Italy’s broadband farce risks state overreach

Italy’s quest to cover the country with broadband is turning into a farce. Ministers are threatening to punish Telecom Italia for supplying super-fast internet access to sparsely populated areas, which puts it in competition with a government-linked rival. The telecom group has accused the government of dirigisme. Whatever the motive, Italy is unwise to attack companies willing to offer private investment.

One of former Prime Minister Matteo Renzi’s more innovative moves was to recruit state-owned electricity distributor Enel to help fix Italy’s poor connectivity. That spooked incumbent telecom group Telecom Italia, controlled by French group Vivendi, to invest more heavily itself. The government also offered subsidies to operators who hook up areas they say they would otherwise neglect. The first tender was won by the broadband company jointly owned by Enel and state bank Cassa Depositi e Prestiti.

Telecom Italia griped about the tender process to the European Commission. But its revenge is unusual. Rather than compete in the second tender, the company has threatened to start rolling out its own network in parts of the same areas. The government, rather than being happy that companies are so intent on providing broadband to poor farmers, argues that Telecom Italia is destabilising its subsidy system. One minister has even talked of imposing damages.

It’s hard to know if the government would have been so furious if Telecom Italia were not French-controlled, and competing with a government-linked group. In reality, however, it looks on shaky ground. While Telecom Italia helped define which areas needed subsidising, it never committed not to invest in them, and it’s hard to see a legal basis for stopping it.

Telecom Italia’s enthusiasm does present Italy with a potential problem: the fact it is happy to roll out fast broadband in less developed areas raises the question of whether those places need subsidies after all. Either way, by griping, the government has put itself in the bizarre position of attacking what Italy needs: private investment. Following through on that threat would be an own goal.

CONTEXT NEWS

Two Italian government ministers have threatened to impose damages on Telecom Italia if it builds a broadband network in areas where a government-linked rival is operating.

Telecom Italia has said it will build a “fibre to the cabinet” network that includes some rural or sparely populated areas officially deemed unable to attract private investment. The Italian government last year awarded the first of several contracts to subsidise the development of broadband in regions including Emilia Romagna, Lombardy, Molise and Umbria to Enel Open Fiber, jointly owned by government-owned utility Enel and Cassa Depositi e Prestiti, the state bank.

The Ministry for Economic Development said in a June 19 statement that the government would “act to protect the public interest” if Telecom Italia were to follow through on its investment plan, disclosed on December 23.

Claudio de Vincenti, minister for territorial cohesion and the south, said in an interview with the Corriere della Sera on June 17 that the government would be forced to value the “validity and scale of damages” invested in competition with Enel.

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