One significant spending decision involves the renewal of CANARIE, Canada's research and education high-speed network (I am a volunteer CANARIE board member).  For years, CANARIE has been responsible for cutting-edge Canadian networking programs such as ensuring Internet connectivity for every school from coast to coast to coast.

More recently, it has focused on meeting the networking demands of data-intensive research programs that would otherwise swamp the networks used by the general public. Beyond providing connectivity to researchers, CANARIE has begun to offer Canadian small and medium sized business a test bed and cloud computing platform to test innovative new services and there have been suggestions that it could use its network to provide linkages for local communities seeking broadband alternatives.

CANARIE operates on five-year mandates and is looking to the government to renew it for another term. The decision won’t be in the fine print - the cost could exceed $100 million over the five years - but the government’s approach will send important signals about how it views the role of CANARIE within its broader digital economy strategy.

The viability of the new anti-spam legislation, which is still awaiting regulations before taking effect, may also be determined by budget choices. Once operational there will be costs to run an anti-spam reporting centre along with the enforcement costs for the three enforcement agencies responsible for taking on Canadian-based spammers.  If there are budget cuts, the enforcement side of the law may languish due to a lack of financial support.

The fine print of the budget may also determine whether another copyright bill is on the way. A new bill is expected to focus on copyright and counterfeiting enforcement, with beefed-up powers for border enforcement and customs agents.

Last summer, U.S. cables released by Wikileaks confirmed Canadian plans for an intellectual property enforcement bill separate from the copyright reform bill date as far back as 2009. The cable stated "the government has completed legislation to enhance Canada’s intellectual property rights enforcement measures. However, the government has no plans to introduce the bill in Parliament any time soon because no funding was linked to the legislation in the last budget."

The bill is expected to grant customs officers new seizure powers for counterfeit products and may create a new national intellectual property crime coordination office.  Given the costs associated with these measures, the budget will need to include financial support for these measures or the bill may face further delays.

As with any budget, there may be additional surprises. These include the possibility of addressing plans for the billions in proceeds from the forthcoming spectrum auction or providing dollars for the open government initiative that has begun to take shape in recent months. Given the broad range of issues, technology policy watchers will undoubtedly dig into the details as soon as the budget is released.

Its strategy to facilitate greater telecom competition focuses on two key issues.  First, it opts for a spectrum cap that will limit the amount of the best "beachfront" spectrum any single company may hold. When combined with a use-it-or-lost-it requirement that should guard against carriers hoarding spectrum without using it, the policy is designed to ensure that every market in Canada has at least one major wireless carrier not named Bell, Telus, or Rogers.

Second, the government has opened the door to increased foreign investment. The current foreign investment restrictions will be lifted for any carrier with less than ten per cent market share (effectively anyone other than the big three). Restrictions remain in place for broadcasters and broadcast distribution companies.  The move will put to rest the controversy over Globalive that dogged the last spectrum auction, when questions arose as to whether it fully complied with foreign ownership restrictions.

After heavy lobbying from all stakeholders, the government's policy choices reflect a desire for compromise. For example, the choice of a spectrum cap falls between the set-aside demanded by smaller players and the fully open auction favoured by the incumbents.

The primary goal appears to be the creation of a strong, fourth carrier in the market. The spectrum caps and foreign ownership changes are both geared toward giving a fourth player the necessary spectrum and access to capital to compete with Bell, Telus and Rogers. That suggests consolidation of the current smaller players in the hope of a single, stronger competitor - possibly foreign owned - challenging the incumbents.

With the proposed approach, large international players such as Verizon or Deutsche Telecom will be limited to buying up (or investing in) smaller Canadian companies with a long-term vision of building market share. Had the government fully liberalized the market, those telecom giants could have considered strategic investments in the big three and caused a far bigger shift in the competitive environment.

The chief barrier to the complete removal of foreign ownership restrictions is presumably concerns over the cultural policy implications of opening the broadcast sector to greater foreign ownership. Many observers appear to assume that Canadian ownership and content requirements go hand-in-hand, fearing that a foreign owned broadcaster would be less likely to comply with Canadian content requirements. Yet there is little reason to believe this to be so.

Foreign owned businesses regularly face Canadian-specific regulations and there is little evidence that Canadian businesses are more likely to comply with the law than foreign operators. Cultural businesses may raise particular sensitivities, but broadcasters dependent upon licensing from a national regulator can ill-afford to put that licence at risk by violating its terms or national law.

The government could have shaken up the Canadian market by removing telecom foreign ownership restrictions altogether and considered dropping foreign ownership limits on broadcasters as well. The Paradis incremental, go-safe approach might make for good politics, but passing on a bolder vision is a lost opportunity.

