Telefónica's 100-Mbps FTTH Service Becomes Commercially Available in Spain

Spanish incumbent Telefónica has commercially launched a 100-Mbps fibre-to-the-home (FTTH) broadband offering in Spain, reports website adslzone.net. The new service is initially available in Bilbao and San Sebastian de los Reyes—a municipality close to Madrid, the capital—and comes with an activation fee of 13.97 euro (US$19.79), the same Telefónica has for traditional copper-wired accesses. The connections have been deployed on a greenfield basis, i.e. to new buildings with no existing copper lines.

Outlook and Implications

• First 30, Now 100 Mbps: Being the only Spanish operator which so far has rolled out fibre in major scale and having a regulatory holiday from the wholesale obligation for access speeds of 30 Mbps and above, Telefónica's new FTTH connections are the fastest provided by the broadband market's leading players. The company launched its 30-Mbps offering in the final quarter of last year, and this newest provision sets a new bandwidth benchmark for the highest end of the market—until now, Ono, the country's largest cable operator, has been able to deliver 50 Mbps in some parts of its Madrid network. (Besides Telefónica, 100 Mbps is at the moment also provided by cableco R Cable, in the region of Galicia, as well as service providers Adamo and Nostracom, in Asturias; in the case of the latter two, the ISPs lease the actual network from the GIT, a public organisation which has deployed FTTH infrastructure in a number of small municipalities in the region, as part of an initiative to boost economic development.) According to regulator CMT, as of end-March this year the FTTH accesses totalled just 5,200, and we expect the short-term uptake of the services to remain similarly modest also for the rest of 2009. On one hand, this is because of currently low consumer demand for such speeds, and on the other hand because of Telefónica's scaled-down fibre investments—pressed by the slump in the economy and having concluded that demand for FTTH is unlikely to pick up anytime soon, the company correspondingly cut its domestic fixed-line capex by 25.7% year-on-year (y/y) in the first half of the year.
• Over 40% FTTH Coverage Forecasted for 2023: Beyond the early days, the regulator forecasts that the FTTH coverage will gradually increase to reach 43—46% of the country's households by 2023 (see Spain: 27 May 2009: Regulator Forecasts 43% of Spanish Households Connected to FTTH by 2023). According to the same analysis, all municipalities larger than 1,000 inhabitants will have return-on-investment high enough to support at least one alternative FTTH provider in addition to the incumbent—in Madrid, the number of competitors is expected to be two or three, and in Barcelona three or four. As yet, none of Telefónica's competitors has announced anything concrete on fibre deployments, although France Telecom's local unit has hinted that it will study the possibility of cooperating with other alternative carriers on the roll-outs (see Spain: 6 March 2009: Orange Spain Confirms Interest in Yoigo, Ready for NGN Sharing). IHS Global Insight believes that the key issue concerning the further fibre investments is to establish a functioning model under which the rivals can efficiently share the civil infrastructure holding Telefónica's fibres, as the excavation-related costs form such a substantial part of the deployment expenditure. For the time being, with no alternative deployments been announced, this factor remains untested.