TELECOM OPERATORS ON THE MOVE

TELECOM OPERATORS ON THE MOVE

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            Since 2005, legislative developments in the telecommunications sector have continued to evolve within the context of Turkey's European Union ("EU") accession process. Turkey has taken significant steps toward market liberalization, one being the enactment on 10 November 2008 of the Electronic Communications Law ("Communications Law"), aimed at creating a de-regulated sector to keep up with technological developments and EU practice.

             The Communications Law necessitates a series of further amendments within the secondary legislation, and even replacement of old legislation – notably, the Regulation on Authorization of Telecommunications Services and Infrastructure ("Old Authorization Regulation") and the Access and Interconnection Regulation ("Old Interconnection Regulation") – with a whole series of new regulations. While the Authorization Regulation regarding the Electronic Communications Sector ("Authorization Regulation") was duly adopted and replaced the Old Authorization Regulation, it is expected that remaining new regulations will be issued towards the second half of 2009 to properly streamline the secondary legislation and make it compatible with the Communications Law.

This article provides an overview of the most significant pieces of secondary legislation in this fast-moving area, namely the Authorization Regulation and Draft Access and Interconnection Regulation ("Draft Access and Interconnection Regulation").

I. LICENSING REGIME INTRODUCED BY THE COMMUNICATIONS LAW AND DETAILED IN THE AUTHORIZATION REGULATION

          Apart from the section related to the authorization of the sector players, the provisions of the Communications Law have been in effect since its enactment. The authorization-related section entered into force only recently, on 10 May 2009. Subsequently, on 28 May 2009, the Authorization Regulation was duly adopted and deemed to be in full effect as of 10 May 2009. It replaced the Old Authorization Regulation.   
Prior to the enactment of the Communications Law, telecommunications services were rendered under authorization, issued pursuant to the Authorization Regulation within the categories of (i) concession agreements, (ii) telecommunications licenses, and (iii) general authorization. Following entry into force of the authorization-related section of the Communications Law, new authorization concepts – namely, notification and right to use – are introduced and detailed under the Authorization Regulation.

              With respect to "notification" as a form of authorization introduced by the Communications Law, the Authorization Regulation requires legal entities providing electronic communication services or laying down an electronic communication network or infrastructure without requesting any resource allocation (e.g., number, frequency or satellite position) to notify the Information Technology and Communications Authority, the regulatory body supervising the telecommunications sector in Turkey ("ITC Authority"), in advance. As of the date of registration of the relevant notification with the ITC Authority registry, the applicant entity is deemed authorized to perform telecommunications services that do not require scarce resource allocation. In case the ITC Authority identifies outstanding documents or irregularities in the notification file of an entity, it must inform the applicant entity of such issues within a maximum of two weeks following registration of notification.
The second feature of the authorization regime in the Authorization Regulation concerns legal entities' right to use electronic communication services. The ITC Authority is entitled to determine whether any category of electronic communication services should be deemed "scarcely resourced," and thus whether "right to use" should be granted to a limited number of operators. The ITC Authority may limit the number of operators enjoying the right to use the relevant electronic communication services in order to achieve effective and productive utilization of relevant resources by a limited number of operators. In such case, the ITC Authority will take into consideration public opinion, international practices, and market conditions in the Turkish telecommunications sector.

           In the event the ITC Authority decides to limit the right to use, the Ministry of Transportation will determine the authorization policy regarding satellite position, utilization of national radio frequency bands, and electronic communication services to be offered by a limited number of operators. The ITC Authority will then grant the relevant authorization. The operators' right to use services with scarce resource allocation will be determined through a tendering process.

             "Right to use" may also be granted to operators that would not be limited by number. In the event the ITC Authority determines that it is not necessary to allocate scarce resources, the ITC Authority will grant a right to use following review of the relevant operators' applications. Upon submission of their applications, operators will be required to pay relevant fees within three months, and following such due payment, the ITC Authority will issue the relevant authorization certificate within 30 days.Term Of Authorization Under The Authorization RegulationUnder the Authorization Regulation, the authorization certificate for a "right to use" can be issued for a maximum term of 25 years. In order to renew or extend the term of their certificates, operators should apply between 6 to 12 months prior to the expiration of the term of their certificate. In relation to "notification," telecommunications services within the scope of notification can be performed as long as the operator continues to be registered with the ITC Authority.

           The Authorization Regulation states that authorization fees will consist of both administrative and right-to-use fees. The administrative fee is the operators' contribution to administrative expenses, including: market analysis, monitoring, regulation and implementation; auditing of operators; technical and all other supervisory work; international cooperation; and integration and standardization work. The administrative fee will correspond to 0.35% of operators' net sales pertaining to the relevant operational term. The ITC Authority is entitled to increase or alternatively decrease this percentage by 0.5% of the maximum, based on the operators' net sales pertaining to the preceding year.

            The Authorization Regulation states that minimum applicable fee levels for the right to use will be determined by the Council of Ministers upon the proposal of the ITC Authority. The Authorization Regulation states that the operators' right to use services with scarce resource allocation will be determined through a tendering process, whereas fees for services that do not require any resource allocation will be independently determined by the ITC Authority, which is entitled to revise fees at any time based on reasonable, transparent, proportional and non-discriminatory grounds.

              To complement the authorization process, a Council of Ministers decree entered into force on 26 May 2009. The decree details minimum calculation figures that will be taken into consideration for determining minimum "right to use" fees of frequencies and numbers that do not require allocation of scarce resources. Different calculation figures and methods are provided for calculating the right to use wireless services for common use and national and international radio link frequency. In determining minimum figures for the number of right - to - use services, different categories – including geographical numbers, mobile numbers, mobile network code, international and national point code, data network definition code, etc, – are listed. The minimum right - to - use fees may be increased on an annual basis depending on re-evaluation figures determined by the Ministry of Finance.

