ESIS extension - Israel - Regulatory Developments

The following report outlines new developments in the past three months and the state of on-going developments.

The parameters indicating that Israel is quickly becoming an Information Society continue to be consistent: there is an expected growth of 10% in the commercial and services areas, mainly fuelled by hi-tech and computation demands. In the first half ot 2000 there was a 40% growth in software exports and a 30% growth in hi-tech exports in comparison to 1999. There is an acute deficit for personnel for the hi-tech industries and emergency measures are being considered by the government and the Council for Higher Education.

The period of this report may be regarded as a milestone in the development of the Information Society in Israel. Several events occupied the public agenda:

No significant changes since the last Master report. The Parliament (Knesseth), was not able to complete the ammendment to the Telecommunications Law needed for the provision of broadband Internet licenses for cable television companies. The Attorney General found an alternative path based on regulations to be issued under the authority of the Minister of Comunications and approved by the Attorney General.

This has been one of the main issues in the recent agenda. In case only one of the main players, the Bezeq or Cable TV receive a license for providing such services, it will strenghten its monopolist advantage at the expenses of the other players. To create effective competition policy makers are attempting to provide licenses at the same time both to the Bezeq and to the cable TV companies. Other possible measures include the enforcement of unbundling allowing additional players to provide access services over the infrastructures of the Bezeq and the Cable TV companies before the implantation of the new wireless LMDS technologies which should provide last mile access to the customers.

We reported (Q5) that the Attorney General to the Government, Eliakym Rubinstein, established that an ammendment to the Telecommunications Law was needed to provide licenses for broadband Internet provision to the Cable TV companies. Although the Ministry of Communications attempted to have this ammendment quickly legislated there have been some delay. It was found an alternative legal venue to provide the licenses, under the established authority of the Minister of Communications and the approval of the Attorney General.

Upon the request of the Prime Minister the Attorney General set up the conditions for providing a temporary license for broadband Internet provision for the Cable TV companies (until the end of their present license for Cable TV in 2003-2005). The conditions are: provision of free access for service providers willing to provide content in the network; unbundling, renting parts of the infrastructure to competitors; the provision of the temporary license will not serve as an excuse for demanding a final license or for not having a tender for the use of the Cable TV infrastructure at the end of the present concession, in case a decision is taken to have such tender (as the alternative to the the present agreement to have the payment for the Cable TV license extension determined by an independent arbiter). In addition the second to the Attorney General, Davida Lehman-Messer demands that in return for the broadband Internet license Cable TV companies renounce their exclusiveness in the area of TV cable broadcasting. (Haaretz, 27.9.2000, C1).

The Attorney General asked the Cable TV companies to provide clarifications regarding their commitment to pay for their final licenses to be established by an arbiter; their position regarding the separation of ownership of the infrastructure from the ownership over the content services for the provision of fast broadband Internet; their position regarding the sanctions to be enacted against them in case they do not comply with the conditions of the licenses. In their answer, provided by their attorney, David Libai, they agree to the Ministry of Communications demands regarding unbundling and providing access to alternative providers of access to fast broadband Internet and the nomination of an arbiter to set up the sum to be paid for their license. On the other hand David Libai ask what is the legal basis for the additional demands. Cable TV companies are not ready to release their monopoly on TV broadcasts and they do not commit themselves not to act against the provision of a TV broadcast license to the Bezeq; they argue that the Bezeq has been already compensated through the YES Digital Satellite Multichannel company in which it has a 30% share. (Haaretz, 28.9.2000, C3)

The head of the Israel Lawyers’ Chamber, Shlomo Cohen, expressed a clear position regarding the dangerous consequences of cross ownerships of content and infrastructures in the communications market. Being an expert in the area of cartels and monopolies, he stated that the Government provided in the past monopolistic rights in the communications area. The companies used such rights to the maximum providing bad services, demanding expensive prices and accumulating much capital at the expense of the public. He strenghtened the position of the Attorney General against the attacks he suffered lately from circles close to the Cable TV companies (Haaretz, 25.9.2000, C14).

