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A large country in Northern Europe, Sweden is covered mostly with forests and lakes. Sweden is mainly populated in the south and in coastal areas, with a population of 9 million people living in 4.2 million households and a population density of 20 inhabitants per square kilometre.

 

GDP per capita in Sweden at $38,493 was the eighth highest in the world in 2004 according to the International Monetary Fund. The world's highest GDP per capita was in Luxembourg at $69,737, while the UK was fourteenth at $35,548. Income distribution in Sweden is one of the most even in the world.

 

The telecommunications sector in Sweden was fully liberalised in 1993; with the Telecommunications Act 1993 setting out the philosophy of the regulator, Post-och Telestyrelsen (PTS), to give priority to furthering consumer interests rather than promoting competition for its own sake.

 

The Swedish Government is committed to extending the information society; with the aim of providing all citizens with the opportunity to benefit from IT. As such, Sweden was the first country in Europe to develop a broadband policy, and in 1999, the government recommended that the state should develop a fibre network.

 

Around SEKr5.8billion (EUR600 million) of public financial aid was set aside for the provision of this network, which has resulted in the deployment of some 200 metro networks in more than one hundred towns. The government has an agreement with electricity utility, Svenska Kraftnät to build this broadband backbone network, which will eventually connect all of Sweden's 289 municipalities to a national broadband network.

 

In December 2002 the Swedish incumbent operator, Telia AB, and the incumbent operator in Finland, Sonera Oyj, merged to create TeliaSonera. The Finnish state currently holds a 13.2% share of the operator while the Swedish state holds a 43.5% share. The Ministry of Industry, Employment and Communications is responsible for the Swedish state holding but it does not have a direct involvement in the management of TeliaSonera.

 

Sweden has a very high amount of international bandwidth for a population of its size. According to the International Telecommunications Union (ITU), Sweden had around 17.5Mbps of bandwidth per inhabitant in 2004. This was the third highest bandwidth per inhabitant in the world; trailing Denmark (around 35Mbps per inhabitant) and The Netherlands (around 20Mbps per inhabitant). At that time, the UK had the fourth highest bandwidth per inhabitant with around 13Mbps.

 

With regard to ICT usage, the latest figures show that in 2004, 80% of households had a PC, while 78% of all households had access to the internet. This is the second highest PC penetration and third highest internet penetration out of all the OECD countries and confirms Sweden as one of the most advanced nations in terms of ICT usage. Iceland leads the OECD for PC penetration at 86% of households; while Korea leads for internet penetration, also at 86% of households. High levels of ICT adoption provide an excellent base for the adoption of broadband. (fig.1)

 

 

 

At the end of June 2005, broadband lines were calculated at around 1.6 million. This represents a growth of 180,000 connections, or 13.8%, over the first half of 2005. (fig.2)

 

 

 

The market growth is one of the lowest within the OECD countries, and compares poorly with the 15.2% growth reported across the OECD and the 16% growth worldwide for the same period. (fig.6)

 

 

 

 

 

Figures published by Point Topic place Sweden in tenth position in the world in terms of broadband penetration per head of population; with 16 broadband connections per 100 inhabitants in June 2005. The Netherlands, with 22 broadband connections per 100 inhabitants, had the highest level in Europe. Korea boasted the world's highest broadband penetration level with 26 connections per 100 people. (fig.3)

 

 

 

 

In comparison with OECD countries, Sweden is ahead of the average broadband penetration level of 11.8% of the population. (fig.4)

 

 

 

 

In terms of broadband households, Sweden had a penetration level of around 35% of households in June 2005 placing it outside the worlds top ten for household penetration. This is significantly lower than the household penetration in Korea, the highest in the world, which had a household penetration level of 81% of households at that time. (fig.5)

 

Sweden was an early leader of broadband penetration in Europe, largely due to the low cost of broadband services and the high internet penetration base in the country, as well as early government intervention. However, operators raised the cost of their services in order to ensure long term profitability and due to this and the fact that the Swedish market is dominated by flat rate services as opposed to the capped usage, entry level services seen in other countries, growth of broadband subsequently slowed. The continued absence of volume and time based services that appeal to lighter users has seen broadband growth remain low.

