The Swedish road to liberalization

Comment The Swedish road to liberalization Bertil Thorngren

The recent Swedish parliamentary decision (June 1988) is described against the history of the country’s telecommunications, which allows Sweden an unusally straightforward road to liberalization, starting from ‘zero-based ’ legislation, and adding only the minimum of rules which might be needed to meet existing international obligations and national objectives. Dr Thomgren is Director and Head of Corporate Planning, Swedish Telecom Group, Marbackagatan 11, S-l 23 86 Farsta, Sweden (Tel: 46 8-713 3077; Fax: 46 a71 3 3588).

By

the

end

barriers removed wards

only

payphones, vices

the

arc

markets

for

of scparatc,

networks

monopoly.

for any

Thus

tions in Sweden

all

PBXs, scr-

competition.

has ncvcr been covered

among

1990 on-

(including

for

fact, the building

tory

few were

etc) but also network open

ly owned

last

market

From

the

of terminals

In

number

Ericsson,

of companies

by local

time

Swedish

communities.

At

T&corn

its major

had

the

business,

increased

in other

parts

market.

For

Swcdcn

was significant.

condi-

can be claimed

to be

in the world,

years

its time,

after

patented, actually

long-distance

but gradually share

privatc-

by any stxtu-

competitive

strength in the emerging market

Bell’s

as well as a

formed

its

of

the

the market

in

;I

few

Only

invention

w;ls

the city of Stockholm had more telephones in abso-

lute terms than larger cities like Lon-

and well in line with the rccommcnda-

don, Berlin or Paris. Intense compcti-

[ions of the EC Green

[ion fuelled

as contemporary

Paper,

conditions

the Netherlands

as well

in the US, and Japan.

Sweden rates

Background Actually,

radically

regulation’

new,

but

rather

traces its roots back to events of more ago. In contrast

P’TTs of Continental UK) was

Televcrkct born

into

commercial mission.

link

to

the

separation budget sidics

Europe

a free There

postal

major

market

bodies

whether

competition

between

of telephony rather a

network

subsidiaries

of

intense

number

of

century,

number

of the local

ten years

debating increasing

share should be converted statutory or not. The

that such a monopoly carry the burden

argument

of providing

service

areas only

served

by commercial

erations.

In

meantime

Telecom

demonstrated

eagerness

Bell

panies,

TELECOMMUNICATIONS

to

buy

was

would be able to

populated

the

to a

network

sluggishly

operators, Tele-

the

share, and was able to

to the sparsely

witnessed

of

successfully gained a

Swedish Telecom’s

monopoly

are

allowed

design, and so

spent

market

sub-

a

parliament

full-fledged

No

in

At that stage the Swedish

the

government

later began

companies.

any

cut.

turn

buy an increasing

and

first few decades

including

the

never

other

in Sweden

local and regional

Around

was the

which

network

Swedish Telecom

and

clear

UK)

on.

with

service

came

the

of penetration,

market,

from from

Telccom)

given or taken. The

in

circle of low prices and high

as its one

has been to or

to the

(and the

(Swedish

telecom

only

(which

than

more efficient

this ‘zero-based

is nothing

by the peak of the Indust-

rial Revolution positive

than a century

94

phone and LM

purpose

market

the most open

the UK, Earlier versions of this paper were presented at the Conference on Telecommunications Deregulation in London, 22 November 1988, and at the Reseau Conference on ‘Telecommunications Will Make the Difference’, Venice, 5-7 April 1989.

1989

in Sweden.

not

kinds

of

to a free telecom

more

not

op-

Swedish only

local

its

com-

but also its readiness to invest

POLICY

April

1990

in less profitable

parts of the country.

