The Ukrainian telecom market has been developing very fast over the past years and as a result has become one of the most advanced and innovative industries in Ukraine. The basic laws governing this sector are the Law of Ukraine “On Telecommunications” dated 18 November 2003, as amended (the "Telecommunications Law") and the Law of Ukraine “On Radio Frequency Resource” dated 1 June 2000, as amended (the "Radio Frequency Law") with the National Commission for State Regulation of Communications and Informatization (the "NCRCI") acting as principal regulator and developing the whole range of implementing instructions and regulations.

Privatisation

Given that the mobile communications market is already highly consolidated (resulting in regular allegations on the part of antimonopoly authorities and NCRCI in the abuse of dominant position by its major players), we now see another important trend in the market – the consolidation of fixed lines operators with the shift in their activities to digital and internet based services. One of the recent significant developments in this direction was the privatization of Ukrtelecom, the largest state-owned operator of fixed lines and 3G mobile network.

The regulator is trying to keep up with this trend by promoting development of broadband internet access in all areas and announcing plans to include it in the list of universal telecommunication services, which must be provided by all entities licensed to operate in the respective areas at special reduced tariffs. Apart from that, the government is actively promoting digital broadcasting services and facilitating the access of new providers to the market by introducing less onerous licensing procedures thus increasing the range of new telecom services for consumers. Another direction of activity of the regulator is to ensure smooth interconnection between operators, their cooperation, including national roaming, and possibility of migration of phone numbers between operators.

Additional powers

At the same time, the NCRCI is getting additional powers to regulate the telecom market with one of the recent draft laws providing for its right to define the market and accordingly determine whether any participant has dominant position and abuses it (the rights which have been traditionally vested only with the Antimonopoly Committee of Ukraine).
Overall, the regulator is constantly developing the telecommunications regulatory framework to respond to the rapid growth of this industry taking into account the EU regulatory principles in order to make market more competitive and transparent for foreign players.

Although according to the Ukrainian laws, direct or indirect foreign ownership of telecommunication companies is not prohibited, the telecommunication services in Ukraine may be provided only by companies registered in Ukraine and/or individual entrepreneurs residing in Ukraine. Pursuant to the Telecommunications Law the undertakings rendering telecommunication services are divided into operators (which maintain and operate telecommunication networks and lease communication channels) and providers (which carry out their activities through telecommunication services).
The telecommunication operators provide telecommunication services to consumers in accordance with the Telecommunications Law, consumer protection legislation, and the Rules on Rendering of Telecommunications Services (the "Telecommunications Rules").

Licensing

The Telecommunications Law provides for certain types of telecommunication activities that are subject to licensing, as well as detailed provisions regulating the access to the telecommunications market. Based on recent amendments to the Telecommunications Law, an undertaking may carry out telecommunications activities upon entering of its details into the operators and providers register and such activities can be carried out without a license unless such activities are subject to licensing. Where a licence is not required, an undertaking must comply with the Telecommunications Rules.

Furthermore, according to the Radio Frequency Law it is necessary to obtain a separate license for the use of radio frequencies for telecommunication activities for those undertakings which use radio frequency spectrum. Such license is issued for particular bands and channels of radio frequencies in specific regions or cities. The issuance of radio frequency license is subject to the availability of radio frequencies resource. A license is awarded on a competitive basis if the requested demand for the frequency spectrum exceeds its availability. The allocation of frequency spectrum is carried out in accordance with the Frequency Plan, which provides for a distinction between mobile, fixed and satellite usage. In particular, the Frequency Plan specifies which spectrum is allotted for which radio devices. In addition, a permit for the utilization of radio, electronic and transmitting devices and documents proving electronic compatibility of radio devices are also required. Pursuant to the recent amendments, if an undertaking imports radio electronic and transmitting devices, it must obtain a permit for such importing activities.

Conveyance services over the internet

It should be noted that Ukrainian legislation does not specifically regulate conveyance services over internet. However, such services fall under the general regulatory regime of the Telecommunications Law and the Telecommunications Rules. Under Ukrainian law, operators or providers are not liable for content carried over their networks. As a general rule, a person who is the owner of the content shall bear responsibility for such information, however no precedents have been established in this respect. Telecommunication operators and/or internet service providers in Ukraine are under no obligation to assist content owners whose rights may be infringed by means of file-sharing or other activities. Besides, liability of operators and providers is also excluded in case of direct or indirect losses incurred by their customers or third parties in connection with the use of internet.

New services

We expect further growth in the Ukrainian telecom market, mostly by offering new products to consumers based on digital data services. One of the most anticipated projects is the launch of mass-scale mobile banking and TV-based digital paid services. Given that currently there is a substantial gap in the regulation of these areas, it is very likely that we will see new pieces of the respective legislation in Ukraine soon.

Nazar Chernyavsky is a partner at Ukrainian law firm Sayenko Kharenko and specialises in banking, capital markets and secured and structured finance. Contact: [email protected]