The Israeli Communications Revolution and the Role the State
By David Levi-Faur
Politika: The Israeli Journal of Political Science and International Relations, No. 4, December 1999, pp. 27-44 [Hebrew].
Abstract
The Israeli telecommunications regime is currently undergoing a process of rapid liberalization. The old telecom regime, established in the 1920s by the British, was characterized by public ownership and management on the one hand, and natural monopoly and analogue technology on the other hand. This regime is now being replaced by a new one, which is characterized rather by a growing separation of the state's functions as a policy maker, a regulator, and a service provider. Technological pluralism and the disintegration of the old natural monopoly are also salient in the current regime. The accomplishments of the new regime are attested to by the falling prices of some telecom services, competition between suppliers and by advanced technology. It is, therefore, not surprising that the so-called "telecom revolution" serves Israeli economic liberals as a paradigm example for the advantages of privatization, liberalization, deregulation, and competition. Telecom liberalization in Israel and elsewhere seems to support the view that all the state need do is to "retreat" for the economy to flourish.
The paper examines these arguments from a critical perspective and distinguishes two types of competition - deregulated competition and regulated competition. Its findings indicate that although it is true that the changes in the Israeli telecom regime include deregulation of certain aspects (e.g., telecom equipment) they include also re-regulation (e.g., interconnection of telecom networks). The paper offers an alternative to the common wisdom that emphasizes deregulation as the major aspect of the changes. It argues that the rise regulatory tools and policy is a critical condition for competition, for the promotion of new technologies, and more generally for the future economic development of the country.