Mobile in Korea

Currently, there are three mobile operators in Korea, SK Telecom, KT and LG Telecom. A new mobile operator will launch their mobile service in July of next year. KMI (Korea Mobile Internet) submitted the application for providing their own service to the Korean Communications Commission on 11th June.

my2pac

   KT officially announced that they will pursue VoIP business aggressively. They released brand-new VoIP phone called "STYLE". (Refer to the below photos.)

    The "STYLE" phone was developed ReignCom which has a reputation for MP3 player, iriver. This phone is not simple VoIP phone. KT named this type of phone "SoIP (Service over IP) phone" which supports a lot of functions such as providing home-banking service, newspaper service, internet connection, video-call and SMS.

   KT was originally conservative for VoIP service, because they already dominated Korean PSTN market. As VoIP market has grown, their revenue from fixed voice service has decreased. Fixed VoIP service has jumped over and finally achieved total fixed voice market share of 10 percent in late last year.


   KT maintained their lone position in the fixed voice market in spite of VoIP's steady attack. However, as the fixed number portability was available from late last year and the fixed voice market environment is changing, KT finally gave up their former position and jumped into VoIP market. KT has around 32,000 VoIP customers, but they set up a target to attract 2 million VoIP customers through protecting their own PSTN customers from other VoIP service providers such as LG Dacom and Samsung Networks and migrating them from PSTN to their own VoIP service.

   Even though KT's fixed voice revenue seems to decrease by focusing on VoIP service, they is expected to make up the revenue with additional ARPU acquired from various value-added services of their brand-new "STYLE" phone.

my2pac

   There will be three big changes in Korean WiBro business this year.


   3 years have passed after WiBro service was launched officially in Korea. In June of 2006, SK Telecom and KT started to provide WiBro business using PCMCIA and USB dongle modems. However, only 0.2 mil users subscribed the service until the December of 2008. Even though SK Telecom and KT have made total investment of around 1,600 bil KRW for 3 years, the current performance of WiBro business is terrible. In the late last year, the Korean Government began to make various policies in order to accelerate WiBro business in Korea. In terms of the point of view, 2009 would become a very important year for Korean WiBro business.

  1. Voice service on WiBro network

   WiBro was originally data-centric service. In 2006, Korean Government permitted only data services such as mobile broadband on WiBro network. Thus, each WiBro device has no identification number which usual mobile handsets have. Instead of the identification number, each WiBro device has special ID which is similar to IDs of usual web services and is made of combination of alphabet characters and numbers. Because this ID is not important for users to use only simple internet connection with USB dongle modem, most of users don’t know their own WiBro ID.

   However, in the Christmas Eve of 2008, Korean Communication Commission (KCC) announced that Korean Government will give identification number to WiBro subscribers and permit Voice service on WiBro network in 2009. KT, a WiBro service provider, positively replied to the announcement of Korean Government through announcing that they will provide voice service on WiBro network in 2009. SK Telecom, another WiBro service provider does not yet announce whether they will provide the voice service or not. Because SK Telecom is already operating usual mobile service using CDMA and WCDMA network, it seems very hard that they easily makes the final decision about providing the Voice service on WiBro network.

   Anyway, new aspects of the situation regarding overall mobile market as well as merely WiBro market will be opened in 2009. If KT tries to penetrate mobile voice market beyond fixed communication market, including fixed broadband and fixed voice service, which KT has focused on, new competition situation in Korean telecommunication market will be built up in 2009.

  2. Appearance of new entrant WiBro service provider?

   As well as deciding to give the identification number to WiBro service and permit the voice service on WiBro network, KCC announced to choose new WiBro service provider in 2009. Originally, Hanaro Telecom (Current SK Broadband) was the third WiBro service provider. However, they gave up the business a few years ago and returned the wireless frequency for the business. KCC seems to ignite the competition among WiBro service providers and try to expand WiBro business in Korea through granting the remained frequency, which Hanaro Telecom returned, to a new service provider.

