South Korean internet had been one of the best and fast network in the world; especially up to the point before KT was privatized. After privatization, three internet service providers have been focusing on exploiting profits, not on making better and faster network infrastructure because they don't have to.
wouldnt competition naturally produce better products if there are 3 providers? from what i remember services from companies, or really any type of services were top notch in korea. due to culture, competition, etc. also noting pricing in general is very high in korea
Competition theory assumes that if firms are abusing their market position by overcharging consumers, competitors can enter the market and undercut them.
When you have a market with very high barriers to entry (government regulation + physical infrastructure costs), you can't just start your own internet service provider to undercut existing Korean telecommunications, because you won't make enough money to pay your investment back.
Yes, this is called a ‘natural monopoly’. It’s the case with most infrastructure - basically there is little incentive for a private company to be more efficient than a public utility, since anybody building competing infrastructure is infeasible, but because they want to make profit there is incentive for them to charge more and to cut costs in other ways (like not investing in more than the bare minimum of maintenance). So it generally tends to work out worse for the customers.
Unfortunately some people genuinely believe the private sector will always deliver services cheaper and more efficiently than the public sector, so all around the world this mistake keeps being made. And the continual failures seem to never affect the firm belief of the adherents to that theory…
I’m not sure how is the reality in South Korea but, if my country is anything to go by, these 3 companies are probably a hidden cartel that monopolizes the price and offers while offering the bare minimum.
There's no economic motivation to compete. The motivation is to raise prices slightly, wait for the other two companies to follow suit as a signal, then to raise prices again. If you raise and someone doesn't follow, backtrack to the previous level. This is assuming that they don't just have a meeting and set prices over drinks.
Right. There are two possible very different strategies - even illegal collusion. There is no reason to compete aggressively until one of the "several" chooses to break ranks and do so.
And if the one that breaks ranks is tiny, that might still not be enough reason for the others. Since there is a good chance they will just fail.
This is one of those situations where rubber hits the road on theory vs real life. The concept of multiple vendors being better for the user seems to not play out as the multiple vendors are still a low number (3 in the current example) which means it's very easy for them to collude even if they never actually get in the same room, chat session, email chain, etc to do the colluding.
This has been the argument for decades to justify privatisation of state infrastructure. Anything with high barriers or physical limitations instead just becomes monopolised. It’s a failed experiment at this point. I’d be highly suspicious of the motivations of anyone arguing for this in 2024.
