Introducing Competition into Broadcasting Industry

Suil Lee

Background and Purpose Traditionally, the competition in the broadcasting industry in Korea has been strictly regulated under the initiative for ‘public interest in broadcasting’, which calls for proper representation of the media, program diversity, and national identity. However, the convergence between the broadcasting and telecommunications sector in terms of technology, service, and business, which has progressed since the early 1990s, has been putting significant competitive pressure on the broadcasting industry. This structural change has put the traditional regulatory structure of the broadcasting industry in question. In addition, the efforts of rebalancing the traditional policy objective o‘f securing public interest of broadcasting’with a newly rising policy objective of‘ enhancing social welfare by introducing or revitalizing competition’have been observed in foreign countries, in particular, the European Union. Reflecting this trend, the report analyzes the market structure and the current competitive situation of free-to-air television market and pay television market. Moreover, the study also investigates whether regulations directly related to the current competition structure of each market can be justified from the perspective of the above mentioned two policy objectives. Finally, this paper offers several policy recommendations to enhance market competition in the broadcasting industry. Main Results Free-to-air TV advertising market in Korea can be characterized as KOBACO (Korea Broadcasting Advertising Corporation) system, in which the total amount of advertising time allowed to free-to-air TV broadcasters must be sold through a monopolistic media representative (i.e. KOBACO) and advertising prices are also regulated by KOBACO. This report analyzes the market structure and competition of three different markets (free-to-air TV advertising market, audience market, and independent TV production market), and shows that competition in all three markets is severely limited by the KOBACO system, in particular, by the price regulation. Then, the report identifies several issues of‘ public interest’thought to be pursued by the KOBACO system and explains that the system has fundamental problems such as a mismatch between regulatory goal and regulatory means in pursuing those public interests. Based on the analysis of the regulatory regime in the free-to-air TV market, this study argues for the dissolution of the KOBACO system and makes an alternative plan for introducing competition into the free-to-air TV advertising market. Three main contents of the alternative plan are as follows: ⅰ) Each free-to-air TV broadcaster should be allowed to choose a way to sell its advertising time, and then each free-to-air TV broadcaster can sell its advertising time by either organizing an internal sales department by setting up a subsidiary media representative, or through an independent media representative; ⅱ) advertising prices should not be determined by regulation but by demand and supply in the free-to-air TV advertising market; and ⅲ) KOBACO needs to continue to act as a media representative for KBS2 and EBS for the next two or three years and thereafter it is desirable to privatize KOBACO. The market structure of pay TV is very different from that of the free-to-air TV in a sense that the function of packaging program contents are in a bundle or a channel. The function of delivering channels to audience are structurally separated in the pay TV market whereas the two functions are internally integrated in the free-to-air market. The former function is performed by program providers (PPs) and the latter is performed by platform operators such as system operators (SOs) in pay TV. There exists a programming distribution market where PPs and platform operators transact channels, which does not exist in the free-to-air TV market. In Korea, most SOs are monopolist in their respective chartered broadcasting area, and the paper shows in detail that this feature is a critical factor hampering the growth of the pay TV market, since it enables monopolistic SOs to conduct anti-competitive behaviors in the programming distribution market and audience market. However‘, public interest of broadcasting’directly related to this delayed competition on the platform level, that is, the ‘realization of localism’seems to be an unrealistic objective to pursue in the pay TV market. Therefore, it is necessary to give up the pursuit of‘ realization of localism’and revitalize competition on the platform level for enhancing social welfare. The paper suggests the following three policy directions for the competition on the platform level: ⅰ) To put competitive pressure on the incumbent monopolistic platform operators, the entry of additional platform operator, IPTV, (Internet Protocol TV) into the market as soon as possible by revising the current broadcasting law;ⅱ) in order to mitigate the opposition from existing platform operators against the introduction of IPTV and ease the entry of IPTV operators into the market, the present regulation on horizontal merger between SOs should be alleviated. Also, its criterion should be based on the total number of subscribers, and not on the amount of revenue or the number of chartered areas; and ⅲ) the current regulation which prohibits KT (Korea Telecom), a market dominant player in the telecommunications sector, from bundling telecommunication goods and services, needs to be softened to make a level playing field with the incumbent SOs. Conclusion This report analyzes the market structure and competition environment of the free-toair TV market and the pay TV market and identifies critical regulations causing the delayed competition in each market. Then, the report evaluates those regulations from the perspective of two policy objectives: Securing public interest of broadcasting and enhancing social welfare by encouraging competition. It shows that the current regulations responsible for the retarded competition in the broadcasting industry cannot be justified even from the perspective o‘f securing public interest of broadcasting’. Considering this evaluation result, it is necessary to abrogate or amend the current regulations and devise appropriate ways to introduce competition into the broadcasting industry. The paper suggests several policy directions to revitalize competition in the free-to-air TV and the pay TV market.

요 약

제1장 서 론

제2장 우리나라 방송산업의 현황
제1절 유료방송시장의 양적 성장
제2절 지상파방송사의 시장지배력 유지
1. 지상파방송사의 방송프로그램 제작시장 지배
2. 방송프로그램의 유통이 지상파방송사 내부로 제약

제3장 지상파방송시장의 경쟁 활성화
제1절 지상파방송시장의 구조와 경쟁현황
1. 지상파방송광고시장의 구조와 현황
2. 지상파방송광고시장의 문제점
제2절 지상파방송광고시장의 경쟁 도입
1. 방송광고시장의 경쟁 도입과 관련된 기존의 논의
2. 지상파방송광고시장의 경쟁 도입을 위한 방안
3. 경쟁 도입에 따라 예상되는 부작용에 대한 검토

제4장 유료방송시장의 경쟁 활성화
제1절 유료방송시장의 구조와 경쟁현황
1. 플랫폼 단위에서의 경쟁현황
2. 플랫폼 단위에서의 경쟁 지체로 인한 문제점
제2절 플랫폼 단위에서의 경쟁 활성화
1. IPTV의 조기 도입
2. 유료방송시장의 겸영규제 완화
3. 결합판매규제 완화

제5장 분석의 종합 및 결론

참고문헌

보론