TELECOM ITALIA STRATEGIC RELEVANCE
The Company stands as a digital ecosystem “enabler”, connecting companies, government bodies and local communities, so as to create positive synergies for development. The contribution the Group makes towards growth in the sectors in which it operates doesn’t stop at infrastructure projects but ranges from digital solutions for government local bodies to cloud services for businesses, digital platforms for healthcare, applications for people with disabilities to technologies for reducing energy use by cities and companies. Various initiatives have been developed in this context, including the crowdfunding platform that receives requests for donations and other non-profit-making financial assistance for people intending to implement environmental protection and social projects. Furthermore, Telecom Italia is a founding member of the Italian Digital Champions association. Digital Champions are innovation ambassadors appointed by each Member State of the EU to promote the benefits of an inclusive digital society and make their citizens “digital”, working with communities, businesses, Governments and academia.
In 2015, the CSV department estimated, through the application of new analysis metrics, the impact of Group activities, with a special focus on domestic activities. Details of the measurement, which came from a mapping of corporate activities, is described in the chapter and highlighted in dedicated boxes to facilitate reading.
Material issues in this chapter:
- network coverage
- listening and transparency towards customers
- innovation management
- sensitive data management and protection
- child protection
Relevant company policies: Service Charter and General Subscription Conditions, Self-regulation Code for mobile services and Code of Conduct for premium services, Guidelines for responsible marketing, Telecom Italia Disclosures pursuant to article 13 of the Privacy Code, Compliance requirements for the processing of anonymised or pseudonymised data, Respect Human Rights in the Telecom Italia Group, available at telecomitalia.com.
Effectiveness and monitoring: the company uses some numerical KPIs in order to monitor the effectiveness of management processes and ensure the monitoring required by quality management systems and internal control structures. This chapter presents the ones related to the cover of the territory with broadband infrastructures, customer satisfaction, the number of conciliation requests received and resolved, the number of reports received. The KPIs regarding numerical targets are presented in an appendix to the Report. In particular, targets are listed for service activation, complaints, support and maintenance, availability and broadband network coverage.
Ultrabroadband networks: a national treasure
Telecom Italia operates the biggest fixed voice and data infrastructure, covering the whole of Italy, and provides one of the country’s most extensive and advanced mobile network platforms. Therefore, in terms of size, ubiquity and infrastructural and technological assets, it is a “system company”, integrated with the territory and with the social, economic and production fabric, with a pervasive role for the whole of the Country’s economy and the competitiveness of its companies, the efficiency of its public administration and, more generally, the welfare of its citizens.
[G4-EC7a], [G4-EC7b], [G4-EC8a], [G4-EC8b], [G4-Dma Indirect economic Impacts] The Group contributes to produce approximately 0.7% of the added value of the Italian GDP1. The Group’s business generates direct work for approximately 50 thousand people in Italy; if indirect employees are considered, i.e. those operating on projects connected with the business of Telecom Italia, it is estimated that approximately 100 thousand units, corresponding to approximately 1% of employees of the entire private sector, would represent the direct and indirect work attributable to the Group in Italy.
In applying the metrics of the CSV model, the estimated value2 generated by the Group in Italy is 8.4 billion euros, detailed as follows:
- 2.8 billion is the direct contribution to families (remuneration to employees);
- 1.4 billion is the indirect contribution to families (suppliers);
- 4.2 billion is the indirect contribution to businesses and local government offices.
[G4-EC7a] Telecom Italia is aware of this strategic role and works constantly to manage and update the infrastructure and technology it makes available to the Country: in 2015, the Company invested around 3 billion euros in innovative infrastructures in Italy; again in the three years 2016-2018, innovative investments are envisaged of approximately 7 billion euros. In 2015, the Group came in first in the European ranking of investments in Research and Development, third worldwide, in the TLC sector3 .
The three-year business plan for 2016-2018 confirms its commitment to investing in advanced infrastructure and technologies and is focused on new generation networks in particular.
