IPTV in Korea and Japan. Milim Kim and Minoru Sugaya Keio University Japan. Abstract

IPTV in Korea and Japan Milim Kim and Minoru Sugaya Keio University Japan Abstract The broadband-based Internet is indispensable to provide the IPTV service. In Japan, the IPTV service started in 2002, earlier than Korea, although the broadband Internet had been spread out in Korea earlier than in Japan. It is due to the difference in the policy and regulatory system for broadcasting and communication in each country. In this study, we firstly compare legislation on the convergence of broadcasting and telecommunication in Korea and Japan, and secondly, describe the institutional difference in the IPTV services in both countries. KEYWORDS IPTV convergence Korea Japan Regulation 1. Introduction The IPTV is defined as a digital television service delivered to subscribed consumers by using a broadband Internet connection. The conditions required for the IPTV are the spread of broadband and the construction of the infrastructure for convergence environment. In 2004, 48.1% of the household with an Internet connection are the broadband users in Japan, whereas 98% of the Internet users were using broadband in Korea. Although Japan was behind Korea in terms of the penetration of broadband infrastructures, the IPTV service began to provide in Japan earlier than in Korea. One of the reasons of this phenomenon is the difference in a regulation framework in each country. Since the IPTV is a new business appeared on the boundary of broadcasting and telecommunication, the traditional system and service should be reconsidered. Page 1 of 16

When it comes to the discussion on the convergence of broadcasting and telecommunication, the following two elements become significant issues for positioning a new service: the legal definitions of "broadcasting" and "telecommunication" and the separation between the carriage of a telecommunication service and the provision of content service. Newly established regulatory frameworks triggered by the convergence in each country vary. Whether the regulatory institution is separated or not, many countries have traditionally adopted vertical regulatory structure in the telecommunication and the broadcasting. However, a common recognition that a horizontal regulation system is efficient for convergent environment was formed in the international society. In Japan, it is considered that the separation of carriage and content in legislation was prepared by implementing the Laws Concerning Broadcast on Telecommunications Services in January 2002. In this paper, we compare the IPTV-related legislations and the present conditions of the IPTV in Korea and Japan after summarizing the penetration of the Internet service in both countries. 2. The Penetration of Internet in Korea and Japan The development of the broadband Internet in Korea started in the second half of the 1990 s. In 1998, the Thrunet, a telecommunication, began to provide the broadband Internet service for the first time in Korea. After the ADSL was developed in the beginning of the 1990 s, it was commercialized in 1999, when "HANARO communication" started the service (Kim, 2005). On the other hand, in Japan, the number of broadband users began to increase from the second half of the 1990 s. The Internet connection via cable TV was in use until the fall 2001. Since 2002, the DSL increased rapidly, and the DSL system occupies the highest share now (Sugaya, 2005). Fig. 1 shows the change of the Internet access rate in Korea and Japan. Page 2 of 16

Fig. 1. The change of the Internet access rate in Korea and Japan 80 70 60 50 40 30 20 10 Japan South Korea 0 1999 2000 2001 2002 2003 2004 Source: Korea Internet White Paper 2005, Japan Internet White Paper 2004, The Homepage of the Ministry of Internal Affairs and Communications According to the ITU, the world ranking of Korea in the Internet access rate, based on the number of Internet users is the 6th, whereas Japan is the 12th. The number of the broadband users and the increase of the Internet access rate in both countries rank high at the worldwide level. With the aid of such backgrounds, the content distribution through the Internet also expended rapidly. 3. IPTV in Korea 3-1. Regulatory Institution and legislation The main issues related to the convergent service are the redesign of regulatory institutions and the reform of regulation in Korea. The current regulatory framework in Korea is vertical, that is, the regulatory institution for broadcasting and telecommunication is separated. The Korean Broadcasting Commission administers the regulations related to the broadcasting industry, and the Ministry of Information and Communication is involved in the regulations of telecommunication industry (See Table 2). In order to operate a terrestrial broadcasting business or satellite broadcasting business, one needs to obtain a license from the Ministry of Information and Communication for a broadcasting station, as prescribed by the Radio Waves Act. (Article9, Broadcasting Act), upon receiving a recommendation from the Korean Page 3 of 16

