Telecommunication Sector Note in the Palestinian Territories

THEWORLDBANKGROUP

TelecommunicationSectorNoteinthePalestinianTerritories:MissedOpportunityfor

EconomicDevelopmentNoteforthePalestinianMinistryofTelecommunicationsandInformation

Technology

CarloMariaRossotto,AnatLewin,XavierDecoster

2/1/2016

TA-P150798-TAS-BB

TelecommunicationSectorNoteinthePalestinianTerritories:MissedOpportunityforEconomicDevelopment 2016

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StandardDisclaimerThisvolumeisaproductofthestaffoftheInternationalBankforReconstructionandDevelopment/TheWorldBank. The findings, interpretations, and conclusions expressed in this paper do not necessarilyreflecttheviewsoftheExecutiveDirectorsofTheWorldBankorthegovernmentstheyrepresent.TheWorldBankdoesnotguaranteetheaccuracyofthedataincludedinthiswork.Theboundaries,colors,denominations,andotherinformationshownonanymapinthisworkdonotimplyanyjudgmentonthepartofTheWorldBankconcerningthelegalstatusofanyterritoryortheendorsementoracceptanceofsuchboundaries.

CopyrightStatementThematerial inthispublicationiscopyrighted.Copyingand/ortransmittingportionsorallofthisworkwithoutpermissionmaybeaviolationofapplicablelaw.TheInternationalBankforReconstructionandDevelopment/TheWorldBankencouragesdisseminationofitsworkandwillnormallygrantpermissiontoreproduceportionsoftheworkpromptly.

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AcknowledgementsThisnotewaspreparedbyateamundertheleadershipofPierreGuislain(SeniorDirector,TransportandICTGlobalPractice)andSteenLauJorgensen(PalestinianterritoriesCountryDirector).TheteamwasledbyCarloMariaRossotto(LeadICTSpecialist,ICTRegionalCoordinator,ECAandMENA,TransportandICTGlobalPractice),andincludedXavierStéphaneDecoster(ICTPolicySpecialist,TransportandICTGlobalPractice), Anat Lewin (Senior ICT Policy Specialist, Transport and ICT Global Practice) and Ihab Jabari(Consultant,ITExpert).

Theteamgratefullyacknowledgesthereviewandqualitycontrolprovidedbythepeerreviewers:KareemAbdel Aziz (Senior Investment Officer, Telecom and Media Team, Asia, Europe and Middle East,International Finance Corporation), and Yann Burtin (Senior Underwriter, Multilateral InvestmentGuaranteeAgency).FurtherreviewwasprovidedbyRanjanaMukherjee(CountryProgramCoordinator,PalestinianterritoriesCountryManagementUnit),MarkEugeneAhern(ProgramLeader,MNC04),BjornPhilip(ProgramLeader,MNC04),AlexandraPugachevsky(SeniorCountryOfficer,PalestinianterritoriesCountry Management Unit), Youssef Issa Habesch (Principal Country Officer, IFC), Nur Nasser Eddin(Economist, GMFDR), Bjorn Philipp (Program Leader, MNC04), Randeep Sudan (Practice Manager,Transport and ICT Global Practice), Boutheina Guermazi (PracticeManager, Transport and ICT GlobalPractice), and Doyle Gallegos (Lead ICT Specialist, Global Lead Broadband, Transport and ICT GlobalPractice).

Theinputofthefollowingcolleaguesisalsogratefullyacknowledged:RanaIshaqKassis(SeniorProgramAssistant,MNC04),Teri Nachazel (Program Assistant,MNC04), Fifi Antar (Program Assistant,MNC04),Khalida Seif El-Din Al-Qutob (Program Assistant, MNC04), and Ndeye Anna Ba (Program Assistant,TransportandICTGlobalPractice).

TheteamhascloselyinteractedwiththeExternalCommunicationsteamoftheWorldBank,andwishestothankfullyacknowledgetheirguidanceandcontribution,includingthatofHebaShamseldin(Manager,MENA External Communications), Lara Saade (Senior Communications Officer, MENA ExternalCommunications),WilliamStebbins(SeniorCommunicationsOfficer,MENAExternalCommunications),AshrafSaadAllahAl-Saeed(OnlineCommunicationsOfficer,MENAExternalCommunications),andMaryKoussa(CommunicationsOfficer,MENAExternalCommunicationsinJerusalem).

TheteamwishestoexpressitsdeepestappreciationforthecooperationandfruitfulinteractionswiththePalestinianandIsraeliauthorities,privatesector,andcivilsociety.Theyhaveprovidedexcellentsupportandhavecloselyinteractedwiththetaskteaminaspiritofopennessduringthepreparationofthisreport.

Thetaskteamtakesresponsibilityforanyerrorsandomissions.


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Content1 Executivesummary................................................................................................................................6

2 Introduction.........................................................................................................................................13

3 AssessmentoftelecomsectorinthePalestinianterritories...............................................................14

3.1 Institutionalandenablingenvironment.....................................................................................14

3.2 Fixed-broadbandsectorassessment..........................................................................................15

3.3 Mobilesectorassessment..........................................................................................................16

3.4 Internationalconnectivityassessment.......................................................................................18

3.5 InternationalbenchmarkofthePalestiniantelecommunicationssector..................................18

4 Telecomsectorachievementsandissues............................................................................................20

4.1 Domesticachievementsandissues............................................................................................20

4.2 Domesticandbilateralachievementsandissues.......................................................................26

4.3 SpecificissuesinGaza................................................................................................................35

4.4 Assessingtheimpactofmobilemarketunder-developmentinthePalestinianterritories.......38

5 Conclusionsandrecommendations.....................................................................................................44

6 Listoffiguresandtables......................................................................................................................47

7 Referencesandsources.......................................................................................................................49

8 Annex...................................................................................................................................................51

8.1 InternationalbenchmarkofthePalestiniantelecomsector......................................................51

8.2 Spectrumtableassignment........................................................................................................56

8.3 Directimpactcalculation............................................................................................................56

8.4 RelevantLegalAgreements........................................................................................................60


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Acronyms

2G Second-generationmobilenetworkorservice

3G Third-generationmobilenetworkorservice

4G Fourth-generationmobilenetworkorservice(alsoknownas“LTE”)

ADSL AsymmetricDigitalSubscriberLine

AREGNET ArabRegulatorsNetwork

COGAT CoordinatorofGovernmentActivitiesintheTerritories

EC EuropeanCommission

GSM GlobalSystemforMobileCommunication

GSMA GSMAssociation

ICT InformationandCommunicationTechnologies

IGW InternationalGateway

ISP InternetServiceProvider

ITU InternationalTelecommunicationsUnion

JDECO JerusalemDistrictElectricCompany

LAN LocalAreaNetwork

LTE Long-TermEvolutionofmobilenetworkorservice(alsoknownas“4G”)

MENA Middle-EastNorthAfrica

MoC IsraeliMinistryofCommunications

MTIT PalestinianMinistryofTelecommunicationsandInformationTechnology

MNO MobileNetworkOperator

NRA NationalRegulatoryAuthority

PA PalestinianAuthority

PNINA PalestinianNationalInternetNamingAuthority

PSTN PublicSwitchTelephoneNetwork

PTRA PalestinianTelecommunicationsRegulatoryAuthority

RIO ReferenceInterconnectionOffer

SIM SubscriberIdentityModule(betterknownas“SIMcard”)

SMP SignificantMarketPower

VAT ValueAddedTax

WB&G WestBankandGaza


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1 Executive summary TheTelecommunicationsSectorAssessmentNote inthePalestinianterritories isaknowledgeproductprepared by the World Bank in response to a specific request from the Palestinian Ministry ofTelecommunications and Information Technology (MTIT) to assess the performance of thetelecommunicationssector,identifyspecificissuesandmakerecommendationsforfurtherdevelopmentandreform.

MAINFINDINGS

The Oslo framework, the reference agreement between the Israeli and Palestinian counterparts tosupporteconomicdevelopmentandstabilityinkeyeconomicsectors,hasfailedtodeliveritspromiseofanindependenttelecommunicationssectorinthePalestinianterritories.Accordingtotheprinciplesofthe Oslo Agreement, “Israel recognizes that the Palestinian side has the right to build and operateseparate and independent communication systems and infrastructures including telecommunicationnetworks, a television network and a radio network.” Several resolutions of the InternationalTelecommunicationsUnion1confirmtherightofthePalestinianpeopletohaveaccesstoanindependenttelecommunicationsnetwork.

The principles of the Oslo agreement with respect to the telecom sector remain valid. However, itsprovisionsarenotapplied.ThisispresentingenormouschallengesforPalestiniantelecomoperators,acleardetrimenttothePalestinianconsumer,afiscallossforthePalestinianAuthority,andanoveralldelayfor sector development. The Joint Technical Committee (JTC) under Oslo, intended to be a regular,technical (non-political) platform to address bilateral issues, has shown inadequate and ineffectiveperformance,andprogresssince2008onbilateralissueshasbeenlimited:

• The lack of spectrum is a significant constraint to the development of the industry; in lateNovember2015,anagreementfora limitedreleaseof frequenciestoPalestinianoperatorstolaunch 3G services has been signed. If implemented, the agreement would finally allowPalestinianoperatorstointroducemobilebroadbandusing3G,abouteightyearsaftertheirinitialrequest.TheagreementwouldstillplacethePalestinianoperatorsatacompetitivedisadvantage,asIsraelioperatorshave3Gand4Gcapabilitiesandareabletoattracthighervaluecustomers.AstheMENAregionismovingtowards4G,therecentagreementonthereleaseoffrequenciescanhardlybecelebratedasasuccess–althoughitdoesrepresentafirststepforward.Combinedwithotherrestrictions,thedelayinmobilebroadbandnegativelyaffectsInternetdevelopment.

• The secondmobile operator (Wataniya) cannot fully play its competitive role for themobilemarket.ItsoperationsintheWestBanksufferedatwo-yeardelayduetoIsraelirestrictionsonreleasingthespectrum.ThesituationforGazaconsumersisworseasWataniyastillcannotstartitsoperationsduetorestrictionsonaccessingspectrumandimportingcivilmaterial2.

• Thepresenceofwidespread,unauthorizedactivityby Israeli operators in theWestBankwithmobile broadband capabilities (Israeli operators have 3G capabilities since 2004 and 4G since2015)hastheeffectofcreatingunfaircompetitionattheexpenseofPalestinianoperatorswhich

1Cf.thefollowingITUresolutions:Resolutions99and125fromthePlenipotentiaryConferencePP-14,Resolution18fromtheWorld Telecommunication Development Conference WTDC-14, Resolution 12 from the World Radio CommunicationConferenceWRC-12.

2ThishasalsoimpactedWataniya’sbusinessplanwhichhasanopenclaimagainstthePalestinianAuthority,askingforpartofitslicenseproceedstobewaivedgiventhelimiteddeploymentofitsoperationscomparedtotherightsunderitslicense.


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cannotevendeliver3Gservices.Dependingonsources,Israelioperatorsmaycurrentlycaptureupto30%oftheWestBankmarket involume–i.e.numberofsubscribers.TheIsraelimarketshareinvalue–i.e.measuredbythetotalsales–isevenhigherasIsraelioperatorscapturehighvalue-addedPalestiniancustomersbyproviding3Gand4G.

Otherconstraintshaveanegativeimpactonsectorperformance,including(i)restrictionsontheimportofequipmentfortelecomandICTcompanies, (ii)restrictionofmovementofgoodsandpeoplewithinAreaC thatimpedesthedeploymentandmaintenanceofinfrastructure,and(iii)therequirementbyIsraelthatPalestinianoperatorsgothroughanIsraeli-registeredcompanytoaccessinternationallinks.

Somedomestic regulatoryandcompetition issuespersist, chiefamong themthestrengtheningof theregulatoryframeworkwith–ideally–thecreationofanindependentregulatoryagency.Theystillpresentan important reason in addition to unilateral and bilateral issues for inadequate sector performance.However,someachievementsaresubstantialwhencomparedwithothercountriesinMENAthathaveyettointroducesimilarreforms,andcomparedtothesituationin2008.

• Withtheissueofasecondmobilelicense(tooperatorWataniya)theauthoritieshaveintroducedamobile-focusedcompetitorenjoyingdejurerightsonequalfootingwithincumbentoperatorPaltel.PaltelandWataniyaarerobustcompanies,withdeepknow-howinthesector,technologyproficiency,excellentcommercialskillsandsolidinvestors.ThesecompaniesareessentialassetsfortheeconomicdevelopmentofthePalestinianterritories.Ifunilateralandbilateralconstraintsarealleviated,chiefamongthemthereleasebyIsraelioperatorsofspectrumfor3Gand4GandtheliftingofIsraelirestrictionsontheimportofequipmentforWataniyainGaza,theycouldmakeasubstantialcontributiontothedevelopmentofthePalestinianTerritories.

• ThePalestinianauthoritiesallowfacilities-basedISPs,whereinalocalISPcanacquireabroadbandlicenseandbecomeabroadbandoperator.Asaresult,localentrepreneurscanacquirerightsanddirectly invest inthedevelopmentofbroadbandinfrastructureataccess level.Thishasbeenafactor of success for the development of broadband in other emerging regions, especially inEasternEurope.FewcountriesinMENAhaveadoptedthisliberalapproach,whichisthenorminEuropeandotherregions.Thisachievementisnoteworthy.

• Palestinian ISPs with a broadband license can use alternative infrastructure built by non-telecommunicationsoperators,inaccordancetothelawandrelevantregulations.Forexample,thefiberopticsinfrastructureofJDECO,aJerusalemutilitycompany,isusedbyatleastoneISP.JDECOmaybewillingtoleaseinfrastructuretootheroperators.

• MTIThasalsointroducedcompetitionintheVoIPandWiFimarketsbyintroducingnewlicenses.

Fortheintroductionofcompetitionthroughtheawardofmobileandbroadbandlicensestobesuccessfulfor the Palestinian territories, the overall domestic regulatory framework needs to be strengthened.Despitetheachievementsmentionedabove,thereisstillthecriticalneedtoissueregulationstotacklethedominantpositionofPaltelinselectedsegments,andofunauthorizedIsraelioperators.Thereisanactiveandpressingdebateontheneedofanewlaw,andontheintroductionofanindependentregulator.Theintroductionofanindependentregulatoryauthorityreflectsgoodinternationalpracticeandshouldbeconsideredasapriority.

Regardlessofthetimingofthecreationofanindependentregulator,however,theregulatoryframeworkis lacking aminimum regulatory package of key regulations that support competition in in advancedmarkets.Forexample,theregulatoryframeworkshouldbestrengthenedthroughapackageofregulationsto address dominance and potential anti-competitive risks such as (i) limited access to essential


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infrastructures in the fixed broadbandmarket, (ii) on-net / off-net price differentiation in themobilemarket,and(iii)fixedandmobilecross-subsidizing.

Therearespecific,additional issuesof regulatoryand institutionaluncertainty inGaza,preventing thedevelopmentofthetelecomsector:

• AnycompanyapplyingforatelecomlicenseintheWestBankmustgoagainthroughawholenewlicensingprocessinGaza.Thisgeneratesinefficienciesandcosts.

• Several counterpartsmentioned that Gaza authorities are levying tax on telecom companies.Whiletheprincipleoftaxingtelecomcompaniescanbelegitimate,anyfiscalrevenuesshouldbemanageddirectlybythePAorbyadedicatedfundsuchasaUniversalServiceAccessfund.

• MTITdoesnothavecontroloverthePalestinianNationalInternetNamingAuthority(PNINA)–andmore specificallyover thePNINAservers–which is located inGaza is theofficialdomainregistry for thePalestiniancountrycodeTop-Level-Domain (“.ps”).While theabsenceofMTITcontroloverPNINAdoesnotcurrentlypreventPalestiniancompaniestoregisterandoperateawebsite,MTITshouldhavecontroloverthisAuthority.

The impact of unilateral and bilateral issues as well as domestic issues on the performance of thetelecommunicationssectoriscompelling:

• The price of fixed andmobile services is still high, andmobile data is particularly expensive,especiallycomparedwiththeoffersofunauthorizedIsraelioperators.

• A high-level, possibly conservative estimation of the foregone value due to lasting effects ofunilateralandbilateralissuesaswellasdomesticissuesisprovidedbasedonabenchmarkingwithpeermarkets.ThetotalrevenuelossforthePalestinianmobilesectorduringthelastthreeyears(2013-2015)rangesfromUS$436to1,150million.Therevenuelossdirectlyattributabletotheabsenceof3GisbetweenUS$339and742millionandthetotal2013-2015ValueAddedTaxfiscalloss for the Palestinian Authority is betweenUS$ 70 andUS$ 184million3. The direct impactrepresentsupto3.0%oftheGDPoverthelastthreeyears.

3AdditionalfiscalrevenuesarenotestimatedinthisNotesuchascorporatetaxes.


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Figure1:Totalrevenuelossoverthelastthreeyears(2013-2015)forPalestinianmobileoperatorsduetotheabsenceof3Gandotherbilateralanddomesticissues

Source:WorldBankcalculation

Inshort,comparedtothe2008situationassessedintheWorldBankTelecommunicationsSectorNote(WorldBank,2008),therehasbeenverylimitedprogressonthebilateralsideandnoticeableprogressonthedomesticside.Onthebilateralside,spectrumissuesemergedasthemostimportantbottleneckforthesector,inthecontextofanindustrythathasstronglyevolvedtowardstheuseofradioresourcesfordatacommunications.Thecreationofanindependentregulatorremainsthemostimportantdomesticpriority, but in some areas (sector liberalization, liberal licensing regime), the authorities have takenpositivestepsthatmostcountriesintheregionhavestilltoembrace.MostoftheissuesidentifiedinthecurrentNotewerealreadymentionedonewayoranotherin2008,andahigh-levelassessmentoftheprogressachievedduringthelast7yearsisprovidedinthetablebelow.

Table1:High-levelsummaryofprogressandstagnationsince2008

Mainissues(2008)

2008situation 2015progress

Unauthorizedcompetitionandtechnicalcoordination

o DysfunctionalJTCo Israelirestrictionson

spectrumreleaseandno3Gservices

o UnauthorizedcompetitionbyIsraelioperators

o IsraelirestrictionstoimportcivilandICTmaterialacrossborders(especiallyinGaza)

o DysfunctionalJTCo Littleprogressonspectrum(releaseof2Gspectrumfora2ndoperatorin

theWestBank).Thereleaseof3Gspectrumhasbeendelayed,placingunauthorizedmobileIsraeliservicesataclearadvantage.

o StillunauthorizedcompetitionbyIsraelioperators;datasuggeststhattheirmarketsharehasdiminishedbutcouldriseagainastheyareabletoprovide3Gand4GservicesanddatapackagesthatcannotbematchedbyPalestinianoperators.ThepresenceofaggressivedatapackagesfromIsraelioperatorsmayalsoprovetobeacompetitivechallengeforDSLoffer.

o IsraelirestrictionstoimportcivilandICTmaterialacrossborders(especiallyinGaza);difficultiestoobtainpermitstooperateinAreaC(infrastructuredeploymentandmaintenance).

o Restrictiononaccesstointernationallinks(possibleonlythroughanIsraeli-registeredcompany).


