broadly similar (Figures 6, 7, and 8). Central to the innovation system are the three public laboratories, CPqD in the case of Brazil, C-DOT in the case of India and the Electronics and Telecommunications Research Institute (ETRI) in the case of Korea. But there is one fundamental difference between Korea on the one hand and Brazil and India on the other. The main difference is in the importance and capability of manufacturing enterprises. In Korea the manufacturing enterprises too are an integral component of the innovation system and the main manufacturers all have relatively stronger in-house R&D centres. As can be seen from my subsequent discussion this meant that the Korea's sectoral system for telecommunications has been much more resilient in dealing with the negative effects of globalisation.
Policy Making of public sector enterprises, R&D and standardization/validation of equipment etc.
Telecom regulation Telecom Regulatory Authority of India
(TRAI)
Dispute Settlement Telecom Dispute Settlement and
Appellate Tribunal(TDSAT) TDSAT is to adjudicate any dispute between licensor and a licensee, between two or more service providers, between a provider and a group of consumers, and to hear and dispose of appeals against any decision or order of TRAI
1. Stand-alone public R&D organisation (Centre for Development of Telematics (C-DOT)
2. In-house R&D organisations attached to public sector enterprises (ITI, Hindustan Cables, Hindustan Teleprinters, Telecommunications consultants) 3. Academic Research Institutes
(The Telecommunications and Computer Network Group at The Indian Institute of Technology)
4. Affiliates of MNCs having R&D (CISCO, Ericsson, Lucent Technologies) 5. Telecom Software Exporters
• Domestic Private sector enterprises (Hughes Systems, Mahindra BT, Impulsesoft, Sasken Communications, Future Software, Wipro, C-DOT)
• Affiliates of MNCs (Texas Instruments, Motorola India, Intel, Lucent, CISCO, Analog Devices, National Semi conductor) 6. Standardisation activity and drawing up of generic requirements
and specification for telecom products, equipment, systems, services and networks, (Telecom Engineering Centre)
Source: Own compilation
Figure 7: Present innovation system of the Indian Telecomm-unications Industry
Institutions and agencies dealing with decision-making towards
telecommunication policy
• Ministry of Information and
Communications-Telecommunications Policy Bureau
• Ministry of Science and Technology
• Korea Information Strategy Development Institute
Research System (a) Government Research Institute
• Electronics and
Telecommunications Research Institute
(b) Manufacturing enterprises having in-house R&D centres Samsung
(c) Exclusive private sector R&D companies
VK, Giga Telecom, Mirea telecommunications etc.
Manufacturing enterprises a) Switching equipment manufacturers
• Samsung
• Hyundai
• LG Electronics
• Mercury (previously Daewoo) b) Mobile handset manufacturers
• Samsung Electronics
• LG Electronics
• Maxon Electronics
• Hyundai Electronics
• ODM Manufacturers to MNCs: Appeal Telecom and Pantech
Telecom Service Providers
• Fixed Line service providers: KT, Hanaro, Dacom, Onse Telecom
• Mobile telecom provider: SK Telecom
• Personal Communication service: LG Telecom, KT Freetel
• IMT-2000: KT iComm, SKIMT, LG Telecom
Regulator Korea Communications Commission
Human Resource Development Public and private sector universities, advanced
research institutes etc.
Source: Own compilation
Figure 8: Present innovation system of the Korean Telecomm-unications Industry
Following Mani (2003, 2004 a and b), the term innovation capability in a particular technology is defined as the ability to conceptualise, design and manufacture state-of-the-art telecommunications equipments and also to keep pace with changes in the world frontier in that technology. Transliterating this definition of innovation capability into measurable indicators is attempted by employing four separate but related indicators. They are: (a) two separate indices of innovation capability which measures innovation capability of both fixed and cellular telecom equipments respectively; (b) market share of domestically developed switches in the total Brazilian, India and Korean network; and (c) an analysis of patents granted to local inventors in four US patent technology classes, namely in 370, 375, 379 and 455. However due to data limitation the third indicator is computed only for Korea, while for both Brazil and India the total number of patents secured is indicated; and (d) other indicators of innovation capability. This is presented only for India.
(a) Index of innovation capability: There are two such indices: Index of innovation capability in fixed telephone equipment, IICFT and Index of innovation capability in mobile telephone equipments, IICMT. They are computed as follows:
IICFT = Domestic production of public switching equipments * 100-(1) Domestic production +Imports-Exports of public switching
equipments
IICMT = Domestic production of wireless telecom terminals *100---(2) Domestic production+ Imports-Exports of wireless telecom
terminals
Where wireless telecom terminals is composed of cellular phones + PCS+ IMT-2000 terminal+ TRS terminal.
