February 9, 2012 / 12:02 PM / 8 years ago

Israel eyes ultra-fast Internet network

JERUSALEM (Reuters) - Four groups have submitted preliminary bids for a super-fast Internet network aimed at significantly upgrading Israel’s telecoms landscape to allow for high-definition television, 3DTV and other services needing large bandwidth.

In one of its most ambitious projects, the government has given the go-ahead for state-run utility Israel Electric Corp (IEC) to find investors to build the network using fiber optic cables, which can provide Internet speeds of 1 gigabit per second — or as much as 100 times what is available now.

“All four groups we have now are big groups with a lot of experience and knowledge,” Tzvi Harpak, vice president of logistics at IEC and head of the tender committee, told Reuters.

Bidders include Sweden’s Viaeurope; defence electronics firm Elbit Systems; Israeli telecom equipment provider BATM Advanced Communications; and RAPAC Communications and Infrastructure.

The winner, to be announced in May after financing is secured, will hold 51 percent of a new private company that will build and operate the fiber-to-the-home (FTTH) network, with IEC holding 49 percent. The project is estimated to cost billions of shekels to deploy some 25,000 km of fiber optics — 70 percent of which will be above ground to keep costs down.

Harpak aims for deployment to begin in early 2013 with a target to cover two-thirds of Israel by 2020. IEC already has close to 3,000 km of fiber across the country.

“Today’s infrastructure is not enough,” he said. “Content providers and suppliers that are dealing with TV — 3DTV and HDTV — and many other services need (fiber) to make progress.”

Using fiber to the curb and standard copper lines to the home, Bezeq — Israel’s largest telecom group — offers Internet to 1.1 million customers for a 59 percent market share. Cable company HOT has 41 percent.

Both companies offer speeds up to 100 megabits per second but most Israelis surf at speeds of 5-10 megabits, which is deemed adequate for downloading and streaming video and music.

Upload speeds, though, are no more than 1 megabit. With fiber optics, 1 gigabit per second of upload and download can be reached, allowing for improved interactive services.

Israel had other constraints in keeping Internet speeds low, such as just one undersea cable to Cyprus to serve the country. Another undersea cable to Italy has recently begun operation and a third is nearing completion.

DATA EXPLOSION

Eden Bar Tal, director general of Israel’s Communications Ministry, said more bandwidth is needed for cloud computing and Internet TV.

“We know there is a world trend of data explosion and that’s why Google, Amazon and Apple are employing thousands of people to develop new services,” he told Reuters.

“We have to look at Korea and Japan and see that FTTH is a mere fact of the present and not the future,” he said, adding that the fiber network will transform the education and health systems by enabling higher quality video to outlying areas.

South Korea has the highest household penetration of FTTH at 55 percent, followed by Japan at 40 percent and Hong Kong at 39 percent, according to the Fiber to the Home Council. Nearly 8 million North Americans receive their Internet, video and/or voice services through fiber, while FTTH is available in 22 million homes in the United States and Canada.

In the first half of 2011, the number of fiber to the home subscribers in Europe rose 24 percent to about 5 million, led by eastern Europe and Scandinavia. About 40 million homes in Europe are hooked up to fiber, according to the Fiber to the Home Council Europe.

The biggest winners of the fiber deployment are expected to be Israel’s top mobile phone operators, Cellcom and Partner Communications, which bought companies that offer Internet and are believed to want to develop Internet TV.

But they now rely on HOT and Bezeq’s infrastructure, limiting their own offerings, while Bezeq has started its own FTTH trials. Both companies said they welcome new competition.

“The consensus view of analysts and Israeli telecommunications companies is that (fiber to the home) is not going to get off the ground,” said UBS analyst Darren Shaw.

Shaw and other analysts believe investment in a fiber optics network will be too large and return on investment unclear, especially when the Communications Ministry is considering forcing Bezeq and HOT to let Cellcom and Partner use their networks to create immediate competition and lower prices.

“If Bezeq and HOT sell their lines then the market will be full and prices will go down so there is no economic reason to do this,” said Ori Licht, head of research at the IBI Investment House in Tel Aviv. “I don’t give this project a high percentage of success.”

Editing by Jon Loades-Carter

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