There is a battle outside and it is raging, for two Korean giants are struggling. KT & SKT threw all their strengths in the fight, downsizing investments and innovation. The recent interesting events concerning a hypothetic launch of iPhone are a part of this bigger picture.

[ iPhone’s deployment planning – Can you see Korea ? ]

“A penny is a penny and we need it”, Korean operators are in a tight spot, looking to keep their income to fuel the tussle. SK Telecom is the biggest Korean mobile operator with a 50.5% market share while KT, which merged KTF, has 32 %. The two giants are trying to retain customers while seducing competitor ‘ones in the saturated market caught in economic slowdown. Hence, companies cut network investment: on a year-to-year basis, KT reduced 60% down to KRW 621.9 billion, while marketing expenditure reached more than KRW 4 trillion.

Furthermore, a recent OECD report shows that annual Korean telcos customer spending are higher than OECD average (227$ > 171$) . Government and the Korean Communication Commission are aiming to lower prices, to suppress monthly basic fees and will maybe introduce MVNOs(mobile virtual network operators) to increase competition. Right now, every won is needed to maintain marketing pressure.This consideration weights heavily in the iPhone’s cold reception in Korea

Double-edged iPhone. A survey among smart phone users shows that more than 9 out of 10 are eager to buy an iPhone. As it comes from a tech-savvy portal with specific profile visitors, it doesn’t tell us that much about how successful iPhone will be in Korea. Anyway, telcos expect to secure at least 500 000 buyers and probably one million. But one of the main reasons Apple and Korean telcos cannot reach an agreement has to do with business model. Korean telcos do not want share any profits from communications service with Apple. In addition, Korean telcos are threatened by Apple’s business model like Appstore since Korean telcos have had full control for mobile contents.
The iPhone passed through restrictive technical norms, handset manufacturers lobby and now face half-hearted operators. SKT seems to be in a position to win iPhone exclusivity, with a release next month, but KT ‘s CFO also announced ambiguously two weeks ago:

“Apple iPhone will be in our smartphone line-up. [We expect that the] iPhone will help to expand the smartphone market and will contribute to increasing the ARPU”

Some jumped to conclusion and consider it is an official announcement leading to a launch both by SKT and KT, a first in iPhone exclusivity-only deployment history. However KT announced one week later customers with iPhone bought overseas will be allowed to subscribe its service, a violation of Korean regulations. SKT denounced a luring PR operation.

The strategy of KT is not clear. Did KT play a trick to force iPhone exclusivity negotiation to push SK telecom or to get maximum exposure for its own non-exclusive launch? iPhone is tangled in a complex tactic operation, involving large spending and market face-shaping. For the moment, customers yet have to wait and expect firm and precise releases.

KT announced voice mobile phone service will be launched in November using WiBro technology as carrier. Network installations and infrastructure are already initiated. The homegrown long range and in-motion standard will deserve Korean market at cheaper rates for customers and aims to demonstrate positive results to back up its losing-ground worldwide struggle against LTE standard, said KT.

I suggest the underlying truth may be different. This blog has already covered here the governmental walled-garden strategy and pressures over Korean companies to champion WIBRO despite their increasing reluctance.  Contrary to publicly expressed motivations, this move have to be understand in a long-term strategic perspective and have little to do with WIBRO success - or rather lack of success -  abroad. KT is indeed preparing the up-coming IT disruption : the mobile VoIP.

<!–[if !vml]–><!–[endif]–> According to Gartner - and my own experience as consultant -,  VoIP is the inevitable evolution of mobile phone market. The American firm estimates that 50% of mobile voice traffic will be under VoIP in 2019.  Only the companies providing such services will have opportunities to make comfortable benefits from the global mobile voice market, whose size is today 692.6 $ billions. The key factor is a wide 4G coverage, LTE or WIBRO whatever, reached around 2017. Once this condition meet mobile VoIP will full bloom, wrote Gartner analyst Tole Hart.

Until now, mobile network operators was really suspicious of VoIP. Terms of service for mobile data  exclude VoIP use, which displease most competition authorities, even pushing  the European Commission to consider regulation issuance.

Because with mobile VoIP will come new competitors, some of them very threatening. VoIP Players such as Skype, already the first operator in international communication with a 8% marketshare, can leverage valuable expertise. Powerful Internet giants may enter as well : Gartner predicts than more a third of mobile voice traffic will go through portals and social networks like Google, Facebook, Myspace or Yahoo.

A business saying goes : “If your core product can be cannibalized, better will be by you”.  VoIP is not only a technical issue, it’s a disruption in the business model. The value will shift from the call itself to its integration in an ecosystem.

The report was released in May and predicted a quick stance change from MNOs. As Korea is known to be a window to the future, we hope KT decision will give us a glimpse to this radically different future and we will follow this topic thoroughly.

The “Internet of things” is being realized and may be in your pocket faster than your expected.. This week, the Ministry of Knowledge Economy selected the consortium to lead RFID development for mobile phone. Consisting of SK Telecom, SK C&C, Phychips, and Incheon International Airport Corp, it will develop RFID-reader smart-phones and Internet services infrastructure.

RFID technology was included in the new governmental scheme so-called “3-3-7” as a “potential items” for new growth engines. Intelligent tags have already proved benefits in supply chain management and inventorying. It is now commonly used by giant retailer Wal-Mart and CHEP, the global leader in pallet and container pooling services. Various Korean public organizations such as museums and veterinary services already have used the technology. Now experimented chip manufacturers, Korean companies are eager to move to the next stage, to service providing.

Therefore, the participation of an airport-managing company in phone application development is a natural evolution. Incheon International Airport will become a test-bed for developers to operate a new system, which bring information to the users wherever is located, through enhanced connectivity.
According to “The Internet of Things “( Lu Yan, Yan Zhang, Laurence T. Yang ; 2008 ), the technology involved has to disappear from user consciousness. One of the three key factors identified is “Pervasive networks to process and convey the contextual information where it is relevant”.

The undergoing development fits this description. The current standards for RFID chips allow less than 128KB of memory embedded in the chip, and this maximum is reached only in military-grade active chips. Average passive tags are under 1KB and contain limited information. Thus, the purpose of RFID reader inside cell phone is to include the reader device in the mobile internet network (WiBro?). It will provide additional and up-to-date information and other services. “RFID on air” will be tested to operate a new air cargo information system shared by sector’s players. The government will support $4 million to the consortium too.

Beyond industrial needs, end-customers applications are near. Incheon International Airport is a part of Incheon Free Economic Zone, a project to build a world class hub by providing state-of-the-art services. Next to Incheon International Airport, New Songdo City often described as the most ambitious ‘ubiquitous city.’ Sensors will provide information to inhabitants concerning pollutions or traffic jamming. RFID will be included in street furniture such as recycling bins.

Science-fiction? No, the city opening is in two weeks. Commercial applications for mobile phone are expected for the end of next year. Welcome in Digital Korea.