Rural broadband and its implications for the future of Universal Service. The Israeli Case

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1 Rural broadband and its implications for the future of Universal Service The Israeli Case OECD, Porto, October 2004 Uri Olenik Director General

2 Presentation Agenda Broadband & universal service regulation Broadband & rural broadband penetration in Israel Public Internet Access (PIA) Rural area solutions for broadband Conclusions

3 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.

4 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.

5 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.

6 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.

7 Broadband Universal Service Obligation (USO) Actual coverage: by the end of % of incumbent s lines. Special exceptions committee. Israel is one of the few countries that has adopted a broadband USO.

8

9 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.

10 ISRAEL Demographics Population ~ 6.7 million. Households ~ 1.9 million. ISRAEL telecommunication statistics 2004 Penetration 43% 55% 75% 72% 75% 95% 95% broadband to households internet to households internet to businesses digital multichannel tv households to cable tv mobile per 100 inhabitents phone lines to households

11 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%. 11

12 Broadband Subscribers Growth in Israel Sub. 700, , , , , , , k Competition begins 150 k 57 k 430 k 210 k 600 k 320 k Oct % 40% 30% 20% 10% 0% Penetration ADSL CABLE MODEM Households' Penetration

13 Households` Broadband Penetration (end of 2003) 73% *43% 31% 27%25%25% 22% 19%19% 16%15% 14%14% 11%11%10% 8% 2% 80% 70% 60% 50% 40% 30% 20% 10% 0% Korea Israel 03 Israel 04 Belgium Denmark Netherlands USA Sweden Austria Finland Spain France Portugal UK Germany Italy Luxembourg Ireland Greece Source: ECTA data, MoC Israel * Oct. 2004

14 OECD Broadband Penetration at end of Broadband Subscribers per 100 inhabitants Korea Canada Iceland Denmark Belgium Netherlands Switzerland Japan Sweden United States Finland Austria Norway France Germany Spain United Kingdom Portugal Italy Australia Luxembourg New Zealand Hungary Ireland Poland Czech Republic Mexico Turkey Greece Slovak Republic Source: OECD - Information Computer and Communications Policy Committee (ICCP)

15 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.

16 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.

17 PIA Projects in Israel Apple

18 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.

19 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.

20 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.

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