Telecom Italia is a complete telecommunications group, spanning fixed-line and mobile telephony, Internet access, multimedia content, TV, news, and so on. The group combines tradition and experience with innovation and quality through the Telecom Italia, Alice, Telecom Italia Mobile (TIM), La7, APCom, MTV Italia, and Olivetti brands. Its tradition and experience also underpin the group's new technology offerings. The group currently serves 35.3 million mobile customers in Italy, 29.2 million mobile customers in Brazil, 22.8 million fixed-line customers in Italy, and 10.7 million broadband users across Europe. A reporter with Huawei Communicate recently interviewed Mr Maurizio Marcelli - director of IES Wireless Access, TIM - on Telecom Italia's perspective on innovation, indoor coverage with UMTS 900M, TCO saving, wireless access infrastructure, and more.
Reporter: How does Telecom Italia develop its competitive advantage and maintain its leading position in such a competitive market? We know that Telecom Italia has always considered innovation as a key element of market positioning.
Maurizio Marcelli: Okay. I'd like to describe how Telecom Italia sees innovation. In Telecom Italia, particularly within our technology department, the Telecom Italia Lab is our way to approach innovation. More than 700 people are working in this area specifically to support innovation, new product engineering, and new services.
Our competence center, the Telecom Italia Lab, has internal knowledge related to all elements of the value chain, starting from the handset, home environment, and also various technologies, fixed and mobile. This investment is very important to our operations. The main center is in Turin, but our Rome and Milan facilities are also involved in these specific activities.
We have put a lot of efforts in generating innovation through patents and in supporting initiatives with our manufacturers, as well as with our partner Huawei, to provide value through new ideas and innovations. So for us, this is a key element in a market that is based on standard products and standardization. We are totally committed to having differentiation and proven quality for the end users in the product and new services areas.
Reporter: Telecom Italia is now progressing with 3G deployment, and has already launched HSDPA. What do you think will be the most outstanding technological innovation in your network within a time frame of 2 years?
Maurizio Marcelli: You know we had a positive experience in the 2G world and it is a success story. Telecom Italia Mobile is a leading provider in Italy and we also have much important experience abroad. The strategic factor for repeating this success story in the 3G arena is to keep in mind a few important facts.
First of all, 2G is success because of its economy of scale and capability for providing a global solution. Up to now, this is something that is really true in the market. 80% of the mobile market today is GSM.
Second, the dream now is that in a few years, 3G could replace 2G as another success story. To guarantee this really lucky path, we, operator and manufacturer, all the eco-systems, must work together, to target the standardization of the long-term evolution (LTE) architecture. We are really committed to implementing as soon as possible, this kind of architecture in the field. We can then ensure that our company maintains its current position in the global market.
Furthermore, this is a great opportunity to have standardized solutions that could provide duly priced terminals, duly priced infrastructure, and guarantee top of the line voice service as well as SMS, the basic service.
Last but not least, we have to build a new business model that is dedicated to data. We expect that in 2 years, we can set up a business model for data on top of voice and SMS, 3G standard architecture, while having LTE architecture as our target.
Reporter: I see. So you believe that data development in the 3G field will be a main focus in your 3G market?
Maurizio Marcelli: Absolutely.
Reporter: Which is more about the indoor coverage of the UMTS signal? We know that sometimes in very complex cities with thick walls, maybe the indoor coverage is not as good as the 3G case that you refer to. So what is your opinion about that? How is Telecom Italia strategizing to recover this gap?
Maurizio Marcelli: I absolutely agree with you. The opportunity to provide our end users with a real quality service indoors is a key factor to ensure that in addition to voice and SMS service; also data service could be perceived as a quality factor. And no doubt about the fact that 3G today doesn't perform indoors.
This is an element that doesn't allow us to have the ramp-up we would expect for this kind of new service. So we are really committed to investigating and supporting the solution that could improve dramatically the indoor level of quality.
