Turkey: Providing Electronic Communications Services: The Stage Is Yours

Despite the credit crunch damaging economies worldwide and putting markets at risk of collapse, the electronic communications market in Turkey is expected to grow due to accelerated implementation of long-awaited liberalization and deregulation in the sector. Enactment of the electronic communications law (the "EC Law") establishes a legal framework for deregulation and strengthens the liberalization of the sector.

To further liberalize the Turkish market and harmonize Turkish regulations with the requirements of the European Union and its directives on telecommunications law, the EC Law aims to gradually replace most of the current pieces of legislation and secondary regulations, including Telegram and Telephone Law No. 406, applicable to market players. These amendments in the legislation, if implemented properly and promptly, will create a deregulated mechanism to oversee and monitor the whole sector, and will foster gradual competition in the market, by encouraging new investors to enter the market.

The existence of an independent and strong regulatory authority is fundamental to full market liberalization and increasing sector efficiency, enabling introduction of new services of technological progress on a continuous basis. In line with this approach, under the EC Law, the Information Technologies and Communication Authority (the "ITC Authority"), previously known as the Telecommunications Authority, is entitled to issue regulations in order to eliminate practices which are obstructive, disruptive or limiting to competition, and to impose obligations on operators with significant market power (the "SMP") in the relevant markets and on other operators when required. Furthermore, the relation between the ITC Authority and other regulatory authorities (i.e. Competition Board) or the Ministry of Transport is clearly set forth under the new law; whereas the former law was ambiguous in this respect. Considering the evolution of the ITC Authority through its interactions with the European Union, it is a natural and expected development that it should become a stronger and less depended authority compared to before. Furthermore, the EC Law encourages moderate competition among the market players of the electronic communications sector in order to raise the sector to an internationally competitive level. For purposes of ensuring competition, the ITC Authority is entitled to monitor, inspect and investigate operations in the electronic communications sector, either upon receipt of a complaint or on its own initiative. The Competition Board is required to take the ITC Authority's opinion into consideration while deciding upon a matter related to the electronic communications sector.

Accordingly, it can be stated that, as between these two governmental authorities regulating the EC sector, the EC Law favors the ITC Authority.

An attempt has been made to deregulate a fundamental segment of the licensing process through the adoption of "notification" and the granting of "right of use" mechanisms to replace the procedure for granting licenses and permits, and executing concession agreements. To be in force as of May 2009, the new procedure requires that in order to provide services in the electronic communications sector investors will need to either notify or apply to the ITC Authority for right of use to be granted for a maximum term of 25 years. These two new authorization forms, "notification" and a "right of use," will indeed replace the former forms of "general authorization," the type 1 and type 2 telecommunications licenses and concession contracts respectively belonging to the pre-EC Law era. On the face of it, it does not seem to be a devastating change from the previous forms. We will need to analyze the upcoming secondary legislation to better understand whether there will actually be a proper deregulation in practice in licensing terms. Obtaining a "right of use" will be required if allocation of a scarce resource (i.e., number, frequency, satellite space) is considered necessary by the ITC Authority. The fee to be paid for the right of use will be determined by the Council of Ministers in compliance with the suggestions of the ITC Authority and the Ministry of Transport. The number of investors to be granted the right of use will not be limited unless such a limitation is justified by the scarcity of the resource. Furthermore, through the enactment of the EC Law, the access and interconnection obligations of the SMPs are regulated under this main piece of legislation.

Freely set tariffs will be encouraging for the current and new entrant operators in the market. Whereas the EC Law clearly sets forth the limits of ITC Authority's power to intervene with the tariffs set by the operators, it cannot be concluded that the EC Law brings a fundamental amendment in this respect. Furthermore, market operators should await secondary legislation to be adopted for further evaluations. According to the EC Law, operators will freely determine the tariffs for any kind of electronic communications services, provided that they comply with the regulations of the ITC Authority and the relevant legislation. However, for the sake of precluding domination of the market by the SMP operators, the ITC Authority is granted the authority to determine the procedures regarding the approval, monitoring and supervision of tariffs as well as determining the tariffs to be applied by the SMPs by the cap method. Additionally, in the EC Law it is stated that the ITC Authority is entitled to impose on the operators the obligation to determine the access fees on a 'cost basis.' If the ITC Authority ascertains as a result of its examination that the access fees are not determined in compliance with the said requirement, it is entitled to set upper limits on the tariffs until the ITC Authority makes its cost-basis determination of the access fee

The EC Law also includes provisions with respect to consumers' rights for the purpose of growth of the subscriber base. Accordingly, number and address portability options, and carrier selections are available within the scope of the new law. The principle of "being exempt from seizure" with respect to frequencies, number lines and internet domain names is introduced under the EC Law to maintain continuity of electronic communications services.

The EC Law aims to foster Research and Development activities and related investments. For this purpose, the ITC Authority is entitled to provide financial support to these sorts of activities, provided that the amount of assistance does not exceed 20% of the ITC Authority's total profit.

For the sake of liberalization and transparency in the market, the EC Law regulates that decisions of the ITC Authority affecting operators and users will be announced to the public.

Considering all the amendments in the legislation through the enactment of the EC Law and the possible issuance of secondary legislation, the electronic communications sector in Turkey is becoming more attractive for new market entrants. However, one should bear in mind that whereas, during the pre-liberalization era, conditions with respect to legal aspects and technological processes were not suitable for investment, a bare legal framework deregulating and liberalizing the sector without due implementation would also be unsatisfactory for reform of the sector. Consequently, for the achievement of a fully liberalized market that is of a competitive nature and welcomes new sector players, due implementation by official entities and proper observance by the sector players of the EC Law, as well as the cooperation of SMP operators in various sectors (i.e., Türk Telekom, Turkcell) will play an important role.

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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