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Ericsson to manage Swedish city network

Tony Chan | May 29, 2009 | 0 Comments

Ericsson recently announced that it has won a deal to build, operate and manage a fibre optic network for the city of Hudiksvall in Sweden. The deal will see Ericsson take over the development and management of an operator-neutral city network for Zitius, an open-access network operator in the Swedish network.

Outsourcing the management of the network to a vendor such as Ericsson isn’t exactly a new concept, since the company has already won some impressive deals to manage the network for operators across multiple continents, including 3 in the UK and Italy, France Telecom’s operations in the Netherlands and Belgium, T-Mobile in the UK, TDC in Denmark, Elisa in Finland, Telcel in Mexico and Bharti Airtel in India.

What is new is that fact that a municipality has decided to build its own network, not unlike the NetCo concept for Singapore’s Next-Gen NBN.

It remains to be seen how the dynamics of having what is effectively a public network infrastructure will have on the telecoms market in Hudiksvall. Will it stifling competition? Will it slow innovation? Will it kill any investment incentive for competitive carriers? Will it create a monopoly market?

All these questions will have to be answer in order to see the effectiveness of the operating model. But one of the most basic benefits of the Hudiksvall model may be that there will be a single network, hence only one infrastructure using power, creating emissions.

It is perhaps one of the most fundamental questions that the telecoms industry must ask itself when it comes to becoming a more sustainable industry – does the benefits of infrastructure duplication, hence competition, justify the extra emissions?

From empirical examples, competition is a major driver for innovation. Where there is competition, there’s going to be constant pressure to make things better, whether it is simple operating costs, or emissions. Where there’s a monopoly operator, the trend tends towards stability, even stagnation.

Of course, it can be argued that Ericsson will have to try its best to drive efficiency since that will add to its margins. On the other hand, will it take the risk of investing in new technology for future savings when it is already generating a profit – assuming that the contract is profitable for the company in the first place. Let’s all hope so.