Telecom Market Liberalization
& Market Entry
ITU Regional Regulatory Seminar
5~8 August 2002, Dalian, China
LEE Kijoo
Director of Planning, Telecom Policy Bureau
Ministry of Information & Communication, Korea
AGENDA
I. History of Market Liberalization
II. Current Licensing Regime
III. Market Access for Foreign Investments
IV. Results of Liberalization
V. Policy Direction
VI. Lessons from Korea’s Experience
2
I. History of Market Liberalization
3
1. Specialization by Service : 1980s
v
Priority : Provision of Basic Telephony Service
Ø
Ø
Ø
Construction of Basic Telecom Network
Separation of Operation from Government
Specialization by Service
v
Market Entry : Designation
v
Monopoly in Each Service (Specialization)
Ø
Ø
Ø
Ø
v
Korea Telecom : wired (’82)
Korea Mobile Telecom : wireless (’84)
Korea Data Comm : value-added (’82)
Korea Port Telephone (’88)
1 Line/1 Household (10 mil lines) : Sep 1987
4
2. Introduction of Competition : 1990s
v Gradual Introduction of Competition
Ø Completion of Building Basic Telecom Network
Ø Globalization of Telecom Market
v Market Entry (Facilities-Based)
Ø 1991~1994 : Designation, Licensing
Ø 1995 ~1997 : Licensing (Prior Notification)
Ø 1998 ~ present : Licensing (Open)
v New Entry
Ø
Ø
Ø
Ø
International (3) : Dacom (’91), Onse (’97)
Long Distance (3) : Dacom (’95), Onse (’99)
Mobile (5) : Shinsegi (’94), 3 PCS (’96)
Local (2) : Hanaro (’99)
5
3. Effective Competition : 2000~present
v Establishment of Full Competition
Ø Market Restructuring : M&As
v New Entry
Ø IMT-2000 (3) : KT ICOM (00), SK IMT (00), LGT (01)
Ø Leased Line (14) : Hanaro (00), Dream Line (00)
SIT (00), Thrunet (00), Daehan L3 (01)
v New Regulatory Framework
Ø
Ø
Ø
Ø
Ø
Price Regulation
Local Loop Unbundling
Number Portability
Interconnection & Access Charge
Accounting System
6
II. Current Licensing Regime
v
Relevant Laws
Ø
Ø
v
Telecom Business ACT (Article 4)
Notification on Licensing Criteria and Procedures
for Facilities-based Telecom Service Provider
Application
2/year : 3.25~3.31, 9.25~9.30
Ø Application Form, Business Plan, Technology
Development Plan, etc
Ø
Decision on Feasibility of Licensing
Based on Public Interest, Laws and Regulations,
Availability of Spectrum
Ø Notification : 4.30, 10.31
Ø
8
v
Licensing Procedure
Ø
Phase I : Qualification, Business Plan
§ Foreign Ownership (up to 49%)
§ 60 pts/Criterion(financial & technical capability,
user protection), 70 pts on Average
Ø
Phase II : Spectrum Fee
Notification of Selection
Ø
v
6.30, 12.31
Issue of License
Ø
Registration of Corporation, Deposit of Capital,
Deposit of Spectrum Fee, etc., according to
relevant laws
9
III. Market Access for Foreign
Investments
10
v Fulfillment of Commitment to WTO Agreement
3 months~2years ahead of Schedule
Before 1998
KT
Limitation
on
Aggregate
Foreign
Ownership Other Carriers
WTO Commitments
(1997.2.15)
Currently
20% from 1998
33% from July 1998
33% from 2001
49% from April 2001
33% from1998
33% from 1998
49% from 2001
49% from July 1999
3% from 1998
15% from 1999
Prohibited
Wired:Prohibited
Wireless:33%
KT
1%(only Koreans)
Limitation on
Individual
Wired: 10%
Ownership Other Carriers
Wireless: 33%
No limits from 1999
No limits from 1999
KT
Largest
Foreign
Shareholder Other Carriers
Prohibited
Prohibited
Prohibited
Prohibited
Permitted from1999
Permitted from 1999
Voice Resale
Foreign
ownership on
Resale
Others
Prohibited
49% from 1999
100% from 2001
49% from 1999
100% from 2001
No limits
100% from 1998
100% from 1998
11
IV. Results of Liberalization
1. Overview
v
KT Monopoly to Full Competition (2001)
Ø
Ø
Facilities-based operators : 34
Non-Facilities-based operators
§
Ø
Ø
Special : 314, Value-added : 2,877
Users : 16 mil (’91) Ù 53 mil (’97) Ù116 mil
Revenues : 4.5 tril won (’91) Ù 32 tril won (US$ 25 bil)
Consumer Benefits & Effects
Ø
Wide Usage of New Services & Market Growth
Ø
Improved Services, Lower Tariffs
Ø
Development and Export of Core Technology
