It is possible to study the Issues Concerning the Competition in the Turkish Telecommunication Sector by seeking answers to the following three basic questions:

• What is the status of the competition authority in the Turkish Telecom Sector?

• How are the impartial competition rules regulated in the Telecom Sector?

• What are possible measures that may be introduced to protect the rights of consumers?

While seeking answers to these basic questions, I will try to analyze the issue of competition in the telecommunication sector in terms of Competition Law. Within this context, I will discuss the matter in light of Law No. 4054 on Protection of Competition, its annexed Communiqués, Decisions of the Competition Board and the European Union’s legislation which is among the international commitments of, and adopted as is, by Turkey. It should be remembered that it is also possible to discuss the Issues of Competition in the Telecommunication Sector through other means.

1. Status of the Competition Authority in the Turkish Telecommunication Sector 

Trading of any goods and service in both domestic and international markets in the globalizing world economy should be realized without suffering from lack of competition. The domestic competition rules contribute to the development of competition in international business by removing competition-restrictive factors from the domestic market structure. Being a member country of the modern world and having adopted the parliamentary democracy and liberal market economy, have embraced a law, which will help it develop its economy and integrate itself into the world.

Law No. 4054 on Protection of Competition was put into force on December 7, 1994 within the scope of the Customs Union which was established pursuant to the Ankara Agreement (1963) and Additional Protocol (1971) signed with the European Union. This law, which significantly concerned the private sector, was, however, not put on the agenda for a fairly long time. The Competition Board could not be formed either. The Competition Board which could only be set up in March 1997 after a long delay of 27 months, have completed the infrastructure of Competition Authority by a rapid structuring, and issued all necessary Communiqués and finally, a Communiqué which comprised the rights and obligations of all enterprises under the law in question, on the date of November 5, 1997.

The Competition Board is vested financial and administrative autonomy by Law No. 4054 on Protection of Competition. The Competition Board is not dependent on any governmental authority, body or entity. No authority, body, entity or person is entitled to give orders or instructions to the Competition Board in order to affect the Board’s final decisions. Finally, the Competition Board is a juridical public institution and enjoys a financial and administrative autonomy. It is assumed that the Board, having such a characteristic, can not be affected by any political authority. There is another important factor; Law No. 4054 on Protection of Competition also apply to State Economic Enterprises. Like private enterprises, SEE’s are also subject to the authority of the Competition Board. In conclusion, there should be no doubt that an autonomous authority can establish competition on Telecom markets. However, it is explicitly indicated in Turkey Report issued by the EU’s Commission on November 8, 2000, that the Competition Board has not been sufficiently enforceable against the state enterprises and other institutions which are invested with special privileges. Just on this point, it should be emphasized that the Competition Board must enforce its authority against the public enterprises acting in the field of telecommunication.

– Moreover, liberalization of the telecommunication market is a must for Turkey in terms of adopting the EU acquis communautaire. Taking into consideration the strengthening of the regulatory authority in the telecommunication sector and aligning with the EU acquis communautaire, all which are mentioned under the Telecommunication heading of the short-term objectives section of the Accession Partnership Document, and the inclusion of state aids which are mentioned under the Competition heading in the same Document, into Competition Law, it is stressed that the liberalization and deregulation processes should be completed rapidly. If we briefly comment on the Accession Partnership Document for the telecommunication sector; it is obvious that the completion, as soon as possible, of the liberalization process and establishment of competition in the sector, deregulation and ensuring that the regulatory bodies function efficiently are required.

2. Non-Discriminative Competition Rules in the Telecom Sector 

Non-discriminative competition rules which prohibit agreements, decisions and practices which restrict competition, are regulated by Article 4 of Law No. 4054 on Protection of Competition, while Article 6 of same Law which prohibits abuse of dominant position and, Article 7, on the other hand, prohibits mergers and acquisitions which may create or increase dominant position. It is, however, not that simple. For instance, one single telecom network may be used by more than one company for various purposes due to technological developments. Further, connection of other companies’ networks to the main network or provision of services by more than one company via the same network in order to make it possible for other companies to use the telecom network has now become a major problem. In that period, just like in Turkey, state owned monopolies in most of the European countries had the monopoly on telecom networks in their countries respectively; naturally, one single network could not be shared for a number of services without changing the status quo.

In the British Telecommunications case which appeared under such circumstances, the decision of the Court of Justice of the European Community which read “The rules of competition of the European Community also apply to the telecommunication sector”, confirmed the need to open this sector to competition in the EU.

These development were not experienced in Europe only. A similar one was experienced in the USA where substantial changes were introduced in the said sector as a result of the split of the AT&T monopoly by a court decision made in 1984, opening the domestic and international markets to competition.

