What a coincidence: Estonian telecom companies declared joint efforts to provide the whole country with fast broadband Internet access by 2015 and the next day, the telecom giant Ericsson announced that it will develop a mobile networks factory in Estonia of key importance for the whole region.

The recently established Estonian Broadband Development Foundation has among its founders a whole army of Estonian telecom companies, members of the Estonian Association of Information Technology and Telecommunications, including the larger mobile operators EMT, Elisa and Tele2, in addition to Elion, Ericsson Eesti and others. A joint action plan has been created in order to develop the infrastructure of a modern information society in Estonia by 2015, which will help develop enterprise and improve the quality of life primarily in rural areas.

“The need for rapid broadband connections is growing all the time. Services such as e-learning, e-health, e-state or digital television, for example, need connections with increasingly higher data transfer rates,” explains Chairman of the Estonian Broadband Development Foundation Olev Harjo. “In order for the enterprises and residents of rural regions to benefit from the advantages of the information society, the new generation broadband must reach every corner of Estonia. We cannot afford to create a wider digital gap between the countryside and the city.”

Connection at least 100 Mbit/s

The action plan, called EstWIN, foresees linking up every Estonian household and office with new fibre-optic connections which have a speed of at least 100Mbit/s. This is estimated to cost between five and six billion Estonian kroons. The state’s organisational input is very significant in this process. The costs, to a large extent, will be covered by the companies themselves, with a quarter of the funds being applied for from EU funds.

The telecom companies offer a fairly obvious argument for the process. The state would be an outsider if it did not have highways. In the same way, it will be an outsider without the “highway of information”. Firstly, it is predicted that Internet data volumes will grow by 50 per cent each year in the next few years. The copper network cables in use today will not be able to physically handle this load. Secondly, the spread of the Internet promotes economic growth. World Bank and European Union research shows that a 10 per cent growth in the usage of broadband will yield 1.21 per cent growth in GDP per capita. The impact of broadband on the growth of productivity is over 50 per cent. According to a research project carried out in the United States, the investment of each 15,000 euros per annum in broadband infrastructure leads to the creation of one job or the preservation of one job per year. Thirdly, Estonia wishes to remain internationally competitive. A proper infrastructure offers a competitive edge in attracting foreign investment. Developed countries invest hundreds of millions of euros and dollars in the development of next generation broadband. It is a race of sorts. In some ways, Estonia is a leader, but in other ways a follower, depending on which country the comparison is made with.

For example, in Lithuania the state will build 8,500 kilometres of fibre-optic cables in two stages. This guarantees access to next generation broadband to 98 per cent of the population. Finland has a broadband strategy with the aim of providing new high-speed Internet to all inhabitants by 2015 and the state is investing 200 million euros in the project. Sweden has commenced with the project “Ambient Sweden”, which aims to make the country a leading Internet country by 2015. On the other side of the world, the Australian government has decided to invest 43 billion AUD in the development of next generation broadband. It is the biggest infrastructure project in Australian history. Singapore has set the goal of having its optic network reach 95 per cent of homes by 2012, with a minimum speed of 100Mbit/s. This involves an investment of 750 million Singapore dollars.

Fourthly, the spread of broadband has an impact on climate change, alleviating the spread of CO2, as well as reducing energy and transport costs. Many things can be done at home.

Services only avalible in cities

As in many other countries, there is access to broadband mainly in cities and bigger rural establishments in Estonia. Nearly 70 per cent of the population lives in cities. This means that services such as e-elections, e-tax declarations, Internet banking, digital television and digital signature—all regular customer services which have brought acclaim to Estonia—are only available in larger settlements where quality Internet access is just as normal as electricity. But the situation in the countryside is much worse. Many places have no access at all to fast Internet. This represents a digital gap, according to the telecom companies.

The EstWIN project will be implemented in several stages. By the end of 2012, a fibre-optic base network should be built everywhere in Estonia, totalling 6,640 kilometres of fibre-optic cable, assuming that 98 per cent of households, companies and organisations are nearer than 1.5 kilometres to the base network. In the second stage, communications companies will build network connection points in cooperation with local governments. There will be open competition: it will be a physical base infrastructure which can be rented on equal terms by all communications companies.

This plan corresponds nicely to the fact that, at the end of August, Ericsson opened its factory in Tallinn, and will focus on developing high-tech production, including building appliances for mobile networks and broadband.

