Why the Future is in South Korea

Business 2.0 has an interesting article arguing that the future is in South Korea. There’s so much food for thought in this article that I had trouble deciding whether to make one long entry about it or a half dozen separate ones. (I’ve chosen the former.) Here’s the premise of the article:

South Korea has become the world’s best laboratory for broadband services – and a place to look to for answers on how the Internet business may evolve….Cyworld, for example, is a social network owned by a subsidiary of SK Telecom, the country’s largest wireless provider. To an American eye, the Cyworld service looks like a mixture of some of the hottest US properties: it’s MySpace meets Flickr and Blogger and AIM and Second Life.

Users have avatars that visit and can link to each other’s “minihompy” – a miniature homepage that’s actually a 3-D room containing a users’ blog, photos, and virtual items for sale. Cyworld’s digital garage sales include music, ringtones, clothes for your avatar and furnishings for your own minihompy.

Cyworld has penetration rates that would make Rupert Murdoch, CEO of MySpace parent News Corp. (Research), green with envy: An astonishing 90 percent of South Koreans in their 20s use the service. Celebrities and politicians set up their own minihompies, and the way to get ahead in twentysomething Korean society is to found a popular Cyworld club, or chat room.

This story came to my attention via a posting by Dewayne Hendricks on Dave Farber’s IP List. There’s also a lot of interesting followup on the list. For example…

Bart Stuck wrote:

“In 1990 Korea Telecom initiated a network study, KT 2000, to take their network to world class in the year 2000. I was engaged as a consultant, And suggested the following: South Korea has 80% of its population in Seoul and five other cities, so deploy optical fiber rings into each city, And trunk them together to provide high speed digital transport for the chaebol. Once that is done, the rings can sprout new optical fiber tentacles: 1) for cellular telephony, 2)for CATV, and for 3)high speed data communications via xDSL and CATV modems (no World Wide Web in 1990). Each of these Rollouts had pro forma income statements, with a revenue model and an expense model (including equipment depreciation, operations, marketing and sales) And each of these rollouts had to PAY FOR THEMSELVES. The study was completed in mid 1991, the management of KT said thank you (HQ has copies Of the final study, four inches thick, in Hangol), and the rest was history. The bulk of the investment went into thenetwork in 1992-1995, and at the very end, deploying PCs was a relatively small amount of total CAPEX.”

Bruce Kushnik then wrote:

“The exact same type of study was done by Deloitte & Touche for the Bell companies — though instead of phone based it was ‘state-based’. Opportunity New Jersey, Pennsylvania, Illinois, Indiana and Ohio all used the same $1 million cookie-cutter study… also with revenue and cost models and all showing how fiber optic services would dramatically change America’s economic growth, — Tele-Learning, Tele-conferencing, Tele-anything you want.

This same type of study was also done by other Bell groups —-

The primary difference — once the laws were changed in favor of the Bell companies, they took the money and ran… Virtually no PUC ever held the companies accountable for the extra cash and tax breaks. Pennsylvania’s PUC tried in 2000 but was shot down, and the Ratepayer Advocate of NJ wrote a
scathing review in 1997 — didn’t matter. (I believe Indiana is the only state that got real concessions for some of the problems.)

Well documented, —According to the New Jersey state order, signed in 1993, that granted the phone companies large sums of customers’ money for upgrading the state with fiber, by 2010 the ENTIRE state is supposed to have been upgraded with 45mbps services, capable of high definition video, as well as open to competitors and ubiquitously deployed.

Here’s the actual info from the New Jersey Order, created in 1993. This “Order”, including this timeline and commitments is still on the books.

Here’s California’s timeline for 5.5 million homes by 2000

We wouldn’t be 16th in Broadband had the states enforced the laws and the FCC analysis/reports actually examined the funding issues. (it left out every state commitment in their reports for Section 706.

Here’s a summary of the FCC’s data problems. [And here’s my article] $200 billion broadband scandal.

That’s a sobering discussion of the failures of corporate responsibility in the U.S. Even today, the telcos are far too reluctant to bet on the future.

The discussion on the list also addressed the issue of connectivity to the outside world. The article had mentioned that the most successful Korean services were all homegrown. Udhay Shankar wrote: “This might also have something to do with the fact that (when I was in Seoul last) accessing the outside internet, while adequately fast, is nowhere near the multi-megabit speeds you can get from servers located in Korea. Trying to access a streaming multimedia service located outside Korea (yes, I tried) was not a very responsive experience.”

