Stockholm: 19 years of municipal broadband success

The Stokab report should be required reading for all local government officials.

Stockholm is one of the top Internet cities in the world -- how do they do it? Wholesale communication infrastructure in Stockholm is provided by AB Stokab, which is owned by the Stockholm City Council. Stokab leases dark fiber and space in nodes/hubs where customers can install communication equipment and interconnect networks since 1994. Stokab's goal has been to build a competition-neutral infrastructure capable of meeting future communication needs, spurring economic activity, insuring diversity and freedom of choice and minimizing disruption to the city’s streets.

How has it worked out?

Quite well, as you see in the following figure, taken from Stokab's report on the socio-economic cost and benefit of the project:

Accumulated investments and socio-economic
return in million Swedish Kronor.

The returns shown here reflect increased property value, returns of the municipal housing companies (currently breakeven, due to large investments), value for tenants, increased employment, Stokab’s profit, saving for the municipality’s and county’s data and IT costs, and increased economic activity in the supplier industry. To drill down into the details, see the Stokab report summary or the full Stokab report.

The Swedish Telecommunication regulator published a report calling for openness and competition at five Internet service infrastructure levels -- from physical access to land, ducts and spectrum through retail Internet service -- based on the Stockholm experience.

A lesson for the US?

The US needs infrastructure investment -- who will make it? The telephone and cable companies were given a chance, and they've dropped the ball. The Stockholm experience shows the role local government can play. National government's have also been important. The US Federal Government underwrote the research that gave us the Internet and governments like those of Singapore or China have worked as planners and venture capitalists. Home and building owners can also contribute to "last 100 yard" investment.

Singapore's government acts as a planner and venture capitalist.

Given the current US Congress, it is hard to imagine the Federal Government investing in Internet infrastructure, but FCC Chairman Tom Wheeler has praised municipal broadband efforts, wants to fight state laws prohibiting or restricting them and he is currently challenging Tennessee's anti-municipal net law.

In spite of the fact that Wheeler came from the ISP industry, you have to like a guy who says:

If the people, acting through their elected local governments, want to pursue competitive community broadband, they shouldn't be stopped by state laws promoted by cable and telephone companies that don't want that competition.

The situation in the US will not change until the Internet becomes a political issue for the general public and that may be happening -- check out comedian John Oliver's piece on the Internet. Wheeler watched Oliver's piece and responded -- check that out too -- it's funny!

ISP industry lobbyists claim that government involvement interferes with The Market, leading to waste and inefficiency, but in Stockholm, the municipal government has created a competitive market. This story is biased because we can't expect every local government to be as skillful as Stockholm's, but their example is worth considering.

Why is connectivty in Stockholm so much faster and cheaper than in US cities?

We've been discussing US broadband policy and the stimulus package, and this table shows the cost of fiber-based, residential Internet service in several cities (Brough Turner provided the European and Asian data):

Where?	Monthly cost	Uplink (Mbps)	Downlink (Mbps)
Stockholm	$11	100	100
Seoul	$24	100	100
Hong Kong	$35	100	100
Tokyo	$61	100	100
Amsterdam	$127	100	100
Lafayette, LA, Municipal	$58	50	50
Lafayette, LA, Cox Cable	$140	5	50
US, where available, Verizon	$145	20	50

Can we explain the large speed and cost differences?

The Cox Cable offering in Lafayette, Louisiana seems to be the worst deal. It is the slowest and only five dollars a month less than the Verizon network. The municipal network in the same city is faster and cheaper. The Cox network reaches more neighborhoods than the municipal network, and they are forced to compete with temporary sale prices.

Stockholm is at the other extreme. They have a municipal network that reaches every block in the city. Unlike Lafayette, they do not offer consumer service over their fiber, but lease network access to anyone who would like to offer service. The Internet service providers, including incumbent telephone and cable companies, compete on an equal footing.

As a result, there are many competing service providers in Stockholm, and, as Turner points out, the city owns the expensive, long-life assets like fiber, rights of way, conduit, and tunnels, and the service providers own the electronic equipment that is relatively cheap and is upgraded frequently as technology improves.

Many factors determine the cost of Internet connectivity, but the ownership model is significant, and it seems the Stockholm model is superior to those in the US.

Note that analysts at the OECD also endorse the Stockholm ownership model, writing that:

Municipal networks can play an important role in enhancing competition in fibre networks. If these develop, governments should encourage them to be open networks, that is providing dark fibre to service providers rather than becoming themselves service providers. Nor should the existence of a municipal network providing dark fibre mean that investment in other fibre networks in that municipality should be prevented.

Should some of our broadband stimulus funds be used for Stockholm-style municipal networks?

Click here for a paper with more on this topic.

Click here for a PowerPoint presentation on this topic.

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Update 11/10/2014

Stockholm reports 19 years of financial and user success. The Stokab report should be required reading for all local government officials.