On 15 Feb 2007, the Swedish regulatory authority PTS issued a 164-page document (available only in Swedish) containing extensive proposals for a new national broadband strategy. 

The stated aim of PTS is to achieve an increase in the accessibility of broadband infrastructure with the short-term objective of broadband for all households (permanent housing), businesses and public entities no later than 2010 and to promote and protect sustainable retail market competition for broadband services. Broadband is defined in the context of this 2010 target as connections that can be upgraded to a downstream transmission speed of at least 2 Mbit/s. 

Several simultaneous 'policy trajectories' are put forward by PTS to achieve the stated 2010 goals. The first trajectory involves financial and regulatory requirements for government funded infrastructures; the second trajectory addresses regulation of the fixed incumbent operator TeliaSonera's network infrastructure and wholesale activities (including proposals for functional as well as legal separation). The third trajectory focuses on openness and neutrality of (often government-owned or funded) fibre infrastructures. 

T-REGS Note: Sweden is the EU Member State in which widespread local access fibre infrastructure was developed first, often funded and operated by local municipalities or regional governments. Many of these infrastructure projects were started in the early 1990s, and were not notified to the European Commission under State Aid rules. This stands in marked contrast to the situation in many other Member States (recently especially Austria, France, Ireland, The Netherlands, and the UK), where municipal and regional public funding of fibre access projects has come under scrutiny of the European Commission in application of State Aid rules (Article 87 of the EC Treaty). 

An explicit element of PTS' newly proposed policy is to take steps to encourage or ensure that municipal authorities that currently own and operate broadband networks in areas where the commercial roll-out of so-called "future-proof broadband infrastructure" has been carried out, or is possible, should consider disposing of such operations, or alternatively, should take special measures to ensure that competition is not distorted. 

The three 'policy trajectories' put forward by PTS, including potentially substantial regulatory interventions, are as follows:

Trajectory 1: government funded infrastructures

PTS suggests the following: 

a)  Continued government support of initiatives representing a global investment of SEK 1135m (€864m) for the rollout of broadband infrastructure (of which SEK 567.5m (€432m) financed by EU structural funds). 

b) Imposition of minimum requirements on infrastructure established with public funds (e.g. minimum transmission rate). 

c) Any broadband networks financed with 'central government support' should be open to service providers other than the network owner during the (entire) lifetime of the networks.

In order to be able to fulfil point c, PTS is requesting (from the legislator) powers to impose access requirements through regulation and wishes to be given a mandate to monitor compliance and to take the measures available under the Swedish Electronic Communications Act with regard to these networks. 

Municipal authorities are bequeathed with a monitoring and structuring role (data collection of existing infrastructure and rollout plans). PTS also asks for legislation allowing municipalities (as broadband providers) more freedom to allow for cross-municipal collaboration. PTS is also advocating the inclusion of access to broadband in the scope of universal service (in the context of the review of the EU Universal Service Directive 2002/22/EC). This, according to PTS, also brings along the need to re-evaluate and change the financing model for universal service based on the allocation of net service costs between the providers of electronic communications networks and providers of communications services. 

PTS also suggests that the Swedish Government should encourage coordination of construction of telecommunications infrastructure with other infrastructure, e.g. electricity infrastructure.

Trajectory 2: TeliaSonera's wholesale activities (especially the local access network)

PTS indicates firmly that it wishes that all operators can gain access to the fixed incumbent TeliaSonera's local access network on equal terms, in order to achieve long-term and sustainable competition on the broadband market. The aim is to dispel any potential favouritism. TeliaSonera's retail organisation should have the same access rights to TeliaSonera's network as other service providers. PTS considers that this will reduce inertia in the market and improve predictability. 

PTS is of the view that the most suitable model to do away with potential favouritism of the incumbent network for its retail division is to adopt the model of 'functional separation' and/or 'a stronger legal separation'. PTS states that it is convinced that such separation should be based on the traditional divisions used at TeliaSonera, with TeliaSonera Network Sales AB addressing only operators (i.e. wholesale) but not end users. 

