7 Oct 2009Italy Broadband Overview

In 2008, Italy’s telecoms sector has largely followed the trends that emerged in previous years, although the situation was affected by the global recession. In 2008, the sector experienced a slight decline in total final expenditure of households and businesses for the first time. Due to the economic downturn, investment in fixed and mobile communications infrastructure declined rather significantly. In 2008, investments in fixed networks decreased by 8.9 per cent while mobile network investment fell by 6.8 per cent.

Nevertheless, Italy continued expanding broadband network coverage by upgrading its copper infrastructure. Along with almost 100 per cent coverage of urban areas, coverage in the suburban areas slightly increased from 93 per cent to 94 per cent while coverage in rural areas rose from 75 per cent to 82 per cent. At the same time, alternative operators continued expanding their infrastructure and 58 per cent of the population are now eligible for unbundled broadband services (slightly up from 56 per cent at the end of 2007). However, the population is still subject to an ‘infrastructural digital divide’, which means about 2.7 million individuals still cannot access broadband at minimum 2 Mbps speeds.

At the same time, the competitive environment benefited from the entry of new operators using wireless technologies. Such operators included those which started deploying WiMAX and MVNOs. There was a marked improvement in the quality of services, especially in terms of speeds offered by both fixed and mobile services. The fixed line market (except broadband) continued to suffer from the decline of traditional services. However the slowdown in growth was also due to more significant barriers to fair competition compared to other developed countries. In the mobile services market however, despite saturation of voice services, broadband is the factor driving growth.

While the traditional voice services have entered the decline phase, sustaining the development of broadband requires investment in the existing networks and especially new generation networks to enable super fast speeds. The number of FTTx connections in Italy grew from 200,000 in 2005 to about 300,000 at the end of 2008. However, by June 2009 Italy dropped out of the ranking of the top ten European countries based on the number of FTTH connections. A number of initiatives to promote the development of fibre networks have been initiated by regions, municipalities and provinces. Despite this, there is lack of coordination with the industrial policy drawn by the government and the technical implementation left to the regulator (please refer to the Regulatory Developments section for more details).

The Italian telecommunications market is dominated by the incumbent Telecom Italia (TI), one of the largest players in the fixed and mobile sectors. In 2007 the incumbent faced a change of ownership, after the consortium led by Telefonica bought a 23.6 per cent stake in TI becoming its largest single shareholder. Striving to cut costs by around USD 370 million through ongoing restructuring, TI plans to eliminate 5000 jobs by 2010.

TI is involved in the Italian mobile market via subsidiary Telecom Italia Mobile (TIM). It also owns the mobile operator TIM Brazil. TIM is the leading operator in the Italian mobile market with 32.6 million subscribers as of Q209. TIM's main rivals are Vodafone and Wind. There were some changes in shares in the mobile voice and data markets between 2007 and 2008: while TIM’s share declined from 41.6 per cent to 40.5 per cent, Vodafone increased its share from 35.6 per cent to 37.2 per cent, while Wind’s share grew from 16 per cent to 16.5 per cent.

Italy’s mobile voice market is highly saturated at above 150 per cent penetration rate. In the mobile broadband market, Italy is witnessing significant growth. In recent months, there was a substantial increase in the number of users who could receive broadband services via UMTS/HSDPA networks – reaching 30 million by the end of 2008. Telecom Italia announced it will start offering mobile broadband connection speeds of up to 21 Mbps in H1 2009 followed by 28 Mbps in H2 2009. Furthermore, Telecom Italia is preparing to deploy 4G (Long Term Evolution) technology in the next few years.