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JEE, Kyoung Yong Principal Researcher Network Economy Research Team/ ETRI

ATIE 2004, Singapore EXPO, Singapore, June 16, 2004. IP Telephony in Korea - current status and future prospect –. JEE, Kyoung Yong Principal Researcher Network Economy Research Team/ ETRI. AGENDA. PART I. Snapshot on Korean IT Industry PART II. Overview on VoIP

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JEE, Kyoung Yong Principal Researcher Network Economy Research Team/ ETRI

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  1. ATIE 2004, Singapore EXPO, Singapore, June 16, 2004. IP Telephony in Korea - current status and future prospect – JEE, Kyoung Yong Principal Researcher Network Economy Research Team/ ETRI

  2. AGENDA PART I. Snapshot on Korean IT Industry PART II. Overview on VoIP PART III.Market Issue PART IV. Market Players PART V. Prospect of Korean VoIP ETRI 정보통신서비스연구단 2

  3. PART I. Snapshot On Korean IT Industry

  4. Economic indicator (GDP Growth) Source : Korea National Statistical Office ETRI 정보통신서비스연구단 4

  5. 1st 1st 1st 5th Shipbuilding DRAM Semiconductor CDMA Automobile Korean Products in the World Market(2002) (Korea National Statistical Office) (Ranking in the World) ETRI 정보통신서비스연구단 5

  6. Market share Global Market Share of Korean IT Products (2002) 673.4 ($ B) 60% Global market size 250 50% 42% 200 40% 187 30% 25% 150 30% 112.3 111.2 18% 100 20% 63.7 57.7 4% 4% 29.0 50 3.5% 28.4 10% 38.6 2.7% 2% S/W Internet equipment Color TV Mobile phone Contents game Flat panel Computer Non-memory Memory Global Market Share of Korean IT ETRI 정보통신서비스연구단 6

  7. IT Export 자료 : Reed Electronics Research(2002) ETRI 정보통신서비스연구단 7

  8. The Ratio of IT to Korean GDP • IT Industry/GDP(1) ETRI 정보통신서비스연구단 8

  9. The Ratio of IT to Korean GDP • IT Industry/GDP(2) ETRI 정보통신서비스연구단 9

  10. Unit: 1,000 Sub. 35,000 30,000 69% 25,000 of population 60% 48.4% 20,000 of population 46% of population 15,000 10% of population of households 10,000 70% of households 5,000 0 Wire line CDMA-1X Wireless Sub. Internet User DTV Broadband Sub. IT Services in General (2003) ETRI 정보통신서비스연구단 10

  11. Unbelievable Success in Internet ETRI 정보통신서비스연구단 11

  12. While the Japan 0.8 Japan 0.18 …it's also the monthly Switzerland 1.3 Korea, Rep of 0.29 speed you get for charge is it that counts. Iceland Belgium 1.3 1.09 important... New Zealand 1.4 1.27 HK, China Price of Price per 100 USA 1.4 Taiwan 1.70 typical BB Kbps of data per Norway 1.5 New Zealand 2.17 connection month, US$, as a % of April 2003 Canada 1.6 Singapore 2.19 monthly Denmark USA 1.6 2.86 household Netherlands 1.8 Canada 3.06 income (PPP), April Belgium 1.8 Australia 4.42 2003 UK 1.9 Netherlands 5.13 HK, China 1.9 Norway 6.55 UK Singapore 1.9 7.18 Sweden 2.1 Iceland 7.27 Taiwan 2.4 Sweden 7.94 Austria 2.7 Austria 10.33 Finland 2.8 Switzerland 13.90 Korea, Rep. 3.0 Denmark 19.13 Australia 3.4 Finland 0 1 2 3 4 0 5 10 15 20 Unbelievable Success in Internet Source : ITU, 2003 ETRI 정보통신서비스연구단 12

  13. Youngster-Driven Revolution The number of internet User by Age (Unit:Mil) KOREA Source : KRNIC, 2003.06 8.63M 7.67M 6.85M 4.11M 1.34M ETRI 정보통신서비스연구단 13

  14. BB users per 100 person R 2 25 KOR y = 0.0054e 0.0002x 20 = 0.7019 Broadband Subsscribers 2002 by GDP (PPP), users per 100 15 HKG CAN 10 ISL DNK BEL SWE TWN NLD AUT USA JPN SGP CHE FIN 5 GDP MAC DEU FRA PRT EST GBR NOR ITA AUS 0 $0 $5'000 $10'000 $15'000 $20'000 $25'000 $30'000 $35'000 $40'000 Broadband Subscribers (per 100). by GDP Unbelievable Success in Internet Source : ITU, 2003 ETRI 정보통신서비스연구단 14

  15. PART II: Overview on VoIP

  16. Convergence Challenges to Service Provider in Korea Regulation Network convergence Service convergence Spectrum mgt. Dichotomy in provider calssification New BusinessModels Service Providers P2P & volume charging New ServiceOpportunities Changing Technology Portable Internet DMB Competition Short life cycle of tech. Too short for cost recovery Predatory pricing behavior X-inefficiency ETRI 정보통신서비스연구단 16

