This post is something of a reference point. I have a reputation for knowing about phone and internet packages, and over the last week, five or six people have asked me for my point of view as they sign up or renew their communications bundle.
If you're new in the country, or just unsure how it works, I hope to break it down right here. This information is from memory and will probably go out of date, but right now, it's fresh stuff.
Bezeq Telephone Lines: Israel currently has two options for landline phones. You can go with tradition and order a Bezeq line, with your regional area code (02, 03, 08 etc) and pay something in the region of 50NIS a month for line rental, and pay per minute for calls. If you are a light user, they have a package called "Kav Kal" for 25NIS. Good if you just want an incoming line but not to good for normal phone use as per-minute calling is more expensive.
HOT Telephone Lines: The other (and IMHO better) option, is a landline through the cable company HOT. You do not need to be a cable customer to order a line. Rather than having a geographical prefix, your line will start with 077. If you move, you can take the number with you, even if you move to another city. They offer much better value for money too. Your line rental of 49NIS/month includes 2000 minutes of free landline calls, to Bezeq and HOT lines, so you know how much your bill will be. Extra minutes are 0.12NIS a minute, and cell calls are charged at 0.49NIS which is less than most cell plans.
If you want to reduce the line rental, you can have a plan for 10NIS less and have your minutes allowance reserved just for HOT 077 lines.
Alternatively, you can order a low user plan which is somewhere between 10-15NIS, and pay 0.12NIS/0.49NIS for landline/cell calls throughout the country.
Internet Service: I have a feeling Israel does this differently too, but I never order internet in the UK. In order to have an internet connection here, you need to order two things. You need the capability to run the internet, and then a service provider. These are going to be from two different companies.
The capability, or internet line, can be purchased from either HOT or Bezeq. As far as I am aware, Bezeq will make you order a landline as well as an internet line. HOT come up trumps here too and let you just order the internet line. They do give discounts (5NIS/month) to TV subscribers, but nothing to write home about.
One you have the capability to run the internet in your home, you then need to order the service, know as the Sapak. You are free to choose who you order this from. Netvision has a good repuation, and at the moment (12/12/06) have an for HOT customers. I use Bezeq Ben Leumi/014 (who are not the same company as Bezeq the phone company) as my Sapak, but when you call to order, haggle. Tell them you got a cheaper deal with another company, they will usually drop the price.
Useful contacts:
HOT - 1800 077 077 - www.hot.net.il
Bezeq (phone company) - www.bezeq.co.il
Netvision - 1800 017 017 - www.netvision.net.il
Bezeq Ben Leumi - 1800 014 014 - www.014.co.il
012 - 1800 012 012 - www.012.co.il
Smile - 1800 200 300 - www.015.net.il
Summary: This information is a result of my own experience and research. I personally use HOT for my telephone and internet services and am very pleased with the services I recieve. This doesn't mean Bezeq don't do a good job, I just have no experience with the company. After number crunching, I believe HOT will save you money.
Try it and see what happens, and please feel free to reference this article to anyone changing their service or new in town. Hat Tip to Natan for suggesting I this online.