First
Previous
Chapter 3: e-Readiness
Fast Forward 5.0: Making Connectivity Work for Canada
Canadian e-Business Initiative (CeBI)
September 2004
3.1 Consumer Online Presence
According to Ipsos-Insight, Canadians are the world's leading Internet users. More than 71 percent of Canadians accessed the Internet in 2003, compared with 70 percent of South Koreans, 68 percent of Americans and 65 percent of Japanese.11 Canada's Internet use is based primarily on access, availability and price. Though this high number of users has led to very rich content, it has not translated directly into a high number of online shoppers. In addition, growth in Internet use among Canadian households has leveled off.12
The majority of Canadians continues to use the Internet primarily for information purposes, including sending and receiving email, searching for health information and making travel arrangements (see Box 1). In fact, Canadians are significant users of online banking. Between 2000 and 2004, 42 percent of Canadians banked at least occassionally on the Internet, and the percentage of Canadians who bank primarily through in this way almost tripled from eight to 23 per cent.13
Box 1: Canadian Consumers in 2002
12.2 million total households; 7.5 million households with Internet access
Surfing
3.6 million households regularly used the Internet at home. Of these:
- 64 percent searched for health information
- 51 percent accessed online banking services
- 25 percent used the Internet for work-related purposes
Source: Statistics Canada, Household Internet Use Survey, September 2003
Shopping
1.7 million households used the Internet to "window-shop"
2.8 million households placed orders online:
- 27 percent purchased books, magazines and newspapers
- 18 percent used the Internet to make travel arrangements
- 18 percent purchased jewelry, clothing or accessories
While Canadians prefer to shop on Canadian sites, $3.64 of every $6.36 or $884 million was spent on non-Canadian websites.
Source: Statistics Canada, E-commerce; Household Shopping on the Internet, December 2003.
Though online consumer spending is growing, this growth remains slow and Canadians continue to express reservations about purchasing online. Canadians spent just over $2.4 billion online in 2002, up 35 percent from the $1.8 billion spent in 2000. However, this $2.4 billion represents only a small fraction of the $656 billion total spent by Canadians in 2002.14
Why have Canadians, leaders in Internet usage, not flocked to online shopping? Many still have reservations about the security of paying for goods and services online. Data collected by Statistics Canada have shown that more than three-quarters of Canadian households that paid online in 2002 indicated that they were "very concerned" or "concerned" about completing financial transactions over the Internet.15 Yet, as the prevalence of banking online indicates, Canadians will use online services if confident of the their security.
In addition, while Canadians increasingly find goods and services from Canadian e-retailers, many goods and services continue to be unavailable through Canadian websites (see Box 1).
3.2 Businesses Online
Basic use of ICTs is an important measure of a firm's ability or "readiness" to develop e-business and participate in electronic commerce. Canadian SMEs continue to make gains in basic connectivity. Though there continues to be a marked difference between the percentages of large enterprises and SMEs that are connected to the Internet, the overall sustained trend of business Internet adoption is encouraging. Statistics Canada's 2003 Survey of Electronic Commerce and Technology reported that over three-quarters of Canadian businesses had Internet access in 2003, up 15 percent since 2000.16 Another source indicates that, in 2003, 82 percent of businesses used Internet and email.17 Small firms, especially, are increasingly using basic technologies. While in 2000 only 56 percent of small firms used email and 59 percent used the Internet, by 2003, 74 percent used email and 78 percent had Internet connections.18
In addition, the type of Internet access is an important precursor to advanced IBS use and continues to vary according to business size. Large companies tend to have high-speed, always-on connections, while many smaller businesses continue to use low-speed, dial-up access. In 2003, 95 percent of large firms used broadband access, compared to 56 percent of small firms.19
These findings are significant given the important contribution of ICTs to the productivity of firms. The capability of Canadian businesses to leverage the potential of ICTs is supported, in part, by their access to, and efficient use of, the Internet. Access remains a barrier: while in 2003 Canada continued to rank in the top ten among all countries when it came to Internet connectivity,20 41 percent of businesses surveyed in a recent report noted lack of availability as the main reason for not having broadband access.21
Figure 1: Type of Internet Access, 2003
Source: EKOS, Rethinking the Information Highway, December 2003
Increased use of ICTs by Canadian businesses of all sizes indicates that businesses are becoming technologically ready to deploy at least basic e-business technologies. Before doing so, however, businesses today must also consider the security of their applications and systems, and the privacy of their clients.
3.3 Privacy and Security Practices
Effective privacy and security practices are integral parts of a successful e-business adoption strategy, both nationally and at the firm level, and must be considered by firms at the outset of implementing an e-business strategy. As the online environment grows more complex, the use of this medium for illegal and undesirable activities also increases. Virus creation, spamming, hacking, identity theft and denial-of-service attacks are doubly damaging to the e-economy. These activities directly increase the cost of adopting and maintaining e-business capabilities and, perhaps more importantly, they erode consumer confidence in the safety of the Internet and electronic transactions (see Box 2).
