Hello, George.
I had just completed writing a lengthy critique on the article that you cited, and my browser crashed as I was editing the final typo. Here's the truncated version:
I had read it earlier this evening on one of the lists I participate in, and subsequently posted it to the Gilder board. I was just about to post it here when I saw your message. Good Timing.
In response to your question, "What's the hold up?", it's the government that has subsidized not only the startups who compete against KT Corporation (formerly, Korea Telecom), the largest incumbent, but the content providers, as well. Notwithstanding, there are a fair number of bankruptcies and hard times being felt by many of the upstarts, as competition continues to grow, causing pricing pressures to persist.
The hold up here is the schism between the group (TechNet, the majority of the GOPs, et al) that would hand over full control of the last mile to the largest incumbents, virtually eliminating any possibility of competition and innovation, on the one hand, and those, on the other hand, who want to see some progress made in rural and underserved areas, for starters (with urban overbuilds to follow where needed) by the implementation of alternative, next generation platforms that are abetted by tax relief/incentives and regulatory changes. To wit: unbundled network element-platform (UNE-P), rights-of-way (ROWs), the issuance of spectrum licenses, and franchise grants, to name a few. I'd like to hear the views of others on this point.
[Peter E., some points made in this article echo those made by you earlier this evening (it's now Monday, so I guess it was last night... ) about the wireline/fiber folks being unable to make a profit. What is your take on the government's involvement here? And could you see them subsidizing wireless last mile buildouts in a similar way? Curious.]
Incidentally, the Utah Valley confederation cited in message #6413 of this thread demonstrates what can be done when municipalities get behind large buildouts. If they can draw industrial tenants to their cities and towns as a result of a more robust communications environment, while attracting uppser-scale residents and satisfying their own internal municipal communications need$, then I'd say that the interest payments and tax revenue impllications resulting from the bond issues that went to support this project were well worth the price. Time will tell.
[Begin Sidebar: I posted the following message to another list. I think it supports the last point I made, above, rather well. I hope my lurking friend(s) in Jersey City don't take offense ;) It was in response to a question that asked the following: How does one justify the argument that network buildouts by municipalities and/or their power utililities make any sense? Is there a software tool into which you can just plug the numbers and see the results?:
<snip>
I've not heard of such a software-based tool, to date. I'd
imagine that the large real estate firms who deal with commercial
properties might have done [similar forms of] analyses, and may have
something along those lines. If not a standalone application, then
as a plug-in component in a larger feasibility assessment tool.
Your question prompted me to think in terms of the trickle-down trends
that have typified how technologies finally reach the consumer, over
time:
First, carriers adopt a technology. Secondly, educational institutions
and commercial enterprises pick up on those carrier-adopted technology
elements that suit their requirements, albeit, often scaled down to the
needs of enterprise capacity needs. Lastly, consumers adopt those
capabilities that enterprises have adopted that most suit their needs.
This last part, of course, with the exception of WiFi and certain
personal area technologies, is most often dependent on the local SP's
adoption of the technology, first.
If you think in terms of commercial real estate developments, then one
can draw some conclusions from the correlation of those [locales] that are
heavily fiberized and those that are not, and how successful each of
these are in attracting businesses and upper-scale residents. In other
words, economic development [and the enhancement of residential
neighborhoods].
In one campus development project that I was recently involved in, my
client was able to pull in four different fiber-based carriers (and two
who piggy-backed on one of them), due to the presence of two readily
accessible carrier hotels and two express routes that ran through
the 'neighborhood' from remote hotels. The client in this case didn't
just happen to walk into this, blindly. Rather, they made their site
selection decision on the basis of the availability of abundant and
diverse fiber routes facilitated by the hotels.
Does the real estate developer, and through extension, the local
municipality, benefit in this case? The answer should be obvious.
Conversely, if the availability of fiber was lacking, the developer
would still be stuck with an abandoned railroad yard, wondering what to
do with it.
Businesses, like consumers, are demanding increasing amounts of
bandwidth, and all other things being equal, an enterprise will select
the site that can provide it (b/w) without having to incur
extraordinary build costs to remote carrier POPs. If you agree with the
trickle down theory, then, one should be able to extrapolate that the
attractiveness of a community and its economic development would be
enhanced through the presence of fiber-based and other high-capacity
forms of networking, as well.
I suspect that incorporating these factors into an algorithm that would
support a tool or application, as you have suggested, would depend on
the gathering of much empirical data over time, although, I don't think
we have a large-enough base of local community installations to work
with, yet. One can only extrapolate with the help of some good ol'
Kentucky Windage. Comments welcome. Frank... End Sidebar]</snip>
I'll post the entire South Korea Broadband article below, for the sake of posterity, and if anyone asks, I'll simply state that you made me do it.
So much for truncated versions, eh? Smiles.
