Korea: Speeding on the IT, communications superhighway

First published in The Hindu Business Line, July 25th
Korea has one of the world’s most active telecommunications and information technology markets backed by strong support from the Government.

No surprise that Korea was ranked No. 1 among 152 countries surveyed in the ICT Development Index of the International Telecommunication Union in end-2012.

The data rank Korea as the world’s most advanced ICT economy for the sixth year in a row followed by Sweden, Denmark, Iceland and Finland. The index is aimed at assessing ICT development routes, digital gaps and growth potentials of each country. The ranking is proof of the Korean Government’s efforts over the years to improve its regulatory environment and to promote policies to advance IT infrastructure.

Korea is one of the fastest growing ICT markets globally with advanced infrastructure and active consumers who adopt new technologies and products quickly. ICT accounts for 17 per cent of Korea’s GDP and 40 per cent of its total exports. The country ranks among the top countries in Internet usage. More than 80 per cent of the population uses the Internet. Practically everyone has a mobile phone and 95 per cent of the households subscribe to broadband Internet.

Today, ICT has changed the way Koreans live. A mobile handset is an essential. All model houses are wired and come with broadband Internet connection. Korean companies, with the support of the Government, are slowly strengthening their position in the global market and consolidating their market share.

Telecom

The telecom market in Korea is fascinating because it is a world mobile leader on many fronts. Korean mobile operators are among the first in the world to offer third- and fourth-generation services. Even as the rest of world is struggling to deploy 3G networks, plans are now on to roll out upgraded 4G services by the second half of the year. Dubbed LTE-A, the new network will offer a significant upgrade from the fourth-generation LTE and will be the first time that a wireless network exceeds the optic local area network (LAN) in data transmission speed.

Korea continues to be a booming mobile market as it innovatively explores the options for value-added services. The market passed the 105 per cent penetration rate mark in 2011, which means many individuals carry more than one mobile phone. According to the latest data, the number of 4G (Long Term Evolution-LTE) smartphone users has surpassed 21 millionand is likely to reach the 32-million level by the year end. This accounts for close to 40 per cent of the total mobile subscribers in the country, and in a country where four out of 10 people use smartphones, the mobile carriers are ramping up efforts to claim a bigger share of the fast growing market.

It helps that Koreans have a fetish for changing their mobile phones every six months. In fact, the country was positioned at the top in terms of mobile phone replacement rate, according to a survey by Strategy Analytics that was conducted in 88 countries worldwide.

Broadband

Where many countries are being challenged with the tasks of improving and making good use of ICT, Korea is known for its rapid and extensive deployment of broadband. The country’s success is due to the far-sighted government initiatives, where strategies put in place are mindful of the point that ICT infrastructure development must be accompanied by investments in the eco-system.

The extensive role of the government in creating demand in broadband through policies is considered as the most remarkable characteristic of Korea’s broadband growth, according to Ahn Jung-mihn of Hallym University,

“The strong bureaucratic approach in the beginning changed to a light-handed approach as the government invited more private sectors participants,” he pointed out.

To build up critical mass, the government initially pushed for an extremely low price for the public sector and free Internet service for schools. The result was a strong pick-up in information technology by the general public in tandem with the education policy.

Market demand further spurred service providers to offer lower prices along with ICT literacy drive across the entire population.

Currently, Koreans have many technology options for broadband in most areas of the country. The most popular connection technology is XDSL followed by Cable connections, LAN and wireless technologies. This strong inter-modal competition has brought down prices and introduced technologies that can serve remote areas. As telecom drove a positive impact on national competitiveness, the government recognized the future needs of a ubiquitous network and more management strategy.

“This interest was reflected in the IT839 Strategy, which is deemed as the most significant strategy in Korea’s overall broadband policy. Under this policy, eight new IT services were introduced to encourage investment in three key network infrastructures that, in turn, promoted the development of nine new growth engines,” noted Prof Dong Hee-shin, Department of Interaction Science, Sungkyunkwan University.

Having completed the first two phases successfully, the government established the ‘Plan for Developing and Promoting Giga-Internet’ that will enable users transmit data at an average speed of 1 gigabyte per second (GBp) through fixed-line connections and maintain a rate of 10 megabytes per second (MBps) on wireless connections, by this year.

Information Technology

The strength of the Korean IT industry has emerged from foresight, product development, and marketing by Korean companies, along with close cooperation with the government. Business government collaboration targeted promising areas for investment and policy support, noted Lee Chi-ho, Senior Research Fellow, Samsung Economic Research Institute.

Anticipating huge growth in LCD panels, Korean firms made massive investments that gave them a strong position when the panel market was ready to take off. Such investments made it easier for Korean firms to rapidly gain ground, in contrast to analog TV, where Korean firms lagged behind their entrenched Japanese counterparts.

By betting heavily on digital TVs, Korean firms were able to outflank their competitors, and exploit the transition to digital broadcasting. The Korean IT industry also focused on large screens and lower operating costs by aggressively investing in LCD panel production facilities. This gave Korean firms an advantage against Japanese companies, who initially focused on high-end, high-definition TVs that failed to reach global consumers. “In semi-conductors, Korean chipmakers raced ahead of their rivals by sustained investment even during contractions in the IT business. Through strenuous efforts to improve production and increase output, Korean companies were able to take the lead in semiconductor miniaturization and price competitiveness.”

In addition, shortened product development cycles and innovations in supply chain management gave Korean makers the flexibility to respond to sudden market changes. Above all, Korean companies developed brand power in emerging economies through diverse marketing and social contributions.