TABLE OF CONTENTS

 

1. INTRODUCTION *

1.1 Key Issues of Finnish Access Market *

3. MAJOR PLAYERS ON THE FINNISH MARKET *

3.1 xDSL Equipment Manufacturers *

3.1.1 Oy L M Ericsson Ab *

3.1.2 Motorola *

3.1.3 Nokia *

3.2 Fast Network Access Providers *

3.2.1 Finnet Group and Helsinki Telephone Company *

3.2.2 Telecom Finland Oy *

3.2.3 Telivo *

4. FINANCIAL ASPECTS CONCERNING ACCESS PROVIDERS *

4.1. Internet Service Providers *

5. MARKET TRENDS AND COMPETITIVE DYNAMICS *

5.1 The size and the growth rate of the market *

5.2 Competition in the Finnish xDSL Market *

5.3 Legal and Regulatory Issues *

6. TECHNICAL DEVELOPMENTS AFFECTING XDSL MARKET IN FINLAND *

6.1 xDSL versus other access technologies *

6.1.1 Analog modem *

6.1.2 ISDN *

6.1.3 Cable *

6.1.4 Fibre *

6.1.5 Wireless Digital TV *

6.1.6 Terrestrial Digital TV *

6.1.7 Satellite networks *

7. SWOT ANALYSIS OF XDSL TECHNOLOGIES IN THE FINNISH MARKET *

8. CONCLUSIONS *

 

 

1. INTRODUCTION

 

The incredibly rapid boom of the Internet use, development of on-demand services and multimedia applications have forced the telecommunications industry to create solutions to increase bandwidth and provide faster access to various networks, enabling more efficient use of various applications. In Finland, the customer segments, who are longing for faster and more reliable access, include residential Internet heavy-users, large businesses with branch offices and telecommuters. At the moment, solutions provided for those customers are analog modems, ISDN and cable modems. However, in the near future, a new technology, namely xDSL, is likely to replace the existing ones. This report provides an analysis of the potentiality of xDSL in the Finnish market. The viewpoint of the analysis will be that of telephone operators and equipment manufacturers.

 

1.1 Key Issues of Finnish Access Market

 

In Finland, the number of telephone lines is fairly high: according to OECD, there are 55 telephone lines per 100 people. The existing copper twisted-pair network is optimal for xDSL technology, which does not require expensive infrastructure upgrading as e.g. cable network.

 

ISDN is already available and it provides adequate access with its 128 kbps data rate. However, the number of ISDN connections is still quite low: according to Statistics Finland, there were 5,962 basic rate ISDN connections (2B+D) and 454 primary rate ISDN connections ( 30 B+D) in Finland in 1995. The cable TV penetration, on the other hand, is fairly low, covering only 40 % of Finnish households.

 

The Finnish telecommunications market is among the most liberalised in Europe. In Finland, the telecommunications operations have been gradually opened to competition since 1985 and the latest Telecommunications Market Act is from 1997.

 

Finland, known for its innovative touch to technological development and early utilisation of technical advances, will be one of the major players in the sharp global competition in the 21st century, too. Taking this into account, it is likely to be one of the first ones to utilise the new xDSL technology.

 

The demand for high speed access is not very high yet, because there is not enough content requiring high-speed connections. For example, Video-on-Demand is a service for which xDSL would be a perfect access technology. Furthermore, where xDSL would make a big difference for videoconferencing. According to Tietoviikko, the market size of videoconferencing equipment is currently FIM 15 million and growing rapidly.

2. MARKET DEFINITION

The Finnish market structure of xDSL can be seen in the figure below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As can be seen from Figure 1.,Finnish market for xDSL can be divided into three major parts. Equipment manufacturers enable operators (Internet Service Providers, teleoperators, both Local Exchange Carriers and Inter-exchange carriers, as well as Competitive Access Providers, to provide their customers with xDSL. End-users can be divided as follows: large companies with branch offices, telecommuters, residential users, and small business/home offices (SOHOs). The analysis of this report concentrates on the operators, as the technology, at the moment, is push oriented - the manufactures are the origin of the market push.

