Closed Mobile Market Frustrates Consumers

A broader range of multifunctional phones is becoming available for Korean consumers, but the expensive data and “closed” data services provided by mobile operators are discouraging users from using their cutting-edge handsets for anything other than voice. / Korea Times

By Kim Tong-hyung
Staff Reporter

South Korea is allegedly the mobile-phone capital of the world and local telecommunications companies claim credit as its main architects. Consumers, on the other hand, grumble about being locked in a high-tech hermit kingdom.

In the age of ``app stores,'' mobile e-mails and ``tweets,'' Korean wireless users are still basically stuck in a phase of text-messaging despite owning among the most expensive pieces of hardware on the planet.

The advancement of portable Internet and computing technologies, along with the resulting explosion of content, was supposed to give increasing power to the end-user in shaping the telecommunications experience. However, in Korea, which proclaims itself to be the IT (information technology) powerhouse, wireless carriers like KT and SK Telecom dictate what services consumers are able to use and how much they have to pay for them.

No, you can't access the Internet from your phone without going through our excuse for a mobile Web portal. And remember, an hour of online news reading will cost you roughly the price of a pair of tennis shoes.

By the way, we just scrapped the Wi-Fi functions on your new 800,000 won (about $630) Samsung smartphone because free Internet can't be that good, can it? And no, we don't intend to make it easier for you to use that shiny handset sold by our rival carrier, although technically, it would only require the switching of universal subscriber identity module (USIM) cards.

``Korea is often mentioned as an IT powerhouse, but those who know better, like early adaptors or power users, would say that the country represents nothing but one of the most closed mobile markets in the world,'' said Jang Jeong-woo, the creator of the popular tech blog, IT Gadget Impression (www.alonecrow.com).

``There is this big, complicated knot of regulations regarding WIPI mandates, USIM, international mobile equipment identity (IMEI) registrations and radio approval, and when you untie one problem, another one comes popping up. It's hard to tell whether these laws are intended to help consumers, or choke them.''

There has been a lot of pent-up consumer frustration, and recently, the delayed domestic debut of the iPhone, Apple's iconic smartphone and the planet's most sought-after gadget at the moment, became the torch to ignite the rage.

After dragging their heels for years, KT and SK Telecom finally seem to have concluded that iPhone's absence is too glaring of a hole in their handset lineups, although they are still reluctant about sharing revenue with Apple while getting nothing from the App Store transactions.

The companies are declining to comment specifically on their negotiations with Apple, citing confidentially issues. But the latest industry talk has KT releasing the older iPhone 3G handset as early as August, with the latest iPhone 3GS models coming in a month or two.

It is widely expected that SK Telecom will embrace iPhone as well, although it can afford to be a bit more patient than KT, as it already controls more than half of the country's wireless users.

SK Telecom recently held a survey on its Web site to measure the interest of its subscribers in the iPhone, going as a far as to ask whether they would consider switching to another carrier (KT) should the company decide against releasing the handset.

The prospect of the iPhone hitting Korean shores was certainly great news for fans and fashionistas waiting for the device. However, their response was something less than euphoric, as they managed to find more to worry about.

Some industry sources believe that the Korean carriers have successfully managed to limit the Wi-Fi functions on the iPhones released here. And they clearly have little intension to retire their ``walled gardens'' of data services that have allowed them full control of the content revenue chain.

Park Sung-ha, a 32-year-old Seoul office worker who carries an iPod Touch multimedia player along with a Samsung mobile phone says he has no interest in buying an iPhone with crippled Wi-Fi capabilities.

``These telecommunications companies always talk about globalization and marketing their products and services elsewhere, but when the discussion becomes about providing global-standard services to local customers, they play dumb,'' he said.

The Big USIM Farce

Industry watchers and tech geeks have been engaged in a guessing game over the past year over whether it will be KT or SK Telecom to first release the iPhone handsets.

But if government policies had worked as intended, the race to be first wouldn't have mattered as much, at least to the end-user.

The Korea Communications Commission (KCC), the country's broadcasting and telecommunications regulator, forced KT and SK Telecom to unlock the USIM chips in the handsets of their subscribers in July last year, aiming to broaden user choices and boost the sales of third-generation (3G) data-enabled phones.

