Laws governing Ukraine’s telecommunications sector will evolve over the coming years as it reforms the countries domestic laws to ensure they comply with European Union regulations, in accordance with the Ukraine-EU Association Agreement, which is due to apply from 2016.
One of the most significant achievements of recent years was the signing of the economic part of the Ukraine-EU Association Agreement on June 27, 20141, which will take effect on Jan. 1, 2016 upon its ratification by all EU Member States2. It is also a powerful driver for the development of Ukraine in its struggle against the post-Soviet Russian dominance.
By signing the Association Agreement, Ukraine agreed to comply with a range of requirements, including those in the telecom sector. In particular, Ukraine is expected to ensure a competitive market, transparent and effective functioning of the regulators, protection of market players against discrimination and effective allocation and use of frequencies and national numbering resources. Ukraine has to ensure relevant national laws and regulations in the telecom sector are gradually made compatible with the EU acquis. The Rules Applicable to Telecommunication Services (Appendix XVII-3 to the Association Agreement) set out the scope and timeline for such adaptations. Thus, the provisions of the nine EU acts will apply in Ukraine as described below.
| EU Directive | Period for implementation after the entry into force of the Association Agreement |
| Directive 2002/21/EC (Framework Directive) | 4 years |
| Directive 2002/20/EC (Authorization Directive) | |
| Directive 2002/19/EC (Access Directive) | |
| Directive 2002/22/EC (Universal Service Directive) | |
| Decision 676/2002/EC of the European Parliament and of the Council of March 7, 2002 on a regulatory framework for radio spectrum policy in the European Community | |
|
Commission Directive 2002/77/EC of Sept. 16, 2002 on competition in the markets for electronic communications networks and services |
2 years |
|
Directive 98/84/EC of the European Parliament and of the Council of Nov. 20, 1998 on the legal protection of services based on, or consisting of, conditional access |
|
|
Directive 2000/31/EC (‘‘E-Commerce’’ Directive) |
3 years |
| Directive 1999/93/EC of the European Parliament and of the Council of Dec. 13, 1999 on a Community framework for electronic signatures |
In the near future, we expect to see active work on adapting Ukrainian legislation to the European legal framework.
Current Legal Framework
The current legal framework of the telecom sector in Ukraine is set out by the Telecommunications Law (2003) and the Radio Frequency Law (2000) as well as some other laws and regulations.
The Telecommunications Law sets out the basic principles of telecommunication market regulation, including:
• Public use of telecommunication networks;
• Rules of interconnection;
• Telecommunication services that are subject to licensing;
• Requirements for obtaining telecommunication licenses;
• Listing of public telecommunication services;
• Conditions for providing telecommunication services; and
• Principles for granting numbering resource as well as the tariff policy regulation.
The Radio Frequency Law establishes general rules for allocation and use of the radio frequency spectrum, including:
• Requirements for obtaining a license for the use of radio frequency resources, and permits for the use of certain types of radio electronic facilities and/or emitters;
• State control and monitoring of the use of radio frequency spectrum; and
• Liability in the event of its misuse.
The terms and conditions of the telecommunication services provisions are also regulated by the state authority by-laws, namely the ‘‘Rules on rendering and obtaining telecommunication services’’ and ‘‘License terms on rendering telecommunication services subject to licensing in Ukraine.’’ According to the Telecommunications Law, the rendering of telecommunications services in Ukraine can be provided by legal entities or individuals (i.e. private entrepreneurs) registered in Ukraine.
Perspective Regulations
Key laws regulating the telecommunications sector were adopted more than 10 years ago. They are outdated and do not meet the recent challenges faced by Ukraine, including the European integration process. Therefore, new legislation is being prepared.
In February 2015, the National Commission for the State Regulation of Communications and Information, the national regulator, presented for public consultation a draft law ‘‘On Electronic Communication,’’ which would substitute the current Telecommunications Law.
The draft law is quite extensive and, among other things, regulates the framework for interaction between all market stakeholders of electronic communication services and also defines basic rights, duties, and liabilities of subscribers, providers, and the state. According to Article 2 of the draft, the law aims to:
‘‘Ensure the widespread provision of electronic communications services of sufficient range, volume and quality through limited regulation of market relations to facilitate effective functioning of an open and fair competitive market. The law defines principles of consumer protection in electronic communications and monitoring of electronic communications market by the state.’’