The tender for for the frequencies for third generation cellular telephony are expected for next December. There is much interest due to the new applications that will become possible like broadband Internet, video conferencing, video clips and music, advanced ecommerce. The cellular companies are pressing the Ministry of Communication so that the tender be of the "beauty contest" kind , like in Sweden (based on the technology capacity, financial strenght, business plans and expertise in communications). It seems that there is agreement between the Ministry of Finance and of Communications that the tender will be for the highest financial offer for the frequencies; this will guarantee an efficient use of the frequencies and develop sophisticated applications.

The decision of Danny Rosenne, the director general of the Ministry is expected for November. He consulted the companies regarding they preferred standard; although two of the present cellular providers use an American standard (Pelephone and Cellcom), all three answered that for the third generation telephony they prefer that the European standard be adopted. The liberation of the frequencies now used by the army, the police and other institutions will require investments of the order of US $ 25 million dollars for the acquisition of broadcasters in alternative frequencies. The cellular companies are not in a hurry for the tender; in addition to the heavy payments they will be required for acquiring the frequencies additional, large, investments will be needed for upgrading their infrastructures. Haaretz, 24.9.2000, C2, Hadar Horesh.

With the opening of the telecommunications market several groups are getting ready to participate in the expected tender for frequencies allocation for services using the LMDS technologies providing last mile home wireless access .

Ofek is carrying out an international tender to choose the equipment provider for its telephony and data network. The contract is expected to be of the order of US $ 400 Million. In the last stage of the tender are participating the companies Nortel, Cisco and Alcatel. It seems that the preferred company is Nortel; however Ofek may choose two providers due to the worldwide innovative aspects of the project. Ofek intends to provide voice communications over a data network (Voice over IP). The connection between the subscriber and the local exchange will be carried out using the LMDS technology. Alcatel and Nortel are offering integral solutions; Cisco is cooperating with an Israeli company whose expertise is in the area of wireless communications. All three companies are carrying out an experiment in the Ariel town connecting schools, and other public institutions using broadband data networking.

Barak, another contender for the inland telephony provision is also carrying a tender for equipment provision among 15 providers.

Cellcom belongs to the same group as Ofek (ADB) may not participate as an independent company in the tender for LMDS frequencies. The Ministry of Communications decided not to allow two companies from the same group to participate in the tender. Eurocom (the parent company of Ofek) and Cellcom entered a request with the Anti-Trust Commissioner to have permission to cooperate and establish a joint company that will participate. In case their request is approved Bell South, which has a third of the shares of Cellcom is expected to acquire a share of the Ofek company. Cellcom has a national backbone with 15 exchanges which will greatly facilitate the establishment of the new network. Haaretz, 21.9.2000, C1.

Ofek and Barak asked the Ministry of Communications to provide them a temporary license for the provision of broadband Internet services under the rules to be established by the Attorney General. They are afraid that the Cable TV companies and Bezeq will use the licenses they are soon expected to receive to dominate the fast broadband Internet market while the new contenders will actually enter the market only at the end of 2001. Haaretz, 21.9.2000, C1.

Cellular telephony development in Israel can be described through the quarterly reports of the cellular telephony companies:

	Cellcom	Pelephone	Partner
Income (millions of NIS) 1 NIS =~ 3.5 Euro	1,083	856.7	479.4
Number of Customers at the end of June 2000 (thousands)	1,641	1,291	504
Increase in number of customers in the second quarter (thousands)	107	120	78
Mean income per subscriber (NIS)	208.6	221	317
Expenses for sales and marketing (millions NIS)	147.6	113.6	69.2
Operational profit (millions NIS)	188.8	(34.0)	(141.4)
Net profit (million NIS)	113.9	(37.0)	(169.5)
Capital (million NIS)	824.8	1,951	968.8

Publicity through cellular telephony: the manager of the publicity company Go-Interactive says that the advantages of publicity over cellular telephone is the possibility to offer the necessary information, at the right moment and place to the chosen person. The possibilitie to broadcast messages to the cellular screen will soon be used and many questions regarding the preservation of privacy and other ethical questions should be discussed and solved. He expects that the cellular operators, Cellcom, Pelephone and Partner will get their customer agreement to receive only those specific messages which they themselves choose to be exposed. Haaretz, 3.8.2000, C7.

