In recent weeks, Ministry of Communications director general Shlomo Filber has been advocating a controversial policy concerning nationwide deployment by Hot Telecommunication Systems Ltd. (TASE: HOT.B1). He brought his decision to postpone for a year Hot's obligation for nationwide deployment before the public committee advising the Ministry of Communications on exceptional issues. Under the terms of its license, Hot must deploy its infrastructure throughout Israel, but it has not done so in 272 outlying communities, in addition to communities in central Israel, and even some neighborhoods in Jerusalem.
The only one who agreed to halt this farce, which has continued for years, was former Minister of Communications Gilad Erdan. Out of consideration for the company's distress and the difficult of making such an expensive deployment, he agreed that the company could do it gradually, and devised a plan in November 2014 requiring Hot to complete its deployment in 61 communities by November 2016. Hot, however, simply did not comply with the plan.
In contrast to Erdan and previous Ministry of Communications director general Avi Berger, however, Hot formed a wonderful friendship in the ministry, culminating in Filber's proposal to allow Hot to postpone its deployment by a year if it provides its television services by Internet to all 272 communities by the end of the year. In other words, the company has been awarded a prize. Not only is it not deploying infrastructure and not investing, but it is obtaining access to Bezeq Israeli Telecommunication Co. Ltd.'s (TASE: BEZQ) infrastructure, thereby enabling it to reach hundreds of thousands of customers it never bothered to reach before. In addition, Filber also said that Hot would be required to upgrade its infrastructure. The members of the consultant committee, who approved the proposal, completely ignored Hot's violations and the very bad odor coming from this deal. According to them, they have safeguarded the public welfare by bringing competition in televisions services to outlying areas, thereby fulfilling their function. As for making Hot fulfill conditions before giving it such a reward, or at least requiring an organized investment plan, they think that this is the Ministry of Communications' job, and is none of their business. They want television in the outlying areas immediately, and that is what they have achieved.
In a "Globes" interview, acting Minister of Communications Tzachi Hanegbi explained that he was behind this decision, but that the difficult questions should be directed at Filber.
"Globes": You undoubtedly have heard the criticism by various parties of your decision to waive Hot's obligation to deploy its infrastructure nationwide. Did you study the issue thoroughly before making the decision?
Hanegbi: "There are dilemmas in any decision. No issue is simple, certainly not in the communications sector. I relied on the committee's recommendation after consulting Filber, its head. I heard that the decision was a unanimous one by all the parties. Not one of them objected, and there were parties there whose professional mandate was in diverse areas, and I adopted their recommendation as made."
It is possible to understand the logic behind the decision, but there is another side to the coin. The Ministry of Communications has approved a violation of a license, and has given benefits to a company that ignored the law. Shouldn't you at least tell Hot, "We are making a concession to you, but you should at least pay a fine, so that you can come before the public with clean hands, and so that Hot does not profit from its violations?
"You have to talk with the chairman of the consultant committee about this, and ask him whether the committee discussed this possibility. I wasn't present at the committee's deliberations, which took place before I began my term. The answer to your question, however, is in the question itself. You yourself say that the violations were ignored and accepted for years. A new minister and a new director general have now come, and we don't want to wallow in the past, because our goal is to increase competition in the sector and improve the service to the consumer, so we have to give incentives to all the companies, so that they will invest in a market with competitors. There are companies here that are doing business calculations, so we have to constantly see what will strengthen competition.
"You constantly complain that the ministry doesn't take on Bezeq, and allows it to remain the strongest and most profitable entity. It seems a little strange to me that when we try to strengthen companies competing with Bezeq, and try to create and incentive for them to invest, extend their deployment, and take on very sizeable expenses at a time of uncertainty, you still complain."
"You have Filber's telephone number. Ask him"
Hanegbi hides behind what he calls the criticisms and arguments of reporters because they ignore the fact that in some cases, the Ministry of Communications is quite capable of setting preliminary conditions. For example, in the case of Bezeq, the Ministry of Communications set a wholesale market policy stating that if Bezeq does certain things, it will receive concessions - in other words, conditions. With Hot, however, there are no conditions.
"If you read it, the decision about Hot is also entirely conditional," Hanegbi says in response. "Hot must deploy in dozens of communities where it has not previously deployed, on the way to nationwide deployment."
But this is not deployment. They are going to receive access through Bezeq's Internet.
"That's obvious, but we don't want the companies to dig up the country three times to lay fibers. We allow them to share. That's the whole idea of the wholesale market you support."
It depends on whom you ask.
