The European Commission approved a proposal by Italy's national telecoms regulator (AGCOM) in May that will allow new entrants in the country's fixed-line telecoms market a degree of preferential treatment in setting non-cost-based wholesale charges. The EC has sanctioned a four-year transitional period during which new carriers can set termination and origination charges on voice calls connected to other networks.
When AGCOM made the proposal in April, it was met with disbelief in some circles. Italy has something of a reputation for flouting EU regulations and Brussels has a reputation for reacting rather angrily when it does so.
By giving the green light, the EC has caused a stir. It appears that Brussels has decided that promoting the development of alternative infrastructure outweighs the need to stick firmly with basic market principles.
'I am determined to open, with the support of national telecoms regulators, national telecoms markets further to effective competition. In order to promote infrastructure-based competition, it can be justified to allow new entrants to charge higher call termination rates,' EU Commissioner for Information Society and Media Viviane Reding said.
'However, such a measure should be justified by higher cost and be clearly limited in time to encourage new entrants to become cost-efficient,' she added.
The principal beneficiary in a market that remains dominated by Telecom Italia is likely to be Wind Telecomunicazioni, in which Orascom Telecom purchased a 62% stake for c3 billion back in August 2005. It is understood to be struggling to wrest fixed-line market share from Telecom Italia, with just 600,000 customers in each of the broadband and telephony markets, compared to 13.7 million in cellular, as of the end of 2005.
It will be interesting to see how other member states react to this indication of a lenient approach to the regulation of new entrants. Many may see this as a means of stimulating economic development.
In contrast, Brussels seems unhappy with the continued dominance of former monopolies in fixed-line markets. While approving a more lax regulatory regime in Italy, it remains on a collision course with Germany over plans to loosen regulations concerning a c3 billion VDSL network being constructed by the incumbent there, Deutsche Telekom. TE