KT Stuck in 2G Mobile Service Conundrum?

The complex interplay between mobile service providers, Korea's telecommunications regulator and the handset and equipment manufacturers is the underlying theme of an interesting article in The Korea Times today.
KT, the country’s No. 2 mobile carrier, desperately needs to close its second-generation (2G) mobile service after dropping its bid for the 1.8 gigahertz (GHz) band in the government auction, otherwise it will lag behind competitors in adopting the ultra-fast 4G service. The regulator, however, isn’t approving KT’s move without proper guidelines.
As noted in an earlier post, KT dropped its bid for the 1.8 GHz band Monday, allowing competitor SK Telecom, the biggest player in the industry, to buy the band at 995 billion won, more than double the starting price.
“We sought approval from the Korea Communications Commission (KCC) for our plan to close the 2G service early August,” a KT representative said.
However, it remains to be seen whether the regulator will approve it. KT already sought approval a few months ago, but the KCC rejected it saying the carrier still has too many 2G users.
KT said it has greatly decreased the number of 2G users since then. It currently has 320,000 2G users, a steep decrease from 1.1 million in March when it first announced the plan to halt 2G service.
“The number is decreasing by thousands each day. We expect to get the green light this time,” the KT representative said. KT has been trying to lure 2G users to its 3G service, providing new handsets for free or offering subsidies and exempting subscription fees.
KT Chairman Lee Seok-chae held a press meeting, and announced that KT would halt the 2G service in September to launch LTE service in November. Lee’s remark is regarded as pressure on the KCC to allow it to halt 2G service.

More on the Opening of Korea's Smart Phone Game Market

As noted in an earlier post, the Korean government has decided to open up the market for mobile games, by eliminating required government ratings.  Bloomberg's Business Week has an interesting follow-up article on this development. It included the following description of a game developed in Korea that was not available to iPhone users in Korea until now.
Air Penguin, a game in which players guide an animated penguin across an icy landscape, jumped to near the top of the iPhone gaming charts last spring. Yet until now the game hasn’t been available to iPhone owners in the home country of its creator, Seoul-based Gamevil. That’s because South Korea has long required game makers to submit their products to the government for review of their suitability for various age groups based on factors such as violence and sexual content.
I particularly liked the illustration that accompanied the Business Week article (click to see a full size version).

Korea Eliminates Required Government Ratings of Mobile Games

As reported by Bloomberg, customers in South Korea will soon be able to download Rovio Mobile Ltd.'s best-selling "Angry Birds" on their iPhones. Korea scrapped rules yesterday requiring developers to have mobile games rated by government, said Yi Ki Jeong, a manager at the Ministry of Culture, Sports and Tourism in Seoul. The rule clashed with internal policies at Apple and Google Inc. (GOOG) enough for the companies to shut their mobile-game stores in the country, keeping Rovio and other developers from offering their products in Korea, Yi said. “A new chapter is opening in the Korean smartphone-game market,” said Jang Woo Jin, an analyst at NH Investment & Securities Co. “With the rule out of the way, we can now expect Apple and Google to throw open games in Korea.”

