BuddeBlog

Sweden is among the top-ranked countries for broadband penetration, with about half of all households subscribing to the service. The government has been keen to promote the country as one of the world’s ICT leaders, and to reach the level of penetration enjoyed by its near neighbours Iceland and The Netherlands.

To this end the government has been guided by its ICT policy, formulated in late 2005, which included allocating SEK600 million (€64 million) to deliver broadband to all areas of the country during 2006 and 2007.

In an important update to this policy, the Swedish regulator in February 2007 published its strategy to deliver broadband of at least 2Mb/s (itself an indication of customer expectations) nationally by 2010. Part of the strategy is aimed at addressing poor broadband availability in a number of rural areas (representing about 136,000 households and businesses), as well as the lack of competition in areas served by a single provider.

The nuts and bolts include continuing government support of SEK1.135 billion to roll out broadband infrastructure, of which EU structural funds would account for SEK567.5 million. Being publicly funded, such infrastructure should meet the minimum transmission capacity, and be open to other service providers.

The key lies in how the regulator intends to provide this open access network. It has taken two cues from the UK model, by which the structural separation of BT resulted in the creation of a separate wholesale division, BT Openreach as a provider of broadband access to all service providers on equal terms. BT Openreach is hugely successful: having started operations in January 2006, the division closed the year with more than 1.3 million lines supplied to customers via more than 200 local loop unbundlers.

At present, LLU in Sweden is still characterised by discriminatory behaviour on the part of the incumbent, TeliaSonera. The regulator has made some headway in providing other operators with increased access to TeliaSonera’s network via LLU since 2000, yet take-up has been stifled by pricing levels which leave little reasonable profit for most new entrants. Although connection prices for fully unbundled loops have fallen since 2004 they remain among the highest in the EU. In addition, TeliaSonera has for the last two years challenged the regulator’s order to include bitstream in its wholesale offering to competitors. A recent court ruling (this month) refusing the company leave to appeal the order, and denying it any other legal option, will go some way to increasing competition and reducing broadband prices.

Given the incumbent’s intransigence, the regulator has understandably become more bold. Its plan is to make the LLU market competition-neutral by separating TeliaSonera’s wholesale division from its retail operations. This new division, most likely the unit managing fixed assets (copper pairs, optical fibre, etc.), would be formed as a separate entity from the rest of the company, to focus solely on wholesale, and be provided with separate buildings and staff.

A second borrowing from the UK model is the notion of Equivalence of Input, by which TeliaSonera would be obliged to provide competitors and its own retail operations with wholesale products on equivalent terms. On a legal level, the regulator envisaged amending the 2003 Electronic Communications Act (EkomL) to bring about structural separation by 2009 at the latest.

The regulator also has is sights on a similar treatment of the country’s fibre networks. Sweden has one of Europe’s strongest fibre platforms, the importance of which will increase in coming years as a result of greater demand for transmission capacity, particularly if technical progress in cable and DSL does not keep pace with demand. Given the cost of fibre rollouts, it is generally unfeasible commercially to install parallel fibre networks at an access line level, and thus the regulator proposed opening fibre networks at an infrastructural level. Although the country’s Competition Authority cannot now force companies to open their networks to other providers, the regulator is prepared to suggest legislating for open fibre if necessary. This would be particularly relevant with networks funded by state or EU funds, or managed by municipalities.

These moves have sound precedence. Openreach has shown how profitable a well-managed wholesale division can become, albeit in a far larger market, while the open fibre network, as is being built by KPN in The Netherlands, must be considered in terms of national interests (economic well-being, job creation) as well as social benefits (almost limitless)

Henry Lancaster – Senior Analyst Europe BuddeComm

See also:
Sweden – Broadband Market – Overview, Statistics & Forecasts;
Sweden – Key Statistics, Telecom Market & Regulatory Overviews;
Europe – Broadband Market – Overview & Statistics;
Europe – Regulatory Environment.

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Double play and triple play models have been on the table since the early 1990s, when cable telephony was added to cable TV offerings. Around the world, various telcos and media companies have attempted mergers, alliances and partnerships to move into this new area. However, the full digitalisation of their networks and increased broadband penetration was necessary before a more economically viable model could be developed.

One of the first companies to explore triple play models in this new environment was FASTWEB in Milan, Italy. Back in 1999 it began to use FttH networks, and has since expanded into DSL networks as well.

TransACT in Australia was also one of the pioneers of the model, using a VDSL network solution.

Australia also saw the first merger between a TV company and a telephone company. This was mainly aimed at an infrastructure level, but in 2005 a combined media and telco company, Soul (SP Telemedia Ltd) (see separate report), began expanding rapidly and entered the triple play market. Today Soul has the largest data network and voice network after Telstra, the largest fully converged voice, video and data IP-based access network in regional Australia and the largest voice-enabled IP network.

