Tim and more, as the network company must be according to Antitrust and Agcom
Can the single network company be a vertically integrated operator like Tim? Here is the position of Antitrust (Agcm) and Agcom when in 2014 they expressed themselves on the issue now back to topicality with the Fibercop plan of the former Telecom Italia with Kkr and Fastweb, in addition to the role of Cdp with Open Fiber
Tim takes the first steps towards the unique company of the network. And it does so together with Kkr and Fastweb, with which it will give life to FiberCop. Tim's secondary network will flow into the company, the copper one that reaches customers' homes from the cabinets under the houses, but the involvement of Open Fiber, controlled by Enel and Cdp, is not excluded in the future.
Agcom and Agcm must also express themselves: will they reject or promote the unique network conceived by Tim and Cdp at the push of the government? Some indications come from a joint analysis on the topic carried out in 2014.
Let's go step by step.
THE NEW COMPANY
Tim works at FiberCop with Kkr and Fastweb. Kkr will take over 37.5% of FiberCop putting 1.8 billion euros on the table. Fastweb, on the other hand, will contribute its 20% of FlashFiber (a joint venture with Tim), to have a 4.5% stake in the new company.
ACCESSCO
And, according to the agreements, even when the first united network core, FiberCop, moves to the new AccessCo company, Tim will keep 51% of the company. Governance will be shared: Tim will have the minority of the board of directors and the managing director who will designate will have to have the approval of CDP, who will instead choose the president who will have heavy powers, including that of network security, writes Ansa .
PLAN THAT AGCOM AND AGCM MUST APPROVE
Agcom and Agcm will also express themselves on FiberCop and then on AccessCo, which in reality had already expressed themselves on the subject in 2014, with an analysis on the scenarios of the evolution of broadband infrastructures, their properties and the consequences for competition .
THE THREE WAYS OF AGCOM-AGCM
Three scenarios envisaged by Antitrust and Agcom: the development and management of the Fttb / H network by a "pure" network operator not vertically integrated; the development and management of the Fttb / H network by the vertically integrated dominant operator; the development and management of the Fttb / H network through a joint venture between several operators.
FIRST SCENARIO: FULL COMPETITION
Passed with full marks, for Agcom and Agcm, the first scenario in which "the definitive overcoming of the vertical integration between the properties of the network that constitutes an essential facility and the supply of services that has historically characterized the fixed network sector after liberalization. The ownership separation between the "essential" network and services has clear advantages from a competitive point of view, since it aboriginally removes the incentives to implement discriminatory conduct from an economic and technical point of view on the part of the network manager and therefore constitutes the most solid basis to allow full compliance ".
However, there is no lack of risks “deriving from uncertain demand from end users or intermediate operators, but also risks deriving from possible opportunistic behavior of downstream operators”.
AGCOM AND AGCM BOCCIANO VERTICAL INTEGRATION
Agcom and Agcm, on the other hand, are not in favor of “a vertically integrated dominant operator”, whose presence could lead to “competitive problems”.
"A more critical situation – explained the Authorities – would arise where the development of Fttb / H networks was not carried out for" internal "growth, but through possible merger operations involving the only wholesale operator that has an alternative infrastructure Relatively extensive Fttb / H. Among the various scenarios considered in this study, it is the one potentially more restrictive for competition ”.
THE JOINT VENTURE HYPOTHESIS
Among the scenarios taken into consideration between Agcom and Agcm there was also that of the creation of a joint venture between several fixed network operators. This hypothesis “does not negate the vertical integration between management of the network and the provision of services to end users, but substantially modifies its physiognomy”.
“Vertical integration, in fact, would not only concern the incumbent operator – wrote the two authorities in 2014 – but a plurality of operators. This can bring about competitive advantages, reducing the risks of ex-post discrimination, especially where the joint venture project is shared by operators who hold a significant market share ".
THE CONCERN ABOUT THE JV
The third way, that of the joint venture, “carries with it the risk of facilitating the coordination of the conduct of the partner companies not only at the level of realization of the network, but also in the provision of services to end users, to the detriment of the latter”.
"The legislation protecting competition and its application by the Competition and Market Authority – reads the Executive Summary – do not constitute an obstacle to the implementation of joint venture projects capable of ensuring efficient development of the networks, improving the well-being of consumers without providing for restrictions that are not indispensable to achieving these objectives and that do not give the companies concerned the possibility of eliminating competition for a substantial part of the products in question ".
NEW REGULATION?
"From the regulatory point of view, it is then clear that such a hypothesis would require an update of the existing regulation to the extent that this would be necessary by virtue of the loss of the functional relationship between access to the essential resource and vertical integration of the incumbent operator alone".
IMPOSSIBLE A PRIOR EVALUATIONS OF THE JOINT VENTURE
Agcom and Agcm, however, do not promote the joint venture a priori. "It is not possible to provide an assessment of whether a joint venture project is compatible or not with the competition law, since this assessment depends significantly on the set of structural and contractual elements that characterize the project in question" , write the two Autorithy.
