iPhone wakes up Korean mobile internet market

Amazing : Korea, a world leader in mobile innovations in the early 2000s, Korea, still nowadays the land of broadband and home to such IT giants as Samsung and LG, Korea is lagging behind European countries in both IPTV and mobile internet.

As we saw with IPTV (see "IPTV in Korea, an update"), lobbying and regulation played an important part in this paradox, and the country is finally trying to fix the bug.

For mobile internet, the first opening came last year with the abandon of WIPI (Wireless Internet Platform for Interoperability) as the mandatory platform for smartphones, opening the market to Blackberry and other players. Today, we can hardly speak of a shift from an industry-based to a consumer-based regulation, but the Korea Communications Commission (KCC) just cleared the way for iPhone in Korea by stating that Apple, after all, doesn't need an extra license for Location-Based Services as long as there's a MNO with the relevant license in the loop.

KT is expected to launch the iPhone in the weeks to come (October or November), and to subsidize the device down to a retail price of around KRW 240,000 (about USD 200). Apple wants more than the 300,000 units announced by its Korean partner, who will have to release its own KT Apps Store ahead of the iPhone in order to mark its territory. In order to leverage on the operator's strong leadership in fixed and fixed wireless services, KT's apps will be downloadable by Wi-Fi.

Competitors have been bracing themselves for the iPhone, fearing market disruptions : wireless leader SK Telecom opened the first App Store earlier this month. But unfortunately, "T Store" has been bashed by the critic : users can browse as much as they want on their PC (tstore.co.kr - about 6,500 references), but can only download apps via their 3G phones, and via 3G only (not Wi-Fi). Worse : the price doesn't include connection costs ! Needless to say the service is WIPI-based : SKT is the mobile leader and bets on a wider installed based from the start. I can already see marketers scratch their heads : we want our customers to rediscover their own handsets and find them sexier than the ultimate hype machine... good luck ! Needless to say T Store won't remain WIPI-based : SKT plans to go "global" within two years and to generate a 1 trillion won turnover in 2013. If SKT maintains its 30% cut, we're talking about over half a billion bucks. And since SKT happens to be also a major content provider, that's a rather conservative estimation... provided the store succees, of course.

Korean developers will have fish to fry, as well as the editors' sectoral federations (ie games), in charge of okaying new apps. Furthermore, Microsoft is also roaming the country to snatch some gems (USD 19M planned for game developers over the next 4 years).

Netcos have been barred by cellcos but grow new ambitions, like NHN for its "web" brands. Beyond Naver, NHN wants to push Me2Day, a K-"twitter" acquired last year and already on iPhone.

Now How about endusers ?

Mobile TV is very popular but doesn't require 3G. And wireless internet echoes more Wi-Fi / WiBro than 3G. Even if half of the core target (12 to 59 year-olds) is somehow using services, mobile internet over 3G remains ways too expensive, and most players would like operators to slash connection costs, particularly to welcome revenues from social networking platforms. MNOs already had to undergo significant cuts in calling charges, but their rates remain high and the percentage of turnover made on wireless internet very low (below 20%) compared to advanced European nations (in the mid 30%s).

Usages are bound to soar once MNOs accept to share more with the rest of the ecosystem, to grow a much bigger pie. All together, now.

ADDENDUM 20090927

More precisions regarding the cuts in mobile charges (announced this week-end) :
- wireless internet basic rates : 50% reduction for LGT, 88% for KT. To be defined for SKT, but from next March on, the leader will calculate call charges per second (every 10 second now). note that Long Distance has disappeared in Korea : calls within Seoul and outside will cost the same. VoIP also gains ground, even if rates are not as slashed as in other countries (ie nothing is actually free).
- basic access fees slashed (KT : from KRW 30 to 24,000 - SKT : from 55 to 44,000)
- loyalty discounts (KT 5,000 / mo, SKT up to 22,000, LGT up to 25,000) - NB: all 3 MNOs have also triple play discounts. Logically, #3 LG Telecom (mobile portal brand : Oz) is the most aggressive player.