Report PTS-ER

Transcription

Report PTS-ER

Report Number
Date
PTS-ER-2009:32
30 November 2009
Open networks and
services
Open networks and services
Report number
PTS-ER-2009:32
File reference
09-6874/69
ISSN
1650-9862
Authors
Camilla Grimelund Thomsen
Stina Levin
Åsa Möller
Patrik Sandgren
Peter Thörnqvist
Mattias Viklund
The Swedish Post and Telecom Agency (PTS)
Box 5398
SE-102 49 Stockholm
+46 (0)8-678 55 00
[email protected]
www.pts.se
PTS
Swedish Post and Telecom Agency
2
Foreword
This report, which is the result of a Government Assignment, focuses on
openness in the electronic communications market. This is a subject that is both
extensive and complex, and each area merits a much more detailed study. The
report nevertheless illustrates that the potential of users to gain access to certain
content or a certain service can be ultimately dependent on either one's ability to
gain access to land or to dark fibre, or a network neutrality principle. It is
important to be aware of the long chain of factors influencing openness on the
Internet and the openness of electronic services. One of the aims of this report is
to engender this kind of awareness.
PTS has found the work on this report to be challenging. However, it is
gratifying to see the interest that the area of open networks and services has
generated. Collaboration and mutual understanding are needed to push this area
forward and to safeguard the values represented by openness.
Stockholm, November 2009
Katarina Kämpe
Deputy Director-General, PTS
PTS
David Troëng
Head of Competition Department
3
Contents
Foreword .............................................................................................................. 3
Sammanfattning ................................................................................................... 6
Summary .............................................................................................................. 8
1
1.1
1.2
1.3
1.4
1.4.1
1.4.2
Introduction ............................................................................................. 10
Openness, IT and the Internet in Swedish society
10
Government Assignment on 'openness'
13
Aim
14
Structure and delimitations
14
Structure of this report
14
Delimitations
15
2
2.1
2.2
2.2.1
2.2.2
2.3
2.3.1
2.3.2
2.3.3
Openness and the electronic communications market .............................. 17
Openness: what, why and for whom
17
The electronic communications market
20
Adding value
20
Market structure
23
Openness in the electronic communications market
25
Openness and adding value
25
Openness at different levels of the value chain
25
Forced openness through special regulation
29
3
3.1
3.1.1
3.1.2
3.1.3
3.2
3.2.1
3.2.2
3.2.3
3.3
3.3.1
3.3.2
3.3.3
3.4
3.4.1
3.4.2
3.4.3
3.5
3.5.1
3.5.2
3.5.3
3.5.4
Current openness situation....................................................................... 33
The natural resource level
34
Production resources
34
Entry terms
35
Market rules
38
The infrastructural level
40
41
Entry terms (for those wishing to lease production resources)
43
Market rules
43
The transmission level
47
48
Entry terms (for those wanting to lease production resources)
48
Market rules
49
The IP level (public Internet and local IP networks)
51
52
Entry terms
52
Market rules
53
The service level
57
Introduction
57
59
Entry terms
59
Highly publicised debates about rules and legal discussions at the service
and IP level
59
Market rules
68
Current measures taken by other countries and international organisations that
affect 'openness'
73
Summarised reflections: tension in the breakpoint between openness and
adding value
76
Challenges identified
76
Natural resource level
77
Infrastructural level
79
Transmission level
80
IP/Internet level
81
Service and content level
83
Conceivable future – a review of potential scenarios
86
Trends in the present and future electronic communications market
87
Four conceivable scenarios for the electronic communications market of the
future
90
3.5.5
3.5.6
3.6
3.6.1
3.6.2
3.6.3
3.6.4
3.6.5
3.6.6
3.7
3.7.1
3.7.2
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4
4.1
4.2
4.3
4.4
4.4.1
4.4.2
4.4.3
4.4.4
4.4.5
4.4.6
Conclusions and recommendations........................................................... 92
Openness creates opportunities for innovation and competitiveness, but must be
balanced against other interests worthy of protection, such as investment
incentives and network security
92
Openness is promoted by ensuring non-discrimination and functioning
competition
95
As openness is of great importance, it is crucial that providers are clear about
lock-in periods, restrictions to Internet access and the accessibility of services
when they market their services and in their agreement terms
95
Proposed measures to counter challenges to openness
96
98
100
Transmission level
103
IP/Internet level
104
Content and service level
107
Concluding reflections
110
Appendix 1 Market stakeholders: interviews and input .................................... 124
Stakeholders
124
What does openness mean and what characterises openness at different levels of the
value chain?
127
How does openness function at the different levels of the value chain?
129
Which business models are applied and how do they work?
134
What needs to be changed as regards openness?
139
Are there any threats to openness?
142
Abbreviations ................................................................................................... 145
List of terms and concepts................................................................................ 147
Bibliography ..................................................................................................... 149
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Sammanfattning
PTS har i arbetet med regeringsuppdraget om öppna nät och tjänster kommit till
följande slutsatser:
1. Öppenhet skapar förutsättningar för innovation och konkurrenskraft
men måste balanseras mot andra skyddsvärda intressen såsom
investeringsincitament och nätsäkerhet.
2. Öppenhet främjas genom säkerställande av icke-diskriminering och
fungerande konkurrens.
3. Eftersom öppenhet är av stor betydelse är det viktigt att leverantörer vid
marknadsföring och i avtalsvillkor är tydliga med bindningstider,
begränsningar i Internetaccess och åtkomlighet avseende tjänster.
I Sverige har användningen av elektronisk kommunikation kommit att bli en
förutsättning för i stort sett all verksamhet – såväl inom näringsliv och offentlig
sektor som i det privata livet. En allt större del av människors vardagsliv utspelar
sig till exempel på Internet, där tillgången till kommunikationstjänster bl.a. bidrar
till såväl kunskapsutbyte som en livskraftig samhällsdebatt. IT och elektroniska
kommunikationstjänster i alla former spelar även en avgörande roll för
produktiviteten och innovationskraften i samhället, och för tillväxten i svensk
ekonomi.
I denna rapport analyseras begreppet öppenhet och dess betydelse för en
konkurrenskraftig och innovativ bredbandsmarknad.
Rapporten utgår ifrån marknadens aktörer och struktureras kring beskrivning av
en värdekedja uppbyggd på fem nivåer – naturresursnivå (markanvändning,
kanalisation och spektrum), infrastrukturnivå (passiva kablar och master),
transmissionsnivå (utrustning som transporterar dataströmmar), IP-/Internetnivå
(utrustning för dirigering och adressering av trafik) samt tjänste- och
innehållsnivå (innehåll, tjänster och användarutrustning). I rapporten identifieras
- på samtliga nivåer av värdekedjan - utmaningar mot öppenheten.
En central utmaning i dagsläget utgörs av begränsningar i tillträde till passiv
infrastruktur (t.ex. svart fiber), vilket är en kritisk insatsvara för produktion av
bredbandstjänster. Begränsningarna skapar etableringshinder eftersom
bredbandsinfrastruktur är mycket kostsamt att nyanlägga och det ofta finns stora
effektivitetsvinster med samutnyttjande. En viktig aspekt i detta är offentliga
aktörers agerande och PTS vill därför betona att dessa aktörer främst bör inta en
marknadskompletterande roll. En annan central utmaning går att spåra i
bristande kundrörlighet pga. långa bindningstider, höga byteskostnader och andra
inlåsningseffekter. Detta leder till försämrade förutsättningar att ”rösta med
fötterna”, vilket i sin tur riskerar att ge upphov till en lägre innovationstakt och
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sämre möjligheter för slutanvändare att slå vakt om sina rättigheter. En tredje
utmaning kan identifieras i en ökad efterfrågan på mobilitet vilket gett upphov till
en brist på spektrum med egenskaper som gör det lämpligt för yttäckande trådlös
kommunikation, något som begränsar möjligheten till Internetaccess överallt.
En utmaning som berör flera nivåer i värdekedjan är öppenheten kring
hanteringen av den elektroniska kommunikationen på Internet, även benämnd
nätneutralitet. Nätneutralitet handlar kortfattat om att all Internettrafik ska
behandlas lika i enlighet med köprinciper. Detta möter svårigheter när t.ex.
kommersiella kvalitetskrav eller säkerhets-, robusthets- eller andra samhälleliga
krav föranleder avsteg från en helt neutral trafikhantering. En viktig fråga blir var
balanspunkten ligger och när det kan anses att gränsen för vad som utgör
befogade ingrepp i nätneutraliteten och öppenheten har passerats. Genom
förändrade regelverk efter översyn av det s.k. Telekompaketet får PTS en större
roll när det gäller att verka för nätneutralitet samtidigt som kraven på transparens
och konsumentinformation ökas.
I rapporten föreslår PTS en rad åtgärder i syfte att säkerställa en öppenhet som
tar alla skyddsvärda intressen i beaktande – inte minst investeringsincitament och
nätsäkerhet. PTS föreslår starkare principer för likabehandling vid anläggning av
ny infrastruktur, ökat tillträde till befintlig infrastruktur, riktad information till
konsumenter om fallgropar och vikten av öppenhet samt mer transparens
angående eventuell förekomst av trafikbegränsande åtgärder såsom prioritering
och blockering.
PTS förslag till åtgärder kommer inte att lösa alla utmaningar men de ger en god
grund för att skapa medvetna konsumenter som kan slå vakt om sina rättigheter,
fler aktörer som kan erbjuda mer mångsidiga och innovativa tjänster på alla
nivåer i värdekedjan samt bättre handlingsberedskap ur regulatoriskt hänseende.
Detta borde sammantaget bidra till en högre samhällsnytta och att
konkurrenskraft och innovationsförmåga kan fortsätta att utvecklas.
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Summary
The Swedish Post and Telecom Agency (PTS) drew the following conclusions
when working on the Government Assignment regarding open networks and
services:
1. Openness creates opportunities for innovation and competitiveness, but
must be balanced against other interests worthy of protection, such as
investment incentives and network security
2. Openness is promoted by ensuring non-discrimination and functioning
competition
3. As openness is of great importance, it is crucial that providers are clear
about lock-in periods, restrictions to Internet access and the accessibility
of services when they market their services and in their agreement terms
In Sweden, the use of electronic communications has become a prerequisite for
basically all activities, both within the private and public sectors as well as in the
private sphere. For example, a growing proportion of our daily lives takes place
on the Internet, where access to communications services promotes the
exchange of knowledge as well as vigorous public debate. In addition to this, all
forms of IT and electronic communications service play a major role in society in
terms of productivity and innovativeness, and as regards the growth of the
Swedish economy.
This report analyses the term 'openness' and its significance for a competitive
and innovative broadband market.
Market stakeholders form the basis of this report, which is structured around the
description of a value chain comprising five levels: the natural resource level
(land use, ducting and spectrum), the infrastructural level (passive cables and
masts), the transmission level (equipment that transmits data streams), the
IP/Internet level (equipment for routing and addressing traffic) and the service
and content level (content, services and user equipment). The report identifies
the challenges facing openness at all levels of this value chain.
One of the major challenges at the present time is restrictions as regards access to
passive infrastructure (e.g. dark fibre), which is a critical input good for the
production of broadband services. These restrictions create barriers to entry, as it
is very expensive to lay new broadband infrastructure, and shared use often
results in considerable efficiency gains. One key aspect here is the behaviour of
public stakeholders; thus, PTS wishes to emphasise that these stakeholders' main
role should be to complement the market. Another major challenge that can be
identified is a lack of customer mobility owing to long lock-in periods, high
switching costs and other lock-in effects. This results in fewer opportunities to 'vote
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with one's feet', which in its turn risks slowing down the pace of innovation and
reducing the potential of end users to safeguard their rights. A third challenge
that can be identified is the increased demand for mobility, which has given rise
to a lack of spectrum with properties enabling wireless communications with high area coverage,
something that limits the potential for Internet access everywhere. A challenge
that affects several levels of the value chain is openness in terms of how
electronic communications are dealt with on the Internet, also known as network
neutrality. In brief, network neutrality means treating all Internet traffic in the
same way in accordance with queuing principles. This presents difficulties when,
for instance, commercial quality, security, robustness or other public
requirements result in a departure from completely neutral traffic management.
One of the key issues is where a balance can be achieved and when the limit for
what comprises a justified intervention in network neutrality and openness is
deemed to have been exceeded. A changed regulatory framework following a
review of the 'Telecom Reform Package' will help to give PTS a more significant
role when striving to achieve network neutrality while also increasing the
requirements imposed on transparency and consumer information.
In this report, PTS proposes a number of measures that aim to ensure openness
while taking into consideration all of the interests worthy of protection, not least
investment incentives and network security. PTS proposes enhanced principles
for equal treatment when establishing new infrastructure, increased access to
existing infrastructure, targeted information for consumers about pitfalls and the
importance of openness, as well as greater transparency regarding the possible
existence of measures that restrict traffic, such as prioritisation and blocking.
PTS's proposed measures will not resolve all of the challenges, but will provide a
good basis for creating knowledgeable consumers who can safeguard their rights,
more stakeholders that can offer more diverse and innovative services at all levels
of the value chain and an improved readiness to act from a regulatory
perspective. Overall, this should help to achieve greater social benefits and the
continued improvement of competitiveness and innovativeness.
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1
1.1
Introduction
Openness, IT and the Internet in Swedish society
The use of electronic communications has become a prerequisite for basically all
activities, both within the private and public sectors as well as in the private
sphere.
For example, a large proportion of our daily lives takes place on the Internet,
where access to communications services promotes the exchange of knowledge
as well as vigorous public debate. Information shows that Swedes are
increasingly making use of digital fora for their communications, for example via
'social media', Internet fora, blogs, etc. 1 Sometimes, this trend is described as the
democratisation of content and the emergence of a participatory culture on the
Internet. 2
What's more, all forms of IT and electronic communications services play a
major role in terms of productivity and innovativeness in society, and as regards
the growth of the Swedish economy. Since the telecommunications market was
opened to competition in the 1990s, there has been rapid technological progress
in recent years as more and more traditional services have become IP-based and
accessible via the open Internet. A large number of service innovations within
the sector originate from small IT undertakings and private entrepreneurs that
have taken advantage of this development and the open nature of the Internet
when developing services and for distribution purposes. Successful Swedish
innovations within services and content have also been deployed around the
world (for example, Skype and Spotify). A high level of technological
development and social participation has been cited as contributing to this
development. 3
According to recent data from Statistics Sweden (SCB), which has been analysed
by the Swedish Trade Council, the export of Swedish services is growing. The
fastest growth has been observed in IT services exported, which has more than
quadrupled in the 2000s. 4 IT and telecom services currently represent almost 15
per cent of the total export of services. Overall, these figures appear to verify the
image of Sweden as a future service society, where services, both on their own
and together with other activities, will play a more prominent role. Despite the
financial unrest that prevails, Swedish e-commerce is also continuing to show
positive growth rates. 5 It has been forecast that e-commerce will have a turnover
World Internet Institute, Svenskarna och Internet 2009 [Swedes and the Internet, 2009], 2009
http://www.idg.se/2.1085/1.119368.
3 http://www.independent.co.uk/life-style/gadgets-and-tech/features/why-sweden-rules-the-web1640950.html.
4http://www.swedishtrade.se/PageFiles/164820/Tj%C3%A4nsteexporten_rapport_091014.pdf?epslanguag
e=sv).
5 Sales over the Internet rose by nearly 10 per cent in the first quarter of 2009.
1
2
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of SEK 21.5bn in 2009. 6 In addition to this, optimism continues to be relatively
high among consumers, with almost 80 per cent believing that they will be
making Internet purchases over the next six months. 7
The increasing use of electronic communications services is significant. Research
clearly shows that IT is a key component for the competitiveness of a country. 8
This involves both having a broadband infrastructure in place and a population
with the necessary ability to use this infrastructure. IT infrastructure with high
transmission capacity is also important for regional and local development.
Broadband underpins both regional and local development potential and creates
opportunities for industry as well as rural prosperity.
Sweden currently has a prominent position as regards access to and the use of
electronic communications services. It is important to safeguard this position so
that a high level of competitiveness and long-term growth can be maintained in
the future.
Table 1 Selection of competitiveness rankings linked to IT and
broadband in 2009 9
Measurement / Party responsible for
Name of study
publishing /
Organisation
Broadband
European
Performance
Commission
Index
E-readiness
Economist
rankings
Intelligence Unit
Ranking of
Sweden
1
2
Networked
Readiness Index
World Economic
Forum
2
Broadband
Quality Score
Saïd Business School
and others
4
The open Internet is also very important for openness and efficiency within
public administration, as well as the ability of citizens to participate in and
influence political work (e-democracy). This is achieved through more citizens using
Internet communications services to manage their contact with public authorities
and elected officials. For example, this means benefitting from public
information and services (for example, minutes from municipal board meetings
Since 2000, the Swedish Retail Institute has been monitoring the development of Swedish retail trade on
the Internet using the e-barometer, www.hui.se/web/E-barometern.aspx.
7 Since 2000, the Swedish Retail Institute has been monitoring the growth of Swedish retail trade on the
Internet using the e-barometer, www.hui.se/web/E-barometern.aspx.
8 For an overview, see, for example, MICUS, 'The impact of Broadband on Growth and Productivity',
Düsseldorf, 2008.
9 Bredband – definition, penetration och position [Broadband: definition, penetration and position], PTS
(memorandum dated 8 October 2009)
6
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and the Swedish Tax Agency's e-returns and other e-Government) as well as being
able to enjoy the benefits of and participate in other issues that affect society (for
example, information about elections, news, etc.). According to recent figures
from the Organisation for Economic Co-operation and Development (OECD),
Sweden is leading the way in terms of the development of e-Government and as
regards the use of public e-services by citizens. 10 It is emphasised that access to
open standards, open and shared platforms between public administrations and
citizens and the use of open software are all key to being able to expand and
improve e-Government within the European Union. 11
The current overall objective of the IT policy in Sweden is that Sweden must be
a sustainable information society for all. 12 This implies that women and men,
young and old in every part of the country must be afforded access to a modern
IT infrastructure and IT services of public benefit so as to simplify everyday life
and improve their quality of life. The provisions of the Electronic
Communications Act (LEK) aim to ensure that private individuals, legal entities
and public authorities in Sweden have access to secure and efficient electronic
communications and the greatest possible benefit regarding the range of
electronic communications services and their price and quality. 13
The Swedish Government has formulated a strategy for the broadband sector
relating to this. 14 This strategy further defines the overall objectives of the IT
policy and emphasises the importance of infrastructure for realising these
objectives. Among other things, the Government also points out that extensive
usage of IT and the Internet is good for Sweden as regards growth,
competitiveness and innovativeness.
Consequently, there is a political ambition to generate long-term consumer
benefits throughout Sweden by means of secure communications, the effective
utilisation of resources and functioning competition for all stakeholders. One
conceivable tool to promote these important factors is moving 'openness'
forward in different ways. In many respects, openness appears to be an
unavoidable topic when discussing the Internet and the electronic
communications market. In particular, openness is presented as a prime factor
behind the historical development of the Internet, and similarly as an explanation
when understanding the current situation and as a point of departure when
10 http://www.sweden.gov.se/sb/d/119/a/134213
http://www.oecd.org/document/33/0,3343,en_2649_33735_43714657_1_1_1_1,00.html
11 Cf. new report from the eGovernment delegation entitled Strategi för myndigheternas arbete med e-förvaltning
[Strategy for the authorities' work with e-Government] (pp. 72-73),
www.sweden.gov.se/content/1/c6/13/38/13/1dc00905.pdf, in addition to a preliminary study for the
Swedish EU Presidency entitled 'A Green Knowledge Society - An ICT policy agenda to 2015 for Europe's
future knowledge society', September 2009 ('The Visby Agenda').
12 The IT Bill: 2004/05:175
13 Government Bill 2002/2003: 110
14 Broadband strategy for Sweden, 3 November 2009
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generating expectations for the future. 15 This was also one of the conclusions
drawn at the conference on Europe's future IT policy that was recently held by
the Swedish EU Presidency. This was a step towards creating a joint platform for
the European IT policy agenda for 2015. 16
1.2
Government Assignment on 'openness'
In order to gain a clearer understanding of openness in relation to electronic
communications, the Government resolved on 4 June 2009 to assign PTS the
task of investigating and analysing:
•
what openness means at an infrastructure and transmission level and in
particular at an Internet and service level,
•
how this area affects the environments for innovation and competition
in the market,
•
which aspects of openness are important to consumers, considering
present and future patterns of electronic service consumption,
•
the opinions in this area on the part of different stakeholders within
public and private operations,
•
the implications of openness under both regulated and unregulated
circumstances, and
•
the implications of openness for the potential to ensure accessibility to
services.
Based on the analysis of the above items, the Government also wants PTS to
focus its documentation on the following:
•
what the different operators' business models (e.g. traffic prioritisations
and lock-in/lock-out effects) mean from the perspectives of consumers,
innovation and competition, and
•
the criteria that an Internet connection should meet from a consumer
perspective and how these criteria can be assessed.
Torstensson, Å., Garantera öppet Internet [Guaranteeing an open Internet],
[http://www.idg.se/2.1085/1.235768/garantera-oppet-internet], 17 July 2009
16 The conference entitled 'Creating impact for an eUnion 2015' summarised its conclusions in a declaration
called 'The Visby Declaration', which presented an open Internet and transparent principles of network
neutrality as critical factors of success; cf. Item 6 of the declaration:
6) Upholding an open Internet and establishing transparent guidelines on net neutrality are important
http://www.se2009.eu/polopoly_fs/1.22793!menu/standard/file/conclusions%20visby.pdf
15
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1.3
Aim
The aim of this report is to explain and analyse the term 'openness' based on the
Government Assignment, together with the importance of openness in markets
where electronic communications are used to produce broadband services, while
considering the regulatory, market and technical circumstances.
This report does not aim to present a series of final solutions for all of the issues
and challenges that arise when discussing the term 'openness'. Instead, the aim is
to provide the Government with a sound information base, which is, among
other things, derived from extensive contacts with market stakeholders and
relevant authorities, and also to propose measures in some cases.
The main ambition of PTS is to focus on different aspects of the term 'openness'
from a financial perspective, even if other aspects (such as freedom of expression
and security) are also included. In order to present an overall picture, it is
extremely important to understand how services are produced and refined at
various levels of the value chain, the way in which the different service markets
function and who the stakeholders are in these markets. The analysis made in
this report is based on this value chain.
1.4
1.4.1
Structure and delimitations
Structure of this report
Openness has been analysed by focusing on consumer benefits, with the present
discussion relating to open networks and network neutrality as a starting point, and by
using economic theory. This has made it possible to define and refine this
concept.
This report is structured as follows: Chapter 2, which provides a theoretical basis,
has the viewpoint that openness can provide a higher degree of aggregate social
benefit. This is achieved by more parties in society being able to use different
services and by these services being produced in a more cost-effective way
through competition.
The chapter also discusses how commercial values are generated by gradually
refining the various levels of the value chain as well as explaining what openness
signifies and who openness is referring to at each respective level of the value
chain.
Chapter 3 applies the theoretical basis of the report to the Swedish electronic
communications market. Here, secondary data in particular (e.g. reports and
trade publications) were used and the discourse in society was monitored. The
chapter also encompasses an international perspective, which aims to capture
aspects that may be related to the situation in the Swedish market. Chapter 3
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concludes with a summary of the observations and analysis of the market that
were made, together with a forward-looking analysis outlining a number of
conceivable scenarios.
Chapter 4, which concludes this report, presents the Agency's conclusions and
proposed measures.
As part of this project work, PTS met with and interviewed a number of
different stakeholders in the electronic communications market. These parties
represent different interest groups (and consequently different standpoints),
including operators, content providers, equipment suppliers, industry bodies and
Internet activists. 17 The aim of these interviews was to get an understanding of
the different aspects conveyed by the term 'openness' on matters relating to
electronic communications networks and the broadband services offered via
these networks. The stakeholders were chosen with an ambition to encompass
various aspects of openness at all levels of the value chain. The report includes
extracts from the information obtained during the interviews and discussions
with different market stakeholders. The appendix to this report provides more
complete information.
The Data Inspection Board (DI), the Swedish Competition Authority (KKV),
the Swedish Consumer Agency (KOV) and the Swedish Consumer Bureau for
Telecom and Internet (KTIB) were consulted during the work relating to this
Government Assignment. The views and comments of these parties have
influenced the final position adopted by PTS.
1.4.2
Delimitations
As matters relating to openness have many dimensions, this report cannot delve
into all of these. For this reason, the report and analysis focus on illustrating how
(a) value is added at respective levels of the value chain to produce broadband
access lines and IP-based services, and (b) the potential for consumers to access
and utilise these services. This delimitation was made to provide a manageable
and useful overview of the market and its various levels as well as to clearly show
that different stakeholders have different views on openness, given their role in
the production and consumption of electronic communications services.
However, the report does also focus on other aspects to some extent, such as
freedom of expression.
This delimitation takes into account the fact that it is difficult to quantify the
benefit for end users and society in general. It is assessed in the report that the
benefit is a direct consequence of the increase in commercial value added, which
means that this analysis suggests positive consequences from the higher level of
commercial value added rather than pointing out direct and measurable
consequences. For example, adding value at undertakings involves generating
17
Appendix 1 provides a full list, including a description, of the different stakeholders.
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15
additional resources, which may be redistributed and benefit consumers, among
other things in the form of improved accessibility or other priorities for society.
It may also be worth mentioning that it is mainly the work to achieve more
robust electronic communications that will be touched on in the assignment that
the Government has announced it will give to PTS. 18
There are also a number of aspects regarding openness that this report has only
dealt with superficially. This for example applies to the equipment (mobile
telephones, handheld computers, laptops, etc.) and computer programs
(operating systems, media players, search engines together with e-mail and social
networking services, etc.) which together enable action at a service level.
This type of equipment and computer program may create restrictions and lockins owing to their design. The reason why these aspects are not analysed in more
detail in this report is because the framework of the analysis was limited to
openness aspects relating to production resources that are directly linked to the
production of broadband services. Another aspect that has not been included is
restrictions relating to the utilisation of content as a consequence of intellectual
property rights.
PTS has mainly chosen to describe openness problems in Sweden, with some
references to the discussions about network neutrality in the United States.
However, this report contains a limited international overview, which is
summarised as a table in Section 3.5. This table only covers the two upper levels
of the value chain; that is, the IP/Internet level and the service level. The aim of
this table is to show how any potential problems and proposed solutions are
being discussed outside the borders of Sweden.
18
N2009/8317/ITP
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16
2
Openness and the electronic
communications market
Market stakeholders' perspectives on the term 'openness'
2.1
•
Openness means allowing everyone to participate and no-one being
excluded.
•
Openness means allowing new combinations of ideas and products
that contribute to a faster rate of renewal.
•
Openness means being free to use those products and services
permitted by access without anyone prioritising or restricting the
content.
•
Openness means freedom of choice and access on equal terms.
•
Openness is a dynamic concept that is constantly changing.
•
Openness means different things at different levels of the value chain
that illustrates the electronic communications market.
•
Openness is a relative concept and must be analysed in light of
prevailing market conditions.
Openness: what, why and for whom
As previously mentioned, this report focuses on illustrating how value is added at
each level of the value chain for the production of a broadband access line and
IP-based services. Traditional telecom operators are the main parties involved in
the more basic parts of the value chain, which describe how a broadband access
line is constructed from different components. A newer type of service provider
is also involved at the levels referring to the provision of Internet-based services.
As stated previously, the Internet world is characterised by a culture of openness.
However, this culture partly conflicts with the culture traditionally surrounding
the telecom sector. While the former encourages innovation (that is, the
introduction of new products to the market) through few restrictions and userdriven development, the business models of telecom stakeholders are
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characterised by clear regulations, a low level of diversification and full control
over these networks.
Considering the rapid development that is taking place as regards electronic
communications services and content, the innovativeness of stakeholders (both
producers and users) and their need for innovation will increase in magnitude.
This development has also resulted in the level of complexity increasing, which
means that fewer and fewer stakeholders possess the necessary specialist
expertise themselves.
In order to retain competitive knowledge within both industry and society as a
whole, it is important that they both strive to generate their own new knowledge
while actively striving to benefit from the knowledge of others. There are reasons
why the principle of an open Internet should continue to be applied, not least
thanks to the tradition surrounding the Internet and the positive impact on
innovativeness that openness appears to have had. 19
In this context, it may be worth noting that openness in the sense of 'access' is
not generally viewed as a fundamental and inherent principle. It is normally
based on the owner of a good or a service having full control over its property
(that is, with no access for anyone other than the owner). The owner can of
course change this by concluding agreements. For example, the fundamental
principle at the infrastructural level has been for network-owning operators to
have the freedom to manage their networks in a way that they find most
appropriate commercially. This assumes that their market position does not
mean that competition is restricted in a way that is detrimental to society. In such
cases, various forms of regulatory intervention may be necessary. Infrastructure
financed through public funding is also managed differently than infrastructure
financed through private funding in terms of the requirements imposed on
openness in the networks.
However, the meaning attributed to the term 'openness' (regardless of the level
in the value chain) is generally positive and is often associated with freedom,
options and accessibility, but as suggested may also end up running directly
counter to aspects such as adding value and investment needs, as it may result in
poorer quality (e.g. owing to the network owner not receiving financial
compensation and thus neglecting maintenance work), reduced investment
incentives and over- or underutilisation. Open networks usually mean
competition and lower prices. For example, PTS's 'Price Report' shows that the
19 In a doctoral thesis written by Joacim Tåg (Essays on Platforms. Business Strategies, Regulation and Policy in
Telecommunications, Media and Technology Industries), it is claimed that 'open platforms' are better from the
perspective of society, as a platform increases in value when more parties are connected (network effects).
In this context, a platform refers to a market made up of businesses connecting two separate groups of
customers. An example of this is where broadband providers interconnect consumers and content providers
on the Internet.
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lowest prices offered for fixed broadband are substantially below the average
national price in areas where several providers are competing for end users.
What needs to be considered with respect to, for instance, investment needs and
other aspects, such as network security, is that it is not self-evident, either at the
infrastructural or service level, that openness must be achieved through
regulation, despite openness being generally desirable as a fundamental principle
at an Internet level in terms of the Internet in its capacity as a network. A more
in-depth discussion about what may be desirable in terms of openness and what
may need to be covered by various forms of regulation will be conducted later in
this report.
Within the framework of this report, openness is defined as everyone being granted
the opportunity of free (unrestricted) 20 access and own utilisation on equal terms. In order to
make it easier to explain the importance and the value of openness, this term
may be described on the basis of economic theory, where stakeholders are
viewed as rational and the aim of their actions is to maximise their own benefit. 21
However, there are several parameters used to meet the need for benefit
maximisation, two of which have a prominent role: price and quality. Price and
quality need to be continually weighed in relation to each other, as one high
quality product may serve as a substitute for several products that – relatively
speaking – are of an inferior standard.
On the other hand, given benefit maximisation, supply and demand patterns are
complex and it is far from straightforward to link market behaviour with a
relatively simple term such as openness. It is even more difficult to measure the
term 'openness' other than by using predetermined key ratios, which signify
openness in various contexts. Consequently, one solution is to describe the term
schematically using a simplified theory:
Assume that all market stakeholders (producers and consumers) are, on equal
terms and as they wish, given the opportunity of free access and of using their
own products in a market; that is, a maximum degree of openness prevails. The
number of potential combinations of products then increases relative to a
situation with a limited degree of openness (that is, with restrictions as regards
access and utilisation). If everything else remains the same, more combinations
will increase the probability of all stakeholders finding a combination that
20 In this report, 'free access' refers to unrestricted or unlimited access, which should not be confused with
'free' in the sense of 'no charge'.
21 It may be worth reiterating that there are a number of other priorities and higher values that cannot be
associated with an immediate economic benefit. These include aspects such as freedom of expression,
democratic participation, good health and meaningful freedom. These values play a major role in people's
well-being and can often overshadow all of the economic arguments. They are also difficult to appraise in
nominal terms. Despite this, benefit maximisation is a reasonable starting point, as it assumes that people
are rational and act to ensure their long-term welfare. This creates a manageable, model-related framework,
which assumes certain types of behaviour. See Mankiw, G., 'Principles of Economics', Thomson Learning,
2003, for an example of the theoretical economic tradition being referred to.
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corresponds to a higher utility value than they would have received in a closed
system with a limited supply. 22 In other words, a reasonable hypothesis may be
that openness in relation to networks and services will lead to increased benefits
for consumers and society owing to its positive effects on competition and
innovation.
2.2
2.2.1
Adding value
A system perspective is a fundamental rationale behind financial activity; that is,
things are interrelated and activities affect each other in a long chain of
processes. 23 Consequently, one way of illustrating how economic values arise in
the electronic communications market is to classify different activities according
to how they generate value. This helps to define the important steps for adding
value and the overall refinement process. The way in which this chain of adding
value is divided up depends on the operation it is meant to illustrate.
According to the Government Assignment, PTS must report on the importance
of the term 'openness' on the basis of the various levels of the value chain and,
particularly, at an Internet and service level.
PTS has chosen to describe the electronic communications market (focusing
specifically on the production of broadband access and IP-based services) using
five distinct levels: the natural resource level, the infrastructural level, the
transmission level, the IP level, and the service and content level. These levels are
illustrated in Figure 1 below.
22 This line of reasoning disregards any costs relating to searching and transactions and thus presupposes
that all stakeholders have perfect information.
23 See, for example, Eklund, K., Vår ekonomi [Our economy]. Norstedts Akademiska Förlag, 2007
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Figure 1
Schematic diagram of the value chain in the electronic
Tjänste- och
innehållsnivå
IP-nivå
Transmissionsnivå
Infrastrukturnivå
Naturresursnivå
[Text for the figure:
IP level
Transmission level
Natural resource level]
In the text below, the term 'value' symbolises (a) the value to the resource
owner's own production operation, and (b) the value generated by the resource
owner leasing all or parts of its resources to another party. One example of this is
the ducting resource, which can be found at the lowest level of refinement.
TeliaSonera controls the ducting and the company can use this ducting to
produce its own broadband access lines (which, in addition to ducting, require
fibre or copper-based lines and equipment to transmit data traffic via these lines,
for instance). However, ducting can also generate value for the company by the
company leasing out the ducting to other market stakeholders who have
requested ducting to produce their own broadband access lines.
The lowest level in terms of 'level of refinement' may be referred to as the natural
resource level. 24 This level refers to the physical location of the infrastructure or
where it is buried, as well as the airspace (spectrum) used for wireless
transmission. Key stakeholders at this level include land owners (not least
municipal authorities) that can, for example, issue permits to lay fibre-optic
networks, afford access to existing ducting or grant building permits for a new
24
Another name for this is the 'ducting level'.
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21
transmitter location (base station). Consequently, from a financial perspective,
adding value is manifested by things such as ground rent, charges and auction
revenues.
The cable, or infrastructural level, is the next step up in the value chain, which
includes physical cables (such as copper, fibre and coaxial cables) together with
the antennae and masts used for above-ground infrastructure. This level also
includes the stakeholders that own the physical infrastructure, such as Skanova,
the urban networks and the Swedish Rail Administration. Besides this
infrastructure affording an owner the necessary prerequisites to produce
electronic communications services, it may also be leased out (for example,
LLU 25 ) to other stakeholders so that they can produce the same kinds of service.
Besides laying the foundation to enable owners to add value, value can also be
added by, for example, charging for access.
What may be referred to as the capacity or transmission level is another step up in
the value chain and at an even higher level of refinement. As the name suggests,
this level includes the actual transmission of data and telephony traffic. 26
TeliaSonera represents an important stakeholder at this level of refinement,
where, for example, bitstream access and leased lines are provided at a wholesale
level. 27 . Mechanisms for adding value include leasing out capacity and
transferring traffic.
The next level of the value chain (the IP level) refers to the level from which the
Internet service provider provides end users with a connection to this service
provider's network and the networks of others in interaction (the Internet). This
is the level at which Internet connections and resale products are produced and
provided. This situation is achieved by using 'routers' as active equipment that
routes signals in interconnected transmission systems. Stakeholders at this level
include Telenor and Tele2. Subscription charges and other leasing charges are
classic mechanisms for adding value.
The actual information content exchanged between users is produced at the top
of the value chain at the highest level of refinement. This level includes the
equipment, programs, services and content offered to end users (consumers,
25 LLU stands for 'Local Loop Unbundling' and means the possibility of gaining access to the part of the
access network that links an end user with telecommunications premises/cabinet.
26 Transmission takes place by physically conveying electronic signals that transmit the actual information
content in the services. This is realised by placing active equipment at the terminals of an item of
infrastructure, which sends and receives the signals sent via the infrastructure in question. The active
equipment at the terminals and the infrastructure in between jointly constitute a 'transmission system'.
