Head in the cloud

I got an email from something this morning saying that Microsoft took a look at setting up a data centre in New Brunswick a few years ago.  I’m not sure what happened but I suspect that power rates were a main reason why they decided against setting up here.

I know I have beat the data centre idea to death on these pages.  I realize that no one much cares but at a minimum wouldn’t it at least be a good thought exercise to model what it would take to make New Brunswick attractive for cloud computing/data centres?

I just have a hard time stomaching a large scale economic development opportunity just passing us by without even a whisper.

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11 Responses to Head in the cloud

  1. mikel says:

    In complex packages like this there is simply know way of knowing what would determine such a decision. Given that the main example you give is a property tax exemption, obviously there’s much more to it than power rates. If they ‘took a look’, then that suggests a little more than somebody at Microsoft going to NB Powers website and checking on the hydro rates.

    So let’s not beat that dead horse. Any proposal like that is going to have a mix of various ‘incentives’, and quite frankly, while I can see pursuing ANY industry as a potential job creator, giving a ten year property tax exemption virtually guarantees two things: in ten years that company is going to show up at the leg and say “we’ve got a cheaper offer elsewhere”-meaning that property tax holiday is permanent. Or two, given the accelerated rate of technology and the global economy, in ten years they are going to be gone somewhere even cheaper.

    I didn’t think it would be so fast, but here we are already talking about RIM’s potential demise-and all it took was one lousy product and some stories about competetiveness. And here we are in Waterloo with a mix of about 32 buildings that RIM has built over the last remaining natural spaces, plus the fact that old industry buildings are sitting vacant, and people should at least NOTICE the problem with investing in corporate, especially single corporate, ventures. And at least in the case of somebody like RIM there wasn’t a huge amount of taxpayers dollars that would end up in the drain.

    My point is that ‘bending over’ for corporate investment virtually guarantees you’ll get the lousiest deals. GOOD corporations look for good government-because they are more stable and tend to have better, and happier workforces.

  2. richard says:

    “My point is that ‘bending over’ for corporate investment virtually guarantees you’ll get the lousiest deals.”

    I’m not sure why trying to improve NB’s economic base by attracting high-wage employers needs to be characterized in that manner. Incentives of various kinds do attract and retain industry. If the costs are less than the tax revenue generated from the industry, its a win for the province. NB has a number of disadvantages including power rates. To counteract that, various types of incentives are required, and those incentives need to be constantly reviewed to ensure they attract new ventures. Incentive packages are not inconsistent with good government, nor do they equal ‘bending over’.

  3. It is really really difficult to compare electricity prices. But…

    From my viewpoint, the major centre for data centres is Houston, Texas. My current server is based there, I’ve had other accounts with other companies based there, and it seems to be the place to go.

    As nearly as I can tell, electricity costs more in Houston than in New Brunswick. Not a lot more — the comparisons seem to be on the order of 10-11 cents/kWh in Moncton, and 11-12 cents in Houston (cites below). Now my numbers could be way off, but this is the best I could get. Hard data here would be invaluable.

    I dug around for a few hours looking at what factors prompted investment in sites like Houston.

    … and found it’s not only Houston, of course. Large new data centres are springing up in places like the British midlands, Iceland, Australia, throughout the U.S., India, even Mauritius. The price of electricity, so far as I can tell, does not appear to be a major factor.

    So, what is? Bandwidth is huge, obviously. No bandwidth, no data centre. So NB may have written itself out of the data centre industry when it lost control of its telecommunications industry. Now we struggle, with the rest of the country, with unreasonably high bandwidth costs.

    Reduction in energy costs, though, can play a major role. Iceland offers its cold, Houston and Mauritius can use seawater. The potential for alternative energy propels sites in tropical regions, where solar energy can come into play in the future.

    Another factor seems to be willingness to invest. Though not always true, it seems that the model is that a large agency builds a data centre, and then fills it out, as though it were an apartment building (but with tenants from everywhere in the world). But industry in Canada being what it is (ie., timid, hesitant to invest, more willing to treat utilities and telecommunications as cash cows) that investment isn’t happening. The presence of large users, such as government or major technology companies, is also a factor.

