Telecompetition : towards a single Nordic market for telecommunication services?

Abstract

The Nordic Working Group on "Competition in the Nordic telecom sector" has examined the telecom markets in Denmark, Finland, Norway, Sweden and Iceland. The purpose of the analysis is to provide recommendations on how to promote competition in the Nordic telecom sector and point at some of the most important problems in a Nordic perspective. The European regulation to promote competition in the European telecom sector has changed the sector dramatically since the beginning of the 1990ies. Public monopolies have been replaced by demand driven markets. Liberalisation combined with fast technological progress has brought considerable welfare benefits.

Telecommunication is of increasing importance to society. Telecommunication revenue as a percentage of GDP has increased considerably across the Nordic countries. In some countries it has doubled during the last decade. Telecommunication revenue constituted from 2.6 percent of GDP in Denmark to 3.4 percent of GDP in Sweden in 2001.

But the telecommunication industry is not only important by virtue of its direct contribution to GDP. The industry is also an important supplier to most other sectors and essential for communication between people. Telecommunication services are thus essential for interaction both between individuals and enterprises within countries and, to an increasing extent, across borders. In a wider perspective, telecommunication facilitates exchange of ideas and culture. And the number of individuals that can benefit from the possibilities offered through telecommunication is increasing as competition pushes down prices for customer equipment and end-user services.

Price comparisons across the Nordic countries indicate that there is room for further price reductions. Average fixed line spending (subscription + usage) for a comparable consumption profile is approximately 40 percent higher in Norway than in Iceland. And Danish high usage mobile customers pay 60 percent less than Swedish customers with a comparable consumption profile. Only part of these price differences is attributable to cost differences. Penetration rates indicate the availability of telecommunication services. Measured by penetration rates, the Nordic countries are among the top performers internationally for fixed line and mobile telephony as well as Internet access, particularly through broadband technologies. Mobile and broadband services have experienced strong growth in recent years. Market liberalisation has been a crucial driver of this development.

Market liberalisation was initiated in the early 1990ies when markets for data transmission and mobile telephony were opened for competition. Liberalisation picked up speed by the end of the last century as fixed line access and voice services were liberalised as well. The current market status is impressive considering the relatively short period of time markets have had to develop on open market conditions. As markets have matured so have consumers. Today, telecommunication services are in many aspects similar to other services or consumer goods.