27 As the name suggests, 'bitstream' refers to the transmission of data streams, for example between a
specific end user's connection and an operator's transmission network. This product can be used to provide
broadband. Leased lines also constitute a data transmission product, which can be used when producing
broadband, although unlike bitstream, they are made up of a point-to-point connection with dedicated
capacity. Consequently, bitstream and leased lines are two separate products in terms of use, even if they
may constitute production resources in the same type of retail product. The regulated products also usually
differ as regards capacity.
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22
undertakings and public authorities). This level also includes the content
generated by the users themselves together with government e-services and other
public information. Other names for this group of activities could be the
'application level' or service level. Mechanisms for adding value at this level include
unit sales of, for instance, digital content as well as subscriptions and advertising
revenues.
Important parameters for adding value according to market stakeholders
•
•
•
•
•
•
•
•
•
2.2.2
Access to infrastructure
Customer volumes
A high-quality range of services
Bundling
Exclusivity agreements
Innovation
Marketing
Visions (business and political)
Coordination
Market structure
The value-adding processes described above illustrate how value can be added in
the electronic communications market. The value chain also indicates that
openness can mean different things at different levels of the value chain, which is
discussed in more detail in Sub-section 2.3.2 below. However, it is worth
discussing the characteristic features of the electronic communications market, as
these features mean both restrictions and opportunities as regards the aim of
market stakeholders to add commercial value.
One of the most obvious distinguishing features of the electronic
communications market is that it is expensive to establish infrastructure, as is the
case in, for instance, the electricity and rail markets. 28 These investments, which
are associated with a very high level of risk 29 and are largely irreversible 30 , are
crucial for the provision of services. This also means that the stakeholder(s) that
have established control over the infrastructure may have a disproportionately
28 These sectors are often called 'network industries' or 'natural monopolies', where the latter means that
there is only room for one effective undertaking in the market.
29 Investments in infrastructure must be made before it is known what exact type of service will actually be
in demand. Rapid technological progress means that infrastructure can rapidly become obsolete.
30 This means that investments should be regarded as irrevocable 'sunk costs', as there is no alternative area
of application or value.
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23
strong influence over the whole value chain and thus over the services that can
be offered and the setting of prices. This market power distorts competition and
prevents the achievement of a pareto optimal outcome. 31 This means that the
value that is actually generated is not as great as could possibly be achieved if the
resources available had been distributed under other circumstances. This
distortion is also compounded by the electronic communications market being
characterised by distribution effects through an increase in the benefits of
products and services as more people use them (network effects) 32 and costs
related to the geographical distribution of customers (economies of density) 33 ,
which provide established stakeholders with immediate advantages.
Table 2 Schematic comparison between a selection of properties
found in an ideal market and the electronic
Ideal market
No barriers to entry
Major establishment costs
(economies of scale)
Perfect information
Asymmetric information
Marginal pricing
Price set by dominant stakeholders (fictional
pricing)
Decreasing marginal benefits
Network effects
A large number of stakeholders
Market dominance
Pareto optimal outcome
Loss of welfare
No spatial boundaries
Economies of density
31 The term 'pareto optimality' originates from the economist Vilfredo Pareto and refers to a situation where
the available resources cannot be redistributed, which means that no-one gains without someone else losing
out.
32 Benefits increase in line with the number of network members who can become connected.
33 Benefits increase the closer the users are located in relation to each other.
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2.3
2.3.1
Openness in the electronic communications market
Openness and adding value
Based on the description of openness and the commercial value chain, it is
interesting to bring the arguments together and build an analytical framework for
what openness could possibly mean from a value chain perspective; that is, how
openness affects the potential for adding financial value.
However, as described in the introduction, openness is a broad term and
consequently needs to be operationalised before it can be attributed any real
meaning. Openness may, for example, be viewed from the perspective of a
producer. Here, openness may be manifested in free access and the potential to
compete on a level playing field. However, openness can also be viewed from the
perspective of a user, who focuses on access and the opportunity to freely use
and take advantage of services. Thus, there is not just one type of openness; this
term has many meanings, and what constitutes 'openness' varies. As the activities
at the various levels of the value chain are clearly separate, it is unavoidable for
openness to correspondingly have different meanings and effects. In other
words, the meaning of openness at the service level will for instance differ from
its meaning at the natural resource level. 34
There may also be interdependence between openness at different levels of the
value chain. This applies, for example, if openness at the transmission or capacity
level (to enable data and telephony traffic to be transmitted in the backbone
network) is a prerequisite for the supply of broadband access lines to enable
access to services and content over the Internet.
2.3.2
Openness at different levels of the value chain
PTS has attempted to formulate descriptions/working hypotheses of openness at
the five levels of the value chain. These should be viewed as describing the
maximum degree of openness. This is thus not about PTS making an assessment in
this report about the degree of openness that is required (implying that there may
thus be a need for regulation or other measures to ensure or change this
openness) at each level of the value chain. Instead, these hypotheses aim to
illustrate the meaning of the term at each level.
This situation is also complicated by the fact that the different levels can encompass several diverse
markets, which means that openness can mean different things even within a given level. For more
information, see e.g. the Commission Recommendation of 17 December 2007 on relevant product and
service markets within the electronic communications sector susceptible to ex ante regulation in accordance
with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory
framework for electronic communications networks and services.
34
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25
At the natural resource level, openness refers to licences, access and availability. In
practice, maximum openness would mean that all stakeholders would have
unlimited potential to, without restrictions (in the form of licences and associated
terms):
1) be afforded access to existing ducting or radio masts,
2) be afforded access to land on which they can lay their own ducting or
erect radio masts,
3) be granted permission to carry out the groundwork and excavation work
deemed necessary to put the basic prerequisites for infrastructure in
place, and
4) be able to use radio spectrum.
At the infrastructural, transmission and IP levels, openness is about different
forms of access and the availability of production resources. At the infrastructural
level, maximum openness would mean unlimited access to existing passive
infrastructure on equal terms for all operators. At the transmission level,
maximum openness is about having unlimited access to existing transmission
systems, where physical transmission and 'peering' 35 of electronic signals are
provided. Maximum openness at the IP level would constitute an unlimited
connection to all of the existing networks offering the Internet as well as
unlimited opportunities to (seamlessly) change operator, form of access and
terminal without disrupting the operation or causing other disturbances. Finally,
a corresponding degree of openness at the service level simply means access to
all services and all content on the Internet.
One conclusion that may be drawn from the above is that openness, when
applied to the electronic communications market, can be made tangible from a
supply perspective (producer perspective) and from a demand perspective (user
perspective), and also that there is both a wholesale customer and an end-user
dimension to the market. This means that any party that can produce a service at
some level of the value chain can offer this service to others, who can refine the
service into a service at the next level of the value chain, with the possible
exception of the service level, where services can be refined by end users and
offered to other end users (e.g. blogs). In order to be able to create a sustainable
situation in the electronic communications market, which is characterised by
competitiveness and innovation, it must be possible to balance maximum
openness against other aspects, such as security and the efficient management of
resources. Sometimes, such factors interact with openness and in other cases
they may run counter to it.
35
See Section 3.4 for more information on peering.
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26
Network neutrality
'Network neutrality' is a subject that is closely related to openness. This principle
generally means that everything and everyone sharing the network are made
equal and are treated equally. For some years now, there has been a lively debate,
primarily in the United States, about the pros and cons of network neutrality.
Operators that own access networks and provide Internet access claim that they
need to use some of their revenues from content providers, some of which are
very profitable (e.g. Google, which also owns YouTube), in order to make
investments in the next generation networks (NGN). According to these
operators, the content providers have enjoyed financial benefits from the access
networks to an extent that far exceeds the amount they are paying for using these
networks. There is consequently a concern that operators will restrict the
accessibility of traffic by, for instance, blocking 36 or deprioritising traffic from
such content providers, since the operators do not consider that they are being
paid for the traffic costs they perceive that these providers are giving rise to. 37
The debate has not been as lively in Europe, partly because, unlike the United
States, Europe has a system for access regulation. Where there is true
competition between broadband services, customers in the European Union
have a choice between alternative operators. If an operator attempts to restrict a
user's potential to make use of services or content, the user can basically switch
to another operator that does not apply the said restrictions. Consequently, end
users do not have to end up in a situation that curbs their freedom to use
services and information. Despite this logic, it may be noted that network
neutrality is also being discussed in Sweden. 38 For example, it may indeed be
noted that customer mobility is an important parameter. If customers are unable
to change provider owing to lock-ins in business models or if they do not change
provider, despite the potential to do so, this could have an impact on how
operators behave and ultimately the potential for innovation in the market. 39
The subject of network neutrality is clearly linked to the subject of openness at
the highest level of the value chain, where services are distributed and consumed,
for which reason network neutrality will be discussed in more detail below. One
of the ways in which this will be done is by describing the various business
models present in the market. The term 'open networks' is sometimes also
36 In this report, the term 'blocking' refers to traffic being stopped. In another context (KTIB), the term
'blocking' is used in reference to access to broadband subscriptions via ADSL.
37 Svenska Dagbladet, Amerikansk strid om öppet Internet [Conflict in America about the open Internet]
[http://www.svd.se/naringsliv/nyheter/artikel_3560081.svd], 24 September 2009
38 Jerräng, M., PTS: Nätneutralitet inget problem [PTS: Network neutrality not a problem]
[http://computersweden.idg.se/2.2683/1.211916/pts-natneutralitet-inget-problem]. For an insight into the
debate in Europe, see, for example: Ricknäs, M., Bredbandsbråk, vem ska betala [Broadband battle, who should
pay], [http://computersweden.idg.se/2.2683/1.78825], 16 September 2009.
39 See, for example, the report written by the Swedish Consumer Agency entitled Kundrörlighet – exempel på
hinder för konsumenter inom några viktiga marknader [Customer mobility – examples of barriers facing consumers
in some key markets] (2009:05) for a detailed discussion about barriers to the mobility of customers. This
includes a discussion about the problem associated with long lock-in periods.
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27
confused in discussions about openness and network neutrality. For this reason,
it may be appropriate to emphasise that network neutrality is linked to open
networks, but is not synonymous with the latter. In order to keep these concepts
separate, PTS has previously chosen to describe 'open networks' as a model where a
neutral stakeholder represents the underlying access infrastructure, while the end user chooses
between different service providers supplying Internet access and other services. 40 In line with
the above, open networks mainly relate to one's access to infrastructure. This
may be compared with network neutrality, which is directed more at the content
being relayed. When PTS previously discussed the question of network
neutrality 41 , the Agency consequently proposed a possible definition of this term
as follows:
Within the framework of the Internet access service indicated in the agreement, a
user should, by means of 'best effort', be able to
•
•
freely receive and send content,
freely use content services that do not damage the network.
Within the framework of the same Internet access service, an Internet service
provider should
•
•
refrain from manipulating or deprioritising data traffic for a user on the
basis of content, origin or destination,
provide clear information in marketing and agreement terms regarding
the capacity and quality of the connection.
As indicated by the above definition, PTS does not view network neutrality as a
universal principle. 42 As in the latter case above, PTS chose to include restrictions
to the services available to users 43 in its report about network neutrality, and
showed its acceptance of operators prioritising traffic as long as users are clearly
notified of this and it is clearly stated in the terms of agreement. In this report,
PTS has thus stated that the prioritisation of traffic for the purpose of
differentiating between services is a tool that makes an efficient use of resources.
However, besides ensuring a reasonable level of quality for services dependent
PTS, Network neutrality, 2009 (PTS-ER-2009:6)
PTS, Network neutrality, 2009 (PTS-ER-2009:6)
42 This definition is closely linked to the definition used in the United States, where network neutrality
focuses on content-related and technological independence: "…a neutral public network, which has a
particular value that depends on its neutral nature". This also relates to the concept of a network where the
'intelligence' is located in the network's equipment, which is connected by end users, whereas the network
itself is only a distribution channel, similar to an electric grid: "The electric grid does not care if you plug in a
toaster, an iron or a computer." See also the pioneering article in this context written by David Isenberg,
who was previously employed by AT&T. Isberg, D., 'Rise of the stupid network',
[http://www.hyperorg.com/misc/stupidnet.html], 1 July 2009, and Wu, T., 'Netneutrality FAQ',
[http://www.timwu.org/network_neutrality.html], 17 July 2009.
43 This may only be used within the framework of what is included in a user agreement for an Internet
access service, and in addition to this, users may not use anything that can damage the network. The
wording of the latter is particularly vague and may be broadly interpreted.
40
41
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28
on short response times, it is reasonable to also include purposes that are vital to
society. These include managing traffic and communications between vital public
stakeholders, such as the rescue services and police. Security and robustness
reasons can also justify varied traffic management. Section 4.1 of this report
expands on the Agency's considerations relating to network neutrality.
2.3.3
Forced openness through special regulation
The ideal situation from a financial perspective is a market with no barriers to
entry, perfect information and rational behaviour. This almost Utopian scenario
would enable all market stakeholders to offer and request the exact goods and
services that afford them the maximum benefit. In this kind of market, free
market forces can then work like an invisible hand, by optimising resources and
bringing about an efficient utilisation of resources and adding value.
As pointed out previously 44 , the existence of openness – in the sense of access
and competition – is limited from the outset, as the electronic communications
market is for example characterised by high establishment costs. High
establishment costs in a market lead to limited competition and thus higher
market prices, which has an impact on prices and competition in markets higher
up in the value chain. This ultimately has a negative impact on end users in the
form of higher prices and reduced freedom of choice. The structure of the
market, with a clear focus on ownership and control, means that it is
characterised by a small number of stakeholders and a price situation that does
not reflect complete information. This is why competition and consequently
freedom of choice (benefit) for consumers become limited.
From an openness perspective, limited competition may be manifested in several
ways. For instance, the opportunity to choose between several providers may be
limited at an end user level. Another example is that the use of networks and
services may be limited to a small number of services and to those areas of use
that producers find particularly lucrative ('walled gardens'). The content of these
walled gardens may deviate significantly from what users are actually requesting.
Market failures, which result in less openness and consequently less potential to
generate benefit, can be found in virtually all markets and can often be dealt with
by imposing general measures such as competition legislation. 45 However, the
electronic communications market has been deemed to require specific sector
regulation owing to its structure, its significance as regards financial growth 46 and
See Sub-section 2.2.2 entitled 'Market structure'.
The competition legislation is intended to ensure that individual stakeholders do not achieve market
dominance, resulting in them controlling the supply available in the market and locking in consumers on
account of their size.
46 The significance of IT and telecommunications in terms of growth has, for example, been emphasised by
the European Commission and OECD. For more information, see, for example, OECD, 'ICT and
Economic Growth - evidence from OECD countries, industries and firms', Paris, 2003, and MICUS, 'The
impact of Broadband on Growth and Productivity', Düsseldorf, 2008.
44
45
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29
the demands of society regarding access to a basic supply that covers everyone. 47
The aim of sector regulation for electronic communications is to oblige
operators to provide access to parties other than the network-owning
stakeholders. More opportunities for other stakeholders to gain access stimulates
competition, which not only provides an increase in the supply of goods and
services but also increases the potential to provide greater benefits for end users
(that is, affords more opportunities to receive a product with a higher utility
value at a lower price).
When determining the wording of a regulation, PTS applies the method
recommended by the European Commission. 48 First, the market is defined
geographically and in terms of products. The market is often broken up into
different sections based on the different levels of the value chain. PTS then
analyses whether the defined market is demonstrating such competition
problems that mean that it should be subject to ex ante regulation and whether
there are any market stakeholders with significant market power ('SMP' 49 ). Only
an operation run by stakeholders with significant market power is regulated in a
market subject to ex ante regulation. A stakeholder has significant market power if
this power significantly enables it to run its operation independent of its
customers and competitors. 50
Sector regulation of electronic communications is proactive; that is, it aims to
create competition rather than just maintain the existing competition situation.
This is why it is important for PTS to strike a balance between static and
dynamic efficiency when formulating regulations; that is, efficient utilisation
today by promoting competition and efficient utilisation tomorrow by providing
incentives to invest in new infrastructure and develop services (innovation). 51
One assumption of the regulatory framework governing electronic
communications is the presence of competition as far down the chain of
refinement as possible. The aim of this is to strengthen competition at the
wholesale level and reduce the dependence on stakeholders with significant
market power; this should achieve an impact from increased competition at a
47 A basic range of services ('universal service') are subject to their own regulation and are often referred to
as 'USO' (Universal Service Obligation). USO is available to ensure a reasonable basic level of services
deemed necessary for a functioning society. The rules of USO state that people, in their capacity as citizens
or business owners, are entitled to a minimum level of electronic communications services at a reasonable
price in their home or fixed place of business. USO is technology-neutral and formulated in terms of basic
functionality, such as voice telephony, emergency services, fax options and functional access to the Internet.
48 The European Commission has also produced a recommendation about the markets relevant for ex ante
regulation entitled 'Commission Recommendation of 17 December 2007 on relevant product and service
markets within the electronic communications sector susceptible to ex ante regulation in accordance with
Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework
for electronic communications networks and communications services'.
49 SMP stands for 'Significant Market Power'.
50 One of the reasons behind this degree of flexibility may be that customers and competitors are dependent
on the former.
51 Econ analysis, Konkurrensen på telemarknaden [Competition in the telecommunications market], 2003
(ECON report no. 2003-096)
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30
retail level as well as in the form of an increase in supply, more options and price
pressure. Among other things, this assumption is based on the Commission
Recommendation on relevant markets within electronic communications, which
places an emphasis on wholesale markets, not retail markets.
The financial arguments that characterise PTS's policy for access regulation in
the access network 52 are also about regulating the lower levels of refinement,
which entail the largest consumer benefits in the form of, for instance, lower
prices and the greater supply of services. Production resources (for example,
fibre and ducting) represent a large proportion of the price of a product or
service at the retail level. This is why functioning competition at a low level of
the chain of refinement, where these production resources are present, could
result in considerably lower retail prices compared with a situation where
measures to ensure functioning competition are aimed at, or limited to, the
higher levels of the chain of refinement.
Some of the sources behind PTS's stance are the regulatory theories presented by
the British researcher Martin Cave. He argues that competition that is sustainable
in the long term, with a high level of innovation and effective investments, can
be brought about by stakeholders in the electronic communications market being
permitted to advance up the 'ladder of investment'. These stakeholders gradually
make more investments in critical production resources and thereby reduce their
dependence on a network owner with a widespread network. 53
Ultimately, and in line with the above-mentioned principles, PTS will introduce
the regulation that is the least onerous of the alternatives available for rectifying
the problems identified. This means that a regulation promoting openness in
some parts of the value chain could be adequate to achieve a sufficiently high
level of openness in other parts of the value chain. In other words, it is not
always necessary to introduce a regulation separating the assets of a stakeholder
between the stakeholder's different operations (different levels of the value
chain) in order to achieve the impact desired (greater consumer benefit).
Regulatory risk can be dealt with by using regulation that is both proportional
and fit for purpose; for example, there is a risk that too much regulation will
reduce the willingness of market stakeholders to invest.
52 Policy for access regulation of last mile networks - PTS-ER-2006:26. There are currently three main
categories of wholesale product in the broadband sector. The lower levels of refinement include regulated
products, such as LLU (at the infrastructural level) and bitstream access (at the transmission level). The
higher levels of refinement (the IP level) include 'resale products' for broadband, which are unregulated.
53 Cave, M., (2006a) 'Encouraging infrastructure competition via the ladder of investment',
Telecommunications Policy, Vol. 30, 223-237 and Konkurrensen i Sverige [Competition in Sweden] 2006,
report from the Swedish Competition Authority, 2006:4
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31
Perspectives of market stakeholders on challenges to openness
•
Openness is restricted by long-standing and old agreements concluded
under market conditions that differ completely from the present
conditions.
•
Openness currently varies depending on stakeholder, business area,
form of access and the parties that are relaying content.
•
Openness does not mean openness for everyone when different
requirements create different prerequisites and distort competition
between both infrastuctures and vertically and horizontally integrated
stakeholders.
•
Today, openness sometimes means an unwillingness to realise that
electronic infrastructure costs money and that someone will ultimately
have to pay for this infrastructure.
•
Uncontrolled openness may result in paralysis, halt investment and
mean a lack of infrastructure, rather than sustainable competition.
•
Openness must be weighed against commercial prerequisites. What's
more, consideration needs to be taken of legal factors as well as those
related to systems and capacity.
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32
3
Current openness situation
This section presents the current openness situation based on the value chain
presented above. The presentation is structured around a number of key factors
(for each level of the value chain) that help to describe the openness situation:
production resources, entry terms and market rules.
'Production resources' refers to what is needed at any given level of the value
chain to contribute to the production of a broadband-based Internet service. For
example, access to infrastructure is needed at the infrastructural level. As
mentioned in the introduction about the delimitations of this report
(Section 1.4), there are many different production resources at the different levels
of the value chain. However as explained above, this report focuses on a number
of production resources that are directly linked to the production of broadband
services.
'Entry terms' means the special requirements (for example, financial
requirements) imposed on stakeholders so that they can operate in the market.
'Market rules' refers to the frameworks that characterise the way in which the
market functions, such as the competition situation, commercial logic, and
applicable rules and regulations.
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33
3.1
The natural resource level
Natural resource level (land, ducting and spectrum)
•
Different terms are currently in force and/or applied to different
stakeholders, which affords them different potential to gain access to
land and ducting.
•
The cost of excavation work represents a significant proportion of the
cost of laying infrastructure, for which reason access to ducting is
crucial if fibre optic networks are to be laid efficiently.
•
The lack of spectrum restricts openness. However, those holding
spectrum licences have more freedom to themselves determine how
best to use these licences.
Electronic communications networks are either wireless or wired. Access to
radio spectrum is required to offer services via wireless networks. This is
described below. Similarly, access to ducting is required to offer services via
wired networks. Strictly speaking, ducting is not a natural resource. Instead, the
land is the natural resource to which a stakeholder may request access if the
operator intends to establish its own ducting. However, requesting access to the
ducting itself may be more justifiable for a number of reasons, and consequently
this report classifies ducting as belonging to the natural resource level.
In this context, it should be noted that there is a certain level of dependence
between wired and wireless network infrastructure. For example, a powerful
wireless infrastructure often depends on the wired infrastructure to be able to
deliver high rates to and from base stations.
3.1.1
Radio spectrum
Radio spectrum is a limited natural resource that is required as an input good for
sending, forwarding or receiving electronic data in a wireless communications
network. For this reason, radio spectrum is an input good that is required for all
wireless and mobile electronic communications. Stakeholders in the telephony,
broadband and television markets thus have a need for radio spectrum.
Therefore, important issues include the potential to gain access to spectrum and
that spectrum must not be hoarded in a way that impedes competition. However,
the increased use of wireless services has entailed a sharp increase in the demand
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34
for radio spectrum, a limited resource, which in its turn has led to an increase in
the value of harmonised radio spectrum. This naturally limits the potential of
market stakeholders to gain access to spectrum. This is why releasing additional
spectrum in the frequency bands that are appropriate for wireless
communications with high area coverage would be crucial for enabling market
stakeholders to gain access to spectrum as an input good.
Land/ducting
Ducting is another kind of resource at this level of the value chain. Ducting
encompasses infrastructure underground and constitutes a shell, or the potential,
for laying electronic communications networks. Spaces underground where
cables or similar installations may be placed thus constitute ducting (for example,
cables, tunnels and cable manholes). When laying electronic communications
networks, these spaces are used for laying optical fibre cables and copper cables.
3.1.2
Entry terms
Radio spectrum
Radio spectrum is managed by PTS on behalf of the Riksdag and the Swedish
Government. Modern spectrum management is often described as an aggregate
of three models: administrative allocation, market mechanisms and collective use.
'Administrative allocation' is the original way of allocating the right to use
spectrum and means that the Agency reserves a frequency band for one or more
users, with pre-determined requirements imposed on the technologies and
services present in the band. 'Market mechanisms' are characterised by the right
to use spectrum being allocated to the party that values this right the most (i.e.
usually through some form of auction) and also that the right of use can
subsequently be assigned. 'Collective use' largely overlaps with an exemption
from an individual licence obligation, where the users do not need a licence to
use a radio transmitter, nor, however, can they count on substantial protection
against harmful interference. Exceptions from the licence obligation are probably
the measures that most radically reduce the barriers to entry for gaining access to
spectrum in a certain frequency band.
Another important concept within modern spectrum management is technology
and service neutrality. Conditions for user rights to spectrum should be
determined so that use of this spectrum can be determined by market
mechanisms; in other words, that any parties that have a right of use are granted
the greatest possible freedom to use the technologies they want in order to be
able to offer the services requested. Generally, the aim of the requirements
imposed on technology and services is only to protect other users from harmful
interference. In practice, the restrictions and requirements that are necessary can
differ significantly between frequency bands; for example, depending on users'
need for protection in adjacent bands. Technology and service neutrality should
therefore be regarded as a relative concept, where the aim is to achieve as much
freedom as possible for parties that have a right of use.
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35
In a broad sense, spectrum liberalisation is currently the predominant trend
within spectrum management. This means endeavouring to increase the use of
market mechanisms and level of collective use, and also introducing technology
and service neutrality in both newly allocated and existing rights of use.
However, administrative allocation will still have a place within spectrum
management in the foreseeable future, mainly in terms of the internationally
coordinated use of spectrum such as within shipping, aviation and satellite
communications, or services vital to society such as defence and emergency
communications. 54
As a result of the investigation entitled 'More efficient signals' (Official
Government Report, SOU 2008:72, the Ministry of Enterprise, Energy and
Communications drafted a memorandum on 16 October 2009 regarding
amended licence rules for the use of radio transmitters, etc. If implemented,
these amendments will be significant in terms of spectrum management in
Sweden as, for example, they include amended rules regarding the extension of
licence conditions.
Land/ducting
New fibre can be laid underground either by drawing or blowing new fibre into
the existing ducting underground, or by laying new fibre and ducting
underground. In a report ordered by the Swedish Competition Authority (KKV)
entitled Hur kommuners ageranden påverkar förutsättningarna för infrastrukturkonkurrens
inom området elektronisk kommunikation [How the actions of municipal authorities
affect the prerequisites for infrastructure competition within the electronic
communications sector], A-focus AB comprehensively described the conditions
for laying new ducting (including fibre) and the associated planning of this work,
together with the typical requirements that are or may be imposed on a party
intending to lay fibre. 55 The planning of this work encompasses the requirements
imposed on licences (land contracts and excavation permits), consultation and
joint laying. 56 Laying costs and municipal charges are additional.
Often, market stakeholders that own ducting also operate in other parts of the
value chain for the production of broadband access lines. Prominent owners of
ducting include municipal authorities (through energy companies or urban
networks) together with, for example, TeliaSonera, Telenor and Vattenfall.
54
A long-term analysis of the development of the electronic communications sector – PTS-ER-2009:2, p. 58
ff.
Report, page 15 ff. www.kkv.se/upload/Filer/Trycksaker/Rapporter/rap_2009-4_a-focus.pdf
A building permit is required in order to lay ducting as well as to erect a radio or mobile communications
mast or tower (Chapter 8, Section 2 of the Planning and Building Act). However, a building permit is not
required for a small installation that is only intended for the needs of one property. A land permit may also
be required for excavating or filling a site that forms part of a detailed development plan if it would cause a
substantial change to the elevation of the site or land for public space (Chapter 8, Section 9 of the Planning
and Building Act).
55
56
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36
TeliaSonera is the largest owner of ducting and this company's ducting was
originally established mainly for the copper-based network infrastructure.
According to A-focus' evaluation for PTS (2009)57 , the cost of laying fibre as a
medium in an electronic communications network largely depends on access to
ducting. Consequently, TeliaSonera's costs for laying fibre networks are clearly
lower than the corresponding costs for other stakeholders, as this company has
existing ducting that can be used, albeit with certain modifications and
adjustments. Other stakeholders having good prerequisites are urban networks,
as they, as land owners, have better potential for laying new ducting. They can
also reduce the cost of this laying work, as they are large-scale purchasers. The
time-related aspect is important in this context. Granting licences and laying
work can take a long time, at the same time as operators of fixed telephony (and
particularly fixed Internet access lines) needing to lay fibre often depend on short
lead-times in order to compete for end users with TeliaSonera, which has access
to ducting.
Some municipal authorities refer stakeholders to the municipally-owned urban
network for the leasing of dark fibre 58 or more refined services, in which
connection excavation permits are denied. 59 In certain cases, however,
TeliaSonera may be granted an excavation permit as a consequence of the unique
position that the company traditionally enjoys owing to its size, negotiating
power and possibly previous long-term land contracts with the municipality in
question. Some municipal authorities limit the number of stakeholders that can
lay fibre to two. Indeed, PTS has received indications that the way in which
municipal authorities are dealing with land contracts and excavation permits is
becoming more uniform and that different stakeholders are being treated more
equally. However, PTS is still of the opinion that there is a need to continue to
clarify the regulatory framework and to develop principles for control. 60
In this connection, an evaluation conducted by A-focus (2009) has indicated that
few municipal authorities have a strategy for laying ducting that can in turn be
leased to stakeholders wanting to lay fibre. There are some discriminatory and
'protectionist' aspects in the way in which municipal authorities operate, as some
municipal urban networks offer retail services themselves, for example through a
municipally-owned housing company. This means that there are incentives for
municipal authorities to direct a request to a certain service provider with a high
Utvärdering av förutsättningar för tillträde till TeliaSoneras tillgångar till kanalisation [Evaluation of the prerequisites
for access to TeliaSonera's ducting assets], a report from A-focus AB commissioned by PTS, April 2009
58
The dark fibre service is produced using optical fibre and is provided as either a wholesale or retail
service. Dark fibre is a cable that is not lit up; i.e. physical fibre cables without electronic equipment.
59 Åtgärder för bättre konkurrens - Konkurrensen i Sverige [Measures for improved competition – competition in
Sweden], the Swedish Competition Authority's report series 2009:4
60 See, for example, an article in Nacka Värmdö Posten dated 10 November 2009 entitled Telia kan ges
ensamrätt på bredbandsnät i Nacka [Telia may be granted sole rights to the Nacka broadband network] about
the management of land access by municipal authorities, http://www.nvp.se/Nacka/Nacka/Telia-kan-gesensamratt-pa-bredbandsnat-i-Nacka/.
57
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37
degree of municipal control over the price, rather than to another stakeholder
that lays its own networks and sets up its own equipment and where there is a
low degree of municipal control (over the price).
3.1.3
Market rules
Radio spectrum
One fundamental aim of market-based spectrum management is for spectrum to
be used for the purposes demanded by the market. Consequently, the right to
use spectrum should be granted to the party that values the right the most, which
normally leads to spectrum being used efficiently; that is, creating the greatest
value by refining the spectrum. A transparent way of achieving this is to grant the
right of use through an auction. As previously stated, however, the increased use
of wireless services has entailed a sharp increase in the demand for the limited
resource of harmonised radio spectrum. In its turn, this has led to radio spectrum
being attributed greater value and, consequently, not all market stakeholders can
gain access to the spectrum that is requested.
One natural consequence of the concept of market-based spectrum management
is that the right to use spectrum can be bought and sold between undertakings.
By trading in spectrum, the right of use can be allocated to those undertakings
valuing the spectrum the most. One conceivable future situation is a spectrum
market that is relatively fluid and where the right of use can be sold (similar to
the property market, for example). Assigning the right to use spectrum has been
permitted in Sweden since 2003. A small number of licences have been assigned,
but even now it cannot be regarded as a true spectrum market. 61
Land/ducting
Relatively few stakeholders besides TeliaSonera and the urban networks are
interested in leasing ducting, as this activity is far from these operators' core
operations. 62 This is why there is instead a demand for leasing dark fibre for the
production of end user services. However, according to a sample of operators
that were asked in an evaluation conducted by A-focus on the assignment of
PTS, 63 there were a number of cases where access to ducting may be relevant:
•
61
ff.
if a major business or customer relationship justifies the installation of
one's own infrastructure; for example, in conjunction with laying LTE
(Long Term Evolution), the next generation mobile telephone system,
and connecting apartment blocks and/or business customers;
A long-term analysis of the development of the electronic communications sector – PTS-ER-2009:2, p. 58
62 Utvärdering av förutsättningar för tillträde till TeliaSoneras tillgångar till kanalisation [Evaluation of the prerequisites
63 Utvärdering av förutsättningar för tillträde till TeliaSoneras tillgångar till kanalisation [Evaluation of the prerequisites
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38
•
if the alternative of leasing a large number of fibre cables proves to be
more expensive than laying one's own infrastructure;
•
if the operator in question needs a stretch of network other than the one
offered by TeliaSonera; for example, to directly connect two areas or
properties instead of going via a telecommunications exchange.
In the draft decision on network infrastructure access that was distributed for its
third consultation in November 2009 64 , PTS proposed introducing an obligation
for TeliaSonera to provide access to dark fibre and also lay dark fibre where
there was none. The draft decision did not propose any regulation as regards
access to TeliaSonera's ducting. This was because mandated access to ducting
was not considered to be proportional; that is, practical and/or legal barriers
were viewed as exceeding the benefits of such regulation. Consequently, others
are currently not entitled to utilise existing, unutilised ducting; instead, this
entirely depends on whether or not the proprietor wishes to sell such access.
Draft decision, 10 November 2009 (file ref. 07-11757): Network infrastructure access ('NIT'),
http://www.pts.se/upload/Remisser/2009/beslutsutkast-kommunicering-nit-marknad-4-91110.pdf
64
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3.2
The infrastructural level
Infrastructural level (cables, masts and antennae)
•
The copper network, which was previously only used for telephony
and covers the whole of Sweden, has been opened up to all
stakeholders. This measure (usually called 'Local Loop Unbundling' –
LLU) means that there is a national broadband infrastructure that
everyone can use.
•
Dark fibre is extremely important for providing broadband services
that demand high capacity, including the next generation mobile
broadband (such as LTE).
•
The current supply of dark fibre is limited, and openness in the form
of opportunities for access shows a clear potential for improvement;
this represents a challenge as demand is increasing.
•
The cost of laying new fibre optic networks means that established
stakeholders are favoured. This also illustrates the importance of
guaranteeing openness (network infrastructure access) when
infrastructure is built using public funding, as it is often not
commercially justifiable to build parallel infrastructures.
•
Coaxial networks (cable television networks) are also used for
broadband. As for fibre, private property owners often own these
networks and openness is restricted, for example owing to exclusivity
agreements.
Once access to the natural resources required (in the form of radio spectrum
and/or ducting) has been ensured, the stakeholder intending to produce a
broadband service can advance along the value chain. It is important to
emphasise that the market stakeholder may either be a stakeholder (A) that is
producing a broadband service entirely on its own and for this reason requires
access to important production resources throughout the entire value chain, or is
a stakeholder (B) that wants to enter at the level of the value chain that is
assessed to be the most feasible commercially considering the stakeholder's
specific requirements. In the latter case, there is a dependency relationship
between the market stakeholders, insofar as stakeholder B is requesting access to
the infrastructure that A has established/acquired in some way.
Different stakeholders (at different levels of the value chain) base their
production of broadband services on different production resources. For this
reason, a stakeholder that uses more refined production resources (e.g. bitstream)
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40
cannot easily alter production if there is a lack of access to the bitstream
production resource and instead leases production resources that are less refined,
such as dark fibre.
Physical transmission media for transmitting electronic communications are
required when producing services and products for end users. Here, the type of
infrastructure referred to includes optical fibre 65 , different kinds of copper line,
masts and other infrastructure for mobile and other wireless communications.
In this report, PTS focuses on dark fibre as an input good. This is mainly due to
this medium being assessed as being the most future-proof of the transmission
media currently on the market in terms of managing the capacity requirements
deemed as relevant in pace with the increasing demand of households and
businesses for bandwidth-hungry services.
3.2.1
Fibre
Dark fibre is passive infrastructure, which constitutes an input good for many
retail products and services within electronic communications. 66 A wholesale
customer that leases dark fibre for further refining and to produce services and
products for end users must also use its own active equipment. Dark fibre can be
used for a number of purposes, such as connecting customers, collocating
equipment, capacity to and from base stations in a mobile telephony network
(backhaul) and also between different items of equipment (nodes) in the
operator's network. Fibre is usually laid in ducting, although there is also fibre
that has no ducting or is used in lines above the ground. However, an optical
fibre cable is more sensitive than copper and for this reason is usually laid (for
example, by blowing) in ducting in the form of plastic pipes. A de facto market for
leasing out ducting through which fibre can be blown can only be said to exist
when plastic pipes of a sufficient size have been incorporated into such ducting.
A wholesale customer that purchases or leases dark fibre connects its own
equipment and consequently has technical and financial control over its use. This
enables the wholesale customer to enjoy a larger share of the added value itself
compared with a situation where the wholesale customer would have leased
more refined production resources, such as bitstream, for example. Fibre as a
medium has a very high transmission capacity. Overall, there are few or no
substitutes for dark fibre where there is a considerable need for transmission
capacity.
