Barrier to the establishment of broadband - PTS-ER-2007:3
29/01/2007
The core of the IT policy is for Sweden to be an information society for all. The rollout of IT infrastructure will predominantly take place on market terms. Sparsely populated areas often lack the prerequisites that are necessary for the commercial feasibility of a market-driven rollout of infrastructure. For this reason, the Swedish Government has decided on a series of supportive measures totalling approximately SEK 5bn for the rollout of infrastructure with a high transmission capacity. This broadband support from central government is being allocated during the period 2001-2007.
According to Swedish municipal authorities, collaboration between the local population and the various relevant bodies, such as municipalities and regional cooperative bodies, has been key to the successful rollout of broadband in many places. The municipal authorities also state that the broadband support from central government has been an important factor behind the establishment of broadband coverage.
The biggest barrier to the establishment of broadband throughout the country is the fact that Sweden has a large surface area with a low population density. The fact that Sweden is sparsely populated also means that the customer base is often too limited for it to be commercially feasible for yet another operator to make the investment needed to offer competing broadband services in an area.
An estimated five per cent of the Swedish population is connected to a telecommunications exchange that is unable to offer broadband using xDSL technology. Other broadband technologies can offer additional coverage, but due to many factors, there are still residential and business customers without access to infrastructure with a high transmission capacity.
As many as 130 000 subscribers (2.5 per cent) in the fixed network would not be able to receive broadband for various technical reasons (such as pair gain equipment installed or the length of subscriber lines) even if they were connected to a telecommunications exchange offering xDSL. It has also become apparent that up to two per cent of fixed network subscribers face never being able to receive broadband through xDSL as they may need to change over to a GSMbased connection via Telia Sonera's product, Telia Fastmobil.
One way of achieving better area coverage for wireless broadband in sparsely populated areas would be to also permit operations in frequency bands below 1 GHz. However, these frequency bands have no frequency space available at the current time. A decision to utilise frequency space that is made available in the band (470 - 862 MHz) for purposes other than wireless broadband means that this frequency space would be 'locked' for the foreseeable future and this makes it more difficult to achieve the objective of access to IT infrastructure with a high transmission rate for everyone, particularly those in sparsely populated areas.
According to the municipal authorities, there are difficulties in their relationship with Telia Sonera. In order to fulfil their responsibility to plan the rollout of broadband infrastructure, municipal authorities are dependent on information about the infrastructure that is available. However, Telia Sonera often fails to provide the necessary information.
Telia Sonera has announced that it will stop selling dark fibre in February 2007 if the company needs to set aside resources in the form of funding, time or human resources. This will also apply even if the purchasing operator offers to pay for all associated costs.
PTS's supervision of the area of local loop unbundling (LLU) suggests that there are significant problems for those operators who want access to Telia Sonera's network. These problems contribute to the creation of barriers to effective competition in the broadband market. In the end user market, for example, this leads to problems arising when changing operators and moving a subscription.
Another problem that is hampering the development of effective competition is that PTS's decision from November 2004 concerning the broadband product of bitstream access lines has been caught up in lengthy legal proceedings. Bitstream access lines are a product which provides operators with the opportunity of offering broadband services in areas where the customer base is too small for investment in own equipment in telecommunications exchanges through LLU.
The report's international perspective suggests that most of the countries studied have regions that are sparsely populated and where the potential customer base and thus the demand for broadband services are far too limited to provide operators with sufficient incentive to set up operations there. The most common forms of central government intervention include direct financial support for rollout, attractive loans subsidised by central government and public authority investment in rollout projects.
The rollout of wireless broadband in both Finland and Denmark must cover areas of these countries lacking broadband infrastructure.
A very common measure that has been undertaken in most of the countries studied and aimed at reducing barriers to entry for new market stakeholders is to impose obligations for stakeholders with significant power to offer access to networks through products such as bitstream and LLU. These measures have reduced barriers to entry for new stakeholders. In turn, this has led to the gradual rollout of competing IT infrastructure in pace with growing customer stock.
It is PTS's assessment that the barriers reported seriously impede the continued rollout of broadband in Sweden. With this in mind, PTS's intention is for its future proposals for a broadband strategy in Sweden to state measures that the authority views as necessary for the removal of barriers and so that Sweden can achieve the IT policy targets that have been set and retain its competitive edge in the sector.