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Viewing cable 06ANKARA1256, TURKEY: TELECOM/IT SECTOR CLAMORING FOR MORE
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
06ANKARA1256 | 2006-03-10 15:22 | 2011-08-24 01:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Ankara |
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 ANKARA 001256
SIPDIS
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK
FCC FOR A THOMAS AND A WEINSCHENK
SENSITIVE
E.O. 12958: N/A
TAGS: ECPS EINT EINV TU
SUBJECT: TURKEY: TELECOM/IT SECTOR CLAMORING FOR MORE
COMPETITION
REF: A: ISTANBUL 124
B: 05 ANKARA 6701 AND PREVIOUS
Sensitive But Unclassified. Please handle accordingly.
¶1. (SBU) Summary: Following the privatization last July of
Turkey's fixed line telecom company Turk Telekom, operators
are urging the Telecommunications Regulatory Board to move
more quickly in licensing cable and new technologies and to
augment competition. Still dominant Turk Telekom's new
management promises to embrace fair competition, but this
promise has not clearly permeated through its traditional
bureaucratic mind set. Despite still low internet
penetration, there are significant growth opportunities in
the telecom/IT sectors in Turkey, and sector participants
are eager to learn from U.S. market and FCC regulatory
experience. End Summary.
---------------------------
Still Dominant Turk Telekom
---------------------------
¶2. (SBU) Representing the 55% majority interest led by Oger
Group, Turk Telekom's (TT) new President and CEO Paul Doany
said all the right things at a recent "STEAM" telecom sector
conference in Istanbul March 1-2. Doany stressed that TT
was fully committed to acting as a fair competitor and good
business partner within the telecom regulatory framework and
given a fair return for investment. He noted that TT's
competitors were customers, too. Doany emphasized that the
company was moving from order taking to marketing, but
admitted that it was hard to effect change overnight. While
claiming unflagging commitment to all stakeholders, he
argued that the incumbent TT could not be solely burdened
with capital costs, allowing newcomers to cherry pick
business. Doany said that PC penetration of 5 million PCs
in Turkey was still too low, but he expected this to double
in 2 years to 10 million PCs. Conference participants gave
TT credit for many successes, achieving majority
privatization to foreign capital, for one. In addition,
multiple, redundant international cable connections have
been established (two Mediterranean submarine and five
European terrestrial), mitigating risky over-dependence on a
single connection. Finally, TT has ramped up its ADSL wide-
band internet portals to over 1.8 million and subscriptions
to over 1.6 million.
¶3. (SBU) Minister of Transportation and Communication
Binali Yildirim - by teleconference - told the conference he
is committed to moving forward on funding universal access,
R&D, PC provision to schools, and e-transformation in
government. He said the government was formulating a new
communications law to improve the business environment. He
said that the tax burden on GSM services is rather high.
This problem would be overcome partly in 2007, he claimed.
The Minister said that GOT, TT, and Microsoft were committed
to increasing PC's in schools (Ref A). Telecommunications
Authority President Tayfun Arcarer outlined an ambitious
work program, which included moving forward on wide-band
provision via cable, wireless, and 3G platforms.
--------------------------------------------- -----
Convergence, Taxation, Customers - not Subscribers
--------------------------------------------- -----
¶4. (SBU) Industry participants made the following points:
High taxation: mobile and other operators lamented that
Turkey faced among the highest taxation rates on telecom
services in the world (just ahead of Uganda), at around 60%,
severely hurting the sector's ability to expand and
innovate. One participant told EconOff that the
government's position was that this was a lucrative sector
that was easy to tax, so it was unapologetic in locking in
an important revenue source. Turkcell is the dominant
mobile provider, but the sector enjoys competition from
Telsim (recently acquired by Vodafone) and Avea (TT minority
interest).