Ø
Building Infra for Information Society
13
v
Market Status (Facilities-based, Dec 2001)
Ø
Number of Operators : 34
§
Ø
Revenues : 27 trillion won (US$ 21 bil)
§
Ø
Local, Long Distance, International, Leased Line, Cellular,
PCS, GMPCS, TRS, Paging, Wireless Data, B-WLL, IMT-2000
Wired 12 tril won, wireless 15 tril won
Market Share
Local (2)
KT (97%)
Hanaro (3%)
Long Distance (3)
KT (85%)
Dacom (11%)
Onse (4%)
International (3)
KT (51%)
Dacom (30%)
Onse (19%)
Leased Line (14)
KT (67%)
PowerComm (10%)
Others (23%)
Broadband (7)
KT (50%)
Hanaro (26%)
Others (24%)
Mobile (3)
SKT (52%)
KTF (33%)
LGT (15%)
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2. Growth of Telecom Service Marekt
v Rapid Growth of Revenues Following the
Introduction of Competition
3500
000 person
10 billion won 3000
2500
2000
1500
1000
500
0
facilities-based service
resale service
value-added service
total
year
1991
446
7
453
1993
589
18
607
1995
803
36
839
1997
1291
99
1390
1998
1393
5
109
1507
1999
1612
27
183
1822
2000
2195
83
257
2535
2001
2720
109
375
3204
15
3. Growth of Mobile Telecom Service
v 32 mil Subscribers in Jun 2002 (65% of pop)
Subscribers
Penetration Rate
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
1995 1996 1997 1998 1999 2000 2001
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vSuccess Factors
Ø High Competition
Ø Low Tariff and Subscription Cost
Ø Core Technology Development Driven by
Government & Telecom Operators
§ TDX, CDMA, Handsets
17
4. Leader in CDMA Market
v
World First Commercialization of CDMA
Ø
v
Most Advanced Technology
World First Commercial IMT-2000 Service
Ø
cdma2000-1x (144Kbps) from Oct 2000
§ 10 mil subscribers by Jun 2002
Ø
cdma2000-1x EV-DO from Feb 2002
§ 20,000 Subscribers as of Jun 2002
18
5. Growth of Broadband Internet
v
8.7 mil Households Jun 2002 (60%)
Ø
7.8 mil Subscribers, 2.2 tril won in 2001
8,000
6,000
4,000
2,000
Jun- 9 9 Dec- 99 Jun- 00 Dec- 00 Jun- 01 Dec- 01
Broadband Internet Subscribers
19
v
Success Factors
Ø
Ø
Ø
Ø
Ø
v
High Internet Penetration (25.7 mil users, Jun 2002)
High Population Density In Urban Area
High Market Competition (7 operators)
Low ADSL Installation Cost
Government Role
§ Low Tariff Policy
§ Informatization Promotion Policy
Successful Business Model for Worldwide
Telephone Service Providers
20
V. Policy Direction
21
1. Changes in Market Environment
v
New Players & Heated Competition
Ø
Ø
Ø
Lower Efficiency in Resources Use
Stronger Market Power thru M&As
Transfer of Market Power to New Market
Full Privatization of KT in Jun 2002
Ø
Strong Market Power in wired Market
Emergence of New Services
Ø
Convergence of wired & wireless, voice &
data, telecom & broadcasting
22
2. Improving Licensing Regime
v
Strengthening Competition Analysis
Ø
Frequency, Licensing Criteria, Evaluation Method
Closer Examination on M&As and New Entry
Ø
Ø
v
Evaluation on Restriction of Competition
Imposition of Conditions for Fair Competition and
User Protection
Licensing Policy for New Services
Ø
Integrated Wired-Wireless Service, TelecomBroadcasting Convergence Service, Power Line
Telecom Service, etc.
23
3. Tasks for Effective Competition
v
Strengthening Korea Communication
Commission
v
Local Loop Unbundling
Ø
Introduction of Open Access in 2002
Number Portability
Ø
Ø
Local : Second Half of 2003
Mobile : 3G Ù 2G
Interconnection & Access Charge
Ø
Long-Run Incremental Cost Method
v
Price Regulation
v
Accounting System
24
VI. Lessons from Korea’s
Experience
25
v
Importance of Government Role
Ø
Ø
Ø
Construction of the Basic Telecom Infra
Gradual Introduction of Competition
Revision of Laws & System
Major Policies
Ø
Ø
Ø
Ø
Localization of Major Technology
Expansion of Network Capacity
Mass Demand & Supply
Low Tariff
Effective Competition
Ø
Ø
Ø
Experience in Mobile & Broadband
Privatization of State-owned Enterprise
Renewal of Regulatory Framework
26
Thank you.
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