Meeting of the minds

In an industry as multifaceted as telecommunications, it's virtually impossible for any one company to have expertise in all fields. To make up for a dearth of knowledge in important areas, businesses turn to strategic alliances.

The deal struck last week between Ericsson and WorldCom's UUNet is a prime example of such corporate partnership. The two companies are offering each other experience, credibility and, most important, a viable position in a market that is ready to take off.

Ericsson's and UUNet's agreement centers around the mobile Internet.

One of the most notable parts of this multifaceted partnership involves joint product development. The two companies will work together to create mobile Internet networking equipment. Both companies bring intellectual property to the table, said Michael Becker, Ericsson's director of new sales for the WorldCom account.

"We have a good understanding of cellular, and they have a good understanding of the Internet," he said.

Ericsson will help WorldCom understand how to handle wireless traffic. To that end, the companies plan on running trials involving Wireless Application Protocol (WAP) and general packet radio service migration to IP.

"We need to find out what we don't know," said Jeremy Penston, business development director of UUNet U.K. "The R&D angle will teach us a lot about mobile networks."

The purpose of this R&D is to create devices that occupy the space between the mobile operator and the fiber carrying the traffic, Penston said. Beyond those devices, "mobile Internet is no different animal. The traffic is still IP."

Ericsson also will benefit from joint testing. While the company has some experience in IP, UUNet's knowledge is much more polished. Given the future of mobile devices, gaining knowledge in this protocol will become essential for Ericsson, said Eddie Hold, principal analyst for Current Analysis.

"The Wireless world has to move to IP-centric over the next five or 10 years," he said. "Nokia is ahead in that."

In addition to providing technical knowledge, the agreement between the two companies also has Ericsson supporting UUNet's bid to provide a global roaming network for the GSM Association. The proposed network not only will be designed to handle roaming for GSM, but CDMA, TDMA and other standards.

UUNet is already the world's largest carrier of landline Internet traffic, and by winning this contract it would position itself as the dominant carrier for mobile Internet traffic, which the company says will be a $100 billion market by 2004.

Not surprisingly, it would be in Ericsson's interest for UUNet to provide this network.

"It helps drive the demand for the wireless Web.... You drive that demand, you drive the demand for WAP handsets," Hold said. "More opportunity means more pressure for service providers to increase their network."

In addition, if UUNet lands the global roaming contract, Ericsson will be in the enviable position of having co-developed networking equipment with a company carrying the wireless traffic as service providers wanting to expand their networks make contract decisions.

While much of this is speculative, the pull each company has could help bring these possibilities to fruition. Certainly the backing of Ericsson - a member of the GSM Association and one of the world's largest handset makers - will help UUNet's bid.

"Ericsson's endorsement will give us more credibility in the community," Penston said.

Becker agrees, noting that the experience UUNet could gain from Ericsson could provide very tangible results.

"They need to understand how the whole wireless market works," he said. "At that point, they'll be able to work with wireless carriers."

In fact, Becker sees this relationship, with so many plays off each other's knowledge and possible influence, as a model corporate partnership. "That's why you come together for alliances," he said. "They have strengths, and you have strengths. It's a win-win situation."