As a result of all these basic factors, the European Commission has taken the first step of liberalization by publishing its Green Book on Telecommunication in 1987. Hence, by issuing a number of decisions and directives, the Commission ensured the opening of telecommunication to competition over the EU until 1998.

When it was indicated that the telecom market of the European Union was opened to competition on January 1, 1998, nothing about a completely competitive market where a number of telecom companies deal in different sections of telecom business, was mentioned. A remarkable portion of the European telecom market was still in the hands of monopolies which were state owned enterprises.

If we are to summarize the development of competition in the European telecom market for the last two years since 1998, substantial portions of most of the old telecom monopolies have been privatized and the competition in the international telephony market has fairly rapidly increased (to give an example, Deutsche Telekom lost about 30 % of its share in the international telecom market over the first half 1998). The business telecom market is another one where aggressive competition to a similar extent is observed. The long distance telephony market is one where relatively less competition is experienced but, which develops rapidly, but fix domestic telephony market in nearly all around Europe is a market which has little competition and developing gradually. In order to enhance competition, the EU continues to take new measures. And the telecom companies of the EU countries have accordingly been adopting new adjustments.

Due its nature to observe the public benefit, the telecom market is one where cross investments are made. With a view to keep their local call charges and subscription fees at competitive levels, such calls are priced even below their costs. On the other hand, such loss is compensated by charging high international telephony fees (since it is considered that these calls are made rather by high-income people), i.e. at levels fairly above the cost and normally applicable charges.

In line with liberalization, the question of state aids is removed. Since cross aid is considered an application which impairs competition in liberalized markets, readjustment of prices experiences a slower trend.

On the other hand, assuming that the Turkish telecom market has been opened to competition and that other operators have entered the market, such new operators will possibly prefer to enter big cities where a huge population is accommodated, i.e. where they can attract customers in big numbers via much less investment. They will not enter a rural area where there is no big population and where the cost of laying a telephone network would be much higher. Therefore, Türk Telekom will not increase its rates charged on its customers living in big cities, on the other hand, the opportunity to charge, at its own discretion, any service fee in rural areas. Thus, taking into consideration the definition of market, these two markets (i.e. cities and rural areas) can be taken as two different markets. However, since Türk Telekom is a supervised company, such a policy will possibly not be allowed.

3. Possible measures that may be introduced to protect the rights of consumers 

Possible measures that may be taken to protect the rights of consumers is a fairly relative issue. Because there is more than one category of consumers. Expectation of each consumer differs from that of another. For instance, big city dwellers object to fixed rates and demand reduction in service fees instead of making investments in rural areas. It is possible to cite more similar examples of this type.

It should however be remembered that one of the basic principles of Competition Law is to protect consumers’ rights. The EU Commission and the Competition Authorities in member countries are organizations which are responsible for ensuring a healthy implementation of competition in the telecommunication sector just like it is in all other sectors. In other words, even though regulatory authorities on telecommunication are vested with regulatory missions, the organizations that will be in charge of supervising competition violations are competition authorities in the end. Competition authorities fulfill their duties upon its own initiative or complaints they receive from parties. The European Commission handles applications of prices in the sector very meticulously in order to protect the rights of consumers. Competition violation in the telecommunication sector is generally defined as “charging, whether directly or indirectly, other enterprises exorbitant sale/purchase prices”. Determination of such exorbitant prices is particularly difficult in the telecommunication sector because the costs of the sector which was until recently controlled by the state, could not be computed accurately. It will, however, be possible in the course of time to compute net costs of services provided.

Taking into account the jurisprudence of the EU Commission, it has been observed that a Belgium Telecom affiliate which provided index services, was given a warning by the Commission upon a complaint and its tariff, after having been recalculated and readjusted basing on the costs, became 90 % cheaper when compared to the previous one. In another case, it was determined that the German Telekom had been charging its competitors unacceptable prices for accessing fixed lines network customers and thus the German Telekom had to make a discount at a rate of 38 % in its prices for use of its local telephone networks and 78 % for use of its international telephone networks. The Commission have used cost/price analysis and market research methods in these cases. What we understand here is that undertakings have to produce acceptable reasons as to why they should keep their prices high. Finally, even though the duty of pricing has been vested in telecommunication authorities, determination of competition violations in pricings and exorbitant charges lies with competition authorities.

In his speech he recently delivered at the European Competition Day Conference, Professor Mario Monti, an EU Commissioner in charge of ensuring competition, has noticed that competition rules had difficulty in reaching major consumer masses. He also added that it had been observed in a very short period of time that the liberalization of telecommunication monopolies had positive effects on prices and that new enterprises in the market had forced old monopoly structures to reduce their prices. He also stated that the telephone service charges had fallen down in the EU in general and that the downfall in certain call services had reached 35 % over the last two years. Taking France as an example, he recorded that the downfall in the said international calls was 22 % last year, while it was 7 % in local calls and 14 % in mobile telephone calls and, in addition to such falls in prices, the quality in services had substantially increased after the liberalization.

