Successful Innovation of the Korean Mobile Communications Industry and SK Telecom's Role
InnChan Lee. Ph.D. Vice President ICT Research Office SK Telecom
1. Introduction
The telecommunications industry is one of the major pillars of the Korean economy along with the semiconductor and automobile industries. The IT industry including telecommunications has been leading the growth of the Korean economy since the late
1990s.
According to Digital Opportunity Index 1 published by the International
Telecommunication Union, Korea ranked first out of 180 countries around the world for two years in a row, proving that it is a true IT powerhouse. In wireless broadband penetration, Korea and Japan show far higher rates than other developed countries.
1 The Digital Opportunity Index (DOI) is a composite index comprising 11 separate indicators, grouped in three clusters of IT Opportunity, Infrastructure and Utilization. Examples of indicators are ‘internet users per 100 inhabitants’, ‘internet access tariffs as a percentage of per capita income’, ‘mobile cellular subscribers per 100 inhabitants’, and etc.
1 [Figure 1] Development of the Korean telecommunications industry
Digital Opportunity Index(2006) Top 10 economies by number of mobile
Korea( Rep.) 1 0.80 broadband subscribers, in milions, 2005 Japan 2 0.77 Denmark 3 0.76 Japan Iceland 4 0.74 Singapore 5 0.72 Ko rea( Rep.) Netherlands 6 0.71 Taiwan, China 7 0.71 Italy Ho ng Kong,China 8 0.70 Sweden 9 0.70 United Kingdom United Kingdom 10 0.69 United States Finland 11 0.69 Norway 12 0.69 Germany Luxembourg 13 0.69 Israel 14 0.69 France Macao,China 15 0.69 Spain Switzerland 16 0.69 Canada 17 0.67 Portugal Austria 1 8 0.67 Germany 19 0.66 Australia United States 20 0.66
0.00 0.20 0.40 0.60 0.80 0 5 10 15 20
Sources: ITU, UNCTAD, KADO
The high infrastructure penetration rate and rapid growth of the ICT2 industry are the basis for Korea to lead the global ICT market as a test-bed for new technology and services. In order to take advantage of the leading status of Korea in the global ICT market, global IT companies have established R&D centers, developed next-generation
IT technology and services, and conducted a test within Korea3.
The advancement of ICT services has facilitated growth of various sectors of the
ICT value chain, helping contents and platform providers and devices and handset manufacturers develop. In particular, advances in mobile communications services have helped ICT device and handset manufacturers including Samsung Electronics and LG Electronics improve their competitiveness and become major players in the
2 ICT : Information Communication Technology 3 Intel established a R&D center in collaboration with ETRI in March 2004. IBM opened the Ubiquitous Computing Research Institute in July 2004. Microsoft established the Mobile R&D Center in July 2005 to develop the next-generation mobile platform technology. Google opened its R&D center in Korea in October 2006 to develop search and wireless internet technology.
2 global handset market. Rankings in the global handset market show that Samsung
Electronics and LG Electronics have been among the top 5 players since 2004, while
Nokia, Motorola, Ericsson, and Panasonic have been leading the market since the late
1990s.
[Table 1] Ranking Changes in the Global Handset Market
Ranking 1998 2000 2002 2004 2006
1 Nokia Nokia Nokia Nokia Nokia
2 Motorola Motorola Motorola Motorola Motorola
3 Ericsson Ericsson Samsung Samsung Samsung
Electronics Electronics Electronics
4 Panasonic Siemens Siemens Siemens Sony
Ericsson
5 Alcatel Panasonic Sony LG LG
Ericsson Electronics Electronics
6 NEC Samsung LG Sony N/A
Electronics Electronics Ericsson
7 Samsung Alcatel Alcatel N/A N/A
Electronics
Sources: KISDI, Gartner
The Korean mobile communications industry has grown based on a series of technology and service innovation: technological independence based on the world's first commercialization of CDMA technology in 1996, the world's first commercialization
3 of CDMA 1x and CDMA 1x EV-DO technology, the world's first service of Mobile WiMax and HSDPA, wireless internet service development, and development and upgrade of
ICT convergence services. In Korea, innovation and advances in mobile communications have been led by SK Telecom. SK Telecom’s innovation efforts have been recognized as one of the top 100 innovative companies in the world by Business
Week in April 2006.
