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Korea Record Of Understanding On Telecommunications--2/7/91


During the Republic of Korea-United States Telecommunications consultations held on February 4-7, 1991, the delegations of the two countries reached the following understandings:

I. Structural Reform Plan

A. The ROKG delegation states that it has taken the following additional steps in the liberalization of its telecommunications services market.

1. A structural reform package that separates the Korean telecommunications services industry into two main categories. Network Service Providers (NSPs) will be telecommunications service providers who construct or own their own circuits and transmission facilities and must abide by common-carrier-obligations, such as universal service. Value-added Service Providers (VSPs) will be telecommunications service providers who lease telecommunications circuits from NSPs and use then to provide their services (described below).

2. NSPs--will be further divided into two categories: General Service Providers (GSPs), which own nation-wide telecommunications facilities; and Specific Service Providers (SSPs), whose service provision is limited by the ROKG to the geographically or technically limited sectors, such as mobile telecommunications services, airport-related telecommunications services, and port telecommunications services. GSPs will be closed to foreign investment. New SSPs will be open to one-third foreign investment. No GSP may provide services reserved for SSPs. In addition, no one shareholder, domestic or foreign, may hold more than one third equity in any new SSP. However, Korea Telecom will be permitted to maintain its current equity in Korea Mobile Telecommunications Corporation.

3. The ROKG delegation confirms that, with the liberalization of international enhanced and value-added services by July 1, 1991, the market for VSPs will be open to competition.

4. The ROKG delegation confirms that all remaining foreign investment restrictions for the VSP market other than data transmission services will be eliminated by no later than January 1, 1994. Until such time, nationals and companies of foreign countries will be permitted to maintain or establish joint ventures with nationals and companies of the Republic of Korea for the provision of any enhanced or value-added services; however, the nationals and companies of foreign countries are limited to owning less than 50 percent of the equity of such joint ventures.

5. The USG delegation reiterates that, given the rapid evolution of the value-added services market, the elimination of the investment restrictions on any VSPs by no later than January 1, 1992, is essential for the creation of a fully competitive market for value-added services in the Republic of Korea.

6. VSPs are further divided into three categories: On-line Database and Remote Computing Services (DB/RCS); Computer Communication; Services; and Data Transmission Services. The ROKG delegation (confirms) that it defines these categories as follows;

a. On-line database and RCS are telecommunications Services which are carried over common carriers' networks and which do not mediate third party communications;

b. Computer Communications Services are telecommunications services, including code and protocol conversion services, which are carried over common carriers' networks and which store and forward, or process and forward customer's information on a non-real time basis, and which do not include services in category 5.a above.

c. Data Transmission Services are telecommunication services which are carried over common carriers' networks and which transmit or exchange a customer's information without changes in' the form or content on a real-time basis. For the purposes of Korea's present telecommunication reform package, data transmission services do not include voice telephony, telex, or facsimile services. Firms that wish to register with the ROKG as providers of Data Transmission Services must be registered to provide Computer Communications Services.

B. The ROKG delegation [confirms] that the scope of Services covered by this Record of Understanding includes all enhanced or value-added services, both now and in the future, that are provided within Korea or, effective July 1, 1991, across its borders. The ROKG delegation confirms that nationals and companies of foreign countries will have unrestricted access to, and use of, telecommunications circuits and services provided by NSPs offered within or across Korea's border, including national and international private leased circuits, for the provision of any services the provision of which is authorized for such nationals and companies, including enhanced or value-added services and simple data transmission services.

C. The following services, which, in the United States, are defined as basic telecommunication services, and which, in the Republic of Korea may be exclusively provided by GSPs, do not fall within the scope of value added services in the Korean liberalization reform package: voice telephony, telex, and (U.S.: basic) facsimile services.

D. With a view to ensuring the equivalency of their definitions of value-added or enhanced services and the scope of this Record of understanding, the delegations agree to compare the definition in paragraph I.A.6.a and b (Database and RCS and Computer Communications) with the following functional definitions and examples:

1. Enhanced and Value-Added Services mean any services offered over the telecommunications transmission facilities of GSPs which employ such computer processing applications as described below:

a. that convert the content, code, protocol, or similar aspects of the subscriber's transmitted information; and

b. that provide the subscriber with additional, different or restructured information; and

c. that involve subscriber interaction with stored information.