FAC
----------
America's Broadband Dream Is Alive in Korea
May 5, 2003
By KEN BELSON with MATT RICHTEL
SEOUL, South Korea - As Cho Won Hee zips effortlessly from
one Web site to another, his doting mother at his side, it
is easy to understand why Silicon Valley views South Korea
as the promised land of instant access to the Internet.
The Chos' high-speed digital line - 100 times faster than
the typical dial-up connection in the United States - is
their zippy gateway to home entertainment, education and
shopping, all for $32 a month. And despite the relatively
recent arrival of such connections, the Chos, like many
Koreans, are already as addicted to their broadband hookup
as most Americans are to their television sets.
The Chos are at the cutting edge of South Korea's grand
experiment with all things broadband, the catch-all name
for high-speed digital connections. With a hefty push from
the government, South Korea's telecommunications providers
have built the world's most comprehensive Internet network,
supplying affordable and reliable access that far surpasses
what is available in the United States, even in those homes
that have their own broadband setup.
And now that most of the nation is online at high speeds,
South Koreans are shifting more of their analog lives to
their computers, where they watch soap operas, attend
virtual test preparation schools, sing karaoke and, most of
all, play games.
By embracing broadband so heartily, Koreans have turned
their country into a test case for the visionaries who,
just a few years ago, imagined a future of nearly infinite
digital possibilities. While those dreams have hit speed
bumps in the United States and elsewhere, South Korea -
with Japan not far behind - is racing ahead.
In the process, Koreans are offering a glimpse of what
wired societies are supposed to look like, where fast
Internet connections vastly increase access to information,
help lift productivity and create new markets.
"The killer application of the Internet is speed," said Lee
Yong Kyung, the chief executive of the KT Corporation,
formerly known as Korea Telecom, which controls nearly half
of the country's broadband market. "The money is in the
pipes."
But maybe not yet. Intense competition and overbuilding has
made prying profits out of building those pipes difficult.
And while some content providers have flourished, many
others still exist on government subsidies. Broadband has
also spawned worrying social trends, some say, raising
concerns about children addicted to online games and a
growing digital divide between the young and the old.
This is not unexpected, given the extraordinary pace of
change. Since 1998, telecommunications companies here have
installed nearly 11 million broadband lines, over 5 million
of those in the last year alone. High-speed lines now reach
significantly more than half of all homes with Internet
access.
The numbers are startling, given that South Korea was among
the nations hardest hit by the Asian financial crisis just
half a decade ago. But rather than retrench, the country
turned a disaster into an opportunity. Spending on
broadband and other high-technology gear helped lead a
transformation of the economy, pushing the overall
information technology sector to about 13 percent of
economic activity and making South Korea much less
dependent on heavy industry.
"In Korea, there was a sense of crisis and they needed to
take aggressive action to keep up with globalization," said
Izumi Aizu, who runs the Tokyo-based Asia Network Research
Inc. "In the U.S., the Internet has turned into a very
conventional business."
By racing the fastest down the information highway, Korea
has highlighted how far the United States has to go. Though
broadband connections are increasingly common in America,
service is comparatively expensive and coverage spotty.
Telecommunications companies in the United States, from
start-ups to long established businesses, spent hundreds of
billions of dollars to build fiber optic networks, but many
ran out of cash before they brought those lines the "last
mile" to people's doors.
When it comes to high-speed penetration of the home, the
United States lags well behind South Korea and Canada, and
has slipped below Japan.
America's uneven adoption of broadband has Silicon Valley
executives looking at South Korea with envy. While often
disdainful of government intervention, many high-technology
leaders in the United States now argue that Korean policy
makers got it right by actively promoting the technology.
The Korean government built a nationwide fiber network to
get students and others hooked on high-speed service. To
keep prices low, it encouraged rivals to compete with the
former state-run monopoly, KT, and it provided loans to
software ventures.
By contrast, the effort to bring broadband to the American
home is bogged down in the fight between the regional Bell
companies and their rivals.
Fee-based online services are now blossoming in Korea. Once
a novelty, home shopping now makes up 8.7 percent of all
retail sales, a rate that is expected nearly to double by
2005, according to Accenture, the global consulting
service.
For the Chos, their experience began, like so many Koreans,
when Won Hee, now 20, visited one of Seoul's many PC bangs,
or Internet cafes, while in high school. Soon he was
studying for his college entrance exams online and shopping
for music, videos, furniture and a vacuum for his mother.
Though he attends lectures at his college, he does most of
his other school work online, including making
presentations with his classmates. "The speed is the
biggest difference," he said. "Because all my friends have
broadband, we tend to use the Internet even more."
Though Korean parents often fawn over their sons, Mr. Cho's
parents grew jealous of Won Hee's connection. Since he was
always online at night, his father stayed late at his
office, where he had his own broadband line. His mother
wanted to study for a real estate broker's license online.
So the Chos leased a Wi-Fi base station from KT so their
other computers could gain access to the high-speed
connection. Mr. Cho started coming home earlier and Mrs.
Cho signed up for her course. Wi-Fi, also known as wireless
fidelity, is a technology for providing wireless Internet
access.
