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Telecom industry enters transition period

This is the first in a three-part series on the development of Korea's telecom industry, sponsored by SK Telecom. - Ed.

By Kim Tong-hyung

In 1984, when SK Telecom, then called as the Korea Mobile Telecommunications Services, launched Korea's first wireless telephony business, only 2,600 people signed up for its car phone service in its first year.

Two decades later, Korea is one of the leading markets in wireless penetration, with more than 75 percent of the nation's 48 million residents registered as mobile phone users.

The wireless telecom industry is now a critical part of the nation's economy. At the end of 2002, mobile service and the telecom service industry generated around 40.4 trillion won ($36 billion), or 6 percent of gross domestic production.

The rapid expansion was largely due to the government's drive to stimulate consumption and secure new growth engines in the economic downturn of the late 1990s.

The government granted a license for Shinsegi Telecom in 1994, putting an end to the monopoly of the Korea Mobile Telecommunications Services. Korea Telecom Freetel, LG Telecom and Hansol PCS were granted the license to participate in CDMA-based PCS (Personal Communications System) mobile telephony system in 1996.

The Korea Mobile Telecommunications Services managed to garner just 270,000 customers through 1992, four years after they started the country's first mobile phone services.

With the government opening up competition, the wireless population reached 5.5 million by 1997 and 28 million in 2000. Now, the number of cellular phone users surpasses 35 million, considerably outnumbering the 23 million fixed-line telephone accounts.

The rapid growth raised concerns of an overheated market and led to government measures to ease competition.

The government banned telecom operators from providing handset subsidies in 2000, halting marketing based on distribution of "free phones," which led to corporate financial troubles. And a major reshuffle took place in 1999, with SK Telecom acquiring rival Shinsegi Telecom and Korea Telecom Freetel acquiring Hansol PCS, relieving market congestion with only the three major companies of SK Telecom, KTF and LG Telecom left.

SK Telecom is currently the country's largest mobile phone operator with 18.5 million subscribers. KTF is second with 11.5 million customers, followed by LG Telecom's 5.5 million users.

A notable aspect of Korea's telecom development is that the government and industry bet on CDMA (Code-Division Multiple Access) technology as their standard mobile platform, instead of the European standard GSM (Global System for Mobile Communications) used nearly in 70 percent of the world's mobile networks.

CDMA has been developed as Korea's lone industry standard since the transition from first-generation analogue phones to second-generation digital phones in the mid-1990s, a process completed in 1999 when the last 23,000 users of SK Telecom's analogue AMPS converted to CDMA services.

The "time-slicing" GSM standard squeezes a maximum number of users to each frequency band by having their handsets take turns transmitting and receiving base-stations.

The CDMA standard is a form of "spread-spectrum" technology, which allows many handsets to transmit simultaneously on the same frequency, with each signal scrambled using a pseudo-random sequence, or "code."

Despite the technical superiority, the government's decision to opt for CDMA technology seemed a risky gamble, since it was used in less than 20 percent of the world's networks. However, the third-generation, of 3G, mobile telephony, have both ended up using CDMA technology: CDMA2000 and the GSM-compatible W-CDMA. That has given Korea a head start in 3G competition, unlike GSM-based Europe and Japan, which are having longer adjustment periods.

Korea was the first to have an effective 3G wireless platform, when the three telecom operators started the cdma2000-1x services in 2000 and followed up with cdma2000-1x EV-DO services in 2002. Currently, there are more than 5 million EV-DO subscribers in Korea.

The successful transition to 3G, which allow Internet access and video reception on handsets, could be critical for the Korean telecom industry, considering that the market for voice communication services has limited growth opportunities with the mobile phone penetration rate nearing market saturation.

The wireless sector has also been focusing on developing convergence concepts, merging wireless telephony with broadcasting and computing.

The most notable efforts come in the form of the satellite DMB system, which embodies one of the most advanced receiver technologies of today. Handheld devices in vehicles moving at speeds up to 150 kilometers an hour will be able to receive vidieo and audio signals from satellites, allowing travelers to watch TV programs and movies

Industry insiders believe that the DMB services can attract 6 million subscribers after five years. The services are expected to be launched in the second half of this year.

Another concept is the portable Internet, a wireless technology that provides high-speed Internet access of 1Mbps to portable receiver devices while moving at the speed of 60 to 70 kilometers. The Korean government aims for the commercial services by 2006 and expects the market size to reach 10 million users by 2008. SK Telecom is competing with KT Corp. and Dacom, the country's two largest fixed-line and broadband operators, to secure the licenses for the business.

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2004.05.24


http://www.koreaherald.co.kr/SITE/data/html_dir/2004/05/24/200405240032.asp