In The Cold And The Dark, High Tech Heat

It's a long trek to Oulu, Finland, a Nordic village some 800 kilometers from Helsinki and only 230 kilometers from the Arctic Circle. But this outpost attracts a stream of visiting Japanese and American technology execs. Some even stay for good, despite the long winters. The attraction: Oulu Technopolis, the world's northernmost science park and home to the world's best telecommunications and electronics technology.

Oulu's success is the result of years of planning. Since the early 1980s, Finland has pushed to make high technology the center of its economy, replacing wood pulp and paper products. Cellular-phone star Nokia Corp., whose stock has risen over 2,000% since 1992, is the country's best-known success story. But it's only one of many Finnish technology pioneers. Oulu alone has 100 startups in fields from software and sensors to optoelectronics and lasers, generating more than $1 billion in annual sales.

Today, nearly a fifth of Finland's exports are high-tech gadgets, up from only 4% a decade ago. The nation's new gloss was partly obscured by a painful recession and brutal economic restructuring in the early 1990s. Deep cuts in the welfare state and corporate downsizing left 20% of the labor force jobless.

TURNAROUND. Now, while unemployment remains high in basic industry, technology companies are expanding rapidly. That, combined with a turnaround in paper and pulp, is expected to boost Finland's gross national product by 6% this year--the strongest growth rate in Europe. The Finnmark, meanwhile, has been the world's second-strongest currency for the past 18 months, after the yen. Finland's turnaround is "an incredible five-year success story," says Gordon Johns, manager of the $170 million Kemper Global Income Fund, 8% of which is invested in Finland.

But the Finns aren't just selling technology abroad. Finland is one of the most wired nations on earth, with more advanced-telecommunications networks and Internet users per capita than either the U.S. or Britain. Most companies have already switched from traditional local-area networks to new broadband networks geared to carry voice, data, and video. Corporate multimedia services also are taking off.

In some ways, it's not mysterious that advanced telecommunications have flourished in this remote northern land. In the late 19th century, Finns developed hundreds of local phone companies to guard against interference by Russian czars who controlled Finnish territory. Although they still enjoy a monopoly over local phone service, 47 local phone companies banded together to challenge state-owned Telecom Finland's monopoly on long distance in 1994. Within four days after they were allowed to compete, they seized 60% of the market. Finland's phone rates are now among the world's lowest.

MULTIMEDIA. Finland also boasts the most advanced telecommunications infrastructure anywhere. Using asynchronous transfer mode (ATM) technology--a new standard for combining video, voice, and data--networks can transfer information 15 times faster than traditional local-area networks. Telecom Finland offers commercial multimedia services over its network at rates as low as a 10th of those in the U.S., Britain, and Europe.

Local startups are working hard to stay on the cutting edge. Three-year-old Oulu-based Elektrobit Ltd. pioneered the world's first entirely cellular office and is launching the first cellular pay phone. Perhaps most important, traditional industries have also undergone a technological overhaul. Even steel, paper, and pulp makers are churning out advanced electronics, from laser measuring devices to sensors and software.

Of course, in a place like Oulu, which has a population of just 100,000, there are some unusual twists. While the region's 4,000 engineers toil in sophisticated labs, most important decisions are made in the sauna. "It's like golf in other countries," says Pertti Huuskonen, president of Oulu Technopolis Ltd. It seems extreme cold, heat, darkness, and isolation can be powerful catalysts for innovation.

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