Sunday, 10:55 a.m., Jaffa Gate. It's just a few hours into the new week and office workers are still turning on their computers and brewing coffee, but Jerusalem's Old City is already wide awake. Arab, Jewish and international residents mingle with the hundreds of tourists and vendors plying their trade, whether it's selling sunglasses and keffiyehs or felafel and freshly squeezed orange juice. On Omar Ibn Al-Khattab Street, two men sit on a balcony peacefully playing backgammon and smoking nargila, apparently oblivious to the bedlam a few feet below them. Taking in the atmosphere, foreign tourists line the stone benches until a young woman approaches them. "Are you here for the free tour?" she asks in a North American accent. Either through recommendation by hotels and restaurants in the city or simply via word of mouth, the news has been slowly spreading about the new guys in Jerusalem's tourist trade. Most people may be unaware, but the woman's red placard emblazoned with the words "Free tour" is a sign of a quiet revolution taking place in Jerusalem's tourism industry. Like many other companies, Sandeman's New Jerusalem Tours offer walking tours of one of the most religiously, historically and culturally rich places on earth: Jerusalem's Old City. But what sets Sandeman's apart from their rivals is that their tours come without a compulsory price tag. Despite popularity among tourists for their trips, which began in October, the new arrivals have been met with a frosty reception by some of the established players in the business. They represent unfair competition, say critics, not just by offering no-fee tours but also for, controversially, using guides who don't yet have their official Tourism Ministry license, an arrangement that poses potential risks for both tourists and their guides. Standing in the shadow of the imposing Old City walls, Sandeman guide Yishai explains that the present structure was built more than 500 years ago by Turkish sultan Suleiman the Magnificent, before reeling off a string of historical facts and anecdotes. "The first question I get asked is how I can be giving a free tour of the Old City," he says, before leading his group to the Armenian Quarter. "Sandeman's believes that regardless of one's budget, everyone should be able to see the Old City through the eyes of a trained guide; and if at the end you think the tour is worth paying for, I do accept tips," he says. The company says that this is the only part of the tour that is scripted; the rest is up to the guides, who rely on their own knowledge to entertain and inform their clients. THE NEWS shouldn't come as a complete surprise to people on the tour because the policy is mentioned in Sandeman's promotional leaflets, albeit in a significantly smaller font than the words "FREE TOUR" in bold at the top of the flyer. "Our unique style of history and entertainment has made us one of the most popular tour companies in the world. Our expert guides want everyone to experience Jerusalem, regardless of their budget. That's why they work on a tips-only basis. If by the end of the tour you feel the tour was worth paying for, you can tip your guide," say the brochures, decorated with a photograph of two of Jerusalem's unique selling points - the Western Wall and the Dome of the Rock. Recent participants certainly felt that the three-and-a-half-hour circuit of the Old City was an experience worth paying for. "The tour is wonderful because it's 'free,' and you pay whatever you like," says Janette Andur from New Jersey, who canceled an Egged tour of Jerusalem she had booked with her husband to go with Sandeman's instead, following a trip to Masada the previous day that had proven disappointing. "This tour is better in every way. The guide is knowledgeable, and he takes his time, too. I like the concept here," she says. Egged's tours of the Old City cost $42 for half a day or $62 for a full day, including the new city. Sandeman's also run set-fee Holy City Tours which, unlike their free counterparts, include entrance to the Temple Mount and the Church of the Holy Sepulcher for NIS 75 ($18) per person. The free tours help to promote the paid-for tours, both of which are promoted by a list of "partner" hotels, restaurants and bars that carry Sandeman's leaflets in exchange for inclusion in their Jerusalem tourist map. In addition to a portion of the fee, guides also receive a commission if participants on one of their free tours turn up on the Holy City Tour. After conducting three tours, the guides for the free tours have to contribute NIS 10 for each participant to Sandeman's. It's a formula that has worked for two British entrepreneurs, including CEO Chris Sandeman, who first launched the model in Berlin in 2004. Since then, the Sandeman's New Europe company has set up shop in eight other major European cities, replicating their success in London, Paris, Amsterdam, Dublin, Madrid and elsewhere. Yishai says that the free tour that In Jerusalem joined was the smallest group he has ever taken, with just seven people. The low season between the Christmas and New Year holiday and the arrival of spring has been exacerbated by the Gaza war, which further depressed numbers. On an average day with Sandeman's, Yishai guides groups of 20 to 30 people, but numbers can reach as high as 60. "The tourism market has a high and low season, and we're looking for work all the time. Now, for example, there are not many tourists; the clientele are people on their own and people staying