Hansuk Kim, Ph.D. SVP, Global Business October 2004
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1 Success and Challenges of Korean Broadband Internet Hansuk Kim, Ph.D. SVP, Global Business October 2004
2 Contents 1. Broadband Internet in Korea 2. Key Success Factors 3. Beyond Broadband Access 2
3 3
4 IT Industry in Korea Billion USD GDP IT Product IT product proportion in GDP % 12.9% 14.7% 15.6% 9.3% 11.2% (ref:
5 PC Penetration in Korea Million PCs % 80% 20 60% % 40% % % 0% # of PCs Penetration rate per 100 people (ref: 5
6 Leadership in Global IT Market Korean IT companies assume dominant position in global market Mobile handset market Sony, Ericsson Others 12.8% 24.9% 20.0% 27.7% 14.7% Nokia Other digital market Market position of Korean product Market share No.1 No.2 No.2 100% 80% 60% 40% (source : IDC) Samsung, LG Motorola 6 20% 0% LCD PDP Digital TV (ref :
7 Growth of Telecom in Korea Million subscribers As of July 2004 Subscriber (M) Population (%) Household (%) Telephone % 152% Future Growth Engine Mobile Phone % 240% Broadband % 77.8% POTS Broadband Wireless Cellular Year
8 Broadband Subscribers in Korea Million People 30 (ref: , % 100% 80% 60% ,617 40% 5 3,103 20% 0 7.4% % Thrunet Hanaro KT # of Households using BB # of Internet users % of Internet users per population 8 78% of total households
9 Broadband Subscribers in Korea Million People mil. (14.3%) 1.3 mil. (11.0%) 2.8 mil. (23.8%) 5.9 mil. KT(50.9%) Others Thrunet Hanaro KT Dec. 98 Dec. 99 Dec. 00 Dec. 01 Jul (ref: www. mic.or.kr)
10 Changing Life Style Phenomenal increase of broadband Internet usage Weekly hours spent on Internet & TV % of daily Internet users 16.5 h Internet TV 71.9% 14.1 h h 30.8% (ref: isis.nic.or.kr) 6.76 h (ref: isis.nic.or.kr) 10
11 Technology Employed Cable 39.3% DSL 60.2% First service by cable modem DSL dominant now June 2000 Cable 34.4% LAN 7.6% BWLL / Satellite 0.3% DSL 57.7% June 2001 July
12 Changing Life Style On-line Off-line Banking Stock trading Commerce Gaming 30 % 50 % 17 % 38 % (ref: isis.nic.or.kr) 12
13 13
14 Key Success Factors All relevant factors needed Dynamic interaction of KSFs needed 14
15 KSF: Cultural Acceptance Digital or die Historical lessons driving national consensus for digitalization Socially competitive Peer pressure Hurry psychology 15
16 KSF: Policy and Regulation Gov t projects/initiatives Early adopter Public promotion Pro-competition Liberalization Facility-based competition Effective incentives Internet PC Cyber Building Certificates 16
17 KSF: Demand Enthusiastic adoption of new services Affluent, savvy, young Many killer applications Online games, stock trading, education Wholesale demand PC cafes.com ventures 17
18 KSF: Supply Need for Survival Facility-based competition Aggressive pricing Geographical Advantages Dense population/network Extensive legacy network Dropping network costs Quantity procurement 18
19 Lessons All factors are required Policy : Align incentives, early adopter roles Demand : Attractive services/apps Supply : Facility based competition Timing and coordination are crucial Need to reach critical mass as fast as possible Sequence less important 19
20 Two Sides of the Broadband in Korea Threats Revenue: Saturating market with flat rate Expenditure: Increasing CAPEX/OPEX from doubling traffic High customer expectation Avr. ~4.5Mbps bandwidth per customer Customer sensitivity to network quality Opportunities Has established High quality infrastructure Large customer base Opportunities in application & value-added services 20
21 21
22 National Vision IT839 U-Korea 8 New Services WiBro DMB Home Networking Telematics RFID-based W-CDMA DTV Broadcasting Internet phone (VoIP) 3 Infrastructure Broadband Converged Network (BcN) U-Sensor Network (USN) Next Generation IP Address (IPv6) 9 New Growth Engines Next Generation Mobile Comm Digital TV Home Networking IT SoC Next Generation PC Embedded S/W Digital Contents Telematics Intelligent Robot 22
23 Different Business & Different Focus Ubiquity Convergence Bandwidth Handy Beyond broadband business Quality Current broadband access business Personalization 23
24 KT s s Octave Project KT s Future: Single service provider (high speed Internet) multiple service provider (application service) New Application Services that will Take Up Broadband Internet Revenue Providing octave service and device to the home with broadband access Reaching up to the next octave level : twice the growth of the current broadband revenue 24
25 Octave Project Red Service Happy Home Green Service Intimate Home Blue Service Hopeful Home Yellow Service Secure Home KT Octave Device Managed Broadband Network (Megapass/NESPOT) 25
26 KT s 4 Color Octave Service High-quality Services for Diverse Customers increasing ARPU Red Service Happy Home Content Service Pay TV /VoD/ AoD/ Game Green Service Intimate Home High Quality Telecom Service High-quality VoIP/ High-quality Videophone Blue Service Hopeful Home Education Service E-learning/EoD/ Education Broadcasting Yellow Service Secure Home Safety Monitoring Service Home Viewer/Intelligent Robot/ Monitoring Elderly and Children 26
27 KT s s Octave Device Telco Service Platform Managed Broadband Network Premium Access Red Service Green Service Blue Service Yellow Service TV PC Phone Extra Device PDA PCS 27
28 Challenges Business Issues Mature market Legacy network evolution Adding value to the network IPR, Security Policy of Regulatory Issues Overhauling regulatory framework Promotion of convergent services Overcoming digital divide 28
29 The Value Networking Company
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