Coarsely grate the potatoes into a large bowl of iced water. Leave to stand for 10 minutes.
Meanwhile, heat 1 tbsp of the oil in a large frying pan and fry the bacon over a medium heat for 5 minutes or until crisp. Remove with a draining spoon and set aside. Add the onion and capsicum to the pan and cook for 5 minutes or until soft. Remove from the pan and set aside with the bacon.
Drain the potatoes, squeezing out as much water as possible, using your hands. Transfer to a kitchen towel or paper napkin and pat dry. Combine the potatoes, bacon, onion, green pepper and paprika in a large bowl and season with salt and pepper.
Add half the remaining oil to the pan and heat. Spread the potato mixture evenly in the frying pan and cook, without stirring, for 15 minutes or until golden brown and crispy on the bottom.
Place a large plate over the pan and invert. Heat the remaining oil in the pan, slide the potatoes back into the pan and cook for a further 10 minutes until golden brown and crispy on the other side. Serve hot, cut into wedges.