Prime Minister's Office director general Eyal Gabbai today told Hot Cable Systems Media Ltd. (TASE: HOT) CEO Herzl Ozer that the he believes that the telecommunications infrastructure market (telephony and broadband Internet transmission) is not a competitive market with multiple participants; there is a duopoly by the infrastructure business of HOT and Bezeq.
Gabbai wrote to Ozer and toldl him that the Israel Electric Corporation (IEC) (TASE: ELEC.B22) would not be allowed to cross-subsidize its fiber optic telecommunications network with revenue from the electricity grid. Prime Minister Benjamin Netanyahu authorized Gabbai to respond to Hot about IEC's entrance into the telecommunications infrastructure business. Ozer is apparently trying to prevent IEC from entering the sector.
Gabbai pointed to the national importance of IEC's entrance into the telecommunications infrastructure sector, in order to prevent a duopoly of HOT and Bezeq The Israeli Telecommunication Co. Ltd. (TASE: BEZQ), and in order to increase competition.
Two months ago, Ozer wrote to Netanyahu in order to block IEC's entry into the telecommunications infrastructure sector. HOT has invested heavily in expanding its own network. Ozer asked Netanyahu to undertake a thorough economic study of the repercussions of IEC's entrance into the telecommunications infrastructure sector.
Gabbai said, "The prime minister supports competition in the economy in general, and in the telecommunications market in particular. The telecommunications market (telephony and broadband Internet transmission) is not a competitive market with multiple participants; there is a duopoly by the infrastructure business of HOT and Bezeq. The lack of competition is liable to result in a reduction of incentive to develop technology and could hurt the consumer's welfare. Exploitation of the infrastructure and the ability of IEC to set up another advanced broadband telecommunications infrastructure is one of the ways to improve competitiveness in the Israeli telecommunications market, expand services and their quality. Therefore, in order to ensure improvement in benefits to consumers, it is necessary to ensure that cross-subsidization will not be permitted between IEC's electricity and telecommunications businesses."
Published by Globes [online], Israel business news - www.globes-online.com - on February 28, 2010
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