in hostels in the Muslim Quarter. If I wasn't doing this now, then I wouldn't be working," he explains, taking a breather in the Jewish Quarter during the tour's only coffee and toilet break. "It's a hard job being a tour guide. There's no work if there's a war like in Lebanon or Gaza. During the intifada, many people were unemployed or became taxi drivers, and one even committed suicide." The Jerusalemite, who has been working as a tour guide since he finished his IDF service in 1998, says that his days of spending extended periods of time leading groups across the country are coming to an end. Half-day shifts better suit his lifestyle, which also includes studying at the Sam Spiegel Film and Television School and returning from two and a half weeks of reserve duty in Gaza. "I know for a fact that I can't go on doing this [leading long tours] for much longer. I just got married, and my wife wants me to be at home more," says Yishai. BUT IF Sandeman's tour guides and customers are content, many others in the tourism business are far from happy. Jerusalem-based guide Suzanne Pomeranz doesn't mince her words. "It's a lousy idea; it's terrible," she says. "Times are hard economically all over the world, but when someone comes in and does this, it harms people. My bread and butter is walking tours of the Old City. Why should people pay me when they [Sandeman's] are advertising for free? Where does that leave me?" Rabbi Barnea Levi Selavan, a licensed guide with 20 years' experience who moderates the Israguides e-mail forum of more than 200 licensed tour guides, says that, exceptions notwithstanding, the majority of feedback regarding the free tours on the forum has been negative. "There's the question of how appropriate it is for a foreign company to enter an already depressed market where people have been struggling for years and all of a sudden come in with a free product," he says. "So many top guides are out of work. People have invested their life to be excellent at what they do and feel that this is a direct attack." Sandeman's flatly reject the charge that they are taking business from established guides. Sandeman's Israel regional director, Gal Mor, argues that Sandeman's core market is foreign independent travelers, individuals rather than organized groups that form the basis of much of the country's tourism. "We're taking non-tour takers," he says. "Look at the people on our photo blog. The majority of them wouldn't be able to afford $100 or $200 for a private tour. People who have the money don't want to shlep around with a group of other people, so they hire a private tour guide." Tal Paz, who juggles leading Sandeman's free tours with the final year of his tour guide training and working as a freelance journalist, agrees. "They are not the kind of people who would have hired a tour guide. They are budget tourists in an expensive country," he says. "You have a tour guide with two years' experience and one with 20 years, is that fair competition? I have 16 months' training - where do you draw the line?" Like Selavan, Pomeranz also takes exception to the fact that Sandeman's use unlicensed guides to give the free tours. "It's fine as long as they are using licensed guides and paying the guides like they should. The paid tours are okay, but the free tours are not. It undermines the credibility of us all - all the tour guides and the tourism industry together," she maintains. Selavan, who charges NIS 160 for a tour of Second Temple Jerusalem, which includes three admission tickets, believes that using guides without a license, even students, is a violation of the regulations, and he doesn't "understand how this can be in effect." To work legally as a tour guide in Israel, one must pass a two-year course run by the Tourism Ministry. In accordance with Israeli law, all the guides giving Sandeman's paid tours hold official licenses. Their free/tip-based tours, however, are given by both license-holders as well as students working toward official accreditation. These guides work on a freelance basis, which means they are not officially employees, says Sandeman's. However, Yossi Weiss, vice chairman of the Israeli Tour Guides Association (ITGA), disagrees: "The company disavows any relationship of being the employer, although it gives them the work schedule and program, and that puts the company in the position of employer." Mor explains that Sandeman's initially attempted to recruit licensed guides but could not find enough to operate the free tours. "The Tourism Ministry said that it would allow student guides on this special tip-based tour," says Mor, adding that in December the ministry informed him that its legal adviser was reviewing this agreement following objections from the ITGA, which represents licensed tour guides in Israel. "I'm hopeful that the Tourism Ministry will come through on its promise to allow us to use these guides." The Tourism Ministry responds: "The Sandeman's company recently began to operate in Israel in the same way that it works in other European capitals, and the Tourism Ministry welcomes the entry of a credible and quality company into the field of tour instruction whose activity will widen and diversify tourism. The company recently asked the Tourism Ministry to allow the employment of students close to the end of their studies as tour guides. We made it clear to the company that the law does not permit the employment of tour guides who are not authorized; therefore, they will not be able to employ them. However, the Tourism Ministry is seeking legal counsel about the possibility of employing these students at no charge as trainees and not as tour guides." THE ITGA says that it is also highly concerned about the lack of social security for Sandeman's guides, as well as the fact that they could find themselves in trouble by working without insurance. "There is no liability in case of an accident. If somebody breaks a leg or gets hurt, they will sue everybody and his dog, including the guide," says Weiss. "I don't think it's right that they are in a situation where they could be sued. I'm really concerned; these [student guides] are my future colleagues. I wouldn't like to see them get busted just because they were desperate when they were in training." In addition, Sandeman's guides have no guarantee that if they turn up at the Jaffa Gate on a given morning, there will even be work waiting for them. Paz says that the company uses a back-up guide who, in cases of low numbers, is simply sent home. To his annoyance, this has happened to him several times. Nevertheless, Paz still encourages his classmates to seek work with Sandeman's. "It's real life experience, losing people in alleyways and struggling with the bathroom!" he says. As Yishai led his group away from the Jaffa Gate, one unsuspecting tourist lagging behind quickly found himself approached, "What's your name, where are you from?" came the well-worn refrain, followed promptly by, "Would you like to see my shop?" Mor believes that the Sandeman's formula can deliver benefits for both tourists and the tourism industry in Israel. He says that the free tours will help to "drive away hustlers," the well-known phenomenon of local Arabs who pose as tour guides and often pressure people into parting with cash in shops or restaurants at the end of their excursion. "Initially these guys were very opposed and aggressive toward us," he says, adding that one man was barred from the Jaffa Gate area after threatening to stab a female guide. Looking at the bigger picture, Mor says that Sandeman's marketing model will help Israel reach the foreign tourist market by including Israeli destinations on their promotional flyers and maps distributed to six million travelers in cities along the European backpacker trail. "They pay horrendous amounts of money to promote Israel abroad, and we are putting Jerusalem and Tel Aviv next to Paris and Amsterdam," he says. ONE YOUNG woman from London took three of Sandeman's free tours in Berlin and one in Munich before seeing what they have to offer in Jerusalem, citing the quality of guides as a major draw. Kate, who is not Jewish, traveled alone to Israel and arrived just days after the Gaza cease-fire was declared. "My friends thought I was crazy coming here!" she says with no regrets. But peace and quiet reign at the sun-drenched Western Wall Plaza, where the only sight that raises an eyebrow is the bright blue tracksuits worn by members of a Russian soccer team slicing through the de rigueur black and white of the Orthodox Jewish worshipers. Turning his back to the ancient stone structure and Al-Aksa Mosque located on top, Yishai declares his bold aim to his group: "I'm going to attempt to give you 4,000 years of Jewish history in three minutes. Let's see if I can do that!" Mor acknowledges that if the Tourism Ministry decides to rule against the use of trainee tour guides, then Sandeman's will be forced to close their operations in Israel or else drastically adjust their model. "It's at the risk of being nipped in the bud," he concedes, adding that walking and cycling tours in Tel Aviv are already in the pipeline, having done the groundwork in contacting potential partner hotels and hostels. Other plans include cross-border activities with Jordan and Egypt, as well as an independent travelers' center in Jerusalem that is tentatively scheduled to be launched in March. Mor has a controversial vision of a "completely unregulated" tourism industry in Israel, following the trend in several European countries. "The reason I'm against licensing is that, as a consumer, I should be the one responsible for making the decision about what I want to purchase. I think that the ITGA should exist, but it shouldn't be mandatory by law to hire guides from them. It's a monopoly because it gives exclusivity to them and the opportunity to jack up prices," he says, adding that the minimum daily fee for a licensed tour guide is around $170. "Licensed guides have a strong argument, but in the bigger picture it's not allowing private investment to promote Israel abroad, since it can't function under these circumstances." Regardless of what the Tourism Ministry's final judgment may be, Sandeman's guides, both students and graduates, believe that the market will decide whether the new venture sinks or swims. Back in the sun-drenched stone of the Old City, Yishai's group takes a short breather in the courtyard of the Church of the Holy Sepulcher, where he explains how a distinguished Muslim family was entrusted with the key to the holy site, keeping at bay rivalries between the different Christian denominations. Although they weren't able to enter the church, built on the site where Jesus is believed to have been crucified, Janette Andur says that she and her husband, Eli, intend to give their guide NIS 100 [$25] between them for their tour. "To the tour guides who are angry, I say come and work with us," says Yishai. "If you're good, then you get tipped; and if you're not, you don't."