Fiber Regulation in Spain

13.October.2015

DISCOVER, DISRUPT, DELIVER2

Highlights of the current Spanish state of affairs

Regulated Telefónica ´s Ducts offer (MARCo)

Symmetric in-building wiring obligations applicable to all

operators.

BSA Service NEBA fiber with speed limitation to 30 Mbps

Pro-Network Investment regulation for Fiber

0

Large proportion of the population concentrated in very dense

areas

Availability of Ducts to the buildings.

Very strong competition from cable operators

Very high development of unbundled local loop services(35%BroadBand Market)

Very high Commercial Pressure based on Convergent Offers.

Highlights

Ripe situation for infrastructure competition

Highlights

DISCOVER, DISRUPT, DELIVER3

Copper regulation

focused on service

competition

NGN regulation focused

on infrastructure

competition

Fibre

Local Exchange

Cu

ULL

Bitstream access

Access to ducts Access to in

building wiring

• Co-investment agreement with

Jazztel for in-building wiring (3

millions of premises).

• Agreement to access in-building

wiring (Orange/Vodafone).

• Industry agreement on technical

and operational procedures to

allow in-building sharing among

operators.

The current regulatory framework has encouraged

infrastructure-based competition0

DISCOVER, DISRUPT, DELIVER4

This NGN regulation has guaranteed equal opportunities to

compete and to invest for all operators

A completely new fibre network, not based on the legacy network in contrast with

the FTTN deployments:

Rep. A

uto

Cu

NodeFibre

In a FTTH deployment, with availability of ducts to the building for all operators, and

symmetrical access to in-building wiring, the legacy network does not represent any

advantage for Telefónica

The use of the legacy

network in a FTTN

deployment justifies

specific remedies

O.F.

Fibre loop

Splitter Splitter

Manhole Optical terminating

segment

Legacy network is

not involved in a

FTTH deployment

0

DISCOVER, DISRUPT, DELIVER5

Civil Infrastructure Reference Offer (MARCO)

The FTTH network

deployment includes all

the civil infrastructure

elements from the local

switch until final

customer houses:

• Manholes

• Handholes

• Poles

• Building access

1

Evolution of occupied km of Ducts

DISCOVER, DISRUPT, DELIVER6

: Case 1: Indoor access

Access to end-user premises through symmetrical share

access to in-building infrastructure (Verticals)

ARQUETA ENTRADA

CTO ME

CTO OP1

CTO OP2

CDP

CDP

CDP

CDP

RO

RORO

RO

Cable multifibra dedistribución del Edificio

Cable multifibra dedistribución del Edificio

Acometida óptica

individual

Acometida óptica

individual

Cable multifibra

Operador 2

Cable multifibra

Operador 2

Cable multifibra

Operador 1

Cable multifibra

Operador 1 RITIRITI

RITSRITS

Caja Derivación en

Planta

Caja Derivación en

Planta

Roseta ópticaRoseta óptica

Caja Derivación en

Planta

Caja Derivación en

Planta

1:16

“OperatorUnits”Ends theOperatordistributionnetworks

“CustomerUnit”Ends thebuildingnetwork

OperatorDrop Cabling

Secondary FCP/Building EntryPoint (BEP):Modular Multi-dwelling Unit

Floordistributor box

OpticalCustomerdrop cabling

OpticalTelecomunicationOutlet

Floordistributor box

Multifibre cable (vertical riser)

Multifibre cable (vertical riser)

Operator 1 Drop Cabling

Operator 2 Drop Cabling

ImputManhole

1

DISCOVER, DISRUPT, DELIVER7

: Case 2: Outdoor Access through facade

The laying of the drop cabling is carried out

following the route of the existing copper network.

Manhole

Access to end-user premises through symmetrical share

access to in-building infrastructure (Verticals)

Individual fiber optic drops cabling

Installed when it’s performed the customer installation

(to final termination unit)

Optical telecomunication outlet (OTO)

It’s installed inside home to

perform the customer installation

Final termination unit (Secondary FCP/BEP) Distribution cabling along the facade

1

DISCOVER, DISRUPT, DELIVER8

While the cost per household in Spain is in the lower levels

of the EU due to the reference ducts offer

In urban areas the cost per

home passed with FTTH is

between EUR 150-540,

according to an analysis of

European Investment Bank,

presented in ICC

Telecommunications and

Media Forum, Brussels, 17

March 2015

1

DISCOVER, DISRUPT, DELIVER9

&

& 4 M (FTTH)0,9 M (FTTH)

8,3 M (HFC) 0,9 M (FTTH)

2,8 M (HFC)

+

+

HH coverage (2Q 2015)Undertakings Wholesale servicesCoverage announced

in 2016

10 M (FTTH)

7 M (FTTH) (2015)

11 M (FTTH y HFC)

0,72 M (FTTH) ¿? (FTTH)

IMPLEMENTATION REPORT 2015“One of the most positive developments in the Spanish market in recent years has been the

substantial investment in FTTH deployment, […] Regulatory measures (both symmetrical and

asymmetrical) also contributed to this fast deployment of FTTH including the obligations imposed by

CNMC via the reference offer of access to ducts (MARCo) and the symmetric obligations for in-house

wiring adopted by the NRA in 2009. The new Telecommunications Law adopted in 2014 also contains

legislative measures to facilitate and reduce the cost of NGA deployment.”

