South Korea: Snapshot of the Internet around 2000

[by Kilnam Chon]

2012.7.10

Broadband

National Broadband Project

The Korea Information Infrastructure (KII) project, the largest project in the history of Korean governments started with the master plan [3] which was established in 1995. In the first stage between 1995 and 1997, optical networks were constructed among 80 urban centers, and Asynchronous Transfer Mode (ATM) testbed network were built. In the second stage between 1998 and 2000, the nationwide ATM network service started. The Internet backbone network located in major cities was upgraded to the bandwidth of 622Mbps using the nationwide optical network. International lines were upgraded to 290 Mbps. By 2000, high-capacity and high-speed optical transmission networks were built in 144 regions in Korea. [22]

While the government along with KT built a backbone network based on ATM switches, Thrunet, the first broadband Internet service provider in Korea, built its backbone network based on Internet routers and the optical Ethernet in 1998. There were further debates on backbone switches between ATM and routers in the government and the major ISPs including KT and Thrunet. The Korean government along with KT decided to extend ATM switches and added ATM-MPLS network in the third stage of Korea Information Infrastructure Project between 2001 and 2005 [23]. Some other commercials ISPs built their backbone networks with the Internet routers.

Internet Cafe

In the late 1990s when demand for the Internet services was increasing but Internet access from individual homes did not meet the demand, Internet cafe, or “PC bang” as it is called in Korea, which provided the general public with Internet access began to appear. The first domestic Internet cafe is Netscape which began its operation in 1995. The number of Internet cafes rapidly increased, reaching 15,150 by the end of 1999 [24]. Many Internet cafe users became the first broadband service subscribers when the broadband became available in the late 1990s.

In addition, the number of online gamers increased, and the Internet cafes were at the center of such a phenomenon. In 1998, an online war simulation game called Starcraft was widely played by the general public, and the Internet cafes were the center for such games. Strong desire of the youth in their 10’s and 20’s for the increased bandwidth for online games made the broadband access at individual homes popular.

Broadband Internet

Individual home users of the Internet had a maximum connection speed of only 64 Kbps (dialup service) until the late 1990s. However, this changed when Thrunet began to provide broadband Internet services in July 1998. It provided approximately 1Mbps connection speed using bidirectional cable TV networks [24]. Hanaro Telecom and KT joined the broadband Internet provider services with the Asymmetric Digital Subscriber Line (ADSL) in 1999. The cable modem and ADSL broadband service companies engaged in fierce competition for subscribers. Such intense competition brought down the subscription fees, while providing better quality of the Internet and additional services. This provided the main impetus for many people to subscribe to broadband services. Because Korea’s Internet service providers were charging one of the lowest monthly subscription fees in the world, the number of broadband users grew very rapidly. The number of home users with broadband Internet access exceeded 7.8 million, over 50% of the households in Korea by the end of 2001 [22] (Fig. 4). The number of the Internet users exceeded 10 million in 1999, and 26 million in 2002, more than half of the population in Korea [23]. The Internet banking service was so convenient that more than 11 million users, about 30% of the population in Korea registered Internet banking by November 2001.

The Fiber-to-the-Home (FTTH) services started with 100 Mbps or higher data rate in 2006. The widespread availability of broadband Internet services including the FTTH, ADSL, and the cable modem provided the momentum for Korea to one of most connected nation in the world [26]. Such a leap in the development of broadband Internet stimulated the expansion of various multimedia services. It paved the way to evolve into ubiquitous networking which was made possible by the convergence of Internet, broadcasting, and telecommunication. Later, broadband wireless Internet services were provided through mobile phones services and the broadband data services including Mobile WiMax.

