Spanish cable TV venture may be put under tougher scrutiny

Date: 18/07/1996

By Tim Jones

COMPETITION Commissioner Karel Van Miert is poised to open an in-depth four-month investigation into a Spanish cable television venture which has already been operating for a year.

With the 22 July deadline approaching for the European Commission to decide whether to clear the venture, officials have suggested that more time will be needed to vet Cablevision SA - a joint enterprise between Telefónica de España and Canal+ España's subsidiary Sogecable.

This will be the second inquiry into the activities of Telefónica by the Commission, which is already looking into the Spanish monopoly telecoms operator's involvement with its Swiss, Dutch and Swedish counterparts in the 'Unisource' global alliance.

In a repeat performance of his treatment of Deutsche Telekom over the firm's Franco-American alliance and its pricing review, Van Miert will use both cases to ensure that the Spanish market is prised open as soon as possible.

At the same time, the Commissioner and his officials in DGIV, the Directorate-General for competition, want to ensure that an emerging market is not foreclosed by a firm already holding a dominant position.

This is a particular risk in the cable-TV market because Telefónica already has a head start. In an unregulated market, it took the plunge and joined forces in early 1995 with the country's largest cable group - Promotora de Informaciones SA (Prisa). Under this agreement, the operator supplies the cable television infrastructure and Prisa the content.

In July last year, Cablevision was founded to combine Telefónica's nation-wide fibre-optics network with programming from Canal+ España. The operator began pilot projects in Madrid and Barcelona.

Since the creation of the venture, the Commission has battled for the right to approve it and ensure it does not stymie competition. It threatened to begin infringement proceedings against the two companies for failing to notify the venture and then beginning operations.

Before the general elections which swept it from power, Spain's Socialist government gave its clearance to the operation despite the concerns of a domestic competition tribunal and complaints from Van Miert that he should have had the right to look at the deal.

Madrid argued that since Canal+ had only a 25&percent; stake in its Spanish subsidiary, the deal had no cross-border elements to be assessed by the Commission. DGIV pointed out that Canal+ had the right to appoint more than half Canal+ España's board and its managing director. This gave the French parent company effective control and, as a result, it had to be scrutinised by the Commission.

Notification was finally forthcoming on 11 June.

The biggest worry for the Commission is the grip Telefónica could command on the cable television market and, thus on the market for alternative networks for telecoms.

The Spanish Cable Telecommunications Act passed in December gives the operator a licence to operate in each government-designated territory of more than 20,000 inhabitants, while other Spanish or foreign firms would have to compete for a second licence.

Few communities have gone ahead with the licensing of a second operator and, in some areas, they are not expected to bother. At the same time, Telefónica will be given a majority stake in the local operator.

As newly licensed firms will have the right to offer a wide variety of services, including interactive video and data transmission, the threat exists that Telefónica could pick up free licences throughout the country.

Although it may feel victimised at times, Telefónica can expect to be treated in just the same way as Deutsche Telekom.

Any time it needs clearance from Van Miert, he will use this as a crowbar to open the market up just a little more.