Netflix and YouTube, Watch Out: Israel Wants Oversight for Internet TV

Internet-based television services by Cellcom and Partner have garnered over 250,000 subscribers, but remain outside the communications law

Observers at a launch event for Partner TV in 2017.
Ofer Vaknin

Cellcom has reason to celebrate. The ad campaign to launch its television services, featuring an eccentric character named Mashiah, recently won the prestigious Platinum Prize of the Effie Awards. Cellcom has netted 190,000 subscribers in less than four years in the field. Together with Partner, they have acquired 254,000 subscribers in the Israeli market.

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But the two firms have reason to worry. Until now, the internet-based television market has been unregulated. Cellcom and Partner exploited this flexibility to hit the veteran companies HOT and Yes, which are shackled by supervision and a host of obligations. However, over the last few months officials in the Cable and Satellite Council have been working with the justice and finance ministries to draft a bill that would put internet-based television services under government supervision. The bill was supposed to have reached the Knesset plenum this summer session but disagreements between the ministries have delayed it.

A draft of the bill, which TheMarker has obtained, reveals the dramatic changes expected to sweep the television market. It would require Cellcom and Partner to receive broadcast licenses, and the Cable and Satellite Council would be able to impose a host of regulations on them. According to the bill, implementation of the requirements would be phased in gradually, and there would be significant differences from the obligations imposed upon HOT and Yes. Cellcom and Partner oppose the move in principle and are demanding broad freedom of action. HOT and Yes want the bill, which they argue is needed in order to level the playing field, by imposing the same requirements on the new players.

The council will decide

By definition multi-channel television, based on the 1982 communications law, was either cable or satellite – the technologies through which television broadcasts were transmitted. However, the rules changed the moment internet-based broadcasting of content commenced. Thus, the law will change the definition to “owner of a license to transmit audiovisual content.” The bill also changes the name of the council to the Council for Audiovisual Broadcasts.

The bill is based on recommendations of the Committee for Regulating Communications Broadcasts, headed by former Communications Ministry director general Shlomo Filber. He is now state’s witness in Case 4000, involving Bezeq and Shaul Elovitch. Filber’s recommendations were premature and partial, and now they are being formulated for the bill.

The market is expected to change from the current state of two companies with identical broadcast licenses to three types of players, relative to their market share, with attendant regulations. The current multichannel market can be viewed two ways – by membership share or by revenue share. However, the bill proposes for the first time integrating the two parameters.

According to the bill, companies with at least a 20% market share will have the highest status. Only HOT and Yes meet this definition, with the others far behind. The next level would be for mid-size companies with a revenue share of at least 10% of the multichannel market. The lowest level, “limited subscribership” would be for content providers whose subscribership is at least 10% share of the total market.

The bill does not allow a company with limited subscribership to broadcast content without a license. Thus, a new operator could launch without regulation, but if its market share grows it would be required to seek a broadcast license.

However, the difficulty in determining which companies would require a license has led to unclear language in the draft bill. A big question mark is whether content providers like Netflix or Amazon Prime and even YouTube would be considered content providers and be required to meet regulatory demands. The bill sets the criteria for a license as any company with at least half of its content in Hebrew or dubbed in Hebrew, or in cases where the “council is convinced” that they are targeted mainly at an Israeli audience; that during prime time the content in Hebrew is prominent in the content catalogues; that the broadcasts have content or services for sale in Israel or services offered in Hebrew; and that broadcasts transmitted in Israel are in a different format than the broadcasts transmitted abroad.

Because of the vagueness of the law, the council will be the one to decide who should be supervised and who shouldn’t. Thus, if a platform produces a broadcast made for Israelis, even if it is a foreign company, the council will regulate it.

The new regulatory rules will give broad authority to the government in overseeing internet video broadcasts. Any regulatory violations are liable to cost broadcasters hundreds of thousands of shekels. For example, the council would be able to set ethics rules for Cellcom and Partner broadcasts and fine them for not abiding by them. It would be able to force companies to label the type of broadcasts and the age-appropriate audience, to require them to broadcast sports programs and even set how much original content is to be aired, as well as what kind and on which channel.

The bill includes deregulation, and substantially reduces the role of the Cable and Satellite Council. Oversight on companies’ customer service answering times will remain in the hands of the council.

Another aspect of deregulation involves the basic packages offered by HOT and Yes. The companies are required to provide customers with an expensive, hefty basic package that includes many channels the client doesn’t use. The new law would eliminate the basic packages and provide consumers with more flexibility in choosing broadcast packages.

The main regulatory demand is the requirement that companies invest in local content. HOT and Yes are now obligated to invest 8% of their revenue in local content. The two companies invested 158 million shekels each in 2017 in local content, even though HOT was only required to spend 147 million shekels and Yes 138 million shekels in local content. Likewise, the companies are required to spend 4% of their annual revenue on high-quality shows, like dramas and documentary series.

Investment in local content includes Cellcom’s recent comedy series “Mashiah,” co-produced with Keshet, and Partner’s foray into content on the Teddy comedy channel and the Children’s Channel.

HOT and Yes are the only companies required to broadcast designated sports events, like major games involving Israel’s national team. They are also prohibited from broadcasting exclusive sports content. If the bill passes, the council could require all multichannel television operators to broadcast what it deems important.

Still, there is no rush to assess all the changes to the market. The chances of the bill passing the current Knesset are slim. Even if a final draft is submitted, it will take some time to debate it in the Knesset, and approval will probably be postponed until the next Knesset.