Information Communication Technologies

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by Hans Messinger

The new economy

Explosive demand for cell phones, personal computers and internet access over the past decade propelled the growth of industries producing ICT (Information and Communication Technologies) goods and services. Services account for the largest share of the ICT sector (about 80% in 2002) and have expanded steadily over the 1997-2002 period examined. ICT services include telecommunications (by far the largest component), pay and speciality TV, software publishers, information services, data processing services, computer systems design and repair services.

The manufacturing of ICT products is heavily concentrated in central Canada with output mostly exported abroad. These industries produce electrical and electronic equipment including computers, office and business machines, telecommunications equipment, semiconductors and electronic components, broadcasting and other wireless communications equipment, instruments for navigation, measurement medicine and control and communications and energy wire and cable.

Years of stellar growth ended abruptly in late 2000 as global demand for investment in ICT infrastructure waned. This had a devastating effect on many ICT manufacturers. The ICT boom and subsequent “Tech-Wreck” in 2001-02 had a significant impact on the economic performance in central Canada vis-à-vis other provinces and territories.

The rise and fall of ICT manufacturing

Ontario accounts for more than half of all ICT manufacturing in Canada. Quebec and Ontario combined make up over 85 percent of this industrial sector, while much of the balance is located in British Columbia and Alberta.

The rise and fall of ICT manufacturing was most pronounced in Quebec where output in this sector shot up 136% from 1997-2000 then tumbled to 58% of its 2000 peak by the end of 2002. This had a profound impact on Quebec’s manufacturing sector. In 1998 and 1999 ICT industries contributed approximately 40% of overall manufacturing growth. The effect of the “high-tech meltdown” was devastating, dragging down an otherwise growing manufacturing sector in 2001 and chopping half the growth in the 2002 recovery. Producers of telecommunications equipment represent the dominant ICT industry expanding nearly two and half times in Quebec from 1997-2000. In the subsequent two years, however, output fell 41% in 2001 and a further 33% in 2002.

In Ontario the effects of the high-tech meltdown on the ICT manufacturing were somewhat less dramatic, but the gains and pains were severe for selected industries. From 1997-2000 the GDP of ICT manufacturing industries shot up 116%, led by producers of semiconductors and electronic equipment where output expanded threefold. During the slide in 2001-02, the effects were hardest felt by producers of telecommunications equipment where the value of output in 2002 was a mere 17% of its 2000 peak. This had a rippling effect on fabricators of electronic components. With the exception of communications and energy wire and cable, other ICT industries fared relatively well over this period.

ICT Manufacturing in British Columbia is concentrated in the production of semiconductors and electronic components and computers and peripherals. These two industries were responsible for more than tripling the output of this sector between 1997 and 2000. By the end of 2002, output was less than half of the 2000 peak. Telephone apparatus is the dominant ICT industry in Alberta. With the exception of a 19% slide in 2001, output of ICT manufacturing was relatively stable compared to central Canada.

Even though ICT manufacturing is concentrated in Canada’s four largest provinces, there are important pockets of specialization in the smaller provinces, for example, navigational instruments in the Atlantic Provinces, communications and energy wire and cable in Saskatchewan and Manitoba.

Steady growth in ICT services

ICT services, unlike manufacturing, continued to expand at a brisk pace over the entire 1997-2002 period. The production of ICT services, with few exceptions, is consumed within Canada. There is a modest amount of inter-provincial trade from larger to smaller provinces and the territories. The growing demand for ICT services has been particularly strong in the household sector where purchases of personal computers, cell phones and other electronic devices (mostly imported) have greatly increased domestic demand for ICT services such as telecommunications and cable internet access. The expansion of wireless communications has facilitated access to internet and television and other communications services to remote regions of the country. Canada boasts one of the highest rates of household internet access. The proportion of households using internet regularly reached 60% in 2001 - nearly doubling since 1997. In 2002, 7.5 million households had at least one member who used the internet regularly at home, work, school or library. Among OECD countries Canada is second only to Korea for per capita broadband connectedness. Broadband (high speed internet access) has emerged as the standard for business and government. In 2001 about half of all households using internet at home (2.8 million), subscribed using broadband. It is of no surprise that household purchases of personal computers and related equipment have soared, more than doubling in every province from 1997-2001, before easing back modestly in 2002.

