Palestinians Still Waiting for Better Cell Phone Service, but Is It Israel's Fault?

Many hoped that Wataniya Telecom would exemplify successful cooperation between Israel and the Palestinians.

The dry, mountainous landscape of the West Bank is dotted with telecom towers that connect friends, families and businesses despite more than 600 checkpoints and security obstacles and a 409 kilometer separation fence.

Amid this isolation, Palestinians have depended on the sole Palestinian mobile phone service provider, Jawwal, which many customers complain charges high prices for out-of-network calls and has poor reception and frequent dropped calls in certain areas. Over the past two years, excitement has been building as a multi-national company, Wataniya Telecom, erected 350 towers in the West Bank and prepared to challenge Jawwal's domination.

Throughout the region, many have pinned their hopes on a thriving Wataniya to create thousands of new jobs and perhaps provide an example of successful cooperation between the Israeli and Palestinian governments. But more than two months after the planned April launch, Wataniya's unused towers stand powerless across the divided landscape.

What has gone wrong? The simple answer is that a contract brokered in part by former British Prime Minister Tony Blair and signed by the Israeli government and the Palestinian Authority last summer has not been carried out as promised. But as with most things in the Middle East, the situation as described by those involved is anything but simple.

Allan Richardson, the Scottish CEO of Wataniya Palestine, which is controlled by the Palestine Investment Fund and Wataniya Telecom of Kuwait, previously started mobile networks in post-war Iraq and Afghanistan.

"The obstacles we're suffering from are obstacles you'll never get anywhere else in the world," he said. "I had nothing like this in Iraq. I had nothing like this in Afghanistan ... Everybody makes lots of promises. But I'm still sitting here with no [frequency] spectrum and not all my equipment."

Frequency spectrum refers to bands of airwaves that must be designated for certain uses in order for electronic devices to operate without interference. For example, a frequency used for aviation cannot also be used for mobile phones. In most countries, a governmental body is charged with insuring that one radio transmitter does not interfere with another.

In Israel, this governmental body is the Israeli Ministry of Telecommunications. In the Palestinian Territories, it is the Palestinian Ministry of Telecom and Information Technology. A Palestinian company that wishes to claim a frequency must solicit the Palestinian ministry, which then negotiates with Israel on its behalf through the Joint Technical Committee, consisting of experts from the Palestinian and Israeli sides.

This is what happened on July 28, 2008, when the Israeli government and the Palestinian Authority signed a GSM Frequency Assignment and Terms of Operation agreement, which outlined plans for releasing frequency for Wataniya's use by April 1 of 2009.

Not only has Wataniya not received any permanent frequency, but some of its crucial equipment has been stuck in customs for more than five months.

Richardson recently demanded that his company's $354 million license fee be returned from the Palestinian Authority, plus another $200 million in expenses. Meanwhile, the Palestinian and Israeli ministries are pointing fingers at one other.

Nati Schubert, the senior deputy director general of spectrum management at the Israeli Ministry of Communications, blamed the Palestinian Authority for the delay. He cited the Palestinian government's failures to uphold commitments, but declined to be specific about what those commitments were.

"It is problems on the Palestinian side, not problems on the Israeli side," he said. "[The frequency] will be released when an issue that the Palestinian Authority is dealing with has been resolved. Our different points of view should be discussed between [the Israeli government and the Palestinian Authority]."

Copies of the July 2008 agreement provided by Palestinian officials outline a conditional timetable for 4.8 MHz of frequency to be awarded to Wataniya. It includes provisions that request, but do not demand, that the Palestinian Authority convince Jawwal to redistribute some of its frequency to Wataniya or that the Israeli government convince Orange, an Israeli company operated by Partner Communications Ltd., to redistribute or share some frequency with Wataniya.

Both Orange and Jawwal have declined to make changes willingly. Although both telecom ministries have the power to make the companies accept new terms, imposing these options could lead to the companies filing legal claims against the ministries.

According to the agreement, if Jawwal or Orange agrees to new terms, Israel will release a total of 6.8 MHz to the Palestinian Authority. The agreement's timetable states that Wataniya will be given 1.2 MHz on January 1, 2009 for its permanent use and another 1.2 MHz on March 1, a date which can be postponed up to 2 months. The remaining spectrum was to be released to the Palestinian Authority by April 1 or June 1 at the latest.

