re: MCI on cdma2000 in Korea (detailed and long)
One of the more comprehensive articles I have seen:
>> State Of Passion
Daniel Scuka
Mobile Communications International
Issue 88
02 February 2002
Few countries can equal Korea's zeal for wireless. Just don't call their CDMA anything but 3G
"CDMA 1X and CDMA 1X EV-DO are full, third-generation technologies," says Moon Suh Park, senior director for business development at Qualcomm Korea, leaning forward and poking his desk with an assertive finger.
Park is obviously passionate about his topic and reacts predictably to the proposition that only WCDMA is 'true' 3G, and that Japan's NTTDoCoMo was first to market, with its FOMA service launch in October 2001.
But then Korea is Qualcomm territory. SK Telecom, KT Freetel, and LG Telecom - the hyper-competitive troika that leads Korea's cellular industry - are all CDMA operators and, in Korea, 3G is synonymous with Qualcomm's next-generation 1X EV-DO network standard. The new networks are scheduled for formal roll-out by SK Telecom and KT Freetel about the same time as the FIFA World Cup starts in May, and by LG Telecom by end-2002.
Granted, SK Telecom and KT Freetel plan eventually to deploy WCDMA systems; but first, all three carriers will deploy 1X EV-DO. In fact, the country's third and final 3G licensee, LG Telecom, is specifically required to use only 1X EV-DO technology for its 3G service.
The three 3G licensees have survived a turbulent couple of years which have seen two carriers, KTM.com and SK Shinsegi, absorbed by rivals and a nationwide boom in fixed-line broadband access that handily outperforms anything offered by the wireless internet.
KTF and LGT launched their own CDMA 1X systems (on 1.8GHz) last May to counter SKT's seven-month lead; they offer downloads in the 144kbps range.
SKT charges 2.5G and 3G subscribers Won2.5 and Won6.5 per 512 bytes for multimedia and text data respectively - typical of fees charged by the other two (there are also flat-rate data usage plans).
By the end of last year, usage of the 2.5G systems (sidestepping the 3G definition debate - the Korean mobile industry refers to 1X as 2.5G) had started to take off, helped by the sexy 256-colour 2.5G browser phones from the likes of Samsung, SK Teletech, and LG Electronics, offering, desktop data synchronisation, low weight (60-80 grams), and downloadable games. Retail list prices range from Won305-548,000.
The Korean Ministry of Communications (MIC) reported 3.49 million CDMA 1X users across all three systems at the end of November (12 per cent of Korea's then 29 million cellular customers), although Jeff Kahng, telecoms analyst at CSFB in Seoul, believes the total count is lower, coming in at 2.35 million as of end-December.
Discrepancies are likely due to differing estimates on how many CDMA 1X handset owners actually use the devices for high-speed access; the MIC says that in October, 68.7 per cent of 2.39 million CDMA 1X subscribers actually used the internet.
The ministry also says that subscribers were migrating to 2.5G at the rate of 700-800,000 per month. The carriers' faith in 2.5G has been well rewarded. In October, they saw combined wireless internet revenues of Won23.1 billion, 34 per cent of which came from the new networks (see figure 1).
Figure 1: CDMA 1X (2.5G) Subscribers By Carrier
Carrier Launch Subscribers
SK Telecom October 2000 1.79 million
KT Freetel May 2001 0.43 million
LG Telecom May 2001 0.13 million
NOTES:
1. All figures as of December 2001.
2. More than 70 per cent of handsets sold are now CDMA 1X-enabled.
3. Some analysts believe almost all such handsets are actually used for 2.5G access, given that the average subscriber changes handset every 16-18 months.
Source: Credit Suisse First Boston
Upping the ante, SK Telecom opened a trial 1X EV-DO system in November last year in Seoul and neighbouring cities. While the network can in theory achieve the 2.4Mbps claimed by Qualcomm's Moon, actual throughput is closer to 1.7Mbps, according to SKT spokesperson Chul Keun Kwon. Still, that's plenty fast enough for the types of content demanded by SKT subscribers.
