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

Chief Executive, The, April, 2004 by Assif Shameen

Little wonder, then, that Korean companics are exporting their skills. Take Korea Telecom, which is called KT Corp. It is the world's largest broadband service provider, with over 6 million broadband customers in Korea. Broadband Internet access revenues for the company were $2.1 billion last year, or nearly 20 percent of its total revenues. Broadband Internet access is no pie-in-the-sky illusion for KT. "It is now a core part of our revenue stream," says KT CEO Lee Yong-Kyung.

Lee says telephone companies around the world are queuing up to sign technical cooperation agreements with KT as they roll out their own broadband infrastructure. In February, KT sealed a deal with the state-owned Telephone Organization of Thailand to roll out high-speed Internet networks in Thailand later this year. KT also has a contract with India's largest fixed-line operator, state-owned Bharat Sanchar Nigam, to provide its expertise in broadband access as well as equipment. "India and China are two of the fastest-growing economies in the world and two of the fastest-growing telecom markets," says Lee. KT is also looking at Indonesia, the Philippines and Malaysia for similar ventures. "The broadband access market in Korea is limited so we need to expand overseas," says Lee. "We want to go to markets where broadband penetration is low."

The Gaming is Serious

Another Korean company exporting its expertise in broadband is online gaming giant NCsoft. Its multiplayer network games like Lineage 1, which lets people dream up characters on the Web and interact with other role players, raked in sales of $145 million last year and net profits of $27.5 million. Analysts are forecasting sales growth of 52 percent this year, with overseas sales growing more than 70 percent.

NCsoft's games are already a huge hit in Taiwan and are catching on in Japan, Hong Kong and China. But its 34-year-old founder and CEO, Kim Taek Jin, is keen on expanding in the U.S. So far, the only problem has been the lack of broadband access in the U.S. "Broadband penetration rate is still low and access speeds are still slow compared with Korea, Japan and Taiwan," says Kim.

But that hasn't stopped him from customizing his games to suit U.S. players. A new game called City of Heroes will be released in the States later this year. And NCsoft has bought online game design houses in the U.S. through share swaps. In 2001, it bought Destination Games, an Austin, Tex.-based online gaming company run by brothers Richard and Robert Garriott. Two years ago, NCsoft acquired another U.S outfit called Arena Net, based in Bellevue, Wash. Its designers were behind popular online games like Starcraft and Diablo. "Our strategy is to grow globally and as we do that we will have to acquire expertise as we have done with those two American companies," says Kim.

The Next Frontiers

One lesson from Korea's experience is that wireless broadband (WiFi) and fixed-line broadband aren't competitors as much as they complement each other. Not surprisingly, Korea is also the world leader in WiFi, which allows PDA and laptop-carrying customers to access the Internet at warp speed. Some 30 percent of the world's WiFi hot spots--in cafes, shopping malls, hotel lobbies, airports and other high-traffic places--are in Korea.