Tue, Oct 30, 2001 page19

• In S Korea, high-speed broadband becomes part of culture

  The country is suffering economic problems but its broadband service is now so integral to life that it's not going to change -- except to become faster

  • NY TIMES NEWS SERVICE
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  Kim Sung-bae recalls with a rueful grin how hard it was to persuade people to pay an extra 40,000 Korean won a month, about US$$30, for the new high-speed Internet connections he was trying to sell two years ago.

  "I said, `The speed is ultra-fast, you can enjoy data-surfing and stock transactions and bill paying,' but people didn't believe me," said Kim, a salesman for Hanaro Telecom, founded four years ago, just before a round of economic crisis.

  The timing, though, was right. By late 1999, the nation was in a boom of sorts, and high-technology companies were leading the way.

  

  Lee Jong-gyu, a technician with Hanaro Telecom in Seoul, South Korea, installs broadband equipment.

  PHOTO: NY TIMES

  "There were so many Internet venture companies in Seoul and other big cities," Kim said, "and the demand for fast service with high quality was growing. Now everybody uses it."

  Today Korea is suffering new economic problems that have people asking whether another crisis looms, but one thing is certain.

  The broadband service Kim and hundreds of others worked so hard to introduce -- a way to receive images and information at several times the speed possible with ordinary phone lines -- is now so embedded here that nothing is going to change except, perhaps, electronic communication getting even faster.

  While broadband is available in all advanced countries, it has caught on here twice as fast as in Canada, which has the second-highest broadband penetration.

  By the end of the year, said Lee Sang-chul, president of Korea Telecom, the telephone company, partly government-owned, that provides 49 percent of Korea's broadband service, "the number of actual users nationwide is projected at 23 million," or half the nation's population.

  "In some apartment complexes," he added, in a speech earlier this month, "the residential penetration rate of broadband hovers over 75 percent."

  Just why has broadband caught on here so much faster than in Japan, the US and Western Europe?

  The answer lies in part in efforts by the Korean government and in part in competition between Korea Telecom, founded more than a century ago, the upstart Hanaro and several even younger, brasher competitors.

  The real answer, though, lies with a people who like nothing better than to communicate. "It's a culture thing," said Lee Jae-hong, a director in the information and communication ministry. "People loved it. Subscribers increased dramatically. Our domestic Internet content has lots of moving pictures and graphics. Everything needs to go `pali, pali' -- quickly, quickly."

  Young people crowding rooms full of computers, housewives in apartment blocks, executives and office workers hustling to ride the crest of the information revolution -- all wanted the same thing: quick communication, quick games, quick contact.

  There was "growing demand, responsive supply and appropriate government policy," said Lee Sang-chul. "These three elements created synergism to prompt explosive growth."

  The demand is such that smoke-filled "PC rooms," where young customers spend hours at a stretch, have largely replaced the relatively leisurely cybercafes. To chat with friends, play games and do school work on line, food and drinks are a distraction.

  "Koreans are fond of community," said Lee Taek-kyu, the 34-year-old owner of Orange PC, a third-floor room in a small building in central Seoul, packed with about 50 computers, almost all of them occupied by youthful customers paying 1,500 won, or US$1.15, an hour.

  "In Seoul, there are between 15,000 and 20,000 rooms like this," Lee said. "They all have broadband service."

  Games are undoubtedly the biggest attraction for the 20-somethings in his PC room, and Diablo and Starcraft, both from the US, and a Korean football game rank as favorites. "They go out, they eat some, they come back, and they're here for five hours, maybe longer," Lee said as an assistant tried to clear the air with a disinfectant spray.

  The broadband craze is, if anything, more pronounced in the apartment buildings that form the skylines of Seoul and other cities. Virtually every new building is now built with fiber-optic wiring to each apartment, and in the last year or two this wiring has been installed in most older buildings.

  The advent of broadband, though, was not cheap. The government estimates the cost of developing the technology, building the infrastructure and marketing it at US$30 billion between last year and 2005.

  Korea Telecom and Hanaro, which rely largely on telephone wires, and Thrunet, which uses cable modems, are counting on huge subscriber bases. By the end of the year, there will be 8 million subscribers, 49 percent on Korea Telecom's Megapass service, 26 percent on Hanaro's HanaFOS, 17 percent wired to Thrunet and the rest divided among half a dozen small providers.

  Government influence is pervasive. "Korea Telecom rose quickly because the government had some vision," said Oh Sung-jin, deputy director of the communication ministry's broadband section. "We're pushing carriers to push the service with low fees."

  The theory is that all providers will make money, but now all are suffering.

  Korea Telecom stock has fallen to 40,000 won today from 180,000 won two years ago, while the government has found no buyers for its 40 percent stake. Stock in Hanaro, formed at the behest of the communications ministry to compete with Korea Telecom as a telephone provider, has fallen to 2,500 won from 20,000 won a year ago.

  Hardest hit is Thrunet, capitalized in 1999 with US$150 million from Korea's Trident Group, a computer maker, and supplemented by US$100 million from Softbank of Japan and US$40 million from Microsoft. Not listed in Korea, the stock hit US$90 on the NASDAQ two years ago but is now worth US$1.35 a share.

  Government researchers, though, remain committed to low prices. The important thing is return on investment, said Yoon Byeong-nam, vice president of the National Computerization Agency, responsible for what is formally called the Korea Information Superhighway Project. "At the beginning, they estimated, if they got 2 million subscribers they would break even. Now KT has 3.5 million and Hanaro has 1.8 million and Thrunet around 1 million. At first, KT managers complained the price was too cheap, but they don't any more."

  Broadband's spread, however, gives some Koreans pause. "Parents worry that their kids are so addicted, through games, chatting, whatever," said Jang Song-hyon, a businessman. "Young people chat on computers for hours."

  Jang's wife refuses to use the Internet, but admits the addiction is catching. He and his two daughters all have their own computers, linked to separate broadband lines.

  "I pay at least half my bills through the Internet," Jang said. "Also, I make reservations and buy tickets that way."
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