According to a Gartner research report from January 2006, Israel is the technology leader in the region, maintaining pace with the rest of the world in the integration of cutting edge technology in the fixed line, international calls and cellular markets. According to the research, users spend approximately $4.7 billion annually on telecommunications services with the market expected to grow at a rate of 4.3% through 2009. Spending on voice services still represents more than 90% of the total expenditure by private and commercial customers.
Gartner forecasts that the entry of additional competitors into the international call market will reduce the market’s size and increase the financial pressure on the players operating in it today, which have only recently moved into the black. This is likely to damage the financial stability of all the current service providers. According to the Israeli Ministry of Communications In 2005, 1.39 billion call minutes were made from Israel, a 10.3% increase compared with 2004. In 2006 MOC forecasts an 8.2% increase in the number of call minutes from Israel although there will be a 14.8% decline in the revenues of international operators from these call minutes. The demand for international call minutes will increase but not enough to compensate for the expected price reduction. These facts will lead to a great demand on the part of the long distance carriers to implement VoIP solutions. Routing calls through VoIP represents the clearest and most direct route for them to maintain and improve operating margins.
The first barrier that VoIP equipment makers face worldwide is the need for potential customers to be connected to the Internet using broadband access. Israel is one of the most advanced countries in the world in terms of the penetration of the Internet into the homes of Israelis with numbers that rival that of the United States providing an excellent platform for launching VoIP equipment. In the consumer market, according to the Smith Research and Consulting Institute, over 58% of Israeli homes are connected to the Internet via either ADSL or cable. In the business sector there are over 160,000 companies connected to the Internet via broadband.
The second most significant barrier is creating an investment opportunity for the customer and creating an atmosphere that will appreciate the need to upgrade existing systems and networks. Today most office phone networks are connected through a PBX. These PBX’s have a centralized architecture that requires separate networks for voice and data. They are cumbersome to install and require great expertise to customize for particular office use.
Companies that have already made infrastructure investments in traditional PBX based on ISDN lines and do not have the capital to start from scratch can take small steps towards VoIP by implementing hybrid solutions that are designed to begin as a kind of helper system to the main PBX, enabling low-cost calls between offices and adding some more features. Among these types of systems are: Software installations that allow analog phones to talk to IP-PBX systems, installing gateways at company satellite offices thereby reducing the costs of internal phone calls and lastly, for companies with a few employees, consumer VoIP is very easy to implement.
For larger scale companies there are full-scale IP-PBX solutions that have relatively high up-front costs but in the short term can provide customers with a significant return on investment (ROI). With prices that range from $7,500 to $75,000 the IP-PBX, which uses packet switching, creates a tremendous opportunity for businesses in terms of savings and features.
Finally, for major institutions there are hosted IP Centrix solutions that provide such services as: Call hold, caller ID, call waiting, simultaneous ring, call transfer, and fax. These services open a window of opportunity to the ISPs to offer their clients additional value added services that have the potential to make up for any “loss” due to a reduction in the per minute revenue structure in use today. Pricing is based on a per seat structure.
The international market all of the operators currently deliver services over a modern digital network, including several switching facilities incorporating advanced intelligent network infrastructure. Other enhancements include optical submarine cables (including Lev, a 5 Gb/s fiber cable between Israel Cyprus and Italy, in service since 1998, and MED Nautilus, a 3.84 Tb/s DWDM system in restorable ring configuration, planned for initial service in 1Q 2002, between Israel, Egypt, Cyprus, Greece and Italy); digital satellite links; modern operator facilities; and advanced data communications facilities. MedNet, a 1500 km domestic DWDM system, based on a combination of coastal submarine cables and land cables, provides multiple points of entry to the domestic and international networks. While telephony costs have been dropping both in Israel and worldwide, the main cause for the reduction in price has been the implementation of VoIP.
Israel is a hotbed for VoIP and is often considered the birthplace of VoIP. Full of manufacturers of VoIP equipment and service providers, the market in Israel has been growing rapidly. To address user concerns over voice quality in comparison to traditional telephone service, to add more value, and to differentiate their VoIP products, manufacturers and service providers are becoming very interested in incorporating real-time voice call quality management capabilities to their basic offerings. Real-time call quality measurements and service degradation analytics are seen as key requirements for VoIP's continued expansion.
Israeli Telecommunications Market
The telecommunications market in Israel is in the process of many changes that create an exciting and dynamic challenge. The movement toward deregulation and a competitive marketplace drives the service providers to find a competitive edge that will help increase their market share and drive profits higher. The market can be broken down into three major parts: PSTN fixed wire, long distance carriers/Internet service providers (ISPs) and multi-channel subscriber television. While there are some players that overlap markets, the most common trend finds particular players with a relative strength in each.