This report thoroughly analyzes major innovation in the Korean mobile communications industry, and success factors and lessons from each innovation.
Chapter 2 examines CDMA technology, which is the most significant innovation in history of Korea's mobile communications, and the subsequent development of wireless platforms and convergence service based on the advanced communications network. Chapter 3 explores global cooperation for innovation including collaboration between SK Telecom and the Chinese government in TD-SCDMA. Lastly, Chapter 4 analyzes what are success factors to Korea's mobile communications innovation and what can be learned from Korea's innovation.
4 2. Major Technology Innovation of the Korean Mobile Communications
Industry
2.1 World's First CDMA Commercialization
Background
Until the early 1990s, Korea had had no proprietary wireless communications technology and depended companies in developed countries for mobile technology. As of 1991, AT&T and Motorola lead the switch, base station, and transmitter markets, and
Motorola accounts for 40% of the Korean handset market.
[Table 2] Mobile Communications System in Korea (as of 1991)
AT&T Motorola Korean Firms
Switch APX 7 units EMX 4 units None
Base Station APX 173 units EMX 35 units None
Transmitter 3,729 RF 1,052 RF None
Source: Sangduk Lee, et al. (1991)
[Figure 2] Market Shares in the Korean Handset Market (as of 1991)
Others, 19% Motorola Hy undai, 9% 43%
LG, 9% Samsung, 20%
Source: Electronics and Telecommunications Research Institute (ETRI) (1997)
5 As foreign companies were occupying the Korea's mobile communications devices and handset markets, mobile devices and handsets were very expensive. Also, foreign companies were reluctant to transfer their advanced technology to Korean manufactures, making it difficult for Korean companies to accumulate technological expertise and knowledge. Lack of technological expertise led the communications device market to be a seller's market. Therefore, Korean communications service providers had no negotiation power in introducing mobile systems and handset devices.
Even though the first mobile communications network was built in Korea in 1984 and as much as 180 billion won was invested in network infrastructure until 1991, only foreign manufacturers gained profits from such a huge investment in the Korean market.
From the late 1980s, demands for mobile telephony in Korea began to increase sharply, requiring technological migration to digital mobile communications. However, the only commercialized digital mobile technology was TDMA developed in Europe. In the early 1990s, CDMA developed by QUALCOMM, a small venture start-up in the U.S., had no public attention, as there were high uncertainties about CDMA commercialization. However, the Ministry of Post and Telecommunication of Korea paid attention to technological advantages of CDMA such as high frequency efficiency and excellent call quality. Korea decided to become the world's first country to commercialize CDMA in order to avoid technological dependence on other nations that it experienced in analogue communications, and to overcome structural weakness of the Korean mobile communications industry.
6 CDMA Technology Commercialization
CDMA technology development was a national R&D project of large scale funded by the Korean government and jointly conducted by handset manufacturers, telecoms service providers, and government-sponsored research institutes. From 1989 to 1996, around 1,000 people worked for this project every year.
CDMA technology development was divided into two phases. In phase I from 1989 to 1993, CDMA was selected as the Korea's mobile communications standard and technology community was organized. In phase II from 1994 to 1996, technology development activities were newly adjusted while the project faced difficulties and the technology environment was rapidly changing. The following figure describes the history of CDMA technology development.
[Figure 3] History of CDMA Commercialization
1989 1991 1993 1995 1996 Research on Agreement on Designation of Development of Launch of the digital mobile joint research CDMA as the commercialized world's first technology program with technology CDMA system commercialized QUALCOMM standard CDMA service
In the national CDMA project, participants had specific roles and responsibilities:
QUALCOMM and ETRI designed the basic technology foundation system; Samsung
Electronics and LG Electronics developed devices and handsets; Korea Mobile
Telecom 4 coordinated the whole project and led test and evaluation of developed
4 Korea Mobile Telecom was the predecessor of SK Telecom. It was a public corporation owned by the Korean government. After the 1994 privatization, it changed the name into SK Telecom in 1997.
7 products. As QUALCOMM had CDMA technology of basic level, it had difficulties in developing switches to commercialize mobile telephony system and producing and manufacturing mobile devices at a large scale. Under the circumstances, Korea, which had sufficient financial resources for technology development and technological expertise in mass-producing TDX, an electronic switch, was the perfect partner for
QUALCOMM to create synergy.
