The Morphing of Ottawa

By Chris Turner

The senate room is a hall that looks like its purpose--it was built to hold peewee hockey league banquets--not least because its walls are draped with enormous glossy photos of hockey stars and because it's located in the bowels of Ottawa's Corel Centre, home of the NHL's Senators. On the last Thursday morning of every month, though, the charmless venue comes alive with the hum of technopower in all its schmoozing, chattering diversity. If you're looking to connect with the Canadian capital's ruling class, this is maybe the most efficient location you'll ever find to start.

Don't try to find your local M.P. here. In fact, sighting any politician might be a good reason to call the local rare-bird society. Thursdays belong to the Technology Executive Breakfast, signature event of the Ottawa Centre for Research and Innovation (ocri) and nexus of the new elite that has reshaped Ottawa--and pretty soon may be reshaping you.

Canada's high-tech future

We discussed the state of high tech in Canada and efforts to wire the country with TIME contributor Chris Turner at 2 p.m. EST Thursday, March 8. Read the transcript.

Over bagels and rubbery scrambled eggs, hundreds of entrepreneurs, policy wonks, venture capitalists and other techies huddle weekly in the Senate Room to swap ideas and business cards and affirm a fundamental shift in the priorities and hierarchy of Canada's capital. The transformation has been incubating slowly for decades, but now it has blossomed into the open. Political power has been supplanted by technopower; the Victorian towers of Parliament Hill have been superceded by the low-slung office complexes of suburban Kanata, 30 km to the west, which lie at the heart of a $17 billion local high-tech industry. Ottawa, font of legislation, regulation and lobbying, now leads the country in economic and per-capita spending on advanced research and development. Local tech firms attracted more than $1 billion in investment capital in 2000 alone. Ottawa--a six-letter crossword answer to the clue "staid government town"--is now the nation's most dynamic high-tech boomtown, even though both Toronto and Montreal are clearly larger tech hubs.

What's happening in Ottawa is part of a national trend as the New Economy, even in a slump, transforms Canada from a resource and manufacturing nation into a major force in the 21st century global economy. From St. John's to Vancouver, new industries and new entrepreneurs are revitalizing cities and rewiring the national economic map. But in Ottawa, the change has taken on special significance because of the city's juxtaposition with the nation's political center. Nowhere is the change of civic psyche more dramatic--or more significant for the rest of Canada--as the techno elite joins with the political and bureaucratic elite to turn the mission of rewiring the country into something of a national crusade. As a result of Ottawa's transformation, and partly driven by it, Canada is on its way to becoming the world's most Internet-connected nation by 2004. "Canada right now stands No. 1 in the world in terms of Internet use," Industry Minister Brian Tobin told Time. "Our mission statement is to try to stay ahead."

Last month's Corel Centre breakfast put up some striking numbers. First, it set an attendance record: nearly 500 execs (from a random cross section of Ottawa's 1,200-plus high-technology companies) made it to the Senate Room to slurp institutional coffee and soak up the wisdom of one of the city's New Sages--JDS Uniphase ceo Jozef Straus, the keynote speaker. The second bid for a record was the fact that the assembled throng was quite possibly the largest number of beret-wearing business executives ever assembled outside France. Everyone in the hall had one on, in homage to Straus, who has turned the beret into a personal trademark.

It was a vivid--and goofy--way to illustrate the tech sector's cockiness. Nortel's market free fall had been dominating the headlines for days. JDS had seen its share price drop more than 4% the previous day and would announce the layoff of 3,000 workers a week later. Yet here was a JDS minion stepping onto the Senate Room podium and announcing that "our speaker today will not speak unless you're wearing a beret." (A black beret with a JDS logo had been conveniently placed on each seat.) No joke. After a pregnant pause and a hearty chuckle, the crowd complied. And then Straus gave a boosterish speech about next-generation optical networks to a room full of business-suited tech executives who suddenly looked like a misguided naval-reserve troop. There was no mention of the tech bloodbath, except in winking one-liners. "The circus will be gone in three days," Straus said, referring to the media attention. The unspoken implication: We won't be.