As a consequence the typical was fair for

the parliament

Swedish position:

enough

1970s

‘de

the first

liberalization

for terminals

Swedish

The

Telecom

de-

(of the

attached

to the

network)

brief,

developments

been

more

in

like

digital

back in the

was the first in Europe

to

buy the licence,

and spent the R&D

monies

to produce

later

needed,

with Ericsson. 90%

and mar-

Telecom

on to co-develop

SL-1,

the

and

MD-110

As a result, more than

of the major

PBX

lines are now

digital.

Thus

Sweden

the

large

chain

of

the

decision of 1980 decision

of

1980 to begin opening the markets

for

terminals

parliamentary attached

corn networks

to Swedish

Tele-

was quite logical. Swed-

ish Telecom

European

possibly meet all the possible custom-

countries.

From

the

have

start

the penetration

levels

high, or higher,

than in the US.

growth

has been

of economics political

Thcrc

had no restriction

on cntcring market

I lowcvcr,

including which

the

sparsely

indcpcndcnt

Swedish

Tclc-

for provid-

entire

Sweden with

country,

populated

companics.

difference

the data other

in the US arc often

vious

has

and

corn has been rcsponsiblc of

arc Tclc-

cntitics,

communications

ing covcragc

than by

Swedish

corn. like other European

arcas.

by ac-

utilization

of scale rather of course.

as The

like that

marked

or legal decisions.

diffcrcnccs,

new

been

of Swedish Tclecom.

quisitions based on cfficicnt

arcas,

served

Another

is of

course

by ob-

scale.

is only the size of California

far less population

(8.4

million

As Sweden never

been

is a small country, possible

major transnational Volvo, and

to

ABBIASEA.

companies of

the

such as

These

and

other

activities

borders.

outside

the

One consequence

this is that they have constantly able

to

make

accurate

comparisons

with the best services available nationally,

of

been intcr-

and to keep Swedish Tcle-

corn on its toes to meet these standards domestically. Given the lack of legislation,

customers

no empty

threat

will go elsewhere are

not

crucial

met.

POLICY April 1990

they say they

if their requirements

One

customer

this size make

when

example pressure

that it could not

er needs for variation a profit). kinds

of

terminals,

phone

(at least not with

Therefore

tclcx

the markets for all

terminals

(data

terminals,

modems

sets, including

phone’)

were opcncd

and

tclc-

the ‘first

tclc-

to competition

during the I9HOs.’ The

l9SO

parliamentary

also gave Swedish

decision

T&corn

the right

to form a holding company, plc, which cnahlcd corn

Group

domestic

T&invest

the Swedish Tclc-

to get

and

markets,

direct

access to

international

finance

to form joint vcnturcs and so

on. This is a ‘structural

separation’

as

in the US. Activities

carried out within

Telcvcrkct

scparatc

require

ing, supervised As

long

met,

account-

by cxtcrnal

as these

managcmcnt

auditors.

requirements

arc

and

arc

or rather

planning

encouraged,

cover the full range of corporate vitics,

within

‘unregulated’ that

Electrolux,

have long since had 50% or their

national

it has

neglect

companies

SKF, Saab-Scania,

more

realized

permitted,

today).

TELECOMMUNICATIONS

mid-1970s

of

events in the US than in most other

of AT&T,

‘Since Swedish Telecom has installed ‘plugs and sockets’ in almost every room in every building, for decades there has been no way to make any distinction between the first and subsequent telephones. The customers simply buy the sets, plug them in, and, if needed, also install any further inside wiring on a do-ityourself basis. Swedish Telecom. however, is still under obligation to deliver a ‘basic telephone set’ on a customer’s request. This apparatus is also adapted to heavy-duty work under difficult conditions in sparsely populated areas, etc. Nevertheless, the customer is free to buy sets elsewhere.

Swedish Telecom,

Parliamentary

Swedish and US developments In

deployment

PBXs.

were

voiced.

have

early

ket the Northern

and prevailed

when

mands for further markets

need

fucfo competition’

was accepted

up to the

No

monopoly.

facto monopoly/de formula

that this

(‘lagom’).

a statutory

took

both areas.

