Research Paper 3
The structure of the telecommunication industry in Italy is closely related to the history of its development. The original dispersion of Italian telecom companies made it hard to coordinate the industry and its development. However, despite the complex structure of the network, in the 1970s Italian telecommunication segment was one of the most developed in Europe. It was the first fully automated network and had the density that was above that of any other European country.
However, the first oil shock and gradual ageing of the infrastructure created the need for restructuring and consolidation (Chapuis, & Joel, 2003). As a result, the 50 dispersed telephone companies in 1964 merged to form one national telecom service provider – telecom Italia (Telecom Italia, 2014). Unfortunately, regional investments into new infrastructure developments were very limited due to the high autonomy of regional authorities in Italy, which, nevertheless, cannot interfere into the decisions about telecommunication infrastructure development. The restricted role of regional authorities also affects the implementation of the directives of the European Commission, thus limiting the ability of the European Union to regulate the Italian telecommunication market. In addition to that, the regional disparity in the level of economic activity makes it hard for telecommunication companies to balance between the low payoff in the districts, where very little traffic is generated, and the need to achieve full coverage. As a result, the development of fixed telecom infrastructure remained quite slow, which created a strong demand for wireless communication and boosted the early adoption of mobile phones.
Today Italian mobile phone market offers lucrative opportunities to market players. Fast market penetration by mobile phones was mainly driven by the limited coverage by fixed line infrastructure (Michael, & Salter, 2006, pp. 202-203). Today it already exceeds 130 percent (Usunier, & Lee, 2009). Additionally, rapid development of smartphone usage in the country creates a foundation for further development. Italy is estimated to be the fourth largest market for smartphones in Europe, with nearly 65% of the mobile phones in the country in the end of 2013 being smartphones. Even despite the fact that local operators do not subsidize mobile handsets, Italians are keen on buying new high-end products rather often (“The Apparatgeist calls”, 2009). Moreover, Italian users continuously increase the usage of apps and mobile websites, which drives mobile commerce in the country (Brian). Most customers prefer prepaid connections to long-term commitments (79.5%), which creates a strong pressure for service providers to lower prices. The market is dominated by 4 large operators: TIM, Vodafone, 3, and Wind, with the largest two holding 65% of the market in 2012 (Mobile Economy Europe 2013, 2013).
In order to support the high customer base and usage growth, Italian operators extensively invest in infrastructure. Thus, 3G Penetration in the country has already reached 90.5% in 2013, and companies continue investing to deliver 4G network to users ( International Telecommunication Union, 2014). Vodafone in Italy, for example, aims to reach 90% of the population by 2017 and has allocated 6 bn GBP in the development if the Italian infrastructure, mostly into the introduction of 4G Networks (Mance, 2013). In addition to that, fixed line infrastructure is being upgraded and extended. The aspiration of current market is to become “data providers”, according to the CEO of Vodafone Vittorio Colao, and to allow customers to remain connected using any platform (Thomson, 2014). This is the next challenge for the mature telecom market in Italy, where clients expect to be connected anytime and through a variety of channels.
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