As a result, Spain is the first European country in infrastructure-based

competition with new networks that allowed bandwidths above 100Mbps

all together with commercial wholesale services over them

Local cable

operators 2,7 M (HFC/FTTH)

12,5 M (FTTH)

2

DISCOVER, DISRUPT, DELIVER10

“Spain deserves a special mention as one of the most competitive markets in the

region. Incumbent Telefonica achieved its aim to cover 10 million households at end year,

compared to less than 4 million at end 2013, making Spain the only Western European

nation to have passed more than 10 million homes with fibre. It is challenged by Vodafone,

which bought cable operator Ono last year. Not to be left out, Orange Spain has agreed to

buy FTTH player Jazztel and plans to step up its fibre investments.”

The first country in growth rate

of FTTH passed homes in 2014192

%

The first country in growth rate

of FTTH subscribers in 2014137

%

The Spanish roll-out is exceptional in two ways: the level of

NGN coverage and the speed of deployment

Source: IDATE and FTTH Council Europe

2

DISCOVER, DISRUPT, DELIVER11

Highlights of Market Evolution since 2009 2

Jan 09

Oct 12 May 13

Vodafone and

Orange reach a

co-investment

agreement

Jazztel and

Telefónica reach

a co-investment

agreement

Telefónica

launches its

100M Product

Jul14

Vodafone buys ONO

• Vodafone and Orange redefine

their agreement.

• Vodafone offers Orange a

Wholesale service on the ONO

network

Telefónica and

Others launch

300M Product

Jazztel

launches its

200M Product

2009

Start of the

Current

Regulation

Cable Operators

launch 50

and100M

products

2011 2014 2015

DISCOVER, DISRUPT, DELIVER12

The Spanish market is among the most competitive in the UE

with a convergent offer of some of the largest EU Telcos2

DISCOVER, DISRUPT, DELIVER13

In conclusion, the results of the regulatory framework

applied to Fiber in Spain are:

Infrastructures

Competition

High Penetration of NGAs in Spain above the European

Average, disregarding a lower fixed broadband penetration.

High speed of NGA development.

Investment in Fiber, which is a technology offering better

capabilities than copper.

Foster a framework of agreements between operators in fiber

networks, favoring co-investment.

All of the operators have had the possibility to compete with

Telefónica´s infrastructure.

Competition between cable and fiber, allowing a higher

differentiation for networks offers.

3

DISCOVER, DISRUPT, DELIVER14

Reflection about the principles for the new regulatory Access

Regime

Fair long-term return on investments. This is a pre-requisite to attract the high

levels of investment needed in order to build the new networks.

A stable and predictable regulatory environment.

Commercial solutions (i.e. voluntary wholesale arrangements) should take

precedence to regulatory impositions

Ex-ante regulation should be removed as much as possible in favor of a greater

reliance on ex post regulatory oversight.

Scope for innovation and differentiation should be allowed.

An efficient level of infrastructure competition should be possible

The concept of static efficiency (regulate wholesale prices as a way to reduce retail

prices) must be overcome and replaced by a dynamic approach (investment as a

tool for improving the benefit of consumers).

Substantially review regulation and simplify the regime, making it less

burdensome for intensive network investing players and allowing for sustainable

competition.

3

DISCOVER, DISRUPT, DELIVER15

Remedies should be focused on bottlenecks, which are

closely linked to network architecture

Once essential facilities (ducts /in-building wiring) are

opened and effectively used by alternative players for

FTTH deployment (as it is the case in Spain), no other

obligation should be imposed, as all operators are able to

undertake investments in NGA. This has been the approach also

followed in FTTH countries such as Portugal or France.

Therefore, competition, in FTTH architectures, is based

on independent infrastructures and does not depend

so much on detailed regulation of active wholesale

products

If other obligation than passive infrastructure access

would be deemed necessary (exclusively in non

competitive areas), a single wholesale network access obligation

should be imposed, in order to avoid an overlapping of

obligations

3

In the case

of FTTH

Architectures