1

ICT 5: Driving demand - Accelerating adoption:

Regulator’s role

Daniel RosenneChairman, Tadiran Telecom Communications Services, Israel

October 7th, 2009

2

Regulation plays key role: setting environment and conditions driving demand and

accelerating adoption

Telecom regulation key role: free market forcesAllowing for innovation, supporting adoption, removing

obstacles

How to achieve this goal?Harness market power of dominant playersReduce entry barriers for new competitorsAssure level playing field

What are the critical issues? InterconnectionOpen accessNet neutrality

3

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: “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”MIT Press, 2001

4

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: “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”MIT Press, 2002

5

Network NeutralityNet 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

6

Israel as an example

7

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

8

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

9

Israeli Example: Broadband InternetEnforcing 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

Total

ADSL

CableModem

10

Israeli Example: Mobile Wireless Non-Voice servicesCould 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

However, non voice revenues are rather low

Source: Bank of America Securities Merrill Lynch Global Wireless Matrix 2Q09

ARPU [US$]

Non voice revenues [%]

Wireless penetration [%]

11

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

12

The EndThanks for your attention