European Telecoms Dial Up Silicon Valley for Next-Generation Data Communications Technologies

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Two of Europe's largest telephone companies are establishing a joint research and development arm in Silicon Valley to identify and exploit emerging new communication technologies. Deutsche Telekom AG and France Telecom SA have founded ThinkOne Inc. in Brisbane, California, in a move that reflects the needs of both operators to go beyond their domestic R&D activities to tap software expertise in the fast-paced North American information technology sector.

Although each carrier maintains extensive research operations in its domestic market, European high-tech companies are generally viewed as lagging behind their U.S. counterparts in the development of next-generation Internet, network computing and broadband wireless data technologies. With ThinkOne, the German and French operators now hope to bridge that gap. And they hope to do so fast.

"Our research in the United States isn't fundamental or applied but something more short-term, something that will give us results anywhere from three months to three years," says Lionel Pelamourgues, executive manager of ThinkOne.

The Germans and French join a list of well-known international telephone companies, including Japan's National Telegraph and Telephone Corp. (NTT) and Telecom Italia SpA, that have launched similar R&D ventures in Silicon Valley in recent months. "I think most networking experts agree," says Joachim Claus, senior executive director of innovative management at Deutsche Telekom, "that when it comes to next-generation data communications technologies, like the Internet Protocol and packet switching, the U.S. is where the music is being played, particularly in Silicon Valley, which is a breeding ground for innovative high-tech startups."

Claus notes that in the past, when most of Europe was dominated by telephone monopolies, incumbent operators-called PTTs-could afford to wait for U.S. innovation to blow across the Atlantic. "We were always a couple of years behind the United States on the Internet," he says, but is quick to add that Europe has been on the cutting edge of digital cellular technology and broadband switching.

Battling Competition

Now competition is changing all that. Most European telecoms markets have been open to full competition since the start of 1998. To give just one example of how quickly the tides can turn: Deutsche Telekom lost more long-distance market share in one year-30 percent-than British

Telecommunications PLC (BT) surrendered in a decade.

Deutsche Telekom and France Telecom aim to defend their positions through new, innovative services and products, some of which they expect to develop in the United States. They are already aligned with Sprint Corp. through their international telecoms alliance Global One. The European carriers, which have taken an equity stake in each other, also own 20 percent of Sprint.

Although the U.S. carrier is not part of ThinkOne, with its own R&D operations in Silicon Valley for years, it maintains close R&D links with its major European shareholders. Sprint operates what is believed to be one of the most advanced fiber optic networks in the United States and is among the first carriers to move away from traditional circuit-based switching technology to packet-based systems, which are used extensively in data networks, such as the Internet.

This is not to say the Europeans have been standing idly on the sidelines watching U. …