Slide 1

Network Economy Research Team ATIE, ATIE, 2002/11/30 Nov. 30, 2002 Jee, Kyoung Yong Successful Case Study of Government-driven IT Development Model

Slide 2

2002/11/30 Jee, Kyoung Yong 2 INTRO New York Times, 2001.10.29 In Korea, Broadband Is Part of the Culture Young people crowding rooms full of computers, housewives in apartment blocks, executives and office workers hustling to ride the crest of the information revolution ? All wanted the same thing: quick communication, quick games, quick contact.

Slide 3

2002/11/30 Jee, Kyoung Yong 3 INTRO Governments Goal : Information Super Highway

Slide 4

2002/11/30 Jee, Kyoung Yong 4 2002 KOREA/JAPAN FIFA WORLD CUP (June) co-hosted by Korea and Japan in June. won the 4th place by the help of four years sweat and tears. Korea team s key success factor were versatility among players and unrivalled physical strength.

Slide 5

2002/11/30 Jee, Kyoung Yong 5 Key Success Factor in Future Network Business Power-based. All round Player Likewise, much of the success in future network business will depends on both network versatility of all IP network and service combinations.

Slide 6

2002/11/30 Jee, Kyoung Yong 6 AGENDA PART I. Snapshot on Korean IT Industry PART II. IT related Policies PART III. Current Status of Korean Internet PART IV. Key Success Factors for Internet Booming PART V. Internet & The Change of Korean e-Life Style PART VI. Internet & Middle-aged People PART VII. Future Prospects PART VIII. Beyond ADSL PART IX. Summary & Conclusion

Slide 7

2002/11/30 Jee, Kyoung Yong 7 PART I PART I. Snapshot On Korean IT Industry

Slide 8

2002/11/30 Jee, Kyoung Yong 8 Economic indicator (GDP Growth) Source : Korea National Statistical Office

Slide 9

2002/11/30 Jee, Kyoung Yong 9 Share of the IT Industry in GDP The IT industry has continued to have a growing share of the GDP from 8.6% in 1997 to 13.0% in 2000. Source : Korea Information Society Development Institute

Slide 10

2002/11/30 Jee, Kyoung Yong 10 Contribution Rate of IT to GDP The IT industry contributed to economic growth(GDP) with a mere 4.5% in 1990, which drastically increased to 50.5% in 2000. Source : Bank of Korea Note : contribution rate = (the real amount of value added increase from IT industry) / (the real amount of GDP increase)

Slide 11

2002/11/30 Jee, Kyoung Yong 11 ADSL Related Export [ Unit : millions USD ] Source : Ministry of Information and Communication

Slide 12

2002/11/30 Jee, Kyoung Yong 12 PART II PART II. Introduction on IT Related Policies

Slide 13

2002/11/30 Jee, Kyoung Yong 13 I. The Role of Korean Government Government Policy In case of Korea, Governments IT policies have contributed for market to act well by supporting a lot of firms and service providers to start up smoothly at a initial stage.

Slide 14

2002/11/30 Jee, Kyoung Yong 14 II. Some Important IT Policies Korea backbone computer network project (1987~1992) 5 government DB Governments efforts to distribute more PCs (1987 & 1999) Korea Information Infrastructure Project (1995~2010) Cyber-Korea 21 (1998~2002) 2000: The KII plan was modified (2010 > 2005)

Slide 15

2002/11/30 Jee, Kyoung Yong 15 Informatization Promotion Act of 1995 Omnibus and fundamental law to activate IT policies. Lauch of Informatization Promotion Council (96 ) Initiation of Long-term Basic Plan for Informatization Promotion (96 ) III. Big step for Information Society

Slide 16

2002/11/30 Jee, Kyoung Yong 16 III. Big step for Information Society KII Project (1995-2010) Background Announcement of US Information Superhighway Policy(Gore) In order to enforce the national competitiveness, It is crucial factor to construct KII as a SOC in digital economy. Government Strategy : To take over the risk which might be resulted from large- scaled investment at the initial stage. To help the private sector to migrate smoothly to the information society by way of prior experience of the Government sector. Investment plan : To complete KII by 2005, investing total 28.5billion US$ for construction.

