Release Details

Bezeq responds to Ministry's demand to terminate Bezeqcard tender process

November 5, 2001
5th November, 2001

Bezeq to the Ministry of Communications:
THE MINISTRY'S DEMAND TO TERMINATE THE TENDER PROCESS FOR SELECTING ONE OPERATOR FOR
INTERNATIONAL DIALING SERVICES FOR BEZEQCARD USERS - REFLECTS TOTAL PREFERENCE FOR THE
INTERESTS OF THE INTERNATIONAL OPERATORS OVER THOSE OF CONSUMERS
"We cannot sit back and accept a situation in which BezeqCard users
are forced to pay tariffs for international dialing services which are
hundreds of percentage points higher than those paid by the users of
the cards of the international operators"

"Bezeq's position is that there is no impediment to continuing the
process for selecting the international operator that will provide
international dialing services for BezeqCard users."

This announcement was made by the CEO of Bezeq, Ilan Biran, to the
Director General of the Ministry of Communications, Adv. Uri Olnik, in
reply to the latter's demand to Bezeq concerning the tender Bezeq
wishes to hold among the international operators for selecting one
operator to provide international dialing services for users of the
BezeqCard.

Biran explained that the Ministry's demand that it cancel the tender
was made only a few days before the date for submitting the proposals,
even though the Ministry had been aware of the process for several
months.

The position paper that Bezeq sent to the Ministry of Communications
expresses the company's surprise that the Ministry should choose to
accept a situation in which BezeqCard consumers are required to pay
high prices for international dialing services, a situation that seeks
to deny Bezeq the option of acting in consumers' interest and
promoting competition in that field.

Bezeq says that the situation today is that BezeqCard service
customers are forced to pay tariffs for international dialing services
which are much higher than those paid by the users of the dialing
cards of the international operators.

For example, when phoning Israel from abroad, BezeqCard customers pay
at least double the tariffs charged the users of the 012 card of
Golden Lines, the company which is the main opponent of the
tender.

There is no financial justification for the tariffs offered by the
international operators to customers of BezeqCard being so high, as
the service does not involve high costs for the operators for
advertising, distribution and collection, all of which are factors
with the cards issued by the operators themselves.

"Clearly, the situation is absurd," says Bezeq in its position paper.
"It is detrimental to BezeqCard customers and unlawfully discriminates
against them compared with the customers of the international
operators. Termination of the process, as the Ministry of
Communications is demanding of Bezeq, reflects a total preference for
the interests of the international operators over those of the
consumers. This is unacceptable. The obvious conclusion from this
situation is that the customer cannot benefit today from open
competition between the international operators insofar as relates to
the use of international dialing cards."

Bezeq notes that in taking a step that promotes equality by
soliciting proposals for international dialing services for BezeqCard
users, it will force the international operators to offer attractive
tariffs to those users, thereby contributing to competition and
benefiting consumers.

"It is surprising that the Ministry of Communications has chosen, in
this instance, to side with the opponents of competition. Bezeq is
concerned that the Ministry is disregarding the fact that the
international operators, wearing the guise of free competition, are
actually seeking freedom from competition," writes Bezeq.

The company goes on to point out that the selection of one
international operator through which BezeqCard customers will place
their calls, will in no way harm the free choice of customers, since
anyone wishing to choose a different operator can do so quite simply
by using the card of that operator.

Bezeq emphasizes that there is no restriction in its general license
that relates to the allocation of BezeqCard customers, and this
service is a free service which is not restricted in any way in the
license. Thus, there is nothing to stop Bezeq from selecting a single
international operator for the customers of the service, provided that
the selection is made in a process of equality and in the customer's
best interests.
Referring to the power of the Ministry of Communications to demand
that Bezeq terminate the tender process, the company contends that the
Ministry's regulatory policy document, published in 1995, on which the
Ministry relies in its demand, has no binding effect, and that
numerous developments have taken place since its publication, as a
result of which the document is no longer relevant. It was published
before licenses were issued for international operators, and certainly
before those operators and other bodies started to issue international
dialing cards.

Moreover, writes Bezeq, after publication of the tender for
international operators, the winning companies were selected and the
Ministry of Communications awarded them general licenses, which
prescribe their rights and obligations. These licenses state
specifically that the license is exhaustive, and supersedes the status
of any earlier or later document.

On the matter of the Ministry of Communication's proposal for a
process of "allocation" of BezeqCard customers to the various
operators, as was done with Bezeq's customers, the company notes that
it would be technically impossible, and furthermore, it is
unnecessary, since a customer wishing to be "allocated" to a
particular international operator, simply has to buy the dialing card
of that operator.

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