E N F O R C E M E N T   AND   C O M P L I A N C E

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Korea Record Of Understanding On Telecommunications--1/23/90


The documents attached and enumerated below represent a collective agreed summary of the status of consultations as of January 23, 1990 between the Government of the United States (USG) and the Government of the Republic of Korea (ROKG) on Telecommunications trade issues of mutual concern. This agreed summary will serve as a record of deliberations.

1 . Draft Language For Standards Setting and Approval Processes

This document represents a bracketed text of a possible agreement between the USG and the ROKG regarding standards-setting and approval processes in telecommunications. Positions of each party with respect to individual issues addressed in this document are summarized in the Notes following each item.

2. Summary of outstanding U.S. Concerns on Standards and Examples of Possible Solutions to these Concerns

This document represents a summary of what the United States seeks on each of the outstanding issues and examples of possible approaches to bridge differences, for consideration by the ROKG. This document solely reflects the views of the United States delegation and does not reflect ROKG agreement or commitments.

3. Refined Tariff Reduction Request - Telecommunications Equipment Tariffs

This document reflects a refinement of the U.S. tariff request on telecommunications equipment tabled in the early stages of consultations. The ROKG suggested that the USG refine its tariff request and the United States has refined its list in response to the ROKG request.

4. Summary Record of Understanding of the ROKG's Position on Liberalization of the Telecommunications Services Market.

This summary serves as an overview of the ROKG position, outlined over the course of the December and January consultations, with respect to the liberalization of the Korean telecommunications market. It is understood by both parties that the United States acknowledgment of this document does not indicate in any way U.S. acceptance of the positions contained therein. U.S. positions with respect to the issues outlined in this document are summarized in document five (below).

5. Key U.S. Concerns with ROKG Proposals Regarding Telecommunications Services Liberalization

This document outlines key U.S. concerns regarding the ROKG's plans for liberalization of the telecommunications market, which are outlined in document four above. This document supplements positions taken by the United States Government in previous discussions. It is understood by both parties that this document does not indicate in any way ROKG acceptance of the positions contained therein.

6. Draft Understanding Between the United States and the Republic of Korea and Summary of Positions Regarding Liberalization of the Korean Telecommunications Government Procurement Market

This document represents the bracketed text of a possible agreement between the ROKG and the USG regarding principles of government procurement in the Korean telecommunications market and a summary of respective positions an outstanding issues. These provisions are meant to be mutually beneficial.



[For Further Discussion]

January 20, 1990


1. By July 1, 1990, the Korean Government will [compile] transparent standard setting and approval procedures for the development of mandatory standards. The procedures will be clear, complete and well-defined. These standard setting and approval processes will provide for participation in a timely manner by foreign firms. A well-defined appeals process will be described.

2. [By July 1, 1990, the Korean Government will ensure the availability of transparent standard setting procedures for the development of voluntary standards. The procedures will be clear, complete and well-defined. These standard setting processes will provide for participation in a timely manner by foreign firms.]

NOTE: ROKG believes that this information exists; USG has requested more information.

3a. [The Korean Government will ensure the ability of U.S. persons to participate in the work of any non-governmental standards-setting organization.]

NOTE: U.S. proposed Language

3b. [The Korean Government will advise non-governmental standards-setting organizations to offer foreign firms/personnel equal opportunity to participate in standards-setting procedures.)

NOTE: Korean proposed Language


1. The Korean Government agrees to limit criteria for wireline telecommunications equipment mandatory standards criterion for mandatory service to the following:

a. Prevention of harm to the network;

b. Prevention of harm to network and radio personnel [and users];

c. Electromagnetic interference;

d. Harm to billing equipment;

e. Degradation of service to persons other than the user;

f. [and other causes of harm to the network].

2. By July 1, 1990, Technical Regulations standards for wireline telecommunications equipment will not include any other criteria other than those listed in B1, such as performance requirements [or interoperability requirements].

3. [After January 1, 1992], mandatory standards for wireless telecommunications equipment [except for navigation and aviation safety equipment] will not include any other criteria other than no-harm-to-the-spectrum, such as performance requirements.


-- Both the USG and ROKG reserve the right to revisit the issue of "other causes of harm to the network."

-- The ROKG will provide additional information on why interoperability requirements are necessary. The USG does not agree that interoperability requirements are necessary.

-- The USG wants performance criteria on wireless equipment eliminated by July 1, 1990.

-- The USG reserves the right to further discuss the exceptions to mandatory standards for wireless equipment in these categories.

-- The Korean Government rejects the above language regarding the National Computer Network Standards.


1. By July 1, 1990, the Korean Government will accept test data generated by foreign independent laboratories and foreign manufacturers f or use in the approval process for all wireline terminal equipment and all wireless terminal equipment, [except for navigation and aviation safety equipment].

2. [The approval process is the procedure followed to determine whether attachment to the network or, in the case of wireless, use of the radio spectrum will be allowed.]

3. [in order to be accepted by the ROKG, the foreign independent laboratory or foreign manufacturer must either be accredited by the ROKG or present test data that shows compliance with the standards criteria in Technical Regulations and demonstrate testing methods adequate to support the results.]

4. [The Korean Government agrees that upon presentation of appropriate test data and the fulfillment of approval process under the criteria in B1, the equipment may be freely imported into Korea.]

5. (The ROKG reserves the right to exclude, subject to a transparent appeals process, type approved customer premises equipment which does not perform according to the test data provided]

6. [The Korean Government will establish an impartial entity to ensure an open and transparent approval program for customer premises equipment]


-- The USG reserves the right to further discuss the exceptions to testing for wireless equipment in these categories.

-- The USG and the ROKG reserve the right to further discuss the definition of the "approval process."

-- In the case of "accreditation," the USG still needs to know what an independent laboratory or manufacturer needs to do to be accredited - procedures, requirements, etc.

--C3 depends upon agreement on standards criteria in the Mandatory Standards and Approval criteria section of this draft.

-- The ROKG has stated that an appeals process is provided for in the Petition Law which was provided to the USG delegation on January 20, 1990. The USG reserves the right to determine the adequacy of the petition law as it applies to telecommunications equipment approval procedures.




January 21, 1990


-- We are seeking clear procedures that are publicly available for standards setting and equipment approval. The ROKG has been unable to demonstrate to us definitively that such procedures exist. We are told that they are contained in a number of different laws and decrees, some of which were recently provided.

