RealTime IT News

AOL To Enter Korea's ISP Market Next Year

America Online will make its debut in the Korean market next year by joining forces with Samsung Corp., posing a threat to local online networks which have been enjoying energetic growth in recent years.

AOL, the world's largest online service provider, has reached an agreement with the Korean conglomerate to form a strategic alliance to launch AOL service in Korea starting early next year, according to a Samsung spokesman.

He said that the American giant would establish AOL Korea in a joint venture with Samsung Corp. and that the two companies will iron out details about when their representatives meet in Washington, D.C. later this month.

The collaboration between AOL and Samsung will cover a wide range of fields, including online information services, group e-mail service, Internet shopping mall and contents. AOL will offer online service, Internet marketing and various Internet-based technologies for the projected venture, the official said.

AOL Vice President Neil Davis told reporters in Seoul that Asia has the greatest potential for Internet businesses, noting that it is vital for AOL to enter the Asian market to maintain its leadership in global online service business. Korea will be AOL's third partner country in Asia after Japan and Hong Kong.

"If America Online launches its operation in Korea next year, the already crowded local online service market will probably be overheated," said an industry analyst. "However, consumers would benefit from AOL's entry into the market wide wider choice."

Currently, there are six major online information services in Korea. They include Chollian, Unitel, Netsgo and Hitel.

And competition between them are heating up as they cut rates in a desperate bid to attract more subscribers. Industry observers say that such competition will result in slimmer profits for them.

Most local online service providers are spending more money on attracting subscribers through advertisement and other marketing activities, rather than on expanding facilities to provide users with better service.

Last year, Korean's online communications service providers enjoyed a rapid growth in both sales and the number of subscribers. They posted a sales increase of 30 percent on an average during 1998.

The number of their subscribers totaled around 5 million, showing a 40 percent increase from a year earlier, according to statistics from the Ministry of Information and Communication.

Chollian, an online service of Dacom, the market leader, has 1.43 million subscribers. Hitel of Korea PC Telecom and Unitel of Samsung Data System(SDS) have 1.18 million and 1.12 million, respectively.

However, some analysts point out that such a growth is not more than an outward growth, still there are many things to be improved in terms of service quality and user environment.

Most of their subscribers access the online service through modem and have to pay expensive local call charges, which is not a flat monthly rate. For this reason, users can hardly enjoy online information services and the Internet as much time as they want.