TURKEY'S TELECOM BOARD CHALLENGES - INTEREST IN

UNCLAS SECTION 01 OF 02 ANKARA 002072

SIPDIS

SENSITIVE

USDOC FOR 4212/ITA/MAC/OEURA/CPD/DDEFALCO
FCC FOR A THOMAS AND A WEINSHCHENK

E.O. 12958: N/A
TAGS: ECPS EINV ECON TU
SUBJECT: TURKEY'S TELECOM BOARD CHALLENGES - INTEREST IN
LEARNING FROM FCC

REF: A. ANKARA 1209


B. 04 ANKARA 6480

SENSITIVE BUT UNCLASSIFIED. PLEASE HANDLE ACCORDINGLY.


1. (SBU) Summary: The Turkish Telecom Regulatory Authority
is planning a visit to the FCC as part of its efforts to
increase capacity and expertise. While the state company
Turk Telekom's privatization and the sector's liberalization
slowly proceed, the Telecom Regulatory Authority struggles to
maintain its independence and perform its role of regulating
the changing market. End Summary.


2. (SBU) Reftels reported on Turkey's challenges in
improving consumer access, service, and cost for telecom and
internet as a key element of improving its investment
environment. A fundamental aspect of this challenge is
nurturing an independent regulatory authority.


3. (SBU) In a meeting March 31 with EconOff and Econ
Specialist, Board Member Galip Zerey expressed enthusiasm for
a yet-to-be-scheduled expert trip to the FCC Washington.
Zerey met Ambassador David Gross at the recent 3GSM
Conference at Nice, France. He stated that the specific
purpose of the trip would be to gain knowledge on 3rd
generation GSM; the more broad purpose would be to gain
general best regulatory practices from the FCC. EconOff also
encouraged the Turkish visitors to meet with State Department
telecom experts. Zerey stated that the board has increased
its outreach to EU members' bodies. According to Zerey, the
previous Board President's term ended March 29 and the Prime
Minister had not yet named a new one. Zerey said that his
name was one of two on the short list. Faruk Comert (another
regular Embassy contact, also eager to pursue contact with
the FCC) is acting President.


4. (SBU) Zerey described on-going challenges of regulating
the liberalizing market, still dominated by Turk Telekom.
Out of 43 licenses issued to open up long-distance operation,
only about 20 have signed interconnection agreements with
Turk Telekom, and only a few are actually in operation - and
not yet profitable, because of lingering conflict over
interconnection cost and practices. The Board issued a model
agreement to provide guidance and has attempted to respond to
numerous complaints by new licensees about unfair practices.
There are about 100 internet service provider (ISP) licenses.
Turk Telekom has brought suits against a few for allegedly
illegally providing Voice Over Internet Protocol service.
The Board has implemented new rules requiring Turk Telekom to
allow ISP's to resell broad band ADSL service to customers,
although to date Turk Telekom has yet to consistently provide
such access. There is competition in mobile phones
(Turkcell; Telsim- also to be put up for tender; Avea),
satellite service (25 licenses),and data transmission (16
licenses). The Board aims to put in place 3rd generation
service and regulation.


5. (SBU) Zerey expressed optimism that Turk Telekom's
imminent privatization would be a positive development for
market liberalization. Moreover, he averred that while the
tender process was still underway, the board would avoid
actions that would be perceived as having a significantly
negative impact on the company's value. Zerey emphasized
that the Turkish judicial system needed to gain specialized
expertise, and ideally to establish specialized courts to
competently handle telecom issues. In the meantime, he
observed that the courts lacked will or expertise to make
judgements against the state company Turk Telekom. He said
that there might be a role for the U.S. to offer training or
share best practices.


6. (SBU) Comment: Officials at the Turkish Telecom
Regulatory Authority appear imbued with a cautious optimism
in their quest to gain competence and exercise liberalizing
regulatory authority in a market dominated by the state
company Turk Telekom. They recognize the challenge of their
task and are eager to pursue contacts and assistance with the
U.S. FCC. Echoing concerns raised by the Energy Market
Regulatory Authority and other independent boards, the
Telecom Board is deeply concerned about prospective
legislation at the Prime Ministry, which, they fear, would
systematically limit their independence by granting greater
control to the relevant ministry (the Communication Office at
the Transportation Ministry for telecom). In addition, a
separate proposed Electronic Communications Law would further
threaten the Telecom Board's authority by transfering
frequency monitoring and licensing to the Communication
Office. Many observers question the AKP majority
government's will to relinquish control of key sectors to
truly independent and empowered regulatory boards.
EDELMAN