More than four years into commercial service in South Korea, WiBro has yet to live up to its hype, with KT and SK Telecom combined reaching just under 400,000 subscribers at the end of Q2 2010. WiBro has had a slow disappointing uptake so far, in part due poor coverage and a lack of suitable handsets.

KT and SK Telecom have been reluctant to invest heavily in WiBro networks, worrying that this would cannibalize revenue from their costly 3G wireless networks. To counter this reluctance the Korean government threatened to revoke mobile WiMAX licenses and to impose other sanctions imposed if operators withheld on investing what was needed. This threat was taken seriously and operators increased their investment budgets for WiBro.

SK Telecom is now planning to invest a total of KRW300 billion (US$250 million) over the next two years, of which KRW140 billion (US$116.5 million) is set to be spent in 2010 alone. KT has increased its investment budget for WiBro to US$1.075 billion by the end of 2011, from a previous estimate of US$986 million. 

KT has also revealed plans to expand coverage of its WiBro service to 82 cities by March 2011, serving 85% of the Korean population. It expects to reach 1.7 million WiBro subscribers by the end of 2012. The operator is introducing attractive price plans and launching an aggressive marketing campaign. 

The Korean government is taking other initiatives as well to save the future of WiBro. Policymakers are considering requiring KT and SK Telecom to allow other companies to provide wireless services using their networks. 

It remains to be seen whether opening these networks to encourage the emergence of mobile virtual network operators (MVNOs), would be enough to spur WiBro growth. However, if we look at UQ Communications in Japan, its business model has always been about MVNOs. UQ currently offers services to consumers via 40 MVNO partners that include resellers, ISPs and mobile operators. 

Another organization is aimed at the forefront of expanding WiBro. Consortium Korea Mobile Internet (KMI) is planning to establish a new WiBro company, and applied for a license in June 2010. According to the Korea Times, the Korea Communication Commission will make a decision on the company’s eligibility as a telecommunications operator by the end of October 2010, and complete the licensing process by December 2010 or January 2011. 

KMI is planning to spend KRW 2.7 trillion (US$2.4 billion) over the next five years to establish WiBro coverage in 85 cities, which will require the deployment of around 8,500 base stations. KMI envisions itself as a wholesaler,’ with each of its major shareholders ― Jaty Electronic, DVS Korea, Stem Science, C-motech, and C&S Asset Management ― leasing capacity from the planned WiBro network as MVNOs, in order to offer their own brands of mobile services to consumers.

It remains to be seen whether this consortium will get the job done. The most serious questions are related to money, as industry watchers are skeptical that KMI will manage to acquire the financial strength to give KT and SK Telecom a glimpse of competition. 

As part of the effort to save the future of WiBro, Samsung, KT and Intel have also joined hands. KT has established a consortium with Intel and Samsung Electronics called WiBro Infra Co. Intel Capital, Intel’s global investment organization, invested US$20 million in WiBro Infra, while Samsung and KT invested about US$52 million and US$56 million, respectively. 

As a symbolic gesture on the WiBro front, Intel is planning to launch nine sets of laptops and netbooks embedded with its mobile chipsets that provide WiBro network service.

With its presence in Uzbekistan, Russia and other countries, KT is also actively promoting its overseas market development. A good example is Rwanda, where KT won a US$7.66 million deal in 2007 from the government to build the infrastructure for a WiBro technology-based network in a bid to tap the African market. KT is expected to make more reasonable overseas investments to encourage WiBro growth in the coming years.

WiBro has garnered a small subscriber base due in large part to its channel bandwidth, which is different from the standard profile of WiMAX. WiBro’s profile is very unique to Korea and is not available in any other markets. It uses an 8.75 MHz profile, which has presented difficulties for any operators looking to deploy networks in countries where 10MHz is the standard bandwidth. WiBro devices and networks are not feasible in the countries using the 10 MHz profile in the 2.3 or 2.5 GHz bands.

The South Korean government has realized this bottleneck and has recently ordered local operators to build WiBro networks using the 10 MHz profile. This is an important step for achieving global harmonization between WiBro and WiMAX ecosystems. Migrating the WiBro network onto 10MHz WiMAX channels will facilitate more interoperability and roaming with WiMAX networks worldwide.

Maravedis believes that Korea’s gambit to promote development of WiBro/WiMAX as an NG standard has given way to market realities: Korea is simply too small of a market to lead device and applications developments that drive user demand and usage patterns, in turn driving the revenue needed for continued expansion of services. While Korea is undoubtedly a leading technology developer, companies centered there must look to foreign shores for sales and therefore, must comply with prevalent trends in standards, namely LTE.

MARAVEDIS is a leading analyst firm focusing on 4G and broadband wireless technologies and markets.

Author: By Basharat Ashai, Market Analyst, APAC & MEA