Internet Telephony on the Rise
By Kim Tong-hyung
Staff Reporter
Voice over Internet Protocol (VoIP), which allows users to make cheap telephone calls over the Internet, seems to be a technology that is truly taking off in credit-crunched 2009.
According to industry figures, the country's Internet telephony subscribers surpassed the three-million mark earlier this month, continuing its rapid growth after reaching two-and-a-half million at the end of December. The growth trajectory is expected to get only steeper with KT, the country's biggest telephone company, becoming serious in VoIP to make up for the erosion of its traditional public switched telephone network (PSTN) services.
``With the improvement in number portability policies, the number of VoIP users will rise by an even faster clip after May,'' said an official from the Korea Communications Commission (KCC), the country's broadcasting and telecommunications regulator.
``At the current rate, the number of VoIP (subscribers) at the end of the year is likely to surpass earlier predictions of five million. There is also immense room for growth among business users, who tend to have higher average revenue per user (ARPU) rates than household users and lower churn rates,'' he said.
Smaller telephone carriers have been aggressively pushing Internet telephony, seeing the current economic crisis as an opportunity to grab market share from industry giant, KT, which controls nearly 90 percent of the country's fixed-line telephone subscribers.
LG Dacom, the smallest of the country's three fixed-line operators, had just a 1.5-percent share of the fixed-line market, accounting for some 336,000 users, at the end of February. However, the company has emerged as a heavyweight in VoIP competition with 1.32 million subscribers, widening its lead over Samsung Networks and KT, who have around 400,000 Internet telephony subscribers apiece.
Korea Cable Telecom (KCT), a VoIP operator jointly established by cable television operators, has about 300,000 VoIP subscribers, while SK Broadband, the runner-up in the fixed-line market, gathered just north of 270,000 VoIP subscribers.
The VoIP market is expected to get another boost as regulators plan to improve the number-portability policy, which allows telephone users to switch to VoIP carriers without changing their numbers.
As a condition for approving KT's merger with its wireless subsidiary, KTF, the country's second-largest mobile telephony operator, the KCC required the fixed-line giant to make it easier for its customers to switch to VoIP services through number portability.
It currently takes about five to seven days for fixed-line users to switch to VoIP carriers, but regulators are planning to shorten the span to two to three days and reduce paperwork in personal verification processes.
KT had been reluctant in the past to commit to VoIP over concerns that an increasing number of PSTN customers switching to VoIP would result in a decline in overall ARPU.
However, with its traditional fixed-line services continuing to be exposed as a decaying business model, KT now plans to use VoIP to stop the bleeding in its customer pool.
KT had 19.62 million PSTN customers in February, losing more than 250,000 users in just the first two months of the year.
VoIP is also becoming more critical as telecommunications groups are racing to offer products combining fixed-line, wireless, broadband, VoIP and premium services like Internet protocol television (IPTV) under a single bill, a trend that will only strengthen with the KT-KTF merger.
KT is planning to differentiate its VoIP offerings by marketing services that combine voice, video and data services. The company will introduce a VoIP phone next month, dubbed ``Style,'' which supports video calls, hands-free functions and time management programs.
LG Dacom plans to stay ahead in the VoIP race by diversifying its phone lineup, recently introducing two new handsets with Wi-Fi capability. The company also lowered the prices of its bundled offering, providing VoIP, broadband Internet and cable television services at a monthly fee of 34,000 won.