Newsletter

7 - Supervisory Board Activities Newsletter July-September 2011

Summary

In July, August and September 2011, the Supervisory Board (SB) conducted the audits of the actual respect of the Undertakings by Telecom Italia required by Resolution 718/08/CONS, with particular reference to the Technical Plans for the quality and development of the fixed access network, the New Delivery Process and the performance indicators.

With reference to the complaint by the operator Welcome Italia, which had given rise to the proceedings "S01/11 - Welcome Italia/Saturation problems in bitstream services - Implementation of Undertakings Group no. 5 on guarantees of transparency of the technical plans for the quality of the fixed access network", the SB, after setting a new time-limit for the conclusion of the investigative stage, and after receiving clarifications from Telecom, closed the procedure with Determination no. 20/2011¹. While the SB considered Telecom Italia's behaviour to be "such as to compromise, albeit solely in relation to the single episodes reported, the requirements for transparency emphasised in the Undertakings approved by AGCom Resolution no. 718/08/CONS and Undertakings Group no. 5", it considered the remedies adopted by Telecom itself to be adequate to overcome the critical elements complained of by the operator Welcome.
With reference to Undertakings Group nos. 3 and 4, the SB requested clarification of some indicators which showed potential critical elements in Determination no. 16/2011. Telecom Italia responded to the requests made by the SB, clarifying the underlying causes of the performance indicators that showed that the Retail department performances were comparatively better than those of the Wholesale department.
The audits of the elementary data used to calculate the Key Performance Indicators (KPIs) continued in the third quarter of 2011, and there were further field investigations of apparent anomalies encountered during extractions at company AOLs that produced positive results.

Regarding Undertakings Group no. 5, and, in particular, the DSLAM equipment desaturation activities, Telecom Italia granted the request of the SB for objectives related to the dates for equipment desaturation to be included in the 2011 MBO, and to provide information on the causes of the protraction of the desaturation operations. With Determination no. 19/2011², adopted by the Board on 13 September, the SB welcomed the adoption by Telecom Italia of measures designed to reduce equipment saturation, and reserved the right to check their efficacy going forward.

The SB continued its activities related to the analyses of the causes of the refusals of Retail Work Orders (WO) during the quarter, sending the necessary specifications to Telecom Italia. At the end of September, Telecom Italia provided the first extractions to the Supervisory Office (SO)
After receiving the contributions of Telia Sonera and the BT Equality of Access Board (EAB) in response to the document sent by the SB, requesting information on the subject of Key Performance Indicators (KPIs), there was a meeting with the BT Equality of Access Office (EAO), at which information on the principal KPIs used was exchanged, and a comparative analysis of the Delivery and Assurance processes was carried out.

Progress regarding the implementation of the Undertakings

Undertakings Group no. 1
(launch of the New Delivery Process)
With Determination no. 15/2011 of 5 July 2011, the SB had asked Telecom Italia to provide information about specific technical issues in the New Delivery Process (NDP) concerning in particular the ways in which WOs from alternative Operators are sent to Telecom Italia Wholesale, with reference to the protocols used, the frequency of these transmissions, the values of the timeouts applied to the WOs that mean that the OLO which issued the transmission has to wait for a certain period of time before being able to proceed to issue the Order again in case a KO occurs.
The Company answered these questions in August, also pointing out the differences that exist between the types of services offered by the Wholesale Department.
Since the NDP started, there have been 93.000 Bitstream service WOs (up to 31 August), 74% of which on non-active lines, and 336 WOs routed through unique queue status and executed with a positive outcome (OK).
Telecom Italia also updated the way in which the results of NDP are represented as requested by the SB in the meeting on 31 August.

Undertakings Group no. 2
(establishment of a new incentive system and a code of conduct)
The second of the two meetings to examine the progress of the training courses for employees of Open Access and the Wholesale Department, as well as to check the effectiveness of these courses, was held in July (the first had taken place in April). The company took this opportunity to present the ConTatto project, which involves putting call centre operators in contact with field technicians. During the hearing on 13 September, Telecom Italia also presented to the SB the plan for assessing the 2011 MBOs assigned to the management by the company to examine how they correlate with the measures specified in the Undertakings.

