Benjamin Joffe-Walt
The Media Line
July 18, 2010 - 12:00am

[Jerusalem] Internet is about to get cheaper for Palestinains.

Within weeks, the Palestinian Authority will be taking action which is expected to end the virtual monopoly held by the Palestinian Telecommunication Group PalTel over Internet services in its territory.

Palestinian Authority Minister of Telecom and Information Mashhour Abu Daka told The Media Line he will be issuing certificates shortly for telecommunications companies wishing to provide Internet services to the Palestinian market.

“I hope to finish the qualification of companies that will be able to offer such services next week,” Minister Abu Daka told The Media Line. “This will create competition, so we expect Internet prices to come down within a few weeks time.”

The Palestinian Telecommunication Group owns almost all telephone and Internet services infrastructure in the West Bank and Gaza. The company includes PalTel, which owns the land line telephone infrastructure; Hadara, the only Internet services provider; and Jawwal, the leading cellular company.

While the Palestinian Authority has a 7 percent stake in the PalTel Group through the Palestine Investment Fund, the company is publicly traded and a giant in the Palestinian economy. It makes up 50 percent of the worth of the Palestine Securities Exchange and 29 percent of the Palestinian Authority’s gross national product (GDP).

The ministry’s initiative will require PalTel to provide ‘Bitstream service’, allowing new Palestinian Internet service providers (ISPs) to use the PalTel broadband Internet infrastructure for an as yet undetermined fee. Such companies would then be able to offer Internet services to the Palestinian market at a speed and quality defined by PalTel.

“Basically the idea is to have a mechanism to allow other service providers to use the PalTel infrastructure for a fee and to provide the service to their customers,” Ahmed El-Farra, the CEO of PalInvest, a Palestinian trade group which promotes free trade told The Media Line. “They are still working out what the fee will be but they haven’t agreed with the ministry.”

“The problem in telecommunications is how you get to the end user and PalTel owns the infrastructure in the West Bank and the Gaza,” El-Farra said. “[PalTel’s Internet services provider] Hadara is basically monopolizing the entire Internet structure. This is part of liberalizing the market but it’s more complicated than it seems. It’s not just a plan; it’s the implementation on the ground which will put it to the test.”

The ministry’s initiative is based on a model very similar to Israel’s Internet market, which has a number of Internet service providers competing with one another under a ‘Bitstream’ scheme in which they share access to two Internet infrastructures.

“Things have been very restrictive to just PalTel,” the minister said. “We are just moving in the same direction as Israel. Now the market will be open to other companies.”

A number of sources told The Media Line that the PalTel Group is planning to downsize so as to better compete under the new scheme for open competition in the Palestinian Internet services market. The PalTel Group is also believe to be planning to dissolve Hadara, the group’s Internet subsidiary and currently the only Internet service provider in the West Bank and Gaza, or to make it a separate company.

Tareq Maayah, CEO of Exalt Technologies, a Palestinian software development company, argued the ministry’s initiative falls far short of introducing competition into the Palestinian Internet services market.

“The ministry is falling short of the ultimate goal,” he told The Media Line. “Basically the ‘Bitstream’ scheme just requires PalTel to sell the rights to use their fixed lines to other Internet providers. This means that the competition is still under PalTel’s control and the quality of the Internet line is still controlled by PalTel.”

“It’s an issue of quality of service and pricing,” Maayah said. “We’d like to see much more competition. It would have been better quality, more reliable Internet at a higher speed at a much cheaper cost.”

But El-Farra, head of the trade group, argued that the PalTel group was simply protecting its interests like any other business would do.

“I don’t think they are directly resisting it, they are trying to go along with whatever the ministry is asking for so that they can keep their position as the market leaders,” he said. “They are being creative in how they are responding, for example by developing a ‘Bitstream’ model which would keep them as the market leaders.”

“The reality is that PalTel has this power and they want to exercise it and make money one way or another,” El-Farra continued. “As business managers they are trying to deal with regulatory changes in a way which keeps them in the lead. I don’t blame them for that.”


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