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Telecommunications Market in Israel May 2006

Telecommunications Market in Israel May 2006. Presentation Agenda. Israel Demographics Telecommunications Market Overview Bridging The Digital Divide. Israel Demographics. ISRAEL Demographics. Population ~ 6.9 million. Households ~ 1.9 million. Average family ~ 3.6 persons.

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Telecommunications Market in Israel May 2006

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  1. Telecommunications Market in IsraelMay 2006

  2. Presentation Agenda • Israel Demographics • Telecommunications Market Overview • Bridging The Digital Divide

  3. Israel Demographics

  4. ISRAEL Demographics • Population ~ 6.9 million. • Households ~ 1.9 million. • Average family ~ 3.6 persons.

  5. Telecommunications Market Overview

  6. Regulation • Free and competitive markets promote growth, efficiency,customer satisfaction & wide geographical coverage. • Facility-Based Competition in Israel.

  7. From Monopoly to Competition State of Israel Ministry of Communications 1994 2000 2005 + • Pelephone • Cellcom • Partner • MIRS • Pelephone • Cellcom • Partner • Pelephone (Bezeq) Mobile Services • Bezeq • Cable Companies • Others: VOB Fixed Services (Infrastructure, Transmission & Telephony) • Bezeq • Bezeq • Bezeq-International • Barak • Golden-Lines • Internet-Gold • X-Phone • Netvision International Long Distance Services • Bezeq-International • Barak • Golden-Lines • Bezeq

  8. Israel's TelecommunicationsStatistics 2005

  9. Israel's Telecommunications • 2.9 million main telephone lines. • 6.5 million mobile customers, on 4 networks. • 1.4 million households connected to multi-channel subscriber television • Cable TV: 3 operators, 0.95 million subscribers, 97% of homes passed. • Satellite DTH TV: 1 operator, 0.49 million subscribers.

  10. Telecommunications Services Market - 2004 Total telecom services market ~ US$ 5.7 billion, 1998-2004 avg. annual growth of 7%

  11. Fixed servicesDriven by Broadband DemandActual competition started Q2 2002

  12. Broadband Regulation • Facility-Based Competition : 1. ADSL Access provided by Bezeq (up to 2.5Mb/s downstream). 2. Cable Modem broadband Internet services provided by cable TV firms - the new entrants (up to 3Mb/s downstream).

  13. Broadband Regulation • Universal Service Obligation (USO) by two players; both have countrywide infrastructures (100% pop. coverage by 4 years). • Unlicensed usage of the 2.4 & 5 Ghz WLAN technology as a step of maximizing the Internet usage in the country.

  14. Broadband • 1,100,000 broadband lines (730,000 ADSL lines; 370,000 cable modems). • Broadband subscriber growth ~50% last year. • Broadband household penetration 52%. • Broadband penetration per 100 inhabitants 16%.

  15. Broadband Subscribers Growth in Israel Competition begins 330k Sub. Penetration

  16. Households` Broadband Penetration (end 2003)) Source: ECTA, MoC Israel Source: TASC Ernst & Young Source * June 2004 * June 2004

  17. OECD Broadband Penetration at end of 2004 Israel

  18. Bezeq in process of privatization • Israel’s incumbent telecommunications operator. • Annual sales ~2.2 billion US $ (inc.subsidiaries) • Government holds 46% of Bezeq shares. • May 2005 the government sold its holdings: • 30% + options of additional 10.66% to financial/strategic investor for 972 mill’ US$

  19. Cable TV firms - the new entrants • Fully digitized HFC networks (750MHz). • Cable Modem broadband Internet services (64Kb/s – 3Mb/s). • Interactive TV • Data services, T- mail, T- commerce. • Universal IP telephony

  20. Bridging The Digital Divide

  21. Regulation • Can regulation help to increase broadband penetration in rural areas and achieve universal coverage?

  22. EU Regulation • The EU framework does not include broadband as part of the Universal Service Obligation (USO). • We believe this assumption needs to be challenged and reexamined.

  23. Broadband Universal Service Obligation (USO) • USO by two players in Israel; both have countrywide infrastructures. • The critical stage: defining USO in the license before granting it to the operators.

  24. Broadband Universal Service Obligation (USO) • Actual coverage: by the end of 2004 - 99% of incumbent’s lines. • Special exceptions committee. • Israel is one of the few countries that has adopted a broadband USO.

  25. The Internet Environment in Israel Israeli consumers are early adaptors of internet technologies, including instant messaging, online services (e-banking, etc.), and VoIP: Skype users per 1000 inhabitants source: company data, from OECD Working Paper

  26. Public Internet Access (PIA) in Israel • The importance of PIA: service provision to inaccessible population due to coverage or cost problems. • Relatively easy implementation of public broadband access all over Israel – In light of USO of two infrastructures and high broadband penetration.

  27. Public Internet Access (PIA) in Israel • PIA is accessible in education institutes, public libraries, community centers etc., but much remains to be done. • Several examples of PIA existing projects: • Tapuah (Apple) the Israeli society for the Advancement of the Information Age; • Lehava (Flame) governmental project - bridging the digital divide within the Israeli society; • Connecting high schools to broadband by ADSL.

  28. PIA Projects in IsraelApple

  29. Solutions for Rural Areas • Israeli vendors` solutions helped to reach rural and remote areas. • Israel’s broadband USO & internet public access models work well in a small, populated country. For larger countries, which are less populated, other models are much more suitable. • For such countries, Israeli companies including Gilat Satellite Networks , Alvarion, Spacecom, and IP Planet network offer several proven and successful solutions for rural areas.

  30. Conclusions Wide geographical competition is the best way to improve the incumbent’s coverage, grade of service, price performance and overall penetration to the benefit & welfare of the society. Such regulation, we believe, can help increase the level of competition in the field of broadband access and narrow significantly the digital divide within the country.

  31. Mobile ServicesCompetition Introduced December 1994 with 130K sub, 2005 – 6.5 million sub. On 4 networks all with USOFuture plans - Numbers portability - 2006

  32. Will 3G Succeed in Israel? • Israel is well suited for 3G: • Relatively wealthy country. • Technology literate. • High mobile penetration, extremely high usage. • Heavy foreign Investments in mobile market. • Favorable auction price • Services launched by operators in recent months • Each service country-wide availability - 24mo after initial commercialization.

  33. 3G Regulation • In the coming years 3G UMTS networks will be able to offer internet access of up to 2Mb/s and a wide variety of services & contents inc. multimedia applications, games, video etc. • Today there is no debate about the economic rationale of establishing 3G networks; Equipment is cheaper than GSM equipment was at its first steps. • Commercial networks have been launched all over Europe and Israel in 2004. • Cellular penetration is much higher than the penetration of computers; thus 3G may prove to be a very essential medium to increase broadband penetration. • Conclusion: today 3G USO is important!

  34. International Long Distanceservices

  35. Facilities Based Competition Introduced July 1997: The incumbent, 2 privately – owned new service providers.2004 – additional 3 operators.

  36. The End Thank you for your attention For more information http:/www.moc.gov.il

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