A political focus on subsidizing telecom infrastructure is just so easy. There are multiple photo opportunities (at the announcement, the cheque presentation and the system activation), happy mayors, happy voters. It gets to be portrayed as economic stimulus, direct job creation and consistent with progress on digital economic development.

But while it may feel satisfying politically, I question the effectiveness of continued broad government subsidies based on geography, rather than taking a more focused approach based on need.

That is what drives my view that our attention needs to turn to subsidies with more precise targeting aimed at those who can’t afford a computer or the connectivity. The approach to date has been trying to level the prices charged in urban and rural markets, without regard to whether that price point is consistent with increased rates of adoption. As an aside, I wonder if there are studies that show that subsidized infrastructure in rural Canada increases broadband adoption more than targeted income-based subsidies would have.

It is within this context that I read an OpEd by Susan Crawford in the weekend New York Times. The piece opened with a paragraph that has since been changed. Here is how the original read:

FOR the second year in a row, the Monday after Thanksgiving — so-called Cyber Monday, when online retailers offer discounts to lure holiday shoppers — was the biggest sales day of the year, totaling some $1.25 billion and overwhelming the sales figures racked up by brick-and-mortar stores three days before, on Black Friday, the former perennial record-holder.

This has since been changed, realizing that Cyber Monday wasn’t the biggest shopping day of the year – just the biggest on-line shopping day:

FOR the second year in a row, the Monday after Thanksgiving — so-called Cyber Monday, when online retailers offer discounts to lure holiday shoppers — was the biggest online sales day of the year, totaling some $1.25 billion and overwhelming the sales figures racked up by brick-and-mortar stores three days before, on Black Friday, the former perennial record-holder.

Both versions continue “Such numbers may seem proof that America is, indeed, online.” But the correction results in the entire opening making no sense. As mighty as the sales were on Cyber Monday, they were only about one-tenth the volumes of sales on Black Friday. In what way did this overwhelm the sales figures of brick-and-mortar stores? I just wrote about Digital corrections. Having the premise of the article destroyed by the opening inaccuracy, it is tough to read through the rest of the piece – at its core, the OpEd was a tired argument for strong government intervention in the communications marketplace.

A blog post by ITIF research fellow Richard Bennett does a great job destructing Professor Crawford’s “old-school analysis.”

Her vision of future applications is utterly pedestrian. She says: “Within a decade, patients at home will be able to speak with their doctors online and thus get access to lower-cost, higher-quality care” without acknowledging that doctors already use e-mail, can use video calling in many cases, and have been reachable by phone for several generations.

Similar misguided calls for “structural separation” have also been heard in Canada – ignoring a regulatory framework that already enables competitors to access facilities and services from the facilities-based carriers. A competitive services marketplace continues to ignore the challenge of connecting households that don’t even have a computer.

Solutions for bridging the digital divide need to look beyond the myopic focus of infrastructure. How do we address adoption among identifiable groups – the most glaring being low income households? That should be a broadband target for the coming year.

Michael Sone and I are launching a new website today for The 2012 Canadian Telecom Summit. The event will take place June 4-6 in Toronto and we have already confirmed a number of sponsors and speakers.

The Canadian Telecom Summit is Canada’s leading telecommunications industry event and we are marking the event’s 10^th anniversary.

For three full days, The Canadian Telecom Summit delivers thought provoking presentations from the prime movers of the industry. The Canadian Telecom Summit gives you the chance to hear from and talk with them in both a structured atmosphere of frank discussion and high octane idea exchange and schmooze in a more relaxed social setting of genial conversation.

This year’s event will explore Competition and Innovation: Celebrating our Legacy, Developing the Future. In-depth panels will examine the Social Networking phenomenon, Cloud Computing, Mobile Commerce, the implications of Multiple Screens on Consumers and Business, the critical issues surrounding Privacy & Security, Unified Communications, the upcoming 700 MHz spectrum auction, and, of course, the not-to-be-missed Regulatory Blockbuster. We have also scheduled a special session to explore the ongoing development of the ever elusive National Digital Strategy.

We look forward to hearing from you with suggestions for the program. The registration system is open and available. To help manage your 2011 budget – you can pay on-line and receive a receipt right away.

Be sure to mark the dates on your calendar: June 4-6, 2012.

Young adults increasingly go online just for fun and pass the time.

We all suspected that. Now there is a study from the Pew Internet & American Life Project that proves it.

On any given day, 53% of all the young adults ages 18-29 go online for no particular reason except to have fun or to pass the time. … Indeed, 81% of all young adults in this age cohort report they have used the internet for this reason at least occasionally.

