telephone and mail services. Businesses, public institutions and governments gather and transmit vast amounts of personal and business-related information across national borders, without the consent of affected individuals. To ensure the protection of privacy rights of Canadians in the information age, the Council believes strongly in the need for national framework legislation to apply to the government and private sector alike. public key infrastructure To provide an adequate legal basis for the security of electronic communications and business transactions, the Council recommends that the government deploy a Public Key Infrastructure -- a certification network to sustain electronic commerce. This is part of the legal and practical infrastructure essential to Canadian participation in a digital environment and a global economy. employment and the workplace The government's first objective for the development of an Information Highway strategy was "creating jobs through innovation and investment". Already Canadians see the emergence of new skills and new kinds of jobs and work arrangements. They also know they can expect job losses in some areas and gains in others. The Council examined these shifts and shared the concerns of many Canadians. Can the new economy generate enough jobs to provide quality employment to all Canadians? Can Canada compete with other countries in which wages are lower and benefits non-existent? What will happen to the rights and protections that Canadian workers have acquired? The Council struck a committee to articulate a common position. Two divergent philosophical approaches emerged. Some members believe that the government should be proactive, via legislative change and support for full employment as a primary goal in directing the transition to an information economy. Others believe that the government should be a facilitator, placing greater reliance on the market as the driving force and on the private sector to address issues relating to job creation, job loss and workplace impacts. However, Council members agreed on the necessity to oversee employment issues specific to the new economy and to identify appropriate action where required. The Council recommends a high-profile advisory body to monitor and facilitate change and foster research on new forms of work and their impacts on workers and organizations. The Council also advocates a review of labour legislation to ensure that workers in non-traditional arrangements enjoy the same level of protection as those in conventional workplace settings. In the workplace, workers need to be protected against the misuse of information, particularly with respect to surveillance. The Council also calls for a National Employment and Job Search Bulletin Board, which would make use of the new technologies to help Canadians find jobs and employers find skilled workers. More generally, the Council calls for a renewed social policy framework to support worker mobility. Despite best efforts, the labour representative on the Council was not able to be part of the consensus reached by the Council. His dissenting view and recommendations are appended to this report. The Knowledge Society vision Learning and training comprise an integral part of the knowledge economy. Canada will provide an environment for lifelong learning in which all Canadians will have access to the widest possible variety of learning opportunities and tools. lifelong learning In the new global economy, where knowledge is the key resource, the quality of the nation's human resources is critical to ensuring competitiveness. For this reason, the Council adopted the principle of "lifelong learning as a key design element of the Information Highway". The route to prosperity in the knowledge economy is for workers to make intelligent use of information. Learning must span our working lives. Technology will make that possible. an economic issue In Canada, annual expenditures on formal education add up to approximately $50 billion. Full-time registrants in formal learning and training represent one-quarter of the Canadian population. In the new formal and informal learning environments, technology-based learning tools have already proven more effective in certain learning situations and also more cost-effective. Learners contribute to the knowledge economy both as purchasers and users of the new technologies. learning and training products The Council believes Canada should use its strengths in telecommunications and broadcasting, and in distance learning and education to establish itself as both supplier and user of high-quality learning and training products and services on the Information Highway. The integration of technology and learning is creating business opportunities for Canadians in course-ware development, course delivery and other software applications. The challenge for the government is to ensure that Canadian content is seen and used by Canadians. new markets If they can harmonize their views on new materials and curricula, provincial and territorial authorities will create economies of scale for software tools. This will provide a foundation for the production of technology-based learning products and services for both domestic and international markets. a national strategy for learning The Council recommends the development of a comprehensive national strategy involving the provinces, territories and other stakeholders to increase the effectiveness of learning and training on the Information Highway, so that Canadians will have access to, and benefit from, new learning technologies. educators Appropriately trained educators, trainers, librarians and school administrators can assist all learners to maximize opportunities offered by the Information Highway. The Council believes learning organizations need to be restructured and professional skills need to be adapted in order to meet the requirements of the new learning environment. New Opportunities role of the private sector The private sector should lead Canada's research and development (R&D) effort on the Information Highway, particularly in new technologies and applications. There is also a critical role for the government. role of government By ensuring a robust business environment and by supporting R&D and applications development for the Information Highway, the government will speed the deployment of a Canadian Highway and allow Canadian technology and services to develop export capability. The government has a key collaborative role to promote innovation in R&D and applications development through its operations and government laboratories. An excellent collaborative example is the Canadian Network for the Advancement of Research, Industry and Education (CANARIE). tax support for R&D The Council considered the advisability of federal tax-related support for R&D. It concluded that this method of support allows industry to drive projects and pays for itself over time in economic benefits. Given the importance of the Highway to all sectors of the economy, the Council recommends the expansion of tax credits for R&D investment in information and communications technologies. standards Canada needs to enhance its influence in international standards development and to use standards strategically to advance Canadian industry and product development. To this end, the Council recommends that the government endorse open interconnection standards supported by international standards bodies and by de facto industry fora, and encourage government-industry partnerships on standards development. applications The Council identified several application areas that would enhance the quality of life of Canadians, reduce costs to governments and stimulate industrial development. There are timely opportunities for developing applications in health, education, electronic publishing and electronic libraries. health care, education, electronic publishing, electronic libraries Individuals and communities stand to derive great benefits from the deployment of networking technology for health care. A balance must be struck between research access to health data and protection of privacy. The government should support pricing structures to promote educational use of telecommunications facilities and provide incentives for the electronic publishing of scholarly information. Canada's large research-granting bodies should immediately demonstrate leadership and disseminate research results throughout the Canadian research community. To begin to digitize Canada's heritage assets in libraries, galleries and museums, pilot projects should be undertaken jointly with the public and private sectors. The Council believes that if Canada minimizes regulation, creates a robust business environment for R&D and seizes opportunities in building specific applications that serve Canadian purposes, its efforts will be repaid through the creation of new businesses, products, services and jobs. Where Are We Headed? The Information Highway is a manifestation of a deep and broad technological change causing major institutional change in all segments of our society. The Council believes its work has shown that change can be managed to the common benefit of Canadians. To do so will require goodwill and concerted action by the government, private sector and individual Canadians. The Council's work reflects the following themes: competition 1. Fair and sustainable competition should be the driving force behind the Information Highway; regulation should ensure an open market, a Canadian presence and a fair game. urgency 2. Industry must move rapidly to build Canada's connections to the Information Highway. For its part, the government must move to articulate and implement a national strategy for the Information Highway. content and culture 3. Canadians and their governments must attach renewed priority to promoting Canadian content and culture on the Information Highway and to creating new jobs in the process. economic engine 4. Use of the Information Highway in all sectors of the Canadian economy will improve competitiveness and create new opportunities for Canadians in global markets. innovation 5. Innovation is the key to growth in the knowledge-based economy. R&D in information technology is critical to innovation on the Information Highway. This in turn will foster productivity, and thus growth and jobs. access 6. The Information Highway should be at least as accessible, affordable and relevant to Canadians as telephone and television services are today. Wherever the marketplace creates inequities of access for Canadians, or barriers to access to Canadian content, problems must be addressed through public/private sector collaboration and, where necessary, government intervention. a learning culture 7. Canadians need to create a learning culture within the new knowledge-based society. This is imperative for economic success, the empowerment of individual Canadians and the enhancement of their quality of life. health and education 8. Strategic investments can ensure that the Highway and its applications make Canada's health and education sectors models for the rest of the world. security and privacy 9. Individuals must remain at the forefront of the information revolution, and their interests and rights, especially in the areas of security and privacy, must be protected. Canadians are at a turning point in history. Our challenge is to make a confident, positive choice toward a more civil society, to seize the new tools of the information revolution and to employ them to the advantage of every Canadian. It is in this spirit that the Council offers the following messages to readers of this report. To the government: - Foster an environment in which the private sector can be innovative and create wealth and jobs for the benefit of all Canadians. - Address market imperfections by ensuring a prominent place for Canadian content and culture as well as equitable access for Canadians to the Highway, both as users and as providers of content. - Set an example as a model user of information and information technologies and use the power of government procurement to help Canadian firms compete globally. To the private sector: - Adapt to the new world of the Information Highway and its credo: Firms that invest in technology and people will prosper; those that do not will fail. To each of us individual Canadians: - Get involved as users of information technology and take charge of our own education and training. Regard the Information Highway not as a threat but as an opportunity to enhance our lives and distinctiveness as Canadians. - Determine the kind of society we want to live in and ensure that this vision is reflected on the Information Highway as we work for the values we care about. A final comment: The issues that the government put before the Council are central to Canada's future. Council members hope that in the months and years ahead, the national dialogue launched through the Council will be continued with the same sense of commitment and even greater vigour by all Canadians.FOREWORD Connecting Ideas In the Speech from the Throne on January 18, 1994, the Government of Canada announced it would develop a Canadian strategy to address the challenges of the Information Highway. In April of that year, the government released a discussion paper entitled The Canadian Information Highway: Building Canada's Information and Communications Infrastructure. That paper identified 15 policy issues -- posed as questions -- raised by the development of the Highway, ranging from its pace of development and ensuring access at a reasonable cost, to promoting economy-wide competitiveness and supporting Canadian cultural content. To gather advice on those issues, the Honourable John Manley, Minister of Industry, established the