Universal Services. Access to telephony - PTS-ER-2008:20
11/11/2008
Access to telephony is a service that historically has been provided by
TeliaSonera (formerly operated by the Swedish state as a public service
corporation, Televerket and later Telia AB) as the only operator. When the
Telecommunications Act (1993:597) came into force in 1993, only Televerket
could offer a telephone service. When the Telecommunications Act was
introduced, the idea was that the state was responsible for providing access to
telephony at uniform prices to everyone in Sweden. When Televerket was
incorporated in 1993, it was enjoined licensing conditions to provide telephony
services to all who requested it. In 2003, the Telecommunications Act was
replaced by the Act (2003:389) on electronic communication (LEK) and the
licensing conditions that was in force for TeliaSonera since before, remained in
force transitionally until April 24, 2004. In 2005, the Swedish Post and
Telecom Agency (PTS) put TeliaSonera under an obligation to, at an
affordable price, meet reasonable requests for access to the public telephone
network. TeliaSonera appealed against PTS’s decision and the County
Administrative Court in Stockholm annulled the decision on February 5, 2007.
Therefore, there is no operator designated to provide telephony services today.
Historically, the national level of ambition in Sweden has been, and still is, very
high, in terms of access to telephony for everyone. The national goal is that
everyone in Sweden shall have access to telephony in their permanent
residence or permanent place of business. The market almost meets this high
level of ambition, but there are areas where market forces on a commercial
basis cannot satisfy everyone's demand for access to telephony. According to
PTS, governmental intervention is needed in these areas to maintain the same
high level of ambition as in the past.
At the end of the year 2007 and in the beginning of 2008, PTS noted that there
was a number of subscribers who no longer had access to telephony in their
permanent residence or permanent place of business. In the first place, these
were subscribers who previously had had access to telephony. Most of these
subscribers have been offered wireless services and today, less than 10
households lack ability to make and receive calls. Some of these subscribers
may possibly be connected through the CDMA2000-network in the 450 MHz
band. These subscribers are mainly residents of northern counties and located
far from public telephone networks.
PTS’s analysis also shows that there is a great risk that another 2 500
subscribers will be without connection to the public telephone network in 5
years time. The reason for this is that the copper network will be removed in
rural areas where, according to TeliaSonera, it is too costly to maintain and
preserve the existing network. These subscribers are not covered by other
networks, according to PTS’s analysis. The cost for solutions to provide
telephony services to non-commercial areas will vary to a large degree. It may
range from small investments on the subscriber's premise to major investments
in the operator's network. So far, it is too early to tell if the majority of the
investments will be small or large. In extreme circumstances, the cost of
reaching an individual subscriber could be exceptionally high. For example, if it
would be necessary to set up base stations in inaccessible terrain, the cost could
be several millions of SEK per base station.
The market for fixed telephony has changed over the last 2 years. On the one
hand, the turnover in this market has declined and on the other hand,
TeliaSonera's dominance in the fixed telephony market has declined. Also, in
2005, the analogue NMT 450 network was run by TeliaSonera. Therefore, it
was this company that owned and ran the two networks (NMT and copper
network) which has the best geographical coverage in the country. Today the
CDMA2000-network in the 450 MHz band is run by the company ice.net.
Besides this, PTS notices a trend of decrease in the number of subscriptions of
fixed telephony and increase in the number of mobile subscriptions, and
subscriptions for IP-based telephony. There is therefore a strong demand for
mobile communications. Traffic has partially migrated from the fixed networks
to mobile networks. Traffic volume in the fixed networks has almost halved in
6 years. The convergence to IP telephony and mobile telephony has increased
competition, as telephone operators, cable companies and Internet service
providers can offer similar services.
As market competition increases, it reduces the former monopolist's ability to
cover the additional net cost of providing universal services with profits from
other customers, because then customers would switch to another operator.
