Regulator Adopts New Broadband Framework for Spain, Exempts NGN from Wholesale

Spain's telecoms regulator, CMT, has published on its website the formally approved version of the framework for the country's broadband market. The new regulation exempts internet services of and above 30 Mbps from the obligation of providing wholesale access to other operators—thus effectively permitting the incumbent, Telefónica, to keep rivals out of the dark fibre of its next-generation network (NGN)—and will apply uniformly across the country, without geographic differentiation. Before the adoption, the decision had undergone the scrutiny by the European Commission (EC), as well as by Spain's national antitrust authority.

Outlook and Implications

• No NGN Wholesale: The major revision in comparison to the former framework is, understandably, the regulation of the fibre-optic infrastructure: the operators are obliged to lease the civil infrastructure accommodating the cables, but permitted to keep their rivals out from the actual fibres. The CMT notes that broadband accesses faster than ten megabytes per second are still rather rare in Spain, representing less than 6% of the total market—the logic being that the NGN exclusivity, at least for the time being, cannot hinder the competition significantly. The authority's chairman, Reinaldo Rodriguez, said that the CMT expects the policy to encourage NGN deployments across the sector, both by Telefónica—which thus far has been the only company to roll-out fibre in a major scale—and the alternatives. The CMT has said that it will review the situation after two years, adding however that it will take no responsibility for increasing the alternatives' market share on behalf of them. According to Reuters, he commented on the alternatives' criticism and his organisation's position by saying that "you can't ask the referee to shoot the goals or to send three off in the middle of the game so that someone can win".
• No Geographic Differentiation: The regulator's other main proposal—deregulation of broadband wholesale on a geographically asymmetric basis—has been scrapped from the final version. The CMT acknowledges that market conditions in some certain areas (i.e. major cities and locations where the cable operators, such as Ono, are present) are substantially more competitive than elsewhere in the country, but adds that since the implications of the NGN wholesale deregulation are not yet entirely certain it has decided to keep the guidance for the speeds below 30 Mbps unchanged. We see this largely as a compromise towards the EC (see Spain: 11 December 2008: Regulator and European Commission Close to Deal on Spanish Broadband Wholesale).
• …But No Long-Term Certainty Either: As mentioned, the CMT has said that the market's NGN outlook would be reviewed in two years' time. This is—in practice—also dictated by the EU's own telecoms framework, as the new EU-wide legislation, expected to formally approved by the end of 2009, would come into national implementation by 2011. Thus far, the framework proposal's stance on the NGNs is that the obligation for wholesale service should be imposed at least on the markets which have not become "sufficiently competitive", and given Telefónica's slice of nearly 57% of the Spanish internet space the one overseen by the CMT would probably be considered as such (see Spain: 20 January 2009: Spanish Broadband Penetration Hits 20%). In IHS Global Insight's view, this period in between—something of a regulatory limbo—is also the main reason why the Commission, generally in favour of the NGN wholesale access, is letting the CMT go on its own way on the issue this time. The EC's only tool for prodding the national regulators in the line (apart from formal queries, which by their nature are basically meant to be pre-emptive) is basically a rather cumbersome procedure at the European Court of Justice (ECJ)—which in this case would take longer than it will take from the member states, including Spain, to put the new pan-European framework into effect.