SPAIN FOCUS: Spanish fibre: new market, but the same old problems
The fibre-optics business in Spain can be considered new in comparison with other European countries: the majority of fibre-optic network operators reached Spain during 1998 and 1999, so the installed base of fibre is reasonably new.
According to data from the Comisión del Mercado de Telecomunicaciones (CMT), a public organisation based in the Spanish government's Ministries of Economy and of Science & Technology, in year 2000 there were 133,000km of fibre used in the telecoms transport network (57% of the total).
In 2002, the fibre-optic scenario in Spain could be seen, in general terms, as following the same trends as the wider international community: a freeze in investments and a dramatic reduction in the hype generated a couple of years ago, due to the slowdown in the telecoms industry and the necessity to adapt to rapid technology upgrade in optical networking technology.
However, some particular aspects are specific to Spain: poor results following liberalisation of telecommunications have prevented many new initiatives; business models have been developed on the basis of unrealistic assumptions about user needs; and, although there is a lot of fibre about, its strategic use is currently weak.
On the positive side, a recovery is expected in the next few years on the basis that the use of the infrastructure will grow. This growth will be due to consolidation, returning stability, and better pricing conditions. The upturn will allow the entrance of new players in the scenario that should mobilise the market.
So far, the year 2000 was the most important period in the evolution of fibre-optics. Growth with respect to 1999 was about 30% with the addition of 40,000km of fibre to the national backbone links.
The reason for this explosion was the entry to the market of big electrical firms Iberdrola, Red Electrica Española, and Hidrocantabrico, gas firms such as Desarrollo del Cable, the Post Office (Publico de Correos y Telegrafos), and railway transport firms Renfe (Spain's largest railway company) and Ferrocarrils de la Generalitat de Catalunya (Catalonia's regional railway system).
Today, the largest share of the fibre market belongs to Spain's incumbent operator Telefónica (which has 50%), followed by operators Uni2 (17%), Jazztel (13%), and Retevision (13%). The remainder is shared by Auna (a partnership of cable operators), the cable operator Ono, the electrical firms Red Electrica Española and Union Fenosa, and Renfe.
And as for Spain's installed dark fibre, Telefónica owns 45%, followed by Retevision (11%), Renfe (4.6%), Ente Publico de Correos y Telégrafos (4%), Red Electrica Española (3.6%) and BT Ignite (3.4%).
The presence of operators with their own fibre infrastructure is scant. The current state of fuzziness and uncertainty has prompted the bigger operators to rent infrastructures in an effort to deliver services rapidly with minimum investment.
This is the case for Retevision, which has decided to rent infrastructure to railway and electrical companies.
Furthermore, the cable operators who have to work on a regional basis with stringent requirements to achieve high penetration in a short time have oriented their deployment strategies to a hybrid copper/fibre strategy, which is cheaper and easy to install.
The particular problems that the fibre-optics sector is suffering are a consequence of the general situation of Spanish telecommunications.
On the side of new operators, the absence of a real liberalisation of the telecom market is perceived as a high barrier for their development: they claim that the incumbent operator Telefónica is a de facto monopoly because it controls around 80% of the key markets.
Figures are highly revealing: from data of the CMT, the market share of Telefónica for ADSL end-services at the end of 2001 was 83% but, including its underlying network activities, the incumbent's share was 95%.
In the fibre-optics arena, 50% of the backbone market which links the most important cities belongs to Telefónica, and this infrastructure is used to manage 90% of the fibre-optic business; the rest of the operators have to work with the remaining 10%.
"This situation, added to the economic crisis, clearly benefits Telefonica," says Javier Lopez Otero, general director of Lambda Net España, a carrier's carrier focused on services over fibre-optics.
Currently, the situation is particularly hot: Telefónica's competitors, grouped in an association, Astel, along with the businesses association CEOE and electronics industry association Aniel, are asking the Spanish government to take action to limit the power of Telefónica. The government has announced some initiatives to meet the groups' requests. But, as expected, Telefónica does not share the feelings of its competitors.
At the beginning of September in Santander in a forum organised by Aniel, Telefónica's general director of strategy Luis Lada criticised the European operators. "In order to circumvent the problem of a lack of viability of their businesses," he said, "they are asking that the regulatory authorities protect them at the expense of other operators, which is contributing to make the crisis even bigger".
And in June, at a telecommunications conference in Cataluña, Josep Garriga, the region's general director of Telefónica, said, "it would be Utopian to believe it possible to construct an infrastructure of fibre optics in a short time and to take 50% of the market share".
Lambda Net España's Javier Lopez Otero believes that, from now on, there will be consolidation. "This will help to mobilise the market", he says. "Operators will establish strategic alliances to work together, so they will be able to re-initiate their plans and then to mobilise the market," he adds. "The use of the fibre-optic infrastructure will grow as a consequence of these alliances. Consolidation of the new operators is necessary to make the market grow".
Xavier Gregoire, general director of Telia International Carrier for the south of Europe, is of the same opinion: "The state of the market in Spain presents opportunities for new operators because a period of consolidation and stability is forecast for the next year".
The Swedish operator Telia sold its Spanish branch, Telia Iberia, to the Spanish cable company Ono some time ago; now it is re-initiating its operations in Spain as a carrier of carriers.
The Telia fibre-optic network Viking, already deployed in northern Europe and the USA, is being extended to Spain: Bordeaux is already linked with Bilbao, Madrid and Valencia and, next, Barcelona will be linked to Marseille.
Contributing Editor, LWE
Maria-Angeles Grado-Caffaro is co-founder and president of Sapienza, a firm devoted to scientific & technology consultancy; she writes frequently on communications.
There are three main companies with production facilities in Spain: Alcatel with its fabrication facilities in Maliaño, a town situated in the region of Cantabria (during 2001 Alcatel produced more than 800,000km of fibre); Pirelli in Barcelona; and Corning in Zaragoza, through Cables de Comunicaciones.
Other fibre suppliers include Siemens (Germany); Ericsson (Hudiskvall, Sweden); Pinacl (UK); NKF (Holland); Nokia Kabel (Finland and Germany). Other providers for LANs and networks shorter than 100km are Avaya; Sagem (France); Leonishe (Germany); Brugg (Switzerland); Lapp Cabel (Germany); and Draka Cables (Dennmark).