65
Optical fibre is a thin glass line made from silicon dioxide (glass) that transfers data via light instead of via
electronic signals as is the case in a copper line. Optical fibre may be found in the entire, or parts of, public
and individual electronic communications networks.
66 Dark fibre - market and state of competition, PTS-ER-2008:9 and Dark fibre – one year later, PTS-ER2009:24
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41
Other infrastructure
The copper-based access network that is owned and operated by TeliaSonera has been
used to provide fixed telephony for quite some time now. 67 This network is
currently used to provide broadband via xDSL 68 , which is the most common
technology. Access to a pair of copper cables (LLU) can be leased either as
shared or full access. For shared access, the broadband operator separates the
frequency space in the cable (broadband uses the higher frequencies) with
another operator that provides telephony (telephony uses the lower frequencies).
In addition to this access, broadband operators that have access to copper cables
also need to be able to install and use transmission equipment in, or in
connection with, the telecommunications exchange or similar premises to which
the end user is connected. This may be done through collocation in TeliaSonera's
telecommunications exchanges.
As xDSL via the copper network has always been the most common technology
used for broadband, the issue of access to the copper-based network is crucial to
operators. A number of large operators have made significant investments in
LLU. However, extensive parallel establishment (replication) should already have
been carried out to the extent that is commercially justified, as exemplified in the
form of a stagnating LLU market. 69 Even if parallel establishment is not taking
place to the same extent now, operators still need access where they are
established, as well as access to service and fault rectification. PTS's draft
decision concerning network infrastructure access (NIT) emphasises the
importance of protecting investments that have already been made. 70 This is why
access to the copper-based network is still highly significant.
Cable television networks represent one alternative to the copper network in terms
of the provision of broadband services. Cable television networks comprise
coaxial cables (even if many of today's networks are 'HFC solutions'; that is,
hybrids of coaxial cables and fibre cables). The cables must be return activated
(i.e. enable two-way communication) if broadband is to be used in these
networks. Return activation normally requires some modifications to the original
network built for analogue television signals and which only requires one-way
communication.
Mobile and other wireless broadband communications require a licence and access for
rollout as well as use of radio masts, towers and transmission equipment (such as
base stations), in addition to access to radio frequencies within a spectrum space.
67 Draft decision, 10 November 2009 (file ref. 07-11757): Network infrastructure access ('NIT'),
68 'DSL' is a copper network-based, high speed connection between a telecommunications exchange and an
end user (Digital Subscriber Line). 'xDSL' is a collective term where 'x' represents different kinds of DSL
product (e.g. ADSL and VDSL).
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42
3.2.2
Entry terms (for those wishing to lease production resources)
Fibre
PTS has observed in various contexts that operators wishing to provide
electronic communications services via access to fibre often encounter major
barriers to entry. These include the high cost of laying fibre for stakeholders that
do not have access to their own ducting and new entrants not having the
economies of scale enjoyed by established stakeholders. 71
There have been some positive changes as regards the supply of dark fibre over
the past few years. Some expansion has taken place through private initiatives on
the part of providers, for example TeliaSonera's new fibre product, which is
called 'Skanova Fiber 2009', and the use of CESAR, a database system for urban
networks. 72 In light of the barriers to entry described above, other factors, and
considering TeliaSonera's strong position in the wholesale market for network
infrastructure access (incl. fibre and copper), PTS nevertheless proposed in the
draft decision in November 2009 that an obligation should be imposed on
TeliaSonera to provide access to dark fibre and also to lay dark fibre where there
was none. The draft decision also proposes that the existing regulation relating to
full and shared access to conventional subscriber lines (copper) shall remain in
place. 73
3.2.3
Market rules
Fibre
As dark fibre is a unique input good for many retail products, the competition
situation in the market is of major significance. If competition is not functioning
in a satisfactory way, this not only impacts on wholesale customers, but also on
the end users of electronic communications services. The fact that ducting and
dark fibre constitute a significant proportion of the total production cost for
electronic communications services means that the further down in the value
chain that competition is satisfactory, the lower the price can be for end users.
One alternative for an operator that does not have access to fibre is to lay its
own fibre. However, this alternative means significant investment costs and, as
mentioned above, is often associated with long implementation procedures and
general difficulties in terms of contracts and licences.
71 Relevant barriers to entry were presented in the report issued by the Agency in 2008 ('Dark fibre - market
and state of competition' (PTS-ER-2008:9)). It was also noted that existing barriers to entry could be
reduced by municipal authorities working actively to achieve more joint laying and establishment in the form
of rollout and competition as well as having sound infrastructural planning.
72 Skanova Fiber 2009 also includes the laying of new fibre in around 100 locations covered by this product.
One limitation in the supply for mobile operators is that this product is not offered to coordinates, but only
to addresses. The aim of CESAR is to coordinate the sale of dark fibre from different urban networks and
also to introduce similar terms of agreement so that urban networks could possibly serve as an alternative to
the national stakeholder, TeliaSonera. The urban networks now also cooperate with the Swedish Rail
Administration. Temporary support for ducting is also available that, albeit limited in its framework, is
expected to help contribute to the laying of fibre networks.
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43
There are several major stakeholders in the Swedish fibre market. TeliaSonera is
by far the largest, with a market share of around 45 per cent 74 , followed by local
urban networks, which have overall fibre coverage of 25-30 per cent 75 , network
owners (the Swedish Rail Administration, Svenska Kraftnät and Vattenfall) and
also operators and other stakeholders (Telenor, TDC and Tele2, IP-Only). Only
a small proportion of optical fibre is leased to market operators, which means
that demand exceeds supply.
Here, PTS would like to emphasise a few of the aspects that significantly
characterise the market. One important aspect is related to the barriers to entry
presented above. These are, for example, manifested in significant, established
stakeholders having a more favourable position in the market than new entrants.
For example, as stated in PTS's draft decision of November 2009, TeliaSonera
has significant power in the market for network infrastructure access. For this
reason, PTS proposes that the company should be subject to an access regulation
to promote competition that includes both copper and fibre-based network
infrastructures.
Another important aspect is the fact that public stakeholders have always
competed with private stakeholders in certain operations. This risks distorting
the market situation. Even if PTS has seen some signs of improvement in this
respect, the Agency still assesses that work relating to control principles for these
stakeholders should be intensified. 76
The Government proposed new regulations for the Competition Act (2008:579)
in a Government Bill (Government Bill 2008/09:231). 77 This would mean that
Stockholm City Court, as requested by the Swedish Competition Authority, can
prohibit the central government, a municipal authority or county council from
applying a certain procedure in an operation of a commercial or financial nature
a) if it distorts, or is intended to distort, the prerequisites for effective
competition, or b) if it impedes, or is intended to impede, the presence or
development of this kind of competition. If the Swedish Competition Authority
decides not to institute proceedings for a certain case, proceedings may be
instituted by an undertaking affected by the procedure or operation.
When infrastructure is built using public funding, requirements are usually
imposed on openness in the networks. This was, for example, the case when
broadband was rolled out in Sweden using public funding at the start of
Dark fibre – one year later, PTS-ER-2009:24
Dark fibre – one year later, PTS-ER-2009:24
76 See, for example, supporting documents such as from the interviews and input in Appendix 1.
77 http://www.regeringen.se/sb/d/11033/a/130519
74
75
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44
the 2000s. 78 Recently, the Commission also issued guidelines for the laying of
broadband networks financed by central government. 79
However, models for openness may vary in their design. One model may involve
the network owner (e.g. a municipal urban network) providing its wholesale
customers with pure resale products for broadband. Another model may involve
the network owner operating further down in the chain of refinement and
providing wholesale customers with passive infrastructure (such as dark fibre). A
third model (often referred to as the CO model) may mean that the network
owner (e.g. a municipal authority) procures a Communications Operator (CO) to
manage the operation of the local broadband network and/or provide a portal to
which service and content providers can connect in order to offer services to end
users. 80 81 In all of the models, the aim and management of the municipal
authority's operation are key for achieving and maintaining the degree of
openness, and ultimately the level of competition, that are desired.
There are several kinds of guidelines governing how publicly-owned
stakeholders, such as municipal urban networks, can run their operations. For
example, at an EU level, there are provisions in the Liberalisation Directive
(2002/77) that stipulate that no publicly owned, vertically integrated undertaking
is permitted to discriminate in favour of its own operation. Furthermore, the
Swedish Association of Local Authorities and Regions (SALAR) has drawn up
guidelines regarding the control of local broadband networks. 82 According to
these guidelines, urban networks should operate at a level of the value chain that
is as unrefined as possible. The Swedish Association of Municipal Housing
Companies (SABO) has also produced a guide to open broadband solutions.
According to this guide, a Communications Operator (CO) should be brought in
as an intermediary between the network owner and service provider. 83 This
solution means that end users choose their own service providers and SABO's
role is limited to procuring a CO on a competitive basis.
A third aspect that is increasingly affecting the market is 'exclusivity agreements'
between operators and property owners. This type of contract is concluded
between operators that control key infrastructure (mainly fibre-based
infrastructure, but also cable television networks) and property owners that want
to connect a group of households to a broadband network with high
See, for example, the report entitled 'Broadband throughout Sweden' (Official Government Report, SOU
(2008:40) for a description of this specific rollout.
79 Community guidelines for the application of state aid rules in relation to rapid deployment of broadband
networks, 17 September 2009
80 A stakeholder that manages the operation of an urban network is also called a 'Communications
Administrator' (CA).
81 The CO model is also used by private stakeholders.
82http://www.skl.se/artikeldokument.asp?C=723&A=50943&FileID=267070&NAME=Principer%Fstyrni
ng%5FKom%5FBredband%5B1%5D.pdf
83 Broadband for all - guide to open broadband solutions,
http://www.sabo.se/kunskapsomraden/teknik_och_forvaltning/bredband/Sidor/Upphandling.aspx
78
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45
transmission capacity. It is the property owner (detached house, industry and
apartment block) that decides on the type(s) of infrastructure that will be
established at the property, and the operators can thus influence this
development by financing all or parts of this rollout.
PTS's report entitled 'Survey of business models between operators and property
owners' (PTS-ER-2009:31) describes two main categories of business model in
this area. One main category is an open model represented, for example, by the
above-mentioned CO model. This model means that competition is permitted at
a service or infrastructure-based level in a specific property network. The second
main category is a closed model that does not permit competition. The open
contractual models thus have a more positive impact on competition. The
potential for infrastructure-based and/or service-based competition is also
affected by contractual conditions, such as conditions concerning collective
affiliation, which restrict competition.
However, it should be noted in this context that the impact on competition is
not the only thing to be considered when assessing exclusivity agreements.
Exclusivity at an infrastructural level may be a prerequisite for an investment
being made in the first place. One further aspect as regards exclusivity
agreements and property networks, which is described in PTS's report, is that
collective affiliation may be an attractive form of connection as it entails lower
prices for end users in the short term. However, in the long run, price levels are
likely to increase as a result of competition being restricted due to collective
affiliation. What's more, end users lose their freedom of choice as regards
operators and the range of services available, and there is a negative impact on
the development of services as barriers to entry arise for service providers.
Service providers that have concluded exclusivity agreements are also affected by
reduced incentives to invest in measures to improve quality in the network.
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46
3.3
The transmission level
Transmission level (digital transmission of data traffic)
•
Significant structural barriers, such as an inadequate prospective
customer base, mean that new entrants find it difficult to establish
themselves (despite network infrastructure access).
•
To ensure that the openness originating from network infrastructure
access actually encompasses the entire country, there is also a need to
be able to purchase transmission of data streams (bitstreams). This
means lower barriers to entry and consequently generates a more open
market with more stakeholders that can compete in terms of quality,
priority and capacity.
•
Leased lines also play an important role in this context (not least when
rolling out the next generation mobile broadband networks), as they
are used to supplement one's own networks and are a means of
replicating infrastructure.
Access to natural resources and infrastructure are in themselves insufficient for
the production of a broadband access line. Equipment for transmitting data
traffic is also required. There are two main kinds of wholesale product that,
besides the natural resources and infrastructure required, also meet the
purchasers' need for data traffic transmission. These involve a) 'bitstream access',
which is also subject to the rules promoting competition, and b) various forms of
leased line, which are also to some extent subject to the rules promoting
competition.
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47
3.3.1
Bitstream access
Bitstream access is a service for the transmission of data between an end user and
the purchasing operator's service or transmission network. 84 Bitstream access is a
more refined product than copper-based or fibre-based access to network
infrastructure (LLU/NIT) 85 , but less refined than a pure resale service, as an
operator that purchases bitstream access uses this product as an input good to
produce its own services for end users.
An operator that uses bitstream (or 'virtual access' as it is also known) does not
need to invest extensively in equipment in order to connect end users to its
service network, which is the case for LLU. Consequently, it is the transmission
equipment that constitutes a critical input good. However, there may be
variations in the level of refinement for the bitstream service.
Leased lines
Leased lines can be provided via 'capacity services', which comprise a connection
with dedicated capacity for transmission, unlike bitstream, which is provided
without dedicated capacity and in accordance with the 'best effort' principle. 86
Leased lines are used both to connect end users to a service network and to link
various units of equipment within one's own network. Consequently, the active
equipment must also constitute a critical input good here.
3.3.2
Entry terms (for those wanting to lease production resources)
Bitstream access
Bitstream access is an important alternative to NIT/LLU, particularly when
conditions in the market do not allow for the investments required by
NIT/LLU. It may be claimed that mandated access in the form of NIT/LLU
could reduce the barriers to entry in the bitstream access market (and increase
the number of stakeholders that are able to supply bitstream) to such an extent
that it would consequently be unjustified to regulate bitstream access. However,
PTS stated in a draft decision about bitstream access 87 that major structural
barriers existed that were high and non-transitory and which restricted new
entrants from establishing themselves in this market segment. This conclusion
was based on fibre networks being laid: a) when building new properties and
upgrading property networks; b) in order to replace copper networks; and c)
closer to the end user from a telecommunications exchange to a connection
cabinet ('VDSL 88 technology'). All of these developments reduce the physical
85 NIT means 'network infrastructure access', which is proposed for regulation in the draft decision (file ref.
07-11757/23).
86 PTS decision, File ref. 04-6950/23, b
87 http://www.pts.se/sv/Dokument/Remisser/2009/Andra-samradet-av-forslag-till-beslutNatinfrastrukturtilltrade-och-Bredbandstilltrade-for-grossistledet/ [Second consultation for proposed
decision; network infrastructure access and wholesale broadband access]
88 Very high-rate Digital Subscriber Line
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48
capacity of entrant operators to compete with a network owner for the end users
included in the catchment area of an interconnection point. The customer base
also shrinks.
Leased lines
A leased line linking two geographical points located far from each other may
comprise a local network section (terminating segment) at both ends as well as a
linking network section (trunk segment) in between. The latter refers to
interurban network sections in the transmission network, whereas the former
refers to network sections in the access network that are used to connect end
users.
In a decision dated 6 October 2005 (File reference 04-6950), PTS stated that
there were significant barriers to entry for both kinds of leased line, but that
there were no operators with significant power in the trunk segments market.
This is why only terminating segments are subject to the rules promoting
competition.
3.3.3
Market rules
Bitstream access
A bitstream service can generally be differentiated in terms of parameters such as
quality, priority and capacity. The purchasing operator's requirements are
ultimately determined by the retail services that the operator intends to provide
in the market. For example, basic Internet access does not require a level of
capacity and quality that is equivalent to those of IPTV and IP-based telephony.
The requirements that may be imposed on a bitstream service are in turn also
related to the infrastructure through which the service can be supplied and it is
ultimately this infrastructure that determines the retail services that can be
provided.
PTS considers it crucial that a wholesale product for bitstream access enables
wholesale customers to offer services at the retail level that corresponds to the
services provided by a wholesale supplier. This means that a bitstream product
cannot be limited to, for example, Internet access, but should also enable the
wholesale customer to provide other services at a retail level.
In conclusion, it should be noted that potentially the most important reason for
PTS having introduced the regulation of bitstream access is the fact that, due to
the geographical nature of Sweden, establishing an access network for Sweden
alone would not be appropriate in the current situation, nor would making
investments on the basis of LLU access in all parts of the country. In some areas,
it is simply not commercially feasible to make this kind of investment, for which
reason bitstream access is necessary to ensure that the positive consequences of
competition via access regulation encompass the whole of Sweden.
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49
Leased lines
It is common for different parts of a leased line to be transmitted over different
media, such as copper wires in both connection terminals and fibre cable in
between. For longer analogue lines, it is also common to just use analogue
technology for transmission at both terminals, whereas digital technology is used
in between. The differences between analogue and digital leased lines lie in their
transmission capacity and functionality. Analogue leased lines are characterised
by low transmission capacity and limited functionality. The type of line requested
by a user partly depends on whether the terminal equipment to be used is
analogue or digital, and partly on the signals to be transmitted. For instance, the
transmission of signals when making a credit card purchase only requires low
capacity, whereas an Internet connection for an undertaking requires high
capacity.
Transmission services enable operators to supplement their own networks with
communication connections that do not require major and irrevocable
investments and consequently make parallel establishment easier. Such services
consequently represent a necessary input good when producing most electronic
communications services. The operators that purchase wholesale services use
these, for example, to transmit large numbers of telephone calls (such as point to
point connections for business communications), to provide Internet services
and to connect base stations and exchanges in a mobile network.
Against the background of the above, it is clear that both dark fibre and leased
lines will represent very important elements when rolling out wireless networks
in the future.
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50
3.4
The IP level (public Internet and local IP
networks)
IP level (addressing of data traffic and access to a network connection:
'access')
•
Different network operators conclude agreements describing how
data traffic is to be transmitted. These contracts mean that not all
stakeholders need networks everywhere, but that all of them can still
reach the entire network. They are often based on network neutrality
and a 'best effort' principle; that is, that the content is not attributed
value but is sent as soon as capacity is available.
•
Content that requires high capacity means that the access lines of end
users must perform sufficiently. However, access to access networks
comprises a bottleneck, which results in openness being limited.
•
There is currently a tendency for openness (freedom of choice) to be
substituted for a lower price through bundling (that is, one
stakeholder offering and providing mobile telephony, broadband and
television together).
This level of the value chain includes providers of Internet services (ISPs 89 ) that
provide access to their networks and the networks of others in interaction (the
Internet). This is consequently the level where Internet connections and resale
products are produced and provided.
In brief, the Internet can be described as a network of several networks that are
interconnected at traffic exchange points, where different network operators
have concluded agreements about how traffic should be sent between the various
networks. Communication takes place using the IP Protocol, and traffic (IP
packets) is directed by routers that use IP addresses to determine how the
respective IP packet should be sent on to the recipient. Traffic across the
Internet is not traditionally restricted by using blocking or prioritisation or the
like depending on its content or source/recipient, but is routed in accordance
with queuing principles and supplied in accordance with 'best effort'. This means
that all potential and available capacity is used at each moment in time, but that
delays and interruptions may take place owing to a lack of capacity.
89
Internet Service Providers
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51
3.4.1
In order to be able to offer end users access to the Internet, the operator needs:
a) access to an IP network (its own network) that is interconnected to other IP
networks (the Internet); and b) access to a digital transmission channel that
extends all the way to where the end user is located. This type of transmission
channel is generated using the production resources acquired at lower levels of
the value chain, for example, raw copper lines or dark fibre from the
infrastructural level, including associated active transmission equipment, or more
refined bitstreams from the transmission level.
If the operator wishes to purchase a wholesale service that is so refined that it is
basically a complete retail service with a connection at the IP level, this type of
wholesale service is usually called a resale service. In this type of case, the retail
service provided by the purchasing operator becomes very similar to the
wholesaler's own retail service. On the other hand, the purchasing operator
basically only needs to invest in a server that generates user accounts and
authenticates customers when they log on.
3.4.2
Entry terms
The sale of resale products has been highly significant to enable operators to
establish themselves in the Swedish broadband market. 90 This is because Sweden
has not had access to a bitstream product that corresponds to market demand
for some time now. In addition to this, no regulated bitstream products have
been provided by TeliaSonera, which dominates the market. 91 In pace with
operators increasing their customer base, they have a financial incentive (e.g.
economies of scale) to invest in their own equipment and infrastructure.
As already stated, Internet traffic is exchanged between different networks. This
is usually done according to the 'best effort' principle, which means that the value
of the content of IP packets is not based on the content sent or who the source
or recipient is. The traffic (IP packets) is supplied to the extent that there is
capacity, and a lack of capacity will mean that all of the recipients with the same
Internet access lines are negatively affected to the same extent by some packets
arriving and some not. The agreements that regulate the exchange of traffic are
known as 'peering agreements' and 'transit agreements'.
'Peering agreements' regulate the exchange between two networks and mean that
the operators exchange traffic that is intended for one of the operator's end users
or other operators connected to the network. Peering agreements are most
common between operators of a comparable size and in most cases the parties
do not pay any traffic fees to each other. However, there are cases where charges
90 In particular, TeliaSonera's unregulated product 'Skanova Bredband' (currently called 'IP-stream',
http://www.teliasoneraic.se/start_ic)
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52
are imposed for interconnection, 'paid peering', which often occurs when the
parties are not of a comparable size.
'Transit' means that one of the parties undertakes to relay the traffic of the other
party and its customers to a third operator. Transit agreements often cover the
entire, or large parts of, the Internet. A small operator, which requires global
access if its services are to be competitive, can achieve this by concluding a
transit agreement with a large operator that already has global connections.
Transit agreements are most common between operators of different sizes and
are often associated with some form of charge for the party providing the transit
function, which is usually the larger operator. This charge may take the form of a
variable or fixed monthly charge. The variable charge is not linked to distance,
but is instead calculated on the basis of the volume of traffic transmitted. 92
3.4.3
Market rules
The structure of the market at the IP level differs from the structure of the
market at the natural resource, infrastructural and transmission levels, insofar as
it has both a wholesale and retail dimension. 93
The market stakeholders compete in the retail broadband market in different
ways. One alternative is for them to build their own access network
infrastructure and another way is to purchase various forms of access product at
the wholesale level; that is, to use someone else's infrastructure. The regulated
access products available in Sweden have been described above. This includes,
for example, LLU (at the infrastructural level), leased lines and bitstream access
(at the transmission level). There are also unregulated products alongside these
regulated products that are used to varying extents. No regulated product at the
IP level can be used to produce broadband, but there is an unregulated resale
product that several market stakeholders use.
Today, the vast majority of Internet access lines in both the residential and
business markets in Sweden are broadband-based. 94 The predominant forms of
connection in the retail broadband market include xDSL (43 per cent of the
market), fibre and fibre LAN (15 per cent), cable television networks
(14 per cent) and mobile broadband (27 per cent). 95 The main stakeholders in
this market 96 include TeliaSonera (39 per cent of the market), Telenor Sverige
92 The description of peering and transit is based on Nya förutsättningar för samtrafik [New prerequisites for
interconnection], PTS-ER-2006:45
93 The other cases do not have an end user structure, as households and businesses do not directly request,
for example, access to infrastructure (this is usually requested by operators who in their turn provide access
and services to end users).
94 PTS Survey of Individuals 2009 and Statistics Sweden, IT i företag [IT in business],
[http://www.scb.se/Pages/Product____15308.aspx], 23 November 2009
95 It should be noted that mobile broadband subscription agreements are concluded on an individual basis,
whereas other forms of access are often shared per household.
96 Based on the number of subscriptions with broadband connections to the Internet
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53
(20 per cent), Com Hem (13 per cent), Tele2 Sverige (9 per cent) and Hi3G
(6 per cent). 97
The different stakeholders focus on slightly different segments. Of course, this is
because supply and demand in the retail market are not uniform in many respects
but vary depending on different customer needs. For example, different private
customers demand different transmission rates and this is reflected by providers
offering products with different rates.
These differences are also reflected in use. Many customers still only use their
Internet access for simple services, such as sending and receiving e-mails and
searching for information ('Internet surfing').
The business market also has a number of different products covering different
customer needs, such as including enhanced accessibility and quality (QoS) to
increase the reliability of important content services.
The services offered at the top level of the value chain (the service level) are
distributed to end users both within local networks from the network operator
itself 98 and from other service providers via the public Internet. In both cases,
these refer to IP-based services. However, in order to gain access to the network
operator's own services via its local IP network (e.g. its broadband telephony
(VoIP) and television service), it is neither necessary nor self-evident that the end
users will simultaneously receive full access to the IP networks (Internet) and IP
services of all of the other providers.
For example, there are currently offers where the Internet access line ('the open
IP access') that is offered alongside the IP services provided by the network
operator is limited in terms of capacity, although the subscriber can pay more to
receive Internet access that is more powerful and open. 99
The widespread discussion about network neutrality that is currently taking place
revolves around network operators prioritising IP traffic for various reasons or
discriminating against and blocking certain IP services. Among the phenomena
being discussed are restrictions in the form of blocking or filtering of individual
services or content 100 and the 'prioritisation of favourites'. 101
Data from PTS, 'Swedish Telecommunications Market' [www.svensktelemarknad.se], 18 November 2009
The network owner, the CO, the MVNO, etc.
99 TeliaSonera has, for example, introduced differentiation in terms of access to services in the various
subscription alternatives for broadband access via mobile surfing. Consequently, access to IP-based
telephony services and file-sharing programs provided by other parties is only granted via the most
expensive subscription alternative. There is no corresponding differentiation relating to mobile broadband
access lines. This is one example of an attempt to introduce a new business model for differentiated Internet
access at prices that vary (PTS's note).
100 Rebtel has described 'dripping' (= that approximately 90 per cent of VoIP calls were disconnected) and
'IP sniffing' (= the IP addresses used by Rebtel for VoIP being afforded lower priority, which undermines
service quality).
97
98
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54
Access to IP networks that are virtually closed could also be mentioned as regards the
situation described above; that is, a situation where an end user happens to have
access to IP-based services (e.g. the IP services provided by the network operator
itself), but at the same time has limited or no access capacity for the IP-based
services of competing service providers (IPTV, VoIP, file-sharing programs or
streamed video).
The network neutrality debate involves a discussion as to whether IP network
access, which only provides limited access capacity for competing IP services
provided by others, can be termed as 'true Internet access'. Has 'Internet access'
been provided if the network operator controls the supply and only enables
access to pre-defined IP services and limited access to websites ('cable television
Internet')? 102 A discussion has emerged about whether it would be possible and
appropriate to, for instance, start labelling different kinds of Internet access or to
clarify the scope of the 'Internet access' offered in some other way.
The Annenberg School at the University of Southern California (Center for the
Digital Future) has published principles for network neutrality, which mean that
operators should provide Internet access including access to the public Internet
with a minimum level of capacity. The operator is free to differentiate and
develop this access to the extent that the broadband access exceeds this basic
access. 103 However, thoughts about network neutrality have also been formalised
outside academia. In Norway, for example, the national regulatory authority has
made a decision on principles for network neutrality, which should provide
guidance for stakeholders in the market. A clear position in favour of network
neutrality was also taken within the EU following the adoption of the Telecom
Reform Package. 104
It should also be noted that some filtering/blocking of traffic on the Internet
may be acceptable. In 2004, PTS found reason to take a stance regarding the
filtering of traffic by service providers (mainly in terms of junk mail, or 'spam')
which may be deemed to constitute a restriction of the use of services and
content on the Internet. In a written communication issued to operators, PTS
determined that a service provider can automatically filter e-mails to prevent the
spread of viruses and malware, provided end users are informed and have
consented to this. 105
That is, an undertaking that wants more rapid and better access to its products can pay the Internet
service provider so that certain websites or applications will be prioritised with a higher level of capacity and
have better response times at the expense of those that have not been prioritised.
102 Cf. Teldok 2.0 (http://www.teldok.se/files/TEP1-Natverksneutralitet.pdf). See also
http://www.dn.se/kultur-noje/forhandlingar-i-bryssel-om-eus-telekompaket-1.844537 [Negotiations in
Brussels about EU Telecom Reform Package].
103 http://www.boingboing.net/2006/03/24/principles-for-netwo.html
104 See Section 3.5 (in particular Sub-section 3.5.4) of this report.
105http://www.pts.se/sv/Nyheter/Internet/2004/PTS%20skickar%20skrivelse%20till%20operat%C3%B6r
er%20om%20e-postfiltrering/
101
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PTS also proposed an amendment of LEK 106 , which would increase the potential
of operators to filter traffic to prevent the spread of viruses and malware. 107
Contact with market stakeholders 108 during the spring of 2009 showed that a
number of the operators present in this market considered that the proposed
statutory amendment was presently too far-reaching (the exemption was overly
comprehensive).
A number of Internet service providers are currently taking part in 'child
pornography blocking'. This means that these providers block access to a
number of Internet addresses belonging to a list (including Internet sites
containing child pornography) that is compiled and updated by the police.
Participation in this project is voluntary. When contacting operators in the past,
PTS has announced that it deems this type of traffic restriction as acceptable,
assuming that the providers apply a transparent model where they clearly define
their participation in relation to their end users.
The proposed blocking of communications to foreign gambling services was the
subject of investigation by the Swedish Inquiry on Gambling. 109
PTS-ER-2005:7 'Swedish strategy to secure the Internet infrastructure' and PTS-ER 2006:12 'Strategy to
improve Internet security in Sweden'. The proposal was to introduce an additional exemption to the
prohibition against wiretapping in Chapter 6, Section 17, meaning that electronic communications service
providers would be given an opportunity to carry out "any processing that is required to discover and
prevent the dissemination of electronic messages that jeopardise the function of the electronic
communications service or the communications network". PTS's proposed amendment to LEK has not
resulted in any measures being taken by the Government.
107 PTS views the promotion of security work in electronic communications networks and the prevention of
security risks as important components of its work. Through the Swedish IT Incident Centre, SITIC, PTS is
striving to establish collaboration between operators to make it easier to disseminate information about
security threats in their own networks. The aim is to strive to combat, for example, 'botnets'. PTS is hoping
that the involvement of SITIC will mean that operators can participate and possibly disseminate information
about the security risks in their respective networks in a way that is both neutral and that does not impede
competition.
108 Regular meetings are held through an Integritetsforum [privacy forum] set up by PTS where operators,
various public authorities and other interested parties are invited to exchange information and discuss issues
related to privacy within the electronic communications sector.
109 En framtida spelreglering [Future gambling regulations] (Official Government Report, SOU 2008:124).
Among other things, this inquiry came to the conclusion that technological development has led to controlrelated problems for Sweden's gambling regulations, where gambling on foreign websites takes place
without government control. As a result of this, the Swedish Inquiry on Gambling proposed a number of
measures aimed at re-establishing government control over gambling in Sweden. Among other things, it has
been proposed that communication companies should be prohibited from relaying electronic
communications from their customers to domain names and IP addresses used for gambling services that
do not have a licence. This proposal means that all Swedish Internet service providers will be obliged to
block traffic in their networks, subject to punitive damages. Several consultation instances, including PTS,
have strongly criticised the proposed blocking, referring to both the practical difficulties of maintaining such
blocking as well as the lack of proportionality in terms of fundamental freedoms and rights, such as freedom
of expression. This proposal is in the course of being drafted.
106
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3.5
The service level
The service level (content, services, terminal equipment and computer
programs)
•
The concerns of end users as regards openness mainly relate to file
sharing, data retention and privacy. Content blocking and the
prioritisation of traffic do not yet appear to be widespread problems
in Sweden, although the market is developing quickly and the situation
is continually changing.
•
Many leading content services currently being offered over the
Internet are offered by third party providers via networks that they do
not own. Network owners clearly consider that their margins are
shrinking and they consequently assert the need to get a larger share
of revenues from content providers.
•
This level is regulated by several pieces of legislation, many of which
are undergoing amendments as they were not enacted to be applied to
a world dominated by digital content.
3.5.1
Introduction
This level of the value chain includes the equipment and programs, services and
content offered to end users (consumers, undertakings and public authorities) as
well as the content generated by the users themselves (for example through
'Web 2.0 services' and social media), together with government e-services and
other public information.
PTS wishes to emphasise from the outset that there are a number of openness
aspects relating to this level that are only touched upon briefly below and which
are not dealt with in any further detail in this report. This applies to, for example,
the equipment (mobile telephones, handheld computers, laptops, etc.) and
computer programs (operating systems, media players, search engines, together
with e-mail and social networking services, etc.) that, together, enable action at the
service level.
This type of equipment and computer program may create restrictions and lockins owing to their design. The reason why these aspects are not analysed in more
detail in this report is because the framework of the analysis has been limited to
openness aspects relating to production resources directly linked to the
production of the underlying electronic communications service (e.g. a
broadband-based Internet service). It is this basic communication service that is
produced in the value chain described above and which is used to subsequently
develop, apply and use additional services. Another aspect that has not been
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57
included below is restrictions relating to the utilisation of content as a
consequence of intellectual property rights.
Given this delimitation, PTS still wishes to emphasise that it is important when
making a further analysis to remember openness aspects relating to equipment
and programs, together with the significance of intellectual property rights. In a
preliminary study commissioned by the Government Offices of Sweden prior to
the Visby Conference 110 , particular importance was attributed to the action of the
European regulatory authorities in this area. For example, it was emphasised that
it was important for regulatory policy with the aim of promoting competition in
the future to take account of problems related to openness and competition that
had become relevant as a consequence of the actions of stakeholders in the
equipment and software markets. 111
As described in the previous section, end users are frequently offered services
from their vertically integrated network operators, which, besides providing
Internet access, also offer their own services via their IP networks, including
broadband telephony (VoIP), e-mail and retention services. Competing content
providers also offer their IP-based services over the public, open Internet. In
addition, the service level also includes services that are available locally on users'
equipment (e.g. VoIP software in mobile telephones and computers).
In light of the large number of services offered, it is not possible to present a
comprehensive picture of the market and supply of services. One clear
characteristic of the market, which makes a comprehensive market description
even more difficult, is the fact that it is cross-border in the same way as the
Internet. 112
See footnote 16 in Section 1.2.
for example, pages 31-32, figures 8 and 9 in 'A Green Knowledge Society. An ICT policy agenda to
2015 for Europe's future knowledge society':
http://www.se2009.eu/polopoly_fs/1.16246!menu/standard/file/A%20GREEN%20KNOWLEDG
E%20SOCIETY_CREATIVE%20COMMONS_%20WEB1.pdf: "There are major problems with
software markets, which also touch the internet at browser and operating system and enabling service levels.
This apparently arcane area is now critical, as our dependence on these upper layers increases daily.
However, Europe’s competition-enforcing process is too long and uncertain. [---] More effective forms of
ICT competition policy need to be realised for all the areas shown in Figure 9. These upper layers are
market segments which do not involve ‘natural monopolies’ but which have been left open to market
dominance, largely ignored by regulators as being too technical. The stranglehold on the market is often via
intellectual property rights for formats, software mechanisms, code and interfaces. Consequently, Europe
lags not only in making the building blocks on which the ICT world and the internet are based, beyond
networking, but also in using them, because competition authorities move too late. Actions occur after a
succession of competitors have been ejected or weakened over many years."
112 One illustrative example is if a subscriber in Sweden attempts to use a US-based content service relayed
over the Internet. If the service provider has not chosen to pay for the prioritisation of traffic, this may
result in the American operator that is managing the traffic and forwarding it to Sweden opting to restrict
the capacity and thus limiting the potential use by Swedes. Thus, in the same way as American users,
Swedish users would have to bear the consequences of network neutrality not being complied with in the
United States.
110
111 See,
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Another characteristic feature of the market is that it is typified by rapid
development, which requires a forward-looking perspective. One significant
example is that many of the most talked-about services today that are accessible
via the open Internet did not even exist a couple of years ago, such as the
Swedish services Skype, Bambuser and Spotify, in addition to Twitter, Facebook,
Google Wave, 113 Wikipedia and YouTube.
The ambition of the section below is to identify a number of the different
aspects of openness that have arisen at the service level. To a certain extent,
problems related to openness on the IP/Internet access level are associated with
the service level, insofar as the measures restricting openness that may possibly
be taken at the IP level (e.g. traffic discrimination/blocking of services) are
experienced by end users via services used at the service level. These aspects are
also discussed in this section.
3.5.2
A user that wants to develop an IP-based service must have access to the
underlying service described above, namely access at the IP level (i.e. Internet
access). Internet access providers often offer IP-based services at the level above
as well (e.g. IPTV and broadband telephony), but not always. An end user
(consumer, undertaking or authority) may just as well purchase the one service
(Internet access) from one provider, and then purchase a number of other IPbased services from elsewhere.