"I haven't heard even one reporter who thinks otherwise. It's ridiculous for Hot to deploy fibers now. It's not impossible, but it isn't right. It would take many years and investments that no company would undertake when the infrastructure system already exists."
You talk about existing infrastructure and digging, so why, for example, is Hot unwilling to allow a wholesale market on its infrastructure, and why is the Ministry of Communications doing nothing about it? Why is it impossible to make the benefit contingent on the existence of a wholesale market on the Hot network? Isn't that right from the standpoint of public fairness?
"As I said, I can't respond to questions about the alternatives facing the committee, because I didn't see them. These things should have been settled earlier, but everything was delayed because of the prime minister's conflict of interest."
With all due respect, however, there isn't even a sanction if Hot does not fulfill its investment obligation this time.
"You have Filber's telephone number. Ask him."
Even Filber mentioned the subject of investments. Wouldn't it be right to make sure that Hot first makes the investments it supposedly undertook, the identity of which nobody knows - even the committee members? Perhaps a guarantee, because we're dealing with a company that openly violates the law.
"I understand the question. I saw the committee's decision, and had there been such an alternative that included a sanction, and had they thought that there was a way to give the company an incentive to make the investment, I assume that it would have been preferred. But even if had not been preferred, I don't know the answer to this. You have to ask the director general, and they are able to defend this decision, and they were also surprised at the negative attitude towards it. What you tell me wasn't written in a single article, and did not appear in a single newspaper."
It appeared in "Globes" quite a few times, and the director general gave no answers.
"I'm not opposed to criticism. I'm willing to talk to everybody. Sometimes, the ministry naturally has a broader view of the constraints, but the criticism doesn't have to come like the UN. It should be balanced. The media fulfills it role, and it eventually strengthens us, because we're tough with the companies, and we need to show that we know how to withstand justified public criticism. I have been familiar with the Ministry of Communications for several months already, and there are disputes there that can't be bridged. On this matter, the stance was clear and unified, and everyone signed the proposal."
You're a seasoned political animal. You know that the committee members are not ministry employees. There's no guarantee that the Ministry of Communications professional echelon supports the Filber proposal.
"Both Haran and Dana (Senior Deputy Director General Haran Levaot and Chief Legal Advisor Adv. Dana Noyfeld, G.P.) attend meetings with me, and they aren't afraid to express their opinion. I told Dana, who is subordinate to the Attorney General, not the Ministry of Communications director general, just like I tell every legal advisor in any ministry in which I serve, 'Feel free to raise any objection, say what you think, I'm not bound to anyone's decision, I'll do only what's right.' I haven't heard a word from anyone on this matter. They realized that to delay decisions and to delay issues is against the public interest. It's a difficult decision; had it been easy, it would have been made earlier."
The professional echelon is not part of the consultant committee. It is by no means sure that they would have given you the same answers.
"But the ministry formulated a positive when reached the consultant committee. Filber didn't represent only himself there."
Bezeq and structural separation: "No magic wand"
I hear that feverish efforts are being made to end structural separation.
"It hasn't reached me yet. It's only carrying out a recommendation by the Hayek committee and Minister of Finance Moshe Kahlon."
But you know the argument that a lot of water has gone under the bridge since 2011, and the market is not the same market.
"I don't want the discussion to begin with me. I want to discussion with me to be the final one, as I have been doing for nine years already in government ministries. If a push is needed, I provide it, but this has been pushed. They'll consult, and present all the views to me. I'm not talking about it, because orderly procedures have to be carried out, and the eventual decision will be controversial regardless of what it is, and there's no magic wand."
Will you hold a hearing?
"The one who actually manages the process is the director general, and he signs the license terms and holds hearings, but because a matter of policy is involved, not rates, I have to the one to approve the proposed policy insofar as it is brought before me."
You did not answer the question.
"What question didn't I answer?"
Is a hearing necessary?
"I said that by law, ministers don't hold hearings."
But you are the appointed minister, and ministers are the ones who determine policy.
"But a hearing is a legal matter. Some decisions require a hearing, and some decisions require a hearing after the decision."
As of now, legally, you do not think a hearing is necessary?
"I'm not familiar with it. It has never been discussed with me. The subject of structural separation has presented to me many times, but the overall recommendation and the recommendations concerning Bezeq have not. It's a broad topic, because it is relevant to the Ministry of Justice, because there will probably be a petition before the High Court of Justice, and it is relevant to the Ministry of Finance. When it reaches me, we'll make a decision."
Published by Globes [online], Israel business news - www.globes-online.com - on October 20, 2016
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