Home Business Insights & Advice TIM tie-up in Italy: experience warns against a single broadband network

TIM tie-up in Italy: experience warns against a single broadband network

by Sponsored Content
17th Nov 20 11:20 am

After new stay-at-home orders were rolled out across the peninsula last week, Italians will begin to rely heavily on the internet once again. A fast and well distributed national network will be a vital life line for Italy’s economy as daily activities from education, to business, to social activities, migrate increasingly online from now into the future.

Unfortunately, despite being the 4th country in Europe to join the internet in 1986, the internet revolution in Italy has stagnated. Italy is one of the few countries in the EU that has never had a cable television network and currently sits at 47th place in the world for internet speed, one of the slowest in Europe.

At the end of August this year, in a bid to save money and accelerate implementation of a superfast national fibre-optic network, Giuseppe Conte’s coalition government pushed ahead plans to instate a Single Broadband network by merging current competitors Telecom Italia (TIM) and Open Fiber into the newly christened AccessCo. Rome sees this merger as a means to avoid duplicate investments in broadband expansion and streamline the replacement of the copper network with Fiber To The Home.

The government hopes that this will be a marriage of convenience. Instead, by eliminating the competition, it’s likely to result in slower broadband rollout and higher prices. If the nation has been hindered in meeting targets, it is not because of duplicated investments, but rather its decades-long reliance on TIM.

Tricksy TIM

This is by no means the first time that TIM will have been left to their own devices. For decades, under a TIM monopoly, the Italians were saddled with slow and unresponsive internet which they paid through the nose for. With no claims on its market dominance, the incumbent company had no incentive to innovate or offer competitive pricing plans. By pushing competing operators to merge together, is the Italian government inviting history to repeat itself?

TIM clearly hasn’t changed its blue and red stripes, because as recently as this March they were fined €116 million by Italian antitrust body as punishment for attempting to thwart new entrants to the Italian telecoms market. Having initially refused to invest funds in so-called ‘uneconomic’ areas, TIM had an abrupt change of heart after losing a government subsidised tender to Open Fiber. Antitrust authorities claimed that this was a “premeditated anti-competition strategy” and rejected the company’s subsequent appeal. Chicanery of this sort demonstrates that TIM is not a team player.

An alternative solution

As a response to TIM’s failures to improve and expand coverage, the government deployed the fibre optic company, Open Fiber in 2015. This initiative was a resounding success and market competition created between the incumbent and the new-entry can take the credit. After just four years, Italy can boast an ultrafast broadband network in 8.5 million homes. Open Fiber was so successful that the UK and German markets caught onto the idea of an alternative provider.

Then suddenly the progress Italy had made hit an obstacle when Conte decided to pull a U-turn. Two months after the folding of Open Fiber into TIM was announced, concerns have not abated amongst antitrust watchdogs and European consumers that a monopoly will not promote progress. A letter to the Commission penned by EU consumer groups Euroconsumers and Altroconsumo mid-October illustrates fears that the price for a “quasi-monopolistic access network… [will] be paid by Italian consumers and businesses”. If the idea catches on in the wider culture of telecommunications, the group predicts that monopoly mania could spread across Europe.

The CEO of Enel himself, Francesco Starace, has expressed concerns about TIM meeting competition rules. As a consequence of this insecurity, ENEL is on the cusp of selling their 50% stake to Australian investors Macquarie. Italy’s plan has failed to convince both consumer watchdogs and Enel that their plan will make for a healthy market.

Cautionary tales from Down Under

Australians would know how a monolithic, state-led approach can go south. Just like the Italians, the Australian government set their sights on a national broadband network (nbn) in 2009. In a political bid to cut costs on fibre and corners on infrastructure as budgeted by the previous government, costs steadily ballooned out of control under the newly elected party. And the worst part? The network doesn’t function.

Ten years and AUD $51 billion later, the nbn is far behind schedule and over budget. Australia has plummeted from 30th to 50th place in the internet speed league tables. Hampered with snail speed connection at extravagant prices, the Australian populace is widely dissatisfied by the failed promise of an efficient system.

Intervention from above

Since Rome and TIM are both onboard with the progression of the merger, the only actor in a position to save Italy from itself could be the European Commission. Authorities in the EU could block the merger on the grounds that this tried and tested anti-competition model has proven unsuccessful before. In Italy, the money probably won’t even be theirs to burn, since the new broadband provider would be a candidate for bankrolling from the €209 billion purse provided by the EU’s Recovery and Resilience Fund. The acceleration of digital transformation will not come with the investment of resources in a company with a significant debt profile and a history of uncooperation.

The emergence of a new competitor was the gearshift that Italy required to instigate change in 2016. If that very same competitor is allowed to be absorbed by the Goliath of Telecoms, nothing will prevent TIM from fixing inflated prices and dawdling on broadband installation. A fixed-line national infrastructure monopoly will bog down progress as plans mire in merger talks between parties with conflicting interests. Competition is the key to technological progress and the EU must intervene before Italy self-sabotages.

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