THE EVOLUTION OF THE TELECOM ITALIA MOBILE NETWORK Press Conference Milan, Telecom Italia Piazza Affari 2 Wednesday 20 October 2010

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1 THE EVOLUTION OF THE TELECOM ITALIA MOBILE NETWORK Press Conference Milan, Telecom Italia Piazza Affari 2 Wednesday 20 October 2010 Dr. Franco Bernabè

2 1. Purpose of the meeting Thank you for accepting our invitation. The purpose of this meeting is to announce the launching of the new 21 megabit/sec mobile Internet service in Milan and Rome. I would like to survey this technological innovation in the context of our plan for the renovation and expansion of the mobile network, and more generally of our investment plan in infrastructures and smart networks. 2. The role of the operators As I have already commented with you on numerous occasions, I believe that the job of the Operators is to build and manage networks, and through these to offer services to the clients. This is how it has always been in the time of networks vertically integrated with telephony services. It will be like this increasingly in the digital world and in the Internet paradigm where the service intelligence tends to have a marginal position outside the network, with other protagonists in the chain such as the OTTs, the terminal producers, directly sell to the clients. This is the reason why I have always considered the hypotheses of Telecom Italia without its network as unrealistic, a mere fantasy. There is no such industrial project in any part of the world. Telecom Italia is keeping its network and will thus continue to invest in technologies and services. 3. The development of the Telecom Italia fixed network Our fixed network is the network providing broadband services to virtually all the Italian customers, either directly or through alternative operators using our wholesale services. Telecom is committed to guaranteeing its Retail and Wholesale clients as well as our country with the maintenance and expansion of this vital infrastructure and its evolution towards 2

3 optical fibres. We have no doubts that the fixed network will involve a grassroots and extensive growth of optical fibres, but this growth will take place on a continuous and gradual basis in accordance with market dynamics, with the rules set by the authorities and with national and European industrial policies. The Telecom Italia plans are designed to guarantee, without any public funding, Italy s compliance with the infrastructure targets set by the European digital agenda. By 2018 we shall, in fact, bring optical fibres to tens of millions of households, in other words to 50 per cent of the population, two years early with respect to the 2020 deadline set by the European Community. We are also ready to follow local and national projects aiming at the acceleration of plans in areas where there is no infrastructural competition. We are doing this with the Province of Trento, Lombardy Region, and on the national level with the Romani scheme. We have contacts to participate in the Sardinia regional project. These plans are not just announcements. We are working at a rate of 2,000 wired homes per day. This means that every working day, we have 2,000 more clients who can have an optical fibre connection. This gradual, but profound transformation of the fixed network is not evident because the demand for ultrabroadband is still marginal, especially on the consumer market. 4. Development of mobile networks and services This leads me to introduce today s topics, i.e. the development of the mobile network. In this area, there is an enormous demand. Every year the number of mobile Internet users is rising. The market for services provided through mobile networks is undoubtedly one of the most interesting markets, and is experiencing a highly dynamic phase. This dynamism is basically due to three phenomena: new terminals, new digital products, new uses. New terminals: An example of the first phenomenon is undoubtedly the significant market position of I-pads and the serious of similar products launched by the main 3

