What we can learn from Sweden: How can the roll-out of true open access fiber networks succeed in Germany?
In his article, Mikael Häußling Löwgren (Swedish Fiber Optic Alliance) describes how regionally located fiber optic providers in Germany can learn from the experiences of Swedish providers and why an open access model is the key to successful FTTH marketing. In a total of three parts, the author discusses the advantages and disadvantages of potential business models for municipal utilities and local FTTH providers and presents these in detail.
Part 3: Which business model suits which municipal utilities?
A local carrier in a large city with several hundred thousand inhabitants in apartment buildings in Sweden does not have the same business model as a local carrier in a medium-sized city (30/40,000 to 150/200,000 inhabitants). The local carriers in even smaller cities have a third business model. In all three models, however, the carriers offer open access, i.e. all service providers are welcome on the same non-discriminatory terms and conditions. The service providers with internet, telephony and other digital products conclude their contracts directly with the end customer and they pay the local carrier an intermediary fee in order to be able to offer their services to customers (see Fig. 4).
Local carriers in large cities
In Stockholm, a city with 976,000 inhabitants, the local carrier is called Stokab and there are over 100 network operators and service providers in its fiber optic network. After more than 25 years of network expansion, the local carrier now reaches 90 percent of apartment buildings, offices and commercial buildings in Stockholm. Its fiber optic network is connected to several national and global hubs. Stokab has almost 400 of its own collocation rooms and 23,000 handover and termination points. Stokab only operates the passive network and offers dark fiber products in two directions: firstly for carriers and service providers, and secondly for the housing industry and commercial customers. It offers network operators and service providers the opportunity to reach almost all private and commercial customers in Stockholm via Stokab, while the housing industry can reach more than 100 network operators and service providers via Stokab’s fiber optic network. To connect an apartment unit to Stokab’s fiber optic network, the housing industry must build a NE4 network in their properties or use an existing one. The network operator, who concludes a contract with the manager/owner from the housing industry, installs its CPE in all apartments. If the housing industry has chosen a network operator that offers Open Access at the level of active wholesale products, the tenants/flat owners can freely choose from all the products of the many service providers. Stokab’s economic success speaks for itself: in 2019, turnover amounted to EUR 80 million and income to EUR 25.4 million. That must be a satisfactory result for the owner, the City of Stockholm.
Local carriers in medium-sized cities
In Linköping, a city with 160,000 inhabitants, the local carrier is called Utsikt. Its fiber optic network has over 20 service providers offering Internet, telephony, IPTV and other digital products. The local carrier currently reaches 65,000 households and businesses in the municipalities of Linköping, Mjölby, Katrineholm and Motala. The number of households in the catchment area with access to fiber optic connections is over 80 percent. Utsikt operates its own fiber optic network, both the active Ethernet with a point-to-point structure (P2P) and the passive network with all passive components. It also offers its open access network – at the level of active wholesale products – in two directions. Its main customers are single-family home owners, the housing industry and commercial customers. In addition, it has its own collocation room where it offers the “telecom operator hotel” service to enable network operators and companies to interconnect and collocate in Linköping. The residential units are connected to Utsikt’s fiber optic network by the carrier installing a CPE in all residential units. In contrast, the building owner builds or uses the NE4 network. In this way, the tenants/apartment owners are connected to the network and can freely choose from products from Utsikt’s 20 connected service providers. The economic success of the local carrier Utsikt speaks for itself: in 2019, turnover amounted to EUR 23 million and earnings to EUR 4.7 million. This should also be a satisfactory result for the owner, the city of Linköping.
Local carriers in small towns
In even smaller cities, it is advisable to have an external partner who operates the active network. The exact threshold above which you should carry out activities yourself depends on the number of inhabitants, population density, topography and other circumstances. There are different findings here, but one empirical value is that it is not worth operating the active network yourself if the population is less than 30,000 to 50,000. In Sweden, the local carriers then turn to private alternatives, platform operators or other local carriers and form a joint venture. The operating costs are shared. In summary, there were two main factors that promoted the roll-out of an open access fiber optic network in Sweden at the level of an active wholesale product: the cooperation of local carriers so that they act as one large, unified marketplace. This created a new market into which network-independent service providers entered in the sense of Internet service providers. The effect: the local carriers built up a new business model. German companies can learn from Sweden and drive forward the rollout of genuine open access fiber optic networks in Germany.
By Mikael Häußling Löwgren, Swedish Fiber Optic Alliance. The original version of this article was published in Cable!vision Europe 02/2021.
The Swedish Fiber Optic Alliance is an initiative of the association “Svenska Stadsnätsföreningen” for the exchange of knowledge on fiber optics between Sweden and Germany. “Svenska Stadsnätsföreningen” is an industry and interest group. Its members are local carriers in almost 200 of Sweden’s 290 municipalities and 135 providers of network services and equipment.
Background to the research: In spring 2020, the Swedish Fiber Alliance and BUGLAS launched a project, a GAP analysis, which compared the business models between the Swedish local carriers and the German local carriers. BUGLAS member company Troiline GmbH was actively involved in the project. The GAP analysis was presented and discussed for BUGLAS member companies in a webbinar.
Mikael Häußling Löwgren is a Swedish telecommunications engineer, economist and chairman of the Swedish Fiber Alliance initiative and has more than 30 years of German-Swedish sales and business experience. For many years he has been involved in the development of the civil fiber optic market in Sweden and Germany. He is therefore very familiar with the topic in both countries, can make profound comparisons and draw appropriate conclusions.
Swedish fiber optic alliance
Mikael Häußling Löwgren
+46 (0) 704 223431
mikael.haussling(at)ssnf.org