Netvision, one of the main ISPs in Israel, signed a credit card settlement agreement with Leumi Card, a credit card corporation which will honour the Visa card for transactions carried out through Netvision. Haaretz, 17.8.2000, C5.

Internet Zahav, one of the main ISPs in Israel will enable its customers to complete commercial transactions in the Internet without using a credit card. They will pay through their monthly invoices following an agreement with the IPIN company.Initially the arrangement will apply for acquisitions up to $75 for electronic content: games, software updates, finance information; later the sum is expected to be higher. IPIN is a universal payment platform that enable the customers to make transactions using a secret code without using their credit cards. Netvision announced that it soon will offer a similar service to its customers. Yedioth Aharonot, 18.9.2000, Economy 4.

Budget 2001. The planned budget for 2001 includes an additional sum of NIS 1 billion for education. Two-thirds will cover natural growth of the student population or increases in the teachers wages. From the remaining increase NIS 170 million are for the addition of children 3-4 years old in kindergartens in development towns and the northern frontier; to increase the number of students in integral schools (full day) in towns with an high rate of unemployment; and for special education. The remaining NIS 130 million will fund an experiment for extending the presence of teachers in the afternoons at school being carried out in cooperation with the High Schools Teachers Association (25,000 students in deprived towns). Haaretz, 17.9.2000, A5.

Encouraging candidates to the matriculation examinations. The Ministry of Education decided to stimulate students and teachers from weak settlements to rise the number of those that get through the matriculation examinations. Such examinations are required for post-secondary studies in Israel. Students participating in the program would be able to choose money prizes of value of 800-1,200 dollars. Teachers may get an annual addition to their wages of up to NIS 38,000. The experimental program carried out in the last academic year tas a result of the initiative of Prof. Michel Abutbul, head of the Pedagogic Secretary will be extended –the students may choose the prize according to the area close to their interests: with $800 they may choose to buy a personal computer or books; $1,000 for a study tour; and $1,200 to be applied in ther post-secondary studies.

Teachers of Mathematics, English and Hebrew in schools were the number of students getting a matriculation diploma does not reach 45% may receive an addition to their wages. The addition will be proportional to the additional number of students that succeed in the matriculation. This is an initiative of the director of the Division for Human Resources in Teaching from the Ministry, Shimeon Harel. Haaretz, 25.9.2000, A9.

The director of the Human Resources Planning Authority, Beny Feferman, said that 30,000 additional workers are needed for the hi-tech industry in Israel in addition to the present 105 thousand employees. He suggested that 10,000 licenses for foreign workers be issued immediately. This would enhance the competitiveness of the Israeli hi-tech industry and will contain wages. Haaretz, 22.8.2000, C3.

70% of the employees in hi-tech industries plan to change their present work place said Yair Perlman, director of MIT an human resources company in the area of information systems and hi-tech. The rate of changing work places is at highest in the 33-34 y.o. age bracket and reaches 65% .He added that the average wage in the hi-tech industry is higher by 15% in August 2000 compared to August 1999. Haaretz, 21.8.2000, C4 .

The Prime Minister Ehud Barak approved a two year plan for the re training of 4,000 workers for the hi-tech industry. He stressed the recommendation of the Ministry of Trade and Industry to integrate the training with absorption at the work place so as do adapt it to the actual needs of the companies. The inter ministerial plan was presented by Yossi Kuchik the director of the prime minister office and should cost 80 million NIS (20 million dollars). The program provide also for doubling the number of hi-tech university seniors (engineering and computer sciences) from the present 2,800 to 5,000-6,000 in three years. Haaretz, 9.8.2000, C7.

