Korea's Mobile Broadband Revolution: Some Market Projections

Pyramid Research recently came out with a report that includes projections for South Korea's communications market revenue through 2015.   The accompanying bar chart (click on the graphic to see a larger version) summarizes their projections.  Not surprisingly, fixed voice service is projected to decrease, while fixed VOIP (Voice over Internet Protocol, as in Skype) is projected to increase significantly by 2015.  Mobile data, the green portion of each bar, is projected to show the greatest increase through 2015.  This segment of the market essentially refers to mobile use of the internet via Apple's iPhone, Android handsets and other devices.  Of course, it include mobile use of Skype, which should come naturally to those who already use it as a fixed VOIP service on their computers at the office, in the home or elsewhere.
The main trend represented in the graphic included here is that broadband internet is going mobile!  I would be surprised if mobile data services don't grow even more than Pyramid predicts.

The ITU's Digital Opportunity Index--Korea Ranks Number One in the World

For the past several years, South Korea has ranked number one in the world on the ITU's Digital Opportunity Index (DOI). For that reason alone it is worth understanding what this index is and what it measures. The index is based on 11 ICT indicators, grouped in 3 clusters: opportunity, infrastructure and utilization, as illustrated in the accompanying graphic (click the graphic for larger version).

Moreover, the DOI is an outgrowth of the World Summit on the Information Society meetings organized by the ITU. Among the dominant concerns at these meetings was the digital divide and the degree to which developing as well as developed nations could achieve digital opportunity. In the Geneva phase of the World Summit on the Information Society, participants decided that, in an ideal world, digital opportunity would mean:

• The whole population having easy access to ICTs at affordable prices;
• All homes equipped with ICT devices;
• All citizens having mobile ICT devices; and
• Everyone using broadband.

As one can see from a glance at the world map, digital opportunity currently varies greatly from country to country and regionally. A couple of points deserve to be emphasized about South Korea's world-leading ranking on the DOI index. First, the index contains a strong measure of infrastructure. The presence and pervasiveness of an infrastructure, or we might say the ubiquity of a network, is a necessary precondition for the equitable flow of information among all citizens in an information society. Second, the "opportunity" which concerns the ITU is opportunity for all citizens, to access information, not simply the question of whether the new networks contribute to economic growth. Third, this index does not incorporate measures of literacy and education, but the inclusion of such data would in all likelihood bolster South Korea's standing. Fourth and finally, one would hope that somehow an index like DOI could be related to the language in which information is accessed, processed and used. The incoming administration in Seoul argues that English has become the lingua franca and therefore Korea needs to mount a major effort to improve English ability precisely in order to improve productivity. If 90 percent of the information on the internet today is in English, is fluency in that language a pre-requisite to true digital opportunity?

Information Age Indices--Where Does Korea Stand?

This month another index has been announced, the purpose of which is to measure progress toward the information society. The development of this index, called the "Connectivity Scorecard," was funded by Nokia-Siemens Networks and its development was led by Professor Leonard Waverman of the London Business School. The developers took as two points of reference, the ITU's Digital Opportunity Index (DOI) and the Economist's E-readiness index. A basic premise of the new index is that the DOI and E-readiness indices stress only infrastructure and usage and slight "the skills and complementarities required to drive communications networks as an engine of growth. That is, it is “smart” usage which helps make Connectivity a driver of productivity gains and hence economic growth." (See The Connectivity Scorecard.) What caught my eye was the statement in this report that "Korea, a star performer on other indexes, finishes 10th largely because very high performance in infrastructure is not matched by correspondingly high scores on usage measures, especially by businesses." At first glance, this statement did not seem to mesh with my understanding of what is going on here in South Korea. To be blunt, it makes me wonder about the usage measures employed in The Connectivity Scorecard and whether they treat countries like Korea fairly, given that the majority of network activity here is carried out in the Korean language (한글 하고 아국마로). The development of international indices to measure the degree to which countries are networked, the extent to which these networks are used, and how that relates to economic, political and social development is no doubt important. However, it seems strange that South Korea would suddenly drop in the rankings with this new index. Rest assured that, as time permits, I will return to this topic and compare the major international indices in some detail.

Korea is Not the "Most Wired" Country in the World

One might be forgiven for believing that Korea is the most wired nation on earth. The most heavily networked nation, very possibly, but not the most wired. This is so for several obvious reasons.

• Merriam Webster online and most other dictionaries define wire as having a metallic component, like the copper phone wires that if counted or weighed would make the US the world's most "wired" country.
• Even if the newer fiber optic cables are counted as "wires" designation of the most wired nation in the world ignores the broad trend in recent years toward "cutting the cord," i.e. the introduction of mobile networks. South Korea is a world leader in mobile technology deployment and use.
• "most wired" is a vague term that makes a nice headline, but in fact is used by different sources in different ways to confuse matters. Anyone who doubts this should do a quick Google search on "most wired countries" (without the quotes). This will show that among the measures of being "wired" are: (1) the information society index, IDC's annual study which includes fifteen variables, (2) broadband users, use per capita, or hours of use per week, (3) polling data about use in the last month, (4) broadband access as in percentage of households connected, (5) the digital access index or digital opportunity index (DOI) and so forth.

Although the "wired" terminology has a comforting, anachronistic feel to it, we probably need to get beyond it to be clear about measures of broadband access or infrastructure versus usage. These two types of measures, along with others such as education, go into indices such as the Digital Opportunity Index. Such measures are going to be important to track various "digital divides" and progress in bridging them.

