FTA likely to dampen growth of local broadcasting sector

Limited impact expected on telecom sector, while protection for intellectual property strengthened


The free trade agreement between Korea and the United States is expected to hit the nation’s small broadcasting and production companies particularly hard.

Under the pact, direct investment by foreign nationals into local program providers will be limited to the current level of 49 percent of shares.

But if they set up a local branch and invest indirectly, 100 percent ownership will be allowed at networks here, excluding news-only, general programming and home-shopping channels.

This type of corporate body, in which a foreign national is the largest shareholder, had been considered direct investment prior to the agreement’s approval.

The new rules will come into effect three years after the FTA’s effectuation.

Despite the three-year grace period, industry watchers say competition between local companies and U.S. broadcasting giants such as Walt Disney and Time Warner has already started.

“The import price of U.S.-made programs could increase and sometimes it might be difficult for local operators to purchase them,” said an official at Korea Cable Television and Telecommunications Association.

“If the domestic audience’s tastes become more familiar with programs made abroad, local program providers will adopt similar concepts with the Korean color of local programs being lost.”

The quota for locally produced programs has also been eased for non-terrestrial broadcasters. It will be lowered from 35 to 30 percent for animated films and from 25 to 20 percent for movies.

The proportion of productions from a single foreign country permitted for general programming, however, will be raised significantly from 60 to 80 percent.

Regarding potential harm to local producers, the Korean government is considering follow-up measures such as building a new production center for digital broadcasting.

But the industry is demanding more aggressive, realistic plans to support broadcasting.

“The government’s policy is focused on new infrastructure rather than on direct investment. Without direct funding for production, individual program providers will not be able to survive in competition with U.S. companies,” said an industry source.

Compared to the broadcasting market, the impact of the FTA on the telecom sector will be limited.

As with the broadcasting industry, the clause regarding direct and indirect investment will be abolished two years after the FTA takes effect.

Key industries are protected by not including KT Corp. ― the market leader in wired markets ― and SK Telecom ― the leader in wireless ― in the new measure.

“There would almost no impact from the new trade pact. It is unlikely for foreign capital to flock into the local telecom market suddenly,” said an industry source.

Foreign investors in SK Telecom, in particular, have already neared the upper limit of 49 percent, with no room for further foreign capital.

Some critics say that even when foreign capital expands indirect investment, the local market could grow further and see healthy competition.

The protection of intellectual property will be strengthened, while it will be easier for a copyright holder to exert his or her rights under the new trade pact.

The protection period has been extended from 50 years to 70 years after the copyright holder dies or the creation is published. The extension, however, will have a two-year grace period after the trade pact comes into effective.

Until now, a trademark had to be something visible. With the pact, sounds and fragrances can be recognized as a trademark when they can be visually expressed. For instance, a sound should come with a score.

A new compensation system for copyright infringement will be introduced to ease the financial burden for a copyright holder’s lawsuit costs. Under the system, the court will offer some compensation even when a copyright holder fails to prove his or her case in a civil trial. 

By Lee Ji-yoon (jylee@heraldcorp.com)