In 2015, Telecom Italia’s commitment continued even more intensely, in investments in the next generation fixed access network (NGAN). This was made possible in particular by technological innovation, which fundamentally changed the reference scenario. Solutions that bring fibre to the line splitter cabinet and then continue into the home using copper wires, known as FTTCab (Fibre to the Cabinet), are now considered to be fully-fledged next generation networks. By boosting existing network infrastructure in the final access section, FTTCab solutions reduce the investment required compared to FTTH (Fibre to the Home) solutions, because they avoid the operator having to lay fibre-optic cables all the way to the customer’s home. This allows next generation access networks to be created more quickly and less expensively.
In the meantime, mobile network coverage of the whole country with the new 4G/LTE4 standard, a significant evolution in response to the growing demand for high speed data, has almost been completed, This new mobile network technology provides greater transmission speed compared to the past and shorter response times, allowing a high degree of interactivity on the move.
Therefore, after having developed the national fixed and mobile infrastructures, the challenge faced by the Group in recent years is the development of ultrabroadband networks, an important effort involving network engineers and technicians on a daily basis.
[G4-EC8b] Moreover, Telecom Italia’s commitment is also shown by its participation over the years, as the only operator, in the Eurosud public tenders organised by the Ministry of Economic Development (MISE)5, which are essential for ensuring ultrabroadband coverage in “market failure” areas (known as “white areas”, in which there is a risk of no return being made on investments) and therefore achieving the objective of 30 Mbit/s coverage of 100% of the population by 20200.
[G4-Dma Indirect economic Impacts] The ambitious investment plan Telecom Italia is implementing coincides with a phase in which the Italian government is engaged in implementing the national strategic ultrabroadband plan, which aims to achieve the challenging objectives of the European Digital Agenda in terms of a widespread supply of infrastructure and an increase in the demand for digital services. Telecom Italia’s investment plan therefore becomes an important element in the digital transformation of the society, confirming the Group’s historic role as an engine for the Country’s modernisation and facilitating achievement of the European Digital Agenda objectives6.
The economic effects of broadband and ultrabroadband networks on growth and employment.
By applying the metrics of the CSV model, the contribution generated7 in Italy by the investments made by the Group have a positive effect on both the growth of the national GDP and the occupational impact, reported as follows:
- 1.9 billion euros (0.12% of the 2014 GDP);
- the number of jobs that can be potentially activated is over 22 thousand.
As regards the specific impact of ultrabroadband networks on economies, one of the first studies on this subject is the one carried out by Analysys Mason and Tech4i2in 2013 for the European Commission8 according to which an investment in ultrabroadband networks can generate benefits of around three times the capital invested. According to the study, investments in new generation networks also have a major impact on employment, with 20,000 jobs potentially being created for every one billion euros invested.
A similar result can also be found in the study conducted by the Boston Consulting Group (BCG) for the ETNO (European Telecommunications Network Operators’ Association) in 20139. BCG estimates that an investment of around 110-170 billion euros is required to achieve the infrastructure objectives of the European Digital Agenda project. BCG estimates that if the increased investments were made, GDP growth of 750 billion euros could be achieved and 5.5 million new jobs could be created, which is the equivalent of 4.4 billion euros in GDP and around 30,000 new jobs for every billion euros invested. Both studies therefore demonstrate that ultrabroadband networks have a positive effect on economies. Better results are definitely achieved when the investment plans of private operators are accompanied by public initiatives aimed at extending coverage and therefore increasing the benefits for all citizens.
Two instruments to improve transparency in the development of network infrastructure and encourage the development of digital projects: Telecom Italia Netbook and Italia Connessa
[G4-Dma Indirect economic Impacts] In order to make the effective development of broadband and ultrabroadband networks even more transparent, since 2012, Telecom Italia has published the Telecom Italia Netbook - telecomitalia.com/ tit/it/innovazione/rete/netbook-2015, which accurately and meticulously tracks the progress achieved in the work. The Telecom Italia Netbook is a publication that shows the Country and the main stakeholders the state of the network with extreme transparency, clarity and precision, using data and maps to illustrate the size and structure of the Telecom Italia infrastructure, the evolution in terms of exchanges (which are increasingly connected by fibre-optic cables and fitted with new generation equipment for managing broadband traffic) and broadband and ultrabroadband network coverage in each individual Italian province.
