A number of contractors who won the incentive tender of the Ministry of Communications for the deployment of optical fiber infrastructures, regretted and informed the ministry that they are renouncing the win. These are relatively small deployment areas of several thousand households, and the ministry will be required to find a separate solution for them that will ensure that those areas will eventually receive optical fiber.
The competition tender allows telecommunications companies and private contractors to deploy fiber optic infrastructures in areas where Bezeq has given up on deploying its own independent infrastructures. The Ministry of Communications formulated an outline according to which these areas will be deployed by other companies that will be financed by funds that the operators transfer to a designated universal fund.
Bezeq gave up nearly 500,000 households (Bezeq decided to deploy in 82% of the households, so 18% remained for the private contractors) and the Ministry of Communications issued a first tender last year to contractors for deployment in 287,000 households. The tender was a success and the office was very satisfied with the results which ensured that the layout would be promoted in the periphery. The Ministry of Communications is already promoting a second tender that is expected to be published soon, after which it hopes to reach a deployment of more than 95% of households in Israel.
The final order of magnitude of the households that will be affected is unclear
But what happened is that some of the aforementioned contractors gave up winning and the exact scope of the event is not clear at the moment. Those contractors came to the conclusion that the areas they won were being deployed by private independent parties, or they discovered late that there was no economic viability in the project and no guaranteed return on investment. The final order of magnitude of the households that will be delayed as a result is not clear at the moment, since some of the contractors have announced their intention unofficially, but it is thousands of households.
Although the Ministry of Communications subsidizes the project through the incentives it gives to those contractors, the execution of the work, the competition that develops, and the understanding that deployment is the easy part and more difficult to provide long-term service – all of these create great uncertainty that caused those contractors to withdraw.
The Ministry of Communications expected that some contractors would have difficulty realizing their winnings, for the reason that not every electrical contractor knows or understands the full meaning of providing service in the worlds of communications. The ministry has the option of issuing guarantees to those contractors, but it seems that the intention at the moment is not to do so, and this is because there are cases that were not foreseen ahead of time, such as fiber deployment by local entrepreneurs who started deploying earlier.
Another point that explains the difficulties of those winning contractors is that some of them did not understand the significance of purchasing international transmissions and capacities. That is, establishing a network and reaching homes is one event, but the network needs to be connected “backward” to the other operators, to the Internet and to the world, and here the costs already start to become heavy when you want to provide customers with high browsing rates.
Bezeq announced today that it will expand the deployment of its fiber optic infrastructure in dozens of towns, most of them in the periphery of Israel, after receiving approval from the Ministry of Communications for another deployment. In total, Bezeq will connect another 60,000 households so that at the end of the deployment it will reach about 85% of the homes in Israel with fiber infrastructure, about 2.5 million households. By the end of the year Bezeq will reach about 1.5 million households.