MEMO #4

The Korean telecommunication service market can be explained by three distinct stages. It includes industry creation in the 1980s, liberalization of the voice services market throughout the 1990s, and the emergence of data services with the advent of the information society in the new millennium [1].

In this memo, I will focus on 1990's liberalization of Korean telecommunications with a little regarding the industry's creation in the 1980's.

In the 1980's, the telecommunication goals for Korea was to construct a nationwide telecommunications infrastructure and to guarantee universal access to basic telephony service for the general public [2].

The Korea Telecom Authority (now KT) was established in 1981 to ensure that the goals were managed more efficiently. Finally, in 1988 Korea attained their telecommunication goals, thereby ushering the telecommunications industry into the age of "one telephone per household" [3].

The introduction of telecommunications liberalization in the 1990's grew more intense in the latter half of this period. In the 1990's, the markets that were the first to open up to competition were international and long-distance services with the entrance of Dacom (1992, 1996) and Onse (1997, 1999) [4]. Competition was unilateral in the sense that these companies had no other means of direct access to households other than providing services through KT’s network. After the first phase of telecommunications liberalization in Korea, competition moved to the mobile services market. According to the Korean goverment's annual statistics, the leader of the mobile services market has been SK Telecom since 1984, and it has been followed by late comers, such as Shinsegi Telecom in 1996 and three PCS (personal communications service) providers, including Korea Telecom Freetel, LG Telecom, and Hansol M.Com in 1997. As a result of the liberalization of telecommunications in Korea, the mobile facility-based service providers have grown enough to be on equal footing with KT in size, outperforming their number of subscriptions by September 1999 [5]. Finally, in 1988, Korea removed the foreign entry barrier that limited ownership in domestic mobile facility-based service providers, and also opened a door to foreign voice resellers, classified as special service providers in response to Korea's WTO agreement [6].

The WTO (World Trade Organization) strongly affected the liberalization of Korean telecommunications. The foreign entry barrier relating to telecommunications was gradually removed in response to strong pressure in during trade negotiations, such as the USTR (1989), UR (1994) and WTO (1997). In particular, the WTO negotiations on basic telecommunications opened up the Korean telecommunications market [7]. In fact, the WTO negotiation agreement brought major changes in the regulatory structure of Korean telecommunications, including the lifting of foreign entry barriers, correcting market distortion in local service, implementing competitive safeguards such as interconnection and parity in dialing, introducing a consumer-oriented service quality monitoring system and market-driven reshuffling of the industry.

In conclusion, liberalization of telecommunications in Korea was strongly affected by reformation effort of Korean government and WTO negotiation agreement, and it is successful so far. Because of liberalization, there has been an influx of foreign investment and the development of domestic competition leading to much expanded telecommunications services.

Reference

[1] Korea Information Society Development Institute. "Paradigm Shift in the Telecom Industry and Korea's Regulatory Reform" by Nae-Chan Lee.

Internet: http://www.kisdi.re.kr/advertise/pdf/1201-3.PDF, [Feb. 8, 2007]

[2] Korea Information Society Development Institute. "Paradigm Shift in the Telecom Industry and Korea's Regulatory Reform" by Nae-Chan Lee.

Internet: http://www.kisdi.re.kr/advertise/pdf/1201-3.PDF, [Feb. 8, 2007]

[3] Korea Information Society Development Institute. "Paradigm Shift in the Telecom Industry and Korea's Regulatory Reform" by Nae-Chan Lee.

Internet: http://www.kisdi.re.kr/advertise/pdf/1201-3.PDF, [Feb. 8, 2007]

[4] Korea Information Society Development Institute. "Paradigm Shift in the Telecom Industry and Korea's Regulatory Reform" by Nae-Chan Lee.

Internet: http://www.kisdi.re.kr/advertise/pdf/1201-3.PDF, [Feb. 8, 2007]

[5] Korea Information Society Development Institute. "Paradigm Shift in the Telecom Industry and Korea's Regulatory Reform" by Nae-Chan Lee.

Internet: http://www.kisdi.re.kr/advertise/pdf/1201-3.PDF, [Feb. 8, 2007]

[6] Korea Information Society Development Institute. "Paradigm Shift in the Telecom Industry and Korea's Regulatory Reform" by Nae-Chan Lee.

Internet: http://www.kisdi.re.kr/advertise/pdf/1201-3.PDF, [Feb. 8, 2007]

[7] Korea Information Society Development Institute. "Paradigm Shift in the Telecom Industry and Korea's Regulatory Reform" by Nae-Chan Lee.

Internet: http://www.kisdi.re.kr/advertise/pdf/1201-3.PDF, [Feb. 8, 2007]