Broadcasting Commission. The same procedure is required to operate a cable broadcasting business. Table 2. The policy and regulatory framework of Broadcasting and Telecommunication Regulation Regulatory institution Industry support policy Function Administration Function Broadcasting The Korean Policy of Ministry of The support of Broadcasting Broadcasting, Culture and Audio-visual Commission Regulation of Tourism service industry Content promotion The Ministry of The allocation of Information and spectrum, Communication A License for a radio station The Korean Economic The Korean Through the Broadcasting Regulation Broadcasting conference and Commission Commission agreement with the Ministry of Culture and Tourism (Article 27 of Broadcasting Act) Telecommunication The Ministry of Policy of The Ministry of The support of Information and Telecommunication Information and telecommunication Communication Communication industry promotion Information Regulation of Communication Telecommunication Ethics Committee Content Korea Communications Commission Source: Kim (2003) Economic Regulation Since the regulatory institutions of broadcasting and telecommunication are separated, Page 4 of 16

regulating a new service becomes difficult. The foundation of integrated regulatory institution is being considered at present. Although the necessity for a integrated regulatory institution and new regulation has been discussed since the second half of the 1990 s, a practical argument began in 2002. Meanwhile, broadcasting and telecommunication in law are defined as follows; Broadcasting is transmission of the broadcast programs which are planned, produced and scheduled to the public by means of telecommunication facilities via cable, satellite as well as terrestrial radio wave in the Broadcasting Act. The definition of telecommunication is transmission or reception of code, words, sound or image through wired, wireless, optic, and other electro-magnetic devices in Telecommunications Basic Act. In brief, the broadcasting means that a specific sender transmits the scheduled information to the public at large, while the telecommunication means that information is transmitted and received in both directions by the electronic method. It is difficult to categorize the IPTV, convergence service, in the present law. It is because that the IPTV service includes the cases that a specific sender transmits scheduled information to the public, that a specific sender transmits only specific information to a specific user, and that the specific sender transmits and receives information to specific individuals. The Korean Broadcasting Commission and the Minister of Information and Communication have discordant opinions regarding that convergence services should be regulated as broadcasting or as telecommunication. The Korean Broadcasting Commission claims to introduce a concept of special category broadcasting service into Broadcasting Act and to regulate a convergence service provider as a broadcasting. The Commission insists that the convergence services should become a concept of broadcasting, based on the opening telecommunication market and competition of the IPTV and cable television. Since Korea allowed the foreigner to investment in the telecommunication service except broadcasting and basic telecommunication service through the WTO, if the IPTV is included in the concept of value added network service, the Korea government cannot help but accept the demand for the opening markets from foreign countries. The Korean Broadcasting Commission points out that if a telecommunication enters into the broadcasting market that offers the IPTV services, there will be a possibility of causing collapse of the cable TV industry. Page 5 of 16

The Ministry of Information and Communication, on the other hand, claims to enact a new law, called Broadcasting and Telecommunication Convergence Service Business Law, and the Ministry insists on regulating a convergent service provider as a network business. The Ministry of Information and Communication claims that the IPTV should be served as value added network service for the following two reasons: the technical maturity which carries out the IPTV service is prepared, and that the delay of convergent service offer causes the result in declining of national competition in the international telecommunication market. While the Korean Broadcasting Commission insists that the establishment of a regulatory Institution and a regulatory framework should be considered first and that services should be launched later, the Ministry of Information and Communication asserts that the IPTV service should begin first and regulations should be reformed second. 3-2. IPTV Service and VOD Service From the Terrestrial Broadcaster In Korea, due to the absence of a regulatory institution and legislation for the convergence service, the IPTV service has not been provided yet. Although KT(Korea Telecom)and HANARO (Hanarotelecom), major telecommunication companies, are doing their best to developing technical elements and gathering content, it is unclear when they will be able to provide the commercial service. The objection from cable TV broadcasters has also prevent them from providing the IPTV service. The cable TV broadcasters stipulated by the Cable Television Act have been restricted from various regulations on channel organization, ownership restriction, and investment. The Korean Cable TV Association demands the Korean Broadcasting Commission that Broadcasting Law should be applied to the telecommunication companies that wish to start the IPTV service, and that the same regulation as the cable TV should be applied to newcomers. If it is difficult, the association demands to deregulate the cable TV. The terrestrial broadcasters, on the other hand, have carried out the VOD service for TV programs through the Internet by themselves. This service, different concept from that of the IPTV, was commercially successful in Korea. SBS (Seoul Broadcasting System), a commercial broadcaster, has provided the VOD service since 1999. MBC (Munhwa Broadcasting Corporation) and KBS (Korean Broadcasting System), both public broadcasters, also have served TV programs through the Internet since 2000. These Page 6 of 16