-- In the case of mandatory standards set by the Ministry of Communications, in order to provide true transparency, these procedures must detail the standards-setting process, including such information as which office or entity handles the development of the standards, the timeframes for the procedure, the place where public notice will be made, the point where public comments should be submitted and the office where appeals can be made. For example:

Ministry of Widgets Standard Setting Procedures

1. The Ministry of Widgets sets all mandatory standards for the widgets.

2 . The Office of Standards is the contact point for all inquiries regarding mandatory widget standards. The address is: One Widget Plaza, Paradise City, Nirvana. The Telephone number is Murray Hill 2007. All inquiries should be addressed to the Widget Standard officer.

3. The Office of Standards will publish in the Nirvana Governmental Register a notice that a new standard is being developed along with a draft text or detailed description of proposed standard. A public comment period of 30 days will be allowed.

4. Public comments may be addressed to office of Standards at the above address.

5. After the close of the public comment period, all comments will be reviewed by the Widget Standards Review Committee.

6. The Widget Standards Review Committee consists of the following members: Wl, W2, W33, W78 (for example, by various offices in the Ministry, or several Ministries.) This committee will review all comments and submit a final version of the proposed standard to the Office of Standards.

7. The office of Standards will announce the final standard in the Nirvana Governmental Register. The standards will not go into effect until xx days following the announcement in the Register.

8. Appeals concerning any mandatory standards may be filed with the off ice of the General Counsel, Ministry of Widgets. Appeals must be filed within xx days.

9. Procedures for the appeal are elaborated in the Ministry of Widgets Handbook of Appeals, which is available to the public through the Nirvana Government Printing office.

-- What the ROKG has described thus far is a series of laws that contain general principles for transparent procedures. We consider these to be the basis for the telecommunications equipment-specific procedures we are seeking.

-- What we need at the next meeting is either:

a) Evidence that the existing procedures offer the same level of detail as the example above; or

b) a commitment that such detailed procedures will be developed by July 1, 1990.

-- In the case of voluntary standards, we need information that demonstrates that the TTA procedures also provide this level of specificity and detail.

-- We are also concerned about TTA's procedures, and are seeking an ROKG commitment to ensure that TTA's procedures allow foreign participation and are fair in cases where TTA is recommending mandatory standards. If TTA procedures are not fair, we seek the ROKG commitment that they will not rely on TTA as a standards-setting body.

-- We have serious problems with the ROKG position regarding standards-setting procedures for the National Computer Networks. The ROKG is in essence closing a market potentially worth millions of dollars to U.S. firms by denying then the ability to participate in the standards-setting procedures. Any progress in the Government Procurement working group will be largely negated by this position.

-- We expect the ROKG to come prepared with a complete description of the standards-setting procedures for these networks (both for the standards that are unique to each network and those that are used by all five networks). We continue to seek the ability for foreign firms to participate on a regular and non-discriminatory basis in the setting of these standards.


-- We have a major problem with continued efforts on the part of the ROKG to extend mandatory standards beyond the no harm to the network criterion. we cannot accept the establishment of interoperability requirements as mandatory standards, because they cannot be justified by the no harm to the network criterion.

-- The removal of performance criteria for wireless equipment should also be effective July 1, 1990, rather than 1992.

-- The exception from the "no harm" standard for navigation and aviation safety equipment is too broad and is undefined. We are willing to consider limited exceptions in special cases, but seek a more concise definition of equipment that the ROKG wishes to exclude. A list of those pieces of equipment that will be subject to performance criteria would be useful, provided that it is very limited.


-- We have problems with the broad exclusion for navigation and aviation safety equipment in this section as well, and seek a better definition or a list.

-- We need detailed information on the accreditation process for foreign labs before we could consider accepting such a process as part of this agreement. We need information such as:

- which office will handle accreditations,

- what the requirements will be (lab size, office personnel, testing methods etc.),

- whether the accreditation will require a site visit, and if so paid for by whom,

- what documentation will be required,

- what fees, if any, will be levied,

- the estimated length of the accreditation process,

- validity period, if any, for the accreditation.

-- We also need detailed information on the requirements for unaccredited foreign laboratories and manufacturers to have their test data accepted by MOC. We require detailed information on what criteria will be used to determine if the test data are adequate. For example, the ROKG cited four items that it would consider in determining whether to accept a foreign test laboratory or manufacturer's lab test data: what forms are required, personnel requirements, laboratory requirements, length of the certification process etc. What must be clearly defined for businesses to use this process is what a foreign laboratory must do to satisfy the MOC criteria.

-- We seek written assurances that once this certification is obtained, customs clearance in Korea will be automatic.

-- We also require assurances that this approval procedure will be fair and unbiased.


-- As you can see, we still have a number of questions about the ROKG standards setting and approval procedures. We also have problems with some of the ROKG positions.

-- Without the information requested above, finalization of this text is impossible.

-- We hope that the ROKG will come to Washington next month prepared to answer our questions and meet our remaining concerns.

-- We have compared where we are today with where we were last February, and see little concrete progress thus far.


January 19, 1990

Refined Accelerated Tariff Reduction Request

Telecommunications Equipment Tariffs

The Government of the United States requests that the Government of the Republic of Korea (ROKG) use its full administrative authority to accelerate annually the planned reductions in the tariff rates on telecommunications equipment by an additional 50% reduction in each year from 1990 to 1993. The following items represent a refined tariff request list,

Tariff Number Description

8517.20 Teleprinters

8517.30 Telephonic or telegraphic switching apparatus

.301 - for public exchange

.3011 -- of electronic switching system

.3019 - Other

.309 - Other

.3091 -- of electronic switching system

.3099 -- other

8517.4050 Optical fiber transmission system -

8517.4060 Carrier equipment for broadcasting system

8517.4070 Signal Converter

8517.4080 Multiplexer

8517.4090 Other

8517.80 Other apparatus

8517.90 Parts

.9010 - of electronic switching system for public exchange

.909 - other

.9091 -- of telephone set

.9092 -- of public exchange

.9093 -- of private exchange

.9094 -- of apparatus for carrier

.9095 -- of facsimile

.9099 - other

8525.1020 Transmission apparatus

Radio-broadcasting apparatus

8525.2030 Transmission apparatus

Facsimile transmission equipment

8525.2060 Transmission apparatus


8527.90 Reception apparatus for radio-telephony...

4. Other

8529.1060 Antennas for 8525 and 8527

8529-9050 Parts (assemblies) of 8525 and 8527

8531.800035 (USHS) Paging alerting devices

8531.90 Parts (assemblies) for 8531





(January 22, 1990)

This paper states for the record what the USG understands to be the ROKG position on liberalization of telecommunications services in the Korean marketplace, based on discussions in the December 1989 and January 1990 negotiating rounds. This paper in no way indicates USG acceptance of any positions presented by the ROKG. U.S. views of the Korean proposal are addressed in a separate paper.

