Italians Forced Into Marriage of Convenience

In an effort to cut costs and counter regulated price rises, Italian alternative operators Fastweb SpA (Milan: FWB) and Wind Telecomunicazioni SpA have struck an accord to share transport and unbundled access infrastructure.

The duo plan to collocate their equipment in Telecom Italia (TIM) central offices, share backhaul capacity, and offer fiber ducts, dark fiber, and transmission capacity to each other. The agreement covers, in particular, "local loop unbundled (LLU) exchanges and fiber-optic infrastructure. The aim of the agreement is to rationalize network costs following recent decisions on unbundling fees."

In March, Italian regulator Agcom increased the unbundled local loop price that Telecom Italia can charge by more than 11 percent, to €8.48 per month, and backdated it to the beginning of the year.

That move, say FastWeb and Wind, means competitive operators are "having difficulty in undertaking further investment in areas not directly covered by their networks, a situation that is harmful to the development of competition in the fixed-line market."

The fixed broadband market is already dominated by the incumbent operator, which had 6.86 million retail broadband lines, for a near 58 percent market share, and leased out 1.58 million wholesale lines at the end of June. (See Telecom Italia Reports H1.)

FastWeb, which is majority owned by Swisscom AG (NYSE: SCM), had 1.575 million broadband customers at the end of June for a 13.2 percent market share, while Wind had 1.52 million (12.77 percent market share), with both reporting strong broadband customer growth. (See Fastweb Reports H1 and Wind Reports H1.)

Both FastWeb and Wind are expected to eat into Telecom Italia's market share in the coming years, with Wind considering a purchase of struggling fourth-placed operator Tiscali SpA to help ramp up its numbers. (See Wind Swirls Around Tiscali and T Italia Set to Take IPTV Crown.)

The increase in regulated pricing and the logistics of their new agreement could slow down that projected market share gain, though.

— Ray Le Maistre, International News Editor, Light Reading

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