Bezeq Israel Telecommunication : Immediate Report – Examination of separation between broadband Internet infrastructure service and ISP Internet access – Secondary Hearing

Immediate Report - Examination of separation between broadband Internet infrastructure service and ISP Internet access - Secondary Hearing.pdf643.5 KB

Immediate Report - Examination of separation between broadband Internet infrastructure services and ISP Internet access - Secondary Hearing

Further to the immediate report of the Company datedOctober 5, 2020regarding the hearing for the examination of the separation between broadband Internet infrastructure services and ISP Internet access services ('ISP') ('first hearing'), an immediate report,is hereby provided that on February 24, 2021 a secondary hearing was published on the Ministry of Communications (MOC) website ('secondaryhearing') with material adjustmentstothe outline proposed in the first hearing, after the MOC considered all the comments received in the first hearing. The MOC's stated position is that they are adamant that they continueto promote the consolidation of retail broadband Internet services into one product offeringalongside the existence of a competitive market in which each provider will have a direct connection with the final customer and the main tool for reaching this goal is the improvement of the wholesale market through self-regulation and equality.

The following are the main points of the amended outline:

-Immediately after publicationofthesecondaryhearing,theinfrastructure providers and ISP access providers will be given the opportunity toreach agreements on indices for the wholesale market and agreed compensation for non-compliancewith such indicesfor a period of up to two months from the secondary hearing decision.

-At the endof thisperiod, each infrastructure provider will submit to the MOC a shelf agreement that reflectsthese understandings. Within one month from the receipt of such agreement, the MOCwill beallowed to either adoptthe shelf agreement(which will be a uniform agreement for alloperators seeking ISP Internet access on a network), to reject it and require the submission of a different agreement or to approve it with certain changes. To the extent that the shelf agreementis not agreed upon by the parties,theMOCwill be entitledto seta differentshelf arrangementthat includes indices for the wholesale market and agreed compensation.

-Upon approval and implementation of the shelf arrangement, a 'calibrationperiod'of three monthswillapplyduringwhich the infrastructure providers will transfer the indices to the ISP providers and to the MOC on a monthly basis. A review of the agreed indices and compensationmechanisms will be conducted,and the MOC will examine claims regarding the effectiveness of the established modeland the implementation process.In addition, it will performcomprehensive reviews onmeasures of productivitywith the possibilityto extend the calibration period to a period not exceedingthree monthsif significant discrepancies are found between the data presented by the infrastructure providers versus the ISP providers.

-After the calibration period, the MOC will announce the beginning of a three-month' preparationperiod'at the end of which the ban on infrastructure providers to offera unified service) ' the determining day'(will be lifted. The compensation mechanism will start operating at the beginning of the preparation period.From the determining date the infrastructure providers will be obliged to continue to publish the indices every monthto the ISP providers operating in the wholesale market as well as the MOC. The MOC may provide these indices to the public or to any of the entities it supervises. It will monitor and enforce the agreement if the performance measurements indicate a breach ofequality in the provision of wholesale services,inadditionto enforcement ofpayment pursuant to the agreed compensation mechanism included in the shelf agreement.

Additional emphasis in the secondary hearing:

- Marketing of a reverse bundle will be permitted until the determining day.

- A complete calibration period will be required in relation to the wholesale market that will operate on the Company's fiber network. Therefore, if the fiber network begins operating after the start of the calibration period in relation to the traditional copper network,the preparation period in both networks will begin only at the end of the calibration period of the fiber network.

- If there will be significant difficulties in implementing a wholesale market, both with respect to the ultrawidebroadband network and the existing broadband network, the MOC will review the policyon this issue and will act in accordance with the tools at its disposal.

- As stated in the first hearing, the MOC intends to establish a mechanism of automatic portability between providers that will take effect on the determining day.

- One year after the determining date, the MOC will review the number of subscribers that are still split between infrastructure providers and ISP providers. If the number is significant, the MOC will take further action in order to bring about a situation where broadband Internet serviceis provided as an end to end service by one provider.

The following is a link to the secondary hearing in Hebrew as published on the Ministry of Communications website:

https://www.gov.il/BlobFolder/rfp/24022021/he/Secondary_Hearing_ISP_24022021.pdf

The Company and itssubsidiary Bezeq International Ltd ('Bezeq International') arestudying the secondary hearing documents. The Company estimates that if implemented, and the ban on the Company to offer a unified service will be lifted from the determining date (and the Company will be permitted to offer a unified end-to-end broadband Internet service) it will have a positive impact on its operations.Regarding Bezeq International, the movecould have a negative impact on its operations and result in an impairment of its assets. However, the total impact on the Group in the coming years is expected to be positive.

Sincerely,
Bezeq - The Israel Telecommunication Corp. Ltd.

The above information constitutes a translation of theImmediate Reportpublished by the Company. The Hebrew version wassubmitted by the Company tothe relevant authorities pursuant to Israeli law, and represents the bindingversion and the only onehaving legal effect. This translation was preparedfor convenience purposes only.