The Canadian Internet Economy Presentation to University of Ottawa Regulation of Internet Commerce Class Richard Simpson Director General Electronic Commerce Branch January 21, 2008

Presentation to University of Ottawa Regulation of Internet Commerce Class

INTERNET USERS Source: ITU, OECD Key ICT Indicators, 2005 Subscribers per 100 population The Internet has become ‘the platform’ for commerce

Broadband adoption is a main driver BROADBAND SUBSCRIBERS PER 100 INHABITANTS Source: OECD, 2006 Broadband Statistics Dec. 2006, April 2007

Source: IDC, Worldwide Internet Usage and Commerce 2005-2009 Forecast update, April 2007 In billions of $ Allowing the internet economy to explode WORLDWIDE E-COMMERCE SALES Worldwide e-commerce spending projected to grow at CAGR of 23%, exceeding $8.75 trillion in 2009 The growth of B2B spending is comparably strong at CAGR of 22%, amounting to $7.6 trillion by 2009

Worldwide e-commerce spending projected to grow at CAGR of 23%, exceeding $8.75 trillion in 2009

The growth of B2B spending is comparably strong at CAGR of 22%, amounting to $7.6 trillion by 2009

ICTs and telecom networks are the foundation of the modern global supply chain . . .supply chains to go global Permits globalization of investment - Trade liberalization, mergers and acquisitions, emerging markets, offshoring, border security, outsourcing Promotes firm efficiency and productivity - Channel coordination and integration through new technology Increases value - Reductions in cycle time, more reliable on-time deliveries, wider variety of products and packages

Permits globalization of investment

- Trade liberalization, mergers and acquisitions, emerging markets, offshoring, border security, outsourcing

Promotes firm efficiency and productivity

- Channel coordination and integration through new technology

Increases value

- Reductions in cycle time, more reliable on-time deliveries, wider variety of products and packages

The “mainstreaming” of electronic commerce has created an e-economy in which the Internet and supporting ICTs are the central infrastructure E-marketplaces Social networks Virtual worlds E-business applications have become the primary tool for the transformation of business processes and marketplace innovation: Digital products and services E-logistics and supply chains E-payments and online banking Online shopping Online procurement . . .creating new markets and businesses

The “mainstreaming” of electronic commerce has created an e-economy in which the Internet and supporting ICTs are the central infrastructure

E-marketplaces

Social networks

Virtual worlds

E-business applications have become the primary tool for the transformation of business processes and marketplace innovation:

Digital products and services

E-logistics and supply chains

E-payments and online banking

Online shopping

Online procurement

% of enterprises that use the Internet Source: Statistics Canada, Survey of Electronic Commerce and Technology , April 2007 Canadian firms are seeing the benefits

. . .and moving to broadband Source: Statistics Canada, Survey of Electronic Commerce and Technology, 2000-2006

Internet sales in Canada continued to grow in 2006 to $49.9 billion, up 40% from 2005 (Statistics Canada, April 20, 2007 ) Canadian online advertising revenues totalled $1.01 billion in 2006, up 80% from $562 million in 2005 (Interactive Advertising Bureau of Canada, April 2007) Source: Survey of Electronic Commerce and Technology 2006 , The Daily, April 20 2007 , Statistics Canada . . .which contributes to growth Value of Canada’s Total Internet Sales 2000-2006 (Billions)

Internet sales in Canada continued to grow in 2006 to $49.9 billion, up 40% from 2005 (Statistics Canada, April 20, 2007 )

Canadian online advertising revenues totalled $1.01 billion in 2006, up 80% from $562 million in 2005 (Interactive Advertising Bureau of Canada, April 2007)

Policy Challenges

Electronic commerce adoption in Canada faces consistent barriers Source: Statistics Canada, Survey of Electronic Commerce and Technology, 2000-2006

Online Business Activities in Canada 2000-2006 Source: Statistics Canada, Survey of Electronic Commerce and Technology , April 2007 Resulting in low adoption of advanced applications

