The Korean Baang: Craze for Broadband

South Korea is a remarkable example of how the opening up of

the telecom market is being used to turn around the economic situation. One of

the hardest hit countries in the Asian economic crisis, it seems to have risen

back and is all set to lead the region in the deployment of broadband access.

High-speed Internet access subscriptions in the country tripled last year, and

are projected to reach three million by the end of 2000, as per data from the

Korea Network Information Centre.

The broadband subscriptions are soaring with the number of

broadband Internet users jumping almost 40 percent between May and August 2000.

In June 2000, it crossed the 1.5 million mark as per data released by Ministry

of Information and Communications (MIC). That represents 12.5 percent of the

country's 12 million households, making Korea one of the world's leading

broadband Internet markets. According to Bloomberg, over 4,50,000 people signed

up for links provided by companies such as Korea Telecom, Hanaro Telecom, and

Korea Thrunet, boosting the total number of high-speed Internet subscribers to

1.57 million. In view of the surge, it is predicted that 25 percent of total

households will have the latest in Internet communications by the end of 2000,

as against 5 percent predicted for US homes.

Policy Initiatives

Hansuk Kim, head of the Management Research Lab at Korea

Telecom, points to massive policy initiatives, competition, and the

proliferation of online gaming and stock trading as the main driving forces

behind the country’s burgeoning demand for broadband. South Korea is believed

to have more broadband users than the rest of East Asia (outside Japan) put

together. The Internet service charges in Korea are among the lowest for any

advanced country and about half of that in Japan, according to the Organization

for Economic Co-operation and Development (OECD). The Government initiated an

Internet PC project to boost the sales of PCs and notebook computers. It also

began certifying and rating commercial and residential building projects on the

basis of high-speed Internet access provided by them. This initiative, which

allows real estate owners to charge more if they provide broadband services, has

resulted in a plethora of partnerships between construction firms, ISPs, and

telecom services providers looking to build broadband-ready complexes.

In mid-2000, Korea Telecom, country’s largest telco, headed

the pack with 4,91,349 broadband connections, followed by Hanaro Telecom with

4,28,527, of which three-quarters were connected via Asymmetric Digital

Subscriber Lines (ADSL). Korea Thrunet, Korea’s first high-speed ISP, claims

3,93,111 customers for its cable modem service. The waiting list for high-speed

Internet services–a result of the low cost and overwhelming popularity of

broadband–dropped to 6,31,072 subscribers, down 14.8 percent, according to the

MIC data.

The ADSL Success Story

In June 2000, Korea Telecom decided to promote the new ADSL

technology over its previous ISDN protocol-based service. As a result,

subscriptions to the service rose 112.1 percent to 2,97,800 and narrowed the gap

between Korea Telecom and Hanaro Telecom, the leader in the ADSL market, to a

little more than 20,000 subscribers. For the first time, the country's ADSL

subscribers outstripped cable users. ADSL accumulated 6,78,923 subscribers

against cable’s 5,63,656 subscribers. The cable Internet subscriptions

increased by 35.3 percent.

With the four Cable Internet operators. Hanaro, backed by new

deals to ensure a supply of sufficient equipment and infrastructure hardware,

projects the number of ADSL subscribers in South Korea to reach 2,40,000 by the

end of the year 2000, compared to just under 1,00,000 at the end of 1999.

Scramble to Wire Homes

Nearly 60 percent of the Korean households own PCs. With some

16 million surfers, Internet usage in South Korea is among the highest in Asia.

Broadband connections recently hitting two million, Korea has the highest

per-capita usage in the world.

With the demand for broadband service growing ferociously,

the developers are racing to build digital homes pre-wired with high-speed

Internet access–also called "cyber-apartments" or even

"cyber-pads". The time is not far away when it will be difficult to

sell unwired new apartments. Builders are tying up with telcos and ISPs to build

homes that probably are the best equipped in Asia for the latest in Internet

communications. Last year, 1.5 million households (i.e. one in eight) signed up

for broadband service.






The country is ripe for a Net explosion. Just over half of its 12 million
households inhabit apartment blocks, which are cheaper to upgrade than

residential districts. It will cost some $1.5 billion to wire 3 million homes

with a combination of copper, optical fibre, and cable. Telcos and developers

will bear the bulk of the cost. In the past, Korea's dense concentration of

residential towers was blamed for traffic congestion and pollution, but no more

so in the Internet Age.

The chaebols–the traditional Korean conglomerates–are

also wiring homes to LANs for tailored services. A pioneer, Daelim Industrial

Co., last year launched fibre-optic service at Seoul’s Acrotown wiring about

three-quarters of its 490 households. Ellina Park, 39, a resident, said,

"Since moving into Acrotown, the Internet has become an essential part of

my life. I learn music, listen to British radio, trade stock, and chat with my

neighbors–all on the Net."

