11

The unfulfilled promise of Korean telecommunications reform

Christopher S. Yoo


Introduction

The deployment of telecommunications services in Korea represents one of the great technological success stories of the developing world. As recently as 1980, telephone service was available in only 21 percent of all Korean households. By 1990, household penetration had reached 90 percent, the benchmark established by the International Telecommunications Union (ITU) for determining which countries are "universally served." Similar advances have occurred in wireless telephony, which has skyrocketed from a household penetration rate of less than 4 percent in 1997 to nearly 80 percent in 2002. Internet usage has witnessed comparable gains. In 1997, only 1.6 percent of all inhabitants had used the Internet. By 2002, Internet use had soared to 55 percent, the third highest penetration rate in the world. Perhaps most strikingly, Korea has emerged as the world's undisputed leader in broadband communications. By 2002, 78 percent of Internet households (which amounts to 43 percent of all Korean households) had been connected to the Internet through some type of broadband technology. This exceeds the penetration rates achieved by the US and Japan by more than three times, and that achieved by the next closest country by nearly 50 percent. The history of Korean telecommunications thus provides a useful case study for other developing countries seeking to expand and modernize their telecommunications infrastructures. Of special interest is the active role that the Korean government has played in guiding all sectors of the economy and the particular attention given to high-tech industries.

At first blush, the explosive growth of telecommunications services in Korea has appeared to go hand in hand with the emergence of competition in the field. A review of the history of telecommunications reform reveals that the relationship between competition and the deployment of communications technologies is not as straightforward as many surmise. Although Korea took steps toward liberalizing its telecommunications market, culminating with the substantial reforms announced in 1995, since then it has allowed the industry to engage in a disturbing degree of

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