Broadband Internet Business And Beyond

1
Broadband Internet BusinessAnd Beyond

• Lee, In-Ho
• Management Research Lab.

April, 2005
2
Agenda
II
Success of Broadband Internet Business in Korea
3
1
Growth of Broadband Users in Korea
2
Initial Deployment
3
Broadband Market Share
4
Development of KTs Broadband Service
5
KTs Broadband Service Portfolio
6
KTs Broadband Networks
7
International Comparison
4
Growth of Broadband Users in Korea
Subscribers are increasing dramatically due to
high internet penetration

• 70.2 of population use internet in Korea
• 77.8 of households are broadband users in Korea
  

(unit thousands)
(source www.nic.or.kr)
5
Initial Deployment
Courageous deployment of a new comer caused
positive cycle

• At the initial stage of broadband, full-scale
  commercial deployment of broadband seemed like a
  risky road to take
• Hanaro Telecoms bold trial succeeded and brought
  booming in demand for broadband internet

6
Broadband Market Share
xDSL is a dominant technology, KT is a dominant
player in Korea

• More than 57 of broadband users subscribe to
  xDSL
• KT, a latecomer in broadband market, became the
  dominant carrier occupying over 50 of the total
  Korean market

(source www.mic.go.kr, Jan. 2005)
7
Development of KTs Broadband Service
KT made continuous efforts for advancing services
to create demand
8
KTs Broadband Service Portfolio
KT launched Megapass, umbrella brand of KTs
broadband service

• Depending on the speed offered and target users,
  the service is divided into Lite, Premium,
  Special, Ntopia, and Nespot

Lite
Premium
Special II
Ntopia
Nespot
9
KTs Broadband Networks
29.377G
Ilsan
NORTH AMERICA , EUROPE
Incheon
Hangdong
45M
Hehwa
AUSTRALIA
SOUTHEAST ASIA
Kooro
USA POP
760M
CHINA HONGKONG
Suwon
JAPAN
WonJu
16.200G
2.794G
3.969G
OVERSEAS BACKBONE
GIX
CheonJu
1.956G
DaeJeon
TaeKu
total 36.945G
JeonJu
KwangJu
40G 49G
PuSan
30G 39G
20G 29G
10G 19G
2.5G x 2 Lines
CheJu
2.5G x 1 Line
10
International Comparison
Korea is a world leader in broadband business
Broadband lines per 100 population
25
3Q, 2004
4Q, 2001
(unit lines)
(unit lines)
21
17.5
13.9
11
5.6
4.8
3.7
Hong Kong
Korea
Israel
Korea
Hong Kong
Netherlands
Taiwan
Canada
(source Point Topic)

11
1
Broadband Success Factors
2
KSF 1 Cultural Acceptance
3
KSF 2 Policy Regulation
4
KSF 3 Demand
5
KSF 4 Supply
12
Broadband Success Factors
Broadband success in Korea attributed to four
major factors

• All relevant factors needed
• Cultural Acceptance
• Policy Regulation
• Demand
• Supply
• Dynamic interaction of KSFs needed

13
Broadband Success Factors
KSF 1 Cultural Acceptance

• Hurry psychology
• Increasing demand for faster and faster
  connection speed
• Socially competitive peer pressure
• Intolerance for slower connection having a slower
  connection than my neighbor
• Digital or die
• Historical lessons driving national consensus for
  digitalization

14
Broadband Success Factors
KSF 2 Policy Regulation

• Govt projects / initiatives
• KII, Korea Information Infrastructure
• Global Leader, e-Korea Initiative
• e-Government Initiative
• Pro-competition
• Facility-based competition
• Deregulation for ISP Business
• Certification System for Super High-Speed
  Building
• Cyber Apartments Buildings
• Classification Premier Class, 1st Class, 2nd
  Class, 3rd Class

15
Broadband Success Factors
KSF 3 Demand

• Enthusiastic adoption of new services
• Affluent, savvy, young users
• Various contents killer applications
• Online games, cyber stock trading
• Use of IT in education from elementary to
  university
• Wholesale demand
• PC cafes as aggregators
• .com ventures

