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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. Daniel Rosenne Director General, Ministry of Communications, Israel [email protected]. Presentation Agenda. - PowerPoint PPT Presentation
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STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
First Regional Forum on Telecommunications Reform in the MEDA AreaAthens, 25-26 April 2001
Liberalization of Markets and New Regulatory Framework
The Israeli CaseDaniel Rosenne
Director General, Ministry of Communications, [email protected]
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONSPresentation Agenda
Telecommunications networks & services: Market overview Mobile services International long distance Fixed services
Regulatory reform: Regulation overview License auctions Tariff rebalancing New numbering plan Bezeq’s privatization
Summary.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Telecommunications Network & Services
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Israel'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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Internet 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Israel Internet DevelopmentGallup Israel survey: Maariv, 30 March 2001, Haaretz, 17 July 2000
Connected households, using more than 1 hour/week
1997 1998 1999 2000
29.0%
42.0%
21.0%
2001
13.2%
5.4%
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Telecommunications Services Market - 2000
InternationalLong-Distance
CableTV
Terminal Equipment& Business Systems
Internet services
FixedServices
49%MobileServices
32%
8% 7% 1.5%2.5%
Total telecom services market ~ US $5 billion
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
The Mobile Boom:Israel Telecommunications Services Revenues, 1995-2000 (US $M)
500
1,000
1,500
3,000
1995 1996 1997 1998 19990
2,000
2,500
2000
Mobile
CATV
Fixed
ILD
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
The 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Mobile 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) - US$50 to 60.
Calling party pays (CPP). Nationwide coverage & “Land-line”quality. Competition & marketing innovations.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
International 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONSDialing 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
International Traffic[Million Minutes/Year]
0200400600800
1995 1997 1998 1999
12001000
2000
Outgoing
Incoming
1996
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Fixed 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
The 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Ofek New WorldIsrael’s 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
TelecommunicationsCompetition Enhancement by
Regulatory Reform
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Regulatory ReformPromoting Competitive Advantage
Competition in fixed services.Structural change of the
telecommunications sector: Liberalization. Re-regulation. Privatization.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONSProactive 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONSRegulation 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONSRe-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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Fixed 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
2G/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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Bezeq Tariff Rebalancing Price-cap regime - productivity gap (x-factor) of 3.5%. One step rate rebalancing in April 1999, almost
eliminating cross-subsidies between servicesFurther adjustments were made on May 2000 & March 2001.Voice traffic still subsidizes telephone access.
Simpler tariffs: Simple tariff matrixLocal 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 2000per-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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Bezeq’sInterconnection Rates
Time Nationalof Day Termination Origination
Peak 1.53 1.56
Interim 0.9 1.56
Off-peak 0.6 1.56
WeightedAverage 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 (>200km): 1.35-1.62.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Mobile 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 122002 112003 10
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
New NNP (National Numbering Plan)
Additional digit (9 digits number length): Step 1 - Mobile: 5 [N]XXX XXXX
(N = 2 for Cellcom, 4 for Partner, 6 for Pelephone, 7 for MIRS).
Step 2 - Fixed: A [N]XXX 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Numbers [Millions] Number Type
Old NNP New NNP
Geographic 56 160 - 320Mobile 8 80Logical - 160 – 80
New Services 10 100Future Use - 240 - 160
Will We Have Enough Telephone Numbers?
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
BezeqThe 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Summary
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Regulatory 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Regulation 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
The Future of Regulation: Open Communications InfrastructureA 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.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Israel's Telecommunications Map
Pelephone(Bezeq)
Bezeq
Bezeq
1994
PelephoneCellcomPartner
2000
Bezeq
Bezeq-InternationalBarakGolden-Lines
Post 2000 Pelephone Cellcom Partner MIRS Others
BezeqOfek New WorldOthers:
Wireline Wireless
Bezeq-InternationalBarakGolden-LinesAdditional operators
MobileServices
FixedServices
(Infrastructure, Transmission & Telephony)
International
Long DistanceServices
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Thank you for your attention
For more information
http://www.moc.gov.il