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Mainissues(2008)


WeakSectorInstitutionalandRegulatoryCapacity

o Noindependentregulatoro MTITisresource

constrainedo Taxcollectiontobe

improvedo Transparencyand

governancetobeenhanced

o Stillnoindependentregulatoryagency.o Improvementsonthepolicysidebutincompleteimplementation(no

regulatoryauthority):• 2009:aTelecommunicationsLawwasapproved;the2009Law

providesforthecreationofthePalestinianTelecommunicationsRegulatoryAuthority(PTRA)

• 2010:MTITpublishedaStatementofNationalTelecommunicationsPolicy

• 2014:MTITpublisheditsICTStrategy

Promotionofnewentrants

o Highentrybarriersfornewentrants,nocompetitioninmobile

o Substantialprogressforthemobilemarket:i)asecondoperator(Wataniya)launchedoperationsinQ42009butstillcannotoperateinGaza;ii)MTRdecreasebasedonLRICmodel

o Substantialprogressforthefixedmarket:i)introductionofliberalISPlicensingregime;ii)aformofbitstreamaccessisavailable;iii)possibleaccesstoalternativeinfrastructure,iv)FTRdecreasebasedonLRICmodel

Marketdominance

o Operatordominance(singlemobileoperatorPaltel-JawwalanddominantISPPaltel-Hadara)

o Regulatoryframeworkneedstobestrengthened:i)frameworktodealwithsignificantconcernsbytelecomchallengersandnewentrantsregardingdominanceofPaltel;ii)noNumberMobilePortability;iii)RIOstoaccessPaltel’sinfrastructure

RECOMMENDATIONSONBILATERALISSUES

RevivetheJTCplatformtoaddressbilateralissues.Specificareasoffocusincludeacomprehensiveandlong-termagreementonspectrum,beyondthecurrentagreementon3G,andincluding4Gspectrumaswellasspectrumfornetworkbackhaulingandotherwirelessbroadbandaccesstechnologies,ensuringthePalestinianoperatorstherighttodevelopindependent,facilities-based,networks,and,iftheywish,accessingsharedpassiveinfrastructurefacilities.

ReviewthemechanismsforthefunctioningoftheJTCtoensuregreatertrust,efficiencyandopenness.Somesuggestionstoexploreinclude:

• Acommitmenttomeetonascheduledandregularbasiswhateverthepoliticalcontextonbothsides;

• Theinclusionofatrustedandindependentthirdpartywithlegalandtechnicalexpertisetoreviewrequestsandproposalsfrombothsideandprovidesuggestionswhererelevant;

• The commitment to i) not disclose sensitive or preliminary proposal and information; ii) andconverselytopublishpublicreportsandupdatesontheworkandprogressoftheJTC.

Release3Gand4Gspectrum.Competitioninthemobilemarkethasbeenthedriverofmobilemarketgrowthandinnovationinallmarkets,includingindistressed,postconflictenvironments,andreleasingadditionalspectrumwouldprovidebenefitstoPalestinianresidentialandcorporateend-users.Leavingamobile-monopoly market structure in Gaza is unhealthy for competition and Gaza consumers. Theabsenceof3G/4GspectrumassignedtoPalestinianoperatorsisalsohurtingPalestinianconsumers.TheIsraeliauthoritieshaveprovidedaproposaltoallocatededicatedspectrumtothePalestinianoperators,aswellasspectrumonasharedprincipleonthe2100MHzband.Afullallocationofspectrumresources,beyondthe3Gspectrum,shouldbenegotiated.


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Lift Israeliconstraintsonthelayoutofmicrowavelinksandthe importofcivilandtelecommaterial–particularlyinGaza.Someoptionsinclude:

• Streamlining the administrative procedure for security clearance with stable, objective,transparentandnon-discriminatorycriteriatobefulfilled;

• PalestiniantelecomandICTcompaniesprovidingalltheneededclearanceformsandproofs;• Israeliauthoritiesmonitoringtheuseofcivilandtelecommaterial–particularlyinGaza–withthe

possible involvementofatrustedthird-partyperformingadetailedauditonaregularbasis toensureallsecurityconcernsaredealtwith.

Mitigatetheeffectofunauthorizedtelecomactivity.TheissueofunauthorizedIsraelitelecomactivityintheWestBankhasbeenpresentthroughtheimplementationoftheOsloagreement.Twomeasurescanaddressthisissue:

• PalestinianoperatorsshouldbeabletoaccesssimilarresourcesasIsraelioperators,inordertobe on the same competition ground. This includes accessing sufficient spectrum to deployindependent3Gand4G/LTEsystems(whichcanbesharedwithIsraelioperatorsonavoluntarybasis);thisisatoppriorityforaction;

• An ideal cooperation between Israeli and Palestinian authorities would limit the coverage ofIsraelioperatorsintheWestBank.Thisincludesthereviewoftelecomequipmentdeployed(e.g.micro-cells with a smaller coverage radius can limit the coverage compared tomacro-cells)4.However,thetrackrecord(especiallyoftheJTC)suggestsskepticismastothereachofasolutiontolimitcoverage.

RECOMMENDATIONSONDOMESTICREGULATORYANDCOMPETITIONISSUES

Createanindependentregulator.Thecreationofanindependentregulator(PTRA)isthetopdomesticpriority, with the setting up of a regulatory framework in line with international best practices. Theregulatoryframeworkshallensureanobjective,transparentandnon-discriminatoryapproachwiththeindustry,supportedbyopennessandpublicconsultations.

Implementthetelecomlaw.TheNotealsourgesthatPalestiniancounterpartstoimplementtheexistinglawwithoutdelay,orintroduceamendmentstoensureitisconsistentwithglobalbestpractices.

Resolve several legaland institutional issuesaffecting the sectorwithaminimumregulatorypackage,including:

• ThemonitoringofthemarketwiththeinstitutionofanICTobservatory.• The introduction and enhancement of regulatory tools such as market observatory, market

definition, identification of Significant Market Power (SMP), remedies definition andenforcements,monitoringandsanctions;

• The enforcement of Reference Interconnection Offers (RIOs) to provide a more dynamic,transparentnon-discriminatoryandcostorientedwholesalemarket;

• The assistance in the setting-up of an ex post competition department or authority (tocomplement theexante regulatoryapproach) tomonitorandapprovepotentialmergersandpreventpotentialanti-competitivebehaviors.

Enhancecapacityandskills.ThelegitimacyandefficiencyofMTITandtheto-be-createdPTRAmustbesupportedbythecontinuingrecruitmentofskilledworkerstokeepupwithmarketdevelopmentsand

4Althoughtheeconomicimpactismarginal,PalestinianoperatorsshouldalsolimittheirsignalreachwithinIsraeliterritory.


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complexregulatorytools.Thisremainsachallengeasthe labormarket issmallandthesalaries inthepublicsectorarelowerthanintheprivatesector.


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2 Introduction ThePalestinianTelecommunicationsSectorAssessmentNote isaknowledgeproductpreparedby theWorldBankinresponsetoaspecificrequestfromthePalestinianauthoritiestoassesstheperformanceof the telecommunications sector in the Palestinian territories, identify specific issues and makerecommendationsforfurtherdevelopmentandreform.

ThisNotebuildsonpreviousanalyticalproductsproducedbytheWorldBankinthisarea.Inparticular,this specific sector was assessed in 2008, with the publication of the “West Bank and GazaTelecommunicationsAssessmentNote–IntroducingCompetitioninthePalestinianTelecommunicationsSector”(WorldBank,2008).ThepresentNotespecificallydiscussestheevolutionoftheissuesandofthetelecommarketwith respect to the situationanalyzed in2008.Abriefdescriptionof themain issuesidentifiedin2008andtheprogressperformedisdisplayedinthefinalConclusionandRecommendationssection(§5).Morerecently,asubsetofthedomesticandbilateral issuesfacedbythesectorhasalsobeenanalyzedintheWorldBankreport“AreaCandtheFutureofthePalestinianEconomy”,publishedbytheWorldBankinOctober2013(WorldBank,2013).

This note has been prepared through a mix of methodological techniques. The research team hasperformeddeskresearch,leveragingontheavailableliteratureonthePalestinianand,toanextent,Israelitelecommunications sector. The teamhashadextensivediscussionswith the relevant stakeholders inPalestinianterritories,includingseniorgovernmentofficials,privatesectorassociationsandcompanies.TheteamhasalsoengagedtherelevantIsraelicounterparts,andtheOfficeoftheQuartet,anddonorsinvolvedinthesector.Theteamhasalsobenefittedfromtheopportunityofconductingtwofieldtrips.ThefirstfieldtripmetwithprivatesectorrepresentativesinGaza.ThesecondtripwasanengineeringfieldvisittositesaroundRamallah.Theteamhasalsoengagedinextensiveconsultations,includingaone-dayworkshopopentoallmainstakeholdersinRamallah,whereadetailedpresentationofthedraftreportwasdiscussed.ThisworkshoptookplaceonJune30,2015.Theteamhasalsocommissioneda“HouseholdSurveyonTelecomandInternetinJordanValleyVillagesandGazaStrip”tothefirmAlphaInternational.ThesurveywascompletedinSeptemberandOctober2015,andwasdeliveredtotheBankonOctober24,2015.Thisreportreferencessomeoftheresultsofthesurvey.

ForthepurposesoftheNote,theteamhasmainlyfocusedontelecommunicationsinfrastructure,leavingoutotherimportantsub-segmentsoftheICTindustry.TheNotetouchesuponbroadcasting(radioandtelevision) issues,totheextentnecessarytodiscussradio-magneticspectrumandother infrastructurerelatedmatters.Thebroadcastingsectorwoulddeserveaseparatenoteandassessment.TheICTindustryandICTapplicationsarenotspecificallyassessedaspartofthereport.Finally,theemergingeGovernmentapplicationsaretreatedinaseparateWorldBankreport.

Thestructureofthenoteisasfollows:afirstsectiondealswiththeassessmentofthetelecommunicationssector, in termsof physical indicators, infrastructure, investment, prices and services. The Palestiniansector is assessed both in historical perspective (having the 2008 analysis as a starting point), and inrelationwithregionalandglobalbenchmarks.Asecondsectionofthereportillustratesthemainissuesidentifiedbythestakeholders.Finally,thelastsectionofthereportproposeskeyrecommendationsforfurthersectordevelopment.


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3 Assessment of telecom sector in the Palestinian territories

3.1 Institutional and enabling environment

ThePalestinianAuthority(PA)isresponsibleforregulatingthetelecommunicationssectorareasunderitsjurisdiction(AreasAandB)asprovidedintheOsloAgreement5,whichsubjectmanyregulatoryareastocoordination between the Palestinian and the Israeli authorities. Sector policy and regulation arepresentlytheresponsibilityofMinistryofTelecommunicationandInformationTechnologies(MTIT)ofthePA.

Until1995,telephonyservicesinthePalestinianterritoriescameunderthejurisdictionofIsrael,whoseincumbentoperatorBezeqfulfilledbothregulatoryandoperationalfunctions.In1995,Israeltransferredaround 80,000 telephone lines connected to 14 exchanges in the Palestinian territories to the newlyformedPA(TeleGeography,2015)6,andin1996theTelecommunicationsLaw3/1996gavetheMTITthe“thedutyofsettingup,runningandoperatingtelecommunicationsnetworksinthePalestinianterritories”(PALaw3/1996,Art.5)7.

In2004MTITandPAstartedaprocess todraftanew legaland regulatory framework tooversee thereformof themarket, including theestablishmentofan independentPalestinianTelecommunicationsRegulatory Authority (PTRA) which would assume all responsibilities held by MTIT for thetelecommunicationssector.Afterseveralreviews,inJune2009thePAPresidentissuedadecreetoenacta new Law on Telecommunications and in April 2010 MTIT published the “The Palestinian NationalAuthorityStatementofNationalTelecommunicationsPolicy”(PAStatement,2010):

• TheStatementincludessix“mainpolicyobjectives”,thefirstofwhichbeingtheestablishmentofthePTRA: (i)To implementthenewregulatoryauthority, (ii)Tocreateacomprehensive legalframework,(iii)Toestablishasoundinterconnectionandaccesspricingregime,(iv)Tointroducewholesale broadband access services, (v) To implement accounting separation and costaccountingand(vi)Toregulatecost-orientedretailpricesofdominantoperators(PAStatement,2010,pp.3-6).

• In addition, MTIT highlighted four “other pressing matters” with (a) “the control nationalfrequenciesandthenationalnumberingplan,thatareatpresentunderthecontroloftheIsraeliauthorities,” (b) “a firstmarket assessment (…) and issueadeclarationdesignatingdominantoperators as appropriate,” (c) “A new form of general licence authorising a broad range ofservices, includingVoiceover IPto InternetServiceprovisiontoreplaceexisting licenceswhichhaveanarrowerscope,”and(d)“severalregulatoryrequirementsthatenhancecompetition,suchascarrierselectionandnumberportability.”(PAStatement,2010,pp.6-7).

5OsloAgreement,AnnexIII,ProtocolonIsraeli-PalestinianCooperationinEconomicandDevelopmentProgramsandTheIsraeli-PalestinianInterimAgreementontheWestBankandtheGazaStrip(“Oslo2”—9/28/95),Article36

6Allsourcesandreferencearelistedattheendofthenote,section“ReferencesandSources.”7Todoso,theMTIT,amongothermeans,“issueslicensestosetup,operateandrunprivatetelecommunicationsnetworksandstatesnecessaryconditionsofauthorizationsandmakethempublic”and“statesstandard,foundationsandratestodesignatepricesprovidedbythelicensee”(PALaw3/1996,Art.7).OneofthefirstactionsofthePAconsistedinawardingalicencetoPalestineTelecommunicationsCompany(Paltel)whichhasmadeverysolidprogressindevelopingthefirstPalestinianfixed-linecommunicationsnetwork(seesections§3.2)andthefirstPalestinianmobilenetwork.


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DespitethedraftingofanewLawonTelecommunicationsandthePAStatement2010,therehasbeennoprogressonthecreationofthePTRA(seeinfra§4.1.2).

TheOsloagreement leaves importantregulatoryandtechnicalcoordinationdecisionsbetweenthePAandIsraeliauthoritiesinthehandsofaJointTechnicalCommittee(JTC)gatheringspecialistsfrombothsides to coordinate frequency assignment, importation of telecommunications equipment,telecommunicationactivitiesinareaC,permitstobuildinfrastructure,etc.Inpractice,theJTChasonlymetafewtimessince2000andremainsdysfunctional(cf.infra§4.2.1)

3.2 Fixed-broadband sector assessment

AftertheOsloagreements,thePAawardedinNovember1996thefixed-lineincumbentPaltel(PalestineTelecommunications Company) a 20-year license to build, operate and own landlines, datacommunications, paging services, public telephones, satellite communication services, lease lines, selltelecommunicationsequipment(peripheraldevices),Value-AddedServices(VAS)anddeployandoperateamobilenetwork(PSR2013,p.3&19).

Followingtheawardofthe20-yearlicenceinNovember1996,thefixed-lineincumbentPaltelstartedtodeliverfixed-servicesinJanuary1997overaninadequateinfrastructureinheritedfromIsraeliincumbentBezeqmadeofaround80,000lines.Paltelhadtoimmediatelysettoworkonmodernisingandexpandingthenetwork,whilekick-startingwide-rangingplanstoachievecoverageofeveryPalestinianhome.WithinayearofoperationPaltelhadreplacedeveryanaloguelinkonthenetwork,andin1998itcompleteda140kmfibre-opticcablelinkingthemaintownsintheGazaStrip,anda260kmlinkbetweenthecitiesintheWestBank.Amicrowaveconnectionwassubsequently installed, connecting the two transmissionbackbones;however,itquicklybecamesaturated.Today,Paltelprovidesacompleteportfoliooffixedlineservices, with telephony and internet narrowband and broadband (especially leased lines and ADSL).Paltelnowhasfixedcoppernetworkthatcoversmostofthe800,000Palestinianhouseholds,andhasastablesubscriberbaseof400,000PSTNcustomerssince2012(TeleGeography,2015).

For fixed-broadband, almost all customers are served by ADSL lines delivered through Paltel’sinfrastructure.PaltelcreateditsHadarasubsidiaryinFebruary2005–bypurchasingthethreestrongestISPsinthePalestinianterritories–tomanagetheinternetanddatabusiness(WB,2011).Hadaranowactsas Paltel’s Internet Service Provider (ISP) and its current retail market share in volume8 is roughlyestimatedataround50%accordingtoaninvestmentbank(Ramsala,2012),therestbeingheldbyadozencompetingISPs.Theresidentialfixed-broadbandmarketisnowmadeofaround230,000customers(thefixed-broadband penetration per household is thus about 29%). Corporate customers are reached bywireline(copperandfiber)andwirelessinfrastructures;nopublicdataareavailableonmarketshares.

8Marketshareinvolumereferstothetotalnumberofsubscribers.


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Table2:PresentationofPaltelGroup(2014)

PALTELGROUP

Subsidiary Paltel Hadara Jawwal

Operations Incumbentfixed-lineoperator InternetServiceProvider Incumbentmobile-line

operator

Yearoffoundation 1995 2005 1999

Subscriberbase(2014) • ~400kPSTNlines• ~230kADSLlines Roughestimateof~40%

marketshareofthe230kresidentialADSLlines

2.66mmobilelines

Marketshare(2014) • ~100%PSTN• ~99%+ADSL

~75%(withinclusionofIsraelioperators)

5-yearCAGRsubscriberbase(09-14)

• +1.6%PSTNlines• +19.9%ADSLlines N/A +9.3%

Note:CAGR=CompoundAnnualGrowthRateSource:PaltelAnnualReports;Ramsalla,2012

3.3 Mobile sector assessment

Followingtheawardofthe20-yearlicenceinNovember1996,andafterthegrantingoffrequenciesbyIsrael,PaltellaunchedthemobileoperatorJawwalinAugust1999.Jawwaloperateswithstrongspectrumconstraintsandcanonlyoperatea2GsysteminthePalestinianterritories(mobileinternetisprovidedthankstotheEDGEtechnologywhichdownloadspeedissimilartofixednarrowbandinternetaccess).

InSeptember2006asecondmobileoperator,WataniyaMobilePalestine,wasdeclaredthehighestbidder(withabidof$US354million) foracombined2Gand3Gmobile licence inthePalestinianterritories9.MTIT subsequently issued a 2G/3Gmobile licence toWataniya inMarch 2007. However, the secondoperator could not commercially launch itsmobile services in theWest Bank beforeNovember 2009becauseofa2-yeardelayinreleasingthespectrumbyIsraeliauthorities.UpuntilSeptember2009,thePalestinianmobilemarket remained one of the few remainingmarketswith a single nationalmobilenetworkoperator(outofthe159mobilemarketsidentifiedbytheGSMAssociationwithapopulationofaleast1million10,only9mobilemarketsweremadeofasinglenationalmobileoperatorasofQ32009,includingthePalestinianterritories).

