On November 10, 1987, at the same time that the government repealed the Basic Press Law, the National Assembly enacted new legislation for the broadcast media and amended the Korea Broadcasting System Law. This legislation established a broadcast committee that would ensure that radio and television stations were managed in the public interest. This committee began operating on August 3, 1988. The committee founded the Seoul Broadcasting System as a privately owned broadcast corporation, bringing Korea’s broadcast industry into a period of dual structure of private and public ownership (Won 219). Legislation also worked further to keep broadcasting monopoly from occurring through the Broadcast Culture Promotion Association which made the environment better for other companies to open up. Thus, government has created a more open environment for other media companies to start business.
Effects of “Freedom of the Press”
With the change in media consumers, from the elite to the general public, and from the general population to the specialists, there has been a trend toward specialization. The trend leads to a specialization according to ideology, political learning, specific consumer state, or outlook on the news. This environment for a “free-press” leads to a wider variety of news, opening up new avenues to express more opinions and more viewpoints in a wider scope. This broadens audience knowledge.
CHAPTER 3:
Present State of Telecommunications in Korea
At present, Korea has 20 million lines with 17 million subscribers which adds up to 42.6 lines per 100 people. The number of cellular mobile phone subscribers amounts to 785,000 lines and paging service numbers reach almost 5.5 million (Apt 338). There are some 285,000 public payphones in the country and coin operated units are being replaced with cardphones.
As a result, Korea now has one of the largest telecommunications networks in Asia and is the world’s eight ranking nation in terms of the number of telephones installed.
In 1984, Korea successfully developed the TDX-AA, a domestically developed digital electronic switching system, becoming the 10th nation to develop native switching system. Enhanced systems like the TDX-1B and TDX-10 followed shortly after. In particular, the TDX-10 system which has a capacity of 100,000 circuits and high interoperability, enabled the installation of a large quantity of telecommunication lines.
Currently, Korea deploys about seven million lines with this TDX system, and exports this system to various countries. Now Direct Distance Dialing (DDD), long-distance service and international telephone services are available anywhere in the country, including rural and remote area.
Other services currently available to Korea are E-mail, voice mail, electronic data interchange, on-line data retrieval and database processing, code and protocol change, and enhanced facsimile services.
Presently, KTA is developing the HiTEL data communications retrieval service allowing information to be retrieved by personal computer or HiTEL terminal and facsimile machine for graphics, from various databases covering many subjects. Some 35,000 users are currently linked to this system. In 1993, KTA’s HiNET-P service was expanded to become a national packet switching service offering a Korean interface. A packet leased line service is available plus dial-up database access. A HiNET-C service has also been expanded to become a national service. Value-added services currently offered by KTA include voice information, voice mail, E-mail, Hi-FAX facsimile and HiVICON domestic conferencing, launched in 1993. KTA is also involved in the R-J-K submarine cable project linking Korea, Japan, and Russia, that was due for completion in 1995. KTA is also a part of the Asia-Pacific Cable Network (APCN) project to connect ten Asian countries.
Satellites
Korea has now been investing in satellite communications. Satellites provide clear and direct connections whether it be for telephones or radio and television broadcasting. Thus, the satellite would be a major forward move into the future for telecommunications. Specifically satellite can be used for long-distance telephone calls, for sending television signals to remote areas in the country, for facsimile transmission of documents that become increasingly important as Korea’s business community continues to expand, for video conferencing, for electronic banking, for electronic classroom instruction, and for sending FM radio programs all over Korea (Lee et.al, 1). These man-made satellites can also be used by the military for defense purposes. Furthermore, a communication satellite will enable Korea to gain instant access to information from other nations, thus narrowing the information gap existing between it and more highly developed countries (Lee et.al 1). Thus, the satellite would actually keep Korea up-to-date on technology and aid Korea in keeping a competitive edge in telecommunications as well as in other social and economical areas. Hence, with the many uses of the satellite, Korea has began its investment for the future.
