A new, super-fast fiber-optic system to be installed across Israel will turn the country into the world’s first digital state and serve as a test case for the world, Cisco CEO John Chambers said.

The cable system, based on technology developed by Cisco, will offer speeds several magnitudes faster than anything the country has seen before, and will link up nearly all facets of the state into a revolutionary network.

“Imagine a world where fast Internet transforms everything, from health care to education to communications to industry,” Chambers said at a special press event in Jerusalem Wednesday. “It’s a way to solve many of the problems that are big concerns of governments around the world — providing jobs for their citizens, education for their youth, improving security, and integrating minorities into the mainstream.”

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The blazing-fast Internet that Cisco will soon begin installing here will be a shining example to the rest of the world of what technology can accomplish — with Israel “ground zero” for the process of “country transformation” that digital technology can bring.

Chambers was in Israel to help Shimon Peres celebrate his 90th birthday. Chambers and Peres have been close friends for years, the Cisco chief said, calling Peres “a visionary, a great man who made a difference because he dreamed and took risks.” Chambers called the president “one of the three men I admire most” — the other two being his father and former American diplomat Henry Kissinger.

But besides coming to bid his friend a happy birthday, Chambers had some other issues on his agenda during the visit, he said — among them closing the details on a deal that will see Cisco providing the technology for Israel’s fast fiber Internet. On Sunday, the eve of Chambers’s arrival in Israel, a special government committee announced after months of deliberation that the ViaEuropa consortium will be installing Israel’s FTTH (fiber to the home) infrastructure and network. FTTH will offer Israelis Internet speeds of up to a gigabit per second (1 Gb/S), 10 times faster than anything Bezeq or cable company HOT can offer on their FTTC (fiber to the curb) network. The new network will be based on Cisco technology, Chambers said, giving the company a major part in the success of the “digital nation” experiment.

For Chambers, what happens in Israel over the next five or so years as the network is installed and deployed is a “test case” for the rest of the world. “Pretty soon we are going to have 500 billion devices connected to the Internet,” Chambers said. “Those devices will change society profoundly, transforming countries, businesses, and people all over the world. Some will make it in the digital age, and some won’t. We believe that Israel is a good place to start.”

“Israel is truly a start-up nation,” Chambers said. “You are way ahead of every other country in innovation, and your leaders understand the need to get ready for the future. Israelis are educated, the country has a small land mass and the right size population for an experiment like this. In addition, Israelis have the ability to get things done quickly and efficiently, with politicians from all parties much more capable of working together than Democrats and Republicans in the US. I trust your leaders.”

Chambers trusts Israel so much, he said, that he sees it as a great place to invest the $40 billion in cash that the company is sitting on, “trapped outside the United States.” The US, he said, has the world’s highest corporate taxes, and while he would love to bring the profits from Cisco’s activities abroad back to the US, he’s unwilling to pay the taxes the IRS is demanding. “Tax policy is extremely important, and it impacts many aspects of society. I have $40 billion now and it grows by about $5 billion a year,” Chambers said. “I can’t just leave that money lying around, I have to invest it somewhere. I see Israel as a good place for at least some of that money.”

Cisco already has about 2,000 employees in Israel and has acquired several Israeli companies, the most recent one being Intucell, a maker of self-organizing network (SON) software for mobile networks. Over the past 15 years, Cisco has spent $1.5 billion on Israeli start-ups, excluding the $5 billion it paid for NDS, which has a large operation in Israel.

Some of that $40 billion investment money may find its way to Israel in the form of investments Cisco will be making in Israeli cyber-security companies. On Tuesday, Chambers met with Prime Minister Benjamin Netanyahu to discuss the FTTH rollout, and discussed a number of other items as well, including the establishment of a cyber research-and-development laboratory that will enable start-ups to use its facilities to test their products, and provide research in the security sphere for universities. Cisco is also investing $15 million in “support integration of Israelis and Arabs and the development of innovative security technologies.” The money will be invested via venture capital funds, a Cisco representative said, with most of the money geared to cyber-security start-ups.

A big part of the digital future Chambers envisions is the “Internet of Things,” where ordinary, everyday appliances, cars, doors, desks, and just about everything else is linked up to a network, allowing users to control them via software. “This is where the real revolution is taking place, and we are supplying the architecture for it,” Chambers said. Over the next 10 years, Cisco customers who are implementing wireless connections in traditionally offline products will truly cash in — earning some $14.4 trillion in profits. “And the whole market is four to six times bigger,” Chambers said, “and keep in mind that that’s just the cream — the profit — and not the actual spending or economic activity. If I were an Israeli start-up, this is where I would want to be.”

Like Shimon Peres, John Chambers has a dream — and Israel is where that dream is going to turn into reality. “There are going to be bumps and controversies along the way,” he said. “But world-class countries and companies don’t lose focus, and I am sure we will all keep the momentum going. This is what we are about, and that is what Israel is about.”