I. Services Discussions and the Uruguay Round

- The ROKG plans not to finalize plans for further liberalization of telecommunications services requested by the U.S. until the results of the General Agreement on Trade in Services (GATS) are known. The ROKG expects the GATS to conclude by November 1990.

- The ROKG Supports the Uruguay Round and intends to play a positive, constructive role in the establishment of a world framework for trade in telecommunications. This includes acting in an intermediary role in bridging the LDC and developed country positions on a telecommunications agreement in the GATS.

- The ROKG expressed interest in obtaining such a liberalized framework so that Korean companies can also take advantage of the international telecommunications marketplace.

- The ROKG plans to incorporate the results of a GATS agreement on telecommunications into a liberalization package (including both legislation and administrative procedures) by the end of 1991.

- The ROKG therefore will not submit its telecommunications reform legislation to the National Assembly with respect to the details of such a reform, until the conclusion of the GATS.

- The ROKG proposes to resume bilateral discussions if the coverage of telecommunications in the GATS is insufficient or if the GATS does not reach agreement on telecommunications services by the end of 1990.

II. Timing of-ROKG-Reform/Liberalization Package

- The ROKG plans to present its reform package to the National Assembly by year-end 1991. The Korean delegation is not able to give assurance of whether the National Assembly would accept the package either in part or in full. [Insert: The ROKG will do its best so that the reform package will be passed by the National Assembly without amendment. ] The Korean delegation said that newly enacted laws usually becomes effective six months after the President signs a bill into law. (The President must act on legislation within two weeks.) During the six months all necessary enactment regulations would be prepared. This would normally include an enforcement decree from the President, a ministerial proclamation and addition of the service to the positive list.

- The Korean delegation has assured the USG that the reform package, to the extent that it has been developed, has full interministerial support. Interministerial consensus specifically extends to the establishment of two categories of service providers in the ROK market: "General Service Providers" (GSPS) and "Value-Added Service Providers" (VSPs).

- While basic definitions for the two categories have been established, the ROKG plans to develop a list of all existing telecommunications services, to be divided between the GSP and VSP categories. The ROKG delegation explained that the list of services assigned to either the GSP or VSP categories will be made available by the effective date of the reform package.

- The ROKG delegation described the hierarchy and sequence of legal procedures necessary to fully implement legislation: a) amendments to current statutes (e.g., Telecommunications Basic Law, Public Telecommunications Business Law, Radio Laws and others related laws, with the approval by the ROK National Assembly; b) any necessary enforcement decrees; and c) any necessary ministerial implementing regulations.

Interim measures

- The ROKG has assured the USG that prior to the adoption and implementation of the ROKG reform package, additional U.S. companies may enter the Korean telecommunications services market under the current Korean laws and administrative procedures, as amended in July

- The ROKG now permits U.S. companies to engage in the provision of Group VAN services and data base and data processing (DB/DP) services to third parties, through joint ventures limited to 50 percent foreign equity shares, where the Korean partner maintains management control. They cannot use packet switches under any circumstances or provide enhanced services which are not computer-related. Specific examples cited were fax transmission and video conferencing.

- Under current law, the ROKG is considering whether to allow voice-mail service.

- Under current law, the ROKG is considering permitting competitive providers to offer packet switching which includes: a) code and protocol processing, b) message handling services, and c) electronic data interchange, etc. (The ROKG has nothing specific additional in mind.)

III. Coverage

General Service Providers (GSP)

Definition and Scope of Activity

- GSPs will be licensed to own basic transport, switching and network facilities. VSPs may not own such facilities.

- GSPs must provide universal services such as voice telephony, telex and "other basic services", although each GSP may not necessarily provide all such services.

- Determination of "other services" under GSP is based on the "simple transmission" principle -- i.e. services which do not alter information or data in any way would be reserved for GSPS. The Korean delegation could cite no specific examples of "other services."

- The ROKG considers the provision of cellular telephony and paging services to be reserved for GSPS, under the rationale that these services do not act upon or change the content (data/voice) of a transmission.

- GSPs have common carrier-like obligations including (but not necessarily limited to): non-discriminatory provision and pricing of basic services, and providing fair terms and conditions.

- GSPs will be permitted to provide all services, but when GSPs and VSPs are competing on service provision, the ROKG intends to develop regulations on unfair practices to ensure fair competition.

- The ROKG anticipates that at a Minimum the four currently designated common carriers will be designated as GSPs. These four are: KTA, DACOM, KHTC and KPTC.

- The ROKG has not decided yet whether additional companies will be designated as GSPS.

- The ROKG is considering, but has not yet decided, whether the four currently designated common carriers can provide additional services.


- The ROKG defines "facilities" reserved for GSP ownership as switching facilities, transmission facilities, and circuit facilities (i.e., coaxial, copper and fiber optic cables, microwave transmission and reception facilities).

- The GSPs would not have exclusive ownership rights for customer premises equipment (CPE). The ROKG defines CPE as "that which is attached to the end of a GSP/VSP facility to facilitate use of the service for a GSP/VSP subscriber." Specific examples include: PABXs, paging displayers, computer terminals, modems, telephone sets (including radio telephone sets). Multiplexers with less than 2.048 mbps speeds are also allowed. There will be no restrictions on customer-owned CPE attachment to the public networks so long as the equipment has obtained MOC type approval.

Ownership/Privatization Plans of Common carriers

- By law, the ROKG or a government-invested entity (i.e. KTA) must own at least 1/3 of any entity designated as a common carrier. This currently includes DACOM, KMTC and KPTC. The ROKG is considering whether to change this requirement.

- KTAI which has discretionary authority to sell any portion above 1/3, sold 32% of its stock in KMTC in 1989. (KTA now owns 68%.)

