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GRUPPO TELECOM ITALIA

Telecom Italia’s Access Network

Separation: Implementing the

Equivalence

Conference on “Experience with Vertical Separation in Telecoms” Brussels, 22nd November 2010

Equivalence and Regulatory Affairs

European and Relevant Markets Regulation

Giovanni Battista Amendola

Telecom Italia SpA - European and Relevant Markets Regulation

G. Amendola

Agenda

► Overview of Telecom Italia’s operational separation model

► Ensuring technical equivalence

► Ensuring economic equivalence

► NGAN undertakings

► The Supervisory Board

► The status of implementation of the undertakings

► Competitive trends in the fixed access market

► Assessment of Telecom Italia’s operational separation model

► Conclusions

3

Experience with Vertical Separation in Telecoms Telecom Italia’s Access Network Separation: implementing the Equivalence


G. Amendola

Overview of Telecom Italia’s operational separation model

Ensuring technical equivalence

Ensuring economic equivalence

NGAN undertakings

The Supervisory Board

The status of implementation of the undertakings

Competitive trends in the fixed access market

Assessment of Telecom Italia’s operational separation model

Conclusions

Index

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G. Amendola

Telecom Italia’s

operational separation

model

Telecom Italia’s access separation model

Parity

of treatment

obligations

In 2002, AGCom imposed regulatory provisions concerning the internal-external parity of treatment between Telecom Italia retail and OLOs.

Creation of

Open Access

In February 2008, Telecom Italia took the autonomous decision to create the Open Access Division.

Submission of

undertakings

on access

separation

Legally binding Telecom Italia’s undertakings approved by AGCom and entered into force as of 1st january 2009. Most of Telecom Italia’s undertakings have been notified to the EC as remedies. Legal implementation completed by 31st march 2010.

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G. Amendola

Separation of

functions

Three operationally separate functions:

I. Telecom Italia Retail → which serves end users;

II. Telecom Italia Wholesale → which serves OLOs;

III. Telecom Italia Network → for access, transport and interconnection

services, which serves both Telecom Italia Retail and Telecom Italia

Wholesale.

Separation of

information

Logical/physical separation of network/wholesale systems from the retail

systems aiming at avoiding access to OLO’s data by the retail units.

Separation of

employees &

management

Physical separation of Telecom Italia Wholesale staff and management

from Telecom Italia Retail’s.

Separation measures introduced in 2002

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G. Amendola

The creation of Open Access

The Open Access Division has been created at the beginning of 2008.

Open Access manages Telecom Italia access network infrastructure in an autonomous and

transparent way in order to provide wholesale access services to both Telecom Italia’s retail division

and to the alternative Operators (OLOs) by means of Telecom Italia’s wholesale unit.

The undertakings are focused on the equivalence in the offer of SMP access services provided by

Open Access.

Open Access provides the following access services:

Copper physical link between the client and the local exchange for both Telecom Italia and the OLOs

Wholesale Line Rental (WLR)

Co-location at exchange level

Fibre optic links

Maintenance on copper and fibre

Access to ducts

Wholesale broadband access

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G. Amendola

An overview of the 14 groups of undertakings

EQUIVALENCE

GOVERNANCE

CONSUMER PROTECTION

1) SMP Services Delivery;

co-location; Wholesale Customer

Relationship Management System

2) Code of Conduct and Incentive System

for Open Access and Wholesale

personnel

3) SMP Services Monitoring System

4) Monitoring System transparency

5) Network Quality and Technical Plans

6) Network Development Plans

8) Open Access Regulatory Accounting

and Transfer Charges

9) NGAN Undertakings

7) Supervisory board

9) NGN Italy

committee

10) Office of telecom

adjudicator

11) Ban on commercial activities

for personnel of Open Access

network

12) Unsolicited services’ activation

reporting

13) CPS termination notification

procedure

14) More efficient dealing with

complaint and reduction of

disputes with consumers

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G. Amendola

Group 1 (SMP service delivery; co-location; Wholesale

Customer Relationship Management)

Group 3 (SMP Service Monitoring System)

Group 4 (Monitoring System Transparency)

Group 5 (Network quality technical plans)

Group 6 (Network development plans)

Group 7 (Supervisory Board)

Group 8 (Open Access Regulatory Accounting and

Transfer Charges)

Group 9 (NGAN Undertakings)

Group 10 (participation to the Office of

Telecommunications Adjudicator- OTA)

Group 11 (Ban on commercial activities for Open

Access personnel)

Transposition of Telecom Italia’s undertakings into remedies

AGCom Decision no. 731/09/CONS

Groups of undertakings transposed into remedies

Group 2 (Code of Conduct and incentive system for

Open Access e Wholesale personnel)