Furthermore, in order the stimulate and promote a culture of innovation and speed-up digitisation processes between medium sized municipalities, 2015 saw the publication of the fourth edition of “Italia Connessa: Regional Digital Agendas”, containing a digital check-up of Italian regions and connected with an initiative aimed at local governments proposing the most concrete and convincing digital development plan. Through this initiative, Telecom Italia is committed to rewarding local institutions that promote the development of digital services for citizens and businesses, creating ultrabroadband infrastructures earlier than planned.
Telecom Italia’s commitment to minimising the negative impacts of creating new networks
[G4-EC7b] The creation of fixed and mobile network infrastructure can cause disruption for local communities (the work needed to lay fibre-optic cables can create noise and traffic). Telecom Italia mitigates these negative aspects by using innovative excavation and cable laying techniques, including the digging of micro-trenches instead of the normal ducts and using innovative materials. This leads to an overall reduction in the time required to carry out the work and in traffic disruption, as well as significantly reducing both the environmental impact (lower emissions and less waste for disposal) and social impact (fewer accidents at work).
Network infrastructure as an enabling platform for developing the digital economy and increasing the competitiveness of the Country
[G4-EC8a] The latest OECD Science, Technology and Industry Outlook10 report provides a very clear summary of the aspects that determine the different levels of competitiveness of countries and outlines the “recipes” that economies should implement to overcome the crisis:
- promoting innovation, particularly by offering training systems geared above all to stimulating talent, disseminating the new skills required by production systems, extending the segment of the population susceptible to new technologies;
- increasing the productivity of labour, which explains the different rates of growth in the wealth of countries most open to new technologies and other economies;
- identifying new growth opportunities in solutions that address environmental protection, the ageing population, improving quality of life in urban areas;
- increasing the effectiveness of local and national research and development systems, connecting them to international research networks and to the main reservoirs of knowledge, increasing opportunities for interaction between research and businesses.
As General Purpose Technologies (GPTs), i.e. enabling technologies needed to activate new services and solutions and disseminate digital culture, the broadband and ultrabroadband infrastructure is one of the main drivers that will enable the developments advocated by the OECD. Since 20009, a study by Waverman11 in fact indicated broadband as a vehicle for increasing the efficiency - and therefore the competitiveness - of an economic system by improving the productivity derived from the greater use of ICT technologies2. Naturally, the more the economic system is open to using new technologies, the wider this impact will be.
[G4-EC7], [G4-EC8] In order to deal with the digital divide that has arisen in the so-called marginal areas of Italy, which would otherwise remain excluded from the mainstream plans of telecommunications operators, owing to the low profitability of investments, between 2005 and December 2015, Telecom Italia implemented a programme of extraordinary investments allowing ADSL coverage (gross coverage12> 70%) to be provided for approximately 7,7000 municipalities in total (4,350 more municipalities than December 2005).
In December 2015, Telecom Italia activated 9,600 exchanges, including 8,2000 optical fibre ones. Alongside its plan to extend coverage, Telecom Italia has launched an additional plan to expand the active network13, where necessary, to guarantee full usability of the service by customers and the development of digital inclusion.
The following table shows the percentages of coverage as of December of the past three years.
|ADLS Coverage (*)||99.10||98.75||98.40|
|UMTS and HSDPA coverage (**)||96.00||96.00||87.50|
|LTE coverage (**)||>88.00||770.00||490.00|
|Next Generation Plan (fixed telephony) cover (***)||>42.00||28.10||16.80|
(*) The percentage refers to fixed Telecom Italia telephone lines.
(**) The percentage refers to the residential population. Coverage values are subject to change based on ISTAT and urbanisations updates.
(***) The percentage is determined by the ratio between the number of properties connected with “cabinets” reached by access optical fibres (or which can be served directly from an exchange if within acceptable distances) and the total number of properties that have or have had active telephone lines in the past.
In order to promote digital inclusion and the consequent coverage of the remaining geographical areas of “market failure”, Telecom Italia cannot avoid engaging in joint “public-private” initiatives.
Two types of action have been taken so far, both fully in line with European competition rules:
- the first is a “central” approach involving collaboration with Infratel Italia S.p.A. (Infrastrutture e Telecomunicazioni per l’Italia)14 ,with the public entity building passive broadband (fibre optic cable), organic and integrated infrastructure throughout the country, with the aim of increasing digital inclusion in lower income areas of the Country;
- the second is a “local” approach, based on collaboration with regions that promote projects aimed at increasing the digital inclusion, e.g. through forms of financing centred on public tenders using the claw-back model, which provides for contributions to be paid to offset the lack of return on investments.
