Taking Stock / Candy From Olmert

Ehud Olmert looks like the front-runner for the title of worst communications minister in Israeli history.

His achievement is no small one. Olmert only took office four months ago, and his role as communications minister is a sideline; his main job is to serve as industry and trade minister, and also as acting prime minister.

Moreover, he has serious competition. Reuven Rivlin and Benjamin "Fuad" Ben-Eliezer were also dreadful communications ministers. But Olmert has always been one of Israel's most talented, brightest politicians. While Rivlin and Fuad cowered before the powers that be and earned their reputation for spinelessness, Ehud Olmert is something else. His capitulation to the big companies is ideological.

Get in line

Olmert's method is the Teacher's Pet one, giving candy to Partner Communications' Amikam Cohen in January, then to Pelephone Communications' Yitzhak Peterburg in February, then to Bezeq's Amnon Dick come March, moving onto Cellcom's Jacob Gelbard in April. In May, Dankner got his. And who got none at all? The ones Olmert actually represents - you, the public.

You aren't likely to read that in the papers over your morning coffee - because Olmert's system is pure genius. Each month, he announced some new prerequisite concerning this or the other sector in the telecoms industry; and the companies and their managers grasped matters quickly: Shut up and wait in line.

A month ago, it became apparent that Olmert meant to ignore the recommendations of his officials and block the cellular providers from entering the long-distance market. Their entry into the market would have triggered a revolution in the long-distance carrier arena, which has settled into an oligopolistic equilibrium, allowing the three incumbent players to milk the public at will.

Olmert proffers a completely untenable explanation for his decision to leave the long-distance market untouched by competition: The carriers have huge debts because of past losses.

Money machine

What about the rules of the free market? That's what risk is all about. The carriers knew the rules of the game when winning their tenders. They knew they'd be paying access fees to Bezeq, the national phone company. They knew the arena would be opened to competitors.

Not according to Olmert's method, though. When communications companies earn billions, he notes the risks they undertook and legitimizes their profits. But when the risks morph into harsh reality, as happened in the case of the long-distance carriers, he propounds protecting the companies and blocking competition, at the expense of the consumer.

Even the fact that the long-distance carriers have become money-printing machines in the last few quarters hasn't deterred the minister.

The entire communications industry was taken aback after Olmert handed down his decision. The cellular providers couldn't believe that the minister, who purported to support reforms and competition, would leave the gigantic long-distance arena behind barricades. But they stayed silent, and waited in line for their candy.

Short message to the people

Then, on Monday, Olmert again ruled against his officials, who had recommended reducing the charge to consumers from sending short messages, SMSs, from one network to another (say from a Partner user to a Cellcom subscriber) by 50 percent. Olmert ruled - 25 percent.

His decision means the cellular carriers will make tens of millions more each year, at the expense of the consumer. They waited silently, and were rewarded with sweet candy indeed.

Ehud Olmert took the job moments before the Communications Ministry was due to be abolished entirely and replaced with a powerful, apolitical authority. But he didn't like that plan and had other ones in its stead. He preferred the concept of the tycoons making the pilgrimage to his Jerusalem office, where he could lavish them with goodies and make himself their pet in return.

Now the Communications Ministry is slated for abolition in 2005. When that day comes, it can presumably be postponed by another year and another year.

Short memory

Olmert has close relations with some of the wealthiest people in Israel, but he knows he can't stuff them with candy without handing out some to Bezeq and its powerful labor committees too. Now the minister is mulling gradually reducing, and probably abolishing, the structural separation of Bezeq's various operations.

He has already permitted Bezeq's chief executive, Amnon Dick, to join the boards of subsidiaries Yes and Pelephone - a move that contravenes the terms of Bezeq's own operating license. Nor were the Communications Ministry officials made aware of Olmert's decision, which also flouted the previous minister Rivlin's refusal to allow the former CEO, Shlomo Biran, to do just the same.

Olmert is also working on changing the terms of Bezeq's license so as to rescind the state's supervision of its tariffs.

It's also the turn of the cable companies. Yesterday, Ma'ariv reported that the Communications Ministry may reduce the royalties they pay the state.

Indeed, the royalties system is a bad one. It should have been eliminated entirely, while ensuring genuine competition. The thing is, the royalties were laid down in legislation enacted two years ago, when the cable companies also received an eternal monopoly over multichannel television over cable, and a license to provide phone service too.

Hmm, what now? Ah! Slash the royalties. The public has a short memory and can't remember when, why and how the royalties were set.

At the end of Olmert's stint as communications minister, we should have a "healthy" communications sector, with a little competition, a lot of profitable companies, and an ocean of consumers paying through their noses.