1. Broadband Internet Business And Beyond Lee, In-Ho Management Research Lab. April, 2005

2. 1 Agenda I I Broadband Internet in Korea II Success of Broadband Internet Business in Korea III Impact of Broadband on Society IV Beyond the Broadband Internet

3. 2 1 1 Growth of Broadband Users in Korea 2 2 Initial Deployment 7 7 International Comparison I I Broadband Internet in Korea 3 3 Broadband Market Share 4 4 Development of KTs Broadband Service 5 5 KTs Broadband Service Portfolio 6 6 KTs Broadband Networks

4. 3 Growth of Broadband Users in Korea (unit: thousands)(source: www.nic.or.kr) Subscribers are increasing dramatically due to high internet penetration 70.2% of population use internet in Korea 77.8% of households are broadband users in Korea

5. 4 Initial Deployment Courageous deployment of a new comer caused positive cycle ISDN xDSL Cable modem Cost? - High equipment cost Demand? - Low demand due to high price QoS? - Varying with distance & quality of copper line Demand up Deployment Cost down Service Price down Broadband technologies Hanaro telecom, 2 nd Local carrier Launched ADSL At the initial stage of broadband, full-scale commercial deployment of broadband seemed like a risky road to take Hanaro Telecoms bold trial succeeded and brought booming in demand for broadband internet

6. 5 Broadband Market Share xDSL is a dominant technology, KT is a dominant player in Korea Technology market share Carrier market share (source: www.mic.go.kr, Jan. 2005) More than 57% of broadband users subscribe to xDSL KT, a latecomer in broadband market, became the dominant carrier occupying over 50% of the total Korean market

7. 6 Development of KTs Broadband Service 2000.5 – Megapass(KTs Umbrella Brand) Launch 2002.1 – Nespot Service Launch 1999.5- Satellite Service Launch 2000.11 – Ntopia(G-bit Ethernet service) Launch 1999.10- B&A(Building & Apartment) Service Launch 1999.6- ADSL Service Launch (Commercialization) 2002.6– VDSL Service Launch 2003.1– Megapass Subscribers Exceeded 5 million 1997- First Trial ADSL Service 2000.6 – Achieved No. 1 player 2001.2 – Megapass Reaches 2 million Subscribers 2001.6 – Megapass Reaches 3 million Subscribers 2002.3 – Megapass Reaches 4 million Subscribers Open Minded User Group General Public Internet Mania Group KT made continuous efforts for advancing services to create demand

8. 7 KTs Broadband Service Portfolio KT launched Megapass, umbrella brand of KTs broadband service Depending on the speed offered and target users, the service is divided into Lite, Premium, Special, Ntopia, and Nespot Special I 4Mbps(Up) 20Mbps(Down) 42 $ Ntopia Nespot DescriptionSpeed Charge (USD) TargetTechnology Premium Lite Special II 4Mbps(Up/Down) 30 $ Large group of households xDSL,Satellite, BWLL,LAN Large apartment Complex (high-priced&speed) 100Mbps(Up/Down)36$ Newly-built building & apartment 11Mbps(Up/Down) Lite/ Premium/ Ntopia+10 $ SOHO, SMEs, Hotspot (Use wired / wireless access at the same time) 4Mbps(Up) 13Mbps(Down) 40 $ Large group of households xDSL VDSL Ethernet Wireless-LAN 4Mbps(Up) 50Mbps(Down) 45$

9. 8 2.5G x 2 Lines 2.5G x 1 Line Hangdong total : 36.945G 45M AUSTRALIA GIX 1.956G 2.794G SOUTHEAST ASIA 760M JAPAN USA POP NORTH AMERICA, EUROPE 29.377G OVERSEASBACKBONE Suwon Incheon CheJu KwangJu Ilsan TaeKu 3.969G 10G ~ 19G 20G ~ 29G 30G ~ 39G 40G ~ 49G JeonJu PuSan WonJu Hehwa Kooro DaeJeon CheonJu 16.200G CHINAHONGKONG KTs Broadband Networks

10. 9 Broadband lines per 100 population (source : Point Topic) Korea is a world leader in broadband business International Comparison Israel 13.9 KoreaHong KongNetherlands 17.5 21 253Q, 2004 (unit: lines) Canada 3.7 Hong Kong Korea Taiwan 4.8 11 4Q, 2001 5.6 (unit: lines)

11. 10 1 1 2 2 3 3 Broadband Success Factors II Success of Broadband Business in Korea KSF 1: Cultural Acceptance 4 4 5 5 KSF 2: Policy & Regulation KSF 3: Demand KSF 4: Supply

12. 11 All relevant factors needed Cultural Acceptance Policy & Regulation Demand Supply Dynamic interaction of KSFs needed Broadband Success Factors Broadband success in Korea attributed to four major factors

13. 12 Broadband Success Factors KSF 1 : Cultural Acceptance Hurry psychology Increasing demand for faster and faster connection speed Socially competitive: peer pressure Intolerance for slower connection having a slower connection than my neighbor Digital or die Historical lessons driving national consensus for digitalization

