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ICT: The shackled engine of Palestine’s development

Nov. 10, 2015 9:03 P.M. (Updated: Nov. 17, 2015 11:06 A.M.)
A Palestinian woman checks the display window of a mobile phone shop in the West Bank city of Ramallah. (AFP/File)
By: Al-Shabaka

Al-Shabaka is an independent non-profit organization whose mission is to educate and foster public debate on Palestinian human rights and self-determination within the framework of international law.

This policy brief is authored by Al-Shabaka policy advisors Nur Arafeh, Wassim F. Abdullah, and Sam Bahour.

In the summer of 2015 reports surfaced that Israel and the Palestinian Authority were set to sign an agreement on releasing the long awaited frequencies required for Third and perhaps even Fourth Generation (3G and 4G) systems and services. By November, those plans were reportedly still going ahead. It remains to be seen whether the negotiations are affected by the widespread Palestinian revolt against Israel’s prolonged military occupation and denial of the most basic human rights.

It was unclear why Israel had suddenly decided to be so forthcoming after tightly controlling the information and communication technology (ICT) sector since the occupation began in 1967 while reaping billions of dollars in the process, all in violation of international law. Perhaps Israeli Prime Minister Benjamin Netanyahu had planned to revive his long-standing efforts to promote “economic peace” in lieu of a political settlement that would fulfill Palestinian rights. What is clear is that the Palestinian economy has paid a high cost for its inability to exploit its own ICT resources.

ICT’s Critical Role and its Legal Framework

The ICT sector has helped to drive the limited development that has been possible in Palestine under prolonged military occupation. It accounts for 5.6 percent of the Palestinian Gross Domestic Product according to 2012 estimates at current prices. Had Palestinians been able to further develop their ICT sector, it could have been -- and still could be -- an important tool to achieve social, economic, and political integration between the West Bank and the Gaza Strip. Some have argued that, because one can develop and market software from any location, ICT could also be a way for the Palestinians to overcome the many restrictions on movement and access that Israel imposes on the population and that hinder other industries. This approach is problematic because it focuses efforts on occupation-circumventing activities rather than on securing basic Palestinians rights.

The legal framework applicable to Palestine’s ICT sector includes international human rights and humanitarian law and other international treaties dealing with telecommunications and related spheres as well as the Oslo Accords that were signed between Israel and the Palestine Liberation Organization (PLO) between 1993 and 1998. Even though the interim period set out by the Oslo accords for a final status agreement technically ended in 1999, the accords have still been in use by both Israel and the PLO to govern their day-to-day relations. Under international humanitarian law, Israel, as an occupying power, is obliged to ensure the welfare of the occupied population and “under no circumstances can Israel or its population benefit from the occupation”. Israel also has an obligation to allow the development of the territory.

In line with the evolving understanding of what constitutes human rights, development was recognized as a human right in 1993. At the present time, communications technology is seen as being so vital to human life that it is also being defined as a human right. The Broadband Commission for Digital Development issued a statement in 2011, co-sponsored by the International Telecommunication Union (ITU) and the UN Educational, Scientific, and Cultural Organization (UNESCO), affirming that communication is a right and urging countries to make access to broadband infrastructure a top policy priority.

Restricting Access to the Electromagnetic Spectrum

Despite its obligations under international law, Israel has seriously impeded the development of the ICT sector, particularly by constraining access to the electromagnetic spectrum. For example, Jawwal, the first Palestinian mobile telecommunication company established in 1999, was licensed access to 4.8 MHz (half exclusive to Jawwal and half shared with Israeli operators) in the 900 MHz band to cater for 120,000 subscribers. However, by this summer Jawwal still operated with the same access but for more than 2.5 million customers. As a result, Jawwal has had to endure a very high frequency load and has been forced to spend additional capital to build extra towers in order to maintain its services. By contrast, Cellcom Israel Ltd, Israel’s primary cellular company, had a total spectrum of 37 MHz by 2009 -- more than seven times bigger than that of Jawwal for its nearly 3 million subscribers.

