C2 – INTERNAL USE

NGA Devel opment

Technol ogi cal evol ut i on of FTTC &

pol i cy i mpl i cat i ons

C2 – INTERNAL USE

Fleming Area – NETCO trial

The widest NGN footprint in Italy: 2 Mln households

passed and around 280k active customers on

proprietary FTTH network in 7 major urban areas in Italy

Extensive LLU coverage with presence in 1,200 LLU

sites

First operator to offer IPTV services in Europe since

2001, on fiber and LLU lines.

First operator in Italy to offer 20Mbit Access

Since end 2008, rolling out 100Mbit FTTH for

Residential and Business Customers

Fastweb is the market leader for NGN deployment and services in Italy and

actively taking part to all co-investment discussions ongoing in Italy

Fastweb’s uni que posi t i oni ng i n t he NGA mar ket

C2 – INTERNAL USE

St at us of co- i nvest ment pr oj ect s i n It al y

Fastweb, Wind and Vodafone launched a co-investment initiative in May 2010

based on a FIBER-CO model building an FTTH point to point network. Pilot

project in Rome 10k households.

Government launched Industry Initiative for co-investment with possibility of public

financing. TI’s participation was seen as essential to ensure profitability of

investment.

Disagreement on network architecture, pricing schemes, NET-CO governance,

compensation for stranded copper assets, buy back from TI led to a delay and

failure of discussions.

Increase of wholesale prices by the NRA deprived OLOs of resources to expand

co-investment initiative (estimated 700 Mln euro of increased costs for alternative

operators).

C2 – INTERNAL USE

Value generation in Fixed TLC market: EBITDA – Investments (%, Bln€)

TI investments (Bln€)

2.7 2.4 2.1 1.9

Total Mkt(€Bln)

Alternative Operators

2010

4,6

0%

100%

2009

4,3

0%

100%

2008

4,2

4%

96%

2007

3,9

-5%

105% Telecom Italia 105% 96% 100% 100%

What ar e t he i ncent i ves f or f i ber depl oyment ?

C2 – INTERNAL USE

Copper access pr i ces vs f i ber depl oyment pl ans

Homes passed

3 Mln in 2011 April 2009

Apr 2010

Dec. 2009 2.5 Mln in 2012

1.3 Mln in 2012

Feb. 2012 FTTC 7.64

8.49

8.7

9.02

9.28

2008

2009

2010

2011

2012

LLU price trend

C2 – INTERNAL USE

FTTC: VDSL2 & Vect or i ng

VDSL2 VDSL2 is based on deployment of fibre at street

cabinets and can provide up to 50-70 Mbs.

Altnets can be VDSL2 operators by co-locating their

equipment in the street cabinets and renting sub-

loop unbundling (i.e. the copper from the cabinet to

the users’ premises).

VECTORING By cancelling the noise on the copper loops, Vectoring

enhances the performances of VDSL2, allowing it to

reach up to 100 Mbs.

Same architecture of VDSL2 (FTTC + copper to

customers’ premises).

In order to maximize the use of available financial resources, FTTC may

be an essential step in the roll out of NGN

C2 – INTERNAL USE

When: 16th to 31st January 2012

Goal: testing the potential and limitations of vectoring

technology; comparing performances of vectoring and

VDSL2

Trial characteristics:

1. A realistic simulation of a standard street cabinet:

connected with fiber to PoP and to 40 copper sub-loops.

2. Different copper lengths to test performances under

various conditions

3. Trials simulating multiple Vectoring-DSLAM operators

from the same cabinet

4. Some improved conditions compared to real field:

New copper loops and low external noise

PoP to Cabinet distance fixed at 800 mt

5. Some worsened conditions compared to real field with

loops used for most tests (710 mt) longer than typical

length of sub-loops in Italy.

Fast web FTTC t r i al i n Mi l an

PG. 7

C2 – INTERNAL USE

VDSL2 and Vect or i ng per f or mances: on- f i el d

r esul t s

PG. 8

Measured Rate vs Reach

With loops under 500 mts:

Vectoring allows to reach 90

Mbs

VDSL2, even without vectoring,

reaches 70 Mbs.

VDSL2 – which has none of the competitive limitation of vectoring -

represents a change of paradigm compared from ADSL from local office

improving current broadband speeds of 250%.

C2 – INTERNAL USE

A. Vectoring across multiple DSLAMs is in the near-term roadmap of the main DSL technology suppliers. Pre-commercial solutions already available for demo.

