AGCM

JOINT PRESS RELEASE

Having concluded the joint investigation between the Antitrust Authority and ACG on broadband: “Proceed immediately with the digitization of the Public Administration”. Fibre-optic networks, “priority need”. For the investments, “consider the role of the private sector even in the form of joint ventures”.

The implementation of broadband networks is essential to achieve the objectives of the European Digital Agenda and to provide a boost to economic growth. But while some areas of the country are seeing a dynamic competition amongst the private operators following the stimulus of regulation, in other areas there is a substantial lack of infrastructural investment. This is why a National Strategic Plan is required for the development of next generation networks, even with the provision of public policies that support the investments; one must speed up the digitization of the public administration and, more generally, promote public interventions in support of the demand and supply of services to ultra-wideband; forms of joint ventures should be supported between private operators meant to accelerate the investments in the next-generation networks. These are the principal indications which emerge from the cognitive network of next-generation communications promoted last January by the Italian Competition Authority (ICA) and the Authority for Communications Guarantees (ACG) and now concluded, following the interventions of the respective Presidents, Giovanni Pitruzzella and Angelo Marcello Cardani.

The purpose of the survey: i) to examine whether the natural dynamics of investments in networks to ultra-wideband enables the radical renewal of the infrastructure required to affirm the economy and the digital society; ii) assess in what way the safeguard of competition – static and dynamic – and the regulation of the markets interact with deep technological and market changes and with the possible public policies in the field of electronic communications.

An essential prerequisite of the survey is that the electronic communication networks are the backbone of the digital economy and information society and, now more than ever, a determining factor for the competitiveness and economic growth. It follows, therefore, the need to bridge the gap that Italy has in the development of communication networks for ultra-wideband and in the spreading of digital skills throughout the population and amongst enterprises.

On the basis of these premises, the two Authorities, envisaged different technological and market scenarios with their relative repercussions in competitive terms, have provided a shared technical contribution which is functional to the understanding and evaluation of the results achieved through private initiative and, consequently, useful to the definition of an institutional framework of rules and, even more generally, of an effective, consistent and transparent public policy.

More specifically, here are some are some key points of the analysis.

1)      The network and next-generation services.

The realisation of the next-generation networks must be recognised as a priority for the competitiveness of the whole economic system and for the growth, worthy of a public policy intervention, because the market forces do not lead – of course – to achieve the objectives of the European Digital Agenda. The reasons are known. On the one hand, Italy is not characterised by a widespread digital culture and there are few families (and enterprises) connected to the internet, and the use of online digital services is also very modest. On the other hand, the investments of private enterprises are insufficient – in the medium term – to guarantee the widespread development of new generation networks. This is because these are investments which involve significant costs that are not recoverable, while the associated incremental revenue expected by operators appears highly uncertain. And it is precisely this uncertainty, moreover in a context of progressive reduction of revenues and margins in the telecommunications industry, which is probably the main risk factor that affects (insufficient) investments in new infrastructure. However, to plan for investments it would be simplistic to only consider the current demand for ultra-wideband services, without considering that – in the coming years – the demand for bandwidth will grow considerably, both with regard to the use by families (for example, video online) and also with regards to the needs of the public administration and private enterprises (for example, cloud computing).

2)      National strategic plan for the development of the networks.

It is fundamental to define a national strategic plan for the development of infrastructure that finds the areas of intervention in organic areas, simplifies the relationships between the various decision-makers involved and performs planning of interventions of infrastructure, while continuing with the acceleration of the digitalisation of the Public Administration. This in order to reduce uncertainties that might affect the investment decisions of private operators, slowing the development of infrastructure. In this context, the policy of supporting demand is also significant. One might consider public interventions aimed to promote more transparency in the quality of online connections with the aim of making the users more aware of the service differentiation of internet connectivity. Policies to support demand in the form of vouchers, subsidies, tax benefits for families and/or enterprises that wish to adopt an ultra-wideband connectivity may be particularly effective. On the supply side, it should be ensured that local authorities actively contribute to the objective of digitization through the necessary measures for administrative simplification that, consistent with the efforts made at legislative level, would reduce the time and cost for the installation of fibre-optic infrastructure. There is also a clear space for direct public intervention in the areas of the country that are not covered by private investment plans. Public investment must nevertheless clearly combine with the mode of selection of the operators and appropriate architectural choices to ensure effective competition.

3)      European Digital Agenda, public programmes, the role of the private sector.

The achievement of the objectives of the European Digital Agenda may require a different set of public policies that may also cover areas where private operators have already defined investment plans. In these circumstances, it is evident that the more public policy assumes a leading role in the innovative process of the sector, the more need to take remember the risks for the functioning of the markets and for the competitive process, both in its static and its dynamic declination. In general, the public intervention – which appears necessary in our country to achieve the objectives of the European Digital Agenda – may mix with scenarios of organisation of the sector that have different degrees of concern with regards to the impact on competition and the regulatory measures.

The creation of a market structure characterised by the existence of a “pure” network operator, not vertically integrated in the provision of services to final users, evidently constitutes the “ideal” scenario in terms of competition and is more “linear” from the regulatory point of view; however, it is a scenario which is very difficult to achieve concretely. A possible alternative scenario, where the market structure was only to regroup on the figure of the dominant integrated vertical operator, contrarily would imply a particularly careful scrutiny both under the antitrust profile and also in relation to its regulatory provisions. A third scenario is one where they develop forms of co-investment between several operators, eventually even through the formation of joint ventures. If this last option were made so as not to unduly restrict the space for competitive comparison, it could be considered as a second best solution from the competition point of view, but with the advantage of accelerating the investment in new-generation networks.

Rome, 8 November 2014