2009 North Korea and South Korea - Telecoms, Mobile and Broadband

Publication Overview

South Korea is a country leading in technology use. The report covers trends and developments in telecommunications, mobile, Internet, broadband, digital TV and converging media including VoIP and IPTV developments. Subjects include:

·         Market and industry analyses, trends and developments;

·         Facts, figures and statistics;

·         Industry and regulatory issues;

·         Infrastructure;

·         Major players, revenues, subscribers, ARPU;

·         Internet, VoIP, IPTV;

·         Mobile voice and data markets;

·         Broadband (FttH, DSL, cable TV, wireless);

·         Convergence and digital media.

Researcher:- Lisa Hulme-Jones

Current publication date:- July 2009 (15^th Edition)

Next publication date:- July 2010

Executive Summary

BuddeComm’s annual publication, North Korea & South Korea - Telecoms, Mobile and Broadband provides a comprehensive overview of the trends and developments in the telecommunications and converging media markets in North Korea & South Korea.

South Korea is the fourth largest economy in Asia and has one of the most vibrant telecommunications markets in the world. The market is supported by a visionary government program of stimulating development through liberalisation, deregulation and early privatisation of the incumbent, a creative and energetic private sector and a technology savvy population.

Loans were given and licences awarded to alternative operators to build networks and increase penetration. To foster a knowledge-based society, a major government education initiative provides Internet education to all segments of the population. Electronic commerce is common in private and public sectors. Of particular interest are the developments in the broadband market including the shift away from DSL, the move to A-LAN and FttH services, the development of mobile DMB services and the launch of WiBro services.

Over 90% of South Koreans have at least one mobile phone. The three main mobile operators are SK Telecom, KTF and LG Telecom. At the start of 2009, SK Telecom held just over 50% of the mobile market, KTF about 30% and LG Telecom almost 20%. South Korea is considered a leader in 3G mobile technology and has the world’s highest percentage of mobile users on 3G.

In an increasingly competitive market the three operators have concentrated on delivering 3G growth via WCDMA and CDMA EV-DO Rev A. There have also been higher levels of investment in mobile content in an attempt to offset downward pressure on ARPU rates. With saturation not far off, the market has a subscription rate rising by less than 10%, one of the slower growing markets in the region.

South Korea has the world’s highest number of broadband services per capita. By early 2009, over 30% of the population, or 90% of households, were broadband subscribers. South Korea is an early adopter of triple play models, which provide TV, broadband Internet and voice telephony as packaged services from a single provider.

The country’s fixed-line telephone market continues to be dominated by the incumbent KT Corp. The South Korean Government is committed to transitioning the country to digital terrestrial, digital cable and digital satellite TV broadcasting by 2010. By 2010 KT plans to have transformed its network into an NGN running over 50 times faster than current rates.

In 2008, the government introduced several stimulus initiatives to help the struggling economy. It has proposed to create a joint fund with Japan and China totalling at least US$80 billion to shield the three countries from the global financial crisis. Another stimulus package will be announced during 2009. The unemployment rate has fallen in recent years but is expected to soar in 2009. Korea’s birth rate and its female workforce participation rate are both among the lowest in the world.

Any government initiatives in South Korea and conducted against the backdrop that the share of the population over age 65 is increasing faster than in other industrialised countries and the number should double in the next two decades. Long-run projections indicate a steep rise in the old-age dependency ratio, making Korea one of the oldest countries in the world by 2050. This should foster exciting development in the areas of e-health.

By contrast, the development of the telecoms sector in the Democratic People’s Republic of Korea (DPRK) is seriously impeded by the country’s parlous economic state and the government’s general repression of communications. North Korea’s obsession with secrecy has made it extremely difficult to get a clear picture of the sector. The announcement in February 2005 that the DPRK had nuclear weapons did nothing to help the flow of useful telecom technologies and expertise into the country.

Key highlights:

·         The South Koran Government expects the economy to contract by about 2% during 2009, resulting in the country’s first recession in a decade.

·         The Korea Communications Commission has consented to allow for the KT and KTF merger to go ahead thus creating a single entity truly capable of offering triple play services.

·         SK Telecom enlarged its market position by acquiring the broadband operations of Hanaro Telecom, renaming itself as SK Broadband.

·         The KCC announced the deployment of a national broadband network offering speeds of around 1Gb/s by 2012 on the fixed-line network and 10Mb/s on the wireless broadband network, by investing approximately US$24.6 million. This is largely designed to improve the country’s economic prospects, and the regulatory authority hopes around 12,000 new jobs will be created as a result of the project.

·         Entering 2009, South Korea had the sixth largest broadband subscriber base in the world. The country had just over 15.5 million broadband subscribers at the time, while Japan had around 30 million and China around 85 million.

