The Swedish telecoms market has long been associated with prominent companies such as Ericsson, and various successful entrepreneurial ventures. IT usage is extensive, with broadband and mobile penetration levels being among the highest in Europe.
Sweden has also been at the forefront of the legislative field, as one of the first European countries to deregulate the fixed telephony market – and, more recently, by the introduction of functional separation as a new regulatory tool. However, in recent years Sweden has also been subjected to criticism for a lack of competition in certain areas, and the European Commission has brought actions against it on several occasions for failing to comply with the relevant Directives. In this article we will focus on some of the more significant recent developments.
Following years of structural competition problems on the communications services market, in July 2008 the Swedish regulatory authority for electronic communications, the Post and Telecom Agency (PTA), was granted new regulatory powers to impose requirements for the functional separation of a dominant incumbent. The PTA may, as an alternative, approve a voluntary commitment.
Functional separation requires a vertically integrated undertaking to place activities related to the wholesale provision of fixed access products in an independently operating business unit. Although in operational terms separate business entities are created, overall ownership remains unchanged. The purpose of functional separation is to ensure the provision of fully equivalent access products to all downstream operators, including the incumbent operator’s own downstream divisions. This significantly reduces the incumbent operator’s incentive for acting in a discriminatory manner, and thus makes it easier to verify and enforce compliance with non-discrimination obligations.
Soon after the bill was presented, the incumbent operator, TeliaSonera, announced the formation of a distinct business division, to separate the network operations from the wholesale division. However, several operators voiced their suspicions about the veracity of TeliaSonera’s claim, arguing that this “voluntary” measure was just “new paint on old windows” to keep the PTA at bay while continuing to reap the benefits of being a vertically integrated company.
In a recent report the PTA concludes that the distribution of market power remains distorted and that the dark fibre market, among others, still suffers from serious competition problems (see below).
ANTI-PIRACY LAW ENACTED
On 1 April 2009, new legislation entered into force in Sweden, compelling internet service providers to supply information regarding users of an IP address.
Upon request by a rights holder, a court may order internet service providers to disclose personal data tied to IP addresses if there is “probable cause” that a person has infringed intellectual property rights by way of file sharing.
The new legislation implements Directive 2004/48/EC on the enforcement of intellectual property rights. However, the Swedish Council on Legislation, which reviews draft legislation, stated during the consultation procedure that the proposal went beyond the Directive’s requirements. The bill attracted substantial media attention, whereupon the evidentiary requirement of “probable cause” became one of the main issues.
Against this background, the Swedish Parliament decided on a compromise when adopting the new legislation. A court order may still be issued if sufficient evidence is presented indicating that an IP address has been used in connection with infringement. However, an order may only be issued if the court considers it proportionate, taking into account the interest of the rights holder and the privacy rights of the subscriber. The requirement for proportionality therefore means that, in practice, court orders will only be issued in the event of infringements generally deemed to impose significant harm to a rights holder, such as the uploading of files containing music or films, or the extensive downloading of protected material.
However, several service providers have claimed that such personal data is not saved and is thus impossible to deliver (see below).
DATA RETENTION OBLIGATIONS STILL PENDING
As mentioned above, legislation compelling internet service providers to disclose subscriber-related information recently entered into force in Sweden. However, there is currently no obligation on service providers to save customer data (including IP addresses). The implementation of Directive 2006/24/EC on the retention of data is lagging behind in Sweden. Under the current legislation, traffic data must be erased or made anonymous when it is no longer needed for the transmission of communication or for billing purposes.
Consequently, the European Commission brought an action against Sweden requesting a declaration by the European Court of Justice that Sweden had failed to fulfil its obligations under the Directive. Sweden has admitted the claim.
A government report has been published proposing implementation of the Directive on data retention, and it is expected that the government will present a bill to the Swedish Parliament at the end of 2009. The government has not yet presented an official timeline for adoption of the proposed legislation, although it has been suggested that this will come into effect at the beginning of 2010.
SURVEILLANCE OF ALL CROSS-BORDER COMMUNICATIONS
A highly controversial bill allowing surveillance of e-mails and telephone calls in the name of national security was adopted in June 2008, when the Swedish Parliament voted in favour of the new Signal Surveillance Act. This entered into force on 1 January 2009 and entitles the National Defence Radio Establishment (FRA) to intercept cross-border internet and telephone communications, transmitted over air or by wire, for defence intelligence purposes.
For the FRA to obtain such information, all operators that own landlines by which cross-border signals are being transmitted must convey such signals to certain access points, and provide the FRA with certain information regarding the signals.
The Surveillance Act contains several provisions designed to protect individuals’ privacy. Critics have claimed, however, that the Surveillance Act gives the FRA, a civilian agency, more extensive powers than those granted to the police, since the FRA, among other things, will not be obliged to seek a court order before commencing surveillance. Moreover, critics including the Swedish Bar Association have argued that the provisions of the Surveillance Act do not go far enough to safeguard individual rights. Additionally, in 2008 several individuals brought an action before the European Court of Human Rights alleging that the Surveillance Act is insufficiently detailed to meet the requirements under article 8 of the European Convention on Human Rights.
