In its SMP decision in May 2019 Post- och telestyrelsen (PTS) designated Telia as the only SMP operator in the Swedish wholesale fibre access market (Market 3A). In consequence, PTS imposed a series of nation-wide remedies on Telia: price control in form of economic replicability test (ERT, a kind of ex ante margin squeeze test) complemented with e.g. non-discrimination, transparency and accounting separation. While PTS separates copper and fibre access to different markets it, however, concludes that the both markets are national. In the Commission’s view, PTS should have put more emphasis on analysing regional differences in the competitive situation, and this is why the Commission put the SMP process on hold on 6 December.
The Swedish fibre access market is exceptionally well-developed: in the end of 2018 a total of 77% of households had access to fibre networks. The figure increases to 88% if we include homes having fibre in close proximity. With these statistics Sweden is among the top countries in the OECD. PTS statistics also show a strong shift from copper-based technologies to fibre; number of FTTH/B connections totals 2.75 million while number of xDSL connections totals not more than 0.55 million. This shift has led to, or is a result of, a structural change in the market. The fibre market is a multi-player market driven by numerous local operators.
Telia is the biggest fibre network owner but only when we focus on national figures. Majority of competing fibre network providers are local, municipality-owned wholesale-only firms, such as Stokab in Stockholm. Number of municipality-owned fibre companies amounts to 180 and these companies can play a very strong role locally. This in turn leads to a situation where market dominance is strongly dependent on geographic market definition. There is a dominant player with a market share higher than 80% in 139 municipalities out of total 290 in Sweden; Telia controls 60 of these while municipality-owned firms control 77. Nationally Telia’s wholesale market share is 37%. In short, PTS focuses on aggregate figures and designates Telia as a national SMP; on the other hand, the Commission recognises the fragmentation of the market and has serious doubts over PTS’s conclusions.
In our view, the Commission addresses an important issue. Technological shift from copper to fibre has opened the access network market to new players and the Swedish municipalities have been active in changing the market setting. They have challenged the former monopoly and by early investments in fibre networks have taken the leading position in most regions. In a way, the dispute between PTS and the Commission tells about challenges that the technological shift poses to regulative analyses; the methods used in analysing copper monopolies may no longer suffice.
The case continues by a review by a Berec expert group. While waiting for the results, PTS puts on hold also the corresponding SMP processes regarding copper access in Market 3A as well as centralized access in 3B.