Other chaebols are copying Daelim. Samsung's property

development arm has tied up with Hanaro Telecom to offer all-you-can-surf access

for $36 a month. More than 5,000 families moved into the wired homes in 1999,

and 10,000 are expected to do so in 2000, when Samsung plans to offer richer

content–ranging from video-on-demand to kimchi recipes. And that comes with a

carrot: two years’ free Net access.

Samsung's foray into wired homes prompted Daelim to form

Icitiro Co., a consortium of chaebol and content providers. In April, a similar

alliance called Techno Villages was formed among 13 construction companies–including

Lotte, Daewoo, Kumho, and Kolon–and seven technology companies. Both

consortiums are building portals for apartments.

Anyuser System Co., a $2.3 million startup, has even linked

up with a fledgling telecom to lend out Web videophones. Featuring an icon-based

touch screen to help newbies get started, they access a broadband and portal

service combining Internet, telephony, and video for $18 a month. Anyuser began

testing in April, connecting 1,000 homes to shops and government services.

Residents can buy flowers, get patient data from a local hospital, book movie

tickets, among other things.

The Government is strongly encouraging this broadband

initiative. Last year, it began rating buildings based on the quality of their

datalines. The greater the speed and bandwidth, the more developers can charge

apartment buyers–an incentive to upgrade Internet hardware. The Government is

also bringing in competition to lay the last-mile. All the new pipes will give

consumers greater access to information about products and prices, boosting

efficiencies and removing barriers to commerce.

PC Baang: Korea’s PC Café

PC Baangs, literally meaning "PC rooms", are a

unique Korean, a phenomenon engulfing and strengthening the base of the

information society in Korea. These Internet cafés are popular, especially

among youth and students, because they are inexpensive, convenient and provide

faster Internet access. Says Lee Yong Tae, chairman, Thrunet, "In my days

as a university student we had tea rooms. Then came the beer parlors, video

gaming parlors, and Western fast-food joints. Now the latest fad in Korea is

Baangs."

These busy Baangs are part Internet Café, part video game

parlor–the distinguishing characteristics being the rows of latest-model

computers hooked up to the Internet over super-swift broadband network

connections–mostly with 24 hours-a-day access.

Here, the youth pay about $1 an hour to match reflexes with

each other, playing the latest multiplayer computer games such as Rainbow 6,

Starcraft or Quake. Others cruise growing mass of broadband Internet content

such as music and streaming video. The PC Baangs, bonding the new generation of

Koreans to the machines, are road-testing the future networks.

There are presently an estimated 16,000 Baangs in South

Korea, up from about 4,000 in June 1999. Industry insiders say there could be

40,000 by the end of 2001. According to one survey, 25 percent of all Koreans

access the Net from a public establishment, each person spending about two hours

online every session.

A story by Assif Shameen in Asiaweek goes thus: "Off a

cramped, congested alley in Seoul’s Shinchon district, an unlit concrete

staircase leads down to a subterranean den. Behind a metal door, marked only by

a poster for a computer game ‘Diablo! Evil Has Survived!’, dozens of young

men slouch in front of rows of PC monitors as they engage in mock combat with

fellow gamers. The floor is sticky with spilled soda and beer. A large model

aircraft hangs from the grimy ceiling, so low that you can crack your head on

it. In a corner, three women in early twenties huddle together and giggle as

they surf Internet entertainment sites. It is 8 p.m. on a Saturday night, and in

South Korea, this is a hot spot." The students find Baang a cool place

because there is broadband access, there are games and the interiors are just

right to make them feel at home away from home, and log on for hours for

high-speed Internet experience.

The nation’s embrace of all networked things makes turning

a profit with a PC Baang almost as easy as point-and-click. Analysts estimate

that these rooms are raking in combined revenues of about $6 billion a year. In

upmarket districts, PC Baangs have thick carpets and velvet sofas, and access

costs as much as $9 an hour. In the not-so-privileged areas, rooms may be

average and crammed with up to 100 machines. Running two PC Baangs is considered

better than running



10 restaurants.

Overhead is low–the recent recession leading to heavy

decline in space cost–and traffic is heavy. Profits from a PC Baang are

believed to be more than double that of a big video game parlor. The preferred

customers are students who play games, send e-mails, surf the Internet and do

not make trouble, quite unlike the stock players and gamblers who tend to loose

control as they lose money.

With about a thousand new PC Baangs opening every month,

analysts say total takings from these rooms–with profit estimated at $2 of

every $3 in revenue–could more than double to $14 billion in a year. However,

with the landlords becoming aware of the opportunity, the profit margins are

likely to ease.

In Korea, mandatory Internet training in schools is starting from primary

level next year. Another generation of Korean Netheads with a national psyche

well suited to the Internet revolution will soon be coming up. It will be

interesting to watch how fast Korea trains its pool of technology experts and

uses the technology, besides building a sound financial system–to make a

successful transformation to the New Economy, i.e. Korea.com.

Niraj K Gupta



www.telecombyNirajGupta.com