   Yet, the official schedule for deciding a new service provider was not announced. The association of MSOs (Multiple System Operators – Cable TV Companies) is considering whether they will together try to acquire the WiBro business authority. Because, recently, commercialization of IPTV was officially decided and real IPTV will be provided this year. Major IPTV service providers are KT and SK Broadband which are fixed telecommunication companies. IPTV services of telecommunication companies will penetrate the broadcasting market which was originally dominated by MSOs. In order to protect their own business domain, MSOs might try to attack telecommunication companies through jumping into telecommunication market. WiBro is able to become a good weapon of MSOs who want to survive under tough competition with telecommunication companies.

   Beside that, possibility that Samsung tries to become a new WiBro service provider might exist. Samsung Electronics is the biggest manufacturer which provides most of WiBro equipments and several WiBro devices. Even though Clearwire in US and UQ Communications in Japan are building the mobile WiMAX network and several companies in India will be chosen as mobile WiMAX service providers this year and start to build mobile WiMAX network soon, Samsung might want to drive WiBro business in Korea directly. SK Telecom and KT already made the maximum investment which they promised to make when they acquired WiBro business authorities. If SK Telecom and KT will not be able to attract more customers beyond current number of subscribers, they might not increase additional investment. Samsung might try to do the business directly and expand the WiBro business market through igniting the competition among WiBro service providers.

   When the official schedule is announced and a new WiBro service provider is chosen, I will make a new post about the news.

   3. Introduction of WiBro MVNO (Mobile Virtual Network Operator)

   There is no MVNO in Korea, in the area of usual mobile service. However, WiBro MVNO might appear this year. When Korean Government granted the WiBro business authorities, there was a contract condition. In 2009, if any company request to rent WiBro network from SK Telecom and KT, SK Telecom and KT should enable the company to start WiBro business as MVNO.

   If MSOs want to penetrate mobile communication market through providing WiBro service, they might do their WiBro business as MVNO instead of becoming a new WiBro service provider as MNO. If they decide to do MNO business, they have to make at least 800 bil KRW in order to cover only Seoul areas. (SK Telecom and KT could not make the nationwide coverage with 1,600 bil KRW.) Because this investment might become a burden to MSOs, I think that MVNO is better option for MSOs .

   The above events will be hot potatoes in overall Korean mobile industry as well as WiBro area. Until last year, WiBro business was an isolate island in Korean mobile industry. However, it might make a great ramification in the overall mobile industry. I will make posts regarding the above events steadily. 

my2pac

I made a post regarding 'Voice Service on WiBro (Mobile WiMAX)' in last August. SK Telecom has maintained a negative stance about voice service on WiBro because voice service on WiBro might cause the cannibalization effect toward SKT's existing voice service on CDMA and WCDMA. However, KT had asked that the government should grant the voice service of WiBro. KT has ever demonstrated the VoIP service using WiBro in OECD Ministerial Meeting of last June. KT seems to solve all technical problems for providing VoIP service using WiBro.

However, KT changed their stance regarding voice service on WiBro. Through 3rd quarter conference call, KT announced that they would not provide voice service using WiBro for quite some time. Why does they change their stance? I think there are two reasons.

First, KT might be concerned about the cannibalization effect as SK Telecom. KT has a plan to become incorporated with KTF, one of their subsidiaries. KTF is a mobile operator and provides CDMA and WCDMA service. If KT provides voice service on WiBro, the service would come into collision with KTF's existing business models.

Also, the coverage and quality of service for voice service might be burdens to KT. The coverage of KT's WiBro service covers only 40% of Korean population. Moreover, KT's WiBro service does not support sufficient quality for voice service in INDOOR SPACE. KT has often communicated with customers by informing that WiBro service could make the best performance in outdoor space. Thus, KT should enlarge the service coverage and improve the quality of service in indoor space as well as outdoor space in order to pursue the voice service on WiBro. It might be not a easy decision.

