Visiting The Front Lines

The future is wireless, or at least that is what Nokia, Ericsson and a host of startups and network operators are earnestly hoping. But the quick success of 3G – The Third Generation of mobile telephony – is more than profitable icing for these companies; it has now become a matter of survival….

This article, which ran in the February, 2001 issue of Tornado Insider magazine, looks at the overall climate in European development of 3G, and then explores how each of Europe’s largest telecom networking manufacturers, Ericsson and Nokia, is coping with the challenge.


For some time, both Ericsson and Nokia have vigorously embraced the role of global industry hothouse by developing new divisions and enhancing old ones to deal with the 3G challenge. But it is about more than money.

“For a fraction of what the operators spent on 3G licenses, they could buy 10 application startups to help with rollout,” says Martti Malka, a partner in Nokia Venture Partners, which is independent from parent Nokia. “It’s not the money; it’s the business model, and the successful operator is going to look to third parties to come up with the innovative business propositions.”

Resources for innovation, too, are only part of the problem. Ericsson has established itself as a curious anomaly. The heavily bureaucratic, press release-driven monolith commands a sensational ability to introduce and gather support for industry-wide protocol initiatives, like Bluetooth and OSGI, its home gateway protocol. Nokia, meanwhile, has made huge progress in end-user customer loyalty through its desirable handsets, capturing 30 percent of the worldwide handset market. Nokia is claiming great gains in GPRS and 3G networking contracts as well.

Nokia and Ericsson realize that in order to give their customers, the operators, the return they’re demanding, they must aggressively court small startups working on applications, services, and hardware for 3G. They’ve partnered with VCs for some, and will continue to do so for others. They have also spent considerable time and money making sure that when 3G rolls out it will live up to the hype.

Enter the startups
“We know we have to develop this market and the key issue is getting the right applications,” says Bengt Larsson, marketing manager for Ericsson Business Innovations (EBI), an independent subsidiary of Ericsson. “It’s not until we have the applications on board that we will see the 3G market take off.”

Nokia Venture Partners, with $500 million under management, concentrates on early stage mobile Internet companies, and looks specifically toward those creating enabling technologies. A perfect example is AVS Technologies, an Espoo, Finland, company whose MVQ (motion vector quantization) method is a high-end video compression and transfer technology that compresses video streams 10 times more effectively than RealPlayer or Windows Media.

For its part, EBI, as well as main divisions of Ericsson such as its Mobile Location Services, work closely with small startup companies developing applications that would eventually work with an Ericsson 3G network. For instance, Ericsson Mobile Location Services works and co-markets with It’sAlive, a startup games-maker funded by Speed Ventures in Stockholm. It’sAlive just rolled out its first product, a location-based game called BotFighters, in which SMS messages appear when opponents are in firing range.

BotFighters is currently running in Sweden on regular public networks. “Ericsson would welcome any application developer who would like to try out a 3G application to come and use it on our demo network in Kista. It’s one of the few places in the world where you can actually test 3G applications in a practical environment,” says EBI’s Larsson.

The first step taken by application startups is a visit to the Ericsson and Nokia developers’ websites, which allow any company to register to receive technical specifications, assistance, emulators, and limited access to the developers’ community for the particular product in which they’re interested. Companies that push past that point and go for a more formal partnership, like It’sAlive, are given co-marketing support and access to live research and development projects, not out-of-the-box technology.

While Ericsson and Nokia are both taking to their roles with gusto, developing deals with laundry lists of third parties from startups to global players, there are subtle differences in their approaches. The following profiles look at the efforts by each of the vendors, and compare and contrast their approaches.