Emergency measures have been adopted by the Council of Higher Education to stop the transference of lecturers to the hi-tech industry. The universities will allow full time academic staff, lecturers and researchers, to work 1-2 days a week in hi-tech industries and receive the wages and labour conditions in the industry including share options. The number of seniors in the high technology areas (Computers Science and Electronic Engineering) increased lately: in 1998 they number was 2,000 and they were expected to reach in 2002-2003 5,000. In 1999-2000 5,865 were registered in the first year of these courses. Still there is a deficit for senior academic staff. The Planning and Budgeting Committee of the Council recommends to the universities: (1) To absorb industry workers with appropriate qualifications who will receive full academic wages in addition to their industrial salaries. (2) To provide to these industry lecturers Associate academic titles, from lecturers to full professors. (3) The experience from Israel and the US shows that such arrangements integrating partial work in the industry are possible. (4) Stimulation measures to keep research students to complete their third degree title in hi-tech areas: 50,000 NIS a year ($ 12,500) will be provided for students to the second degree (M.Sc.) and 60,000 NIS a year ($15,000) a year for the third degree (Ph.D.). Haaretz, 7.9.2000, C1.

The Ministry of Communications, Benyamin Ben Eliezer (Fuad) signed the regulations opening the telecommunicatins market to competition in September 4. The basic demands for an inland telecommunications provider to get a license are: (1) That he be incorporated in Israel. (2) That 20% of the company should be held by Israeli citizens resident in Israel. (3) The general manager and most of the directors should be Israelis. (4) Should have knowledge and experience in establishing and managing telecommunications systems. (5) Should have experience in managing a servicing system in Israel with at least 50,000 customers. (6) Should have capital of at least 60 million dollars. (7) Should be able to start providing services 12 months from the date the license is issued. (Haaretz, 5.9.2000, C1).

The actual opening of the inland telecom market take place October 4. The companies expected to ask for a license are: Barak; Ofek, a subsidiary of Eurocom; Cellcom (cellular operator); Tevel Telecom, a subsidiary of the cable TV company Tevel; Pelephone (cellular operator); ITN directed by Dov Tadmor. Cable TV companies will be able to get a temporary license in case the Attorney General approves or the Telecom Act is ammended by the Parliament. Some of the companies will participate in the LMDS frequencies tender and others will rent infrastructures from the Bezeq or the Cable TV companies (unbundling). Haaretz, 4.10.2000, C1.

The final opening of the inland market involved some final delays, the last one , caused by the sanctions applied by the historical operator workers. The workers striked providing restricted services (like in holidays).(Yedioth Aharonot, 30.8.2000, Economy, 1). The main issue was how to guarantee the funds needed to the retirement plans for the workers who will be dismissed after privatization of the historical operator. This was garanteed by the Ministry of Finance in an agreement signed with Shlomo Kfir the head of the Workers Committee of the Bezeq and approved by the Finance Committee of the Parliament(Haaretz, 15.8.2000, C1).

Unbundling has been included as a possible action in the regulations that opened the market. Without unbundling there is the danger that no effective competion evolve due to the delay in the deployment of LMDS technologies that may provide an alternative, last mile, access to the homes. This is in contrast with the policy announced in the Rosenne Report that established that the competition should be facility based; the facility based policy was intended to stimulate the development of additional infrastructures to that of the Bezeq and the cable TV.

Critics of the Rosenne Report argues that if an unbundling policy has been adopted in the early planning phase Bezeq could have been split into two companies, one for Infrastructures and another for Communication Services. Each of such companies would have welcomed additional players, the Infrastructure company welcoming additional corporations in the Communications Services area and the Services company welcoming additional Infrastructure corporations (Haaretz, 10.9.2000, C2).

