Title: First Regional Forum on Telecommunications Reform in the MEDA Area Athens, 25-26 April 2001 Liberalization of Markets and New Regulatory Framework The Israeli Case
1First Regional Forum on Telecommunications Reform
in the MEDA AreaAthens, 25-26 April
2001Liberalization of Markets and New
Regulatory FrameworkThe Israeli Case
- Daniel Rosenne
- Director General, Ministry of Communications,
Israel - rosenned_at_moc.gov.il
2Presentation Agenda
- Telecommunications networks services
- Market overview
- Mobile services
- International long distance
- Fixed services
- Regulatory reform
- Regulation overview
- License auctions
- Tariff rebalancing
- New numbering plan
- Bezeqs privatization
- Summary.
3Telecommunications Network Services
4Israel's Telecommunications
- 2.8 million main telephone lines
- (45 penetration).
- 4.8 million mobile customers, on 4 networks
- (76 penetration).
- 1.3 million households connected to multichannel
subscriber television - Cable 3 operators, 1.2 million subscribers, 70
of homes passed, 95 household coverage. - Satellite 1 operator, 0.1 million subscribers.
5Internet Services
- 40 Internet service providers, 1,000,000 dial-up
10,000 directly connected customers, 50,000
domains. - Penetration 40 of households, 50 of
businesses. - IIX (Israel Internet eXchange) non-profit peering
point. - Hands-off overall regulatory policy.
- High growth 50 annual.
6Israel Internet DevelopmentGallup Israel survey
Maariv, 30 March 2001, Haaretz, 17 July 2000
- Connected households, using more than 1 hour/week
42.0
29.0
21.0
13.2
5.4
1997
1998
1999
2000
2001
7Telecommunications Services Market - 2000
International Long-Distance
Cable TV
Terminal Equipment Business Systems
Internet services
1.5
2.5
7
8
Mobile Services
49
Fixed Services
32
Total telecom services market US 5 billion
8The Mobile BoomIsrael Telecommunications
Services Revenues, 1995-2000 (US M)
3,000
2,500
Mobile
2,000
Fixed
1,500
1,000
CATV
ILD
500
0
1995
1996
1997
1998
1999
2000
9The Existing Regulatory Environment
- Separation between regulation and operation
(since 1984). - Regulation responsibility - Ministry of
Communications. - General licenses issued to facilities based
service providers - Fixed services - Bezeq, Ofek.
- Mobile services - Pelephone, Cellcom, Partner,
MIRS. - International long-distance services - Bezeq
International, Golden Lines, Barak. - Special licenses issued for value-added services.
- Termination of exclusive rights
- Fixed Services - 1 June 1999.
- International long distance - 31 December 2001.
10Mobile ServicesCompetition introduced in
December 1994
- Rapid growth - 125,000 subscribers in January
1995. In November 1999 the number of mobiles (2.9
million) exceeded the number of fixed lines. - Key expansion stimulators
- Perceived low tariffs US 0.11 to 0.23/minute
air time, 11 to 29 monthly charge. - ARPU (Average Revenue Per User) - US50 to 60.
- Calling party pays (CPP).
- Nationwide coverage Land-linequality.
- Competition marketing innovations.
11International LongDistance Services
- Competition introduced in July 1997.
- 3 facilities based operators
- Golden Lines (012)
- Telecom Italia, Fishman.
- Barak (013)
- Sprint, Deutsche Telekom, France Telecom,
Clalcom Matav. - Bezeq International (014)
- The incumbent carrier, 100 owned by Bezeq.
- Dialing Parity.
12Dialing Parity Rules
- Per-call carrier-selection prefixes (01X).
- For each of the international service providers.
- CPS (carrier pre-selection) - subscribers choose
a preferred provider for 00 prefix and 188
international operator services. - Competitive practices -
- CPS balloting.
- Consumers data provided by Bezeq mobile
operators on non-discriminatory basis.
