Military Intelligence

Jonas Birgersson, a 28-year-old Swedish Internet entrepreneur, doesn't look to Americans such as Amazon.com's Jeff Bezos for role models. He takes his cues from the military strategists of the 19th century Prussian army. A military history buff, Birgersson runs Framfab, an Internet consultancy with a market cap of $1.7 billion, according to lessons learned by the Prussian military in their battles against Napoleon. That approach should come in handy as Birgersson girds himself for war on two fronts: in Europe, where he is challenging the Continent's dominant phone companies by offering cheap high-speed Internet access, and in the U.S. market, where he is competing for the digital services business of multinationals.

Just as the Prussians learned from Napoleon's army that troops divided into small corps are more effective and respond better to rapid change than large groupings, Birgersson has split Framfab into a network of small, independent cells. This structure has served the firm well. Founded by Birgersson in 1995, the company, which offers strategic consulting, employs 1,700 people and operates in eight countries. It counts multinationals like Volvo, Kellogg's, Commerzbank, Bosch, Ikea and Nike among its clients. Describing Framfab's strategy in the U.S. market as a "flank attack," Birgersson clearly views the marketplace as a battlefield. "Only idiots compete on equal terms," he says. "This is war."

For Birgersson, who made his first million at age 26 yet still rides a bicycle to work, the battle is not about money or personal clout, but about empowering consumers. "We want to give ordinary people more for less," he says. Enter another of his businesses: B2 or Bredbandsbolaget, which means broadband network in Swedish, a high-speed Internet service provider that offers Web access to people across Europe at cut-rate prices. But unlike most high-tech business plans, this one starts by targeting the bottom of the personal income pyramid instead of the middle or top.

The idea behind B2, which is 25% owned by U.K.-based cable operator NTL and also backed by Intel, is to install in apartment buildings the local area networks (lans) used in offices to provide high-speed connections for PCs. Typically, Internet surfers use 56 kilobits per second modems and pay a per minute charge. The lan does away with the need for modems. In fact, B2's advertised speed is around 20 times faster for downloading data from the Web and around 80 times faster for uploads than the average cable modem or digital subscriber line consumer offer, says Sam Paltridge, an Internet expert at the Paris-based o.e.c.d. "The telcos' dsl and cable modem offers make a big thing of the fact that they are x times faster than ordinary modems," says Paltridge. "Yet B2 is offering something that is less expensive than many of the telcos' narrow band offerings over the public switched telephone network, but at a speed around 180 times a 56 kbit/sec modem."

A recent o.e.c.d. study on the pricing of broadband services for consumers in the U.S., Japan and many European countries shows the average monthly cost for digital subscriber line connections is $60.80, and $44.80 for cable modem serviceanywhere from two to three times Bredsbolaget's charge of $20. B2's 10 megabits per second connection can transmit and receive services such as video-on-demand, radio, television and telephony. It also allows users to create their own portals or Web TV channels. The monthly fee even includes free phone calls to other users of B2's network. And, for an as yet unspecified additional charge, B2 plans within the next few months to introduce flat rate local and national telephone calls over the traditional phone network, using a converter box which will allow consumers to use their normal telephones.

The goal, says Birgersson, is to give consumers all of these services for the same amount asor even less thanthey currently pay the phone company for regular phone service and slow Internet access. Small wonder that the offer is proving appealing to the residents of government-run public housing. Last August HSB, the largest Swedish organization of tenant-owned housing, signed a contract with B2 covering 350,000 households. Birgersson says phone companies could have long ago introduced the kind of high-speed lan service B2 is offering consumers, but didn't because it would cut their profits from existing services. B2 filed a complaint last November to the European Commission's Directorate alleging that Sweden's former monopoly, Telia, has reduced its prices 90% for high speed lan services in some of the places where B2 has introduced competition. B2 charges that Telia is abusing its dominant position by using predatory and discriminatory pricing. The case is still pending.

Birgersson has no use for any of Europe's major telecommunication firms and goes so far as to claim that they are "absolutely worthless" because their copper wire networks are too time-consuming and expensive to upgrade to handle the next generation of high-speed services. That is why B2 is building its own fiber optic network from scratch, one that allows faster and cheaper connections to the Internetwithout the need for modems.

Framfab is working with the Swedish government on a plan to link 70 Swedish cities through a high-speed fiber optic network that would allow companies to rent "raw" fiber opticsfiber which is not connected to a traditional phone company networkand run any type of service over it. Eventually, the national network being built by the government will link up with the local loop being built by B2. "It's a paradox that it takes government infrastructure to get competition to start in broadband," Birgersson remarks. By the end of this year, B2 plans to connect 100,000 housing units in Sweden. The eventual goal will be to connect 50 million households in Europe over the next five to seven years, primarily by striking deals with local new entrants which have fiber optic networks.

A key part of Framfab's global strategy is to entice U.S. companies to test their Web commerce offerings in Sweden first, since it will be one of the first countries in the world to have full national broadband coverage. "We want to create the world's greatest lab in Sweden," Birgersson says. "It's a small market, so if it blows up, who cares. But if it works, you can deploy worldwide." Birgersson, who says he has ideas for other companies in the works, is convinced his projects will be winners in the long run. "We are judged by history," he says. "It's okay if in our lifetime nobody understands what we are doing. Inspiring and motivating people in the future will be our greatest achievement." Spoken like a true warrior.