Update:
July 1999
Israel - General Background
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Israel - General Background |
Israel has successfully modernized its telecommunications market by following a path of corporatization, privatization, liberalization and re-regulation with the controlled introduction of new operators and services, and by opening markets to free competition.
Exports of high-tech products reached US$ 10.4 billion in 1996 and 12 billion in 1997, accounting for approximately 75% of all industrial exports. Hi-tech exports are expected to grow at approximately 20% annually.There are 45 venture capital firms solely dedicated to hi-tech industries currently operating in the country.
Communications equipment and services account for approximately 39% of the country’s electronics industry. The communications sector is leading the country in the push for privatization, liberalization and re-regulation. Efficient, innovative and competitively priced telecommunications are a necessity for national economic growth, and a major indicator for foreign investors planning to invest in a specific country.
Over a period of ten years, Israel has turned an ailing Government-dominated market into a modern and competitive area of operations, customer-focused and with high service standards. This has been achieved by shiftingcommunication operations responsibility from the Government to the private sector.
Bezeq, the national telecommunications company which holds a monopoly in local telecommunication services, provides 2.6 million direct exchange lines (45% penetration). It also provides leased line and switched data services (e.g. packet switching and frame relay), utilizing 100% modern digital networks while using the latest technologies in digital switching, Signalling System No. 7, fibre transmission, synchronous digital hierarchy (SDH), advanced intelligent network (AIN), integrated services digital network (ISDN), telecommunication management network (TMN), etc.
Liberalization has enhanced service provision through the controlled introduction of new operators and services, and by opening markets to competition areas such as customer premises equipment and business systems, data networks and information technology services, Internet service provision, audiotex services, etc.
Major progress in market liberalization has allowed the population to benefit from competition in the areas of television, radio, cellular telecommunications, and in international telecommunications. From June 1, 1999 the liberalization of the internal communications market is implemented.
Israel’s three private-sector cellular phone operators is expected to reach in 1999 a combined subscription rate of approximately 2.7 million. The country has one of the world’s highest cellular telephone penetration rates.
Pelephone, jointly owned by Bezeq and Motorola, was formed after a successful implementation of a BOT (build-operate-transfer) contract by Motorola. Pelephone provides services using NAMPS (advanced mobile phone service - a North American analogue standard) network technology and has also begun implementing CDMA technology.
Cellcom, the second cellular operator, is owned by Bell-South and other foreign and local investors. It received its concession through public tender, and provides services using TDMA network technology (it is currently transforming its network to the modern IS-136 standard).
In February 1998, the tender for a third cellular operator in the country was completed and the new licensee is operating in the 900 MHz range, according to the GSM standard. The new licence was awarded to Partner, owned by Hutchison of Hongkong, along with additional local investors and started operations in early 1999.
These networks offer countrywide portable coverage and support modern networks with services such as personal numbering plans, calling party identification, international roaming, etc.
International Telecommunications
The two winners of the tender to operate facility-based international telecommunication services in the country, Barak and Golden Lines, began operations in July 1997, ending the monopoly of Bezeq International - a subsidiary of the national telecommunications company in this field. Major international telecommunication companies including Sprint, SBC, Deutsche Telekom, STET, and France Telecom play an active role and hold significant ownership in both new operators.
International rates were dramatically reduced: in some instances, they are now less than one quarter of those previously paid by consumers.
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Reform in the Domestic Telecommunications Market
The telecommunications sector is on undergoing a major restructuring with licences to be granted to domestic telecommunication operators. The main recommentdations of the Rosenne Committee orienting this process are:
There are currently three cable television operators, each with a monopoly in specific geographic regions, and covering over 90% of the country. About 70% of homes have subscribed to cable television. The cable television networks are based on 50 channels, 550 MHz systems, utilizing fibre-based feeders and “tree and branch” coaxial distribution systems. The programming includes “off the air” and satellite channels, as well as five self-provided programme channels and six new dedicated orogramme channels to be introduced during 1998. An “open sky” broadcasting policy was a approved in August 1997. The new policy means major changes in broadcasting, among them a total industry restructuring and the introduction of digital radio and television. Five key points are highlighted in the broadcast industry restructuring.
The Israeli Parliament recently passed a law enabling multi-channel direct broadcast by satellite (DBS) which is planned to be operational in 1999, providing an alternative to cable television. Other activities include the introduction of new sector targeted commercial channels on cable and satellite.
The Internet market currently comprises approximately 520,000 users, and enjoys a high 5% per month growth rate. The licensing of commercial Internet services was begun in 1994 and there are about 30 service providers, four of them with a dominant position in the market. The Israeli Internet service providers (ISP) utilize international leased line interconnections, using fibre-optic routes and satellite links to the United States Internet backbone; they are locally interconnected through the IIX, Israeli Internet eXchange managed by the Israeli Internet Association (ISOC-IL).
In 1997, Israel signed the World Trade Organization Agreement on Basic Telecommunication Services, committing itself to opening the local basic telecommunication services market to competition. The country plans to begin competition in the local services market, including infrastructure, data transmission and basic telephony by January 1999.
Privatization is a declared policy goal of
the Ministry of Communications which is committed to reducing its
share of Bezeq. Currently the Government’s holdings are 54%.
Additional shareholders are Cable & Wireless of the United
Kingdom with approximately 12.7%, Merrill Lynch holds 6%, and the
public holds the remainder of the shares which are traded on the
Tel Aviv Stock Exchange. The Government plans to reduce its
holdings further, with the intent of eventually pulling out
completely.
At this point, almost all of the new players in the
telecommunications industry are private corporations.
The third pillar upon which the policy of the Ministry of Communications stands is re-regulation The Government plans to establish an independent regulatory authority, thus reducing direct Government involvement in the communications sector, and enabling market restructuring and competition enforcement.
Re-regulation will cover competition rules such as cross-ownership, resale issues and interconnection arrangements, including tariffs and technical standards, universal access definitions, obligations and reciprocal compensation, special provisions and obligations of general licence owners, numbering issues and other related issues.
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