CDMA: Korean Recipe for Success

South Korea gambled with CDMA. It took the bold decision to be with a new
technology and race ahead of others, and the technology was adapted to suit the
needs of the land.

The gamble paid off. Today, South Korea exemplifies the success of CDMA.
Besides, it is one of the few countries to have a very high penetration of
mobile telephony, which continues to rise. The total number of mobile
subscribers was close to 31.3 million in June 2002 and the total penetration was
over 65 percent.

Handful
of Lessons

The Korean example throws up several lessons. The most important, at a micro
level, is that the government’s commitment can play a decisive role in shaping
the future of not just a technology but also the lives of the people. At a micro
level, there are answers to questions like ‘what next after reaching a
saturation point?’

Countries like India, that are rolling out full-fledged CDMA services only
now, stand to gain a lot from the lessons offered by Korea.

So far, we have mostly looked for lessons offered by the US or European
nations. More recently, we have also started looking at Chinese experiences. But
we have hardly tried to take cues from the Korean model. If you thought that
there are not many similarities between India and South Korea, read on.

A quick comparison will show that both the nations are governed by democratic
governments, both have predominantly family-controlled businesses, and both have
been primarily agriculture-oriented economies.

So lessons from South Korea may not be without merit. It is a country that
has actually grown from rags to riches in the past two decades and also managed
to bounce back to strength from the worst-ever Asian crisis. Today, it’s an
exports-driven economy.

So
what is the driving philosophy behind South Korea’s success? Of course, the
strategy of outward-looking development, and growth first. "We cannot
expect the whole draught-stricken paddy land to become evenly watered
immediately after we start irrigating it. We ought to have the patience and
wisdom to share ten bushels later rather than exhibit the impatience and
ignorance to insist on sharing a package of seeds evenly now," President
Park Chung-Hee of South Korea said in 1967. This guiding statement has formed
the Korean philosophy in all its endeavors–be it the mobile telephony or the
electronics industry or the semiconductor industry. And the government has
always provided a strong leadership and strategic direction, committing itself
to standardization and deregulation. As a result of this, South Korea was the
first country to launch commercial CDMA services (started in 1996); the first to
have 3G CDMA services (January 2002); and the first to launch CDMA wireless data
services and wireless mobile Internet services.

Moving Forward

Knowing the past is important, but moving forward is the key. With the
mobile telecommunications service market reaching saturation in South Korea, the
question is: what next? The country is at crossroads today. Sales are declining
due to cuts voice service rates and the introduction of a packet rate system in
data communications. However, it is believed that the market momentum is going
to be sustained by increased use of wireless Internet services after the
introduction of CDMA2000 1x. Further, there will be an increase in fee income by
providing contents and from global roaming service with the commercialization of
3G. The handset subsidy has now gone. And consolidation is on.

The domestic mobile services market has been reorganized into a three-company
system with one cellular service provider, SK Telecom, and two PCS providers KTF
and LGT. This happened following the acquisition of KTM by KTF in May 2001 and
that of SK Shinsegi Telecom by SKT. SKT is the leading player. In 2000, SKT had
about 54 percent of the market share (including Shinsegi Telecom’s 13
percent), followed by KTF with 32 percent (including KTM’s 12 percent) and LG
Telecom with 12 percent. And the ratio more or less remains the same today.

The
synchronous and asynchronous IMT-2000 providers have been finalized. Synchronous
IMT-2000 grand consortium is led by LG Telecom. SK Telecom established an
independent company in March and commenced preparations for providing 3G
services (SKIMT). So while KT and SKT will offer asynchronous IMT-2000, LG will
go for synchronous. Experts argue that synchronous IMT-2000 uses the same
technology as second-generation mobile telephones and has an advantage of
step-by-step investment of 3G, since 2G and 3G dual bands constitute the
synchronous system. But global roaming is difficult due to huge spread of GSM.

SK Telecom is the leading player and its 3G services arm is SKIMT. It is
expected to invest 1.25 trillion won for the establishment of a nationwide
network, 1.20 trillion won for the establishment of an additional network from
the increase in subscribers, and 820 billion won for network advancement and
quality improvement, according to the KIDC report. SKIMT expects that 13
trillion won will be needed for business operations until 2007, which it plans
to raise through business activities (9 trillion won) and financial activities
(3 trillion won). It also has ambitious plans to establish a single telecom
network in northeast Asia with cooperation from Japan’s NTT DoCoMo and China’s
China Mobile for global roaming services. This, experts say, will prepare the
ground for asynchronous services to further expand to Europe, the US, and South
East Asia.

The No 2 player is KT. It established an independent company with 1.80
trillion won in capital for KT ICOM. It also plans to establish a nationwide
network by the end of 2004 and provide diverse 3G services. Its investment until
April 2007 is expected to be 11.30 trillion won. The third player is LG Telecom.
It is leading a grand consortium for synchronous IMT-2000 in association with
Hanaro Telecom.

The service areas by year-end will be six major metropolitan cities,
including Seoul, and will be expanded in an year’s time for a nationwide
network. Others like Thrunet, Powercom, and Dacom, which have a huge
infrastructure, have taken the service license for 220 billion won.

Addressing the Crisis

It is not that IMT-2000 service terms and conditions were hassle-free. There
were issues related to selection of carriers, early integration of second- and
third-generation service carriers, asymmetric regulations and securing of ‘B’
bandwidth. There was the issue of asymmetric regulation. The IMT-2000 bandwidth
is classified into A band (1,920—1,940 MHz), B band (1,940—1,960 MHz) and C
band (1,960—1,980 MHz).

A dispute began when SK IMT and Synchronous Grand Consortium both claimed the
B band. SK IMT’s point of view was that for global roaming conformity, the B
band was a must, as its alliance partner NTT DoCoMo also uses the B band. The
Synchronous Grand Consortium believed that some of the channels in the A band
could not be used where there was interference from the TDD band.

Another issue was about differentiated services. With advanced 2G networks,
3G-like services were possible. CDMA2000 1x itself supported data transmission
speeds of up to 144 kbps, and the introduction of CDMA2000 1x DV (also known as
HDR) enabled data transmission speed of 2.4 Mbps.

All such issues have been resolved, and things are all set to move ahead. 3G
services are also expected to be rolled out next year.

Ch Srinivas Rao