Very High Take-up of Broadband
South Korea was one of the earliest countries to introduce DSL on a substantial scale. As a result of the success of this introduction, the country now has a very high take-up of broadband, 11.9 million subscribers at the end of 2004. In terms of broadband penetration (subscribers per 100 persons), Korea ranks at No. 1 in the world (25 per 100), even higher than leading West European countries, Canada or Japan. As well as offering incentives (e.g. soft loans) for private companies to invest in broadband infrastructure, the Korean government set an example by investing in a national fibre optic backbone, known as KII-G (Korea Information Infrastructure – Government), in order to distinguish it from private sector infrastructure (KII-P). The government has also provided test-beds for new technology and supported private sector R&D.
Slow Start to DSL in Korea
DSL was first introduced in the Korean market in 1998 and initial take-up was quite slow. However, the number of DSL subscribers grew rapidly from 2000 onwards, after Korea Telecom, the incumbent telco in Korea and the market leader in broadband, cut its prices. After the surge in growth between 2000 and 2002, the growth rate in Korean DSL subscribers has slowed, the total reaching 6.4 million subscribers at the end of 2003, with a relatively modest 0.4 million subscribers added during 2004. There is also a large number of subscribers using cable modems, 4.5 million, compared to 6.8 million DSL subscribers at the end of 2004. Hanaro Telecom, the main rival to Korea telecom in broadband, offers DSL over Korea Telecom’s lines but also has its own fibre to buildings. Hanaro Telecom and others offer broadband services via cable modems, in some cases leasing lines from the CATV operator Powercomm.
More than half of the South Korean people live in apartment blocks, a factor which has reduced the scale of the investment required to introduce broadband. One reason for the initial success of broadband in South Korea was a large number of “PC bangs”, Internet cafés that made some consumers aware of what was possible with high speed connections. Online games are particularly popular in South Korea; online shopping, stock trading and video download service have also taken off. Despite these successes, the companies that have invested in broadband infrastructure have not been able to generate good returns, as they have been struggling to service their debts.
Prospects for FTTH in Korea
Rather than deploying fibre on a large scale, Korea Telecom has so far chosen to upgrade customer connections from ADSL to VDSL as a means of enhancing its broadband service. Fibre optic cables have already been installed to large office and apartment buildings in South Korea, as this was one of the early objectives set by the government. The government has a long term aim to have FTTH to all Korean households, so the question is not if FTTH will happen in Korea, but when it will happen, and what version of FTTH technology will be used. The government has been sponsoring a project known as the Broadband Convergence Network (BCN) that involves three private companies (Korea Telecom, SK Telecom and Dacom). Researchers in South Korea are developing a 1-Gbit/s Ethernet passive optical network (E-PON) to enable low cost deployment of FTTH – “near the cost of ADSL”, according to a report in Telecom Asia. Korea Telecom has also developed PONs based on WDM but the cost appears to be too high for deployment. The company will soon announce its firm plans for FTTH and will launch its service in 2006. Hanaro Telecom also has trials of all fibre E-PON and WDM-PON systems, and also a hybrid fibre-UTP solution.