Dark fibre - one year later - PTS-ER-2009:24
24/06/2009
In June 2008, the Swedish Post and Telecom Agency (PTS) published a report about the state of the wholesale market for dark fibre entitled 'Dark fibre – market and state of competition' (PTS-ER-2008:9). In this report, PTS made the observation that there were serious problems associated with the wholesale market. However, PTS noted potential indications that the market should be able to start moving towards a greater degree of competition without the need for intervention in the form of ex ante regulation. For this reason, the preconditions for imposing ex ante regulation in accordance with the Electronic Communications Act (2003:389) have not been satisfied. However, PTS assessed that signs indicating that the market is moving in the required direction should appear relatively quickly. Otherwise, there could be reason to reconsider whether the imposition of special ex ante regulation was justified.
The intention of the current report is to follow up the previous report in order to determine whether the market is moving in the required direction. Thus, the aim is to describe the current market situation and compare this with the situation one year ago. Based on these results, PTS will then adopt a position on whether the market is moving in the required direction or whether new measures should be proposed.
PTS has established that the shortage of fibre identified last year seems likely to persist especially within municipalities both as concerns end user connections and connections to telecommunication exchanges. This deficit also extends to access lines to mobile base stations, combined with a certain lack of capacity between the backbone network and communities. There also does not appear to have been any change to the impediments to establishment identified in the previous report. Some optical fibre was rolled out over the past year, primarily in the form of complementary additions to the existing infrastructure. This rollout primarily took place in urban networks.
TeliaSonera still owns the largest share of fibre in Sweden and TeliaSonera’s fibre network makes up about 45 per cent of the fibre coverage in Sweden. The other factors that strengthen TeliaSonera's market power are also still present; that is, the consequences of TeliaSonera's vertical integration, the fact that TeliaSonera's infrastructure is difficult to copy and/or replicate and the lack of potential competition. The existing competition comprises local fibre networks that are not capable of fully holding their own in the national market. There is consequently an inherent problem related to competition in the market in the form of a distorted distribution of market power. No long-term change to this is in sight. Changes on the access side primarily comprise individual initiatives from providers, such as TeliaSonera's new dark fibre product 'Skanova Fiber 2009' and use of the urban networks' database system, 'CESAR'.
It should also be noted that publicly-owned fibre-based infrastructure, that is, infrastructure owned by government or municipal enterprises such as urban networks, Svenska Kraftnät, Vattenfall and the Swedish National Rail Administration, jointly have approximately 45 per cent of the fibre coverage in Sweden. This corresponds to TeliaSonera's share of optical fibre.
There is increasing demand for dark fibre as a result of the increased use of demanding electronic communications services and upgrading to new technologies. The shift towards NGN/NGA means that optical fibre is required further out in the network both to connect more end users using fibre and to increase the number of fibre connections between telecommunications exchanges. Upgrading mobile networks in the future will also increase the need to connect mobile base stations to fibre. In the event that problems related to competition persist in the wholesale market, there is a risk of these problems transferring to other adjacent markets, both vertical and horizontal, resulting in the re-monopolisation of fixed access networks and impaired competition in the mobile markets.
Specifically, as regards the development and upgrading of mobile networks, regulation imposed to resolve the problems related to competition will not completely meet the future need for optical fibre as a transmission technology. At the same time, this will require operators to work together on commercial terms for transmission similar to the way in which they have worked together to date as regards collocation and the placement of equipment at base stations.
There is a need for measures in the market as a consequence of the increased demand for dark fibre. This can partly be resolved by the introduction of rules promoting competition. PTS has proposed to regulate TeliaSonera's ownership of dark fibre in the access network by imposing an access obligation in the network infrastructure market (market 4). However, this will only solve parts of the problem.
Just as concerns the mobile networks, there are also problems that cannot entirely be resolved by the introduction of rules promoting competition. For this reason, PTS proposes the following measures:
1. As PTS has previously suggested, the Government should produce a national strategy for IT. This should include a strategy for the publicly-owned infrastructure.
2. Improve regional and municipal planning for IT infrastructure; coordinate this with the national plan and municipal planning under the Planning and Building Act (1987:10) (PBL).
3. Municipalities, both as land owners and owners of urban networks, should act in a way that is competition neutral and work to ensure that infrastructure, including ducting, is available at a level that is as basic as possible.
4. PTS shall investigate whether the preconditions exist for imposing ex ante regulation in respect of dark fibre outside the scope of Market 4; e.g., in the market for terminating segments of leased lines.