Telecommunications liberalization in Spain: European objectives versus national interests

Abstract

This paper analyses the liberalization of the telecommunications sector in Spain in the period 1987-2003. Our main hypothesis is that although liberalization was imposed by the European authorities, the strategy adopted and steps taken by the Government to open the market were importantly determined by two objectives of the national economic policy: the universalization of the service and the anti-inflationary policy oriented toward entrance into the European Monetary Union (EMU). Identification of the national political interests at each point in time led the Government to block or accelerate liberalization according to the European calendar. This political use of liberalization is essential to understanding the telecommunications policy of this period. We also argue that the subordination of telecommunications policy to the anti-inflationary policy caused a delay in Telefonica’s tariff rebalancing. Finally, we explain how telecommunications policy was affected by national policy objectives. Initially, a model of infrastructure competition was introduced, but it was soon reformed due to a lack of competition and investment. Thus, a more pragmatic strategy was adopted, based on access to Telefonica’s local loop.