Slide 17

2002/11/30 Jee, Kyoung Yong 17 IV. To meet with Internet Booming Modified KII Project To change the end period from 2010 to 2005 (Feb.2000). Strategy To construct IP common networks and to upgrade ATM switching networks at the same time. To construct both wire and wireless access networks which is applying new technologies including optical fiber, ADSL, CATV, satellite communication, IMT-2000, and B-WLL etc.

Slide 18

2002/11/30 Jee, Kyoung Yong 18 CYBER KOREA 21(march 1999) Koreas vision for knowledge-based information society Traffic flood in 1998 resulted from internet booming urge the government to make a big step for new alternatives on high speed internet of xDSL rather than low speed ISDN Key policies were included to undertake for the next four years (99 ~ 2002) including high speed internet. IV. To meet with Internet Booming

Slide 19

2002/11/30 Jee, Kyoung Yong 19 PART III PART III. Current Status of Korean Internet

Slide 20

2002/11/30 Jee, Kyoung Yong 20 I. Internet Exchanges Internet Infrastructure 4 IXs (Internet eXchanges): KIX(NCA), KT-IX(Korea Telecom), DACOM-IX(Dacom), and KINX(a consortium of ISPs). ISP As of July 2002, there were 84 ISPs. 6 of them were non-commercial operators of backbone network such as KREONET, KOSINET, PUBNET, PUBNETPLUS, HPCNET and EDUNET

Slide 21

2002/11/30 Jee, Kyoung Yong 21 II. DSL Provisioning by ISPs Principal Providers (as of Jun 2002) Big 5(KT, Hanaro, Thrunet, Dreamline, Onse) These 5 ISPs have 98% of the market share

Slide 22

2002/11/30 Jee, Kyoung Yong 22 High-speed Internet Subscribers III. More Details on High speed Internet Users xDSL : 5,734,690 CATV : 3,287,464 ISDN : 84,175

Slide 23

2002/11/30 Jee, Kyoung Yong 23 Total Internet Users Korean Internet population reached 25.65 million as of Jun, 2002. Domains have the 6 th largest domains in the world with 471 thousand internet domains as of April 2002. IV. Internet Population and Domains

Slide 24

2002/11/30 Jee, Kyoung Yong 24 76 of World's Top 1,000 Websites are based in Korea daum, yahoo Korea, lycos are ranked in the top 20 in the world. The 60 percent of the Asian top 20 are located in Korea. Source: Alexa.com V. Successful Result

Slide 25

2002/11/30 Jee, Kyoung Yong 25 PART IV PART IV. Key Success Factors for Internet Booming

Slide 26

2002/11/30 Jee, Kyoung Yong 26 1.Governments Activism at initial stage Governments long-term development plan has contributed to guide market players, ISPs and vendors, with a confirmed anticipation. Korea Information Infrastructure(1995~2005) Cyber-Korea 21(1999~2002) :

Slide 27

2002/11/30 Jee, Kyoung Yong 27 Mass provisioning of Internet PC with the help of Post Office network Half level of market price (pentium III, 700-800$) Factoring by Post office Result : Penetration rate of PC per family 44.5%(1998), 66%(2000), 71%(2001.6) 2.Mass Provisioning of Internet PC

Slide 28

2002/11/30 Jee, Kyoung Yong 28 3.Cultural & Behavioral Aspect A sense of alert that one can be left behind pushes Korean people to be more responsive Koreans tendency of being hasty served to fuel a social atmosphere to learn and embrace computers and the Internet.( Pali Pali characteristics ) Love to catch on new trends Preference of new technology and premium quality In result, Internet-literacy is now increasingly perceived as a basic skill for daily life.

Slide 29

2002/11/30 Jee, Kyoung Yong 29 4.e-Education Contribution of Govs firmly belief in e-Education All of Korean 43,000 elementary, middle, and high schools are connected each other by the Internet. Homework assigned by teachers and collaboration after school So Korean parents aspiring spirit for top-level education accelerated a shift toward ADSL usage Neighboring effect or dependence in consumption in APT residential areas.