  17. Definition of VoIP • “ the service enabling user to telecommunicate through Internet line by converting the sound to data signal ” • “ the service enabling user to telecommunicate by simultaneous use through Internet and PSTN ” • Terminal • (Phone+TA) Setting exclusive modem to existing telephone device • (IP Phone) (or) exclusive Internet phone. • Modem • Providing as an independent modem function by integrating with ADSL modem. ETRI 정보통신서비스연구단 17

  18. Background Convergence in technology Multi-networking, multi-functioned & mixed terminal equipment e.g. NGcN, WLAN, portable internet and etc. Future major convergence will be a multi-media service using VoIP technology Changes in user and provider side Increased requirement on multi-media service including voice communication through IP network New demand of vendors and operators for the new numbering system for users to receive VoIP call ETRI 정보통신서비스연구단 18

  19. Network Configuration • VoIP network • Components of VoIP network • Clients : IP Phone, PC, Soft Phone, Analog Phones, Video, etc. • Infrastructure : Switches, Routers, Gateways, etc. • Call Control : Call Manager, Gatekeeper, etc. • Applications : Voice Mail, UMS, etc. ETRI 정보통신서비스연구단 19

  20. Classification of Service ETRI 정보통신서비스연구단 20

  21. Technology • Organization of Global Standardization • World widely 25 institutes such as ITU-T, ETSI, 3GPP, 3GPP2, MSF, IMTC • TTA • Current status • on the way of evolution into the NGN to provide with new service replacing simple voice exchanges(PSTN exchanges). • And finally will move from existing telephone network into All IP network. • NGcN ETRI 정보통신서비스연구단 21

  22. PART III: Market Issue

  23. Korean VoIP from Market Perspective • Strength : Low tariff structure • In Korea, many of a type-II providers have price leadership by applying VoIP into international call. • Many companies replacing the telephone, between HQ and LO, to VoIP for reducing the cost of telecommunication • Many of a type-II providers provide with the service at relatively lower price. • ∵ based on the IP technology sharing network infra. • Saerom Technology, Anyusernet, Samsung Networks • only 3.25 cents per 3 min. ETRI 정보통신서비스연구단 23

  24. Korean VoIP from Market Perspective • Difficulties : service definition and classification • Phone to Phone service using IP network is used for long-distance or international call. • Cf : IP Phone(PC) to Phone, IP Phone to IP Phone, PC to PC services could not be categorized as a telephone services group. • Co-existence of complicated and similar words • At present there is no united concept in Korea (IP Telephony, VoIP, Internet phone, etc.) ETRI 정보통신서비스연구단 24

  25. Korean VoIP from Market Perspective • Weakness • Numbering system • No unified numbering system to receive a call with a internet terminal • Each providers are using their own numbering system. • Due to lack of receiving system, Internet phone is not easily activated in Korean market. • Interconnection & QoS • Current interconnection rule doesn’t reflect peering or transit agreement. • Providers get high burden of usage charge for Type-I carrier’s Internet backbone and access network. • No quality control on QoS of Internet telephony. ETRI 정보통신서비스연구단 25

  26. Year 2000(since April) 2001 2002 2003 Turnover 10.3 16.3 22.3 31.0 traffic 580 732 394 554 Current Market Status • KT, Hanaro, Anyusernet, Saerom Technology, KI Telecom, etc. • more than 90 companies • Turnover for Internet phone : 31 M US$ (2003) . • Market share to PSTN(LCC+LDC+INC) : 0.001% • Korea is just on the initial stage of Internet phone service in the view point of market growth and market share. Internet Telephony Market and Calls (unit: M US$, M minutes) ETRI 정보통신서비스연구단 26

  27. Market Positioning Three Competitive Services ETRI 정보통신서비스연구단 27

  28. Traffic of Internet Telephony in Korea • Reached the climax point of traffic with 110 M Minutes per month as of June 2001. • And then, started to decrease due to service provider’s announcement of charging plan. • Since introduction of charged system, many of new services including “mobile call transfer service” is launched. • New services contributed to increase IP telephony traffic. • Traffic share to PSTN (minutes): • VoIP traffic to LDC+INTC = 2.3 % (2003) ETRI 정보통신서비스연구단 28

  29. Market Size & Traffic Volume (2003) ( traffic : B minutes ) (unit : B $) ETRI 정보통신서비스연구단 29

  30. Market Size & Traffic Volume ( Japan ) Japanese VoIP traffic volume is 15.5 times bigger than Korea ETRI 정보통신서비스연구단 30

  31. Market Forecast ( 2000-2005 ) Forescasts on Domestic on VoIP service (2000-2005), unit:M US$) Forecast on Domestic VoIP Port (2000-2005, units: thousand ports) ETRI 정보통신서비스연구단 31

  32. Market Forecast ( 2002-2007 ) • Outlook for development • Turnover in domestic IP telephony service: 848 • Outlook on domestic market Thousand Subscriber 3,200 ETRI 정보통신서비스연구단 32