As of todayWataniya canonly operate a 2Gmobile system in theWestBank (Wataniya can still notoperate a 3Gmobile system in theWest Bank and cannot operate at all in Gaza). Jawwal (and nowWataniya)alsocompetes fromthebeginningwith IsraelimobileoperatorswhocoverthewholeWestBankwith2G,3Gand4Gsignals(astheydelivermobileservicestosettlers).

9AccordingtoMTIT,asidelettersignedbythethen-MinisterstipulatedthatMTITwouldnotintroduceanew2Gor3Goperatorsforfouryears,thusgrantingWataniyaa4-yearexclusivityfor3G.

10ThisthresholdissettoconsidermarketsthatarecomparabletothePalestinianmarketastheGSMAincludeseveralmarketsmadeofislands,remoteterritoriesandprincipalities.


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Table3:2Gand3GavailabilityinthePalestinianterritories(2015)

TerritoryJawwal Wataniya Israelioperators

2G 3G/4G 2G 3G/4G 2G 3G/4G

WestBank

Gaza

Source:PaltelandWataniyaAnnualReports

EstimationsofIsraelimarketsharesintheWestBankvarydependingonthesource,goingfromalow7%estimatetoover30%11.

Table4:Estimationofmobilemarketsharesinvolume(e.o.2014)

Operators Palestinianterritories WestBankmarket Gazamarket

Jawwal [60%-80%] [50%-70%] 100%

Wataniya [15%-25%] [20%-30%] 0%

Israelioperators [10%-20%] [15%-30%] 0%

Total 100% 100% 100%

Source:PCBS,MTIT,Quartet,TeleGeographyandWorldBankestimates

Israelioperatorshavestabilisedtheirtotalmarketsharessince2010.However,observersbelievethatthey are currently regaining a stronger foothold as they provide 3G and 4G services to Palestinianconsumers(whichneitherPalestinianoperatorareabletodo).Theprovisionof3Gand4GservicesalsoallowsIsraelioperatorstoattractcustomerswithahigherAverageRevenueperUser(ARPU).

11AccordingtothePalestinianCentralBureauofStatistics(PCBS),theshareofPalestinianhouseholdsowningatleastoneIsraelimobilelinewasestimatedat30.3%in2011(WorldBank,2012).In2012,thethenMinisterofMTITclaimedthatIsraelimobileoperatorscontrolledmorethan20%ofthePalestinianmarketshare(Ma’anNewsAgency,2012). In2014theOfficeoftheQuartet Representative stated that “Israeli operators captures 20-40% of market share” (Quartet, 2014). MeanwhileTeleGeography,atelecommunicationsconsultancy,estimatesthatIsraelimarketshareinthewholePalestinianterritorieswasaround7%bytheendof2014.


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Figure2:Mobilesubscriberbasebyoperator(2003-2014)

Figure3:Mobilemarketsharebyoperator(2003-2014)

Source:TeleGeography,2015

Note:TeleGeographyfiguresforIsraelimarketsharesareconservativecomparedtootherPalestinian(PCBS,MTIT)andinternational(OfficeoftheQuartet)sources

3.4 International connectivity assessment

NoPalestinianoperatorsownaninternationalgatewaytoconnectdirectlytheirnetworktotherestoftheworld;theyarerequiredbyIsraeltogothroughanIsraeliregisteredcompanytocarrytrafficoutofPalestinianterritories.

Althoughthelackofownershipofaninternationalgateway(IGW)remainsastrongissueforPalestinianoperators,therehasbeensomeprogresssincethelast2008assessment:

• In2011Paltelstartedaprojecttolayouttoafibre-opticcablefromJerusalemtoJordaninordertobothsupportitsinternationaltrafficandreducethepriceofInternetservicesforconsumers.Thisinternationallinkisnowactivated,butthroughanIsraeliregisteredcompany.

• SimilartoPaltel,allotherPalestinianoperatorsdonotownaninternationalgateway.However,theyarenowallowedtoconnectdirectlytoIsraelicarriers,thusbypassingPaltel.

• PalestinianoperatorscanbuycapacitydirectlyontheMedNautilussubmarinecableandco-locatetheirswitchesatthelandingstationbasedinHaifa,Israel,buttheystillneedtogothroughanIsraeliregisteredcompanytocarrytrafficfromthislandingstationtothePalestinianterritories.

Palestinian operators also face strong constraints in Area C as they cannot provide “microwavebackhauling”(i.e.wirelesslinksusedtoconnectthelast-milenetworkwiththebackbone;thistypeoflinksiscommonlyusedinthevastmajorityoftheworld).

3.5 International benchmark of the Palestinian telecommunications sector

ThePalestiniantelecommunicationsmarketisquiteuniqueasanumberofinputs–suchasspectrumformobile services and backhauling, permits for importing and deploying telecom infrastructure andequipment, and access to international connectivity – rely on an Israeli approval process. A detailedbenchmark in Annex § 8.1 highlights how these unilateral and bilateral issues affect the Palestinian


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market,whilekeepinginmindthatdomesticissuesarealsohinderingthedevelopmentofthetelecomsector:

• ThepenetrationofPalestinianmobileservicesislowerthaninothersimilarmarkets,whereasthefixedbroadbandpenetrationisintheaverage;

• RetailpricesofmobileandfixedservicesarehigherinthePalestinianterritoriesarehigherthaninsimilarmarketswhentakingintoaccounteitherthePurchasingPowerParityortheGDPpercapita.


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4 Telecom sector achievements and issues Note: all achievements and issues are largely common between the Palestinian territories; for issuesspecifictoGazathereisadedicatedsectionattheend.

4.1 Domestic achievements and issues

4.1.1 Main Policy and Regulatory achievements

Introductionofasecondmobileoperator

TheawardofasecondmobilelicensetoWataniyaisapositivesteptowardsenhancingcompetitioninthemobilemarket,thoughthenarrowspectrumwasawardedtoWataniyawitha2-yeardelayandthenewentrantcontinuestofacesignificantspectrumconstraints,inabilitytodeploy3G,andinabilitytooperateinGaza.TheincumbentJawwalalsofacessignificantspectrumconstraintsbutisabletooperateinGazawhereitisthedefactomobilemonopolyoperator.

Enhancementofthefixedwholesalemarket

Afterthepublicationofthe2010TelecommunicationsPolicy(PAStatement,2010),MTITpushedformorecompetitionbyenhancingthewholesalemarket,whichatthattimeconsistedintheabilityofISPstoresellPaltelbroadbandlinesontheretailmarket.TwomainmeasureswereimplementedbyMTITtothisend:

1. MTITandPaltelworkedtogethertosetupanewBitstreamServiceAccess(BSA)anda“Bit-StreamAccess–ModelDescription”paperwaspublished inOctober2010byMTIT (MTITBSA,2010).However, the bitstream service offered by Paltel is not as fully functional as the standardbitstreamencounteredinothercountries;theend-userisrequiredtosubscribetoabroadband(ADSL)linetoPaltel,andthenaddanInternetaccessserviceontopofit(aschemesometimesreferred toas “doublebilling”). TheBSAoffer is also restrictiveasADSL technology limits thecapabilitiesofISPstoprovidebroadbandtocorporatecustomers.

2. MTITprovidedatemporarypermissiontotheJerusalemDistrictElectricityCompany(JDECO)todeploy fibre for smart metering; JDECO has now deployed around 380km of fibre along itselectrical lines. Its telecom subsidiary needs a license in order to provide access to its fibrenetworkinanon-discriminatoryfashiontotelecomoperators.

ISPs also have developed their own fibre infrastructure and fixed-wireless infrastructure to deliverbroadbandandVoIP,mainlytoprofessionalandcorporatecustomers12.

The introductionBSA in 2010 led to a significant increase in broadband subscription as shown in thefiguresbelow,andin2015Paltellistedatotalof17ISPsofferingservicesundertheBSAmodel,excludingitssubsidiaryHadara;ofthose,tenwereoperatingsolely intheWestBank,sixwereoperatingonly inGaza,withoneservingbothregions(TeleGeography,2015).

12 In2008MTITopened the internetandVoIP services for competitionand8broadbandand8VoIP serviceproviderswerelicensed.MTITalsointroducedcompetitionontheValueAddedServicesmarketandWiFimarket.


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Figure4:Broadbandsubscribersbase(2005-2014)

Figure5:Broadbandsubscribersyearlygrowth(2008-2014)


LiberallicensingregimeforISPanddataproviders

MTIThasintroducedalight-handedlicensingregimeforISPs,asalocalISPcanacquireabroadbandlicenseandbecomeabroadbandoperator;therearenowmorethan20ISPsinthemarket.FewothercountriesinMENAhaveadoptedthisliberalapproach,whichisanorminEuropeandotherregions.Asaresult,localentrepreneurscanacquirerightsandinvestdirectlyinthedevelopmentofbroadbandinfrastructureatconnectivityandaccesslevel.Thishasbeenafactorofsuccessforthedevelopmentofbroadbandinother countries,especially inemergingmarkets inEasternEurope. Inaddition,Palestinian ISPswithabroadband license are allowed to use alternative infrastructure built by non-telecommunicationsoperators.ThePalestinianauthoritiesdeservepraiseforthispolicyapproach.

Introductionofaccountseparation

Another positive development is the 2010 issuance of an ISP license to Hadara, which stipulates fullaccountseparationfromPaltel’saccount.WhiletherearenodetailedguidelinesissuedyetbyMTITonthismatter,in2014MTIThiredanauditfirmtoperformacomplianceaudit,andaccordingtoMTITandPaltelthenon-publicinterimreportdrawsfavorableconclusionsforPaltel.

Pricingoffixedandmobileterminationrates

The setting of fixed andmobile termination rates (FTR andMTR) is performed byMTITwith a cost-modelingtool.Therehasbeenasignificantglide-pathduringthelast6yearsastheMTRshavedecreasedatarateof15%everyyear(fromanaverageof$6.7cin2009to$2.1cin2015).TheFTRdecreasedatalowerpace(from$2.7cin2009to$1.6c).SinceJune2015MTIThasendedthemobileasymmetryregimetoswitchtosymmetricrates.MTITalsoplanstofurtherreducetheMTRs inanearfuture.ThestrongdecreaseintheMobileTerminationRateswillhelptoenhancecompetitiondynamicsonthemobileretailmarketbyimprovingthepossibilitiesforthemobilechallengerWataniyatoreplicatetopreferentialon-netoffersbytheincumbentJawwal(cf.§0).


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Figure6:Evolutionoffixedandmobileterminationrates($cent)

Source:MTIT

4.1.2 Main Policy and Regulatory issues

A. Theregulatoryframeworkneedstobestrengthened

ThedomesticlegalframeworkinthePalestinianterritoriespresentsseveralsignificantchallenges,chiefamongthemthelackofanindependenttelecommunicationsregulatoryauthoritysupportedbyanup-to-dateregulatoryframework.

Theprocessofsettingupanationalregulatoryauthoritystarted12yearsago(cf.PPIAF,2011).InAugust2003,thePAdecidedtoestablisharegulatoryauthoritytoorganizethetelecommunicationssectorinthePalestinian territories as part of an overall strategy to develop a liberalized, competitivetelecommunicationsmarket.ThetelecommunicationssectorLaw3/1996wasconsideredoutofdateasitlackedappropriateregulation–throughanindependentregulator–andallowedformonopolies13.InMarch2006alawcreatinganewregulatorwassignedbythePresidentofthePAbutrejectedinMay2006bythePalestinianLegislativeCouncil.InJune2009thePresidentofthePAissuedadecreetoenactanewLawonTelecommunications14toprovidefor:

• The establishment of a separate and strong national regulatory authority, the PalestinianTelecommunicationsRegulatoryAuthority(PTRA),toprovideprofessional,fair,transparent,andindependentregulationofthetelecommunicationsindustry.

• ThesplitofresponsibilityforthesectorbetweentheMTIT,whichwillestablishtheoverallsectorpolicy, and represents the sector in bilateral and international fora, and the PTRA,whichwillimplementthesepoliciesandregulatethetelecommunicationsindustry.

Asoftoday,theregulatorhasnotbeenestablished,andtheprospectsofhavinganationalregulatoryauthorityinthenearfuturearedim.Moreover,thereremainsaninternaldebatewithinMTITregarding

13ThePAstartedtocooperatewiththePublicPrivateInfrastructureAdvisoryFacility(PPIAF,amulti-donortechnicalassistancefacility)in2004toformulateanddraftanewtelecommunicationslaw.ThePPIAF-fundedstudiesrecommendedanupdatedlegalframeworkforthesectorandpreparedanewdrafttelecommunicationslaw.Thedraftlawallowedfortheestablishmentofaproposednewregulatoryauthority,thePTRAorPalestinianTelecommunicationsRegulatoryAuthority(PPIAF,2011,p.1)

14The2010“PalestinianNationalAuthorityStatementofNationalTelecommunicationsPolicy”document(PAStatement,2010)onlyreferstoitasthe“2009Law”.


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therevampingof theregulatory frameworkonwhether it shouldcompriseaseparatenew law,oranamendmenttotheexistingTelecommunicationsLaw(PPIAF,2011,p.2).

The establishment of an independent regulatory authority would provide a strong catalyst for theenhancement of the Palestinian telecommunication markets. According to 2013 data from theInternationalTelecommunicationUnion(ITU),159ofits194memberstates(82percent)haveaseparateICTregulatoryagency.Thisreportstillstronglyadvocatestheneedtoestablishanindependentauthority.

ThecreationofthePTRAwouldhelptoresolveseverallegalandinstitutionalissuesaffectingthesector,including:

• enhancing regulatory framework to handle market observatory, market definition, SMP,remedies,monitoringandsanctionsandenforcement;

• enforcementofReferenceInterconnectionOfferstoprovideamoredynamic,transparentnon-discriminatoryandcost-orientedwholesalemarket.

• Thelackofanexpostcompetitionauthority(asopposedtoanexanteregulatoryauthority)tomonitorandapprovepotentialmergers15andpreventpotentialanti-competitivebehaviors.

B. DominanceofPaltelGroup

AbodyofevidencepointstoPaltelbeingthedominantoperatorinboththemobileandfixedmarkets16:

• Fixedwholesalemarket:o Paltel fullyowns the fixed-infrastructure,whichcanbeconsideredanessential facility

withthecivilengineering(trenches,ductsandpoles)andthecopperlocalloop;o Forresidentialcustomers,thereisnoLocalLoopUnbundling,andtheBitstreamService

Access BSA consists in end-users having to subscribe to an ADSL line to Paltel beforesubscribingtoanISPtoaccesstheInternet.ThissignificantlylimitsthecommercialandtechnicalfreedomofISPs;

o Forprofessionalandcorporatecustomers,thereisnowholesaleofferavailabletoaddressthislucrativesegment.

• Fixedretailmarket:PaltelGrouphasastrongandstablemarketshareinvolume(around50%)duetoitssubsidiaryHadara.

15The2011WorldBankreport“WestBankandGaza,ImprovingGovernanceandReducingCorruption”states:“PaltelalsocreatedHadara, bypurchasing the three strongest ISPs inWB&G. In this process,Hadaraandother ISPsbecame resellers ofADSLprovided by Paltel. The creation ofHadara, in fact, should have been reviewed byMTIT froma competition standpoint todeterminewhetherPaltel–withcontrolover infrastructure–shouldhavebeenallowedsuchdominance in the ISPmarket.However, according toMTIT, theagreement in the licensegavePaltel the exclusive rights toprovideall telecoms services,includingISP,andthisrestrictedtheministry’sabilitytointerveneinthisissue.”(WorldBank,2011,p.39)

16ConductingaproperSignificantMarketPower(SMP)regulatoryassessmentisoutofscopeofthisnote;formoredetailsonthemethodologythereadermayrefertoEuropeanCommission,CommissionguidelinesonmarketanalysisandtheassessmentofsignificantmarketpowerundertheCommunityregulatoryframeworkforelectroniccommunicationsnetworksandservices(2002/C165/03),11July2002.Asmentionedina2011WorldBankreportonImprovinggovernanceandreducingcorruptionin West Bank and Gaza, “for the past 15 years, Paltel, which includes companies in all the main sectors of thetelecommunicationsandinformationtechnology(IT)market,hasdominatedtheICTsector.Itcontrolsahighmarketshareinallrelevantmarketsegmentsandistheonlycompanyabletooperateinawiderangeofsegments”(WorldBank,2011).


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• Mobile retail market: Paltel: Paltel Group has a strong and stable market share in volume(between75%whenincludingIsraelimobileoperatorsand81%whenexcludingthem)duetotoitssubsidiaryJawwal.IthasnocompetitorsyetinGaza.

• Cross-sectorleveraging:PaltelGroupisaprivatelyowned,verticallyintegratednetworkoperator,with Paltel as the fixed line operator, Jawwal themobile operator, Hadara the data servicesprovider,Hulul the ITarm,Palmedia themultimedia servicesproviderandReach the first callcenter17. As Paltel stated it in its 2013 annual report, “Paltel Group plays a vital role in thePalestinianeconomy,astheGroupcontributestoabout5.9%ofGDP(PCBS,2013).TheGroupisalsoconsideredthe leadingemployer inPalestinewithin thePalestinianprivatesector.PALTELstockalso represents33.16%of the totalPalestineExchangemarket cap,according tomarketdataasendof2013”(PaltelGroup,2013).

Basedonextensiveinterviewswithoperators,thecreationofthePTRAwouldmitigatetheriskofanti-competitivepracticesbyPaltel,whocouldleverageitsdominanceonthePalestinianwholesaleandretailtelecomsmarkets(monitoringdominanceisusuallypartofthemandateofaregulatoryauthority).Thecompetitorsidentifythreepotentialanti-competitivepractices(detailsareprovidedintheBoxbelow):i)limited access to Paltel’s infrastructure, ii) differentiated price for “on-net/off-net” and iii) cross-subsidizedfixedbroadbandandmobileservices.Althoughseveralcompetitorsmentionedthesepractices,assessingtheirexistenceandimpactisoutofscopeofthisNote.ThisNotedoeshoweveridentifythelackofaregulatoryagencywiththeproperframework,capabilitiesandtoolstodealwiththem.

PotentialmarketconductsthatcouldbeinvestigatedbythePTRA

Based on extensive discussion with several Palestinian operators, the PTRA could investigate at least threepractices,andassesstowhichextenttheyinduceanti-competitiveeffectsorprovidebenefitstotheconsumers.