Fixed wire:
The government used to own Bezeq until September 2005 when Bezeq was sold to private owners. Bezeq is Israel’s national telecommunications provider and together with its subsidiaries it offers a full range of telecom services including domestic, international and cellular phone services;
Bezeq aims to maintain its position as the #1 communications group in Israel, leading in both infrastructure and services, providing managed solutions to business customers, broadband and interactive services to consumers, as well as next generation mobile and wholesale network services. The company has adopted a strategy of growth and defense in an era of new technologies, emerging business possibilities, and intensified competition in the wake of government liberalization and deregulation.
The strategy includes strengthening group awareness so that Bezeq is seen as a one-stop-shop for domestic, cellular (Pelephone Communications), international (Bezeq International), satellite (YES) and Internet (Bezeq International and Walla!) solutions.
VoIP and Israel have had close ties that are as old as the VoIP technology itself. Israel is the country where this technology originated. A lot of high-tech innovation has come from the Israeli military that was subsequently commercialized. VoIP was pioneered and commercialized by
Though the traditional incumbent in Israel, Bezeq did not offer VoIP services by 2005, it has been exploring investment into VoIP technology for long time now. Bezeq introduced IP Centrex services
Long distance carriers/ISPs:
Bezeq International provides customers with telecommunications solutions in the fields of International phone calls, Internet, Data, Hosting and Security.
Bezeq International entered the Internet market in 1999, and today has approximately 600,000 subscribers, they are one of Israel’s leading Internet Service Providers (ISP), and is the leading provider for broadband Internet services (ADSL and Cable).
Bezeq International offers advanced telecommunications services, such as global and domestic IP-VPN and MPLS, hosting services for servers and websites, and high speed, always on, Internet services through a variety of broadband technologies, such as ATM, Private Leased Circuits, ISDN, Frame Relay, ADSL, Cables and Wi-Fi. In addition, Bezeq International offers services such as telephony using the IP technology (VoIP), LAN-to-LAN connection from anywhere in the world, single-provider connection of multiple corporate branches, backup services, 24/7 monitoring and reporting services.
Netvision: Netvision provides customers with a variety of Internet service packages including dial-up, or broadband Internet technology, using ADSL, cable, ISDN and integrated solutions, which offer complete networks for commercial activity in the Internet environment. These packages include data security, hosting services, complex Internet and Intra-Net systems and external CRM services.
Netvision operates the largest IP communications network in Israel which facilitates PTP access to the Internet for hundreds of thousands of customers. Netvision’s broadband subscribers enjoy an advanced ADSL and cable network.
Golden Lines/Internet Gold: The Company provides a line of Internet-access services including broadband via DSL and cable lines, dial-up and private lines. Internet Gold offers a broad range of Internet services and solutions for both the residential and business sectors.
They focus on their business subscribers' needs through Internet Gold Business, a department specializing in networking solutions for organizations. Internet Gold Business end-to-end solutions are based on always-on Internet connections utilizing clear channel ("Sifranet") and frame-relay/ATM lines, ADSL and ISDN. Internet Gold Business offers custom services for building and maintaining organizations' internal networks. The network currently includes eight points of presence and has the capability to provide dial up access, with local telephone calls, to the entire Israeli population. Internet Gold is the first Israeli Internet service provider to use ATM wide-area-network technology in its connection centers. The company continuously monitors capacity demands on its network, so network resources grow ahead of market demands.
012.net: 012.net offers both Internet access through dial-up and broadband access (ADSL and cable) and long distance telephone services.
012.net offers its business customers telephony services including Multi-protocol Label Switching that allows for global businesses to operate its network over a private line as well as offering VPN services. 012.net does offer long distance business services that include dedicated operators, call forwarding and toll free services. They do not offer VoIP services to their customers.
Barak: Barak offers direct dialing from Israel to the rest of the world using: International Toll-Free Service (ITFS), international ISDN service for voice data and video transmission, video conference services, Summit conference services, International information services and customer support and Pre-paid and post-paid calling cards. As a player in the ISP market Barak 013 offers Internet connectivity services to residential and business customers, using a broadband connection to the Internet backbone.
For the consumer market Barak provides dial-up, ISDN, ADSL and cable. And for business customers hosting infrastructure, international and local Internet connections and CPE support, as well as, Frame Relay, ISDN, ATM, ADSL and dial-up service.