Brett Glass replied: “This may have something to do with the fact that Korea is among the #1 sources of spam. One of the unintended negative consequences of providing ubiquitous, extremely high speed access to nearly an entire country is that others actually have to throttle or block traffic from those networks to prevent abuse.”

John Levine expanded on South Korea’s bad net-behavior:

“South Korea has made itself into a thoroughly unpleasant net neighbor. When they wired up the country, they gave no apparent thought to security. You could tell each time a new school came online because it had a server with the same unpatched version of Windows which was taken over by worms in about 15 minutes and started spewing spam and worse. They compounded the damage with an ill-considered spam law that made spam legal so long as the subject line had the Korean equivalent of ADV:, so the blast of illegally relayed foreign spam was soon joined by an equal blast of home-grown spam. Complaining about the spam was useless for a combination of reasons: the nominal managers of most of the computers were completely untrained, they usually had no language in common with the recipients of the spam their networks were sending, and the sheer volume of spam was so huge that even the few competent ones were overwhelmed.

Several years ago I got so tired of Korean spam that I got the list of IP ranges assigned to Korea and set up a DNSBL for my own use called korea.services.net. Despite having no publicity other than word of mouth, it’s now used by mail admins around the world and fields hundreds of queries a second. I keep statistics, and will remove networks on request if it’s not seeing spam from them, but I have only
removed a few small industrial and education networks and the big ones, most notably the national phone company’s Kornet just blast away. Now and then someone writes and says “how dare you block our whole network, it’s a gross overreaction.” I write back and say “what would you do if a network were sending a thousand spams for every real message? That’s what I did.”

The government changed the spam law to be reasonable, and I have talked to people from the Korean government who are trying to deal with their network security problems, but they have an impossible task. I gather that most people in Korea consider e-mail to be useless, and if they use it at all, they discard an address after a month or two because of the spam load. I don’t follow other security issues as closely, but I see a lot of Korean addresses wherever trouble arises.

So it’s true, wiring up the entire country that fast was a technical tour de force, but before you wish for your own country to do the same thing, be sure you understand what you’re asking for.”

(On a contrary note, though, Slashdot just pointed to a Register article noting that 64% of spam comes from Taiwan. The US is #2 with 24%, and China is #3 with 3%. Korea wasn’t even on the list. So this looks like a good time to remember the biblical admonition against looking for the mote in your neighbor’s eye….)

Back to the positive enthusiasm of the original article, here are some of the other things that caught my attention:

  • “Cyworld is a license to print money. The service itself is free (and available on cellphones as well as online), but to buy all the extras – like ringtones and virtual furnishings – will cost you “acorns,” the service’s virtual currency. Cyworld sells its users $300,000 in acorns every single day.” Do the math: a free service, with a commerce marketplace owned by the vendor that generates well over $100 million a year in revenue. In Korea, with a population one sixth the size of the US. Not too shabby.
  • “Users have avatars that visit and can link to each other’s “minihompy” – a miniature homepage that’s actually a 3-D room containing a users’ blog, photos, and virtual items for sale.” Love that neologism, “minihompy”! But what I really found interesting here was the idea that the 3D web has reached the mass market not through wide-open worlds like Second Life, but by a constrained model that creates the 3D equivalent of MySpace.
  • “Cyworld is expanding fast. It launched in China and Japan last year, and a US launch is slated for later this year…. SK Telecom’s ace in the hole is its experience with running a social network on mobile devices.” It has always seemed to me that social networking and the phone are made for each other. Current social networks require you to recreate your communications network. But applications like telephony, IM, and email, tools for communication between your real social network, are ripe for reinvention in the Web 2.0 world. The question is whether the phone companies have the genetic makeup to let go of their walled gardens. Cyworld may work in Korea because SK Telecom holds all the cards, much as AOL did before the introduction of the open world wide web. What I really want to see is this kind of thing built on the open web, with 3D minihompy servers that can be put up by anyone as easily as they can put up a normal web site, and with open interconnectivity to social networking on phones, via interoperable IM networks, or any other mechanism that people use to communicate with each other.

Lots of food for thought.