The decision, following a "long public consultation process," is based on the spectrum shortage in the country. Erdan says that letting CSPs use the frequencies will "limit the public access to the Internet." The Ministry's tests found that Israel only has 200MB of spectrum allocated for Wi-Fi compared to the U.S. and Europe where 500MB is set aside, making it a scarce commodity. Municipalities and other public organizations will still be allowed to offer free public Wi-Fi services.

The distinction between carrier Wi-Fi use and public use is an interesting one. As wireless analyst Dean Bubley points out in his blog, it suggests that sponsored Wi-Fi is more valuable to the city given that it adds to public Internet access versus just substituting 3G/4G connectivity for Wi-Fi.

But it also raises some some important concerns about the future of carrier Wi-Fi. The wireless operators have high hopes for Wi-Fi as they look to integrate it with their own heterogeneous networks. That includes applying policy to authenticate users, testing out new business models including monetizing Wi-Fi through ads and generally treating the network as if it were its own with guaranteed quality of service and improved security. If they are banned from participating in public spaces, their opportunities would be severely limited. (See Carrier Wi-Fi: Always Best Connected.)

They wouldn't just be missing out on a business opportunity, but would lose the primary way they relieve congestion on their cellular networks. This type of government regulation most likely wouldn't catch on outside of Israel (and it's not a given that it will be passed there), but it's something the network operators should be keeping an eye on as they make huge bets on Wi-Fi.

— Sarah Reedy, Senior Editor, Light Reading