The News Behind The News
January 11, 2000
The Bezek Strike and the Light (of the Train) at the End of the Tunnel
By Amir Etzioni, IASPS FellowBezek workers chose to end the second millenium with a protest strike which left no doubt as to their plans for the third millenium. Why did they take advantage of their monopolistic power, which was granted to them by the state, in order to make life difficult for the Israeli consumer who has no choice but to purchase telephone services from Bezek? The answer: Israel Railways and the first signs of competition to Bezek which are sprouting on its tracks.
First, let us remind ourselves that Bezek is a monopoly in the domestic telephone market which enjoys total government protection from competition. This situation results in excess costs to the economy amounting to millions of dollars annually, part of which ends up in Bezek's coffers.
This situation would have come to an end long ago if the government had carried out its decision to open the domestic communications market to full competition by January 1999. However, a year after this date, the market is still not competitive and competition is still a long way off.
And now, almost by surprise, the signs of competition are appearing. There is still no real competition to Bezek and the threat is not immediate or significant; however, there are signs. And they are significant enough to put Bezek workers on alert and cause them to revert to a strategy of threats.
We are referring to an announcement made by the Ministry of Communications that it intends to allow Israel Railways to offer communications services on the fiber optic infrastructure which it set up along some of its tracks. In principle, this decision represents a preliminary sign that something is happening at the Ministry of Communications and that the long awaited moment is approaching when the communications market is opened to competition. On a practical level, the importance of this communications infrastructure lies in the fact that Bezek's competitors will not have to build their own infrastructure once competition is permitted. This new reality will make it difficult for Bezek to preserve its monopolistic position in the future and will result in lower prices and improved services to consumers at Bezek's expense.
It should suffice to mention just one example, taken from the Internet sector, of the effects of competition on Bezek in order to understand why there will be warfare. We should first mention that anyone interested in a special satellite line for data communications must pay $100 or more to Bezek every month. The competition expected in the future brought about a commitment from Bezek's Vice-President for Marketing before the Knesset Science Committee that "It [ADSL service] will cost approximately $10…" If in fact competition is implemented, Bezek will have to fulfil this commitment to provide quality service at a much cheaper price than at present.
Are you surprised? Doesn't a strike appear to be an inappropriate step? Not to the workers at Bezek or to those among us who remember the opening of the long distance communications market to competition. Then, in 1995, the issue of opening the international communications market to competition was being discussed just as the issue of opening the communications market as a whole is being discussed today. Then, as now, Bezek workers began a series of strikes which at their height involved ignoring Labor Court orders and open threats against the government. In the end, the government caved in to them. As a result, an agreement was signed with Bezek entitled the "Agreement for Financial Stability". It granted various benefits to Bezek which allowed it to achieve huge profits in recent years at the expense of the consumer.
The lesson to be learned is that the Ministry of Communications must not be left alone to fight the battle. The Ministries of Finance and Justice and especially the Prime Minister must align themselves with the Ministry of Communications when it finally makes decisions for the good of Israel's economy.
In fact, in the case of Israel Railways, the Ministry of Communications has found itself fighting not only Bezek but also the Ministries of Finance and Justice. True, it is preferable that Israel Railways stick to the railways and that a business concern in the private sector should provide communications infrastructure. At a minimum, the offering of communications services by Israel Railways should be offered through an independent subsidiary or a private business concern. However, bureaucratic concerns should not prevent this communications infrastructure from being used.
A winning strategy should not be abandoned as is well understood by Bezek workers. This time, the strategy of pressure and blackmail, which was so successful in the past, must not be allowed to succeed again. The communications market must be opened to competition and strikes and threats must not succeed in maintaining Bezek's monopoly position.
Israel Railways should be the squirrel signaling the coming of spring and in its wake will come additional companies which, for a change, will compete for the consumer's business and finally eliminate Bezek's ability to strike which it uses so effectively to achieve its goals.
The writer is a researcher of communications policy at the Institute of Advanced Political and Strategic Studies and a strategy consultant to Internet companies.