Swedish

under Computer puter

to acti-

‘regulated’

and

One

say

Tclecom

could is

working

III rather than Com-

II conditions

compared

to the

us. Also

back in 1981, Comvik.

vate competitor

a pri-

to Swedish Tclccom,

started

building

its own

cellular

network

in competition

the

NMT

Tclccom telecom

system

run

by

and the other organizations.

1989 the Swedish

nationwide with

Swedish

Scandinavian By the end of

part

of the NMT

system will have close to 350 000 users and there

will bc more

of

this

users throughout

was

the

ing bought their terminals

than 700 000

Scandinavia,

all hav-

from a free

95

Commrnl

market

with

suppliers.

close

The

to

30

Comvik

different

system,

its own proprietary

terminals.

than 20 000 users.

Even

represents

real

using

has less

so, Comvik

competition

in

both

price and service levels. Another TV,

competitive

area is cable

which by the end of 1989 will serve corre-

sponding to about 50% of the potential (namely

populated

the

parts

used

or

any radio or TV by

the

in

use

or

is needed

joint

households.

use

by

the

‘regular’

llowcvcr. Cable

others,

from

formed

the

by private

is increasingly business’,

protected

minimum

or

the

tion needed to meet international national Later

in 1958 the Swedish

ment

and

obligations.

also

decision

took

to permit

pany Comvik

govern-

a precedent-setting the private

com-

to access the frequencies

needed

to open

satellite

over

up competition

the

Atlantic,

by

between

Sweden and the US.

Summary

has hcen more ‘tightly

100 Telc-

share

TV

in

market. as

United

and companies

in an increasing

priccportion

The

common view, among Swedes as

of

the market.

decision of 1988 of spring

This

might

ing

and

still

be a valid picture

other

in

Thus,

when

it comes to tclccom(and

all

publications

the historical

consitlcr

freedom as the natural

Advocates the

tradition

of restrictions

burden

of

such

competition.

media).

tion

and

arcas

long since ex-

posed to international

process.

completely

traditional

as tclsconlniunications,

necessary.

were

than

public concern, but not in others

1YSS contained some final steps of the

The markets for PBXs

regulated’

‘laissez faire’ in a number of respects.

munications

decision

is that the country

sonic areas. such as liquor sales, farm-

and co-op house

payphones

only

of special rules and legisla-

than

successfully

parliamentary

This

considered

with

less

competing

(coin)

of

proof

is to stats.

must

that

carry

they

arc

Silence the lack of Icgisla-

and the caution

in creating

new rules which might unduly

any

hamper

opened by the end of lY8Y and 19SX

the dynamics of markets and technolo-

respectively.

gy, or which might simply

payphones All

(The

already

was

markets

market

for

card

competitive.)

are on an ‘open for

all’

significant

liamentary Swedish

decision

Telecom

sibility

and

was

with a minimum

outside

Tclccom test

‘The

National

Council’

some

parliamentary

a pragmatic. There

matter-of-fact

ing issues,

the most crucial being the

conditions

under which open resale of

from

leased circuit capacity can be allowed. This

(STN)

or

issue

has been entrusted

govcrnmcnt

committee,

and is to report March

1 Janu-

body can be considcrcd

the

to a

which

in-

cludes datacom users’ rcprcsentativcs

Telecommunications

in

attitude.

are, of course, some remain-

its operations

However,

of debate, guided by

in or

A new indcpcndcnt

‘micro-version’ Oftcl

of

before

results

Telcn:imnd

started

ary lY90. This

Even has for

laboratories,

Sweden. Statcns

British

respon-

private

body.

FCC.

of its earlier

lY8X

from

Consequently was

relieve

accepted

years

;I

prove.

countries

decision

to

equipment..

Swedish

approved

as

other

taken with a very large majority

for the testing and approval

customer that

as experiences

the

Another

be ‘bypas-

sed’ by reality,

part of the par-

basis.