Meanwhile, for decades the prohibited access to these services has resulted in severe technological barriers to Palestinian companies. The 2G frequencies that have been available were unable to provide quality services, especially data value added services for new generation smartphones, which Palestinian customers want. GPS, Paypal, and other mobile applications are thus not accessible on the Palestinian network: Basic functions that users in other countries take for granted are simply not available through Palestinian providers, forcing both the business community and other customers to look elsewhere to the advantage of Israeli Internet providers.

Israeli Operators Reap What Palestinians Sow

Israeli operators have been able to offer Palestinian customers better quality services at the expense of Palestinian operators by capitalizing on Israel’s superior force as an occupying power and the captive state of the Palestinian market. For example, Israeli operators have built 3G towers in the Israeli settlements -- which are illegal under international law -- strategically locating these on hilltops across the OPT and, in many instances, on privately owned Palestinian land. By contrast, Palestinian operators are broadly excluded from building service towers in Area C. Moreover, Israeli operators sell of 3G and 4G SIM cards (especially Cellcom and Orange) in the West Bank, which has allowed them to siphon off a share of the Palestinian Internet market because the Israeli services are cheaper. Consequently, it is estimated that 20 percent to 40 percent of the Palestinian telecommunication market share is seized by Israeli operators, leading to major losses in revenue. Indeed, as noted in the Overview, it is estimated that Palestinian operators lose $80 to $100 million annually as a result of the lack of 3G services.

Beyond the international law restrictions on an occupying power profiting from its occupation, the competition by Israeli operators is illegal in several respects. The operators cover areas under the Palestinian Authority’s (PA) control in violation of Art 36 (4.b) of Annex III in the Interim Agreement between Israel and the PLO; they are not subject to environmental oversight, and they do not pay taxes to the PA on the telecom cards that are sold in the West Bank.

In a 2008 World Bank report on the sector, the loss in the PA’s revenue was estimated at $60 million annually due to unauthorized Israeli operators. There were estimates that Palestinian mobile losses in 2014 could have been as high as $240 million, alongside a fiscal loss of value-added tax of between $10 and $40 million to the PA, although these figures are the subject of debate. More authoritative data are expected in a report scheduled for publication later this year.

In short, while Israeli companies accrue illegal commercial benefits Palestinians bear not only financial losses but also opportunity costs through the thwarted development of next generation information society applications such as, e-governance, e-health, e-commerce, digital media, and other spheres. Moreover, the absence of 3G and 4G services has constrained technical innovation in the territories, although there are some promising technology startups despite the difficulties -- e.g. the start-up accelerators Gaza Sky Geeks.

Similarly, the Palestinians’ access to the radio frequency spectrum, has also suffered losses as a result of Israel’s control. Radio too is key to development and a major employer. It had an august history in Palestine: The second transmitter in the Middle East was built in Ramallah in 1936 by the British during their mandate over the country. Israel damaged this transmitter tower in 2000 and destroyed it and the transmitter room in 2002 during the Second Intifada. Kuwait was willing to send a replacement AM transmitter but Israel wouldn’t allow it into the occupied territory, thus restricting the Palestinians to FM frequencies. This was a major blow to the Palestinians’ ability to broadcast to the rest of the region: Whereas AM can cover vast territory, FM coverage is easily blocked in hilly or built up areas and far more transmitters are needed. Meanwhile, Israel also occupied and has been broadcasting on the Palestinian’s medium wave radio frequency to this day.

There was a time when Palestine had more private radio and TV stations than the rest of the entire Arab world, a proliferation that was partly due to the fact that the Ministry allowed private radio stations to operate because this was seen as a way to "counter-occupy" the frequencies pending their legal registration at the ITU. This situation remained in place until some frequencies were legally assigned to Palestine through the ITU in addition to those listed in Art 36 (4.b) of Annex III in the Interim Agreement. Only then was the PA able to begin licensing local FM radio and TV stations.

