Imagine a world where most of the functions of our personal computers – running applications, communicating, and storing data – do not take place on those computers but rather at massive computer server farms located in remote locations and linked through high-speed networks. This is not the stuff of science fiction but rather describes "cloud computing," one of the hottest Internet and computing trends and the subject of my weekly technology law column (Toronto Star version, Vancouver Sun, homepage version).

Despite limited public attention, cloud computing has already woven its way into the fabric of the Internet. Web-based applications allow users to word process, create presentations, and manipulate data spreadsheets online, Internet-based data backup services offer the chance to store mirror images of our computer hard drives, and every day hundreds of millions of people use Internet services such as web-based email, photo sharing sites, or Facebook applications where the significant computing power resides elsewhere (in the "cloud" of the Internet).

Critics argue that the benefits of cloud computing – greater computing efficiencies and the accessibility of data and applications from anywhere – are offset by the privacy implications of lost control over our personal data. Moreover, a growing number of environmental groups note with alarm the enormous energy requirements to power (and keep cool) hundreds of thousands of computer servers.

While cloud computing is an international trend, Canada may interestingly enjoy a global competitive advantage that would address some of the critics' concerns. Indeed, led by Bill St. Arnaud, the Senior Director of Advanced Networks for CANARIE, which focuses on advanced networks in Canada, there are mounting efforts to position the Canadian north as the ideal home for cloud computing.

The starting point is to establish high-speed, optical networks that run north – south between the Canadian arctic and the major Canadian urban centres. Connecting these two regions by optical network would use minimal energy and have the power to instantly transfer huge amounts of data.

Locating the server farms in the Canadian north offers several environmental advantages. These include easy access to clean energy sources such as wind and geo-thermal energy and, given the colder climate, decreased energy requirements to cool the computer server farms. In fact, St. Arnaud argues that the heat generated by the computers can be captured and used to heat nearby buildings leading to zero carbon data centres.

In addition to the environmental considerations, locating computer server farms in Canada would offer Canadians better privacy protection since their data would never leave the country and would be subject to national privacy laws.

St. Arnaud is quick to point out that Canada is not alone in competing for cloud computing installations, however. As companies increasingly factor environmental and legal considerations into their decision making processes, other countries are trying to position themselves as the ideal hosts. For example, Iceland recently announced the creation of a high-speed link with the United States, as it seeks to parlay its geographic position and availability of geo-thermal energy to advantage.

Canada already has much of the technical and privacy infrastructure in place to become a global player. It is a recognized fibre-optic network leader in close proximity to the United States and its privacy legislation meets international standards, thereby removing a potential impediment to data transfers into the country.

A significant barrier, however, may be the failure to address several legal issues that increases the risk of storing data in Canada. These include the absence of legal protections for Internet intermediaries (such as Internet service providers) for content they host but over which they have no knowledge or control. Moreover, the absence of a "fair use" provision under Canadian law increases the potential liability for innovative business models that rely on cloud computing infrastructure.

Many of the world's leading technology companies, including IBM, Google, and Microsoft, are moving rapidly toward the cloud computing model. If Canada responds, it could emerge as a leader and in the process address mounting concerns over the cloud computing's effect on personal privacy and the environment.