Presentation for an event organised in Brussels by the Swedish Association of Local Authorities and Regions (SKL) entitled Local and Regional Authorities: Key Players for Broadband Rollout. Note that the white paper mentioned in this presentation can be found here: http://www.diffractionanalysis.com/blog/2012/10/04/white-paper-in-depth-examination-of-stokab.html

1. How Can the Stokab Model be
Replicated?
Benoît Felten, CEO
benoit@diffractionanalysis.com

2. Context
• In late 2010, Google contacted Diffraction Analysis asking for an examination
of the Stokab project.
• The main questions were:
• How did it come to be ?
• What were the challenges in its inception and growth ?
• What were the impacts of Stokab on Stockholm ?
• Could other cities follow in Stockholm’s lead ?
• In order to answer these questions, Diffraction Analysis went on a research
trip in Stockholm and met with Stokab, the City, Stokab’s customers and
various politicians who were involved in the decisions to launch the project.
• This in turn led to the release of a white paper entitled Stockholm’s Stokab:
A Blueprint for Ubiquitous Fiber Connectivity?

3. A Short History of Stokab
Stokab Investment and Profit (1994-2012)
(Millions of SEK)
First customers
(city, hospitals, universi First deals with
600 housing
ties) sign up. City of First (and only) loss
Stockholm IT bill goes companies and in Stokab history
down by 40%. communications post 1997, due to
500 operators for Stokab announces Stokab announces
over-expansion
residential a residential an expansion of
without
Stokab purchases service. deployment plan to the residential plan
400 commensurate
inner city duct ultimately cover to 40 000 single
market growth.
network to allow 400 000 homes in homes inside
Expansion Stadshus AB writes
initial deployment. Stockholm. Stockholm.
300 starts beyond off SEK 600m of
inner city. assets.
Jan.
24, 1994, Stockh
200
olm City Council
Stokab is
votes the
cash-flow
creation of
100 positive
Stokab.
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-100
-200
Investment Profit

4. Stokab in Numbers Today
600
100 Employees
Network Nodes
105 Operator 1 250 000km of
Customers Fiber Deployed
800 Customers 1 000
Sub-Contractor
5 500km of Employees
Cable Deployed

5. Stokab’s Market
• Stokab sells one product and one product only: point-to-point dark fiber
circuits.
• By not offering any form of lit services Stokab does only competes in a very
limited way in the retail market.
Residential Customer
Internet Service Provider
Public
Businesses
Institutions
Communications Operator
Wireline Mobile
Integrators Broadband Broadband
Operator Operator
Real Estate
STOKAB

6. Stokab’s Pricing
• Stokab’s pricing has two essential components:
• Set-up fees dependent on the location to be connected and whether it is already on the
physical network or not. Multiple fibers and redundant circuits are discounted when
purchased at the same time.
• Recurring fees based on the straight distance between the two nodes the access lines are
connected to. Recurring fees also depend on level of SLA purchased.
• Stokab’s pricing is transparent. Only locations that are outside the inner city
and not yet on the network require a specific quotation. All the rest is catalog.
• Stokab’s pricing is replicable: any customer purchasing something another
customer already purchased will get the same price.
• This leaves some latitude for Stokab to innovate on price when it negociates
new contract types (for example, very short or very long contract terms) but
once a quote is agreed, that sets the price for the future.

7. How Stokab Benefited Stockholm
• Stockholm considerably reduced the amount of telecom related digging work and the
associated costs and disruption for citizens.
• Stockholm punches above its weight in international rankings for business attractiveness, due in
large part to best-in-class Quality of Telecommunications (4th in C&W rankings)
• PwC examined the various services available in 26 large cities around the world. It identified
Stockholm as having the best network for schools, the second best broadband quality, and the
best digital economy (PwC Cities of Opportunity, 2011).
• Stockholm has become a European IT hub and a welcoming environment for Start-Ups. Venture-
capital firm Creandum reports that over the past five years, more than €1.3 billion has been
generated per year from Swedish tech company exits.
• The City of Stockholm has embraced its connectivity. It saved 40% on its IT bill from the first year
onwards, and has been leveraging the network to equip and manage remote locations. More
recently it launched over 50 e-services thanks to the fact that 90% or more of the population is
considered online.

8. Innovation: SVT’s live event coverage
• For live events in Stockholm (marathon, Stockholm Tennis Open, royal
wedding…), SVT used to send one or more trucks on location to edit the live
feeds.
• For the royal wedding, SVT approached Stokab to see if they could rent fiber
on location and directly connnect their camera equipment to the editing
center in their headquarters.
• This in turn led to SVT reworking their whole
approach to live coverage, now edited in
house. The savings are massive, estimated at
around 40% of production costs.

9. Innovation: Stockholm’s 4G coverage
• The pre-existence of an extensive fiber network throughout
Stockholm has allowed 4G mobile broadband competition to a
degree not seen anywhere else in the world yet.
• Long-term leases of dark fiber by mobile operators was made
possible by Stokab’s latitude to price (provided the prices
become replicable).
• 4 networks operate in Stockholm:
• The incumbent’s, Telia Sonera,
• Operator « 3 »,
• Tele 2 and Telenor who operate their passive infrastructure through a joint
consortium called Net4Mobility

10. Innovation: Heating schools
• One interesting side-effect of the
Stokab deployment has been an
experiment in school heating.
• Stokab’s nodes host active
equipment and therefore generate
heat. Instead of letting that heat
dissipate, Stokab experimented with
using the energy to hear a public
school in Stockholm.
• The program was successful and is
now being expanded to other nodes
and other public buildings.

11. Key Success Factors
Political Marketing
Focus on passive service offering
Consensus accross party lines
Neutral and non-threatening position
Understanding of infrastructure
in the market
dynamics
Gradual build-up with high revenue
Long-term vision and support
generators targeted first
• Stokab remained a key infrastructure asset for the city despite political
changes and even when things turned tough in 2002-2003.
• Throughout its history, Stokab was never financed by taxpayers’ money
except for the initial 5000 € to incorporate it.

12. Can the Stokab model be replicated ?
Challenges Opportunities
Existing copper competition is alive
Technology is mature and costs to
and active
deploy have gone down considerably
Cherry-picking in the business market
Awareness for high-speed broadband
has already happened in most large
services is building
cities
Operators are more willing to
Broadband players are likely to be
consider public-private partnerships
more aggressive on all fronts
• A Stokab-like project in a city the size of Stockholm seems unlikely
• However, in Tier 2 cities with operator participation, the model should be
successfully replicable.

13. Thank You!
• Visit www.diffractionanalysis/publications for more
reports on broadband and NGA.
• Contact benoit@diffractionanalysis.com for queries and
further analysis.
• Benoît Felten’s blog: www.fiberevolution.com
• Follow Diffraction Analysis: @diffraxion
• Follow Benoît Felten: @fiberguy
Latest Reports:
• The dynamics of Public Private Collaboration in Next-Generation Access Infrastructure
• Can the New Zealand NGA Model be Replicated?
Upcoming Reports:
• Optimizing NGA Service Portfolios
• What can we learn from Google Fiber?