Education, Age and Broadband Use in Korea

All the evidence suggests that young people in Korea, and those who are highly educated, are the most active participants in the information revolution, at least if you measure that by levels of broadband usage. The data for education are show in the figure above (just click on the figure to see a full-size image of it). It shows clearly that levels of internet usage increase with education. These data emphasize the potential, even in the most networked society on earth, for a digital divide between those who have little formal education and those that are highly educated. Age also has a strong relationship to internet usage, as shown in the figure below from the same OECD report. These two findings, that age and education are highly related to internet usage, are reproduced as other countries adapt to the internet era, and require elaboration based on other factors. However, they are clearly two major aspects of the information society, or the knowledge economy, evolving here.

Broadband Internet in South Korea

Broadband internet penetration, as measured by the OECD, the ITU and other organizations, indicates the number of internet subscriptions per 100 population. As indicated by the chart in my previous post, South Korea led the world by this measure for the first few years of the new century. It also led, and continues to lead, by another important measure--the percentage of households connected to broadband internet. As of September 2007, 90.1% of South Korean households had broadband connections, the highest percentage in the world. As shown in the chart above, other countries are catching up, led by several of the smaller nations of Scandinavia and Europe. South Korea's high household access to the internet is boosted by the extremely high concentration of its population in Seoul and a few other large cities. Beyond that, even in smaller towns a large portion of the population resides in the large apartment complexes that have, for some years now, all been wired for 100 Mbps internet connections. With such a high level of household connections to fast internet service, it stands to reason that usage levels will increase and that seems to be the case, as shown in the second graphic below. Over half of the South Korean population now uses the internet more than ten hours per week.

Information Highways: Korea's Broadband Networks

Anyone with an interest in Korea's telecommunications development and its current status as a world-leader in broadband infrastructure, will want to consult the OECD's broadband portal. This portal makes available data for all of the OECD countries and a variety of studies that help to make sense of the information revolution around the world. South Korea has been an active participant in these new OECD studies.

In an earlier post, I commented on the tendency of mainstream media reports to lag or misrepresent actual developments in South Korea. The OECD data on broadband internet penetration from 2001 through mid-2007 help us to understand why. In terms of this particular measure, South Korea was number one in the world until 2005, when some small Scandinavian and European countries caught up. The "suddenness" of South Korea's rise as a broadband internet power is probably what threw the mainstream media off course. It simply didn't fit within the story line used to report about that nattion.

There is much more information to digest on the OECD broadband portal, quite a bit of which relates to the South Korean experience. I plan to comment on it in future posts.

Korea's DMZ as Digital Divide -- The Satellite Photos

The topic of Korea's digital divide obviously attracts interest. It is the single most widely read post on this new blog. A bit of research on the web indicates that the existence of iconic satellite photographs of the Korean peninsula at night have contributed to the interest. These have indeed been widely circulated on the internet and have received some attention in the business and mainstream press. Former Secretary of Defense Donald Rumsfeld used such an image an October 11, 2006 news briefing following North Korea's nuclear test. The image used during his briefing shows not only the well-lit urban concentrations in South Korea, but also the bright lights of the squid-fishing boats off the east coast of the country.

There are many versions of the satellite photos and some of the most interesting are those provided by Google Earth. For example, a researcher at the Georgia Institute of Technology has put together a world map of Earth Lights on Google Maps. You can also use an interesting overlay available within Google Earth to zoom in on the Korean peninsula at night. What all of these views have in common is that North Korea, with the exception of Pyongyang, is literally "in the dark." Not surprisingly, these images from space have come to symbolize the lack of modern communication networks in North Korea, compared with the south. A view of the Korean peninsula representing the density of either fiber optic networks or mobile telecommunications networks would approximate what the satellites now capture at night.

Korea Posts Large Digital Electronics Trade Surplus in 2007

The news is out. According to the Ministry of Commerce, Industry and Energy (MOCIE), Korea’s trade surplus in the digital electronics sector reached a record $57.1 billion in 2007, fueled by strong global demand for display panels and semiconductors. Total exports of digital electronics rose 8.9 percent year-on-year to $124.9 billion, while imports gained 10.1 percent to $67.8 billion. Exports of liquid-crystal display panels rose 36.4 percent over 2006. According to the Ministry Korea’s total exports rose 14.2% year-on-year to USD $371.8 billion in 2007. Digital electronics accounted for $124.9 billion or 33.6 percent South Korea's total exports. More evidence, if any were needed, that information and communication technology is the primary growth engine of Korea's economy today. This is especially true since exports of digital electronics do not factor in their influence on other leading export sectors such as automobiles, steel, general machinery or shipbuilding.

Report Positions Asia, Korea in World IT Trade

The World Trade Organization yesterday issued an important report that highlights the role of trade in the development of Korea's information economy over the past decade. The World Trade Report 2007 marks the 60th anniversary of the multilateral trading system. More importantly, it contains a section that examines trade in information technology (IT) products since the December 1996 signing of the Information Technology Agreement (ITA) by 23 economies at the first WTO Ministerial Conference in Singapore. When the ITA went into force in 1997 the trade value of the participants exceeded 90 percent of world trade in covered products. A goal of the agreement was to achieve maximum freedom of world trade in IT products by eliminating all tariffs on these products. As noted in the report, an outstanding feature of world trade in IT products was the prominent role of Asia. In 2005 Asian economies accounted for more than 50 percent of world exports and more than 40 percent of imports of IT products. In that year, (as shown in the chart below) Korea was the world's sixth largest exporter, sending IT-related goods worth some $87.95 billion (roughly 81.13 trillion won) to other countries. The top five exporting economies were the EU, China, the U.S., Japan and Singapore. South Korea ranked seventh in the world as an importer of IT products in 2005, purchasing $59.22 billion worth of such products from other countries. Perhaps most remarkably, South Korea was the only country other than China to maintain a continuous increase in world market share over the past nine years, despite the IT bubble bursting in the early 2000s. The entire World Trade 2007 report may be downloaded at the WTO website http://www.wto.org/