Information Highway Advisory Council. He named as its Chair, David Johnston, former Principal and Vice-Chancellor of McGill University and now Professor of Law at McGill's Centre for Medicine, Ethics and Law. The Council held the first of 15 monthly meetings on May 5 and 6, 1994. Three Objectives, Five Principles In its discussion paper, the government stated that the Canadian Information Highway strategy should be based on the following three policy objectives: - creating jobs through innovation and investment in Canada - reinforcing Canadian sovereignty and cultural identity - ensuring universal access at reasonable cost. In addition, the strategy should be guided by four operating principles: - an interconnected and interoperable network of networks - collaborative public and private sector development - competition in facilities, products and services - privacy protection and network security. In recognition of the Highway as a tool for "providing new dimensions for learning, creativity and entrepreneurship", which would become the title of the Council's interim report in November 1994, the Council added a fifth principle to the government's four: lifelong learning as a key design element of the Information Highway. The 29-member Council represented a wide range of interests -- the telecommunications, cable-television, broadcasting, information technology and cultural and multimedia industries; information institutions such as libraries and research organizations; the artistic, creative and educational communities; and labour and consumer organizations. The Council, ever conscious of the need to see Canada's linguistic duality reflected in the nation's Information Highway, sought to do the same in its membership, its discussions and many of its recommendations. How the Council Worked In order to examine the government's 15 issues, the Council established five working groups, to which another 26 ex officio members were added, for a total of about 10 members for each group. Each group was assigned issues specific to its mandate. Each undertook consultations and, where necessary, called upon outside experts to prepare and bring forward reports and position papers and to propose recommendations. In addition, special task forces were set up on growth, employment and competitiveness and on competition and regulation, and a subcommittee was established on copyright. Each working group's recommendations received three readings at Council and were voted upon. After each of its meetings, the Council made public its approved recommendations. Because many issues were of interest to all working groups, discussions and consultations between them became integral to the process: business leaders discussed cultural and educational issues with creators, film producers and educators; and creators confronted bottom-line questions about global markets, competition and investment and access. On complex issues that cut across working groups, the Council established bridging committees. This approach was used to find common ground on convergence, copyright, personal communications services (PCS) and the impact of the Highway on jobs and the workplace. In cases where issues fell within the domain of provincial governments -- as with education and health care -- the Council called upon all levels of government to endorse national priorities and to consult, coordinate and engage the many players within and outside the government. THE FIVE WORKING GROUPS AND THE ASSIGNMENT OF THE 15 PUBLIC POLICY ISSUES Competitiveness and Job Creation 1 How fast should the advanced network infrastructure be built? How will network improvements be financed? 2 What is the proper balance between competition and regulation? 5 How can the federal government coordinate its activities with other governments? 12 How can the Information Highway best be used to improve the growth and competitiveness of all Canadian businesses, especially small- and medium-sized enterprises, throughout Canada? 15 What opportunities does the Information Highway present to improve government operations? Canadian Content and Culture 2 What is the proper balance between competition and regulation? 3 Should requirements for Canadian ownership and control of communications networks be reviewed? 6 How should copyright and intellectual property issues be addressed? 7 What measures are needed to support Canadian cultural and other content-based products and services? 8 What controls, if any, should be placed on the information that is put on the network? 12 How can the Information Highway best be used to improve the growth and competitiveness of all Canadian businesses, especially small- and medium-sized enterprises, throughout Canada? 13 How can Canadians be assured of universal access to essential services at reasonable cost? Access and Social Impacts 8 What controls, if any, should be placed on the information that is put on the network? 9 How can the Information Highway be used to improve government services to the public? 10 How can personal privacy and security of information be protected? 13 How can Canadians be assured of universal access to essential services at reasonable cost? 14 What consumer awareness and learning opportunities should be provided to enable Canadians to be effective users of the Information Highway? Learning and Training 14 What consumer awareness and learning opportunities should be provided to enable Canadians to be effective users of the Information Highway? Research and Development, Applications and Market Development 4 How quickly can Canadian industries move toward universal standards and how should these standards be determined? 11 How can we ensure that Canadian information industries take full advantage of the R&D and technological development opportunities presented by the Information Highway? 12 How can the Information Highway best be used to improve the growth and competitiveness of all Canadian businesses, especially small- and medium-sized enterprises, throughout Canada? The Council's recommendations are addressed to the government as the recipient of its advice, but the reader should not take this to imply that the government should be the driving force in building the Information Highway. Except as one of the largest users and, therefore, a persuasive role model, governments in Canada should allow the private sector to do what it does best -- invest, innovate and create jobs. Five Working Groups Competitiveness and Job Creation Consumer, labour and small-business representatives joined industrialists to focus on issues concerning the pace of development of the Highway, the balance between competition and regulation, and economy-wide competitiveness. This group provided advice on the government's role in procurement and the use of technology. It also led the development of Council-wide responses on such issues as personal communications services and convergence -- the move from regulated monopolies to sustainable competition in the telephone and cable industries. Canadian Content and Culture This group included representatives from Canadian broadcasting, cable and telephone companies as well as Canada's cultural industries, among them artists and creators. It focussed on issues concerning the need to maintain a dynamic Canadian cultural production industry and to strengthen Canadian culture as part of the Canadian identity, and on matters of foreign ownership and copyright. Access and Social Impacts This broadly based group of business and community interests involved in access to information also included operators of community networks. It focussed on issues including the definition of universal access to services and its economic practicality, the need for privacy and security, and offensive content and consumer awareness. The group also looked at the issue of using the Highway to improve government services. In addition, it led a Council-wide discussion on the employment and workplace impacts of the Highway. Learning and Training Educators and trainers, content producers, developers and users of learning materials carried out consultations on how to ensure that learning is at the centre of the knowledge-based economy for a bilingual and multicultural Canadian population. The group approached learning as a policy issue of national importance, requiring federal and provincial coordination and consultation. It concentrated on learning opportunities to enable Canadians to become effective users of the Information Highway. Because the Council formulated learning as a fifth operating principle, the group also made supplementary recommendations on issues before other groups. Research and Development, Applications and Market Development Represented in this group were public and private sector communications and information technology R&D organizations, as well as industrialists and educators. The group focussed on how Canada's information industries can take full advantage of R&D and technological opportunities presented by the Highway and on the roles of industry and government in setting standards. The group also looked at the organization of the government's science and technology activities, and identified specific applications of information technology in health and education and in institutions such as libraries and museums. This Report The challenge of the emerging Information Highway for Canada is presented in the introductory chapter. Five chapters follow that are devoted, repsectively, to the perspectives and key recommendations of the five working groups. Unresolved differences are noted. In particular, the Council member representing organized labour was not able to agree with the Council's workplace and employment recommendations, and his dissenting report and recommendations are attached as Appendix IV. Chapter 7 on implementation presents the Council's major themes of its recommendations and report. As well, the Council offers its central messages to governments, the private sector and individual Canadians. Chapter 8 presents all the Council's recommendations, supported by explanatory notes. References in the report to the Council's recommendations are in parentheses and numbered in relation to the 15 issues posed by the government. Thus, (rec. 1.2) corresponds to Issue 1 and the second recommendation under that issue. In many ways the Council reflected the diversity of Canada itself. As with any national dialogue, our's was marked by a healthy tension. Determined to speak with a coherent voice to Canadians, the Council believed its task was not so much to eliminate this tension, but to manage it creatively and sensitively in the pursuit of common goals. We wish to express our gratitude to those who took the time to share their ideas. Many provided written comments, connected to the Council on the Internet, or participated in meetings or conferences with Council members. These views helped shape the Council's advice. We are also grateful for the support provided by the members of the Council's Secretariat. Despite long hours of hard work, their dedication and professionalism were exemplary. We also owe a substantial debt to the "sherpas", the public servants from various departments who worked so diligently on behalf of the five working groups. To all the aforementioned, thank you. CHAPTER 1 - THE INFORMATION HIGHWAY: Transition to a Knowledge-Based Society Before they head out to work every day, Canadians turn on the radio or television to get an update on the weather or road conditions, or perhaps to scan the headlines. On their way to work, some drop off their children at school. Students with computers in the classroom will log on and pick up the latest messages from pen pals in Trois-Rivières, Prince George or even Sapporo, Japan. At lunchtime, their parents may stop by an automated teller machine to pick up cash, or buy tickets to a hockey game at a commercial kiosk, or perhaps use a government automatic teller to renew their vehicle permit. Then it's back to the office where they retrieve a document faxed to their computer for weekend reading. On their way home, a cellular telephone call settles the family's Friday night video choice -- a movie that will be transmitted to their home over cable television. These Canadians are all travelling the Information Highway. Hardly exotic phenomenon of the future, the Information Highway is already part of our lives. Indeed many of us already possess, and use, an "on-ramp" to the Highway, whether via bank machines, pay-per-view television or business utilities such as video conferencing. Even the most sophisticated interactive connections today will become commonplace tomorrow, ever more integrated into almost every facet of our daily lives. Perhaps the brightest promise of the new Highway technology is that it offers a chance for all Canadians, to be part of the mainstream. For some this is already happening. In 147 communities in rural Newfoundland, interested individuals can access St. John's Memorial University's Teleconference System and link up to 217 different health education user groups. WHAT IS THE INFORMATION HIGHWAY? So, what is the Information Highway? It is all that has been discussed before and more. The term flows from the convergence of once-separate communications and computing systems into a single global network of networks. It also refers to the content carried on these electronic networks. Finally, as an integral part of the Information Highway, the software intelligence available will enable users to navigate pathways to a whole universe of information. Nowadays we still use distinct systems for various services, such as telephone, cable and satellite systems and computer networks. Each of the telecommunications industries built transmission systems for its particular type of communication, developing its own route into