A new approach to financing the national regulator is being discussed. Currently (as of July 2015) the regulator is financed from the state budget. Instead of this, service providers may be charged a 1 percent levy on their income to fund the authority. This new approach — common in other European countries — should make the regulator independent from the state.
However, the reaction of market players to the draft Electronic Communication Law has been mixed. It is notable that since the public presentation of the draft law more than a thousand comments have been submitted. Hence, the initial draft will probably be significantly amended before its consideration by the Ukrainian Parliament.
Other recent legislative initiatives already submitted to parliament aim to improve national cybersecurity. The new edition of the Radio Frequency Law is also in the pipeline. However, no official draft has been presented as yet.
3G on the Move
Ukraine used to be one of few countries in Europe (if not the only one) that did not have the capacity to offer 3G or 4G technology to consumers of telecom services.
Until recently only one operator — Trimob LLC — held a 3G license in Ukraine. However, Trimob failed to roll out the service countrywide.
Other market players, in particular Intertelecom, offered certain solutions to their subscribers by using specific Wi-Fi pocket routers working at the CDMA standard. Thus, 3G was available only in the largest cities and Ukrainian consumers mainly used low-tech 2G technology.
In February 2015, the government held a long-awaited public tender and issued 3G licenses to three major Ukrainian telecom operators — MTS, Kyivstar, and Astelit (operating under the ‘‘life:)’’ trademark).
MTS and Kyivstar have each paid the equivalent of approximately 85 million euros ($96 million) to the state budget for their licenses under the official exchange rate set at the bidding date, while life:) paid the equivalent of approximately 105 million euros ($118 million) for its license. Conversion will cost these operators around an additional 50 million euros ($56 million), on top of their license fees.
The Ukrainian government reported this public tender as effective, transparent, and successful.
Currently, the three operators, which bought a 3G license, are pushing for the early rollout of their networks. Kyivstar and life:) have already launched 3G in the capital, Kyiv, and a few of the largest cities with a population of approximately 1 million people. Meanwhile, 3G from MTS is currently available at large shopping malls and through Trimob roaming.
However, the three operators could see a surge in costs if the government succeeds in implementing a proposed initiative. The government, looking for ways to increase fiscal revenue against the national currency devaluation, is considering increasing the radio frequency fee by 26.7 percent for operators. After their acquisition of 3G frequencies, the three major operators increased their bands substantially, but their payments to the state budget could double if the government’s initiative succeeds. This in turn may increase fees for subscribers.
Turkcell Concentrates 100 Percent in Astelit and Acquires Trimob from SCM
On June 26, 2015 two shareholders of Astelit (using the ‘‘life:)’’ trademark) entered into an agreement on the acquisition by Turkcell of a 44.96 percent stake in Euroasia Telecommunications Holdings B.V. (Netherlands), from System Capital Management (SCM) which is owned by Ukrainian tycoon Rinat Akhmetov. After the deal is closed, Turkcell will hold 100 percent shares in Euroasia Telecommunications Holdings B.V., owning Astelit (the ‘‘life:)’’ trademark).
Another deal on the table between the same players involves Trimob. It is a subsidiary of the major telecoms operator of fixed and mobile telecommunication services, Ukrtelecom JSC, which is currently controlled by SCM. As of July 2015, the parties have not reached an agreement. This acquisition will allow Turkcell to concentrate on two 3G spectrums — one for Trimob and another for Astelit — providing additional technical advantages and opportunities to compete with two other major operators.
Plans for 4G
To date, 4G licenses have not yet been granted to any telecom operators in Ukraine because currently there is no available spectrum.
The spectrum required for high-quality 4G services is currently available to the state security and defense authorities — so-called ‘‘special users.’’ After the parliamentary elections in October 2014, a new parliamentary majority executed a Coalition Agreement, undertaking, in particular, to ensure the development of telecommunication networks of the 4th and 5th generations in 2015.
In June 2015, following the president’s announcement to offer 4G licenses for bids in 2017, the regulator has started making arrangements for the bidding. For this purpose, the regulator approached foreign consultancy agencies to elaborate a 4G (LTE) rollout plan in Ukraine. It is expected that by the end of 2015 the Ukrainian government or the president will adopt their respective plans. In parallel, the regulator is also proceeding to make preparations for the re-distribution of frequency bands used by the operators.