three companies began to charge service in 2001. Currently, they are making profits. There are several reasons behind the profits of these services. Firstly, the terrestrial broadcasters in Korea had a lot of contents that they could use for second and third use. Secondly, the infrastructure of broadband was constructed in Korea early enough for the population of the Internet users to increase rapidly. Finally, the production of appealing content was slower than the speed of the infrastructure expansion. As a result, TV programs provided by the terrestrial broadcasters became one of the most competitive contents on the Internet. There is no legal definition on the concept of the VOD service, whereas it is described that such a service is included in the range 1 of broadcasting in the article 32 of Broadcasting Law. From this standpoint, the opinion that the IPTV should be specified in broadcasting service is still strong. 4. IPTV in Japan 4-1. Regulatory Institution and legislation The Ministry of Internal Affairs and Communications is a national system covering administration and regulation on broadcasting and telecommunication in Japan. Because of such an integrated system, the Ministry of Internal Affairs and Communications was able to respond to the convergent environment quickly. The advent of the separation of carriage and content in Japan stemmed from the enforcement of the Telecommunications Business Law in 1985 and the amendment of the Broadcasting Law and Radio Law in 1989. The enforcement of the Telecommunications Business Law caused the privatization of the Nippon Telegraph & Telephone Public Corporation and introduced competitions into the telecommunication industry. In satellite broadcasting, the amendment of the Broadcasting law and Radio Law brought a classification of the facility-supplying broadcaster, which has the equipment for broadcasting, and the program-supplying broadcaster, which provides contents. Accordingly, the separation of carriage and content was realized for the first time in Japan (Uehara, 2004). Moreover, the separation of carriage and content in the cable broadcasting was realized by the enforcement of the Laws Concerning Broadcast on Telecommunications Services. This law allowed the broadcasting service to provide the service by using telecommunication line facility in 2002. Page 7 of 16

The Laws concerning Broadcast on Telecommunications Service defines Broadcast on Telecommunications Service as transmission of telecommunications intended to be directly received by the public, all or part of which is transmitted on telecommunications service provided by a person who operates telecommunications business (Article2 of Chapter1). The IPTV is embraced in the concept of Cable Broadcast on Telecommunications Services. Cable Broadcast on Telecommunications Service means transmission of telecommunications intended to be directly received by the public, all or part of which is transmitted on cable telecommunications service provided by a person who operates telecommunications business (Article2-2 of chapter1, Regulations for Enforcement of the Laws concerning Broadcast on Telecommunications Service). Those who did not have an installed facility and an obtained permission could not enter the cable broadcasting industry until then, because cable television broadcaster had regulated the Cable Television Broadcast Law. However, the enforcement of the law allowed content providers to enter the broadcasting industry by borrowing the telecommunication line facility. Figure 2. Outline of Laws concerning Broadcast on Telecommunications Service Source: the Ministry of Internal Affairs and Communications (http://www.soumu.go.jp/joho_tsusin/denkitsusin/pdf/gaiyou.pdf) Although there was such a reform of regulation as the one above, there are a few Page 8 of 16

problems in Japanese IPTV services. Especially, it is pointed out that the different concepts on broadcasting become a cause to prevent the IPTV from expanding and activating. The definitions of broadcasting in the Laws Concerning Broadcast on Telecommunications Service and that of the Copyright Law are different. Although the IPTV is broadcasting in the Laws Concerning Broadcast on Telecommunications Service, it is included in interactive transmission in the Copyright Law. Broadcasting in the Copyright Law is defined as the public transmission of radio communication intended for simultaneous reception by the public of the transmission having the same contents, and interactive transmission as public transmission made automatically in response to a request from the public, excluding the public transmission falling within the term broadcasting or wire-diffusion. In the case of the IPTV service, since not all channels are sent to the STB (Set Top Box) in users home but only the selected channel are sent to the receivers, this service is considered as interactive transmission in the Copyright Law. There are two types transmission method for the IPTV services. One is the QAM system, and the other is the Internet Protocol Multicast system. Because the content delivered by the IP system is defined as interactive transmission in the Copyright Law, there are several problems in the IPTV services. In order to solve such problems, the Nippon Keidanren started a broadband-contents distribution study group. The members of study group regulated the rate and provisional rule 2, which will become a standard of audio-visual contents distributed through broadband. (Takahashi, 2005) 4-2 IPTV service Currently, there are 16 Cable Broadcast on Telecommunications Service Providers (IPTV providers) that obtained registration from the Ministry of Internal Affairs and Communications (See Table 2). There are two types of Cable broadcast on Telecommunications Services (IPTV services). Some borrow only a main line from a telecommunication ; others borrow not only a main line but also lines that connect between providers and users. In the latter case, in particular, there are some entrants that provide various services.(suzuki, Kondo, Sakurai, Komukai, 2004) Page 9 of 16

