Global Insight Perspective | |
Significance | Telecom Italia has created an Open Access unit tasked with managing its fixed-line network and ensuring that other operators and internal customers obtain equal access to the network. |
Implications | By succumbing to regulatory expediency to create a new unit, Telecom Italia has signalled its reluctance to engage in a long-drawn-out battle with both the Italian regulator and the European Union. |
Outlook | The creation of the new network paves the way for Telecom Italia to embark on the roll-out of a new high-speed broadband network across Europe. |
Telecom Italia has announced plans to create a new unit to manage its fixed-line network, becoming the latest European telecoms company to implement functional separation. In a surprise announcement yesterday, Telecom Italia said the new unit, to be called Open Access, would be completely autonomous and separate from its other commercial operations. "The Open Access division will assure other operators and internal customers of an efficient service in line with market expectations and in line with indications from the telecom regulator," the company said, adding that, "the Open Access activity will be completely independent and separate from the commercial functions of the group".
The creation of the new unit is the key point of Telecom Italia's reorganisation plan. The company says that the aim of the reorganisation is to increase efficiency, reduce costs and give greater transparency to the access network. Open Access will form part of a new division called Technology and Operations. Apart from Open Access, the new division will also have a network branch to design and build a modern network, an information technology branch and a technical infrastructures branch for real estate, plants and facilities management. Telecom Italia said it plans to spend the next year fully implementing the creation of the new unit.
Outlook and Implications
- Making the Regulator Happy: Telecom Italia's planned creation of a new unit will finally help it to appease the Italian telecoms regulator, AGCOM. The regulator has been vocal in its demands for Italy's former incumbent telco to implement functional separation, a position that largely contradicts that adopted by regulators in France and Germany. In fact, given AGCOM's threat to impose functional separation on Telecom Italia, the company's actions may be more to do with "regulatory expediency" than strategic purpose. "We do not want to have things imposed on us," Telecom Italia Chief Executive Franco Bernabe said at a news conference yesterday, adding that, "we want to have an open and transparent relationship with the regulator". Commenting on the development, AGCOM said it views the plans positively and will meet with Telecom Italia chiefs shortly to evaluate their suggestions (see Italy: 21 November 2007: Under the Spotlight—Telecom Italia's Management Waiting Game, 18 October 2007: Under the Spotlight: Confusion Trails Quest to Separate Telecom Italia's Network Operations, 9 October 2007: Telecom Italia Shareholders Mull Separation of Fixed Network—Reports, 13 April 2007: Italian Government Mulls Bill to Allow Telecom Italia Network Separation and 9 June 2006: Regulator Mulls Splitting Telecom Italia's Commercial, Network Units).
- In the Footsteps of BT: After much hullabaloo, the European Union (EU)'s call for functional separation is beginning to yield fruits. BT blazed the trail in September 2005, creating its Openreach unit to become the first European former incumbent telco to implement functional separation. Since then, and despite fervent demands by the EU and some national telcos, only Sweden's TeliaSonera has followed suit, announcing plans to create its own independent unit in September 2007. Regulators in Greece, the Netherlands and Italy have all raised the prospect of forcing through similar actions in their own countries, but it is only in Italy that this has materialised. This latest development in Italy could potentially tilt the debate across Europe on the merits of functional separation, empowering the EU to come forward with more authoritative policy ideas (see Europe: 4 October 2007: National Regulators Back EU's "Functional Separation" Call, Europe: 26 September 2007: EU Commissioners Split on Functional Separation, Sweden: 24 September 2007: TeliaSonera Caves in to "Functional Separation", Creates New Infrastructure Company, 29 March 2007: EU Renews Call for Telecoms Network Separation, Netherlands: December 2006: Regulator Mulls Split of KPN into Service and Infrastructure Unit and United Kingdom: 22 September 2005: BT Unveils Openreach Division).
- Clarifying Telecom Italia's Future: Yesterday's announcement has finally offered a glimpse into the strategic direction of Telecom Italia's new management. For a start, the Bernabe-led team has not signalled that it has any plans to spin off or sell stakes in the new unit. Indeed, although both promise to offer equal access to an incumbent's fixed network, Telecom Italia's Open Access will be structurally different from BT's Openreach because unlike the latter, Open Access will not have a separate, independent board. The creation of the new network, in a way, summarises the domestic agenda of the new management, paving the way for that all-important investment into a new high-speed broadband network. Attention will now shift to 6 March, when the company unveils its international strategy. However, by reiterating his management's desire to expand rather than sell, Bernabe will be wary of major divestments, including Alice France (see Italy: 1 February 2008: Telecom Italia Drops Plans for Fixed Network Spin-Off—Reports, 28 December 2007: Telecom Italia to Restructure Management for Expansion Push and 19 February 2007: Telecom Italia Plans US$8.8 bil. Network Modernisation by 2016; Telefónica Eyes 12-14% Stake in Olimpia).