Make No Mistake: Canada Is A Digital Backwater

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So, Canadians spend more time online than anyone else, huh? That’s what the latest report from analysis firm ComScore says.

Now, before anyone misinterprets the results and proclaims Canadians to be digerati – and Canada to be an online leader – there are many other facts to consider that suggest the contrary.

Regardless of the fact that ComScore looks at only 11 countries (a limited sample that makes it hard to declare anyone as “best in the world”), it’s important to understand why Canadians do spend so much time online. The simple explanation is: they were there before most other people.

When the world was moving from dial-up to broadband more than a decade ago, both Canada and the United States were in the lucky position of having both cable and phone providers competing to sign up customers. Since internet access represented a new gold mine for these companies, the competition was fierce, prices were low and the services kept getting better.

Cable infrastructure didn’t (and doesn’t) exist in much of the rest of the world, so governments and regulators had to figure out how to convince, cajole or force their phone companies to provide good broadband and reasonable prices. Some are still trying to do that.

So, while most of the rest of the planet was stuck in the kilobit dark ages, North Americans surfed around on their super high-speed (at the time) two- and three-megabit connections. But things changed over the next decade.

With all the easy-to-reach customers – known as “low-hanging fruit” – signed up, that early competition tailed off as large internet providers moved from the acquisition phase to monetization, which is fancy business speak for milking people. The ISPs had to recoup all that money spent building networks and advertising services, so prices started to creep upward. (Remember when you could get the fastest speeds for $25? Ah, the halcyon days of broadband…)

In some countries, ISPs haven’t yet got to this stage – sometimes because regulators haven’t let them – and customer acquisition is still the name of the game. That’s why ridiculously cheap broadband can be had in places such as the United Kingdom.

The larger effect over the decade was that Canada and the United States leveled off while other countries caught up and surpassed them. Both countries used to top OECD measures of broadband-connected citizens, but they’ve been sliding steadily to the point where Canada is clinging to the top 10, while the U.S. – the country that ironically invented the internet – is mired in the middle of the pack.

This early adoption thus hooked North Americans on the internet early. And hooked is the right word – as anyone who has ever used it can obviously attest to, once you’re online you never go back, which explains why Canadians and Americans are such rabid users of everything from YouTube to Facebook to Twitter. North Americans are the veritable crack addicts of the internet world – they’ll use it no matter how much it costs them.

That’s about all online Canadians have in common with Americans, who are true digerati and internet leaders. Besides their similarly high usage, Americans have also created virtually every large internet business, from Google to Amazon to eBay to Netflix, which raises the question: where are the Canadian equivalents?

Many have tried to answer that conundrum and there are several theories. Some small businesses – the lifeblood of Canada – have in fact argued that the high cost of telecommunications services have been a barrier to online expansion. Zip.ca, for example, told regulators a few years ago that it was cheaper to distribute movies on DVDs through the mail than it was to do so electronically.

There’s also the suggestion that Canadians’ are naturally more conservative and risk averse, which keeps their businesses from becoming digital leaders. As Google Canada’s country director Chris O’Neill said a few years ago, business usage of the internet is out of whack with that of individuals: “I’d like to see retailers think more in (new) ways, rather than fearing and trying to avoid the experiences and the behaviours that consumers aren’t just experimenting with, (but) are becoming mainstream.”

Heading back to the consumption side again, there’s also the familiar song that Canadians hear whenever a hot new gadget or internet service debuts – “It’s available everywhere… but not in Canada!” In situations that involve digital content, such as with Hulu or the superior selections available through iTunes and Netflix south of the border, it’s usually a case of tangled licensing rights. And who’s in the middle of those? You guessed it – Canadian broadcasters, who are now also the country’s big ISPs.

What else is there? Oh yes… there is the dearth of venture capital, an inability to convert innovation into commercialization, repeated examples of companies selling out too soon (cough Kobo cough) and the fact that Canada is the only G8 country besides Russia that does not yet have some sort of digital economy strategy (Russians spent this past weekend protesting electoral corruption – what’s Canada’s excuse?)

No less than the highest authority in the land, before he actually was so, said it best a few years ago: “Those societies that have a better understanding of the digital economy will prosper very quickly and those that don’t will not. We’ve had a failure of imagination there,” said David Johnston while he was still president of the University of Waterloo. Today, he serves as the Queen’s representative and, as the Governor General, is technically the boss of Canada.

And while we’re on the topic of the government, how about the international shame Prime Minister Stephen Harper has brought the country by muzzling scientists? As an editorial in Nature, one of the world’s leading scientific journals, put it:

Policy directives and e-mails obtained from the government through freedom of information reveal a confused and Byzantine approach to the press, prioritizing message control and showing little understanding of the importance of the free flow of scientific knowledge.

Are Canadians smart and innovative? Absolutely – and the examples are too numerous to list, although the country’s world-beating video-game industry is a notable one. Are they also heavy users of the internet? By all measures, that also seems to be the case.

But when all of the above is taken together, it seems clear that Canada is institutionally a technological backwater. In other words, who really cares how many YouTube videos Canadians watch or how much time they spend on Facebook?