Undertakings Group no. 3
(establishment of a performance monitoring system for SMP services)
The Supervisory Office continued its audits of the elementary data used for calculating the specified indicators, on the basis of the specifications for the certification of data communicated by Telecom Italia to the SB, as required by Determination no. 4/2011³ (for more details see the paragraph below on data certification). ³Determinazione_n4_2011_Certificazione_dati.pdf

Undertakings Group no. 4
(guarantees of transparency of the monitoring system)
Analysis of the data on the indicators specified in Undertakings Group no. 4 identified some critical elements in two KPIs, and Telecom were asked to provide further information about them in Determination no. 16/2011/. The Company responded to the SB in September, clarifying the underlying causes of the performance indicators that showed that the Retail department performances were comparatively better than those of the Wholesale department. During the quarter referred to Telecom Italia transmitted to the SB reports on the indicators for the months of June, July and August, specified in the Undertakings proposal.

Undertakings Group no. 5
(guarantees of transparency of Technical Plans for the Quality of the fixed access network)
The SB also analysed the documents produced by Telecom Italia in accordance with Undertakings Group no. 5, which in the third quarter of 2011 concerned the final figures for QII 2011 and the Programme for QIV 2011. In September Telecom Italia published the territorial programmes for the "Extraordinary maintenance of the copper access network and the optic fibre network" project. With Determination no. 19/2011⁴ the SB concluded its audits of the frequent rescheduling of broadband equipment desaturation dates; the Newsletter examining the progress of the desaturation plan for ATM technology exchanges for ADSL services has also been published (for more detail, see the paragraph below on exchange desaturation operations ). ⁴Determinazione_n1_19_2011.pdf

Undertakings Group no. 6
(guarantees of transparency of Technical Plans for the Development of the fixed access network)
The SB analysed the reports sent in by Telecom Italia on the final figures for the second quarter of 2011 for the development of the fixed access network – NGA network, Broadband Coverage and Lotting Plan. Telecom also sent the quarterly Programme for the fourth quarter of 2011 and Release 2 of the Broadband Long Term Technical Plan (2011-2013) which envisages the revision of the coverage objectives for ADSL services and Release 2 of the NGAN Long Term Technical Plan (2011-2013) which includes the redimensioning of the development objectives for the new generation optic fibre network.

Undertakings Group no. 8
(integration of regulatory accounting and calculation of transfer charges)
As regards Undertakings Group no. 8, the definitive resolution by the Authority concerning the guidelines on regulatory accounting has not yet been published.

Undertakings Group no. 12
(obligation to report activation of unrequested services)
Telecom Italia sent the SB the document containing the data on the second quarter of 2011, which shows that no reports of the activation of unrequested services were collected by the Open Access technicians in the period considered.

Complaints by alternative operators

Complaint S01/11 - Welcome Italia/Saturation problems on bitstream services – Implementation of Undertakings Group no. 5 relating to the guarantees of transparency of the technical plans for the quality of the fixed access network.

In February 2011 the SB received a complaint from operator Welcome Italia S.p.A. concerning a presumed violation of the Undertakings by Telecom Italia; in particular, the OLO complained of inconveniences related to the saturation status of Telecom exchanges with reference to the supply of bitstream services: the Company allegedly disregarded certain communications made in 2010 regarding desaturation operations planned but not subsequently carried out at the exchange in question. This situation, according to the claimant, as well as making it impossible to guarantee due regularity in the supply of the service to customers, could potentially compromise the alternative Operators' capacity to plan network development strategies and marketing of Retail services sufficiently in advance.

With Determination no. 2/2011⁵, the SB started verification activities, inviting interested parties to supply any information useful in determining this case.

The SB then called Telecom Italia to a attend a hearing on 24 March 2011: at this hearing, the Company pointed out that the critical issues relating to complaints of "slow navigation" raised by Welcome Italia derive from the growth of broadband traffic which is faster than expected, requiring Telecom to continually extend the broadband capacity of the saturated DSLAM ATMs .