Table 2. The list of Cable broadcast on Telecommunications Service (IPTV service) provider No. Company Service System of Transmission Note Day of Registration No.1 No.2 BB Cable Corporation Tokyo Bay Network Co.,Ltd. BBTV IP - 2002.7.24 - QAM* 1 They borrow only a main line 2002.9.20 No.3 Tsuyama - QAM* 1 They borrow only a main line 2003.9.1 Television Corporation No.4 No.5 No.6 No.7 No.8 No.9 KDDI Corporation Media Links & CO.,LTD. K-CAT Cable Television Corporation Inc. Ehime CATV Corporation Opticast corporation Cable Television Tokyo.Ltd. Hikari Plus TV IP - 2003.10.3 - QAM* 1 They borrow only a main line 2003.10.29 eot.v. QAM* 1-2003.11.18 - QAM* 1 They borrow only a main line 2003.12.26 HIKARI QAM* 1-2004.2.25 Perfect TV! - QAM* 1 They borrow only a main line 2004.3.24 No.10 On-line TV 4th MEDIA IP - 2004.6.30 Co.,Ltd. No.11 Town TV Co.,Ltd. - QAM* 1 They borrow only a main line 2004.8.25 No.12 I-Cast, Inc. On IP - 2005.5.25 Page 10 of 16

Demand TV No.13 Bay - QAM* 1 They borrow only a main line 2005.5.31 Communications Inc. No.14 Tokyo Cable - QAM* 1 They borrow only a main line 2005.6.15 Network, Inc. No.15 STNet Inc. Pikara QAM* 1-2005.8.4 No.16 Kintetsu Cable - QAM* 1 They borrow only a main line 2005.9.26 Network, Inc. (KCN) Source: the Ministry of Internal Affairs and Communications(http://www.soumu.go.jp/), Nishioka (2005), refer the homepage of each * 1 The transmission method which is same to that of the cable TV. The providers written with bold characters borrow lines between providers and users as well as the main lines between telecommunication and providers. While the IPTV industry has enjoyed many entrants, there are several problems in its services. First, the Cable Broadcast on Telecommunications Service (IPTV service) providers offering content by the IP Multicast technology cannot serve the re-transmitting of terrestrial television signals. The terrestrial broadcasters are hesitating to permit the re-transmitting of terrestrial television signals by those providers, for the IP Multicast technology is the mechanism that transmits the only content selected by users. The BBTV provide by Yahoo! BB is a typical example. Second, the managers of the terrestrial broadcasters are concerned that the license system should be nominal. If the IPTV service providers are not able to offer the re-transmitting of terrestrial television signals, it will be a disadvantage for the IPTV providers in the competition with the cable TV broadcasters, which will make it more difficult for them to expand the IPTV services. Consequently, it will be difficult to increase the investment from speculators about the IPTV industry. Page 11 of 16

Third, It is difficult for users to distinguish between the IPTV services and the cable TV services, because the both services are almost similar. The development of a unique IPTV services is expected. 4-3. VOD service from the terrestrial broadcaster and another VOD services There is no VOD service via the terrestrial broadcaster in Japan. TORESOLA, established by three terrestrial broadcasters, TBS, FUJI, and ASAHI in 2002, conducted a pay service experiment. However, full-scale service is reserved for the following two reasons: firstly, it is difficult to deal with the copyright-related issues of TV programs, and secondly, the problem of costs. It costs a lot to develop technologies related to the protection of content and clear image. The participants of TORESOLA concluded that the cost would deteriorate profits. Meanwhile, a telecommunication called USEN has begun to offer the VOD services called Gyao for free of charge from April 2005. Gyao provides free content, based on new business model which use advertisements on service via personal computers, which is different from Cable Broadcast on Telecommunications Service (IPTV service). Users are not required to register in Gyao. One can use the service for free by only typinh the gender, zip code, birthday, e-mail address, and occupation. 5. Conclusion The differences in the IPTV industries in both countries can be summarized as follows: Firstly, the regulatory institutions and legislations vary in both countries. In Japan, the Ministry of Internal Affairs and Communications administers the broadcasting and telecommunication industries, whereas the regulatory institutions exist independently in both industries in Korea. In addition, the system can be seen in legislation. As a result, the enactment of a new law, Laws Concerning Broadcast on Telecommunications Services in Japan, could be advanced earlier than that in Korea. Secondly, there are differences in relationships between the ownership association (which has the right to manage the TV programs) and the content provider (that pays the charge for content-use to the ownership association) in both countries. The terrestrial broadcasters have provided programs using the Internet since 1999 in Korea, and a few Page 12 of 16