90% of spam is relayed from zombie computers A network of zombie computers is capable of sending hundreds of millions of spam messages in a couple of hours Source: Symantec Corporation - Symantec Internet Security Threat Report, Trends for July-December 2006 MALICIOUS ACTIVITY BY COUNTRY PER INTERNET USER Internet threats remain a challenge

90% of spam is relayed from zombie computers

A network of zombie computers is capable of sending hundreds of millions of spam messages in a couple of hours

Consumers: Criminal misuse of personal, online banking and other financial information to steal money Luring individuals to counterfeit websites via spam e-mail (phishing) Deceptive marketplace behaviour, using false or misleading product claims in the online marketplace Businesses: Electronic theft of corporate information holdings and transaction records Counterfeiting of web addresses to defraud individuals and businesses Networks: High volumes of spam that can equate to 75% of all e-mail traffic clog and slow networks. Providers forced to spend millions to prevent spam from entering their networks Networks are threatened by viruses, worms, botnets, and other malicious based software ( Malware ) which can lead to attacks that threaten the reliability and stability of the Internet, electronic commerce and online banking What are these threats?

Consumers:

Criminal misuse of personal, online banking and other financial information to steal money

Luring individuals to counterfeit websites via spam e-mail (phishing)

Deceptive marketplace behaviour, using false or misleading product claims in the online marketplace

Businesses:

Electronic theft of corporate information holdings and transaction records

Counterfeiting of web addresses to defraud individuals and businesses

Networks:

High volumes of spam that can equate to 75% of all e-mail traffic clog and slow networks. Providers forced to spend millions to prevent spam from entering their networks

Networks are threatened by viruses, worms, botnets, and other malicious based software ( Malware ) which can lead to attacks that threaten the reliability and stability of the Internet, electronic commerce and online banking

Privacy fears discourage electronic commerce in Canada: Canadians more concerned about security and privacy than U.S.: 40% Canadians avoid online shopping compared to 24% of Americans. (Canadian Alliance Against Software Theft (CAAST) - November 2005) Users change their online behaviour due to security concerns: Majority (91%) of U.S. Internet users have altered online behaviour. (Pew Internet and American Life Project – June 2005) Number of U.S. phishing attempts grew 28% in 2005 and will inhibit three-year U.S. e-commerce growth rates by 1% to 3%. (Gartner, June 2005) Consumers lose trust in online banking: 74% of online Canadian online have concerns about e-mail fraud which affect their online financial behaviour. ( Forrester – April 2005) 80% of consumers in the U.S, Canada, Germany and the U.K concerned about someone stealing their online identity to access online bank accounts. ( Entrust Internet Security Survey, 2004 ). Impacts on the internet economy

Privacy fears discourage electronic commerce in Canada:

Canadians more concerned about security and privacy than U.S.:

40% Canadians avoid online shopping compared to 24% of Americans. (Canadian Alliance Against Software Theft (CAAST) - November 2005)

Users change their online behaviour due to security concerns:

Majority (91%) of U.S. Internet users have altered online behaviour. (Pew Internet and American Life Project – June 2005)

Number of U.S. phishing attempts grew 28% in 2005 and will inhibit three-year U.S. e-commerce growth rates by 1% to 3%. (Gartner, June 2005)

Consumers lose trust in online banking:

74% of online Canadian online have concerns about e-mail fraud which affect their online financial behaviour. ( Forrester – April 2005)

80% of consumers in the U.S, Canada, Germany and the U.K concerned about someone stealing their online identity to access online bank accounts. ( Entrust Internet Security Survey, 2004 ).

