For many years, the Israeli public has suffered from the heavy hand of the four cellular telephone operators. They charged us exaggerated fees and generally abused us. We were forced to bow to their power and agree to all kinds of plans, rates and unwritten contracts that were impossible to understand, but whose results could be understood only too well: excessive payments to these four companies.
This situation was able to continue for so long because of the distorted structure of the market: When only four companies control it, they essentially form a cartel-like group that can charge monopolistic prices, which necessitates government intervention. Thus the intervention by Communications Minister Moshe Kahlon was both necessary and proper.
The result was that two new cellular operators launched revolutionary communications packages on the same day this week. These packages allow unlimited calling at low rates. And the market that had previously been comprised of four large companies has now become one with eight companies: the four veteran firms, the two new ones and two virtual firms that piggy-back on the infrastructure of the established companies. In a single day, the Israeli market closed a gap of many years with the rest of the world.
The veteran companies were forced to adjust to the new situation, and they have indeed begun lowering prices. They claim that such low rates cannot be maintained for long, so prices will soon rise again. They also say they will be forced to fire workers, thereby increasing unemployment.
There's no need to get excited over these claims. Israel's exaggerated prices have now merely fallen to the levels found overseas, so there is no reason why they should rise again. There's also a difference between a full-service company and one that maintains contact with the customer only via the Internet, so the former companies will legitimately charge higher prices.
The threat of dismissals is also an empty threat. The veteran companies may indeed be forced to fire some of their workers, but that doesn't mean unemployment will rise. Studies show that when reforms are carried out in a given industry, employment in the economy as a whole actually rises, because the entire market expands, new companies are opened and technologies improve.
In other words, this reform is beneficial from every possible standpoint - and particularly for the Israeli consumer.
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