Group 12 (unsolicited services’ activation reporting)

Group 13 (CPS termination notification procedure)

Group 14 (More efficient dealing with complaints and

reducing disputes with consumers)

Groups of undertakings not transposed

The Italian Access Regulation is by far one of the most detailed and

pro-competitive in Europe

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G. Amendola

Index




NGAN undertakings





Conclusions

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G. Amendola

Technical equivalence: the objectives and the means

Groups of undertakings no. 1,3,4 are aimed at ensuring “technical equivalence”

which is to provide:

the same set of services and commercial information;

the same handling process at the Open Access level;

non discriminatory provision time, terms and conditions.

Technical equivalence is achieved through:

A new delivery process at the wholesale level

A new system for wholesale customer relationship management (CRM)

A monitoring system based on several KPIs ensures to verify the effectiveness of

the equivalence

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G. Amendola

Objectives of the New Delivery Process and of the New Wholesale CRM System

The New Delivery Process aims at:

improving internal/external equal treatment in the production and provision of SMP services;

handling orders, without discriminating between internal and external ones, with the introduction of a “single queue” in case of network shortage, based only on reception time (first come-first served).

OLOs have been involved in “technical meetings” to share technical solutions and to optimise the processes. About 80% of the requests made by OLOs have been accepted.

The outcomes of the New Delivery Process are: reduction of KOs, reduction of service delivery time, greater transparency of the transactions with OLOs.

The New Wholesale CRM System aims at:

improving the quality and maintenance of the services offered;

increasing the transparency about the fixed network status.

All wholesale services are managed on the new Wholesale Customer Relationship Management System: it ensures the completion of the equivalence process.

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G. Amendola

The technical equivalence model adopted by Telecom Italia

undertakings no. 1: Wholesale Customer Relationship

Management and New Delivery System

undertakings no. 3 - 4: KPI Monitoring system

Customer

Customer OLO

TI wholesale orders and

Trouble ticket by

OLOs

TI Retail

Retail Orders and Trouble tickets

OPEN ACCESS

Delivery and Assurance of SMP services

Retail completion of end user services

OLO’s completion of end user services

Customer

Customer

Te

ch

nic

al E

qu

iva

len

ce

E

qu

ivale

nce

of O

utp

ut

New Delivery Process

CRM wholesale

Chinese wall

Area of interest of Undertakings 1,3,4

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G. Amendola

Monitoring technical equivalence: the objectives

A “monitoring system”, verified by several KPIs, measures the Open Access performances

in the provision of SMP services for Retail and Wholesale customers in terms of:

Internal/external equal treatment, by comparing KPIs related to the production of

SMP services supplied to the Operators with KPIs related to corresponding activities

supplied to Telecom Italia’s commercial department.

Quality level of the production and relative supply processes by comparing quality

key performance indicators (“KPI”) and the corresponding annual targets (Key

Performance Objectives, “KPO”).

The current monitoring system includes both the set of KPIs proposed by Telecom Italia

and the additional 12 KPIs proposed and requested by OLOs.

Telecom Italia also provides performance monitoring regarding the internal Wholesale

Department.

The monitoring system will be certified by the end of 2010.

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G. Amendola

Monitoring technical equivalence: the KPI system adopted (1/2)

Customer

Customer OLO

TI wholesale orders and

Trouble ticket by OLOs

TI Retail

Retail Orders and Trouble tickets

OPEN ACCESS

Delivery and Assurance of SMP services

Retail completion of end user services

OLO’s completion of end user services

Customer

Customer

KPI 1 and 2: Delivery and Assurance

KPI 4:Wholesale Systems Availability

KPI 3: Service Availability

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G. Amendola

Monitoring technical equivalence: the KPIs system adopted (2/2)

KPI 1

Delivery

KO; Queue

% of orders in queue solved

Ageing of order

Order falling into a Network KO

Pots Delivery Respect of appointment

Orders solved within 20 days

BB delivery asymmetric




Orders solved at the appointment date

symmetric Average time

KPI 2

Assurance

Pots Assurance

Average time in working hours

Trouble Tickets closed within the second day

Trouble Tickets repeated within 30 days

Trouble Ticket closed

BB Assurance

asymmetric


Trouble Tickets closed within 2° day


Trouble Tickets open within 14 days

symmetric


Trouble Tickets closed within 2° day


Trouble Tickets open within 14 days

KPI 3

Service Availability Availability of services

KPI 4

System Availability

Unavailability of system front end

Unavailability of system back end

Group of KPI KPI

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G. Amendola

Monitoring technical equivalence: empirical evidence in 2010 (1/2) (source: Quarterly Reports, submitted to Agcom, Supervisory Board and OLOs)

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G. Amendola

(source: Quarterly Reports, submitted to Agcom, Supervisory Board and OLOs)

Monitoring technical equivalence: empirical evidence in 2010 (2/2)

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G. Amendola

Index




NGAN undertakings





Conclusions

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G. Amendola

Economic equivalence: the objectives and the means

Group of undertakings 8 is aimed at ensuring full transparency of the economic conditions

applied by Open Access to Telecom Italia retail department and to OLOs for SMP wholesale

services.

