TURKISH COMPETITION AUTHORITY FINED TÜRK TELEKOM FOR REFUSING TO DEAL OF THE INFRASTRUCTURE AND FACILITY SHARING

Turkish Competition Authority (TCA) fined Türk Telekom in fully regulated era of infrastructure and facility sharing due to violation of competition law. As it is a long debate on application of competition law in regulated industry, this decision is an example of competition of laws and regulations on regulated industries.

The complaints and effects on the violation was three years before (in 2014) but the competition investigation had a procedural time’s and reasoned decision took one years to notify and publish publicly which is a defect to effective implementation of the administrative fines. The reasoned decision dated 09.06.2016 and numbered 16-20/326-146 published in the TCA web site on 09.01.2017.

In this brief, we would give main points of the decision which have lots of details and discussion points on market structure, market definition, powers of authorities etc.

1. What was the subject of investigation?

Turkish Competition Authority examined complaints against Türk Telekom that it is restricted competition by abusing its dominant position by delaying, complicating, refusing to deal and / or hindering the applications for facility sharing in the investigation decision dated 09.06.2016 and number 16-20/326-146.

2. What were the complaints of the competitors?

The TCA decision summarized the claims of Vodafone, Superonline and TurkNet, which are primarily complainants. Below we summarize the common points of the claims of the complainant enterprises;

• In the process of concluding the Facility Sharing Agreement; Türk Telekom delayed the completion of the proceeding, demanded unreasonable rent and maintenance fees, created difficulties in reconciliation by foreseeing the contractual provisions,
• Türk Telekom abused the dominant position with its actions and procedures by these complained actions,
• Türk Telecom’s infrastructure is an essential facility for the competitors,
• Türk Telekom delayed / prevented applications for facility sharing,
• Although there is not a requirement for requesting process of facility sharing, Türk Telekom’s Infrastructure Sharing Agreement was required to be signed,
• The fact that the facility is not shared by Türk Telekom has effectively removed the competition from the sub-market.
• Türk Telekom rejected applications for facility sharing on unreasonable grounds,
• Türk Telekom prevented competitor undertakings from conducting location studies before requesting facility sharing.

3. What was the Information and Communication Technologies Authority (ICTA-BTK)’s Opinion?

In the reasoned decision; claims from the complainant enterprises, the information and documents obtained in the on-site examination were submitted and then the ICTA’s opinion on the issue was included. TCA have to get the formal opinion of the ICTA because of the Electronic Communication Act has the special provision on the relation between ICTA and TCA.  Main points of the Opinion submitted by ICTA shown below;

• The right to transition is subject to the relevant communiqué of the Ministry of Transport, Maritime Affairs and Communications,
• Türk Telekom is determined as an operator of having significant market power (SMP) in the Access to Wholesale Physical Network Infrastructure Market with ICTA’s decision dated 12.04.2013 and numbered 2013/DK-SRD/188,
• RETPAFT, which includes the procedures, principles and fees to be applied when providing Türk Telekom’s infrastructure services, was approved by BTK’s decision dated 17.6.2014 and numbered 2014 / DK-ETD / 324.
• Problems expressed by VodafoneNet have been largely resolved with the RETPAFT approved by Board decision dated 17.6.2014 and numbered 2014 / DK-ETD / 324.

4. How Did the TCA Identify the Relevant Market?

Following the opinion of the ICTA, the sectoral regulations regarding the right of transition and facility sharing and ICTA’s decisions have been examined. TCA defines the relevant product market as “physical infrastructure elements such as pipes, channels, eyes, manholes, poles and towers, and unlit fiber market” because of the fact that the fiber which is not lited up with physical infrastructure is substitutes in terms of establishing the physical infrastructure by the enterprises. Since the enterprises did not advocate any claim on unlit fiber matter, only the physical infrastructure elements were evaluated in the decision.

In the TCA decision, the sub-market was designated as the “physical infrastructure market” under the refusal to deal theory. It is stated that the competitors provides electronic communication services at wholesale and retail levels by using the physical infrastructure of Türk Telekom.

The crucial point in the decision is that services are provided through the physical infrastructure that operators lease or own, and that the services provided by purchasing wholesale products from the infrastructure of the SMP operator are not substitute services. In the first place, the aim is to provide electronic communication service at both wholesale and retail levels with its own infrastructure. Secondly, the aim is to provide electronic communication service to institutional and individual customers only at the retail level. The TCA believe that facility sharing services are not substitutes for wholesale access. Again, according to the TCA, the physical infrastructure market and VPN and leased circuit services are not substitutes.

 

 

5. How Did the TCA Justify its Authority in the Electronic Communication Sector?

Following the determination of the relevant market, evaluations of the TCA’s authority in the electronic communications sector were made. It has emphasized in the decision that the TCA has the authority to conduct a competition infringement examination in the regulated electronic communication sector by taking precedent decisions of the 13th Department of the Supreme Administrative Court (Danıştay).

