STATE OF ISRAEL MINISTRY OF COMMUNICATIONS Fixed-Mobile Convergence Regulatory Point of View Daniel Rosenne Director General, Ministry of Communications, Israel rosenned@moc. gov. il
STATE OF ISRAEL Presentation Agenda MINISTRY OF COMMUNICATIONS l What is Fixed-Mobile Convergence ? l Market realities: Mobile versus Fixed l The future: unified regulation l Example: the case of Israel l 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 l Consumers: Seamless Services, regardless of type of network. l Incumbent Operators: One stop shopping/one bill - bundling of fixed and mobile services. l Mobile Operators: Integrated services - cellular service positioning as fixed replacement. l 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 l Competition for voice minutes : Fixed versus Mobile. l Competition for value added services revenues : Mobile versus value added service providers. l 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 l Can STATE OF ISRAEL MINISTRY OF COMMUNICATIONS mobile substitute fixed ? YES! l When will it happen? When mobile offers: Similar tariffs: Additional competition. n Similar services: Data services. n n Same quality: as fixed.
Mobile Tariffs Paradox STATE OF ISRAEL MINISTRY OF COMMUNICATIONS l Simple economics: n Marginal investment per customer: S Fixed: US $1000 -1500. S Mobile: US $300 -500. n Operating expense: similar for both. l Why are mobile tariffs higher than fixed tariffs? l 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
Why Regulation? STATE OF ISRAEL MINISTRY OF COMMUNICATIONS l Market controlled by limited number of dominant operators. l Abuse of market power by discrimination and unfair practices will eliminate competition. l Regulator’s goal - foster competition, for the ultimate benefit of consumers. ’
Fixed-Mobile Convergence: Regulator’s Role l Protect STATE OF ISRAEL MINISTRY OF COMMUNICATIONS consumers’ interests. l Abolish artificial and historical barriers to competition. l 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 l Cost-based interconnection : eliminating market distortion resulting from different methods for mobile and for fixed interconnection tariff setting. l 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 l Open network access : allowing long distance and value added service providers access to the mobile network, similar to their fixed network access. l Prevention of discriminatory bundling : ensuring transparent bundling, in a non -discriminatory manner.
STATE OF ISRAEL MINISTRY OF COMMUNICATIONS The Case of Israel
Israel's Telecommunications STATE OF ISRAEL MINISTRY OF COMMUNICATIONS l 2. 8 million main telephone lines. (47% penetration) l 2. 5 million mobile customers, on three networks, Pelephone, Cellcom & Partner/Orange. . (42% penetration) l 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 l STATE OF ISRAEL MINISTRY OF COMMUNICATIONS Pelephone: 800 MHz NAMPS and CDMA. Operations since 1987. Bezeq (50%), Motorola (50%. ( l Cellcom: 800 MHz TDMA. Operations since 1995. Bell. South (34%), Safra Brothers (34%), Discount Investments (12. 5%), PEC (12. 5%), private investors (7%. ( l 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, 000 500 0 International CATV 1995 1996 1997 1998
Israel’s Mobile Services Growth STATE OF ISRAEL MINISTRY OF COMMUNICATIONS l High growth - 2. 5 million subscribers, compared to 125, 000 in January 1995. l Key stimulators for the explosive growth: n Low tariffs: ~ US $0. 11 to 0. 23/minute air time, ~ $11 to 29 monthly charge. 300)min average monthly bill - $56 to 74( n Calling Party Pays (CPP), in operation since 1994. n High quality, nationwide coverage. n Fair competition.
Israel’s Regulatory Issues Concerning Fixed-Mobile Convergence STATE OF ISRAEL MINISTRY OF COMMUNICATIONS Achievements l Structural separation, preventing discriminatory bundling l Calling party pays l Cost-based fixed interconnect tariffs l Open access, to fixed & mobile networks (including pre-selection/dialing parity to international long distance providers( Open Issues l Symmetrical air time l Cost-based mobile interconnect tariffs l Enhanced competition: n Additional mobile operators n 3 G frequencies allocation.
STATE OF ISRAEL MINISTRY OF COMMUNICATIONS Conclusions
Summary - Market Related Points STATE OF ISRAEL MINISTRY OF COMMUNICATIONS l Fixed-Mobile convergence has several meanings: n For incumbent Telco: one stop shopping. n For competing Celco: fixed substitute. n For consumers: additional competition? better service? more service offerings? lower prices? l Mobile will not be true substitute to fixed, unless: n Mobile prices will be similar to fixed. n Mobile service offering will be similar to fixed, including data services. n Mobile will offer fixed quality.
Summary Regulatory Points STATE OF ISRAEL MINISTRY OF COMMUNICATIONS l Competition in telecommunications services is still limited, and should be promoted. l In the context of “Fixed-Mobile Convergence”, regulators’ role is to prevent abuse of market power by discrimination and unfair practices. l The key issues are: n Cost-based interconnection. n Symmetrical airtime. n Open network access. n Prevention of discriminatory bundling.
Regulation - It’s All About Competition STATE OF ISRAEL MINISTRY OF COMMUNICATIONS l The future - from convergence to integration. l Regulation - uniform rules and principles for fixed and mobile. l Re-alignment of competitive positions n Mobile and fixed n 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
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