 

3. MAJOR PLAYERS ON THE FINNISH MARKET

 

The major players in the field of fast access technology in Finland can be divided in two groups: equipment manufacturers and access providers. This chapter describes briefly the major xDSL equipment manufacturers and the network access providers in the Finnish market.

3.1 xDSL Equipment Manufacturers

3.1.1 Oy L M Ericsson Ab

Ericsson Finland is one of the most important R&D centres of the Sweden based Ericsson Group. Approximately 600 people are working in product development, which is targeted mainly at the global market. In addition, the unit conducts basic and applied telecommunications research, often in co-operation with customers. The most important R&D areas are Internet solutions, signalling, and mobile systems.

 

Ericsson offers Finnish operators products as well as services for developing and expanding fixed public and mobile networks. These products include exchanges, transmission technology, intelligent network services and network management systems.

 

Ericsson has launched a product line called Cobra (Copper Broadband Access) and is now offering a range of products for business and home mainly based on ADSL technology.

 

The main strength of Ericsson in Finland is that it has a subsidiary located in Finland and thus, an established position in the Finnish telecommunications market. Ericsson has good relations with major Finnish telephone operators.

 

The main weakness of Ericsson might be that it has mainly concentrated on ADSL, even though other xDSL technologies could be deployed more easily in Finland.

3.1.2 Motorola

The US based Motorola is one of the world's leading providers of wireless communications, semiconductors and advanced electronic systems, components and services. Major equipment businesses include cellular telephone, two-way radio, paging and data communications, personal communications, automotive, defence and space electronics and computers. Motorola manufactures semiconductors power communication devices, computers and several products.

 

Motorola has introduced a full ADSL product line called CopperGold.

 

Motorola's strength is its size. It has large turnover and substantial profits, and thus it has an ability to take risks. Motorola's main weakness, on the other hand, might be its lack of knowledge of the Finnish market. In addition, it has no subsidiaries located in Finland.

3.1.3 Nokia

The Finnish Nokia is a leading international telecommunications group. Nokia is strongly positioned in all key growth areas of the telecommunication business, such as network solutions for the telecommunications industry, and it continuously expands its market share. Nokia runs focused R&D programs in Europe, Asia-Pacific and the United States.

 

Nokia has not published any information concerning the deployment of xDSL products, but according to Helsinki Telephone Company, Nokia is supplying xDSL technology, namely ADSL and HDSL, for their Helsinki Arena 2000 multimedia service (see more below in the HPY section). The Information Networking Systems division of Nokia's telecommunications unit develops, implements and markets Internet-technology based systems for telecommunications operators.

 

Nokia is a Finnish company, which certainly is strength in the Finnish market. However, Nokia's weakness is that it has not yet launched any xDSL products, whereas its competitors have.

 

Table 1 presents some key financial aspects regarding the three xDSL technology manufacturers.

 

Table 1. Key Financial Figures of Three major Equipment Manufaturers

COMPANY

TURNOVER FIM MILLION

NET PROFIT FIM MILLION

PERSONNEL

ROI %

EQUITY TO TOTAL ASSETS

INVESTMENT IN CAPITAL ASSETS

INVESTMENT IN R&D

Ericsson *

84 488

4 834

93 949

22,4

39,1

4 887

11 876

Nokia

39 321

3 263

31 766

22,7

48,4

3 058

3 514

Motorola *2

129 789

5 354

139 000

8,4

NA *3

13 794

11 108

*FIM=SEK 0.6799

*2 FIM=USD 4,6398

*3 Motorola's per cent of net debt to net debt plus equity is 13,4 %.

 

The three companies are already competitors in other fields of telecommunications industries (e.g. mobile phones) in Finland as in other countries. Although Motorola clearly is the biggest one of them, they are nevertheless all quite similar in many ways. For example, they all operate in several countries around the world and in several fields of telecommunications industries, they are all quoted in Stock Exchange in their home countries, and none of them have any rules on foreign ownership.

 

3.2 Fast Network Access Providers

3.2.1 Finnet Group and Helsinki Telephone Company

The Finnet Group is a consortium, comprising of 46 private local telephone companies owned by their customers. The Group has expertise in the entire range of telecom services, from the fixed network through data services to mobile telephony. The global dimension in operations is guaranteed by co-operative agreements signed with leading international operators.

