Construction of Estonian National Broadband Network to Begin in 2010

The Estonian Broadband Development Foundation (ELA) has announced new details of “EstWin”, the planned nationwide broadband network roll-out project. Local media quotes ELA head Olav Harjo as stating that construction of the network of fibre-optic cables will begin in spring 2010 as part of the previously stated aim of making 100-Mbps broadband available to all households, enterprises and institutions in the country by 2015 (see Estonia: 3 August 2009: Estonian Government Approves Plan for Nationwide 100-Mbps Broadband by 2015). Technical preparatory work is already under way and activities relating to the financing of the project are due to begin in early 2010. The cost of the entire project is estimated at around 6 billion kroons (US$549 million), with the government having previously pledged 1 billion kroons. ELA hopes to obtain around 350 million kroons from European Union (EU) structural funds.

Harjo also revealed further details of the planned roll-out. The ELA will begin construction of the network in rural areas where unprofitability has traditionally warded off potential investors from the private sector. The ELA expects the EstWin project to help to eliminate the divide in broadband access that currently exists between developed cities and rural areas. When the network is constructed, it is anticipated that 98% of homes, businesses and institutions will be within 1.5 kilometres of the laid fibre-optic networks. However, the ELA will not construct the last-mile connections to end users, but will provide equally priced wholesale access to all communication enterprises. It will then be left to such telcos to decide for themselves their own last-mile technologies and pricing policies.

Outlook and Implications

• Progress Made, But Grey Areas Remain over Funding: The announcements from Harjo and the ELA indicate that progress is being made in the EstWin project. When the plan was previously mooted by Estonian Minister of Economic Affairs and Communications Juhan Parts in August 2009, no foundation had yet been created in order to construct the network; now the ELA has been established and has created a loose timetable. However, there remains something of a grey area around funding, with three-quarters of the total cost likely to come from private telcos in Estonia, with no details as yet on which—if any—groups are to contribute and how such contributors will charge for the use of infrastructure they have funded.

• Positive Move in Already Well-Developed Market: The Estonian broadband market is already well-developed with 317,900 subscribers at the end of 2008, equating to a penetration level of around 23.7% (above the EU average of 22.4%). Competition is relatively healthy, with several dozen registered internet service providers in operation. Elion dominates the market with a 54% market share of broadband connections, while around 82% of the country’s total broadband subscriber market was shared between three operators—Elion and cable operators Starman and STV. However, one of the principal aims of the EstWin project is to offer connectivity in those regions traditionally neglected by such leading operators. As such, IHS Global Insight considers the project to be a positive move on the part of the government, which could easily have been content to rest on its laurels given the healthy penetration level in Estonia.