Telecom Infrastructure and Regulation in Finland

Finland has extensive legacy, (PSTN), network. It was fully digitalizied in the early nineties, but is expensive to maintain in the rural areas, where customers are geographically dispersed and may make limited use of the services, but where regulation requires service be provided. From a business perspective, this could be spurring Finland's 90+ telecommunication providers to place more emphasis on wireless communications, since it is less cost-effective for them to maintain wireline, given the dispersed population and terrain. Yet from a consumer perspective, the legacy network appears to have little to do with popularity of cellular communications. Cell phones provide more convenience (especially for a sparsely populated country) for a price competitive to a fixed-line phone. Additionally, Finns can be describes at "gadgetphiles", and having a cell phone is seen as "hip". (27)

As mentioned above, Finland is moving forward in an aggressive manner in the field of wireless technology. This is especially true in the area of broadband, where the costs associated with laying new pipe are prohibited and provide poor (if any) near and long-term return on investment. By 1999, possession of a mobile phone for Finns between the ages of 15 and 74 stood at around 85%, with a peak of almost 100% for those falling into the 20-29 age range. Overall, this amounts to a figure 76.9 mobile phones per 100 population. (28)

The explosion of the mobile phone segment in Finland can be clear seen in the following set of figures. From 1990 to 2001, overall fixed telephone subscriptions remained relatively constant, increasing from 2,670,000 (53.4 per 100 population) in 1990 to 2,806,000 (54.1 per 100) in 2001. However, this latter figure represents a drop from 2,849,000 subscriptions (55.1 per 100) in 2000 - a loss of 43,000 subscriptions, and a full point per 100, in only a year. Total telephone connections dropped from 131.1 per 100 households to 12.5. Even more telling, during the same period the number of public phones decreased from a high of 25,267 in 1995 to 8,851, with a loss of 3,576 public phones from 2000 to 2001 alone. (29)

At the same time (1990 to 2001), mobile phone subscriptions increased from 257,872 to 4,175,587, an increase of over 1600%, while mobile telephone connections increased from 12.7 per 100 households to 178.4. (29)

Coinciding with the explosion of the wireless telecom market, Finland was experiencing a rapid trend of deregulation within its telecommunications industry. Deregulation started during the 1980s with I/T services. Existing regulations, written years before and targeted to dealing with telegraphs and telephones, did not anticipate I/T, let alone the impending rapid growth in that segment. This loophole was exploited by local telephone providers in 1985, in a joint venture to offer competitive IT services.

This competition forced the government telecommunications monopoly to reduce prices and improve services. Spurred by the positive effects of this competition, the existing legislation was reformed and deregulation of the entire telecom sector was adopted as the goal. Competition in the mobile telephone network began in 1990, with competition in long-distance services beginning in early 1994 and International services deregulated in 1995. This competition has reduced and restrained the costs of telecommunication services, allowing providers to offer reasonable prices that encourage public consumption and can be seen as the driving force behind the popularity of mobile phone services. (30)

As can be seen in the table below, mobile communication has been a driving force behind the 43% revenue growth seen in the Finnish telecom sector over the past four years, accounting for nearly 60% of the total growth. By comparison, revenues from local and long-distance telecom have stayed constant, and have even declined somewhat between 2000 and 2001.

The uses for mobile telecom devices in Finland are growing at a respectable rate, especially in the area of eCommerce. Innovations being prototyped include the use of mobile phones to pay for travel (52)