One trend became obvious during 2006: the rise of mobile broadband traffic. The volume doubled in the six months at the end of 2006 and the start of 2007. Consumer-created content was beginning to take off – and an innovation called YouTube was particularly important. As a result, transmission capacity was becoming a bottleneck in many networks.

This trend gave rise to a strategic focus on a new business segment at Ericsson, with Multimedia taking its place alongside Networks and Professional Services, from the beginning of 2007. This meant Ericsson was taking a serious step into the field of software and services in broadband networks, such as IPTV, music services, media distribution, charging systems and enterprise applications.

Jan Wäreby, appointed to head the new business division, said in an interview with Torbjörn Carlbom in business magazine Veckans Affärer: “In telecommunications, the only application for a century was speech. Now the internet, media and telecommunications are merging.” 

“This market is very fragmented but we reckon that it is growing by about 15 percent every year … By fragmented, I mean that Ericsson is facing many different competitors in various segments of the market. Virtually all the major IT companies and a good many of the smaller ones are working on service platforms, such as IBM and Accenture. In the media and messaging market, there are all the traditional competitors, such as NokiaSiemens and Alcatel-Lucent as well as many others. All over the world, media companies are grappling with their roles and strategies as we enter this digital era. Several have already entered the telecommunications sector. Payment systems is an arena for specialist companies where, for instance, LHS in Germany is one player. Add new participants from the internet, such as Google and Yahoo, and it becomes even harder to work out what is what.”

HUNDREDS OF COMPETITORS

Altogether, Ericsson had hundreds of competitors, some of them giants with global operations and healthy bank accounts. And those involved could be competing in one place and working in partnership somewhere else.

Journalist Carlbom commented: “Everyone is chasing the same mobile users. Giants such as Nokia, Microsoft, Vodafone, Google, Ericsson, News Corp. or whatever have no scruples about using any means at their disposal to gain their share of this market. And there are others, like cable television companies, small interesting service providers and social websites that also naturally want to earn money from mobile phones. Billions are already being spent at a fantastic rate.”

Wäreby could see another “ecosystem” from the one Ericsson currently occupied:

“Traditionally we have been a technological company and this is a new area for our sales organization. They face a huge challenge, to extend their knowledge. Multimedia involves integrating solutions that combine software, systems integration and some hardware … It is the services that call the tune, not the technology. Ericsson has to contribute to the development of solutions that can attract everyone from Chinese peasants and British businessmen to young Swedes and German directors.”

Author: Svenolof Karlsson & Anders Lugn

© Telefonaktiebolaget LM Ericsson and Centre for Business History

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