VZCZCXRO6739
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHAK #0501/01 0651108
ZNR UUUUU ZZH
R 061108Z MAR 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 1219
INFO RUCPDOC/USDOC WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHIT/AMCONSUL ISTANBUL 2258
RUEHDA/AMCONSUL ADANA 1712
RUEAFCC/FCC WASHDC

UNCLAS SECTION 01 OF 02 ANKARA 000501 
 
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: EXCITEMENT AND FRUSTRATION IN TURKEY'S TELECOM SECTOR 
 
REF: A) ANKARA 49 
 
B) 06 ANKARA 6055 
 
ANKARA 00000501  001.2 OF 002 
 
 
Sensitive But Unclassified.  Please handle accordingly. 
 
¶1. (SBU) Summary: Fresh from participation at the annual 3GSM World 
Conference in Barcelona, participants at a recent telecom sector 
conference in Istanbul were agog with new visions, technology, and 
opportunities.  Coming back to earth, there was widespread 
frustration with recently privatized and still dominant (in fixed 
line) Turk Telekom continuing to seek to stifle competition, rather 
than seek to increase market share.  Moreover, the well-intentioned 
telecom regulatory authority is still perceived as slow in 
implementing new licenses.  Real competition is emerging between 
Turk Telecom and the livelier mobile sector, where penetration has 
surpassed well over that in fixed line.  The President of the 
Telecom Board aims to lead a delegation to meet with the FCC in 
April.  Embassy Telecom Officer gave a speech on Internet regulation 
at the conference.  End Summary. 
 
---------------------------------------- 
Brave New World of 3G, WIMAX, and Beyond 
---------------------------------------- 
 
¶2.  (SBU) The 6th "Steam" Telecommunications Conference in Istanbul 
February 22-23 brought together a wide representation of Turkey's 
public and private telecom sector participants to seek to answer the 
question: "Is the (telecom) process meeting expectations?"  By 
videoconference from Bodrum, Minister of Transportation and 
Communication Binali Yildirim emphasized the government's commitment 
to developing the newest telecom technology and services in Turkey. 
He noted that mobile penetration had reached 73 % (53 million 
subscribers) versus fixed line 26% (19 million).  He voiced 
commitment to increasing broad-band penetration beyond the current 
5% (three million). 
 
¶3.  (SBU) Telecom Board President Tayfun Acarer said that the 
regulatory body was preparing for licensing number portability, 
E-signature, 3G, and WiMax.  The time frame is imminent for the 
first two and six months for 3G.  WiMax is still under research. 
Another regulator rep stressed that the board was active in moving 
forward on value-added services.  He asserted that there would soon 
be clarification in the three levels of long-distance service (A, B, 
and C) and that the Board was finalizing a new basic fixed line 
service license. 
 
------------------------- 
What is Fair Competition? 
------------------------- 
 
¶4.  (SBU) Turk Telekom General Manager Paul Doany was very defensive 
about steady criticism of Turk Telecom for alleged unfair 
competition.  He claimed that his company had never delayed any 
rulings from the regulator.  Doany defended recent price changes 
(decrease in long distance, where there is competition, and increase 
in local service where there is still a monopoly), claiming that he 
was clear at the time of privatization for a need to rebalance 
tariffs.  He defended Turk Telecom as following the same business 
approach of other former monopoly providers like Deutsche Telecom 
and France Telecom.  Doany complained that Turk Telekom faced 
"unfair competition" in high, unfair inter-connection fees with 
Turkcell, the dominant mobile carrier, asserting that these charges 
were not cost based.  He also complained that Turk Telecom's mobile 
company AVEA had paid ten times the license fee of others in return 
for unrealized promised services. 
 
¶5.  (SBU) Representing his own company Satko and long-distance 
operators (Telkoder), Mehmet Celebiler engaged in a lively debate 
with Turk Telekom's number two, almost coming to fisticuffs over 
Turk Telekom's alleged go-slow and say-no approach to competition. 
 
¶6.  (SBU) Internet service provider Superonline DG Savas Unsal noted 
there was some progress in the six years since the onset of 
liberalization, but market participants were unsatisfied.  He said 
his company had established many WiFi hot-spots at airports and 
hotels and was pleased to have a WiMax testing license in 
collaboration with Motorola and Alcatel-Lucent for 3.5 GHz operation 
in the Asian part of Istanbul.  He called for increased public 
awareness of WiMax potential and urged the regulatory board to move 
more quickly on licensing.  Unsal also called for quick action from 
the board on 3G licenses.  He said that WiMax was a revolution, not 
evolution. 
 
¶7.  (SBU) Dr. Osman Dur, DG of state-owned Turksat, which inherited 
cable service from Turk Telecom's privatization, claimed that 
 
ANKARA 00000501  002.2 OF 002 
 
 
Turksat "is not a monopoly.  We are an infrastructure, and we are 
ready to share."  He admitted that cable Internet service had much 
greater potential than had been realized.  He commented that Turkish 
private sector licensees could establish their own network, but they 
have not pursued this.  Critics express frustration that cable could 
have opened up greater competition, but the Competition Authority 
required the cable business to be split from Turk Telekom to Turksat 
ahead of the privatization. 
 
--------------------------------------------- ---- 
Stifling Competition, Rather than Building Market 
--------------------------------------------- ---- 
 
¶8.  (SBU) In a private conversation on the margins of the 
conference, Dogan Telecom General Manager Cem Erkun painted an 
overwhelmingly negative story of Turkey's slow liberalization.  He 
claimed that the Telecom Authority has still not been able to 
exercise independence and is slow to intervene or enforce rulings. 
Erkun asserted that Turk Telekom aimed to beat up competitors, 
rather than increase the market.  He complained that Turk Telekom 
remains a difficult partner on interconnection, seeking to unfairly 
use court cases to infringe Dogan's and others' use of VOIP.   Erkun 
complained that given Turk Telekom's former government status and 
connections, Dogan encounters obstacles at every step and place in 
seeking right of way when they consider investing in new 
infrastructure. 
 
¶9.  (SBU) Erkun said only Dogan Telecom and Superonline have been 
successful in re-marketing ADSL broad-band service slots from Turk 
Telecom, because of either substantial media (national Hurriyet for 
Dogan) or distribution assets.  Erkun noted that Dogan began 
marketing its service with free modems and Turk Telecom then started 
to give away modems.  He noted that Turk Telecom still exhibited 
large differences in its approach depending on the city, meaning 
that in some cities Dogan could not get ADSL slots or reasonable 
follow-up.  Erkun echoed many of his peers in expressing frustration 
in waiting for WiMax. He saw 3G as a dead and distracting 
technology, given the lack of success in Europe (too much money paid 
for licenses).  Erkun noted that Dogan was Skype's local partner in 
Turkey and lauded this low margin but high volume business. 
 
¶10.  (SBU) COMMENT: Effective competition is now occurring between 
mobile (dominant Turkcell plus two other lesser operators) and fixed 
line Turk Telekom.  Penetration is rapidly increasing in mobile 
where there is substantial competition.  Turk Telekom continues to 
successfully argue that it has made substantial investment in fixed 
line infrastructure, so it has maintained its monopoly on local 
calls and continues to exercise dominance over long distance.  The 
wide-eyed excitement about new technology is dampened by Turk 
Telekom's delaying tactics and a slow program and limited 
independence on the part of the regulator.  Telecom Board President 
Tayfun Arcarer intends to lead a delegation to Washington to meet 
with the FCC in April.  Contact between our regulators could be very 
useful in empowering and influencing the relatively young Turkish 
regulator. 
 
Wilson