Including their home phone, three cellphones and cable
television, the Chos spend about $200 a month on
telecommunications fees, which is not atypical for wired
families in Korea and a hefty expense in a country where
the median annual household income is under $20,000,
roughly half that in the United States. Despite the
relatively low cost for high-speed Internet, that overall
sum, most experts here agree, is close to the limit of what
ordinary families will pay. So companies are now focusing
on providing even faster connection speeds and new services
without raising prices.
Like many American broadband users, the Chos started out
with what is called A.D.S.L., for asymmetric digital
subscriber line, which is best at downloading data over
broadband telephone networks. But they recently upgraded to
a system that is even faster in both directions, making it
easier to use interactive games and other two-way services.
The lines, capable of speeds of up to 40 megabits per
second, are much faster than anything commonly available in
the United States, where 1 megabit to 3 megabit
transmission rates are typical.
High-speed digital access is creating businesses that were
unworkable with ordinary dial-up connections. The Korean
company Megastudy, for example, has built the country's
biggest online test preparation school for college entrance
exams, while KT and rival Hanaro Telecom sell accounting
services over the Web to small businesses.
But entertainment, as expected, is the big attraction,
especially games and videos. In 2001, SBSi, the interactive
division of the Seoul Broadcasting System, started charging
500 South Korean won (about 40 cents) a show to watch soap
operas and other streaming video programs. The service has
attracted 1.8 million registered users; 4,000 more sign up
every day. The drama "All In," the true story of a Korean
gambler who beat the odds in Las Vegas, drew 1.6 million
viewers during its initial 24-episode run online; now
10,000 Koreans a day pay to see reruns on their computers.
"On the basis of this new infrastructure," said Hwang Eun
Ju, a manager in SBSi's strategy division, "we could
develop and benefit from new broadband content."
While content providers are taking advantage of Korea's
broadband network, the companies that built it are
besieged. Growth of new subscribers is leveling off and
providers, locked in a price war, are cutting installation
fees and giving away modems.
KT has the deepest pockets, but its continuing investment
in the new super-fast interactive technology is expected to
keep its broadband division in the red for at least another
year. The chief of the No. 2 player, Hanaro, resigned in
March in response to the company's mounting losses. The
third-largest provider, Korea Thrunet, filed for bankruptcy
protection from creditors, also in March, after failing to
find new investors.
"Turning a profit is not the issue; it's whether they can
survive or not," said Song Sauk Hun, an analyst at Gartner
Korea.
After encouraging rivals to enter the market, the
government is now quietly endorsing consolidation.
The United States has gone through a similar shakeout,
except it happened before the broadband network was
extensively built. The Telecommunications Act of 1996 set
off a surge of expansion that collapsed when the Internet
bubble burst, driving many of the broadband start-ups, like
Rhythms NetConnections and NorthPoint Communications, out
of business. While fixed-line operators in Korea and Japan
were cajoled into making D.S.L. service available at low
cost, analysts say that the Bells are reluctant to cut
prices.
At around $50 a month, broadband costs about twice as much
in the United States as in Korea and Japan. Worse,
broadband in the United States is slower and less suited
for interactive entertainment and other two-way uses
because it relies on an asymmetric system that receives
data much faster than it can send it.
The Bells say they are doing everything they can to promote
broadband. But critics say the phone companies view
broadband as more of a threat than an opportunity, so they
have done little to rectify these problems.
The phone companies "are a very powerful industry that
spends enormous amount on lobbying," said Charles H.
Ferguson, a senior fellow at the Brookings Institution in
Washington who is working on a book on broadband. "They've
been able to retard progress and competition."
Even so, after a slow start, the United States is catching
up, mostly because the cable industry has picked up the
ball. At the end of 2002, about 16.4 million homes had
broadband lines, up 52 percent from a year earlier. Cable
companies, which provide more than half of all connections,
will invest at least $10 billion this year in new
infrastructure.
America's suburban expanse certainly adds to the expense of
connecting every home, but until broadband costs less,
supporters say, consumers will remain wary.
"If the prices for high-speed access were $25 or $27," said
Joseph A. Crupi, vice president for broadband communication
at Texas Instruments, "it would be a no-brainer."
But while few question the advantages of having the nation
hooked to the Internet by high-speed services, many argue
about whether the benefits are worth the cost. The
Telecommunications Industry Association, which represents
Intel, Cisco Systems and Lucent Technologies, among others,
wants Washington to take a larger role in shaping a
national broadband policy. A bill now before Congress would
provide tax breaks of $2 billion over 10 years; it faces an
uphill struggle at a time of budget deficits.
Having seen how South Korea has turned itself into an
Internet powerhouse, broadband advocates say that the
United States risks losing out by not moving faster.
"People must have access to high-speed Internet from home,
as well as work," said Paul Saffo, a director of the
Institute for the Future, a technology industry forecasting
group in Menlo Park, Calif., "or we won't be full players
in the global economy."
nytimes.com |
