Coming soon: Web-surfing by cellphone

Bjrn Nordhammer has seen the future: In it, he is using a mobile video-phone to e-mail personal films to his family while he's away on a business trip.

Martin Bouygues has seen the future, too, and he's afraid he can't afford it.

Mr. Nordhammer is a manager at Ericsson, the Swedish cellphone company that is among those blazing the trail toward the mobile Internet, allowing customers to surf the Web wherever they are - in the backyard, in the car, even at the beach.

Mr. Bouygues runs Bouygues Tlcom, a French mobile-phone operator that is horrified by the cost of a license to use the radio spectrum that it needs to get into the business of offering "third generation" or "3G" mobile-phone services.

Both men are caught up in the surge of money and technology that is sweeping Europe as it ventures into the era when the mobile phone will replace the personal computer as the essential tool of the Information Age. But the very hype surrounding the future of a Web without wires in Europe could end up smothering its prospects here, analysts warn.

When 3G systems are up and running in Europe in 2002, mobile-phone users will enjoy faster access to the World Wide Web than cable gives today. With it, say the telecom marketing men, will come all kinds of wireless multimedia features and applications such as videoconferencing, bank transactions, e-mail, or travel-route planning, all at the touch of an interactive phone-sized screen. Already, manufacturers have sold 1 million Europeans their first WAP (wireless application protocol) phones that allow one to browse a simplified, text-only version of the Web.

The battle for bandwidth

But more sophisticated services will require high speeds, and high speeds require high bandwidth. The value of that bandwidth - a finite commodity - has become clear as European governments begin allocating spectrum frequency to mobile phone operators. In April, the British government earned an astonishing $34.3 billion by auctioning five 3G licenses. In the US, the government plans two auctions later this year, but the situation is complicated by the fact that, unlike Europe, America has no common cellular standard, and by the fact that TV stations broadcast on parts of the same spectrum.

Britain's windfall has whetted appetites elsewhere in Europe: Germany expects to take in $47 billion when it auctions six licenses in July, while Italy will be selling its spectrum next December.

As the French government pondered whether to auction the spectrum to the highest bidders or allocate it in a "beauty contest" to those who pledge to meet certain public service obligations, Bouygues lashed out at the auction system. Such sales, he said last month in an opinion article in France's Le Monde newspaper, made an operator's choice between abstaining or bidding into "a choice between sudden death and slow death," since nobody can afford not to stay in the market, but few could afford to stay in it either, with such high license prices.

Bouygues is clearly worried that as a relatively small player, he cannot compete with European telecommunications giants such as France Tlcom or Britain's Vodaphone. But the mobile Internet market itself might suffer from the sky-high costs of licenses, some observers say.

When those costs are passed on to consumers, they could be discouraged from buying services and the market may never develop properly, worries Detlef Eckert, an economist at the European Union headquarters in Brussels who addressed an IT conference here last week.

The European Commission, the EU's administrative body, "is afraid that we might be making a huge mistake," he said. "Perhaps we ought to be giving the benefits to consumers, instead of cashing them in."

That is the approach Sweden and Finland have taken: They are giving the spectrum away to operators, because "low cost for consumers is fundamental in bringing about massive growth in the use of new technology," in the words of Swedish Trade Minister Leif Pagrotsky. "In this way greater accessibility will be offered to computer communication and multimedia at lower prices - boosting use and a faster rise in demand," he explained to last week's conference.

Nordic know-how

Given their track record, Finland and Sweden are the sort of countries whose advice would seem worth listening to. Finland is home to Nokia, the world's largest manufacturer of cellphones. Ericsson, the biggest maker of cellular network infrastructure, is a Swedish company. Its base in a science park just outside Stockholm has been dubbed "Wireless Valley."

In its most recent study, the IT market research company International Data Corporation (IDC) ranked Sweden as the globe's leading information society - just ahead of the US - measured by PC ownership, internet penetration, mobile phone use, and so on. Four of the top five countries on the list were Nordic, with Finland, Norway, and Denmark behind America.

Iceland, with 82 percent of its homes hooked to the Internet, is the most Webbed-up society, and Sweden has the most mobile phones per capita, with penetration approaching 60 percent. (The rate is around 25 percent in the US.)

This scene has drawn leading US companies across the Atlantic. Key players such as Microsoft, Oracle, and Intel have all set up new research and development facilities in Sweden in the past couple of years. "This is the place to be if you want to work in wireless technology," says Toivo Rjder, who heads Intel's Wireless Competence Center.

"We are a Seattle-based company, but we don't spend much time or energy there," says Jeffrey Westland, founder of e-licious, a company providing tools for online grocery stores. "In the Nordic countries you have tremendous penetration - there are so many people willing to use their phones for new things."

That willingness is rooted in local traditions: the Nordic telecom companies were the first to set up a cellular system with international roaming, in 1981, and Swedes have always been quick to take up new technologies. In 1900, Stockholm had more phones than London, and in the 1970s IBM used to send prototype products to Swedish firms such as Volvo to test them out.

"How is it that a small Nordic bank like Merita-Nordbanken has more online customers in tiny Denmark, Finland, and Sweden alone that giants like Citibank or Wells Fargo have all over the world?" asked Mr. Pagrotsky rhetorically. "Because they have the world's best and most advanced customers. Much of our secret [lies] in how the whole society is putting technology to use."

And that is no accident. Sweden has fostered computer literacy by allowing everyone to buy a tax-deductible computer through his or her employer, a scheme that Denmark and Finland have copied and that has pushed computer use to the highest levels in Europe.

But in the fast-changing high-technology market, nothing can be taken for granted. "Our dominant position could be gone in a year," warns Kai Hammerich, head of the government's "Invest in Sweden" agency.

Europe's lead in mobile telephony means that the Continent as a whole "feels like it is coming up to a second Silicon Valley," says Zaheed Haque, founder of a mobile Internet provider called room33.

"But how will things look three years down the road? I don't know, it is all up for grabs."

(c) Copyright 2000. The Christian Science Publishing Society