Nothing of this has happened by chance, but rather it is the result of a stable, predictable regulatory framework aimed at simultaneously fostering both investment and competition, with broad and sustained agreements over time among political parties.
That is why it is surprising that now an attempt is being made to alter one of the pillars on which that model has been built: the regulation of access to essential physical infrastructures for deploying telecommunications networks.
The proposal would involve replacing the current regulation with commitments unilaterally assumed by Telefónica, including an important review of the prices that its competitors pay to access ducts and conduits. According to the data collected in the documentation submitted to the regulator, the increase could reach 116% in five years.
But the debate, before the regulator approves—or does not approve—esa proposal should not focus solely on how much those prices can rise. The question is more substantial: what has changed in the market to justify now the modification of a model that has worked?
An infrastructure that cannot be replicated
The physical infrastructure that supports a large part of the fiber networks in Spain is not an ordinary market. It is an asset that is difficult to replicate, with characteristics specific to a natural monopoly. The reality of deployments shows that, in most cases, replicating these infrastructures is economically unfeasible or, at best, would considerably hinder the competitive capacity of alternative operators.
This has meant that, over the last 15 years, more than 80% of alternative fiber deployments have been carried out using Telefónica’s infrastructures.
Precisely for this reason, for years European and Spanish regulation have required cost-oriented access conditions that allow different operators to compete on equal terms in retail markets. The existence of the MARCo service, which sets the prices of the wholesale access service to registers, ducts, and poles, responds precisely to that reality.
It is not regulation designed in the abstract, but the result of years of experience in deploying networks in Spain. Attempts to build alternative passive infrastructures showed the enormous economic and operational difficulties of replicating a conduit network by opening new trenches, adem'as of an unnecessary waste.
The negative experience accumulated by cable and ADSL operators, led the regulator and the various governments to assume that guaranteeing access to infrastructure that is difficult to replicate was necessary so that other operators could deploy their own networks and compete.
Those who now defend the change consider that this regulation is no longer necessary, but there are important reasons to question that claim. Telefónica maintains a dominant monopolistic position in these infrastructures, and a very significant part of the alternative networks depends on its ducts, conduits, and poles. Once those networks are deployed, moving them to different infrastructures would mean having to face extraordinary costs that would exceed those incurred for the initial fiber deployments. In addition, the future European framework that we have known with the proposal of the Digital Networks Act continues to protect access to physical infrastructures with the same intensity.
To this is added a strictly economic question. According to the documentation submitted to the regulator, the MARCo service shows margins close to or above 50% in Telefónica’s financial statements, while its prices have already experienced recent increases justified by the CNMC on the basis of its cost model.
In that context, a rise of the magnitude proposed requires especially solid justification. France offers an interesting point of reference, although it is not the only one. While the tariff structures of both countries are not comparable, data from the French regulator make it possible to draw a parallel with a normalized metric that assesses the set of costs used to build the tariffs: the annual cost per kilometer of infrastructure.
Using that criterion, the equivalent unit access cost in Spain is 110% higher than that of the French market. Portugal also has lower prices and has recently notified the European Commission of a measure to reduce prices.
Competition, investment and prices
Because what is at stake does not affect only the operators’ accounts. If the cost of access to an essential infrastructure is increased substantially, alternative operators will have to dedicate more resources to paying for that infrastructure. This can reduce their capacity to invest and end up weakening the competitive pressure that has characterized the Spanish market.
And there appears the real risk for the consumer. Less competitive pressure can translate into greater pressure on the prices that households and businesses pay. It is estimated that the deregulation of the conduits would represent an additional monthly cost of €1.5 per customer for alternative operators, which very likely would pass it on to the prices of the broadband service to customers.
There is also another element that deserves attention. Spain competes internationally to attract investment. Investors value the quality of infrastructure, but also the stability of the rules of the game. Substantially modifying a regulatory framework that has driven one of the continent’s greatest digital successes sends a difficult-to-interpret signal for those who must decide where to allocate capital in the long term. Especially when it does not seem to be substantiated that a change in economic or market conditions justifies a transformation of such scope.
The same can be said regarding the signal that this regulatory change conveys to investors in other Member States. Spain is one of the main European success cases in the rollout of FTTH networks and a benchmark for other countries. In this context, a change now in the regulatory framework could send a message to the market that the rules can be modified after the investments are made and the rollout targets are reached. This would increase the perception of regulatory risk and could discourage future investments in rollout in the European Union.
A threat to the Spain brand
But only future investments are not at stake: the value of investments already made is also at stake. In recent years, major investors have allocated capital to Spanish telecommunications operators and infrastructure, making their decisions under certain access rules to an essential infrastructure. It is important to remember here that considerable amounts of money have been handled to support the scale of the fiber rollouts to be undertaken.
An unjustified alteration of the rules under which the investment was made can end up affecting something that goes beyond the telecommunications market: the perception of Spain as a stable and predictable market in which to invest.
It is also revealing that Europe is not moving in that direction. Regulation of access to physical infrastructures continues to be regarded as a fundamental tool for ensuring effective competition when there is significant market power. The very European regulatory references continue to insist on the need to preserve cost-oriented access mechanisms for this type of essential assets.
Spain does not need to change a model that has worked without weighty reasons to do so. For years, this framework has promoted investment, competition, and the rollout of networks that today place our country among the European benchmarks in fiber.
Of course, regulation must evolve when market conditions change and the failures it is designed to correct disappear. Precisely for that reason, a change like the one now being proposed needs solid economic, regulatory, and competitive arguments. And those arguments, for the moment, do not appear. Without them, it is difficult to justify a decision that may end up weakening fundamental competitive safeguards that have contributed to the success of the Spanish fiber rollout model.