- KTA plans to sell additional stock in KHTC in 1990 but the Korean delegation is not aware of any specific amount.

- The ROKG intends to gradually privatize KTA by reducing government ownership to 51% by year-end 1992. This would be accomplished through public sale of shares on the Korean stock market. (The ROKG currently plans to sell 25% in 1990 [provided strong market conditions exist] and 12% each year for the next two years.)

- The ROKG will not increase its direct ownership in GSPs above the current level. No decisions have been made yet on further privatization of other common carriers.

Value-added Service Providers (VSPs)

Definition and Scope of VSPS

- A VSP is a service provider that offers any telecommunications service listed on a "positive list" issued by the MOC. A VSP may not own network facilities but must lease circuit capacity from a GSP and attach certain permissible equipment in order to provide that listed service.

- The primary criterion for inclusion on the positive list of a service eligible for VSP provision is whether the service it provides acts on or changes the content of the information transmitted, i.e., whether value is added.

- A VSP may only provide those services specifically listed by the ROKG as telecommunications services open to competition. This is known as "the positive list approach." The ROKG will publish the exact criteria to be used to designate services on a "positive list" as soon as they are finalized. The ROKG indicated that the services eligible for inclusion in the positive list would not be limited to the value-added services now offered in Korea, but would include any value-added service offered anywhere in the world.

- All currently existing services will be designated simultaneously on the "positive list" or to the realm of the GSP. If any services are accidentally omitted from the list, the ROKG will amend the positive list immediately. Once services are designated on the positive list, all companies may provide them equally, although only domestic services will be allowed at the outset.

- VSPs will not be permitted to undertake simple transmission services, simple resale or simple data transmission which would circumvent the Public network. The VSP may only provide resale "with an accompanying information processing."

- Other factors the ROKG will consider, in developing the positive list include economic and sociocultural criteria. The Korean delegation cited as examples of materials which it intends to prohibit a) obscene material and b) unsolicited sales material.

- The ROKG clarified that it would open any service on the positive list to any qualified provider.

- Competitive providers are now limited to providing enhanced, computer-related telecommunications services. The ROKG is considering the addition of some non-computer related enhanced services to the positive list. Specific examples include voice mail and video conferencing.

- The ROKG is reluctant to open packet switching to competitive providers due to economic bypass concerns.

New Services

- As new services develop, the ROKG will temporarily designate them as open to either GSPS or VSPS. The ROKG will review the designations at least every three years to make temporary designations permanent.

- The ROKG will consider the addition of a new service on an ad hoc, temporary basis to the VSP list (or positive list) if requested to do so by a prospective service provider.

International Services

- international services in the context of this record refers to value-added or competitive services provided from points within Korea to points outside of Korea.

- The Korean delegation stated that Article 52 of the PTBL in principle bars the third-party use of leased lines. However, by Article 74 of the Enforcement Decree of the PTBL, the MOC may allow exceptions to such restrictions to special cases in the public interest. The ROKG delegation stated that some international value-added services can be provided as long as the MOC characterizes such services as "permissible usage of leased lines" within the range of the above mentioned exceptions, and does not characterize them as "value-added telecommunications services".

- The Korean delegation said that since such services are directly related to International Value Network Services (IVANS), it is reasonable to withhold decisions on international services until the issue is negotiated in the GATS. The ROKG does not consider bilateral agreements to be appropriate for telecommunications services trade.

- The ROKG stated a major consideration in its current refusal to allow international value-added service is to control transborder data flow.

- The Korean delegation said the ROKG would "gradually introduce" the liberalization of international services, but the delegation was unable to provide details on implementation, including a timetable or specific services.

- ROKG delegation states that the reform package will include a provision empowering the MOC to allow the provision of international VSP services.

- Only GSPS will be permitted to provide international common-carrier transmission services.

Intracorporate Communications

- Due to concern for bypass of the public networks, the ROKG has not made a decision whether a company can construct and/or own its own network facilities.

IV. Investment/Foreign Participation

- Foreign equity restrictions of a maximum 50% share with maintenance of Korean management control still exist for data base and data services providers, and for Group VANS. Restrictions on foreign equity participation in telecommunications equipment manufacturing companies were lifted as of January 1, 1990.

- The ROKG is committed to ensure the smooth implementation of the telecommunications reform package as it relates to direct foreign investment in competitive telecommunications services.

- However, the ROKG will not reduce foreign investment restrictions until after the Uruguay Round is completed, because the extent to which the ROKG will liberalize investment depends on the results of the Uruguay Round.

- The ROKG has thus made no decision to lift foreign equity restrictions either under the current or planned regulatory regime.

V. Terms and Conditions of Market Access

GSP and VSP Rights and Obligations

- The MOC will use its oversight authority to ensure that rights and obligations are maintained for GSPs and VSPs.

- Both VSPs and GSPs must provide their services in a "timely manner, under "fair conditions," and "accurately." They should not refuse to provide service to a customer without a justifiable reason. They should not transmit communications which "harm the public order," i.e., harm public safety, health or morality. This obligation includes restrictions on the content of data bases offered by a VSP. Service providers and their personnel are legally liable to ensure that the confidentiality of the information they handle is protected.

- The Korean delegation said "fair conditions" means that information will be provided on a non-discriminatory basis, with equal pricing to all clients for identical services. However, the ROKG indicated that the fair condition obligation is a general philosophy of the Telecommunications Basic Law (Fundamental Law) and not a substantive provision with enforcement provisions.

- The Korean delegation gave a general assurance that oversight of "fair market conditions" would not be abused to prevent competition. It would only be applied in "common sense" cases. It would not be applied, for example, to raise subscriber rates which undercut the market and were not financed by cross-subsidization.

Specific VSP Rights and Obligations

- In general, VSPs will not be required to provide services to a third party, except in cases of national emergency or natural disaster.

- Specifically, VSPS must meet the following obligations: 1) file to the MOC a pricing schedule and standardized contract for each service offering (i.e., tariff); 2) notify both the customer and the MOC when the VSP must discontinue service; 3) submit for MOC approval any contract for interconnection with another VSP or with a GSP; 4) fulfill "registration requirements".

- Specific "registration requirements" include the following: 1) the VSP must register with the MOC, although the MOC is planning to allow an exception for "simple VAS," e.g. domestic data base and data processing providers; 2) the VSP must re-register with the MOC when a major change occurs in a VSP's service offering (except for changes that are "minor"); 3) the VSP must meet specific MOC registration criteria.

