EoW November 2009

Transat lant ic Cable

In brief . . .

Telecom

The European Union has reasserted its lead over the United ❈ ❈ States in the use of high-speed computer connections, making the Continent “the world leader in broadband Internet,” the European Commission said on 4 th August. Europe’s broadband lead over the US narrowed to about one percentage point after 2004, when countries from Eastern Europe joined the bloc, according to a spokesman for the commissioner who oversees the Internet. Martin Selmayr said the EU has since established a lead of three percentage points over the US, with 23% of European homes and businesses using fixed-line broadband as compared with 20% in the United States. Denmark has 37% equipage with high-speed Internet, the top percentage in the world, followed by the Netherlands, Sweden, Finland, and Luxembourg, according to figures released by the European Commission. The United States ranks 17 th globally – at about the level of Spain. For her part, Commissioner Viviane Reding has said that the spread of Internet technology could help power Europe’s economic recovery, but she called upon EU member countries to ease the way for new entrants into telecommunications markets. A proposal under consideration in Congress would charge ❈ ❈ a $10 fee to some visitors to the United States, to help finance a new US programme to promote tourism. Sharply critical of the fee idea, the European Union’s ambassador to Washington, John Bruton, said in a 4 th September statement, “Only in ’Alice in Wonderland’ could a penalty be seen as promoting the activity on which it is imposed.” While residents of most European nations had long been permitted visa-free travel to the US, as of 2009 they are required to register online at least 72 hours before travelling and to re-register at two-year intervals. If the new congressional proposal were signed into law, these visitors would pay the fee when they register. A sponsor of the bill, RepWilliam Delahunt, of Massachusetts, dismissed EU objections to the “nominal fee” that is being advertised in the US as cost-free to the taxpayer. The money would go towards a travel promotion campaign run as a public-private partnership. Among its aims would be educating foreign visitors on US entry procedures, including online registration (with a $10 fee) for visa-free travel.

The purchase of Canada’s Nortel could expand Ericsson’s footprint in North America by up to 30%

Ericsson AB, of Sweden, the world’s largest maker of wireless phone networks, seems poised to acquire the wireless equipment unit of insolvent Nortel Networks Corp, of Canada, for US$1.13 billion, after beating bids from Finland-based Nokia Siemens Networks and the private equity firm MatlinPatterson Global Advisers LLC, of New York. When the outcome of the auction was announced, on 25 th July, reaction in Canada was swift – and, in some instances, bitter. Writing in the Toronto Star, business columnist David Olive asserted that the 114-year-old Canadian company would be paid a derisory sum for its most valuable business: “about half what Nortel was expecting the unit to fetch when it filed for bankruptcy protection in January and began a rapid dismantling of Canada’s long-time R&D flagship in fire-sale deals with foreign buyers.” (“Nortel a Sweet Deal for the Swedes,” 26 th July) Crucially, Ericsson is to inherit Nortel’s commanding position in CDMA, or code division multiple access, the standard of wireless networks serving over 50% of subscribers in the United States. Ericsson’s current strength is in GSM, or global system for mobile communications, the dominant wireless standard outside North America. Mr Olive wrote, “As a fading technology destined to disappear over the next decade, CDMA won’t require lavish R&D spending by Ericsson. Which means it throws off a lot of cash.” More important, he added, CDMA is the ideal “platform” from which the world’s telecoms will migrate to the next-generation wireless standard, LTE, or long-term evolution, “in which Nortel has a significant edge.” The Star ’s business columnist consoled himself with the observation that, because the deal with Nortel was not set to close until later in 2009, Ericsson did not have a lock on the prize. There was, he wrote shortly past mid-year, time for Nokia Siemens to trump Ericsson’s offer or for Waterloo-based Research in Motion Ltd, the BlackBerry smartphone maker, to launch a formal bid. The proposed deal is subject to regulatory and bankruptcy court approval in Canada, the US, and Europe, but if no other suitors present themselves, there would appear to be no impediment to the transaction. Canadian Prime Minister Stephen Harper has said that it would be reviewed under the Investment Canada Act to ensure that it is “in Canada’s national interest,” but he ruled out any other intervention. If the deal succeeds it will almost double Stockholm-based Ericsson’s sales in North America, which would become the company’s biggest wireless market. Over the next two to five years, its share of that market could expand by almost 30%; its global share, by more than 5%.

Aviation

Continental Airlines switches over to Star Alliance. But how much will it help?

Having set a date of 24 th October for its withdrawal from the 11-member SkyTeam alliance, Continental Airlines would lose no time going it alone.

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EuroWire – January 2006 EuroWire – November 2 09