The Ministry of Science and Technology has recently announced new measures to increase competition in the telecommunications sector. The package aims to reduce regulation and increase efficiency.

The main features of the package are as follows:

  • The existing price-cap system will be relaxed as of 2003. Telefónica is obliged to reduce its prices by 2% in nominal terms (4% in actual terms). The price reduction system is maintained, but the subscription fee will be excluded from it. At present, the price-cap system must compensate for any rise in the subscription fee through price reductions. Following requirements imposed by the European Commission, the subscription fee will be increased by €0.95 up to €12.62 in the next year.

  • Telefónica may increase the subscription fee for Integrated Services Digital Network lines.

  • Telefónica's discount plans will only be authorized if they contribute to the implementation of new services.

  • A price reduction of 15% on leased lines is to be imposed on Telefónica.

  • The capacity-based interconnection model which Telefónica was obliged to include in its interconnection reference offer of August 9 2001 will also apply to voice communications.

  • Telefónica's competitors have a greater opportunity to provide services to the government. Government contracts are regulated by the Administrative Law, which requires that they be awarded by beauty contests. Alternative operators often allege that Telefónica has won beauty contests unfairly. The ministry is drafting a procedure to apply to these bids.

  • The virtual local loop will be implemented. At present, customers who receive services from alternative operators using Telefónica's local loop are also invoiced by Telefónica for the access service. The virtual local loop will allow alternative operators to provide and invoice the access services themselves.

  • The ministry announced that investment commitments assumed by operators who were granted licences to provide Universal Mobile Telecommunications System or Local Multipoint Distribution Service services will be reviewed under a more realistic approach.

For further information on this topic please contact Almudena Arpón de Mendívil, Eduardo Gómez de la Cruz or Alejandro Plaza at Gómez-Acebo & Pombo by telephone (+34 91 582 9100) or by fax (+34 91 582 9186) or by email ([email protected] or [email protected] or [email protected] ).