Japan and Korea were other early adopters of the triple play model and they have made significant progress, which has spilled over into Hong Kong, Taiwan and other South East Asian markets. For more information, see separate reports:

·         Japan – Convergence – Triple Play & Digital TV;

·         South Korea – Convergence – Triple Play & Digital TV.

Hong Kong Broadband Network Ltd (HKBN) has traditionally been a leader in this field, and was one of the early companies to offer a pay TV service over its broadband network. Today more than 35 countries offer broadband TV services. The service can be used on TV sets and PCs, and is very competitively priced against other pay TV services.

It was in 2004 that further progress was made in Europe, when the regulatory regimes started to deliver more commercially viable ULL services. During 2006 the triple play model in Europe saw widespread deployment by a number of network operators and providers. Through mergers and buyouts, the year also saw the first quad-play offers, notably in the UK, with mobile telecoms added to existing bundles of fixed-voice, Internet and TV. For more information, see separate report: Europe – Convergence – Triple play and Digital TV.

Italy is one of the core countries in Europe for triple play and converging media applications, and its large population offers enormous potential for content providers. The delivery of triple play services through broadband has been helped by the country having one of the fastest growing broadband sectors in the EU. For more information, see separate report: Italy – Convergence – Triple Play & Digital TV.

In mid-2006 the Netherlands, after Denmark, had the highest level of broadband penetration amongst the Organisation for Economic Co-operation and Development (OECD) countries. One of the country’s major media companies Talpa (John de Mol, the inventor of Big Brother and other shows) had a 40% share in one of the country’s leading new telcos, Versatel, since sold to Telia Sweden. This company rapidly developed triple play models; however it was only in late 2006 that Versatel surpassed the 100,000-subscriber mark it had initially hoped to reach at the end of 2005.

The killer application in the Netherlands is football, with Versatel owning the live TV rights for all the important games. For more information on the Netherlands, see separate report: Netherlands – Convergence – Triple Play & Digital TV.

In the US, RBOCs and Multiple System Operators (MSOs) compete to be chosen as the pipeline into the home to deliver triple play services. According to a report published by Business Week, by November 2005, Comcast and the other MSOs with their triple play bundles, had taken 4.4 million phone customers from the four RBOCs. For more information on triple play in the US, see separate report: USA – Convergence – Triple Play & Quadruple Play.

In terms of pricing, basic access to all three services should be made available for around US$50/€50, with extra services being made available at small incremental charges – for instance, US$5 for all-you-can-eat calls, US$10 for a higher broadband speed, US$5 for a games package, US$10 for a set of broadband TV channels, etc.

It was in 2006 that we saw the emergence of quadruple play (quad-play) models that incorporate fixed-voice, Internet and TV with mobile communications as well. More players are planning to enter this market throughout 2007.

Paul Budde

Updated February 2007

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The enterprise IP telephony market grew by nearly 98% in 2004, according to a report from IDC. Also the Australian enterprise IP telephony market grew 29% during the second quarter of 2004 compared with the first quarter.

The Australia Quarterly IP Telephony Enterprise Equipment Tracker, which records sales of IP phones, single-mode IP PBXs and dual-mode IP PBXs, also found that IP phone sales more than doubled in 2004, growing by 176% year-on-year, with over 200,000 IP Phones shipped in 2004.

IDC expected the enterprise IP telephony market to reach more than $500 million in 2008, fuelled by increased IP phones shipments and Pure and Enabled IP-PBX revenue growth.

All segments of the market grew by more than 15% and as expected, IP phones experienced the highest growth with 44% sequentially. More IP phone vendors are entering this market – such as Zultys – which are offering competitively priced Session Initiation Protocol (SIP) phones.

The majority of the projects continued to be greenfield deployments and end-of-life PABX replacements, but implementations were boosted by the end of financial year and the Y2K LAN refresh cycle. The finance sector was a great contributor to growth, with some large financial institutions initiating deployments of IP telephony.

Managed IP telephony offerings by telecom carriers and systems integrators were also helping the rapid adoption of VoIP in enterprises. Handset subsidies, like those offered by Optus were also proving to be quite successful.

Most vendors in 2004 experienced double-digit growth. Notable deals for the year included Westpac with Cisco, Ernst & Young with Alcatel, and Victoria Office Telephony Service with NEC.

In 2005 IDC predicts more strategic partnerships between equipment vendors, service providers/ISPs and systems integrators.

Cisco maintained its lead of the local market in both IP PBX and IP phones, with 37% overall market share. The company is continuing its focus on medium-to-large users, whilst addressing the smaller end of the market with its IPFX product. Avaya was placed second with 22% of the overall market.

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