SKT in Need of Better Business Model
By Kim Tong-hyung
The success of Apple's App Store for its iPhone and iPod Touch devices has major high-tech companies following suit. And Korean mobile phone operators and electronics makers are no exception, as they have yet to find that elusive mobile Web goldmine despite working with one of the most wired countries on the planet.
In a news conference in Seoul Monday, SK Telecom, the country's biggest mobile phone operator, with a 50 percent-plus market share, announced plans to launch its own version of an App Store in September, enabling users to download applications developed for data-enabled handsets.
The online content store will provide programs for both ``smart'' phones, which allow Web browsing, multimedia and other data services, and the more conventional handsets with fewer capabilities.
The service will also function as an ``open market,'' SK Telecom officials said, which will give developers a platform to create content and sell it at their own prices. But the company has yet to determine how it will share the revenue with developers.
``The SK Telecom App Store will provide customers with new value in their services by giving them larger freedom in accessing and using content while providing developers a system of support and an eco system whereby they can see their industry grow,'' said Oh Se-hyun, the head of SK Telecom's convergence and Internet services unit, in a news conference at COEX, southern Seoul.
``We have a lot of things to do and a lot of people to talk to before we settle on the framework for our commercial services, but we are nonetheless confident that our app store will inject new energy in the content development industry,'' Oh added, talking to an audience of over 1,000 that included software developers, electronics and mobile industry officials, and tech geeks.
SK Telecom's online store, which will reveal its beta version around June, will be accessible both from personal computers and mobile Internet devices, including smart phones.
SK Telecom subscribers can purchase the content on the Web site using credit cards or mobile-phone payment and won't have to pay data rates when downloading the programs via mobile. The programs will be subject for review from the Korea Contents Industry and Business Association (KIBA).
SK Telecom provided a software development kit for developers and said it will offer a Web site for its potential partners soon to encourage them to develop applications and stay informed on the latest tech trends.
The company declined to reveal specific plans regarding its relations with content developers, such as the level of annual membership fees and how to finance the testing and regulatory reviews of the programs.
SK Telecom is expecting fierce competition in the online software markets, and one of its biggest foes would be none other than KT, it's bitter industry rival.
KT, the country's biggest telephone company, is looking to leverage its fixed-line dominance in the wireless sector, with regulators, clearing the path for the merger with its wireless unit, KTF. This has the company planning an online content store soon around July, with the programs being provided to mobile phone users and also household customers using voice over Internet protocol (VoIP) phones.
Samsung Electronics was the first to jump into the App Store craze when it opened a content store providing applications for mobile phones, computers and portable music players.
Even the government is joining in. Assisted by financial support from the Ministry of Culture, Sports and Tourism, the Korea Software Industry Promotion Agency (KIPA) opened Wapool (www.wapool.co.kr), which it called a ``Koreanized'' App Store.
Google is also planning to make Android Market, which lets users download applications from an online store for handsets using the Android mobile operating system, available to Korean users this year.
Despite the enthusiasm from the industry, Korean companies aren't expected to come close to simulating the success of Apple's original. Since the company opened its App Store for iPhone in July last year, iPhone users downloaded more than 500 million programs, which is expected to account for about $1 billion in sales.
It's difficult to imagine Koreans benefiting from a similar model, as the paucity of a vibrant software industry means that the mushrooming online stores could be hollow in quality content.
Korea's reputation as a high-tech nation has relied solely on its hardware products, most notably mobile phones. The software side has remained a mess.
According to industry estimates, there are only about 100,000 professionals who could be called application developers here, and that group is threatened by slews of software companies going down amid the economic turmoil.
And the country's strong censorship of games and related content would ensure that developers will have to invest more time and money then they would like to make their products available from the online stores.
``Building a lot of shopping malls won't be the answer when there aren't enough products to sell, which could end up closing the shopping malls as well,'' said an official from a mid-sized mobile application company.
``I guess this provides a new opportunity for us, and there is no reason to resist it, but it remains to be seen whether we'll ever get enough content to create a serious buzz among consumers.''