The costs to both business and consumers is estimated at $100 billion per year globally Ferris Research, February 2007 Cost of phishing per incident estimated at $850, while total damage to US economy is $630 million Consumer Reports, State of the Net 2006 Cost of spyware per incident estimated at $100, while total damage to US economy is $2.6 billion Spyware infections prompted nearly a million U.S. households to replace their computer Consumer Reports, State of the Net 2006 The costs are significant

The costs to both business and consumers is estimated at $100 billion per year globally

Ferris Research, February 2007

Cost of phishing per incident estimated at $850, while total damage to US economy is $630 million

Consumer Reports, State of the Net 2006

Cost of spyware per incident estimated at $100, while total damage to US economy is $2.6 billion

Spyware infections prompted nearly a million U.S. households to replace their computer

Consumer Reports, State of the Net 2006

And our digital profile is growing. . . Source: Pew Internet & American Life Project Tracking Survey, November 30 - December 30, 2006 Margin of error is ±3% for results based on total internet users [n=1,623] 17% 59% 24% Things written that have your name one it 10% 67% 23% Photos of you 23% 47% 30% Home phone number 38% 20% 32% Email address 11% 44% 35% Company or employer 5% 92% 2% Video of you 25% 40% 35% Home address Don’t Know No Yes % OF INTERNET USERS WHO SAY THE FOLLOWING IS AVAILABLE ABOUT THEM ONLINE

Policy Response In many ways, we are at the very beginning. During the next digital decade, technology will make our lives richer, more connected, more productive, and more fulfilling Bill Gates, January 2008

Ensure clear and consistent ground rules for the online environment to: Promote consumer trust and business confidence Network Protection Develop best practices to protect the global network Standards Keep them open and interoperable Coordinate laws, policies and regulation across borders Creating the right environment “… Government’s role is to provide a supportive and responsive policy environment for business and consumers… Countries that can provide such an environment will be better positioned to compete internationally.” The Canadian Electronic Commerce Strategy (1998)

Ensure clear and consistent ground rules for the online environment to:

Promote consumer trust and business confidence

Network Protection

Develop best practices to protect the global network

Standards

Keep them open and interoperable

Coordinate laws, policies and regulation across borders

Threats to the Internet and online commerce require a concerted, cooperative approach with combined public and private sector efforts : Governments Responsible for the legal framework, providing strong laws with meaningful penalties to address threats, and for effective enforcement Industry Voluntary standards, guidelines and best practices Systematic blocking of spam messaging – ISP filters, better network management, corporate firewalls Joint Increased consumer awareness and education Improved international cooperation and coordination Protecting the internet economy: network threats

Threats to the Internet and online commerce require a concerted, cooperative approach with combined public and private sector efforts :

Governments

Responsible for the legal framework, providing strong laws with meaningful penalties to address threats, and for effective enforcement

Industry

Voluntary standards, guidelines and best practices

Systematic blocking of spam messaging – ISP filters, better network management, corporate firewalls

Joint

Increased consumer awareness and education

Improved international cooperation and coordination

Strengthen laws for the protection of personal information and privacy as part of the statutory review of PIPEDA. Currently considering the Report of the Parliamentary Committee (ETHI) and its recommendations concerning: the definitions of lawful authority and mandatory security breach notification Other areas of work: Enhanced related authentication requirements for accessing/disclosing personal information Measures to counter deceptive or fraudulent acquisition of personal information (pre-texting) Measures to address harmful/fraudulent information-handling practices Protecting the internet economy: personal privacy

Strengthen laws for the protection of personal information and privacy as part of the statutory review of PIPEDA.

