July
2000
Israel
Update Memo
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Israel Update Memo |
The following report outlines new developments in the past three months and the state of on-going developments.
1. The Interaction between business and regulatory constraints
1.1 The regulatory background
Several regulatory decisions taken in the months of April to June 2000 bridge the transition to a competitive market providing alternative telecommunications infrastructures.
The Attorney General for the Government, Elyakim Rubinstein, ruled that the Ministry of Communications cannot award communications licenses for cable companies without a basic change in the Telecommunications Act. He decided on the conflict between the Ministry of Finances and the Ministry of Communications regarding the conditions for providing the Cable TV corporations with licenses for providing broadband Internet access and telephony. These licenses were related to the issue of the conditions for extending the licenses for the Cable TV corporations due to expire between 2002 and 2005.
Contrary to the position of the Ministry of Finances he decided that no tender was necessary for the extension of the licenses for Cable TV provision; on the other hand, against the position of the Ministry of Communications he decided that the Cable TV corporations should pay for the extension of their licenses – the value of the licenses to be established by and independent arbiter to be nominated by the government.
This decision paves the way for granting of licenses to the Cable TV companies for the provision of broadband Internet access and IP telephony after the Telecommunications Act is amended..
The related matters were also decided in the last months. The YES DBS TV Satellite corporation is about to provide multi channel TV in competition to the Cable TV companies. The chairman of the Cable TV and Satellite Council decided that Cable TV corporations should open access for content to the YES DBS TV Satellite corporation breaking the present cartel of the cable companies on content. The YES corporation will provide broadband satellite Internet access; its business viability is dependent on reaching a minimum number of users; it will be able to offer tiering arrangements while the cable TV will not be able to offer tiering packets to its customers for 8 months since the beginning of YES broadcasts.
These developments have delayed the provision of ADSL services by the historical operator, the Bezeq. The regulator, Ministry of Communications, acted in view to delay the provision of this service until the Cable TV companies are able to provide Internet broadband access. The rationale is that immediate ADSL provision would have curtailed effective competition.
Allocation of additional spectrum for additional providers of wireless cellular and for LDMS and WLL will be by made by tender to be published in the coming weeks (July 2000).
1.2 Business constraints and entry barriers
The Ministry of Communications approved in early June 2000 a wireless trial in the town of Ariel by Ofek Technology of the Eurocom group.The trial will use LMDS technology for wireless access. The trial constitutes part of Ofek’s preparations for setting a telephony and high speed Internet network in competition with Bezeq.
Ariel will be divided into four areas for the purposes of the trial. Each area will use technology from a different company: Alcatel, Nortel, Netro and Floware of Israel, which is included in the Cisco bid. The license received includes the approval to hook up all public institutions, as well as 500 private households.
Services to be given as part of the trial are telephony, broadband Internet, and multimedia services. Ofek received approval to connect a line to Bezeq, to an international communications company (not yet chosen) and to Internet Gold of the Eurocom group for the purpose. Int the initial stage of the trial Internet Gold will provide a hook-up of 2Mbps bandwidth, which will allow communications with 256 Kbps for any household or institution hooked up to the trial.
1.3 Attitude of the incumbent operator towards alternative network providers
In its offer of shares of March 1998 the historical operator recorded the need for major changes in its operations to be ready to the incoming competitive market. They were aware of the need to eliminate cross-subsidy among different services and to rise the overall efficiency of its operations. A major step in the process of liberalisation was the Gronau report - the historical operator tried to appeal its conclusions and moderate the drop in tariffs.
Another way the historical operator found to cope with the opened market is to speed the introduction of broadband technologies over its copper local loop, both with the expansion of ISDN services and with the upcoming ADSL services now being tested in a large scale.
Some compensation for the expected competition by the Cable TV companies is being provided to the historical operator. It was authorised by the Ministry of Communications to participate in the two DBS (Direct Broadcasting Satellite) companies (an operating one and one for content); it has a 30% share of these companies.
1.4 On-going regulatory developments concerning alternative network providers
See 1.1 above.
2. Inventory of the major "public" utilities with a potential for use in I.S. applications
2.1 Types of companies offering networks
The companies that in the near future will be able to offer alternative network services are the following:
2.2 Types of operators using the networks
The possible opening of these networks to operators is dated from June 1, 1999 so that no new licenses have been already allocated.
2.3 Types of services offered by the operators on the networks
The possible opening of these networks to operators is dated from June 1, 1999 so that no new licenses have been already allocated.
3. Synoptic tables
The ownership composition of the candidates for establishing such networks follows:
Cable TV: Aruzei Zahav (Aureq -12%; Fishman/Bar-On and Yediot Aharonot - 66%; Tevel - 22%); Matab (Denkner - 43%; Maariv - 16%; Hanania Gibstein - 7%; Shimeon & Ali Hefetz - 6%; the public - 28%); Tevel (I.D.B - 48.5%; UPC - European Cable Company - 46.5%). (Globes, 16.12.1999, p.8).
MED-1: Telecom Italia (23.17%); Telecom Cyprus CYTA (9.22%); Clalcom (owner of Barak) (23.17%) ; Aureq (14.39%) ; Globscom (14.39%) (owned by Golden Lines, private investors, Telrad and Kama); Zohi (15.66%) (Shay Livnat). It was announced ( 30.1.2000) that Telecom Italia is buying control of MED-1 by acquiring 29% of the shares hold by the Israelis for US $ 70 million expressing a value of $ 240 million for the company. Following this agreement Telecom Italia will own 52% of the shares of MED-1. (Yedioth, 30.1.2000).
YES - DBS (Direct Broadcasting Satellite) Companies: Eurocom (40%); Bezeq (30%); Gilat (10%); Lidan (5%); Cardin (5%); Poalim Investments (10%). (7.2.2000).
Israel Railways: owned by the Government of Israel
Israel Electric Company: owned by the Government of Israel, to be privatised in the near future.
Cross Israel Road: The concessionaire is the Derech Eretz group led by Africa-Israel (25%) and includes CHIC of Canada (25%); Hughes from the USA (20%); Societe Generale d'Enterprise of France (20%).