While (1) is computed for all the three countries (2) is done only for Korea. A few further comments about the indices are in order, given the quality and availability of data at individual country levels. In the case of Brazil, (1) is computed in a slightly different manner. Hence I have adapted the index to suit the specificities of the Brazilian case where the total demand for switching equipments is met through both domestic production and imports. Domestic output emanates from domestically developed technologies and from imported technology by affiliates of MNCs. . Equation 1 a explains this further:
IICv = Psd *100 (1a) {(Psd +IS) -- Es}
Where
IICv = Index of innovation capability based on value terms Psd = Domestic output of switching equipments in value terms.
This data are taken from Vainsencher (2003) IS = Imports of switching equipments Es = Exports of switching equipments
Both the import and export data are taken from the U N Comtrade Database. In this database trade data are classified according to six different classification systems. I have chosen the Standard International Trade Classification, Revision 3 (SITC Rev. 3) as under this classification system data are available at five digit level over the period 1989 through 2002. Further in SITC Rev. 3 code 76415 denotes telephonic or telegraphic switching apparatus. Hence in my view this dataset is the most direct one for measuring imports and exports of telephone switching
equipments to a country5 : switching equipments, on an average accounted for only 18 per cent of imports and 36 per cent of total telecommunications equipment exports. Based on the data and using equations (1) and (1a), index of innovation capability is computed and is presented in Figure 9.
Before interpreting the Figure, it is important to state two major limitations of the index. First, it is rather difficult to interpret short-term movements in the index. Second, the index is defined in terms of Source: Mani (2003, 2004 a and b)
0 50 100 150 200 250
Index of innovation capability
Korea- Fixed 99.38 96.58 98.65 106.76 103.26 102.37 102.81 100.79 111.18 97.21 94.71 97.89 108.38 Korea-Mobile 172.53 79.73 107.34 103.92 106.05 112.64 100.24 120.82 147.29 164.51 205.67 209.96 105.12
Brazil 92 85 81 69
India 175.99 73.54 109.8 84.36 104.8 145.48 234.83
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
5 All the scholars who have computed net exports of telecommunications equipments to Brazil have relied on the trade data on total telecommunications equipments provided either by the industry association ABINEE or by the BNDES. See for instance Schjolden (1999), Szapiro and Cassiolato (2003).
Figure 9: Index of innovation capability in Brazil, India and Korea, 1990-2002
production figures, and not in terms of number of working connections:
problems in domestic production may bring down the value of the index for that year, but this may not mean that the innovation capability is decreasing. It is important that one should be using the index to form an informed opinion about the over all movements in innovation capability over a period of time. In other words the index is not robust enough to track year to year movements in innovation capability. But I argue that this will only affect the level of the index and not its direction of movement. This will become clearer when one analyses the actual market share of domestically developed switches in the total network. The performance of the three countries with respect to this index is discussed below:
Korea: Korea has innovation capability in both fixed and mobile telecom equipment although its capability in mobile equipments appears to be stronger than in fixed telephones. The successful implementation of both the TDX digital technology in fixed telephones and CDMA technology in mobile telephones are clearly reflected in the upward movements in both the indices.
Brazil 6: The index shows a declining trend. However one should not be hasty in interpreting this to a decline in innovation capability.
This is because, as noted before, the index is based on domestic output manufactured with both domestic and foreign technology. From scattered
6 There are, however, three important caveats. Firstly, as mentioned before data on domestic output (namely Psd) is available only at the aggregate level. Ideally speaking one should use only that part of the total domestic output that is produced with domestic technology. This data, however are not easily available.
Hence we are interested in only the broad trends in the movement of the index.
Secondly, even the data on domestic output of switching equipments are available only for the period since 1998. Thirdly, it is very likely that the import data (especially) on switching apparatus8 includes both fixed line and mobile switching centres as well. Once again ideally speaking a break up of the two is needed and in very specific terms one should be using only the import data on fixed line switching.
evidence that is available (to be seen in detail below) installed capacity based on domestic technology at no time in the history (precisely during the 1976-2003 period) was more than 30 per cent of the total installed capacity for switching equipments in the country. The three affiliates of MNCs, namely Ericsson, Siemens and NEC accounted for a larger share.
