As a result of the technological boom in the last three decades, the perception and definition of telecommunications have changed, and the telecom sector has grown rapidly. As the sector develops, more stakeholders become involved, the pace of technological and legislative changes increases, and the more complex the sector gets. This growing complexity and the underlying technicalities make the telecom sector more prone to disputes stemming from a variety of reasons, and arsing between a variety of parties.
While one could believe that disputes in the telecom sector primarily relate to sector-specific technical issues between the stakeholders and the regulator, most disputes actually take place between market players, which usually are private entities, over the commercial aspects of their transactions. Nevertheless, these are perceived as “telecom disputes” because of the parties’ identities; such disputes are perhaps best described as disputes with a “telecom flavour”.
Each telecom dispute has its own characteristics and when it comes to dispute resolution mechanisms, the applicable rules and the parties’ preferences vary. Some disputes in the telecom sector are not suited to resolution by arbitration, including those which must mandatorily be brought before administrative courts. There may already be a fixed dispute resolution method by operation of the law, which cannot be bypassed by an agreement to the contrary. Below is an overview of the types of dispute most commonly encountered in the telecom sector, followed by a review of the factors that make arbitration, where available, a preferred dispute resolution mechanism in this field.
Operator vs. regulatory body
As in many other jurisdictions, the telecom sector is heavily regulated in Turkey and the regulatory body, the Information Technologies and Communication Authority (ICTA) maintains a strict oversight of the sector. The ICTA renders its decisions through administrative acts and any challenge against them is subject to the exclusive jurisdiction of administrative courts. Therefore, one can say that disputes relating to the regulatory powers and actions of the ICTA are exclusively resolved by Turkish administrative courts. The ICTA is given wide scrutiny powers by the law, with the capacity to impose fines or issue warnings, for instance upon an operator’s failure to obtain the necessary licences or comply therewith, abide by statutory and regulatory obligations, or provide the requested information and documents. Operators in the sector are obliged to notify and request permission from the ICTA for certain changes in their corporate structure. In a recent decision, the ICTA cancelled an operator’s licence due to its failure to inform the ICTA of a change in company representative. Any challenge against this type of decision must be brought before administrative courts.
This being said, not all disputes between operators and the regulatory body fall within the jurisdiction of administrative courts. In Turkey, concession agreements may be used to grant private companies the right to establish and/or operate telecommunication services. Since a 1999 amendment was made to Article 125 of the Turkish Constitution, the parties to such a concession agreement may opt for international arbitration to resolve contractual disputes, provided that there is a foreign element in the dispute. Some of the concession agreements signed between the ICTA and Turkish operators thus provide for arbitration as a dispute resolution mechanism for disputes stemming from the agreement. An important number of disputes has arisen of such concession agreements, where both the ICTA and the telecom operators had the opportunity to familiarise themselves with arbitration. In most cases, the choice of arbitration turned out to be an opportunity for the parties to resolve their dispute in an efficient and timely manner.
Operator vs. operator
The telecom sector is a narrow one and operators have to maintain smooth relations with each other despite their disagreements. An important level of collaboration is required due to the need for interconnection and roaming arrangements. Apart from a few circumstances where the regulator steps in, both interconnection and roaming agreements are subject to private law. Most disputes arising of these agreements relate to topics that are technical in nature, such as network access, quality of services or access to infrastructure, and thus well suited for arbitration. This is primarily because (i) the parties are able to appoint arbitrators with experience in the sector, who speak the same technical language as they do, (ii) the parties can bring in technical experts who can shed a light on the technical issues at stake in the course of the proceedings, (iii) the parties, who will often be of different nationalities, can choose a common language to argue their dispute, and (iv) despite regular criticism, arbitration remains a discreet and speedy dispute resolution tool when compared to state courts.
Operator vs. vendor
Operators enter in various commercial relationships with software and hardware companies to facilitate their operations. Similarly to inter-operator disputes, disputes arising from this kind of private contracts inherit significant technicalities. Thus, agreements between operators and vendors are also well suited to resolution through arbitration, for the reasons explained above.