2. Some examples of value-added or enhanced services are:

a. data communications services that involve

(1)code or format conversions;

(2) protocol conversions, in addition to that between X.25 and X.75, in packet switching; and

(3) store and forward.

b. facsimile communications that involve store and forward or one of the functions listed above in I.G.I.a or b.

3. Other examples of services that are enhanced or value-added services are: database access, remote computing services or data processing, EDI, electronic mail, voice mail, enhanced facsimile (including store and forward), and any other service that employs the computer processing applications described in paragraph I.D.I.

The USG delegation confirms that it sees no discrepancies between the definition in paragraph I.A.6.a and b and the above functional definition and examples. The ROKG delegation, in turn, agrees to inform the USG delegation by no later than March 17, 1991, of any discrepancies it identifies between the definition in paragraph I.A.6.a and b and the above functional definition and examples. The delegations shall consult further should any disagreement arise regarding such discrepancies.

E. The USG delegation confirms its position (1) that a service that combines basic and enhanced service functions is considered to be enhanced or value-added when the service provider offers the enhancement as part of a service offering, even though such enhancement may not be required on a particular call; (2) that enhanced or Value-added Service Providers (VSPs) may, at the request of their customer, transmit without such enhancements as part of their service to users; and (3) that the provision of protocol conversion an an enhanced orvalue-added service, in addition to that between X.25 and X.75, in packet switching may also include the transmission of messages without such conversions as part of the service to users.

F. The ROKG delegation confirms that Packet switching with code and protocol processing is permitted as a distinct enhanced or value-added service, and that VSPs will not be required to offer such code and protocol processing services in conjunction with any other enhanced or value added services described herein.

II. Registration

A. The ROKG will require all providers of the following services, other than NSPs, to register with the MOC:

1. international on-line databases and remote computer Services (DB/RC8);

2. domestic and international computer communication services; and

3. domestic and international data transmission services.

B. Providers of domestic DB/RCS services will not be required to register.

C. The exclusive purpose of the registration procedure shall be to ensure that the registrant is technically and financially qualified to provide the service described in the application for registration. The ROKG shall ensure that the registration procedure is administered in a routine manner and not with the purpose or effect of restricting competition or discouraging the provision of any particular service.

D. An application for registration need contain only the following items:

1. the registrant's business plan for the service, which need not disclose any information that the registrant deems proprietary;

2.a. If the registrant is a Korean national, the registrant's "standard personal certificate," which confirms such information as the registrant's possible criminal record, bankruptcy history,

b. if the registrant is a foreign national residing in the Republic of Korea, the registrants "standard registration for foreign residents," which is provided under the Korean naturalization and immigration statutes, and

c. if the registrant is a corporation, (i) a "standard personal certificate' for each member of the board of directors who is a Korean national, (ii) a "standard registration for foreign residents" for each member of the board of directors who is a foreign national residing in the Republic of Korea, and (iii) a copy of the corporation's articles of incorporation;

3. evidence of registrant's financial capability:

a. if the registrant is a physical person, a certification prepared in accordance with the procedures a specified in MOC Proclamation No. 111 by a Korean-certified public accountant that the registrant owns assets valued at a minimum of 100 million won,

b. if the registrant is a legal person, copies of the Korean corporate registration showing paid-in capital of a minimum of 50 million won;

4. a general description of the services to be provided;

5. a summary listing of the major nodes and processing facilities to be used to provide the service, that is sufficient to demonstrate that the registrant will have the technical capability to provide the service;

6. a summary network map;

7. The names of the two persons to be employed by the registrant who hold National Technical Qualification Certificates in telecommunications or information processing and copies of their Certificates; and

8. the registrant's plan for meeting the requirements with respect to protecting customer information from loss and unauthorized disclosure specified in MOC Proclamation No. 103.

E. The MOC shall approve the registration no later than 30 days after submission of the application unless:

1. an element specified in the previous paragraph is missing from the application or fraudulent;

2. the information provided under clause I.D.2 disqualifies the registrant pursuant to Article 73.4 of the Public Telecommunications Business Law ("PTBL"); or

3. the registrant has had a previous registration canceled pursuant to Article 73.8 of the PTBL.

