A major revision of the Italian legal framework for the regulation of the telecommunication sector has been introduced by Law no. 249 of July 31, 1997, effective August 1, 1997, (the so-called "Maccanico Law" by the name of the Italian P.T. Minister) and the Telecommunications Regulation, adopted on August 5, 1997 by the Italian Government pursuant to Law no. 650 of December 23, 1996. As a direct effect of the new legislation on telecommunications and broadcasting, the PT Ministry has changed its name to the Ministry of Communications.

The Maccanico Law provides for the introduction of the Communications Agency, which shall cooperate with the Italian Government and the relevant national Authorities in the broadcasting and telecommunications sectors concerning, among other: i) preparation of regulations in the telecommunication field; ii) issuance of concessions, authorizations and licenses; iii) assistance in the procedures and requirements for the adoption of such authorizations or licenses, also with reference to the conditions affecting access and interconnection agreements; iv) determination of the criteria affecting prices and tariff of services; v) issuance of directives and aimed at insuring accounting separation of different activities provided by dominant operators; vi) examination of controversies filed by users in relation to the quality of services and level of tariffs.

The Communications Agency consist of a President appointed by the Italian Government, a Committee on Infrastructures and Networks, a Committee for Products and Services and a Council. The Committee's members are selected by the Parliament and appointed by the President of the Republic. The Committee on Infrastructures and Networks is, inter alia, responsible for the definition of objective and transparent criteria in the definition of interconnection and network access, allocation of frequencies, settlement of disputes on interconnection rights and definition of the universal service obligation. The Committee for Products and Services is also responsible for product quality and fixed network services control.

The Telecommunication Regulation introduces in Italy EU directives 95/51/CE, 95/62/CE, 96/19/CE and 96/2/CE (on ONP principles applied to voice services, liberalization of CATV networks for telecommunications services, full competition and mobile and personal services; to some extent, the Regulation also applies the interconnection principles contained in the recently enacted EU directive 97/13/CE). In particular, the Regulation sets the applicable regime on: i) authorization and licensing; ii) universal service obligation; iii) interconnection and access policies; iv) rights of way and obligations on operators detaining significant market power.

With regards to the authorization and licensing the Regulation provides that operators are required to obtain individual licenses from the Agency in order to provide telecommunication services and operate network infrastructure. Specifically an individual license is required for the implementation of fixed lines, public networks and voice services, mobile and personal communication systems and when specific obligations are to be imposed or limited resources (i.e. frequencies and/or numbers) have to be allocated.

The universal service obligation includes the offering of fixed line public voice services, publication of telephone directories, public payphones, free emergency calls and services for disabled.

Operators having market share greater than 25% may be identified has having significant market power, and thus special obligations or applicable in relation to accounting and interconnection policies.

On the numbering policy the Regulation provides for a gradual introduction of carrier selection as of June 30, 1998 and a number portability among fixed line operators starting from the year 2001 in metropolitan.

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