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KT is finding out that being a leader in broadband does not necessarily translate into sustainable financial performance. This leadership reality is also important to the rest of the industry. For example, on Wednesday, February 4, 2000 KT reported that:

KT Corp. has reduced its earnings target for 2005 by 15.6 percent, or 2.3 trillion won, to 12.4 trillion won as growth slows. The original target was for earnings at 14.7 trillion won in 2005.

KT reported 2003 sales at 11.57 trillion won, which is short of its target 11.7 trillion won. The net income was down 58 percent from 2002 to 830 billion won.

In Korea broadband penetration is at 69% and KT has 50% market share. In saturated markets growth can come in two ways: increased income from the existing customer base and expanded markets, especially international. Driving ARPU in Korea has proved especially difficult. In March 2003 KT launched VoD and its subscriber numbers have stalled at 200,000. KT intends to launch its HDS (Home Digital Service) as a comprehensive consumer offering. It has a demonstration facility at its headquarters in Seongnam, Korea outside of Seoul. By the end of 2004 it expects to install integrated gateways for this service into 300,000 homes. The services include: home control, appliance control, television control and home security. Yet, in our brief visit to Korea it is not at all clear consumers care about these services that will increase their monthly bill. Consumers state they want fixed known monthly costs which are within their means.

At the same time that KT is launching its HDS, the Korean government is behind its digital home pilot program. The government has stimulated the formation of two consortiums one with KT, Samsung and its members and the other with SKT, LG and other companies. There are major differences between the KT HDS effort and what the government is seeking. While the government is backing an open Linux effort KT is seeking a closed approach, in part, to retain its customers with proprietary services. The details of the pilot program are expected to be announced in April.

For Korea to leverage its experience in broadband it must participate in international markets be it either in hardware or services. For example, if the forthcoming integrated home gateway specification is successful in Korea this would allow companies such as Samsung to compete against products that implement OpenCable and OpenDSL specifications. The key here is sustainable profitable applications that use the platform. Likewise if KT is to become an international player and exports its broadband services this could stimulate additional market growth. Yet, KT lags far behind such leaders as BT, DoCoMo and DT in entering international markets.

The WAVE Report visited KT at its headquarters in Korea to understand how HDS and other efforts would allow it to stimulate growth in the broadband market, especially in applications. When we arrived the company cancelled the interviews. We can only surmise that the company did not want to discuss how it will use broadband to reverse its current difficult situation.

WAVE Comments

The WAVE Report has long stated that home broadband applications will evolve into much more than media, home security and always on Internet access. For broadband to be successful it has to make life for the family and individual easier to live. This has many dimensions and the most difficult part is finding those services which consumers will pay for. Paying 10¢ to turn on a microwave from a cell phone is more of a nuisance than making life easier. The assumption that escalating bandwidth means more applications and that equates to more revenue for the provider has yet to be demonstrated. Creating a broadband infrastructure, in the years ahead, will be seen as the easy part, making it useful and a sustainable profitable business is where the challenge lies.

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Page updated 11/11/03
Copyright 4th Wave Inc, 2004