As the “voice age” wanes, telecom operators must urgently restructure their own services, networks and subscribers in order to respond to the new opportunities and challenges that come with the digital age through a transformation. In this regard, Telefónica has been at the forefront of the industry, releasing rich new support layer technology and applications through its deployment of a fiber to the home (FTTH) ultra-wideband network and promoting subscriber needs with “Fusion” bundled services, especially video streaming, as it sets out on a new path.

In the past year, Telefónica’s FTTH subscribers in the domestic market grew to over 1 million, equivalent to its growth for the past three years; meanwhile, as of the second quarter of this year, its subscription TV (PayTV) has reached 2.2 million subscribers, 1.8 times its number of subscribers in the previous year. The new business model based on ultra-wideband has not only effectively stimulated subscriber growth but it has also significantly enhanced profitability – in the first half of this year, Telefónica’s profits doubled by up to €3.693 billion.

Spain’s Broadband Industry Layout

Spain’s broadband industry has developed quite rapidly, placing it in the lead in Europe. This is due in part to the government’s comprehensive support as well as the full competition in the country’s broadband market.

In 2013, the Spanish government presented a digital agenda in the hopes of promoting high-speed network deployment and released various telecom industry laws and regulations to provide policy assistance for comprehensive broadband planning and to provide subscribers with guaranteed experiences. The government also provides budgetary subsidies combined with funds that the EU has set aside for investments of over €170 million in broadband construction.

Based on comprehensive broadband planning, by 2020, Spain will achieve complete broadband coverage with network speeds of 30Mbps or higher, and broadband with speeds of 100Mbps or higher in over 50% of homes. Spain’s FTTH network currently covers 35% of the population, 5% higher than the European average.

“As a social infrastructure, broadband must be one of the services that we provide, and we hope to achieve full coverage as quickly as possible,” says Deputy Director General of Spain Telecommunications Networks and Operators Jose Angel Cabrera Garcia. He added that FTTH in Spain already serves as a reference story for research for promoting deployment in other European countries and regions.

The Spanish market has 12.6 million broadband home subscribers with a penetration rate of up to 91%. With a 45% share of the domestic market, Telefónica, having connected over 5.9 million broadband subscribers, is the market’s absolute leader. Meanwhile, however, the company faces increasingly fierce competition from competitors – of the many local fixed broadband access operators, market players with significant subscribers include Vodafone (20%), Orange (15%), and Jazztel (12%).

To attract subscribers in the saturated market, these operators have made a big deal out of bandwidth expansion, business innovation, and subscriber experiences. When an operator does make a breakthrough, it triggers a ripple effect, stimulating overall broadband industry growth and ultimately benefiting the average consumer.

Telefónica’s Ultra-Wideband Transformation

Founded in 1924, Telefónica is one of the top telecom companies on a global scale with main operations in the Spanish and Latin American markets. The company ranked eight among global operators in the latest Forbes Fortune 500, retaining its top ten position in terms of subscribers.

Spanish and Latin American telecom consumption is not high, and because Telefónica always adapts to and closely follows market trends, it has been able to achieve such impressive results. Early in 2008 in the initial stages of the global broadband industry, this operator had determined its FTTH strategy and had plans for its ambitious development program.

In the face of the surging tide towards digitization, Telefónica has actively embraced ultra-wideband as a highest priority strategy for strong investment. Just this year, it launched Spain’s fastest broadband network with downlink speeds of up to 300Mbps and bundled video and other services to form a differentiated service experience, leading subscribers to migrate to the fiber optic network, creating a domestic market success with 1 million new FTTH subscribers for the year.

Virtual reality, artificial intelligence and other aspects have exponentially increased demands on future broadband technological innovations while 4K streaming and cloud services will stimulate demand for ultra-wideband. At the 2015 Ultra Broadband Forum that was just held in Madrid, Zhao Houlin, Vice Chair of the United Nations Broadband Commission and Secretary-General of the International Telecommunication Union, and Telefónica Chief Technology Officer Enrique Blanco both pointed out that the ultra-wideband industry has already entered the best stage of its historic development and will become a driving force of economic development for various countries.

In the FTTH network deployment process, this operator similarly encountered a variety of challenges. For example, there are many historic buildings and structures in the local region, making it all the more difficult to bring fiber optics “into the home”, and “the last 100-150 meters” became an insurmountable divide. After three years of targeted innovations together with its partners, Telefónica found a path to success through ODN pre-connected solutions – this solution adopts aviation connector technology, using quick connections to replace traditional manual welding, pre-connecting homes for plug-and-play, not only successfully resolving the pipeline difficulties when reaching subscribers but also greatly enhancing construction efficiency (reducing subscriber connection times by 20%) while also strengthening environmental adaptability.

At the market level, Telefónica vigorously implemented the fusion business transformation, drawn by subscriber demand and the promotion of business development. In 2012, the company joined with partners to promote fixed/mobile integrated “Fusion” services; in 2015, it was the first to launch a smart home service, achieved the 5-play (voice, broadband, IPTV, mobile, smart home) concept, utilizing a comprehensive business package to gain a competitive edge. It is precisely because of this that Spain’s telecom circle underwent a wave of acquisitions: Vodafone acquired Spain’s largest cable operator Ono, for €7.2 billion while Orange brought in broadband service provider Jazztel, thereby achieving integrated business operations.

As explained by local telecom industry experts, this kind of bundling is conducive to overall advantages and to respond to OTT attacks. In its transformation, the slogan put forward by Telefónica, “Be More”, is very aggressive; by building ultra-wideband and constantly enriching home service packages, based on the network and driven by the market, it has achieved a positive business cycle as it moves step by step from being a traditional operator to a digital operator.

Best Experiences through Focus on Video

As a post-voice “killer application”, video is at the core of Telefónica’s 5-play and the direction of its business transformation.

On the one hand, Telefónica obtained a large volume of premium video resources through its acquisition of Canal+ and purchase of La Liga / UEFA Champions League exclusive broadcasting rights; on the other hand, in launching 300Mbps broadband access, it also announced that it would provide subscribers with 4K streaming services.

Just as Telefónica Chief Technology Officer Enrique Blanco said, only by providing the absolute best subscriber experiences can subscriber affirmation be won over, and on the basis of satisfying basic connection needs, Telefónica do its best to provide perfect experiences for subscribers around its video business.

“We’re both humble and yet very proud to be a part of this industry. Our jobs revolve around providing perfect service experiences every single day. We want to be at the forefront of the industry and must meet the needs of subscribers in their digital lives. We take the initiative to understand their needs through Big Data and other methods. Whether it be operators or other companies in the industry, none of us can stop. We must grasp every second and every minute to guarantee that subscribers have the best experiences and will not be infringed upon when using services,” he said.

Meanwhile, video is also the best business for bandwidth utilization. Thanks to the rapid popularization of 4K TV and set-top boxes and the increasing enrichment of 4K content, 4K streaming through On-Demand has already become a basic requirement for consumers. Moreover, a single 4K movie with a size of tens to hundreds of gigabytes, online video streaming requires a broadband of at least 30-50M, and over 100M for smooth streaming. If streaming is needed for multiple screens or in multiple rooms, higher bandwidth guarantees are needed.

4K is not the end point. Looking to the future, 8K and even high articulation video services will be required. Third party forecasts believe that, by 2020, 8K will become a basic requirement, this means that the network must be able to provide 1G broadband. For operators like Telefónica, this also means a continuous enhancement of ARPU value and the creation of new opportunities for a competitive edge.