Abstract
Toward an Integration of Cable System Operator and Network Operator in Korean Cable TV Industry
- Focusing on Recent Restructuring Processes -
By Eun-Ki Cho
This article addresses current issues of Korean cable TV Industry going through revolutionary restructuring processes, in particular with an emphasis on Integration of cable system operator(SO) and network operator(NO). Inefficiency due to 'triple system' separating Korean cable industry into three distinct business sectors, SO, NO, and PP can not be remedied without full understanding about inherent characteristics of cable TV business in order to maximize revenue per subscriber.
Market strategies for increasing rate of return on investment(ROI) are strictly limited under the existing system, which divests an inventor(NO) of the right to sell final cable TV services(SO). Empirical data identifying no relationship between home-passed rate and subscription rate in Korean cable TV Industry obviously shows that unavoidable inefficiency stems from disintegration of SO and NO. In addition, the integration of SO and NO is necessary to introduce competition in Korean cable TV Industry separated into two different markets, broadband cable TV and primitive CATV.
The problems associated with KT(Korea Telecom) and KEPCO(Korea Electric Power Corporation)'s exit from NO business bring new policy challenge, in particular as to how to adequately transfer existing facilities to the third party. General theories of franchise bidding express that individual(ism level sales should not be justified because those kinds of sales are likely to unfairly exploit economic rents which are not attributable to physical facility values, but rather to the values from subscribers and franchise area.
Alternatives could he found in that government takes over KT and KEPCO's facilities at equitable prices, and then resells those to potential efficient users with competitive auction system. For the policy objective of integration of SO and NO, it could be considered that auction design contains a provision to enforce an winner to undertake SO's assets with properly evaluated market price if the winner is not SO. It could be also suggested that the logic of universal service funding(USF) in telecommunications can be applied to subsidize the areas incurring high cost in wiring cable. Finally, it should be noted that really effective competition in local telephone market would be more likely to happen with the advent of cable system operators providing local telephone service.
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