KT proposes global virtual goods market

The Korea Times

The Korea Times

Business

Thu, December 7, 2023 | 03:19

Tech

KT proposes global virtual goods market

Posted : 2013-02-26 16:24

Updated : 2013-02-26 16:24

Lee Suk-chae, right, chairman and CEO of KT, shakes hands with Samsung Electronics Vice Chairman Lee Jay-yong at the Mobile World Congress in Barcelona, Spain, Tuesday. / Courtesy of KT

Chairman Lee calls for joint development of ecosystem from global telecoms

By Cho Mu-hyun

BARCELONA - KT Chairman and CEO Lee Suk-chae said Tuesday that global mobile operators must work together to create a common market for virtual goods or online commodities.

He also stressed that telecommunications firms must shed their old business model of relying on income from subscription fees for networks and develop platforms and virtual goods of their own that will result in their own ecosystems.

"There is no future if we only cling to network traffic fees. We must create a global common market for the distribution of virtual goods," said Lee at a keynote speech, delivered for the first time by a Korean CEO at the Mobile World Congress.

He stressed that an ecosystem provided by all the operators across the world was needed in the current data-intensive age.

He further stated that "the importance and value of traditional communications businesses will continue to diminish even more in the broadband era."

Internet access via smartphones has diminished mobile operator's income from voice calls and text messages as more and more subscribers prefer Web-based data services that are currently offered for free by over-the-top (OTT) players, or content providers that uses carriers' networks.

Beginning in the third-generation (3G) era and now ever more intensified due to the deployment of fourth-generation (4G) long-term evolution (LTE) networks, carriers are busy looking for new revenue lines from content and expansion to traditionally non-telecommunications industries.

The chairman said KT has invested over 4 trillion won ($3.68 billion) since being the first to introduce Apple's iPhone in 2009, without any significant changes in growth rate.

At the same time, OTT firms like Kakao and Internet portal provider NHN have seen an increase in revenue by offering virtual goods distributed on costly networks such as those provided by KT and other mobile operators.

"Virtual goods refers to non-communications services produced, distributed and consumed online in the broadband era including digital content, applications, information technology solutions, e-learning, e-health and others," said Lee.

Citing Apple's powerful ecosystem which it controls to earn money from content, he said carriers "must now become virtual goods manufacturers or virtual goods distributors like Apple's app store."

KT has been actively expanding its content portfolio by developing its own apps and helping developers create an ecosystem owned by the company. Like Apple or Google, it seeks to create an online market that will be distinctively more open relative to those offered by its competitors.

KT has so far been successful in forming an app community with Japanese and Chinese counterparts called Oasis, explaining why it thinks the time for a global version of the alliance is long overdue.

"One of the reasons why telecommunications firms fell behind is because they held onto what they had without giving up some of their traditional rights such as networks. You can't survive and grow without sharing what you have.

"Instead, carriers must more actively create their own ecosystems to rival those of OTTs instead of hoping that the latter will suddenly pay their dues for using networks."

Korean carriers saw their revenue from voice calls and text messages cut by nearly 20 percent last year.

"KT's fierce struggles today will be the exact future of what global telecommunication firms will be faced with," Lee said, adding they must act now.

Operators initiated a community for wholesale applications (WAC) in 2010, but have seen no growth due to the market created by iOS and Android.

He said telecommunications companies have only themselves to blame, adding that they must divert their investments to competing operating systems such as Firefox or Tizen.

"We must go beyond the spirit of WAC for the creation of a common market facilitated by telecommunication firms by building four to five competing operating systems."

Lee also proposed a joint venture of GSMA-associated operators to actively invest in creating their own app ecosystems.

He said that a common market by telecom companies will create new job opportunities for developers, and beneficial apps will mitigate social, educational and medical problems across the globe.

The chairman held panel discussions with Hans Vestberg, Rene Obermann and Talman Marco, the heads of Ericsson, Deutsche Telekom and Viber Media respectively.

impale@koreatimes.co.kr