The Association of Independent Internet Providers (AIIP) filed an antitrust suit against Telecom Italia stating that evidence indicates the state-run telecommunications company is selling Internet services below cost in order to monopolize the Italian market.
According to a report in the weekly news magazine, PANORAMA, Telecom Italia’s Internet division, TIN, lost 145 million lira ($8.5 million) in 1997. No other Italian server could have survived such a loss. But this, says the report, is not the base of AIIP’s complaint.
TIN, while being part of the Telecom group, is required to operate as a
separate entity. This means that it must face the same overhead as other
Internet providers. Presently, the highest part of any server’s operating
expense are line charges and monthly fees charged by Telecom Italia, which
continues to hold a monopoly on the country’s telecommunications until the
second authorized carrier, WIND, begins operation later this year or early
in 1999.
Every TIN client, according to AIIP, should cost the company nearly $411 a
year, based on current business standards. It is suspected, however, that
clients are being charged far less than this in order to monopolize the
country’s Internet services.
An illustration of figures that tend to
support AIIP’s claim, are those of market share versus profits. Over the
past year TIN’s customer base tripled, going from 47,400 to 133,400. During
that same period, though, the company’s revenue dropped 30 percent. In
TIN’s business sector, where there has been an increase of 123 percent, the
company registered losses of $32,2 million.
The suspicion of AIIP is that, given the vast growth and lack of profit,
Telecom Italia is providing TIN free access to its national and
international communications network, without applying fees and service
charges that are levied to other Internet servers. Otherwise, according to
reports, TIN would appear to be offering clients prices that are less than
their per customer overhead; an unfair practice to drive private servers
out of business.
