ACCESS: Wisdom of the East

Having been a past critic of carriers’ “build it and they will come” market development strategies, I’m now prepared to reconsider my position—based upon the rapid deployment and penetration of broadband services in South Korea.    

Korean Telecom now offers 2-megabyte VDSL broadband access for $25/ month and bundled Wi-Fi public hotspot access for an additional $8/month. Using this forward-looking approach, they’ve already attained the highest broadband penetration rate of any nation—95% of households are covered, with 54% penetration, according to a recent McKinsey study. They’ve also pioneered innovative prototype applications to stimulate mainstream market demand. 

It’s all part of the South Korean government’s very deliberate “Broadband IT Powerhouse Vision 2007” strategy that trickles down to the county’s primary communications service providers. The daring policy objective includes ubiquitous broadband access of 155 megabytes to 5 gigabytes nationally by 2005. Prepared to put its public money where its policy mouth is, the South Korean government has made direct investments of $2 billion in a national backbone network, and provided $100 million in loans to service providers who deployed new local access networks and $600 million to promote digital content. They’ve also committed an additional $30 billion via public/private investment in broadband infrastructure by 2010.

In contrast, the U.S. lacks a coherent and substantive telecom public policy game plan. Granted, knowing the pro-libertarian ideals of many U.S. citizens, it’s difficult to imagine a similar public-funded infrastructure investment policy gaining momentum and support here. Besides, while several U.S. carriers have promoted short-term broadband pricing around $30/month, it’s not clear how many loyal customers will be gained if and when subscribers are faced with the transition to a standard $50/month service fee.

On the upside of U.S. market developments, I’m encouraged by planned fiber-to-the-premises and broadband wireless investments (notably 2.5G and Wi-Fi) that theoretically create exciting new opportunities for LECs. But have U.S. carriers really learned how to effectively price services and encourage third-party content applications that will accelerate market penetration?

Not in the eyes of industry analysts and pundits alike who believe that U.S. carriers have fumbled launching wireless data and messaging services. According to market research company Telecom Trends International, the success of SMS in Europe and Japan has prompted other operators to follow suit, and by year-end 2002, there were 580.2 million mobile messaging users globally who sent 430.8 billion messages during the year. By contrast, the Cellular Telecommunications & Internet Association estimates only 1.02 billion messages were sent last year in the U.S.—less than 1% of the global total.

Regardless of prior innovations that have been the envy of many other nations, the U.S. telecom industry has reached a pivotal crossroads. Like South Korea, we now need a bold national goal—not to mention savvy carriers who creatively deploy, price and package new services in such a way that it will stimulate subscriber demand.

David H. Deans is a Senior Partner with Deans & Associates and founder of the Economic TeleDevelopment Forum.