Your Broadband Sucks, Telecom Italia CEO Tells UK

When it comes to soccer, opera, pasta and words featuring the most vowels, a majority of Brits would doff their caps to the superiority of the Italians (OK, maybe not soccer). But surely the UK, with its tech clusters and banking might, can get a better broadband network together than its southern European neighbor?

Not according to Amos Genish, the CEO of Telecom Italia, who took umbrage during a call with analysts today when quizzed about the Italian operator's plans to reduce capital expenditures, as a percentage of revenues, in 2019. Wouldn't a better strategy be to follow the example of the UK's BT Group plc (NYSE: BT; London: BTA), increasing expenditure on high-speed networks in exchange for more supportive regulation? (See Telecom Italia Says 5G Auction May Force It to Sell Assets.)

"We cannot compare the UK with Italy," Genish scoffed. "BT and the market were really behind with respect to UBB [ultra-fast broadband] coverage. We've had no complaints from the regulator and we've jumped in rankings of UBB coverage as well."

Indeed. How could anyone bear comparison with the UK? This is, after all, a country whose broadband inadequacies were laid bare and ridiculed by its own government this week, when a new report revealed that all-fiber networks are available to just 4% of UK premises. Next to well-endowed Portugal and Spain, where 89% and 71% of properties have all-fiber availability, the UK looks like a fiber weakling. (See UK Bumpkins Told Not to Expect Fiber in Their Lifetimes.)

But so does Italy. Recent data on all-fiber coverage is not readily available, but Italy's all-fiber networks covered just 2.7% of the population in July 2016, according to the European Commission, and that figure was up from 2.4% a year earlier. Even with the recent spending by Telecom Italia (TIM) and Enel, a state-backed utility now building a wholesale fiber network, Italy is unlikely to have pumped up its fiber muscle all that much.

That Telecom Italia is so coy about its own all-fiber situation does not instill confidence, either. Asked to disclose details of its all-fiber coverage, the operator basically said it was not ready to share that information, sounding like a teenager out on a first date. What it did claim is that its all-fiber coverage is twice that of Enel's in cities where the two operators are competing. Genish also revealed that in the second quarter, when Telecom Italia spent €740 million ($865 million) in total capex, around €150 million ($175 million) went solely to fiber-to-the-home networks.

BT, for its part, has promised to spend £200 million ($263 million) more this fiscal year than in the previous one, bringing overall capital expenditures to about £3.7 billion ($4.9 billion). But that will still equate to just 16% of revenues, assuming BT's sales forecasts are correct. In Italy, Telecom Italia spent €4.6 billion ($5.4 billion) last year, a staggering 32.3% of domestic revenues. Yes, it is cutting expenditures as a percentage of sales. But it still expects to invest around one-fifth of its total revenues in capex in 2019. (See BT to Slash 8% of Jobs in Efficiency Drive.)

For more fixed broadband market coverage and insights, check out our dedicated Broadband content channel here on Light Reading.

Troubling as the reduction may be for Telecom Italia's suppliers, it does not necessarily mean engineers are planning for more lazy afternoons at the beach. As part of the operator's "digitalization" program, it is trying to find ways of slashing both operating and capital expenditures without taking shortcuts and jeopardizing its network competitiveness. The planned virtualization of its radio access network, for instance, is expected to cut related costs in half, Genish told analysts today. (See Is vRAN Still Too Hot to Handle?)

Where Italy has traditionally lagged the UK, according to European authorities, is on the coverage of erroneously labeled "next-generation access" (NGA) infrastructure -- meaning fiber-to-the-something-that-is-not-the-actual-property networks that can support connection speeds of at least 30 Mbit/s. While recent data is again unavailable, the UK ranked seventh in Europe in 2016, with NGA networks that covered between 90% and 95% of households. Italy then languished in the number 23 spot, providing NGA coverage for 70-75% of homes.

Italy also seems to have lagged on broadband adoption. According to a 2017 study by the OECD, it came 30th out of 37 countries that were ranked on fixed broadband subscriptions per 100 inhabitants, with a figure of 27.4%. The UK came eighth, with 39.4%.

Of course, one of the problems with studies of this nature is that broadband statistics can be sliced and diced in so many ways. How many people can access a basic service of at least 2 Mbit/s? How many are in hot spots? Which country has the highest average download speeds? While the list is endless, one can safely assume that rankings of so-called NGA penetration will become increasingly worthless in the era of gigabit connectivity. An all-fiber diet is the only one that will count.

— Iain Morris, International Editor, Light Reading

Be the first to post a comment regarding this story.
Sign In