12 Sep 2007   |   Viewpoint

Hurry up and change

Jozef Cornu, an Alcatel-Lucent director, argues that Europe can repeat its GSM success story in other technology fields – if the EU acts fast.

Jozef Cornu: start with standards

One of the hottest new tech-policy ideas circulating in Brussels has been the “lead markets” concept: that Europe can attain global market success by coordinated government and industry effort to create new markets for e-healthcare, low-carbon technologies and other sexy fields. That is, of course, exactly what happened in the 1980s when Europeans launched the now-dominant global GSM mobile phone standard – and for quickly surpassed the US and Asia in a tech market.

The lead markets idea was floated last year in a high-profile expert report to the European Commission, led by former Finnish Prime Minister Esko Aho and Jozef Cornu. Cornu was for years the chief strategist and chief operating officer of French telecoms-equipment giant Alcatel, and is now a board member of the newly merged Alcatel–Lucent and chairman of European semiconductor-research group Medea+.

In an interview with Science|Business CEO & Editor Richard L. Hudson, Cornu explains the logic behind the lead markets idea – and chides the European Commission for moving too slowly to adopt it.

So what is a “lead market?”

When people talk about research and innovation policy, the big change we have to make is, instead of having technology push, you have market pull. GSM was an example of market pull, which I was involved in. We had a first generation of mobile networks in Europe which was specific per country: A French network based on technology from Matra, the Scandinavians with their NMT, the German C Network that came from Siemens, and so on. And then there was an agreement to create a working group to define a new standard which would be common. And suddenly everybody said, OK, this is a market. Everybody began to invest in R&D. Alcatel had never invested in mobile technology before because we considered this a totally fragmented market, in which to be present against the local champions was practically impossible. And with GSM, the cost of services went down.

In what sectors could GSM be replicated?

Healthcare is today 9 per cent of the gross national product in Europe. It is growing very fast because of the ageing of the population, and because a number of the illnesses are becoming chronic. You need solutions for this, and a lot of this must come from technology – technology of communications, analysis, provision of service. All of this creates a new market. So this is an opportunity.

Transportation is a big opportunity. You stand along a highway and you see trucks passing. And then you stand along a railway track and you wait. And you wait. And then a train passes. And then you wait again. Nevertheless, railway tracks are saturated. How can that be when there are practically no trains? They have a safety system which is 100 years old, and which divides the railway tracks into segments of 1.5 kilometres per segment; and the way to avoid accidents is to have one train every segment. Just imagine you applied that to highways. How many trucks could pass? There is a lot of technology, including GPS, which would allow you to control the trains better – but this is not done.

Another example is electronic payments on highways. Every county is working on this with different systems. If you say we have one European standard for electronic payments for cars, suddenly the whole industry will see big markets in the future and everybody will invest in the technology.

Another example is digital entertainment. Europe has an extremely weak position: only 20 per cent of all the DVDs sold in Europe have European content. If you had automatic translation for subtitles, you could offer it by the Internet and watch any kind of television series. Today Spanish people watch Spanish TV. Nobody else in Europe watches Spanish television. Why is that? Do they necessarily make worse quality shows than the Americans? I don’t think so. But the American series are in English and are being subtitled.

So what does it take to create new lead markets?

First of all you need to create standards, as with GSM.

Secondly, make sure the regulations facilitate development. In the case of GSM, this had to do with making sure the frequency spectrum was available. In healthcare, what’s important is the reimbursement system. Today if you take a scan of somebody’s body you generate an enormous number of pictures that are analysed by a local doctor – but you could send them over the Internet to a specialist in India or wherever. But in most countries, these people could not be paid because the reimbursement system is such that a doctor can only be paid if he has physically seen the patient. This is all about regulation.

Thirdly you have investments. A lot of these areas are where government spending is basically alone – roads, healthcare, and so on. Governments could create some initial markets for these technologies (through procurement.)  

OK, but there are several possible problems. Standard-setting is politically charged.

You have to put your standards at the right level. For patient electronic records, you don’t need to define the database but you can define the structure of the data – say, this is the way a patient record will look, these are the fields, and whether you do it with Oracle or SAP doesn’t matter.  

Could this standard-setting become a form of protectionism?

You make the standards discussions open to everyone. When the GSM standard was defined, everybody could make a contribution to it.

But are government procurement people competent to pick the right technologies?

I do not suppose that, say, national health authorities would set the standards. It’s the specialists, not the end users, that set standards. The national health authorities can project what kind of demand they have, what they would like to see as performance. But the way they are realised is the work of a group of specialists coming from all the industry sitting together and trying to define things. The worst possible standardisation is when it is based on political voting – and that is the problem with ETSI [the European Telecommunications Standards Institute] today.

Then there would have to be a reform of the standards process?

Absolutely. You cannot define standards in some kind of democratic way. If you have the European Parliament vote on standards, you are sure that 95 per cent of the people who vote don’t understand the issue. I would set a rule that the only companies who can vote are the ones who contribute experts.  

So what is happening to the lead market idea in Brussels now?

At the moment there is very little movement. DG Enterprise (the EU unit responsible for the project) is not doing enough. The way to unblock this is for the ministers to put some pressure on the Commission to be more proactive. But the action is at a relatively low level. We had proposed (in the expert report) that they name a person per subject at very high level in order to really drive the process, but this recommendation has not been taken.

Why not?

Because if course, if you are a commissioner responsible for, say, transportation, you don’t like somebody else to be named to create a lead market for transportation. You consider this your job. This is a battle in the world of the Commission. And I can understand psychologically that this is a little difficult.

So is the idea dying?

No, it’s not dying, but it’s too low-key.

(Commission officials say there is no delay in adoption of lead-market proposals, and they are still aiming for a communication in December to start the ball rolling with up to five initial projects.)

Never miss an update from Science|Business:   Newsletter sign-up