Koreas Broadband Infrastructure Policies Strategy for Success July

Korea’s Broadband Infrastructure Policies - Strategy for Success July 2009 Young Min Ko Global Cooperation Team IT Policy Division National Information Society Agency (NIA) .

Contents I. IT Infrastructure Status & Policies II. Overview of KII Project III. Success Factors IV. Implications * KII Project : Korea Information Infrastructure Project 2

I. IT Infrastructure Status & Policies IT Infrastructure Status IT Infrastructure Building Policies 3

IT Infrastructure Status (1) • Telephone Penetration - 0. 36 per 100 inhabitants - 1/10 of world average (1960) - caught up with world average (1981) - 48. 8 per 100 inhabitants - three times more than world average (2002) • Internet Penetration - less than one Internet user per 100 inhabitants (1995) - surpassed developed nation average (1999) - world’s fifth largest market with 26 million users (2002) • - Source : ITU World Telecommunication Indictors database

IT Infrastructure Status (2) Broadband Penetration(2008) • Internet Usage Rate & Users : 77. 1%, 35. 4 million users • Broadband Internet Subscribers : 15. 5 million subscribers • 50% of Broadband Internet Subscribers use Bc. N (50 -100 Mbps) World Best Broadband Infra • 7 th in Broadband Penetration (OECD, 2008. 6) 1. Denmark, 2. Netherland, 3. Norway, 4. Switzerland 5. Iceland, 6. Sweden, 8. Finland • 1 st in Digital Opportunity Index (ITU, 2007) • 6 th in e-Government Readiness Index (UN, 2008) 5

IT Infrastructure Building Policies Projects for building IT infrastructure launched since 1987, preparing for new IT environment B$ : Billion dollars National Basic Information System Project Korea Information Infrastructure Project Bc. N Project outcome Bc. N (50~100 Mbps) Broadband N/W (1. 5~2 Mbps) Narrowband N/W Intelligent Home N/W (2. 4~9. 6 Kbps) Post PC 1987 TDX DRAM CDMA 0. 15 B$ 0. 400 B$ 0. 1 B$ 7 B$ (’ 89~’ 02) 108 B$ (’ 91~’ 02) 1995/6 Digital contents 54 B$ (’ 96~’ 02) 2004/5 DTV embedded S/W IT growth engines 2, 500, 000 $ 600 B$ So. C (’ 03~’ 07) 2010 telematics Mobile communication Intelligent robot year

II. Overview of KII Project Scope of KII Project Beneficial Cycle of KII Project Key Strategy of KII Project 7

Overview of KII Project KII project consists of KII-T, KII-G, KII-P (1995 -2005) KII-Testbed KII-Government KII-Public For R&D For taking the lead For Diffusion Objective • To build High Speed Network Environment R&D • To deploy Nationwide High Speed backbone Network (144 calling zones) • To construct High Speed Internet Access Network Main Users • Universities • Research Institutes • Public Organizations • Research Institutions • Schools • Businesses • Individual Households • Budget : Government (pay back by price discount ) • Project Management : NCA • Network O&M : KT, Dacom • Budget : Private Sector • Pilot Service : NCA, & Major Carriers • Network O&M : Carriers • Budget : government. • Project Management : Role NCA division • Network O&M : KT * KII Project : Korea Information Infrastructure Project

Scope of KII Project Private Network Subscriber Network Switching Network WDM transmission system Backbone Transmission Network Terminal system Local Loop Access system switching system WDM KII-G Private Subscriber Backbone Network (local/long-distance Subscriber Private transmission and switching network) Network * Transmission networks are only for long-distance, while ATM switching networks are for both local and long-distance.

Beneficial Cycle of KII Project Policies for deregulation and competition Government Support Private Sector Investment Secure d Infrast ructur e Facilita ted Industr y Policies for IT education and PC distribution Reaso nable Rate Increa se of Usage Increased Revenue of Providers Extended Informatization of Public Sector

Key Strategy of KII Project Vision Setting, Strategic Policy Coordination Demand Creation • e-Government Text • Broadband Access toall schools Text • Computer literacy Leading Investment of Government Text • KII-Public Text -Facility-Based Competition ICT Industry Promotion Text • Online Game Text • Online Portal Text -Privatization -Public Financing Competition * KII Project : Korea Information Infrastructure 11

III. Success Factors Vision Setting KII-G : Leading Investment of Government KII-P : Competition Policy Demand Creation Targeting Digital Divide Other Factors 12

Vision Setting Established Comprehensive Promotion Framework Ministry of Information and Communication (1994) The Framework Act on Informatization Promotion (1995) Informatization Promotion Committee (1996) Provided Long Term Vision and Strategies Cyber Korea 21 (1999) e-KOREA Vision 2006 (2002) Broadband IT KOREA Vision 2007 (2003) 13

KII-G : Leading Investment of Government’s leading investment to induce participation of the private sector : 97% Private + 3% Government (Unit : 1 million USD) KII-Government (public sector) KII-Public (private sector) • 2 nd Phase (1998~2000) 3 rd Phase (2001~2005) TOTAL 173 262 371 806 1, 982 6, 964 23, 581 32, 527 Gov’t Invested in Telcos’ backbone networks (KT/Dacom) − − • 1 st Phase (1995~1997) Connecting 32, 000 public buildings (government offices, schools, etc) The fund was repaid in the form of service fees Gov’t provided low interest loans to Telcos’ Access Network − 0. 8 billion $ from 1999 to 2005 14