14. 13 Govt projects / initiatives KII, Korea Information Infrastructure Global Leader, e-Korea Initiative e-Government Initiative Pro-competition Facility-based competition Deregulation for ISP Business Certification System for Super High-Speed Building Cyber Apartments & Buildings Classification: Premier Class, 1st Class, 2nd Class, 3rd Class KSF 2 : Policy & Regulation Broadband Success Factors

15. 14 Enthusiastic adoption of new services Affluent, savvy, young users Various contents & killer applications Online games, cyber stock trading Use of IT in education from elementary to university Wholesale demand PC cafes as aggregators.com ventures KSF 3 : Demand Broadband Success Factors

16. 15 Stiff Competition 3 major players Aggressive pricing competition Facility-based competition Geographical Advantages More than 50% households in apartment complexes More than 93% of all residents within 4km of central offices Dropping network costs Cost effective deployment Mass Deployment and Operating Know-How KSF 4 : Supply Broadband Success Factors

17. 16 1 1 Increase of Internet Usage 2 2 Prosperity of Cyber Society 3 3 III Impact of Broadband on Society From Off-line to Online

18. 17 Increase of Internet Usage Broadband stimulated usage of internet in our daily lives Users spend 11.7 hours on the internet per week on average 86.7% of internet users have one or more e-mail accounts (unit: hours) Weekly hours spent on internet (unit: %) E-mail usage

19. 18 From Off-line to Online Broadband changes every aspects of our daily lives 47.3% of internet users have bought goods/services on-line 58.2% of internet users use on-line stock trading 31.6% of internet users use on-line banking On-line purchasing On-line stock trading On-line banking (unit: %)

20. 19 Prosperity of Cyber Society Broadband accelerated the prosperity of cyber community Cyber politics Cyber community 41.7% of internet users use internet messenger 6.3 hours per week on average Main reason is for friendship/chatting(87.1%) 50.1% of internet users belong to online communities Over 7million cyber communities exist Internet votes during the presidential candidate elections in 2002 2.5% of votes, during April 18~27, 2002 More than 81% of congressmen have personal homepage 84% of netizens feel that internet is an effective way to express ones political opinion

21. 20 1 1 Wireless Lan 2 2 Portable Internet (WiBro) 3 3 Moving to Mobile Data Service IV Beyond the Broadband Internet IPTV 4 4 Home Networking 5 5 NGN 6 6

22. 21 Moving to Mobile Data Service 0.1 1 2 20 Low Very high High W-CDMA (3G) Mobility Speed (Mbps) WLAN 2.3GHz Portable Internet xDSL/HFC/B-WLL Cellular,PCS (2G/2.5G) 10 Data service positioning Mobile data service subscribers Increase in mobile data usage requires mobility to broadband 2003.6 2003.12 2004.4 2005.2 (unit:1,000 users) Mobile Data Service Users nearly Doubled in one and half years 2.5 G service is currently available and 3 G service in preparation

23. 22 Wireless Lan WLAN hotspot network configurationPublic hotspots Providing wireless broadband access to home and public hotspots KT deployed a wireless LAN service called Nespot in early 2002 Expanding terminals and hotspots

24. 23 Portable Internet (WiBro) Internet Wireless LAN 2.3 GHz WiBro service coveringMarket potential in Korea 2.3GHz wireless service enhancing mobility for multimedia communication (unit: 1,000 users)(unit: million US$) (source: KISDI) Wibro, Portable Internet using IEEE802.11g will upgrade the WLAN service The market potential of WiBro is quite promising so far

25. 24 IP TV Contents Provider Live Content TV Services Delivered over a closed IP, QoS enabled Network VOD T- Internet T-Commerce On-Demand Content On-Demand Encoder Live EncoderIP (DSL) TV via STB Live Streaming Server VOD Streaming Server Subscriber Management Server TV Services of comparable/better quality than existing digital TV services Provides VOD, Commerce, Internet services through broadband network via STB

26. 25 Home Networking VoD / Multicast Tele-metering / Energy saving Medical / Health Security / Safety T-Commerce VoD / Multicast Tele-metering / Energy saving Medical / Health Security / Safety T-Commerce Appliance control Home control VoD Home surveillance Tele- metering Remote health care Scheduled shutoff Content filtering Home Gateway xDSL Ethernet FTTx Convergence of telecom, broadcasting and home appliances Remote controlling and networking of home appliances are becoming possible Various state-of-the-art services carried out in home

27. 26 Today Single-service NW Data/IP Networks PLMN PSTN/ISDN CATV Services Access Transport & Switching Networks Servers Clients Backbone Network Access Tomorrow Multi-service NW/client-server Communication Control Content Access NGN Core Network environments of user-oriented ubiquitous services Establish NGN for Seamless access conditions New interconnection systems needed according to the change

28. 27 NGN Solution : Co-developing & Cooperation among carriers VoIP Interconnection Interconnection system in the internet International settlement in the internet Transiting from PSTN to IP Networks Peering & Transit Dominant Generates zero revenue Current Situation Developing a new interconnection system for All-IP networks Short-term Issues New Interconnection System Needed Problem : Losing Main Revenue Sources Long-term Issue

29. 28 The Value Networking Company THANK YOU!