E-Stonia Becomes Unlikely High-Tech Hub

Thursday, December 15th 2005, 11:23 am

By: News On 6

TALLINN, Estonia (AP) _ Millions of tourists have flocked to Tallinn to enjoy the winding, cobblestone streets in its Old Town since Estonia regained independence during the 1991 Soviet collapse.

But the quaint surface conceals a new high-tech reality: This nation of 1.4 million people that just a decade ago was among Europe's poorest is undergoing a technological revolution that has changed the way its residents do business and produced technology companies that are grabbing the world's attention.

More than 280 wireless Internet points, many of them free, have sprung up throughout Tallinn in the last four years. The black and orange signs advertising them can be seen all over the capital _ even at gas stations, which offer free Wi-Fi to customers while they fill up.

With such widespread access, regular office hours are no longer the norm.

``I'm in a cafe here having breakfast, doing my e-mails, but the cafe next door has free Internet, the one down the street has free wireless Internet. It's just a very convenient way of doing business in a relaxed atmosphere, enjoying yourself,'' said Australian computer programmer Tim Heath, who runs his Internet gaming company _ Heathmont Enterprises _ from Tallinn.

Estonia _ or e-Stonia as some people have taken to calling it _ has also seen an explosion of digital entrepreneurship. The most prominent example is Skype Technologies, which offers users free calls over the Internet and was recently sold to eBay for $2.5 billion.

Started by the same antiestablishment programmers who wrote the music file-sharing application Kazaa, Skype now boasts more than 70 million users since the company's inception two years ago, and its popularity has prompted some to speculate that calls placed over the Internet could eventually replace traditional phone calls.

``The core of Skype ... now has been downloaded two hundred million times and we have 70 million users and we're adding another million in five days, every five days we get another million,'' said Sten Tamkivi, who heads Skype's Tallinn office. ``The core of that software was developed pretty much by three guys so this is something that Estonians are known to be able to do.''

It is not entirely clear even to Estonians how this tiny nation on the fringes of Europe has developed into a small-scale tech wonder. Many attribute it to a strong independent streak combined with high-quality research facilities developed in the Soviet era _ including a computer science institute set up in the 1960s.

``It is very difficult to give a simple answer to that question,'' says Ennu Rustern, dean of the information technology faculty at Tallinn University of Technology. ``But Estonia has traditionally been good in technical research.''

Though many Estonian software experts are self-educated and possess no formal academic education, Rustern says his institution _ the main technical university in the country _ is able to offer tech companies a pool of talent.

Companies like Hansabank, the pan-Baltic banking group with an acclaimed e-banking system, have recruited the best and brightest of Rustern's students _ from software developers to experts in electrical engineering and telecommunications.

Lauri Haav, sales executive at a rapidly expanding Baltic e-commerce site MarkIT, agrees that research facilities have helped build Estonia's technological prowess. ``I actually think it's the educational system,'' Haav said.

Estonia has become the most cyber-oriented state to emerge from the collapsed Soviet Union. A greater percentage of Estonians have Internet access than their counterparts in France or Italy.

But there are no guarantees Estonia will continue to grow as a high-tech center.

For one thing, the Estonian software industry is tiny, employing only a few thousand people. Neighboring Russia has a huge pool of equally talented software developers and programers restless to break out onto the world scene.

Small tech companies here also often lack proper financing to expand their operations, as the Baltic venture capital environment has begun to develop only recently.

But for many young Estonians _ who view the Internet as a right, not a privilege _ the nation's fortunes are tied to the high technology.

``In 30 years we won't have any computers, we will have the Internet available ... everywhere,'' said Kris Haamer, a Tallinn high school student.

Gaming entrepreneur Heath said the digital revolution has already permeated everyday life in Estonia.

``Everything's done on the Internet, project management is done on the Internet, we talk to our clients in Europe over the Internet using Skype, one of the other technologies built from here, and we don't need to sit in an office from nine to five because we're working online in different time zones,'' he said.