Sweden's Telco Monopoly Turns to Internet

Losing market share for the first time, Telia goes on-line

STOCKHOLM -- Any company can start a telecom business in Sweden, as long as it obtains a license, which is a mere formality. It's the most relaxed telecom regulatory structure in the world. But the government-owned monopoly, Telia, has long been the only operator in town. Facing market share loss for the first time since new laws were passed three years ago, Telia sees the future in one word: Internet.

New telecom legislation took effect in Sweden in July 1993 and the country is just now seeing its effect. The laws reorganized Televerket, the government telecom monopoly, into Telia AB, a state-owned company. The philosophy was to separate the regulatory structure from the services and infrastructure arm.

As a result, the market is open and Telia runs 91 percent, rather than 100 percent, of telecom operations in Sweden. Losing its lock on that core business, Telia is branching out into what it sees as the next huge market. Much like telcos in the United States, Telia is aggressively moving into the on-line world.

"The Internet market will grow five or six times as fast as mobile phones ever did," said Kerstin Ahlberg, vice president of Telia InfoMedia Interactive. Ahlberg is in charge of several new Internet efforts at Telia.

Part of Telia's plan involves embedding Internet Protocol throughout telephone lines, with the goal of eventually replacing traditional systems with IP networks. Customers would get a voice service similar to telephone, Internet, video-on-demand and electronic shopping.

That means Telia would be the single source for the entire country's communications needs. "People would like to see one invoice," said Ahlberg. In the United States, companies are now offering one-stop shopping for many communications services -- local, long distance, Internet, mobile.

Telia executives are also taking on the problem of speed on the Internet -- the lack of bandwidth -- that drives people crazy. Making electronic access to data and graphics part of everyday life will not work if calling up an image or sending e-mail takes too long. So Telia has just launched trials of "Broadway," a project to bring broadband Internet access to the household and business. By addressing this issue head-on, Telia hopes to beat small Internet service providers that are only as fast as their weakest link, which could be the modem in an office or a transfer point along a network.

Another program, Telia's Internet Marketplace, began beta tests last month and should be introduced to customers in the fall. This program is a combination of electronic shopping, information and chat lines written in Swedish. Although most World Wide Web sites are in English, more and more countries are creating sites in native tongues. The Marketplace program seeks to capitalize on this trend.

Telia is targeting 15- to 30-year-old customers because they are expected to buy the most products over the Internet. Market studies show this group is shunning fixed-line telephones. "The young people don't buy a traditional telephone," said Ahlberg.

Many people in Sweden rely more on mobile phones than the phones in their kitchens. The average Nordic family has two wired phones, and each person in the household has a mobile phone. But since Telia is the primary operator for both kinds of service, it is only benefiting from the wireless boom.

While annual revenue growth for fixed-line calls through Telia fell from 6.7 percent in 1991 to 1.1 percent in 1995, growth in mobile phone revenues jumped from 14 percent in 1991 to 37.5 percent in 1995.

Just in case computers aren't the wave of the future, Telia has also launched an interactive TV counterpart in alliance with Apple Computer Corp., Cupertino, Calif. The project, along with a trial underway in the United Kingdom by British Telecommunications, is one of the first in Europe. Telia's interactive TV program uses asymmetrical digital subscriber line, a fast technology that telecom companies in the United States are expected to use in Internet offerings.

Niklas Rosell, Telia's project manager for the interactive TV effort, predicts the product will have 100,000 customers in the next two years. Still, electronic shopping, which is not yet a success in the United States, may be an even harder sell in Sweden - where people don't even give their credit card numbers over the phone.

Like most countries, Sweden is starting to address the question of how to control the Internet without killing freedom of expression. "There are those who would like to see formal regulation of the Internet [in Sweden]," said Curt Andersson, deputy director general of the Post and Telecom Agency, the country's telecom regulatory arm. Right now, he said, government sees Internet as a private business. That might change if, for example, certain laws protecting personal data are broken.

More immediately, Sweden's competitive atmosphere is giving the agency a lot of new work. Andersson said a major problem lies in negotiating interconnection deals between Telia and its new competitors. The deals are needed so telecom operators can reach customers in each other's networks. Telia now has seven companies, including Tele2 AB, Telenordia and MFS Communications AB, competing for leased-line market share.

Telecom partnerships are becoming more important in Europe as competition heats up. And as of July, the European telecom market will be liberalized. All services except fixed telephony will be permitted through networks other than the national telecom company's.

Telia has allied itself with Unisource, which also includes partners PTT Telecom Netherlands, Swiss Telecom PTT and Telefonica, Spain. Last year, AT&T formed a partnership with Unisource to connect European business customers to the United States. The strongest competitors to Unisource in the European market are Concert, an alliance between MCI and British Telecommunications, and Global One, a joint venture of Sprint, Deutsche Telekom and France Telecom.

An increasing percentage of investments will be made overseas, according to Telia strategy, suggesting that Internet and the international market will be its two primary areas of focus in the coming years.

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