Regulations on the Dominant IT Companies

Ministry of Information and Communication will strengthen regulations on the dominant IT service providers, such as Korea Telecom and SK Telecom in order to reorganize telecommunications industry.

Information and Communication Minister Yang Seung-Taik said yesterday at the press conference that ‘The government will step up asymmetric regulations which will limit the dominant companies’ market share rate for the establishment of the three-way competition system in the fixed-line and wireless telecommunications industry’. Minister Yang said that the government would carry out this regulation despite potential side effect.

The regulation is based on the plan that will secure a certain market share rate to other companies, while lowering the market share rate of the dominant service providers, Korea Telecom and SK Telecom. Therefore, it is viewed that competitiveness of LG Telecom, Dacom, and Hanaro Telecom will improved. However, both SK Telecom and Korea Telecom are oppose to this regulation by saying that ‘It is contrary to the market principle’. The market share rate for Korea Telecom is 90 percent (local 98.2 percent, long-distance 87.2 percent) in the fixed-line telecommunication industry. SK Telecom’s market share rate is 52 % in the wireless telecommunication industry.

Minister Yang said that ‘After deciding a desirable market share structure in each business field, the government will implement asymmetric regulations. The concrete plan will be open to the public when the three-way competition system is confirmed after synchronous-mode IMT-2000 operator is selected’. He also added that ‘Because asymmetric regulations that had been used in the past have not been affective, the government will make the necessary adjustments to create a functioning model.

However, Economics professor Kim Sang-Taek from Ewha Women’s University said that ‘There is a danger in the government’s artificial market involvement despite its intention to create a fair competition and to prevent dominance by a few service providers’.

In fact, Ministry of Information and Communication’s plan was made on the basis of LG’s demand to secure the business under the condition of synchronous-mode IMT-2000 business. Therefore, it was predicted that the process of selecting synchronous transmission business provider would be quicker. Minister Yang indicated that the government would support LG’s synchronous-mode business by saying that ‘With its 10 MHz spectrum, LG cannot compete with SK Telecom, which owns more than a 40 MHz spectrum’.

Minister Yang also indicated a possibility to regulate SK Telecom’s market share rate after July by saying that ‘Regulations on the second generation mobile market will be necessary.’ Ministry of Information and Communication announced that there were other regulations, such as connection fee and service fee regulation, in relation to the asymmetric regulations.

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