LimitedaccesstoPaltel’sinfrastructureinthefixed-broadbandmarket

Third-partyISPsdonothaveopen,transparentandnon-discriminatoryaccesstoPaltel’sinfrastructure;thereisnoReferenceInterconnectionOffer(RIO),oracataloguepricelist.WhencompetingISPsdohaveaccesstoPaltel’sfixed infrastructure, the contractual conditions do not allow for strong and commercial freedom. As aconsequence, ISPs claim that they are better off by deploying their own fiber infrastructure, which impliesinefficient infrastructure duplication. Even though MTIT introduced Bitstream Service Access in 2010 thatimprovedthebroadbandpenetration,end-usersarerequiredtosubscribetoabroadbandlinetoPaltelbeforeselecting an ISP to provide the Internet access; there is no local loop unbundling planned at this stage. Asmentionedintheaforementioned2011WorldBankreport,anotheranti-competitivebehaviorisa“processof‘cherrypicking’majorinstitutions,whichwerereceivingleased-lineservicesfromtheexistingISPs,andprovidingtheservicesatacheapercost,whichwaspossibleduetotheirownershipoftheinfrastructure;andtheofferofsubscriptionfreeinternetservice,aprocesscarriedoutinamannerthatmarginalizedexistingISPsasthemainservice providers” (World Bank, 2011). Such anti-competitive risk would require an extensive regulatory andcompetitionassessment.Intheinterim,fibreinfrastructureisvisiblydeployedintheWestBankbycompetingISPs:thisraisesadoublequestionofeconomicefficiencyandeconomicrationalityascompetingISPsconsideritmorecost-effectivetoduplicatethefixedinfrastructureratherthanaccessPaltel’sinfrastructure.

“On-net/off-net”pricedifferentiationinthemobilemarket

“On-net/off-net”pricedifferentiation impliesthat“on-netcalls” (callsmadewithinthenetworkofthemobileoperator)arecheaperthan“off-netcalls”(callsmadetoarivalmobilenetwork).AnevidenceofthispracticecanbefoundintheAlphaInternationalsurveythatshowsthat71.7%ofPalestinianrespondents“agreethatthey

17PaltelalsoownsequityinVTelHoldings,aDubai-basedtelecommunicationsfirm.


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limittheirphonecallstomobileorfixedphonesofanothernetworkoperatorbecausetheyareconcernedwiththehighercommunicationchargesthanwhenmakingaphonecalltoothersonthesamenetworkoperator.”Whileatfirstsightsuchoffersappeartobemarketingtacticsbymobileoperators,theyhaveasignificantimpactonthemobilemarketstructurebyfavoring“big”operatorswithhighmarketshares,tothedetrimentofnewentrants(formoredetailsontheeconomicdemonstrationseeFrenchAutoritédelaConcurrence,2012).Although“on-net/off-net” price differentiationmay induce an anticompetitive effect, they can be objectively justified by adifferencebetweenthecostsborneforthesupplyofthetwotypesofcalls(thechiefreasonbeinganasymmetryin the call termination rates). The end of termination rate asymmetry and the glide path to lower mobileterminationratesisagoodstepinthisrespect.

Cross-subsidyoffixedandmobileservices

CompetitorstoPaltelinthefixedandmobilemarketmentiontheriskthatPaltelisusingitsdominantpositiontoperformcross-subsidiesbetweenitsdifferentbusinessunits,makingitdifficultforWataniyaandotherISPstocompete.Performingcross-subsidiesbetweendifferentsubsidiariescanprovidebenefitsfortheconsumers,butcanalsoforeclosethemarketforcompetitors.Thisshouldbesortedoutthroughtheenforcementofaccountingseparation to ensure a fair competition between Paltel’s different subsidiaries and competitors.Note: Cross-subsidisingshouldnotbeconfusedwithbundlingfixedandmobileservicesinasinglepackage,acommonpracticeintendedtoprovidecustomerswithbetterproductsorofferingsinmorecosteffectiveways.CurrentlyPaltelisnotauthorizedtoprovidebundles.

C. Otherregulatoryandmarketissues

Otherregulatoryissuesshouldbeaddressedtostrengthencompetition.MobileNumberPortability(MNP)isnotimplemented;thisisanimportantmeasuretoallowWataniyatocompetewithPaltelandattractcustomers that arewilling to switchoperatorbut fear the lossof theirmobilenumber.Anadditionalmeasure to foster competition is ensuringpublic and fully competitive tenders to providebroadbandservicestoPalestinianministries.

4.1.3 Institutional capacity at the Ministry

AccordingtoMTIT,aftertheseparationofGazalate2007,MTITdidnothaveenoughqualifiedemployeesinWestBankasalltheengineersandexecutiveswereinGazaatthattime.Sincethattime,MITasstartedapolicyofrecruitmentofqualifiedstaffinthetechnical,legal,Policyandregulation,andadministrativefieldtoleadthetelecommunicationssectorinPalestinianterritories.

MTIT has currently around 322 employees, and most of them (209) are employed by the postaldepartment.113employeesworkinthefieldofICT,including20qualifiedengineers18.MTITemployeesparticipateininternationalandregionalorganizations,suchasITU,ESCWA,EMERG,andUFM19.Anew,IT-enabled, licensing system has been introduced and a new headquarters, including an advanced ITtrainingcenterhasbeenintroduced,inpartnershipwithforeignaidfromKoreaandEstonia.DespitetheeffortsundergonebyMTITtoattractcompetentpersonnel,itstillsuffersfromlackofqualifiedICTstaff–suchasengineersandlegalexperts.

18AsapointofcomparisonMTIThadonly11engineersin2008.19Participationsinsuchorganizationsareservingasaplatformforknowledgeexchangeandtechnicalcapacitydevelopment,mainlythroughtheexpertgroupworkshops,thetrainingprograms,andtheexchangeofideasandexpertise.


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4.2 Domestic and bilateral achievements and issues

4.2.1 Bilateral framework

TheframeworkgoverningPalestinian-IsraelibilateralarrangementsontelecommunicationsistheOsloAccordof1993,specificallyArticle36ofAnnexIIIoftheInterimAgreementonTelecommunications20(e.g.ArticlesB.6,C.2,D2).Thisframework,thereferenceagreementbetweentheIsraeliandPalestiniancounterparts to support economic development and stability in key economic sectors, has failed todeliveritspromiseofanindependenttelecommunicationssectorinthePalestinianterritories.AccordingtotheprinciplesoftheOsloAgreement:“IsraelrecognizesthatthePalestiniansidehastherighttobuildand operate separate and independent communication systems and infrastructures includingtelecommunicationnetworks,atelevisionnetworkandaradio.”

In 2008, theWorld Bank study on the Palestinian telecommunications sector found that the existingconflicthurtstheworkofOslo’sJointTechnicalCommittee(JTC)toimplementtheprovisionsunderthetelecommunicationssectionsoftheOsloAgreement,thattheJTChadmetonlytwicesince2000fortwoperfunctorymeetingsin2004,andhadleftimportantissuesunresolved.The2008studyrecommendedthat “the structured negotiations mechanism of the JTC (which deals with mutual coordination offrequenciesuse,interferenceproblems,diverseinternationalissues,andothersensitivesubjectsofmutualimportance),shouldbesupportedandencouragedinthefuture.”

In2015,Oslocontinuestobeadejurevalidbutdefactolargelynon-operationalframeworkcapturedbypoliticalagendasandunabletodeliverthebasicrequirementsof:

1. regularandformalizeddialoguebetweentheIsraeliandPalestiniansides;2. jointagreements,decisionmakingandimplementationinatime-sensitivemannersuitablefora

rapidlyevolvingsector;and3. effective resolutionof challengesbrought to the tablebyeither side,while takingboth sides’

concernsintoaccount.

The instrument for such discussion was mandated to be the JTC composed of the Israeli MoC, thePalestinianMTIT and COGAT with occasional observers. JTC was intended to be themain forum fordialogueandagreements,butislargelydefunct.JTCmeetingsaretoofewandfarbetween;whenthisanalysis was conducted in May 2015, the previous JTC meeting had been held in March 2014. ThePalestiniancounterpartswould like to schedule regularmeetingsof the JTC, coherentlywith theOsloAgreement. However, by Israeli accounts, the JTC stopped meeting after Palestinian politiciansapproached variousUN agencieswith the request for state recognition or for technical assistance. ApoliticaldecisionwasmadeinIsraeltopausetheJTCmeetingsasIsraeliauthoritiesconsideredthatthecounterpartwasactivelyseekingsolutionsoutsideoftheOsloframework.

3GspectrumallocationforthePalestinianterritorieshasbeeninastalemateholdingpatterneversince,whichisclearlydetrimentaltothePalestinianeconomy(seenextsection).PotentiallyencouragingisthatneitherIsraelinorthePalestinianofficialsinterviewedwouldcallOslo‘obsolete’or‘dead’–bothsides

20Cf.Article36ofAnnexIIIoftheInterimAgreement“OsloAccords”–Telecommunications.


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agreedthatuntilapoliticalstatementwasmadepertainingtothismatter,Oslowasdejureintactandcouldberevived21.

4.2.2 Acute spectrum scarcity for Palestinian mobile operators

Per the Article 36 of Annex III of the Interim Agreement, total control of the Palestinian frequencyspectrumwasgiven to Israelprovided that Israelwould releasespectrumto thePalestinianAuthoritywhenneededandwithinonemonthofrequest.HoweverthishasnotbeenthecaseandtodaythetwoPalestinianoperatorsholdatotalof9.4paired-MHz22:4.8MHzforJawwalinthe900MHzbandand4.6MHzforWataniya–with1.8MHzinthe900MHzbandand2.8MHzinthe1800MHzband–.Thisisinstarkcontrastwiththe121.6paired-MHzcurrentlyallocatedtofivemobileoperators in Israel(andanauction inJanuary2015awardedanadditional38paired-MHzfor4G/LTE),withthe5thmobile licenceawardedtoGolanTelecominApril2011.

The amountof frequencies that themobile operator receives is important because it determines thenumberofsubscribersthecompanycanserviceandthekindsofservicesitcanprovide.Moreover,lowerbandfrequencies(800and900MHzband)havebetterpropagationcharacteristicsandcantravelfartherandpenetratewallsbetter,andarethusmoredesirablethanhigherbandfrequencies(1800MHz,2100MHzand2600MHz).Withonly4.6paired-MHzdistributedbetweenthe900MHzbandand1800MHzband,Wataniyaisaco-holderofaworld-recordwithaBulgarianoperator(Mobiltel)asnoothermobileoperatorintheworldstarteditsoperationswithsuchanarrowfrequencyrange23(TheEconomist,2010).

21 Israeliofficial stated theremightbe readiness to reconvene talksonoutstanding issues through the JTC.PalestiniansalsoindicatedreadinesstoreboottheJTCprocess.However,Israel’spositionisthatithopesthePAwillrecognizethatunilateralstepsontheworldstage,suchasapproachingUNagenciestorecognizeaPalestinianstate(whichIsraelseesinviolationoftheagreed-uponmechanisms) are no substitute for working ties. Palestinians are frustrated by years of stalemates andmaycontinue to turn to international agencies for technical and political support. Political maneuvering is therefore likely tocontinue to capture the potential progress that necessary regular and timely discussions could provide, producing anunnecessarystalematethatisharmingPalestinianbusinessesandconsumers.

22Alsoknownas“MHzduplex”of“MHzFDD”,wherebyalowerbandisusedfortheuplinkpathandthe(paired)upperbandisusedforthedownlinkpath.

23MobiltelBulgariawaslaterawarded19.4paired-MHz.


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Figure7:Paired-MHzassignedtoIsraeliandPalestinianmobileoperators(2015)

Figure8:Country-comparisonoftotalpaired-MHzassignedtomobileoperators(2014ormostrecentyear)

Source:SpectrumMonitoring,2015;GSMA,2013;Schejte,2006;MoC,2014;NRAwebsites

ThisverystrongspectrumscarcityimposesaheavyburdenonPalestinianmobileoperators:

• Such a narrow spectrum bandwidth leads to higher deployment cost as additional sites areneededtocopewiththeincreaseintraffic(withalargerspectrumbandwidthadditionalspectrum– or “carriers” – can be activated on the same site which reduces the total amount of sitesrequired)24.

• Averynarrowspectrumbandwidthlimitsthenumberofcustomersamobileoperatorcanserve.Becauseoftheverylowspectrumbandwidthavailableinthe900MHzband,WataniyaclaimsthatithasreacheditsnetworklimitsintheWestBank(WataniyacouldincreaseitssubscriberbasebyaddressingGazaconsumers,butitiscurrentlyforbiddentodosobyIsraeliauthorities);

• Palestinian operators cannot deploy any 3G or 4G/LTE system as 3G and 4G/LTE require abandwidthofat least5paired-MHz(a“carrier”);thesecarrierscomeontopofthebandwidthrequiredfor2G(itisnotpossibletoallocatethewholespectrumfor3Gastherearestillnumerousmobilehandsetswhichareonly2G-compatible).

OsloprovidesforfullaccesstothespectrumforPalestinianoperatorsaccordingtotheirneeds.Giventhefast-changingpaceoftheindustry,mobilebroadbandisessential.SofartheIsraelipositionshasbeentodiscussportionsofthespectrumthatwasnotallocatedtoIsraelioperators.Inthisnarrowercontext,this spectrum scarcity is surprising.Nowadays,mobile spectrum could bemade quickly available andspectrum refarming could free up additional space for Palestinian operators. An in-depth analysis ofspectrumusebyPalestinianandIsraelioperatorsleadstothefollowingshort-termspectrumavailability:

• Inthe900MHzGSMband,thereareatleast5paired-MHzthatcouldbemadeavailable;• Inthe1800MHz,therewas45paired-MHzavailablebeforethe2015LTEauctioninIsrael.After

theauctionof38paired-MHz,thereshouldbe7paired-MHzthatcouldbemadeavailable;• Inthe2100MHz,thereare10paired-MHzavailable;

24AccordingtotheIsraeliMinistryofCommunication:“inordertoachievethesamecoveragewiththesamelevelofserviceinthe1800MHzrangeversusthe850MHzor900MHzrange,nearlydoublethenumberofsitesisneeded”(MoC,2014).


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• Inthe2600MHzband(whichisnotyetassignedtoIsraelioperators),accordingtotheIsraeliMoCthere are 60 paired-MHz that could be made available; this band is “currently used by atelecommunicationscompanyandthestate,andexpectedtobeclearedinthenearfuture”(MoC,2014,p.14).

AccordingtotheMoC,thespectrumidentifiedaspotentiallyavailableinthe900,1800and2100bandiscurrently“inuse”butcouldbemadeavailableinthefuture.ItisnotclearyetwhyadditionalspectrumhasstillnotbeenalreadyreleasedtoPalestinianoperators.

Figure9:SpectrumassignedtoIsraeliandPalestinianmobileoperatorsandpotentialavailability(2015)

Source:SpectrumMonitoring,2015;Schejte,2006;MoC,2014;MoC,2015

Onthebilateralside,anagreementshouldbereachedto:

• Letthesecondmobileoperatorprovide2GmobileservicestoGazapopulation;• Let the twoPalestinianmobileoperatorsprovide3G services– and lateron LTE services– to

Palestinianpopulation;• Let the two Palestinian mobile operators deploy an efficient mobile network with sufficient

spectrum;• Possiblyenabletheattributionofa3rdPalestinianmobileoperatorinthefuturetostrengthenthe

mobilecompetitiondynamics.

Recent3Gagreement

InlateNovember2015,anagreementforalimitedreleaseoffrequenciestoPalestinianoperatorstolaunch3Gserviceshasbeensigned.Ifimplemented,theagreementwouldfinallyallowPalestinianoperatorstointroducemobilebroadbandusing3G,abouteightyearsafter their initial request.Theagreementwould stillplace thePalestinianoperatorsatacompetitivedisadvantage,asIsraelioperatorshave3Gand4Gcapabilitiesandareabletoattracthighervaluecustomers.AstheMENAregionismovingtowards4G,therecentagreementonthereleaseoffrequenciescanhardlybecelebratedasasuccess–althoughitdoesrepresentafirststepforward.

4.2.3 Unauthorized Israeli mobile activity in the West Bank

ThepresenceofunauthorizedIsraelimobileactivityintheWestBankisamajorissuethatisaffectingthedevelopment of the Palestinian telecommunications sector. The Oslo Agreement confers to licensedIsraelitelecommunicationsoperatorstherighttoestablishfacilitiesinthesettlementsandtocovertheroads connecting the settlement to Israel. As a result, mobile operators have established


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telecommunicationsinfrastructureinthesettlementsandcoverlargeareasoftheterritoryintheWestBank.Asanexample,thepicturesbelowshowtelecommunication infrastructures inthesettlementofPsagot,onahillfacingdowntownRamallah.

Figure10:PictureofamobiletowerinthesettlementofPsagot

Source:Authors

Thecoverageofthesignalisverycomprehensiveandhasbeenverifiedbytheauthorsofthereport.Togiveanideaofthephenomenon,itispossibletorefertothecoveragetableprovidedbyOrange(Partner)andPelephonetotheGSMA.


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Figure11:Mobile3GcoverageofIsraelioperatorOrange/Partner(2.1GHzband)

Figure12:Mobile3GcoverageofIsraelioperatorPelephone(850MHz/2.1GHzband)

Source:WorldBankmapsbasedonGSMAAssociationmaps(2015)25

Themere fact that Israeli operators areoffering commercial services in theWestBank is amatterofcontention.PalestinianoperatorsareclaimingthatthereisadeliberateattemptontheIsraelioperatorparttoestablishcommercialpresenceinthewholeoftheWestBank.ThetowerinstallationinsettlementsclosetoRamallah,liketheoneinPsagot,forexample,dosuggestthattheIsraelioperatorhavedeployedinfrastructuretocoverwellinexcessoftheneedsofthepopulationofthesettlement(itmaybetocovertheroadslinkingthesettlementstoIsraelbuthastheeffectofcoveringthewholearea).Inaddition,thestrengthofthesignal,forexampleindowntownRamallah,issuchtosuggestthatnocontrolisplacedonthepartoftheIsraelioperatorstolimitthestrengthofthesignal.TheIsraelicounterparts,ontheotherhand, claim that the sale of pre-paid cards of Israeli operators in the territory of theWest Bank is aphenomenonthatthePalestinianauthoritieshavethepowertoaddressinternally.

The presence of Israeli operators, already an issue in 2008, is aggravated by the lack of 3G and 4GcapabilitiesbythePalestinianoperatorsandbytheasymmetryinprices.

ThehouseholdsurveycommissionedbytheWorldBankconfirmedthepresenceofthisissue.Accordingtothesurveyresults,while95.6%ofhouseholdsintheJordanValleyownedatleastonemobilelinewitha Palestinian operator, only 10% owned at least one mobile line providing Internet access with aPalestinian operator. In stark contrast, 46.3% of households in the Jordan Valley owned at least onemobilelineprovidinginternetaccesswithanIsraelioperator.

25GSMA,MobileWorldLive–GSMRoamingandCoverageMaps;accordingtotheGSMA,“GSMCoverageMaps isauniqueresourcecontaininginformationsuppliedandapprovedbythemembersoftheGSMAssociation.”


