U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

investment (FDI) in facilities-based telecommunication-services firms to 49 percent of total
voting shares. 59 The provisions of the FTA, however, remove this restriction, allowing
100 percent foreign ownership 2 years after the FTA enters into force. 60 Although high levels
of competition, the maturation of important market segments (box 4.4), and FTA exclusions
pertaining to mobile services 61 and nonfacilities-based service providers 62 may deter U.S.
firms from entering the domestic Korean market and/or impair the ability of U.S. firms to
offer telecommunication services to residential and/or corporate customers within Korea, the
FTA’s investment provisions would likely benefit U.S. firms seeking to offer international
corporate data, virtual private network, and Internet Protocol-based corporate customers in
Korea.
The telecommunication provisions of the U.S.-Korea FTA would likely have minimal impact
on U.S. cross-border imports of telecommunication services, largely due to already high
levels of price competition for voice telephone services between the United States and
Korea. Efforts by the FCC to reduce accounting rates may have contributed to the decline
in per minute prices during the years 2001 to 2005. Overall, U.S. imports of
telecommunication services were relatively small, totaling $74 million, or 2 percent of total
telecommunications exports, in 2005. 63 The FTA would likely have minimal impact on the
entry of Korean telecommunication firms into the U.S. market, or the sales of existing
Korean subsidiaries in the United States, due largely to the existing regulatory openness of
the U.S. telecommunication services market. For example, Korean operator SK Telecom
currently offers wireless service in the United States via Helio, a mobile virtual network
operator (MVNO) 64 established as a 50/50 joint venture with U.S. Internet firm Earthlink. 65
High levels of competition in the U.S. telecommunication services market and several FTA
exclusions pertaining to mobile services operators 66 in the United States may deter additional
market entry by Korean telecommunication services firms.
59 USFCS, “Doing Business in Korea: A Country Commercial Guide for U.S. Companies,” 2005, 88; EIU,
“Country Commerce: South Korea,” July 2006, 117; and USTR, “Korea,” 2007 National Trade Estimate
Report on Foreign Trade Barriers, April 2, 2007, 367.
60 At the end of 2005, foreign ownership in Korea’s major fixed-line telecommunication services firms
included 5 percent in Dacom, 46 percent in KT, and 48 percent in Hanaro Telecom. In the wireless sector,
foreign ownership stood at 22.5 percent in KT Freetel, 27 percent in LG Telecom, and 49 percent in SK
Telecom. EIU, “Country Commerce: South Korea,” July 2006, 118.
61 In Korea, commercial mobile services are not subject to commitments related to major suppliers,
services resale, network unbundling, leased circuits, colocation, and access to poles, ducts, conduits, and
rights-of-way.
62 In Korea, commitments related to network unbundling, interconnection, leased circuits, submarine cable
access, colocation, and access to poles, ducts, conduits, and rights-of-way do not apply to non-facilities based
providers.
63 USDOC, BEA, Survey of Current Business, October 2006.
64 MVNOs typically do not own spectrum allocation or telecommunication network facilities. As a result,
MVNOs typically resell the wireless services of established mobile services providers. Helio, for example,
leases network capacity from Verizon Wireless and Sprint Nextel.
65 Krause, “Amp'd Mobile Bankruptcy Casts Shadow on MVNOs,” June 6, 2007; Nam, “Helio's Losses
To Widen This Year-SK Telecom,” February 7, 2007; Kawaguchi, “Telecommunications: Wireless-Asia,”
April 2007, 12; and Tae-gyu, “Telecom Operators Set Eyes on Overseas Markets,” July 29, 2007.
66 In the United States, commercial mobile services are not subject to commitments related to dialing
parity, major suppliers, services resale, and access to poles, ducts, conduits, and rights-of-way.
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