KEY POINTS:
As Telecom enters the post unbundling world and attempts to adapt its businesses to meet the demands of the new internet economy it's going to have to improve its patchy track record in research and development.
In the past five years, Telecom's investment in R&D initiatives has looked
like this:
2006/05 - NZ$9m
2005/04 - $9m
2004/03 - $10m
2003/02 - $7m
This is from a company that generated $5.7 billion in operating revenue last year. Telecom's spend has averaged about 0.2 per cent of revenue over the last few years, an incredibly low rate by world standards as the latest report from the OECD shows. A healthy R&D spend could be considered to be one per cent of revenue.
The big innovators in the telco space, the likes of NTT, BT and Telia, spend upwards of three per cent of revenue on R&D each year.
Telecom argues that it is able to gain advantage of the R&D done by its
partners Alcatel Lucent and Sprint.
"These amounts do not reflect the significant staff costs that may be involved in projects such as the NGN roll-out. They also don't take into account the extensive R&D undertaken by our strategic partners such as Alcatel-Lucent and Sprint which we, and our customers, also benefit from," said Telecom spokesman Brett Jackson.
There's some truth to that, but the fact remains that by world standards, Telecom is doing less to innovate new products and services in its own shop than other telcos around the world. With Telecom facing some major technology changes and now firmly in the e-commerce world with its online retailer Ferrit and YahooXtra, you'd think it would be putting more resources into developing technologies it can use to improve its communications networks and potentially license the intellectual property it generates for use overseas.
No New Zealand company is in a better position to innovate in the communications space than Telecom, which can support its activities from its profitable businesses. We even have a track record in this country of world leadership when it comes to developing wireless technology, thanks to companies like RoamAD and 4RF. Has Telecom tried to leverage this capability with R&D efforts? It would seem not.
Hopefully Telecom's new chief executive Paul Reynolds, fresh from BT, where R&D levels as a percentage of revenue are huge compared to that of Telecom, will re-evaluate the telco's activities in this area. If he doesn't Telecom risks being left further behind in the internet space it is trying to adapt to and forever being at the mercy of foreign technology suppliers hungry for fat equipment and software contracts.
