Letter to Jacob

ATT: Jacob Gelbard, Bezeq Group CEO

Dear Jacob,

I received the letter you wrote us about what you call "biased reporting in TheMarker" about the Bezeq group, after the Bezeq union disconnected the HOT cable phone users from the Bezeq network. I have passed all the points to the relevant editors and writers of TheMarker: we shall look into the matter and if there is need to correct, we shall do so.

I would like however to take this opportunity to confess that from time to time, we get similar messages about our "biased reporting". And indeed, reporting in TheMarker is biased, and the Bezeq people know it well.

As you recall, for the last five years, the owners of the cable companies have been at war with Bezeq and its subsidiary Yes, which they want to crush into dust. As powerful businessmen owning newspapers to boot, they have managed time and again to terrorize the regulators and politicians who are responsible for the communications market.

Throughout that period, TheMarker ran stories calling on the regulators and politicians not to bow before the threats of the monopoly, but to assure that competition would survive in the multi-channel television arena - competition over content, infrastructure, and service. The cable campaign failed: Yes is still around and consumers have a choice.

Biased reporting

The Bezeq people know well our "biased" reporting in favor of a competitive market structure. The bankers also know TheMarker's biased reporting in our seven-year campaign supporting a competitive market structure and separation of the banks from their provident and mutual funds.

The cellular carriers remember our "biased" reporting about lowering the oligopoly's fees on connecting cellular calls between one network and another. Food manufacturers and industrialists remember our biased campaign to lower import levies.

Not all our campaigns succeeded. Some were dismal failures. Our campaign to prevent Super-Sol (TASE: SAE) from swallowing Clubmarket failed, and unhappy consumers are already feeling prices creep up.

We can't say whether the Antitrust Authority was swayed by our arguments against letting Nochi Dankner's gigantic IDB group buy Bezeq, but be that as it may, IDB was forced to withdraw from that race. Haim Saban, Mori Arkin and the Apax group bought Bezeq from the state instead, and appointed Jacob Gelbard as CEO.

In short, Jacob, sometimes you win and sometimes you get burned by the biased coverage in TheMarker in favor or competition, consumers and what we see as the public interest.

We admit we are not free of mistakes. Sometimes what we think may be the best solution to create more competitive market conditions turns out to make matters worse. We are committed to only one thing: to act in favor of what we perceive to be the public interest.

The union wags the dog

Now to get to the point: Last week the Bezeq workers disconnected all 110,000 HOT telephony subscribers from the Bezeq network for almost two days. It took the Bezeq management 20 hours to motion the Labor Tribunal against the workers, and even after the court ordered the workers to reconnect the HOT users, six hours passed until they complied.

My question to you, Jacob, is this: Do the NIS 6 million you receive as CEO of Bezeq confer responsibility for the Bezeq workers upon you? We think that the company's privatization was the moment it was supposed to undergo a revolution, organizational and cultural, that would transfer the actual running of the company from the union to the management, and place the customer in the center.

In our innocence, we thought that when Israeli billionaire Haim Saban linked arms with one of the biggest investment firms in the world, Apax, and put a top-tier manager at the company's helm, we'd have a brand new Bezeq that would fight for its position in the market through management, service, and labor relations.

To the best of our recollection, over the last decade the Bezeq workers received more than NIS 5 billion through extraordinary pension terms that exist nowhere else in the communications sphere. These profligate terms were dubbed "privatization remuneration" or "acquiescence payment", a reward for accepting competition.

Each Bezeq worker received, beyond his or her regular pension provisions, between NIS 700,000 to NIS 1.5 million. They were spared the pension reform that deferred the retirement age from 65to 67 for men, and all this was at our expense.

We paid those billions, whether through taxes or through Bezeq's rates, and thought that it was time for some of that money to return to us, as the privatized Bezeq starts being managed in a businesslike, advanced and competitive fashion. The violent, anti-competitive step of cutting off the young rival's customers reminds us of fears we expressed in the past: that in some cases, privatization can be of dubious value.