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FastWeb Plans Home Improvements

Italian alternative operator Fastweb SpA (Milan: FWB) is set to launch new services and capabilities for its triple-play customers as it continues to compete with chief rival Telecom Italia (TIM) and starts to deliver profits to its new owner, Swisscom AG (NYSE: SCM). (See Swisscom Bids $4.9B for FastWeb and Swisscom Buys FastWeb.)

It's also planning to extend its own network to even more Italian homes, aiming to directly reach half of the European country's 58 million population.

The triple-play pioneer, which boasts nearly 1.2 million broadband customers (980,000 residential and 215,000 business users) compared with Telecom Italia's 6.1 retail DSL users, told investors today it's ready to deliver self-install home gateways to its domestic and SoHo (small office home office) customers in the second half of this year.

The new gateway, which will connect to set-top boxes, laptops, and other home devices using fixed or WiFi connections, will enable SIP-based telephony and fixed/mobile convergence (FMC) services, something that FastWeb has on its roadmap.

FastWeb is currently in talks with multiple Italian wireless carriers about the possibility of becoming a mobile virtual network operator (MVNO) so it can put its mobile plans into action. (See Fastweb Plays Wireless Waiting Game .)

The new gateway will also cut out installation costs for customers, shorten the service activation process, and enable remote updating and configuration via the customer's broadband connection.

The move will bring FastWeb in line with a number of European Tier 1 incumbent carriers that are delivering their expanded broadband service portfolios, including video, through increasingly sophisticated home gateways.

Paolo Pastorino, chief technology officer at the Home Gateway Initiative (HGI) , a carrier-led organization that develops home gateway specifications, says operators including BT Group plc (NYSE: BT; London: BTA), Orange (NYSE: FTE), and Telecom Italia already provide self-install gateways, and notes that the integrated tools that enable customer self-installation are among the key features carriers want from their gateway vendors. (See Home Gateway Group Puts on Specs, HGI Defines IMS Specs, and HGI, FMCA Team Up.)

FastWeb also says it's developing a new service, based on the Universal Plug and Play (UPnP) standard that will enable its customers to use their TV sets to watch and listen to different types of media files, such as video, audio, and photos, that are stored on their home gateways or other devices, such as laptops, that are UPnP-capable.

Pastorino notes that, while the planned UPnP-based capabilities, which would require a UPnP client to be installed in the customer's set-top box, would not necessarily drive additional revenues for FastWeb, it would meet increasing customer demand for greater home networking capabilities, and so likely help reduce churn.

It would also mean that FastWeb's customers would not need to invest in an additional home device, already available from various home electronics manufacturers, to link their PCs to their TVs for access to stored media files, or use physical media such as DVD discs to transfer files, adds the HGI man.

Heavy Reading chief analyst Graham Finnie believes both moves will benefit FastWeb. “Residential gateways with sophisticated capabilities and self-install features are becoming essential to success in broadband. Done right, it reduces opex, raises customer exit barriers, and reduces churn," notes the analyst.

Finnie adds: "The addition of UPnP capability for video transfer will broaden FastWeb’s video capabilities at a time when the video market is undergoing Internet-led upheaval. Again, it looks like a good move.”

News of the new features and services come as FastWeb announced its financial results for the second quarter, and first half, of this year. (See FastWeb Reports 1H07.)

While the Italian operator reported a net loss of €14.9 million (US$20.5 million) from revenues of €714.4 million ($985 million) for the first six months of the year, it managed to make a net profit of €5.8 million ($8 million) from revenues of €360.5 million ($497 million) during the second quarter.

FastWeb also announced that it's evaluating plans to expand its own network to reach half the Italian population, from the 45 percent it currently covers. The cost of unbundling Telecom Italia's local loop and installing more equipment in local exchanges would cost an extra €60 million ($82.7 million) in capex on top of 2007's planned capital outlay of €400 million to €500 million ($551 million to $689 million).

FastWeb's share price closed today on the Milan exchange up €0.27, about 0.7 percent, at €37.29.

— Ray Le Maistre, International News Editor, Light Reading

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