Research Notes

New report concludes: South Korea is the most developed market for mobile services in the world

Being the first is not always the same as being the best.
Japan was first to launch a 3G network for mobile services. But South Korea has been by far the best in turning this network technology into a commercial success.
The new report from Strand Consult “The Korean Market for Mobile Services, a window to 3G” shows how South Korea has developed the most advanced market for mobile services in the world. Even the Japanese market, often used as the benchmark, is a distant second compared to the Korean. Anyone looking for mobile Internet success stories should look to South Korea rather than Japan:

– Though the South Korean CDMA 2000 1X network is technically still a 2.5G network, its 144 Kbs of transmission speed is sufficient to handle almost all 3G mobile services. Only streaming video is reserved for ‘pure’ 3G technologies like NTT DoCoMo’s FOMA network capable of transmitting at 384 Kbs – therefore, despite the differences in technology the two markets for mobile services are comparable.

– Only 2 out of every 1000 mobile users in Japan own a FOMA terminal. In South Korea 200 out of every 1000 mobile users own a 1X terminal.

– The much higher rate of penetration in South Korea has been achieved without subsidising the terminals. While in Japan, FOMA terminals have been heavily subsidised.

How has this much higher level of penetration been achieved? How did South Korea become the most advanced market for mobile services in the world?

The report documents how the South Korean mobile operators, by focusing strongly on revenue sharing, have made it much more attractive to content and service providers to develop and market quality services. This, in turn, has made it more attractive for users to subscribe to these services and to upgrade their 2G terminals. This positive chain reaction has resulted in a considerable increase in the number of both content and service providers.

South Korean operators have done what operators in Japan and elsewhere have refused to do. They have accepted their role and responsibility as drivers of the market for mobile services. They have understood that this chain reaction is key to the successful development of the market for 2.5G and 3G mobile services.

SKT, South Korea’s largest mobile operator, has in a relatively short time attracted more than 4,5 million subscribers to its CDMA 2000 1X based services. Already these subscribers represent 28% of SKT’s total customer base.

Because of the 3G compatible transmission speeds, the high penetration rates and the structure of its mobile market South Korea represents the first real 3G lessons in the world. Contrary to the Japanese market, the South Korean is operating under realistic conditions with multiple operators and without the subsidising of terminals.

As such, the South Korean market represents the first real taste of the 3G challenges ahead for European operators, content and services providers. The South Korean experience is a rare one. It is an important one. It is a success story!
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