This is compounded by the difficulties involved in the desaturation operations on the exchanges serviced by DSLAM ATM, a technology that is no longer produced; according to Telecom Italia, the only way to desaturate the DSLAMs is therefore to install IP technology DSLAMs alongside the existing systems, and migrate Telecom Italia Retail customers onto these. For migrating Wholesale customers, however, OLOs will have to equip themselves with Ethernet interconnection Kits in exchanges which currently only have ATM interconnection Kits.

Telecom Italia also informed the SB that it had undertaken new initiatives to boost desaturation activities, such as reducing the price of the Ethernet band compared with the ATM band and directing the remaining resources to expanding sites where there is no Ethernet alternative.

Telecom Italia also transmitted information to the SB about the interventions carried out to overcome the problems highlighted by Welcome Italia, methods of handling Trouble Tickets, the territorial distribution of the recorded percentage increase in bandwidth and the representation of the number of systems desaturated in 2010 and 2011, broken down into interventions carried out on exchanges open to LLU and exchanges not open to LLU.

With the results of the audits carried out, the SB approved the actions taken by Telecom, at the board’s own suggestion, focussed on improving the process of handling the deterioration of the network, particularly those related to respect for the dates specified for resolving issues raised by the alternative operator, the SB therefore set a new time-limit for the conclusion of the investigative stage of this complaint, with the adoption of Determination no. 13/2011⁶ of 3 May 2011, and at the same time requested clarification of some aspects of the new process for handling complaints from the alternative Operators over slow navigation. In response to the requests in the aforementioned Determination no. 13/2011, Telecom Italia sent initial information on the subject on 7 June 2011; Telecom Italia also asked for a hearing, to be able to explain the operations to improve the OLO complaint handling processes in greater detail. So on 13 July the SB called the Company to a hearing, during which it provided further details on the types of operations and the rationale for determining the dates of desaturation operations.

On 19 July the SB adopted Determination no. 17/2011, with which it established a new time period for completion of the investigative phase.

On 31 August Telecom Italia responded to the requests formulated by the SB in the aforementioned Determination no. 13/2011, sending a document containing informatiom about the new arrangements for managing slow navigation complaints that should guarantee faster Operator responses: this document makes clear that the application of the new process from April 2011 has indeed enabled the backlog of complaints of this category to be eliminated (for more detail, see the paragraph below on exchange desaturation operations).

Finally, with Determination no. 20/2011⁷ adopted in the Board meeting of 13 September, the SB, while it considered Telecom’s behaviour to be "such as to compromise, albeit solely in relation to the single episodes reported, the requirements for transparency emphasised in the Undertakings approved by AGCom Resolution no. 718/08/CONS and Undertakings Group no. 5", it also considered the remedies adopted by Telecom Italia to be suitable to overcome the critical aspects complained of by the operator Welcome, and therefore ordered the compliant to be closed. At the same time, the SB reserved the right to continue its audits of the number, frequency and impact of the aforementioned problems on customers.

Specific analyses

Certification of data

A project was started in 2010 to validate the mechanism for extracting data generated by the performance Monitoring System for Telecom Italia’s SMP services on Trouble Tickets and Work Orders.

In the third quarter the SB continued the audits of the statistical samples of the data used by Telecom Italia to draw up the Monthly Reports on the indicators.

These audits had been instituted by the SB to monitor the correctness of the basic data used to calculate the indicators specified in Undertakings Groups nos. 3 and 4. The audits start with the data for January 2011 and will last for 12 months. They are carried out by SO personnel, who report the results to the SB every quarter. Following these audit activities, the SB will prepare a final assessment report, including any corrective action to be taken.

The samples for the months of May and June were extracted on 8 July and 15 September respectively. In each extraction a sample of 386 work orders for the delivery process (KPI 1 indicators) and 947 trouble tickets for the assurance process (KP2 indicators) were examined, making a total of 1,333 elements. The identifying details of the sample records were sent, in the presence of Open Access and the Supervisory Office, to Telecom Italia, which arranged to supply all the data in its operational databases for each record.

