Korea Gets It

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The South Korean experience indicates that consumers are willing to pay for faster, easy-to-use phones. In South Korea the latest models, which cost around $300, use a technology called EV-DO and can access the Internet at a rate of up to 2.4 megabits per second. That is about four times as fast as the general packet radio service (GPRS) phones, the most sophisticated models currently sold in Europe, and 250 times speedier than Japan's i-mode service. Verizon is rolling out a service that is only about 2% as fast as EV-DO but is piloting technology already used in South Korea and hopes to match those speeds by the end of the year.

The South Korean operators certainly seem to know which marketing and service buttons to push. Unlike European operators Orange and Vodafone, which use one brand across different markets and customer groups, South Korean operators use sub-brands targeting different groups by age and gender. That is counterintuitive to the global-branding ideal that pervades advertising, as well as to the notion that the bigger the brand, the more efficient the marketing. The sub-branding is paying off, says Yoon Soo Kim, manager of KTF's Internet marketing team, with each subgroup reporting higher average revenue per user and lower churn rates than the standard KTF brand.

E-mail has been another key to South Korea's mobile-telecom success. About 80% of Korea's 47 million people will soon be connected to the Internet at home, with more than half using high-speed connections. A new service offered by Daum, a South Korean Web portal with 32 million users, allows users to forward the free e-mail they receive on their PCs to their mobile phones for the nominal fee of $1 a month and has become an instant hit.

South Korean operators have also chosen to differentiate download prices, charging one rate for text and another for multimedia content. On 2.5G networks, all the mobile operators take half a cent per packet (which represents 512 bytes) for text but only about one-quarter of a cent per packet for multimedia content. The reason? To make it more attractive for consumers to use the new traffic-intensive multimedia services such as video on demand. Otherwise, they might stick to less traffic-intensive text-based services like e-mail.

So why isn't the rest of the world rushing to copy Korea? Technical standards are still an issue. South Korean phones are based on a standard called CDMA (code division multiple access) rather than GSM (global system for mobile communication), the standard used in Europe and many other parts of the world. It is easier and cheaper to upgrade CDMA, so South Korean mobile operators are able to offer high speeds now, while it may take operators in Europe several more years to get there.