Telefonica to triple broadband speeds to 300Mbps: A sticking plaster on an open wound?

The Spanish broadband and phone provider is facing stiff competition thanks to the arrival of streaming services and a period of consolidation in the country.

Spanish telco Telefonica is planning to triple the speed of its fastest broadband connections for both ADSL and fibre, in a bid to win the battle for superfast broadband customers.

The proposed speed bump - which will see the telco debut a new top speed of 300Mbps before the summer - was reported in Spanish media following statements made by its Spanish president Luis Miguel Gilpérez.

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The move comes at a time when the industry is beginning to see revenues recover after years of falling prices, sparked by the economic crisis and following a period of market concentration. After several mergers and acquisitions, 90 percent of broadband fixed and mobile lines are now in the hands of just a few companies: Telefonica, Vodafone-ONO, and Orange-Jazztel, with the latter union still pending EU approval.

At the end of last year, the Comisión Nacional de los Mercados y la Competencia (CNMC), the Spanish markets and competition regulator, proposed legislation that would force Telefonica to provide competitors with access to its fibre network at a regulated wholesale price, as currently happens with the ADSL infrastructure.

While the Spanish telecommunications market was liberalised in 1998, Telefonica still owns the last mile of the copper network: when a customer wants to subscribe to a broadband service, the engineer doing the installation is still employed by Telefonica, whichever ISP they've signed up to.

Telefonica - which currently operates in 21 countries and made revenues of €50.38bn for the last calendar year - had to make a move. So, earlier this month, Gilpérez said: "It appears that 100Mbps falls short and customers demand more speed, so the company is looking to develop these services [with] an increase in speed."

Telefonica declined to provide further details on the proposed increase, saying it has yet to be made official. According to Spanish media outlets, broadband customers currently on packages offering download speeds of up to 100Mbps will be bumped up to 300Mbps, while those on up to 10Mbps will see their theoretical maximum download speed increase to 30Mbps. All ADSL customers are also expected to be automatically migrated to fibre broadband as soon as it is available in their area.

Further revenues?

The company is also thought to be considering a slight fee increase of €5 for Movistar Fusion broadband and TV packages, which have around 3.7 million customers. The move appears risky considering that, according to Spanish regulation, consumers can leave a provider without penalty when a company unilaterally changes their terms of service.

Bundling more TV channels in with broadband access is viewed by the sector as a vaccine against the tightening of the pay TV market - where consumers are tempted to choose cheaper internet access and spend the difference on a streaming service instead - thanks to the arrival of TV on demand services from the likes of Netflix, Amazon, and Apple in Spain. By offering TV channels bundled with an internet connection, consumers are less likely to leave and subscribe to other services, goes the thinking. It's a big claim in a context of ever more demanding users.

With this initiative, Telefonica is hoping to get ahead of its rivals. Jazztel (12 percent market share) has a top broadband speed of 200Mbps, while Vodafone-ONO (21.4 percent market share) offers up to 500Mbps, but only for businesses. It also appears that Telefonica will continue replacing its copper network, which is more expensive to maintain than fibre.

According to data published by the Spanish stock market regulator CNMV, Telefonica had 5.88 million customers at the end of 2014 (a 44.3 percent market share) of which 1.3 million were on fibre connections. If the firm does not halt its fibre rollout because of CNMC's decision to force the company to provide wholesale fibre access, its fibre footprint is expected to be close to 13.6 million premises later this year. The goal is for Spain to be "the most digital country in Europe", Gilpérez said. But do users really want to pay for that?

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