QUALCOMM provided only stations-handsets connection technology for the
CDMA project, while Korea independently developed CDMA switch (based on the existing TDX switch), system design technology, control technology, RF technology, and hand-off technology.
Success Factors of CDMA Commercialization
There are several factors to the successful CDMA technology innovation. First, the
Korean government pushed for a large-scale project in collaboration with the private sector to commercialize the cutting-edge CDMA technology at a time when the paradigm was shifting from analogue communications to digital communications in the mobile telecoms market.
In 1980, the Korean government enacted the ‘Electronics Industry Promotion Act’ and designated communications as one of the core industries of the Korean economy.
It recognized the importance of the communications industry and facilitated development of communications network and basic technology to upgrade the Korean
8 communications industry. In addition, it funded around 70% of cost for the CDMA project with government budget as it was leading the project. Also, the Korean government came up with policy5 to link selection of new mobile telecoms operators and service types to the CDMA commercialization project.
Second, development methodology and project management expertise learned from the previous TDX technology project contributed significantly to making the CDMA project a success.
The TDX development project required highest technological expertise. Korea was then compared to a tube radio repairman trying to make a color TV set. In 1981, ETRI had an annual R&D budget of 2.4 billion won, while a total of 24 billion won was invested in the TDX project for five years. With development of TDX technology, Korea became the 10th country in the world to have digital switching technology, laying the foundation for developing CDMA technology later.
In the early stages of the CDMA commercialization project, Korea planned to design and develop a system in collaboration with QUALCOMM. However, in 1993,
ETRI changed the plan and decided not to depend on QUALCOMM 100% in order to develop its proprietary CDMA system based on the basic system design. The reasons for such decision were that the pace of the joint project was too slow, it took too much
5 In 1993, the Ministry of Information and Communication announced that new mobile telecoms operators would have to provide mobile telephony service using CDMA-based equipment made in Korea. It postponed selection of new telecoms operators until CDMA technology was successfully commercialized. At the same time, the Korean government requested new service providers to launch digital mobile communications service in 1995, two years earlier than scheduled, to encourage CDMA project participants to concentrate more on the project.
9 time for QUALCOMM to finish system design, and the Ministry of Information and
Communication announced in 1993 to accelerate the CDMA project by two years.
Since the decision was made, ETRI shifted its focus from development based on technology transfer from QUALCOMM to independent management and control of the
CDMA project. ETRI also applied experience and know-how learned from the previous
TDX development project. For example, the general manager of CDMA technology was replaced by another manager, who had been responsible for the TDX-10 technology project before. Experience gained from the TDX project laid the basis for the successful
CDMA development.
Third, the ‘Taskforce for Mobile Communication Technology Development Project
Management’ led by Korea Mobile Telecom defined the scope and specifications of technology development from the perspective of service providers to reduce uncertainty in the project, and conducted tests to solve technological problems.
In the early stages, there were conflicts of interest between ETRI, which was responsible for system design and integration, and manufacturing companies, which produced commercial devices based on the design presented by ETRI. In other words,
ETRI focused more on technology itself than commercialization, as it was responsible for design and technology development. Therefore, participating companies made complaints that they had difficulties in producing commercial products as ETRI did not clearly define required system specifications and features. Such conflicts discouraged the two parties from conducting joint research and study, and consequently, brought
10 about challenges to the CDMA project.
The Taskforce for Mobile Communication Technology Development Project
Management presented user specifications that clearly define system configuration and functionalities from the perspective of mobile communications service providers to set the direction of the CDMA project. Once specifications and common design guidelines for ETRI and participating companies were defined, the project was accelerated in earnest.
Lastly, the Korean government developed demand facilitation policy to create a commercial market for CDMA technology after CDMA technology was successfully developed.
The Korean government allowed mobile telecoms operators to both manufacture handsets and provide mobile service to consumers to create synergy. It also selected synchronous IMT-2000 service providers to lay the foundation for continuous development of the CDMA industry. In addition, ‘Shinsegi Telecom’ and three PCS service providers entered the mobile communication service market in 1996 and 1997, respectively, intensifying competition and resulting in lower service prices and market expansion. In fact, subscription cost including a handset started to fall significantly since 1996, when CDMA infrastructure was localized and new players entered the mobile communications market, increasing competition. This competition policy contributed to penetration of mobile communication among general public as well as business users, leading to CDMA technology taking root in the market earlier than
11 expected.
