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DE RUEHAK #6055/01 2930510
ZNR UUUUU ZZH
R 200510Z OCT 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 9531
INFO RUCPDOC/USDOC WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHIT/AMCONSUL ISTANBUL 1492
RUEHDA/AMCONSUL ADANA 1249
RUEAFCC/FCC WASHDC
UNCLAS SECTION 01 OF 02 ANKARA 006055
SIPDIS
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK
FCC FOR A THOMAS AND A WEINSCHENK
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ECPS EINT EINV TU
SUBJECT: TURKEY TELECOM LIBERALIZATION IN PROGRESS
REF: ANKARA 1256
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Sensitive But Unclassified. Please handle accordingly.
1. (SBU) SUMMARY: Turkey's telecom sector has achieved a number of
important milestones: including creation of a semi-independent
regulatory authority and privatization of Turk Telekom (and earlier
termination of its monopoly in fixed line infrastructure and voice
services). However, liberalization has faced delays and
uncertainties and there is frustration about unmet potential in this
critical sector. The Telecom Authority is weak and lacks
independence and Turk Telekom has not significantly changed its
statist approach, nor its intent to use its dominance to stifle
competition. Turksat, a 100% state-owned firm, maintains control
over the satellite and cable sectors, and developments in the latter
are tied up in court cases. Turk Telekom maintains an effective
monopoly over wide band internet provision. The Telecom Authority
is interested in cooperation with the FCC. End Summary.
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Struggling Regulator
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2. (SBU) Telecom Authority Board Member Faruk Comert (protect)
painted a gloomy picture of slow progress in liberalization of
Turkey's telecom sector. He said that Turk Telekom (TT) had
undergone little change in its personnel and attitude, except at the
very top of the organization, since its privatization in July 2005.
Comert lamented that in effect the telecom regulator now has less
control over TT since its privatization, given TT's connections with
the Ministry of Transportation and Communication, which has control
over the telecom board. Comert also expressed worries about the
expertise and wherewithal of 55% majority owner Saudi Oger, even
sharing with us a press story alleging that there had been
significant bribes paid to the government.
3. (SBU) Comert expressed interest in cooperation with the FCC to
help the Turkish regulator increase its capacity. He described his
productive meetings with the FCC in Washington early last summer.
Comert complained that the Telecom Authority was spending the bulk
of its time cracking down on illegal cell phones and phone tapping,
and neglecting timely progress on regulation. He did, however,
express optimism on moving forward on licensing of new wireless
"WIMAX" technology, especially for rural areas.
4. (SBU) While other interlocutors expressed optimism about a new
telecom law that will bring Turkey's legal environment more in line
with EU law, Comert asserted that it would have little effect on the
Telecom Authority. He claimed that the constraints were political
will from the Ministry, rather than the legal standing of the
regulator. Other interlocutors told us that the new law would help
reduce ambiguity about the respective responsibilities of the
Telecom and Competition Boards.
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Slow Liberalization
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5. (SBU) In the long-distance and ISP sectors, Dogan On-Line
manager Halil Yalcin told us that great expectations for
liberalization have largely been unmet. Although there were over 40
long-distance service license holders, fewer than ten are now
active, and he expects only five to remain in the near future.
Yalcin perceives a big gap between Turkey and the EU with respect to
market competition, consumer choice, and "value added" services
available. He observes that Turk Telekom maintains a monopoly over
wide band internet service and his company and others could only
resell, limiting their ability to compete. His company and others
have benefited from the ruling that they can provide
Voice-Over-Internet-Protocol (VOIP) technology, to date not provided
by TT. The Dogan manager complained about the unmet potential for
cable television as an alternative infrastructure, as it has
effectively been tied up by 100% state-owned Turksat. In his view,
the government aims to maintain control over cable television in the
run up to 2007 elections.
6. (SBU) Many of these same complaints were echoed by Yusuf Ariak,
President of the long-distance and ISP operator organization
TELKODER. Complaining that liberalization was not occurring in
Turkey, he noted that new entrants were being forced out of the
market. He claimed that Turksat had effectively usurped the cable
infrastructure even though the Telecom Board had issued licenses
last spring to four companies which had realized the cable
investments. (The Competition Board insisted that the cable
business be separated from Turk Telecom prior to its privatization,
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transferring it to the state-owned satellite operator Turksat.)
Ariak criticized early Telecom Board decisions that stifled
competition by allowing TT to implement deep price cuts and set high
interconnection rates in advance of liberalization. He also
criticized decisions that stifle competition for satellite business;
for example, all state business has to go through Turksat.
7. (SBU) COMMENT: While slow progress in Turkey's liberalization is
a negative factor for the investment environment, new technology
cannot be excluded from markets. The arrival and expansion of use
of internet-based services like Skype and Vonage is ineluctable.
While Turkcell is dominant, the mobile phone sector exhibits
substantial competition and Turk Telekom's role is limited to a
significant share in the number three provider. Until the Telecom
Board can act independently and in a timely fashion, Turkey's market
will always be playing "catch up" and will remain subject to
dominance by the fixed line operator Turk Telecom or the state-owned
Turksat. Effective competition in the telecom sector remains very
low.
8. (U) The ITU Plenipoteniary in Antalya in November will be a good
opportunity for contacts between our FCC and other officials and the
Telecom Authority.
WILSON