All that is basically required to launch an IP-based service over the Internet is an
idea and knowledge about how this service (application) should be set up,
together with the relevant equipment and computer programs. A key input good
for developing all of these services is consequently the 'know how' and
inventiveness that, together with the open structure of the Internet, including its
principle of application neutrality and intelligence at the termination points of the
network, afford everyone with Internet access the opportunity to develop and
distribute services. In fact, much of today's Internet content was created by
private individuals who have taken advantage of this openness. Many content
providers and service providers, with small-scale and innovative operations, have
been able to reach users and markets through the openness and range of the
Internet, and in that way have been able to become flourishing and established
undertakings. A few examples include Skype, which has its roots in Sweden, plus
the Swedish company Rebtel, together with Google, an American company.
3.5.3
Entry terms
Those wishing to provide services at the service level may encounter barriers
when another party is providing users with this service at the IP level; that is,
when the users purchase Internet access from a party other than the party
113 http://wave.google.com/. 'Wave' is up-and-coming software on the Internet that mixes old
communication methods, such as e-mail, instant messaging and documents in web browsers, with new
social ways of sharing and working together. It is intended for both private individuals and undertakings.
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providing the overlying service. First, the Internet access may be blocked in
different ways, and second the traffic to and from the overlying service provided
may be discriminated against in various ways. One such situation is when the
party controlling the Internet traffic and Internet access lower down in the value
chain does not offer an operator providing a more refined service (e.g. VoIP or
streamed video) with the particular, specific traffic transmission quality ('QoS
service') that it requires.Network neutrality is all about this type of problem,
which is described in Section 3.4.
Even if gaining access to the above-mentioned production resources (primarily
Internet access and know-how) is relatively straightforward and inexpensive at
the present time, there are a number of legal prerequisites that must be
considered by stakeholders at the service level. To some extent, these legal
prerequisites constitute the 'entry terms' for this level of the value chain.
Examples of legal prerequisites, or entry terms, that all stakeholders must take
into consideration to varying degrees include competition law, law of contract,
market law and sales law (including consumer protection regulations), copyright,
privacy protection regulations, together with legislation on the freedom of
expression and freedom of information. 114 This is in addition to the anticipated
legislation concerning, for example, the retention of traffic data. This context
also brings specific legislation to the fore, such as the Electronic
Communications Act (LEK).
In the same way as day-to-day interaction between people and between private
individuals, legal entities, undertakings and the public sector is controlled by
norms and legislation that are known, predictable and clear, it is important for
regulations and entry terms for action at the 'service level' to be predictable and
relatively constant. This is because private individuals, legal entities and
undertakings must be able to assess the risks and consequences attributed to
entry into the market in question or the participatory culture on the Internet.
However, several of these legal prerequisites, or entry terms, are currently being
updated and adapted to IT and the digital interaction over the Internet. What's
more, some of them are completely new with a focus on new phenomena that
communications and interaction over the Internet have made possible.
3.5.4
Highly publicised debates about rules and legal discussions at
the service and IP level
A description is provided below of a number of debates that must be borne in
mind concerning some of the legal prerequisites encountered by stakeholders at
the service and IP level. As emphasised above (Sub-section 3.5.1), problems
related to openness at the service level are associated with the IP level, insofar as
the measures restricting openness that may possibly be taken at the IP level (e.g.
traffic discrimination/blocking of and discrimination against services) are
114 Cf. the Teldok 2.0 document Nätverksneutralitet i Sverige [Network neutrality in Sweden] and postgraduate
student Daniel Westman's report about some of the legal aspects relating to network neutrality, page 52ff.
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60
experienced by end users via services used at the service level. Hence, aspects
associated with both the IP and service levels are addressed in the section below.
The debates are grouped on the basis of what they are usually called in the media:
•
The 'Data Retention Debate' about traffic data storage and personal
privacy
•
The 'FRA Debate' about signals intelligence and personal privacy
•
The 'Telecom Reform Package Debate' about protection against the
disconnection of a private individual's Internet access (the 138th 115 ) and
network neutrality
•
The 'IPRED Debate' about anonymity on the Internet and access to
personal data in connection with unlawful file sharing, etc.
•
The 'Black Internet Debate' concerning the limitation of liability of
Internet service providers just forwarding content over the Internet
('mere conduit' 116 )
'The Data Retention Debate' about traffic data storage and personal
privacy
The protection of personal privacy is dealt with in the Personal Data Act
(1998:204) (PuL), as regards the processing of personal data, and in LEK, where
it specifically relates to electronic communications. LEK includes regulations
governing the processing of traffic data, a prohibition against wiretapping
together with a duty of confidentiality regarding the content of electronic
messages. With reference to the processing of traffic data, the basis for the act is
that such information must be eradicated when it is no longer necessary for
transferring communications or for invoicing purposes. 117
The proposed amendment was number 138 in the first (round of negotiations). The most recent wording
was reproduced in II DRAFT RECOMMENDATION FOR SECOND READING on the Council
common position for adopting a directive of the European Parliament and of the Council amending
Directives 2002/21/EC on a common regulatory framework for electronic communications networks and
services, 2002/19/EC on access to, and interconnection of, electronic communications networks and
associated facilities, and 2002/20/EC on the authorisation of electronic communications networks and
services (16496/1/2008 - C6-0066/2009 – 2007/0247(COD)).
116 The legal expression ‘mere conduit’ originates from the EU's 'E-commerce Directive' (Directive
2000/31/EC of the European Parliament and of the Council on certain legal aspects of information society
services, in particular electronic commerce, in the Internal Market). The provisions basically mean that
intermediaries running certain kinds of Internet-related operation of a purely technical nature should not be
held criminally liable or liable for damages for the content of the messages and information that they
forward or retain. Swedish legislation states that service providers that only transmit or retain data provided
by others should not be fully liable for the content of this information; see the Act on e-commerce and
other information society services, etc., Government Bill 2001/02:150.
117 Chapter 6, Sections 5 and 6 of LEK
115
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Rules relating to the processing of traffic data are subject to an amendment of
Swedish legislation. New legislation will be based on an EU Directive that was
adopted following a number of terrorist attacks, such as the one in Madrid in
2004. 118 The aim of this Directive is to ensure that data relating to
communications using fixed and mobile telephony, Internet access, e-mail and
Internet telephony is retained so that law enforcement authorities can gain access
to this data for the purpose of the investigation, detection and prosecution of
serious crime.
As described above, the type of data that is currently processed with a view to
transmitting an electronic message via an electronic communications network
must usually be eradicated or de-identified when it is no longer necessary for the
transfer of communications. After the implementation of the EU Directive on
data retention in Swedish law, the starting point will be the exact opposite; that
is, that stakeholders in the electronic communications market must retain
subscriber information for a fixed term. 119 According to the Directive, traffic data
must be retained that is required to show the origin of a call and when and to
whom a person made a call. Information must also be retained about who sent a
text message to whom and when this took place. The Internet data that must be
retained includes the IP address of each subscriber at every given point in time.
Providers of e-mail services must also retain data about, for example, the
originator and recipient of an e-mail message.
Network operators and service providers have voiced criticisms in this debate 120
in respect of the rules for retention, stating that they are difficult to apply and
adapt to, and also that such modifications have significant cost implications.
Some believe that it distorts the market if the business sector is compelled to
finance some of the central government's main tasks, such as law enforcement.
This may lead to increased transaction costs, which in turn may affect
openness. 121 However, the Government recently announced that it intends to put
the proposed legislation on hold until after the Riksdag (Swedish Parliament)
election in 2010. 122
The 'FRA Debate' about signals intelligence and personal privacy
118 Directive 2006/24/EC of the European Parliament and of the Council of 15 March 2006 on the
retention of data generated or processed in connection with the provision of publicly available electronic
communications services or of public communications networks and amending Directive 2002/58/EC
119 Official Government Report, SOU 2007:76 Lagring av trafikuppgifter för brottsbekämpning [Retention of
traffic data for law enforcement]
120 http://www.dn.se/nyheter/sverige/datalagring-forsenat-lagforslag-kommer-i-host-1.934893 [Data
retention delayed – statutory proposal to be made in the autumn]
121 http://www.svd.se/opinion/brannpunkt/artikel_3687675.svd and
http://www.itotelekomforetagen.se/web/Kostnader_telekom.aspx
122 http://www.dn.se/nyheter/sverige/regeringen-skjuter-pa-datalagring-1.979458 [Government postpones
data retention]
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In October 2009, the much debated proposal for a new act on signals intelligence
in military intelligence operations was voted through. The National Defence
Radio Establishment (FRA) had already been conducting signals intelligence for
radio traffic. The new act will mean more opportunities to carry out signals
intelligence, regardless of whether the signals are present in airwaves or wires,
and affords FRA the opportunity to also monitor cable traffic (signals in an
electronic form, i.e. telephone and Internet traffic) that passes over Sweden's
borders. Domestic traffic will not be subject to signals intelligence. 123 A new
provision in LEK will impose an obligation on operators that own the wires in
which signals are transmitted over Swedish borders to transmit these signals to
'processing points' where these signals can be dealt with by the FRA. Every
operator subject to this provision must notify the FRA of the presence of one or
more processing points. 124
The introduction of this legislation gave rise to questions concerning the
protection of personal privacy and whether the FRA should be afforded
extensive powers to survey the social networks and behaviour. of large groups via
traffic data. 125 Taking consideration of the criticism received about the legislation
originally proposed, the final wording was voted through, thereby including new
provisions that aim to enhance privacy protection in connection with signals
intelligence. 126 For example, the legislation now states the specific purposes for
which such work may be conducted in addition to the fact that a permit for
signals intelligence must be examined by a new court, a military intelligence
court. A representative to protect personal privacy (integritetsskyddsombud) must be
present during such court examination. It has also been criticised that, unlike
circuit switched traffic, it is not possible to determine the route taken by IP
traffic, for which reason it is claimed to be impossible to ensure that only the
traffic passing over Sweden's borders is being monitored. 127
The 'Telecom Reform Package Debate' about protection against the
disconnection of a private individual's Internet access (the 138th) and
network neutrality
The content of LEK is governed by five EU Directives in the electronic
communications sector. 128 These Directives have been the subject of a review.
Government Bill 2006/07:63, En anpassad försvarsunderrättelseverksamhet [Adapted military intelligence
operations]
124 PTS has the mandate to issue regulations about these processing points.
125 http://www.dn.se/nyheter/valet2010/het-debatt-i-riksdagen-om-fra-1.974600 [Heated debate in the
Riksdag about FRA]
126 Government Bill 2008/09:201, Förstärkt integritetsskydd vid signalspaning [Stronger protection of privacy in
connection with signals intelligence]
127 http://www.sr.se/cgi-bin/ekot/artikel.asp?Artikel=1240436
128 The Telecom Reform Package is a proposed amendment of a number of EU Directives with a view to
changing the EU's telecommunications regulations from 2002. These amendments apply to the Access
Directive (2002/19/EC), the Authorisation Directive (2002/20/EC), the Framework Directive
(2002/21/EC), the USO Directive (2002/22/EC) and the Directive on Privacy and Electronic
Communications (2002/58/EC).
123
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63
On 5 November 2009, the European Parliament and the Council of Ministers
finally agreed on a much debated amendment proposal, 'Amendment 138', which
was the only unresolved issue between these institutions preventing these
Directives from entering into force. At the end of November 2009, this
agreement was confirmed by its approval by the European Parliament and the
Council of Ministers. The review has come to be known as the 'Telecom Reform
Package'.
The above-mentioned amendment came to be a much debated part of the
Telecom Reform Package. 129 According to this proposal, no one would be
allowed to be disconnected from the Internet without this matter being
examined beforehand by a court. This proposal was made by the European
Parliament and, according to certain experts, was forwarded as a response to the
chain of events in France where a law was introduced (the HADOPI Act; cf.
Table 3 in Sub-section 3.5.6) 130 , which meant that parties who have unlawfully
shared files of copyright material via the Internet could be disconnected without
examination by a court. The Council of Ministers could not accept the European
Parliament's proposal, among other things because it was deemed to contravene
the EC Treaty.
The agreement that has now been confirmed means that an Internet user cannot
have their Internet connection shut down without the case being considered in a
legally secure manner. The debate relating to Amendment 138 has manifested
itself in many different ways, both in the general media 131 and through blogs. 132
For example, 'We Rebuild', which is a cluster of Internet activists 133 , was formed
as a direct consequence of this debate (PTS met representatives of We Rebuild
within the framework of this assignment; see also Appendix 1).
The amendment was numbered 138 in the first reading (round of negotiations) and 46 in the second
reading. Formally, the latest number applies and this wording is reproduced in II DRAFT
RECOMMENDATION FOR SECOND READING on the Council common position for adopting a
directive of the European Parliament and of the Council amending Directives 2002/21/EC on a common
regulatory framework for electronic communications networks and services, 2002/19/EC on access to, and
interconnection of, electronic communications networks and associated facilities, and 2002/20/EC on the
authorisation of electronic communications networks and services (16496/1/2008 – C6-0066/2009 –
2007/0247(COD)).
130www.nytimes.com/2009/10/23/technology/23net.html?_r=1&scp=1&sq=france%20three%20strike&st
=cse and http://www.dn.se/kultur-noje/nyheter/nej-till-fildelningslag-i-frankrike-1.888864 [France says
'no' to file sharing act]
131 http://www.sr.se/sida/artikel.aspx?programid=1630&artikel=2816230
http://www.svd.se/nyheter/politik/euvalet2009/artikel_2772417.svd
http://www.svd.se/nyheter/inrikes/artikel_3580273.svd
http://www.dn.se/kultur-noje/nyheter/forhandlingar-om-paragraf-138-1.962543 [Negotiations about
Section 138]
132 http://danielrisberg.wordpress.com/2009/04/19/telekompaketet-och-tillagg-138/ [Telecom Reform
Package and amendment 138]
http://www.erikjosefsson.eu/blogg/2009/04/09/laenken-mellan-hadopi-och-telekompaketet [Link
between HADOPI and the Telecom Reform Package]
133 http://werebuild.eu/wiki/index.php/Main_Page
129
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The proposed new USO Directive that has been negotiated includes provisions
that aim to both strengthen the principle of network neutrality as well as limit the
service providers' lock-in periods in relation to consumers. 134 In addition,
requirements are imposed meaning that service providers must inform end users
about measures taken by the service providers that may limit the capacity of
subscribers to have access to and be able to distribute lawful content and use
lawful applications and services at their own option. Furthermore, end users
must be given information about the processes used by service providers to
measure and manage traffic flows, together with how these processes may affect
the quality of a service. This proposal also empowers regulatory authorities to
require operators to provide information about the limitations mentioned
above. 135 Critics view this as constituting the legal support required by service
providers to be able to prioritise and block certain types of traffic to a greater
extent. In practice, however, the new provisions mean that transparency and
consequently consumer protection will increase compared with the present
situation as no similar requirements concerning information, etc. have been
found at an EU level. Consequently, limited measures could be taken previously
without any obligation to inform consumers. Moreover, according to the new
USO Directive, the regulatory authorities will be able to impose requirements on
service quality, which may combat discrimination and thus also promote network
neutrality. In addition to this, Article 8 of the Framework Directive also currently
stipulates that the regulatory authorities must work to ensure that end users
receive and are able to distribute information and applications as they wish. This
is also a clear stance in favour of regulatory authorities working to ensure
network neutrality.
The 'IPRED Debate' about anonymity on the Internet and access to
personal data in connection with unlawful file sharing, etc.
A much debated law has recently been introduced in Sweden based on the EU
Intellectual Property Rights Enforcement Directive ('IPRED'). 136 This Directive
Article 30 introduces a maximum introductory contractual period of 24 months. Directive 2002/22/EC
of the European Parliament and of the Council on universal service and users' rights relating to electronic
communications networks and services, Directive 2002/58/EC concerning the processing of personal data
and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004
on cooperation between national authorities responsible for the enforcement of consumer protection laws
2007/0248 (COD).
135 Article 21, Directive of the European Parliament and of the Council amending Directive 2002/22/EC
on universal service and users' rights relating to electronic communications networks and services, Directive
2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic
communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities
responsible for the enforcement of consumer protection laws 2007/0248 (COD). See also Article 8,
Proposal for a Directive of the European Parliament and of the Council amending Directives 2002/21/EC
on a common regulatory framework for electronic communications networks and services, 2002/19/EC on
access to and interconnection of electronic communications networks and services, and 2002/20/EC on the
authorisation of electronic communications networks and services – Outcome of the European Parliament’s
second reading (Strasbourg, 4 to 7 May 2009).
136 Directive 2004/48/EC of the European Parliament and of the Council on the enforcement of
intellectual property rights
134
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65
was adopted with a view to creating a high, equivalent and uniform level of
protection for intellectual property rights (e.g. copyright) within the EU.
The Directive was implemented in Sweden by amending various laws relating to
intellectual property rights. For example, these amendments mean that measures
can be taken against those involved in infringements. Sweden has also introduced
rules that enable courts to order a party that is alleged to have committed or
participated in an infringement to provide information on the origin and
distribution networks of the goods or services to which the infringement relates,
subject to the penalty of a default fine (an information injunction). This type of
injunction may also be issued to a party that has provided a service on a
commercial scale (for example, an electronic communications service) that was
used when the infringement was committed. 137
As a consequence of the new rules about the information injunction (which has
come to be known as the 'IPRED Act' in this debate 138 ), entitled parties have a
civil law possibility to gain access to information (for example, from an Internet
access provider) about the party having a subscription that was used during a
suspected infringement of copyright made via the Internet. Examination by a
court is required for information to be released and there must be reasonable
grounds for considering that such an infringement has taken place. The rules
contained in LEK previously meant that only the police and certain other law
enforcement authorities had the powers, subject to restrictive conditions, to gain
access to this type of information.
The introduction of the new rules in Sweden has resulted in certain service
providers, referring to the rules contained in LEK about the obligation to delete
traffic data, stating that in most cases they would not usually be able to release
the information requested, as this information had not been retained. 139
Prosecutors recently emphasised that it has become more difficult to search for
crime on the Internet since these rules were introduced. 140 The introduction of
See Section 53 c of the Act on Copyright in Literary and Artistic Works (1960:729).
http://www.dn.se/kultur-noje/riksdagen-beslutade-om-ipred-lagen-1.807030 [The Riksdag makes a
decision on the IPRED Act]
139 See, for example, http://www.idg.se/2.1085/1.226635/tele2-skrotar-anvandaruppgifter [Tele2 scraps
user data] and http://www.idg.se/2.1085/1.224739/alltele-struntar-i-ipred-lagen [Alltele ignores the IPRED
Act].
140 http://www.sr.se/cgi-bin/ekot/artikel.asp?artikel=3239832 and
http://www.aftonbladet.se/nyheter/ipred/article6126445.ab
137
138
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66
these rules has also given rise to a debate concerning the need for end users to be
anonymous on the Internet in order to protect their personal privacy. 141
Up until now, one much debated case has been considered by a court as a result
of the new rules. An Internet service provider was ordered by a district court to
divulge information about the name and address of the user of one of the IP
addresses supplied by this Internet service provider, as it was deemed that there
were reasonable grounds that the user of this address was guilty of a copyright
infringement. 142 An appeal against this decision was made to the Court of
Appeal. The Court of Appeal revoked this decision, with the justification that the
applicant had not submitted plausibly that the works protected by copyright had
been made available to the general public in such a way that is required for an
infringement of copyright to be deemed to have taken place. An appeal against
this decision has subsequently been made to the Supreme Court. 143
The 'Black Internet Debate' concerning the limitation of liability of
Internet service providers when forwarding content over the Internet
('mere conduit')
Another judgment publicised in recent times is the one against an Internet
service provider called 'Black Internet' which, according to this service provider,
supplied Internet capacity to another Internet service provider which in its turn
supplied Internet access to The Pirate Bay, a file sharing service. In an interim
decision, Black Internet, pending a final decision on the issue of whether it
should be deemed to have been involved in an infringement of copyright, was
prohibited from participating in an infringement of certain listed works by
providing Internet connections for The Pirate Bay's services. 144 An appeal has
also been made against this decision.
For service providers, this decision has led to concerns about a need to increase
the prior scrutiny of end users, which is claimed to potentially result in the
operators' costs rising, resulting in higher broadband charges and undermining
freedom of expression and freedom of information. 145 The criticism made by the
Internet service providers should also be viewed in light of the principle of
limitation of liability for intermediaries; for example, when forwarding content
http://www.newsmill.se/artikel/2009/02/05/ipred
http://www.newsmill.se/artikel/2009/06/25/fel-av-ephone-att-spara-uppgifter-om-sina-kunder [ePhone
wrongly retaining customer data]
http://www.svd.se/nyheter/politik/artikel_3721029.svd
http://www.newsmill.se/artikel/2009/06/25/centern-maste-atervinna-integritetsfragorna [The Center
Party needs to reclaim privacy issues]
http://www.idg.se/2.1085/1.221453/fyra-tjanster-som-utmanar-ipred-lagen [Four services challenging the
IPRED Act]
142 Solna District Court, Dept. 1, Case no. Ä 2707-09
143 Svea Court of Appeal, Department 02, Division 0202, Case no. ÖÄ 6091-09
144 Stockholm City Court, Department 5, T 7540-09 and T 11712-09
145 http://www.svd.se/opinion/brannpunkt/artikel_3584645.svd
141
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over the Internet ('mere conduit'). 146 In brief, this means that service providers
that only forward material cannot be held criminally liable or liable to pay
damages for the content supplied over their networks. This principle is
incorporated in the Electronic Commerce Act 147 in accordance with Sweden's
obligation to incorporate the Directive on e-commerce. One legal-policy
objective behind this principle is to ensure that intermediaries are not adversely
affected by onerous liability, which risks impeding the development of services
provided by the information society. Another aim is to increase the level of
general security and legal certainty, and also to remove barriers for the free
mobility of services by having clear and, above all, common rules in the inner
market. 148
In the course of the debate about the Black Internet case, it has been claimed
(among other things) that the outcome of the case may result in Internet service
providers feeling compelled to assess their customers' operations proactively so
as to ensure that they are not drawn into costly legal proceedings similar to those
involved in the Black Internet case. If operators feel compelled to exercise
caution when deciding whether or not to connect customers to the Internet as a
result of this type of financial risk, growth and innovativeness may be impeded
and thus lead to more 'permission-based innovation'. As a consequence, this may
make it difficult for services within new, unexplored areas to find businesses
willing to provide them with a connection. 149 This would be in direct
contravention of the intentions behind the principle of mere conduit, which is to
promote the development of services provided by the information society.
In this context, it is worth noting that there was a new legal case in Norway dated
6 November 2009, the outcome of which was completely different to the Black
Internet case. There, the court decided not to order the Norwegian company
Telenor to block the Pirate Bay network service. The court stated the following,
which is of interest as regards the above-mentioned line of reasoning:
[Blocking Pirate Bay] will result in Telenor and other Internet service providers,
as limited companies, being forced to evaluate whether or not the website or
service in question should be stopped. This is the kind of task that is usually
allocated to a public authority, and in the view of the court it is unnatural in the
current situation to impose this kind of duty on limited companies. A more indepth investigation into this matter appears to be necessary to decide on
whether this solution should be chosen. 150
The question relating to the liability of intermediaries when forwarding Internet
traffic, etc. has arisen in conjunction with international trade negotiations
146
147
Cf. footnote 121
Act concerning e-commerce and other information society services (2002:562)
Government Bill 2001/02:150, page 87
http://www.idg.se/2.1085/1.243535/risk-for-forhandsgranskad-webb [Risk of web being subject to
prior scrutiny]
150 Asker og Baerum District Court, 6 November 2009, Case no. 09-096202TVI-AHER/2
148
149
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regarding the 'Anti-Counterfeiting Trade Agreement' (ACTA). 151 ACTA
negotiations include discussing which forms of sanction as regards intellectual
rights can be imposed in relation to, for example, transmission service providers,
etc. 152 Owing to the limited transparency of these negotiations, it is still unclear
what the negotiations involve in detail. 153 Swedish representatives have recently
communicated that Sweden will not agree to any amendments of the laws
governing the responsibility of Internet service providers for illegal file
sharing. 154
3.5.5
Market rules
Lock-ins, bundling and the prerequisites for customer mobility
One openness aspect at the service level is the issue of how accessible (open) the
services are that, for example, a consumer has paid for. Some of the measures
that may restrict openness include measures taken by stakeholders at a lower
level of the value chain; that is, they are not necessarily taken by the party that
the end user has concluded a separate agreement with at the service level. On the
contrary, this service provider may have set up this service so that it must be
accessible over the Internet, regardless of the terminal or access network used.
Despite this, the end user may be adversely affected by limited accessibility to
this service.
This may take place if the provider of Internet access at an underlying level of
the value chain (the IP level) restricts or completely blocks access to the service
in question by discriminating against certain communication protocols or by
blocking the IP addresses of private individuals. This could be due to the
broadband telephony service or the entertainment service purchased competing
with a service that the vertically integrated network operator wants to offer to the
end user.
See www.se2009.eu/sv/moten_nyheter/2009/11/6/the_6th_round_of_negotiations_on_anticounterfeiting_trade_agreement_engelska. Cf. also http://karlsigfrid.se/2009/11/04/acta-utkastavstangning-och-okat-ansvar-for-internetleverantorer/ [ACTA draft disconnection and increased liability for
Internet service providers] and www.michaelgeist.ca/content/view/4510/125
152 "Elements under discussion in this section include the availability of remedies: in cases of third party
liability, without prejudice to the availability of exceptions and limitations",
www.se2009.eu/polopoly_fs/1.22452!menu/standard/file/ACTA%20Summary%20of%20Key%20Elemen
ts%20Under%20Discussion%20-%20091106.pdf
153 Cf. www.michaelgeist.ca/content/view/4534/125
154 http://www.dn.se/fordjupning/europa2009/actaavtalet-sverige-sager-nej-till-forslag-om-illegalfildelning-1.994262 [ACTA agreement: Sweden says 'no' to proposal regarding illegal file sharing]
151
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Section 3.4 discusses the risk of services and access to the Internet generally
being restricted by measures that involve the underlying Internet access. 155
Prioritisation may be a resource-efficient tool, for example when differentiating
between services where 'QoS' is used to provide the customer with the quality
and level of service that the customer has chosen to pay for. However, risks are
involved, particularly if it is used in a discriminatory way and under conditions
where there is no competition; that is, if there are not several stakeholders
established and the potential of end users to switch Internet access provider
consequently does not serve as a restraining factor in relation to an individual
provider that may be considering misusing this prioritisation tool. 156 Sub-section
3.6.6 delves into the importance of end users having a practical opportunity to
switch provider and that they actually use this opportunity to switch ('vote with
their feet').
However, the problems related to openness that are referred to above must not
be confused with the problem of certain services being restricted per se as a result
of measures taken by the service provider in question owing to its choice of
business model and its technical limitations. This could be the case in connection
with offers of 'bundled services', where an entertainment service that has been
provided (e.g. IPTV) or an e-mail or retention service is only accessible via a
specific Internet access or a specific access network. IP services that vertically
integrated network operators provide over their (fixed or mobile) Internet access
are often inaccessible via other access networks or via terminals over which the
network operator has no control. Likewise, services may be directly integrated in
terminals, for example, separate television services in mobile telephones that
cannot be accessed via other access networks or terminals.
One key issue for this type of openness restriction is the question of whether the
end user has received sufficient information about the nature and degree of the
restriction. Is there a sufficient level of transparency as regards the terms for
Internet access and for the IP-based services used by the end user? If the end
user is aware of what applies and can choose alternative services if he or she is
dissatisfied, the combination of this potential for customer mobility and the fact
that the end user does not 'vote with his or her feet' should indicate that this
customer is in fact satisfied.
However, it should be noted that the blocking/prioritising of services does not currently appear to be a
major problem from the perspective of consumers, judged from the complaint statistics published by the
Swedish Consumer Bureau for Telecom, TV and Internet. The Bureau has received very few complaints in
this area. In addition, these complaints do not appear to significantly relate to consumers not being able to
access certain services, but the fact that they are sometimes forced to pay an additional charge for services.
For example, this may involve having access, via a mobile telephony operator, to a 'surf zone' and the
services provided there, but that consumers are charged more if they wish to access the entire Internet.
156 PTS, 'Network neutrality', 2009 (PTS-ER-2009:6)
155
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In the PTS report from January 2009, which is entitled 'Network neutrality' 157 ,
the Agency states the following:
Action taken by PTS will focus on promoting competition and availability in the
access market, so that end users have several options when choosing a service
provider, and informing consumers about differences between the offerings of
service providers. If this is done successfully, this is likely to reduce the need to
uphold network neutrality through regulation. It should be easy for customers to
assess prices, what a service includes and its quality. The quality actually supplied
as regards Internet access should agree with the description contained in the
agreement. It is important to state capacity rates both upstream and downstream
and to do this as precisely as possible. Several service providers in Sweden have
started stating capacity rates in intervals.
The Swedish Consumer Agency (KOV) presented a report on customer mobility
in different markets (e.g. the electronic communications market) on behalf of the
Swedish Competition Authority (KKV). 158 Among other things, KOV pointed
out that consumers often have a major information and knowledge disadvantage
in relation to service providers, and also that the cost of searching for relevant
information is often perceived as being excessive, despite the availability of price
comparison sites such as Telepriskollen (a Swedish telecom price comparison
tool). KOV also emphasises the risk of consumers tiring of making choices.
Bandwidth-hungry services, laying networks and financing networks using new
business models
One area that has taken off over the past few years is IPTV, and not only via
closed IP networks (particularly via TeliaSonera's metallic access network), but
also in the form of web IPTV. Web television is usually transmitted via
'streaming technology' 159 and is still not fully comparable with traditional
television broadcasting. Many broadcasters currently put out a lot of their
content on their websites; for example, SVT Play, TV3 Play and TV4 Anytime.
This means that viewers can personally choose when they want to see a certain
programme or programme clip.
End users must have access to an increasingly powerful access network in order
to be able to consume such television services, as is the case with other services
that demand high capacity for moving images with better picture resolution and
sound (e.g. Video on Demand (VoD) and YouTube). Consequently, this
increases demand and requires the upgrading of existing infrastructure and new
investment. One key issue in the discussion about network neutrality that has
been taking place over the past few years, primarily in the United States, involves
the challenges faced by the market in terms of functioning business models to
secure new investments needed in future-proof infrastructure.
PTS-ER-2009:6
'Customer mobility' report, 2009:5
159 'Streaming' or 'streaming media' means playing back sound or video files on a computer or mobile
telephone at the same time as they are transmitted from the Internet.
157
158
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Several of the services in question have been developed by what could best be
called 'service provider giants' ('mega-ISPs'). 160 It should be noted that many of
the content services currently being offered over the Internet are provided by
this type of third party service provider, via networks owned by other operators.
These large stakeholders are financially sound, have strong brands and are in the
process of establishing themselves within the video and voice market. A megaISP receives much of its revenues through advertising and can thus subsidise, for
example, IP-based telephony competing with the operators' traditional services.
This may result in a new competitive situation where these mega-ISPs represent
strong stakeholders. At the same time, it is important to emphasise that there are
also small content providers that are not as financially sound as the abovementioned mega-ISPs. Several of these small stakeholders originate from
Sweden. These include Spotify (www.spotify.com), Voddler (www.voddler.com)
and Bambuser (www.bambuser.com). They also provide capacity-hungry
services.
In the PTS report entitled 'A long-term analysis of the development of the
electronic communications sector' (PTS-ER-2009:2), the Agency discussed the
need for new business models. The report states that a small number of service
providers generate large volumes of traffic in the networks and this is driving
investment. Many operators consider this to be unsustainable, claiming that the
network costs for the service providers are disproportionate in relation to the
investment required, despite service providers paying for their Internet
connections. There are also corresponding problems for users in terms of the
mobile communications networks, where a small group of users utilise a large
amount of capacity without paying any more for this. In the report, PTS
emphasised the possibility that one of the consequences of this development
could be a differentiation in quality levels for different services and differentiated
pricing.
One question to consider in this context is whether there is a risk of the
historically open Internet changing into a more closed 'cable television Internet'.
If this were to happen, Internet access might become one of several services
provided in an ever larger infrastructure, rather than all of the services being
provided over the Internet.
At the 'Teldok 2.0 Seminar' about network neutrality, the issue was described as
follows:
Is it generally better or worse for society to freely allow service integration and
profit maximisation? Should society impose any 'fairness requirements'? These
questions have been posed by, for example, Odlyzko (2008). In the discussion,
the opportunities for innovative new services on the open platform are thus set
Konvergens och utvecklingen mot nästa generations nät [Convergence and the progression towards the next
generation network], PTS-ER-2008:11
160
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72
against the clearer, direct investment incentives of the access and serviceintegrated networks ('closed platform'). Can this kind of integrated network be
referred to as the 'Internet' or are they really only IP-based transmission
networks for certain pre-defined services, possibly with restricted Internet access
as one of their many features? This is the balancing act around which the issue
of network neutrality mainly revolves. If network providers are prohibited from
making their own decisions about the terms for the services that can be
provided via their networks, this will reduce the potential for revenues, as
competing services will be afforded access to the network provider's network,
and they claim that there will be less incentive to build infrastructure. On the
other hand, if the network owners can freely choose which e-services are to be
available to end users, then who will want to set up the e-services of the future if
they can suddenly disappear from the Internet or have to negotiate to get access
to end users even before they have become established? 161
3.5.6
Current measures taken by other countries and international
organisations that affect 'openness'
The table below illustrates a selective sample of measures for the purpose of
painting a picture of some of the current discussions relating to openness and
events taking place outside the borders of Sweden. This table only covers
problems and proposed solutions related to the two uppermost levels of the
value chain (the IP level and the service and content level respectively). The
focus is on discussions and proposals relating to new regulation. Some of the
examples in the table are also described in other parts of this report.
Table 3 Measures taken by other countries and international
organisations that affect 'openness'
Measures that have a bearing on the disconnection of an individual's
Internet access
Country/
Region
Measures ('Solution')
EU
'The Telecom Reform Package' encompasses protection for
end users and requires a special procedure for disconnecting an
end user's Internet access. 162
http://www.teldok.se/files/TEP1-Natverksneutralitet.pdf
The full wording of this much-debated provision is as follows: "Measures taken by Member States
regarding end-users’ access to or use of services and applications through electronic communications
networks shall respect the fundamental rights and freedoms of natural persons, as guaranteed by the
European Convention for the Protection of Human Rights and Fundamental Freedoms and general
principles of Community law. Any of these measures regarding end-users’ access to or use of services and
applications through electronic communications networks liable to restrict those fundamental rights or
freedoms may only be imposed if they are appropriate, proportionate and necessary within a democratic
society, and their implementation shall be subject to adequate procedural safeguards in conformity with the
European Convention for the Protection of Human Rights and Fundamental Freedoms and general
principles of Community law, including effective judicial protection and due process. Accordingly, these
measures may only be taken with due respect for the principle of presumption of innocence and the right to
161
162
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France
The 'HADOPI Act' contains a three-step procedure which
ultimately involves disconnecting end users from the Internet
(referred to as a 'three strikes law'). 163
United
Kingdom
Proposed legislation that is similar to the HADOPI Act, with a
procedure for gradually disconnecting illegal file sharers from
the Internet. This procedure involves warning letters,
restricting access capacity and finally complete
disconnection. 164
International
negotiations
The ACTA negotiations involving the forms of sanction as
regards intellectual rights that can be applied in relation to,
among others, transmission service providers, etc. As a
consequence of restricted access to information in these
negotiations, it is still unclear what these negotiations involved
in detail. Swedish authorities have recently communicated that
Sweden will not agree to any amendments of the laws
governing Internet service providers' liability for illegal file
sharing (see Sub-section 3.5.4 above).
Measures with a bearing on network neutrality
Country/
Region
Measures ('Solution')
EU
The 'Telecom Reform Package' that has just been finally
negotiated 165 includes, for instance, amendments of the
Framework Directive and USO Directive. Among other things,
the regulatory authority 166 must actively work to promote
network neutrality. An extended information obligation will be
imposed on service providers vis-à-vis end users relating to the
privacy. A prior fair and impartial procedure shall be guaranteed, including the right to be heard of the
person or persons concerned, subject to the need for appropriate conditions and procedural arrangements
in duly substantiated cases of urgency in conformity with the European Convention for the Protection of
Human Rights and Fundamental Freedoms. The right to an effective and timely judicial review shall be
guaranteed." (Article 1(3)a of the new Framework Directive)
163www.nytimes.com/2009/10/23/technology/23net.html?_r=1&scp=1&sq=france%20three%20strike&st
=cse
164 http://digitalbritainforum.org.uk/2009/10/the-future-of-copyrightand-p2p/
http://www.berr.gov.uk/files/file51703.pdf
http://www.idg.se/2.2370/1.241393/storbritannien-slar-till-mot-fildelare [The UK strikes back against file
sharers]
165 http://www.se2009.eu/sv/moten_nyheter/2009/11/5/europa_enat_kring_telekompaket [Europe
united on the Telecom Reform Package]
166 PTS is likely to be appointed as the regulatory authority in charge.
167 Cf. Sub-section 3.5.4, under 'The Telecom Reform Package Debate'
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quality and openness restrictions of the services. 167
Norway
PT, the regulatory authority in Norway, adopted guidelines in
2009, including three principles relating to network neutrality 168
(see Sub-section 3.4.3 above).