 

Helsinki Telephone Company (HPY) is the largest local private telephone company in Finland and forms a cornerstone of the Finnet Group. HPY owns about 25% of the Finnish subscriber lines, and in Helsinki area their market share is around 90%.

 

HPY has initiated Helsinki Arena 2000 consortium project in collaboration with the City of Helsinki. The project aims at developing a Virtual Helsinki into the Cyberspace and the project has received a widespread support of business and public organisations. As already mentioned, Helsinki Arena 2000 multimedia network will be integrated by HPY to public telephone line with xDSL technology supplied by Nokia and also with ISDN. HPY is targeting ADSL and HDSL technologies for both small and medium sized companies and residential users.

 

According to Risto Linturi, technology manager of the Helsinki Telephone Company, HPY expects to have about 10,000 xDSL users within their network area by the year 2000. These potential customers will include households requiring high-speed connections as well as enterprise telecommuters.

 

HPY has also participated in a Diamond research project of the RACE program funded by the European Commission. Purpose of the project was to test video program transmitting via telephone lines with ADSL technology. Families taking part in the field trial could use remote control and screen menu facilities to select video programs, which are then transmitted to the family television set via the telephone line. Viewers could rewind or stop the video the same way as a normal video cassette. The phone itself could be used as normal for outgoing and incoming calls during viewing. According to interviews, 80% of test users wanted to get the service, when it is commercially available. Naturally, they required that the service would be reasonably priced, and the number of services provided by the system would be large. Furthermore, the field trial was successful from the technical point of view. Further investigation and trials will be conducted to collect more experiences from the field.

 

HPY as well as the entire Finnet Group own 70 % of the access lines, which is its major strength. Minor weakness of Finnet Group is that it does not have wide international connections. In addition, HPY has invested fairly heavily in ISDN and might wish to defer deployment of xDSL if possible.

3.2.2 Telecom Finland Oy

Telecom Finland, the country's largest telecommunications company, is owned by the State of Finland. It is the leading operator in the market (mobile, wireline, etc.), holding over 50% market share of all telecommunications and over 60% of corporate communications.

 

Telecom Finland is currently researching the potentiality of xDSL technologies. However, it has already invested in cable network. In September 1996, Telecom Finland was the first in the world to bring fast Internet services for households: the cable TV households in the city of Lappeenranta can subscribe to the cable data service and get data transmissions at a speed of 4 Mbit/s. This has been a very interesting service For Internet heavy users. Moreover, the transmission capacity makes the use of interactive and multimedia services easier and far more enjoyable. And it also leaves the telephone line free.

 

Telecom Finland provides European cable operators with the whole concept of cable data based services including fast Internet and local server with related content. They also provide customer service, subscriber management systems and marketing support.

 

Telecom Finland has the strength of being the leading telephone operator. However, Telecom Finland owns only 30 % of the local loops.

 

3.2.3 Telivo

Telivo is an inter-exchange carrier owned by Swedish telecommunications operator Telia AB (75%) and Finnish power company Imatran Voima (IVO) Group (25%). It offers telecommunications products and services to private users and companies. Telivo's market share is 5% of domestic calls and 11% of international calls respectively.

 

Telivo also is conducting research on xDSL as well as running trials and pilots in Sweden. Vesa Ruokonen from Telivo Finland believes that xDSL will be launched in Finland in a couple of years if access to local loops is granted.

 

Telivo's strength is that it has not yet made any investments in ISDN or cable access, and its major weakness is that it currently has no access to local loops.

 

4. FINANCIAL ASPECTS CONCERNING ACCESS PROVIDERS

 

This chapter presents some key financial information. The figures are based on the companiesí 1996 Annual Reports.

 

Telecom Finland is clearly the leading telephone operator in Finland. Its turnover totaled FIM 6,421 million, whereas the turnover of the Finnet Group (which consists of 46 regional phone companies) was FIM 5,120 million. However, most Finnet companies are very small: the turnover of the biggest Finnet company and Finland's second biggest telephone company, Helsinki Telephone Company, amounted to FIM 2 695,7 million and the turnovers of the rest of the Finnet companies are well below FIM 400 million. Telivo's turnover and its market share are quite small. Telivo can, however, become an important competitor for Telecom Finland and for Finnet companies in the local access market, as it is already well established in Finland.