The provision, Section 31.1(5) on network services, states:

Subject to subsection (5), a person who, for the purpose of allowing the telecommunication of a work or other subject-matter through the Internet or another digital network, provides digital memory in which another person stores the work or other subject-matter does not, by virtue of that act alone, infringe copyright in the work or other subject-matter.

The provision clearly covers hosting services, including cloud-based services. The problem, according to companies such as Rogers and Shaw, is that it remains unclear whether the transmission of the stored content is subject to a similar safe harbour. For example, Rogers states in its submission:

Should the hosting provision of Bill C-11 remain as it is now drafted, it could result in a number of serious consequences for Canadian consumers and policy makers. As drafted, Bill C-11 allows network service providers to host remote storage of personal time-shifted and format-shifted copies, but it is vague about the retrieval of those personal copies.  We are concerned that we will face years of battling frivolous litigation to keep consumers from facing double payments for copyrighted works stored in the cloud because section.31.1(5) is ambiguous and unclear.

The consequence of this ambiguity in the section 31.1(5) will be to throttle innovation.  We will likely see the delayed rollout and diminished adoption of next generation technologies like NPVRs.  In fact, left unchanged, the law could have the effect of locking Canadians to set top PVRs and physical storage devices long after new solutions could have replaced them. Legal uncertainty could also lead to higher overhead costs for cloud storage providers and fewer options for consumers.  Vague and ambiguous language in Bill C-11 could well conspire to leave Canadian investors and consumers looking enviously to other jurisdictions enjoying the benefits of new cloud storage solutions.

Shaw raised the same concerns:

The need for clarity is particularly important, given the amendments to section 2.4 of the Act. The new language that will be added at 2.4(1.1) will deem every single transmission over the internet to any individual to be a “communication to the public by the telecommunication” which is a separate act from the provision of digital memory referred to in the hosting exception. Since it is clearly the Government’s intention that the proposed exemption operate to shield host services from any copyright liability,  Shaw submits that an amendment is required to remove any doubt in this regard. Any potential risk will act as a deterrent to the development of innovative new services in Canada.

The Liberals put forward a motion to amend this provision in a manner consistent with the ask from Rogers and Shaw. The Conservatives defeated the motion after a discussion that focused on whether there was anything in the bill to stop a business-to-business arrangement between broadcasters and broadcast distributors to create network PVRs.

Yet there was never anything to stop businesses from reaching agreements outside the Copyright Act. The ongoing concern - particularly given Canada's highly concentrated broadcast and broadcast distribution sectors - is whether the law might help facilitate these services. Network-based PVRs do not touch the compensated broadcasting rights, but rather focus on whether additional payments may be needed to allow consumer to record programs they have effectively paid for, have them stored by the provider, and watch them on demand. The bill already allows consumers to record programs on their own PVRs or recording devices. The Conservatives asked whether double payment was possible for the network PVR and officials merely responded that it would depend on the facts of the case but there was nothing in the bill requiring double payment.

Given the decision to leave it unchanged, the provision will cover hosting of the programs, but will not cover services that transmit those hosted programs. This means companies must approach the large broadcasters (often their competitors) to ask whether they can offer competing services, invariably leading to double payments (one for broadcasting the program and another for transmitting the recorded program). If an agreement cannot be reached, the government has left legal risk for those seeking to introduce those cloud-based services into Canada.

The meeting focused on issues such as broadband access, technology adoption in small and medium sized businesses, and digital skills. While it is easy to dismiss such meetings are mere politicking, the provincial role in a national digital economy strategy has been badly neglected. In addition to the potential for provinces to work on broadband access issues, many digital economy legal and policy issues may fall under provincial jurisdiction.

This is obviously the case for e-commerce consumer protection issues (note the growing number of provincial initiatives on consumer protection on wireless services), but may also involve privacy, spam, and even para-copyright such as digital locks. As I noted earlier this year, the Supreme Court of Canada's recent ruling that plans to create a single securities regulator are unconstitutional has major implications for the digital economy strategy. Federal privacy law may now be particularly vulnerable to challenge since it relies on the same trade and commerce provision that was used in the securities regulator case. Anti-spam regulations may also be at risk and there has been open speculation that Bill C-11's digital lock rules are unconstitutional since they move too far away from conventional copyright law (a federal power) by encroaching into provincial jurisdiction over property and civil rights. In short, there is no digital economy strategy without provincial involvement. Yesterday's meeting may be a step in the right direction with growing indications that the neglected file is at long last attracting some attention.