In an opinion published today, the Luboshitz Kasierer Ernst & Young accounting firm's telecommunications division estimated revenue in the communications industry in 2001 at $21 billion, excluding reciprocal connectivity between the operators. Of this, $17 billion was from access services for the communications networks of Bezeq, the cellular companies, and the cable companies. The remaining revenue came from accompanying services provided on these networks.
Luboshitz Kasierer Ernst & Young telecom department head Alex Weissman predicted competition in national inland telephony would begin in late 2004 at the earliest and include only two new competitors: Cellcom and the cable companies. Competition will initially be confined to data communications.
The accounting firm forecast that total revenue from fixed national inland telecommunications services would grow an average of 3% annually in 2002-2006, reaching NIS 5.69 billion in 2006. This figure excludes Internet provider connectivity services.
Two major trends in the field are predicted: a rise in revenue from data communications services and a decline in revenue from call traffic telephony, access, and inter-network reciprocal connectivity services.
Communications providers are expected to earn NIS 700 million more from data communications services. Data communications, which accounted for 16% of total fixed national inland communications services revenue in 2001, are expected to reach a 28% revenue share by 2006.
Revenue from broadband Internet access services through Bezeq's ADSL lines and the cable companies infrastructure will total NIS 800 million in 2006, and ISPs will earn NIS 800 million from their broadband services. This forecast assumes that 54% of households will be hooked up to the Internet in 2006, half (560,000 households) through a broadband hookup and half through a regular telephony link.
The rate of Internet penetration in the business sector will reach 70% in 2006 - 680,000 subscribers, while 120,000 businesses will use a broadband-based solution.
Weissman said the corporate structural and accounting separation between fixed and mobile communications was justified. He added, however, that there was no clear necessity for a corporate separation between accompanying services provided over the Internet and access services to a communications network. He believes this separation will affect the economic performance of some market players, detract from the business flexibility of communications services operators, and reduce the variety of services packages available to the consumer.
Development of content suitable to broadband will speed up when the operators anticipate substantial revenue from providing access services, and invest some of this revenue in creating suitable content. The opinion in effect recommends eliminating the existing limitations on links between infrastructure providers and content providers.
Bezeq and the cable companies have a clear advantage in providing last mile services, and Luboshitz Kasierer Ernst & Young therefore believes that local multipoint distribution system (LMDS) wireless broadband access solutions, which will require an estimated $350 million investment, are unlikely to enter the national inland communications market.
Published by Globes [online] - www.globes.co.il - on August 7, 2002