Avi Aharon

The cellular telephony market has its beauties. I am not talking about its technological beauties. Technology is nice, and it’s in its best when it affects business in the right direction. However, the cellular business is even nicer than the technology.

The cellular telephony market has popped out of nowhere. The entire world was using wire-line phones (telephones tide to the nearest wall). In 1970s Israel, my parents had to wait 6 years(!) for the “ministry of telecommunication” to hand them a line. The first Israeli cellular service provider was government-owned as well. It had a government-granted monopoly for a decade. Then a second palyer was allowed to provide service and prices dropped so fast, everyone had a phone. In the past decade, BTW, my cellular bill had dropped 90%, where I advanced from 2G (voice and sms) to 3G (camera, internet, facebook-in-the-meeting-room, etc.).

To have prices drop so nicely, you have to allow for some competition. Israel has 4 cellular service providers today, and one of them is not doing very well. In fact, it never has. So, it’s on the market and the other service providers show some interest in the goods.

(I have no idea why. Had this company collapsed altogether, its subscribers will have to move to the other providers. Why pay for something you will eventually get for free? Then again, I don’t own a cellular service provider, so maybe I don’t know as much as I think I know.)

One of the companies has become serious in buying the failing company, and for over a week now, we hear from the regulator (ministry of finance, no less). The regulator claims there are too few cellular companies in Israel, so the acquisition will hurt completion, hence hurt the subscribers, the very people the government is obligated to their welfare.

Business-wise, the argument “there’s too little competition” (or, there is too much, etc.) is meaningless. No one knows everything about the market they play in. You make a move (say, start a cellular company) see how it goes, make another move, and so on.

Let’s look at the following example. In 2002 UK – the most competitive cellular market in the world – there were 4 service providers. Was there a room for a fifth provider? H3G was this fifth player who introduced 3G to the UK (and to the entire world but Japan). With no subscribers to begin with, they offered free voice and sms in exchange for 3G usage. Would it work? How would you know?

H3G new subscribers took the free voice (plain-old telephone calls) and refused to use 3G services. Was this expected? Was H3G losing money? Almost a decade later, we all recognize the brilliant move. Moreover, the UK market has even more service providers. In 2001 Japan, BTW, the first provider to offer 3G had made it expensive right from the start, and had succeeded as well.

The Israeli minister of finance laughs at these examples. The government knows best and the government is the one to determine how many cellular companies this country needs.

You want competition? No problem. The government will give you some. Sure, it will cost you a little, but not via your cellular bill.

Have you paid your income tax for this month already? 

* I know, “irregulable” is not a word. I should be, though, as it is going to be an important milestone on our way to take down the nanny state.