Telecom Italia: Functional Separation of Access Network

It's official: Telecom Italia is creating a separate wholesale access operation clearly separated from Telecom Italia retail operations. When the new change takes effect, Telecom Italia retail and all other competitors will buy access services from the wholesale business.

Open Access will develop and maintain the access network infrastructure and manage activation and other processes.

The move is the latest example of ways different service providers in different countries are adapting to differing regulatory regimes and competitive "facts on the ground."

While there have been discussions of structural separation in the U.S. market, there never has been any political will to change the regulatory regime strongly in that direction, though aggressive wholesale discounts were the rule, for a period after 1996, and began heading the other way after about 2004.

Markets where functional separation has been adopted tend to be characterized by weak ability on the part of cable operators to provide meaningful competition in voice and high-speed Internet access services.

That isn't the case in the U.S. market, where regulators basically have decided that a competitive duopoly where cable and telco incumbents battle it out will lead to the greatest consumer gains, in the shortest amount of time. As a practical matter regulators probably got this one right.

Given the current state of capital markets over the past four or five years, it is virtually impossible to raise enough money to build a third, widespread broadband terrestrial network. Aggressive wholesale requirements meanwhile were all the excuse the large telcos needed to drag their feet on rapid broadband upgrades.

It is no coincidence that Project Lightspeed and Verizon FiOS really cranked up after it was clear the aggressive wholesale requirements would not stand.

That said, nothing in the telecom world ever is completely stable. What the government gives, the government takes away. At some point, the rules will begin to change again. As always in the U.S. market, the issue is whether the problem is too much freedom or not enough.