- The MOC will require prospective VSPs to meet four criteria in order to register. They are as follows: 1) a -uniform minimum standard "financial ability" to provide the service, (subscribed capital of 50 million Won [about $70,000 USD] required under the Commercial Code), 2) a uniform minimum standard "technical ability" for a VSP to provide service, e.g., a minimum criterion applied to required manpower and to required facilities; 3) a demonstration that the VSP can meet uniform minimum standard requirements to ensure the privacy of customer information; 4) whether the legal foreign investment equity ratio is observed.

- The Korean delegation does not believe that these "minimal registration requirements" will limit the ability of US firms to enter the market. The ROKG indicated that these registration requirements are intended for primarily for Korean firms.

Interconnection of GSP and VSP Networks

- The interconnection of GSPs/VSPs and VSPs/VSPs will be governed by their own contractual relationships.

- VSPs will not be required to interconnect with other VSPS, or with GSPS, except in cases of national emergency. (The MOC will retain authority to require interconnection.)

- All contracts for interconnection must be filed with the MOC which must approve the contracts. The Korean delegation indicated that the primary criterion for disapproval would be abuse of dominant market position.

Protocols and Standards

- The ROKG will permit VSPs to use proprietary protocols of their own choice for intracorporate communications, for the provision of VSP services, and for purposes of interconnection with other VSPs. When VSPs connect their networks, with the public switched telephone network or the public switched data network, they will use the protocols of such public switched networks.

- If connecting with the public switched telephone or data networks, protocols must meet MOC compatibility standards.

- If the ROKG believes that proprietary protocols are disrupting the "smooth flow of information" it may, in the future, require standardized protocols.

- The Korean delegation understood USG concerns that forced standardization of protocols would cause serious economic and competitive harm to VSPs already using proprietary protocols. As a result, the ROKG will reconsider whether it will keep open the option of standardizing protocols sometime in the future.

VI. Relaxation of Restrictions on Usage of Leased Circuit capacity

- The ROKG plans to relax the current restrictions on the use of leased-circuit capacity (i.e., private lines) for those users that utilize such capacity for non-telecommunications business purposes (i.e., for those not engaged in a telecommunications business).

- The ROKG will further relax restrictions on the use of domestic private lines during 1990. (No date has been set for announcement, since details are still under study.)

- Shared use of domestic private lines is now allowed only among companies with close business relationships.

- In the future, the ROKG will allow shared use of domestic leased lines, even when there is no business relationship, so long as the shared use is not for the purpose of resale or simple transmission.

- If it is not for the purpose of conducting a telecommunications business, the ROKG will allow shared use of international private liner, on a case-by-case basis.

- The third party use of domestic leased lines for the provision of simple data base and data processing services will be liberalized in 1990. Such uses will not require approval or notification.

- A list of firms which currently share international leased lines is attached as Annex I.

- The ROKG is considering the basic policy direction of further liberalization of use of leased lines after the reform package is implemented.

VII. Competition Safeguards

- The ROKG plans to impose "regulations" on the GSPS in order to prevent the abuse of market power in the competitive VSP services market.

- The ROKG did not elaborate as to what measures it intended to adopt, when it intended to adopt them, or how it intended to ensure that the GSPs had implemented such measures before the GSPs began to offer a service in competition with a VSP.


January 21, 1990



TIMING: Delay of any telecommunications services liberalization until several years after the conclusion of the Uruguay Round effectively prohibits market access for U.S. firms in the dynamic telecommunications services market. Korean firms currently have open access to the U.S. telecommunications services market. Therefore, the United States does not have any assurance of market access now or in the future.

COVERAGE: Scope of Services Allowed to VSPs

1. The proposed GSP/VSP approach significantly broadens the number of services reserved for the Korean common carriers as compared to the limited reservation contemplated by the U.S. proposal. The scope of services available to VSPs under the ROKG proposal is significantly narrower than that currently available to Korean firms in the U.S. market.

2. The ability of VSPs to provide packet-switched data transmission services is not assured by the ROKG approach. This area is critical to U.S. telecommunications services providers.

3. The use of a positive list approach for determining the services which a VSP can provide remains a significant concern because a VSP has no certainty that the service it wants to provide will be included in the positive list. In addition, the definitions of services appearing on the positive list may serve further to restrict the activities U.S. firms can undertake.


A. Registration:

1. The registration procedure the ROKG proposes is a virtual licensing system. Such a system tends to restrict entry, despite the intentions expressed by the ROKG to create an open, competitive market for VSP services in Korea.

2. The information required by the registration scheme described by the ROKG appears to require prospective VSP applicants/registrants to provide the kind of information that could effectively reveal their confidential plans.

B. Tariff Requirements

1. The essence of many of the services we are talking about here is that they are tailored to meet the precise needs of individual customers. The requirement for VSP providers to file a pricing schedule and standardized contract (tariff) is anticompetitive and prevents service providers from tailoring services to meet the specific needs of their customers in a timely manner. It is also anticompetitive because it requires VSPs to reveal information that is proprietary. A requirement for a tariff is also anticompetitive because it prevents service providers from rapidly responding to changing market conditions.

2. The tariff filing requirement would also make marketing of services more difficult by restraining a VSP's ability to package services of interest to a particular customer and to offer

a discount on the total package.

C. Common Carrier-Like Obligations

The statement that a VSP will not be required to serve particular customers contradicts both the tariff requirement and statements that a VSP must provide non-discriminatory service to all potential customers. A provider of VSP services must be able to configure its customer base in a manner which would ensure the protection of its own proprietary business information and the security of its network.

D. Simple Resale

The ROKG definition of simple resale in which a VSP cannot engage is unclear. The requirement that a VSP can provide resale only "with accompanying information processing" is too restrictive to allow firms to provide the full range of services they provide in other markets.

E. Switching Equipment Attachment

The ability of an intracorporate user or a VSP to attach switching equipment, including packet switches, for use within the corporation or for the provision of a VSP service is crucial. Most of the services that we are talking about cannot be provided on an economic basis unless the user/VSP can attach and use its own switches. The desire to protect against bypass of the public switched telephone network does not require a total ban on the attachment of switching equipment.

