Effective Competition, Administrative Guidance, and Collusion in the Telecommunications Sector

Abstract

The regulatory authority of the telecommunications sector in Korea has typically employed explicit or implicit administrative guidance as a means of effective competition. This paper critically reviews an administrative guidance of the Ministry of Information and Communications (the regulatory authority for the telecommunications sector until 2007) through the Korea Fair Trade Commission case of KT Hanaro Telecomm in the fixed-line telecommunications service market. Our analysis indicates that empirical evidence does not support the concerns that motivated the administrative guidance. Instead, it turned out to facilitate collusion between the dominant firm and a fledgling competitor. We suggest an alternative pro-competitive policy that provides a level playing field to fledgling competitors from the beginning and regulates predatory pricing and collusion.