Google Under Scrutiny in Korea

Even in this information age, the major nations and cultures of East Asia often seem inscrutable to the mainstream western press. Since mid-April, the international media, led by business writers and technology blogs have been abuzz with news from South Korea. There, two leading internet portals, Naver and Daum, had lodged a complaint against Google with the Korea Fair Trade Commission, the nation’s competition and antitrust regulator. They alleged that Google unfairly used its status in the mobile industry to make it difficult or impossible for competing search services to be installed on Android devices in Korea. By forming a marketing partnership with major smartphone producers, so the complaint reasoned, Google had unfairly created a new ecosystem in which the Android system was offered free as a way to control the market.Furthermore, Google’s 15-20 percent share of Korea’s mobile search market could not possibly reflect the free choices of mobile carriers and manufacturers since Google controls only a small single-digit share of fixed line internet search in Korea. Google responded to the complaint with a statement that “carrier partners are free to decide which applications and services to include on their Android phones.” However, as widely reported thus far, news of the complaint against Google in South Korea fits into a familiar and most plausible story line. Many reports have explicitly linked Korean developments to the investigation of Google launched last year by the European Commission, and the complaint filed earlier this year by Microsoft. While this story line may be accurate, as far as it goes, it does not go far enough. The developments in Korea deserve closer scrutiny with a bit more historical and cultural context. The following elements should be added to the story to more adequately understand what is occurring with the complaint against Google. First, an acknowledgement that South Korea led the world in constructing nationwide, fast, fiber-optic broadband internet networks. When U.S. Vice President Al Gore spoke in 1994 of the need for an “information superhighway”, Korea acted the following year by implementing its ambitious Korea Information Infrastructure (KII) plan. By 1999, the year Naver was launched, PC Rooms had spread throughout Korea and with them such popular multi-player online games as World of Warcraft. The Korean social networking service Cyworld also debuted that year, half a decade before Facebook was invented! Second, while Naver is unquestionably Korea’s most popular internet portal, it is not at all an internet search engine like Google. Naver’s most popular feature, called “Knowledge-in” allows Koreans to input questions that are then answered by other Koreans online. Moreover, regular searches on Naver return pages on which paid advertisements top the results. When compared with Google, Naver appears as a large, Korean-language intranet with social networking and collective intelligence capabilities, rather than a comprehensive internet search tool. Its success underscores the centrality of language to web-surfing behavior. Third, although much of the international reporting mentions the rapid diffusion of smartphones in South Korea, with over ten million currently in use, some relevant history is generally ignored. Although introduced in the U.S. in mid-2007, Apple’s iPhone did not reach the South Korean market until two and a half years later! The combined interests of Korea’s mobile service providers, large handset manufacturers, and government policies led to this unusual set of circumstances. Although Korea was the first nation in the world to commercialize CDMA technology and build nationwide networks with it, public use of these 3G data services remained at extremely low levels through mid-2009, even as the iPhone was proving immensely popular all around the world. Consumers were put off by the high cost of such services, while Korea’s mobile service providers feared the loss of voice revenues to the new VOIP services like Skype. Finally, the extraordinarily rapid diffusion of smartphones here in South Korea, owing partly to pent-up demand, has a decidedly youthful cast. The same young people who were loading Skype onto their iPod Touch devices while awaiting the arrival of the iPhone in 2008 and 2009, and who studied English more avidly than their parent’s generation, were early adopters of the iPhone and Android devices. Interpreted within the above background context, the recent complaint against Google in South Korea has alternative explanations that do not fit so neatly with the story line advanced by most international media. It arose partly out of a natural reluctance on the part of Daum and Naver to see their market share internet search slipping away with the introduction of smart phones. Other explanatory factors are language and more global patterns of internet use by young people. Google’s growing share of Korea’s mobile search market may in fact be driven by web surfers who are discovering a great deal of English and other language content on the wide internet beyond the current search capabilities of Naver. This would also explain why it is not only Google’s share of search that is increasing with the adoption of smart phones, but also use of Facebook and Twitter, social marketing innovations that, like Google, originated in the West.

How Widespread is Mobile Phone Use in North Korea?

The English online version of The Chosun Ilbo this morning has a short, but fascinating article, entitled "How Widespread is Mobile Phone Use in North Korea?"  As readers of this blog will know, I've been following not only the extent of mobile phone usage in North Korea, but also its implications, in posts over the past several years.  According to The Chosun Ilbo article, the mobile phone penetration rate in North Korea is only about 1.3 percent, far lower than South Korea's 103.9 percent, but the average usage time amounts to 300 minutes, more or less the level of South Korea's. Hwang Sung-jin of the Korea Information Society Development Institute, said this is because of brisk usage among high-ranking North Korean officials.  The article also quotes Suk Ho-ick of KT, the chairman of the IT Unification Forum, on North Korea's efforts to control the use of mobile phones.