Tightly Controlling the Infrastructure

Not only does Israel illegally restrict Palestinians’ access to the electromagnetic and radio frequency spectrums, but it also has complete control over the international gateways. Palestinians have been denied the right to build a Palestine-based international gateway including submarine cables, satellite earth stations, microwave systems, and optical fibers, in contravention of resolutions 12, 18 and 125 of the ITU.

When the MTIT requested the establishment of a Palestinian international gateway in the late 1990s, Israel agreed on the condition of excluding East Jerusalem from the Palestinian network, a condition that was impossible for the Palestinians to accept given that East Jerusalem is part of the Israeli-occupied territory and is recognized as such by the international community and under international law. Palestinian operators have built independent international gateways -- but outside Palestine. And, even though it connects to international carriers directly, Israel gets a cut on every call from Palestinian operator’s externally placed gateways to their West Bank and Gaza users.

This has not only impacted telecommunications between the OPT and the rest of the world; it has also affected these within the OPT itself and in particular between the West Bank, including East Jerusalem, and Gaza. Israel has only allowed for three fiber optic cables and two microwave links between the West Bank and the Gaza Strip, making it impossible to create an independent Palestinian telecommunication network.

The infrastructure in Gaza itself is completely dependent on Israel. The only fiber optic cable that connects Gaza with the world is placed in Israel. Thus, all calls must be routed through Israel. The telecommunication infrastructure in Gaza has thus become a space of control and surveillance, as reflected in the calls and text messages that the Israeli military sent during its assault on Gaza in the summer of 2014.

Israel’s control over telecommunication infrastructure is also manifested in the West Bank. As noted above, companies rarely get permission to build service towers in Area C, but they are also prohibited from building switches in Area A, which is supposed to be under sole PA control under the Oslo accords. This has forced Jawwal to locate its switches to London and Jordan, while Wataniya Mobile had to build them in East Jerusalem, under Israel’s control.

Because of constraints on infrastructure development, Palestinian transmitters cannot cover all cities in the West Bank and thus direct terrestrial connection within the West Bank is nonexistent. Hence, when a Palestinian cellular operator has no coverage for a call between Ramallah and Nablus, for example, Palestinian operators have to roam on Israeli networks. By contrast, Israeli operators have coverage over most Palestinian cities. This gives Israeli companies an additional financial advantage: They get a percentage surcharge on revenues from calls between the mobile phones of Palestinian and Israeli operators, and collect revenues from calls between Palestinian cellular phones and landlines.

As for East Jerusalem, its telephone network has been excluded from the Palestinian network, deepening the fragmentation between the different parts of the OPT and further isolating the city itself from the rest of the Palestinian territory.

Restricting Access to Essential Equipment

The lengthy process that Palestinian shippers have to go through to be allowed to import ICT equipment has been a major obstacle to ICT development. In fact, Palestinians are required to get approval from the Israeli Ministry of Communications for each shipment they have. Hence, even if a Palestinian trader has two shipments of the same product, she or he must get an approval for each shipment. To get this approval, Palestinian shippers must provide: a certificate of origin; an invoice; an air waybill; a packing list with details on the quantities imported and their standards, which should comply with Israeli standards; explanation of the need of the product and information regarding the end-user. The import request must be submitted to the Coordination of Government Activities in the Territories (COGAT), a division in the Israeli Ministry of Defense, and then to the Israeli Ministry of Communications and the Standards Institution of Israel to get approval. This process used to take one to two months in the early 2000s and now still takes up to 30 days.

As a result of the long periods of testing standards compliance and security checks by the Israeli authorities, severe time delays are inflicted upon Palestinian shippers. For instance, when Wataniya Mobile was about to start its operations in 2009, essential ICT equipment was held in customs for more than five months. Moreover, unlike Israeli traders, Palestinians are bound by an Israeli-defined “dual-use items” list. According to Israeli claims, “dual-use items” are products that can be used for military purposes in addition to civilian ones, such as equipment with a communications function or equipment used for communication network infrastructure. The Israeli government either prohibits the import of these items to the OPT or imposes lengthy security measures to inspect the products and license their import, even though most of these products may be purchased off the shelf inside Israel.

