The Swedish City Networks: A Wholesale Success Story

The fiber networks of Swedish cities and municipalities are a remarkable success story that traces back to the mid-90s. The 'Swedish concept' emerged when Telia Sonera, the former incumbent telco, ruled the market. At that time, the majority of the population used modem dial-up connections, and only a lucky few with early copper XDSL access could take full advantage of the emerging IT era.

The story behind the Swedish fiber revolution

Today, there are about 170 city or municipality networks in Sweden, of which 90% are owned by the municipalities, collectively owning 50% of the Swedish fiber infrastructure. What's the story behind the Swedish fiber revolution, and can it still inspire other markets struggling to find viable business models?

In short, the Swedish city networks, sometimes called municipality networks, are geographically delimited networks, primarily owned by the municipalities directly or via municipality-owned utility companies. The idea behind city networks has always been to provide service provider-neutral infrastructure. Municipalities provide the infrastructure, while privately-owned commercial service providers offer actual internet, telephony, and IPTV services — the "Swedish wholesale access model."

This model has fostered a variety of smaller and medium-sized retail service providers that can offer their services without making the substantial investments required to build new fiber networks. Increased market competition has benefited Swedish consumers, with over 84% of the population now having access to fiber at some of the lowest prices globally. This has significantly contributed to Sweden's success in producing new IT startups over the last 25 years, including well-known companies like Spotify, Skype, and Klarna.

Reference:
SSNF.org

FTTH - Market panorama 2023

FTTH - Fiberranking 2023 (SE)

Sweden's Commitment to EU's Gigabit Connection Goal

Sweden is committed to the goal set by the European Union in 2022, stating that all citizens should have access to a gigabit connection by 2030. Achieving this requires reaching the large population living in rural areas and "white spots." Municipalities will continue to play a vital role in reaching these goals. In 2023, the Swedish government allocated an additional 3 billion SEK (USD275 million) in funding to the Swedish Post and Telecom Agency (PTS), targeting rural white spots.

The government also recently changed the "locality principle," making it easier for municipalities to expand their networks to nearby areas across municipal borders. This change has been advocated by the Swedish Local Fibre Alliance (SSNf) for many years as a key to reaching up to 150,000 additional residences while increasing the robustness of the infrastructure.

Vallastaden - Linköping

Reference: 
SSNF - Nytt om stadsnäten (SE)

Ny Teknik (SE)

Three main variants of city networks in Sweden differ in their position in the value chain.

The first type only owns the infrastructure, acting as network owners (NO), while the active part of the network is managed by a larger communication operator (CO), such as Global Connect, Telia, or Open Universe. This option is beneficial for the network owner, avoiding the need to invest heavily in all IT infrastructure and staff required to operate the network. The communication operator takes care of wholesale business and the onboarding of retail service providers, often attracting larger ISPs due to their size, enabling a wider selection for end consumers.

The communication provider is selected according to the rules of public procurements. In this model, the network owner still plays a key part in the fiber rollout, and close collaboration is required between both parties to connect new households.

The second type is city networks that also operate the active network themselves. Many municipalities see this as an attractive option, allowing them to take an increased share of the consumer price. Remarkably, many city networks manage to operate the network with only a handful of people, with some having as few as three people working on the BSS/OSS side. This model may be more suitable for medium-sized networks, where the size of the network outweighs the costs of investments in IT infrastructure and systems.

The third type is city networks that also act as retail service providers in their own network, either alone or as a hybrid. This is an exception, as the majority of networks belong to the first or second type. However, there is no definition of city networks; not all are true open-access networks.

Applicability of the Swedish model in other markets and the role of Netadmin Systems

—Can the Swedish model be replicated in other markets? Certainly, there is much to learn from the Swedish approach, even if conditions vary across markets. Importantly, this model is primarily an outcome of political will and decisions. The strategic distribution of national funding between city networks owned by municipalities and commercial operators is a key factor.

The outcomes would be different if the funding were solely directed to commercial operators. Municipalities have the unique characteristic of choosing to deliver to rural areas and white spots that no commercial companies would find economically viable in the short term. Instead, the Swedish model is driven by a philosophy of a more democratic society, providing everyone with equal opportunity to participate in the digital era and enabling companies to grow. To understand this calculation, investments and revenue must be considered for the entire network, taking into account the overall picture of national growth.

This need has been further emphasized after the COVID-19 pandemic, with lockdowns in most counties. For example, I am working from my home office in a rural area on a high-speed fiber connection, in an area of little interest to commercial players. Doing so allows me to contribute to the prosperity of our society. It should also be mentioned that Telia has played a significant role in building open-access infrastructure and made the decision to cancel copper access services following the PTS decision to remove Telia's obligations in this aspect.

Another crucial difference is that competing technologies like higher VDSL speeds and DOCSIS, especially in densely populated areas, have not been as significant an obstacle in Sweden as in other markets. In some markets where national funding is used to overbuild existing infrastructure, convincing consumers to switch to fiber can be challenging. This decreases the incentives for privately owned companies to build, even if nationally funded, because the uptake of customers is initially too low.

Nevertheless, the goals set out by the European Union stand, and public funding will play a vital role in meeting these goals. The Swedish model will become essential with its political decisions to provide everyone with fiber. In this context, the wholesale approach will often be necessary to efficiently address the long-term goals of society with the short-term gains demanded by the service providers.

The Role of Netadmin Systems in the Swedish Wholesale Access Model

Netadmin Systems has played a vital role in supporting the Swedish wholesale access model since 2004. Netadmin has been the dominant BSS/OSS software vendor on the Swedish market, setting standards and ensuring consistency in operating a wholesale business efficiently.

Some of the components delivered by Netadmin include resource management and activation, address and customer management, trouble ticketing, and diagnostics, along with key components for the wholesale business itself. This includes the Open Network API (ON API), offering tools for efficient integration between retail service providers and communication operators.

Netadmin is also a crucial component in the network build-out process, facilitating communication between network owners, communication operators, and retail service providers throughout the process, from planned areas to active service. Especially for the second type of municipalities, where an external communication operator manages the active parts of the network, Netadmin provides tools such as the Network Insight Portal (NIP) that increases transparency for network owners and allows them to play an important role in driving their own build-out process within their network. This, in turn, helps achieve the national and European fiber goals.

Thank you for taking the time to read! - Ulf Engstrand