Regulatory Reforms in Telecom Services. - Korean Experience -

Transcription

1 Regulatory Reforms in Telecom Services - Korean Experience Chong Hoon Park KISDI 0

2 Table of Contents 1. Introduction 2. Characteristics of Regulatory Reforms 3. Responding to the Challenges 4. Lessons 5. Conclusion 1

3 Table of Contents 1. Introduction 2. Characteristics of Regulatory Reforms 3. Responding to the Challenges 4. Lessons 5. Conclusion 2

4 Industry Performance (I) Teledensity (1980~2001) Broadband Penetration Ratio Unit: per 100 person USA UK m ƒ Unit: per 100 person SUP[S 50 Japan B wuc UPT 40 Korea lƒ ƒ RP[V 10 wm RPTZ Source : ITU(2001) R T V X Z SR ST SV SX Source : ITU(2001) 3

5 Industry Performance (II) Worldwide Cellular/PCS Ranking Worldwide Handset Market Share No. Country No. of Subscribers (thousand) Penetration (%) 1 China 144, USA 127, Japan 72, Germany 56, LG Electronics 3% Others 22% Nokia 34% 5 Italy 48, United 6 47, Kingdom Sony 7 France 35, Ericsson Motorola 6% 8 Korea 29, % Siemens Samsung 9% 10% Source : ITU (2002) Source :Gartner,

6 Different Approach / Same Principle Deregulation Methods Same Principle Early Liberalization and Privatization - Privatize the incumbent early - Full competition in early stage - ex: USA, UK Progressive Liberalization and Privatiz ation - Pursue liberalization and protection of incumbent - Step-wise Liberalization - ex: Korea, Singapore, Japan Late Liberalization and Privatization - Secure the competitiveness of incumbent - Set up the privatization date - Progressive Liberalization - ex : Germany, France Separation of Service operator fro m the government Paradigm Shift from monopoly to C ompetition Anti-competitive Safeguards Consumer Protection Universal Service 5

7 Table of Contents 1. Introduction 2. Characteristics of Regulatory Reforms 3. Responding to the Challenges 4. Lessons 5. Conclusion 6

8 Textbook Approach Privatization Liberalization Deregulation ½ Establishment of KTA(1981) ½ Separation of specialized serv ice operators from KTA - Dacom (1982) - Korea Mobile Telecom (1983) - Korea Port Telephone (1995) ½ Privatization of KMT(1994) ½ Privatization Act (1997) ½ Full Privatization (2002) ½ Gradual introduction of competi tion in basic telecom service - International(1991) - Long-Distance (1995) - Mobile(1994) - Local Service(1999) ½ Full liberalization of value-added service(1990) ½ Resale(1997) ½ Foreign Ownership Limit up to 4 9% including KT (2001) ½ Interconnection Regulation ½ Licensing Framework ½ Price Regulation ½ Carrier Pre-selection (1997) 7

9 Facility-based Competition Competition Network Build out Korea Approach Network Sharing enhance s the service competition but reduces the incentive of network build-out. Introduce network sharing meas ure such as LLU after witnessing the effective competition in netw ork. Ex: PCS License, Classify the broadband as value-added service 8

10 Regulations on Demand Characteristics ½ Essential Facility/ Vertical Integration ½ Large Sunk Cost ½ Entry Barrier (Economy of Scal e, Spectrum Scarcity) ½ Lock-in, Tipping ½ Tariff Regulation ½ Interconnection Regulation ½ Spectrum Management, Number Allocation, Rights of Way ½ Incentive Regulation ½Bp BBBgš ƒž ½Bw ƒžbu ½Be ˆŽ B ˆBk ½Be Br Effective Competition Universal Service, Consumer Protection 9

11 Virtuous Cycle Increase in number of mobile telephone subscribers Low Ta riff Improvement in service quality High Compet ition Action taken ½ Development of Digital Switch Exchange ½ Selecting CDMA for 2G Standard Low Subscription costs & R&D Support ½ Dual Standards for 3G ½ R&D Support Increase in handset demand 10

12 Table of Contents 1. Introduction 2. Characteristics of Regulatory Reforms 3. Responding to the Challenges 4. Lessons 5. Conclusion 11

13 Effective Competition Telecom Market Structure (End of 2001) Actions Taken Local Long-distanc e KT (96.8%) Hanaro (3.12%) KT (85%) Dacom (11%) Onse (4%) ½LLU (2001) - finalized the details of the obligation and a relevant pricing scheme International KT (46.4%) Dacom (25.4%) Onse (8.7%) ½Number Portability Leased Line KT (66.7%) Others (33. 3%) - local telephony (2003) Broadband (7) KT (50%) Hanaro (25%) Others (25%) - Wireless (3G service) Wireless (3) SKT (52.3%) KTF (33.3%) LGT (14.7%) ½LRIC (2004) 12

14 Incentive Regulation Competition Investment Incentive Actions Taken ½ Privatization Act (1997) - remove the government influence o n procurement, business plan and Asymmetric nature of regul ations for the effective comp etition reduces investment i ncentive. business function ½ Tariff Deregulation - Continuous tariff deregulation - Plan to implement Price Cap on loc al Telephony(2001) 13

15 Conflict of Interests Challenges Actions Taken ½ Conflicts between operators and manufacturers ½ Dual Policy Objectives - possibility of government inf luence on operators - market inefficiency ½ Eliminate lump-sum contri bution(2002) ½ Reduce the annual contribu tion to 0.5% ½ Strengthening the KCC s fu nction and independence 14

16 Digitization and Convergence Challenges Actions Taken ½ Balance between business oppor tunity and Anti-competitive beh avior ½ Consumer Welfare ½ Dual regulatory structure for the same service ½ Classification of new service s based on Telecom Busines s Act ½ Allow the cross entry ½ Safeguards for the dominant player 15

17 Table of Contents 1. Introduction 2. Characteristics of Regulatory Reforms 3. Responding to the Challenges 4. Lessons 5. Conclusion 16

18 Lessons Lessons ½ Textbook Approach ½ Facility- based competition ½ Concrete Competitive Safeguards ½ Responds to environmental changes ½ Following the international standards 17

19 Table of Contents 1. Introduction 2. Characteristics of Regulatory Reforms 3. Responding to the Challenges 4. Lessons 5. Conclusion 18

20 Conclusion Vision MKT Opening Safeguards Consumer Protection MKT Evolution ½ Licensing ½ Tariff ½Incentive Regulation ½ Foreign ownership ½ Vertical integration ½ Interconnection ½ Number Portability ½ Pre-selection ½ Universal Service ½ Service Quality ½Convergence (Telecom and Broadcasting) ½Network Integration (Fixed line and wireless) Regulatory Reform 19

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