Israel's leading pay TV operators, YES and HOT, have introduced low cost subscription TV packages. The move follows pressure from the government, though it is also a pre-emptive response to plans by mobile operators Cellcom and Partner to launch IPTV services and the introduction of pay digital terrestrial TV.
The new TV package from satellite operator YES comprises 15 channels costing 129 shekels (€26) per month. YES's long-standing competitor, cable operator HOT, launched its own low cost package a few days earlier. HOT's package includes 16 channels for the 129 shekels. HOT stated that subscribers who sign up in December will pay a fixed price of 129 shekels for the first 18 months.
There are some minor differences between the two packages. For instance, HOT includes its basic movie channel within the package while YES does not. Furthermore, YES is not offering a basic sports channel (RGE Sports) replacing it with One, a channel from Yediot Ahronot, one of Israel's largest daily newspapers. YES is offering its subscribers the option to add more channels to the basic package in the future if they wish to do, while HOT's customers do not have that option, at least currently. Both packages include all six free-to-air must-carry channels plus a number of radio stations.
The offering of low-cost pay TV packages by YES and HOT is a long-awaited move. Their cheapest introductory packages are currently relatively expensive: HOT's basic package costs €45 a month while YES's equivalent costs €40 a month. The Israeli government has taken a hostile stand towards both YES and HOT and the Minister of Communications Moshe Kahlon has publicly stated the government's intention to bring new competitors into the television market in an effort to push YES and HOT to come up with cheaper packages of their own.
The government has also unveiled plans to privatise the digital terrestrial (DTT) platform and to set up a tender that will be offered to private companies on condition that they make a commitment to provide a package of channels in accordance with the provisions of a new DTT Law that was passed by the Knesset in March 2012. A series of negotiations between the Ministry and the two operators followed the Minister's announcements. Their aim was to test the waters for a pilot launch of a package containing only a small number of channels offered at low cost.
Extra pressure was put on HOT and YES by the summer 2012 announcements by Cellcom and Partner, Israel's largest mobile operators, that they have made plans to launch TV services both costing less than 100 Israeli shekels (€20) per month. Going a step further, Cellcom is reported to have closed television content deals with leading US studios, including Warner Bros. Both Cellcom and Partner have been lobbying the Ministry of Communications for a long time, urging the politicians to ease the regulatory status under which they cannot offer combined television, internet and telephony packages for a single price. Their lobbying efforts seem to have paid off. The two mobile operators are planning to offer IPTV services without ruling out the possibility of launching OTT services instead.
The launch of low cost TV packages has faced some serious complications, at least on the part of YES.
Bezeq, YES's parent company, had plans to market triple-play services jointly with its satellite subsidiary. Each service can be purchased separately at the same price with the customer paying a single bill through YES. Although the Ministry of Communications has given its permission for this plan to go ahead, the Antitrust Authority has halted it on the grounds that Bezeq has significant market power as the major infrastructure owner in Israel. Furthermore, the Antitrust Authority has stated that Bezeq's telephony and internet services are classified as monopolies. Bezeq reacted strongly to this ruling, lamenting the advantage being granted to its competitor, HOT, by the regulator as Bezeq is banned from offering any discounts. Although talks between the Antitrust Authority and Bezeq's parent company, Eurocom Group, have been going on for a long time, the former remains adamant on its position not to allow the Bezeq-YES joint offer until after the establishment of a wholesale market which will allow Bezeq's competitors to use its infrastructure.
The low cost pay TV packages seem to constitute a first, albeit flimsy, step towards the radical transformation of the Israeli pay TV broadcasting landscape.