After years of watching cell phone companies gain market share at its expense, Israel’s landline phone company Bezeq this week fired back at its competitors with its own project – a free nationwide wifi system, using already-installed Bezeq routers. The system will enable any Bezeq customer subscribed to the network to take advantage of what Bezeq expects to be hundreds of thousands of wifi hotspots all around Israel, enabling them to connect to the Internet from hundreds of thousands of places around Israel.

“This program is part of Bezeq’s long-term strategy,” Bezeq CEO Avi Gabai said at a press conference introducing the service. “Bezeq customers will now be able to use their wireless devices outside the house, as well as inside.”

Customers have long been able to take advantage of remote Internet connections for their devices, like smartphones and tablets – using the 3G cellular networks offered by Israel’s cellphone service providers. Cell companies make a good chunk of their revenue from the data packages, though some customers complain of slow speeds and bottlenecks when too many people are trying to use the network at once.

Now Bezeq is hoping to tap into the dissatisfaction and eat into the 3G’s market dominance.

According to Bezeq, the new network, called Free Wifi, will present a much more attractive alternative for Israelis, because the network will be much faster. In addition, the network will prove a boon for the owners of devices, such as many tablets, that support wifi but not 3G connections.

While setting up a national free wifi service sounds like an expensive proposal, it won’t actually cost Bezeq anything, because the network will be built around the router infrastructure that already exists in homes and businesses around Israel. Taking a cue from social networking sites, Free Wifi will “borrow” bandwidth from Bezeq customers who use its NGN high-speed Internet network.

The program is open to customers with a 5 megabit/second (mbps) and higher connection using a Bezeq router. Customers with connections between 5 and 100 mpbs will “donate” 1 or 2 mbps to the program, and be able to surf the Internet using the Free Wifi network around the country at the same speed. While in theory speeds on cell data networks are higher (3G network speeds can average between 2-3 mbps, or more), in practice many users get far less bandwidth.

The only thing a customer has to do to get on the network is to join; Bezeq takes care of the rest, remotely managing routers to carve out a separate segment of bandwidth for the Free Wifi network. Thus, a customer with a 10 mbps will “donate” 1 mbps to the network, reserving 9 mbps for their own use. And if there is no one in the neighborhood using their donated bandwidth, they will be able to use it themselves. The system guarantees security, says Bezeq; by creating a second, separate network, users are protected from individuals who might want to eavesdrop on their home networks by connecting to their routers. Free Wifi users connect to a separate, “virtual router,” so there is no “fraternization” between private networks and the public, socially supported one, Bezeq claims.

The program is voluntary, and doesn’t cost anything. A Bezeq spokesperson told The Times of Israel that while it may take some time, the company expects that the network will eventually allow users to connect from almost anywhere in the country. “We have a potential pool of over 850,000 customers who can participate, and we expect a significant portion of them to sign up,” the spokesperson said. In the meantime, city centers and other urbanized neighborhoods will be covered almost immediately, because the company has signed up a slew of businesses, gas stations, stores, malls, and public institutions to participate.

Free Wifi is Bezeq’s latest gambit to restore business it has lost to the cellphone companies, communications industry expert Dani Fridman said. “Over the past several years they have run ad campaigns comparing the cost of cellphone calls as compared to Bezeq calls, and stressed how users at home could save money by using their landlines instead of a cellphone, but the new all-in-one plans offered by the cellphone companies has taken the price advantage on phone calls away from Bezeq.

“But the cellphone companies are vulnerable on data speeds and connections, because most of the free plans include limits on how much bandwidth customers can use,” he added. “By building a free, unlimited hotspot network, Bezeq will be able to at least retain customers, who are relying more on devices they use outside the home and require a remote connection, instead of their home PCs. This move keeps them in the data game, and perhaps gives them an opportunity to sign up customers who might be getting frustrated with their cellphone company data plans.”