New fund will pay telecom firms to deploy fiber optic cables for faster internet

Taxes levied on phone and internet companies will then be used to incentivize those that agree to invest in infrastructure across the country, which suffers from subpar speeds

Shoshanna Solomon was The Times of Israel's Startups and Business reporter

Illustrative image of an optical fiber connection (alphaspirit; iStock by Getty Images)
Illustrative image of an optical fiber connection (alphaspirit; iStock by Getty Images)

With Israel suffering from lagging internet speeds, the Communications Ministry said Tuesday that it is planning a fund to finance the deployment of fiber optic cables countrywide within a few years.

The new fund will be financed by a levy imposed on telecom firms that currently use the nation’s landline infrastructure, totaling 0.5 percent of their total annual revenues, a person familiar with the matter told The Times of Israel. Based on 2018 revenues, the fund would total some NIS 90 million ($26 million), but this figure could change, the person said.

Money from the fund will be given out via a tender process to telecom firms that set up fiber optic networks in various areas of the country — with an emphasis on the less densely populated periphery, where the financial benefits of deploying will presumably be lower.

The initiative, set up by the Communications Ministry and backed by the Finance Ministry, comes as part of recommendations made by an interministerial panel that looked into how to improve internet speeds in the co-called Startup Nation.

Bezeq workers installing fiber optic cables (Photo credit: Courtesy)
Bezeq workers installing fiber optic cables. (Courtesy)

The Communication Ministry wishes to take “a technological leap that will place Israel in the most advanced group of countries in terms of landline communications,” it said in a statement.

The plan would require changes to the nation’s telecommunication law that the ministries hope to get approved next year once a new government is in place, the person familiar said. Countries such as Canada, the US, Italy and France have used similar fund models to further telecom infrastructure projects in their regions, the source said.

The move comes as Israel lags on internet speeds due to the slow deployment of fiber optic cables. According to a report published last year by M-Lab that looked at internet speeds from June 2017 to May 2018, Israel ranks 70th out of 200 nations surveyed, and is losing pace compared with other nations.

The nation has an average download speed of 7.64 megabits per second, well below the global average of 9.10 Mbps, for the period studied. In the same period a year earlier, Israel ranked 60th out of the 189 nations surveyed, with an average download speed of 7.2 Mbps.

Fiber optic networks, which use light signals beamed along hollow cables rather than electricity along copper wires, as the current systems use, can offer download speeds of several gigabits per second. Current speeds are measured in tens of megabits per second.

Fiber optic networks are considered the best way to provide faster connections in a world that is becoming more and more connected to the internet — from smart cars to smart homes and fridges and TVs. Faster internet speeds are also necessary to use advanced technologies such as virtual and artificial reality and for advanced data delivery requirements or even high definition TV transmissions. Higher internet speeds have also been linked to GDP growth and in helping close social inequalities, research has shown.

In Israel, deployment of these networks has been slow as the countries’ two telecom giants, Bezeq and Hot Telecommunication Systems Ltd, have dragged their feet on the matter. A reform aimed at upgrading the infrastructure was derailed and is the basis of a graft case in which Prime Minister Benjamin Netanyahu is facing possible prosecution.

Telecom giant Bezeq has deployed fiber optic cables to 60% of the nation’s homes, but has not activated the network, claiming that it is expensive to activate the system and is still debating what technology it should use to bring it online. It also says it is waiting for the regulator to set out the service terms for the network’s operation.

Hot Telecommunication still needs to deploy the network and is balking at the high costs this entails.

Other companies, such as Partner Communications Co. and Cellcom Israel Ltd. have started deploying fiber optic networks, using Bezeq infrastructure that is in place, and have connected some 20-22 percent of homes to date.

The new initiative aims to incentivize companies to deploy additional networks at a faster pace in all areas of the country with financing from the new fund, the person familiar with the matter said.

Under current market conditions, the Communications Ministry said in the statement on Tuesday, Bezeq has no economic incentive to deploy the networks across the nation, as it is required to by law.. Thus the interministerial team recommends changing this “universal deployment” requirement and instead allow Bezeq to choose how much territory it is willing to cover and activate. The fund will then finance the networks in the areas that are not covered by Bezeq.

If Bezeq decides not to connect certain areas, it will be forfeiting these areas forever, the statement said. At the same time, Bezeq will not be able to partake in the tenders issued by the fund, but will participate, along with the other telecom firms, in financing the fund.

The Communications Ministry issued its recommendations about the initiative on Tuesday for comment from the public and from telecommunications firms.

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