 

Since most of the Finnet Group companies have a turnover of FIM few hundred million or considerably less, it is supposed that they do not invest heavily in R&D. Thus, there are only two Finnish companies conducting research and development activities; Telecom Finland and HPY.

 

Table 2. Key Figures of the Major Operators

COMPANY

TURNOVER

FIM MILLION

NET PROFIT

FIM MILLION

PERSONNEL

ROI %

EQUITY TO TOTAL ASSETS

INVESTMENT

IN CAPITAL

ASSETS

R&D INVESTMENT

Telecom Finland Oy

6 421,1

331,1

7 362

16

60,5

2 396,8

192,5

Telivo

138,8

6,9

NA

5

28

NA

NA

Finnet Group

5 120,0

NA

9 100

NA

NA

NA

NA

Helsinki Telephone Company*

2 695,7

51

3 553

6,4

52

585,9

46,8

Tampereen Puhelino-

suuskunta*

395,3

20,1

683

NA

NA

141,1

NA

Keski-Suomen Puhelin Oy*

107,4

2,4

196

NA

80,4

31,0

NA

* belongs to the Finnet Group

 

4.1. Internet Service Providers

 

There are two major Internet Service Providers in Finland: Finland based Scifi and Eunet, a subsidiary of the multinational Eunet International. There is no data available concerning their market shares or financial positions, and thus, they are excluded from this analysis.

 

5. MARKET TRENDS AND COMPETITIVE DYNAMICS

 

Technological advances in and increased utilization of telecommunications and information technology have had a significant impact on business operations. Increased networking has required further training and investments on information technology and telecommunications networks. For example, some of the advertising agencies use the Internet as a part of the normal planning, and they implement it either themselves or through partnership companies. A great deal of the agencies have established their own companies to carry out digital communications.

 

In recent years, new media industry has become the fastest growing industry in Finland. It is estimated that the net sales of new media companies will double in 1997, totalling to almost FIM 500 million. At the moment, there are about 300 new media companies operating in Finland, which are mainly content producers for digital media and information networks. Characteristics of the new media industry are the small size of companies, rapid growth (375% in 1995-1995) and annual net sales of less than FIM 2 million. The strengths of the Finnish new media industry can be found in the technical know-how, strong infrastructure and the flexibility of companies due to their small size. New markets will open up for the new media companies, as the problems of the electronic money, standardisation and security, are solved. New media industry will undoubtedly become a major competitor to the traditional TV, movie and video production.

 

There are only few companies licensing the technology needed in xDSL products. Companies involved in the xDSL development can be divided into the following categories: semiconductor companies, modem suppliers, access network suppliers, network/service providers and consultants. Due to the availability of various technical applications and marketís early stage, a lot of emphasis has to be concentrated on customersí easy access to new technology. Thus, many companies are co-operating and forming strategic alliances across categories.

 

5.1 The size and the growth rate of the market

 

The exact size of the xDSL market in Finland is not known, since the technology has not yet been commercially launched. However, it is possible to estimate the potential growth by considering the substantial growth figures of telecommunications sector.

As already pointed out in Section 1.1 the number of telephone lines is fairly high in Finland: according to OECD, there are approximately 2,8 million telephone lines, thus, in the long run, the theoretical market size for xDSL is 2,8 million subscribers.

 

Accordingly, the penetration of PCs in 1995 was 25 per 100 people and, in 1995, there were 9 modems per 100 people. Thus, the size of the access line market is approximately 1,4 million subscribers.

 

Moreover, the number of Internet hosts was 62 per 1,000 people in January 1997. Internet usage has grown extremely rapidly during the past two years: at the end of 1996, 419,000 Finns used Internet at least once a week. Hence, it can be expected that the demand for access lines and faster access in particular increases in the future.

 

The penetration of VCRs in 1995 was 61 %. On the average, only 12 % of Finns used their VCR daily in 1995. Thus, it seems that is not so common to rent video cassettes or to record movies and series from TV for later preview in Finland. Hence, it could be interpreted that there would be strong demand for VOD in the future.