[U.S.:The MOC shall approve or deny an application for registration in writing within the 30 days of submission of the application. The written notice of denial shall include reasons for the denial.]

F. The MOC will permit concurrent review of registration applications, interconnection agreements, and operating agreements with an objective of minimizing the time required for the overall process.

G. A VSP may cancel its registration at any time and withdraw from the market. Under Article73-5.5 of the Public Telecommunications Business Law, if a VSP closes its business, it must notify its users and the MOC thirty days in advance.

III. Notification of New Services

A. A registered VSP wishing to provide a service the provision of which would require registration but which was not described in its initial registration need only notify MOC of (1) the service to be provided and (2) the standardized contract

pursuant to which the services will be offered.

B. Unless the MOC informs the VSP in writing that the proposed new service is not a service open to VSPs within 20 days of submission of the notice, the VSP's provision of the notified service shall be deemed approved by the MOC, and the VSP may begin providing that service.

C. The VSP may have recourse to the MOC's appeals procedure to challenge a determination by the MOC that a proposed service is not a service open to VSPs.

IV. Filing of Standardized Contracts

A. NSPs must provide their services pursuant to standardized contracts approved by the MOC. The ROKG delegation states that the ROKG does not permit NSPs to file non-standardized contracts for the provision of telecommunications services.

B. The ROKG delegation confirms that the requirement for VSPs to file standardized contracts with the MOC shall be satisfied by simple notification, without any opportunity for approval or denial.

C. The ROKG delegation further states that in order for VSPs to meet the diverse demands of customers and to provide services tailored to specific requirements, VSPs are permitted to maintain different price structures for their services. The ROKG delegation explained that VSPs are not required to charge the same price for such diversified services. The requirement for VSPs to notify MOC of their standardized contracts should not prevent such VSPs from tailoring services to meet the specific needs of their customers in a timely manner, nor are VSPs required to reveal information they deem proprietary.

V. Interconnection Contract Approvals

A. The ROKG delegation explained that, under Current law, the ROKG requires any interconnection contract both between and among VSPs and between and among VSPs and an NSP to be approved by the MOC. The ROKG delegation states that the ROKG will introduce, and endeavor to obtain passage of, legislation so as to require

only simple notification for interconnection contracts between VSPs in the upcoming legislation for the structural reform. Simple notification means there is no requirement for MOC approval.

B. The ROKG delegation states that, under current law, such contracts should clearly describe interconnection conditions, including demarcation points and how the networks are interconnected. VSPs may negotiate the terms and conditions of such contracts without interference by the ROKG and based on their own commercial considerations. The ROKG delegation confirms that the purpose of such interconnection contract notification is not for regulation VSP interconnection, but it is for informational purposes only. The ROKG delegation also confirms that the ROKG will protect the confidentiality of any interconnection contracts filed with it by VSPs, and that MOC will not release the information to any party outside the MOC. The ROKG delegation reconfirms its commitments to the principles of interconnection, dial-up access to NSP networks, and the use of proprietary protocols as described by the February 15, 1990, Summary Record of Understanding.

C. The ROKG delegation also confirms that, following the change in Korean law outlined in paragraph A, the MOC will no longer require VSPs' interconnection contracts to contain any. specific item of information, but will allow VSPs to negotiate such contracts freely and to submit only such information as the VSP believes is necessary to describe the interconnection in a general manner and is not proprietary.

D. The ROKG delegation states that the ROKG requires international VSPs to file their contracts for interconnection with other VSPs or NSPs for authorization by MOC for the following reasons: (1) to prevent discretionary or unfair terms and conditions imposed by NSPs on VSPS; and (2) to prevent bypass of NSP networks, so that interconnection does not cause severe damage to the NSP's financial viability.

E. The USG delegation states that the current ROKG policy to review and approve interconnection contracts of VSPs constitutes a common carrier obligation and is inconsistent with the ROKG policy to review such contracts for informational rather than regulatory purposes only. The USG delegation also states that there is no need to review interconnection contracts between VSPs to ensure fair terms and conditions of services provided by NSPS, since such matters are addressed by NSP tariffs with VSPS. Finally, the USG delegation states that VSP interconnection would not cause severe financial damage to NSPS, and that this concern is insignificant in light of Korea's intention to open up direct competition between KTA and DACOM.

