The Strategy for Building Information Society in Korea

1
The Strategy for Building Information Society in
Korea

• Kijoo Lee
• Senior Information Officer
• Informatics Program, ISG
• The World Bank
• The Conference for Financing Information Society
• Santiago, Chile
• July23, 2003

2
Content
Koreas ICT Status and Achievements
I
Koreas Informatization Promotion Strategies
II
Financing the Informatization
III
Success Factors and Future Tasks
IV
Cooperation between DGF/MIC and Latin America
V
Concluding Remarks
VI
3
I. Koreas ICT Status and Achievements

4
Koreas ICT Status (End of 2002)
Unit 10,000 Subscriber
Digital TV 1,080,000 Penetration 7.3
of Total Household
3,500
3,000
68
2,500
IT Industry Production 160.1 Billion USD (14.9
of GDP)
of population
58
49.3
2,000
of population
of population
12
1,500
36
of population
IT Export 46.4 Billion USD 28.6 of Total Export
of population
1,000
70
500
of households
0
Wireline
Wireless Sub.
Internet User
CDMA 2000-1x
Broadband User
Electronic Signature
5
Achievements
Building Network Based Economy

• Leader in Broadband
• Leader in 3G Service

Growth
Engine of Economic Growth
Informatization

• 21.3 growth per year

• Economic Efficiency
• Building E-Government

6
II. Koreas Informatization Promotion
Strategies
7
Koreas Information Promotion Strategies
Bridging Digital Divide
Frameworks
E-Government
Network Build-out
Resolving Adverse Effects
ICT Industry Promotion
Competition
Promotion Strategies
8
1. Frameworks
Strengthening the Informatization
Strategic Framework
Basic Plan for Informatization
Legal Regulatory Frameworks
Informatization Promotion Fund
9
Strengthening the Informatization

• The establishment of the informatization
  promotion system
• - MIC for balanced development
• Informatization Promotion Act
• Informatization Promotion Committee
• Informatization Planning Office in MIC
• Special committee for the e-Government

10
Basic Plan for the Informatization Promotion
11
Legal and Regulatory Frameworks

• A total of 187 acts have been enacted or revised
  based on the results of
• the analysis of 7 rounds from 95.
• 86 laws, including the Basic Act on
  Informatization Promotion, have been
• enacted or revised for informatization
  promotion in the public sector
• - 101 laws, including Acts on Digital Signatures
  and Online Digital Contents
• Industry Promotion, have been enacted or
  revised for the development
• of the IT industry and informatization of the
  private sector

12
Informatization Promotion Fund
13
2. Network Build-out
Mondernize Fixed Line
Network Build-out
Fast 2G/3G Roll-out
Leading Broadband Network
14
Mordernize Fixed Line
Up to early 80s, fixed line facilities were
lagging behind in terms of quality and quantity.
(penetration rate was 7.2)

• Major Policies
• - Financed the large-scale investment through
  installation fee, telephone
• bond, tariff, etc
• Korea became the 10th producer in the world with
  the successful development of
• fully digitized telephone switching system,
  TDX-1 in 86
• -1987 marks the opening of the 1 phone per
  person era, completing the
• digitization of wide area telephone switching
  and achieving no waiting list for
• telephone line installation

Those resulting high quality telephone networks
provide the physical basis for the roll out of
xDSL, Broadband Internet.
15
Fast 2G/3G Roll-out
Up to the middle of the 80s, wireless services
were limited.

• Major Policies
• - In 84, Korea Mobile Telecom was spun off from
  Korea Telecom
• - Successful deployment of CDMA with the
  investment of USD 84.44M from 89 to 96
• Introduced the competition issuing licenses of 1
  cellular operator in 94 and 3 PCS operators in
  96
• Licenses granted for 3G operators(2 for W-CDMA,
  1 for CDMA 2000) in Mar and December, 2002

