Agenda for Action in the UK:  Continued

APPENDIX 6

Visit to Nortel Technology Laboratories, Harlow

Wednesday 8 May 1996

Present:

              Lord Craig of Radley
              Lord Gregson
              Lord Haskel
              Lord Phillips of Ellesmere (Chairman)

1. The Sub-Committee heard presentations from Dr Allan Fox, Managing Director, Mr John Winterbotham, IT Strategy and Dr Piers Dawe, Principal Research Engineer, Optical Communications. It also saw a brief demonstration of the Cambridge OnLine trial in the Broadband Centre.

Background

2. Nortel (Northern Telecom) is one of the world's largest telecommunications manufacturers, and the second largest telecommunications and R&D company in the United Kingdom. Nortel provides the transmission and switching technology which enables the private and public telecommunications companies to run their networks and deliver advanced services to their customers, who include British Telecom, Mercury, Energis and Ionica. It is not a telephone operator.

    Nortel's markets are currently as follows:

        50%
        24%
        11%
        15%        		USA
        Europe
        Canada
        other international

3. Nortel is exclusively an equipment supplier, with product lines broken down as follows:

        40%
        30%
        15%
        10%
         5%        		 Switching (this sector is shrinking in proportional terms)
        Enterprise networks
        Wireless networks (growing rapidly)
        Broadband networks
        Cable and other

Nortel Research

4. Over 13 per cent of Nortel's annual revenue is ploughed back into research and development, with a substantial proportion going into the United Kingdom. In a recent Department of Trade and Industry report Nortel was credited as being the fifth largest investor amongst unlisted companies investing in United Kingdom R&D.

5. The Harlow laboratories employ about 1,000 people, and a $30 million building investment programme is underway. Fibre optics were invented in the Harlow laboratories (which pre-date their take-over by Nortel) and Nortel's scientists have maintained a leading edge in this field. Nortel's world centre of broadband services is based in Harlow and Belfast and its centre for radio technology development is at Paignton. These laboratories are linked electronically with others in the United Kingdom and a further 19 world-wide in one of the world's largest private networks. The Nortel network moves 1.5 million megabytes of information per month in and out of the United Kingdom.

The Information Superhighway

6. To Nortel, "the information superhighway is not a revolutionary, single, new entity but an evolutionary network of networks - some copper wire, some co-axial (TV), some optical fibre, some radio, some fixed, some mobile. Nor is it restricted to the developed world. In fact many developing countries are now able to leapfrog ahead, by-passing the old technology and moving straight to advanced networks. What is required is seamless interconnection between all the network technologies with as much bandwidth being carried as possible".

Terabit[1] Optical Switch Lead Project

7. The objective of this project is to determine the architectural options, practical feasibility and product opportunity for very high capacity 80-1000 GBit/s optical switches. The programme takes advantage of high speed optical technology developed for transmission applications and the use of existing products such as Magellan Concorde as front-ends. The massive capacity provided by this switch means that Nortel has "a solution waiting for a problem".

Regulation

8. The liberalisation process has been the key to Nortel's progress in recent years, and it is for this reason that it is now moving into France and Germany. In 1991 it acquired STC in the United Kingdom, and in 1994 it launched joint ventures with Matra in France and in 1995 with Daimler Benz in Germany.

9. Nortel would support minimalist definitions of universal service. It opposes the current "RPI minus" formula for charging for telecommunications services in the United Kingdom, arguing that "it is not in UK Plc's best interests that innovation should be suppressed". The company believed that the RPI minus price cap was resulting in money haemorrhaging out of Nortel's marketplace. There was a need to ensure that the associated regulatory and legal frameworks developed with and not after the superhighways themselves.

Comments on IT Strategy

10. The work on the centre of the Global Transmission Network was complete, and the cost of high speed transmission was dropping dramatically. The problem areas lay out on the periphery. This raised the need to:

    (i) encourage increased bandwidth in the Local Loop, by a combination of fixed radio access, cable modems and increased ISDN;
    (ii) increase the national skill base in IT;
    (iii) develop a critical mass for Internet and broadband applications in the general population. Here a middle-class fear of unemployment was becoming a motivating factor in home PC purchase as parents wanted to equip their children with IT skills, much as people used to buy encyclopedias by the yard. The United Kingdom was lagging behind the United States, where the rate of take-up of display telephones was now supply limited.

11. There had been a change in the perspective of the use to which broadband services would be put, at least in the immediate future. The growth of Internet (rather than video-on-demand, which had previously been expected to be the "killer application" for cable companies) brought with it new possibilities for presenting a business case. BT, and other PTTs worldwide, were now building an advanced network for business use in parallel to the existing voice network.

12. Much of the money which was going to be made out of the Internet would be displacement revenue, for example electronic versions of local free newspapers. Little was know about its possible impact on the traditional postal service.

13. In New Brunswick the Government had taken the initiative in establishing broadband services. It was now estimated that by the year 2000 two out of three jobs in New Brunswick would be knowledge-based.

1. 1 terabit = 1000 gigabits.   Back

 

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