Korean Broadband Miracle

WSJ has a commentary by Thomas Hazlett, a senior fellow at the Manhattan Institute, who formerly served as chief economist of the Federal Communications Commission:

78% of Korean households subscribe to broadband, the highest penetration rate in the world and well over twice that of the U.S. While broadband via standard cable modems and digital subscriber line (DSL) services are available for about $27 a month, households paying about $52 a month receive lightning fast 20 mbps VDSL service — connections sufficient to receive live high-definition TV. In short, the apartment dweller in Korea enjoys the same level of Internet service as the largest corporate customers in the U.S. All this in a country of 48 million which, in 1979, had just 240,000 phone subscribers.

Circle back to the government’s original goal: introducing local phone competition. It flopped, at least in the way regulators expected. While minutes of use on KT’s phone network declined by a stunning 12% last year, the primary reason is intermodal competition as consumers switch to mobile phones (with 36 million subscribers) and Internet substitutes. Given ubiquitous broadband, voice traffic is migrating to “Voice over Internet protocol” (VOIP) and e-mail.

Sang-Seung Yi, an economist at Seoul National University, explains that the “Korean broadband market succeeded because of fierce facilities-based competition among Hanaro, Thrunet and KT. This took place not because of ‘smart’ government regulation such as unbundling, but because of the absence of regulation.” Other factors feed the broadband miracle, of course. Koreans live in close proximity to one another, so the cost of building networks tends to be low. The Korean government has subsidized certain applications and invested public monies in broadband and wireless. And the fabled Korean demand for online gaming suggests a hunger for broadband applications.

Will India learn and do the right things?

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Rajesh Jain

An Entrepreneur based in Mumbai, India.