The number of mobile service subscribers
surpassed that of the fixed service in Sep,
99. The number of subscriber is now at 32.34
million, ranking 8th in the world as of Dec, 02
. In addition, with the expanded usage of 3G
service(CDMA-1X, launched in Oct 00), the number
of subscribers had reached 17.2 million as of the
end of 02. By the end of this year, 3G
service(W-CDMA) will be offered in the Seoul
metropolitan Area.
16
Leading Broadband Network
In March 1995, Comprehensive Plan for KII(Korea
Information Infrastructure) was launched for the
construction of a nationwide optical network. -
USD 9B was invested for this project. Government
funds USD 1B for the KII-Government,
KII-Testbed. - In December 2000, 144 call
zones were connected through high speed large
capacity optical cables(155Mbps- 5Gbps). - A
variety of resources including CATV, telephone
line, satellite, optical cables were used for
access network in KII-Public. ADSL was especially
endorsed.
KII-Testbed
KII-Government
KII-Public
By 2005, USD 16.3B(government funds USD 1.76B)
will be invested while service with speeds of
622Mbps for government and business, and 20Mbps
for households will be provided.
17
3. E-Government
National Basic Information System was classified
into 5 areas of administration, finance,
education and research, defense and
national security and carried out. - National DBs
for the essential information was constructed. -
USD 250M was invested from 87 to 96.
National Basic Information System, electornizing
basic administrative information and connecting
administration, enhanced efficiency of the
public sector and high quality of administrative
service.
E-Government Special Committee was organized to
complete e-government by 2002, and initiated the
11 key projects. - Single Window
e-Govenrment(G4C), National e-Procurement(G2B),
National Finance Information System(G2G) were
implemented. - USD 190M was invested from 01 to
02.
18
4. Bridging the Digital Divide
With the rapid rise of informatization, the
Digital Divide between classes and regions began
to widen in the 90s.
Bridging the digital divide - KADO(Korea Agency
for Digital Opportunity Promotion) develops
regional informatization projects, creates
greater awareness of informatization, and runs
computer education program - Comprehensive Plan
for the resolving the digital divide was
established in 01. - 10 million people(21of
the population) education program completed. -
4,397 information facilities have been setup for
the free in remote and rural areas. - KT is
obliged to provide broadband internet
service(1Mbps) to all farming and fishing
village by 2005.
19
5. Resolving Adverse Effects
With the spread of information technology, we
witnessed the social losses such as privacy
infringement, computer hacking and computer
viruses.
In order to keep these losses to a minimum, the
countermeasures for the adverse effects of
informatization were established and Implemented
in Oct 99. - Digital Signature Act(Feb 99) and
Basic Act on Information Security(Jan 01) -
Certification Body for Digital Signature was
designated(Feb 00) - Personal Information
Mediation Committee was established (Dec 01) -
Enforcing the law and regulation to protect
against spam mail
20
6. Competition(1)
Market Structure(02.12)

Monopoly
Duopoly
Competition
97
Local
Long Distance
96
97(3)
International
96(3)
90
Leased Line
96(18)
90
Broadband
99
00(6)
Mobile Phone
94
96(3)
3G
03
04(3)
( ) Number of operators
21
6. Competition(2)
Regulatory Body
KCC(Korea Communication Commission) was
established in 1992 - 7 Commissioners(including
the chairperson) Appointed by the President - 3
Special Committees - Legal Issues/Contracts,
Tariff, and Accounting - 5 Divisions and 25
Employees
Major Functions - Examine the agreement regarding
provision of facilities and interconnection -
Investigate unfair practices and arbitrate
consumer loss and damage - Authorize the
agreement between telecom operators - Arbitrate
disputes of network sharing and interconnection
between operators
22
6. Competition(3)
Regulatory Framework for Competition
Incumbents market dominance has become strong
through MA. Growing concern for the level
playing fields.

• Major Policies
• KT Privatization Privatization Plan was setup
  in 87, the process was
• started from 1993 and completed in Feb 2002
• - Interconnection Essential facility owners are
  required to provide interconnection
• - Accounting Separation Ban on cross subsidy of
  facility-based service operator
• - Tariff Approval(LocalKT, MobileSKT) and
  Notification(the others)
• - Carrier Pre-selection for long distance
  introduced in 97
• - Universal Service Fund Introduced in Jan 00.
• - LLU (Local Loop Unbundling) introduced in 02
• For Local networks, Broadband Networks
• Type Full Unbundling, Line Sharing,
  Bit-stream Access

23
6. Competition(4)
Future Plan

• Number Portability
• Local Telephony Implementing stage-wise from
  Jun 03 to Dec 04
• Mobile Implementing in 6 months intervals in
  order of SKT(1st), KTF(2nd),
• and LGT(3rd) from Jan 04
• Long-Run Incremental Cost
• - Assess the connection charge most effectively
• - Plan to establish detailed plans based on
  policy research reports coming
• December
• Revise Universal Service
• - Review the possibility of including the
  broadband in universal service after 2005

