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As of tomorrow, telecommunications companies will no longer be allowed to charge subscribers exorbitant exit fines for terminating their contracts with service providers early. The Ministry of Communications capped exit fines by Internet service providers, cable and satellite television, and telephony, after abolishing fines by mobile carries earlier this year.
The law came into effect for new subscribers in August 2011, and has now been extended to current subscribers. The ministry capped exit fines to 8% of a subscriber's average monthly bill times the remaining months of the contract period. The law applies to subscribers whose average monthly bill is less than NIS 5,000. For subscribers with a higher average monthly bill, or which have more than 100 mobile telephone lines, the exit fine is as stipulated in the contract with the service provider.
The law applies to Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) and its satellite TV provider subsidiary DBS Satellite Services (1998) Ltd. (YES), cable TV and telephony services provider HOT Telecommunication Systems Ltd. (TASE: HOT), and all Internet service providers.
Until now, the heavy exit fees charged by the telecommunications companies effectively prevented subscribers from switching providers before the expiration of their contracts, thereby limiting subscribers' bargaining power and restricting competition in the market.
Minister of Communications Moshe Kahlon said, "The era in which customers wanting to switch providers were forced to pay unreasonable fines is over. As of today, the customer will benefit from the fruits of real competition."
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