Economic Equivalence is achieved through:

Internal service contracts containing both technical and economic conditions for internal

charges of SMP access services provided by “Open Access” to the Company’s retail

departments (submitted for approval to AGCom).

Transfer price model (i.e. applying to Telecom Italia’s retail departments the same prices

applied to OLOs).

Separate accounting for SMP services provided by Open Access.

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G. Amendola

Index




NGAN undertakings





Conclusions

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G. Amendola

NGAN undertakings

Group of undertakings no. 9:

Access to ducts and dark fibre

Telecom Italia is committed to provide access to ducts and dark fibre.

Investment sharing

Telecom Italia is committed to propose to all interested Operators to participate in the deployment of new passive infrastructure on the basis of the principle of investment sharing:

Whenever Telecom Italia plans to build a new NGAN local infrastructure within an area with a minimum of 500 house units connected by ducts longer than 100 m., the Operators will be informed about all the details in order to weigh up their interest to invest in the area by joining Telecom Italia in the realisation of the passive infrastructure.

Access equivalence to NGAN

Undertakings shall be extended to all new wholesale network services provided over the NGAN in case Telecom Italia is found to have SMP in the provision of such services.

Group of undertakings no. 6:

Transparency on NGAN development plans

Telecom Italia is committed to release the “New Generation Access Network plan (NGAN)”, including the outline of the percentage of new generation lines for each local exchange area and municipality, with reference to the “homes passed”. In addition, the plan will provide any technical information on wholesale services becoming available at local level on the new platform.

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G. Amendola

Index




NGAN undertakings





Conclusions

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G. Amendola

The Supervisory Board (1/3) Telecom set up an independent body (“Supervisory Board”) in charge of supervising and assessing:

► the proper implementation of the undertakings;

► the compliance of Key Performance Indicators (KPIs) to the principles of equal treatment and quality objectives in the supply of fixed network access services.

The Supervisory Board is supported by a secretary and a technical office (“Supervisory Office”)

On 27th February 2009 Telecom Italia’s Board appointed the members of the Supervisory Board

Prof. Giulio Napolitano (Chairman), Professor of Public Law at Roma Tre University

Prof. Gérard Pogorel, Professor of Economy of Telecommunications at Ecole Nationale Supérieure des Télécommunications in Paris

Prof. Claudio Leporelli, Professor of Economic-managerial Engineering at La Sapienza University in Rome

Ing. Sergio Fogli (former Head of Telecom Italia’s Regulatory Affairs Dept.)

Ing. Francesco Chirichigno (former Telecom Italia’s CEO)

Designated by AGCOM

Designated by Telecom Italia

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G. Amendola

The Supervisory Board (2/3)

The Supervisory Board monitors the effective implementation of the undertakings by

making and adopting “recommendations” aimed to improve transparency and non-

discrimination.

The main activities carried out by the Supervisory Board are focused in the following

areas:

► KO reduction

► KPI certification system

► Transparency of Quality and Technical Plans for the development of fixed network

access

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G. Amendola

The Supervisory Board (3/3) The Supervisory Board can receive reports and complaints by alternative Operators and other third parties, with regard to:

(i) the implementation of the undertakings;

(ii) the values of the KPIs.

In case of third parties’ reports or complaints, the Supervisory Board:

► can use its powers to investigate the facts reported;

► the Board informs the Supervisory Office of the complaint;

► within 5 days the Supervisory Office provides the first outcomes of the investigation:

► if the complaint is generic or unfounded, the Supervisory Office, on behalf of the Supervisory Board, notifies the conclusion to the interested party;

► if the matter of complaint does not fall within its jurisdiction, the Supervisory Office, on behalf of the Supervisory Board, notifies the conclusion to the interested party;

► if the report is justified the Supervisory Office, on behalf of the Supervisory Board, begins the inquiry activities and notifies the opening of the inquiry to the interested parties.

