By Kim Tong-hyung
Staff reporter
Soon (virtually) anyone will be allowed to run a mobile telephony service, according to the way Korean regulators are rewriting the country's telecommunications laws. Whether consumers will be interested in paying for a wireless service from a non-mobile-phone company, however, is anybody's guess.
The revised law on electronic communications businesses, which goes into effect Sept. 23, will enable companies to set up as mobile virtual network operators (MVNO), slapping their own brands on mobile phones that work on the networks of telecommunications operators like SK Telecom and KT.
Cable television operators, which are increasingly looking to grow beyond their traditional boundaries and establish a niche in the telecommunications market, represent the most aggressive group among companies with MVNO aspirations. Retailers and financial service providers such as banks are also considering setting up their own wireless services, industry watchers say.
However, it would be hard to describe the overall level of interest as intense, as there are grumblings within the business community that the telecommunications companies are pricing their wholesale minutes too lavishly.
The Korea Communications Commission (KCC), the country's converged regulator for broadcasting and telecommunications, says that MVNOs will benefit consumers by accelerating the price competition in the wireless market, currently divided between three carriers ― SK Telecom, KT and LG Telecom.
Korea Mobile Internet (KMI), which recently applied to the KCC for a license to operate WiBro, the mobile broadband Internet service that is the local variant of mobile WiMAX, also says its yet-to-be-built network will be available for MVNOs.
SK Telecom, the largest wireless carrier with a 50-percent-plus market share in subscribers, was obligated by the KCC to provide their networks to MVNOs.
Its archrival KT, which is the runner-up wireless operator but the biggest telephone and Internet company, has announced plans to provide an ``ecosystem'' for MVNOs, seen as a part of its efforts to foster a developers' network for content for its smartphones and Web-enabled televisions.
``Although the new law kicks in during September, it is likely that the MVNOs won't get their businesses going until next year, as they will have a three-month negotiating period with telecommunications operators to decide on the prices of the wholesale minutes,'' said an official from the KCC's telecommunications policy division.
``The government will fully back the MVNOs, which will induce the lowering of the prices of voice services and add to the wealth of wireless services consumers can choose from.''
It remains to be seen how much of a difference the new ``branded'' mobile-phone services would make here as the track-record for MVNOs in other countries has been mixed.
Telecom learned the hard way that an effective business model could be elusive when its U.S. wireless brand, Helio, an MVNO it established with Earthlink, tanked in 2008.
Now, in a reversal of roles, SK Telecom will be the one lending the network and seeing if Korean MVNOs can achieve what it never could with Helio.
Perhaps, the future of the Korean MVNO market can be pretty much defined by a single moment next month when the KCC announces guidelines for the wholesale pricing of voice minutes. The standards will be enforced on SK Telecom, the required network provider, and will essentially determine how KT prices its own wholesale minutes to MVNO clients.
According to industry sources, SK Telecom maintains that the price of the whole sale minutes shouldn't be more than 30 percent cheaper than the retail prices. The MVNO candidates, on the other hand, insist that their wireless business will only be feasible if the whole sale minutes are 50 to 60 percent cheaper. Some of these companies are claiming that SK Telecom should initially adopt a form of cost-plus pricing to assure them a profit for a certain period.
And it's not like SK Telecom and KT are delighted about the possibilities of MVNOs giving them further competition in a country with more mobile phones than heads.
Unlike the reluctant SK Telecom, KT has been touting itself as an avid MVNO backer, even announcing the establishment of the ``KT Eco-system,'' which will be managed as a partnership of its MVNO clients, and also promising attractive prices in wholesale data services.
However, where KT agrees with SK Telecom is that MVNOs should predominantly focus on data services to enrich the content for smartphones and Internet protocol television (IPTV) broadcasts, not traditional telephony.
Major MVNO candidates, on the other hand, are rather insisting to focus on voice instead of pushing a package of products that consumers may like or not.
``KT's MVNO-related plans are surely a preemptive move to add wealth to its content platform and also guard against MVNOs that could compete with its voice business from emerging,'' said a telecommunications industry source.
``The telecom operators are being increasingly pressured to lower prices and the competition will only be intensified in a market where the penetration rate of telecommunications services moved north of 90 percent.''
The immediate interest in MVNOs is found from cable television companies and small-sized telecommunications firms that are operating in niche markets such as long-distance and international calls and Internet data centers.
T-Broad, one of the major cable television providers, is planning to set up as an MVNO through the Korea Cable Telecom (KCT), which is currently managing the Internet telephony services provided by cable television companies.
Other cable companies like CJ and CNM have yet to decide whether to push independent MVNO services or join the efforts with KCT, of which T-Broad holds a majority stake.
Onse Telecom, a long-distance call operator, is also planning to promote wireless services tailored for business users as an MVNO.