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4.2.4 Cross-border restrictions on telecom material and staff

Asmentionedinsection§3.4,PalestinianoperatorscannotconnectdirectlytheirnetworkstotherestoftheworldandareobligedtogothroughIsraeliregisteredcompanies,evenforaccessingtheMedNautilussubmarine landing station located in Israel. This represents an economical and technical burden toPalestinianoperators.

AsecondissueisthelackofadirectconnectionbetweenPalestinianterritories.PaltelhasindicatedthattheycannotlinktheirinfrastructureintheWestBankwiththecounterpartsinGaza,forexample,throughamicrowavelinkwithsufficientcapacity.TherearestrongIsraelirestrictionsinreleasingpermitstomoveequipmentwithinAreaC,allowinfrastructuredeployment,andallowtheinstallationofmicrowavelinks26.

AthirdissueisthedifficultiesfacedbyPalestinianoperatorstoaddressconsumersinAreaC.Accordingto theAlpha International survey, the Israeli operatorCellcomhas a41.5%market shareof the fixedbroadbandmarketintheJordanValley,comparedto16.1%forHadara.

Finally,bothJawwalandWataniyasharedthattheIsraelicounterpartshaveforcedthemtoplacetheirmainswitchesinIsraeliterritory.Bothclaimthattheserestrictionsamounttoextracostsforthecompany.Forexample,bothcompaniesneedtohire–atahighcost–staff inIsraeltoserviceandmaintaintheswitches in Israel.Whilethisclaim ismost likelycorrect, itwasnotpossibletoquantifytheextracostincurred.

Palestinian government counterparts and Palestinian private sector companies highlighted majordifficultiesexperiencedwith the importofequipment.Difficultieswith the importofequipmenthavebeenquotedbyWataniya,forexample,asanobstaclethatpreventedthemfromlaunchingoperationsinGaza(seealsoinfra§4.2.2).

ThemeetingswithPalestinianICTcompanies,highlightedseveraldifficulties,including:

• Delaysinobtainingrelevantauthorizations;• Cumbersomeprocedures;• Extracost,relatedtotheobligationofgoingthroughIsraeliimporters;• Non-transparentandchangingprocesses, andopaquedecisionmaking, causingundetermined

delays.

ChallengesfacedbyPalestiniantelecomandICTcompaniestodeployinfrastructures

Theoperatorshavepointedouttoaseriesofconstraintsfacedwhenimportingequipment.Inparticular,Jawwalhasprovidedadetailedaccountoftheprocedures,whichareillustratedbelow.OneofthemanyconstraintsfacedbyJawwalisitsinabilitytobuildinfrastructureandspecificallytowersinAreaC.Thisresultsinalossofopportunitytoservemanyofthe100,000Palestinianswholiveinthisarea,inadditiontothe2.5millionPalestinianswhopassthroughtheroadsofAreaC.

AccordingtoJawwal,thecompanyrequestedseveraltimesandinmanyoccasionstogetapprovaltodeploycellsitesinAreaCinordertofulfilthelicenseobligationtocoverthePalestinianvillagesandmainroadsconnectingmaincitiesinAreaC.In2009,theIsraeliAuthoritiesrespondedthatJawwalcouldgetthenecessaryapprovalsforCAreasitesviaanIsraelicompany,whereasJawwalrequestedthatsuchapprovalsbegranteddirectlytoJawwal.In the same year, Jawwal submitted a plan for 57 sites,where Israeli Authorities respondedwith very strict

26Cf.WorldBankreport“AreaCandtheFutureofthePalestinianEconomy”,publishedbytheWorldBankinOctober2013(WorldBank,2013)formoredetails.


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conditionsasaprerequisiteforsiteapprovals.Therestrictionswereasfollows:

1. ThesiteshouldbeinstalledinareasownedbyIsraeliAuthorities;2. ThesitecannotbeconnectedtoAreaAandB;3. ThetransmissionfrequenciestoconnectsitesinAreaCshouldbeallocatedwithintheIsraeliband.

AccordingtoJawwal,basedontheserestrictions,JawwalisunabletohaveanysiteoperationalinAreaC,henceJawwal asked the Israeli Authorities in 2013 to revise these restrictions. As a result, the Israeli Authoritiesrespondedin2014byremovingpoint1&2andmaintainingpoint3.

Accordingtoalloperatorsinterviewedforthisreport,despitethechangesmadebytheIsraeliAuthoritiesin2014,theprocessinobtainingaspecificapprovalforaspecificsiteislengthyandcomplicatedsincetimelimitsarenon-existentduringanystageoftheprocess.Oncetheprocessbegins,themilestonesforeachstageareunpredictablesince there isnotimeline for theprocessand leavesoperatorswithnoend insight.Addingto thechallenge,approvalwasgiven to the57 sitesona “generalapproval”principlewhichmeans that specificapprovalsareneededforeachrequestedsite;inotherwords,eachsiteisconsideredasaseparateprojectandneedsspecialapprovals.

Hence,accordingtoJawwal,outofthe57sitesrequested,only1sitehasbeeninstalledsince2014.Inaddition,theIsraeliAuthoritiesallowedJawwaltogetapprovalsforsitesinthelistsubmittedlocatedinareasnotmorethan500metersfarfromAreaAandB.Asaresult,5sitesweredeployedintheseareas.

Jawwalhasprovidedaflowchartforsiteapproval(seefigurebelow).

Figure13:FlowchartforsiteapprovalbyJawwal

Source:Jawwal

AccordingtoJawwal,eachstageoftheprocessasdisplayedontheflowchartdoesnothaveafixeddurationandhencetheteamworkingontherequirementsareconstantlyleftinthedark.

AccordingtoJawwal,thefollowingpointsdeservetobehighlighted:

OwnershipoftheLando Ifthelandisprivatelyowned,Jawwalfacesthetediousprocessoffiguringoutwhothelandbelongsto

exactly.Itisalongprocessandaninvestmentoftimeandenergy.o TheIsraeliAuthoritiesalsohavetheoptionofadvisingJawwaltochooseanalternativesitetoerecta


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cellularsite,andifthisisthecase,thenJawwalneedstostartfromthebeginning(afterbeinginalengthyprocessofayearormore)intermsoffiguringoutwhetherthelandisprivatelyorpubliclyheld.

AllStageso AfterJawwalappliesforalltheapprovalstoerect/constructasitetherequestmightberefusedfrom

theIsraeliAuthoritiessincethesitemightbeamilitaryarea,publiclandbelongingtothegovernmentalauthoritiesorlandthathasalreadybeenconfiscated.

o Asaresult,theIsraeliAuthoritieswillaskJawwaltosearchforanalternativesitewheretheentireprocesswhichmayhavetakenuptoayearormore,willneedberepeatedfromthestartsinceconstructioninanewsitewillberequestedbyJawwal.

The Israeli counterpartshavepointedout to security concerns. Theyhavementioned thedual useofcertain equipment, such as spectrum monitoring equipment. Spectrum monitoring equipment is anessentialtoolforanyregulatoryagencywiththeresponsibilitytooverseethedevelopmentofthetelecomsector.

4.2.5 Complaints by Israeli stakeholders

DuringourmeetingswithIsraeliauthorities,threemaincomplaintshaveemerged.

CoverageofIsraeliterritoriesbyPalestinianoperators

PalestinianoperatorscoversignificantpartsofIsraeliterritoriesneartheIsraeli-Palestinianborder.ThePalestiniansignalcanreachas farastheBenGurion InternationalAirportnearTelAviv.This isnotaninterference issue (the MoC does not complain about interferences for mobile services27) but asovereigntyissue,wherebycustomersinIsraelshouldbesolelycoveredbyIsraelioperators.

PalestinianoperatorsacknowledgethattheycoverpartsofIsraeliterritoriesneartheborder,andstatethatsuchcoverageisessentialtocontinueservicePalestiniancustomerstravellingintoIsrael.However,andcontrarytoIsraelioperatorsoperatingintheWestBank,PalestinianoperatorsdonothaveanyIsraelicustomers.

27Ina2010studyonspectruminterference,theIsraeliMoCstated:“Nosignificantinterference(exceptun-intentionalroamingwith JordanandPSE) at theGSM family European frequencies:GSM900M /GSM1800 /UMTS2000Mbands.” (Ministry ofCommunications,WirelessCommunications:Co-ExistencebetweenIsraelanditsNeighbors,17May2010).


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Figure14:Mobile2GcoverageofPalestinianoperatorJawwalandzoomonIsrael/WestBankborder

Source:WorldBankmapbasedonGSMAAssociationMap(2015)

SpectruminterferenceinTVandradiobroadcastfrequencies

TheIsraeliauthoritieshaveregularlycomplainedof interferencesbyPalestinianTVandradiostations,andonseveraloccasionsintervenedtoceasetheinterference28.

CallterminationratesforthePalestinianterritories

IsraelioperatorscomplainofexcessivechargestoterminatecallfromIsraeltofixedandmobilelinesinthePalestinianterritories(figurescitedrangebetween$12cto$15c).ThishurtsbothcustomersinIsraelwhichpayexcessivecharges,andPalestiniancustomerswhicharelesslikelytoreceivecalls.ThissituationisasymmetricastheotherwayroundIsraelioperatorschargePalestinianoperatorstheregulatedfixedormobileterminationratesetbytheIsraeliMoC(theorderofmagnitudeis$1c).

4.3 Specific issues in Gaza

TheauthorityofMTITinGazaisanadditionalissueasitpresentsseveralhurdlesforthedevelopmentofthetelecommunicationssector:

28Asan illustration,aEuropeanParliamentresolutionstates thatonFebruary2012,“the IsraelDefenceForceandthe IsraeliMinistryofCommunicationraidedtwoPalestiniantelevisionstations”(EuropeanParliament,2012).TheResolutionexplainstheviewsofbothsidesintheseterms:“theIsraelMinistryofCommunicationsaidinastatementthatithadrepeatedlywarnedbothstationsthattheywereusingfrequenciesthatviolatedIsraeli-PalestinianagreementsandinterferedwithcommunicationandtransmissionsystemsinIsrael;whereasaspokesmanfortheIsraelimilitarysaidthattheinterferencewasaffectingaircraftcommunications at Ben Gurion International Airport; the Palestinian Authority (PA) replied that the Israeli accusationsconcerningtheinterruptionofflightcommunicationswerefalse,addingthatneitheritselfnorthetwotelevisionstationshadreceivedanywarningfromtheIsraeliauthorities,andthatthetwostationswerenotguiltyofanyviolationoftheagreementsbetweenIsraelandthePA.”


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• ThereisnocoordinationbetweentheadministrativeandlegalprocessesbetweenthePalestinianterritories.Consultationswithprivatesectorstakeholdershaverevealedconcernsrelatedtothe“double taxation issue”whereby operators are often asked to pay fees fromMTIT and fromHamas(thedefactoauthorityinGaza)29.ThereareinformalreportsandfeedbackfromexistingandhopefulserviceprovidersthatoperatorsinGazaareobligedtopayfeesortaxestothedefactoauthorityinordertodeliverservicestocitizens,andthatlicensesaremoreeasilyobtainedbypersonswhoaremembersofthedefactoauthority.

• There also seems to be an informal “double licensing” regime in place with operators whoobtainedalicensefortheWestBankhavingtoreapplyfora“new”licensetobeabletooperateinGaza.

• AccordingtoMTIT,thereislittletonooversightoftheiremployeesinGaza.ApparentlyseveraldozensGazaemployeesonthepayrollofMTITcannotworkefficiently–ifatall–todealwithICTissues.

• MTITdoesnothavecontroloverthePalestinianNationalInternetNamingAuthority(PNINA)–andmore specifically over the PNINA serverswhich are located inGaza; PNINA is the officialdomainregistryforthePalestiniancountrycodeTop-Level-Domain(“.ps”).WhiletheabsenceofMTIT control over PNINA does not currently prevent Palestinian companies to register andoperateawebsite,theabsenceofcontrolbyMTITposesadoubleissue:

o A“principle”issue,wherebyMTITshouldhaveoversightoversuchpublicICTmatter;o Asecurityissue,asGazaauthoritiescouldtheoreticallyshutdownwebsitesintheWest

BankthankstotheircontrolofthePNINAinfrastructure.

Inadditiontothisdomesticissue,thedomesticandbilateralissueshavealsotakenamajortollonthedevelopmentofthesector.AlloperatorshavehighlightedharderconstraintsontheimportofequipmentinGaza.

TheGovernmentofIsrael(GoI)hasimposedasystemofentryrestrictionsthatlimitstheavailabilityofmaterials and equipment in Gaza. The entry restrictions affect a range of constructionmaterials andoperationequipment included inthe listof"dualuse items".Clearances,orentrypermits,needtobeobtained from theCoordinationofGovernmentActivities in theTerritories (COGAT), reporting to theIsraelMinistryofDefense.Theapprovalprocessrequiresdetailedlistsofmaterials,mapsoftheprojectlocation, arrangements of storage and daily supervision, and evidence of proper usage to COGAT forclearance.

FollowingtherecentGazawarinJuly-August2014,theGazaReconstructionMechanism(GRM)hasbeenestablished based on a temporary agreement between the PA and the GoI, brokered by the UnitedNations.TheGRMhastheobjectivetofacilitateentryofconstructionmaterialsintoGaza.ItreliesontheestablishmentofacentraldatabasewithinthePA’sMinistryofCivilAffairs(MoCA)totrackthematerialrequiredanddeliveredtotheGazaStrip.AlthoughtheGRMisoperational,constructionmaterialimportedinto Gaza continues to be lower than what is needed, even though it has recently increased.Whiledesignedinprincipletofacilitateentryofmaterialsforthereconstruction,practically,nearallmaterialsforimportintoGazahavebeensubjecttoapprovalthroughtheGRM.Thiswouldlikelyalsoaffectany‘dualuse’equipmentrequiredforinvestmentsintheICTsector.

29PresidentMahmoudAbbasforgedaunitypactin2014withHamas(whichcurrentlyformsthedefactoauthorityinGaza).


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Inpractice,ISPsreportthatthesameequipmentallowedfortheiroperationsintheWestBankhasnotbeenallowedintoGaza.WataniyahassharedwiththemissionacomprehensivelistofequipmentandcivilengineeringmaterialsthathavenotbeenallowedbytheIsraeliauthoritiesforimportintoGaza.

As a result of these restrictions on the import of equipment,Wataniya has not been able to launchoperationsinGaza.Gazadoesnothavecompetitioninmobile,whiletheWestBankhasacompetitivemarketinthissegment.Thelackofcompetitionisaconcern,asthedevelopmentofthebroadbandandtelecom sector is strictly related to the degree of competition in themarket. In addition, there is nocompetitioninbackbone.ISPsandbroadbandoperatorsneedtorelyonlyontheinfrastructureofPaltel(whileWestBankbenefitsfromWataniyaandpossiblyBezeq).

Inspiteoftheseissues,thehouseholdsurveycommissionedbythisreportseemstopointtoarelativelyhighsatisfactionrateforthequalityoftheInternetinGaza,wherethepolledhouseholdsinGazashowahigherqualitysatisfactionthantheircounterpartsintheJordanValley.

A possible alternative network, that would benefit the sector and introduce more competition inbroadband, istheWiMaxnetworkdevelopedbytheUNtoservetheschools inGaza.Theprojectwaslaunched in 2006 by the Telecom operator Fusion which implemented the network by usingWiMaxtechnology to connect 150 school inGaza stripwith 2main towers that serve 250 000 students andteachers.Theservices includeUNprivateportals,mail,andalso internetwithhighscalableandstableinternet link.There isanextensionplannedthisyear (2015)with25newschools thatshouldsoonbeconnected.Thisoperatoralsoservesafewprivatecustomers(15)outsidetheschoolsystem.

Figure15:PicturesoftheWiMaxinfrastructureinGaza

Source:Authors

ThecustomersandthenetworksinGazaalsosufferedfromdisruptionsrelatedtotherecent2014war.TheAlphaInternationalsurveyprovidesevidenceofthisissue.AmongtherespondentsinGazathathadamobilephonelineduringthe2014war,“42%saidthatitwasnotdisruptedduringthewar;whereas28.1%indicatedthatitwasdisruptedseveraltimesandreturnedduringthewar,23.4%statedthatitwasdisruptedandreturnedduringthewar,4.4%indicatedthattherewasaproblemsmakingcalls,and2.2%indicatedthatitstoppedandreturnedafterthewar.”


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Figure16:DisruptionthatoccurredtothemobileserviceinGazaduringthe2014war(amongGazarespondentsthatownedamobilephonelineatthattime)

Source:AlphaInternationalsurvey(2015)

Asforthefixedbroadbandservice,amongtherespondentswhodidhaveaninternetsubscriptionduringthe2014war,“49.0%indicatedthatitwasnotaffectedbythewar,17.9%indicatedthatitwasdisruptedand returnedduring thewar, 23.8% indicated that itwas disrupted and returnedafter thewar, 8.6%indicated that it was disrupted and returned several times during thewar and 0.7% indicated it wasdisruptedandhasnotbeenreturnedyet.”

Figure17:ThetypeofdisruptionthatoccurredtothefixedbroadbandserviceinGazaduringthe2014war(amongGazarespondentsthatownedaninternetaccessatthattime)

Source:AlphaInternationalsurvey(2015)

4.4 Assessing the impact of mobile market under-development in the Palestinian territories

Theimpactofallthebilateralanddomesticissueslistedinthisnotesonthedevelopmentofthemobilesector isundeniable.With regards to the impactofbilateral issues,variousstakeholdershavealreadyperformedpubliccalculationsinthepast.

Previouscalculationsofimpactofbilateralissues

In 2012, the then Minister of MTIT claimed that Israeli mobile operators controlled more than 20% of thePalestinianmarketshareanddrainedrevenuesbysome$150millionannually(Ma’anNewsAgency,2012).

A2012WorldBankreport–“FiscalCrisis,EconomicProspects”forWestBankandGaza–mentionsestimationsperformedbyPaltelonthefixedmarket(WorldBank,2012);theestimationistwofold:


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• Israeli restrictions on building infrastructure in Area C prevents Paltel to expand its customer base,leading to a lost opportunity of serving around 8,000 potential customers that could generate anadditionalUS$2millionperyearinrevenues(withamonthlyARPUof$20).

• The tediousandcomplex Israeliprocess togetpermission to carryout regularmaintenanceworkornetworkfaultsrepair inAreaCpreventsPalteltomaintainproperly itsnetworkandcausesqualityofservicedegradationandservicedisruptions,costingPaltelaroundUS$1.2millioninlosseseveryyear.

The2013WorldBankreport(“AreaCandtheFutureofthePalestinianEconomy”)focusedontheWestBankandcalculatedtheimpactofannuallostrevenues–duetotheinabilitytooperateinAreaCandthecompetitionofIsraelioperators–aswellastheannualcostincurred–duetorestrictionsinAreaC–.Thereportestimatedthatthe totalannual foregonevalue (lost revenuesandcost incurred)amountedto$48millions,with83%of thisforegonevaluecomingfromthemobilesector(WorldBank,2013).

