As we say RIP to the laboratories which invented fibre optic cable, what should be the government response?

The UK government's stated policy is that the communications infrastructure should support future economic growth. So should it let a once-proud UK telecoms company be broken up into mere products? Nortel - whose laboratories developed the fibre optic cable on which 21st century communications depend - is being sold off. Its staff, who possess the skills essential for the Digital Economy, accuse the administrators of breach of contract, and government support is seriously lacking.

Before Christmas I went out for the usual festive drinks and dinners. But in Maidenhead, where I live, it was not just the credit crunch and recessionary climate that cast a shadow. I encountered several ex-Nortel staff, and it was impossible not to hear their claims of betrayal by the their company and an alleged breach of employment law which means that a former innovator and world leader in the telecommunications industry isnow a mere corpse for the corporate vultures.

The demise of Nortel signals the end of telecoms manufacturing in the UK, and the end of era of UK innovation and engineering successes.

Nortel was placed in administration at the beginning of last year, and in March the Maidenhead employees were made redundant by the administrators, Ernst and Young. These employees claim they were not given the statutory consultation and they were given only the minimum redundancy payments. They got no more than 2 days' notice of the redundancy. People who have given 30 years service and played key roles the development of the knowledge economy, have been told to go without the redundancy pay to which they would have been entitled. They are now taking Ernst and Young to an employment tribunal. One of the claims is breach of contract.

In a recording of the staff meeting called by Ernst and Young to announce the redundancies, the E and Y representative is heard to admit that the law has been broken. Ernst and Young have however, maintained the line that they did not break the law, and that there were "special circumstances" which meant they did not have to go through the statutory consultation.

The ex-employees ask what those "special circumstances" could be? On the local grapevine, they accuse Ernst and Young of using a loop-hole in UK employment law to avoid payouts to staff, pointing out that Nortel employees in France and Germany have got better deals. French Nortel employees went on strike and were not happy either.

The administrators have been found a buyer for some parts of the business. Avaya - a US company, spun off from Lucent Technologies and originally part of the AT&T empire. However, it's evident that the sale consists only of selected products, and will result in a break-up of the business.

My question is what will happen to the thousands of patents which Nortel held, many of which must have been British? And we should also question the loss to the UK - and indeed to the EU - economy of 12,000 telecoms research and development professionals. The administrators will no doubt see their job as getting a price for product, but R and D represents not only a financial value, but a value to the economy as a whole. Especially when the digital economy is being touted as the way out of the credit crunch (as expressed by the former European Commissioner for Information Society, Viviane Reding) such losses are more than just the price of the products. Arguably, these are engineers and innovators on whom the country will depend in order to evolve the digital economy and they deserve better from the government.

Nortel's UK headquarters was in Maidenhead, and there was a time when it dominated the town. The local MP, Theresa May, has taken up the Nortel employee's cause, however, as an opposition MP, there is more she could do to call the government to account. The responsible Ministry, Business, Innovation and Skills - BIS - is busier putting in place policies which will stifle the communications infrastructure in the so-called Digital Economy Bill ( see other articles on iptegrity.com), and appears to have done little in this case.

The Minister is - you guessed it - Lord Peter Mandelson. Now, who did he eat his Christmas dinner with, I wonder? Another Hollywood mogul?

Background on Nortel in the UK:

Nortel, a Canadian company, gained its presence in the UK by purchasing the UK telecoms equipment company STC, in 1990. STC began life as Standard Telephones and Cables, and it established a reputation for telecommunications transmission equipment, and cable manufacturing. STC's labs in Harlow gained a worldwide reputation for innovation. It was at STC laboratories where fibre optic cable was invented in 1966. Fibre optic cable has enabled the telecoms revolution that has brought us cheaper phone calls and the Internet. Without fibre optic cable, very little of the communications benefits we enjoy today, would have been possible. I attended the 25^th anniversary dinner at London's Science Museum to celebrate the invention of fibre optic in 1991 - Nortel's demise precludes a similar event for the 50^th anniversary.

STC was also one of three British companies which developed digital telephone exchanges, which facilitated the modernisation of the telephone network and the type of facilities which we take for granted today: fast, automated calling, freephone and premium rate numbers, voicemail and call centres. (The other two companies, Plessey and GEC merged to become GPT and were absorbed by Siemens.)

In the 1980s, STC took over computer company ICL in an early attempt to develop 'convergence' technologies. Under Nortel, STC's telecoms engineers developed advanced transmission technology. At the height of the dot-com boom Nortel purchased Bay Networks, a competitor to Cisco Systems, to take it into the Internet transmission market.

RIP Nortel

Nortel UK employees protest to Ernst and Young

Nortel corporate video from 2007

Nortel France mock burial

Noisy protest outside Ernst and Young's Paris office

***I have received an email from a former employee of Nortel Canada to say that they have also lost their pension rights, with no government protection.

This article is licensed under a Creative Commons Attribution Non-commercial-Share Alike 2.5 UK:England and Wales License. http://creativecommons.org/licenses/by-nc-sa/2.0/uk/ It may be used for non-commercial purposes only, and the author's name should be attributed. The correct attribution for this article is: Monica Horten (2010) RIP Nortel: should government intervene? http://www.iptegrity.com 3 January 2010.