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G. Amendola

Index




NGAN undertakings





Conclusions

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G. Amendola

Status of implementation of undertakings

1 st January

2009

28 th February

2009

31 th March

2009

30 th June

2009

31 th March

2010

October to

December

2010

Entering

into force

Group 8

First stage on

Transfer Charge

Models and

Regulatory

Accounting

Group 1

Closing of technical

tables with OLOs on

NDS, Co - Location

and Wholesale CRM

Group 3

Setting KPI

Project for KPIs monitoring

system

Group 9 NGAN

Offer of:

- Local ducts

- Co - digging

Starting of the New

Delivery Process for

Bitstream Services with

15 small/medium

OLOs

Completion of the

Economic

Equivalence:

Transfer Charges

Model and Open

Access Regulatory

Accounting

Release of the New

Delivery Process

Release of the new

wholesale CRM system –

New DB

Group 1

Experimentation

of the New Contact

Policy (SWAP)

with Major OLOs :

Fastweb , Wind

Vodafone, TeleTu ,

Tiscali , BT, ..

1 st September

2009

September

2010

Group 1

Starting

with New Delivery

Process with

Tiscali

November -

December

2010

Group 1

Full

Implementation of

the New Delivery

Process with

other large OLOs

1 st December

2009

Group 1

Experimentation

of the New Delivery

Process with

Fastweb on

restricted areas

October

2010

Group 2

Implementation of:

Code of Conduct;

Education Training;

Customer

Satisfaction Survey

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G. Amendola

Index




NGAN undertakings





Conclusions

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G. Amendola

Development of competition in the fixed access market

In the last 2 ½ years, OLOs have increased

their lines by 87% while Telecom Italia has

lost 18% of its lines.

OLOs cumulative market share increased

up to 30% at the national level.

In the last 2 ½ years, alternative operators

have increased their broadband lines by

50% while Telecom Italia has grown only by

10%.

Alternative operators cumulative

broadband market share has reached 44%

at the national level.

6,4 6,8 7,0 7,1

3,74,4

5,3 5,6

Dec '07 Dec '08 Dec '09 Jun '10

63,4%

60,5%

56,9%

56,1%

Broadband accesses (millions)

TI BB Accesses

AOs’ BB Accesses

(LLU, SA,

Bitstream, Fiber)

TI Market Share

10,1 11,2

12,3 12,7

TI Market Share

Fixed voice accesses (millions)

83,9%

77,0%

71,4%

69,9%

TI Accesses

AOs’ Accesses

(LLU, Naked DSL,

WLR, Fiber)

22,9 22,6 22,6 22,6

19,2 17,4 16,1 15,7

3,7 5,2 6,5 6,9

Dec '07 Dec '08 Dec '09 Jun '10

In the period of implementation of the undertakings OLOs market shares have continued to

increase both in fixed voice accesses and in broadband accesses.

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G. Amendola

Index




NGAN undertakings





Conclusions

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G. Amendola

Assessments of Telecom Italia’s separation model by third parties

AGCOM Chairman:

“The model is in the lead in Europe and I hope that the positive results achieved are

assessed with care at all levels, be them national and European. There is still much to be

done but I think we are on the right track” (see AGCom Press release dated 10th February

2010).

Supervisory Board:

“In carrying out the supervisory activity during 2009, the Supervisory Board did not notice

any formal breach of the undertakings” (see Introduction to 2009 Annual Report, page 2).

BEREC:

According to Berec: «the Italian Separation case contains elements which can be found both

under the heading of “functional separation” (option 3) and “functional separation with

incentives” (option 4)»

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G. Amendola

Index




NGAN undertakings





Conclusions

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G. Amendola

Conclusions: main features of Telecom Italia’s operational

separation model

Creation of a separated business unit – Open Access – providing SMP access services both internally

and externally. The service portfolio includes both copper access, fibre optic and ducts.

Physical separation of Open Access and Telecom Italia wholesale staff and management.

Separated incentive schemes and separated code of conduct for Open Access and Telecom Italia

wholesale staff and management.

Logical/physical separation of information systems (the Chinese wall) certified by an external auditor.

Technical equivalence for both existing and forthcoming SMP access services based on the Equivalence

of Output principle. The Equivalence is monitored by certified KPIs.

Transparency on network evolution by means of the publication of the Technical and Quality Plans

including the evolution toward NGAN.

Economic equivalence based on internal contracts, internal transfer charges consistent with regulated

wholesale prices and separated accounts for services provided by Open Access.

Governance of the equivalence model ensured by a Supervisory Board where external members

designated by AGCom are the majority.

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G. Amendola

Thank you!

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Telecom Italia’s Access Network - · PDF fileGRUPPO TELECOM ITALIA Telecom Italia’s Access Network ... KPI Monitoring system Customer Customer OLO TI wholesale orders and Trouble