F. It is also the position of the United States that there should be no requirement for SPs to file separate interconnection contracts for connection with the services or facilities of NSPS, and that the terms and conditions of VSP interconnection with NSPs should be governed solely by uniform. NSP tariffs filed with and approved by MOC.

VI. Local Processing Requirements

The ROKG delegation states that the ROKG imposes no requirements on providers of international database and international remote computing services that information be processed in the Republic of Korea, except for the purpose of protecting national security or public morals, where the purpose or effect is not to distort trade.

VII. Self -Use and Shared-Use Communications

A. The ROKG delega tion confirms the ROKG's definition of self use for da ta communications as the use of private leased NSP ser vices or facilities, including leased line networks, f or communications by the same juridical person. Such juridical persons include corporations, proprietorship , and partnerships. Examples of such self use include , but are not limited to, communications between or am ong headquarters and branch offices, corporate departm ents, and headquarters and factories or warehouses via leased line service leased from NSPs. The category o f self use for data communications is described by Art icle 42.2 of the Public Telecommunications Business La w.

B. The ROKG delegation confirms the ROKG's definit ion of Shared use for data communications as the use o f private leased NSP services or facilities, including leased line networks, for communications between or a mong different juridical persons for non-telecommunica tions business purposes.

C. The ROKG delegation confi rms that joint ventures constitute juridical persons u nder Korean law.

D. The ROKG delegation confirms that there are no restrictions on the relationship between the parties that may share domestic NSP services or f acilities, including leased lines, for data communicat ions, as stipulated in Article 73-2 of the Enforcement Decree of October 1990.

E. The ROKG delegation confi rms that self-use, domestic and international NSP leas ed line services or facilities is permitted without MO C approval or notification for voice and data communi cations.

F. The ROKG delegation exclaimed that, under current law as codified in Article 85.2 of the Enforc ement Decree, as amended as of October 1990, shared us e of domestic leased line services for voice communica tions is permitted only within and among the following groups:

1. Central government authorities;

2. Local government authorities

3. Government invested authorities such as KTA and KEPCO; and

4. Research institutes financially supported by the central government, such as KISDI.

G. Shared use of international leased line services is currently permitted for data communications only on a case-by-case basis, with MOC approval, and if a close business relationship exists between or among the parties. These requirements are stipulated in Article 73-2 of the Enforcement of October 1990. Shared use of international leased lines in Korea for voice communications is not permitted under current law. The ROKG delegation confirms that, under current law, it has no exact definition of a close business relationship.

H. The ROKG delegation confirms that, in consideration of international practice and domestic conditions, it will develop a precise definition of close business relationships on or about the date of liberalization for international value-added services (i.e., July 1, 1991). The ROKG delegation further confirms that the ROKG will no longer approve shared use of international leased lines for data communications on a case-by-case basis, but will accept a simple notification by the shared user of its compliance with the ROKG's definition of a close business relationship and intent to engage solely in data, communications.

I. The ROKG delegation states that there is currently no settled international practice regarding the shared use of international leased circuits, and stresses the difficulty of defining shared use for data communications in a manner that would not disadvantage other users or intrude into the domain of registered VSPs. The ROKG delegation declares that the ROKG has made plans to liberalize the shared use of international lines for voice communications.

J. The USG delegation objects to the ROKG's differential treatment of voice and data communications, differential treatment of international and domestic use of leased lines. The services, and case-by-case approval of international shared use of leased lines. The USG delegation notes that it is difficult if not impossible for international shared use to occur if the ROKG does not permit the use of "exchange" equipment. The USG delegation notes that the USG's interpretation of the scope of intra corporate communications is broader than the ROKG's definition of self use, and includes communications between or among affiliated parties, for example, the parties in a joint venture or a parent-subsidiary relationship. The USG delegation notes that the ROKG's definition of self use is communications between the same juridical person, that Korean law treats joint ventures as juridical persons, but that the ROKG definition described joint ventures as shared users.

