Korean Mobile Ultra Broadband
- KT’s Strategies for the Era of Mobile Data Explosion -
2011. 10. 14
Hee-Su Kim, Ph.D.
Senior VP
Economics & Management Research Lab
KT
1. Data Explosion
Status
Mobile traffic in Korea is expected to grow by 103% each year, increasing 35-fold from 2010 to 2015.
In 2010, the average monthly traffic among KT iPhone users was 360MB, 5 times more than the average traffic of
75 MB among smartphone users worldwide.
For KT, iPhone traffic increased over two-fold, and call quality has decreased since the introduction of
unlimited data plans.
Before the plan: average traffic = 250MB (monthly increase = 8%) → After the plan: average traffic = 630MB
(monthly increase = 14%)
Call success rate drops to 97.2% during data use (98.3% during voice calls only). * Source: KCC (04/2011)
※ QoS: call success rate = 95%
Korean Mobile Traffic Forecast
KT iPhone Users’ Monthly Data Usage Trend
(MB)
(PB/mon.)
CAGR
Increase by 8%
per month
Introduction of
unlimited data
plans
Increase by 14%
per month
Global average of
smartphone traffic in
2010 = 75 MB*
*Cisco Global Mobile Data Traffic Forecast, 2010-2015
1
2. KT’s 3W Network Strategy
WCDMA+WiFi+WiBro
Facing the Data Explosion, KT has implemented the 3W N/W strategy for offloading.
Combination of WCDMA(3G), WiFi , WiBro(WiMax)
Offloading smartphone traffic to WiFi and WiBro
Relative ease of implementing 3W N/W due to the superiority of Korea’s fixed high-speed internet
network. ※ 50,000 Hotspots(03/2011) + WiBro (82 Cities & Expressways)
KT WiBro Network
KT 3W Network
WCDMA(3G)
• Upgrade to HSPA+ in Oct. 2010
WiFi
• 50,000 Hotspots(2011.3)  100,000 Hotspots in
2011
Public Egg*
WiBro
• Expanding WiBro coverage (82 Cities &
Expressways)
*WiBro(Wireless Broadband): Korean version of Mobile WiMAX
*Portable WiBro+WiFi Router c
2
3. KT’s 3G Strategy for D/E
CCC(Cloud Communication Center)
KT tried to manage the Data Explosion by increasing network capacity through the adoption of
the CCC technology, but the outcome was limited.
Separates the DU and the RU that were combined in the base stations.
Centralizes the DU, installs the RU in service areas, and interconnects them through an optic cable.
Allows for capacity expansion by splitting cells  KT plans to establish CCC networks in 90% of the
Seoul region (10/2011)
Existing Network Structure
* DU: Digital Unit, RU: Radio Unit
CCC Network Structure
3
4. Securing 4G Frequency Bands
LTE Spectrum Auction
As a response to the D/E, KT participated in an LTE spectrum auction to secure frequency bands.
Traffic is expected to exceed the maximum capacity of 3G and WiBro in 2012.
LTE services exceeding 100 Mbps are unlikely in the near future due to the results of this auction.
Continuous frequency spectrum of mobile operators for LTE usage is 2x10MHz, enabling a speed of
75Mbps at maximum.
LTE services exceeding 150Mbps is unlikely until the commercialization of the LTE advanced technology
sometime after 2014.
Mobile Traffic to Exceed the capacity of 3G+WiBro
LTE Spectrum Allocation in Korean Market
3G + WiBro Capacity
Mobile Traffic
KT
SKT
LGU+
800MHz
10MHz
10MHz
20MHz
900MHz
20MHz
1800MHz
20MHz
2100MHz
※
20MHz
20MHz
auction spectrum(paired)
4
5. Commercialization of LTE Services
LTE Market
SKT and LGU+ started their LTE services in the latter half of 2011, and KT will launch in 11/2011.
SKT and LGU+ launched their LTE dongles in 07/2011  Released LTE smartphone payment plans in 10/2011.
KT launched its 4G WiBro service in 03/2011  Plans to launch its LTE service in 11/2011.
It will take time for LTE services to be fully activated.