96

munications

well as non-Swedes,

arc

The

trade

existing

Ombudsman).

individual

owners,

Parliamentary

fair

the

the concept that trlecom-

for

such US

(the

underlines

and with

permit

market

cahlc

authorities

rest

no

At present Swedish

corn has the largest

‘The historical tradition is to consider freedom as the natural state’

cooperation

right,

Constitution,

will

As receiving

signal is considered

citizen’s

registration

an

which may be

nearby neighbours.

an essential

As

from a number of

in the market,

individually

with

densely

can instead buy their

okvn dishes (TVRO) suppliers

more

of Sweden).

option customers

protection

practices

a ‘normal

close to 1 000 000 households, market

consumer

before

the

end of

1000.

Presently,

no class licences or other

of Oftcl

or

the

permits

arc needed for data traffic

and

contrast

to

the

quite a number of what in the UK

are

for

called VANS

for

responsibilities

TELECOMMUNICATIONS

have been operating

POLICY

April 1990

Commenr

years. Also, means between world. a

the absence of legislation

that

no

distinction

is

made

voice and data in a digital

It is not realistic

distinction

in

more than 50%

a

to make such

network

of the trunks

ready digital, providing kbps services,

where are al-

switched 6456

pre-ISDN

services and

must

of course

agreements

mendations.

Taking

tional

etc) is therefore development,

Here,

as in other

areas,

Sweden

operating

under

private

and recom-

part

fora (the ITU,

in interna-

GATT,

CEPT,

a necessity for further as well as for maintain-

ing as much consistency with ongoing activities the US

so on.

take due account of

international

and other

as possible

within

the EC,

international

mar-

kets.

Appendix Conditions in Sweden, 1989 CPE

rrwrkets

on Open, requirement

to register

basis.

entrance;

test data from as

domestic

acccptctl. The

No

before market

as

well

subsidiaries

(incl~cding payphotre).

a free-for-ail

principle

puter

pliance is supervised

of self-testing

acccptcd. The

conand

rcplaccd by simple registration. Err1rcrtrccil .sc*rriw.s. Open, ;I

liccnce or to rcgistcr

offering

to obtain

ONP.

operation

Competing

diffcrcnt

nct-

technology.

nationwide

requirement

of network

where

is prac-

the arca of cclfular

competing

networks

access to the PSTN

radio.

have had

since IYXI.

since IYXI.

in No

for inter-operability.

(wd

free-for-all permits only.

Gcncral

frorctiofis.

supcr-

of fair trade practices, consum-

er protection, regular

etc. is covered by the

authorities

(Ombudsman)

covering all kind of businesses ing

on

basis. No requirement

or

registration

for

transmission

frequency permit, on VSAT

Open,

VSATs).

Two-way

telecommunications,

a for

regulatory

performed

receive-

Telecom

requires

transferred

no other constraints

operations.

Cub/e TV.

Open,

lowing lY88,

on

a free-for-all

No franchising,

tive tcndcrs

thus

for building

competi-

of networks

available also in the same gcogmphical

area. Cable operators

dered

carriers

media content. through

not

are consi-

concerned

(Content

with

is regulated

media laws, outside

the area

of telecommunications.)

Strlccticml

such

marketed

by

Group,

Competitive

separation.

activities,

as VANS the

Swedish

are structurally

TELECOMMUNICATIONS

activities

to appeal by an external

agency. As

a country,

in tclecom

cquipmcnt

cludcd

the

in

code. Swcdcn

Swcdcn

is

the view that trade should

GATT

hc in-

procurcmcnt

is also supporting

posals

that trntfc

should

be included in

pro-

in tclccom scrviccs ;I

future

GATT

and

CPE

Tclecom

separated into

POLICY

ixstrcs. Swedish Tclccom

Rcrminitq

on record as rsqucsting existing

restriction

leased circuits’

includ-

computers.

