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Korea Broadband Industry Report, 2005

Published: Feb/2005

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Year 2004 saw a fast growth in China's broadband market. By the end of November, broadband subscribers had increased from 9 million in 2003 to over 22 million, making a spotlight in China's telecom industry. However, there lies a worry behind this fast growth—growth in number but not in profits. Decreasing price has become the main measure to initiate the market. These problems, if not solved efficiently, will inevitably obstruct the further development of China's broadband industry. Practices of overseas broadband industry have proved that, the development of broadband market is by no means a plain sailing. Faultage crisis is likely to emerge in the transition from early customer market, which was focused on technology, to a value-oriented mainstream customer market. For example, in US broadband market, subscriber development was very slow for reasons of high access price, low network speed and few applications, while Korea's broadband industry has went through the faultage and successfully entered into mainstream market.

Among the current over 10 million broadband subscribers, KT--the largest ISP in Korea, which mainly adopts ADSL and Ethernet technologies—occupies a share of 45.8 percent. Hanaro Telecom, the second largest ISP in Korea, occupies 28.6 percent of the market, which mainly adopts ADSL and Cable modem technologies. Thrunet is the third largest with 13.1 percent share, using Cable modem mainly. Other broadband subscribers belong to local small ISPs, which often rent lines from big operators such as KT to provide Internet services.

The fast growth of Korean broadband access business has benefited both the equipment manufacturers and SPs. To the manufacturers: thanks to the continuously expanded market, they have got a chance to develop new and more competitive solutions for operators, which strengthened their technical force. To the operators: broadband services have created new income sources, which offset the income deficiency of fixed telephone service. For instance, KT increased its profits by 36 percent in the first half of 2002. Besides online games, KT offers a VOD service called “HomeMedia”, providing movies, education programs and entertainments to stimulate the development of new broadband applications such as SOHO, distant education, distant medical treatment and E-government. Hanaro has been offering a trial financial resources management service to every online user, targeting the age from 20-60. This service not only allows users to enter their bank accounts online, but also provides investment consultancies, tools to calculate budgetary income and expenses and suggestions on financial products.

The great success of broadband in Korea has drawn worldwide attention. After studying the success of Korea, many countries  concluded that government's support and guidance, population and geographic factors, competitive infrastructural facilities, moderate control, low price and Korean's great enthusiasm lead to Korea's success in broadband industry.

First of all, Korea's success in broadband industry should be owed to the government's support and guidance. Since high-speed Internet service was first offered on Cable TV network in 1998, Korea has invested totally $9 billion in the construction of infrastructural facilities, among which the government spent $1.5 billion building a national backbone network connecting government departments. And SPs can rent capacity from the backbone network. In addition, the Korean government has provided a soft loan of $1 billion to build major local access facilities, together with a $700 million fund for R&D.

Besides the investments, the Korean government introduced competition in broadband business particularly to motivate those inactive traditional operators. Competitions among different backbone networks are fierce, so are between Cable Modem and DSL technologies.

Along with the price drops, broadband Internet soon became popular among Koran citizens. Koreans now feel that the broadband is nothing special but a life necessity. Current services are mainly centered on education and entertainment. The Korean government now is encouraging Korean children to do their homework online and email their homework to their teachers, and Korean teachers have their own homepages. VOD is developing rapidly in Korea, which has become a new distribution channel for movies and TV programs. Housewives enjoy watching soap operas through VOD the most. At present, 20 percent of broadband income comes from VOD service in Korea.

Another reason for the rapid growth of Korea's broadband is population and geographic factors. Korea is a small country, 80 percent of its populations live in several major cities and surrounding areas and 49 percent live in large living quarters, which make broadband easy to reach homes. It is applicable and economical to adopt ADSL technology in a dense-populated area. Plus unique Korean language and habits, over 90 percent Internet visits flow to local websites, which makes full use of domestic networks.

Combining its national situations, positively leading by the government, Korea has make great success in broadband Internet services, which suggests a prosperous future of next generation service based on broadband and each nation has the possibility to succeed. Learning from Korea's broadband development experience and bringing into play our creativity, it is quite probable for us to find our own way out.



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