Telefonica Reduces FTTH Investment Pace Because of Wholesale Rules

Telefonica has decided to reduce its planned investment in its fiber-to-home network after
the National Commission of Markets and Competition proposed that Telefónica offer wholesale access to competitors.

The NCMC proposal exempts the wholesale requirement in nine Spanish municipalities, including Madrid and Barcelona, but would force Telefonica to sell wholesale access to competitors potentially 84 percent of the population.

The proposal exempts the wholesale requirement in Madrid, Barcelona, ​​Malaga, Seville, Valencia, Alcalá de Henares, Badalona, ​​Coslada and Móstoles, which collectively account for 16 percent of the Spanish population.

Telefonica currently accounts for 85 percent of Spain's fiber-to-home networks.

Telefonica plans to cut FTTH deployments by 35 percent, or to some 3.6 million homes in 2015, down from the initial 5.5 million planned, as a result of the CNMC proposal.

Telefonica originally had expected to connect about 300,000 new households each month.

Telefonica connected five million new homes to its FTTH network in 2014, doubling its total coverage to 10 million premises. Since 2008, high speed access prices in Spain have dropped 30 percent.

Higher levels of competition arguably account for those trends.

Telefonica has 46 percent market share, with Orange holding about 27 percent, Vodafone-Ono about 21 percent.

The move is not unexpected, as most tier one service providers oppose mandatory wholesale requirements, and especially new requirements on next generation infrastructure.

Though competition between multiple facilities-based contestants typically obviates the need for such wholesale policies, in many markets that might not be practical. In such cases, mandatory wholesale policies are necessary.

Still, how wholesale policies are implemented makes a big difference. Sharing of passive layers, with no sharing of active layers, for example, arguably provides more competitive differentiation.
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