October 5th 2009
The rise of smart phones in South Korea has reached a high point but this boom has occurred without one major player.
Almost every person travelling on the subway in downtown Seoul is using their phone for various functions such as the internet, chatting or watching t.v.
Koreans have always been eager to get their hands on the latest technology and many are willing to pay a high price to be the first on the block with a new toy.
Kim Si-Gwon, an Internet Business and Electronics student at Korea Polytechnic University can’t wait for the iPhone.
“I want the iPhone because we can do many things on it, like use the internet for free, play online games for free and so on.”
So why has the Apple iPhone has taken so long to reach Korean shores?
The reason has been a combination of Korean regulations which discourage competition from overseas manufacturers and local carriers’ domination of the way data is priced within their products.
Up until April of this year all phones sold in the country had to be W.I.P.I. enabled. Wireless Internet Platforms for Inter-operability (W.I.P.I.) is a regulation set by the Korean Communications Commission (K.C.C.) which all Korean mobile phones must use for data transmission.
According to the K.C.C, any product without W.I.P.I. is not allowed to be sold in South Korea.
Phone manufacturers outside Korea have to custom build the W.I.P.I. feature into their phones if they wish to sell them in Korea. The extra cost has previously steered companies such as Nokia and Apple away from the Korean market.
Local phone manufacturers L.G. and Samsung have dominated for years and this has allowed them and local telecommunications carriers to set the price of phones and phone contracts.
Last month local carrier Korea Telecomm (K.T.) won the right to sell the iPhone exclusively in Korea. K.T. is Korea’s biggest mobile phone company and is the second biggest mobile wireless provider next to S.K telecom.
The company hopes to start shipping the iPhone by the end of the year but the local carrier is still trying to impose certain restrictions on the iPhone. Apple is fighting these restrictions.
According to a story in last month’s ‘The Korea Times’, K.T. wants the iPhone’s wireless internet function disabled. They want the internet and data to run only through their own networks to enable them to charge consumers.
Apples Inc’s Korean website released a press statement in response to K.T.’s request and ‘The Korea Times’ article.
“Apple has refused this request because many of the iPhone’s features and applications need the internet to run and would greatly affect the cost of accessing data through the iPhone and would become impossibly expensive.” The site goes on to state: “By removing its core features the iPhone would lose its uniqueness.”
The reason Apple’s iPhone has been so successful in other countries has been its Wi-Fi function which allows the iPhone free internet access anywhere a wireless network is available.
In Korea, Wi-Fi coverage is almost everywhere. By allowing the iPhone to be Wi-Fi enabled, Korean phone carriers’ internet service would lose a lot of money.
This would also affect other carriers such as S.K. Allowing free internet use on its iPhone would steer customers away from their expensive phones and phone plans.
Currently all Wi-Fi phones must use their provider’s internet service and until now S.K. and K.T. have been able to set the market price on using wireless internet.
The cost is still quite high. An average K.T. mobile phone user on a $35 per month plan has to pay an extra $30-$40 per month for mobile internet which has a download limit and is a slow and unreliable connection.
The Organization for Economic Co-Operation and Development (OECD) released a report this year revealing South Korea’s mobile internet service is three times the cost and twice as slow compared to other big Wi-Fi country users, especially in Europe.
The current price compared to American phone plans seems significantly higher.
According to technology website engadget.com, American carrier AT&T currently offers an unlimited iPhone Wi-Fi internet usage plan for $69 per month that includes calls and text messaging. This plan was decided jointly by AT&T and Apple and similar plans have been hinted at for Korea.
Another is the iPhone’s low purchase price. Samsung’s new Omnia 2 phone which boasts internet connectivity, a touch screen and multimedia functions is sold for around $700 USD. The Apple iPhone is usually released at around $199 USD.
It is understandable that Korean local carriers want to protect their corner of the mobile internet market. Opening the floodgates on Wi-Fi enabled phones would readjust market share.
Korean carriers also want to block access to Apple’s online download store iTunes which allows users to download cheap or free software applications. This would damage the local carriers’ own online download stores such as Magic-N and Nate.
At the moment it appears Korean carriers are making a lot of money from data services such as the internet and downloadable content.
How can Korean phone manufacturers and service providers compete with the low and affordable cost of the iPhone when their products are more expensive and come with internet use limits?
In the end it is consumers who decide the success or failure of a product. Many consumers want more freedom with their smart-phones.
Jong Su-Bin sells K.T. phones exclusively in downtown Gangnam, Seoul and believes the iPhone will be a big seller.
“Many people ask when it will come here. They have an iPod Touch and want an iPhone now. I think we will sell many, many iPhones.”
If the iPhone is finally released this year the company is expecting strong sales and the introduction of the iPhone may signal a forced change in Korean carriers’ services and prices in the face of new competition.
AC 2009
