Wednesday, February 18, 2009

Local Loop Unbundling (LLU) in South Korea

An interesting article in The Korea Times  describes how rivals, especially SK Telecom are not happy about KT's proposed merger with KTF, the country's number two mobile operator.   KTF has a 32 percent market share in mobile and rivals claim that consolidation with its fixed-line parent would threaten the health of competition in the wireless market.  KT, suffering from declining voice business in recent years, counters that absorbing KTF is the only way it can stay competitive, now that its public-switched telephone network (PSTN) services have been exposed as a decaying business model.
Both the Korea Communications Commission, the country's broadcasting and telecommunications regulator and the Korea Fair Trade Commission, are reported to be leaning toward approval of the KT-KTF merger.  KT has the largest network infrastructure in the country, but it points out that its network is already open through local loop unbundling (LLU).  LLU is the regulatory process of allowing multiple telecommunications operators to use connections from the telephone exchange's central office to the customers premises.  The physical wire connection between customer and company is known as the "local loop."
Reportedly, rival companies have requested access to KT's phone lines in only 145 cases over the past eight years, as they also have the option of borrowing facilities from the Korea Electric Power Corporation and cable system operators.  According to Lee Hyung-hee, director of SK Telecoms CR strategy division, "KT rejected about 86 percent of the requests by SK Broadband to use its network, so it is hard to say that the LLU is working."  

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