 

5.2 Competition in the Finnish xDSL Market

 

The following figure (see next page), with empasis on the operators, presents the five competitive forces affecting xDSL market in Finland. Moreover, it higlights the key issues which will shape the future competition.

 

At the moment, the market is technically developed and there are not many content providers. Thus, the market is push-oriented. However, in the near future, when the number of services and applications requiring high speed connections increases the market is moving towards pull-orientation.

 

Figure 2. Five competitive forces in the xDSL market in Finland.

 

Entry Barriers Rivalry Determinations

-Copper twisted-pair lines -Different business strategies

owned by few companies New Entrants -Co-operation

-Existing co-operation -Lack of standards

agreements -Brand competition

-Lack of standards -International experience

-Users bound to local

telcos

xDSL

operator market in

Finland



Suppliers Buyers

Determinants of Supplier Determinants of Buyer

Power Power

-Price levels -Price vs. need

-Different xDSL standards -Need for content

-Differentiation of products -Charging model

-Existing co-operation -Brand identity

-Experience on international fields -Technical awareness

-High level to reinvest in -Early utilisation of new

access technologies technology

Substitutes

 

Determinants of Substitution Threat

-ISDN, existing technology

-ISDN, adequate performance with lower price

-Cable, good performance

-Cable, no distance limitations

 

5.3 Legal and Regulatory Issues

 

The legal and regulatory issues concerning to xDSL technologies and their deployment relate very closely to those of telecommunications industry.

 

In Finland, liberalization of the telecommunications industries began in the 1980s. The last step in the liberalization process was taken in 1996, as the local call markets were opened up to competition. As a result, there is a lot of competition in all sectors of the Finnish telecommunications market with the exception of the local access sector. The 46 regional phone companies, which each operate in a different city or region, hold monopolies in their operating areas. However, competition in local access markets has potential to increase in the future. Network operators have obligation to lease free sections of the network to all telecommunications companies on impartial and reasonable conditions independent of the service to be provided. Nevertheless, the local companies are well established in the operating areas and supposedly people especially in rural areas prefer local businesses. Therefore, the competition in local access is not bound to increase as much as it has in other sectors of Finnish telecommunications industry.

 

6. TECHNICAL DEVELOPMENTS AFFECTING XDSL MARKET IN FINLAND

 

The need for high speed, digital broadband access lines is going to increase substantially in the near future due the increasing deployment of multimedia applications, which is facilitated by developments in terminal and Internet related technologies:

 

It has been estimated that PCs capable of handling high quality multimedia applications will be available to consumers by the beginning of the next century. Such a PC would have a processor speed of hundreds or thousands of MIPS, several hundreds of MB memory and mass memory of dozens of GBs.

 

New types of terminals are also being developed: for example, inexpensive networked terminals will probably expand the market for Internet access as they will be affordable to a larger number of consumers than traditional PCs. In addition, Internet usage and the demand for residential Internet access is expected to grow substantially, as businesses start to offer more on-line services and deploy Electronic Payment Systems (EPS).

 

Currently, Internet data rates are mainly 45 Mbps. However, data rates of 155 Mbps and 622 Mbps are already deployed in some parts of the network and they will become common in the near future. Moreover, fast routers and switches are under development, and their deployment will remove most of the volume based bottlenecks of the Internet backbone. Thus, the need for high-speed access lines will increase, as slow data rate local loops remain as the major bottlenecks.

 

6.1 xDSL versus other access technologies

 

This section describes xDSL technology in terms of other access technologies and deals with the strategic gains xDSL can generate.

 

6.1.1 Analog modem

The data rate of xDSL line is up to 51.84 Mbps (VDSL), whereas the data rate of the fastest existing analog modem is up to 56.6kbps. Compared to analog modem xDSL provides more possibilities for network content providers to create new services due to the high speed of xDSL in transferring data. Considering analog modem versus ISDN, some ISPs prefer high-speed analog modems that can be installed without the local telco supporting the service contrary to ISDN.