For all the economic storms of the moment, Ottawa's new masters are adamant that the transformation they represent is only beginning. "The money that was invested here last year is not going to be spent instantaneously," says Adam Chowaniec, ceo of Tundra Semiconductor, which manufactures fiber-optic components. "It's going to take two or three years to get spent. So I think the money is here to fund the growth on a continued basis, and I think we will be able to grow through this downturn." Chowaniec notes that his company has not wavered from its plan to expand its 220-member work force nearly tenfold over the next 10 years.

Terry Matthews, ceo of March Networks (which develops video-based applications for broadband networks) and arguably the most influential person in Ottawa's tech sector, takes an even sunnier view. "Cutbacks by Nortel probably help to fuel the boom even more, because there's no lack of funding for start-up companies," he says. After JDS Uniphase announced its layoffs, Matthews reiterated that the slowdown remained "just a small blip" and predicted that growth in the next two years would outpace that of the previous five. Matthew's investment firm, Celtic House International (one of the city's most important venture-capital firms), plans to hand out more money this year--somewhere in the neighborhood of $129 million--than it did in the past four. Ottawa's boom, in other words, is no dotcom bubble: the city's high-tech industry has long, deep roots that aren't likely to be torn up in a single market storm.

No one knows this better than Matthews, who has been a central figure in the high-tech growth in Ottawa since its beginnings in the early 1970s. Back then, he and a colleague at Microsystems International--a chipmaking operation affiliated with Bell Northern Research, now Nortel Networks--formed one of Ottawa's first tech start-ups, Mitel. (That colleague was a boisterous fellow named Michael Cowpland, who built--and then nearly melted down--one of Ottawa's top software developers, Corel, and purchased a majority interest in Ottawa softwaremaker Zim Technologies International just this past February.) In the years leading up to Mitel's founding, BNR and two arms of the federal government--the National Research Council and the Communications Research Centre--kept a steady stream of research dollars and gifted scientific and engineering minds from around the world flowing into Ottawa. Mitel was one of a tiny handful of pioneering companies--other early start-ups included SHL Systemhouse and Quasar Systems (now Cognos)--looking to capitalize on the city's growing wealth of research dollars and brainpower. In those less overheated times, Mitel grew steadily until it made it onto the New York Stock Exchange in 1981.

Ottawa's transformation didn't really get rolling until the mid-1980s, when a small community of the city's research elite--particularly those at BNR--had begun spinning their projects into fledgling companies. Then, in 1986, Mitel sold a controlling interest in itself to British Telecommunications. Matthews moved on to found Newbridge Networks (sold last year to Alcatel for more than $6.4 billion); Cowpland was a year into the building of his own new venture, Corel, into one of Canada's first big software success stories before it fell back into a welter of business problems and controversy. Meanwhile, four researchers from BNR--among them Straus--had finally turned their moonlighting gig into a full-time fibre-optics-components business that would become the colossus JDS Uniphase. From a huddled aggregate of small firms, Ottawa had assembled a core collection of globe-girdling players.

Steady growth turned downright rapid through the early 1990s, and by 1997, Ottawa's tech industry was more than 40,000 workers strong. Start-ups, mergers and ipos were increasingly commonplace. Theorists of the development of technology clusters often speak of "critical mass," and Ottawa had it. But it took a precocious entrepreneur--Antoine Paquin, then 30--and, yet again, Terry Matthews to demonstrate just how robust Ottawa's tech sector had become.

Early that year, Skystone Systems, Paquin's optical-component company, had begun to attract serious venture-capital interest from south of the border. Kleiner Perkins Caufield & Byers, the legendary California venture-capital firm that funded Sun Microsystems, was ready to make a financing offer. "So Terry jumped to the table and said, 'No way--not in my backyard,'" Paquin recalls. He went with Matthews, who invested $2.9 million through Celtic House, then a three-year-old VC firm. Within months Skystone was sold to Cisco Systems for $57 million, by far the biggest tech buyout Ottawa had yet seen. The deal made Paquin an important player, turned Celtic House into a VC powerhouse and made it clear that Ottawa was a major prospecting site in the high-tech gold rush. The Skystone episode also made it clear that Ottawa's tech sector was a full-fledged community now; it wasn't going to be trucked off to California.

