March 12, 2007
A next-gen wireless broadband network will allow Koreans to use high-speed apps on their mobile handsets. And it's sure to power big growth
by Moon Ihlwan
South Korea, with its blisteringly fast broadband networks and tech-happy consumer base, is one of the most wired societies in Asia, if not the world. And if a new next-generation wireless broadband network under development here lives up to the hype, South Korean consumers could soon be enjoying such high-speed data applications as video conferencing, file swapping, or catching TV entertainment on their mobile phones anytime, anyplace.
That is the hope of engineers at South Korea's flagship telecom operator KT (KTC), who are trying to work out any potential kinks in the company's new wireless broadband network. In April, the company will roll out a new high-speed network based on a technology called Mobile WiMAX (as in worldwide interoperability for microwave access) in Seoul.
This will be the first time that Mobile WiMAX—by far the fastest wireless broadband standard available today—will be made available in such a large metropolitan market. It could be a powerful source of revenue for KT—whose fixed-line business is facing slower growth—and a big step forward for South Korea in its quest to stay at the forefront of information technology innovation.
This wireless network, which is called WiBro—short for wireless broadband—in Korea, boasts peak data download speeds of 16 megabits per second. (The upload speed is about seven megabits per second). It is based somewhat on the WiMAX technology developed and heavily promoted by Intel (INTC) as the next big thing in mobile communication. However, Korean engineers in the private sector and working at the state-run Electronics & Telecommunications Research Institute have made significant engineering changes to adapt Mobile WiMAX for handling high-speed data transmissions.
A successful commercial launch would spur innovation, create new consumer markets, and boost South Korea's digital credentials internationally, the government hopes. "The IT sector has been the engine of our economic growth," says Lee Sang Jin, director at Korea's Ministry of Information and Communication. "We must try to create leading-edge environments to turbocharge this engine."
South Korea has already made some significant strides. One can point to the widespread use of the Internet and digital gadgets at home—or the rise of Samsung Electronics and LG Electronics as world-class competitors in consumer electronics, mobile phones, and high-end memory chips over the last decade.
Nearly 90% of the nation's 15.9 million households enjoy broadband Internet access and virtually all adults and teenagers carry mobile phones, the bulk of them capable of surfing the Net and handling multimedia services. And policymakers are determined to turn the country into testing ground for all things digital (see BusinessWeek.com, 1/29/07, "The Mobile Internet's Future is East").
That's important for local companies that want to try out new gadgets or digital applications at home before exporting them abroad. Shipments of IT products and parts last year totaled $113.4 billion and accounted for 35% of the country's total exports abroad. The sector also racked up a trade surplus of $54.5 billion in 2006 against a deficit of $38.1 billion in trade of non-IT products. In the past four years, South Korean IT industries represented nearly half of the expansion in Korea's overall economy, according to government statistics.
For instance, Samsung is rolling out a new line of multitasking mobile gadgets with the new KT wireless broadband network in mind. One product is a smartphone and an all-purpose portable device called the Deluxe MITs, short for mobile intelligent terminal by Samsung. The MITs, whose prototype was first unveiled during an industry conference on Mobile WiMAX last November, functions like an ultra-mobile personal computer, in addition to being a high-end mobile phone and camera (see BusinessWeek.com, 11/8/06, "Samsung's Next-Gen Wireless Vision").
In close cooperation with KT, Samsung engineers have made sure its WiBro gadgets meet both consumer and business needs. The mobile intelligent terminals allow a consumer moving in a vehicle at a speed of 60 mph to download games and transmit photos. A business traveler could hold a video conference with clients showing changes in an Excel spread sheet called up on the screen.
There is also considerable export potential if overseas telecoms adopt this network technology. Samsung has either signed agreements or is in talks with more than 30 overseas carriers, including British Telecom (BT), France Telecom (FTE), KDDI of Japan, and Sprint Nextel (S) to supply Mobile WiMAX equipment or handhelds.
Much hinges, though, on how well KT commercializes the service at home. "A success story in a test bed here will serve as a springboard for our marketing push abroad," says Kim Song Shin, senior manager at Samsung's telecom division.
Betting on User-Created Content
With consumer demand for high-speed connectivity strong in rich world markets, the Koreans could be at the forefront of a lucrative segment. Researcher Yankee Group projects the global Mobile WiMAX infrastructure market will amount to nearly $4 billion in three years and device sales of the technology will hit 32 million units globally by 2011.
Korean companies are also exploring rival wireless technologies. KTF, a subsidiary of telecom giant KT and Korea's second largest wireless carrier, this month became the world's first company to launch a nationwide wireless broadband network using a competing technology called HSDPA, or High-Speed Downlink Packet Access, promoted by wireless chipmaker Qualcomm (QCOM). Both Samsung and its crosstown rival LG make HSDPA handsets, too.
For Mobile WiMAX, KT is pinning its hopes on the explosive growth in user-created content, and increasing demand for swapping photos, music, and video data at ever-faster speeds. "We believe WiBro will become a significant contributor to our revenues and profits by 2010, when we expect to have a subscriber base of four to five million," says Cho Sung Kil, director at KT's mobile Internet business group.
Nevertheless telecom analysts expect WiBro and HSDPA to complement each other, given the faster speed of the former and the latter's wider area coverage. To accommodate such needs, the Seoul government has recently allowed telcos to offer services in a mix of various networks based on different technologies. KT is offering a USB-based modem with connectivity for both HSDPA and WiBro for PC users.
Whatever the outcome, Seoul isn't letting up in its drive to keep the country in the vanguard of telecom infrastructure. In the past three years, the government spent $563 million on research and pilot projects, thereby prompting private companies to invest $20.9 billion in building a so-called broadband convergence network (BCN) designed to integrate wired and wireless systems and the telecom and broadcasting sectors. The country plans to invest many more billions to increase the number of BCN-latched households from 5.5 million at the end of 2006 to 8.2 million in 2007—and virtually all urban households by 2010.
The BCN systems will allow companies and consumers to send voice, text, photos, and video all through the same pipe. KT says the company alone has earmarked some $10 billion for BCN over a five-year period until 2010, when most Koreans will be able to send data at ultra-fast speeds—between 50 megabits and 100 megabits per second.
"A Trigger Unleashing Innovation"
Information and Communication Ministry officials say the government also wants to lead the way to foster two new IT areas for future growth. One is the ubiquitous sensor network, or USN, aimed at letting smart machines and products communicate with each other. That network will use radio-frequency identification technology for industries and government to manage logistics and distribution.
Another IT segment policymakers are pushing hard to develop is software and digital content. To help create a cluster of related companies, the government is due to launch "Nuritkum Square" comprising four buildings in Seoul, in November, at the cost of $386 million. For the USN and radio chip project, the government last December began building a $334 million research and development and manufacturing site in the Songdo special economic zone, west of Seoul. "The government wants to be a trigger unleashing innovation by Korea's IT companies," says Lee of the Korean information ministry.◦