Canada faces numerous challenges in developing and maintaining critical infrastructure, which significantly impacts its economic growth and competitiveness. From inefficient regulatory systems to cost-driven decision-making and reliance on U.S. connectivity, these issues hinder progress and innovation in AI development and North American tech hubs. This article explores the key reasons behind Canada's struggles and potential solutions to enhance its infrastructure capabilities.
Key Takeaways:
- Canada's reliance on only three direct subsea cable connections to other continents creates a dependency on U.S. networks, leading to higher data transfer costs and potential vulnerabilities in international connectivity. This impacts the efficiency and competitiveness of AI development and other data-intensive industries.
- Despite its abundant renewable energy resources, Canada's energy infrastructure is insufficient to meet growing demands. This shortfall hinders the expansion of eco-friendly data centers and the overall energy transition, affecting the country’s ability to attract businesses prioritizing sustainable practices.
- Infrastructure projects in Canada are frequently delayed and over budget due to an inefficient regulatory system and a focus on low-cost bidding. The lack of expertise and slow construction processes, especially in specialized areas like transit, result in prolonged timelines and increased costs, stifling economic growth and public confidence in project execution.
The limited subsea cable connections in Canada pose a significant challenge for AI development and the deployment of AI products. With only three direct subsea cable connections to other continents, Canada’s international internet connectivity is heavily reliant on routes passing through the United States. Note that none of three cables are owned by Canada, the most recent cable, Topaz, is built by Google. This reliance can lead to increased costs and potential vulnerabilities, affecting the efficiency and competitiveness of AI initiatives.
Firstly, the dependence on U.S. connections means that Canadian AI developers and companies may face higher data transfer costs. The increased routing through U.S. networks can incur additional fees from service providers, which can significantly impact the overall budget for AI projects. These costs can be particularly burdensome for startups and smaller enterprises that already operate with limited resources. Consequently, the financial strain could stifle innovation and slow down the pace of AI development in Canada
The reliance on external connectivity routes may result in higher latency and reduced data transfer speeds. AI applications, especially those requiring real-time data processing and analysis, depend on low-latency connections to function optimally. Increased latency can degrade the performance of AI models, leading to slower response times and less efficient operations. This is especially critical for sectors like autonomous vehicles, financial services, and healthcare, where milliseconds can make a difference in decision-making and outcomes.
The lack of direct international connectivity can hinder collaboration with global AI research communities. AI development thrives on international collaboration, with researchers and developers needing to exchange large datasets and engage in seamless communication. The current infrastructure limitations can create barriers to such exchanges, isolating Canadian AI researchers and limiting their access to global knowledge, resources, and partnerships.
Lastly, the economic implications cannot be ignored. The AI industry is poised to be a major driver of economic growth, and countries with robust infrastructure are better positioned to attract investments and talent. Canada's limited connectivity could deter global tech companies from establishing operations in the country, thereby missing out on potential job creation and economic benefits. To remain competitive on the global stage, Canada needs to invest in expanding its connectivity and energy infrastructure, ensuring it can support the high demands of AI development and deployment. However, Canada is infamous for being incapable of building infrastructure with crown and private collaborations.
Inability to Build Infrastructure in Canada
Most Ontarians are well aware that Canada struggles with building reliable infrastructure. Both Ottawa and Toronto have faced frequent repairs and significant delays. For instance, the Eglinton Crosstown Light Rail Transit project, originally scheduled to open in 2020, still lacks a confirmed opening date as of June 2024. This has led to a loss of public confidence in the Canadian government and companies. The challenges in building critical infrastructure essential for economic growth and competitiveness are largely due to an inefficient and ineffective regulatory system. Here’s a detailed exploration of the reasons behind Canada's difficulties in infrastructure development:
1. Regulatory Complexity and Inefficiency
The current regulatory system in Canada is cumbersome and unpredictable, involving overlapping layers of government and expansive intervenor rights. These complexities lead to prolonged approval processes and excessive costs. For example, the federal review and approval of trade-enabling infrastructure can take years or even decades, which is untenable in a competitive global market. The lengthy timeline for mines, often taking 15 years or more to plan and build, highlights the inefficiency, especially when critical minerals are urgently needed.
2. Overlapping Jurisdictions and Conflicting Regulations
Projects often require multiple assessments from different levels of government, creating redundancy and conflict. This overlapping jurisdiction causes delays and confusion, making it difficult to coordinate and complete projects efficiently. Simplifying the process to require only one comprehensive assessment per project could significantly reduce the burden and streamline approvals.
3. Excessive Intervenor Rights
The current system grants intervenor status to a broad range of stakeholders, including those who may not be directly affected by the project. This broad scope allows for numerous objections and appeals, which can indefinitely delay projects. Limiting intervenor status to those directly impacted by a project would help streamline the approval process and reduce unnecessary delays.
4. Judicial Interference and Appeals
Courts often overturn decisions made after extensive regulatory review, adding another layer of unpredictability. This was exemplified by the federal court judge nixing a proposed rail terminal in Ontario three years after ministerial approval. Streamlining the appeals process and limiting judicial interference in economic and national security policy decisions could reduce delays and enhance project viability.
5. Market Risks and Regulatory Risks
Besides inherent market risks, the regulatory environment in Canada adds substantial risk to capital projects. The uncertainty and length of the regulatory process make large investments excessively risky, discouraging both domestic and foreign investment. By reducing regulatory risks, Canada can create a more attractive environment for capital investment.
6. Cost-Driven Decision Making and Unrealistic Bidding
Anyone who tried bidding for government contracts would know: Canada's approach to building infrastructure is often driven by selecting the cheapest contractors and bidders, sometimes at the expense of necessary criteria and realistic schedules. Unrealistic bids result in numerous change orders, escalating costs and extending timelines. Additionally, the requirement to use Canadian companies with specific employment metrics further complicates project execution, particularly in specialized areas like transit infrastructure, where there is a lack of expertise and efficiency. This ultimately nurtures an unhealthy, unproductive culture in the Canadian supplier market that is only willing to meet the bare minimum of the contract.
Proximity to US is Doubled-edged
One might argue that Canada's lack of productivity is due to its proximity to the United States, which drains Canadian projects and talent. However, unlike other countries such as Australia, Canada benefits from global connectivity and easy access to top funding institutions in the United States. Another key advantages Canada has are its natural cooling system and abundant renewable energy resources. The country boasts vast hydroelectric, wind, solar, and biomass resources, making it an ideal destination for eco-friendly data centers. With growing concerns about the environmental impact of digital infrastructure, many organizations are seeking sustainable solutions. Canada's renewable energy advantage aligns perfectly with this trend, attracting businesses that prioritize green practices and aim to reduce their carbon footprint.
