Hot has announced an increase in the price for its 200-megabyte Internet package, following intervention by the Ministry of Communications, sources inform "Globes." The Ministry of Communications found that Hot was selling the package at a lower price than it was charging Partner and Cellcom for its infrastructure services in the wholesale market.
Several weeks ago, the Ministry of Transport sent a letter to Hot stating that the company was marketing its 200-megabyte services to consumers at a retail rate of only NIS 74 a month, including VAT. "This means that the retail rate that Hot charges consumers for this service is lower than the wholesale rate it charges competing service providers in the wholesale market for providing the identical service, even if we ignore the additional retail costs incurred in providing this service to customers," the letter stated.
The Ministry of Communications added, "The predictable result of this is severe damage to the development of competition on the Hot network based on the wholesale market reform. Most of the damage concerns the ability of the service providers to make competitive offers in the wholesale market to the consumers at this speed. This practice, called margin squeeze, exists when an infrastructure owner providing wholesale inputs to its competitors in the wholesale market framework squeezes the possible margin for the competitors resulting from the retail price offered to customers in comparison with the wholesale rate charged from the competitors. This squeezing of the competitors' margins detracts from the viability for the competitors of buying wholesale inputs from the infrastructure owner. In this case, the margin created as a result of Hot's practices is not only 'too low'; it is negative, even if we completely ignore the retail costs borne by the service provider. This is therefore an extreme example of such practices.
"This practice of extreme margin squeezing attacks the purpose of the wholesale market regulation, thwarts the Ministry of Communications' efforts to create a level playing field, and clearly causes substantial harm to telecommunications competition."
Following this letter, Hot had to raise its prices. The company announced yesterday that it had revised the monthly price of its 200-megabyte package from NIS 85 to NIS 95.
The monthly price of 200-megabyte infrastructure plus provision of Internet services rose from NIS 99 to NIS 109. On the company website, the monthly price of 200-megabyte infrastructure rose from NIS 79 to NIS 89, and the monthly price of 200-megabyte infrastructure + Internet services rose from NIS 90 to NIS 100.
Hot objected to the Ministry of Communications' demand, because forcing a company to raise its prices only because of the wholesale market policy is unprecedented, and harms consumers. Partner and Cellcom would prefer a reduction in the price for using Hot's infrastructure, which would enable them to compete without an increase in the price for the consumer. The usage fees for infrastructure, however, are set by the Ministry of Communications, and it can be assumed that the last thing that Hot would agree to is to lower the price of using its infrastructure for its competitors.
The Ministry of Communications said in response, "Following repeated complaints about the pricing of Mega's 200-megabyte package, which constitutes extreme margin squeezing in comparison with the wholesale price of Hot's services, the Ministry of Communications took steps to clarify the matter with Hot.
"The question of margin squeezing is important for the wholesale market's activity and the introduction of competition into the Internet sector in Israel. Unless this anti-competitive practice is barred, the infrastructure owner can push the competitors out of the market, thereby affecting the welfare of the Israeli consumer."
Published by Globes, Israel business news - en.globes.co.il - on June 18, 2019
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