Operator vs. subscriber
The ICTA exercises significant oversight upon user subscription agreements, and regulates almost all aspects of the relationship between operators and subscribers in significant detail through the Regulation on the Rights of Customers in the Electronic Communication Sector. Disputes between operators and subscribers mostly relate to service delivery, service costs and equipment failure. A panel of consumer arbitrators resolves such disputes, which is a simple and inexpensive out-of-court dispute resolution scheme. The decisions of this panel can be challenged before the consumer courts.
Competition law disputes
The Turkish Competition Authority closely scrutinises the activities of operators in order to maintain a level playground for all players in the sector. Although the Competition Authority has rarely imposed fines on telecom operators to date, investigations are relatively frequent, especially with regard to suspected abuses of dominant position, price squeezing, or anticompetitive behaviour in tariffs and interconnection pricing. One of the most recent fines imposed on a leading GSM operator relates to the abuse of its dominant position by determining the resale prices of top-ups. Operators can challenge the decisions of the Competition Authority exclusively before administrative courts.
Investment disputes
Foreign investors may try their claims through international arbitration if an investor-state dispute settlement mechanism to that effect is available under the agreement between the investor and the state, or under a bilateral or multilateral investment treaty. One set of institutional rules most commonly used by telecom companies is the rules of the International Centre for the Settlement of Investment Disputes (ICSID). Pursuant to the latest data, the information and communication sector represents 6% of the total cases brought before the ICSID. Telecom investment disputes often stem from state reforms affecting the value of private-sector telecom investments, such as the early termination of monopoly rights, the freezing of service tariffs or the imposition of mandatory interconnection. Turkey has been a party to the ICSID Convention since 1989, although no telecom investment related claim has been brought against Turkey under the Convention to date.
Arbitration, the preferred dispute resolution method in the telecom sector
Arbitration seems to offer more advantages than litigation before state for resolving telecom disputes with a technical background. The main upside is the opportunity to have the dispute decided upon by arbitrators who are experts in the field of telecom, considering that in pure telecom disputes, technical issues are mostly at stake and may even sometimes take more significance than the underlying legal issues. By contrast, in the Turkish judicial system, a judge will be randomly assigned to the case and he or she may not have any expertise in the technical aspects of the dispute.
Another upside of arbitration is the ability to resolve disputes in a speedy manner. Given that telecommunication services must by nature be provided on a continuous basis, operators make it a priority to resolve their disputes in a prompt and constructive manner, so as to minimise operational disruptions. Operators do not have the freedom to stop providing communication services, which is a constitutional right. In addition, considering the fast-paced sector they operate in, telecom companies cannot afford to become tangled in a lengthy dispute resolution process such as court litigation, which would not only divert the companies financial resources but also the attention of management and key employees away from their core business. Therefore, even for the non-technical disputes with a telecom flavour, arbitration remains quite attractive.
Maintaining confidentiality is also of great significance to telecom companies, all the more in relation to commercial disputes between major operators. Considering that, as in many other countries, judicial proceedings in Turkey are open to the public, the confidentially provided by arbitration is another factor that draws telecom players to this dispute resolution mechanism.
It may well be that most of the typical telecom disputes listed above will become obsolete or undergo substantial transformation in the near future, owing to the fast-paced technological innovation which constantly alters business models and trends in the sector. Telecom companies, which mostly consisted in telephone and internet service providers a couple of decades ago, now present themselves as well-versed information technology companies and provide their customers with a variety of services, ranging from cloud computing, music streaming or television to online concierge services. As the sector continues to evolve, the nature of potential disputes will evolve as well. It is thus crucial for the preferred dispute resolution mechanism to keep up with the expectations of the sector. Many believe that arbitration is already well suited for most telecom disputes, and that its inherent flexibility will only make it more suitable to respond to the telecom sector’s need for innovative, time-efficient and result-oriented solutions to disputes.
