Telecommunications and Audiovisual Sector Economic Report 2018 ESTAD/CNMC/004/19 Index HIGHLIGHTS OF 2018 3 1. THE TELECOMMUNICATIONS AND AUDIOVISUAL SECTOR 10 1.1 Introduction ........................................................................................... 10 1.2 Revenue ................................................................................................. 13 1.3 Investment and employment ................................................................ 18 1.4 Infrastructure ......................................................................................... 21 1.5 Penetration ............................................................................................ 29 1.6 Prices ..................................................................................................... 35 1.7 Use of the services ............................................................................... 38 1.8 Bundling ................................................................................................ 43 1.9 Public sector initiatives Key initiatives ............................................... 48 in 2018 and prospects for 2019 .................................................................. 48 1.9.1 EUROPEAN TELECOMMUNICATIONS AND AUDIOVISUAL FRAMEWORK 48 1.9.2 CNMC INITIATIVES 52 2. RETAIL SERVICES 61 2.1 Fixed communications ......................................................................... 61 2.1.1 FIXED TELEPHONY 61 2.1.2 FIXED BROADBAND 76 2.1.3 BUSINESS COMMUNICATIONS 94 2.2 Mobile communications ....................................................................... 98 2.2.1 MOBILE TELEPHONY 98 2.2.2 MOBILE BROADBAND 119 2.3 Audiovisual services .......................................................................... 128 2.3.1 FREE-TO-AIR TELEVISION 128 2.3.2 RADIO 134 2.3.3 PAY TELEVISION 137 3. WHOLESALE SERVICES 143 3.1 Fixed network interconnection .......................................................... 143 3.2 Fixed broadband ................................................................................. 152 3.3 Leased lines ........................................................................................ 159 3.4 Mobile communications ..................................................................... 164 3.5 Audiovisual signal transport and broadcasting services ................ 173 3.6 Audiovisual content ............................................................................ 176 Telecommunications and Audiovisual Sector Economic Report 2018 2 HIGHLIGHTS OF 2018 Global figures for the telecommunications and audiovisual sector The total turnover of the sector increased by 0.7% compared to 2017 to stand at €34,516 million. Revenue from the sale of retail services remained almost unchanged from the previous year, at €25,240 million, while wholesale revenue - corresponding to the services provided between operators - increased by 3.2% to €9,276 million. Among retail services, mobile broadband was the one with the fastest growth, with a growth rate of 12.7% to stand at €5,275 million. In terms of wholesale services, the strongest growth was seen in revenue from fixed broadband (an increase of 14.6% up to €917 million) and audiovisual content (7.3% increase up to €3,464 million). At the other extreme we have revenue from fixed and mobile interconnection services which fell by 7.5% and 5.4% respectively, to €899 million and €1,466 million. The penetration of all retail services increased, except for fixed telephony The penetration of mobile broadband increased by five percentage points, up to 98.6 lines per 100 people, and fixed broadband reached 32.5 lines per 100 people. Pay television grew by 3.1%, up to 14.8 lines per 100 people, and so did mobile telephony, up to 116.1 lines per 100 people. The penetration of fixed voice was the only one to see a decline, falling to 42 lines per 100 people. Greater degree of bundling of services, mainly due to the increase in bundles including pay television The degree of bundling of pay television stands out for the third year running, as 91.3% of subscribers receive it under joint offers with other services. This is 30 percentage points higher than in 2014, when quintuple-play bundles (fixed and mobile voice, fixed and mobile broadband and pay television) started to become significant. Fixed telephony and fixed broadband saw 75% and 97% of lines being bundled, respectively. Quintuple-play bundles were the only ones to grow significantly Quintuple-play bundles saw the most significant growth again this year with almost half a million new subscribers, increasing to 5.9 million. This compares to quadruple-play bundles which added 100,000 units and finished the year at 6.3 million. Telecommunications and