Companies battle for control of Italy's national fiber network

Fight brews over who gets control of Metroweb

Telecom companies are vying for control of a small company that rents out fiberoptic cables in Milan in a competition that could determine who gets to build and control Italy's high speed telecommunications network.

Telecom Italia, Vodafone and Wind have all expressed interest in ownership of Metroweb, which generates sales of only €60 million euros (US$74 million) a year but offers a model for high speed connectivity in a country that comes last in the European Union (EU) for 30Mbps fixed broadband penetration. The Italian telecom regulator, AgCom, confirmed recently that only 21 percent of Italian households have access to 30Mbps broadband, compared to the EU average of 62 percent.

Telecom Italia and Vodafone have expressed interest in buying a controlling stake in Metroweb from infrastructure fund F2i, while Wind said it was prepared to bring in the assets of its Infostrada fixed-line unit if the company was opened up to investment by all the main telecom players.

Metroweb CEO Alberto Trondoli says his company is an ideal candidate to roll out Italy's new fiber-optic network, which is intended to bring fast internet to 85 percent of Italian consumers over the next six years and for which Prime Minister Matteo Renzi has pledged €6 billion in public funds.

"We can easily replicate what we've already done in Milan on a national scale, giving all players access on equal terms," Trondoli told reporters.

Metroweb is intending to complete its fiber-to-the-home network in Milan by next summer and to follow this with a fiber-to-the-building project in Bologna, which is due to connect 80 percent of the central Italian city's homes and offices. A similar project has also been agreed on with the city of Turin, with an initial rollout connecting 50,000 households, 30 schools and 20 local government offices. In Turin Metroweb will explore the possibility of deploying its cables along the city's existing tram tracks.

The competition for control of Metroweb has already sparked political debate, with some politicians arguing that Telecom Italia should be allowed to take outright control since the network is its core business and the former incumbent has already invested more than anyone else in infrastructure.

Telecom Italia President Giuseppe Recchi has made it clear he is not keen on sharing control with his competitors in a kind of Metroweb "condominium."

Condominiums find it hard to decide on when people should water the plants on their balconies, let alone building a new generation network," Recchi told reporters earlier this month. "Fragmenting ownership would only slow progress."

Michele Meta, a deputy with the governing Democratic Party, said the answer was a balanced plurality of stakeholders in Metroweb. "In 2014 Italy can no longer permit de facto monopolies, which would slow down the necessary modernization of our infrastructures," he said in a prepared statement.

An official at the Economic Development Ministry said there were three possible outcomes to the battle over Metroweb: outright control going to a single telecom player; sale of only part of F2i's 54 percent stake to a major player; or the opening of the company to all the major telecom operators. He said the government did not intend to interfere in market choices.

"The government has an objective, which is to improve broadband connectivity throughout the country, but it doesn't have a model as to how that should be achieved," the official, who asked not to be named, said in an interview.

Tax breaks for investments in high speed broadband and public funds to encourage the development of networks in areas where there was insufficient demand to attract purely commercial investments would ensure that Italy began to close its own digital divide, the ministry official said. "We need to develop both our copper and our fiberoptic networks, because we are so far behind," he said.

The government will still be able to exert some influence on the outcome through its control of Cassa Depositi e Prestiti, the state-owned lender that owns a 46 percent stake in Metroweb. "The Cassa has a strategic role to play as a vehicle of industrial policy," the official said. "It's trying to decide how to deal the cards so that it becomes the pivot of a company that must invest in the long term infrastructure needs of the country. It will have a big say in the choices."

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Tags telecommunicationVodafoneWindTelecom ItaliaMetrowebinternet

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