Pyrhhic Victory for SK in Korean Bandwidth Auction?

In the words of a headline in The Korea Times, SK Telecom won a Pyrhhic Victory in the recently concluded bandwith auction here. For SKT, winning is bittersweet, the article reported, since it has to pay an enormous amount after repeated rounds of proposals and counterproposals with some describing it a “Pyrrhic victory.” The final bid by SK Telecom amounted to 995 billion won.
Opting to concentrate on cloud computing instead, KT declined to continue bidding for the 1.8 gigahertz (GHz) band.
“We decided to stop bidding for the 1.8 GHz bandwidth, to prevent social controversy and national loss following excessive competition in an auction that was held for the first time in the country,” KT said.
As noted by the Joongang Daily,The 1.8-GHz band is thought to be the most suitable for fourth-generation (4G) mobile communications technology. Many mobile carriers in Europe, the United States and Asia have chosen it for their 4G mobile telecommunication services. It can process data much faster than the 3G service, and thus carry out more tasks such as playing full high-definition content.
Both of the telecom giants were determined to clinch the band since the auction began on Aug. 17. As a result, the auction dragged on for nine days and 83 rounds, and the bidding price soared to 995 billion won ($919 million), more than double the minimum bidding price of 445.5 billion won set by the KCC.
The KCC, which ran the auction, did not place a limit on how many rounds could take place, nor how high the bidding price could go.
Finally KT backed off. When the auction resumed yesterday morning, KT bid for the 800-megahertz (MHz) band, and as the sole bidder, the company got it for the minimum bid price of 261 billion won.
“We withdrew from further bidding for the 1.8-GHz band in light of the social controversy about the overheated competition and national loss,” KT CEO Lee Suk-chae told reporters. “I thought if I use more than one trillion won on spectrum, KT won’t be able to do more important things.”

Traffic Spike Crashes LG U+ Phone Data Network

The data network of LG U+, Korea's smallest mobile network, was out of service yesterday, causing inconvenience to startled subscribers.   As reported in the Joongang Daily, data traffic spiked to about five times the normal traffic, starting around 8:00 A.M.
With the popularity of data-gobbling smartphones and tablet PCs, compounded by mobile carriers spoiling customers with unlimited data usage plans, the nation’s data networks are already handling more data than they should, observers say.
And while the surge in data traffic has caused dropped calls and slow connections, it has never caused a network to blackout for hours.

A Nostalgic Note on the Decline of PC Rooms

The Joongang Daily has an interesting article, including the accompanying graphic (click to see a full size version), on the declining number of PC bangs (PC Rooms or internet cafes) in South Korea.  As noted in the article,PC bangs enjoyed their heyday in the late 1990s and early 2000s. After the Asian financial crisis of 1997 and 1998, many people who lost their jobs opened PC bangs to survive.
Government regulations are thought to be partly behind the decline of PC Bangs.

One new restriction to take effect by the year’s end is the Cinderella law pushed jointly by the culture and family ministries. Under the law, PC bangs cannot offer online games to anyone younger than 16 from midnight to 6 a.m., in the hopes of curbing game addiction among Korean minors.

There is also a regulatory question over whether PC Bangs are allowed to sell cup ramen or green tea to their customers. Jo, a 37-year-old owner of a PC bang in Imun-dong, central Seoul, was recently hit with a fine. He was guilty of pouring boiling water into a customer’s cup ramen, and someone caught him with a camera and filed a report.

“I was told that if customers pour the water themselves, it’s OK. But if I pour the water, I’m guilty,” Jo said. “There are many cases in which owners served green tea, and ended up paying a 500,000 won fine.”
In addition to the regulatory issues raised in the Joongang Daily article, I would simply note the reality of the mobile broadband revolution, ignited in Korea with the arrival of Apple's iPhone in late 2009.  The fact that people can easily use their Android devices, iPhones or tablet computers in coffee shops and public wi-fi hotspots all over the country, has undoubtedly lessened their interest in PC Bangs.

Mobile Internet as the "First Screen" in the Asia Pacific Region

As reported by eMarketer, Asia Pacific consumers view mobile as their first screen. Asia-Pacific is economically diverse, but universally high mobile usage unites the region. Mobile users in Asia-Pacific are increasingly looking at their phones as a first screen, whether to download media, access the internet or communicate with peers—and marketers.
eMarketer estimates over 2.1 billion people in Asia-Pacific will use a mobile phone at least monthly this year, representing over half the population of the region. By the end of 2011, Asia-Pacific will account for 56% of all mobile users in the world. Growth will be steady, with penetration reaching 72.6% by 2015 for a mobile population of nearly 2.9 billion.
eMarketer estimates just under 30% of Asia-Pacific mobile users, or 623.3 million, will log on to the web via mobile at least monthly in 2011. As shown in the accompanying illustration (click to see full size version) mobile internet penetration is expected to rise to 42.1% of mobile users in the region by 2015. And for many of these users, mobile is the first screen for internet access.