In those palmy days, the high-tech tide floated all boats and supported a new form of civic pride. The growing self-consciousness of Ottawa's high-tech world is best reflected in ocri, the host organization for the monthly tech breakfasts and a uniquely Canadian incubating tool that is being emulated worldwide. ocri's activities run the gamut from networking events to job-training (and retraining) initiatives and even a free-breakfast program for 3,600 Ottawa schoolchildren. In an industry that has been resolute in its desire to keep government at arm's length, ocri has emerged as a sort of para-governmental organization dedicated to building a durable community out of the boom. "There's a real feeling of family here," notes ocri president Bill Collins, who joined the organization in 1984 as its marketing director, giving him front-row seats for the entire community-building process.

The family mood now faces its biggest test yet, and not only--or even primarily--because the stock values of the city's two biggest high-tech employers (Nortel and JDS Uniphase) are in the toilet. More worrisome, in the long run, is the growing list of big-city problems that sleepy old Ottawa never had to face previously, including traffic snarls, an overtaxed transit system, a housing shortage and the nation's lowest apartment-rental vacancy rate. "In many respects, the city and the municipal infrastructure were caught off guard," says Jim Watson, mayor of Ottawa from 1997 to 2000. Watson championed this year's federal-government-inspired amalgamation of the National Capital Region's seven municipalities in an effort to reduce turf wars and other red tape that contributed to many of the growth problems. The first step in decreasing the strain will be unveiled in August, when the newly amalgamated government will open a single light-rail line. Ontario's provincial government is looking into widening the Queensway, the city's primary highway.

While they wait for the various governments to act, local tech executives are worried that Ottawa's quality of life--that fragile, intangible dna that enables them to persuade top minds to work there--is being badly compromised. And some have begun work on solutions of their own. Tundra Semiconductor's Chowaniec, who has been calling for upgrades to local infrastructure since the boom began, launched a far more ambitious plan late last year. His fast-growing company was in need of a bigger office building, so Chowaniec decided to create a huge new headquarters complex in Kanata that would be a recruitment tool in itself. The idea dovetailed with the decade-old dream of Kanata's then mayor, Merle Nicholds, to build a city-center complex on a prime piece of real estate nestled between the Queensway and Kanata's main shopping center. The result: a $193 million, 25-acre complex of offices, apartments and retail space (and, possibly, an outdoor amphitheater) to be built by Tundra over the next five to eight years. "If you can prevent people from traveling every day," says Chowaniec, "if they have a way of getting to work or living closer to work or being part of a community, I think those concepts have a huge appeal."

There are other community aspects that can't be addressed by municipal planning committees or building projects. Start with Ottawa's long-standing reputation as a city as dull as the gray suits of its bureaucrats. There are increasing signs of life beyond the civil service. Case in point: Ottawa's Byward Market area, the address of choice for tech employees who prefer loft apartments and eclectic cafes to the split-level homes and big-box stores of Kanata. In Byward, where farmers' produce stands still open during the day, the hip Mercury Lounge doesn't open until 8 p.m. (a full three hours after the streets of Old Ottawa have rolled up). Just down the street, the Empire Grill boasts a fusion-cuisine menu and a meeting room that was recently rewired for Internet conferencing to cater to the restaurant's rich, techie clientele. In an old strip mall near the Queensway, a software-development firm called Bitheads has converted a video arcade into a funky, open-concept office complete with a liquor bar and is expanding into the former cineplex next door (and keeping one of the old screening rooms intact for company use). ocri sponsors an annual battle-of-the-bands competition called Tech Rocks for the industry's weekend guitar gods at the Corel Centre's Hard Rock Cafe. John Criswick, owner of the Mercury Lounge, voices what was formerly unthinkable. Ottawa, he says, "is about to become more cosmopolitan."

Well, let's not get too carried away. Better to say that the tech boom has created a more volatile and far more colorful city. The important thing is that the changes that have swept the capital out of its bureaucratic gray flannels, and the technologies it is generating, are creating big, broadband waves that will be felt nationwide.

--With reporting by Steven Frank/Toronto