homes or offices. - Telephone companies built two-way, point-to-point narrowband networks using mainly copper wire. - Cable companies built broadband channels using mainly coaxial cables and fibre optic trunk lines which provide the greater capability needed for video transmission. But, unlike telephone systems, their networks were built for one-way communication only. - Computer networks were originally designed for transmitting data within and between organizations. As recently as the late 1970s, North American computer equipment executives were sceptical of the potential for computers in the home. However, in the last 15 years the phenomenal increase in the power of computer chips, accompanied by a similarly dramatic drop in prices, has seen computers evolve from large mainframe machines to personal computers to the latest handheld devices. Today, 40% of Canadian households have personal computers. One-third of these are equipped with modems - devices that allow computers to send and receive information over telephone lines. Computers are slowly being introduced into schools: the number of computers in classrooms for students up to Grade 12 now averages one for every 15 to 20 students. Two forces of technological change have created a shock wave through the communications and computing industries and shaped the blueprint for the Information Highway. In telecommunications, transmission has evolved from copper wire to fibre optic cable, along with a new generation of telecommunication switches and embedded software. The virtually limitless capacity of optical fibre has substantially eliminated capacity or bandwidth (i.e., the number of signals that can be squeezed into a wire or cable) as a constraint. Moving the large amount of information required for videos or X-ray imaging has become increasingly rapid and cost-effective. The second technological breakthrough is "digitization", the conversion of text, sound, images, video and other content into a common digitized format. This is what is referred to as "convergence". Digitization makes it possible to connect all communication systems into a single, vast network. The challenge facing Canada is to capitalize on these breakthroughs to integrate our telephone, cable, satellite and wireless networks into an interoperable network, and to upgrade them to fully interactive broadband capabilities that will carry information efficiently to Canadians across the country and beyond. The creative challenge is to develop electronic applications, services and content that will inspire people to use the Highway and realize its full benefits. HOW DO WE ACCESS THE HIGHWAY? In its simplest form, we can see the Information Highway in objects that are as near to hand as the telephone, television and personal computer. We also see the Highway in the form of communications networks. The best known electronic network is the Internet, a dramatic illustration of how the new communications technologies have become more accessible. Once the preserve of research scientists, the Internet is now used by tens of millions of individuals in their businesses and everyday life. The Internet is really a series of computer networks with a single point of access that connects the user to an electronic information system spanning the globe. The user can retrieve scientific information, explore "chat groups", find movie clips, listen to songs, view pictures from a museum, read a book, sell a report, choose a ski vacation or preview the newest cars. The practical, and commercial, uses of the Internet are enormous and increasing daily. There are nearly five million computer hubs on the Internet, with the number of users worldwide estimated at between 30 and 40 million. The Internet was originally designed as a network for emergency communications in the event of nuclear attack. Canadians have been quick to participate in the Internet, with their growth rate in using it among the fastest in the world. Many access it through commercial networks, others subscribe to community Freenets. Supported by donations and the hard work of members, these local networks lease lines and equipment from a commercial facility and provide Internet access free of charge to members. Still, the Internet is but a first glimpse of the Information Highway. Services such as secure electronic payment remain in their infancy. There is as yet limited provision to address public concerns such as network security or privacy protection. The most common access point is a computer with a modem hookup. When computer networks can be linked equally to television, telephone and other networks to form a "network of networks," the Information Highway will become a more significant part of our daily lives, an evolving mix of the old, the new and the yet-to-be-invented. WHAT'S IN IT FOR CANADA? Every technological advance is accompanied by hopes for a brighter future. In envisioning the Highway's potential to improve the quality of life for Canadians, the Council found itself using words like "catalyst," "empowerment," and "enrichment". These words echoed those expressed in times of previous dramatic advances in communication, the telegraph, telephone, radio and television. People said then what we are saying today, what matters is not so much the new hardware as how people use it, and the value it adds to their lives. Canada's Competitiveness The Council believes that Canada's Information Highway will be key to improving Canada's competitive position. It is essential for a successful transition to an economy in which jobs and wealth are based on the creation, movement and application of information. The Highway affords enormous potential for promoting regional development. For example, New Brunswick has moved aggressively to promote itself as a centre for the application of new communications technologies. "The wired province" has been successful in attracting global firms to locate there, and as a result, has realized significant employment benefits. Firms throughout the economy, not just those in the computing and telecommunications industries, are finding out how computers and telecommunications can improve productivity, sales and growth. "Just-in-time" delivery to market shaves turn around times, reduces inventory costs, lowers prices and generally better serves customers in a global market. Businesses use electronic communications to send in data from the field to a central computer, conduct training programs in remote locations and provide mobile, two-way communication between employees. Buying and selling on the Internet is still in its infancy but could well spawn a whole new retail sector. The information and communications infrastructure is vital to an innovative economy. Fortunately, Canada's communications infrastructure is world-class. We launched the world's first geostationary domestic communications satellite, and today its successors transmit telephone, television and data signals across the country and around the world in several languages. Despite the adversities presented by our geography, Canada's penetration rates of telephone and cable service are among the highest in the world. Canada has world-class communications: 99 percent of Canadian households have telephone service, a fraction of a percentage point more than those who have colour television, and virtually all of the 79 percent of Canadian households with access to cable subscribe to it. Canada's Information Industries The information technologies sector is an important contributor to Canada's information and communications infrastructure. This sector's total revenues in 1993 were $50 billion, contributing 7 percent of gross domestic product. The industry features some of Canada's, and the world's, most prominent companies offering telecommunications equipment and services, computers and office equipment, software and computer services, instrumentation, microelectronics and consumer electronics. Among the fastest growing sectors in the economy, Canadian information technologies feature internationally renowned expertise in robotics, data communications and switching, network computing, geographic information systems, remote sensing and graphics software. The global market for information technology products and services exceeds US$1 trillion, and will double by the year 2000. Industry Canada is working with provincial and territorial ministries of education and other stakeholders through SchoolNet, to ensure that by 1998 all Canada's 23,000 schools, libraries, universities and colleges are connected to the Information Highway. By using the Highway, Canadian cultural industries and content providers can reach consumers around the world. Canadians have received international recognition in publishing, music, film and television and, along with success on the Information Highway, Canadian talent can continue to flourish at home and succeed globally. However, past achievement does not guarantee future success. In the race to integrate and upgrade Canada's electronic infrastructure and generate new forms of content, the future of our telecommunications, broadcasting and information technology industries is at stake. No longer is there any technological barrier to Canadian communications firms competing in the carriage and provision of all digital information and services. In this new environment, companies are moving quickly to strike alliances breaking down traditional industry boundaries. Nowhere is this more true than in the industries that build and supply the Information Highway. Former competitors choose to become partners, believing that delay serves only to erode their market share and efforts to keep skilled workers going to new entrants or the trans-national multimedia giants acting in partnership with software and other content creators and major service providers. Choice and Opportunity As consumers, Canadians are beginning to perceive value in the Highway and are contemplating the possibilities of "connection". A survey of Canadian attitudes toward the Information Highway reported the highest level of interest in the following seven services: Receiving News or Information -6% Playing Video Games of Choice - 15% Home Shopping - 19% Ordering Tickets - 43% Viewing Movies of Choice - 48% Banking from Home - 53% Educational Home Study Programs - 63% Source: Andersen Consulting Survey, March 1995 Some industry analysts believe current research underestimates market potential because many of those who will benefit from the range of services yet to be developed are in their 20s or younger. Since it will be the consumer who ultimately pays for the new services and products, care must be taken to ensure that: - access is affordable and user friendly - privacy and security are assured - content meets Canadian needs and wants - consumers are informed and protected. WHY SHOULD THE GOVERNMENT BE INVOLVED? The pace of technological change and the new paradigms created by the information revolution will affect how citizens and their governments conduct themselves. Facing growing fiscal pressure, governments have no choice but to use information and communication technologies to improve productivity and service and save money. As users of the Information Highway, governments have an important opportunity to modernize and reform the critical social infrastructure of education, learning and training, and health care that has given Canadians their enviable quality of life. The market is a powerful force for progress. Competition breeds innovation and innovation leads to productivity, growth and jobs. The market is comprised of people who, through their choices as consumers, express their interests. Those already connected to the Highway and who see its benefits are the enthusiasts. But what these electronic producers and consumers want for themselves is not necessarily what society as a whole might choose. Canadians have worked hard over the generations to give expression to equality and opportunity, values that must be preserved. The challenge for Canadians in this new electronic age is to avoid creating new divisions in society between information "haves" and "have-nots". For the government of Canada, there is no choice but to be involved, its first responsibility being that of establishing the ground rules and then ensuring that there are appropriate enforcement mechanisms. As such, the government can either slow or accelerate the pace of change. Competition and Regulation Historically in Canada, telecommunications has been regulated to meet economic and social objectives, largely in terms of providing non-discriminatory and universal service. By contrast, broadcasting has been regulated through the allocation of the airwaves as a public good and in an effort to enhance, not only economic and social objectives but also cultural objectives related to national identity. This was the "contract" that underlay the award of monopoly privileges to telephone and cable companies. Today, countries around the world are liberalizing their telecommunications and broadcast regulatory regimes. In Canada, a new Telecommunications Act was proclaimed in 1993, completing the legislative agenda which began with the update of the Broadcasting Act in 1991 and the revision of the Radio-communications Act in 1989. Competition has been introduced into the long distance telephone market. The issue of rate rebalancing (reducing cross-subsidization of local telephone service price from long distance revenue) is before the CRTC. Since long distance telephone services were opened up to competition in 1992, the industry estimates that competition saved its customers $800 million. This saving is projected to rise to $1.3 billion by the end of 1995. The imminent introduction of Personal Communications Services (PCS) and further deregulation will increase