Using the above forms of intervention, in some cases simultaneously, Telecom Italia has in recent years signed cooperation agreements with several local entities, (such as: Memorandum of Understanding with the region of Emilia-Romagna and Lepida15 ), , some still under development in 2015. Amongst others, we note the award of a tender in 2012 by the Marche region to complete digital inclusion (through state-of-the-art broadband services with speeds of up to 20 Mbit/s) in the region’s market failure areas. The project was completed during the last quarter of 2015.
As from the second half of 2013 and through to September 2015, as part of the National Broadband Plan, the Ministry of Economic Development (MISE) issued eleven regional tenders through Infratel Italia S.p.A., identified as the implementing organisation and assignee of the funds provided.
The funds allocated for projects to extend broadband technology to digital inclusion areas amount to 353 million euros, including 225 million euros to be allocated to the “clawback” model: the contribution for each Region can correspond to a maximum of 70% of the cost of the project to widen digital inclusion. The tenders issued relate to the following twelve regions: Abruzzo, Calabria, Campania, Emilia-Romagna, Lazio, Liguria, Marche, Molise, Sicily, Tuscany, Umbria and Veneto. In 2015, no calls for tenders were issued in the last five regions: Basilicata, Lombardy, Piedmont, Apulia and Sardinia.
For the remaining three regions (Friuli Venezia-Giulia, Trentino Alto-Adige and Valle d’Aosta) no actions is planned on the part of MISE as these regions have their own independent plans.
Telecom Italia has participated in all the tenders issued to date, except for the Liguria region: it was awarded the tenders called for the regions of Calabria, Campania, Lazio, Veneto, Tuscany and Sicily (with total contributions assigned in the amount of around 63 million euros), whilst those relating to Abruzzo, Emilia-Romagna, Marche, Umbria and Liguria were awarded to NGI S.p.A..
For Molise, a first call for tenders was cancelled and a second saw no one bid.
The creation of this digital ecosystem is based on the excellence of the products and services offered to customers and on the procurement process aimed at the acquisition of products and services under the best market conditions, at the same time guaranteeing the requisites of quality, safety and social and environmental respect.
For information regarding the initiatives implemented by Telecom Italia for the social inclusion of customers with specific needs (hearing impaired, the elderly, children, etc,) see the website telecomitalia.it.
Presence of the Group in Brazil
[G4-EC7a] A focus on innovation and investments in new infrastructure and technology also characterise Telecom Italia’s action in Brazil, a Country where the Group has been operating since 1997 through its subsidiary TIM Brasil and which is the Group’s second biggest market. Its presence in Brazil has been increasing in recent years thanks to strategic acquisitions: the Intelig and AEM Atimus fixed network infrastructure has allowed the Group to strengthen the backbones and connecting links of the mobile network radio base stations through the use of fibre-optic cables which, in view of the development of LTE networks, are even more important and strategic.
In the past 5 years alone, Telecom Italia has invested more than 7.5 billion euros in Brazil, focusing primarily on building new generation infrastructure and actively contributing to the modernisation of the Country.
Following the acquisition in 2014 of the right to use the 700MHz bandwidth (with an expenditure of 936 million euros), in 2015 TIM Brasil continued to invest in the 3G network infrastructureand achieved leadership in 4G, in terms of both the number of cities covered (411 at the end of 2015) and coverage related to the urban population (59% at the end of 2015).
Cover of 4G sites has also increased: more specifically, the number of sites covered with LTE more than doubled in 2015, reaching a total of 7,7000. The investment in infrastructure allowed the fibre optic network (both urban and long distance) to be extended to 68,000 km.
Finally, TIM Brasil concluded the sale of the third tranche of telecommunications towers to American Tower do Brasil in order to optimize the Company’s financial resources and support the investment plan announced in Brazil.
In the two years 2014-2015 alone, investments in innovative infrastructures were worth more than 2 billion euros and the plan 2016-2018 envisages approximately 4 billion euros in investments, almost entirely allocated to ensuring a better 4G cover of the Country.
