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Italians Strike NGN Ducts Deal

Ray Le Maistre
6/23/2008
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Italian network operators Telecom Italia (TIM) and Fastweb SpA (Milan: FWB) have brokered a landmark agreement to share some of the passive infrastructure assets of their next-generation network (NGN) rollouts, the two companies announced today. (See TI, FastWeb Share Nets.)

The two carriers say they will cooperate on the reciprocal use of existing fiber ducts and on the planning of new fiber route construction to eliminate "duplication." They are encouraging other companies to join their new gang as well.

Both the incumbent carrier and triple play pioneer FastWeb, which is now majority (82 percent) owned by Swisscom AG (NYSE: SCM), have plans to build fiber access networks extensively throughout Italy, which will cost each carrier hundreds of millions of euros over the coming years. (See TI Uses Huawei for NGN, Report: EMEA Set for FTTH Surge, FastWeb Approves Expansion, FastWeb Plans Home Improvements, and Swisscom Buys FastWeb.)

While the agreement is believed to be focused on new access network routes, a Telecom Italia spokesman said the carrier couldn't comment on whether the deal might extend deeper into the carriers' respective networks to include backhaul and/or metro routes. FastWeb did not respond to a request for comment.

Cost and time-to-market benefits
Although neither company disclosed any financial details, the move should provide significant benefits to both carriers. Identifying and gaining access to rights of way and digging the roads to lay new cables, is costly and time-consuming, especially as there is, according to some industry executives, a dearth of experienced companies with the smarts to lay new fiber cables properly.

In the two operators' joint statement, FastWeb CEO Stefano Parisi said: "For the first time, we are seeing cooperation in infrastructure and know-how which will accelerate the spread of broadband across the country. It is a European ‘first’ which demonstrates the positive results of competition between infrastructure operators and Italy’s specific success.”

To date, the sharing of passive infrastructure has been a cost- and time-saving approach adopted by European mobile operators such as Vodafone Group plc (NYSE: VOD), Orange UK , T-Mobile International AG , and 3 Group . (See Vodafone, Orange Revamp Network Share Deal and 3 & T-Mobile Share 3G in the UK.)

Telecom Italia and FastWeb also announced the end to a number of ongoing legal and financial disputes, though one brought by FastWeb against Telecom Italia, related to customer "win-backs," is not included in the agreement. (See FastWeb Fights TI.)

While neither operator provided any guidance as to financial impact of the network sharing agreement and the cessation of the numerous legal tussles, investors were clearly pleased, especially FastWeb's stockholders. While Telecom Italia's share price ended the day up 0.7 percent at €1.25, FastWeb's stock shot up by more than 7 percent to €22.20.

Pleasing the regulator
The news comes only days after Telecom Italia, which is under new leadership and ownership, announced it had drawn up a set of proposed commitments for its recently formed Open Access division, created by the incumbent to promote access network competition and transparency. (See TI Steps Towards Separation, Telecom Italia Hives Off Access Network, Telecom Italia Confirms New CEO, and Telefónica Gets Green Light for TI Stake.)

And it's clear that Telecom Italia is looking to put itself in a positive light with the Italian regulator and with its wholesale access customers. In the new partners' joint statement, Telecom Italia's domestic operations chief Oscar Cicchetti notes: “We are committed to building a new generation network... It is a project of great importance for our customers, the market and the country, which does not want to see resources wasted or pointless duplication of infrastructure, but does want to move quickly. The agreement with Fastweb goes in this direction. Our hope is that this model of cooperation will be pursued by other operators too."

The other Italian operators that could, in time, pitch into such an agreement are the country's other fixed broadband access network operators Wind Telecomunicazioni SpA and Tiscali SpA (Milan: TIS), the latter of which is likely to come under new ownership sometime soon. (See Wind Joins Euro IPTV Surge, Tier 1 M&A Update, and Tiscali Takeover Looms.)

— Ray Le Maistre, International News Editor, Light Reading

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