competition and consumer choice. The investment challenge of the Information Highway and the desire of consumers for more choice cannot be met without a quick move from monopoly toward fair and sustainable competition. This was the main thrust of the May 1995 report of the CRTC entitled Competition and Culture on Canada's Information Highway: Managing the Realities of Transition. Also known as the "convergence report", it proposed rules to govern the move toward competition between cable and telephone companies and the introduction of video-on-demand and other new services. The convergence report recognized that Canadians do not want to jeopardize their long-standing economic and social goals, in particular, universal access to broadcasting and communications services, in the new information economy. Similarly, the report acknowledged that when it comes to promoting Canadian culture and identity, a balance must be struck between market and non-market considerations. Meeting Cultural Policy Objectives Canada has a unique political and cultural landscape: we are a bilingual country with a small population, and therefore a small market, stretched along an open border adjacent to the United States, a country whose cultural and entertainment industry dominates not only the Canadian but also the global markets. The cultural objective of ensuring access to Canadian content becomes an even greater challenge in the new global environment of the Information Highway. Linking Canadians to a global system of interactive media creates at once opportunity and threat to the promotion of Canadian cultural content. Canadian artists and cultural industries will find new and better promotion and distribution channels to help them reach their audiences in Canada and around the world. Yet maintaining and promoting a distinctive Canadian cultural presence will continue to be a challenge. Increased competition and choice cater to us as individual consumers, yet this individualism also presents challenges for our collective agenda. Another hurdle is that greater access to information can lessen our security and personal privacy. Again, we are reminded of the role of the state in preserving values essential to a civilized society. Concepts such as copyright, fairly well established in the world of print and publishing, are harder to apply in a still unfolding digital world. It is the very nature of the Highway, its evolving, expanding structure and presence, that produces a two-sidedness to almost every issue surrounding it. CONCLUSION The Information Highway will shape the future of our nation. Governments, businesses and individuals alike must spell out how the Highway can work in our common interest. The challenge is formidable. There will be enthusiasts and sceptics; both sides must be heard if we are to create a strategy that benefits all Canadians. As a metaphor, the term "highway" suggests a physical structure on which we can carry "things". Canadians know how our country was connected as a physical and political entity by transportation infrastructures such as the Canadian Pacific Railroad or the St. Lawrence Seaway. These were "highways" that moved goods and people. But Canadians also know that we have built our country with networks like the Canadian Broadcasting Corporation, which carry information and ideas. The power of the Information Highway as a metaphor lies in our seeing it as a new infrastructure around which to evolve a new sense of community and nationhood, as Canadians become more creative, innovative and entrepreneurial. Just as a transcontinental railway had its "last spike" in linking a nation at the time of Confederation, the Information Highway is a "next spike" in defining Canada at the dawn of the third millennium. The Information Highway Advisory Council worked and communicated in French and English. Through its Internet access point (Internet: council@ic.gc.ca) and conventional media outlets, it was able to elicit comments from both linguistic communities. Its findings, reports, minutes and recommendations were published simultaneously in both official languages on the Net and in hard copy. The government put 15 policy issues before the Council. We, the members, offer this report in reply and invite Canadians to "connect" their ideas on these critical issues with ours. CHAPTER 2 - COMPETITIVENESS AND JOB CREATION: The New Marketplace All over the world, there has been an ever-increasing demand for better, faster and more affordable communications. Canada's success on the Information Highway will depend on whether we can establish a framework for its development, one that will unleash our creativity and innovativeness. If we have the necessary foresight and boldness to push forward, then economic growth and jobs will follow. The most effective way we can respond is to move away from regulation and rely more on market forces. The convergence of once-separate information technologies and industries has an "enabling effect" that will stimulate industrial development throughout our economy. Canadian firms using the technology, products and services of the Information Highway can improve their competitiveness on a global scale and create jobs at home. So too are governments in Canada look to the Highway to improve services and reduce costs. It is these themes - increased competition, new jobs and better government - that comprise the framework for the recommendations of the Working Group on Competitiveness and Job Creation. Duthie Books, which has six stores in Vancouver, started a Virtual Bookstore. Users can search and order 50,000 titles in 150 subject areas and get information on new releases, book awards and articles. Through its Internet site, Duthie also coordinates The Reader, an electronic journal of reviews and announcements, and Literascape, an on-line centre for book-related materials and services. THE CHALLENGE: "Who will build it? Who will come?" The Information Highway is a work-in-progress. Canada already has part of the technological infrastructure in place: telecommunications networks, cable television, satellite and other wireless systems, and computer networks such as the Internet and Freenet. These facilities provide Canadians with converging services and applications, for example, broadcasting, telephone, data and other communications services. In this field, it is the marketplace that should determine winners and losers. The Council supports the government policy to establish a competitive environment for the development of the Highway (Recs. 1.3 and 12.4). This is consistent with the government's goal to preserve and expand fair, vigorous competition, within a framework that, while not protecting individual firms, does not lead to the extinction of any particular sector. Canada's infrastructure builders face challenging, multifaceted goals, to rapidly deploy the new technologies, upgrade and develop interactive (broadband) networks, and integrate different networks into a seamless "network of networks". From Old Economy to New Economy Resource-based -to- Ideas-based Stable comparative advantage -to- Dynamic comparative advantage Resource extraction, manufacturing fundamental wealth to wealth creation -to- Knowledge increases importance of service sector in wealth creation Investment in physical capital key to competitiveness -to- Investment in human capital key to competitiveness Safety Nets -to- Trampolines Monopolistic, low value-added infrastructure -to- Competitive, high value-added infrastructure Protection -to- Openness Discrete domestic and international markets -to- Interdependence of domestic and international markets Multinational firms -to- Global firms/strategic partnering Quantity: economies of scale -to- Quality: economies of scope Hierarchical organizations -to- Total quality, strategic alliances, partnerships Subsidies to slow change -to- Encouragement to adapt Source: Preliminary documents relating to "Building a More Innovative Economy", Industry Canada, July 1994. Timing and Financing Issues The public and private sectors here and abroad are cooperating to refine policy frameworks guiding the development of the infrastructure of the Information Highway. In the transition from the old economy to the new, emphasis shifts from resources and physical infrastructure to people and ideas. To keep pace with the rest of the world, Canadians must rapidly invest and innovate. Regardless of the technological opportunities, building Canada's new communications and information infrastructure will be costly. However, the door to the knowledge society will open wider, depending on decisions taken regarding when and how much to invest in infrastructure construction and upgrades and in the development of new information services. Balancing supply and demand for products and services will largely determine how, and how fast, the Information Highway will evolve. On the demand side, user content ranges from E-mail and educational course-ware, to movies-on-demand and electronic commerce. As the number of users increases, so too will the range of available content. Put simply, the more people willing to pay to use content, the faster the Highway will evolve. Because the financing of the Information Highway should be left to the private sector, the firms and individuals who bear the risks of these investments should also reap the rewards (Rec. 1.2). Suppliers - telephone, cable television, content and other service providers - make investment decisions on new hardware, applications and services, based partially on general economic conditions and expected returns. Their decisions also hinge on the degree of uncertainty, or certainty, conferred by the telecommunications and broadcasting policy and regulatory framework, which includes specific financial and service obligations as well as the rules affecting ownership and licensing. Even as Canada makes the transition from monopoly to a competitive environment, regulations and policies must be clear and consistent as well as stable and predictable. One shortcoming of the existing framework is the lack of a uniform national regulatory regime. For instance, telecommunications services in Saskatchewan are not under federal jurisdiction. The Council recommends that such geographic gaps in regulatory jurisdiction be eliminated (Rec. 2.2); otherwise the rollout of new nation-wide services will be inhibited. Regulations among governments in Canada governing the establishment of network facilities and services can also be confusing. For example, different levels of government have different requirements for the placement of cellular radio towers. The Council recommends that municipal, provincial and federal licensing and regulatory requirements be coordinated and streamlined (Rec. 2.8b). COMMENTS ON THE CRTC'S REPORT ON CONVERGENCE In May 1995, the CRTC released its report on convergence, Competition and Culture on Canada's Information Highway: Managing the Realities of Transition. The Council struck a bridging committee to identify issues that merited a response and to develop recommendations in reply. Before making any final decision, the government, thereby, has the benefit of the CRTC's report and the Council's response. The CRTC's report addressed the issue as to when and under what terms telephone companies might offer significant competition in the cable television market. The report has suggested that regulatory proceedings are already under way and that technological developments and market forces will provide a transition period of three to four years. The CRTC's position, therefore, was that there was no value in fixing a transition period to competition. Instead, during the transition period, government should aim to remove barriers and invoke competitive safeguards before telephone and cable television companies begin competing in each other's basic market. The CRTC estimates that it will require 12 to 18 months to put these safeguards in place. During that time, local telephone competition and rate restructuring issues will also be resolved. The Council agrees that setting arbitrary timetables for the building of the Information Highway is inappropriate. The private sector, users and providers, will, and should, drive the pace and scope of development. Balancing supply and demand is a self-reinforcing dynamic. Regulatory frameworks, which also affect this dynamic, should therefore emphasize competition and choice, rather than monopoly and protection. The Council believes competition is all-important in hastening the development of the Information Highway in the best interest of producers and consumers in Canada. There is an overriding sense of urgency to move ahead with competition, (Rec. 2.15) thus, the Council endorses a move toward greater competition in all lines of business on the Highway where competition is viable and sustainable (Rec. 2.6). Remaining monopoly services should not be permitted to practice cross-subsidization between competitive and non-competitive services. Therefore, the Council recommends accelerating the move toward price-cap regulation and away from rate-of-return regulation (Rec. 2.9). The Council believes the CRTC should make every effort to meet the targets it set out for the transition to competition in local telephone and licensed cable television. The Council agrees with the need to address, as a prerequisite to permitting all firms to enter into all lines of business, the following five issues (Recs. 2.12, 2.13 and 2.16) identified by the CRTC: - interconnection - co-location - unbundling - rate restructuring - interim number portability The Council believes that neither cable nor telephone companies should enjoy a head start in competing in the other's core business (Rec. 2.10). Council members hold a range of views on the application of the Broadcasting