Audiovisual Sector Economic Report 2018 3 Household spending on quintuple-play and quadruple-play bundles fell in 2018 At the end of 2018, households with quadruple-play bundles (fixed and mobile voice and fixed and mobile broadband services) spent an average of €53.20 a month - slightly less than at the end of 2017. Furthermore, households with a quintuple-play bundle spent €77.30, almost two euros less than in 2017. Investment in the sector exceeded €5,300 million Total investment in the sector stood at €5,340 million. This figure includes the investment in spectrum, which stood at €494 million in 2018. Leaving out the cost of acquiring spectrum, investment in the telecommunications and audiovisual sector in 2018 was 3.8% higher than in 2017, due to the rollout of their fibre optic networks by the main telecommunications operators, and also to the rollout by the mobile operators of their 4G networks (Long Term Evolution). Extensive rollout of Next Generation Access (NGA) networks By the end of the year, NGA networks accounted for 57 million lines, of which 46.7 million corresponded to fibre and 10.3 million to HFC DOCSIS 3.x. These figures represent almost 8.3 million new lines compared to the previous year, corresponding entirely to FTTH (Fibre to the home). The three main operators accounted for 77.1% of total retail revenue The market share of the three main operators in this sector (Movistar, Orange and Vodafone) stood at 77.1% of the retail revenue, almost 10 percentage points more than in 2013, the date marking the start of the concentration process taking place in the sector in recent years. The MASMOVIL group accounted for 5.7% and Euskaltel (which includes R and TeleCable), for 2.6%. Fixed communications FIXED TELEPHONY Telecommunications and Audiovisual Sector Economic Report 2018 4 The trend in the number of fixed lines changed after three years of growth The total number of fixed lines fell by about 100,000 lines, down to 19.5 million, and penetration fell by three tenths to 41.8 lines per 100 people. Likewise, voice revenue from fixed telephony fell by 7%, down to €2,244.4 million. In 2018, the average traffic per fixed line fell significantly, albeit at a lower rate than in previous years Voice traffic originating from fixed networks fell by 12.9%, mainly due to the decrease in the average consumption per fixed line, which fell by the same proportion. In contrast, traffic originating on mobile networks grew by 3%. The number of fixed lines bundled with mobile services has increased At the end of 2018, 75.3% of all fixed lines were bundled, two percentage points more than in the previous year. 63% of the total were included in a quadruple-play or quintuple- play bundle, compared to 60% in 2017. In terms of fixed lines, the combined market share of the three main operators was 89.5% The alternative operators continued gaining ground and reached a fixed line market share of close to 55%, whereas the incumbent Movistar lost 1.5 percentage points during the year to see its share fall to 45.3%. If we add the MASMOVIL group and Euskaltel to the three main operators, the market share of the five taken together is 98%. FIXED BROADBAND Broadband connections reached 15.2 million lines Fixed network broadband lines increased by 3.5% in the past year, up to 15.2 million. This volume of lines resulted in penetration of 32.5 lines per 100 people. However, revenue fell by 1.3%, down to €4,411.2 million. Active FTTH lines accounted for more than half of all broadband Lines with xDSL technology continued to fall. In 2018, these lines fell by 26%, while FTTH connections grew by 30.2% to stand at 8.7 million, a figure which represents 58% of all broadband lines. Telecommunications and Audiovisual Sector Economic Report 2018 5 9 million lines with a connection speed of 100 Mbps or greater The improvement in access networks led to an increase in the speed of the broadband lines provided. 74.2% of lines had a speed equal to or greater than 30 Mbps, compared to 64.8% in the previous year. The percentage of lines with a speed of 100 Mbps or greater reached 58.7%. The MASMOVIL group saw the greatest increase in fixed broadband lines 509,000 new broadband lines were added to the market. The MASMOVIL group added 478,000 lines in 2018. Movistar ended last year with an increase of 123,000 lines and a share of less than 40%; Orange added just over 26,000 lines and the number for Vodafone fell by 140,000. An increase in convergent bundles offering fixed and mobile services 96.6% of broadband lines were bundled with another service. Quadruple-play and quintuple-play bundles accounted for 83.5% of all bundles that come with fixed broadband. The local loop unbundling wholesale service continued to decline The local loop