    What do I conclude from this?

    – fixation on power-rates is a non-starter. We can overcome higher power rates if we excel in other areas, especially with regard to reductions in power usage

    – investment is needed. A data centre won’t just land here; we have to kickstart our own industry in order to demonstrate a skilled workforce, reliability, political stability, and good regulatory environment

    – without excellent telecommunications and excellent data rates, a data centre is a non-starter. This to me is the major hurdle in New Brunswick, and in Canada in general.

    – but in every document I looked in, there seems to be the assumption that the data centre market is still growing significantly, with a substantial upside

    Power Rates

    Data Centres and such

  4. mikel says:

    There is a difference between ‘bending over’ and ‘offering incentives’. Like I’ve said before, getting rid of the tax credits for the film industry was a crazy move, and as you may have heard, the province is offering direct subsidies for ‘certain’ movies.
    I agree with Stephen Downes, there are places where the province can excel, and there are ways the government can help that. But sometimes the numbers just don’t add up.

  5. richard says:

    “Hard data here would be invaluable.”

    See: http://www.eia.gov/cneaf/electricity/epm/table5_6_a.html



    Power rates for industrial users in NB appear to be higher than the Cdn average. If you compare Texas industrial rates to NB industrial rates things do not look so attractive either. That being said, no one is ‘fixing’ on energy rates; it is simply a significant disadvantage when you are trying to attract energy heavy users.

    “There is a difference between ‘bending over’ and ‘offering incentives’”

    What would that be? Please be specific. If we compare ON and NB net job creation per 100K inhabitants over the past 20-30 yrs, what do you think we would find, and how would that relate to various incentive packages offered in these jurisdictions? I think it is clear that NB’s tax revenue situation is decaying due to growing income inequality and loss of high-paying industrial jobs. Perhaps, as an Ontarian, Mikel, you could offer some concrete and practical suggestions on how NB can start generating enough high-wage jobs to pay the costs of public services. Empty phrases such as ‘there are places where Nb can excel’ have no value.

  6. mikel says:

    Dude, you are hardly one to criticize about ‘specifics’. If you think LIVING in Ontario, makes a person an ontarian, that’s no more true than an NBer teaching english in China is Chinese. I’ve been at this blog and others in NB as well as been politically active in NB more than most NBers I know. My family typically calls me when they want information about New Brunswick. So pipe down.

    The difference between bending over and offering incentives is usually pretty clear. If you want specifics, all you have to do is go back to virtually any topic discussed and you will find them. I get complaints when I write too much, then I get complaints when every post I don’t go into specifics.

    You asked some questions that seemed hypothetical, or certainly too much to go into here. But for the latter part, since you asked:

    1. Make insurance public. This keeps provincial money in the province. It also makes a predictable cost. Richard mentioned how power rates are things that ‘go into the mix’, there are also insurance costs for those using vehicles which have to pay exhorbitant insurance premiums.

    2. Richard states that income inequality is one of the problems, and I agree. That’s why corporate income taxes should be increased. That’s why Graham’s tax breaks on the wealthiest NBers should be abolished-and increased, since most of the wealthiest NBers are public servants anyway.

    3. ‘Bending over’ is particularly clear in a case like Irvings LNG terminal. These terminals bring in up to 10 million in the US, they also have profit sharing and numerous programs to benefit the local cities. In Levi they lost the referendum, but the gas companies were almost literally saying ‘the sky’s the limit’. In NB, not only did they not get concessions, the province….well, you already know. If there is a better example of ‘bending over’, I haven’t seen it. But just to remind you, Bernard Lord actually rewrote a forty year old law that prohibited the provincial government from getting involved in the property tax ‘race for the bottom’ that previously meant that most companies paid NOTHING. Profit sharing was a concession that was made in the Fracking debate because of the protest. Profit sharing should be part of EVERY business compromise that includes public resources.

    4. Start a provincial television station. Take a look at the jobs available at TVO and how much they pay. Or in Manitoba, or Saskatchewan. Here we should make a distinction since I know a lot of people in the arts. Most of them would be quite happy with even a subsistence wage, but that’s virtually impossible in NB, and getting harder. A CONCRETE suggestion is to not abolish a tax credit that generated more economic activity than it cost the province. I’ve been pretty specific on this one before, so won’t go into it now.