¶5. (SBU) Low internet penetration: According to EU
statistics overall internet usage in Turkey stands at 15%,
versus an EU average of 40%. Participants noted that low
internet penetration was a function of low computer
penetration (5 million in Turkey) and to some extent low
fixed line penetration.
¶6. (SBU) Broad-band is not Broad: Turk Telekom is still the
sole provider of wide-band internet through its ADSL
service. While it has ramped up subscriptions at a fairly
reasonable price, there is no competition for services. One
media participant lamented that Turkey's wide-band was
mostly 256 and 512 bp, while in parts of Europe and Asia
customers used 2 MB and above. He said Turkish customers
were eager for new services and products, but needed more
band-width. He claimed that one-half of Europe's high speed
ADSL was provided by new competitors.
¶7. (SBU) Interconnection and Legal Woes: A Turkcell rep
told EconOff that TT's interconnection and leased line
pricing was still exorbitant. He said that Turkcell is able
to mitigate this cost somewhat by using competing
international providers (who still have to connect through
the Turk Telekom infrastructure; out of forty licenses, 25
licensees have signed an interconnection agreement with TT,
but only a handful of long-distance license-holders
operate). One participant noted that Turkcell's audit
report was filled with pages of descriptions of legal cases
filed against it by TT. The industry still perceives that
rather than embracing competition in new technology, TT
resorts too quickly to legal action (because it often wins).
One participant told EconOff that TT had filed well over 200
cases against individuals who were providing competing
services. One Vice President of the Telecommunications
Authority mentioned that TT's new DG Doany told them that
TT's new management would drop most of these court cases in
the near future. ISP's still struggle with expensive
interconnection with TT as both provider and competitor.
¶8. (SBU) Cable: Industry is eager for cable licenses to be
issued, heretofore held up by legal and regulatory cases,
hoping that - like in the U.S. and elsewhere - this could
provide effective wide-band internet competition.
Currently, there is limited internet provision under an
existing cable license. Once the licenses are issued,
licensees are planning to provide digital cable connections
which will enable wide-band interconnection. The current
cable-TV network is analog type. Prospective cable-TV
licensees would like to provide their services free from
Turksat, but the new draft law states that they have to go
through Turksat satellite services, which is still 100%
owned by the GOT (it was separated from TT prior to
privatization).
¶9. (SBU) VOIP: Under Turkish regulations, Voice Over
Internet Protocol (VOIP) can be provided under voice
licenses for international service or intra-company. Long
distance service providers are mostly using VoIP. Turks are
also taking advantage of Skype, Vonage, and other similar
providers. For this kind of service, the regulator noted
the challenge of the lack of a telephone number, which
causes a problem for emergency services. Currently, the
regulator does not have a separate regulation for VoIP.
¶10. (SBU) There was lots of buzz about local loop
unbundling, wireless, 3G and more to catalyze competition in
internet and telecom provision. The regulator stated that
it was closely studying new technology to bring in new
licensing.
¶11. (SBU) Comment: Both the Telecom and Energy Regulatory
Boards in Turkey have struggled to gain competence and
safeguard independence in their respective sectors. While
the energy board's challenge has been that the sector is
still dominated by government actors - so it does not yet
have a dynamic market to regulate, the telecom market is
majority privatized and market participants are tearing at
the bit. The STEAM telecom conference was striking in the
significant participation by the regulator and extensive and
spirited dialogue with industry. However, industry is
intensely frustrated with slow progress on licensing new
technologies and imperfect competition in many areas.
Industry is speaking loudly, and the regulator is listening,
so there is great hope in this critical sector.
¶12. (SBU) Many participants expressed to EconOff the desire
to learn from U.S. and FCC experiences; for example, there
was interest in the recent FCC ruling that cable provided
sustained competition to telephone fixed line DSL provision
in the U.S. market. Turkey inevitably looks first to the
EU, but realizes that its own specific approach can benefit
from American lessons learned, especially in the dynamic
telecom/IT sectors.
Wilson