Mobile Phone Use in North Korea Increasing and Diversifying

Media reports, including one in The Joongang Daily, indicate that mobile phone usage in North Korea is up 50 percent, year on year.   The development and use of mobile telephony is a topic that I've followed somewhat closely in this blog (see earlier posts).  There are many interesting aspects to the development.  Use of Chinese mobile services along North Korea's border with China highlights the dilemma that the North faces in trying to keep information from its people.  Continued restrictions on the use of mobile phones and other digital devices has the effect of restricting economic growth and development, while expansion of services multiplies the ways North Korean citizens can receive and share information about the outside world.  Gigaom has an interesting article, based on some recent research, about how Twitter could help unleash world peace.
According to figures released by South Korean officials, the number of mobile phone users in North Korea has increased to 450,000 and South Korea's Vice Unification Minister believes, probably correctly, that this indicates not only growth in numbers but also a diversification of users, after the early usage was largely limited to elites.  This diversification, in turn, could signal the growth of a tech-savvy generation in North Korea.  If that happens, one can only speculate about the future role of digital media in political change within North Korea.  The matter becomes especially interesting with the current rapid decrease in cost, accompanied by increase in computing and communication power of a growing array of smart phones!

The Mobile Broadband Revolution in Korea

Two articles in the Joongang Daily this morning provide further evidence of the mobile revolution that is sweeping the nation since the arrival of Apple's iPhone in late 2009.  The first article, entitled "Smartphone craze spurs location-based apps" explains a variety of location-based services that are taking off in Korea.  One will allow a woman to track the location of her boyfriend, another allows parents to follow the location of their children, and so forth.
The other article, describing how credit card companies and mobile carriers are vying for mobile payments business also presents some interesting data on the rapid diffusion of such services here.   (Click on the graphic to see a full-size version.)
Location-based services and mobile payments are but two examples of the types of services that become possible once broadband goes mobile.

A New Round of Competition for Smartphones and Tablets

As a user of both an iPhone 3GS and, starting just recently, a Samsung Galaxy Tab I've found the recent spate of media coverage about the "second round" of competition in the South Korean market quite interesting.  The Korea Times carried an article entitled "iPhone Drives Smartphone makers into corner."  It describes what it calls the "second round" of the smart phone wars.  In the first round, SK Telecom teamed with Samsung, while KT offered Apple's iPhone.  In the second round, by contrast, the competition is between the carriers, with both offering Apple's iPhone.   The article goes on to speculate whether market power is shifting from the carriers to the handset makers.
It is not only the second round of competition for mobile handsets, but also for tablet devices.  As noted in another article in The Korea Times, even though Apple has not yet announced when the iPad2 will be available in the Korean market, early adopters are flooding shopping agencies in a pre-launch craze. An agency which runs an Internet café on the country’s top portal Naver had over a hundred requests to purchase the iPad2. On this site it costs 845,000 won to buy a 16GB, Wi-fi iPad2, including the agent fees and shipping costs. It depends on the agent, but the price is usually 1.5 times more than the price in the United States which starts from $499.   Furthermore, consider the actual cost of the parts that make up an iPad2.  As reported in yet another article, iSuppli has revealed that the iPad2 3G equipped with GSM has about 370,00 won ($327) worth of parts while the CDMA version is slightly cheaper.

Smartphones Boost Mobile Commerce

As reported in The Korea Times, the rapid diffusion of smartphones in the South Korean market is giving a measurable boost to mobile commerce. 11st, an online market operated by SK Telecom, announced that it recorded 1.85 billion won in monthly sales through mobile shopping last month, the most since it started the service. Its mobile shopping application had 625,000 downloads, and Auction and G-market have also launched similar applications. Mobile commerce currently marks 4 billion won in monthly sales, and is expected to grow to 50 billion won this year. This is still a small part of the online shopping industry, but the growth is remarkable. According to the Korea Online Shopping Association, the market is set to double, exceeding 120 billion won next year. Not only open markets but also TV home shopping channels are stretching to the mobile sector. CJ O Shopping, Hyundai Home Shopping, GS Home Shopping, and Lotte Home Shopping have launched applications to attract smartphone users. They find it appealing as they can reach out to customers regardless of time or place. On top of showing the shopping programs in real-time, the home shopping channels are linking the mobile service with their other online and offline shops.