    5. Build your own damn medical school, vet school, architecture school, environmental school. Studies show that people stay close to the places where they go to school. As I’ve said before, one of the ‘perks’ at the University of Waterloo is NOT a systemic focus. It’s the simple fact that ONE particular prof does almost nothing but go back and forth between ontario and China and get students. That’s why UW is essentially a private school. For good or bad, the economic ramifications are VERY clear. I’m a left wing commie, but when I see things like universities in NB expanding journalism schools and getting more south american students, then it becomes pretty clear. It may be BETTER to do that, but it certainly isn’t more cost effective.

    6. Teach programming as a ‘FIRST language’ in schools, in parks, on street corners, in pubs, in homes, every place there is a person. Anybody with half a brain knows that ‘social studies’ will only make you smarter than the people you serve drinks to. Its a global market, and the language is technology. Teach a fisherman to fish, don’t teach him hemingway.

    7. Partnerships. When I was at home I looked for signs of ‘twinning’. Here in ontario there is considerable traffic between cities and their ‘twins’. Even economic partnerships. Waterloo is twinned with Waterloo, Ohio, and Waterloo, Quebec, and there are trade programs just based on a MUNICIPAL partnership that is run by a volunteer organization.

    8. Educate, educate, educate. Every single person who has dropped out of school is a guaranteed drain on the system-and that doesn’t even include the moral implications. Thats outreach programs, language programs-but Fredericton is a city that doesn’t even give a PENNY to its homeless shelter. It has beggars lining every street, and its more worried about ticketing people for bike infractions and paving walking trails. As I’ve said before, the population of Waterloo is about twice that of Fredericton. In Waterloo there are TWO guys who regularly ask for change downtown, and one of them looks like he’s just lazy. But as has been said before, RIM actually got relatively little in tax dollar support.

    9. Set up international embassies. This isn’t ‘official’ diplomacy, but can be as little as providing a derelict building, fixing it up, and offering it to the numerous Korean, Vietnamese, Chinese, or Brazilian association. Most people know NOTHING about international trade. But there are people who make crap and try to sell it to miserly scots at the farmers market, when wealthy chinese will pay a fortune for some garbage that they think will increase their virility.

    I could go on, thats just off the top of my head, but I suspect I’m running out of characters. I know Richard was just being pissy, but I’m used to the “how dare you talk ‘from away’ aboot us” line. You can argue with any or all of those, but they are pretty ‘concrete’. If you want to talk data centers, while David may be right that they are ‘higher paying’, that is only true RIGHT NOW. Back in the 90s you could make 60 grand if you knew how to make a web page, but technology has a way of running down wages.

  7. richard says:

    Typical, a laundry list. Dude, cost those things out. Dude, calculate the tax revenue gained by raising corporate and personal taxes to national averages. NB has little if any revenue to invest; where will the money come from for any of those proposals? In order to make any of those investments, a lot more money will be required. Where will it come from? Not from raising corporate tax; the gain in revenue there is not nearly enough. Funds will have to be found from taking from other public investments. You will have to identify those. Tough choices have to be made; pretending that the evil coporate sector is going to be the source of the money is just an expression of ignorance or deceit. It’s easy to mount the white charger and ride off in ‘defense of the people’, but when real choices have to be made, the populists run away and hide. We have our own populists here; don’t really need any more of that stuff from those in Ontario.

  8. richard says:

    “5. Build your own damn medical school, vet school, architecture school, environmental school. ”

    Let’s look at this boner in a bit more detail. There is a shortage of MDs (although it isn’t clear that increased use of nurse practitioners etc would not do a lot to alleviate that problem) but there is little reason to believe that a medical school in NB would be superior in outcome to funding Dalhousie, or Dalhousie’s ‘mini’ med school in SJ. In any event, where will the money come from to pay for the new doctor graduates’ billing numbers, or the infrastructure itself?

