Bottom shekel / My switch from Cellcom to Pelephone cost me NIS 13,000

Recently I decided to switch from Cellcom to Pelephone. Among my incentives was the "mobility reform," enabling me to switch cellular providers while keeping my personal phone number.

Representatives of Pelephone told me I'd have to pay exit fines to Cellcom, of two types: paying any outstanding amount owed on equipment, and a disconnection fine they call "returning the value of a benefit." That second fine is under government control. Pelephone estimated that I'd have to pay Cellcom about NIS 7,000 in fines..

Upon learning of my decision to switch, Cellcom sent me an SMS, warning me that I'd have to bear fines. When I called to ask how high the fines would be, I learned they could be as high as NIS 20,000. But, I was told, Cellcom's policy prevented the company from sending me a written breakdown of the penalties.

When I got the Cellcom bill, the fines turned out to total NIS 13,227, not as high as Cellcom had threatened but more than Pelephone had estimated.

The details of the fines, their magnitude, their substance and even the mere fact of their collection beg questions. For example, when you get a new cellular phone, you usually don't pay for it up front. The monthly bill includes a charge for the phone which is offset by "free airtime." As a result, the consumer cannot know the actual price of the phone.

Only when disconnecting from service does the consumer learn just how high the phone's price is, in the "charge for the device." As for the fine called "returning the value of a benefit," its main purpose is apparently to prevent competition and deter consumers from switching cellular provider.

Paying any outstanding amount on the phone includes future interest, even though one pays on the spot. Cellcom also charges other fines that the Pelephone representative hadn't known about. The main one was "charge for ceasing service with a commitment," meaning I'd committed to service and was canceling it anyway. Pelephone claims this fine is illegal and Cellcom shouldn't charge it, but the fact is, it did. Pelephone also told me the fine on the phone had been higher than what was legal, adding that I'd also been fined for a phone that had been fully paid for.

I was also charged for "outstanding payment on repair services" - meaning, for a future warranty that was discontinued with my subscription anyway.

If despite all, the firms are entitled to impose fines, why is there no proper disclosure? The absence of transparency is so great that even the marketing representatives of a rival company can't estimate, even roughly, how high the previous vendor's fine will be. That uncertainty deters consumers from switching because even if the competing company is prepared to cover the fine for the user, it can't know for sure what commitment it is undertaking.

Here is a suggestion for the regulators: Make the cellular phone companies write on their monthly bills, and on the invoice when a phone is sold or when someone joins a service package, what the exit fine will be as of that moment. This transparency in and of itself would reduce the level of fines.

The Communications Ministry has its work cut out for it. As is, the situation deters competition and hurts service. If a dissatisfied client has to pay NIS 13,000 to disconnect, the new provider won't be prepared to bear the fine, and the harm to the company losing the client seems quite small. When I told Cellcom before disconnecting that I was dissatisfied with the service and was considering a shift to another company, I was offered a voucher for a cup of coffee and cake as an incentive to stay.

The writer served as chief economist at the Bank of Israel.