Slide 30

2002/11/30 Jee, Kyoung Yong 30 5.Emergence of 3-8-6 generation Independent of tradition and habit. Aggressive to learn new knowledge and to seek new information

Slide 31

2002/11/30 Jee, Kyoung Yong 31 6.Koreas unique housing pattern Koreas unique housing pattern that 50% of Koreans live in apartments allowed ISPs for easy deployment of LAN. Easy optic cables installment, reasonable prices, high- speed data transmission resulted in rapid diffusion. Source : NCA(2000.12)

Slide 32

2002/11/30 Jee, Kyoung Yong 32 7.PC-Bang After using experience in PC Bang, It came to be a prevalence for youngsters to enjoy on-line game in home with the help of ADSL subscription. PC-Bang : Korean version of Internet cafes Served as good infra for net manias sick and tired of ISDN or D/U in 98 and 99 just before the prevalence of xDSL PC-bang is equipped with high-speed LAN,at low-price.

Slide 33

2002/11/30 Jee, Kyoung Yong 33 8.Aggressive Marketing & Price Competition Aggressive Marketing promotion & Predatory pricing behavior Various channel for sales promotion: discount in membership fee or installation fee Relatively cheaper tariff than that of any other countries Lowered ADSL tariff triggered sharp increase in users demand. And this made it possible for ISPs to look the bright side of future business and to invest more.

Slide 34

2002/11/30 Jee, Kyoung Yong 34 PART V PART V. Successful Result I : Internet & The Change of e-Life Style

Slide 35

2002/11/30 Jee, Kyoung Yong 35 I. Korean e-Life(1) : Gender Source : KRNIC(2001.12) Internet Users By Gender (%) - KOREA 14.8% 30% 38.6% 50.9% 41.6% 55.6% 0 30 60 MaleFemale 1999.12 2000.12 2001.12

Slide 36

2002/11/30 Jee, Kyoung Yong 36 I. Korean e-Life : Gender(US) Source : KRNIC(2001.12) Internet Users By Gender (%) - U.S 20.2% 24.3% 53.8% 58.9% 0 30 60 MaleFemale 1997.10 2001.9

Slide 37

2002/11/30 Jee, Kyoung Yong 37 II. Korean e-Life(2) : Ages

Slide 38

2002/11/30 Jee, Kyoung Yong 38 II. Korean e-Life(3) : Surfing Time Source: Alexa.com, 2000. South Koreans are the world's most avid Internet surfers, followed by people in Hong Kong and the United States, Surfers in South Korea (news - web sites) spent an average of 19 hours 20 minutes online in July 2001, topping the list in Internet usage(Reuters, August 24, 2001) HK : 12 hours and 12 minutes US : 10 hours and 19 minutes

Slide 39

2002/11/30 Jee, Kyoung Yong 39 II. Korean e-Life(4) : Rich Contents Lover Netizens who have usage experience with Audio & Video streaming Contents (as of Feb. 2001) Source : NetValue.2001.4.2.

Slide 40

2002/11/30 Jee, Kyoung Yong 40 II. Korean e-Life(5) : E-Commerce E-commerce site access : Korea in top position in the world with 78.2% of its internet users visiting e- commerce sites. Secured connection rate(the actual purchase) : 28.3%. The highest actual purchase on e-commerce sites : auction site, game site, shopping mall, music/literature, movies and stock/finance site in order. Reuters, August 24, Survey: South Koreans Are Biggest Internet Users

Slide 41

2002/11/30 Jee, Kyoung Yong 41 II. Korean e-Life(5) : e-Market Place Number of e-MP

Slide 42

2002/11/30 Jee, Kyoung Yong 42 II. Korean e-Life(5) : E-Commerce Volume [ Unit : Billion USD ] Source : Ministry of Information and Communication

Slide 43

2002/11/30 Jee, Kyoung Yong 43 II. Korean e-Life(5) : Certified Digital Signature Users [ Unit : million users]

Slide 44

2002/11/30 Jee, Kyoung Yong 44 II. Korean e-Life(6) : Application Broadband applications comparison among 5 Asian countries Korean loves to enjoy on-line gaming and audio or video streaming application. Migration from text-based to multimedia-based Source: Netvalue(2001.3)

Slide 45

2002/11/30 Jee, Kyoung Yong 45 PART VI PART VI. Successful Result II : Internet & Middle-aged People .killer application is cyber banking and stock trading.

