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Telecom Italia and Aria partner for WiMAX in Italy

Julien Grivolas

Telecom Italia and Aria partner for WiMAX in Italy

Italian WiMAX operator Aria has won the right to use Telecom Italia's 3.5GHz spectrum to supply WiMAX services in Sardinia and in the central and southern regions of Italy. In addition, Aria will be able to use Telecom Italia's transport network to support its WiMAX network. In return, the Italian incumbent will have access to Aria's nationwide wholesale services.

Incumbent Telecom Italia to use WiMAX as a complement to DSL

This partnership is in line with our belief that the most likely business models to succeed using WiMAX technology in the developed markets of Europe are those targeting users that have limited access to alternative broadband technologies, as detailed in our report WiMAX operator strategies in Europe. Other incumbents such as Telenor and Lattelecom already use WiMAX in previously unserved areas but, unlike Telecom Italia, they have invested in the rollout of their own WiMAX infrastructure.

To date, Telecom Italia has not used the three 3.5GHz regional licences it acquired for €13.8 million. However, like all operators in the current economic climate, it is paying close attention to its spending. Thanks to the agreement, Aria will incur the deployment and maintenance costs for the WiMAX network in exchange for access to Telecom Italia's spectrum and its existing transport capability. The agreement also allows Telecom Italia to comply with the regulatory obligations associated with the granting of the licence at a minimal cost. Until now Telecom Italia has done almost nothing with its spectrum. It will also contribute to Telecom Italia's branding and corporate responsibility image, as it shows the incumbent's commitment to bridging the digital divide in the underserved areas of Italy.

A win-win partnership

If the deal sweetens the WiMAX investment pill for the incumbent, for Aria it significantly reinforces its wholesale strategy as it has attracted the incumbent as a nationwide customer. Compared to its competitors, this brings a great deal of credibility to its value proposition and will potentially instil confidence in its service capability in order to attract other customers. However, conversely, it may also be perceived as being less disruptive than other WiMAX providers because it works so closely with the incumbent. Telecom Italia's WiMAX pricing strategy, when revealed, will hopefully help solve this question.

Another positive from the partnership for Aria is the agreement related to the transport network. Deploying WiMAX base stations implies that the traffic generated has to be backhauled efficiently to allow customers to enjoy a good user experience. There are few alternatives for a small service provider with nationwide ambitions: deploy its own transport network nationwide; rent capacity to companies that may also be competitors; or a mixture of both. By partnering with the incumbent, Aria has answered this challenging aspect of the WiMAX equation.

Italy's WiMAX deployments are not too far behind

A couple of years ago Italy faced a lot of criticism that it would be badly positioned to benefit from WiMAX because it was one of the last countries to allocate 3.5GHz spectrum. However, several companies have now launched WiMAX services, mostly using the mobile WiMAX standard even if it is for the provision of fixed wireless services. For example, the main spectrum owners (Aria, Linkem and Retelit) have all commercially launched services, along with some smaller, local players such as Mandarin.

Therefore, Italy is actually not too far behind in its WiMAX rollouts, certainly when compared to what is happening with 3.5GHz spectrum in other Western European countries such as France. There is still only very limited WiMAX activity in France, even though the spectrum was allocated 20 months earlier than in Italy. This has led the French regulator to track market developments more closely, but with only limited improvements, as demonstrated by the market update published a couple of months ago.

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