International Benchmark

Italy

Form of separation: Functional
Infrastructure: TIM wholesale
Retail: TIM retail
Non-discrimination: EoI and EoO
Supervisory committee: Yes

Italy's Functional separation

  • Functional separation*: Telecom Italia has a wholesale division department to provide access services both to TIM’s retail arm and also to alternative network operators (ANOs).
  • Provisioning & assurance: TIM offers ANOs the possibility to choose a third-party company for provisioning and assurance of LLU and SLU services
  • Supervisory board: Organo di Vigilanza (OdV) monitoring TIM’s compliance with undertakings and investigating any breach in non-discrimination obligations
  • Unified technical delivery system: Both TIM Retail and ANOs use the same processes, the same systems, and the same databases
  • Elements of equivalence: EoI: LLU, SLU, VULA FTTH services / EoO: VULA FTTC, WLR, BSA
  • Netmap: The new network topology database implemented by TIM which gives the same information to TIM Retail and ANOs for the services activation.

*Project of voluntary legal separation notified to NRA in 20
 

Key facts

  • Fixed broadband subscriptions by technology: xDSL – 86%, FTTH/B – 6%, FWA – 8%
  • Incumbent’s retail broadband market share: Overall 43% – EU average 40% / xDSL 50% - EU average 53%
  • Wholesale competitors: Open Fiber and Fastweb
  • Major retail competitors: Vodafone, Fastweb, WindTre


Model of separation adopted

Italy currently uses a functional separation model. The Italian incumbent, Telecom Italia (TIM), has a wholesale division department to provide access services both to TIM’s retail arm and also to alternative network operators.

TIM’s wholesale division function has its own staff, information systems, investment budget, and a separate incentive scheme for wholesale staff and management. In addition, the Italian approach to separation includes a supervisory committee, Organo di Vigilanza (OdV), which is responsible for ensuring TIM’s compliance with the principles of non-discrimination and equal treatment towards all ANOs accessing the incumbent’s network.

TIM notified a project of voluntary legal separation to the Italian telecoms regulator (AGCOM) in March 2018. The project entails the creation of separate wholesale (NetCo) and retail (ServCo) companies, both 100% owned by TIM. AGCOM evaluated the voluntary legal separation plan in its final decisions on markets 3a and M3b, published on 8 August 2019, but did not grant any regulatory relief based on TIM’s proposed new organisational structure.

According to TIM’s project, NetCo will have the assets and staff necessary to provide wholesale services independently. As stated by TIM, “the model will guarantee full equality of treatment thanks to a single access point, a ‘one-stop shop’ for regulated and unregulated wholesale services for all operators, including TIM”.

At present, there are no available public sources describing the state of play on the implementation of the legal separation project. However, press reports indicate that there is a long term plan to integrate Open Fiber with TIM (Open Fiber is the FTTH wholesale-only operator created in 2016 through a joint venture between state-controlled institutions Enel and Cassa Depositi e Prestiti). TIM’s press release of 20 June 2019 reported the signing of a non-disclosure agreement with the shareholders of Open Fiber (ENEL and Cassa depositi e Prestiti) “aimed at starting discussion between TIM’s and Open Fiber’s optic networks, including corporate operations”.

If the integration of TIM and Open Fiber goes forward, there could be an impact on the notified fixed market analysis because it could affect the competitiveness of the Italian wholesale market.
 

Organisational and governance structure

The organisational and governance structure of TIM’s model of separation has developed through a series of different regulatory steps and undertakings, summarised in the table below:

Step

Date

AGCOM decision

Actions

1

15 May 2002

152/02/CONS “Measures to guarantee internal and external equal treatment”

  • Accounting separation
  • Operational separation between TIM’s wholesale and retail businesses

2

11 Dec. 2008

718/08/CONS “Approval of TIM’s undertakings”

AGCOM approved TIM’s voluntarily proposed undertakings, including:

  • Creating a separate wholesale business unit (Open Access) and a new delivery and co-location procedure
  • Establishing a new incentive scheme and code of conduct for TIM’s wholesale staff
  • Creating a mechanism of KPIs and Key Performance Objectives (KPOs) to test the quality of wholesale services
  • Establishing a supervisory committee

3

5 Nov. 2015

623/15/CONS “Fixed market review M3a and 3b/2014 (split into decisions 652/16/CONS and

321/17/CONS)

  • AGCOM approved TIM’s voluntary undertakings on the New Model of Equivalence (NME)
  • Disaggregation of provisioning and assurance for LLU and SLU

4

18 July 2019

348/19/CONS “Fixed market review M3a and 3b/2014”

  • Assessment of the project of voluntary legal separation with a separate wholesale company (NetCo) 100% owned by TIM

The Italian supervisory committee started in November 2015 to monitor TIM’s compliance with the undertakings set out in decision 718/08/CONS, which entered into force in January 2009, and on the new model of equivalence (NME) offered by TIM.

The Italian supervisory committee (OdV) is composed of five members, each serving a term of five years. Three members are designated by AGCOM and two by TIM’s CEO, after consultation with AGCOM. The president of OdV is chosen from one of the committee members designated by AGCOM. The staff of the OdV’s office are employees of Telecom Italia designated to support the work of the OdV committee with a mandate of three years, renewable once for a maximum additional term of three years. Staff must sign a code of conduct to avoid any potential conflict of interest with TIM including for confidentiality, independence and diligence. OdV has an independent annual budget of not less than €880,000.

In addition to overseeing TIM’s compliance with undertakings, OdV has started new forms of cooperation with AGCOM set out in annual workplans, such as:

  • the development of a proposal for a new set of KPIs and KPOs linked to the NME (OdV’s proposal was largely reflected in AGCOM decision 395/18/CONS on KPIs);
  • the proposal for a simplification and rationalisation of the causes of failed provision orders; and
  • a study on the digitalisation of processes for monitoring delivery performance in work orders.

In the last fixed market review (AGCOM decision 348/19/CONS), AGCOM explained the new role that OdV will play until 2022, assuming that legal separation will take place. According to that decision, OdV will support the regulatory start-up phase of NetCo, offer technical support to AGCOM to monitor compliance with NetCo’s non-discrimination obligations, and gather input from the new regulatory compliance officers of Netco.

In addition, OdV will continue to monitor non-discrimination obligations, such as the new EoI model and the new KPIs set out in in decision 395/18/CONS.


Elements of equivalence and non-discrimination

On 5 November 2015, TIM’s board approved a "plan to introduce a New Model of Equivalence, aimed at further strengthening the efficiency and effectiveness of the delivery and assurance processes” for its wholesale access services.

The aim of the NME is to ensure that the sales divisions of TIM have an equal footing with those of the ANOs for more effective internal and external equality of treatment and for greater transparency in the management of line activation requests.

Currently, TIM must assure EoI (also called the full equivalence model) to ANOs for LLU, SLU and VULA FTTH services, whereas it must assure only EoO (described as an enhanced EoO “equivalence +”) for VULA FTTC, bitstream and WLR shared access services.

If TIM’s legal separation takes place (as considered in the new fixed market review decision 348/19/CONS), the new EoI model will also cover VULA on FTTC, which represents 36.5% of access lines. This compares with VULA over FTTH, which accounts for only 5.2% of lines.

As part of the new equivalence model, TIM also implemented:

  • unified technical delivery system (Nuova Catena di Delivery) for both TIM Retail and ANOs to use the same processes, systems and databases for analysis of technical coverage and topology, order validation and acceptance, formal and commercial checks, assessment of technical feasibility, and order management and creation of the intervention request; and
  • new network topology database (Netmap) which gives the same information to TIM Retail and ANOs for service activation.

In addition, TIM implemented the disaggregation of provisioning and assurance for LLU and SLU. This means that TIM gives ANOs the possibility to choose a third-party company (Impresa System) for provisioning and assurance in relation to LLU and SLU. These third- party companies are selected by TIM based on criteria such as reliability, competence, and financial stability, established in accordance with AGCOM.