After Long Wait, Israeli Internet Is Poised to Enter Fiber Optic Era

Bezeq has linked up 200,000 households, Hot isn’t far behind and Electric Corp. is rolling out a network of its own.

Bezeq has disclosed that it has already linked 200,000 households to its fiber optic network, saying it intends to double this figure by next year. Meanwhile, rival Hot is laying out its own network, but hasn't revealed how many residential buildings it has reached.

Communications via fiber optics usually necessitates a switch of modems in customers' homes to accommodate the faster flow of data, and it isn't yet known when the networks will go "live" to become a marketable product.

The newest wave of investment in infrastructure follows a long period of decline. In addition, another new group has been tapped to establish a new fiber optic network – Israel Broadband Company, the name it temporarily goes by until a catchier one is chosen – to be based on the Israel Electric Corporation's network.

The new initiative, which hasn't yet been formally licensed by the Communications Ministry, will be 40% owned by the IEC and 60% by investors led by the Sweden’s ViaEuropa.

Some say Bezeq, which made its disclosure last week, and Hot are too far ahead for IBC to make much of a market impact. But IBC intends to introduce not just new technology into Israel but a unique business plan that will set the new standard. ViaEuropa has already done this in Sweden, Norway, and Switzerland with its 900,000 customers, and now intends to duplicate this model in the Israeli market.

IBC's innovative business model will resemble the model used in the cellular industry since the market was opened last year to competition by allowing customers to join or switch companies via the Internet. The IEC's initiative will also adopt the Internet as its primary means of distribution.

Customers wanting to connect to the fiber network of a certain company will sign up at a dedicated website. As soon as enough neighbors say they want to connect to the same network the company will lay out the infrastructure for the neighborhood. A link will be provided to the building and a technician will install a device in the customer's home that connects the landline and television set and provides Internet service.

After connecting to the network, each customer will be able to enter a special Internet or TV portal and choose from between the variety of packages offered by suppliers. Rather than contacting the supplier by phone and ordering a visit by a technician, the customer will be able to choose the package that suits him directly from the TV or computer screen, enter his credit card data, and connect right away. All customer contact will be handled by the service supplier which will deal with IBC behind the scenes.

All this means good news for consumers: A variety of suppliers, transparent pricing, immediate choice, and the ability to quickly switch suppliers. ViaEuropa CEO Birgersson has claimed the model is so successful that telecom companies maintain special customer service departments for clients connected to them through ViaEuropa.

An opportunity for small service suppliers

Not only customers will enjoy the new opportunities offered by the system. Small telecom suppliers will also benefit. Customers will be exposed to all companies to which they can connect. And as for payment, the cost of the line leading into the home will remain identical and large suppliers won't be entitled to discounts.

Most Western countries have three to five major telecom suppliers along with dozens of tiny suppliers. The same model applies to Israel: Bezeq International, 012 Smile, and 013 Netvision each have about 600,000 customers, HOTnet has around 150,000 – and the remaining 4% of the market is divided among a long list of small suppliers with no more than 20,000 customers each.

But connecting to ViaEuropa's intiative could strengthen the hands of the small suppliers. In Sweden, for example, two small suppliers that joined up with ViaEuropa each grew to encompass 10% of market share. And the large telecom companies won't have any choice but to join IBC's neutral platform: If they're absent there will be other companies to take their place.

The World Economic Forum's network readiness index examines the situations of 138 countries when weighing together the quality of Internet networks along with the capacity of the business and private environments to adapt to new technology. Finland took first place this year and Sweden was third, down from top spot last year. Israel is ranked in 15th place.

Even if the speed at which data can be downloaded in Israel is open to dispute, there is no doubt it fares poorly in the speed for uploading. An Israeli consumer ordering Internet service at 12 megabits per second is provided upload capacity of 1 Mbps – less that 10% of what he pays for. This is a major problem considering that the Internet is becoming increasingly share-oriented and two-directional. Video chats, for example, rely equally on an upload and download stream. IBC continually stresses in its advertisements that its fiber optic network will be symmetrical: The upload speed will be identical to the download speed.

"If you want to transmit several picture files or put them in the cloud, today's situation on a DSL or cable network is worse than it was a few years ago because Moore's Law[relating to the constant doubling of computing power] doesn't apply to networks," according to one computer expert. "The quality of cameras has improved so the size of files has doubled, the physical connection between the computer and the camera has improved, and the computer's hard drive is bigger, along with processing capabilities. The only thing that hasn't improved at the same rate is the crappy communications networks."

Birgersson thinks Israel's infrastructure gap makes it an ideal place to invest in fiber optic infrastructure and once even said that Israel is a wonderful place for broadband. Sweden has 4.2 million households and its population density is 21 people per square kilometer, whereas Israel has 2.5 million households and population density of 350 people per square kilometer – making this country a particularly convenient place to lay out a new network.

Furthermore, much of the network in Israel is already laid out: The IEC's existing fiber optic network reaches about 900 points throughout the country. IBC will essentially need to extend the fiber optic lines from these points to the homes of customers. As opposed to Sweden, where overhead cables are banned, 60% of homes in Israel are connected to aerial cables so there's no need for digging a channel to the building – but just to join it to the electricity wires. This is a great advantage in cheapening labor costs and shortening the time required for extending the network.

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Haaretz