KT chairman proposes to build global virtual goods market

SPAIN: KT chairman, Lee Suk-Chae forecasted the dismal and bleak future of the traditional telecom industry and proposed an alternative in his keynote speech delivered at the Mobile World Congress 2013 in Barcelona, Spain on the 26th of February.

Chairman Lee in his speech to a crowd of CEOs representing mobile operators and device manufacturers said that “legacy networks are moving to the All-IP broadband faster than any other country in Korea,” and also forecasted “the importance and value of traditional communication business will continue to diminish even more in the broadband era.”

Lee also pointed out the harsh challenges which Telcos like KT are facing today whereas OTT (Over-The-Top) players using broadband networks such as KaKaotalk are flourishing.

Lee said, since KT introduced the iPhone over 4 trillion krw was invested in mobile networks in the last three years, however earnings were stagnant. However, internet portals like Naver have made substantial revenues by distributing virtual goods and providing application services. Virtual Goods refers to non-communication services produced, distributed and consumed online in the broadband era including digital contents, applications, IT solutions, e-Learning, e-Health and etc.,.

Lee said, “Telcos must now become virtual goods manufacturers or virtual goods store distributors like apple’s app store.” This proposes for the creation of a huge market for the trading of broadband based virtual goods where numerous people buy and sell goods in this marketplace for a fee.

He said “KT is directly entering the virtual goods market and transforming from a ‘traditional telco’ to a global ‘ICT Convergence corporation’ and continued to elaborate with KT’s case study. KT provides IPTV services on both fixed and mobile, and has brought up to date the mass consumption of contents era and also have entered the media contents sector. In addition, we are also utilizing smart devices to provide e-learning services to contribute in mitigating educational inequality.

At the same time, KT has actively entered the virtual goods distribution market to provide various virtual goods manufacturers a marketplace for their products. KT is currently running sites like Soompi(Korean wave English information site), Ustream(real time videa streaming site), Genie(smartphone music service) and the Korea-China-Japan common application market OASIS.

Lee said: “KT’s fierce struggles today will be the exactly the future of what global telcos will be faced with. Telcos to transform themselves into broadband based virtual goods players must go beyond local markets and collaborate to create a global ‘Common market'."

Efforts to create global common markets were also made in the past. At the 2010 Mobile World Congress, global telcos initiated ‘WAC(Wholesale Applications Community)’ going beyond OS, device and network and possible for free virtual goods distribution.

However, it was difficult for WAC to achieve growth amidst the fast expansion of iOS and Androids. Also, the formation of the global common market has been delayed by telcos’ conventional practices rather than looking to new markets of virtual goods.

Lee proposed in his speech toward chief executives of global telcos “to go beyond the spirit of WAC for the creation of a common market.” He stressed that to create a global application market we must build a competing system of 4-5 OS operations or incubate other operating systems like Tizen. In addition, chairman Lee added that if it is difficult to create a global scale market at once then at least partial implementation from telcos for a common free trade market could be an alternative, and it also proposed for possible action to make a joint venture for speedy decision making process.

Lee explained that, “The virtual goods economy will not only create new job opportunities but also contribute to mitigate various social problems, such as educational inequality and energy scarcity, and thus provide new growth engines for the global economy.”

Following the keynote address, Lee participated in discussions in the ‘Future of Communications’ conference with fellow panel participants represented by prominent CEOs from global telecom operators, Hans Vestberg (Chief Executive of Ericsson), Rene Obermann (CEO of DeutscheTelekom) and Talman Marco (Viber Media).