Tuesday, March 27, 2007

Convergence is Coming


Ten years ago the really hot products to have were a laptop computer hooked up to that new-fangled thing called the Internet, a mobile telephone, and a flat screen television, plus a VCR.

Who wudda thunk that in so short a space of time that the then-new technologies that powered these enchanting gadgets would intertwine and mutate to produce then-unimaginable services and products based upon digitalization of information, a process that seems to open an almost infinite realm of possibilities and whose import is only just becoming apparent.

Now though a spate of new services available in Korea, via Internet Protocol TV (IPTV), it's possible to download the last episode of Desperate Housewives that you missed last night and watch it on a computer screen or television.

Through Korean developed Digital Multimedia Broad- casting technology (DMB, see IK Journal, Cover Story March/April 2005), it's now possible to watch TV programming, via satellite or terrestrial transmissions, on a handheld device even while traveling at speed.

Others on the move can use a phone enabled with high-speed downlink packet access (HSDPA) to download massive amounts of high-quality multimedia including games, movies, music, and yes, the phone can also be used as a phone!

It may have seemed cool to talk on a mobile phone 10 years ago but Voice over Internet Protocol (VoIP) not only allows users to make significant economies in making long-distance or international calls but also permits video connection by personal computers, to the betterment of relations, either personal or commercial.

Logging onto the Internet with your first laptop back in `97 was a thrill, but such was the technology at that time that you had to stay in one place -- indoors at that and close to a telephone jack -- to access the wonders of the information highway. That was then but this is now and through Korean-developed wireless broadband (WiBro), access to the Internet is not only always on (remember dial-up?) but accessible anywhere even (like DMB) in moving vehicles.

Welcome to the new era of digital technology convergence, one that will render obsolescent services that not too long ago were lauded as cutting edge and one where Korea is staking out its leadership, partly on the back of its groundbreaking homegrown technologies, partly through the power of its digital information networks -- wired and wireless -- but most certainly because of the incredible level of broadband access that allows the markets for these new technologies to be driven.

Korea has one the world's highest broadband penetration rates at 25.3 per 100 persons at end-2005. This translates into 12.3 million households or 77 percent of the total among a population of 49 million that are connected to high-speed Broadband service, mostly of the ADSL type (Asymmetric Digital Subscriber Line) although faster and more capable systems are being installed at the time of writing (see below).

Already vested with one of the world's fastest Internet speeds of 1.5 to 2 megabytes per second (Mbps), the government is currently constructing the nationwide Broadband Convergence Network (BcN) that will allow the transmission of data and images at speeds of 50 Mbps to 100 Mbps.

Meanwhile, on the wireless network front WiMax (Worldwide Interoperability for Microwave Access) offers upload/download speeds of 70 Mbps, WiBro offers 50 Mbps and HSDPA 14.4 Mbps (with plans in the works to raise speeds to 28.6 Mbps).

As wireless speeds match those of the wired network, and the differences between them become less apparent, Koreans will have access to a seamless, ubiquitous information platform that can be tapped into by numerous types of devices and appliances.

It is by the five technologies and systems of IPTV, DMB, HSDPA, WiBro and VoIP referred to above that will leverage the capabilities of these networks, drive the trend to convergence and thereby generate new market opportunities.

Certainly the stakes are high. Initially estimating a commercialization date for IPTV in Korea of 2006, the Research on Asia (ROA) Group projected that the service would attract as many as 570,000 subscribers by the end of the year producing revenues of 160 billion won (approximately US$154 million), rising to three million subscribers by end of 2012 who would provide an income flow to service providers of 770 million won (US$827 million at current rates). ROA based its prediction on the likely modes of delivery of the service with its implications for quality and breadth of accessibility: the Broadband Convergence Network and the equally speedy (100 Mbps) Fiber to the Home (FTTH) network. Cognizant that ADSL just doesn't have the capability to handle the traffic content of IPTV, Korea's largest Internet service provider KT (Korea Telecom) has embarked upon an ambitious program to connect every household in the country with FTTH service at a cost of US$1 billion.

So how is the ROA projection panning out? Full commercialization of IPTV has been delayed over regulatory issues but KT and Hanaro Telecom have weighed into the market offering non-real-time video on demand (VOD) content as opposed to live broadcasting. With the limited service they are able to provide, Hanaro Telecom's HanaTV attracted 330,000 subscribers paying 10,000 won per month by mid-February since its launch in July, while another 30,000 had signed up for KT's MegapassTV, available to homes equipped with the carrier's 100-Mbps optical local area network (LAN) service, by the end of January. Good news travels fast since NHN, operator of the Naver Internet portal, the country's most popular, has announced that it, too, will enter the IPTV market.

What do IPTV subscribers currently get for their money? Besides retransmission of programming from on-air broadcasters KBS, MBC, SBS and EBS, MegapassTV users can have access to movies, music, and a number of interactive services that concern education, finance and a messaging service. While the DVD player has eclipsed the VCR, the movie downloads now possible through IPTV also call into question the convenience of such devices and threaten that venerable neighborhood institution, the video store. Along with real-time live broadcasting, IPTV is eventually expected to offer a broad range of home networking-type home automation and security services as well as securities dealing, banking and T-commerce, or television commerce, that is, shopping by TV via a suite of systems that includes interactive applications.