Figure1. Broadband subscriber statistics as of Jun. 2001 (Source: OECD 2001)

Wireless Broadband

Korea is one of the leaders in the wireless Internet market by being the first country in the world to introduce CDMA 2000 1x in October 2000. EV-DO was introduced in January 2002. The wireless Internet service via the mobile handset had limited universal applicability due to its low data rate and high connection fee in the past. Mobile WiMax, called WiBro in Korea was developed in Korea to provide the high-speed mobile Internet service. In February 2002, the Korean government allocated 100 MHz bandwidth in the 2.3–2.4 GHz band for Mobile WiMax service, and ITU formalized Mobile WiMax as IEEE 802.16e standard [27] in late 2005. WiBro service, Korea version of Mobile WiMax began in June 2006. It can offer up to 10 Mbps data rate per device, and cover a radius of 1–5 km allowing for the use of wireless internet. It could provide mobility for up to 120 km/h which is faster than WiFi, but slower than mobile phone technologies which have mobility up to 250 km/h or more.

Two out of three mobile telephone service providers started WCDMA service in December 2003, providing voice, video, and high-speed data service at 2Mbps using mobile handsets. However, the data traffic did not fully grow because the mobile telephone service providers maintained expensive data traffic policies and WiFi module were not available until the smart phones were introduced in 2008. The introduction of the smart phone has led to an explosion of the wireless Internet traffic. LTE services were launched to overcome bottleneck in the Internet in July 2011.

Commercial Internet

With the emergence of commercial Internet access services [28] in 1994, a wide-variety of web-based commercial services also emerged. Internet World Exposition in 1986 helped to boost the web-based services as well as the Internet ventures in Korea and other countries in the world [29].

Initially, only simple duplicate services of the business model which had been proven in the USA were offered in Korea. These services included the online newspaper services [30, 31], the directory services to guide through a number of emerging web services [32], the online shopping mall, Interpark [33], the auction service, Auction [34], and so on. The web-based commercial service was initially dominated by Yahoo! Korea, which was established in 1995 as a joint venture of Yahoo! and TriGem.

The first web-based email service was Hanmail by Daum [35], which eventually grew into the first dominant search engine and portal, overtaking Yahoo! Korea around 2000. This trend of copying and localizing the USA-initiated web services continued and spurted along with the proliferation of the Dotcom era in the late 1990s and early 2000s.

However, Korean web community was not satisfied with simple copying of the USA-initiated business model, and began to create new service models as well as new business models. Most notable was the invention of the business model of selling the virtual items by SayClub [36]. This being the most important revenue model, was the underlying foundation of numerous online services and gaming. Also notable were the creation of online gaming market, and the creation of social network services.

Figure2. Top five search engines in Korea by query volume as of Sep. 2011 (Source: aceCouter.com)

SayClub started as a web-based reincarnation of IRC-based chat, but became an instant success connecting the online users in real-time chat. In 1997, SayClub started selling virtual items including personal avatars to symbolize the user’s online identity, costumes to decorate those avatars and so on, and became an instant commercial success. This model started the now-common business model of “offering the commercial service for free, and selling virtual items needed to use the service better”, so-called freemium services. The freemium service model has since become so ubiquitous, especially in online gaming, that a number of now-popular Internet businesses rely mostly on the freemium model, including Tencent and Zynga. This invention of the freemium model may be considered as the most important invention of the Korean commercial Internet community, contributing to the global online service community.

Korea Internet game companies started a new market of online gaming, in particular in the Massive Multi-player Online Role Playing Game (MMORPG) category. Initially in 1994, a game called “The Land of Dangun (the progenitor of Korean people)” in the RPG category became a huge success on then-popular PC online services. Inspired by the success of the game, several web-based online RPG games including “The Kingdom of the Winds” [37] and “Lineage” [38] were introduced, and created over 5 billion dollar online gaming market in Korea in the following decade. This trend also created over 20 billion dollar market for multi-player online games globally, mostly in East Asia market.

The first commercial success of the social network services was made by Cyworld, which started its service in 1999. Cyworld gathered more than 70% of Korean population as its members, even several years before the birth of Facebook. Naver also made the first commercial success of online Q&A service, called Jishik-In, which means "Knowledge Man" in English, on its dominant search service. This helped Naver to grow to 10 billion dollar search powerhouse in Korea, and one of the ten most popular websites in the world (Fig.5).

The Korean commercial Internet community has invented some important business models, and made the first commercial successes in several key Internet services. Those inventions and successes made profound influence on subsequent commercial web-services globally by providing important business models for commercial services.

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