In comparing the data extracted from the database used for calculating the KP1 and KP2 indicators for Undertakings Group no. 4 with the corresponding data in the operational databases, the SB was able to verify that no significant critical elements emerged, as had been the case for the previous extractions.

However, to investigate some apparent anomalies encountered in the course of the extractions, it was decided to carry out a field check in the Ancona AOL, as well as that already carried out in June in the Agrigento AOL: so the SO checked the integrity of some formally incomplete WOs in July, and no anomalies were found.

In addition, the SB welcomed the news, announced by Telecom Italia during the meeting on work progress held on 12 September 2011, that validation of the additional KPIs identified in the joint work groups with the alternative Operators and AGCom would start in October.

Analysis of Wholesale KOs

The SB started a detailed analysis of the causes of refusals of Wholesale Work Orders (the so-called "KO analysis project"), to improve understanding of the causes of refusals of the delivery process that Telecom Italia used until the transition to the New Delivery Process (NDP).
The project consisted of extracting the customer and network KOs on bitstream, LLU and WLR services from the Telecom Italia systems divided by cause and distributed on a time basis according to the date of issue of the Work Order, so as to reconstruct the dynamics of the WO for each customer. In particular, the Project analysed all the orders on which work started between January 2009 and January 2010.
The results of the Project may be used as a reference for comparisons to be made to assess the benefits deriving from the introduction of the NDP as soon as it is adopted for a significant percentage of orders.

With Determination no. 22/2010⁸, the SO approved the Final Report of the "Wholesale KO Analysis" Project, and formulated a series of recommendations for Telecom Italia intended to make the operation of the delivery process more efficient, particularly in relation to the improvement of the management of reasons for refusals. In particular, the SB asked Telecom to reclassify some reasons for refusal that are similar but attributed to different categories.

The SB also recommended that the Company start working with the alternative operators to identify shared solutions to overcome the causes that contribute to delays in the activation of services requested, inviting the major alternative operators to join the Project, urging real collaboration and reiterating its willingness to assess all suggestions and proposals for integration and change that might be received; this invitation has been accepted by an alternative Operator, which has continued a collaboration with the SB that has allowed the calculation parameters to be better adjusted, and considerably reduced the likelihood of an approximation error.

At the request of the SB, Telecom Italia has also prepared a guide on how to fill in WOs correctly.

In response to Determination no. 15/2011, Telecom transmitted information on specific technical issues regarding the New Delivery Process (NDP) and the management of KOs to the SB in August (see paragraph above on Undertakings Group no. 1).

Finally, on 28 July Telecom Italia sent the document analysing the trend in the outcomes of WOs received in the period 1 April 2010 to 31 March 2011, and closed by June 2011, to the SB, in compliance with the request made in Determination no. 22/2010⁹.

Analysis of Retail KOs

The SB bas ordered the start of the analysis of the causes of refusal of Work Orders (so-called KOs) in relation to the offer of Telecom Italia Retail services.

As decided in the 2011 Work Plan, the SB mandated the SO to extend the Analysis of KOs carried out the previous year, so as to assess the actual equality of internal-external treatment in the execution of the Delivery process. The analysis activities focus on examining the causes of the cancellation of WOs for Retail customers of Telecom Italia and on assessing any differences in their treatment compared to WOs for OLO customers. The audit will last for a period of 11 months, and a report will be drawn up at the end to illustrate the actions taken and the results achieved.
Activities related to this analysis continued during the reference quarter: at a meeting at the end of July, Telecom asked the SB for the specifications needed to start the study of the causes of refusal of WOs, which the SB promptly supplied. The Company then started transmitting the data on the extractions needed to start the analysis activities.

The pre-warning signalling system ("Amber Light") for exchanges at risk of saturation

After the suspension of marketing of the bitstream service at approximately 500 Telecom Italia exchanges due to network saturation, and the related analysis carried out after OLO Complaint S01/2010, the SB recommended that Telecom Italia set up a shared mechanism to indicate the pre-alert status of exchanges close to saturation.

