Bumpy road to deregulation much smoother in Sweden

Liberalisation of the telephone industry should be a good thing, but it's understandably hard to accept this when the most visible effect is a series of trenches being dug down recently-resurfaced city streets. Beleaguered motorists and cyclists may be the first to feel the bumpy road to deregulation, but they won't be the last: the current situation whereby new networks mean fresh digging discourages competition and ultimately means we all pay more for less choice when making phone calls.

Perhaps we could learn from what happened in Sweden. The Swedes do not go overboard on business cliches, but if they did they would surely describe their capital city's approach to telecoms fibre-laying as a "win-win" situation. Well ahead of the rest of Europe, the Swedish market was the most liberalised in Europe in 1993 when the Stockholm city authorities set up a single company which now provides underground fibres to the many operators there.

The company, Stokab, is owned by the City of Stockholm and Stockholm County Council, and originally intended to provide an alternative infrastructure using existing public ducts and resources. But seeing the drawbacks of several telecoms companies digging up London's streets following liberalisation there, the company decided against becoming a telecoms operator itself and instead opted to lay a network of so-called "dark fibres" which could then be leased out to the other operators. Now, according to its managing director Mr Anders Comstedt, one of its prime objectives is to avoid digging up city streets.

Dark fibres have no terminating equipment like switches or routers, meaning once rented they can be used for any purpose. Additionally, Stokab's network, with access points on every city block, allows operators to rent their own fibres, without having to worry about what route they take. "The customers don't know where the fibres run," says Mr Comstedt, "and they don't know where their competitors' fibres run."

The company now rents out dark fibre to all of the 20 to 30 operators in Stockholm. These range from Telia, the incumbent which alone had fibres before Stokab was set up, to small Internet service providers or even branches of large banks or insurance companies which want private fibre links to each other. Realising the importance of credibility, Stokab stresses its non-discriminatory policy, and says customers trust it due to its operator-independent ownership.

When Stokab was set up in 1993 it inherited infrastructure from the city council, including 450 kilometres of ducts from the cable television company, and tunnels. "All resources in the ground were pooled into Stokab initially," says Mr Comstedt. Now it boasts more than 600 kilometres of ducting and more than 1,100 kilometres of cable containing more than 100,000 kilometres of fibres. A duct is just a plastic pipe which can contain many cables; each cable can contain many fibres, and each fibre can provide broadband communications.

The high level of investment has meant the company hasn't yet made profits, but Mr Comstedt anticipates profits of £500,000 this year. Last year the company made a loss of nearly £1 million sterling (£1.17 million) from turnover of £7 million, down from a loss of £2.5 million in 1996.

But aside from financial returns, Mr Comstedt stresses the indirect returns. Without the company, he says, there would now be "only one or two minor players, [which] wouldn't be a viable alternative to Telia".

He says no one is laying their own fibres since it is cheaper to rent from Stokab, and that in one dense business area north of the city the incumbent is uniquely smaller than the others combined.

"We have somehow removed competitive advantage of its own network from the incumbent," he says, "and given it to the other players." He says 25 other Swedish municipalities are now doing something similar.

Meanwhile, in the newly-liberalised Republic telecoms companies are laying their own networks at considerable expense. One senior source in the subcontracting industry put the cost of laying fibre from £30 per metre to £300 per metre, depending on the nature of the cable, where it was being laid and other factors. He estimated two-thirds of this cost related to "civil work" the digging and relaying of road surfaces to lay ducts.

Not only does this represent a significant entry barrier to new competition, the repeated road works also represent a considerable cost to Irish towns and cities, in terms of traffic disruption, leading to lost work time, inefficient transport and poor road surfaces. In Dublin, the Corporation's Traffic Division decides when digging takes place. It also rules that contractors need to reinstate roads to the Corporation's standards following digging and that a company digging within a year of resurfacing must pay the full cost of surfacing half the carriageway. However, Mount Street, dug twice since high quality resurfacing was carried out just a year ago, seems to contradict this policy.

It doesn't look likely that Dublin will emulate Stockholm's example of publicly-owned ducting. The Corporation says it is "looking at all options" and has hired consultants to examine the area, but the attitude is that the amount of ducting already in place means the train has already been missed. Mr Tim O'Sullivan, senior engineer in the traffic division, says: "In an ideal world and starting with a brand new city, you would do things that are not possible in an old city like Dublin."

Both Mr O'Sullivan and the Department of Public Enterprise are keen to point out that telecoms companies are encouraged to share underground ducts. This means a company laying ducts should lay spare ones when it digs up a road, allowing competitors to run their own fibres through these later and eliminating the need for further digging.

However, despite a statement last November from the Minister, Ms O'Rourke, that "we no longer have the situation where one company digs up a roadway one month, to be followed by someone else carrying out virtually the same task the following month", a senior subcontractor in Dublin says he knows of nobody laying spare ducts and that duct sharing hasn't happened yet.

Where the carrot fails, enter the stick. The Telecoms Infrastructure Bill currently being drafted will, if enacted, empower local authorities to demand that spare ducts be laid to facilitate sharing. But in practice this would mean telecoms companies relying on competitors' infrastructure, in the process giving away precise knowledge of network details, which is unlikely to be appealing.

Stockholm's dark-fibre solution is more equitable, literally keeping competitors in the dark. In doing so it has ensured two surfaces are more level: the playing field of telecoms competition and the city streets.

Eoin Licken is at elicken@irish-times.ie