InfoVía: From a Centralized Access System to a Parallel Internet

Javier Solá <>
Spanish Internet Users' Association


In December 1995, Telefónica, Spain's largest telecommunications company and holder of a monopoly over voice communications until 1998, started up a new service called InfoVía. The main idea of the service was to facilitate Internet users' access to any Spanish Internet service provider (ISP) from anywhere in Spain, charging only for a local call. Almost a year later, InfoVía now has more than 130,000 users. Over 80% use it to access their ISP and go out on the Internet. Others use it to access other local services without going out to the Internet. Telefónica's main interest in this operation is to increase the use of telephone lines from 7 minutes a day (mostly voice) to 13 (50% voice, 50% data).

InfoVía (an Internet Protocol [IP] network using private addresses) has more than 500 servers connected to it, and navigation capabilities have been added. It has become a private parallel Internet, with all its content in Spanish.

The difference in cost between local calls and long distance is paid by the ISPs. ISPs pay a fixed monthly charge that covers all communication surcharges for connection with customers. Of course, they also have to pay for their connection to the Internet.

InfoVía allows ISPs to draw customers on a national basis, increasing competition (there are no local ISPs). Spain has more than 150 ISPs and about 120,000 paying customers with Internet access (of which about 100,000 access Internet through InfoVía). Of course, this ratio of 1,000 customers per ISP cannot be maintained; a number of providers have started to go bankrupt.

InfoVía has helped to break down some of the barriers that potential users come up against when getting into online services. Users do not have to look for an ISP, get the software, and sign a contract in order to be online. The InfoVía software may be picked up at any telephone company office, and it gives online access with no contract or payment for anything else. Once in the online world, it is easy for the user to find an ISP in InfoVía and start working with it (the InfoVía software includes a navigator program and e-mail software).

Spain was the first country in the world to have a centralized Internet access system that allows anybody in the country to access the Internet through a local phone call. The experiment seems to work quite well and the local phone company has found a way of having the connection paid for and still make it profitable for the ISPs. Will this be an example to be followed by telephone companies in the rest of the world?


Background information on telecommunications in Spain

Telefónica, Spain's telephone company, was created in 1924, the state being the main shareholder. The state maintained its controlling interest until the 1960s. At that time it reduced its participation to a third of the capital. Now this participation is being reduced to zero. Telefónica is one of the world's 10 largest telecommunications companies and has subsidiaries in most South American countries.

Telefónica holds a monopoly over voice communications and wiring. No other company is allowed to lay telephone lines in the streets of Spain. This monopoly will terminate at the end of 1998. Eleven companies have been granted licenses to operate telecommunications in the country. In order to do this, they lease lines from Telefónica. It is important to mention that I do not work for Telefónica.

What is InfoVía?

At the end of 1995, Telefónica started a new service: InfoVía. InfoVía is a service through which any Internet service provider (ISP) may be reached by any of its customers--from anywhere in the country--paying for just a local call (a little over one U.S. dollar an hour). The user still has to pay the ISP for access to the Internet, but he will not be discriminated against for living outside a city.

As far as ISPs are concerned, InfoVía replaces a large part (or all) of their modem racks. Customer calls are collected by the phone company at the source and passed on to the ISP through a single frame-relay line. ISPs receive calls from the users through InfoVía and then route them to the Internet. Modem racks are still used to service local customers in major metropolitan centers.

Technically, InfoVía is an IP (Internet Protocol) network that operates with group 10 private IP addresses (which makes it a small "Internet" that is not compatible with the Internet and therefore cannot be included in it). However, InfoVía is not only used to provide access to the Internet. A service that may be accessed from anywhere in the country--at a level, very low cost--is an excellent tool for those who wish to offer online services to their customers without forcing them to contract Internet access with an ISP. Banks and online retailers are good examples.

As with any other service, the next question to be answered is very clear: who pays for it? The ISPs do. The cost of their connections to InfoVía includes a charge that levels the difference in price for phone calls that come from outside cities that have InfoVía nodes.

When it was created, InfoVía only allowed direct access to sites from the InfoVía home page (main directory). It was not possible to navigate within InfoVía from one server to another. Only in the fall of 1996 did the network become open to navigation, becoming almost like a parallel Internet, fully in Spanish and restricted to Spanish users. Users may connect to InfoVía using either a modem or an ISDN connection. The connections, made locally by the phone company, are centralized through one single telephone number (055).