Internet Access and National Broadband
According to the data of the Ukrainian Internet Association3, as of May 2015 in Ukraine:
• 59 percent of the population are regular internet users (21.8 million);
• 61 percent (22.4 million) have internet access at home; and
• 5 percent of all regular users use only mobile devices to access the internet.
The new parliamentary majority, apart from the plans for 4G and 5G, brought forward another ambitious initiative — implementing a nationwide broadband internet. The EU-Ukraine Association Agreement also provides for cooperation on promotion of broadband access (Article 391 Chapter V). Currently, the Ministry of Economical Development and Trade of Ukraine is designing the respective program.
Deregulation
The government is planning to implement a range of measures aimed at deregulation of the telecommunications market in Ukraine. On March 18, 2015 the Cabinet of Ministers of Ukraine adopted the Action Plan for Deregulation of Commercial Activity (Decree No. 357-p), which inter alia includes 16 measures with regards to telecommunications. Among the most significant are the following:
• Harmonizing the procedure for allocation of radio frequencies and spectrum redistribution with the EU Directives by Quarter 2 of 2017;
• Implementing the technological neutrality in different spectrum by Quarter 2 of 2017;
• Abolishing of a range of licenses and introducing the notification procedure by Quarter 3 of 2015;
• Implementing mobile number portability by Quarter 3 of 2015; and
• Simplifying a range of technical procedures in 2015 and 2016.
It is worth mentioning that currently the state authorities’ inspections of small and medium enterprises in all spheres are temporarily prohibited, unless such an inspection is approved by the Cabinet of Ministers of Ukraine or initiated by the same enterprise being inspected. Reducing such government interference in the telecommunications market should have a positive impact on the market and support fair competition.
Public Sector Digitalization
The Ukrainian government has recently intensified cooperation with global vendors of software and hardware and solutions for data protection, cybersecurity, and other advanced technology products. Use of cutting-edge solutions is aimed at improving the efficiency of Ukraine’s public sector.
On June 16, 2015, a brand new web portal of the state services was presented. Now, Ukrainians can order any of the first 22 services, such as obtaining formal documents and official information, from one website4. Another 45 services will be available soon and an additional 484 are in progress. The project is the result of cooperation between the state, private IT companies, and civil activists (volunteers).
Another recent success is the launch of an electronic, publicly available tool for effective and transparent public procurements, known as the ProZorro system5. (In Ukrainian, ‘‘prozoro’’ means ‘‘transparent’’).
The tool aims, on one hand, to minimize corruption in public procurement, and, on the other hand, facilitate procedure.
In particular, in June 2015 the Ministry of Defense reported that all public procurement will be made through the new electronic portal only to effectively arrange logistic support for the Ukrainian army, which is standing against the Russian attack on Ukraine.
On July 2, 2015, the Ukrainian Parliament amended the Law of Ukraine ‘‘On appeals of citizens.’’
Now Ukrainians can submit both individual and collective appeals electronically (e-petitions) to the president, parliament, government and local municipalities. This is a great step forward towards the up-to-date communications between the state and civil society.
Further, under the Governmental Deregulation Action Plan, the Economy Ministry is in charge of the improvement of the legal framework of electronic documents management, in order to make it close to paper documents management by the end of 2015.
In summary, telecommunications is one of the most promising markets in Ukraine that demonstrates significant development potential.
NOTES
1. The English text of the EU–Ukraine Association Agreement is available at http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1413961918333&uri=CELEX:22014A0529%2801%29.
2. The EU–Ukraine Association Agreement ratification progress is available on the official website of the European Council of the EU at http://www.consilium.europa.eu/documents-publications/agreements-conventions/agreement/?aid=2014045.
3. The direct link to download the report is at http://www.inau.org.ua/download.php?491d3c591971bf8e42ae9ce698e28bc0; and also available at http://www.inau.org.ua/analytics_vuq.phtml. Please note that the report is only available in Russian.
4. The one-stop-shop website for obtaining public documents is https://igov.org.ua/.
5. The ProZorro system website is http://prozorro.org/.
Author: Volodymyr Igonin
Published by World Communication Regulation Report (Bloomberg BNA),
Volume 10, number 8, August 2015
08/15 Copyright © 2015 by The Bureau of National Affairs, Inc. WCRR ISSN 1750-1784