Estonia good place for IT development

According to Jan Wassenius, Vice President of the Ericsson Business Unit Networks, the existence of trained personnel with the appropriate know-how who worked in the former Elcoteq factory became decisive when choosing the location for the investment. In addition, Estonia boasts a very favourable climate for the development of information technology.
A precondition for the opening of the Ericsson factory was a previously signed contract with the former subcontractor Elcoteq, according to which Ericsson will take over most of the production units of Elcoteq Tallinn, together with its 1,200-member staff. Elcoteq has been a subcontractor of Ericcson in Tallinn for a decade already.

“Elcoteq had its own problems and plans; we had our own problems and maps. Elcoteq wanted to consolidate its production somewhere else and we needed to expand. Hence we found a mutually suitable agreement,” said Wassenius.

According to the Estonian Minister of Economics and Communications, Juhan Parts, the decision made by Ericsson is noteworthy for several reasons. Firstly, it shows Estonia’s competitiveness and, secondly, it sets an example for other Estonian and Scandinavian companies in making investments. Thirdly, it creates wider opportunities for cooperation with Estonian higher education institutions and innovative enterprises.

Focus on manufacturing high-tech equipment

Ericsson’s factory in Tallinn focuses on the production of high-tech equipment. The factory continues to produce appliances for mobile networks for the base stations of Ericsson 2G and 3G, with appliances of the RBS6000 series being the newest product, which supports the technology of GSM/EDGE, WCDMA/HSPA and LTE.

A hundred per cent of the factory’s production will be exported, according to Veiko Sepp, Chairman of the Board of Ericsson Eesti. At the opening event of the factory, the manager of Ericsson’s Nordic and Baltic Region, Mikael Bäckström, expressed his wish that, in the future, a growing part of the turnover of the factory will stay in Estonia. “Today many countries are investing in roads, bridges and railways. Estonia is also investing in information highway technology, and this is precisely the kind of technology offered by the new factory,” said Bäckström.

Veiko Sepp is certain that some of the network appliances produced in the factory will be used in the Internetisation of Estonia. The role of the factory is to be a regional centre for European production as well. Ericsson also produces network appliances in India, China and Brazil, and there are partner factories in Sweden.

Several important trends can be spotted in mobile communications technology, according to Sepp. Firstly, there has been tremendous growth in the speed of building networks. Secondly, other new technologies are rapidly catching up.

“There are already four billion mobile phone users in the world today. The first billion was reached only in 2001. The kind of growth since then has been beyond anybody’s imagination. Mobile phones have become standard consumer items, and without them people cannot live,” said Sepp.

China and India coming online

Whereas in Estonia and most West European countries the number of SIM cards already exceeds the number of people, many large Asian countries are yet to have their mobile phone boom. India and China are coming online at tremendous speed.

People in many areas have never seen a regular land-line phone and the mobile phone is their first experience of a telephone. Also, in many places in Africa, second generation GSM networks are being built, and they need to cover very large territories.

Ericsson is a clear world market leader in the production of mobile communication networks, having a 40 per cent share. However the competition is growing, as the Asian manufacturers Huawei and ZTE are trying to establish themselves in Europe.

Sepp sees significant real benefits in the Estonian broadband strategy. Internet coverage will enable people to work where they want to. “If you are a writer or a financial specialist who does not need to be physically present in an office, you will have a chance to work from a distance and to choose where you live. Things like being close to nature and fresh air will become more available,” he says. But perhaps the broadband strategy has an even more important message to promote. Many people say that the development of Estonia as an outstanding e-state has come to a standstill in recent years. In other words, the tiger is asleep and the telecom companies are trying to wake him up.

Sepp believes that the tiger is not asleep. Estonians simply have been spoilt and no longer recognise all the innovative services and opportunities available to them which are really considered to be something special by tourists.

Indeed, are there any other states in the world where mobile car parking is as ordinary as buying a newspaper from a kiosk, where income tax declarations are done online in three minutes and where you can also vote in elections online?

Estonians take broadband to fighter planes and trains

Estonians do not just actively use communication technologies; they also come up with their own revolutionary solutions. Modesat, the portfolio company of Ambient Sound Investments (the investment group of the founders of Skype) was the first in the world to solve the challenge of delivering broadband on a plane moving at a speed of 1,200 kilometres an hour.

Modesat is one of the most ambitious technology companies in Estonia: it patented the effective PilotSync radio communications solution and is breaking into foreign markets with the product.

