Moshe Kahlon - Eyal Toueg
Moshe Kahlon, author of the reform. Photo by Eyal Toueg
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Israel's consumers may soon gain access to really high-speed Internet service, after the cabinet on Sunday approved the plan for the Israel Electric Corporation to become an Internet-infrastructure wholesaler.

The government thus approved the plan formulated at the Communications Ministry to set up a third high-speed Internet network using the state-run Electric Corp's power grid. What does this mean to consumers? It means that once its venture is up and running, the IEC will be running fiber-optic cables to consumer homes over which the Internet service will be provided - by another company entirely, unrelated to the IEC. The IEC's network will be 10 to 100 times faster than the technologies presently available in Israel.

Consumers won't be contracting directly with the IEC, though. A consumer will as usual reach an agreement for Internet service from one of the Internet service provision companies, such as NetVision, Bezeq International or 012 Smile.

That ISP then contracts with HOT or Bezeq - or in the future, possibly with the IEC - to run the infrastructure to your home.

If the ISP chooses the IEC, the IEC will run a fiber optic cable to your home. The speed is expected to be as fast as 100 megabytes per second.

The IEC infrastructure is one development. A second is the development of a wholesale market.

Presently, you order Internet infrastructure from Bezeq or HOT and contract with NetVision or whoever to provide the Internet content. The IEC is essentially going to be selling wholesale infrastructure service to the ISPs. In the future Bezeq and HOT may do so as well, while also marketing their Internet services directly to consumers as they do now (over cable in the case of HOT and phone lines in the case of Bezeq ).

IEC wouldn't be in control

Under the Communications Ministry's plan, the utility would own 49% of the new communications company. A private investor, which has yet to be chosen, would own the remaining 51%, the ministry said in a statement.

"The cabinet's decision significantly advances the establishment of a new communications company," Communications Minister Moshe Kahlon said. "The project of broadband Internet for every home is essential for economic growth and to help the weaker sectors."

"The price of high-speed Internet in Israel is frightening, by international standards," said Assaf Cohen, the deputy director-general for economics at the Communications Ministry.

The electric corp. won't be selling Internet service to consumers: It will be selling infrastructure services to content providers. Bezeq and HOT will also be selling infrastructure services to content providers.

Carmel Shama-Hacohen, chairman of the Knesset Economics Committee that had discussed the proposal ahead of the cabinet vote, said the committee applauds the reform led by the Communications Ministry. Shama-Hacohen concurred with Cohen, saying Israeli Internet prices are too high: "There is no reason why a family in Israel should pay more than a family in Europe," the Knesset member said. "It is time to end the hassle deriving from the separation of infrastructure and content services."

"When the decision on separation was made years ago, it was intended to spur competition," Shama-Hacohen said. But consumers haven't benefited: They've suffered, he said.