Israel plans to phase out interconnection charges

Israel plans to phase out interconnection charges

Israel’s Minister of Communications, Yoaz Hendel, has announced plans for the gradual abolition over a three-year period of connectivity rates for the networks of cellular companies and landline telephone companies.

This move has been promoted as continuing a policy of deregulation and encouraging competition in the communications market. According to TeleGeography's CommsUpdate, the move follows initial proposals that were set out in September 2021.

In a press release from the Ministry of Communications, Liran Avisar Ben-Horin, the ministry’s Director General, said: “The connectivity fee rate has not been updated since 2014 and has lost relevance in relation to technological developments and the market situation in Israel and around the world.”

This fee is a charge levied by network operators on other service providers to recover the costs of the interconnection facilities (including the hardware and software for routing, signalling, and other basic service functions) provided by the network operators.

The gradual move to cancel the payment and the transfer of the payments between the companies will, it is argued, “benefit consumers and allow cellular companies to offer an unlimited amount of minutes for a lower amount and, inter alia, reduce the cost of home telephone plans”.

The ministry also seems to be optimistic that this move will allow number portability from landline phones to mobile phones and encourage competition among minor actors in the market. Smaller companies have so far earned relatively less from connectivity because most of the calls from these operators tend to be to larger service providers.

A similar move has made headlines recently in Kenya where, as we reported recently, plans have been unveiled for operator Safaricom’s mobile termination rates to be controlled by the government in a bid to protect smaller rivals.

The Israeli decision will abolish the current existing control regarding connectivity fees, while moving to a model known as BAK (bill and keep), in which there is competition in the call completion section, but which eliminates the wholesale transfer of payments between communications companies and reduces connectivity fees.

Bill and keep is defined by the OECD as "a pricing scheme for the two-way interconnection of two networks under which the reciprocal call termination charge is zero – that is, each network agrees to terminate calls from the other network at no charge".

It is not yet known how the country’s operators feel about these plans.

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