Competitive rivalry, inter-modal competition and market performance in the Korean cable television markets: An empirical analysis

Abstract

This study consists of two empirical analyses regarding the state of competition in the Korean cable television (CATV) markets. In the first analysis, this study provides empirical evidence regarding the effects of intra-modal competition within the CATV markets and inter-modal competition from direct broadcast satellite (DBS) on market performance in the CATV industry prior to the introduction of internet protocol television (IPTV). The empirical results described herein demonstrate that intra-modal competition between two cable operators in the same franchise area tended to reduce both cable prices and operator profits, and to increase the CATV penetration rate. The strong presence of a DBS was concomitant with reductions in a cable operator's profitability and cable subscriptions. The second part of this study attempts to briefly describe the state of competition in the CATV industry for the post-IPTV period. The results demonstrate that IPTV experienced a rapid growth in its subscriptions, which exerted competitive pressures on cable prices. That is, IPTV is emerging as a close substitute for CATV shortly after its introduction. Considering the significant inter-modal competition that exists between cable and telecom operators, the results of this study indicates that a regulator should focus its policies on promoting this inter-modal competition.