Based on this, my conjecture is that even though the market share of domestically manufactured switching equipments (in total consumption) have suffered a decline especially with increasing imports, the relative share of switching equipments manufactured with domestic technology has continued to maintain its previously acquired share at about the same level. Since precise data on this share especially during the 1998-2003 period is not available, a fall in the IICV cannot be interpreted to mean a fall in innovation capability. Of course, based on other pieces of evidence to be presented in our discussion on changes in the innovation system, it was indeed subjected to a major structural transformation during the period and these changes may have adversely affected the performance of the system. But the Brazilian government have indeed responded to these challenges and have put in place a whole package of legal and fiscal instruments designed to continue to support the domestic development of technology. I will be discussing this package of measures in the next section. In short, given the transitory nature of the phenomenon it is not easy to draw firm conclusions about movements in innovation capability either way. Even though imports of switching equipments have been increasing during the 1990s, much of the increases have happened during the pre privatisation phase (1991-1997). The average rate of growth of imports during this period was 49 per cent per annum as compared to only 22 per cent per annum during the post liberalisation phase (1998-2001)7 . Much of this increase in the pre privatisation phase
7 The growth rate during the post liberalisation phase (1998-2002) plummets to just 2 per cent if one includes the abnormal year of 2002. Owing to the telecom bust of 2000, 2002 was a very bad year for the world telecommunications industry.
might have been contributed by the phenomenal growth of mobile telephony. Once again it may not be very prudent, therefore, to link the increases switching equipment imports to privatisation of telecom services in the country. It is interesting to note that there has been some switching equipment exports, although it has tended to come down over time. My analysis of the UN data shows that most of these exports have been to other Latin American countries. However, once again since the export data is not broken into those that are based on domestic technology and those that are not, one cannot use this data for drawing any conclusions about the direction of movement in innovation capability.
India: Excepting for the initial year, the index has been showing a continuous rise over time implying a rising capability. This finding is quite significant as this has been happening at a time when the industry was going through a flux: the service segment was getting deregulated and MNCs were entering the equipment industry. So despite these factors which can militate against the usage of domestically designed switches one sees a systematic and continuous increase in its market share. This could largely be explained by the public technology procurement policy of the largest consumer, the Department of Telecommunications (DoT).
(b) Market share in the telecom network
The share of domestically developed switches in the total network range from 32 per cent in the case of Brazil to about 75 per cent in the case of Korea (Table 7). In all the three countries domestically developed switches are used primarily in the local call segment of the services industry. In India an irregular import of switching equipments (Mani, 2003) during the 1990s reduced the share of domestically developed switches to about 30 percent of the annual intake of switching equipments
in the network8. Thus from this evidence too it is clear that Korea's innovation capability is very much intact although both in Brazil and India, the share of domestically developed switching equipments have suffered some erosions.
Table 7: Domestically developed switching equipments in the total telecom network of Brazil, India and Korea (Cumulative)
Period Type of Market share
technology in per cent Brazil 1987-1997 Tropico family
of digital switching 32.03 systems
India 1986-2003 C-DOT family of
digital switching 50.00 systems
Korea As on December TDX family of
31- 2003 digital switching 75.56 systems
Source: Mani (2003) and Mani (2004 a and b)
8 It is also clear from an answer to an unstarred question (Rajya Sabha Unstarred Question No: 4125, http://164.100.24.219/rsq/quest.asp?qref=21560) in the upper house of the Indian parliament that the DoT procured almost five times the tendered quantity of switching equipments during the same period, supposedly for modernising the network with ISDN facility11. But the number of subscribers using ISDN in the whole country was just 30912. So it is clear that DoT appears to have purchased these ‘overspecified’ equipments far in excess of its actual requirement and this ‘excess purchase’ appears to have eroded the market share of C-DOT. Further the Comptroller and Auditor General of India (2000) found number of other irregularities with this tendering process. For instance, although most of the components of these switching equipments were imported by the suppliers, DoT assumed the import content as low as 23 per cent while working out reduction on rates on account of fall in customs duty in the 1995-96 budget. This inaccurate assumption by DoT led to excess payment of Rs 405 million to the suppliers with corresponding loss to the government exchequer. DoT also had to make an avoidable expenditure of Rs 639 million in the procurement of these exchanges against 1997-99 tender due to failure of the Tender Evaluation Committee (TEC) to submit its report within the bid validity period. TEC took 190 days in finalisation of its report against the prescribed limit of 42 days;
(c) Patenting performance
The number of patents granted, especially abroad, is a good indicator of innovative capability. However, as mentioned earlier, consistent time series data on foreign patents exists only in the case of Korea. Korean institutions, primarily, Samsung and ETRI has been particularly active in patenting in four areas directly connected with telecommunications technologies, namely US patent technology classes 370, 375, 379 and 455 (Table 8). It is seen that there has been a significant acceleration in patenting since 1998. Although the patents secured in year't' is the result of research done in 't-1' period, it is interesting to note that there has been no deceleration in the number of patents secured by Korean institutions in the US since the period of globalization. In terms of the number of patents in these four classes, Korea compares very favourably with three European countries such as France, Germany and Sweden.