Act to new programs and services on the Information Highway. Some believe that the definitions in the Broadcasting Act should be narrowed to exclude those services that do not contribute to the objectives of the Act. This would provide the necessary certainty and clarity to encourage investment in new and emerging applications and services. In addition, these members hold that use of the exemption power is not a sufficient means for encouraging investment in new services. Others believe it is important to maintain current definitions in the Act in order to ensure the continued presence and commercial viability of Canadian services on the Highway. Amendments to the Act would be premature, given the uncertain nature of services yet to be developed. Rather, use of the exemption powers could allow for deregulation of services that do not contribute to the objectives of the Act. The Council agrees that there should be greater certainty and clarity in determining which services should be subject to broadcast licensing or exemption requirements. The Council recommends the CRTC review the definition of "broadcasting", provide illustrative examples and report back to the government in three months (Recs. 2.18 and 2.19). The CRTC has announced it will initiate a public process to clarify the use of exemption orders. THE REGULATORY TRANSITION TO SUSTAINABLE COMPETITION In the past 15 years or so, countries around the world have accelerated the shift from monopoly to competition in their telecommunications sectors. Competitiveness is indicative of international and domestic success. It stimulates innovation, expands choice and leads to greater economy-wide efficiency. In Canada, recent regulatory decisions on local telephone competition and reports submitted to the government on convergence and Direct-to-Home satellite (DTH) services have taken Canadian information industries further down the road toward sustainable competition. The Council made specific policy recommendations on the introduction of two new components of Canada's Information Highway: Global Mobile Satellite (GMS) systems (Rec. 1.7) and Personal Communications Services (PCS) (Recs. 2.20-2.27). The GMS recommendations tie Canadian equity rules to Canadian use of these international systems. On PCS, the Council put forward recommendations to promote competition and new entry into wireless services and to emphasize consumer choice, universal access, privacy protection and non-discriminatory access by third parties to the network. In addition, the PCS policy promotes job creation by favouring license applications that commit to R&D expenditures in Canada. The Council was pleased to see the government accept these recommendations. The Council recommends that the government, in liberalizing its regulatory framework for telecommunications, should act (Recs. 1.1 and 2.11) to remove outdated and unnecessary barriers to competition and implement safeguards against anti-competitive practices. Furthermore, a reformed regulatory system should reflect convergence and promote synergy by, wherever possible, integrating information industry regulations (Rec. 12.4b). The Council recommends these specific regulatory changes: - address lack of access to American and international markets by promoting competition in international telecommunications services based on a public proceeding to examine international by-pass, and the use of Canadian facilities and foreign ownership caps (Rec. 2.5) - provide fair access for multi-tenant buildings and municipal rights-of-way by ensuring service providers have access on fair and equal terms (Rec. 2.3) - address the issue of inconsistent spectrum allocations and assignments by continuing to strive for consistent assignments across Canada which conform to International Radio Regulations and are protected from foreign interference, directions and control (Rec. 2.4) - protect programming rights by developing regulatory measures to support such rights licensed to Canadian individuals and organizations (Rec. 2.7) FOREIGN OWNERSHIP LIMITS As a means of reinforcing Canadian sovereignty, the Telecommunications Act, the Broadcasting Act and the Teleglobe Act include provisions respecting Canadian ownership and control. In broadcasting and telecommunications, current regulations limit foreign ownership to 20 percent. In telecommunications, the limit on foreign ownership at the holding company level is 33.33 percent. As part of foreign ownership provisions and the Canadian ownership requirements in the Telecommunications Act (1993), Parliament introduced grandparenting provisions for two telephone companies, BC Tel and Québec-Téléphone Co. The Council considered whether the grandparented status of these companies should be extended to cover licenses to operate broadcasting undertakings. No consensus was reached. Foreign ownership limits are meant to promote Canadian control. They may, however, deny Canada access to the investment necessary to develop the Canadian Information Highway. As a first step, ownership regulations in the Broadcasting Act should be harmonized and liberalized with those of the Telecommunications Act, namely 33.33 percent at at the holding company level (Rec. 3.1). The government has initiated a policy review in this regard. As a second step, in order to promote investment and competition in Canada, foreign ownership rules should be the same across federal communications legislation (Rec. 2.1). The Council believes that with respect to attracting investment, the behaviour of capital is more critical a policy issue than its source. The reason is that the national ownership of globally dispersed operations is becoming more difficult to determine and less relevant in a global economy. The objective of retaining national sovereignty over the Information Highway could be realized by liberalizing foreign ownership limits to some degree, while at the same time ensuring that firms, regardless of their origins, operate in a manner consistent with Canada's economic, social and cultural objectives. Thus, the Council recommends that foreign ownership policies should be reviewed (Rec. 12.4c). DELIVERING ECONOMY-WIDE BENEFITS The information industry represents about 10 percent of Canada's national output. It is in the remaining 90 percent that uses the industry's products and services where the Information Highway will have a powerful transformative and beneficial effect in terms of improved production and new job creation. Accordingly, all levels of government in Canada, federal, provincial and municipal, should review their legislation, regulations and policies to identify and eliminate obstacles to the use and development of the Highway by individuals and firms (Rec. 12.1). Economic opportunity is not limited to the supply sector. However, competition in that sector lowers costs of communications services, which enhances the ability of Canadian firms who use those services to compete domestically and globally. Competition reinforces a cycle of greater innovation, higher productivity, lower prices, higher quality and greater choice. It lays a new foundation from which all firms, large and small, can grow and create jobs. Technology Creates Jobs Private Sector Job Creation 1984-1991 High Technology users: 508,000 Medium Technology users: 423,000 Low Technology users: 135,000 Total jobs created: 1,066,000 Source: Building a More Innovative Economy, Industry Canada, November 1994. Generating new applications and content promises to be a major source of economic growth and increased employment for Canada. The emphasis should be on reducing impediments to the development and export of content products and services in which Canada has a comparative advantage. New approaches to promote Canadian content should be developed in a manner consistent with Canada's cultural objectives, the realities of a global marketplace and the economic opportunities of the Highway (Rec. 12.3). Competition alone will not ensure the rollout of the Information Highway nation-wide. At the same time, how the issue of access will play out is uncertain -- communities are moving quickly to establish local networks, which are helping deliver benefits to local economies. The challenge is to address those situations where Canadians are denied affordable access. The Council agrees that market forces should be the primary instrument for promoting access (Rec. 1.5) and that any intervention, such as subsidies, should be transparent and competitively neutral (Recs. 1.6 and 1.4). THE ROLE OF GOVERNMENT In February 1995, G7 countries, with representatives from both the public and private sectors, met in Brussels to discuss the implications of the Information Highway. As the regulatory regimes for communications services are liberalized, the private sector will be better able to meet the immense challenge of building and operating the Highway. G7 countries endorsed the principle of a collaborative effort between the public and private sectors to achieve a global Information Highway and make the transition to a knowledge-based society. What is the role of government? The Council sees the government's primary task as setting the legislative, regulatory and policy framework, in effect, the ground rules. Its other important, pivotal roles are: - to coordinate related policies and initiatives within an overall strategy for the Information Highway - through use of its power of procurement, to be a catalyst in building the Highway - to be a model user inspiring all Canadians to participate and share in the benefits of the Highway. Government as Coordinator The first level of coordination is within the federal government itself. In early 1995, in response partly to a recommendation from the Council, the federal government struck an interdepartmental committee (Rec. 5.1b). Next, because the Highway's potential impacts of extend across jurisdictions, a second level of government-to-government coordination is required. Thirdly, Canada must participate in international initiatives to raise, discuss and resolve issues related to the development of a global network. Federal, provincial and territorial ministers and officials whose portfolios impinge upon the development of the Highway should meet regularly (Rec. 5.1a). A formal mechanism for coordination and cooperation should be established. Furthermore, municipal, regional, provincial, territorial and federal licensing and regulatory requirements should be coordinated and streamlined in order to facilitate the development and dissemination of Information Highway facilities and services (Rec. 5.2). International organizations are turning their attention to Information Highway issues. The absence of international coordination mechanisms addressing Highway-related problems, including implementation and access standards, could work against Canada's interests and hinder the development of a global Information Highway. The government should strengthen its linkages with existing international agencies and build on its international reputation for statesmanship by pursuing international initiatives such as meetings between national advisory bodies of the Information Highway (Rec. 5.3). Government as Catalyst Public procurement can be a powerful tool to stimulate scientific and industrial development. The Council urges that more be done, and done faster, to foster innovation, encourage participation by small and medium-sized enterprises and facilitate the formation of consortia to develop the Highway. This will create more commercial spinoffs, export opportunities and jobs (Rec. 15.6). If the government disseminates its own information more aggressively and widely, the private sector will be better positioned to develop new applications and content (Rec.12.2). The government should appoint a deputy-minister-level official to lead in identifying technology issues and developing solutions in consultation with government departments, key stakeholders and major trading partners (Recs. 9.19 to 9.22). That same official should have responsibility to "champion" and oversee the implementation of the Information Highway within the government (Rec. 15.3). In November 1994, Industry Canada released a report, Building a More Innovative Economy, which discusses ways in which the government is using information technologies to meet economic and social objectives. The Council highlights the following two initiatives, (already under way in collaboration with the private sector), as success stories: - The Canadian Network for the Advancement of Research, Industry and Education (CANARIE), a not-for-profit organization, has 140 members from industry and the research and education communities. They have joined forces to accelerate the introduction of high-speed networks in Canada. More than 200 firms and research institutes across the country have already worked on CANARIE projects, with plans under way for more than 30 additional firms to join the consortium. - SchoolNet, one of the leading educational networks in the world, is a joint federal, provincial and territorial initiative, which provides Canadian teachers and students with electronic services to stimulate the skills needed in the knowledge society. More than 4,000 of Canada's 16,000 schools are connected to the Information Highway through SchoolNet. The goal is to link all 23,000 schools, universities, colleges and libraries electronically by 1998. The Open Bidding System, developed for the government by ISM Information Systems Management Corp., allows companies that seek to do business with the government to search on-line for procurement opportunities. Updated daily, the service offers access to tenders from the governments of Manitoba, Ontario and Alberta and the federal government. Some 25,000 businesses subscribe to the services at an annual cost of $130 per