It's stuck in the mud, declares Benny Einhorn.
He should know. He's responsible for telecommunications investments by the Tel Aviv Stock Exchange-traded Discount Investments. He's also champions the cable television providers in their various struggles to wedge a foot into the communications industry.
Without getting into the convoluted history of Israel's telecommunications industry, the reality is stark. There is one and only provider of domestic communications and fast Internet. The government-controlled Bezeq phone company.
What's bogged down fast is efforts to prise the domestic sector open to competition. But Einhorn thinks the newly formed government and new Finance Minister may bring the opportunity to change matters, he told TheMarker.com. Einhorn would like the media to gather behind him and commence a campaign calling for the government to expedite opening the sector to competition.
Meanwhile, the cable TV companies are in sorry condition. They received their cable operating licenses in the early 1990s, but this year all three - Matav Cable Systems Media (Nasdaq:MATV), Tevel and Golden Channels all lost money. They lost hundreds of millions of shekels because of the high cost of upgrading infrastructure to digital, because foreign-content prices soared after the advent of their first rival in mult-channel TV the YES satellite broadcasting company. Matav also had to shoulder the burden of financing Internet content company NonStop.
For the first time, the cable companies are looking like whipped underdogs. They certainly look pathetic when compared with megalithic Bezeq, the only company to receive licensing to provide fast Internet service over ADSL infrastructure. Bezeq also has a finger in the content pie thanks to its holdings in the YES satellite company.
Einhorn has a solution for the stagnating industry, albeit one based on his vested interest. To sum it up: The state should free the cable companies to compete in the domestic telecommunications sector, providing phone and Internet service, in return for regulating the content they offer (if it must). The three cable companies currently own five channels: family, movies, sport, kids, and science & culture.
Signs of desperation
His basic idea isn't new. What is new is his statement that the cable companies are even willing to completely get out of content, if they must, just let them at that market. They are even willing to relinquish control of popular channels, such as the children's channel, movies and sports, but for a price. The price is that the treasury can't charge much for communications licenses.
Einhorn's interest is clear. The treasury is likely to demand hundreds of millions of dollars for communications licenses, possibly as much as a billion.
Although Einhorn radiates confidence, the mere fact that the cable companies are talking of relinquishing control over content may indicate how much pressure they're feeling.
On arch-enemy Bezeq, Einhorn states that the real reason it bought its stake in the YES satellite broadcaster is its desire to weaken its potential rivals, the cable companies. YES launched operations in mid-2000. The cable companies have hooked up 95% of Israel's households to their network (excluding Arabs and households of the ultra-Orthodox, who do not watch television). Households registering for YES service disconnect from the cable network.
No crocodile tears for YES
YES has encountered functional difficulties and its losses are mounting, leading Einhorn to speculate that by year-end, Bezeq will own the whole company. He believes Bezeq finds the investment in YES worthwhile, if only for the sake of disconnecting households from the cable network and reconnecting them to the set-top box belonging to YES/Bezeq. But he adds that Bezeq's dastardly scheme will fail, and threatens to take the whole thing to the High Court.
Einhorn doesn't try to conceal his glee at YES's losses and problems. Nor does he pussyfoot about the effect the media has on the situation in the telecommunications industry.
"Stories written about the five families that ostensibly control the entire marketplace and media are populism," he spells out. "But they influence the policy-makers and government officials." And he reiterates: They may decide whatever they want about content as long as the cable companies get licenses to provide communications service.
His generosity is mainly lip-service. But to Einhorn's credit, he doesn't try to hide the dire condition of the Israeli content market. For now the cable TV companies are the main buyers of content and they will always have influence, even if they aren't packaging the content any more. "It doesn't matter if somebody else packages the channels for me, because we're the only ones with real money," Einhorn admits.
Leaving nothing to chance
Last week the Knesset's House Committee finished debating amendments to the Telecommunications Law. Speaking on behalf of the cable TV companies, Einhorn proposed that licensing for the cable companies be incorporated in the amended law. His proposal seriously irritated deputy attorney-general Davida Lachman-Messer and Antitrust Authority commissioner David Strum, mainly because he raised the suggestion when they were out of the room.
The next stage in the legislative process is for the legal counsels of the Knesset's Economics Committee to offer compromises for issues in dispute, such as the price of a communications license.
Einhorn worries that the legislative process will either move at a snail's pace, or not at all, possibly due to Bezeq's lobbying power. That is why the cable companies have not renounced legal steps involving the High Court. Now they've petitioned the court to allow them to provide communications services before their cable licenses expire, without going through a legislative process. They hope that once a precedent is set, it won't be canceled.
The High Court hasn't yet said whether it will even hear the case before the Knesset finishes its handling of the Telecommunications law. But Einhorn explains that the cable companies aren't leaving anything to chance.