Telecom Italia, Open Fiber trade barbs over single network project

ROME (Reuters) - Telecom Italia (TIM) and smaller broadband rival Open Fiber traded blows on Thursday on how they do business, complicating plans for a tie-up to create a single fiber network.

FILE PHOTO: Telecom Italia logo is seen at the headquarter in Rozzano neighbourhood of Milan, Italy, May 25, 2016. REUTERS/Stefano Rellandini

TIM’s CEO Luigi Gubitosi criticized Open Fiber for being slow to roll out its fast fiber network and said it was building “fiber to nowhere”. Open Fiber in turn said in a statement that TIM’s plans for buying the company were “neither favored by other industry players nor consistent with competition rules.”

Open Fiber, jointly owned by utility Enel and state lender CDP, has won all three public tenders to roll out a fast broadband network in so-called non-viable areas in Italy.

Unlike Telecom Italia, Open Fiber is a wholesale-only business, which sells capacity to telecom operators and not retail consumers. It is spending billions of euros to build an ultrafast fiber-to-the-home (FTTH) network for consumers and businesses, including in remote areas of the country.

The government would like Telecom Italia to join forces with Open Fiber to avoid duplicating investments and roll out a future-proof full fiber network.

But a series of problems, including differences of opinion over how much Open Fiber is worth and where funding will come from, have slowed down efforts to tie the knot.

Gubitosi said public data showed delays in rolling out fiber to so-called economically non-viable areas in Italy had risen despite the use of 1.5 billion euros ($1.65 billion) of public funding.

“What seems to emerge is that in those very areas where everyone has been trying to make up for a delay, the delay in reducing the digital divide has actually increased,” Gubitosi, speaking at a conference, said.

He added that a recent parliamentary hearing indicated Open Fiber was laying its fiber an average of 17 meters from homes “creating in this way a new type of undefined architecture which we in TIM jokingly refer to as FTN - Fiber to Nowhere,” he said.

Open Fiber said the criticism was unfounded. It said that since its creation three years ago it had managed to bring fast fiber to 8 million customers, more than any other operator in Italy and including 2 million in the non-viable areas.

The comments may complicate efforts to combine the two companies, or at least some of their assets, even though Gubitosi reiterated his view that the creation of a single network was the most efficient way to build a modern broadband infrastructure for the country.

“A tie up between TIM and Open Fiber makes sense and should be pursued, but if this goal is not shared then it will be TIM that takes on this challenge so crucial for the country,” he said.

Telecom Italia has been asking infrastructure funds to come up with bids for Open Fiber’s assets. The former monopoly is expected to select one or more partners before year end and then start negotiations with Enel and CDP early next year.

But Enel boss Francesco Starace has repeatedly shown little enthusiasm in parting ways with the fiber business.

Gubitosi also said international studies had shown that the wholesale-only model - not selling capacity direct to end users - had not proved very efficient in building out a FTTH network - a point disputed by Open Fiber.

Reporting by Elvira Pollina, writing by Stephen Jewkes, editing by Jane Merriman and Alexandra Hudson