South Korea’s Grand Telecom Plan

Discussions about Asian telecom often begin and end with China. The
expansive yet populous country has dizzying potential as a producer and
consumer of communications products and services.

But another nation is quietly making a name for itself. In recent weeks,
South Korean companies have signed deals with North American heavy-hitters,
including EarthLink , Nortel and Verizon
Wireless. Not bad for a country the size of Indiana.

Executives and government officials expect the trend to accelerate as the
benefits of cooperation become more pronounced and political and trade
policies continue evolving.

A New Perception, Approach

Sang Hoon Lee, a director at South Korea’s Ministry of Information and
Communications (MIC), said new partnerships represent a shift in how
companies perceive themselves.

Conglomerates, known as chaebols, aspire to be global forces, not just South
Korean companies selling overseas, Lee said. As such, they recognize that
partnering works better than going it alone.

At an event trumpeting
a $440 million joint venture with ISP EarthLink, Brian Kim, president of
SK Telecom’s international arm, noted a number of similar moves of late.

Last year, it teamed with China Unicom to bring advanced wireless services
to China. The company also offers wireless services in Mongolia and Vietnam, as well as exports its platform to Israel, Taiwan and the United States.

The government is stepping up, as well. In December, it agreed to cooperate
with the British government in a number of areas, including digital
broadcasting and mobile gaming. Similar deals were struck with France and
Poland.

And according to yesterday’s The Korea Times, the government wants to
help establish 40 corporate R&D centers over eight years in a bid to become
Northeast Asia’s research hub.

Currently, chipmaker Fairchild and handset giant Motorola
have R&D sites in South Korea, but the government is
negotiating with several firms, including Qualcomm , the
newspaper said.

More broadly, economic reforms have moved the country “away from a centrally
planned, government-directed investment model toward a more market-oriented
one,” a U.S. State Department note on the country concluded.

The diplomatic agency, however, said more can be done, such as loosening
labor regulations, improving financial markets and making regulations more
straightforward. But the country is now the United States’ seventh largest
trading partner and the world’s 12th largest economy.

Broadband Nation

North American telecom firms go to South Korea to get a glimpse of the future.

The government subsidizes broadband connections, which has led to the best
high-speed Internet penetration rates in the world — 21.3 subscribers per
100 people, according to recent research from the U.S. Federal
Communications Commission. Whereas, the United States ranks 11th, with 6.9
subscribers per 100 residents.

“It’s an extremely well-developed and advanced broadband network,” said Sean
Ryan, a spokesman for iPark, a business development agency backed by the
South Korean government.

The initiative has helped users and vendors. South Koreans are
technology-savvy and open to new applications, such as Voice over IP and multi-player and mobile gaming.

And South Korean companies have addressed last-mile clogs and other vexing
problems, lessons that could be applied in other developing nations.

“There are well over 10 million people in downtown Seoul, 15 million in
greater Seoul,” Ryan said. “Network equipment companies have focused on the
last mile and edge, because so many people are in apartments.”

So for example, a company like Corecess, which makes IP-based DSL equipment
for high-rises and hotels, has experience in the field not just the lab, Ryan said.

Nortel’s joint
venture
with LG will focus on network gear, both for South Korean
carriers, as well as other Asia-Pacific countries. Nortel will also use the
South Korean joint venture as a base to sell its optical, wireless and
wireline products to enterprise customers throughout the region.

3G Trailblazers

For EarthLink, experience with 3G technology and marketing was the impetus
behind its pact with SK Telecom.

“Kids in Korea are downloading videos on their phones, watching television,
listening to music on their phones,” Sky Dayton, EarthLink’s chairman, said
during a news conference. “They’re using location-based services and finding
their friends wherever they are.”

Dayton, who is so bullish on the project that he will be CEO of the joint
venture, believes there’s a large group of tech-savvy U.S. consumers who are
underserved by U.S. wireless carriers.

Gary Betty, EarthLink’s president, said SK Telecom has been first to
implement every new Code-Division Multiple Access application
during the last decade, including new location-based services and
video conferencing.

In addition, SK Telecom has experience and success in mobile marketing,
which helped it reach an average revenue per user (ARPU) level of $40 per user
last year — the highest of any provider when the gross domestic product of
the country is considered.

Given its track record with 3G, it’s no wonder Verizon Wireless chose South
Korea’s LG and Samsung to build two of its first three 3G phones, analysts
said.

But the industry is not content with stopping at 3G. IPark’s Ryan said South
Korean companies are developing prototypes and core technologies for
fourth-generation mobile communications by 2007.

Work is also under way on home networking technologies and digital
Multimedia-broadcasting technologies for consumers. The technology is designed to have
advantages over video-on-demand, 3G and other existing services.

“Some Korean companies are developing things you wouldn’t see over here,”
iPark’s Ryan said. “[U.S. companies are] using the market to gauge when
we’re ready for it.”

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