Fiber-Optic Network To Revive Italian Broadband Market

The new company will build a core standard fiber-optic network across Italy. By coordinating launch plans, the company can install the required volume of fibre to suit the needs of particular regions. Left to their own individual build-out plans, the operators would have installed duplicate network elements, resulting in wastage of investment and the unnecessary tie-up of physical resources such as cable ducts and towers. A coordinated launch would also allow the venture to deliver infrastructure in a more timely manner, essential to reviving Italy's stalled broadband expansion programme.
Italy Fixed Broadband Subscriber Growth, 2008-2015 ('000) Source: f = forecast; Source: BMI

Alternative fixed-line and broadband operators FastWeb, Wind Telecomunicazioni, Vodafone Italia, Tiscali, BT Italia and 3 Italia are joining Telecom Italia in the project. Each company will have a representative on the board of the new entity, which will be managed by an independent representative from the industry ministry. The new company's business plan is to be defined in three months. The scheme will be financed by the operators and public funds from state-owned Casa Depositi e Prestiti (CdP).

With a fixed-access user base approaching 13.6mn in 2010, Italy's broadband market is growing slowly in relation to other markets in Western Europe. Fixed broadband penetration is set to reach 22.5% by end-2010, among the lowest in the region is being held back by the fact that Telecom Italia's ageing last-mile copper network is the principal platform for broadband services, through xDSL technology. There are no cable networks in Italy and means alternative operators either have to build their own networks - a prohibitively expensive prospect outside affluent metropolitan markets - or unbundle local loops from the incumbent. Some limited fibre-to-the-home (FTTH) and wireless LAN solutions are in place, but are limited in scope and are expensive to use.

Telecom Italia charges relatively high interconnection and access rates to competitors wanting access to its infrastructure, which has also dissuaded alternative operators from expanding as rapidly as they would like. It is unclear whether the companies' existing broadband assets will be contributed to the new venture, as is the case with Australia's planned National Broadband Network (NBN) company, but BMI believes Telecom Italia would not have joined the project if this had been a requirement. The company remains concerned about ceding too much control of its network infrastructure, though whether the potentially greater threat from a union of all of its rivals has persuaded it to put those fears to one side, is yet to be seen.

In summary, BMI is encouraged by this development. We believe the new company will increase broadband availability across Italy and should result in lower retail and wholesale prices to be offered to end-users and third-party service providers. The open-door policy of the scheme also permits other operators to join up in future, which is positive for many smaller operators aiming to exploit untapped demand in rural and underserved areas.