(Unit : USD) (Unit : 10,000) 2000 2500
1800 1600 2000
1400 1200 1500 1000 800 1000 600 400 500 200 0 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 Handset Cost + Subscription fee number of subscribers
Ú ‘Shinsegi Telecom’ and three PCS service providers launched their service in 1996 and 1997,
respectively.
Source: Ministry of Information and Communication
In addition, competition to attract subscribers has resulted in better service quality, and Korean handset manufacturers were able to catch up with foreign manufactures in the process of the Korean mobile market expansion, allowing the Korean manufacturers, not foreign handset manufactures, to lead the Korean handset market.
12
60%
50% 40%
30%
20% 10%
0% 1994 1995 1996 1997 1998 1999 2000 Motorola Samsung LG
Source: Cellular Monthly
As competition has been intensified in the mobile service and handset markets,
Korea has become a global test-bed for new technology, products, and services. Also, next-generation products and services have been first commercialized or developed in the Korean communications market.
Significance of CDMA Technology Innovation
Before CDMA technology was commercialized, Korean companies were making efforts to catch up with global leaders in developed nations by importing, adopting, and improving products of advanced companies. However, CDMA technology first commercialized by Korean companies did not existed in the market before. The CDMA project was the turning point for Korea's technology innovation, as it successfully developed a brand-new technology, despite uncertainties in technology and market conditions. The successful CDMA commercialization helped Korea change from a follower into a leader in IT and communications innovation. Korea is now able to
13 independently set the direction of technology and service development, define technological architecture, and pursue new technological innovation.
2.2 Development of the Korean Wireless Internet Platform - WIPI6
Growth of the Korean Wireless Internet Service Market
With technological innovation including CDMA 1x and CDMA 1x EV-DO, the
Korean communications market has gone beyond voice-oriented service to lay the basis for wireless internet environment earlier than expected. Also, as the Korea communications market matured and the increase in the number of new subscribers slowed down since 2000, competition became more intense. As a result, telecoms operators tried to provide consumers with differentiating services to gain competitive edge and create new revenue streams. After wireless internet service was first released in May 1999, mobile telecoms providers began to compete to offer handsets with high-end features and various contents and to develop new business models. In this process, the Korean wireless internet market has grown rapidly to create one of the world's most advanced wireless internet markets along with Japan.
A comparison study on wireless internet markets of developed nations shows that contents excluding messaging accounts for 19.4% and 9% of total revenues in Japan and Korea, respectively, and takes up 72.4% and 55.2% of data revenues in Japan and
Korea, respectively. These figures in Japan and Korea are far higher than those in other developed markets. These high figures suggest that the data market has shifted
6 WIPI: Wireless Internet Protocol for Interoperability
14 its focus from simple messaging to various contents.
80.0% 72.4% 70.0%
60.0% 55.2% 50.0% 40.0% 29.6% 30.5% 27.2% 30.0% 24.3% 26.4% 26.6% 21.5% 19.4% 20.0% 9.0% 5.5% 6.9% 10.0% 3.3% 4.2% 3.8% 4.6% 3.5% 0.0% USA Finland France Germany Italy Spain UK Japan Korea(rep.)
% of Contents Revenue in Total Revenue % of Contents Revenue in Data Revenue
Source: OVUM (2006). SK Research Institute analysis
Background for Development of Wireless Internet Platform
Growth of the advanced wireless internet was accelerated based on network infrastructure upgrade and standardized proprietary wireless internet platform development. Mobile telecoms operators had provided consumers with services based on their own wireless internet platforms since 2000 to differentiate themselves from other players in the face of intense competition and matured market. However, in 2000, the global communications market did not have an advanced wireless internet technology that Korea wanted to introduce. Therefore, mobile telecoms operators in
Korea decided to develop a proprietary platform to upgrade their wireless internet service. QUALCOMM, which provided basic CDMA technology to Korea, released its wireless platform, "BREW" only after 2001.
15 As of 2002, SK Telecom adopts GVM and SK-VM, KTF introduces MAP and
BREW, and LG Telecom selects KVM as their wireless internet platform.
[Table 3] Wireless Internet Platform Penetration in Korea (as of 2002)
SK Telecom KTF LG Telecom
GVM MAP KVM (SUN Microsystems)
SK-VM BREW (QUALCOMM)
* All standards except BREW and KVM are proprietary wireless internet platforms developed by the Korean telecoms operators.