Slide 46

2002/11/30 Jee, Kyoung Yong 46 Remarkable Increase of Internet users aged 30s and 40s Increased users in the middle-aged class promote prevalent use of cyber banking. Especially supply push of high speed internet made it easy for residential users(housewives) to access to the Internet, I. Prevalent Use of Cyber Banking

Slide 47

2002/11/30 Jee, Kyoung Yong 47 Housewives Web Surfing Time for a day (+70%=+1H) I. Prevalent Use of Cyber Banking

Slide 48

2002/11/30 Jee, Kyoung Yong 48 Boomed investment in KOSDAQ caused high penetration rate in Internet use and home PC during the year 2000 and 2001. Contributed to provide a good opportunity for such a person, housewife and middle-aged person, who are not good at operating PC. Total investors in Korea : Over 10M population as of march 2001 Over 60% of them are over 30s who has never used to operate PC. Most of private academy and regional governments district office have been crowded with housewives who want to learn how to use PC and Internet. II. KOSDAK Booming

Slide 49

2002/11/30 Jee, Kyoung Yong 49 Prevalence of Stock Trade in PC-bang Dynamic growth of Internet and KOSDAQ gave birth to the second version of PC-bang. A kind of PC-bang equipped with stock trading system. PC-bang couldnt get more money during the daytime with student customers. Therefore PC-bang prepared new plan for stock investors Now, PC-bangs target user is broadened from student to middle-aged people who are interested in stock trading. There are some stock trade agency companies having a partnership with PC-bang in order to get more investors Frequency of Cyber trading 36 percent of total stock trader with a experience of cyber trading buy or sell their stock every day over the cyber space while 77% once per a week III. Second version of PC-Bang : Stock-Bang

Slide 50

2002/11/30 Jee, Kyoung Yong 50 Ubiquitous Internet Stock Trading Stocks can be traded via cellphone and PDA anywhere. Customized stock trading alerts the investor when the stock reaches a certain price.

Slide 51

2002/11/30 Jee, Kyoung Yong 51 III. Second version of PC-Bang : Stock-Bang

Slide 52

2002/11/30 Jee, Kyoung Yong 52 PART VII PART VII. Future Prospects

Slide 53

2002/11/30 Jee, Kyoung Yong 53 High Speed Internet Users Is +10M (as of September 28 th) Will be +11M (by the end of this year)

Slide 54

2002/11/30 Jee, Kyoung Yong 54 Broadband Access Penetration High-speed Internet penetration per family

Slide 55

2002/11/30 Jee, Kyoung Yong 55 PART VIII PART VIII. Beyond ADSL .. As adsl market approach to saturation.

Slide 56

2002/11/30 Jee, Kyoung Yong 56 VDSL(Very-high-speed digital subscriber) adopted for remote households and apartment Where is traffic-congested or impossible to enjoy Internet with ADSL. G.SHDSL Is ready to launch for S&M firms. Wireless Internet in hot spot area Final alternatives on xDSL

Slide 57

2002/11/30 Jee, Kyoung Yong 57 The first Home Network-Ready Apartment Complex(Operating from Nov. 2002) High-End (42~77 Floors) Apt equipped with total home N/W equipment Security, Remote Home Appliance Control, IT Products Networking, etc) Home Gateway : Samsung Tower Palace

Slide 58

2002/11/30 Jee, Kyoung Yong 58 PART IX PART IX. Summary & Conclusion

Slide 59

2002/11/30 Jee, Kyoung Yong 59 36% Growth in Six Months 150% Year Over Year DSL Market For world-wide DSL market development

Slide 60

2002/11/30 Jee, Kyoung Yong 60 For world-wide DSL market development DSL Market Penetration to 30 June 2002: Top 20 Countries DSL market penetration is based on the percentage of total telephone lines in each country that are delivering services over broadband DSL. Market potential to be developed in world-wide

Slide 61

2002/11/30 Jee, Kyoung Yong 61 Valuable experience in the course of xDSL deployment. New last mile solutions which is best-fitted for such an intensive residential area like Korea or even rural areas. There are many rooms for cooperative possibility through partnership between U.S firms with core technology and marketing network and Korean firms with manufacturing technology and field evidence. So, we can go together for development of worldwide DSL market For world-wide DSL market development

Slide 62

2002/11/30 Jee, Kyoung Yong 62 Q & A Thank You for Your Attention J e e, K y o u n g Y o n g ( k y j e e @ e t r i. r e. k r ) (+82-42-860-5666) Network Economy Research Team