Seoul to Boost its Urban Competitiveness with IT

Dr. Jong-Sung Hwang, the newly appointed Assistant Mayor of Seoul for IT (AKA the CIO for the City of Seoul) has publicly stated his plans to boost the South Korean capital’s urban competitiveness to the 5th highest level among world cities. Plans to boost Seoul’s urban competitiveness will be created based on the following agenda: 1) A city making the most of smart technologies by extending the use of smart phones, CCTV, smart TV, and WiFi. 2) A city making outstanding use of smart technologies by applying real-time intelligent data and pre-emptive public services. 3) A city with a future-oriented smart urban living system which will address issues of safety, disaster, welfare, transportation, and other civil affairs. 4) A city with a smart economy and culture with focus on IT services, smart business, information security, and global contents. For further details, consult Asia Pacific FutureGov.
For even more background, there is an interesting post by Tim Carmody on FastCompany.  The last half or so of his post gets into the problem cities around the world face in providing free mobile service outside, on the streets and in public places, versus in people's homes.   In that section of his post, I only wish Carmody had mentioned the obvious fact that South Koreans spend a much greater portion of their waking hours outside the home, than do Americans and perhaps people in other cultures.  I think this is quantifiable and helps to explain why the Seoul government is so confident in moving ahead with its ambitious plan.  Also, the density of Seoul's large apartment complexes raises the obvious question of how many of them will be within range of one of the free wireless signals.  Certainly it will be a measurable and significant percentage. Finally, most apartment dwellers in Seoul and other large cities already have fiber to the home (FTTH) to their apartments and many, like me, have spent about $20-25 to purchase a wireless router and install a wireless access point in their apartment.  So, they already have fast wireless internet at home, at no cost other than their basic broadband subscription monthly fee.
In conclusion, I wish Dr. Hwang and his team at City Hall the best of luck. It seems clear that we residents of Seoul have some interesting new services to look forward to!

"South Korea's Smart Phone Love Affair Lures Foreign Suitors": More to the Story

I was reading the paper edition of the International Herald Tribune on an Air Canada flight to Vancouver B.C. yesterday when I ran across the Reuters story "South Korea's Smart Phone Love Affair Lures Foreign Suitors."  As mainstream international journalism goes, it was quite a good report, but it suffers from the same weaknesses that characterize most such reporting about Korea, and about its remarkable ICT sector in particular.  They include a lack of historical perspective and a shortage of data or evidence-based analysis.
First, the Reuters analysis notes that the number of smartphone subscribers in South Korea has exploded more than ten-fold to top 10 million in just 18 months, now accounting for around a fifth of the population. However, the analysis fails to note the most obvious reason for this rapid growth, the fact that development of the smartphone market in South Korea was delayed for about two and one half years by strategic corporate decisions and legal requirements. Indeed, the two and a half years preceding entry of Apple's iPhone into the South Korean market at the end of 2009 provide an extremely informative picture of how government, the major mobile service providers and Korea's handset manufacturers, led by Samsung and LG, approached the situation. The Reuters analysis, while not inaccurate per se, simply fails to provide some of this essential historical perspective.
Second,quoting a Seoul-based industry source, the report notes that smart phones have become a “Trojan horse into the Korean market” for the likes of Google and Facebook, which had a head start on local firms in optimising their offerings for smart phones. This is an insightful point, but again, the Reuters article does not go on to address the question of why the Trojan horse metaphor should apply to Korea in 2010 and 2011. The article mentions the dominance of companies like Daum, Naver and SK Communications in the South Korean market and the PC-based approach in Korea, but stops short of explaining the main reasons for this. These include both the role of language in shaping patterns of internet use and South Korea's half-decade or more lead on the U.S. and other western countries in building its fiber-based information superhighways. These two factors are keys to the dominance of Naver in search and the market leadership of Cyworld in social networking, although simple one to one comparisons of Naver to Google or Cyworld to Facebook and other social networking services are not realistic.
There is much more to all of this than can be conveyed in a blog post.  However, I could not let the interesting Reuters news analysis pass without some comment, since it touches directly on issues treated at some length in my new book, co-authored with Dr. Myung Oh, Digital Development in Korea:  Building an Information Society (Routledge, March 2011).  Those of you interested in delving further into the issues touched upon here will want to read portions that book.