Asthecurrentreportfocusesonbilateralaswellasdomesticissues,thissectiondealswithahigh-levelestimationofthecumulated impactofbothdimensions. In linewiththe2013WorldBankreport,thisNote is of the view that the strongest impact in value is on themobilemarket, and thus focuses theestimationonthismarket.

4.4.1 Direct impact

ThedirectimpactconsistsinA)theannualrevenuelossformobileoperators(lucrumcessans);andB)theadditionalcostincurred(damnumemergens)30.

A) REVENUELOSSThelossiscalculatedoveraperiodof3years(2013to2015)tofocusonthemorerecentperiodandisbasedon:

• 2013-2015 3G revenue loss on current subscriber base, i.e. the revenue loss on the currentsubscriber base due to a lower Average Revenue PerUser (ARPU) because of the inability toprovide3Gservices.

• 2013-2015 revenue lossdue tomissingadditional subscribers, i.e. the revenue lossdue to alowermobilepenetrationratebecauseoftheimpactofallbilateral(especiallytheabsenceof3Gservices)anddomesticissues.Thisiscalculatedbyestablishingthecounterfactualsubscriberbaseand deriving the missing additional 2G and 3G subscribers by comparing it to the current(baseline)subscriberbase;

Allthesources,rationalesandcalculationdetailsareprovidedinAnnex8.3.

1. 2013-20153Grevenuelossoncurrentsubscriberbase–Current2G-onlyARPUbeinglowerthanthecounterfactual2G/3GARPU

IfthePalestinianoperatorshad3Gcapabilities,theywouldbeabletoderiveahigherARPU.Basedoninternationalcomparison(cf.Annex8.3),Palestinianoperatorswouldbeabletomigratehalf(i.e.50%)oftheircustomerbaseto3Gservicesandthe3GAverageRevenuePerUser(ARPU)wouldbe30%higher

30 For more details on best practices in quantifying impact cf. European Commission, Practical guide on quantifying harm[SWD(2013)205accompanyingCommunicationC(2013)3440],6Nov.2013.


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thanthecurrent2G-onlyARPU.Asaconsequence,thetotalrevenuesofPalestinianoperatorsontheircurrentsubscriberbasewouldhavebeen15%higher(i.e.50%*30%)iftheyhad3Gcapabilities,whichrepresentatotallossin3GrevenuesofUS$212millionforPalestinianoperatorsoverthelastthreeyears.AsthecurrentValueAddedTax(VAT)rateintheWestBankisat16%,thisleadstoaVATfiscalrevenue31lossforthePalestinianAuthority(PA)ofUS$34million.

2. 2013-2015revenuelossduetomissingadditionalsubscribers–Currentsubscriberbasebeinglowerthancounterfactualsubscriberbase

Becauseof theabsenceof3Gservicesandotherbilateralanddomestic issues, thePalestinianmobileoperatorshavesufferedfromamissingadditional3Gsubscriberbaseinarangebetween250,000and1millionoverthelastthreeyears(therangeisbasedondifferentbenchmarksofpeermarketsdetailedinAnnex8.3),andasimilarrangeforamissingadditional2Gsubscriberbase.

Therevenuelossduetomissingadditionalsubscribersisthus:

• BetweenUS$97to408millionof2Grevenuelossonthemissingadditional2Gsubscriberbase;• BetweenUS$127to530millionof3Grevenuelossonthemissingadditional3Gsubscriberbase.

This leads to a total loss of revenues on themissing additional subscriber base betweenUS$ 224 toUS$938millionoverthelastthreeyears,andanunderlyingVATfiscalrevenuelossforthePAbetweenUS$36to150million.

31The lossof corporation taxcouldbeapproximatelycalculatedwith theEarningBeforeTax (EBT) ratiobut this ratio isnotavailableforthePalestinianmobilemarket.


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Figure18:Totalrevenuelossoverthelastthreeyears(2013-2015)forPalestinianmobileoperatorsduetotheabsenceof3Gandotherbilateralanddomesticissues

Source:WorldBankcalculation(cf.Annex8.3fordetailedcalculation)

Allinall,thetotal2013-2015revenuelossforPalestinianmobileoperatorsisbetweenUS$436to1,150million(ofwhichtherevenuelossdirectlyattributabletotheabsenceof3GisbetweenUS$339and742million)andthetotal2013-2015ValueAddedTaxfiscallossforthePalestinianAuthorityisbetweenUS$70andUS$184million.

As thePalestinianGDPwasUS$12.4billion in2013andUS$12.7billion in201432, thedirect impactrepresentsbetween1.2%to3.0%oftheGDPoverthelastthreeyears33.

B) ADDITIONALCOSTINCURRED

Thecalculationofannualcostincurredwouldbebasedontwomainfactors:

• Additional costs due to (i) the spectrum scarcity and (ii) the inability to deploy access andbackhauling infrastructures in Area C. This constitutes an inefficient additional cost for thatincreasestheforegonevalueforthePalestinianmobilesector.

32WorldBankindicators,GDPatmarketprice(currentUS$).33Assumingthatthe2015GPDisequaltothe2014GDP.


42

• Additional costs to serve theadditional subscriptions calculated in the “revenue loss” sectionabove(suchasacquisitioncostandcoreandaccessnetworkextensionsandupgrades).Thisisalegitimateadditionalcostreducingtheforegonevalue.

Apropercalculationoftheannualcostincurredwouldrequirearobustcostmodel–suchasaregulatorymobile cost model – that is currently unavailable. However it can be assumed that the inefficientadditionalcosts(duetospectrumscarcity34andinabilitytodeployinfrastructureinAreaC)outsetsthelegitimateadditionalcosts(toserveadditionalsubscribers).

C) TOTALDIRECTIMPACTEVALUATION

Allinall,thetotalforegonevalueoverthelastthreeyears(2013-2015)duetoabsenceof3GandtheimpactofotherbilateralanddomesticissuesisbetweenUS$436to1,150million(ofwhichUS$339to742milliondirectlyattributabletothelackof3Gservices),andtheunderlyingValueAddedTaxfiscalrevenuelossforthePalestinianAuthorityisbetweenUS$70to184million.

As thePalestinianGDPwasUS$12.4billion in2013andUS$12.7billion in201435, thedirect impactrepresentsbetween1.2%to3.0%ofthePalestinianGDP.

Finally,thisdirectimpactisonlyfocusedonthemobilesector,andwouldbeevengreaterbyincludingthefixedtelecommunicationssector.

4.4.2 Additional indirect impact

This underdevelopment of the mobile market, coupled with the absence of 3G (which makes thePalestinianmobilemarketoneof thevery last intheworldtonotbenefit from3G)has its tollonthePalestinianeconomy.ArecentstudybytheGSMAssociationevaluatedthebenefitsofmobilepenetrationaswellasthespecificbenefitsof3G,andtheresultsareimpressive(GSMA,2012):

o Foragivenleveloftotalmobilepenetration,a10percentsubstitutionfrom2Gto3GpenetrationincreasesGDPgrowthby0.15percentagepoints.

o Adoublingofmobiledatause leads toan increase in theGDPgrowth rateof0.5percentagepoints.

IfPalestinianoperatorshas3Gcapabilities,theywouldbeabletomigratehalf(i.e.50%)oftheircustomerbaseto3Gservices(cf.Annex8.3).Moreover,accordingtothetelecommanufacturerNokia,anaverage3G subscriber consumesover 3 timesmoredata thanhis/her 2G counterpart36. Basedon the figuresprovidedbytheGSMAssociationabove,theindirectimpactofproviding3GtoPalestinianconsumersandofliftingalltheotherbilateralanddomesticissueswouldleadtoanincreaseintheGDPgrowthrateof

34Onspectrum,theIsraeliMoCstatesthat“inordertoachievethesamecoveragewiththesamelevelofserviceinthe1800MHzrangeversusthe850MHzor900MHzrange,nearlydoublethenumberofsitesisneeded”(MoC,2014).

35WorldBankindicators,GDPatmarketprice(currentUS$).36Nokia,IndiaMobileBroadbandIndex2015.


43

1.25percentagepoint37.AsthePalestinianGDPwasUS$12.4billionin2013andUS$12.7billionin201438,theindirectimpactrepresentsUS$473millionofmissingGDPoverthelastthreeyears39.

Finally,thisindirectimpactisonlyfocusedonthemobilesector,andwouldbeevengreaterbyincludingthefixedtelecommunicationssector.

37i)as50%ofthesubscriberbasewouldmigrateto3G,theGDPgrowthrateincreasesby50%/10%*0.15=0.75percentagepoints;ii) as 3G subscribers consumer 3 times more data than 2G subscribers, the overall mobile data consumption is doubled(3G_consumption*50%+2G_consumption*50%=2*2G_consumption*100%)whichleadstoanadditional0.5percentagepointincrease.

38WorldBankindicators,GDPatmarketprice(currentUS$).39Assumingthatthe2015GPDisequaltothe2014GDP.


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5 Conclusions and recommendations Inshort,comparedtothe2008situationassessedintheWorldBankTelecommunicationsSectorNote(WorldBank,2008),therehasbeenveryslimprogressonthebilateralsideandnoticeableprogressonthedomesticside.Onthebilateralside,spectrumissuesemergedasthemostimportantbottleneckforthesector,inthecontextofanindustrythathasstronglyevolvedtowardstheuseofradioresourcesfordatacommunications.Thecreationofanindependentregulatorremainsthemostimportantdomesticpriority, but in some areas (sector liberalization, liberal licensing regime), the authorities have takenpositivestepsthatmostcountriesintheregionhavestilltoembrace.MostoftheissuesidentifiedinthecurrentNotewerealreadymentionedonewayoranotherin2008,andahigh-levelassessmentoftheprogressachievedduringthelast7yearsisprovidedinthetablebelow.

Table5:High-levelsummaryofprogressandstagnationsince2008

Mainissues(2008)


Unauthorizedcompetitionandtechnicalcoordination

o DysfunctionalJTCo Israelirestrictionson

spectrumreleaseandno3Gservices

o UnauthorizedcompetitionbyIsraelioperators

o IsraelirestrictionstoimportcivilandICTmaterialacrossborders(especiallyinGaza)

o DysfunctionalJTCo Littleprogressonspectrumwiththereleaseof2Gspectrumfora2nd

mobileoperatorintheWestBank.Thereleaseof3Gspectrumhasbeendelayed,placingunauthorizedmobileIsraeliservicesataclearadvantage.

o StillunauthorizedcompetitionbyIsraelioperators;datasuggeststhattheirmarketsharehasdiminishedbutcouldriseagainastheyareabletoprovide3Gand4GservicesanddatapackagesthatcannotbematchedbyPalestinianoperators.ThepresenceofaggressivedatapackagesfromIsraelioperatorsmayalsoprovetobeacompetitivechallengeforDSLoffer.

o IsraelirestrictionstoimportcivilandICTmaterialacrossborders(especiallyinGaza);difficultiestoobtainpermitstooperateinAreaC(infrastructuredeploymentandmaintenance).

o Restrictiononaccesstointernationallinks(possibleonlythroughanIsraeli-registeredcompany).

WeakSectorInstitutionalandRegulatoryCapacity

o Noindependentregulatoro MTITisresource

constrainedo Taxcollectiontobe

improvedo Transparencyand

governancetobeenhanced

o Stillnoindependentregulatoryagency.o Improvementsonthepolicysidebutincompleteimplementation(no

regulatoryauthority):• 2009:aTelecommunicationsLawwasapproved;the2009Law

projectsthecreationofthePalestinianTelecommunicationsRegulatoryAuthority(PTRA)

• 2010:MTITpublishedaStatementofNationalTelecommunicationsPolicy

• 2014:MTITpublisheditsICTStrategy

Promotionofnewentrants

o Highentrybarriersfornewentrants,nocompetitioninmobile

o Substantialprogressforthemobilemarket:i)asecondoperator(Wataniya)launchedoperationsinQ42009butstillcannotoperateinGaza;ii)MTRdecreasebasedonLRICmodel

o Substantialprogressforthefixedmarket:i)introductionofliberalISPlicensingregime;ii)aformofbitstreamaccessisavailable;iii)possibleaccesstoalternativeinfrastructure,iv)FTRdecreasebasedonLRICmodel


45

Mainissues(2008)


Marketdominance

o Operatordominance(singlemobileoperatorPaltel-JawwalanddominantISPPaltel-Hadara)

o Regulatoryframeworkneedstobestrengthened:i)frameworktodealwithsignificantconcernsbytelecomchallengersandnewentrantsregardingdominanceofPaltel;ii)noNumberMobilePortability;iii)RIOstoaccessPaltel’sinfrastructure

RECOMMENDATIONSONBILATERALISSUES

RevivingtheJTCplatform.ThenoterecommendstheintroductionofarevisedJTCplatformorforumtoaddress bilateral issues. The Oslo principles remain valid, and, if implemented, would create a trulyindependent telecommunications sector in the Palestinian territories. This agreementwould need toincludeacomprehensiveandlong-termagreementonspectrum,beyondthecurrentagreementon3G,andincluding4Gspectrumaswellasspectrumfornetworkbackhaulingandotherwirelessbroadbandaccesstechnologies,ensuringthePalestinianoperatorstherighttodevelopindependent,facilities-based,networks,and,iftheywish,accessingsharedpassiveinfrastructurefacilities.

The mechanisms for the functioning of the revised JTC should be reviewed to ensure greater trust,efficiencyandopenness.Athoroughreviewisoutofscopeofthisnote,butsomesuggestionscouldbeexploredsuchas:

• Acommitmenttomeetonascheduledandregularbasis,andwiththecommitmentthatmeetingsshouldtakeplaceasagreedwhateverthepoliticalcontextonbothsides;

• Theinclusionofatrustedandindependentthirdpartywithlegalandtechnicalexpertisetoreviewrequestsandproposalsfrombothsideandprovidesuggestionswhererelevant;

• The commitment to i) not disclose sensitive or preliminary proposal and information; ii) andconverselytopublishpublicreportsandupdatesontheworkandprogressoftheJTC.

Liberating3Gand4Gspectrum.Competitioninthemobilemarkethasbeenthedriverofmobilemarketgrowthandinnovationinallmarkets,includingindistressed,postconflictenvironments,andreleasingadditionalspectrumwouldprovidebenefitstoPalestinianresidentialandcorporateend-users.Leavingamobile-monopoly market structure in Gaza is unhealthy for competition and Gaza consumers. Theabsenceof3G/4GspectrumassignedtoPalestinianoperatorsisalsohurtingPalestinianconsumers.TheIsraeliauthoritieshaveprovidedaproposaltoallocatededicatedspectrumtothePalestinianoperators,as well as spectrum on a shared principle on the 2100MHz band. This proposal is currently undernegotiationandconsiderationbythePalestinianandtheIsraelicounterparts.

Liftingconstraints.CurrentlytheIsraeliauthoritiesrestrictthelayoutofmicrowavelinksandtheimportofcivilandtelecommaterial–particularlyinGaza–becauseofsecurityconcerns.TopmanagementofPalestiniantelecomandICTcompanieshaverepeatedlystatedduringinterviewsthatitisreadytofullycooperatewith Israeliauthoritiestoclearanysecurityconcerns.Athoroughanalysisof liftingsecurityconcernsandrationalizingtheimportprocessisoutofscopeofthisnote,butsomesuggestionscouldbeexploredsuchas:

• Streamlining the administrative procedure for security clearance with stable, objective,transparentandnon-discriminatorycriteriatobefulfilled;

• PalestiniantelecomandICTcompaniesprovidingalltheneededclearanceformsandproofs;• Israeliauthoritiesmonitoringtheuseofcivilandtelecommaterial–particularlyinGaza–withthe

possible involvementofatrustedthird-partyperformingadetailedauditonaregularbasis toensureallsecurityconcernsaredealtwith.


46

Mitigatingtheeffectofunauthorizedtelecomactivity.TheissueofunauthorizedIsraelitelecomactivityintheWestBankhasbeenpresentthroughtheimplementationoftheOsloagreement.Twomeasurescanaddressthisissue:

• PalestinianoperatorsshouldbeabletoaccesssimilarresourcesasIsraelioperators,inordertobe on the same competition ground. This includes accessing sufficient spectrum to deployindependent3Gand4G/LTEsystems(whichcanbesharedwithIsraelioperatorsonavoluntarybasis);thisisatoppriorityforaction;

• An ideal cooperation between Israeli and Palestinian authorities would limit the coverage ofIsraelioperatorsintheWestBank.Thisincludesthereviewoftelecomequipmentdeployed(e.g.micro-cellswith a smaller coverage radius can limit the coverage compared tomacro-cells)40.However,thetrackrecord(especiallyoftheJTC)suggestsskepticismastothereachofasolutiontolimitcoverage.

RECOMMENDATIONSONDOMESTICREGULATORYANDCOMPETITIONISSUES

Creatinganindependentregulator.Thecreationofanindependentregulator(PTRA)isthetopdomesticpriority, with the setting up of a regulatory framework in line with international best practices. Theregulatoryframeworkshallensureanobjective,transparentandnon-discriminatoryapproachwiththeindustry,supportedbyopennessandpublicconsultations.

Passing the telecom law. The Note also urges that Palestinian counterparts to pass the existing lawwithoutdelay,orwithpossibleamendmentstoensureitisconsistentwithglobalbestpractices.

Enhancingtheregulatoryframework.Thecreationofanindependentregulatorwithasoundregulatoryframeworkandasupportingtelecommunicationslawisnowastandardpracticeintheworld.Accordingto2013datafromtheInternationalTelecommunicationUnion(ITU),159ofits194memberstates(82percent) have a separate ICT regulatory agency. The creation of the PTRA with the setting-up of aregulatory framework and the passing of the existing lawwill help to enhance competition dynamicsthankstoavibrantwholesalemarket(e.g.bitstreamandunbundling)andsoundretailmeasuresaimedatreducingswitchingcosts(e.g.MobileNumberPortability).Itwouldalsohelptoresolveseverallegalandinstitutionalissuesaffectingthesectorwith:

• Themonitoringofthemarketwiththeinstitutionofatelecommunicationsobservatory.• The introduction and enhancement of regulatory tools such as market observatory, market

definition, identification of Significant Market Power (SMP), remedies definition andenforcements,monitoringandsanctions;

• The enforcement of Reference Interconnection Offers (RIOs) to provide a more dynamic,transparentnon-discriminatoryandcostorientedwholesalemarket;

• The assistance in the setting-up of an ex post competition department or authority (tocomplement theexante regulatoryapproach) tomonitorandapprovepotentialmergersandpreventpotentialanti-competitivebehaviors.

Enhancingcapacityandskills.ThelegitimacyandefficiencyofMTITandtheto-be-createdPTRAmustbesupportedbythecontinuingrecruitmentofskilledworkerstokeepupwithmarketdevelopmentsandcomplexregulatorytools.Thisremainsachallengeasthe labormarket issmallandthesalaries inthepublicsectorarelowerthanintheprivatesector.