Israel’s discriminatory policies are also manifested in their preventing Palestinian clearance agents or customs employees from accessing Israeli ports or crossings. Thus, Palestinian traders do not have any point of contact of their own for investigations on the status of their shipments or the reasons they may have been refused by Israeli customs. Israel also refuses to disseminate trade-related information and does not consult with Palestinians when changing trade regulations, leading to delays, miscommunication, and additional costs.

The import process becomes even more tedious in the case of transfer of ICT equipment from the West Bank to the Gaza Strip. In such cases, Palestinians need to apply for approval for each shipment going to Gaza (a process that takes between one to four weeks), and must then wait for the specific day on which imports to Gaza are allowed, generally Mondays.

The delay inherent in these processes has led to extra direct costs (storage, damage/losses of some goods, decline in the actual value of the product, etc.) Israel’s measures against Palestinians have also prevented a level playing field between Palestinian and Israeli traders. The high transport and other costs incurred by Palestinians are reflected in the final price of the good, thus eroding the competitiveness of Palestinian products. This has encouraged some Palestinian customers to import from Israeli markets instead of importing from abroad or buying from Palestinian clients, since this would be much easier, quicker, and less costly.

Israel also receives commercial benefits by, effectively, blackmailing Palestinian traders. For instance, if a company has a bid to import ICT products by a specific date, Israeli customs brokers would only allow the shipment if the company pays a sum of money. It is informally estimated that Israeli customs brokers gain millions of dollars through these practices.

In addition to the costs borne by Palestinian ICT companies, the Palestinian government also incurs fiscal revenue losses. Indirect imports - the entry of non-Israeli products to the OPT as if they were of Israeli origin - has led to leakage of taxes, since the PA can only claim the VAT revenues and not customs duties. In case of smuggling or the non-submission of a clearance bill to the Palestinian tax offices, Israel retains all revenues from these taxes, leading to considerable losses to the Palestinian government. This does not just apply to ICT imports: An UNCTAD study found that there was over $310 million worth of fiscal leakage in 2011 -- as much as 3.6 percent of GDP -- as a result of importing goods from or through the Israeli market.

Severe Israeli restrictions on the freedom of movement of people in the OPT through a hermetic system of physical, institutional, and administrative barriers is another major obstacle to ICT development. Fixed and flying checkpoints, earth mounds, trenches, road gates, roadblocks, the Separation Barrier, and stringent permit requirements are among the hallmarks of Israel’s occupation. These restrictions affect the ICT sector simply by making it harder for those working in it to travel within the OPT and between the OPT and the rest of the world, affecting access to universities and exchanges with experts overseas, among other constraints.

The Way Ahead for Palestine’s ICT Sector

Major changes in the Palestinian ICT sector may be brought in by the agreement that has been under discussion between the Palestinian Ministry of Telecommunications and Information Technology and the Israeli Ministry of Communications, but it remains to be seen how it will be implemented. Regardless, Israel is unlikely to completely lift its hand from this key sector.

As the above discussion has shown, Israel has violated its obligations as an occupying power. The severe restrictions on the Palestinian ICT sector – in common with all other sectors - have crippled social and economic development. These restrictions are not based on any valid security argument. The fact that Israeli operators provide Palestinians with the same services that are restricted to Palestinian operators, as previously discussed, suggests that the obstacles imposed by Israel are not designed to address security concerns. Rather, they appear punitive in nature and have resulted in massive economic gains to Israel and Israeli companies, thus increasing dependency on Israel, and putting the resilience of the population and its ability to achieve self-sufficiency at risk.

Parts of this piece have been condensed for brevity. The fullversion was originally published on Al-Shabaka's website on November 9, 2015.

The views expressed in this article are the authors and do not necessarily reflect Ma'an News Agency's editorial policy.
Comments
Now live with the consequences / Nigeria
These article above is the economic consequences, of the Jordanian military forces making pre-emptive strikes against Israel in June 1967. The thinking was
the massed Arabs would push the Jewish people into the sea.
11/11/2015 08:56
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