Is South Korea the Exception or the Rule?

At the recent Broadband World Forum Asia 2013 conference, Korea Telecom’s EVP Tae-Yol Yoo predicted the collapse of voice and SMS services revenues in Korea:

  • KT’s PSTN revenue has dropped from $5.4 billion in 2008 to $2.7 billion in 2012;
  • Its mobile voice revenue fell from $6.2 billion in 2010 to $5.2 billion last year a fall of 16%;
  • OTT messaging (KakaoTalk) in Korea has jumped from 100 million daily in 2010 to 4 billion now;and
  • Korea’s SMS has fallen from 330 million daily in to 128 million during the same period.

Focusing on a recent personal experience while roaming, we moved to Verizon Wireless, my family and I are using the share everything plan.  We chose Verizon because they have a 2GB shared plan, while AT&T did not, only having a 1 and 4GB plan, which again demonstrates the lack of competition in the US market that enables such un-customer-focused pricing.

The interesting thing is Verizon’s roaming data charges, $25 for 100MB, which can be pro-rated for the time I am abroad, e.g. if I’m out of the country for 10 days I can get 33MB for about $8.  They still threaten the extortionate $20 per MB if I do not jump through their hoops.  Now, roaming SMS is 50c per sent message, and voice is $1.29 per minute.  The reason for this crazy difference in pricing is the silo’ed nature of telcos, there’s likely a dusty old international voice and SMS pricing manager hanging on to a legacy pricing model, when customers’ expectations and the telcos’ other products have moved on.

So how is that pricing impacting my communications policies?  We’re using Skype.  When I’m working on my laptop we can chat over Skype using the hotel’s WiFi, and when I’m out and about we use mobile data on my Galaxy Note 2.  By the way, I’ll be doing a weblog soon on my experiences of moving from an iPhone 4 to the Samsung Galaxy Note 2, I was dubious about the phablet category, hence the experiment.  But back to this weblog, we are rational buyers, and telcos’ pricing is forcing its customers to internet based service providers and away from their services, and they’re going about it in a nasty way, i.e. jump through these hoops and its 25c per MB (which is reasonable) else its $20 per MB (an 8000% price difference which is extortionate).

Tae-Yol pointed to virtual goods as the new business model in the broadband era.  “Consumption of these virtual good is proportional to the number of broadband connections.”  But Apple and Google have that wrapped up in most markets.  And people need to wake up to the fact the games are rigged to make you pay, the reason that level was so hard is you’re being “groomed” for another $1.49 charge.  In-app billing has destroyed games and turned them into con-apps, where they’re messing about with the level of play to squeeze cash out of its players.

But back to the question on whether South Korea is the exception or the rule.  As explained, Virtual Goods is a seedy world focused on conning people out of cash, where Apple’s App Store and Google Play dominate the distribution of those apps.  So I think its a false hope for most telcos.  Pricing is critical, the crazy roaming voice and SMS charges are doing more harm than good as they’re driving customers to adopt internet-based services, and once there customers do not come back easily.  The same is true for voice and SMS charges in-country for many markets, the US being an exception as its as cheap to buy an unlimited plan as a typical consumption plan.  Telcos’ pricing is driving customers’ behavior away from Telcos, and telcos are not responding, this trajectory can only lead to becoming ISP (Internet Service Provider).

South Korea is the rule, their future I doubt will be saved by virtual goods.  Rather a real commitment to either being a service provider or an ISP, and the bias from the current pricing appears to be ISP.  What do you think?