As each mobile telecoms operator adopted its own proprietary service platform, the mobile contents market was divided by operator. Consequently, this led to redundant investment and inefficiency, as contents providers and handset manufacturers had to develop multiple contents and handsets according to wireless internet technology specifications of each operator.
In addition, the Korean mobile communications industry had to pay huge royalties to QUALCOMM in the process of CDMA commercialization. QUALCOMM also requested Korean companies to pay additional $3 per a handset as royalty for its wireless internet platform, BREW. To reduce the cost burden caused by high royalty to
QUALCOMM in the mobile communications industry, Korean service providers had to develop their own wireless internet platform.
In conclusion, Korea pursued to develop its own proprietary wireless internet
16 platform to eliminated inefficiency from lack of standardized wireless internet platform and increase interoperability among contents and handsets.
Process of Wireless Internet Platform Development
In 2001, SK Telecom, KTF, LG Telecom, Samsung Electronics, LG Electronics,
ETRI, the Telecommunication Technology Association, and the Radio Research
Laboratory began to work together to develop WIPI, the Korea's proprietary wireless internet platform. A total of 8 billion won (4 billion won for each of Phase I and Phase II) was invested in the WIPI project for one year from July 2001. For a month from August
2001, SK Telecom, KTF, and LG Telecom jointly defined next-generation wireless internet platform requirements after reviewing advantages of each of the existing platforms.
In March 2004, WIPI was selected by the WIPI Forum as the official wireless internet standard in Korea. Starting April 2005, all handsets newly released had to support WIPI to promote penetration in the market.
Significance of Wireless Internet Platform Development
WIPI was developed under the support of the Korean government for technological standardization and innovation of mobile telecoms operators. As WIPI is an open standard to meet various needs of interested parties, it has been successfully penetrated into the market. Mobile telecoms operators in Korea provided technological expertise and know-how for WIPI based on their experience in developing their own wireless internet platforms and services before WIPI was developed. In addition, WIPI
17 accommodated technological differences and requirements of contents providers, handset manufactures, and wireless internet platform providers including QUALCOMM and SUN Microsystems as an open standard, laying the foundation for successful market penetration.
The standardized wireless internet platform promoted content development, helping Korea lead the global wireless internet market along with Japan and Korean mobile content and platform providers advance into overseas markets. From 2003, a total of 55 content and platform providers had entered overseas markets along with SK
Telecom, and sold their wireless internet platforms and solutions in 10 countries including China, the U.S., the Netherlands, and Israel.
SK Telecom launched HELIO, a MVNO, in the U.S. market based on its expertise on advanced wireless internet service. HELIO laid the foundation for Korean content providers to advance into the U.S. market earlier than expected. Also, 23 partners that offered wireless internet solutions including wireless internet platforms and download servers were able to sell their products and solutions in the U.S.
Such joint efforts to advance into overseas markets created good opportunities to prove technological prowess of Korea's IT start-ups in the global market. Difficulties facing small content and solution providers in entering the global market have been eased with global business model, where a mobile telecoms operator first builds a local stronghold in other countries, and content and solution providers advance into overseas markets based on the stronghold.
18
In addition, WIPI has been the basis for developing killer contents for wireless internet. Korean ICT companies in related fields join forces to enter the global market based on expertise and know-how gained in the Korean market, and in turn, achievements in the global market are applied to the Korean market. Such a virtuous cycle has been created to help the communications service industry that creates higher values added become a new engine for export growth of Korea.
SK Telecom has built R&D infrastructure for SMEs that try to advance into the overseas markets. For example, SK Telecom has operated the ‘3G Reality Center’, where GSM test network is built, and the ‘Mobile Test Lab’, where technology and solutions of partners are tested on the real mobile communications network and feasibility test is conducted, to support partners to enter the global market.
19 2.3 Innovation of Convergence Service – Satellite DMB Service As information and communications infrastructure evolves and the communications market matures, ICT convergence has become a new growth engine for Korea since 2000. SK Telecom has been leading ICT convergence innovation by launching a variety of services such as MONETA, a financial convergence service,
Nate Drive, a telematics service, and TU, a mobile TV service, in order to provide consumers with new values and to promote the ICT industry based on a new growth engine. A good example of convergence services in Korea is satellite DMB, a communications-broadcasting convergence service.