Chart 1: GDP billions of dollars at 1997 prices

Provincial distribution of ICT services production closely resembles the distribution of the Canadian population as telecommunication, cable TV distribution and computer related services are largely provincially based. Consumer demand for telecommunications services in Canada surged 57% from 1997-2002 led by Ontario and Alberta with growth of 75% and 57% respectively. Over the same period, personal spending on Cable and Pay T.V. jumped by almost one-third with particularly strong expansion in Alberta, Manitoba, Ontario. For almost all years (1997-2002) in all provinces, the production of ICT services exhibited robust growth rates providing a major source of growth to the service sector as well as total GDP. In most provinces there was a sharp increase in computer systems design services in 1999 reflecting concerns and needs to redesign for Y2K compliancy.

Current trends

Demand for ICT services are continuing to expand within the household, business and public sectors, but are showing some sign of abatement as growth of household internet use has levelled off. New technologies and the continued transition to digital information and communications are showing some sporadic signs of renewed activity.

Table 1: Gross Domestic Product of ICT Sector

		1997	1998	1999	2000	2001	2002
		GDP millions of dollars at 1997 prices
Newfoundland	Goods	3.6	6.3	10.3	17.7	9.5	10.4
	Services	296.2	339.7	350.7	400.9	437.3	477.4
Prince Edward Island	Goods	1.6	2.3	0.6	2.0	2.4	1.9
	Services	62.9	71.3	81.2	87.5	89.2	97.3
Nova Scotia	Goods	36.7	54.5	59.1	73.4	80.1	81.1
	Services	562.6	635.9	718.8	753.5	825.2	904.8
New Brunswick	Goods	13.8	12.4	19.2	28.8	21.0	20.0
	Services	481.9	550.7	610.6	638.4	698.0	763.4
Quebec	Goods	2,473.3	3,145.5	4,949.8	5,827.0	4,371.1	3,391.4
	Services	5,532.9	6,340.2	7,386.8	7,905.3	8,581.1	9,260.6
Ontario	Goods	4,535.4	5,260.4	6,872.1	9,799.1	7,172.3	6,487.8
	Services	10,119.6	11,570.1	15,395.9	17,399.7	19,005.2	20,073.4
Manitoba	Goods	88.3	89.2	95.8	144.4	112.9	86.0
	Services	660.2	758.5	815.0	885.7	965.8	1,032.0
Saskatchewan	Goods	82.5	89.1	202.3	278.7	205.9	135.9
	Services	638.1	704.0	788.6	817.6	828.7	860.1
Alberta	Goods	560.9	616.9	689.6	650.9	524.8	524.4
	Services	2,772.9	3,318.6	3,560.2	3,936.9	4,337.9	4,635.3
British Columbia	Goods	433.2	509.5	777.2	1,371.1	950.2	681.5
	Services	3,252.2	3,575.3	3,913.4	4,075.4	4,426.1	4,620.9
Yukon	Goods	0.0	0.0	0.0	0.0	0.0	0.1
	Services	22.5	32.8	33.3	39.8	38.4	39.9
NWT	Goods	0.0	0.0	0.0	0.0	0.0	0.0
	Services	74.8	60.5	53.3	54.3	61.3	67.7
Nunavut	Goods	0.0	0.0	0.0	0.0	0.0	0.0
	Services	0.1	0.1	15.0	18.6	21.3	23.6
Canada	Goods	8,229.2	9,786.2	13,676.0	18,192.9	13,450.3	11,420.4
	Services	24,476.7	27,957.6	33,722.7	37,013.6	40,315.3	42,856.3