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Fiber deployment in Spain

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Abstract

Next generation access networks will be critical for future economic growth and access to these infrastructures will have major consequences for territorial and social cohesion. This paper examines the economic and competition determinants that serve as incentives for operators to invest in fiber-to-the-home technology. We draw on a dataset comprising 6603 Spanish municipalities with access to broadband services to examine the incumbent’s (Telefónica) deployment of fiber in the period 2010–2013. We show that local loop unbundling competition had a strong positive impact on Telefónica’s fiber deployment, while bitstream competition had a negative effect. Moreover, the incumbent was more likely to invest in municipalities with a large presence of cable operators. We also consider how the municipalities’ sociodemographic characteristics affected the operator’s deployment decision. While market size and population density had a positive effect on investment, the level of unemployment and the percentage of elderly population had a negative impact.

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Fig. 1

Source: CNMC

Fig. 2

Source: CNMC

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Notes

  1. There are three types of NGA broadband: VDSL over copper (with a network topology known as FTTN/FTTC), FTTP (comprises both fiber to the home—FTTH—and fiber to the building—FTTB) and coaxial cable networks upgraded by the standard DOCSIS 3.0. These networks vary on the distance between the fiber end and the consumer’s premises. For example, in Spain, Portugal and France, the fiber reaches the customer’s home (FTTH), whilst in the UK, Germany and Belgium the fiber reaches a street cabinet (FTTC) from which a copper cable provides access (BEREC 2016, p. 21).

  2. The EC Communication “Connectivity for a Competitive Digital Single Market—Towards a European Gigabit Society” states that by 2025, symmetrical connectivity must be provided at 1 Gb per second in strategic locations (public infrastructure and industrial areas), that there should be complete 5G coverage in urban centers and on main transport routes, and that all households should have Internet at speeds of at least 100 Mbps. In addition, the EC proposes a reform of the regulatory framework for electronic communications and suggests the creation of a European Broadband Fund.

  3. In Spain, the regulation of the local loop was established in 1999 and the EC recommended it in its Directives in 2001 (Calzada and Costas 2016).

  4. The “ladder-of-investment” approach was initially described by Cave (2006).

  5. Another strand in the literature uses country-level data to analyze broadband diffusion. Some papers discuss the relevance of inter- and intra-platform competition (Distaso et al. 2006; Lee and Brown 2008; Bouckaert et al. 2010; Gruber and Koutroumpis 2013; Briglauer 2014; Ovington et al. 2017). See a review of the literature in Briglauer et al. (2014). Other papers use microdata to analyze broadband diffusion (Dauvin and Grzybowski 2014; Nardotto et al. 2015).

  6. Previous analyses of this approach are Hazlett and Bazelon (2005) and Hausman and Sidak (2005).

  7. According to BEREC (2016), civil infrastructure works can constitute up to 70–80% of the cost of deploying this technology.

  8. Bitstream prices were the same in all the period of analysis, but the LLU price rose from 7.79 to 8.32 euros in February 2011.

  9. See pages 14–16 in CMT’s “Report about the revision of some prices of the reference offers on the basis of Telefónica’s audited 2008 accounts” (DT 2010/1275).

  10. These were Telefónica, Vodafone, Jazztel, Orange, Ono, R, Telecable and Euskaltel. At the start of the period of analysis in 2010, these operators accounted for 97.5% of the national broadband market.

  11. In the period we analyze there were no fiber exits in Spain and therefore it is not possible to identify sunk entry costs by comparing entry and exit thresholds, as suggested by Bresnahan and Reiss (1994). Such dynamic entry models have been used by Xiao and Orazem (2011), Nardotto et al. (2015) and Bourreau et al. (2017) to analyze LLU entry.

  12. Note that as the probability of fiber deployment (Pi) is so low, the odds are similar to the probability and the odds ratio is similar to the probability ratio.

  13. Duso et al. (2017) examine the impact of national state aid schemes in Germany and of some regional programs. They show that the aid schemes were successful and did not impair competition.

  14. For the FTTH market share, see CNMC’s quarterly data at data.cnmc.es. The source for the household coverage is the EC’s Europe’s Digital Progress Report, 2016.

  15. This reform eliminated the 30 Mbps limit for access to Telefónica’s network.

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Acknowledgements

We thank Mattia Nardotto and Lukasz Grzybowski for their valuable comments and suggestions. Joan Calzada acknowledges financial support from the Spanish Ministry of Economy and Competitiveness (ECO2015- 69193R). The opinions and analysis that appear in this paper are responsibility of the authors only and do not necessarily represent those of the CNMC.

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Authors and Affiliations

  1. University of Barcelona, Barcelona, Spain

    Joan Calzada

  2. Department of Statistics and Knowledge Management, Comisión Nacional de los Mercados y la Competencia, Barcelona, Spain

    Begoña García-Mariñoso, Jordi Ribé, Rafael Rubio & David Suárez

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  1. Joan Calzada
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  2. Begoña García-Mariñoso
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  3. Jordi Ribé
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  4. Rafael Rubio
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  5. David Suárez
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Correspondence to Begoña García-Mariñoso.

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Calzada, J., García-Mariñoso, B., Ribé, J. et al. Fiber deployment in Spain. J Regul Econ 53, 256–274 (2018). https://doi.org/10.1007/s11149-018-9357-y

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