Rural broadband and its implications for the future of Universal Service

The Israeli Case

OECD, Porto, October 2004

Uri Olenik Director General Ministry of Communications Presentation Agenda – Broadband & universal service regulation

– Broadband & rural broadband penetration in Israel

– Public Internet Access (PIA)

– Rural area solutions for broadband

– Conclusions

State of Israel

Ministry of Communications Regulation

• Can regulation help to increase broadband penetration in rural areas and achieve universal coverage?

• Free and competitive markets promote wide geographical coverage, growth, efficiency & customer satisfaction.

State of Israel

Ministry of Communications EU Regulation

• The EU framework does not include broadband as part of the Universal Service Obligation (USO).

• We believe this assumption needs to be challenged and reexamined.

State of Israel

Ministry of Communications Broadband regulation in Israel • Facility-Based Competition :

1. ADSL Access provided by the incumbent (up to 2.5Mb/s downstream). 2. Cable Modem broadband Internet services provided by cable TV firms - the new entrants (up to 3Mb/s downstream). • Unlicensed usage of the 2.4 & 5 Ghz WLAN technology as a step to maximize the internet usage.

State of Israel

Ministry of Communications Broadband Universal Service Obligation (USO) • USO by two players; both have countrywide infrastructures.

• The critical stage: defining USO in the license before granting it to the operators.

State of Israel

Ministry of Communications Broadband Universal Service Obligation (USO) • Actual coverage: by the end of 2004 - 99% of incumbent’s lines.

• Special exceptions committee.

• Israel is one of the few countries that has adopted a broadband USO.

State of Israel

Ministry of Communications

3G Regulation in Israel • In the coming years 3G UMTS networks will be able to offer internet access of up to 2Mb/s and a wide variety of services & content. • Commercial networks have been launched all over Europe and in Israel. • Cellular penetration is much higher than the penetration of computers; thus 3G may prove to be a very essential medium for increasing broadband penetration. • Our conclusion: 3G geographical USO.

State of Israel

Ministry of Communications ISRAEL Demographics • Population ~ 6.7 million. • Households ~ 1.9 million.

ISRAEL telecommunication statistics 2004

Penetration

95% 95% 75% 72% 75% 43% 55%

broadband to internet to internet to digital households to mobile per 100 phone lines to households households businesses multichannel tv cable tv inhabitents households Broadband • 920,000 broadband lines (600,000 ADSL lines; 320,000 cable modems).

• Broadband subscriber growth ~50% last year.

• Broadband household penetration 43%.

• Broadband penetration per 100 inhabitants 14%.

State of Israel 11

Ministry of Communications Broadband Subscribers Growth in Israel

700,000 50% 600 k 600,000 40% Sub.500,000 Competition 430 k 400,000 begins 320 k 30% 300,000 210 k 20% 200,000 150 k

10% Penetration 100,000 38 k 57 k 0 0% 2001 2002 2003 Oct. 04

ADSL CABLE MODEM Households' Penetration Households` Broadband Penetration (end of 2003)

80% 73% 70% 60%

*43% 50% 31% 40% 27%25% 25%22% 30% 19%19% 16%15% 14%14%11%11% 20% 10% 8% 2% 10% 0% l 4 in a K rg d ria a g U u n ce st p u any Italy o la e USA u nland S rance rt m b e e Korea i o r Ir r Belgium A F F e G Israel 0Israel 03 Denmark Sweden P G Netherlands Luxem

Source: ECTA data, MoC Israel * Oct. 2004 OECD Broadband Penetration at end of 2003

Broadband Subscribers per 100 25 inhabitants

20

15

10

5

0

l a d k s d n s d ia y e y n ly a g d y d d ic co y e c n c ga ta l ke c li ad lan te lan pai I b xi e land ta ustr orwa ran S our elan olan u e ur re Korea an ce elgium r Japan wede in A F ortu b ealan ungar Ir p M T C I enmar S S F N erman ustrali P G D B d G P A H Re ethe witzerla k Repub N S nite uxem ew Z U L N nited Kingdom zech lova U C S

Source: OECD - Information Computer and Communications Policy Committee (ICCP) Public Internet Access (PIA) in Israel • The importance of PIA: service provision to inaccessible population due to coverage or cost problems. • Relatively easy implementation of public broadband access all over Israel – In light of USO of two infrastructures. • Public access is somewhat less crucial Israel: – Beginning end 2004: no rural areas without broadband coverage; – High broadband penetration. State of Israel

Ministry of Communications Public Internet Access (PIA) in Israel • PIA is accessible in education institutes, public libraries, community centers etc., but much remains to be done. • Several examples of PIA existing projects: – Tapuah (Apple) the Israeli society for the Advancement of the Information Age; – Lehava (Flame) governmental project - bridging the digital divide within the Israeli society; – Connecting high schools to broadband by ADSL. State of Israel

Ministry of Communications PIA Projects in Israel Apple

State of Israel

Ministry of Communications Solutions for Rural Areas • Israeli vendors` solutions helped to reach rural and remote areas. • Israel’s broadband USO & internet public access models work well in a small, populated country. For larger countries, which are less populated, other models are much more suitable.

• For such countries, Israeli companies including Gilat Satellite Networks , Alvarion, Spacecom, and IP Planet network offer several proven and successful solutions for rural areas.

State of Israel

Ministry of Communications Conclusions • In Israel, the USO and competition, as well as particular country features, have made high broadband penetration to rural & remote areas a practical goal. • PIA may be successfully provided by both governmental and business non-profit initiatives. • For rural & remote areas in bigger, less populated countries developing broadband is more suitable by successful cost-effective satellites and wireless solutions .

State of Israel

Ministry of Communications Conclusions Wide geographical competition is the best way to improve the incumbent’s coverage, grade of service, price performance and overall penetration to the benefit & welfare of the society. Such regulation, we believe, can help increase the level of competition in the field of broadband access and narrow significantly the digital divide within the country.

State of Israel

Ministry of Communications Thank you for your attention

For more information http:/www.moc.gov.il