Who Oversees the Telecom Giants?

 

·        Licensing of telecommunications companies and revenues arising from license grant agreements, and the annual levies (7%) for 2024

-         The Ministry of Communications and Digital Economy is the body responsible for regulating and developing the telecommunications, information technology and postal sector, setting policies and legislation, monitoring licensed companies, and ensuring the existence of a fair competitive environment and the protection of consumer rights.

-         The strength of the state in the telecommunications sector is not measured only by the number of operating companies or the volume of collected revenues, but by its ability to build strong regulatory institutions that make the law the ruler, ensure fair competition, and put the citizen as the primary beneficiary! There is a vision regarding the existence of a fundamental basis in managing strategic sectors, where:  the greater the strength of the companies operating in the market, the greater the need for an independent, strong regulatory body with clear powers! This ensures that investors' interests are balanced with citizens' rights and the public interest!

-        The strength of telecommunications companies is not a problem in itself; the sector needs strong companies capable of investing and developing. But the problem arises when the economic power of the companies is not matched by institutional regulatory strength capable of setting the rules, monitoring compliance, and applying the law fairly to everyone!

-         The State Audit and Administrative Control Bureau (SAACB) conducted an audit of the work of the Ministry of Communications and Digital Economy related to granting telecommunications company licenses and collecting license fees and the annual levies of (7%) for the fiscal year 2024, with the aim of assessing the ministry's compliance with laws, regulations and licensing agreements, and verifying the soundness of financial, administrative and oversight procedures.

-         These observations do not concern only administrative procedures, but touch the essence of the relationship between the state and the market; the license is not merely a document that permits a company to operate, but rather a contract that carries mutual obligations: rights for the company, and duties toward the state and the consumer! Therefore, implementing the SAACB's recommendations should not be viewed as a limited corrective measure, but as an opportunity to rebuild the telecommunications regulatory system on modern foundations!

·        Positive aspects:

-         On the positive side: the report pointed to a number of positive practices, most notably the ministry's initiation of amending the Telecommunications Law to align with its new competencies in the field of the digital economy, progress in reviewing the companies' financial files and issuing claims and settlements, in addition to activating number portability service that grants subscribers the freedom to move between operators and enhances competition.

·        Principal observations of the SAACB report that require serious engagement to address and correct such important observations:

First: governance :

-        The report revealed the continued absence of activating the Telecommunications Sector Regulatory Authority despite the issuance of the necessary legislation since 2009, which has led to a regulatory vacuum and overlap in powers between the ministry and the supposed regulatory entity, and a weakness in oversight of service quality and prices.

-        The SAACB also pointed to the continued application of the old Telecommunications Law despite the structural changes that have occurred in the ministry, and the failure to adopt an organizational structure commensurate with its new tasks, which led to overlapping competencies.

-        The report recorded weakness in following up the implementation of annual plans and the absence of precise periodic evaluations that measure actual achievement compared to the set objectives.

Second: the financial aspect and revenues :

-         The SAACB noted a difference of approximately 223 million shekels between expenditures and revenues in the 2024 trial balance, which indicates accounting issues that need to be addressed!

-         It also recorded a decrease in revenues from license fees and annual levies by (18%) compared to 2023 as a result of weak collection and some companies' delayed payments.

-         The report indicated the issuance of retrospective financial exemptions for the period (2010-2018) without clear criteria or an assessment of the economic impact, in addition to not updating the definition of operating revenues in the license agreements to include modern digital developments.

-         The ministry also did not complete auditing the (7%) levy on some major companies for periods after 2021.

Third: licenses and company oversight

-         The report clarified the absence of written and approved procedures to regulate licensing, renewal and cancellation processes, and the existence of 486 entities that did not renew their licenses for 2024 without clear oversight mechanisms to ensure compliance.

-         It also pointed to some companies' failure to submit the required technical and financial reports in accordance with the licensing agreements, which weakens the ministry's ability to oversee and evaluate.

Fourth: service quality and citizen complaints

-         The number of complaints filed against licensed companies reached 895 complaints, a large proportion of which were related to service quality, with weakness in corrective procedures against companies repeatedly complained about.

-         The SAACB affirmed the necessity of linking companies' performance to clear service quality indicators and taking more effective regulatory measures.

Fifth: compliance with license agreements

-         The report revealed that some operators did not pay the full fees due from license fees, which amounted to 214 million dollars, in addition to some companies' failure to comply with the national numbering plan!

-         It also pointed to the incomplete implementation of the number portability service, the failure to issue an official list of competitive services, and the absence of clear rules for pricing telecommunications services!

-         The report also recorded some operators' failure to provide written interconnection agreements, and the absence of a unified template for subscriber contracts.!

·        Key recommendations of the SAACB

-         The SAACB recommended many recommendations that the concerned entities must comply with to correct the items of observations referred to above:

-         Activate a clear regulatory framework for the telecommunications sector and end the overlap in powers.

-         Adopt a modern organizational structure for the ministry that is commensurate with its tasks.

-         Develop a centralized electronic system to monitor revenues and collections.

-         Obligate companies to submit periodic financial and technical reports.

-         Update license agreements to be consistent with the digital economy.

-         Link license renewal to settling financial obligations.

-         Set transparent criteria for financial exemptions.

-         Create a central database of licensed and non-renewed companies.

-         Enhance inspection and oversight of companies.

-         Establish clear rules for pricing services and improving telecommunications quality.

-         Implement the number portability service and enhance competition among operators.

·        The ministry, in its response as the responsible entity, confirmed that it will take the SAACB's recommendations and work on implementing them.!