Wataniya did not receive permanent frequencies on January 1, March 1 or April 1 and currently has only a temporary frequency strip used for testing purposes that must ultimately be returned to the Israeli government.

"From my perspective, it's a very simple thing," said Richardson. "We didn't get it. We were promised, and [the Israelis] didn't deliver."

Dr. Robert Danin, Head of Mission for the Office of the Quartet Representative headed by Tony Blair, said in a June 3 statement that the release of telecommunications frequency was "an important part of the set of understandings with the Israelis that Mr. Blair announced on May 12, 2008."

An excerpt from Tony Blair's May 12, 2008 statement reads: "The Government of Israel has agreed to approve this [Wataniya telephony license] and to release a frequency of 2.4 MHz in the 900 bandwidth. The Government of Israel will commit, in writing, that within 6 to 8 months, the assignment of frequency will be amended to a total bandwidth of 4.8 MHz at the 900/1800 MHz bands and will assign a frequency of more than 4.8 MHz in due course, with details to be finalized between the parties."

Sulaiman Zuhairy, the Palestinian Deputy Minister of Telecom and Information Technology, said he suspected that the Israeli government, under pressure from private Israeli cellular providers and Israeli military officials who also want frequency spectrum, is playing tough with the Palestinian Ministry in an attempt to ration away as little frequency as possible.

According to a recent scan conducted by the international firm Ericsson, 40 MHz is currently available out of the 75 MHz in the 1800 band. However, Palestinian Authority representatives said they've been told by Israeli government officials that the Israeli military has been using the entire available portion of the 1800 band.

Zuhairy also emphasized that the frequency airwaves were promised to the Palestinian Authority to allocate as it sees fit and said that Israel is now interfering in Palestinian internal affairs.

"Jawwal is a company and Wataniya is another company," he said. "It has the right not to share frequencies. If they want to share frequencies, they have to benefit from that. Otherwise, they will not share. It's a Palestinian internal issue. The Israeli side should allocate and we will worry about how to divide it between the companies."

Abdel Malik Jaber, the outgoing CEO of Paltel Group of which Jawwal is a subsidiary, said that he's not surprised by these developments. His company, which was recently acquired by the multi-national telecommunications provider Zain Group, encountered similar difficulties in trying to get the Israeli government to release more frequency for its use.

"Since 1996, we have asked for frequencies from the Israeli side and all the time we are having difficulties," he said. "How come we get about a tenth of the spectrum [that the Israelis get]?"

In general, the more spectrum a telecommunications operator has, the more subscribers it can serve. Lower band frequencies of 800-900 MHz generally travel farther and penetrate walls better, and thus are more desirable than higher band frequencies of 1800-2100 MHz. However, spectrum is also a hotly contested scarce resource and must be divided between military, science, government and companies that naturally seek to maximize their allotment.

Jawwal's 1996 license gave it 4.8 MHz in the 900 band for a target of 120,000 subscribers. The company now has 1.5 million subscribers but the same amount of frequency. For multiple periods over the past ten years, Jawwal stopped selling SIM cards because its network was running overcapacity due to lack of frequency, according to Jaber.

Derek Kerton, a principal analyst with Kerton Group, a telecommunications consulting company, said that most major carriers in the world have at least 10 MHz, and that Jawwal's frequency allotment of only 4.8 MHz is likely to either unduly impede their growth or cause service disruptions.

"I'm not aware of any successful cellular companies with just [4.8MHz] in a competitive market," he said. "It may 'work' in the rare case of a monopoly, only because the logical choice of the monopolist is higher price and constricted supply, which negates the constraint of limited spectrum. But whichever the cause, the communication needs of the populace are underserved."

He continued, "If the carrier does succeed at market, and utilizes all 4.8MHz, it becomes the victim of its own success. The crowded network drops calls, but it cannot install additional channels, nor properly serve the demand they worked so hard to create."