 

6.1.2 ISDN

As the number of ISDN connections have risen drastically in the past few years, it can be assumed that the need for high-speed access exists. There have been some problems concerning the implementation of the ISDN technology. Accordingly, there have been rumours that Telecom Finland would skip the whole ISDN and instead concentrate on xDSL and solutions based on cable. As can be seen from Table 3. and Figure 3. below, Tele is pricing its ISDN connection well above its competitors. The difference in pricing might be due to hard competition in urban Helsinki area where HPY operates.

 

Table 3. ISDN Pricing

HPY

TELE

Subscription

450

610

Monthly fee

60

85

Total cost/month

197

271

 

 

Figure 3. ISDN Pricing

 

Moreover, not all Internet Service Providers offer ISDN access, even though the local telephony company would provide ISDN. Although the Finnish telecom market is highly developed, the number of ISDN connections is still quite low: according to Statistics Finland, there were 5,962 basic rate ISDN connections (2B+D) and 454 primary rate ISDN connections (30B+D) in Finland in 1995. Figure 4, presents the development in the number of ISDN connections from 1993 to 1995. Despite the set-up problems ISDN has faced, the growth of the market has been remarkable.

 

Figure 4. Total Number of ISDN Connections

 

 

 

Source: Liikenneministeriö, Televiestintäyksikkö, http://www.vn.fi/vho/tilast1.htm

 

6.1.3 Cable

Currently, there are approximately 820,000 cable connections in Finland, which means that 42 % of all Finnish households have cable TV. The cable TV operators are converting their networks into bidirectional. Thus, in the future, cable TV network will be suitable for high speed asymmetric data transmission (downstream 4-40 Mbps and upstream 20 kbps-2 Mbps depending on the amount of users at a given time). However, the low penetration of cable connections is bound to limit the deployment of cable based access solutions. Furthermore, the cable TV networks are mainly owned by the regional phone companies, who do not seem to have an incentive to invest in cable based access solutions. However, Telecom Finland is interested in cable TV based access solutions as their share of the local loops is low.

 

6.1.4 Fibre

Certainly, fibre optic is the way of transferring data in the future, but it is still too expensive to install everywhere. On the contrary, in order to create a connection with xDSL modem, the whole neighbourhood does not have to be cabled with fibre optics.

 

6.1.5 Wireless Digital TV

Wireless digital TV networks is capable of providing very high data rates. However, the equipment required for upstream transmission are very expensive and will be out of the reach of consumers for several years. Thus, the applications suitable for wireless digital TV networks will be ones that demand data transmission only downstream or that allow upstream transmission to be done through telephone networks.

 

6.1.6 Terrestrial Digital TV

Terrestrial digital TV networks could also provide high speed data transmission. Nevertheless, the digitization of TV networks will begin only in 1998-1999 and hence, it is estimated that majority of Finnish households will have digital TV by the year 2004.

 

6.1.7 Satellite networks

The cost of deploying satellite networks make prices relatively high compared with terrestrial options. Moreover, a satellite loop is not meant for replacing the existing local loops, but should be seen as complementary to mobile local loops. Approximately 160,000 Finnish households had a satellite antenna in 1995; i.e. the penetration of satellite TV was 10 % of all households.

 

Table 4. compares various access techonologies in terms of traffic, speed, connection and availability. Table 5 (see next page), on the other hand, presents a comparison between Finland and the EU in terms of different access technologies.

 

Table 4. Comparison of Different Access Technologies

Voice/data

Media

Speed

Traffic flow

Connection

Availability

ADSL

Data (incl.

Voice)

Copper pair

1.544 mbps (T1) to 9 mbps downstream; 16 to 640 kbps upstream

Asymmetric

Point-to-point

Limited

Cable modems

Data

Coaxial cable

500 kbps to 30 mbps downstream; 640 kbps to 15 Mbps upstream

Both

Point-to-point

Limited

HDSL

Data (incl.

Voice)

Copper pair

384 kbps to 1.544 mbps (T1)

Symmetric

Point-to-point

Limited

ISDN

Both

Copper pair

128 kbps

Symmetric

Switched

Nationwide

 

 

Table 5. Comparison Access Technologies in Finland and the EU

 

Finland

 

EU

 
 

Date

Data

Min.

