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This reports describes the current status of broadband in Italy and highlights market opportunities for U.S. firms.
This report profiles the Italian broadband market, with a focus on Digital Subscriber Line (DSL) and fiber to the home (FTTH).   It describes wired broadband network infrastructure, broadband technologies, applications, major service providers, and trends.  The Italian government's proposal for broadband growth is also summarized.
Italy represents the third largest market in the European Union for telecommunications products, services and technologies respectively.  Even though the telecommunications sector is currently in the midst of a slowdown, Italy offers many opportunities for U.S. companies.

Broadband services are relatively new to Italy due to a comparatively low personal computer and Internet penetration rates by European standards.
The market consists mainly of digital subscriber line (DSL) services and leased line offerings to business customers. Alternative technologies are primarily fiber optics cable networks for fiber to the home (FTTH), and satellites for television broadcasting and limited broadband Internet access.  Cable networks, for cable modems and cable television, are not well developed, and their use is minimal in Italy.
The only complete national broadband infrastructure in Italy consists of Telecom Italia's own network.  Accordingly, Telecom Italia is the chief provider of DSL services.  Following the unbundling of the local loop, the market has opened to new entrants and it is now one of the most competitive in Europe.
The outlook for broadband growth is promising as the Italian government considers it an essential means for reaching its program objectives for e-government, healthcare and education, and for the country's industrial and economic growth. The Italian government will invest heavily in broadband and in information technologies, particularly for the public administration.  It will also grant tax incentives to industry.
Broadband use by both residential and business sectors is expected to become much more widespread over the next five years as competition increases and providers offer various technology platforms to access the local loop. 
While there are no U.S. broadband providers operating in Italy and the returns from breaking into a well-guarded sector may not be rewarding, opportunities abound for U.S. vendors of broadband technology applications.
Ultimately, U.S. companies will have to establish a local presence in order to successfully compete inItaly.  The nature of the market, the culture, the difference in size, and the market's fragmentation and distribution systems will demand careful planning and local support but the rewards could be worth the effort. 
Note: The estimates and forecasts indicated are based on information from trade sources and reports from the OECD, the Organization for Economic Co-operation and Development; trade associations FEDERCOMIN, the Italian Federation of Telecommunications Industries; ASSINFORM, the Italian Association of Information Technology; and EITO -European Information Technology Observatory; from market research organization Netconsulting; and Gartner Research, and the U.S. Department of Commerce's Export IT Report - Spain and Italy.

*All currency is expressed in US dollars.
2001 Exchange rate:  1 = $1.12
2002 Exchange rate:  1 = $1.11
2003 Exchange rate:  1 = $.088 (est.)
The Broadband Market
Italy has the third largest market for telecommunications equipment and services in the European Union, with a value of $44 billion in 2002.  The value of the market for telecommunications services was $37 billion in 2002, accounting for 14 percent of the European Union market for telecommunications services.  Fixed line and wireless telephone services accounted for the bulk (38 and 50 percent respectively) of the market in 2002.  The remainder consisted of Internet and online services (4 percent), switched data/leased line services (8 percent) and cable television services (0.3 percent), according to EITO 2003. The growth rate in telecommunications services decreased from 10 percent in 2001 to 4 percent in 2002, and it is expected to decelerate to 3 percent in 2003. The gradual slowdown in growth has been due to both the global economic stagnation and sector-specific factors.



Telecommunications infrastructure is comprised of 47 percent of fixed line networks, 26 percent of mobile networks, and 21 percent of telecommunications cables.

National Infrastructure

Fixed telephone lines:  27.303,000
Teledensity:  47 %
Analog lines:  100%.

Telecom Italia operates the majority of the national fixed line infrastructure.

