The impact of competition
On July 1, 1993, Sweden finally got a new telecommunications act. In the same year Televerket was turned into a limited company and renamed Telia AB. The agency’s remaining supervisory duties were transferred to the National Post & Telecom Agency. Tony Hagström’s title changed from director-general to managing director. The following year he retired from Telia, to be succeeded by Lars Berg, who had a long career with Ericsson behind him.
Events at Televerket revealed that those in favor of change were not always in the majority. One fundamental belief that presented obstacles for a long time was that network competition was impossible. Who would ever think of building alternative railroad networks or alternative national power grids?
In the field of telecommunications, however, there was another factor: new alternative technologies were being developed all the time. MCI Communications was founded in the US in 1983 and became successful by using its own radio network links to compete with AT&T’s telephone lines. The development of optical-fiber technology offered even more alternatives.
And telecom agencies all over the world were adopting a “Robin Hood” approach to tariffs – without any reference to the actual costs. For instance, profits from international calls were used to make up for losses from local calls and calls in rural areas.
Televerket’s Bertil Thorngren recalls: “By and large this was ‘inviting’ competition. Not only could the benefits of new technology be exploited but so could the imbalance between tariffs and actual costs. Anyone who invested in the most profitable routes had an obvious advantage over those who also had to finance losses in local calls and rural areas.”
Towards the end of the 1980s, competition became a hot potato in Sweden when state-owned operations also began to prefer other suppliers to Telia. Swedish Railways and the Swedish National Grid, for example, opted to work with Televerket’s competitor Tele 2 on a network of optical cables. The Swedish Foreign Office chose the UK’s BT instead of Televerket because the British company could offer greater international coverage.
The challenge facing Televerket became even more evident when a number of multinational companies, several of them based in Sweden, launched a joint procurement body for telecommunication services under the name of EVUA (European Voice Users’ Association).
“They had tired of high prices for international telecommunications services and the time-consuming administration. Their motto was ‘One-Stop Shopping’ and they wanted to sign a contract with someone who could take on the responsibility for all their traffic in Europe,” says Thorngren.
The EVUA initiative spurred the formation of new constellations among the European operators, such as one between the German and French telecom agencies. British Telecom opted to form an alliance with MCI. Sweden’s Televerket began to see this as a life or death struggle. Losing a customer such as Volvo or Electrolux to a foreign operator was bad enough. But the worst-case scenario was not even being asked to tender. “Pretty well all the (excess) profit Televerket was making came at this time from the commercial sector,” Thorngren says.
Author: Svenolof Karlsson & Anders Lugn
Ilkka Jäntti, right, director of Ericssons office in Riga. His assistant Ginta Joste to the left.
From left Prime Minister Tiit Vähi, Tönu Tee, CEO of new GSM operator EMT, and Matti Makkonen and Bo Magnusson, representatives for the two part-owners, Telecom Finland and Telia.