year. Government as Model User The government has already begun to use the Information Highway to modernize and improve the way it operates and delivers services. In March 1994, Treasury Board released a discussion paper, Blueprint for Renewing Government Services Using Information Technology, with recommendations to enhance government operations and implement the electronic delivery of government services. Services such as electronic bidding, computerized income tax declarations and radio license renewal are now in place or soon to be in place. To make the government more efficient, cost-effective and responsive, the Council believes in more vigorous and concerted effort to innovate, co-ordinate and implement new technologies throughout government departments and agencies. Accordingly, the Council recommends that the government adopt the following "mission statement": The government will make it a priority to become a world leader in the rapid introduction and generalized use of electronic information and communications systems, and in affording all Canadians the opportunity to communicate and interact electronically with its departments and agencies in either official language. (Rec. 15.1) As a major creator, user and provider of information, the government must be a model in the timely and effective use of applications, products and services of the Highway (Rec. 9.10). It must instill a sense of urgency in making the transition to a knowledge-based society (Rec. 15.2). Redefining the government's services for a digital environment will entail significant "re-engineering" within government departments and agencies. The benefits will be greater efficiency, lower cost of operations and faster, better services for Canadians (Recs. 9.1 to 9.4). The deployment of the Information Highway will speed the shift toward paperless communications and transactions. It will facilitate access to government procurement opportunities for small and medium-sized enterprises (Rec. 9.5); as well, services such as employment counselling can be conducted over the Information Highway, thereby resulting in fewer visits to government office. Lower costs of delivering social benefits and programs will produce savings and consequently more resources that might be used in pursuit of social objectives. Revenue Canada offers EFILE, an electronic income tax filing service. Almost three million Canadians used the service for their 1993 tax returns. Clients receive refunds or notices of assessment in less than two weeks. EFILE has enabled Revenue Canada to improve its service and reduce administration costs. The Enterprise Network, a Newfoundland Crown corporation, operates an on-line network service to assist in the development of rural information industries, including home information technology applications such as telework, telehealth, tourism and education. As the Highway is deployed throughout the government, evaluation mechanisms will be necessary to ensure cost-effective implementation (Rec. 15.4). Re-engineering will pose formidable technological, financial and, most importantly, human challenges. Increasing levels of automation and electronic service will create tension within established organizations, and government staff must be trained to exploit opportunity (Rec. 9.9). The merits of the technology must be readily understandable and electronic service delivery programs must be accessible and user friendly (Rec. 15.5). What will work best is appropriately scaled, off-the-shelf, proven technology geared to users' needs (Rec. 9.10). CONCLUSION The Council believes that the necessary prerequisites to building a sound Information Highway in Canada are to update and reform the regulatory environment and move to sustainable competition and marketplace rules. As a consequence, the Highway will strengthen Canada's information industries sector and others throughout the economy and create a self-reinforcing cycle of innovation, growth and jobs, and provide for better government. CHAPTER 3 - CANADIAN CONTENT AND CULTURE: A Strong Canadian Presence New information technologies are changing the relationship between producers and consumers and between governments and citizens. For Canada's cultural industries, the Information Highway offers new opportunities to reach consumers around the world, while at the same time presenting familiar challenges when it comes to connecting with Canadians. While the government has found it advisable to regulate cultural and intellectual content, neither the intent nor the effect of such regulation has been to limit consumer choice. On the contrary, government policies have ensured a wide range of choice, balancing our needs as consumers with our priorities as citizens. The challenges associated with ensuring a prominent place for Canadian content on the Information Highway are not new. As Canadians, we have always been confronted with the dual challenge of a small domestic market and our proximity to the United States, the world's most powerful cultural exporter. Past federal policies have attempted to give Canadians a fighting chance in the cultural marketplace. These policies have been effective: 60 years ago we were a market for British, American and French cultures; today Canada is a major exporter of film and television products. But culture is not simply a product on the global market. It is also a process, an ongoing dialogue that can focus a spectrum of diverse perspectives into a shared vision. In contrast to the robust existence of exportable products, the Canadian cultural dialogue within our borders is fragile. Will the new technologies enhance our role as providers to the world or will we revert to the role of passive consumers? On the Information Highway, will Canadians drive an industry or will we become just another consumer group? Over the longer term, will the national dialogue that Canadians developed in this century continue to exist? Or will globalization, paradoxically, force us to withdraw into our conflicting individual, regional and ethnic shells? The principal challenge is clear: How should Canadian public policy continue to ensure Canadian choices on the Information Highway? There are three fundamentals to consider: - The Information Highway is a natural extension of the current broadcasting and telecommunications environments. - In the face of ferocious competition from foreign sources, Canada's success is primarily due to its cultural and broadcasting policies. - To ensure success in the future, cultural and broadcasting policies must adjust to the changing relationship between consumers and producers. CANADIAN CONTENT AND THE INFORMATION HIGHWAY There is much utopian speculation about the Information Highway's potential to "bring down borders" between nations. This sort of speculation must be tempered by the potentially negative effects of such eventualities. Bringing down borders can lead to a blurring of national identities. It can enable large population masses to dominate smaller cultures and define the emerging "global culture" by sheer economic force. It can also rekindle old divisions - ethnic, regional, religious - which national cultures now transcend. The Canadian Museum of Civilization partnered with Kodak and Digital Equipment Corp. to digitize the museum's collection. The CMOC site features a virtual tour of the museum's Grand Hall of West Coast Native longhouse facades, with totem poles and a forest backdrop. The Great Adventure lets children take a virtual tour around the world to experience images of different cultures. (http://www.cmcc.muse.digital.CA). Respect for cultural differences is an essential component of civilized life. At the G7 Conference on the Information Society in February 1995, all participants supported the principle of encouraging cultural and linguistic diversity. In international terms, the recognition and protection of cultural differences is an expression of goodwill. It is not about creating barriers; it is about tolerance. Historically, Canada has nurtured its culture through a variety of measures which include the following: - direct assistance through programs such as those delivered under the auspices of the Canada Council and Telefilm Canada - public institutions such as the Canadian Broadcasting Corporation (CBC) and the national museums program to produce, distribute and showcase Canadian culture - mechanisms such as the Broadcasting Act, rules for advertising in foreign media and rules governing split-run publications (where foreign periodical content is used as an advertising vehicle aimed specifically at the Canadian market). Like the majority of Canadians, the Working Group on Canadian Content and Culture endorses the Canadian cultural imperative. Canadians must be able to provide their own content on the Information Highway. The aim of recommendations in this chapter is to ensure a prominent place for Canadian content on the Highway (Recs. 7.1 to 7.18). They take the following into account: - fiscal restraints that confront governments at this time - the need for Canadian business to compete internationally, free of outdated regulation - the need to balance the interests of Canadians, both as consumers and citizens - the international treaties to which Canada is committed. Private Communication or Broadcasting? Much effort has been expended to distinguish "broadcasting" from "communication". While the distinction is by no means absolute, it is still valid. Broadcasting is, at its core, the electronic provision of entertainment and information programming for reception by the public. Private communication, on the other hand, could be considered the exchange of ideas -- by voice, text, data and visual images -- between individuals. In broadcasting, it might be possible to establish a distinction between programs that are transmitted over the airwaves and those sent by wire, or based on whether programming is received via television or computer, however, these distinctions are of little consequence because they are all considered programming. That is not so with private communications. This broad distinction remains and must remain valid despite converging technologies and exceptional instances. For example, as long as the Internet remains principally a private communication medium, used as a depository of databases and scientific information or as a promotional tool, regulating its content is no more appropriate than regulating the content for the telephone or, for that matter, publicity flyers. But if the Internet evolves into a medium for the commercial provision of programming, cultural policy goals will have to be set. The Council believes the government stated a fundamental element of the Canadian Information Highway in its Order-in-Council of October 1994, which initiated a public process led by the CRTC on how to best frame a competitive policy for the Information Highway. Participants in the Information Highway should make equitable and appropriate contributions to the production and distribution of and access to Canadian-cultural-content products and services; and government should continue to have the tools and mechanisms necessary to promote Canadian content. Redefining the Regulatory Framework for Canadian Content As was noted by the CRTC in its report on convergence, the Broadcasting Act, passed four years ago, "anticipated both the extraordinary pace of technological change and an explosion of broadcasting services in a competitive environment". The CRTC went on to say that the legislation "held to the primary importance of maintaining a Canadian system that offers Canadians programming of high standards and one that, in its totality, reinforces the sovereignty of their country and their own cultural identity". Much of the success of Canada's cultural industries has been a direct consequence of effective federal broadcasting and cultural policies. Where such measures have been absent, results have been disheartening. For example, Canadian feature films occupy less than 6 percent of theatrical screen time in Canada and rarely light up international screens. Canadian film artists, like their music industry counterparts a quarter century ago, are more inclined to pursue their careers in the United States. For Canadians, the greatest achievement in film may yet be our contribution to the American entertainment industry. In contrast, Canadian broadcasting policies have inspired Canadian talent to remain at home, while giving Canadian consumers the benefit of the widest possible choice of any country in the world. By any standard, the range is astonishing. In television services, Canadians are presented with the following choices: public, private, community, French-language, English-language, multilingual, Native, Canadian and foreign, educational, specialty, pay TV, pay-per-view, and much more. Simply stated, this wide range of choice would not have occurred without the support of strong broadcasting and cultural policies and programs. Canadian cultural policy must be reaffirmed and strengthened in relation to the new information infrastructure (Rec. 7.1). The challenge now is to ensure that these policies are sufficiently flexible to accommodate unforeseeable changes, yet strong enough to continue to provide Canada some stability in an unstable world. Given the evolutionary nature of the development of the Information Highway and the proven adaptability of broadcasting policy to change, the Council believes the Broadcasting Act can continue to support the presence and commercial viability of Canadian content amid an increasing range of products and services. Accordingly, the government should confirm the important role of the CRTC to ensure the implementation of long-standing cultural policy objectives for the Information Highway (Rec. 7.2). To reflect the linguistic