Potential obstacles include an end to unlimited data plans, low demand for pads, and limited coverage.
SKT’s LTE Price Plans
LTE Service Plans by Mobile Operators
Mobile
3G + WiBro 수용용량
4G Service Status
Operators
Mobile traffic
SKT
LGU+
KT
Monthly Allowances
Plans
Costs
07/2011. Launched LTE services
09/2011. Launched LTE smartphone services
2012. Plans to build LTE networks in 25
major cities
LTE 34
07/2011. Launched LTE services
10/2011. Launched LTE smartphone
services
By the end of 2012. Plans to build LTE
networks in 82 cities and towns
03/2011. Launched WiBro 4G services
11/2011. Plans to launch LTE services
Voice(min.)
SMS
DATA
$ 29
120
200
350 MB
LTE 42
$ 36
180
200
700 MB
LTE 52
$ 44
250
250
1.2GB
LTE 62
$ 53
350
350
3 GB
LTE 72
$ 61
450
450
5 GB
LTE 85
$ 72
650
650
7 GB
LTE 100
$ 85
1,050
1,050
10 GB
* Exchange rate: 1,179 won per dollar
* Unlimited data plans are unavailable in LTE.
5
6. Characteristics of LTE
3G vs. LTE
Being in the early stage of LTE services, mobile operators emphasize the fast speed of LTE in their
advertisements and services.
Mobile operators promote LTE by emphasizing its speed advantage, 5 times faster than 3G.
Killer App will allow HD Video Calls, N-Screen Video Streaming Services, and Mobile Network Game.
Differences between 3G and 4G
3G
Devices
Plans
-
• Unlimited
data plan
4G
Price Plan Comparison
Plans
(3G vs. LTE)
Monthly Cost
Data allowance
3G
LTE
3G
LTE
• Bigger display size
• High performance CPU
All-in-one 34
vs.
LTE 34
$ 29
$ 29
100 MB
350 MB
• Unlimited data plan
unavailable.
• Reduction in monthly prices
(vs. 3G)
All-in-one 44
vs.
LTE 42
$37
$ 36
500 MB
700 MB
All-in-one 54
vs.
LTE 52
$ 46
$ 44
unlimited
1.2GB
Speed
•28.8Mbps
(HSPA+)
• 5 times faster, compared to
3G
Killer
App.
•Mobile
Instant
Messenger
•mVoIP
• HD Video calls
•N-Screen HD Video
Streaming
•Mobile Network Game
• Video Messenger
All-in-one 64
vs.
LTE 62
$ 54
$ 53
unlimited
* Exchange rate: 1,179 won per dollar
* Comparison of 3G and LTE services with similar plans
3 GB
7
6
Complementary or Substitution?
7. LTE vs. Fixed Broadband
MBB is expanding in some countries, including Sweden and Germany, by substituting for FBB.
In Sweden, one person households and people under 30 are leading the replacement of FBB with MBB.
In Germany, MBB is expanding in out-of-service areas with limited FBB infrastructure, and its price is at a competitive
level. ※ Germany’s FBB data usage per user is 11GB/month, similar to MBB data usage.
In Korea, mobile broadband (MBB) is still a complementary service to fixed broadband (FBB),
but there is a high possibility that MBB could substitute for FBB.
100Mbps high speed and national coverage are distinctive conditions, not comparable with other countries.
If the price gap between MBB and FBB is reduced, MBB could replace FBB.
※ SKT eliminated its unlimited data plans in concern of LTE replacing the fixed high-speed internet.
Comparison of Vodafone LTE vs. DSL in Germany
Current Status of Swedish BB Services (%)
[By age]
[By household size]
(€/mo)
Age
DSL
Cable
LAN/
Fiber
MBB
HH size
DSL
Cable
LAN/
Fiber
MBB
10s
63.44
6.45
16.13
12.90
1
28.99
16.61
28.34
23.13
20s
35.11
16.03
29.01
19.08
2
52.22
13.30
15.59
13.88
30s
44.33
14.00
22.67
15.67
3
56.63
12.90
16.85
11.83
40s
56.23
13.74
18.21
10.54
4
61.79
10.57
18.29
7.72
50s
58.41
10.03
16.22
11.80
5
61.54
7.69
12.09
14.29
60s
50.55
13.93
11.48
15.57
6 or
more
45.10
9.80
27.45
11.76
*Source : EUI working paper survey results, n=2083, 2011
*Source : Vodafone, UniCredit Research
(Mbps)
7
8. KT’s 4G Network Strategy
Premium 4G Networks
Dual 4G – Offer an optimum service environment through the harmonization of LTE and WiBro.