United
States
In September 2009 169 , a proposal from the FCC, the regulatory
authority in the US, regarding two further 170 principles to
protect network neutrality: (1) a prohibition against
discrimination in respect of specific content or specific services
in connection with traffic management, and (2) transparency
regarding openness restrictions.
United
Kingdom
BBC/iPlay discussion 171 concerning the access providers' plans
to block an Internet video service with reference to this service
consuming an unreasonable amount of network capacity.
Belgium
Proposed legislation about forcing Internet access providers to
block 'illegal' gambling sites. The proposed legislation has been
attacked by the European Commission with reference to free
competition. 172
www.npt.no/ikbViewer/Content/109604/Guidelines%20for%20network%20neutrality.pdf
These proposals are still being drafted and are expected to be adopted in the spring of 2010 at the earliest
(www.networkworld.com/news/2009/102209-fcc-takes-first-step-toward.htm). See also
www.washingtonpost.com/wp-dyn/content/article/2009/09/20/AR2009092002290.html l.
170 The FCC had already adopted four principles on network neutrality in 2005,
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-05-151A1.pdf
171 http://www.independent.co.uk/news/business/news/Internet-groups-warn-bbc-over-iplayer-plans461167.html
172 See EU study entitled 'Legal analysis of a Single Market for the Information Society', from 9 July 2009,
Chapter 6, 'Net neutrality', and also http://www.dekamer.be/FLWB/PDF/52/2121/52K2121001.pdf.
168
169
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3.6
3.6.1
Summarised reflections: tension in the breakpoint
between openness and adding value
Challenges identified
The perspective of the market stakeholders interviewed in relation to
threats to openness
•
There is a risk of vertical integration and stakeholders joining forces,
which may result in a restriction in the potential to utilise content and
services.
•
There is a risk that gradually restricting openness, similar to a slippery
slope, will open the door for greater restrictions.
•
There is a risk that the inability of local and regional public
stakeholders to coordinate initiatives relating to broadband and other
IT investments will lead to the suboptimisation of resources, paralysis
and discrimination.
•
There is a risk that a lack of a political vision will lead to no
investments being made in the electronic communications
infrastructure and consequently undermining the competitiveness of
Sweden.
This chapter has described each level of the value chain in terms of adding value
and openness, with production resources, entry terms and market rules as the
starting point. It has focused on the factors that comprehensively describe the
different sub-markets and how they function. Other aspects, such as freedom of
expression and democracy, have also been included to some extent in the
discussion.
The three key factors have clearly demonstrated the following: what is required
to produce broadband services; the criteria that must be met to achieve
production; and the way in which the market functions. It should be noted in
this context that the component equipment in these production resources, for
example switches, have not been analysed in detail, nor have the equipment or
computer programs of end users at the service level (cf. Sub-section 3.5.1).
Consequently, this chapter has illustrated a number of factors that serve as a
basis for adding commercial value and for commercial use while also describing
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76
how openness affects the ability of those stakeholders participating in the
production process in question to run business operations.
The results achieved by the activities included in the value chain generate tension
between adding value and openness aspects. In most cases, opposing interests
(based on, for instance, willingness to pay and compensation requirements) can
be dealt with by market stakeholders on their own (by means of commitments
under contractual law) or resolved on a case by case basis. From a national point
of view, there is no reason to draw particular attention to them, as they relate to
functioning, market-related relationships. However, each of these levels is
associated with openness-related challenges which considerably undermine the
functioning of the market and the realisation of consumer and social benefits
that openness (i.e. that everyone is offered the potential of free access and own use on equal
terms) can help to achieve. Identifying and addressing these challenges is
extremely important, as there is a risk of them growing in magnitude.
An analysis is carried out below of the main challenges facing openness that have
been identified by PTS. The factors for openness and the mechanisms for
creating value described above have been used as a starting point. In Section 4.4,
the Agency provides a number of proposals for how these may be addressed
(these proposals are also summarised in Table 4).
3.6.2
Challenges to openness identified at a natural resource level
•
•
•
General lack of ducting
Access to land and ducting being granted on different terms
Lack of spectrum appropriate for wireless communications with high
area coverage
Three main challenges to openness have been identified at the lowest level of the
value chain, which encompasses spectrum and land use. These include a general
lack of ducting, access and land permits being granted on different terms and
that there is a lack of spectrum appropriate for wireless communications with
high area coverage.
The first challenge (lack of ducting) addresses the fact that there is currently
room for improvement in terms of the permit granting procedures for land use
for the purpose of excavating land for new ducting and, not least, access to
existing ducting. Coordinated and open access in terms of ducting should
provide socioeconomic gains in the form of cost savings and an efficient
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77
utilisation of resources. 173 As excavation work is a limiting factor and it may be
demanding both in terms of time and cost to apply for land permits in order to
roll out infrastructure, access to ducting can stimulate the establishment of new
entrants. 174 This helps to promote competition and thus stimulates an increased
supply of services that can benefit end users.
The second challenge is linked to the first challenge and focuses on the permit
granting procedure. Today, some municipal authorities apply different terms for
different stakeholders, which afford varying potential to conclude land contracts
and be granted excavation permits. Indeed, PTS has received indications that the
way in which municipal authorities deal with these matters is becoming more
uniform and that different stakeholders are being treated more equally. However,
PTS is still of the opinion that there is a need to continue to make the regulatory
framework more clear and to develop principles for control.
It appears unlikely that the challenges, which in some places encompass ducting
and access to land (e.g. suboptimisation of resources and discrimination), can be
solved through the agency of the market itself. Instead, government, regional and
municipal initiatives would be appropriate that have the express aim of ensuring
increased access to ducting, e.g. by means of joint laying. 175 Likewise, increased
and improved public coordination of the routines and guidelines governing
access to land is needed.
As mentioned previously, the natural resource level not only affects land permits,
but also the use of spectrum. This is addressed by the third challenge. However,
unlike land permits and ducting, a reduced level of government involvement for
access to radio spectrum may be expected to lead to increased openness. There is
a general lack of spectrum with good properties for wireless coverage that is
appropriate for wireless communications. By releasing additional spectrum in
those frequency bands that are appropriate for wireless communications with
high area coverage and through more liberal spectrum rules, innovations can be
more easily commercialised, which may be expected to lead to an increased
supply of wireless services and new applications that would benefit end users.
In some cases, however, there may be significant practical and legal difficulties, e.g. if access to ducting
were to be considered as an obligation to be imposed on operators with significant market power. Cf. PTS's
NIT decision, draft Nov. 2009
174 The importance of short lead-times in this process has been emphasised above in Sub-section 3.1.2
175 It may be noted in this context that OECD has also drawn attention to this area and is of the opinion
that governments and municipal authorities should reduce barriers to entry (such as by simplifying
administrative routines and forms of excavation permits and land contracts) in order to promote the rollout
of infrastructure (Broadband Growth and Policies in OECD Countries, OECD, July 2008,
http://www.oecd.org/document/1/0,3343,a an one_2649_34223_40931201_1_1_1_1,00.html).
173
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3.6.3
Challenges to openness identified at an infrastructural level
•
•
Restrictions in access to passive infrastructure (e.g. dark fibre)
Lack of broadband coverage
One step up in the value chain – the infrastructural level – is the level that
involves passive (unrefined) infrastructure in the form of cabling, masts and
antennae. Two primary challenges to openness can be identified at this level:
first, restricted access to passive infrastructure; and second, a lack of
infrastructure that allows for broadband coverage, particularly in areas with less
commercial potential. 176
The first challenge (restricted access to passive infrastructure) mainly involves
access to fibre. However, it may also be associated with copper-based
infrastructure. For example, a planned shutdown or move of a
telecommunications exchange may have an anti-competitive effect as regards the
investments made in equipment belonging to LLU. PTS has pointed this out in
its draft decision. 177 Restricted access makes it impossible for services to be
offered by stakeholders that do not own their own infrastructure. Ownership can
provide disproportionate market power and lead to competition becoming
limited and supply restricted, which may disadvantage end users.
Another problem encompassed by the first challenge is that access is provided at
a higher level of the chain of refinement than that requested. When market
stakeholders request access to passive infrastructure, they are sometimes offered
refined production resources instead at the transmission level or even higher up
in the value chain. This entails changed market prerequisites for these
stakeholders, with a reduced potential for financial and technical control 178 over
the end user product. This is in addition to the fact that stakeholders that own or
control the infrastructure often offer their own services relatively high up in the
chain of refinement, and even at the end user level, competing with those to
whom they lease production resources. This may cause suspicions about these
stakeholders favouring their own services (by excluding or discriminating against
competing stakeholders).
The second challenge identified involves a lack of broadband coverage.
Widespread infrastructure of high quality is a requirement for deriving any
advantage from existing and future electronic communications services. The
For an overview of Sweden's broadband infrastructure, see PTS's report entitled 'Broadband Survey
2008', 2009 (PTS-ER-2009:8).
177 Draft decision, 10 November 2009 (file ref. 07-11757), Network infrastructure access ('NIT')
178 As regards the importance of achieving financial and technical control, see PTS's NIT draft decision,
Nov. 2009.
176
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79
wider the coverage, the greater the potential to use content and services. In
principle, good coverage everywhere consequently has a strong correlation to
competitiveness, innovativeness and sustainable development.
Besides changes in technology, services and business models, factors related to
the business cycle play a major role when rolling out broadband infrastructure.
Thanks to political initiatives that have been conducted, widespread rollout of
broadband took place between 2001 and 2007 in areas where the market had not
regarded such investments as profitable. In spite of this, a large number of
households and businesses now depend on one individual access technology or
have no potential to receive broadband at all. The rollout is mainly inadequate in
sparsely populated areas and the restructuring of the copper network initiated by
TeliaSonera is very likely to result in poorer access. In light of this, and since it
appears that the issue of universal services (USO 179 ) could become more relevant
in the future, access to broadband will be highly significant and will thus need to
be managed by public authorities. 180
The challenges described above still largely apply to wired infrastructure alone.
One important reason for this is that the commercial prerequisites and
relationships between costs and revenues when laying new infrastructure differ
for laying wired infrastructure compared with laying wireless access
infrastructure. This means that there are currently a number of operators that
provide wireless access networks and that have also rolled out equivalent
infrastructure in sparsely populated areas, despite the customer base being
smaller there and the potential for revenues poorer compared with urban areas.
3.6.4
Transmission level
Challenges to openness identified at a transmission level
•
Restricted access to active infrastructure; e.g. bitstream access and
various forms of leased line
A major challenge to openness can be identified one further level up in the value
chain (at the transmission level; that is, the level relating to the equipment that
transmits data traffic), namely restricted access to active equipment (incl.
transmission services).
This challenge is primarily attributed to there being high and non-transitory
barriers to entry for active equipment. This is a problem from an openness
perspective, as it may limit the potential to safeguard competition in all parts of
Universal Service Obligation
Today, USO primarily concerns access to telephony (voice traffic) and is used to safeguard the
entitlement of citizens to basic electronic services. The current requirement levels determined for USO (20
kbit/s) also do not correspond to the requirements imposed by modern electronic services.
179
180
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Sweden, particularly in areas with less commercial viability. The barriers to entry
also help jeopardise the rollout of the wireless network infrastructure of the
future, as the latter depends on extensive wired infrastructure for the rapid
transmission of large streams of data ('backhaul capacity').
Another issue within the framework of this challenge (restricted access to active
equipment) is that the supply of transmission services may entail restrictions as
regards quality, priority and capacity, as well as geographical distribution in
relation to that demanded by the wholesale customer. The requirements that may
be imposed on a bitstream service are, for example, related to the infrastructure
through which the service can be supplied.
The wholesale customer (that is, the purchasing operator) determines its
requirements on the basis of the retail services that the operator intends to
provide in the market. As a result of this, the above-mentioned restrictions
become an anti-competitive factor making it difficult for operators to provide
end users with alternative services in competition with the parties controlling the
transmission service and that often operate in the retail market themselves. There
is a risk of this limiting the supply and in the long term, this may undermine the
potential of end users to safeguard their freedom of choice.
3.6.5
IP/Internet level
Challenges to openness identified at an IP/Internet level
•
•
•
Potential problems with restricted access to services due to the
restrictions/prioritisations of operators
Increased pressure on Internet service providers, which risks
undermining the aim of rules relating to limitation of liability for
stakeholders that forward Internet traffic, etc. (risk of increased prior
scrutiny and higher costs)
Uncertainty about the requirements that Internet access must fulfil,
with the result that consumers do not know what they will actually be
receiving when they purchase this type of access
The IP or Internet level is one level up in the value chain; that is, the part of the
value chain that includes Internet service providers and suppliers of resale
products. Three primary challenges to openness have been identified at this level:
the potential risk of restrictions/prioritisations resulting in problems with access
to services; pressure on operators to take more responsibility for who is
connected to the Internet; and uncertainty about what defines Internet access
and what it should enable.
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The first of the challenges identified (that is, access to services) lies in the need to
strive for the renewal of existing business models. For example, for Internet
service providers, this manifests itself in avoiding at all costs being reduced to a
'bit pipe'; that is, a stakeholder that provides access but which cannot capitalise
on the added value generated by content services. This change should also be
viewed in the light of the reducing cost of producing traditional services (such as
telephony and television broadcasting) in pace with the increasing cost for all
broadband access lines.
One potential risk for the future within the framework of this challenge is that,
instead of blocking certain services or restricting access to them in some other
way, Internet service providers will choose to prioritise traffic in a discriminatory
way or strangle traffic, thereby jeopardising the quality of the service for
competing service providers. Examples of this can be found in other countries. 181
A vertically integrated operator that provides Internet access could for example
discriminate against other providers' streamed IPTV services via the end users'
Internet access in order to ensure that they do not receive perceived quality that
is on a par with the IPTV service provided by the vertically integrated operator
(despite sufficient capacity and quality of the Internet access under the sales
terms). In practice, prioritising in the manner described above can drastically
reduce freedom of choice as regards versatile services and the potential of end
users to safeguard openness.
The above situation has also given rise to a closely-related challenge in terms of
openness. Changes to the conditions under which businesses are run have
resulted in divided opinions about what constitutes Internet access. 182 As the
current concept of 'access' does not include any general requirements that it
should be possible to reach all content and all services via Internet access, this
creates scope for enabling Internet service providers to themselves determine the
content in and scope of the Internet access provided. This means that openness
can be limited very quickly, which jeopardises benefits to end users, unless they
can choose from alternative operators or other access technologies. It should
also be added that the Agency, as described above (cf. Sub-section 3.5.4), is likely
to be assigned to work to achieve network neutrality in conjunction with
implementing the Telecom Reform Package. One important area that PTS must
address within this role involves the extent to which it should be possible to
apply the prioritisation tool if there is a lack of capacity in the networks instead
of the operators expanding network capacity or building separate networks. This
challenge consequently includes finding a balance and identifying when the limit for what
comprises a justified intervention in network neutrality and openness has been exceeded.
Openness is also challenged by operators being under pressure. Owing to the
illegal conduct of some users and new legal provisions, which aim to address
181
182
See Sub-section 3.5.6.
Cf. Vad är Internetaccess? [What is Internet access?], http://stupid.domain.name/node/889
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these unlawful activities, the pressure has also increased on operators to broaden
their area of responsibility. However, there is a risk of this creating uncertainty,
which may result in operators having to calculate the risk of disconnection in
relation to the potentially illegal use. 183 Consequently, the increased pressure on
Internet service providers means that the rules on limitation of liability, which
cover all stakeholders that forward Internet traffic, etc., may be undermined,
resulting in increased prior scrutiny and higher costs. This kind of development
is problematic from the perspective of openness, as it may limit the supply of
content and thereby curb the many ideas that are currently permitted to flourish
on the Internet. This reduces the potential to find and combine ideas, which in
its turn makes innovation more difficult. In the long run, this type of
development may have a negative impact on competitiveness. Not least, there is
an imminent risk that the capacity for innovation will be curtailed, as express
permission may be required prior to a new product being tested. 184
Furthermore, there is a risk that this type of development could lead to fewer
users being able to access the Internet owing to an increase in the cost of
providing access. This would create higher barriers to entry for end users and
would reduce the number of positive network effects, which are achieved by
many users and their activities. In summary, there is a risk that increasing the
responsibility of operators for traffic could result in reduced openness.
3.6.6
Challenges to openness identified at a service and content level
•
•
•
Restricted access to services and content via alternative access
networks
'Cloud computing' that disappears
Limited customer mobility
This level of the value chain includes the equipment, programs, services and
content offered to end users (consumers, undertakings and public authorities) as
well as the content generated by the users themselves, together with government
e-services and other public information. This level primarily encompasses end
users, and a number of challenges have been identified from their perspective.
PTS considers that the main ones include: restricted access to services and
content via alternative access networks, 'cloud computing' that disappears, and
limited customer mobility.
See also Sub-section 3.5.4
Cf. www.idg.se/2.1085/1.243535/risk-for-forhandsgranskad-webb [Risk of web being subject to prior
scrutiny]
183
184
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The first challenge involves, for instance, a service (such as IPTV, e-mail or a
retention service) being linked to the network of the vertical service provider,
meaning that it cannot be accessed through other access networks (for example,
from one's summer cottage or via the mobile network). Some services in
themselves are restricted owing to measures taken by the service provider in
question.
The fact that a service itself is restricted may, for example, be the case in
connection with offers of 'bundled services', where an entertainment service that
has been provided (e.g. IPTV, or an e-mail or retention service) is only accessible
via a specific Internet access or a specific access network. This means that end
users are cut off from this service when they are outside the network of their
own operator. One key issue for this type of openness restriction is the question
of whether the end user has received sufficient information about the nature and
degree of the service's restriction. In other cases, the party developing the service
may have intended the service to be available everywhere, but that activities at
the underlying IP level have resulted in restricted access. 185
The second of the challenges identified above comprises 'cloud computing'.
More and more opportunities are being offered to retain data and gain access to
services via the Internet in order to receive continual access, achieve greater cost
efficiency and to fully utilise mobility. This means that the performance and
computer programs that were previously available locally where the end users
were located are being moved out into 'cloud computing' and becoming
accessible from there. Likewise, this phenomenon means that the capacity to
retain data is also being moved out into cloud computing; that is, to virtual
retention sites.
Cloud computing is a potential challenge as it may entail a restriction to the
openness of end users due to difficulties in moving content to where users have
chosen to locate it in cloud computing. Cloud computing also imposes high
accessibility requirements, but in practice, end users have little opportunity to
receive compensation if for some reason their content disappears, is restricted or
is misused, for example, owing to the bankruptcy of the company looking after
such retention and access.
The third challenge facing openness that has been identified at this level is a low
level of customer mobility. In the electronic communications market, where
there is an uneven power situation between those with access to the necessary
production resources and other stakeholders, it has become essential for end
users to safeguard openness by exercising their capacity to make choices. As the
customer base is mobile and consequently network and service providers are
continually exposed to the risk of customers 'voting with their feet', incentives
are created for market stakeholders to satisfy the preferences of end users. As a
185
Cf. above in Sub-section 3.6.5
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result, innovative pressure and competition generate the offering of products and
terms that are as attractive as possible. Here, a high level of openness may
represent an important sales argument for individual stakeholders, as openness
means that more content can be created and sought, and more services
developed and provided. The increased quantity of content and services also
increases the likelihood of satisfying the preferences of end users 186 , which
affords greater potential benefits.
Considering the fact that customer mobility is an important aspect for ensuring
openness at a service and content level, a low level of active switches and options
turns into a challenge. There are many factors behind inadequate mobility,
among others the high cost of searching and switching which quite easily arises
for end users. Even if many end users have an information disadvantage in
relation to the different providers in the market and this lack cannot be alleviated
by more information activities, it is perhaps not only the lack of information that
is the main problem. Many end users are overwhelmed by information and are
expected to make a large number of important choices in modern society
(regarding, for instance, electricity suppliers, insurance and pensions), which has
resulted in people becoming tired of, or potentially tiring of, making choices and
ultimately not making well-founded decisions. This is why it is crucial that the
information discussed here, for example concerning restrictions to services, must
be adapted to the capacity of end users to make use of this information. For this
reason, increased clarity on the part of providers when conducting marketing
activities and in their conditions of use is key so that end users know what
choices they can make and the factors to take into consideration; for instance,
when choosing Internet access and choosing between different IP-based
services.
Without a sound understanding of the alternatives available or even an awareness
that it is possible to switch provider, it becomes difficult for end users to exercise
their right to make choices. There is also a risk that all of the different rational
choices that end users are expected to make in the market will create a 'choice
overload', particularly in connection with choices that are of an advanced
technical nature and which demand basic technical know-how and a
sophisticated understanding of the parameters 187 that are important when making
a choice. What's more, long lock-in periods 188 can pinion end users, and the
choice of solutions for, for example, retaining content, which Internet service
Of course, this line of reasoning assumes that an increased quantity will also lead to increased
diversification.
187 Besides price, examples of relevant parameters for Internet access include bandwidth, a quality-related
minimum level for services, response times and the use of traffic prioritisation.
188 In the 'USO Directive', there are now rules stating that the maximum initial lock-in period should be 24
months; see the amendment of Directive 2002/22/EC of the European Parliament and of the Council on
universal service and users' rights relating to electronic communications networks and services, Directive
2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic
communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities
responsible for the enforcement of consumer protection laws 2007/0248 (COD), Article 30.
186
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providers are offering for free, may be expensive if this content is tied to a
specific platform or service. 189 In addition to this, the providers often have a
major information advantage and expert knowledge about the contract
conditions, which makes it even more difficult for consumers to assert their
rights. 190
3.7
Conceivable future – a review of potential
scenarios
One of the clearest conclusions that can be drawn from previous sections and
chapters is that openness has different implications in different parts of the value
chain. The above has also made it clear that the different parts are interlinked
and affect each other to varying extents. However, the previous chapters and
sections focus on the existing challenges in the market, based on current market
conditions. In contrast, this section has a forward-looking perspective and aims
to focus on potential scenarios. This helps to generate preparedness for action
and the ability to act strategically (with a view to achieving or avoiding potential
scenarios).
On the other hand, making promises about the future represents a major
challenge. It is never possible to make definite forecasts of market trends, and
the high level of uncertainty means that caution is justified when making
interpretations and drawing conclusions. 191 Not least, credible and feasible
'forecasts' of conceivable future trends require a good understanding of:
•
historical development – this is used to capture long-term dynamics and
achieve a perspective on trend-related changes,
•
the prevailing market situation – this is to determine key factors that
reinforce or weaken the impetus that has historically played a crucial role,
as well as to identify signs of future and revolutionary trends, and
•
future scenarios – these are used to substantiate the goal profiles for
conceivable future scenarios and also the expectations that may influence
overall development.
In this context, where openness and adding value are at the forefront, one way of
conceptualising conceivable goal profiles is to use the potential conflict between
See also the challenge relating to 'cloud computing'.
Without a contract, there is no guarantee that the ownership of material placed with a specific
commercial stakeholder will not belong to the latter as soon as it is uploaded. One example is Facebook, the
social media site. In early 2009, this site changed its terms of use, which created a legal opportunity for the
company to retain user-generated material even if a user no longer has any dealings with the site. For more
information, see: The Consumerist, 'Facebook's New Terms Of Service: We Can Do Anything We Want
With Your Content. Forever.' 29 October 2009.
191 For an overview of the difficulties faced when conducting future studies, see, for example: Olsson, Lars,
Teknisk baksyn [Technology hindsight] [http://www.dimea.se/customers/tfOld/old/omtf/baksyn.htm ], 26
June 2009.
189
190
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these two concepts. 192 In many ways, the balance between openness and adding
value is key to the continued development of the electronic communications
market. In order to illustrate this, four brief conceivable scenarios are presented
below illustrating how future market trends could manifest themselves. These
scenarios have been drawn up on the basis of the overall trends that can
currently be observed in the market and which in many cases may be expected to
grow in importance over the years to come. These trends are described in Subsection 3.7.1, followed by a short impact analysis (that is, substantiating the
scenarios presented in Sub-section 3.7.2). The latter is intended to illustrate and
create the clarity desired for the respective scenario. 193
3.7.1
Trends in the present and future electronic communications
market
As there are a considerable number of trends affecting and influencing
developments, it is extremely difficult to make a fair selection. It should be
emphasised that market trends will not only be governed by both global and
market factors, but also by how the Government and responsible authorities deal
with questions concerning accessibility and the potential to use broadband (the
broadband issue). However, based on the material presented above and the
aspects assessed as essential for openness and adding value, the following factors
have been identified as critical so that content and services, which can be used
via broadband, can also be provided in the future.
IP networks – a clear trend towards convergence is taking place, where an
increasing amount of the traffic relayed electronically is IP-based. IP systems
have many advantages. While opening up the potential for new services, they also
generally involve lower investment and operating costs. The transition to IP also
creates the prerequisites for convergence between different markets that were
previously separate (bundling services) and thus may have a radical impact on
how the market functions. 194
Consolidation – the move towards more IP-based traffic is closely linked to the
need for businesses to be able to offer a service portfolio that can be used via
both wired and wireless access lines. This puts pressure on operators with a
limited range of services to broaden their operation – or seek forms of
collaboration – so that they can offer a complete range of products. This
pressure to adapt may be expected to result in a higher degree of consolidation
See also Chapter 2
Note that these scenarios illustrate the overall parameters for market development based on the trends
that can be observed. However, they are not claimed to be complete, but should be used as guidance.
194 One clear indicator of this is subscriptions being offered for bundled services. There are currently around
887 000 subscriptions in the Swedish market where two or more services are combined at a package price.
However, this amounts to just less than 10 per cent of the total number of subscriptions. Data from PTS,
'Swedish Telecommunications Market [www.svensktelemarknad.se], 18 November 2009
192
193
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(buyouts and mergers) 195 , which may have an impact on the way in which the
market functions in terms of vertical and horizontal integration.
Access to capacity – the IT and telecom industry is research intensive and
characterised by a rapid pace of innovation. Overall, the technical advances
achieved to date have meant that broadband capacity has increased tenfold every
six years. 196 One contributory factor behind this is that nanotechnology,
standardisation and software-based technology have given rise to new solutions
that save money. 197
Cloud computing – as mentioned previously, the increased access to capacity has
also been catalysed by the potential to increasingly use virtual retention space and
access to applications via terminals connected to the Internet. Several major
stakeholders, such as Google, IBM and Microsoft, have started to invest in this
area, which is often called 'cloud computing'. 198 Cloud computing provides
improved scalability and helps to do away with traditional licence models, which
in turn increases the total value of the electronic communications market. 199
Security and monitoring – the increased dependence on IT in general and broadband
in particular means that the requirements imposed on quality, backups and
operational reliability are increasing. Commercial applications and systems that
are critical to society and connected via broadband presuppose the potential to
carry out monitoring for the purpose of preventing and rectifying faults. 200 This
can increase confidence in broadband infrastructure and thus help to bring about
more and new users and areas of use. However, it may have the opposite effect.
The increased potential for control and the possibility of far-reaching tracking
and control of private individuals may, for example, generate uncertainty and
intimidate users. An increased need for security also imposes demands on
capital-intensive investments.
User patterns – the supply of new services generates expectations to be able to
access the Internet 'anywhere and at any time' and thus be able to communicate
The competition law rules at an EU level counteract consolidation, setting limits for the permitted level
of concentration. However, several examples of consolidation can be provided. In the Nordic market, the
above-mentioned trend has been demonstrated by the formation of Net4Mobility, an undertaking jointly
owned by Telenor and Tele2. In the rest of Europe, this trend has been demonstrated through the merger
of Deutsche Telekom and Orange, and in the US market, has been shown through Sprint's acquisition of
Nextel and AT&T's acquisition of Cingular.
196 Alcatel Lucent, 'An update on broadband', presentation for the Board of PTS, June 2009
197 The price of electronic communications equipment has fallen annually by approximately 7-8 per cent. Ny
Teknik, De tvingar Ericsson att spara – igen [They are forcing Ericsson to cut back – again], 15 October 2009
198 PTS, 'Strategic Agenda 2010' (PTS-ER-2009:27)
199 Computer Sweden, Begreppet molnet på väg att lösas upp [The concept of 'cloud computing' about to
dissipate], 16 October 2009
200 Computer Sweden, Fler fall av svåra haverier [Several cases of meltdowns], 10 November 2009
195
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with other users, and also directly with all kinds of electronic device. 201 It is also
likely that there will be a marked increase in both the need to be able to carry out
activities simultaneously and in the demand for realtime applications that
demand high capacity. 202 It is also expected that people will become less tolerant
of disruptions. In addition, it is considered likely in the near future that one can
manage a greater proportion of public services, such as healthcare at home, by
means of electronic communications. This will have a direct impact on the
market and how it functions.
Involvement – political interest in issues relating to Sweden's position as a
prominent IT nation in general and the electronic communications market in
particular plays a part in these developments. Clear, political leadership in ITrelated matters send signals to market stakeholders and serves as a catalyst for
growth. This can inspire use and also contribute to balancing various interests
and the issues that have been put on the political agenda. Conversely, a lack of
political involvement can obviously result in issues concerning the electronic
communications market being put on the back burner. This may lead to
uncertainty, which risks impeding the adding of value and degree of use and
could consequently have a negative impact on general market trends.
Attitudes – the views of different parts of the population on the use of digital
information differ to some extent. Not least, many young people and young
adults criticise the existing business models that are based on copyright. 203
Growing up with Internet access and the information content offered via digital
networks appears to have brought about a situation where virtually complete
access to information is taken for granted. 204 This may have an impact on market
growth and the potential to run a commercial operation.
Besides the need for human communication, there is an increasing need for human-machine
communication and machine-machine communication. Nokia, a telecommunications company, also
estimates that an average end user will have approximately ten devices connected by 2015. Similarly, Cisco, a
network equipment company, expects that an increasing number of applications on home computers will be
connected to the Internet. In conjunction with the launch of 'Tangent Bay' (a laptop with multiple screens),
Intel (a processor company) claimed that users are already now using between 20 and 30 programs
simultaneously. Cisco, 'Hyperconnectivity and the approaching zetabyte era', 2009, and PTS, Broadband
Survey 2008, 2009 (PTS-ER-2009:8), PC för Alla, 'Intel demonstrates laptop with four screens',
[http://pcforalla.idg.se.1054/1.254085/intel-visar-upp-barbar-med-fyra-bildskarmar#], 15 October 2009
202 Oxford Saïd Business School, 'Broadband Quality Score',
[http://www.sbs.ox.ac.uk/news/media/Press+Releases/New+High-Quality+Broadband+Study.htm], 26
June 2009
203 See Viviane Reding's speech about the criticisms voiced by young people about obsolete business
models. Digital Europe – Europe's Fast Track to Economic Recovery, Viviane Reding's speech in Brussels
on 9 July 2009, 09/336 and Dagens Nyheter, Tre miljoner fildelar illegalt i Sverige [Three million people sharing
files illegally in Sweden] [http://www.dn.se/kultur-noje/nyheter/tre-miljoner-fildelar-illegalt-i-Sverige1.972254], 15 October 2009
204 In 2008, the percentage of people between the ages of 15 and 19 with Internet access at home was 96 per
cent. The corresponding figure for people over the age of 65 was 60 per cent that same year (Nordicom's
Internet barometer). For more information, see:
http://www.nordicom.gu.se/?portal=mt&main=nat_stat_publ.php&me=5], 15 October 2009.
201
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3.7.2
Four conceivable scenarios for the electronic communications
market of the future
If the above-mentioned trends are combined with the other material presented in
this report, it is possible to distinguish four conceivable development paths for
the electronic communications market in terms of openness and adding value.
Scenario I: A mediocre network characterised by varying quality and content
One conceivable future might be characterised by network neutrality and with
pressure exerted by Internet activists and content providers demanding high
capacity meaning that 'best effort' becomes the dominant model. This would
enable pluralism but entail a risk of limiting the potential to guarantee quality. In
addition to this, uncertainty about the potential to make a return on
infrastructure investments could slow the pace of rollout and thus the
transformation to new access technologies. In many respects, this kind of
scenario brings with it a future where infrastructure is viewed as something that
is shared and can be taken for granted, but which is surrounded by very unclear
responsibility (in terms of who should finance maintenance and new
investments).
Scenario II: An experimental network characterised by pluralism and interaction
Another conceivable future is based on a scenario where consensus has been
achieved in terms of traffic prioritisation (what may be stopped, by whom and
when) and a balance has been achieved to enable the testing of new solutions
and services (innovations). In contrast to when the Internet was created, a
change has taken place to the prerequisites and the requirements imposed on
networks. New business models have resulted in situations that are questionable
from the viewpoint of competition and which extend beyond those areas that are
traditionally regulated. This scenario is based on a future that has identified
mechanisms allowing for a sufficient level of openness.
Scenario III: A cable television network characterised by a limited range of services with a
good level of quality
A third conceivable future could include a scenario where copyright is
strengthened, at the same time as regulatory supervision is eased up and the
stakeholders that currently own or control the networks are afforded increased
potential to regulate their own content and design. For operators, this means
many opportunities to create a 'cable television Internet'. This means that they
can prioritise their own services (in their own portals) and offer these with a high
level of quality and reliability while also restraining other stakeholders and
possibly limiting the rollout of capacity. 205 Exclusivity agreements 206 or
The latter is due to the operator being able to resolve bottlenecks by deprioritising the traffic of other
stakeholders and subsequently prioritising its own services before having to roll out any infrastructure.
206 It is likely that the network owner would require sole rights to realise such building work. Particularly in
the case of sparsely populated areas with limited commercial viability, it appears (in the scenario described)
that the only alternative to exclusivity in the market would be that no rollout of infrastructure would be
realised at all.
205
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agreements with lock-in periods should be the prevailing norm in this type of
future, and a marked difference in the quality of service is expected to arise
between different parts of Sweden, depending on the owners of the
infrastructure.
Scenario IV: A number of closed networks characterised by control, surveillance and
restrictions at all levels
A fourth conceivable future is based on a scenario where the surveillance
legislation introduced over the years becomes more far-reaching. For example, if
the operators and network owners become liable for the content of information
relayed on behalf of their customers, there is consequent risk of surveillance and
vigilance arising in terms of the type of material that is given a digital haven. 207
This development may result in networks becoming fragmented and all network
owners isolating themselves, with the justification that this is necessary in order
to guarantee the quality of content in the networks for which they are legally
liable. It is also likely that the requirements imposed when limiting the terms of
use will increase (i.e. what is actually permitted), as well as the applications and
terminals permitted for access. This type of restriction also has an impact on the
potential for innovation and tolerance levels for experimenting.
These four scenarios necessitate a schematic simplification. Of course, reality is
more complex. This is why it is important to emphasise that these scenarios have
been refined intentionally in order to make it clear how shifts in the balance
between openness and adding value could have practical consequences on
market trends and that it is important to take this into consideration when
discussing and envisioning the future.
Among other things, this could mean that fully legal material that could be perceived as offensive or
controversial could be blocked and denied access. This obviously inhibits a vigorous social debate and a
breeding ground for new concepts.
207
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4
Conclusions and recommendations
4.1
Openness creates opportunities for innovation
and competitiveness, but must be balanced
against other interests worthy of protection, such
as investment incentives and network security
This report analyses the term 'openness' (that is, everyone being granted the opportunity
of free (unrestricted) 208 access and own utilisation on equal terms). This includes focusing
on how openness affects the capacity of stakeholders in society to compete and
create added value through innovation and participation in the electronic
communications market and in society.
The report is based on openness (as opposed to a closed system) generating a
higher socioeconomic value; that is, a social benefit. This occurs through open
access and access to an electronic communications infrastructure contributing to
increased innovativeness; that is, the introduction of new goods and services and
thus a varied range of options for consumers. Openness means that broadband
providers can interconnect more end users with more content providers over the
Internet. This generates network effects 209 , and increases the potential of end
users to create new combinations of ideas as well as to find products that suit
them. In other words, openness can potentially contribute to achieving greater
overall benefit and more innovativeness when compared with a closed system. It
is particularly worth noting that openness consequently also applies to ideas. A
free flow of views and opinions makes it easier to conduct a social dialogue,
where different arguments are considered and weighed in relation to each other,
enabling continuous development.
