Korea's broadband: revolution; What Korea is doing will have global impact

Chief Executive, The,  April, 2004  by Assif Shameen

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Adimly lit staircase leads down to the vast basement of an office building in Seoul's Shinchon district near Yonsei University. Inside, there are five long rows of personal computers. "The Knock." as the dungeon calls itself, is a PC baang, or part Internet cafe, part gaming room. On a chilly winter night, the 24-hour baang (pronounced "bong") is bursting at the seams with almost no elbowroom for 50 or so patrons. They are using the PCs to play online games, check email, watch video clips or even watch two TV channels simultaneously through small windows on their screens. There is little ventilation in the smoky room. Patrons are huddled around the terminals. It is the very picture of broadband intensity.

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The Knock is just one of the 30,000 PC baangs in Korea, which between them have some 1.2 million PC terminals connected to high-speed Internet or broadband networks. In metropolitan Seoul, Pusan and other large cities where a majority of Koreans live, there is a PC baang on almost every other street or almost every other block.

South Korea is ground zero in the global broadband boom. In a country of 48 million people, there are 12 million broadband lines, which pump data between 20 to 400 times faster than the old trusted 56K dialup modem connection over normal copper-wire telephone lines. Of the nearly 16 million Korean households, 78 percent now have a broadband connection--or more than four times the home broadband penetration rate of North America. (The United States has 21.5 million broadband connections serving 110 million households.) On average, Koreans spend more than 20 hours a week surfing the Internet. Korea has the world's highest rate of video- and movie-on-demand downloads. Last year, 68 percent of all stock trading in Korea was done online (compared with less than 25 percent in the U.S.). Online shopping now makes up nearly 12 percent of all retail sales in Korea. Companies like CJ Home Shopping and LG Home Shopping, which started with home shopping channels on cable TV, now derive the bulk of their revenues from online sales.

It may be surprising to some that Korea is the world leader in broadband, because as recently as 1997 and 1998 it was undergoing what the Koreans call "the IMF crisis." That crisis, however, helped spark action. "It injected a sense of urgency and spurred Koreans on to new technology because they sensed the older economic model had failed them," says Dominique Dwor-Frecaut, Northeast Asia economist for Barclays Capital Asia in Singapore.

Dwor-Frecaut says Koreans have traditionally been early adopters of technology in Asia, along with the Japanese. And Korea is home to global technology leaders such as Samsung Electronics, the world's largest maker of memory chips and LCD screens and second-largest manufacturer of cellular phones, as well as LG Electronics and cellular service giants SK Telecom and KT Corp. The Koreans also took advantage of the bursting of the American tech bubble in 2000 to buy equipment on the cheap from the likes of Juniper Network, Riverstone Networks, Nortel and Cisco Systems.

Not only is broadband ubiquitous in Korea, it is also much faster than elsewhere. At top speed, Korea's broadband connections over very high-bit digital subscriber lines (VDSL) are on average four times faster than the fastest broadband connections that the likes of Comcast, Time Warner or the Baby Bells provide in the U.S. over cable or the slower ADSL (asymmetric digital subscriber line) modems. "Within two and a half years, we expect more than 70 percent of our households will have Internet connections with access speeds of 20 megabits per second, which will allow them to download movies to watch on their high-definition TVs," says Chin Daeje, Korea's minister of information and communications and a former Samsung Electronics executive. "By 2010, the bulk of Korean households would have migrated 100 megabits per second."

Korea's broadband network is also well used. A third of Korean Internet users regularly enjoy broadband entertainment such as network games, videos on demand and movies on demand. Local TV channels run their own portals where, for as little as 80 cents, you can download last night's news or a program you missed. For movie producers and TV channels, revenues from online downloads are becoming an important stream. The Korea Information Society Development Institute estimates that peak traffic on Korean broadband networks is up to five times higher than on similar U.S. networks. "Korea is at the forefront of the broadband revolution, and everyone from telephone and cable companies in America to policy makers in developing countries wants to learn from Korea's experience," says Renee Gamble, Asia telecom analyst for technology research firm IDC in Singapore.

Not all of what the Koreans are doing will seep into the American market, but some of it almost certainly will. Consider the widespread adoption of avatars. Nearly 6 million Koreans have a network identity in the form of a cartoon character that represents them. As soon as the user's avatar appears on the screen, friends, colleagues and family members logged on to the network elsewhere are alerted. They can then join in to play an online network game, share video clips or audio files or just do a quick video chat with the help of their Web camera. They can also invite family or friends to watch the same on-demand video or sports game they are watching.