On the other hand, the Korean government seems to be disappointed that SKT and KT are passive for WiBro business in domestic market. A few days ago, the Government announced that another new WiBro service provider will be selected next year. The Government has additional 27MHz available whithin 2.3 GHz bandwidth. It will be given to a new service provider and both data service and voice service are expected to be permitted on WiBro network. The Korean Government wants to invigorate the WiBro business in domestic market by raising new competition among KT, SKT and a new service provider.

The Korean mobile market is wondering which one will be a new WiBro service provider.

my2pac

   Korea Communication Commision requested in-depth research about voice service on WiBro to Korea Information Society Development Institute. WiBro was commercialized by KT and SKT in 2006, but WiBro was permitted for only data service, not voice service. Because voice service can not be provided on WiBro, call number for each WiBro device is not necessary until now.

   However, because KISDI started to investigate the long-term effects to the telecom industry of Korea if voice service is allowed on WiBro, new competition might be started on mobile industry of Korea. Real mobile services, including voice and data services, are only provided by mobile operators such as SK Telecom, KTF and LG Telecom. If voice service on WiBro is possible, KT can participate in the competition. KT has steadily insisted that voice service on WiBro be provided.
 
   If Korean Government permits the voice service on WiBro, will KT and SK Telecom start the service? I think it is not sure. There are two reasons.

   First, COVERAGE of WiBro!! Even if KT and SK Telecom commercialized WiBro service in 2006, the services only cover Seoul and near areas of Seoul. In addition, WiBro is well operated outdoor only. Indoor, the signal of WiBro is very weak. KT and SK Telecom should invest much money to strengthen the network coverage. Because the penetration rate of mobile voice service in Korea is already over 90 percent, it is not sure whether the operators make the huge investment on WiBro.

   Second, the merge of KT and KTF is expected within near future. Even if KT promotes WiBro service aggressively and wants voice service on WiBro in order to strengthen WiBro service now, KT might lose the driving force for voice service on WiBro after merging KTF. KT can provide mobile voice service through KTF without voice service on WiBro.

   I am wondering how KISDI will make the final decision about the voice service on WiBro. I will make a posting after announcement of the decision.

my2pac

   On July 30, KT announced that KT launched a SoIP Video Phone. SoIP means 'Service of IP'. SoIP usually includes VoIP service and other IP-based services. SoIP video phone allowed customers to use a high-quality video call.

   Since last year, KTF and SKT have provided mobile video call on HSDPA network. However, mobile video call is made on 2 inch display of mobile handset. KT provided the SoIP phone having 4.3 inch display and wide QVGA resolutions. In addition, although mobile handset provides low-quality picture with 5 to 15 frames, the SoIP provides high-quality picture with 24 frames. KT's SoIP phone also provides some value added services such as internet banking.

my2pac

  VoIP is a hot potato in communication industry of Korea. Fixed VoIP services already atrracted a lot subscribers, however mobile VoIP is not yet permitted. Recently, JCI, a japanese mobile virtual network operator (MVNO), announced that mobile VoIP service will be provided using DoCoMo's 3G N/W in Japan.

  In Korea, WiBro is considered as an appropriate mobile network in terms of mobile VoIP. As I mentioned on the former post, there are two operators, KT and SK Telecom, providing WiBro service in Korea. SK Telecom might have no needs for voice service on WiBro, because SK Telecom already provides mobile voice service using CDMA and WCDMA.  However, because KT is a fixed communication operator, KT is trying to expand its business area to mobile communication service. KT has aggresively pushed WiBro service into Korean market. Although KT has attracted 150,000 subscribers for one year, is seems to be very hard to attract more subscribers without voice service on WiBro. However, Korean government allowed that operators can only provide data service through WiBro.

  By the way, Korean Communication Commision, a division of Korean government, announced to start the review about VoIP using WiBro network. In addition, KT announced that VoIP trial service using WiBro will be demonstrated at the OECD conference which will be held in Seoul next month. If VoIP service using WiBro is permitted, it means a direct crash between two biggest Korean operators, KT and SK Telecom. It seems like a night before a storm in Korean communication industry.

my2pac