Korea Leads World in Mobile YouTube Viewing

As I predicted in a December 2009 post, viewership of Youtube video on mobile devices has skyrocketed in South Korea.  An article in the Joongang Daily notes that more Koreans now watch YouTube on mobile devices than do people in any other country around the world.  On the third anniversary of YouTube's launch in Korea an executive of that company noted that mobile views grew nine-fold last year.  He also noted that YouTube is now being used to deliver Korean content, including popular soap operas, to a global audience.  YouTube Korea has signed partnerships with Korea's top three talent agencies, under which the agencies provide premium content for YouTube, while YouTube provides them with useful information such as the number of viewer hits.

Orascom Comments on Investment in North Korea's Mobile Network

I commented late last month on the meeting that North Korean leader Kim Jong Il had with Naguib Sawiris, Chairman and CEO of Orascom Telecom.  Today an interesting article in The Sydney Morning Herald by Eric Ellis, gives some insight into how Sawiris views his company's investment in North Korea.  Ellis interviewed Sawiris in Egypt in early January.
Orascom, the article noted, is a classic example of a company where the sum of the parts is greater than the whole. Like North Korea, where the value of the Koryolink JV "is either zero, or $5 billion. If there is reunification, then I will be the incumbent of North Korea, and my value will be something like [South Korean carriers] SK Telecom or Korea Telecom," Sawiris said. "If there is a war and they unify after the war, it is still the same, depending on who wins, of course. And if they take the asset, then it is worth zero. There is no between value [in North Korea] because who will buy? No one else has the relationship that we are building there."

More on Microsoft Monoculture and the Mobile Revolution in Korea

An article in The Korea Times yesterday highlights an important aspect of the mobile broadband revolution occurring in South Korea, namely the problems caused by the so-called "Microsoft Monoculture" that has grown up here.  Readers of this blog will know from earlier posts that I've been an observer of the heavy reliance on Microsoft and its implications for Korea.
The article notes the great popularity of both the Apple iPad, running on the Apple OS, and the new Samsung Galaxy Tab, which runs on the Android operating system.   Unfortunately, despite all of their other attractive features, the fact that these devices do not work with the older Microsoft software that has been adopted for online banking and many e-government services in Korea somewhat limits their utility.   The article correctly notes how the nearly exclusive adoption of Microsoft's Active X and public key certificates is at the heart of this problem.   Ironically, Micorosft itself has been moving away from Active X for a long time now due to security problems.   Another factor diminishing the appeal of the iPad is that it will not display many "Flash-happy" Korean websites.
The article might have gone on to note that the mobile broadband revolution involves not only Korea, but is global in scope.  Most likely, the introduction of the iPad and the Galaxy Tab signal an increasingly urgent need for South Korea to jettison its reliance on Microsoft and move more aggressively into the mobile and ubiquitous network environment of the future!

Converged Network Operators Will Lead the Mobile Broadband Era

Interesting coverage in The Korea Herald yesterday of a speech by KT Executive Choi, Doo-hwan.  He makes some obvious, but important points about the network infrastructure needed for the emerging era of mobile broadband and eventually ubiquitous networking. "The key to success in the competition of wireless Internet, triggered by the rising popularity of smartphones, is gaining competitiveness in wired broadband networks,” said Choi. “The firm with both the wireless and fixed-line networks will ultimately pioneer the wireless Internet market.”
The reason for this is rather straightforward.  It will be necessary to spread the increasing wireless internet traffic to different networks, including Wi-Fi, WiBro and 3G in order to handle the amount of data used by smartphone users.

Intel to Invest $20 million in Korean WiBRO Venture

As reported by Reuters and other media outlets, Intel will invest $20 million in a wireless broadband joint venture with Samsung Electronics, Korea Telecom, and Korea's National Pension Service.  The joint venture was announced last May by KT, with capital of $280.9 million.   It will expand South Korea's mobile WiMax coverage to 82 cities by March of next year, covering 85 percent of the nation's population.
The expansion is part of KT's effort to cope with surging data traffic following introduction of Apple's iPhone in late November of last year.