[G4-EC7b] In Latin America, ever since it was introduced, mobile telephony has played a key role in the process of integrating more disadvantaged people, contributing to cohesion and to involvement in social and democratic life. TIM Brasil manages over 66 million mobiles lines and has always played a major role in this context. The work already done to extend mobile network coverage to the whole Country is continuing on a number of development fronts, which include improving the quality of the network in major cities, developing Mobile BroadBand and Fiber-To-The-Site (FTTS) in some cities, pilot small- cell and Wi-Fi projects and developing the LT Amazonas Fiber transmission project in the Amazonian region.
[G4-EC8] TIM Brasil is notable for its social inclusion projects, such as the Transamazonica Digital, which takes fibre optic to certain municipalities in the State of Amazonas, Parà and Amapà. However, the availability of infrastructure is only one of the ingredients and has to go hand-in-hand with an overall digital growth of the population in a literacy development process that will increase demand and stimulate investments. Part of this process is the “National Broadband Plan” for Brazil (PNBL - Programa Nacional de Banda Larga), in which the Telecom Italia Group has been involved from the start. It is a federal programme which has led the Country towards the objective of encouraging and disseminating the use and distribution of ICT goods and services, extending network coverage to the more remote areas of the Country and making services more accessible to all segments of the population, contributing to reduce economic and social inequalities.
TIM Brasil has continued to promote commercial offers to encourage the spread of the mobile web, particularly among the poorer classes. These consist of low cost services which are particularly suited to helping to widen the socio-cultural digital inclusion (e.g. INFINITY WEB and LIBERTY WEB).
Moreover, the Data Connections project reaches all public schools located in rural areas within the area of TIM coverage (data download at 256 kbps and upload at 128 kbps). In December 2015, 75% of the project had been developed.
1 Internal estimates.
2 For more details, please refer to the CSV sheet on Impact on employment.
3 EU Industrial R&D Investment Scoreboard. 2015 European Commission Report.
4 Data at end 2015, more than 88% of the population; for more details see the paragraph on geographic digital inclusion.
5 In 2015, no calls for tenders were issued. During 2014, Telecom participated in and won the two tenders for Calabria and Veneto, which joined the two tenders - relating to
Lazio and Campania - that Telecom Italia won in 2013.
6 Telecom Italia Group chapter contains an account of the initiatives involving national and local institutions for assessing infrastructure work requirements.
7 For more details, please refer to the CSV sheet on the Digitisation of the country.
8 Study on the socio-economic impact of bandwidth (SMART 2010/0033), Analysys Mason e Tech4i2 – March 2013. The whole study can be downloaded via this link http://ec.europa.eu/digital-agenda/en/news/study-socio-economic-impact-bandwidth-smart-201000033. A summary of the main results of the work is available on the Analysys Mason website using this link: http://ec.europa.eu/digital-agenda/en/news/study-socio-economic-impact-bandwidth-smart-201000033. http://www.analysysmason.com/About-Us/News/Press-releases1/broadband-benefit-for-EU-Mar2013.
9 Reforming Europe’s Telecoms Regulation to Enable the Digital Single Market, The Boston Consulting Group - 2013.
10 Scince, Technology and Industry Outlook, OECD.
11 Economic Impact of Broadband: An Empirical Study, L. Waverman - 20009. Waverman estimated an increase in productivity of 0.13% each percentage poin increase in the broadband network coverage.
12 Official Telecom Italia Coverage data refers to the technical coverage of the telephone population (in terms of 64 kbit/s equivalent lines) gross of areas that cannot technically be served, due to the characteristics of the copper access network (presence of digital devices such as, for example, MPX, UCR or MD48, excessive distance from the exchange, etc.).
13 The plan consists of actions to ensure full enjoyment of the service by customers by expanding the capacity of equipment used, in terms of both user ports and bandwidth available on the Internet. The technical term for this is desaturation of DSLAM equipment, performed either in advance or once specific broadband quality and availability thresholds are exceed.
14 The Company was set up on the initiative of the Communication Department of the Ministry of Economic Development and Invitalia, the national inward investment and business development agency, and is the entity implementing the Broadband Programme.
15 Lepida S.p.A. is the operating tool promoted by the Emilia-Romagna region for the unified and standardised planning, development and management of the telecommunication infrastructure of entities connected to the network. The company also promotes interventions in favour of digital inclusion in rural or mountain areas.