Swedish government approves functional separation bill

On 18 March 2008, the Swedish government approved the Bill of Functional Separation for Better Broadband Competition. The proposed Act is due to come into force on 1 July this year.

The Bill gives more power to the regulator, PTS, to intervene and ensure TeliaSonera cannot discriminate in providing access to its copper wire network, as Ofcom oversees BT's Openreach structure in the UK.

Full Comment: as we have commented before PTS has not had the power to implement functional separation as Ofcom did. However, the Swedish regulator has taken great interest in BT's separation, which resulted in the creation of Openreach, and for the past year has been suggesting that the Swedish law should be modified to empower PTS to implement functional separation.

As a response to the regulator's proposal, the incumbent, TeliaSonera, voluntarily opened up its broadband network by establishing a new infrastructure company that will cover copper and fibre networks, and multiplexing, and promised to provide services under equal terms.

It seems this is not enough for PTS. In a Broadband Survey it published last February, the regulator concluded that there was still not effective competition in the broadband market, and approximately 106,000 households and businesses did not have access to established or planned wired broadband infrastructure. In the meantime, broadband penetration in Sweden is lagging behind that of its neighbours. According to Point-Topic, Swedish household penetration is at 63%, compared to 73% in Norway and 79% in Denmark, although it is quite high when compared to the European average.

The proposed act will also give TeliaSonera an option for implementing functional separation voluntarily, although this is not likely to happen before PTS' market review, which is due to take place this year. When the new provision becomes effective in July, it is possible that PTS will impose functional separation then. We will keep you posted on the developments.

Charice Wang, Research Analyst