Korean Universal Service Obligation (USO) Korean Universal Service Obligation (USO) Korean Universal Service Obligation (USO) Korean Universal Service Obligation (USO) in in in in the the the the AllAllAllAll----IP EraIP EraIP EraIP EraEUNEUNEUNEUN----A PARK, A PARK, A PARK, A PARK, Ph.D.Ph.D.Ph.D.Ph.D.

UNIVERSITY OF NEW HAVENUNIVERSITY OF NEW HAVENUNIVERSITY OF NEW HAVENUNIVERSITY OF NEW HAVEN

PACIF IC TELECOMMUNICATIONS COUNCIL ANNUAL CONFERENCE, 2016

Environmental Change

Figure 1: A simplified ICT Ecosystem model

(Martin Fransman, 2010)

World Internet Subscribers (ITU, 2014)

Telecommunications revenue (% GDP)

S. Korea United States U.K. France OECD

Average

Germany

All IP Network: From Vertical Silos to Horizontal Structure

Sabella (2007)

Past: One network for

Each service/deviceFuture: Common net for all

Services/devices: services independent

of connectivity & control

South Korea: Saturated Market and Paradigm Shift

Telecom Usage Behavior Changes

Wired/wireless communication

(Voice)SNS, Apps on Smartphones

(Data)

- Phenomenal growth in services (LTE mobile phones, VoIP, value added services and content, MIM, mVoIP)

4G LTE & Smartphone Madness (Korea Communication Review Q3 2015)

Stagnating Basic Telecoms, Emerging New Services

Source) KISDI (2014)

Unit) Trillion Won (KRW)

1st 2nd 6th

Wired

(60 calls)Iceland Norway … S. Korea …

OECD

Average

$10.8 $14.7 $26.8 $33.9

1st 2nd 16th

Mobile

(100 calls,

500 MB)Austria Estonia … S. Korea …

OECD

Average

$29.9 $33.2

1st 2nd 3rd 4th

Broadban

d

(54 GB,

>45

Mbps)

S. Korea Slovakia Hungary Japan …OECD

Average

$29.9 $41.0

1st S. Korea 4.28%

2nd Mexico 4.24%

3rd Netherland 4.10%

4th Israel 4.00%

5th Hungary 3.74%

…

OECD Average 2.63%

Communication expenses

(% of household budget)Price ranking (USD PPP)

KISDI (2014)

Affordable Prices – Relatively Low

Outstanding Network Quality � Emergence of Korea as a leader in broadband and telecommunications (OECD Broadband Rankings, 2014)

� 1ST in FTTH deployment

� The Giga Internet Era began

KISDI (2014)

Universal Service Structure-Transition from direct support by the government to indirect support through the collaboration of public and private sectors (next two slides)

-Common carriers: carriers with over 30 billion won revenue

◦ Required KT to upgrade networks in high cost areas in compensation for its privatization in 2002

◦ Required SK the same obligation in 2008 in compensation for allowing SK’s acquisition of HanaroTelecom.

- Major M&As resulted in triangular competition between KT, SK, LG.

- Korea’s “Guidelines on Net Neutrality and Internet Traffic Management”, published in December 2011

- Unveiled its plan for building the IoT with the aim of launching a hyper-connected “digital revolution” to address policy goals (Feb., 2014)

Universal Service Policy Changes

1993-1998 1998-2003 2003-2008 2008-2013

Network policy

Broadband network deployment

Broadband Convergence Network

(BcN) deployment

Ultra-Broadband

Convergence Network

(UBcN) deployment

Laws Framework Act on Informatization PromotionFramework Act on

National Informatization

Principal Agents,

strategies

Government’s leadership, direct

support

Public-private partnership, indirect

support

Universal Service Policy Changes (Cont.)1993-1998 1998-2003 2003-2008 2008-2013

Telephone WiredPublic enterprise’s

investment

Private investment + Loss

compensation system

Wireless Private investment

Backbone networks

(Government

support)

Cost offset

deposit*

(1996-2005)

Private investment

Subscriber networks Private investment

Rural areasPublic enterprise’s

investmentMatching funds + Loan support

Others Temporary Investment tax credits (~2011), tax support

*: The government invested first in network deployment, and later offset against the governmental usage of the networks.

Government Actively Leads- Active government initiatives facilitated rapid development of infrastructure

- Mostly focus on the deployment of FTTx

- Government subsidies for subscriber networks in rural and remote areas:

◦ Matching funds: central government, local government, and carriers, 1:1:2 respectively

◦ Loan support – KT’s broadband network deployment until 2008 when the goal is accomplished (99.7% of rural households).

- Reducing subsidies in lucrative urban areas and increasing support in rural areas since 2000.

-Combining universal service with the welfare programs: actively subsidizing the disabled, seniors, veterans and low income for telephone, mobile phone and broadband access

-Discussion transitioning from Digital Divide to Smart Divide

Effects of Rural Broadband Deployment (2008)

58.3

39.7

2005 2009

Rural Digital Divide Index

23%

36.20%

2005 2009

Rural Internet Usage (%)

DTV/DMB – Video Service for All - Digital Multimedia Broadcasting (DMB): free and universally available, uses the broadcasting network.

-DMB coverage 84% (97% for the capital region)

- June 2014: DMB app users 29% of the whole population

- Korea uses DMB technology, which has become entrenched as a universal service thanks to the rapid diffusion of mobile devices.

Conclusion-Universal service ≠ Universal access to telecommunicaQons infrastructure

-Universal service = Basic 3 tenets: Availability, affordability, accessibility. E.g., free emergency calls, affordable telephone/mobile/Internet services for the disabled and the underprivileged, the public phone network, etc.

-The universal service obligation (USO) discussion has been fading in South Korea

-The universal service debate evolving into FTTx, mobile, DTV/DMB, IoT, etc.

ReferencesFransman, M. (2010), The New ICT Ecosystem. Cambridge University Press.

OECD (2015), OECD Digital Economy Outlook 2015, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/9789264232440-en

KISDI (2014). A study on reforming regulatory frameworks of the telecommunications business reflecting the development of ICT ecosystems and the migration into all-IP networks. Retrieved from http://www.kisdi.re.kr (Korean)

KISDI (2012). ICT Masterplan policy advice for strategic partnership countries (III). Retrieved from http://www.kisdi.re.kr (Korean)

Etnews (Jan. 29, 2015).DMB, 지난해월평균 1180만이용자기록···최다이용방송앱등극. Retrieved from http://www.etnews.com/20150129000208