International Infrastructure

Satellite networks - Italy's satellite networks are made up of 3 Intelsat earth stations for a total of 5 antennas:  3 for the Atlantic Ocean and 2 for the Indian Ocean;
Submarine networks - Italy's submarine cable network consists of 21 submarine cables and a 10,000 km. two fiber optic pair system. The network is able to carry up to half a million calls simultaneously.
The main backbone providers include:
-                     Telecom Italia
-                     Nautilus/Med1 (51% owned by Telecom Italia
-                     Wind
-                     Tiscali
-                     Albacom
-                     Fastweb
-                     Atlanet
-                     Global Crossing
-                     Colt.
Broadband services are relatively new to Italy due to a comparatively low personal computer and Internet penetration rates. In June 2001, Italy had the 12th highest broadband penetration rate in the European Union
, equal to 0.44. connections per 100 inhabitants. As of December 2002, the use of the Internet for commercial purposes experienced exponential growth, and penetration rates now approach the European average of 40 percent, with business and consumer accounts expected to surpass 38 percent and 49 percent respectively by the end of 2003. 

Digital Subscriber Line (DSL), Asymmetrical Digital Subscriber Line (ADSL) and DSL [1] Broadband Technologies
Digital Subscriber Line (DSL) is Italy's main technology for broadband Internet access, accounting for 84 percent of broadband subscribers. The only significant competition to DSL for broadband Internet access is provided by fiber to the home (FTTH), satellites and leased lines, which accounted for 16 percent of retail broadband Internet access by August 2002. Italy's cable television network penetration is very low and its development is recent.
The rate of DSL deployment in Italy is increasing:  the number of DSL subscribers in Italy to Telecom Italia's investment in network development, recent decreases in prices for ADSL rose by 41 percent in the first half of 2002.  .
Telecom Italia (TI) S.p.A, the former government monopoly,
remains the dominant provider of broadband services. The incumbent was the first to trial ADSL services in September 1999 to 300 of its Tin.it Internet Service Provider (ISP) narrowband subscribers in 25 cities.  Full broadband business services were launched the following year, and residential services have been available since April 2001.
At the end of June 2002, Telecom Italia had 585,000 ADSL subscribers.  In April 2003, the company's ADSL service was available in 1,300 towns and to 74 percent of Internet users. By mid 2002, Telecom Italia had invested over $330 million on ADSL, and this figure is expected to reach nearly $900 million by 2004.  The operator announced in October 2002 that the company set itself a target of registering 1.4 million domestic ADSL subscribers by 2004.
Italy has a unique local loop infrastructure that has affected the deployment of broadband.  In particular, local exchanges are not very far from home/business end-users compared to other European nations.  This has allowed operators to provide higher speeds in Italy than in other European countries and potentially makes faster forms of DSL less costly to provide than elsewhere in Europe.  Another feature is that there are simply more local exchanges in Italy than might be found elsewhere. Alternative network operators have invested in developing alternative networks instead of attempting to access many small local exchanges. 
Telecom Italia owns the only complete national broadband infrastructure network and controls the local loop, and therefore access to competing operators.  As a result of the liberalization of the Italian regulatory regime for telecommunications services in January 1998 Italy, like most European Union Member States, ended the monopoly of Telecom Italia and gradually opened the sector to new entrants.  31 unbundling agreements have been signed between TI and its competitors, and with 82,000 as of September 2002, Italy has the second-largest number of unbundled local loops in the European Union. The Ministry of Communications website  (www.comunicazioni.it/licenze) has a current listing of telecommunications license holders.

