Israel’s telecom market hots up ahead of 4G LTE spectrum tender
Israel possesses a well-developed telecommunications market characterised by high penetration and a significant number of service providers. Regulation remains the responsibility of the Ministry of Communication, which has been encouraging competition through various regulatory mechanisms. Several operators have been licensed to provide VoIP services, which are usually referred to as Voice over Broadband (VOB) in Israel. Fixed network operators are required to allow VOB licensees access to their networks.
Nevertheless, telecoms incumbent Bezeq continues to dominate the fixed-line market, and only one company, cable TV provider HOT Telecom, has had success in gaining a portion of the fixed-line market. HOT Telecom supplies bundled packages including cable TV, broadband, and fixed telephony. While several providers offer fixed telephony using VOB, Bezeq and HOT Telecom are the only fixed network operators in Israel.
In the broadband market, Bezeq is the country’s only ADSL network operator and HOT Telecom is the only cable network operator. The same duopoly can be seen in Israel’s pay TV market, where HOT Telecom is the only provider of cable TV while YES TV, owned by Bezeq, is the only provider of satellite TV.
The Israeli broadband market is characterized by regulatory structural separation between the providers of the internet infrastructure and the internet access service. Thus, broadband users pay two separate bills: a physical connection bill to the broadband network operator, and an internet ‘access’ bill to the ISP providing the service. This system, however, is changing; unsuccessful in stimulating competition, the Ministry of Communications will remove structural separation in exchange for the creation of a viable wholesale market.
Although there are numerous ISPs in Israel, until recently Bezeq and HOT Telecom were the only two broadband network operators. A third company, Israel Broadband Company (IBC), launched wholesale services branded Unlimited in May 2014. IBC operates an FTTx network, using the fibre-optic infrastructure of its parent company Israel Electric Corporation (IEC).
Unlike the fixed-line market, Israel’s mobile market is highly competitive, with five mobile network operators – Partner’s Orange, Bezeq’s Pelephone, Cellcom, HOT Mobile, and Golan Telecom – as well as a number of Mobile Virtual Network Operators (MVNOs). Cellcom is the mobile market leader, followed by Partner, which trades under the Orange brand name. All five of Israel’s mobile network operators plus ISP 018 Xphone have applied to participate in a 4G LTE public tender scheduled for December 2014 However, following regulatory approval, Partner, Cellcom, and Pelephone have used existing or borrowed spectrum to launch LTE services ahead of the 4G auction.
Factors that have helped drive competition include full mobile number portability and regulatory barriers that prevent operators from linking sales of handsets to services, or offering discounts to customers that commit to longer periods. Strong competition has led to operators focusing on mobile data and content opportunities as well as on costs, resulting in a number of infrastructure sharing agreements.
Nine years after the start of privatisation, the government has sold its final remaining 0.97% interest in Bezeq; a Net Neutrality law covers fixed line ISPs as well as mobile operators; the Ministry of Communications is developing a wholesale market including Bitstream Access, lease of access segments, dark fibres, tubes, and transmission services; Israel’s Antitrust Authority has given Bezeq conditional permission to merge with its satellite TV affiliate YES; the Ministry of Communication has published a network-sharing policy; network sharing agreements have been set up between Partner and HOT Telecom, and between Cellcom and Golan, among others.
Companies and subsidiaries covered in this report include:
Bezeq, Bezeq International, Pelephone, YES TV; HOT Telecom, HOT Mobile; Cellcom, 013 NetVision; Partner (Orange), 012 Smile; Xfone; Golan Telecom; Israel Broadband Company.
Data in this report is the latest available at the time of preparation and may not be for the current year