Satellite licensee impact evaluated

Background of KDB¡¯s acquisition of business license:

Members of the screening committee seem to have judged that Korea Digital Satellite Broadcasting (KDB) is superior to Korea Satellite Broadcasting (KSB) in securing the capital, technology and image contents of Korea Telecom and ground wave broadcasting companies. It seems that they made a judgment that the strong man is safe in order to settle the satellite broadcasting business with opaque futures at an earlier date possible and avoid repeating the failure of the cable TV.

In particular, KDB proved to be the best in the financial capability of the six screening fields. It seems to be influenced by the recent downgrade in the credit rating of corporate bonds floated by Dacom, which leads KSB as a subsidiary of LG Group. At the public hearings Dec. 7, a participant pointed out, ¡°What is LG¡¯s measure to mobilize several hundreds of billions won required in the future?¡±

Controversial points in the process of screening:

The broadcasting committee said on the screening process that as 14 members screened in the thorough security, there was no room for lobbying or the government¡¯s exercise of its influence.

However, some pointed out that 250 out of the possible 1,000 points were available for the measurement and that the declination among screening judges was severe in many fields. Namely, they say, the possibility is high that the rosy blueprint has earned better marks than the business plan with high potential to be realized according to the judges¡¯ biased views.

In its business plan, actually, KDB said it would supply an enormous volume of receivers valued at 270,000 won on average to consumers free of charge or at a price of 150,000 won (12-month installment basis) and record net profits within 5 years. On the KDB project, however, many pointed out that it has less possibility to be realized.

Impact of KDB selection:

Korea Telecom has been entitled to lead the fusion of broadcasting and telecommunications. However, it is a concern that Korea Telecom, which already has raised several questions as a giant public corporation, has captured an initiative to lead the domestic new media market. The issue on the separation and disposal of the giant Korea Telecom in the process of privatizing it in March next year also has emerged as a new problem to be solved.

As KBS, MBC and SBS have consolidated their monopoly and oligopoly structure in the satellite broadcasting market, following the ground-wave broadcasting, the imbalance in the domestic broadcasting market is feared to be accelerated further. In the channel operation, KBS, MBC and SBS urgently have insisted upon so-called profit-generating channels such as drama and sports. Accordingly, program suppliers of cable TV in relatively poor surroundings are expected to face difficulties in the future.

In case that ground-wave broadcasting companies, including KBS, operate satellite broadcasting business simultaneously, they might be negligent in the satellite broadcasting business with relatively low profits, resulting in the fall in the quality of the satellite broadcasting programs. In that case, viewers are expected to look away from the satellite broadcasting, critics pointed out.

Along with this, KDB said it plans to commercialize 74 channels and begin service in October next year. How to compose the contents in each channel is also another problem to be solved.

Heo Yeub heo@donga.com