Max.

Households

1994

2004

0,15

95,6

TV households

1994

1960

0,15

95,6

PSTN

       

% main lines/

households

1994

139%

109%

157%

% digital main lines

1994

76,7%

31%

100%

ISDN

       

Number of basic access connections

1994

1100

200

710000

Date of Euro-ISDN 100% availability

Jan. 1997

 

Jan. 1994

> 1997

Cable networks

       

% homes passed/

TV households

1994

66,3%

<1%

100%

% homes connected/

TV households

1994

40,8%

<1%

95,15%

% subscriber homes/ homes passed

1994

61,5%

<1%

95,84%

Source: Infrastructure profile, http://www.idate.fr/actu/bids/BIDS-Finland.htm

 

7. SWOT ANALYSIS OF XDSL TECHNOLOGIES IN THE FINNISH MARKET

 

Table 6. SWOT Analysis of the xDSL

STRENGTHS

WEAKNESSES

  • can be deployed over existing network infrastructure
  • does not require switch upgrades
  • can be rolled out subscriber-by-subscriber on demand
  • data streams are routed to the Internet backbone at the closest telephone exchange
  • high data privacy
  • each xDSL technology has different characteristics, and the most suitable technology can be chosen for each application/subscriber
  • expensive, at the moment at least
  • can not be deployed on copper wires longer than 4 Km
  • lack of standardisation slows down deployment

 

 

 

 

 

 

 

 

OPPORTUNITIES

THREATHS

  • Finns are usually very fast investing in and deploying new technologies
  • new applications and services (VOD, on-line services) can be created
  • new terminals and more powerful PCs are being developed
  • telephone companies already have comprehensive infrastructure to address customer support, billing and installation
  • telephone companies are required to lease free sections of their network to all telecommunications companies
  • lack of standardisation prevents becoming popular
  • number of content providers is still low
  • Telecom Finland is investing heavily in cable modems
  • private telephone companies and some user companies have invested in ISDN
  • Internet backbone is not yet accessible at every telephone exchange
  • length of the copper lines in some locations exceeds 4 Km

 

8. CONCLUSIONS

 

Although xDSL is one of the most promising alternatives for remote access, it will not immediately replace competing access technologies. At the moment, it is still quite difficult to estimate the size of the market for xDSL. Nevertheless, telcos are preparing themselves for high demand and wider deployment will most likely occur in couple of years, perhaps in 1999 or year 2000.

 

It is highly likely that xDSL will become widely adopted particularly among high-speed Internet "power users", telecommuters as well businesses requiring fast access to various networks, provided naturally that the prices come down. Large companies are likely to start using xDSL first, followed by SMEs and residential users. xDSL deployment will certainly take place in Finland and elsewhere in Europe, as the replacement of copper lines with fibre takes too much time to provide a remedy or panacea for scarce bandwidth. Accordingly, the cable network especially in Finland does not support broadband cable modems at the moment and its coverage is only about 40%. xDSL technology offers a viable interim solution to the bandwidth problem while fibre optic cables are being installed. The potential of xDSL technology and its advantages can be summarised with the words of Rick Gilbert, President at the ADC Kentrox.

"The real advantage of HDSL is the ability to economically deliver a six-fold increase in bandwidth over basic rate ISDN."

 

Consequently, it will be of great interest to see how and to what extent the major operators in the market will deploy xDSL technology. Basically, the "battle" will occur between two major players, namely Telecom Finland and Finnet Group: both have the resources and infrastructure to be the future winners. On the one hand, Telecom Finland might make the decision not to deploy xDSL, since it has already invested quite heavily in its cable network and is likely to continue investing. However, Telecom Finland will face sharp competition from Helsinki Television, who can provide content and services, whereas Telecom at the moment can only provide network. Therefore, Telecom Finland might decide to compete with Finnet Group and other smaller players in the xDSL field, especially as it is already in the process of leasing local loops and will acquire local telephone companies, if some of them decide to sell.

