With the digital infrastructure citizens need, Canada can unlock the vast economic and human potential of small towns and rural communities.

(This article has been translated into French.)

Small towns and rural areas in Canada have much to offer – access to nature, lower cost of living, and other lifestyle advantages. Many of these areas are declining, as a result of dwindling populations, lower education and lower employment levels. While they have the potential to drive economic growth and innovation, small towns and rural communities often lack the broadband infrastructure needed for them to prosper. This trend is often amplified in rural communities with large Indigenous populations.

Traditionally, researchers have explained the rural deficit tend on the basis of physical issues, Proximity to large urban employment and consumer markets is particularly important when the focus is on moving people and physical goods. But there is increasing evidence to support the notion that digital infrastructure is also important – that investing in digital infrastructure spurs economic development, especially in rural areas. In an important study, Ivus and Boland analyzed the impact of broadband deployment on urban and rural areas. They concluded that between 1997 and 2011 the deployment of broadband promoted growth in aggregate employment and average wages in rural regions across Canada – particularly in service industries – and curtailed growth in urban areas. As they said, it helped “businesses in service industries overcome geographical barriers that have traditionally hampered rural employment growth.”

Access to digital technology is not just important for businesses offering digitally enabled products and services. It is also essential to support all aspects of businesses: linking with suppliers and information; tapping into workforce talent, building strategic partnerships; accessing intermediary support services such as training, financing and legal services; and, above all, accessing markets and customers. Companies without reliable access to high quality digital infrastructure are disadvantaged in virtually every aspect of business.

The digital economy operates in unique ways. Research suggests that the spatial dimensions of clusters for knowledge-intensive services differ from traditional physical supply chains, in that they are less bounded by geography. In e-commerce, digital services, and other industries, there are many examples of small rural companies becoming part of national and global supply chains and bypassing the traditional physical networks. Serving companies worldwide are Breaker Technology Ltd. In Thornbury, which supports mining companies with its rock breaker technology, and Husky Injection Moulding, which operates out of its offices in Bolton, Ontario. Other companies launched in small towns have become large players: P.W. Graham and Sons began as a construction company in Estevan, Saskatchewan, and it has grown to $2 billion in sales, with 14 offices and 1,200 employees. And Leon’s, which began as a family business in Welland, Ontario, now employs 10,000 people across Canada.

Despite decades of discussing the opportunities that digital technology offers as a substitute for transportation in telecommuting, e-health, e-learning and more, much of the gap between urban haves and rural have-nots is amplified by a digital divide. This gap is the result of a lack access to affordable, inclusive digital infrastructure and of digital skills, and of not adopting digital products and services.

Many communities, despite being within 100 km of major urban centres, are considered Internet black-out zones, sometimes for geographical reasons such as being too far from a signal tower. Providers have tended to ignore rural and smaller communities, paving the way for enterprises such as the Eastern Ontario Regional Network, the Woodstock New Brunswick Xplornet, which fill gaps in 5G service, and the Manitoba First Nations Technology Council, which is bringing Internet access to Indigenous communities. Canada has committed to ensuring that rural communities have access to wireless technology, particularly where other options are not available.

Competition in the provision of Internet service has led to more differentiation around services, prices and access. Dense markets enjoy considerably more choice than small towns and rural communities. Ninety-nine percent of Canadians have access to wireline telephone service, and 84 percent of Canadian households have access to fixed broadband internet services that meet the CRTC’s target speeds. However, there are massive disparities across the country: according to a recent Auditor General’s report, 39 percent of rural households have access to this kind of service, compared with 96 percent in urban areas. The higher the download speeds the wider the service availability gap was between urban and rural areas.

In 2016, the CRTC changed the definition of “basic” services to include broadband internet. Now, the federal, provincial and municipal governments are investing heavily, together with private sector and community partners, to expand broadband deployment, as are jurisdictions around the world. But compared with other countries, Canada’s vast geography and dispersed population presents a considerable challenge outside of its urban centres.

What if we look at the costs and benefits of access to digital infrastructure more broadly, and think of it as a way of strengthening the networks that build human and financial capital?

The federal government has embraced a strategy to advance broadband access as a pillar of its innovation strategy. However, analysts suggest that we still have only a fraction of the support needed to provide Canadians equitable access to Internet services. The 2018 report from Standing Committee on Industry, Science and Technology, Broadband Connectivity in Rural Canada: Overcoming the Digital Divide, affirmed the importance of innovative partnerships to improve connectivity. It also confirmed that current financial commitments from government, communities and the private sector serve only a fraction of what is needed to achieve equitable connectivity. It suggested an investment of $7 billion is needed to address the rural broadband shortfall.

The current public-private mix of investments has produced uneven results and, for many communities, progress is slow.

But what if we look at the costs and benefits of access to digital infrastructure more broadly and think of it as a foundation for providing access to the full range of public services, employment and education opportunities, as well as a way of strengthening the networks that build human and financial capital?

In chapter 5 of their recent book on artificial intelligence, Malcom Frank, Paul Roehrig and Ben Pring proclaimed that “Data is Better Than Oil,” pointing to the growing importance of the digital economy. Increasingly, digital assets are fundamental drivers of economic and social development, just as oil fuelled the transportation systems that underpin the physical economy. Governments can unlock assets first by thinking of digital networks not as expenditures but as enablers, and second, by recognizing the importance of rural communities in developing and testing new solutions, driving innovation and economic development, and attracting foreign investment.

For innovation to be inclusive, all citizens must have access to affordable digital-technology infrastructure, including broadband and wireless internet. They must also be able to get the skills and tools they need to effectively use it. This will also help to level access to critical government services, business development, learning opportunities, health care and security. To ensure that happens, the government should develop a strategy that is informed by (1) focusing a rural lens on the full range of government investments in technology, innovation, skills and economic development; and (2) recognizing that digital networks are essential for driving economic development across all economic sectors, including agriculture, tourism, resources, and service industries.

When rural development is made a government priority, we will see the emergence of new approaches to encouraging investment, which will strengthen the links between smaller communities and larger centres, and will attract and grow businesses in rural communities.

This article is adapted from Canada Next: 12 Ways to Get Ahead of Disruption, a Public Policy Forum report consisting of 12 papers on disruptive challenges and opportunities facing Canada.

This article is part of the Nimble Policy-Making for a Canada in Flux special feature.

Photo: Shutterstock, by Lamyai.


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