WiBro  Focus on high traffic devices, including notebooks, tablet PCs (Pad), and netbooks (Data use only)
LTE + WCDMA  Focus on smartphones (Voice+Data)
WiBro + LTE Dual Network Composition
City/Expressway
Whole country
Mobile WiFi service
High traffic devices
National service with
WCDMA
Smartphone devices
8
9. Government’s Future Network Vision
Ultra Broadband Roadmap
Mobile operators establish network plans to prevent the dumb pipe phenomenon, while the
government does the same in order to expand the infrastructure.
Mobile operators plan to establish intelligence networks to boost their profits.
The government aims to expand the infrastructure to boost investments in the Smart Era, rather than
planning to expand profit of network providers.
※ Plans to facilitate private sector investment of 38 trillion won to build a 1Gbps fixed-line network and a 100
Mbps wireless network by 2012.
The government’s role is limited, compared to its effort in the high speed internet during the 2000s.
※ Has limited plans for securing frequency bands and devising demand/supply management policies.
Amount of Private Investments for Fixed and Mobile Ultra Broadband(trillion won)
2008
2009
2010
2011(P)
2012(P)
2013(P)
2014(P)
2015(P)
6.9
6.5
6.4
7.2
7.3
7.7
7.7
7.7
*Source : KCC(06/2011)
Fixed and Mobile Ultra Broadband Roadmap
2011
Advancement of Fixed
Broadband Network
Network Establishment
Advancement of Mobile
Broadband Network
Virtualization and
Intelligence Network
Efficient Content
Distribution
Open Platform and
Integration
*Source : KCC(06/2011)
2012
~1Tbps transmission links, 1Gbps network '12)
A dozen Tbps
transmission links,
1Gbps network
1Gbps ~ WiFi,
4G (600Mbps)
600Mbps WiFi, 3.9G(100Mbps)
Establishment of Virtualization Research
Network and Quality Assurance N/W
Establishment of Overlay-based
N/W
2013~
2015
Content
Standardization of Open API,
Establishment of Standard Platform
2016~
2020
Several dozen Tbps transmission
links, 10 Gbps network
Several dozen Gbps ~
Expansion of WiFi,, 4G, or B4G
Introduction of
Expansion of Virtualization,
Virtualization, Establishment
Establishment of Cognitive N/W
of Custom N/W
Introduction of
Expansion of
Smartnode- based
smartnode-based
Content N/W
Content N/W
Trial Application of
Open API and
standard platform
Expansion of Open API
and standard platform
9
10. KT’s Future Challenges
The Data Explosion leads to an MBB demand increase, but not to an increase in operators’ profit.
Rather, there is a loss of investment drives.
① Oversaturation of mobile phone market
② Lack of Killer Application
③ Collapse of Legacy BM
④ Diminishing ARPU
• Mobile phone penetration rate
in 08/2011 = 102.6%
Oversaturation
of customers
Lack of new
Killer
Application
• 4Q 09’ ARPU $30.8  2Q 11’ $29.1
• Reasons:
Crisis of loss
of investment
drives
Fall in ARPU
• Dominant
Application:
Nothing but
Kakao Talk
Collapse of
Legacy BM
1) Unlimited data plan
- Move from high-end to lower-end plans
- Use of Kakao Talk, instead of text/voice
messages
2) Intensification of competition for
combined product discounts
3) Pressure to lower rates by the
government, congress, and NGOs
• Popularity of Kakao Talk is replacing SMS/voice messages.
•
- 73% of Kakao Talk users reduce their use of SMS.
- 41% of Kakao Talk users reduce their use of voice messages.
Concern for the replacement of PSTN and VoIP from the
expansion of mVoIP
10