Overview of Satellite DMB Service
TU7 is a satellite digital multimedia broadcasting (DMB) service. It is a true brand- new broadcasting service to help consumers access audio, video, and data anywhere anytime from various devices such as cell phone, specialized DMB terminal, or vehicle- based terminal. It is totally different from the traditional terrestrial DTV or satellite radio broadcasting with fixed receptor, as broadcasting center on the ground sends various multimedia data to a satellite, which in turn, transmits broadcasting contents to handsets or vehicle-based terminal via a satellite repeater.
7 Satellite DMB service provider is TU Media, whose largest shareholder is SK Telecom.
20 [Figure 7] Configuration of Satellite DMB Service
Ku-band (13.824~13. 883 GHz) Ku-band (12.214~12. 239 GHz)
S-band (2.630~ 2.655 GHz) Gap Filler Program DMB S-band Broadcasting Provider Center
Handset DMB Device Car
Currently, various mobile broadcasting technology standards including DVB-H and
MediaFLO are being developed. However, Korea became the world's first country to commercialize satellite DMB and provided satellite DMB service since May 2005.
[Table 4] Comparison of Major Mobile Broadcasting Technology Standards
Standard S-DMB DVB-H MediaFLO T-DMB ISDB-T
Europe, the Korea, Coverage Korea, Japan U.S. Japan U.S., Asia Europe TU, Toshiba, QUALCOMM, Samsung Samsung Samsung Panasonic, Nokia, TI, Electronics, Operator Electronics, Electronics, Sanyo, BenQ LG LG LG Hitachi Electronics Electronics Electronics OneSeg, an Tests are Commercial Tests are ISDB-T- conducted services by Tests are conducted based in France, Status TU in Korea conducted in in Germany service was the U.K., and MBCo in the U.S. and launched in and Japan. Norway. the first half Finland. of 2006.
21 Satellite DMB Technology Development Overview and Major Issues
SK Telecom had a strong will to innovate service and significantly contributed to developing satellite DMB service, the world's first mobile TV service. It recognized the potential and importance of mobile multimedia service early on. Despite high risks including lack of relevant laws and technological standards, SK Telecom decided to focus its investment on commercial communications-broadcasting convergence service for four years from 2001 to 2005.
SK Telecom laid the foundation for satellite DMB service by registering satellite network internationally in 2001 and began to provide pilot service right after the international satellite network registration. In October 2002, it reached a collaboration agreement with Mobile Broadcasting Corp. (whose largest shareholder is Toshiba) in
Japan to launch commercial satellite DMB service.
SK Telecom also played a leading role in standardization of satellite DMB technology in Korea. It supported in the Satellite DMB Standardization Committee, which consists of academia, research institutes, manufacturers, broadcasting networks, and government agencies under the Ministry of Information and Communication. The committee evaluated various satellite DMB technology standards including five system standards. At the time, European "System A" and Japanese "System B" were strong candidates to become the technological standard. However, "System E" adopted by SK
Telecom was finally selected as the Korea's DMB standard in February 2003.
To promote the Korean IT industry, major system components such as
22 broadcasting center, gap filler, and receiver chip except satellite itself were all developed by Korean companies, helping other related industries including handset and gap filler manufacturing grow. In the process of satellite DMB technology development, SK Telecom participated in the joint research on gap filler, supported development and commercialization of H.264, the next-generation video compression technology, and helped satellite DMB device and content providers advance into the global market. In particular, in February 2003, SK Telecom established the ‘Handset
Development Council’, which consisted of 19 handset manufactures, to support effective development and commercialization of satellite DMB handsets. The council helped manufactures develop products of various types and prices, contributing to promotion of satellite DMB service in the Korean market.
[Table 5] Localization of Satellite DMB System Components Possibility of Component Note Localization
Satellite Low Satellite N/A Launch Vehicle Low
PMS/APC and data Broadcasting Middle broadcasting devices are Broadcasting System localized Center TDM/CDM converters are Station Middle localized Signal High Localized Processing Gap Filler RF High Localized
CDM and Chip Module High compression/multiplication Receiver chip are to be localized
Receiver High To be localized.
