Discussing the State of Telecom Research Today

Bob Lucky

2

Once Upon a Time …

3

Role of the Pre-divestiture Bell Labs

Standards (both official and ad hoc) End-to-end network design Basic research Industry and research leadership Seeding alumni throughout industry and academia

4

The Economics of Telecom

Bits are becoming a commodity Overcapacity in the long haul plant Pricing tends to incremental cost, which is nearly zero High up front costs Fast depreciation

5

Telco Revenue per Minute and per Call1980-2002

6

US Telecom Capital Spending

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

1995 1996 1997 1998 1999 2000 2001 2002 2003E

Others

Wireless

Long-Haul Incumbents

Local Incumbents

Source: Sanford Bernstein

DollarsIn

Millions

$39,488$45,235

$58,186$67,146

$89,676

$119,925

$102,502

$58,923$53,483

Year-over-Year Growth Rate

14.6% 28.6% 15.4% 33.6% 33.7% -14.5% -42.5% -9.2%

7

“Telecom is headed the way of DRAMs – pricing is setby the most idiotic competitor. It’s a race to the bottom.”

Roxane Googan, Industry analyst

8

Is There any Bottom to the Price?

9

Yes, maybe there is a bottom

Free?

10

Free WiFi

11

Is it Possible?

12

Telecom’s Paradox

Telecom industry is in crisis in the midst of technological progress and strong user demand

Annual traffic growth: 100% Annual growth of Internet users: 40% Strong growth in wireless penetration Usage of broadband, data, wireless, long distance all rising

13

Problems in Telecom Research

Reduction in research spending Change in the nature of research -> short term and applied Globalization of the industry Horizontal restructuring of the industry Shortcomings of university research Lack of national vision Lack of end-to-end responsibility

14

Where is Innovation Coming From Today?

Service providers have abandoned research almost completely Equipment vendors do the only research in the traditional

industry – and they have cut back significantly New players – Microsoft, Qualcomm, and Cisco – have

emerged to do varying amounts of research The venture market, while still active, is not as robust The academic community remains strong

15

Where is Telecom Research Done? – Percent of IEEE Papers Authored by Industry and Academia

0

20

40

60

80

100

1970 2003

% Academic

% Industrial

16

Issues

Is Telecom research endangered? Are there significant economic consequences? What can be done

– By government?

– By industry?

– By academia?

17

The Panel

Jeff Jaffe, Lucent Fred Chang, UT Austin Niel Ransom, Alcatel