Israel: Israel Communication Profile

Israel Communication Profile 2012

Israel has pursued a gradual liberalisation and privatisation policy in its telecoms sector since 1984. These efforts included adoption of a regulatory regime suitable for a multi-operator environment and competitive local exchange carrier (CLEC) licences for infrastructure, transmission, data and telephony services.

In 1984, amount government operated telecommunications facilities were transferred to Bezeq which was granted a regulated monopoly for the provision of telecommunications services. In 1994, Bezeq was told to form subsidiary companies to provide services in market sectors other than domestic fixed line telephony in an attempt to promote competition. These subsidiaries included mobile operator Pelephone and Bezeq International Ltd.

At the end of 1994, the mobile market saw new entrant Cellcom, followed by Partner in 1998 and Mirs in 2001. Competition in the international telephony and data markets picked up in 1997 with the entry of Barak and Golden Lines of the effects being a fall in the cost of international calls by over 70 %.

Bezeq’s exclusive monopoly on fixed telephony services ended in June 1999. In September 2000, the Minister of Communications enacted regulations for the licensing of new operators in the fixed services market. Bezeq’s infrastructure as well faced competition from the cable companies which were granted licences to provide broadband telephony access in March 2002. As a result, broadband penetration part households had grown from about 4 % in 2002 to approximately 88 % in mid-2010, with 99 % of homes passed. In addition, broadband prices had fallen significantly.

CLECs have been allowed to compete in the fixed telecommunications market without Universal Service Obligation (USO) since September 2004. Since then of these licences were issued to 012 Telecom, Globcalll Telecommunications, Cellcom fixed Telecommunications services, and Partner fixed Telecommunications services.

Today, Israel’s telecommunications market is rather competitive with high mobile and fixed broadband penetration rates and well developed pay-TV services. The country’s economy was affected by the World Financial Crisis but quickly bounced back. In mid-2010 Israel become a member of the OECD.

Fixed-line Market, Broadband and Digital Media
Israel is very dynamic fixed-line voice and broadband market, together with its digital media market is profiled in this statement. Bezeq has retained the majority of the domestic fixed-line voice market but new licences being granted for VoIP service provision are shaking up the market. The International fixed-line voice market has been very competitive for a lot of years. Israel has a very high household broadband penetration rate. Market competition is fierce, both between cable and DSL infrastructures and between ISPs. Competition is as well fierce between Bezeq's satellite TV subsidiary YES and cable TV operator HOT, with both challenged by DTTV. Israel's very high broadband penetration rate provides great potential for triple play and digital media market developments and competitors are manoeuvring for position with a lot of changes of ownership since mid-2009.

Telecommunications Market
Israel has a very competitive and dynamic telecommunications market with of the highest mobile penetration rates in the world and of the highest household broadband penetration rates. This statement introduces the key aspects of the market with statistics and analysis. It then goes on to overview the key regulatory issues affecting the market in some detail. The nature of competition in the market is changing and the advent of VoIP, triple play strategies and the new digital media puts particular focus on the details of regulation. The local players are heeding these market changes and are re-positioning themselves for the next.

Mobile Market
Israel's mobile communications market is of the majority competitive in the region, with operators in a saturated market. The last year has seen substantial merger and acquisition activity as players battle for position in the converging industry. The difficulties of increase through new customer acquisition and voice tariff competition have led the operators to focus on mobile data, regularly launching new price-added products and extending their offerings to provide bundled services including fixed-line. 3G subscriber numbers are substantial. Success in selling mobile content and applications is essential to combat falling ARPU.

Israeli companies have traditionally been at the forefront of the world Communications industry. 60 years of innovation in civilian and military applications have resulted in the emergence of several world renowned communication powerhouses in Israel, along with hundreds of smaller tech companies and over 1,000 active Israeli communications start-ups.

Highlights

• Of the approximately 2,000 Israeli start-up companies in 2007, 50% were in Communications.
• Communications exports in 2007 accounts for 23% of Israel’s Hi-Tech exports and 8% of the country’s total exports.
• The number of employees in the communication industry was 15,000 in 2007.
• Over half of the 120 foreign R&D centers operating in Israel develop Communications technologies, including multinationals such as Cisco, IBM, HP, Intel, Microsoft, Google and Yahoo!
• Motorola Israel’s (MIL) R&D centers have produced major breakthroughs in the field of mobile and cellular communications and pioneered the world’s first car phone. MIL completed the construction of a new R&D center in northern Israel in 2007.and currently employs over 3,000 people in its 4 Israeli plants.
• Intel Israel employs 7,000 workers in 4 R&D and 2 Manufacturing facilities located across the country and is responsible for the development of leading technology solutions.
• In the 2007 Deloitte Technology Fast 500 EMEA ranking, 4 Israeli companies - Voltaire Ltd, Celltick Technologies, Runcom Technologies and Red Bend - took 1st, 2nd, 3rd and 6th places respectively.
• Israel is ranked 2nd in the world for Venture Capital availability (IMD Yearbook 2007) with Communications receiving the majority of any sector with 21% of the VC investments (IVC On-line 2008)