Telefónica's reasons behind InfoVía

Telephone lines in Spain are used on average 7 minutes a day. The existing communications structure could handle much more than that at no extra cost, especially if communications occur outside the main business hours. Telefónica's first goal is to increase those seven minutes to 13 by encouraging the use of online services.

Also, by creating this service two long years before a second local telephone carrier is allowed to operate, Telefónica centralizes data communications through its own network, turning it into a virtual space where all ISPs and other product and service providers have to be, making it very difficult to create a competing service.

InfoVía today

One year later, InfoVía is used daily by more than 200,000 Spaniards. It has become the main channel to access the Internet. At least 80% of InfoVía users use it exclusively to access the Internet. Most Spanish ISPs do not have modems; the only possibility of access their customers have is through InfoVía.

InfoVía has turned into a key segment of Internet access. If it stopped working for a day, 80% of Internet users would be kept away from the Net, as the available modems (for those who have them) could only handle 20% of the calls. Also, most ISPs have InfoVía as their only distribution channel. Without InfoVía they would be out of business in a few hours. In short, InfoVía has turned into a key part of Internet communications in Spain.

At this point, Telefónica is implementing similar networks in South American countries where it controls local telephone companies or carriers. In the long run Telefónica plans to have these networks connected, turning InfoVía into a free, parallel Spanish-speaking Internet. Bill Gates himself, at a conference given at the 2nd Spanish Internet and InfoVía Users Conference (organized by the Spanish Internet Users' Association) in February 1997, backed the development of InfoVía in Spain and considered it to be a good idea that should be exported to other countries.

Consequences of InfoVía

Political issues

The creation of InfoVía was not well received by Telefónica's competitors. Telefónica itself is not a player in the Internet telecommunications market, but its subsidiary, Telefónica Transmisión de Datos (TTD), competes with BT Telecomunicaciones (British Telecom) and with Global One.

These competitors demanded the opportunity to start their own InfoVía-type network, with another centralized phone number (say, 056) through which they could have access to this network. They accused Telefónica of abusing its control of local communications (through the monopoly) to compete in the telecommunications market, as no other company was allowed to install the resources to replicate InfoVía.

To settle what could have become a major problem, the administration decided to regulate InfoVía. It stated that only the major carriers (TTD, BT, and Global One) could sell connections to InfoVía. An ISP could only buy its connection to InfoVía from one of these three companies. The price at which Telefónica was to sell the connection to these carriers (including its subsidiary) was also fixed. Still, TTD's competitors were not happy. InfoVía is a trademark of Telefónica, and its logo (as well as TTD's) includes Telefónica's logo. By selling communications to InfoVía, they were (and are) advertising for their main competitor.

A commission was set up to regulate the development and future of InfoVía. It did not consider providing the opportunity to create services that could compete with InfoVía (in the short run), but it imposed strict rules on Telefónica as to handling the information that it received from InfoVía, and did not allow the company to offer any added-value services, leaving these to ISPs and telecommunications companies.

Today, more than a year later, the commission is still dealing with this issue, besides others that have been regulated, such as the amount of information that Telefónica is allowed to collect from the InfoVía service. As Telefónica is in full control, it knows from exactly which phones InfoVía is called and the time that each user spends using the service. The company could even establish where each user goes in the service--in short, everything is theoretically accessible, including information about competitors' services. The commission prevents this information from being collectible.

Consequences of InfoVía for users

Leveled access

The first implication of InfoVía for users is very clear. It removes discrimination between urban users and those who live in small towns or the areas surrounding large cities. Still, it is not clear that this will change the profile of the average Internet user (as far as social class is concerned), as the possession of a computer with a modem seems to be the major entry barrier.

Dividing barriers to online connection

Connecting to the Internet for the first time is a complicated process. It usually includes a change in mentality, a decision, and some physical and contractual elements. It is necessary to complete this process before a first online connection may be accomplished.

Three elements are usually necessary to access the Internet for the first time:

The computer and the modem are basic. They can be bought anywhere in the world. The selection of an ISP, receiving or buying the software, and contracting with the ISP are a little more complicated. The user is asked to trust a company that he does not know. He is not even very clear on what it does or why he has to pay it. Nor does he know whether it is expensive or not.

With InfoVía, the computer is still necessary, but the software can be found, for free, in any telephone company office around the country. Step in, ask for it, and leave. InfoVía is free, so there is no need even to know what an ISP is. You can start navigating right away.

