Competition and Policy Issues of Over-the-Top Video in the US and Korea

Continuous innovations in the media and telecommunication industry marked by technological convergence enable consumers to access video content through various broadband networks. With the diffusion of new technologies, online video reaches consumers via multiple devices, including computers, smartphones, tablets, gaming consoles, television sets, and other equipment connected to the Internet. As evidence of this trend, Internet-based video services like over-the-top (OTT) have shown a rapid growth in many countries including the U.S. and Korea. In the U.S., the FCC refers to OTT video services as online video distributors (OVDs), so-called edge providers that offer video programming to subscribers. Unlike an MVPD, who packages an array of programming channels and uses its own infrastructure (e.g. cable) to distribute content to subscribers, an OVD packages programming but uses an existing broadband connection to distribute video content. In other words, these edge services like Hulu and Netflix run OTT of the Internet, often on an MVPD-affiliated broadband connection. Like most OTT services, OVDs are largely unregulated, falling outside any traditional service classifications and rules that apply to MVPDs or broadcast stations. As the FCC suggests, “the OVD industry is evolving, and no single business strategy has emerged as the dominant model. Unlike with MVPDs, which generally compete to be the sole provider for a consumer, a single consumer often uses or subscribes to multiple OVDs.” In Korea, OTT video service is categorized as one of the “value-added telecommunications services” based on the Telecommunication Business Act. Whereas comparatively strict regulatory frameworks are imposed on Pay-TV service operators such as cable TV operators, satellite broadcasters and IPTV operators based on the Broadcasting Act or the Internet Multi-Media Broadcasting Business Act, light-touch regulation is imposed on OTT video providers. While enjoying little regulation, OVDs vary in terms of their various business models, with the more popular services like Netflix and Hulu operating under “all you can eat” video streaming of their current inventory of programming. In addition to offering previously aired television shows and films, OVDs like Netflix, Hulu, Amazon Prime and Crackle have all distributed their own original programming series. Some OVDs like CBS-all Access and HBO GO provide broadcast and cable network programming directly to individual subscribers. Other OVDs work under a pay-per-view model, where by one purchases a single episode, movie or series to watch within a limited time window (24-48 hours). In addition, new services like Sling TV provide a scaled-back package of existing MVPD channels that include many of the more popular cable networks. Utilizing comparative case study method, this paper examines the market status and regulatory environment of OTT video services in both the U.S. and Korea. To date, research has yet to address a comparative analysis of OTT video services between two countries that are arguably significant players in the Internet economy. This comparative analysis includes the regulatory classifications of OTT and its competitors, network neutrality and deployment implications in fixed and wireless broadband, data privacy and security concerns, as well as the emerging business models and market structure within the video landscape. Based upon these comparative findings, this study suggests future policy directions to address the anticipated growth of OTT video as a significant competitor to regulated services.