Spanish Telecom Price Wars Promise Cheaper Net Access

In the aftermath of this month’s liberalization
of the telecommunications industry, new companies are engaged in a price
war that may translate to cheaper Net access.

Retevision, which offers its Iddeo
Internet service, launched the price war by offering clients local rates
9.3 percent cheaper than those of Telefonica, Spain’s largest
operator and former monopoly. This benefit is currently extended to only
20,000 companies. The company–Spain’s second largest operator–has also
led the way in billing clients by the minute, rather than by several minute
cycles.

Uni2–owned by France Telecom, Cableuropa, Ferrovial
and the Banco Santander–is also breaking with tradition by not charging
callers the cost of establishing a phone connection. The old practice
raised the ire of Internet activist groups because users were being billed
for failed connections in addition to valid online time. The company is
also reducing its rate for nighttime calls.

According to a study by the Organization of Consumers and Users (OCU),
of Spain’s three main telephone companies (Telefonica, Retevision, and
Uni2), the latter offers the most competitive pricing.

Rafael Arias-Salgado, Spain’s Minister of Development and Public Works,
said that, despite liberalization and “price wars,” his ministry and the
Telecommunications Market Commission (CTM) will continue to share certain
regulatory functions in “establishing a price fixing system for telephone
service.”

Currently, infant companies are required to use Telefonica’s
infrastructure–and are thus subject to the company’s base price–though
the minister told Radio Nacional de Espana that these new operators will be
operating entirely independently of Telefonica by March 1999 “at the
latest.”

Telefonica offers a number of Internet access plans of its own and many
third parties access cyberspace through its InfoVia Plus onramps.

“I think Telefonica is in a good position despite losing its monopoly,”
said Arias-Salgado. ” [It’s] probably better than it would be willing to recognize
publicly, given that among the great telephone monopolies of the Western
world, Telefonica has been one of the most efficient.”

More than twenty other companies have applied for licenses to operate in
some aspect of telephony. The CMT has announced that all should be granted
by January.