40Althoughtheeconomicimpactismuchlessimportant,PalestinianoperatorsshouldalsolimittheirsignalreachwithinIsraeliterritory.


47

6 List of figures and tables FiguresFigure1:Totalrevenuelossoverthelastthreeyears(2013-2015)forPalestinianmobileoperatorsduetotheabsenceof3Gandotherbilateralanddomesticissues........................................................................9

Figure2:Mobilesubscriberbasebyoperator(2003-2014).......................................................................18

Figure3:Mobilemarketsharebyoperator(2003-2014)...........................................................................18

Figure4:Broadbandsubscribersbase(2005-2014)...................................................................................21Figure5:Broadbandsubscribersyearlygrowth(2008-2014)....................................................................21

Figure6:Evolutionoffixedandmobileterminationrates($cent)............................................................22

Figure7:Paired-MHzassignedtoIsraeliandPalestinianmobileoperators(2015)...................................28

Figure8:Country-comparisonof totalpaired-MHzassigned tomobileoperators (2014ormost recentyear)...........................................................................................................................................................28

Figure9:SpectrumassignedtoIsraeliandPalestinianmobileoperatorsandpotentialavailability(2015)....................................................................................................................................................................29

Figure10:PictureofamobiletowerinthesettlementofPsagot.............................................................30

Figure11:Mobile3GcoverageofIsraelioperatorOrange/Partner(2.1GHzband)..................................31

Figure12:Mobile3GcoverageofIsraelioperatorPelephone(850MHz/2.1GHzband)...........................31

Figure13:FlowchartforsiteapprovalbyJawwal......................................................................................33

Figure14:Mobile2GcoverageofPalestinianoperatorJawwalandzoomonIsrael/WestBankborder35

Figure15:PicturesoftheWiMaxinfrastructureinGaza...........................................................................37

Figure 16: Disruption that occurred to themobile service in Gaza during the 2014war (among Gazarespondentsthatownedamobilephonelineatthattime)......................................................................38

Figure17:ThetypeofdisruptionthatoccurredtothefixedbroadbandserviceinGazaduringthe2014war(amongGazarespondentsthatownedaninternetaccessatthattime)............................................38

Figure18:Totalrevenuelossoverthelastthreeyears(2013-2015)forPalestinianmobileoperatorsduetotheabsenceof3Gandotherbilateralanddomesticissues..................................................................41

Figure19:Mobilepenetrationcomparisonwith20MENAcountries(%population,2014,average123%)....................................................................................................................................................................52

Figure20:Mobilepenetrationcomparisonwith18countrieshaving2MNOsin2014(%population,2014,average105%)............................................................................................................................................52

Figure21:Downloadspeedbycountry(Mbps,2015)...............................................................................53

Figure22:Averagepriceofa4Mbpsbroadbandconnection(US$,July2015)..........................................55

Figure23:Averagepriceofa4Mbpsbroadbandconnection(%ofGDP,July2015).................................55

Figure23:MobilepenetrationcomparisonofthePalestinianterritorieswithcountrieshaving2MNOs,asimilarGDPpercapita,andalowerstartingpointin2005(%ofpopulation,2005-2014)........................59


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TablesTable1:High-levelsummaryofprogressandstagnationsince2008..........................................................9

Table2:PresentationofPaltelGroup(2014).............................................................................................16Table3:2Gand3GavailabilityinthePalestinianterritories(2015)..........................................................17

Table4:Estimationofmobilemarketsharesinvolume(e.o.2014)..........................................................17

Table5:High-levelsummaryofprogressandstagnationsince2008........................................................44

Table6:Palestinianterritoriesretailpricerankingamong20MENAmarketsandcomparisonwithMENAaverage (June 2015, US$/month PPP with VAT included, OECD price comparison methodology andbaskets)......................................................................................................................................................54

Table7:SpectrumtableallocationforPalestinianandIsraelioperators(2015).......................................56

Table8:Evaluationof2013-20153Grevenuelossoncurrentsubscriberbase........................................58

Table9:Evaluationof2013-2015revenuelossduetomissingadditionalsubscribers.............................60


49

7 References and sources (AAG,2015)ArabAdvisorsGroup,ADSLRatesintheArabWorld:aRegionalComparison,August2015.

(BTRA-ARGENET, 2015) Kingdomof Bahrain Telecommunications Regulatory Authority (TRA), StrategyAnalytics,2013TelecommunicationsRetailPriceBenchmarkingReport forArabCountries,Report fromtheAREGNETPriceBenchmarkingStudy,December2015.

(Dhaher, 2013) Omar Dhaher,Telecommunications regulation and the institutional foundation of thePalestinianAuthority,Info,Vol.15Iss:1,pp.17–33,2013.

(European Parliament, 2012) European Parliament, Resolution on Palestine: raids by Israeli forces onPalestinianTVstations,2012/2570(RSP),15March2012.

(FrenchAutoritédelaConcurrence,2012)FrenchAutoritédelaConcurrence,Décision12-D-24relativeàdes pratiques mises en œuvre dans le secteur de la téléphonie mobile à destination de la clientèlerésidentielleenFrancemétropolitaine,13December2012.

(GSMA, 2012)GSMAssociation,Deloitte, Cisco,What is the impact ofmobile telephony on economicgrowth?,November2012.

(GSMA,2013)GSMAssociation,ArabStatesMobileObservatory,2013.

(GSMA,2015)GSMAssociationIntelligence,Datametrics,2015.

(JPost,2012)TheJerusalemPost,Israel,PalestinianscooperateonGazaInternet,4October2012.

(Ma’anNewsAgency,2012)Ma’anNewsAgency,PAseeksrecourse for Israeli telecomrestrictions,12October2012.

(MoC,2014)IsraeliMinistryofCommunications,EconomicExpertOpinionRegardingSharingoftheRadioNetworksintheCellularPhoneMarketinIsrael,15May2014.

(MoC,2015)IsraeliMinistryofCommunications,Pressannouncement–Theauctionforoperatingfourthgenerationserviceshasended:6companieshavewontheauctionforoperatingfourthgenerationcellularnetworks,12January2015.

(MTITBSA,2010)MTIT,Bit-StreamAccess–ModelDescription,7October2010.

(PaltelGroup,2013)PaltelGroup,AnnualReport2013.

(PALaw3/19996)Lawno.(3)of1996forTelecommunications,ChairmanoftheExecutiveCommitteeofPalestineLiberationOrganization(PLO),PresidentofthePalestinianNationalAuthority,1996.

(PA Statement, 2010) The Palestinian National Authority Statement of National TelecommunicationsPolicy,IssuedbytheMinisterofTelecommunications&InformationTechnology,April2010.

(PPIAF,2011)PPIAF,TechnicalAssistanceforWestBankandGaza’sTelecommunicationsSector,February2011.

(PSR,2013)PalestinianCenterforPolicyandSurveyResearch,Dr.MashhourAbudaka,TheEffectsofthePA’sDissolutionorCollapseonTelecommunicationandPostalServices,October2013.


50

(Quartet,2014)OfficeoftheQuartetRepresentative,InitiativeforthePalestinianEconomy,InformationandCommunicationTechnology,2014.

(Ramsala,2012)Ramsala,Equities–Palestine–Telecoms,PaltelGroup,BellwetherofthePalestinianstockmarket,10December2012.

(Schejter,2006)AmitM.Schejter,Israelicellulartelecommunicationspolicy,TelecommunicationsPolicyn°30,2006

(SpectrumMonitoring,2015)SpectrumMonitoring,Comprehensiveoverviewofmobilefrequencybandassignmentslistedbycountry,2015

(TeleGeography,2015)TeleGeography,GlobalCommsDatabase,2015.

(TheEconomist,2009)TheEconomistIntelligenceUnit,CountryReport–PalestinianTerritories,October2009.

(World Bank, 2008) World Bank,West Bank and Gaza Telecommunications Sector Note, IntroducingcompetitioninthePalestiniantelecommunicationssector,January2008.

(WorldBank,2011)WorldBank,WestBankandGaza,ImprovingGovernanceandReducingCorruption,2011.

(WorldBank,2012)WorldBank,Fiscalcrisis,economicprospects:theimperativeforeconomiccohesioninthePalestinianterritories,EconomicmonitoringreporttotheAdHocLiaisonCommittee,September2012.

(WorldBank,2013)WorldBank,AreaCandtheFutureofthePalestinianEconomy,October2013.


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8 Annex

8.1 International benchmark of the Palestinian telecom sector

ThePalestiniantelecommunicationsmarketisuniqueasanumberofinputs–suchasspectrumformobileservicesandbackhauling,permitsforimportinganddeployingtelecominfrastructureandequipment,andaccesstointernationalconnectivity–relyonanIsraeliapprovalprocess.Adetailedbenchmarkhighlightshow these unilateral and bilateral issues affect the Palestinian market, while keeping in mind thatdomesticissuesarealsohinderingthedevelopmentofthetelecomsector.

8.1.1 Telecom service penetration benchmark

The Palestinianmobilemarket is among the bottom performers compared to similar countries. Twopanelsofcountriescanbesetforcomparison:

o Panel#1–All20MENAcountries;o ThereisonlytwonationalMobileNetworkOperators(MNOs),whereastheaverage

numberintheMENAregionis3(Israelhasnow5MNOsoperatingonitsmarket);o ThemobilepenetrationamongthePalestinianpopulationisestimatedat78%atthe

endof2014,comparedtoasimpleaverage41of123%forthewholeMENAregion;o Panel#2–18countrieswith2MobileNetworkOperators(MNOs)

o BecausethetotalnumberofsubscriptionishighlydependentonthenumberofMNOs,thePanel#2isfocusedonallcountriesintheworldwithtwoMNOs.AccordingtotheGSMAssociation,thereare18countriesintheworldwithonly2mobilenetworksin201442.

o ComparedtothisPanel,thePalestinianmarket(78%populationpenetrationattheendof2014)isstillapoorperformerasthesimpleaverageofPanel#2is105%.

Finally,thePalestinianmarketisoneofthelastmarketsintheworldwithno3G:inMay2015,theGlobalmobileSuppliersAssociation(GSA)statedthat582MobileNetworkOperators(MNOs)hadlaunched3Gin216countriesandmarkets.

41Thesimpleaverageistheaverageofthepenetrationratesforthe20MENAcountries.42Tobemoreprecise,thecountriesselectedarecountrieswithapopulationofaleast1million,thisthresholdissettoconsidermarketsthatarecomparabletothePalestinianmarketastheGSMAincludeseveralmarketsmadeofislands,remoteterritoriesandprincipalities


52

Figure19:Mobilepenetrationcomparisonwith20MENAcountries(%population,2014,average123%)

Figure20:Mobilepenetrationcomparisonwith18countrieshaving2MNOsin2014(%population,2014,average105%)


The fixed-broadband penetration is on par with its MENA peers, as the percentage of Palestinianhouseholdshavinga fixedbroadbandconnectionbeingat29%(theMENAaverage is26%).Regardingbroadbandspeed,PalestinianconsumersenjoyagoodbandwidthcomparedtootherMENAcountries,with an averagedownload speedof 3Mbps according toAkamai (an internationalweb company thatprovidesanalysisofInternetaccessparameters).


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Figure21:Downloadspeedbycountry(Mbps,2015)

Source:Akamai,2015

8.1.2 Telecom retail pricing benchmark

The most comprehensive retail pricing benchmark for the MENA region is issued by the TelecomRegulatoryAuthority of the Kingdomof Bahrain (BTRA),which commissions and coordinates a yearlystudyonbehalfoftheArabRegulatorsNetwork(AREGNET)basedonthecostofpurchasing“baskets”oftelecommunicationsservices.ThelateststudywaspublishedinDecember2015(BTRA-AREGNET,2015),andbenchmarkedtheretailpricesasofJune2015.ThisstudyallowsArabcountriestocomparethepricelevelswithinandbetweencountries,andalsotocomparewiththeOECDcountries43.

Formobile services, Palestinian consumers face one of themost expensivemobile prices. Amonthlybasketof40callspermonthsand60SMSmessageswillcostanaverageof$18permonth,whichis60%more expensive compared to an average of $11 per month for the MENA region (PPP and VATincluded).Whenitcomestomobiledata,thePalestinianmarketisbyfarthemostexpensive,ashaving30callspermonthand100Mbof2Gdatawillcostmorethan$176/monthwhichissixtimesmorethantheMENAaverage($31/month,PPPandVATincluded).ThesehighpricesreflecttheconstraintsimposedbyIsraeliauthoritiesonmobilespectrumaswellas3Gand4G.

For fixed-telephony prices, Palestinian consumers face higher prices than the MENA average with amonthlycostof$44for60calls/month,comparedtoanaverageof$29/monthfortheMENAaverage(PPPandVATincluded).Asformobiletelephony,PalestinianconsumersdonotfacesignificantlyhigherpricesforinternationalcallscomparedtotheaverageinMENA;bycontrast,Palestinianconsumersfacethehighestfixed-to-mobileprices.

Forfixed-broadband,aconnectionwithadownloadspeedofatleast2Mbpsis30%moreexpensivethantheMENAaverage.Finally,thePalestinianpriceofaLeasedLine(LL)isintheMENAaveragefora2Mbpscircuit.

43 The baskets are defined by theOrganisation for Economic Co-operation andDevelopment (OECD) and the comparison isperformedbyusingPurchasingPowerParities(PPPs),whichincorporateboththefinancialdifferencesbetweenexchangerates,andthedifferencesinthestateoftheeconomiesasseenthroughthepurchasingpowerofthecitizensineachcountry.AllmonetaryvaluesinthissectionarethusexpressedinUnitedStatesdollarswithPPPandVATinclude


54

Table6:Palestinianterritoriesretailpricerankingamong20MENAmarketsandcomparisonwithMENAaverage(June2015,US$/monthPPPwithVATincluded,OECDpricecomparisonmethodologyandbaskets)

Note:20marketsareconsideredintheMENAregion

Source:BTRA-AREGNET,2015

Anotherretailbenchmarkingstudy isprovidedbytheArabAdvisorsGroup(AAG,2015).Basedontheretailpriceofa4MbpsconnectioninJuly2015,theAAGstudyshowsthatthePalestinianbroadbandpriceis below the Arab region average (unlike the BTRA-AREGNET study, the AAG does not include thePurchasingPowerParities)andthePalestinianterritoriesranksatthe8thplaceoutof19countries.


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Figure22:Averagepriceofa4Mbpsbroadbandconnection(US$,July2015)

Figuresource:ArabAdvisorsGroup,2015

However, when the retail price of a broadband connection is compared to the GDP per capita, thePalestinianterritoriesrankingdropssignificantlyastheannualfeeforabroadbandconnectionrepresents13%oftheannualPalestinianGDPpercapita.

Figure23:Averagepriceofa4Mbpsbroadbandconnection(%ofGDP,July2015)

Figuresource:ArabAdvisorsGroup,2015


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8.2 Spectrum table assignment

Table7:SpectrumtableallocationforPalestinianandIsraelioperators(2015)

Source:SpectrumMonitoring,2015;Schejte,2006,p.23;MoC,2014,p.14,MoC2015

8.3 Direct impact calculation This annex details the methodology and calculation leading to the quantification summarized in thesection§4.4.1oftheNote.Thelossiscalculatedoveraperiodof3years(2013to2015)tofocusonthemorerecentperiodandisbasedon:

• 2013-2015 3G revenue loss on current subscriber base, i.e. the revenue loss on the currentsubscriber base due to a lower Average Revenue PerUser (ARPU) because of the inability toprovide3Gservices.

• 2013-2015 revenue lossdue tomissingadditional subscribers, i.e. the revenue lossdue to alowermobilepenetrationratebecauseoftheimpactofallbilateral(especiallytheabsenceof3Gservices)anddomesticissues.Thisiscalculatedbyestablishingthecounterfactualsubscriberbaseand deriving the missing additional 2G and 3G subscribers by comparing it to the current(baseline)subscriberbase;


57

1. 2013-20153GrevenuelossoncurrentsubscriberbaseIfPalestinianoperatorshad3Gcapabilities,theywouldbeabletoprovidedataservicestotheircustomerswhich in turnwould increase their revenue.The increase inARPUcanbeestimatedbasedon severalreferencepoints:

• InJapan,the3GARPUin2004was43%higherthanthe2GARPU44;• InAustralia,the3GARPUin2006was34%higherthanthe3GARPU45;• InKorea,the4GARPUin2013was32%to40%higherthantheblendedARPU46.

Basedonthesereferencepoints,theevaluationconsidersthat3GPalestiniansubscriberswouldhaveanARPU30%higherthan2Gsubscribers.Assuming that 3G services would indeed be introduced in the Palestinian territories, it would beunreasonabletoconsiderthatallthecurrent2Gsubscriberbasewouldmigrateto3Gservices.AccordingtotheGSMAssociation47,aroundhalfofthetotalmobilesubscriberbaseintheMiddle-Easthasa3Gor4G price plan. The evaluation thus considers that 50% of the Palestinian mobile customers wouldsubscribeto3Gservices.As50%ofthePalestinianmobileconsumerswouldsubscribeto3Gservices,andthattheywouldgeneratea 3G ARPU that would be 30% higher than the 2G ARPU, the overall “blended” ARPU of the wholesubscriberbasewouldincreaseby15%(i.e.50%of30%).Asaconsequence,thetotalrevenuesofPalestinianoperatorswouldhavebeen15%higher;thistranslatestoatotallossinrevenuesofUS$212millionoverthelastthreeyears,andasthecurrentValueAddedTax(VAT)rateintheWestBankisat16%,thisleadstoalossofVATfiscalrevenueforthePAbetween$10and$39millions48.

44TeleGeography,DoCoMosubscribergainshitprofits,29Oct.2004.45Telecomasia.net,3Gservicegrowthonthehorizon,7Dec.2006.46GSMA,4Gdrivingdatausagebutnotallmarketsreapingtherewards,2014.47GSMAIntelligencedata.48The lossof corporation taxcouldbeapproximatelycalculatedwith theEarningBeforeTax (EBT) ratiobut this ratio isnotavailableforthePalestinianmobilemarket.