In a bid to overcome the regulatory obstacles to its introduction, the Ministry of Information committed itself in February to full commercialization of IPTV this year with enabling legislation promised for April.

As noted by Hanaro Telecom CEO, Park Byung-Moo, commercialized IPTV is the subject of eager anticipation by Korea's telecom players as it represents a broadcasting/telecom convergence business model through which to create new streams of revenue.

More developed as a market is Digital Multimedia Broadcasting. The subscriber-based satellite service (S-DMB) was introduced nationwide in May 2005 by SK Telecom subsidiary TU Media, and in the December of the year became available via terrestrial stations (T-DMB). Although this latter service has the advantage of being gratuitous it has restricted availability. S-DMB service offers 15 video channels, 19 audio channels, and three data channels, while its terrestial counterpart provides 11 TV channels, 25 radio, and eight data channels.

Like WiBro, DBM was developed by the Daejeon-based Electronics and Telecommunications Research Institute (ETRI) and debuted for the first time in Korea. Like IPTV, DMB is a new concept in multimedia transmission that converges telecommunications and broadcasting but with the major difference that reception is via mobile devices. It features crystal-clear reception and FM-quality sound even while traveling in a moving vehicle. Receivers are usually integrated into other systems such as laptop computers, mobile phones, portable media players (PMPs) personal digital assistants (PDAs) or in-car navigation systems.

So more than a year after the introduction of two rival DMB services -- S-DMB and T-DMB -- how have they fared? The fee-based satellite service run by TU Media is the clear winner. After investing heavily to eliminate reception "shadow" areas, the telecom giant watched its subscriber base climb toward the one-million mark in December 2005, and is garnering enough in the way of fees to invest back into quality programming and thereby further boost its popularity. In November, for example, TU Media revealed that it was in negotiations with the English Premier League to broadcast the league's matches on its S-DMB system this year.

Terrestrial DMB, by contrast, has not yet succeeded in generating sufficient revenues through advertising, a situation compounded by the fact that the free service has wide shadow areas where it cannot be accessed. Therefore, the experience of TU Media points to a fee-based business model being that most likely to succeed with this particular technology.

If DMB is a form of convergence that elicits a passive response from its user (TV shows can only be watched), HSDPA might prompt a more interactive approach. Why, you might ask, is that guy with the mobile phone on the corner talking to himself, or more precisely, talking at his phone? Closer inspection will reveal that the telephone is far from conventional, featuring a split video screen with talking heads in each of its three segments. Hmmm.....mobile video conferencing in action!

High-Speed Downlink Packet (or Protocol) Access (HSDPA) is like a type of mobile broadband, but is, in fact, a 3.5G (three-and-a-half generation) mobile telephony protocol currently used by some 64 networks in 64 countries.

Like many high-technologies, HSDPA comes with a pedigree and one in which Korea has played a significant role. HSDPA is an advance on its predecessor, the 3G Wideband Code Division Multiple Access (W-CDMA), a CDMA channel, but one that is four times as broad as predecessor, CDMA proper. Second-generation CDMA, in turn, is a technology devised by Qualcomm of the United States, but one that was first commercialized in Korea by ETRI in 1996. The big improvement compared to WCDMA is download speed; HSDPA is as much as 10 times quicker than its predecessor. As such, downloading crisp-image movies, sophisticated multiplayer games and other massive files from the `Net is a cinch. As in the case of IPTV, the availability of such content via downloads brings into question the future of separate devices in the home on which to play them.

Given its history with the technology, Korea understandably became a leader in the building and operation of W-CDMA systems but this is now falling out of favor with carriers given the superior capabilities of HSDPA and its inherent potential for convergence and hence the provision of value added services. Korea Telecom and SK Telecom are building HSDPA networks across the country, with this latter carrier hoping to have the bulk of the population covered by installing service in 84 cities. In May last year, SK Telecom pipped KT to be the first to bring a commercial network into operation with Samsung simultaneously launching the world's first HSDPA handset, the W200. Major features of the phone that exemplify HSDPA's capability are video calls, Internet telephony (voice over Internet protocol, see below), ultra-high speed data transfer allowing the downloading of DVD-quality movies, a high-resolution (320x240 pixel) screen on which to view them, and an upload link allowing users to put their user-created contents (UCC) up on the Web. Did I mention global roaming? It is now possible to roam with the W200 in WCDMA-serviceed areas of Europe and Asia.

Offering a download speed of 14.4 Mbps, KT launched its own HSDPA network the following July in 50 cities including Seoul with plans for a further 34 by year-end. Primary network supplier Korean/Canadian joint venture LG-Nortel supplied a 5.8-Mbps uplink packet while access to the network was provided initially by LG's SH-100 phone, with the promise of five more models to come.

The full effect of HSDPA, a form of wireless Internet that closely conveys the Web experience, will become fully apparent later this year when the two carriers complete their networks and full range of handheld terminals comes on the market. Telecom industry observers expected it to promote convergence through the greater availability of virtual communities such as Cyworld, on which 90 percent of Koreans in their twenties have a page, and music portals such as Jukeon.

