Cook bacon in large nonstick skillet over medium heat, stirring occasionally, until crispy. Remove bacon from pan with slotted spoon and drain on clean kitchen towel. Pour all but 2 tablespoons bacon fat from skillet.
While bacon is cooking, shred potatoes on large holes of box grater into large bowl. Fill bowl with cold water, stir until water is cloudy, then drain. Repeat process with fresh cold water. Drain and pat potatoes dry with clean kitchen towels. Add potatoes to skillet with bacon fat and season with pepper. Cook potatoes, undisturbed, until brown crust forms on bottom, about 5 minutes. Stir and continue to cook until potatoes are golden brown and crispy, about 5 more minutes.