December 21, 1999 Web posted at: 12:37 p.m. EST (1737 GMT) by Terho Uimonen and James Niccolai

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(IDG) -- When it comes to wireless data services -- the new frontier in the Internet's rapid development -- even the largest U.S. IT companies are learning to play second fiddle to their European cousins.

For one thing, the European market right now is better prepared to actually use wireless services. The penetration of data-enabled mobile phones already is higher in Europe than in the United States -- a gap that is expected to widen rather than narrow over the next few years. In addition, a more integrated wireless infrastructure allows Europeans to roam with their handsets without having to worry about network incompatibilities.

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Smart cell phones

With a market primed to move on to a new set of sophisticated handheld mobile devices, leading European carriers and mobile phone vendors are poised to deliver a whole new set of services and gadgets. Services that exist today overseas point to services for U.S. consumers tomorrow. As a result, IT managers need to keep a close watch on how the mobile Internet unfolds elsewhere to develop Web site features and mobile services for future mobile use in the United States.

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Likewise, American technology companies are making moves to follow their European counterparts. In the latest of a string of announcements made by U.S. and European companies, Microsoft's long-awaited move to more firmly establish itself in the wireless arena consisted of setting up a joint venture with L.M. Ericsson Telephone Co., the Swedish mobile-phone network equipment provider and handset maker.

The majority of the joint company will be owned by Ericsson and based in Stockholm.

"I know no better place to base the company than here," said Steve Ballmer, president of Microsoft, speaking at a press event held in the Swedish capital. Microsoft earlier this year established a wireless research and development center near Stockholm, which Ballmer called "the center of mobility."

To the surprise of many observers, Ericsson did not even sign up to use the software giant's OS in its products -- it only committed to using Microsoft's new Mobile Explorer microbrowser in some future handsets.

Microsoft, however, had a great deal to gain from partnering with one of the leading companies in mobile telephony. Much of the joint venture's core development and marketing activities will be targeted at mobile-phone network operators, a market with potentially large returns in which Ericsson is already well-established, helping Ericsson come within reach of the world's largest software company.

More importantly for business users, the partnership will drive for more standardized wireless access to e-mail and data residing on corporate intranets, based on Microsoft's Exchange Server platform and Ericsson's wireless infrastructure products, officials said.

"We see this as an important step in our efforts to work cooperatively with the [mobile-phone] industry," said Bob Muglia, the newly appointed vice president of Microsoft's Business Productivity Group.

Microsoft is not alone in signing up European partners to advance its wireless efforts. Hewlett-Packard and IBM have spent much of the past year building closer ties with other mobile players in Europe, most notably Finland's Nokia. Intel also recently announced the establishment of a research and development unit in Sweden that will target the wireless market.

Oracle, meanwhile, has a three-year-old development relationship with Sweden's Telia, the country's largest telecommunications carrier. Located in the Swedish port city of Gothenburg, the joint development team's efforts already have resulted in new Oracle products including Portal-to-Go, the database vendor's first software offering aimed squarely at delivering Web content to mobile phones and other handheld devices. The companies are codeveloping further applications for Portal-to-Go, including an instant-messaging program.

Europe's infatuation with digital mobile phones stands in contrast to the continent's relatively slow adoption of PCs and the Internet. While only about one-fifth of European households currently own a PC, mobile-phone penetration in several countries has reached about 40 percent. In technology-mad Finland, more than 60 percent of the population already has a mobile phone, and the country's largest carrier, Sonera, foresees that wireless subscriptions soon may outnumber fixed-line connections in the Nordic country.

The discrepancy between PC and mobile phone saturation is causing some Internet companies to rethink their strategies in Europe. Online auctioneer eBay, for example, has already launched a trial offering its services to German mobile-phone users.

"In Italy, there is such a high mobile-phone penetration that we are considering offering auctions there via mobile phone without even setting up a Web site for auctions," said Oliver Samwer, eBay's managing director for Europe.

Increasingly, Europeans are using their beloved mobile phones for more than just gabbing. In the United Kingdom alone, the country's 20 million or so users exchanged some 140 million short-message service (SMS) text messages during the month of October, according to statistics from the Mobile Data Association, an industry group in London.