Telecommunications innovation system: development and impacts of the structural changes Possible research themes for BRICS Marina Szapiro Associate Researcher of RedeSist, Economics Institute, Federal University of Rio de Janeiro, Brazil BRICS Workshop February 14, 2006

n To present the dynamic evolution and rupture of the Brazilian telecommunications innovation system; and n To propose some questions to be answered by the BRICS research. Structure of the presentation

Brazilian telecom innovation system (From the 1980s to mid 1990s) Source: Szapiro, 1999

Brazilian telecom innovation system: main achievements n Gradual involvement of multinational subsidiaries in the process of innovation and technological capability development n Establishment of a network of local suppliers (120 local firms responsible for 17% of the market in 1982) n Local development of key technologies for the telecom system expansion (Trópico) n Reduction in the investment costs of building the Brazilian telecom network

The Context and impacts of Telecommunications Restructuring Process n Trade liberalization of the beginning of 90s, Liberalisation process (1995) and Telebrás’ fragmentation and privatisation (1998) –Increase in investments –Increase in number of fixed and mobile lines –Entrance of new international operators

–Disarticulation of the innovation system –Entrance of new equipment suppliers –Increase in imports of telecom equipment and acquisition of dynamic nationally owned firms by MNCs subsidiaries –Privatisation of CPqD, uncertainty and change of role in the system –Innovation in the equipment industry: Reduction of the innovation rate from 2000 to 2003 Investment reduction in innovative activities from 2000 to 2003 Investment reduction in internal R&D activities from 2000 to 2003 Impacts of Telecommunications Restructuring Process

Impacts on the innovation system- Denationalization of the equipment industry Source: Oliva, 2002 and Szapiro, 2005

Impacts on the innovation system - Increase in telecommunications imports of components, parts, pieces and final products Source: Szapiro, 2005

Impacts on the telecom innovation system Source: Szapiro, 1999

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 multinationals telecom operators and denationalization of the equipment industry –Uncertainty of the R&D telecom laboratory –Weakening and disarticulation of Brazilian telecom IS

Perspectives of the telecom innovation system n Definition of the Digital TV pattern n Funttel (sectoral fund for telecommunications)

Telecom innovation system and the BRICS n Objectives –i) to analyze the historical evolution of the capability building process in telecommunications in the BRICS; –ii) to analyze and compare the structural reforms adopted in the 90s and its impacts on the five telecom innovation systems; –Iii) to discuss the policy implications of the main opportunities and obstacles of telecommunications capability building for the five countries.

Main questions for BRICS n What was the organizational structure and the development level of the telecommunications innovation system before the structural reforms in the BRICS? What were the main results? n Do these countries continue to invest in the local development of telecommunications capability after the structural reforms? n What is the new organization of the telecommunications innovation system after the liberalization and deregulation process? n What are the new roles of the telecommunications equipment suppliers (both multinational subsidiaries and national firms), the local R&D centre(s), the university system and the services suppliers companies in the local technology development?