South Korea to Launch Massive Test of Mobile Entertainment

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SEOUL--In the next few months, South Korean companies will launch competing terrestrial and satellite-based multimedia broadcasting services, marking one of the first commercial showdowns over digital video content for mobile phones.

It's a gamble involving millions of dollars and could set a precedent for companies in other countries seeking to market subscription services for streaming bits of video, music, and information. South Korea--whose savvy consumers spend dead time on subways and buses glued to their cell phones, sending text messages and playing games--is prime territory for a test run. It's also one of the world's most broadband-connected countries.

In the United States, Verizon Communications last month launched a limited third-generation multimedia service, VCAST, in some cities on its broadband EV-DO network. For $15 a month, the service offers a range of video clips and news on handset models offered by Verizon and made by Korean electronic giants LG Electronics and Samsung Electronics.

The Korean experiment may be watched closely for several reasons, said Anthony Townsend, an urban planning research scientist at New York University. South Koreans have been accustomed to a broadband experience for years, so they may be more tolerant of technical limits, whereas Americans may expect devices to function at the speed of cable television. "It's going to be a tough sell," Townsend said of Verizon's launch.

Investment in Future

The South Korean government has high hopes that investments in its digital economy will give further impetus to the country's above-average economic growth. It predicts that multimedia broadcasts will create 160,000 jobs over the next 10 years, with $13 billion in product sales and added services.

TU Media started a free satellite content service last month. The broadcasts come from a satellite it jointly launched in March 2004 with Mobile Broadcasting, a Japanese company backed by Toshiba.

South Korea is using its propriety Digital Multimedia Broadcast (DMB) standard, derived from the Digital Audio Broadcast (DAB) standard that enjoys wide use in Europe for radio broadcasts. Japan uses DAB for satellite broadcasts, too, but has its own standard for terrestrial broadcasts.

Both LG and Samsung have major investments in DMB and hope that it will be adopted throughput Europe as a standard. South Korea's ministry of communications has created a special task force to lobby for European use of the DMB standard, and Korean companies have performed several demonstrations.

The European Telecommunications Standards Institute (ETSI) picked the other competing technology, Digital Video Broadcasting - Handheld (DVB-H), as a standard in November. But ETSI recommendations for a standard are voluntary, not compulsory, according to Kevin Flynn, press coordinator for ETSI.

Whether it catches on remains to be seen. LG recently promoted its DMB standard at the 3GSM Conference at Cannes as requiring less infrastructure investment than DVB-H because of existing DAB services in many countries. In South Korea, however, satellite and terrestrial systems both use the DMB standard.

Unlike terrestrial-based systems, satellite DMB immediately covers the whole country.

TU Media is aiming for a full subscription-based service by May, priced at about $12 per month. When fully launched, TU Media's satellite broadcasts will provide 14 video and 22 audio channels. TU Media has contracted with production companies to create short videos, skits, and films for its broadcasts.

Company officials predict that 600,000 people will buy handsets for satellite broadcasts and sign up for the service in 2005 alone. They anticipate having 6.6 million subscribers within five years, said Huh Jae-young, public relations manager at TU Media.

A Competitive Market

Soon, however, TU Media will face a ground-based competitor. In March the Korean Broadcasting Commission, which regulates South Korea's airwaves, will select three broadcasting companies and three consortia composed of dozens of companies each to provide terrestrial-based multimedia services.

South Korea's four main broadcasters have applied. Terrestrial broadcasts will be free because the government forbids charging for what are considered public broadcasts. Companies backing terrestrial systems say without a monthly fee--some proposals have called for charging a fee of less than $5--it will be difficult to cover pricey infrastructure investments.

One major broadcaster, Munhwa Broadcasting, is vying for one of the slots as a terrestrial broadcaster while also maintaining a partnership for satellite broadcasts. The Korean Broadcasting System, another main broadcaster, is readying its content for terrestrial-based multimedia systems.

But questions remain about whether, over the long term, satellite and cable providers can compete with major broadcasters that spend tens of millions of dollars annually for their appealing programming.

"The programs of ground-wave TV broadcasters are the most popular," said Do Jun-ho, a journalism professor at Sookmyung Women's University, on a news program about TU Media's trial launch last month aired by the Korean Broadcasting System. "Therefore, success will largely depend on whether their programs are provided or not."

The winner may come down to which company can most quickly establish the largest subscription base. TU Media is 30 percent owned by SK Telecom, the largest mobile phone provider in South Korea, and has the advantage of a large customer base.

Initially observers thought that both satellite and terrestrial multimedia broadcasts might be complementary services. But technical limitations mean that consumers will have to opt for one or the other, since phones won't be able to handle both signals.

The only phone satellite-capable phone on the market now--Samsung's SCH-100, a swivel-head screen--costs around $700. Other companies are preparing entrants for the market, but prices will remain higher than for phones that can't carry satellite broadcasts.

Subscription pricing plans and handset prices could come down over time, however. "In my opinion, they are taking the two most successful electronic devices and putting them together," Townsend said. "This one definitely has a lot of potential."

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