One of the issues which has been discussed, is domestic roaming agreements. Also in the case of an agreement, an evaluation is required to be made in light of Competition Law; are there anything in the signed agreement which may prevent competition and, would restriction on competition be allowed by taking into account interests of consumers?

Roaming agreements may be signed both between operators operating in different countries and operators operating in the same country. Roaming agreements are not definitely described as international and domestic in the European Community documents. Roaming agreements in the Green Book which was published in relation to mobile communication and which should be taken into account by the member countries of the EU in their new arrangements, is described as “a commercial agreement which authorizes a mobile device user to benefit from another operator’s network”. Since international roaming prevents unnecessary investments and rapidly widens the mobile communication network, it is generally accepted as beneficial. As well, domestic roaming agreements are not subject to a different treatment in the Community’s law, because their benefits are all the same. In the new regulation introduced by the Community with respect to UMTS, which is the new generation technology in mobile telephone communication, it is indicated that domestic roamings should be promoted by the member countries and, if need be, may take decisions to this end. The situation is not different when it comes to GSM networks.

Mobile telephone operators which evade to make investments particularly in relatively less populated regions, will be able to provide nation-wide services when roaming is promoted. The first operator(s) who is given a license will have the opportunity to provide services to immense masses and form a big customer portfolio in exchange of their big investments. Operators which obtain licenses on a later date, will need to make domestic roaming agreements with a view to compete with other operators which entered the market first, because it will be hard for them to obtain a substantial share in metropolitan city markets in exchange of their investments. However, since investments channeled into less populated regions will create new markets, operators which enter the market later would have more chance. But, a new operator’s sustainability in such a new situation depends on its use of the infrastructures which have already been established by other operators. Otherwise, full competition would not be achieved; and new operators in the market will reinforce their dominant positions. As we have indicated here-above, the Community’s law also have dealt with this issue and invested the member countries with authority to take any necessary measure.

Issuance of mobile telephone licenses is limited in each country. And this indicates that the market is not wide open to free competition and that competition would only be established by a controlling mechanism. Right at this stage, domestic roaming agreements are very much beneficial and necessary to ensure a full competition among operators who receive licences at different times, and spread the communication network all over the country and moreover to unfruitful regions.

A company which enters the market late and signs a domestic roaming agreement, is entitled to benefit from the infrastructure of other companies which entered the market first, for a period until the infrastructural investment pays off and helps such company survive. But, what is important here is that such a period will necessarily be reasonable. After an enterprise which entered the market late, has become self-sufficient, a domestic roaming agreement between such two parties will not be an obligatory agreement and would be extended if agreed.

As a result, domestic roaming agreements through which mobile phone operators which may, or will, be competitors of one another, may undertake not to compete against each other, are contrary to Competition Law. But, domestic roaming agreements should be regarded as necessary for the public interest while they prevent unnecessary investments and spread the communication network all over the country. Under these circumstances, domestic roaming agreements have certain characteristics that may make it benefit from individual exemptions within the scope of Article 5 of Law No. 4054 on Protection of Competition. In other words, even though such agreements, considering their nature, are in disagreement with competition, they may be approved by the Competition Board, since they ameliorate the provision of services and are to the interest of consumers.

There two active mobile phone operators in our country. Two more will be added soon. As it is known, the Ministry of Transportation has inserted a provision into the bid specifications of the GSM 1800 bid, which was awarded to İş Bankası and Italia Telecom, which stipulates “no domestic roaming shall be implemented in areas populated over 10.000 for a period of two years”, and for that reason, the bidders kept their offers at a low level. However, though the mentioned provision stipulated in the agreement drawn up was acceptable to the Competition Board, the Council of State have not agreed with the Competition Board and declared its opinion that the provision was not justifiable. Adoption of the opinion by both the Ministry of Transportation have delighted both İş-TİM and Türk Telekom which was to benefit from this opportunity over its own GSM 1800 operator. The other parties who failed in the bidding, expressed that they would bid higher if only they could expect that such a development would have taken place; who can say they are not right. Though this was all in all a return from what was wrong, it is right that procedure was not fair. Our Head of Telecommunication Board stated that if there had been something wrong, it was the bid specifications.