23
Delays in enacting laws and regulations on convergence service were a major challenge to commercialization of satellite DMB service. As satellite DMB service was launched by Korea for the first time in the world, broadcasting laws and regulations had to be first revised to allow for such a new service. However, the Korean Broadcasting
Commission and Ministry of Information and Communication had differences of opinion on the scope and regulations of data broadcasting. 8 As a result, revision and passage of laws and regulations were postponed, presenting a big risk to the successful launch of satellite DMB service. In the end, the Broadcasting Act was finally revised in March
2004, when a satellite was supposed to be launched. Since then, satellite DMB service providers were selected and broadcasting networks gained government approval for convergence service.
Significance of Satellite DMB Technology Development
TU, a satellite DMB service, is one of the most successful convergence services in the Korean ICT industry. It has promoted the Korean mobile TV market and made
Korea a global test-bed for satellite DMB service. After S-DMB service was launched, the Broadcasting Commissions, broadcasting networks, and telecoms operators in many countries including France, the U.K., Finland, the U.S., and China benchmarked
TU and showed interests in adopting satellite DMB service.
8 The Korean Broadcasting Commission insisted that data broadcasting should be regarded as broadcasting contents and subject to evaluation of the commission. However, the Ministry of Information and Communication was against the idea, saying that internet business would be shrunk, if all data distributed via the internet should be reviewed by the commission.
24 As satellite DMB technology enables for personalized broadcasting service, it creates more consumer demands than the traditional broadcasting technology based on the unit of households. In the existing content distribution market occupied by terrestrial, cable, and satellite broadcasting service providers, a new sector for mobile broadcasting contents was created, contributing to expansion and growth of the Korean content market. In addition, satellite DMB service promoted development of specialized or differentiated contents and mobile broadcasting contents, offering more consumer values.
SK Telecom has innovated services based on its satellite DMB technology by developing mobile T-commerce and TPEG-based9 intelligent telematics service as well as mobile broadcasting service. In March 2007, it made an alliance with CJ Home
Shopping to open a DMB shopping channel for TU. The DMB shopping is the world's first two-way communication T-commerce, which allows users to purchase products on the spot while they are watching satellite DMB. TPEG is a traffic and related information service, where drivers can access real-time intelligence data on the fastest path, traffic speed of the road ahead, best detour road, travel and weather, and traffic accident rescue from their terminals via satellite DMB signal.
Satellite DMB service is a successful convergence service, which has encouraged various interested parties including broadcasting networks, broadcasting content providers, and the Korean Broadcasting Commission to effectively cooperate with one another. The Korean Broadcasting Commission was responsible for selection of satellite DMB service providers and revision of the Broadcasting Act, while the Ministry
9 TPEC: Transport Protocol Experts Group
25 of Information and Communication selected a satellite DMB technology standard and gave a government approval to broadcasting networks. Such a close cooperation also applied to TU Media. Media companies and handset manufactures have 9% and 12% of shares in TU Media, respectively, to promote satellite DMB service, while SK
Telecom coordinates interests of related parties and promotes mutual cooperation as the largest shareholder.
[Figure 8] Collaboration Model for Satellite DMB Service
SKT Subscribers satellite repeater rental subscription fee service fee
satellite repeater frequency rental fee fee TU Media Corp Ministry of Information and advertising fee broadcasting Communication promotion program fee fund
Korean Program Broadcasting Provider Commission
In addition, satellite DMB service is one of the most successful service innovation based on global cooperation, as SK Telecom has developed TU in collaboration with
MBCo in Japan. SK Telecom and MBCo decided to jointly own the satellite. In terms of the number of satellite repeaters and coverage, SK Telecom owns 34.66% of the satellite and MBCo has 65.34%. This joint ownership helped SK Telecom reduce risks and cost in the early stages of satellite DMB business.
26 3. New Innovation in the Communications Industry Based on Korea-China Cooperation
As advanced ICT technology of Korea attracts a lot of attention from global market players, R&D collaboration between Korean ICT service providers and global telecoms operators has been promoted and expanded. SKT, the ICT leader in Korea, has led global R&D cooperation and explored new service innovation in collaboration with leading global companies such as Google, Yahoo, and Visa.
In particular, SK Telecom has cooperated with China to develop the next- generation mobile technology based on its technological expertise on CDMA, CDMA 1x
EV-DO, and wireless internet platform. In August 2006, SK Telecom became the first foreign communications service provider to make an MOU with the National
Development and Reform Commission of China to develop TD-SCDMA technology and build a test-bed in Korea, laying the basis for another new technological innovation.
