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DE RUEHAK #6055/01 2930510
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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
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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 
 
ANKARA 00006055  001.2 OF 002 
 
 
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. 
 
-------------------- 
Struggling Regulator 
-------------------- 
 
¶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. 
 
------------------- 
Slow Liberalization 
------------------- 
 
¶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, 
 
ANKARA 00006055  002.2 OF 002 
 
 
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