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Table8:Evaluationof2013-20153Grevenuelossoncurrentsubscriberbase

Source:WorldBankcalculation49basedonTelegeographyandGSMAdata

2. 2013-2015revenuelossduetomissingadditionalsubscribers–Currentsubscriberbasebeing

lowerthancounterfactualsubscriberbaseTheimpactofbilateralanddomesticissueshasledtoconstraintthegrowthofthePalestiniansubscriberbase compared to a counterfactual situation where all these issues are lifted. The counterfactualsubscriberbaseiscalculatedthankstoabenchmarkmethodologywithpeermarkets50;threepanelsaresettoestablishthecounterfactualscenario:

o Panel#1–All20MENAcountries;thePalestinianmobilepenetrationratein2015isestimatedat80%,comparedtoasimpleaverage51of126%fortherestofthewholeMENAregion;

o Panel#2sensulato–18countrieswith2MobileNetworkOperators(MNOs)o BecausethetotalnumberofsubscriptionisdependentonthenumberofMNOs,thePanel

#2 is focused on all countries in the world with two MNOs. According to the GSMAssociation,thereare18countriesintheworldwithonly2mobilenetworksin201452.

o Compared to this Panel, thePalestinianmarket (80%populationpenetration) is still apoorperformerasthesimpleaverageofPanel#2is108%in2015.

o Panel#2sensustricto–Thispaneltakesthe18countriesofPanel#2latosensuandretainsonlythecountriesthatfollowtwoadditionalcriteria:

o Criteria1–ComparableGDPpercapita(withPurchasingPowerParity–PPP–inclusion)with the Palestinian territories (to ensure that thewealth factor of the population iscontrolled);

49Additionalrefinementwouldincludei)consideringthemid-yearsubscriberbaseratherthantheend-of-yearsubscriberbase,buttheimpactonthecalculationwouldbemarginalandii)includinganinterestratetoupdatethe2013and2014revenuelosstotheyear2015(i.e.computingpresentvalueofpastlosses).

50Relyingonbenchmarksofpeermarkets isconsistentwith internationalbestpractices (cf.EuropeanCommission,Practicalguideonquantifyingharm,2013).

51Thesimpleaverageisthe(un-weighted)averageofthepenetrationratesforthe20MENAcountries.52Tobemoreprecise,thecountriesselectedarecountrieswithapopulationofaleast1million,andthispopulationthresholdissettoconsidermarketsthatarecomparabletothePalestinianmarketastheGSMAincludeseveralmicro-marketsmadeofislands,remoteterritoriesandprincipalities


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o Criteria 2 – Comparablemobile penetration rate 10 years ago (2005)with Palestinianmobilemarket(toensureasimilarstartingpoint);

o 10countriesarepartofthePanel#2sensustricto:Mali,Togo,Angola,Lesotho,Kosovo,Syria,Nicaragua,Namibia,Lebanon,andthePalestinianterritories.

The evolution of the Palestinianmarket compared to all the 10 countries in Panel #2 sensu stricto isrevealing:whereasthePalestinianmarketwastheleaderofthese10countriesin2005(witha30%mobilepenetration),itlost5ranksin10years.

Figure24:MobilepenetrationcomparisonofthePalestinianterritorieswithcountrieshaving2MNOs,asimilarGDPpercapita,andalowerstartingpointin2005(%ofpopulation,2005-2014)


Becauseof theabsenceof3Gservicesandotherbilateralanddomestic issues, thePalestinianmobileoperatorshavesufferedfromamissingadditional3Gsubscriberbaseinarangebetween250,000and1millionoverthelastthreeyears(therangeisbasedondifferentbenchmarksofpeermarketsdetailedinAnnex8.3),andasimilarrangeforamissingadditional2Gsubscriberbase.

Therevenuelossduetomissingadditionalsubscribersisthus:

• BetweenUS$97to408millionof2Grevenuelossonthemissingadditional2Gsubscriberbase;• BetweenUS$127to530millionof3Grevenuelossonthemissingadditional3Gsubscriberbase.

This leads to a total loss of revenues on themissing additional subscriber base betweenUS$ 224 toUS$938millionoverthelastthreeyears,andanunderlyingVATfiscalrevenuelossforthePAbetweenUS$36to150million.


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Table9:Evaluationof2013-2015revenuelossduetomissingadditionalsubscribers

Source:WorldBankcalculationbasedonTelegeographyandGSMAdata

8.4 Relevant Legal Agreements

8.4.1 Oslo Agreement, Annex III, Protocol on Israeli-Palestinian Cooperation in Economic and Development Programs

ThetwosidesagreetoestablishanIsraeli-PalestiniancontinuingCommitteefor EconomicCooperation,focusing,amongotherthings,onthefollowing:

1. Cooperation in the field of water, including a Water Development Program prepared byexpertsfrombothsides,whichwillalsospecifythemodeofcooperationinthe managementofwater resources in theWest Bank andGazaStrip, and will include proposals for studiesand plans onwater rights of each party, as well as on the equitableutilizationofjointwaterresourcesforimplementationinandbeyondtheinterimperiod.

2. Cooperationinthefieldofelectricity,includinganElectricityDevelopmentProgram, whichwillalsospecifythemodeofcooperationfortheproduction,maintenance,purchaseandsaleofelectricityresources.

3. Cooperationinthefieldofenergy,includinganEnergyDevelopmentProgram,whichwillprovidefortheexploitationof oil and gas for industrial purposes, particularly in the GazaStripandintheNegev,andwillencouragefurtherjointexploitationofotherenergyresources.ThisProgrammayalsoprovidefortheconstructionofaPetrochemicalindustrialcomplexintheGazaStripandtheconstructionofoilandgaspipelines.

4. Cooperationinthefieldoffinance,includingaFinancialDevelopmentandAction ProgramfortheencouragementofinternationalinvestmentintheWestBankandtheGazaStrip,andinIsrael,aswellastheestablishmentofaPalestinianDevelopmentBank.

5. Cooperationinthefieldoftransportandcommunications,includingaProgram,whichwilldefine guidelines for theestablishment of a Gaza Sea Port Area, andwill provide for theestablishingoftransportandcommunicationslinestoandfromtheWestBankandtheGazaStriptoIsraelandtoothercountries.Inaddition,thisProgramwillprovideforcarrying outthenecessaryconstructionofroads,railways,communicationslines,etc.


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6. Cooperation in the field of trade, including studies, and Trade Promotion Programs, whichwillencouragelocal,regionalandinter-regionaltrade,aswellasafeasibilitystudyofcreating free trade zones in the Gaza Strip and inIsrael,mutual access to these zones, andcooperationinotherareasrelatedtotradeandcommerce.

7. Cooperation in the field of industry, including Industrial Development Programs, which will provide for theestablishmentofjointIsraeli-PalestinianIndustrialResearchandDevelopmentCenters,willpromotePalestinian-Israelijointventures,andprovideguidelinesfor cooperation in the textile, food, pharmaceutical, electronics, diamonds,computer andscience-basedindustries.

8. A program for cooperation in, and regulation of, labor relations and cooperation in socialwelfareissues.9. A Human Resources Development and Cooperation Plan, providing for joint Israeli- Palestinian workshops and

seminars, and for the establishment of joint vocational trainingcenters,researchinstitutesanddatabanks.10. An Environmental Protection Plan, providing for joint and/or coordinatedmeasures in thissphere.11. Aprogram for developing coordination and cooperation in the field of communication andmedia.12. Anyotherprogramsofmutualinterest.

8.4.2 The Israeli-Palestinian Interim Agreement on the West Bank and the Gaza Strip (“Oslo 2”— 9/28/95) - ANNEX III, ARTICLE 36, Telecommunications

A.General

1.Thissphereincludes,interalia,themanagementandmonitoringoftheuseoftheradiofrequencyspectrum,theuseofthegeostationarysatelliteorbit,theplanning,formulationandimplementationoftelecommunicationspolicies,regulationsandlegalframeworks.Theaboveshallbeinaccordancewith,andsubjectto,thefollowingprovisions:

2.a. InAreaC,althoughpowersandresponsibilitiesaretransferredtothePalestinianside,anydiggingorbuildingregardingtelecommunicationsandany installationoftelecommunicationequipment,willbesubjecttopriorconfirmationofthe Israeliside,throughtheCAC.

b.Notwithstandingparagrapha.above, thesupplyof telecommunicationsservices inAreaC to theSettlementsandmilitarylocations,andtheactivitiesregardingthesupplyofsuchservices,shallbeunderthepowersandresponsibilitiesoftheIsraeliside.

B.Principles

1.IsraelrecognizesthatthePalestiniansidehastherighttobuildandoperateseparateandindependentcommunicationsystemsandinfrastructuresincludingtelecommunicationnetworks,atelevisionnetworkandaradionetwork.

2.WithoutprejudicetosubparagraphD.5.cofthissection,thePalestiniansidehastherighttoestablishsatellitenetworksforvariousservices,excludinginternationalservices.

3.ThePalestiniansidehastherighttoestablishitsowntelecommunicationspolicies,systemsandinfrastructures.ThePalestiniansidealsohastherighttochooseanyandallkindsofcommunicationsystems(includingbroadcastingsystems)andtechnologies,suitableforitsfuturein,interalia,basicandvalueaddedservices(includingcellulartelephony).

4.Operatorsandprovidersofservices,presentlyandinthefuture,intheWestBankandtheGazaStripshallberequiredtoobtainthenecessaryapprovalsfromthePalestinianside.Inaddition,allthoseoperatingand/orprovidingservices,presentlyandinthefuture,intheWestBankandtheGazaStripwhowishtooperateand/orprovideservicesinIsrael,arerequiredtoobtainthenecessaryapprovalsfromtheIsraeliMinistryofCommunications.

5.Bothsidesshallrefrainfromanyactionthatinterfereswiththecommunicationandbroadcastingsystemsandinfrastructuresoftheotherside.

Specifically,thePalestiniansideshallensurethatonlythosefrequenciesandchannelsspecifiedinSchedule5:ListofApprovedFrequencies (herein-"Schedule5")andSchedule6:ListofApprovedTVChannelsandtheLocationofTransmitters (herein -"Schedule6")shallbeusedandthat itshallnotdisturbor interferewithIsraeliradiocommunicationactivity,andIsraelshallensurethatthereshallbenodisturbanceoforinterferencewiththesaidfrequenciesandchannels.

6.A jointcommitteeoftechnicalexpertsrepresentingbothsidesshallbeestablishedtoaddressany issuearisingoutofthissectionincludingthegrowingfutureneedsofthePalestinianside(hereinafterreferredtoas"theJointTechnicalCommittee"or"JTC").TheJTCshallmeetonaregularbasisforthepurposeofsolvingallrelevantproblems,andasnecessaryinordertosolveurgentproblems.

C.TheElectromagneticSphere


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1.ThePalestiniansidehastherighttousetheradiofrequencyspectruminaccordancewithprinciplesacceptabletobothsides,forpresentandfutureneeds,andfrequenciesassignedorreassignedwithintheWestBankandtheGazaStripcoveringallitsrequiredserviceswithinthebandsL.F.,M.F.,H.F.,V.H.F.,U.H.F.,S.H.F.andE.H.F.InordertosatisfythepresentneedsofthePalestinianside,thefrequenciesdetailedinSchedule5areassignedfortheuseofthePalestiniansideintheWestBankandtheGazaStrip.

2. Future needs for frequencies shall be agreed upon by the two sides. To that end, the Palestinian side shall present itsrequirementsthroughtheJTCwhichmustfulfilltheserequirementswithinaperiodnotexceedingonemonth.

Frequenciesorsectionsoffrequenciesshallbeassigned,oranalternativetheretoprovidingtherequiredservicewithinthesameband,orthebestalternativetheretoacceptablebythePalestinianside,andagreeduponbyIsraelintheJTC.

3. a. The frequencies specified in Schedule 5 shall serve, inter alia, for the transmissionof a televisionnetwork and a radionetwork.

b. The television channels and locations of transmitters to be used by the Palestinian side are specified in Schedule 6. TheproductionstudiosandrelatedbroadcastingequipmentshallbelocatedintheWestBankandtheGazaStrip.

c.TheradiotransmittershallbelocatedintheareaofRamallahandAl-BirehCities,atthepresentlyagreedsite.

d.ThePalestiniansidehastherighttochangethelocation(s)ofradiotransmittersaccordingtoanagreementbetweenthetwosidesthroughtheJTC,toservethePalestinianplansinachievingthebestcoverage.

D.Telecommunications

1.PendingtheestablishmentofanindependentPalestiniantelephonenetwork,thePalestiniansideshallenterintoacommercialagreementwithBezeq-TheIsraelTelecommunicationsCorp.Ltd.(herein,"Bezeq"),regardingsupplyofcertainservicesintheWestBankandtheGazaStrip.Intheareaofinternationaltelephony,commercialagreement(s)shallbeconcludedwithBezeqorotherduly-licensedIsraelicompanies.

Theaboveshallbewithoutprejudicetosubparagraph5.cbelow.

2. As long as the Palestinian network is integrated with the Israeli network, the Palestinian side shall use such telephonicequipment as is compatible with the standards adopted and applied in Israel by theMinistry of Communications, andwillcoordinatewiththeIsraelisideanychangestothestructureandformoftelephoneexchangesandtransmissionequipment.ThePalestiniansideshallbepermittedtoimportanduseanyandallkindsoftelephones,faxmachines,answeringmachines,modemsanddata terminals,withouthaving tocomplywith theabove-mentionedstandards (accordingly, listsAlandA2ofAnnexV(ProtocolonEconomicRelations)willbeupdated).Israelrecognizesandunderstandsthatforthepurposeofbuildingaseparatenetwork,thePalestiniansidehastherighttoadoptitsownstandardsandtoimportequipmentwhichmeetsthesestandards(accordingly,listsAlandA2ofAnnexV(ProtocolonEconomicRelations)willbeupdated).TheequipmentwillbeusedonlywhentheindependentPalestiniannetworkisoperational.

3.a.ThePalestiniansideshallenablethesupplyoftelecommunicationsservicestotheSettlementsandthemilitaryinstallationsbyBezeq,aswellasthemaintenancebyBezeqofthetelecommunicationsinfrastructureservingthemandtheinfrastructurecrossingtheareasundertheterritorialjurisdictionofthePalestinianside.

b.TheIsraelisideshallenablethesupplyoftelecommunicationsservicestothegeographically-dispersedareaswithintheWestBankandtheGazaStrip.Thisshallincludeprovision,subjecttotheapprovaloftheproperIsraeliauthorities,freeofcharge,ofrightsofwayorsitesintheWestBankformicrowaverepeaterstationsandcablestointerlinktheWestBankandtoconnecttheWestBankwiththeGazaStrip.

c.IsraelrecognizestherightofthePalestiniansidetoestablishtelecommunicationslinks(microwaveandphysical)toconnecttheWestBankandtheGazaStripthroughIsrael.Themodalitiesofestablishingsuchtelecommunicationsconnections,andtheirmaintenance,shallbeagreeduponbythetwosides.TheprotectionofthesaidconnectionsshallbeundertheresponsibilityofIsrael.

4.Withoutprejudicetoparagraph3above:

a. ThePalestinian side shall take thenecessarymeasures toensure theprotectionof the telecommunication infrastructuresservingIsrael,theSettlementsandthemilitaryinstallations,whicharelocatedintheareasundertheterritorialjurisdictionofthePalestinianside.

b.TheIsraelisideshalltakethenecessarymeasurestoensuretheprotectionofthetelecommunicationinfrastructuresservingtheWestBankandtheGazaStripandwhicharelocatedinareasunderIsrael'sresponsibility.


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5.a.ThePalestiniansidehastherighttocollectrevenueforallinternalandinternationaltelecommunicationservicesoriginatingandterminatingintheWestBankandtheGazaStrip(exceptSettlementsandmilitarylocations).

b.DetailsregardingpaymentbythePalestiniansidetoBezeqorotherduly-licensed Israelicompanies,andcompensationbyBezeqorthesaidcompaniestothePalestinianside,referredtoinsubparagrapha.above,shallbeagreeduponinthecommercialagreement(s)betweenthem.

c.Theprovisionsofsubparagraphsa.andb.abovewillbeappliedbetweenthesidesuntilsuchtimeasthetwosidesagreeuponinstallationandoperationofan"internationalgateway",aswellastheinternationalcode,forthePalestiniansideandtheactualcommencementofoperationofthesaidgateway.

d.ThePalestiniansideshallenterintoadiscussionwithBezeqforthepurposeofcomingtoanagreementfortheuseofaseparateareacodeandnumberingplan,pendingtheestablishmentofaseparatePalestiniannetwork.

6.ThePalestiniansidehastherighttocollecttaxesonalltelecommunicationsservicesbilledintheWestBankandtheGazaStrip,subjecttotheprovisionsofAnnexV(ProtocolonEconomicRelations).

7.aTheIsraelisideshallprovidethePalestiniansidewithalloperating,maintenanceandsystemmanuals,informationregardingbilling systems and all operating and computer programming protocols of all the equipment thatwill be transferred to thePalestinianside,subjecttoprotectionofrightsofcommercialconfidentiality.

b.TheIsraelisideshallalsosupplythePalestiniansidewithallcontractualagreementsbetweentheCivilAdministrationandalldomesticandinternationalentitiesintheareaoftelecommunications.

ThetimingoftheprovisionoftheabovementionedmaterialswillbeasprovidedforinthisAnnex.

c.Bezeq,inaccordancewiththecommercialagreement,willsupplythePalestiniansidewithalllegalverificationofitspurportedownership of any and allmovable or immovable assets in theWest Bank and theGaza Strip, that are not part of the CivilAdministration'spresentnetwork.

8.4.3 Relevant ITU Resolutions

DuringrecentITUmajorconferencessuchasthePlenipotentiaryConference(PP),theWorldRadiocommunicationConference(WRC),andtheWorldTelecommunicationDevelopmentConference(WTDC),variousresolutionsrelatedtotheStateofPalestinewereadopted.Theseresolutionsaddressthe:“StatusofPalestineinITU(PPRes.99(Rev.Busan,2014));“Assistanceandsupportto Palestine for rebuilding its telecommunication networks” (PP Res. 125 (Rev. Busan, 2014)); “Assistance and support toPalestine” (WRC-12Res.12)on spectrum-related issues;and“Special technicalassistance toPalestine” (WTDCRes.18 (Rev.Dubai, 2014)). These Resolutions or actions are consistent with Article 36 of Annex III of the Interim Agreement onTelecommunications(OsloAccordof1993).

Inimplementingtheseresolutionsthefollowingactionshavebeenundertaken:

• ConnectaSchoolprojecttopromotebroadbandconnectivityinschoolslocatedinremote,ruralorunderservedareas;• OngoingprojectontheestablishmentofComputerIncidentResponseTeam(CIRT);• Assistance on spectrum-related aspects, including frequency notification and coordination, technical examinations,

transitiontodigitalbroadcasting,thedigitaldividendandtheallocationofspectrumandlicensing;• Internationalgateway;and• AssistanceforcapacitybuildingthroughfellowshipstofacilitateparticipationofPalestiniandelegatestoseminarsand

workshops;and• AssistancetofacilitateparticipationofPalestiniandelegatestoITUmeetings,includingTDAGandGSR.• Formoredetailsontheprovidedassistance,atable2(Statusofimplementation)isannexedtothisreport.

Also,acoordinationmeetingbetweentheStateofPalestineanditsneighbouringcountries,includingIsrael,wasorganizedinGenevafrom29Septemberto1October2014,undertheauspicesoftheITU,tocoordinatetheuseofspectruminordertofacilitatethetransitiontodigitaltelevisionandtheallocationofthedigitaldividendtothemobileservice.

Documents

Telecommunication Sector Note in the Palestinian Territories