Unlike Jawwal, Israel's leading cellular company, Cellcom Israel Ltd., which has about 3.2 million subscribers, is satisfied with its total spectrum allotment of 37 MHz. In its 2008 annual report, Cellcom states: "We believe that our available spectrum is sufficient for our needs."

Another Israeli company, Orange, states in its 2008 annual report: "We have built an extensive, resilient and advanced network system in Israel, allowing us to offer our services with extensive coverage and consistent high quality."

Israeli official Nati Schubert said that the larger and denser population of Israel requires that more frequency be allocated to Israeli companies. While many factors are involved, more frequency is indeed required for efficient operation in high density to accommodate high call traffic. It is also required in markets with high levels of mobile voice and data activity, according to telecom analyst Kerton. Otherwise, the company would encounter dropped or rejected calls and be forced to invest significant capital for additional base stations.

Israel's total population is about 7.4 million and its total population density is 316 people per square kilometer, according to the Israeli Central Bureau of Statistics. However, large areas of Israel, such as the Negev desert, are unpopulated or sparsely populated, while others, such as Tel Aviv, Jerusalem and Haifa, have population densities of more than 1000 people per square kilometer. The Tel Aviv district has a population density of about 7073 people per square kilometer.

By contrast, the total population in the Palestinian Territories is 3.9 million, according to the Palestinian Central Bureau of Statistics. About 2.4 million live in the West Bank and, of these, about half a million live in the densely populated city of Hebron. Overall population density, including all people and land mass, is 427 people per square kilometer in the West Bank and 4,010 people per square kilometer in the Gaza Strip, according to the Palestinian Central Bureau of Statistics.

The Palestinian mobile phone company Jawwal operates in both the West Bank and Gaza, and its networks were severely damaged during the Gaza conflict in December and January. Wataniya has thus far only erected towers in the West Bank.

Israeli official Nati Schubert did not dispute that Gaza is densely populated but said that the Israeli government "[doesn't] deal with Gaza, as long as Hamas does not recognize the right of the Israeli state to exist."

Leaders at Wataniya and Jawwal aired additional complaints about the difficulty of conducting business under Israeli-imposed security restrictions. High among these complaints were prohibitions on building towers in Area C, which represents 60 percent of the West Bank and is reserved for settlements and the Israeli military. When traveling between Palestinian cities in the West Bank, Jawwal customers can receive but cannot make calls in parts of Area C and pay 30 to 50 percent more in roaming charges to use Israeli networks that are permitted to build towers on this disputed land, according to Aker.

Another contentious issue is the competition posed by Cellcom, Orange and two other Israeli providers that operate in Palestinian areas of the West Bank without permits from the Palestinian Authority. These Israeli providers do not pay taxes or license fees, but capture about 30 percent of the Palestinian market, according to Jawwal's CEO Ammar Aker. Representatives from Cellcom and Orange declined to comment on this issue.

Aside from its undelivered frequency spectrum, the most immediate problem for Wataniya is that some of its essential equipment has been awaiting customs inspection for more than five months. Jawwal has experienced similar challenges. The average customs holdup for Jawwal base stations and towers is six to 18 months, and some of Jawwal's switch equipment has been held in customs since 2005, according to Aker. Israel recently prohibited Jawwal from importing microcells used to prevent dropped calls.

Despite their disagreements, both the Israeli and Palestinian sides agreed that Wataniya's launch would be a positive development.

"It's good for Israel if the people in the West Bank can prosper and raise their style of living," said Israeli official Nati Schubert.

In the Palestinian city of Hebron, a Jawwal salesperson named Mahmoud Mujaheed said that he was excited for a new competitor to enter the market and has a cousin and a friend who are employed by Wataniya.

"Business is beautiful if there's competition, better prices and service," Mujaheed said. "The second point is that it creates new jobs, but Jawwal will be the best!"

Even Jawwal's CEO, Ammar Aker, welcomed his new competitor. He believed that at long last consumers would see a second telecom provider operate under the same Israeli-imposed restrictions and understand that Jawwal has been doing the best it could to provide quality services.

"I think people will realize that ... Jawwal was not only successful because it is the dominant player in the market," he said. "People will appreciate our service much more ... We are waiting for [Wataniya] to start, praying for them to start."