There's no word yet on total number of 1X EV-DO subscribers on SKT's system. Furthermore, the MIC maintains an interventionist presence in the industry. Last year, it mandated that market heavyweight and former state monopoly SK Telecom absorb the then-No. 4 operator Shinsegi - and then stop accepting new subscribers until the combined carriers' market share fell below 50 per cent (which occurred in June 2001).
The merger became final in January this year, after a several-month delay due to intense opposition from LGT and KTF. The two were at least partially mollified after the MIC imposed 13 conditions on the merger designed to stymie any anti-competitive tendencies at the new entity (these included opening SKT's wireless internet portal to competitors and the granting of equal network access rights to content providers and ISPs).
Nonetheless, during the second half of 2001, KTF's market share slid some two per cent to 33.4 per cent while LGT's dropped about the same amount to 15.4 per cent (the combined SKT-Shinsegi unit ended up at 51.2 per cent). No doubt the two smaller competitors will make sure that the MIC watches the situation closely in 2002.
The MIC also prohibited handset subsidisation, provisionally in the spring of 2001 and finally in October. New sign-ups fell steeply, and carriers scrambled to devise alternative sales strategies. In November, LG Telecom CEO Nam Yong charged that SK Telecom was continuing to offer deep price discounts to new subscribers in their 20s, an unfair advantage if not technically a subsidy, since SKT had a well-established foothold in the lucrative 40s-and-over demographic, which LGT couldn't easily attract.
Industry watchers, while not exactly sympathetic, could at least feel Yong's pain, measured to the tune of a Won1.3 trillion negative cash flow. SKT meanwhile reported EBITDA of Won2,376 billion for the Q1-Q3 of fiscal 2001, while KTF said it pulled in Won4,644 billion in the first half of 2001. Despite LGT's troubles, 2001 was a banner year for the three carriers.
Wireless subscribers surpassed fixed-line subscribers in 1999, and continued to grow in 2000 and 2001. Growth in CDMA 1X subscribers was faster than expected, according to the MIC. Over 60 per cent of the total South Korean population now uses mobile phone services, making Korea one of the most unwired countries in the world, according to industry sources. At year's end, all carriers cut their telecommunications fees partly to grab more customers and partly to head off criticism from civic and other groups about high costs. SKT, KTF, and LGT reduced fees by an average of 8.3, 4.3, and 6.3 per cent respectively (see figure 2).
Figure 2: Market Share By Carrier
Carrier Subs Market Churn Mins Of Total Data
Million Share Use/Sub ARPU ARPU
(KRW) (KRW)
SK Telecom 14.99 51.2% 1.0% 142 40,085 2,324
KT Freetel 9.74 33.4% 2.5% 151 30,337 2,108
LG Telecom 4.33 15.4% 3.4% 124 26,061 2,178
TOTAL 29.06 100.0%
Also in November, LGT fought back with a thinly veiled subsidy of its own in the form of an M-Plus credit card offered to new handset purchasers that can be preloaded with up to Won300,000 (the credit card company kicks back a 'commission' to the carrier). Chagrined, SKT and KTF launched their own credit card co-marketing schemes (although with lower preloaded Won limits). By early December, almost 300,000 SKT and 130,000 LGT subscribers had opted for the cards (KTF won't announce its results). CSFB's Kahng believes that the credit card promotions - combined with falling availability of older 2G handsets - will help drive migration to 2.5G. "[Despite] the higher 2.5G handset prices, substantial [numbers of] subscribers will take up the credit card promotional package in order to make the handset upgrade," he says.
The handset situation took another twist in 2001 as all three carriers reinforced their own handset manufacturing efforts. SK Teletech, founded as a subsidiary of SK Telecom in 1998 (Japan's Kyocera holds 27.5 per cent), sold some 65,000 units in October 2001, up substantially from 40,000 units in September. It now ranks third after Samsung and LG Electronics.
KTF also has a manufacturing subsidiary, KTF Technologies. The company plans to introduce high-end CDMA 1X models in time for the World Cup this summer.