The Rapid Diffusion of Smartphones in Korea

The Joongang Daily carried two articles today that underscore important aspects of the transformation taking place in mobile communication, here in Korea as well as globally.  The first article noted that the recent Chuseok holiday led to a surge in the downloading of smartphone applications. Applications for road navigation, expressway traffic congestion and charye, the Korean ancestor veneration ritual, topped the popular application list during the holiday period. The same article noted that smartphone users in Korea currently number three million, a figure that is expected to double by year's end. I expect that may be a conservative estimate. Just think of how many family members and relatives had a chance to see the iPhone or Android phones in operation over the Chuseok holiday! That sort of exposure probably represents the most powerful form of sales promotion for these devices here in Korea.
A second article described the parts bottleneck that is being faced by the manufacturers of smart phones. As shown in the accompanying graphic (click to see a larger version), industry forecasts in the spring of 2009 significantly underestimated the worldwide growth of demand for smart phones.  Consequently, such parts as the organic light emitting diode (OLED) screens are in short supply.  The manufacturing process for such parts bears many similarities to that for semiconductors and requires long lead times to build fabs and ensure adequate capacity.

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.

Mobile Phone Subscribers Outnumber People in Korea

It finally happened.  The number of mobile phone subscribers in Korea now outnumbers the population.  This is a trend that arrived several years ago in some other countries which allowed a single individual to have multiple mobile subscriptions by swapping SIM cards.  As reported in the Chosun Ilbo, the number of subscribers to wireless communications services totaled 50.05 million as of September 8th, while the nation's population was estimated at 48.88 million.
With the arrival of smart phones, tablets and notebook PCs, the trend toward more than one mobile service is likely to continue.

iPhone 4 Arrives in Korea

As reported in the Joongang Daily and other papers, the arrival of the iPhone 4 in South Korea was greeted by long lines of customers.  (click on the photograph to see a larger version).  Although Samsung's Galaxy S and other smartphones are present in the Korean market, they still do not have the sheer number of applications that Apple's platform supports.  It seems likely that the iPhone will continue to drive the mobile revolution here, and worldwide, until Android phones catch up on the application side of things.
In an encouraging note, KT is taking the iPhone 4 introduction as an opportunity to promote its expanded services for expatriates in Korea. With the growing number of foreigners in the country, KT said it will provide special services for expats in Korea. The mobile carrier opened a twitter account (http://twitter.com/ollehkt_expats) that offers advice in English on the use of the iPhone 4 and KT’s other services. In addition to the permanent expat community in Korea, KT and the other mobile service providers should be explicitly targeting more of the marketing toward tourists and business visitors, who may want to use state-of-the-art mobile services during short stays here!

Apple Faces Developer's Collective Action in Korea

Apple's closed approach to the approval and marketing of apps for its iPhone, in contrast to the open approach adopted by the Google-backed Android platform, is raising some hackles in South Korea.  As reported in The Korea Times, Korean internet companies are voicing increasing anger at what they say has been Apple's slowness and inconsistency in approving applications for iPhones. Controversy erupted last month when Apple discarded a number of applications from Korean music streaming sites including ``Bugs Music,'' ``Soribada'' and ``Mnet'' from its App Store content platform.  The Korea Internet Corporations Association, an industry lobby that represents 150 internet firms including NHN, Daum and Google Korea said its member companies are considering collective action against the U.S. technology giant's "unfair" business policies.  Apple has offered no explanation of why the previously-approved applications were pulled, although industry watchers suggest it may be part of the company's changing business strategy for music in the Korea market.
Until recently, Korean iPhone users had been able to access only a fraction of the vast iTunes content pool, but Apple now appears to be opening up the pipeline.  This would mean iTunes would have to compete directly with services like Bugs music.   The outcome of these developments will be worth watching closely, especially with a raft of Android-based phones hitting the market in the last half of this year!

The "iPhoning" of Korea

Jasper Kim had an excellent short article in the Wall Street Journal a few days ago, entitled "The iPhoning of Korea."   It reiterates a number of points made in earlier posts here, and adds a new one.  According to the article, mobile service providers balked at providing free WiFi service for the iPhone, something that had become commonplace elsewhere in the world.  Eventually, as we all know, KT provided free WiFi service to iPhone owners through its nationwide Nespot network.  I'd be pleased if any readers can elaborate on this point.  Did the issue of free WiFi further delay the iPhone's entry into the Korean market, after WIPI issue was taken care of?