T-REGS Note: TeliaSonera Network Sales AB (operating under the trade name 'Skanova') has, already for several years, been a separate legal entity, wholesaling the fixed network infrastructure. Therefore, there is already, in effect, legal separation of wholesale and retail sales of fixed network products in Sweden. The regulatory authority PTS has nevertheless stated that it noted discrepancies of treatment with regard to information flows and differences of procedures for installation and maintenance between the affiliated retail organisation and alternative wholesale customers (alternative operators).  

PTS proposes that the functionally (and/or) legally separated wholesale organisation should provide the products which are currently regulated and which are, to some extent, attributable to TeliaSonera's fixed networks (last mile networks and/or transmission networks). PTS wishes to draft 'principles of equal treatment' (an advanced form of non-discrimination) which should be inspired from the 'Equivalence of Input' concept that has been developed in the UK.

PTS also envisages a complete separation of the workforce and suggests separating all wholesale human resources from the rest of the company. In addition PTS also wants to eliminate any exchange of information between the wholesale organisation and other parts of TeliaSonera that could benefit TeliaSonera's retail operations at the expense of other market players. 

PTS indicates its wish to set up a compliance board (including PTS officials) whose task it would be to continuously monitor the outcome of the proposed functional and/or legal separation model. The compliance board would be the forum to which TeliaSonera would report, but it would also be the place for alternative market players to have their voice heard in the discussions regarding the new separation model. 

PTS encourages TeliaSonera to reinforce such separation (and all the boundaries this implies) voluntarily, as PTS considers that there is limited scope under the current Swedish Electronic Communications Act to impose separation as a sector specific remedy. PTS is however convinced that the new model will bring advantages to TeliaSonera and that this should be sufficient motivation for the company to proceed voluntarily to separation. 

PTS states that the forthcoming revision of the Electronic Communications Act could provide an opportunity to enshrine the possibility for the regulatory authority to impose functional separation. However, the timing of the legislative process, which is reliant upon the revision of EU directives, would not allow new powers for PTS to enter into force before 2009 or 2010. PTS is eager to secure powers to impose separation. In the absence of a voluntary implementation by TeliaSonera, PTS is sufficiently eager to investigate the possibilities of imposing functional separation under the current law (noting that it seems possible in other EU member states) and is openly encouraging the Swedish Government, being a shareholder of TeliaSonera, to proceed in the direction of achieving a voluntary separation. 

Trajectory 3: Fibre infrastructures

PTS expresses its belief that fibre networks will become more and more important, but the regulatory authority is not convinced that it is commercially feasible or socio-economically desirable to install parallel fibre networks everywhere at an access network level. 

In the absence of competition in local fibre infrastructure, PTS believes that network owners should receive sufficient incentives to maintain and upgrade their network in order to serve end users better. PTS also expresses the opinion that fibre networks must be open at an infrastructural level. 

The regulatory authority is especially concerned with regard to local fibre networks which have been established with the aid of various Swedish government authorities and/or EU funding, whereby the networks are owned and often operated by local municipalities or regional governments, and funded also by central government. 

PTS proposes that the Swedish Government should impose more stringent requirements for new projects and PTS suggests that, for already established networks, the supervision of county administrative boards should be intensified. 

The regulatory authority doubts whether the Swedish Competition Authority is empowered under general competition law to take action against a local fibre operator that would be limiting access to its network. Nevertheless, PTS urges the Swedish Competition Authority to consider this on a case-by-case basis. In view of PTS' doubts, it urges the owners of local fibre networks (especially those owned by local governments) to voluntarily set up and adhere to rules of openness (i.e. to allow third party providers access to their networks). 

T-REGS Note: This extensive summary of PTS' proposals and expression of its preferences suggests that, unless voluntary action is taken by network owners (TeliaSonera and municipal/regional authorities, power companies etc.), or unless shareholder or government pressure is effective, and in the absence of formal EU State Aid investigations, or new interpretation of currently applicable law, no immediate effect can be expected from the publication of the PTS proposals. 

The full text (164 pages in Swedish only) of the PTS proposals can be accessed by clicking here.

An English language summary (with different points of emphasis than this T-REGS news item) can be accessed by clicking here.