Bezeq fiber-optic launch faces obstacles

Bezeq

The Internet service providers are putting spokes in the wheels, and may have a legal case.

Israel's home Internet market is at a serious inflection point. As reported last week, Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) is due to launch its fiber-optic project shortly, introducing much faster Internet than most households in Israel are familiar with.

Bezeq has been sitting on the fence for a long time. Despite the fact that the infrastructure was ready, the company decided to play for time and use its new network as a bargaining chip for obtaining regulatory relaxations from the Ministry of Communications. What made it finally decide to get underway, what obstacles lie ahead, how much will the service cost, and how will it affect the Israeli telecommunications market?

Expected speeds, and why now

Last week, Bezeq informed the ISPs of its intention of launching the project, and stated the speeds that would be available. The idea was to enable the ISPs to gear up and offer surfing prices in new packages: 600 Mbps and 1 Gbps, far faster than the 100 Mbps best speed that Bezeq currently offers. The notification was in the framework of its obligations under the Ministry of Communications' wholesale market policy of allowing all Bezeq's competitors the use of its network, including the fiber optic network that the ministry has been crying out for it to be deployed.

As far as price is concerned, it's hard to assess what will happen, but the expectation is that it will be higher than the price of Bezeq's current service.

As regards the timing, Bezeq waited with the launch of the project because it wanted to wait and see what would happen in the hearing to be held by the Ministry of Communications on the abolition of the mandatory split in the market between infrastructure provider and service provider. Once it understood that there was no chance that it would obtain approval for providing service directly to subscribers rather than through external ISPs, it announced the launch.

The announcement was not coordinated with the Ministry of Communications. Bezeq believed that it was not obliged to give three months notice to the ISPs of the new service under the wholesale market policy. The reactions were not late in coming, and as soon as the announcement was made, the ISPs turned to the Ministry of Communications and demanded that it should delay Bezeq and compel it to comply with the wholesale market rules.

Small ISPs not rushing to cooperate

What lies behind the demand of the ISPs? They claim that they need time to prepare; for example, to procure routers that support the higher speeds.

From a strictly legal point of view, they may be right. Bezeq would have done better had it given longer notice of its intention to launch the fiber-optic network officially. Nevertheless, it is by no means clear that the fiber-optic network is the whole story. Everyone in the market knew that Bezeq was going to launch the project; the ISPs were not taken by surprise. The aim was to gain time and delay Bezeq.

The claim about needing to gear up is dubious. ISPs that want to provide their customers with service over fiber-optic cable can already do so through IBC. What's more, Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) have already rolled out fiber-optic cable to hundreds of thousands of households, so where's the big problem in Bezeq's launch, and if there is a problem, why can’t it be solved on the move? It will be several weeks before Bezeq gets the project going, and it can't sell anything without combined infrastructure and service packages.

One way of solving the problem - which, as mentioned, may not really exist anyway - is to allow Bezeq to lend routers to ISPs that don’t have them. The problem is not expected to arise with Cellcom and Partner, which sell routers on their independent networks.

Communications Ministry maintains a resounding silence

And where is the Ministry of Communications in this battle? Ministry director general Liran Avisar Ben Horin presumably does not like the attempt to stop Bezeq. She was very happy last week when Bezeq announced the launch, and she sees it as a peak of her career at the ministry. For the time being, however, she is keeping quiet. There are those at the ministry who think that it should be tough on Bezeq,

They believe that it will be the start of a slippery slope if Bezeq is allowed to launch its new network without controls. From a legal point of view, it could be that if one of the ISPs were to go to court and demand that the launch should be halted, the ministry would have a problem on its hands.

Ministry of Communications sources said that the matter was under examination.

Published by Globes, Israel business news - en.globes.co.il - on March 1, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

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