24
7. ICT Industry Promotion
Public-Private Partnership in RD
Relied heavily on foreign technology and
equipment until middle of 80s. MIC, research
institutions and manufactures launched
partnership for developing TDX and CDMA
technology. The domestic ICT industry could
acquire technology and enjoy the cost advantage.
Expand RD through ICT Human Resource Development
Need to increase the number and quality of highly
trained workers to create a RD base and for the
early realization of the information
society Established the Information and
Communication University in 1998, established IT
related department in universities, sponsored
research projects, media support, and scholarship
Develop SW, Digital Contents Industry
Crack down on illegal copying, prevent sharing of
softwaresupport the production and creation of
computer games and multimedia contents, support
new ventures
25
III. Financing the Informatization
26
Financing the Informatization
Informatization Promotion Fund
Informatization Support Program for Public
Sector
Universal Service Fund
KII-G KII-P
Tariff Strategy
Financing the Informatization
27
1. Informatization Promotion Fund
Goal
Status of Fund Investment
Promotion of e-Government Broadband Network
Roll-out Support RD and Standardization
Educating human resources in ICT
Funding Total of 7.78 billion USD
(9302) - Government USD 3.06B
(39.3) - Private Sector USD 3.59B (46.2) -
Miscellaneous profits and interests
USD 1.13B (14.5) Investment
Total of 5.33 billion USD
(9403) - Broadband infrastructure and
promotion USD
800M (15.1) - Informatization promotion
USD 1.07B (20) - Infra
for IT industry
USD 375M (7) - IT RD USD 2B (37.5) - ICT
Human Resource USD 950M (17.8) -
Standardization USD 135M (2.6)
Management

• MIC(overall management), IITA(specific
• project management)
• Fund Management Council (Evaluation)
• - Chair Vice Minister of MIC
• Members Director Generals of related
• Ministries

28
2. Informatization Support Program for Public
Sector (1)
Major support area outcome

• Search and support informatization projects that
  are difficult to
• pursue at the ministerial or autonomy level
• Construct the infra for information integration
  and sharing among departments
• Maximize the effect of investment using economy
  of scale and scope
• Support projects that promote regional
  informatization and narrow the digital
• divide
• From 1994 to 2002, USD 310M has been invested
  into 328 informatization
• projects such as Local Government Administration
  Information System and
• Home Tax Service

