More competition means lower FTTH prices according to Swedish study

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.