Transfer Of Authorization – Transfer Of Shares Under The Authorization Regulation

         Operators intending to transfer their authorization will apply to the ITC Authority with the relevant required documentation in order to obtain the approval of the ITC Authority. Within one month following approval by the ITC authority in this respect, the right-to-use certificate will be issued on behalf of the transferee, or the transferee will be registered within the scope of notification.

           Operators authorized within the scope of a limited right to use will inform the ITC Authority with respect to any kinds of share transfers, whereas operators authorized within the scope of an unlimited right to use or notification will inform the ITC Authority only with respect to share transfers triggering change of control within a maximum of two months. The ITC Authority, while examining share transfers, takes into consideration current market conditions, competition conditions and market share of the relevant operator.

II. DRAFT ACCESS AND INTERCONNECTION REGULATION

             The Interconnection Regulation will be replaced with the Draft Access and Interconnection Regulation, within the scope of harmonizing the secondary legislation with the Communications Law. It is expected that the Draft Access and Interconnection Regulation will not be adopted earlier than the second half of 2009. Currently, provisions of the Interconnection Regulation are applicable to interconnection and access transactions.

           Terminology And Definitions Under The Draft Access And Interconnection Regulation.The terminology used in the Interconnection Regulation is amended as per the Draft Access and Interconnection Regulation in line with the terminology of the Communications Law, e.g., the term "telecommunications services" is replaced with "electronic communications services"; "user" is replaced with "subscriber." Certain definitions are also included under the Draft Access and Interconnection Regulation, including "Access Obligor," "Carrier Pre-election" and "Carrier Election Code."

           Under the Interconnection Regulation, "interconnection" is defined as the connection of two networks for the provision of telecommunications traffic between two different telecommunications networks possessed by different operators. However, the Draft Access and Interconnection Regulation defines "interconnection" as the physical and logical connection of electronic communications networks used by the same or different operators in order to provide (i) access to the services provided by different operators, or (ii) connection between the same or different operators' subscribers.

Interconnection And Access Obligation

           According to the Interconnection Regulation, operators with significant market power ("SMP") in the telecommunications market are obliged to provide interconnection to their networks as requested by other operators. The Interconnection Regulation imposes the obligation to provide interconnection services on the operators with SMP. In addition, the ITC Authority may designate the operators as the interconnection obligor if refusal to provide interconnection services by the operator causes certain conditions adverse to the subscribers or prevents formation of a competitive environment.

           In relation to the access obligation, it is stated that operators with SMP may be obliged to provide access if the ITC Authority determines that such operators' refusal to provide access is causing certain conditions adverse to the subscribers or preventing formation of a competitive environment. In this respect, according to the Interconnection Regulation, operators with SMP are obliged to provide interconnection as requested by other operators and may be obliged to provide access under certain conditions.

           However, the Draft Access and Interconnection Regulation includes a new provision, "Imposition of Obligation," stipulating that operators with SMP – apart from "provision of interconnection," "joint localization" and "facility sharing" – may be obliged to provide access and election of carrier. In this respect, the Draft Access and Interconnection Regulation deletes the provision of interconnection obligation of such operators with SMP and, in deleting this, imposes the obligation for all operators to negotiate interconnection with each other upon request. In case of a disagreement between parties to interconnection negotiations, the ITC Authority may impose a provision of interconnection obligation on operators.
The access obligation of the operators with SMP remains the same under the Draft Access and Interconnection Regulation.

Interconnection And Access Tariffs

           According to the Interconnection Regulation, the operators determine interconnection and access tariffs independently in line with the principles indicated in the Interconnection Regulation. The ITC Authority may request from the operators determination of cost-based tariffs. If the ITC Authority determines that the tariffs are not cost-based, then the ITC Authority may determine the tariffs. The tariffs determined by the ITC Authority are binding. In the Draft Access and Interconnection Regulation, the provisions regarding the interconnection and access tariffs remain the same for the most part.

               The interconnection tariffs applicable as of 1 May 2009, in accordance with the decision of the ITC Authority dated 25 March 2009, are determined as (i) Türk Telekom interconnection tariffs: 1.31 kuruş plus taxes per minute for local calls; 1.71 kuruş plus taxes per minute for calls within the area; and 270 kuruş plus taxes per minute for calls outside of the area; (ii) Turkcell interconnection tariffs: 6.55 kuruş plus taxes per minute; (iii) Vodafone interconnection tariffs: 6.75 kuruş plus taxes per minute; and (iv) Avea interconnection tariffs: 7.75 kuruş plus taxes per minute.

Dispute Resolution

          The Interconnection Regulation states that if the operators cannot reach mutual agreement within three months upon submission of an interconnection or access demand, they are entitled to initiate the conciliation process before the ITC Authority. Following commencement of the conciliation process, the parties will have six weeks to reach a mutual understanding with the assistance of the ITC Authority. The ITC Authority may extend this period for a term of four weeks. If the parties cannot agree

         within such term, then the ITC Authority's resolution on the subject matter will be binding on both parties.The Draft Access and Interconnection Regulation amends the dispute resolution process by deleting the initiation of conciliation proceedings for disputes arising from interconnection and applying the conciliation process to access-related disputes. The above-mentioned timeframes are also amended. In this respect, if the operators cannot reach mutual agreement within two months upon submission of an access demand, they are entitled to initiate the conciliation process before the ITC Authority. Following commencement of the conciliation process, if the parties cannot reach an understanding during such conciliation period, the ITC Authority is entitled to decide on the provisions of the access agreement subject to dispute within two months.