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Is Canada North America's Wireless Leader?

Is Canada North America's Wireless Leader?

Despite some of the lowest pricing in the world, only about 25% of Canadians own mobile phones. Perhaps it's this very fact that has been driving Canada's rise to its present position as what many would argue is North America's wireless leader - measured by the availability of applications, accessibility of wireless infrastructure, and affordability of wireless communications.

Ottawa companies in the wireless space raised more than $1.3 billion [all figures are in U.S. dollars] in venture capital in 2000, up from just $274 million in 1999.

Zucotto Wireless, Inc., which WBT profiled in its wireless VC roundup in July (Vol. 1, issue 5, "Wireless VC Is Alive and WellŠ") was one of the companies that helped boost that figure with funding received from Silicon Valley. But it's only one of a whole welter of Canadian wireless companies. Innovatech, the Quebec-based, state-owned VC company specializing in financing technological innovations, took 400 business plans to the screening stage, and made one closing a week in telecom/wireless start-ups. ROI was 52% and Innovatech has a working capital of $350 million and a portfolio of 120 companies.

Viable Voice Applications
Of all places, Montreal has turned out to be a hotbed of speech technology. "The reason," explains Claude Vachet, investment director at Innovatech, "is that more than 100 nationalities with different dialects live in Montreal. To make wireless applications viable and attractive to the market, you have to customize technology for the companies and the people who are expected to use them."

Low-cost, real-time voice, fax, management, and conferencing services based on Internet Protocol (IP) such as unified messaging and Web-based voice IP communications are the ingredients of the mission of one of Innovatech's start-ups, CESCOM. According to its president Samir Talhani, this nearly 3-year-old international carrier and application service provider "builds virtual bridges between people and companies in the wireless market." As there are many Europeans among CESCOM's partners and customers, they speak a wide variety of languages. CESCOM already exports its voice technology to mobile operators and traditional companies in more than 25 countries.

In fact, Canadian listings, combined, make up the largest chunk of non-U.S. stock on the Nasdaq, with more than 150 companies. Since the end of 2000, a new Nasdaq stock exchange opened in Montreal, too.

A strange thing about Canadian companies is that when they become big and famous they're often confused with Americans, which irritates Canadians (the Big Brother complex is deeply rooted). Cognos and Corel are two old examples, but in the wireless sector, the examples are 724 Solutions, Research in Motion Limited (RIM), and PixStream. Each of these companies, while Canadian, has seen itself headlined as if it was a U.S. success story.

Wireless Banking and E-Mail
724 Solutions, listed on both the Nasdaq and the Toronto Stock Exchange, delivers smart solutions that enable wireless banking and brokerage to financial institutions. They can be used from any handheld device. Customers include Bank of America, Citibank, Wachovia, Wells Fargo, and the Bank of Montreal. Canadian customers use electronic banking more than any other nation in the world.

RIM is another Ontario-based "mobco" (mobile communications company), known for its innovative wireless e-mail solution for business - the BlackBerry - a device that AOL now offers to its 30-million subscribers as a wireless option within its "AOL Anywhere" program. [See the article by David Geer elsewhere in this issue of WBT.]

Another is PixStream, of Kitchener, near Toronto. Although purchased by Cisco in 2000, and thus strictly speaking now American-owned, PixStream - which creates hardware and software for digital video and streaming media - was considered a "crown jewel" in the Canadian wireless sector by Randy R. Ellis, CEO of Canada Technology Triangle, a science park near Waterloo (not far from Toronto). PixStream is now the Cisco Video Networking Division.

"Brain Game"
In addition to the University of Waterloo, which acts as a reservoir supplying freshly trained minds to Kitchener and Toronto, Ontario has 17 other major universities, making its population the best educated in the world (even better than the Canadian national average, which is the highest among the OECD countries). Many of the wireless companies recruit directly from universities through a co-op program fathered by the University of Waterloo, and exported to as far away as Seattle. (Microsoft employs more graduates from Waterloo than from any other university in North America.)

"We receive a lot of attention from Silicon Valley as well," explains Jerry Gray, director of the University of Waterloo. "Our graduates are attractive. The Valley comes here to take people, but the companies open their development shops in Waterloo as well. It's a kind of brain game. Who wins? Who knows? People gain," he says.

It may be warmer in California but the social climate is colder, so Cisco will not be moving its new division from Kitchener. Canadian knowledge workers are less "footloose" than others, too; in Silicon Valley labor turnover rates are 15-20%, compared to just 5% in Canada.

Ensuring Wireless Trust
Cisco's largest competitor, Nortel Networks, is Canada's telecom giant. But Nortel, like all top telecom and technology companies, lets smart people with golden ideas go and start their own businesses. This happens particularly when a business goes beyond Nortel's own business focus, as with the case of the encryption experts, Entrust Technologies.

Ian Curry and Stephen Hillier left Nortel together with a small group of cryptography and security freaks in 1993 to build "a big gorilla" in public key infrastructure (PKI) software.

Realizing that the issue of trust was going to become paramount in a world of e-commerce, e-banking, and e-healthcare, Curry and Hillier were joined by Entrust's president John A. Ryan and vice president Brian O'Higgins. Nearly eight years and 1,000 employees later, Entrust Technologies provides worldwide solutions that make it safe to do wireless (and wired) Internet transactions and communications. The company went public on the Nasdaq in 1997, and in 2000 was the first company to deliver digital certificates to enable secure wireless transactions. Last spring it launched the encryption of WAP transactions.

The company even coined a new acronym, "E2B" (Entrust to Business). They work with Motorola, Sonera, 3COM, IBM, Nokia, Telenor, Schlumberger, and RIM for new wireless security solutions, and with NASA as well as American, Canadian, Japanese, and European banks. Global corporations such as Fedex and Great Britain's Royal Mail service are also Entrust clients.

Elvis+Gates = Hill
Montreal is also home to Austin Hill of Zero Knowledge. Hill is a 28-year-old serial entrepreneur with a boyish face like the young Elvis and charisma like Bill Gates, and is reckoned to be among Canada's most promising young business leaders. After dropping out of school at 17 to found his first company, Cyberspace Data Securities, he, too, realized the growing importance of security, and by the late 1990s had started Zero Knowledge Systems, today one of North America's leading developers of Internet privacy software and security technologies.

"Just think of wireless location-based services, wireless health care, and tailored wireless marketing services," explains Hill. "My focus is on defending people's integrity and building privacy into the mobile economy: with wireless devices, it will be a lot to defend."

Hill attracted some of the world's top cryptographers to come to Montreal and build Freedom (he calls it "the mother of all privacy systems"). Zero Knowledge sells it as a download from their Web site.

Government Help
Canada's size, large distances, and extremes of climate are good reasons to have reliable, cheap, and convenient communications," says Michael Binder, assistant deputy minister of industry, spectrum, IT, and communications. "In our spacious country, wireless is a natural necessity," he adds.

That is perhaps why, even if the infrastructure for wireless technologies in Canada is being built by private enterprise, the Canadian government's measures over recent years have been substantial, as evidenced by programs with names such as "Connecting Canadians" and "Closing the Last Mile."

3G may remain a song of the future for Canadians, but Canadian carriers are busy bridging the present network with 2.5G solutions such as GPRS. When the range of frequencies set aside for 3G is finally agreed upon by the FCC, then a next-generation device from Canada will function in the United States and vice versa. But 2.5G will have to be good enough for the time being.

More Stories By Marta Sandén

Marta Sandén is editor-in-chief of BrainHeart Magazine and writes frequently about aspects of the New Economy.

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