I recently returned from Seoul, South Korea, where I gave the keynote address at the 2012 KISDI International Conference. My talk, “The Next Generation of the Internet—Revolutionizing the Way We Work, Live, Play, and Learn,” focused on the key trends shaping the next generation of the Internet and the implications for players in the ITC industry and government policy/regulation. However, based on what I observed in Seoul, much of the future has already arrived in South Korea.
Besides the ultra-modern skyscrapers of Seoul, South Korea has the highest domestic penetration rate of mobile subscribers in the world: 110 percent (total number of mobile subscribers divided by total population). Equally, it is the world leader in broadband penetration per household (107 percent) and was one of the first countries to roll out new LTE networks, which are used by 20 percent of South Korea’s mobile users. Sixty percent of mobile users own smartphones, which is visibly evident as one walks the streets and rides the subways of Seoul—everyone seems to be tapping away on the latest futuristic device. This hyper-connectivity continues underground with multiple cellular and Wi-Fi networks available on the extensive Seoul subway system. I happily joined my fellow subterranean Seoul travelers, effortlessly sending emails and surfing the web while using the modern and extremely efficient subway system.
Despite all of this success in connecting South Koreans to the Internet, service providers are facing a number of challenges. Although the rise of LTE is increasing average revenue per user (ARPU) for data, overall ARPU is declining. In fact, South Korea has some of the lowest-priced data plans, charging less than a $10 premium for the speed and new capabilities of LTE compared with typical 3G pricing. As we found in our Cisco IBSG Mobile User Study, in many developed countries these days, public Wi-Fi is available seemingly everywhere—and much of it is free. South Korea is no exception. The country’s mobile users are increasingly connecting their sophisticated devices via Wi-Fi, despite the availability of fast LTE networks. Over-the-top (OTT) services are taking advantage of all of these fast mobile networks to provide innovative, low-cost alternatives to traditional carrier services. For example, since the launch of KakaoTalk in South Korea, SMS usage is down by 40 percent, depressing messaging revenues by 28 percent. Does this experience show the future for operators in other parts of the world?
South Korean service providers recognize that with a pervasive and fast network infrastructure virtually in place, they need to seek new sources of value and find new business models to ensure continued success. Operators have launched a number of innovative services and applications over their mobile networks, but are still searching for the key differentiation that LTE brings. SPs now recognize that Wi-Fi needs to play a critical role in their overall network and business architectures. They are exploring many of the new business models that Cisco IBSG outlined in “Profiting from the Rise of Wi-Fi.” SPs are also realizing that they need an innovative, robust, and scalable technology architecture that will allow them to readily extract the intelligence from the network needed to create these unique, value-added services.
In my talk, I concluded that the next generation of the Internet will be faster, smarter, more connected, more pervasive, and definitely mobile. South Korea is progressively thinking about what this means for its ITC industry and national policies to help the country remain a world leader. As with the service providers, the national challenge is how to “move up the stack,” beyond the success that South Korea has achieved in delivery infrastructure. Keys to success will be continuing to encourage competition among all players in the value chain, fostering an environment and culture of innovation, and continuing to promote and encourage open global technology standards. Equally important will be promoting customer trust through effective consumer protection, openness in networks and industry policies, and facilitating new economic frameworks that seek to better balance infrastructure investments with revenue generation.
“Memories of the Future”: I think that this enigmatic, yet intriguing title of a piece of contemporary art at the wonderful Leeum, Samsung Museum of Art in Seoul says it all. South Korea may provide a good look into the future of the Internet and of what we will remember from that future.
Join me at our next CKN webcast this Tuesday, September 25 at 8am PDT/ 11am EDT to discuss the monetization opportunities that Service Providers can consider as they deploy Wi-Fi to support the increase in mobile traffic.