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.
SUMMARY
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.)
A. MARKET HIGHLIGHTS AND BEST PROSPECTS
1. MARKET PROFILE
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.
Infrastructure
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.
Government Role IN ITALIAN TELECOMMUNICATIONS
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.
BEST SALES PROSPECTS
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.
B. COMPETITIVE ANALYSIS
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:
Operator
|
Service
|
|
Tin.it,
Alice (Telecom Italia)
|
Business
and residential ADSL in over 100 cities
|
|
Fastweb (e-Biscom)
|
Business
and residential ADSL in 10 cities
|
|
Albacom
|
Business
in over 50 cities
|
|
Wind
|
Wind Net
in 15 cities to business customers
|
|
Tiscali
|
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.
D. MARKET ACCESS
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:
www.comunicazioni/normativa/it.
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
www.assinform.it
Assinform@assinform.it
FEDERCOMIN - Federazione Imprese Comunicazioni e
Informatica
Via Barberini 11
00187 Rome
tel. 39/06/421401; Fax 39/06/4214044
www.federcomin.it
info@federcomin.it
ASSOTEL - Associazione Operatori Telefonia & Telematica
Corso Vercelli 42
20145 Milan
Tel. 39/02/48008956; fax: 39/02/4800895
www.assotel.it
info@assotel.it
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