Fibre network competition and the entry of new players has removed the need for wholesale broadband regulation, but Telefónica’s physical infrastructure remains a bottleneck
The CNMC has launched two consultations on the future regulation of wholesale broadband markets
On 17 December 2024, the Comisión Nacional de los Mercados y la Competencia (CNMC) published two separate consultations on the regulation of wholesale access to high-speed broadband networks in Spain. The proposals, on which stakeholders can provide feedback until 22 February 2025, seek a balance between the liberalisation of markets where effective competition has been achieved and the preservation of regulated access to Telefónica's physical infrastructure. Specifically, the regulator’s first consultation contains draft measures for the wholesale broadband access markets, which includes:
Wholesale local access (WLA) at a fixed location – Market 1 of the EC’s 2020 Recommendation on relevant markets; and
Wholesale central access (WCA) at a fixed location – formerly Market 3(b) of the EC’s 2014 Recommendation.
Market developments have enabled the deregulation of WCA and WLA
The previous review of these markets was completed in 2021, with the CNMC identifying 696 municipalities (‘Zone 1’, which accounts for 70% of the population) where there is competition and Telefónica should not have to provide rivals with access to its fibre network. In the remaining 7,453 non-competitive areas (i.e. ‘Zone 2’), the regulator imposed wholesale fibre access obligations on Telefónica. The new analysis shows significant progress in competition within WCA and WLA throughout the country, prompting the CNMC to propose the full deregulation of these markets and the withdrawal of requirements on Telefónica to offer its ‘NEBA local’ and ‘NEBA fibra’ services. The regulator has highlighted four key developments that have contributed to its proposed decision:
Increases in fibre (in particular, FTTH) coverage; Telefónica has achieved close to 90% coverage in both Zones 1 and 2;
Telefónica's declining market share in retail fixed broadband, which has fallen below 50% in non-competitive areas, and significant annual reductions (5-9 percentage points) in its wholesale fixed broadband access market share between 2020-2023;
The entry of new operators and business models, including the creation of MASORANGE, the sale of Vodafone to investment firm Zegona and the presence of DIGI and wholesale players such as Lyntia and Onivia; and
Commercial agreements, which have increased the availability of high-capacity services for consumers and facilitated the development of competition at the wholesale level and improved returns on investment.
Preserving regulation on Telefónica's ducts and poles
The second consultation focuses on the wholesale market for physical infrastructure access (PIA). The CNMC considers that this market remains crucial for the deployment of telecoms networks due to the difficulty of replicating Telefónica's infrastructure, which represents the majority of overall rollout costs. The terms and conditions for PIA are set out within Telefónica's ‘MARCo offer’, enabling the:
Efficient deployment of FTTH networks by alternative operators with their own networks; and
Connection of base stations necessary for the densification of mobile coverage, especially with respect to 5G technology.
The CNMC proposes maintaining ex-ante regulatory obligations for access to Telefónica's physical infrastructure, including the use of ducts and poles at cost-oriented prices and under transparent and non-discriminatory conditions, as defined by the MARCo offer. The regulator states that this measure has been essential in achieving a high availability of very high capacity networks based on fibre, as well as in promoting competition in downstream markets (where fibre accounts for 89% of all fixed broadband connections).
Rivals unimpressed by proposed increases to Telefónica's PIA prices
The consultations come not long after the CNMC proposed to increase the prices competitors pay for access to Telefónica's physical infrastructure. The PIA remedy in Spain has been in force since 2008, with Telefónica required to offer access based on charges calculated using a bottom-up cost model. On 25 September 2024, the CNMC issued a consultation that proposed to increase recurring (monthly) PIA prices by around 20% on average. It stated that this takes into account factors such as the weighted average cost of capital (WACC), the useful life of civil works infrastructure or its state of amortisation, in line with the EC’s Gigabit Recommendation from earlier in the year. The regulator also proposed to raise non-recurring (one-off) PIA prices by 11% to reflect an increase in the cost of labour since the previous determination. Meinrad Spenger (CEO, MASORANGE) questioned the timing of the move, suggesting it has occurred “just a few months after” the Spanish Government became a shareholder in Telefónica via SEPI. The National Association of Telecommunications Operators and Internet Services (AOTEC) has argued that the proposed price increases are “excessive”, not reflective of reality and require rethinking. The CNMC is currently reviewing feedback on its draft measures.