should

be removed,

mentation

of

functions

as part

a parliamentary the registration

full

is carried

being

Thus,

fol-

decision

of CPE

in

will

be

of a new, scparats Telecommunica-

flat

kind

of

‘usage-dcpcndrnt

The

matter

Swcd-

rates instead

special government representation

from

its

of any

charging’.

has been rcfcrrcd

to

;I

committee,

with

datacom

user

organizations. The

historical

of standards

any ‘common

out by another

body (SIS-

and open participa-

implc-

customers.

for

drvclopmcnt direct

tclcphony)

market/cost-based

support

tory

with

(Statens

for

pending

has also announced

Telcnamnd,

The

ITS)

ish T&corn

Swedish

are

to new bodies.

Council

SIN).

the

administration

agency, the National tion

of

earl&

is

that tfic still

on ‘pure rcsalc of

(also

pricing for business

Also,

the responsibility basis.

but under

other

agrccmcnt on trade in services.

etc.

TVROs

duties,

from

char-

capacity

on equal terms (transparency)

~tC’gll/(JtOry

si~rvic~3.

with

Com-

and subject

GATT.

Provision

vision C’c~lllilrrr

US).

separation

before or after

scrviccs.

works,

in

by external

the administration’s strict

actively promoting

tiscd within

on a frcc-

for-all basis. No rcquircmcnt

conditions

to Com-

tered auditors.

IEEE

abolished

III

for separa-

(comparable

laboratories

in accordance with

conditions

tion accounting

international

by manufncturcrs

ccpt of type approval

law, or under requirement

absence of any statu-

monopoly,

require

and conscqucntfy carrier’

a pragmatic

possibility

of

concept, might solution.

One

could be the USC of some

tion of all parties concerned, including

kind of access charge as in the US

international

‘bridge’ the time gap until fully noncompromised market pricing can be

in Sweden.

computer The

firms

present

standardization

pro-

to

cess is focused on active participation

implcmentcd

in

ers. It is also sensible not to block the

international

(CCIIT,

ISO,

on establishing

standard-setting ETSI,

etc) rather

any deviating

than

national

standards. Frequency

April

1990

possibilities

is still

part of

for

custom-

harmonization

with

the outcome of ongoing international work

allocation

for all business

(ONP),

on

open

CEI/ONA,

network

provision

etc.

97

Commenf

Some orders of magnitude Swedish telecommunications Sweden

has 8.4 million

of California.

market

inhabitants

and an area of 450 000 km’,

Main

telephone

Data

terminals/PCs

lines

5600000

667:lOOO inhabitants

1000000

500: 1000 office employees

NTPs Cellular

roughly the size

or twice the area of the UK.

radio terminals

Fax

250 000

125: 1000 office employees

350 000

100: 1000 cars 75: 100 workplaces

150 000

Because

of competitive

modems,

fax terminals,

supply,

official

etc. only estimates

figures

are

no longer

available

for

based on surveys, etc.

Prices at 1.7.89

SEK 0.23

$ 0.04

f

Local calls (within

(for 6/3 minutes)

(for 6/3 minutes)

(for 6/3 minutes)

0.66-l

0. I I-O.2OImin

0.07-O. 12fmin

5.35-6.9Wmin

0.87-I.

0.53-0.69/min

Rcsidcntial

59-62lmonth

9.3_5-lO.O3/month

5.H7-6.17/month

Business

106/month

17.35/month

9.6O/month

a radius of two

0.02

miles in Stockholm) Trunk

calls

(90 up to 1500 km) Sweden-USA Monthly

time) l7/min

charges:

Installation

charge:

Rcsidcntial

93

151.29

93.03

Business

1410

22x. 18

140.30

US$

98

.25/min

(low/peak

I = SEK 6. IX, and f I = SEK 10.05, at I. I .90.

TELECOMMUNICATIONS

POLICY April 1990