6. Which Result Has the TCA Reached in Dominant Position Analysis?

At the head of the dominant position analysis, it is concluded that Türk Telekom has the dominant position in the relevant product market as well as the physical infrastructure market which is the sub-market.

After the dominant position analysis, the claims of complainant enterprises against Türk Telekom were evaluated in detail. TCA has examined one by one the claims regarding the overall application of Türk Telekom, and claims related to individual applications as a whole. As a result, TCA has reached the opinion that the behaviors of Türk Telekom in the related product market are not reasonable and that it is delaying, complicating or obstructing facility sharing.

7. How was the Refusal to Deal Theory Applied?

The TCA also assessed the issue on the refusal to deal theory. In the reasoned decision, it was determined that the refusal to deal affected operations of the competing undertakings which demand for facility sharing and led to the closure of the market. TCA has reached the conclusion that Türk Telekom violated Article 6 of the Law on Protection of Competition No. 4054 through refusal to deal as of the period examined.

8. What Have Been Said in Türk Telekom Defense?

TCA has reviewed three separate documents under the heading of assessing defenses. The first one is the written defense of Türk Telekom and the second one is the study by Türk Telekom sent to the TCA during the investigation regarding the existence of fixed and mobile substitution in the voice and broadband markets and the last one is the legal opinion on the authority of the TCA in the electronic communication sector .

8.1. Türk Telekom’s Written Defenses

• TCA formal decision regarding the opening of an investigation has not been notified to Türk Telekom. This is a procedural deficiency that may require the annulation of administrative action.
• Preventing access to opposition member views and ICTA views has limited Türk Telekom’s right of defense.
• Facility sharing process is regulated by ICTA. All actions of Türk Telekom are suitable for the regulations of the Ministry of Transport and ICTA. The investigation of the TCA furthermore is contrary to the principle of the integrity of the administration.
• Electronic communication services consist of “single voice market”, “single broadband market” and “single infrastructure market”. Mobile platforms have to be taken into consideration in the definition of the top market.
• If mobile services are included in the relevant product market, Türk Telekom could not be in the dominant position.
• The market definition of the TCA is not compatible with EU practices.
• Türk Telekom’s infrastructure is not an essential facility.
• There is no distinction between the operators in the “Determination of infringement” section of the Investigation Report.
• Türk Telekom’s access to the file is restricted.
• The intentions expressed in documents obtained during on-site inspection should not be regarded as an intention indicator.
• Türk Telekom cannot determine freely location study period and facility sharing fees. All decisions and practices regarding facility sharing are submitted to the ICTA’s approval.
• Monthly fiber maintenance-operation fees applied prior to RETPAFT are approved by ICTA. It is not true that these charges are not reasonable.
• The provision of maintenance and operation services by Türk Telekom is aimed at protecting the fiber optic infrastructure completely.
• The right to make unilateral changes to the agreement by Türk Telekom is limited to the process of application and evaluation of the requests. It is not possible for Türk Telekom to make unilateral changes in matters other than this.
• It is clearly stated by the ICTA that in the case of ROYTEPT and RETPAFT, the additional requirements that the operator may make in the future for the existing facility sharing request are considered as new applications.
• It is a cost for Türk Telekom to meet new requests to be made by the operators after the sharing of any facility. For this reason, it is reasonable for Türk Telekom to receive a fee for a new application.
• Mandatory signing of contracts for the evaluation of facility sharing requests is necessary for the quality of the work and for preventing the waste of human resources. Moreover, only the ICTA, which is the sectoral regulatory body, can bring an exception to the contract liberalization policy.
• The contract negotiation process is still in progress as operators have not applied for the ICTA’s reconciliation process until RETPAFT enters into force.
• The essential facility doctrine constitutes firstly the issue of regulation law, not competition law. If there is an essential facility on the infrastructure elements, ICTA already has the authority to regulate them. Therefore, there is no need for the TCA to be involved.
• The condition of the essential facilty or indispensable element in the concrete case has not been realized.
• The compliance with the ICTA regulations should be considered as mitigating factors.
• The penalty must be calculated on the relevant product market.

8.2. Economic Analysis and Legal Opinion Sent by Türk Telekom

• Demand flexibility and cross-demand flexibility were analyzed using time series for 2012 and 2015 and survey data for 2015.
• Fixed and mobile technologies are substitution in the retail voice and broadband markets (from the consumer point of view).
• Since the existing demand in the retail market restricts wholesale market pricing behavior, it has been determined that mobile and fixed wholesale input or infrastructure elements are substitutes for each other.
• The related product market should be defined as “electronic communication services market” as a whole without the distinction between bottom and top market.
• Türk Telekom is not in a dominant position in the “electronic communication services market”.
• Türk Telekom is not a natural monopoly due to fixed-mobile substitution.
• Facility sharing is not a necessary element to compete in the relevant market.
• TCA has a “complementary” function, according to the Supreme Court’s 13th Chamber’s precedent, and the competition authority should be active only in regulated sectors where the sectoral regulator tries to “do” the subject but is insufficient for technical reasons.
• According to the decision of Administrative Law Chambers Board dated 31.01.2013 and numbered E.2008 / 1410, TCA can directly reject the complaint without preliminary investigation and / or investigation in competition infringement claims arising from a description in the authority of the sectoral regulator.
• The ICTA regulates facility sharing service in detail.
• All transactions and actions of Türk Telekom are carried out under the supervision of the Ministry and ICTA.
• The fact that the ICTA remains stationary as a result of Türk Telekom’s submission of contracts and fees and the provision of notification to the ICTA under the obligation to make declarations implies that ICTA gave tacit approval.
• It is incompatible with competition authorities’ “complementary function” that rival operators do not apply to ICTA firstly and complaint to TCA directly.