Currently considering the Report of the Parliamentary Committee (ETHI) and its recommendations concerning: the definitions of lawful authority and mandatory security breach notification

Other areas of work:

Enhanced related authentication requirements for accessing/disclosing personal information

Measures to counter deceptive or fraudulent acquisition of personal information (pre-texting)

Measures to address harmful/fraudulent information-handling practices

Global harmonization of Internet laws, policies, standards, regulations, and business practices: Common guidelines to protect the privacy of personal information across borders Cooperation to address global cyber-threats such as spam Alignment of rules and standards for the conduct of e-business trans-nationally, e.g. recognition of electronic signatures and contracts, authentication Cross-national cooperation essential among government, industry and consumers The Messaging Anti-Abuse Working Group (MAAWG), a private sector body, leads coordination of anti-spam efforts of Internet Service Providers (ISPs), technology providers and bulk email senders, from around the world International cooperation is essential

Global harmonization of Internet laws, policies, standards, regulations, and business practices:

Common guidelines to protect the privacy of personal information across borders

Cooperation to address global cyber-threats such as spam

Alignment of rules and standards for the conduct of e-business trans-nationally, e.g. recognition of electronic signatures and contracts, authentication

Cross-national cooperation essential among government, industry and consumers

The Messaging Anti-Abuse Working Group (MAAWG), a private sector body, leads coordination of anti-spam efforts of Internet Service Providers (ISPs), technology providers and bulk email senders, from around the world

The 2008 Ministerial will mark the 10 year anniversary of the milestone Ministerial Conference held in Ottawa in 1998 Since 1998, the Internet is increasingly critical to our economies and societies – with implications for all policy domains. Key challenges include : Expand access to all people around the world Empower and protect Internet users, especially the most vulnerable Ensure a secure and trusted online environment Promote Internet-based innovation, investment, competition and choice Make better use of the Internet to address global challenges such as climate change 2008 OECD Ministerial Meeting “The Future of the Internet Economy”

The 2008 Ministerial will mark the 10 year anniversary of the milestone Ministerial Conference held in Ottawa in 1998

Since 1998, the Internet is increasingly critical to our economies and societies – with implications for all policy domains.

Key challenges include :

Expand access to all people around the world

Empower and protect Internet users, especially the most vulnerable

Ensure a secure and trusted online environment

Promote Internet-based innovation, investment, competition and choice

Make better use of the Internet to address global challenges such as climate change

‘ Shaping policies for Creativity, Confidence and Convergence in the digital world’

Build awareness of the importance of the Internet economy All public policy should favour development and use of Internet Publish better metrics for benchmarking and monitoring the Internet economy Use the Internet to improve social welfare Online delivery of services ICTs and environment Make the Internet economy truly global Capacity-building for non-OECD economies Cross-border regulatory enforcement cooperation And addressing . . .

Build awareness of the importance of the Internet economy

All public policy should favour development and use of Internet

Publish better metrics for benchmarking and monitoring the Internet economy

Use the Internet to improve social welfare

Online delivery of services

ICTs and environment

Make the Internet economy truly global

Capacity-building for non-OECD economies

Cross-border regulatory enforcement cooperation

Internet as platform for innovation, research, economic opportunity ICTs and the environment RFID and sensor-based networks Regulatory frameworks for converged networks Internet infrastructure issues: investments and access Internet services issues: intermediaries, traffic management, discrimination, blocking, control and reporting, etc. Anti-malware collaboration model Security and privacy in the participative web Digital identity management Effective cross-border enforcement cooperation Measurements / indicators: converged networks, access, uses, trust, and impacts on productivity, innovation and society Agenda for 2008 and beyond

Internet as platform for innovation, research, economic opportunity

ICTs and the environment

RFID and sensor-based networks

Regulatory frameworks for converged networks

Internet infrastructure issues: investments and access

Internet services issues: intermediaries, traffic management, discrimination, blocking, control and reporting, etc.

Anti-malware collaboration model

Security and privacy in the participative web

Digital identity management

Effective cross-border enforcement cooperation

Measurements / indicators: converged networks, access, uses, trust, and impacts on productivity, innovation and society

Policy Development and Implementation Research and Statistics International Development Strategies for e-Business Adoption and Diffusion www.e-com.ic.gc.ca Electronic Commerce Branch

Policy Development and Implementation

Research and Statistics

International Development

Strategies for e-Business Adoption and Diffusion