Numerous territorial bodies have also decided to intervene directly in the creation of broadband access networks.  For example, a network was created in the city of Siena that aims to put all the local authorities of the province on line.  In the cities of Milan, Sesto San Giovanni and Prato, the municipal firms that run public utility services are committed to the creation of a broadband infrastructure in partnership with telecommunications firms.
In January 1998, the Italian government ended the monopoly of Telecom Italia and opened the telecommunications sector to unlimited competition in basic, fixed line telecommunication services and related infrastructure.  To safeguard competition in the sector, the government established an independent regulatory agency for the communications, press and broadcasting sectors.  In 2001, the government transferred the responsibility for issuing licenses to the Italian Ministry of Communications.  The regulatory agency remains in charge of monitoring compliances with public service licensing conditions, while the Ministry of Communications is responsible for monitoring compliance with technical and administrative conditions of licenses.
While the government ended the monopoly of Telecom Italia in 1998, it retained one "golden" share of 3.5 percent in Telecom Italia.  Although the government sold its residual stake in 2002, it retains the symbolic "golden" share and a seat on the board of directors in Telecom Italia, which allows it de facto veto power over certain strategic decisions.
The government has also a major, albeit indirect role, in telecommunications provider Wind.  Wind is primarily owned by Enel, the national electricity conglomerate, in which the government owns 70 percent of stock.
Broadband diffusion a priority target of the Italian government
The development and expansion of broadband is a key goal for the Italian government. Italy's "Document of Economic and Financial Policy for the Year 2002" stated that one of the Italian government's priorities for the 2002-2007 period was to invest in the digital society and provide access to the information highway.  It considers broadband usage essential for the reaching of program objectives, particularly those concerning e-government, healthcare and education. The government will make substantial investments in broadband telecom infrastructure and will also accelerate the full liberalization of telecommunications services. This investment is expected to make Italy's government one of the fastest growing public markets in Western Europe. 
As for investment funding, the Task Force set up by the Ministry of Communication and the Ministry of Innovation and Technology have issued an Intervention Plan (see
www.innovazione.it).  The Plan's objective is to activate a "critical mass" of public and private demand capable of setting in motion a cycle of investment in infrastructures and services.  The intent of the Plan is that by the year 2005, 90 percent of public buildings, 65 percent of businesses (especially Small Medium Enterprises - SMEs) and 35 percent of Italian families should have access to broadband.  Broadband penetration in the government should grow from the current level of 20 percent to 90 percent by 2005.
The expenditure envisaged under the Plan amounts to approximately 2 billion dollars. The 2004 Financial Law is expected to set out details of how financial intervention is to be carried out.  Such intervention may come in the form of tax deductions for enterprises to invest in infrastructure, reduction of value-added tax rates, or subsidized loans.
The Italian government spent over $3 billion dollars in ICT in 2001, according to EITO. 
Fiber Optic Networks (FTTH)
According to Time magazine, Italy leads the world in the FTTH, which transmits 20 to 200 times faster than the DSL and the cable broadband services common around the globe.  As fiber to the home implies, operators run fast optical-fiber wires all the way into consumers' living rooms.  In  2002, the Italian fiber optic network covered only 30 percent of the north-west part of the country, 25 percent of central Italy, 25 percent of Southern Italy and the islands, and 20 percent of the north-east.  However, by the end of 2002, 6 million kilometers of fiber optic cable was added to the existing 149,500 kilometers by a number of providers. 
The telecom branch of the e-Biscom group successfully launched Metro Ethernet services to the business sector in Milan in March 2000.  By August 2000, it had expanded into the Milanese residential sector.  The company now has about 145,000 fiber customers in Italy.  In addition to conventional Web and telephone services, Fastweb now funnels feature films and television shows to Personal Computers (PC) and television in Milan, Rome, Florence, Naples, Bologna and Turin.  Fastweb has quickly grown into the No. 2 broadband provider in Italy behind Telecom Italia. 
E-Via has also concluded the first stage of its fiber optic cable broadband network in a central-south Italy ring.  Upon completion, the network will be over 8,000 kilometers long and serve over 100 cities.
In 2000, Wind began implementing its broadband services for mobile and fixed communications across a 10,000 kilometers fiber optic backbone to 113 cities and connected to the European fiber optic backbone, reaching a total of 250 European cities.  Wind also installed metropolitan area networks in 11 cities, providing a total length of more than 350 kilometers.
In June 2002, Tiscali signed an agreement with Telecom Italia and telecom company Interoute to access their fiber optic networks.  Tiscali said that the fifteen-year agreement for an undisclosed amount should help it meet demand for broadband services across Europe.  However, Interoute went into liquidation in November 2002.
Other Broadband Access Technologies
The other leading broadband platform deployed in Italy is satellites, which are used primarily for television broadcasting but also offer broadband Internet access.  There are some 60,000 asymmetric broadband Internet access connections in Italy via satellite.  This technology is not competitive with DSL or FTTH, but it is the only alternative available for customers in certain remote areas that are inaccessible to fixed operators.
Italy's satellite networks are made up of 3 Intelsat earth stations for total of 5 antennas:  3 for the Atlantic Ocean and 2 for the Indian Ocean.
Another new broadband platform in Italy is Wireless local loop (WLL or fixed wireless) for which the Italian government issued 73 licenses in May 2002 while requiring Telecom Italia to wait four years before launching its own WLL. 