This report has drawn the conclusion that openness is a broad concept that is
attributed many meanings and which often serves as a prefix for emphasising the
special properties of a phenomenon. The following are included in the
discussion: open infrastructure, open networks, the open Internet, open source code and open
services. The term also has a strong cultural element with regard to the Internet
and its open structure and systems. In many respects, it could be seen as
opposing the tradition of control and the closed systems that have historically
characterised the traditional telecommunications sector. The varied meanings of
the term 'openness' also signify the importance of operationalising this term so
that it has real relevance.
On the other hand, openness does not work in a vacuum. The degree of
openness that can be applied is not a given, but is based (among other things) on
In this report, 'free access' refers to non-limited or unrestricted access, which should not be confused
with 'free' in the sense of 'no charge'.
209 Here, 'network effects' refers to synergies that may arise, which result in lower costs and the overall value
being greater than the value of the individual parts.
208
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the priorities and values of society. For example, the openness requirements that
are used to promote use and innovation opportunities for private individuals and
service developers must be balanced against other interests worthy of protection,
such as investment incentives for Internet service providers and network
security.
Considering the information presented in this report, PTS has assessed that an
appropriate level of openness includes both access to production resources for
those stakeholders involved in producing broadband services, as well as access
for all users of communications, services and content over the public Internet.
This promotes the following:
•
competition in different markets
•
the development of new and/or improved input goods, services and
content (innovation)
•
access to information
•
the use of a varied range of services and content
•
participation in the public (digital) dialogue over the Internet
The above-mentioned factors indicate that a high level of openness should be
found at all levels of the value chain for the production of broadband services,
which forms the basis of this report. 210 Even though the importance of openness
has been emphasised, it has been pointed out that varying degrees of restrictions
to openness may be viewed as necessary and desirable. 211
For example, restricting openness through traffic management may be justified
to maintain security and robustness in the networks. Vulnerability to network
disruptions also increases in pace with increased dependence on electronic
communications. This makes security and robustness-related issues even more
important, and restrictions to openness may be relevant for, among other things,
ensuring that the networks and exchange points function and are protected
against interruptions, sabotage and other incidents. 212 A certain amount of cleanup work, which may include traffic prioritisation, blocking and selection to
counteract extreme variants (spam, Botnets, malware), may thus be deemed to be
a reasonable sacrifice on the part of openness and a reasonable restriction of the
principle of network neutrality, as it helps to ensure the functionality of these
210
The levels of the value chain are the natural resource level, the infrastructural level, the transmission
level, the IP level (Internet level) and the service/content level.
211 The extent of the permitted restrictions entirely depends on the level of the value chain referred to.
212 In its Broadband Strategy for Sweden (N2009/8317/ITP), the Government has announced that it will
give PTS the assignment of analysing and making proposals for how the work relating to robust electronic
communications can be developed further in order to correspond to the long-term needs of society and vital
public users for robust electronic communications.
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networks. In many respects, high functionality is something that benefits
everyone.
Many types of government body currently depend on being able to exchange
information, and this can be achieved by using various electronic
communications networks. Prioritisation functions enable selected users to
access existing communications resources even in situations where the total
network capacity has been reduced owing to damage, overloading or due to
other reasons. This may also justify restricting openness and network
neutrality. 213
The need for different 'realtime services' for an even flow of data may also be
reasonable grounds for purposeful traffic management, with a view to ensuring
quality for all. However, this of course results in openness being restricted for
other services (e.g. that all telephony traffic or emergency-related traffic is
prioritised over other traffic). Prioritising some realtime services in traffic
management because of the requirements imposed by the properties of these
services cannot generally be deemed to be an unwarranted restriction of
openness. However, this may result in the setting up of autonomous IP-based
networks that are dedicated to such services. This type of segmentation serves to
restrict openness and results in weakened network effects.
Here, PTS would like to emphasise that a packet-based network (such as the
Internet) basically only needs prioritisation (that is, rules about what should be
discarded when the network is congested) when the transmission channels are
full. Operators can either choose to invest in enhanced transmission capacity, or
impose prioritisation principles for data traffic to deal with congested networks
(e.g. at particularly intensive times during the day) and in this way 'spread out' the
peaks in traffic. Regulatory authorities attempting to achieve network neutrality 214
will find it difficult to achieve a balance as to how this type of far-reaching
prioritisation tool should be used rather than operators expanding network
capacity or building separate networks. The core of this challenge thus becomes
identifying where the point of balance can be found and when the limit for what
comprises a justified intervention in network neutrality and openness is deemed
to have been exceeded.
213
Over the past few years, PTS has conducted investigations and practical trials for priority functions
together with operators and prospective users. Needs analyses have been conducted where a large number
of organisations were consulted about their need for priority functions for vital public operations. Most of
those consulted stated in these analyses that they need priority functions in public communications
networks and that the use of priority functions could save lives. There are also several international
examples of priority functions that have already been introduced or are being planned. PTS's investigative
work is summarised in the report entitled 'The need of vital public users for priority functions in electronic
communications' (PTS-ER-2008:7). This report also recommends the introduction of priority functions in
mobile communications networks.
214 See the description of the Telecom Reform Package in Sub-section 3.5.4.
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4.2
Openness is promoted by ensuring nondiscrimination and functioning competition
In the sense used in previous chapters, openness presupposes functioning
competition. Today, however, the electronic communications market is
characterised by restrictions and barriers to entry. As shown in previous chapters,
there have been cases of discrimination both as regards granting licences/permits
and the possibility of gaining access to the production resources required for
broadband services. This may result in delays and higher costs, which give rise to
transaction costs and thus undermine competition. This is also the reason behind
the market being subject to the EU's rules on ex ante regulation. 215 Such
regulation primarily applies to the lower levels of the value chain, as this is
deemed sufficient for generating innovative pressure on those stakeholders that
can stimulate the supply of new and differentiated services.
Besides interests worthy of protection, such as robustness and network security,
matters concerning the potential of stakeholders to create added value and a
future return for investments made also become important socioeconomic
considerations in cases where regulation is applied to facilitate openness.
Regulation to achieve increased openness may also have unwanted
consequences. This is why a precautionary principle must be applied when
intervening in the market. 216 It is also crucial for intervention in the form of
regulation at one level of the value chain to be viewed from a wider perspective
(that is, consideration is taken of the entire electronic communications market
and its value chain), as intervention at one level may have a resulting impact on
another level and unduly affect the market.
A precautionary principle in connection with intervention is also important
owing to the degree of openness and the need for openness continually changing
in pace with changes in the market, its stakeholders and rules.
4.3
As openness is of great importance, it is crucial
that providers are clear about lock-in periods,
restrictions to Internet access and the
accessibility of services when they market their
services and in their agreement terms
The increased potential to prioritise traffic has been brought about as a
consequence of technological advances and the need for new business models.
This means that Internet service providers currently have more opportunities to
offer communications services with different levels of quality. These quality
levels are paired with price models, which derive advantage from the differences
of consumers and other users relating to willingness to pay. Most users are
already able to differentiate their digital services by paying different amounts for
215
Consequently, this regulation is proactive and aims to increase openness.
The objective of this regulation is thus to optimise allocation of resources in society and to avoid overand underinvestment.
216
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Internet access depending on the capacity and quality they wish to receive and
the operator in question.
Users appear to consider the differences between the various access technologies
and operators to be reasonable. 217 However, besides price levels and lock-in
periods, there may be reason to conduct a clearer discussion about what
constitutes an Internet access line 218 and inform end users about the differences
in what the operators are offering. In particular, this includes demonstrating that
services can differ in relation to: 219
•
bandwidth (capacity and actual performance in the up- and downlink)
•
minimum quality levels for services and content
•
response times
•
the presence of traffic prioritisation and the blocking of services and
content
•
access to services and content
•
rating and ranking of Internet service providers conducted by users
4.4
Proposed measures to counter challenges to
openness
Earlier in this report, PTS described the main existing and potential challenges
relating to openness that could be identified by the Agency when analysing the
electronic communications market. 220 The challenges identified can be
summarised as follows:
1. Access to services and content by linking them to the networks of vertical
service providers and through them not being accessible via other access
networks, such as mobile networks
217
Here, it may be added that up until now PTS has not considered that there is reason to act on any matter
related to network neutrality. A decisive reason for this is that the Agency is unaware of any complaints
regarding the unjust blocking of individual applications, content or other traffic discrimination.
218 One relevant example of an embryo to such a discussion was demonstrated by Patrik Fältström at Cisco.
Fältström has, for example, compiled a tentative list of criteria for what may define Internet access. For
more information, see: http://stupid.domain.name/node/889.
219 PTS previously published general advice about the information requirements imposed on service quality.
See PTS, 'PTS's general advice on service quality' (PTSFS Code of Statutes - PTSFS 2007:01),
[http://www.pts.se/sv/Dokument/Foreskrifter/Tele/PTSFS-20071---PTS-allmanna-rad-omtjanstekvalitet/], 17 July 2009.
220 See also Section 3.6 for more information about the different challenges.
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2. More services and more content being retained in cloud computing, which
sparks a discussion about the fact that cloud computing may 'disappear'
3. A lack of customer mobility owing to:
(a) the high cost of searching and switching
(b) consumers having a knowledge and information disadvantage
in relation to business operators
(c) information and choice overload
(d) collective affiliations (mainly in apartment blocks)
(e) long lock-in periods and exclusivity agreements
(f) content locked to a particular platform
4. Uncertainty about what the Internet access includes; that is, consumers do not
know what kind of access they are actually receiving
5. Increased pressure on Internet service providers undermining the objective of
the limitation of liability rules for stakeholders forwarding Internet traffic
6. Potential problems with access to services owing to operators'
restrictions/prioritisation affecting innovation and consumer benefit
7. Restrictions in access to active infrastructure, such as bitstream access and
different forms of leased line
8. Lack of broadband coverage
9. Restricted access to passive infrastructure such as dark fibre
10. Lack of ducting
11. Access to land, for instance, being granted on different terms
12. Lack of spectrum appropriate for wireless communications with high area
coverage
These challenges differ and their orientation and extent vary depending on the
part of the value chain being analysed. The differences in the extent and
orientation of the respective challenges imply that each challenge is encompassed
by a specific development and in many respects needs to be addressed by a
targeted measure. Measures have already been taken in several areas, but there is
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a need for additional measures to ensure a favourable balance between adding
value and openness. (Table 4 contains a summary of measures and challenges.)
The three lower levels of the value chain (the natural resource level, the
infrastructural level and the transmission level) generally appear to have a greater
need for measures than the two upper levels (the IP/Internet level together with
the content and service level). This is partly due to the fact that the high
establishment costs and major structural problems of the lower levels greatly
exceed the corresponding challenges at the upper levels. The latter refers to the
challenges at the three lower levels already having been subject to large-scale
interventionary measures, whereas the challenges at the two upper levels can
instead be viewed as potential challenges and are of a much smaller magnitude
relatively speaking. As shown in this report, however, there are signs that these
may be growing. 221
4.4.1
As described above, the main challenges identified at the natural resource level
include a general lack of ducting, different terms for access to, for example, land,
and also a lack of spectrum appropriate for services such as mobile broadband.
The first-mentioned challenge (the general lack of ducting) was addressed by the
Government both in the Broadband Strategy presented in November 2009 as
well as through the 'ducting support' granted for the period 2009 to 2010. This
ducting support is paid out in the form of a 'joint laying grant' and, in a nutshell,
means that the cost of laying ducting is compensated when other infrastructure is
being constructed. 222 The Government also intends to review the present forms
of planning for excavation work and submit proposals for improved
collaboration, information processing and coordination. One tool in this work is
'Ledningskollen.se', which is a GIS system offering information about who has
laid different kinds of infrastructure underground at specific locations. It should
be possible to use this system on a voluntary basis to facilitate joint laying.
What's more, the Swedish Road Administration will be commissioned to draft
proposals in consultation with PTS about how to evaluate whether ducting
should be laid when new roads are being built or when rebuilding roads. 223
The amendments presently being discussed as regards the Planning and Building
Act (PBL) should also be added to the above, where facilities for
telecommunications and other information technology will become part of the
221 See Chapter 3, in particular Section 3.5. See also, for example, pages 31-32, Figures 8 and 9 in 'A Green
Knowledge Society - An ICT policy agenda to 2015 for Europe's future knowledge society'
http://www.se2009.eu/polopoly_fs/1.16246!menu/standard/file/A%20GREEN%20KNOWLEDGE%20
SOCIETY_CREATIVE%20COMMONS_%20WEB1.pdf.
222 The support only covers areas where the assessment has been made that market stakeholders will not
implement rollout. For more information, see, for example, 'Ducting support', PTS (Memorandum dated
17 March 2009).
223 Broadband Strategy for Sweden, Government Offices, N2009/8317/ITP
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municipal planning procedure. These amendments mean that municipal
authorities may decide that building permits cannot be granted in an area before
telecommunications facilities have been set up.
PTS is of the view that the measures taken are a step in the right direction in
terms of ensuring openness, but that it is too early to make any general statements
about the results achieved; that is, whether the measures have afforded greater
access to ducting and thus potential for more operators to become established.
Access to ducting is a key component that creates opportunities for establishing
physical and logical infrastructure and thus openness at all other levels of the
value chain. While taking this into consideration, it is important from the
perspective of PTS to follow up the measures being taken to achieve access to
ducting. This can be done in several ways, not least within the framework of the
Broadband Survey conducted annually by PTS on the assignment of the
Government. An empirical analysis of the findings and anticipated impact should
help to produce the supporting documents necessary for making a rational
assessment of whether the present measures are sufficient.
The second challenge at the natural resource level (that permits and access to land
and ducting are granted on different terms) is manifested in several different
ways. To some extent, the different terms relate to adaptation to local conditions
and legitimate societal prioritisations. In other cases, however, it cannot be ruled
out that they relate to routines and methods of working that could just as well be
done in some other way, but which in their present form have a direct negative
impact on competition. This type of discrimination may lead to the creation of
local monopolies or attributing particular value to municipal stakeholders, which
prevents end users from being able to freely choose services and content.
Municipal authorities have expressed concerns to PTS about a situation where
favourable terms for access to land could result in streets being dug up repeatedly
to lay fibre. However, there is little likelihood of these fears being realised, as the
parallel establishment of fibre is only appropriate under particularly favourable
conditions.
Several of the stakeholders interviewed by PTS, or who provided PTS with
material within the framework of this assignment, have pointed out that
discriminatory terms are negative from the perspectives of openness and
competition. These stakeholders have also warned of the consequences. 224
SALAR and others have drawn up principles for the ownership control of local
broadband networks aimed at rectifying the prevailing maladministration. SALAR
intends to update these after possible amendments have been made to the
Planning and Building Act. PTS considers the work being conducted by SALAR
to be important and that SALAR should take the process of granting
licences/permits and concluding land contracts into consideration when
224
See Appendix 1: 'Market stakeholders: interviews and input'.
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reviewing the control principles and establish principles for non-discrimination
where this is deemed to be appropriate. In conjunction with this review, SALAR
should also run projects to improve municipal coordination for IT infrastructure
issues relating to excavation permits and land contracts.
It should also be noted that PTS has been assigned within the framework of the
Government's Broadband Strategy to conduct information activities directed at
municipal authorities. The aim of these activities is to minimise the difficulties
experienced by operators when it comes to concluding agreements with
municipal authorities and receiving the licences/permits required for the rollout
of broadband infrastructure. This should help to improve the competitive
conditions and enable more stakeholders to establish themselves.
The third challenge (lack of spectrum) has primarily been addressed by relaxing
the processing of licences. Among other things, this involves PTS to a lesser
extent imposing requirements on the type of technology to be used in a specific
frequency band. PTS considers that releasing spectrum holdings from a predefined application will improve the potential for innovation, as it will become
easier to introduce new technical solutions and business models.
Another important measure within the field of spectrum is releasing further
spectrum in frequency bands that are appropriate for wireless communications
with high area coverage; for example, by releasing frequencies from the Swedish
Armed Forces.
In this way, more efficient use will create greater opportunities to offer wireless
solutions and services. This will benefit openness and means that, for instance,
mobile broadband will be able to serve as an alternative to wired Internet access
solutions in the long run. All in all, this should benefit end users.
4.4.2
At the infrastructural level, which is one step up in the value chain, the primary
challenges to openness have been identified in terms of restrictions in access to
passive infrastructure, that is, dark fibre, and a lack of broadband coverage.
The first challenge (restrictions in access to the passive infrastructure) is closely
linked to the European regulatory model relating to electronic communications,
and to PTS's access regulation in Sweden.
The type of access regulation applied in Sweden – where existing infrastructure is
open for stakeholders other than the owner in return for payment – provides a
basis for competition unrestricted by infrastructure ownership. This type of
regulation enables more stakeholders to offer a broader range of services in the
retail market. More stakeholders increase the potential for end users to find
service providers capable of providing the services and content in demand. For
this reason, one of the major challenges involves making the existing
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infrastructure even more accessible and in this way limiting the control that is
restricting competition and the damaging market power that can be exercised by a
dominant infrastructure owner.
One measure taken by market stakeholders is the deployment of the Swedish
Urban Network Association's CESAR system. Improved coordination between
urban networks and a shared marketplace has made it easier to procure dark fibre
for a national market in a way that is more uniform and efficient. The increased
range of production resources potentially entails lower prices and a sharp
reduction in search costs. 225 This contributes towards more stakeholders being
able to establish themselves and a further increase in supply, something that
benefits competition and ultimately consumers and society in general. The supply
of dark fibre has also increased through one of the market stakeholders (Skanova)
currently offering fibre in more than 100 communities. However, this offer does
not meet the present level of high demand.
PTS is currently working to draw up a new access regulation which also
encompasses the fibre-based network owned by TeliaSonera, the dominant
market stakeholder. 226 The aim is to ensure that all stakeholders are subject to the
same rules and can establish themselves in the market on equal terms. Regulation
helps to ensure that more parties are able to gain access to the production
resources being requested (in particular dark fibre) so that they can offer the
services in demand by end users, i.e. capacity-hungry services.
In a draft decision, PTS has also chosen to retain the current access regulation for
the copper network (the 'LLU Regulation'). This means that the national copper
network owned by TeliaSonera which reaches almost the entire Swedish
population can be used by all market stakeholders at a regulated price. This
orientation means that competing providers can maintain the LLU investments
that have been made and continue to establish themselves, and consequently
offers freedom of choice to end users, even in locations where the providers do
not have any infrastructure of their own.
Besides the implementation of the above rules for forced openness, the
Government recently proposed in a Government Bill (Government Bill
2008/09:231) 227 new rules for the Competition Act (2008:579), which would
mean that Stockholm City Court, as requested by the Swedish Competition
Authority, could prohibit the central government, a municipal authority or a
county council from applying a certain procedure in an operation of a commercial
or financial nature: a) if it distorts, or is intended to distort, the prerequisites for
effective competition; or b) if it impedes, or is intended to impede, the presence
or development of this type of competition. If the Swedish Competition
225
That is, the time and resources needed to locate a suitable stakeholder.
Draft decision, 10 November 2009 (file ref. 07-11757): Network infrastructure access ('NIT'),
227 http://www.regeringen.se/sb/d/11033/a/130519
226
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Authority decides not to institute proceedings for a certain case, this may be done
by an undertaking affected by the procedure or operation. 228 In brief, this should
be implemented so that public stakeholders can be prohibited from running
business operations in a way that distorts competition.
PTS considers that urban networks should operate at the infrastructural level and
provide raw dark fibre when there is interest from the market to operate at higher
levels of refinement. In other words, urban networks should not advance up the
value chain if this means that they are competing with other market stakeholders.
The aim of this restraint is to guarantee that urban networks do not take
advantage of their unique position, but instead concentrate on providing
something that is particularly expensive from the perspective of infrastructure; i.e.
passive physical infrastructure such as dark fibre.
In the view of PTS, public urban networks at a municipal and regional level
should take on a role that complements the market. One guiding principle should be
to mainly provide services (dark fibre) on the infrastructural level and guarantee a
supply of the production resources being requested by market (commercial)
stakeholders. This also makes it possible to ensure that passive infrastructure is
available and is being used to the greatest extent possible. This should increase
the likelihood of achieving a diversified range at the higher levels and enhancing
openness and competition. As pointed out consistently throughout this report,
challenges at the lower levels of the value chain must be dealt with to ensure
openness for end users. This is because limitations at an infrastructural level
create lock-in effects which undermine openness at the higher levels of
refinement.
PTS considers that SALAR's work involving a review of the principles for
ownership control relating to municipal broadband networks also has an
important function in this context. In conjunction with this review, SALAR
should adopt principles for openness/access and also expressly stipulate that
urban networks should operate at the infrastructural level if market stakeholders
are interested in operating at other levels. Moreover, it would be useful if SALAR
could clarify the framework for municipal operations in accordance with various
laws and ordinances to make it easier for municipal authorities to make
assessments; for example, under the rules on state aid and the Competition Act.
The second challenge at the infrastructural level of the value chain can be linked
to inadequacies in the geographical coverage of infrastructure; that is, the fact that
access to broadband infrastructure varies considerably between different parts of
Sweden. The Government has drawn special attention to this challenge on several
occasions, most recently in its Broadband Strategy, and has also initiated several
228
"The new statutory rule will have a restraining effect. Municipal and other authorities that manage or
plan to launch an operation in competition with businesses in the market will need to continue considering
this carefully." (Quotation from Director-General of KKV),
http://www.konkurrensverket.se/t/NewsPage____5155.aspx
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measures to reduce these differences. Among other things, this means that PTS
will be assigned to highlight good examples of private-public partnerships, as they
represent an important component when rolling out broadband in rural areas.
One of the largest public support initiatives for the rollout of broadband
infrastructure was carried out between 2001 and 2007 within the framework of
'broadband support'. A total of SEK 5.2 billion of central government funding
was invested during this period, which was matched by market stakeholders. This
helped to realise a massive deployment of infrastructure in those parts of Sweden
that market stakeholders did not deem as being of commercial interest.
Although many areas gained access to infrastructure as a result of this broadband
support, there are still a number of areas where broadband cannot currently be
offered or which depend on obsolete technology. For this reason, the
Government has decided to use SEK 200 million within the framework of Rural
Area Programmes to further improve broadband coverage in rural areas. 229 This is
in addition to the 'HUS deduction' now available, where private individuals may
receive a contribution towards the installation of broadband in their homes. Add
to this approximately SEK 600 million, which, on average, will be available
annually for IT research and test-beds within the European framework
programmes, bilateral research projects and national development initiatives. 230
However, in order to ensure broadband coverage throughout Sweden, PTS
assesses that it would also be desirable to include broadband as part of the
universal service. The Government recognised this in its recently published
Broadband Strategy and states that there is a need to review the definition of
functional access to the Internet in pace with the development of more bandwidthhungry services. 231 This type of change would help to enable citizens to enjoy the
benefits of content and services, regardless of their geographical location. It
would also help to ensure that people in sparsely populated areas can also benefit
from the advantages brought about by openness to infrastructure.
4.4.3
Transmission level
Restricted access to active equipment and transmission services, such as
bitstream access and different forms of leased line, is the main challenge to
openness identified one step further up in the value chain (at the transmission
level; that is, the level comprising equipment that refines and transmits data
streams).
229 For more information, see: Computer Sweden, 'SEK 250m for broadband in sparsely populated areas'
[http://www.idg.se.1085/1.244952/250-miljoner-till-bredband-i-glesbygd], 1 November 2009.
230'Broadband support via the Rural Area Programme', PTS (Memorandum dated 11 September 2009)
231 http://www.pts.se/upload/Remisser/2009/beslutsutkast-kommunicering-bitstrom-marknad-5091110.pdf) [Draft decision communication bitstream Market 5]
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The market is already subject to regulation 232 to compel an improvement in
supply and enable more stakeholders to benefit from the active equipment
available. In this connection, a market analysis indicates that there are currently
no signs of the market being expected to progress towards effective competition
in the foreseeable future. The supply of bitstream in the market does not
correspond to the demand of operators, as the products provided do not meet
appropriate levels of quality and flexibility. In addition, supply has mainly
comprised offers in local infrastructure with strong geographical limitations,
which do not in any way correspond to the demand. 233 In other words, this
suggests that the barriers to entry will remain in place and that openness will
continue to be restricted in the market.
The regulation of bitstream access and leased lines, which ultimately aims to
drive through increased openness, thus continues to play an important role and
may contribute to both ensuring competition throughout Sweden and enabling
the deployment of the wireless network infrastructure of the future – an
infrastructure that depends on capacity to and from base stations (backhaul
capacity). PTS is currently working on a new access regulation for bitstream. 234
4.4.4
IP/Internet level
There are three major challenges to openness one further step up in the value
chain, at the IP/Internet level. These challenges may be summarised as: the
potential risk of restrictions and prioritisations leading to problems with access to
services, increased pressure on Internet service providers to take more
responsibility for those connected to the Internet (leading to a risk of more prior
scrutiny and higher costs), as well as uncertainty about the requirements that
Internet access must meet and what it should enable.
As regards the first challenge (a risk of restrictions/prioritisations leading to
problems in terms of access to services), this includes a risk of a transition
towards a 'cable television Internet', where it is ultimately the Internet service
provider that chooses the services and content. In this type of situation, the
primary aim of the provider's IP network is to enable access to selected services,
without simultaneously affording access to open and powerful Internet access.
This also involves a risk of the vertically integrated Internet service provider
Cf. PTS obligation decision regarding bitstream from 24 November 2004,
www.pts.se/upload/Documents/SE/Bredbandstilltrade_i_grossistledet_skyldigheter.pdf [Broadband access
at a wholesale level - obligations] and corresponding decision concerning leased lines from 6 October 2005,
www.pts.se/upload/Documents/SE/Skyldighetsbeslut_Term_avsnitt_HF_2005_10_06.pdf
233 Cf. PTS draft decision concerning broadband access for the wholesale level ('Bitstream'), 'Draft decision,
10 November 2009 (File reference 07-11741), http://www.pts.se/upload/Remisser/2009/beslutsutkastkommunicering-bitstrom-marknad-5-091110.pdf [Draft decision communication bitstream Market 5]
234 Draft decision, 10 November 2009 (file ref. 07-11741): Broadband access for the wholesale level
('Bitstream'), http://www.pts.se/upload/Remisser/2009/beslutsutkast-kommunicering-bitstrom-marknad5-091110.pdf [Draft decision communication bitstream Market 5]
232
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prioritising its own services, or services that are transmitted by certain preferred
third party suppliers, to the disadvantage of other competing service providers. 235
Unlike several other countries, where the issue of network neutrality has been
made topical due to incidents where network operators have discriminated
against or blocked traffic, protocols or services, or threatened to take such
measures, PTS is not aware of any similar incidents of a significant scope in
Sweden. PTS considers that there is justification to study the experiences of
other countries in more detail as well as the measures that these countries have
taken to ensure openness and network neutrality. PTS should also be assigned to
monitor further developments in Sweden. It should also be added that the
regulatory authorities, as described above (cf. Sub-section 3.5.4) in conjunction
with the adoption of the Telecom Reform Package, have been assigned to work
to achieve network neutrality. Within this role, one important area for PTS to
address is the extent to which prioritisation tools may be used when there is a
lack of capacity in the networks, rather than the operators expanding network
capacity or building separate networks. As emphasised above, a key issue is
where the balance can be found and when the limit for what comprises a justified
intervention in network neutrality and openness is deemed to have been
exceeded.
The above line of reasoning is also linked to the second challenge, which relates
to the concern of network operators as a result of the increased pressure on their
taking greater control over the information relayed in their networks and over
who is connected to the Internet. As shown above (Sub-sections 3.5.4 and 3.6.5),
this concern originates from operators feeling increasingly forced to assess their
customers' operations proactively so that they can, for example, ensure that they
are not drawn into costly legal proceedings similar to those in the Black Internet
case. 236 There is a risk that prior scrutiny will lead to increased costs, resulting in
higher broadband charges while undermining freedom of expression and
freedom of information. 237
The uncertainty expressed by operators should also be linked to the rumour
spreading that has arisen as a consequence of the 'ACTA negotiations'.
According to information provided in the media 238 , these international
negotiations involve discussing guidelines for the forms of sanction in
conjunction with intellectual rights that can be used against, for example,
transmission service providers, etc.
It is thus in the best interests of both market stakeholders and end users that this
situation is resolved as soon as possible and that legal predictability is improved
Prioritisation takes place at the same time as services offered by other market stakeholders are given
insufficient capacity or discriminated against in other ways resulting in, for instance, user experiences of
these services being undermined.
236 www.svd.se/opinion/brannpunkt/artikel_3584645.svd
237 See also Sub-section 3.5.4.
238 See, for instance, footnote references in Sub-section 3.5.4 for specific sources.
235
PTS
105
for network operators. For this reason, PTS considers that there is a considerable
need for a working group that, on the mandate of the Government, can
investigate the consequence of the development described above regarding the
increased pressure on Internet service providers to take greater responsibility for
traffic content.
The third challenge (that is, uncertainty about the requirements that Internet
access must meet and what it should enable) is a debated one. This challenge
probably contributed to the market stakeholders' support for 'Bredbandskollen'
(the consumer portal) and also the aspiration for a uniform assessment of rates
and stated rates for wired broadband.
Although Bredbandskollen is a useful tool and serves as a platform for operators,
PTS considers that the level of transparency could still be improved. In relation
to end users, this would more clearly emphasise the requirements that Internet
access should meet.
One of the measures to increase transparency could include developing a service
through which consumers can obtain information about traffic management (e.g.
a further development of Bredbandskollen TPTEST 239 ). PTS also recommends
the development of an industry standard that aims to achieve clearer agreements
and more easily understandable information about what consumers can expect
when purchasing a broadband connection for Internet access. In this connection,
PTS considers that there is a great need to improve the opportunities for
consumers to receive information about the presence of traffic management that
may restrict their potential to receive content and services. Within this
framework, there is also reason for PTS, in its role as a supervisory authority, to
review its general advice about the information requirements for service quality.
This is particularly pressing, as the above-mentioned advice does not currently
cover information about bandwidth, traffic prioritisation or the blocking of
certain traffic. Here, consideration must also be taken of the new tasks for PTS
prescribed by Article 8 of the new Framework Directive, which, for example,
include PTS working to achieve network neutrality.
PTS considers that it would be useful to review whether sufficiently clear
information is provided to consumers about what Internet access includes. PTS
should conduct this review in consultation with the relevant authorities (such as
KOV). The focus of this review should include contract conditions that can
promote a better understanding among all consumers about what they may
expect from Internet access and clarify the requirements that consumers can
impose on their access to services and content. In other words, this provides the
tools required to ensure that openness is not restricted, that there is potential to
detect unsanctioned restrictions, and also secure more opportunities for
consumers to 'vote with their feet'.
239
http://www.bredbandskollen.se/
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106
4.4.5
Content and service level
As with the other levels of the value chain, PTS has identified a number of
challenges relating to the service and content level. At this level, these challenges
consist of inadequate prerequisites for customer mobility, the presence of 'cloud
computing', where there is a risk of this 'disappearing', and also restricted access
to services and content via alternative access networks.
As mentioned above, one assumption of the regulatory framework governing
electronic communications is the presence of competition as far down in the
chain of refinement as possible. The aim is to strengthen competition at the
wholesale level and reduce the dependence on dominant stakeholders in order to
also achieve an impact from increased competition at the retail level in the form
of a greater supply, freedom of choice and price pressure. Among other things,
this assumption is expressed in the Commission Recommendation on relevant
markets within electronic communications, which places an emphasis on
wholesale markets, not retail markets.
The economic line of argument in favour of focusing regulation on the lower
levels of refinement relates to infrastructure-based competition, besides pure
service-based competition (with price pressure), also putting pressure on
undertakings that encounter competition to develop their supply of services,
differentiate their pricing structures and improve internal efficiency. Production
resources (for example, dark fibre and ducting) represent a large proportion of
the price of a service at the retail level. This is why functioning competition at a
low level of the chain of refinement, where these input goods are present, means
that retail prices may be considerably lower than if measures to ensure
functioning competition are aimed at/limited to the higher levels of the chain of
refinement. This line of argument also characterises PTS's policy for the access
regulation of last mile networks. 240
The Swedish model, involving access regulation, is consequently based on the
concept that competition should be promoted and that end users, through their
choices, can put pressure on providers to supply whatever is in demand. Thus
the 'weapon' for end users is to be able to vote with their feet. This is also the
core of the first challenge identified by PTS at the content and service level:
prerequisites for customer mobility.
While end users are theoretically free to choose their own operator, a switch may
be more difficult to make in reality. Easily accessible information of the kind
currently being distributed via KOV or a partnership service in the form of
'Telepriskollen' goes a long way. However, there may also be reason to increase
the level of awareness about this kind of information resource. Here, KOV and
PTS in particular have an important task. Information is of limited benefit if
240 Policy
for Access Regulation of Last Mile Networks – PTS-ER-2006:26
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107
consumers are unaware of it or do not know what parameters they should
consider when making a decision.
In this connection, PTS assesses that there are currently knowledge gaps in terms
of the consequences of long lock-in periods in subscriptions, and similarly notice
periods, sanctions and switching costs. This is in addition to extensive problems
relating to collective affiliations that can have far-reaching consequences. The
latter situation is based on the fact that it is often not the consumers themselves
in apartment blocks who are personally concluding agreements, but someone
else (e.g. the property owner) doing this on the consumers' behalf. This strongly
curtails the capacity of end users to personally safeguard their freedom of choice.
PTS previously drew particular attention to exclusivity agreements and how such
business models restrict competition. 241
For this reason, PTS proposes that the relevant authorities (e.g. KOV and PTS)
are assigned to investigate the potential consequences of restricting contract
periods in consultation with KKV. The framework of this assignment should
include reviewing notice periods, charges when switching operators, the
reasonableness between the costs of operators and the consumers' performance
in return, in addition to problems relating to collective affiliations.
The second challenge to openness at the service and content level concerns the
presence of 'cloud computing', where there is a risk of this 'disappearing'. In a
nutshell, cloud computing means performance, computer programs and services
(e.g. retention) that were previously linked locally on the end user level, for
instance, via end users' own computers, subsequently being moved to 'cloud
computing' on the Internet. This means that cloud computing is available from
any computer connected to the Internet.
Whereas the increased supply of services mentioned above may help to improve
openness and access to information, programs and performance, there is also a
simultaneous risk of it generating interdependence and lock-in effects. This risk
is particularly pronounced when cloud computing is provided by market
stakeholders that have a strong influence on other parts of the market, such as
Microsoft, Google and TeliaSonera.
PTS considers that there is a need for clear information about what would
happen if a service provider supplying, for instance, virtual storage or some other
Internet-based cloud computing service goes bankrupt or if the end users just
want to move their services and stored content to another provider. Among
other things, this mobility is affected by whether service providers are using
standardised solutions based on open source codes or are using their own
proprietary solutions.
241
See PTS, 'Survey of business models between operators and property owners' (PTS-ER-2009:31).
PTS
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For this reason, PTS proposes that the Agency, in consultation with KOV for
example, should review whether there is sufficient information available about
'cloud computing'. The first step will be to confirm that the websites of these
authorities contain straightforward information about how end users can avoid
the above-mentioned threats and choose services with reasonable terms.
The third challenge relating to openness is restricted access to services and
content via access networks other than the network where the end users have a
subscription. PTS considers that this gives rise to the need to review whether the
information provided to consumers about what they are buying is sufficiently
clear; for example, Internet service providers should provide clear information in
their agreements about restrictions to access via alternative networks. PTS should
conduct this review in consultation with the relevant authorities (such as KOV).
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109
4.4.6
Concluding reflections
As illustrated above, there are number of challenges at each level of the value
chain that result in a need to take specific measures. Although stakeholders in the
electronic communications market have common interests and this may help the
market to resolve several of the challenges identified through, for example,
sectoral agreements, PTS considers that a number of challenges will persist.
These should be rectified to ensure the requisite level of openness in networks
and services.
However, besides regulatory intervention, other factors will also have an impact
and either strengthen or weaken the rules stipulated. These include the corporate
consolidation of market stakeholders (whereby stakeholders are integrated
vertically or horizontally). There is a risk of this kind of development giving rise
to fewer stakeholders in the market and thus a lower level of competition.
PTS's proposed measures and anticipated results are fully described in the table
below. It is important to realise all of these as soon as possible. In line with the
information provided in the Agency's Strategic Agenda, there is also reason to
prioritise and address the following challenges in particular:
•
Restrictions in access to passive infrastructure. The removal of barriers to
entry enables more stakeholders to operate in the broadband market via
fibre optic networks. This means that more stakeholders can offer
services that demand high capacity
•
A lack of customer mobility owing to long lock-in periods and lock-ins in
business models. Long lock-in periods reduce the need for a high rate of
innovation. Long lock-in periods also tend to restrict competition and
help to undermine the potential of consumers to safeguard their rights
•
Lack of spectrum appropriate for wireless communications with high
area coverage
PTS
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Table 4. Ongoing or implemented measures that have been taken to
counter challenges to openness, including proposed measures from PTS
and also the anticipated results in respect of the different levels of the
value chain i
Level of the value
chain
Service and content
level (different
applications and uses
within electronic
communications)
Main challenge
1. Access to services and
content is restricted by
linking them to the
networks of vertical
service providers and they
are not accessible via
other access networks,
such as mobile networks.
