One hundred years ago, Stockholm had more telephones than Berlin, Paris, or London. Despite Sweden's sparse population and remote location, or perhaps because of these, for the past century it maintained a leadership role in telecommunications. Even today, Sweden boasts one of the highest penetrations of mobile phone use of any country, along with PC and Internet usage. And Stockholm is fast emerging as the white-hot center of the fledgling wireless Internet industry.

Stockholm has become a kind of Klondike for the wireless Web. But instead of Alaskan gold, prospectors are flocking to the city to lay claim to the fortunes that may reside in the "Web without wires." During the past year, hundreds of startups have sprung up around Stockholm, aided by the unprecedented abundance of venture capital. The draw of the wireless Internet has pulled many technology companies from around the world to the Stockholm area. "When Ericsson moved its headquarters to Kista, outside of Stockholm, in the '70s there were only farm fields and cows walking around," says Jan-Еke Bjцrk, senior business manager at Ericsson. Now nearly every major IT company, including Apple Computer, Microsoft, and Compaq Computer, has set up an office in Kista, which has earned the nickname Wireless Valley even though the region lacks any mountains.

There's good reason for the wireless explosion occurring in Stockholm: the mobile communications giant Ericsson. The company offers a wide base for Swedish startups and is pushing hard for wireless's next generation. But obstacles abound: in addition to the technical challenges in making the wireless Web interesting and workable for the average Joe, there are more than a few cities vying to claim the title of wireless Web capital.

The longest shadow cast over Sweden's wireless industry comes from Finland, whose wireless presence sometimes relegates Sweden to the status of "that other Scandinavian country." Finland is arguably the only country in the world with higher mobile-phone penetration than Sweden, and Nokia, based outside of Helsinki, is one of two companies that sell more mobiles than Ericsson (the other being Motorola). But more wireless startups have taken root in Stockholm than in Helsinki, and there's plenty of pent-up rivalry between the two even though the wars between Nordic powers ended nearly 200 years ago. "The startup culture is stronger in Stockholm than in Helsinki -- there is definitely something going on here," says Martin Svahn, founder and chief technology officer of the Stockholm-based startup Mobyson.

All of this momentum gives rise to Swedes' belief that they can leapfrog the United States by way of the wireless Web. "This is a window of opportunity for Sweden to hold some sort of edge in the global technology game," says Michael Mandahl, CEO of Linq Systems, a wireless software company based in Stockholm. And there is a lot at stake. According to Ericsson, Nokia, and others, there will be more than 1 billion mobile phones in use worldwide by 2003, when the number of mobile Internet users will exceed the number of fixed-line users.

RISING STOCKHOLM

In the past year, the number of new IT companies in Stockholm has doubled; by mid-2000, there were more than 1,200, according to the Swedish government. And about half of these companies are in the wireless sector. At last count, there were 40 wireless companies on Stьreplan, a street in central Stockholm. It is too early to say which, if any, of the startups will be successful. But some of the best bets are companies like Melody Interactive Solutions and Columbitech, that aim to provide integration and support services for the wireless business user.

The growing number of startups has generated a significant amount of venture capital. About 100 billion kronor ($11.2 billion) are waiting to be invested in Swedish startups, according to Fцrvarv & Fusioner (F & F), a Stockholm-based research firm. Some of these VC firms are concentrating exclusively on wireless businesses, such as the Stockholm-based incubator Startupfactory. And the pace of investment doesn't look as if it's going to slow. The number of investments in this area is expected to double this year. And the number of privately owned VC firms in Sweden has risen significantly since 1992, from six to more than 200, according to F & F. "It's a very different game in Sweden than it was one-and-a-half years ago," says Mr. Mandahl of Linq.

Ericsson is the foundation for the current growth of the wireless community. Ericsson and, to some extent, Telia, Sweden's recently privatized telephone company, were instrumental in the growth and development of the modern mobile phone industry (see "Mr. Mobile"). Despite its difficulty in keeping pace with Nokia in the mobile handset market, Ericsson is clearly the leader in building wireless infrastructure, which consists of the base stations, transmitters, nodes, and antennas -- "basically everything that allows you to make a call except for the phone," says an Ericsson spokesperson.

SWEDISH MESSAGES

But there is still a tendency to judge the phone by its cover. The problem with an Ericsson phone, goes the saying in wireless circles, is that it looks like a Volvo: square, black, and heavy. However, Ericsson recently launched several sleeker models, like the R380, which has a keypad that flips back to reveal a Palm-type personal digital assistant screen. Another interesting product popular among short message service (SMS) users is the Chatboard, which is a small, inexpensive keyboard that plugs into a mobile phone.

Ericsson says it plans to offer a major upgrade to the current GSM standard by the end of the year. This new standard, called general packet radio service (GPRS), will offer data transfer speeds that are about double that of the average desktop modem, providing a major boost for wireless application protocol (WAP)-type applications, which on GSM and other current systems run at about one-fifth the speed of a 56K modem.

There's been much fanfare around the introduction of the third-generation (3G) mobile standard known as universal mobile telecommunication system (UMTS). But despite its boost in bandwidth, the degree to which it will benefit suppliers is still uncertain. In late June, Ericsson President Kurt Hellstrцm said the high cost of 3G licenses could delay implementation of the network, which sent a ripple of concern throughout the industry. Although Ericsson and others envision the launch of 3G networks as early as 2004, the actual rollout may come much later, according to analyst Lars Godell of Forrester Research, a market research firm.

Being a country of only 9 million inhabitants that imports much of what it consumes, Sweden is proud of its famous exports. Stikkan Andersson is regularly lauded for creating the music group ABBA, whose music is still heard throughout the world, a tribute to Mr. Andersson's forward thinking.

Swedes themselves make up an essential part of the wireless phenomenon. Sweden not only has a high percentage of mobile phone users, but a high percentage of those are also Internet users. Mobile phone penetration in Sweden is above 60 percent, compared with the United States, where it is only about 25 percent. "If you eliminate the very old and the very young, mobile phone ownership rises to about 100 percent," says Eric Paulak, an analyst at the Gartner Group in Stockholm. But what separates Sweden from other countries that also have high mobile usage is that more than 60 percent of Swedish households have a PC and Internet access, which is also higher than in the United States. Swedes are self-professed early adopters of new technology.

Mobiles, as they are called in Sweden, have become an inescapable part of the culture. In business, mobile numbers are exchanged rather than office numbers. And many young apartment dwellers never install a fixed-line phone. For Swedish teens, sending and receiving short text emails by way of mobile phone, using SMS, is essential to staying in the loop. In a recent poll by the tabloid Dagens Nyheter, Swedes voted their mobile phones, not their cars or clothes, as the item they most identify with.

Swedes are not just talking on their mobiles either -- they're checking their stock portfolios or locating a nearby restaurant. Even though data speeds of the current WAP technology are painfully slow and mobile phone screens are small, many believe that there is much money to be made on the wireless Web as connections and interfaces improve.

The end of the Cold War reduced Sweden's military equipment exports, forcing many companies, including Ericsson, to seek out new areas. But while Ericsson and Nokia still compete fiercely in the mobile handset market, they must also coцperate on several fronts, such as in developing the 3G standards and Bluetooth. If Stockholm succeeds in establishing itself as the new home of the wireless Web, Swedes will have wrested bragging rights from their counterparts in Finland -- and obtained long-sought recognition from the rest of the world.

Write to jarret.adams@redherring.com.