Korean telecom regulatory framework modified

Changes to convert from license to registration system, and eliminate ceiling on foreign ownership, set to take effect in summer 2019

Amended statute includes extraterritoriality clause

Following on draft legislation first introduced in March 2018 (as reported and summarized in our newsletter at the time), the National Assembly on December 7, 2018 passed amendments to the Telecommunications Business Act (TBA) that will relax and simplify the regulatory framework. The amended statute, which largely tracks the draft version unveiled in March, will probably take effect in the summer of 2019 (that is, 6 months after promulgation, which should come by end of 2018).

Under the impending new rules, what was formerly a fairly demanding, time-consuming license regime for “core” telecom enterprises (owning their own lines, cable landing stations or other facilities) will be replaced by a simpler “registration” process. Related substantive requirements may be modified, but this point must await further regulation, starting with a Presidential Enforcement Decree that should follow at some point in the first half of 2019.

Moreover, while there has been in place a 49% ceiling on foreign ownership in “core” telecom enterprises, this 49% limitation is eliminated (foreign ownership as such is unrestricted) under the new rules – except in the case of some class of “large scale” operators as to which important “public interests” are deemed to be at stake. Criteria for those enterprises, which will remain subject to the 49% foreign ownership ceiling, are to be later specified by regulation. It seems likely they will include at least KT and other major telecoms.

Existing rules distinguish core telecom enterprises from “special category telecom” (SCT) businesses, which use leased facilities and are already subject to a relatively straightforward registration process. Under the new rules, SCT businesses will be folded into the (broadened) class of core telecom enterprises, but, in order to engage in core type business, they will need to effect a change in registration.

The amended TBA will also clarify that enterprises primarily engaged in business other than telecom but that sell (in their own name) goods or services incorporating telecom-enabled components, such as “connected” vehicles and appliances, will not be required to obtain a license or registration, and must merely file a report of core telecom business.

The amended statute contains an extraterritoriality provision: The TBA will apply also to conduct occurring overseas, if it has an impact on the market or on users in Korea. How this rather vague clause might be construed and enforced in practice remains to be seen.