While this is a US based study, there is no reason to suspect the results would show a lower percentage in Canada. Indeed, it is likely higher – much higher – given that Canadians are recognized as being online more than any other people on the planet.

What troubles me is wondering about the young adults who aren’t going online to have fun and pass the time. Having fun and just passing the time is evidence of comfort, of digital literacy, of access. Shared access in a school or community centre or library doesn’t afford the same level of access as having a connected device at home.

But, as I have written before, computer ownership is highly correlated to household income and half the Canadian households in the bottom income quintile do not own a computer.

So we have a sizable part of the population that may be excluded from online social interaction because they lack computer access and are missing out on development of current digital literacy skills. The lack of comfort operating in a digital environment will have cascading economic impact, with more employment – even those jobs considered menial – increasingly demanding computer literacy.

The Pew study breaks down their results to show that spending time online, just for fun, is tied to income levels and age. There is also a gender factor that appears to have significance: 62% of males versus 54% of females.

How do we make sure that all Canadians have the ability to get online, even if it is for “no particular reason”.

Is telecommunications exclusively under federal jurisdiction in Canada?

We used to think so, at least since the Supreme Court of Canada ruled on the AGT/CRTC case in 1989 and the Guèvremont/Quebec case in 1994. But, recent cases suggest that federal authority may merit “new reflection”.

My friend Michael Ryan has an article in the November issue of Canadian Bar Review that suggests that the division of powers may not be so clear in the case of non-facilities-based telecommunications services providers – specifically those entities that are not physically involved in transport across provincial boundaries. In 2009, the Supreme Court ruled on Consolidated Fastfrate versus Western Canada Council of Teamsters.

Referring to Fastfrate’s role, [Rothstein J] said that its “presence at both the originating and terminating ends may mean that it can provide a comprehensive service to its customers, but this does not change the fact that it is still only a shipper using an interprovincial railway or trucking company.” [emphasis in original]

The article reviews various cases in depth, and specifically identifies provincial consumer protection legislation as an area where questions of authority may arise.

As a consequence of the recent decisions of the Supreme Court of Canada, the bounds of federal authority over telecommunications undertakings are less certain than they have been for many years. It is left to future decisions to determine more precisely where the new boundaries lie.

Given that my legal training used to consist of tele-training for the California bar through episodes of LA Law, my interest in the article is somewhat voyeuristic. I’m sure some members of the Canadian bar will be looking at opportunities and challenges inspired by this article.

Innovation drives productivity. I understand that point. But what is the best way to drive innovation?

A much tougher question. Governments around the world are doing what governments typically do when they want to incent behaviours: use the lever of money.

A couple weeks ago, Canada threw $80M toward the problem, issuing a press release saying that it was “invest[ing] in Canadian business innovation [to make] Canada a global leader in the digital economy.”

But if money is the only lever that is being used, a country can only “lead” until some other region opens its wallet even more. Europe is now proposing to spend €80B (that’s right – B as in Billion – Euros) in funding for research and innovation, citing “a €120 million research investment by the EU enabled the 3G mobile market that we know today, worth €250 billion”. The implication being that the EU got a 2000 times return on its investment in 3G. That kind of economic analysis may be what makes Europe such a beacon of fiscal leadership that guides global markets today.

But that is not what I want to talk about. Nor will I look at whether the EU can actually write a cheque for €80B.

I’m just not convinced that we have the right approach in governments throwing money toward selected performers of research and innovation. It seems to me that application based programs have winners and losers. Some group of bureaucrats sit in judgment over projects and determine which are naughty and which are nice, which get funding and which get rejected. There are just so many problems with this approach, not the least of which is that governments are not known for making winning decisions.

Are innovation incentives rewarding the wrong kinds of companies? As I wrote earlier this week, if an innovation is going to result in a productivity improvement, why isn’t the business doing it on its own? Why wouldn’t the business be trying to improve its profitability without the need for cash from a government program?

Let’s not forget to look at where the government program is being funded – the source of those tax dollars. Profitable companies – including those that took the risks and innovated on their own prior to the program – are seeing their profits taxed so that companies with lower risk tolerance could get a handout. There seems to be something inherently wrong with the kind of Sherwood Forest code of justice, that takes taxes from winners and innovators and hands it over to their competitors who weren’t willing to innovate on their own.

Governments need to innovate in their approach to managing behaviour. Protective tariffs block competition, reducing incentives to innovate and increasing costs for consumers and businesses that use the goods as inputs. Restrictions on trade, investment, paperwork and more need reform to be part of government leadership in innovation. Government handouts aren’t innovative. Getting out of the way would be a novel approach for government.

Can we use the levers of increased competition, coupled with increased willingness and need to take risks, in order to more systemically drive an innovation economy?