PilotSync is a revolutionary solution which synchronises the radio channel which makes the communication channel more effective and secure to use. It offers higher data rates and efficiency. In addition, it also comes at a cheaper cost.

Rain, snowfall or falling leaves can disrupt mobile coverage in Estonia, as signals can dissipate, reflect or be disturbed in some other way. However, those problems do not affect communications based on Modesat technology.

“At a time when people are increasingly mobile and want to be online 24/7, the data rate and efficiency of communications channels are becoming ever more important,” says Põldsamm.

Modesat’s main markets are telecom markets. There are 1.2 million radio links sold every year throughout the world and this is growing by 20-30 per cent a year. A large share of the 3G and 4G mobile operators must thoroughly upgrade their networks in the next two to three years, in order to be able to offer broadband.

The trend of mobile phones as the main multi-medium, with the computer and permanent home Internet connections exchanged for mobile Internet, is predicted everywhere. This assumes the working quality of and increase in the data rate of the networks.

Modesat is also interested in the field of satellite connections – broadband in fast moving objects such as aeroplanes, boats etc. – and in the military field, where there is demand for technologies which work in difficult connections, for example for secret communications.

Where many have failed, Modesat can confirm that they have the technological solution to transfer television signals to a very rapidly moving terminal, for example a passenger plane moving at a speed of 1,200 kilometres per hour, not to mention a train which moves at a speed of 300 kilometres per hour.

Negotiations are underway with dozens of companies throughout the world, including Italy, China, the USA, Great Britain, Germany, Canada, India and Israel. Many of those are large stock exchange companies. Modesat has not needed to do active sales since spring, as its negotiation partners hold a whopping 85 per cent of the market!

They are targeting the largest possible companies, mainly the producers of cable modems and radio links, for example Huawei, Ericsson, Nokia Siemens Networks, Alcatel-Lucent and many other network appliance producers. Among satellite- and mobile communication producers, there are companies such as ViaSat, iDirect, Boeing and Saab. But these are just some of the potential clients.

In addition to Estonia, the company has representations in Belarus, Russia, Israel and the Silicon Valley in the US. The main research and development work is carried out in Tomsk, Russia and in Gomel, Belarus.

% of households with a broadband connection (2008)

1 Denmark 74%
2 The Netherlands 74%
3 Sweden 71%
4 Finland 66%
5 The United Kingdom 62%
6 Luxembourg 61%
7 Belgium 60%
8 France 57%
9 Malta 55%
10 Germany 55%
11 Austria 54%
12 Estonia 54%

% of enterprises with fixed broadband access (2008)

1 France 92%
2 Spain 92%
3 Finland 92%
4 Belgium 91%
5 Sweden 89%
6 Malta 89%
7 Estonia 88%
8 The United Kingdom 87%
9 Luxembourg 87%
10 The Netherlands 86%
11 Slovenia 84%
12 Germany 84%

% of population using e-government services for returning filled in forms in the last three months (2008)

1 The Netherlands 32%
2 Denmark 27%
3 Sweden 26%
4 France 25%
5 Estonia 24%
6 Ireland 18%
7 Finland 18%
8 Luxembourg 16%
9 Austria 14%
10 Lithuania 13%
11 Portugal 13%
12 The United Kingdom 12%

Source: Eurostat

What do Estonians do online?

A brief overview of theregular use of internet applications (%) among the Estonian population between the ages of 15-74, September 2008:
E-post 58 %
Internet bank 55 %
Search engines (neti.ee, Google, etc.) 43%
News portal delfi.ee/rus.delfi.ee 39%
Online issues of newspapers/magazines 35%
Messaging programme MSN or Windows Messenger 32%
Internet based state services (e.g. tax declarations) 31%
Weather portals 30%
Booking or buying tickets online 24%
Youtube 23%
Skype 22%
Environments for posting/looking at photos 19%
Portals for downloading music (MP3) 19%
Games on the Internet 18%
Torrents (for downloading films/programmes/books) 16%
Job search portals (cv.ee, hyppelaud.ee etc.) 14%
TV- or radio programmes online 14%
Information catalogues (1182, 1188 etc.) 13%
Social networking environment rate.ee 12%
Social networking environment orkut.com 12%

Source: GFK 2008

This story was first published in the quarterly magazine Life in Estonia Fall 2009 edition