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Liberalization and Deregulation Summary The development of the Korean telecommunication services market can be divided into three distinct states: industry creation in the 1980s; full-blown competition in the voice services market throughout the 1990s; the emergence of data services with the advent of the information society in the new millennium. Like many developed nations, the telecommunication industry in Korea is significantly liberalized already. As a result, the cost of telecommuting is going down. However as the telecommunication industry is shifting from voice to data, the Korean government is now facing more challenges to effectively help deregulate data sector of telecommunication industry to make it more competitive.
Beginning in the 1980's, the policy goals for Korea was to construct the nationwide telecommunications infrastructure and to guarantee universal access to basic telephony service for the general public. During this period, Korea Telecom Authority (now KT) was established in 1981 to ensure that these goals are managed more efficiently. Also, in this period, the market entry was held back so what economies of scale could be fully enjoyed and local charges were set far below costs for public interest and the resulting deficits were cross subsidized by the high-profit sector. In 1988, Korea had attained these goals.
The telecommunications market in the 1990's was characterized by the introduction of competition that grew more intense in the latter half of this period. The regulatory regime in this period underwent major changes by 1) lifting foreign entry barriers and introducing resellers, 2) correcting market distortion in local service, 3) implementing competitive safeguards such as interconnection and parity in dialing, 4) introducing consumer-oriented service quality monitoring system, and 5) market-driven reshuffling for the industry. The changes in the regulatory structure were the result of several different influences. The foreign entry barrier was gradually removed in response to strong pressure by trade negotiations such as the USTR (1989), UR (1994), and WTO (1997), in particular the WTO negotiations on basic telecommunications to open up the telecommunications market. The impact of foreign ownership on related industries was estimated AT USD 320 million in 1998 and USD 548 million (USD 1 =KRW 1,300) in 1999 [12]. In addition, the ceiling for domestic FSPs ownership, including KT, was lifted voluntarily in order to attract foreign investment during the Asian Financial Crisis and to speed up the privatization process of KT. The markets that were the first to open up to competition were international and long-distance services with the entrance of Dacom and Onse. Competition was unilateral in a sense that these companies had no other means of direct access to households other than providing services through KT's network. As the wireless channels replaced the local loop, competition moved to the mobile services market. The leader in this market since 1984 is SK Telecom (SKT), followed by late comers such as Shinsegi (STI) in 1996 and three PCS providers, Korea Telecom Freetel (KTF), LG Telecom (LGT), and Hansol M.Com (HMC) in 1997. The mobile facility-based service providers (FSPs) have grown enough to be on equal footing with KT in size outperforming the number of subscriptions by September 1999. Furthermore, with the increases in off-net calls, the reciprocity between fixed and mobile network has become greatly intensified.
Now at the beginning of the new millennium, the market is shifting from voice to data. High-bandwidth Internet services with ADSL and Cable modem utilizing existing local loop and cable television networks is rapidly expanding throughout Korea. In this market, there are seven competitors (KT, Hanaro, Thrunet, Dreamline, Dacom, Onse, and SKT), which are leveling out the playing field by offering high-bandwidth services. The demand for high-speed Internet services has reached more than 3 million subscribers [12] as of October 2000, recording the highest teledensity in the world. Mobile FSPs are also quickly evolving towards data service. The rapid growth in wireless Internet, a transient service of IMT-2000, using mobile networks that were originally to be constructed for vice service, now amounts to 12 million [12], as of October 2000. From 1999 to 2000, the mobile service market has been reshaped with three groups: SKT and STI; KTF and Hansol M.Com; and LGT. Now the regulatory regime is shifting to issues that the market itself is unable to address. For example, there is a concern of bridging the widening digital divide, i.e. guaranteeing universal access to information for the under-served areas and the socially under-privileged rather than the general public. On the demand side, Korean government manifested strategy in Cyber Korea 21 of providing easy access to the Internet through community access centers, provisions of affordable PCs, and IT training and education for low-income households, students, senior citizens, agricultural workers, housewives, and the disabled. On the supply side, KT's local loop opened to ISPs by the end of 2000. Powercomm, a subsidiary of Korea Electric Public Corporation, will voluntarily open its Cable networks that have been leased by other FSPs by exclusive contracts to the ISPs. |
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