29
2. Informatization Support Program for Public
Sector (2)
Assignment of General Budget Fund
General Budget was used for the ministerial
project that are directly related to the
management or expanded usage.
The fund mainly dealt with infra construction
that is difficult to carry out on the single
agency level - Projects that involve integration
or information sharing among ministries - Long
term, large scale informatization projects with
confirmed feasibility through the pilot
project which minimizing risks when implemented
in the public sector - Projects that need
confirmation of adequacy when applying new
technology or projects dealing with pending
problems that need to be carried out quickly -
Projects that research and develop coordination
of interests, management methodology, project
management models, etc
Settlement After Investment
The risks that large scale network projects
entail were dispersed and budgetary limits were
overcome.
30
3. KII-G and KII-P
Rate Structure of KII-G
KII-G
The government invested public funds and settled
accounts after the completion of projects.
Facilities are reverted to the business and
investment funds are set off by the user fee.
Setoff Fee
User Fee
KII-P
Private companies invest their own
funds. Government provide loans or portion of the
funding as a means of narrowing digital divide.
Loan was provided USD 360M as the end of 02.
31
4. Universal Service Fund
Concept
Methods
Prior Competition Subsidized by the
profitable local long-distance and international
services Early stage of Competition(95) NTS
Subsidies Fund and connection fee structure
Rise in Competition Shared based on revenue
levels, with the enactment of the Business Act
2002 Subsidy Fund
Type
Total Losses USD 470M Subsidies(rate) USD
220M (46)
32
5. Tariff Structure
Major Service Tariff Structure
Fixed Telephony
Mobile Phone
Installation Charge(USD 205) and Telephony Bond
(USD 170) Incremental increase in local
service charges
Installation Charge(USD 550) Changed to deposit
and subscription charge system after the
introduction of competition in 1996.
Procurement
Fixed Service Investment increased greatly to
7.5(previously 3) in total investment, which
reached USD 8.22B from 80 to 87. Mobile
Service USD 930M from 85 to 95
33
IV. Success Factors and
Future Tasks
34
Success Factors
Success Factors
Government Leadership
Competition Policy
Focused Strategy
Effective Financing
35
1. Success Factors(1)
Government Leadership
Adoption of a government led model Application of
effective policy vehicles including planning,
laws and regulations, funds and organization
Focused Strategies
Investments focused in the future demand of
ICT Building the infra and implementing
e-Government and e-commerce for the
knowledge-based economy RD efforts in human
resources, TDX-1, and CDMA technology
36
1. Success Factors(2)
Effective Financing
Informatization Promotion Fund enabled focused
investment in ICT. Developed effective
investment criteria such as settlement after
investment Attracted private investments with
governments seed money.
Competition Policy
Liberalization and open competition in local
telephony and broadband created the mass market
that formed virtuous cycle by reducing the
cost. Unique habitat(60 of population lives in
high rise apartment) Rapid increase of internet
users with the rise in computer usage and
real time information exchange Online game, PC
Bang as well as Internet Café
37
Future Tasks
Solving Adverse Effects
Strategic Investment
Regulatory Reform for the Convergence
Coordinating Divergent Interests
Optimization of Network Usage
Future Tasks
38
2. Future Tasks(1)
Coordinating Divergent Interests
Establishment of a general office responsible for
ICT and maintaining strong government leadership
giving ICT top priority.
Strategic Investment
Concentration on strategic areas such as
construction of infra inducing voluntary
participation from the private sector
Solving Adverse Effects
Measures minimizing the adverse effects of
informatization in all areas including security
and privacy, and preventing the digital
divide between the rich and the poor
39
2. Future Tasks(2)
Regulatory Reform for the Convergence
Continuous regulatory reform to encompass the
convergence such as telecom and broadcasting,
etc.
Optimization of Network Investment
Prepare the measures optimizing network
investment such as interconnection and sharing
of a base station.
40
V. Cooperation between DGF/MIC and Latin
America
41
1. Status of Cooperaton(1)
Development Gateway Foundation (DGF)
DGF - DGFs mission is to reduce poverty and
support sustainable development through the
use of ICT. DGF is a not-for-profit organization,
established in Dec 2001, currently based on
Washington, D.C.. - ISGIF (Information Solutions
Group Informatics Program) of World Bank
supports the actual operations including human
resources and technology. Major functions -
Operate the Portal(www.developmentgateway.org) -
Organize ICT Development Forum - Operate the
Research and Training Network - Support
e-Government Project (Grant Program) - Support
the Country Gateway(Grant Program) - Provide
electronic Procurement Service(dgMarket)
42
1. Status of Cooperation(2)

• Major cooperation status with countries of Latin
  America
• - 13 country gateways have been established in
  Latin America
• Argentina, Bolivia, Brazil, Colombia, Costa
  Rica, Dominican Rep., El
• Salvador, Guatemala, Jamaica, Nicaragua, Peru,
  Uruguay, and Venezuela
• (total 44 country gateways)
• Country gateways are locally-owned
  partnership-based initiatives that
• pursue DGFs mission on a local level
• The ICT Training Center(DGF-KTC) established in
  Seoul, Korea in Nov 2002
• offered training programs for 24 participants
  from 12 countries such as Argentina,
• Bolivia, Chile, Colombia, El Salvador,
  Guatemala, Jamaica, Mexico, Paraguay,
• Peru, Uruguay, and Venezuela.(Total 128
  trainees from 49 countries)

43
1. Status of Cooperation(3)
Ministry of Information Communication (MIC)
Formed economic and telecommunication cooperation
committee with the major countries of Latin
America to facilitate cooperation in the ICT
fields MOU Agreements and Telecom Cooperation
Committees
Chile, Mexico, Brazil Economic Cooperation
Chile, Mexico, Brazil, Argentina, Peru,
Venezuela, Paraguay,
Colombia, Ecuador,
Bolivia, Jamaica, Uruguay, Suriname(13
Countries)
44
2. Future Cooperation
DGF
MIC
45
VI. Concluding Remarks
46
Concluding Remarks

• Information Society is a national goal for all
  countries.

• Strategic design encompassing the unique
  environment
• is a key for the success.

• Koreas experience and success can be considered
  as a
• reference for a unique model of development
  for the
• information society.