The race towards 3G warmed up in December when second place carrier KTF announced the start of its own CDMA 1X EV-DO network. Trials will start this month and the carrier is planning to introduce dual-mode CDMA 1X/CDMA 1X EV-DO handsets that will automatically select the network based on the bandwidth demands of the content being downloaded. KTF will also launch video on demand (VOD) and multimedia messaging services, the former offering 12 frames per second at 100x120 pixels and 256 colours.
The VOD service represents somewhat of a coup for New York-based Solidstreaming Inc, the video codec and player developer; the KTF deal is its first large commercial sale. "The video player can be embedded or downloaded via BREW, and KTF will use both options," said William Kang, business development director for Solidstreaming's Korea office. But a KTF engineer present at the trial launch demonstration admitted that the handset batteries would be "hit pretty hard" by the VOD system. He explained that initially, heavy users will only see about one day's worth of operation.
In January this year, KTF also announced a unique GSM-CDMA roaming agreement, set up through the GSM Association and France's Bouygues Telecom (operator of France's 1800MHz GSM network). Using special CDMA handsets that accept GSM SIM cards, European visitors whose networks sign roaming agreements with KTF will be able to receive service. With the advent of the World Cup, KTF anticipates as many as 100,000 GSM roaming clients during the year.
But the biggest news of 2001 has to be the late-December collapse of investment talks between SKT and Japan's NTTDoCoMo, ostensibly because the companies could not agree on financial terms. Media reports had said that DoCoMo was considering a 15 per cent stake in SKT - valued at some Y297 billion. But MIC foot-dragging in approving the launch of 3G WCDMA services was also part of the cause, according to one anonymous SKT source. "SKT wants to move to WCDMA, but the MIC wants to cultivate CDMA technology further, so there is pressure not to abandon CDMA just yet."
Another cause was SKT's realisation that 1X EV-DO subscriber numbers were not growing as fast as the carrier would like, making any additional investment in WCDMA risky. The carrier sees the MIC's prohibition of handset subsidies as a major factor in the slower-than-expected growth. "The current 800MHz band is sufficient to handle the 3G population," said the source, adding: "We will move to 3G WCDMA's 2GHz band when we need it, perhaps in 2003/04." The foot-dragging may not all be due to the ministry, and it's no surprise that DoCoMo put away its wallet and went home. But SKT remains hopeful that its good and growing relations with China will entice DoCoMo back to the bargaining table one day soon. "DoCoMo wants to use a Korean tie-up as an entry to China, so they are still interested," said the source.
Korea's CDMA expertise is actually a key element in exploiting any Chinese opportunities - Korea was the first country to commercialise CDMA (in 1996), through R&D led by ETRI, Korea's Electronics and Telecommunications Research Institute. In January 2002, Information and Communication Minister Yang Seung-taik said that Korea will participate in China's second bid for CDMA equipment in 2002 based on the CDMA 1X standard. China Unicom (China's No. 2 carrier) intends to ask Korean firms to bid on a $3 billion contract for a 20-million subscriber network (4.5 million more than the last contract in 2001).
If Korea gets the deal, it will be a major boost to the industry. SK Telecom has already won significant contracts in China, signing an agreement in February 2000 with China Unicom to co-develop telecom technology based on CDMA in Fujian, Hainan, and other provinces. SKT also offers roaming with first place Chinese carrier China Mobile, and it has set up a joint venture with Chinese game developer Gameking to create mobile games, as well as finance and e-commerce applications, for wireless.
Consumers, meanwhile, have a plethora of fixed-line broadband access options to choose from, lessening the appeal of high-speed wireless internet. This also raises the threshold of 3G service that Korean carriers must achieve - such as streaming video and audio - before large numbers will migrate to 3G-data-enabled handsets. "In Korea, there is well-developed DSL infrastructure, so it is difficult for the wireless net to play a role," says SKT's Kwon. "Most subscribers think content should be free, so it's tough for mobile content providers to make a profit," he adds.
