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More competition means lower FTTH prices according to Swedish study

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Sweden breeds competitors.

Competition drives prices down on open access municipal fiber-to-the-home (FTTH) systems. That’s the conclusion of a study completed by a graduate researcher in Sweden. Ziyi Xiong, a masters candidate at the KTH Institute of Technology in Stockholm, examined data from 290 Swedish municipalities – with and without FTTH service – and found that the cost of a 10 Mbps subscription dropped by about a dollar a month for every service provider on a given fiber network. Five service providers means consumers pay about five dollars less a month.

FTTH systems in Sweden are typically (although not always) built by municipalities. Any provider can lease access to the fiber, install its own electronics and offer service to residents and businesses. Xiong found that the base cost of 10 Mbps service was about $38 per month on FTTH systems. For every competitor added to the system, that price drops by about a buck.

Although at first glance that monthly rate seems significantly cheaper than the $50 or more charged by incumbent carriers for comparable service in California, there’s more to the story. According to the report, homeowners might pay something in the $2,000 to $3,000 range to hook up to the network and apartment tenants typically pay about $7 a month to landlords for a connection. Factor in that connection cost and Swedish prices can still be a bargain, albeit a bit less so.

The study had a broad base of data to worth with – Sweden has the highest FTTH penetration in Europe and one of the highest in the world – and relied on established econometric methodology. It also found that building an FTTH system leads to a modest increase in population growth for a community. Unlike all too many FTTH studies, this one had a well-defined and limited focus. The conclusions were quantitative and specific. And the methodology and results were reviewed by experts who understand the tools.

FTTH studies with this degree of analytical rigor are, unfortunately, rare. We can hope Xiong’s report marks a change for the better.

Modest FTTH growth benefit found in rigorous Swedish study

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Blow fiber, not tumbleweeds.

Fiber-to-the-home (FTTH) systems drive growth in cities by a measurable amount, according to a recent study in Sweden. The analysis was done by Ziyi Xiong, a graduate student at the KTH Royal Institute of Technology in Stockholm.

She crunched demographic and network data from 290 Swedish municipalities, factored out other possible influences, such as the degree of urbanization, and found that increasing fiber availability at workplaces by 10% results in population growth of nearly two-tenths of a percent (.17%). Building residential FTTH systems also leads to population growth, but it takes a 13% increase in fiber penetration to get the same result.

The implication is that going from zero to 100% FTTH availability in a community, rural or urban, would lead to an increase of more than 1% in population. It’s a significant economic development factor for rural communities in Sweden, and elsewhere, that are fighting population decline.

Sweden is the most heavily fibered country in Europe, and near the top of world rankings. That gave Xiong a broader range of data to analyze; FTTH is found in all kinds of communities, not just exceptional ones.

About two-thirds of the population increase comes from people moving into fibered communities, the remainder is due to a higher birthrate. The implication is that better broadband creates jobs that particularly attract younger people who are starting families. Confirmation (or not) of that hypothesis, though, will have to wait. This study did not correlate fiber penetration with employment growth or changes in the mix of jobs available.

Most of the FTTH systems were municipally owned and open access, meaning competitive providers can offer service to residents via the same network. The study did not look at municipal FTTH financial results or try to quantify any economic development benefits beyond population growth. Its limited scope and analytical rigor adds credibility and value to the results, though. Too many FTTH studies try to draw too many conclusions from too little data. Xiong has created a model that, hopefully, will be adopted by future researchers.