F. Interconnection Requirements

The statement that VSPs will not be required to interconnect with other VSPs or with GSPs is contradicted by the statement that such interconnections may be required to assure the free flow of information. A VSP must be assured that it will not be required to interconnect with the network of a competitor.

G. Proprietary Protocols

The statement that the ROKG might require a VSP to abandon its proprietary protocols and to use a standard protocol to assure the free flow of information does not give VSPs who use proprietary protocols adequate assurance that their intellectual property rights in those proprietary protocols will be protected.


1. The current restriction to fifty percent foreign equity in a telecommunications provider (and the fact that the ROKG reform proposal does not contain any change in the fifty percent equity requirement for VSPs under the reform) does not constitute reciprocal market access. Korean firms face no such restrictions in the U.S. telecommunications market.

2. The decision not to revisit the equity restrictions until after the Uruguay Round does not give U.S. firms the assurance that the current unfair equity limitations will be liberalized.


1. The current prohibition on the provision of international value added services and the proposal to continue that limitation for the foreseeable future effectively denies U.S. firms market access in the Korean value added services market or prevents U.S. firms from providing such value added services on a cost-effective basis. The ban on international value added services discriminates against foreign providers because foreign providers are the firms who most need to provide services cross-border.

2. The decision not to consider removal of the prohibition on international value added services until after the conclusion of the Uruguay Round does not give U.S. firms assurances that the current discrimination against foreign firms will be eliminated.


The ROKG proposal to impose "regulations" on GSPs to prevent anticompetitive conduct in their participation in the VSP services market appears from available information to be inadequate. The GPSs enjoy a protected monopoly which could be used to cross-subsidize competitive VSP services and control the access of competitive VSPs to the facilities of the GSPS. In order to prevent abuse of the dominant market position the GSPs enjoy as a result of the monopoly grant by the ROKG, the ROKG must put in place effective measures that assure that such abuse will not take place.


The United States Government continues to assert that the issues under discussion are bilateral issues and that the appropriate forum to address them is in the current bilateral negotiation.

Document 6

January 23, 1990

Draft Understanding

between the Governments of Korea and the United States

and Summary of Positions on Outstanding Issues


Improvement of Korean Telecommunications Procurement

This document reflects the USG and ROKG understanding as of January 22, 1990 of the remaining outstanding issues concerning Korean telecommunications procurement.

1. Policy Guidance for Contracting officers

U.S. Position: The ROKG will issue policy guidance to contracting officers awarding contracts covered by this agreement. The policy guidance will be issued by March 1, 1990 and will include, but not be limited to, the information in the U.S. proposal presented on December 18, 1989.

ROKG Position: The ROKG has to consider whether of issuing this guidance is consistent with the way the current ROKG procurement system operates.

2. Coverage

U.S. Position: The U.S. seeks ROKG agreement to use a complete set of transparent, non-discriminatory procedures for telecommunications contracts, including contracts for goods (including software) and services, awarded by the Ministry of Communications (MOC), the Office of Supply (OSROK), the Korean Telecommunications Authority (KTA) , the Data Communications Corporation (DACOM), and the Korean Mobile Telecommunications Corporation (KMTC).

ROKG Position: The ROKG will submit an application to join the GATT Government Procurement Code in April, 1990, and pending the success of the ROKG's Code accession effort - will cover under the Code procurement of goods and incidental services by MOC, OSROK, and "general Products" by KTA. KTA network equipment procurement will be covered by a separate set of procurement procedures. The ROKG agrees to cover software contracts to the extent that these contracts are currently covered by the GATT Code. otherwise, the ROKG will cover software contracts when the Code is expanded to cover software contracts.

Procurement by DACOM and KMTC, as well as services contracts awarded by MOC, OSROK, and KTA would not be covered.

3. Procedures

U.S. Position: Covered contracts should be awarded according to the procedures stipulated in the annex given to the ROKG on September 6, 1989. Exceptions to these procedures may be considered if the exceptions proposed are required to maintain the commercial viability of the entity.

ROKG Position: Contracts for general products awarded by KTA, and contracts for goods and incidental services awarded by OSROK and MOC should be awarded using the Code's procedures. KTA network equipment contracts should be awarded according to the procedures proposed in the ROKG's January, 1990 non-paper. In addition to implementing the non-paper procedures, KTA will also fully observe the requirements of the Code. The ROKG will review the proposed (1/22/90) amendments to the ROKG non-paper.

4. Timing

U.S. Position: The policy guidance should be issued by March 1, 1990. Implementation of the bilateral agreement should begin by January 1, 1992 subject to change upon ROKG accession to the GATT Government Procurement Code and the Code's expansion to cover telecommunications contracts (see section 5).

ROKG Position: Implementation of the bilateral agreement should begin by January 1, 1993 pending ROKG accession to the GATT Government Procurement Code and the Code's expansion to cover telecommunications contracts (see section 5). The question of whether the suggested policy guidance should be issued is being reviewed.

5. Relationship between the GATT Code and this Bilateral Agreement

The ROKG agrees to attempt to complete successfully, on a developed country basis, its Code accession negotiations by January 1. 1991. The ROKG agrees to include in its upcoming code coverage offer list all ROKG telecommunications contracts (i.e.,, goods and [incidental) service contracts), including all telecommunications contracts awarded by [the Government and telecommunications contracts awarded by/the government agencies of] the Ministry of Communications (MOC) , the Office of Supply (OSROK), the Korean Telecommunications Authority (KTA), [the Data communications Authority (DACOM) , and the Korean Mobile Telecommunications Authority (KHTC)]. [In the case of KTA, only the "general products" will be subject to the Code's procedures.] [KTA network equipment contracts will be subject to the procurement provisions of the ROKG's January, 1990 non-paper. In addition to implementing the non-paper procedures, KTA will also fully observe the requirements of the Code. The ROKG

will review the proposed (1/22/90) amendments to the ROKG non-paper. ]

If ROKG Code accession negotiations and the Code negotiations to expand the Code to cover telecommunications goods and services contracts are successful the provisions of the expanded Code agreement will apply to the ROKG contracts and. entities referred to above on the implementation date established by the Code negotiations in lieu of the government procurement provisions of the U.S.-ROKG telecommunications agreement.

In the event the ROKG's accession negotiations to the Code or the Code negotiations to expand the Code to telecommunications contracts have not been completed by January 1, 1991, the ROKG agrees to implement the procurement provisions of this telecommunications agreement by January 1, [1992/1993].