SK Telecom CEO Kim Shin-Bae has pointed out that the convergence potential of HSDPA between digital cameras and mobile terminals such as laptops and PMPs is heightened by the use of a USB modem that can actually boost accessibility to the network. Moreover, he maintained the use of a Universal Subscriber Identity Module (USIM) would promote convergence in mobile banking and credit card services since a smart card bearing a single chip would allow transactions with numerous financial institutions.

If HSDPA comes close to replicating mobile Internet, WiBro is mobile Internet, offering flawless connection at speeds of up to 120 kilometers per hour. The two have different operating platforms and both can offer voice and videophone calls making them natural competitors, although WiBro has yet to offer these services.

WiBro was developed by ETRI in collaboration with Samsung as a Korean version of WiMax (Worldwide Interoperability for Microwave Access) to provide a broader range of function than represented by the mobile phone and a mobile version of broadband Internet. The Internet connectivity of WiBro depends on base stations operating at speeds of up to 50Mbps. Through a network of such stations covering parts of Seoul and surrounding cities, Korea Telecom and SK Telecom launched commercial WiBro services in mid-2006.

It may be early days for WiBro but subscriptions have failed to meet expectations and KT has halted its program of network expansion. It is deemed a superior 4G technology to the more popular 3.5G HSDPA as it offers speeds three times faster, but perhaps it is a question of it finding its niche. Premier telecom provider SK Telecom maintains that WiBro is meant to complement HSDPA rather than compete with it. For this reason, the company intends to make WiBro available only in densely populated university areas or business districts, while deeming HSDPA more suitable for national coverage.

The Korean Information Strategy Development Institute (KISDI), a government sponsored think tank, has recognized the potential for competition between HSDPA and WiBro but stresses that they are essentially suited to different markets. KISDI has argued that because WiBro is directly connected to the Internet provider (IP) backbone, it is better suited to handling large data transfers such video (and music)-on-demand, network gaming, game downloading, and e-mail. HSDPA, on the other hand is a more appropriate technology for the transfer of data of a more limited scale such as short messaging services (SMS), video telephony, and banking and securities transactions.

One impressive success of WiBro to date is its adoption by telephony operators Sprint of the United States and KDDI of Japan as their mobile Internet platform of choice in their respective countries. Perhaps success overseas for this stellar Korean technology will encourage its broader use at home.

VoIP (voice over Internet protocol) has the power to effect huge savings and directly create new markets to support the service. In all, it is big business, and domestic Korean companies have not been slow to recognize the potential offered by foreign providers. Kookmin Bank, Korea's largest, selected Nortel of Canada in 2002 to provide a single next-generation network (NGN) voice over IP (Internet protocol) and multimedia solution for its call centers in Seoul and Daejeon. The following year, Nortel found itself selected once more, this time by telephony and data communications company Dacom Corp. to provide a similar solution in a deal that included products from Nortel Networks Multimedia Communications.

The year 2006 was marked by renewed interest by overseas VoIP solutions providers in the Korean market.

U.S.-based Skype, the world's most popular VoIP provider and now acquired by eBay, launched services in Korea in February 2006 after being attracted by the potential of what the company described as the world's leading broadband infrastructure. In keeping with its usual practice, Skype makes no charge for PC-to-PC calls, but charges a small fee for international PC-to-phone calls.

The Korean market attracted another major player in the VoIP field when Broadsoft of the United States launched its mobile VoIP software platform Nov. 1st, claiming high-profile corporates Korea Telecom, Samsung Networks, SK Telink and Hanaro among its clientele.

"Korea leads the world in next-generation mobile communications services, such HSDPA, making it an ideal market for our Broadworks mobile PBX, mixed/mobile convergence solutions," said Ken Rokoff, vice president of business development and Asia/Pacific sales. (A PBX is a private branch exchange, a private telephone network used within an enterprise).

Meanwhile, the newly established Korea Cable Telecom -- a nationwide consortium of seven cable operators -- began VoIP services last August. The launch followed government approval of the consortium the previous March in order to create synergy between the broadcasting and telecom sectors, and to further the success of cable-based convergence services.

IDC Korea projects that the Korean VoIP service market will grow 54 percent annually, from US$250 million in 2006 to US$1 billion in 2009, and that IP convergence products will drive the VoIP device market to US$263.5 million by 2009.

The Internet Society (ISOC), a think tank comprised of professionals worldwide, observed the massive efficiencies of VoIP compared to traditional telephony systems in a 2006 paper. The society highlighted its relatively low cost of deployment in system terms, and stated that a country would be at a disadvantage if it did not embrace the protocol while warning of the impending obsolescence of circuit-switched networks.

Doubtless, Korea is in the process of embracing VoIP in a manner that may eventually result in a radical alteration in the nature of the telecommunications industry. Indeed, the impact of VoIP may well be taken as an example as to how technological convergence is bringing subtle but immense change for the Korean economy and society. Convergence is coming, and with it, new industries and lifestyles that are guaranteed to fuel the dynamism that is the essence of Korea. ◦

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