Vodafone, Orange to roll out joint FTTH network in Spain
Vodafone (LSE: VOD.L) and France Telecom-Orange's (FTE.TI) Spanish subsidiaries are investing up to €1 billion ($1.3 billion) to build out a joint Fiber to the Home (FTTH) network covering 50 of Spain's major cities.
Set to begin offering services to an initial 800,000 households in March 2014, the joint effort will reach 3 million households in 2015 and 6 million in 2017, said the companies in a news release.
The deployment will enable the two providers to effectively compete with Telefonica (NYSE: TEF), which operates a FTTH network that currently reaches 2.2 million homes. It could also help drive more competition in Spain's emerging FTTH service market.
Both of the service providers, reported Reuters, still need to get Telefonica's permission to access its connections into individual homes.
"The fibre optic market in Spain is very deficient in terms of competition and could end up... a monopolised market if this is not corrected," Orange Spain CEO Jean-Marc Vignolles told Reuters at a news conference in Madrid.
While each service provider will own and operate complementary networks, including horizontal and vertical cabling to access buildings, the two service providers will be able to share network investments and use of their network infrastructure. Orange and Vodafone will build their own vertical network infrastructure in the buildings where they don't already exist within their coverage territories while maintaining the networks in their territories.
They will jointly negotiate sharing agreements with other service providers that have vertical infrastructure in the territories the agreement covers but will be responsible for their own networks.
Both companies will independently handle the connection, delivery, maintenance and service management of their networks. They will also market and price the services differently.
On the regulatory front, the two providers said they would focus on three areas: sharing vertical infrastructure at prices based on actual cost; gaining access to Telefonica's ducts to facilitate rapid deployment of horizontal infrastructure; and streamlining the methods to obtain permits to build into buildings by working closely with local municipalities and neighborhoods.
The two service providers will also open their networks, which are based on an open access model, to other operators that want to invest in the new FTTH deployment system.
This agreement comes at a time when momentum for FTTH-based services is growing, albeit slowly.
Although FTTH makes up a minority of Spain's overall 11.56 million wireline broadband connections, adoption is rising. According to Spain's telecom regulator Comisión del Mercado de las Telecomunicaciones (CMT), 53.6 percent of the 42,380 new broadband subscriptions added in December were FTTH.