 

Finnet Group and HPY in particular is highly likely to adopt xDSL on larger scale to existing and new telecommuter customers (large companies, freelancers, etc). Moreover, due to the large project of Helsinki Arena, Finnet Group will utilize xDSL and promote it to its customers. Finnet Group companies have the advantage of owning large share of local networks. Finnet Group use xDSL as competitive edge over cable modems and especially against Telecom Finland, as high usage of xDSL lines will not block other telephone traffic, and thus get congested. Cable network, on the other hand, is likely to be blocked when the number of users increases.

 

Future competition between xDSL manufacturers is likely occur between Ericsson and Motorola. Both have production lines up and running, but Ericsson has existing clientele in Finland to support the sales of xDSL and wide knowledge of Finnish market. Nokia can change the competitive setting in the future, but at the moment it is not viable competitor for Ericsson and Motorola.

 

On the basis of the brief analysis conducted in this report, the potential winners of the future seem to be Finnet Group from the operating side and Ericsson from manufacturers respectively.

 

 

 

 

 

 

 

LIST OF REFERENCES

 

"Alternative local loop technologies" A Review, OECD Paris 1996, OECD/GD(96)181

 

Annual Report 1996, Helsinki Telephone Company

 

"At the Crossroads of Telecommunications" http://www.telechoice.com

 

Communications Outlook 1997, OECD

 

"DSL Internet Access at ISDN Prices", http://www.kentrox.com/news/022497b.pr.html

 

"Ericsson" http://ericsson.se/cobra

 

"Ericsson" http://www.ericsson.se/FI/general2.html

 

"Finnet Group" http://www.finnet.fi/inenglish/index.html

 

"Helsinki Arena 2000" http://www.helsinkiarena2000.fi/projekti/yhttyo.html

 

"Helsinki Arena 2000" http://www.helsinkiarena2000.fi/summary

 

"HPY" http://www.hpy.fi/english/hpy.html

 

"HPY" http://www.rc.hpy.fi/research/multimedia/menu1.htm

 

"HPY" http://www.rc.hpy.fi/research/multimedia/vdo/vdores/eng/diamresu.htm

 

Joukkoviestinnän talous ja rakenne 1996, Tilastokeskus ("Economy and Structure of Mass Media", Statistics Finland

 

Liikenneministeriö, Televiestintäyksikkö, http://www.vn.fi/vho/tilast1.htm (Finnish Ministry of Transport and Communications)

 

Linturi, Risto: "HPY tarkentaa multimediaverkon hinnoittelua", Letters to the Editor/Tietoviikko 21 February, p. 7 1997 ("HPY Conducting Price Checks on Multimedia Networks", Information Technology newspaper)

 

Mainostoimistojen liitto MTL: "Lehdistötiedote 12.6.1997" (Press Release by the Finnish Association of Advertising Agencies)

 

"Motorola,Annual Report" http://www.mot.com/General/Financial/Annual_Report/1996/lite/01_highlights/highlights.html

 

"Motorola,Annual Report" http://www.mot.com/General/Financial/Annual_Report/1996/lite/toc.html

 

"Motorola" http://motorola.com

"Nokia" http://www.nokia.com/company/overview/nokia_brief_new.html

 

"Telecom Finland" http://www.tfi.net/businesssolutions/cabletv.html

 

"Tietoviikko, "Information Technology News", http://www.talentum.fi/tietoviikko.htm/

 

Tilastokeskus (Statistics Finland)

 

"Yleislainsäädäntöä uudistetaan: tavoitteena koko sähköisen joukkoviestinnän kattava laki. Liikenneministeriö, (1997). http://www.vn.fi/lm/suomenv/v970325a.html. ("Reform of the General Legislation aims at a law for the Electronic Media", The Finnish Ministry of Transport and Communications)

 

"The new Telecommunications Market Act will increase competition further in

telecommunications sector in Finland", http://www.vn.fi/lm/english/news/v970430.html

 

Tiedolla tietoyhteiskuntaan 1997, Tilastokeskus ("Information Way to the Information Society", Statistics Finland)

 

"Uusmediateollisuudesta Suomen nopeimmin kasvava ala", Kauppalehti May 5, 1997 ("New Media Industry the fastest growing Sector in Finland")

 

xDSL Primer, p. 4,

http://www.kentrox.com/product/cellworx/nspeed/xDSLprimer.4.html