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Cisco Plans Israel’s Transformation Into First Digital Nation

Cisco Plans Israel’s Transformation Into First Digital Nation
Israeli President Shimon Peres (L) greets John Chambers, Chairman and CEO of Cisco Systems, as they meet at a convention center in Jerusalem on June 18, 2013. Photographer: Jim Hollander/AFP via Getty Images

Cisco Systems Inc. will make Israel the world’s first fully digital country with a fiber-optic network to serve multiple requirements, showcasing technology that other nations may adopt, its chief executive officer said.

“Israel’s transformation to next-generation ‘Start-Up Nation,’ the digitalization of the whole country, that is the future,” CEO John Chambers said, referring to the title of a book on the country’s technology industry. “Israel is going to be the first digital nation if we are successful.”

Cisco is likely to start building the fast network for Israel Electric Corp. this year. It will compete with the networks of Hot Telecommunication System Ltd. and Bezeq The Israeli Telecommunication Corp. and will eventually serve as the backbone for electricity, television, health care and even education, Chambers said in Jerusalem today.

“I’m beginning to believe this will actually happen,” said Ori Licht, head of research at Tel Aviv-based IBI-Israel Brokerage & Investments, noting that the Israel Electric group now has enough money to start building the network, even as Israeli inexperience may raise obstacles.

The Finance Ministry has approved a group of investors and companies that will partner with Israel Electric for the project and the final signing is expected within weeks. Cisco will provide vendor financing of about $140 million and the cost of the entire infrastructure has been estimated at 5 billion shekels ($1.39 billion).

Growing Market

“There will be challenges and controversies along the way,” said Chambers, without elaborating. “When you do something no other nation’s done you are taking risk and it is a risk Cisco is very much committed to.”

One challenge will be to protect the network, and San Jose, California-based Cisco will establish a lab in Israel to develop security technologies.

Israel is a good choice for the project because of the number of technology startups, the small land mass, the medium-size population, and the high level of education, Chambers said. The new network will be a model for other countries, and startups that develop for the infrastructure will find a growing market outside the country, he said.

“Cisco obviously wants to use Israel as a showcase to show how you can transform a whole country to a cyber-based economy, and how it can help GDP growth,” said Gilad Alper, senior analyst at Excellence Nessuah Brokerage Ltd. in Tel Aviv.

Bezeq started building a competing fiber-to-home network last year. Bezeq shares have jumped 17 percent this year, compared with a 3.2 percent gain for the benchmark TA-25 index.

“Bezeq would have preferred a thousand times over not to have to deal with the electric company and Cisco,” said Alper.

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