Italian broadband recovery plan in doubt after small islands failure

Italy’s telecoms players have all declined to take part in a project to roll out high-speed broadband in its islands, an outcome that could have a knock-on effect.

The first ultrabroadband tender under the Italian National Recovery and Resilience Plan, known locally as PNRR, was designed to allocated €60.5 million in funding to network builders, systems integrators and so forth, for the build out of submarine fibre-optic cables to provide fast broadband to around 20 so-called minor islands, including parts of Sicily and Sardinia. According to Italian financial daily Il Sole 24 Ore, the 22 December deadline for submissions passed without a single applicant coming forward. There has been no formal confirmation of that from the government though.

In the overall scheme of things, this first tender was a small one, and therefore its tempting not to read too much into it. But there are bigger funding allocations to come under the same umbrella project, therefore the failure of part one is naturally casting doubt on the changes of success of the whole.

As a quick reminder, the PNRR was conceived as Italy’s response to the Covid-19 pandemic. It avails itself of funding from the European Union’s €750 billion Next Generation EU (NGEU) programme…quite a lot of it actually. The PNRR takes up €191.5 billion in EU funding as well as some tens of billions of additional funding set out by the Italian government. High-speed broadband only takes up a small proportion of the spend; there is €6.7 billion available for broadband, including fixed broadband, 5G and satellite, the goal being to improve connectivity throughout the country in the wake of the pandemic.

Future broadband funding allocations under the PNRR will be in the billions of euros and therefore should prove more tempting to industry players. But as the Il Sole 24 Ore report points out, there as some issues linked to the minor islands tender that could resurface in later allocations.

Chief among these are certain onerous conditions placed on the funding. The paper highlights hefty bank guarantees and insurance requirements, as well as severe financial penalties – of up to 20% of the net contractual amount – on any failure to meet interim project deadlines imposed by the European Commission.

The ‘Italia a 1 Giga’ tender is due to take place this month, and will see €3.8 billion in funding up for grabs for fixed ultra broadband rollout, while a €2 billion 5G tender is also in the offing. As the paper puts it, Italy cannot afford another misstep with those allocations.

The government is now looking at the T&Cs, which could help smooth the way for the upcoming tenders and draw interest into a relaunched minor islands project.

But the conditions of the tenders are not the only potential obstacle.

Some in government, including members of the democratic party – one of a number of groupings making up the Draghi government – are calling for the ‘Italia a 1 Giga’ contest to be postponed pending the outcome of the KKR takeover bid for TIM.

As it stands, the Ministry for Technological Innovation and Digital Transition (MITD), headed of course by minister Vittorio Colao, intends to push on with the tender as scheduled, the paper notes. But time will tell on that score.