GOVERNMENT LIKELY TO DEFER RESEARCH FUNDING PROPOSAL FOR ICT SECTOR, DESPITE RAPIDLY GROWING DEMAND

Inadequate public funding for information and communications technologies (ICT) research at the university level is drying up the discovery pipeline and threatening one of the fastest growing sectors of the Canadian economy, says a new study sponsored by the Canadian Institute for Telecommunications Research (CITR). The situation is not likely to improve in the near term given the apparent one-year deferral of a $350-million, five-year funding proposal delivered to government late last year for inclusion in this year's Budget.

Entitled Assessing the Adequacy of Public Funding of ICT-related R&D in Canada, the study makes a strong case for a dramatically increased public spending for ICT R&D. It bases its argument on an extensive "spillover" analysis of R&D activity, with public funding of R&D tied to the degree to which the benefits of the R&D spill over to other sectors. If the spillover benefit of an R&D activity is 40% (the economy-wide average), it concludes that public support should account for the same ratio. In the case of ICT R&D - electrical engineering and computer science and engineering - non-for-profit sources account for just 26.2% of funding (as of 1995), creating a serious imbalance for the sector.

"The federal government is not honouring in practice its policy commitment to R&D in the ICT sector. … The for-profit ICT sector is being starved of the investment in upstream basic research, discoveries, and people that nourish its own research efforts, thus impeding its capacity for future innovation and competitiveness."

Exacerbating the situation is significant underfunding of the sector by the Natural Sciences and Engineering Research Council (NSERC). The report contends that disciplines underpinning the raw materials sector receive funding far in excess of the private/spillover ratio of 60/40, despite anecdotal evidence that spillover from the ICT sector is greater than from others.

"The proportion of NSERC grants distributed to ICT disciplines … is less than half that of those awarded in raw materials-based disciplines … despite comparable research costs, and has barely grown at all in relative terms," states the report. Granting priorities in NSERC are virtually unchanged from a decade ago, making one wonder when, if ever, federal R&D priorities are going to adjust to the ICT-driven economic revolution currently sweeping the world."

To address the underfunding crisis, CITR commissioned the study and followed it up with a proposal to government championed by Peter Nicholson, BCE Inc's chief strategy officer and chair of CITR's board of directors. Sources close to the bid say decision to formally propose more funding for ICT R&D came too late in the Budget cycle for serious consideration, although senior government officials are apparently open to discuss the sector's R&D funding needs. A similar scenario unfolded for a parallel bid by the microelectronics sector, which formed a consortium to lobby for $160 million in R&D funds over five years through NSERC (R$, December 22/99)..

Regroup for next Budget cycle.

It's expected both groups will use the additional time to adjust and refine their bids, possibly coming together with a joint proposal given the inclusion of microelectronics in the ICT sector. CITR is also preparing a comprehensive plan to determine the ICT sector's future requirements for highly qualified personnel. It's anticipated that undergraduate enrolment in the relevant disciplines will double over the next 5-7 years, necessitating a commensurate increase of faculty over the same timeframe.

Although the proposal document has not been publicly released, it has been circulated to relevant department heads across the country to generally favourable response. Dr Safwat Zaky, chair of the Univ of Toronto's department of electrical and computer engineering, has seen the report and says it contains excellent data and insight which, while not new, serve to reinforce the growing need for basic research support for the ICT sector. He says he's disappointed that the proposal likely won't be considered in this year's Budget, as plans to expand his faculty and research activities could be delayed at least one year.

"Research funding in the field is becoming very critical from the point-of-view of attracting faculty and building the research programs we need," says Zaky. "(If the proposal is delayed) we will look at other opportunities for building, but this makes it that much more difficult."

Zaky says his department has 58 faculty (up from 45 five years ago) and with plans to expand to 87 within three years. The new positions are available and the money to hire staff is in place, but until new resources for research are secured from NSERC, little can be done to accommodate the demand. He notes that programs such as the Canada Foundation for Innovation and the federal Networks of Centres of Excellence are helping, as are the Ontario R&D Challenge Fund and applicable Ontario Centres of Excellence programs. But their assistance is more targeted, and don't address the financial needs of basic research.

For Jeremy Leonard, the economist who authored the original CITR study, the necessity of public funding of R&D is obvious. For-profit firms simply don't have the incentive to fund research in which a portion of the benefits are captured by others. This is particularly true of the ICT sector, which one of the highest degrees of spillover, and without public investment, the ability of Canada to remain on the forefront of innovation will be significantly inhibited. The inescapable conclusion is that economic considerations must be considered in the development of university R&D priorities. It's a contention that supports the recent expert panel report on which recommended that innovation be part of each Canadian university's mission statement.

Leonard points to a 1999 statistical review by Industry Canada which shows that the ICT sector accounted for 23.2% of the total growth of the Canadian economy between 1990 and 1997, while it commands a 6.1% of output. By the middle of the last decade, half of private -sector personnel R&D worked in ICT industries, accounting for 10% of the sector's employment base.

The task of analyzing the ICT' sector is challenged by the lack of data on total R&D spending broken down by funding source. The last year in which all the necessary data are available is 1995, compelling Leonard to make assumptions about the distribution of R&D funding. The most up-to-date data are drawn from various sources including Statistics Canada, Finance Canada, the US National Science FoundationNSERC, the National Research Council, the Communications Research Council and other federal agencies and departments.

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