Case Study - Korea

Opportunities for BB Connectivity in APAC

Ki-young, Ko｜ 2013. 9. 24 0 Introduction

1 International Internet Traffic Trend

2 KT Plan to Cope with the Traffic

Highway Construction & Telecom 3 Infrastructure

4 Considerations 01 International Traffic Trend Traffic is growing but growth rate is slowing down, so is the Asian Region

Global Traffic Regional Traffic Growth Rate

Int’l Internet Bandwidth(Tbps) Africa 120 140% Europe 100 120% US&Canada Latin America 80 100% Asia

60 80%

40 60%

20 40%

0 20% 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 2013

Telegeography 02 International Traffic Forecast Growing but the growth rate is slowing down, without a “Star” application

Internet Traffic by Application Estimated Global IP Traffic per Month

Unit(Exabyte) 120 IP-VPN 109.5 Email 3% 100 93.8 2% Other Gaming 8% 80 77.4 4% VoIP/IM/Video Web Browsing 60 59.1 23 18 Calling 26% 5% 43.5 14 40 30.7 9 6% 6 19% 52 20 28% 49 33% 41 5 60% 32 P2P 24 Streamed & Buffered 15 19% Audio/Video 2011 2012 2013 2014 2015 2016 22% Online File Video File Sharing Storage Business Data Web and Other Data 11% Video Communications Voice Communications Telegeography Online Gaming Cisco 03 Traffic Trend in Korea

By internet services

14% 13% 12%

10% 11% 12%

10% 11% 14%

31% 32% 31% Video 76% 35% 33% 31%

2012Y 4Q 2013Y 1Q 2013Y 2Q

Web-hard P2P Multimedia Web E-mail etc. 01 KT Traffic Forecast by Country

US Traffic Asia Traffic (Unit : Gbps) (Unit : Gbps) 350 300 321G 275G 300 250 235 257G 274 250 200 226 194 200 190G 173 150 148

150 143 104 100 100 99 60 60 50 46 50 40 28

0 0 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2016

Inbound Outbound Current Capacity Required Capacity

Analysis by Estimated global IP traffic per month in Telegeografy and kt global traffic expectation graph 01 KT Total Need 628 G bandwidth to cope with global IP traffic by 2016 Total Traffic (Unit : Gbps) 700

31G 600

500 447G 275G

400

300 628G

200 321G 100

0 2009 2010 2011 2012 2013 2014 2015 2016

Forecast US Inbound EU Inbound ASIA Inbound Current Capacity Required Capacity 03 Domestic Traffic Trend 66.5% of households in Korea have smart devices

Market share Traffic

Destkop 81.4% Fixed(Tbps) Mobile(Gbps)

Smartphone 65.0% 2.5 30 Smart TV 5.2% Smart device SmartPad 4.1% 66.5% 2

Digitial TV 56.6% 20 1.5 Digital Camera 54.8%

GPS Navigation 43.7% 1 Notebook 20.2% 10

MP3 Player 16.8% 0.5

Game console 11.9%

Digital camcoder 9.1% 0 0 2010 Jan 2010 Jun 2010 Dec 2011 Aug Other 2.8% KISA 2012 NTMS/ARGOS 1 International internet traffic trend

2 KT Plan to Cope with the Traffic

Integrated construct highway and 3 network infrastructure

4 Consideration 01 Plan 1 - Submarine Cable Capacity

‘14 ‘15 ‘16 ‘13 US 280Gbps US 340Gbps US 400Gbps Asia 240Gbps Asia 290Gbps Asia 340Gbps The existing submarine system will adapted a new technology : 40Gps or 100Gps

Asia Pacific Gateway launching (under construction)

New pacific cable launching (under discussion)

APG (Asia Pacific Gateway) New trans pacific - Landing (11): Korea, Japan (2), - Landing (7): Korea, China (3), China(2), Hong Kong, Singapore, Taiwan, Japan, USA Malaysia, Taiwan, Vietnam, Thailand - System Capacity : at least 15Tbps - System Capacity : 38.4Tbps - Ready For Service - Ready For Service : Early 2015 : 2017 (under discussion) 02 Plan 2 - Global POP

TORONTO SEATTLE London Amsterdam

KOREA JAPAN PALO FrankFurt NY HongKong INDIA VIETNAM LA (1Wilshire / Equinix) THAI SINGAPORE PHILIPPINE INDONESIA

Global POP : 12 Countries 14POPs Internet POP : 7 Countries 10 POPs

USA(5), Canada, United Kingdom(2), Germany(2), Netherlands, Japan(2), Hong Kong(4), Singapore(2), Vietnam, Philippine, India, Thailand, Indonesia + West Asia(4), Europe(2) countries (until 2016) 03 Plan 3 - IP Network Optimization

1 High Bandwidth Interconnections - 2 center nodes and 20 main nodes - 10 Gbps to 100 Gbps

2 Without a Blind Spot - Around 100 nodes all over the nation

3 Domestic Backbone Bandwidth - 6,600 Gbps - Plan to upgrade to higher bandwidth

4 Domestic FTTH rate - Copper based access network: 10% - Fiber based access network: 90% 05 Plan 4 - All-IP Based Transformation Fixed & Wireless Convergence Service on ALL-IP Network

Current (2011) Evolution (2013) Future (2015)

PSTN Enterprise Home Wireless PSTN Wireless Show-talk Home + Enterprise PSTN, Intelligent Service, Intelligent SoIP SoIP Additional Intelligent Additional AS SoIP AS Service AS AS Service Service Service Messaging, Web AS

Enterprise Integrated SSW DB

Fixed Wireless Integrated POTS IMS IMS POTS POTS IMS Integrated Upgraded IMS Cloud DB