Currently, we see two approaches that are realistically possible. The first approach is to share with other operators and regulatory entities to define the opportunity to reuse the 900MHz frequency we use today for GSM services that could also be used for 3G. This will enhance the performance that we can obtain from 900MHz indoors and also allow for better redesign of outdoor coverage infrastructure. This is a general approach.
The other innovative approach that could provide us also with the synergistic contribution from the fixed line, is to adopt a solution based on the Femto Cell. This is something new. It could be seen not only as a way to implement a better level of signal indoors, but also to provide new services. We are in the process of defining a new way for the end users to have in the home environment, a new device that could be a great tool for supporting new and complex services. So these are two ways to improve quality but also new approaches to multimedia offerings for the customer. Also the Femto Cell could give us a more flexible approach for the defining services.
Reporter: Now I want to ask your opinion on managing another important issue: how to save TCO. We know that all operators nowadays are extremely interested in lowering the equipment cost and expenditure, but it is no more than 30% of TCO. As a matter of fact, the OPEX has always been the biggest part of all the expenditures. Are you analyzing ways to benefit from innovation to lower the OPEX in your network? How could Huawei contribute?
Maurizio Marcelli: We absolutely believe that Huawei can make a valuable contribution. One of the reasons that Telecom Italia selected Huawei was their ability to substantially contribute. I would like to highlight the fact that on the last occasion we had for providing HSDPA in the Telecom Italia network. Another reason that we selected Huawei is also due to our evaluation in the TCO, and the solution you can provide for us to minimize OPEX.
It is safe to say that we are paying maximum attention to this topic. And also in the future, we have the intention to stress this as a value, an absolute value for Telecom Italia.
How significant is innovation in this matter? Our consumption, square meters, and innovation could provide us with a competitive advantage while having the same results for the end users. Once again, I would like to stress that we have hundreds of people devoted to innovation in Turin, Rome, and Milan and we expect that Huawei will cooperate with our team in investigating the best way to minimize TCO.
In the future, we do not want non-standardized technology in our network. We can maximize the final results, having the best know-how, the best conditions for investigation, while maintaining the integrity of the Telecom Italia infrastructure, the Telecom Italia technology, and the Telecom Italia approach to our market. Together, we can have superior results that could be the differentiator between us and our competitors, and realize the best return on investment, such as HSDPA for instance.
Reporter: We are now stepping into the All-IP era. How does this affect the wireless access infrastructure in your network? Are you looking for new equipment to cover this All-IP criterion?
Maurizio Marcelli: As you know, I am responsible for wireless access in Telecom Italia. We started a couple of years ago trying to maximize our competitive advantage and have Italy's biggest IP backbone. Since then, we have tried to connect all of our network elements to this IP backbone. So the IP interfaces in all network elements could help Telecom Italia to maximize the economical benefit from the investment we have in the IP backbone. This is a general trend and up to now we have seen many cases that are valuable and efficient solutions interconnected to our IP backbone and network elements. So the cooperation with Huawei in the area could help us to have this kind of solution in the field, and to have return on our investment in the IP backbone network in a very short time.
Reporter: Finally I have to ask the most important question in regard to the selection of a new partner. We know that the selection of a new partner, or new vendor from your vendor list is a very strict process in Telecom Italia. We have been cooperating for quite a number of months. Which criteria do you use to select Huawei as your new working partner? How about the progression of cooperation with Huawei? Any suggestions on improving this cooperation?
Maurizio Marcelli: We are very happy to have Huawei as our partner and vendor in mobile access. We expect you continue to emphasize the value. There are several reasons why we selected Huawei for HSDPA. The first is that in the competition arena, you are a player that is quite able to emphasize the economic scale to the cost, with the highest grades for functionality and innovation in your products. According to the opportunities in the competitive market, you provide the best economic results for the operators, and excellent performance for the end users. So these are the two key factors we expect you to keep your eyes on regarding the top 10 topics you will discuss in the future with Telecom Italia. In the end, I'd like to emphasize that, it's essential to listen to your customers, as the customers know what they want.