On February 15, 2022, the Italian Competition Authority (the “ICA”) accepted the commitments proposed by Telecom Italia S.p.A. (“TIM”), Fastweb S.p.A. (“Fastweb”), FiberCop S.p.A. (“FiberCop”), Tiscali Italia S.p.A. (“Tiscali”), Teemo Bidco S.r.l. (“Teemo”) and KKR & Co. Inc. (“KKR” and, together with TIM, Fastweb, FiberCop, Tiscali and Teemo, the “Parties”) with respect to certain agreements concerning the creation of FiberCop and access to its infrastructure (the “Decision”).[1] 

Factual Background

FiberCop is a joint venture set up by TIM, Fastweb and KKR in 2020 to develop an ultra-broadband secondary fiber-to-the-home (FTTH) network in Italy. The set of agreements establishing FiberCop envisaged, inter alia: (i) the transfer from TIM to FiberCop of the business unit relating to its secondary passive access network and its 80% shareholding in Flash Fiber S.r.l. (“Flash Fiber”); (ii) the purchase by Teemo of a 37.5% stake in the share capital of FiberCop; and (iii) the signing of a Master Service Agreement, which defined the terms and conditions of the long-term relationship of mutual service provision between TIM and FiberCop. Furthermore, in a commitment letter signed on September 1, 2020, TIM, Teemo and Fastweb agreed that the remaining 20% stake in Flash Fiber held by Fastweb would be transferred to FiberCop.

TIM, Fastweb and KKR created FiberCop to deploy an ultra-broadband network in Italy by 2025, through the use of optical technologies with GPON-FTTH architecture.[2] FiberCop is active exclusively on the wholesale markets for the provision of passive access services of the secondary network. TIM and Fastweb committed to purchase from FiberCop certain volumes of passive access services, which will be used by the two shareholders to provide ultra-broadband services to their customers at the wholesale and retail levels. FiberCop is also the vehicle to implement a co-investment project open to other operators that intend to invest in ultra- broadband networks, in accordance with Article 76 of Directive (EU) 2018/1972, establishing the European Electronic Communications Code (the “EECC”).

FiberCop’s infrastructures cover the final portion of the telecommunications network. The local telecommunications network can be subdivided in primary network, constituted by the section connecting the central office to the street cabinet (CRO), and secondary network, which is the section connecting the street cabinet to user premises. FiberCop’s perimeter includes only the secondary network. Consequently, in order to connect the networks of alternative operators (other authorized operators, “OAOs”) to FiberCop’s network, it is necessary to associate a primary network section that reaches the street cabinet.

Access to the network can be passive or active. Passive access can be realized when the OAO owns or, in any case, has at its disposal (for instance, through indefeasible rights of use) primary network infrastructures up to the street cabinet. Passive wholesale access services allow the OAO to manage communication with its final customers in total autonomy, and to control all the qualitative aspects of the network. By contrast, OAOs that want to reach final customers, but do not have primary network infrastructures, have to purchase active wholesale access services (such as the VULA H and Bitstream NGA services)[3] from TIM or other operators holding a primary network connected to FiberCop’s secondary network. In this case, the OAO does not manage communication from the collection point (located, for instance, at local exchange or macro-area level) to user premises, and does not control all the qualitative aspects of the network.

The co-investment project allowed the OAOs to participate in the co-investment by purchasing from TIM active wholesale access services (VULA H and Bitstream NGA), based on both primary and secondary network elements.

Tiscali joined the co-investment project in the initial stages of its implementation. In particular, in November 2020, TIM and Tiscali entered into a rationalization agreement, providing for the dismissal of certain network infrastructures and the purchase of wholesale access services (bitstream) by Tiscali, and (ii) a co-investment agreement, according to which Tiscali would have participated in the co-investment project by purchasing from TIM a minimum guaranteed volume of active wholesale access services.

The ICA’s Concerns, the Initiation of Proceedings by AGCM and the Publication of the Co-investment Offer by TIM

On December 15, 2020, the ICA launched antitrust proceedings to establish whether the agreements entered into by the Parties, relating to the creation of FiberCop and the provision of access services based on its secondary network (the “Agreements”), could reduce competition in the markets for (i) wholesale broadband and ultra-broadband access services, and (ii) retail broadband and ultra-broadband telecommunications services, in breach of Article 101 of the Treaty on the Functioning of the European Union (the “TFEU”).[4]

In particular, the ICA was concerned that:

  1. the agreements entered into with Fastweb and Tiscali could have reduced the contestable portion of the demand for wholesale broadband and ultra-broadband access services, as they provided for the purchase of minimum guaranteed volumes, which seemed to cover a large portion of Fastweb’s and Tiscali’s requirements;
  2. the conditions for access to the co-investment could have reduced the OAOs’ incentive to build primary network In particular, according to the ICA, the possibility to participate in the co-investment project by purchasing, at lower prices, active wholesale access services (VULA H and Bitstream NGA) based on both primary and secondary network elements, instead of passive wholesale access services based only on secondary network elements, would have reduced the OAOs’ incentive to invest in the development of alternative primary infrastructures;
  3. the agreements entered into with Fastweb could have limited competition by Fastweb in the provision of active wholesale broadband and ultra-broadband access services (VULA and bitstream NGA), due to the fact that the prices charged by FiberCop for access to its FTTH network increased above certain volume Moreover, by transferring its stake in Flash Fiber to FiberCop, Fastweb would have renounced to develop its own independent access network;
  4. certain contractual provisions could have also limited competition in the market for retail broadband and ultra-broadband telecommunications In particular, in the ICA’s view, the structure of the prices for wholesale access services provided by FiberCop (which increased above a given threshold) and the purchase of active wholesale access services by the OAOs could have reduced their incentive to compete to acquire new customers in the retail market, and could have limited dynamic competition based on innovation and the improvement of electronic communications services.