·         In early 2009, fibre technology accounted for 43% of all broadband subscribers in South Korea. The country has the highest fibre penetration rate among the OECD countries at nearly 14%. In terms of broadband speeds, South Korea is second only to Japan with an average 78Mb/s speed compared with 90Mb/s. These two countries rank first and second in the OECD for broadband speeds.

·         VoIP subscribers have continued to grow at an impressive rate to reach over 3 million in early 2009. The introduction of number portability in mid-2009 fuelled the growth of VoIP as fixed-line operators turn to VoIP to increase business. Subscriptions could pass the earlier target of 5 million by end-2009.

·         3G-based HSDPA and HSUPA services continue to show great success, with KTF planning to migrate all its subscribers to 3G by 2012 or earlier.

·         The KCC awarded IPTV licences to KT, Hanaro Telecom and LG Dacom in September 2008. All three recipients bid for licences with a view to offsetting declines in traditional phone services by expanding their product offerings.

·         Partial legalisation of handset subsidies should lead to greater competition in the market.

·         The very low number of prepaid subscribers remains at under 2% of the market; however, the majority of net additions are coming from the low-end segment.

South Korea – key telecom parameters – 2004; 2008

(Source: BuddeComm based on NIDA and industry data)

Data in this report is the latest available at the time of preparation and may not be for the current year.

For those needing high level strategic analysis and objective analysis on Korea, this report is essential reading and gives further information on:

·         The relatively limited success of WiBro due mainly to limited coverage, unreliable connectivity and lack of ‘killer applications’. HSDPA continued to outperform even though WiBro is cheaper.

·         Korea’s policy emphasis on completing a BcN or Broadband Convergence Network evolving to a UBcN or Ultra Broadband convergence Network by 2012/13.

·         Announcements by KT Corp and Japan’s Softbank to launch a KRW40 billion (US$41 million) fund focused on new media content. The fund is to invest in companies aiming to develop educational, entertainment and other media content to be used for IPTV services.

·         The KCC and Ministry of Education, Science and Technology (MEST) deciding to build IPTV networks in schools in 2009 by advancing the previous 3 year plan to a year plan.

·         The South Korean social network Cyworld being a trendsetter in e-commerce and generating an astounding amount of revenue in 2008, surpassing that of Facebook. The majority of their cash flow is built up out of digital presents, not advertisements.

·         A law that went into effect April 2009 although passed by the South Korean Government in 2008, to prevent cyber bullying and curb the spread of false information online.

·         Korean government plans to pay up to 50% of all mobile phone calls for people in low-income brackets to help them cope with inflation. This was an increase from the previous level of 35%.

·         The new structure for the ‘Informatization Promotion’ execution body including the Ministry of Knowledge Economy.

·         The take-off of music, gaming, TV, social networking and advertising.

