The 100-Mbps upgrade plan that Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) launched on Tuesday will be used by other carriers in their responses in the upcoming Ministry of Communications hearing on the wholesale market. Bezeq's rivals say that the free upgrade shows why no carrier which buys infrastructure from Bezeq can compete against it
Bezeq's timing plays into its competitors' hand, because the upgrade highlight's the power of the threat Bezeq poses if the restrictions on the company are lifted, especially when the issue of the margin squeeze remains unsolved, jeopardizing competition against the company.
Bezeq's upgrade is mainly intended to compete against Hot Telecommunication Systems Ltd. (TASE: HOT.B1), which is allowed to market triple play services, while Bezeq may not.
The carriers' main argument against the wholesale market model rests on three main points. Bezeq's upgrade touches directly on one of these points: Bezeq can lower prices for its infrastructures without the carriers which buy infrastructures or lease phone lines being able to obtain discounts or the same lower price from it. For example, if Bezeq offers its subscribers a free Internet access service upgrade, without the buyer of Bezeq infrastructures receiving the same discount, that carrier cannot compete against Bezeq and will lose money.
The Ministry of Communications has not included the margin squeeze in the hearing's topics, saying that it would deal with the matter separately. Given the speed at which the ministry works, it is unclear when an agreed model will be reached.
The carriers also argue that the wholesale market model does not allow them to offer Internet protocol television (IPTV), which could compete against Bezeq's satellite television subsidiary DBS Satellite Services (1998) Ltd. (YES) and Hot's cable television.
According to preliminary estimates, the carriers will not oppose the prices for telephony and Internet services that the Ministry of Communications has set for Bezeq, because these prices make competition possible. The problem is in television, given the absence of a mechanism that will allow the carriers to compete against discounts offered by Bezeq after its structural separation is abolished.
Bezeq said in response, "The upgrade is available for all ISPs for their full use, allowing customers to upgrade access speed up to 100 Mbps over Bezeq's infrastructure."
Published by Globes [online], Israel business news - www.globes-online.com - on February 12, 2014
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