The Forthcoming "Big Bang" in Korean Mobile Game Market

As reported in the Joongang Daily, the growth of the mobile game business in Korea has been notably slow despite the explosive popularity in the use of smartphones. One of the main culprits has been strict government censorship. In Korea, games must be reviewed and rated by the Games Ratings Board before they become available on the market.  This situation caused Apple and Google, which operate the App Store and the Android Market, to close their game categories for Korean users.
The situation may be about to change, as the "Open Market" law passed by the National Assembly in March is going to take effect in July.   Industry experts expect Apple and Google to reopen the "Game" category once the new law goes into effect and leading industry players in South Korea are reportedly ready for this event.   The attached graphic (click to see full size version) shows the expected growth of Korea's mobile game market, without factoring in a return to the market by Apple and Google.

"Haves" and "Have-Nots" in Korea's Smartphone Era

Right up until 1980, basic telephone service in South Korea was considered a luxury and the lack of adequate telephone networks had created a major social crisis in the country.  However, beginning in 1980, the country instituted changes designed to build modern networks.   From the very beginning, these networks were considered incomplete until they were equally available to all citizens nationwide, reaching the most remote farming and fishing villages in the nation.   This emphasis on universal service, from the start of construction on Korea's digital networks, is described in detail by Dr. OH, Myung and me in our new book, Digital Development in Korea:  Building an Information Society (Routledge, March 2011).
South Korea's experience with the utter lack of phone service during the 1970s may explain partly why it worked so hard for so long and invested so much to build the worlds most extensive and fastest digital networks.   This meant that, while the debate about "network neutrality" flourished in the U.S. and Europe, not much was heard here in South Korea.  Until the end of 2009, when the Apple iPhone finally arrived, there was an excess of network capacity and major industry players were concerned about how to increase use of data services!
This background explains why I read with great interest the Joongang Daily's article entitled "Haves and have-nots in the Smart Phone Era."  As shown in the accompanying graphic, (click to see full size version) ownership of smartphones in Korea currently has a great deal to do with level of education, financial status and residence location.  This information is based on a 2010 survey, but it is sure to cause concern among senior policymakers here in South Korea.  However, the problem may soon be ameliorated by the rapidly decreasing cost and increasing power of the so-called smart phones.  In the near future, it may be that "haves" and "have-nots" will be distinguished by the cost of the mobile broadband services they can afford, rather than simply smart phone ownership. 

Why the Rise of Tablets?

Interesting article in the Chosun Ilbo English edition today, entitled "PC Market Stung by Rise of Tablets."  Indeed, the rise of tablets, not only in the South Korean market, but globally, is not at all surprising.  The reason for this is simply that, all other things equal, human beings prefer a mobile device, untethered by wires, to the old fashioned, wired desktop computers.  This is expressed succinctly in the so-called "Law of Mobility" or "McGuire's Law."
Having said this much, South Korea presents a special case in point.   I believe that Koreans are, culturally speaking, much more mobile than, for example, Americans.  Here I mean mobile in the sense of the percent of their average day spent outside the home.  I have no empirical data to present on this, but would appreciate observations.   Those of you who have ventured into the central district of most American cities after working hours might think of comparing that to any of Korea's cities when work in the office is finished.  Or, as the accompanying illustration (click to see full size version) shows, consider the average commute via public transportation in Korea versus commuting in a private vehicle in North America.  Comments welcome.

Seoul Police Raid Google Korea's Offices

The global controversy over collection and use of location data from Apple and Android smartphones has taken a new turn in Korea.   The media today, including both the Chosun Ilbo and the Joongang Daily, are reporting that the Seoul Metropolitan Police raided Google Korea's offices in Yeoksam-dong. (click on the accompanying graphic to see a full size version)
According to the Chosun Ilbo account, Police said members of their cyber unit conducted the raid Tuesday. They carried away hard drives and other equipment related to Google's AdMob unit, which is suspected of collecting personal location information without authority or permission.The probe is not directly related to a previous investigation of Google in Korea. That probe concerned the incidental collection of personal data while Google cars were cruising through neighborhoods and taking photographs for the company's Street View service.