By navigating through InfoVía, if you are interested in connecting to the Internet you will end up finding the ISPs. They are all grouped together in a directory. You can check their conditions and contract the one you choose directly through InfoVía. You already have the software, as the InfoVía software includes, for free, all major navigators, mail programs, and so on. The ones that do not come with the original package may be downloaded from InfoVía at no extra charge. Dividing the connection steps into two parts probably simplifies the process and reaches certain types of people faster than making them go through all of it at the same time.


InfoVía does create a certain level of confusion among potential online service users. The difference between InfoVía and the Internet is not clear enough to the public. Users keep asking which one they should connect to and the price of each.

Consequences of InfoVía for ISPs and the Internet access market

InfoVía as a distribution channel for ISPs

Before InfoVía came along, Spain had a traditional ISP structure: the market an ISP could reach depended on the number of nodes it had in different locations. Potential customers would live in areas close to a node. In order to cover a large part of the country, an ISP had to deploy nodes in all the major cities. The necessary investment was large enough to discourage small companies from trying. These small companies could attack a local market, either a major city (a lot of competition) or a small one (with a reduced number of potential customers), which made their success uncertain.

InfoVía has allowed any ISP to provide service anywhere in the country just by renting an InfoVía line. It has completely changed the rules for competing in the ISP market. Most barriers to entry have disappeared. This has occurred at the same time as Microsoft has come out with inexpensive ISP software that runs on a Pentium machine. A lot of small ISPs with resources close to nil have been created. These companies have a Pentium machine in somebody's apartment, InfoVía and Internet connections, and a technician/owner who thinks that he can reach a break-even line very quickly. The result is a country with more than 250 ISPs who fight for a market with less than 150,000 paid Internet connections, 50% of which are probably handled by fewer than 10 companies.

Also, service companies, such as banks, are giving Internet access to their customers, therefore competing with the ISPs. Other institutions are offering services to their associates, also giving access nationwide through InfoVía. Consequently, Spain has a highly unstable ISP system, with about 2,000% of reasonable ISP capacity. No less than 95% of the ISPs will probably have to sell, change to another business, or file for bankruptcy within the next 18 months.

Furthermore, telecommunications in Spain are fairly expensive (compared with the USA). The price of a 64 K line in Spain is equivalent to that of a T1 line in the States. As prices charged by ISPs are similar to those charged in the States, the quality of the connection ISPs offer (except at the beginning, when they have very few customers) is significantly poorer.

The customer ends up paying for this lack of stability. Regular customers start renting a low-cost connection from a newborn ISP, which will probably charge one low price for the whole year and then go bankrupt after a few months. The customers have to change ISPs and e-mail addresses. Also, they have to pay again for something that they have already bought. This time they will probably rent their connection from a major ISP, paying a little more but getting a provider that has a more stable connectivity and that will allow them to maintain an e-mail address for as long as they desire.

Major ISPs also suffer from this cannibalistic war, which always ends up turning into a price war. The difference is that the ratio of ISPs to customers is so skewed that the rationality of prices is lost. Some ISPs offer unlimited annual connection for US $40 (in a country where connectivity costs 20 times more than in the U.S.). They do not do it for too long, though. The only defense for major ISPs is to maintain rational prices and compete in quality and stability of service. Once again, all this is caused by an ISP market in which competitors may attract customers from all over the country and where the entry cost is very low, eliminating the entry barrier.

Consequences of InfoVía for telecommunications companies

InfoVía has opened a new market for carriers. They can now profit from the customer-to-ISP segment of Internet access, which has traditionally been a product for the local telephone company. In countries where local calls are included for a basic price, this would not be the case (as this market does not exist), but would turn into a more extensive use of lines that should be as empty as possible.

In Spain, all calls have a price that must be paid by somebody. With the existing structure, the excess cost of InfoVía is paid by ISPs through a retailer (a carrier). In the long run this means that Telefónica gets more efficient use of existing telephone lines (and gets paid for it). Carriers are retailers for this service, and therefore must retain a part of the amounts they invoice to ISPs (otherwise it would not make any sense to be in this business). ISPs pay whatever they are asked for, as they have no other way of reaching the whole Spanish market. In order to survive, they must pass this cost on to their customers (if they can). As ISPs cannot usually pass this cost on (because of the price wars), they end up assuming it (one more nail in their coffin).

The explosion in the access market has created a very unstable Internet and InfoVía segment for carriers, with many small customers who may go bankrupt in a short period of time, always leaving some debts. The market should grow--in the next two years--to be much more stable, with a few well-established customers who will use a much larger bandwidth than all the small bandwidths used by today's Spanish ISPs taken together. It will be two hard years for the market, as carriers must look out for (and bet on) the ISPs that will probably survive and be the large customers two years from now.

