A group led by Sweden’s Viaeuropa won the contract to build a nationwide super-fast Internet network in Israel, running along the national electricity grid.

The network should significantly upgrade Israel’s telecoms capabilities and pose fierce competition to Israel’s phone and cable companies.

Earlier this year, in one of its most ambitious projects, the government gave the Israel Electric Corporation the go-ahead to find investors to build the network. The system will be based on fiber-optic cables, which can provide Internet speeds of one gigabit per second − 100 times currently available speeds.

IEC said yesterday that Viaeuropa’s bid, chosen by a quasi-governmental committee, will be analyzed over the next month with the hope that the network can start to be deployed by the end of 2013.

“This telecoms venture will … put Israel on par with developed countries,” said Yiftach Ron-Tal, IEC’s chairman.

Processed delayed five times

The process was delayed five times and by seven months amid limited participation. The government was forced to sweeten the terms of the project to the winner, such as raising the stake of the chosen group in a new private company to 60% from 51%.

IEC will hold the rest of the company, which will build and operate a fiber-to-the-home network.

Initially, four groups submitted bids but just one made it until the end, as two of the other companies joined up with Viaeuropa.

Viaeuropa holds half of the consortium. Four other companies, including Israel’s Rapac Communications and Infrastructure and BATM Advanced Communications, will hold 12.5% each.

The project will cost billions of shekels to deploy some 25,000 kilometers of fiber optics, 70% of which will be above ground to keep costs down. The government seeks to cover two-thirds of Israel by 2020. IEC already has close to 3,000 kilometers of fiber optics across the country.

Using fiber optics to the curb and standard copper lines to the home, Bezeq, Israel’s largest telecom group, offers Internet to 1.15 million customers for a 59% market share. Cable company HOT has 41%.

Both companies offer speeds up to 100 megabits per second but most Israelis surf at speeds of 5Mbps-10Mbps, which is deemed adequate for downloading and streaming video and music.

Upload speeds, though, are no more than 1Mbps-1.5Mbps. With fiber optics, 1 gigabit per second of upload and download can be reached, allowing for improved interactive services.

The biggest winners of the fiber deployment are expected to be Israel’s top mobile phone operators, Cellcom and Partner Communications ‏(Orange‏), which bought companies that offer Internet services and seek to develop Internet TV.

Right now, however, they now rely on the HOT and Bezeq infrastructures, limiting their own offerings, while Bezeq has started its own FTTH trials. Both companies have said they welcome new competition.