See Sub-sections 3.6.6 and
4.4.5 for a more detailed
description of the challenges
and proposed measures
Ongoing or
implemented
measure
Proposed measure
Anticipated result
of proposal
PTS should be assigned
to review, in consultation
with relevant authorities
such as KOV, whether
the information provided
to consumers is
sufficiently clear. ISPs
should clearly inform
consumers in their
agreements about
restrictions to access via
alternative networks, so
that consumers of
services and content
know what they are
buying.
Informed consumers who
can make rational
ii
choices
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111
2. More services and
content are being retained
iii
in cloud computing.
However, there is a risk
of cloud computing
'disappearing' (e.g.
retained data and e-mail
addresses) as a result of
bankruptcy or when
consumers terminate
agreements).
There should be clear
information about what
happens when a service is
terminated (that is,
information about how
the data can be moved).
In this connection, PTS
should also be assigned to
review, in consultation
with authorities such as
KOV, whether the
information provided to
consumers is sufficiently
clear.
can make rational choices
Public authorities (such as
KOV and PTS) should
also develop and
coordinate consumer
information on their
websites explaining how
consumers can avoid
these problems.
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112
Level of the value
chain
Main challenge
3. A lack of customer
iv
mobility owing to:
(a) the high cost of
searching and switching
(b) consumers having a
knowledge and
information disadvantage
in relation to business
operators
(c) information and
choice overload
(d) collective affiliations
(mainly in apartment
blocks)
(e) long lock-in periods
and exclusivity
agreements
(f) content locked to a
particular platform
Ongoing or
implemented
measure
The 'Telepriskollen'
consumer portal
providing information
about transaction costs
and lock-in periods
KOV's new website
collects all of the
information provided by
authorities that is aimed
at consumers.
PTS has drawn attention
to, among other things,
the effects that lock-ins
have on end users as well
as the effects of
restricting competition
that ensue from
exclusivity agreements
and forms of collective
affiliation. v
In 2009, the Member
States and European
Parliament agreed that
lock-in periods for
electronic
communications services
may not exceed 24
months. This agreement
is expected to enter into
force in early 2010 and
will subsequently be
implemented in national
law. vi
Proposed measure
Anticipated result
of proposal
In accordance with
KOV's previous
proposal, the relevant
authorities (e.g. PTS and
KOV) should be assigned
to investigate the
potential consequences of
restricting contract
periods on the
telecommunications/
Internet/television,
electricity and insurance
markets in consultation
vii
with KKV. The
framework of this
assignment should
include reviewing notice
periods, charges when
switching operator, the
reasonableness between
the costs of operators and
the consumers'
performance in return in
addition to problems
relating to collective
viii
affiliations.
are able to make rational
choices as well as an
information base for
socioeconomic
assessments about
potential measures
PTS and KOV should
take measures to increase
consumer awareness
about portals offering
ix
consumer information.
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113
Level of the value
chain
Main challenge
Ongoing or
implemented
measure
Proposed measure
Anticipated result
of proposal
IP/Internet level
(equipment that processes
and distributes electronic
data)
4. Uncertainty about what
x
Internet access includes ;
that is, consumers are
unaware of what kind of
access they are actually
receiving
The 'Bredbandskollen'
consumer portal
providing information
about broadband rates
Increase transparency by:
Raised consumer
awareness about Internet
access as well as increased
potential to identify
unsanctioned
xi
restrictions
A sectoral agreement
about the stated rates for
fixed broadband
(a) PTS being assigned to,
in consultation with the
relevant authorities (e.g.
KOV), review whether
information provided to
consumers in agreements,
etc. is sufficiently clear
(b) sectoral agreement
concerning how
restrictions should be
made clear to consumers
(c) developing a service
through which consumers
can obtain information
about traffic management
(e.g. a further
development of
Bredbandskollen)
(d) PTS reviewing its
general advice concerning
information requirements
for service quality that
currently do not relate to
information about
bandwidth, traffic
prioritisation or blocking
of certain types of traffic
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Level of the value
chain
Main challenge
Ongoing or
implemented
measure
Proposed measure
Anticipated result
of proposal
5. Increased pressure on
Internet service providers
that undermines the
objective of the rules on a
limitation of liability for
stakeholders that forward
Internet traffic, etc. There
is a risk of increased prior
scrutiny and higher costs
that (among other things)
may result in restrictions
xii
affecting innovation.
ACTA negotiations
involving a discussion of
which forms of sanction
as regards intellectual
rights can be applied in
relation to transmission
service providers, etc.
A working group should
be appointed by the
Government assigned to
investigate the
consequences of
increased pressure on
Internet service providers
to take responsibility for
traffic content.
A more clearly defined
legal situation by
clarifying the division of
xiii
responsibility
PTS is assigned to
monitor developments in
traffic management, and
to draw up guidelines for
network neutrality if there
is a risk of someone being
prevented from using the
public Internet.
Being ready to take
measures if necessary
6. Potential problem with
access to services owing
to an operator's
restrictions/
prioritisations: 242 there is
a risk of this resulting in
reduced innovation and
consumer benefits in the
long term
This challenge involves broadband access being reduced to a specific portal and a very limited range of
content and services chosen by the Internet service provider.
242
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115
Level of the value
chain
Transmission level
(equipment that refines
and transmits data
streams)
Main challenge
7. Restrictions in access
to active infrastructure,
such as bitstream access
and different forms of
xiv
leased line
Ongoing or
implemented
measure
xv
Current SMP regulation
(for Markets 12 and 13)
encompassing access to
bitstream and leased lines
Proposed measure
Anticipated result
of proposal
Proposed SMP regulation
(of Market 5) to
encompass access to
bitstream
Increased supply by
lowering barriers to entry
and price pressure on
stakeholders dominating
xvi
the market
Ongoing SMP analysis to
encompass leased lines
(Market 6)
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116
Level of the value
chain
(cables and masts)
Main challenge
8. Lack of broadband
xvii
coverage
Ongoing or
implemented
measure
(a) Central government
broadband support
(2001-2007)
(b) Possible broadband
financing through the
Rural Area Programme
and HUS deduction for
electronic infrastructure
Proposed measure
The level for functional
access to the Internet
should be raised so that
xx
USO also includes
broadband.
Anticipated result
of proposal
Increased rollout of
broadband infrastructure
and ensured access to
broadband in areas that
are weaker commercially
(c) Increased access
through R&D funding
(d) The Government
stated in its Broadband
Strategy that PTS will be
assigned to describe
examples of regional and
local initiatives as well as
public private
partnerships promoting
the deployment of
xviii
broadband
(e) The Government
intends to submit a
memorandum that will
include raising the level
for functional access to
xix
the Internet
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117
Main challenge
Ongoing or
implemented
measure
Proposed measure
9. Restrictions in access
to passive infrastructure
such as dark fibre
Skanova Access fibre
being offered in more
than 100 communities
Proposed SMP regulation
(for Market 4) to
xxii
encompass NIT /LLU
Current SMP regulation
(for Market 11)
xxi
encompassing LLU
SALAR has produced
principles for ownership
control for municipal
broadband networks.
SALAR will review these
principles. In conjunction
with this work, SALAR
should also, in
collaboration with the
Swedish Urban Network
Association:
CESAR (the urban
network database)
providing stakeholders
with information about
the networks'
infrastructure
Amendment to the
Competition Act that
makes it possible to
prevent the central
government, a municipal
authority or a county
council from conducting
business operations in a
way that damages
competition
Anticipated result
of proposal
Increased supply of
infrastructure together
with efficient use of
existing infrastructure
that promotes
xxiii
competition
(a) adopt principles for
openness/access
(b) clarify what applies to
municipal operations in
accordance with different
laws and regulations; for
example, under the rules
on state aid and the
Competition Act
(c) expressly stipulate that
urban networks should
operate at the
infrastructural level if
market stakeholders are
interested in operating at
other levels
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118
Level of the value
chain
(land, ducting and
spectrum)
Main challenge
10. Lack of ducting
xxiv
Ongoing or
implemented
measure
Proposed measure
Central government
ducting support for
rollout started in 2008
PTS intends to follow up
ongoing measures and
measures implemented in
the Broadband Survey
with respect to
broadband coverage.
In its Broadband Strategy,
the Government states
that it intends to assign
the Swedish Road
Administration to draft
proposals in consultation
with PTS about how to
evaluate whether ducting
should be laid when new
roads are being built or
when rebuilding roads. It
has also been pointed out
that ducting should be
available for all
stakeholders in the
market on reasonable and
non-discriminatory
xxv
terms.
Anticipated result
of proposal
This follow-up will
provide supporting
documents for
socioeconomic
assessments of the need
for potential
xxvi
measures.
An amendment to the
Planning and Building
Act (PBL), which among
other things means that
municipal authorities may
decide that building
permits will not be
granted in an area before
facilities for
telecommunications and
other information
technology have been set
up
In its Broadband Strategy,
the Government states
that PTS will be assigned
to review the present
forms for planning
PTS
119
excavation work as well
as provide proposals for
improved
Level of the value
chain
Main challenge
Ongoing or
implemented
measure
Proposed measure
Anticipated result
of proposal
information processing
xxvii
and coordination.
'Ledningskollen' can be
used to obtain
information about
excavation work and its
coordination.
11. Access to land and
ducting being granted on
xxviii
different terms
According to the
Broadband Strategy, PTS
shall implement
information activities
directed at municipal
authorities within the
framework of its
assignment. These
initiatives should be
carried out in
collaboration with
SALAR. The aim is to
minimise the difficulties
experienced by operators
as regards concluding
agreements with
municipal authorities and
receiving the licences/
permits required to roll
out broadband
xxix
infrastructure.
When reviewing the
control principles (see
above under
'Infrastructural level'),
SALAR should take the
process of granting
licences/permits and
concluding land contracts
into consideration and
establish principles for
non-discrimination where
this is deemed
appropriate. In
conjunction with this
review, SALAR should
also run projects to
improve the municipal
coordination of IT
infrastructure issues
relating to excavation
permits and land
contracts.
An increased level of
openness and nondiscriminatory terms that
are competition neutral
with better potential for
competition in the
xxx
broadband sector
12. Lack of spectrum
appropriate for wireless
communications with
Liberalisation of
spectrum management
Release parts of the
spectrum being used by
the Swedish Armed
Forces
More efficient use of
spectrum and increased
scope for innovation
Release of what is known
as the '800 MHz band' for
PTS
120
high area coverage
xxxi
purposes other than
television
PTS intends to
commence a review of
how different frequency
bands are used to
improve efficient
spectrum use.
i More detailed references to the relevant chapter of the report that deals with the content in
the table are provided for the reader in the table below in the column 'Level of the value chain'.
ii If the end users have the necessary information, they can consider how their actions will
affect their ability to make choices in the future.
There is a risk of reduced local management of programs and digital data undermining the
end users' control over this material, as well as over who, how and when one has access to it.
iii
Swedish regulation of the electronic communications market is based on end users making
active choices and taking advantage of the competition situation emerging from regulations
imposed at the lower levels of the value chain.
iv
v
PTS, 'Survey of business models between operators and property owners' (PTS-ER-2009: 31)
This agreement was reached in conjunction with the review made of the Directive of the
European Parliament and of the Council about, for example, the rights of users relating to
electronic communications networks.
vi
'Customer mobility – examples of barriers facing consumers in some key markets', report by
the Swedish Consumer Agency, 2009:5
vii
It is often not consumers themselves in apartment blocks who personally conclude an
agreement, but someone else (e.g. a property owner).
viii
To enable end users to make rational choices, they must be aware of and confident with the
information available. It is extremely difficult to safeguard openness if the parameters
underpinning openness are unknown.
ix
There is a distinction between broadband access and Internet access, where the latter implies
that access to services and content should be virtually complete whereas the former only
indicates the availability of a high bit rate for access to digital content and services.
x
The end users must be able to easily orient themselves in terms of what constitutes Internet
access; that is, the level of freedom they can expect. They also need to be able to personally
test the presence of restrictions or the quality of the broadband access they are purchasing.
xi
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121
xii There is a risk of the capacity for innovation being restricted, as express permission may be
required prior to a new product being tested. Cf. www.idg.se/2.1085/1.243535/risk-forforhandsgranskad-webb [Risk of web being subject to prior scrutiny]
Uncertainty about the existing division of responsibility means that providers of
transmission services, such as Internet access and transit, cannot make rational decisions as
they lack essential information about where their responsibility ends as well as what they are
actually entitled to do via digital networks.
xiii
Infrastructure presupposes large capital investments and creates market power for the
owner. For this reason, it is important to ensure that existing infrastructure is used and that
stakeholders with less capital, or stakeholders with a smaller customer base, are also able to
become established on a national basis.
xiv
'SMP regulation' refers to decisions about markets for ex ante regulation in which one or
more stakeholders are assessed to have significant market power and thus one or more
obligations are imposed.
xv
A greater supply and lower prices mean more potential for new entrants to become
established or offer niche products. This encourages competition and thus boosts the potential
of end users to choose content and services according to their own preferences.
xvi
xvii In order to be able to safeguard openness, the entire population needs to be able to use
content and services.
xviii
xix
Broadband Strategy for Sweden, Government Offices, N2009/8317/ITP
USO stands for 'Universal Service Obligation' and is a group of services to which all citizens
in a country are entitled (as these services are deemed necessary for a functioning society).
xx
xxi LLU stands for 'Local Loop Unbundling' and means the potential to gain access to that part
of the access network that links an end user with telecommunications premises/cabinet.
NIT stands for 'network infrastructure access' and is the part of the legislation that forces
the emergence of openness at the lower levels of the value chain.
xxii
A greater supply gives more stakeholders greater potential to compete, despite the fact that
not all of them own their own infrastructure. This lays the foundation for the capacity required
so that stakeholders can offer a varied range and is the factor that means that openness can be
ensured at the higher levels of the value chain.
xxiii
xxiv Ducting, such as vacant ducts underground, comprises an essential component of the
infrastructure that creates the prerequisites necessary for broadband connections via fibre, for
example. Without access to existing ducting, costs may be up to 90 per cent higher for those
interested in laying their own infrastructure.
xxv
PTS
122
xxviCoordinated activities at the natural resource level generate the potential to create
opportunities for replication; that is, more stakeholders with their own infrastructure or having
access to someone else's infrastructure. This contributes to competition at the lower levels of
the value chain and thus (potentially) creates more opportunities for more stakeholders to
operate in the market. This provides fewer opportunities to limit the range of content or
services.
xxvii
As earthworks are costly and infrastructure is laid with a certain level of advance planning,
it is crucial that routines are drawn up to reduce uncertainty in the market and to provide
incentives for stakeholders to invest.
xxviii
xxix
A high level of competition can provide the necessary basis to avoid openness being
restricted. Several stakeholders at different levels helps to enable end users to choose the
operator that best meets their preferences.
xxx
Spectrum is a limited resource. By affording the holder of frequency the possibility of freely
using its resource, it should be possible to promote innovation and develop existing solutions.
This benefits end users and may contribute to circumventing restrictions to openness at the
different levels of the second value chain.
xxxi
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Appendix 1 Market stakeholders:
interviews and input
Stakeholders
AT&T is an international company offering telephony and broadband
services. In 1984, intervention resulted in the structure of this company
changing in the American market. Since then, market conditions have changed
and AT&T and BellSouth have merged.
Bambuser is a Swedish content provider that offers a free Internet service
through which customers can send and receive videostream in realtime via
their mobile telephones. This service currently has almost 2 000 users in
around 50 countries.
Bonnier is a media group with operations in around 20 countries, with seven
divisions including books, television, business press, entertainment media, and
morning and evening newspapers. Bonnier applies many different business
models in its operation depending on the area. Internet editions are mainly
financed by advertising.
Cisco is an international company originally founded by scientists from Stanford
University. It is currently a global leader in network solutions for both
consumers and businesses (routers, switches, different platforms, etc.) and
operates in 165 countries.
Com Hem is a major provider of television, broadband and telephony, which
started offering cable television in the 1980s through a business operation
originating from the Swedish Telecommunications Administration. There are
currently 1.76 million Swedish households connected to Com Hem's network,
corresponding to around 40 per cent of all households.
Christer Mattson currently works for the Acreo research company, which is
prominent from a European perspective within the fields of electronics, optics
and communications technology. He has previous experience from Ericsson,
STOKAB and Bredbandsbolaget. He has profiled himself as an advocate of
open infrastructure and open networks and also emphasises the importance of
rolling out broadband networks.
Swedish IT and Telecom Industries is a membership organisation for undertakings
within the IT and telecommunications sector, and is part of Almega.
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Juliagruppen is an 'Internet activist group' that arranges seminars, provides
information and runs projects to promote a more open and Internet-friendly
society.
Nicklas Lundblad is Senior Vice President at the Stockholm Chamber of
Commerce and a member of the Government's IT Council. He was previously
responsible for policy at Google, director of the Stockholm Chamber of 'ecommerce' and IT expert within the European Union, etc. He has also written
a number of articles and books about information technology and society.
The Swedish Telecom Users Association (NTK) is an organisation for electronic
communications users. This association represents both small and large
businesses and is independent of any supplier. NTK works to promote more
competition in the market.
Rebtel is a Swedish company offering mobile telephony services between
different countries over the Internet. This company was established in 2006
and has experienced strong customer growth. Its customer base now includes
more than three million customers in over 50 countries. Rebtel finances relayed
calls via a call charge that is comparable in size to a local call being made via
the fixed telecommunications network.
SICS is a not-for-profit research institute with links to both academia and
industry working to help strengthen competitiveness in industry and increase
the use of new research in society.
The Swedish Association of Local Authorities and Regions (SALAR) is an association
for employers and professional and industrial organisations, whose members
include Sweden's 290 municipal authorities, 18 county councils together with
the regions of Skåne and Västra Götaland. Members of this association from
the municipal sector have an important role as owners of urban networks in
terms of consumer access to broadband and broadband services. The role of
SALAR also includes conducting a dialogue about the purpose of urban
networks as well as control over the same and has also drawn up principles for
ownership control (see 3.2.2). However, decisions relating to the operation of
urban networks are made by the respective municipal authority.
The Swedish Urban Network Association (SSNF) is an association of 170 municipal
broadband networks (urban networks) in the same number of municipalities.
SSNF's most important product is the CESAR platform, which is a dark fibre
database that can be used by stakeholders wishing to offer broadband services.
SSNF is conducting an active dialogue about issues relating to open networks
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and open infrastructure. In this respect, SSNF has also provided a
recommendation on open networks.
STOKAB is a municipally-owned infrastructure company founded in 1994 with
a view to setting up competition-neutral infrastructure in Stockholm that can
cope with future needs and the requirements of electronic communications. As
a competition-neutral owner, STOKAB leases out dark fibre to operators
wishing to supply broadband and other communications services.
SVT is a limited company owned by a foundation that broadcasts public
television; i.e. as a public service. This company broadcasts television via
different platforms, such as terrestrial networks, cable networks, satellite and
xDSL. The company is also the provider of an Internet service called 'SVT
Play'.
Tele2 is a company supplying electronic communications services within both
fixed and mobile networks. The company currently has a customer base of
over 25 million customers in eleven countries.
TeliaSonera is a limited company partly owned by central government, which
provides electronic communications services in the Nordic countries, the Baltic
States, Spain as well as in the growing markets of Eurasia, including Russia and
Turkey (20 countries in total). This company originated from the Swedish
Telecommunications Administration. Telia was founded in 1993 and
subsequently became TeliaSonera (in 2003) through a merger of the Swedish
company, Telia, and a Finnish company, Sonera. TeliaSonera has
approximately 43 million subscriptions.
In 2007, TeliaSonera formed Skanova Access, which is a company within the
TeliaSonera Group responsible for sales of network capacity to other operators
and to TeliaSonera's own operation.
Hi3G, with the Tre brand, is a company supplying electronic communications
services within a mobile network. This company started its Swedish operation
by rolling out a 3G network in the early 2000s after having received a share of
the '3G licences' through PTS's assignment procedure. This company has 18
million customers in ten countries, with its largest markets being the United
Kingdom and Italy.
The main outline of the discussions conducted between PTS and the various
stakeholders is provided below.
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What does openness mean and what characterises
openness at different levels of the value chain?
Transparency together with open data and communications
One stakeholder considered that openness means transparency between
companies in that no one is excluded. Transparency is maintained through
open networks that are competition neutral, together with equal and standard
terms. It is possible to exclude other stakeholders using technology. For
example, the copper-based telecommunications access infrastructure is
mentioned in this context. According to some stakeholders, one prerequisite
for the continued development of broadband and other services is to replace
the current copper network with fibre-based access infrastructure. One of the
stakeholders was of the opinion that open data (i.e. access and the potential to
use data compiled via the Internet) is one implication of openness. Another
stakeholder was of the opinion that open communications pave the way for
democracy in that everyone who wants to can and may participate in
communications.
Innovation and competitiveness
One stakeholder was of the opinion that openness, from a financial
perspective, is associated with innovation and competitiveness. Consequently,
openness creates new combinations of ideas and products that contribute to
more rapid renewal. Openness strengthens competitiveness through business
models being honed and becoming sustainable in an open scenario. From this
perspective, there also does not appear to be any contradiction between
openness and investments in electronic infrastructure, as in most cases
investments yield a return and the stakeholders also take into account the fact
that infrastructure may be opened up to others.
Several stakeholders also consider that there is a correlation between openness
on an infrastructure and service level in terms of competition. This is mainly
related to freedom of choice and consumer benefits for users at the service
level of the value chain. However, one stakeholder considers that openness
may have the opposite effect; that is, not resulting in competition, freedom of
choice or consumer benefits, but instead leading to paralysis, investment halted
and a lack of infrastructure.
Openness and neutral networks
Another stakeholder pointed out that openness and neutral networks are not
the same thing and that this discussion should be divided up thereafter and
that openness must be attributed a dynamic perspective (i.e. the requirements
of end users will not be the same five years from now).
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In this connection, one of the stakeholders pointed out that full openness
should be present at the lowest level possible of the public network (e.g. access
to passive fibre). However, it was said that the possible level of openness in
public networks depends on market conditions. Consequently, poorer market
conditions in the form of a smaller customer base may mean that a public
stakeholder must operate higher up in the value chain in order to obtain access
to additional, and larger, income streams to achieve a return on investments
made. On the other hand, one stakeholder pointed out the particular
importance of making an objective and forward–looking analysis of market
conditions. There is otherwise a risk of public stakeholders (urban networks)
operating higher up in the value chain than necessary, resulting in competition
being distorted.
Freedom of choice
Another stakeholder stated that the term 'openness' can be identified on the
basis of freedom of choice between customers and businesses and openness
between businesses, and in the latter case, refers to access on equal terms.
Infrastructural and service level
Several stakeholders stated that the term 'openness' should be divided into an
infrastructural and service level as openness means different things at these
levels. Having an openness concept that is too broad can make it meaningless.
At the infrastructural level, openness is mainly about access (regulated or
unregulated) to infrastructure and permits for laying infrastructure. One of the
stakeholders went one step further in this definition and wanted to divide up
openness in terms of networks, services and information. The first level
comprises access to and choices between different infrastructures and rates,
etc. It was stated that free and open competition lays the foundation for the
above-mentioned options, and then not only at the network level, but also at
the service level. The second level, services, should be monitored so that they
continue to remain open. Consumer information, rather than regulation and
monitoring, is offered as one possible solution. The third level, information, is
regulated by freedom of expression and is less problematic.
In a corresponding way as at the infrastructural level, openness at the service
level can also be about access; for example, for the resale of products and
services. However, according to the stakeholders, openness at the service level
is mainly about the opportunities for users to freely make use of the products
and services that they can gain access to via the access they purchase; that is,
that there is no inappropriate prioritisation or blocking of services and/or
traffic.
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According to one stakeholder, openness at the service level also has a
geographical dimension. A lack of investment incentives in areas with poorer
commercial potential in terms of customer base involves a risk of these areas
having a poorer supply of services. In turn, this may lead to inadequacies; for
example, in terms of public services. However, a type of inadequacy that is
commercially based may need to be accepted, or alternatively financed in some
other way.
Other stakeholders describe openness at the service level (for example, open
data traffic in broadband access lines) as a basic assumption that is self-evident,
regardless of the level of competition, which may (need to) be restricted for
legal, security and capacity-related reasons.
Openness and responsibility for rolling out infrastructure
One of the stakeholders stated that IT infrastructure is a public concern when
it comes to responsibility for a coordinated rollout. This means that central
government resources can be coordinated in a way that facilitates the linking of
private, central government and municipal networks (urban networks) and also
rollout where needed in order to achieve a modern network appropriate for
electronic communications. According to this stakeholder, this kind of IT
infrastructure is a basic prerequisite in a democratic society, where the benefits
enjoyed by citizens depend on access to the public Internet.
How does openness function at the different levels of the
value chain?
Variations at different levels
In discussions with market stakeholders, it has become apparent that openness
can vary at different levels of the value chain, but also within the same level,
e.g. depending on infrastructure. For example, openness can vary in fixed and
mobile networks.
According to one stakeholder, openness must function from the lowest level
(the natural resource level) and in this case in the form of ducting. Long-standing
agreements concluded during a period when there was a monopoly should not
be allowed to block permits for ducting or excavation.
However, a few stakeholders have mentioned in this context that there are
problems related to full openness when it comes to permits for the installation
of infrastructure (excavation), as excavation entails a high one-off cost (that is,
does not justify parallel infrastructure) and means higher costs in relation to
existing infrastructure (e.g. shortening the technical lifespan of a tarmac road
or street).
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Another stakeholder pointed out that the Swedish market has a tradition of
openness. For example, an important criterion when developing GSM was for
everyone to be able to reach each other, which is not self-evident in the United
States on account of blocking functions in mobile telephones, etc.
According to one stakeholder, openness at the second lowest level, the
infrastructural level, should be based on basic commercial prerequisites such as
free access to dark fibre in areas with a large customer base, but possibly
exclusivity in areas with a small customer base. Alternatively, a national fibre
company may be a good solution. A comparison has been made between
different urban networks where criteria for success included the assessment
that operations have an open approach from the outset.
According to one stakeholder, there is a growing demand for fibre and
wavelength products, which has an impact on the requisite level of openness at
the infrastructural level, as well as the transmission level. According to this
association, the range of wavelength products is not a means in itself, but may
be a natural consequence of the stakeholders operating in the market and their
size and demand.
Network operators are technically capable of blocking and/or prioritising data
traffic packets at the IP level of the value chain. However, based on the
supporting documents used by PTS in the interviews with market stakeholders,
the blocking and/or prioritisation of traffic in Sweden has not yet appeared to
be a primary phenomenon linked to business models, but is instead used for
legal, security and capacity-related reasons (note by PTS). However, one
stakeholder pointed out that reasons related to capacity constitute a grey area,
within which the blocking of a certain capacity-hungry service within the
framework of a business model applied could mean a restriction in terms of
openness. This is indeed the case, as such reasons are not necessarily as
compelling as reasons relating to the security and illegal content of a network.
This was also discussed in relation to business models (below).
There are, however, examples of the downward prioritisation of traffic
generated by certain services from other countries. Rebtel's mobile IP
telephony service for international calls is one such service. According to
information provided by Rebtel, this service has been prioritised by 'dripping'
(that is, approximately 90 per cent of calls are disconnected) or 'IP sniffing'
(which means that the IP addresses used by Rebtel for voice traffic are
afforded a lower priority). 243 This downward prioritisation has taken place in
243
Information from Hjalmar Winbladh, Rebtel, when interviewed on 26 August 2009
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Ireland and Germany. Rebtel was barred from operating in Portugal and
Singapore.
Other examples mentioned in the interviews included the blocking of torrent
traffic 244 and VoIP among mobile telecom operators in France, as well as
British Telecom's 'stop package' applying to delays in traffic. Corresponding
measures have also been identified in the Netherlands and the United States.
The Hi3G company mentioned one example of traffic management in Sweden,
which aimed to prevent obvious inappropriate use such as anonymous text
messages sent as a form of harassment. In this case, Hi3G chose to remove the
services in question.
One of the stakeholders stated that it would be desirable, even from the
perspective of market stakeholders, if end users could use any applications they
wanted and if attempts at 'walled gardens' could be combated. Customers
would be unhappy if some applications were restricted, which in its turn would
mean negative marketing for the Internet service provider carrying out such a
restriction. However, port 25 is routinely blocked to prevent spam from
reaching end users. As some applications can be very capacity-hungry, this
development imposes requirements on Internet service providers to guarantee
service quality, which costs money. According to this stakeholder, the question
consequently is not about whether traffic should be restricted, but how
Internet service providers can be paid for guaranteed service levels.
In this context, it is pointed out that suppliers of equipment and technology
indirectly restrict services through their development of equipment and
applications, something which Internet service providers view as unfortunate
and as a factor restricting openness. The Internet standard also has built-in
priority systems; for example, as regards time-critical applications.
Openness at the service level can be described in terms of end users being free to
use the products and services that they purchase, with the exception of
potentially harmful effects. Based on these prerequisites, blocking and
prioritisation are generally ruled out other than from the basis of 'best effort',
on the assignment of a customer or if network security would be jeopardised
owing to such use. Time-critical applications, such as voice and video, are also
prioritised. Here, there is a difference between fixed and mobile networks. In
mobile networks, operators often limit (restrict or sharply reduce) the
broadband capacity of a user when this user has exceeded the maximum
capacity allowed. The fact that there is a difference in how users are allowed to
244
'Torrent traffic' means file-sharing traffic
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utilise capacity in the networks is because several users share access (base
station) in a mobile network, whereas a fixed network means dedicated access.
Network structures mean that a user's use of network capacity has a greater
impact on others' use in the mobile network compared with the fixed network.
Several stakeholders offer broadband access to end users. The products and
associated services are relatively standardised with a low level of differentiation
and a resulting focus on price. In several respects, they are also provided over
the same infrastructure. One stakeholder mentioned that it is important to
achieve innovation and differentiation (e.g. in terms of quality) in order to
achieve long-term competition. One stakeholder was of the opinion that the
development of services and content would not have been as rapid without the
rollout of the IT infrastructure and an open Internet.
Another stakeholder pointed out that it would not have been possible to
develop innovative services such as Google, YouTube, Spotify and several
similar services without openness at the service level. These service
innovations challenge the predominant business models, which is an
innovation in itself according to this stakeholder.
Open networks
The formation of the 'Skanova' network undertaking was mentioned by one
stakeholder as an example of an open network, where the intention is for
TeliaSonera's wholesale customers to gain access to the wholesale products
provided over Skanova's network on the same terms as TeliaSonera's. A
committee for equal treatment has also been set up to monitor compliance
with this. Skanova's operation encompasses both passive and active
infrastructure. These then serve as production resources when producing
electronic communications services such as broadband. According to the
definition of the 'value chain' used in this report, the network undertaking's
operation is important, both at an infrastructural and transmission level.
SSNF has issued a recommendation on open networks. According to SSNF, 9
out of 10 urban networks comply with this recommendation, but there are
about 15 urban networks that do not offer dark fibre. Some are unable to offer
dark fibre for technical reasons, whereas others have local commercial or
political reasons for why they do not offer dark fibre. 245
Information from Mikael Ek, the Swedish Urban Network Association, from interview conducted on
12 October 2009
245
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One stakeholder expressed scepticism to full openness at all levels of the value
chain and mentioned MVNOs 246 as an example of phenomena which,
according to this stakeholder, have not led to a substantial increase in
competition.
Variations depending on stakeholder
Openness can also vary depending on the stakeholder. A stakeholder can choose
a business model with an open structure for its own network or its own
infrastructure (i.e. with access to all levels of the value chain), whereas another
stakeholder, for corresponding infrastructure, may choose a business model
with a more or less open structure, where access is only partly possible or is
only possible at a certain few levels of the value chain. In the case of the first
stakeholder, competition becomes possible in relation to own infrastructure at
both a wholesale and resale level, whereas in the latter case this is only possible
with competition within certain limitations. Openness may also vary depending
on stakeholder for reasons other than the choice of business model. This is
illustrated below.
As regards public service television broadcasting, one restriction of openness is
stated, as in practice only one company (Teracom) is capable of broadcasting
with the current coverage requirement. This is mainly a question of technology
and is not about traffic management per se but could be about this in practice at
a later point in time.
Another major issue is rights in connection with television broadcasting. For
example, SVT Play applies certain contractual rights. The issue of rights is also
relevant in terms of broadcasting SVT Play via IPTV for Internet service
providers that broadcast this service. Technical issues relating to platforms for
television broadcasting is another area that is important from the perspective
of openness. Television services are very similar to other services in that the
breadth and quality of the range of services are important ingredients in offers
made to end users. As regards SVT, this situation means that the company has
had an advantageous baseline when negotiating with different stakeholders
about broadcasting over their platforms.
Openness among public stakeholders (urban networks) is applied differently
among the stakeholders, which take on different roles in the market; in the
opinion of some stakeholders, this is sometimes questionable from the
perspective of competition.
246 MVNO stands for 'Mobile Virtual Network Operator' and means that a stakeholder leases someone
else's network in order to be able to offer services to end users.
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Which business models are applied and how do they work?
The stakeholders apply many different business models for the products and
services they provide. These include both the stakeholder-end user
relationship, as well as the relationship between stakeholders.
One of the stakeholders was of the opinion that 'openness' is not the same as
'free'. The business models encompassing the relationship between
stakeholders must consequently be continually developed and adapted to
changed market prerequisites, such as upgrading and rolling out networks. For
example, content providers need to be involved in and pay for future
investment in network structure. This may be solved by means of peering
agreements between the stakeholders.
In the business models, important parameters in terms of the relationship
between a stakeholder and an end user include customer volume and a wide
range of high quality services. Business models can vary depending on the level
of the value chain at which the products or services are offered. The business
models of different stakeholders are similar, particularly at an end user level, as
the models there are open and visible. 247
Business models with lock-in effects
These business models include bundling (or multiple play) through which a
combination of services is offered. One such offer is triple play (television,
broadband and telephony) and quattro play (for example, television,
broadband, fixed and mobile telephony), terminals bundled with mobile
telephony subscriptions as well as exclusivity agreements and similar
agreements for exclusive rights that may entail lock-in effects, in addition to
IP-based business models.
Triple play is currently being offered by a small number of market stakeholders
and quattro play is only being offered by one stakeholder. These offers usually
entail a certain lock-in period and also a package discount via such bundling. A
lock-in period restricts the consumer's freedom of choice and may entail costs
if the consumer switches (note by PTS).
There are often long lock-in periods (for example, 24 months) for sales of
mobile terminals (mobile telephones) bundled with mobile telephony
The fact that these business models are similar is also to be expected, as successful business models
are copied as a part of the market stakeholders' operations, and this is a natural component of
competition. In contrast, a market that lacks the same or similar business models is either heavily niched
or demonstrates functioning competition that is less than satisfactory in the market in question.
247
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subscriptions, where a mobile telephone is obtained without having to make
any cash payment. Here, however, the market has several different
stakeholders with infrastructure that they either own themselves or jointly,
whose areas of coverage sometimes overlap. For this reason, there should be
options available for end users in terms of the supply of mobile telephony
services. Service levels as well as possible capacity levels are important
ingredients of end user agreements.
Exclusivity agreements may also mean lock-ins in a similar way as for different
types of bundling. In themselves, however, exclusivity agreements may be a
prerequisite for realising an infrastructure investment, as the contractual period
for such exclusivity, including the right to associated income streams, means
that the investment yields a return. Alternatives could include upfront
payments or cost sharing, but an upfront payment is often deemed to surpass
the immediate willingness of customers to pay, and cost sharing can be both
time-consuming and complicated. However, what is important is the duration
of the contractual period; that is, if it is reasonable in relation to the investment
made (note by PTS).
Exclusivity agreements for fibre investments negotiated in the Swedish market
can be compared with the three-year moratorium imposed in the Norwegian
market by the Norwegian regulatory authority. Consequently, the former
Norwegian monopoly may exclusively use the fibre investments made for a
period of three years.
One of the stakeholders mentioned that bundling, exclusivity agreements and
long lock-in periods should not be necessary from a financial perspective; that
is, that profitability should still be achievable. Bundling, as well as exclusivity
agreements and long lock-in periods, should also involve a suboptimisation of
the resources of society as it contributes to consumers possibly needing to use
services that are inferior to corresponding alternatives in the market. Another
stakeholder mentioned that exclusivity agreements were not preferable, as
users appreciate being able to reach a service everywhere; that is, not via a
single provider or only one type of terminal. According to this stakeholder,
exclusivity in this type of scenario would favour competing services. Another
stakeholder considers that exclusivity should be permissible as regards own
services as long as a company does not block the services of other companies;
that is, access to the public Internet should be granted alongside any
proprietary IP services.