KII-P : Competition Policy 1990 ~ 1998 1980 ~ 1990 • Insufficient PSTN • - From international calls to local telephony(98) - 1 telephone 1 household(1987) • Privatization (1982) began - KT was separated from the government • Gradual liberalization of market Liberalization of telephone terminal equipment(1982) • Facility-based competition - No resale obligation • Fair competition regulation - Set up of KCC(97) - Interconnection regulation 15

KII-P : Competition Policy 1998 ~ 2000 s • Hands off approach on new services such as Internet service Cable company (Thrunet) initiated broadband service(98) − New local call provider (Hanaro) made incumbent (KT) concentrate on ADSL, introduced fierce competition with low price($19 -33) and high quality − • LLU played a negligible role Service based competition was introduced to scale up competition(2002) − Alternative network (cable network covers 50% of households, 2002), − • Complete privatization of KT(2002) − Obligation of deployment of access networks to remote rural areas (Coverage reached to 99%) 16

Demand Creation e-Learning • Literacy Training to 10 M people - Internet education to 1 milion house wives • Broadband Access to All Schools (Free / 90% discount) New e-Business • Rapid growth of e-education Business - Credu Co. : 8. 5 mil(06)-69 mil(07) • Success of ‘PC Bang’ e-Government • 11 e-Government Projects (2002) Dissemination • PC for Common People Demand Explosion - Ignite the price war among PC vendors • Cyber Building Certification Program 17

Targeting Digital Divide (1) Direction and Strategy to Close the Digital Divide STEP 1 Free Access to ICT STEP 2 Education about ICT Life with ICT • Closing the gap in ICT accessibility • Closing the gap in ICT • Closing the gap in Policy Goals • Actualizing universal information accessibility • To build high-speed Internet network in Rural areas • To provide PCs and Projects Assistive technologies • To establish free access centers literacy STEP 3 ICT productivity • Enhancing ICT Application skills • Promoting productive information use • To provide basic ICT education • To provide advanced ICT education • To construct an ICT education infrastructure • To create IT-related jobs And businesses • To vitalize productive u. Life and social Participation • To diffuse sound digital culture

Targeting Digital Divide (2) Broadband Construction in Farming/Fishing Villages <High-speed network - Rural villages > 2002 2003 2004 2005 2006 2007 Total 3. 47 million households 3. 03 (81%) 3. 18 (92%) < Bc. N Plan > 2008 2009 2010 2011 ~ Total 3. 77 million households 3. 25 (94%) 3. 53 (94%) 50 households or over 3. 68 (98%) 3. 77 (100%) Less than 50 households Bc. N Deployment Announcement of common benefit guarantee by KT Broadband Expansion Financing support for high-speed network Financing support for Bc. N deployment Financing Project (in million US$) Year 1999 2000 2001 2002 2003 2004 2005 Total Budget 100 150 80 68 70 50 618 Target Metropolitan cities Small/Mid cities Farming/Fis hing villages Farming/Fi shing villages

Other Factors • Unique housing patterns and high population Density - 60% of population lives in Apartments - Ideal condition for ADSL Technology (Within 4 km of Telephone office) • Receptive culture of new technology • Highly motivated and educated people • Cultural characteristics for racing ahead 20

IV. Achievements and Implications Outcome of KII Project Achievements of KII Project Implications 21

Outcome of KII Project (As of 2005) PHASE 1 PHASE 2 PHASE 3 (1995~1997) (1998~2000) (2001~2005) Backbone Network Seoul-Daejeon (2. 5 Gbps) Major 5 cities (2. 5 Gbps) Major 6 cities (40 Gbps) Optical Network 80 zones connected nationwide (max 5 Gbps) ATM Network ATM pilot switches in 5 regions ATM pilot switches in 144 regions MPLS Backbone Network Optical network for cities/towns (max 40 Gbps) Optical network for farming/fishing villages (max 40 Gbps) Capacity upgrade (max 320 Gbps) Subscriber Line FTTO in major buildings TYPE KII-Testbed KIIGovernment KII-Public 144 zones connected nationwide (max 5 Gbps) ADSL, CATV (FTTC: 10% of entire line) Capacity upgrade (max 40 Gbps) VDSL, CATV, FTTH (FTTC: 90% of entire line)

Achievements of KII Project (As of 2005) Raising World Recognition Nurturing IT Industry IT Production : USD 51 billion (1995) USD 231 billion (2005) Share in GDP : 7. 0% 15. 1% Business Sector Public Sector • 32, 000 public organizations nationwide • 10, 000 elementary/middle schools nationwide Highly recognized by the world (OECD, ITU, etc. ) Individual Sector • E-Commerce volume : US$ 351 High-speed Internet billion (21%) subscribers : 12. 19 million • E-Signature users : 11. 34 (77%) million All 144 calling zones connected with optical networks (max 410 Gbps) High-speed subscriber networks constructed in all 1, 400 towns and villages with 100 households and more Public Resource Investment Private Sector Investment US$ 855. 5 million (1995~2005) Induced US$ 32. 6 billion from private sector

Implications • Leading role of Government is vital at early stage - Set up comprehensive national plan & vision with a close cooperation with private sector - Upfront Investment to reduce the risk and induce private investment • Active government’s efforts to create demand are needed • Deregulation/ fostering a fair competition environment to provide various cost-effective technologies and services - Inter-modal(Facility-based) competition when alternative networks exist • Vicious Circle of Informatization(Demand) and IT Industry(Supply) 24