duality of Canada, the French language must have a prominent place on the Information Highway. Thus, French-language products and services must continue to develop as an essential expression of Canadian content. Government policies should stimulate, through incentives, the creation and production of new content adapted to information technology, with special consideration for the needs of the French-language market. In addition, the creation, production and implementation of navigational and menu systems in both official languages should incorporate the principle of universal access by all Canadians to all forms of content (Rec. 7.3). The Council had a divergence of views regarding the definitions contained in the Broadcasting Act. Some members believed the definitions should be narrowed. Others believed that the existing definitions in the Act were sufficiently flexible to accommodate new services and therefore should be maintained or interpreted broadly. There was concurrence that judicious use of exemption orders would make any such changes to the definitions in the Act unnecessary. Nonetheless, some members still believe that the CRTC should evaluate services that are exempted from the requirement to hold licences so as to assess their potential to materially contribute to the objectives of the Act. Council members who felt that changing the definitions was unnecessary nevertheless believe that where services cannot contribute to the objectives of the Act, effective procedures, including timely exemptions of classes of services without obligations, must be developed. Securing A Prominent Place for Canadian Content The book publishing industry in Canada can provide essential content for the Highway and Canadian publishers must be given that chance. The value of book-based content multiplies with each new format or window. Publishers in other countries are at the forefront in developing electronic content, and Canada must find a foothold to compete. Given the current precarious state of the Canadian book publishing sector, the government should put in place fiscal measures to support the financial viability of this industry until longer-term solutions emerge. Structural policies to ensure the industry's long-term viability should include investment incentives as well as access to funds designated for multimedia programs (Rec. 7.4). The University of Calgary is the home of CultureNet, an information hub for cultural activities across Canada. The site (http://www.ffa.ucalgary.ca) is a signpost to cultural information resources on the Internet in Canada, from architecture to literature and theatre. Searches can be made of databases such as the Canadian Music Centre Library, and of cultural organizations and their programs and member artists. Two-way access, the ability to receive content and to provide content, is paramount. The importance of the Broadcasting Act cannot be underestimated. Section 3(l)(t)(i) of the Act requires distribution undertakings to "give priority to the carriage of Canadian programming services and, in particular, to the carriage of local Canadian stations". The Council recommends that government policy continue to recognize and implement measures that give priority to the services of Canadian programming undertakings and, in particular, ensure the pivotal role of local private and public radio and television broadcasters as key universal providers of Canadian information and programming services (Rec. 7.5). While "shelf space" for Canadian content is essential, prominent shelf space at "eye level" for Canadian products and services is also important. Formal, enforceable access rules should be developed that strengthen the principle of priority carriage for all licensed Canadian programming services on all distribution systems, to ensure access to capacity, channel placement menus, navigational systems and ancillary capabilities (Rec. 7.6). The Broadcasting Act calls for programming that reflects a wide range of views on matters of public concern. As companies merge to compete globally and benefit from vertical integration, measures will be required to discourage preferential treatment based on ownership. The principle of carriage/content separation should be maintained through, at a minimum, the requirement of structural separation between programming and distribution undertakings and other reasonable safeguards (Rec. 7.7). Digitization and New Applications Canadian public policy has sometimes focussed on infrastructure of the Highway while allowing funding for content to dwindle. An example of this incongruity is SchoolNet, a program to link Canadian schools on the Information Highway. As it was being created in 1993, a funding program for course-ware fell victim to budget cuts. The unintended result is that SchoolNet may well become a conduit for providing American learning products to Canadians. The artifacts of Canada's history and heritage must be digitized, so that they may reach new generations of Canadians. Because of current fiscal restraints, a collaborative approach should be adopted. To encourage investment in the digitization of collections, the Council recommends that governments solicit competitive bids from the private sector for licences to reproduce such works (excluding those protected by copyright) in digital form (Rec. 7.8). More generally, a portion of funds granted to heritage institutions should be earmarked for the digitization of collections, which would proceed according to the individual priorities of these institutions (Rec. 7.9). MAKING CANADIAN-CONTENT PRODUCTS COMPETITIVE ON A WORLD STAGE While government support is required to ensure a strong Canadian presence on the Information Highway, there is also a need to reduce reliance on that support. Canadian cultural industries should strive to be self-sustaining, in order to better position themselves in domestic and international markets. Maximizing Opportunities The Canadian market is not dominated to the same degree as the United States by giant media conglomerates. Canadian players are, typically, small and medium-sized private businesses. Canadian cultural industries require strategies to compensate for the difference in size with their American counterparts and to fully exploit potential domestic markets. Accordingly, funding should provide incentives to maximize the exposure of content products in different media and to maximize their potential in domestic and foreign markets (Rec. 7.10). The important role of traditional cultural industries cannot be overlooked. For example, the Canadian film industry will not develop on the Information Highway without a proper base for growth. The industry's future viability depends upon more equitable access to distribution channels through Canadian movie theatres. Public policies must rectify this situation. Although Canada's domestic cultural market is small, every effort must be made by Canadian producers to exploit it. In recognition of the important opportunities in the market for educational products and services, the Council of Ministers of Education, Canada should be encouraged to urge its members to adopt policies (i.e., procurement and incentives) that foster the development and delivery of Canadian learning products and services (Rec. 7.11). Without creators, there is no content. Creators must become adept at using new technologies for the production and distribution of their products, and educational opportunities should be made available to them (Rec. 7.12). Institutions should also encourage multidisciplinary research projects. There will be a variety of non-cultural content on the Highway, including telecommunications services, data banks, health and information services, non-cultural multimedia products and software applications. Canada cannot stand out in all subsectors. Canadian companies must make strategic choices and concentrate in emerging and niche markets where there is maximum potential reward. ARTS AND CULTURAL SECTOR Contribution to Gross Domestic Product, 1992-93 (In millions of Candian dollars) Visual Arts - 677.7 Government - 1,336.3 Libraries - 1,052.2 Other Stage Performances - 291.8 Professional Performing Arts - 240.4 Retail - 1,686.3 Wholesale - 1,017.5 Manufacturing (Sound & Musical Instruments) - 260.3 Record Production/Distribution - 240.5 Broadcasting - 3,128.3 Film - 824 Print Media - 4,263.9 Source: Statistics Canada, Client Study, 1992-1993 Direct Employment in Canada Visual Arts - 35,876 Government - 19,926 Libraries - 33,560 Other Stage Performances - 32,250 Professional Performing Arts - 56,591 Retail - 66,739 Wholesale - 7,738 Manufacturing (Sound & Musical Instruments) - 2,692 Record Production/Distribution - 2,833 Broadcasting - 36,168 Film - 27,406 Print Media - 52,528 Source: Statistics Canada, Client Study, 1992-1993 Funding the Production of High Quality Canadian Content In Canada, to the extent that the public has "paid the piper", the public interest has "called the tune". Public funding for Canadian content has helped offset the cost of achieving high standards. In return, the public interest has helped determine what is or is not high quality programming. Now that public funding can no longer be provided at the same level, will the marketplace become the sole determinant of "quality" on the Information Highway? Will the public interest continue to play a role? To promote the public interest, new ways must be found to direct resources to Canadian content. In recent years, private resources have been important to the production of high-quality Canadian content. The CRTC for example, requires cable operators to fund the production of community programming. Many operators also contribute to the production of Canadian content. Television stations, specialty services, pay TV and pay-for-view services are required to target a large percentage of revenues for Canadian programming. The Council believes that new entrants to the system should be expected to contribute equally to the creation and distribution of Canadian productions. Through the direct allocation of a percentage of revenues from the distribution in Canada of broadcast services, all distribution undertakings governed by the Broadcasting Act should contribute equally to the development and production of Canadian programming, including interactive multimedia products (Rec. 7.13). Access to Financing Equitable access to production funds, distribution opportunities and fiscal incentives are critical. Provided there are safeguards with respect to non-arm's-length transactions, government policy should permit equitable access for broadcasters and independent producers, including multimedia producers, to production funds, distribution opportunities and tax measures (Rec. 7.14). As previously stated, the government should continue to support Canadian publishers and other cultural industries and promote export opportunities for Canadian content. However, the government should also put in place new funding or tax incentives to encourage Canadian businesses to invest in new products, including Canadian content multimedia products for the Information Highway (Rec. 7.15). Taxation One fiscal measure that has proven effective is Section 19 of the Income Tax Act, which keeps advertising dollars in Canada by disallowing the tax deductibility of advertising on foreign print and broadcast media primarily directed to the Canadian market. The Council recommends that Section 19 be amended to apply to advertising in all electronic media, including new media applications such as electronic publishing and on-line services and, moreover, that it be properly and consistently enforced (Rec. 7.16). Government Harmonization Governmental harmonization will facilitate the production and export of Canadian programs, including film productions and multimedia. It will also encourage productions with countries where Canada has co-production treaties. As a first step, further federal/provincial harmonization must be undertaken to streamline the objectives of support programs and other incentive measures, as well as the rules and criteria of access to funding. As a second step, there should be similar harmonization between Canada and its treaty partners (Rec. 7.17). Market for Rights New American service providers would prefer not to regard Canada as a separate and distinct market. That commercial reality was readily apparent in issues raised by Direct-to-Home (DTH) satellite broadcasting. Given the disparities in economies of scale between Canada and the United States, the dominance of foreign programming in Canada and the potential fragmentation of our small market, the Council recommends that government policies continue to enforce a discrete Canadian marketplace for program rights and discourage the continentalization of such rights (Rec. 7.18). COPYRIGHT Since the Copyright Act first came into force in 1924, copyright has been an essential lever to encourage creativity and ensure adequate compensation for creators. In this way, copyright has both benefitted Canadian creators and proven important to the realization of Canadian cultural sovereignty and national identity. However, the new technologies - primarily digitization and interactivity - have provoked wide debate as to how copyright should be applied and enforced on the Information Highway. To examine the issue, the Council struck a subcommittee on copyright. Its report to Council was one of the first attempts to comprehensively examine copyright law and practice in the context of the Information Highway in Canada. The potential for piracy, or unauthorized use and reproduction of protected works and the consequent economic repercussions, is a cause for concern to creators and producers. At the same time, users, service providers and distributors of protected works on the Information