9. TCA’s Evaluation for Türk Telekom’s Defense

TCA evaluated mainly three seriously defense points of TT. First one is the conflict of authorities of the ICTA and TCA. Second one is the definition of the relevant market and third one is the abusive conducts.

On the conflicts of authorities point, TCA has evaluated previous Danıştay decisions as giving permission to TCA to apply directly competition law in regulated sector which is electronic communication sector on this file. But there is no any evaluation about why the complainants did not apply firstly to sectoral regulator and TCA would implement its power directly. The nonsense approach of sectoral regulator may outcome this result. On the other hand, TCA also evaluated that, before the sectoral regulatory authority’s regulations, TT had some free period to implement its own policy which is subject of competition law. As sum shortly, there is a serious problem for implementing competition law in regulated sector, especially in electronic communication sector.

On the definition of the market points, TCA responded TT’s defenses, as the extending the market definition to the “electronic communication sector” based on the fixed-mobile substitution is meaningless for the file. But there is no any economic analyses for the market structure on this point which shows accepting the current condition as it is that a weak point of the reasoned decision. Looking the market only from supply sides misses the real effect of the market structures.

On the abusive conducts defenses, as TCA has rejected main points of the infrastructure market definition and refused the sole authorities of the ICTA, the defenses of TT became meaningless as all the delaying points became a violation of the competition law. TCA has eliminated some unnecessary complaints and reached that TT has violated its dominant position via refusal to deal with some conditions; such as giving long term for competitors local study process, demanding high fees for local study process, applying monthly high fees for the maintenance, bundling maintenance services to facility sharing, having authority to change unilaterally facility sharing agreement, enforcing competitors to sign a formal contract for evaluation of the facility sharing demands, evaluating as a new demand of renewing or upgrading demands and having restart of process, mandating to give application in *.kmz formats,  not having service level commitment in signed contract, not obeying the time limits for facility sharing, refusing of demands with unreasoned explanations.

10. TCA Desicion of Violation

TCA did not find Türk Telekom’s defenses justified and decided unanimously that;

• Türk Telekom has violated Article 6 of Law No. 4054 by refusing to deal with some applications for facility sharing,
• For these reasons, administrative fine given amounting to TL 33.983.792,76, which is composed of 0.45% of gross annual income determined by the Board at the end of fiscal year 2015,
• Notification of segmented route within the scope of facility sharing service has negative effects on facility sharing process. Where it is possible to meet share requests with a piecemeal route, arrangements must be made in favor of undertakings that request facility sharing. This will increase competition in the market. Opinion on this evaluation will be sent to the Ministry and ICTA.
• Decided refusal of the complainants’ requests for interim measures.

11. Conclusion

From the reasoned decision, it is understood that Turkish Government policy could not be implemented well in the electronic communication sector. Ministry has its own regulation, stating that every physical infrastructure has to be shared although there was an independent regulatory agency (ICTA). ICTA was late to regulate correctly this infrastructure sharing in all details, complainant Vodafo-Net and Superonline who are fixed branch of the mobile operators Vodafone and Turkcell claimed that there are some delays which create that they could not use its own leased lines from other government owned institutions and they will have some loses and difficulties to enter in the market and TCA intervened with its rules and fined Türk Telekom.

If this decision of the TCA will not annulled by the administrative judiciary, it may come to the agenda that the victims of the damage will sue three times of their loses as compensation pursuant to article 58 of the Law on Protection of Competition against Türk Telekom. Complainants were already claimed their loses in the compliant pleas. This compensation claims are similar as it is in France antitrust claims to Orange.

On the other hand, Türk Telekom saying that, there is a completely change in the Turkish Electronic Communication Sector and he lost its market share in total market from %96 to %38 in ten year’s liberalization process and it must be counted in the market definition which makes it dominant position in the competition law enforcement and Significant Market Power (SMP) operator in the regulatory area by ICTA. But neither ICTA, nor TCA does not accept this demand side view and approach to the digital market from supply side as an orthodox view which gives them comfort of regulation.

When the regulators comes to market realities is a difficult question to answer not only in Turkey, but also in Europe and in the world.

Oğuzkan Güzel, Ph.D.

Guzel Law Office

oguzkan.guzel@guzel.av.tr