Fixed Wireless Integrated Wireless Integrated Wireless PSTN & Wireless PSTN & PSTN & Back-Bone Back-Bone Back-Bone CS network Back-Bone CS network AGW CS network AGW AGW network network Network Network

Fixed & Wireless Transform to 2 Networks: All-IP Circuit Switched Network Network Network Separate & IP Multimedia Sub System Integrated 1 International internet traffic trend

2 kt’s plan for traffic increasing

Highway Construction & Telecom 3 Infrastructure

4 Consideration 01 Case Study – “Dreamline” Dreamline leased telecom networks from Korea Expressway Corp. that constructed highways with telecom infrastructures

Dreamline network structure (43,188km)

Core Network Structure • Highways • DWDM 400G • Speed up to 1.6Tbps

Metro Network Structure • Subway and main roads • 14 MSPPs

Access Network Structure • Ring configuration 01 Case Study – “Dreamline”

Dreamline Network Features

1 Stability Cables are housed in cable ducts 1.5m under the surface

2 Expandability Easy connection to other highway cables

3 Cost Savings

4 Easy Access for Maintenance 02 Synergy Effects

1 Construction Cost Reduction

2 Maintenance Efficiency

3 Restoration Option

4 Service Price Reduction

5 Applications for ITS 02 Synergy Effects - Construct Cost Reduction (per km)

Terrestrial fiber cable Submarine cable

Form

$ 13,800 $ 1,000 $ 45,000 Material Cable: $ 1,000 Cable: $ 1,000 Submarine cable: $ 35,000 Manhole: $ 4,800 Steel pipe: $ 10,000 Pipe: $ 8,000

Construction $ 58,000 $ 5,370 $ 135,000

Standard: 1km cable construction - Landing fiber cable : from kt standard quantity for unit (pipe(4), manhole(4), 36C fiber cable) - Submarine cable : from kt Submarine Company Information 02 Synergy Effects - Maintenance Efficiency

Terrestrial fiber cable Submarine cable

Feature

Repair 1 day (using vehicle) 20 days (using Cableship) duration

Repair cost $ 5,000 $ 500,000 (per 1 time) 02 Synergy Effects - Restoration Option

Current Future

Taiwan earthquake example - Multiple & Simultaneous submarine cable faults - 8 cables(2006), 4 cables(2007), 8 cables(2009)

Landing Cable is a Restoration Option 02 Synergy Effects – Service Price Reduction Asia IP transit & backhaul price is 3 times more expensive than that of Europe/North America

Asian Information Super Highway

Atlantic 23 Indian 8 Pacific 18

Why Expensive? Asian Information Super Highway • Only 8 submarine cables in Asia • Can reduce service price by more IP transit • Asian population is 60% competition of the world

Technology: Making the Asian Highway also an Information Highway By Rphan Samarajiva; published on January 6, 2011 02 Synergy Effects - Applications for ITS ITS (Intelligent Transport System), leveraged on integrated highway and network infrastructure

ATMS ETCS Advanced Traffic Management Service Electronic Toll Collection Systems

Information Processing  Automatic Vehicle Charging Service

& Monitoring  Traffic Flow Control Service

ATE Automatic Traffic Enforcement Service

 Illegal parking enforcement services

 Vehicle number recognition system

ATC Advanced Vehicle and Highway Information Information Service Collection Provision  Real time Signal Control Service

 Traffic Flow Control Service 03 Applications for ITS - ETCS Electronic Toll Collection Systems

Number of Passed Vehicles per day(/Lane) 108,000 → 432,000

Processing time per Vehicle 45sec → 9sec 03 Application – ATE Automatic Traffic Enforcement

Number of Traffic Accidents Number of Casuality (for 6 months) by Traffic Accidents (for 6 months) 1,405 → 999 87 → 52 03 Applications for ITS - ATC Advanced Traffic Signal Control Systems

Travel speed Travel hours per travel distance 1 International internet traffic trend

2 kt’s plan for traffic increasing

Integrated construct highway and 3 network infrastructure

4 Considerations 01 Consideration - North America Traffic The highest traffic in Asia is to North America

Aisa North America Europe 01 Consideration – North America Traffic Need to Construct a new Backbone Network connecting North America

ISP Europe ISP

Traffic Mongolia North America Korea Traffic ISP Asian Information ISP Super Highway Japan ISP China ISP Pakistan

India ISP Thailand ISP ISP ISP ISP Vietnam Cambodia ISP Laos ISP ISP 02 Consideration – Traffic usage efficiency Ring Topology to Unprotected Network (reduce USD 650,000 and capacity efficiency increase 12.5%)

Before Optimization

Hehwa Seoul Backbone efficiency rate W+P (75%) ITMC Busan Capacity : 2 X Protected 10G & KORNET Usage : 15G Geoje Busan • Ring topology W+P (75%) ITMC • transmission protected scheme Guro

After Optimization

Hehwa

W (50%) ` Seoul Backbone efficiency rate W (50%) ITMC Busan Capacity : 4 X Unprotected 10G & KORNET W (50%) Usage : 20G Geoje Busan • Unprotected topology W (50%) ITMC • Routing protected scheme Guro 02 Consideration - Cost Efficiency The Latest Transmission Technology – PTN, ROADM

Previous 1980s 1990s 2000s Afterward

10/100BaseT GbE 10GbE 40/100GbE

Pure IP Packet MPLS Router Transport Pure Switch Ethernet Metro MSPP PTN Ethernet PDH SDH Next Circuit Voice MSPP Transport & Hybrid

Metro MSTP DWDM CWDM ROADM Optical Technology DWDM

• PTN : Packet Transport Network • ROADM : Reconfigurable Optical Add-drop Multiplexer