ICT 5: Driving demand - Accelerating adoption:
Regulator’s role
Daniel Rosenne
Chairman, Tadiran Telecom Communications Services, Israel
October 7th, 2009
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Regulation plays key role:
setting environment and conditions driving demand and
accelerating adoption
 Telecom regulation key role: free market
forces
 Allowing for innovation, supporting adoption, removing
obstacles
 How to achieve this goal?
 Harness market power of dominant players
 Reduce entry barriers for new competitors
 Assure level playing field
 What are the critical issues?
 Interconnection
 Open access
 Net neutrality
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Interconnection is Key:
creating “Network of Networks”
 Major regulatory challenge:





Assuring non-discrimination and fairness
Preventing abuse of market dominance
Promoting competition
Avoiding discrimination
Assuring transparency
 Professor Noam, 2001:
MIT Press, 2001
 “The regulation of interconnection is
therefore becoming the paramount tool of
government into the reasonably
foreseeable future, replacing the
regulation of telecommunications retail
pricing, the rate of return, or competitors’
entry.
 It provides government with a tool for
extensive micromanagement of markets” 3
Open Access is essential:
Enabling value added service providers to utilize public networks
without discrimination
 Essential for promoting
competition:
 Small, agile, innovative and hungry for
business value added service providers are the
main innovators of new ideas and services
 Pat Longstaff, 2002: Policymakers
double voice:
MIT Press, 2002
 “Policymakers in every country have generally
been unable to decide if they want the
communications sector, and the industries and
firms in it, to move towards concentration or
toward diversity…
 Although most governments embrace diversity
to promote competition, they are nevertheless
willing to allow concentration if that would
enable companies to survive a competition
they are in danger of losing”
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Network Neutrality
 Net neutrality refers to a network open to carry every
form of information and support every kind of
application
 Net neutrality deals with a central concern, the power
held by access providers - wireline, cable and
wireless providers - to select, price or differentiate
among Internet information streams passing through
their networks
 Enforcement of net neutrality is considered
essential for achieving telecom competition and
market development
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Israel as an example
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Israel - a “case in point”
Broadband - the merits of pro-competitive
measures
 Structural separation enforced 2001 – assuring
open access and net neutrality
 Results: extremely high growth and adoption rate
Mobile - the pitfalls of “hands-off”
regulation:
 Mobile service providers enjoy high degree of
freedom
 Results: extremely low mobile non-voice revenues
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Israel's Telecommunications
 7.4 m pop, 1.7m households, US$ 27,200 GDP/capita
 3.2 million main telephone lines
(43% penetration)
 Bezeq: 2.6m subscribers
 HOT (cable): 0.5 m subscribers
 VoB: 0.1 subscribers
 9.3 million wireless customers, on 4 networks
(126% penetration)
 35% with broadband capability
 1.5 million households connected to multichannel subscriber
television (88% of households):
 HOT (cable): 0.9m subscribers,

Out of these: 0.4 subscribe to VOD services
 Yes (satellite): 0.6m subscribers
 1.7 million broadband Internet connections
 Bezeq (ADSL): 1m
 HOT (cable modem): 0.76m
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Israeli Example: Broadband Internet
Enforcing open access & net neutrality led to enormous growth
Since 2001, Bezeq and HOT adhere to “structural separation” rules, are allowed to provide
access services only, to Internet service providers, assuring open access and net neutrality
1,800,000
1,685,000
1,579,000
1,600,000
Total
1,422,000
1,400,000
1,230,000
1,200,000
ADSL
990,000
1,000,000
963,000
800,000
892,000
650,000
600,000
Cable
Modem
680,000
800,000
650,000
1,005,000
616,000
530,000
400,000
430,000
207,000
340,000
200,000
2,000
430,000
220,000
38,000
150,000
0
57,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
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Israeli Example: Mobile Wireless Non-Voice services
Could it be that discriminatory practices delay adoption of new services?
 Israel is well suited for growth in
non-voice mobile wireless services:
 Relatively wealthy country (~$20K
GDP/cap,~$27K)
 Technology literate
 High mobile penetration, extremely high
usage
Non voice revenues [%]
 However, non voice revenues are
rather low
ARPU [US$]
Wireless penetration [%]
Source: Bank of America Securities Merrill Lynch Global Wireless Matrix 2Q09
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Conclusions
 Competition is essential for high adoption rate for
new services
 Only competition can reduces prices and create market
innovation and agility
 Regulators have a critical role - free market forces:
 Cost based interconnect regime
 Open access
 Net neutrality
 The Israeli experience demonstrates the effects of
regulatory measures on the demand and adoption
rate of new services
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The End
Thanks for your attention
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