Localization Delays Israel Channel Launches

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Tel Aviv, Israel -- Regulations governing the localization
of foreign channels are delaying the launch of several new networks and hampering cable
operators in their effort against direct-to-home start-up YES.

The government claimed that the regulations, in existence
for a few months, are vital to the preservation of Israel's television industry and
culture in general. While the government's "Open Skies" policy permits
foreign channels to be transmitted into Israel "as is," cable channels are
prohibited from televising ads targeting Israelis.

At the same time, cable operators must pay a
$1.50-per-subscriber, per-year fee to the government if the channels carry subtitling.

The fee is "not a great burden," claimed Eli
Nissan, senior media consultant to the Regulatory Broadcasting Administration of the
Ministry of Communications.

The cable industry differed. "Instead of bringing in
10 to 12 subtitled channels, we can only afford to bring in two or three. The consumer
loses," said Idit Herzeg, spokeswoman for Israel's No. 1 cable operator, Golden
Channels.

No fees have been paid yet as the cable industry voices its
opposition.

How the fees are to be spent is another contentious issue.

Each network is required to invest in local production to
be televised in Israel, which raises objections on the grounds of practicality and
expense.

"How are foreign channels going to add local
origination?" asked Pnina Schenhav, vice president of programming and marketing for
cable operator Tevel Israel International Communications Ltd. "We are in negotiations
with Granada U.K. Is a British company suddenly going to make British drama in
Israel?"

As Golden Channels, Tevel and Matav Cable Systems Media
Ltd., the country's other operator, hurry to sign new carriage deals, opposition to
the regulation continues to mount.

That's in part because it protects YES, which is due
to launch next spring, as it doesn't apply to any distribution platform with fewer
than 200,000 subscribers. YES is not expected to reach that level for some time.

Foreign programmers said they're disturbed by the
regulations, even though Nissan claimed, "They accept it -- they're used to
it."

Hallmark Entertainment Network, for one, has signed
contracts with Matav and Tevel to transmit with Hebrew subtitling. It also inked a deal
with YES to transmit with Hebrew, Arabic and Russian subtitles.

The channel's representative in Israel, Ami Ella,
countered Nissan's claim. He said Hallmark stands to lose "a lot of money. We
hope advertising will be allowed in a few years."

Ella added that he's aware of other foreign channels
that have expressed their frustration with the regulations. "But the platforms are
the people who must fight, and they're better able to do it than we can," he
said.

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