Split between ISP and infrastructure set to be abolished

As first reported by "Globes", the Ministry of Communications and the Ministry of Finance plan to abolish the split that exists in Israel between internet service providers and providers of telecommunications infrastructure. Section 11 of the Economic Arrangements Bill that accompanies the budget states that the two ministries will coordinate the abolition of the split, subject to the drafting of transitional rules. The clause explains that the aim is to simplify and streamline the provision of telecommunications services while striking a balance between competition and making the purchase of internet services easier for the consumer.

One of the main obstacles to the development of the internet market in Israel is the split between internet service providers (ISP), such as Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR), and infrastructure companies such as Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) and HOT Telecommunication Systems Ltd. (TASE: HOT). The split was introduced in the 1990s in order to encourage competition with monopoly telecommunications company Bezeq.

Since then, many changes have taken place in telecommunications markets around the world, and the split has become irrelevant, and even harmful to the market's development. The change now becomes possible among other things because of the fact that the wholesale market and access to Bezeq's infrastructure have lowered barriers to competition, and also because in the new era of optic fiber infrastructure, ISPs have become redundant.

The Ministry of Finance and the Ministry of Communications have belatedly recognized that the distortion needs to be fixed, but they are not saying exactly how this will be done.

The change does not herald abolition of the structural separation between Bezeq and Bezeq International (which acts as an ISP), which still awaits a decision be the minister of communications. It does make the outlook on that seem more hopeful for Bezeq, but it is not likely to happen soon.

Published by Globes, Israel business news - en.globes.co.il - on July 5, 2020

Split between ISP and infrastructure set to be abolished

The Ministry of Communications and the Ministry of Finance have belatedly realized that the split harms development of the market.