Table of Contents

• 1. North Korea
  • 1.1 Key statistics
    • 1.1.1 Country overview
  • 1.2 Telecommunications market
    • 1.2.1 Overview of North Korea’s telecom market
    • 1.2.2 Market analysis
    • 1.2.3 Relationship with South Korea and the world
  • 1.3 Regulatory environment
    • 1.3.1 Foreign investment
  • 1.4 Fixed network operators
    • 1.4.1 Lancelot Holdings
    • 1.4.2 Loxley Pacific (Loxpac)
    • 1.4.3 KT Corporation
    • 1.4.4 Shin Satellite Corp
  • 1.5 Telecommunications infrastructure
    • 1.5.1 National telecom network
    • 1.5.2 International infrastructure
  • 1.6 Internet market
    • 1.6.1 Overview
    • 1.6.2 Internet Service Providers (ISPs)
    • 1.6.3 Websites
    • 1.6.4 Email service
    • 1.6.5 Voice over Internet Protocol (VoIP)
    • 1.6.6 Internet cafes
  • 1.7 Broadcasting market
    • 1.7.1 Overview
    • 1.7.2 TV stations
    • 1.7.3 Cable TV
    • 1.7.4 Satellite TV
  • 1.8 Mobile communications
    • 1.8.1 Overview of North Korea’s mobile market
    • 1.8.2 Mobile technologies
• 2. South Korea
  • 2.1 Key Statistics
  • 2.2 Telecommunications market
    • 2.2.1 Overview of South Korea’s telecom market
    • 2.2.2 Competitive market
    • 2.2.3 Digital Korea statistics – convergence
    • 2.2.4 Fixed-line and mobile services
    • 2.2.5 Internet in South Korea
    • 2.2.6 Television broadcasting in South Korea
    • 2.2.7 Telecommunications service markets
  • 2.3 Regulatory environment
    • 2.3.1 Policy overview
    • 2.3.2 Rural access
    • 2.3.3 Low income assistance
    • 2.3.4 Ministry of Information and Communication (MIC)
    • 2.3.5 National Internet Development Agency of Korea (NIDA)
    • 2.3.6 Korea Communications Commission (KCC)
    • 2.3.7 National Computerisation Agency (NCA)
    • 2.3.8 Korean Broadcasting Commission (KBC)
    • 2.3.9 Telecommunications and Broadcasting Committee
    • 2.3.10 Deregulation
    • 2.3.11 Ownership rules
  • 2.4 Major fixed-line network players
    • 2.4.1 Overview
    • 2.4.2 KT Corp
    • 2.4.3 LG Dacom
    • 2.4.4 SK Broadband (Hanaro Telecom)
    • 2.4.5 Onse Telecom
  • 2.5 Telecommunications infrastructure
    • 2.5.1 Overview of infrastructure developments in South Korea
    • 2.5.2 National telecom network
    • 2.5.3 International infrastructure
  • 2.6 Internet market
    • 2.6.1 IPv6
    • 2.6.2 Inter usage patterns
    • 2.6.3 Wireless Internet
    • 2.6.4 Internet search engines
    • 2.6.5 Voice over Internet Protocol (VoIP)
    • 2.6.6 E-services
  • 2.7 Broadband market
    • 2.7.1 Overview
    • 2.7.2 Growth drivers
    • 2.7.3 Broadband convergence Network (BcN)
    • 2.7.4 Major broadband ISPs
    • 2.7.5 Broadband services
    • 2.7.6 Broadband charges
  • 2.8 Convergence
    • 2.8.1 Overview of media convergence
    • 2.8.2 Triple play models
    • 2.8.3 Digital TV
  • 2.9 Mobile communications
    • 2.9.1 Overview of South Korea’s mobile market
    • 2.9.2 Mobile technologies
    • 2.9.3 Major mobile operators
    • 2.9.4 Mobile voice services
    • 2.9.5 Mobile data services
    • 2.9.6 Mobile content and applications
• 3. Glossary of Abbreviations

