Market Barriers for Communications

How many mobiles operators does Korea have? Three: SK Telecom, Korea Telecom and LG Telecom. This could change this year, however. A much-rumored fourth operator is expected to be born, one which does not require its own network like the three companies. The revision of the Telecommunications Business Act at the end of February helped the creation of a mobile virtual network operator, or one allocated with WiBro frequencies. The Korea Communications Standards Commission said, “Anyone who is qualified to pay money for using frequencies can become the fourth operator.”

In the past, entering the communications industry in any country required enormous capital expenditures and business rights. Now, an entrepreneur with strategies and ideas that can enter a niche market can borrow a network. This is a mobile virtual network operator system that mandates mobile companies to lend the network to such entrepreneurs at a wholesale price. The system was first introduced in Norway in 1997 and accounts for five to 10 percent of the market in Europe and North America. A good example is Virgin Mobile, a company led by the freaky CEO Richard Branson, who is known for “fun management.”

Korea Information Strategy Development Institute said the entry barriers to the Korean communications market must be lowered in line with the convergence of communications services. This reflects fears over competition among the three mobile operators as a result of M&As. A non-communications operator used to rely on large communication operators by supplying devices or contents to them. Apple broke that system. Like Apple, anybody can find a profit source with new services searching for customers around the world. Lower entry barriers will promote competition in the communications market and create more innovative entrepreneurs.

In December last year, the commission portended the change of policy in line with the integration of wired and wireless and convergence of broadcasting and communications. Effective competition policy is in place, putting stricter regulations on SK Telecom, the frontrunner, to help KT and LG Telecom survive on their own. According to the new policy, the government will regulate the three independent mobile operators to a similar degree and support latecomers. The commission’s new policies, however, need to be directed in the way that significantly lowers the entry barrier for latecomers.

Editorial Writer Hong Kwon-hee (konihong@donga.com)