IT in Korea
Privatization and Deregulation
Market Liberalization and Deregulation.
In Korea, especially, regulations and restrictions
to telecommunication businesses ( voice and cellular service providers)
are significantly deregulated and the telecommunication industry is getting
more liberalized than ever.
Like many other countries in the past, telecommunications
was generally viewed as either a natural monopoly or a social good, and
managed by government agency called a PTT (Public Telephone and Telegraph)
in Korea. However, Korean government has realized that liberalization
and deregulation are necessary to cope with the current economic difficulties.
The government has reformed in every sector of telecommunication industry
by abolishing laws and regulations that are inconsistency with the
international norms and promoting competition in the industry.
In 1996, the government granted 27 new companies
licenses to do business in 7 telecommunication sectors, bringing to 40
companies engaged in telecommunication business. In addition,
the government revised the Telecommunications Business Act, and announced
market competition into all sectors of the telecommunication industry in
1997. With an effort of the government to provide a fair competition
environment, almost all telecommunication services' tariffs don't need
to be approved by the government. The revised Telecommunication Business
Act allows firms to change tariffs without approval from the government
except for Korea Telecom (KT)'s local telephone service and SK Telecom's
cellular service. [16]
According to the Ministry of Information and Communication,
182 rules and regulation (53.2%) have abolished and 70 rules and regulations
(20.5%) will be improved within the 342 rules and regulations[17].
This means that 73.7% of the existing regulations and rules have been abolished
and will be changed. The government's liberalization of the telecommunication
industry is a part of a long term policy to make Korea a global telecommunications
hub.
Market Competition
Until 1991, Korea Telecom (KT) was the only one local,
long distance, and international call services provider in Korea.
In 1991, the international telephone service market was opened to other
domestic carriers, and the DACOM jumped into the market. Five years
after, the long distance telephone service market was also opened to other
domestic carriers.
Currently, KT and DACOM are providing long distance
and international call services. In the wireless service sector,
the market was monopolized by Korea Mobile Telecommunications Corporation
until other cellular service providers jumped into the market.
Table 1. Domestic Telephone Service
Providers
|
Communication Type
|
Service Classification
|
Service Provider
|
|
Wired
|
Long Distance Call Services
|
KT
DACOM
Onse Telecom
|
| |
International Phone Call Services
|
KT
DACOM
Onse Telecom
|
|
Wireless
|
Cellular Phone Services
|
SK Telecom
Shinsegi Telecom
|
| |
Personal Communication Services (PCS)
|
Hantong Freetel
Hansol PCS
LG Telecom
|
| |
CT-2
|
KT
|
Foreign Ownership.
After the WTO/GBT negotiations, the Korea government
submitted its final schedule for the liberalization of the basic telecommunications
market in 1997.
Until 1998, foreign ownership of wireless services
is limited to 33% of total shares and wired services is prohibited.
However, the government allowed foreign ownership for wired services in
1998 and will increase to 49% in 2001. Also, the foreign ownership
ceiling of wireless services will be increased from 33% to 49% in 2001[18].
Table 2. Foreign
Ownership Ceiling for Domestic Common Carriers.
|
Wired Service |
Wireless Service |
| Until 1998 |
Prohibited |
33% |
| From 1998 |
33% |
33% |
| From 2001 |
49% |
49% |
After 1999, foreigners are allowed to become
the largest shareholders of domestic telecommunications
firms except for the KT. Also, foreigners are allowed to become CEOs
of domestic telecommunications firms [19].
This report was completed in December
1999 for the class
Impacts of National Information Technology
Environments on Business
taught in the program of the MOGIT
(Management of Global Information Technology)
at the
Kogod School of Business at American
University in Washington, D.C.
