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
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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