In light of such massive criticism, and following extensive negotiations within the government, amendments to the Surveillance Act were recently adopted to increase privacy protection. Some of the most significant revisions to the Surveillance Act include an obligation for the FRA to seek permission before commencing any surveillance, and the establishment of a special tribunal with powers similar to those of the courts of general jurisdiction to take decisions regarding such permissions. The changes will come into effect on 1 December 2009.
SCOPE OF RIGHT TO APPEAL WIDENED
The EU legal framework for regulating telecommunications services was implemented in Sweden through the Electronic Communications Act (ECA) in 2003. The PTA settles disputes regarding obligations under the ECA between providers of electronic communications services, communications networks or associated services. As of 1 July 2009, the scope of the right of appeal under the ECA has been extended to include a wider range of interested parties, following the European Court of Justice’s judgment in C-426/05. For instance, competitors that are adversely affected by a decision may now challenge it, under certain circumstances. Moreover, the scope of dispute settlement procedures has been clarified to include “disputes in connection with obligations pursuant to the ECA”. This change was in response to a Swedish judgment that held that disputes in connection with obligations pursuant to the ECA (eg, term of contract), did not fall within the scope of dispute settlement procedures. The legislator considered this judgment incompatible with the Framework Directive (2002/21/EC).
SUPREME ADMINISTRATIVE COURT EXCLUDED
Following the enactment of the ECA, during 2004 and 2005, in accordance with the 2003 Commission Recommendation on relevant markets, the PTA identified several product and service markets whose characteristic features were deemed to justify the imposition of obligations on operators. Divergences between the operators regarding, among other things, methods for pricing interconnection charges also gave rise to a large number of disputes which the PTA settled during the same period. Many of the PTA’s decisions were appealed by the operators to the Stockholm Administrative Court, the judgments of which were in turn appealed to the Administrative Court of Appeal and, ultimately, to the Supreme Administrative Court. Many of these disputes were not finally settled until 2008.
To expedite the administration of justice, the number of instances of appeal under the ECA was reduced as of 1 January 2008. In its preparatory stages, the proposed reduction was subject to harsh criticism. Several bodies opposed the change, including the Swedish Council on Legislation as well as the Supreme Administrative Court and the Swedish National Courts Administration. At the same time, several operators argued that the reason for the protracted proceedings was not so much the number of appeals or the number of instances, but rather the fact that the proceedings went very slowly in the lower instances, with turnaround times of up to two years per instance. Nevertheless the bill was approved by the Swedish Parliament, and the Administrative Court of Appeal became the court of final instance for adjudicating cases under the ECA. Moreover, an appeal to the Administrative Court of Appeal requires permission.
Furthermore, the right to adduce new facts and evidence at county administrative courts becomes limited after four months, and new facts or evidence may only be adduced in the Administrative Court of Appeal if exceptional grounds exist.
During 2007 and 2008, the PTA concluded that the market for dark fibre – an important component for high speed transmissions of signals in next generation networks – suffered serious competition problems associated with the wholesale market. At the time, however, the PTA stated that there were indications that the market was moving towards a greater degree of competition, and accordingly the conditions for imposing ex ante regulation were not satisfied.
One year later, as the demand for dark fibre increases, problems still persist – primarily because the Swedish incumbent, TeliaSonera, still owns the largest share of fibre in Sweden, with a network that accounts for almost 50 per cent of the fibre coverage. TeliaSonera’s position in combination with its vertical integration makes it difficult for competition to be established, which entails a significant risk of re-monopolisation of fixed-access networks.
In a recent report, the PTA has established the need for additional measures to promote competition. One such measure is the regulation of TeliaSonera’s fibre network through the imposition of access obligations. A decision is expected on this issue at the end of the year. However, the PTA takes the view that such obligation will still only solve part of the problem.
Publicly owned infrastructure makes up another large chunk of the fibre coverage in Sweden. Consequently, the PTA suggests a national strategy for IT and publicly-owned infrastructure, as well as the improvement of regional and municipal planning for IT infrastructure. Furthermore, municipalities will be required to act in a way that is competition-neutral, and will endeavour to ensure the availability of infrastructure and ducting on base level.
MONOPOLY ON DIGITAL TERRESTRIAL TELEVISION ABOLISHED
Ever since Sweden commenced the shutdown of the analogue terrestrial television broadcasting network in 2005, Sweden has faced criticism from the Commission for not allowing competition in the digital terrestrial network. In late 2006 the Commission brought an action against Sweden in the European Court of Justice for failing to abolish Boxer TV-Access’s monopoly, as required under the Competition Directive (2002/77/EC).
Boxer TV-Access is owned by the incumbent Teracom, a state-owned company, and distributors of digital television content have been forced to engage with Boxer in relation to access services such as decryption and the provision of associated hardware.
Following pressure from the Commission, in late 2007 the government announced the abolition of Boxer’s monopoly on access services as of 1 April 2008 through revised legislation, paving the way for improved competition on the market from distributors that, until then, had been limited to using cable or satellite services.
Under the revised provisions, the technical coordination between distributors shall be resolved by agreements between distributors, and content shall be accessible as far as possible via the same smart card or similar technology. Furthermore, the distributors will have the option of allowing different companies to market subscriptions and provide access services.
However, Teracom has ceased the build-out of the terrestrial network required to facilitate more channels within the network. Moreover, new entrants have so far failed to reach agreements with Boxer regarding technical coordination, and Boxer remains the sole provider of access services.