Ministry to take closer look at SKT

The Ministry of Information and Communication yesterday stood firm on its stance to restrict SK Telecom Co.`s handset business, countering accusations made by the country`s largest mobile-phone operator that regulations are becoming excessive.

The ministry also said it plans to generate 52 billion won ($51.7 million) in investment for the broadband convergence network pilot projects and start trial services in six cities nationwide by the second half of the year.

At a news conference in Seoul yesterday, Information and Communication Minister Chin Dae-je said the increasing market share of SK Telecom`s handset affiliate, SK Teletech Co., could hurt competition on the domestic telecom market by eliminating the "healthy tension" between mobile-phone operators and electronics manufacturers.

"The government is cautioning against the possibilities of SK Telecom extending its dominance in the mobile-phone market to the manufacturing side by accepting more supplies from its handset affiliate," he said.

"We will hold further discussions with mobile-phone operators and handset manufacturers and hold public hearings before setting a standard on the market cap for handsets made by the affiliates of mobile-phone operators."

Korean telecommunications law prohibits mobile-phone operators from marketing handsets but it does not cover the activities of affiliates. The Communication Ministry is seeking a revision that would force mobile-phone carriers to give up their ownership interests in the handset affiliates or face caps on market share and production.

SK Telecom CEO Kim Shin-bae recently questioned the logic employed by the Communication Ministry and electronics manufacturers to restrict the company`s handset business. He pointed out that Korea`s three largest mobile-phone makers Samsung Electronics Co., LG Electronics Inc. and Pantech & Curitel Co. control more than 85 percent of the domestic market.

SK Telecom is the country`s largest mobile-phone carrier with a 51.3 percent market share in 2004. Under the antitrust agreement following SK Telecom`s 2002 takeover of Shinsegi Telecom, the mobile operator may sell no more than 1.2 million SK Teletech handsets per year to its subscribers through 2005.

With regulators lifting the market cap at the end of the year, electronics manufacturers have been calling for further restrictions on SK Telecom`s handset business, fearing that the company will aggressively go after the handset market using its dominant customer pool.

Separately, Chin said he expects the network infrastructure for the broadband convergence network pilot projects to be completed by the second quarter. The broadband convergence network is conceived as a massive Internet protocol where people can connect from a wide range of terminals from nearly everywhere, while allowing the overlapping of voice, video and data services and applications. It is designed to provide connection at speeds of 50 Mbps to 100 Mbps, or 50 times faster than current broadband services, with nationwide coverage.

"Land-based television broadcasters will see their role expand eventually in the broadband convergence network trial projects as developing Internet protocol-based broadcast applications and interactive data transmission systems will become critical. The government is also working to expand the participation of cable television operators in the broadband convergence network project," he said.

The broadband convergence network is seen as the most critical project of Korea`s national info-tech strategy, dubbed "IT839," that aims to create an integrated service environment combining wired and wireless communication, data transmission and broadcasts.

In August last year, the government picked three consortia - respectively led by KT Corp., SK Telecom and Dacom Corp. - to conduct the broadband convergence network trial operations that are hoped to attract 2 million users by the year`s end. Commercial services are expected to go online in 2006.

In other plans, Chin said the ministry will invest 4.2 billion won this year to support the deployment of radio-frequency identification systems at government agencies such as the Ministry of National Defense and the Public Procurement Office. Earlier in the day, the Defense Ministry said it is preparing to adopt RFID systems to manage its inventory of munitions and supplies through a joint development project with the Communication Ministry.

Chin also said the ministry plans to lure investment from local companies to set up an industrial cluster for RFID technology in the western coastal city of Songdo.

"RFID will have an extensive impact on keeping growth alive in the info-tech sector in the next decade. We are talking with the Ministry of Planning and Budget over our road map plan for the RFID cluster," he said.

RFID describes a method of identifying unique items using radio waves, through an electronic reader communicating with a microchip embedded on objects that store information. The technology is designed to improve efficiency in supply chain management and inventory control.

Korean policymakers hope that RFID deployment at government organizations, such as the Defense Ministry, will accelerate the use of RFID technology on the commercial side by bringing down costs. For RFID tags to be more widely used, analysts believe the price per tag must drop to less than 5 cents from the current 1,000 won ($1) level, which is only possible with greater volume.

(thkim@heraldm.com)



By Kim Tong-hyung