16
Broadband Success Factors
KSF 4 Supply

• Stiff Competition
• 3 major players
• Aggressive pricing competition
• Facility-based competition
• Geographical Advantages
• More than 50 households in apartment complexes
• More than 93 of all residents within 4km of
  central offices
• Dropping network costs
• Cost effective deployment
• Mass Deployment and Operating Know-How

17
1
Increase of Internet Usage
2
From Off-line to Online
Prosperity of Cyber Society
3
18
Increase of Internet Usage
Broadband stimulated usage of internet in our
daily lives

• Users spend 11.7 hours on the internet per week
  on average
• 86.7 of internet users have one or more e-mail
  accounts

Weekly hours spent on internet
E-mail usage
(unit hours)
(unit )
19
From Off-line to Online
Broadband changes every aspects of our daily lives

• 47.3 of internet users have bought
  goods/services on-line
• 58.2 of internet users use on-line stock trading
  
• 31.6 of internet users use on-line banking

On-line purchasing
On-line banking
On-line stock trading
(unit )
(unit )
(unit )
20
Prosperity of Cyber Society
Broadband accelerated the prosperity of cyber
community
Cyber community

• 41.7 of internet users use internet messenger
• 6.3 hours per week on average
• Main reason is for friendship/chatting(87.1)
• 50.1 of internet users belong to online
  communities
• Over 7million cyber communities exist

Cyber politics

• Internet votes during the presidential
  candidate
• elections in 2002
• 2.5 of votes, during April 1827, 2002
• More than 81 of congressmen have personal
• homepage
• 84 of netizens feel that internet is an
  effective
• way to express ones political opinion

21
1
Moving to Mobile Data Service
Wireless Lan
2
Portable Internet (WiBro)
3
IPTV
4
Home Networking
5
NGN
6
22
Moving to Mobile Data Service
Increase in mobile data usage requires mobility
to broadband

• Mobile Data Service Users nearly Doubled in one
  and half years
• 2.5 G service is currently available and 3 G
  service in preparation

Mobile data service subscribers
Data service positioning
(unit1,000 users)
Mobility
Very high
W-CDMA (3G)
Cellular,PCS (2G/2.5G)
2.3GHz Portable Internet
High
WLAN
Low
xDSL/HFC/B-WLL
0.1
1
2
20
Speed (Mbps)
10
2003.6 2003.12 2004.4 2005.2
23
Wireless Lan
Providing wireless broadband access to home and
public hotspots

• KT deployed a wireless LAN service called
  Nespot in early 2002
• Expanding terminals and hotspots

WLAN hotspot network configuration
Public hotspots
24
Portable Internet (WiBro)
2.3GHz wireless service enhancing mobility for
multimedia communication

• Wibro, Portable Internet using IEEE802.11g will
  upgrade the WLAN service
• The market potential of WiBro is quite promising
  so far

WiBro service covering
Market potential in Korea
(unit 1,000 users)
(unit million US)
(source KISDI)
25
IP TV
TV Services Delivered over a closed IP, QoS
enabled Network

• TV Services of comparable/better quality than
  existing digital TV services
• Provides VOD, Commerce, Internet services through
  broadband network via STB

Live Streaming Server
VOD
Contents Provider
Live Content
Live Encoder
IP (DSL)
T-Commerce
Subscriber Management Server
VOD Streaming Server
TV via STB
On-Demand Content
On-Demand Encoder
T- Internet
26
Home Networking
Convergence of telecom, broadcasting and home
appliances

• Remote controlling and networking of home
  appliances are becoming possible
• Various state-of-the-art services carried out in
  home

27
NGN
Core Network environments of user-oriented
ubiquitous services

• Establish NGN for Seamless access conditions
• New interconnection systems needed according to
  the change

Today Single-service NW
Tomorrow Multi-service NW/client-server
Servers
Content
Content
Communication Control
Media Gateways
Media Gateways
Backbone Network
Access
Access
Access
Clients
28
NGN
New Interconnection System Needed

• Transiting from PSTN to IP Networks
• Peering Transit Dominant
• Generates zero revenue

Current Situation
Problem Losing Main Revenue Sources
VoIP Interconnection
Interconnection system in the internet
International settlement in the internet
Short-term Issues
Developing a new interconnection system for
All-IP networks
Long-term Issue
Solution Co-developing Cooperation among
carriers
29
THANK YOU!