K. The USG and ROKG delegations agree to revisit the issue of self use and shored use of leased lines.

VIII. Operating Agreement Approval

A. The ROKG delegation states that it does not yet have a policy on what criteria it will use to approve operating agreements between Korean international VSPs and their foreign partners. The ROKG delegation confirms that the market for international value-added services will not be open to full competition until a transparent process for operating agreement approval is in place.

B. The USG delegation confirms its position that the ROKG approval of international VSP operating agreements is a barrier to entry, a common carrier obligation, and constitutes ROKG interference into private contracts negotiated on the basis of commercial considerations. The USG delegation confirms its expectation that the ROKG will enter into negotiations on international VANs that will include provisions on operating agreement approval, in particular the specific criteria for approval or denial, time tables for MOC decisions, and procedure for appeal and government consultations.

C. The ROKG delegation has states that the only criterion for approving the operating contracts, including interconnection provisions, of international VSPs is to ensure that such contracts conform to the terms of the governmental [USG: trade agreement][ROKG: arrangement] on international value-added services to be negotiated between the United States and Korea.

IX.Equipment Attachment

A. The ROKG delegation confirms that customers are free to attach, without separate approval or notification, any terminal equipment for which type approval has been obtained to the networks of NSPs. Such equipment includes multiplexers with a capacity of more than 2 megabits per second, high speed packet switches and any other digital or analog equipment. The ROKG delegation confirms that it will study the issue of Network Channel Terminating Equipment and Digital Service Units.

B. The USG delegation objects to the ROKG prohibition on the use of "exchange" equipment for the shared use of both domestic and international leased lines. The USG noted that this restriction was inconsistent with ROKG delegation statements on the free attachment of equipment to NSP networks, that the ROKG delegation gave no definition of "exchange" equipment, and that it would be impossible to share leased lines if there was no method of connecting them.

X.Competition Safeguards

A. The ROKG delegation confirms that the MOC will secure fair competition in the Korean market for domestic and international telecommunications services. Tho ROKG delegation further confirms that when an NSP engages in the provision of a value-added service, either directly or through an affiliate, the MOC will take steps to ensure that the NSP does not engage in anti-competitive conduct, for example cross-subsidization, predation, unauthorized disclosure of proprietary customer network usage information, or discriminatory provision of access to network services or functions.

B. The ROKG delegation confirms that it will soon initiate a study of the effectiveness of various competition safeguards, including structural and non-structural separation requirements, such as Open Network Service Provision (ONSP) and cost-accounting methodologies. This study will consider, among other things, sufficiency of accounting requirements to protect against anticompetitive conduct related to network access, the protection of' proprietary customer information, and the advance disclosures of technical changes to the network of NSPs.

C. In studying the issue of competition safeguards and with regard to proposed changes in Korean telecommunications policy, the ROKG will make available opportunities for public input from all interested parties, including domestic and foreign-invented VSPs, in the development of specific safeguards to prevent anti-competitive conduct.

D. The ROKG delegation states that it will introduce and endeavor to obtain passage of new legislation designed to secure and promote fair competition in the Korean telecommunications service market. This legislation will provide the MOC with the authority to implement adequate and effective anticompetitive safeguard measures, such as structural and non-structural separation and ONSP. ONSP or other equivalent measures will ensure that NSPs provide VSPs with access to network services and functions that are equivalent to the access that NSPs provide to themselves and to their affiliates for the provision of value-added services. Prior to the enactment of such legislation, the ROKG delegation confirms that it will use the full extent of its existing authority to enforce the policy described in the paragraph A.

E. The ROKG will ensure that NSPs make their services available to VSPs on a cost-oriented basis, and that they will applyany surcharges to the telecommunications leased circuits used by VSPs to provide their services. The ROKG will ensure that NSPs make services available to VSPs in a reasonable period of time.

F. The ROKG delegation confirms that, in accordance with the requirements of the PTBL, the ROKG shall give public notice in the Official Gazette, and NSPs shall give public notice in a special gazette and in newspapers, at least twenty days in advance of taking any measure affecting users, including VSPs. The ROKG delegation further confirms that any interested person, whether Korean or foreign, may comment on, and participate in any public hearings regarding, any proposed measures affecting the provision of telecommunication services.

G. The ROKG delegation confirms that safeguards to prevent anti-competitive conduct should apply only to NSPs, and do not apply to VSPs.

