Talk of a unified telecom network in Italy long predates the Covid-19 pandemic, with then-deputy prime minister Luigi di Maio admitting the government was “working to set the conditions” for it in November 2018. Credit: Belga
Given the emphasis her office has put on the importance of antitrust measures in the digital market, and indeed rumblings from her own team as recently as September, the decision by European Commission Executive Vice President (and Commissioner for Competition) Margrethe Vestager not to ask for paperwork regarding Italy’s drive for a single broadband network comes should not be seen as an endorsement of the endeavour.
In mid-October, the European consumer advocacy organisation Euroconsumers wrote to Vestager and fellow commissioners Thierry Breton and Paolo Gentiloni to ask the Commission to use its antitrust prerogatives to ensure Italy’s move towards a rete unica or “single network” did not grant the former Italian telecoms monopoly, Telecom Italia (TIM), control over a renewed “quasi-monopolistic access network.” Though it has not required TIM to submit a notification for the new landline network, dubbed FiberCop, for procedural reasons, that does not mean the Commission has greenlit the Italian government’s plans to force competing operators into a single ultra-fast broadband network.
The fact of the matter is that, while it may appear as a win for TIM and the Italian government, this is far from the last hurdle Giusuppe Conte’s government and TIM will need to clear in order to make FiberCop a reality. As Franco Bassanini, the chair of broadband provider Open Fiber, pointed out on December 2nd, the Italian initiative to create a single network under the control of one operator will make it more difficult for Italy to tap into its tranche of the European Union’s unprecedented recovery funds to improve the country’s overall levels of Internet access and speed. The Commission may have determined it won’t look into FiberCop, but that doesn’t mean it will agree to the single network plan.
Rome runs roughshod over operators
The Italian government’s plans for its broadband network, as Euroconsumers made clear in their plea to the Commission, is a fairly clear cut about-face on market liberalisation and competition. Having multiple operators drive the expansion of Italy’s broadband grid has itself been a relatively recent development, with the Italian state controlled Cassa Depositi e Prestiti (CDP) investment bank collaborating with energy champion Enel to jointly create Open Fiber in 2016. As the consumer advocates point out, TIM’s failure to make the necessary investments to help Italy close its connectivity gap with other EU markets spurred the creation of Open Fiber in the first place.
Just a few years later, Rome seems intent on undoing what has, by all accounts, been a successful experiment in market competition. Over the past several months, the Italian economy minister Roberto Gualtieri has been spearheading efforts to reallocate broadband network assets from TIM, but also Open Fiber, into a unified network. Unfortunately, that ‘new’ entity will be controlled by TIM, which has bought into the state’s decision to effectively write its competition out of existence.
In line with those efforts, the Italian government has taken a heavy hand with any outside investors looking to invest in this new network. After TIM moved to sell the American investment fund KKR a 37.5% stake in its “last mile” grid, Italy only granted the transaction a ‘conditional clearance’ under the proviso that KKR plays along with the government’s plan. KKR muddied the waters surrounding the transaction soon afterwards, however, by exploring the sale of 30% of that minority stake to a branch of the Abu Dhabi Investment Authority (ADIA), an Emirati sovereign wealth fund. Rome has now given a ’conditional’ green light to KKR and ADIA to move forward with the sale, provided ADIA agrees to the same conditions.
Will Brussels foot the bill?
Talk of a unified network in Italy long predates the Covid-19 pandemic, with then-deputy prime minister and Five Star Movement leader Luigi di Maio admitting the government was “working to set the conditions” for this plan in November 2018. Now, however, the historic stimulus funding package put together by the European Union within the framework of ‘NextGenerationEU’ has raised obvious questions over whether the Italian state is planning to use some of the nearly €210 billion in grants and loans it will be receiving from Brussels to fund this new, TIM-dominated network.
On the surface, this would appear to be exactly the type of digital infrastructural investment the EU is asking governments to prioritise in their recovery spending plans. The ‘digital transition’ is a major pillar of NextGenerationEU’s Recovery and Resilience Facility, which accounts for €672.5 billion of the total €750 billion package. This is not even including the €8.2 billion Ursula von der Leyen’s Commission has allotted for the ‘Digital Europe Programme’ in its 2021-2027 multiannual financial framework (MFF), nor the funds that the next MFF will likely allocate to digital infrastructure in the mould of the Connecting Europe Facility.
As Franco Bassanini of Open Fiber recently explained, however, the specifics of the Italian initiative are likely to cause problems if Rome wants to put European funds towards its nationalistic broadband project. As he pointed out: “one thing is using European recovery funds for a common broadband network available to all operators, quite another using them to favour one operator versus another.” By indulging TIM’s push to maintain a dominant position in the future combined network, the Italian state is going against the grain of European regulations that would instead favour a network outside TIM’s control.
As such, while the Commission may not be nixing the plan at this stage, it clearly is not committing to bankrolling it either.