Korea already receives international maritime satellite communications services among navigation vessels or vessel-to-land communications through the INMARSAT-F3 satellite through its earth station which was completed in December 1990. Since 1989 MOC has considered launching geostationary satellites. In 1992, KTA signed a satellite purchase contract with GE which would be assigned to Martin Marietta, and a launching service contract with McDonnell Douglas for launching two “MUGUNGWHA” satellites with the capability of 3,900 communications circuits, 3 video channels, and 3 broadcasting channels in April and October 1995. As a preliminary step to acquiring satellite operating techniques and creating demands for satellite communications services before the operation of the satellites, KTA leased one set of 72 MHz-level Ku-Band transponders form INTELSAT for five years that began in April 1992. Since September 1992, KTA has been providing VSAT services through the INTELSAT satellites. Furthermore, in August 1992, the Korea Advanced Institute of Science and Technology successfully launched a 50Kg-level scientific experiment satellite, named KITSAT, through Arianespace. Planned satellite services include trunk relay for public telephony, high speed data, VSAT, DAMA/SCPC rural public voice/data, and direct TV broadcasting (Chung 66).
CHAPTER 4:
Government Policies
The Telecommunications Basic Law and Public Telecommunication Business Law was amended and the Korea Communication Commission was established to secure fair competition, protect subscriber rights and decide on important telecommunications policies. Korea’s closed market system has been changing to a more open market system. The Korean government has liberalized its regulations on foreign investment and government procurement. The regulatory framework for telecommunications service providers are governed by the Basic Telecommunications Law and the Public Telecommunications Business Law. Under these two laws, the Korean telecommunications service providers are divided into two main categories: network service providers and value added service providers. Network Service Providers are telecommunications service providers who construct or own their own circuits and transmission facilities and must abide by common-carrier obligations, such as universal service. Value Added Service Providers are telecommunication service providers who lease telecommunications circuits from network service providers and use them to provide their services.
Network Service Providers are divided into two categories: General Service Providers, which own nation-wide telecommunications facilities, and specific service providers, whose service provision is limited to the geographically or technically limited sectors, such as mobile telecommunications services.
General Service Providers can provide any or all of the following services upon designation of the MOC: voice telecommunications, telex, lease circuits, lease equipment, telegram, data communications, facsimile, and other miscellaneous services. Specific Service Providers can provide any or all of the following services upon license from the MOC: mobile voice telecommunications, paging, port telecommunications, airport telecommunications, trunk radio communications, wireless data communications, and other miscellaneous services.
On the other hand, Value Added Service Providers can provide the following services upon registration with the MOC: on-line database and remote computing services, computer communications services, data transmission services except voice telephony, telex and facsimile services. Only domestic on-line database and remote computing services do not require registration with the MOC. According to the “Understanding”, policies which were signed by the Korean government, the value added services are defined as “any serviced offered over the telecommunications transmission facilities of General Service Providers which employ such computer processing applications as: conversion of content, code, protocol or similar aspects of a subscriber’s transmitted information, provision of additional, different or restructured information, and computer processing involving a subscriber’s interaction with stored information” (Jeong 4). The Understanding also illustrates the examples of value added services as follows: code or format conversion, protocol conversions, store and forward, facsimile communications which involve store and forward or one of the functions listed above, database, remote computer service, electronic mail, electronic data interchange, message handling service, value-added facsimile service and voice mail.
Business Sectors Open to Foreign Investment
With the enactment of the Basic Telecommunications Law and the Public Telecommunications Basic Law, KTA and DACCA has provided only data communications, lease circuit, and international voice telecommunications services. For any additional services, MOC approval is required. General Service Providers are closed to foreign investment. In addition, no one shareholder may hold more than 10 percent equity interest in General Service Provider companies. Equipment manufacturers are not allowed to own more than a 3 percent equity interest in General Service Provider companies.
Also under the Basic Telecommunications Law and the Public Telecommunications Basic Law, three Korean telecommunications companies, KMTC, KPTC, and KOTIS were licensed as Special Service Providers. Special Service Providers are open to one-third foreign investment. In addition no one shareholder, domestic or foreign, may hold more than a one-third equity interest in any Special Service Provider company. No one equipment manufacturer or government-invested enterprise may hold more than 10 percent equity interest in Special Service Provider company.
In August 1992, the MOC initially issued a preliminary license for mobile telephone services as a competitor of the Special Service company, KMTC. For the license, six consortia associated with eleven foreign concerns such as GTE, Hutchison, Bodafone, Bell Atlantic, U.S. West, Southwestern Bell, Swedish Telecom, Qualcom, Pactel, Mannesmann, Nynex and BT. Since the selected consortium returned the license to the MOC because of political turmoil involving the selected licensee, the MOC will issue another request for proposal within this year. At the same time as the selection of the licensee for mobile telephone services, nine preliminary licenses for regional paging services were issued to nine consortia out of forty-one. Although foreign investment is allowed, no significant foreign service concerns were involved with the forty-one consortia except Millicom.