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JOINT AGCOM-AGCM COMMUNICATION DATED 8 NOVEMBER 2014
The creation of broadband networks is essential to achieve the objectives of the European Digital Agenda and to provide a boost to economic growth. But while in some areas of the country there is a competitive dynamic on the part of private operators under the stimulus of regulation, in others there is a substantial absence of infrastructural investments. For this we need a national strategic plan for the development of the new generation networks, also with the provision of public policies to support investments; it is necessary to accelerate the digitalisation of the Public Administration and, more generally, to promote public interventions to support the demand and supply of ultra-broadband services; Forms of joint ventures between private operators aimed at accelerating investments in new generation networks should be supported. These are the main indications that emerge from the fact-finding survey on new generation telecommunication networks promoted last January by the Competition and Market Authority (Agcm) and by the Communications Authority (Agcom) and now concluded
Aim of the survey: i) to examine whether the natural dynamics of investments in ultra-broadband networks allow for the radical renewal of infrastructures required by the affirmation of the digital economy and society; ii) to evaluate how the protection of competition – static and dynamic – and the regulation of markets interact with the profound technological and market changes and with possible public policies in the electronic communications sector.
An essential assumption of the survey is that electronic communications networks are the backbone of the digital economy and the information society and, today more than ever, a determining factor for competitiveness and economic growth. It follows, therefore, the need to fill the delay that Italy suffers in the development of ultra-broadband communication networks and in the diffusion of digital skills among the population and among businesses.
On the basis of these premises, the two Authorities, envisaging different technological and market scenarios with the relative repercussions in competitive terms, have provided a technical – shared – functional contribution to the understanding and evaluation of the results achievable through private initiative and, a consequence, useful for defining an institutional framework of rules and, more generally, an effective, coherent and transparent public policy.
In more detail, here are some qualifying points of the analysis.
1) Next generation networks and services.
The creation of the new generation networks must be recognized as a priority need for the competitiveness of the entire economic system and for growth, worthy of public policy intervention, as market forces alone do not lead – naturally – to achieving the objectives of the European Digital Agenda. The reasons are known. On the one hand, Italy is not characterized by a widespread digital culture and there are few families (and businesses) connected to the Internet, as well as the use of digital online services is modest. On the other hand, investments by private companies are insufficient – in the medium term – to guarantee the widespread development of the new generation networks. This is because these are investments that involve significant sunk costs, while the connected incremental revenues expected by operators appear highly uncertain. And it is precisely this uncertainty, moreover in a context of progressive reduction of revenues and margins in the TLC industry, which is probably the main risk factor affecting the (insufficient) investments in new infrastructures. However, to plan investments, it would be simplistic to consider only the current demand for ultra-broadband services, without considering that – in the next few years – the demand for bandwidth will grow considerably, both with regard to household uses ( video online , for example), both with regard to the needs of the Public Administration and private companies ( cloud computing , for example).
2) National strategic plan for the development of networks .
The definition of a national strategic plan for the development of infrastructures is fundamental, which identifies the areas of intervention in an organic way, simplifies the relationships between the various decision-makers involved and carries out a planning of interventions on infrastructures, while continuing with the acceleration of digitization of the Public Administration. This is in order to reduce the uncertainties that can affect the investment choices of private operators, slowing down the development of infrastructures. In this context, the demand support policy also assumes significant importance. For example, public interventions could be considered aimed at promoting greater transparency of the quality of online connections in order to make users more aware of the differentiation of Internet connectivity services. Particularly effective can be policies to support the demand in the form of vouchers , subsidies, tax benefits for families and / or businesses that want to have ultra-broadband connectivity. On the supply side, it is necessary to ensure that local authorities actively contribute to the digitization objective through the necessary administrative simplification interventions which, in line with the initiatives promoted at the legislative level, make it possible to reduce the time and costs for the installation of infrastructures in optic fiber. There is also a clear space for direct public intervention in the areas of the country that are not covered by private investment plans. However, public investment must clearly be combined with methods of selecting operators and architectural choices suitable for guaranteeing effective competition.
3) European Digital Agenda, public programs, role of private individuals.
Achieving the objectives of the European Digital Agenda may require a different set of public policies which may also concern areas in which private operators have already defined investment plans. In these circumstances, it is evident that, the more public policy assumes a guiding role in the sector's innovation process, the more it is necessary to take into account the risks for the functioning of markets and for the competitive process, both in its static and dynamic declination. More generally, public intervention – which also appears necessary in our country to achieve the objectives of the European Digital Agenda – can intertwine with organizational scenarios in the sector that present different degrees of problematicity with regard to competitive impacts and regulatory measures.
The creation of a market structure characterized by the existence of a "pure" network operator, not vertically integrated in the supply of services to end users, clearly constitutes the "ideal" scenario from a competitive and more "linear" point of view. view of regulation; however, this is a scenario that is very difficult to implement in practice. A possible alternative scenario, in which the market structure were to reorganize itself only on the figure of the vertically integrated dominant operator, would imply – on the contrary – a particularly careful scrutiny both from an antitrust profile and in relation to its regulatory discipline. A third scenario is that in which forms of co-investment are developed between a plurality of operators, possibly also through the establishment of joint ventures. If this last option were implemented in such a way as not to unjustifiably restrict the space for competitive comparison, it could be considered as a second best solution from a competitive point of view, but with the merit of accelerating investment processes in new generation networks.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/tim-e-non-solo-come-deve-essere-la-societa-della-rete-secondo-antitrust-e-agcom/ on Mon, 31 Aug 2020 14:20:36 +0000.