Turkey: Commitment To Liberalize Communications

Since the beginning of 2007, the Telecommunications Authority (the "Authority") and the Ministry of Transportation have stepped up the pace of their studies and regulatory activities. The Authority has issued further regulations that are important to the liberalization process by enhancing competition in this vibrant market. Although the Electric Communications Law, which is the telecommunication sector's landmark legislation, is still under review, secondary legislation is steadily evolving towards compliance with the European Union's Acquis Communitaire.

Fixed Telecommunications Services

In August 2007, the Authority issued a new license for the provision of fixed telecommunication services. This license includes a wide scope of services, combining long distance telephone services ("LTDS") with other licenses, such as Wired and Wireless Internet Service Provision, and public pay telephone services over a fixed-terrestrial telecommunications network. With this license, the Authority's goal is to combine all services for data transmission, telephone and access services. This license applies not only for international telecommunication, but also for local and inter-city calls. Its purpose is to ensure that all markets are competitive with regard to the provision of services over the fixed- terrestrial telecommunications network. In other words, Türk Telekomünikasyon A.S. ("Türk Telekom") will no longer be the only provider in the public pay phone and inter-city call-services market. This will theoretically lead to more competition and, thus, better pricing and service for consumers in this market. Unfortunately, the regulation goes into effect, the GSM market in Turkey will have far greater opportunities for investors.

In the interim, Turkcell initiated legal action for annulment of the regulation, by filing a motion to stay the execution of the new regulation before the Council of State (Conseil D'Etat). Although this file is still pending, the interim decision of the court on 4 December 2007 regarding the motion was to reject the stay.

Universal Service Obligation

The Law on Universal Service Obligation was enacted in 2005, and the Regulation on the Procedure and Substance for Collection of Universal Service Fund Revenues and the Payment of Expenditures ("Regulation on Universal Service") entered into force on 29 June 2006. This brings more detailed provisions on universal services. The Universal Service Obligation intends to provide communication services, including access to the internet, at an affordable price, with minimum standards, and access for everyone.

For this reason, the Regulation on Universal Service and the Law on Universal Service bring additional obligations for universal service providers, regarding fixed telephone, pay phone, telephone directory, emergency calls, basic internet, and communications services with respect to safety at sea. The Ministry of Transport requires the deposit of a substantial contribution fee to the State Treasury. Under the Regulation, varying ratios are determined for different telecommunications services (i.e. for Türk Telekom and operators other

than GSM operators, 1% of the annual net sales; and for GSM operators, 10% of contribution fees paid on a monthly basis to the Treasury).

The Regulation on Universal Service was amended by another regulation on 20 April 2007. This particular regulation enlarged the scope and expanded the definition of net cost calculation to include the incumbent universal service obligors. The universal service obligors have strenuously objected to these amendments. On 19 June 2007 they challenged the amending regulation before the Council of State by Telkoder (the Association of Independent Telecommunications Service Operators).

Significant Market Power

On 7 January 2007, the Regulation on Principles and Procedures for Determination of the Operators with Significant Market Power entered into force. The Regulation authorizes the Authority to impose obligations on those companies with significant market power. The operators with significant market power are determined every year by the Authority, and the obligation to enter into interconnection agreements is announced. In 2007, the Authority determined that Turk Telekom and all three of the GSM operators (Turkcell, Avea and Vodafone) have significant market power in the mobile call termination market. Therefore, these four companies must execute interconnection agreements with each other, using the tariffs imposed by the Authority.

Other obligations which may be announced by the Authority might include a transparency obligation, a broadcasting obligation of reference access and/or interconnection proposals, a non-discrimination obligation, a separation of accounts, a provision of access obligation, an obligation to be subject to tariff regulations, and a cost-accounting obligation. Telecommunication law is one of the most rapidly evolving practice areas. We can expect further legislation and regulations to be introduced in order to further change the face of this still nascent industry.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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