Solution to the saturation problem: while most countries are pushing to make mass broadband deployments, Korea is already a saturated market. Yoon Jong-Lok, executive vice president of KT's marketing group, tells Robert Clark that solutions are the solution - Best Broadband Provider or ISP: KT Corp - Interview

Telecom Asia, July, 2003 by Robert Clark

Telecom Asia: How important has been the role of government in developing broadband in Korea?

Yoon Jong-Lok: Traditionally, the Korean government was quite interested in the telecom industry. We don't have natural resources, so the government is interested in knowledge-based industries like telecom and IT.

Starting in 1980, the government supported Korean industry in developing electronic switches. From 1996, the government extended the telecom infrastructure with a fiber-optic nationwide information highway, for the government agencies initially. Eventually it was opened to public telecommunications. During that time the Internet was spreading throughout the world, and

Korean people are quite interested in the Internet. That is why KT focused on our high speed internet access capability. Initially we tried to extend ISDN.

Did you decide it was not fast enough?

At the time it was considered the fastest capability, but ADSL emerged from the US. Fortunately our network was quite optimum for adopting ADSL. More than 80% of our households are located within two miles of a central office. That's quite an important factor.

So you don't have a lot of old copper in the ground?

We expanded ADSL from 1999. By the end of last year, 2002, KT had expanded [total] subscribers up to 5 million. As a total number of very high-speed access capabilities, not just KT plus our competitors, the number reached more than 10 million. By the end of this year it will turn into saturation status. That is a problem for KT.

Most of the carriers around the world lose 10% of voice market annually. In the case of KT, we expanded annually $1.5 billion though Korean broadband. But now we turn into saturation status, so we have to improve our services on top of ADSL access capabilities, or VDSL access so that is one of the important missions for my business group.

But the number of ADSL and VDSL [customers] in Korea is almost at saturation now, so that is our problem.

What services have the most potential?

In most countries, network services is considered infrastructure, but in Korea, VDSL and ADSL are everywhere. The network services business isn't making money any more. So we have turned our business from network services provider into solutions provider.

KT is going to be a solution provider in ten years. That's why we opened Bizmeka services last year. Most of the small enterprises, if they need some kind of ASP, or some kind of software-based based solution, must buy it from a solution provider like Oracle, where Bizmeka is different because we have a very high-speed pipeline to their home or business, and then we put some valuable solutions on the network.

That's the classic ASP model. What applications are you running?

Two different kinds of solutions, first is horizontal, the second is vertical. The horizontal one is valuable for any kind of business. Vertical solutions are specifically designed for designated area, such as used car repair centres--we have 40,000 throughout the country. For them we have created valuable solutions for our customers.

What kind of apps in particular?

Last year [in] November, we did a kind of SAT testing--all of the 12th graders were supposed to test on a designated day. Right after that day, a beauty chain announced a special offer to their customers. That beauty shop has more than 3,000 customers, and they sent a mail to girl students born between 1984-85. The girls study all the year, and then the day after the SAT test, the beauty shops sent an offer saying we have such a discount for you, because you have just finished SAT and now you have to enjoy your lifestyle.

But the solutions business is quite different for carriers. They don't quite understand the solutions business. A lot of our employees are quite involved in the telecom business, and ADSL, VDSL, but this kind of solutions business is quite a challenging area. It is very hard for me to turn our employees from legacy business to this kind of solutions business.

What's the target for your ASP business model this year?

We are going to extend our vertical solutions, such as used cars, beauty salons, drugstores--we are going to expand them year to year. Ultimately we are going to have more than 300 different solutions. So far we have 30. Besides that we are going to provide quite valuable solutions for medium to big-sized companies, like CRM, supply chain management.

You have been rolling VDSL out which provides up to 50 Mbps. What is the strategy behind that?

50 Mbps not yet--so far we can deliver 20 Mbps. We want to do VOD. We have more than 300 kinds of movies, like Disney, Sesame Street, and Nickelodeon.

But your rivals must have already bought the rights to prime Hollywood content?

We are talking to Hollywood. They are quite interested in KT's markets, because we have almost 70% of the market connected by high speed capabilities.

What was the original goal for VDSL? Video?

Of course. We compete with the competitors on speed so far. [At home] last month we utilized VDSL instead of ADSL, and my kids were very interested in it because the speed is very fast. So speed in itself is meaningful.