In this case, U.S. and ROKG officials agree to meet during the first two months of 1991 to discuss and complete any provisions of this agreement not yet precisely defined (i.e., a rule of origin for services contracts.)

6. Principles Concerning Korean Telecommunications Procurement

If a telecommunications agreement is reached that includes satisfactory government procurement provisions on coverage, procedures, and timing, the U.S. and Korean delegations would consider agreeing to the following preliminary principles:

A. Korea will be implementing non-discriminatory procurement procedures to provide U.S. products, (incidental] services, and suppliers an equal opportunity to compete for Korean telecommunications contracts.

B. This means that for telecommunications contracts Korea will no longer consider whether an identified procurement need may be satisfied by a domestic source before opening the procurement to foreign competition. As soon as a need is identified and a decision is made to procure, U.S. and Korean sources will be treated the same regardless of the origin of the product, [incidental] service or suppler. Any information given to one supplier must be given at the same time to all suppliers participating in the tendering process, including the procurement planning process and the adoption process. Telecommunications contracts shall be awarded without giving preference to domestic suppliers, goods or [incidental] services.

In the qualification of potential products, [incidental] services or suppliers, evaluation of bids, and award of contracts, Korean officials shall not, either explicitly or implicitly, impose, seek or consider offsets, including localization, local content, licensing of technology, technology transfer, investment requirements, or similar conditions.

C. Korea will be establishing procedures for the hearing and reviewing of complaints arising in connection with any phase of the telecommunications procurement process, so as to ensure that, to the greatest extent possible, disputes will be equitably and expeditiously resolved between the suppliers and the entities concerned.

D. The Korean Government agrees to meet periodically review the operation of this agreement.

Attachment 1

Government Procurement obligations: Suggestions for Policy Guidance to Contracting Officers

Issuance of policy guidance to all procurement officials of both central government entities and governmental entities playing a commercial role in the marketplace to accord non-discriminatory treatment in procurement to US suppliers and suppliers of US products and services, with particular emphasis in the following areas:

-- prenotification stage

-- no biased standards or specifications

(criteria for award)

-- appeals mechanism for standards or specifications considered restrictive by U.S. suppliers, [including ability to stop procurement until issue is resolved];

-- timely notification of requirements;

-- no offsets, including localization or local content requirements;

-- award of contracts exclusively in accordance notified requirements;

[-- grant requests of US suppliers for renegotiation of existing contracts to bring them into compliance with these nondiscrimination obligations;]

[-- establishment of appeals mechanism: government to government.]

*ROKG problems in brackets.

December 18, 1989

Document 6

Attachment 2

Changes made on 1/22/90


I. Introduction

In the December, 1989 meeting, the Korean Government (the "ROKG") presented a non-paper concerning the basic principles and framework of new competitive procurement procedures in an effort to facilitate agreement on procurement

More specifically, paragraphs (A) - (D) on page I of the non-paper represent the basic principles on which Korea's future telecommunications procurement will be based, and pages 4 and 5 describe the basic framework of the competitive procurement procedures implementing such principles.

We believe that it would be only appropriate to prepare detailed procedures after both parties agree on the basic principles of procurement. For the purpose of reaching agreement on the basic principles of telecommunications procurement by February 1990, we elaborate below on the procurement procedures for telecommunications network equipment in more concrete terms. We hope that this attempt will help the USG better understand Korea's position on this subject.

In the December, 1989 meeting, the ROKG also revealed its intention to join the GATT Government Procurement Code (the "Code") in 1990. Hence, in procuring "general products" that Korea plans to place under the Code, the Code's procedures will be used. The detailed range of the general products will be determined before the signing of the Code and will be specified in a list.

With respect to procurement of telecommunications network equipment, detailed procurement procedures will vary depending on the types of procurement discussed in page 5 of the December, 1989 non-paper: (i) "initial procurement of new products," (ii) "procurement by development of new products," and (iii) "follow-up procurement" for products already procured by the above two methods. We believe that these procedures are not inconsistent with the provisions of the Code, and are reasonable in view of the characteristics of telecommunications network equipment procurement. In addition to implementing the procedures, we will also fully observe the requirements of the Code. Upon agreement with the USG, the ROKG will prepare new procurement regulations for telecommunications network equipment based on the discussions in this paper in the future.

II. Procurement Procedures for Telecommunication Network Equipment

A. Public Notice

(1) When a contracting entity determines that there is a need to procure telecommunications network equipment, it shall use these procedures and will make its intent to purchase known through public notice.

(2) Such notice will constitute invitations to participate in each procedure.

(3) The public notice will be published in the Korean official gazette, and will also be sent to prospective suppliers identified to be interested in and/or capable of producing the products required.

(4) Suppliers responding to the notice published in the official gazette will be treated in a manner no less favorable than those responding to the Notices sent individually.

(5) Depending on the types of procurement, the timing of procurement notice will vary.

First, the "notice of request for proposals (RFP/notice)" for "initial procurement of new products" and "the notice of invitation for participation (Invitation/notice)" for "procurement by development of new products" will be published in the official gazette for every procurement.

Second, notice of the "follow-up procurement " will be published in the official gazette on an annual basis with possible additional notices, as necessary, in the official gazette.

(6) The RFP/notice and Invitation/notice will include the following information:

- Nature and quantity of the product to be supplied;

- Notice that the purchase will be made through procedures of "initial procurement of new products" and/or "procurement by development of new products";

- Any delivery date;

- The addresses and deadline for submitting an application, and the language in which it must be submitted;

- Any information necessary for obtaining procurement documentation and other documents;

- Any economic and technical requirement, financial guarantees and information required from suppliers;

- Written notice that suppliers who qualify under the above procedures will be considered as qualified suppliers for follow-up procurement;

- The amount and terms of payment of any sum payable for the procurement documentation;

- The fact that one winning application will be selected or, in the case that more than one supplier is necessary to assure stable supply, the proposed number of suppliers to be selected.

(7) A notice of "follow-up procurement shall constitute an invitation to participate and will contain the following information:

- Type, category and quantity of the product to be procured (based on the annual projection of purchasing plans);

- Any delivery date;

- The address and deadline for submitting applications, and the language in which it must be submitted;

- The designated contact point.

