UPDATE:Italy Regulator Eyes New Co To Fund Broadband Invest

The head of Italy's telecommunications regulator Tuesday proposed the creation of a new company to fund the development of a nationwide high-speed broadband network.

In the regulator's annual speech to parliament, AGCOM Chairman Corrado Calabro said the new "vehicle company," which would include the main operators as industrial partners, could involve public funds, possibly provided by state lender Cassa Depositi e Prestiti.

According to the proposal, the new company would aim to replace the old copper network with a new fiber infrastructure proceeding region-by-region, like the switch to digital terrestrial in Italy's media sector.

AGCOM would set the tariffs to access the fiber network and ensure an adequate return on investments for the operators involved.

Analysts and investors have been focusing on the potential impact of the creation of new network company on Telecom Italia SpA (TI), Italy's largest telecoms operator, which relies on its fixed-line network as a key asset.

AGCOM's proposal didn't specify if the new company would also include Telecom Italia's network among its assets.

Forza Italia, Italy's biggest party in the center-right ruling coalition, has openly backed a spinoff of Telecom Italia's network into a new company, possibly with the participation of state-sponsored funds, to boost broadband development. But Telecom Italia's management has always rejected such a plan.

The Italian government has already said it plans to invest EUR1.47 billion to develop broadband coverage in the country, with the aim of overcoming the existing digital divide in rural and outlying areas.

Calabro said Tuesday the government plan is complementary and not alternative to AGCOM's one, which would lead investments for a next-generation network to cover the whole country.

Telecom Italia Chief Executive Franco Bernabe said Tuesday the company was open to considering shared investment projects with other operators, provided that the solutions proposed would be advantageous in terms of returns on investments.

Telecom Italia has pledged to invest EUR6.7 billion in network infrastructure in the next few years.

-By Giada Zampano, Dow Jones Newswires; [phone]; [e-mail]