Israel’s Belated Communications Upgrade Gains Urgency Amid Virus

Hauling Israel’s backward telecommunications grid into today’s world has become an economic imperative, and the country’s new communications minister has made it his top priority.

While Israeli companies produce some of the world’s most sophisticated technology, the country’s telecoms infrastructure is about a decade behind most other Western nations’ -- and the coronavirus epidemic has made that gap all the more glaring. While other nations are operating fiber optic networks and working to deploy 5G mobile grids, Israel is still using infrastructure laid in 2009 that’s not up to the demands of widespread distance learning and working from home.

Slow speeds also imperil the global competitiveness of Israel’s tech industry, which accounts for nearly half of the country’s more than $110 billion in yearly exports.

Israel Regulator Permits Bezeq to Upgrade Network Speed

Without a major overhaul that would optimize data flow, Israel’s communications infrastructure won’t be able to support developments that are the wave of the future, like internet-connected home appliances, autonomous driving and the storage of big data troves. To redress this deficit, Communication Minister Yoaz Hendel wants to revise regulation that discouraged investment.

His proposal is to revoke a demand that the biggest telecommunications network, Bezeq The Israeli Telecommunication Corp., deploy across the entire country. In exchange, Bezeq must contribute to a planned government fund that would be used to build out the system in remote areas.

“Today communication networks are sometimes even more crucial than roads and other national infrastructure,” Hendel said in an interview. “My goal is to bring us into the future as fast as I can.”

Bezeq already offers fiber to corporate clients and has laid fiber-optic cables in about 60% of the country. It hasn’t connected to households, however, a project it estimates will take at least five years and cost billions of shekels.

The company has been in talks with regulators for years on finding a financially viable way to go forward after market reforms increased competition and shrank profits. But an accord has been held up by a years-long corruption probe into alleged favoritism of the company by Prime Minister Benjamin Netanyahu and 17 months of political paralysis that ended with the formation of a government in May.

“There has to be some kind of incentive for those companies that don’t have an economic motive to lay fiber in the periphery,” said Liran Lublin, head of research at Israel Brokerage and Investments Ltd. “This fund is a good solution.”

Bezeq said in a statement that it has to study the fund proposal further before commenting.

The policy gridlock that took root while Israel cycled through three elections also held back the mobile sector. Now that a governing coalition is in place, plans to build a 5G mobile network are moving ahead. The first stage of the bid closed in June.

Bolton Said to Raise Concerns About China, Huawei, ZTE in Israel

U.S. pressure to freeze out Chinese providers such as Huawei Technologies Co. could impact the process. While Hendel wouldn’t explicitly rule out working with Chinese companies, local media have reported that they are being blocked from participating in tenders.

Moving quickly is crucial, said Jon Medved, chief executive officer of online investor OurCrowd.

“Just as a country should not neglect investments in ports, airports, railways, roads and energy production, neither should any country -- especially those aspiring to tech leadership -- neglect investments in high speed fiber optics and 5G networks,” Medved said.

©2020 Bloomberg L.P.

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