Friday, January 16, 2009

WiBro Turns Into White Elephant

Korea's hope of creating a legacy in wireless technology may come true but for all the wrong reasons.

It wasn't long ago when government officials were convinced that the market was ready for a new kind of wireless network, which they dubbed WiBro, designed to provide high-speed data services to handsets, computers, homes and offices.

Now, just two-and-a-half years into deployment, WiBro, which is short for "wireless broadband,'' is looking more and more like a monumental letdown everyday.

Desperate to save the WiBro, policymakers recently enabled operators to provide voice over Internet Protocol (VoIP) services on their networks and pressed them to increase investment.

The problem with the plan is that these are the same companies that are backing alternative mobile-phone services that so far have successfully fended off WiBro's challenge with ease.

"We have no intention of allowing WiBro to fade out when we believe the technology has great potential,'' said Shin Yong-sub, an official of the Korea Communications Commission (KCC), the country's broadcasting and telecommunications regulator.

"If the home-made WiBro goes international, it will bring new opportunities for Korean high-tech firms in royalty payments and equipment sales, and for this to happen, the local market for the service needs to get bigger. Allowing voice is a good way to achieve that and we need operators to renew their commitment and invest more aggressively,'' he said.

WiBro is designed as a predecessor to mobile WiMAX, which is competing with Long Term Evolution (LTE) technology in the fourth-generation (4G) telecommunications race.

The government has been promoting WiBro aggressively in hopes of allowing local companies to drive the standard and capture the benefits of homegrown intellectual property.

However, in a country that boasts one of the most advanced wireless networks in the world, WiBro looks like a solution without a problem. WiBro's struggles are not just a concern for its operators, but for high-tech giants Intel and Samsung Electronics, who are the biggest backers of WiMAX and had hoped WiBro would provide a convincing reference case against LTE in the standards race.

Now, WiBro seems to be mentioned more by LTE supporters, including Ericsson Vice President Jonas Lundstedt, who, in a recent news conference in Seoul, claimed that the experience in Korea indicates that mobile WiMAX is lagging by years.

KT, the country's biggest telephone company and Internet provider, has just 180,000 customers for its WiBro services, while wireless leader, SK Telecom, which had to be dragged into the market by heavy-handed government policies, gathered 11,000 customers through a half-hearted effort.

Around the time of WiBro's commercial launch in June 2006, the state-run Korea Information Society Development Institute (KISDI) predicted the market for the technology would grow to 12.5 trillion won (about $9.2 billion) by 2012.

KCC now says the goal is to reach 330 billion won by then.

Considering that KT and SK Telecom used 790 and 600 billion won, respectively, to build their WiBro networks and each needs to spend between 200 and 400 billion won more to expand coverage, a 300 billion won-plus market after seven years hardly qualifies as a consolation prize.

KCC officials are betting heavily that VoIP could inject new life into WiBro, which appears particularly vulnerable. Jo Young-hoon, a KCC official, says that VoIP WiBro could provide customers with mobile services that are about 30 percent cheaper than current ones.

"We expect commercial services to start in December this year, when consumers will be able to use dual-band, dual-mode handsets that switch between WiBro and existing mobile-phone networks,'' he said.

The WiBro handsets will be given numbers that start with the 010 prefix, used by all three of the country's mobile-phone carriers ― SK Telecom, KTF and LG Telecom.

SK Telecom, which controls more than 50 percent of wireless customers and currently enjoys leadership in the third-generation (3G) market, doesn't like the scenario one bit.

KCC officials recently "recommended'' SK Telecom executives consider allowing VoIP calls on its WiBro handsets, according to government sources, which has the company reacting as if it was robbed of its wallet.

"We would need to invest at least two trillion won more to complete a nationwide WiBro network, and the cheap calls on WiBro handsets will erode our profits by initiating fierce competition,'' said an SK Telecom spokesman.

The idea of allowing VoIP over the WiBro network was first initiated by KT, which looked ready to tap into the mobile telephony market to compensate for its declining fixed-line revenue.

However, with the company expecting to complete its merger with its mobile subsidiary, KTF, during the first-half of the year, KT is suddenly indifferent.

Although KT plans to introduce the services by the end of the year, its level of commitment remains to be seen, as company officials now claim that WiBro should complement existing mobile-phone services, not cannibalize the customer pool.


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