Against the grain: France Telecom's R&D

While the telecommunications industry retrenches, the dominant French operator expands its research budget and seeks new lab partners. Why?

Take a walk round the “Garden of Innovations”, France Telecom’s “new new” technologies showroom at its main corporate lab in Issy, near Paris. The innovations sprout like weeds – systems to monitor blood pressure by mobile phone, technical standards to interconnect logistics across an entire industry, and a video-conferencing suite so realistic that you can almost imagine yourself in a meeting room in Tokyo or San Francisco.

Impressive – but none of it is basic research, the Nobel-winning stuff for which the global telecoms industry once hankered. So why, then, does France Telecom need 4,200 researchers – and an R&D budget growing at 20 per cent a year - while many in the global telecoms world continue to hack at their once-grand labs? The answer: A corporate push – involving new money, partners and ventures – to lead in providing new services.

Pascal Viginier, executive director of France Telecom’s R&D, says the company is at the start of a three-year transformation called Next. “Basically we are going to change the company from a network operator into a services operator.” This will be driven with more mathematics and software than physics and hardware research. It also means France Telecom will need more money and more external partnerships – with universities, customers and suppliers.

“We see ourselves as a big integrator of global innovations,” explains Viginier. “So we need a workforce to both maintain our core expertise as well as to accelerate the time to market during the development phase.”

The telecommunications industry has changed, after 20 years of privatisation and competition and, since 2000, industry failures and mergers. The Issy office, known as CNET, was once a public telecom laboratory similar to the old Bell Labs. Its research was generously funded. And the lab was home to some of the inventions behind Europe’s biggest tech success, the GSM mobile phone standard.

Aiming to innovate

But unlike its competitors – which according to R&D analyst Mike Cansfield from consulting firm Ovum are “keeping R&D mainly to maintain the know-how around their legacy networks and proprietary technologies” – France Telecom’s R&D aim is to innovate. To get there, it plans to raise its R&D spend (currently €700 million from 1.5 per cent of turnover to 2 per cent by 2008.

It is also on a partnering spree, with 18 external research contracts signed since the start of this year and 94 in 2005, making a total of 259 ongoing contracts as of March. “For example, INRIA [France’s national research institute for informatics and automation] is now a major research partner because of the need for software developments in fields like grid computing, 3D or IP protocol,” says Viginier.

With new technologies such as voice over internet threatening the core business, one could be forgiven for wondering whether France Telecom might be entering some fields just to slow them down. Not so, says Ulrich Finger, director of Eurecom, a joint research institute between École Nationale Supérieure des Télécommunications (or Telecoms Paris) and the École Polytechnique Fédérale de Lausanne, Switzerland. “They don’t hesitate to do research in fields that are against the religion.”

“Every new technology is both a threat and an opportunity,” says Viginier. “Remember, five years ago everybody was predicting WiFi networks would replace mobile networks. It hasn’t happened. Because we embraced this new technology and integrated it in our new ADSL modem [two million sold and counting], it now gives us plenty of opportunities to develop telecommunications inside the homes of our customers instead of just stopping at the plug.”

The example also shows how France Telecom R&D used its corporate venture arm, Innovacom, to feed its own innovation process with start-ups. One of the 300 companies Innovacom has invested in, Inventel, achieved the integration of WiFi technologies with ADSL modems. The fund is also on hand when France Telecom wants to spin out R&D developments into new companies, such as Certimail, Telisma or French TicketSurf.

New connections

And the evolution towards services means that France Telecom has to connect with new scientific disciplines. For example, it is working with researchers at the École Normale Supérieure on econometric models to optimise existing infrastructure, and with doctors at Nice University Hospital to look at bio-traceability and emergency management. Sensor networks require environmentalists. Usage studies involve sociologists…

France Telecom has 3,500 of its researchers based in its eight laboratories in France, and most of its major external partnerships are with French research institutions. But the company is fast globalising its R&D. With new antennas in Warsaw and in China, France Telecom now has nine research centres located outside France. “Our objective is to participate in all the major telecom research clusters worldwide,” explains Viginier.

Does this mean that France Telecom’s increased effort in R&D is directed towards some sort of intelligence gathering? Yes, in part. The company has realised that it has to participate right at the early stages of the coming innovations – hence major research partnerships with universities such as Berkeley for sensors, MIT for virtual worlds, Sherbrooke in Canada for tele-education, and so on. And its external partnership department, headed by Thierry Zylberger, is clearly after new ones.

Still, there are limits to how much research France Telecom wants done outside its own walls. “Incumbent telcos tend not to put their most strategic research into partnerships,” says Eurecom’s Finger. With 600 scientists and around 10 per cent of the R&D spending, the in-house advanced research team is still pretty important. With 495 patents registered during the past 12 months and 7874 patents in its portfolio, the advanced research team is impressively productive. “That is where most of our patents are coming from,” says Viginier.