Korea Telecom announced yesterday that it is opening up its network to MVNOs (Mobile Virtual Network Operators) and launching MVNO services for the first time in Korea. KT has partnered with “Entaz” (http://www.entaz.com), a mobile contents provider, and with “Free Telecom” and “Evergreen Mobile,” both of which are prepaid service providers. KT will open its mobile network to these selected MVNOs so that they can utilize KT’s network infrastructure to offer inexpensive data and voice services, especially to consumers within a niche market.

(source: JoongAng Daily)

Entaz, Free Telecom, and Evergreen Mobile

Entaz has a mobile portal service called “Free Mobile Town” that provides various contents including mobile game, cartoon, photobook, and ebook services. As Entaz will be taking advantage of KT’s low wholesale rates for data service, consumers will be able to access “Free Mobile Town” contents with no charge for mobile data service itself. While Entaz is utilizing KT’s network for data usage service, the other two are using the network for a prepaid voice call service; “Free Telecom” and “Ever Green Mobile” are targeting foreigners or short-term users, to whom they will offer their services at a low rate thanks to KT’s MVNO policies that aim to create a mobile ecosystem.

The first MVNO service in Korea?

It is only recently (March, 2010) that the Korean government passed a bill allowing the leasing of mobile networks, or MVNO business in the country. Previously, MVNOs were not allowed, and the Korean telecom market was fully dominated by the three MNOs, creating a huge market barrier for new entrants. The advent of MVNO companies is expected to work for the benefit of consumers by driving accelerated price competition into the market. By September 23rd, KCC (Korea Communications Commission) will prepare a complete set of guidelines and regulations for MVNO services. Once the guidelines are out, many changes are bound to take place as SKT, currently holding over a half of the market share, will be legally obliged to open its network, and as other companies, such as Onse Telecom and KCT (Korea Cable Telecom: a consortium of seven cable operators providing VoIP services throughout Korea) have demonstrated their willingness to start a MVNO business.

A fourth MNO in Korea

With KT launching its first MVNO services, which are not yet complete MNOs themselves in that they only offer either data usage service or voice call service, the idea of a fourth MNO in Korea seems to be gradually turning into reality. Soon, mobile phone users in Korea will have more options to choose from, compared to when they had only three choices: SK Telecom, KT, or LG U+. In addition, the advent of KMI (Korea Mobile Internet), a MNO that will be based on mobile WiMAX network and one that will generate many other MVNOS there forth, is imminent as well. (more about KMI at an upcoming entry) It will be interesting to see how such factors will play out in Korea’s telecom market. Meanwhile, let’s wait to see a myriad number of MVNOs rolling out starting from next year.

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.

Last Sunday, the Korean Blue House (the presidential office) publicized Ericsson’s plan to invest $1.5 billion in Korea for the R&D of LTE technology. The statement came after a meeting of Korean President Lee Myung-bak and Ericsson`s CEO Hans Vestberg in Sweden. The Blue House touted it as one of Lee`s major achievements in attracting foreign investment into the country. But it was corrected quickly by Ericsson spokesman asserting company had not such intention. Why does this happen?

[Handshake between Chairman of KCC and CEO of Ericsson]

The context is the current battle for the 4th mobile communication dominant technology. Two standards are competing: WiBro is the South Korean developed variant of mobile WiMax, while Ericsson champions 3GPP Long Term Evolution, LTE. Currently, LTE progresses globally, and Ericsson Korea said LTE would become the dominant technology in the market, accounting for 90 percent of the global market in 2014. Rival mobile WiMax will account for only 1 to 2 percent, according to Ericsson Korea.

Korean manufacturers show different positions. LG Electronics is supporting LTE while Samsung Electronics supports WiBro technology. In fact Samsung owns significant amount of original technology for WiBro and thus are not willing to develop LTE.

The government’s position is quite mixed. On the one hand, they want safeguard its homegrown WiBro in their domestic market. On the other hand, they want Korean manufactories lead global LTE market through exporting. That is why the Korean government wanted Ericsson to cooperate with Korean manufacturers to develop and export LTE devices targeting for the global market.

However, Ericsson’s position is that it would invest in Korea only if the government creates LTE opportunities in Korea.

But Korea stays adamant: “We cannot give up our homegrown technology,” said Korean Communication Commission head yesterday.

It will be interesting to watch if the Korean government’s strategy can succeed. I will follow up with this issue continuously.