Highway need to have a fuller understanding of the nature and extent of copyright liability as well as streamlined procedures for rights clearance. In the search for a balance, the Council raised some of the complex questions to be addressed as digitization proceeds: - How will existing rights apply to the creation and use of works in a digital environment? - How will the moral rights of creators be protected? - Who is liable for copyright infringement? - How can the use and reproduction of protected works for the purposes of enforcement be tracked? - How can the process of clearing rights, particularly for multimedia works, be streamlined? In reply, the Council developed a set of principles (Rec. 6.1) to govern the application of copyright on the Information Highway, based upon the following requirements: - A balance should be maintained between the rights of creators to benefit from the use of their works and the need of users to access and use those works. - Industry, creators and user communities should be encouraged to develop and implement an administrative and regulatory framework that is easily understood and not seen as a barrier to access or use of content. - The need for creativity and the multiple roles of individuals as creators, disseminators and users of information should be recognized. - The creation of works critical to national and cultural identity and economic development should be encouraged. - Exchange of information should be facilitated. The Council believes that these principles address, in an orderly way, issues raised by increased digitization and therefore set the framework for discussion among stakeholders. These principles will be useful to explain copyright legislation to the public and to facilitate legislation and regulations interpretation by creators and users as well as the courts. There has been considerable discussion in the industry as to whether multimedia works are protected under the Copyright Act or whether they require the creation of a new category of works. The Council agreed that the digitization of works in itself does not result in the creation of new works; rather, it constitutes the expression of copyright subject matter in a different format. Accordingly, the Council is of the view that all digital works, including multimedia works, have sufficient protection under existing categories of works in the Copyright Act (Rec. 6.2). The Information Highway permits users to "browse" works, including books, artwork, music, films, videos, live and recorded music, among others. Creators must retain the right to authorize or prohibit the use of their works, regardless of the technology or medium. Therefore, the Council believes it should be left to the copyright owner to determine whether and when browsing should be permitted on the Information Highway. However, in order to provide greater clarity to users, the copyright owner should also identify what part of his or her work is appropriate for browsing. To clarify these practices, the Council recommends that the Copyright Act be amended to provide definitions of "browse" and of "publicly available work" (Rec. 6.4). "Fair dealing" is designed to be a valid defence for users in cases where an infringement has occurred. The relevant section of the Copyright Act should be clarified regarding its application in a digital environment. Specific criteria and guidelines should include explicit clarification that fair dealing applies to the making of an electronic copy of a work and to the storage and transmission of that copy by electronic means (Rec. 6.5). The principle of ensuring that Information Highway provides access to more, not less, information has renewed debate in Canada as to whether Crown copyright should be abolished. In the Council's view, what is required is not the abolition of Crown copyright, but rather a more liberal approach to making works of the Crown available to the public (Rec. 6.7). Under current copyright law in Canada, bulletin board service (BBS) operators are liable for copyright infringement. Only common carriers functioning solely in that capacity are exempt from copyright liability. The Council accepts that BBS operators should be liable for copyright infringement (Rec. 6.16) except where: - they did not have actual or constructive knowledge that the material infringed copyright - they acted reasonably to limit potential abuses. Contrary to what might be expected, the issues presenting the greatest challenge to develop a truly Canadian Information Highway with new Canadian products and services were not legal or policy-related in nature, but administrative and technical. In that regard, the industry believes the enforcement of copyright and the clearance of rights constitute a priority. The Council reviewed the range of mechanisms that could be developed to track and enforce copyright on the Information Highway. It concluded that the industry itself, with the assistance of the government, was best suited to develop the necessary technological solutions. However, the Council recommends that legislative action be taken to amend the Copyright Act to make it a criminal offense to tamper or by-pass copyguards or encryption technologies for the purposes of infringing copyright (Rec. 6.11). Furthermore, the government should encourage the industry as well as creator and user communities to create an administrative system to streamline the clearance of rights for use of works in a digital medium (Rec. 6.12). In summary, the Council believes the Copyright Act provides sufficient protection for new and existing works, including multimedia works, that are created or distributed in a digital medium. The current legislative and policy framework is sufficiently flexible to provide the means of effectively enforcing copyright on the Information Highway and, at the same time, provide users with reasonable access to protected works. The Council's recommendations respecting copyright law and practice on the Information Highway are only a first step. Users, creators and the industry need to be better informed about the rights of creators and the needs and responsibilities of users. Accordingly, the Council recommends that the government, in partnership with industry and creator and user communities, should launch a public education campaign on the application of copyright on the Information Highway (Rec. 6.13). CONCLUSION Canadian broadcasting and cultural policies have never limited consumer choice. Rather, they have ensured the widest possible choice in Canadian and foreign content. In fact, Canada is one of the most open markets for foreign cultural products among industrialized nations. The Council supports the principle adopted by G7 countries in Brussels in February 1995 at the conference on the information society. "Citizens should be provided with access to all content, including a strong presence for indigenous cultural products and services. Diversity of content, including cultural and linguistic content, should be promoted." (Adopted by G7 countries at Conference on the Information Society, February 1995) As Canadians, we find ourselves questioning assumptions as to what the nationstate is and what it is for; yet no alternative instrument has shown itself capable of maintaining the fundamental precepts of civility such as rule of law, without which private commerce cannot take place. We cannot be certain what changes will occur as a result of the digital revolution. At the same time, we cannot wait for the outcome before mapping national strategies. Faced with this paradox, our challenge is to determine which traditions we can forego in order to successfully address global changes, and which are essential to maintaining our integrity as a nation. We must be continually prepared to address the fundamental Canadian question: What constitutes Canada? We must also ask ourselves: What are the essentials that make this nation viable as a society and, that enable us to maintain consensus, rules of law and a distinctive national identity? If we are to reach a national consensus regarding our efforts on the Information Highway, broadcasting and cultural policies must not simply react to technological change, they must also drive change. That is the fundamental imperative for a strong Canadian presence on the Information Highway. CHAPTER 4 - ACCESS AND SOCIAL IMPACTS: The Human Dimension The Information Highway is not just about technology, nor are its considerations solely commercial. It must have a human dimension, so that its use, operation and impact respect and reflect the values that Canadians hold, both as individuals and as a society. Even as the Highway permeates almost every facet of daily life, it must create opportunities to improve the quality of life. Canadians have always worked hard within their society to overcome differences of gender, age, income and other social factors creating barriers to equality. But for some Canadians. like those living in rural and remote communities or those with disabilities, the reality of life involves a constant struggle to conquer isolation and vast distances. The Information Highway can change all that, creating opportunity where there was none before. The Working Group on Access and Social Impacts listened to the hopes of many Canadians, not just those in isolated communities or those with disabilities, but also community leaders, aboriginal peoples, community networks operators, educators and librarians - Canadians who believe that promise can become reality. The working group discussed three topics regarding Canada's Information Highway: access to facilities, content and services; how best to protect Canadians against offensive content; and how to ensure privacy and network security. In addition, it led a bridging committee on issues respecting the impact of the Highway on employment and the workplace. On all these issues, the group's challenge was to determine how best to apply established goals and practices in Canadian society to an uncertain future. ACCESS Government policy has made it clear that provision of the Highway's services will largely be determined by a competitive environment. The market can indeed deliver most services to a majority of Canadians, however, there will be instances where the market creates inequities of access. The use of non-market mechanisms must ensure, if possible, that all Canadians are able to use the Highway and derive benefits. According to recently published opinion surveys, which were confirmed by consultations undertaken by the Council, access to the Highway ranks high among the public's concerns. With this in mind, the Council recommends that the government develop a national access strategy (Rec. 13.1) based on four principles (Rec. 13.2): - Universal, Affordable and Equitable Access: Basic access facilities for the delivery of Information Highway services should be locally available, at reasonable cost, regardless of location. There must be equitable opportunity for all, including people with disabilities and groups with special needs, to access and use the Information Highway. - Consumer Choice and Diversity of Information: To the maximum extent possible, provision of services will be driven by market forces, so that consumers will be able to choose from a wide range of commercial and non-commercial information and services. - Competency and Citizens' Participation: Canadians should be able to acquire a basic understanding and command of information technology to enable them to use and benefit from the Information Highway. The Highway must provide adequate opportunity for self-expression and participation in the information society and for the control of incoming and outgoing information. - Open and Interactive Networks: Networks must offer full interactivity, interconnection and interoperability, as well as the freedom to provide, circulate and exchange information. Universal and Affordable Access In a genuinely competitive environment, the market determines prices, and services pay for themselves. However, market forces occasionally fail to provide universal access at affordable prices. This may be the case, for example, in high-cost-of-service areas such as rural and remote communities or in the provision of high-cost services for Canadians with special needs. Where market forces can be shown to have failed in that respect, government intervention is required (Rec. 13.3). Traditionally, in telephony, a system of cross-subsidies, hidden by system-wide rate averaging, has been used to ensure the availability of basic services across the country. However, in the more competitive environment of telecommunications, this is becoming less and less viable. Other non-market mechanisms to improve access to services might include universal service access funds, targeted subsidies or preferential tariffs. Their use, however, should be explicit, targeted and competitively neutral (Rec. 13.4). How these non-market mechanisms are to be funded is a matter for the government and the CRTC to assess through regular public hearings. Marketing surveys assessing services on the Highway provide few clues about which ones will evolve into "basic services". Residential telephone service was once considered a luxury. Eventually, as technology and the needs and expectations of telephone users changed, it became a necessity of modern life. Rather than engaging in prediction, the Council believes that it is advisable to let demand determine which services are essential. Only then should such "basic services" be considered by the regulator as candidates for universal service. As a consequence, the Council recommends that there be periodic public reviews for defining and designating which services should be provided universally and to determine conditions under which provision might be accomplishe