Digital Signature: A subcommittee of the Economics Committee of the Parliament (Knesset) chaired by M.K. Michael Eitan has carried out marathon hearings during the month of September towards the preparation of the Digital Signatures Law. For the first time the hearings are broadcast online through the Knesset Web Site (http://www.knesset.gov.il ).

National Data Security Authority to be established following the proposal by the National Security Council. The proposal presented to the government is intended to coordinate the efforts for the protection of the civil economy against computer terrorism threats. There are presently several data security institutions but they deal with military/defense data and not with the civil aspects of the problem. The proposed Authority is to be established as part of the General Security Service should develop the appropriate tools and will guide the protected institutions. Among these the Ministeries, the Courts, the Bank of Israel, the Police, the General Security Service, the Electricity Company, the Bezeq, Zim, Mekorot and more. Haaretz, 25.9.2000, A1. A parallel, civil society initiative, has been developing in recent months based on the voluntary cooperation between possible threatened institutions in the line of the American CERT; if successful the voluntary cooperation and building of trust among the participants has better chances to succeed in getting the necessary sharing of delicate information.

2.17 Freedom of expression and information as far as the distribution via electronic networks is concerned

The DBS YES satellite multichannel TV Company started operations in July. A conflict immediately developed between the company and cable TV providers. The argument was that YES technicians were causing damages to cable TV infrastructures when disconnecting cable subscribers and connecting them to the new service.

At the end an agreement was reached under the sponsorship of the Anti Trust Commissioner, David Tadmor (Haaretz, 3.8.2000, C1). The final agreement was signed September 13^th and was to be approved by the Tel Aviv Regional Court and the Anti Trust Commissioner. A procedure was set for transferring customers from one company to another in the same day thus avoiding interruption of service. The contractor will be chosen from the Bern-David Engineering Group; sub contractors of the YES company will need to be approved by the cable TV companies. In addition it was agreed that when fast broadband Internet can be provided in the same infrastructure as TV the two companies will use the same cable at the customer’s house so he may be able to get services from both companies at the same time (v.g. TV from one and broadband Internet from the another). A technical solution for installing a common cable for both services should be provided in 60 days; if no such agreement is reached the director of the Ministry of Communications will serve as arbiter and determine the solution.

Tender for the additional commercial TV channel (Third Channel) will be carried out

The Supreme Court of Justice rejected the appeal of the concessionaires of the commercial TV channel (Second Channel) against the tender for the licensing of the third channel. They appealed following the disbandment, by the Supreme Court, of the Second Broadcasting Authority Council due to the political considerations that impinged in the nomination of its members. The Second Broadcasting Authority is the supervisor for the Third Channel tender.

The Minister of Communications stated that the monopoly of the Second Channel concessionaires over TV publicity cause damage to the growth of the economy. An inquiry ordered by the Ministry of Finance show that the monopoly causes unusually high prices for publicity that in the end are paid by the consumer. He added that the tender for new concessionnaires for the Second Channel will be published not later than the end of 2001; Third Channel concessionnaires will not be allowed to participate. The small number of players in the Israel communications market rises continuous anxiety regarding preservation of freedom of speech. Haaretz, 29.9.2000, C5.

The new role of the Attorney General as a regulatory authority as reported in our Q5 report has been strenghtened. He has been required by the prime minister to intervene and provide a solution for a temporary license allowing Cable TV companies to provide fast broadband Internet access. As this issue is related to almost all other aspects of opening the market to competition the regulatory tasks of the Attorney General has been much expanded.

