Fast broadband for jobs and growth across Sweden

Sweden has come a long way in the expansion of broadband. This creates good conditions for a strong position as we enter the digital era. It provides a good basis for business development and growth. It is important for society as a whole, but for rural areas it is a necessity.

Modern digital broadband infrastructure is currently being built in different parts of the country. Major investments are being made, creating jobs, increasing connectivity and giving individuals and businesses access to an ever-expanding digital offer. Most importantly, modern infrastructure gives us access to a digital society that can create new businesses, growth, better and more cost-effective private and public services. IT&Telecom and many others have argued that broadband must be seen as an infrastructure as important as roads, railways and electricity grids. We are not there yet.

During the period 2014-2018, the government has allocated around SEK 5 billion to broadband support. This has been a valuable addition when market players have taken on the more challenging connections in rural areas. But it can also be seen in relation to the infrastructure investment in roads, railways and shipping that the government presented in 2018 totaling SEK 700 billion over ten years.

The effects of digitization

The benefits of broadband grow over time, and they grow the more people have access to it and the fewer who do not. The challenge for rural broadband deployment is that the longest and most remote connections are the most costly. At the same time, they are the ones with the most to gain.

High-speed broadband is also crucial for the development and delivery of future public services. The benefits of broadband are long-term for society and public authorities must make decisions accordingly. It is easy to understand the immediate positive impact of broadband. That is, in the deployment phase when companies plan, build and buy equipment and more and more end customers connect. The indirect effect of the rollout comes when more people use the digital services offered. That is, the broadband connection goes live and more people consume the services. The so-called induced effect occurs when access to new services creates new opportunities and needs that in turn affect behavior and society as a whole. This is the really interesting phase, and this is where the big benefits are, but everyone has to be involved.

Rural areas prevented from joining the digital age

The national broadband targets do not take sufficient account of rural areas and may mean that necessary efforts are not made. We are in the midst of a societal change, but many cannot keep up. Much of society is stuck with old technology that is being phased out, and if the modern technology is not in place, there is a great risk that many will have to settle for inferior alternatives, even worse than what they have today. Either society will have to stick to less developed digital solutions and analog alternatives with unit costs that increase the fewer end users, or society will have to accept a deterioration in services in rural areas. This has costly consequences.

Everyone should join

IT&Telecom companies are convinced that "Everyone must be included" is the goal and that efforts need to be strengthened accordingly. There is a need for a results-oriented plan and action for a faster broadband rollout to everyone.

The government's target of 95% of households and businesses having access to 100 Mbit/s by 2020 can be achieved if densely populated areas reach 100% and sparsely populated areas only 46%. The government has a complementary target of 98% having access to 1 Gbit/s by 2025, but this does not mean connection of the property but broadband in the vicinity, so-called homes passed. This can be achieved with an expansion to 78% in sparsely populated areas, homes passed.

Government targets disadvantage rural areas

Both targets look good from a national perspective but unacceptably disadvantage rural areas. Municipalities and regions have set their own local targets, which in most cases meet or exceed the national targets. We are pleased with the higher level of ambition, as broadband with high speeds is absolutely crucial for favorable social development. However, this expansion will not be possible unless the public and private sectors start working together.

A shared challenge ahead

Market players have a major responsibility for further deployment. The public sector must provide them with the best conditions when deployment is particularly challenging.

Rural areas need to be seen as a shared challenge. Today, fast broadband reaches eight out of ten households and businesses, which is a high proportion from a national perspective. Unfortunately, this is not the case throughout the country; according to PTS's survey, only four out of ten in rural areas have fast broadband.

Rural areas one of the biggest challenges for the digitalization of Sweden

Future investment needs in rural areas are greater than what has been invested so far. There are more people left to connect than those who have, and now it's about the most remote and thus the most costly connections. In June 2018, the OECD highlighted rural deployment as one of the biggest challenges for Sweden's digitalization.

An early deregulated telecom market with high competitive pressure has contributed to extensive investments by market players over many years. Market players, including urban networks, have invested around SEK 54 billion in the expansion of fixed infrastructure over the past six years. New working methods, partnerships and new business models have made more and more areas possible investment targets. Promotional initiatives by national players such as the Broadband Forum and PTS have contributed to a stimulating competitive situation and to regions and municipalities becoming increasingly involved. Broadband support and regional broadband coordinators have also contributed.

The public sector's contribution to an inclusive smart society and further broadband deployment must increase

During the period 2014-2018, the government has allocated around SEK 5 billion through local and regional broadband subsidies. The government grants finance 40-60 percent of the expansion, on average 50 percent, which means that existing support contributes to investments of approximately SEK 10 billion. Assuming an average connection cost of SEK 50,000, the subsidies will contribute to around 200,000 connections in sparsely populated areas, when the build-out is complete. However, more than double that remains in rural areas. For us, it is clear that the public sector's contribution to an inclusive smart society and continued broadband expansion must increase.

42 billion missing

Our calculations show that fiber to everyone who currently lacks 100 Mbit/s would cost about SEK 42 billion, SEK 21 billion of which is needed in rural areas. Given the same situation as in previous support programs, the expansion in urban areas can be taken care of by market forces, in addition, about 20-25 percent of rural areas are built without support. The subsidized development has so far taken place with an average 50/50 split between public and private financing.

What can broadband mean - five municipalities as examples

For many municipalities, broadband in rural areas is an either/or proposition for the future. To illustrate the consequences, we have applied our templates to five municipalities:

Gnesta municipality

• Broadband rolled out throughout the municipality can generate additional tax revenue of SEK 32 million annually and 40-50 more people in employment.
• An extension to everyone in Gnesta's rural areas is estimated to cost SEK 70-90 million.

Berg municipality

• Broadband rolled out throughout the municipality could bring in an additional SEK 20 million in tax revenue annually and another 50-60 jobs.
• An extension to all of Berg's rural areas is estimated to cost SEK 60-80 million.

 Hörby municipality

• Broadband rolled out throughout the municipality could generate additional tax revenues of SEK 50 million annually and an additional 100 people in employment.
• An extension to everyone in Hörby municipality's sparsely populated areas is estimated to cost SEK 110-120 million.

Nordanstig municipality

• Broadband rolled out throughout the municipality can provide additional tax revenue of SEK 34 million annually and an additional 60-70 people in employment.
• An extension to everyone in Nordanstig municipality's sparsely populated areas is estimated to cost SEK 75-90 million.

Uppsala municipality

• Broadband rolled out throughout the municipality could bring in additional tax revenues of SEK 160 million annually and almost 400 additional jobs.
• An extension to all of Uppsala municipality's rural areas is estimated to cost SEK 270-290 million.