Israel officially entered the 5G era last week when an auction awarded frequencies that can carry broadband data of up to 1,000 megabits a second. Fifth-generation service is at least 10 times faster than the dominant 4G technology. It will enable mobile operators to offer services for smart cities, autonomous vehicles, gaming and other entertainment that existing networks cannot carry.
Israel may have one of the world’s leading high-tech economies, but it is lagging behind as far as allocating frequencies for fifth-generation mobile is concerned. The delay is not too critical because there aren’t yet any vital services being run on 5G and few 5G handsets exist anywhere. Israel has time to catch up.
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Although the frequencies that were auctioned were billed as 5G, most of them were a faster version of 4G. The Communications Ministry offered frequencies of 700 Mhz and 2100 MHz, which are also used for 4G, to 2600-3800 MHz that will solely be used for 5G services. The most intense competition was for 700 MHz frequencies, which are relatively narrow bandwidth and relatively slow, but more widely dispersed.
However, going forward, the cellular companies will begin investing to deploy real 5G networks nationwide. For that, the ministry will auction additional frequencies of 3500 MHz and more.
For these high-frequency networks to work optimally, the companies will have to put up many more antennas, an undertaking that involves considerable investment and navigation of regulatory issues. Nevertheless, within four years Israel is expected to have deployed 5G to almost every corner of the country.
But for users to benefit, they will have to buy 5G smartphones. The only maker to sell 5G phones in Israel is the Chinese company Xiaomi, although Samsung and Apple are expected to begin selling 5G phones too. Don’t rush to buy one. It will be several months before any 5G service is widely available in Israel.
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In contrast to other countries, Israeli mobile operators don’t plan to charge an additional fee for 5G. Xfone, with its we4g brand, and Bezeq’s Pelephone have confirmed their customers won’t face any additional charges. Users are expected to start using more and more bandwidth once 5G is up and running, which would lead them to upgrade to bigger and costlier monthly plans.
Around the world, 5G is expected to spur economic growth. According to the GSMA, a global association of mobile operators, 5G networks will contribute $2.2 trillion to the world economy through 2034.
In Israel, however, officials are concerned about the lack of 5G initiatives. The ministry is aware of the fact that Israel is behind is deploying 5G and aims to make up for lost time via a joint undertaking with the treasury, Innovation Authority and other ministries.
“The Communications Ministry will offer incentives to the telcos, venture capital funds and startups to invest in research and development,” said Director-General Liran Avishar Ben Hurin.
The biggest losers in last week’s auction were the mobile operators who operate the CMG Network jointly – Cellcom Israel-Golan and Xfone. They agreed to pay 155 million shekels ($33.8 million) for a single inferior frequency that is likely to face disruption because parallel frequencies are used by the army and the Palestinian Authority.
Partner Communications/Hot Mobile bid 62 million shekels for a frequency that may also be subject to disruptions while Pelephone agreed to pay 88 million for high-quality frequencies.
Cellcom was aware that the auction was problematic. It appealed to the High Court of Justice asserting that the complicated process made it possible for bidders to force their rivals to raise their offers without having to raise their own. The court rejected the suit and Cellcom turned out to be the victim. If the bidding companies had only bid for the frequencies that they had indicated in advance that they wanted, they each would have paid about 50 million shekels for a license.
Instead, Partner and Pelephone adopted an aggressive strategy that raised their rivals’ costs. If Cellcom CEO Avi Gabbay had played the same game, he could have forced Pelephone to raise its bid by almost 40 million shekels and Partner/Hot’s by 13 million. Industry sources had expected him to withdraw from the auction altogether, but instead he stayed in and exercised restraint.
However, the overpayment by Cellcom/Xfone will be limited due to government incentives of up to 500 million shekels to bidders subject to milestones, including delaying the need to pay for the license until 2022.
Pelephone won the best frequencies, which is part and parcel of its strategy to build the country’s highest-quality network. In contrast to its rivals, who have formed groups to cut down on the costs of deploying 5G, Pelephone is acting alone.
Tomer Raved, the CEO of Bezeq’s parent company B Communications, is giving Pelephone his full backing on the assumption that 5G will be the groups’ growth engine in coming years. In the 5G era, customers won’t have SIM cards just for their smartphones but for their PC, their car and other devices. He is ready for Pelephone to spend heavily to capture market leadership.