In the meantime, TIM continued to pursue its co-investment project, which was amended also in light of the concerns expressed by the ICA in the decision to open proceedings. In particular, on January 29, 2021, TIM submitted to the Italian Communications Authority (“AGCOM”), and simultaneously published, a co-investment offer pursuant to Article 76 of the EECC. The co-investment project envisaged the deployment of a very high capacity fiber infrastructure in 1,610 Italian municipalities, with a FTTH secondary access network, and a residual fiber-to-the-building (FTTB) network. On April 22, 2021, AGCOM launched a market consultation on TIM’s co-investment offer,[5] which ended on June 7, 2021.[6]

The Commitments offered by the Parties and the Decision

Between August 4 and 9, 2021, the Parties submitted to the ICA a number of commitments, which were subject to public consultation and then partially amended.

The commitments offered by the Parties aimed at removing all concerns raised by the ICA in its decision to open proceedings. Inter alia, the Parties offered the following commitments:

  • in order to ensure that the co-investment project will accelerate the development of new ultra- broadband infrastructures, TIM committed to realize FiberCop’s infrastructures in the areas covered by the project according to a stringent timetable in the period 2021-2026;
  • in order to remove the ICA’s concerns related to the alleged reduction of the contestable portion of the demand for wholesale broadband and ultra-broadband access services, TIM and Tiscali undertook, inter alia, to reduce the minimum guaranteed volume provided for by the rationalization agreement and to terminate the co-investment Tiscali also committed to limit the minimum guaranteed volumes in the event of future participation in the project through a new co-investment agreement. In addition, Fastweb committed to participate in the co-investment project in a broader set of areas, and to redefine the minimum guaranteed volumes accordingly;
  • in order to remove the ICA’s concerns related to the alleged decrease in OAOs’ incentive to build primary network infrastructures, TIM undertook that the co-investment offer will only provide for the purchase of passive wholesale access services based on FiberCop’s secondary TIM also committed to offer passive primary network fiber to co-investors at favorable conditions for 20 years, so as to facilitate the development of new infrastructures by co-investors. In addition, Fastweb committed to own, or acquire through indefeasible rights of use, primary network infrastructures covering a given percentage of its overall areas of activity by January 2027;
  • as to the structure of the prices for wholesale access services, which increased above a given threshold, TIM explained that this pricing structure was essential to ensure effective sharing of the risks relating to the development of the new FTTH network, as it guaranteed that the OAOs could benefit from the lower prices reserved to co-investors only for the volumes they committed to purchase, with a reasonable margin of flexibility (equal to a given percentage of the minimum guaranteed volumes). In any event, in order to remove the ICA’s concerns, TIM and Fastweb undertook to increase the margins of flexibility for Fastweb and other co-investors;
  • in order to strengthen co-investors’ ability to compete in the retail markets, TIM undertook to grant the OAOs the possibility of independently managing the activation and maintenance of lines;
  • in order to prevent any risk of restriction of competition caused by the structural link between TIM and Fastweb through FiberCop, TIM, KKR, Teemo and FiberCop undertook that the latter will adopt appropriate measures to prevent any transfer of sensitive information between its shareholders, as well as an antitrust compliance manual and an internal regulation for FiberCop’s board of

In addition, FiberCop, TIM, KKR and Teemo offered a number of commitments aimed at improving the co-investment project, also by increasing the options and margins of flexibility for co-investors, as well as their participation in the project.

In the Decision, the ICA found that the commitments proposed by the Parties, as amended, were capable of (i) enhancing the efficiency aspects of the co-investment project, including the potential improvement in infrastructure competition in fixed electronic communications markets, and (ii) removing the competition concerns identified by the ICA.

In particular, in the ICA’s view, the commitments removed the competition risks initially identified by the Authority, by providing adequate guarantees in relation to the development of new infrastructures by FiberCop and the OAOs, in line with the ladder of investments principle, also in light of the evolution of the market scenario over the last few years, characterized by increasing competitive pressure from Open Fiber, which offers wholesale ultra-broadband access services based on alternative infrastructures.

In light of the above, the ICA decided to make the proposed commitments, as amended, binding on the Parties and to close the proceedings without finding any infringement.

[1]      ICA Decision No. 30002 of February 15, 2022, case I850 – Accordi FiberCop.

[2]      A gigabit-capable passive optical network is a technology commonly used to build FTTH networks, whereby a home’s Internet connection is made by bringing fiber optics all the way into the home.

[3]      With the VULA H service, the owner of the primary network retains control of the segment of the connection that goes from the customer’s premises to the central office or local exchange where the OAO’s collection point is located. In case of Bitstream NGA services, the connection point between the network of the wholesale service provider and that of the OAO is located further downstream.

[4]      ICA Decision No. 28488 of December 12, 2020.

[5]      AGCOM Resolution No. 110/21/CONS of March 31, 2021.

[6]      The proceedings for the approval of TIM’s co-investment commitments are currently pending. On January 3, 2022, AGCOM initiated a second public consultation, concerning the draft decision on the assessment of the co-investment offer, as amended by TIM in light of the market test and AGCOM’s indications (see AGCOM’s Resolution No. 1/22/CONS of January 3, 2022). The draft decision, published under Annex B to Resolution No. 1/22/CONS, acknowledged that the co-investment offer “is, in principle, compliant with the requirements laid down in Article 76(1) EECC”. Finally, on April 7, 2022, AGCOM issued a press release communicating that, following the conclusion of the second market test, it had completed its assessment of the offer and, accordingly, it had initiated the process for notifying the EU Commission of the draft decision, with a view to obtaining its opinion.