NOTIZIE ITALTEL

FASTWEB, HIGH SPEED GROWTH

Guido Garrone, Chief Technical Officer at Fastweb, illustrates the technological and strategic implications of Fastweb’s new industrial plan. Enlarging the network’s geographic coverage will be accompanied by strengthening services and customer care solutions.

"In little more than five years, Fastweb has become the leading alternative Italian broadband operator and the only one to offer a complete range of Triple Play services based on an all IP fiber optics network, which is a point of reference for the world. Today, Fastweb is entering, ahead of schedule, 'phase two' of its original business project, involving enlarging the client base and consolidating internal processes to further strengthen its customer relationship and support: in fact, this plan can strengthen today our competitive advantage, adding to our undisputed technological leadership."

Guido Garrone, Chief Technical Officer at Fastweb, sums up what is, for the TLC world, a reference point of excellence at a global level. Today Fastweb, buoyed by the confidence shareholders and the financial community have shown, as demonstrated by an entirely underwritten 800 million euros capital increase, is getting ready for further growth and it is set to take advantage of a favorable moment in the most dynamic sector of the Italian TLC market, broadband access and related services.

The new industrial plan presented at the beginning of the year by the company's top management envisages investments of 2.8 billion euros by 2010 and outlines a development route that maintains parallel focus on infrastructures and supplying innovative services. Garrone goes into this ambitious program for Notizie Italtel in the following interview.

The rapid growth is a distinctive feature of FASTWEB'S first five years. Now you're aiming for even more, what factors brought about this decision?

Fastweb is the only 'facility based' alternative fixed network operator: five years ago, when we started, all the other newcomers where acting as resellers of telephony or connectivity. We chose to differentiate ourselves right from the word go by an all IP fiber optics infrastructure, with plenty of band capacity, which, at the end of 2004, stretched for 15,600 kilometers, able to offer the users effective services convergence. It's an innovative proposition born from significant capacity to invest and vast knowledge of the technology's potential.

And in five years you have been able to convince more than 500,000 customers…

Not just that, we've achieved amazing operational and financial results: revenues in 2004 almost touched 720 million euros (+36% with respect to 2003), and a MOL of 219 million euros, but the crucial data is relative to ARPU, which comes in at around 900 euros per residential client, the highest in the sector. This all shows that we have the richest offer, the Fastweb client can access services and content that the competition just isn't able to give. We've brought to the surface a potential market of great value. Analysts foresee a very high growth rate in average spending for broadband access and services in the next few years, especially in 2005, and for Internet based services and TV. That's why all our competitors are launching offers in this sector, in a different manner.

So, you've decided to enter the game early, making the most of your technological advantage. What are the key strategic goals in the development plan?

The objective is to consolidate our position as the second fixed network operator in Italy, just behind Telecom Italia. In the Italian broadband market last year, the number of clients doubled, reaching a total of more than 4 million. Telecom Italia, with its ADSL services, holds about two thirds of the connections, while the other operators, who are positioned mainly as wholesale service resellers of Telecom Italia, have quite insignificant penetration levels.

Fastweb is the only one that has the financial power and technology to become a real alternative operator, and we've decided to follow this growing wave in order to expand our position. Rather than confirming our original business plan, which forecasted a slowdown in growth in 2005 to reach breakeven, we've decided to accelerate geographic coverage and increase investments.

What are the guidelines?

The new industrial plan envisages that the targets set for 2010 will be brought forward to 2006, which means bringing broadband coverage to 10 million families, enlarging territorial coverage of the network to all cities with more than 50 thousand inhabitants. All the same, the breakeven point is forecast for 2006, which is only one year later than previously targeted. We're talking about developing a long-distance infrastructure in fiber optics and WDM, to realize new metropolitan networks and to overcome the last mile with co-location ADSL access on Telecom Italia exchanges.

Will expanding the network mean the chance of new services?

Absolutely, even if at the beginning we'll be concentrating on consolidating our base offer for residential customers, which comprises VoIP telephony, broadband Internet access (6 Mbps with ADSL and 10 Mbps with fiber optics) and video (free channels, satellite and on-demand), with an additional package of services including Unified Messaging, virtual video recorder, etc. Video is the strong point in our offer, the one that's had the greatest impact with the consumer, because previously cable TV operators didn't exist here in Italy.

As far as the business segment goes, by enlarging territorial coverage we'll be able to offer services to large enterprises which have their sites scattered around the country, like banks, the public administration and the large-scale retail trade, focusing above all on managing private networks (VPN) and corporate videoconferencing.

Italtel is one of Fastweb's main technological partners. What role will it play in this development scenario?

The relationship we have with Italtel is solid and very satisfying. They have outstanding abilities in softswitch and in integrating different technologies, and have really contributed to the realization of our infrastructure. In this phase of expanding geographic coverage of the service, Fastweb has found itself faced with problems connected with the increase in network complexity and in the number of clients, which is going to double in around two or three years. For this reason, we're developing along with Italtel a Service Assurance solution that will enable us to consolidate current platforms that manage and control the performance of the network and of services offered to different types of customers.

For us it represents a strategic activity, in as much as it will have an immediate impact on an area that will more and more make a competitive difference, in other words the ability to manage, on time, the relationship with the client, both in technological and administrative terms. Today, we're witnessing heavy competition between operators based on the bandwidth offered.

Fastweb was already offering 10 Mbps connections in 2000, and was the first operator to exploit ADSL access beyond all expectations, up to the present offer of 6 Mbps access to all clients. But I also believe that a strategy that keeps enlarging bandwidth, searching for that extra Megabit, and reducing prices is a bit shortsighted. The risk is to stifle innovation, transforming broadband into a simple commodity. In reality, what will more and more differentiate operators in this market is the ability to give customers application broadband services and to offer prompt, decisive answers. Technology alone is no longer the sole, discriminating competitive factor.

Fastweb, an overview

Fastweb, founded in 1999, has been listed on the Milan Stock Exchange's 'Nuovo Mercato' since March 2000. It is the first operator at a world level to have developed a Triple Play network based on IP protocol.

By 31st March 2005, the network reached 4.8 million families in the principal cities of Italy, with 542,000 users. The business model is based on the development of a fiber optics network and uses a full IP multi-service platform to manage and integrate all types of traffic: voice, data and video in DVD live quality. Access to the end-user is provided directly through fibre optics (with Fibre-to-the-Home/Fibre-to-the-Office solutions) or through xDSL technology over unbundled lines.

Fastweb provides a wide range of services - telephony, broadband Internet connectivity, advanced video-communication (video-conferencing for businesses and video-telephony for residential customers), virtual private networks (VPN), audio and video streaming, business-to-employee (B2E), tele-surveillance, digital and interactive TV and Video-on-Demand services - to all market segments ranging from large, small and medium sized businesses, small offices and home offices to residential customers.