The authors address claims that vertical ownership ties reduce programming diversity, restrict entry of competitors to cable, or have other socially undesirable effects

The Korean cable television industry has recently experienced a strong tendency toward the vertical integration of system operators (SOs)/cable operators and program providers (PPs)/cable networks, resulting in multiple system program providers (MSPs). This formation of MSPs may lead to either vertical foreclosures or unfair treatment for competitors, particularly independent PPs. In fact, a simple count shows that SOs affiliated with five MSPs tend to carry affiliated PPs more frequently than independent PPs and to provide more accessible channel numbers to these affiliated PPs. This study examines the effects of this vertical integration on channel carriage and channel numbers of affiliated and unaffiliated PPs. An empirical analysis is conducted using cross-sectional data obtained in 2013 on analog channel numbers. Excluding uncarried PPs in the regression equation for the channel number may produce some sample selection bias. To address this bias, Heckman's two-step procedure (the so-called "Heckit estimation method") is adopted. The empirical results indicate that, with other variables for SO and PP characteristics controlled for, vertically integrated SOs are more likely to carry affiliated PPs than unaffiliated ones and more likely to provide accessible channel numbers to affiliated PPs. As a general practice, terrestrial, total TV programming, and home shopping channels are given lower channel numbers. The results are robust to the inclusion or exclusion of these channels. In addition, SOs tend to carry PPs with higher viewing rates more frequently and assign lower channel numbers to them. The larger the number of available analog channels, the higher the probability of the channel carriage is. The results suggest that vertically integrated SOs may unfairly discriminate against unaffiliated or independent PPs. In this regard, broadcasting regulatory policy should be carefully devised by considering the status of competition in the broadcast program market.