telecommunications innovation system: development, impacts of the structural changes and...
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Telecommunications innovation system: development, impacts of the structural
changes and perspectives
Marina Szapiro
Associate Researcher of RedeSist, Economics Institute, Federal University of Rio de Janeiro, Brazil
II International Workshop of the BRICS ProjectApril 26, 2007
• To present the development of the Brazilian telecommunications innovation system
• To discuss the main features of the telecommunications restructuring process and its impacts on the innovation system
• To discuss the future perspectives of the telecommunications innovation system in the context of the new organization of the telecommunications industry.
Structure and objectives
Brazilian telecom innovation system: main policy measures
• Political context: military government and II National Development Plan (PND)
• Creation of Embratel (1965), Telebrás (1972) and CPqD (1976).
• Specific policy measures to foster the local industrial and technological development
• Governmental procurement power – to promote homogenization both technical and of
equipment specifications – to enhance the development of domestic technology and
national telecoms equipment companies as well
• Funding of the system based on the National Telecommunications Fund (FNT) - a tariff of 30% on all telecommunications services
Brazilian telecom innovation system(From the 1980s to mid 1990s)
OperatingCompanies
IndustryCPqD
Public policiesMinicom and Telebrás
University andIndustry
technology
demands
products
joint projects
demands
Source: Szapiro, 1999
Brazilian telecom innovation system: main achievements
• Establishment of a network of local suppliers (120 local firms responsible for 17% of the market in 1982)
• Gradual involvement of multinational subsidiaries in the process of innovation and technological capability development
• Local development of key technologies for the telecom system expansion (optical fibre, Trópico digital switching systems, induction-loop phone card)
• Reduction in the investment costs of building the Brazilian telecom network
• Development and qualification of Human Resources
Challenges faced by the telecom innovation system in the beginning of
the 90s
• Funding problems (low tariffs and international restrictions)
• Scarcity of telephone lines • Speed up of technological changes in
the telecommunications sector, diffusion of microelectronics and convergence between telecom and informatics
The Context and Impacts of Telecommunications Restructuring Process
• Trade liberalization of the beginning of 90s, Liberalisation process (1995) and Telebrás’ fragmentation and privatisation (1998)– Increase in the participation of
multinational subsidiaries on the telecom equipment industry
– Increase in investments: growth of the number of fixed and mobile lines
– Entrance of new multinational operators: internationalization of the supply of services in Brazil
Reorganization of the Telebrás system - 1998
Region IIITelesp
5.074 million fixed lines
75% digitalisation24,000 employees
36% of GDP22% of populationUS$ 4,967 million
Region IIITelesp
5.074 million fixed lines
75% digitalisation24,000 employees
36% of GDP22% of populationUS$ 4,967 million
Region ITele Norte Leste5.642 million fixed
lines73% digitalisation37,000 employees
39% of GDP54% of populationUS$ 2,949 million
Region ITele Norte Leste5.642 million fixed
lines73% digitalisation37,000 employees
39% of GDP54% of populationUS$ 2,949 million
Region IITele Centro Sul
3.694 million fixed lines
69% digitalisation19,000 employees
25% of GDP24% of populationUS$ 1,778 million
Region IITele Centro Sul
3.694 million fixed lines
69% digitalisation19,000 employees
25% of GDP24% of populationUS$ 1,778 million
Source: author’s elaboration
Main Results of the Telecommunications Restructuring Process on the segment of
services• Rapid increase in the number of fixed and mobile
services until 2001 – universalization goals• From 2001 on: stagnation of the number of fixed lines
– International and general trend; and– Migration of fixed line subscribers to pre-paid mobile services
(80% of the total number of mobile lines)• Few telecom operators supplying telecom services in
different segments – low competition on fixed services, oligopoly in the mobile segment, and competition on the long distance services– Telefonica/Vivo– Telmex/América Móvil (Embratel/Claro)– Brasil Telecom– Oi/Telemar– TIM
• Main focus of Telefonica, Telemar/Oi and Brasil Telecom: still fixed and broadband services
• Integration of fixed and mobile services• Triple play (voice, data and video)
Evolution of fix and mobile phones 1994-2006
0
20
40
60
80
100
120
year
milli
on o
f pho
nes
f ixed phones in service