H. The ROKG delegation confirms that all governmental benefits in respect of the provision of telecommunication services will not be awarded with the purpose or effect of discriminating among providers of such services in like circumstances.

XI. Standards

A. Discussions regarding the implementation of Attachment 3 of the February 1990 Record of Understanding focused upon clarification of implementation measures and a review of bracketed elements.

B. Regarding standards setting and approval procedures, the Korean Government confirms that:

1. The ROKG has revised its standards-setting and approval procedures, which went into effect on July 27, 1990. -

2. Several new standards have already been implemented under the new procedures.

3. The ROKG continues to disseminate information regarding its new standardization process. This includes publication of an MOC guide book describing MOC's and Telecommunications Technology Association's (TTA) responsibilities in the standardization area, based upon guidelines agreed in the February 1990 ROU.

4. MOC verifies that it will investigate any problems reported to it regarding TTA's procedures. It also confirms its understanding that foreign interested parties may join all membership categories of TTA, both general and special, since there are no TTA procedures that discriminate against foreigners, It further confirms that foreign parties have voting rights in all TTA's subcommittees.

5. Regarding a request for verification of the methods of appeal and comment, the Korean delegation confirms that firms incorporated in Korea can be represented in the appeals process by its foreign or domestic representative. However, firms which are not incorporated in Korea may resort either to the GATT Committee on Technical Barriers to Trade or be represented by a Korean national.

6. The ROKG delegation has proposed to change bracketed language under Paragraph A(5) regarding Government Computer Networks, from "until a consensus of reasonable opinions is reached, to "until a reasonable majority opinion is reached." The U.S. delegation has agreed to consider the proposed language in consultation with its authorities.

7. The ROKG delegation confirms that TTA's recent document describing the newly implemented type approval procedures provides an illustrative list of mandatory standards and approval criteria, but does not contain an officially-sanctioned listing of all such criteria. MOC officials will review the TTA list and inform the U.S. delegation of any additional criteria that were not included on the TTA list, to ensure that U.S. industry is provided with accurate information.

8. The ROKG will include wireless equipment under the limitation of "no harm to the spectrum" criteria. The ROKG has issued for public comment a draft of a "Radio Equipment Regulation Ministerial Decree" to begin on July l, 1991, which specifies approval criteria limited to "no harm to the spectrum."

9. Regarding acceptance of test data, the ROKG delegation maintains its position that a foreign test laboratory must be accredited by the ROKG or present test data to "show compliance with standard criteria" set forth in the technical regulations adopted in 1990. (C.(3)) The ROKG delegation maintains this position because: (1) there is only one test for the type approval process; and (2) the FCC does not designate any Korean laboratories or manufacturers as eligible test agencies for type approval in the U.S. market. The ROKG delegation maintained that the FCC has no transparent system for accreditation of foreign labs and manufacturers for its homologation process. It further maintained that the FCC's list of labs whose test data the FCC accepts regularly for the purpose of certification currently includes no Korean laboratory or manufacturer. The USG delegation noted that the FCC does not need to officially designate any laboratories for type approval because compliance with relevant standards is met through self-certification of the manufacturers without the need for government interference.

XII. Government Procurement

The ROKG delegation confirms its intention to implement fully all provisions of the February 1990 ROU regarding government procurement of telecommunications goods and services. Further, it indicates that responses to GATT Government Procurement Code-member questions on the initial Korean offer for consideration in its application to join the Government Procurement

("Code") would be forthcoming in the next few weeks and that the ROKG could be prepared to conduct negotiations regarding the terms of its accession with the code member countries, possibly during the first quarter of 1991. In this regard, the ROKG delegation would like the USG to propose dates and venue for such negotiations between the two countries. [U.S.: The USG delegation confirms that upon the ROKG's implementation of the commitments regarding telecommunications procurement contained in the February 1990 ROU and successful completion of the Code application process, the U.S. would provide the Republic of Korea with reciprocal competitive opportunities in the U.S. government procurement market.] [ROK: The USG delegation confirmed that upon the ROKGs implementation of the commitments regarding telecommunications procurements contained in the February 1990 ROU or successful completion of the Code application process, the U.S. would provide the ROK with reciprocal competitive opportunities in its government procurement market.]

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.