 

In terms of the business market, there are around 520,000 businesses in The Netherlands; with small and medium sized enterprises (SMEs) accounting for around 99.8% of them. Latest figures, in 2004, show that 96% of all enterprises with 10 or more full time employees had internet access. The figures also show that 75% of all enterprises with 10 or more full time employees used a broadband connection. This is the second highest business broadband penetration level in Europe, trailing only Denmark, at 80%. (fig.7)

 

 

 

 

Despite the relatively high penetration of broadband, availability of broadband services is not yet ubiquitous. TeliaSonera claimed that its ADSL network was available to 92% of households by September 2005. Furthermore, more than half of the households in Sweden are passed by fibre infrastructure. Although cable TV networks are fairly extensive, the majority of these lines have not yet been modified for broadband access. (fig.8)

 

 

 

 

Nevertheless, the availability of 'second generation' services is one of the highest in Western Europe. Figures from Analysys Research show that in March 2005, 71% of all households could access broadband services at speeds of 8Mbps or higher; whilst Glocalnet claimed in July 2005 that it had extended the coverage of its 8Mbps DSL product to 80% of Swedish households. There are also many ADSL2+ services with download speeds of 20Mbps or higher, and some FTTx services of up to 100Mbps available.

 

The dominant broadband technology in Sweden is DSL, which accounted for around 65% of all broadband connections in June 2005. Fibre and cable had almost equal shares of the market, at around 17% each. (fig.9)

 

 

 

 

With such a substantial share of the broadband market, Sweden is one of the world's leading countries for the deployment of fibre. Its success is largely due to the high proportion of the population living in a small geographical area; more than 50% of Sweden's workforce lives within the three main cities, many of whom live in blocks of flats.

 

Many of the fibre networks have been built by organisations other than telecommunications operators. Sweden was one of the first countries in the world to see the deployment of these operator-neutral local networks. These are built by municipalities, housing associations and local utility providers and are opened to a range of suppliers including ISPs, TV companies, and telephony suppliers.

 

Fibre services in Sweden are typically deployed through a 100Mbps fibre link to a block of flats that is then shared via an Ethernet LAN, offering each flat a maximum 10Mbps two-way connection. ADSL2+ and VDSL services are available to business and residential users with higher download speeds than shared Ethernet. These services are at similar prices and are available within the same areas that fibre services are available. Fibre therefore has no advantage over DSL services in price or speed, and as DSL is favoured by the incumbent, fibre has yet to wrestle a large share of the market from DSL. As 100Mbps services are introduced directly to the premises, and more bandwidth intensive services are launched, this speed advantage over DSL may see fibre taking a greater share of the market in the future.

 

As well as technology competition, competition has also been stimulated in the market by LLU (local loop unbundling). Sweden has been one of the most active country markets in this area. As at June 2005, Sweden had the second highest LLU share of the DSL market in Western Europe at 28.7%. Analysys Research calculated that 298,547 local loops were unbundled by the end of June 2005. TDC Song and B2 Bredband are the most significant operators who offer DSL over unbundled local loops. (fig.10)

 

 

 

LLU operators were given a boost in December 2003, when PTS ordered the incumbent, TeliaSonera to lower its prices for LLU access. It ruled that the incumbent had been discriminatory by charging different prices to different operators.

 

TeliaSonera has the highest share of the broadband wholesale market in Sweden. At the end of June 2005, TeliaSonera DSL lines accounted for 46% of all wholesale broadband connections. TeliaSonera's share of the retail broadband market is slightly lower at 37%. This is one of the lowest incumbent retail shares in Western Europe. The high level of competition that has resulted in the low incumbent retail share has also had a positive impact on the choice of services available in Sweden, with 'second generation' broadband packages broadly available. (fig.11)

 

 

Although mainly a DSL operator, TeliaSonera has in the past provided services over other technologies. Having previously owning cable infrastructure, one of the conditions of the TeliaSonera merger, imposed by the EU, was that Telia would have to dispose of its cable subsidiary, com hem. It was sold in April 2003 to EQT Northern Europe for SEK2.15 billion (EUR236 million). It has also provided some subscriptions over Ethernet infrastructure. Having its own copper network already in place has made DSL a more economically viable technology for the incumbent, and as a result, TeliaSonera has stopped marketing Ethernet in the residential sector and has concentrated on ADSL2+ and VDSL technologies for its higher speed services.

 

TeliaSonera's main broadband competitor, B2, has taken a different approach by concentrating mainly on high speed Ethernet and VDSL connections to households. Having originally offered 10Mbps services over Ethernet, it is now in the process of upgrading these connections to 100Mbps, at no cost to the user, and aims to finish upgrading all lines by the middle of 2006. However it has started to migrate its VDSL users over to ADSL2 and ADSL2+. Although ADSL2+ looks set to become B2's main access technology, it has announced that it intends to deploy VDSL2 services sometime during 2006.