In addition, the following information will be included in the "follow-up procurement " notice:

- Amount of products by categories procured actually in a previous fiscal year;

- Technical information, including a general description of products;

- Any information necessary for obtaining specifications and other documents;

- The amount and terms of payment of any sum payable for the procurement documentation;

- The fact that the winning proposal will be selected from suppliers which have completed the qualification process;

-The fact that one winning proposal will be selected, or, in the case that more than one supplier is necessary to assure stable supply, the proposed number of suppliers to be selected;

Such information shall also be published in the above notice, or reference will be made in that notice that such information will be published in the procurement guidebook.

(8) In addition, an English summary of the RFP/notice and Invitation/notice will be published in the official gazette and will include the following information:

- Subject matter of the procurement;

- Time limitation for submission of an application

- Addresses from which necessary documents and further information may be requested.

B. Documentation

(9) Any suppliers responding to the procurement notice will be provided with procurement documentation on a timely basis.

(10) The procurement documentation will contain all information necessary to permit suppliers to submit responsive applications including:

- The address to which applications should be sent;

- The addresses where requests for supplementary information should be sent;

- The closing date for receipt of applications;

- Any economic and technical requirements, financial guarantees and information required from suppliers;

- A complete description of the products required or of any requirements including technical specifications, conformity certification to be fulfilled by the products, necessary plans, drawings, and instructional materials;

- The criteria for the selection and award of the contract(s) to the successful applicant(s), including any factors other than price, such as compatibility, quality control, and stable supply, that are to be considered in the evaluation of applications and the cost element to be included in the evaluation of applications prices;

- The terms of payment;

- In cases of purchases where more than one supplier is to be selected, the factors to be utilized in the allocation of the total procurement among the selected suppliers including the intended minimum lot for orders to be placed;

- Any other terms or conditions.

(11) A contracting entity will respond promptly to any reasonable request for clarification of the RFP or of the procurement documentation.

(12) Any clarification or amendment of the RFP or documentation shall be provided simultaneously to all interested suppliers in adequate time for such suppliers to consider this information and respond to it.

C. Deadline

(13) The period for receipt of applications will in no case be less than forty days from the date of procurement notice.

The application period may be reduced in the case of an emergency, but, in any case, would not be less than ten days.

D. Selection and Award of Contract(s) of Successful Applicants

(1). Selection of Successful Applicants through the "Initial Procurement of New Products" and "Procurement by development of New Product" procedures.

Selection of award of contracts will be accomplished as follows:

(14) In order to be considered for selection, any application must:

- conform to the essential requirements of procurement notice and procurement documentation; and

- be from suppliers which comply with the conditions for participation.

(15) Applications will be evaluated in terms of the selection criteria set forth in the procurement documentations.

(16) The applicant determined to be the most advantageous in terms of the selection criteria shall be selected and awarded the contracts.

(17) If it appears that no application, or applications, as the case may be, is obviously the most advantageous in terms of the selection criteria listed in the procurement documentations, a contracting entity will, in subsequent negotiations, give equal consideration and treatment to all suppliers within the competitive range.

(18) Those suppliers successfully selected through these procedures will be considered as qualified suppliers for the follow-up procurement; and this fact will be specified in the procurement notice.

(II). Qualification and Selection In the "Follow-Up Procurement"

(19) A contracting entity will establish and maintain lists of qualified suppliers.

(20) Upon receiving an application from any supplier at any time, a contracting entity will promptly initiate the qualification/selection process, and will give equal treatment to both foreign and domestic applicants in the process of qualifying/selecting suppliers.

(21) If, after publication of the procurement notice, a supplier not yet qualified requests to participate, the contracting entity will start the qualification/selection procedure without delay.

(22) Suppliers requesting to participate in procurement opportunities shall be permitted to resubmit proposals, and their proposals shall be considered, provided, in the case of those not yet qualified, there is sufficient time to complete the qualification procedure for a particular procurement.

(23) If the applicant, though not finally selected as a successful supplier in a previous application, had already undergone part of the qualification procedure, the applicant will be exempted from all or part of the relevant screening procedure.

(24) The number of suppliers permitted to participate shall be limited only by the efficient operation of the procurement system, and only when such limitations are not made in a discriminatory manner.

E. Information on Purchase and Procurement Procedure

(25) In connection with the "follow-up procurement" procedures, a contracting entity will publish annually the following information with additional announcements in the official gazette:

- An enumeration of the lists of qualified suppliers maintained, including their headings, in relation to the products or categories of products to be purchased through the lists;

- The criteria for inscription on these lists and the screening procedures involved, including:

- Technical qualifications;

- Information necessary for establishing the financial, commercial, and technical capacity of suppliers;

- The means by which the qualification will be verified;

- Specific qualification criteria, such as compatibility, quality control, and stable supply;

- The period of validity of the lists, and the formalities for their renewal.

(26) Concerning the procurement process, the following information will be released for the suppliers' convenience by the contracting entity:

- Guidebooks - explaining, among other things, the contracting entity's procurement policy, organizations, for purchasing and purchasing procedures;

- Each fiscal year's management program and plant engineering programs;

- Economic evaluation methods;

- Guidelines concerning construction, operation and maintenance instructions to be attached to supplied products.

(27) To assist foreign suppliers, a new department for international procurement will be set up at the headquarters. KTA's foreign offices will also conduct procurement-related activities, including:

- Active gathering of product information in the foreign telecommunications markets;

- Effective and prompt response to suppliers' sales activities, inquires and requests for consultations;

- Provision of necessary documentation and information regarding the procurement involved.

F. Appeal Procedures

(28) A contracting entity will maintain a complete record of each procurement process, including a complete record of all matters concerning each contract awarded.

(29) A contracting entity shall promptly, and in no case later than seven working days from the date of the completion of the selection/award of a contract, inform unsuccessful applicants by written communication or publication that a selection has been completed.

(30) Upon request by the unsuccessful applicants, the contracting entity shall promptly provide those applicants with pertinent information concerning the reasons why the applicants were not selected, including the relative advantages of the application selected, as well as the name the winning applicant.

(31) A contracting entity will provide procedures for the hearing and review of complaints arising in connection with any phase of the procurement to be equitably and expeditiously resolved.

TANC offers these agreements electronically as a public service for general reference. Every effort has been made to ensure that the text presented is complete and accurate. However, copies needed for legal purposes should be obtained from official archives maintained by the appropriate agency.