The McKinsey Quarterly writes:
From 1998 to 2003, the number of broadband subscribers in South Korea rose from zero to more than 11 million. Bolstered by an eager and technology-savvy market, a highly urbanized and dense population, and extensive government support, broadband services reached 72 percent of all households in 2003a level of penetration three times higher than the United States can boast and more than six times what many European countries have achieved.
South Korea’s broadband providers are now developing growth strategies along two fronts:
Improved access. The top three companies are working to bring faster broadband to subscribers, but these improvements have thus far had little effect on revenues. Most efforts have focused on the next generation of Digital Subscriber Line (DSL) technology: Very High Bit Rate DSL (VDSL). Although these lines carry information about 60 percent faster than Asymmetric DSL (ADSL) networks do, price cutting by KT has brought subscription fees for VDSL into line with those for ADSL.
Value-added services. Some new options could deliver bigger revenue streams from a broader set of users. Hanaro and Thrunet are offering voice communications over the Internet as an alternative to fixed-line telephones, for example, but availability is limited and each company’s debt level means that neither has the marketing power to promote the service. (KT, with hefty fixed-line voice revenue, has little incentive to pursue Internet voice services.) Other access-based services offered by broadband operators include parental controls and remote maintenance and diagnostics for home computers. South Korea’s broadband providers have also led the way in offering improved content, such as online educational programs, games, and video on demand. But the skills required to develop and deliver profitable content are quite different from those needed to wire a nation and run a network. Our analysis suggests that content-based services are struggling because providers can’t segment customers, identify profit pools for various content offerings, or generate substantial advertising revenues.