Technical structure of InfoVía

InfoVía is centralized in a number of access points around the country. The legal regulation that controls InfoVía states that there should be 50 of these points, one in each major city (head of province). This structure was quickly found to be very expensive and impractical because:

  1. It is much more expensive to create a structure in each city than to carry user telephone traffic to a few central points (unless there is a very large amount of traffic in a given city).
  2. An ISP, when leasing a line to InfoVía, must divide the rented bandwidth among the access points. An ISP must have as many fixed virtual circuits as access points exist in InfoVía. It is complicated to change bandwidth from one access point to another, and in no case can it be done dynamically. With two access points (Madrid and Barcelona) this is not too complicated. A third point (Valencia, being opened now) is already creating problems. Fifty points would be a nightmare for ISPs and network managers. Just imagine dividing 64 Kb among 50 points and giving each one of them the right bandwidth, the minimum unit being 1 Kb.

The starting point for InfoVía was a two-node network. Each of the nodes allowed more than 7,000 users to connect simultaneously (from the outside through modem or ISDN). One year after that, 15,000 concurrent connections are available, collapsing the system at peak time. The solution has been to open a new node in Valencia, the area with the third-largest number of users. New nodes will be opened as the need arises. Modem and ISDN calls are directed to a single telephone number (055, same number all over the country), which discriminates the type of call.

It is easy to see that the spirit of InfoVía is different from that of the original Internet, centralizing resources instead of decentralizing them in preparation for problems (such as nuclear war) that may affect some of the nodes of the Net. But again, the goal is not to create a highly secure network, but one that is adequate for commercial use. The Internet itself is changing quite a lot in this sense. Communications are centralized more and more in points where carriers exchange local or international traffic. InfoVía's main difference is that its exchange points are also access points for users.


InfoVía has simplified access to the Internet in Spain by supplying low-cost user-to-ISP communications countrywide and by giving away Internet access software. It has also established a simple communication system for Spanish companies or institutions to offer online services to Internet nonusers.

InfoVía has very quickly become the main distribution channel for the Internet in Spain, creating a high level of dependency, even for customers of other carriers. It has significantly affected the ISP market by lowering the barriers to entry, therefore allowing a large number of low-capital companies to destabilize the market. Spanish users now have an inexpensive way of accessing the Internet, but have lost the stability offered by systems with a few well-established ISPs. The consequences are starting to show. Many users that have contracted year-round access for US $50 or $60 are finding that their ISP has simply disappeared after a couple of months, forcing them to find another ISP and contract and pay again. This second time they will probably contact an ISP that is bigger, more stable, and more expensive.

Another destabilizing factor, independent from InfoVía, is that banks have started offering access as a free service to their customers. What was started by one bank is becoming, very quickly, a mandatory service that most banks will soon have to offer to their customers to stay competitive. Such service will not be a tool to gain competitive advantage (as intended by the banks that originated the move), but one more cost that they have brought upon themselves. Again, somebody has to pay for access, and if the banks do, users will not have to. At this point, even the largest Spanish ISPs will have a very dark future unless they handle outsourcing for corporations that offer access to add value to their business.

Coming back to the subject of this paper, we find that more than 1,000 companies are now offering services through InfoVía. In the beginning these domains belonged mainly to access providers, but the number of ISPs is decreasing, while content providers and real-life service providers are increasing their numbers. This means that Telefónica must now start advertising InfoVía, not as an inexpensive way to access the Internet, but as a network through which anyone with a modem may access a large number of services without having to contract Internet access. Only if the number of users who access these services through InfoVía increases will the service have a possibility of continuing and having a competitive advantage over other services that might be started after liberalization.

InfoVía has become established as a key to Internet access in Spain, and it will be very hard to replace or compete with it in the short run, as competitors--if or when allowed to--will have to set up a whole communications structure like the one established by Telefónica. It does not seem likely that several of these services can survive in Spain concurrently.

It is in the interest of other Internet carriers to maintain InfoVía, as they do not have to create separate structures to handle incoming calls and they can still participate in the user-to-ISP market. They will keep trying to have Telefónica release control over the service (even if it is still operated by Telefónica), but their goal is to separate the image of InfoVía from that of Telefónica, their competitor, so that when they sell InfoVía lines, they do not have to advertise for Telefónica.

Telefónica will have to consider within the next year how the end of its monopoly may affect its control over InfoVía and act accordingly, paying special attention to maintaining the business that it has created.