As of 2007, the information technology or IT sector contributed some 10-12 percent of the Palestinian gross domestic product, with a market value of $500 million. There are approximately 250 IT companies, 150 small computer stores, more than 150 internet cafés and over 5,300 individuals working in the sector in the West Bank and Gaza Strip.

The Palestinian high tech sector also includes hardware distributors, software development firms, office automation vendors, internet service providers, telecommunications companies, and consulting and training companies. Most of these companies are relatively small.

The IT sector is considered one of the Palestinian economyzzz*zs possible growth areas, since resources other than human capital are restricted by Israelzzz*zs occupation of the West Bank and Gaza Strip. IT products can often penetrate international markets over the internet, bypassing Israelzzz*zs physical and economic blockades.

Further, the near proximity of Israelzzz*zs high-tech sector has spurred hopes of cooperation in the field,

REGULATION & TELECOMMUNICATIONS

Peace agreements between Israel and Palestinians left control over communications lines and frequencies in the hands of Israel, with Palestinian access coordinated through a Joint Technical Committee. These arrangements granted the first Palestinian operating license to PalTel Telecommunications Company, which introduced internet access to Palestinian households.

Todayzzz*zs PalTel Group, which includes the only authorized mobile operator and supplier of internet service in the Palestinian Authority areas, provides services in nearly every sector of information technology and telecommunications. Without competitors, PalTel effectively operates as a monopoly, only challenged by Israeli providers, which penetrate some 20 percent of the telecommunications market.

In September 2006, a second mobile operator, Kuwait-based Wataniya, was issued a license, promising to introduce competition into the market. Only in 2008 did Israel release limited frequencies for the company. The World Bank estimated in a 2008 study that the delay will cost the Palestinian Authority $13 million in the first year and $28 million in the second year.

Also that year, the Palestinian Authority granted licenses to operators in data and voice over internet protocol services. Generally, however, the slow pace of telecommunications deregulation combined with Israeli restrictions have impacted the development of a viable high tech sector in the occupied West Bank and Gaza Strip.

The information and telecommunications sector is organized by the Palestinian IT Association of companies or PITA.