A general increase in awareness of these threats has caused consumers and businesses to demand adequate privacy and security protection. A 2003 poll by Ipsos Reid showed that nearly one-third of Canadian Internet users are more concerned about online security compared to a year ago, and that 35 percent have suffered a breach of privacy online. Canada's major trading partners are equally concerned about privacy and security of information crossing borders. The European Union (E.U.) has a Privacy Directive and privacy laws that prohibit the flow of personal data to countries with inadequate privacy protection.
January 1, 2004 was a milestone in Canadian policymaking as the Personal Information Protection and Electronic Documents Act (PIPEDA) came fully into effect, applying to all businesses across the country, and in provinces that have not enacted "substantially similar"22 legislation. With the implementation of PIPEDA, and its recognition by the E.U. as meeting the requirements of the Privacy Directive, business transactions with the E.U. have been facilitated.
Many in the business community are aware of the new legislation and are responding to consumer demand for privacy protection. However, security and privacy issues, including the new legislation and its requirements, are often not understood by small firms, with only eight percent of firms feeling "extremely confident" about their level of e-security.23
To aid SMEs in understanding and complying with privacy legislation, and to mitigate SME concerns about the perceived barriers presented by online privacy and security practices, CeBI recommends that the federal Privacy Commissioner's office continue its efforts to educate SMEs in this area. In addition, CeBI recommends that the federal government continue to aggressively address security issues.
Box 2: Security Threats in the Online Environment
SPAM
Spam may be defined as an electronic communication that cannot be reasonably assumed to be wanted or expected by the recipient. Spam has become the Internet issue du jour. According to Brightmail, a leading Internet security firm, in June 2004, spam accounted for 65 percent of Internet email. While comparable figures for Canada are not available, spam is becoming a significant worldwide problem that clogs networks, consumes resources and, due to its implication in virus distribution, identity theft and other criminal activities, significantly erodes trust in electronic commerce.
Canada is heavily implicated in spamming, rated among the top ten countries from which spam originates. According to software firm Sophos, Canada is responsible for 6.8 percent of worldwide spam, second only to the United States (56.74 percent). Spamhaus, an organisation dedicated to identifying spammers and fighting spam, places Canada as seventh on its list of top ten spamming countries.
Source: Brightmail Logistics and Operations Centre (BLOC)
Recognising the need for a concerted approach to fight spam, the Ministerial Task Force on Spam will review the current legislative situation and, in 2005, present to the Minister of Industry its recommendations.
Identity Theft
Identity theft is the criminal activity of assuming and using another individual's identity by wrongfully obtaining and using someone else's personal information, with a view to committing a forgery or a fraud for financial gain. Identity theft is facilitated by technology and takes heavy emotional and financial tolls on individuals, and erodes consumer confidence. Identity Theft is often associated with email "phishing", where look-alike emails and websites with the names and logos of legitimate financial institutions, business and government agencies are used for illegal purposes.
- According to the U.S. Federal Trade Commission, identity theft is the fastest growing crime in North America that targets consumers (Source: USFTC to the Senate Judiciary Committee's Subcommittee on Technology, Terrorism and Government Information, March 20, 2002);
- In 2003, 13,359 Canadians reported being victims of identity theft, with direct losses totalling approximately $21 million (Source: Phonebusters);
- The Canadian Council of Better Business Bureaus estimates that identity theft costs the Canadian economy approximately $2.5 billion per year.
Business practices that protect customer information and prevent the theft of identification data are key to meet growing security problems, both in the online and offline world. But business and consumer action is only one part of the solution. Government must also take the necessary legislative steps to effectively address these issues, including amending and strengthening existing legislation as necessary, for example clearly defining identity theft in the Criminal Code and enacting a provision making it an offence to possess multiple pieces of identification, and modernizing existing Criminal Code offences aimed at addressing identity theft to better reflect the technological advances. In addition, it will be important to work closely with businesses and consumers through initiatives such as the Ministerial Task Force on Spam.
11 Ipsos-Insight, Face of the Web, January 2004.
12 Statistics Canada, Household Internet Use Survey, July 2004.
13 Canadian Bankers Association, Taking a Closer Look: Ways Canadians Bank at: www.cba.ca, July 2004.
14 Statistics Canada, Household Internet Use Survey, December 11, 2003.
15 Ibid.
16 Statistics Canada, Survey of Electronic Commerce and Technology, 2003.
17 EKOS, Rethinking The Information Highway, Winter 2004.
18 Mark Uhrbach and Bryan van Tol, Information and Communications Technology Use: Are small firms catching up?, Analysis in Brief, Statistics Canada, 2004.
19 Statistics Canada, Survey of Electronic Commerce and Technology, 2003.
20 World Economic Forum, Global Information Technology Report, 2003-2004.
21 EKOS, Rethinking The Information Highway, Winter 2004.
22 Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5.
23 Canadian Bankers Association, Minding Your eBusiness: Privacy and Security Matter, Final Report, September 2003.