With Determination no. 12/2011, the SB, in noting the excessive frequency at which the dates for reopening exchanges for the marketing of the specified bitstream services for wholesale portals are rescheduled, asked Telecom Italia to provide more detailed information on this matter, also inviting the company to take appropriate steps to improve the reliability of the specified dates for desaturation of exchanges notified to operators via the said wholesale portal.

During the hearing on 13 July, which followed the hearing held on 22 June, in which an initial report had been made on this topic, Telecom Italia provided further information about the revision of the process to manage communications with the Operators, providing details of the types of intervention and rationale used to determine the dates for the desaturation work.

With Determination no. 19/2011¹⁰ , adopted during the Board meeting of 13 September, the SB welcomed the adoption of the aforementioned measures by Telecom Italia.

Specifically, the Supervisory Board ascertained that, after its intervention, Telecom Italia had accepted that the desaturation procedures, and their communication to the market, needed radical review, in order to accelerate the adoption of timely measures, and to provide more reliable information to the operators.

Again at the invitation of the Supervisory Board, Telecom Italia also decided to include specific objectives linked to the quantities and respect for the dates of intervention work in the exchanges into the management incentive system.

The Supervisory Board reserved the right to undertake regular audits of the execution of these processes so as to ascertain that the critical elements raised by the alternative Operators were actually being overcome.

On this question, an in-depth Newsletter¹¹ had also been published on the progress of the plan to desaturate ATM technology exchanges for ADSL services.

The monitoring of the pre-warning ("amber light") system and of the state of saturation of the exchanges that provide bitstream services continued in the third quarter.

After the fall noted in the first months of 2011, the number of exchanges in amber alert remained more or less constant. In the third quarter of 2011 the fall in the number of saturated exchanges served by 7 Mbit/s DSLAMs continued, progressing steadily downwards to 62 units on 30 September 2011 (-62.4% compared with the value recorded at the beginning of the year), below the expected values specified in the Telecom Italia Technical Plans for the third quarter.

Finally, as regards the resources which trigger the change to amber light status when they reach critical levels of availability, 36% of the 233 exchanges equipped for 7Mbit/s services on "alert" at 30 September 2011 were declared to be at risk of saturation because of the high level of occupation of the backhauling bandwidth capacity, while the remaining 64% were declared critical because of the high level of occupation of the termination ports on the DSLAMs.

International benchmarks on the Key Performance Indicators

At the international meeting of supervisory boards held in Brussels in December 2010, it became evident that all participants wanted to develop a reciprocal exchange of information for the in-depth examination of specific themes and topics of mutual benefit: it was agreed that Key Performance Indicators (KPIs) would be an interesting first subject for comparison.

On 13 May 2011 a document was sent to the British, Swedish and New Zealand supervisory bodies containing requests for information on the subject of Key Performance Indicators (KPI). The document was also sent to Japanese operator NTT, which had attended the meeting of supervisory bodies held in Brussels in December 2010, and had declared its intention of jointly investigating specific subjects.

This document followed this meeting, at which a consensus emerged that an exchange of information would be developed to enable increasingly in-depth analysis of specific topics: the KPIs were in fact identified as one of the first topics for comparison.

In particular, the document mentioned contained a request for information on the KPIs and the Delivery and Assurance processes, as well as on the principal causes of refusals (KOs) detected in the delivery process.

The SO has received contributions from Telia Sonera and British Telecom, and has carried out an initial analysis of the information.

There was then a meeting between the SO, the Equality of Access Office (EAO) of British Telecom (BT) and Openreach, for the reciprocal exchange of information on the principal KPIs. During the meeting the similarities and differences of the "Open Access model" and the "Openreach" model, in relation to the Delivery and Assurance processes, were explored. Although some differences remain between the different models, many common points emerged from the comparison. The meeting went on to analyse the principal causes of KOs, and the ways in which they are managed; the issues that arise in this work in Italy and in the United Kingdom were found to be very similar.

A meeting with Telia Sonera is planned to look at the same issues in depth.

Other activities of the SB

• The structure of the SB site was revised in September: a "Documents" section was added, containing the published documents arranged by topic, making them easier to use and consult.