Based on the MOU, China and Korea will be able to develop an ICT collaboration model for post-3G and 4G technology as well as TD-SCDMA, and share the benefits of such a collaboration model.
After the MOU was signed, SK Telecom and the National Development and
Reform Commission of China established the Joint Service Development Center for
TD-SCDMA in China to jointly conduct a research on 3G multimedia and value added services and related platforms. SK Telecom has also established and operated the TD-
SCDMA Test Center in Korea and tested TD-SCDMA technology and value added services in order to improve TD-SCDMA network and facilitate TD-SCDMA
27 commercialization in China. In this regard, the TD-SCDMA Test Center has several objectives: improvement of TD-SCDMA network, development of network management system (NMS) for TD-SCDMA, development of TD-SCDMA-based LBS technology, organization of the TD-SCDMA Industry Alliance in Korea, development of TD-SCDMA handset platform, and development of platform for value added service (VAS). The center also checks and corrects problems in advance in the process of TD-SCDMA commercialization, and cooperates with the Joint Service Development Center for TD-
SCDMA in Beijing, China, to facilitate TD-SCDMA commercialization.
Based on such technology development cooperation, the TD-SCDMA Test Center in Korea became the world's first institute to have successfully tested TD-SCDM-based global video telephony between China and Korea, and interconnection between TD-
SCDM and WCDMA. Demonstration of global video telephony and TD-SCDM -
WCDMA interconnection laid the foundation for China to upgrade its TD-SCDMA technology, and proved SK Telecom's superb technological expertise.
SK Telecom has significant experience developing and operating 3G technologies such as CDMA and WCDMA, and hopes to share know-how and experience in TD-
SCDMA development. SK Telecom expects to significantly contribute to growth of the
Chinese communications market and globalization of TD-SCDMA in the future.
28 4. Lessons Learned from Innovation of the Korean Mobile Communications Industry
There are several factors behind a series of successful innovation in the Korean mobile communications industry ranging from the world's first CDMA commercialization to the global test-bed for TD-SCDMA.
First, top management vision for growth based on technology and service innovation, and organizational commitment are the basis of the continuous innovation.
Korean mobile telecoms operators have not been complacent with the world's first
CDMA commercialization and continued to make an investment in R&D to create new innovation. In particular, critical success factors include continuous investment supported by top management with vision for innovation, and organization-wide commitment for technological innovation as well as technological prowess to develop world's first technology and service such as CDMA 1x, CDMA 1x EV-DO, and satellite
DMB.
Second, innovation has been made based on consumer needs, not technological attractiveness, to provide more consumer values in order to maximize market adoption of new service and to increase innovation potential in the market. It is well-known that
Asian consumers, especially Korean consumers, have higher adoption rate in new communications technology and service than their counterparts in other countries and regions. However, Korean consumers have also higher expectation of the quality of ICT service and products. To satisfy the demanding consumers, Korean mobile telecoms operators have thoroughly studied consumers' needs in every day life and designed
29 technology and service to maximize consumer satisfaction from the consumer-oriented perspective.
Third, Korean mobile telecoms operators have cooperated with other service providers in various industries and government agencies to maximize service values created through innovation. Convergence between ICT and finance, broadcasting, or distribution requires telecoms operators to closely cooperate with companies in relevant industries and to get policy support from the government. In order to promote convergence service, Korean mobile telecoms operators have made a collaboration with relevant industries and government agencies, built convergence infrastructure, shared technological know-how with other participating companies, and coordinated interests among related parties, contributing to successful market penetration of new convergence service.
Lastly, risk taking and perseverance to overcome difficulties in the process of technological innovation and new service development are the foundation for the
Korean mobile communications industry to become an innovation frontier with competitiveness edge in the global market. Self-conviction and strong will to overcome challenges have helped Korean mobile telecoms operators move beyond import and accommodation of technology and service developed by developed countries and develop their own proprietary technology and service.
The Korean mobile communications industry is now focusing on the 4G network, the most promising ICT technology in the future, and speeding up development of
30 cutting-edge wireless multimedia technology and intelligent network. It seeks to reinforce collaboration wit other countries including China based on its advanced R&D infrastructure, technological expertise, and innovation initiatives to lead the global ICT industry.
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33