There are three main vectors that are likely to drive the increase in adoption of broadband over the next five years:
-         the changing social, demographic and economic factors which will drive increasing usage of the Internet as a whole;
-         the natural tendency of Internet users to migrate towards broadband even if only to get better performance on existing applications;
-         most important of all, the development of the new "broadband generation" applications.  These will extend the demand for broadband to more users and increase usage by existing users.
Because DSL cable modems and fiber to the home have taken off as broadband platforms, related technologies provide some of the best market opportunities.  There is a need to increase the speed and reliability of xDSL while lowering its cost and hastening its deployment, particularly among corporate clients for whom it is a potential alternative to leased lines.
Interactive digital TV is believed to have much potential in Italy albeit over a longer term.
Media companies and telecommunications operators need attractive, practical and robust applicants and content to drive broadband adoption among consumers.  There is currently no "killer application" to convince the majority of Italian consumers that they need broadband, let alone to pay more for broadband content.  Applications in the areas of e-work, e-education, e-government, e-health and e-entertainment could help provide such demand.
The prospect for all broadband technologies will also get a boost from the Italian Ministry of Communications, which plans to encourage broadband diffusion using tax incentives to stimulate private demand and also to increase broadband penetration in the government.


Market position of locally-owned establishments
Telecom Italia remains the dominant provider of broadband services.

The telecom branch of e-Biscom, Fastweb, supplier of FTTH broadband, is now the No. 2 broadband provider in Italy behind Telecom Italia
The Italian competition regulator ruled in December 199 that Telecom Italia could offer its own retail ADSL product to ISPs and other potential service providers.  Mannesman's Infostrada (now Wind) was the first to take up the wholesale offer and provide alternative services over Telecom Italia's infrastructure in eleven cities.

Albacom is also a strong competitor because it specializes in corporate services.
These operators mainly serve the business sector:
Main ADSL retail offering providers are:





Tin.it, Alice (Telecom Italia)
Business and residential ADSL in over 100 cities
Fastweb (e-Biscom)
Business and residential ADSL in 10 cities
Business in over 50 cities
Wind Net in 15 cities to business customers
Business and residential

Third Country Competitors
KPTQwest of the Netherlands bought the independent ADSL company Comm2000 in 1999, giving access to its business-serving ADSL network.
Cable & Wireless of the United Kingdom entered the market in 2001 with its purchase of Unidata.  Unidata of Italy has its own ADSL network and operates under the Smart brand.

