Taking Stock / Round It Out to Zero

1.We were wrong. When Haaretz reported that the cellular carriers had hired lobbyist Eyal Arad to fight the Communications Ministry plan to slash the tariffs for incoming calls, it wrote that Arad is a close associate of Finance Minister Benjamin Netanyahu.

Naturally, Arad is nothing of the sort. He changed his political horse years ago. Now he's associated with the prime minister and his office. We should have known better. If Arad's association had been with Netanyahu, we might assume the cellular trio wouldn't have hired him now.

The person who decided the companies had to slash their incoming call rates was Communications Minister Ehud Olmert, who is also associated with the prime minister. And every political novice knows that you don't hire a lobbyist associated with Netanyahu to advance a deal with Olmert.

2. Olmert's decision is likely to cost the cellular carriers between two to three billion shekels in revenues each year. We may assume the companies will therefore fight the decree not only through lobbyists but on the beaches, the landing grounds and indeed in every arena that suggests itself.

The first arena is the press. The day Olmert announced his decree, the cellular companies hurried to damn his decision as stupid. It would do the public no good, they said - in response they'd simply raise the cost of outgoing calls, warned the chief financial officer of one of the companies.

Two days later, the cellular carriers realized they weren't finding many buyers for their theory that cuts in incoming calls could be offset by raising the tariffs of outgoing calls. So then we the media were passed the following leak - because of the cut, "the cellular companies will have to fire hundreds of workers."

Clearly the companies urgently need a PR professional or a strategist, to explain that they should adopt a clear line of battle. They can't just fire off wild statements in all directions, telling contradictory stories in the same week.

If the cellular companies are threatening hundreds of job cuts, then obviously they do expect a serious drop in revenues. Therefore - they cannot raise the cost of outgoing calls by enough to compensate for the falling revenues from incoming calls.

And if they can't hike outgoing calls by enough to make up the difference, what does that say about competition in the "market" of incoming calls? Versus the competition in the "market" of outgoing calls? Does that mean that there is no real competition regarding income calls, that the customers are captive, and that the intervention of the Communications Ministry is a good thing?

3. After applauding Communications Minister Ehud Olmert's readiness to go to war with the cellular companies, one should remember that the ministry has shown precious little interest regarding incoming calls.

First of all, the correct model would be to reduce the price of incoming calls to zero. Yes, zero, nothing, a big fat nought. Wise regulation of the communications market should divert revenues to more competitive arenas, such as outgoing calls. A zero cost for incoming calls would be a bellwether the entire marketplace needs - the ability of subscribers to change providers without changing their phone number.

Secondly, the recommendation to slash incoming call tariffs has been kicking around for more than a year. It could have been done at the start of 2004, not in stages ending in January 2006. That delay is costing Israel's citizens several billion shekels.

4. The idea of reducing the cost of incoming calls, which is also called interconnection fees, to zero, may sound revolutionary. But it isn't - it's an ancient idea and in fact, the ministry and several of the major communications players have already acknowledged the need. Look at the "bill and keep" arrangement on which the ministry has based its plan to allow the cable companies to compete with Bezeq over domestic communications.

Under that arrangement, cable companies won't be giving Bezeq the interconnection fees they collect. They get to bill customers and keep the money. The purpose of the arrangement is to give the cable companies a head start against the incumbent national giant, Bezeq, as almost all incoming and outgoing calls will be via its nationwide network.

The Communications Ministry decided that to stimulate competition in the domestic arena, they have to slash domestic interconnection fees to zero. Yet for some reason, they haven't extrapolated that conclusion to cellular communications.

5. This article is excruciating, isn't it - terms, tariffs, markets, zeroes?

Hah! That's exactly what the Communications Ministry hopes you feel. The more complicated the matter is, the more rates and obscure terms are involved, the greater is the chance that the companies can charge us through the nose while the debate rages on over our heads.

So let us wrap this up with some simple numbers. The cellular companies' revenue from income calls is about NIS 4 million a year. The Communications Ministry suggests reducing that rate by 66 percent.

That gives us, the customers, NIS 2.2 billion. Anybody can understand that.