It’s the Lawyers Who Are Holding Israeli Wireless Providers’ Feet to the Fire

Class action suits are doing the work of the state and winning customer refunds.

Tali Mayer

Current and previous customers of Cellcom, the cellular service provider, began receiving checks for a few dozen shekels recently as result of a successful 2008 class action suit against the company. As far back as 2004, Cellcom, one of the three long-standing cellular service providers in the market, began charging customers 4.90 shekels a month ($1.37 at current rates) for bills that included call details. Prior to that, Cellcom had provided the information at no charge and reference to the charge did not appear in the company’s contract with its customers.

Lawyers Gil Ron and Havi Klein filed a class action against the company on the issue, and won. In 2011, a court ordered Cellcom to return a collective sum of 22 million shekels to customers for overcharging them for the billing detail. The company appealed to the Supreme Court, which halved the amount of the judgment to 11 million shekels, which it ordered that the company distribute among 282,000 customers.

A few days ago another of the three veteran mobile service providers, Partner Communications, which does business as Orange, also began sending out checks as a result of a class action. Partner had been illegally charging customers for unlocking their phones so that the devices could be switched to another service provider. It collected a total of 6 million shekels in such fees, but was ordered to refund 2 million of it.

And in June the third veteran cellular provider, Pelephone, agreed to settle a class action case filed in 2012 alleging that customers had not received the Internet connection speeds that they been paying for. Pelephone agreed to a 3.7 million shekel settlement, to be split among 308,000 customers.

These cases are a reminder of the power that these companies wielded in the marketplace before a number of upstart competitors upended the market in recent years. It’s also an indication of the lengths that the three companies used to go to in order to squeeze a few more shekels out of its customers. It furthermore underlines the importance of citizen enforcement in the communications sector.

While the Communications Ministry has levied relatively paltry fines of tens or hundreds of thousands of shekels for violations on the companies’ part, judgments in the millions of shekels have been handed down in class action cases.

“One cannot exaggerate the importance of a complaint of this kind,” Central District Court Judge Esther Stemmer wrote in a ruling against Cellcom. “It is for this very reason that the class action law was passed,” she noted, and if it were not for this legal route, she wrote, “it is doubtful if Cellcom’s customers would have seen to it to challenge the violation and doubtful whether Cellcom would have refunded the sums that were charged here.”

The Communications Ministry, however, seems to have other priorities, with what a senior ministry official says is 24 hearings pending within the ministry on various cellular service policy issues. In light of the small staff dedicated to handling the cases, priorities have to be set, but they seem to relate to other issues rather than companies overcharging for the most part.

The ministry has made safe surfing of the Web a priority so that children, for example, don’t encounter problematic situations in their use of the Internet. The ministry is seeking to require Internet service providers to give parents and employers who ask for it lists of websites that are being viewed on a particular computer – with the potential invasions of privacy that this involves as well as the expense that would be incurred by the service provider. And once the information is available, civil libertarians may have concerns that the Shin Bet security service and the Israel Police may seek to obtain the information rather than it just serving the owner of a particular computer.

Furthermore, although Communications Minister Gilad Erdan has made Internet safety a priority, the number of customers who avail themselves of a service that screens offensive Internet content is said to be very small, even though it is offered for free.

Another priority of the ministry involves the proposed requirement that cellular service providers make reception available to nearly 100% of Israel’s territory, even on relatively minor highways and most railway lines. A lot of comments could be made about the cellular market in Israel, but many would agree that the coverage area is the least of the problems. Coverage is among the best in the world. Competition is sufficiently stiff that if one company doesn’t provide good reception, it’s easy enough to switch to another of the many providers.

The mobile operators are concerned about the coverage requirements that the ministry is seeking to impose, which would require them to spend major sums of money that could amount to hundreds of millions of shekels. When the ministry issued its notice regarding a hearing on the issue, all the publicly traded cellular firms sent warnings to the Tel Aviv Stock Exchange disclosing that the development could affect their businesses.

It is thought that such a new requirement would force the cellular providers to install a combined 1,500 new transmission antennas, which will also expand sources of radiation. But in practice, it’s nearly impossible for the mobile operators to put up new transmission facilities. Local governments around the country make that very difficult and in the process, the cellular firms might be faced with violating any new requirement despite their willingness to comply.

So why was Erdan so hot on the issue? Ministry sources say the intention is not to put the companies on the spot over coverage on every inch of minor roadway, but rather to give the ministry the legal muscle to require that the firms provide service where there are real gaps in the networks. The hearing, they say, was an opportunity to set enforcement standards in the event that they need to be invoked in the future.

There was a further tidbit of information in a ministry press release: reference to the fact that the hearing was being held in conjunction with the Israel Defense Forces’ Civil Administration, which is responsible for civil matters in Israeli-controlled areas of the West Bank. By implication, at least, the move may be designed to deal with coverage issues there. This may be a sign that Erdan is seeking to address concerns among residents of West Bank settlements, who have complained in the past of poor cellular reception.

A hearing is also scheduled on a ministry proposal that cellular companies’ call centers have to answer customers within two minutes. Such a requirement would also have financial implications, and the companies have issued stock market warnings on that prospect as well.

Critics of the move may question whether the long wait times on the phone are best addressed through regulation. Wait times are generally short in the cellular sector because of the competition, and opponents may suggest the ministry’s time would be better served by continuing to cultivate competition rather than deal with such a detail.