To put an operator, in a competitive market, under an obligation to provide
universal services without financing or with insufficient funding, means that
the operator meets with a competitive disadvantage compared to those
operators who are not put under such obligation. To let an operator alone bear
the net cost of delivering a universal service is therefore primarily relevant in
markets that are not deregulated, or where competition is still very limited.
Therefore, in a competitive market, the net cost for providing universal
services can become an unfair burden for the service provider.
As described above, competition in the Swedish market has developed
significantly. Therefore, it would not be justifiable to charge a single operator
with any major net costs. The expected net costs for providing access to
telephone services to the end-users who are without telephone in this case,
come to such amounts that there, according to PTS, is a great risk that these
net costs would be considered unduly burdensome for a single operator to bear
on the current Swedish telecom market. To ensure that households and
businesses have access to telephony in this case and similar cases, it is therefore
in PTS’s opinion necessary with governmental actions. The conclusion is that,
since the indirect benefits of being a USO provider often is negligible while the
direct net cost per household may be relatively high, it would be an unfair
burden for the operator to have to provide the service without compensation
for the net costs.
The basis of a universal service is a desire to ensure services to everyone that
are considered socially and economically desirable, but commercially unviable.
In other words, universal services, also known as USO services, are a minimum
set of services that all citizens should have access to. A USO-service can either
be provided through a decision by PTS to designate a service provider or
through public procurement.
In LEK there are following options:
- The market meets the need of USO services and the authority does not need
to take action.
- If the market does not in itself provide universal services to anyone who
requests it and at an affordable price, PTS can put appropriate operator(s)
under an obligation to do so. This obligation shall, according to the principal
rule, be made without funding.
- If it turns out that the obligation to provide a universal service is unduly
burdensome, the service can be procured with state funds.
Because affected subscribers usually live in very sparsely-populated areas, it
would, according to PTS’s estimates, be very expensive to provide these
subscribers access to the public telephone network for any operator that is put
under such an obligation.
The alternative at hand is procurement with state resources. According to the
directive, which is the basis of LEK, it is possible to establish a fund, that
operators and / or the state contributes with funds to. This fund would cover
the costs of unduly burdensome obligations to provide access. However, such
a possibility is not implemented in LEK today. Given that there may be a need
for such funding, the agency has submitted a bill to the government to allow
the creation of a fund. Also according to the proposed bill, PTS shall have the
right to issue regulations.
According to PTS’s proposed bill, all basic universal services are covered by
possibilities of different financial solutions, provided that the provision of such
services is unduly burdensome. This will ensure a minimum level of provision
of universal service to all end users in Sweden, without operators being put
under an obligation which can only be accomplished with a loss or a net cost
that goes beyond the normal commercial conditions.
In order to achieve a long-term, sustainable and flexible funding solution, the
possibility of financing through a fund that operators and the state contributes
to, should be established.
The majority of EU countries, where the USO Directive has been
implemented into national law, the so-called fund solution has been chosen as
a possible way of financing or as the only way of financing. In other words, the
majority of countries within the EU has found reasons to allow financing of
the USO-operators with a fund.
PTS's view is that the state has the primary responsibility for the electronic
communication where the market fails to provide services on commercial
terms. The state should therefore, together with operators, contribute with
means to a fund which provides for the financing of services of advantage to
society in commercially unprofitable areas. How large this share should be is a
question that PTS needs to analyze further, as well as how operators may
contribute to the fund. More detailed descriptions of the fund and means for
the fund etc. need to be worked out and established within the framework of
the proposed regulation right. These include the design of the fund, the
calculation of net costs of providing services, which method to use for
calculating the net cost, that the operators shall provide enough detail on
request, the resources of and contributions to the fund to be cut, principles for
how funds from the fund will be distributed and exemptions from fees.
The issue of the bill is now at the government table. In the budget proposition
for 2009, funds are allocated to address the acute situation of permanent
residences or fixed places of business which do not have telephone services
today.