Table 8: Patenting performance of South Korea Inventors in the US for Telecommunications technology classes, 1990-2001 (Number of patents granted)
370 Multiplex 375 Pulse of 379 Telephone 455 communication digital communications Telecom
communications munications
1990 0 0 4 2
1991 4 5 9 3
1992 1 4 9 3
1993 3 8 8 8
1994 3 12 5 8
1995 3 19 4 4
1996 20 45 7 7
1997 19 43 6 5
1998 36 80 46 18
1999 46 77 64 45
2000 53 76 28 58
2001 63 89 11 76
Source: US PTO
The Brazilian CPqD has secured over 100 patents within Brazil and about 50 abroad, while India's C-DOT did not focus on patenting its innovation, but has managed to export its small rural exchange equipments to over twenty developing countries. Further the USPTO has granted C-DoT a patent for Asynchronous Transfer Mode (ATM) switch fabric implementation, which enables higher speed data transmission.
(d) Other indicators
India has demonstrated innovation capability in a Wireless in Local Loop (WiLL) access equipment called corDECT. In most countries the telecoms boom left an oversupply of fibre-optic cable along trunk routes, but this links directly only to the largest customers. Homes and small offices that want high-speed internet access usually subscribe to either a digital subscriber line (DSL) or a cable-television service. Both are far from ideal: the phone wires used by DSL and the television cables tend to be owned by monopolies, and neither was designed for surfing the web. Retrofitting a 1950s telephone line for broadband takes a lot of work, making cheap DSL hard to supply profitably. In principle, the new WiLL has no such drawbacks. Indeed, many see it as an ideal solution to the local access problem as it is based on radio waves. Of course, most WiLL systems require their own dedicated radio frequencies, but regulators have been fairly generous with these-selling enough licences to competing WiLL operators at a fraction of the prices paid by mobile-phone operators. Some can even use the same free, unlicensed frequencies in the 2.4 and 5 gigahertz bands. In the real world, wireless has so far lagged behind both cable and DSL. CorDECT is a WiLL access technology developed by two Indian research organisations namely IIT Chennai, Midas Communication Technologies, Chennai and a US semiconductor manufacturer. The project started towards the end of 1993 and was completed in 1994. The innovation system for this technology
consisted of three different types of entities, namely (a) Indian Institute of Technology, Madras and Midas Communications; (b) Four private manufacturers who funded the project through advanced licences; and (c) Semi conductor manufacturer which included a MNC from the U S.
Royalty from their equipment sales goes to IIT, Chennai. The total development cost of the project was Rs 750 million financed mainly through, as mentioned before, advanced licensing. Currently between the four manufacturers there is an installed capacity to manufacture 1 million lines per annum. This technology offers relatively low cost and rapid installation of telecom services in areas with even high subscriber density environments. This system relies on a modest bandwidth of 20 MHz for the entire country and is very useful for rural areas where subscriber density is low and laying of cable is not economical. The following description of this technology helps one to understand the significance and utility of this technology 9.
In very simple terms, corDECT technology will reduce significantly the access cost of telecom service especially in rural areas10. This will hasten the diffusion of internet services in the country and especially in the rural areas and is also eminently suited to other developing countries as well. The system has also been exported to fourteen different countries namely Madagascar, Kenya, Fiji, Iran,
9 This description is largely based on the information contained in Asian Technology Information Program (1997) and Jayaraman (2002).
10 CorDECT technology effectively and inexpensively addresses the problems of distance and lack of infrastructure in rural areas. Installing a fixed wireless local
10 CorDECT technology effectively and inexpensively addresses the problems of distance and lack of infrastructure in rural areas. Installing a fixed wireless local