The Supreme Court of Justice decided that the the members of the Assembly of the Broadcasting Authority and the members of the Council of the Second Broadcasting Authority were nominated through an irregular procedure. The Court decided that the government should nominate the membeship for these bodies in four months. The Court accepted the actions by the Associations of Directors, Screen Play Writers and the Documentary Films producers against the government and by the Association for Good Government and the High Schools Teachers Association against the government and the Second Broadcasting Authority. The Court strongly criticized the previous and the present government by the fact that they didn’t comply with the legal requirement to consult with specific public institutions like the Council for Higher Education, the Teachers Associations, the different Artists Associations in the process of nominating the members of these statutory bodies. Instead a political key was agreed amon the political parties in 1998 and the resulting list sent to the consultative bodies but their objections weren’t accepted. Haaretz, 23.8.2000, A6.

The Ministry of Finance proposes the tranfer of the functions of the Ministry of Science, Culture and Sports to other Ministeries. External relations in the area of Science should be transferred to the Planning and Budgeting Committee of the Council of Higher Education; to the Ministry of Education should receive the activities for encouraging the sciences among special populations; NIS 40 million from the budget for infrastructural R&D should be channeled to the Council for Higher Education; additional budgets should be transferred to the Ministry for Trade and Industry. The proposal caused a strong reaction in the Ministry specially the decision regarding the budget for infrastructural R&D; they bring as an example of the importance of the program the NIS 8 million invested in R&D in the area of optical technologies; as a result today there are in Israel about 50 companies that have mobilised capital of the order of $1.7 billion. They add that the optical knowledge of Chromatis company sold a few months ago for $4.7 billion was developed in the framework of that program. Haaretz, 15.9.2000, C1. Following an intensive lobbying pressure that the Ministry of Science developed through the mobilisation of leading scientists the Prime Minister in consultation with the Minister of Finance decided not to bring the proposal for discussion in the weekly government meeting. Haaretz, 18.9.2000, C9.

5. Market: Privatisation, foreign investment, mergers, acquisitions, call for tenders,…

The Ministers Committee for Privatization decided that the control of the Bezeq will be sold as a whole package and did not accept the alternative option of a 40% sale. A package of 50.01% shares will be sold at the end of the year. Prior to the sale the Bezeq will issue privately 8.25% of its sales for institutional investors so as to finance the retirement agreement with Bezeq workers. The decision was possible in the wake of the announcement by the general manager of the Government Companies Authority, Yaron Jacobs, that an agreement has been reached with the workers. Haaretz, 28.8.2000, C1. The Finance Committee of the Parliament (Knesset) approved the request of the Government Companies Authority to sell 50.01 % of the Bezeq shares to a private investor; it rejected the proposal to sell them through the Exchange; without knowing the identity of the buyer it is impossible to make the necessary future arrangements regarding the land dispute between the Bezeq and the Israel Land Authority that are still to be decided by a Court. Haaretz, 7.9.2000, C5.

The agreement between the Bezeq management and the workers refer to the conditions for the early retirement of 2000 workers until 2008. The cost of the agreement is evaluated as NIS 1.6 billion. Haaretz, 27.8.2000, C1

The groups competing in the tender for the control of the historical operator, the Bezeq, will need to include a foreign strategic investor having at least a 20% share. Israeli investors will need to cooperate with a foreign telecom operator as the Anti Trust regulations do not permit that Israeli telecoms participate in the tender (that is the cellular and international calls companies). It is expected that a minimum investment of 2.5 billion dollars will be needed. Among the Israeli groups that have shown an interest in the tender are Gad Zeevi, who holds 20% of the Bezeq; the Israel Corporation controlled by the Ofer family; Poalim Investments controlled by Sharm-Pudim-Kelner; and a group being organised by Doron Cohen, former general manager of the Governmental Companies Authority. Haaretz, 22.8.2000, C4.

The Israel Corporation controlled by the Ofer family and Telefonica are considering cooperative arrangements towards their joint participation in the tender for the Bezeq. The companies have already cooperated in the past in several international tenders through the Call 1 company (owned by the Israel Corporation). Another international expression of interest in the Bezeq tender came from the finish Sonara company. Haaretz, 23.8.2000, C1.

