Last week, the Israel Government awarded the Ofek company a
license to set up a phone network to compete with government-
owned Bezeq in providing phone service for private homes and
businesses. The new venture, backed by Eurocom and Arison
Investments, holds out the promise of reducing the costs of
local communications and improving available services.
The new company has a broad license to offer a number of
services, including voice, video and high speed data
communications. Ofek plans to use the latest IP technology,
with Nortel as the main supplier of network apparatus and
Cisco providing the central exchange. IP is the
communications protocol underlying the Internet.
The license culminated four years of preparation and an
investment of $20 million by Ofek. Shaul Elovitch, president
of Eurocom Israel, said it was a day he had been dreaming of
for years. Ofek's license application was made possible
after the regulations covering the opening of the market to
competition were published in September 2000.
Ofek is to set up a domestic telecommunications network
covering 29 of the country's 50 areas, 14 more than the
minimum required by their contract. The license agreement
was signed by Communications Minister Binyamin Ben Eliezer
allowing Ofek to take on the national telephone monopoly.
Ofek CEO Reuven Sgan-Cohen has announced that the company
will cover all the main urban and industrial centers, plus
part of the outlying areas. Ofek plans to have its
alternative network up and running within the year. The
system will be based on wireless access to subscribers'
homes for telephone lines and high speed Internet
services.
The Ofek network will operate on high capacity fiber optic
cables and the company has already signed a lease agreement
for 500 km out of its expected total of 1000 km of optical
cable.
Ofek is one of several potential companies that could
capture some of Bezeq's domestic telephone market, among
others are Cellcom, Barak and Golden Lines (Kavei Zahav).
Cellcom is engaged in advanced talks with Ofek for a joint
venture and sources close to the talks say the chances of
the two reaching an agreement are high.
Ofek's service, based on Internet Protocol running on a
fiber optic transport with infrared (IR) or wireless LMDS as
its primary last mile technologies (to bring the information
from the trunk lines to the individual homes), will offer
customized communications packages to individual homes and
businesses.
Customers will be able to choose voice-only services, or
voice plus fast Internet and data communications, with the
cost of the Internet service dependent on the speed
requested. With the Ofek service, which will be launched in
nine months, each home phone outlet will have the
possibility of being defined for a different purpose, giving
parents the ability to restrict outlets in children's rooms
to a certain number of calls per month or a limited number
of hours on the Web.
The company plans to operate on a money-back-if-not-
satisfied basis.
Ofek, which is also bidding in the wireless LMDS tender
scheduled to close in March, has spent most of the last four
years planning a network primarily based on that
technology.
The request for the fixed access license was a step to get
Ofek into the market early, and the fiber optic backbone it
is setting up now will eventually be combined into the LMDS
network it plans to build.
LMDS at this point is one of a few ways Ofek can provide
last-mile access to customers, since laying fiber optics to
every home is a costly and timely endeavor. Sgan-Cohen said
that the company has already been experimenting with IR
technology in Ariel, where it has been operating a pilot
system since mid-2000 and has been pleasantly surprised at
the results.
Both the IR and LMDS systems -- whose stamina in difficult
environments has been questioned -- withstood the heavy
rains and fog of this winter, Sgan-Cohen said.
A failure to win the LMDS tender would be a blow to the
company, which is counting on developing its network with
the wireless technology that insures quick deployment and
pay-as-you-grow capability. Ofek is already building a
similar network in Greece.
Overall, the company plans to invest $1 billion in its
network and to employ a staff of 1,500, 10 times what the
company has at present.
While acknowledging that the competition with Bezeq was sure
to be tough, Sgan-Cohen was optimistic that Ofek's advanced
technology would have a market advantage, especially among
the fifth of the population already surfing the Net.
Bezeq general manager Ilan Biran welcomed the opening of the
communications market to competition and called on the
Minister of Communications and the government to fulfill
their commitment to Bezeq and immediately implement
privatization.
The cable companies welcomed the granting of the license to
Ofek, but believed it did not constitute real competition
between cable companies and Bezeq. The cable companies
issued a joint statement in which they claimed they are
equipped with the infrastructures for providing services in
competition with Bezeq. They said the LMDS technology, which
Ofek is scheduled to use after the March tender, does not
constitute a real alternative to Bezeq in the next few
years. They called on the government to speed up the process
for granting them a license as well.
