Use of Internet in Israel lagging behind other countries

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JERUSALEM — Even the computer-behomath Microsoft may not succeed in getting Israelis to join the online revolution.

Earlier this month, the world's largest software company announced that it will launch its first Hebrew-language portal Web site. It will be backed by a non-Israeli company, together with Internet Gold, a leading Israeli Internet service provider.

But it is unclear whether Israelis will suddenly wake up and join the Net.

Israel has gained international acclaim for its rapidly growing high-technology sector but the use of the Internet by average Israelis lags behind the rest of the world's.

Avi Weiss, an Internet researcher for the International Data Corp., a market research company, said the Internet penetration rate in Israel is about 10 percent, compared with about 15 percent in Europe and more than 30 percent in the United States.

Weiss, who is compiling his second comprehensive survey of the Internet in Israel, points to several reasons for the lag:

*Personal computers are expensive in Israel — often twice the price of computers in the United States — and therefore only about 36 percent of all Israeli households have PCs, compared to about 46 percent in the United States.

*Standard Web browsers were not designed for right-to-left languages like Hebrew. Companies took a long time to agree on a standard technology to deliver Hebrew content online, and even this requires users to set up their browsers to read Hebrew characters.

*Internet usage in Israel is expensive. Until last year, Israel's leading Internet service providers did not offer monthly unlimited surfing packages, and there is no flat monthly fee for local telephone calls as there is in the United States. This means that during most hours of the day, Israelis pay per minute to use the phone lines that link them to the Internet.

"The reality of Israel's high-tech infrastructure stands in stark contrast to Israel's image as a high-tech superpower," says a report on the Internet published in August by the Institute for Advanced Strategic and Political Studies, an Israeli-based liberal economic think tank. "Both the users and the public at large suffer."

According to the report, Israel ranked 36th out of 44 countries in terms of Internet charges. The study says the total cost of 20 hours of surfing the Web in Israel is about $49.83 compared with about $19.95 in the United States.

Much of the problem is attributed to a lack of competition for elements of the Internet infrastructure. Although there is fierce competition among Internet service providers, local telephone hookups are controlled by Bezek, the state-owned telecommunications company. The institute estimates that high prices and slow Internet speed caused $61 million in charges to Internet users who suffered from inflated telephone and Internet bills.

Those who are willing to brave the charges and venture online despite high costs are enjoying more and more Hebrew language content. International Data Corp. says there were 7,200 Israeli Web sites in mid-1998, and that number is growing by nearly 6 percent a month.

But until recently major international companies such as Microsoft didn't want to bother with Israel's tiny Internet population.

Israel, with 6 million people, is a small market for those companies. Although several local Hebrew-language portals exist, only in the past few months have major Internet companies begun building portals — or gateways to the Internet — tailored to foreign markets around the globe.

This month's agreement came after Microsoft launched 27 similar portals around the world, and other portals such as Yahoo! and Excite also have significant international operations.

Of course, the success of those portal sites depends on advertising and e-commerce. But with little Internet usage, Israel also lags far behind the rest of the world in e-commerce. Last year Israelis only carried out about $3 million in transactions online.

This year, that number will jump to about $10 million, but that number is tiny compared to the United States. According to the Yankee Group, a U.S. market research firm, consumer online business is expected to jump from $14.9 billion last year to $37 billion this year.

Koby Bremmer, marketing director at, a Tel Aviv company that builds Web sites for Israel's biggest companies, says Israel's corporate sector still does not understand the Internet.

"Big Israeli companies do not yet understand the power of the Internet," he says. "They have not even budgeted the Internet into their business plans."

That, he explains, has created a chicken-and-egg situation where Israeli companies are not yet willing to invest in the Internet until they see more people online, and the public does not come online until there are more local sites to shop on.

Shally Tshuva, managing director of Foresight, a Tel Aviv high-tech consulting firm, is more upbeat. "We are about two years behind the U.S. in e-commerce," she says. "But we will begin to see the sparks of e-commerce during 1999."

In part, the e-commerce lag is also caused by Visa C.A.L., one of Israel's biggest credit card franchises, which during 1998 scared people away from online shopping by refusing to allow its credit card to be used for Internet transactions, claiming they were not safe.

Tshuva also says that the generally low level of development of the Internet in Israel is misleading.

"Israel is considered a very high-tech country not because of its 6 million population, but because of about 2 million who are relevant," he says. There are, says Tshuva, about 1 million Arab citizens and 1 million Russians who are less well off than the average Israeli and are not interested in the Web. Another 1 million haredim and other religious Jews shun the Internet for religious reasons.