mobile phones
Source: www.teleco.com.br
General data about the Brazilian telecommunications
market
Brazil 2003 2004 2005 2006 Fixed telephones 39,2 39,6 39,6 38,5 Mobile telephones 46,4 65,6 86,2 99,9 Pay TV subscribers 3,5 3,8 4,2 4,6 Internet subscribers 20,5 17,9 18,9 22,1 Broadband Internet 1,2 2,3 3,8 5,6
(in million of units)
Source: www.teleco.com.br
Gross Revenue of the main telecom operators in Brazil
US$ billion Gross revenue
Telefonica/Vivo 18,1
Telemar/Oi 12,0América Móvil/Telmex 12,0Brasil Telecom 7,5Tim 6,9
Source: www.teleco.com.br
– Disarticulation of the innovation system• Privatisation of CPqD, uncertainty and
change of role in the system• Increase in technology imports• Decrease of the use of national technology
– Entrance of new equipment suppliers – Increase in imports of telecom
equipment and acquisition of dynamic nationally owned firms by MNCs subsidiaries
Impacts of Telecommunications Restructuring Process
on the innovation system
Impacts on the innovation system- Denationalization of the equipment
industry
Year 1988 1997 2000 2003 Market share of the nationally owned firms
77% 41,5% 8,7% 4,3%
Market share of the foreign firms
23% 58,5% 91,3% 95,7%
Source: Oliva, 2002 and Szapiro, 2005
Impacts on the innovation system - Increase in telecommunications imports of components, parts, pieces and final
products
-4.000,00
-2.000,00
0,00
2.000,00
4.000,00
6.000,00
Imports
Exports
Trade balance
Imports 2.087 2.752 2.682 2.710 3.434 3.752 1.510 1.482 2.306
Exports 154 288 330 494 1.311 1.551 1.547 1.548 1.452
Trade balance -1.93 -2.46 -2.35 -2.21 -2.12 -2.20 36,5 65,5 -855
1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: Szapiro, 2005
Innovation in the equipment industry (Pintec)
• Reduction of the number of innovative firms from 167 in 2000 to 136 em 2003 (although the number of firms in the segment has increased in the period)
• Reduction of the innovation rate from 2000 to 2003: 56% to 44%
• Investment reduction in innovative activities from 2000 to 2003: 4,97% to 4,25%
• Investment reduction in internal R&D activities from 2000 to 2003: 1,75% to 1,30%
Main results of telecom restructuring strategies from the point of view of the innovation system
– Privatization: Maximization of the entrance of foreign capital
– Entrance of multinational telecom operators and denationalization of the equipment industry
– Uncertainty/change of role of the R&D telecom laboratory
– Weakening and disarticulation of Brazilian telecom IS
Organization of the “old” telecommunications Industry
• Monopoly in the supply of services and oligopoly in the equipment industry – Vertical integration in the USA;– “national championship” policy in the
developing countries;– Developing countries that created a domestic
telecom equipment industry (Brazil)• High level of interference of the government in the
telecommunications strategic decisions• Concentration of the R&D activities in the services
operators laboratories
• Oligopoly in the services supply • Concentration of the R&D activities in the big
telecom equipment industry• Some new “entrants operators” entering the
telecom market with low R&D efforts• International incumbents maintaining
sigficative R&D investment• Importance of the role of the state on the
strategic decisions of the sector (for developing and developed countries)
• Growing internationalization of the services market in developing countries (especially in Latin America)
Organization of the “new” telecommunications Industry
Perspectives of the telecom innovation system
• Funttel (Telecommunications Technological Development Fund): problems of continuity
• Fust (Universalization of Telecommunications Services Fund): problems of operation
• Definition of the Digital TV pattern• Universalization of broadband access:
“window of opportunity” for the development of WiMax technology?
Perspectives of the telecom innovation system - Definition of the Digital TV
pattern
• Creation of a Brazilian Digital Television System based on the Japanese pattern– Development of a research program
involving CPqD (as the coordinator) and research institutes and universities
– Funding: Finep with the resources of Funttel
– Opportunities of development of softwares, middlewares, set-up-boxes, audiovisual content
• Governmental initiatives to promote the universalization of broadband internet access to schools and hospitals in many parts of Brazil
• Use of this opportunity to foster the local development of technological and industrial capabilities
• Procurement power as a strong policy instrument
• Window of opportunity for the development of fix WiMax technology and production of Radio Base Stations and Customer Premises Equipment (CPEs)
Perspectives of the telecom innovation system – Universalization of broadband internet access