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Orange Tightens Control Over Innovation

Orange makes no secret of its strategy to ensure a cut of the revenues generated by content. But it also wants to prevent equipment and software manufacturers sucking all the value out of the markets for media and content services, which Nokia is addressing with Ovi, and have a bigger say in how services evolve.

"The big mistake with 3G was to let equipment manufacturers do it alone," said Didier Lombard, CEO of Orange during a press tour last week of the company's Technocentre, a pressure cooker for the company's R&D and marketing divisions. Housing 1,000 employees, the Technocentre was set up in 2006 to galvanise the efforts of its marketing and research and development teams, and aims to churn out dozens of new services and products a year. [see Total Telecom, October 2007 ] Upcoming products from the centre include high definition mobile television delivered via UMA to the company's dual band GSM-Wifi phone, called Unik.

Orange wants innovative products to account for 15% of its revenue stream in 2010, up from 6% in 2007, says Lombard, with much of that innovation driven by Orange's own efforts (although the company has relationships with third parties such as Microsoft and China Telecom.)

Orange spent 1.7% of its annual revenues on R&D in 2007, up from 1.1% in 2003 and makes several tens of millions of Euros a year out of intellectual property, said Lombard. The company spends 30% of its spend devoted to fundamental research – although the term "fundamental research" encompasses strictly commercial demands such as the shrinking of set top boxes. "We want to avoid the effect Xerox," says Lombard. "Xerox invented everything, but didn't earn a cent."

Orange's development teams are also working to ensure their networks can underpin new online advertising models.

"There is a new, more sophisticated [model of online advertising] in which we are engaging, of much more targeted ads that correspond with the [users' precise] interest at a given moment," Lombard told journalists.

"We could have a model whereby [advertising] revenue is only attributed when the ad works. That will develop very quickly … and the network will evolve," said Lombard.

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