New report: Hidden charges on broadband hamper Sweden's digital development
Procurement of broadband services to multi-family properties leads to increased costs for residents and risks slowing down Sweden's digitalization. This is shown in the report "Näthyra - Den osynliga avgiften", produced by Arthur D. Little on behalf of the industry and employer organization TechSverige, in collaboration with Telia, Tele2, Telenor, GlobalConnect and Stadsnätsföreningen.
Sweden has long been at the forefront of broadband deployment and digitalization. Since the turn of the millennium, households across the country have gained access to fast and stable internet, which has fostered innovation and social development. But today, when almost all apartment buildings are connected with fiber, the market has changed - from deployment to management. This raises a problem: procurement of broadband services is increasingly driven by revenue maximization for property owners through so-called network rent, a fee that operators pay to use existing property networks but which ultimately ends up on the consumer's broadband bill.
The report shows that network rent has increased significantly - from previously covering the operation and maintenance of the network to becoming a source of income for property owners, with no link to actual costs.
- Network rent has in many cases become a significant cost component of the end-user broadband price, with no clear link to actual service quality or network costs. Moreover, many are forced to pay twice, both through their broadband bill and through previous rent increases linked to the property's broadband infrastructure," said Martin Glaumann, partner at Arthur D. Little.
Impacting the digitization of society as a whole
The negative effects of rising online rents extend beyond individual households. The report points to several negative consequences for digital development:
- Digital welfare: The digital transformation of the public sector and the ability to provide effective health, social and administrative services depend on households and businesses having access to high-quality connectivity. If more people do not connect to the internet and use digital services, it will make the digital transformation more difficult.
- Stifling innovation: Network development is hampered when tenders reward high network rents rather than quality, security and innovation. Instead of property owners using tenders as a carrot to drive development, they incentivize operators to put all their resources into offering the highest network rent to win the contract.
Time for change
Robert Liljeström, industry policy expert at TechSverige, highlights the problem of unreasonable online rents and the need for change:
- As a trade association and competing suppliers of broadband and fiber networks, we do not have a common proposal for a model for the procurement of broadband to multi-family houses. On the contrary, we see that different models are needed to meet different conditions and needs. However, we agree that the current development, where network rents continue to rise without any connection to actual costs, is harmful both to residents and to Sweden's digital development.
He continues:
- By highlighting and describing the problem and its consequences, we want to contribute to a broader dialogue and change where procurement is used to strengthen the digital opportunities of residents.
Read the report: Online rent - The invisible fee