Israel’s wholesale sector gets shake up

15 February 2011 |

Israel’s Ministry of Communications has moved to encourage further development of the country’s wholesale telecoms market, and is considering legislation to allow alternative telcos to lease fixed-line infrastructure on favourable terms.

All landline connections are controlled by incumbent Bezeq or cableco Hot Telecommunication Systems. Government proposals would allow other service providers to demand discounts on the use of these assets, making them more competitive. A committee has been established to drive the development of the wholesale sector, and may ultimately have the power to set pricing.

The Israeli government is also reviewing the structural separation of Bezeq. At the moment, Bezeq’s dealings with international and domestic telcos are managed separately to its retail internet access, international calls, satellite television and mobile voice and data services.

Erez Hasdai, manager of strategic planning with Bezeq Telecom said he considers proposals for wholesale market developments as a potential threat to the company, with mandated price setting likely to upset its standing in the market. His concern is that when ISPs are able to lease VDSL from Bezeq at a low price, Bezeq’s own offer might become uncompetitive. “The broadband market in Israel is already very dynamic and vibrant, with two nationwide FTTC and DOCSIS-3 networks and with 80% household penetration,” said Hasdai.

“The present state of competition in Israel’s fixed-line market is clearly that of a duopoly, dominated by two network owners,” said Paul Budde, founder of the Budde-Comm consultancy. “Effective infrastructure-based competition is difficult to facilitate due to the significant amounts of upfront capex required by new market entrants. Israel, like Europe, can develop a healthy regulatory-based wholesale market given the development, implementation and policing of a wholesale market regulatory regime.”

Bezeq faces multiple challenges in its domestic market, Budde believes: “Bezeq has retained the majority of the domestic fixed-line voice market, but new licences being granted for VoIP service provision are shaking up the mar ket,” he said. “The international fixed-line voice market has been very competitive.”

Israeli department store Hamashbir, which became the country’s first licensed mobile virtual network operator (MVNO) in June 2010, has withdrawn its service.