Why does Jerusalem - a city of only about one million residents - have two separate bus networks?

Jerusalem has historically had two bus systems - one operated by Egged serving mostly destinations in 'West' Jerusalem. And another operated by two Palestinian companies - one serving destinations in the south of East Jerusalem (as well as the checkpoint leading into Bethlehem) and the other reaching destinations to the north of Damascus Gate in East Jerusalem (such as Beit Hanina. There are also bus services to Ramallah and back).

The situation is a hangover from the days when Jerusalem was split in half between Israel and Jordan (between 1948 and 1967). In the 90s, Israel brought the situation under control and the bus companies are now fully licensed and operated under the aegis of Israel's Ministry of Transport.