Barriers to Entry Analysis of Broadband Multiple Platforms: Comparing the U.S. and South Korea

Abstract

This paper compares barriers to entry in the broadband markets between the U.S. and South Korea. First, it explores economic conceptions of barriers to entry from the economics literature. Second, it speculates on how the conception of barriers to entry has been dealt with in the telecommunications industry. It clarifies the various industrial factors that could prevent, or make it difficult, to successfully enter the residential telecommunications market. Third, it introduces an analytical framework that can be adopted for evaluating the barriers to entry. Fourth, employing that framework, it examines the broadband markets in the U.S. and in South Korea, focusing on barriers to entry in multiple broadband access platforms. Both the U.S. and South Korea have shown greater barriers to entry in wireline broadband markets such as cable modem and DSL compared to wireless broadband when it comes to a facilities-based entry. South Korea has offered more opportunity to non-dominant ISPs as new entrants and thus, has been able to facilitate more vibrant competition nationwide. This paper concludes with an analysis of the barriers to entry for alternative broadband access platforms in residential high speed Internet services, more specifically, wireless access technologies, including other economic and policy factors in the US and South Korea. The sluggish progress of intermodal and intramodal market competition explains a part of the sluggish demand in the residential high speed Internet access market in the U.S., while the South Korean market was able to grow rapidly due to fierce competition in the market, mostly facilitated by the Korean government’s open access rule and policy choices more favorable to new entrants rather than to the incumbents. Furthermore, near monopoly control of the residential communications infrastructure by cable operators and telephone companies manifests itself as relatively high pricing and lower quality in the U.S. The more favorable terms from which the dominant providers have benefited, and government’s deregulation, may limit business opportunities for other Internet service providers.