Transcript Israel's Telecommunications 1997

STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
Fixed-Mobile
Convergence
Regulatory Point of View
Daniel Rosenne
Director General, Ministry of Communications, Israel
[email protected]
STATE OF ISRAEL
Presentation Agenda
MINISTRY OF
COMMUNICATIONS

What is Fixed-Mobile Convergence?

Market realities: Mobile versus Fixed

The future: unified regulation

Example: the case of Israel

Conclusions.
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
What is
Fixed-Mobile
Convergence?
Fixed-Mobile Convergence:
Different Meaning from Different Views
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS

Consumers:
Seamless Services, regardless of type of network.

Incumbent Operators:
One stop shopping/one bill - bundling of fixed and
mobile services.

Mobile Operators:
Integrated services - cellular service positioning
as fixed replacement.

Regulators:
Ensuring fair competition - Fixed versus mobile,
Mobile versus value added services.
Fixed-Mobile Convergence:
It’s All About Competition
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS

Competition for voice minutes:
Fixed versus Mobile.

Competition for value added services
revenues:
Mobile versus value added service
providers.

Competition for content revenues:
Mobile versus value added service
providers versus content providers.
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
Mobile
Versus Fixed:
Market Realities
Fixed-Mobile Convergence:
It’s All About Competition
 Can
mobile substitute fixed?
 When
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
YES!
will it happen?
When mobile offers:
 Similar tariffs: Additional
competition.
Similar services: Data services.
 Same quality: as fixed.

STATE OF ISRAEL
Mobile Tariffs Paradox
MINISTRY OF
COMMUNICATIONS

Simple economics:
 Marginal investment per customer:
 Fixed: US $1000-1500.
 Mobile: US $300-500.
 Operating expense: similar for both.

Why are mobile tariffs higher than fixed
tariffs?

Let’s face reality: tariffs are not pushed
down, neither by market forces, nor by
regulatory action.
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
Towards Unified
Regulation
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Why Regulation?
MINISTRY OF
COMMUNICATIONS
 Market
controlled by limited number of
dominant operators.
 Abuse
of market power by
discrimination and unfair practices will
eliminate competition.
 Regulator’s
goal - foster competition,
for the ultimate benefit of consumers’.
Fixed-Mobile Convergence:
Regulator’s Role
 Protect
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
consumers’ interests.
 Abolish
artificial and historical barriers
to competition.
 Reduce
entry barriers to new entrants,
especially for innovative new players.
The meaning of “Fixed-Mobile
Convergence” is a need for unified
regulation for fixed & mobile markets.
Key Regulatory
Action Points (1)
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 Cost-based
interconnection:
eliminating market distortion resulting
from different methods for mobile and
for fixed interconnection tariff setting.
 Symmetrical
airtime:
eliminating discriminatory practices
resulting from charging different
airtime tariffs from mobile subscribers
and from fixed subscribers.
Key Regulatory
Action Points (2)
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 Open
network access:
allowing long distance and value added
service providers access to the mobile
network, similar to their fixed network
access.
 Prevention
of discriminatory bundling:
ensuring transparent bundling, in a
non-discriminatory manner.
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
The Case of
Israel
STATE OF ISRAEL
Israel's Telecommunications
MINISTRY OF
COMMUNICATIONS

2.8 million main telephone lines
(47% penetration).

2.5 million mobile customers, on three
networks, Pelephone, Cellcom &
Partner/Orange.
(42% penetration).

1.1 million Cable-TV connected households.
(3 operators, 70% of passed households,
90% household coverage).
Telecommunications
Services Market - 1998
Cable International
Internet
TV Long-Distance services
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
Terminal Equipment
& Business Systems
2% 2%
11%
7%
Fixed
Services
Cellular
Telephony
38%
40%
Total telecom services market ~ $ 3.7 billion
Israel’s
Mobile Operators

STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
Pelephone: 800 MHz NAMPS and CDMA.
Operations since 1987.
Bezeq (50%), Motorola (50%).

Cellcom: 800 MHz TDMA.
Operations since 1995.
BellSouth (34%), Safra Brothers (34%), Discount Investments
(12.5%), PEC (12.5%), private investors (7%).

Partner/Orange: 900 MHz GSM.
Operations since 7 October 1998.
Hutchison (46.67%), Matab (20.31%), Elbit.com (16.5%),
Tapuz (16.5%)
The Mobile Boom:
STATE OF ISRAEL
Israel Telecommunications Services
Revenues, 1995-1998 ($US M)
MINISTRY OF
COMMUNICATIONS
2,000
1,500
Fixed
Mobile
1,000
International
500
0
CATV
1995
1996
1997
1998
Israel’s Mobile
Services Growth
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS

High growth - 2.5 million subscribers,
compared to 125,000 in January 1995.

Key stimulators for the explosive growth:
 Low tariffs: ~ US $0.11 to 0.23/minute air
time, ~ $11 to 29 monthly charge.
(300 min average monthly bill - $56 to 74)
 Calling Party Pays (CPP), in operation
since 1994.
 High quality, nationwide coverage.
 Fair competition.
Israel’s Regulatory Issues
Concerning Fixed-Mobile
Convergence
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
Achievements

Structural separation,
preventing
discriminatory bundling

Calling party pays

Cost-based fixed
interconnect tariffs

Open access, to fixed &
mobile networks (including
pre-selection/dialing parity to
international long distance providers)
Open Issues

Symmetrical air time

Cost-based mobile
interconnect tariffs

Enhanced
competition:
 Additional mobile
operators
 3G frequencies
allocation.
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
Conclusions
Summary - Market
Related Points
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS

Fixed-Mobile convergence has several meanings:
 For incumbent Telco: one stop shopping.
 For competing Celco: fixed substitute.
 For consumers: additional competition? better
service? more service offerings? lower prices?

Mobile will not be true substitute to fixed, unless:
 Mobile prices will be similar to fixed.
 Mobile service offering will be similar to fixed,
including data services.
 Mobile will offer fixed quality.
Summary Regulatory Points
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS

Competition in telecommunications services is
still limited, and should be promoted.

In the context of “Fixed-Mobile Convergence”,
regulators’ role is to prevent abuse of market
power by discrimination and unfair practices.

The key issues are:

Cost-based interconnection.

Symmetrical airtime.

Open network access.

Prevention of discriminatory bundling.
Regulation - It’s All
About Competition
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 The
future - from convergence to
integration.
 Regulation
- uniform rules and
principles for fixed and mobile.
 Re-alignment
of competitive
positions  Mobile and fixed
 Incumbent and new operators.
The Regulatory
Equation
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
FMC = CBI+ONP
FMC: Fixed-Mobile Convergence
CBI: Cost Based Interconnect
ONP: Open Network Provision
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
For more information
about Israel’s
telecommunications:
http://www.moc.gov.il
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
The End
Thank you for your attention