B. Such solution allows to maintain vectoring performances even

with multiple ISPs operating at the same cabinet provided that:

i. The second operator willing to deploy Vectoring from a cabinet adopts the same technology chosen by the first mover and connects to the first DSLAM with a cable to achieve vectoring coordination

ii. A shared vector processor manages the noise cancellation for all in a neutral way

C. Such an evolution is pushed by incumbents interested in

vectoring to overcome current limitations of the technology: as vectoring customer base grows, vectoring coordination across multiple DSLAM/chassis/cabinets will be needed regardless of their physical location

D. The same solution enables coexistence of multiple providers using same vectoring technology while maintaining enhanced vectoring performances

Cl ear pat h t owar ds coexi st ence of mul t i pl e

pr ovi der s

PG. 9

Cross-DSLAM vectoring coordination for

normal expansion needs (single provider)

Cross-DSLAM vectoring coordination for

multiple SP co-existence

C2 – INTERNAL USE

Pot ent i al of FTTC i n It al y

PG. 10

8 cities considered by FW for the initial deployment: • Bergamo • Brescia • Florence • Rome • Naples • Bari • Catania • Palermo

• Based on TI database information, average copper length in 8 cities is around 409 meters

(70% of loops are below 400 meters)

• FTTC, either through VDSL2 or Vectoring, represents a promising technology to reach

Digital Agenda targets

Fastweb has already requested Sub-loop Unbundling for over 200 cabinet areas and is

ready to increase this footprint under the right conditions

1.000 800 600 400 200

100M

95M

80M

Vectored Down Speed

VDSL2 Down Speed

70M

70M

58M

Distribution of length in secondary copper network

Meters

C2 – INTERNAL USE

FTTC has a relevant potential to provide ultra-broadband services in Italy

and can represent an intermediate step to FTTH.

Performances of non-vectored VDSL2 are already remarkable with short

loops and could be considered as an alternative until vectoring becomes

mature and allows multi-operator environment.

Vectoring evolutions available by end of 2012/2013 will enable different

ISPs to provide vectoring from the same cabinet.

Fast web t r i al : mai n f i ndi ngs

PG. 11

C2 – INTERNAL USE

Sub Loop Unbundling (SLU) will play an essential role in the deployment of FTTC and increase infrastructure-based competition towards full FTTH solutions

Withdrawing or limiting SLU is not necessary and not desirable: • it would give incumbents the capability to deploy FTTC if/when/where they want,

therefore taking away any competitive pressure • vendors not encouraged to develop pro-competitive evolutions of vectoring;

Deploying of vectoring under existing limitations can be enabled by establishing: • Obligation for the first mover to take care of the cross cancellation for other ISPs

(allow other ISPs to connect their DSLAM to the first mover’s CPU • Obligations for second/third movers at each cabinet to adopt the same

technology as the first mover. Facilitating deployment of FTTC by Altnets would put pressure on incumbents triggering a competitive race to be the first mover.

What does t hi s i mpl y i n t er ms of pol i cy?

PG. 12

C2 – INTERNAL USE

Currently, alternative operators have relevant cost and operational

disadvantages in deploying FTTC:

Disproportionate price of sub-loop SLU is currently priced at a very high and disproportionate level compared to

LLU, making it hardly sustainable for Altnets. This is one of the main reasons for the

marginal deployment of VDSL by Altnets.

Delays in availability of cabinets to install active equipment: Co-location at street cabinet may be complex, providing opportunity for incumbent to

delay process and put in place discriminatory behavior; provision of sub-loops

currently subject to many technical limitations. Additional cost/operational complexity

Limited control of provisioning and assurance activities Whereas incumbent operates directly with its own workforce (or external contractors)

on the cabinets for activation and maintenance, Altnets need to rely on the incumbent

to do these activities for them. This has been historically a major source of

discrimination and would be even more relevant in vectoring/VDSL.

Bar r i er s f or Al t net s i n depl oyi ng FTTC

C2 – INTERNAL USE

Introduce measures in the costing and non discrimination Recommendations making it easier for Altnets to roll-out FTTC:

Lower sub-loop prices: decrease SLU more than proportionally compared to LLU

Stricter non discrimination measures for VDSL: give Altnets the possibility to use external contractors used for delivery/maintenance of sub-loops.

Vectoring: do not remove subloop ULL but impose an obligation for ISPs willing to deploy vectoring at a specific cabinet to coordinate equipment with other operators. Accelerate pro-competitive development of vectoring technology. Need to avoid that technology drives regulation. Should be the other way around.

Push for a “competitive” r ol l - out of FTTC