Smartphone users in the western world might still be getting used to the rapid connections offered by 4G mobile networks, but South Korea first rolled out the technology in 2006.
Now, the country’s government, telecoms networks and technology groups are racing to take the lead in developing a new 5G standard that they claim will be 1,000 times faster than the best connections available.
Seoul hopes to cement the country’s leading position in internet speed and hardware exports, while accelerating global progress towards telecoms standards that could enable dramatic advances in communications technology.
There is strong competition: three Beijing ministries have joined forces to drive Chinese efforts in this field, while the European Union last December established a 5G Infrastructure Partnership with private-sector groups including Alcatel-Lucent and Nokia.
But South Korea is “leading the issue”, claims Lee Sang-kug, deputy director of ICT policy at Seoul’s future planning ministry. This year the ministry announced plans to invest an initial $1.5bn in developing 5G mobile standards, with a goal of trialling the technology by 2017 and a commercial rollout by 2020.
The close interplay between the government and leading commercial groups such as Samsung, LG and SK Telecom is reminiscent of the industrial policy through which the state drove South Korea’s rapid growth from the 1960s onwards.
However, Mr Lee says the driving force in South Korea’s 5G programme must come from the companies themselves, not state funding and targets. “The government is a trigger for the private sector,” he explains. “The private sector is doing very well on the R&D, and the government needs to encourage them to build advanced infrastructure.”
Government support was instrumental in building the world’s fastest wired internet network, and in making South Korea the first country to launch 4G services.
Nevertheless, the experience of rolling out new telecoms technologies in South Korea tells a story about the need for careful planning.
Consumers’ enthusiastic embrace of first 3G and then 4G technology prompted operators to slash charges, leaving them short on capital to invest in upgrading infrastructure.
For example, when the three major telecoms providers – Korea Telecom, SK Telecom and LG U Plus – began offering customers a flat-rate unlimited 3G tariff four years ago, average revenue per user fell sharply. Data from Digieco, the research unit of Korea Telecom, show that Arpu stood at nearly Won33,000 ($30) in the second quarter of 2010, but declined to less than Won29,000 ($26) by the first quarter of 2012. Fierce competition between them also drove multi-billion dollar marketing programmes, further depressing margins.
Amount to which South Korea’s capex fell in 2013, from $5.5bn the previous year
Kim Jang-won, an analyst at IBK Securities, says the fierce competition to attract customers by reducing charges was one of the reasons Arpu fell during the 3G era.
Industry figures also show the companies’ capital expenditure went up when they when they were installing national 4G networks, but fell back once they had introduced it. Mr Kim points out that, for the three Korean operators, 3G capex was cut from Won 6,159bn ($5.5bn) in 2012 to Won 4,580bn ($4.1bn) in the following year.
The sharp cut to capex has hurt South Korea’s international competitiveness in mobile internet speed. As a result, while South Korea’s wired network is by far the fastest in the world – 60 per cent faster than second placed Japan, and six times the global average, according to the software company Akamai – its 4G speed has fallen behind nations such as Australia and Denmark.
SK Telecom, the country’s biggest mobile operator, is committed to paving the way for the next generation of mobile technology despite the large expected costs of upgrading its infrastructure, says Alex Choi, head of its ICT research division. “The technology is there – the issue is how to implement it,” he says, voicing plans to roll out a trial of the system at South Korea’s 2018 Winter Olympics.
SK last month signed a partnership with Samsung Electronics, aimed at developing 5G technologies and identifying suitable radio frequencies for data transmission.
Oh Min-seok, head of wireless technology research at LG Electronics, can reel off a list of innovations that might be possible with 5G connections, from holographic phone calls to telerobotic systems for highly complex surgery.
5G technology could also give a large boost to Samsung’s and LG’s sales of more familiar products such as televisions and refrigerators, as rapid connections and low-cost data transmission drive growth in the number of wirelessly connected devices. “All of our current products can be considered,” Mr Oh says.
Even so, Korea’s technology companies are aware that such first-mover advantage is unlikely to be decisive. “It’s clear that we won’t be the only ones manufacturing 5G phones,” says Cheun Kyung-whoon, head of the communications research team at Samsung Electronics. “But we hope to stay at the leading edge. By 2020, we might be a totally different company.”
South Korea’s 5G ambitions will also be reliant on technological developments by foreign companies in areas where it lacks expertise – notably in the baseband chips that process radio information, where the US company Qualcomm dominates. So far, Qualcomm has been restrained in its investment in 5G technology.
“It’s the result of logical thinking,” Mr Choi admits. “They are making huge money out of the current 4G technology.”
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