Some Data on Mobile Data Use in Korea

The Joongang Daily, in an article entitled "Telecom Data Use Booming," provides some data to show the increase in mobile data usage with the arrival in Korea of smartphones. (click on the accompanying graphic to see a full-size version)  As the article notes, users of tablet devices use more data services than users of smart phones, probably about two times as much.

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.

The Latest on "Smartphone Shock" in South Korea

As readers of this blog already know, I've been fascinated by the shock created when the Apple iPhone finally reached the South Korean market, after more than two years of delay. (for example, see this earlier post)  Now a Google study has released some fascinating data about the rapid spread of mobile broadband usage here in South Korea.  As reported in The Wall Street Journal  smart phone usage has grown so much that Google is now tracking more than 100 million "ad requests" a day in South Korea.
In the study, Google found that nearly 60% of people using mobile devices accessed the internet on their handset at least five times a day. And 35% said they spend more time online via a mobile device like a smartphone or tablet PC than they do watching TV. That seems startlingly high, but TV watching is reduced for many South Koreans by long working hours, after-work outings and lengthy commutes.

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.

Cheap Smartphones and the Mobile Broadband Revolution

The modular character of digital devices is becoming very apparent in the worldwide diffusion of smartphones.  Although the mainstream press often reports that the Apple iPhone is "manufactured" in China, this is really a misnomer.  Instead, it is assembled in China, rather like putting together lego blocks, while the highly sophisticated components are manufactured in Korea, Japan or elsewhere.
The Chosun Ilbo this morning carried an article headlined "Cheap Chinese Smartphones Poised for World Conquest."    It notes that ZTE, which ranked fourth in smartphone shipments in 2010, is selling its San Francisco smartphone through Tesco Mobile of the UK for 80 pounds per unit (about 145,000 won) based on prepaid calling plans.  By contrast, LG Electronics sells a phone which is almost identical, with better finish and trim, for 150 pounds.  Samsung, the article notes, has plans to release a lineup of cheaper smartphones later this year.
So the familiar pattern underlying the information revolution continues, the cost keeps decreasing while the computing and communications power increases!

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.

Samsung (and LG's) Relationship With Apple

The introduction of the Apple iPhone, followed by Android devices was a boon for South Korean electronics manufacturers, led by Samsung and LG.  However, as noted by an article in the Joongang Daily, the relationship with Apple poses somewhat of a dilemma for the Korean firms.  As Samsung and Apple products go toe to toe in the global market, the two companies are now more dependent upon each other than ever before.
Samsung has never specified which parts it supplies to Apple. But when consumers disassemble the iPod, iPhone, and iPad, Samsung’s A4 central processing unit, NAND Flash, DRAM, and liquid crystal display panels are there in plain sight. Industry sources also say Samsung is in the running with LG to become the main display supplier for the second version of the iPad. Apple will place an order worth of $7.8 billion in parts for future productions.
As for the iPhone 4, Samsung parts account for 27.5 percent of the device, which amounts to $187.51 per iPhone, according to iSuppli, a research firm.
As shown in the accompanying graphic (click to see a full size version) Apple remains far ahead of Samsung in the global market.  With the growing strength of Android devices in the world market, it will be interesting indeed to watch the shifts taking place in market share.

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.

Mobile Broadband is the Future

There is some interesting news these days out of the recently concluded World Mobile Congress in Barcelona.  Samsung and the other major manufacturers of smart phones have announced plans to release cheaper smart-phones that will be accessible to the masses of users around the world.  This is hardly surprising since the general logic of the digital information revolution is that semiconductors, screens and other modular devices continue to become more powerful and cheaper over the long run.
Eric Schmidt of Google gave the keynote speech in Barcelona.  As he noted in a recent article for the Harvard Business Review, we are on the cusp of a big mobile revolution that requires three developments.

• Development and deployment of fast mobile networks for the future services.
• Development of mobile money, and
• Increasing the availability of inexpensive smart phones in the poorest parts of the world.

Euromonitor on Global Digital Divide: From Korea to Kenya

The Euromonitor blog has a new report on the global digital divide with the accompanying graphic. (click to see full size version).  The measure represented in this graphic is the proportion of households in each country that possess broadband internet-enabled computers.  Nearly all South Korean households do, compared with only about two-thirds of those in the United States.  The report also notes the following main points.

• Access to and use of broadband internet has significant social, economic and political implications.
• While developed economies continue to have a higher rate of broadband internet penetration than developing ones, growth rates are significantly higher in developing regions.

Notably, the report does not deal with the current explosive growth of mobile broadband services via so-called "smart phones."  However, addition of this important factor would only seem to underscore the main points noted above.