Israeli Government Abolishes Split between Infrastructure Suppliers and ISPs

The Ministry of Communications in Israel has reformed the internet marketplace with their new reform.

The Ministry of Communications puts an end to the split between the infrastructure provider and the Internet market service supplier. The reform will mean that every consumer in Israel will have one single address for purchasing Internet services and for troubleshooting problems.

“In October 2020, as a Minister in the 35th Government of Israel, I announced the intention to abolish the split between the infrastructure and the Internet service supplier as a means of improving the service – A hearing was launched and the process was carried out until the elections were held. Currently, after the political crisis and the formation of a permanent government, we are closing the circle. This is one of the first decisions to be made because its impact on the pockets of Israeli citizens and the service they will receive is enormous – the Internet is one single product and the split has caused confusion on the part of the customers with the customer running back and forth between supplier companies in the event of a malfunction.”

Yoaz Hendel, The Minister of Communications

The reform will also put a stop to the phenomenon of dormant subscribers – tens of millions of Shekels that have been taken out of the pockets of citizens in vain – and will also rectify a distortion that has impacted many consumers. We will continue to take actions that will make the communications market more transparent, more competitive, and of a higher quality.”

“After extensive and complex work conducted at the Ministry headquarters level, we have reached the finish line in the process of abolishing the split between the Internet service supplier and the infrastructure provider in the Internet market. The split, which was important at the time it was set up, has become a source of turmoil, a proliferation of dormant subscribers, and has impacted upon the service consumers receive. The new structure of the Internet market will allow consumers to enjoy quality services and, in parallel, will promote the wholesale market in a manner that will ensure competition for the consumer’s heart and mind.”

Director-General of the Ministry of Communications, Liran Avisar Ben-Horin

The reform is expected to take effect in early 2022.

The main principles of the reform: 

  • Improving the service that the consumer will receive in the fields of the Internet, by creating a “single address” – one company from which the services are obtained. 
  • The reform will address, once and for all, the phenomenon of “shrugging off responsibility” on the part of the service providers, made possible as a result of the separation between the infrastructure company and the service provider, in matters of malfunctions, which will oblige the company that provides the unified service to meet a higher service standard. 
  • The reform will minimize the phenomenon of “dormant subscribers” which, according to estimates, caused consumers about NIS 50 million in excess payments in Israel each year, for a product they did not use. 
  • Over the past year, the Ministry has piloted actions that lead to a reduction of over 46% of subscribers who were plagued by the phenomenon and continues to act regarding this matter at all times. 
  • The process of transitioning to the new regulation will be gradual, with the aim of strengthening the wholesale market mechanisms in a manner that will ensure and strengthen competition after the abolition of the separation between infrastructure and the Internet services supplier. 
  • The reform produces mechanisms that will ensure that even small and new players can operate effectively, equitably, and competitively vis-à-vis infrastructure owners within the wholesale market. Infrastructure owners will sign binding agreements with companies seeking to use the infrastructure, under which compensation arrangements will be concluded for breach of the terms of the agreement. 
  • The reform ensures that the small companies in the market will continue to market the unified Internet service. 

The Minister of Communications, Yoaz Hendel, this morning (Sunday) approved the reform to abolish the split between the infrastructure provider and the Internet service supplier, which will change the structure of the Internet market and is expected to lead to a significant improvement in the quality of service to consumers. Currently, a consumer is able to purchase the service from two different companies that provide infrastructure and Internet access services separately.

The “wholesale market” reform made it possible to market the two services in one package, but, in practice, the services were still provided by two companies separately, in a manner that impacted the quality of consumer services in Israel. Consumers who were plagued by malfunctions had to deal with a “shrugging off of responsibility” between the infrastructure company and the Internet service supplier, and were afflicted with the phenomenon of “dormant subscribers” – continued oblivious payment to the communications company even though the consumer stopped receiving services from the communications company. The new reform will abolish the separation between the two services and allow a single company of the choice of the consumer, to sell the services as one single package and one single service.

The Ministry of Communications believes that it is time to end the supplier-infrastructure model that has run out of competitive steam, and instead to encourage competition through the wholesale market. Over the past year, the Ministry has been working on formulating the reform that will abolish the split created about 20 years ago. 

Last October, the Ministry held a hearing regarding the outline for the implementation of the reform, and later also held a secondary hearing, following which it formulated the outline for abolishing the split between infrastructure provider and Internet service supplier, as approved this morning by the Minister of Communications. 

The Ministry decided upon the abolition plan as detailed: 

  • The companies that own the infrastructure will present an agreement with the Internet service supplier companies (“shelf agreements”) to the Ministry of Communications, which will include result indices and compensation mechanisms defined and agreed upon in advance, after which the Ministry will announce the acceptance of the agreement and/or changes in the agreement. 
  • A calibration period will be set during which the infrastructure and Internet service supplier companies will submit, each month, the main performance indices to the Ministry. 
  • Existing customers who wish to continue consuming the Internet services in a split manner will be permitted to do so. New customers who sign up will be allocated to the unified service only. 
  • At the end of one year from the implementation of the reform, the Ministry of Communications will review market trends and the transition of subscribers to the unified Internet service. Based on the findings of the review, steps will be considered to ensure the implementation of the reform and the improvement of consumer service.

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