In this context, one stakeholder also mentioned that the electronic
communications market appears to be approaching greater openness in that
more and more systems that were previously closed are being forced to open
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up in order to retain their competitiveness. The business models used by
traditional telecom operators are used as examples of models whose services
have not been developed in ways corresponding to those of new service
providers, such as Internet companies. The telecom operators' models, with
lock-ins and restricted use for customers, no longer work and reserved
resources need to be redistributed.
Business models in different networks
The business models for data traffic in mobile networks, for example relating
to mobile broadband, have been emulated from the fixed network and mainly
involve a fixed charge for mobile broadband access. As shown in the
interviews, one problem here is that the distribution of capacity and use are
different in a mobile network compared with a fixed network. Several users
share access in a mobile network, while one user has dedicated access in a fixed
network. Today's business models for mobile broadband do not support the
type of use that has emerged in the fixed network, even if the use of capacity in
the fixed network has temporarily slowed through the implementation of the
IPRED Act.
The business models in the mobile networks are not designed for large-scale
use of IP-based telephony in the opinion of one stakeholder (cf. Skype,
Vonage and Rebtel). It is stated that one difference compared to the fixed
network is that the fixed charge of a fixed network for broadband access
allows for cost coverage, whereas a fixed charge for broadband access in a
mobile network does not do so in connection with the same level of use. In
this context, the price of mobile access is stated as needing to increase or the
business models needing to change; for example, by means of advertising
revenues. 248
Differentiated business models
Differentiated pricing in relation to end users on a par with use of capacity is
generally deemed as acceptable according to several stakeholders, but it is
important for pricing and price formation to be communicated clearly. What's
more, one stakeholder was of the opinion that including capacity utilisation in
business models may be a driving force when developing different solutions
that demand high capacity. By this it is meant that the possibility of charging
different prices for products that have different attributes, such as varied
capacity – in a nutshell, the potential to use different business models – is a
prerequisite for the development of products and services.
AT&T was mentioned in the interviews as one example of an international stakeholder that has started
to charge variable amounts on a trial basis for broadband based on use and capacity usage.
248
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Operating at several levels of the value chain (in other words, both as a content
provider and operator) affords greater control over revenues, which is the
natural starting point for commercial stakeholders in the broadband market.
For municipal urban networks, the starting point for an urban network
operation is related to the need of society for future-proof IT infrastructure,
even in unprofitable areas such as sparsely populated and rural areas. In this
context, the behaviour of public stakeholders in the broadband market at
different levels of the value chain, via urban networks, should be clarified
according to some stakeholders, among these SALAR. 249 One question that
arises is how to combine the profit interests of commercial stakeholders with
the interests of municipal stakeholders to receive a reasonable return from the
investments made in open IT infrastructure. In this way, the Association refers
to the market analyses that form the basis of the municipal authorities' conduct
at a certain level of the value chain and indicates that these can and should be
improved, which is also one the aims of SALAR in its advisory role. The
Association urges deeper collaboration with KKV and PTS as regards market
assessments and principles for ownership control. SALAR also points out that
supervision relating to terms of entry, matching the actions of urban networks
and underlying market analysis, and also the CO model's application at the
service level are measures that can address the problems that currently exist in
the market.
It is worth mentioning in this context the views and comments about labelling
of types of end user access compiled through the interviews (see below).
Should an end user access line be labelled?
Several stakeholders have pointed out that some kind of labelling is necessary
for end user access lines in accordance with general contractual principles; that
is, there must an agreement regulating the business relationship. This labelling
should not only relate to levels of quality, but also potential restrictions of a
technical nature.
One of the stakeholders stated that important aspects as regards labelling an
end user access line include how this should be done, the type of information
as well as the point in time and the duration. It has also been pointed out in
this context that market development is moving quickly, which may mean that
parameters in an end user contract may need to be updated quite regularly. It
may also be a challenge in itself to determine what constitutes an inferior
access line and what constitutes a poor service. Another stakeholder stated that
Information from Björn Björk, Swedish Association of Local Authorities and Regions (SALAR), when
interviewed by telephone on 22 October 2009
249
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transparency in end user agreements is one example of openness in access
lines.
One stakeholder was of the opinion that building standards are needed for the
Internet and compares this with the labelling of foods. An Internet access line
should be open, whereas a network can be closed.
Another stakeholder was of the opinion that it should be made clear that
openness does not lie in the rate, but in the openness itself; that is, it is not a
democratic right to have an access line with a certain rate, but that one's access
line should be open in terms of communications.
The CO model
A few stakeholders presented the CO model 250 as one example of an open
network model. This model appears to be more common in urban networks,
although a few stakeholders pointed out that a CO is relatively dependent on
economies of scale to make revenues. One of the stakeholders was of the
opinion that the CO model should be applied in a way that achieves openness
(in terms of the potential for competition) on equal terms for market
stakeholders. In that way, this model can also mean openness at an end user
level in terms of freedom of choice. However, a few of the stakeholders
considered that the CO model may involve an extra level of costs for
consumers.
Urban networks: open and neutral or a specific business model?
A few of the stakeholders were of the opinion that several urban networks
operate 'too far up' in the value chain (service level). Here, opinions diverge as
another stakeholder was of the opinion that this is not the case and that when
this does happen, it is a consequence of a lack of interested market
stakeholders. One stakeholder stated that the quality of urban networks does
not meet customer needs.
One of the stakeholders was of the opinion that the proposed regulation of
fibre may affect the business models relating to open urban networks in that
the rollout of urban networks in sparsely populated areas hinges upon rollout
in central areas where parallel establishment is possible.
SALAR considers that municipal owners of urban networks should conduct a
risk assessment based on the competence provisions contained in the Local
CO stands for 'communications operator'. It should be mentioned in this context that 'CO' may refer
to just the operation or both the operation and provision of a portal for services. The stakeholder
responsible for the operation of a network is sometimes referred to as a 'communications administrator'
(CA), whereas a communications operator (CO) is the stakeholder providing a portal.
250
PTS
138
Government Act and other competition legislation in the sector in terms of the
level at which the operations of urban networks should be conducted. A
municipal owner should first determine in its owner terms of reference or
corresponding control document that the main aim of the urban network is to
provide accessible IT infrastructure that is open to other stakeholders and is
available on commercial terms. In addition, if the owner deems that it is
justified that the urban network should operate at a level higher than the
infrastructural level – both passive and active – in order to achieve this
objective, this should be confirmed by the relevant market analyses so that the
urban network's operation serves to complement and, when relevant, can also
interact with other market stakeholders. 251 The question of whether a municipal
urban network can or should be a CO or communications administrator (CA)
is a complicated one and for this reason needs careful analysis. If 'CO' means a
pure operation, this should be associated with less risk from an openness
perspective if the urban network operates the network itself, as long as the
criteria are met for an open network. If one uses a CO to also include the
provision or relaying of services (CA), there is a greater risk of this colliding
with commercial market stakeholders and in this case the owner should
consider issuing instructions to the urban network to transfer such operation
to another market stakeholder. The basic intention is that an urban network
should be capable of making large and often irrevocable investments in
infrastructure, whereas a market stakeholder can make investments that are
relatively small and can be reused.
What needs to be changed as regards openness?
Less regulation, more public initiatives and increased collaboration
A few of the stakeholders were of the opinion that the proposed fibre
regulation 252 will not have the intended impact, as it only impedes the
willingness of TeliaSonera to invest, or limits the potential of central
government and municipal authorities to roll out infrastructure. It is expensive
to build networks (fibre, which is now on the agenda) and it requires
economies of scale. Consequently, no more restrictions are required in this
respect; instead, non-regulation and central government responsibility are
needed instead of sector-specific regulation. Joint (central government and
other public) initiatives are needed in areas that are unprofitable. An integrated
approach is also needed for IT infrastructure in terms of long-term
development; what do we, as a leading IT nation, wish to achieve over the next
10 to 15 years?
251
PTS
139
One stakeholder was of the opinion that the prevailing market situation means
that stakeholders must share the existing infrastructure while also jointly
creating new infrastructure so that it can be used to its maximum potential.
However, competition between stakeholders is important at higher levels of
the value chain, while determining the exact boundary between collaboration
and competition is difficult to do and depends on the relevant geographical
area. New markets give rise to new delimitations.
Several of the stakeholders stressed the importance of having a political IT
strategy as a basis for corporate investment in infrastructure (reducing
uncertainty through political decisions or a lack of political decisions).
One of the stakeholders proposed that the level of innovativeness in Sweden
should be increased by having Internet access that is open and 'free of charge'
as a new type of public service (for example, by using spectrum in the 450
MHz band financed by television licence charges). In this way, this service
would develop in line with the principle of public access to official records and,
among other things, enable searching online in public materials.
More regulation and access on equal terms
On the other hand, other stakeholders considered that more access regulation,
particularly in fixed networks (copper, fibre, coaxial), is desirable to maintain
open networks. Ducting, dark fibre and bitstream are mentioned in this respect
for the production of services at different levels of the value chain. What's
more, this type of access must be granted seamlessly; that is, associated
collocation, backhaul, etc. are required so that the access in question is made
possible on competitive terms. In the opinion of one stakeholder, networks
and services should be separated through regulation. For example, a network
owner should not be able to prioritise an operator within its own corporate
group over other operators. Such regulation must also take full consideration
of new technology so that old technology does not conserve a high price in
relation to the price made possible by the new technology. As an example here,
it is stated that the regulated price of interconnection, which is based on cost,
does not reflect the actual situation. Old pricing models (for example, unit and
minute prices for text messages) do not provide incentives to transfer over to
all-IP.
One of the stakeholders was of the opinion that different regulations for
stakeholders operating in the same market create different game plans and
distort competitive conditions between infrastructures and between
stakeholders that are vertically integrated and those that are not. Here,
regulation should be harmonised in order to achieve equal terms for access.
PTS
140
Some of the stakeholders compared access regulation in Europe with the
situation in the US. One view that emerged in this respect was that European
access regulation does indeed aim to promote open networks and thus open
services as well, but that it focuses on the networks of SMP operators. Besides
the networks of SMP operators, there may be other networks that are more or
less open, which create unsustainable situations for service providers and end
users. Another viewpoint was that the area of network neutrality weighs less
heavily in Sweden in light of the prevailing access regulation, but that the
network neutrality debate (in terms of equal treatment and openness) is
nevertheless considered to be important.
Development and adaptation of business models
The unregulated end-user market is characterised by international competition,
and a critical volume is required in order to remain a long-term stakeholder.
Skype and similar business models can be mentioned in this context, through
which Internet access and a network infrastructure are assumptions and the
end user, and Skype, can utilise this base with a supplement for marginal added
costs relating to this business area. Indeed, operators that have an existing
customer base can compete with Skype and other parties in this business area,
but not without cannibalising their own business.
This situation will consequently force the emergence of new business models
to counter competition from Skype, etc. Closed as opposed to open (Skype's)
business models were mentioned in this context as being necessary to ensure
compensation for investments made in infrastructure (compare with exclusivity
agreements).
However, there is no complete unanimity about the use of closed business
models. Some stakeholders consider that prioritising or blocking content
and/or services should not be allowed other than as regards the functionality
and technical performance of the network. Here, one of the stakeholders
questioned whether it was really necessary to manage this kind of traffic. The
Measurement Labs and Switzerland services were mentioned in this context as
possible prototypes for developing a service for assessing prioritisations, etc.,
for example through Bredbandskollen.
Several stakeholders were of the opinion that 'openness' should not be equated
with 'free of charge'. Here, a comparison is made with Microsoft's entry into
the Chinese market through price dumping. Correspondingly, business models
relating to copyright and exploitative models using pirate copying must be dealt
with and new business models developed. Alternatively, one of the
stakeholders mentioned that diversification may be necessary.
PTS
141
Open and neutral networks
Operating at several levels of the value chain (in other words, both as a content
provider and operator) affords greater control over revenues. According to a
few of the stakeholders (e.g. SALAR), the behaviour of public stakeholders in
the broadband market via urban networks should be clarified. 253 SALAR seeks
more in-depth collaboration with KKV and PTS relating to market
assessments and principles for ownership control. Here, 'market assessments'
refer to an assessment of whether there are any private stakeholders interested
in running an operation via municipally-owned urban networks. SALAR is of
the opinion that more in-depth collaboration between KKV and PTS in these
respects, together with supervision relating to access terms and an application
of the CO model, may address the problems that currently exist in the market.
Are there any threats to openness?
One of the stakeholders is of the view that a commercial approach may
threaten openness. A commercial stakeholder may need to act on its own or
higher up in the network in order to make money, whereas a public
stakeholder, in parallel with the commercial operation, acts in accordance with
a general political assignment, which may offset, or weigh more heavily than,
the profit motive. A commercial stakeholder may also go bankrupt, which is a
risk that should not be taken by a network for a public commitment (municipal
services, etc.).
Another stakeholder mentioned different prerequisites in terms of excavation
permits, the action of urban networks as service providers and also the
interaction of urban networks, property networks and municipal housing
companies as a threat to openness at various levels of the value chain.
One of the stakeholders pointed out the importance of having long-term and
clear regulation as a prerequisite for regulation leading to openness, as
uncertainty generates transaction costs, which in turn restrain investment
decisions.
The CO model is stated as leading to openness in the form of freedom of
choice at an end user level, but there are concerns that it: a) will reduce the
potential for stakeholders at a lower infrastructural level to receive a return on
an investment, b) will not be used openly with access on equal terms, and c)
will create an additional stakeholder level that must be paid for by the end
users.
253
PTS
142
One of the stakeholders stated that the opposite of the CO model (that is,
power being created by networks and services being set up together) affords a
telecom operator the opportunity to check the content of the communication.
Filtering data packets on the assignment of or in collaboration with the police
is an area that Internet service providers are implementing at the service level.
This applies to data traffic relating to child pornography. 254 Several
stakeholders stated that they do not make their own assessments of what
should be blocked in accordance with the police's list, but comply with this list.
Some doubts were raised among the stakeholders interviewed as regards the
presence of this filter.
As regards the debate on file sharing, one of the stakeholders pointed out that
there is a threat to openness in terms of networks and services as to how the
shutdown of the Black Internet service provider was handled. This Internet
service provider was shut down as it was supplying capacity to Pirate Bay,
whose originators were found to have breached copyright. However, Pirate
Bay was one of several clients of Black Internet and the question raised in the
interviews was whether an Internet service provider should monitor the way in
which customers use the Internet.
One of the stakeholders was of the opinion that open communications,
without filters, may raise some moral questions (for instance, access to and the
distribution of films showing attacks or other serious crimes) which in
themselves can compel a restriction to openness. The web company Bambuser
is worth mentioning in this context. Bambuser's work involves filtering
functions, warning menus, etc., concerning 'dubious' material. According to
this company, it is a matter of moral aspects and is not a question of
censorship. 255
One of the stakeholders mentioned that the interoperability between different
cloud computing services in pace with increasing amounts of material being
retained and activities being moved out onto the Internet is an important issue
for the continued openness of the Internet. There was assessed to be a risk of
lock-in effects in this respect.
According to one of the stakeholders, the benefits of the Internet are curtailed
for all users if openness is restricted. Individual restrictions in the form of
Other traffic (file sharing) has also been mentioned in this debate. However, after having verified this
with the operators, PTS has come to the conclusion that this currently only involves traffic relating to
child pornography.
255 Information from Måns Adler, Bambuser, when interviewed on 30 September 2009
254
PTS
143
blocking, etc., are consequently spread further in the form of fewer positive
network effects, as fewer parties can be reached. This also creates a poorer
foundation for innovative investments relating to services and content.
PTS
144
Abbreviations
ACTA
Anti-Counterfeiting Trade Agreement
CESAR
Swedish Urban Network Association's dark fibre database
CO/CA
Communications Operator/Communications Administrator
DI
Data Inspection Board
DSL
Digital Subscriber Line
FRA
National Defence Radio Establishment
HADOPI
La Haute Autorité pour la Diffusion des Œuvres et la Protection
des Droits sur Internet
HFC
Hybrid Fibre Co-axial
HUS
Household tax deduction
IPRED
Intellectual Property Rights Enforcement Directive
ISP
Internet Service Provider
KKV
Swedish Competition Authority
KOV
Swedish Consumer Agency
KTIB
Swedish Consumer Bureau for Telecom, TV and Internet
LEK
Electronic Communications Act
LLU
Local Loop Unbundling
MVNO
Mobile Virtual Network Operator
NGN
Next Generation Network
NIT
Network infrastructure access
NTK
Swedish Telecom Users Association
PTS
145
OECD
Organisation for Economic Co-operation and Development
PBL
Planning and Building Act
PTS
PuL
Personal Data Act
QoS
Quality of Service
SABO
Swedish Association of Municipal Housing Companies
SALAR
Swedish Association of Local Authorities and Regions
SCB
Statistics Sweden
SMP
Significant Market Power
SSNF
Swedish Urban Network Association
USO
Universal Service Obligation
VoD
Video on Demand
PTS
146
List of terms and concepts
Best effort
transit of data traffic according to queuing
principles; this principle means that the value of
the content of IP packets is not based on the
content sent or who the source or recipient is
Bitstream
transmission of data streams, for example, between
one specific end user's connection and an
operator's transmission network. The wholesale
bitstream access product is (for instance) used to
provide broadband
Bundling
Swedish: sampaketering
Cloud computing
services and content that are neither retained nor
processed locally (molntjänster in Swedish)
Dark fibre
dark fibre is a cable that is not lit up; i.e. physical
fibre cables without electronic equipment
Leased lines
point-to-point transmission of data streams with
dedicated capacity
LLU
'Local Loop Unbundling', meaning the potential to
gain access to that part of the access network that
links an end user with telecommunications
premises/cabinet
Network effects
benefits increase with the number of network
members
Optical fibre
a thin glass line made from silicon dioxide (glass)
that transfers data via light instead of via electronic
signals as is the case in a copper line. Optical fibre
may be found in the entire or parts of public or
individual electronic communications networks
Peering
exchange of traffic
PTS
147
Streaming
'streaming' [strömning in Swedish] means playing
back sounds and images via transmission from the
Internet
Terminating segment
end section or local network segment of a leased
line
Transit
Swedish: förmedling
Transmission
Swedish: transport
Trunk segment
an interconnecting network segment of a leased
line
PTS
148
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PTS
149
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150
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PTS
151
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PTS
152
Articles
Facebook banar väg för sociala medier [Facebook paves the way for social media],
Fredrik Wass (Internet World), 21 April 2008
http://www.idg.se/2.1085/1.119368
Garantera öppet Internet [Guaranteeing an open Internet], Åsa Torstensson
(Internet World), 15 June 2009
http://www.idg.se/2.1085/1.235768/garantera-oppet-internet
Tele2 skrotar användaruppgifter [Tele2 scraps user data], Daniel Goldberg
(Computer Sweden), 27 April 2009 http://www.idg.se/2.1085/1.226635/tele2skrotar-anvandaruppgifter
Alltele struntar i Ipred-lagen [Alltele ignores the IPRED Act], Jörgen Löwenfeldt
(IT 24), 17 April 2009 http://www.idg.se/2.1085/1.224739/alltele-struntar-iipred-lagen
Risk för förhandsgranskad webb [Risk of web being subject to prior scrutiny],
Linus Larsson and Daniel Goldberg (Computer Sweden), 1 September 2009
http://www.idg.se/2.1085/1.243535/risk-for-forhandsgranskad-webb
PTS: Nätneutralitet inget problem [PTS: Network neutrality not a problem],
Marcus Jerräng (Computer Sweden), 13 February 2009
http://computersweden.idg.se/2.2683/1.211916/pts-natneutralitet-ingetproblem
Bredbandsbråk, vem ska betala? [Broadband battle, who should pay?], Mikael
Ricknäs (Computer Sweden), 13 October 2006
http://computersweden.idg.se/2.2683/1.78825
Begreppet molnet på väg lösas upp [The concept of 'cloud computing' about to
dissipate], Håkan Ogelid (Computer Sweden), 16 October 2009
http://www.idg.se/2.1085/1.260801/begreppet-molnet-pa-vag-losas-upp
250 miljoner till bredband i glesbygd [SEK 250m for broadband in sparsely
populated areas], Marcus Jerräng (Computer Sweden), 8 September 2009
http.//www.idg.se/2.1085/1.244952/250-miljoner-till-bredband-i-glesbygd
Flera fall av svåra haverier [Several cases of meltdowns], Linus Larsson
(Computer Sweden), 10 November 2009
http://www.idg.se/2.1085/1.268013/fler-fall-av-svara-haverier
PTS
153
Fyra tjänster som utmanar Ipred-lagen [Four services challenging the IPRED Act],
Martin Appel (PC för alla), 1 April 2009
http://www.idg.se/2.1085/1.221453/fyra-tjanster-som-utmanar-ipred-lagen
Storbritannien slår till mot fildelare [UK strikes back against file sharers], Michael
Jenselius (PC för alla), 17 August 2009
http://www.idg.se/2.2370/1.241393/storbritannien-slar-till-mot-fildelare
Hård slutstrid om Internets framtid [Fierce final battle about the future of the
Internet], Jenny Stiernstedt (Dagens Nyheter), 15 April 2009
http://www.dn.se/kultur-noje/forhandlingar-i-bryssel-om-eus-telekompaket1.844537
Datalagring: Försenat lagförslag kommer i höst, [Data retention: delayed statutory
proposal to be made in the autumn], Hans Rosén (Dagens Nyheter), 20 August
2009 http://www.dn.se/nyheter/sverige/datalagring-forsenat-lagforslagkommer-i-host-1.934893
Regeringen skjuter på datalagring [Government postpones data retention], (TT
Swedish news agency), 21 October 2009
http://www.dn.se/nyheter/sverige/regeringen-skjuter-pa-datalagring-1.979458
Het debatt i riksdagen om FRA [Heated debate in the Riksdag about FRA], Hans
Rosén (Dagens Nyheter), 14 October 2009
http://www.dn.se/nyheter/valet2010/het-debatt-i-riksdagen-om-fra-1.974600
Nej till fildelningslag i Frankrike [France says 'no' to file sharing act] (TT-AFP),
10 June 2009 http://www.dn.se/kultur-noje/nyheter/nej-till-fildelningslag-ifrankrike-1.888864
Tre miljoner fildelar illegalt i Sverige [Three million people sharing files illegally in
Sweden], Sten Gustafsson (TT Swedish news agency), 12 October 2009
http://www.dn.se/kultur-noje/nyheter/tre-miljoner-fildelar-illegalt-i-sverige1.972254
Förhandlingar enbart om paragraf 138 [Negotiations only about Section 138], Clas
Svahn (Dagens Nyheter), 28 September 2009 http://www.dn.se/kulturnoje/nyheter/forhandlingar-om-paragraf-138-1.962543
Riksdagen beslutade om Ipredlagen [Riksdag resolution on the IPRED Act],
Caroline Thorén (Dagens Nyheter), 25 February 2009
http://www.dn.se/kultur-noje/riksdagen-beslutade-om-ipred-lagen-1.807030
PTS
154
Actaavtalet: Sverige säger nej till förslag om illegal fildelning [ACTA Agreement:
Sweden says 'no' to proposal regarding illegal file sharing], Hans Rosén
(Dagens Nyheter), 13 November 2009
http://www.dn.se/fordjupning/europa2009/actaavtalet-sverige-sager-nej-tillforslag-om-illegal-fildelning-1.994262
Amerikansk strid om öppen Internet [Conflict in America about the open Internet],
Tomas Augustsson (Svenska Dagbladet), 23 September 2009
http://www.svd.se/naringsliv/nyheter/artikel_3560081.svd
Nätoperatörernas roll görs omöjlig [The role of network operators is being made
impossible], Ann-Marie Fransson (Director of Association, Swedish IT and
Telecom Industries within Almega), Erik Heilborn (CEO of TDC Sverige),
Georgi Ganev (CEO of Bredbandsbolaget), Jon Karlung (CEO of Bahnhof),
Mikael Ek (CEO, Swedish Urban Network Association), Niclas Palmstierna
(CEO of Tele2 Sverige AB), Ola Norberg (CEO of Alltele), Roger Söderberg
(CEO of BT Nordics), Stefan Trampus (Head of Broadband Services,
TeliaSonera Sweden) and Tomas Franzén (CEO of Com Hem), (Svenska
Dagbladet), 30 September 2009
http://www.svd.se/opinion/brannpunkt/artikel_3584645.svd
Datalagringsdirektivet kan ge Internetskatt [Data Retention Directive may result in
Internet tax], Karl Sigfrid (Member of Riksdag, Moderaterna Party) (Svenska
Dagbladet), 22 October 2009
http://www.svd.se/opinion/brannpunkt/artikel_3687675.svd
Slutstrid om Telekompaketet [Final battle about the Telecom Reform Package],
Tobias Olsson (Svenska Dagbladet), 21 April 2009
http://www.svd.se/nyheter/politik/euvalet2009/artikel_2772417.svd
Fildelarlagen farligare än FRA-lagen [File Sharing Act more dangerous than the
FRA Act], Sten Gustafsson (TT Swedish news agency), 29 November 2008
Bakslag för Internetaktivister om Telekompaketet [Setback for Internet activists
regarding the Telecom Reform Package], Tobias Olsson (Svenska Dagbladet),
28 September 2009 http://www.svd.se/nyheter/inrikes/artikel_3580273.svd
Integritet skapar djup S-spricka [Privacy creating a deep conflict within the
Swedish Social Democratic Party], Tomas Brandel (Svenska Dagbladet), 29
October 2009 http://www.svd.se/nyheter/politik/artikel_3721029.svd
PTS
155
PTS skickar skrivelse till operatörer om e-postfiltrering [PTS sends written
communication to operators about e-mail filtering] (PTS website), 13
December 2004
http://www.pts.se/sv/Nyheter/Internet/2004/PTS%20skickar%20skrivelse%
20till%20operat%C3%B6rer%20om%20e-postfiltrering/
Växande kritik mot nya avlyssningslagen [Growing criticism about the new
surveillance act], Stefan Winiger (Sveriges Radio), 7 March 2007
http://www.sr.se/cgi-bin/ekot/artikel.asp?Artikel=1240436
Telekompaketet – konsumentskydd eller begränsad yttrandefrihet? [Telecom Reform
Package: protecting consumers or limiting freedom of expression?], Mikael
Stengård (Sveriges Radio),
http://www.sr.se/sida/artikel.aspx?programid=1630&artikel=2816230
Ipred försvårar för upphovsrätten [IPRED complicates copyright], Sveriges Radio,
15 November 2009 http://www.sr.se/cgibin/ekot/artikel.asp?artikel=3239832
Svårare att jaga pirater [More difficult to chase pirates], TT Swedish news agency,
15 November 2009
http://www.aftonbladet.se/nyheter/ipred/article6126445.ab
Kränker Ipred den personliga integriteten? [Is IPRED violating personal privacy?],
Arvid Isaksson (Newsmill), 5 February 2009
http://www.newsmill.se/artikel/2009/02/05/ipred
Fel av Ephone att spara uppgifter om kunderna [ePhone wrongly retaining customer
data], Ola Norberg (Newsmill), 25 June 2009
http://www.newsmill.se/artikel/2009/06/25/fel-av-ephone-att-sparauppgifter-om-sina-kunder
Centern måste återvinna integritetsfrågorna [The Centre Party needs to reclaim
privacy issues], Magnus Andersson, Johan Pettersson, Hanna Wagenius,
Karin Fälldin, Johan Kling, Anders Dahlberg and Per Johansson (Board of the
Centre Party's Youth Association) (Newsmill), 25 June 2009
http://www.newsmill.se/artikel/2009/06/25/centern-maste-atervinnaintegritetsfragorna
Ny lag sätter stopp för ojust konkurrens [New act calls a halt to unfair competition],
Jimmy Dominius, Press Officer (Swedish Competition Authority), 26 August
2009 http://www.konkurrensverket.se/t/NewsPage____5155.aspx
PTS
156
Telia kan ges ensamrätt på bredbandsnät i Nacka [Telia may be granted sole rights to
the Nacka broadband network], Lennart Spetz (Nacka och Värmdöposten),
11 November 2009 http://www.nvp.se/Nacka/Nacka/Telia-kan-gesensamratt-pa-bredbandsnat-i-Nacka/
'France approves wide crackdown on net piracy', Eric Pfanner (The New York
Times), 22 October 2009
www.nytimes.com/2009/10/23/technology/23net.html?_r=1&scp=1&sq=fra
nce%20three%20strike&st=cse
'FCC takes first step toward net neutrality rules', Grant Gross (IDG News
Service), 22 October 2009 www.networkworld.com/news/2009/102209-fcctakes-first-step-toward.htm
'FCC "Net Neutrality" Rules Expected to Advance on Vote', Cecilia Kang
(The Washington Post), 21 September 2009
http://www.washingtonpost.com/wpdyn/content/article/2009/09/20/AR20
09092002290.html
'Why Sweden rules the web' (The Independent), 10 March 2009
http://www.independent.co.uk/life-style/gadgets-and-tech/features/whysweden-rules-the-web-1640950.html
'Internet groups warn BBC over iPlayer plans', Andrew Murray-Watson (The
Independent), 12 August 2007
http://www.independent.co.uk/news/business/news/Internet-groups-warnbbc-over-iplayer-plans-461167.html
Intel visar upp bärbar med fyra bildskärmar [Intel demonstrates laptop with four
screens], Michael Jenselius (PC för alla), 24 September 2009
http://pcforalla.idg.se/2.1054/1.254085/intel-visar-upp-barbar-med-fyrabildskarmar
'Facebook’s new terms of service: "We can do anything we want with our
content. Forever"', Chris Walters (The Consumerist), 15 February 2009
http://consumerist.com/5150175/facebooks-new-terms-of-service-we-cando-anything-we-want-with-your-content-forever
Sverige ledande på e-förvaltning [Sweden in the forefront within e-Government],
(Mia Widell, Press Secretary for Mats Odell, Ministry of Finance), 23 October
2009 http://www.sweden.gov.se/sb/d/119/a/134213
PTS
157
The 6th round of negotiations on anti-counterfeiting trade agreement (Martin
Valfridsson, Press Secretary for Beatrice Ask, Ministry of Justice), 6 November
2009
www.se2009.eu/sv/moten_nyheter/2009/11/6/the_6th_round_of_negotiatio
ns_on_anti-counterfeiting_trade_agreement_engelska
Europa enat kring Telekompaketet [Europe united on the Telecom Reform
Package] (Sandra Bagirjazid, Desk Officer, Ministry of Enterprise, Energy and
Communications), 5 November 2009
http://www.se2009.eu/sv/moten_nyheter/2009/11/5/europa_enat_kring_tel
ekompaket
Saïd Business School, University of Oxford, Press Release, October 2009
http://www.sbs.ox.ac.uk/Pages/Search.aspx/Results.aspx?k=high%20quality
%20broadband%20study
Legal cases
Solna District Court, Department 1, Case no. Ä 2707-09
Svea Court of Appeal, Department 02, Division 0202, Case no. ÖÄ 6091-09
Stockholm City Court, Department 5, Case nos. T 7540-09 and T 11712-09
Asker og Baerum District Court, 6 November 2009, Case no. 09-096202TVIAHER/2
EU Directives
Directive 2000/31/EC of the European Parliament and of the Council on
certain legal aspects of information society services, in particular electronic
commerce, in the Internal Market
access to, and interconnection of, electronic communications networks and
associated facilities
Directive 2002/20/EC of the European Parliament and of the Council on the
authorisation of electronic communications networks and services
Directive 2002/21/EC of the European Parliament and of the Council of 7
March 2002 on a common regulatory framework for electronic
communications networks and services
PTS
158
universal service and users' rights relating to electronic communications
networks and services
Directive 2002/58/EC of the European Parliament and of the Council of 12
July 2002 concerning the processing of personal data and the protection of
privacy in the electronic communications sector
competition in the markets for electronic communications networks and
services
enforcement of intellectual property rights
retention of data generated or processed in connection with the provision of
publicly available electronic communications services or public
communications networks and amending Directive 2002/58/EC
Directive of the European Parliament and of the Council amending Directive
2002/22/EC on universal service and users' rights relating to electronic
communications networks and services, Directive 2002/58/EC concerning the
processing of personal data and the protection of privacy in the electronic
communications sector and Regulation (EC) No 2006/2004 on cooperation
between national authorities responsible for the enforcement of consumer
protection laws 2007/0248 (COD)
II DRAFT RECOMMENDATION FOR SECOND READING on the
Council common position for adopting a directive of the European Parliament
and of the Council amending Directives 2002/21/EC on a common regulatory
framework for electronic communications networks and services, 2002/19/EC
on access to, and interconnection of, electronic communications networks and
associated facilities, and 2002/20/EC on the authorisation of electronic
communications networks and services (16496/1/2008 - C6-0066/2009 –
2007/0247 (COD)
PTS
159
Proposal for a Directive of the European Parliament and of the Council
amending Directives 2002/21/EC on a common regulatory framework for
electronic communications networks and services, 2002/19/EC on access to,
and interconnection of, electronic communications networks and services, and
2002/20/EC on the authorisation of electronic communications networks and
services – Outcome of the European Parliament's second reading (Strasbourg,
4 to 7 May 2009)
General advice and recommendations
PTS allmänna råd om tjänstekvalitet [PTS's general advice on service quality],
PTSFS 2007:01
Commission Recommendation of 17 December 2007 on relevant product and
service markets within the electronic communications sector susceptible to ex
ante regulation in accordance with Directive 2002/21/EC of the European
Parliament and of the Council on a common regulatory framework for
electronic communications networks and services
Community guidelines for the application of state aid rules in relation to rapid
deployment of broadband networks, 17 September 2009
Sources in print
Cave, M., (2006a) 'Encouraging infrastructure competition via the ladder of
investment', Telecommunications Policy, Vol. 30, 223-237
Joacim Tåg, 'Essays on Platforms: Business Strategies, Regulation and Policy in
Telecommunications, Media and Technology Industries', Monograph, PhD
Thesis, 2008
Mankiw, G., 'Principles of Economics', Thomson Learning, 2003
Eklund, K., Vår ekonomi [Our economy], Norstedts Akademiska Förlag, 2007
PTS
160
Websites
www.bredbandskollen.se
www.ledningskollen.se
www.telepriskollen.se
www.teliasoneraic.se/start_ic
http://wave.google.com/
http://werebuild.eu/wiki/index.php/Main_Page
Other sources
'Broadband – definition, penetration and position', PTS (memo dated
8 October 2009)
'Ducting support', PTS (memo dated 17 March 2009)
'Broadband support via the Rural Area Programme', PTS (memo dated 11
September 2009)
Alcatel Lucent, 'An update on broadband', presentation for the Board of PTS,
June 2009
'Digital Europe – Europe's Fast Track to Economic Recovery', Viviane
Reding's speech in Brussels on 9 July 2009, 09/336
'A Green Knowledge Society - An ICT policy agenda to 2015 for Europe's
future knowledge society', September 2009 (the Visby Agenda)
Cisco, 'Hyperconnectivity and the approaching zetabyte era', 2009
Geist, Michael, 'The ACTA Internet Chapter: Putting the Pieces Together'
http://www.michaelgeist.ca/content/view/4510/125
Geist, Michael, 'ACTA Criticism Goes Global'
http://www.michaelgeist.ca/content/view/4534/125
PTS
161
Isberg, D., 'Rise of the stupid network'
http://www.hyperorg.com/misc/stupidnet.html
Wu, T., 'Netneutrality FAQ' http://www.timwu.org/network_neutrality.html
2009-07-1
Olsson, Lars, Teknisk baksyn [Technology hindsight]
http://www.dimea.se/customers/tfOld/old/omtf/baksyn.htm
'Principles for Network Neutrality from USC Annenberg', posted by Xeni
Jardin, 24 March, 2006
http://www.boingboing.net/2006/03/24/principles-for-netwo.html
http://danielrisberg.wordpress.com/2009/04/19/telekompaketet-och-tillagg138/ [Telecom Reform Package and amendment 138]
http://www.erikjosefsson.eu/blogg/2009/04/09/laenken-mellan-hadopi-ochtelekompaketet [Link between HADOPI and the Telecom Reform Package]
http://digitalbritainforum.org.uk/2009/10/the-future-of-copyrightand-p2p/
http://stupid.domain.name/node/889
http://karlsigfrid.se/2009/11/04/acta-utkast-avstangning-och-okat-ansvarfor-internetleverantorer/ [ACTA draft disconnection and increased liability for
Internet service providers]
PTS
162

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