Bundling broadband spain

BROADBAND

BUNDLING

IN

SPAIN:

CROSS-

SECTIONAL ANLYSIS AND EVOLUTION
Rodrigo Alcázar Silva

M. Sc. in Economics and Regulation of Public Utilities Universitat de Barcelona

June 2012

Content
I. II. a. b. III. a. i. ii. b. i. ii. c. d. IV. INTRODUCTION ........................................................................................................................ 3THEORETICAL FRAMEWORK AND LITERATURY REVIEW ..................................... 3 Bundling and its effects on competition. ....................................................................................... 3 Bundling in broadband market ...................................................................................................... 6 BROADBAND BUNDLING INSPAIN................................................................................. 7 Cross-sectional analysis ................................................................................................................. 8 Usage of bundling strategies ...................................................................................................... 8 Prices of bundles..................................................................................................................... 10 Bundling and pricing evolution ................................................................................................... 13 Usage of bundling strategies .................................................................................................... 13 Prices of bundles..................................................................................................................... 15 Analysis of incremental prices by operator .................................................................................. 17 Concentration and bundling ........................................................................................................ 23 CONCLUSIONS, REGULATORY AND PUBLIC POLICY CHALLENGES................. 26

ANNEX 1. THE DATABASES ............................................................................................................. 28 ANNEX 2. PRELIMINARY RESULTS OF INTERNATIONAL BENCHMARK .............................. 29 REFERENCES ...................................................................................................................................... 31

2I.

INTRODUCTION

It is well known that, market competition is critical to allocate resources efficiently, leading to a greater social welfare, because competition usually leads to lower final prices and handle greater quality and greater variety in products and services. The breaches of competition and the abuse of a dominant position in a market, significantly affect the user, making itnecessary the intervention of the regulator in order to prevent it. In this work, I first expose a brief theoretical framework in which I try to respond basic questions like: What is bundling, what area its advantages and if its usage is good or not for the society. After this, I analyze the current status of broadband bundling in Spain, as well as its recent evolution. Finally, I try to brieflyexpose some findings as well as regulatory and public policy challenges in the sector. II. THEORETICAL FRAMEWORK AND LITERATURY REVIEW a. Bundling and its effects on competition. What is bundling, what are its advantages as a sales strategy and how it impacts on welfare are issues about which there is abundant literature. This work is not intended to offer new discoveries in this field, at leastnot from a theoretical point of view. However, it is necessary to define, at least, a theoretical framework in which the basic considerations about this topic can be presented. Thus, I must start by saying that bundling is the business strategy of selling two or more products or services through their presentation as only one. There are different types of bundling, which have been exposed by...