    The vet industry in NB is already saturated. Why? The population isn’t growing so demand is not growing. There was some expansion of clinics in Moncton, but now over-expansion has led to falling revenues in a number of clinics there. Most graduates of an NB vet school would have to leave the province to find full-time work. Again, where would the infrastructure money come from?

    Same for architects – they need a demand for their skills and in NB construction is falling.

    What NB needs is growth in high-wage sectors. That generates tax revenue to support public services, and increases the level of discretionary income sufficiently to provide a multiplier effect. Then perhaps there would be more demand for vets and architects, and the money to build the schools. You need to put the cart before the horse, dude.

  9. mikel says:

    Dude, if you don’t LIKE the specifics, thats different than my not OFFERING any. If your complaint was that “hey you ontarian we don’t need any more opinions that don’t agree with mine”, then I’ve got a two word answer for you.

    Again, you want money, you tax the people that have it. It’s not rocket science. Just getting rid of Graham’s tax cuts raises 40 million a year at least. Like I’ve said, most of the highest wage earners are those who are either at the government teat directly or indirectly. If they try to leave, you cut off their source.

    You want more money, put on a highway toll. You want more money? Like I said, a television station would more than pay for itself if it was run communally just by government advertising. Go take a look at what Irving charges for advertising in print and on its website for ads, then go count the government ads there (and that doesn’t even include private sources).

    As for vet schools, again, maybe thats why they say those who leave are ‘best and brightest’, because at the very least it makes us realize that there is a larger world out there. As I’ve said before, the university of Waterloo is essentially a private school for international students, do you think all those graduates live in Waterloo? Of course not, if the market is saturated in one place, they go to another. The money comes from those ATTENDING the school, obviously more vets don’t necessarily mean more vet jobs (although I can tell you I know more than a few locations in NB that certainly are not oversupplied).

    And again, architects bring their own ideas and their own markets. There are architectural firms in Fredericton that service INTERNATIONAL clients. So again, Richard is just throwing stones because he simply doesn’t like the ideas. Going back to David’s newer post, perhaps what NB needs is a lot more people like David who have their heads in the clouds and fewer people who do nothing but criticize everything they see. Ironically, it makes Richard sound exactly like the ‘populist’ folks who at the very least have history and morality on their side.

    Again, Waterloo is a university town, thats where its money comes from. The students from that university then set up technology and other types of industrial firms. I think Richards is just unaware of what a cart and a horse look like.

  10. mikel says:

    Oh yeah, and I almost forgot, going back to an old blog of David’s, its interesting to note that virtually NONE of the NB public pension funds are invested in the province. I can’t remember that amount, but I’m pretty sure the number was pretty close to the amount of the provincial debt. The liberals made an attempt and passed a law that I think required the to invest about 1% in the province-and even with that they ended up getting shafted because they invested in US mortgages. That money could have stayed in the province and disappeared just as easily as going into the US and disappearing.

    And by the way, I know people who work in government, and I know people who have contracts with government. If you think they have ‘no money’, then you really don’t know what you are talking about. What they have is no PRIORITIES.

  11. mikel says:

    Oh yeah, and if you want more money, raise the gas tax to what it was before. If you are looking for a ‘plus’ for the province, its that its always cheaper to buy gas in NB than virtually anywhere else. Raising the gas tax is something that was supposed to be done before anyway. Those are consumptive taxes that have nothing to do with the ‘evil corporations’ that Richard seems obsessed with. But again, the city of Saint John is out 7.5 million every year-all because of a special law that limits the amount of property tax (and its liability) that the LNG terminal paid. Say what you want Dude, but if Irving has the money to build new developments for people who got flooded out, then they aren’t paying enough tax. It’s always easy to spot those people. If their car is worth more than 40 grand-they aren’t paying enough tax. If they were seriously considering doubling the size of their refinery-they aren’t paying enough tax.

    And to go back to the vet example, the SPCA didn’t even have a qualified vet to go look at the horses on that 38 horse farm that they closed down. If you have vets who are graduating who don’t even know that you don’t put stallions and mares and foals in the same trailer, then you can’t tell me that you’ve got an oversupply of vets. I did a search and could only even find THREE farriers for the entire province, and you don’t even need any accreditation to call yourself a farrier.

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