Nortel and the future of global telecom

By Bill Owens

Nortel is a big company providing about 85% of the telecom R&D and about 15% of the total R&D in Canada, and this country is a good place to do that kind of work. Everybody says, ‘Well let’s move to China, and let’s move to India, and do our R&D in developing countries’. I can tell you that when you make a business judgment about where you do R&D in the telecom industry, you put a large share of it in this great country. And there are a lot of good business reasons.

I would encourage government to take that very seriously and put in place policies that allow the continued competitiveness of that R&D market. Because to Nortel, Canada looks as good as any place in the world to do R&D, with educated people, great universities and a great business environment. We want to make sure that the strategies are in place to allow that kind of business to continue to flourish in this country, because that’s the mind share of our business.

Nortel has taken pride in spawning a lot of businesses in this country, and a lot of that comes from money spent on R&D and smart people putting their minds into our industry. Nortel today has 3,500 patents in the US, and 5,600 that we have pending, and lots of other patents that are being registered around the world in various countries.

We’re deeply engaged in two critical areas. There’s the whole range of telecom equipment from every form of wireless to wireline and optical. We’re also deeply involved in the enterprise world. That is all of the areas of Internet protocol (IP): voice over IP, video over IP, data, and streaming video.

So, Nortel is deeply involved in the range of technology that we believe will change the world. Convergence is certainly there. We all have different definitions, but we are all moving into an IP world, whether we are wireline or optical or wireless. We are seeing the triple play of data, IPTV, and voice over IP. We’re seeing things move towards a future of IP. It has enormous ramifications.

Then there’s network security. We at Nortel are as aware of this issue of security of the IP networks as any company in the world. What is security? It is all kinds, of course, but it also means the ability to see inside your network and be able to isolate it quickly, get rid of it in microseconds, and return the network to normal.

Another area is mobility. We’re seeing mobility play a real role around the world, especially in developed countries. The North American marketplace is clearly booming, but Nortel does a lot of business in India and China, and remote areas of Pakistan. In Asia, taken at large, the number of mobile users is increasing by 11 million a month. It takes about six weeks to increase in those markets the size of the Canadian marketplace as a whole. If you’re Nortel, you can’t afford not to be there.

If you look at India, China and perhaps some other nations that have had explosive telecom growth like Korea, Taiwan, Hong Kong, what you see is vision at the top of governments about what it means. I won’t be too harsh on our governments, except to say it’s very visible in those countries at the highest levels what it means to build out bandwidth, to have mobile networks, to provide subsidies and the incentives to build those networks, and the reality that if they do that as governments, their nations are going to be much more productive. The issues of the poor in their nations are addressed more readily than perhaps anything else they do to help their economies.

At the highest level of those governments — India, China, Korea — you find an awareness of what 3G means. You find an awareness of how they’re going to build it out and how they’re going to sponsor and subsidize their networks. You find an awareness of what it’s going to do for their gross national product and their productivity.

Governments are realizing the importance and what I would say to our developed governments — Canadian, US, European — is there’s a lot we can do associated with the strategy for telecom. And I salute many of the things that are going on in the Canadian government to include telecom in the studies of how we can benefit Canada and the rest of the world. We must take a real interest in the regulatory side.

We’re seeing explosive growth in India that wasn’t there three years because the networks, the backbone, wasn’t completed. But also the government vision wasn’t there. So you find great visionaries in government who see the value of telecom networks. I would just say to all of us in our western governments, if they see the vision, why don’t we step up to it in profound ways to make our societies better and make our businesses prosper as we in business find our way to connect with those marketplaces?

Governments are doing wonderful things and Canada stands pretty high in this regard. If you look at rural areas and access to bandwidth, Canada is #5 in the world. The US is not doing well. The visibility in the US, the regulatory policies, the bureaucracies, the politics, have gotten in the way of building out my home state of North Dakota. Rural communities tend to dry up unless government has a vision for providing real bandwidth at competitive prices in rural areas. The economics are not very good in those areas with sparse populations, but it's very important to all of us that we see that kind of vision by our governments.

Finally, we see the coming of IP. And government, whether it is of Canada or of the US, should stand for providing a fair return to people who invest in networks. If you’re going to put billions of dollars into a network, you should be allowed to have a fair return on that investment.

Nortel also believes that this world of IP solutions and applications is one of great opportunity. And here we have an opportunity to allow free enterprise around those applications and services. And so, to whatever extent possible, government should allow that free enterprise, free movement of the IP solutions that are on those networks subject to what I said before — the fair return on the investment in those networks. We see that in many nations around the world. Certainly Korea has done that. China is very much on that wavelength.

And governments in western democracies can do a lot for our regulatory futures, if we look at it somewhat simplistically and provide that kind of vision for our countries. It’s really good for the businesses in Canada. It’s really good for the access into these other nations, which is huge if we treat it correctly. And it’s really good for the telecom industry in any form.

Bill Owens is vice chairman & CEO of Nortel Networks Corp.

This article is an edited transcript of a keynote at Toronto's Canadian Telecom Summit, May 31, 2005.