Taking Stock / The Soviet Tractors Barrel on

Privatization is not an end in and of itself, as the affair of the Internet, Bezeq and the IEC shows.

The residents of northern Israel remember Soviet tanks all too well, thanks to the wars with the Syrians. Our memories of Soviet tractors are less immediate. Israel's farmers naturally preferred to buy American, German, French or British heavy machinery. Soviet tractors were generally poor imitations of the American ones. A museum on the history of tractors at Ein Vered has models made by McCormick, Caterpillar, Oliver, John Deere, Ferguson, Ford, Harris, Empire, Farmall and even Porsche. Museum director Erez Milstein told us he isn't aware of any Russian tractors in Israel at all.

Russia tractor

Yet your faithful author could swear he heard the grunting of a Soviet tractor up north last week. I couldn't identify the model. What's for sure is that I heard Prime Minister Benjamin Netanyahu talking about it on a visit to Kiryat Shmona.

The event for which the Soviet tractor was whipped out was the inauguration of a pilot program to supply high-speed Internet to 150 homes in Kiryat Shmona.

At the ceremony, the prime minister said his friend, Communications Minister Moshe Kahlon, told him, "Fast Internet in Israel is a Soviet tractor instead of a racing car."

These are dramatic days. Israel is under attack the world wide and the Finance Ministry is under attack by the oligarchs and cartels. You might be surprised that the prime minister has the leisure to cut ribbons at a high-speed Internet pilot.

But you shouldn't be. No politician, let alone Netanyahu, could resist the killer combination of high-speed Internet and Kiryat Shmona. Technology plus periphery, with a frill of education and border-town-in-constant-danger - competition, progress and symbol of our survival, all in one.

It's a little overdone to compare Israeli Internet service to a Soviet tractor. More than a year ago Bezeq launched its NGN - next-generation network - which it's gradually deploying nationwide. Even the HOT cable television company is offering clients high speeds of up to 100 megabits a second (limited to certain places, and at a high cost of NIS 600 a month ).

But Netanyahu isn't wrong. Israel is indeed one of the most backward countries when it comes to Internet speed. Our admission to the OECD gives us a benchmark, an accessible and excellent criterion for comparison, and it turns out that the average Internet speed in Israel is about half that elsewhere in the world. Compared to the most advanced regions such as Scandinavia and Southeast Asia, Israel's Internet really is a Soviet tractor.

But before we look at how Netanyahu plans to accelerate Internet speed in Israel, let's see why it's so slow. After all, we are the land of milk and honey and high-tech, the land that gave us the three great religions and any number of cool startups that do that very thing - accelerate the speed of data traffic on the Internet.

Porsche to borscht

To understand the problem, we must go back five years to another press conference at which Netanyahu was cutting a ribbon. That was at Bezeq's privatization. The state sold 30.6% of the company's stock for NIS 4.3 billion to a group of investors headed by Apax Partners, media mogul Haim Saban and Mori Arkin (who had owned the drug company Agis Industries, which he sold to Perrigo ). Netanyahu, the King of Privatization, was very moved at the event, where he said: "Privatization will benefit all Israel's citizens. This particular privatization will benefit every citizen, but it has something else, too: It is a demonstration of faith in Israel's economy."

It is five years since the privatization of Bezeq, the company that controls most of Israel's high-speed Internet infrastructure - a wealthy, liquid company whose privatization is considered one of the most lucrative deals Apax has made in the last five years. So how is it that Internet in Israel, provided by this shining example of privatization, is a Soviet tractor?

Why on earth do we privatize government companies in the first place? To get Soviet-style service? Surely Bezeq wasn't sold just to make Apax and Saban some more billions?

No, Bezeq was privatized based on the assumption that the government isn't good at managing companies, mainly in dynamic areas such as telecommunications, which is also key infrastructure for economic activity.

Until eight years ago Israel was considered one of the most advanced nations in high-speed Internet service, more advanced than the United States and most of Europe.

Strange but true: When Bezeq was run by the government, the Internet was fast. Since then it's morphed into a Soviet tractor.

It's no wonder, really. Bezeq's new owners did the math, factoring in competition in Israel, and concluded they could wait before investing heavily in speeding up Internet service.

HOT, Bezeq's only real competitor, was in no rush either. The result is that Israel's standing in the world of high-speed Internet eroded.

Only in the last year did Bezeq and HOT really get into high-speed Internet, and only now, five years belatedly, did Netanyahu decide they need a push, in the form of a new rival that would force them to offer the public what it deserves - true high-speed Internet under international standards.

Who's the new rival? An Italian sports car, metaphorically speaking?

Not exactly. Netanyahu is bringing Israel none other than the Admiral Kuznetsov, the most terrifying Soviet aircraft carrier of them all - the Electric Corporation.

Which Electric Corporation? Russia's? No, dear reader, our own Israel Electric Corporation, which our own prime minister despaired - exactly two months ago - of ever reforming, improving service, streamlining and lowering its prices. Yes, the IEC, a creaking utility de facto in a state of bankruptcy (see page 8 ), dependent for its very survival on government handouts or a handout from the public by jacking up its tariffs.

The idea of using the IEC's electrical infrastructure to get more companies into fast Internet is inspired. But the idea of allowing the people who control the most pugnacious monopoly in the land into the Internet market seems a little strange, especially coming from the King of Privatization and Competition Too, Netanyahu.

The affair of high-speed Internet, Bezeq and the IEC is another opportunity for the prime minister and the Finance Ministry to rethink their policy on privatization. It is time for them to remind the public and themselves that privatization is not the goal in and of itself. It's a means to an end, the end being to make the company more efficient and improve its service to the public. If the company's sale did not achieve those ends, it was superfluous at best and harmful at worst.

The treasury boys have been complaining they can't gain control of the national economic agenda - somebody else is driving it.

One could think of several reasons why the treasury lost control of the reins, but perhaps first the ministry should do some introspection.

Israel's economic growth, competitive edge, entrepreneurial spirit and flexibility won't come from the tycoons, the cartels and the monopolies, be they government-owned or private.

Economic growth and innovation come from the small companies and entrepreneurs. The big groups, government or private, have no incentive to take risks, to innovate, to streamline. Their attention is devoted to protecting the market's convenient structure.

The smaller the group of people running the economy, the more competition and management suffer. They scratch each other's backs rather than compete. They take the public's money and invest it in each others' businesses.

The heads of the business sector, who call themselves "business leaders," sneer that people seeking to promote competition and fairer play, to allow talent to win, are "communists" or "socialists."

But the public isn't stupid. People are gradually starting to realize that the real thing closest to a Soviet regime in Israel is precisely the regime of the 10 big business groups.

If the Prime Minister's Office and Finance Ministry want to regain control over the economy and their relevance, maybe they should meet less with the "business leaders," whose aim at those meetings is to suffocate reform and squeeze the government for more money.

The people at the Prime Minister's Office and Finance Ministry would do better to spend their time planning and executing reforms to create infrastructure that supports businesses, innovation and entrepreneurship. They would find that it isn't only bureaucracy stifling the entrepreneurial spirit, it's the Soviet tractors, cartels and monopolies.