EoO or EoI and is there another way to prevent discrimination? BEREC roundtable on Equivalence of Inputs Bruxelles, April 29th 2014

EoO proved ineffective in ensuring technical non discrimination in Italy EoO implementation started in 2008 following Telecom Italia’s undertakings, to avoid sanctions for discriminatory behaviour in activation of services In 2009, TI undertakings were transposed into remedies within the second round of analysis of markets 1, 4 and 5 2 EoO does not involve the use of the same processes and interfaces the vertically integrated incumbent operator uses internally for activation and fault repair After 5 years, experience demonstrates that the retail arm of the vertically integrated incumbent operator enjoys a de-facto preferential treatment, in terms of lead-time and effectiveness for activation/fault repair Incentives and capability to discriminate not eliminated!

Discrimination is in-built in the EoO approach: line activation PG. 3 TI Retail Open Access TI Wholesale Final customer Altnets Final customer BT Retail Final customer Final customer Altnets Openreach provides wholesale services to internal and external customers through the same processes and systems, on the same timescale  In Italy, different processes and systems are used for the activation of wholesale products: Altnets orders have to be processed by TI Wholesale first, resulting into increased lead- time compared to activation for TI’s retail arm Open Access Provisioning leadtime for Altnets Provisioning leadtime for TI retail

Lead-time for Altnets activation further increased by the “two-step“ process PG. 4 Two step activation process: longer time and higher complexity TI sends its technician to configure the line and activate it TI sends its technician to configure the line After line configuration by TI, Altnets’ technician steps in and activates the line The inability to control the activation process end-to-end is a huge issue for Altnets, especially in the transition to ultrabroadband services Activation for TI prospect customers Activation for Altnets’ prospect customers Activation leadtime - TI Activation leadtime - Altnets

The use of different databases and interfaces leads to further rejections of requested activations Altnets recently found out that the database through which they get information on whether a prospect customer is reached by a TI line -and therefore whether the service can be provided through LLU or WBA- was incomplete for about 10% of available lines. Fastweb filed a complaint on rejections by Telecom Italia for «impossibility to provide ADSL services for presence of MUX equipment» on which TI had activated ADSL clients. The outcome was that in over 20% of cases, there was a «disalignment of databases» which led to the unjustified rejection. In many cases, Altnets have not been able to activate a service for a prospect customer because the system did not detect the presence of a copper line in their premises, whereas TI was able to connect the same customer having a more complete database available The use of different databases between TI retail and Altnets has led to a significant part of the market not to be addressed by competition PG. 5

Telecom Italia fault repair is always “first time right“, whereas for Altnets it may take several field interventions, as part of the access network is under the responsability of Telecom Italia and other under the responsability of Altnets FW TI Fault in Altnet’s part of the newtork fault in TI’s part of the network Second field intervention Fault repair for TI customers Fault repair for Altnets customers TI FW First field intervention TI If the fault diagnose was wrong in the first intervention Discrimination in fault repair First intervention Not even EoI can resolve this kind of discrimination FW Check FW Check

Strategic use of internal/external workforce Telecom internal workforce External workforce Telecom internal workforce External workforce Telecom Italia extensively uses external contractors for activation and fault repair When TI uses external contractors to activate and repair Altnets line, Altnets can hire the same contractors and simplify/speed-up their activation/repair. Telecom Italia is increasingly and strategically witdrawing the use of external contractors for activation and fault repair of the Altnet lines in specific areas, thus affecting the quality of services that Altnets can offer to their customers After March 2013 in Milan and Sicily, upon the elimination of external workforce for the fault repair of LLU lines, average time to repair a fault for Altnets has doubled

Persistent discriminatory behaviour recognized by competition authority PG. 8 The Italian Competition Authority launched an investigation to TI discriminatory behaviours in June The complaint concerned the high number of rejections of Altnets’ requests for activations of wholesale access lines to provide services to end users (technical boycotting) AGCM found that from 2009 to 2011: TI had unfairly rejected a number of requests for activation of wholesale services TI treated requests coming from other operators in a discriminatory manner compared to those originating from its internal divisions by obstructing competitors' access to its infrastructure and making service access activations significantly more difficult AGCM imposed a €88.2m fine on TI

The ineffective or delayed fault resolution is the major reason for customer churn 9 Fastweb customer churn (customer that have experienced a fault) Fonte: Dati Fastweb Fault solved <72hFault solved >72h Multiple faults

Unbundling of fault repair and activation services is feasible, easy and cost effective Incumbents in many countries already outsource these services to external contractors Unbundling would simply involve the capability for the Altnet to negotiate contracts directly with the certified technicians and manage activation and fault repairs end-to-end Providing the Altnets the capability to manage end- to-end the activation and fault repair processes is the real answer to technical discrimination issues Incumbent MDF NTP CPE segment of access network under the responsibility of incumbent segment under the responsibility of Altnets CABINET ONE CONTRACTOR CARRIES OUT THE FAULT REPAIR ACTIVITIES END-TO-END UNBUNDLING OF ACTIVATION/REPAIR ACTIVITIES PERFORMED BY INCUMBENT WORKFORCE EXISTING APPROACH ACTIVITIES CARRIED OUT BY ALTNET CUSTOMER PREMISE

Unbundling of services for SLU is even more critical No need for intervention at MDF (less security issues) No impact on incumbent workforce (the percentage of SLU activation/repair will be 5% of total activities) Effectiveness and quality in the activation of ultrabroadband services will be key in stimulating the market!! Fastweb is currently engaged in a massive migration of its customer base to SLU-based services, to enable ultra-broadband services to existing and new customers

Lessons to be drawn PG. 12 In Italy EoO has proved to be: Ineffective: as discrimination by the SMP operator has been persistent under EoO regime; Expensive: as it has required the supervision of two public authorities (AGCM and AGCOM) plus the establishment of an ad hoc Body of Surveillance (Organo di Vigilanza); Highly damaging: It has damaged competition and investments, consequently consumer welfare and innovation Unbundling of activation and fault repair services can be highly cost/time effective and create huge advantages for the competition and for end users

Introduce competition on quality of service offered to end users The impossibility of Altnets to fully control quality of services provided on provisioning and maintenance of wholesale access lines translates into: Absence of differentiation of services to the end users An inefficient and cumbersome process to provide wholesale services (ie. longer provisioning times, greater costs for altnets and poor service for end users) Possible discriminatory behaviour by incumbents No incentive/possibility of competition on the quality of service offered No competitive pressure on the incumbent to improve quality of services 13 Impossibility of Altnets to manage directly activation and fault repair services has a direct impact on the competitiveness of the market and on end users