• Table 1 – Country statistics North Korea – 2008
• Table 2 – Telephone network statistics – 2009
• Table 3 – Mobile statistics – 2009
• Table 4 – National telecommunications authority
• Table 5 – Fixed lines in service and teledensity – 1990 - 2005
• Table 6 – Country statistics South Korea – 2009
• Table 7 – Telecom revenue and investment statistics – 2007
• Table 8 – Telephone network statistics – June 2008
• Table 9 – Internet user statistics – 2008
• Table 10 – Broadband statistics – March 2009
• Table 11 – Mobile statistics – 2008
• Table 12 – National telecommunications authorities
• Table 13 – Telecom service subscribers and market share by sector – June 2008
• Table 14 – Telecom service subscribers by sector – 2004 - 2008
• Table 15 – South Korea telecom industry revenue – 2004 - 2008
• Table 16 – KT Corp fixed-line subscribers and market share – 2004 - 2009
• Table 17 – Fixed and mobile lines in service and teledensity – 1991 - 2008
• Table 18 – Fixed-line subscribers and market share by operator – September 2008
• Table 19 – Number portability of fixed line services – 2003 - 2007
• Table 20 – Local telephony lines by operator – 2005 - 2008
• Table 21 – Local telephony market share by operator – 2005 - 2008
• Table 22 – Mobile subscribers and market share by operator – 2008
• Table 23 – Number portability of mobile services – 2004 - 2007
• Table 24 – Registered .kr domains – 1996 - 2009
• Table 25 – Internet users – 1994 - 2008
• Table 26 – Internet subscribers – 1996 - 2008
• Table 27 – PC penetration – 2000 - 2008
• Table 28 – Broadband Internet subscribers by operator – 2005 - 2008
• Table 29 – Broadband Internet market share by operator – 2005 - 2008
• Table 30 – KT Corp financial data – 2006 - 2008
• Table 31 – KT Corp shareholders – 2008
• Table 32 – KT Corp broadband subscribers and market share – 2003 - 2009
• Table 33 – KT Corp fixed-line subscribers and market share – 2003 - 2009
• Table 34 – KT Corp IPTV subscribers – 2007 - 2009
• Table 35 – LG Powercom financial data – 2005 - 2008
• Table 36 – SK Broadband financial data – 2003 - 2008
• Table 37 – SK Broadband shareholders – 2008
• Table 38 – SK Broadband subscribers – 2005 - 2008
• Table 39 – SK Broadband TV subscribers – 2008
• Table 40 – SK Broadband revenue split – 2008
• Table 41 – Number of IPv4 and IPv6 addresses – 1997 - 2009
• Table 42 – Internet usage rates – September 2008
• Table 43 – Purpose of using the Internet – September 2008
• Table 44 – Internet search engines market share – January 2009
• Table 45 – VoIP subscribers by operator and market share – February 2008
• Table 46 – E-commerce volume – 2001 - 2008
• Table 47 – E-commerce volume by transaction type – 2001 - 2007
• Table 48 – Purchase items: Internet shopping – 2008
• Table 49 – Online stock trading customers – 2004 - 2007
• Table 50 – Internet banking service subscribers – 2001 - 2008
• Table 51 – Financial service by delivery channel – 2005 - 2008
• Table 52 – E-tax usage rates – 2002 - 2007
• Table 53 – E-learning user market volume – 2004 - 2007
• Table 54 – Online game market volume – 2002 - 2007
• Table 55 – Digital music market volume – 2003 - 2007
• Table 56 – Methods of watching online movies – 2008
• Table 57 – Broadband Internet subscriber growth and penetration rate – 1998 - 2009
• Table 58 – Broadband subscribers and annual growth by access type – March 2009
• Table 59 – Broadband subscribers and households – March 2009
• Table 60 – Broadband Internet subscribers by system – 1998 - 2009
• Table 61 – Broadband market share by operator – September 2008
• Table 62 – BcN implementation goals in households/subscribers – 2005; 2007; 2010
• Table 63 – Broadband subscribers and market share – major providers – March 2009
• Table 64 – Broadband subscribers by access type – March 2009
• Table 65 – Cable modem subscribers – 2000 - 2009
• Table 66 – Cable modem (HFC) subscribers by service provider – March 2009
• Table 67 – DSL subscribers – 1999 - 2009
• Table 68 – DSL subscribers by service provider – March 2009
• Table 69 – A-LAN subscribers by service provider – March 2009
• Table 70 – FttH subscribers by service provider – March 2009
• Table 71 – South Korea FttH / FttB subscribers – 2005 - 2011
• Table 72 – Wireless Internet subscribers by service provider – June 2008
• Table 73 – KT’s WiBro subscribers – 2006 - 2008
• Table 74 – Cable TV subscribers – 2002 - 2008
• Table 75 – Mobile subscribers – 1994 - 2008
• Table 76 – Mobile subscribers and market share by operator – 2008
• Table 77 – Mobile subscribers and annual change by operator and technology – 2008
• Table 78 – Overall mobile ARPU by operator – 2008
• Table 79 – Mobile subscribers by operator – 2002 - 2008
• Table 80 – Mobile operator financial data – 2006 - 2008
• Table 81 – CDMA 2000 1x mobile subscribers by operator – 2002 - 2008
• Table 82 – CDMA2000 subscribers by operator and system – 2004; 2008
• Table 83 – WCDMA subscribers by operator – 2008
• Table 84 – Mobile manufacturers’ shipments and market share – 2008 - 2009
• Table 85 – SKT financial data – 2005 - 2008
• Table 86 – SK Telecom shareholders – 2008
• Table 87 – SKT mobile subscribers, minutes of use and ARPU – 2004 - 2009
• Table 88 – KTF financial data – 2004 - 2008
• Table 89 – KTF shareholders – 2008
• Table 90 – KTF data and total ARPU by network type – Q4 2007
• Table 91 – LG Telecom financial data – 2005 - 2008
• Table 92 – LG Telecom mobile subscribers, minutes of use and ARPU – 2003 - 2009
• Table 93 – Wireless Internet subscribers and market share – November 2007
• Table 94 – KT wireless Internet ARPU by service type – 2007 - 2008
• Table 95 – Terrestrial and Satellite DMB subscribers – 2008

• Exhibit 1 – Bits and bytes
• Exhibit 2 – Regional TV broadcasters in South Korea
• Exhibit 3 – Classification of service providers
• Exhibit 4 – Foreign ownership restrictions
• Exhibit 5 – Significant telecoms operators in South Korea
• Exhibit 6 – Overview of KT subsidiaries
• Exhibit 7 – Informatization policies and paradigms – 1998 - 2012
• Exhibit 8 – Informatization Promotion: Execution body
• Exhibit 9 – Overview of national submarine fibre optic cables in South Korea
• Exhibit 10 – International submarine fibre optic cables overview in South Korea
• Exhibit 11 – Confusion surrounding DSL statistics in South Korea
• Exhibit 12 – Estimated B-WLL frequencies, bandwidth and applications in South Korea
• Exhibit 13 – LMCS network operators in South Korea
• Exhibit 14 – Representative charges per service in Seoul – 2008
• Exhibit 15 – Types of telecom convergence
• Exhibit 16 – Wireless Internet operators and services
• Exhibit 17 – Comparison of WiBro and other technologies in South Korea
• Exhibit 18 – Comparison of S-DMB and T-DMB application in South Korea