Italy Considers Experimental Public/Private NGN Roll-Out to Bypass Telecom Italia

The Italian regulator has revealed it is considering the launch of a public-private fibre next-generation network (NGN) as part of ongoing efforts to bring high-speed broadband to under-served regions. Regulator AGCOM is examining the experimental model, which will use a combination of public money and private investment from one of Italy's broadband operators to bring an NGN to the Lombardy region, which includes Italy's financial capital, Milan. Notably, given Telecom Italia's unwillingness to share control of its NGN roll-out, the proposed model will presumably exclude the incumbent.

Head of AGCOM, Corrado Calabro, told Reuters at the telecom industry's annual conference in Capri that forming a network company with all the major Italian telecom operators to roll out fibre would not work because former monopoly Telecom Italia is unwilling to join in, significantly adding that the network company "is not the only solution there is". He also said that while the Lombardy project is valuable for experimental purposes, it is also being considered as a possible model for other parts of the country.

Outlook and Implications

• AGCOM's Patience with Telecom Italia Wears Thin: The announcement marks the regulator's latest effort to offer an alternative to NGN roll-out in Italy, which is in danger of floundering due to the lack of any nationwide agreement on investment. The alternate operators, including Fastweb, Wind, Tiscali, and Vodafone Italia, are currently locked in a war of words with Telecom Italia, with the incumbent refusing to consider any shared NGN roll-out that would lead to a loss of network control for the incumbent. The alternates have announced plans to roll out a 2.5-billion-euro (US$3.5 billion) fibre-optic network without Telecom Italia, but have been forced to admit this will be very difficult without the incumbent's co-operation (see Italy: 20 September 2010: Italian Operators Reach Agreement on Technical Standards for Fibre Roll-Out). Telecom Italia continues to resist efforts to broker a co-operative roll-out deal, and the suggestion of excluding the incumbent signals that the regulator's patience is wearing thin.

• Public Funding May Be Vital for Under-Served Regions: AGCOM says the way in which high-speed broadband is delivered will require a different approach depending on the population density and demand for services. While Telecom Italia is already pushing ahead with NGN roll-out in cities, Italy has a relatively sparse population density, particularly with the remote mountainous areas in the south offering challenges to traditional roll-out models. The regulator has conceded that the state financing agency, Cassa Depositi e Prestiti (CDP), may need to step in to provide extra incentive to operator roll-out in such regions, as has been seen elsewhere in Europe.

• Alternates Become Increasingly Bold: The Italian alternative providers have recently launched a challenge to a rise in Telecom Italia's unbundling tariffs, arguing that the increase would strengthen the incumbent's interest in its traditional copper network, and discourage investments in NGNs (see Italy: 29 September 2010: Italian Alternates Launch Challenge to Telecom Italia Unbundling Tariff Rise). Vodafone Italia has recently revealed plans to invest some 1 billion euro (US$1.4 billion) in improving its mobile broadband network in Italy, with a target of extending coverage to the 12% of the population that still lack adequate internet access within three to four years (see Italy: 7 October 2010: Vodafone Italia Announces US$1.4-Bil. Investment in Mobile Broadband Network). Elsewhere, the board of Fastweb announced last week that it has accepted Swisscom's offer to acquire the remaining 18% of the Italian broadband unit that the Swiss incumbent does not already own as it seeks to boost a flat performance in its stagnant home markets (see Italy: 5 October 2010: Fastweb Board Accepts Swisscom Bid for Remaining 18% Stake). With increasing investment muscle, Italy's alternate operators are now seriously looking at efforts to expand their fixed-line networks with Telecom Italia's help.