Infrastructure sharing and network competition in Spain – Regulating for network competition
In as innovative a sector as telecommunications, competition between the networks of different operators is the driver of effective investment and brings the user innovative, better-quality services at competitive prices.
We at Spain’s National Authority for Markets and Competition (CNMC: Comisión Nacional de los Mercados y la Competencia) – responsible for multisectoral regulation, including the telecommunication sector, and for competition law enforcement – are staunch advocates of this approach.
The regulation we apply – which in some cases imposes infrastructure-sharing – eliminates bottlenecks and provides operators with the rungs required to climb the investment ladder. Thus while deploying their networks, they are also able to compete in services.
Since 2009, Telefónica (the operator with significant market power) has been under the obligation to give third parties access to its ducts and conduits (the MARCO offer). Likewise, we regulate symmetrically, obliging all operators to provide access to vertical infrastructure within buildings where duplication would be senseless. In this way, operators have access to the civil works for the purpose of installing next-generation networks, which can account for three quarters of deployment costs.
The regulations regarding wholesale broadband markets were updated in early 2016, with the adoption of an innovative approach. The operator with significant market power is subject to obligations regarding the old copper-wire networks and new fibre networks, with differentiated treatment for the latter depending on the competitive environment.
This means that for fibre, greater obligations are imposed on Telefónica in areas where there is no effective competition in regard either to services or networks; a regional service is established for access to Telefónica’s fibre network (regional NEBA (Nuevo servicio Ethernet de Banda Ancha – new broadband Ethernet service)). In areas with competition in services but limited network competition, virtual unbundled local access is also enabled (local NEBA offer).
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Lastly, in 66 municipalities (35 per cent of the Spanish population) in which at least three operators are competing on next-generation networks, obligations relate solely to access to copper wire and civil works, with no obligation regarding the fibre network.
In mobile telephony, the investment obligations associated with licences for the use of spectrum boosted the development of four operators with their own networks offering services on the national market. As from 2006, access obligations were also imposed on virtual mobile operators, and were withdrawn in 2017 once market-dynamization objectives had been achieved.
Broad deployment of next-generation networks
The results of this model are extremely positive, especially in regard to next-generation network coverage, both mobile and fixed.
In 2016, ninety-four per cent of Spanish homes could, as a minimum, access an operator’s mobile network using 4G technology. Of even greater relevance is the indicator based on average mobile operator coverage, which stands at around 86 per cent of homes and reflects considerable freedom of choice for users. Both figures are close to European Union (EU) averages.
On fixed networks, next-generation access (NGA) coverage for homes in Spain stands at 81 per cent, which is above the European average (76 per cent). Most significantly, 63 per cent of homes already have access to fibre optic networks, fundamentally fibre-to-the-home (FTTH), offering greater services, as compared with 24 per cent with access to fibre-to-the-property (FTTP) networks at EU level, sometimes with lower quality features. The four main operators present on the Spanish market are deploying FTTH networks, the trend being towards strong growth. This means a solid wager is being placed on development of the digital society.
Tackling the challenges of deployment through sharing and co-investment
The regulatory model generates competitive pressure that promotes the deployment of next-generation networks.
Since 2012, in order to accelerate such deployment and reduce its cost, Spanish telecom operators have at their own initiative concluded infrastructure-sharing and co-investment agreements, fundamentally for fibre optic networks. Three major agreements stand out, involving co-investment and infrastructure-sharing commitments and the participation of four operators in total. Each of the three agreements would cover, respectively, 3 million, 6 million and 3 million building units.
Implementation of the agreements – along with other agreements concluded under market conditions for the provision of wholesale access services, including in areas designated as competitive – will bring the percentage of Spanish homes with NGA coverage to over 95 per cent in 2020.
Benefits and risks, a case-by-case analysis
The benefits of infrastructure-sharing agreements are clear, particularly when, as in Spain, they are accompanied by investment commitments.
The cost reductions and risk reductions associated with innovative investments make it possible – when the regulatory and competitive environment is right – for users to access better-quality services at more competitive prices sooner.
But risks are also possible, deriving from the exchange of information between competitors sharing infrastructure, from reduced differentiation between their networks and from decreased competitive pressure, combined with reduced idle capacity on the networks. There is an increased risk of collusion, and possibly less freedom of choice for consumers.
There is more likely to be a net benefit when the agreements relate to passive infrastructures (such as the ducts or placements) and are focused on rural areas. It is nevertheless the CNMC’s understanding that the operators are responsible for analysing the effects of their agreements on competition and wellbeing, taking into account the competitive and regulatory environment.
CNMC had the opportunity, as the competition authority, to take a decision on a complex set of agreements between the first and fourth mobile telecommunication operators (S/0490/13). Those agreements, dating back to 2013, included elements relating to infrastructure sharing.
Without questioning the fact that some of those elements may generate efficiencies and foster competition, the CNMC ruled that other elements – such as limitations on the resale of certain wholesale services or certain provisions on roaming on 4G networks, which presupposed the sharing of active components of the networks and affected urban areas – constituted disproportionate restrictions on competition.
To reach these conclusions, it was necessary to carry out an in-depth analysis of all the agreements, the competitive context, operators’ different positions, and the regulatory framework. It all illustrates how difficult it is to determine in advance which agreements may ultimately not be admissible.
Fortunately, as the regulatory authority responsible for telecommunications and for competition law enforcement, the CNMC is well placed to carry out these analyses.