The move was supposed to enable wireless subscribers to use any 3G handset, iPhone or not, by just inserting their own USIM chip into it, regardless which carrier released the device.

However, a year after the changes, consumers aren't feeling that their freedom in choosing phones and mobile services has improved in any way.

The problem is that KT and SK Telecom agreed not to unlock the USIM cards of their subscriber handsets until the end of the following month from when the phones were purchased.

For example, a consumer who subscribed to an SK Telecom phone on July 1 must wait until Sept. 1 to use his USIM card on a KT handset.

And since the carriers have yet to develop unified standards for short message services (SMS) and mobile Internet, the lack of interoperability renders the unlocked USIM cards virtually irrelevant.

The mobile carriers also have a chokehold on retail networks. The thought of picking up the latest devices from Wal-Mart-like discount stores and then using them by inserting a USIM card is quite an alien idea to consumers here.

``Consumers must be able to buy the mobile phones they want from marts'' (discount retailers), said KCC commissioner Lee Byeong-gi. The KCC said it is currently discussing ways to improve its ``open USIM'' policy and eliminate obstacles that discourage users from switching devices.

Achieving a greater degree of openness between KT and SK Telecom over USIM cards will be a difficult job, and even that won't bring an end to the problems.

The true unlocking of USIM cards may not broaden consumer choice by much, as the carriers block 3G handsets that aren't registered to their servers by screening the international mobile equipment identity (IMEI) numbers of the devices.

This also blocks users from buying an unreleased phone, such as the iPhone, in another country and bringing it back home to use.

The IMEI numbers are used by operators to identify valid devices and prevent them from being illegally cloned, while also stopping stolen phones from accessing their networks.

However, the numbers have lesser importance in 3G phones, which have personal information stored on USIM cards. Most 3G operators in other countries do not screen the IMEI numbers of their devices, and critics claim that Korean carriers are abusing their power to limit the choice of consumers.

Wi-Fi, Friend or Foe?

Korean consumers have long accused their wireless carriers of being excessively greedy. And now with the voice market nearing saturation, the greed may come around to hit the operators in the neck, critics say.

It is becoming increasingly difficult for KT and SK Telecom to keep growth alive in a country with more mobile phones than heads. Increasing data revenue is obviously critical.

But despite efforts by both companies, the mobile Internet explosion has yet to happen here, with consumers put off by the expensive data rates and the closed nature of services.

The companies are desperate to get more return on their massive investments in 3G networks, and ironically, devices like the iPhone could be just what the doctor ordered.

It's questionable how far KT and SK Telecom will go in promoting the iPhone, as the handset could pose a challenge to their existing business models. The Korean companies aren't too happy about sharing their data revenue with Apple, as the U.S. company does with other operators around the world.

And the thought of iPhone users downloading cheap or free software from computers and browsing the Web using Wi-Fi networks, which would also enable voice over Internet telephony (VoIP) calls, is a scary thought for them.

The acceptance of the iPhone may indicate a change in the wind. Consumers blasted the carriers when they recently forced Samsung to disable Wi-Fi from its new AMOLED handset, as they have been doing with other multifunctional phones.

However, it is also obvious that KT and SK Telecom are increasingly warming up to the idea that the Wi-Fi threat could be a blessing in disguise. The possibility of cheap VoIP calls over Wi-Fi networks is disturbing to the two carriers, who each spent several trillions of won to build their networks for 3G and WiBro, a local variant of mobile WiMAX.

But both companies are also involved in the household telephone business, with KT being the country's biggest telephone company and SK Telecom having a fixed-line subsidiary in SK Broadband.

Although a threat to their wireless business, the companies can't ignore that VoIP, based on Wi-Fi technology, is becoming a bigger part of their fixed-line business.

A telling development came in April when KT introduced a portable gateway, dubbed ``Egg,'' that enables WiBro on Wi-Fi devices such as laptop computers, portable media players and game machines. SK Telecom is also planning to release a similar product next month, tentatively named ``Bridge.''

thkim@koreatimes.co.kr