Evidently 3G has a fight on its hands. "The market for 3G is growing fast," says Lee Sang-Moo, deputy director for mobile internet at the MIC's Telecommunication Business Promotion Council, "but content and solutions are critical." He explains that the government has been focusing on mobile e-government initiatives to help spread the mobile internet, including post-office access, police alerts and 911 emergency services. Lee says that Korea will commit $200 million to such projects starting in March 2002, and that it expects to get a lot of public uptake. "The mobile net is a passion to Koreans," he says.
In the private sector, at least some agree that mobile internet is still a tough line of business. "Koreans have a short temper - they want speed," explains Daisuke Yamauchi, CEO of content aggregator Cybird's Korean office.
Despite what you hear, he says, the CDMA 1X systems only give a throughput of 30 to 40Mbps (an observation confirmed by one senior executive at Lucent's Korean office). Also, compared to Japan, the carriers don't provide enough help to third-party content providers. "Revenues are too low," he says.
Yamauchi says only a handful of content providers are profitable, and that the carriers' billing systems tend to favour, well, the carriers.
Cybird Korea offers chat, BBS, web mail, fortune telling, and games on all of Korea's wireless networks, but is actively considering how to re-export its expertise to other markets, including Taiwan, China, Hong Kong, and Singapore. (Parent Cybird Japan was named in December as one of the content partners on KPN's i-mode network set to start trials in Holland around April this year.) Yamauchi reveals at least one advantage of Korea's content creation business: "It's about 50 per cent cheaper to create content here than in Japan."
Others, however, are much more bullish. "We've got 140 staff, and we'll grow to 220 in the first half of 2002," says WiderThan.com director of global business YongWook Lee. The company is an affiliate of SKT, and works with independent content providers to produce characters, music, ringtones, and multimedia for SKT's wireless portal. He explains that the firm will expand into broadcast services, as well as voice recognition and text-to-speech, in 2002. SKT says it earned Won22,257 million in wireless internet fees in October 2001, up from Won13,816 million in January.
The challenge in 2002, says Lee, is to develop higher-value content and services, like m-commerce. SKT now has 419-plus content partners maintaining some 6,400 sites (the other two carriers have fewer), and WiderThan.com is heavily involved in SKT's ambitious NATE-branded content redevelopment plan. The plan will see SKT's wireless portal reworked to be accessible via PC, TV, PDA, mobile phone, home appliances, and telematics-equipped vehicles.
A new discount packet tariff will be introduced in 2002, and a key cornerstone will be the Moneta IC chip-equipped credit card. Handsets equipped with card slots were fielded in December 2001, and SKT will cull a 0.2 per cent commission off m-commerce transactions conducted on Moneta cards (the system is being developed in partnership with five credit card companies). The plan will also see the introduction in 2002 of NEMO e-currency, a mobile commerce system being developed with four major banks.
Overall, the Korean wireless industry faces several issues in 2002. ARPU for all carriers has been trending up, but ARPU due to data is now becoming much more significant than that due to voice. "After CDMA 1X launched, data ARPU took off," says Joon Koo Lee, researcher at Seoul-based Atlas Research Group. She expects this to increase as colour displays become ubiquitous and as the carriers bring Java and BREW environments into service.
LGT has Java, SKT has Java and a proprietary GVM environment, and KTF will launch BREW this year, explains Lee, adding: "KTF is trying to catch up to SKT, so BREW is a very strategic choice."
Finally, the opening of the carriers' portals, already mandated for SKT and soon to be applied to the other two carriers, is causing the operators a lot of sleepless nights. Wireless mail services from Daum, a major PC web portal, are already available on SKT and KTF, and will start on LGT by February 2002.
To date, wireless internet portals in Korea have been closed, walled gardens (there is almost no non-official content, although technically phones can access off-portal URLs). Atlas's Lee sees this as a big plus, however: "The operators are unwilling, but even after portal access is opened, most revenue - such as data usage - will still go to them. So opening the portals will be an overall benefit to the carriers."
And the users? Even deep underground, on the Seoul subway, several passengers can be seen animatedly chatting on their handsets. The time and expense of installing repeaters in tunnels and stations is not insignificant; Koreans aren't just keen on cell phones - they're downright fanatical. <<
- Eric - |