U.S. Market Position

There are no U.S. broadband providers operating in Italy. The returns from entering into a very competitive may afford limited returns, particularly in the short term, while opportunities abound for U.S. vendors of broadband technology platforms and applications.
Competitive Factors
A well-established regulatory regime should also stimulate continued growth in the number of unbundled lines.  Recent regulatory intervention to reduce leased line prices and the introduction of a wholesale leased line offer will also help support competition using leased lines. Revenue from switched data and leased lines continues to grow steadily in Italy and is expected by EITO to grow by 14 percent in 2003.
Broadband use by both residential and business sectors is expected to become much more widespread over the next five years as competition increases and providers offer various technology platforms to access the local loop. 
Opportunities abound for U.S. vendors of any and all broadband technology platforms that can help operators and the Italian government to meet these objectives. 
Ultimately, U.S. companies will have to establish a local presence in order to successfully compete in Italy. The nature of the markets, culture, difference in size, and the market's fragmentation and distribution systems will demand careful planning and local support but the rewards could be worth the effort. 
Industry experts recommend that U.S. small and medium size technology companies form strategic alliances or partnerships with small, well-established local firms that have complementary products or services.  Italy has a large and growing number of such small, competitive firms, providing numerous partnering opportunities.  At the same time, many Italian technology Small Medium Size Enterprises (SMEs) seek partnerships with U.S. companies with technology to enable them to:
            Access leading-edge Internet and e-commerce technology;
            Learn from their U.S. counterparts the latest trends and technologies in the more  mature  U.S. Internet and e-commerce markets;
           Serve the U.S. market and view partnerships with U.S. firms as a means of achieving that goal.
End-User Profile
A survey published by FEDERCOMIN, the Federation of Information Technology and Telecommunications Enterprises and ASSINFORM, the Italian Association of Information Technology Companies in December 2002 found that broad penetration in Italy in the business sector is still very low: around 110,000, or 30 percent of companies, connect to the Internet using fiber optic cable or xDSL.  Companies in the financial services sector had the highest penetration, followed by general services and industry.

The potential business market is huge, since around 267,000 companies and institutions have yet to switch to broadband.  According to Gartner Research, the rate of business adoption is slowed by the fact that some 95 percent of Italian companies are small and medium sized, and are reluctant to invest in international technology, especially in southern Italy, which consists largely of agricultural communities. 
Italy's public sector is one of the biggest information and telecommunications technology (ICT) market segments in Italy, and it will continue to be a vibrant market for ITC products as the government attempts to advance Italy's information society.



1. Foreign ownership limits

In order to obtain an individual license for the provision to the public of telecommunications services/networks, the applicant corporation must have its registered office in either Italy, a member state of the European Union, or a signatory state of the World Trade Organization.  Moreover, control of the applicant corporation must be held only by a person or persons with Italian or European Union citizenship, or that of a country which gives Italy reciprocal rights.

Similar requirements apply to applications for general authorizations but no mention is made in the regulations of requirements for the owner of a corporate applicant.
2. Licensing Requirements for telecommunications operators

Decree of the Ministry of Communications No. 318 of September 19, 1997, provides for two types of operating licenses: (a)  individual licenses; and (b) general authorizations.  Of the two, "individual licenses" have stricter prerequisites and are required for the provision of voice transmission services (both fixed network and mobile), for the construction and operation of publicly accessible telecommunications networks, access to and use of radio frequencies, provision of mobile and personal services, those actions and services that use resources considered to be scarce or that are subject to particular obligations, and for services provided on a national scale by companies with significant market forces. 

"General authorizations" will be issued for other acts and services, such as data transmission services, construction and operation of closed user group networks, and value added services. 
Italy established a regulatory framework under a decree issued in February 2003 that allows Wireless Local Area Network (W-LAN)s, or Wi-fi- (Wireless Fidelity) both for public and private use, without a license, but W-LAN operators must inform the government before starting operations.
Since March 2001, the Ministry of Communications is in charge of answering inquiries, receiving applications and issuing licenses.
Contact:  Dott.ssa Laura Aria
Direzione Generale Concessioni e Autorizzazioni
Ministero delle Comunicazioni
Viale Europa 201
00144 Rome, Italy.
Further information, including application forms, are available from the Ministry's website: 
Italian Trade Associations

ASSINFORM - Associazione Nazionale Produttori Tecnologie e Servizi per l'Informatica e la Comunicazione
Via Larga 23
20122 Milan
Tel. 39/02/58304141; Fax  39/02/58304457
FEDERCOMIN - Federazione Imprese Comunicazioni e Informatica
Via Barberini 11
00187 Rome
tel. 39/06/421401; Fax 39/06/4214044
ASSOTEL - Associazione Operatori Telefonia & Telematica
Corso Vercelli 42
20145 Milan
Tel. 39/02/48008956; fax: 39/02/4800895

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