On the other hand, the technical developments in the sector contributes to the enhancement of competition. To give an example, everyone in Europe will very soon have a life-long number and be able to use any one operator to make calls. Most of the European countries have started to standardize the telephone numbers and allocate one for each person for the lifetime. Thanks to this application, consumers will be able to change their operators without fearing that their number would also be changed. Such a fixed number system would be adopted among the GSM operators of which the number reaches four, including the fixed lines of Türk Telekom and the new two operators, in Turkey. All these applications in Europe are carried out in accordance with the directives issued by the European Commission. It is indicated that the competition generated by this development leads to a number of gains, the total of which may be close to that the state earns via a GSM bidding. Recently, the Commission was trying to bring forward the date of this application to 2000 from 2003, the date which the Commission previously assigned to this end; I do not know the result. In addition to the effect of fixed telephone numbers on competition, there is another system which allows us to make a choice among the operators. In this system which is used among mobile or fixed telephones, you just prefer to make all your local calls via one certain operator or you first dial a code number before dialing the telephone number and your call is conducted via the operator you picked. Since the fixed lines in Turkey are only in the hands of Türk Telekom, there is no competition in this field but, if we think that there are more than one GSM operator in the market, this technical development has various facilities which can be used in particularly the mobile phones in our country, and we can hope that this may, in the long run, be implemented for the fixed-line telephones after a full competition environment is established. Due to the Commission’s effective studies and the pressure from consumer associations in Europe, it is requested that an obligation to acknowledge these two application or facilities in licenses to be issued hereafter, be introduced. Use of one single number on both mobile and fixed-line phones, which is technically the difficult stage of the application, will in the end be possible and everyone will have a fixed number which can be used all over the world; home number, office number, etc. If a system in which one can make a choice among operators and make any call via any operator at his/her discretion, can be launched in Turkey, competition will incredibly increase and consumers will gain a lot in such a system. Now it is time to introduce in Turkey such applications which will aggressively enhance competition and are consumer-friendly, and stipulate same in the specifications of licenses to be issued hereafter.

Another matter which Turkey has been facing is the internet infrastructure. Though the private sector rapidly entered this market, the monopolies’ delay in realizing necessary infrastructural investments and their certain anti-competitional actions have raised adverse reactions. But, there is an abnormal contradiction among multi-million dollar advertisement spendings of service and content providers and the quality in the internet connections handled only by Türk Telekom and the realized infrastructure investments. The major reason for this is that the sector is not open to competition. Among the complaints, most of which are serious assertions as to non-compliance with competition, received by Türk Telekom are that no opportunity is given for the use of new technologies and thus decreasing the quality level of service providers, making service providers obligated to use their own infrastructures, preventing their in-sector cooperation by contracts, behaving discriminatory, conditioning that all goods shall be purchased from companies determined by itself, making its own company always advantageous, changing the agreements, without cause, it made with service providers.

The Telecommunication Board and the Competition Board are supposed to seriously handle these assertions. Türk Telekom is still acting like a monopoly and considers itself exempt from any competition rule.

Since the telecommunication sector is a dynamic, continuously developing sector which is open to technological innovations and addressing directly to consumers, it is closely connected to the protection of consumer rights. If the objective of competition policy is to keep the competition level in the market as high as possible, the reflection of this policy to consumers should be in the form of lower prices, wider range of products and more access to technological innovations. Naturally, all technological developments experienced in the sector will, at first stage, lower the charges and then direct the companies to provide new services to consumers in the competition environment appeared.

The best way to protect consumer rights in the telecommunication sector is to establish productive relations between competition authorities and consumer associations. Protection of consumer associations as an “economic agent” by the Competition Board will constitute the most important step in this matter. Thus, consumers will be able to enhance their capacities of shifting in the market and benefit from the results of competition. It should be remembered that consumers are among the most important structural elements. In other words, ensuring properly functioning of the market will also enable consumers to make their best choice among what are offered.

The Commission expects much from consumers and consumer associations with respect to the protection of consumer rights. Consumer protection associations, thanks to their knowledge and experience on the functions of the market, provide data to the Commission via unofficial contacts. In addition, they are entitled to be a party in lawsuits as far as they are concerned.

Moreover, “BEUC”, a federation established by consumer associations of the member countries of the Union, participates in discussions which take place during the preparation of reports within the scope of laws or in relation to certain issues. The offer made by “Belgacom Project” of Belgacom of Belgium, within the scope of “Belgacom Club” project, to its fixed-line subscribers who prefers to pay their annual subscription in advance, a reduction in international call charges, was taken to the Commission by BEUC and a legal proceeding was introduced with respect to such offer. Upon the Commission’s intervention within the frame of its investigation, Belgacom had to collect its subscriptions, which it applied for a while within the frame of the said project, on a monthly basis in order not to prevent any new enterprise from entering the market.

Another example is that “The Consumers’ Association” of England played an actual role in the merger of Airtours / First Choice and provided support to the Commission during the conduct of economical scrutinies and the generation legal grounds.

As it is clear, consumer associations plays a very important role in the Union’s Competition Law. First of all, the development of consumer associations in our country as well should be supported within the frame of protecting the rights of consumers and, on the other hand, the competition environment need to be strengthened by way of taking necessary measures to ensure that the market functions at a high level of capacity.