Transcript MEDA Liberalization & New Regulatory Framework

STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
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]
STATE OF ISRAEL
Presentation Agenda
MINISTRY OF
COMMUNICATIONS
 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
Israel's Telecommunications
MINISTRY OF
COMMUNICATIONS
 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
Internet Services
MINISTRY OF
COMMUNICATIONS
 ~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
Israel Internet Development
MINISTRY OF
COMMUNICATIONS
Gallup 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
Telecommunications
Services Market - 2000
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
Cable International Internet Terminal Equipment
TV Long-Distance services & Business Systems
8%
7%
Fixed
Services
2.5% 1.5%
Mobile
Services
49%
32%
Total telecom services market ~ US $5 billion
The Mobile Boom:
Israel Telecommunications Services
Revenues, 1995-2000 (US $M)
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
3,000
2,500
Mobile
2,000
1,500
Fixed
1,000
500
0
ILD
CATV
1995 1996 1997 1998 1999 2000
The Existing Regulatory
Environment
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 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.
Mobile Services
Competition introduced in December 1994
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 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.
International Long
Distance Services
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 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
Dialing Parity Rules
MINISTRY OF
COMMUNICATIONS
 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.
International Traffic
[Million Minutes/Year]
1200
1000
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
Outgoing
800
600
400
Incoming
200
0
1995 1996 1997 1998 1999 2000
Fixed Services Competition
Driven by Broadband Demand
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
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.
The Birth of
New Entrants
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 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.
Ofek New World
Israel’s first licensed CLEC
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 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
Telecommunications
Competition Enhancement by
Regulatory Reform
Regulatory Reform
Promoting Competitive Advantage
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 Competition in fixed services.
 Structural change of the
telecommunications sector:
 Liberalization.
 Re-regulation.
 Privatization.
STATE OF ISRAEL
Proactive Re-regulation
MINISTRY OF
COMMUNICATIONS
 The end of the access monopoly:
Facilities-based competition.
Alternative infrastructure: fiber, copper, cable,
fixed wireless, satellite.
 Simple interconnection rules:
Non-discriminatory access, carrier preselection & dialing parity.
Non-discriminatory interconnection tariffs.
Minimum compatibility requirements.
 “Open access” for value-added service providers.
 New numbering plan & frequency allocations.
STATE OF ISRAEL
Regulation Philosophy
MINISTRY OF
COMMUNICATIONS
 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 antitrust “ex-post” regulation.
STATE OF ISRAEL
Re-regulation Covers:
MINISTRY OF
COMMUNICATIONS
 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.
Fixed Wireless
Access Auctions
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 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.
2G/3G Mobile
License Auctions
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 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.
Bezeq Tariff
Rebalancing
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS

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.
Bezeq’s
Interconnection Rates
Time
of Day
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
Termination
National
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 (>200km): 1.35-1.62.
Mobile CPP
Tariff Regulation [Sept. 2000]
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 Cost-based CPP (Calling Party Pays) mobile
call termination tariffs, as of September 2000.
 Eliminating discriminatory and anticompetitive practices resulting from
subsidizing outgoing calls by incoming calls
revenues.
 CPP mobile call termination tariffs:
Year
Tariff [US ¢/minute]
2001
2002
2003
12
11
10
New NNP
STATE OF ISRAEL
(National Numbering Plan)
MINISTRY OF
COMMUNICATIONS
 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.
Will We Have Enough
Telephone Numbers?
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
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
Bezeq
The Israel Telecommunication Corp Ltd.
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
 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
Regulatory Policy
MINISTRY OF
COMMUNICATIONS
 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
Regulation Philosophy
MINISTRY OF
COMMUNICATIONS
 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.
The Future of Regulation: Open
Communications Infrastructure
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
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 laissezfaire.
The bounds are the basic essentials:
Open access.
Universal access.
Interconnection.
Fair competition.
Public safety & security.
Israel's
Telecommunications Map
1994
Mobile
Services
 Pelephone
(Bezeq)
2000
 Bezeq
International
Long
 Bezeq
Distance
Services
MINISTRY OF
COMMUNICATIONS
Post 2000
 Pelephone
 Cellcom
 Partner





 Bezeq
 Bezeq
 Ofek New World
 Others:
 Wireline
 Wireless
 Bezeq-International
 Barak
 Golden-Lines
 Bezeq-International
 Barak
 Golden-Lines
 Additional operators
Fixed
Services
(Infrastructure,
Transmission
& Telephony)
STATE OF ISRAEL
Pelephone
Cellcom
Partner
MIRS
Others
STATE OF ISRAEL
MINISTRY OF
COMMUNICATIONS
Thank you for your attention
For more information
http://www.moc.gov.il