[South Korea] Amendments to Korean telecom license framework taking shape

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  • Legislators
    have put forward an advanced draft of amendments to the Telecommunications
    Business Act, Korea’s main telecom statute.

  • The draft amendments, proposed on March 29,
    2018, would finalize changes anticipated since August 2017, so as to relax
    license requirements and foreign ownership restrictions for telecom carriers.

  • Amendments
    seem likely to pass within 2018, with effect 6 months following passage.

  • Various
    standards will depend on further regulations, for which Ministry drafting is
    expected in coming months.

In follow-up to tentative rule
changes announced by the government in August 2017, Korean lawmakers have proposed
significant amendments to the Telecommunications Business Act (TBA) that would
ease a number of important requirements for the conduct of telecom-related
services. Mainly espousing draft rule changes that were unveiled by the Korean
Ministry of Science & ICT (MSIT) in August 2017,
the proposal would convert the existing license requirement for “core”
businesses (owning lines, cable landing stations or other telecom facilities)
into a simpler registration process – basically collapsing it into the existing
system for facility-leasing telecom service providers. The amendments will also
newly permit 50%+ foreign ownership of telecom “core” businesses, except for
some threshold of “large-scale” operators (to be better defined in ensuing

Differing from the original
government plan unveiled last August, however, the current bill would exclude a
requirement upon telecoms, including mobile and other carriers meeting some
threshold, to implement a reduced rate structure. This
controversial part of the plan as of August 2017 had evidently held up progress
on the wider package of amendments, and has been dropped in the current

Sponsored by a group of ruling
party lawmakers, the current bill seems likely to pass, pretty much intact, by
some time in 3Q or in 4Q 2018, though this is uncertain. If passed late this
year, the amendments to the TBA would normally take effect around 6 months
after promulgation, thus possibly around mid-2019.

Following are highlights of the
proposed amendments, generally coinciding with the MSIT plan of August 2017,
aside from the jettisoning of the concept of the reduced telecom rate


Changeover to registration
instead of license regime

the bill, “core” telecom enterprises that use their own (self-owned) telecom
lines and facilities to offer telecom services, sometimes termed common
carriers) would be subject to a simplified registration procedure, as applies
currently to telecom services that use leased facilities , “special category telecom” or
secondary businesses). “Telecom services” means broadly any service for
transmitting sound, images or other data, unmodified, including internet
connectivity as well as mobile and landline phone.

the current TBA, a core business, such as a line operator or mobile carrier,
must get a license from the MSIT, which is a relatively challenging process involving
broad agency discretion and typically 2 to 6 months for review. In contrast, a
secondary business, such as a mobile virtual network operator, requires only a
registration with the MSIT, which involves simpler requirements with little
scope for agency discretion, and 1 to 2 months of processing.

the bill, telecom core businesses, like secondary businesses, will require a
registration, rather than a license. This involves a variety of substantive
criteria, but it should be straightforward in terms of agency process. With
this collapse into a registration-only system, a number of requisites will
likely be modified. For example, the range for capitalization requirements
(varying with the scale of business) in the current registration system may change.
However, in overall structure, the registration system will resemble the
existing one for secondary businesses.


Majority foreign ownership to be
permitted, with exception for “large scale” operators

bill would generally allow 50% or more foreign ownership even in core
(facility-owning) telecom businesses, as well as secondary businesses (which
are already open to majority foreign ownership). However, this would be subject
to constraint in the case of “large scale” core enterprises.

present, aggregate foreign ownership in core enterprises (such as KT, SK
Telecom and other such carriers) is generally capped at 49%, while there is no
such cap for secondary businesses. However, companies headquartered in Korea
free trade agreement (FTA) counterparty jurisdictions, such as the US and EU,
are permitted to hold over 49% in core enterprises indirectly, through a Korean
subsidiary, so long as the subsidiary is seen by the MSIT to satisfy “public
interest”, in terms of data security, consumer interests and so forth.

pending bill will eliminate the 49% foreign ownership ceiling, across the
unified registration-only system (core and secondary enterprises), except in
the case of a category of “large scale” telecom businesses. This restricted
“large scale” category corresponds to what were major core businesses, and will
probably include the likes of KT, SK Telecom and LG Uplus. However, the present
bill (like the August 2017 plan) does not include specific criteria for the
restricted category; these will have to await a later Presidential decree.

the FTA situation, under the bill (as under the existing rules),
US-headquartered and other FTA-covered companies could own 50%+ of any telecom
business in Korea, through a local subsidiary. However, in the case of a “large
scale” target, this would be subject to satisfying the “public interest”


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