Panel applies impractical rule too strictly in selecting new cable television operators

The recent selection of successful applicants for general and news programming television licenses resulted from the application of ambiguous criteria which may be viewed as illegal.

The ignorance over a criterion which restricts double investment by a stakeholder of an applicant in another applicant has led to the rejection of a bona fide applicant.

In setting the screening criteria for television licenses, the Korea Communications Commission banned a single entity with a 5 percent stake in an applicant from investing in another applicant.

The rule was viewed as problematic by the commission itself, which voiced concern about the lack of its legal basis.

Nevertheless, it applied the standard too strictly in screening the applicants, and, as a result, rejected a well-intentioned applicant that tried to diversify its stakeholders to satisfy the intent of the media law and screening guidelines.

Furthermore, all aspiring channels and their shareholders had kept silent about the makeup of shareholders for security reasons. So, it was practically impossible for a would-be broadcaster to grasp whether one of its shareholders doubled as an investor in another applicant. 

In this situation, there was the possibility of an applicant falling victim to the blind spot in the screening criteria, and the possibility has become a reality.

Herald TV, led by Herald Media, a company which is nominally affiliated with but practically separate from the major shareholder of Herald TV, was found to have held a small stake in another applicant which wanted a license to broadcast all genres of programs.

Due to this, HTV received a deep cut in marks. Otherwise it would have surpassed the cut-off level of 800 points. The rejection of the HTV application for the reason that the two companies are legally a single entry raises suspicions that the commission ignored reality to apply the rule too strictly in order to select a certain applicant.

The overlapping investment restriction criterion was a matter of dispute from the beginning. The watchdog agency admitted to its unfairness in September last year.

The panel said in its document for a public hearing that it could cause controversy to set the equity restriction without legal basis.

The restriction on overlapping investment has serious flaws in both practicality and fairness. If an applicant goes public later, its shares will be traded freely, making it possible for an investor in another applicant to acquire the stocks.

In the public hearing document, the watchdog agency also pointed out that “the restriction has no merit because it is impossible to restrict stock trade and double investment after a successful applicant will list its equity on the stock exchanges.”

The panel also said that the criterion might be an excessive requirement for new networks because existing broadcasters are not subject to the rule.

Taking into consideration the excessiveness of the rule, the panel has either abolished or allowed double investment in case of the license issuance to satellite broadcasting, satellite digital media broadcasting and news FM.

In addition to the double investment restriction criterion, another matter of concern is how the commission will handle the MBN channel, a business news channel, which is supposed to be returned by the Maeil Business which got a license for general programming. Even after the license was issued this time, the number of news channels remains the same, triggering a call for additional licenses in order to promote diversity of public opinion.

Given the fact that the existing news channel YTN is also indirectly owned by the government, it is controversial, too, to issue a news television license to the state-subsidized Yonhap news agency. The Yonhap news agency had spun off YTN. In this respect, the decision to issue the license to the news agency is not appropriate to the goal of fostering diversity of news media shareholders and public opinion.

By Chun Sung-woo (swchun@heraldcorp.com)