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.