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Korean Cablers Aim to Take Cue from Taiwan

A likely reform of South Korea's pay TV industry will
use Taiwan's as a blueprint for growth, the head of South Korea's cable
operator's association said.

W.S. Park, executive manager of the Korean Cable TV
Association, said the government's proposed deregulation of the cable-TV industry
will double the limit on foreign ownership, permit the creation of MSOs and merge the
national and regional cable-TV-distribution companies.

"We should use Taiwan to measure the reform of the
cable-TV industry; it is a good model for us," Park said, referring to Asia's
healthiest cable-TV market, where operator flexibility and fewer regulations have enabled
pay TV penetration to reach 80 percent of the country's 5 million TV homes

In contrast, Korea has around 1 million paying cable
subscribers and between 250,000 and 1 million homes that are connected but that don't
pay subscription fees -- either because the households have stopped making payments, or
because the operators are failing to collect them.

In addition, a further 7 million to 8 million cable-TV
subscribers are watching the provincial, or "A," cable systems that were
originally set up in the 1960s to relay terrestrial channels to remote areas in the
mountainous country.

Park said new legislation is likely to be passed
"pretty soon." One of its most significant aspects would increase the share that
any foreign investor can own in a channel provider to 30 percent from 15 percent.

The new legislation would also enable the creation of MSOs
by permitting wealthier operators to acquire weaker systems outside of their existing
district borders, and it would create a merger of the national cable system with the A
cable system.

The A systems are only officially sanctioned to offer the
terrestrials, but they have also added music videos, foreign channels downlinked by
satellite and locally made shows to their 12-channel package.

Despite the large number of A-cable homes, the
systems' official role as a terrestrial relay means that they have not been included
in assessments of cable penetration. Overall, about 93 percent of Korea's 14 million
households have television.

South Korea's 29-channel national cable-TV system has
lost a total of $1.4 billion since it began operating in March 1995, according to the
KCTA. In addition to the severe recession gripping South Korea and much of Southeast Asia,
which has inhibited growth, pay TV has been hindered by government regulation.

Government planners created three sectors: cable operators;
network distributors, which physically build and lay the system; and channel providers.
Cross-ownership by one sector into the other two is forbidden -- a regulation enacted to
stop Korea's giant conglomerates, known as chaebols, from dominating cable TV.

Subscription revenues are divided up according to a set
formula that gives about 50 percent to cable operators, one-third to program-providers and
the remainder to the network distributor.