GameTheoretic Analysis of Digital Multimedia Broadcasting Industry

Cellular phone users in Korea can watch TV using their mobile phones. The new multimedia service for the mobile users is called Digital Multimedia Broadcasting (DMB). DMB is a process of broadcasting multimedia over the Internet or satellite that can be tuned in by multimedia receivers or players. There are two competing DMB technology standards in South Korea: Terrestrial DMB and Satellite DMB. These services are expected to become fierce competitors in the mobile broadcasting market. One of the major differences between the two is the service business model: while SDMB is a fee-based service, T-DMB is a free service. There are two important regulatory issues imposed by the government for the purpose of fair competition: (1) SDMB is not allowed to re-transmit land-based TV programs and (2) T-DMB is not allowed to convert to a fee-based service. In this paper, the authors make an analysis of the DMB market using a game theory approach. Three major issues are examined: (1) which of the DMB services will have a better market position in the future, (2) what is the optimal pricing level for T-DMB service if both regulatory issues are removed and (3) what is the amount that the regulatory body will allow T-DMB providers to bill their customers if it is needed.