13International TrafficMillion Minutes/Year
1200
Outgoing
1000
800
600
Incoming
400
200
0
1995
1997
1998
1999
2000
1996
14Fixed Services CompetitionDriven by Broadband
Demand
- Prolonged Delays
- Politics May 1999 elections.
- Government - cable companies disputes
- Fulfillment of universal service obligation.
- Competition - DBS services, content.
- Finance Ministry seeking payment for granting
telecom license. - Justice Ministry seeking limits on content
control. - Union disputes - safeguarding employee rights.
- Rough Road Ahead
- Telecom law change underway, allowing cable
companies entry into telecom. - Fixed wireless access tender.
15The Birth of New Entrants
- Regulation allowing fixed services licensing -
published September 2000. - Ofek fixed services license - granted February
2001. - Fixed wireless access tender - published October
2000. - Cable companies restrictions removal - Telecom
Law update due during 2001. - Roll out of several competitive fiber-based
backbones - MedNet, Ofek, Cellcom, Israel
Railways.
16Ofek New WorldIsraels first licensed CLEC
- Owned by Eurocom group (50.33) Arison
investments (49). - Fixed services general license as of 1 February
2001. - Plans for modern IP based infrastructure,
utilizing 1000 Km fiber cables. - Covering 15 natural zones (out of 53).
- Will offer wide range of telephony broadband
data services, for business households. - Plans for US 1Bn investment, 1500 employees.
17TelecommunicationsCompetition Enhancement by
Regulatory Reform
18Regulatory ReformPromoting Competitive Advantage
- Competition in fixed services.
- Structural change of the telecommunications
sector - Liberalization.
- Re-regulation.
- Privatization.
19Proactive Re-regulation
- The end of the access monopoly
- Facilities-based competition.
- Alternative infrastructure fiber, copper, cable,
fixed wireless, satellite. - Simple interconnection rules
- Non-discriminatory access, carrier pre-selection
dialing parity. - Non-discriminatory interconnection tariffs.
- Minimum compatibility requirements.
- Open access for value-added service providers.
- New numbering plan frequency allocations.
20Regulation Philosophy
- Consumers are the focus.
- Competition is essential.
- Interconnection is the key.
- Technology neutral regulation is an important
concept. - Facilities based competition is the preferred
way. Unbundling is interim competition
promotion method. - Structural separation cross-ownership
limitations are important to assure fair
competition. - Cable companies should be regulated as common
carriers. - Hands off regulation of new services (e.g.
internet). - Transform from sector specific ex-ante to
general anti-trust ex-post regulation.
21Re-regulation Covers
- Competition rules - ownership, resale. timetable.
- Universal service - obligations, reciprocal
compensation. - Interconnection - rules, tariffs, terms.
- General license owners - obligations, structural
regulation, services. - Numbering - administration, portability, new
numbering plan. - Tariff rebalancing.
- National Emergency Security issues.
22Fixed Wireless Access Auctions
- Up to 3 operators, selected in MSR (Multiple
Simultaneous Round) combined auction. - Frequency Allocations, for each operator
- 26 GHz Broadband 2 x 196 MHz.
- 3.5 GHz Narrowband 2 x 12 MHz.
- Participation of Bezeq cable operators in the
auction is excluded. - Reserve price US 1.5 million.
- Roll-out obligation 3 years.
- Tender published 12 October 2000. Applications
deadline 3 April 2001.
232G/3G Mobile License Auctions
- MSR (Multiple Simultaneous Round) combined
auction. - Frequency packages, for 4 licenses
- 2G FDD 2x10 MHz.
- 3G FDD 2x10 MHz.
- 3G TDD 5 MHz (for 3 packages only).
- Reserve price US 100M. 25 reduction for new
operators. - Tender published 28 March 2001. Applications
deadline 17 July 2001.
