ISRAEL: An Introduction to TMT: Telecoms, Media & Broadcasting

Telecommunications Infrastructure

The Fibre-Optic Reform

As of January 2021, the Israeli Ministry of Communications (the "MOC") has begun implementing the fibre-optic reform, aiming to reach a wide deployment of ultra-broadband communication networks within 5 years, and a nationwide deployment within the coming 10 years, while increasing competition in the infrastructure market. According to the MOC, the new regulation produces a comprehensive set of incentives and is designed to ensure that an ultra-broadband network will be deployed in every region in the state by at least one licensee. According to the reform, the network will be subject to open-access and wholesale market principles, thus allowing every service provider to use the network and offer services to every household in Israel.

The reform eliminates the nationwide deployment obligation and allows Bezeq The Israel Telecommunication Corp. Limited ("Bezeq") to select areas in which it will deploy and operate, within 5 years, an ultra-broadband network. In order to ensure the deployment of fibre-optic infrastructure in areas where Bezeq will choose not to deploy, a fund will be established and will be used to provide economic incentives for deployment in these areas.

Approval of the Merger of HOT and IBC

In February 2021, the Israeli regulatory authorities approved the transaction for Hot Telecommunication Systems Ltd. ("HOT") to buy a 23.3% stake in fibre-optic venture IBC Israel Broadband Company (2013) Ltd. ("IBC"). As a result, Cellcom Israel Ltd. ("Cellcom"), HOT and the Israel Infrastructure Fund will hold equal shares in the partnership that holds a 70% interest in IBC. The remaining 30% interest in IBC will continue to be held by the Israel Electric Corporation Ltd. ("IEC").

The transaction is expected to make IBC the owner of a widespread fibre network that will be able to compete with Bezeq's network. However, due to the competitive concerns arising from the transaction, the regulatory approval was given subject to several conditions, including a guarantee to deploy a network that will reach 1.7 million households in Israel within five years, as well as a commitment to provide discounts for the use of the network by other players in the market, lowering the entry barriers for smaller players.

Telecommunication Licensing

Proposal for Changing the Licensing Framework and Policy

In August 2020, the MOC published a government bill seeking to change the current regulatory framework of the communications field in Israel, by reducing the number of telecoms services that will be subject to licensing and issuing a general permit for the provision of most telecoms services. This proposed change will, according to the MOC, reduce the number of licensees in Israel to approximately 30, instead of the current number of 150.

It is proposed that the general permit – which is characterised by retrospective supervision while setting known rules in advance – would be the main way of supervising communications services. Thus, the operation, installation, or construction of a telecommunication facility for telecommunication purposes will not be subject to a licensing obligation. In addition, services provided directly to the consumer, regardless of the network on which they are provided, including services provided in a format known as Over the Top (OTT), will not require a licence.

However, several services will remain subject to licensing regulation, due to considerations including the following: the need to promote competition in a specific area of activity; the need to regulate services which are reliant on limited resources; or the need to protect security considerations. Accordingly, it is proposed that the services which will continue to be subject to a licensing requirement will include communication services provided to the public, telephone services, services provided while operating a satellite network, and more.

Broadcasting Market

The Committee for the Examination of the Regulation in the Field of Broadcasting

In light of the changes that have taken place in recent years in the broadcasting market – including the technological advances that enable Internet platforms to compete with traditional broadcasting platforms and the accelerated entry of international streaming companies into the local market – the Committee for the Examination of the Regulation in the Field of Broadcasting was appointed in October 2020 by the Minister of Communications to examine the existing regulation in this field (the "Committee").

The Committee, chaired by former Knesset member Mr. Roy Folkman, includes representatives from the Ministry of Justice, the Ministry of Finance, the MOC, and the Competition Authority. The Committee's recommendations have not yet been formulated.

According to the Invitation for Public Comments issued by the Committee, it will formulate its recommendations for a regulatory framework based on two basic principles. The first is that regulation should be "technologically indifferent", meaning regulation that examines the nature of the service and not the type of infrastructure on which the service is provided. This approach will be able to reduce the significant regulatory differences that currently exist between the various players in the market. For example, according to the current regulatory regime, cable and satellite broadcasting platforms are subject to strict regulation under the Communications Law (Telecommunications and Broadcasting), 5742-1982, while broadcasting platforms transmitted over the Internet are not subject to any regulation.

The second basic principle mentioned in the Invitation for Public Comments is that the regulation should be simple and easily enforceable. It should focus on solving the material market failures and enable competition between products and companies for the benefit of the consumer.

With regard to content, the Committee will make recommendations regarding the mechanism and scope of regulation that will ensure the creation of high-quality, diverse and sustainable local content. Inter alia, the Committee will examine the current regulation, which imposes an obligation on traditional content providers to invest in local, original productions, while content providers broadcasting via the Internet are exempt from this obligation.

Regarding the structure of the regulator, the Committee's recommendations are expected to include the consolidation of separate regulators, so that all supervised commercial content providers will operate under one regulator. Currently, two different regulators supervise the commercial broadcasting field – the Cable and Satellite Broadcasting Council (supervising the multi-channel cable and satellite subscriber platforms) and the Second Television and Radio Authority (supervising the commercial free-to-air broadcast channels).

The Committee is also looking into the sports broadcasting market and examining the existing mechanism for selling the broadcasting rights among the original rights holders and the sports channels, producers, and broadcasting platforms.

Lastly, the Committee will be examining whether the market situation requires structural changes that will allow for the various players' economic existence over time. Among other things, the Committee will examine the current ban on some broadcast platforms to include advertisements on their channels. Currently, only licensed commercial free-to-air broadcast channels can include commercials in their broadcasts.

The implementation of the Committee's recommendations, once made, is conditional on their adoption by the Minister of Communications. At the time of writing, Israel is in the midst of an election period, so that even if the Committee's conclusions and recommendations are submitted shortly, it seems that their implementation will depend mainly on the identity of the Minister of Communications appointed after the elections. Nevertheless, the Committee's recommendations are of great importance, as they provide an indication of the position of professionals in relation to the desired structure of the broadcasting market and will likely form the basis for future regulation.