 

On a content level, B2 launched an IPTV service to its FTTx subscribers in 2004 and extended it to include its DSL subscribers in 2005. A VoD service was launched in June 2005. Its purchase by Telenor will allow it to increase its effectiveness in this area by capitalising on expertise from Telenor's broadcasting arm, Canal Digital Kabel TV. As yet B2 has not bundled its products into a triple-play offering, preferring to market its services as high-end premium products.

 

Other competitors to have entered the Swedish telecommunications market are The Danish and Norwegian incumbent operators. The Danish incumbent, TDC, was the first to enter with its purchase of Song Networks in November 2004, the new company being named TDC Song. In May 2005, the Norwegian incumbent, Telenor, agreed to purchase B2, the second largest broadband provider in Sweden. The SEK6 billion (EUR650 million) deal was given regulatory approval in June 2005.

 

TDC Song has so far concentrated mainly on the business sector, and as a result, its connections accounted for just 1.7% of total broadband connections in June 2005. There are signs however that it may become a bigger player in the residential sector. It aims to increase the coverage of its residential DSL network from around 33% of households in June 2005, to 40% by the end of 2005, and eventually to 50% of all households. Its launch of a 28Mbps ADSL2+ service in August 2004 follows the trend in Sweden of product differentiation by speed of service. It has also announced its intention to compete on a content level by the introduction of an IPTV service during 2006.

 

A recent development in the market has been the introduction of naked DSL (NDSL). During September 2005, PTS made an announcement that TeliaSonera would be fined SEK100 million (EUR10.8 million) if it did not begin providing naked DSL connections to the market within four weeks. As a result the incumbent began offering naked DSL connections in October 2005. The introduction of naked DSL will potentially allow users to discard their PSTN telephone lines in favour of mobile telephony or VoIP services. As a result this could accelerate fixed-mobile substitution and also increase the likelihood of bundled, mobile and broadband services being introduced in the future.

 

In terms of pricing, basic 'First generation' broadband services with download speeds of 512kbps to 2Mbps are available in Sweden for around EUR30-35 per month. This is slightly expensive when compared to other Western European markets. Similar services in The Netherlands, which has similar GDP per capita, but higher broadband penetration than Sweden, cost around EUR20-30. In France and the UK, where GDP per capita and penetration levels are similar to Sweden, similar services cost around EUR25-30 per month.

 

Furthermore, higher speed 'second generation' broadband services have been available in Sweden for longer than in many other European markets. These services are similar in cost to the 'first generation' services, ranging from around EUR25 to EUR45 per month for 8-24Mbps services. These are similar in cost to 'second generation' services in France and the UK, though cheaper than in The Netherlands, where these services cost around EUR60-80 per month.

 

Furthermore, in June 2005, PTS launched a new web service that makes it easier to compare the prices of telecommunication and internet offers. The service combines the various charges that affect the total cost and combine them into a monthly cost, making them easier to compare in an equivalent manner.

 

In conclusion, government investment in a national high-speed infrastructure, high GDP per capita, high levels of ICT penetration and high levels of international bandwidth per inhabitant have resulted in Sweden having a mature and well developed broadband market. Although broadband penetration is not as high as some of the leading Western European nations, such as Denmark and The Netherlands, there are a high proportion of users who have a higher speed connection; Analysys Research estimated that 38% of residential subscribers had a 2Mbps or above service at the end of 2004.

 

A unique feature that separates the Swedish market from others was the early adoption of many operator neutral networks throughout the country that were built by municipalities and utilities. These allow ISPs and other service providers to offer their services without any investment in expensive infrastructure.

 

The high number of higher speed subscribers has come about from Sweden's uniqueness in having FTTx and VDSL services available to residential customers, as well as businesses for some time.

 

Nevertheless, the broadband market has yet to achieve tele-density levels (Analysys Research calculated that there were 89 lines per 100 people in Sweden in 2004). It is therefore expected that the broadband market will continue to grow; driven by increased use of IP-based applications and the delivery of triple-play service offerings.

 

In 2005, Sweden has a competitive broadband market; with a range of suppliers offering broadband across a choice of DSL, LLU, cable and fibre.

 

 

Broadband

Sweden

FTTx

LLU

Country report

Market

Europe

Naked DSL

Government investment

Second generation

High speed

Operator-neutral

ADSL2+

VDSL

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