24Bezeq Tariff Rebalancing
- Price-cap regime - productivity gap (x-factor) of
3.5. - One step rate rebalancing in April 1999, almost
eliminating cross-subsidies between services - Further adjustments were made on May 2000
March 2001. - Voice traffic still subsidizes telephone access.
- Simpler tariffs Simple tariff matrix
- Local calls or urban-toll calls during peak
hours (0800-1800, Sunday to Thursday), unified
tariff for off-peak hours. - Per-second billing, as of May 2000
- per-second billing with minimum charge per-call,
replacing traditional meter pulse. - Special Internet promotion dialup tariffs, as of
May 2000 Customer choice between number of
alternative tariff plans, bundling local call
minutes in exchange for monthly fee.
25BezeqsInterconnection Rates
- Time National
- of Day Termination Origination
- Peak 1.53 1.56
- Interim 0.9 1.56
- Off-peak 0.6 1.56
- Weighted
- Average 1.16 1.56
Per minute rates, per second billing US cents,
1 NIS 4.116, 1 1.11
EU 2000 Best current practice termination
charges, US Local 0.45-0.81, single transit
(metropolitan) 0.72-1.35, double transit
(gt200km) 1.35-1.62.
26Mobile CPP Tariff Regulation Sept. 2000
- Cost-based CPP (Calling Party Pays) mobile call
termination tariffs, as of September 2000. - Eliminating discriminatory and anti-competitive
practices resulting from subsidizing outgoing
calls by incoming calls revenues. - CPP mobile call termination tariffs
- Year Tariff US /minute
- 2001 12
- 2002 11
- 2003 10
27New NNP (National Numbering Plan)
- Additional digit (9 digits number length)
- Step 1 - Mobile 5 NXXX XXXX
- (N 2 for Cellcom, 4 for Partner, 6 for
Pelephone, 7 for MIRS). - Step 2 - Fixed A NXXX XXXX
- Area codes consolidation
- Area codes 6 7 reclaimed December 2000.
- Services numbering re-arrangement
- 1XX for life threatening emergency 1XXX for
other services. - 1 YYY XXX XXX logical numbering.
- Toll-free (1-800) number portability.
28Will We Have Enough Telephone Numbers?
Numbers Millions Number Type Old
NNP New NNP Geographic 56 160 -
320 Mobile 8 80 Logical - 160 80 New
Services 10 100 Future Use - 240 - 160
29BezeqThe Israel Telecommunication Corp Ltd.
- Israel's incumbent operator (ILEC).
- Annual sales US 2.05 billion.
- 11,000 employees (8,200 in Bezeq, the parent
company). - Government holds 55 of Bezeq shares (remaining
shares - publicly held). - Government formally approved selling 50.01 of
Bezeq shares to a single strategic investor. - Government plans to complete privatization during
2001.
30Summary
31Regulatory Policy
- Structural changes - achieving strategic
advantage in competitive global markets. - Competition - the key for innovation,
entrepreneurship, investment growth. - Key action areas
- Liberalization.
- Re-regulation.
- Privatization.
32Regulation Philosophy
- Free and competitive markets promote growth,
efficiency, customer satisfaction economic
advantage. - Market restructuring, in transition from monopoly
to open and free market, during a short time
period, requires active and balanced regulatory
intervention. - Once competitive marketplace is achieved, a
strong regulator will provide unnecessary
intervention, and should be abolished.
33The Future of Regulation Open Communications
Infrastructure
- A system of largely free-market competition with
just enough governmental oversight to ensure that
competitors stay within bounds. - Best combination of the benefits of government
oversight with those of laissez-faire. - The bounds are the basic essentials
- Open access.
- Universal access.
- Interconnection.
- Fair competition.
- Public safety security.
34Israel's Telecommunications Map
1994
Mobile Services
Fixed Services (Infrastructure, Transmission
Telephony)
International Long Distance Services
35Thank you for your attentionFor more
informationhttp//www.moc.gov.il