. "Offshoring in the U.S. Telecommunications Industry--Theodore S. Rappaport." The Offshoring of Engineering: Facts, Unknowns, and Potential Implications. Washington, DC: The National Academies Press, 2008.
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The Offshoring of Engineering: Facts, Unknowns, and Potential Implications
ing future technologies, which they are exporting already and will be exporting more aggressively in the future. Korean companies are encouraged to send their brightest researchers to U.S. graduate programs, usually subsidized at least partly by government.
The Chinese government has provided significant focus and funding for the broadband build-out in the rapidly growing Chinese economy through investment and subsidies for capital infrastructure projects, start-up ventures, wireless spectrum licensing, and technology standards. China is most likely to insist that its billion-plus population have wireless technology standards based on Chinese intellectual property. New roads, built in very remote parts of China, are being installed with massive fiber-optic capacity, even where the nearest community is dozens of miles away. The Chinese government understands that communications connectivity will be vital for the developing knowledge-based capabilities in rural areas. The government also supports R&D in many areas of telecommunications and sends tens of thousands of China’s brightest students to attend graduate school in the United States each year.
India has a truly fascinating engineering culture. I recommend Tom Friedman’s book, The World Is Flat (2005), as an excellent read on this subject. One of the interesting things I have learned from talking to businessmen in India is that the tax structure for outsourcing and for IT and telecom companies is so favorable that it’s bad business not to invest in India. Under the Indian tax code, IT, software, and telecom types of companies pay virtually no income taxes. In fact, just today, I turned on Bloomberg, and Azim Premji, the founder of Wipro, was talking about how his tax breaks will end in 2009 and that for the next decade, there will be a 0.5 percent tax (maybe) on IT companies.
The tax structure in India requires that employees pay personal income tax, but companies do not pay corporate taxes. This is very, very lucrative for business and another example of a government focusing on engineering. In India, government policy is designed to bolster an industry or a capability to increase national competitiveness. The professions of “engineer” and “medical doctor” are two of the highest callings in Indian society. When I ask Indian graduate students to describe their culture, they remark how very different it is from the culture of the United States, where engineering is in decline among our own citizens and where capitation and insurance/drug policies are making things difficult for the U.S. medical profession. Not so in India where government policies encourage and reward people for pursuing careers in these fields and encourage businesses to establish centers there.
In the European Union, as many of you may know, the Cooperative Arrangement with Science and Technology (COST), which began in the mid-1980s, has funded telecom research at much higher levels than anything in the United States. COST in Europe created the GSM cellular standard (the most widely used cellular standard in the world with 85 percent world market share). COST, which has brought industry and academic researchers together for the last 20 years, provides strong government funding and matching corporate funding, which leads to a great deal of cooperation between industry and academia. Research expenditures are in the hundreds of millions of dollars per year.
The United States has traditionally relied on the Defense Advanced Research Projects Agency (DARPA), the National Science Foundation (NSF), and the major telecommunications laboratories to fund research in the United States. But since the mid-1990s, when DARPA adopted a “problem of the week” mentality, the agency has moved quickly away from basic research. Compare that to the late 1980s, when DARPA program managers were instructed to fund the best academic minds in the United States and let them create great technologies. Today, DARPA requires strict deliverables and quarterly project reviews, as if academic labs were for-profit contractors.
The Industry-Academia Chasm
Although accountability is a good thing, there are likely to be fewer companies like Broadcom, Atheros, SUN, FORE, and others that spun out of universities with DARPA-funded research. DARPA used to empower highly motivated and entrepreneurial faculty. Now it is difficult even to find entrepreneurial faculty on U.S. campuses, because industry and academia are separated by a chasm created by the dot-com bust.
NSF’s proposed funding rates are in the small single digits, making it very difficult for faculty to obtain funding for basic research. A “follow-the-herd” mentality has developed, and only esoteric, far-removed projects, which are of great cerebral academic interest but have little industrial relevance, are selected for funding by NSF peer reviewers, who are also removed from industry’s competitive needs.
The chasm between industry and academia in the United States, which developed in the wake of the dot-com bust, has become worse over time. Another victim has been the major corporate R&D laboratories that supported applied research and brokered activities between academia and mainstream U.S. corporations. The United States no longer has Bell Laboratories or Xerox PARC (as they once existed). A huge part of the telecom research community has been demolished.
With the dot-com crash, stock prices dropped by orders of magnitude in the telecommunications field. QUALCOMM dropped from $200 to $20 a share; Lucent dropped from $80 to $2 a share. The Telecom Act of 1996 had opened the floodgates of competition, and thus capital, between competitive local exchange carriers and incumbents. Huge amounts of money had flooded in, and maybe expectations were too high. Yes, clearly they were. But the fall of these companies and the layoffs in telecom hit the American psyche harder than anything else I have seen in my professional career.