By Kim Tong-hyung
Staff Reporter
Internet protocol television (IPTV) has gotten a lot of press in the past months, with telecommunications companies and policymakers drumming it up as the future of household entertainment.
However, some industry insiders are questioning whether Web-based television deserves the lofty expectation when broadband carriers are failing to generate significant demand among customers for the prototype video-on-demand offerings.
IPTV is about the delivery of conventional television broadcasts over broadband networks, allowing subscribers advanced features like video-on-demand, online commercial transactions and data transfer with a lot more interactivity.
KT, which controls more than 90 percent of the country's fixed-line telephony market and nearly 45 percent of broadband customers, has applied for an IPTV license to the Korean Communications Commission (KCC).
It joins runner-up broadband carrier Hanarotelecom, LG Dacom and Open IPTV, a joint venture between Internet company, Daum, and equipment maker, Celrun.
Korea Inc. already seems to have anointed IPTV as the crown prince of the country's fast-growing information technology (IT) industry.
According to a rosy report by the KCC, the country's broadcasting and telecommunications regulator, the IPTV industry will generate a production of 8.9 trillion won (about $7.9 billion) and create 36,000 new jobs over the next five years.
In a policy report to President Lee Myung-bak, Thursday, the KCC said IPTV will play a critical role in expanding the market for broadcasting by allowing more conglomerates to invest in television.
Lee was also told that IPTV could provide a cheaper and easier way for people to access public information and e-government services, and even reduce household spending on private tutoring by providing interactive education programs online. Anything short of finding a cure for cancer!
However, there seems to be a significant gap between the enthusiasm of government and industry and the actual acceptance of IPTV by customers.
KT and Hanarotelecom has been gathering customers for their broadband television services, which provide video-on-demand but not real-time broadcasts, but the results have been disappointing thus far.
Hanarotelecom has about 776,000 subscribers for its Hana TV services, followed by KT with 720,000 subscribers for Mega TV. LG Dacom's video-on-demand offerings, myLGtv, has just 40,000 customers.
This gives a customer base of about 1.5 million for the full-fledged IPTV services expected to start in October, clearly not a number to be overly excited about.
The lukewarm response from customers on Web-based television is easily explained ― there is not much to see.
`` More than 45 percent of all television users click on national television channels everyday and about 90 percent of the popular content on Hana TV are reruns from the programs of terrestrial broadcasters,'' said a Hanarotelecom official.
``Without the retransmission of content from national television channels, IPTV will always face limits in growth,'' he said.
KT, representing the telecommunications companies interested in IPTV, have been negotiating with the country's three terrestrial broadcasters ― KBS, MBC, and SBS ― for nearly two months since the KCC announced the licensing plans for IPTV.
However, KT is no closer to a deal with the television stations over purchasing their content for IPTV. Industry sources say broadcasters have been demanding an annual fee of about 30 billion to 50 billion won ($44.7 million) for the rights to use their content.
Frustrated by the talks turning circular, KT announced earlier this week that it could start its IPTV services without a deal with the television stations, and provide customers with antennas to allow them to receive terrestrial broadcasts for free.
Although this would eliminate the need for KT to pay for content, it would also make the point of IPTV irrelevant, as the company will be unable to provide interactive services for real-time content.