Consulting firms for the Bezeq tender. The Government Companies Authority contacted 6 large law firms in Israel for a closed tender for consulting services for the privatization of the Bezeq; some difficulties are expected as the largest firms are or soon will be contracted by the groups competing in the tender. The Authority is also contacting 12 large investment banks for consulting services in the privatization process. The tender will be published in December and is expected to be completed in April 2001. Haaretz, 8.9.2000, C1.

In the debate held in the government regarding the planned budget for 2001 the Finance Minister, Avraham Shohat, said that the success of the economic policy of the government will enable it to invest more in education and infrastructures. Compared to the same period in the last year the industrial exports have grown by 27% against a rise of6% in ’99 and 8% in ’98; they are are of the order of $20 billion in annual figures. The hi-tech exports that are 75% of Israel’s industrial exports grew by 30% in comparison to 8% in ’99 and 11% in ’98. The electronic components and the computer industry was the most salient due to the contribution of the new Intel plant in Kyriat Gat. Without Intel the growth for this branch in the first semester is 19%. Haaretz, 31.7.2000, C3.

The Israel software exports increased by 40% in the first half of the year 2000 and reached 1.3 billion dollars. A third of the exports are for the US market and another third to Europe. The sales of the industry have rised by 30% and reached 1.8 billion dollars. The explanation is the specialization of the Israel software industry in areas of quick growth like Internet and telecommunications; the recovery of worldwide economy; the governmental support for R&D; better marketing and mergers and acquisitions among Israeli companies or by foreign investors. The leading companies in compartive growth between the second quarter of 1999 and that of 2000 are: AMDOCS whose sales rised by 80% to $297 million; Check Point that rised by 81% to $90.6 million; Mercury by 64% to $69.6 million. Haaretz, 22.8.2000, C3.

In the first half of the year 2000 the product of the commercial and services sectors reached 12% in comparison to the parallel period of 1999 and 5% in comparison to the second half of 1999. The growth in the commercial services is a direct consequence of the growth in the advanced technologies branches. This in consequence of the direct growth in computer services but also the large demands of the technological branches for other commercial services like car rentals, catering and restaurants, financial and legal counseling etc.

A survey carried out by the Gallup Research Institute among the Jewish population in Israel indicates that 29% (478 thousand) of the households are connected to the Internet; the main users of the Internet in 272 thousand households are the youngsters 13-17 years old (that is in 56.8% of the connected households). There are great gender differences: 42.4% of the households said that the boys are the main users and only 14.4% said that the girls are the main users. 48.2% of the youngsters said that they undertand better the Internet than the average user. The time of use by the youngsters is mainly at night, between 22:00 p.m. and 2:00 a.m. (58.4%) – this explains the drop in TV use at these hours. The survey indicates that Bezeq International is the third ISP in Israel with 14.2% of the private market after Internet Zahav and Netvision with 33% each.

The Israeli Institute for Accountancy Standards will publish in the last quarter a new standard for investments in R&D and in intangible resources. The new standard will be enforced from January 2002 and he express the changes brought by the new economy on the investments of the firms in R&D. Following the present rules R&D investments are immediately registered as a loss at the moment when the expense is made. The new standard will differentiate, for accounting purposes, between investments in Research from those in Development. Research investment have a large uncertainty component; in development the uncertainty is much smaller. This distinction will be reflected in the balance of the firm. Recognition of investment in Development as a capital investment will allocate it through its entire economic life and not as an immediate loss; investments in Research will continue to be registered as an immediate loss. As a consequence of this change hi-tech companies will show larger margins of profit which will increase investments on them. Haaretz, 2.10.2000, C3.

Please note that this report has been prepared under the sole responsibility of the ESIS II contractors.
It does not necessarily reflect the views of the Commission, nor does the Commission accept responsibility for the accuracy or completeness of information contained herein.
The ESIS Team of contractors welcomes any additional information or corrections.