4 consumer electronics producers (the RIM Playbook, the HTC Tablet, the HP Slate etc.). While the I-pod took 360 to reach a million units sold, the Blackberry took 300, the I- phone 74 and the I-pad just 28! Next year, the number of smart-phones sold on the world level will probably exceed the number of traditional phone, and each smart-phone generates a data traffic flow 10 times that of a traditional phone. New digital products: the market generated by advanced terminals does not just end with the actual sale of the terminal, but extends to the sale of the digital products that these terminals utilise (for example I-phone applications, music for I-pod or the publishing and audiovisual contents for I-pad). Apple s App store has over 200,000 applications, and on average each I-phone user downloads 47 applications with a total of over 4 billion applications downloaded (!). The App store phenomenon has now also been successfully repeated by per Google, which has over 50,000 applications for Android mobile platform, with a total of 400 million downloads. New uses: The latest element contributing to the worldwide scenario of terminals connected to mobile networks is rising trend to the use of the social networks through mobile terminals and the creation of new specialised services for mobile use (for example geographical positioning services). Approximately 30% of registered Facebook users (about 150 million users!) access the social network services from mobile terminals. Moreover, the users who access Facebook from mobile terminals access and use the website at double the rate compared to normal users. These three growth elements - new terminals, new digital products and new uses mutually strengthen and drive each other, leading to important synergies. This is a perfect storm that could bring about strong, sustained growth in this market a relatively short time. The Telecom Italia Group, will remaining first and foremost a supplier of infrastructures and services, aims to be an active system protagonist throughout the production chain. We will be present in the terminals segment with the Olivetti e-reader, in products with a distribution platform and with agreements made with Mondadori and the publishers, and of 4

5 course in new uses where, thanks to Virgilio, the top Italian web portal and the mobile marketing solutions and services offered by Matrix, we maintain a major position. The network effect of telecommunications services will further increase the value of these services for the users. The HSPA 21 Megabit/sec technology, allowing for sufficiently high speeds to be achieved also for uploads (i.e. 5.7 Megabit/sec), is especially suited to the new type of uses I have just mentioned, i.e. the collaborative and participative uses in which users do not merely receive information from the web, but can also upload it and transfer it to other users in real time. A consequence of this development is the great increase in data traffic on mobile networks. In 2010 the TIM will handle approximately 60 Petabyte of traffic with an increase of 15 times compared to the 4 Petabyte in 2007, and by 2013 the traffic handled is expected to reach 150 Petabyte, equivalent to 2.5 volte the volume in This is why we have launched an important project that will radically transform the TIM network in the next two/three years. The launching of the 21 Mbps is a step in this path. 5. Two Necessities for the Industry However, in order to sustain this growth and to be able to guarantee the offer of services at accessible prices which actually stimulate the growth of the market, two critical aspects must be overcome with regard to limitations on use the availability of frequency resources: The first one regards the excessively cautious threshold level chosen by Italy, with municipal authorities actually further, though ineffectively, increasing the limitations on electromagnetic emissions. The maximum limit for electromagnetic emissions in Italy, in places where people are present for more than four hours, is now set at 6 volt/metre when on average, in the rest of Europe, the threshold value allowed by the law is at higher values (40 60 volt/metre according to the bandwidth considered). It is therefore necessary to adjust the values set by Italian law with those provided for in the rest of Europe. 5

6 The second one regards the need to make available in the shortest time possible the frequencies that will become free with the shift from analogical to digital TV, the socalled digital dividend, which in other Member States such as Germany has already been assigned to the mobile operators. The persistence of these two critical elements would endow other European operators with an unjustified competitive advantage in terms of costs and development potentials, which they could exploit in order to acquire international leadership. We cannot let this happen. For Europe, mobile telephony has been an important target. Thanks to the successes achieved in the development of mobile telephony services and equipment, the European enterprises managed to overcome the domination of US technology which had existed since the post-war period. GSM has been a specifically European success exported to the rest of the world. 6. The TIM Plan In this scenario, TIM in particular has had a key role in guiding technological innovation and determining market innovation. Our plan for a new mobile network is formed by: Technological innovation (we are working intensively on the technologies of the future and TIM has recently obtained recognition of a patent for LTE services); New infrastructures and smart networks (as shown by the plan for the radical transformation that we have started and are telling you about today); New services (we want to provide TIM clients with innovative, robust, reliable and attractive services). 6

7 I would like to ask Oscar Cicchetti, Telecom Italia CTO, to give a brief but complete overview of this project or transformation. Just after, Marco Patuano will say something about the evolution of the services; useless to say, the reason for the new networks is to provide new services. 7

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