  33. Market Forecast (World) Overseas market forecast on VoIP service (2001-2007, unit:M US$) ETRI 정보통신서비스연구단 33

  34. PART IV: Market Players

  35. IP Telephony Providers Market • Change of market leadership from Type-II carriers to Type-I carriers. • Initial stage : Type-II carriers had market leadership. • Present: most of telecom carriers (Type-I carriers) entered into the market. • It is expected that Korean Gov. itself will adopt Internet phone for general administration. Hence the better and hotter market competition is inevitable. • Type-II carriers • Have contributed to the initial activation of Internet phone service. • but they are experiencing difficulties in management due to hot competition. • another Type-II carriers group supported by their holding company such as Samsung and etc. • are enjoying more stable market share and revenue with the help of existing sales network and holding company’s internal demand. ETRI 정보통신서비스연구단 35

  36. End User Market Player Wholesale Market Player • End user market player source : Information and communication policy, Vol.14, 2002.09 ETRI 정보통신서비스연구단 36

  37. End User Market Player Wholesale Market Player • Wholesale market player source : Information and communication policy, Vol.14, 2002.09 ETRI 정보통신서비스연구단 37

  38. KT • Service model • Basic service • provides voice & image exchange service with end-to-end connection through signal processing • Value-added service • Enhanced services utilizing the function for signal processing and basic service ETRI 정보통신서비스연구단 38

  39. KT • Infrastructure for VOIP • between PSTN and internet • Gatekeeper for signal processing Gateway with interworking function • Proxy server, server farms for call charging, user authentication and routing. ETRI 정보통신서비스연구단 39

  40. KT • Network Evolution in the future (KT-BcN) • Objective • to upgrade the quality of telecommunication service, enlarging the whole market size by transforming voice-centric service into multi-media service • Strategy • Stepwise migration strategy toward total multimedia service line-up in line with existing service line up. • to construct wired/ wireless integrated network providing multi-media based services on packet base with upgrading KT’s existing network. • to provision existing service by securing the network, which converts voice-centered service into multi-media service. • Creation of new revenue source through reduction of cost & new service ETRI 정보통신서비스연구단 40

  41. * International IP telephone is separated General Type Premium of life-long number Enterprise type IP telephone for company Wholesale of VoIP network Household type IP phone for home use (cable / adsl ) Hanaro • Type of service • VoIP service for household. • VoIP service for enterprise users • Premium service available for whole life (life-long number system) ETRI 정보통신서비스연구단 41

  42. Hanaro • More details on VoIP service for household • Launched VoIP service through HFC network • Preparing triple play serviceintegrated with broadcasting. • Expected to expand into the other VoIP service based on BWLL and xDSL. • Migrated from H.323 to MGCP • Docsis 1.1 was introduced to existing HFC network for resolving the QoS problem. • And next, planning to provide the clean voice quality, being equal to local telephone, by introducing DQoS(Dynamic QoS) technology. ETRI 정보통신서비스연구단 42

  43. PART V: Prospect of Korean VoIP

  44. Anticipated Effect after VoIP Introduction • Faster migration to All-IP based BCN by deployment of IP in PSTN. • Could improve national welfare by expanding the user option and lowering usage rate. • Promotion of competition in wired telephony market • Could promote new service development by more intelligent telephone terminal. • Promotion of active IT investment to introduce new services • Could contribute to increase IT export and production such as VoIP equipment and etc. ETRI 정보통신서비스연구단 44

  45. Improvement of QoS Up to similar quality to PSTN by developing of VoIP technology PSTN > Internet phone (VoIP) > mobile phone (cellular, PCS) Increase of user’s demand Requirement of a variety of value-added service and cost reduction seek for easy Internet access and convenience network efficiency Integration of voice and data network Reduction of the investment cost due to the use of sharable Internet equip. easy operation & maintenance Government’s drive Introduction of new numbering system for VoIP Key Enabler for Korean VoIP Business in the future • Key Enabler of Korean VoIP Market Activation • And these key enablers are dependent on the Type-I carrier’s long term BCN plan & aggressive marketing of major VoIP providers. ETRI 정보통신서비스연구단 45

  46. Retail Market Wholesale Market Future Prospect of Korean VoIP Market In 2007, the amount of turnover reduced in wired/ wireless market is expected about 596 M US$. To the contrary, Internet phone is expected to be increased up to 848 M US$. - Therefore, overall voice market turnover is expected to be increased by 252 M US$. IP network providers are expected to make more wholesale revenue with VoIP network. Influence Consumer’s surplus will be better from lowered usage rate of voice service. reduction of maintenance and operation due to integrated IP network with flexibility and cost advantage. The costs of maintenance & up-grade are less than 50% in comparison to circuit network . Consumer’s welfare Market performance ETRI 정보통신서비스연구단 46

  47. Thank you for your attention JEE, Kyoung Yong (Principal Researcher) kyjee@etri.re.kr +82-42-860-5666 / +82-10-9744-5003 ETRI 정보통신서비스연구단 47

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