ownership associations have the standard of audio-visual content distributed through the Internet in Korea. At the beginning of the program service through the Internet by the terrestrial broadcaster, however, the ownerships did not have recognition for protecting their content. Consequently, it allowed the terrestrial broadcaster to provide the TV programs using the Internet earlier than Japan. On the other hand, there was no standard for the charge system of content-use through the Internet in Japan, which is one of the reasons not to distribute TV programs on the Internet. However, the fact that the TV program service distributed through the Internet could not be provided due to the absence of the standard is a manifestation of high recognition for protecting their content. As mentioned in the section 4-1, Broadband-contents distribution study group made by the Nippon Keidanren stimulated the rate and provisional rule, which may become a standard of audio-visual contents distributed in broadband. However it is not certain whether the associations of ownership and contents provider follow this rule or not, because there is no binding force in this rule. Regardless of that, it is expected that the establishment of the rule will contribute to the protection of the ownership and increase of the content distribution in broadband. On the other hand, three similarities between both countries in the IPTV industry can be seen. Firstly, it is necessary to consider the laws related to broadcasting, telecommunication and copyright. In Japan, the difference between the broadcasting in Broadcasting Act and the broadcasting in Copyright Law should be reconsidered for the expansion of the IPTV service. In the Korea s case, they have adopted a specific sector for legislation and an independent regulatory institution. The reconsideration of regulatory framework is required in a competitive environment. Secondly, It is difficult to differentiate between the IPTV service and other media which are competing against the IPTV. Cable TV broadcasters complain about the offer of the IPTV service regarding some issues. In Cable Television Broadcast Law in Japan, a person who intends to conduct a cable television broadcasting service has to establish cable television broadcasting facilities and obtain a permit from the Ministry of Internal Affairs and Communications with respect to the establishment of the facilities. However, according to a new law, Laws Concerning Broadcast on Telecommunications Services, it is relatively easy to conduct the IPTV broadcasting service. Only a registration is required to conduct the IPTV service. Cable TV broadcasters complain that this is unfair. Page 13 of 16

Although the IPTV service is not yet offered in Korea, cable TV broadcasters in Korea also object to the launch of the IPTV service. Thirdly, the issue of re-transmitting terrestrial television signals is significant in both countries. The definition of broadcasting is related to the re-transmitting of terrestrial television signals on the IPTV in Japan. In the case of Korea, there is a precedent regarding a digital satellite broadcasting. Despite of the Korean Broadcasting Commission permitting the re-transmitting of terrestrial television signals through the digital satellite broadcasting, the terrestrial broadcaster refused to provide TV programs via the digital satellite broadcasting. If the IPTV services start, the re-transmitting of terrestrial television signals through the IPTV will also become a significant issue. These are the common aspects and the differences in the IPTV industries in both countries. These results lead to several factors being necessary for the IPTV service to be expanded. For one thing, the reconsideration of legislation on the IPTV service is required. The traditional regulatory framework should be replaced by a more flexible framework to respond to the convergence of broadcasting and telecommunication. Moreover, the competition with other pay channels becomes a significant issue, which will decide whether the IPTV will become a new dominant media in the broadcasting market or that the IPTV will develop into another form. The last point is the acquirement of the audio-visual content. The present issue related to the content for the IPTV market is the re-transmitting of terrestrial television signals. Since the problem of the re-transmitting is indispensable for the expansion of the IPTV, this problem is being discussed in both countries. However, the terrestrial broadcasters are also providing new services which offer TV programs through the Internet by themselves in Korea, and the offer of similar services are examined in Japan. The acquirement of another contents except TV programs is as significant as the re-transmitting of signals from the terrestrial broadcasters. Furthermore, interactive applications, such as distance learning and T-commerce should be developed as actively as original services. Page 14 of 16

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Yoichi Suzuki, Satsuki Kondo, Yasuo Sakurai, Taro Komukai (2004) Copyright Problem over Broadcast on Wire Telecommunications Services InfoCom REVIEW Vol.34 Yoko Nishioka (2005) convergence service in Japan 18 June: 2005 ETRI (Electronic and Telecommunications Research Institute) Workshop in Korea Broadcasting Law (Korea / Japan) Cable Television Broadcast Law (Japan) Cable Television Act (Korea) Copyright Law (Korea / Japan) Laws Concerning Broadcast on Telecommunications Services (Japan) Radio Law (Japan) Radio Waves Act (Korea) Telecommunications Basic Act (Korea) Telecommunications Business Law (Japan) 1 A cable TV relay broadcast and an electric sign board broadcast, or the contents of information similar to a broadcast and the information 2 This rule published in March 2005, and it will be applied until March 2006. Page 16 of 16