As of February 1992, there exists 30 value added providers, 13 of which are joint venture companies. AT&T, IBM, EDS, and AMCOR from the United States maintain a minority interest in their joint ventures with Korean partners. Out of 30, only 4 Value Added Service Providers are registered to provide international value and services. These companies are Asiana Air, STM (joint venture between Goldstar and EDS), SDS (joint venture between Samsung and IBM), and Trans World Net (Joint venture with Global Communications).
In contrast to the telecommunications services, foreign investment in manufacturing telecommunications equipment may be freely made without any restrictions on foreign equity ratio, etc. For example, Motorola has maintained a wholly-owned subsidiary for manufacturing equipment in Korea. Such investment, however, must pass through the Ministry of Finance (MOF) approval process under the Foreign Capital Inducement Law (FCIL) that is generally applicable.
One issue related to the value added services is shared use of leased circuits. Currently, while the shared use of Network Service Providers’ domestic leased circuits for data communications is permitted without any restriction on the relationship among the users, the shared use of Value Added Service Providers’ domestic leased circuits for voice communications, international leased circuits for voice communications, and international leased circuits for data communications is permitted only within the group of entities which maintains a close business relationship. The scope of close business relationship includes affiliates with 30 percent equity interest and business partners which account for 20 percent of the total value of transactions. Users of Network Service Providers’ services within the same close business relationship are free to attach exchange equipment. Currently only one end of a domestic leased circuit for data communications is currently allowed to be connected with the public Network Service Provider network.
Requirements for Joint Venture
Like any foreign investment in Korea, a foreign investor must obtain approval from or file a notification with the Ministry of Finance and the Foreign Capital Inducement Law. More specifically, foreign investment for those industrial sectors on the negative list or which are subject to local equity participation requirements need approval from the Ministry of Finance. For such approval, a foreign investor must submit a detailed business plan and a joint venture agreement. The business plan must state the marketing plan, the financial plan and other prescribed items. The joint venture agreement should provide the rights and obligations of each party to the joint venture.
If the amount of investment is three million U.S. dollars or more, the joint venture agreement will be reviewed by the Korean Fair Trade Commission to determine whether it contains any unfair provisions according to the Anti-monopoly and Fair Trade Law. The following terms will be regarded as unfair trade practices: “the joint venture company is unreasonably required to purchase raw materials, parts, equipment, related goods, etc., from the foreign investor or its designee; the joint venture company is prohibited from, or is required to obtain prior approval for exporting any product it manufactures to areas other than those were the foreign investor is engaged in ordinary sales activities or those where the foreign investor has granted exclusive sales rights to a third party; the joint venture company is required to export any product it manufactures only through the foreign investor or its designee, except where the foreign investor or its designee assumes an obligation to accept such product at internationally reasonable prices and conditions at the appropriate time; and in light of the generally accepted practices in international agreements of this nature, the contractual conditions are unreasonably disadvantageous to the domestic investor (Jeong 6). The Korean Fair Trade Commission might regard as unfair such provisions where a foreign investor elects directors in excess of the equity ratio or a foreign investor has the tie-breaking vote in a 50/50 joint venture. The minimum amount of foreign investment is 50 million Korean won (approximately U.S. $60,000). With Ministry of Finance approval, a foreign investor can incorporate a joint venture company in accordance with the Korean Commercial Code.
A joint venture company establishing itself as a value added service provider must register with the Value Added Service Providers by satisfying several requirements under the Telecommunications Business Law. These requirements are as follows: “the financial requirement – the minimum capital is 50 million won;telecommunications facilities requirement – maintenance of certain major telecommunications facilities and satisfaction of the safety and reliability standards; and technical capability requirement – retention of a minimum of two technicians (Jeong 6). Along with an application form, the documentation for registration is limited to those to confirm the above. A registered Value Added Service Provider must notify the MOC of standardized contracts with the customers. An interconnection with networks of Value Added Services’ required a notification to the MOC. Interconnection between a Value Added Service Provider’s network and a Network Service Provider’s network would be governed by a standardized contract of the Network Service Provider. Where no standardized contract of an Network Service Provider is available for the type of interconnection requested by a Value Service Provider, a special interconnection agreement may be made subject to the approval of the MOC. Furthermore, operating agreements between a registered Value Added Service Program in Korea and service providers in a foreign country are subject to MOC approval.